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AU Small Finance Bank Ltd.

BSE: 540611 Sector: Financials
NSE: AUBANK ISIN Code: INE949L01017
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VOLUME 23268
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P/E 52.82
Mkt Cap.(Rs cr) 19,071
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OPEN 669.00
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VOLUME 23268
52-Week high 736.00
52-Week low 496.40
P/E 52.82
Mkt Cap.(Rs cr) 19,071
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

AU Small Finance Bank Ltd. (AUBANK) - Director Report

Company director report

To

The Members

Au FINANCIERS (INDIA) LIMITED ("Company")

Your Directors are pleased to present the 21st Annual Report on the performance of yourCompany for the

financial year ended March 31 2016 along with Audited Financial Statements includingConsolidated Financial Statements Auditor's Report and Secretarial Auditor's Report.

STANDALONE FINANCIAL RESULTS

The Summarized Financial Performance of your Company Standalone basis for theFinancial Year ended 2015-16 is as follows:

KEY PERFORMANCE HIGHLIGHTS - STANDALONE

Au FINANCIERS (INDIA) LIMITED

• The total income achieved by your Company during FY 2015-16 was ' 1015.48 Crregistering growth of 44% over the total income of ' 706.31 Cr earned during FY 2014-15.

• Profit before tax and Profit after tax stood at' 322.65 Cr and ' 211.62 Cr forFY 2015-16 respectively as against ' 208.38 Cr and ' 140.23 Cr for FY 2014-15respectively. Profit aftertax showed a growth of 51% over that of FY 2014-15.

FINANCIAL RESULTS - STANDALONE Au FINANCIERS (INDIA) LIMITED

Particulars 2015-16 2014-15
TOTAL INCOME 1015.48 706.31
Total Expenditure 684.31 491.42
Profit Before Depreciation & Tax 331.17 214.89
Depreciation 8.52 6.52
Current Tax 115.08 75.66
Deferred Tax (3.80) (5.48)
Adjustment of tax relating to earlier periods (0.25) (2.04)
Profit after Tax 211.62 140.23
Transfer to Statutory Reserve 42.32 28.05
EPS:-
Basic 48.01 32.03
Diluted 47.70 32.03

CONSOLIDATED FINANCIAL RESULTS - Au GROUP

Your Company's outstanding performance on standalone basis was equally driven andsupported by its subsidiaries and associate Companies and the summary of ConsolidatedFinancial Results is presented below:

KEY PERFORMANCE HIGHLIGHTS

• The total income achieved by your Company on Consolidated basis during the FY2015-16 was

' 1214.10 Cr registering growth of 49% over the total income of ' 815.27 Cr earnedduring FY 2014-15.

• Profit before tax and after tax on consolidated basis was ' 373.25 Cr and '246.54 Cr for FY 2015-16 as against ' 240.88 Cr and ' 163.08 Cr for FY 201415respectively. Consolidated profit before tax increased by 55% over the previous year2014-15 whereas profit after tax registered a growth of 51% over that of FY 2014-15.

Consolidated Financial Results
(' in Cr)
Particulars 2015-16 2014-15
TOTAL INCOME 1214.10 815.27
Total Expenditure 831.05 566.87
Profit Before Depreciation & Tax 383.05 248.41
Depreciation 9.80 7.53
Current Tax 131.36 85.45
Deferred Tax (2.94) (4.69)
Adjustment of tax relating to earlier periods (0.23) (2.00)
Share of profit of Associate 1.48 0.96
Profit after Tax 246.54 163.08

OTHER OPERATIONAL PERFORMANCE HIGHLIGHTS

• Disbursements

Your Company achieved a disbursement figure of ' 5619 Cr compared to ' 3378 Cr Thedemand for products offered by your Company remained healthy during the year with growthpredominantly in rural and semi urban areas this became possible with commitment onoffering a bouquet of loan products to a wide spectrum of customers with expansion ofbusiness to newer geographies and increased penetration. Customer connect schemesreferral schemes and distribution vertical supported the vision of achieving numbersbeyond what were envisaged at start of FY 2015-16.

• Assets Under Management

Duringthe period under review the net loan booksize grew from ' 5568 Cr to ' 8221 Crreflecting a growth of 48%.

• Non-performingAssets

The amount of gross Non-Performing Assets (NPA) as at March 312016 was ' 74 Crvis-a-vis ' 55 Cr as at March 312015 which was 0.88% of loan portfolio in current yearagainst 0.95% for previous year. Despite steep increase in loan book with 48% in lastyear NPA has not increased.

• Lending Operations

The demand for products offered by your Company remained healthy during the year withgrowth predominantly in rural and semi urban areas. Commitment towards offering a bouquetof loan products to a wide spectrum of customers was maintained; instead a growth of 66%of loan disbursed was witnessed.

• Appropriations to Reserves

Your Company proposes to transfer ' 42.32 Cr i.e. 20% of the net profits to statutoryreserve created under Section 45 IC of the Reserve Bank of India Act 1934.

