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Magma Fincorp Ltd.

BSE: 524000 Sector: Financials
NSE: MAGMA ISIN Code: INE511C01022
BSE 00:00 | 22 Jun 164.45 -0.90






NSE 00:00 | 22 Jun 165.20 -0.65






OPEN 166.85
52-Week high 193.50
52-Week low 139.25
P/E 21.87
Mkt Cap.(Rs cr) 4,429
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 166.85
CLOSE 165.35
52-Week high 193.50
52-Week low 139.25
P/E 21.87
Mkt Cap.(Rs cr) 4,429
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Magma Fincorp Ltd. (MAGMA) - Director Report

Company director report

Management Discussion and Analysis

Financial highlights is given below:

( Rs in lacs)

Consolidated Standalone
FY 2016-17 FY 2015-16 FY 2016-17 FY 2015-16
Total income 239945.16 250633.08 202204.50 213915.55
Profit before interest and depreciation 122073.72 153690.22 99687.52 130340.43
Less: Interest and finance charges 112544.47 119159.57 93788.05 99808.90
Less: Depreciation 4850.13 3948.43 4828.66 3934.44
Profit before tax 4679.12 30582.22 1070.81 26597.09
Tax Expense 3405.89 9234.35 461.13 7882.12
Profit after tax (Before Minority Interest)1 1273.23 21347.87 609.68 18714.97
Minority Interest (772.04) 210.16 - -
Profit after tax (After Minority Interest) 2045.27 21137.71 609.68 18714.97
Add: Surplus brought forward 55160.75 42725.31 47129.24 37285.78
Add: Impact of pre-acquisition surplus on change of shareholding in Magma
- 1239.67 - -
HDI General Insurance Company Limited
Balance available for appropriation 57206.02 65102.69 47738.92 56000.75
- Statutory reserves 800.05 4820.00 130 3750.00
- General reserve - 1880.00 - 1880.00
Provision for dividend2
- On preference shares 2.08 428.23 2.08 427.87
- On equity shares - 2265.36 - 2265.36
- Dividend tax 0.42 548.35 0.42 548.28
Balance carried forward 56403.47 55160.75 47606.42 47129.24


Economic Overview

Financial Year (FY) 2016-17 was marked by two major developments for the Indian Economy– withdrawal of high-denomination banknotes from circulation (demonetization); andpassage of Constitutional amendment for implementation of Good and Services Tax (GST).

During the financial year the Indian economy suffered a modest setback as a result ofdisruptions to consumption and business activity due to demonetization. The InternationalMonetary Fund (IMF) envisages GDP growth for FY2016-17 to slow down to 6.8%.

However India's overall Economic Outlook is positive and appears as a bright spot inthe global economic landscape. Improved external current account continued fiscalconsolidation low inflation and an anti-inflationary monetary policy stance much-neededmacroeconomic stability to the economy.

The IMF estimates economic growth to recover to 7.2% growth in FY2017-18 and to furtherrise to 7.7% in FY2018-19. According to the IMF India has a favorable medium-term growthprospects as it expects GDP growth to rise to about 8% over the medium term. This can beattributed to the implementation of key reforms such as GST reduction of supply-sidebottlenecks and appropriate fiscal and monetary policies.

Industry Overview NBFC Sector

Over the past few years NBFCs have been continuously gaining some market share in theorigination of retail loans to banks thus playing an important role in the Indianfinancial sector. This role assumes even greater significance at a time when bankinginstitutions especially Public Sector Banks are struggling with growth and asset quality.

FY 2016 -17 has thrown up several challenges and opportunities for the NBFC sector. Thekey challenges to the sector were demonetization increased competition from banks inretail loans segment changes in regulation of underlying asset class like selective banon diesel cars moving to BS IV emission norms and moral hazards arising due to farm loanwaivers announced by few state governments. On the other hand the opportunities for thesector were normal monsoon after 2 rainfall deficitnotification of SARFAESI for NBFCsector 7th Pay commission lower interest rates and relaxation in credit linked subsidyscheme of Pradhan Mantri Awas Yoyana (PMAY).

After overcoming the challenges posed in FY2016-17 NBFCs are now well poised tobenefit from the above mentioned opportunities in FY2017-18.

Overview of underlying asset class Automobile sector

The sale of new passenger vehicles recorded a growth of 9.2% during FY2016-17 against7.2% growth recorded in FY2015-16. Within the Passenger Vehicles segment Passenger CarsUtility Vehicles and Multipurpose Vehicles grew by 3.8% 29.9% and 2.4% respectivelycompared to the corresponding previous year.

All India sales of new Commercial Vehicles (CV) recorded a growth of 4.2% duringFY2016-17 as against growth of 11.5% in FY2015-16. The slowdown in CV was largely due tomuted demand for Medium and Heavy Commercial Vehicles (MHCV). The Small have Commercial(SCV) provided the and Light Commercial (LCV) vehicles witnessed better growth of7.3% and 4.2% respectively.

Volume in the Construction Equipment (CE) segment declined 12.5% in FY2016-17 asagainst 14.9% growth in FY2015-16.

Revival in rural demand due to better Kharif and Rabi crop and higher infrastructurespending by the Government will drive growth for the passenger vehicle CV and CE segmentin FY2017-18.

