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CARE Ratings Ltd.

BSE: 534804 Sector: Others
NSE: CARERATING ISIN Code: INE752H01013
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OPEN 477.00
PREVIOUS CLOSE 475.25
VOLUME 29768
52-Week high 588.00
52-Week low 236.45
P/E 17.65
Mkt Cap.(Rs cr) 1,371
Buy Price 467.00
Buy Qty 6.00
Sell Price 465.45
Sell Qty 12.00
OPEN 477.00
CLOSE 475.25
VOLUME 29768
52-Week high 588.00
52-Week low 236.45
P/E 17.65
Mkt Cap.(Rs cr) 1,371
Buy Price 467.00
Buy Qty 6.00
Sell Price 465.45
Sell Qty 12.00

CARE Ratings Ltd. (CARERATING) - Director Report

Company director report

Your Directors are pleased to present the Twenty Seventh Annual Report of your Companyalong with the audited Financial Statements for the year ended March 31 2020.

Financial Performance

Your Company's Financial Performance for the year ended March 31 2020 is summarizedbelow:

Summary Financial Performance

Particulars

For the year ended March 312020

For the year ended March 312019

Income from Operations 219.10 297.36
Other Income 31.34 29.83
Total Income 250.44 327.19
Total Expenditure 150.19 129.15
Profit Before Tax (PBT) 100.25 198.04
Provision for Tax 19.75 63.05
Profit After Tax (PAT) 80.50 134.99
Other comprehensive Income/(loss) -0.70 -2.04
Total Comprehensive Income for the period 79.80 132.95
Appropriations
Interim Dividend 50.08 53.03
Tax on Interim Dividend 10.29 10.90
Final Dividend 35.35 109.01
Tax on final dividend 7.27 22.41
Total (Dividend Outflow) 103.00 195.35
Transferred to General Reserve 3.22 -

• Proposed Dividend of Rs.2.50 per equity share declared in Q4 FY 20 is notconsidered in FY 20 as per Ind AS Accounting.

• Total income for the year is Rs 250.44 crore compared with Rs 327.19 crore inFY19.

• Other income had increased from Rs 29.83 crore in FY19 to Rs 31.34 crore inFY20.

• Total expenditure increased by 16.3% in FY20 largely on account of:

1. Depreciation costs which increased by Rs. 3.84 crore (amortization on leasedproperties on adoption of Ind AS 116 "Leases" and fresh capitalization ofassets);

2. One-time cost on forensic audit SEBI penalty and COVID 19 provisions (Rs. 7 crore);and

3. Salary expenses which rose by Rs.10.54 crore (due to salary revision generalincrements and new hiring) that was offset by savings on ESOP costs by Rs.7.39 croressince ESOP vesting date ended on August 31 2019 leading to net increase in employee costby Rs. 3.15 crore.

Dividend

Your Company paid a total interim dividend of Rs.17/- per equity share amounting to apayout of Rs. 60.38 crores including Dividend Distribution Tax (DDT). The Board hasrecommended final dividend of Rs. 2.50/- per equity share amounting to a payout of Rs.7.37crore for FY 2019-20 to be approved at the ensuing Annual General Meeting. The dividendwould be paid in compliance with the applicable rules and regulations. In terms ofRegulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 the Dividend Distribution Policy is appended as Annexure-I to the report and isavailable on the website of the Company at www.careratings.com.

Transfer to Reserves

On account on ESOPs lapsed on resigned employees Rs.3.22 crore has been transferred tothe General Reserve of the Company during the said period.

Share Capital

The Authorised Share Capital of your Company is 30000000 Equity Shares of face valueRs.10/- each amounting to Rs. 300000000/- (Rupees Thirty Crore only ) and the Paid-upShare Capital is 29461214 Equity Shares amounting to Rs. 294612140 /- (Rupees TwentyNine Crore Forty Six Lakh Twelve Thousand One Hundred and Forty only). During thefinancial year ended March 31 2020 the Company has not issued and allotted any equityshares.

Extract of Annual Return

Pursuant to the provisions of Section 143(3)(a) of the Companies Act 2013 the extractof Annual Return for the financial year ended March 31 2020 in MGT-9 in accordance withSection 92(3) of the Companies Act 2013 read with Companies (Management andAdministration) Rules 2014 is available on the website of the Company atwww.careratings.com and is also appended as Annexure- ll.

Economic Backdrop: 2019-20

The Indian economy slowed down with GDP growth moderating to 4.2% in 2019-20 thelowest rate in the 2011-12 GDP series and lower than 6.1% witnessed in 2018-19. Thelockdown in the last week of March 2020 did impact the year end business targetsachievements of several entities.

