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Mahindra & Mahindra Financial Services Ltd.

BSE: 532720 Sector: Financials
NSE: M&MFIN ISIN Code: INE774D01024
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NSE 15:46 | 18 Aug 415.55 -5.35
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OPEN 422.00
PREVIOUS CLOSE 420.35
VOLUME 115254
52-Week high 434.85
52-Week low 244.35
P/E 65.48
Mkt Cap.(Rs cr) 23,612
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 422.00
CLOSE 420.35
VOLUME 115254
52-Week high 434.85
52-Week low 244.35
P/E 65.48
Mkt Cap.(Rs cr) 23,612
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Mahindra & Mahindra Financial Services Ltd. (M&MFIN) - Director Report

Company director report

To

The Members of

Mahindra & Mahindra Financial Services Limited

Your Directors are pleased to present their Twenty-Seventh Report together with theaudited financial statements of your Company for the Financial Year ended 31st March2017.

The performance highlights and summarised financial results of the Company are givenbelow:

PERFORMANCE HIGHLIGHTS

• Consolidated income for the year increased by 9% to Rs. 7200.7 Crores ascompared to Rs. 6597.5 Crores in 2015-16;

• Consolidated income from operations for the year was Rs. 7146.2 Crores ascompared to Rs. 6553.9 Crores in 2015-16 a growth of 9%;

• Consolidated profit before tax for the year was Rs. 837.8 Crores as compared toRs. 1224.1 Crores in 2015-16;

• Consolidated profit after tax and minority interest for the year was Rs. 511.6Crores as compared to Rs. 772.3 Crores in 2015-16.

FINANCIAL RESULTS

Rs. in Crores

CONSOLIDATED STANDALONE
March 2017 March 2016 March 2017 March 2016
Total Income 7200.7 6597.4 6237.5 5905.1
Less: Finance Costs 3186.2 2868.3 2857.4 2639.3
Expenditure 3123.0 2459.3 2714.0 2186.7
Depreciation/Amortisation 53.7 45.7 46.0 40.9
Total Expenses 6362.9 5373.3 5617.4 4866.9
Profit Before Tax 837.8 1224.1 620.1 1038.2
Less: Provision For Tax
Current Tax 463.5 614.4 363.5 535.6
Deferred Tax (155.4) (177.7) (143.6) (170.0)
Profit After Tax for the Year before Minority Interest 529.7 787.4 400.2 672.6
Less: Minority Interest 18.1 15.1 - -
Profit After Tax for the Year after Minority Interest 511.6 772.3 400.2 672.6
Add: Amount brought forward from Previous Years 3017.9 2245.6 2240.5 2040.9
Amount available for Appropriation 3029.0 3017.9 2635.6 2713.5
Appropriations
General Reserve 40.0 67.2 40.0 67.2
Statutory Reserve 109.2 154.9 80.1 134.5
Debenture Redemption Reserve 26.5 - 26.5 -
Proposed Dividend on Equity Shares -* 227.5 -* 227.5
Income-tax on Proposed Dividend 2.8 45.8 - 43.8
Surplus carried to Balance Sheet 2850.5 2522.5 2489.0 2240.5

* In terms of the revised Accounting Standard (AS) - 4 ‘Contingencies and Eventsoccurring after Balance Sheet date' as notified by the Ministry of Corporate Affairsthrough amendments to Companies (Accounting Standards) Amendment Rules 2016 dated 30thMarch 2016 the Company has not accounted for proposed dividend for the current financialyear as liability as at 31st March 2017. However the proposed dividend was accounted foras liability as at 31st March 2016 in accordance with the then existing AccountingStandard.

TRANSFER TO RESERVES

The Company proposes to transfer an amount of Rs. 40.0 Crores to the General ReserveRs. 80.1 Crores to the Statutory Reserve and Rs. 26.5 Crores to the Debenture RedemptionReserve. An amount of Rs. 2489.0 Crores is proposed to be retained in the Statement ofProfit and Loss.

DIVIDEND

Your Directors are pleased to recommend a dividend of Rs. 2.4 per Equity Share of theface value of Rs. 2 each payable to those Members whose names appear in the Register ofMembers as on the Book Closure date. The dividend including dividend tax will absorb a sumof Rs. 161.0 Crores [as against Rs. 271.3 Crores on account of dividend of Rs. 4 perEquity Share paid for the previous year].

DIVIDEND DISTRIBUTION POLICY

The Board of Directors of the Company at its Meeting held on 25th October 2016 hasapproved and adopted the Dividend Distribution Policy of the Company containing therequirements prescribed in Regulation 43A of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015. The Policy isappended as Annexure I and forms part of this Annual Report.

The Dividend Distribution Policy can also be accessed on the Company's website at theweb-link: http://www.mahindrafinance.com/policies.aspx.

During the year an amount of Rs. 254886 being the unclaimed/unpaid dividend of theCompany for the Financial Year ended 31st March 2009 was transferred in August 2016 tothe Investor Education and Protection Fund.

OPERATIONS

Rural demand continued to be sluggish in the early part of the year due to deficientmonsoons in the previous two consecutive years coupled with lack of sufficient investmentin infrastructure. However the situation showed signs of impending revival with a goodmonsoon but faced a temporary slowdown in the third quarter due to demonetisation causingdeceleration in the economic growth.

Being largely engaged in the semi-urban and rural areas of the country many of theCompany's customers earn their livelihood in cash. It is well known that over 40% of therural population does not have a bank account and easy access to banking network as thereare relatively fewer bank branches in these areas and they are few and far between.

Hence most of the Company's customers prefer to repay their monthly installments incash.

As per Gazette Notification dated 8th November 2016 issued by the Government of Indiaannouncing the discontinuance of Rs. 1000 and Rs. 500 denominations of Bank Notes("Specified Bank Notes") from 9th November 2016 the demonetisation impact wasseverely felt in rural India substantially impacting business and collections of yourCompany. The effect of demonetisation stretched and continued almost till mid-February2017 and the Company did see elevated levels of gross Non-Performing Assets. The effect ofdemonetisation was also felt severely in the sale of crops (even though the yields weregood) resulting in low cash flows. Post mid-February 2017 there has been a significantimprovement in the farm cash flows which is a result of cash being released to farmersagainst their sale of crops to Mandis. The rural sentiments turned positive and theCompany did see an improvement in its performance both in sales as well as overallcollections.

Your Company continued to offer a wide range of financial products and services to itscustomers during the year under review. Your Company was at the forefront of meeting thevarious lifecycle needs of its customers by consistently expanding its product offeringsbeyond vehicle financing. In order to effectively service its diversified productportfolio the Company engages its employees with appropriate training programs.

Despite the challenging business environment the overall disbursement registered agrowth of 19% at Rs. 31659.1 Crores as compared to Rs. 26706.3 Crores in the previousyear. Your Company was able to retain its leadership position in financing the Mahindrarange of vehicles and tractors in addition to extending its lending to vehicles of otherOriginal Equipment Manufacturers (OEMs).

Your Company yet again consolidated its position as a leading financier for Marutivehicles in semi-urban and rural India by financing over 100000 vehicles during thisfiscal and also successfully emerged as the preferred financier for Hyundai Renault andNissan range of vehicles.