A normal monsoon led to 18.9% volume growth in tractors during FY2016-17. This growthwas after two successive years of de-growth in tractor volumes. In 2017-18 demand fortractors to be better on back of increased farm activities with normal monsoon forecastand improved soil moisture and reservoir levels. Upward revision in Minimum Support Price(MSP) farm mechanization and non-agriculture demand will also contribute to tractorgrowth in 2017-18.

SME Sector

The SME business got adversely impacted due to demonetization during the year underreview. In the short-term demonetization along with the implementation of GST inFY2017-18 could lead to uncertainties in the SME Sector. However in medium to long termboth demonetization and GST will lead to formalization of the sector which is structurallypositive. Further as announced years ofsuccessive in Union Budget of 2017-18 for SMEswith turnover of less than

Rs 50 crores in FY 15-16 the income tax rate has been reduced by 5%. This steepreduction in income tax rate is a big boost to SME segment as it would enable them to bemore competitive.

Mortgage Sector

Affordable housing has been a key focus area of the current

Government. To give impetus to this segment the Government has announced a number ofinitiatives which includes 39% higher allocations in 2017-18 compared to FY2016-17 underthe Pradhan Mantri Awas Yojana (PMAY) and extension of the credit-linked subsidy schemeupto to an income level of Rs 18 lakhs.

The Government is also making additional efforts to address supply and demand sideissues in the affordable housing space.

These steps taken by Government in this space will create huge opportunity for NBFCssector in coming years.


FY 2016 -17 has been characterized by extraordinary impact of demonetization and NPAsale by the Company. Though it has impacted the profitability for the year as a whole theCompany has emerged much stronger with a healthier Balance Sheet as on

1 April 2017. Therefore FY 2016-17 was a defining year for your

Company along with the clean up of old hard bucket NPAs it has taken several newinitiatives under a new and stronger leadership to embark on a profitable growth path inFY 2017-18.

Asset quality

During the year 2016-17 your Company has sold Non-performing assets (NPAs) of Rs59347.56 lacs at standalone level and

Rs 67802.19 lacs at consolidated level. This includes NPAs which were greater than 2years in Asset Backed Finance (ABF) business; and greater than 6 months in the mortgagebusiness. Loss on account of NPA sale on the standalone PAT was

Rs 12625.97 lacs and Rs 14526.88 lacs on consolidated PAT in

FY 2016-17. This consequently led to lower profits ofRs 609.68 lacs at standalone leveland Rs 2045.27 lacs at the consolidated level in FY2016-17. However this sale of NPAsimproved the Company's standalone GNPA and NNPA ratio as at 31 March 2017 to 6.6% and 5.5%respectively. Magma recognizes NPA on 120 DPD basis. On a consolidated basis GNPA andNNPA ratio were 6.7% and 5.6% respectively as at 31 March 2017.

The Company would now increase focus on the balance NPAs which are just about anaverage of 8 months into NPA buckets. The NPA management team would be very sharplyfocused on recoveries in these early bucket NPAs and leading to quick and betterresolution and thereby reducing the overall NPAs and credit cost going forward.

Peaking of NPAs in older portfolio significant improvement in asset quality of newportfolio originated post December 2015 (under new business model) and increase incontribution on newer book will lead to further reduction in NPAs in FY2017-18. Hence theworst with respect to NPAs seems to be behind for the Company.

Disbursements and loan assets

The Company's disbursement in FY 2016-17 on standalone basis declined to 0.7% yoy to Rs596750 lacs and on consolidated basis it declined 6.5% yoy to Rs 671582 lacs. Thisdecline in largely attributed due to the weak second half of the fiscal which was impactedby the demonetization.

Total assets on standalone basis declined by 10% yoy to

Rs 1501259.72 lacs and on consolidated basis declined by 10% yoy to Rs 1772774.45lacs as on 31 March 2017. Lower disbursements and sale of NPAs led to this decline intotal assets. On similar lines total Loan Assets on standalone basis declined by 12% yoyto Rs 1351422 lacs and on consolidated basis declined by 11% to Rs 1610058 lacs as on31 March 2017.

New Initiatives and business outlook

Magma shifted its corporate office to Mumbai and now its leadership team operates outof the new Mumbai office. This will lead to better coordination and collaboration andenable better interface with the industry players and OEMs. The leadership team is fullycommitted to lead the transformational journey of Magma starting with this year and overthe next few years.

Asset Backed Finance (ABF) business under its new leadership has taken manyinitiatives to return to the path of healthy growth with clear focus on portfolio quality.Several initiatives have been launched in the areas of business origination underwritingreceivables management and hygiene and efficiency enhancement

ABF business to register a superior performance in FY 2017-18.

Mortgages business the company made a significant to lower ticket loans in FY2016-17. Average ticket size in the mortgage business disbursements reduced to Rs 14 lacscompared to Rs 20 lacs in FY16. This shift to lower ticket size loans impacted ourdisbursement and loan growth of mortgage business in FY 2016-17. With this transitionbeing completed now the Company expects steady growth in the business going forward.ordable housing by the Government of India will aff Thepushto further boost Company'scurrent housing strategy.

