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Ujjivan Financial Services Ltd.

BSE: 539874 Sector: Financials
NSE: UJJIVAN ISIN Code: INE334L01012
BSE LIVE 12:15 | 21 Nov 401.65 -2.00
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409.00

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411.45

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NSE 12:02 | 21 Nov 401.40 -2.65
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OPEN

408.00

HIGH

411.05

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OPEN 409.00
PREVIOUS CLOSE 403.65
VOLUME 121060
52-Week high 464.55
52-Week low 285.00
P/E 75.07
Mkt Cap.(Rs cr) 4,843
Buy Price 401.70
Buy Qty 800.00
Sell Price 402.15
Sell Qty 506.00
OPEN 409.00
CLOSE 403.65
VOLUME 121060
52-Week high 464.55
52-Week low 285.00
P/E 75.07
Mkt Cap.(Rs cr) 4,843
Buy Price 401.70
Buy Qty 800.00
Sell Price 402.15
Sell Qty 506.00

Ujjivan Financial Services Ltd. (UJJIVAN) - Director Report

Company director report

To the Members Overview

The Company was originally incorporated as Ujjivan Financial Services Private Limitedon December 28 2004 at Bengaluru Karnataka India as a private limited companyundertheCompaniesAct1956.Pursuantto certificateissued by the Reserve Bank of India("RBI") on October 31 2005 the Company was permitted to commence operations asa non-banking financial company ("NBFC") under section 45 IA of the Reserve Bankof India Act 1934. Since financial year 2008-09 the Company has been classified as asystemically important non-deposit accepting NBFC. Pursuant to the RBI introduction of anew category of NBFC-Micro Finance

Institution vide its circular BI/2013-14/49 DNBS.(PD)CC.No. 347 /03.10.38/2013-14 datedJuly 01 2013 the Company was granted NBFC-Microfinance Institution("NBFC-MFI") status by the RBI on September 5 2013. Subsequently the Companywas converted into a public limited company pursuant to a special resolution passed by itsShareholders at the extraordinary general meeting ("EGM") held on November 32015 and the name of the Company was changed to Ujjivan Financial Services Limited. Afresh certificate of incorporation consequent upon conversion to a public limited companywas issued by the Registrar of Companies Bangalore Karnataka ("ROC") onNovember 26 2015. Subsequently a fresh certificate of NBFC-MFI registration consequentupon the change of name of the Company was issued by the RBI on March 4 2016.

On October 7 2015 the Company was one amongst 10 companies in India out of a totalof 72 applicants to receive in-principle approval from the RBI to set up a small financebank (" SFB").

The Company completed its maiden Initial Public Offering (IPO) and its equity shareswere listed in NSE and BSE on May 10 2016.

In accordance with the terms as mentioned in the application submitted to the RBI andin compliance to the terms and conditions on which the RBI has granted an in-principleapproval to the Company to set up a SFB the Company incorporated ‘Ujjivan SmallFinance Bank Limited' ("USFB") on July 04 2016 as a wholly ownedsubsidiary of the Company.

The Company had submitted an application to the Reserve Bank of India on August 182016 for grant of banking licence in terms of Section 22 of the Banking Regulation Act1949 to USFB. Pursuant to the application submitted the Reserve Bank of India has issuedto the subsidiary of the Company i.e. ‘Ujjivan Small Finance Bank Limited' theLicence No. MUM 123 dated November 11 2016 to carry on Small Finance Bank business inIndia subject to the terms and conditions as mentioned in its letter dated November 112016.

The Company based on the approval of the Board in their meeting held on July 29 2016and Shareholders' approval on September 13 2016 through a postal ballot has executed anagreement to transfer its business undertaking ("BTA") to USFB. The Companyexecuted the BTA with USFB on January 12 2017 followed by an addendum agreement to theBTA on February 09 2017 which included the purchase price and mode of discharge ofconsideration by USFB to the Company. Pursuant to the execution of the BTA the Companyhas transferred its business undertaking as a going concern by way of a slump sale to USFBon February 01 2017 for a lump sum consideration. This was in line with the restructuringplan submitted by the Company to the RBI and as disclosed by the Company in its prospectusdated May 03 2016.

Pursuant to the compliance of all the terms and conditions on which the licence wasgranted ‘Ujjivan Small Finance Bank Limited' commenced its operations as a SmallFinance Bank with effect from February 1 2017.

The Company has made an application to the RBI for getting itself registered as aNBFC-Core Investment Company ("CIC") for which the RBI approval is awaited. TheCompany on receipt of the CIC registration from RBI will surrender its NBFC-MFIregistration to the RBI.

1. Financial Results

The director's submit annual report of Ujjivan Financial Services Limited (the"Company" or "Ujjivan") alongwith the audited financial statements forthe financial year (FY) ended March 31 2017.

(Rs. in Crore)
Standalone Consolidated
Particulars FY 2016-17* FY 2015-16 FY 2016-17
Operating Income 1145.53 1007.25 1349.37
Other Income 42.00 20.36 48.25
Total Income 1187.53 1027.61 1397.62
Less: Operational Expenses
Personnel Expenses 220.87 196.65 271.62
Administrative Expenses 134.85 102.17 173.80
Finance Charges 432.76 423.50 542.72
Depreciation 7.53 8.02 12.63
Provision For Doubtful Debts 70.68 25.27 75.12
Total Operational Expenses 866.68 755.62 1075.89
320.85 271.99 321.74
Less: Income tax 135.54 103.57 136.96
Less Deferred tax (22.33) (8.80) (22.90)
Profit/(Loss) After Tax 207.64 177.22 207.67

* includes the numbers for both discontinued as well as continued operations.

2. IPO

The Company came out with its Initial public offer (IPO) of 42023609 equity shares offace value of Rs. 10 each for cash at a price of Rs. 210 per equity share (including ashare premium of Rs. 200 per equity share) aggregating to Rs. 882.50 Crore comprising afresh issue of 17055277 equity shares aggregating to Rs. 358.16 Crore by the company("fresh issue") and an offer for sale of 24968332 equity shares aggregating toRs. 524.34 Crore by 8 selling shareholders.

The Company's equity shares got listed on NSE and BSE on May 10 2016.

The objects of the IPO inter alia was to augment the capital base of the Companyand to meet the future capital requirements of the Company arising out of growth of theCompany's assets primarily the Company's loans and advances and other investments.Further the Company intended to reduce its foreign shareholding in accordance with therequirements of the RBI in-principle approval to set up the SFB.

There has been no deviation in the utilization of the IPO proceeds by the Company.

3. Dividend

In accordance with the Dividend Distribution Policy adopted by the Board in its meetingheld on April 27 2017 and in continuation to the dividend payment track record of theCompany the directors are pleased to recommend for approval of the members a dividend ofRs. 0.80 per equity share for the FY 2016-17. The dividend on equity shares if approvedby the shareholders would involve a cash outflow of ~ Rs. 11.5 Crore (including dividenddistribution tax).

