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Directors Report of Cholamandalam Financial Holdings Ltd.
Mar 31, 2025
Your Directors take pleasure in presenting the 76th Annual Report together with the audited financial statements of the Company for the financial year (''FY'') ended March 31, 2025.
The world economy observed a steady growth of 3.3% in calendar year 2024 albeit at a slow pace characterized by regional disparities, political tensions and evolving inflation dynamics. Since the beginning of the year 2025, the economic landscape has been witnessing significant imbalances and vulnerabilities. Trade policy shocks, financial volatility and a surge in uncertainty pose major threats to the global outlook. Ongoing policy reforms to enhance growth potential and international cooperation are likely to support in navigating the challenges and bolster resilience. Looking ahead to 2025, the IMF has projected global GDP to drop to 2.8% in 2025 and 3% in 2026, following tariff measures being announced by the United States. While easing inflation and stabilizing input costs could create a more favourable environment for margin expansion and strategic investments in many markets, escalating trade tensions and financial market adjustments leading to elevated inflation and interest rates pose a downside risk to the growth potentially impacting business sentiments, employment conditions and consumer spending.
Amidst a volatile global economic environment, India remained the fastest-growing major economy in FY 25. The country''s economy is expected to expand by 6.2% in FY 25 outpacing many of its global counterparts. Despite muted growth in the first three quarters of FY 25 due to momentary headwinds like election-led policy caution, erratic rainfall, and volatile global trade flows, the economy demonstrated resilience and stability with key indicators pointing to sustained growth momentum in the final quarter of FY 25. Public investments in infrastructure, continued government spending and robust private consumption and rising household investments in real estate continue to be key drivers of GDP growth. The buoyant manufacturing sector grew by 9.9 %, while services remained resilient, compensating for the underperformance in agriculture. On the fiscal side, the Union Budget 2025-2026 sets a bold agenda of focusing on inclusive development, digital innovation, and infrastructure, improving tax efficiency and rationalizing tax rates to further augment growth prospects. With inflation easing and risks to growth emerging, the RBI turned its stance accommodative, cutting rates by 50bps in 2025 thus far and signaled further easing ahead to remain supportive in the evolving global uncertainties.
Against this backdrop, the Indian economy is expected to remain buoyant in FY 26, backed by strong Government thrust on capital expenditure, and robust agricultural output supported by favourable monsoon. Easing inflation and decline in interest rates as monetary transmission gathers pace should provide a fillip to urban consumption demand in the coming quarters. Sustained higher capacity utilisation, strong government spending, healthy balance sheets of banks and corporates, and easing of financial conditions provide a conducive environment for recovery in private investment activity.
Cholamandalam Financial Holdings Limited (''CFHL) is primarily an investment company holding investments in group companies. CFHL is registered as a non-deposit taking Systemically Important Core Investment Company (''CIC'') pursuant to the receipt of Certificate of Registration dated January 6, 2020, issued by the Reserve Bank of India (''RBI'') under section 45-IA of the Reserve Bank of India Act, 1934. In terms of the Scale Based Regulatory Framework for NBFCs notified by RBI, the Company being a CIC falls under the category of Middle Layer NBFC (''NBFC-ML'').
CFHL holds substantial investments in the following financial services/risk management companies of the Murugappa Group (hereinafter collectively referred as ''the group / group companies'').
⢠Cholamandalam Investment and Finance Company Limited (''CIFCL''), a non-banking finance company engaged in lending business offers vehicle finance, home loans, loan against property, SME loans, secured business and personal loans (SBPL), consumer & small enterprises loans (CSEL) and a variety of other financial services to customers;
⢠Cholamandalam MS General Insurance Company Limited (''CMSGICL''), engaged in general insurance business offers a wide range of insurance products that include Motor, Health, Property, Accident, Engineering, Liability, Marine, Travel and Crop insurance for individuals and corporates;
⢠Cholamandalam MS Risk Services Limited (''CMSRSL'') offers comprehensive Risk Management and Engineering solutions.
The paid-up equity share capital of CFHL as on March 31, 2025 was ''18.78 Crore.
DIVIDEND
The Board of Directors have recommended a final dividend at the rate of 130% i.e. ''1.30/- (previous year: ''0.55/- per share) per equity share of face value of ''1/- each for the year ended March 31, 2025.
APPROPRIATIONS
The Company has transferred a sum of ''12.89 Crore (previous year: ''12.35 Crore) to Statutory Reserve under section 45-IC of the Reserve Bank of India Act, 1934 for the year ended March 31, 2025.
BUSINESS ENVIRONMENT
CFHL earns revenue primarily by way of dividend income from investments held in group companies. An overview of the financial services sector in which the Company operates along with a business update of group companies in FY 25 is summarised in the following paragraphs.
NBFC INDUSTRY & BUSINESS UPDATE
India''s financial sector is a highly diversified one comprising commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The sector dominated by banking and non-banking financial companies (''NBFCs'') has demonstrated remarkable growth largely driven by government initiatives, digital innovation and robust regulatory frameworks. The regulatory environment continues to play a significant role in shaping the sector''s development, with the RBI''s guidance and oversight being crucial. Digital / Technology advancements remains to be a key enabler for NBFCs, improving their efficiency and reach.
After a moderation in growth post the pandemic, NBFCs are back on track with an expected credit growth of 13~15% in FY 26. The sector has grown significantly, with a number of players
The Company being an investment company does not carry on any business other than holding investments in its group companies. Dividend receipts from investee companies are the primary source of income.
|
('' in Crore) |
||
|
1 Particulars |
2024-25 |
2023-24 |
|
Total Income |
86.20 |
86.00 |
|
Total Expenses |
3.63 |
6.99 |
|
Profit Before Tax |
82.57 |
79.01 |
|
Tax Expense |
18.17 |
17.29 |
|
Profit for the year |
64.40 |
61.72 |
|
Other Comprehensive Income |
9.74 |
(0.28) |
|
Total Comprehensive Income |
74.14 |
61.44 |
with heterogeneous business models starting operations. The increasing penetration of neo-banking, digital authentication, rise of UPI and mobile phone usage as well as mobile internet has resulted in the modularisation of financial services. The growth momentum is expected to continue in the current year also. The outlook for the industry remains positive as the country strides on its growth trajectory leading to higher credit demand. The growth in credit is expected to be broad based across products and segments with key risks being elevated interest rates and inflation.
Cholamandalam Investment and Finance Company Limited (''CIFCL), an associate company of CFHL, was incorporated in 1978 as the financial services arm of the Murugappa Group. CIFCL is registered with RBI as an NBFC- Investment and Credit Company and continues to be classified as an NBFC in Upper Layer (''NBFC-UL) under the Scale Based Regulatory Framework for NBFCs of RBI.
At the industry level, the Indian commercial vehicle (''CV'') had a degrowth of 1% in FY 25 with the Heavy Commercial Vehicle degrowing by 3% in FY 25 due to the high base effect in the previous year and Small Commercial Vehicle degrew by 9% in FY 25, due to high inventory levels and rising vehicle costs due to BS VI transition. The Light Commercial Vehicle had a growth of 3% in FY 25. The Commercial Vehicle industry in India is poised for growth in FY 26, propelled by a surge in e-commerce, increasing infrastructure spending, and government initiatives to promote clean energy and domestic manufacturing. The Passenger Vehicle segment had a growth of 2% and the Two-Wheeler industry had a growth of 9% in FY 25. The Construction Equipment segment had a growth of 2% in FY 25 which is an all-time high sale. This segment is expected to grow at a moderate pace in FY 26 with single digit growth supported by higher coal and iron ore mining, healthy real estate demand and increased budgetary outlay by government. The tractor industry had a growth of 7% in FY 25. This segment is expected to grow aided by expectations of a normal monsoon, improved cash flows from Kharif output, robust rabi sowing and higher minimum support prices for the crops.
CIFCL''s Vehicle Finance (''VF'') business comprising diversified portfolio viz., Two-Wheelers, Three-Wheelers, Commercial Vehicles, Passenger Vehicles, Used Vehicles, Tractors and Construction Equipment, continues to be the major segment contributing 51% of its aggregate Assets under Management (''AUM'') as of March 31, 2025. VF Disbursements in FY 25 were at ''53,922 Crore (previous year: ''48,348 Crore) with a double-digit growth of 12% and profit before tax (''PBT'') for the year was ''2,824 Crore (previous year:''2,532 Crore), a growth of 12%. The growth in disbursements was predominantly from
the new passenger vehicle segment, which had a growth of 17% over last year followed by used vehicle segment with a growth of 13% and 11% in the new commercial vehicle segment. The vehicle finance business will continue to maintain a balanced mix of used and new vehicles loans to maintain marginal yields.
The credit ecosystem will be further reinforced with revamped, templated underwriting models and the use of alternate data to strengthen credit rule engines with the sole objective of reducing delinquencies at micro-cluster levels. The VF business will benefit from its expansions in Tier 4 & Tier 5 markets over the years, which will de-risk business concentration and enable last mile coverage for customer acquisition and collections. The business will realign its organizational structure with strategic business objectives to drive efficiency & effectiveness to handle higher volume growth. The business will continue to focus on increasing its existing customers base through preapproved loan offers using technology-based communication and social media platforms.
Loan against Property (''LAP'')
Industry''s LAP portfolio is expected to grow by 21-23% in FY 26 driven by increasing property ownership, rising demand for financial products, and an expanding middle class. The market has been further propelled by the digitalization of lending processes and the growing number of NBFCs and banks offering tailored LAP products to meet diverse consumer needs.
CIFCL''s LAP business achieved ''17,913 Crore of disbursements in FY 25, which is 32% higher than FY 24 disbursements. The AUM for business grew by 39% to ''41,439 Crore in FY 25 compared to ''29,859 Crore in FY 24. Pan-India presence and geographical penetration into new markets, introduction of localized credit policy in line with market developments, increased contribution from rural branches have led to this growth. As of FY 25, LAP business has 630 branches in rural locations, which is 81% of total LAP branches across India. In FY 25, LAP business has disbursed ''6,809 Crore in rural locations, amounting to 38% of total disbursements. The business continues to focus on a systematic approach to build a healthy portfolio mix, with more than 77% of the portfolio being residential properties and an average loan ticket size of less than ''51 lakhs.
The asset quality of this business has shown steady improvement with the net credit losses and Stage 3 assets coming down significantly with consistent improvement in collection efficiency.
The outlook for India''s housing sector continues to be positive, fueled by a combination of government initiatives, urbanization trends, and technological advancements. The recent budget announcements have provided a significant boost to the sector, particularly through the expansion of PMAY 2.0, which is set to
enhance the availability of affordable housing for India''s growing urban population. The housing finance (HF) services industry is expected to report a double-digit growth in revenues on the back of continued healthy demand for housing, particularly affordable housing. The housing finance services industry is likely to grow at a healthy pace on the back of a revival in demand for affordable housing and an increase in demand for mid-segment and premium-segment housing.
NBFC-HFCs'' on-book portfolio grew by 14% YoY in 9 months of FY 25. Analysts expect disbursements portfolio of HFCs to grow by 20-22% in FY 25 as well as FY 26.
As of March 31, 2025, CIFCL''s HL business had 1.5 lakh live accounts (39% growth Y-o-Y) with an AUM of ''18,427 Crore (37% growth Y-o-Y). The disbursements grew 16% to ''7404 Crore in FY 25 (previous year: ''6,362 Crore). The target group remains to be the lower middle income group customer. The HL business leverages CIFCL''s strength in reaching out and underwriting lower and middle-income borrowers across the country, penetrating to the smallest villages and towns. CIFCL offers loans for self-construction, purchase of new flats/ independent houses, purchase of pre-owned flats/independent houses, balance transfer from other financiers, mortgage of existing houses for business use and shop loans. CIFCL continues to build a strong ecosystem of channel partners, coupled with its digital offerings for customer service and onboarding, making it a trustworthy choice for customers pan-India.
Consumer & Small Enterprise Loan (''CSEL'')
As of March 31, 2025, the CSEL business of CIFCL has been serving close to 14 lakh customers with an AUM close to ''14,600 Crore. The business has expanded across the country covering 25 states and 4 union territories with over 200 area offices. The primary strengths of CSEL business encompass a transparent end-to-end digital process, an exceptional customer experience journey, robust data-driven underwriting, and risk management capabilities. Coupled with the trust instilled by the Chola brand, these factors position it favourably to emerge as a leading player in this segment.
Small and Medium Enterprises (''SME'')
As a vital contributor to India''s industrial landscape, the MSME sector plays a crucial role in manufacturing, exports, and employment. With over 6 crore registered MSMEs employing more than 25 crore people, these enterprises generate a significant share of the country''s economic output. FY 2023-24, MSME-related products accounted for 45.73% of India''s total exports, reinforcing their role in positioning the country as a global manufacturing hub. The new budgetary provisions aim to build on this strong foundation by fostering innovation, enhancing competitiveness, and ensuring better access to resources. Through these steps, the government seeks
to equip MSMEs with the tools needed to expand their reach and strengthen their contribution to India''s economic growth.
As of 31st March 2025, CIFCL''s SME business has around 9200 MSME customers with an AUM of ''6,628 Crore. With the growing Small and Medium Enterprises ecosystem, CIFCL''s SME loans business division provides bouquets of products to meet the requirements of working capital and capex of SMEs. The SME division focuses on the following product segments:
⢠Secured Term loan: Secured Term Loans as offered to formal SME Segments with loan amounts ranging from ''50 Lacs to ''15 Crore, which are backed by land & building as primary collateral.
⢠Equipment funding: These are short-term loans provided to MSME clients against hypothecation of machinery with key targeted market segments including machine tools, plastic and packaging, textiles, medical equipment, DG sets and printing industries.
⢠Vendor Invoice discounting and Channel finance: These solutions provide short-term revolving credit facility of up to 90 days tenure with sanctions valid for one year backed by invoices to vendors or dealers.
⢠Loan Against Securities: Loan against securities offers loans to retail and HNI investors and promoters against the pledge of securities and mutual funds units.
Secured Business and Personal Loan (''SBPL'')
The Indian lending landscape faces a unique challenge: a segment that remains largely untapped despite possessing collateral and repayment capacity. This segment, distinct from regular Loan Against Property (LAP) borrowers, encounters barriers due to financial, geographical, and profile-related norms set by prime LAP lending institutions. India faces high levels of financial exclusion due to factors such as low income, lack of financial literacy, high costs, and poor infrastructure. As a result, many people still rely on informal sources of credit, such as relatives, money lenders, and landlords. SBPL offers collateral backed business and personal loans based on the credit assessment and cashflow projections of these businesses.
As of March 31, 2025, CIFCL''s SBPL business had crossed 62,000 live accounts with an AUM of ''2,422 Crore. The average ticket size is around ''4.30 lakhs with an average tenure of 6 years. Key differentiators include personalised doorstep service to customers, a unique assessed income program for business owners, a transparent end-to-end digital process and customised products focussing on new-to-credit customers.
Consumer Durables Loan (''CD'')
CIFCL''s CD lending business was launched in FY 24 through a tie up with a leading mobile phone manufacturer. In FY 25, the
business expanded to cover 22 states across 54,000 dealers and increased its market share. In late FY 25, the business also launched the Open Market consumer durables financing through direct associations with other OEMs and onboarded customers through a dedicated platform.
To target digitally savvy customers, CIFCL had introduced Direct to Customer (D2C) channel, to disburse loans directly to existing and new customers without any intermediaries. The business commenced in Q4 of FY 23 is currently focussed on a pre-approved loan journey servicing the existing customer base of other businesses.
In response to economic challenges, RBI reduced the repo rate to 6% by early 2025 and shifted its policy stance from neutral to accommodative. The combination of income-tax relief in the Union Budget for FY26, rate cuts leading to lower Equated Monthly Instalments (EMIs), and a moderation in food instalation is expected to boost household disposable incomes and urban consumption in FY26. However, the retail AUM of NBFCs (excluding HFCs) is projected to grow at a moderated pace of 16-18% in FY26. This growth rate is slightly lower than the levels seen in FY25, with potential downside risks arising from global macroeconomic uncertainty impacting domestic economic activity.
GENERAL INSURANCE INDUSTRY & BUSINESS UPDATE
The general insurance industry began the financial year well, but growth tapered through the year with drop in automobile sales. The regulatory mandate with respect to change in method of reporting of gross premium on long term non-motor products which came into effect from October 1, 2024, reduced the reported GWP for all players in the industry stymying reported growth for the year. Competitive intensity in the industry continues to be high. While the inflation led cost-push in parts and labour charges in motor, medical costs and in re-instatement costs in fire losses led to hardening of claims ratios, climate change induced natural catastrophe events, though not of large magnitude, impacted all players in their risk retentions.
In this context, the gross direct premium of multi-line non-life insurers (excluding Standalone Health & Specialized insurers) was reported at around ''2,581 billion and registered a growth of around 5.2% over the previous year. The combined ratio of all players in the industry rose during the year underpinned by the natural catastrophe losses, compressed premium realization in motor own damage and the effect of inflation on claims. The rise in investment income aided by the interest rate environment and buoyant equity markets helped insurers to register overall operating profits.
Cholamandalam MS General Insurance Company Limited (''CMSGICL''), the insurance subsidiary of CFHL, is a joint venture between the Murugappa Group and Mitsui Sumitomo Insurance Company Limited, a leading insurer in Japan. CMSGICL registered with the Insurance Regulatory and Development Authority of India (''IRDA'') to carry on general insurance business, offers a wide range of insurance coverage including motor, travel, health, accident, home and other types of insurance for individual and corporate customers.
CMSGICL grew its gross direct premium higher than industry growth, helping it grow its market share. On IGAAP basis, the motor insurance business of CMSGICL registered a growth of 9.4% as against industry growth of 7.9% with a market share of 5.5%. In the fire line of business, CMSGICL registered a de-growth of 7.5% as against the industry de-growth of 5.3% leading to a market share of 2.7%. CMSGICL''s overall health, accident and travel volumes grew by 4.7% while industry grew at 6.3%. While growing its topline, a GWP of ''8,564 Crore in FY 25 (previous year: ''7,542 Crore) and absorbing costs upfront, the company held its underwriting loss stable. This, together with higher investment income for the year, augmented the profit before tax. Recoveries from written-off stressed investments also contributed to the company reporting a profit before tax of ''650 Crore for the year ended March 31, 2025 (previous year: ''590 Crore).
During the year, the company grew its agency force, renewed all bancassurance relationships, added to its NBFC and OEM tie-ups. CMSGICL operated in its crop cluster and had a higher enrolment. All these contributed to the Company''s GWP growth. The tailwinds were the pricing discounts across lines of business, inflationary impact on claims.
The premium pricing in motor own-damage witnessed severe pressure with discounts across vehicle categories staying at higher levels. In motor third party segment, the pricing remained static even as the industry witnessed inflation in medical costs as well as continuous increase of the minimum wage levels across all states in the country.
Property and Casualty Insurance
Marine and Group Accident lines of businesses witnessed improved performance with increase in the levels of economic activity and focused sourcing. CMSGICL continues to follow disciplined underwriting and prudent risk selection in the highly demanding environment.
Health, Accident and Travel Insurance
CMSGICL''s overall health, accident and travel volumes grew during the year with stronger growth in Group Health. Even as retail indemnity business continues to scale up, the bancassurance / NBFC led long term, credit linked health benefit and accident product was impacted arising from the 1/n accounting change effective October 1, 2024. Some indemnity products were repriced besides stepping up its distribution build of both POSP (point of sales person) as well as channel partners. The company continues to strengthen its underwriting framework with intelligent use of technology for its risk selection, upsell and cross-sell initiatives.
The company operates the crop insurance in a cluster in Maharashtra under the 80-110 loss corridor scheme. The loss ratios for the year in both Kharif and Rabi were good arising from a normal monsoon and efficient ground management. The company also wrote reinsurance inward business in crop on a risk-transfer basis which has performed reasonably.
Globally, there were multiple varied incidents of catastrophic losses, but the overall reinsurers'' profitability remained strong. In the Indian context, the multiple natural catastrophic events by way of floods in Uttarakhand, Telangana & Andhra Pradesh, Gujarat, New Delhi, and Cyclone Dana in Odisha and Cyclone Fengal in Southern India had an impact on the industry at a gross level. In the wake of higher deductibles on insurers, the impact was marginal for reinsurers. Reinsurance renewals for FY 26 was marked by a soft market, availability of capacity for insurers with prudent underwriting giving scope for improvements in the commercial terms. The company''s proportional and nonproportional treaties generated surpluses for the reinsurers during the year.
Claims
CMSGICL continues its journey in digitization of its claims processes across lines of businesses and will continue to focus on harnessing efficiencies for severity control across all lines, automation for speed and operational controls, and a proactive approach to servicing for building transparency and satisfaction levels of customers.
The general insurance industry is poised to grow in the context of strong economic growth of the country. Headwinds for the industry include the pricing pressures across product lines / segments, the possible impact from the detariff of fire / engineering / motor lines as to product wordings, the predicted slowdown in the automobile sector and withdrawal
of universalisation by States in crop insurance due to fiscal constraints. Higher inflation in the context of geo-political conflicts could impact customer sentiment and claims costs. Amongst the tail winds are the infrastructure spend thrust from the Government, expected credit offtake from the banks, the prediction of a normal monsoon, the re-entry of a few more states into the PMFBY scheme and the lower level of insurance penetration.
CMSGICL will continue its strong growth path by adding new channel partners, expand into new markets, enhance its focus on renewals besides launching new products across lines of businesses. The company is committed to further tighten its expense of management levels by a judicious mix of channels, product subcategories and rationalise commission structures linked to inherent profitability. Besides, efforts towards thrust on productivity and efficiency improvements shall continue to enable the company to stick to its committed glide path of reducing expenses of management to prescribed regulatory levels.
Digital / Technology Initiatives
Technology has become ingrained as a key driver in connecting people across various walks of life. Aligned with the trend, digital transformation continues to be the focus area of the group. Various initiatives and technology tools are deployed for automation of repetitive activities across functions wherever opportunity exists. Digital/Technology initiatives implemented by CMSGICL during the year include - enablement of new product launches, enablement of digital journey and integrations with new bancassurance partners and NBFCs, OEM tie-ups, building of apps for ease of business transactions with customers / business partners and the revamp of business workflow tools and enablement of CIS (Customer Information Sheet). Further, several other operating measures were put in place relating to information security and running awareness campaigns for employees.
With regard to NBFC business, CIFCL has been on a rapid journey transforming the company that leverages technology to digitize its business processes into one that is fundamentally driven by digital innovation. Chola One and Gaadi Bazaar - our key customer facing and vehicle ecosystem related platforms - are being continuously enhanced to deliver more personalized, contextual, and efficient customer experiences. A two-pronged approach of using both in-house-developed and best-of-breed off-the-shelf solutions has been adopted to deliver a combination of agility and control across the different systems of engagement and records. Cyber guardrails continue to be a core area of activity to ensure infrastructure reliability, service continuity, and data integrity are maintained. Optimal mix on internal talent and external
cyber domain experts are engaged to manage and mitigate risk across the entire digital landscape. Further, the company maintains an unwavering focus on regulatory compliance and data privacy by continuously adapting tools & practices to align with evolving data protection laws and ensure responsible handling of customer information across the layers. By nurturing a digital workforce with future-relevant skills and designing intelligent scalable purpose-built solutions, the company aims to unlock sustained business growth using technology.
RISK MANAGEMENT SERVICES - BUSINESS UPDATE
Cholamandalam MS Risk Services Limited (''CMSRSL), is a joint venture entity of the Murugappa Group and Mitsui Sumitomo Insurance Group, Japan. Established in the year 1994, CMSRSL provides risk management and engineering solutions in the areas of safety, health and environment. CMSRSL is part of the Inogen Alliance, a global network of environment, health, safety and sustainability consulting companies working together to provide one point of contact to guide multinational organizations to meet their global commitments locally.
During the year, the company broadened its service credentials by launching several long-term strategic projects focused on Cultural Transformation, Behavior-Based Safety, and other sustainability initiatives, and successfully executed projects in each of these areas. The company has further increased its order book with new orders amounting to ''124 Crore during the year.
CMSRSL strengthened its partnerships with key allies like Inogen, Tonkin & Taylor, BPC and EIC-Dubai and strengthened ties with JV partner MS&AD. The company also deployed digital EHs solution & took significant steps by developing six different EHS tools & modules as enhancement of its service offerings in FY 25. The company has also actively participated in various industry forums by presenting technical papers and making representations in panel discussions, as part of the efforts to strengthen brand presence and demonstrate technical excellence.
CMSRSL continues to serve Cholamandalam MS General Insurance Company Limited and its clients through value-added services like Thermography, Safety Audits, Cargo Loss minimization studies and BRSR Reporting. The Joint Venture Partner, Mitsui Sumitomo Insurance Company Limited, Japan, continues to support the company by introducing Japanese Companies in the Indian market for risk management services.
The company enters FY 26 with a strategic executable order book of about ''63 Crore, offering considerable revenue stability and forecasting visibility for the year ahead. As part of its strategic growth roadmap, the company will prioritize expansion by strengthening its presence in the Kingdom of Saudi Arabia through local partnerships and deepen presence in Middle East Market. In addition to geographical expansion, CMSRSL
A report on the performance and financial position of each of the group companies as per section 129(3) of the Act read with the Companies (Accounts) Rules, 2014, in the prescribed form AOC-1 is annexed to this Report as Annexure I. The consolidated financial statements of the Company prepared in accordance with the Companies Act, 2013 (''the Act'') and the relevant Accounting Standards, forms part of the annual report.
The annual report containing standalone and consolidated financial statements will be uploaded on the Company''s website, www.cholafhl.com. Annual accounts of the group companies will also be uploaded on the Company''s website and be made available for inspection by shareholders through electronic mode until the date of the Annual General Meeting (''AGM'').
FINANCIAL REVIEW
CFHL earned an income of ''86.20 Crore (previous year: ''86.00 Crore) and profit before tax was ''82.57 Crore (previous year: ''79.01 Crore) for the financial year ended March 31, 2025. Aggregate investments stood at ''1,290.72 Crore (previous year: ''1,279.31 Crore) as on March 31, 2025.
There has been no change in the nature of business of the company during the year.
Associate Company : Cholamandalam Investment and Finance Company Limited (''CIFCL'')
The Company holds 44.34% in the paid-up equity share capital of CIFCL as on March 31, 2025 and has de-facto control as per the principles of Ind AS 110. Accordingly, CIFCL is treated
will continue to promote a structural and forward-looking capability-building program across all verticals with specific budget allocation on skill development, and aim to strengthen technical depth, delivery readiness, and future leadership across the organization. To enhance execution excellence, the company is streamlining operations through a centralized resource pool dedicated to resource management and report writing.
|
CONSOLIDATED FINANCIAL RESULTS |
('' in Crore) |
|
|
1 Particulars |
2024-25 |
2023-24 |
|
Total Income |
33,459.92 |
26,086.76 |
|
Total Expenses |
27,060.36 |
20,886.93 |
|
Profit Before Tax of Profits from Associate / Joint Venture and Tax |
6,399.56 |
5,199.83 |
|
Share of Profit from Associates / Joint Venture (Net of Taxes) |
5.90 |
12.08 |
|
Profits Before Tax |
6,405.46 |
5,211.91 |
|
Tax Expense |
1,665.58 |
1,361.35 |
|
Profits for the year |
4,739.88 |
3,850.56 |
|
Minority Interest |
2,566.22 |
2,078.04 |
|
Net Profit for the year attributable to owners of the Company |
2,173.66 |
1,772.52 |
as a subsidiary for the purpose of consolidation of financial statements. The securities of CIFCL are listed and traded on the National Stock Exchange of India Limited (NSE) and the BSE Limited (BSE).
The Assets under Management (''AUM'') grew 30% to ''1,99,876 Crore as at March 31, 2025 (previous year: ''1,53,718 Crore). Loan disbursements aggregated to ''1,00,869 Crore (previous year: ''88,725 Crore) registering a growth of 14%. Profit after tax grew 24% to ''4,259 Crore (previous year: ''3,423 Crore).
During the year CIFCL raised funds from banks/ Financial Institutions and from money markets to support the growth of its businesses at competitive interest rates without compromising the right mix of long and short-term borrowings, thereby maintaining a healthy asset liability position. In FY 25, the company raised Commercial Papers (CP) of ''13,200 Crore of which ''9,175 Crore were repaid in FY 25. CP outstanding at the end of the year was ''4,025 Crore. Medium and long-term secured NCDs to the tune of ''10,336 Crore by private placement were mobilised at competitive rates. At the end of FY 25, the outstanding NCD stood at ''22,989 Crore (''18,569 Crore by way of Private Placement and ''4,420 Crore by way of public placement) & CCD at ''2,000 Crore. Tier II borrowings raised during the year were ''1,000 Crore of Perpetual debt and ''4,760 Crore of Sub Debt. At the end of FY 25, Tier II borrowings stood at ''10,621 Crore. CIFCL''s capital adequacy ratio stood at 19.75% as on March 31, 2025, as against the minimum regulatory requirement of 15%.
CIFCL paid an interim dividend of ''1.30 (65%) per equity share of face value of ''2/- each for FY 25. The Board of CIFCL has recommended a final dividend of ''0.70 (35%) per equity share for FY 25, subject to their shareholders'' approval.
The subsidiary companies of CIFCL are Cholamandalam Securities Limited (''CSEC''), Cholamandalam Leasing Limited (''CLL'') (Formerly, ''Cholamandalam Home Finance Limited) and Payswiff Technologies Private Limited (''Payswiff''). CSEC is engaged in stock broking and investment advisory services. Payswiff is engaged in the business of offline payment aggregator services and provides e-commerce solutions. Vishvakarma Payments Private Limited is the associate company of CIFCL.
CSEC achieved a gross income of ''104.44 Crore (previous year: ''156.85 Crore) and profit before tax of ''10.85 Crore (previous year: ''84.20 Crore) for the year ended March 31, 2025. CLL recorded a gross income of ''3.45 Crore (previous year: ''186.05 Crore) and made a loss of ''0.45 Crore (previous year: ''63.25 Crore) for the year ended March 31, 2025. Payswiff recorded a gross consolidated income of ''110.87 Crore (previous year: ''135.57 Crore) and made a profit of ''6.27 Crore (previous year: loss ''2.17 Crore) for the year ended March 31, 2025.
Subsidiary Company: Cholamandalam MS General Insurance Company Limited (''CMSGICL'')
CFHL holds 60% of the paid-up equity share capital of CMSGICL. The IRDAI has deferred the implementation of Ind-AS for insurance companies. Therefore, the accounts of CMSGICL have been converted as per Ind-AS for consolidation purposes and figures of CMSGICL reported in this annual report are under Ind-AS.
CMSGICL achieved a gross written premium of ''8,564 Crore in FY 25 (previous year: ''7,542 Crore) and profit before tax was ''650 Crore (previous year: ''590 Crore). The investment portfolio of CMSGICL grew to ''18,601 Crore as at March 31, 2025 (previous year: ''16,538 Crore). The Company continued to deploy its accretion/maturing funds in such a manner that portfolio yields were higher than the previous year. The interest rates environment had a downward bias given the growth and inflation situation in the economy. As of March 31, 2025, the company had no non-performing assets in its investment portfolio. The solvency ratio of CMSGICL as on March 31, 2025, was 2.18 times as against the minimum regulatory requirement of 1.50 times. With a view to augment growth and solvency, the Board of CMSGICL has not recommended dividend for FY 25.
Joint Venture: Cholamandalam MS Risk Services Limited (''CMSRSL'')
The Company holds 49.5% stake in CMSRSL. CMSRSL achieved an income of ''83.20 Crore (previous year: ''71.27 Crore) and profit before tax of ''9.52 Crore (previous year: ''8.18 Crore) for the year ended March 31, 2025. The Board of CMSRSL has recommended a final dividend of 30% i.e. ''3/- per equity share of face value of ''10/- each for FY 25.
Mrs. Vasudha Sundararaman (DIN:06609400) and Mr. K Balasubramanian (DIN: 00137260) were re-appointed as Independent Directors for a second term of three consecutive years each with effect from February 12, 2025 and March 17, 2025 respectively, vide special resolutions passed by the shareholders at the 75th AGM held on August 9, 2024.
As per the provisions of section 152 of the Act, Mr. Sridharan Rangarajan (DIN: 01814413) retires by rotation at the ensuing AGM and being eligible offered himself for re-appointment. The Board recommends the re-appointment of Mr. Sridharan as a director liable to retire by rotation and the resolution in this regard forms part of the Notice convening the 76th AGM. Information as required to be disclosed under regulation 36(3) of the SEBI Listing Regulations, for re-appointment of director is provided in the Notice convening the AGM.
DECLARATION FROM INDEPENDENT DIRECTORS
The Independent Directors (''IDs''), Mr. B Ramaratnam, Mrs. Vasudha Sundararaman and Mr. K Balasubramanian have submitted declarations stating that they meet the criteria of independence as required under the provisions of section 149(6) of the Act and regulation 16(1)(b) of the SEBI Listing Regulations. In the opinion of the Board, all the IDs possess integrity, expertise and relevant experience in their respective fields including the proficiency required to effectively discharge their roles and responsibilities in directing and guiding the affairs of the Company.
In terms of section 150 of the Act read with the Companies (Appointment & Qualification of Directors) Rules, 2014, the IDs of the Company have registered their names in the independent directors'' data bank, created and maintained by the Indian Institute of Corporate Affairs (''IICA''). The IDs are also required to pass an online proficiency self-assessment test conducted by the IICA within a period of two years from the date of inclusion of their names in the data bank, subject to exemption to individuals who fulfill the eligibility criteria prescribed under the said Rules. All the IDs are compliant with the requirement under the said Rules.
Pursuant to the provisions of section 203 of the Act, Mr. N Ganesh, Manager & Chief Financial Officer and Mrs. E Krithika, Company Secretary are the key managerial personnel of the Company and there were no changes during the year.
Risk management is a process to identify and manage threats that could have an impact on the operations of the Company. Generally, this involves reviewing business operations, identifying potential threats to the company and the likelihood of their occurrence and then taking appropriate actions to address the most likely threats. The Company adopts a systematic approach to mitigate risks associated with accomplishment of objectives, operations, revenues and regulations. The risk management framework of the Company comprises of the following key elements viz., a) Risk Assessment: study of threats and vulnerability and exposure to various risks; b) Risk Management and Monitoring: probability of risk assumption is estimated and monitored; and c) Risk Mitigation: measures adopted to mitigate risks by the Company.
The Risk Management Committee assists the Board in monitoring various risks, reviews and analyses risk exposures and mitigation plans related to the Company and its group companies. A Risk Management Policy has been approved by the Board of Directors which inter alia sets out risk strategy, approach and mitigation plans, liquidity risk management
and asset liability management. During the year the Risk Management Committee of CFHL reviewed key risk exposures of the Company along with mitigation measures, asset liability management, structural liquidity management besides review of key risk exposures and mitigation measures of group companies.
Key risk exposures of the Company along with risk mitigation measures are provided in the table below. The risks furnished below are not exhaustive and assessment of risk is based on management perception.
Further, risks arising out of NBFC and insurance business constitute the dominant risks of the Company on a consolidated basis. The group companies have their own risk management framework in line with its strategic business operations as appropriate to the industry in which they operate. The risk management framework of NBFC and insurance business are broadly based on: clear understanding and identification of various risks, disciplined risk assessment by evaluating the probability and impact of each risk, measurement and monitoring
of risks by establishing key risk indicators with thresholds for all critical risks and adequate review mechanism to monitor and control risks. The business operations of each group company, the risks faced by them, and the risk mitigation tools followed by them are reviewed periodically by the Risk Management Committees and the Boards of the respective companies.
The risk management process of CIFCL is driven by a strong organisational culture and sound operating procedures involving
corporate values, attitudes, competencies, internal control culture, effective internal reporting and contingency planning. The risks associated with the company''s business and scale of operations are strategic, financial, operational, reputation, compliance, liquidity & capital, cyber security, credit, fraud, people, market, emerging risks and others. Business process mappings identify the key steps in business processes, activities and functions. The key risk points in the overall business process are documented. Process maps reveal individual risks, risk interdependencies, and areas of control. The company periodically revisits the risk universe and updates appropriately. In the event of product changes and additions, the respective teams appraise the Risk Management Team of the new risks faced.
CMSGICL has put in place an appropriate risk management system covering various risks the company is exposed to. Risk management activities of CMSGICL are aligned to its corporate objectives, organisational priorities and designed to protect and enhance its reputation. During the year, the Risk Management Committee of CMSGICL reviewed strategic risks that have the ability to affect the organization''s overall operating framework, operational risks that stem solely from the internal processes within the organization, risk management initiatives undertaken and its effectiveness, the status of the overall risk appetite framework and the asset liability management framework.
The Company has not accepted any fixed deposits under Chapter V of the Companies Act, 2013 and as such no amount of principal and interest were outstanding as on March 31, 2025.
Particulars of Loans, Guarantees or Investments
During the year the Company has not made any investments in group companies. The provisions of section 186 of the Act pertaining to investment and lending activities is not applicable to CFHL since the Company is an NBFC whose principal business is acquisition of securities. Information regarding investments made during the year is given in the financial statements. During the year the Company has not given any loans or guarantees under the provisions of section 186 of the Act.
Internal Financial Control Systems with reference to the Financial Statements
The Company has in place adequate internal financial controls to ensure reliability of financial and operational information and regulatory and statutory compliances. The Company''s business processes are equipped with monitoring and reporting processes to ensure financial discipline and accountability. The internal financial control systems are monitored both by internal and statutory auditors of the Company. The statutory
auditors of the Company have also certified the existence and operating effectiveness of the internal financial controls as on March 31, 2025.