SME Business continues to remain a bright spot for us. With better yields and lowercredit cost SME profitability is best among the products which we offer. Temporarydisruption due to demonetization led to lower disbursement in second half of fiscal

2016-17 however on the positive side SME business saw the best collectionsperformance during demonetization period. In FY 2017 - 18 SME business will focus onincreasing contribution of business from tier 2/3 towns build geo-cluster and industrialsegment expertise to have a micro-market approach to business growth shift sourcing mixtoward sectors impacted positively by

GST and increase contribution of business from Direct Sourcing starting withpre-approved loans on large existing customer database.

Insurance business has turned the corner and returned to profitability in FY2016-17. The leadership team of the insurance business is now based in Mumbai and duringthe year a sound foundation has been laid by the new management team. The Company hasachieved improved loss ratios through portfolio correction measures and ensuring that theunderwriting guidelines and processes are well defined. This would ensure that the Companywould grow in a responsible and calibrated manner in FY 2017 - 2018. The Company intendsto launch new products and shall continue to invest in technology so as to enhance thedealing experience for channel partners resulting in an improved customer experience. Thiswould ensure that the Company remains nimble and cost-efficient in its operations.

Branch network

Magma has realigned its existing branch network in FY2016-17 by opening 56 branches inrural India. The current network of 284 branches is well placed to drive the businessgrowth going forward. It also focused on exploiting the untapped potential of existingbranches and ensured that more products are available across our branch network. Generalinsurance and mortgage finance products are available in 80 and 159 branchesrespectively. There would be a planned roll-out of these two business across the remainingbranches of Magma.


(All figures are on consolidated basis unless specifically mentioned otherwise)

The Company ProfitafterTax (PAT) on consolidated basis declined

94% yoy to Rs 1273 lacs in FY2016-17 compared to Rs 21348 lacs in FY2015-16 largelyon account of one time impact of loss incurred on NPA sale of Rs 67802.19 lacs. Theimpact of the NPA sale on FY16-17 PAT was of Rs 14526.88 lacs.

Better interest cost management and a prudent mix of products financed helped theCompany increase it's Net Income

Margin(NIM) by 47 bps from 6.97 % to 7.43 % during FY2016-17. Average lending rates onincome earning loan assets improved by 7 basis points (bps) to 16.35 % during FY2016-17versus 16.28% last year and total cost of funds declined from 9.99% in FY2015-16 to 9.81%in FY2016-17.

However due to the lower loan assets compared last year income from operations duringthe year declined by 5.3% yoy on a consolidated basis from Rs 247220 lacs last year to Rs234447 lacs this year. Consequently the Company's total Income also reduced by 4.3% fromRs 250633 lacs to Rs 239945 lacs.

The Company has taken various measures to optimise the opex in FY2016-17 whichresulted in decrease in Personnel Costs and Brokerage & Commission by 7.53% and 8.79%respectively. Other operating cost (including Depreciation) increased by 10.86%. Despite adecline in overall cost the Opex ratio increased from 3.36% of AUM in FY2015-16 to 3.62%in FY2016-17 due to a decline in loan assets.

On a Standalone basis the total Capital Risk Adequacy Ratio (CRAR) for the year2016-17 was 20.4 % against the RBI stipulated norm of 15% for non-deposit taking AssetFinance Companies.



Two-thirds of India's population lives in rural areas where financial services havemade few inroads so far. Rural India however has seen a steady rise in incomes creatingan increasingly significant market for financial services. Normal monsoon leading tobetter crop output and increased budget allocation to rural India further enhances theunderlying opportunities in these regions. Over the last decade as part of a deliberatestrategy Magma has been focusing on Rural and Semi Urban India which we believe willprovide significant growth opportunities in future.

The Government's special focus on infrastructure and on reviving growth withoutcompromising on financial discipline along with RBI's focus on credit growth withoutinducing inflationary pressure is expected to reap rich dividends in the long term. Magmafocuses on the self-employed non-professional customer segment in the semi urban and rurallocations and these customer segments are expected to benefit from infrastructure-drivengrowth impetus provided by the current government. Further the

Government's focus on affordable housing provides a significant opportunity for Magmato grow its mortgage portfolio.

Technology has penetrated into rural India through the surge in usage of smartphones.Increasing use of technology to reach rural India is a paradigm-shifting enabler. Internetkiosk based channels are expected to become the bridge that connects rural

India to the financial services sector. As rural India gets connected to the outsideworld consumer awareness on formal channels of financing will increase thus providing aplatform for rural focused companies to chart new growth regions.


The Government needs to push industry friendly regulations to provide a fillip tocommercial activity. Inability or delay of the

Government in taking concrete steps to smoothen the policy making processes will resultin a more prolonged economic recovery process.

Competitive intensity in the retail loans is expected to increase from banks as theyare witnessing significant stress in corporate loans. The entry of payment banks and smallbanks will further intensify competition in the rural and semi-urban markets. Anysignificant adverse financial event in the global markets is expected to have a negativeimpact on the domestic markets as well. Though growth rate remained robust despitedemonetization lagged effect from the move cannot be eliminated. Uncertainty aroundcommodity prices especially of crude oil has implications for the fiscal situation ofemerging economies. While the market opportunity is huge for multiple players to co-existentities which can cater to the under-penetrated customer segments and have strong riskmanagement abilities will be on a stronger footing.


