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Cholamandalam Financial Holdings Ltd.

BSE: 504973 Sector: Financials
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OPEN 400.05
52-Week high 568.20
52-Week low 222.00
P/E 91.27
Mkt Cap.(Rs cr) 7,058
Buy Price 376.05
Buy Qty 7.00
Sell Price 393.55
Sell Qty 5.00
OPEN 400.05
CLOSE 406.80
52-Week high 568.20
52-Week low 222.00
P/E 91.27
Mkt Cap.(Rs cr) 7,058
Buy Price 376.05
Buy Qty 7.00
Sell Price 393.55
Sell Qty 5.00

Cholamandalam Financial Holdings Ltd. (CHOLAHLDNG) - Director Report

Company director report

Dear Shareholders

The Directors take pleasure in presenting the 71st Annual Reporttogether with the audited financial statements of the

Company for the year ended March 31 2020.


Cholamandalam Financial Holdings Limited (‘CFHL') is theholding company for the financial services and risk management businesses of the MurugappaGroup. CFHL is registered as a Non-Deposit taking Systemically Important Core InvestmentCompany (‘CIC') pursuant to a certificate of registration dated January 6 2020issued by the Reserve Bank of India (RBI) under Section 45-IA of the Reserve Bank of IndiaAct 1934.


The Company's paid up equity share capital as on March 31 2020was `18.77 Crore. During the year 23796 equity shares were allotted upon exercise ofvested stock options by the eligible option grantees under the Company's EmployeesStock Option Schemes 2007 and 2016.


Indian economy had shown clear signs of slowing down even before theonset of the pandemic. The country's GDP grew by 4.2% in the FY 19-20 with a moderategrowth of 4.8% in the first half year. A weak consumer demand slow private investment andtight credit conditions in the financial sectors were some of the key factors for thedecelerated growth during the year. Reforms undertaken by the government to revamp thefinancial sector address the NBFC crisis reduce the stress in the real estate sector andspeed up the resolution under Insolvency and Bankruptcy Code (IBC) had a marginal impactduring the second half year. However GDP growth tapered significantly to 3.1% in thefourth quarter due to the outbreak of coronavirus pandemic and the resultant nationwidelock down.

Globally the weaker-than-expected performance reflected a markedslowdown amongst some of the developing economies. The slowdown partly reflects globalfactors such as softened demands political instability and impacts due to extreme weatherevents. Few major economies witnessed a dampened growth during the year due to contractionin global trade and manufacturing activities. International trade disputes resulted inuncertainty and strained global trade which further led to a decline in most commodityprices. Financial market improved towards the end of the fiscal year with the easing oftrade tensions. However the outbreak of COVID-19 in the beginning of the year 2020 hassent shock waves across global equity markets. The pandemic paralyzed activities in mostof the countries. Financial sector volatility has exploded to levels last seen during theglobal financial crisis. With the continuing unprecedented situation a probability existsthat major parts of the global economy could slip into recession. In India adverse impactis manifested in most of the businesses due to supply disruptions fall in consumptiondemand and stress on the banking and financial sectors. India's GDP growth for FY20-21 is estimated to reduce significantly as compared to pre-covid projection of around5%. Several important relief measures and stimulus packages announced by the government isexpected to contain the economic impact of COVID-19.


CFHL earns revenue predominantly by way of dividend income frominvestments held in subsidiary and other group companies. An overview of the financialservice sector in which the company operates along with a business update of thesecompanies during FY 19-20 is summarised in the following paragraphs.

NBFC Industry & Business Update

India's financial sector is a highly diversified one comprisingcommercial banks insurance companies non-banking financial companies co-operativespension funds mutual funds and other smaller financial entities. The sector ispredominantly driven by banking and non-banking financial companies (‘NBFCs').Over the past few years NBFCs have emerged as important financial intermediariesparticularly for the small-scale and retail sectors in underserved areas and unbankedsectors. The sector turned out to be growth engines in an environment where significantimportance is assigned to financial inclusion and have aided the economy in employmentgeneration and wealth creation by making credit available to the rural segment. Howeverin recent times the sector is becoming a weaker segment in Indian financial system.

During FY 19-20 the sector continues to witness liquidity challengeswhich led to certain NBFCs experience stress in their loan books as evidenced by thegrowing level of non-performing assets (‘NPAs'). The onset of COVID-19 duringthe fourth quarter further weakened NBFCs stance in the economy. Asset qualitydeterioration in NBFCs is expected to be more severe than banks because of its exposure inriskier segments. To support the economy the RBI eased monetary policy to maintainadequate liquidity in the system facilitate smooth bank credit flow and moderatefinancial strain. Revival measures initiated by the regulator include provision ofmoratorium on EMI repayments cut on repo rates from 6.25% to 4.40% relaxation inclassification of loan as NPAs and provision of long-term repo operations (LTRO).Prudential requirements for banks have also been eased to free up liquidity for lending.