Your Company strengthened its pan-India presence with a network of 1182 offices whichis one of the largest amongst Non-Banking Financial Companies. In addition to theseoffices your Company has set up over 180 smart branches at dealerships of OEMs and worksclosely with dealers and customers. Your Company's nationwide network of branches andlocally recruited employees have facilitated in catering to the diverse financialrequirements of its customers by identifying and understanding the needs and aspirationsof the people. Your Company continues to be focused in introducing technology basedsolutions and demonstrates effective use of its resources to enhance customer service andprovide a range of financial solutions for a variety of needs. Your Company has earned thetrust and confidence of its customers with its consistent transparent and reliableservices. With its strong presence covering even the most remote areas of the countryyour Company is providing flexible financing opportunities to aspiring individuals torealise their dreams and helping them to ‘RISE'.

Your Company has cumulatively financed over 4.7 million customers since its inception.

The Goods and Services Tax (GST) a single tax intended to replace the existing Centraland State indirect taxes is expected to be rolled-out from 1st July 2017. The GSTwill have a short term volume impact as well as medium term margin impact onbusiness and recoveries.

During the year under review your Company continued to expand its reach in the MicroSmall and Medium Enterprises (MSME) segment. MSME Assets Under Management crossed morethan Rs. 2960 Crores during the period under review covering 1911 customers.

Total Income grew by 5.6% to Rs. 6237.5 Crores for the year ended 31st March 2017 ascompared to Rs. 5905.1 Crores for the previous year. Profit Before Tax (PBT) declined by40.3% to Rs. 620.1 Crores as compared to Rs. 1038.2 Crores for the previous year. ProfitAfter Tax (PAT) declined by 40.5% to Rs. 400.2 Crores as compared to Rs. 672.6Crores in the previous year.

During the year under review the Assets Under Management stood at Rs. 46776 Crores asat 31st March 2017 as against Rs. 40933 Crores as at 31st March 2016 a growthof 14%.

There is no change in the nature of business of the Company during the year underreview.

DISTRIBUTION OF MUTUAL FUND PRODUCTS

During the year under review the activity of distribution of Mutual Fund Products(MFP) was carried out across 160 branches covering 23 States. As on 31st March 2017 theamount of Assets Under

Management outstanding through the Company's Advisory and Distribution Services on MFPaggregate of institutional and retail segment was Rs. 1705.57 Crores and the number ofclients stood at 53785.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed analysis of the Company's performance is discussed in the ManagementDiscussion and Analysis Report which forms part of this Annual Report.

CORPORATE GOVERNANCE

Your Company practices a culture that is built on core values and ethical governancepractices and is committed to transparency in all its dealings. A Report on CorporateGovernance along with a Certificate from the Statutory Auditors of the Company regardingcompliance with the conditions of Corporate Governance as stipulated in Regulations 17 to27 clauses (b) to (i) of sub-regulation (2) of Regulation 46 and paragraphs C D and E ofSchedule V of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 are annexed to this Report.

SHARE CAPITAL

The issued subscribed and paid-up Equity Share Capital as on 31st March 2017 was Rs.113.75 Crores comprising of 568764960 Equity Shares of the face value of Rs. 2 each.

There was no change in Share Capital during the year under review.

The Company has neither issued shares with differential rights as to dividend votingor otherwise nor has issued sweat equity other than Employee Stock Options under theEmployees' Stock Option Scheme referred to in this Report during the year under review.

As on 31st March 2017 none of the Directors of the Company holds instrumentsconvertible into Equity Shares of the Company.

STOCK OPTIONS

During the year under review on the recommendation of the Nomination and RemunerationCommittee of your Company the Trustees of the Mahindra & Mahindra Financial ServicesLimited Employees' Stock Option Trust have granted 217400 Stock Options to EligibleEmployees under the Mahindra & Mahindra Financial Services Limited Employees' StockOption Scheme–2010 ("2010 Scheme"). No new Options have been granted underthe Mahindra & Mahindra Financial Services Limited Employees' Stock OptionScheme–2005 ("2005 Scheme")

[hereinafter collectively referred to as "the Schemes"]. The Company does nothave any scheme to fund its employees to purchase the shares of the Company. No employeehas been issued stock options during the year equal to or exceeding 1% of the issuedcapital of the Company at the time of grant.

The Schemes of the Company are in compliance with the Securities and Exchange Board ofIndia (Share Based Employee Benefits) Regulations 2014 ("SBEB Regulations") andthere were no material changes made to the said Schemes. Messrs. B. K. Khare & Co.Statutory Auditors of the Company have certified that the abovementioned Schemes havebeen implemented in accordance with the SBEB Regulations and the Resolutions passed bythe Members for the 2005 Scheme and the 2010 Scheme. The Certificate would be placed atthe Annual General Meeting for inspection by Members.

Voting rights on the Shares issued to employees under the aforesaid Schemes are eitherexercised by them directly or through their appointed proxy.

The details of the Employees' Stock Options and the Company's Employees' Stock OptionTrust as required under the SBEB Regulations read with SEBI Circular CIR/CFD/ POLICYCELL/2/2015 dated 16th June 2015 have been uploaded on the Company's website and can beaccessed at the web-link: http://www. mahindrafinance.com/annual-reports.aspx.

ECONOMY

Global

Economic activity gained some momentum in the second half of 2016 especially inadvanced economies. Growth picked up in the United States as firms grew more confidentabout future demand and inventories started contributing positively to growth (after fivequarters of drag). Growth also remained solid in the United Kingdom where spending provedresilient in the aftermath of the June 2016 referendum in favour of leaving the EuropeanUnion (Brexit). Activity surprised on the upside in Japan thanks to strong net exports aswell as in euro area countries such as Germany and Spain as a result of strong domesticdemand. Economic performance across emerging markets and developing economies has remainedmixed. Whereas China's growth remained strong reflecting continued policy supportactivity has slowed in India because of the impact of the currency exchange initiative aswell as in Brazil which has been mired in a deep recession. Activity remained weak infuel and non-fuel commodity exporters more generally while geopolitical factors held backgrowth in parts of the Middle East and Turkey.

World growth estimated as in the October 2016 World Economic Outlook at 3.1% in 2016is projected to increase to 3.5% in 2017 and 3.6% in 2018 - an upward revision of 0.1percentage point for 2017 relative to October. Together with the modest change in theforecast for the overall global growth rate projections of the strength of economicactivity across country groups have also shifted. Economic activity in advanced economiesas a group is now forecast to grow by 2.0% in 2017 and 2018 0.2 percentage point higherthan expected in October 2016. Growth in the group of emerging market and developingeconomies is forecast to rise to 4.5% and 4.8% respectively in 2017 and 2018 from anestimated outturn of 4.1% in 2016.

* Source IMF

Domestic

Economic activity has been losing momentum since second half of 2015-16 on acombination of structural and cyclical factors. On a year-on-year basis this trajectorywas dented further by the transient impact of demonetisation. Both private and governmentconsumption demand have held up well against this slowdown together accounting for 90% ofreal gross domestic product (GDP) growth in second half of 2016-17 on a weightedcontribution basis. Investment demand which had sunk into contraction in first-halfrecovered from third quarter of 2016-17. Net exports have been growing strongly sincethird quarter of 2015-16. The same however turned negative with imports starting to expandat a higher pace than exports as domestic demand strengthened.

Headline inflation fell off its July cliff and was already traversing a decliningtrajectory during August to October when demonetisation hit in November. This tookinflation down to 3.2% the lowest in the history of India. In February however the dragfrom these transitory effects began to ebb and headline inflation edged up on a pickup infood and fuel price pressures. With the effects of demonetisation turning out to beshort-lived and modest discretionary consumer spending held back by demonetisation isexpected to have picked up from Q4:2016-17 and will gather momentum over several quartersahead. The recovery will also likely be aided by the reduction in banks' lending rates dueto large inflows of current and savings accounts ("CASA") deposits although thefuller transmission impact might be impeded by stressed balance sheets of banks and thetepid demand for bank credit.

