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IIFL Securities Ltd.

BSE: 542773 Sector: Financials
NSE: IIFLSEC ISIN Code: INE489L01022
BSE 00:00 | 17 Feb 53.95 -2.80
(-4.93%)
OPEN

54.00

HIGH

55.85

LOW

53.95

NSE 00:00 | 17 Feb 53.90 -2.80
(-4.94%)
OPEN

53.90

HIGH

56.10

LOW

53.90

OPEN 54.00
PREVIOUS CLOSE 56.75
VOLUME 133556
52-Week high 62.65
52-Week low 19.10
P/E 15.73
Mkt Cap.(Rs cr) 1,722
Buy Price 54.15
Buy Qty 100.00
Sell Price 53.95
Sell Qty 15447.00
OPEN 54.00
CLOSE 56.75
VOLUME 133556
52-Week high 62.65
52-Week low 19.10
P/E 15.73
Mkt Cap.(Rs cr) 1,722
Buy Price 54.15
Buy Qty 100.00
Sell Price 53.95
Sell Qty 15447.00

IIFL Securities Ltd. (IIFLSEC) - Director Report

Company director report

Dear Shareholders

On behalf of the Board of Directors it is our pleasure to present the First AnnualReport after effecting the De-Merger of IIFL Finance Limited (Formerly IIFL HoldingsLimited) the Listed Company and the Twenty Fourth Annual Report of IIFL SecuritiesLimited ("the Company"; erstwhile India Infoline Limited) together with theAudited Financial Statements for the year ended March 31 2019. We welcome all theshareholders of IIFL Finance Limited pursuant to allotment of shares of the Company inJune 2019 upon affecting the Composite Scheme of Arrangement.

Highlights of Financial Performance

The Company has recorded the following financial performance for the year ended March31 2019:

1. Financial Results

Pursuant to the notification dated February 16 2015 issued by the Ministry ofCorporate Affairs the Company has adopted the Indian Accounting Standards (‘Ind AS')notified under the Companies (Indian Accounting Standards) Rules 2015 with effect fromApril 1 2018. Financial statements for the year ended and as at March 31 2018 have beenrestated to conform to Ind AS.

A summary of the financial performance of the Company and its major subsidiaries forthe financial year ended March 31 2019 is as under:

(Rs. in million)
Name of the Company Revenue Profit after Tax
IIFL Securities Limited 7058.05 1449.39
IIFL Facilities Services Limited 1119.84 122.77
IIFL Insurance Brokers Limited 367.27 120.66
IIFL Management Services 334.17 27.68
Limited
IIFL Capital Inc 243.33 22.99
IIFL Wealth (UK) Limited 115.82 -9.95

- Consolidated Financial Results

A summary of the consolidated financial performance of the Company for the financialyear ended March 31 2019 is as under:

(Rs. in million)
Particulars 2018-19 2017-18*
Revenue 8755.65 9471.93
Profit Before Tax 2580.81 2735.31
Profit After Tax 1714.33 1805.76
Total Comprehensive Income 1721.01 1797.63

* Previous period figures have been regrouped/rearranged wherever necessary

- Standalone Financial Results

A summary of the standalone financial performance of the Company for the financialyear ended March 31 2019 is as under:

(Rs. in million)
Particulars 2018-19 2017-18*
Revenue 7058.05 7426.57
Profit Before Tax 2162.73 2412.75
Profit After Tax 1449.39 1575.08
Total Comprehensive Income 1457.32 1567.85

* Previous period figures have been regrouped/rearranged wherever necessary

2. Review of Operations and Business and the state of Company affairs

The Company's consolidated revenue was Rs. 8755.65 million in the financial year2018-19 as against Rs. 9471.93 million in the financial year 2017-18 a decline of 7.56%from that of previous year. The Company has earned consolidated net profit of Rs. 1714.33million compared with the previous year net profit of Rs. 1805.76 million a marginaldecline of 5.06% from that of previous year.

I. Broking and Distribution

The Company's broking & distribution services continues to be a key player in boththe retail and institutional segments of the capital market with over 2500 points ofpresence covering the Company's branches and business partners over 500 cities in India. Acombination of reduced investor optimism shocks in the debt market and uncertainty aboutthe consumption story led to a volatile year in terms of inflows to the markets. Despitethese headwinds the average daily equity market volumes for the capital market businesssurged 26% year-on-year (y-o-y) to Rs. 177.96 billion. The Company has continued theacceleration in new client acquisition with the retail broking business adding 88398 newcustomers in FY 18-19.

As you are aware IIFL offers a varied product/service suite to its customers –equities commodities and currency broking mutual fund distribution depositoryparticipant services portfolio management services structured products and InvestmentBanking. The distribution business faced significant headwinds during the year due to thevolatile situation with high net worth clients taking longer to commit funds towardscapital market-linked investments. Our Mutual Fund distribution AUM grew 25.6% to reachRs. 36.25 billion at the end of FY 18-19 supported by growth in the large-cap andindex-linked stocks. Net mutual fund inflows for the year were Rs. 3.53 billion. Theretail investors remain committed to building long term wealth as witnessed in our SIPAUM growing to Rs. 6.18 billion a growth of 64.8% year on year. Distribution strength wasalso witnessed when the Company emerged as the top distributor for the Non ConvertibleDebentures (NCD) issue of India Infoline Finance Limited by garnering Rs. 106 billion ofsubscription from a large number of clients towards the same.

