Your directors present the thirty-third Annual Report along with the audited standalone and consolidated financial statements for FY2020.
Sad demise of Nanoo Pamnani
At the outset your Directors express their profound grief on the sudden and sad demise of Nanoo Pamnani Vice-Chairman and independent director of Bajaj Finance Ltd. (the `Company') who passed away on 22 February 2020.
His association with the Company began on 16 May 2007 when he joined the Board. His leadership helped the management to propel the Company to become the most diversified NBFC in the country over the last decade. This would not have been possible but for his astute expertise and supervision over years. He was the Chairman and Member of several Committees of the Board.
The Board places on records its sincere appreciation for valuable services rendered by Nanoo Pamnani as an independent director and Vice-Chairman of the Company. He will be missed dearly.
The COVID-19 pandemic has caused a huge disruption creating an unprecedented impact on the financial well-being of nations corporations and individuals. A detailed discussion on impact of COVID-19 on the NBFC sector and operations of the Company is covered in the `Management Discussion and Analysis.'
Circulation of Annual Reports in electronic form
In view of the prevailing COVID-19 situation and consequent lockdown across the country the Ministry of Corporate Affairs (MCA) has exempted companies from circulation of physical copies of Annual Report for FY2020.
Accordingly the Annual Report of the Company for FY2020 is being sent only by email to the members and all other persons/entities entitled to receive the same.
This Annual Report along with other documents is also available on the Company's website at https://www.bajajfinserv.in/finance-investor-relation-annual-reports
The highlights of the standalone financial results are as under:
Table 1: BFL's Standalone financial performance
|(Rs in Crore)|
|Particulars||FY2020||FY2019||% change over FY2019|
|Interest and finance charge||7857||5939||32|
|Net interest income||15977||11460||39|
|Total operating expenses||5364||3949||36|
|Pre-provisioning operating profit||10613||7511||41|
|Impairment on financial instruments||3805||1476||158|
|Profit before tax||6808||6035||13|
|Profit after tax||4881||3890||25|
|Retained earnings as at the beginning of the year||7612||4788||59|
|Profit after tax||4881||3890||25|
|Other comprehensive income on defined benefit plan||(25)||(9)||178|
|Retained earnings before appropriations||12468||8669||44|
|Transfer to reserve fund u/s 45-IC(1) of the RBI Act 1934||(977)||(779)||25|
|Tax on dividend||(195)||(48)||306|
|Adjustment of dividend to ESOP Trust||3||1||200|
|Retained earnings as at the end of the year||10349||7612||36|
Due to rounding off numbers presented in above table may not add up precisely to the totals provided.
Transfer to reserve fund
Pursuant to the RBI Directions non-banking financial companies (NBFCs) are required to transfer a sum not less than 20 per cent of its net profit every year to reserve fund before declaration of any dividend. Accordingly the Company has transferred a sum of Rs 977 crore to reserve fund.
Subsidiaries associates and joint ventures
The Company has two wholly owned subsidiaries. These are: (i) Bajaj Housing Finance Ltd. (`BHFL' or `Bajaj Housing') which is registered with National Housing Bank as a Housing Finance Company (HFC); and (ii) Bajaj Financial Securities Ltd. (`BFinsec') which is registered with the Securities and Exchange Board of India (SEBI) as a stock broker and depository participant. BHFL started its business in the financial year 2017-18 (FY2018). BFinsec commenced its commercial operations from August 2019 (FY2020).
The Company does not have any associate or joint venture company.
A summary of financial performance of subsidiaries viz. BHFL and BFinsec is given below:
(i) Bajaj Housing Finance Ltd. (BHFL)
BHFL is a housing finance company registered with NHB and is engaged in the business of mortgages. The performance highlights of BHFL for FY2020 are as below:
Assets under management as at 31 March 2020 was Rs 32705 crore as compared to Rs 17562 crore representing a growth of 86%.
Total income increased by 130% to Rs 2646 crore.