Cholamandalam Investment and Finance Company Limited (CIFCL) a NBFCincorporated in 1978 is one of the leading comprehensive financial service provideroffering vehicle finance home loans home equity loans etc. to a wide range ofcustomers. The NBFC business observed an overall slow-down during the FY 19-20. TheVehicle Finance (VF) business comprising of diversified portfolio viz. commercialvehicles passenger vehicles and used vehicles continues to be the major segmentcontributing 73% of its aggregate assets under management (AUM) as at March 31 2020. Thedivision has more than 80% of branches operating in the rural areas towns and semi urbanareas. CIFCL is one of the largest player in the used vehicle financing business with adisbursement mix of almost 30% in this segment. Severe de-growth in the auto industryacross product segments led to a decline of 6% in VF disbursements to `23387 Crore(previous year: `24983 Crore). With higher disbursements from used 3-wheeler and2-wheeler products the Company was able to offset drop in other segments. Assets undermanagement grew by 9% to `44206 Crore (net) (previous year: `40606 Crore). The businesshas a robust collection mechanism and strong credit risk assessment framework in placewhich will help navigate the present day conditions. The Home Equity (HE) businesscontinues to focus on a systematic approach to build a healthy portfolio mix with morethan 80% of the portfolio as Self-Occupied Residential Properties (SORP) and an averageloan ticket size of less than `50 Lakh. AUM for HE business grew by 11% to `12960 Crore(previous year: `11626 Crore) and disbursements registered a decline of 5% to `3662 Crore(previous year: `3837 Crore). End to end digital integration in loan processing has beenthe focus for business in order to improve overall customer experience and cut downbusiness turnaround time. Online payment modes for collections have been enhanced to offermultiple payment options to customers. During the year the business expanded its branchnetwork pan India with focus on Tier II III and IV cities. Home Loans (HL) businessoffers loans for self-construction purchase of new and resale flats/ independent housesbalance transfer from other financiers top-up loans for existing customers. As at March31 2020 the business division had 24000 live accounts and disbursed `1505 Crore duringthe year (previous year: `1157 Crore) registering a growth of 30%. Middle-Income-Groupcustomers continue to be the target group for the HL business. 95% of the portfoliocomprises business owners with semi-formal income and significant business vintage buyingtheir first home. Lending for self-construction remains to be a strong focus withsignificant proportion of the portfolio and fresh disbursements sourced from this segment.The Company has fast-tracked implementation of a host of IT and digital initiatives whichshall help to serve customers better and faster in a post COVID-19 world. Business outlookof CIFCL for FY 20-21 remains uncertain with the COVID-19 situation evolving each day.Vehicle finance segment will continue to be the mainstay for CIFCL. While the home equityportfolio has also been a significant contributor to the company's growth the homeloan business has a great potential to be built into a solid portfolio considering theexpertise of the company in handling typical customer profiles.

General Insurance Industry & Business Update

In India insurance industry is gaining momentum in securing lifehealth and property of individuals by acting as a risk management tool. Government'spolicy of insuring the uninsured has gradually pushed insurance penetration in the countryand proliferation of insurance schemes. The general insurance industry grew by 9.5% in FY19-20 and achieved a Gross Written Premium (GWP) of `1642 billion with about 55% marketshare of private players vis--vis PSU players. During the year the general insuranceindustry underwent a turbulent phase with several far-reaching developments many of whichwere positive and impactful with a clutch of factors causing severe transitory problemsand impact on profitability. Positive developments during FY 19-20 include amendmentproposed to Motor Vehicles Act mandatory minimum pricing for property line of businesscontinued strong growth of specialized health players etc. Decline in sale of newvehicles pricing discounts offered in Motor Own Damage (OD) insurance resulting in sharprise in Motor OD claims heavy losses from crop insurance segment and mandatory investmentnorms on stressed housing & infrastructure sectors were some of the limitation factorsfor industry's growth. Cholamandalam MS General Insurance Company Limited (CMSGICL)the insurance business division of CFHL is registered with Insurance Regulatory andDevelopment Authority of India (IRDA) to carry on general insurance business. CMSGICLoffers a wide range of insurance including motor travel health accident home and othertypes of insurance for corporate customers. In a highly competitive business environmentCMSGICL ranks 8th position among private insurers with a market share of 3.1%(excluding crop insurance).