Building on the successes of the previous years the Company continues to improve itsdigital offerings in its retail broking business. The Company's mobile trading app‘IIFL Markets' remains the highest rated on Android and iOS among peers with over2.7million downloads. Since its launch in February 2015 the brokerage earned and thenumber of retail clients trading on mobile is on a steady rise. D-I-Y (Do It Yourself)based mobile trading revenue contribution crossed 50% in the last quarter of FY18-19 andover 40% of the total client base has used this channel for trading. New enhancementscontinue to add value to users and help keep them engaged on the platform in a sustainablemanner. IIFL has also launched a holistic goal-based investment management solution tohelp investors target key lifestyle goals.

Our focussed and consistent efforts towards digitisation and enhancing our serviceoffering & manpower productivity have resulted in improved profitability and enhancedoperating margins for the retail broking business.

II. Institutional Equities

Market volumes in the institutional segment were more or less the same as the previousyear's. The Company's market share was marginally higher on a year-on-year basis. Thepressure on yields remained unrelenting compressing them by almost 2bps in FY18-19. Ourefforts to invest in the F&O business paid o3; volumes were up almost six times YoYalbeit on a relatively low base. The Company's institutional equities research continuedto be one of the best ranked on the Street.

III. Investment Banking

Despite the market volatility especially in the second half of the fiscal ourinvestment banking division completed more than 15 transactions including 3 IPOs 4 QIPsand 1 ReIT listing. The Investment Banking division continues to have market leadership inequity raising for private sector corporates and has been ranked No. 1 in equity capitalraising for private sector companies covering equity IPOs FPOs QIPs ReITs InvIts andIPPs during FY17-19. For the second year in a row the Investment Banking division hasbeen ranked as the Best IPO Lead Manager - India by Capital Finance International("CFI.co") in 2019.

Some of the large transactions completed by the Company's investment banking divisionin FY18-19 include:

i. Rs. 47.5 billion ReITs issue of Embassy Office Parks;

ii. Rs. 28 billion IPO of HDFC Asset Management Company;

iii. Rs. 27.75 billion QIP of HDFC Bank;

iv. Rs. 11.31 billion IPO of CreditAccess Grameen; and

v. Rs. 7.5 billion QIP of Aarti Industries.

The Company has a robust pipeline of investment banking transactions across a number ofproduct categories which are in different stages of execution. The Company's investmentin people and processes for the past few years is starting to bear fruit as it continuesto diversify its product/service offerings. Clients continue to value the Company's focus& commitment and consider it as their trusted advisor as reflected in the largevolume of repeated business.

3. Macro-economic Overview:

India was the fastest growing economy in the world in FY19 and is expected to sustainthe same pace in FY20. Various structural reforms like Goods and Services Tax andInsolvency and Bankruptcy Code led to a shift towards an organised economy and improvedease of doing business. India's real GDP grew at 7.1% in FY19. Price levels remainedwithin RBI's target and headline inflation largely remained at the same level as theprevious year.

The Indian economy was adversely affected with the global slowdown increase incommodity prices fiscal slippage and domestic liquidity transmission causing a slowdownin consumption. Growth rates were adversely affected across sectors; Manufacturing slowedfrom 16.7% YoY in Q1FY19 to 11% YoY in Q3FY19 agricultural output from 6.8% YoY in Q1FY19to 2% YoY in Q3FY19 and Services remained stagnant at ~13% through FY19. Despite facingheadwinds though the economy demonstrated resilience in 2018-19. Indian Capital Marketsremained attractive for domestic and global investors and investment in Mutual Fundscontinued to see traction.

Developments on the digital front have been impressive in the past year. TheGovernment's ‘Digital India' initiative has led to major transformations in thetraditionally cash-driven economy. Digital payments and transactions have boomed in recenttimes and technology initiatives are expected to revolutionise the financial servicesindustry.

4. Industry Overview

Despite headwinds from the global slowdown and the transient impact of demonetisationthe Indian economy demonstrated resilience in FY18-19. As per the IMF's World EconomicOutlook April 2019 edition India's GDP grew at 7% in FY19 as against 8.2% in FY17. Thiswas majorly due to an overall slowdown in consumption which is impacting key indicatorsleading to a heightened pace of economic and structural reforms that in the medium termshould positively impact economic growth. With the current government's ambition ofrealising a US$ 5 trillion economy by 2024 consumption and investment are both likely toaccelerate rapidly.

A positive investment scenario supported by a robust macroeconomic performance easinginflationary pressures stable FDI inflows and regulatory and structural reforms by thegovernment have improved business confidence and attracted investors to the Indian capitalmarket. The Indian stock market scaled new peaks on the back of positive domestic andglobal sentiments despite a pick-up in the GDP growth being restricted in first half ofFY18-19.

Healthy returns on investments and increasing awareness among the masses have boostedparticipation of individual investors (retail and HNI) in mutual funds. Assets managed bythe Indian mutual fund industry have grown from Rs. 9.75 trillion as on June 30 2014 toRs. 24.25 trillion as on June 30 2019 about 2 fold increase in a span of 5 years.Individual investors held Rs. 13.54 trillion in mutual funds as of March 2019 an increaseof 16.08% over March 2018. Investments of individual investors in equity schemes increasedby 16.39% over March 2018. Regulatory changes have impacted the commissions earned bydistributors through changes in the payout structures. Small players are expected to behit much more compared with larger distributors who have multiple streams of income.