Net interest income rose by 122% to Rs 1030 crore.
Total operating cost to net interest income improved significantly to 33% from 64% in FY2019.
Impairment on financial instruments was Rs 124 crore which included a contingency provision of Rs 50 crore for COVID-19.
Gross NPA and Net NPA were at 0.08% and 0.05% respectively among the lowest across all HFCs.
Profit before tax (PBT) increased sharply by 281% to Rs 567 crore.
PAT grew by 283% to Rs 421 crore.
As on 31 March 2020 capital adequacy was 25.15% which is well above the NHB norms of 13%.
Regulation 16 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (the `SEBI Listing Regulations') prescribes that a subsidiary whose income or net worth exceeds 10 per cent of consolidated income or net worth in the immediately preceding accounting year shall be a material subsidiary. Based on the net worth of BHFL it has become a material subsidiary of the Company.
(ii) Bajaj Financial Securities Ltd. (BFinsec)
BFinsec is registered with SEBI as a stock broker and depository participant. During FY2020 BFinsec also received registration from AMFI to act as a distributor of Mutual Fund products. It generated a total income of Rs 11 crore and profit after tax of Rs 2 crore in FY2020.
Performance and financial position of subsidiaries
A summary of financial performance for FY2020 of the wholly owned subsidiaries i.e. BHFL and BFinsec is given below:
|Table 2: BHFL's financial performance||(Rs In Crore)|
|Particulars||FY2020||FY2019||% change over FY2019|
|Interest and finance charges||1616||685||136|
|Net interest income||1030||465||122|
|Total operating expenses||339||297||14|
|Pre-provisioning operating profit||691||168||311|
|Impairment on financial instruments||124||25||396|
|Profit before exceptional item and tax||567||143||297|
|Profit before tax (PBT)||567||149||281|
|Profit after tax (PAT)||421||110||283|
|Other comprehensive income/(expenses)||(1)||(2)||0|
|Total comprehensive income||420||108||289|
|Earnings per share (EPS) basic in H||1.12||0.52|
|(Rs In Crore)|
|Table 3: BFinsec's financial performance|
|Interest and finance charges||1||-|
|Net interest income||10||2|
|Total operating expenses||9||-|
|Profit before tax (PBT)||1||2|
|Profit after tax (PAT)||2||1|
A separate statement containing the salient features of its subsidiaries in the prescribed form AOC-1 is attached to the standalone financial statements.
Pursuant to the provisions of section 136 of the Companies Act 2013 as amended (the `Act') the financial statements consolidated financial statements of the Company and separate financial statements of each of the subsidiary is available on the website of the Company at https://www.bajajfinserv.in/finance-investor-relation-annual-reports.
Dividend distribution policy
Pursuant to the provisions of regulation 43A of the SEBI Listing Regulations the Company has formulated a Dividend Distribution policy. The said policy is annexed to this report. The policy states that the Board should inter alia consider prevailing circumstances and conditions in determining the distribution of dividend to its members.
The Board of Directors at their meeting held on 21 February 2020 declared an interim dividend of Rs 10 per equity share (500%) of face value of Rs 2 payable to shareholders holding shares as on 4 March 2020. The amount of interim dividend and tax thereon aggregate to Rs 725.37 crore. Dividend paid for FY2019 was Rs 6 per equity share (300%) of face value of Rs 2. The amount of dividend and tax thereon aggregated to Rs 419.46 crore.
The directors recommend for consideration of the shareholders at the ensuing annual general meeting (AGM) the above referred interim dividend as final dividend for the financial year ended 31 March 2020.
As on 31 March 2020 paid-up share capital of the Company stood at Rs 120.34 crore consisting of 601689069 equity shares of face value of Rs 2 fully paid-up.
a. Qualified Institutions Placement
During FY2020 pursuant to provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 the Act and the approval of members and of the Board of Directors the Company made a Qualified Institutions Placement (QIP) of 21794871 equity shares of face value of Rs 2 at a price of Rs 3900 per equity share (inclusive of premium of Rs 3898 per equity share) representing a discount of 2.98 per cent to the floor price of Rs 4019.78 per share to Qualified Institutional Buyers (QIB) aggregating to approximately Rs 8500 crore.
