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Indostar Capital Finance Ltd.

BSE: 541336 Sector: Financials
NSE: INDOSTAR ISIN Code: INE896L01010
BSE 14:54 | 04 Jul 133.85 -0.95
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NSE 14:38 | 04 Jul 134.00 -1.15
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OPEN 134.05
PREVIOUS CLOSE 134.80
VOLUME 286
52-Week high 389.00
52-Week low 129.50
P/E
Mkt Cap.(Rs cr) 1,821
Buy Price 134.15
Buy Qty 20.00
Sell Price 135.55
Sell Qty 2.00
OPEN 134.05
CLOSE 134.80
VOLUME 286
52-Week high 389.00
52-Week low 129.50
P/E
Mkt Cap.(Rs cr) 1,821
Buy Price 134.15
Buy Qty 20.00
Sell Price 135.55
Sell Qty 2.00

Indostar Capital Finance Ltd. (INDOSTAR) - Director Report

Company director report

Dear Members

Your Directors take pleasure in presenting the 12th AnnualReport on the affairs of your Company together with the audited financial statements forthe financial year ended March 31 2021.

FINANCIAL HIGHLIGHTS

The key highlights of the audited standalone financial statements ofyour Company for the financial year ended March 31 2021 and comparison with the previousfinancial year ended March 31 2020 are summarized below:

(Rs. in crore)

Particulars As at March 31 2021 As at March 31 2020
Total income 1193.27 1540.00
Total expenditure 1450.37 1987.66
Profit before taxation (257.10) (447.66)
Less: Provision for taxation
- Current tax - 0.02
- Deferred tax asset (20.21) (107.59)
- Tax of earlier years 4.56 -
Net profit after taxes (241.47) (340.09)
Other comprehensive income net of tax 0.01 0.47
Total comprehensive income (241.46) (339.62)
Transfer to statutory reserve fund pursuant to Section 45-IC of the Reserve Bank of India Act 1934 - -
Appropriation towards dividend and dividend distribution tax - *22.24
Surplus in the statement of profit and loss (241.41) (361.86)
Balance brought forward from previous period 538.08 899.94
Balance carried to balance sheet 296.99 538.08
Earnings per share (Face Value Rs. 10/- each)
Basic (Rs.) (23.14) (36.85)
Diluted (Rs.) (23.14) (36.85)

 

*includes dividend and dividend distribution tax aggregating to Rs.11.12 crore towards final dividend for financial year 2018-19 paid in financial year2019-20.

FINANCIAL PERFORMANCE AND COMPANY'S STATE OF AFFAIRS

The Company utilized the lockdown period to ring-fence the businessfrom potential stress arising out of the tough business environment and build a scalableand sustainable future. The conservative approach of ring fencing the balance sheet sincethe first quarter of the financial year under review has strenghthened the Company'sposition and placed it ideally to take advantage of future growth opportutunities. TheCompany is now looking to accelerate the buildup of the retail business. The combinationof opening smart branches along with the digitization initiative will help the Company toenhance productivity and reduce operating expenses.

Pursuant to the requirement of the Reserve Bank of India("RBI") Master Direction - Non-Banking Financial Company - SystemicallyImportant Non-Deposit taking

Company and Deposit taking Company (Reserve Bank) Directions 2016 thecirculars directions notifications issued by the RBI from time to time and provisions ofthe Companies Act 2013 (the "Act") read with Rules made thereunder a provisionof Rs. 74.87 crore (previous year: Rs. 151.58 crore) at the rate of 1.06% of outstandingstandard assets of the Company was made as at March 31 2021. For details of Reserves andSurplus of the Company please refer Note 21 of the audited standalone financialstatements of the Company for the financial year ended March 31 2021.

Investment by Brookfield

On January 31 2020 the Board of Directors of your Company approved

(i) issue and allotment of 30172414 equity shares and 12068966compulsorily convertible preference shares ("Subscription Securities") to BCP VMultiple Holdings Pte. Ltd. ("Brookfield") at Rs. 290 per share aggregating toan approximate investment of Rs. 1225 crore in the share capital of the Company("Preferential Allotment"); and

(ii) execution of a share subscription agreement ("SSA") andshareholders' agreement ("SHA") among the Company Brookfield and IndostarCapital ("ICM"). The SSA and SHA were executed on January 31 2020 which hadalso triggered an obligation on Brookfield to make an open offer to the publicshareholders of the Company in terms of Regulations 3(1) and 4 of the Securities andExchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations2011 ("SEBI Takeover Regulations") ["Open Offer"].

During the year under review upon receipt of approval of theshareholders of the Company and regulatory authorities Brookfield acquired 56.55% stakein the fully diluted share capital of the Company by way of

(i) acquisition of Subscription Securities on May 27 2020 underPreferential Allotment

(ii) acquisition of 29241258 equity shares of the Company on July08 2020 under the Open Offer and

(iii) acquisition of 5000000 equity shares of the Company on July 092020 from ICM. Subsequent to completion of the abovementioned acquisitions in terms ofthe SHA and the Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 Brookfield is in control of the Company and a promoter ofthe Company. ICM continues to be in control and be classified as a promoter of theCompany. Funds raised pursuant to the Preferential Allotment have been utilized for thepurpose for which it was raised.