4. Transfer to reserves

The Company transferred Rs. 41.5 Crore to Statutory Reserves. Transfer of 20% of theProfit after Tax to the statutory reserves in accordance with the provisions of section 45– IC Reserve Bank of India Act 1934.

5. Credit Rating

CRISIL has assigned the Company a grading of mfR1 (the highest grading for MFI) onOctober 29 2016. CARE has assigned a rating of ‘CARE A+' (Single A Plus) to the longterm facilities of the Company in November 2016 for its Long Term Bank Facilities of Rs.4500 Crore and has assigned a rating of ‘CARE A+' for its NCDs* of Rs. 825 Crore.

* The Company has transferred all its NCDs to USFB through novation in the month ofFebruary 2017. Also all the debt portfolio of the Company comprising ofborrowingsfrombanks/financialinstitutions transferred to USFB on February 01 2017 etcwere

6. Capital Adequacy

The Capital Adequacy Ratio of the Company was 113.76% as of March 31 2017 as againstthe minimum capital adequacy requirements of 15% by RBI.

7. Corporate Governance and Management Discussion and Analysis Report

In accordance with SEBI LODR Regulations Management Discussion and Analysis Report andCorporate Governance Report the Independent Practicing Company Secretary is providedseparately and forms together with the Certificate part of this Directors' Report.

8. Extract of Annual Return

In accordance with Section 134(3)(a) of the Companies Act 2013 an extract of theAnnual Return in the prescribed format (MGT-9) is appended as "Annexure 1"to the Board's Report.

9. Business Responsibility Reporting

The Board of the Company in its meeting held on April 27 2017 has approved theBusiness Responsibility Report ("BRR") of the Company as stipulated underRegulation 34 (as amended) of SEBI Listing Regulations which mandates that top 500 listedcompanies based on market capitalization as on March 31 should include its BRR in itsAnnual Report. The Company is ranked 308 in the list.

Please refer the section ‘Business Responsibility Report' of the Annual Report.

A copy of the BRR has also been hosted on the website of the Company at www.ujjivan.comand can be accessed from the link below http://ujjivan.com/html/ujjivan_policies.php

10. No. of Meetings of the Board during the FY 2016-17

During the Financial Year 2016-17 our Board has met 12 (twelve) times and the meetingsof our Board of Directors were held on April 13 2016 May 03 2016 May 25 2016 July05 2016 July 29 2016 November 09 2016 December 08 2016 January 10 2017 January19 2017 February 06 2017 February 10 2017 and March 27 2017. For further detailsplease refer to the Corporate Governance Report which forms part of this report.

11. Reappointments

As per the provisions of the Companies Act 2013 Mr. Amit Gupta retires by rotation atthe ensuing 13th AGM and being eligible seeks his appointment. The Boardrecommends his appointment. Please refer the 13th AGM Notice for furtherdetails.

12. Directors' Responsibility Statement

Pursuant to Section 134(5) of the Companies Act 2013 the Board of Directors of theCompany confirms and state that:

(i) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(ii) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the company at the end of the financial year and of the profitand loss of the company for that period;

(iii) care for the maintenance of adequate accounting records in accordance with thesufficient they have taken proper and provisions of this Act for safeguarding the assetsof the company and for preventing and detecting fraud and other irregularities;

(iv) they have prepared the annual accounts on a going concern basis;

(v) they have laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and were operating effectively; and

(vi) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company audit of internal financial controls and thereviews performed by management and the risk management and audit committee of the boardthe board is of the opinion that the Company's internal financial controls were adequateand effective during the FY 2016-17.

13. Declaration by Independent Directors

The Company has received necessary declarations of independence from each of itsIndependent Directors under section 149(7) of the Companies Act 2013 that he/she meetsthe criteria of independent director envisaged in section 149 (6) of the Companies Act2013.

All Independent Directors have submitted the declaration of Independence as requiredpursuant to Section 149(7) of the Act stating that they meet the criteria of Independenceas provided in section 149(6) of the Companies Act 2013 and are not disqualified fromcontinuing as Independent Directors.

14. Nomination and Remuneration Policy

The Company pursuant to the provisions of Section 178 of the Companies Act 2013 hasformulated and adopted a nomination and remuneration policy which is disclosed on ourwebsite at the below link-

http://ujjivan.com/html/ujjivan_policies.php

15. Statutory Auditors

M/s Deloitte Haskins & Sells (Firm Reg. No. 008072S) Chartered Accountants whowere appointed as Statutory Auditors of the Company for two years till the conclusion ofthe ensuing the 13th Annual General Meeting will complete their tenure of 13years (maximum continuous tenure for a statutory auditor permissible under the CompaniesAct 2013 including the extension of 3 years subsequent to the commencement of provisionsof Section 139 of the Act) with the Company on the conclusion of the 13th AGM.

Considering the above the Board based on the recommendation of the Audit Committee inits meeting held on April 27

2017 subject to the approval of the shareholders has appointed M/s Price WaterhouseChartered Accountants LLP (FRN: 012754N/N500016) as the Statutory Auditors of the Companyfor a period of 5 (five) years commencing from the conclusion of the ensuing 13thAGM till the conclusion of 18th AGM of the Company. The Company has receivedwritten consent(s) and certificate(s) of eligibility in accordance with Sections 139 141and other applicable provisions of the Act and Rules issued thereunder (including anystatutory modification(s) or re-enactment(s) for the time being in force) from M/s PriceWaterhouse Chartered Accountants LLP. Further they havec onfirmed that they hold certificateissuedby the Peer Review Board of valid the Institute of Chartered Accountants of India(ICAI) as required under SEBI LODR Regulations.

16. Explanations or comments by the Board on every qualification reservation oradverse remark or disclaimer made

(i) By the auditor in his report;

Statutory Auditor

M/s Deloitte Haskins & Sells (Firm Reg. No. 008072S) Chartered Accountants wereappointed as Statutory Auditors of the Company for 2 years till the conclusion of the 13thAnnual General Meeting to be held for the FY 2016-17. The shareholders in the 12thAGM held on August 10 2016 have ratified their appointment as Statutory Auditors of theCompany till the conclusion of the ensuing 13th AGM of the Company.

Auditor's report

There are no disqualifications reservations adverse remarks or disclaimers in theauditor's report

(ii) By the Company Secretary in practice in his secretarial audit report;

Secretarial Auditor

Mr. K. Jayachandran PracticingCompanySecretary(ACSNo.11309andCertificateof PracticeNo. 4031) was appointed as the Secretarial Auditor of the Company to conduct secretarialaudit of the Company for the Financial Year 2016-17 as required under Section 204 of theCompanies Act 2013 and the Rules made thereunder. The secretarial audit report for FY2016-17 is appended as "Annexure 2" to the Board's Report.

The Secretarial Audit Report does not contain any qualification reservation or adverseremark made by the Secretarial

Auditor.