The ebullient rebound in agricultural activity on the back of normal monsoon and recordfoodgrains production have boosted rural incomes and supported consumption. In contrastthe modest pick-up in industry in second half of 2016-17 and the slower growth in servicessuggests that investment demand is still sluggish.

Going forward implementation of the Goods and Services Tax ("GST") and themeasures taken in the Union Budget to boost the rural economy infrastructure microsmall and medium enterprises ("MSMEs") and low cost housing should helpinvigorate domestic demand. However a sustained revival of investment holds the key tostepping up the pace of economic activity closer to its medium-term potential.

Finance

During the current year the monetary policy framework ushered in amendments to theReserve Bank of India Act 1934 wherein the monetary policy decision is now vested in asix member monetary policy committee (MPC). Following its decision to lower the policyrepo rate by 25 basis points (bps) at the time of the October 2016 Monetary Policy Report(MPR) the MPC decided to hold the policy rate in the December 2016 and February 2017meetings of its bi-monthly schedule. The Reserve Bank of India (RBI) also changed instance from accommodative to neutral in the bi-monthly monetary policy of February 2017.

Yields in the government securities (G-sec) market remained volatile in H2 induced bythree major events. First G-sec yields softened in October 2016 following the 25 bpspolicy repo rate cut by the RBI. Second G-sec yields softened significantly after theannouncement of demonetisation and the resultant surge of liquidity in the system.

The yield on the benchmark 10-year paper dropped from 6.80% on 8th November 2016 to6.19% on 24th November 2016. Third G-sec yields hardened in February 2017 and the yieldcurve steepened in response to the unexpected shift in the monetary policy stance of theRBI from accommodative to neutral.

During F.Y. 2016-17 the banks witnessed huge inflows post demonetisation leading toreduction in their term deposit rates. With increasing deposits at lower rates banks wereable to reduce their Marginal Cost of Lending Rates (MCLR) which on an average declinedby a cumulative 70 bps (range of 25 bps– 148 bps) since November 2016. Your Companyhas also received Benefit of the reduction in interest rate. While the new loans areborrowed on MCLR your Company also plans to shift its existing bank rate borrowings toMCLR as well.

Private Placement Issues of Non-Convertible Debentures

During the year under review your Company issued secured redeemable non-convertibledebentures ("NCDs") aggregating to Rs. 6903.20 Crores on a private placementbasis in one or more series/ tranches.

As Specified in the respective offer documents the funds raised from NCDs wereutilised for the purpose of financing repayment of dues of other financialinstitutions/Banks and for long term working capital.

Public Issuance of Non-Convertible Debentures

Your Company continues to broaden the liability mix by bringing in new instruments aswell as diversifying the investor base and profile.

During the year under review your Company successfully completed its maiden publicissue of 10000000 Unsecured Subordinated Redeemable Non-Convertible Debentures("NCDs") of face value of Rs. 1000 each aggregating up to Rs. 1000 Crores. TheIssue was subscribed over 7 times of the Base Issue Size. This is an acknowledgment of theconfidence reposed in your Company's Management by the investors and public at large andthe strong credit profile of your Company over the years. The NCDs were allotted on 6thJune 2016 and listed on BSE Limited on 8th June 2016.

The net proceeds received from the Public Issue were used for the purpose of onwardlending financing refinancing the existing indebtedness of the Company long termworking capital requirements Issue expenses and for general corporate purposes. Detailsof the Issue and the end use were furnished to the Audit Committee.

The Company has been regular in making payments of principal and interest on the NCDs.There are no NCDs which have not been claimed by investors or not paid by the Companyafter the date on which the NCDs became due for redemption.

Rupee Denominated Medium Term Note (MTN)

As a risk management measure diversification of its resources is one of the focus areasof the Company. To this end your Company has filed an Offering Circular for establishmentof a Rupee Denominated Medium Term Note (MTN) programme during the year under review. Theprogramme is duly listed on the Singapore Exchange Securities Trading Limited.

Your Company plans to issue bonds under the MTN programme during the current year.

INVESTOR RELATIONS

During the year under review your Company continued to engage with investors inmultiple ways including individual meetings Telepresence meetings structuredconference-calls participating in investor conferences and undertaking quarterly earningscalls. Your Company continues to interact with Indian and global investors and analysts ina number of investor meets organised by reputed Global and Domestic Broking Houses bothin India and abroad to communicate details of performance important developments andexchange of information. All interactions with institutional shareholders fund managersand analysts are based on generally available information that is accessible to the publicon a non-discriminatory basis.

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

CAPITAL ADEQUACY

As on 31st March 2017 the Capital to Risk Assets Ratio (CRAR) of your Company was17.2%. Out of the above Tier I capital adequacy ratio stood at 12.8% and Tier II capitaladequacy ratio stood at 4.4% respectively. The minimum requirement for the capitaladequacy ratio is 15.0% CRAR prescribed by the Reserve Bank of India.

RBI GUIDELINES

The Company has complied with all the applicable regulations of the Reserve Bank ofIndia (RBI).

As a prudent practice your Company makes accelerated provisioning for Non-PerformingAssets (NPAs) than that required by RBI for NBFCs. Your Company continues to make ageneral provision at 0.40% on the standard assets outstanding as mandated by the RBI.

DETAILS OF GOLD LOAN AUCTIONS HELD DURING THE FINANCIAL YEAR 2016-17

Disclosure as required pursuant to Clause 26(4) (d) of Master Direction DNBR. PD.008/03.10.119/2016-17 dated 1st September 2016 issued by the Reserve Bank of India on theNon-Banking Financial Company-Systemically Important Non-Deposit taking Company andDeposit taking Company (Reserve Bank) Directions 2016 is furnished below:

Year No. of Loan Accounts Total Outstanding Amount Value Fetched
(Rs.) (Rs.)
2016 59 2524553 2021698

The Company confirms that none of its sister concerns participated in the aboveauctions.

CREDIT RATING

The credit rating details of the Company as on 31st March 2017 were as follows:

Rating Agency Type of Instrument Rating* Remarks
India Ratings & Research Private Limited Long-term instrument and Subordinated Debt Programme ‘IND AAA/Stable' The ‘AAA' ratings denote the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
Credit Analysis & Research Limited Long-term Debt instrument and Subordinated Debt Programme ‘CARE AAA/Stable'
Brickwork Ratings India Private Limited Company's Long-term Subordinated Debt Issue ‘BWR AAA/Stable'
CRISIL Limited Fixed Deposit Programme ‘FAAA/Stable'
Long-term Debt Instruments and Bank Facilities ‘CRISIL AA+/ Stable' The ‘AA+' rating indicates a high degree of safety with regard to timely payment of financial obligations. Such instruments carry very low credit risk.
Short-term Debt and Bank Loans ‘CRISIL A1+' The ‘A1'+ rating indicates the highest level of rating. Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk.

* The ratings mentioned above were reaffirmed by the Rating Agencies during theFinancial Year 2016-17. With the above rating affirmations your Company continues toenjoy the highest level of rating from all major rating agencies at the same time.

ACHIEVEMENTS

Your Company won several awards and accolades during the year under review. Select fewawards/ recognition are enumerated hereunder:

• Conscious Capitalist for the Year Award for the stellar role in promotingsustainable and transformational business practices at the Forbes India Leadership Awards(FILA) 2016.

• India's Most Ethical Companies Award in the category of Ethical Companies in theFinancial Services Sector. The Award was supported by "Indira – Shree ChanakyaEducation Society" and endorsed by "World CSR Day" "World FederationCSR Professionals" and "Asia Confederation of Businesses".