• Share Capital

Duringthe period under review there was no change in share capital of your Company andno new shares were issued during the year.

• Related Party & Contracts

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm'slength basis. All such Related Party Transactions details were placed before the Auditcommittee for approval wherever applicable. Approval from Audit Committee was obtainedfor the Related Party Transactions.

Particulars of contracts or arrangements with related parties referred to in Section188(1) of the Companies Act 2013 in the prescribed Form AOC-2 is appended as AnnexureII to the Board's report.

• Dividend

Your Company is aiming to expand and transform into a small finance bank owing to thedevelopment and expansion plans of the Company your Directors

have not proposed any dividend for the year ended March 31 2016. Your Board believesthat it will be prudent for the Company to conserve resources as we are transiting intoSmall Finance Bank platform.

• Loans&Guarantees

Loans guarantees and investments covered under Section 186 of the Companies Act 2013form part of the notes to the financial statements provided in this AnnualReportandwithrespecttodisclosure. Further pursuant to Section 186(11)(a) of the CompaniesAct 2013 (the'Act') read with Rule 11(2) of the Companies (Meetings of Board and itsPowers) Rules 2014 the loan made guarantee given or security provided in the ordinarycourse of business by a Non-Banking Financial Company (NBFC) registered with Reserve Bankof India (RBI) are exempt from the applicability of provisions of Section 186 of the Act.

DEPOSITS

Your Company is a non-deposit taking NBFC and thus has not accepted any publicdeposits during the FY 2015-16.

Particulars Status
a Accepted during the year Not Applicable as no deposits were accepted by the Company.
b Remained unpaid or unclaimed as at the end of the year Not Applicable
c Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so number of such cases and the total amount involved- Not Applicable
(i) At the beginning of the year
(ii) Maximum during the year
(iii) At the end of the year
d The details of deposits which are not in compliance with the requirements of Chapter V of the Act Not Applicable because no deposits were accepted by the Company

BUSINESS & OPERATIONS

• Company'sStrategy&Transformation

The business has grown well on the back of its business model built on the fundamentalcreed of client centricity and customized products close connect flexibility deeperreach into rural/ semi urban geographies and execution efficiency with timelydisbursement.

The Indian market is huge and offers ample scope for immense growth and long-termeconomic prospects positive demographics rising income levels etc. therefore committedyoung and dynamic team of Au FINANCIERS (INDIA) LIMITED is poised to grow leaps and boundsto mark its substantial presence in the financial services space.

In view of the same your Company made an application to Reserve Bank of India to setup Small Finance Bank in February 2015 with an object to expand its business in rural andsemi urban areas and cater its services via banking products. Reserve Bank of Indiagranted 'in-principle approval' to your Company to set up Small Finance Bank via approvaldated October 07 2015. The 'in-principle approval' granted is valid for 18 months toenable to comply with the requirements under the guidelines and fulfill other conditionsas may be stipulated by the RBI. On being satisfied that the applicants have complied withthe requisite conditions the RBI would consider granting them license for commencement ofbanking business under the banking regulations Act 1949. For meeting the aforesaid yourCompany is strategically working for complying all the requirements and conditions asstipulated by the apex bank of India for converting it into 'Small Finance Bank'.

Small Finance Bank platform to the Company shall be a logical step in furtherstrengthening the trust of our customers and servicing their needs comprehensively throughintegrated financial solution to meet their personal banking and business requirement. Wewill continue to innovate on our low-cost technology-driven operating model and strongrisk architecture which allows us to serve customers in under-banked geographiesefficiently. Our superior service and firm presence will allow us to aid Governmentschemes of financial inclusion including direct benefit transfer and promoting smallticket and regular saving vehicles in unbanked & under banked districts.

• Change in Nature of Business if any

There was no change in nature of business during the FY 2015-16; your Company hascontinued to carry on its lending operations.

• Areas of Operations Subsidiaries & Associates (including major change withSubsidiaries & associates in reference to RBI Guidelines)

A statement containing the salient features of the financial statement of oursubsidiaries in the prescribed format AOC-1 is appended as

Annexure I. The statement also provides the details

of performance and financial positions of each of its subsidiaries & associates. Ason March 312016 your Company has following subsidiaries & associates:

Au HOUSING FINANCE LIMITED

Au HOUSING FINANCE LIMITED is a subsidiary of your Company as on March 31 2016 and isa registered National Housing Bank ("NHB") primarily engaged in the business ofhousing Finance Activities addressing lower income households (unserved and unreachedsegment) in rural and semi urban areas. Au HOUSING FINANCE LIMITED uses unique appraisalmethodology to assess these customers individually and financing solution is customized tothe customer's housing finance needs. Major housing financing products of the company areas follows:

• House purchase loan

• House construction loan

• House renovation extension loan

• Plot cum construction loan

It is reported 68% growth in profit after tax amounting to ' 32.06 Cr in FY 2015-16against' 19.08 Cr in FY 201415. Au HOUSING FINANCE LIMITED made preferential offer ofshares under section 62 read with section 42 of Companies Act 2013 for 4666667 sharesto Au FINANCIERS (INDIA) LIMITED for subscription amount of ' 700000050 during FY2015-16 and Au HOUSING FINANCE also made preferential offer of 800000 shares to Mr.Sushil Kumar Agarwal Whole Time Director and CEO of AU HOUSING FINANCE LIMITED whichwere duly subscribed and paid.