17. Particulars of loans guarantees or investments under Section 186

The Company has not given any loans and guarantees to any-body corporate. The Companyhas made the following investment in ‘USFB' as per the details below:

Sr. No. Date of Investment Mode of Investment Amount (Rs. in Crore)
1. July 04 2016 First Subscription of 50000 Equity Shares of Rs. 10/- each 0.05
2. July 30 2016 Subscribed the Rights Issue of 109986800 Equity Shares of Rs. 10/- each 109.99
3. February 10 2017 Allotment of Securities* 1530.00
4. March 31 2017 Investment in Fixed Deposit 100.00
Total 1740.04

*‘USFB' on February 10 2017 has allotted the below securities to the Company indischarge of the consideration for the acquisition of the business undertaking of theCompany by USFB.

Sr. No. Securities Type Number of Securities Interest Rate Premium Amount (in Rs.)
(In Rs.)
1. Equity Shares 1330000000 N.A. Nil 13300000000
2. 11% Perpetual Non-Cumulative Preference Shares 200000000 11% per annum N.A. 2000000000
Total 1530000000 15300000000

18. Transaction with related parties

The Company pursuant to the approval of the Audit Committee and the Board in theirrespective meetings held on July 29 2016 and the approval of the Shareholders through apostal ballot on September 13 2016 has transferred its business undertaking as a goingconcern by way of a slump sale to its wholly owned material subsidiary ‘Ujjivan SmallFinance Bank Limited' on February 01 2017 for a lump sum consideration of Rs. 1530 Crorewithout values being assigned to individual assets and liabilities.

M/s GRSM & Associates Chartered Accountants carried out an exercise foridentifying various components of assets and liabilities of the Company as on January 312017 and through its Asset Allocation Report dated February 06 2017 had a consensus witha value of Rs. 1530 Crore of the Company which includes the goodwill value of Rs. 16Crore.

The valuation for the slump sale transaction was done by M/s GRSM & AssociatesChartered Accountants. through their report dated February 06 2017. The fair value perequity share of USFB as on January 31 2017 was Rs 10 per equity share while the fairvalue of 11% Perpetual Non-Cumulative Preference Shares was Rs 10 per preference share ason January 31 2017.

Information on transaction with related parties pursuant Particulars of contracts orarrangements with related parties referred to in Section 188(1) in the prescribed form AOC-2 is appended as "Annexure 3" to the Board's Report.

19. The state of the Company's affairs

The Company is registered with RBI as a NBFC-MFI and was one of the largestmicrofinance institutions in the country before it transferred its business undertaking toUjjivan Small Finance Bank Limited.

The Reserve Bank of India has stipulated in its final licence that inter alia theCompany (the promoting entity of USFB) shall be registered as a NBFC-Core InvestmentCompany after the transfer of its business undertaking to USFB.

In compliance to the aforesaid condition the Company subsequent to the transfer of itsbusiness undertaking to USFB on February 01 2017 has made an application to the RBI forgetting itself registered as a Core Investment Company ("CIC") and to complywith the conditions of the Master Direction - Core Investment Companies (Reserve Bank)Directions 2016.

The Company will surrender its NBFC-MFI registration to the RBI prior to there ceipt ofits CIC registration certificate from the RBI.

Note on Demonetisation

Background

On November 8 2016 the Governmentdemonetizedtheexisting500and1000rupeenoteseffectivelytaking over 80% of cash out ofcirculation. The new bills were in short supply leading to restrictions on cash withdrawaland creating a cash impact on the micro finance sector which deals with a borrower basethat crunch for the ensuing months. This had significant predominantly earn theirwages/incomes in cash.

Impact on the MFI Industry

The first impact has been on the collections for the MFI Industry which is dipped to86% from its standard collection rate of around 99%. Consequently the collectiondiscipline has been derailed resulting in higher Par & Provisions. As MFI's were notallowed to collect the repayments through old notes and deposit the same in banks thisfurther impacted the collections.

The RBI dispensation on classification of NPA (allowing a further 90 days over the 90days overdue norm for classification as an NPA) has been misconstrued and deemed asrepayment holidays adding woes to the already affected situation. This has further beentaken advantage of by Politicians in states of UP Maharashtra Uttarakhand Karnataka.Since cash limits were common for financial institutions and retail no cashdisbursements were possible to a large section of MFI Borrowers especially new borrowersleading to a tremendous impact on business during the last two month

Impact on Ujjivan

Challenges faced: Demonetization led to a slow-down of business momentum in Q3 andQ4 political interference and rumors of loan waiver disturbed the credit discipline amongour customers affecting collections. Paucity of currency necessitated reduction inbusiness volumes. New customer acquisition for both group lending and individual lendingbusiness was suspended during the period. The Company made cash disbursements to selectrepeat customers with good credit track record to smooth their cash flow. Our securedHousing business was affecteddue to a bearish real estate market. Challenges in incomeflow and property valuation & construction due to uncertainty also affected volumes.Business was suspended UP NCR select areas of Rajasthan. MSE business was affected dueto suspension of business in UP closure of markets in Delhi

TN slowdown of customer sales and stocks in Gujarat and non- disbursal of sanctionedcases due to deferral by customers. Key Challenges faced across regions are summarizedbelow:

South:

• Local organizations interference in Karnataka

• Rumors of loan wave-off in most parts of North Karnataka

• Currency crunch in some parts of Kerala

North

• Religious and Political interventions in most places in UP and Uttarakhand

• Minority concentrated area hit the most

• Small Businesses and Wage earners struggling to repay in Delhi Punjab andHaryana

East

• Political interference in Assam and Jharkhand

• Small businesses and Laborer impacted due to cash crunch in Bihar Jharkhand andWest Bengal

• Loan waiver rumors in few areas of West Bengal

Impact on portfolio quality

Our NPA levels saw a significant rise due to demonetization related over dues.Collections saw a dip and over dues increased in November and December. Please refer thetable below:

Particulars Oct'16 Nov'16 Dec'16 Jan'17 Feb'17 Mar'17
Cumulative Repayment Rate 99.8% 98.7% 97. 9% 97.3% 96.9% 96.7%
Monthly Repayment Rate 99.6% 90.7% 88.2% 87.2% 86.8% 88.5%
Total Delinquent Accounts 15284 337283 459755 484746 497485 430375
Incremental Over dues 1322 320824 233319 111167 87502 26782

Repayments were severely affected in 8 states UP UK Karnataka Maharashtra NewDelhi Haryana Rajasthan and Punjab in which the repayment rates fell to sub 90%

Estimated write and provisions in current year and hit to P&L

Incremental provisions were made in Q3 on account of demonetization RBI dispensationon Asset Classification of overdues originating in Nov & Dec was considered in Q4 andprovisions made accordingly. Excellent recovery efforts in Mar-17 led to lower provisionon the account of over dues originated in Q4.

Credit Cost Q1 Q2 Q3 Q4 FY2016-17
Credit Provisions 5.8 4.5 54.3 5.0 69.6
Write Off 0.4 2.4 0.5 2.2 5.5
Total Credit Cost 6.2 6.9 54.7 7.2 75.1

Overdues falling in November'16 and December'16 were named as "Special MentionAccounts (SMA) – Demonetization" and classified as standard asset for 90additional days (Up to 180 days) as per RBI dispensation. Provisioning was made at 10%(Group loans) and for Individual loans at20%acrossSMA-Demonetizationoverduesforaffectedstateswith<90%collectionefficiency.Existing standard asset provisioning norms of 0.65% on GL and 0.75% on IL for 180 dayswere adopted across non-affected states with >90% collection efficiency on Nov'16 andDec'16 Incremental Overdue accounts.