This strategic investment by Brookfield will enable your Company toleverage Brookfield's expertise in the financial services domain globally to facilitatethe raising of external finance introduce operational improvements and continue to scalethe business and will accelerate the pace of achieving your Company's objective ofbecoming a leading provider of financing and credit solutions for commercial vehicleowners affordable home finance small and medium enterprises and emerging businesses.

Details on performance of your Company has also been covered in theManagement Discussion and Analysis Report which forms part of the Annual Report.

During the year under review there has been no change in the nature ofbusiness of your Company. Pursuant to concious efforts of the Company towards its strategyto de-risk the balance sheet through retailisation the share of retail AUM as on March31 2021 stood at 78% (as on March 31 2020: 71%).

No material changes and commitments affecting the financial position ofyour Company have occurred between the end of year under review and date of this Board'sReport.

IMPACT OF COVID-19

The year under review saw unprecedented economic and social distruptionon account of the COVID-19 pandemic. The nation witnessed a complete lock-down at thestart of the financial year which was gradually relaxed and tightened as and when theimpact of the virus varied which has contributed to a significant decline in economicactivities and severely impacted the business and operations of your Company. The extentto which the COVID-19 pandemic will impact the Company's financial position will depend onfuture developments which are highly uncertain.

During the pandemic safety of employees has been your Company'spriority. Further your Company has collaborated with various non-governmentalorganisations to contribute towards the fight against COVID-19. Your Company and itsemployees have through their contribution supported various initiatives for providing PPEkits in hospitals family essentials including dry ration for the underprivileged.

In support of the Government's initiatives to support general public inthe wake of disruption caused by the pandemic your Company provided its borrowersaffected by the pandemic with moratorium on payment of loan instalments and has extendedcredit wherever deemed fit to eligible borrowers under the Emergency Credit LineGuarantee Scheme (ECLGS). Your Company believes that this move has enabled borrowersespecially small and medium sized business who have availed the facility to cope with thedifficult business conditions caused by the pandemic.

Detailed information on initiatives taken by your Company to tackleCOVID-19 has been included under the Management Discussion and Analysis Report which formspart of the Annual Report.

DIVIDEND AND DIVIDEND DISTRIBUTION POLICY

In terms of the Dividend Distribution Policy of the Company dividendshall be declared / recommended on the equity shares of the Company keeping in view theCompany's objective of meeting the long term capital requirement for the business frominternal cash accruals and appropriately rewarding shareholders. Details of the DividendDistribution Policy have been provided in the Corporate Governance Report which is annexedto and forms an integral part of this Board's Report and is also available on the websiteof the Company at https://www.indostarcapital.com/invest ors-corner#investor-services.

With the intention to conserve cash in the Company inter-alia tomeet the uncertainties arising out of COVID-19 the Board of Directors has not recommendedfinal dividend on equity shares for financial year 2020-21.

Subsequent to the year under review the Company paid dividend due on12068966 complusorily convertible preference shares ("CCPS") of the Companyat the rate of 10% p.a. calculated on the issue price of CCPS i.e. Rs. 290 per CCPS inaccordance with terms of the CCPS approved by the equity shareholders of the Company.

FINANCIAL STATEMENTS

The financial statements of the Company have been prepared inaccordance with the Indian Accounting Standards ("Ind AS") notified underSection 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015as amended from time to time.

In terms of Section 129 of the Act read with Rules framed thereunderaudited consolidated financial statements of the Company and its subsidiaries shall belaid before the ensuing Annual General Meeting of the Company along with the auditedstandalone financial statements of the Company for the financial year ended March 312021.

The audited standalone and consolidated financial statements togetherwith Auditor's Report(s) thereon along with the salient features of the financialstatements of the subsidiaries of the Company in the prescribed Form AOC-1 forms part ofthe Annual Report and are also available on the website of the Company athttps://www.indostarcapital.com/invest ors-corner#investor-relations.

SUBSIDIARY COMPANIES & THEIR FINANCIAL PERFORMANCE

Your Company has 2 (two) unlisted wholly-owned subsidiaries namelyIndoStar Home Finance Private Limited ("IHFPL") and IndoStar Asset AdvisoryPrivate Limited ("IAAPL"). Your Company does not have any joint venture(s) /associate company(ies) within the meaning of Section 2(6) of the Act.

During the year under review there has been no change in the nature ofbusiness of the subsidiary companies and there were no additions / deletions in the numberof subsidiaries of your Company.

The audited standalone financial statements of each of the subsidiariesare available on the website of the Company at https://www.indostarcapital.com/investors-corner. Members interested in obtaining a copy of the audited standalonefinancial statements of the subsidiaries may write to the Company Secretary at theRegistered & Corporate Office of the Company or atinvestor.relations@indostarcapital.com.

In terms of Regulation 16(1)(c) of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations") and Company's Policy for Determining

Material Subsidiary subsequent to the year under review IHFPL hasbecome a material subsidiary of your Company. Further in terms of explanation toRegulation 24(1) of the Listing Regulations the requirement of appointing an IndependentDirector of the Company on the board of directors of IHFPL is currently not applicable.

The Audit Committee reviews the financial statements of subsidiaries ofthe Company the investments made by its subsidiaries and the statement of all significanttransactions and arrangements entered into by the subsidiaries if any in terms of theListing Regulations. The minutes of board meetings of the unlisted subsidiary companiesand detailed presentations on business performance of material subsidiary are placedbefore the Board.