After suffering from the transient negative impact of demonetization in FY2016-17 GDPgrowth is expected to exceed the 7% mark in FY2017-18. On the other hand demonetizationis expected to leave a positive impact on the economy through greater tax complianceincreased digitalization and investments in capital formation. Besides to mitigate theadverse impact of demonetization several pro-poor and pro-rural initiatives have beentaken during Union Budget 2017-18 to spur demand contributing towards economic growth.Demonetization also led to an increase in bank deposits. Flushed with cash the banks areexpected to cut lending rates. Real estate prices are also expected to remain low.

The Goods and Services Tax (GST) is expected to be implemented by 1 July 2017 and itis likely to lead to spurt in growth competitiveness indirect tax simplificationtransparency. Apart from widening of the tax net GST will also contribute significantlyto the GDP.

Faster and more effective decision making and implementation of various initiativesalready launched by the incumbent government are key drivers for the economic recovery.Reduction in global crude oil prices and consumer inflation numbers has provided the

Indian Government with a window of opportunity to put in place the building blocks fora sustained growth trajectory.

Magma remains confident of the long-term growth prospects and opportunities ahead of itin each of its businesses and chosen customer segments. It is uniquely positioned withinthe NBFC industry to capitalize on the opportunities provided and shall continue to seekgrowth in its target market segments of rural and semi-urban India.

Magma feels that its blend of business model infrastructure technology managementbandwidth and field force will lead to a sustainable high growth trajectory in years tocome. It would be pertinent to mention that the adverse impact of demonetization is almostover and the Company has witnessed substantial improvement in the business and collectionsin the last quarter of FY2016-17. With improved focus on the existing portfolio as well asfresh business the Company is expecting to build quality loan book and better financialsin the years to come.


During the year there was no change in the nature of business of the Company or itssubsidiaries.


There are no material changes or commitments affecting the financial position of theCompany which have occurred between the end of the financial year and the date of thisReport.


In accordance with the requirements in terms of Regulation 34 of SEBI (ListingObligations and Disclosure Requirements)

Regulations 2015 (hereinafter referred to as ‘Listing Regulations') your Companyprepared Consolidated Financial Statements in accordance with AccountingStandard-21-"Consolidated Financial Statements" and AccountingStandard-27-"Financial Reporting of Interests in Joint Ventures" issued by TheInstitute of Chartered Accountants of India. The Consolidated Financial Statements formspart of this Report.



Magma Advisory Services Limited (MASL) is a subsidiary of the Company and which furtherholds investment in Magma Housing Finance Limited {Formerly Magma Housing Finance (APublic Company with Unlimited Liability)} (MHFL). MASL has operating loss of Rs 0.56 lacsfor the year ended 31 March 2017 against PBT of Rs 3.58 lacs in previous year.

MHFL is a step down subsidiary of the Company. MHFL has made disbursements of Rs47539.02 lacs against Rs 87427.51 lacs in previous year. This decline in disbursement islargely due to the Company's conscious decision to focus on the lower ticket size loans.MHFL has earned a PBT of Rs 5197.88 lacs for the year ended 31 March 2017 against Rs3533.46 lacs in previous year.

Magma ITL Finance Limited (MITL) a subsidiary of the Company and Joint Venture withInternational Tractors Limited manufacturers of Sonalika brand of tractors is registeredwith the RBI as a Non-Deposit Taking NBFC. MITL has made disbursements of Rs 27292.94lacs against Rs 29529.20 lacs in previous year and reported operating loss of Rs 1884.71lacs for the year ended

31 March 2017 against operating profit of Rs 684.36 lacs in previous year. Operatingloss is primarily due to loss on sale of NPA amounting to Rs 2019 lacs (net of provision)in FY17.

Joint Ventures

The Company's Joint Venture with HDI Global SE (Formerly HDI-Gerling IndustrieVersicherung AG) for General Insurance Business in India named Magma HDI General InsuranceCompany Limited

(MHDI) (the ‘JV Company') has completed four full years of operation in the yearending 31 March 2017. MHDI has reported Gross Written Premium (GWP) of Rs 42287.96 lacsin FY 2016-17 against Rs 42736.70 lacs in FY 2015-16. MHDI has earned PBT of

Rs 717 lacs for the year ended 31 March 2017 as against loss of

Rs 658 lacs for the year ended 31 March 2016.

Jaguar Advisory Services Private Limited (JASPL) a Joint Venture with HDI Global SE(Formerly HDI-Gerling Industrie Versicherung AG) and the Company is an Advisory ServicesCompany domiciled in India. Presently JASPL provides manpower services. JASPL has earneda PBT of Rs 1.92 lacs for the year ended 31 March 2017 against Rs 4.37 lacs in previousyear.

Statement containing salient features of Accounts of the Company's subsidiaries andjoint venture companies

Pursuant to Section 129(3) of the Companies Act 2013 a statement in Form AOC-1containing the salient features of the Financial Statement of your Company's subsidiariesand joint ventures forms part of this Report and hence not repeated here for the sake ofbrevity.