The slowdown in the economy during the year can be ascribed to sluggish growth inconsumption expenditure sharp decline in investment activity and negative exports growth.The investment rate in the economy declined during 2019-20 to 26.9% which is the lowestrate since 2000-01. The rate is significantly lower than 34.3% achieved in 2011-12. Thedecline in the investment rate in the economy is also reflected in the low capacityutilization rates as per the RBI's survey. The capacity utilization has declined steeplyin Q2 and Q3 of 2019-20 and the utilization rate achieved in Q3 is at its lowest levelsince Q1 of 2008-09.

Industrial output going by the Index of Industrial production contracted by 0.7% in2019-20 negative annual growth for the first time since the commencement of the newseries in 2011-12. Industrial production had recorded a growth of 3.8% in 2018-19.

Corporate performance has been subdued during 2019-20. Our study on corporateperformance for a sample of 1706 companies reveals a decline in sales by 0.7% with netprofit falling by 37%.

Bank credit growth declined to 33-year low of 6.1% in 2019-20 compared with 13.3% inthe previous year. The notable decline in bank credit growth has been on account of weakgrowth to the services and industrial segment. Growth to manufacturing was lower at 0.7%as against 6.9% in FY19 with micro small and medium units witnessing negative growth.Growth in credit to services was lower at 7.4% as against 17.8% in FY19.

In 2019-20 total corporate bond issuances aggregated Rs 6.9 lakh crs 6.6% higher thanthe issuances of Rs 6.46 lakh crs in 2018- 19. Among sectoral issuances the highest wasbanking and term lending at 35% followed by financial services (17%) and housing finance(13%). In terms of sectoral growth in issuances in 2019-20 21% growth was recorded in thebanking segment 62% in roads and highways and 40% in the power segment. At the same timeissuances of housing finance and financial services contracted by 28% and 20% respectivelyfrom a year ago.

Commercial Paper (CP) issuances by corporates were lower in 2019-20. Fresh issuances ofcommercial paper amounted to Rs. 22 lakh crore 15% lower than in 2018-19. In terms ofoutstanding CPs there was a decline of 28.6% on March 31 2020 over March 31 2019. Againstthe background of the NBFC crisis which started in second half of 2018 interest of mutualfunds in such instruments especially from NBFCs came down.

Inflation in the country recorded mixed trend during the year with retail pricesincreasing and wholesale prices moderating. The RBI during the year slashed the repo rateby 185 basis points from 6.25% as of end-period March'2019 to 4.4% as of the end of 2019-20. The RBI has maintained an accommodative monetary policy stance throughout the year.This has continued in the first quarter of FY21 and is expected to remain so for the restof the year too.

The banking system liquidity surplus had widened to almost 4.8 lakh crs in March 2020.Since February 2020 the RBI had commenced with its new programme of Long-Term RepoOperations (LTRO) to provide a boost to term lending which has subsequently been targetedto specific sectors in FY21.

GSec yields broadly declined during the year to 6.73% in 2019-20 1% lower than a yearago. The GSec yields largely fell during the first half of the fiscal on account of fallin the policy repo rate in the economy surplus liquidity in the banking system and benigninflation in the economy. During the second half of the fiscal GSec yields have beenpressured and elevated on account of likely fiscal slippages weakness in the domesticcurrency foreign investor outflows and growth concerns amidst the COVID-19 outbreak.

The rupee witnessed significant volatility in 2019-20 ranging between Rs.68.4/$ andall-time low of Rs.76.3/$. It ended the year at around Rs.75.6/$ a depreciation of 9.3%from the start of the fiscal. In March 2020 the rupee depreciated to its all-time lowlevel on the back of foreign investors pulling out funds and rushing towards safe havenassets amidst global growth concerns.

The performance of your company should be looked at against this background.

Major Developments

Over the past year your company has taken various measures for strengthening therating processes as well as analytical rigour. We had appointed external consultants forsuggesting improvements in our processes and systems with a view of modernizing the same.Going forward the processes will get augmented with the use of best digital technologies.

During the year SEBI had directed the company to conduct a forensic audit in thematter of anonymous complaints received by it. The former MD & CEO was sent on leaveand subsequently his employment was terminated. SEBI has advised CARE to carry out aninvestigation in a matter relating to the former Chairman and former MD & CEO andother employees for alleged interference in the ratings. The same has been initiated.

The Board has appointed Mr Ajay Mahajan as new MD & CEO of the Company who hasaround three decades of experience in the financial sector. He will henceforth be drivingthe business strategies of the company.

Business operations

In FY20 in a rather challenging environment your Company's focus was on building theclient base and widening the coverage of debt rated in the market. Since inception yourcompany has completed a total of 81874 rating assignments till March 31 2020. On acumulative basis the amount of debt rated instruments increased to Rs. 141.10 lakh croreas of March 31 2020.