The net proceeds from the aforementioned QIP was approximately Rs 8449.94 crore. The entire net proceeds have been utilised for the purpose stated in the placement document i.e. for funding the business requirements of the Company and for general corporate purpose.
b. Employee stock options
During FY2020 1925810 equity shares at applicable grant prices were allotted to BFL Employee Welfare Trust pursuant to BFL Employee Stock Options Scheme 2009.
In addition to the approval for issue of securities by way of a QIP during FY2020 approval of shareholders was also sought for the below businesses through a Postal Ballot. All the resolutions were passed by overwhelming majority:
Amendment to articles of association
The Articles of association of the Company were amended to insert an enabling provision for appointment of any person who has rendered significant or distinguished services to the Company or to the industry to which the Company's business relates or in the public field as `Chairman Emeritus'.
Investment limit of foreign portfolio investors
The Ministry of Finance (Department of Economic Affairs) vide its notification dated 17 October 2019 superseded the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2017 and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2018 with the introduction of Foreign Exchange Management (Non-debt Instruments) Rules 2019.
As per the said rules the FPI limit with effect from 1 April 2020 will automatically get enhanced to sectoral cap i.e. 100 percent in case of the Company. However the Board and the shareholders may choose to set a lower limit of 24 or 49 or 74 per cent. Accordingly pursuant to the approval of the shareholders by means of a special resolution through a Postal Ballot the investment limit of Foreign Portfolio Investors was fixed at 49 per cent. As per the said rules this limit can be enhanced to 74 per cent or 100 per cent but cannot be reduced. For details of the shareholding of Foreign Portfolio Investors as on 31 March 2020 please refer the annexed `Extract of Annual Return'.
Increase in borrowings powers and creation of charge
The Company has increased the borrowing powers of the Board from Rs 130000 crore to Rs 160000 crore pursuant to section 180(1)(c) of the Act and to create/provide necessary security for such borrowings by creation of charge on the assets of the Company present and future for an amount up to Rs 160000 crore.
The combined borrowing limit of the BFL and its housing finance subsidiary i.e. BHFL as approved by their respective shareholders now stands at Rs 215000 crore.
Working results of the Company
BFL enjoyed yet another strong year of performance aided by a diversified product mix robust volume growth prudent liability management efficient operating costs and effective risk management. With a standalone AUM of Rs 116102 crore and a consolidated AUM of Rs 147153 crore the Company has emerged as one of the leading diversified NBFCs in the country today. During the nine months ended 31 December 2019 the Company maintained its strong growth trajectory. It recorded a growth of 35% in consolidated AUM and of 52% in consolidated profit after tax (PAT). The last quarter's performance was impacted due to a lockdown caused by COVID-19 which resulted in full year's consolidated AUM growing at 27% compared to 35% in the first nine months; and consolidated PAT increasing by 32% versus 52% in first nine months. It was still a strong outcome given the difficult environment.
Performance Highlights of the Company for FY2020 are as below
Number of new loans booked increased by 17% to 27.44 million.
AUM grew by 27% to Rs 147153 crore on a consolidated basis and by 18% to Rs 116102 crore on a standalone basis.
Total income increased by 43% to Rs 26386 crore on a consolidated basis and by 37% to Rs 23834 crore on a standalone basis.
Net interest income (NII) rose by 42% to Rs 16913 crore on a consolidated basis and by 39% to Rs 15977 crore on a standalone basis.
Total operating cost to NII improved to 33% from 35% in FY2019 on a consolidated basis.