CMSGICL recorded a gross written premium of `4824 Crore (previous year:`4552 Crore) for the year ended March 31 2020. Growth in business operations continues tobe driven by strong performance in retail channels with Motor & Health insurancesegments being significant contributors of the premiums with a good mix across metros& non metros. In Motor insurance business besides stepping up its presencesignificantly in the two-wheeler segment the Company expanded its participation in theOEM programs of motor vehicles. The premium pricing in Motor OD insurance witnessed severepressure throughout the year with discounts across vehicle categories rising to new highs.The decision of the regulator to defer the price increase in motor third party premiumcould further aggravate the situation. The Health Accident and Travel lines of business(other than employer-employee group health) grew by 9.5% during the year. Muteddisbursements in motor NBFCs / HFCs impacted the benefit of product bundling in healthand accident products leading to lower growth. Loss ratios across this line of businesscontinues to be good with the Company continuing to adopt prudent underwriting practiceswhile focusing on new segments of growth. Revenue from property lines of business scaledup (both banca and commercial channels) contributing about 8% of the total GWP. Higherproportion of business from preferred category risks geographical spread of risksgranular risks have ensured improvement in the claims ratios of these lines. CMSGICLstrengthened its bancassurance business through renewal of its tie-up with a PSU bank fora further period of 3 years. Expansion of its network with channel partners including PSUBanks NBFCs

Co-operative banks and addition of OEMs and digital partners isexpected to provide a strong momentum in the coming years. Pricing discounts in Motor ODbusiness due to a slump in automobile industry continued weakness in credit marketsleading to downgrades and defaults in the financial sector natural catastrophes andprolonged monsoons impacted business growth during the year. Business during the yearexperienced favourable reinsurance treaties resulting in the willingness of globalreinsurers to enhance their capacity and support. As at March 31 2020 the investmentportfolio was `9027 Crore (previous year: `7697 Crore). The Company continues to emphasiseon safety and liquidity of investments and together with monetised gains grew theinvestment income to `770 Crore (previous year: `566 Crore) with a gross yield of 9.05%(previous year: 7.92%). The average investment portfolio duration was at 4.25 years.

During the year the Company focussed on new digital enablers acrossall operating functions and processes through a number of initiatives. These initiativeshave enabled the Company to serve its customers faster and better bringing in efficienciesand more importantly strengthening the ability to scale volumes.

Growth in general insurance industry is driven by economic activitiesand GDP growth. Motor insurance and property line of business are likely to be impactedwith its dependence on automotive and industrial sectors. Business has drawn countermeasures to reduce the COVID-19 impact which include enhanced focus on renewals highervolumes in health line of business launch of COVID-19 specific products and harnessingthe state-owned banks bancassurance relationships. The Company will monitor theenvironment carefully to recalibrate its growth plans for the ensuing years.

Risk Management Solutions – Business Update

Cholamandalam MS Risk Services Limited (CMSRSL) is engaged inproviding risk management and engineering solutions in the field of safety health andenvironment in association with CMSGICL. CMSRSL strengthened its order book during theyear by bagging few long term contracts in domestic as well as in overseas. The Companycontinued to partner with organizations in implementation of their CSR projects in theareas of Health Safety & Environment (HSE) programs and Road Safety programs. Thebusiness also partnered with digital developers to introduce HSE digital products andexplore introduction of AI integrated studies into the market. The joint venture partnerMitsui Sumitomo Insurance Company Ltd. Japan continues to support the Company byintroducing Japanese companies entering the Indian market for risk management services. Ason March 31 2020 CMSRSL had an order book of `68 Crore for execution in the comingfinancial year.

Particulars 2019-20 2018-19
Total Income 90.90 73.52
Total Expenses 3.97 2.61
Profit Before Tax 86.93 70.91
Tax Expense 3.60 4.38
Profit for the year 83.33 66.53
Other Comprehensive Income (0.61) (0.68)
Total Comprehensive Income 82.72 65.85


During the year the Company has transferred `16.67 Crore to statutoryreserve (previous year: `13.31 Crore) as required under RBI regulations.


CFHL earned an income of `90.90 Crore (previous year: `73.52 Crore) andprofit before tax was `86.93 Crore (previous year: `70.91 Crore) for the year ended March31 2020. An additional capital of `300 Crore was infused in the preferential allotment ofshares of CIFCL besides market purchase of CIFCL's shares aggregating to `24.26Crore. As at March 31 2020 aggregate investments stood at `1278.35 Crore (previous year:`954.78 Crore). During the year the Company obtained a term loan of `200 Crore to meetits funding requirements. Financial review of CFHL's subsidiary / associate and JVcompanies during the year is furnished below.