IndoStar Home Finance Private Limited

IHFPL is registered with the National Housing Bank to carry on thebusiness as a housing finance institution without accepting public deposits and primarilyfocuses on providing affordable home finance. IHFPL commenced business operations in midof 2017 and has built a quality and profitable portfolio of over Rs. 838.22 crore as onMarch 31 2021. IHFPL operates in 10 states across India through various branches and hasan employee base of over 270 employees as on March 31 2021.

During the year under review the total income of IHFPL was Rs. 134.06crore (previous year: Rs. 97.14 crore). The operations of IHFPL during the year underreview has resulted in profit after tax of Rs. 27.95 crore (previous year: loss after taxwas Rs. 14.20 crore).

Subsequent to the year under review your Company further capitalizedIHFPL with Rs. 250 crore subsequent to which your Company's investment in the equityshare capital of IHFPL stands at Rs. 450 crore.

IndoStar Asset Advisory Private Limited

IAAPL is enabled under its objects to carry on the business of inter-aliaadvising managing providing investment advisory services financial advisory servicesmanagement and facilitation services. Currently IAAPL acts as an investment manager toIndoStar Credit Fund and IndoStar Recurring Return Credit Fund both Category IIAlternative Investment Funds registered with the Securities and Exchange Board of India("SEBI"). Since IndoStar Recurring Return Credit Fund is not operational IAAPLhas applied to SEBI for surrendering the registration of IndoStar Recurring Return CreditFund and the application is under process.

The tenor of IndoStar Credit Fund expired on June 09 2019 and inaccordance with the provisions of Securities and Exchange Board of India (AlternativeInvestment Funds) Regulations 2012 the Board of Directors of IndoStar Asset AdvisoryPrivate Limited have approved winding up of the fund which is in process.

During the year under review the total income of IAAPL was Rs. 0.04crore (previous year: Rs. 1.85 crore) and the loss after tax was Rs. 0.04 crore (previousyear: profit after tax was Rs. 0.63 crore).

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of the Listing Regulations and the circulars directionsnotifications issued by RBI ("RBI Directions") the Management Discussion andAnalysis Report for the year under review is presented in a separate section forming partof the Annual Report.

AWARDS AND RECOGNITION

Your Company is a 'Great Place to Work' Certified organization. Beingcertified as a Great Place to Work means that the Company is committed to building andsustaining a culture that drives high performance and trust.

Every year more than 10000 organizations from over 60 countriespartner with Great Place to Work Institute for assessment benchmarking and planningactions to strengthen their workplace culture.

In order to get certified the Company undergoes a rigorous process bywhich Great Place to Work analyses suitability for certification:

• Culture Audit - which consists of organization demographic keyhuman resources (HR) matrices detailed write ups and showcase of HR practices inpredefined areas of HR intervention

• Trust Index Survey - it consists of administering a "TrustIndex Survey" to a 30% of the employee base selected on random basis and

• Post Submission Audit - it includes conducting of telephonicinterview to verify and validate the responses submitted during the abovementionedprocesses.

SHARE CAPITAL

Issued Subscribed and Paid-up Share Capital

During the year under review the Company issued and allotted

(i) 30172414 equity shares and 12068966 compulsorily convertiblepreference shares to BCP V Multiple Holdings Pte. Ltd. by way of preferential allotment;and

(ii) 1107000 equity shares pursuant to exercise of stock optionsunder various Employee Stock Options Plans of the Company.

Subsequent to the year under review your Company allotted 64400equity shares pursuant to exercise of stock options.

Consequent to the abovementioned allotments the issued subscribed andpaid-up share capital of the Company as on the date of this report stands increased to Rs.1358636950/- divided into 123794729 equity shares and 12068966 compulsorilyconvertible preference shares.

Your Company has not issued any equity shares with differential rightsas to voting dividend or otherwise.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

At present the Board of Directors of your Company comprises 8 (eight)Directors of which 3 (three) are Non-Executive Independent Directors 4 (four) areNon-Executive Non-Independent Directors and 1 (one) is an Executive Director. The Chairmanof the Board of Directors is a Non-Executive Independent Director. The Board compositionis in compliance with the requirements of the Act the Listing Regulations and the RBIDirections. Detailed composition of the Board of Directors of the Company has beenprovided in the Corporate Governance Report which is annexed to and forms an integral partof this Board's Report.

Appointments and Cessations:

All appointments of Directors are made in accordance with the relevantprovisions of the Act the Listing Regulations the RBI Directions and other laws rulesguidelines as may be applicable to the Company. The Nomination & RemunerationCommittee ("NRC") exercises due diligence inter-alia to ascertain the'fit and proper' person status of person proposed to be appointed on the Board ofDirectors of the Company and if deemed fit recommends their candidature to the Board ofDirectors for consideration.

During the year under review in terms of the SHA executed by theCompany with Brookfield and ICM the Board of Directors at its meeting held on July 102020 approved appointment of Mr. Aditya Joshi and Mr. Sridhar Rengan (both nominated byBrookfield) and Mr. Vibhor Kumar Talreja (nominated by ICM) as Additional Directors inthe category of Non-Executive Non-Independent Directors of the Company. Further in termsof notice(s) received under Section 160 of the Act proposing candidature of Mr. JoshiMr. Rengan and Mr. Talreja the shareholders at the Annual General Meeting of the Companyheld on September 24 2020 approved the appointment of Mr. Joshi Mr. Rengan and Mr.Talreja as Non-Executive Non-Independent Directors of the Company liable to retire byrotation.