Indian equity indices hit all-time highs in 2019. Buoyant markets have acceleratedtrading volumes. Average daily cash trading volumes went up 44% YoY. However rise intransaction volumes has been offset by steadily falling yields. Yields have been decliningover the past few years due to multiple factors including:

i) rise of passive investment

ii) rising participation of domestic funds that have lower yields

iii) increasing share of derivatives in transactions and

iv) the European and UK regulators having introduced Markets in Financial InstrumentsDirective or MiFID II norms from January 2018 and under these norms investors need toseparately account for execution and research instead of the bundled cost model followedso far.

5. KEY INITIATIVES/DEVELOPMENTS:

I. Investment Banking

Pursuant to Composite Scheme of Arrangement approved by National Company Law TribunalMumbai Bench ("NCLT") vide its order dated March 07 2019 as explained inpoint no. 6 of this report and SEBI approval dated July 12 2019 the Merchant BankingLicense of IIFL Finance Limited (Formerly IIFL Holdings Limited) was transferred to theCompany being part of Securities business undertaking.

II. Commodities Broking

With a view to integrate the equity and commodities broking business carried on byrespective subsidiaries within the IIFL group and to ensure smooth operations andservicing of their clients the commodity broking business of Multi Commodity Exchange ofIndia Limited ("MCX") and the National Commodity and Derivatives ExchangeLimited ("NCDEX") carried on by IIFL Commodities Limited was transferred to IIFLSecurities Limited vide slump sale agreement dated June 5 2018 executed between IIFLCommodities Limited and IIFL Securities Limited pursuant to the necessary approvals and inaccordance with the SEBI circular dated September 21 2017 which permits integration ofequity and commodity broking.

III. Launched a mobile office solution ‘AAA' i.e. Advisor Anytime Anywhere

A one-stop solution for entrepreneurs interested in the capital market with anobjective of facilitating those who want to follow entrepreneurship route in the capitalmarkets IIFL Securities has launched a mobile office solution ‘AAA' i.e. AdvisorAnytime Anywhere. Backed by robust technology and expertise AAA helps its businesspartners/advisors manage their client's investments access quality research &training and monitor their business performance all within a single device. A tab-basedplatform AAA comes with in-built comprehensive and relevant features in order to assistits partners.

IV. Enterprising India Investor Conference

IIFL's Tenth Enterprising India - Global Investors' Conference was held from the 13thto 15th of February 2019. This time the theme was ‘Elections-Economy-Earnings'.

The Enterprising India Conference brings together some of the most notable industryexperts investors and corporate presenters. This year we witnessed participation from122 companies and 700+ investors. Additionally we also featured 25 specialist speakersincluding Dr. Jim Walker renowned economist; Mr. Manish Sabharwal Chairman - TeamLeaseServices; Mr. Shekhar Gupta Editor in Chief – The Print; Mr. Amitabh Kant CEO -NITI Aayog; Mr. Krishnan Sitaraman Senior Director – CRISIL; Mr. Nikhil OjhaPartner (Mumbai) - Bain & Company; and Mr. Amin Toufani Chair - Finance &Economics Singularity University (New York).

The conference was well attended by companies from all major sectors – AutoCement Banking FMCG IT Services Infrastructure Oil & Gas and Media amongothers.

V. Awards and Accolades

The Directors are happy to report that during the year the Company was recognised andfelicitated for its exemplary performance in various fields.

Some of its significant achievements are:

• Won the NSE Market Achievers Awards 2018 in the Best IPO Bidding Member Retailcategory

• Received two awards at the BSE Annual Felicitation ceremony

• Awarded for being the top volume performer in the Primary Market segmentregarding Equity- IPO/FPO Bids Members for FY17-18 and in the Primary Market Segmentregarding Debt Public Issue Bids - Members for FY17-18.

• Honoured for the Go Green Initiative for 'Executing Maximum DigitalTransactions' by NSDL at its Star Performer Awards 2018

• ET Now and Broadcast One recognised the IIFL Group as Disruptors in theFinancial Services

Space for sustained innovation through technological intervention in non-bankingfinance wealth management and broking space

• Received the Qadat Al Tagheer Award under the Best Financial Advisory servicesfor the NRI category at the UAE-India Economic Forum

• The Company is India's Number-1 banker for equity issuances by private sectorcompanies in Fiscal 2017-18 by Prime Database

• Customer Excellence in NBFC Sector at the India CX Summit and Awards 2019

• Received the 'Customer Experience Award' for the Category: Best Use ofTechnology to Enhance Customer Experience at the Customer Fest Show 2019

• Received the prestigious ET Now Making of Developed India Awards For Brand andMarketing Excellence under the Category: Best use of Technology to improve CustomerService in the Financial Industry

VI. Corporate Social Responsibility (CSR) Initiative

The Corporate Social Responsibility Committee of the Board has formulated andrecommended to the Board a Corporate Social Responsibility Policy (CSR Policy) indicatingthe CSR activities which can be undertaken by the Company. The Board approved CSR Policywhich is available on the website of the Company i.e. www.iifl.com andwww.indiainfoline.com.

IIFL group has set-up India Infoline Foundation (generally referred to as "IIFLFoundation") a Section 8 Company under the Companies Act 2013 which acts as theprincipal arm to undertake CSR initiatives on behalf of the Company & itssubsidiaries.

The Company has identified focus areas for CSR initiatives which includes:

• Water Conservation

• Provision of Medical Eguipment to Hospital

• Medical Treatment for poor patients

• Education - Eradication of Girl child Illiteracy

• Support to Differently abled

• Educational support to the Tribal out-of-school children - Maharashtra

During the financial year your Company deployed 2% of its average net profits(computed as per the relevant provisions of Companies Act 2013) of the preceding threeyears on CSR projects fully utilising the required amount.