As stipulated in SEBI (Listing Obligations and Disclosure Requirements) (SecondAmendment) Regulations 2016 the Company has adopted Dividend Distribution policy whichhas been posted on the Company's website at its weblink i.e. accordance with the Policy the Board would endeavor to maintain a total dividendpay-out ratio in the range of 10% to 20% of the annual standalone PAT of the Company. Butto deliver sustainable value to its shareholders your Directors recommend the followingdividend subject to your approval at the ensuing Annual General Meeting as under:

1. On Equity Shares @ 40% i.e Rs 0.80 per Equity Share of the face value of Rs2/- each.

2. On Preference Shares: 4.57% i.e. Rs 4.57 pro-rata per share dividend on6500999 Cumulative Non-Convertible Redeemable Preference Shares of Rs 20/- each for 3days i.e. 1 April 2016 to 3 April 2016 (both days inclusive); the shares were then fullyredeemed on 4 April 2016 (1 2 and 3 April 2016 being holidays).


The Company proposes to transfer a sum of Rs 130 lacs to Statutory Reserve as requiredby RBI. An amount of Rs 47606.42 lacs is proposed to be retained in the Surplus Accountas at the end of FY 2016-17.


Being a non-deposit taking Company your Company has not accepted any deposits from thepublic within the meaning of the provisions of the Non-Banking Financial CompaniesAcceptance of Public Deposits (Reserve Bank) Directions 2016 and provisions of CompaniesAct 2013.


Your Company had formulated and implemented Magma Employees Stock Option Plan 2007(MESOP 2007) and Magma Restricted Stock Option Plan 2014 (MRSOP 2014) in accordance withthe SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines1999 and SEBI (Share Based

Employee Benefits) Regulations 2014 including any amendments thereto (‘SEBIGuidelines/Regulations').

The Nomination and Remuneration Committee of the Board of Directors of the Companyinter alia administers and monitors the MESOP 2007 and MRSOP 2014 in accordance with theapplicable SEBI Guidelines/Regulations.

The details of the options granted and outstanding as on 31 March 2017 along with otherparticulars as required by Regulation

14 of the SEBI (Share Based Employee Benefits) Regulations 2014 is posted on thewebsite of the Company at the Auditors'

Certificate would be placed at the forthcoming Annual General

Meeting pursuant to Regulation 13 of the said Regulations.


Equity Shares

During the year the following changes were effected in the Share

Capital of the Company:

Issue of Equity Shares under the Magma Employees Stock Option Plan 2007:

During the year 131000 Equity Shares of the face value of Rs 2/- each were allottedto the eligible employees (including an ex- employee) at a price of Rs 60/- per EquityShare (including a premium of Rs 58/- per Equity Share) upon the exercise of stock optionsby the employees.

After the close of the financial year 14000 Equity Shares of face value of Rs 2/-each were allotted to the eligible employee at a price of Rs 60/- per Equity Share(including a premium of Rs 58/- per Equity Share) upon the exercise of stock options bythe eligible employees of the Company.

The new Equity Shares issued shall rank pari passu with the existing Equity Shares ofthe Company in all respects.

Consequent to issue of the additional Equity Shares as above the issued subscribedand paid up Equity Share Capital of the Company stands increased to Rs 4739.47 lacsdivided into 236973672 (Twenty Three Crore Sixty Nine lacs Seventy Three Thousand SixHundred Seventy Two Only) Equity Shares of Rs 2/- each as on date.


Secured Debt

During the year the Company issued 550 Nos. Secured Redeemable Non-Convertible Debt inthe nature of Debentures of face value Rs 10 lacs each aggregating to Rs 5500 lacs.Total amount raised through Secured Redeemable Non-Convertible Debt Instruments is Rs5500 lacs.

Unsecured Subordinated Debentures

During the year the Company issued 1130 Nos. Unsecured Redeemable Non-ConvertibleSubordinated Debt in the nature of Debentures of face value of Rs 10 lacs eachaggregating to

Rs 11300 lacs. The Company had also raised a term loan in the nature of SubordinatedDebt aggregating to Rs 10000 lacs which carries an interest rate of (floating - 1 yearMCLR + 1.35%) for tenure of 7 years. It is repayable in 18 equal monthly installmentsafter initial moratorium of 66 months from the date of the loan viz. 30 June 2016.

Perpetual Debt Instrument

During the year the Company issued 94 Nos. of Unsecured Redeemable Non-ConvertiblePerpetual Debt in the nature of Debentures of face value of Rs 5 lacs each aggregating toRs 470 lacs and 159 Nos. of Unsecured Redeemable Non-Convertible Perpetual Debt in thenature of Debentures of face value of

Rs 10 lacs each aggregating to Rs 1590 lacs. Total amount raised through UnsecuredRedeemable Non-Convertible Perpetual Debt instruments is Rs 2060 lacs.