During the year under review Mr. Bobby Parikh Non-ExecutiveIndependent Director was appointed as Chairman of the Board in place of Mr. DhanpalJhaveri with effect from July 10 2020.

During the year under review Mr. Shailesh Shirali Whole-timeDirector Mr. Dinesh Kumar Mehrotra Non-Executive Independent Director and Mr. AlokOberoi Non-Executive Non-Independent Director resigned from the Board of Directors ofthe Company with effect from July 10 2020. Further Mr. Sridhar Rengan resigned from theBoard of Directors of the Company with effect from February 04 2021. The Board ofDirectors places on record its sincere appreciation for the valuable contribution andguidance provided by Mr. Shirali Mr. Mehrotra Mr. Oberoi and Mr. Rengan during theirassociation with the Company.

Subsequent to resignation of Mr. Regan upon nomination by Brookfieldin terms of the SHA the Board of Directors at its meeting held on February 04 2021approved appointment of Mr. Munish Dayal as Additional Non-Executive Non-IndependentDirector to hold office up to the date of the ensuing Annual General Meeting of theCompany. Further notice in terms of Section 160 of the Act has been received from aMember of the Company proposing the candidature of Mr. Dayal as Non-ExecutiveNon-Independent Director of the Company which shall be considered by the shareholders atthe ensuing Annual General Meeting of the Company. The Board of Directors recommendsappointment of Mr. Dayal as Non-Executive NonIndependent Director of the Company at theensuing Annual General Meeting of the Company. Brief profile of Mr. Dayal has beenincluded in the notice convening the ensuing Annual General Meeting of the Company.

Director(s) Retiring by Rotation

In terms of Section 152(6) of the Act read with the Articles ofAssociation of the Company Mr. R. Sridhar Executive Director of the Company shallretire by rotation and being eligible has offered himself for re-appointment at theensuing Annual General Meeting of the Company. A brief profile of Mr. Sridhar has beenincluded in the notice convening the ensuing Annual General Meeting.

Director(s) Declaration and Disclosures

Based on the declarations and confirmations received in terms of theprovisions of the Act the Listing Regulations and the RBI Directions none of theDirectors on the Board of your Company are disqualified from being appointed / continuingas Directors.

A certificate from H Choudhary & Associates Practicing CompanySecretary confirming that none of the Directors on the Board of the Company as on March31 2021 have been debarred or disqualified from being appointed or continuing as Directoron the Board of the Company by the Securities and Exchange Board of India the Ministry ofCorporate Affairs or any such statutory authority forms part of the Corporate GovernanceReport which is annexed to and forms an integral part of this Board's Report.

The Company has received declaration from all the Non-ExecutiveIndependent Director(s) affirming compliance with the criteria of independence asstipulated in Section 149(6) of the Act and Regulation 16(1)(b) of the ListingRegulations.

Key Managerial Personnel ("KMP")

During the year under review Mr. Shailesh Shirali resigned from theoffice of Whole-time Director of the Company with effect from July 10 2020.

Following are the KMPs of the Company as on date of this Board'sReport:

1. Mr. R. Sridhar - Executive Vice-Chairman & CEO
2. Mr. Amol Joshi - Chief Financial Officer
3. Mr. Jitendra Bhati- Company Secretary & Compliance Officer

RBI DIRECTIONS

Your Company complies with the direction(s) circular(s)notification(s) and guideline(s) issued by the Reserve Bank of India as applicable to yourCompany as a systemically important non-deposit taking non-banking financial company("NBFC").

Your Company has complied with the provisions of the extant circularsregulations and guidelines related to foreign investment in India with respect to thedownstream investments.

COMPLIANCE WITH SECRETARIAL STANDARDS

In terms of provisions of Section 118 of the Act your Company is incompliance with Secretarial Standards on Meetings of the Board of Directors andSecretarial Standards on General Meeting issued by the Institute of Company Secretaries ofIndia.

DEPOSITS

Your Company has not accepted any public deposits during the year underreview and shall not accept any deposits from the public without obtaining prior approvalof the RBI. Further your Company being an NBFC disclosure requirements under Chapter V ofthe Act read with Rule 8(5)(v) and 8(5)(vi) of the Companies (Accounts) Rules 2014 arenot applicable to your Company.

RESOURCES AND LIQUIDITY

Your Company has diversified funding sources including public sectorbanks private sector banks mutual funds insurance companies and financial institutions.Funds were raised through various modes including bank borrowings issuance ofnon-convertible debentures on private placement basis and sale / assignment /securitisation of loan assets of the Company.

During the year under review your Company has raised funds from inter-aliafollowing sources

(i) Rs. 1225 crore by way of issue and allotment of 30172414 equityshares and 12068966 compulsorily convertible preference shares at Rs. 290 per shareon private placement basis;

(ii) Rs. 829.39 crore as bank borrowings (outstanding as on March 312021: Rs. 2776.14 crore);

(iii) Rs. 550 crore through issuance of non-convertible debentures(outstanding as on March 31 2021: Rs. 1889.64 crore); and

(iv) Rs. 373.39 crore by sale / assignment / securitisation of loanassets of the Company. Funds raised through private placement of debentures were utilisedfor the purpose mentioned in the respective offer documents.

