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ICRA Ltd.

BSE: 532835 Sector: Others
NSE: ICRA ISIN Code: INE725G01011
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NSE 00:00 | 20 Sep 3015.10 8.30
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OPEN 3006.45
PREVIOUS CLOSE 3008.30
VOLUME 162
52-Week high 3790.00
52-Week low 2570.15
P/E 32.98
Mkt Cap.(Rs cr) 2,906
Buy Price 2918.00
Buy Qty 1.00
Sell Price 3050.00
Sell Qty 2.00
OPEN 3006.45
CLOSE 3008.30
VOLUME 162
52-Week high 3790.00
52-Week low 2570.15
P/E 32.98
Mkt Cap.(Rs cr) 2,906
Buy Price 2918.00
Buy Qty 1.00
Sell Price 3050.00
Sell Qty 2.00

ICRA Ltd. (ICRA) - Director Report

Company director report

To

The Members ICRA Limited

Your Directors have the pleasure in presenting the 28th Annual Report of your Companyalong with the Audited Financial Statements for the year ended March 31 2019.

Financial Performance

During its 28th year of operations your Company has earned a net profit of Rs. 95.97crore as against Rs. 100.32 crore during the previous year. Your Company's basic earningsper share for the year ended March 31 2019 was Rs.98.36 as against Rs. 102.01 in theprevious year. The financial results of your Company (standalone and consolidated) for theyear ended March 31 2019 are presented in the following tables.

Particulars Standalone
2017-18 2018-19
(Rs. crore) (Rs. crore)
Revenue from operations 222.13 230.14
Other income 50.74 44.53
Total income 272.87 274.67
Total expenses 127.03 143.60
Profit before exceptional items and tax 145.84 131.07
Exceptional items - -
Profit before tax 145.84 131.07
Total tax expense 45.52 35.10
Profit for the year 100.32 95.97
Total other comprehensive income net of tax (0.22) (0.23)
Total comprehensive income for the year 100.10 95.74

Figures are extracted from the audited standalone financial statements as per IndianAccounting Standards (Ind AS). 1 crore = 10 million

Particulars Consolidated
2017-18 2018-19
(Rs. crore) (Rs. crore)
Revenue from operations 308.86 328.06
Other income 49.36 44.80
Total income 358.22 372.86
Total expenses 201.42 220.82
Profit before tax 156.80 152.04
Total tax expense 55.62 47.46
Profit for the year 101.18 104.58
Total other comprehensive income net of tax 0.00 0.43
Total comprehensive income for the year 101.18 104.15

Figures are extracted from the audited consolidated financial statements as per IndianAccounting Standards (Ind AS).

1 crore = 10 million

Review of Operations Rating Services Market Overview

The market for the credit rating business in FY2019 faced headwinds in terms of risinginterest rates and tight liquidity conditions in the first half of the year and laterbecause of the increased risk aversion towards the debt instruments of non-bankingfinancial companies (NBFCs) which typically account for 55-60% of the total debtissuances. Even as the economic growth is estimated to have picked up marginally duringFY2019 it was primarily supported by the Government's thrust on the road sector andaffordable housing even as the broad-based recovery in investment activity continued to bedelayed. Bond issuances in the first half witnessed a decline of 12% on a YoY basisbecause of rising interest rates as well as higher base of the previous year. With risinginterest rate differential between long-term debt and short-term borrowings there was ashift to commercial paper (CP) borrowings. However the bond issuances improved during thesecond half with YoY growth of 75% as the borrowers replaced short-term debt with longermaturity debt to reduce asset-liability mismatches there was a decline in corporate bondyields a surge in issuances of Government of India (GoI) fully-serviced bonds by variouspublic-sector undertakings as well as due to a favourable base effect of relatively lowerissuances in H2 FY2018. Revival in bank credit growth during FY2019 was mainly driven bythe demand from the NBFCs and the retail segments. A reduction in the Statutory LiquidityRatio (SLR) holding requirements for banks recapitalisation of public sector banks andexternal rating-based risk-capital allocation by banks for more categories of NBFCs mayfurther improve the overall bank credit growth.

Economic growth in FY2019 picked up modestly as the transition impact witnessed onvarious sectors because of the GST implementation waned and the Government's thrust oninfrastructure and housing activities continued. The depreciation of the Indian rupee alsoprovided an impetus to exports even as domestic consumption continued to remain strong.Notwithstanding the above positives the impact of the credit squeeze witnessed by theNBFCs had an adverse impact on consumption as well as supply of credit to micro-small andmedium enterprises which was reflected in the slowing growth of industrial activity aswell as the services sector starting from the second half of FY2019. Consumption growthhas slowed down quite significantly since then and with increasing concerns on trade warscorporate leverage and the Government's fiscal constraints to scale up expenditure ininfrastructure sectors the overall sentiment has turned somewhat negative in the last fewmonths. On the positive side with the recapitalisation of public sector banks a recoveryin investment activity is likely to find funding support.