6. Composite Scheme of Arrangement of the IIFL Group

As you are aware the Board of Directors of the Company at its meeting held on January31 2018 had approved the Composite Scheme of Arrangement amongst the Company IIFLFinance Limited (erstwhile IIFL Holdings Limited; "IFL") India InfolineMedia and Research Services Limited ("IIFL M&R") IIFL WealthManagement Limited ("IIFL Wealth") India Infoline Finance Limited ("IIFLFinance") IIFL Distribution Services Limited ("IIFL Distribution")and their respective shareholders under Sections 230-232 and other applicable provisionsof the Companies Act 2013 ("Scheme") which inter-aliaenvisages the demerger of the Securities Business Undertaking (as defined in the Scheme)of IIFL Finance Limited into the Company. The Hon'ble National Company Law Tribunal ("NCLT")Mumbai Bench vide its order dated March 7 2019 sanctioned the Composite scheme ofarrangement and the certified true copy of the NCLT order was received on March 15 2019.

Pursuant to the order the following parts of the Scheme are made effective:

(a) amalgamation of IIFL M&R with IFL;

(b) demerger of the Securities Business Undertaking (as defined in the scheme) of IFLinto the Company;

(c) demerger of the Wealth Business Undertaking (as defined in the Scheme) of IFL intoIIFL Wealth; and

(d) transfer of the Broking and Depository Participant Business Undertaking (as definedin the Scheme) of IIFL Wealth to its wholly-owned subsidiary i.e. IIFL Distribution on agoing-concern basis. However the merger of India Infoline Finance Limited with IFL shallbe made effective on receipt of the requisite licences/ registrations by IFL to carry onthe lending business.

Upon the Scheme coming into effect and in consideration of the transfer and vesting ofthe Securities Business Undertaking into the Company 18718281 Equity Shares of Rs. 10each held by IIFL Finance Limited (erstwhile IIFL Holdings Limited) in the Company wereextinguished and cancelled and in lieu of the same the equity shareholders of IIFLFinance Limited whose name appeared in the Register of Members on record date May 31 2019were allotted one (1) equity share in IIFL Securities Limited of Rs. 2 each credited asfully paid-up for every one (1) equity share of Rs. 2 fully paid-up and held by suchequity shareholders in

IIFL Finance Limited. Accordingly 319234462 equity shares of Rs. 2 each of theCompany were issued and allotted to the Eligible Shareholders of IIFL Finance Limited onJune 6 2019.

Pursuant to the above and the Scheme becoming effective from April 1 2018 thefollowing Companies have become subsidiaries of the Company:

Name of the Subsidiary

1 IIFL Facilities Services Limited

2 IIFL Management Services Limited

3 IIFL Insurance Brokers Limited

4 IIFL Commodities Limited

5 IIFL Wealth (UK) Limited

6 IIFL Capital Inc.

7 IIFL Asset Reconstruction Limited

8 India Infoline Foundation (Section 8 Company)

As per the Scheme IIFL Finance Limited transferred the assets and liabilitiespertaining to the demerged undertaking (Securities Business Undertaking) to the Companyat the respective carrying values as appearing in the books of accounts of IIFL FinanceLimited from April 1 2018 (the appointed date). The demerger has been accounted under thepooling of interests method in accordance with Appendix C of IndAS 103 BusinessCombinations and comparatives have been restated from the beginning of the earliestprevious year presented in these financial statements viz. April 1 2017 as if thebusiness combination had occurred from that date. Accordingly the capital reserve as ateach of the reporting periods arrived at is as mentioned below:

(Rs. in million)
Particulars March 31 2019 March 31 2018 April 1 2017
Net assets value of the 1414.99 1470.15 1655.73
Securities Business
Undertaking (A)
Profit for the year transfer under the Scheme (B) 178.67 - -
ESOP reserve (C) 21.83 - -
Equity share capital to be cancelled (D) 187.18 187.18 169.00
New equity share capital to be issued (E) 638.41 637.96 635.82
(Rs. in million)
Particulars March 31 2019 March 31 2018 April 1 2017
Impact of differential tax rate - deferred tax (F) 1.68 1.68 -
Capital reserve created from the above (A-B-C+D-E-F) 761.58 1017.69 1188.91

Listing of Shares on Stock Exchange

The Company has filed the necessary listing application with the SEBI NSE and BSE forlisting of its equity shares. After the receipt of approval of listing and tradingtrading on the stock exchanges will commence.

7. Dividend

During the year under review the Company declared and paid an interim dividend of Rs.15 per share (i.e. 150% of the face value of Rs. 10 per share); this led to an outgo of  Rs. 280.77 million excluding dividend distribution tax. The same is considered asfinal dividend. Similarly the subsidiaries namely IIFL Commodities Limited and IIFLInsurance Brokers Limited had also declared dividends and the same had led to an outgo ofRs. 12.54 million and Rs. 50 million respectively.

The dividend payout for the year under review is in accordance with the Company'spolicy to pay sustainable dividend linked to long-term growth objectives of the Companyto be met by internal cash accruals.

The Board of Directors of the Company has adopted a Dividend Distribution Policy andthe same is available on the website of the Company i.e. www.iifl.com and www.indiainfoline.com.

8. Share Capital:

In terms of the Composite Scheme of Arrangement approved by the NCLT on March 7 201918718281 Equity Shares of Rs. 10 each held by IIFL Finance Limited (formerly IIFLHoldings Limited) in the Company were extinguished and cancelled and in lieu of the samethe Company allotted fresh 319234462 equity shares of Rs. 2 each to the eligibleshareholders whose name appeared in the Register of Members on May 31 2019 i.e. RecordDate.