Capital Infusion by Brookfield has strengthened the Company's liquidityposition and the Company is operating with low debt: equity ratio of 1.57:1 as on March31 2021. The investment not only provides capital funding but also access to new debtfinancing via Brookfield's relationships with financial institutions. This positions theCompany well to further accelerate its retailisation strategy in a challenging marketenvironment and equips it with the ability to use capital for both organic and inorganicgrowth.

Credit Rating(s)

Your Company's financial discipline and prudence is reflected in thestrong credit ratings ascribed by rating agencies. Ratings assigned to the Company as onMarch 31 2021 is summarised below:

Particulars/Rating Agencies Rating Remarks
Long Term:
• Debt Programme The ratings indicate that the instruments have high degree of safety regarding timely servicing of financial obligations and carry low credit risk.
CARE Ratings Limited "CARE AA-"
CRISIL Ratings Limited "CRISIL AA-"
India Ratings and Research Private Limited (Fitch Group) "IND AA-"
• Market Linked Debentures
CARE Ratings Limited "CARE PP-MLD AA-"
• Short Term Debt Programme/Commercial Paper:
CRISIL Ratings Limited "CRISIL A1+" The ratings indicate that the instruments have very strong degree of safety regarding timely payment of financial obligations and carry lowest credit risk.
CARE Ratings Limited "CARE A1+"
ICRA Limited "[ICRA] A1+"
Short Term Debt Programme / Commercial Paper of your Company carry the highest rating by three major credit rating agencies.

Subsequent to the year under review upon request by the Company forvoluntary withdrawal of rating India Ratings and Research Private Limited re-affirmed andwithdrew rating assigned to the long term debt program of the Company.

DEBT EQUITY RATIO

Your Company's Debt Equity ratio as on March 31 2021 stood at 1.57:1.

CAPITAL ADEQUACY RATIO

Your Company is well capitalised to provide adequate capital for itscontinued growth. As on March 31 2021 the Capital to Risk Assets Ratio("CRAR") of your Company stood at 34.6% well above the regulatory limit of 15%as prescribed by the RBI for NBFCs.

NET OWNED FUNDS

The Net Owned Funds of your Company as on March 31 2021 stood at Rs.2716.04 crore.

AUDITORS

Statutory Auditors & their Report

In terms of provisions of the Act M/s. Deloitte Haskins & SellsLLP Chartered Accountants having ICAI Firm Registration No. 117366W/W-100018 wereappointed as the Statutory Auditors of the Company at the 11th Annual GeneralMeeting of the Company held on September 24 2020 for a term of five years and they heldoffice till the conclusion of the 16th Annual General Meeting of the Company.

Subsequent to year under review the RBI has issued guidelines on April27 2021 for appointment of statutory auditors for NBFCs applicable from second half offinancial year 2021-22 which inter-alia mandates tenure of statutory auditors to befor a continuous period of three years subject to satisfying the eligibility criteria eachyear. The Company will be taking necessary steps to comply with the said RBI guidelines.

M/s. Deloitte Haskins & Sells LLP Statutory Auditors in theirreport(s) on the audited standalone and consolidated financial statements of your Companyfor the financial year ended March 31 2021 have not submitted any qualificationsreservations adverse remarks or disclaimers.

During the year under review the Statutory Auditors have not reportedany instances of fraud in the Company committed by officers or employees of the Company tothe Audit Committee.

Secretarial Auditors & their Report

In terms of Section 204 of the Act and Regulation 24A(1) of the ListingRegulations secretarial audit report from M Siroya and Company Practicing CompanySecretary in the prescribed format for the financial year ended March 31 2021 is enclosedherewith at Annexure I to this Board's Report.

M Siroya and Company Practicing Company Secretary in their report onthe secretarial audit of your Company for the financial year ended March 31 2021 have notsubmitted any qualifications reservations adverse remarks or disclaimers.

MAINTENANCE OF COST RECORDS

Your Company is not required to maintain cost records in terms ofSection 148(1) of the Act.

REPORT ON CORPORATE GOVERNANCE

The Corporate Governance Report for the year under review includingdisclosures as stipulated under Regulation 34 read with Schedule V of the ListingRegulations and the RBI Directions is annexed to and forms an integral part of thisBoard's Report.

A certificate from H Choudhary & Associates Practicing CompanySecretary confirming compliance with the conditions of Corporate Governance as prescribedunder the Listing Regulations is annexed to the Corporate Governance Report.

Meetings

The Board and Committees meet at regular intervals inter-alia todiscuss review and consider various matters including business performance strategiespolicies and regulatory updates and impact. During the year under review the Board met 6(six) times and several meetings of Committees including the Audit Committee were held.Details with respect to the meetings of the Board of Directors and Committees held duringthe year under review including attendance by Directors / Members at such meetings havebeen provided in the Corporate Governance Report which is annexed to and forms an integralpart of this Board's Report.

Board Committees

The Board of Directors in compliance with the requirements of variouslaws applicable to the Company as part of good corporate governance practices and foroperational convenience has constituted several committees to deal with specific mattersand has delegated powers for different functional areas to different committees.