INDEX MONEY LIMITED

Index Money Limited (IML) is a public limited company and a subsidiary of your Companyas on March 31 2016 and is engaged in business of financial consultancy. Considering theincreasing demand of funds by the corporate small business entities IML continues toprovide debt syndication services to small business entities.

The Company is in the process of divesting stake in Index Money Limited and Au HousingFinance Ltd which will be completed before the filing of application for the finalBanking License as per approval received from RBI.

Au INSURANCE BROKING SERVICES PRIVATE LIMITED

Au INSURANCE BROKING SERVICES PRIVATE LIMITED an Associate Company of Au FINANCIERS(INDIA) LIMITED as per definition of section 2(6) of Companies Act 2013 and during theperiod under review has reported growth in profit after tax amounting to ' 2.05 Cr in FY2015-16 against' 1.96 Cr in FY 2014-15.

M POWER MICRO FINANCE PRIVATE LIMITED

Microfinance has occupied center stage as a promising conduit for extending financialservices to unbanked sections of masses with over 60000 customers. M POWER MICRO FINANCEPRIVATE LIMITED is an Associate Company of Au FINANCIERS (INDIA) LIMITED as per definitionof section 2(6) of Companies Act 2013. During the period under review it has reportedgrowth in profit after tax amounting to ' 2.52 Cr in FY 2015-16 against' 1.17 Cr in FY2014-15.

NAMES OF COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES JOINT VENTURESORASSOCIATE COMPANIES DURING THE YEAR

During the year under review no company have become or ceased to become subsidiaryjoint venture or associate of your Company.

TREASURY & FINANCE • MobilizationofFunds

During the year under report and as per business requirement your Company raised fundsat lower cost mainly by way of rupee Term Loans from Banks and private placement ofDebentures with comfortable liquidity position undrawn cash credit lines. New Loanssanction in hand. During the year your Company further focused on bringing reduction inits cost of borrowings by raising funds through short term instruments like CommercialPapers WCDL and further reduction in rate of interest on existing lines of credit frombanks. Same is represented herein:

Borrowing mix as on March 2016

Product ' in Cr %
Banks & Fis 1833 25
NCDs 2075 28
Commercial Paper 520 7
Subordinated Debt (Tier II) 355 5
Securitization/Assignment 2600 35
Total 7383

• Credit Ratings

As on March 312016 credit ratings granted to your Company is as follows:

Sl. Credit Rating Agency No. Instruments Upgraded/Assigned Ratings as on March 31 2016
1 Brickwork Long-Term Rating BWRAA-/Stable
2 ICRA Long-Term Rating ICRAA+/Stable
Short Term Debt ICRAA1 +
3 India Ratings & Research Long-Term Rating IND A+/Stable
Short-Term Debt (Including Commercial Paper) IND A1 +

• Capital Adequacy Ratio

The present Capital Adequacy Ratio (CRAR) of your Company is maintained at 17.10%which is higher to the minimum requirement as prescribed by the RBI. Such high rate ofCRAR defines that your Company is able to maintain the capacity to meet the timeliabilities and other risks such as credit risk operational risk.

CORPORATE GOVERNANCE

• Board & Committees Brief and Composition

Duty of the Board of Directors of your Company is to oversee the management andoperations of the Company. The Board is scheduled to meet at least once a quarter andeach quarterly meeting of the Board generally include a business and finance update. On anongoing basis during the year the Board monitors the Company's performance against itsannual financial plan.

Committees of the Company as per the requirement of Companies Act 2013 and RBIRegulations as on March 31 2016 are as follows:

• Audit Committee

• Nominations & Remuneration Committee

• Corporate Governance Committee

• Asset & liability Management Committee

• Credit & Risk Management Committee

• Corporate Social Responsibility Committee

• Executive Committee

The composition number of meeting held during the year the scope of work of therespective committees have been reiterated in the report on corporate governance formingpart of this Annual Report.

• Board Meetings

There were 10 (ten) meetings of the Board held during the year. Detailed information isgiven in the Report on Corporate Governance forming part of this Annual Report.

• Declaration by Independent Directors

A declaration under section 149(6) & (7) of the

Companies Act 2013 has been obtained from each of the Independent Director.

• Directors

The composition of the Board of your Company is in

conformity with the provisions of the Companies Act 2013 as amended from time to timeand has a well- structured Board with a balanced mix of Executive and Non-ExecutiveDirectors comprising Eight Directors - 6 (Six) Non-Executive and 2(Two) ExecutiveDirector. The Executive and Non-Executive Directors are competent and knowledgeablepersonalities possessing required skills and competencies.