Assignment Type (New Instruments)

Number of New debt instruments rated

Volume of new debt instruments rated (Rs. crore)

2019-20

2018-19

2019-20

2018-19

Short & Medium term 74 110 224772 326932
Long term 290 338 632584 813405
Bank Facility Ratings 4046 8088 415812 850170
Others 933 844 -
Total 5343 9380 1273168 1990507

The above table provides information on the various aspects of the business profile andgrowth during the year. Certain key aspects are enumerated as under:

1. The total number of new rating assignments declined by 43.0% in 2019-20. Themoderation can in large part be ascribed to the decline in bank facility ratings. Bankfacilities accounted for around 76% of total assignments in 2019-20. There was a sharpdrop (of about 50%) in bank facility rating assignments in 2019-20. This was more due tothe adverse external environment which was typified by a slower growth rate in growth inbank credit to the manufacturing and services sectors - which are the segments relevantfrom a rating perspective.

2. The total volume of new debt rated decreased by 36.0% from Rs. 19.91 lakh crore in2018-19 to Rs. 12.73 lakh crore in 2019-20 mainly on account of broad-based decrease indebt rated volume across categories. For the volume of long-term instruments which relateto the corporate bond market the higher volume of 2018-19 relative to issuance at themacro level meant lower spill over for the current year. It must be noted that debt ratedby us in a year may not necessarily be issued/ fully issued in the same year and could bedone the following year.

3. In terms of number of new debt instruments rated the bank facility ratingswitnessed a decline in share from 86.2% in 201819 to 75.7% in 2019-20. On the other handthe share of short & medium-term instrument ratings increased from 1.2% to 1.4% andthat of long-term instruments ratings increased from 3.6% to 5.4% in 2019-20. Quiteclearly the subdued lending conditions in the banking system impacted the rateable debtin the market.

Business during the year

Large corporates and Mid-corporates

During the year there was an industry wide reduction in the number of new clientsrated. Our focus on the large and midcorporate segments helped in ensuring that thecompany does not get impacted more than the industry on this count. The important stepsincluded constant connect with the clients and outreach to prospects.

Small and Medium Enterprises (SMEs)

The SME rating business is a small component of our business in revenue terms. Howeverwe do attach importance to this segment considering that the SMEs of today are the largecorporates of tomorrow. As highlighted there was an industry wide decline in the numberof new companies rated during the year compared with the previous year and the SME segmentwas relatively more impacted. CARE has put in place technology enabled models both toacquire and provide analytical services to this set of customers.

Effective from FY21 some of the product offerings on the SME side shall move to CARE'swholly owned subsidiary as a part of the regulatory requirements.

IT Initiatives:

In 2019-20 CARE Ratings' IT initiatives were focused on upgrading the existing ITinfrastructure in order to support rating operations. We also upgraded our InformationSecurity Management System (ISMS) framework and successfully implemented the rating modelapplication integrated with core rating application. Digitizing of the rating modelsprovided us opportunities to do assessments online with greater potential towardsaccuracy. We have enhanced our core business application to add new features.

The development of digital technology in IT infrastructure by your company hassignificantly changed the business landscape. As a result we have managed entire businessoperations to run smoothly during the COVID19 epidemic.

IT has successfully enabled all employees to work from home.

The focus for 2020-21 will be on building core business applications on the newtechnology framework which will integrate various applications within the organizationand data sourcing tools from the market. This initiative will automate various manualprocesses with the help of AI / ML based models.

The COVID-19 crisis has caused unprecedented disruption to normal business activityglobally. In 2020-21 the IT initiatives of your company will be based on the principles ofdigital transformation and adoption of a holistic digital strategy to ensure readinessfor any unforeseeable future disruptions.

Knowledge dissemination

CARE Ratings has significant knowledge at an aggregate level of economic industrialand capital market activities and has been very proactive in reacting to events anddisseminating our views immediately to our clients regulators government departmentsopinion makers and media houses on various issues. For this we have three independentresearch teams - Economics BFSI and Industry Insights.

CARE Ratings has continued with its monthly release of CARE Debt Quality Index (CDQI)which tracks the changes in the overall quality of debt in the economy based on arepresentative sample of companies in our portfolio besides the quarterly release ofModified Credit Ratio (MCR) which looks at the trend of upgrades and downgrades. Employeesare also encouraged to conduct webinars partake in training programs and engage inoutreach programs with clients on their subject which gives them an opportunity todiscuss their research with other stakeholders.

Economics

The Economics Division has always been consistent in circulating real-time domestic andglobal economic related updates. The division also initiates daily and monthly debt marketreports- DDMU- Daily Debt Market Update and DMR- Debt Market Review. In addition aliquidity report is published on a weekly basis. The issuances and yields in the CP andcorporate bond markets are monitored on a regular basis.