The Board of Directors has amongst others constituted Audit CommitteeCredit Committee Asset Liability Management Committee Risk Management CommitteeNomination & Remuneration Committee Corporate Social Responsibility CommitteeStakeholders Relationship Committee IT Strategy Committee Debenture Committee InternalComplaints Committee(s) Banking Committee Investment Committee and Grievances RedressalCommittee.

Details with respect to the composition terms of reference number ofmeeting(s) held and attended by respective member(s) roles powers and responsibilitiesof the Committee(s) have been provided in the Corporate Governance Report which is annexedto and forms an integral part of this Board's Report.

PERFORMANCE EVALUATION

In terms of the provisions of the Act and the Listing Regulations theBoard of Directors adopted a Board Performance Evaluation Policy to set out a formalmechanism for evaluating performance of the Board that of its Committee(s) and individualDirectors including the Chairperson. Additionally in order to outline detailed processand criteria to be considered for performance evaluation the Nomination &Remuneration Committee has put in place the 'Performance Evaluation Process - BoardCommittees and Directors' which forms an integral part of the Board PerformanceEvaluation Policy.

In terms of the requirement of Schedule IV of the Act and Regulation 25of the Listing Regulations a separate meeting of the Independent Directors was held onMarch 23 2021 to review the performance of the Non-Independent Directors including theChairman and the Board as a collective entity.

Subsequent to the year under review the Board of Directors evaluatedthe performance of the Directors including Independent Directors Committee(s) of theBoard and the Board as a collective entity during the year under review.

A statement indicating the manner in which formal evaluation of theperformance of the Board Committee(s) of the Board individual Directors including theChairman during the year under review was carried out is provided in the CorporateGovernance Report which is annexed to and forms an integral part of this Board's Report.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

In compliance with the requirements of the Listing Regulations theCompany has adopted and put in place a Familiarisation Programme for Independent Directorsto familiarize Independent Directors inter-alia with the industry in which yourCompany and its subsidiaries operate the Company's business model and its operations inorder to give them an insight into the Company's business and its functioning. A formalletter of appointment is given to Independent Directors at the time of their appointmentwhich lays down the fiduciary duties roles and responsibilities of an IndependentDirector. The terms and conditions of appointment of Independent Directors is available onthe website of the Company at https://www.indostarcapital.com/ investors-corner#investor-services.

Details of familiarisation programmes imparted to the IndependentDirectors during the year under review including details of number of programmes andnumber of hours spent by each Independent Director are hosted on the website of theCompany at https://www.indostarcapital.com/investors-corner #investor-services.

POLICY ON APPOINTMENT OF DIRECTORS AND SENIOR MANAGEMENT PERSONNEL

In terms of Section 178 of the Act the Listing Regulations and the RBIDirections the Board of Directors adopted a 'Policy on Selection Criteria / "Fit& Proper" Person Criteria' inter-alia setting out parameters to beconsidered for appointment of Directors and Senior Management Personnel of the Company.

Details of the Policy on Selection Criteria/"Fit &Proper" Person Criteria have been provided in the Corporate Governance Report whichis annexed to and forms an integral part of this Board's Report and is also available onthe website of the Company at https://www.indostarcapital.com/investors-corner#investor-services.

REMUNERATION POLICY DISCLOSURE OF REMUNERATION & PARTICULARS OFEMPLOYEES

Remuneration Policy

In terms of Section 178 of the Act and the Listing Regulations theBoard of Directors adopted a Remuneration Policy inter-alia setting out thecriteria for determining remuneration of Executive Directors Non-Executive DirectorsSenior Management and other employees of the Company.

Details of the Remuneration Policy have been provided in the CorporateGovernance Report which is annexed to and forms an integral part of this Board's Report.The Remuneration Policy is also available on the website of the Company athttps://www.indostarcapital.com/ investors-corner#investor-services.

Employee Remuneration

In terms of Section 197 of the Act read with Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the disclosures withrespect to the remuneration of Directors Key Managerial Personnel and employees of theCompany have been provided at Annexure II to this Board's Report.

Statement containing details of employees as required in terms ofSection 197 of the Act read with Rule 5(2) and Rule 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is available for inspection at theRegistered & Corporate Office of the Company during working hours for a period of 21days before the date of the ensuing

Annual General Meeting. A copy of the statement may be obtained byshareholders by writing to the Company Secretary at the Registered & Corporate Officeof the Company or at investor.relations@ indostarcapital.com.

The Board of Directors confirm that remuneration paid to the Directorswas as per the Remuneration Policy of the Company.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

In terms of Section 177(9) and Section 177(10) of the Act and theListing Regulations the Board of Directors adopted a Whistle Blower Policy / VigilMechanism inter-alia to provide a mechanism for Directors and employees of theCompany to approach the Audit Committee of the Company and to report genuine concernsrelated to the Company. The Whistle Blower Policy/Vigil Mechanism provides for adequatesafeguards against victimization of Director(s) or employee(s) who report genuine concernsunder the mechanism.

Details of the Whistle Blower Policy / Vigil Mechanism have beenprovided in the Corporate Governance Report which is annexed to and forms an integral partof this Board's Report.