In accordance with the provisions of sub section (6) of Section 152 of the CompaniesAct 2013 and the Articles of Association of the Company; Mr. Vishal Mahadevia NomineeDirector is liable to retire by rotation at the ensuing Annual General Meeting and beingeligible has offered himself for reappointment.

The Board recommends his re-appointment for consideration of the Shareholders approvalpursuant to applicable provisions of the Companies Act 2013. Also Mr. Nishant Sharma whowas appointed as an additional director on 22nd December 2014 was regularized in the lastAnnual General Meeting held on July 13 2015 with requisite majority.

None of the Directors of the Company are disqualified from being appointed as Directorsas specified under Section 164(2) of the Companies Act 2013 read with its applicablerules.

• Policies Regarding Appointment & Remuneration

With an ambition to become one of the most preferred financiers and to outperform itspeers with an ambition to remain front runner in delivering best financial solutions theCompany has devised policy to pay adequate remuneration to its Directors and KeyManagerial Personnel (KMP) to align the remuneration structure with best industrypractices and appropriate risk rewards matrix.

The Nomination & Remuneration Committee has put in place the policy on boarddiversity for appointment & remuneration of directors taking into considerationqualification and wide experience of the directors in fields of banking financeregulatory administration legal commercial vehicle segment apart from compliance oflegal requirements of the Company.

REGULATORY COMPLIANCES

• RBI Guidelines

The Company continues to comply with the applicable regulations and guidelines of RBIas applicable to a Non-Banking Non Deposit Taking Systemically Important Asset FinanceCompany ('NBFC-ND-SI- AFC'). The Company continues to comply with all requirementsprescribed by RBI from time to time.

• Companies Act 2013

Pursuant to applicable provisions of the Companies Act 2013 read with the respectiverules formed there under your Company complied with all the compliance requirements andthe detail of compliances in respect of Section 134 of Companies Act 2013 are enumeratedin this report.

Extract ofAnnual Return

The extract of annual return as provided under subsection (3) of section 92 of theCompanies Act 2013 in the prescribed Form MGT-9 is annexed to this Report as AnnexureIV.

Conservation of Energy and Technology Absorption

The disclosures to be made under sub-section (3) (m) of Section 134 of the CompaniesAct 2013 read with Rule (8)(3) of the Companies (Accounts) Rules 2014 by your Companyare explained as under:

Conservation of Energy

Your Company has adopted social environment

management system and installed LCD monitors LED lights wherever possible at branchesto conserve energy and with low cost highly technology lean operations model yourCompany has installed control over system of branches to keep control of usage of power.

Technology Absorption

Your Company has implemented social media cutting-edge technologies likevirtualization and continue to invest in the best-in-class IT systems with the objectiveto make IT systems as business enabler and tool for improving efficiency and speed itsoperations.

Foreign Exchange Earnings and Outgo

The foreign exchange earnings and the foreign exchange outgo of the Company isfurnished in Notes to the accounts and significant policies for FY 2015-16.

Management Discussion and Analysis Statement

Management Discussion and Analysis on the business of the Company is attached to thisReport.

POLICIES & FRAMEWORK

• Risk Management Policies

Your Company has a Board approved Integrated Risk Management Policy which has laiddown framework for identifying assessing measuring various elements of risk involved inthe business and formulation of procedures and systems for mitigating such risks. RiskManagement Committee of the Board has overall responsibility for overseeing the Company'srisk management activities approving measurement methodologies and appropriate riskmanagement procedures across the organization. Risk Management Committee periodicallyreviews and updates the Board about various risks related to your Company. Further yourCompany is focusing on Technology & Innovation to leverage its huge customer base andit looks forward to strengthen the Risk Management Framework of the Company withincreasing complexities in view of diversification of product and external factorsaffecting the business of the Company.

• Corporate Social Responsibility

Your Board has constituted a Corporate Social

Responsibility committee in accordance with requirement of Section 135 of CompaniesAct 2013. Details of CSR Committee are available in the report on Corporate Governance.CSR Committee has formulated and recommended a CSR policy which

has been approved by the Board and periodically reviewed. Your Company's CSR policy iscommitted towards CSR activities as envisaged in Schedule VII of the Companies Act 2013.The details of CSR policy of the Company are available on the website of the Company atwww.aufin.in .

The Annual Report on CSR activities as required under Companies (CSR Policy) Rules2014 which is attached to this report as Annexure V.

• Vigil Whistle Blower Mechanism & Anti Bribery and Corruption Policy

The Company has formulated and established a Vigil Mechanism Framework to enabledirectors and employees to report genuine concerns about unethical behaviour actual orsuspected fraud or violation of Code of Conduct. This policy promotes open and fearlessenvironment of direct communication by employees to management of the Company. Furtherthis policy seeks to provide necessary safeguards for protection of employees fromreprisals or victimization for whistle blowing in good faith. The Policy neither releasesemployees customers and/or vendors from their duty of confidentiality in the course oftheir work nor is it a route for taking up a grievance about personal situation. TheVigil Mechanism & whistle blower policy has been uploaded on the website of theCompany i.e. www.aufin.in .