Surveys have been carried out on the impact of COVID on the economy and sectors twice -before and after the lockdown to ascertain views from industry and experts.

Sectoral Views

The Industry and BFSI research team covers over 65 sectors. Sector specialists alsogive their views on various developments from time to time which blend the expertise ofour rating and research specialists. The inputs from Industry research team aid the ratinganalysts on understanding the demand-supply and outlook prospects of a particularindustry.

The division also publishes thematic reports reports on developments pertinent to thesector and updates on the tracked sectors on a regular basis. This year the research teamstarted publishing an Industry Confidence Index which provides an objective view of theconfidence level present in the industry based on 6 touch points (of which 5 areobjectively defined) for 50 industries on a quarterly basis. The 6 variables looked at aresales profit margins pricing power ratings changes interest cover and outlook. Thelast factor is the only subjective indicator based on our perception. This index hencereflects objectively the confidence level in industry on a quarterly basis.

Webinars

In continuation of our Knowledge Dissemination series CARE Ratings conducted 34webinars during FY2019-20. All key sectors from economy & public finance industrialsbanking and infrastructure were covered. Each presentation was made by a Senior DirectorSector specialist from ratings and analyst (ratings or research).

Knowledge Partnerships

CARE Ratings was associated as knowledge partners for various conferences of ASSOCHAMPHD Chambers of Commerce and Industry ICAI IIPF and ET Rise. Subjects covered werediverse and included Mining in Karnataka steel electric vehicles real estate andhousing finance oil and gas and capital markets.

Media interactions

CARE Ratings' published reports updates and newscasts on various sectors and economyare widely covered across all media. Our Senior Management team is regularly seen atprominent news channels and their views and quotes are published across major printeditions and online news portals. CARE Ratings' reports and insights have often beenquoted by prominent columnists thought leaders and influencers on social media.

Challenges to industry and our plan of action

There are always two sets of challenges for a credit rating agency. The first is theevolving regulatory framework where we proactively respond and tune our processes so as tobe aligned with the rules laid down. The second is external to the system where theenvironment determines the perimeter of business. The lines are drawn by the overallgrowth impetus in the economy and the investment taking place. These two factors have abearing on the rateable universe which in turn sets limits on growth in our business. FY20has been challenging on both counts with GDP growth slowing down and investment ratereaching the lowest level.

Our action plan is to get more diversified through our subsidiaries so that we arebetter prepared to build the future edifice of the CARE Group of companies. This has thepotential for growing the overall business of the Group as upside in rating business isrestricted to a large extent by the buoyancy of the economy and hence it becomesnecessary to focus on the other areas to build shareholder value.

We are also focusing on areas like securitization structured products and resolutionplans within the realm of credit rating to carve a new niche for the company.

Human Resources

The level of analytical expertise has a bearing on the quality of the ratings assignedby a credit rating agency where human resources play an important role in the business. Wehave always believed in picking up the right talent to ensure that the appropriate skillsand competencies are available for executing the business objectives and encouraging themto think independently while working in teams in order to enhance the quality of rating.We further enrich their talents by way of conducting induction and training programmeswhich are conducted by experts in the field. In addition systematic training programshave been conducted to build and enhance key functional and behavioural competencies forboth new recruits and existing employees.

As on March 31 2020 we had 646 employees (compared with 633 as of March 31 2019)with around 90% of the staff professionally qualified in the areas of management CA CSlegal economics engineering etc. holding professional or post graduate degrees.

Number of Meetings of the Board of Directors

The Board of Directors met Thirteen (13) times during the Financial Year 2019-2020 onMay 21 2019 June 21 2019 July 17 2019 July 31 2019 August 19 2019 October 012019 November 04 2019 November 18 2019 December 20 2019 January 14 2020 January27 2020 February 07 2020 and February 14 2020. The particulars of meetings held andattended by each Director are detailed in the Corporate Governance Report which formspart of this Report.

Directors Responsibility Statement

The Board of Directors to the best of their knowledge and ability confirm that:

i. In the preparation of the annual accounts for financial year ended March 31 2020the applicable accounting standards have been followed along with proper explanationrelating 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 financial year and of the profit forthat period;

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

iv. They have prepared the annual accounts for financial year ended March 31 2020 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 have been operating effectively;

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

Declaration by Independent Directors

The Independent Directors of the Company have submitted the declaration of Independenceas required under Section 149(7) of the Companies Act 2013 confirming that they meet thecriteria of independence under Section 149(6) of the Companies Act 2013 and Regulation 16(1) (b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

The Board is of the opinion that the Independent Directors of the Company possessrequisite qualifications experience and expertise in the field of finance strategyauditing tax risk advisory and financial services and they hold the highest standards ofintegrity.