• CNBC Asia's Corporate Social Responsibility Award.

• Ranked 68th in Top 100 India's Best Companies To Work For 2016 ranked 5th inthe Financial Services Sector and ranked 3rd in Workplace Transformation Case Study bythe Great Place to Work Institute in collaboration with the Economic Times.

• Listed in Dow Jones Sustainability Index for the 4th year in a row being theonly Indian Company from the Diversified Financial Services Sector to get selected in thislist.

• Recognised as "Best Overall Excellence in CSR" by National Awards forExcellence in CSR & Sustainability.

• Included in ‘The Sustainability Yearbook 2017' released by RobecoSAM beingthe only Financial Company amongst NBFCs and Banks in India to be included.

• Recognised with significant achievement in HR Excellence at the 7th CII HRExcellence Award.

FIXED DEPOSITS AND LOANS/ ADVANCES

Your Company offers Fixed Deposit schemes that cater to various classes of investors.The Deposits carry attractive interest rates with superior service enabled by robustprocesses and technology. In order to tap rural savings your Company continues to expandits network and make its presence felt in the most remote areas of the country.

During the year CRISIL has reaffirmed a rating of ‘CRISIL FAAA/Stable' for yourCompany's Fixed Deposits. This rating represents the highest degree of safety regardingtimely servicing of financial obligations and carries the lowest credit risk. YourCompany's deposits continue to be a preferred investment amongst the investors.

As on 31st March 2017 your Company has mobilised funds from Fixed Deposits to thetune of Rs. 4382.96 Crores with an investor base of over 155551 investors.

Your Company has initiated several customer centric measures on an ongoing basis tofurther strengthen its processes in sync with the requirements of the Fixed Depositholders. The Company communicates various intimations via SMS e-mails post etc. to itsinvestors as well as sends reminder emails to clients whose TDS is likely to be deductedbefore any payout/ accrual. Your Company also provides online renewal facility onlinegeneration of TDS Certificates from customer/broker portal and Seamless Investment processfor its employees.

During the year under review your Company has rolled out several initiatives aimed atsurpassing the expectation of its Depositors. Some key ones are:

• commenced acceptance of Fixed Deposits from 198 offices of the Company.

• introduced free accident insurance coverage of Rs.1 Lakh per depositor for ayear.

• auto renewal of Fixed Deposits option to facilitate timely renewal of deposits.

• introduced year-wise interest statement projection for the full Deposit tenure.

As at 31st March 2017 2736 deposits amounting to Rs. 9.16 Crores had matured forpayment and remained unclaimed. The unclaimed deposits have since reduced to 1512deposits amounting to Rs. 4.96 Crores. There has been no default in repayment of depositsor payment of interest during the year.

Your Company being a Non-Banking Financial Company the disclosures required as perRule 8 (5)(v) and (vi) of the Companies (Accounts) Rules 2014 read with sections 73 and74 of the Companies Act 2013 are not applicable to it.

The information pursuant to Clause 35(1) of Master DirectionDNBR.PD.002/03.10.119/2016-17 dated 25th August 2016 issued by Reserve Bank of India onNon-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions2016 regarding unpaid/unclaimed public deposits as on 31st March 2017 is furnishedbelow:

i. total number of accounts of public deposits of the Company which have not beenclaimed by the depositors or not paid by the Company after the date on which the depositbecame due for repayment: 2736.

ii. the total amounts due under such accounts remaining unclaimed or unpaid beyond thedates referred to in clause (i) as aforesaid: Rs. 91627906.

Your Company continues to send intimation letters via registered post every 3 months toall those fixed deposit holders whose deposits have matured as well as to those whosedeposits remain unclaimed.

The particulars of loans/advances etc. required to be disclosed in the AnnualAccounts of the Company pursuant to Regulation 34 read with paragraph A of Schedule V ofthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 are furnishedseparately.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS IN SECURITIES

Pursuant to section 186(11) of the Companies Act 2013 ("the Act") theprovisions of section 186 (4) of the Act requiring disclosure in the financial statementsof the full particulars of the loans made and guarantees given or securities provided by aNon-Banking Financial Company in the ordinary course of its business and the purpose forwhich the loan or guarantee or security is proposed to be utilised by the recipient of theloan or guarantee or security are exempted from disclosure in the Annual Report.

Further pursuant to the provisions of section 186 (4) of the Act the details ofinvestments made by the Company are given in the Notes to the Financial Statements.

SUSTAINABILITY INITIATIVES

Sustainability is imbibed in your Company's ways of working since its inception. Focuson rural customers at the bottom of the pyramid and enabling them to Rise has been theCompany's business philosophy. Your Company strongly believes in people empowerment andcreating shared value. As the Company is progressing it is ensuring that its businessmodel becomes more inclusive and efficient.

Your Company commenced its journey towards reporting sustainability performance since2008-09 through the Mahindra Group's Sustainability Report and in the year 2012-13 yourCompany came out with its 1st standalone Sustainability Report. During the year yourCompany released its 4th Sustainability Report for Financial Year 2015-16 with the theme"Empowering Dreams Enabling Progress" based on the Global ReportingInitiative's (GRI) G4 Guidelines which highlights its endeavors towards creating a betterfuture. This Report can be accessed on the website of the Company at the web-link:http://www.mahindrafinance.com/sustainability. aspx. During year under review yourCompany's

Sustainability Report for the Financial Year 2014-15 was conferred the best report inCSR/Sustainability Report Category by IndiaCSR which is a popular newswire that promotesinnovation and leadership in Corporate Sustainability and Responsibility Practices inIndia.

The Sustainability performance of your Company for the Financial Year 2016-17 will beelaborated in detail in the GRI Report which is under preparation and will be ready forrelease shortly.

Your Company continued to focus on sustainability awareness for different stakeholdersand took various initiatives to engage them on these fronts. A project on Road Safety waslaunched during the year imparting safe driving practices through e-learning modules andclassroom training sessions to the Company's employees and field staff. Interventions onreduction in water and energy consumption and recycling of waste generation were rolledout throughout the year at different locations.

Your Company has been listed on the Dow Jones Sustainability Index (DJSI) EmergingMarket Trends for the 4th consecutive year. It is the only Company from amongst theDiversified Financial Services Companies in India to have made it to this list. To beincorporated in the DJSI companies are assessed and selected based on their long termEnvironmental Social Governance (ESG) management plans. The Company has also been includedin The Sustainability Yearbook 2017 being the only Financial Services Sector Company toqualify amongst six companies from India. This signifies the Company being amongst the topSustainability performers in Diversified Financial Services Sector in the World based onCorporate Sustainability Assessment done by RobecoSAM.

In addition to this your Company continues to report on Carbon Disclosure Project(CDP) since the Financial Year 2011-12. CDP seeks information on management of carbonemissions across world's largest companies and how they are geared up to mitigatechallenges pertaining to climate change and global warming in future. During the yearunder review your Company achieved "CDP Performance Band – B" whichaffirms that the Company is taking coordinated action on climate change issues. Your Companycontinued to make proactive efforts to reduce CO2 emissions (carbon footprint) throughProject ‘Mahindra Hariyali' by planting more than 1.5 Lakh saplings acrossthe country.

Your Company is continuously driving interventions on sustainability at anorganisational level and ensuring adequate engagement of its employees customers and thelocal communities in the areas where it operates. The challenges and opportunitiespertaining to sustainability and climate change prevailing in markets in which the Companyoperates have been well managed through its robust risk management framework. Your Companycontinually aspires to make sustainability a strategic differentiator for it andencourages adoption of sustainable practices across its value chain partners andstakeholders at large.