CORPORATE SOCIAL RESPONSIBILITY

In terms of Section 135 of the Act read with the Companies (CorporateSocial Responsibility Policy) Rules 2014 ("CSR Rules") the Board of Directorshave constituted a Corporate Social Responsibility (CSR) Committee and in light of yourCompany's philosophy of being a responsible corporate citizen the Board of Directorsadopted a CSR Policy which lays down the principles and mechanism for undertaking variousprojects / programs as part of Company's CSR activities. During the year under review theCSR Policy of the Company was amended in order to inter-alia align the policy withamendments in the Act and the CSR Rules. In terms of the CSR Policy during the year underreview your Company's CSR activities were focused in the fields of education womenempowerment environment and sanitation.

Details of the composition of the CSR Committee and the CSR Policy havebeen provided in the Corporate Governance Report which is annexed to and forms an integralpart of this Board's Report.

Disclosures in terms of Section 134(3)(o) and Section 135 of the Actread with the Companies (Corporate Social Responsibility Policy) Rules 2014 with respectto CSR activities undertaken by the Company during the year under review have beenprovided at Annexure III to this Board's Report.

RISK MANAGEMENT FRAMEWORK

Your Company has in place a mechanism to identify assess monitor andmitigate various risks associated with the business of the Company. Major risks identifiedby the business and functions if any are systematically addressed through mitigatingactions on a continuing basis. The Board of Directors have adopted a Risk ManagementFramework and Policy which inter-alia integrates various elements of riskmanagement into a unified enterprise-wide policy.

The Risk Management Committee of the Company has not identified anyelements of risk which in their opinion may threaten the existence of your Company.Details of the risks and concerns relevant to the Company are discussed in detail in theManagement Discussion and Analysis Report which forms part of the Annual Report.

In terms of the RBI Directions and in order to further strengthen therisk management framework the Company appointed a Chief Risk Officer ("CRO")and adopted a policy on Independence of the CRO. In order to ensure that the Companymaintains high standards of risk management practices the CRO functions independentlywith no relationship with business verticals of the Company. The CRO is inter-alia entrustedwith the responsibility of identifying measuring and mitigating risks which may affectthe Company and putting in place and monitoring the risk management policies and practicesof the Company.

Details of the Risk Management Framework and Policy have been providedin the Corporate Governance Report which is annexed to and forms an integral part of thisBoard's Report.

INTERNAL CONTROL / INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIRADEQUACY

Your Company's well-defined organizational structure documentedpolicies defined authority matrix and internal controls ensure efficiency of operationscompliance with internal system / policies and applicable laws. The internal controlsystem / policies of your Company are supplemented with internal audits regular reviewsby the management and checks by external auditors. The Audit Committee and the Board ofDirectors monitor the internal controls system / policies of your Company. The RiskManagement Committee and the Audit Committee periodically review various risks associatedwith the business of the Company along with risk mitigants and ensure that they have anintegrated view of risks faced by the Company. The Board of Directors is of a view thatyour Company's internal control systems are commensurate with the nature of its businesssize and complexity of operations.

The Company has set up an in-house Internal Audit Department whichwill be instrumental in further strengthening the internal control systems and processesalready adopted developed and implemented by the Company.

To the best of our knowledge and belief and according to theinformation and explanations obtained by us and based on the report(s) of StatutoryAuditors and submission(s) by Internal Auditors of the Company for the financial yearunder review the Board of Directors is of the view that the internal financial controlswith reference to the financial statements of the Company were adequate and operatingefficiently and further confirm that:

(i) the Company has comprehensive internal financial control systemsthat are commensurate with the size and nature of its business;

(ii) the Company has laid down standards processes and structureswhich enable implementation of internal financial control systems across the organisationand ensure that the same are adequate and operating effectively;

(iii) the systems are designed in a manner to provide reasonableassurance about the integrity and reliability of the financial statements;

(iv) the Company adopts prudent lending policies and exercises duediligence to safeguard its loan asset portfolio; and

(v) the loan approval process involves origination and sourcing ofbusiness leads credit appraisal and credit approval in accordance with approved processes/ matrix.

CEO & CFO CERTIFICATE

Compliance Certificate in terms of Regulation 17(8) of the ListingRegulations on the audited financial statements and other matters prescribed thereinsubmitted to the Board of Directors by the Executive Vice-Chairman & CEO and the ChiefFinancial Officer of the Company for financial year ended March 31 2021 is enclosedherewith at Annexure IV to this Board's Report.

BUSINESS RESPONSIBILITY REPORT

In terms of Regulation 34(2)(f) of the Listing Regulations theBusiness Responsibility Report (BRR) of your Company detailing initiatives undertaken bythe Company on environmental social and governance front during the year under reviewforms part of this Annual Report and has been provided at Annexure V to thisBoard's Report and is also available on the website of the Company athttps://www.indostarcapital.com/ investors-corner#investor-relations.

CONTRACTS / ARRANGEMENTS WITH RELATED PARTIES AND RELATED PARTYTRANSACTION POLICY

In terms of the provisions of the Act the Listing Regulations and theRBI Directions the Board of Directors adopted 'Related Party Transaction Policy' toensure obtaining of proper approvals and reporting of transactions with related parties.

In terms of Section 177 of the Act and Regulation 23 of the ListingRegulations read with the Related Party Transaction Policy of the Company transactionswith related parties were placed before the Audit Committee for its approval and omnibusapproval of the Audit Committee was obtained for related party transactions of repetitivenature within the limits prescribed by the Board of Directors. The Audit Committee isperiodically updated with respect to related party transactions executed under omnibusapproval.