During the FY 2016-17 the Company has obtained ratings from SMERA Ratings Limited(SMERA AA) for its long term Subordinated Debt Instruments. Instruments with this ratingare considered to have high degree of safety regarding timely servicing of financialobligations. Credit Analysis & Research Limited (‘CARE') retained its ratings onthe Company's Short term debt instruments & long term Secured & Unsecured Debtinstruments. Short-term debt instruments are reaffirmed at CARE A1+ rating forSubordinated

Debt instruments Secured Debt Instrument and Bank Facilities are re-affirmed at havehigh degree of safety regarding timely payment of financial obligations and carry very lowcredit risk. The rating of Perpetual

Debt instruments have also been reaffirmed at CARE A+. The long term secured debtinstruments and the Bank Facilities of the Company have been reaffirmed by ICRA Limited& India Ratings & Research Pvt Limited at ICRA AA - and IND AA- respectively.

Rating for Short-term debt instruments from CRISIL are reaffirmed at CRISIL A1+.

Instrument Rating Rating Agency
Rating Under Basel Guidelines
Fund Based & Non Fund Based from Banks AA- CARE
AA- India Ratings
Short Term Debt (Commercial A1+ CARE/CRISIL
Secured Redeemable Long Term AA- CARE
Bond/Note AA- ICRA
AA- India Ratings
Unsecured Subordinate Tier II AA- CARE
Bonds AA Brickwork/SMERA
Perpetual Debt Instruments A+ CARE
AA- Brickwork

A status of ratings assigned by rating agencies and migration of ratings during theyear is also provided in note no. 35(i) to the standalone financial statements.


Particulars of loans guarantee and investments outstanding during the financial yearis furnished in note nos. 14 19 30 and 43 to the standalone financial statements of theCompany.


The Risk Management Committee (RMC) functions in line with the Non-Banking FinancialCompanies – Corporate Governance (Reserve Bank) Directions 2015. The Committee met 4times during the year its terms of reference and functioning are set out in the CorporateGovernance Report. The Company understands that risk evaluation and risk mitigation is afunction of the Board of the Company and the Board of Directors are fully committed todeveloping a sound system for identification and mitigation applicable risks viz.systemic and non-systemic. The Company has also implemented/adopted Risk ManagementPolicy.

To make the current Risk Management practice more robust and aligned to the industrypractice the management is taking help of external experts to set up an Integrated RiskManagement (IRM) Framework encompassing both the Credit Risk and the Operational Risk ofthe organization. The said framework will eventually help manage the various types ofcredit and non-credit risks through constant monitoring of key parameters within theorganization. Involvement of the Senior Management team with the external experts willensure that the output of this IRM Framework is acclimatized to Magma's parlance andeasily implementable across various functions.

Currently Magma's Risk Management team of dedicated professionals uses lateststatistical tools and applications to help it benchmark against the best competitivepractices of the industry and accordingly align its credit policies for every customercategory in accordance with the organization's own risk appetite and historical portfolioperformance.

The country faced challenges this year during the months of demonetization in Q3 FY2017 due to which the customer cash flows affected. However the situation improved in Q4and the collection performance of Magma improved significantly that helped theorganization overcome the demonetization effect completely.

Challenges of Portfolio quality faced in FY 2016 that led to further calibration of thecredit process and offerings has largely been overcome in FY 2017 in the new businessmodel being followed for asset based finance products. process hawk like focus on earlywarning indicator (EWI) cases and resolution thereof with strong monitoring of portfolioquality measurement parameters the initial results are encouraging.

Market risk

Magma's approach towards mitigation of market risk operate at two levels; namely -

(a) Identification of the macro-economic indicators as relevant to Magma's lendingbusiness and

(b) Establishing and regular monitoring of delinquency parameters at the portfoliolevel

Lead indicators

Lead macro-economic growth indicators that govern Magma's credit & risk policiesare as follows:

1. Gross Domestic Product

2. Index of Industrial Production

3. Core Sector index

4. WPI Inflation

5. CPI Inflation

The above indicators have direct impact on customer cash flows and operationalviability of a number of commercial assets that Magma funds; these are tracked veryclosely throughout the year to ensure portfolio level corrective steps from time to time.

Regular portfolio reviews by Magma's Risk Department that eventually reports to Magma'sRisk Management Committee ensures assessment of the evolving and changing market risks.The RMC meets at regular intervals to chalk out road-map in respect of building asset baseas well as maintaining portfolio quality in the evolving market.

Operational risk management particularlythatoftheentrylevel customers was severely

Operational risk encompasses anything that is beyond credit or market risk and covers awide range of the Company's activities. It involves alignment of all functions andverticals towards identifying the key risks in the underlying process. Each functionalvertical does transaction testing to evaluate internal compliance and thereby lay downprocesses for further improvement. Thus the approach is "bottom-up" ensuringacceptance of findings and by faster robusthind-sighting adoption of correctiveactions if any to ensure mitigation of perceived risks.

Magma's Risk Department is working closely with external experts to set up a robustOperational Risk Framework in the organization to build up strong safe-guards against theperceived operational risks. With the proposed framework in place Magma will look forwardtowards an automated Risk Control system which will better manage both policy andprocesses and help minimize frauds and improve portfolio quality.

Presently Magma already has following mechanisms and implemented processes that helpminimize operational risks:

All processes are standardized and documented

Clearly defined delegation of authority matrix

Segregated operations vertical to ensure effective maker and checker system

Implementation of training calendar for all functions

Easy access for all employees to various processes rules regulations and operatingguidelines through web-based interactive system

Internal audit process covering both on-site and off-site audit of branches anddepartments

In a nutshell internal metrics form the key of risk management in Magma. The entirecredit process is metrics-driven to achieve the risk-return goals and ensure a healthyportfolio.