BUSINESS RESPONSIBILITY REPORT

The ‘Business Responsibility Report' (BRR) of your Company for the year 2016-17forms part of this Annual Report as required under Regulation 34(2) (f) of the Securitiesand Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 and is appended as Annexure II. Your Company continues to protect and sustainthe rural livelihoods through a sustainable business model. The business model aims attransforming rural lives and driving positive change in the community. Your Company isworking comprehensively on sustainability and engaging different stakeholders and drivingcollaborative efforts on this front.

The BRR can also be accessed on the Company's website at the web-link: http://www.mahindrafinance.com/sustainability.aspx.

CORPORATE SOCIAL RESPONSIBILITY

Your Company's Corporate Social Responsibility (CSR) initiatives are aligned to themission of transforming rural lives while contributing to the well-being of people andthe planet. The endeavour is to empower the rural communities and help them unleash theirpotential. Your Company has identified Healthcare Education and Environment as key CSRthrust areas and is engaged in a number of CSR initiatives directed at – CommunityDevelopment Employability Enhancement and Environment Sustenance.

During the year under review your Company continued to make an impact through itsongoing CSR programs in the domains of:

(a) Healthcare – by organising a nationwide Blood Donation Drive and variousHealth check-up camps in different locations donating medical care equipment ambulancesthat provide medical care and treatment to communities in rural areas who do not haveaccess to any medical facilities.

(b) Education – by supporting:

Nanhi Kalis – providing educational support to underprivileged girls from poorurban remote rural and tribal communities across India.

Mahindra Pride School - providing intensive training in ITES Retail andHospitality to youth from socially and economically disadvantaged communities in urban andrural areas.

Mahindra Finance Scholarship - providing scholarships to meritorious students fromfinancially weaker backgrounds.

Financial Literacy - imparting financial literacy skills to school children andsensitising individuals on various cashless methods of transaction.

(c) Livelihood - imparting drivers training to women and financial skills tounemployed youth to make them employable and live with dignity.

(d) Environment - by adding green cover through planting of over one lakh treesduring the year through Project Hariyali and ensuring environmental sustainability.

(e) Rural Development - by supporting small and marginal farmers by training themin effective farming practices thereby increasing crop productivity through the WardhaFamily Farming Project.

In addition to the above your Company continued to support the Prime Minister's SwachhBharat Mission by conducting various activities on sanitation and hygiene organisedvisits to Municipal Schools Orphanages Differently-abled Homes and Old-Age Homes tore-affirm its pledge to the society.

During the year under review your Company has spent Rs. 30.48 Crores towards CorporateSocial Responsibility on CSR projects/programs. The amount equal to 2% of the average netProfit for the past three financial years required to be spent on CSR activities was Rs.30.42 Crores. Your Company is in compliance with the statutory requirements in thisregard.

CSR COMMITTEE

The Company has duly constituted a CSR Committee in accordance with section 135 of theCompanies Act 2013 to assist the Board and the Company in fulfilling the corporate socialresponsibility objectives of the Company. The CSR Committee presently comprises Mr. PiyushMankad (Chairman) Mr. Ramesh Iyer Mr. V. Ravi and Dr. Anish Shah.

CSR POLICY

The CSR Policy of the Company is hosted on the Company's website at the web-link: http://www.mahindrafinance.com/csr.aspx and a brief outline of the CSR Policy and the CSRinitiatives undertaken by the Company during the year as per Annexure prescribed in theCompanies (Corporate Social Responsibility Policy) Rules 2014 have been appended as AnnexureIII to this Report.

EXTRACT OF ANNUAL RETURN

Pursuant to sub-section 3(a) of section 134 and subsection (3) of section 92 of theCompanies Act 2013 read with Rule 12 of the Companies (Management and Administration)Rules 2014 an extract of the Annual Return as at 31st March 2017 forms part of thisReport and is appended as Annexure IV.

BOARD MEETINGS AND ANNUAL GENERAL MEETING

The calendar of the Board/Committee Meetings and the Annual General Meeting iscirculated to the Directors in advance to enable them to plan their schedule for effectiveparticipation at the respective meetings. Additional Board Meetings are convened by givingappropriate notice to address business exigencies. At times certain decisions are taken bythe Board/Committee through circular resolutions.

All the decisions and urgent matters approved by way of circular resolutions are placedand noted at the subsequent Board/Committee Meeting.

The Board of Directors met six times during the year under review on 23rd April 201622nd July 2016 25th October 2016 29th November 2016 24th January 2017 and 23rdMarch 2017. The requisite quorum was present for all the Meetings. The maximum time gapbetween any two Meetings was not more than one hundred and twenty days. These Meetingswere well attended. The 26th Annual General Meeting (AGM) of the Company was held on 22ndJuly 2016.

Detailed information on the Meetings of the Board its Committees and the AGM isincluded in the Report on Corporate Governance which forms part of this Annual Report.

MEETINGS OF INDEPENDENT DIRECTORS

The Independent Directors met twice during the year under review on 29th November2016 and 22nd March 2017. The Meetings were conducted in an informal manner without thepresence of the Whole-time Directors the Non-Executive Non-Independent Directors or anyother Management Personnel.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company has various Committees which have been constituted as a part of goodcorporate governance practices and the same are in compliance with the requirements of therelevant provisions of applicable laws and statutes.

Your Company has an adequately qualified and experienced Audit Committee with Mr. C. B.Bhave as the Chairman and Mr. Dhananjay Mungale Mr. M. G. Bhide Ms. RamaBijapurkar Mr. Piyush Mankad Mr. V. S. Parthasarathy and Dr. Anish Shah asMembers.

The recommendations of the Audit Committee were duly approved and accepted by the Boardduring the year under review.

The other Committees of the Board are: i) Nomination and Remuneration Committee ii)Stakeholders Relationship Committee iii) Corporate Social Responsibility Committee iv)Risk Management Committee v) Asset Liability Committee vi) Committee for StrategicInvestments (formerly known as the "Strategy Committee for Acquisitions")

The details with respect to the composition powers roles terms of referenceMeetings held and attendance of the Directors at such Meetings of the relevant Committeesare given in detail in the Report on Corporate Governance of the Company which forms partof this Annual Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Directors

During the year under review Mr. Ramesh Iyer was re-appointed as the Managing Directordesignated as "Vice-Chairman & Managing Director" of the Company for afurther period of five years with effect from 30th April 2016 to 29th April 2021 by theMembers by means of a Postal Ballot voting process on 16th June 2016.

During the year the Members have also appointed Mr. V. Ravi as a Whole-timeDirector designated as "Executive Director & Chief Financial Officer" of theCompany for a period of five years with effect from 25th July 2015 to 24th July 2020 byway of Postal Ballot on 16th June 2016.

Dr. Anish Shah was appointed as a Non-Executive Director of the Company by the Board ofDirectors at its Meeting held on 18th March 2016. During the year under review theMembers have by means of a Postal Ballot voting process on 16th June 2016 approved theappointment of Dr. Anish Shah as a Non-Executive Director.

In accordance with the provisions of the Companies Act 2013 Mr. Ramesh IyerVice-Chairman & Managing Director is liable to retire by rotation at the forthcomingAnnual General Meeting and being eligible offers himself for reappointment.

None of the Independent Directors are due for reappointment.