While bank credit growth is expected to be steady during FY2020 debt capital marketsactivity will be driven by factors like inflation interest rate trajectory and the demandfor corporate bonds amid a large supply of Government bonds. An increased regulatorythrust by the RBI as well as by SEBI to part finance incremental borrowings through themarket route in case of large borrowers is likely to support the bond market though thecurrent risk aversion amongst market participants against all but the highest rated bondsor those backed by strong parentage may continue to act as impediments in the short run.

Corporate Sector

The bank credit growth to the corporate sector was moderate in FY2019 as the pick-up inthe investment cycle continued to get deferred. Borrowings through the bond route wereimpacted by high yields for most parts of the year and also due to increased risk aversionfrom debt investors in the second half of the financial year but showed a significantpick-up towards the end of the last quarter as yields subsided. Credit growth showed arevival in the second half of the year because of enhanced demand for working capitalloans. Also the capacity utilisation levels in several industries improved and freshinvestments have been visible on the marginal improvement in a few capital-intensivesectors like steel and cement. Given the borrowings of the Central and state governmentsas well as public sector undertakings planned for the year there are apprehensions aboutthe manner in which yields would play out. On the positive side the SEBI rule that largecorporates with a rating of AA and above must raise 25% of their incremental borrowingsthrough the bond market from this year onwards and likewise the RBI requirement topart-finance incremental borrowings in case of large exposures through the market route isexpected to provide an impetus to bond issuances provided the demand-side issues areaddressed. While fund-raising through new instruments like Infrastructure InvestmentTrusts (InvITs) formed under the Sebi InvIT Regulations 2014 did not show adequatetraction your Company was associated with the rating of the first Real Estate InvestmentTrust (REIT) under the SEBI REIT Regulations 2014.

Your Company was also involved in the Independent Credit Evaluation (ICE) of stressedassets as required under the Reserve Bank of India's revised framework for resolution ofstressed assets.

Financial Sector

The trend of rising bond yields during H1 FY2019 resulted in issuers' preference forbank credit and the widening interest rate differential between short-term and long-termdebt improved the attractiveness of short-term borrowings for the NBFCs. As a resultcommercial paper (CP) volumes touched all-time highs during Q2 FY2019. Though during H2FY2019 concerns on asset-liability mismatches also prompted borrowers to raise long-termbonds during H2 FY2019 even if it was at a relatively higher cost. Because of the abovefactors the bond issuances from both banks and the NBFCs which were down during H1FY2019 rose significantly during H2 FY2019 with a corresponding moderation in CP volumesoutstanding. With recapitalisation public sector banks (PSBs) are expected to seeimproved credit growth during FY2020 which coupled with phasing out of Basel II debtcapital instruments and continued growth of private banks should support bond issuancesfrom banks. Your Company continues to maintain strong presence in debt issuances from thebanking sector. With increased competition from banks increased cost of funds for theNBFCs and increased risk aversion to them the NBFCs may face a challenging year forgrowth going ahead. With likely pressure on profitability and asset quality some of themmay witness a relatively muted year of growth and hence issuances during FY2020. YourCompany continues to remain active in this sector. The year under review continued towitness Tier II bond issuances from insurance companies to strengthen their regulatorysolvency profile which is in addition to the ratings done on the claims-paying ability ofthese companies. Your Company continued to maintain a strong position in this segment.Rating downgrades during FY2019 impacted the quality of the underlying portfolios ofvarious debt mutual fund (MF) schemes and also resulted in higher risk aversion forinvestors. As a result the asset under management for debt MFs witnessed a muted YoYgrowth of ~2% during FY2019. With a view to match the investor's risk appetite variousnew schemes like overnight funds were also launched by the MFs which further expandedthis segment during the year under review for your Company.

Structured Finance

During FY2019 the securitisation market witnessed the highest-ever issuance volumes ofRs. 1.97 lakh crore a surge of nearly 135% over the previous fiscal (Rs. 84000 crore inFY2018). The market particularly gained buoyancy in H2 FY2019 driven by the liquiditycrisis in the financial sector that forced the NBFCs and the HFCs to increasingly look atthe securitisation route as an alternate funding tool. The relaxation of the minimumholding period (MHP) criteria for long-tenure loans by the RBI also helped as itincreased the supply of assets eligible for securitisation in the system. Continuing thetrend that started in FY2017 (pursuant to the clarity on legacy tax issues and removal ofthe distribution tax on securitisation trusts) healthy participation from the MFs andforeign investors continued to push the non-priority sector loan volumes.