9. Employees Stock Option Scheme (ESOS)

As approved by the shareholders of the Company at their extra-ordinary general meetingheld on February 21 2018 the Company has in place the IIFL Securities Employee StockOption Scheme 2018 (IIFL ESOS Scheme-2018) with a pool size of 16000000 options of Rs.10 each of the Company. Pursuant to the approval of NCLT Mumbai Bench on the CompositeScheme of Arrangement the above mentioned ESOP pool of 16000000 (Sixteen million)options was converted into 80000000 (Eighty million) Stock Options exercisable intoshares of Rs. 2 each of the Company. Till date no grant has been made under the Scheme.However pursuant to the Composite Scheme of Arrangement eligible option holders of IIFLFinance Limited (formerly known as IIFL Holdings Limited) will be entitled for stockoptions of the Company under IIFL ESOS Scheme-2018 in the ratio of one stock option forevery stock option held in IIFL Finance Limited.

There is no material change in the IIFL ESOS Scheme-2018 during the year under reviewand the Scheme is in line with the SEBI (Share Based Employee Benefits) Regulations 2014("SBEB Regulations"). The disclosures relating to ESOPs required to be madeunder the provisions of the Companies Act 2013 and the rules made thereunder and the SEBI(Share Based Employee Benefits) Regulations 2014 are provided on the website atwww.iifl.com and www.indiainfoline.com and the same is available for inspection by themembers at the Registered Office of the Company. If any member is interested in obtaininga copy thereof such member may write to the Company Secretary whereupon a copy would besent.

The Company is proposed to be listed therefore approval of members by a SpecialResolution for ratification of the ‘IIFL ESOS Scheme-2018 is being sought in thenotice convening the Annual General Meeting of the Company. (Please refer Item No. 4 ofthe Notice.)

10. Deposits

The Company did not accept/renew any deposits within the meaning of Section 73 of theCompanies Act 2013 and the rules made thereunder and as such no amount of principal orinterest was outstanding as on the Balance Sheet date. Further the Company does notintend raising any public deposits in terms of its declaration to the Reserve Bank ofIndia.

11. Transfer to Reserves

The Company during the year under review has not transferred any amount to the GeneralReserve.

12. Subsidiary Companies

Pursuant to the Composite Scheme of Arrangement become effective as mentioned in point6 above from April 1 2018 IIFL Finance Limited (Formerly IIFL Holdings Limited) ceasedto be the Holding Company of the Company and below mentioned companies have becomesubsidiaries of the Company:

Name of the Subsidiaries

1 IIFL Facilities Services Limited

2 IIFL Management Services Limited

3 IIFL Insurance Brokers Limited

4 IIFL Commodities Limited

5 IIFL Wealth (UK) Limited

6 IIFL Capital Inc.

7 IIFL Asset Reconstruction Limited

8 India Infoline Foundation (Section 8 Company)

During the financial year 2018-19 the Company had incorporated IIFL SecuritiesServices IFSC Limited as Wholly Owned Subsidiary. IIFL Facilities Services Limited awholly owned subsidiary of company has acquired 99% stake in Shreyans Foundations LLPwhich is holding 50% stake in Meenakshi Tower LLP a joint venture between wholly ownedsubsidiaries of the Company IIFL Management Services Limited and Shreyans Foundation LLP.Pursuant to this Meenakshi Towers LLP has become subsidiary of the Company.

As per the provisions of Sections 134 and 136 of the Companies Act 2013 read withapplicable Rules Regulation 33 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and applicable Accounting Standards the Board ofDirectors had at its meeting held on May 13 2019 approved the consolidated financials ofall the subsidiaries of the Company along with the Company's Standalone financialstatements. Copies of the Balance Sheet Profit and Loss Account Report of the Board ofDirectors and Report of the Auditors of each of the subsidiary companies are not attachedto the accounts of the Company for the Financial Year 2018-19. The Company will make thesedocuments/details available upon request by any member of the Company. Thesedocuments/details will also be available for inspection by any member of the Company atits registered office and at the registered offices of the concerned subsidiaries excepton Saturdays Sundays and Public Holidays. The Annual Report of all the subsidiaries willbe uploaded on the website of the Company i.e. www.iifl. com and www.indiainfoline.com.As required by Companies Act 2013 the Company's consolidated financial statementsincluded in this Annual Report incorporate the accounts of its subsidiaries. A report onthe performance and financial position of each of the subsidiaries associates and jointventures companies as per Companies Act 2013 is provided in the prescribed form AOC-1 as ‘AnnexureA' of the Consolidated Financial Statement and hence not repeated here for thesake of brevity.

Pursuant to Regulations 16 and 24 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 IIFL Facilities Services Limited (formerly IIFL RealEstate Limited) is the ‘material subsidiary' of the Company for the Financial Year2019-20.

The policy on determining the material subsidiary is available on the website of theCompany at www.iifl.com and www.indiainfoline.com.

13. Management Discussion and Analysis Report

In accordance with Regulation 34 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Management Discussion and Analysis Report forms partof this report.

14. Directors and Key Managerial Personnel

• Directors

The Board comprises of Mr. Venkataraman Rajamani (DIN: 00011919) Managing Director Mr.Mohan Radhakrishnan (DIN: 00012070) and Mr. Narendra Jain (DIN: 01984467) as the ExecutiveDirectors of the Company. Mr. Kranti Sinha (DIN: 00001643) and Ms. Rekha Warriar (DIN:08152356) are Independent Directors and Mr. Aniruddha Dange (DIN: 02599853) is aNon-Executive Non-Independent Director of the Company. Mr. Kranti Sinha (DIN: 00001643) isthe Chairman of the Company.