Provisions were made on the monthly Incremental Overdues from Jan'17 onwards for theloan portfolio under the existing provision norms. No deviation from the existing policy.Cumulative Provisions as of March: Rs. 125 Crore on own assets.

Collections

Continuous improvement was observed in collection of demonetization dues for allstates. Cumulative collections for demonetization related over dues originating in Nov2016 stand at 97.7%.

Collection efficiency of severely affected states such as UK & UP have bounced backto 90% on November dues and 70% overall a positive sign of progress. Collectionefficiency is likely to improve gradually over the next few months since externalinterventions (especially in states where elections have concluded) have reduced &many customers have started making repayments with a lag of 2-4 months

Collateral Impact

Impact of Demonetization will spill over into the next financial year with increasedcredit costs. Ujjivan shall follow a cautious approach towards business in the stressedclusters to contain the credit quality for the first two quarters of the next year

Initiatives taken

Communication to staff and customers: The Company has sensitized itsstaff on non-coercive collections and offered extended repayment time for customerscontinuing a healthy relationship with them during such testing times. Ujjivan pamphletswere distributed to all customers and the Company offered continued service to goodcustomers by providing them with repeat loans largely in cash wherever possible enablingthem smoothen their cash flow

Focus on Collections: TheCollectionsTeamfocusedonrepaymentcollectionsacrossdifficultareas providing the muchneeded support to staff. The Company distributed a set of relevant documents with allField staff to enable them to convince customers and family members about the false rumorsand importance of repayment. Branch wise based Action plans were put in place providingfulltime support for collections while mentoring of the branches. Pin Code wise enquirywas made for all the Over- due customers – to focus on collections with those regularin other MFI's if any.

Focus on Cashless collections: The Company encouraged its customers touse the cashless payment options such as Cheque POS and NEFT

• The Company enlisted Police support to curb third party interventions

20. Material changes and commitments if any affecting the financial position of thecompany which have occurred between the end of the financial year of the company to whichthe financial statements relate and the date of the report;

None

21. The conservation of energy technology absorption foreign exchange earnings andoutgo in the manner as prescribed in Rule 8(3) of the Companies (Accounts) Rules 2014

Conservation of energy and technology absorption

Since the Company does not own any manufacturing facility the particulars relating toconservation of energy and technology absorption are not applicable.

The Foreign Exchange earnings and outgo

There was no Foreign Exchange inflow and outflow during the year except dividend payoutto the foreign shareholders for the dividend declared in the FY 2015-16.

22. Development and implementation of risk management policy

Ujjivan's Risk Management Committee consists of well experienced Directors from diversebackground who bring in the best risk practices to the organization. The Risk ManagementCommittee which meets at frequent intervals comprises of four Directors including twoIndependent Directors.

The Committee reviews the risk management framework of the company and verifiesadherence to various risk parameters and compliances. The Company's risk managementstrategy is based on clear understanding of various risks disciplined risk assessment andcontinuous monitoring. During the year the risk management committee reviewed variousrisks which the organization is exposed to including credit risk interest rate riskliquidity risk operational risk and regulatory compliance issues. It also met to reviewand discuss on the impact due to the extraordinary situation of demonetization on thecollection efficiency across states. The risk Committee approves and makes recommendationsto the Board regarding all its risk-related responsibilities including the review ofmajor risk management and regulatory compliances.

The Company has in place an effective risk management policy which highlights thefunctions implementation and the role of the committee and the board.

23. Corporate Social Responsibility

The Corporate Social Responsibility (CSR) programs were started by the Company in theyear 2010. During the year Ujjivan CSR Team has mainly focused on the Government of India"Swachh Bharat Abhiyan".

A brief outline of the company's CSR policy is disclosed on our website at the belowlink-

http://ujjivan.com/html/ujjivan_policies.php

The initiatives undertaken by the Company on CSR activities are out in "Annexure4" of the Board's Report in the format prescribed in the Companies (CorporateSocial Responsibility Policy) Rules 2014. For other details regarding the CSR Committeeplease refer to the Corporate Governance Report which forms part of the Board's Report.

24. Board Evaluation

The board of directors has carried out an annual evaluation of its own performanceboard committees and individual directors pursuant to the provisions of the Companies Act2013 and the corporate governance requirements as prescribed by Securities and ExchangeBoard of India (Listing Obligations and Disclosure Requirements) Regulations 2015("SEBI Listing Regulations") and SEBI guidance note on Board Evaluation.

Performance evaluation criteria for Board Committees of the Board and Directors wereapproved by the Nomination Committee of the Board at its meeting held on March 27 2017.Evaluation formats and criteria of evaluation duly incorporated the criteria and otherparameters as suggested by SEBI vide their guidance note on evaluation through theircircular dated January 05 2017.

The Board was evaluated comprehensively on the following broad categories:

• Structure of the Board - Competency Experience and Qualifications of directorsDiversity in Board under various parameters Appointment Process

• Meetings of the Board - Regularity of meetings and adequacy discussions andrecording of dissent if any.

• Recording of minutes dissemination of information

• Functions of the Board - Role and responsibilities of the Board

• Strategy and performance evaluation

• Evaluation of Risks

• Grievance redressal for Investors

• Management of Conflict of interest

• Stakeholder value and responsibility

• Corporate culture and values

• Facilitation of independent directors

• Evaluation of performance of the management and feedback

• Independence of the management from the Board

• Access of the management to the Board and Board access to the management

• Secretarial support and fund availability for conducting its meeting effectively

• Succession planning

• Professional development

• Board Candor Collegiality Transparency and Board Education

• Ethics & Compliance

The performance of the board was evaluated by the board after seeking inputs from allthe directors on each of the above parameters of evaluation and the performance of thecommittees was evaluated by the board after seeking inputs from the committee members onthe basis of the above parameters of evaluation.

Performance Evaluation of the Directors

The board and the nomination and remuneration committee reviewed the performance of theindividual directors on the basis of the criteria such as the contribution of theindividual director to the board and committee meetings like preparedness on the issues tobe discussed meaningful and constructive contribution and inputs in meetings etc. Inaddition the chairman was also evaluated on the key aspects of his role.

Evaluation of the Board Committees

The Board evaluated the performance of each of the Board Committees on the followingbroad categories:

• Mandate and composition

• Effectiveness of the Committee

• Structure of the Committee its functioning and attendance

• Discussion quality of agenda and action taken report

• Independence of the Committee from the Board

• Contribution of the Committees to the decisions taken by the Board

• Functioning of the committee in accordance with the terms of reference

The Board opined that the Board Committees' composition structure processes andworking procedures are well laid down and that the Board Committees members have adequateexpertise drawn from diverse functions industries and business and bring specificcompetencies relevant to the Company's business and operations.