Anti Bribery Policy mechanism is in place to ensure that no bribe and corrupt practicesare carried out by the Company or its employees and associates and report on the samebeing submitted to the Board.

• Disclosures under Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013.

The Company is committed to provide a safe and

conducive work environment to its employees and has formulated 'Policy for Preventionof Sexual Harassment' to prohibit prevent or deter any acts of sexual harassment atworkplace and to provide the procedure for the redressal of complaints pertaining

to sexual harassment thereby providing a safe and healthy work environment. During theyear under review no case of sexual harassment was reported.

• Performance Evaluation

Board evaluation is the most effective way to ensure the Board members understand theirduties and to adopt effective good governance practices. To be effective boardroomappraisals need to have specific clearly defined steps and practices and a specialcommitment from the Board. Your Company believes in evaluating the performance ofindividual directors constituting the Board as a whole and its committees from time totime on annual basis. Evaluation mechanism is based on independent assessment ofperformance of Directors and Board as a whole and its committees. Evaluation sheets arecirculated to members highlighting the key points and thereafter filled evaluation sheetsreceived from directors are placed before the members of Nomination and RemunerationCommittee Independent Directors and the Board of Directors of the Company for evaluatingperformances.

• Meetings of Independent Directors

The Independent Directors met once during the year under review. The meeting wasconducted in an informal manner without the presence of the Executive Directors theNon-Executive NonIndependent Directors or any other Management Personnel.

• Internal Financial Controls and their Adequacy

The Companies Act 2013 has introduced a reasonably advanced reporting concept forauditors i.e.. Internal Financial Control (IFC). Auditors of the Company are required toreport on adequacy and operating effectiveness of Internal Financial Controls of theCompany with reports on financial statements prepared under Section 143.

The Company as per the requirement of section 134 (5)(e) has adopted the policies andprocedures to ensure orderly and efficient conduct of its business including adherence tothe Company's policies safeguarding of its assets prevention and detection

of frauds and errors accuracy and completeness of accounting records timelypreparation of reliable financial information.

During the year under review the Statutory Auditors and the Secretarial Auditor havenot reported any instances of frauds committed in the Company by its Officers or Employeesto the Audit Committee under section 143(12) of the Companies Act 2013 details of whichneeds to be mentioned in this Report.

AUDITORS &AUDITORS' REPORT:

• Statutory Auditor

In terms of Sections 139 and 141 of the Companies Act 2013 read with Companies (Auditand Auditors) Rules 2014 the appointment of Statutory Auditors is to be ratified everyyear via approval of the members at the Annual General Meeting. For auditing the AnnualAccounts of the Company for FY 2016-17 ratification of auditors is proposed at thisAnnual General Meeting of the Company. A certificate under Section 141 of the CompaniesAct 2013 is received from the M/s S. R. BATLIBOI & ASSOCIATES. LLP CharteredAccountants who are proposed to be appointed in place of M/s S. R. BATLIBOI & CO.LLP existing auditors and proposed audit firm fulfils the criteria prescribed in thesaid section to the effect that their appointment if made would be within the prescribedlimits under Section 141 of the Act and that they are not disqualified for suchappointment within the meaning of Section 141 of the Act and the Company and it isproposed to appoint M/s S.R. BATLIBOI & ASSOCIATES LLP in place of M/s S. R. BATLIBOI& CO. LLP.

• Reports & Qualifications if any

The notes on the financial statements referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Auditors' Report does notcontain any qualification reservation or adverse remark.

• Secretarial Auditor

Pursuant to Section 204 of the Companies Act 2013 your Company had appointed M/s V. M.Associates Practicing Company Secretaries Jaipur as its Secretarial Auditor to conductthe secretarial audit of the Company for FY 2015-16. Your Directors recommended andapproved their appointment as the Secretarial Auditors of the Company for FY 2016-17.

• Reports & Qualifications if any

The Company provided all assistance and facilities to the Secretarial Auditor forconducting their audit for FY 2015-16. The Secretarial Audit Report as specified inSection 204 of Companies Act 2013 in Form MR-3 which is annexed to this report asAnnexure VI. There are no qualifications or adverse remarks in the Secretarial AuditReport.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND THE COMPANY'S OPERATIONS IN FUTURE.

No significant and material orders were passed by the regulators or courts or tribunalsimpacting the going concern status and the Company's operations in future.

HUMAN RESOURCES

The Company aims to align HR practices policies and processes with businessobjectives goals to motivate people for higher performance and build a competitiveworking environment. The Company strongly believes that its employees are the mostimportant asset base and all measures introduced by the Company is aimed at providingemployee satisfaction enabling them to deliver better results year over year. Withincrease in growth and size it was inevitable for the Company to increase ability to hiremanpower faster so the Company started hiring employees from external manpower servicescompanies to ensure that growth envisaged by management can be achieved on consistentbasis. Employee relations remained cordial and the work atmosphere remained congenialduring the year.