Financial Ratios
Key ratios relevant to the Company''s operations are given in the table below:
|
Ratio Description |
31-Mar-2025 |
31-Mar-2024 |
|
Return on Net Worth |
4.77% |
4.79% |
|
Return on Total Assets |
4.75% |
4.79% |
|
Debt Equity Ratio (No. of times) |
NA |
NA |
|
Leverage Ratio (No. of times) |
0.0002 |
0.0001 |
|
Ratio of Adjusted Net Worth (ANW) to its aggregate risk weighted assets |
1999.12% |
1763.36% |
The Company being a holding investment company and not having debt obligations, ratios viz., debtors turnover, inventory turnover and interest coverage ratios are not applicable. The increase in adjusted networth is on account of an increase in unrealised gains on investment in subsidiaries. The leverage ratio (maximum regulatory requirement: 2.5 times) and adjusted networth ratio (minimum regulatory requirement: 30%) are computed in accordance with the Master Directions - Core Investment Companies (Reserve Bank) Directions, 2016 (''Master Directions of RBI''). There was no significant change in other key ratios applicable to the Company.
INTERNAL CONTROL SYSTEM AND INTERNAL AUDIT
Internal control system of an organisation is looked at as the key to its effective functioning. The Company has internal control systems in place commensurate with the nature of business and size of its operations, to ensure compliance with internal policies, regulatory matters and to safeguard reliability of financial reporting and its disclosures. An audit of systems and processes is conducted by the internal auditor of the Company.
The internal audit is performed based on the audit plan approved by the Audit Committee annually. The internal audit report along with the observations and recommendations from the audit review are discussed and reviewed in the quarterly meetings of the Audit Committee. The Audit Committee evaluates the adequacy and effectiveness of the internal controls, performance of the internal audit, recommends improvements and reviews the action taken.
M/s Sharp & Tannan Associates, having completed their term, retired at the conclusion of the 75th AGM held on August 9, 2024. The shareholders at the 75th AGM held on August 9, 2024, appointed M/s. R G N Price & Co., (''RGNP''), Chartered
Accountants (Firm Registration No. 002785S) as the statutory auditors of the Company for a period of three years commencing from the conclusion of the 75th AGM till the conclusion of the 78th AGM. RGNP have confirmed their eligibility to continue as statutory auditors for FY 26.
The Auditors'' Report issued by RGNP for the year under review is unmodified and does not contain any qualification, reservation, or adverse remark. The statutory auditors have not reported any incident of fraud to the Audit Committee or the Board of Directors under section 143(12) of the Act during the year.
Pursuant to Regulation 24A(1)(b) notified vide SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2024 dated December 12, 2024, on the basis of recommendation of board of directors, a listed entity shall appoint or re-appoint: (i) an individual as Secretarial Auditor for not more than one term of 5 consecutive years; or (ii) a Secretarial Audit firm as Secretarial Auditor for not more than two terms of 5 consecutive years, with the approval of its shareholders in its Annual General Meeting.
Accordingly, based on the recommendation of the Audit Committee, the Board recommends the appointment of M/s. Sridharan & Sridharan Associates, Company Secretaries (Firm Registration No. P2022TN093500) as secretarial auditor of the Company for a period of five consecutive years commencing from the financial year 2025-26 till the financial year 2029-30. M/s. Sridharan & Sridharan Associates fulfills the eligibility criteria for secretarial auditors prescribed under the SEBI Listing Regulations. Necessary resolution for appointment of secretarial auditor forms part of the Notice convening the 76th Annual General Meeting.
The Company firmly believes in committing itself to maintaining high standards of corporate governance. A report on corporate governance of the Company together with a certificate from practicing company secretaries in accordance with the SEBI Listing Regulations is annexed to this Report as Annexure II. The Report further contains other details which are required to be provided in the Board''s Report.
Five meetings of the Board were held during the year ended March 31, 2025. Further details on the Board meetings are disclosed in the Report on Corporate Governance.
COMPOSITION OF THE AUDIT COMMITTEE
The Board has constituted an Audit Committee in terms of the applicable provisions of the Act, the SEBI Listing Regulations
and the Master Directions of RBI. Details of terms of reference, composition and meetings of the committee are disclosed in the Report on Corporate Governance.
Pursuant to the provisions of section 134 of the Act and regulation 17 of the SEBI Listing Regulations, the Board of Directors have carried out an annual performance evaluation of the Board itself, the individual directors, various committees of the Board and the Chairman for FY 25. The manner in which the evaluation has been carried out is provided in the Report on Corporate Governance.
POLICY ON BOARD NOMINATION AND REMUNERATION
The Board has formulated a policy for selection and appointment of directors, senior management and their remuneration. Details of which are furnished in the Report on Corporate Governance.
CORPORATE SOCIAL RESPONSIBILITY (''CSR'')
With the enactment of Corporate Social Responsibility (CSR) provisions in the Companies Act, 2013, the Company has framed a CSR Policy and the policy is available on the Company''s website at https://files.cholamandalam.com/cholafhl/csr-policy.pdf. Pursuant to the provisions of section 135(5) of the Act, every company shall spend at least two percentage of its average net profits made during the three immediately preceding financial year in pursuance of its CSR Policy. The Company does not have CSR obligations for FY 25 and hence the annual report on CSR activities as required under the Act is not required to be attached to this Report.
The Company has formulated a policy on related party transactions. All transactions that were entered into by the Company with related parties during the financial year were in the ordinary course of business and on an arm''s length basis. There were no materially significant related party transactions during the year which had potential conflict with the interests of the Company at large. Pursuant to section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014, there were no transactions during the year to be reported under section 188(1) of the Act in Form AOC-2.
Necessary disclosures on related party transactions have been made in the notes to the financial statements. None of the Directors had any pecuniary relationships or transactions vis-a-vis the Company.
HUMAN RESOURCES (''HR'') AND PARTICULARS OF EMPLOYEES
Human Resources (''HR'') are the valuable assets for the group. CFHL along with its group companies has a workforce of more than 48,400 employees as of March 31, 2025. The group
companies have robust HR management practices enabling the achievement of organizational goals and key milestones through people. The safety and well- being of the employees continue to be a focus area. The group continues to emphasize on resourcing and talent planning strategies based on their functional and general management requirements in preparing the organisation for the future.
As on March 31, 2025, there were two employees on the rolls of CFHL. The information required to be disclosed under the provisions of section 197 of the Act read with rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure III to this Report.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The Company has no activity relating to consumption of energy or technology absorption etc. and does not have any foreign exchange earnings. There was a foreign exchange outgo during the year by way of repatriation of dividend amounting to ''0.31Lakh (previous year: ''0.31 Lakh).
WHISTLE-BLOWER/VIGIL MECHANISM
In compliance with the provisions of section 177(9) of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, regulation 22 of the SEBI Listing Regulations and the Scale Based Regulations of RBI, the Company has established a whistleblower/vigil mechanism for directors and employees to report genuine concerns. The mechanism provides for adequate safeguards against victimisation of persons using the mechanism and makes provision for direct access to the Chairman of the Audit Committee in appropriate or exceptional cases. The policy is available on the Company''s website at https:// files.cholamandalam.com/cholafhl/whistle-blower-policv.pdf
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
Pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013, the Company has formulated a policy for prevention of sexual harassment at workplace. An internal complaints committee (''ICC'') is in place to redress complaints received regarding sexual harassment. The policy extends to all employees (permanent, contractual, temporary and trainees). During the calendar year 2024 no referrals were received under the policy and no complaints were pending at the beginning and end of the year.
Maintenance of cost records and requirements of cost audit as prescribed under the provisions of section 148(1) of the Act is not applicable to the Company.
ANNUAL RETURN
Pursuant to the provisions of section 92(3) and section 134(3) (a) of the Companies Act, 2013, the annual return for the year ended March 31, 2025 is available on the Company''s website at https://www.cholafhl.com/investors/annual-return.
COMPLIANCE WITH SECRETARIAL STANDARDS
The Company has complied with the Secretarial Standards on Meetings of the Board of Directors (SS-1) and Secretarial Standards on General Meetings (SS-2) issued by the Institute of Company Secretaries of India.
SECRETARIAL AUDIT REPORT
Pursuant to the provisions of section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and regulation 24A of the SEBI Listing Regulations, the Board appointed M/s. Srinidhi Sridharan & Associates, Company Secretaries, to conduct the secretarial audit for the year ended March 31, 2025. The Report issued by the secretarial auditor in the prescribed form MR-3 is annexed to this Report as Annexure IV. The secretarial audit report does not contain any qualification, reservation or adverse remark by the secretarial auditor.
In compliance with regulation 24A of the SEBI Listing Regulations, the secretarial audit report of the Company''s material subsidiary, Cholamandalam MS General Insurance Company Limited, for the year ended March 31, 2025 is annexed to this Report as Annexure V.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There are no material changes and commitments affecting the financial position of the Company which occurred between March 31, 2025, and the date of this Report.
BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT
In terms of regulation 34(2)(f) of the SEBI Listing Regulations, the annual report of top one thousand listed entities based on market capitalization, shall contain the Business Responsibility and Sustainability Report (''BRSR'') describing the initiatives taken by the entity from an environmental, social and governance perspective. Accordingly, the Company has prepared BRSR, which indicates the consolidated performance of group entities against the principles of the National Guidelines on Responsible Business Conduct. A copy of the BRSR is annexed to this Report as Annexure VI.
DIRECTORS'' RESPONSIBILITY STATEMENT
The Board of Directors confirm that the Company has in place a framework of internal financial control and compliance system, which is reviewed by the Audit Committee and the Board and
independently reviewed by the internal auditors, statutory auditors and secretarial auditors. Further, pursuant to section 134(5) of the Companies Act, 2013, the Board of Directors confirm that:
a) i n the preparation of the annual financial statements for the year ended March 31, 2025, the applicable accounting standards have been followed and that there were no material departures therefrom;
b) they have, in the selection of the accounting policies, consulted the statutory auditors and have applied their recommendations consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2025 and of the profit of the Company for the year ended on that date;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual financial statements on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively during the year ended March 31, 2025; and
f) proper system has been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively during the year ended March 31, 2025.
DECLARATIONS/AFFIRMATIONS
⢠There was no significant material orders passed by the regulators or courts or tribunals impacting the Company''s going concern status and its operations in future.
⢠The Company does not carry on any activities other than those specifically permitted by the RBI for CICs.
RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the Company or the correctness of any of the statements or representations made or opinions expressed by the Company and for discharge of any liability by the Company.
Neither is there any provision in law to keep, nor does the Company keep any part of the deposits with RBI and by issuing a Certificate of Registration to the Company, RBI neither accepts any responsibility nor guarantees the payment of deposits to any depositor or any person who has lent any sum to the Company.
⢠There are no applications made or any proceedings pending under the Insolvency and Bankruptcy Code, 2016 during the year.
⢠During the year, the Company had not made any one-time settlement with banks or financial institutions.
ACKNOWLEDGEMENT
The Directors express their gratitude for the support and co-operation extended by the Ministry of Corporate Affairs, Securities and Exchange Board of India, Reserve Bank of India, Stock Exchanges and other statutory authorities. The Directors also wish to thank all investors, vendors, financial institutions, banks and joint venture partners for their continued support and faith reposed in the Company. The Board places on record its appreciation for the contribution made by the employees of the Company and its group companies across all levels.
Mar 31, 2023
Your Directors take pleasure in presenting the 74th Annual Report together with the audited financial statements of the Company for the financial year (âFYâ) ended March 31,2023.
Cholamandalam Financial Holdings Limited (âCFHLâ) is primarily an investment company, holding investments in its subsidiary / associate / joint venture and other group companies. CFHL is registered as a Non-Deposit taking Systemically Important Core Investment Company (âCICâ) pursuant to the receipt of Certificate of Registration dated January 6, 2020 issued by the Reserve Bank of India (âRBIâ) under section 45-IA of the Reserve Bank of India Act, 1934. The RBI vide its notification dated October 22, 2021 had introduced an integrated regulatory framework for NBFCs under âScale Based Regulation (âSBRâ):A Revised Regulatory Framework for NBFCsâ. The SBR framework encompasses different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulation, etc. Under the SBR framework, NBFCs are divided into four layers viz., top layer, upper layer, middle layer and base layer based on the size, activity and perceived riskiness. The Company being a CIC falls under the category of Middle Layer NBFC (âNBFC-MLâ).
CFHL holds substantial investments in the following financial services / risk management companies of the Murugappa Group (hereinafter collectively referred as âthe group companiesâ).
⢠Cholamandalam Investment and Finance Company Limited (âCIFCLâ), a non-banking finance company engaged in lending business offers vehicle finance, home loans, loan against property, SME loans, secured business and personal loans (SBPL), consumer & small enterprises loans (CSEL) and a variety of other financial services to customers;
⢠Cholamandalam MS General Insurance Company Limited (âCMSGICLâ), engaged in general insurance business offers a wide range of insurance products that include Motor, Health, Property, Accident, Engineering, Liability, Marine, Travel and Crop insurance for individuals and corporates;
⢠Cholamandalam MS Risk Services Limited (âCMSRSLâ) offers comprehensive Risk Management and Engineering solutions.
The global economy has been through a series of significant shocks over the past couple of years. The year 2022 started off with geopolitical tensions and the consequential inflationary pressures triggered a pervasive slowdown in several economies. Global inflation continued to rise significantly leading to a cost-of-living crisis in many regions across the world. The impact of tighter monetary policies was felt across the economy, particularly on private investment besides affecting global output causing risks to food and energy, security and other significant changes in commodity markets. Though in the interim, the economy saw some relief, uncertainties continue to undermine the confidence among consumers. Further challenges to the global economic growth include Chinaâs recovery of private consumption, tight labour markets in many countries and the deterioration in China-U.S. relations threatening international trade and policy co-operation. Against this backdrop, analysts have projected the global economic growth to remain at low trend rates of 2.6% in 2023 and 2.9% in 2024.
Despite the global slow down, Indian economy demonstrated resilience during FY 23. The economy driven by strong macro-economic fundamentals and domestic demand continues to be one of the fastest growing major economies. As per IMF reports, India is the fifth largest economy and is estimated to fare well in the medium term amongst large economies. The domestic GDP moderated in the second half year as evidenced from the macro-economic indicators. To augment the ongoing momentum, the Union Budget 2023-24 emphasised growth through capital expenditure, inclusive development and policy reforms. The initiatives taken by the Government to improve the disposable income of taxpayers in the country will aid in boosting consumption by an increase in discretionary spending. Further, the Governmentâs strong infrastructure push under the Prime Ministerâs Gati Shakti scheme is expected to drive growth, investments, and job creation. Strong credit growth and resilience in financial markets are further expected to create an environment that supports investments.
Inflation in India remained high, averaging around 6.7% in FY 23 as compared to 5.3% in the same period last year. The RBIâs continual focus in controlling inflation led to a hike in policy repo rates quite a few times since May 2022. In response to the measures taken by RBI, the spurt in liquidity conditions that prevailed post pandemic moderated during the year in consonance with the changed monetary policy stance that focused on the withdrawal of accommodation. Overall, the domestic GDP growth in FY 23 is estimated at around 7% compared to 9.1% in the previous year.
In the above context, we look forward for a favourable economic environment in FY 24 backed by a robust domestic demand and supportive government initiatives. The economy is likely to witness an accelerated growth as investments kickstart the virtuous circle of job creation, income, productivity, demand and exports supported by favourable demographics in the medium term. However, external challenges such as geo-political conditions, global inflation, supply chain disruptions and tight monetary policy continue to be the downside risks that could impact the GDP growth.
|
STANDALONE FINANCIAL RESULTS |
('' in Crore) |
|
|
Particulars |
2022-23 |
2021-22 |
|
Total Income |
83.76 |
83.51 |
|
Total Expenses |
9.90 |
12.77 |
|
Profit Before Tax |
73.86 |
70.74 |
|
Tax Expense |
15.99 |
15.23 |
|
Profit for the year |
57.87 |
55.51 |
|
Other Comprehensive Income |
0.22 |
0.58 |
|
Total Comprehensive Income |
58.09 |
56.09 |
The paid-up equity share capital of CFHL as on March 31, 2023 was ''18.78 Crore. During the year, 34,570 equity shares were allotted upon exercise of vested stock options by eligible option grantees under the Companyâs Employees Stock Option Scheme 2016.
The Board of Directors have recommended a final dividend at the rate of 55% i.e., ''0.55 per equity share of face value of ''1/- each for the year ended March 31, 2023.
The Company has transferred a sum of ''11.58 Crore (previous year: ''11.11 Crore) to Special Reserve under section 45-IC of the Reserve Bank of India Act, 1934.
CFHL earns revenue primarily by way of dividend income from investments held in group companies. An overview of the financial services sector in which the Company operates along with a business update of group companies during FY 23 is summarised in the following paragraphs.
NBFC Industry & Business Update
Indiaâs financial sector is a highly diversified one comprising commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The sector dominated by banking and non-banking financial companies (âNBFCsâ) has witnessed exponential growth in the last decade driven largely by regulatory reforms and their ability to cater to unbanked areas through innovative products and service delivery mechanisms. However, in the past few years the sector was dealing with the contagion effects associated with the collapse of a few NBFCs and co-operative banks followed by the pandemic and global political conflicts. After challenging years, the NBFC industry has rebounded well in FY 23. The overall NBFC sector including Housing Finance Companies (âHFCsâ) benefited from resurgent domestic economic activity leading to strong momentum in disbursements and bolstering higher business growth backed by various policy initiatives of the Government and the regulators. The momentum is expected to continue in the current year also. The outlook for the industry remains positive as the country strides on its growth trajectory leading to higher credit demand. The growth in credit is expected to be broad based across products and segments with key risks being elevated interest rates and inflation.
Cholamandalam Investment and Finance Company Limited (âCIFCLâ), an NBFC incorporated in 1978, is one of the leading, comprehensive financial service provider offering vehicle finance, home loans, loan against property etc., to a wide range of customers.
Vehicle Finance (âVFâ)
CIFCLâs Vehicle Finance business comprising diversified portfolio viz., commercial vehicles, passenger vehicles and used vehicles, continues to be the major segment contributing 69% of its aggregate assets under management (âAUMâ) as at March 31,2023.
At the industry level, commercial vehicles, passenger vehicles and two-wheelers registered double digit growth in FY 23 due to improvement in economic activity, revival of construction / mining activities and improvement in semiconductor supplies. The commercial vehicle industry is expected to deliver double digit growth in FY 24 driven by freight demand, replacement demand, structural economic recovery and higher infra spends by the Government. However, the increase in fuel prices and its impact on viability of fleet operators will remain a key challenge in FY 24. The domestic car and utility vehicle industry witnessed a 27% growth in FY 23 backed by strong underlying demand, easing of semiconductor supply and improvement in sale of utility vehicles due to shift in customer preferences. Steady demand is expected in FY 24 with double digit growth. The two-wheeler segment witnessed a 17% growth in FY 23 with improved demand sentiments over the previous year. This segment is expected to grow by 9 to 10% in FY 24 with the expectation of improved rural demand. The domestic tractor industry had a 12% growth in FY 23 supported by strong demand during the festive season, favourable monsoon and farm cash flows remaining stable. However, moderation in demand during FY 24 is expected due to uncertainties relating to monsoons. The domestic construction equipment industry witnessed a growth of 26% in FY 23 supported by improvement in the overall macroeconomic environment, a strong revival in construction activities and thrust on completion of infrastructure projects. Healthy volume pickup with the run up to elections augur well for this industry in FY 24.
The VF business of CIFCL disbursed ''39,699 Crore in FY 23 as against ''25,439 Crore in the previous year registering an impressive growth of 56% and profit before tax (âPBTâ) for the year was ''2,272 Crore as against ''2,054 Crore in the previous year. The business aims to improve the marginal yields across its segments considering the increase in borrowing rates and focus on driving higher disbursals in the high yield segments which will help in maintaining Net Income Margin (âNIMâ).
The companyâs vast branch network helps in acquiring new customers and creates proximity with customers, helping in better collection efficiency and higher repeat business. The VF business will continue to expand and strengthen its existing relationships with customers, manufacturers, brokers, and dealers by utilizing new tools and platforms. Analytics based pre-approved loan offers are being generated for both new and existing customers which simplifies the loan origination journey leading to enhanced customer experience. The business with a robust collection mechanism, best-in-class credit underwriting, a strong risk assessment framework and an extensive penetration in the hinterland is expected to progress to the next level of growth in the coming year.
Loan against Property (âLAPâ)
In FY 23, Banks registered strong growth in the segment due to lower cost of funds and adequate liquidity support. The segment is expected to grow by 9-11% in fiscal 2024, driven by improved economic conditions assisting in normalisation of business activities.
Pan-India geographical penetration into new markets, introduction of localized credit policy in line with market developments, increased contribution from rural branches has led to the growth of CIFCLâs LAP business. The business continues to focus on a systematic approach to build a healthy portfolio mix, with more than 80% of portfolio secured by residential properties and an average loan ticket size of less than ''50 Lakhs. The business has further introduced new high yield product like Small and Emerging Group (SEG) and Micro LAP to increase the profitability.
Assets Under Management (âAUMâ) for the business grew by 29% to ''21,588 Crore (previous year: ''16,795 Crore) and disbursements registered a growth of 68% to ''9,299 Crore (previous year: ''5,536 Crore).
Home Loans (âHLâ)
The Indian Housing Finance market is estimated to be about ''26 lakh crore and grew at around 11-15% in FY 23. Credit growth in Banks outpaced that of HFCs/ NBFCs. In terms of ticket size, the sub ''25 lakh segment contributed 29% of the disbursements during last FY and this level is expected to be sustained. Analysts expect the housing sector to grow 11-16% in FY 24 and affordable housing to grow at 18-22% in the same period.
As on March 31, 2023, CIFCLâs HL business had 70,182 live accounts (53% growth Y-o-Y) with an AUM of ''8,451 Crore (51% growth Y-o-Y). 93% of this portfolio is from tier II, III, IV cities and towns. The disbursements grew by 102% Y-o-Y from ''1,896 Crore in FY 22 to ''3,830 Crore in FY 23.
Lower Middle-Income-Group customers continue to be the target group for HL business. The business has been strengthening the channel partner network to reach out to more customers. During the year, the HL business expanded its footprint in Northern / Eastern states besides expansion of its branch network further in states previously operational. Given that these customers are mostly first-time buyers, the sales officers guide and facilitate the customer through the entire borrowing process. The business has also developed a strong collections and legal recovery team across geographies to ensure that asset quality is maintained.
Consumer & Small Enterprise Loan (âCSELâ)
As of March 31,2023, the CSEL business of CIFCL had crossed 5 lakh active customers with an AUM of ''5,527 Crore. The division has entered strategic partnerships with leading fintech companies to drive greater financial inclusion, especially among those customers who are economically active but not having adequate access to formal credit. Overall disbursements of the division crossed ''6,865 Crore and a PBT of ''62 Crore in FY 23 with contribution from all zones in the country. The key strengths of the division such as its transparent end to end digital process, superlative customer experience journey, strong data driven underwriting & risk management capabilities combined with the trust of Chola brand makes it well placed to become a market leader in this segment.
Small and Medium Enterprises (âSMEâ)
The progressive reforms introduced by the government for SME sector resurgence have been fruitful as reflected in the vigorous business activity. Demand for credit from the SME sector is high and supply by the credit industry remains stable while delinquencies have declined. The rapid pace of innovations driven by the government and the lending ecosystem has significantly enabled the SME sector to continue its high growth trajectory.
CIFCLâs SME finance disbursements during the year were at an all-time high of ''6,388 Crore against ''1,926 Crore in the previous year with a growth of 232%. The SME division was able to grow significantly by onboarding new OEMs, Anchor Tie-ups, Fintech partnerships and through branch expansion. AUM for the business grew by 235% to ''3,550 Crore in FY 23 compared to ''1,058 Crore in FY 22. SME Division will continue to focus on equipment finance, term loans and supply chain finance and also launch new product lines in the form of Health care financing, lease rental discounting, leasing finance, factoring and solar financing etc. The business has been strengthening the sourcing partners network to reach out to more customers.
Secured Business and Personal Loan (âSBPLâ)
Personal & Professional Loans is one of the fastest-growing segments in India. As per market research reports, disbursement growth in the personal loan space is expected to reach 18-20% in FY 24 due to a healthy credit demand. NBFCâs market share in terms of value in the personal loan space is currently at 21% and is expected to increase to 22% in FY 24. As per the reports, the business loan segment will see a growth of 15-18% in FY 24 ad NBFCs are expected to grow faster in this space.
As of March 31, 2023, CIFCLâs SBPL business had crossed 10,000 active accounts with an AUM of ''444 Crore. The average ticket size was around ''4.42 lakhs with average tenure of 69 months. The loans offered are predominantly business loans against self-occupied residential property.
Outlook
CIFCL will look to scale up through new product segments as well as improving efficiencies in existing segments. The companyâs strong sales and collections combined with digital initiatives and branch reach will also support in improving efficiencies.
General Insurance Industry & Business Update
The general insurance industry was characterized by several regulatory changes that are favourable to the industry in terms of growth, adding business partners, securing Tier II capital etc. during FY 23. Effective April 1,2023 regulations relating to commission and expenses of management were amended with an aim to provide flexibility to the insurers in operational management and mandates insurers to conform to an overall capped expense level with in a period of three years. Other proposed regulatory changes relating to long term products, reinsurance, amendment to insurance act etc., is likely to enhance the operational scope of non-life insurers.
The Gross Direct Premium of multi-line non line insurers (excluding standalone health & specialised insurers), was reported at around ''2,148 billion, a growth of around 16.2% over the previous year. Amongst the various lines of businesses, motor insurance registered a growth of 15.4% while the fire line of business grew by 11.1%. The growth in the health and personal accident lines for general insurers was 21.2% and 1.6% respectively. At the industry level, the market share of public sector companies was 38.6% with the private sector companies growing their share to 61.4%.
Cholamandalam MS General Insurance Company Limited (âCMSGICLâ), the insurance subsidiary of CFHL, is registered with the Insurance Regulatory and Development Authority of India (âIRDAâ) to carry on general insurance business. CMSGICL offers a wide range of insurance coverage including motor, travel, health, accident, home and other types of insurance for individual and corporate customers.
CMSGICL achieved a gross premium of ''6,407 Crore, a growth of 23% which helped in growing its market share to 2.87% (among general insurance players). The company grew its business operations across
channel categories of bancassurance, agents/Point of sales person (POSP), brokers, Motor Insurance Service Provider (MISP). During the year, the company added to its channel partners by entering into new bancassurance agreements besides renewal of existing agreements. The company expanded its presence in automobile manufacturers and agency network which aided in improving its business dispersal across the country. The customer additions in FY 23 crossed 1 Crore and over 5.5 Lakh claims were serviced by the company during the year. The company also finalised its plans for technology transformation and data analytics for implementation in the following year. This exercise would help the company shift from it legacy systems platforms to a contemporary, customer-intermediary friendly transacting experience.
Motor Insurance
The motor insurance business registered a growth of over 26.8% during the year. The company stepped up the renewal ratio in the cars segment. The premium pricing in motor own-damage witnessed severe pressure with discounts across vehicle categories staying at higher levels. This has caused an adverse change in the motor OD claims ratios of all players in the industry. Corrective steps have been initiated by way of reduced discounts and reduced intermediation fees.
In motor third party, the marginal hike in pricing of third party premium effective June 2022 was inadequate to compensate for the inflation in medical costs as well as continuous increase of the minimum wage levels across all states in the country. The company continues to exercise utmost care in its choice of sub-segments and geographies.
Property and Casualty Insurance
The growth in premium from commercial lines of business was mainly driven by 33.4% growth in the fire insurance business. Marine and group accident lines of businesses also witnessed improved performance with increase in the levels of economic activity and focused sourcing. The miscellaneous lines of insurance business grew well during the year. The Company registered growth across its business verticals of Indian Commercial, SME, Japanese & Korean and Bancassurance. CMSGICL continues to follow disciplined underwriting and prudent risk selection in the highly demanding environment.
Health, Accident and Travel Insurance
The health, accident and travel insurance business grew by more than 35% during the year with stronger growth in retail health. Even as retail indemnity business continues to scale up, the bancassurance led health benefit and
accident product grew faster with the return of economic activity. New health products - both indemnity and benefit were added during the year besides stepping up on its distribution build of both POSP as well as channel partners. The company continues to strengthen its underwriting framework with intelligent use of technology for its risk selection, upsell and cross-sell initiatives.
Crop Insurance
In the context of the Expenses of Management Regulations and changes in the crop insurance space, CMSGICL has decided to participate in crop insurance schemes in FY 24 and has secured necessary reinsurance arrangements to re-enter the line of business.
Reinsurance (RI)
During the year the international markets witnessed absolute hardening due to natural catastrophes across the globe, sharp inflation and currency depreciation in Europe and the USA. Consequently, it resulted in reinsurers restricting capacity, moderating on commission levels and insisting on sharp price increases for balance sheet protection covers. The companyâs proportional and non-proportional treaties generated surplus for the reinsurers during the year. The company has put in place new reinsurance arrangements in respect of its product offerings. Reinsurance renewal for FY 24 had challenges on cost of covers for catastrophe programs and the company successfully negotiated and completed the RI placements for FY 24 by diversifying the panel of reinsurers.
Claims functions
The year under review witnessed the claims management function stepping up speed of disposal while handling larger volumes with efficiency and productivity. The company continues its journey in digitisation of its claims processes across lines of businesses.
Harnessing efficiencies for severity control across all lines, automation for speed and operational controls, proactive approach to servicing for building transparency and satisfaction levels of customers continues to be the focus area of CMSGICL.
Outlook
The general insurance industry bounced back after the two covid years in terms of growth and carries the optimism into FY 24 also. Headwinds for the industry include price reduction in property premium, higher inflation impacting consumer spends and claims costs, uncertainty over the revision in motor third party premium pricing, rise in reinsurance costs etc. Amongst
the tail winds are the anticipated growth in automobile sales, infrastructure spend thrust from the Government, expected credit offtake from the banks etc.
CMSGICL will continue to strengthen its growth path by addition of new channel partners, expansion into new markets, enhanced focus on renewals besides launching new products across lines of businesses. The company is committed to tighten its expense of management levels by a judicious mix of channels, product sub categories and rationalise commission structures linked to inherent profitability.
Digital / Technology Initiatives
Digital transformation continues to be the focus area of the group companies. Various initiatives and technology tools are deployed for automation of repetitive activities across functions wherever opportunity exists. The initiatives implemented by CMSGICL during the year include - launch of new mobile applications which enhances customer experience, enablement of digital platforms for new products, expansion of modes for claims intimation through IVRS and voice BOT enablement and revamp of CRM software to provide superior customer service.
With regard to our NBFC business, significant enhancements on the digital front have been put in place for new businesses - CSEL, SBPL and SME. Besides driving changes to external facing applications, CIFCL is also rigorously driving automation across different parts of the business and supporting functions. Further, the company is carrying out a key transformation of its data infrastructure and building an integrated data repository to serve business and compliance reporting as well as analytical needs. The businesses will continue its efforts around strong technology controls, secure development, structured technology & security operations for system availability, data sanctity, and appropriate and timely handling of security incidents.
Risk Management Services - Business Update
Cholamandalam MS Risk Services Limited (âCMSRSLâ), is engaged in providing risk management and engineering solutions in the field of safety, health and environment, in association with CMSGICL. CMSRSL expanded its service offering in FY 23 by launching a number of strategic projects in the areas of âBehavioural Science Based Safetyâ and âAlliance Water Stewardshipâ. Additions to the companyâs order book during the year aggregates to ''70 Crore and more than 325 assignments in the segment of process safety, 170 projects in electrical and 50 in environment studies were carried out
during the year. CMSRSL has strengthened its business relationship with strategic alliance partners and continues to serve Cholamandalam MS General Insurance through value-added services like Thermography, Safety Audits, and Cargo Loss Minimization studies. CMSRSL has crossed 375 resources mark, backed by a strong technical team of multidisciplinary and certified professionals having exposure to domestic and international markets. Our joint venture partner, Mitsui Sumitomo Insurance Company Limited, Japan, continues to support the business by introducing Japanese companies in the Indian market for risk management services.
FY 24 began with a strong order book of ''61 Crore. The outlook for FY 24 includes expansion of its customer base through a targeted marketing and branding strategy in the domestic market and leveraging the customer base of its strategic alliance partners. Implementation of organizational restructuring that will enable the company to adapt to future requirements, entering new areas such as green hydrogen and supporting companies in the energy transition are some of the key initiatives planned in FY 24. The company will also focus on building its capabilities in the areas of net zero consulting with its Inogen partners and planning to become active in the ESG reporting market.
|
CONSOLIDATED FINANCIAL RESULTS |
('' in Crore) |
|
|
Particulars |
2022-23 |
2021-22 |
|
Total Income |
18,376.03 |
14,734.98 |
|
Total Expenses |
14,551.63 |
11,691.42 |
|
Profit Before Tax of Profits from Associate / Joint Venture and Tax |
3,824.40 |
3,043.56 |
|
Share of Profit from Associates /Joint Venture (Net of Taxes) |
(8.69) |
(2.87) |
|
Profits Before Tax |
3,815.71 |
3,040.69 |
|
Tax Expense |
(1006.09) |
(801.33) |
|
Profits for the year |
2,809.62 |
2,239.36 |
|
Minority Interest |
(1,519.39) |
(1,216.29) |
|
Net Profit for the year attributable to owners of the Company |
1,290.23 |
1,023.07 |
During the year the Company has not made any investments in its subsidiaries. There has been no change in the nature of business of the company and the group companies during the year. Business performance of the group companies has been furnished in earlier paragraphs of this report.
A report on the performance and financial position of each of the group companies as per section 129(3) of the
Act read with the Companies (Accounts) Rules, 2014, in the prescribed form AOC-1 is annexed to this Report as Annexure I. The consolidated financial statements of the Company prepared in accordance with the Companies Act, 2013 (âthe Actâ) and the relevant Accounting Standards, forms part of the annual report.
The annual report containing standalone and consolidated financial statements will be uploaded on the Companyâs website, www.cholafhl.com. Annual accounts of the group companies will also be uploaded on the Companyâs website and be made available for inspection by shareholders through electronic mode until the date of the Annual General Meeting (âAGMâ).
FINANCIAL REVIEW - SUBSIDIARY / ASSOCIATE / JOINT VENTURE COMPANIES
CFHL earned an income of ''83.76 Crore (previous year: ''83.51 Crore) and profit before tax was ''73.86 Crore (previous year: ''70.74 Crore) for the financial year ended March 31, 2023. Aggregate investments stood at ''1,280.12 Crore (previous year: ''1,279.84 Crore) as on March 31, 2023. During the year, the Company repaid ''50 Crore of Non-Convertible Debentures (âNCDsâ) and the outstanding NCDs as on March 31, 2023 was ''50 Crore.
Cholamandalam Investment and Finance Company Limited (âCIFCLâ)
The Company holds 45.36% in the paid-up equity share capital of CIFCL as on March 31,2023 and has de-facto control as per the principles of Ind AS 110. Accordingly, CIFCL is treated as a subsidiary for the purpose of consolidation of financial statements. The securities of CIFCL are listed and traded on the National Stock Exchange of India Limited (NSE) and the BSE Limited (BSE).
The Assets under Management (âAUMâ) grew by 36% to ''1,12,782 Crore as at March 31,2023 (previous year: ''82,904 Crore). Loan disbursements aggregated to ''66,532 Crore (previous year: ''35,490 Crore) registering a growth of 87% during the year. Profit after tax grew by 24% to ''2,666 Crore (previous year: ''2,147 Crore). Investment portfolio of CIFCL as at end of FY 23 was ''3,628 Crore including investments in government securities of ''1,541 Crore.
The company maintained a comfortable ALM position with no negative cumulative mismatches across all time buckets. As at end of FY 23, the capital adequacy ratio stood at 17.13% as against the minimum regulatory requirement of 15%. During the year CIFCL raised CP aggregating to ''15,800 Crore of which ''14,250 Crore were repaid. Outstanding NCDs were ''14,767 Crore and Tier II borrowings stood at ''4,376 Crore as on March 31,2023.
CIFCL paid an interim dividend of ''1.30 (65%) per equity share of face value of ''2/- each for FY 23. The Board of CIFCL has recommended a final dividend of ''0.70 (35%) per equity share for FY 23, subject to their shareholdersâ approval.
CIFCLâs subsidiary companies are Cholamandalam Securities Limited (âCSECâ), Cholamandalam Home Finance Limited (âCHFLâ) and Payswiff Technologies Private Limited (âPayswiffâ). CSEC is engaged in stock broking and investment advisory services. CSEC focused on creating three distinct business lines for enhancing revenues and productivity - broking, wealth and insurance distribution. During the year, the company increased its footprint from 22 branches to 34 branches. CSEC achieved a gross income of '' 51.54 Crore (previous year: ''40.01 Crore) and profit before tax of ''8.68 Crore (previous year: ''7.48 Crore) for the year ended March 31, 2023 and the mutual fund AUM was ''790.66 Crore as at March 31,2023.
CHFL recorded a gross income of ''81.87 Crore (previous year: ''56.37 Crore) and made a profit before tax of ''7.66 Crore (previous year: ''9.19 Crore) for the year ended March 31, 2023. Currently, the company continues its focus on growing insurance corporate agency business.
Payswiff recorded a gross consolidated income of ''230.27 Crore and made a loss of ''12.03 Crore (previous year: loss ''42.51 Crore) for the year ended March 31, 2023. Payswiff Solutions Private Limited and Payswiff Services Private Limited are subsidiaries of Payswiff.
The associate companies of CIFCL are White Data Systems Private Limited, Vishvakarma Payments Private Limited and Paytail Commerce Private Limited.
Cholamandalam MS General Insurance Company Limited (âCMSGICLâ)
The Company holds 60% in the paid-up equity share capital of CMSGICL a joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan and is a material subsidiary of the Company. The IRDAI has deferred the implementation of Ind-AS for insurance companies. Therefore, financials of CMSGICL have been restated as per Ind-AS for consolidation purposes and figures of CMSGICL reported in this annual report are under Ind-AS.
CMSGICL achieved a gross written premium of ''6,407 Crore in FY 23 (previous year: ''5,194 Crore) and profit before tax was ''211 Crore (previous year: ''139 Crore).