Impairment on financial instruments was Rs 3929 crore on a consolidated basis which included an accelerated charge of two identified large accounts of Rs 483 crore and a contingency provision of Rs 900 crore for COVID-19. This on a standalone basis was Rs 3805 crore including the accelerated charge of Rs 483 crore and a contingency provision of Rs 850 crore for COVID-19.
BFL's consolidated and standalone net NPA stood at 0.65% and 0.79% respectively-among the lowest across all NBFCs. The Company's loan book continued to remain strong because of its deeply embedded risk culture and robust risk management practices.
Profit before tax increased by 18% to Rs 7322 crore on a consolidated basis and by 13% to Rs 6808 crore on a standalone basis.
PAT grew by 32% to Rs 5264 crore on a consolidated basis and by 25% to Rs 4881 crore on a standalone basis.
As on 31 March 2020 capital adequacy was 25.01% which is well above the RBI norms. Tier I adequacy was 21.27%.
The Company continued to prudently manage its asset liability management (ALM) with a strategy of raising long-term borrowings and maintaining a judicious mix of borrowings between banks money markets and deposits. As on 31 March 2020 the Company had a consolidated liquidity buffer of Rs 15725 crore.
During FY2020 the Company's borrowing cost increased by 13 bps over FY2019. This was for two reasons; (i) elevated borrowing rates for the sector in the early part of FY2020 caused by default committed by a systemically important NBFC in September 2018; and (ii) conservative liquidity management stance of the Company to go long on its liability profile.
The Company's provision coverage on non-NPA assets on a consolidated basis excluding the contingency provision stood at 97 bps and 159 bps including the contingency provision which is higher than the extant provisioning norms of RBI for NBFCs.
Given the COVID-19 situation the outlook for the coming year is expected to be extremely demanding. In the current situation lending businesses face four daunting challenges of (i) disruption in business acquisition (ii) providing customers adequate relief on their debt servicing obligations (iii) dealing with incapacitated customer service and debt recovery infrastructure and (iv) continuing to service their own debt.
To overcome the COVID-19 crisis governments across the world will look to the financial sector to help revive their economies. Here given your Company's healthy capital adequacy strong liquidity position low gross NPA and net NPA access to retail deposits large customer franchise diversified portfolio mix granular geographical distribution and robust risk metrics it is better placed than many others in the NBFC space to capitalise on the opportunities that will emerge in what will possibly be a totally new business environment.
Moratorium of loans
The Reserve Bank of India issued guidelines on 27 March 2020 permitting all commercial banks co-operative banks All India Financial Institutions and NBFCs to give moratorium to customers in respect of instalments falling due between 1 March 2020 to 31 May 2020. Accordingly the Company started offering moratorium to its customers basis a Board approved policy.
Details regarding the operations of the different products of the Company and the state of affairs of the Company are covered in the `Management Discussion and Analysis'.
Extract of Annual return
The Extract of Annual Return as provided under section 92(3) of the Act in the prescribed form MGT-9 is annexed to this Report and is also hosted on the Company's website and can be accessed at https://www.bajajfinserv.in/finance-investor-relation-annual-reports
Directors and key managerial personnel (KMP)
A. Change in Directorate
On account of his untimely and sad demise on 22 February 2020 Nanoo Pamnani ceased to be a director with effect from the said date. The Board places on record its sincere appreciation for guidance services and mentorship provided by late Nanoo Pamnani as an independent director and Vice-Chairman of the Company.
B. Directors liable to retire by rotation
Madhur Bajaj director (DIN: 00014593) retires by rotation at the ensuing AGM being eligible offers himself for re-appointment. Necessary details for re-appointment as required under the Act and the SEBI Listing Regulations is given in the notice of 33rd AGM.
C. Re-appointment of Managing Director
Rajeev Jain (DIN: 01550158) was appointed as the Managing Director of the Company for a period of 5 years from 1 April 2015 up to 31 March 2020. The Board on recommendation of the Nomination and Remuneration and after evaluating his performance and considering the Company's growth under his leadership approved his re-appointment for a period of 5 years commencing 1 April 2020 subject to approval of the shareholders.