In FY2019 your Company rated the country's first covered bond transaction and thefirst persistent securitisation transaction in the vehicle finance asset category. YourCompany also rated the first REIT vehicle launched in the country and continued tomaintain its position as a thought leader and a leading credit rating agency (CRA) in thestructured finance segment. Going forward the extent of priority sector loan (PSL)shortfall in the banking system and the availability of eligible assets with sellers areexpected to be the key factors influencing securitisation /assignment volumes. Howeverany significant traction in the priority sector loan certificates (PSLCs) market orwidespread adoption of the loan co-origination framework by banks for sourcing PSL assetscould restrict issuance volumes in the medium to long term. Nonetheless increasingappetite for non-PSL assets is a healthy trend that is expected to continue.

Industry Research

During the year 2018-19 your Company has made deeper inroads with a cross section ofclients across the market segments. ICRA research has regular coverage on 60+ industrieswith several sub-segments within the corporate sector and multiple sub-segments under thefinancial services and structured finance sectors. Clients continue to appreciate theanalytical depth of our reports and the level of engagement with our analysts.

Franchise Development

Your Company continues to enhance its franchise through periodic conferences seminarswebinars and media activities aimed at promoting its visibility and brand strength.

During the year your Company organised several seminars and conferences todisseminate its views on credit trends in specific sectors in the domestic markets. Likeevery year ICRA held joint events with Moody's involving speakers and panelistsrepresenting the broad market which were very well received by the event participants.Further your Company's sector-specific webinars and thematic research reports continuedwith a view to enhance our brand. Your Company continues to be at the forefront in termsof share of voice in the electronic and print media through regular releases expressingour opinion on contemporary issues with credit significance.

It continues to be a preferred partner in powering the Financial Advisor Awards alongwith CNBC-TV18. These awards have a strong franchise and are a matter of considerablepride for the winners.

Change in nature of business

During 2018-19 there was no change in the nature of business of your Company.

Subsidiary Companies (including step-down subsidiaries)

At the beginning of the year 2018-19 your Company had six subsidiaries including onestep-down subsidiary.

The Board of Directors of your Company had approved the merger of two of itswholly-owned subsidiaries - ICRA Management Consulting Services Limited which is involvedin consulting services with and into ICRA Online Limited involved in outsourcing andinformation services subject to requisite approvals. Pursuant to the aforesaid approvalan amalgamation scheme has been filed for approval of the merger with the Hon'ble NationalCompany Law Tribunals in Delhi and Kolkata. The Hon'ble National Company Law Tribunal NewDelhi has sanctioned the scheme of amalgamation filed by ICRA Management ConsultingServices Limited.

The said scheme of amalgamation will be effective upon sanctioning of the scheme filedby ICRA Online Limited by the Hon'ble National Company Law Tribunal Kolkata.

Apart from the above there has been no material change in the nature of the businessof the subsidiaries. As of March 31 2019 your Company had namely the followingsubsidiaries including the step-down subsidiary:

S. No. Name of Subsidiary Companies Category Country of Incorporation
1. ICRA Management Consulting Services Limited$ Subsidiary India
2. Pragati Development Consulting Services Limited Step-down subsidiary India
3. ICRA Online Limited$ Subsidiary India
4. PT. ICRA Indonesia* Subsidiary Indonesia
5. ICRA Lanka Limited Subsidiary Sri Lanka
6. ICRA Nepal Limited Subsidiary Nepal

$Scheme of amalgamation filed with the Hon'ble National Company Law Tribunal*liquidation initiated by the Company

Highlights of performance of subsidiary companies and their contribution to the overallperformance of the Company during the year 2018-19 are provided in the ManagementDiscussion and Analysis Report. The consolidated financial statements of Group ICRAconsisting of ICRA Limited its subsidiaries and step-down subsidiary for the year2018-19 which form a part of the Annual Report are attached. The Auditors' Report on theconsolidated financial statements is also attached. In compliance with the relevantprovisions of the Companies Act 2013 a statement containing the brief financial detailsin Form AOC-1 as per Rule 5 of the Companies (Accounts) Rules 2014 of the saidsubsidiaries is annexed to the consolidated financial statements prepared in accordancewith the prescribed Accounting Standards.

As required under the provisions of Section 136 (1) of the Companies Act 2013 thefinancial statements including consolidated financial statements and other documentsrequired to be attached thereto have been uploaded on the Company's website www.icra.in.Further your Company has also uploaded on its website the audited financial statements ofeach subsidiary company.

Branches of the Company

Your Company operates its business from its offices in New Delhi Gurugram MumbaiKolkata Chennai Ahmedabad Bengaluru Hyderabad and Pune.

Board meetings held during the year

During the year five meetings of the Board of Directors were held. The details of themeetings are furnished in the Corporate Governance Report attached as Annexure-III to thisReport.