The investment portfolio of CMSGICL grew to ''14,271 Crore as at March 31, 2023 (previous year: ''11,356 Crore). The company took advantage of the rising interest rate environment to deploy its accretion/maturing funds at higher yields. The exposure to Central and State Government securities stood at 65.1% of the investment assets (previous year 66.1%). As of March 31, 2023, the company had nil non-performing assets in its investment portfolio. The solvency ratio of CMSGICL as on March 31, 2023 was 2.01 times as against the minimum regulatory requirement of 1.50 times.
With a view to conserve its resources and augment solvency ratio, the Board of CMSGICL has not recommended dividend for FY 23.
Cholamandalam MS Risk Services Limited (âCMSRSLâ)
The Company holds 49.5% in the paid-up equity share capital of CMSRSL, a joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan and has a technical collaboration with Inter Risk, a group company of Mitsui Sumitomo Insurance Group.
CMSRSL achieved an income of ''64.93 Crore (previous year: ''59.69 Crore) and profit before tax of ''9.19 Crore (previous year: ''7.15 Crore) for the year ended March 31,
2023. The Board of CMSRSL has recommended a final dividend of 25% i.e., ''2.50 per equity share of face value of ''10/- each for FY 23.
Pursuant to section 149 and regulation 17(1C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âthe SEBI Listing Regulationsâ), the appointment of Mr. K Balasubramanian (DIN : 00137260) as an Independent Director for a term of three (3) consecutive years with effect from March 17, 2022 till March 16, 2025 was approved by the shareholders by way of special resolution passed through postal ballot on May 17, 2022.
The shareholders at the 70th AGM approved the appointment of Mr. B Ramaratnam (DIN: 07525213) as an Independent Director for a term of five consecutive years commencing from March 18, 2019 till March 17,
2024. In view of his current term coming to an end on March 17, 2024 and based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors at their meeting held on May 12, 2023 recommended the re-appointment of Mr. Ramaratnam as an Independent Director for a second term of three consecutive years with effect from March 18, 2024 till March 17, 2027. In the opinion of the Board, Mr. Ramaratnam continues to fulfill the criteria of
independence prescribed in the Act and under the SEBI Listing Regulations for re-appointment as an Independent Director of the Company and that he is independent of the management. The Company has received a notice under section 160(1) of the Act from a member proposing his candidature at the ensuing AGM. Necessary resolution seeking shareholdersâ approval for re-appointment of Mr. Ramaratnam as Independent Director on the Board, forms part of the Notice convening the 74th AGM of the Company.
As per the provisions of section 152 of the Act, Mr. Vellayan Subbiah (DIN: 01138759) retires by rotation at the ensuing AGM and being eligible offered himself for re-appointment. The Board recommends the re-appointment of Mr. Subbiah as a director liable to retire by rotation and the resolution in this regard forms part of the Notice convening the 74th AGM of the Company. Information as required to be disclosed under regulation 36(3) of the SEBI Listing Regulations, for re-appointment of directors is provided in the Notice.
DECLARATION FROM INDEPENDENT DIRECTORS
The Independent Directors (âIDsâ), Mr. B Ramaratnam, Mrs. Vasudha Sundararaman and Mr. K Balasubramanian have submitted declarations stating that they meet the criteria of independence as required under the provisions of section 149(6) of the Act and regulation 16(1)(b) of the SEBI Listing Regulations. In the opinion of the Board, all the IDs possess integrity, expertise and relevant experience in their respective fields including the proficiency required to effectively discharge their roles and responsibilities in directing and guiding the affairs of the Company.
In terms of section 150 of the Act read with the Companies (Appointment & Qualification of Directors) Rules, 2014, the IDs of the Company have registered their names in the independent directorsâ data bank created and maintained by the Indian Institute of Corporate Affairs (âIICAâ). The IDs are also required to pass an online proficiency self-assessment test conducted by the IICA within a period of two years from the date of inclusion of their names in the data bank, subject to exemption to individuals who fulfill the eligibility criteria prescribed under the said Rules. All the IDs are compliant with the requirement under the said Rules.
Pursuant to the provisions of section 203 of the Act, Mr. N Ganesh, Manager & Chief Financial Officer and Mrs. E Krithika, Company Secretary are the key managerial personnel of the Company and there were no changes during the year.
Mr. Ganesh was re-appointed as the Manager of the Company for a period of three years with effect from June 15, 2020. His tenure as Manager expires on June 14, 2023. Subject to the approval of shareholders, the Board at its meeting held on May 12, 2023 re-appointed Mr. N Ganesh as the Manager for a further period of three years with effect from June 15, 2023. Necessary resolution seeking shareholdersâ approval forms part of the Notice convening the 74th AGM of the Company.
Pursuant to the provisions of section 139(2) of the Act and the rules made thereunder and the guidelines for appointment of statutory auditors for Banks and NBFCs dated April 17, 2021 issued by the RBI, M/s. Sharp & Tannan Associates (âS&T Associatesâ), Chartered Accountants, were appointed as the statutory auditors of the Company at the 72nd AGM held on August 4, 2021, for a period of three years commencing from the conclusion of the 72nd AGM until the conclusion of the 75th AGM. M/s. S & T Associates have confirmed their eligibility to continue as auditors of the Company for FY 24.
The Auditorsâ Report issued by S&T Associates for the year under review is unmodified and does not contain any qualification, reservation, or adverse remark. The statutory auditors have not reported any incident of fraud to the Audit Committee or the Board of Directors under section 143(12) of the Act during the year.
Deposits
The Company has not accepted any fixed deposits under Chapter V of the Companies Act, 2013 and as such no amount of principal and interest were outstanding as on March 31,2023.
Particulars of Loans, Guarantees or Investments
The provisions of section 186 of the Act pertaining to investment and lending activities is not applicable to CFHL since the Company is an NBFC whose principal business is acquisition of securities. Information regarding investments made during the year is given in the financial statements. During the year the Company has not given any loans or guarantees under the provisions of section 186 of the Act.
Internal Financial Control Systems with reference to the Financial Statements
The Company has in place adequate internal financial controls to ensure reliability of financial and operational information and regulatory and statutory compliances. The Companyâs business processes are equipped with monitoring and reporting processes to ensure financial
discipline and accountability. The internal financial control systems are monitored both by internal and statutory auditors of the Company. The statutory auditors of the Company have also certified on the existence and operating effectiveness of the internal financial controls as on March 31,2023.
The Company being an investment company does not carry on any business other than holding investments in its group companies. Dividend receipts from investee companies is the primary source of income. Key ratios of the Company are given in the table below:
|
Ratio Description |
31-Mar-2023 |
31-Mar-2022 |
|
Return on Net Worth |
4.68% |
4.68% |
|
Return on Total Assets |
4.49% |
4.30% |
|
Debt Equity Ratio (No. of times) |
0.04 |
0.08 |
|
Leverage Ratio (No. of times) |
0.004 |
0.01 |
|
Ratio of Adjusted Net Worth (ANW) to its aggregate risk weighted assets |
1123.23% |
942.78% |
The Company redeemed NCDs aggregating to ''50 Crore during the year. Therefore, there is a decrease in debt equity ratio and leverage ratio. The increase in adjusted net-worth is on account of an increase in unrealised gains on investment in subsidiaries. The leverage ratio (maximum regulatory requirement: 2.5 times) and adjusted net worth ratio (minimum regulatory requirement: 30%) are computed in accordance with the Master Directions - Core Investment Companies (Reserve Bank) Directions, 2016 (âMaster Directions of RBIâ).
INTERNAL CONTROL SYSTEM AND INTERNAL AUDIT
Internal control system of an organisation is looked at as the key to its effective functioning. The Company has internal control systems in place commensurate with the nature of business and size of its operations, to ensure compliance with internal policies, regulatory matters and to safeguard reliability of financial reporting and its disclosures. An audit of systems and processes is conducted by the internal auditor of the Company.
The internal audit is performed based on the audit plan approved by the Audit Committee annually. The internal audit report along with the observations and recommendations from the audit review are discussed and reviewed in the quarterly meetings of the Audit
Committee. The Audit Committee evaluates adequacy and effectiveness of the internal controls, performance of the internal audit, recommends improvements and reviews the action taken.
Risk management is a process to identify and manage threats that could have an impact on the operations of the Company. Generally, this involves reviewing business operations, identifying potential threats to the company and the likelihood of their occurrence and then taking appropriate actions to address the most likely threats. The Company adopts a systematic approach to mitigate risks associated with accomplishment of objectives, operations, revenues and regulations. The Company believes that this would ensure mitigating risks proactively and help to achieve stated objectives. The risk management framework of the Company comprises of the following key elements viz., a) Risk Assessment: study of threats and vulnerability and exposure to various risks; b) Risk Management and Monitoring: probability
of risk assumption is estimated and monitored; and
c) Risk Mitigation: measures adopted to mitigate risk by the Company.
The Risk Management Committee assists the Board in monitoring various risks, reviews and analyses risk exposures and mitigation plans related to the Company and its group companies. A Risk Management Policy has been adopted by the Board of Directors which inter alia sets out risk strategy, approach and mitigation plans, liquidity risk management and asset liability management. During the year the Risk Management Committee of the Board of CFHL reviewed key risk exposures of the Company along with mitigation measures, asset liability management, structural liquidity management besides review of key risk exposures and mitigation measures of its NBFC and general insurance businesses.
Key risk exposures of the Company along with risk mitigation measures are provided in the table below. The risks furnished below are not exhaustive and assessment of risk is based on management perception.
Further, risks arising out of NBFC and insurance businesses constitute the dominant risks of the Company on a consolidated basis. The group companies have their own risk management framework in line with its strategic business operations as appropriate to the industry in which they operate. The risk management framework of NBFC and insurance businesses are broadly based on: clear understanding and identification of various risks, disciplined risk assessment by evaluating the probability and impact of each risk, measurement and monitoring of risks by establishing key risk indicators with thresholds for all critical risks and adequate review mechanism to monitor and control risks.
Business operations of each of the group companies, the risks faced by them, and the risk mitigation tools followed by them are reviewed periodically by the Risk Management Committees and the Boards of the respective group companies.
CIFCLâs risk management division works as a value center by constantly engaging with the business and providing key insights into the portfolio based on data driven analysis. The key risks faced by CIFCL are credit risk, liquidity risk, interest rate risk, operational risk, reputational and regulatory risk, which are broadly classified as credit risk, market risk and operational risk. The in-house developed risk monitoring tool of CIFCL measures the movement of critical risks. This provides the level and direction of risks which are arrived at, based on the two-level risk thresholds for the identified key risk indicators and are aligned to the overall companyâs risk appetite framework approved by the Board.
The risk management framework of CMSGICL broadly comprise of establishment of risk management policy, formulation of risk register, review of key risk exposures and asset liability management. Risk management activities of CMSGICL are aligned to its corporate objectives, organisational priorities and designed to protect and enhance its reputation.
The Company firmly believes in committing itself to maintaining high standards of corporate governance. A report on corporate governance of the Company together
with a certificate from practicing company secretaries in accordance with the SEBI Listing Regulations is annexed to this Report as Annexure II. The Report further contains other details which are required to be provided in the Boardâs Report.
Five meetings of the Board were held during the year ended March 31, 2023. Further details on the Board meetings are disclosed in the Report on Corporate Governance.
COMPOSITION OF THE AUDIT COMMITTEE
The Board has constituted an Audit Committee in terms of the applicable provisions of the Act, the SEBI Listing Regulations and the Master Directions of RBI. Details of terms of reference, composition and meetings of the committee are disclosed in the Report on Corporate Governance.
Pursuant to the provisions of section 134 of the Act and regulation 17 of the SEBI Listing Regulations, the Board of Directors have carried out an annual performance evaluation of the Board itself, the individual directors, various committees of the Board and the Chairman for FY 23. The manner in which the evaluation has been carried out is provided in the Report on Corporate Governance.
POLICY ON BOARD NOMINATION AND REMUNERATION
The Board has formulated a policy for selection and appointment of directors, senior management and their remuneration. Details of which are furnished in the Report on Corporate Governance.
CORPORATE SOCIAL RESPONSIBILITY (âCSRâ)
With the enactment of Corporate Social Responsibility (CSR) provisions in the Companies Act, 2013, the Company has framed a CSR Policy and the policy is available on the Companyâs website at http://www.cholafhl.com/article/profile/967. Pursuant to the provisions of section 135(5) of the Act, every company shall spend at least two percentage of its average net profits
made during the three immediately preceding financial year in pursuance of its CSR Policy. The Company does not have CSR obligations for FY 23. Therefore, annual report on CSR activities as required under the Act is not attached to this Report.
The Company has formulated a policy on related party transactions. All transactions that were entered into by the Company with related parties during the financial year were in the ordinary course of business and on an armâs length basis. There were no materially significant related party transactions during the year which had potential conflict with the interests of the Company at large. Pursuant to section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014, there were no transactions during the year to be reported under section 188(1) of the Act in Form AOC-2. Necessary disclosures on related party transactions have been made in the notes to the financial statements. None of the Directors had any pecuniary relationships or transactions vis-a-vis the Company.
HUMAN RESOURCES (âHRâ) AND PARTICULARS OF EMPLOYEES
Human Resources (âHRâ) are the valuable assets for the group. CFHL along with its group companies has a work force of more than 14,400 employees as at March 31, 2023. The group companies have robust HR management practices enabling achievement of organizational goals and key milestones through people. The safety and well-being of the employees continues to be focus area. The companies continue to emphasize on resourcing and talent planning strategies based on their functional and general management requirements in preparing the organisation for the future.
As on March 31,2023, there were two employees on the rolls of CFHL. The information required to be disclosed under the provisions of section 197 of the Act read with rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure III to this Report.
EMPLOYEE STOCK OPTION (âESOPâ) SCHEMES The Companyâs ESOP Schemes viz., Employee Stock Option Plan 2007 (âESOP 2007â) and Employee Stock Option Plan 2016 (âESOP 2016â) have been approved by the shareholders.
During the year there have been no fresh grants under either of the schemes. Details in respect of ESOP 2007 and ESOP 2016 as required under the applicable SEBI
regulations are displayed on the Companyâs website at http://www.cholafhl.com/article/investors/554. Both the schemes are in compliance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and SEBI (Share Based Employee Benefits) Regulations, 2014 respectively. There are no options outstanding under either of the schemes as at end of the year.
Vide the scheme of arrangement (demerger), employees of the Company were transferred to the resulting company, Tube Investments of India Ltd. The stock options granted by the Company prior to the effective date of demerger,i.e. August 1,2017, continue to be held by the option grantees who are employees of the resulting company. During the year upon exercise of vested stock options by the eligible option grantees, 34,570 equity shares were allotted under ESOP 2016 scheme.
The certificate from the secretarial auditor, M/s. Srinidhi Sridharan & Associates, Practicing Company Secretaries confirming that ESOP 2007 and ESOP 2016 schemes have been implemented in accordance with the applicable regulations and shareholdersâ resolutions passed in the general meeting of the Company, will be available for the shareholders at the ensuing AGM.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The Company has no activity relating to consumption of energy or technology absorption etc. and does not have any foreign exchange earnings. There was a foreign exchange outgo during the year by way of repatriation of dividend amounting to ''0.31 Lakh (previous year: ''0.31 Lakh).
WHISTLEBLOWER / VIGIL MECHANISM
In compliance with the provisions of section 177(9) of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, regulation 22 of the SEBI Listing Regulations and the SBR regulations of RBI, the Company has established a whistleblower / vigil mechanism for directors and employees to report genuine concerns. The mechanism provides for adequate safeguards against victimisation of persons using the mechanism and makes provision for direct access to the Chairman of the Audit Committee in appropriate or exceptional cases. The policy is available on the Companyâs website at http://www.cholafhl.com/article/investors/34.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
Pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013, the Company has formulated a policy for prevention of sexual harassment at workplace. An internal complaints committee (âICCâ) is in place to redress complaints received regarding sexual harassment. The policy extends to all employees (permanent, contractual, temporary and trainees). During the calender year 2022 no referrals were received under the policy and no complaints were pending at the beginning and end of the year.
Pursuant to the provisions of section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and regulation 24A of the SEBI Listing Regulations, the Board appointed M/s. Srinidhi Sridharan & Associates, Practicing Company Secretaries, to conduct the secretarial audit for the year ended March 31,2023. The Report issued by the secretarial auditor in the prescribed form MR-3 is annexed to this Report as Annexure IV. The secretarial audit report does not contain any qualification, reservation or adverse remark by the secretarial auditor.
In compliance with regulation 24A of the SEBI Listing Regulations, the secretarial audit report of the Companyâs material subsidiary, Cholamandalam MS General Insurance Company Limited, for the year ended March 31,2023 is annexed to this Report as Annexure V.
Maintenance of cost records and requirements of cost audit as prescribed under the provisions of section 148(1) of the Act is not applicable to the Company.
Pursuant to the provisions of section 92(3) and section 134(3)(a) of the Companies Act, 2013, the annual return for the year ended March 31, 2023 is available on the Companyâs website at http://www.cholafhl.com/article/subsidyfinancials/400.
COMPLIANCE WITH SECRETARIAL STANDARDS
The Company has complied with the Secretarial Standards on Meetings of the Board of Directors (SS-1) and Secretarial Standards on General Meetings (SS-2) issued by the Institute of Company Secretaries of India.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There are no material changes and commitments, affecting the financial position of the Company which have occurred between March 31, 2023 and the date of this Report.
BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT
In terms of regulation 34(2)(f) of the SEBI Listing Regulations, annual report of top one thousand listed entities based on market capitalization, shall contain the Business Responsibility and Sustainability Report (âBRSRâ) describing the initiatives taken by the entity from an environmental, social and governance perspective. Accordingly, the Company has prepared BRSR, which indicates the Companyâs performance against the principles of the National Guidelines on Responsible Business Conduct. A copy of the BRSR is annexed to this Report as Annexure VI.
DIRECTORSâ RESPONSIBILITY STATEMENT
The Board of Directors confirm that the Company has in place a framework of internal financial control and compliance system, which is reviewed by the Audit Committee and the Board and independently reviewed by the internal auditors, statutory auditors and secretarial auditors. Further, pursuant to section 134(5) of the Companies Act, 2013, the Board of Directors confirm that:
a) in the preparation of the annual financial statements for the year ended March 31, 2023, the applicable accounting standards have been followed and that there were no material departures therefrom;
b) they have, in the selection of the accounting policies, consulted the statutory auditors and have applied their recommendations consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31,2023 and of the profit of the Company for the year ended on that date;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual financial statements on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively during the year ended March 31,2023; and
f) proper system has been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively during the year ended March 31,2023.
⢠There were no significant material orders passed by the regulators or courts or tribunals impacting the Companyâs going concern status and its operations in future.
⢠The Company does not carry on any activities other than those specifically permitted by the RBI for CICs.
RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the Company or the correctness of any of the statements or representations made or opinions expressed by the Company and for discharge of any liability by the Company.
Neither there is any provision in law to keep, nor does the Company keep any part of the deposits with RBI and by issuing a Certificate of Registration to the Company, RBI neither accepts any responsibility
nor guarantees the payment of deposits to any depositor or any person who has lent any sum to the Company.
⢠There are no applications made or any proceedings pending under the Insolvency and Bankruptcy Code, 2016 during the year.
⢠During the year, the Company had not made any one-time settlement with banks or financial institutions.
The Directors express their gratitude for the support and co-operation extended by the Ministry of Corporate Affairs, Securities and Exchange Board of India, Reserve Bank of India, Stock Exchanges and other statutory authorities. The Directors also wish to thank all investors, vendors, financial institutions, banks and joint venture partners for their continued support and faith reposed in the Company. The Board places on record its appreciation for the contribution made by the employees of the Company and its group companies across all levels.
On behalf of the Board M M Murugappan
Place : Chennai Chairman
Date : May 12, 2023 DIN:00170478
Mar 31, 2022
The Directors take pleasure in presenting the 73rd Annual Report together with the audited financial statements of the Company for the financial year (âFYâ) ended March 31,2022.
Cholamandalam Financial Holdings Limited (âCFHLâ) is registered as a Non-Deposit taking Systemically Important Core Investment Company (âCICâ) pursuant to the receipt of Certificate of Registration dated January 6, 2020 issued by the Reserve Bank of India (âRBI'') under section 45-IA of the Reserve Bank of India Act, 1934.
CFHL holds substantial investments in the following financial services / risk management companies of the Murugappa Group (hereinafter collectively referred as âgroup companiesâ) and serves large number of customers by providing loans for asset acquisition through financing, asset and family protection through general insurance and risk management services.
⢠Cholamandalam Investment and Finance Company Limited (âCIFCLâ), engaged in non-banking finance company business;
⢠Cholamandalam MS General Insurance Company Limited (âCMSGICLâ), engaged in general insurance business;
⢠Cholamandalam MS Risk Services Limited (âCMSRSLâ) engaged in risk management and engineering solutions business.
|
STANDALONE FINANCIAL RESULTS |
('' in Crore) |
|
|
Particulars |
2021-22 |
|2020-21 |
|
Total Income |
83.51 |
58.14 |
|
Total Expenses |
12.77 |
24.24 |
|
Profit Before Tax |
70.74 |
33.90 |
|
Tax Expense |
15.23 |
12.19 |
|
Profit for the year |
55.51 |
21.71 |
|
Other Comprehensive Income |
0.58 |
0.53 |
|
Total Comprehensive Income |
56.09 |
22.24 |
The paid-up equity share capital of CFHL as on March 31,2022 was ''18.77 Crore. During FY 22, 19,910 equity shares were allotted upon exercise of vested stock options by eligible option grantees under the Companyâs Employees Stock Option Schemes 2007 and 2016.
The Board of Directors have recommended a dividend at the rate of 55% i.e., ''0.55 per equity share of face value of ''1/- each for the year ended March 31,2022.
The Company has transferred a sum of ''11.11 Crore (previous year: ''4.35 Crore) to Special Reserve under section 45-IC of the Reserve Bank of India Act, 1934.
The financial year 2022 began with the impact from the COVID second wave creating havoc for India and the world, ushering in newer challenges across sectors. However, a rapid vaccination coverage, positive business environment paired with government support provided a strong momentum for a sustained economic recovery. The onset of the third wave, which was seen in the latter part of the year was quite brief and had a muted impact on the economy than the earlier two waves. The second half of the year gradually picked up with progress in consumption, investment, capacity utilisation, among others. Key macroeconomic parameters including GST collections, digital transactions, FASTag revenues, demand for electricity, metals and coal production demonstrated a positive trajectory. The country continues to remain one among the fastest growing economies with its GDP expected to grow around 9.2% in FY 22.
Turning to the sectoral aspects, growth in agriculture and allied activities is estimated at 3.3% backed by a normal monsoon. After a contraction in the previous fiscal year the manufacturing sector is expected to expand by 12% while the services sector is projected to grow by 8.2% in FY 22 following a decline of 8.4% last year. Contact intensive segments such as trade, hotels, transport and communication though yet to fully recover is likely to expand 11.6% in FY 22. Private consumption improved to recover significantly from the second half of the year. The RBIâs Monetary Policy maintained an accommodative stance and continues to support the economyâs expansion.
The Union Budget for FY 2022-23 laid emphasis to strengthen the infrastructure with its focus on key priorities including Productivity Enhancement, Financing Investments and GatiShakti Plan. The GatiShakti National Masterplan for seamless multi-modal connectivity continues to be the focus area for augmenting transportation and logistics infrastructure. Governmentâs initiatives on driving Public Private Partnership (PPP) projects and extension of Production Linked Incentive (PLI) schemes to new sectors is expected to drive growth in domestic manufacturing and create more jobs.
Globally, as the economy was gradually recovering from the effects of the pandemic and several economies returning to their pre-covid levels, another shock struck. The ongoing conflict between the Russia and Ukraine since late February 2022 triggered a humanitarian crisis. Headwinds consequent to the war include high commodity prices, especially energy, metals, and some food and agricultural products, tightened fiscal conditions, trade and supply chain disruptions and lower private sector confidence. These disruptions pose risk of elevated inflation for businesses and consumers across the world, urging continued tightening of monetary and fiscal policies. Furthermore, frequent and wider-ranging lockdowns in China have impacted economic activity creating new bottlenecks in global supply chains. Overall risks to economic prospects have risen sharply and policy trade-offs have become ever more challenging. As per the IMF, global growth prospects are expected to slow down to 3.6% in 2022 after a projected expansion of 6.1% in 2021.
Consequent to the evolving geopolitical situation and Indiaâs dependence on crude oil, natural gas, and other commodities, a spike in inflation and in the current account deficit are aspects to be kept under watch. Exports that were providing a cushion to the loss of domestic output are likely to be subdued as the developed countries are also witnessing a slowdown. Foreign direct investment inflow could moderate amid contraction of global economic and financial conditions. Outlook for the domestic economy remains positive for FY 23 backed by normal monsoon and high public investment though uncertainty prevails from the ongoing global conditions, potential new wave of COVID and sharp rise in commodity prices. Amidst volatile economic conditons, India''s GDP is projected to grow over 8% in FY 23.
CFHL earns revenue primarily by way of dividend income from investments held in group companies. An overview of the financial services sector in which the Company operates along with a business update of group companies during FY 22 is summarised in the following paragraphs.
NBFC Industry & Business Update
Indiaâs financial sector is a highly diversified one comprising commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The sector dominated by banking and non banking financial companies (âNBFCsâ) have witnessed exponential growth in the last decade driven largely by regulatory reforms and their ability to cater to unbanked areas through innovative products and service delivery mechanisms. However, in the past few years the sector was dealing with the contagion effects associated with the collapse of a few NBFCs and co-operative banks followed by the onset of COVID-19 pandemic in the early 2020. Various policy initiatives of the Government and the regulator have helped NBFCs to navigate through the challenges in terms of liquidity, provisioning and asset management. As economic activities gathered momentum post relaxation of pandemic restrictions, the sector rebounded from second quarter of the fiscal year 2022 posting a significant growth. With an aim to strengthen supervision of NBFCs, RBI introduced various regulations and guidelines during the year, such as: a) scale based regulations to provide enhanced regulatory standards based on the size and activities of NBFCs b) prompt corrective action framework for timely regulatory intervention which require NBFCs to initiate and implement remedial measures so as to restore its financial health c) revised norms for income recognition, asset classification and provisioning, to ensure uniformity among lending institutions. Though these regulatory changes are expected improve overall governance standards of NBFCs in the long term, the sector might face some headwinds in the short term.
Cholamandalam Investment and Finance Company Limited (âCIFCLâ), an NBFC incorporated in 1978, is one of the leading, comprehensive financial service provider offering vehicle finance, home loans, loan against property etc., to a wide range of customers.
Vehicle Finance (âVFâ)
ClFCLâs Vehicle Finance business comprising of diversified portfolio viz., commercial vehicles, passenger vehicles and used vehicles, continues to be the major segment contributing 69% of its aggregate assets under management (âAUMâ) as at March 31,2022.
Commercial vehicles and passenger vehicles registered double digit growth in FY 22 after two years of continuous de-growth backed by improvement in economic activity, revival of construction / mining activities and improvement in semiconductor supplies towards the end of the year. The domestic commercial vehicle industry grew by 26% in FY 22, supported by a low base and improvement in economic activity. The commercial vehicle industry is expected to deliver double digit growth in FY 23 driven by freight demand, replacement demand, structural economic recovery and higher infra spends by the government. However, inflation in fuel prices and its impact on viability of fleet operators will remain a key challenge in FY 23. The domestic car and utility vehicle industry had witnessed a 14% growth in FY 22 aided by improvement in semiconductor supplies towards the end of the year and improvement in sale of utility vehicles due to shift in customer preferences. A gradual recovery in two-wheeler demand is expected in FY 23 with a decent growth year on year considering a low base. Tractor industry had witnessed a de-growth of 6% in FY 22 attributable to the huge volumes in FY 21 which was the ever all-time high for tractor sales in lndia. Tractor volumes might show minimal growth in FY 23 given the high base and moderation in demand. After strong volume upsurge in H1 of FY 22, the volumes in construction equipment moderated significantly during the second half and had a de-growth of around 8%. Major factors that contributed to the de-growth were increasing cost of equipment prices, muted rentals and monsoon related impediments which impacted the road and construction sector. With higher allocation to infra sector in the union budget and restoration of normalcy in mining and construction activity the construction industry is expected to grow in FY 23.
The Vehicle Finance business disbursed ''25,439 Crore during FY 22 as against ''20,249 Crore in the previous year registering a growth of 26% and profits before tax (âPBTâ) during the year was ''2,054 Crore as against ''1,287 Crore in the previous year. The VF business continued its focus on maintaining asset quality through a co-ordinated collection strategy, which helped in
restricting gross stage 3 assets to 3.9% inspite of the second COVID wave in Q1 which had a severe impact on customer cash flows. The company has designed a multi-pronged long-term strategy to minimize the cost of operations and credit losses, to maximize ROA and customer experience. Operating model enhancements have been prioritized and implemented at product level. The business has a robust collection mechanism in place aided with a strong credit risk assessment framework which will help in steering through any strong currents in the market.
Loan against Property (âLAPâ)
In FY 22 growth rate in LAP segment was higher than non-LAP segment (secured non-LAP and unsecured) as non-banks preferred mortgage-based lending over cashflow-based lending in the short-run given the potential risks in other segments. LAP segment is expected to perform better in FY 23 with improvement in economy and lenders being positive towards mortgage-based lending.
The focus of ClFCLâs LAP in FY 22 was to stabilize collections, scale up disbursements, get systems and processes equipped to handle COVID induced challenges. The business continues to focus on a systematic approach to build a healthy portfolio mix, with more than 80% of portfolio as self-occupied residential properties (SORP) and an average loan ticket size of less than ''45 Lakh. The business had started exceeding pre-COVID level of monthly disbursements with adequate branch expansion while strengthening credit policy in tune with market developments.
Assets Under Management (AUM) for the business grew by 16% to ''17,115 Crore (previous year: ''14,777 Crore) and disbursements registered a growth of 62% to ''5,862 Crore (previous year: ''3,627 Crore).
Home Loans (''HL'')
The Indian Housing Finance market grew around 9~11% in FY 22. Q1 was significantly impacted by the second wave of COVID-19 and its impact was felt through subsequent quarters. In terms of ticket size, the <25 lakhs segment contributes more than 43% of the mortgage outstanding. Housing sector is expected to grow 10~12% in FY 23 and affordable housing to grow 7~9% in the same period. Regulatory and fiscal environment remains conducive for the demand in affordable housing segment.
As on March 31, 2022, the HL business had 43,056 live accounts (25% growth Y-o-Y) with an AUM of ''5,269 Crore (21% growth Y-o-Y). 89% of this portfolio is in Tier II, III, IV cities and towns. The disbursements grew by 2% Y-o-Y from ''1,542 Crore in FY 21 to ''1,571 Crore in FY 22.
Lower Middle-Income-Group customers continue to be the target group for HL business. CIFCLâs HL business has built on inherent strength in lending to the lower middle income (LMI) segment with a customized eligibility program for business owners and salaried customers. Lending for self construction, remains a strong focus with significant proportion of the portfolio and fresh disbursements sourced from this segment.
New Business
CIFCL launched new businesses during the year viz.,Consumer & Small Enterprise Loan (âCSELâ) and Secured Business & Personal Loan (âSBPLâ) alongwith Small and Medium Enterprise Loans business. CSEL offers personal loans, professional loans and business loans to salaried, self-employed professionals and micro & small businesses spread across 50 locations and have acquired over 1.3 Lakh customers in Q4 of FY 22. The business growth is both through traditional and partnerships with Fin-techs. SBPL offers secured business loan with self-occupied residential property or commercial cum-residential property as collateral, launched in 50 locations with initial focus on South and West Markets. In SME business, the product suite includes supply chain financing, term loans for capex, loan against shares, funding on hypothecation of machinery for specific industries. Business AUM sourced through new businesses aggregates to ''1,642 Crore and disbursements was ''2,618 Crore for FY 22.
New Acquisitions
During the year, CIFCL invested ''450 Crore and acquired 73.8% stake in Payswiff Technologies Private Limited (''Payswiff'') and invested ''9.75 Crore and acquired 16.29% stake in Paytail Commerce Private Limited (''Paytail''). Payswiff is engaged in the business of enabling online payment gateway services for e-commerce businesses and provides e-commerce solutions. Payswiff is an omni channel payment transaction solution that lets business owners accept payments from their customers in-store, at home deliveries, online and on-the-go using mPOS and POS solutions. Paytail is a new age fintech company focusing on offline âBuy Now Pay Laterâ through brand partnerships.
Other functions
Automation continues to be a key initiative and technology tools are deployed for automation of repetitive activities across functions wherever opportunity exists. During the year CIFCL upgraded its system with a host of integrations to reduce physical touch-point with stakeholders. Online payment modes for collections have been introduced to provide customers with multiple payment options. For vendors, online portals have been introduced to liaise and share documents with the business.
Outlook
Industry outlook across all business segments is positive and CIFCL will look to scale up disbursements by expanding into new geography/customer segments, driving market share growth through OEM/dealer tie-ups, co-lending partnerships, improving internal efficiencies through digital initiatives. Strong collection infrastructure is driven by experienced field teams with product level focus from early buckets. The company is running host of initiatives to digitize the collection processes which will help strengthen the asset quality position back to pre-covid levels.
General Insurance Industry & Business Update
Financial year 2021-22 was a mixed one for the non-life insurance industry. Following the impact from COVID second wave, the industry evidenced a phase of recovery only to be beset with challenges of heightened competitive intensity, chip shortages in the four-wheeler segment and weak customer demand in the two-wheeler segment. The general insurance industry grew around 8.8% in FY 22 and achieved a gross written premium (''GWP'') of ''1,848 billion.
The market share of public sector companies was 40.7% with the private sector companies growing their share to 59.3%. Amongst the other lines of insurance businesses, motor insurance registered a muted growth of 4% while the fire insurance business grew by 7%. Growth in the health insurance segment was higher in the backdrop of group and Government health business.
Cholamandalam MS General Insurance Company Limited (''CMSGICL''), the insurance subsidiary of CFHL, is registered with the Insurance Regulatory and Development Authority of India (âIRDAâ) to carry on general insurance business. CMSGICL offers a wide range of insurance including motor, travel, health, accident, home and other types of insurance for corporate customers.
In a highly competitive business environment, CMSGICL ranks 8th position among private insurers with a market share of 2.6% (among general insurers).
CMSGICL recorded a GWP of ''5,194 Crore (previous year: ''4,705 Crore) for the year ended March 31, 2022. The GWP growth was largely driven by its thrust in adding new channel partners, entry into large motor OEM programs and growth in commercial lines. Digital business grew well to contribute 2% of the top line. The company grew its business operations by welcoming over 10 million customers across its product categories. CMSGICL continues to lead the industry in motor OD loss ratios and to secure higher levels of compromise settlements in motor third party claims. In FY 22, the company serviced over 4.7 Lakh claims across various lines of business, which is 52% more than the previous fiscal year.
Motor Insurance
Motor insurance business registered a higher than industry growth at 9.7% during the year. The company stepped up its renewal ratio in the cars portfolio even as the pandemic impacted the renewal ratio in commercial vehicles. The premium pricing in motor own-damage (âODâ) witnessed severe pressure with discounts across vehicle categories rising to new highs. This has caused an adverse change in the motor OD claims ratios of all players in the industry. In motor third party, the absence of hike in third party premium was extended for the second year due to the pandemic. The company continues to exercise utmost care in its choice of sub-segments, geographies has been rated high by its channel partners and customers for its claims servicing processes.
Property and Casualty Insurance
Growth in premium from commercial lines of business was mainly driven by the 11% growth in fire insurance portfolio. Marine and engineering lines of businesses also witnessed improved performance with increase in the levels of economic activity. Miscellaneous lines grew well during the year. CMSGICL continues to follow disciplined underwriting and prudent risk selection in the highly demanding environment.
Health, Accident and Travel Insurance
During the year, health, accident and travel insurance business grew marginally with stronger growth registered in the last quarter. While the growth in retail indemnity policies was strong, the bancassurance led bundled
product sales in personal accident and health benefit policies suffered a drop as a fall out of the pandemic and reduced lending by financiers.
The second wave of the pandemic impacted heavily with CMSGICL settling over 58,000 COVID health claims aggregating to ''277 Crore during the year. The company continues to strengthen its underwriting framework with intelligent use of technology for its risk selection, upsell and cross-sell initiatives.
Other functions
FY 22 witnessed claims management function stepping up speed of disposal while handling larger volumes with efficiency and productivity. Besides digitisation of its claims processes across lines of businesses, CMSGICL continues to focus on harnessing efficiencies for severity control across all lines, automation for speed and operational controls, proactive approach to servicing for building transparency and satisfaction levels of customers.
The company implemented several new tech platforms and IT initiatives including digital integration with channel partners such as OEMs, bancassurance partners, digital partners etc. for seamless issuance of policies, a fully digitized platform for on-boarding of POSP agents, introduction of robotics process automation in claims and finance functions, AI powered chat-bot enabled on corporate website to benefit customer self-service etc.
Outlook
The general insurance industry which has displayed good resilience during the two years ravaged by the pandemic expects to grow strongly in FY 23. Headwinds for the industry include the micro-chip shortage induced lower automobile sales, higher inflation impacting consumer spends while the tailwinds are the enhanced level of awareness towards health insurance, newer products in the market, the infrastructure spend thrust from the Government, expected credit offtake from banks etc. The imminent rise in interest rates in the economy will augment the investment income for all players in the industry.
CMSGICL will continue its focus to add channel partners, expand geographically into new markets, enhance its focus on renewals besides launching new products across lines of businesses. The company will tighten its expenses of management and related processes by its thrust on productivity and efficiency improvements.
Risk Management Solutions - Business Update
Cholamandalam MS Risk Services Limited (''CMSRSL''), is engaged in providing risk management and engineering solutions in the field of safety, health and environment, in association with CMSGICL. Although the first quarter was impacted by the second wave of COVID, the business divisions ramped up in the subsequent quarters and met the targets set for FY 22.