Cholamandalam Investment & Finance Company Limited (CIFCL)

CFHL holds 45.50% in the paid-up equity share capital of CIFCL as onMarch 31 2020. Securities of CIFCL are listed and traded on the National Stock Exchangeof India Limited (NSE) and the BSE Limited (BSE). CIFCL is treated as a subsidiary underInd-AS. Rationale in this regard is provided under Note 23 of standalone financialstatements.

During the year the existing equity shares of CIFCL of `10/- eachfully paid up were subdivided into five equity shares of face value of `2/- each fullypaid up. The Company raised `1200 Crore by way of equity infusion through qualifiedinstitutional placement (`900 Crore) and preferential allotment (`300 Crore) during theyear to strengthen its capital adequacy requirement. CIFCL further raised funds through anissue of ‘Masala bonds' of `400 Crore to augment its Tier II capitalrequirements. Assets under Management grew by 12% to `60549 Crore (net) as at March 312020 (previous year: `54279 Crore). Loan disbursements aggregated to `29091 Crore(previous year: `30451 Crore) registering a decline of 4% during the year. Profit aftertax was `1052 Crore after a one-time provision of `504 Crore to cover contingencies due toCOVID-19 and macro-economic factors. On a comparable basis profit after tax for the yearended March 31 2020 was `1387 Crore before the one-time provision as against `1186 Crorethe previous year registering a growth of 17%. Pursuant to RBI guidelines the Companyoffered moratorium to its customers for EMI repayments. CIFCL's liquidity positionwas strongly placed as at March 31 2020 to meet its near term commitments. The Companydid not avail moratorium on its borrowing obligations. As at end of the year capitaladequacy improved to 20.7% as against the statutory requirement of 15%.

CIFCL paid interim dividend in two tranches aggregating to `1.70 perequity share of face value of `2/- each. The first interim dividend at the rate of 50%(`1/-per equity share) was approved in December 2019 and the second interim dividend atthe rate of 35% (`0.70 per share) was approved in February 2020. The Board of CIFCL hasnot recommended any final dividend for the year ended March 31 2020.

CIFCL's subsidiary companies are Cholamandalam Securities Limited(CSEC) and Cholamandalam Home Finance Limited (CHFL). CSEC is engaged in stock broking andinvestment advisory services. The Broking business grew by 9% while wealth businessdropped by 32% due to cap on upfront income and insurance distribution business scaled upsignificantly during FY 19-20. CSEC achieved a gross income of `23.58 Crore for theyear ended March 31 2020 and Profit Before Tax of `3.26 Crore as against `2.68 Crore inthe previous year.

CHFL recorded a gross income of `38.61 Crore for the year ended March31 2020 and made a loss before tax of `0.77 Crore as against a loss of `11.0 Crore in theprevious year. The Company had filed an application with the regulator seekingregistration as a Housing Finance Company and the registration is awaited. Currently the

Company continues its focus on growing insurance corporate agencybusiness.

Cholamandalam MS General Insurance Company Limited (CMSGICL)

The Company holds 60% in the paid-up equity share capital of CMSGICL -a joint venture with Mitsui Sumitomo Insurance Company Ltd. Japan and is a materialsubsidiary of CFHL.

IRDAI has deferred the implementation of Ind-AS for insurancecompanies. Therefore financials of CMSGICL have been restated as per Ind-AS forconsolidation purposes and the figures reported for CMSGICL in the annual report are underInd-AS.

CMSGICL achieved a gross written premium of `4824 Crore during the FY19-20 (previous year: `4552 Crore) and the profit before tax was `216 Crore (previousyear: `280 Crore). While Claims ratios were under control despite adverse environment ofcyclones higher discounts in motor own damage etc business sourcing costs were higherimpacting the underwriting results to remain flat at a negative of `218 Crore. Aided byover `5 billion of long term premium investment income levels rose to `770 Crorefrom `566 Crore despite interest rates dropping during the year. `170 Crore was the gainon sale of debt investments for the year which largely helped in meeting the provisioning/ write off of stressed debt assets.

With a view to conserve its resources the Board of CMSGICL has notrecommended dividend for FY 19-20.

Cholamandalam MS Risk Services Limited (CMSRSL)

The Company holds 49.5% in the paid-up equity share capital of CMSRSLa joint venture with Mitsui Sumitomo Insurance Company Ltd. Japan and has a technicalcollaboration with Inter Risk a group company of Mitsui Sumitomo Insurance Group.