Human Resource Development & Training

Human resources continued to provide a variety of training & developmentopportunities in the year under review with an aim to build employee capacity to meetstrategic needs and align with the company's strategic plan and overall mission. Afundamental belief of our management philosophy is to invest in our employees and enablethem to develop new skills and capabilities which benefit them as well as the Company. Avariety of training & development programmes were provided in areas of Functional& Behavioural Skills Team Building Managerial effectiveness with emphasis placed onimproving skill competency and knowledge. New hires go through a systematic on-boardingprogramme designed to equip them adequately with the right skills and competencies toachieve their best potential. ICRA continues to focus on building a strong talent pipelineacross levels through regular in-house and external programmes. Developing andstrengthening capabilities of all employees has remained an ongoing priority. Deservingemployees who demonstrate high performance and potential are awarded challengingassignments and higher responsibilities. They are provided adequate training and coachingto prepare them towards the same.

The Company's talent management strategy is focused on building leaders of tomorrow. Weinvest through world class leadership development programmes to build the talent bank inthe organisation. The Company has a robust talent review programme and ensures asuccession plan towards critical positions annually.

There is a harmonious relationship between the employees and the management of yourCompany. The consultative and participative management style of your Company hasfacilitated the achievement of its corporate goals. The employee morale has been highresulting in a positive contribution to your Company's progress.

Employees Stock Option Scheme (ESOS)

The Employee Stock Option Scheme 2006 (‘the Scheme') expired on June 27 2016after completion of 10 years. During the year under review the eligible employees hadexercised their last instalment of granted options. The members of your Company in theAnnual General Meeting held on August 9 2018 by passing a special resolution had adopteda new scheme called Employees Stock Option Scheme 2018 (ESOS 2018) under which anaggregate of 31950 stock options are proposed to be granted. Permanent employees(excluding Promoters and Independent Directors) of your Company and its subsidiaries areeligible to participate in the ESOS 2018. An estimated 31950 stock options (shares ofwhich are with the ICRA Employees Welfare Trust) will be granted under the ESOS 2018.

The disclosures in terms of Regulation 14 of the SEBI (Share-based Employee Benefits)Regulations 2014 read with Circular No CIR/CFD/POLICY CELL/2/2015 dated June 16 2015issued by SEBI are available on the Company's website and the web-link for the same is:

https://www.icra.in/InvestorRelation/ShowCorpGovernanceReport/?Id=27&Title=Corporate%20Governance&Report=Disclosure%20by%20Board%20of%20Directors%20(ESOP)_2018_March.pdf

Particulars of Employees

The disclosure under the provisions of Section 197(12) of the Companies Act 2013regarding the ratio of the remuneration of each Director to the median employee'sremuneration and such other details as specified in Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed to theDirectors' Report (Annexure I). A statement showing the names of the top ten employees interms of remuneration drawn and other particulars of the employees drawing remuneration inexcess of the limits set out in Rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 as well as the names and other particulars of everyemployee covered under the rule are available at the registered office of the Company andany member interested in obtaining such information may write to the Company Secretary andthe same will be furnished without any fee.

With regard to the provisions of Section 136(1) of the Companies Act 2013 theDirectors' Report excluding the information provided in compliance with Rule 5(2) and5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is being sent to the members of the Company.

Extract of the Annual Return

An extract of the Annual Return in Form No. MGT 9 as per Section 92(3) and Rule 12 ofthe Companies (Management and Administration) Rules 2014 is annexed with this report(Annexure II).

Corporate Governance

The report of the Board of Directors of your Company on Corporate Governance ispresented as a separate section (Annexure III) titled Corporate Governance Report whichforms a part of the Annual Report. The composition of the Board the Audit Committee theNomination and Remuneration Committee the Stakeholders Relationship Committee theCorporate Social Responsibility Committee and other committees of the Board the number ofmeetings of the Board and committees of the Board and other matters are presented in theCorporate Governance Report. The certificate of the Statutory Auditors of your Companyregarding compliance with the Corporate Governance requirements as stipulated in the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 (‘ListingRegulations') is annexed to the Directors' Report. Your Company has obtained a certificatefrom a practicing company secretary that none of the Directors on the Board of yourCompany have been debarred or disqualified from being appointed or continuing as directorsof companies by the SEBI /Ministry of Corporate Affairs or any such statutory authority.

Management Discussion & Analysis

The Management Discussion and Analysis is annexed to the Annual Report (Annexure IV).

Insider Trading Regulations

Based on the requirements under the SEBI (Prohibition of Insider Trading) Regulations2015 as amended from time to time the Code of Conduct for prevention of insider tradingis in force in your Company. The Board of Directors of the Company has adopted the Code ofPractises and Procedures for Fair Disclosure of Unpublished Price Sensitive Informationthe policy for determination of legitimate purposes and policy for enquiry in case of theleak of unpublished price sensitive information in compliance with the said regulationsand the same have been uploaded on the Company website.