The business is backed by a strong technical team of multidisciplinary & certified professionals having exposure to domestic and international markets. During the year, the company continued to extend digitalisation in its offeringâs by adding Virtual DMC v.02, gamification in PSM Studies, introducing âSHE Genieâ for Construction safety application and automating checklist-based audit reports. The launch of scaffolding inspector training in collaboration with STI Texas was another key milestone achieved during the year. CMSRSL expanded its presence to around 54 locations across the country including resources deployed at various client project sites. More than 350 assignments in process safety, 150 plus assignments in electrical and more than 75 projects environment were carried out successfully during the year. The company further strengthened its Order book with new orders aggregating to ''57 Crore. CMSRSL continues to offer services to CMSGICL and its clients through value-added offerings like thermography, safety audits and cargo loss minimization studies.
FY 23 began with a strong open order book of ''41 Crore. Business is looking forward to increase the existing client base with a focused marketing and branding strategy in domestic market. Key Initiatives planned for FY 23 include addition of new services, focusing emerging sectors and strengthening execution excellence. Other key initiatives include participating in standards formulation / seminars and industrial trade events and meeting key clients besides rolling out of a structural and future focused competency building program across all verticals.
FINANCIAL REVIEW - SUBSIDIARY / ASSOCIATE / JOINT VENTURE COMPANIES
CFHL earned an income of ''83.51 Crore (previous year: ''58.14 Crore) a growth of 43% and profit before tax was ''70.74 Crore (previous year: ''33.90 Crore) for the financial year ended March 31, 2022 registering a growth of 109%. Aggregate investments stood at ''1,279.84 Crore (previous year: ''1,279.22 Crore) as on March 31, 2022. During the year, the Company repaid ''50 Crore of NonConvertible Debentures (âNCDsâ) and the outstanding NCDs as on March 31,2022 was ''100 Crore.
During the year, India Ratings and Research Private Limited has affirmed a rating of IND AA /Stable for the debt instruments of the Company.
Cholamandalam Investment and Finance Company Limited (''CIFCL'')
The Company holds 45.41% in the paid-up equity share capital of CIFCL as on March 31, 2022 and has de-facto control as per the principles of Ind AS 110 and accordingly CIFCL has been considered as a subsidiary, for consolidation purposes. Securities of CIFCL are listed and traded on the National Stock Exchange of India Limited (NSE) and the BSE Limited (BSE).
Business Assets under Management (''AUM'') grew by 10% to ''76,907 Crore as at March 31, 2022 (previous year: ''69,996 Crore). Loan disbursements aggregated to ''35,490 Crore (previous year: ''26,043 Crore) registering a growth of 36% during the year. Profit after tax grew by 42% to ''2,147 Crore (previous year: ''1,515 Crore). Investment portfolio of CIFCL as at end of FY 22 was ''2,076 Crore including investments in government securities of ''1,543 Crore. As per RBI mandate, CIFCL adopted tighter provisioning norms on its NPA and held a management overlay of ''500 Crore as at March 31, 2022. The company maintained a comfortable ALM position with no negative cumulative mismatches across all time buckets. As at end of FY 22, the capital adequacy ratio stood at 19.6% as against the minimum regulatory requirement of 15%. During the year, CIFCL raised CP of ''5,550 Crore of which ''2,750 Crore were repaid. Outstanding NCDs stood at ''10,252 Crore and Tier II borrowings stood at ''3,734 Crore as on March 31,2022.
CIFCL paid an interim dividend of ''1.30/- (65%) per equity share of face value of ''2/- each for FY 22. The Board of CIFCL has recommended a final dividend of ''0.70/- (35%) per equity share for FY 22, subject to their shareholdersâ approval.
CIFCLâs subsidiary companies are Cholamandalam Securities Limited (''CSEC''), Cholamandalam Home Finance Limited (''CHFL'') and Payswiff Technologies Private Limited (''Payswiff''). CSEC is engaged in stock broking and investment advisory services. CSEC focused on creating three distinct business lines for enhancing revenues and productivity - broking, wealth and insurance distribution. During the year, the company increased its footprint from 22 branches to 34 branches. CSEC achieved a gross income of ''40.01 Crore (previous year: ''30.14 Crore) and profit before tax of ''7.48 Crore
|
CONSOLIDATED FINANCIAL RESULTS |
('' in Crore) |
|
|
Particulars |
2021-22 |
¦2020-21 |
|
Total Income |
14,734.98 |
13,960.84 |
|
Total Expenses |
11,691.42 |
11,560.56 |
|
Profit Before Tax of Profits from Associate / Joint Venture and Tax |
3,043.56 |
2,400.28 |
|
Share of Profit from Associates /Joint Venture (Net of Taxes) |
(2.87) |
0.32 |
|
Profits Before Tax |
3,040.69 |
2,400.60 |
|
Tax Expense |
(801.33) |
(636.38) |
|
Profits for the year |
2,239.36 |
1,764.22 |
|
Minority Interest |
(1,216.29) |
(939.58) |
|
Net Profit for the year attributable to owners of the Company |
1,023.07 |
824.64 |
(previous year: ''6.84 Crore) for the year ended March 31, 2022 and the mutual fund AUM was ''839 Crore as at March 31,2022.
CHFL recorded a gross income of 56.37 Crore (previous year: ''37.15 Crore) and made a profit before tax of ''9.19 Crore (previous year: ''2.62 Crore) for the year ended March 31, 2022. Currently, the company continues its focus on growing insurance corporate agency business.
Payswiff recorded a gross income of ''284.60 Crore and made a loss of ''33.78 Crore for the year ended March 31, 2022. Payswiff Solutions Private Limited and Payswiff Services Private Limited are subsidiaries of Payswiff.
The associate companies of CIFCL are White Data Systems Private Limited, Vishvakarma Payments Private Limited and Paytail Commerce Private Limited.
Cholamandalam MS General Insurance Company Limited (''CMSGICL'')
The Company holds 60% in the paid-up equity share capital of CMSGICL a joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan and is a material subsidiary of the Company. The IRDAI has deferred the implementation of Ind-AS for insurance companies. Therefore, financials of CMSGICL have been restated as per Ind-AS for consolidation purposes and figures of CMSGICL reported in this annual report are under Ind-AS.
CMSGICL achieved a gross written premium of ''5,194 Crore during FY 22 (previous year: ''4,705 Crore) and the profit before tax was ''140 Crore (previous year: ''367 Crore). During the year IRDAI withdrew its earlier permission on accounting treatment of sourcing costs on long term policies and directed the Company to absorb all costs relating to sourcing of business upfront. CMSGICL was further directed to absorb the carried forward pre-payments fully. The financial impact of the direction aggregated to ''327 Crore. The investment portfolio of CMSGICL grew to ''11,356 Crore as at March 31, 2022 (previous year: ''10,262 Crore). In the context of the pandemic environment and with interest rates rendered higher in first few months of the year, the company churned and deployed its investments largely in central and state government securities and pared down exposures to corporate bonds. Investments of CMSGICL in government securities stood at 74.91% of the investment assets (previous year: 74.91%). Solvency ratio of CMSGICL as on March 31, 2022 was 1.95 times as against the minimum regulatory requirment of 1.50 times.
With a view to conserve its resources and augment solvency ratio, the Board of CMSGICL has not recommended dividend for FY 22.
Cholamandalam MS Risk Services Limited (''CMSRSL'')
The Company holds 49.5% in the paid-up equity share capital of CMSRSL, a joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan and has a technical collaboration with Inter Risk, a group company of Mitsui Sumitomo Insurance Group.
CMSRSL achieved an income of ''59.69 Crore (previous year: ''43.59 Crore) and profit before tax of ''7.15 Crore (previous year: ''2.64 Crore) for the year ended March 31, 2022. The Board of CMSRSL recommended a dividend at the rate of 25% i.e., ''2.50/- per equity share of face value of ''10/- each for FY 22.
BUSINESS REVIEW - SUBSIDIARY, ASSOCIATE AND JOINT VENTURE COMPANIES
Cholamandalam MS General Insurance Company Limited is the subsidiary company of CFHL. Under Ind-AS, Cholamandalam Investment and Finance Company Limited is considered as a subsidiary and Cholamandalam MS Risk Services Limited is the joint venture company of CFHL. There has been no change in the nature of business of these companies during the year. Business performance of these companies has been furnished in earlier paragraphs of this report.
A report on the performance and financial position of each of the aforesaid companies as per section 129(3) of the Act read with the Companies (Accounts) Rules, 2014, in the prescribed form AOC-1 is annexed to this Report as Annexure I. Consolidated financial statements of the Company prepared in accordance with the Companies
the criteria of independence as required under the provisions of section 149(6) of the Act and regulation 16(1)(b) of the SEBI Listing Regulations. In the opinion of the Board, all the IDs possess integrity, expertise and relevant experience in their respective fields including the proficiency required to effectively discharge their roles and responsibilities in directing and guiding the affairs of the Company.
In terms of section 150 of the Act read with the Companies (Appointment & Qualification of Directors) Rules, 2014, the IDs of the Company have registered their names in the independent directorsâ data bank created and maintained by the Indian Institute of Corporate Affairs (âIICAâ). The IDs are also required to pass an online proficiency self-assessment test conducted by the IICA within a period of two years from the date of inclusion of their names in the data bank, subject to exemption to individuals who fulfill the eligibility criteria prescribed under the said Rules. All the IDs are compliant with the requirement under the said Rules.
KEY MANAGERIAL PERSONNEL
Pursuant to the provisions of section 203 of the Act, Mr. N Ganesh, Manager & Chief Financial Officer and Mrs. E Krithika, Company Secretary are the key managerial personnel of the Company and there were no changes during the year.
STATUTORY AUDITORS
Pursuant to the provisions of section 139(2) of the Act and the rules made thereunder and the guidelines for appointment of statutory auditors for Banks and NBFCs dated April 17, 2021 issued by the RBI, M/s. Sharp & Tannan Associates (''S&T Associates''), Chartered Accountants, were appointed as the statutory auditors of the Company at the 72nd AGM held on August 4, 2021, for a period of three years commencing from the conclusion of the 72nd AGM until the conclusion of the 75th AGM.
The Auditorsâ Report issued by S&T Associates for the year under review is unmodified and does not contain any qualification, reservation, or adverse remark. The statutory auditors have not reported any incident of fraud to the Audit Committee or the Board of Directors under section 143(12) of the Act during the year.
FINANCE
Deposits
The Company has not accepted any fixed deposits under Chapter V of the Companies Act, 2013 and as such no
Act, 2013 (''the Act'') and the relevant Accounting Standards, forms part of the annual report.
The annual report containing standalone and consolidated financial statements will be posted on the Companyâs website, www.cholafhl.com. Annual accounts of the subsidiary companies will also be posted on the Companyâs website and be made available for inspection by shareholders through electronic mode until the date of the Annual General Meeting (''AGM'').
At the 72nd AGM held on August 4, 2021 the appointment of Mr. Vellayan Subbiah as a Non-Executive Director of the Company was approved. Mr. Ashok Kumar Barat, Independent Director resigned from the Board on December 21, 2021. The Board places on record its appreciation for the contribution rendered by Mr. Barat during his tenure on the Board.
Based on the recommendation of the Nomination & Remuneration Committee of the Board, Mr. K Balasubramanian (DIN: 00137260) has been appointed as an additional director in the category of an independent director with effect from March 17, 2022. Pursuant to section 149 and regulation 17(1C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âthe SEBI Listing Regulationsâ), the Company has sought shareholdersâ approval by way of special resolution through postal ballot for appointment of Mr. K Balasubramanian as an independent director for a term of three (3) consecutive years with effect from March 17, 2022 till March 16, 2025. The result of the postal ballot shall be announced on or before May 19, 2022.
As per the provisions of section 152 of the Act, Mr. Sridharan Rangarajan (DIN: 01814413) retires by rotation at the ensuing AGM and being eligible offered himself for re-appointment. The Board recommends the re-appointment of Mr. Rangarajan as a director liable to retire by rotation and the resolution in this regard forms part of the Notice of the 73rd AGM of the Company.
Information as required to be disclosed under regulation 36(3) of the SEBI Listing Regulations, for re-appointment of director is provided in the AGM Notice.
DECLARATION FROM INDEPENDENT DIRECTORS
The Independent Directors (âIDsâ), Mr. B Ramaratnam, Mrs. Vasudha Sundararaman and Mr. K Balasubramanian have submitted declarations stating that they meet
amount of principal and interest were outstanding as on March 31,2022.
Particulars of Loans, Guarantees or Investments
The provisions of section 186 of the Act pertaining to investment and lending activities is not applicable to CFHL since the Company is an NBFC whose principal business is acquisition of securities. Information regarding investments made during the year is given in the financial statements. During the year the Company has not given any loans or guarantees under the provisions of section 186 of the Act.
Internal Financial Control Systems with reference to the Financial Statements
The Company has in place adequate internal financial controls to ensure reliability of financial and operational information and regulatory and statutory compliances. The Companyâs business processes are equipped with monitoring and reporting processes to ensure financial discipline and accountability. The internal financial control systems are monitored both by internal and statutory auditors of the Company. The statutory auditors of the Company have also certified on the existence and operating effectiveness of the internal financial controls as on March 31,2022.
Financial Ratios
The Company being an investment company does not carry on any business other than holding investments in its group companies. Dividend is the primary source of income. Key ratios of the Company are given in the table below:
|
Ratio Description |
31-Mar-2022 |
31-Mar-2021 |
|
Return on Net Worth |
4.68% |
1.90% |
|
Return on Total Assets |
4.30% |
1.67% |
|
Debt Equity Ratio (No. of times) |
0.08 |
0.13 |
|
Leverage Ratio (No. of times) |
0.01 |
0.02 |
|
Ratio of Adjusted Net Worth (ANW) to its aggregate risk weighted assets |
942.78% |
626.00% |
Dividend income is higher by 53.7% in FY 22 compared to the previous year. Consequently, there is improvement in the return on networth and return on total assets. The Company redeemed NCDs aggregating to ''50 Crore during the year. Therefore there is a decrease in debt equity ratio and leverage ratio. Increase in adjusted
networth is on account of increase in unrealised gains on investment in subsidiaries. The leverage ratio (maximum regulatory requirement: 2.5 times) and adjusted net worth ratio (minimum regulatory requirement: 30%) are computed in accordance with the Master Directions - Core Investment Companies (Reserve Bank) Directions, 2016 (''Master Directions of RBI'').
Managing risk is fundamental to any business in general, and in particular to financial services industry. CFHL has a risk management framework in place which provides an integrated approach for identifying, monitoring and mitigating risks associated with its business and that of its group companies. Risks arising out of NBFC, insurance and risk management businesses of the group companies are the dominant risks of the Company. Key risk exposures of CFHL include financial risks, governance risks, market risks, reputation risks and compliance risks. The Risk Management Committee (âRMCâ) assists the Board in monitoring various risks, review and analysis of risk exposures and mitigation plans related to the Company and its group companies. A Risk Management Policy has been adopted by the Board of Directors which inter alia sets out risk strategy, approach and mitigation plans, liquidity risk management and asset liability management.
The group companies have their own risk management framework in line with its strategic business operations as appropriate to the industry in which they operate. The risk management framework of NBFC and insurance businesses are broadly based on (a) clear understanding and identification of various risks (b) disciplined risk assessment by evaluating the probability and impact of each risk (c) measurement and monitoring of risks by establishing key risk indicators with thresholds for all critical risks and (d) adequate review mechanism to monitor and control risks. Business operations of each of the group companies, the risks faced by them and the risk mitigation tools followed by them are reviewed periodically by the Risk Management Committees and the Boards of the respective group companies.
CIFCLâs risk management division works as a value center by constantly engaging with the business and providing key insights into the portfolio based on data driven analysis. The key risks faced by CIFCL are credit risk, liquidity risk, interest rate risk, operational risk, reputational and regulatory risk, which are broadly classified as credit risk, market risk and operational risk.
The in-house developed risk monitoring tool of CIFCL measures the movement of critical risks. This provides the level and direction of risks, which are arrived at, based on the two level risk thresholds for the identified key risk indicators and are aligned to the overall companyâs risk appetite framework approved by the Board.
The risk management framework of CMSGICL broadly comprise of establishment of risk management policy, formulation of risk register, review of key risk exposures and asset liability management. The Risk Management Committee of the Board of CMSGICL reviews the risk management framework periodically. Key risk exposures of CMSGICL include financial risk, credit risk, market risk, operational risk and compliance risk. CMSGICLâs Enterprise Risk Management (âERMâ) function continually conducts risk and control assessments for all functions across the Company. Risk management activities of CMSGICL are aligned to its corporate objectives, organisational priorities and designed to protect and enhance its reputation.
During FY 22 the Risk Management Committee of CFHLâs Board reviewed key risk exposures of the Company along with mitigation measures, asset liability management, structural liquidity management, key risk exposures and mitigation measures of subsidiaryâs businesses viz., NBFC and general insurance businesses.
Internal control systems of an organisation is looked at as the key to its effective functioning. The Company has internal control systems in place commensurate with the nature of business and size of its operations, to ensure compliance with internal policies, regulatory matters and to safeguard reliability of financial reporting and its disclosures. An audit of systems and processes is conducted by the internal auditor of the Company and significant observations, are reported to the Audit Committee every quarter. The Audit Committee evaluates adequacy and effectiveness of the internal controls, recommends improvements, and reviews the corrective action taken to address gaps, if any.
The Company firmly believes in committing itself to maintaining high standards of corporate governance.
A report on corporate governance of the Company together with a certificate from practicing company secretaries in accordance with the SEBI Listing Regulations is annexed to this Report as Annexure II.
The Report further contains other details which are required to be provided in the Boardâs Report.
Five meetings of the Board were held during the year ended March 31, 2022. Further details on the Board meetings are disclosed in the Report on Corporate Governance.
COMPOSITION OF THE AUDIT COMMITTEE
The Board has constituted an Audit Committee in terms of the applicable provisions of the Act, the SEBI Listing Regulations and the Master Directions of RBI. Details of terms of reference, composition and meetings of the committee are disclosed in the Report on Corporate Governance.
Pursuant to the provisions of section 134 of the Act and regulation 17 of the SEBI Listing Regulations, the Board of Directors have carried out an annual performance evaluation of the Board itself, the individual directors, various committees of the Board and the Chairman for FY 21-22. The manner in which the evaluation has been carried out is provided in the Report on Corporate Governance.
POLICY ON BOARD NOMINATION AND REMUNERATION
The Board has formulated a policy for selection and appointment of directors, senior management and their remuneration. Details of which are furnished in the Report on Corporate Governance.
CORPORATE SOCIAL RESPONSIBILITY (''CSR'')
The Company being a part of the Murugappa Group, is known for its tradition of philanthropy and community service. The Companyâs philosophy is to reach out to the community through service-oriented philanthropic institutions in the fields of education and healthcare.
With the enactment of CSR provisions in the Companies Act, 2013, the Company has framed a CSR policy and the policy is available on the Companyâs website at http://www.cholafhl.com/article/profile/967. Since the amount required to be spent by the Company towards CSR activities does not exceed the threshold limit prescribed under section 135(2) of the Act, constitution of the CSR Committee is not mandatory for the Company. Accordingly, the Board discharges the functions of CSR Committee envisaged under the Act.
Pursuant to the provisions of section 135 of the Companies Act, 2013, atleast 2% of the average net profits of the Company shall be spent towards CSR activities. Accordingly, the Company has spent an amount of ''6 Lakh on CSR projects/ programmes approved by the Board during the year ended March 31, 2022. The annual report on CSR activities has been appended as Annexure III to this Report.
All transactions that were entered into by the Company with related parties during the financial year were in the ordinary course of business and on an armâs length basis. There were no materially significant related party transactions during the year which had potential conflict with the interest of the Company at large. Pursuant to section 134(3)(h) read with rule 8(2) of the Companies (Accounts) Rules, 2014, there are no transactions to be reported under section 188(1) of the Act in Form AOC-2.
Necessary disclosures in this regard have been made in the notes to the financial statements. The Company has formulated a policy on related party transactions. None of the Directors had any pecuniary relationships or transactions vis-a-vis the Company.
HUMAN RESOURCES (''HR'') AND PARTICULARS OF EMPLOYEES
Human Resources (''HR'') are the valuable assets for the Company. CFHL along with its group companies has a work force of more than 9900 employees as at March 31, 2022. The group companies have robust HR management practices enabling achievement of organizational goals and key milestones through people. Safety and well being of the employees continues to be focus area. The companies continue to emphasize on resourcing and talent planning strategies based on their functional and general management requirements in preparing the organisation for the future.
As on March 31,2022, there were two employees on the rolls of CFHL. The information required to be disclosed under the provisions of section 197 of the Act read with rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure IV to this Report.
EMPLOYEE STOCK OPTION (âESOPâ) SCHEMES
The Companyâs ESOP Schemes viz., Employee Stock Option Plan 2007 (âESOP 2007â) and Employee Stock
Option Plan 2016 (âESOP 2016â) have been approved by the shareholders.
During the year there have been no fresh grants under both the schemes. Details in respect of ESOP 2007 and ESOP 2016 as required under the applicable SEBI regulations are displayed on the Companyâs website at http://www.cholafhl.com/article/investors/554. Both the schemes are in compliance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and SEBI (Share Based Employee Benefits) Regulations, 2014 respectively. There are 41,680 options vested and not exercised under ESOP 2016 as on March 31, 2022 and no options were outstanding under ESOP 2007 as at end of the year.
Vide the scheme of arrangement (demerger), employees of the Company were transferred to the resulting company, Tube Investments of India Ltd. The stock options granted by the Company prior to the effective date of demerger, i.e. August 1, 2017, continue to be held by the option grantees who are employees of the resulting company. During the year upon exercise of vested stock options by the eligible option grantees, 5,000 and 14,910 equity shares were allotted under ESOP 2007 and ESOP 2016 schemes, respectively.
The certificate from the secretarial auditor, M/s. Srinidhi Sridharan & Associates, Practicing Company Secretaries confirming that ESOP 2007 and ESOP 2016 schemes have been implemented in accordance with the applicable regulations and shareholders'' resolutions passed in the general meeting of the Company, will be available for the shareholders at the ensuing AGM.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The Company has no activity relating to consumption of energy or technology absorption etc. There was no foreign exchange earnings or outgo during the year.
WHISTLEBLOWER / VIGIL MECHANISM
In compliance with the provisions of section 177(9) of the Act, read with the Companies (Meetings of Board and its Powers) Rules, 2014 and regulation 22 of the SEBI Listing Regulations, the Company has established a whistleblower / vigil mechanism which inter alia facilitates its employees to report genuine concerns. The mechanism provides for adequate safeguards against victimisation of persons using the mechanism and makes provision for direct access to the Chairman of the
Audit Committee in appropriate or exceptional cases. The policy is available on the Companyâs website at http://www.cholafhl.com/article/investors/34.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
Pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013, the Company has a policy for prevention of sexual harassment at workplace. An internal complaints committee (âICCâ) is in place to redress complaints received regarding sexual harassment. The policy extends to all employees (permanent, contractual, temporary and trainees). During the year no referrals were received under the policy and no complaints were pending at the beginning and end of the year.
Pursuant to the provisions of section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and regulation 24A of the SEBI Listing Regulations and the rules made thereunder, the Board appointed M/s. Srinidhi Sridharan & Associates, Practicing Company Secretaries, to conduct the secretarial audit for the year ended March 31,2022. The Report issued by the secretarial auditor in the prescribed form MR-3 is annexed to this Report as Annexure V.
The secretarial audit report does not contain any qualification, reservation or adverse remark by the secretarial auditor.
In terms of regulation 24A of the SEBI Listing Regulations, the secretarial audit report of the Companyâs material subsidiary, Cholamandalam MS General Insurance Company Limited, for the year ended March 31,2022 is annexed to this Report as Annexure VI.
Maintenance of cost records and requirements of cost audit as prescribed under the provisions of section 148(1) of the Act is not applicable to the Company.
Pursuant to the provisions of section 92(3) and section 134(3)(a) of the Companies Act, 2013, the annual return for the year ended March 31, 2022 is available on the Companyâs website at http://www.cholafhl.com/article/subsidvfinancials/400.
COMPLIANCE WITH SECRETARIAL STANDARDS
The Company has complied with the Secretarial Standards on Meetings of the Board of Directors (SS-1) and Secretarial Standards on General Meetings (SS-2) issued by the Institute of Company Secretaries of India.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There are no material changes and commitments, affecting the financial position of the Company which have occurred between March 31, 2022 and the date of this Report.
BUSINESS RESPONSIBILITY REPORT
The Company abides by a set of enduring values and beliefs called the âfive lightsâ viz., the lights of integrity, passion, quality, respect and responsibility in order to be a socially responsible business, which would on a continuous basis, enhance the interests of all its stakeholders. By steadfastly upholding the principles of good and robust corporate governance ingrained with discipline, accountability, transparency and fairness, the Company constantly endeavors to sustain and enhance itself as a responsible corporate citizen.
In terms of regulation 34(2) of the SEBI Listing Regulations a Business Responsibility Report in the prescribed form is annexed to this Report as Annexure VII.
DIRECTORSâ RESPONSIBILITY STATEMENT
The Board of Directors confirm that the Company has in place a framework of internal financial control and compliance system, which is monitored and reviewed by the Audit Committee and the Board, besides the statutory, internal and secretarial auditors. Further, pursuant to section 134(5) of the Companies Act, 2013, the Board of Directors confirm that:
a) in the preparation of the annual financial statements for the year ended March 31, 2022, the applicable accounting standards have been followed and that there were no material departures therefrom;
b) they have, in the selection of the accounting policies, consulted the statutory auditors and have applied their recommendations consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31,2022
and of the profit of the Company for the year ended on that date;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual financial statements on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively during the year ended March 31,2022;
and
f) proper system has been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively during the year ended March 31,2022.
⢠There were no significant material orders passed by the regulators or courts or tribunals impacting the Companyâs going concern status and its operations in future.
⢠The Company does not carry on any activities other than those specifically permitted by the RBI for CICs.
⢠RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the Company or the correctness of
any of the statements or representations made or opinions expressed by the Company and for discharge of any liability by the Company.
Neither there is any provision in law to keep, nor does the Company keep any part of the deposits with RBI and by issuing a Certificate of Registration to the Company, RBI neither accepts any responsibility nor guarantees the payment of deposits to any depositor or any person who has lent any sum to the Company.
⢠There are no applications made or any proceedings pending under the Insolvency and Bankruptcy Code, 2016 during the year.
⢠During the year, the Company had not made any one-time settlement with banks or financial institutions.
The Directors express their gratitude for the support and co-operation extended by the Ministry of Corporate Affairs, Securities and Exchange Board of India, Reserve Bank of India, Stock Exchanges and other statutory authorities. The Directors also wish to thank all investors, vendors, financial institutions, banks and joint venture partners for their continued support and faith reposed in the Company. The Board places on record its appreciation for the contribution made by the employees of the Company and its group companies across all levels.
On behalf of the Board M M Murugappan
Place : Chennai Chairman
Date : May 11,2022 DIN:00170478
Mar 31, 2019
Dear Shareholders,
The Directors take pleasure in presenting the 70th Annual Report together with the audited financial statements of the Company for the year ended March 31, 2019.
The Company is a Core Investment Company and holds substantial investments in the following three key financial services / risk management companies of Murugappa Group and serves large number of customers by providing loans for asset acquisition through financing, asset and family protection through general insurance and risk management services.
- Cholamandalam Investment and Finance Company Limited (CIFCL), is engaged in non-banking financial business;
- Cholamandalam MS General Insurance Company Limited (CMSGICL), is engaged in general insurance business;
- Cholamandalam MS Risk Services Limited (CMSRSL) is engaged in risk management and engineering solutions business.
NAME CHANGE
The name of the Company got changed from âTI Financial Holdings Limitedâ to âCholamandalam Financial Holdings Limitedâ with effect from March 27, 2019. Approval for change in name has been obtained from the Registrar of Companies and the Stock Exchanges in which the Companyâs securities are listed.
SHARE CAPITAL
The paid up equity share capital as on March 31, 2019 was Rs. 18.77 Crore. During the year 158538 equity shares were allotted upon exercise of stock options by eligible option grantees under the Companyâs Employees Stock Option Schemes 2007 and 2016.
DIVIDEND
The Company paid an interim dividend on the equity shares at the rate of 60% i.e., Rs. 0.60 per share of Rs. 1/- each as approved by the Board of Directors on February 4, 2019 for the year ended March 31, 2019. The Board recommends a final dividend of 65% i.e. Rs. 0.65 per share of Rs. 1/- each on the paid-up shares of the Company. With this, the total dividend will be Rs. 1.25 per equity share of Rs. 1/- each for the year ended March 31, 2019.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Rs. in Crore)
|
Particulars |
2018-19 |
2017-18 |
|
Total Income |
10946.81 |
8909.90 |
|
Total Expenses |
8812.02 |
7215.36 |
|
Profit Before Share of Profits from Associate / Joint Venture and Tax |
2134.79 |
1694.54 |
|
Share of Profit from Associate / Joint Venture (Net of Taxes) |
1.11 |
1.07 |
|
Profit Before Tax |
2135.90 |
1695.61 |
|
Tax Expense |
(721.07) |
(568.73) |
|
Profit for the year |
1414.83 |
1126.88 |
|
Minority Interest |
(718.13) |
(576.97) |
|
Net Profit for the year |
696.70 |
549.91 |
BUSINESS REVIEW - SUBSIDIARY, ASSOCIATE AND JOINT VENTURE COMPANIES
The Companyâs subsidiaries are Cholamandalam MS General Insurance Company Limited and Cholamandalam Health Insurance Limited. Cholamandalam Investment and Finance Company Limited is an associate and Cholamandalam MS Risk Services Limited is a joint venture of the Company. There has been no change in the nature of business of these companies during the year. Business performance of these companies are detailed in earlier paragraphs of this report.
The statement containing salient features of the financial statements of the Companyâs associate, subsidiary and joint venture company is annexed to this Report as Annexure A. The consolidated financial statements of the Company, prepared in accordance with the Companies Act, 2013 (âthe Actâ) and the relevant Accounting Standards, forms part of the annual report.
The annual report containing standalone and consolidated financial statements will be posted on the website of the Company, www.cholafhl.com. The annual accounts of the subsidiary companies will also posted on the Companyâs website and be made available for inspection by shareholders during the business hours at the Registered Office of the Company until the date of the Annual General Meeting (âAGMâ). A copy of the annual accounts of subsidiaries will be provided to shareholders upon request.
DIRECTORS
At the 69th AGM held on July 31, 2018, Mr. M M Murugappan was appointed as a director liable to retire by rotation. Mr. M B N Rao retired at the conclusion of the 69th AGM held on July 31, 2018 and Mr. N Srinivasan, stepped down from the Board with effect from August 1, 2018. The Board places on record its appreciation for the contribution made by Mr. Rao and Mr. Srinivasan during their tenure on the Companyâs Board.
Mr. Ashok Kumar Barat was appointed as an additional director in the category of an independent director with effect from August 1, 2018 and Mr. Sridharan Rangarajan was appointed as an additional director from August 30, 2018. Mr. B Ramaratnam was appointed as an additional director in the category of an independent director and Mr. V Ravichandran as an additional director at the Board meeting held on March 18, 2019.
The additional directors appointed during the year viz., Mr. Ashok Kumar Barat, Mr. Sridharan Rangarajan, Mr. B Ramaratnam and Mr. V Ravichandran hold office till the date of the forthcoming AGM. The Company has received notice from a shareholder proposing their candidature as Directors in the forthcoming AGM. The Board recommends their appointment as directors of the Company to the shareholders and the resolutions proposing their appointment under relevant provisions of the Act, forms part of the notice for AGM.
Mr. M M Murugappan retires by rotation at the forthcoming AGM under the provisions of section 152 of the Act, and being eligible, offers himself for re-appointment.
The Board recommends the re-appointment of Mr. M M Murugappan as a director at the forthcoming AGM for approval of the shareholders.
The information as required to be disclosed under regulation 36(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âthe Listing Regulationsâ), for appointment / reappointment of directors is provided in the notice for AGM.
DECLARATION FROM INDEPENDENT DIRECTORS
The Independent Directors, Ms. Shubhalakshmi Panse, Mr. Ashok Kumar Barat and Mr. B Ramaratnam have submitted declaration stating that they meet the criteria of independence as required under the provisions of section 149 of the Act and regulation 16 of the Listing Regulations.
KEY MANAGERIAL PERSONNEL
Pursuant to the provisions of section 203 of the Companies Act, 2013, Mr. N Ganesh, Manager & Chief Financial Officer and Ms. E Krithika, Company Secretary are the key managerial personnel of the Company and there were no changes during the year.
STATUTORY AUDITORS
At the 66th AGM held on August 6, 2015, M/s. S R Batliboi & Associates LLP, Chartered Accountants were appointed as the Statutory Auditors of the Company for a period of five years viz., from the conclusion of the 66th AGM till the conclusion of the 71st AGM subject to ratification by members at every AGM.
Pursuant to the Companies (Amendment) Act, 2017 notified on May 7, 2018, the requirement for ratification of statutory auditorsâ appointment at every AGM stands omitted. Accordingly, at the 69th AGM held on July 31, 2018, the appointment of M/s. S R Batliboi & Associates LLP, as statutory auditors of the company was ratified by the shareholders from the conclusion of 69th AGM till the conclusion of 71st AGM and the Board was authorised to fix remuneration of the auditors on the recommendation of the Audit Committee.
The Auditorsâ Report to the members for the year ended March 31, 2019 forms part of the annual report and does not contain any qualification or adverse remarks. The Auditors have not reported any incident of fraud during the year to the Audit Committee of the Company.
FINANCE
Deposits
The Company has not accepted any fixed deposits under Chapter V of the Companies Act, 2013 and as such no amount of principal and interest were outstanding as on March 31, 2019.
Particulars of Loans, Guarantees or Investments
During the year, the Company has not given any loans or guarantees under the provisions of section 186 of the Act. Information regarding investments made during the year is given in the financial statements.
Internal Financial Control Systems with reference to the Financial Statements
The Company has in place adequate internal financial controls to ensure reliability of financial and operational information and regulatory and statutory compliances. The Companyâs business processes are equipped with monitoring and reporting processes to ensure financial discipline and accountability. The internal financial control systems are monitored both by internal and statutory auditors of the Company. The statutory auditors of the company have also certified on the existence and operating effectiveness of the internal financial controls as on March 31, 2019.
Financial Ratios
In terms of the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the Company is required to disclose details of significant key financial ratios along with the detailed explanations therefor. The Company being an investment company and not having any debt, debtors turnover ratio, inventory turnover ratio, interest coverage ratio, current ratio, operating margin ratio, net profit margin ratio and debt equity ratio are not applicable. The return on net worth of the Company was 6.25% as at March 31, 2019 as against 5.83% as at March 31, 2018. Change in the rate is on account of increase in income earned on investment of surplus funds.
CORPORATE GOVERNANCE
The Company firmly believes in committing itself to maintaining high standards of corporate governance. A report on corporate governance of the Company together with a certificate from the Auditors in accordance with the Listing Regulations is annexed to this Report as Annexure B. The Report further contains other details which are required to be provided in the Boardâs Report.
BOARD MEETINGS
Six meetings of the Board were held during the year, details of which are disclosed in the Report on Corporate Governance.
COMPOSITION OF THE AUDIT COMMITTEE
The Company has constituted an Audit Committee in terms of the applicable provisions of the Act and the Listing Regulations. Details of terms of reference, composition and meetings of the committee are disclosed in the Report on Corporate Governance.
BOARD EVALUATION
Pursuant to the provisions of section 134 of the Act and regulation 17 of the Listing Regulations, the Board has carried out an annual evaluation of its own performance, individual directors and its committees. The manner in which evaluation has been carried out is provided in the Report on Corporate Governance.
POLICY ON BOARD NOMINATION AND REMUNERATION
The Board has framed a policy for selection and appointment of directors, senior management and their remuneration. Details of which are furnished in the Report on Corporate Governance.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company being a part of the Murugappa Group, is known for its tradition of philanthropy and community service. The Companyâs philosophy is to reach out to the community through service-oriented philanthropic institutions in the fields of education and healthcare.
With the enactment of CSR provisions in the Companies Act, 2013, the Company has framed a CSR policy and the policy is available on the Companyâs website at, http://www.cholafhl.com/article/investors/467.
Pursuant to the provisions of section 135 of the Companies Act, 2013, atleast 2% of the average net profits of the Company shall be spent towards CSR activities. Accordingly, the Company has spent an amount of Rs. 73 Lakh on CSR projects / programmes approved by the CSR Committee during the year ended March 31, 2019 as against the statutory requirement of Rs. 72 Lakh.
Detailed information on the CSR activities undertaken during the year is annexed to this Report as Annexure C.
RELATED PARTY TRANSACTIONS
All transactions that were entered into with related parties during the financial year were in the ordinary course of business and on an armâs length basis. There were no materially significant related party transactions during the year which may have a potential conflict with the interest of the Company at large. Necessary disclosures as required under the Indian Accounting Standard (IND AS) have been made in the notes to the financial statements. The Company has framed a policy on related party transactions. None of the Directors had any pecuniary relationships or transactions vis-a-vis the Company.
HUMAN RESOURCES AND PARTICULARS OF EMPLOYEES
Being a Core Investment Company, the number of employees of the Company as on March 31, 2019 was two. The information required to be disclosed under the provisions of section 197 of the Act read with rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014 is annexed to this Report as Annexure D.
EMPLOYEE STOCK OPTION (ESOP) SCHEMES
The Companyâs ESOP Schemes viz., Employee Stock Option Plan 2007 (ESOP 2007) and Employee Stock Option Plan 2016 (ESOP 2016) have been approved by the shareholders. During the year there have been no fresh grants under both the schemes. Details in respect of ESOP 2007 and ESOP 2016 as required under the SEBI (Share Based Employee Benefits) Regulations, 2014 are displayed on the Companyâs website at http://www.cholafhl.com/article/investors/554. Both the schemes are in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014.