CMSRSL achieved a revenue of `46.28 Crore (previous year: `40.82 Crore)and profit before tax of `5.62 Crore (previous year: `4.88 Crore) for the year ended March31 2020. CMSRSL recommended a dividend of `1.25 per share on its equity share of facevalue of `10/- each for the FY 19-20.

Cholamandalam Health Insurance Limited (Chola Health)

Chola Health was incorporated in July 2017 to offer health insuranceservices and the Company has invested 99.9% in its paid up capital. Chola Health is yet tocommence its business operations.


The Company paid an interim dividend on the equity shares at the rateof 65% i.e. `0.65 per equity share of face value of `1/- each as approved by the Board ofDirectors on February 26 2020 for the year ended March 31 2020. The Board hasrecommended to confirm the interim dividend as the final dividend for FY 19-20.


( ` in Crore)
Particulars 2019-20 2018-19
Total Income 13135.73 10946.81
Total Expenses 11330.11 8812.02
Profit Before Share of Profits from
1805.62 2134.79
Associate / Joint Venture and Tax
Share of Profit from Associate /Joint
1.27 1.11
Venture (Net of Taxes)
Profit Before Tax 1806.89 2135.90
Tax Expense (641.84) (721.07)
Profit for the year 1165.05 1414.83
Minority Interest (614.20) (718.13)
Net Profit for the year attributable
550.85 696.70
to owners of the company


CFHL's subsidiary companies are Cholamandalam MS General InsuranceCompany Limited and Cholamandalam Health Insurance Limited. Under Ind-As CholamandalamInvestment and Finance Company Limited is treated as a subsidiary company andCholamandalam MS Risk Services Limited is a joint venture company of CFHL. There has beenno change in the nature of business of these companies during the year. Businessperformance of these companies are detailed in earlier paragraphs of this report.

A report on the performance and financial position of each of theaforesaid companies as per section 129(3) of the Act read with the Companies (Accounts)Rules 2014 in the prescribed form AOC-1 is annexed to this Report as Annexure A.The consolidated financial statements of the Company prepared in accordance with theCompanies Act 2013 ("the Act") and the relevant Accounting Standards formspart of the annual report. The annual report containing standalone and consolidatedfinancial statements will be posted on the

Company's website The annual accounts of thesubsidiary companies will also posted on the Company's website and be made availablefor inspection by shareholders until the date of the Annual General Meeting("AGM") through electronic mode.


Spread of the COVID-19 pandemic impacted the regular operations of theCompany and its subsidiary / associate / JV companies. In response to the nation-wide lockdown announced by the Government the Companies activated business continuity planaddressing financial planning business strategy realignment employee productivityre-focus IT enablement and renewed customer engagement. To ensure safety of employees andin adherence to the Government norms various measures including the facility to work fromhome have been implemented. Since the pandemic and the lockdown imposed affected the tailend of the financial year there is no impact on the standalone financial performanceduring FY 19-20. A note in this regard is included in the Standalone and ConsolidatedAudited Financial Statements for the year under review vide Note 1.4 and Note 4.1respectively. Given the inherent uncertainty regarding the severity and duration of thepandemic the Company will continue to monitor for any material changes to future economicconditions.


At the 70th AGM held on August 1 2019 the appointment of Mr. AshokKumar Barat and Mr. B Ramaratnam as Independent Directors of the Company for a term offive years commencing August 1 2018 and March 18 2019 respectively was approved.Further Mr. Sridharan Rangarajan and Mr. V Ravichandran were appointed as directorsliable to retire by rotation at the 70th AGM. Ms. Shubhalakshmi Panse (DIN: 02599310)Independent Director resigned from the Board on November 20 2019. The Board places onrecord its appreciation for the contribution rendered by Ms. Panse during her tenure as anIndependent Director and as a member of Board Committees.

Based on the recommendation of the Nomination & RemunerationCommittee of the Board Ms. Vasudha Sundararaman (DIN: 06609400) has been appointed as anadditional director in the capacity of an Independent Director with effect from February12 2020 and holds office till the date of the ensuing 71st AGM. The Company has receiveda notice from a shareholder proposing the appointment of Ms. Vasudha as a director of theCompany. The Board recommends her appointment as a director of the Company and theresolution proposing her appointment forms part of the Notice for the 71st AGM ofthe Company.