• Change in Directors

During the financial year 2018-2019:

a) Appointment

Mr. Venkataraman Rajamani was appointed as an Additional Director w.e.f. May 13 2019and was designated as Managing Director w.e.f. May 15 2019 for a period of five years.He was confirmed as Managing Director at the Extraordinary General Meeting of the Companyheld on May 17 2019.

Ms. Rekha Warriar was appointed as an additional Director in the capacity ofIndependent Director for a period of five years w.e.f. May 8 2019. She was confirmed asan Independent Director at the Extraordinary General Meeting of the Company held on May17 2019.

Pursuant to the Scheme becoming effective Narendra Jain was re-designated as anExecutive Director on May 13 2019.

Mr. Aniruddha Dange was re-designated as Non-Executive Director on July 1 2019.

b) Retirement by Rotation

In accordance with Section 152 of the Companies Act 2013 ("Act") read withArticle 157 of the Articles of Association of the Company Mr. Aniruddha Dange is liableto retire by rotation at the ensuing Annual General Meeting and being eligible hasoffered himself for reappointment. The Board recommends the same for the approval ofShareholders.

c) Resignation:

Ms. Geeta Mathur due to her personal reasons resigned as an Independent Director ofthe Company w.e.f. May 8 2019. The Directors of the Company place on record theirsincere appreciation for the valuable services rendered by Ms. Geeta Mathur during hertenure as an Independent Director.

d) Key Managerial Personnel

Mr. Venkataraman Rajamani - Managing Director Mr. Mohan Radhakrishnan and Mr. NarendraJain - Whole Time Directors of the Company Mr. Arindam Chanda - Chief Executive OfficerMr. Bhawani Jhanwar - Chief Financial Officer Mr. Jayesh Upadhyay – CompanySecretary & Compliance Officer are the Key Managerial Personnel as per theprovisions of the Companies Act 2013 and rules made thereunder.

Remuneration and other details of the Key Managerial Personnel for the year ended March31 2019 are mentioned in the Extract to the Annual Return in Form MGT-9 which isattached as"Annexure - 2" and forms a part of this report of theDirectors.

15. Meetings of Directors & committees/Board effectiveness:

• Meetings of the Board of Directors

The Board met five (5) times during the FY18-19 to discuss and approve variousmatters including financials appointment of the Auditors review of audit reports andother Board businesses. For further details please refer to the report on CorporateGovernance.

Committees of the Board

In accordance with the applicable provisions of the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board constitutedthe following Committees:

• Audit Committee:

• Nomination and Remuneration Committee:

• Corporate Social Responsibility Committee

• Stakeholders Relationship Committee

Audit Committee:

The Audit Committee comprises of Mr. Kranti Sinha Independent Director Ms. RekhaWarriar Independent Director and Mr. Narendra Jain Whole Time Director.

The role terms of reference and powers of the Audit Committee are in conformity withthe requirements of the Companies Act 2013 and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

The Committee met during the year under review and discussed on various mattersincluding financials internal audit reports and Audit Report. During the period underreview the Board of Directors of the Company accepted all the recommendations of theAudit Committee.

The details of Committee meeting held during the year under review and the terms ofreference of Audit Committee are provided in the Corporate Governance Report.

Nomination and Remuneration Committee:

The Nomination and Remuneration Committee comprises of two Independent Directors viz.Mr. Kranti Sinha Independent Director Ms. Rekha Warriar Independent Director and Mr.Aniruddha Dange Non-Executive Director as members of the Committee.

The role terms of reference and powers of the Nomination and Remuneration Committeeare in conformity with the requirements of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 and the same has been providedin the Corporate Governance Report.

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a Nomination and Remuneration policy in compliance with the aforesaid provisionsfor selection and appointment of Directors KMPs senior management personnel of theCompany. The Nomination and Remuneration policy is available on the website of the Companyi.e. www.iifl.com and www.indiainfoline.com.

The said policy the details of Committee meetings and the terms of reference ofNomination and Remuneration Committee held during the year under review are provided inthe Corporate Governance Report.

Corporate Social Responsibility Committee

As per Section 135 of Companies Act 2013 the Company has constituted Corporate SocialResponsibility (CSR) Committee comprises of Mr. Kranti Sinha Independent Director Mr.Mohan Radhakrishnan and Mr. Narendra Jain Whole Time Director.

The Committee has approved CSR Policy of the Company and the same is available on thewebsite of the Company i.e. www.iifl.com and www.indiainfoline.com. The Annual Report onCSR activities in accordance with Companies (Corporate Social Responsibility Policy) Rules2014 is attached as "Annexure - 1" to this report.

The details of Committee meeting held during the year and the terms of reference of CSRCommittee are provided in the Corporate Governance Report.

Stakeholders Relationship Committee

The Stakeholders Relationship Committee comprises of Mr. Kranti Sinha IndependentDirector Ms. Rekha Warriar Independent Director and Mr. Narendra Jain Whole TimeDirector.

The role and terms of reference of the Stakeholders Relationship Committee are inconformity with the requirements of the Companies Act 2013 and Regulation 20 of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 and the same has beenprovided in the Corporate Governance Report.

16. Board Effectiveness

• Familiarisation Program for the Independent Directors

In compliance with the requirements of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has put in place a Familiarisation Programmefor Independent Directors to familiarise them with the working of the Company theirroles rights and responsibilities vis--vis the Company the industry in which theCompany operates business model etc. Details of the Familiarisation Programme are givenin the Corporate Governance Report and are also available on the Company's website i.e.www.iifl.com and www.indiainfoline.com.