Accordingly resolution seeking his re-appointment for further term of 5 years forms a part of the notice convening the 33rd AGM.
D. Key Managerial Personnel
There was no change in the Key Managerial Personnel of the Company during FY2020.
Number of meetings of the Board
Nine (9) meetings of the Board were held during FY2020. Details of the meetings and attendance thereat forms part of the `Corporate Governance Report'.
Consequent to demise of Nanoo Pamnani Dr. Omkar Goswami was designated as Chairman of the Committee with effect from 17 March 2020. Further Dr. Naushad Forbes has been inducted as a member w.e.f. 19 May 2020.
More details regarding the Audit Committee including composition attendance at the meetings and brief terms of reference are given in the annexed `Corporate Governance Report'.
Directors' responsibility statement
In compliance of section 134(5) of the Act the directors state that:
(i) in the preparation of the annual accounts the applicable accounting standards have been followed along with proper explanation relating to material departures;
(ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for FY2020;
(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
(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 and that such internal financial controls are adequate and are operating effectively; and
(vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.
Declaration by independent directors
The independent directors have submitted a declaration of independence stating that they meet the criteria of independence provided under section 149(6) of the Act as amended and regulation 16 of the SEBI Listing Regulations. The independent directors have also confirmed compliance with the provisions of rule 6 of Companies (Appointment and Qualifications of Directors) Rules 2014 as amended relating to inclusion of their name in the databank of independent directors.
The Board took on record the declaration and confirmation submitted by the independent directors regarding them meeting the prescribed criteria of independence after undertaking due assessment of the veracity of the same in terms of the requirements of regulation 25 of the SEBI Listing Regulations.
Policy on directors' appointment and remuneration
The salient features of the policy on directors' appointment and remuneration forms a part of the `Corporate Governance Report'. The said policy is placed on the Company's website at https://www.bajajfinserv.in/media/finance/downloads/remuneration-policy.pdf
Particulars of loans guarantees and investments
The Company being a non-banking financial company registered with the RBI and engaged in the business of giving loans is exempt from complying with the provisions of section 186 of the Act w.r.t. loans. Accordingly the disclosures of the loans given as required under the aforesaid section have not been made in this Report.
During FY2020 the Company made the following significant investments:
1. Investment in subsidiaries
BHFL-an amount of approximately Rs 1500 crore by subscribing to 1333333329 equity shares at a price of Rs 11.25 for equity share of face value of Rs 10 on rights basis. The total investment in BHFL as on 31 March 2020 is approximately Rs 5050 crore.
BFinsec-an amount of Rs 100 crore by subscribing to 100000000 equity shares of the face value of Rs 10 issued at par on rights basis. The total investment in BFinsec as on 31 March 2020 is approximately Rs 120.38 crore.
2. Investment in One MobiKwik Systems Pvt. Ltd. (MobiKwik)
BFL was allotted 45325 Series E compulsorily convertible cumulative preference shares in tranches against the receivables of the Company pursuant to commercial agreement with MobiKwik amounting to Rs 37.32 crore. The total investment in MobiKwik as on 31 March 2020 is approximately Rs 262.32 crore.
3. Investment in RBL Bank
BFL participated in qualified institutions placement of RBL Bank and was allotted 4273504 equity shares at a price of Rs 351 per equity share aggregating to approximately Rs 150 crore.
Information regarding investments covered under the provisions of section 186 of the Act is detailed in the financial statements.
Related party transactions
All contracts/arrangement/transactions entered by the Company during FY2020 with related parties were in compliance with the applicable provisions of the Act and SEBI Listing Regulations. Requisite approval of the Audit Committee was obtained for all related party transactions.
All related party transactions entered during FY2020 were on arm's length basis and in the ordinary course of business of the Company under the Act and not material under the SEBI Listing Regulations or extant RBI guidelines. None of the transactions required members' prior approval under the Act or SEBI Listing Regulations.