As per the scheme of arrangement (demerger), employees of the Company as on the effective date of demerger, i.e. August 1, 2017 were transferred to the manufacturing concern, Tube Investments of India Limited (âthe Resulting Companyâ). The scheme of arrangement provided that the stock options granted by the Company under the existing ESOP Schemes would continue to be held by the employees concerned whether they are employees of the Company or the Resulting Company. Further, as provided in the scheme, post demerger the exercise price of the options of the Company was revised by the Nomination & Remuneration Committee at its meeting held on November 11, 2017. By virtue of this revision, the exercise price of stock options of the Company stands reduced than the original exercise price and the balance of the exercise price becomes the exercise price of the stock options of the Resulting Company.
During the year, upon exercise of stock options by the eligible option grantees, 52118 and 106420 equity shares were allotted under ESOP 2007 and ESOP 2016 schemes, respectively.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The Company has no activity relating to consumption of energy or technology absorption etc. The Company does not have any foreign exchange earnings. There was a foreign exchange outgo, by way of repatriation of dividend, amounting to Rs. 0.008 Crore during the year (previous year Rs. 0.003 Crore).
WHISTLEBLOWER / VIGIL MECHANISM
In compliance with the provisions of section 177(9) of the Act read with rules made thereunder and the Listing Regulations, the Company has established a whistleblower / vigil mechanism which inter alia facilitates its employees to report genuine concerns. The mechanism provides for adequate safeguards against victimisation of persons using the mechanism and make provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases. The policy is available on the Companyâs website at, http://www.cholafhl.com/article/investors/34.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
Pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013, the Company has a policy for prevention of sexual harassment at workplace. An Internal Complaints Committee (ICC) is in place to redress complaints received regarding sexual harassment. The policy extends to all employees (permanent, contractual, temporary and trainees). During the year no referrals were received under the policy and no complaints were pending at the beginning of the year.
BUSINESS RESPONSIBILITY REPORT
The Company abides by a set of enduring values and beliefs called the âfive lightsâ viz., the lights of integrity, passion, quality, respect and responsibility in order to be a socially responsible business, which would on a continuous basis, enhance the interests of all its stakeholders. By steadfastly upholding the principles of good and robust corporate governance ingrained with discipline, accountability, transparency and fairness, the Company constantly endeavours to sustain and enhance itself as a responsible corporate citizen.
Regulation 34(2) of the Listing Regulations mandate that annual report of top 500 listed entities based on market capitalisation, shall include a Business Responsibility Report (BRR) in the prescribed form. Accordingly, a BRR is annexed to this Report as Annexure E.
ANNUAL RETURN
The extract of annual return as required under section 92(3) of the Companies Act, 2013, in the prescribed form MGT-9 is annexed to this Report as Annexure F. Copy of the return is available on the Companyâs website, www.cholafhl.com.
COMPLIANCE WITH SECRETARIAL STANDARDS
The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.
SECRETARIAL AUDIT
Pursuant to the provisions of section 204 of the Companies Act, 2013, and the rules made thereunder, the Board appointed M/s Srinidhi Sridharan & Associates, Practicing Company Secretaries, as the secretarial auditor to conduct secretarial audit of the Company for the year ended March 31, 2019. The Report issued by the secretarial auditor in the prescribed form MR-3 is annexed to this Report as Annexure G.
The said secretarial audit report does not contain any qualification or adverse remarks.
DIRECTORSâ RESPONSIBILITY STATEMENT
The Board of Directors confirm that the Company has in place a framework of internal financial control and compliance system, which is monitored and reviewed by the Audit Committee and the Board, besides the statutory, internal and secretarial auditors. Further, pursuant to section 134(5) of the Companies Act, 2013, the Board of Directors confirm that:
a) in the preparation of the annual financial statements for the year ended March 31, 2019, the applicable accounting standards have been followed and that there were no material departures therefrom;
b) they have, in the selection of accounting policies, consulted the statutory auditors and have applied their recommendations consistently and made adjustments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2019 and of the profit of the Company for the year ended on that date;
c) t hey have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual financial statements on a going concern basis;
e) t hey have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively during the year ended March 31, 2019; and
f) proper system has been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively during the year ended March 31, 2019.
DECLARATIONS / AFFIRMATIONS
During the year:
- there were no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate viz., March 31, 2019 and the date of this Report; &
- there were no significant material orders passed by the regulators or courts or tribunals impacting the Companyâs going concern status and its operations in future.
ACKNOWLEDGEMENT
The Directors wish to thank all customers, investors, vendors, financial institutions, banks, Central / State Governments and joint venture partners for their continued support to the Companyâs performance and growth. The Directors also wish to place on record their appreciation for the contribution made by the employees of the Company resulting in good performance during the year.
On behalf of the Board
Place : Chennai M M Murugappan
Date : May 3, 2019 Chairman
Mar 31, 2018
Dear Shareholders,
The Directors take pleasure in presenting the 69th Annual Report together with the audited financial statements of the Company for the year ended March 31, 2018.
Standalone Financial Highlights Rs. in Crores
|
Particulars |
2017-18 |
2016-17 |
|
Total Income |
64.64 |
40.07 |
|
Total Expenses |
3.23 |
3.78 |
|
Profit Before Tax |
61.41 |
36.29 |
|
Tax Expense |
2.05 |
- |
|
Profit After Tax |
59.36 |
36.29 |
|
Surplus at the beginning of the Year |
371.18 |
776.45 |
|
Transfer pursuant to the scheme of arrangement |
- |
(406.05) |
|
Profit for the year |
59.36 |
36.29 |
|
Transfer to Reserve Fund |
(11.90) |
(7.30) |
|
Interim Dividend Rs. 0.60 (Previous year Rs.1.25) per Equity Share of Rs.1/- each |
(11.25) |
(23.43) |
|
Dividend distribution tax |
(0.10) |
(4.78) |
|
Balance carried to Balance Sheet |
407.29 |
371.18 |
Performance Overview
During the year, the Company earned revenue of Rs.64.62 Cr. mainly through dividend income received on its strategic long-term investments in the companies engaged in financial services business as stated above. Profit before tax for the year was at Rs.61.41 Cr. and profit after tax was at Rs.59.36 Cr.
The Company has a portfolio of strategic investments which are long-term in nature in the financial service companies. These companies performed well during the year and their performance summary is furnished below.
Cholamandalam Investment and Finance Company Limited (CIFCL)
The Company holds about 46% of the paid up and subscribed equity share capital of CIFCL, a leading, comprehensive financial services provider offering vehicle finance, business finance, home loans, home equity loans and provides stock broking & distribution of financial products through its subsidiaries. CIFCL is an Associate Company. CIFCL presently operates from around 870 branches spread across 27 states in India with assets under management above Rs.42879 Cr. CIFCL is a listed company, with its equity shares traded on the National Stock Exchange of India Limited (NSE) and the BSE Limited (BSE).
CIFCL had yet another year of fine performance in FY 18. The companyâs aggregate loan disbursements grew by 35% from Rs.18591 Cr. in FY 17 to Rs. 25114 Cr. in FY 18, contributed by 42% growth in vehicle finance disbursements. CIFCLâs consolidated profit before tax at Rs.1483 Cr. increased by 30% (previous year: Rs.1107 Cr.) and consolidated profit after tax at Rs.975 Cr. grew by 35% (previous year: Rs.719 Cr.).
CIFCL paid an interim dividend of Rs.4.50 per share and further, recommended a final dividend of Rs. 2/- on equity share of face value of Rs.10/- each for the financial year 2017-18.
Cholamandalam MS General Insurance Company Limited (CMSGICL)
The Company holds about 60% of the paid up and subscribed equity share capital of CMSGICL - a joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan, engaged in general insurance business. Thus, CMSGICL is a subsidiary of the Company. CMSGICL offers a wide range of insurance products for individuals and corporates. For individuals, various products are offered under Motor, Travel, Health, Accident Insurance and Home Insurance. For SMEs and Corporate clients, CMSGICL offers customized insurance services such as Property & Engineering Insurance, Liability Insurance, Marine Insurance etc., CMSGICL achieved a Gross Written Premium (including reinsurance remittance) of Rs.4103 Cr. during the financial year 2017-18 (previous year: Rs.3143 Cr.), a growth of 31%. The profit before tax at Rs.347 Cr. increased by 17% (previous year: Rs. 297 Cr.) and profit after tax at Rs. 243 Cr. grew by 17% (previous year: Rs. 208 Cr.).
CMSGICL recommended a dividend of Rs. 0.60 per share on its equity share of face value of Rs.10/- each for FY 2017-18.
Cholamandalam MS Risk Services Limited (CMSRSL)
The Company holds about 49.5% of the paid up and subscribed equity share capital of CMSRSL, a 50:50 joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan and has a technical collaboration with Inter Risk, a group company of Mitsui Sumitomo Insurance Group. CMSRSL offers comprehensive risk management and engineering solutions in the field of Safety, Health and Environment.
CMSRSL achieved revenue of Rs.56.16 Cr. during the financial year, 2017-18 (previous year: Rs.36.53 Cr.). During the year, the profit before tax was Rs.3.83 Cr. (previous year: Rs. 2.61 Cr.) and profit after tax was Rs. 2.65 Cr. (previous year: Rs.1.60 Cr.).
CMSRSL recommended a dividend of Rs. 2.50 per share on its equity share of face value of Rs.10/- each for FY 2017-18.
Cholamandalam Health Insurance Limited (Chola Health)
Chola Health was incorporated in July 2017 to offer health insurance services and the Company has invested about 99.9% in its paid up capital. Chola Health is in the process of seeking regulatory approval from the Insurance Regulatory and Development Authority of India (IRDA) for registering as a standalone health insurance company.
Dividend
The Company paid an interim dividend on the equity shares at the rate of 60% (Rs. 0.60 per share) as approved by the Board of Directors on February 5, 2018 for the year ended March 31, 2018.
The Board recommends a final dividend of 65% on the equity shares of the Company. With this, the total dividend will be Rs.1.25 per equity share of Rs.1/- each for the year ended March 31, 2018.
Transfer to Reserves
The Company has transferred a sum of Rs.11.9 Cr. to statutory reserve as required under RBI regulations.
Registration with Reserve Bank of India(RBI)
The Company being an investment company, satisfies the criteria specified for being a Core Investment Company (CIC) under RBI regulations. Pursuant to the provisions of Section 45-IA of RBI Act, 1934, though registration under RBI regulations is not required, the Company had opted to seek registration with RBI, considering its prospective intent to access public funds. The application for registration of the Company as CIC has been filed with RBI.
Consolidated Financial Highlights
Rs. in Crores
|
Particulars |
2017-18 |
2016-17 |
|
Total Income |
3,345.82 |
2,689.15 |
|
Total Expenses |
2,993.82 |
2,394.41 |
|
Profit Before Tax |
352.00 |
294.74 |
|
Tax Expense |
(106.64) |
(89.43) |
|
Profit After Tax |
245.36 |
205.31 |
|
Minority Interest |
(97.04) |
(83.26) |
|
Share of profit from Associate |
450.70 |
332.52 |
|
Net Profit for the Year |
599.02 |
454.57 |
Business Review - Subsidiary, Associate and Joint Venture Companies
The Companyâs subsidiary companies are Cholamandalam MS General Insurance Company Limited and Cholamandalam Health Insurance Limited. Cholamandalam Investment and Finance Company Limited is an associate and Cholamandalam MS Risk Services Limited is a joint venture of the Company.
Business review of the aforementioned companies are detailed in earlier paragraphs of this report.
The statement containing salient features of the financial statements of the Companyâs associate, subsidiary and joint venture company is annexed to this report (refer Annexure A). The Consolidated financial statements of the Company, prepared in accordance with the Companies Act, 2013 and the relevant Accounting Standards, forms part of the Annual Report.
Directors
Consequent to the demerger of manufacturing business, M/s. M M Murugappan, Hemant M Nerurkar, Madhu Dubhashi, Pradeep V Bhide, S Sandilya and L Ramkumar resigned from the Board with effect from August 1, 2017. The Board places on record its appreciation for the contributions made by them during their term as Chairman / Directors of the Company.
Post demerger, Mr. A Vellayan, Mr. M B N Rao and Ms. Shubhalakshmi Panse were appointed as additional directors of the Company with effect from August 1, 2017 and Mr. Vellayan was elected as the Chairman. At the 68th Annual General Meeting (AGM) of the Company held on September 25, 2017, Mr. A Vellayan was appointed as a director retiring by rotation and Mr. M B N Rao and Ms. Shubhalakshmi Panse were appointed as Independent Directors for a term of 1 year and 5 years respectively.
Mr. Vellayan stepped down from the Board on February 5, 2018. The Board places on record its appreciation for the contribution made by him during his tenure in the Company.
Mr. M M Murugappan, was appointed as an additional director by the Board on November 11, 2017 and holds office till the date of the forthcoming AGM. The Board at its meeting held on February 5, 2018, elected Mr. M M Murugappan as the Chairman. Resolution proposing the appointment of Mr. M M Murugappan as a director liable to retire by rotation, under Section 152 of the Companies Act, 2013 (âthe Actâ), forms part of the notice for AGM.
Mr. N Srinivasan, retires by rotation at the forthcoming Annual General Meeting under Section 152 of the Companies Act, 2013, and being eligible, offers himself for re-appointment.
The information as required to be disclosed under regulation 36(3) of the SEBI Listing Regulations, 2015, for appointment / reappointment of directors is provided in the notice for AGM.
The Board recommends the appointment of Mr. M M Murugappan and the re-appointment of Mr. N Srinivasan at the forthcoming AGM for approval of the shareholders.
Declaration from Independent Directors
The Independent Directors, Mr. M B N Rao and Ms. Shubhalakshmi Panse, have submitted declaration of independence as required under Section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in the said Act.
Key Managerial Personnel
Post demerger, Mr. L Ramkumar, Managing Director, Mr. K Mahendra Kumar, Chief Financial Officer and Mr. S Suresh, Company Secretary resigned from the Company with effect from August 1, 2017.
The following Key Managerial Personnel (KMPs) of the Company were appointed by the Board at its meeting held on August 9, 2017.
a) Mr. N Ganesh - Manager;
b) Mr. AN Meyyappan - Chief Financial Officer (CFO); and
c) Ms. E Krithika - Company Secretary.
The appointment of Mr. Ganesh as Manager for a term of 3 years, was approved by the shareholders at the 68th Annual General Meeting held on September 25, 2017. Mr. AN Meyyappan resigned as CFO in view of other assignments with effect from February 5, 2018. The Board appointed Mr. N Ganesh as CFO with effect from February 5, 2018, in addition to his current position as Manager.
Auditors
At the 66th Annual General Meeting, M/s. S R Batliboi & Associates LLP, Chartered Accountants were appointed as the Statutory Auditors of the Company for a period of five years from the conclusion of the said 66th Annual General Meeting till the conclusion of the 71st Annual General Meeting subject to ratification by members each year. Further, in terms of the shareholdersâ approval, the remuneration payable to the said Statutory Auditors in respect of their appointment is to be fixed each year. M/s. S R Batliboi & Associates LLP, have confirmed their eligibility under the provisions of the Companies Act, 2013.
Pursuant to the recent amendment of the Companies Act, 2013, the requirement of ratification of statutory auditors appointment at every AGM is no more required.
In view of the amendment, the Board recommends ratification of the appointment of M/s. S R Batliboi & Associates LLP, Chartered Accountants as the Statutory Auditors of the Company for the period from the conclusion of the 69th Annual General Meeting till the conclusion of the 71st Annual General Meeting on the terms of remuneration as set out in the resolution contained in the notice for the Annual General Meeting.
Finance
Deposits
The Company has not accepted any fixed deposits under Chapter V of the Companies Act, 2013 and as such no amount of principal and interest were outstanding as on March 31, 2018.
Particulars of Loans, Guarantees or Investments
During the year, the Company has not given any loans or guarantees under the provisions of Section 186 of the Companies Act, 2013. Information regarding investments made is furnished in the financial statements.
Internal Financial Control Systems with reference to the Financial Statements
The Company has in place adequate internal financial controls to ensure reliability of financial and operational information and regulatory and statutory compliances. The Companyâs business processes are equipped with monitoring and reporting processes to ensure financial discipline and accountability. The internal financial control systems are monitored by internal auditors of the Company. The statutory auditors of the company have also certified on the adequacy of the internal financial control systems over financial reporting and their operating effectiveness as on March 31, 2018.
Risk Management and Internal Control Systems
Internal control systems in the organisation are looked at as the key to its effective functioning. The Company has a risk management framework which provides an integrated approach for identifying, monitoring and mitigating risks associated with the business of the Company. The risk and control matrices for financial operations have been put in place. The control measures, basis the matrices are tested by the internal auditor and reported to the Audit Committee.
The Audit Committee evaluates adequacy and effectiveness of the internal controls, recommend improvements and reviews corrective action taken to address gaps, if any, through the internal audit carried out as per plan approved by it. Further, being an investment company, all investments are subject to a detailed evaluation and approval by the Board of Directors.
These measures have helped in ensuring adequacy of risk management and internal control systems.
Corporate Governance
The Company firmly believes in committing itself to maintaining high standards of corporate governance. A report on corporate governance of the Company together with a certificate from the Auditors in accordance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations) is annexed and forms part of the Boardâs Report (refer Annexure B). The Report further contains details as required to be provided in the Boardâs Report on the policy on directorsâ appointment and remuneration including the criteria, annual evaluation by the Board and Directors, composition and other details of Board committees, whistle-blower policy / vigil mechanism etc.
A certificate from the Manager & CFO has been submitted to the Board regarding the financial statements and other matters as required under regulation 17(8) of the Listing Regulations.
Corporate Social Responsibility (CSR)
The Company being part of the Murugappa Group, is known for its tradition of philanthropy and community service. The Companyâs philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. With the enactment of CSR provisions in the Companies Act, 2013, the Company has put in place a CSR policy incorporating the requirements therein which is available on the Companyâs website at, http:// www.tifhl.com/article/investors/467.
Pursuant to the provisions of section 135 of the Companies Act, 2013, atleast 2% of the average net profits of the Company shall be spent by the Company towards CSR activities. Accordingly, the Company spent an amount of Rs.134 lakhs on CSR projects / programmes approved by the CSR Committee during the year ended March 31, 2018 as against the statutory requirement of Rs.132 lakhs.
Detailed information on the CSR activities undertaken during the year is annexed to and forms part of this Report (refer Annexure C).
Related Party Transactions
All related party transactions that were entered into during the financial year were on an armâs length basis and in the ordinary course of business. There were no materially significant related party transactions during the year which may have a potential conflict with the interest of the Company at large. Necessary disclosures as required under the Accounting Standard (AS) 18 have been made in the notes to the Financial Statements.
The Company has in place a policy on related party transactions as approved by the Board. The policy is available on the Companyâs website. None of the Directors had any pecuniary relationships or transactions vis-a-vis the Company.
Particulars of Employees
The information required to be disclosed under the provisions of Section 197 of the Act read with Rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014, is annexed to and forms part of this report (refer Annexure D).
Prevention of sexual harassment at workplace
Pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (sexual harassment act), the Company has a policy on prevention of sexual harassment at workplace. An Internal Complaints Committee (ICC) has been formed to redress complaints received regarding sexual harassment. The policy extends to all employees (permanent, contractual, temporary and trainees). During the year, no complaints were made under the sexual harassment act.
Employee Stock Option Schemes
Further to the Companyâs Employee Stock Option Plan 2007 (ESOP 2007), the Company introduced and implemented Employee Stock Option Plan 2016 (ESOP 2016) with the approval of the shareholders obtained through a postal ballot process on January 11, 2017 for grant of 37,48,000 Stock Options to eligible employees of the Company. During the year, there have been no fresh grants under both the schemes.
Details in respect of ESOP 2007 and ESOP 2016 as required under the SEBI (Share Based Employee Benefits) Regulations, 2014 are displayed on the Companyâs website at http://www.tifhl.com/article/investors/554. Both the Schemes are in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014.
As per the Scheme of arrangement, the stock options granted by the Company under the Existing Stock Option Schemes would continue to be held by the employees concerned (irrespective of whether they continue to be employees of the Company or the Resulting Company). Post demerger, employees of the Company were transferred to the Resulting Company. Further, as provided in the Scheme, the Nomination & Remuneration Committee approved the adjustment of existing exercise price of the stock options of the Company at its meeting held on November 11, 2017. By virtue of this adjustment the exercise price of stock options of the Company stands reduced and the balance of the exercise price becomes the exercise price of the stock options of the Resulting Company.
During the year, upon exercise of unvested options by the erstwhile employees of the Company, 85825 equity shares were allotted under Employee Stock Options Scheme 2007.
Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo
The Company has no activity relating to consumption of energy or technology absorption etc. The Company does not have any foreign exchange earnings. There was a foreign exchange outgo, by way of repatriation of dividend, amounting to Rs. 0.004 Cr. during the year (previous year Rs. 0.03 Cr.)
Vigil Mechanism/Whistle Blower Policy
In compliance with the provisions of Section 177(9) of the Companies Act, 2013 read with the Rules made thereunder, the Company has instituted a whistle blower mechanism which inter alia facilitates its employees to report genuine concerns. The mechanism provides for adequate safeguards against victimisation of persons using the mechanism and make provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases. The policy is available on the Companyâs website at http://www.tifhl.com/article/investors/34.
Business Responsibility Reporting
The Company abides by a set of enduring values and beliefs called the âfive lightsâ viz., the lights of integrity, passion, quality, respect and responsibility in order to be a socially responsible business, which would on a continuous basis, enhance the interests of all its stakeholders. By steadfastly upholding the principles of good and robust corporate governance ingrained with discipline, accountability, transparency and fairness, the Company constantly endeavours to sustain and enhance itself as a responsible corporate citizen.
Regulation 34(2) of the SEBI Listing Regulations, 2015, inter alia, provides that the annual report of the top 500 listed entities based on market capitalisation, shall include a Business Responsibility Report (BRR). Accordingly, a BRR is attached and forms part of this Report (refer Annexure E).
Annual Return
The extract of annual return as required under sub-section (3) of Section 92 of the Companies Act, 2013, in the prescribed form MGT-9 is annexed to this Report (refer Annexure F).
Compliance with Secretarial Standards
The Company has complied with applicable secretarial standards issued by the Institute of Company Secretaries of India.
Secretarial Audit
Pursuant to the provisions of Section 204 of the Companies Act, 2013, and the Rules made thereunder, the Company appointed M/s Srinidhi Sridharan & Associates, Company Secretaries, to conduct the secretarial audit of the Company. The secretarial audit report for the year ended March 31, 2018 as issued by the auditor in the prescribed form MR-3 is annexed to this Report (refer Annexure G).
The said secretarial audit report does not contain any qualification, reservation or adverse remark or disclaimer made by the secretarial auditor.
Directorsâ Responsibility Statement
The Board of Directors confirms that the Company has in place a framework of internal financial control and compliance system, which is monitored and reviewed by the Audit Committee and the Board, besides the statutory, internal and secretarial auditors. Further, pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors confirm that:
a) in the preparation of the annual financial statements for the year ended March 31, 2018, the applicable accounting standards have been followed and that there were no material departures therefrom;
b) they have, in the selection of accounting policies, consulted the statutory auditors and have applied their recommendations consistently and made adjustment and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2018 and of the profit of the Company for the year ended on that date;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual financial statements on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively during the year ended March 31, 2018; and
f) proper system has been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively during the year ended March 31, 2018.
Declarations/Affirmations
During the year:
- the Companyâs manufacturing business was demerged pursuant to the Scheme of Arrangement as per details furnished in this report. Consequently, the Company has become financial services company in the nature of investment company;
- there were no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate viz., March 31, 2018 and the date of this Report; &
- there were no significant material orders passed by the regulators or courts or tribunals impacting the Companyâs going concern status and its operations in future.
Acknowledgement
The Directors wish to thank all customers, investors, vendors, financial institutions, banks, central / state governments and joint venture partners for their continued support to the Companyâs performance and growth. The Directors also wish to place on record their appreciation for the contribution made by the employees of the Company resulting in good performance during the year.
On behalf of the Board
Place : Chennai M M Murugappan
Date : May 10, 2018 Chairman
Mar 31, 2017
Dear Shareholders,
The Directors take pleasure in presenting the 68th Annual Report together with the audited financial statements of the Company for the year ended 31st March 2017.
1. Scheme of Arrangement, Share Capital and reduction in face value of Share
The Board of Directors of the Company, at the meeting held on 3rd November, 2016, approved a Scheme of Arrangement (''Scheme'') for the demerger of the Manufacturing Business Undertaking of the Company, on a going concern basis, in favour of Tube Investments of India Limited (Resulting Company, formerly ''TI Financial Holdings Limited''). The Manufacturing Business Undertaking means manufacturing of tubes, strips, tubular components, bicycles and fitness products, chains for automobile sector and industrial applications, roll-formed sections, other metal formed products, industrial gears, designing and manufacturing of dies and includes investments in Shanthi Gears Limited, Financiere C10 SAS, Sedis SAS, Sedis Co. Limited, Sedis Gmbh, TI Tsubamex Private Limited and TI Absolute Concepts Private Limited. The Scheme received the approval of the shareholders of the Company at the Equity Shareholders meeting convened and held on 24th April, 2017 as per the directions of the National Company Law Tribunal, Chennai (''NCLT''). The Scheme was sanctioned by the NCLT vide its Order dated 17th July, 2017. The Scheme has become effective on 1st August, 2017, being the date of filing of the aforementioned Order of Sanction with the Registrar of Companies, Tamil Nadu, Chennai. The Appointed Date for transfer and vesting of the Manufacturing Business Undertaking of the Company into the Resulting Company was 1st April, 2016.
Consequent to the said demerger of the manufacturing activities, the business of the Company is financial services in the nature of investment company. The Company has substantial investments in the following companies:
- Cholamandalam Investment and Finance Company Limited engaged in non-banking financial business;
- Cholamandalam MS General Insurance Company Limited engaged in general insurance business; and
- Cholamandalam MS Risk Services Limited engaged in risk management and engineering solutions business.
In order to reflect the present nature of business, the name of the Company is being changed to ''TI Financial Holdings Limited''.
Pursuant to the Scheme, in respect of the issued, subscribed and paid up share capital of the Company, the face value of each share was also correspondingly reduced to ''1/-. Necessary formalities are being complied with in the said regard including crediting of the new Equity Shares of the face value of ''1/- and dispatch of the share certificates to the shareholders holding the shares in physical form.
The shareholders are entitled for issue and allotment of corresponding number of equity shares of ''1/- each in the Resulting Company. The shares so issued will be listed on the same Stock Exchanges where the equity shares of the Company are listed viz., the BSE Limited and the National Stock Exchange of India Limited.
During the year under review, the Company has not issued shares with differential voting rights and sweat equity shares.
2. Share Capital
The paid up Equity Share Capital as on 31st March, 2017 was ''18.75 Cr. During the year under review, the Company allotted 1,01,334 Equity shares to eligible employees under the Employees Stock Option Scheme.
Consequent upon demerger of the Manufacturing Business Undertaking as stated above on a going concern basis in favour of the Resulting Company, the share capital will stand reduced in accordance with the Scheme of Arrangement.
3. Business Environment
The Indian financial sector is a highly diversified one comprising banks, insurance companies, non-banking financial companies, pension funds, mutual funds, co-operatives and smaller financial entities, with payment banks being the latest entrants to the sector. The sector is currently in an expansion mode with the existing financial services players registering strong growth besides new entities entering the market. In recent years, the Government of India and the Reserve Bank of India have ushered in a slew of reforms to liberalise, regulate and boost the sector. With such a collective thrust by the Government as well as the private sector, needless to state, the Indian financial services market is fast becoming one of the most dynamic and vibrant of the capital markets across the globe.
The Company has a sizeable shareholding stake in businesses engaged in non-banking financial services (NBFCs, as generally referred), general insurance and risk management services as per details furnished in this Report.
For the Indian NBFC industry, the year 2016-17 was a stable one, thanks to the favourable stance adopted by both the Regulator and the Government. Riding on the back of very welcome measures, by and large, it is expected that the sector will witness steady growth in the coming years, backed by a continuous expansion of the asset classes and higher market share for the key players in the market, which may come even at the cost of mid-sized banks.
For Cholamandalam Investment and Finance Company Limited, engaged in financial services, with its major funding stake in the auto sector, the outlook remains positive as the sector is expected to grow between six and nine per cent.
The Indian general insurance industry has grown close to twenty per cent year after year over the last several years with the gross direct premium of non-life insurers (except standalone health) at around ''1.1 billion in 2016-17. This, despite the challenges the industry has been facing due to the overall slowdown in the economy, weak investment stream and changes that tail a de-tariffed regime. The new Crop Insurance Scheme of the Government of India has provided an appreciable impetus in handsomely improving the crop insurance premium for the industry, with the motor, health and fire segments too continuing to grow strongly.
For Cholamandalam MS General Insurance Company Limited, engaged in general insurance business, the business outlook remains very positive as it seeks to geographically grow through phased building of its distribution reach, through a digitally enabled model, across the country.
For Cholamandalam MS Risk Services Limited, engaged in providing risk management and engineering solutions in the field of safety, health and environment, in association with Cholamandalam MS General Insurance Company Limited, the business outlook is bright as it looks at constantly strengthening its consultancy portfolio through the launch of newer services.
4. Standalone Financial Highlights Rs, in Crores
|
Particulars |
2016-17 |
2015-161 |
|
Total Income |
40.07 |
3975.38 |
|
Total Expenses |
3.78 |
3836.58 |
|
Profit Before Exceptional Items and Tax |
36.29 |
138.80 |
|
Exceptional items |
- |
784.98 |
|
Profit Before Tax |
36.29 |
923.78 |
|
Tax Expense |
- |
(193.89) |
|
Profit After Tax |
36.29 |
729.89 |
|
Surplus at the beginning of the Year |
776.45 |
181.53 |
|
Transfer pursuant to the Scheme of Arrangement |
(406.05) |
- |
|
Profit for the Year |
36.29 |
729.89 |
|
Transfer to Reserve Fund |
(7.30) |
- |
|
Transfer to Debenture Redemption Reserve (Net) |
- |
(24.27) |
|
Interim Dividend Rs,1.25 (Previous year Rs,1.50) per Equity Share of Rs,2/- each |
(23.43) |
(28.09) |
|
Final Dividend Proposed - Nil (Previous year Rs,3.50 - Special Dividend) |
- |
(65.57) |
|
Dividend Distribution Tax |
(4.78) |
(18.49) |
|
Earlier year''s provision for Dividend Distribution Tax no longer required |
1.45 |
|
|
Balance carried to Balance Sheet |
371.18 |
776.45 |
5. Performance Overview
During the year under review, the Company earned revenue of Rs,40.07 Cr. mainly through dividend income received on its strategic long-term investments in the companies engaged in financial services business as stated above. The profit before and after tax for the year was at Rs,36.29 Cr
As stated, the Company has a portfolio of significant, strategic investments which are long-term in nature in the companies as listed above. These companies performed well during the year under review as may be seen from their performance summary below:
5.1 Cholamandalam Investment & Finance Company Limited (Rs,CIFCL'')
The Company holds about 46% of the paid up and subscribed equity share capital of CIFCL, a leading comprehensive financial services provider offering vehicle finance, home loans, home equity loans, SME loans, investment advisory services, stock broking and a variety of other financial services to its customers. Thus, CIFCL is an Associate Company. CIFCL presently operates from over 700 branches across India with total assets under management above ''36,000 Cr. CIFCL is a listed company, with its equity shares traded on the National Stock Exchange of India Limited (NSE) and the BSE Limited (BSE).
CIFCL had yet another year of fine performance with its vehicle finance vertical doing well. CIFCL''s consolidated profit before tax at Rs,1107 Cr. increased by 26% (previous year: Rs,879 Cr.) and consolidated profit after tax at Rs,719 Cr. grew by 25% (previous year: Rs,575 Cr.). CIFCL''s disbursement''s increased to Rs,18,591 Cr. during the year (previous year: Rs,16,380 Cr.).
CIFCL declared an interim dividend of Rs,3.50 per share and further, declared a Final Dividend of Rs,2.00 on equity share of face value of Rs,10 each for the financial year, 2016-17.
5.2 Cholamandalam MS General Insurance Company Limited (''CMSGICL'')
The Company holds about 60% of the paid up and subscribed equity share capital of CMSGICL - a joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan, engaged in general insurance business. Thus, CMSGICL is a subsidiary of the Company. CMSGICL offers a wide range of insurance products for individuals and corporate. For individuals, various products are offered under Motor Insurance, Travel Insurance, Health Insurance, Accident Insurance and
Home Insurance. For SMEs and Corporate Insurance clients, CMSGICL offers customized insurance solutions encompassing insurance and risk consulting services such as Fire Insurance, Engineering Insurance, Liability Insurance, Marine Insurance and Property Insurance.
CMSGICL achieved a Gross Written Premium (including reinsurance remittance) of Rs,3143 Cr. during the year (previous year: Rs,2466 Cr.), a growth of 27%.
CMSGICL''s profit before tax at Rs,297 Cr. increased by 39% (previous year: Rs,213 Cr.) and profit after tax at Rs,208 Cr. grew by 41% (previous year: Rs,148 Cr.).
CMSGICL has declared a maiden dividend of Rs,0.60 per share on its equity share of face value of Rs,10 each for the financial year.
5.3 Cholamandalam MS Risk Services Limited (''CMSRSL'')
The Company holds about 49.50% of the paid up and subscribed equity share capital of CMSRSL, (a joint venture with Mitsui Sumitomo Insurance Company Ltd., Japan) and has a technical collaboration with InterRisk, a group company of Mitsui Sumitomo Insurance Group. Chola MS Risk offers comprehensive Risk Management and Engineering solutions in the field of Safety, Health and Environment.
CMSRSL achieved revenue of Rs,39.19 Cr. during the year (previous year: Rs,32.42 Cr.). The profit before tax was at Rs,2.61 Cr. (previous year: Rs,2.83 Cr.) and profit after tax was at Rs,1.60 Cr. (previous year: Rs,1.99 Cr.).
CMSRSL declared a dividend of Rs,2.00 per share on its equity share of face value of Rs,10 each for the financial year, 2016-17.
6. Dividend
The Board of Directors had declared an interim dividend of Rs,1.25 per share during the financial year 2016-17, which was paid on 24th February, 2017. After considering the accounts of the Company for the year ended 31st March, 2017, the Board does not propose to recommend any final dividend for the year.
7. Registration with Reserve Bank of India
The Company''s revenue and assets are in the form of financial assets/revenues and hence, certain regulatory requirements prescribed by the Reserve Bank of India (''RBI'') for non-banking financial companies would be applicable to the Company. Since the Company meets all the criteria for a Core Investment Company and has a net worth in excess of Rs,100 Crore, the Company may have to seek registration with the RBI under the relevant provisions, if the Company intends to access public funds as defined under the extant regulatory guidelines.
8. Directors
Mr. C K Sharma resigned from the Board with effect from 7th March, 2017 for personal reasons. Further, consequent to the demerger of the Manufacturing Business Undertaking, M/s. M M Murugappan, Hemant M Nerurkar, Madhu Dubhashi, Pradeep V Bhide and S Sandilya resigned from the Board of Directors of the Company with effect from 1st August, 2017. The Board places on record its appreciation for the contributions made by them during their term as Chairman / Directors of the Company.
Consequent to Mr. L Ramkumar assuming Office as Managing Director in the Resulting Company, he resigned as a Director and as Managing Director of the Company with effect from 1st August, 2017. The Board places on record its appreciation for the contribution made by Mr. Ramkumar during his tenure in Office.
Mr. Vellayan Subbiah was appointed as Additional Director and as Managing Director (Designate) with effect from 19th August, 2017, subject to the approval of the shareholders. As per the terms of his appointment, the appointment was intended for the manufacturing business company. Consequent to the demerger of the manufacturing business and his assuming office as such in the Resulting Company, his appointment will not be taking effect in the Company.
Mr. A Vellayan, Mr. M B N Rao (Independent Director) and Ms. Shubhalakshmi Panse (Independent Director) were appointed as Additional Directors of the Company with effect from 1st August, 2017. Mr. A Vellayan was elected as the Chairman of the Board of Directors of the Company at the Board meeting held on 9th August, 2017.
A resolution proposing the appointment of Mr. A Vellayan as a Director liable to retire by rotation, under Section 152 of the Companies Act, 2013 (''the Act''), forms part of the Notice for the ensuing Annual General Meeting (AGM).
Mr. N Srinivasan, Director, liable to retire by rotation under Section 152 of the Act, retires by rotation at the forthcoming AGM and being eligible, offers himself for re-appointment.
Mr. M B N Rao and Ms. Shubhalakshmi Panse, Independent Directors in terms of the Act and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''SEBI Listing Regulations''), being eligible, offer themselves for appointment as Independent Directors pursuant to Section 149 of the Act. Each of them has furnished necessary declaration in terms of Section 149(6) of the Act, affirming that they meet the criteria of independence as stipulated there under.
The Board takes pleasure in recommending the appointments of Mr. A Vellayan, Mr. M B N Rao and Ms. Shubhalakshmi Panse and the re-appointment of Mr. N Srinivasan at the forthcoming AGM as Directors as per details contained in the Notice for the 68th AGM.
13. Finance
13.1. Deposits
The Company has not accepted any fixed deposits under Chapter V of the Companies Act, 2013 and as such no amount of principal and interest were outstanding as on 31st March 2017.
13.2. Particulars of Loans, Guarantees or Investments
During the year, the Company has not invested or given any loans or guarantees under the provisions of Section 186 of the Companies Act, 2013.