Key Managerial Personnel

Mr. Ramesh Iyer Vice-Chairman & Managing Director Mr. V. Ravi Executive Director& Chief Financial Officer and Ms. Arnavaz M. Pardiwala Company Secretary of theCompany have been designated as the Key Managerial Personnel of the Company (KMP) pursuantto the provisions of sections 2(51) and 203 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014.

There has been no change in the KMP during the year under review.

Declaration by Independent Directors

The Company has received declarations from all the Independent Directors of the Companyconfirming that they fulfill the criteria of independence as prescribed under sub-section(6) of section 149 of the Companies Act 2013 and the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015.

Directors' Responsibility Statement

Pursuant to the provisions of section 134(5) of the Companies Act 2013 ("theAct") your Directors based on the representations received from the OperatingManagement and after due enquiry confirm that:

i. in the preparation of the annual accounts for financial year ended 31st March 2017the applicable accounting standards have been followed and there are no materialdepartures in adoption of these standards;

ii. they have in consultation with the Statutory Auditors selected such accountingpolicies and applied them consistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of theCompany as at 31st March 2017 and of the Profit of the Company for the year endedon that date.

iii. they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.

iv. they have prepared the annual accounts for financial year ended 31st March 2017 ona going concern basis.

v. they have laid down adequate internal financial controls to be followed by theCompany and that such internal financial controls were operating effectively during thefinancial year ended 31st March 2017.

vi. they have devised proper systems to ensure compliance with provisions of allapplicable laws and that such systems were adequate and operating effectively during thefinancial year ended 31st March 2017.

Performance Evaluation of the Board

The Companies Act 2013 and the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("the Listing Regulations") stipulate the evaluation of theperformance of the Board its Committees Individual Directors and the Chairperson.

The Company has formulated a Policy for performance evaluation of the IndependentDirectors the Board its Committees and other individual Directors which includescriteria for performance evaluation of the Non-Executive Directors and ExecutiveDirectors.

The evaluation framework for assessing the performance of Directors comprises ofvarious key areas such as attendance at Board and Committee Meetings quality ofcontribution to Board discussions and decisions strategic insights or inputs regardingfuture growth of the Company and its performance ability to challenge views in aconstructive manner knowledge acquired with regard to the Company's business/activitiesunderstanding of industry and global trends etc.

The evaluation involves self-evaluation by the Board Member and subsequent assessmentby the Board of Directors. A member of the Board will not participate in the discussion ofhis/her evaluation.

Pursuant to the provisions of the Companies Act 2013 and Regulation 17 of the ListingRegulations the Board has carried out an annual evaluation of its own performance and theDirectors individually (including Independent Directors) as well as the evaluation of theworking of its Committees.

Feedback was sought by well-defined and structured questionnaires covering variousaspects of the Board's functioning such as adequacy of the composition of the Board andits Committees Board culture areas of responsibility execution and performance ofspecific duties obligations and governance compliance oversight of Company'ssubsidiaries etc.

A separate exercise was carried out by the Nomination and Remuneration Committee of theBoard to evaluate the performance of individual Directors who were evaluated on severalparameters such as level of engagement and contribution independence of judgmentsafeguarding the interest of the Company and its minority shareholders and knowledgeacquired with regard to the Company's business/activities.

The performance evaluation of the Non-Independent Directors and the Board as a wholewas carried out by the Independent Directors. The performance evaluation of the Chairmanof the Company was also carried out by the Independent Directors taking into account theviews of the Executive Directors and Non-Executive Directors.

The performance evaluation of the Independent Directors was carried out by the entireBoard excluding the Director being evaluated. Qualitative comments and suggestions ofDirectors were taken into consideration by the Chairman of the Board and the Chairman ofthe Nomination and Remuneration Committee. The Directors have expressed their satisfactionwith the evaluation process.

Familiarisation Programme for Independent Directors

The details of programmes for familiarisation of Independent Directors with theCompany their roles rights responsibilities in the Company nature of the industry inwhich the Company operates business model of the Company and related matters along withdetails of number of programmes and number of hours spent by each of the IndependentDirectors during the Financial Year 2016-17 in terms of the requirements of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 are available on the website ofthe Company at the web-link: http://www.mahindrafinance.com/pdf/familiarisation-programmefor-IDs.pdf.

Policies on Appointment of Directors and Remuneration of Directors Key ManagerialPersonnel and Employees

In accordance with the provisions of section 134(3) (e) of the Companies Act 2013("the Act") read with section 178(2) of the Act and Regulation 17 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 your Company hasadopted a Policy on Appointment of Directors and Senior Management and succession planningfor orderly succession to the Board and the Senior Management which inter alia includesthe criteria for determining qualifications positive attributes and independence ofDirectors.

Your Company has also adopted the Policy on Remuneration of Directors and theRemuneration Policy for Key Managerial Personnel and Employees of the Company inaccordance with the provisions of sub-section (4) of section 178 and the same areappended as Annexure V-A and Annexure V-B respectively and form part ofthis Report.

The criteria for determining qualifications positive attributes and independence of aDirector and the Remuneration Policy for Directors Key Managerial Personnel and otheremployees have been discussed in detail in the Report on Corporate Governance.

AUDITORS

Statutory Auditors

Messrs. B. K. Khare & Co. Chartered Accountants (ICAI Firm RegistrationNo.105102W) the retiring Auditors of the Company complete their term as StatutoryAuditors as provided under the Companies Act 2013 and relevant Rules thereunder at theconclusion of the ensuing Annual General Meeting ("AGM") of the Company.

The Board has placed on record its sincere appreciation for the services rendered byMessrs. B. K. Khare & Co. as Statutory Auditors of the Company.

The Board of Directors on the recommendation of the Audit Committee has approved andrecommended to the Members the appointment of Messrs. B S R & Co. LLP CharteredAccountants (ICAI Firm Registration No. 101248W/W-100022) as Statutory Auditors for aperiod of 5 years commencing from the conclusion of the 27th AGM till the conclusion ofthe 32nd AGM subject to ratification of their appointment by the Members at every AGM asmay be applicable. Messrs. B S R & Co. LLP Chartered Accountants have given awritten consent to act as Statutory Auditors of your Company and have also confirmed thatthe said appointment would be in conformity with the provisions of sections 139 and 141 ofthe Companies Act 2013 read with the Companies (Audit and Auditors) Rules 2014.

The Members are requested to appoint Messrs. B S R & Co. LLP CharteredAccountants as Statutory Auditors of the Company in place of the retiring AuditorsMessrs. B. K. Khare & Co. Chartered Accountants at the ensuing AGM for a term of 5years from the conclusion of the ensuing AGM till the conclusion of the 32nd AGM and fixtheir remuneration.

The Auditors' Report is unmodified and does not contain any qualification reservationadverse remark or disclaimer.

Secretarial Auditor

The Board of Directors of the Company has appointed Messrs. KSR & Co. CompanySecretaries LLP to conduct the Secretarial Audit of the Company pursuant to the provisionsof section 204 of the Companies Act 2013 and the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014. In accordance with the provisions of sub-section (1)of section 204 the Secretarial Audit Report for the Financial Year 2016-17 is appended tothis Report as

Annexure VI.

The Secretarial Audit Report does not contain any qualification reservation adverseremark or disclaimer.

Reporting of Frauds by Auditors

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 whichneed to be mentioned in this Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All contracts/arrangements/transactions entered into by the Company during theFinancial Year with related parties were in the ordinary course of business and on anarm's length basis. During the year the Company had not entered into any contract/arrangement/transaction with related parties which could be considered material inaccordance with the Policy on Related Party Transactions.