During FY2020 there were no related party transactions requiring disclosure under section 134 of the Act. Hence the prescribed Form AOC-2 does not form a part of this report. However the details of transactions with related parties are provided in the Company's financial statements in accordance with the Indian Accounting Standards.
The Company's policy on materiality of and dealing with related party transactions as approved by the Board is uploaded on the website of the Company and can be accessed at https://www.bajajfinserv.in/media/finance/downloads/policy-on-materiality-of-related-party-transactions.pdf and is also included in the annexed `Corporate Governance Report'.
Material changes and commitments
There were no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company and the date of this Report.
Conservation of energy
The operations of the Company are not energy intensive. However the Company has taken various measures for conservation of energy these include:
Switching from conventional lighting systems to LED lights at most of the branches in metro areas.
Selecting and designing offices to facilitate maximum natural light utilisation.
Use of cloud based virtual servers to increase energy efficiency and data security.
Commencement of installation of solar panels at Nashik and Baroda branches.
Further details of initiatives taken by the Company are included in the Business Responsibility Report.
The details pertaining to technology absorption have been explained in the annexed `Management Discussion and Analysis'.
Foreign exchange earnings and outgo
During FY2020 the Company did not have any foreign exchange earnings and the foreign exchange outgo amounted to Rs 203.67 crore (FY2019-H 35.39 crore).
The Board of Directors have adopted a risk management policy for the Company which provides for identification assessment and control of risks which in the opinion of the Board may pose significant loss or threat to the Company. The Management identifies and controls risks through a defined framework in terms of the aforesaid policy. A detailed discussion on the Company's risk management and portfolio quality is covered in the `Management Discussion and Analysis'.
Corporate social responsibility
During FY2020 the Company spent Rs 82.19 crore on corporate social responsibility (CSR) activities as against mandatory expenditure of Rs 81.92 crore. Detailed information on the CSR policy its salient features and CSR initiatives taken during FY2020 and composition of the Committee is given in the annexed `Annual Report on CSR activities'.
The CSR policy of the Company has been hosted on the website of the Company and can be accessed at https://www.bajajfinserv.in/finance-investor-relations-policies-and-documents.
Formal annual evaluation
Information on the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees Chairperson and individual directors is given in the annexed `Corporate Governance Report'.
Significant and material orders
During FY2020 no significant and material orders were passed by any regulator or court or tribunal impacting the going concern status and Company's operations in future.
At the beginning of each financial year an audit plan is rolled out after approval of the Audit Committee. The audit plan is aimed at evaluation of the efficacy and adequacy of internal control systems and compliance thereof robustness of internal processes policies and accounting procedures compliance with laws and regulations. Based on the reports of internal audit function process owners undertake corrective action in their respective areas.
Significant audit observations and corrective actions thereon are presented to the Audit Committee.
Internal financial controls
The internal financial controls of the Company are commensurate with its size scale and complexity of operations. The Company has robust policies and procedures which inter alia ensure integrity in conducting business timely preparation of reliable financial information accuracy and completeness in maintaining accounting records and prevention and detection of frauds and errors.
The internal financial controls with reference to the financial statements were tested and reported adequate and operating effectively.
Employee stock option scheme
During FY2020 there has been no change in the BFL Employee Stock Option Scheme 2009 (the `ESOP scheme') of the Company. The ESOP Scheme is in compliance with the SEBI (Share Based Employee Benefits) Regulations 2014 (the `SBEB Regulations').
A Statement giving complete details as at 31 March 2020 pursuant to regulation 14 of the SBEB Regulations is available on the website of the Company and can be accessed at https://www.bajajfinserv.in/finance-investor-relation-annual-reports
Grant wise details of options vested exercised and cancelled are provided in the notes to the standalone financial statements.
The Company has not issued any sweat equity shares or equity shares with differential rights during FY2020.