EMPLOYEE STOCK OPTION PLAN

Your Company provides its employees a platform

for participating in important decision making and instilling long-term commitmenttowards future growth of the Company by way of rewarding them through Stock Options. TheEmployee Stock Option Plans are administered by the Nomination & Remuneration

Committee of the Board and the Committee reports to the Board.

Name of ESOP Scheme No. of Shares under the Scheme Status
EMPLOYEES STOCK OPTION SCHEME 2011 (Au ESOP 2011) 643042 Completed
EMPLOYEES STOCK OPTION PLAN 2015 PLAN - A 639343 In Progress
EMPLOYEES STOCK OPTION PLAN 2015 PLAN - B 822199 In Progress
TOTAL NO.OF SHARES 2104584

PARTICULAR OF EMPLOYEES

The particulars of employees pursuant to sub Rule 2 & 3 of Rule 5 of Companies(Appointment & Remuneration of Managerial Personnel) Rules 2014 has been annexed andis forming part of Board's report.

INVESTOR RELATIONS

To communicate details of performance important developments and exchange ofinformation any investor can write at investorrelations@aufin.in and for other enquiriesinvestors can visit the Company's website www.aufin.in .

Your Company ensures that critical information about the Company is available to allthe investors by hosting all such information on the Company's website.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under clause (c) of sub-section (3) of section 134 of the Companies Act2013 directors to the best of their knowledge and belief state that -

• in the preparation of the annual accounts the applicable Accounting Standardshad been followed along with proper explanation relating to material departures;

• the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit and loss of the Company for that period;

• the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the Company's assets and for preventing and detecting fraud and otherirregularities;

• the directors had prepared the annual accounts on a

going concern basis;

• the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and

• the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

ACKNOWLEDGEMENTS

Your Company would like to acknowledge the role of all its stakeholders - shareholdersborrowers depositors key partners and lenders for their continued support to theCompany.

The directors appreciate the guidance received from various regulatory authoritiesincluding RBI SEBI MCA Registrar of Companies the stock exchanges and the depositories.

Your directors place on record their appreciation of the hard

work and dedication of all the employees of the Company.

For and on behalf of the Board of Directors For Au FINANCIERS (INDIA) LIMITED

Sd/-
Sanjay Agarwal
Managing Director
DIN:00009526

 

Sd/-
Uttam Tibrewal
Executive Director
DIN: 01024940

 

Place: Jaipur
Date: May 27 2016
CIN: U36911RJ1996PLC011381

Disclosures of employees pursuant to Sub Rule 2 & 3 of rule 5 of Companies(Appointment & Remuneration of Managerial

Personnel) Rules 2014 as in force

Name of. Employee Remuneration (Amount fIn Lacs) Designation Nature of employment (Contractual/ Otherwise) Qualifications and experience of the employee; Date of commencement of employment The age of such employee The last employment held by such employee before joining the Company The percentage of equity shares held by the employee in the Company within the meaning of clause (iii) of sub-rule (2) above; and Whether any such employee is a relative of any director or manager of the Company and if so name of such director or manager
1 Mr. Sanjay Agarwal 322.73 Managing Director Confirmed FCA B. Com 21 Years Appointed as Managing Director since February 14 2008 and was re-appointed for a further period of 5 years by the Shareholders of the Company with effect from August 262013. 45 NA 14.98% NO
2 Mr. Uttam Tibrewal 171.44 Whole time Director Confirmed B. Com 20 Years Appointed as Whole Time Director since February 14 2008 and was reappointed for a further period of 5 years by the Shareholders of the Company with effect from August 262013. 45 NA 0.67% NO
3 Mr. Deepakjain 127.24 Chief Financial Officer Confirmed FCA 18 Years May 172010 42 NA 0.37% NO
4 Mr. Manoj Tibrewal 105.37 Chief Operating Officer Confirmed CS 20 Years February 12009 46 NA 0.57% NO
5 Mr. Rishi Dhariwal 79.17 Chief Risk Officer Confirmed BE(Mechanical)MBA (IIMAhmedabad) 24 years November 152013 46 Citibank NIL NO

FORM AOC- 1

(Pursuant to first proviso to Sub-Section (3) ofsection 129 read with rule 5ofCompanies (Accounts) Rules 2014) Statement containing salient features of the Financialstatement of Subsidiaries / associate companies/joint ventures

Part "A": Subsidiaries

Particulars Name 1 Name 2
Name ofthe Subsidiary Au HOUSING FINANCE LIMITED INDEX MONEY LIMITED
Reporting Period for the Subsidiary concerned if different from the holding company's reporting period. NA NA
Reporting currency and exchange rate as on the last date ofthe relevant financial year in case of foreign subsidiaries. NA NA
Share Capital 3838.33 172.45
Reserves & Surplus 16471.95 374.26
Total Assets 171341.03 548.55
Total Liabilities 171341.03 548.55
Investments - 545.95
Turnover/lncome 19697.81 177.01
Profit before taxation 4885.67 174.29
Provision for taxation 1679.27 37.06
Profit after Taxation 3206.40 137.23
Proposed Dividend - -
% of Shareholding 98% 100%

Notes:

1. Name of Subsidiaries which are yet to commence operations

There are no subsidiaries ofthe Company which are yet to commence their business.