Material Changes and Commitments

No material changes and commitments that would affect the financial position of theCompany have occurred between the end of the financial year to which the attachedfinancial statements relate and the date of this report. Further as per the disclosurerequired under Section 134 of the Companies Act 2013 read with Rule 8(5) of Companies(Accounts) Rules 2014 no significant and material orders have been passed by theregulators or courts or tribunals impacting the going concern status and the Company'soperations in future.

Buyback of Shares

During the year 2018-19 the Board of Directors of your Company at its meeting held onAugust 9 2018 had approved the buyback of the Company's fully paid-up equity shares ofthe face value of Rs. 10 each from its members/beneficial owners other than those who arepromoters or the persons in control of the Company and the promoter group from the openmarket through the stock exchange mechanism i.e. using the electronic trading facilitiesof the BSE Limited and the National Stock Exchange of India Limited where the equityshares are listed in accordance and consonance with the provisions contained in theCompanies Act 2013 and the provisions contained in the SEBI (Buyback of Securities)Regulations 2018 (Buyback Regulations).

The buyback commenced from October 1 2018 and closed on December 12 2018. YourCompany bought back 252049 equity shares at an average price of Rs. 3388.18 per equityshare for a total consideration of Rs. 853987926.34/- (Rupees Eighty-Five CroreThirty-Nine Lakh Eighty-Seven Thousand Nine Hundred Twenty-Six and Thirty-Four Paisa Only)(excluding transaction costs) representing 99.9986% of the total approved amount of Rs.85.40 crore (Rupees Eighty-Five Crore and Forty Lakh Only) towards the buyback.

Share Capital

As on March 31 2019 the Company's issued subscribed and paid-up equity sharecapital stood at Rs. 96512310 (Nine Crore Sixty-Five Lakh Twelve Thousand ThreeHundred and Ten Only) divided into 9651231 equity shares of Rs. 10/- each.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings andExpenditure

As your Company is not involved in any manufacturing activity the particulars relatingto conservation of energy and technology absorption as mentioned in the Companies(Accounts) Rules 2014 are not applicable to it. However emphasis is placed on theemploying techniques that result in the conservation of energy. Details on the foreignexchange earnings and expenditure of your Company appear in the notes to the financialstatements.

Update regarding certain ongoing matters

The Company is in the process of addressing certain ongoing matters. First theSecurities and Exchange Board of India (SEBI) has initiated adjudication proceedings(‘Adjudication Proceeding') related to the credit ratings assigned to one of theCompany's customers and the customer's subsidiaries. The settlement application filed inthis regard by the Company has been rejected by SEBI. The Company is also cooperating withgovernment agencies and responding to their queries in relation to this matter. Secondlythe Board of Directors of the Company appointed external experts to examine and report onanonymous representations against its officials which were forwarded to the Company bySEBI (Representations). There have been certain allegations during the course of theinternal examination of the representation which appear to be retaliatory in nature forwhich the Board is in the process of appointing external experts to examine. Thirdly theCompany has received a letter from SEBI seeking comments on observations made in theinterim report dated July 15 2019 prepared by Grant Thornton India LLP which wascommissioned by the IL&FS group. The Company has submitted its responses to SEBI onsuch observations.

While the Company has made a provision for penalty on a prudent basis with regards tothe Adjudication Proceeding the Adjudication Proceedings as well as the examinations andother matters noted above remain ongoing the results of which are not yet available orknown. In the meantime the Board of Directors of the Company on July 1 2019 placed itsManaging Director and Group CEO on administrative leave with immediate effect untilfurther notice.

As on date the Company is unable to estimate the impact if any that may result froma potential unfavourable conclusion of these matters or any related inquiry.

Directors and Key Managerial Personnel

During 2018-19 Ms. Farisa Zarin Non-Executive Non-Independent Director of yourCompany resigned from the Board of your Company inclusive of membership in any and allcommittees of the Board. The resignation of Ms. Zarin was effective from March 29 2019.During the year under review the Members of the Company at the Annual General Meetingheld on August 9 2018 approved the appointment of Mr. Navneet Agarwal as Non-ExecutiveNon-Independent Director of the Company.

The Board of Directors of your Company appointed Mr. David Brent Platt as an AdditionalDirector of your Company under the category of Non-Executive Non-Independent. Mr. Platt'sappointment is effective from April 30 2019. The Nomination and Remuneration Committeeand the Board of your Company recommend appointment of Mr. Platt under the category ofNon-Executive Non-Independent Director liable to retire by rotation for approval of theMembers of the Company at the forthcoming Annual General Meeting. The resolution seekingMr. Platt's appointment as Director has been included in the Agenda of the Annual GeneralMeeting. On the basis of the recommendation of the Nomination and Remuneration Committeethe Board of Directors in its meeting held on May 9 2019 has considered the matter ofre-appointment of Mr. Arun Duggal Ms. Ranjana Agarwal and Ms. Radhika Vijay HaribhaktiIndependent Directors who are to complete their first term in 2019. The Board had decidedto place the proposal for re-appointment of Mr. Arun Duggal Ms. Ranjana Agarwal and Ms.Radhika Vijay Haribhakti as Independent Directors for a further term of five years forapproval of the members at the forthcoming Annual General Meeting. Pursuant to theprovisions of Section 152 of the Companies Act 2013 and the Articles of Association ofyour Company Dr. Min Ye is due to retire by rotation and being eligible has offeredhimself for reappointment.