The Company accepts deposits from retail and corporate clients. As on 31 March 2020 it had a deposits book of Rs 21427.10 crore delivering an annual growth of 62% in FY2020. Deposits contributed to 21% of BFL's standalone borrowings versus 15% as at the end of FY2019. To further facilitate this growth BFL in FY2020 as a test launched 31 fixed deposits service branches across three large cities in India.
During FY2020 the Company accepted public deposits of Rs 8172.43 crore. Public deposits outstanding as at the end of the year aggregated to Rs 13127.33 crore. As on 31 March 2020 there were 6 FDs amounting to Rs 5.45 lakh which had matured and remained unclaimed and interest on matured deposits amounting to Rs 0.36 lakh had also remained unclaimed.
Pursuant to provisions of the RBI Act 1934 the Company has created a charge on statutory liquid assets amounting to Rs 2242.09 crore in favour of the trustee for FD holders.
During FY2020 the Company accepted inter corporate deposits (ICDs) of Rs 7098.19 crore. ICDs outstanding as on 31 March 2020 were Rs 5939.94 crore.
During FY2020 the Company accepted other deposits of Rs 2121.39 crore. Other deposit outstanding as on 31 March 2020 were Rs 2359.82 crore.
During FY2020 there was no default in repayment of deposits or payment of interest thereon.
External commercial borrowings and medium-term note programme
In January 2019 RBI permitted NBFCs to borrow up to USD 750 million per financial year pursuant to the External Commercial Borrowing (ECB) Framework under the `Automatic' route. Accordingly in June 2019 the Company established Secured Euro Medium Term Note Programme for USD 1.5 billion listed on Singapore Exchange Securities Trading Ltd. to be utilised over a period of time.
During FY2020 the Company has availed External Commercial Borrowings to the tune of USD 575 million equivalent to approximately Rs 4082.66 crore. The said borrowing is within the overall borrowing limits approved by the shareholders.
Debenture redemption fund
The Ministry of Corporate Affairs (MCA) has amended the Companies (Share Capital and Debenture) Rules 2014 doing away with creation of debenture redemption reserve by NBFCs with respect to issue of non convertible debentures (NCDs). Vide the said amendment now NBFCs are required on or before 30 April of each year to invest or deposit in prescribed securities a sum not less than 15 per cent of the debentures maturing during the year ending on 31 March of the next year.
In view of the COVID-19 pandemic MCA announced several special measures under the Act. As a part of such special measures the due date to make investment/deposit for debentures maturing in FY2021 has been extended from 30 April 2020 to 30 June 2020.
The brief details of the ratings received from credit rating agencies by the Company for its outstanding instruments is given in the annexed `General Shareholder Information'.
Whistle blower policy/vigil mechanism
The Company has a whistle blower policy encompassing vigil mechanism pursuant to the requirements of the section 177(9) of the Act and regulation 22 of the SEBI Listing Regulations. The Audit Committee reviews the functioning of the Whistle blower policy. The policy/vigil mechanism enables directors and employees to report to the Management their concerns about unethical behaviour actual or suspected fraud or violation of the Company's code of conduct or ethics policy and leak or suspected leak of unpublished price sensitive information.
The whistle blower policy is uploaded on the website of the Company and can be accessed at https://www.bajajfinserv.in/finance-investor-relations-policies-and-documents
The Company continues to fulfill all the norms and standards laid down by the RBI pertaining to non-performing assets capital adequacy statutory liquidity assets etc. As against the RBI norm of 15% the capital to risk-weighted assets ratio of the Company was 25.01% as on 31 March 2020. In line with the RBI guidelines for asset liability management (ALM) system for NBFCs the Company has an Asset Liability Committee which meets monthly to review its ALM risks and opportunities.
The Company continues to be in compliance with the NBFC-Corporate Governance (Reserve Bank) Directions 2015.
The financial results of the Company are placed on the Company's website https://www.bajajfinserv.in/finance-investor-relations-financial-information
Details required under the provisions of section 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 containing inter alia ratio of remuneration of directors and KMP to median remuneration of employees percentage increase in the median remuneration are annexed to this Report.