Annual Evaluation of the Board

Pursuant to the provisions of the Companies Act 2013 and the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 and the SEBI Circular no.SEBI/CFD/CMD/CIR/P/2017/004 dated January 5 2017 the Board of Directors has carried outan annual performance evaluation of its own performance the Directors individuallyincluding Independent Directors based on the criteria and framework adopted by the Board.The Board approved the evaluation results as collated by the Nomination and RemunerationCommittee ("NRC"). The evaluation process manner and performance criteria (forindependent directors) in which the evaluation has been carried out are explained in theCorporate Governance Report.

The Board considered and discussed the inputs received from the Directors. Also theIndependent Directors at their meeting held on March 22 2019 reviewed the following:

• Performance of Non-Independent Directors and the Board as a whole.

• Performance of the Chairperson of the Company.

• Assessed the quality quantity and timeliness of flow of information between theCompany's management and the Board which is necessary for the Board to effectively andreasonably perform its duties.

The Independent Directors expressed their satisfaction with the overall functioning andimplementations of their suggestions.

The evaluation process endorsed the Board Members' confidence in the ethical standardsof the Company the cohesiveness that exists among the Board Members the two-way candidcommunication between the Board and the Management and the openness of the Management insharing strategic information to enable Board Members to discharge their responsibilities.

• Statement on declaration given by the Independent Directors

The Company has received necessary declaration from each Independent Director of theCompany that they meet the criteria of independence laid down in Section 149(6) of theCompanies Act 2013 and Regulation 16(1)(b) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (‘‘Listing Regulation‘‘).

The above declarations were placed before the Board and in the opinion of the Board allthe Independent Director fulfils the conditions specified under the Act and the ListingRegulation and are Independent to the Management.

17. Directors' Responsibility Statement:

Pursuant to the requirement under Section 134(5) of the Companies Act 2013 it ishereby confirmed that:

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

b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit of the Company for that period;

c) the directors had 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) the directors had prepared the annual accounts on a going concern basis;

e) the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems are adequate and operating effectively.

18. Risk Management

The Company has in place various policies and procedures covering the business riskmanagement compliance operations employees finance & accounting and customerservices that are approved by the Board. Further the Company has in place the RiskManagement systems policy for the Securities broking and investment banking business asmandates by the SEBI Stock Exchange and depository.

The Directors on a regular basis (a) oversee and approve the Company's enterprisewide risk management framework; and (b) oversee that all the risks such as strategicfinancial credit market liquidity security property IT legal regulatoryreputational and others that the organisation faces have been identified and assessed andthere is an adequate risk management infrastructure in place capable of addressing suchrisks.

The Company has in place specialised internal audits on the Broking and DepositoryParticipant business as per SEBI/Exchanges/Depositories' norms. The findings on AuditReports are reviewed by the Audit Committee/Board at its periodical meetings and thereports are submitted to the Exchanges/Depositories.

The Company's management monitors and reports the principal risks and concerns that canimpact its ability to achieve its strategic objectives.

The Company's management systems organisational structures processes standards andcode of conduct together form the risk management governance system of the Company andmanagement of associated risks.

19. Internal Financial Controls

The Company has in place adequate internal controls with reference to financialstatements and operations and the same are operating effectively. The Internal Auditorstested the design and effectiveness of the key controls and no material weaknesses wereobserved in their examination. Further Statutory Auditors verified the systems andprocesses and confirmed that the Internal Financial Controls system regarding financialreporting are adequate and such controls are operating effectively.

20. Contracts and arrangements with Related Parties:

The Company has put in place a policy for Related Party Transactions (RPT Policy)which has been approved by the Board of Directors. The policy provides for identificationof RPTs necessary approvals by the Audit Committee/Board/ Shareholders reporting anddisclosure requirements in compliance with the Companies Act 2013 and provisions of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

All contracts executed by the Company during the financial year with related partieswere on arm's length basis and in the ordinary course of business. All such Related PartyTransactions were placed before the Audit Committee/ Board for approval whereverapplicable.

The policy for determining ‘material' subsidiaries and the policy on materialityof Related Party Transactions and dealing with Related Party Transactions as approved bythe Board may be accessed on the website of the Company i.e. www.iifl.com andwww.indiainfoline.com. You may refer to Note no. 35 to the Standalone Financial Statementwhich contains related party disclosures. Since all related party transactions enteredinto by the Company were on an arm's length basis and in the ordinary course of businessand the Company had not entered into any material related party contracts Form AOC-2disclosure is not required to be provided.

Since the Company is proposed to be listed the Company has sought approval fromshareholders for material related party transactions and details of the same can bereferred from the Notice convening the Annual General Meeting of the Company.

21. Extract of Annual Return

The details forming part of the extract of the Annual Return of the Company in formMGT-9 is annexed herewith as "Annexure - 2". The extract of the AnnualReturn of the Company has been placed and can be accessed at website at www.iifl.com andwww.indiainfoline.com.

22. 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 the end of the financial year of the Company towhich the financial statements relate and the date of the report.

23. Secretarial Audit

The Board had appointed M/s Nilesh Shah and Associates Practicing Company Secretariesto conduct the Secretarial Audit of the Company for the Financial Year 2018-19. TheAuditor had conducted the audit and their report thereon was placed before the Board. Thereport of the Secretarial Audit is annexed herewith as "Annexure - 3".There are no qualifications or observations in the Report.

24. Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo

The additional information on energy conservation technology absorption and foreignexchange earnings and outgo stipulated under Section 134(3) (m) of the Companies Act 2013read with Rule 8 of the Companies (Accounts) Rules 2014 is appended as ‘‘Annexure- 4'' and forms part of this Report.

25. Whistle Blower Policy/ Vigil Mechanism

In compliance of the Companies Act 2013 and Regulation 22 of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 the Company has adopted a Whistle BlowerPolicy and has established the necessary vigil mechanism for Directors Employees andStakeholders to report genuine concerns about unethical behaviour actual or suspectedfraud or violation of the Company's code of conduct or ethics policy. The Company hasdisclosed the policy on the website of the Company i.e. www.iifl.com andwww.indiainfoline.com. During the financial year 2018-19 no cases under this mechanismwere reported to the Company and/or to any of its subsidiaries.

26. Prevention of Sexual Harassment

The Company recognises its responsibility and continues to provide a safe workingenvironment for women free from sexual harassment and discrimination. In Compliance withthe Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013 the Company has put in place a Policy on prevention of Sexual Harassment of Women atworkplace.

The Company's Directors further state that during Fiscal 2018-19 there were nocomplaints pending pursuant to the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013. The following is reported pursuant to Section 22 ofthe Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013:

a) Number of complaints received in the year : 01

b) Number of complaints disposed of during the year : 01

c) Number of cases pending more than ninety days: Nil

d) Number of workshops or awareness programme against sexual harassment carried out:

The Company has conducted online training for creating awareness against sexualharassment of women at work place.

e) Nature of action taken by the employer or district officer: Not applicable

27. Particulars of Employees

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided in "Annexure –5" to this report.

Further a statement showing the names and other particulars of employees drawingremuneration in excess of the limits as set out in the Rules 5(2) and 5(3) of theaforesaid Rules forms part of this report. However in terms of first proviso to Section136(1) of the Act the Annual Report and Accounts are being sent to the members and othersentitled thereto excluding the aforesaid information. The said information is availablefor inspection by the members at the Registered Office of the Company during businesshours on working days up to the date of the ensuing Annual General Meeting. If any memberis interested in obtaining a copy thereof such member may write to the Company Secretarywhereupon a copy would be sent.

28. Statutory Auditors

M/s. V. Sankar Aiyar & Co Chartered Accountants Mumbai (Firm Registration Number:109208W) were appointed as the Statutory Auditor of the Company at the Twenty SecondAnnual General Meeting held on July 21 2017 to hold office from the conclusion of thesaid Meeting till the conclusion of the Twenty Seventh Annual General Meeting to be heldin the year 2022 subject to ratification of their appointment by the Members at everyintervening Annual General Meeting held thereafter. However the requirement of seekingratification of the members for continuance of their appointment has been withdrawnconsequent upon the changes made in the provisions of the Companies Act 2013 by theCompanies (Amendment) Act 2017 with effect from May 7 2018. Hence the resolutionseeking ratification of the members for their appointment is not being placed at theensuing Annual General Meeting.

The Notes to the financial statements referred in the Auditors Report areself-explanatory and therefore do not call for any comments under Section 134 of theCompanies Act 2013. The Auditors' Report is enclosed with the financial statements in theAnnual Report.

29. COMPLIANCE WITH SECRETARIAL STANDARDS

The Board of Directors affirms that the Company has complied with the applicableSecretarial Standards issued by the Institute of Company Secretaries of India (SS1 andSS2) respectively relating to Meetings of the Board and its Committees that havemandatory application.

30. Reporting of Frauds by Auditors

During the year under review the Statutory Auditors and the Secretarial Auditor havenot reported any instances of fraud committed in the Company by its Officers orEmployees to the Audit Committee under Section 143(12) of the Companies Act 2013details of which need to be mentioned in this Report.

31. Corporate Governance

The Company is committed to maintaining the highest standards of Corporate Governanceand adhere to Corporate Governance requirements set out by the SEBI. As a proposed to be alisted Company the report on Corporate Governance as stipulated under the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 forms an integral part of thisReport. The requisite certificate from the Auditors of the Company confirming compliancewith the conditions of Corporate Governance is attached with the report on CorporateGovernance.

32. Particulars of Loans Guarantees or Investments

Particulars of loans given and investments made are given in the notes for theStandalone financial statements (refer to Notes 6 & 7 of the financial statements forthe year ended March 31 2019).

33. General

The Directors state that during Financial Year 2018-19:

1. The Company has not issued equity shares with differential rights as to dividendvoting or otherwise.

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

3. There is no change in the nature of business of the Company. There are nosignificant and material orders passed against the Company by the Regulators or Courts orTribunals which would impact the going-concern status of the Company and its futureoperations.

34. Appreciation

The Directors place on record their sincere appreciation for the assistance andguidance provided by the Government Regulators Stock Exchanges Depositories otherstatutory bodies and the Company's Bankers for the assistance cooperation andencouragement extended to the Company.

The Directors also gratefully acknowledge all stakeholders of the Company viz.customers members dealers vendors banks and other business partners for the excellentsupport received from them during the year. The Company's employees are instrumental inthe Company scaling new heights year after year. Their commitment and contribution isdeeply acknowledged. Your involvement as shareholders is also greatly valued. TheDirectors look forward to your continuing support.

For and on behalf of the Board
Venkataraman Rajamani Narendra Jain
Managing Director Whole Time Director
DIN: 00011919 DIN: 01984467
Date: August 14 2019
Place: Mumbai