Policy on Directors' appointment and remuneration

The Policy of the Company on Directors' appointment and remuneration including criteriafor determining qualifications positive attributes independence of a Director and othermatters provided under sub-section (3) of section 178 is appended as Annexure - III tothis Report and also available on the website of the Company at www.careratings.com

Particulars of Loans Guarantees or Investments under section 186

The details of Loans guarantees and investments covered under Section 186 of theCompanies Act 2013 read with Companies (Meetings of Board and its Powers) Rules 2014 aregiven in the notes to the Financial Statements forming part of this Annual Report.

Particulars of Contracts or Arrangements with Related Parties

All transactions entered into during the Financial Year 2019-20 with Related Parties asdefined under the Companies Act 2013 and Regulation 23 of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 were in the ordinary course of business and onan arm's length basis. During the year the Company had not entered into any transactionreferred to in Section 188 of the Companies Act 2013 with related parties which could beconsidered material. Accordingly the disclosure of Related Party Transactions as requiredunder Section 134(3) of the Companies Act 2013 in Form AOC-2 is not applicable.

Attention of the members is drawn to the disclosures of transactions with relatedparties as required under IND AS-24 set out in Notes to Accounts - Note No 35 of theStandalone Financial Statements forming part of this Annual Report

As required under Regulation 23 (1) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has formulated a Policy on Materiality of anddealing with Related Party Transactions which is available on the website of the Companyat www.careratings.com.

Material Changes and Commitments affecting the Financial Position of the Company

There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between March 31 2020 and the date of this report otherthan those disclosed in this report.

Particulars regarding conservation of energy technology absorption and foreignexchange earnings and outgo Conservation of Energy and Technology Absorption

Your Company has taken necessary steps and initiative in respect of conservation ofenergy to possible extent to conserve the resources as required under Section 134(3)(m) ofthe Companies Act 2013 and rules framed thereunder. As your Company is not engaged in anymanufacturing activity the particulars of technology absorption as required under thesection are not applicable.

Foreign Exchange Earnings and Outgo

During the year under review the Company has earned a foreign exchange equivalent toRs. 2.04 Crore and has spent a foreign exchange equivalent to Rs. 0.51 Crore.

Business Risk Management

The Board of Directors of the Company has constituted a Risk Management Committeeconsisting of members of the Board of the Company to frame implement and monitor the riskmanagement plan for the Company. The composition of the Committee is in compliance withRegulation 21 of the SEBI LODR Regulations. The Company has a Risk Management framework toidentify evaluate business risks and opportunities. This framework seeks to createtransparency minimize adverse impact on the business objectives and enhance the Company'scompetitive advantage.

The business risk framework defines the risk identification and its management approachacross the enterprise at various levels including documentation and reporting. Theframework helps in identifying risks trend exposure and potential impact analysis on aCompany's business.

Corporate Social Responsibility

As a part of CARE Ratings' initiatives under Corporate Social Responsibility (CSR) in2019-20 your Company released payments amounting to Rs.5.26 Crores (P.Y.: Rs.3.27 Crores)in areas of education infrastructure development community development child welfareart and culture and Healthcare. This also includes contribution Rs. 2 Crores to the PMCARES Fund in our country's fight with Covid 19.

The Board has constituted a Corporate Social Responsibility (CSR) Committee inaccordance with Section 135 of the Companies Act 2013. The CSR Policy has been devised onthe basis of the recommendations made by the CSR Committee. The brief outline of theCorporate Social Responsibility (CSR) policy of the Company and the initiatives undertakenby the Company on CSR activities during the year under review are set out in Annexure-IVof this report in the format prescribed in the Companies (Corporate Social ResponsibilityPolicy) Rules 2014. The CSR policy is available on the website of the Company atwww.careratings.com.

Vigil Mechanism - Whistle Blower

The Company has established a vigil mechanism for Directors and Employees in compliancewith the provisions of Section 177(10) of the Act and Regulation 22 of the ListingRegulations to report their genuine concerns and to provide for adequate safeguardsagainst victimization of persons who may use such mechanism. During the year your Companyaffirms that no employee of the Company was denied access to the Audit Committee. The saidpolicy is also available on the website of the Company at www. careratings.com.

Annual Evaluation of Performance of the Board

Pursuant to the provisions of the Act and Regulation 19 of the Listing Regulations theBoard has carried out an annual evaluation of the performance of Board Individualperformance of the Directors as well as the evaluation of the working of its Committees.

The Nomination & Remuneration Committee and the Board has defined the evaluationcriteria for the Board its Committees and Directors.

The Board's functioning was evaluated after taking inputs from the Directors on variousaspects including inter alia degree of fulfillment of key responsibilities Boardstructure and composition establishment and delineation of responsibilities to variousCommittees effectiveness of Board processes information and functioning.