Pursuant to section 134(3) (h) read with Rule 8(2) of the Companies (Accounts) Rules2014 there are no transactions to be reported under section 188(1) of the Companies Act2013. Accordingly the disclosure of Related Party Transactions as required under section134(3)(h) of the Companies Act 2013 in Form AOC 2 is not applicable.

The Policy on Related Party Transactions as approved by the Board of Directors of theCompany is uploaded on the website of the Company and the same can be accessed at theweb-link: http://www. mahindrafinance.com/policies.aspx.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

No material changes and commitments affecting the financial position of your Companyhave occurred after the closure of the Financial Year 2016-17 till the date of thisReport.

RISK MANAGEMENT POLICY

Your Company has a comprehensive Risk Management Policy in place and has laid down awell-defined risk management framework to identify assess and monitor risks andstrengthen controls to mitigate risks. Your Company has established procedures toperiodically place before the Risk Management Committee and the Board of Directors therisk assessment and minimisation procedures being followed by the Company and steps takenby it to mitigate these risks.

The Risk Management Policy inter alia includes identification therein of elements ofrisk including those which in the opinion of the Board may threaten the existence of theCompany. The Risk management process has been established across the Company and isdesigned to identify assess and frame a response to threats that affect the achievementof its objectives. Further it is embedded across all the major functions and revolvesaround the goals and objectives of the Company.

The development and implementation of Risk Management Policy adopted by the Company isdiscussed in detail in the Management Discussion and Analysis chapter which forms part ofthis Annual Report.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

The Company promotes ethical behaviour in all its business activities and hasestablished a vigil mechanism for its Directors Employees and Stakeholders associatedwith the Company to report their genuine concerns. The Vigil Mechanism as envisaged in theCompanies Act 2013 and the Rules prescribed thereunder and the Listing Regulations isimplemented through the Whistle Blower Policy to provide for adequate safeguards againstvictimisation of persons who use such mechanism and make provision for direct access tothe Chairperson of the Audit Committee.

As per the Whistle Blower Policy implemented by the Company the Employees Directorscustomers dealers vendors suppliers or any Stakeholders associated with the Companyare free to report illegal or unethical behaviour actual or suspected fraud or violationof the Company's Codes of Conduct or Corporate Governance Policies or any improperactivity to the Chairman of the Audit Committee of the Company or Chairman of the Companyor Convenor of the Corporate Governance Cell.

The Whistle Blower Policy provides for protected disclosure and protection to theWhistle Blower. Under the Whistle Blower Policy the confidentiality of those reportingviolation(s) is protected and they are not subject to any discriminatory practices.Protected disclosures can also be made by sending an email at the designated email id:mmfsl_whistleblower@ mahindra.com.

The Whistle Blower Policy has been appropriately communicated within the Company and isavailable on the website of your Company at the web-link: http://www.mahindrafinance.com/pdf/MMFSL_VigilMechanism.pdf.

No personnel have been denied access to the Audit Committee.

SUBSIDIARIES JOINT VENTURE AND ASSOCIATES

The Company's subsidiaries and joint venture continue to contribute to the overallgrowth in revenues and overall performance of your Company.

A Report on the performance and financial position of each of the subsidiaries and thejoint venture company as per the Companies Act 2013 is provided in Form AOC-1 as AnnexureA to the Consolidated Financial Statements and hence not repeated here for the sake ofbrevity.

The Policy for determining material subsidiaries as approved by the Board is hosted onthe Company's website and can be accessed at the web-link:http://www.mahindrafinance.com/policies.aspx.

SUBSIDIARIES

Mahindra Insurance Brokers Limited

During the year under review Mahindra Insurance Brokers Limited (MIBL) serviced 1.5million insurance cases with a total of 1591796 cases for both Life and Non-Life Retailbusiness. The customised Life insurance cover "Mahindra Loan Suraksha" (MLS)increased from 513093 lives covered with a Sum Assured of Rs. 14792.8 Crores in theFinancial Year 2015-16 to 582949 lives covered with a Sum Assured of Rs.18027.6 Croresin the Financial Year 2016-17. A substantial portion of MLS continues to be covered in therural markets.

MIBL achieved a growth of 27% in Gross Premium facilitated for the Corporate and Retailbusiness lines increasing from Rs. 1238.6 Crores in the Financial Year 2015-16 to Rs.1567.9 Crores in the Financial Year 2016-17.

The Total Income of MIBL increased by 17% from Rs. 149.2 Crores in the Financial Year2015-16 to Rs. 174.2 Crores in the Financial Year 2016-17. The Profit before tax increasedby 9% from Rs. 75.2 Crores to Rs. 81.7 Crores and the Profit after tax increased by 9%from Rs. 48.5 Crores to Rs. 53.0 Crores during the same period.

Mahindra Rural Housing Finance Limited

Mahindra Rural Housing Finance Limited (MRHFL) has during the year ended 31st March2017 disbursed loans aggregating Rs. 2116.2 Crores (previous year Rs. 1552.5 Crores)achieving a growth of 36% over the previous year. Profit after tax was 32% higher at Rs.83.0 Crores as compared to Rs. 62.7 Crores for the previous year. The outstanding loanportfolio as at 31st March 2017 stood at Rs. 4823.6 Crores.

MRHFL continued its focus on serving customers in rural India. Majority of the loansdisbursed were to customers in villages with an average annual household income of lessthan Rs. 1.5 lakhs. During the year under review around 172000 families were given homeloans (in addition to around 388000 existing families as on 31st March 2016).

MRHFL has been expanding its geographical presence to provide affordable services forrural households and has also entered the semi-urban market segment.

Mahindra Asset Management Company Private Limited

The Securities and Exchange Board of India (SEBI) had granted a Certificate ofRegistration to Mahindra Mutual Fund on 4th February 2016. SEBI had also approved theapplication of Mahindra Asset Management Company Private Limited (MAMCPL) a wholly-ownedSubsidiary of the Company to act as an Investment Manager to the schemes of MahindraMutual Fund on the same date. Following this approval MAMCPL launched the first schemeof Mahindra Mutual Fund in July 2016. As on 31st March 2017 MAMCPL was managing fourschemes of Mahindra Mutual Fund with average assets amounting to Rs. 2050 Croresin March 2017. During the year under review MAMCPL has opened six branches employedclose to one hundred employees empanelled more than 4100 distributors and opened morethan 37800 investor accounts.

During the year MAMCPL earned investment management fees of Rs. 351 lakhs andinvestment income of Rs. 530 lakhs. The total income for the year was Rs. 881 lakhs andthe total expenses amounted to Rs. 2928.5 lakhs leading to a loss of Rs. 2047.4 lakhs.MAMCPL has issued equity shares on a Rights basis amounting to Rs. 3045 lakhs during theyear to fund the expenses as well as maintain its networth above Rs. 5000 lakhs asmandated by SEBI Regulations.

Mahindra Trustee Company Private Limited

The Securities and Exchange Board of India (SEBI) had granted a Certificate ofRegistration to Mahindra

Mutual Fund on 4th February 2016. Mahindra Trustee Company Private Limited (MTCPL) awholly-owned Subsidiary of the Company acts as the Trustee to the schemes of MahindraMutual Fund.

During the year MTCPL earned trusteeship fees of Rs. 3.1 lakhs. The total expenseswere Rs. 23.5 lakhs leading to a loss of Rs. 20.4 lakhs. MTCPL has issued equityshares on a Rights basis amounting to Rs. 35 lakhs during the year to fund the expenses.

JOINT VENTURE

Mahindra Finance USA LLC.

The joint venture company's disbursement registered a growth of 12.3% to USD 7646.11Lakhs for the year ended 31st March 2017 as compared to USD 6807.75 Lakhs for theprevious year.