Independent Directors' Evaluation of Non-Independent Directors

In a separate meeting of independent directors held on March 27 2017 performance ofnon-independent directors performance of the board as a whole and performance of thechairman was evaluated taking into account the views of executive directors andnon-executive directors. The Independent Directors also assessed the quality quantity andtimeliness of flow of information between the Company management and the Board.

Performance evaluation of independent directors was done by the entire board excludingthe independent director being evaluated.

25. Details as required under Rule 8 of the Companies (Accounts) Rules 2014

(i) The financial summary or highlights:

(Amount Rs. in Crore)
Standalone Consolidated
Particulars FY 2016-17* FY 2015-16 FY 2016-17
Operating Income 1145.53 1007.25 1349.37
Other Income 42.00 20.36 48.25
Total Income 1187.53 1027.61 1397.62
Less: Operational Expenses
Personnel Expenses 220.87 196.65 271.62
Administrative Expenses 134.85 102.17 173.80
Finance Charges 432.76 423.50 542.72
Depreciation 7.53 8.02 12.63
Provision For Doubtful Debts 70.68 25.27 75.12
Total Operational Expenses 866.68 755.62 1075.89
320.85 271.99 321.74
Less: Income tax 135.54 103.57 136.96
Less Deferred tax (22.33) (8.80) (22.90)
Profit/(Loss) After Tax 207.64 177.22 207.67

* includes the numbers for both discontinued as well as continued operations.

Strategic Highlights:

• Receipt of final licence from the RBI to USFB to commence small finance bankbusiness

• The Company transferred its business undertaking to USFB on February 01 2017

• The wholly owned subsidiary commenced small finance bank operations on February01 2017

Consolidated Asset Business Performance

• 18% growth in Business volumes slowdown of momentum post demonetization in Q3and Q4

• Lower NCA due to no new branches and suspension of NCA post demonetization

• 16% growth in MFI vertical : GL business grew by 15% while Unsecured IL grew by21% over PY

• Swift scale up of MSE and Secured Housing vertical. New product variantslaunched in Housing while Unsecured MSE business was rolled out during the year

• GL Business: 84.9% of the portfolio Unsecured IL: 13.3% Housing: 1.5% MSE:0.3%

• Secured portfolio increased to Rs.117 Crore from Rs.27 Crore in March 2016; anincrease of 333%

Deposit Business Performance of USFB

• The Deposit business stood at Rs.206 Crore spanning 13293 accounts at the endof March 2017

• CASA stood at Rs. 3.2 Crore of which staff savings/salary accounts constitutedRs. 2.7 Crore

• Time Deposits stood at Rs. 3.3 Crore while Recurring deposits stood at Rs.1Lakh

• Institutional Deposits stood at Rs.199.8 Crore out of total deposits of Rs. 206Crore

• CASA ratio stood at 1.5% Credit to Deposit Ratio stood at 2846%

Financial Performance: PAT of Rs. 207.64 Crore in FY 2016-17 as against Rs.177.2Crore in FY 2015-16 an increase of 17%. USFB breaks even in the first two months ofoperations with a PAT of Rs. 3.4 Lakh

Profitability: (Rs. in Crore)
Particulars (FY 2016-17) Standalone Consolidated
Pre-Tax Profits (PBT) 320.85 321.74
Profit after Tax (PAT) 207.64 207.67

Efficiency :

• Fresh GL TAT- 8.1 days against 8.5 in March 2016

• Fresh IL TAT- 14.4 days against 12.2 in Mar 2016

• SHL: 23 days against 30 days in March 2016

• MSE: 13 days against 34 days in March 2016

(ii) highlights of performance of subsidiaries associates and joint venturecompanies and their contribution to the overall performance of the company during theperiod

‘Ujjivan Small Finance Bank Limited' ("USFB") is a wholly owned materialsubsidiary of the Company. USFB was incorporated on July 04 2016 and commenced itsoperations as a small finance bank w.e.f. February 01 2017. The highlights of thefinancial performance of USFB are as under:

(Rs. in Crore)
Particulars FY 2016-17
Operating Income 212.71
Other Income 13.39
Total Income 226.10
Less: Operational Expenses 55.57
Personnel Expenses 50.74
Finance Charges 109.36
Depreciation 5.10
Provision For Doubtful Debts 4.44
Total Operational Expenses 225.21
Profit/(Loss) Before Tax 0.89
Less: Income tax 1.42
Less Deferred tax (0.57)
Profit/(Loss) After Tax 0.04
Transfer to Statutory Reserve 0.01
Balance carried over to Balance Sheet 0.03

 

Key Ratios:
Particulars March 31 2017
Interest income as a percentage to working funds 2.52%
Non-interest income as a percentage to working funds 0.16%
Operating profit as a percentage to working funds 0.06%
Business (deposits plus gross advances) per employee (Rs.) 5914099
Profit per employee 34

Business Highlights:

Launch of Banking Operations on February 06 2017 15 live branches were operational asof March 31 2017.

Deposit Business Performance

• The Deposit business stood at Rs.206.41 Crore spanning 13293 accounts at theend of March 2017 CASA stood at Rs. 3.23 Crore of which staff savings/salary accountsconstituted Rs. 2.7 Crore Time Deposits stood at Rs. 3.3 Crore including Recurringdeposits of Rs. 0.01 Crore Institutional Deposits stood at Rs.199.8 Crore

Financial Performance:

• USFB has achieved breakeven in the first two months of operations with a PAT ofRs. 0.04 Crore

• Higher cost to income ratio on account of transition increased finance cost tomeet regulatory compliances one time write-off of goodwill has impacted the overallprofitabilityof USFB

• Treasury income of Rs. 19.72 Crore in first two months of operations

Credit Performance:

• Over all PAR at 10.2% in March 2017.

• GL overall PAR: 10.2% Unsecured IL PAR: 11.3%

• GNPA (Par > 90 days) rose to 3.8% in March 2017 (0.28% with RBI dispensation)

Cost Efficiency: Cost to Income Ratio at 95.4%

Rating: USFB has received a credit rating of A+

Profitability: Pre-tax profits - Rs. 0.89 Crore and post- tax profits - Rs. 0.04 Crorefor the period ended March 31 2017

Please refer the section ‘Consolidated Financial Statements' for further detailson the contribution of USFB on the overall performance of the Company.

(iii) The change in the nature of business if any:

The Company has floated a 100% subsidiary ‘Ujjivan Small Finance Bank Limited'("USFB").

The RBI vide its letter dated November 11 2016 granted the final licence (licencenumber Mum-123) to USFB to carry on the business of a small finance bank in India subjectto the terms and conditions mentioned therein.

The RBI has in the said letter stipulated inter alia that the promoting entity of thesmall finance bank shall be registered as an NBFC-Core-Investment Company("CIC") after the transfer of its business to USFB.