Asset liability risk

Any mismatch in tenures of borrowed and disbursed funds may result in liquidity crisisand thereby impact Company's ability to service its loans. Thus it is imperative thatthere exists nil or minimal mismatch between the tenures of borrowed funds and assetsfunded. At Magma prudence and appropriate risk is the guiding principle for decisionmaking in the treasury functions. The Company has maintained appropriate asset liabilitymaturity as regards its tenure and interest rates.

Foreign exchange risk

The Company has marginal exposure to foreign exchange risk since its disbursements arein rupee terms and also its borrowings are in the nature of domestic rupee debt. Whereverlimited foreign exchange exposure exists the Company has entered into appropriatecurrency hedging to adequately cover up the said risk.

Liquidity risk management

Magma has over a period of 3 decades worked meticulously in diversifying its borrowingprofile the set of institutions it borrows from. Such diversified and stable fundingsources emanate from several segments of lenders like Banks Insurance Companies MutualFunds Pension funds Financial and other institutions including Corporates. In additionto this the Company has established a formidable track record in its access to thesecuritization/ assignment market. As a matter of prudence and with a view to manageliquidity risk at optimum levels Magma keeps suitable levels of unutilized bank limits toeffectively mitigate possible contingencies arising out therefrom.

The Company has in place an Asset Liability Management Committee (ALCO) comprising ofBoard Members which periodically reviews the asset-liability positions cost of funds andsensitivity of forecasted cash flow over both short and long-term time horizons. Itaccordingly recommends for corrective measures to bridge the gaps if any. The ALCOreviews the changes in the economic environment and financial markets and suggestssuitable strategies for effective resource management.

This results in proper planning on an on-going basis in respect of managing variousfinancial risks viz. asset liability risk foreign currency risk and liquidity risk.

People Risk

We are vigilant in ensuring that various possible people risks are anticipated andaddressed at the earliest if they occur. Some people risks that Magma focuses on include:

Risks associated with recruitment:

Not finding candidates with appropriate qualifications & experience at affordablecost and in the location required

Cultural misalignment

Risks associated with employing people:

Losing high performers / people in critical roles Lack of timely action againstnon-performers Ethical and fraud related issues

Risks associated with redeploying or letting people go include:

Terminations or job loss due to organization restructuring

Further the Board is of the opinion that at present there are no material risks thatmay threaten the functioning of the Company.


Internal Control and Audit

Magma has an adequate system of internal controls in place. The company has documentedits policies controls and procedures covering all financial and operating functionsdesigned to provide a reasonable assurance with regard to reliability of financialreporting monitoring of operations protecting assets from unauthorized use or lossescompliances with regulations prevention and detection of fraudulent activities etc. The

Company has continued its efforts to align all its processes and controls with leadingpractices.

A well-established independent Internal Audit team reviews monitors and evaluates theefficacy and adequacy of internal control systems in the Company its compliance withoperating systems procedures and policies of the Company and its subsidiaries. The scopeand authority of the Internal Audit division is derived from the Audit Charter dulyapproved by the Audit Committee.

The Audit Committee of the Board of Directors comprising of independent directorsregularly reviews the audit plans significant audit findings adequacy of internalcontrols compliance with accounting standards as well as reasons for changes inaccounting policies and practices if any.

Internal Financial Control

Your Directors have laid down internal financial controls to be followed by the Companyand that such internal financial controls are adequate and are operating effectively. Inthis regard your Board confirms the following:

Systems have been laid to ensure that all transactions are executed in accordance withmanagement's general and specificauthorization. There are well-laid manuals for suchgeneral or specific authorisation.

Systems and procedures exist to ensure that all transactions are recorded as necessaryto permit preparation of financial statements in conformity with Generally Accepted

Accounting Principles or any other criteria applicable to such statements and tomaintain accountability for aspects and the timely preparation of reliable financialinformation.

Access to assets is permitted only in accordance with management's general and specificauthorization. No assets of the Company are allowed to be used for personal purposesexcept in accordance with terms of employment or except as specifically permitted.

The existing assets of the Company are verified/checked at reasonable intervals andappropriate action is taken with respect to any differences if any.


The Company has in place a vigil mechanism named "Breach of Integrity and WhistleBlower (Vigil Mechanism) Policy" to provide a formal mechanism to the Directors andemployees to report their concerns about unethical behaviour actual or suspected fraud orviolation of the Company's Code of Conduct or ethics policy. The Policy provides foradequate safeguards against victimization of employees who avail of the mechanism and alsoprovides for direct access to the Chairman of the Audit Committee.

The details of the said Policy is explained in the Corporate Governance Report and alsoposted on the website of the Company at


At Magma our belief is that people are key in ensuring consistent business success.Our aim is to provide a conducive work environment and enhance their skills so that theycan add more value for the Company while meeting their career aspirations.