The Committees of the Board were evaluated after taking inputs from the Committeemembers on the basis of criteria such as degree of fulfillment of key responsibilitiesadequacy of Committee composition and effectiveness of meetings.

The Board reviewed the performance of the individual directors on aspects such asattendance and contribution at Board/ Committee Meetings and guidance/support to themanagement outside Board/ Committee Meetings.

The performance evaluation of the Independent Directors was carried out by the entireBoard excluding the Director being evaluated. The performance evaluation of the Chairmanand the Non-Independent Directors was carried out by the Independent Directors who alsoreviewed the performance of the Board as a whole.

In a separate meeting of independent directors performance of Non-IndependentDirectors performance of the Board as a whole and performance of the Chairman wasevaluated taking into account the views of executive director and non-executive director.

Subsidiaries

A. CARE Advisory Research and Training Limited

CARE Advisory Research and Training Limited (CART) is a wholly owned subsidiary of yourCompany which was incorporated on September 06 2016. CART is in the business of AdvisoryResearch and Training.

Advisory division

CART offers services in the field of transaction advisory (valuation IM preparation)banking services support (TEV LIE vetting of resolution plans machinery cost vetting)corporate advisory (DPR Business plan preparation financial improvement plan financialappraisal) and risk management services (risk related policy documents credit assessmentmodels).

Research Division

CART services a variety of business needs of its domestic and multinational clientswith credible high-quality research and analysis on various facets of the economy andindustries.

Training Division

The Company caters to the training needs of corporates and professionals through itstraining programmes which are offered through on-line as well class room mode.

B. CARE Risk Solutions Private Limited

Our wholly owned subsidiary CARE Risk Solutions Pvt. Ltd (CRSPL) is a leading fin-techcompany which provides risk management and financial compliance software solutions forBanking Financial Services and Insurance (BFSI) sector with its Enterprise RiskManagement suite (ERM) Asset Liability Management (ALM) Fund Transfer Pricing (FTP)International Financial Reporting Standards (IFRS) & Financial Reporting Applicationlending suite and early warning systems. The focus of the organization is multi-fold andis directed at innovative disruption digitization and hence enable financial institutionsmeet the compliance norms and move towards leveraging risk management from a strategicperspective. It involves robust effort on technology R&D and product compliance tocentral bank's regulation across geographies and rapid and timely implementation.

CRSPL has the soul of an agile start up and the maturity of an established specialistin creating and delivering advanced technology solutions for its customers. CRSPL'sexceptional product and immaculate implementation framework has helped them to partnerwith the best names in the Financial Technology globally and regionally.

C. CARE Ratings (Africa) Private Limited

CARE Ratings (Africa) Private Limited (CRAF) is the first credit rating agency to belicensed by the Financial Services Commission of Mauritius from May 7 2015. It is alsorecognized by Bank of Mauritius as External Credit Assessment Institution (ECAI) from May9 2016. In February 2020 CRAF has received the approval of the Capital Markets Authorityof Kenya to operate as a Credit Rating Agency in Kenya under the Capital Markets Act andthe Regulations and Guidelines issued thereunder.

During FY20 the Company has assigned ratings to 28 corporates of Mauritius includingrenowned Corporates like The Mauritius Commercial Bank Ltd. Bank One CIEL CIM LealOmnicane Alteo MUA and ENL. In FY20 CRAF has assigned credit ratings to bank facilitiesand bond issues aggregating to around MUR 40.0 billion (MUR 21.0 billion in FY19). Therehas been an increase in awareness about the concept of credit rating among Banks andCorporates and clear understanding of the benefits from ratings.

D. CARE Ratings Nepal Ltd.

CARE Ratings Nepal Ltd. (CRNL) is incorporated in Kathmandu Nepal as a credit ratingagency and is licensed by Securities Board of Nepal w.e.f. November 16 2017. CRNL hasdone 93 rating assignments in FY20. In a short span of time CRNL has been able to expandits operations and has since inception added more than 200 clients till March 31 2020.

Material Non-Listed Indian Subsidiary

There is no material (non-listed) Indian subsidiary of your Company as on March 312020

Performance and Financial Position of Subsidiary Associate and Joint Venture Companyand their contribution to the overall performance of the Company

As required under Section 129 of the Companies Act 2013 and Regulation 33 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the ConsolidatedFinancial Statements have been prepared by the Company in accordance with the applicableAccounting Standards and form part of the Annual Report. Statement on the highlights ofperformance of the subsidiary companies and their contribution to the overall performanceof the Company are given in the Form AOC-1 has been appended as Annexure-XI to thisreport.

Details relating to Deposits covered under Chapter V of the Companies Act 2013

Your company has not accepted any deposits within the purview of Chapter V of theCompanies Act 2013 during the year under review.