2. Names of Subsidiaries which have been liquidated or sold during the year.

There are no subsidiaries ofthe Companywhich have been liquidated or sold during theyear.

Part B: Associates and Joint Ventures

(Statement pursuantto Section 129 (3) ofthe CompaniesAct 2013 related toAssociateCompanies andJointVentures)

(' in Lacs)
Particulars Name 1 Name 2
Name ofAssociates/Joint ventures Au INSURANCE MPOWER MICRO
BROKING SERVICES FINANCE PRIVATE
PRIVATE LIMITED LIMITED
1. Latest audited Balance sheet Date 31.03.2016 31.03.2016
2. Shares of Associate held by the Company on the year end
i. No. of Equity shares held 195000 4500000
ii. Amount of investment in Associates in ' 1950000 45000000
Hi. Extend of Holding % 26.00% 38.53%
3. Description of how there is significant influence This is an associate company within the definition under section 2 (6) of Companies Act 2013 This is an associate company within the definition under section 2 (6) of Companies Act 2013
of Au FINANCIERS (INDIA) LTD. of Au FINANCIERS (INDIA) LTD. Au FINANCIERS is a strategic investor in Mpower Micro Finance Private Ltd.
4. Reason why the associate/ joint venture is not consolidated NA NA
5. Net worth attributable to shareholding as per latest audited Balance Sheet {(Net Worth= Share Capital + Reserve & Surplus - DTA/(DTL))* % of Holding} 131.45 556.63
6. Profit / Loss for the year
i. Considered in consolidation 53.31 94.77
ii. Not Considered in Consolidation 151.72 156.47
1. Names of associates or joint ventures which are yet to commence operations (NOT APPLICABLE)
2. Names of associates or joint ventures which have been liquidated or sold during the year (NOT APPLICABLE)

Note: i) The financial statements have been audited by firm of chartered accountantsother than S.R. Batliboi & Co. LLP

As per our report of even date
For S.R. Batliboi & Co. LLP

ICAI Firm Registration No.: 301003E/E300005 Chartered Accountants

 

Forandon behalf ofthe Board of Directors
For Au FINANCIERS (INDIA) LTD.

 

Sd/-
per Viren H. Mehta
Partner
Membership No. 048749 Place: Jaipur
Date: May 27 2016

 

Sd/-
Sanjay Agarwal
Managing Director

 

Sd/-

Uttam Tibrewal

Executive Director

 

Sd/-

Deepak Jain

Chief Financial Officer

 

Sd/-
Manmohan Parnami
Company Secretary

Particulars ofcontracts or arrangements with related parties referred to in Sub-Section(1) of

Section 188 in Form AOC-2

Name(s)ofthe No. related party and nature of relationship Nature of contracts/ arrangements/ transactions Duration of the contracts/ arrangements/ transactions Salient terms of the contracts or arrangements or transactions including the value ifany Date(s) of approval by the Board Amount paid as advances ifany (' in Lacs)
1 Au HOUSING FINANCE LIMITED Infrastructure Sharing Agreement Duration of agreement will be for a one year term can be extended with the mutual consent of parties a) The office spaces of the branch network of the Holding Company in the Branch Offices shall be used for the purpose of the carrying on respective business activities by each party. April 1 2012 Nil Outstanding
b) The Subsidiary shall be entitled to use the utilities in the Branch Offices with the Holding Company.
c) Towards contribution in expenses of office spaces of Branch Offices and Facilities the Subsidiary Company shall pay the Holding Company the amount equal to 5% to 10% of expenses d) Payment shall be made to Au FINANCIERS (INDIA) LIMITED no monthly basis. Au FINANCIERS (INDIA) LIMITED of the amounts due under this Agreement on Monthly basis.
e) All other relevant terms will be required to abided by the parties.

 

Name(s) ofthe related party and nature of relationship Nature of contracts/ arrangements/ transactions Duration of the contracts/ arrangements/ transactions Salient terms of the contracts or arrangements or transactions including the value ifany Date(s) of approval by the Board Amount paid as advances ifany (' in Lacs)
2 M POWER MICRO FINANCE PRIVATE LIMITED Enterprises under significant influence - Associate Company Ongoing till the requirement subsists The Company granted loans to M Power Micro Finance Private Limited for their business requirements and for fulfilment of its working capital needs. The loan so granted in the FY 15-16 falls within the ambit of sub section 11 of section 186 of Companies Act 2013 read with its applicable rules. NA Nil loan is outstanding (Outstanding balance under portfolio buyout was 1821 as March 31 2016)
3 Mr. Sanjay Agarwal - Managing Director Rent Agreement Rent agreement with Mr. Sanjay Agarwal to take on lease property situated at 301/302 Atharwa Plaza 3rd floor Opp. Shankar Maharaj Nath Mandir Pune Satara Road Dhankawadi Pune-411043 belonging to Mr. Sanjay Agarwal Managing Director ofthe Company. May 23 2014 Nil