14. Consolidated Financial Highlights Rs, in Crores
|
Particulars |
2016-17 |
2015-162 |
|
Total Income |
2689.15 |
8011.93 |
|
Total Expenses |
2394.41 |
7364.37 |
|
Profit Before Exceptional items and Tax |
294.74 |
647.56 |
|
Exceptional items |
- |
726.62 |
|
Profit Before Tax |
294.74 |
1374.18 |
|
Tax Expense |
(89.43) |
(367.07) |
|
Profit After Tax |
205.31 |
1007.11 |
|
Minority Interest |
(83.26) |
(142.04) |
|
Share of profit from Associate |
332.52 |
173.84 |
|
Net Profit for the Year |
454.57 |
1038.91 |
15. Business Review - Subsidiary, Associate and Joint Venture Companies
Cholamandalam MS General Insurance Company Limited is a subsidiary, Cholamandalam Investment and Finance Company Limited is an associate and Cholamandalam MS Risk Services Limited is a joint venture of the Company.
A review of the business of the aforementioned Company''s subsidiary, associate and joint venture is made as part of 5 above.
The Statement containing salient features of the financial statements of the Company''s subsidiary, associate and joint venture companies is attached as Annexure C. The Consolidated Financial Statements of the Company and its subsidiary, associate and joint venture companies prepared in accordance with the Accounting Standard (AS) 21, form part of the Annual Report.
16. Financial Review
16.1. Profits & Profitability
The Company derives its income mainly by way of dividend from long-term investments made in companies engaged in financial services, which are mainly subsidiary, joint venture or associate of the Company. During the financial year, the profit before and after tax were at Rs,36.29 Cr., due to dividends received from the investee companies on the back of their improved business performance.
16.2. Internal Control Systems
Internal control systems in the organization are looked at as the key to its effective functioning. The role of Internal Audit is to periodically evaluate the adequacy and effectiveness of the internal controls, recommend improvements and also review adherence to policies based on which corrective action is taken to address gaps, if any.
Revenue and capital expenditures will be governed by approved budgets and the levels defined by a delegation of authority mechanism. Review of capital expenditure will be undertaken with reference to benefits expected in line with the policy for the same.
Investment decisions are subject to formal detailed evaluation and approved by the relevant authority as defined in the delegation of authority mechanism.
The scope of Audit Committee includes review of the plan for internal audit, significant internal audit observations and functioning of the Company''s Internal Audit department on a periodic basis.
22. Directors'' Responsibility Statement
The Board of Directors confirm that the Company has in place a framework of internal financial control and compliance system, which is monitored and reviewed by the Audit Committee and the Board besides the statutory, internal and secretarial auditors. Further, pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors confirm that:
a) in the preparation of the annual financial statements for the year ended 31st March 2017, the applicable accounting standards have been followed and that there were no material departures there from;
b) they have, in the selection of accounting policies, consulted the statutory auditors and have applied their recommendations consistently and made adjustments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2017 and of the profit of the Company for the year ended on that date;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual financial statements on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively during the year ended 31st March, 2017; and
f) proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively during the year ended 31st March, 2017.
23. Related Party Transactions
All related party transactions that were entered into during the financial year under review were on an arm''s length basis and were in the ordinary course of business. There were no materially significant related party transactions during the year which may have a potential conflict with the interest of the Company at large. Necessary disclosures as required under the Accounting Standard (AS) 18 have been made in the notes to the Financial Statements.
The policy on Related Party Transactions as approved by the Board is uploaded and is available on the following link on the Company''s website, http://www.tifhl.com/article/values/476. None of the Directors had any pecuniary relationships or transactions vis-a-vis the Company.
24. Declarations/Affirmations
During the year under review:
- the Company''s manufacturing business was demerged pursuant to the Scheme of Arrangement as per details furnished in paragraph 1 above [Scheme of Arrangement, Share Capital and Listing of Equity Shares]. Consequently, the Company has become financial services company in the nature of investment company;
- there were no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate viz., 31st March, 2017 and the date of this Report; &
- there were no significant material orders passed by the regulators or courts or tribunals impacting the Company''s going concern status and its operations in future.
25. Secretarial Audit
During the financial year 2016-17, the Company had pursuant of the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 appointed Mr. R Sridharan of Messrs. R. Sridharan & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial
Audit is annexed herewith and forms part of this Report as Annexure F.
26. Annual Return
Extract of the Annual Return is annexed and forms part of this Report as Annexure G.
27. Business Responsibility Reporting
The SEBI Listing Regulations stipulates that top 500 listed entities based on market capitalization (calculated as on 31st March of every financial year) are to furnish as part of their Annual Report, a Business Responsibility Report.
Accordingly, in accordance with the requirements of the Regulations, a Business Responsibility Report is attached and forms part of this Annual Report as Annexure H.
28. Acknowledgement
The Directors thank all Customers, Vendors, Financial Institutions, Banks, State Governments, Joint Venture Partners and Investors for their continued support to your Company''s performance and growth. The Directors also wish to place on record their appreciation of the contribution made by all the employees of the Company resulting in the good performance during the year under review.
On behalf of the Board
Place: Chennai A Vellayan
Date: 9th August, 2017 Chairman
Mar 31, 2015
Dear Members,
The Directors take pleasure in presenting the 66th Annual Report
together with the audited Financial Statements for the year ended 31st
March 2015.
1. Business Environment
The financial year 2014-15 was marked by falling oil prices, a
reasonably stable US economy and signs of weaknesses in the Euro zone.
Major global economies barring the US have witnessed either no growth
or declining growth in the previous year. While the US grew marginally
in 2014, the European countries registered marginal or no growth. Euro
zone continues to be under pressure. China has been experiencing
another year of slow growth. After an initial period of growth, the
Japanese economy too has seen lower growth rates with deflationary
concerns. The Indian economy registered a growth rate of 7.4% for the
year compared to 6.9% for the year 2013-14. The Indian Rupee remained
range bound against the US dollar during the last financial year
whereas other currencies showed a declining trend against the US
dollar.
The Government of India has undertaken various policy initiatives such
as reallocation of coal blocks, investments in railway infrastructure
and enhancement of foreign direct investment limits for Insurance
sector. Many broad based set of initiatives aimed at encouraging "Make
in India" are expected to give an impetus to the manufacturing sector.
Inflation rate has been subdued and interest rates have softened. It is
expected that the benefits from various policy initiatives will have a
positive impact on the manufacturing sector in the coming years.
The Automobile sector in India registered a growth of 9% during
2014-15. In the four wheeler segment, passenger vehicles and heavy
commercial vehicles grew by 4% and 21% respectively, whereas light
commercial vehicles declined by 10%. In the two wheeler segment,
scooters grew by 28% and motor cycles grew by 4%.
2. Standalone Financial Highlights
Rs. in Crores
Particulars 2014-15 2013-14
Sale of Products - Gross 3916.16 3609.42
Less: Excise Duty on sales 270.38 257.73
Sale of Products - Net 3645.78 3351.69
Profit Before Exceptional Items and Tax 121.15 141.16
Add: Reversal of Provision for Diminution - 0.06
in value of Investments (net)
Less: Compensation under Voluntary Retirement 27.43 -
Scheme
Add: Profit on sale of Non-Operating Assets 61.43 -
Profit Before Tax 155.15 141.22
Less: Tax Expense 34.29 47.15
Profit After Tax 120.86 94.07
Add: Surplus at the beginning of the year 176.98 160.04
Add: Earlier year''s provision for dividend 1.22 1.59
tax no longer required
Less: Depreciation on Tangible Fixed Assets
on transition to Schedule II of the Companies 4.63 -
Act,2013
Profit Available for Appropriation 294.43 255.70
Less: Transfer to General Reserve 30.00 20.00
Transfer to Debenture Redemption Reserve 42.18 19.28
Interim Dividend @ Rs. 1.50 (Previous year
Rs. 1.50) per Equity Share of Rs. 2 each 28.06 28.02
Final Dividend Proposed @ Rs. 0.50 (Previous
year Rs. 0.50 paise) per Equity 9.36 9.34
Share of Rs. 2 each
Dividend Distribution Tax - Current year 3.30 2.08
Balance carried to Balance Sheet 181.53 176.98
3. Performance Overview
For 2014-15, the Company achieved a net turnover of Rs. 3646 Cr., a
growth of 9% over the previous year. The Profit before Depreciation,
Interest, Exceptional Items and Tax for the year was Rs. 356 Cr. as
against Rs. 349 Cr. in the previous year, a growth of 2%. However, the
Profit before Exceptional items and Tax dropped to Rs. 121 Cr., a
decline of 14% over the previous year, mainly attributed to high
finance costs and depreciation. To strengthen the balance sheet, the
Company sold non- operating assets, which generated a profit of Rs. 61
Cr. Further, the Company implemented Voluntary Retirement Schemes in
certain locations at a cost of Rs. 27 Cr. to improve the productivity
and competitiveness of its businesses.
The Cycles and Components segment recorded a revenue of Rs. 1314 Cr. as
compared to Rs. 1185 Cr. during the previous year, a growth of 11%.
This was driven by higher volume of specials and institutional sales.
The operating profit before interest and tax stood at Rs. 58 Cr. as
compared to Rs. 39 Cr. during the previous year, a growth of 50%.
The Engineering segment recorded a revenue of Rs. 1725 Cr. as compared
to Rs. 1622 Cr. during the previous year, a growth of 6%. The operating
profit before interest and tax stood at Rs. 103 Cr. as compared to Rs.
136 Cr. during the previous year. The drop in profits was due to
additional costs associated with the new Large Diameter Tubing
facility, the revenue from which is expected to flow in 2015-16.
The Metal Formed Products segment recorded a revenue of Rs. 929 Cr. as
compared to Rs. 851 Cr. during the previous year, a growth of 9%. This
was driven by higher volume of auto chains and fine blanking sales. The
operating profit before interest and tax stood at Rs. 81 Cr. as
compared to Rs. 67 Cr. during the previous year, a growth of 21%.
4. Business Review - Standalone
4.1. Cycles and Components
TI''s Presence
The Cycles and Components segment of the Company comprises bicycles of
the Standard and Special variety including alloy bikes & specialty
performance bikes, bicycle components sold as spares, fitness equipment
such as motorised tread mills, elliptical, recumbent bikes etc.
Industry Scenario
Bicycles fall under two distinct categories - Standard and Special. The
bicycle is today viewed as a product for fun, fitness and leisure
activities in addition to being viewed as just a transportation medium.
According to industry estimates, the bicycle industry volumes had a
muted growth of approximately 2% in 2014-15. The industry volumes for
standard bicycles registered a marginal decline despite higher
institutional volumes. The Specials segment which includes Mountain
Terrain Bikes, Sport Light Roadsters and Kids Bikes where your Company
has inherent strengths grew approximately 6% in 2014-15.
Consumers today pay greater attention to design, features and retail
experience in their purchase decisions. Increasing aspirations, higher
purchasing power, international exposure to usage patterns and growing
fitness consciousness have provided impetus to the high-end and Special
bicycles. These segments continue to grow steadily year on year.
Between the four major players, close to 85% of the country''s
requirements are met and smaller regional players and imports
constitute the balance. The Company enjoys a share of over one-fourth
of the total market with a much higher share of the Special and premium
segment.
The domestic Fitness Industry continues to be attractive with
significant growth in 2014-15. The fitness equipment business can be
broadly classified under two segments - home and commercial. The
fitness business of the Company is largely restricted to the home
segment. Higher Income and a greater desire to be healthy and fit
drive the growth of the fitness industry in India.
Review of Performance
Creating enhanced retail experience continues to be the focus for the
Company especially with respect to Specials and premium segment. The
Company has over 930 retail outlets including 663 exclusive stores in
order to provide a superior purchasing experience to the consumers.
These retail outlets also help the Company to better understand the
market requirements by interacting directly with the consumers. The
Company also continues to invest in strengthening its supply chain
capabilities to address the market requirements.
In addition to the above, the Company has 13 premium stores under the
"Track and Trail" banner in select locations. The Company has also
introduced new retail concepts like a cafe-cum-store to promote sales
of high end cycles and to strengthen its presence amongst cycling
communities. The Company opened its first such store called "Ciclo
Cafe" in Chennai during the year.Similar new concepts aimed at
providing customers with an opportunity for an experiential purchase
are also planned in the fitness business.
The Company will further improve its product portfolio by introducing
new products and designs driven by consumer insight. The Company will
continue to pursue initiatives aimed at widening the distribution
reach, targeted advertising to drive demand and enhancing plant
capacities. The Company is planning to set up a greenfield bicycle
plant in Punjab to take advantage of an established vendor base and to
cater to the higher demand in select segments and geographies. The
Company will also continue the cost reduction initiatives in order to
improve competitiveness and profitability.
The segment recorded revenue of Rs. 1314 Cr. as compared to Rs. 1185
Cr. during the previous year, a growth of 11%. The operating profit
before interest and tax stood at Rs. 58 Cr. as compared to Rs. 39 Cr.
during the previous year, a growth of 50%.
4.2. Engineering
TI''s Presence
The Engineering segment of the Company consists of cold rolled steel
strips and precision steel tubes viz., Cold Drawn Welded tubes (CDW),
Electric Resistance Welded tubes (ERW) and Stainless Steel tubes. These
products primarily cater to the requirements of the automotive, boiler,
bicycles, general engineering and process industries. With the
establishment of a new plant for the manufacture of large diameter
welded tubes, the Company has enhanced its product range for non-auto
application, hitherto largely serviced by imports.
Industry Scenario
The automotive industry grew by 9% during 2014-15. Barring Light
Commercial Vehicle Segment, all the other segments registered a growth
compared to the previous year. Passenger vehicles and Two Wheelers grew
by 4% and 10% respectively as compared to previous year. The Cold
Rolled Steel Strips segment is dominated by integrated steel
manufacturers. In this business, the Company continues to be a ''niche
player'' focusing on the special grades catering to diverse applications
in various sizes and grades.
Review of Performance
The Company witnessed a volume growth of 6% in steel tubes and 2% in
cold rolled steel strips over the previous year.
Production in the new facility for large diameter tubing commenced
during the year and is expected to stabilize in the coming year. This
plant will cater to a wide set of customers in the off-highway,
infrastructure and general engineering segments.
The segment recorded revenue of Rs. 1725 Cr. as compared to Rs. 1622
Cr. during the previous year, a growth of 6%. The operating profit
before interest and tax stood at Rs. 103 Cr. as compared to Rs. 136 Cr.
during the previous year. The drop in profits was due to additional
costs associated with the new Large Diameter tubing facility at
Tiruttani and the revenue from which is expected to flow in 2015-16.
The segment continued to maintain its focus on value added products,
cost management, modernising its facility and improving the
efficiencies, which helped improve the profitability.
4.3. Metal Formed Products
TI''s presence
Automotive and industrial chains, fine blanked products, stamped
products, roll-formed car doorframes and cold rolled formed sections
for railway wagons and passenger coaches constitute the Metal Formed
Products of the Company.
Industry scenario
The two wheeler segment recorded a growth of 10% during the year. The
growth is mainly due to higher growth of 28% in Scooter segment and 4%
growth in motor cycle segment. Passenger car segment has registered
only 4% growth.
Increased movement towards urbanization results in higher demand for
scooters as well as high performance motor cycles. The Company is one
of the three major players manufacturing roller chains and fine blanked
parts for automotive industry in India. With the growth in two wheeler
population, the replacement market for chains and sprockets continued
to register healthy growth. The domestic demand for industrial chains
has grown moderately.
There are currently three established roll-formed car doorframe
manufacturers in India. Car manufacturers continue to invest in India
and are increasingly using India as an export base. As a result, many
component manufacturers have the opportunity to cater to the global
needs of automobile manufacturers and their Tier 1 suppliers.
The railway segment is yet to show signs of a major revival. In the
latest Union Budget, the Government has announced investments aimed at
improving railway infrastructure.
Review of Performance
The sale of automotive chains to OEMs (Original Equipment
Manufacturers) recorded a growth of 11% over the previous year. The
Company continues to expand its presence in the aftermarket segment
benefiting from the growing population of two- wheelers on the road.
The sale of industrial chains in the domestic market recorded a growth
of 3% during the year while the fine blanked components volume grew by
17%. Exports recorded a growth of 3% over the previous year. Exports
continued to be a challenge in light of difficult demand conditions in
Europe and with weak Euro affecting realisations.
The volume of car doorframes sold was lower by 15% due to a decline in
the sale of select models of major car manufacturers. The Company has
recently been awarded new doorframe programs from auto majors and is
also expanding its presence in rolled components for car doors.
The Company is also looking at enhancing its product portfolio in value
added stamped and pressed components with a focus on import
substitution.
The Company is hopeful that with increased investment allocation
towards improving the quality of railway infrastructure, the Company
will benefit from higher demand for wagons.
The segment recorded revenue of Rs. 929 Cr. as compared to Rs. 851 Cr.
during the previous year, a growth of 9%. The operating profit before
interest and tax stood at Rs. 81 Cr. as compared to Rs. 67 Cr. during
the previous year, a growth of 21%.
5. Dividend
The Board of Directors has recommended a final dividend of Rs. 0.50 per
share, on Equity Share of face value of Rs. 2 each, for the financial
year ended 31st March, 2015.
Together with the interim dividend of ''1.50 per share, paid on 23rd
February, 2015, the total dividend for the year works out to Rs. 2 per
share on Equity share of face value of Rs. 2 each. Final dividend, if
approved by shareholders, will be paid on or after 14th August, 2015.
6. Share Capital
The paid up Equity Share Capital as on 31st March 2015 was Rs. 37.43
Cr. During the year under review, the Company has issued 2,38,898
Equity Shares to eligible employees under the Employee Stock Option
Scheme.
7. Finance
Cash and Cash Equivalents as at 31st March 2015 were Rs. 25.73 Cr. The
Company continues to focus on judicious management of its working
capital. Receivables, inventories and other working capital parameters
were kept under strict check through continuous monitoring.
7.1. Non-Convertible Debentures
During the year, the Non-Convertible Debentures aggregating Rs. 350 Cr.
were issued and Rs. 230 Cr. were redeemed. As on 31st March 2015,
Non-Convertible Debentures aggregating Rs. 1050 Cr. were outstanding.
7.2. Deposits
The Company has not accepted any fixed deposits under Chapter V of the
Companies Act, 2013 and as such no amount of principal and interest
were outstanding as on 31st March 2015.
7.3. Particulars of Loans, Guarantees and Investments
During the year, the Company has not given any loans or guarantees
under the provisions of Section 186 of the Companies Act, 2013. The
Company subscribed to 1,75,00,000 Equity Shares of Rs. 10 each of TI
Tsubamex Private Ltd at Rs. 10 per share amounting to Rs. 17.50 Cr.
8. Consolidated Financial Highlights
Rs. in Cr.
Particulars 2014-15 2013-14
Revenue from Operations 9697.56 8834.49
Profit Before Tax 1003.28 789.37
Tax Expense (319.64) (271.84)
Profit for the year before Minority Interest 683.64 517.53
Minority Interest (259.28) (206.22)
Net Profit for the year 424.36 311.31
The Company''s consolidated Net Profit before Minority Interest for the
year was at Rs. 684 Cr., as compared to Rs. 518 Cr., during the
previous year, a growth of 32%. Net profit after minority interest for
the year was at Rs. 424 Cr. as compared to Rs. 311 Cr. during the
previous year, a growth of 36%.
9. Business Review - Subsidiaries and Joint Ventures
9.1. Cholamandalam Investment and Finance Co Ltd (CIFCL)
CIFCL had another year of good performance. Backed by the sustained
performance of its vehicle finance and home equity verticals, CIFCL''s
profit before tax grew 19%, at Rs. 657 Cr. (previous year: Rs. 550 Cr.)
and profit after tax increased to Rs. 435 Cr. (previous year: Rs. 364
Cr.). Disbursements of CIFCL marginally declined to Rs. 12,808 Cr. in
2014-15 (previous year: Rs. 13,114 Cr.).
The Company holds 7,22,33,019 Equity Shares aggregating 50.28% of
CIFCL''s Equity Capital. CIFCL has allotted, on 3rd September, 2014,
5,00,00,000 1% Compulsorily Convertible Preference Shares ("CCPS") of
Rs. 100 each aggregating Rs. 500 Cr. on preferential basis to M/s.
Dynasty Acquisition (FDI) Ltd., in accordance with the SEBI (Issue of
Capital and Disclosure Requirements) Regulations, 2009. As per the
terms of the said issue, the CCPS are convertible into 1,22,85,012
Equity Ehares of Rs. 10 each in the share capital of CIFCL at a
conversion price of Rs. 407 (including a premium of Rs. 397) per equity
share not later than 12 months from the date of allotment.
9.2. Cholamandalam MS General Insurance Co. Ltd (CMSGICL)
CMSGICL, a joint venture with Mitsui Sumitomo Insurance Company Ltd.,
Japan, achieved a Gross Written Premium (including reinsurance
acceptance) of Rs. 1,896 Cr. during 2014-15 (previous year: Rs. 1,872
Cr.), registering a growth of 1%. The profit before tax was Rs. 200 Cr.
for the year (previous year: Rs. 102 Cr.), registering a growth of 96%.
The Company holds 22,11,15,659 Equity Shares aggregating 74% of
CMSGICL''s equity capital. Recently, the Government of India has
enhanced the FDI (Foreign Direct Investment) limit for the Insurance
Industry from 26% to 49%.
9.3. Shanthi Gears Ltd (SGL)
SGL recorded a turnover of Rs. 152 Cr. in 2014-15 against Rs. 151 Cr.
in the previous year. Profit before tax was Rs. 13 Cr. (previous year:
Rs. 26 Cr.). During the year, SGL focused on re-establishing itself in
the market. SGL grew its order booking by 20% due to the efforts taken
in the previous year to enhance presence in the market especially in
key user locations, enhancing its reach by strengthening its s ales
and service teams, building references in high potential segments,
entry into the defence segment and building its capability in certain
high end applications.
9.4. Financiere C10 SAS (FC10)
FC10, a wholly-owned subsidiary in France, recorded a consolidated
turnover of Euro 33 Mn in 2014 (previous year: Euro 32 Mn). The loss
before tax for the year was Euro 0.38 Mn (previous year: profit before
tax Euro 0.23 Mn). The consolidated results of FC10 include results of
its subsidiaries viz., Sedis SAS & S2CI in France and Sedis Co Ltd in
UK.
9.5. TI Tsubamex Private Ltd (TTPL)
TTPL was incorporated on 3rd January 2014, as a Joint Venture Company
promoted by the Company jointly with Tsubamex Company Limited, Japan
(TMX) with a Share Capital of Rs. 4 Cr., to engage in the business of
design and engineering of sheet metal dies & fixtures and providing
related services. The Company has further invested Rs. 17.50 Cr. in the
Share Capital of TTPL during the year towards the setting up of a die
design-cum-manufacturing facility for dies and TMX, the joint venture
partner has invested Rs. 4.50 Cr. Post this infusion, TTPL has become
the subsidiary of the Company, with the Company''s shareholding in TTPL
at 75%.
TTPL''s loss before tax for the year was Rs. 1.94 Cr. (previous year:
Rs. 2.06 Cr.).
9.6. TI Financial Holdings Ltd (TIFHL)
TI Financial Holdings Ltd is a wholly-owned subsidiary of the Company
with an investment of Rs. 0.11 Cr. and is yet to commence its
operations.
9.7. Cholamandalam MS Risk Services Ltd (CMSRSL)
CMSRSL, a joint venture with Mitsui Sumitomo Insurance Company Ltd.,
Japan, offers consulting services in the areas of risk assessment and
mitigation across a range of industries. CMSRSL recorded a revenue of
Rs. 35.33Cr. during the year 2014-15 (previous year: Rs. 24.58 Cr.).
The profit before tax for the year was Rs. 2.04Cr. (previous year: Rs.
3.36 Cr.).
The Statement containing salient features of the Financial Statements
of the Company''s subsidiaries and joint venture companies is attached
as Annexure-A. The Consolidated Financial Statements of the Company and
its subsidiaries, prepared in accordance with the Accounting Standard
(AS) 21, form part of the Annual Report.
10. Financial Review
10.1. Profits & Profitability
While Operating Profit before Depreciation and Interest registered a
marginal growth over the previous year through continued control on
costs and better operating efficiencies, the Operating Profit before
Tax excluding exceptional items were impacted by costs incurred on the
Large Diameter plant which is yet to reach full production levels. On
certain occasions, the Company was not able to fully recover the
increase in cost from its customers.
All the business segments of the Company maintained their focus on
servicing customers, improving efficiencies, controlling working
capital and reducing resources employed in the business.
10.2. Capital Expenditure
The Company''s Large Diameter Tube manufacturing plant commenced
production during the year under review and production is expected to
stabilize in the coming year. The Company continues to invest in
facilities with a view to servicing its customers in a more timely and
efficient manner, modernising its assets and aims to be the best in
class. The Company continues to assess the trends emerging in the
industry and the changing requirements of its customers and invest
appropriately for the long-term. To compete more effectively in the
market and to address the growing bicycle segment in the northern and
western parts of the country, the Company has started to work on a new
facility in Punjab for manufacturing bicycles. The Company provides for
accelerated depreciation with respect to some of its assets to reflect
the remaining estimated useful life given the dynamic market
conditions.
10.3. Interest Cost
The Company''s average cost of borrowing remained at 9.4% p.a. through a
judicious mix of foreign currency and Indian Rupee borrowing in long
and short-term funds. The interest cost for the year was higher due to
the higher quantum of borrowings carried out to meet the expansion
needs of the Company.
10.4. Internal Control Systems
Internal control systems in the organisation are looked at as the key
to its effective functioning. The Internal Audit team periodically
evaluates the adequacy and effectiveness of these internal controls,
recommends improvements and also reviews adherence to policies based on
which corrective action is taken to address gaps, if any.
The Company has a risk management policy and its internal control
systems are an integral part of this policy. The Company has extensive
internal control systems to mitigate risks inherent to day-to-day
functioning and covers all areas of operations.
Revenue and capital expenditures are governed by approved budgets and
the levels are defined by a delegation of authority mechanism. Review
of capital expenditure is undertaken with reference to benefits
expected in line with the policy for the same.
Investment decisions are subject to formal detailed evaluation and
approved by the relevant authority as defined in the delegation of
authority mechanism. The Audit Committee reviews the plan for internal
audit, significant internal audit observations and functioning of the
Company''s Internal Audit department on a periodic basis.
10.5. Internal Financial Control Systems with reference to the
Financial Statements
The Company has a formal system of internal financial control to ensure
the reliability of financial and operational information, and
regulatory and statutory compliances. The Company''s business processes
are enabled by an Enterprise-wide Resource Platform for monitoring and
reporting processes resulting in financial discipline and
accountability.
11. Enterprise Risk Analysis and Management
Risk management refers to the formal processes whereby risks associated
with the "enterprise", as a whole, are managed. Risk management
encompasses the following sequence:
* Identification of risks and risk owners
* Evaluation of the risks as to likelihood and consequences
* Assessment of options for mitigating the risks
* Prioritising the risk management efforts
* Development of risk management plans
* Authorisation for the implementation of the risk management plans
* Implementation and review of the risk management efforts
Risk management strengthens the robustness of the business. The Company
has an established risk assessment and minimisation procedure. There
are normal constraints of time, efficiency and cost.
Some of the risks associated with the business and the related
mitigation plans are discussed hereunder. The risks given below are
not exhaustive and the evaluation of risk is based on management''s
perception.
The Risk Management Committee of the Board of Directors, constituted
specifically to identify/monitor key risks of the Company and evaluate
the management of such risks for effective mitigation, met on 3rd
February 2015. The Committee reviewed the risks and related mitigation
plans across the various SBUs of the Company.
11.1. Bicycles and Components
Risk Why considered as Risk
Product * Availability of alternatives
Obsolescence * Increased affordability for motorised vehicles
Risk * Shrinking road space for cycling
Price Risk * High competition leading to reduction in prices
Sourcing Risk * Dependence on vendor base
* Consistent quality and supplies
* 25% of vendors located in residential area
Competition Risk * Competition from domestic suppliers
* Imports
Risk Mitigation Plan/Counter Measure
Product * Higher variety, especially of premium bikes
Obsolescence * Products based on customer need
Risk * "Cycling" as a concept - leisure,fitness, fun and
recreation
Price Risk * Cost competitiveness
* Development of lower cost models
* Consumer insight based new product development
and improving quality of aesthetic
Sourcing Risk * Continuous upgrading of vendor capability
* Relationship building
* Imports from quality sources
* Relocate vendor base through vendor park at new
location
Competition Risk * Enhancing the Brand Awareness
* Introducing new models with a healthy innovation
funnel
* Consistent quality and timely delivery
* Enhancing competitiveness
11.2. Engineering
Risk Why considered as Risk
User Industry * Significant exposure to auto sector
Concentration * Lag in pass through of input cost changes
Risk * Demand declining in global markets
Technology * Cheaper alternatives for auto applications
Obsolescence affecting revenue streams
Risk
Raw Material * Volatility in steel price
Risk * Inconsistency in quality
* High inventory holding
Competition * Competition from integrated steel mills
Risk * New entrants with financial strength
* Imports
Risk Mitigation Plan/Counter Measure
User Industry * New products/applications to existing new customers
Concentration * Introduction of new products catering to non-auto
Risk users
* Leverage application engineering skills for tubular
solutions
* Drive operational efficiencies vigorously
* Cost reduction through operational excellence
initiatives
Technology * Strategic alliance with educational/research
Obsolescence institutions
Risk * Technology tie-up with global major
* Imbibing new and relevant technologies
Raw Material * Alliance with steel producers
Risk * Global sourcing
* Strategic sourcing
* Rationalisation and standardisation of grades
* Move to products with higher value addition
Competition * Consistent quality and timely delivery
Risk * Project range of offering leveraging all
businesses of the Company
* Innovate on products, process and applications
* Leveraging metallurgy skills
* Enhancing competitiveness
* Lock-in with customers
11.3. Metal Formed Products
Risk Why considered as Risk
Product Risk * Revenues are model specific
User Industry * Dependence on auto sector
Concentraion * Impact of slow down
Risk
Customer * Availability of alternative source
Retention Risk * Disruption in supplies
Entry of * Low technology barrier
competition * Impact on profit
Entry of
internationally * Better product range
established
players in * Tie-up with local player/end user
domestic
market * ''High quality'' image
Sourcing Risk * Dependence on few vendors for certain components
Risk Mitigation Plan/Counter Measure
Product Risk * Increase in customer base and models
* Indigenisation of equipment
* Pursue options for other business using the same
facilities
* Model specific investments to be done by OEMs
User Industry * Diversification into non-auto business
Concentraion * Focus on industrial applications
Risk * Develop range of power transmission products
Customer * Cost competitiveness through Operational
Retention Risk Excellence initiatives
* Leverage design strength
* Leverage proximity to customer
* Build technology superiority
* Product - plant rationalisation
Entry of * Leverage position with customer as technology
competition leader
* Continuous upgrading of technical specifications
* Cost reduction
* Concentration in focus markets
Entry of * Enhance product portiolio leveraging acquisition
internationally * Leverage leadership and competitive position in
established industry
players in * Strengthen collaboration with R&D team of customer
domestic * Pursue opportunities in systems/components
market * Pursue options for collaborating with other
multi-national player(s) of repute
Sourcing Risk * Vendor relationship building
* Enhancing vendor base, both locally as well
as overseas
* Leveraging strength of combined entity
11.4.General
Risk Why considered as Risk
HR Risk * Ability to attract talent, especially people
with domain knowledge for new projects
* Retention of talent
Internal Control * Multiple locations
Risk
Currency Risk * Foreign currency exposure on exports,
imports and borrowings
IT Related Risk * Confidentiality, integrity and availability
Project * Delay in implementation
Management * Increase in cost
Risk * Potential delay in stabilization of production
Risk Mitigation Plan/Counter Measure
HR Risk * Corporate Brand Building
* Robust recruitment process
* Structured induction and on the job training
* Coaching and team building
* Individual career and development plan
* Effective communication exercises
* Continuous engagement with identified talent pool
* Deskill operations
Internal Control * Review of controls in a structured manner,
Risk Risk at defined frequency
* Risk based audit of controls
Currency Risk * Early identification and monitoring of
imports and borrowings exposures
* Hedging of exposures based on risk profile
IT Related Risk * Access controls
* Secure Network Architecture
* Infrastructure Redundancies & Disaster
recovery mechanism
* Audit of controls
Project * Effective project management
Management * Pre implementation planning
Risk * Deployment of adequate resources
* Effective monitoring
12. Corporate Social Responsibility (CSR)
The Company, being part of the Murugappa Group, is known for its
tradition of philanthropy and community service. The Company''s
philosophy is to reach out to the community by establishing
service-oriented philanthropic institutions in the field of education
and healthcare as the core focus areas. With the enactment of the CSR
provisions in the Companies Act, 2013, the Company has put in place a
CSR policy incorporating the requirements therein which is also
available on the Company''s website at the following link,
http://www.tiindia.com/article/values/467.
As per the provisions of the Companies Act, 2013, the Company is
required to spend Rs. 2.99 Cr., out of which the Company has spent Rs.
2.64 Cr. towards CSR activities during the year 2014-15. The Company
had identified the projects as with the endeavour of making an impact
in the areas of its operations by working closely with local
communities. Details of the same are furnished in the Annual Report of
CSR activities for the year 2014-15 annexed to and forming part of this
Report as Annexure-B.
Being the first year, the Company took some time in ensuring that the
programmes were carefully chosen but, could not spend the required
amount fully, the reasons for which are explained in detail in the
aforesaid Annual Report of CSR activities.
13. Corporate Governance
Your Company is committed to maintaining high standards of corporate
governance.
In response to the changes brought into effect through the Companies
Act, 2013 and the changes in the corporate governance norms (Clause 49
of the Listing Agreement) announced by the SEBI, the Board of Directors
of your Company has reviewed the constitution and terms of reference of
the Audit Sub-Committee, the Compensation & Nomination Committee
(renamed, Nomination & Remuneration Committee) and the
Shareholders''/Investors'' Grievance Committee (renamed, Stakeholders
Relationship Committee). The required changes to the above Committees
have been made to ensure compliance with the new requirements.
A report on corporate governance together with a certificate from the
Auditors is annexed in accordance with the terms of the Listing
Agreement with the Stock Exchanges and forms part of the Board''s
Report. The Managing Director and the Chief Financial Officer have
submitted a certificate to the Board regarding the Financial Statements
and other matters as required under Clause 49(IX) of the Listing
Agreement.
The Report further contains details as required to be provided in the
Board''s Report on Independent Directors declaration, policy on
Directors appointment and remuneration including criteria, annual
evaluation by the Board and Directors, composition and other details
required of Board committees, implementation of risk management policy,
whistle-blower policy/vigil mechanism etc.
14. Human Resources
The Company leveraged its strength of human capital by focussing on
building technical and leadership capabilities, driving operational
excellence initiatives and enhancing the engagement of employees.
The vision is to continue to build the capability of the human
potential required to harness the business opportunities presented
through various operational and strategic interventions.
The journey of investing on people potential continued during 2014-15.
Comprehensive approach towards re-skilling of shop-floor manpower was
completed through a manpower mix study across the Company. Actions are
being taken to have the right mix of skilled workforce at the plants.
Learning and development processes have been tailor made to suit the
business needs and aid the individual in meeting the competency gaps
identified as part of their development process. A customised
functional competency dictionary has been charted for all functions
across the Company. The Company has also taken the initiative of value
stream mapping, a critical process aimed at improving the process
efficiencies and productivity improvements.
Employee engagement continued to be a focus area and a survey was
carried out covering all levels across India with clear action plans
crafted for implementation.
The Company launched an end-to-end Human Resource Management System.
The e-portal is aimed at modernising the existing system and inclusion
of new modules like learning management, talent management,
e-recruitment, etc. A Central Recruitment Team was formed to
standardise and optimize resource utilization across the Company.
Operational excellence continued to remain a critical area of focus
during this financial year also. Operational excellence for support
functions, horizontal deployment of projects across units and
innovative approach to cost competitiveness were deployed. These
projects are seen to have brought immense cost saving and process
efficiency across various functions for the business. Industrial
relations remained cordial at all the units and long-term settlements
were successfully concluded with the unions at Mohali and Shirwal.
The number of permanent employees on the rolls of the Company as at
31st March, 2015 was 3434.
The information relating to employees and other particulars required
under Section 197 of the Companies Act, 2013 read with Rule 5 of the
Companies (Appointment & Remuneration of Managerial Personnel) Rules
2014 will be provided upon request. In terms of Section 136 of the
Companies Act, 2013, the Report and Accounts are being sent to the
Members excluding the information on employees, particulars of which
are available for inspection by the Members at the Registered Office
of the Company during business hours on all working days of the
Company up to the date of the forthcoming Annual General Meeting.
If any Member is interested in obtaining a copy thereof, such Member
may write to the Company Secretary in the said regard.
The disclosure with respect to remuneration as required under Section
197 of the Act read with Rule 5 of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 is attached and forms
part of this Report as Annexure-C.
15. Prevention of sexual harassment at workplace
The Company has put framed a policy on prevention of sexual harassment
at workplace in line with the requirement of the Sexual Harassment of
Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
An internal Complaints Committee (ICC) to redress complaints received
regarding sexual harassment has been constituted. The policy extends
to all employees (permanent, contractual, temporary and trainees).
Employees at all levels are being sensitized about the new policy and
the remedies available thereunder. No complaints were received and
disposed off during the year under review.
16. Employee Stock Option Scheme
Details of the Employee Stock Option Scheme as required under the
relevant SEBI Guidelines are annexed to this Report as Annexure-D.
17. Directors'' Responsibility Statement
To the best of their knowledge and belief and according to the
information and explanations obtained by them, your Directors make the
following statements in terms of Section 134(3)(c) of the Companies
Act, 2013:
a) that in the preparation of the annual Financial Statements for the
year ended 31st March 2015, the applicable accounting standards have
been followed along with proper explanation relating to material
departures, if any;
b) that such accounting policies as mentioned in Note 1 of the Notes to
the Financial Statements have been selected and applied consistently
and judgement and estimates have been made that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company as at 31st March, 2015 and of the profit of the Company for
the year ended on that date;
c) that proper and sufficient care has been taken for the maintenance
of adequate accounting records in accordance with the provisions of the
Companies Act, 2013 for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities;
d) that the annual Financial Statements have been prepared on a going
concern basis;
e) that proper internal financial controls to be followed by the
Company have been laid down and that the financial controls are
adequate and were operating effectively; &
f) that proper systems have been devised to ensure compliance with the
provisions of all applicable laws and that such systems were adequate
and operating effectively.