Significant and Material Orders passed by the Regulators or Courts or Tribunals

There are no significant material orders passed by the Regulators/Courts which wouldimpact the going concern status of your Company and its future operations.

Instances of fraud if any reported by the Auditors

There have been no instances of fraud reported by the Auditors under Section 143(12) ofthe Companies Act 2013.

Adequacy of Internal Control with reference to Financial Statements

The Company has an Internal Financial Control System commensurate with the size scaleand complexity of its operations.

The Company has adopted accounting policies which are in line with the IndianAccounting Standards notified under Section 133 and other applicable provisions if anyof the Act read together with the Companies (Indian Accounting Standards) Rules 2015.

The Company in preparing its financial statements makes judgments and estimates basedon sound policies and uses external agencies to verify/ validate them as and whenappropriate. The basis of such judgments and estimates are also approved by the StatutoryAuditors and Audit Committee.

The Internal Auditor evaluates the efficacy and adequacy of internal control systemaccounting procedures and policies adopted by the Company for efficient conduct of itsbusiness adherence to Company's policies safeguarding of Company's assets preventionand detection of frauds and errors and timely preparation of reliable financialinformation etc. Based on the report of internal audit function process owners undertakecorrective action in their respective areas and thereby strengthen the controls.Significant audit observations and corrective actions thereon are presented to the AuditCommittee of the Board.

Directors and Key Managerial Personnel

In accordance with the Articles of Association of the Company and provisions of theSection 152(6) (e) of the Companies Act 2013 Mr. V. Chandrasekaran (DIN: 03126243) willretire by rotation at the ensuing Annual General Meeting of the Company and beingeligible offers himself for re-appointment.

Further Mr. Nitin Kumar Agarwal Chief Financial Officer of the Company resigned fromthe services of the Company with effect from July 18 2019 and your Company has appointedMr. Bharat Adnani as the Chief Financial Officer with effect from August 19 2019.

During the year Mr. Najib Shah Dr. M Mathisekaran and Mr. Ananth NarayanGopalakrishnan were appointed as Non-Executive (Independent Directors) and whoseappointment was also approved by the shareholders at the 26th AGM held onSeptember 30 2019. Further Ms. Sadhana Dhamane Non-Executive Director and Mr. S BMainak Non-Executive (Independent Directors) of the company resigned from the Board onAugust 08 2019 and February 11 2020 respectively.

During the year the Company initiated forensic audit as advised by SEBI in the matterof anonymous complaints received by it. Pending investigation Mr Rajesh Mokashi theformer MD and CEO was sent on leave on July 17 2019.

Mr. Rajesh Mokashi suo-moto resigned from the services of the Company with effect fromDecember 20 2019. The Board of CARE took the resignation on record without prejudice tothe ongoing examination of anonymous complaints and any action if required to be takenpursuant thereto. Mr S.B. Mainak also tendered his resignation as Director of CARE onFebruary 11 2020 which was accepted by the Board.

In February 2020 the Board considered the forensic audit report and independent ofany legal assessment decided to terminate the employment of Mr. Rajesh Mokashi witheffect from the date he was sent on leave in July 2019. The Board also reviewed variousmeasures for improvement in its systems and processes to ensure that CARE maintainshighest standards of professional quality and integrity.

As advised by SEBI the Company has instituted a full-fledged inquiry by Justice (Retd)B. N. Srikrishna a retired Supreme Court Justice for alleged interference in the ratingsby erstwhile Chairman and MD and other employees and to take appropriate action ifrequired. The said inquiry is going on.

Based on the recommendation of the Nomination & Remuneration Committee the Boardof Directors have appointed Mr. Ajay Mahajan as an Additional Director and as ManagingDirector & Chief Executive Officer of the Company with effect from April 15 2020 fora period of five years subject to the approval of the shareholders at the ensuing AnnualGeneral Meeting.

Detailed profile of Mr. Mahajan in line with Regulation 36(3) of the ListingRegulations is forming a part of the Notice of the Annual General Meeting.

Auditor and Auditor's Report

M/s. Khimji Kunverji & Co. Chartered Accountants (Firm Registration No. 105146W)were reappointed as the Statutory Auditors of the Company at the 23rd Annual GeneralMeeting to hold office from the conclusion of 23rd Annual General Meeting till theconclusion of the 28th Annual General Meeting to be held in 2021.

Your Company has received a confirmation from Khimji Kunverji & Co. CharteredAccountants (Firm Registration No. 105146W) to the effect that that they are notdisqualified within the meaning of Section 141 and other applicable provisions of the Actand rules made thereunder.

There are no qualifications reservations or adverse remarks or disclaimers made byM/s. Khimji Kunverji & Co. Chartered Accountants Statutory Auditors in theirreport.