The Company pursuant to the approval of the Audit Committee Board and the Shareholdershas executed an agreement with USFB on January 12 2017 pursuant to which the businessundertaking of the Company has been transferred to USFB as a going concern on a slump salebasis. The agreement to transfer is in line with the Company's restructuring planssubmitted to the RBI and as disclosed by the Company in its prospectus dated May 03 2016filed with SEBI for its IPO.

The aforesaid transfer was done to ensure that USFB will undertake the small financebank business and post transfer the Company registers itself as a CIC with DNBS RBIBangalore.

Subsequent to the execution of the agreement the Company has transferred conveyedassigned and delivered all rights title and interest in its Business Undertaking to USFBand USFB has acquired the Business Undertaking of the Company.

The Company has transferred its business undertaking to USFB as a going concern by wayof a slump sale as defined in Section 2(42C) of the Income Tax Act 1961 for a lumpsumconsideration of Rs. 1530 Crore.

The effective date of transfer of Company's business undertaking to USFB andcommencement of business as a small finance bank by USFB was February 01 2017.

The Company as on March 31 2017 is registered with RBI as a NBFC-MFI; however theapplication for its registration as a NBFC-Core Investment Company is in process and thefinal approval and registration from the RBI is awaited. Once the CIC registration isreceived the Company will surrender its NBFC-MFI registration certificate and then will aNBFC-CIC with its primary business of making investments in its group companies.

Further all the employees of the Company except few identified personnel have beentransferred to USFB as part of the transfer of the business undertaking.

Transfer of Listed Non-Convertible Debentures through Novation to USFB

The Company pursuant to the receipt of consents of the Debenture Trustees (IDBITrusteeship Services Limited and Catalyst Trusteeship Limited) has transferred (novationof all rights and obligations of the Company) the below 9 (Nine) listed NCDs from theCompany to USFB through novation.

Sr. No ISIN Description of NCD Maturity date Amount Debenture Trustee
(in Rs.)
1. INE334L07076 Secured Redeemable 30-Jul-19 400000000 IDBI Trusteeship
2. INE334L07100 Secured Redeemable 28-May-19 600000000 IDBI Trusteeship
3. INE334L07134 Secured Redeemable 20-Mar-17 187500000 Catalyst Trusteeship *
4. INE334L07126 Secured Redeemable 26-Dec-17 250000000 Catalyst Trusteeship *
5. INE334L07142 Secured Redeemable 12-May-17 1000000000 Catalyst Trusteeship *
6. INE334L07167 Secured Redeemable 5-Aug-21 1000000000 Catalyst Trusteeship *
7. INE334L07159 Secured Redeemable 23-Jun-17 1000000000 Catalyst Trusteeship *
8. INE334L08017 Unsecured Redeemable 7-Oct-18 1750000000 Catalyst Trusteeship *
9. INE334L08025 Unsecured Redeemable 16-Nov-18 2250000000 Catalyst Trusteeship *
Total 8437500000

* Formerly known as GDA Trusteeship Limited

Post the novation of the aforesaid NCDs by the Company to USFB all references to theCompany's payment obligations in the Debenture Documents shall be read as references toUSFB to the extent legally applicable and USFB is to be considered as the debtor inrespect of the outstanding debt.

Further all the rights obligations and liabilities of the Company in respect of thepayment of the outstanding debt under the terms of the Debenture Documents has beenassumed by USFB and any claims by the Debenture Trustee shall be made only against USFBand as per terms of the Debenture Documents.

The Company has received the approval from the BSE Limited for the novation of theabove listed NCDs and the terms & conditions including description of security dateof allotment date of maturity coupon rate and face value of the aforesaid NCDs remainsintact and bears the same respective ISINs.

(iv) The details of directors or key managerial personnel who were appointed or haveresigned during the year;

Sr. No. Name Designation DIN Date of Appoint- ment/ Change/ Cessation Reason
1 Mr. Samit Ghosh MD & CEO (KMP) 00185369 January 31 2017 Resignation
2 Mr. Sunil Patel Independent Director 00050837 January 31 2017 Resignation
3 Mr. Nandlal Sarda Independent Director 00147782 January 31 2017 Resignation
4 Mr. Anadi Charan Sahu Nominee Director 06696504 January 31 2017 Resignation
5 Ms. Sudha Suresh CFO (KMP) N.A. January 31 2017 Resignation
6 Ms. Sudha Suresh MD & CEO (KMP) 06480567 February 01 2017 Appointment
7 Mr. Hiren Shah CFO (KMP) N.A. February 01 2017 Appointment

(v) the names of companies which have become or ceased to be its Subsidiaries jointventures or associate companies during the year;

The Company incorporated its wholly owned subsidiary ‘Ujjivan Small Finance BankLimited' on July 04 2016.

(vi) Deposits from public

During the year the Company has not accepted any deposits from public and as such noamount on account of principal or interest on deposits from public was outstanding as onthe date of the balance sheet. However the subsidiary of the Company viz ‘UjjivanSmall Finance Bank Limited' which is a Small Finance Bank and has been granted a licence(licence number MUM: 123) from the RBI to carry on small finance bank business in Indiahas mobilized a total deposit of Rs. 206 Crore as on March 31 2017.

(vii) The details of significant and material orders passed by the regulators orcourts or tribunals impacting the going concern status and company's operations in future;

None

(viii) The details in respect of adequacy of internal financial controls (IFC) withreference to the Financial Statements

In respect of internal financial control the Board has adopted the policies andprocedures for ensuring the orderly and efficient conduct of its business includingadherence to the Company's policies the safeguarding of its assets the timely preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information.

Further the management regularly reviews the control for any possible changes andtakes appropriate actions.

26. Other disclosures

(i) Details of equity shares with differential rights

The Company has not issued any equity shares with differential rights during the year

(ii) Details of sweat equity shares issued

The Company has not issued any sweat equity shares during the year

(iii) Details of employee stock option scheme

The Company has established Employee Stock Option Plan (ESOP) for compensation to itsemployees being ESOP 2006 ESOP 2007 ESOP 2008 ESOP 2010 MD-ESOP 2010 and ESOP 2015.

ESOP 2006

The Company pursuant to resolutions passed by the Board and Shareholders on March 292006 and May 12 2006 respectively adopted the ESOP 2006. The ESOP 2006 was for a totalof 64000 Equity Shares for all the eligible employees of the Company. In accordance withthe ESOP 2006 each option on exercise would be eligible for one Equity Share on paymentof exercise price. As on March 31 2017 out of the 64000 options granted 28629 optionshas been exercised and 35371 options were lapsed

ESOP 2007

Pursuant to resolutions passed by the Board and Shareholders on June 9 2007 and July21 2007 respectively the Company instituted the ESOP 2007. The ESOP 2007 was for atotal of 189440 Equity Shares for all the eligible employees of the Company. Inaccordance with the ESOP 2007 each option on exercise would be eligible for one EquityShare on payment of exercise price. As on March 31 2017 out of the 189400 optionsgranted 138030 options has been exercised 44500 options lapsed and 6910 valid optionsare left to be exercised.