Proposal for the above appointment/re-appointment forms a part of the Agenda for theforthcoming Annual General Meeting and the resolutions are recommended for your approval.The profiles of Mr. Duggal Ms. Agarwal Ms. Haribhakti Dr. Ye and Mr. Platt arepresented in the Notice of the 28th Annual General Meeting as required under theCompanies Act 2013 and the Listing Regulations.

On July 1 2019 the Board of Directors of your Company pending the completion of theexamination of the concerns raised in the anonymous representation that was forwarded tothe Company by the Securities and Exchange Board of India (SEBI) placed Mr. NareshTakkar Managing Director & Group CEO on administrative leave effective from July 12019 until further notice.

In addition the Board of Directors of your Company appointed Group Chief FinancialOfficer (Group CFO) Mr. Vipul Agarwal as Interim Chief Operating Officer of the Companyeffective from July 1 2019. Mr. Agarwal has assumed responsibility for the day-to-dayoperations of your Company and during Mr. Takkar's period of leave reports to the Boardof Directors. Mr. Agarwal continues to hold his position as the Group CFO.

Independent Directors' Declaration

As required under Section 149(7) of the Companies Act 2013 read with Schedule IV ofCompanies Act 2013 the Company has received a confirmation/declaration from each of theIndependent Directors stating that they meet the criteria of independence. The followingNon-Executive Directors of the Company are independent in terms of Section 149(6) of theCompanies Act 2013 and the Listing Regulations:

1. Mr. Arun Duggal

2. Ms. Ranjana Agarwal

3. Ms. Radhika Vijay Haribhakti

Directors' Responsibility Statement

As required under the provisions contained in Section 134 of the Companies Act 2013your Directors hereby confirm that: (i) in the preparation of the Annual Accounts for theyear ended March 31 2019 the applicable accounting standards have been followed andthere are no material departures from the same (ii) the Directors had selected suchaccounting policies and applied them consistently and made judgments and estimates thatare reasonable and prudent to give a true and fair view of the state of affairs of theCompany at the end of the financial year and of the profit and loss of the Company forthat year (iii) the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013to safeguard the assets of the Company and to prevent and detect fraud and otherirregularities (iv) the Directors had prepared the Annual Accounts on a going concernbasis (v) the Directors had laid down the internal financial controls followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and (vi) the Directors had devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively

Policy on Directors' Appointment

The Nomination and Remuneration Committee works with the Board to determine theappropriate characteristics skill and experience that are required of the members of theBoard. The members of the Board should possess the expertise skills and experience neededto manage and guide the Company in the right direction and to create value for allstakeholders. The members of the Board will need to consist of eminent persons of provencompetency and integrity with an established track record. Besides having financialliteracy experience leadership qualities and the ability to think strategically themembers are required to have a significant degree of commitment to the Company and shoulddevote adequate time in preparing for the Board meeting and attending the same. Themembers of the Board of Directors are required to possess the education expertise skillsand experience in various sectors and industries needed to manage and guide the Company.The members are also required to look at strategic planning and policy formulations.

The members of the Board should not be related to any executive or independent directorof the Company or any of its subsidiaries. They are not expected to hold any executive orindependent positions in any entity that is in direct competition with the Company. Boardmembers are expected to attend and participate in the meetings of the Board and itsCommittees as relevant. They are also expected to ensure that their other commitments donot interfere with the responsibilities they have by virtue of being a member of theBoard of the Company. While reappointing Directors on the Board and Committees of theBoard the contribution and attendance record of the concerned Director shall beconsidered in respect of such reappointment. Each Independent Director shall hold officeas a member of the Board for a maximum term as per the provisions of the Companies Act2013 and the rules made thereunder in this regard from time to time and in accordancewith the provisions of the Listing Regulations. The appointment of the Directors shall beformalised through a letter of appointment.

The Executive Directors with the prior approval of the Board may serve on the Boardof any other entity if there is no conflict of interest with the Company's business.