Income grew by 36.27% to USD 426.66 Lakhs for the year ended 31st March 2017 ascompared to USD 313.09 Lakhs for the previous year. Profit before tax was 43.96% higher atUSD 129.13 Lakhs as compared to USD 89.70 Lakhs for the previous year. Profit after taxgrew at a healthy rate of 42.22% to USD 81.49 Lakhs as compared to USD 57.30 Lakhs in theprevious year.

Names of companies which have become or ceased to be subsidiaries joint ventures orassociate companies during the year

During the year under review no company has become or ceased to be a subsidiary jointventure or associate of your Company.

The Company shall provide the copy of the annual accounts of its subsidiary companiesand the related information to the Members of the Company on their request. The annualaccounts of the subsidiary companies will also be kept open for inspection by any Memberat the Registered Office of the Company and also at the Registered Office of therespective subsidiary companies during working hours upto the date of the Annual GeneralMeeting.

The Annual Reports of the subsidiaries will also be available on your Company's websiteat the web-link: http://www. mahindrafinance.com/annual-reports.aspx.

Material Subsidiary

Regulation 16(1)(c) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 defines a "material subsidiary" to mean a subsidiary whoseincome or net worth exceeds twenty percent of the consolidated income or net worthrespectively of the listed entity and its subsidiaries in the immediately precedingaccounting year.

Under this definition the Company did not have any material subsidiary during theyear under review.

Consolidated Financial Statements

The Consolidated Financial Statements of the Company and its four subsidiaries viz.Mahindra Insurance Brokers Limited Mahindra Rural Housing Finance Limited Mahindra AssetManagement Company Private Limited and Mahindra Trustee Company Private Limited preparedin accordance with the Companies Act 2013 and Accounting Standard AS 21 prescribed by TheInstitute of Chartered Accountants of India along with all relevant documents and theAuditors' Report form part of this Annual Report. The Consolidated Financial Statementspresented by the Company include the financial results of its subsidiary companies and itsjoint venture viz. Mahindra Finance USA LLC.

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

There are no significant and material orders passed by the regulators or courts ortribunals that would impact the going concern status of the Company and its futureoperations.

DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THEFINANCIAL STATEMENTS

Your Company has in place adequate internal financial controls with reference tofinancial statements commensurate with the size scale and complexity of its operations.Review of the internal financial controls environment of the Company was undertaken duringthe year which covered verification of entity level control process level control and ITcontrols identification assessment and definition of key business processes and analysisof risk control matrices etc. The risk and control matrices are reviewed on a quarterlybasis and control measures are tested and documented.

Reasonable Financial Controls are operative for all the business activities of theCompany and no material weakness in the design or operation of any control was observed.

PARTICULARS OF REMUNERATION AND RELATED DISCLOSURES

Disclosures pursuant to Section 197(12) of the Companies Act 2013 and Rule 5(1) ofCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are as under:

1) The remuneration calculated is as per section 2(78) of the Companies Act 2013 andincludes the perquisite value of Stock Options of the Company exercised during the year.

2) The calculations are based on Employees who were on the rolls of the Company for thewhole of the Financial Year 2015-16 and Financial Year 2016-17.

Mr. Ramesh Iyer Vice-Chairman & Managing Director and Mr. V. Ravi ExecutiveDirector & Chief Financial Officer of the Company do not receive any remuneration orcommission from its holding company or any of the subsidiaries of the Company. HoweverMr. Iyer has been granted stock options under the Employees' Stock Option Scheme of theholding Company Mahindra & Mahindra Limited. Mr. Iyer has not exercised ESOPs of theholding Company during the year which were granted in the earlier year(s).

The Company had seven employees who were in receipt of remuneration of not less thanRs.10200000 during the year ended 31st March 2017 or not less than Rs. 850000per month during any part of the year.

Details of employee remuneration as required under provisions of section 197(12) of theCompanies Act 2013 read with Rule 5(2) & 5(3) of Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are available at the Registered Officeof the Company during working hours 21 days before the Annual General Meeting and shallbe made available to any Shareholder on request. Such details are also available on yourCompany's website and can be accessed at the web-link: http://www.mahindrafinance.com/annual-reports.aspx. None of these employees is a relative of anyDirector of the Company.

None of the employees holds either by himself/herself or along with his/her spouse ordependent children more than two per cent of the Equity Shares of the Company.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013

Your Company is an equal opportunity employer and is committed to ensuring that thework environment at all its locations is conducive to fair safe and harmonious relationsbetween employees. It strongly believes in upholding the dignity of all its employeesirrespective of their gender or seniority. Discrimination and harassment of any type arestrictly prohibited.

The Company has in place an appropriate Policy in accordance with the provisions of theSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013to prevent sexual harassment of its employees.

Internal Complaints Committee (ICC) has been set up to redress complaints receivedregarding sexual harassment.

All employees (permanent contractual temporary and trainees) are covered under thisPolicy.

The Company ensures that no employee is disadvantaged by way of gender discrimination.

The following is a summary of Sexual Harassment complaints received and disposed offduring the year 2016-17 pursuant to the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and Rules framed thereunder:

(a) Number of complaints of Sexual Harassment received during the year – 3

(b) Number of complaints disposed off during the year – 3

(c) Number of cases pending for more than 90 days – 0

(d) Number of workshops/awareness programme against sexual harassment carried out– 5 workshops were conducted. Awareness on sexual harassment was carried out inbranches pan-India for all employees of the Company.

(e) Nature of action taken by the employer or District Officer – The allegationwas not proved hence no action was taken against the alleged employees.

CONSERVATIONOFENERGYTECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars in respect of conservation of energy technology absorption and foreignexchange earnings and outgo as required under sub-section (3) (m) of section 134 of theCompanies Act 2013 read with Rule (8)(3) of the Companies (Accounts) Rules 2014 aregiven as under:

(A) Conservation of Energy

(i) The steps taken or impact on conservation of energy: The operations of your Companyare not energy intensive. However adequate measures have been initiated to reduce energyconsumption.

Select few steps are listed: a) Installation of Solar UPS in different States: TheCompany has deployed Solar UPS at 62 branches pan-India. The Company has one branch inGopalganj Bihar which is running completely on Solar energy since last 3 years.

b) Replacement of conventional lighting with Light Emitting Diode (LED) lighting.

c) Reduction in water and energy consumption and recycling of waste generation atvarious locations.

(ii) The steps taken by the Company for utilising alternate sources of energy: TheCompany has generated 323 megawatt of energy through 62 Solar UPS having total capacity of176 kilowatt ‘peak' installed across various branches pan-India during the FinancialYear 2016–17.

(iii) The capital investment on energy conservation equipments: Nil.

(B) Technology Absorption

(i) The efforts made towards technology absorption:

Not Applicable.

(ii) The Benefits derived like product improvement cost reduction product developmentor import substitution: Not Applicable.

(iii) In case of imported technology (imported during the last three years reckonedfrom the beginning of the Financial Year): Not Applicable.

(a) Details of Technology Imported; (b) Year of Import;

(c) Whether the Technology has been fully absorbed; (d) If not fully absorbed areaswhere absorption has not taken place and the reasons thereof.

(iv) Your Company has not incurred any expenditure on Research and Development duringthe year under review.

(C) Foreign Exchange Earnings and Outgo

The information on foreign exchange outgo is furnished in the Notes to the Accounts.There were no foreign exchange earnings during the year.

For and on behalf of the Board
Dhananjay Mungale
Chairman
Place: Mumbai
Date: 25th April 2017