18. Auditors
The Companies Act, 2013 has made it mandatory to rotate the statutory
auditors once every 10 years in case of a firm of auditors. It
stipulates compulsory rotation of auditors every 10 years in case of a
firm of auditors and companies have been given a maximum of 3 years
from 1st April, 2014 to comply with the requirement.
Consistent with the above requirement, M/s. Deloitte Haskins & Sells,
Chartered Accountants, who have been the Statutory Auditors of the
Company since the year 2005, have informed that they will not be
seeking re-appointment at the ensuing 66th Annual General Meeting.
The Board of Directors take the opportunity to place on record its
grateful appreciation of the contribution and services rendered by M/s
Deloitte Haskins & Sells, Chartered Accountants, its partners and
managers for their contribution and services rendered over the years.
In view of the above, it is proposed to appoint M/s. S.R. Batliboi &
Associates LLP, Chartered Accountants, as the Statutory Auditors of the
Company for a period of 5 years from the conclusion of the ensuing 66th
Annual General Meeting till the conclusion of 71st Annual General
Meeting.
The Board of Directors recommend the appointment of M/s. S.R. Batliboi
& Associates LLP, Chartered Accountants as Statutory Auditors.
Consequent to the applicability of cost audit under the Companies (Cost
Records and Audit) Amendment Rules, 2014 notified by the Ministry of
Corporate Affairs (''MCA'') in December, 2014, Mr. V Kalyanaraman, Cost
Accountant was appointed as the Cost Auditor for auditing the cost
accounting records maintained by the Company relating to Steel Products
and Metal Formed Products for the financial year ending 31st March,
2015. The Cost Audit Reports relating to the above products will be
filed within the stipulated period of180 days from the close of
financial year.
In respect of the previous year, 2013-14, the Cost Audit and Compliance
Reports relating to Steel Products and Metal Formed Products, audited
by Mr. V Kalyanaraman, Cost Auditor, were filed electronically in XBRL
mode, on 24th September 2014 viz., well within the limit of within 180
days from the end of the financial year as stipulated by the MCA.
19. Related Party Transactions
All related party transactions that were entered into during the
financial year under review were on an arm''s length basis and were in
the ordinary course of business. There are no materially significant
related party transactions during the year which may have a potential
conflict with the interest of the Company at large. Necessary
disclosures as required under the Accounting Standard (AS) 18 have been
made in the notes to the Financial Statements.
The policy on Related Party Transactions as approved by the Board is
uploaded and is available on the following link on the Company''s
website, http://www.tiindia.com/article/values/476. None of the
Directors had any pecuniary relationships or transactionsvis-a-vis the
Company.
20. Directors
Ms. Madhu Dubhashi was appointed as Additional & Independent Director
with effect from 3rd November, 2014. She holds office up to the date of
the ensuing Annual General Meeting. The Board recommends her
appointment as Independent Director under Section 149 of the Act for a
term of five years viz., from the date of the 66th Annual General
Meeting (2015) till the date of the 71st Annual General Meeting (2020).
Notice along with the deposit in terms of Section 160 of the Companies
Act, 2013 has been received from a Member proposing the candidature of
Ms. Madhu Dubhashi for appointment as Independent Director of the
Company.
Mr. M M Murugappan will retire by rotation at the ensuing Annual
General Meeting under Section 152 of the Companies Act, 2013 ("the
Act") and being eligible, he offers himself for re-appointment.
The Board takes pleasure in recommending the appointment of Mr. M M
Murugappan as Director and Ms. Madhu Dubhashi as Independent Director
of the Company at the forthcoming Annual General Meeting.
21. Secretarial Audit
Pursuant to the provisions of Section 204 of the Companies Act, 2013
and The Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014, the Company has appointed Mr. R Sridharan of
M/s. R. Sridharan & Associates, Company Secretaries in Practice to
undertake the Secretarial Audit of the Company. The Secretarial Audit
Report is annexed herewith and forms part of this Report as Annexure-E.
No qualifications or observation or other remarks have been made by the
Secretarial Auditor in his said Report.
22. Annual Return
Extract of the Annual Return is annexed and forms part of this Report
as Annexure-F.
23. Key Managerial Personnel
Mr. L Ramkumar, Managing Director, Mr. Arjun Ananth, ChiefFinancial
Officer and Mr. S Suresh, Company Secretary are the Key Managerial
Personnel of the Company as per Section 203 of the Companies Act, 2013.
24. Energy Conservation, Technology Absorption and Foreign Exchange
Earnings and Outgo
The information on conservation of energy, technology absorption and
foreign exchange earnings and outgo stipulated under Section 134(3)(m)
of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts)
Rules, 2014 is annexed herewith and forms part of this Report as
Annexure-G.
The Directors thank all Customers, Vendors, Financial Institutions,
Banks, State Governments, Joint Venture Partners and Investors for
their continued support to your Company''s performance and growth. The
Directors also wish to place on record their appreciation of the
contribution made by all the employees of the Company resulting in the
good performance during the year under review.
On behalf of the Board
M M Murugappan
Chairman
Chennai
5th May, 2015
Mar 31, 2014
Dear Members,
The Board of Directors is pleased to present the performance of your
Company for the year ended 31st March, 2014.
Financial Highlights Rs.in Crores
2013-14 2012-13
Sale of Products - Gross 3609.42 3642.25
Less : Excise duty on sales 257.73 251.88
Sales of Products - Net 3351.69 3390.37
Earnings Before Finance Costs, Tax,
Depreciation and Amortisation Expense 348.67 334.95
Less: Finance Costs 123.27 104.16
Depreciat on and Amort sat on Expense 84.24 79.77
Earnings Before Tax and Exceptional Items 141.16 151.02
Less: Provision for Diminution in
value of Investments - 3.81
Add: Reversal of Provision for
Diminution in value of Investments 0.06 -
profit Before Tax 141.22 147.21
Less: Tax Expense 47.15 43.25
profit After Tax 94.07 103.96
Add: Surplus at the beginning of the year 160.04 279.70
Add: Earlier year''s provision for
dividend tax no longer required 1.59 1.17
profit Available for Appropriation 255.70 384.83
Less: Transfer to General Reserve 20.00 100.00
Transfer to Debenture Redempt on Reserve 19.28 84.27
Interim Dividend Rs. 1.50 (previous
year" 1.50) per Equity Share of" 2 each 28.02 27.99
Final Dividend Proposed Rs.0.50 (previous
year" 0.50 paise) per Equity Share of 9.34 9.33
2 each
Dividend Distribut on Tax - Current year 2.08 3.20
Balance carried to Balance Sheet 176.98 160.04
Review of Performance
Your Company achieved a revenue of Rs.3,609 Cr. during 2013-14 (previous
year Rs.3,642 Cr.), a marginal decline over the previous year mainly at
ributable to the slowdown in the automobile sector. Most of the
segments within the automobile sector registered a decline in sales as
compared to previous year.
Despite a challenging macro-economic environment, your Company''s
Earnings before Finance Costs, Tax, Depreciat on and Amort sat on
Expenses were at Rs.349 Cr. during the year as against Rs.335 Cr. in
2012-13, registering a growth of 4%. Finance costs were higher at Rs.123
Cr. as against Rs.104 Cr. in 2012-13 due to the increased borrowings
resorted to meet the Company''s expansion programmes. profit before Tax
and except onal items was at Rs.141 Cr. for the year 2013-14 as against
Rs.151 Cr. in the previous year, a decline of 7%.
Cycles and Components
The Bicycle division recorded a revenue of Rs.1,185 Cr. in 2013-14 as
against Rs.1,260 Cr. in the previous year. In volume terms, the Bicycle
division recorded a marginal decline in sales in the current year. The
prevailing low sent ment in the consumer goods industry impacted the
demand for bicycles result ng in lower industry volume.
In order to meet the growth aspirat ons going forward, your Company has
taken a slew of measures that is expected to provide the desired
results in the coming years. Your Company has taken steps to
strengthen its supply chain capabilit es. Based on extensive and cont
nuous market research, your Company plans to launch new models that are
expected to fi ll the current gaps in the product port olio. Your
Company at aches greater importance to enhance the buying experience of
the consumers. In this regard, the
940 retail outlets cont nue to provide a superior buying experience to
the consumers. These retail outlets also enable direct interact on with
the consumers to understand their requirements.
The division has reported a net operat ng profit before interest and
tax of Rs.39 Cr. in 2013-14 as against Rs.49 Cr. in the previous year,
registering a decline of 21%. Input cost increase could not be fully
passed on to the customers due to compet t ve pressure in the industry,
impact ng margins. Your Company continues to focus on improving the
operat onal efficiencies and reducing the cost in order to enhance the
profitability of the division going forward.
Engineering
The Engineering division recorded a revenue of Rs.1,622 Cr. as against
Rs.1,582 Cr. in the previous year. This division is signifi cantly
dependent on the automobile sector. In the automobile sector, the
passenger vehicles volumes declined by 5%, while the commercial
vehicles sales declined by 16%. The two wheeler segment alone recorded
a growth of 7%, largely driven by the scooter segment which registered
a growth of 21%.
The division has recorded a volume growth of 1% in steel tubes and 7%
in cold rolled steel strips over the previous year. Export turnover
recorded a growth of 15% during the year. Your Company''s Large Diameter
Tubes project has progressed well and the same is expected to commence
commercial product on in the second quarter of 2014-15. The project
will de-risk your Company from over dependence on the automot ve sector
and cater to the requirements of off -highway segments, infrastructure
and general engineering. The division continues to expand its port olio
of value added products while maintaining its focus on cost reduct on
and operat onal efficiencies.
The division has reported a net operat ng profit before interest and
tax of Rs.136 Cr. as against Rs.110 Cr. in the previous year, a growth of
24%.
Metal Formed Products
The Metal Formed Products segment of the Company registered a fl at
growth in revenue at Rs.851 Cr. Despite a contract on in the
manufacturing sector, your Company recorded a volume growth of 13% in
the industrial chains segment. While, the two wheeler industry recorded
a growth of 7% in volume terms, your Company recorded a growth of 19%
in volume terms in the automot ve chains segment. This business cont
nues to expand its presence in the aftermarket segment. Export segment
was impacted due to the unfavourable economic condit ons in Europe.
The division is directly dependent on the growth of automot ve sector
which faced one of its most challenging years. The passenger vehicles
recorded a decline of 5% as compared to the previous year. The volume
of car doorframes sold was lower by 14% due to a decline in demand for
select models of major car manufacturers. Delay in finalisat on of
tenders by the Ministry of Railways coupled with lower realisat on
leading to capacity under- ut lisat on in the Railway business and
lower off -take of doorframes impacted the operat ng profit of the
segment.
Net operat ng profit before interest and tax for this segment was at
Rs.67 Cr. as against Rs.80 Cr. in the previous year, a decline of 16%.
Management Discussion and Analysis
The Management Discussion and Analysis Report, which forms part of this
Annual Report, sets out an analysis of the individual businesses
including the industry scenario, performance, financial analysis,
investments and risk mit gat on.
Dividend
The Board of Directors has recommended a final dividend of Rs.0.50 per
share, on equity share of face value of Rs.2 each, for the financial
year ended 31st March, 2014. Together with the interim dividend of
Rs.1.50 per share, paid on 21st February, 2014, the total dividend for
the year works out to Rs.2 per share on equity share of face value of Rs.2
each. Final dividend, if approved by shareholders, will be paid on or
after 11th August, 2014.
Joint venture with Tsubamex, Japan
The Company had entered into an agreement with Tsubamex Co. Limited,
Japan ("Tsubamex") on 12th July, 2013, to form a 50:50 joint venture
company in India by name, TI Tsubamex Private Limited, to engage in the
business of design and engineering of sheet metal dies & fi xtures and
providing related services. Tsubamex is a reputed die and tool maker
for components to the automot ve industry and has several decades of
experience in this fi eld. Tsubamex has a good client base comprising
of renowned global auto companies and t er - I suppliers to such auto
makers. The Company and Tsubamex invested Rs.2 Cr. each towards their
respect ve init al subscript on in the joint venture company, which was
incorporated on 3rd January, 2014.
Subsidiary Companies
Cholamandalam Investment and Finance Co Ltd (CIFCL)
It was another year of good performance for CIFCL. Riding on the back
of sustained performance by its vehicle finance and home equity vert
cals, aggregate disbursements of CIFCL improved to Rs.13,114 Cr. in
2013-14 (previous year Rs.12,118 Cr.), profit before tax grew 22%, at
Rs.550 Cr. (previous year Rs.451 Cr.) and profit after tax increased by
19% to Rs.364 Cr. (previous year Rs.307 Cr.).
Cholamandalam MS General Insurance Co Ltd (CMSGICL)
CMSGICL, a joint venture with Mitsui Sumitomo Insurance Company Ltd.,
Japan, achieved a Gross writen Premium (including reinsurance
acceptance) of Rs.1,872 Cr. during 2013-14 (previous year Rs.1,652 Cr.),
registering a growth of 13%. The profit before tax was Rs.102 Cr. for
the year (previous year Rs.88 Cr.), registering a growth of 16%. During
2013-14, to augment its solvency posit on and support the business
plan, CMSGICL came out with a rights issue of shares of Rs.75 Cr. Your
Company''s subscript on was Rs.55.50 Cr.
Shanthi Gears Ltd (SGL)
SGL recorded a turnover of Rs.152 Cr. in 2013-14 against Rs.146 Cr. in the
previous year. profit before tax was Rs.26 Cr. (previous year Rs.22 Cr.).
SGL grew its top line in both the nat onal market and through exports,
mainly due to the focus on winning back customers lost during the diffi
cult years of the past, improving operat onal efficiencies leading to
higher service levels and focus on the service segment. SGL enhanced
its presence in the market, key user locat ons and reach to customers
by strengthening its teams involved in sales & service. The company
also built on its distribut on network during the year and established
its presence in many key markets.
Financière C10 SAS (FC10)
FC10, a wholly-owned subsidiary in France, recorded a consolidated
turnover of Euro 32 Mn in 2013 (previous year Euro 33 Mn). Its profit
before tax was Euro 0.23 Mn (Euro 0.31 Mn).
The Statement pursuant to Sect on 212 of the Companies Act, 1956
containing details of the Company''s subsidiaries is at ached.
The Consolidated Financial Statements of the Company and its
subsidiaries, prepared in accordance with the Account ng Standard (AS)
21, form part of the Annual Report.
Directors
Mr. S B Mathur, Director, resigned from the Board with eff ect from 8th
August, 2013 due to his other commitments. The Board places on record
its appreciat on of the service rendered by Mr. S B Mathur during his
tenure as Director of the Company.
Mr. S Sandilya and Mr. Pradeep V Bhide, non-execut ve Independent
Directors in terms of the List ng Agreement, will ret re by rotat on at
the ensuing Annual General Meet ng ("AGM") under Sect on 152 of the
Companies Act, 2013 ("the Act"). Being eligible, they off er themselves
for appointment as Independent Directors pursuant to Sect on 149 of the
Act. The Board recommends the appointment of Mr. S Sandilya as
Independent Director for a term of four years viz., from the date of
the 65th AGM (2014) t ll the date of the 69th AGM (2018). As regards
Mr. Pradeep V Bhide, the Board recommends his appointment as
Independent Director for a term of fi ve years viz., from the date of
the 65th AGM (2014) t ll the date of the 70th AGM (2019).
Mr. C K Sharma, non-execut ve Independent Director in terms of the List
ng Agreement, who is not liable to ret re at the ensuing AGM, is also
seeking appointment as Independent Director in terms of Sect on 149 of
the Act. The Board recommends his appointment as Independent Director
for a term of three years viz., from the date of the 65th AGM (2014) t
ll the date of the 68th AGM (2017).
Mr. Hemant M Nerurkar was appointed as Addit onal Director with eff ect
from 5th May, 2014. He holds Office up to the date of the ensuing AGM.
The Board recommends his appointment as Independent Director under Sect
on 149 of the Act for a term of four years viz., from the date of the
65th AGM (2014) t ll the date of the 69th AGM (2018).
Individual Not ce in terms of Sect on 160 of the Act has been received
from members proposing the candidature of Messrs. S Sandilya, Pradeep V
Bhide, C K Sharma and Hemant M Nerurkar for appointment as Independent
Directors of the Company.
The Board takes pleasure in recommending the appointment of Messrs. S
Sandilya, Pradeep V Bhide, C K Sharma and Hemant M Nerurkar as
Independent Directors as their associat on will immensely benefit the
Company.
Corporate Governance
Your Company is commit ed to maintaining high standards of corporate
governance. A report on corporate governance, along with a cert fi cate
from the Statutory Auditors on compliance with the corporate governance
norms forms part of this Annual Report.
In response to the changes brought into eff ect through the Companies
Act, 2013 and in the corporate governance norms (Clause 49 of the List
ng Agreement) [to be eff ect ve from 1st October, 2014] announced by
the Securit es and Exchange Board of India, the Board of Directors of
your Company has reviewed the const tut on and terms of reference of
the exist ng Audit Commit ee, the Compensat on & Nominat on Commit ee
and the Shareholders''/Investors'' Grievance Commit ee. Requisite changes
have been made thereto to ensure compliance with the new requirements.
Human Resources
During the year, among the many init at ves taken on the HR front, the
focus was inter alia on improving employee product vity, building
organisat onal & people capabilit es and ensuring greater compliance
under various statutes. Customised programmes were conducted round the
year addressing all levels of employees in order to create a robust
talent pipeline and assist them in chartering their career plans. The
quest for operat onal excellence was further strengthened through the
unique House of Excellence framework supported by the ''Train the
Trainer'' programme, named as ''Shiksha''. The Company had cordial
industrial relat ons across businesses and this enabled the Management
to conclude the long-term set lement in two of the business locat ons,
when it became due.
The Company had 3,486 permanent employees on its rolls, as on 31st
March, 2014.
Employees'' Stock Option Scheme
''Details of the Employees'' Stock Opt on Scheme as required under the
relevant SEBI Guidelines are annexed to this Report.
Social Commitment
As a corporate cit zen, your Company is commit ed to the conduct of its
business with a strong sense of social responsibility. Every year, the
Company has been contribut ng a small port on of its profits for the
promot on of worthy causes like educat on, healthcare, scient fi c
research etc. This year too, a sum of "0.73 Cr. was contributed to
various organisat ons engaged in the aforesaid fi elds and to others.
Your Company has further const tuted a Corporate Social Responsibility
(CSR) Commit ee of the Board towards the end of the financial year,
2013-14 in line with the requirement of the new Companies Act, 2013 and
the Rules thereunder. This Commit ee will implement the CSR activities
of the Company from the current year onwards.
Financial Statements
Though a number of provisions of the new Companies Act,
2013 have come into force eff ect ve 1st April, 2014, the Ministry of
Corporate Affairs, Government of India vide its General Circular
08/2014 no.1/19/2013-V dated 4th April,
2014 has clarifi ed that for the financial year, 2013-14, preparat on
of the Financial Statements and documents to be at ached thereto,
auditors'' report and Board''s report shall be governed by the provisions
and schedules of the Companies Act, 1956. Accordingly, the Financial
Statements and other documents for the financial year, 2013-14 have
been prepared in accordance with the relevant provisions/
Schedules/Rules of the Companies Act, 1956.
Auditors
The new Companies Act, 2013 has made it mandatory to rotate the
statutory auditors once every ten years in case of a fi rm of auditors.
The Act provides companies a maximum of three years, namely, up to 31st
March, 2017 to eff ect rotat on, wherever necessary. M/s. Deloit e
Haskins & Sells, Chartered Accountants, who have been the Statutory
Auditors of the Company since the year 2005, being eligible, have off
ered themselves for appointment at the ensuing 65th Annual General Meet
ng. The Board of Directors recommend their appointment as the Statutory
Auditors for the period from the conclusion of the ensuing 65th Annual
General Meet ng t ll the conclusion of the next (66th) Annual General
Meet ng.
Mr. V Kalyanaraman was appointed as the Cost Auditor for audit ng the
cost account ng records maintained by the Company of E-Scooters,
Pedelec (bat ery powered bicycles), Steel Products and Metal Formed
Products for the financial year ended 31st March, 2014. The Cost Audit
Reports relating to the above products will be fi led with the
Government within the st pulated period of 180 days from the close of
financial year.
In respect of the previous year, 2012-13, the Cost Audit and Compliance
Reports relating to E-Scooters, Pedelec (bat ery powered bicycles),
Steel Products and Metal Formed Products, audited by Mr. V
Kalyanaraman, Cost Auditor, were fi led electronically in XBRL mode, on
25th September 2013 viz., well within the limit of within 180 days from
the end of the financial year st pulated by the Cost Audit Branch,
Ministry of Corporate Affairs, Government of India.
The other informat on required to be furnished in the Directors'' Report
under the provisions of Sect on 217 of the Companies Act, 1956 relating
to conservat on of energy,
technology absorpt on, foreign exchange earnings and outgo and
Directors'' Responsibility Statement are annexed and form part of this
Report.
In accordance with the provisions of Sect on 217(2A) of the Companies
Act, 1956 read with Companies (Part culars of Employees) Rules, 1975
and the Companies (Part culars of Employees) Amendment Rules, 2011, the
name and other part culars of employees are to be set out in the
annexure to the Directors'' Report. However, having regard to the
provisions of Sect on 219(1)(b)(iv) of the Companies Act, 1956, the
Annual Report is being sent to all members of the Company excluding the
aforesaid informat on. Any
member interested in obtaining such part culars may write to the
Company Secretary at the Registered Office of the Company.
The Directors thank all Customers, Vendors, Financial Inst tut ons,
Banks, State Governments and Investors for their cont nued support to
your Company''s performance and growth. The Directors also wish to place
on record their appreciat on of the contribut on made by all the
employees of the Company result ng in the good performance during the
year under review.
Directors'' Responsibility Statement
(Pursuant to Sect on 217(2AA) of the Companies Act, 1956)
Pursuant to Sect on 217(2AA) of the Companies Act, 1956, the Directors
to the best of their knowledge and belief confi rm that:
- in the preparat on of the Statement of profit and Loss for the fi
nancial year ended 31st March, 2014 and the Balance Sheet as at that
date ("financial statements"), applicable Account ng Standards have
been followed.
- appropriate account ng policies have been selected and applied
consistently and such judgments and est mates that are reasonable and
prudent have been made so as to give a true and fair view of the state
of Affairs of the Company as at the end of the financial year and of
the profit of the Company for that period.
- proper and suffi cient care has been taken for the maintenance of
adequate account ng records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
prevent ng and detect ng fraud and other irregularit es. To ensure
this, the Company has established internal control systems, consistent
with its size and nature of operat ons. In weighing the assurance
provided by any such system of internal controls its inherent limitat
ons should be recognised. These systems are reviewed and updated on an
ongoing basis. Periodic internal audits are conducted to provide
reasonable assurance of compliance with these systems. The Audit Commit
ee meets at regular intervals to review the internal audit funct on.
- the financial statements have been prepared on a going concern
basis.
- the financial statements have been audited by Messrs. Deloit e
Haskins & Sells, Statutory Auditors and their report is appended
thereto.
On behalf of the Board
M M Murugappan
Chairman
Chennai
5th May, 2014
Mar 31, 2013
Dear Shareholders,
The Board of Directors is pleased to present the performance of your
Company for the year ended 31st March, 2013.
Financial Highlights Rs. in Crores
2012-13 2011-12
Sale of Products - Gross 3642.25 3664.77
Less: Excise duty on sales 251.88 200.35
Sales of Products - Net 3390.37 3464.42
Earnings Before Finance Costs, Tax, 334.95 397.74
Depreciation and Amortisation Expense
Less: Finance Costs 104.16 76.56
Depreciation and Amortisation Expense 79.77 76.08
Earnings Before Tax and Exceptional Item 151.02 245.10
Less: Provision for Diminution in value
of Investments 3.81 -
Profit Before Tax 147.21 245.10
Less: Tax Expense 43.25 65.01
Profit After Tax 103.96 180.09
Add: Surplus at the beginning of the year 279.70 392.70
Less: Final dividend including tax on dividend 0.00 0.02
Add: Earlier year''s provision for dividend
tax no longer required 1.17 1.76
Profit Available for Appropriation 384.83 574.53
Less: Transfer to General Reserve 100.00 200.00
Transfer to Debenture Redemption Reserve 84.27 31.66
Interim Dividend @ Rs. 1.50 (previous year
Rs. 2) per Equity Share of Rs. 2 each 27.99 37.24
Final Dividend Proposed @ Rs. 0.50 (previous
year Rs. 1) per Equity Share of Rs. 2 each 9.33 18.63
Dividend Distribution Tax - Current year 3.20 7.30
Balance carried to Balance Sheet 160.04 279.70
Review of Performance
Your Company achieved a turnover of Rs.3,642 Cr. during 2012-13
(previous year Rs.3,665 Cr.). This performance has to be viewed in the
context of the current economic environment. Your Company is largely
dependent on the auto industry, with the exception of the Bicycle
segment. In view of the economic slowdown, the auto industry as well
as the bicycles industry did not fare well during the year, which
impacted your Company''s performance. Earnings before Finance Costs,
Tax, Depreciation and Amortisation Expenses were at Rs. 335 Cr. during
the year as against Rs. 398 Cr. in 2011-12, a decline of 16%. Finance
costs was high at Rs.104 Cr. as against Rs.77 Cr. in 2011-12 due to the
increased borrowings resorted to meet the Company''s expansion
programmes. Profit Before Tax was Rs. 147 Cr. for the year 2012-13 as
against Rs. 245 Cr. in the previous year.
The Bicycle division recorded a turnover of Rs. 1,255 Cr. in 2012-13 as
against Rs. 1,285 Cr. in the previous year. This segment witnessed
steep increase in the customs and excise levies. Lower disposable
income in the rural areas affected the demand for Standard bicycles.
Higher input costs, together with the increase in the statutory levies,
resulted in the higher price of bicycles for the end consumer,
affecting the demand in Specials segment as well. As part of its growth
strategy, your Company continues to invest in the expansion of retail
outlets to improve its reach and the buying experience. The business
has established a manufacturing and assembly line for high-end
bicycles, to cater to the export market. The division continues to
focus on promoting cycling. Your Company has reduced its dependence on
imports in select product lines and has plans to introduce many new
models in the coming years to meet customer aspirations.
As regards electric scooters, lack of infrastructure support and the
withdrawal of subsidies by the Government have affected the consumer''s
preference for this product. In this scenario, prospects for the growth
of this product are not expected to improve in the near term.
The division has reported a profit before interest and tax of Rs.49 Cr.
in 2012-13 as against Rs.76 Cr. in the previous year, registering a
decline of 36%.
The Engineering division recorded a turnover of Rs. 1,467 Cr. in
2012-13 as against Rs. 1,449 Cr. in the previous year. With the bulk of
its revenue coming from the auto sector, the performance of this
business was impacted during the year due to decline in demand for
motor cycles and commercial vehicles. Margin was affected due to the
increase in power & fuel cost and the inability to pass on the same in
entirety. The tubular component business continued to enjoy good
patronage from its user segments and grew by 6%. Your Company
commissioned a stainless steel tube manufacturing facility in the
previous year and is working with user industries for product
acceptance. Export turnover of the division was at previous year''s
levels despite the market slowdown witnessed in Europe and the United
States of America. Efforts are underway to enhance the product
portfolio of the division through the manufacture of large diameter
Cold Drawn Welded tubes (CDW), which finds application in non-auto
industries. Towards this, a green fi eld facility is under
establishment and it is expected to start commercial production in the
first quarter of 2014-15.
The division has reported a net operating profit before interest and
tax of Rs. 110 Cr. as against Rs. 131 Cr. in the previous year.
Improving internal effi ciencies and aggressive cost management helped
to limit the impact of the drop in volume and steep increase in costs.
The Metal Formed Products segment of the Company registered a turnover
of Rs.795 Cr. in 2012-13, as against Rs.860 Cr. in the previous year.
Stagnati on in demand from the motorcycle segment affected the sale of
drive chains to OEMs. To counter this, your Company focussed on the
replacement market, which facilitated good growth in volumes for the
division. Consistent with the decline in the key industry user segments
like cement, material handling and infrastructure, off-take of
industrial chains was not encouraging. Uncertain conditions and low
economic activity in the European markets further impacted the export
of industrial chains. Your Company continues to invest in equipment to
manufacture fine blanked products as there is a good opportunity for
growth in the domestic and export markets. Sale of fine blanked
products grew by 33% in 2012-13 over the previous year. Passenger cars
designed with roll-formed doorframes did not grow during the year,
resulting in a drop in the volume of doorframes sold. The existence of
a large underutilised capacity in cold rolled sections for railway
wagons affected the top line and margin. Net operating profit before
interest and tax for this segment was at Rs. 80 Cr., representing a
decline of 29%.
Management Discussion and Analysis
The Management Discussion and Analysis Report, which forms part of this
Annual Report, sets out an analysis of the individual businesses
including the industry scenario, performance, financial analysis,
investments and risk mitigation.
Dividend
The Board of Directors has recommended a final dividend of Rs.0.50 per
share, on Equity Share of face value of Rs.2 each, for the fi nancial
year ended 31st March, 2013. Together with the interim dividend of Rs.
1.50 per share, paid on 22nd February, 2013, the total dividend for the
year works out to Rs.2 per share on Equity Share of face value of Rs.2
each. Final dividend, if approved by shareholders, will be paid on or
after 6th August, 2013.
Subsidiary Companies Cholamandalam Investment and Finance Co Ltd
(CIFCL)
It was another year of good performance for CIFCL. Riding on the back
of sustained performance by its vehicle finance and home equity
verticals, aggregate disbursements of CIFCL improved to Rs.12,118 Cr.
in 2012-13 (previous year: Rs. 8,889 Cr.), profit before tax grew 56%,
at Rs.451 Cr. (Rs. 290 Cr.) and profit after tax increased by 77% to
Rs. 307 Cr., (Rs. 173 Cr.). In order to meet the projected growth in
its loan disbursements and to augment the capital adequacy ratio, CIFCL
came out with a Qualified Institutional Placement of Equity Shares to
Qualified Institutional Buyers (QIBs). CIFCL issued 1.05 Cr. Equity
Shares of face value of Rs. 10 each, on private placement, at a premium
of Rs. 275 per share, aggregating Rs. 300 Cr. to QIBs. The Company''s
present shareholding in CIFCL is 50.47%.
Cholamandalam MS General Insurance Co Ltd (CMSGICL)
CMSGICL, a joint venture with Mitsui Sumitomo Insurance Company Ltd,
Japan, achieved a Gross Written Premium (including reinsurance
acceptance) of Rs.1,652 Cr. during 2012-13 (previous year Rs. 1,506
Cr.), registering a growth of 10%.
Completing its first decade of business operations, CMSGICL registered
a profit before tax of Rs.88 Cr. in 2012-13 (previous year Rs. 16 Cr.).
During 2012-13, to augment its solvency position and support the
business plan, CMSGICL came out with a rights issue of shares of Rs. 50
Cr. Your Company''s subscription was Rs. 37 Cr.
Shanthi Gears Ltd (SGL)
Pursuant to the Share Purchase Agreement dated 13th July, 2012 with the
erstwhile promoters of SGL and the consequent mandatory Open Offer made
to the public shareholders of SGL under the SEBI Takeover Regulations,
your Company acquired 5,72,96,413 Equity Shares (70.12%) of SGL, during
2012-13, for an aggregate consideration of about Rs.464 Cr. SGL became
a subsidiary of the Company effective 19th November, 2012.
SGL designs, manufactures and supplies various kinds of industrial
gears and gearboxes catering to a wide variety of applications across
industries. Over the last four decades, SGL has built a very strong
brand through the supply of high quality products, efficient service
and meeting customer expectati ons, both in India and overseas. Your
Company considers the acquisition of SGL as a strategic fit, which will
yield immense benefits in the years to come.
SGL recorded a turnover of Rs.161 Cr. in 2012-13 against Rs. 187 Cr. in
the previous year. Profi t before tax was Rs. 22 Cr. (previous year
Rs. 42 Cr.)
Financiere C10 SAS (FC10)
FC10, in which the Company earlier held 77.13% of the share capital,
became a wholly-owned subsidiary effective 17th December, 2012,
consequent to the Company acquiring the balance 22.87% of the share
capital from the remaining shareholders, at an investment of Rs. 16.55
Cr.
FC10, the holding company of Sedis SAS, France, Societe De
Commercialisation De Composants Industriels, France and Sedis Company
Ltd., UK recorded a consolidated turnover of «33.3 M in 2012 (previous
year «33.3 M). Its profit before tax was «0.31 M («1.05 M).
TICI Motors (Wuxi) Co Ltd (TICI Motors)
Considering the accumulated losses and the prevailing business
conditions, your Company has decided to voluntarily liquidate TICI
Motors, the wholly-owned Chinese subsidiary, established for
manufacturing electric scooter CKD kits for sale in the Indian market.
A sum of Rs. 3.81 Cr. has been provided in the books of account for the
year towards diminution in value of the investment.
The Statement pursuant to Section 212 of the Companies Act, 1956
containing details of the Company''s subsidiaries is attached.
The Consolidated Financial Statements of the Company and its
subsidiaries, prepared in accordance with the Accounting Standard (AS)
21, form part of the Annual Report.
Directors
Mr. N Srinivasan will retire by rotation at the ensuing Annual General
Meeting and is eligible for re-appointment.
Mr. S B Mathur was appointed as an Additional Director with effect from
2nd May, 2013 and a resolution under Section 257 of the Companies Act,
1956 for his appointment is being placed before the shareholders at the
ensuing Annual General Meeting for approval.
Mr. L Ramkumar was re-appointed by the Board of Directors, at the meeti
ng held on 31st January, 2013, as Managing Director of the Company, for
a fresh term, from 1st February, 2013 to 8th April, 2016 (both days
inclusive). Necessary resolution for the re-appointment of Mr. L
Ramkumar, payment of remunerati on and other terms thereof form part of
the Notice of the ensuing Annual General Meeting for shareholders''
approval.
Corporate Governance
Your Company is committed to maintaining high standards of corporate
governance. A report on corporate governance, along with a certificate
from the Statutory Auditors on compliance with corporate governance
norms forms part of this Annual Report.
Human Resources
The HR strategy of your Company is to support and drive business
deliverables by leveraging the people resources in the organisation. To
this end, HR programs of the Company focus on both strategic and
operational prioriti es of the business.
A comprehensive study of shop floor operations was taken up at some of
the units to facilitate productivity improvements through a desirable
manpower mix, elimination of non-value added activities, layout changes
etc. Also, a pilot study on organisation design & structure was
conducted at one of the businesses to identify and recommend optimal
manning and levels required for various functions. With the objective
of building the capabilities of sales workforce across all its
businesses, a new program was initiated in association with an
international firm. This initiative is expected to help in improving
the sales force productivity and also in retaining customers. Special
efforts are being taken to improve the technical capabilities of shop
floor operators through customised training programs by reputed
institutions and technical experts. Focus is also being laid on a
Career Development Program wherein competency gaps of individual
employees are being identified and based on these gaps, Individual
Development Plans (IDPs) are being drawn up and development inputs
provided based on the IDPs. Long-term settlements were concluded with
the labour unions at four manufacturing units during 2012-13. Your
Company also took various initiatives to strengthen the safety,
statutory compliance and security related areas. The Company had 3,443
permanent employees on its rolls, as on 31st March, 2013.
Employees'' Stock Option Scheme
Details of the Employees'' Stock Option Scheme as required under the
relevant SEBI Guidelines are annexed to this Report.
The introduction of a new ESOP Scheme (ESOP 2012), which was approved
by the Members at the last Annual General Meeting held on 6th August,
2012, stands withdrawn, without implementation, as the market regulator
pronounced its view that such schemes providing for acquisition of
securities from secondary market are outside the purview of the
relevant regulations.
Social Commitment
As a corporate citizen, your Company is committed to the conduct of its
business with a strong sense of social responsibility. Every year, the
Company has been contributing a small porti on of its profi ts for the
promoti on of worthy causes like education, healthcare, scientific
research etc. This year too, a sum of Rs. 1.26 Cr. was contributed to
various organisations engaged in the aforesaid fields and to others.
Auditors
Messrs. Deloitte Haskins & Sells, Chartered Accountants and Statutory
Auditors of the Company retire at the conclusion of the ensuing Annual
General Meeting and being eligible, offer themselves for
re-appointment.
Mr. V Kalyanaraman has been appointed as the Cost Auditor for auditing
the cost accounting records maintained by the Company of E-Scooters,
Pedelec (battery powered bicycles), Steel Products and Metal Formed
Products for the financial year ending 31st March, 2013. The Cost Audit
Reports relating to the above products will be filed within the
stipulated period of 180 days from the close of the financial year.
In respect of the previous year, 2011-12, the Cost Audit and Compilance
Reports relati ng to Cycles, Steel Products and Metal Formed Products,
audited by Mr. V. Kalyanaraman, Cost Auditor, were filed electronically
in XBRL mode, on 7th January, 2013 viz., well within the limit of 28th
February, 2013 stipulated by the Cost Audit Branch, Ministry of
Corporate Affairs, Government of India.
The other information required to be furnished in the Directors'' Report
under the provisions of Section 217 of the Companies Act, 1956 relati
ng to conservation of energy, technology absorption, foreign exchange
earnings and outgo, particulars of employees and Directors''
Responsibility Statement are annexed and form part of this Report.
The Directors thank all Customers, Vendors, Financial Instituti ons,
Banks, State Governments and Investors for their conti nued support to
your Company''s performance and growth. The Directors also wish to place
on record their appreciation of the contribution made by all the
employees of the Company resulting in the good performance during the
year under review.