Board and Directors' Performance Evaluation

The Board of Directors of the Company based on the recommendations of the Nominationand Remuneration Committee has formulated a Board and Directors' Performance EvaluationPolicy thereby setting out the performance evaluation criteria for the Board and itsCommittees and each Directors' performance including the Chairman of the Company. YourCompany's Board had undertaken a formal performance evaluation in a comprehensive andstructured manner as a part of the strengthening exercise. Based on the recommendations ofthe Nomination and Remuneration Committee the Board has adopted a process of receivinganonymous feedback and discussing the same at the meeting to ensure the Directors'collective participation and meaningful discussion over the performance of the Board itsCommittees individual Directors and Chairperson of the Board. Your Company's Boardbelieves that trust in the evaluation process and its confidentiality is critical for thesuccess of the evaluation exercise therefore the Board encourages fair and transparentevaluations and maintains anonymity of those providing the feedback.

During the evaluation process various suggestions were made by individual Boardmembers to further enhance the effectiveness of your Company's Board. The results of thefeedback were discussed with the Board and its respective committee members. Individualfeedback was shared by the Chairman with each Board member separately.

The Board of Directors of the Company believes that the effectiveness of its governanceframework can continue to be improved through periodic evaluation of the functioning ofthe Board as a whole its committees and individual directors' performance evaluation.

Auditors

M/s. B S R & Co. LLP Chartered Accountants were appointed as Statutory Auditorsof your Company at the 24th Annual General Meeting to hold office until the conclusion ofthe 28th Annual General Meeting. The Audit Committee and the Board of Directors haveconsidered and recommended the appointment of Statutory Auditors to the Members of theCompany. The disclosures as required under Regulation 36(5) of the Listing Regulationswill be presented in the Notice of the 28th Annual General Meeting.

Comments on Auditors' Report

The notes to the financial statements referred to in the Auditors' Report areself-explanatory and do not call for any further comments except for the disclosurepertaining to certain ongoing matters as provided under ‘Update regarding certainongoing matters' and ‘Directors and Key Managerial Personnel' of this report of theBoard of Directors.

The Statutory Auditors have not reported any incident of fraud to the Audit Committeeof the Company in the year under review.

Secretarial Audit

The Board of Directors of the Company has appointed M/s. Chandrasekaran AssociatesCompany Secretaries (Certificate of Practice No. 13725) as the Secretarial Auditor of theCompany for the financial year 2018-19 in terms of Section 204 of the Companies Act 2013and Regulation 24A of the Listing Regulations. The Secretarial Audit Report for financialyear 2018-19 has been annexed to this Report (Annexure V). The Secretarial Audit Reportdoes not contain any qualifications reservations or adverse remarks.

As per the requirement of the Listing Regulations material subsidiary has appointed asecretarial auditor who has undertaken secretarial audit of the material subsidiary forthe financial year ended March 31 2019.

Transfer to Reserves

Your Company proposes not to transfer any amount to the General Reserve.

Dividend

The Board of Directors recommends for approval of the Members at the forthcoming AnnualGeneral Meeting payment of dividend of Rs. 30 per equity share for the financial yearended March 31 2019. If the members approve the dividend at the forthcoming AnnualGeneral Meeting the dividend shall be paid to: (i) all those members whose names appearin the Register of Members as on Wednesday September 25 2019; and (ii) all those memberswhose names appear on that date as beneficial owners as furnished by the NationalSecurities Depository Limited and Central Depository Services (India) Limited.

Dividend Distribution Policy

Your Company has formulated a Dividend Distribution Policy (‘the Policy') pursuantto Regulation 43A of the Listing Regulations. The objective of the Policy is to maintainstability in the dividend payout of the Company subject to the applicable laws and toensure a regular dividend income for the members and long-term capital appreciation forall stakeholders of the Company. Your Company would ensure to strike the right balancebetween the quantum of dividend paid and the amount of profits retained in the businessfor various purposes. The Board of Directors refers to this Policy whiledeclaring/recommending dividends on behalf of the Company. Through this Policy theCompany would try to maintain a consistent approach to dividend pay-out plans subject tothe applicable laws. The Policy has been annexed to this report (Annexure VI) and alsouploaded on the Company's website - www.icra.in.

Transfer to Investor Education and Protection Fund

The Company sends reminder letters to all members whose dividends are unclaimed toensure that they receive their rightful dues. Your Company has also uploaded on itswebsite www.icra.in information regarding unpaid/unclaimed dividend amounts lying withyour Company. During 2018-19 the unclaimed dividend amount of Rs. 90389 towards theunpaid dividend account of the Company for the financial year 2010-11 was transferred tothe Investor Education and Protection Fund. The said amount had remained unclaimed forseven years despite reminder letters having been sent to each of the members concerned.

Pursuant to Section 124(6) of the Companies Act 2013 and the Investor Education andProtection Fund Authority (Accounting Audit Transfer and Refund) Rules 2016 and itsamendments all shares in respect of which dividend has not been paid or claimed for sevenconsecutive years or more shall be transferred by the Company in the demat account ofInvestor Education and Protection Fund (IEPF) Authority (the Authority) within a period ofthirty days of such shares becoming due to be transferred to the IEPF as per theprocedure mentioned in the said Rules. Accordingly your Company has transferred 142equity shares to the demat account of the Authority and in terms of the said rules. Allbenefits accruing on such shares viz. bonus shares split consolidation fraction sharesetc. except the right issue shall also be credited to such a demat account. Members maynote that unclaimed dividend and shares transferred to the demat account of the Authoritycan be claimed back by them from the Authority by following the procedure mentioned in thesaid Rules.