Status of Investors Compliant

During the financial year 2019-20 your Company has received complaints with regard tonon-receipt of annual report and nonreceipt of dividend. The details of complaints areappended to this Report as Annexure-V.

Secretarial Audit Report

The Board of Directors of your Company have appointed M/s A. K. Jain & Co. CompanySecretaries Mumbai to conduct the Secretarial Audit of the Company. The SecretarialAudit Report is appended to this Report as Annexure-VI.

There are no qualifications reservations or adverse remarks or disclaimers made by M/sA K Jain & Co. Company Secretaries Mumbai in their secretarial audit report.

Maintenance of Cost Records & Cost Audit

Maintenance of cost records and requirement of cost audit as prescribed under theprovisions of Section 148(1) of the Act are not applicable for the business activitiescarried out by the Company.

Change in the Nature of Business

During the financial year 2019-20 there was no change in the nature of business of theCompany.

Employees Stock Option Schemes

As required in terms of the Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulations 2014 the disclosure relating to CARE Ratings Limited("ESOS - 2013") is appended as Annexure-VII to this report.

Management Discussion and Analysis Report

The Management's Discussion and Analysis Report for the year under review asstipulated under Regulation 34(2) (e) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 with the Stock Exchanges is annexed as Annexure-VIII tothis report.

Particulars of Employees

Disclosures with respect to the remuneration of Directors and employees as requiredunder Section 197 of the Companies Act 2013 and Rule 5(1) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 has been appended as Annexure-IX tothis Report.

The information required pursuant to Section 197 of the Companies Act 2013 read withRule 5(2) & (3) of the Companies (Appointment and Remuneration of managerialPersonnel) Amended Rules 2016 in respect of employees of your Company is available forinspection by the members at the Registered Office of the Company during business hours onworking days up to the date of the ensuing Annual General Meeting. If any member isinterested in obtaining a copy thereof such member may write to the Company Secretarywhereupon a copy would be sent.

Business Responsibility Statement

A Business Responsibility Report as per regulation 34(2) of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 detailing the variousinitiatives taken by the Company on the environmental social and governance front.annexed as Annexure-X and forms an integral part of this Annual Report.

Corporate Governance

The Company is committed to maintaining the highest standards of Corporate Governanceand adhering to the Corporate Governance requirements as set out by Securities andExchange Board of India. The Report on Corporate Governance as per regulation 34(3) readwith Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 forms part of the Annual Report. The Certificate from the Auditors of the Companyconfirming compliance with the conditions of Corporate Governance as stipulated underSchedule V (E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 forms part of the Corporate Governance Report.

Audit Committee of the Company

Your Company's Audit Committee comprises the following directors as its members:

1. Mr. Adesh Kumar Gupta Chairman (Independent Director)
2. Ms. Sonal Gunvant Desai Member (Independent Director)
3. Mr. V. Chandrasekaran Member (Non-Executive Director)
4. Mr. Ananth Narayan Gopalakrishnan Member (Independent Director)

The composition of the Audit Committee is in compliance with the requirements ofSection 177 of the Companies Act 2013 and Regulation 18 of the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015

Disclosures under Sexual Harassment of women at workplace (Prevention Prohibition& Redressal) Act 2013

Your Company has always believed in providing a safe and harassment free workplace forevery individual working in the Company's premises through various interventions andpractices. The Company always endeavours to create and provide an environment that is freefrom discrimination and harassment including sexual harassment.

Your Company has a policy on Prevention of Sexual Harassment at Workplace. The policyaims at prevention of harassment of employees and lays down the guidelines foridentification reporting and prevention of undesired behaviour. An Internal ComplaintsCommittee (ICC) has been set up as per the provisions of Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 in order to investigate anycomplaints / issues related to sexual harassment. The ICC is responsible for redressal ofcomplaints related to sexual harassment and follows the guidelines provided in the Policy.

During the year ended March 31 2020 the ICC did not receive any complaint pertainingto sexual harassment.

Compliance of the Secretarial Standards 1 & 2 Issued by the Institute of theCompany Secretaries of India (ICSI)

The relevant Secretarial Standards issued by ICSI related to the Board and GeneralMeetings have been complied by the Company.

Acknowledgements

The Board places on record its appreciation of the contribution of its employees to thecompany's operations and the trust reposed in it by market intermediaries issuers andinvestors. The Board also appreciates the support provided by the Reserve Bank of IndiaSecurities Exchange Board of India and the Company's Bankers IDBI Bank and HDFC Bank.

On behalf of the Board of Directors
Date: Mumbai Ajay Mahajan Adesh Kumar Gupta V Chandrasekaran
Place: July 10 2020 Managing Director & CEO Director Director

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