On behalf of the Board
M M Murugappan
Chennai Chairman
2nd May, 2013
Mar 31, 2012
The Board of Directors is pleased to present the performance of your
Company for the year ended 31st March, 2012.
Financial Highlights
Rs in Crores
2011-12 2010-11
Sales of Products - Gross 3659.32 3126.40
Less : Excise duty on sales 200.35 163.82
Sales of Products - Net 3458.97 2962.58
Earnings Before Finance Costs, Tax, 397.35 355.72
Depreciation and Amortisation Expense
Less: Finance Costs 76.17 65.92
Depreciation and Amortisation Expense 76.08 69.10
Earnings Before Tax and Exceptional Item 245.10 220.70
Add: Exceptional Item - Profit
on sale of land and building - 20.60
Profit Before Tax 245.10 241.30
Less: Tax Expense 65.01 71.64
Profit After Tax 180.09 169.66
Add: Surplus at the beginning of the year 392.70 334.61
Less: Final dividend including
tax on dividend 0.02 0.02
Add: Earlier year's provision for
dividend tax no longer required 1.76 -
Profit available for appropriation 574.53 504.91
Less: Transfer to General Reserve 200.00 25.00
Transfer to Debenture Redemption Reserve 31.66 23.34
Interim Dividend @ Rs 2
(Previous year Rs 1.50) per
Equity Share of Rs 2 each 37.24 27.84
Final Dividend Proposed @ Rs 1
(Previous year Rs 1.50) per Equity 18.63 27.85
Share of Rs 2 each
Dividend Tax - Current year 7.30 8.18
Balance carried to Balance Sheet 279.70 392.70
Review of Performance
During the year 2011-12, the Company consolidated and built on its
position in the markets it operates and achieved a higher turnover of
Rs3,659 Cr. (Previous year Rs3,126 Cr.) despite the presence of a few
adverse factors in both the domestic and international markets. This
growth of 17% in turnover comes on the back of higher volume and better
product mix from most product lines. The Earnings before Finance
Costs, Tax, Depreciation and Amortisation Expense were at Rs397 Cr. as
against Rs356 Cr. during the previous year. The outflow on finance cost
was higher due to increase in borrowing rates and the enhanced capital
expenditure programme of the Company. The Profit before Tax was at
Rs245 Cr. for the year 2011-12 as against Rs241 Cr. during the previous
year. The Profit before Tax for the previous year included an
exceptional income of Rs21 Cr. from the sale of land and building.
The Bicycle division recorded a turnover of Rs1,280 Cr. against Rs1,114
Cr. in the previous year. Higher volume, better product mix and focus
on the growing premium segment helped the division improve its
performance over last year. The new premium alloy bicycle, developed
indigenously, has been well received. This, together with other premium
brands catering to different user segments, has enabled the Company to
be the leader in this segment. The division continues to focus on
product development based on customer needs, improving the buying
experience of customers, an efficient supply chain and ground level
activities aimed at increasing the user base. During the year, the
division launched 27 new products. Over 800 retail outlets in various
formats across the country, including one for the rural markets,
returned revenue of 26% during the year.
In the Electric Scooters business, the division re-engineered the
product to make it more suitable to Indian conditions and focused its
efforts on specific markets thereby helping it increase the number of
electric scooters sold by 14%.
Increased competition from other manufacturers, higher steel prices and
depreciation of the Indian Rupee kept the margin under pressure and
consequently, the Net Operating Profit before interest and tax dropped
3% to Rs76 Cr.
In the Engineering division of the Company, the turnover grew 22% to
Rs1,449 Cr. This growth was possible due to the growth in the
two-wheeler and commercial vehicle segments of the auto industry, large
users of the value added tubes supplied by the business. The volume of
value added precision tubes sold was higher by 13%. The Company
continues to be the market leader in this segment with a market share
of around 55%. Sale of cold rolled steel strips was also higher by 7%.
Consolidating on its position as a supplier of quality tubular
components, the Company increased the sale of such components by 48%.
During the year, the segment commissioned a facility for manufacture of
stainless steel tubes and marked its entry into the segment with a
small sale. The new range of tubes is expected to contribute higher
revenues to the segment in the ensuing financial year.
The division has reported a Net Operating Profit before Interest and
Tax of Rs131 Cr. as against Rs113 Cr. in the previous year, registering a
growth of 16% in a not too favourable year. Despite input cost
increases and inflation, the margin for the year was affected only
marginally due to the tight control on costs and various measures taken
by the segment to improve its operational efficiencies.
In the Metal Formed Products segment of the Company, the turnover
increased by 12% to Rs859 Cr. The Automotive chains business registered
a growth of 14% in line with the growth in the motor cycle segment of
the auto industry. A new facility for manufacture of automotive chains
was commissioned during the year at the Company's plant near Hyderabad.
Domestic Industrial chains grew at a rate higher than the industry and
achieved a growth of 11%. Export of Industrial chains registered a good
growth of 40% due to the higher supplies to its customers in the
European and American markets. In Fine Blanked components too, the
segment grew by 17% despite some segments of the user industry not
performing as well as the previous year. In the Car Doorframe business,
however, there was a decline in the volume of doorframes sold due to the
low growth rate in the passenger car segment of the auto industry.
Off-take of doorframes by one of the segment's customers was affected
due to the labour unrest at their plant. The sale of sections for railway
wagons registered a small growth during the year.
Net Operating Profit before Interest and Tax for this segment was at
Rs112 Cr., representing a growth of 10%. This growth is creditable
considering the low growth in demand, increased competition in some
product lines and inability to recover all cost increases. Control on
costs and focus on improving its efficiencies helped the segment retain
its margin at the levels prevailing last year.
Management Discussion and Analysis
The Management Discussion and Analysis, which forms part of this Annual
Report, sets out an analysis of the individual businesses including the
industry scenario, performance, financial analysis, investments and
risk mitigation.
Dividend
The Board of Directors has recommended a final dividend of Rs1 per
share, on equity shares of face value of Rs2 each, for the financial
year ended 31st March, 2012. Together with the interim dividend of Rs2
per share, paid on 13th February, 2012, the total dividend for the year
works out to Rs3 per share on equity share of face value of Rs2 each.
Final dividend, if approved by shareholders, will be paid on 9th
August, 2012.
Subsidiary Companies
Cholamandalam Investment and Finance Co. Ltd. (CIFCL)
The year 2011-12 was a good year for CIFCL, the Company's subsidiary.
Disbursement in vehicle finance continued to be robust and grew by 63%
and home equity by 24%, compared to the previous year, 2010-11. During
the year under review, the company disbursed Rs7,306 Cr. (Rs4,496 Cr.) in
vehicle finance assets and Rs1,528 Cr. (Rs1,235 Cr.) by way of home
equity loans. The aggregate disbursement of the Company for the year
was higher at Rs8,889 Cr. (Rs5,731 Cr.), registering a growth of 55% for
2011-12. Profit Before Tax was Rs290 Cr. (Rs100 Cr.) for 2011-12,
registering a growth of 190%. During the year under review, CIFCL
issued 1,32,55,454 equity shares of Rs10 each at Rs160 per share
aggregating Rs212 Cr., on preferential basis, to two foreign and one
domestic investors to meet its projected growth in loan disbursements
and to augment the capital adequacy ratio. Consequently, the Company's
holding in CIFCL was reduced to 54.49% from 60.56%.
Cholamandalam MS General Insurance Co. Ltd. (CMSGICL)
CMSGICL, a joint venture with Mitsui Sumitomo Insurance Company Ltd,
Japan, achieved a Gross Written Premium (including reinsurance
acceptance) of Rs1,506 Cr. during 2011-12 (previous year Rs1,047 Cr.), a
growth of 44%.
CMSGICL registered a Profit before Tax of Rs16 Cr. for 2011-12 (previous
year loss of Rs23 Cr.) after making a provision of Rs66 Cr. (previous
year Rs61 Cr.) toward share of losses from Indian Motor Pool Third Party
Insurance.
During the year under review, CMSGICL infused Rs50 Cr. to its equity
share capital by way of issue of rights shares and your Company's
subscription was Rs37 Cr.
Financiere C10
Financiere C10, the holding company of Sedis SAS, Societe De
Commercialisation De Composants Industriels (S2CI) and Sedis Company
Ltd., UK, performed creditably during the calendar year 2011. The
consolidated turnover of the company grew by 19% to reach a level of
Ã33.3 M. The profit before tax was at Ã1.05 M registering a growth
of 110%. The improved performance came on the back of long-term supply
contracts with two key manufacturers of automotives in Europe and also
the supply of special chains to meet specific user requirements in the
refining sector. The distribution segment of the company moved in line
with the trends in the economy and tapered off during the year after
registering a strong start. Sedis continues to focus on it superior
strength in providing solutions for complex applications and enhancing
its business from such products.
TICI Motors (Wuxi) Co Ltd.
The operations of TICI Motors (Wuxi) Co Ltd. (TICI Motors), a
wholly-owned subsidiary established in China, have been stabilised. The
plant is presently geared up to produce 1,000 CKD E-bikes per month.
During calendar year 2011, TICI Motors produced 6,310 CKD E-bikes
(1,545 in 2010). The operations of the subsidiary resulted in a loss
of Rs0.72 Cr. (Rs1.02 Cr.) in 2011. A sum of $800,000 has so far been
infused in TICI Motors' share capital, making the company fully
capitalised.
The Statement pursuant to Section 212 of the Companies Act, 1956
containing details of the Company's subsidiaries is attached.
The Consolidated Financial Statements of the Company and its
subsidiaries, prepared in accordance with the Accounting Standard (AS)
21, form part of the Annual Report.
Directors
Your Directors regret to inform the sad demise of Maj. Gen. (Retd.) E J
Kochekkan, Director, on 26th November, 2011. The Board places on record
its
contributing a small portion of its profits for the promotion of worthy
causes like education, healthcare, scientific research etc. This year
too, a sum of Rs1.07 Cr. was contributed to various organisations
engaged in the aforesaid fields and to others.
Voluntary delisting
On the Company's application made in June, 2010, in compliance with the
provisions of the SEBI (Delisting of Equity Shares) Regulations, 2009,
for voluntary delisting of its Equity Shares from the Madras Stock
Exchange ("MSE"), by its letter dated 10th April, 2012, MSE has
informed that the Company's shares stood withdrawn for dealings on MSE,
effective from that date. The delisting from MSE will not affect
investors as the Company's shares will continue to remain listed on the
National Stock Exchange of India Ltd ("NSE") and the Bombay Stock
Exchange Ltd ("BSE"), which have nationwide terminals.
Auditors
Messrs. Deloitte Haskins & Sells, Chartered Accountants and Statutory
Auditors of the Company retire at the conclusion of the ensuing Annual
General Meeting and being eligible, offer themselves for
re-appointment.
Mr. V Kalyanaraman, Cost Accountant, has been appointed as the Cost
Auditor for audit of the cost
accounting records for Bicycles, Steel Products and Metal Formed
Products for the financial year ended 31st March, 2012. The Cost Audit
Reports relating to the above products will be filed within the
stipulated period of 180 days of the close of the financial year.
In respect of the previous year, 2010-11, the Cost Audit Reports
relating to Bicycles (audited by Mr. D Narayanan, Cost Auditor) and
Steel Tubes (audited by Mr. V Kalyanaraman, Cost Auditor) were filed
within the stipulated time frame of 180 days of the close of the
financial year viz., on 20th September, 2011 and 24th September, 2011
respectively.
The other information required to be furnished in the Directors' Report
under the provisions of Section 217 of the Companies Act, 1956 relating
to conservation of energy, technology absorption, foreign exchange
earnings and outgo, particulars of employees and Directors'
Responsibility Statement are annexed and form part of this Report.
The Directors thank all Customers, Vendors, Financial Institutions,
Banks, State Governments and Investors for their continued support to
your Company's performance and growth. The Directors also wish to place
on record their appreciation of the contribution made by all the
employees of the Company resulting in the good performance during the
year under review.
Directors' Responsibility Statement
(Pursuant to Section 217(2AA) of the Companies Act, 1956)
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
to the best of their knowledge and belief confirm that:
- in the preparation of the Statement of Profit and Loss for the
financial year ended 31st March, 2012 and the Balance Sheet as at that
date ("financial statements"), applicable Accounting Standards have
been followed.
- appropriate accounting policies have been selected and applied
consistently and such judgments and estimates that are reasonable and
prudent have been made so as to give a true and fair view of the state
of affairs of the Company as at the end of the financial year and of
the profit of the Company for that period.
- proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities. To ensure
this, the Company has established internal control systems, consistent
with its size and nature of operations. In weighing the assurance
provided by any such system of internal controls its inherent
limitations should be recognised. These systems are reviewed and
updated on an ongoing basis. Periodic internal audits are conducted to
provide reasonable assurance of compliance with these systems. The
Audit Committee meets at regular intervals to review the internal audit
function.
- the financial statements have been prepared on a going concern basis.
- the financial statements have been audited by Messrs. Deloitte
Haskins & Sells, Statutory Auditors and their report is appended
thereto.
On behalf of the Board
Chennai M M Murugappan
30th April, 2012 Chairman
Mar 31, 2011
The Board of Directors is pleased to present the performance of your
Company for the year ended 31st March, 2011.
Financial Highlights
Rs. in crores
2010-11 2009-10
Gross sales and processing charges 3129.99 2453.65
Less : Excise duty on sales 163.82 108.01
Net sales and processing charges 2966.17 2345.64
Operating Profit before depreciation and interest350.22 265.02
Less: Interest 60.42 28.76
Depreciation 69.10 66.81
Operating Profit before tax and Exceptional
Items 220.70 169.45
Add: Profit on sale of land and building 20.60 --
Less: Provision for loss on liquidation of
Overseas Subsidiary -- 39.95
Profit before tax 241.30 129.50
Less: Provision for taxation 71.64 48.29
Profit after tax 169.66 81.21
Add: Surplus brought forward 334.61 311.11
Less:Final Dividend including tax on Dividend
for 2009-10 0.02 --
Add: Dividend on own shares held through Trust 0.66 0.44
Profit available for appropriation 504.91 392.76
Less:Transfer to General Reserve 25.00 15.00
Transfer to Debenture Redemption Reserve 23.34 10.83
Interim Dividend à Rs.1.50 per share of Rs.2 each
(Previous year Rs.Nil) 27.84 --
Tax on Interim Dividend (Net) 3.66 --
Final Dividend à Proposed @ Rs.1.50 per Equity Share
(Previous year Rs.1.50 per share) of Rs.2 each 27.85 27.72
Tax on Final Dividend 4.52 4.60
Balance carried to Balance Sheet 392.70 334.61
Review of Performance
The Company performed well during the year 2010-11, crossing the Rs.3000
crore mark in gross revenue terms, for the very first time. All the
business segments of the Company registered a double digit growth and
maintained their profitability despite a sustained period of high
costs. Strong consumer demand contributed to the robust volume growth
in all the product lines of the Company. The operating profit before
depreciation and interest for the year 2010-11 at Rs.350 crores, was up
by 32% over the previous year. Together with an extraordinary income of
Rs.21 crores on sale of land and building, the Companys Profit before
Tax for 2010-11 was Rs.241 crores, a growth of 109% over the previous
year.
The Bicycles division of the Company crossed Rs.1000 crores in sales for
the first time, reporting a revenue of Rs.1121 crores in 2010-11, a
growth of 18% over the previous year. It was only four years ago that
the division crossed the Rs.500 crore mark in revenue à a fine example of
how customer insight-led product development, operational excellence
and superior service can spur faster growth.
The year also marked the introduction of the first indigenous carbon
fibre bicycle and launch of the internationally renowned ÃGT and
ÃMongoose brand cycles in the domestic market. These products
complement our range of premium products and give us a position at all
price points in the premium segment.
During the year, 78 new models were introduced and these were received
well. Sale of new models contributed 23% to the divisions revenue for
the year.
With a slew of premium products, the number of outlets selling the
divisions products increased too. Currently, 647 outlets retail the
Bicycle divisions entire range of products, of which 175 sell
exclusively the divisions branded products.
In the Electric Scooters segment, lesser number of vehicles was sold
during the year owing to a contraction in demand. Considering the
difficult market conditions, the Company restructured the operations
and further controlled its costs. With the incentives announced by the
Government of India for the development and sale of electric vehicles
in the country and rising fuel prices, renewed consumer interest is
being witnessed for these products. It may, however, take a longer time
for these products to gain acceptance and establish a position for
themselves in the market place. The Wholly Foreign Owned Enterprise
set up by the Company in China to source components for Electric
scooters is expected to help the performance of this business going
forward.
Overall, the division reported a profit before interest and tax of Rs.78
crores, representing a growth of 14% over the previous year, made
possible by the growth in volume, better product mix, control over cost
and keeping the funds employed in the business, low.
The Engineering division of the Company too had a very good year,
clocking a turnover of Rs.1195 crores, a growth of 34% over the previous
year. The growth in this division over the last two years, has been
high, riding largely on the growth of the Auto industry in the country.
Having come out of the recession in early 2009, all segments of the
Auto industry have grown significantly in the last two years, thanks to
the policies of the Government of India. Being a key supplier of tubes
to all segments of this industry, the Engineering division was able to
register a growth of 21% in the value-added tubes segment and an
overall growth of 20% in tubes. In the cold rolled steel strips segment
too, the division grew 7%, despite the dominance of large integrated
mills. The growth numbers of this division would have been higher but
for the fact that capacities were fully taken up and some requirements
of customers could not be met.
The product range in the tubes segment is being augmented and plans are
afoot to introduce new products. The division will have to invest in
new capacities to meet the growing demand in the auto sector.
Substantial investments are expected to be made in the current
financial year.
This division reported a profit before interest and tax of Rs.113 crores,
a growth of 32% over the previous year, contributed by better product
mix, higher volume and a combination of internal operating efficiencies
besides partial pass through of cost increases. The funds employed were
also kept at around the same level as the previous year, despite the
higher activity, yielding a higher return on the capital employed.
In the Metal Formed Products division, all product lines grew at a
higher rate, except the sections for railway wagons. The Automotive
chains segment grew by 30%, which was higher than the growth of 26%
registered by the two wheeler segment of the Auto industry, resulting
in an improvement in the market share. Here again, constraints were
faced in meeting in full the requirements of customers despite having
increased capacity and productivity. In Industrial chains, the segment
grew 11% in the domestic market and 60% in the export market. This was
enabled by the strong industrial growth and the revival of demand from
overseas customers. In the Fine Blanked products segment, significant
progress was achieved with the commercialisation of the new products
developed, resulting in a growth of 138%. This has also helped de-risk
some of the revenue streams as the user base has been expanded. With
the launch of more products, this segment offers good potential for
growth.
Supply of car doorframes grew 17% in line with industry growth. This
segment too achieved a landmark in that the figure of 1 Million sets of
car doorframes sold in a year was crossed for the first time, the
volume having doubled in just five years. Full fledged operations
commenced at the re-located car doorframe facility at Sanand in
Gujarat. On the railway products, growth was marginal in the supply of
sections for wagons. Supply of side and end walls for passenger coaches
commenced during the year. A new facility at Uttarakhand became fully
operational during the year.
The division recorded a turnover of Rs.775 crores, a growth of 34% over
the previous year. Profit before interest and tax grew by 26% with high
volume growth from key product lines. The margin, however, was slightly
impacted due to extra costs incurred to service customers on time,
entry of a regional player in the wagons business resulting in intense
price pressure and an inability to pass on cost increases fully. The
return on capital employed remained healthy, despite the significant
investments made recently in creating additional capacity and
establishing state-of- the-art facilities.
Management Discussion and Analysis
The Management Discussion and Analysis Report, which forms part of this
Annual Report, sets out an analysis of the individual businesses
including the industry scenario, performance, financial analysis,
investments and risk mitigation.
Dividend
The Board of Directors is pleased to recommend a final dividend of
Rs.1.50 per equity share of Rs.2 each. The Company has already paid an
interim dividend of Rs.1.50 per share, making a total dividend of Rs.3 per
share for the financial year 2010-11.
Subsidiary Companies
Cholamandalam Investment and Finance Co Ltd
Cholamandalam Investment and Finance Co Ltd (CIFCL), a subsidiary of
the Company (60.56% equity holding), has reported a consolidated gross
income of Rs.1222 crores (previous year: Rs.956 crores) and consolidated
profit before tax of Rs.123 crores (previous year: Rs.57 crores) in the
financial year 2010-11. During the year under review, CIFCL refocused
on its core businesses viz., vehicle finance, home equity and business
finance, which enabled a strong performance. The profit for the year is
after reckoning Rs.227 crores for the potential delinquencies in the
personal loan segment and exceptional items in a subsidiary and Rs.21
crores on account of additional provision on all standard assets in
compliance with the new provisioning norms introduced by the Reserve
Bank of India in January 2011.
Cholamandalam MS General Insurance Co Ltd
Cholamandalam MS General Insurance Co Ltd (CMSGICL), a joint venture
with Mitsui Sumitomo Insurance Company Ltd, Japan, achieved a Gross
Written Premium of Rs.968 crores during 2010-11 (previous year Rs.785
crores), registering a growth of 23%. The General Insurance industry in
India offers good potential for growth as penetration is low in this
sector. However, there is intense competition amongst the players in
this industry. The industry hence, continues to reel under the pressure
of inadequate premium pricing seriously impacting underwriting
profitability. While CMSGICL attained an operating profit before tax of
Rs.38.8 crores in its eighth full year of operations, it reported a net
loss of Rs.22.6 crores after providing for an amount of Rs.61.4 crores on
account of the increased provisioning on Indian Motor Third Party
Insurance Pool mandated by IRDA. With the recent announcement by the
Regulator for increase in the premium rates of motor third party
liability insurance by 60-70% coupled with the establishment of a
mechanism for an annual review of these rates, the future motor pool
losses are expected to be contained and thereby, improve CMSGICLs
profitability.
Tubular Precision Products (Suzhou) Co Ltd
Tubular Precision Products (Suzhou) Co Ltd, the Chinese subsidiary for
manufacture of precision cold drawn welded steel tubes was not
profitable in view of difficult market conditions and hence, it was
decided to liquidate the company in the year 2009-10. After complying
with the legal formalities and with the receipt of requisite clearances
from the Chinese authorities, the subsidiary was liquidated effective
29th March, 2011. The provision for diminution in value of the
investment made during 2009-10 has been adequate to cover the loss on
liquidation.
Financiere C10 SAS
Financiere C10 SAS, France, the holding company of Sedis SAS and S2CI,
both in France and Sedis Co Ltd in UK achieved a consolidated turnover
of Euro 27.9 million for the financial year 2010, a growth of 4.3% over
the previous year. This growth was achieved even as the European
economy is slowly emerging from the recession. Profit before tax was
Euro 0.5 million, an increase of 39% over the previous year. While,
Sedis SAS is a pioneer in the manufacture of Industrial and Engineering
Class Chains with two manufacturing plants in France, S2CI and Sedis Co
Ltd are distribution companies. The brand ÃSedis has a strong equity
and the company has a presence in almost 100 countries through its vast
distribution and sales network.
TICI Motors (Wuxi) Co Ltd
TICI Motors (Wuxi) Co Ltd is a wholly-owned subsidiary established in
China during 2009-10 to facilitate the operation of Electric scooters
and Bicycles business.
TICI Motors (Wuxi) Co Ltd, in its first year of operations, made a loss
of Rs.1.02 crores.
The Statement pursuant to Section 212 of the Companies Act, 1956
containing details of the Companys subsidiaries is attached.
The Consolidated Financial Statements of the Company and its
subsidiaries, prepared in accordance with the Accounting Standard (AS)
21, form part of the Annual Report.
Directors
Your Directors regret to inform the sad demise of Dr. D
Jayavarthanavelu, Director, on 11th June, 2010. The Board places on
record its deep sense of appreciation of the valuable contribution made
by Dr. Jayavarthanavelu to the Companys growth during his long
association as a Director, since July 1997.
Messrs. Pradeep Mallick and S Sandilya will retire by rotation at the
ensuing Annual General Meeting and are eligible for re-appointment.
Mr. Pradeep V Bhide was appointed as an Additional Director with effect
from 28th October, 2010. A resolution under Section 257 of the
Companies Act, 1956 for the appointment of Mr. Pradeep V Bhide as a
Director is being placed before the shareholders at the ensuing Annual
General Meeting for their approval.
Corporate Governance
Your Company is committed to maintaining high standards of corporate
governance. A report on corporate governance, along with a certificate
from the Statutory Auditors on compliance with corporate governance
norms forms part of this Annual Report.
Human Resources
Your Company recognises the crucial role of human resources in
realising its corporate objectives and the need to retain and nurture
talent. The Company is taking several initiatives to build
organisational capability through continuous upgradation of technical,
functional and managerial competencies. International exposure is also
being provided to select employees, including operators, to learn
global best practices from vendors/ associates, subsidiary companies
etc., so that such practices can be assimilated in the Companys
businesses.
During the year, the Company continued to hire talent from premier
engineering colleges and business schools in order to build a talent
pipeline to facilitate sustainable future growth. The teams to manage
the Companys long-term projects in its business verticals were also
identified.
Further, a number of leadership initiatives like Ãin class training
programmes, one-on-one coaching, feedback sessions etc., were taken
during the year. Some of the potential business leaders of the Company
attended leadership development programmes organised by leading
business institutes/schools viz., IIM-Ahmedabad and Ross Michigan
Business School.
Various programmes involving the employees and their families were
organised during the year. Enthusiastic participation of employees was
witnessed in programmes like Small Group Activities, Cross Functional
Teams, Kaizens, 5s etc.
The Company had 3150 permanent employees on its rolls, as on 31st
March, 2011. Industrial relations continued to remain cordial during
the period under review. Long-term wage settlements were reached with
workmen in respect of the Companys factories at Avadi, Ambattur and
Nashik.
Employees Stock Option Scheme
Details of the Employees Stock Option Scheme as required under the
relevant SEBI Guidelines are annexed to this Report.
Social Commitment
As a corporate citizen, your Company is committed to the conduct of its
business with a strong sense of social responsibility. Every year, the
Company has been contributing a small portion of its profits for the
promotion of worthy causes like education, healthcare, scientific
research etc. This year too, a sum of Rs.3.09 crores was contributed to
various organisations engaged in the aforesaid fields and to others.
Auditors
Messrs. Deloitte Haskins & Sells, Chartered Accountants and Statutory
Auditors of the Company retire at the conclusion of the ensuing Annual
General Meeting and being eligible, offer themselves for
re-appointment.
Mr. V Kalyanaraman and Mr. D Narayanan have been appointed as the Cost
Auditors for auditing the cost accounting records maintained by the
Company relating to Tubes and Cycles respectively for the financial
year ending 31st March, 2012.
The other information required to be furnished in the Directors Report
under the provisions of Section 217 of the Companies Act, 1956 relating
to conservation of energy, technology absorption, foreign exchange
earnings and outgo, particulars of employees and Directors
Responsibility Statement are annexed to and form part of this Report.
The Directors thank all customers, vendors, Financial Institutions,
Banks, State Governments and investors for their continued support to
your Companys performance and growth. The Directors also wish to place
on record their appreciation of the contribution made by all the
employees of the Company resulting in the good performance during the
year under review.
On behalf of the Board
Chennai M M Murugappan
2ndMay, 2011 Chairman
Mar 31, 2010
The Board of Directors is pleased to present the performance of your
Company for the year ended 31st March 2010.
Financial Highlights
Rs. in Crores
2009-10 2008-09
Gross sales and processing charges 2453.65 2212.22
Less : Excise duty on sales 108.01 152.98
Net sales and processing charges 2345.64 2059.24
Operating Profit before depreciation and interest 265.02 123.67
Less: Interest 28.76 28.19
Depreciation 66.81 59.12
Operating Profit before tax 169.45 36.36
Add: Profit on sale of long term investments - 46.66
Less: Provision for Loss on Liquidation of
Overseas Subsidiary 39.95 -
Profit before tax 129.50 83.02
Less: Provision for taxation 48.29 10.84
Profit after tax 81.21 72.18
Add: Surplus brought forward 311.11 277.61
Dividend on own shares held through Trust 0.44 0.44
Profit available for appropriation 392.76 350.23
Less: Transfer to general reserve 15.00 15.00
Transfer to debenture redemption reserve 10.83 2.50
Dividend à Proposed @ Rs.1.50 per equity share
(previous year Re.1 per share) of Rs. 2/- each 27.72 18.48
Tax on dividend 4.60 3.14
Balance carried to Balance Sheet 334.61 311.11
Review of Performance
The highlight of the year was the improved performance by all the
business segments of the Company. Good growth in volume, largely stable
prices with respect to key raw materials and focus on operating
efficiencies enabled the Company to report a higher Profit before Tax
at Rs.129.50 Crores against Rs. 83.02 Crores, last year, a growth of
56%. The Profit reported above is after providing Rs.39.95 Crores
towards diminution in value of investments and other amounts receivable
relating to the Companys subsidiary viz., Tubular Precision Products
(Suzhou) Co Ltd. The operating profit excluding the said provision grew
by 366% over the previous year.
The Bicycles divisions turnover grew by 31% and the division reported
a profit before interest and tax of Rs. 68.72 Crores against Rs. 29.17
Crores in the previous year. A significant growth in volume, good
product mix and higher sales through the retail formats pioneered by
the Company contributed to this performance. As many as 79 new models
were introduced catering to the various customer segments based on
consumer insights and feedback and these products have met with very
good response from the market. The division continues its focused
marketing efforts across all segments, from toddlers to the high-end
performance bicycles, for the discerning bicycle enthusiast.
The electric scooters launched by the Company last year have gained
market acceptance garnering a good market share in the southern part of
the country. The division has been working on improving the performance
of motors, controller and battery in line with the expectations of the
consumers.
The Engineering division of the Company grew its tubes business by 20%
in volume terms and 5% in turnover. A significant part of the growth
came through the higher sale of the value added tubes and tubular
components. The profit before interest and tax grew by 415% from Rs.
16.54 Crores to Rs.85.10 Crores. This was achieved through higher
volume, good product mix, focus on internal efficiencies and better
utilisation of resources. The export market was affected due to the
recession and consequently, exports were down by 12%. Your Company is
also pursuing growth opportunities in new segments linked with the
infrastructure industries that offer higher potential; this will help
de-risk the revenue streams in the coming years.
In the Metal Formed Products division, there was a double digit growth
in volume of all segments, excluding export of industrial chain which
continues to be affected by the recession. With an improvement in the
sale of new models and growth in the existing models, the sale of car
doorframes was higher at 31%. The new facility for manufacture of
doorframes at Sanand, Gujarat is nearing completion and is expected to
be commissioned in the first quarter of this financial year. In the
Railways segment, there was an increase of 49% on the sale of cold
rolled formed sections for wagons. The new facility at Uttarakhand for
manufacture of these sections was commissioned during the year and this
will help your Company to increase revenue in the current year. The
facility for manufacture of side wall, end wall and roof assemblies for
passenger coaches at the plant near Chennai has been commissioned and
the output of this facility will contribute to the growth of this
division from this financial year. During the year under review, the
sale of automotive chains increased by 53%. This was possible due to
the increased off-take by major customers on the back of growth in the
industry. The facility established at Uttarakhand for manufacture of
chains is functioning at full capacity and given the growth trends;
there is a need to pursue expansion of capacities at all the plants.
Management Discussion and Analysis
The Management Discussion and Analysis Report, which forms part of this
Annual Report, sets out an analysis of the individual businesses
including the industry scenario, performance, financial analysis,
investments and risk mitigation.
Dividend
Your Directors are pleased to recommend a dividend of Rs.1.50 per
equity share of Rs.2 each.
Directors
Major General (Retd) E J Kochekkan was appointed as an Additional
Director with effect from 1st August, 2009. A resolution under Section
257 of the Companies Act, 1956 for the appointment of Major General
(Retd) E J Kochekkan as a Director is being placed before the
shareholders at the ensuing annual general meeting for their approval.
Messrs. Amal Ganguli, M M Murugappan and N Srinivasan will retire by
rotation at the ensuing Annual General Meeting and are eligible for
re-appointment. Mr. Ganguli has expressed his desire not to seek
re-appointment. He has been on the Board since June 1989, barring a
brief gap in 2002-03. The Chairman and other members of the Board wish
to place on record their grateful appreciation of the excellent
contribution made by Mr. Ganguli, as a member of the Board and as
Chairman and member of the Audit Committee, over the years.
Corporate Governance
Your Company is committed to maintaining high standards of corporate
governance. A report on corporate governance, along with a certificate
from the statutory auditors on compliance with corporate governance
norms forms part of this Annual Report.
Investments in Financial Service Sector
Subsequent to the close of accounts for 2009-10, the Companys holding
in Cholamandalam DBS Finance Ltd (CDFL) increased from 30.93% to
57.41%, consequent upon the acquisition of 1,75,82,000 equity shares of
CDFL from DBS Bank Ltd., Singapore, involving an investment of
Rs.160 Crores. Consequently, CDFL became a subsidiary of the Company
with effect from 8th April, 2010. CDFL is engaged in the business of
vehicle finance, home equity and business finance.
During the year, the Company also invested Rs.92.50 Crores in the
rights issue of Cholamandalam MS General Insurance Co Ltd, a subsidiary
company engaged in general insurance business.
Human Resources
The HR programmes of the Company focus on building capabilities and
engaging employees through various initiatives to help the organisation
consolidate and achieve sustainable future growth for the business.
Your Company has been continuously upgrading technical, functional,
managerial and leadership skills of its human resources through various
training programmes. The Senior Management Programme, Executive
Development Programme and Technology Appreciation Programme which were
completed successfully in the previous year were further followed up
with a review of the content and effectiveness. The enthusiastic
participation of the employees in the improvement programmes such as
Small Group Activities, Cross Functional Teams, Quality Circles,
Kaizens, 5s etc., continued during the year under review. The
successful teams were recognised bi-annually by awards given by the
Chairman and the Managing Director.
Industrial Relations remained cordial at all manufacturing locations
and the Unions and Workmen responded positively to the challenging
times of the business during the year under review.
Effective employee communication through various channels ensured that
all the employees are kept abreast of the current business situation.
This has helped your Company to build mutual trust and confidence with
the employees.
Employeesà Stock Option Scheme
Details of the Employees Stock Option Scheme as required under SEBI
Guidelines are annexed to this Report.
Social Commitment
As in the previous years, your Company contributed a small portion out
of its profits to AMM Foundation - Rs. 0.40 Crores and Shri AMM
Murugappa Chettiar Research Centre (MCRC) - Rs.0.15 Crores.
AMM Foundation is a philanthropic organisation and manages nine
institutions - five in the educational sector and four in the health
care sector. With a heritage of over half a century, the Foundation is
known for its steadfast commitment to diligently providing valuable
education and healthcare for the less privileged and the needy. All
institutions are run on a non-profit basis.
MCRC is a non-profit research organisation with its ideologies centered
around science and technology application for rural development thereby
improving the quality of life of the rural people, particularly the
underprivileged and marginalised.
Apart from the above, the Company contributed Rs.3 Crores to Mahindra
World School Educational Trust for establishing a world class school
near Chennai for the purpose of imparting quality education to
children.
Performance of Subsidiaries
During the last quarter of this year, your Company acquired a majority
stake in Sedis Group of companies in France. Sedis manufactures
engineering class industrial chains using world class technology that
will now be available to your Company. The operations of Sedis will be
integrated with the activities of the Companys chains business to
achieve the synergies this acquisition offers. Your Company has
acquired 77.13% of the equity capital of Financiere C 10 SAS (FC 10)
which is the holding company for all the Sedis group of companies. As
per the Share Purchase Agreement entered into with the shareholders of
FC10, the balance equity capital of 22.87% can be acquired by the
Company at any time prior to 28th February, 2013. FC 10 has three
wholly owned subsidiaries viz., Sedis SAS, Societe De Commercialisation
De Composants Industriels - S2CI, SARL (S2CI) in France and Sedis Co
Ltd in UK. FC 10, has recorded a consolidated turnover of Euro 26.720 M
and a profit after tax of Euro 0.333 M during the year ended 31st
December 2009.
The operations of Tubular Precision Products (Suzhou) Co., Ltd, the
Companys subsidiary in China, could not be turned around due to
intense competition in the Chinese market. Under the circumstances,
the process of liquidation of this company commenced in December, 2009.
A provision for the diminution in the value of Investment and other
receivables amounting to Rs. 39.95 Crores has been made in the accounts
for the current financial year.
TI Financial Holdings Limited, incorporated as a wholly owned
subsidiary last year, has not yet commenced operations.
During the year, TICI Motors (Wuxi) Company Ltd, was incorporated in
China as a wholly owned subsidiary to facilitate the operations of the
e-scooters & bicycles business and US$ 0.4 Million was invested towards
registered capital of this company.
Cholamandalam MS General Insurance Company Ltd (CMSGICL) has achieved a
Gross Written Premium of Rs. 784.86 Crores (previous year Rs.685.44
Crores), recording a growth of 15% over the previous year. During the
year, this subsidiary achieved a PAT of Rs.2.40 Crores (last year
Rs.6.99 Crores). CMSGICL is a fast growing general insurance company,
poised to increase its market share.
Auditors
Messrs. Deloitte Haskins & Sells, Chartered Accountants retire at the
ensuing Annual General Meeting and being eligible, offer themselves for
reappointment.
The other information required to be furnished in the Directors Report
under provisions of Section 217 of the Companies Act, 1956 relating to
conservation of energy, technology absorption, foreign exchange
earnings and outgo, particulars of employees and Directors
Responsibility Statement are annexed and form part of this report.
The Directors thank all customers, vendors, Financial Institutions,
Banks, State Governments and investors for their continued support to
your CompanyÃs performance and growth. The Directors also wish to place
on record their appreciation of the contribution made by all employees
of the Company resulting in the good performance in the year under
review.
On behalf of the Board
Chennai M M Murugappan
1st May, 2010 Chairman
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