Risk Management Policy

Your Company has formulated a risk management policy. This policy is a formalacknowledgement of the commitment of your Company to risk management. The aim of thepolicy is not to have the risk eliminated completely from the Company's activities butrather to ensure that every effort is made by the Company to manage risks appropriately tomaximise potential opportunities and minimise the adverse effects of risk. The Board andthe Risk Management Committee monitor and review the risk management plan.

Internal Control System and their Adequacy

Your Company has an internal control system commensurate with its size nature of itsbusiness and complexities of its operations. The Board of Directors of your Company hasadopted policies and procedures for ensuring the orderly and efficient conduct of yourCompany's business. The Board of Directors of your Company has laid down InternalFinancial Controls to provide reasonable assurance with regard to recording and providingreliable financial and operational information adherence to the Company's policiessafeguarding of assets and prevention and detection of frauds and errors the accuracy andcompleteness of accounting records and timely preparation of reliable information. TheBoard and the Audit Committee regularly evaluate internal financial controls.

Corporate Social Responsibility

Your Company 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 composition of the CSRCommittee the CSR policy of the Company details about the development and implementationof the policy and initiatives taken by the Company during the year as required under theCompanies (Corporate Social Responsibility Policy) Rules 2014 have been annexed to thisreport (Annexure VII).

Business Responsibility Report

Your Company in accordance with the provisions of Regulation 34(2)(f) of the ListingRegulations has prepared a Business Responsibility Report for the year 2018-19. TheBusiness Responsibility Report describes the initiatives taken by the Company from theenvironmental social and governance perspective. The Business Responsibility Report hasbeen annexed to this report (Annexure VIII) and forms a part of the Director's Report.

Particulars of Contracts or Arrangements with Related Parties

Your Company has entered into contracts or arrangements with its related parties. Therelated-party transactions are disclosed in the financial statements for the year endedMarch 31 2019. There have been no material-related party transactions as per Section188(1) of the Companies Act 2013 and as per Regulation 23 of the Listing Regulations andthe required disclosures of information in Form AOC-2 in terms of Section 188 of theCompanies Act 2013 read with Rule 8(2) of the Companies (Accounts) Rules 2014 areannexed to this report (Annexure IX).

Policy on Prohibition Prevention and Redressal of Sexual Harassment

Your Company has formulated a Policy on Prohibition Prevention and Redressal of SexualHarassment of Women at Workplace in accordance with The Sexual Harassment of Women atWorkplace (Prohibition Prevention and Redressal) Act 2013. The Company has constitutedan Internal Committee for prevention and redressal of sexual harassment at the workplaceseparately for all the branches. The Company has not received any complaints. Thedisclosures in relation The Sexual Harassment of Women at Workplace (ProhibitionPrevention and Redressal) Act 2013 has also been made in the Corporate GovernanceReport.

Deposits

The Company has not accepted any public deposits and as such no amount on account ofprincipal or interest on public deposits was outstanding as on the date of the balancesheet.

Particulars of Loans Guarantees and Investments

The particulars of loans guarantees and investments are disclosed in the financialstatements for the year ended March 31 2019.

Vigil Mechanism/Whistle-Blower Policy

Your Company has established a vigil mechanism in compliance with the provisions ofSection 177 (9) of the Companies Act 2013 and Regulation 22 of the Listing Regulations.Your Company has adopted a Whistle-Blower Policy to report unethical/ illegal/improperbehaviour. Your Company has made employees aware of the whistle-blower policy to enablethem to report instances of leak of unpublished price sensitive information.

The said whistle-blower policy also provides for adequate safeguards againstvictimisation of persons who use such vigil mechanism and makes provision for directaccess to the chairperson of the Audit Committee in exceptional cases. Further nostakeholders have been denied access to the Audit Committee.

Composition of the Audit Committee

Your Company has constituted an Audit Committee the composition of which has beenprovided in the Corporate Governance Report. During the financial year 2018-19 the Boardaccepted all the recommendations of the Audit Committee.

Litigations

There are two pending cases in the Hon'ble High Court at Madras which are forinjunction petitions by clients against publishing of surveillance rating by your Company.

Acknowledgements

Your Directors acknowledge the cooperation and assistance received from variousinstitutions Government agencies members and professionals from different disciplines.

Your Directors also wish to place on record their appreciation of the contribution madeby the members of the staff of your Company.

For and on behalf of the Board of Directors
(Arun Duggal)
Chairman
DIN: 00024262
Place : Gurugram
Date : August 22 2019