Details of top ten employees in terms of the remuneration and employees in receipt of remuneration as prescribed under rule 5(2) Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended containing details prescribed under rule 5(3) of the said rules which form part of the Directors' Report will be made available to any member on request as per provisions of section 136(1) of the Act.
During FY2020 the auditors have not reported any matter under section 143(12) of the Act and therefore no detail is required to be disclosed under section 134(3)(ca) of the Act.
The Company being an NBFC the provision relating to Chapter V i.e. acceptance of deposit of the Act are not applicable. Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions 2007 and other NBFC regulations have been made in this Annual Report.
Pursuant to RBI Master Direction-Information Technology Framework for the NBFC sector the Company has constituted an IT Strategy Committee to review the IT strategies in line with its corporate strategies cyber security arrangements and other matters related to IT governance.
The provision of section 148 of the Act are not applicable to the Company. Accordingly there is no requirement of maintenance of cost records as specified under section 148(1) of the Act.
The Company has a policy on prevention of sexual harassment at the workplace. The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. The number of complaints received disposed of and pending during FY2020 is given in the annexed `Corporate Governance Report'.
There is no change in the nature of business of the Company during FY2020.
The Company has not defaulted in repayment of loans from banks and financial institutions.
There were no delays or defaults in payment of interest/principle of any of its debt securities.
The Managing Director as per the terms of his appointment does not draw any commission or remuneration from BFL's holding or subsidiary companies. Hence no disclosure as required under section 197(14) of the Act has been made.
Disclosures pursuant to RBI Master Directions unless provided in the Directors' Report form part of the notes to the standalone financial statements.
Pursuant to the SEBI Listing Regulations a separate section titled `Corporate Governance' has been included in this Annual Report along with the Reports on `Management Discussion and Analysis' and `General Shareholder Information'.
All Board members and Senior Management personnel have affirmed compliance with the code of conduct for FY2020. A declaration to this effect signed by the Managing Director of the Company is included in this Annual Report.
The Managing Director and the Chief Financial Officer have certified to the Board in relation to the financial statements and other matters as specified in the SEBI Listing Regulations.
A certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.
Business responsibility report
Pursuant to the provisions of the SEBI Listing Regulations the Company is required to give Business Responsibility Report (`BRR') in the Annual Report. The BRR for FY2020 is uploaded on the website of the Company and can be accessed at https://www.bajajfinserv.in/finance-investor-relation-annual-reports
Secretarial standards of ICSI
The Company has complied with the requirements prescribed under the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2).
Pursuant to the provisions of section 139 of the Act S R B C & CO LLP Chartered Accountants (Firm Registration No. 324982E/E300003) were appointed as statutory auditors of the Company to hold office from the conclusion of the 30th AGM of the Company till the conclusion of the 35th AGM.
The Audit Report by S R B C & CO LLP for FY2020 is unmodified i.e. it does not contain any qualification reservation or adverse remark.
Pursuant to the provisions of section 204 of the Act the Board has appointed Shyamprasad D Limaye practising company secretary (FCS No. 1587 CP No. 572) to undertake secretarial audit of the Company.
A report from the secretarial auditor in the prescribed Form MR-3 is annexed to this Report. The same does not contain any qualification reservation or adverse remark.
In addition to the above and pursuant to SEBI circular dated 8 February 2019 a report on secretarial compliance by Shyamprasad D Limaye for FY2020 has been submitted with stock exchanges. There are no observations reservations or qualifications in the said report.
The Board of Directors would like to express its gratitude and its appreciation for the support and co-operation from its members RBI and other regulators banks financial institutions trustees for debenture holders and FD holders.
The Board of Directors also places on record its sincere appreciation for the commitment and hard work put in by the Management and the employees of the Company and thanks them for yet another excellent year.
On behalf of the Board of Directors
Rahul Bajaj Chairman
Pune: 19 May 2020