ESOP 2008

Pursuant to resolutions passed by the Board and Shareholders on July 23 2008 andAugust 18 2008 respectively the Company approved the ESOP 2008. The ESOP 2008 was for atotal of 396680 Equity Shares for all the eligible employees of the Company. Inaccordance with the ESOP 2008 each option on exercise would be eligible for one EquityShare on payment of exercise price. As on March 31 2017 out of the 396680 optionsgranted 200130 options has been exercised 153290 options lapsed and 43260 validoptions are left to be exercised.

ESOP 2010 and MD-ESOP 2010

Pursuant to resolution passed by the Board and Shareholder resolutions dated May 172010 and July 12 2010 respectively the Company approved the ESOP 2010 and MD ESOP 2010and granted 3384300 options under ESOP 2010 and 871060 options under MD-ESOP 2010.Further pursuant to the Shareholders resolution dated July 12 2010 the exercise periodunder the ESOP 2006 ESOP 2007 and ESOP 2008 was aligned with the exercise period timeframe mentioned in ESOP 2010. Pursuant to sub-division of the face value of the equityshares from face value of Rs. 100 each to Rs. 10 each on October 12 2010 and inaccordance with ESOP 2010 maximum number of shares available for being granted under ESOP2010 stood modified and the cumulative face value prior to sub-division remainedunchanged.

Pursuant to resolution passed by the Board on August 12 2011additional grants were approved under the MD-ESOP 2010 amounting to 378112. Accordinglythe total options granted under MD-ESOP 2010 were increased to 1249172 options.

In accordance with the ESOP 2010 and MD-ESOP 2010 each option on exercise would beeligible for one Equity Share on payment of exercise price.

Thereafter pursuant to resolution passed by the Board and Shareholders on August 82012 and September 12 2012

respectively the Company approved creation of a pool of 1243233 options under theESOP 2010 for the Financial Year 2011-12.

As on March 31 2017 out of the 3384300 options granted under ESOP-2010 1065710options has been exercised 1553653 options lapsed and 764937 valid options are left tobe exercised.

As on March 31 2017 out of the 1249172 options granted under MD-ESOP 2010 440000options has been exercised and 809172 valid options are left to be exercised.

As on March 31 2017 the Company has granted 5283592 options under ESOP 2006 ESOP2007 ESOP 2008 ESOP 2010 and MD-ESOP 2010.

ESOP 2015

The Company pursuant to resolutions passed by the Board and the Shareholders datedSeptember 29 2015 and November 3 2015 respectively has adopted ESOP 2015. The totalemployee stock option pool available under ESOP 2015 is 5561188 options.

In accordance with the ESOP 2015 each option on exercise would be eligible for oneEquity Share on payment of the exercise price.

In compliance with Regulation 12 of Securities and Exchange Board Of India (Share BasedEmployee Benefits) Regulations 2014 (SEBI ESOP Regulations) the Company got its ESOPScheme 2015 ratified by its shareholders subsequent to the IPO in their AGM held on August10 2016. Subsequent to the ratification the Company granted 1696850 options to itsemployees under the ESOP 2015 on September 14 2016.

As on March 31 2017 the Company has granted 3166650 options under the ESOP 2015(including 1696850 options granted to eligible employees during the FY 2016-17 onSeptember 14 2016). Further as on March 31 2017 out of the 3166650 granted optionsunder ESOP 2015 458918 options are vested out of which 9329 vested options has lapsed82400 vested options were exercised and 367189 valid vested options were left to beexercised. Further 236413 unvested options has lapsed and 2480648 valid options areunvested. Overall 2847837 vested and unvested options are valid as on March 31 2017.

The vesting period for the options granted under ESOP 2015 is for a period of threeyears as under:

Year Options Granted Year 1 Year 2 Year 3
ESOP 2015 (Tranche 1) 1469800 34% 33% 33%
ESOP 2015 (Tranche 2) 1696850 33% 33% 34%
Total 3166650

The ESOP 2015 is in compliance with Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulations 2014 (SEBI ESOP Regulations) the Companies Act 2013 andis implemented in accordance with guidance notes issued by ICAI and the relevantaccounting standards.

Revisions in the ESOP Schemes during the Year

None

ESOP Schemes Compliance Status

ESOP 2006 ESOP 2007 ESOP 2008 ESOP 2010 and MD-ESOP 2010 were adopted prior to thecommencement of the Companies Act 2013.

The ESOP 2015 is in compliance with Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulations 2014 (SEBI ESOP Regulations) and the Companies Act 2013.

The ESOP Schemes are implemented in accordance with guidance notes issued by ICAI andthe relevant accounting standards.

"The guidance note issued by the Institute of Chartered Accountants of Indiarequires the disclosure of pro forma net results and Earnings Per Share (EPS) both basic& diluted had the Company adopted the fair value method amortizing the stockcompensation expense thereon over the vesting period the reported profit for the yearended March 31 2017 would have been lower by Rs.119550825/-and the basic and dilutedEPS would have been revised to Rs.16.73/- and Rs.16.11/- respectively."

Administration of ESOP Schemes

The Governance Nomination and Remuneration Committee of the Board administer theEmployee Stock Option Schemes formulated by the Company from time to time.

Mandatory ESOP Disclosures

Disclosures as required under Section 62 of the Companies Act 2013 (to be read withRule 12 of the Companies (Share Capital and Debenture) Rules 2014 and SEBI ESOPRegulations:

Sr. No. Particulars March 31 2017
1. Number of options granted beginning of year (A) 4264392
2. Number of options granted during the year (B) 1696850
3. Number of options vested during the year 676805
4. Number of options exercised during the year 1135767
5. Number of shares arising as a result of exercise of options (C) 1135767
6. Money realized during the year by exercise of options (in Rs.) 56248163
7. Number of options Forfeited/Expired during the year (D) 351849
8. The exercise price of the options (in Rs.) 10 12.5 28 40 47 146.35 & 417.15
9. Number of options granted and in force at the end of year 4473626
= (A)+(B)-(C)-(D)
10. Number of valid vested options exercisable at the year end 1992978
11. Weighted average of remaining contractual life (years) at the year end 1.05
12. Variation of terms of the options None

Consolidated Summary of all ESOP Schemes as on March 31 2017

Particulars ESOP ESOP ESOP ESOP MD-ESOP ESOP Total
2006 2007 2008 2010 2010 2015
Options Granted (A) 64000 189440 396680 3384300 1249172 3166650 8450242
Options Un-Granted - - - - - 2394538 2394538
Total Options Exercised (B) 28629 138030 200130 1065710 440000 82400 1954899
Options Lapsed (C) 35371 44500 153290 1553653 - 236413 2023227
Options Still Unexercised (D) = (A)-(B)-(C) - 6910 43260 766447 809172 2847837 4473626

Options Granted to Key Managerial Personnel during the year

Employee Name Designation Options Granted Exercise Price (in Rs.)
Ms. Sudha Suresh MD & CEO (w.e.f. February 01 2017; from April 01 2016 till January 31 2017 was the CFO) 13710 417.15
Mr. Sanjeev Barnwal Company Secretary and Compliance Officer 7310 417.15
Mr. Hiren Shah Chief Financial Officer 7310 417.15

Any other employee who receives a grant of options in any one year of options amountingto five percent or more of options granted during that year – - None

Identified employees who were granted options during any capital (excluding outstandingwarrants and conversions) of the Company at the time of grant. - None

27. Appointment of Independent Directors

The Company with the approval of the shareholders through a postal ballot on September13 2016 has approved the change in categorization of Mr. Abhijit Sen (00002593) as theIndependent Director of the Company and appointed him for a period of five consecutiveyears from September 13 2016 to September 12 2021 and whose office shall not be liableto retire by rotation.