As per the provisions of section 152 of the Act Mr. SridharanRangarajan retires by rotation at the ensuing AGM and being eligible offers himself forre-appointment. The Board recommends the re-appointment of Mr. SridharanRangarajan as a director liable to retire by rotation and the resolution in this regardforms part of the notice for the 71st AGM of the Company. Information as required to bedisclosed under regulation 36(3) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 ("the Listing Regulations") for appointment /reappointment of directors is provided in the Notice for AGM.


TheIndependentDirectors("IDs")Mr.AshokKumarBarat Mr. BRamaratnam and Ms. Vasudha Sundararaman have submitted declaration stating that they meetthe criteria of independence as required under the provisions of section 149 of the Actand regulation 16 of the Listing Regulations. In the opinion of the Board all the IDspossess integrity expertise and relevant experience in their respective fields includingthe proficiency required to effectively discharge their roles and responsibilities indirecting and guiding the affairs of the Company. All the IDs are registered in theindependent directors' data bank maintained by the Indian Institute of CorporateAffairs as required under the Companies Act 2013 and the Rules referred therein. The IDsare in the process of completion of the online proficiency self-assessment test as per thetimeline notified by the Ministry of Corporate Affairs ("MCA").


Pursuant to the provisions of section 203 of the Companies Act 2013Mr. N Ganesh Manager & Chief Financial Officer and Ms. E Krithika Company Secretaryare the key managerial personnel of the Company and there were no changes during the year.

Mr. Ganesh was appointed as the Manager of the Company with effect fromAugust 9 2017 for a period of three years. His tenure as Manager expires on August

8 2020. Subject to the approval of shareholders the Board at itsmeeting held on June 15 2020 re-appointed Mr. N Ganesh as the Manager for afurther period of three years with effect from June 15 2020. Appropriate resolutionseeking shareholders' approval is provided in the Notice for the 71st AGM of theCompany.


M/s. S.R. Batliboi & Associates LLP Chartered Accountants wereappointed as the Statutory Auditors of the Company at the 66th AGM held on August 102015 for a period of five years and will complete their present term on conclusion of theensuing 71st AGM of the Company. The Board pursuant to the recommendation of theAudit Committee recommends the re-appointment of M/s. S.R. Batliboi & Associates LLPChartered Accountants as the Auditors of the Company for a second term of five years fromthe conclusion of the 71st AGM until the conclusion of the 76th AGM.

Appropriate resolution seeking shareholders' approval for there-appointment of M/s. S.R. Batliboi & Associates LLP as the Auditors andauthorisation to the Board to fix the remuneration payable to them is provided in theNotice for the 71st AGM of the Company.

FINANCE Deposits

The Company has not accepted any fixed deposits under Chapter V of theCompanies Act 2013 and as such no amount of principal and interest were outstanding as onMarch 31 2020.

Particulars of Loans Guarantees or Investments

The provisions of section 186 of the Act pertaining to investment andlending activities is not applicable to CFHL since the Company is an NBFC whose principalbusiness is acquisition of securities. Information regarding investments made during theyear is given in the financial statements. During the year the Company has not given anyloans or guarantees under the provisions of section 186 of the Act.

Internal Financial Control Systems with reference to the FinancialStatements

The Company has in place adequate internal financial controls to ensurereliability of financial and operational information and regulatory and statutorycompliances. The Company's business processes are equipped with monitoring andreporting processes to ensure financial discipline and accountability. The internalfinancial control systems are monitored both by internal and statutory auditors of theCompany. The statutory auditors of the company have also certified on the existence andoperating effectiveness of the internal financial controls as on March 31 2020.

Financial Ratios

In terms of the SEBI (Listing Obligations and Disclosure Requirements)(Amendment) Regulations 2018 the Company is required to disclose details of significantkey financial ratios along with the detailed explanations therefor. The Company being aninvestment company and not having any trade receivables debtors turnover ratio inventoryturnover ratio interest coverage ratio current ratio operating margin ratio and netprofit margin ratio are not applicable. The leverage ratio computed in accordance with RBIregulations is 0.03 as against the regulatory maximum of 2.5. Capital adequacy ratio ofthe Company as on March 31 2020 was 478.51% as against the minimum RBI requirement of30%. Return on net worth of the Company was 7.45% as at March 31 2020 as against 6.25% asat March 31 2019. Change in the rate was on account of higher receipt of dividend incomeduring the year.