During the year under review no material related party transactions asprescribed in Section 188 of the Act read with Companies (Meetings of the Board and itsPowers) Rules 2014 were entered by your Company. Accordingly the disclosure of relatedparty transactions as required under Section 134(3)(h) of the Act in Form AOC-2 is notapplicable to the Company. Further during the year under review the Company had notentered into transactions with related parties which could be considered to be 'material'in accordance with the Related Party Transaction Policy of the Company. All othertransactions with related parties during the year under review were in compliance withthe Related Party Transaction Policy of the Company. Further the Company has not enteredinto transactions requiring disclosures in terms of Regulation 53(f) of the ListingRegulations.

Disclosure of the related party transactions as required under IndAS -24 are reported in Note 32 of the audited standalone financial statements of the Companyfor the financial year ended March 31 2021.

Details of the Related Party Transaction Policy have been provided inthe Corporate Governance Report which is annexed to and forms an integral part of thisBoard's Report.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

In terms of Section 186(11) of the Act read with Companies (Meetings ofBoard and its Powers) Rules 2014 the provisions of Section 186 in respect of loans madeguarantees given or securities provided or any investment made by the Company are notapplicable to the Company.

ANNUAL RETURN

In terms of Section 134(3)(a) and Section 92(3) of the Act read withthe Companies (Management and Administration) Rules 2014 the Annual Return as atfinancial year ended March 31 2021 is available on the website of the Company athttps://www.indostarcapital.com/investors-corner# investor-services.

EMPLOYEE STOCK OPTION PLANS ("ESOP PLANS")

Your Company believes that its success and ability to achieve itsobjectives is largely determined by the quality of its workforce and recognises that notonly good employment opportunities but also additional motivating mechanisms are needed toincentivise employees and aligning their interest with the interest of the Company. Inrecognition of the said objective the Company adopted and implemented IndoStar ESOP Plan2012 ("ESOP 2012") IndoStar ESOP Plan 2016 ("ESOP 2016") IndoStarESOP Plan 2016-II ("ESOP 2016-II") IndoStar ESOP Plan 2017 ("ESOP2017") and IndoStar ESOP Plan 2018 ("ESOP 2018") (collectively referred toas "ESOP Plans") to attract retain motivate and incentivise employees of theCompany and its holding / subsidiary companies.

The ESOP Plans of the Company are implemented and administered by theNomination & Remuneration Committee.

The Board of Directors confirms that the ESOP Plans are in compliancewith the provisions of the Act and the Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulations 2014 as amended ("SEBI ESOP Regulations").

Disclosures in terms of Regulation 14 of the SEBI ESOP Regulations readwith SEBI Circular No. CIR/ CFD/POLICY CELL/2/2015 dated June 16 2015 are available onthe website of the Company at https://www.indostarcapital.com/investors-corner#investor-services.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION & REDRESSAL) ACT 2013

Consistent with its core values your Company is committed to create anenvironment in which all individuals are treated with respect and dignity and promote agender sensitive and safe work environment. Accordingly the Board of Directors adopted aCare & Dignity Policy and also constituted an Internal Complaints Committee incompliance with the provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013.

Considering geographic diversification across the country and increasein number of employees the Board of Directors have constituted Regional InternalComplaints Committees for North West and South regions.

During the year under review no complaints related to sexualharassment were received by the Internal Complaints Committee and the Regional InternalComplaints Committees.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO

Since your Company is engaged in financial services activities itsoperations are not energy intensive nor does it require adoption of specific technologyand hence information in terms of Section 134(3)(m) of the Act read with the Companies(Accounts) Rules 2014 is not provided in this Board's Report. Your Company is vigilant onthe need for conservation of energy.

During the year under review your Company did not have any foreignexchange earnings and incurred foreign currency expenditure of Rs. 0.59 crore (Previousyear foreign exchange expenditure: Rs. 1.04 crore).

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS

During the year under review no orders have been passed against yourCompany by any regulator(s) or court(s) or tribunal(s) which would impact the goingconcern status and / or the future operations of your Company.

DIRECTORS RESPONSIBILITY STATEMENT

To the best of our knowledge and belief and according to theinformation and explanations obtained by us pursuant to the provisions of Section134(3)(c) read with Section 134(5) of the Act the Directors hereby confirm that:

a) in the preparation of the annual accounts for the year ended March31 2021 the applicable accounting standards have been followed and no materialdepartures have been made from the same;

b) they have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the loss of the Company for that period;

c) they have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;

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

e) they have laid down internal financial controls to be followed bythe Company and that such internal financial controls are adequate and were operatingeffectively; and

f) they have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

APPRECIATION AND ACKNOWLEDGEMENT

The Directors take this opportunity to express their appreciation toall stakeholders of the Company including the Reserve Bank of India the National HousingBank the Ministry of Corporate Affairs the Securities and Exchange Board of India theGovernment of India and other Regulatory Authorities the BSE Limited the National StockExchange of India Limited the Depositories Bankers Financial Institutions Members andCustomers of the Company for their continued support and trust. Your Directors would liketo express deep appreciation for the commitment shown by the employees in supporting theCompany in achieving continued robust performance on all fronts.

By the Order of the Board of Directors
For IndoStar Capital Finance Limited
Bobby Parikh
Place: Mumbai Chairman
Date: August 25 2021 DIN:00019437

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