ANNEXURE-III

The ratio of the remuneration of each director to the median employee's remunerationand other details in terms ofsub-section 12 ofSection 197 ofthe CompaniesAct 2013 readwith Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014:

Sr. Requirements No. Disclosure
1 Ratio of the remuneration of each director to Mr. Sanjay Agarwal MD 182X*
the median remuneration of the employees of Mr. Uttam Tibrewal WTD 97X*
the Company for the financial year. Remuneration includes Bonus of KMP mentioned above*
2 The percentage increase in remuneration of each director Chief Financial Officer Chief Name & Designation of KMP lncrease%/ (Decrease)%
Executive Officer Company Secretary if any in Mr. Sanjay Agarwal MD* 259.23
the financial year. Mr. Uttam Tibrewal WTD* 45.56
Mr. Deepakjain CFO* 46.88
Mr. Manmohan Parnami CS* 7.43

 

*The figures for FY15-16 have been inclusive of Bonus figures for the previous year 14-15 in above calculations for KMP's remuneration while calculating percentage increase/(decrease). If Bonus figure would not have been considered the Increase in remuneration of Key Managerial Person (KMP) would have been 27.97% for Mr. Sanjay Agarwal 7.92% for Mr. Uttam Tibrewal 13.13% for Mr. Deepakjain and 5.92%for Mr. Manmohan Parnamifor the FY2015-16.
3 The percentage increase in the median remuneration of employees in the financial year. There has been increase of 1.33% in median remuneration of employees. (The employees have been taken as on year end and there has been decrease in no. of employees of 391 during FY15-16 over FY14-15 and median has been calculated taking employees on comparable basis and annualized remuneration arrived considering employees as on year end worked for whole year. The Company hired staff from manpower services Companies in FY 2015-16 resulting which there was decrease in nos. of total employees on the rolls of Company as on March 31 2016 vis-a-vis as on March 31 2015).
4 The number of permanent employees on the rolls of company as on March 31 2016. There were 3162 employees as on March 31 2016.
5 The explanation on the relationship between average increase in remuneration and Company performance Factors considered while recommending increase in the remuneration were: (a) Financial performance of the Company (b) Peer Analysis (c) Industry Benchmarking and consideration towards inflation (d) Variable compensation is decided on an individual performance rating and other parameters.
6 Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company. For the FY 2015-16 KMPs were paid 3.09% of the net profit for the year and Company reported excellent financial performance with 50.90% growth in Profits in FY15-16 over previous year which has been result of strong disciplined led execution and implementation of strategies expansion in geographies & reach.

Sr. Requirements Disclosure

No.

7 Variations in the market capitalization of the Not applicable as Company shares arenot listed.

Company price earnings ratio as at the closing

date of the current financial year and previous financial year and percentage increaseover decrease in the market quotations of the shares of the Company in comparison to therate at which the Company came out with the last public offer in case of listed companiesand in case of unlisted companies the variations in the net worth of the Company as atthe close of the current financial year and previous financial year;

8 Average percentile increase already made There was average percentile increase of51.98% in FY15-16 over FY14-15 in the salaries of employees other than the for employeesother than in managerial capacity. For managerial personnel managerial personnel in thelast financial There were increase of 101.42% in remuneration of managerial personnel onyear and its comparison with the percentile overall basis in Financial Year 2015-16 overprevious year.

increase in the managerial remuneration and

justification thereof and point out if there are Note: (KMP's remuneration have beentaken as recorded in Audited Financial any exceptional circumstances for increase inStatements of the Company and if managerial personnel remuneration is the managerialremuneration being calculated on comparable basis taking into effect of bonus amount and

annualized calculation then total remuneration of managerial personnel of FY14-15vis-a-vis FY15-16 remained unaffected in total)

9 Comparison of each remuneration of Key Managerial personnel against the performance ofthe Company:

Comparison of each remuneration of Key Managerial Personnel (KMP) against the performance ofthe Company:

Particulars % of Net Profit for FY15-16
Mr. Sanjay Agarwal MD 1.53%
Mr. Uttam Tibrewal WTD 0.81%
Mr. Deepakjain CFO 0.60%
Mr. Manmohan Parnami CS 0.15%

 

Note: The % of KMP has been ascertained over the Net Profit After Tax for the F.Y. 2015-16 and the element of bonus was included in of calculation of KMP remuneration.
10 The key parameters for any variable component of remuneration availed by the directors. The overall performance of Company including financial performance profitability asset quality growth of Asset under management and other relevant parameters are considered for deciding the variable remuneration component.
11 The ratio ofthe remuneration ofthe highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year; and There was no employee in the Company who was in receipt of remuneration in excess of highest paid director during the year.
12 Affirmation that the remuneration is as per the remuneration policy of the Company. Yes it is confirmed.

General Note:

for KMP's remunerationfigures have been arrived as recorded in Auditedfinancialstatements ofthe Company. Calculations above have been made on comparable and annualizedbasis wherever applicable.