Managing risk is fundamental to any business in general and inparticular to financial services industry. The Company has an established risk managementframework which provides an integrated approach for identifying monitoring and mitigatingrisks associated with its business and that of its subsidiaries / associates. Risksarising out of NBFC insurance and risk management businesses of the investee companiesare the dominant risks of the Company. The investee companies have their own riskmanagement framework in line with its strategic business operations as appropriate to theindustry in which they operate. Various risk exposures of CFHL include financial risksgovernance risks market risks reputation risks and compliance risks. The Risk ManagementCommittee (RMC) assists the Board to oversee various risks including review and analysisof risk exposures related to the Company and its subsidiary / associate companies. RMC issupported by the Asset Liability Committee (ALCO) constituted pursuant to the RBIguidelines. The ALCO monitors asset liability mismatches besides management of liquidityrisks. A Risk Management Policy has been framed by the Board of Directors. TheCompany has also put in place a risk control matrix. The control measures basis thematrices are tested by the internal auditor and reported to the Audit Committee. TheBoard reviews the risk framework on an annual basis.


Internal control systems of an organisation is looked at as the key toits effective functioning. The Company has in place internal control framework to ensurecompliance with internal policies regulatory matters and to safeguard reliability offinancial reporting and its disclosures. An audit of systems and processes is conducted bythe internal auditor of the Company and the key findings are reported to the AuditCommittee every quarter. The Audit Committee evaluates adequacy and effectiveness of theinternal controls recommends improvements and reviews the corrective action taken toaddress gaps if any.


The Company firmly believes in committing itself to maintaining highstandards of corporate governance. A report on corporate governance of the Companytogether with a certificate from the Auditors in accordance with the Listing Regulationsis annexed to this Report as Annexure B. The Report further contains other detailswhich are required to be provided in the Board's Report.


Seven meetings of the Board were held during the year. Details of theBoard meetings are disclosed in the Report on Corporate Governance.


The Board has constituted an Audit Committee in terms of the applicableprovisions of the Act and the Listing Regulations. Details of terms of referencecomposition and meetings of the committee are disclosed in the Report on CorporateGovernance.


Pursuant to the provisions of section 134 of the Act and regulation 17of the Listing Regulations the Board has carried out an annual evaluation of its ownperformance individual directors and its committees for FY 19-20. The manner in whichevaluation has been carried out is provided in the Report on Corporate Governance.


The Board has framed a policy for selection and appointment ofdirectors senior management and their remuneration. Details of which are furnished in theReport on Corporate Governance.


The Company being a part of the Murugappa Group is known for itstradition of philanthropy and community service. The Company's philosophy is to reachout to the community through service-oriented philanthropic institutions in the fields ofeducation and healthcare. With the enactment of CSR provisions in the Companies Act 2013the Company has framed a CSR policy and the policy is available on the Company'swebsite at

Pursuanttotheprovisionsofsection135oftheCompanies Act 2013 atleast 2%of the average net profits of the Company shall be spent towards CSR activities.Accordingly the Company has spent an amount of `11 Lakh on CSR projects /programmes approved by the CSR Committee during the year ended March 31 2020 as againstthe statutory requirement of `6 Lakh. Detailed information on the CSR activitiesundertaken during the year is annexed to this Report as Annexure C.


All transactions that were entered into with related parties during thefinancial year were in the ordinary course of business and on an arm's length basis.There were no materially significant related party transactions during the year which mayhave a potential conflict with the interest of the Company at large. Necessary disclosuresas required under the Indian Accounting Standard (IND AS) have been made in the notes tothe financial statements. The Company has framed a policy on related party transactions.None of the Directors had any pecuniary relationships or transactions vis--vis theCompany.


As on March 31 2020 CFHL had two employees. The investee companies ofCFHL continue to emphasise on resourcing and talent planning strategies based on theirfunctional and general management requirements in preparing the organisation for thefuture. The information required to be disclosed under the provisions of section 197 ofthe Act read with rule 5 of the Companies (Appointment & Remuneration of ManagerialPersonnel) Rules 2014 is annexed to this Report as Annexure D.


The Company's ESOP Schemes viz. Employee Stock Option Plan 2007(ESOP 2007) and Employee Stock Option Plan 2016 (ESOP 2016) have been approved by theshareholders. During the year there have been no fresh grants under both the schemes.Details in respect of ESOP 2007 and ESOP 2016 as required under the SEBI (Share BasedEmployee Benefits) Regulations 2014 are displayed on the Company's website at the schemes are in compliance with the SEBI (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines 1999 and SEBI (Share Based Employee Benefits)Regulations 2014 respectively. Vide the scheme of arrangement (demerger) employees ofthe Company were transferred to the resulting company Tube Investments of India Ltd. Thestock options granted by the Company prior to the effective date of demerger i.e. August1 2017 continue to be held by the option grantees who are employees of the resultingcompany. During the year upon exercise of stock options by the eligible option grantees7026 and 16770 equity shares were allotted under ESOP 2007 and ESOP 2016 schemesrespectively.