He has been appointed on the terms and conditions as mentioned in his appointmentletter; the extracts of the terms & conditions of the appointment of the independentdirectors has been placed on the website of the Company.

28. Vigil Mechanism

The Company in compliance with Section 177 of the Companies Act 2013 and Regulation 22of SEBI Listing Regulations has established a Whistle Blower policy / Vigil Mechanism forthe directors and employees to report genuine concerns or grievances about unethicalbehavior actual or suspected fraud or violation of the company's Code of Conduct orEthics Policy. The Company has a vigil mechanism process wherein the employees are free toreport violations of laws rules regulations or unethical conduct to the whistle andethics officerf the Company.o

Name and Address of the Whistle and Ethics Officer

Mr. Sanjeev Barnwal Company Secretary and Compliance Officer (w.e.f. April 27 2017)

Ujjivan Financial Services Limited

Grape Garden No. 27 3rd A Cross 18th Main 6thBlock Bangalore – 560095 Karnataka

Email- sanjeev.barnwal@ujjivan.com

Protected Disclosure against the Whistle and Ethics Officer should be addressed to theCEO& MD of the Company and the Protected Disclosure against the CEO & MD of theCompany should be addressed to the Chairman of the Audit Committee.

Name and Address of MD & CEO of the Company: (w.e.f. February 1 2017)

Ms. Sudha Suresh

Ujjivan Financial Services Limited

Grape Garden No. 27 3rd A Cross 18th Main 6thBlock Bangalore - 560095 Karnataka

Email: sudha.suresh@ujjivan.com

Name and Address of the Chairman (Audit Committee):

Mr. K. R. Ramamoorthy

D - 302 Mantri Gardens Jayanagar 1st Block Bangalore - 560011 Karnataka

Email: ram@bankconsult.co.in

The confidentiality of those reporting violations is maintained and they are notsubjected to any discriminatory practice

The whistle blower policy of the Company is disclosed on our website -http://ujjivan.com/html/ujjivan_policies.php

29. Remuneration details of Directors KMPs employees

Sr. No. Particulars Disclosures
1. The ratio of the remuneration of each Whole time director to the median remuneration of the employees of the company for the financial year MD & CEO: 3.17x
2. The percentage increase in remuneration of each director Chief KMP % increase in remuneration
Financial Officer Chief Executive
Officer Company Secretary or Mr. Samit Ghosh 26%
Manager if any in the financial year (MD & CEO – April 01 2016 till January 31 2017)
Resigned w.e.f. January 31 2017 (close of business hours)
Ms. Sudha Suresh
CFO - April 01 2016 till January 31 2017) 24%
MD & CEO – February 01 2017 till March 31 2017 (pending for shareholders ratification and approval) 25%
Consolidated Salary increase during the FY 2016-17 55.3%
Mr. Hiren Shah – CFO (appointed as a CFO w.e.f. February 01 2017) 23.5%
Mr. Sanjeev Barnwal - CS 50.7%
3. The percentage increase in the median remuneration of employees in the financial year; 18.4% increase in the median remuneration of employees in the FY 2016- 17. However all the employees of the Company except 4 (four) employees has been transferred to USFB w.e.f. February 01 2017.
4. The number of permanent employees on the rolls of company as on March 31 2017 4
5. Average percentile increase already than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration The average increase in the salaries of employees was 18% and the made in the salaries of employees other average increase in the managerial remuneration was 31%
is 6. Affirmation as per the remuneration policy of the company Yes

A statement showing the name of every employee of the company whoa. if employedthroughout the financial year was in receipt of remuneration for that year which in theaggregate was not less than one crore and two lakh rupees;

- None b. if employed for a part of the financial year was in receipt of remunerationfor any part of that year at a rate which in the aggregate was not less than eight lakhand fifty thousand rupees per month;

- None c. if employed throughout the financialyear or part thereof was in receipt ofremuneration in that year which in the aggregate or as the case may be at a rate whichin the aggregate is in excess of that drawn by the managing director or whole-timedirector or manager and holds by himself or along with his spouse and dependent childrennot less than two percent of the equity shares of the company.

- None

Information as per Rule 5(2) of Chapter XIII the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 The names of the top ten employees interms of remuneration drawn:

The Company as on March 31 2017 had only the following 4 (four) employees:

Sr. No. Particulars Ms. Sudha Suresh Mr. Sanjeev Barnwal Mr. Hiren Shah Ms. Mantasha Mizaj
1. Designation MD & CEO Company Secretary and Compliance Officer Chief Financial Officer Assistant Manager – Investor Relations
2. Remuneration received 8202497* 3601943* 3311395 769801
3. Nature of employment whether contractual or otherwise; Permanent Permanent Permanent Permanent
4. Qualifications and experience of the employee CA CS & CWA 20+ years' experience CS LLB Diploma in Business Management 13+ years' experience MBA 17 years' experience MBA 2 years' experience
5. Date of commencement of employment November 03 2008 August 12 2014 August 17 2015 May 19 2015
6. The age of such employee 53 36 37 24
7. The last employment held by such employee before joining the company Skyline Construction & Housing Private Limited SMC Capitals Limited Concept Public Relations India Limited None
8. The percentage of equity shares held by the employee in the company 0.02% Nil Nil Nil
9. Whether any such employee is a relative of any director or manager of the company and if so name of such director or manager No No No No

* including perquisite by way of exercise of vested equity options

Compliance of Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013

The Company is in compliance with the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and has a prevention of sexualharassment policy in place. The Directors further state that during the year under reviewthere was no case filed pursuant to the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act

2013.

Green Initiatives

Electronic copies of the Annual Report for the FY 2016-17 and the Notice of the 13thAGM is being sent to all the members whose email addresses are registered with the Company/ Depository Participants. For members who have not registered their email addressphysical copies are sent in the permitted mode.

ACKNOWLEDGEMENT

Your Directors wishes to gratefully acknowledge the assistance and guidance receivedfrom the RBI ROC Investors Banks Auditors Lawyers Accountants Suppliers PartnerNGOs Institutions and Foundations Police & Government Authorities Advisors and allour well-wishers. The Board also wishes to place on record their warm appreciation for thecreative and dedicated efforts of staff at all levels.

For and on behalf of the Board of Directors
K.R. Ramamoorthy Sudha Suresh
Chairperson Managing Director & Chief Executive Officer
DIN: 00058467 DIN: 06480567
Date: April 27 2017
Place: Bangalore