The Company has no activity relating to consumption of energy ortechnology absorption etc. The Company does not have any foreign exchange earnings. Therewas a foreign exchange outgo by way of repatriation of dividend amounting to `0.007Crore during the year (previous year `0.008 Crore).


In compliance with the provisions of section 177(9) of the Act readwith rules made thereunder and the Listing Regulations the Company has established awhistleblower / vigil mechanism which inter alia facilitates its employees to reportgenuine concerns. The mechanism provides for adequate safeguards against victimisation ofpersons using the mechanism and makes provision for direct access to the Chairman of theAudit Committee in appropriate or exceptional cases. The policy is available on theCompany's website at


Pursuant to the Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 the Company has a policy for prevention of sexualharassment at workplace. An Internal Complaints Committee (ICC) is in place to redresscomplaints received regarding sexual harassment. The policy extends to all employees(permanent contractual temporary and trainees). During the year no referrals werereceived under the policy and no complaints were pending at the beginning of the year.


Pursuant to the provisions of section 204 of the Companies Act 2013and the rules made thereunder the Board appointed M/s Srinidhi Sridharan &Associates Practicing Company Secretaries as the secretarial auditor to conductsecretarial audit of the Company for the year ended March 31 2020. The Report issued bythe secretarial auditor in the prescribed form MR-3 is annexed to this Report as AnnexureE.

The said secretarial audit report does not contain any qualification oradverse remarks.


The extract of annual return as required under section 92(3) of theCompanies Act 2013 in the prescribed form MGT-9 is annexed to this Report as AnnexureF. Copy of the return is available on the Company's website


The Company has complied with the applicable Secretarial Standardsissued by the Institute of Company Secretaries of India.


There are no material changes and commitments affecting the financialposition of the Company which have occurred between March 31 2020 and the date of thisreport.


The Company abides by a set of enduring values and beliefs called the‘five lights' viz. the lights of integrity passion quality respect andresponsibility in order to be a socially responsible business which would on a continuousbasis enhance the interests of all its stakeholders. By steadfastly upholding theprinciples of good and robust corporate governance ingrained with disciplineaccountability transparency and fairness the Company constantly endeavours to sustainand enhance itself as a responsible corporate citizen.

In terms of regulation 34(2) of the Listing Regulations the annualreport shall include a Business Responsibility Report (BRR) in the prescribed form.Accordingly a BRR is annexed to this Report as Annexure G.


The Board of Directors confirm that the Company has in place aframework of internal financial control and compliance system which is monitored andreviewed by the Audit Committee and the Board besides the statutory internal andsecretarial auditors. Further pursuant to section 134(5) of the Companies Act 2013 theBoard of Directors confirm that:

a) in the preparation of the annual financial statements for the year ended March 312020 the applicable accounting standards have been followed and that there were nomaterial departures therefrom;

b) they have in the selection of the accounting policies consulted the statutoryauditors and have applied their recommendations consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at March 31 2020 and of the profit of the Company for theyear ended on that date;

c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

d) they have prepared the annual financial statements on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively duringthe year ended March 31 2020; and

f) proper system has been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively during theyear ended March 31 2020.


• There were no significant material orders passed by the regulators or courts ortribunals impacting the Company's going concern status and its operations in future.

• The Company complies with all applicable laws rules circulars and regulationsincluding the Master Direction - Core Investment Companies (Reserve Bank) Directions 2016(‘Directions') as amended from time to time and does not carry on anyactivities other than those specifically permitted by the RBI for CICs.

• RBI does not accept any responsibility or guarantee about the present positionas to the financial soundness of the Company or the correctness of any of the statementsor representations made or opinions expressed by the Company and for discharge of anyliability by the Company.

Neither there is any provision in law to keep nor does the Companykeep any part of the deposits with RBI and by issuing a Certificate of Registration to theCompany RBI neither accepts any responsibility nor guarantees the payment of deposits toany depositor or any person who has lent any sum to the Company.


The Directors express their gratitude for the support and co-operationextended by the Ministry of Corporate Affairs Securities and Exchange Board of IndiaReserve Bank of India Stock Exchanges and other statutory authorities. The Directors alsowish to thank all investors vendors financial institutions banks and joint venturepartners for their continued support and faith reposed in the Company. The Directors alsoplace on record their appreciation for the contribution made by the employees of theCompany and its associate / subsidiaries across all levels.

On behalf of the Board
Place : Chennai M M Murugappan
Date : June 15 2020 Chairman