Learning and development

During 2016-17 we launched some key initiatives to create an ecosystem of continuouslearning. Performing field staff was taken through a structured training program toprepare them for the next role and thus create a steady supply of trained manpower stlevel managerial roles. For branch managers a focused fir forthe program was conducted toimpart skills for becoming effective in a multi-product business model. They were alsogiven inputs on people management and client relationship management in an experientialmanner. Train the Trainer (TTT) workshops were conducted to create a pool of trainers inbusiness who imparted product/process training to their teams. During the TTT participantswere trained on platform skills session engagement query handling and creating aconducive learning environment using appropriate communication tools.

We have provided our field officers with user-friendly tabs to streamline the processand save time. Relevant training has also been given to utilise this technology in thebest possible way.

We conducted trainings through our online channel portal to ensure all-rounddevelopment anytime anywhere.

Driven by technology

PeopleSoft implementation is well underway and Leave & Attendance EmployeeConfirmation even automated Birthday mails have gone live. We have a full agenda ahead ofus with a complete suite of modules scheduled to go live. Intent is to significantlyleverage technology thereby simplifying lives of our internal stakeholders (employees) andquicker decisioning and access to information.

Incentive schemes

Schemes are sharper with clear key performance indicators (KPIs) for people to ensurebetter accountability and understanding. We have monthly incentive schemes based on themonthly performance of employees. These are dynamic schemes that reflect changes in theexternal business environment also. In

FY 17 we responded to the challenges of demonetisation with schemes drivingCollections and focusing on specific business drivers.

Employee retention endeavours

Employee retention has always remained one of our most significant focus areas. Tostrengthen the process we emphasise on:

Maintaining work-life balance

Personally communicating with our employees to understand their problems Strengtheningemployee touch points with HR via branch visits open house Clarifying career aspirationsfor key talent so that they remain aware of their growth within Magma.


In the coming year we will focus on the following areas:

Talent acquisition & management

- Recruitment / staffing

- Signature new hire orientation framework - Talent management

Enhance HR processes by Leveraging technology. Enable all PS modules – SeparationFlexi Pay Recruitment Manpower Planning Dashboards

Enable efficiencies and performance by strengthening

Performance management architecture

- Simplify and implement a robust performance improvement plan Cultural transformation- Create and execute a roadmap for driving the key cultural shifts across the organisation

- Galvanise and motivate the ‘rank and file'

Strengthening process of employee investigation and consequence management

- Drive mandatory online programs (Annual Certification)

- Value based recognition framework

Sexual Harassment of Women at Workplace

The Company has zero tolerance towards sexual harassment at the workplace and hasadopted a ‘Policy for Prevention of

Sexual Harassment' to prohibit prevent or deter any acts of sexual harassment atworkplace and to provide the procedure for the redressal of complaints pertaining tosexual harassment thereby providing a safe and healthy work environment in line with theprovisions of Sexual Harassment of Women at Workplace (Prevention Prohibition &Redressal) Act 2013 and the rules thereunder. During the year under review one case ofsexual harassment was reported which was then resolved by the Company.


Magma Information Technology strives to emerge as an enabler for the business functionsand have been instrumental in driving automations and transformations.

This year Information Technology focused on business value and cost optimization alongwith focus on regulatory controls implementation.

In 2016-17 Magma's Datacenter Compute and Storage has been enhanced significantly toenable quick efficient and quality delivery of various IT initiatives bringing businessvalue. Worked closely and collaborated with various stakeholders to expand Magma footprintby an additional 56 branches. As part of the cost optimization drive brought all tabletusers into a uniform data plan removed barely utilized hardware reducing rack and AMCcharges.

Magma Service Desk (MSD) which is the primary interface for all employees to addresstheir IT HR or Admin requirements has evolved well resulting in greater satisfactionamongst employees regarding the various services being delivered by IT Admin and HRdepartments. MSD has been enabled for accessing from internet in a secured way byauthenticating with company's employee data and also made the same available in tabletsenabling sales force and FOS to also address their needs and concerns through MSD.

The initiatives of last year - Decision Support System (DSS) on mobile tablets CADDform to assist the decision for credit team fuzzy logic system to de-duplicate customerrecords have now got adopted very well have improved the speed of credit sanctions.

Business Intelligence dashboards usage have gone up showcasing the near-optimalutilization of automation processes to drive decisions. Attendance and Leave managementhave been rolled out in Peoplesoft as part of the initiative of consolidation of HRprocesses.

Asset management module on MSD is now hosting the list of all IT

Assets like laptop desktop Network equipment and Softwares.

Other initiatives in this year included – Empowering of Customer service desk withautomated lead generation through ‘Cross Sale lead management" module Journeyplanning for Sales and other allied functions including Credit F&F Product teamgiving more visibility to the senior leadership about visit plans and actual visits andenablement of cross sell of Insurance products (MLS LP) through integration at FO Tab andbuilding deviation dashboards.

Various Security initiatives to prevent data leakage enhancement of Anti-malwareAnti-Ransomware capabilities and Information Rights Management (IRM) to authenticate userswhile accessing confidential/sensitive data has been implemented. These cover

Seclore – IRM for secure document sharing Zscalar –protection for laptopsfrom Internet threats when connected on personal

Wifi (out of Magma Network) Web Application Firewall (WAF) to prevent Hacking attackson web based applications. These initiatives along with few automations like deletion ofuser accounts on last working day of employee improvised the IT compliance to aconsiderable extent.

During FY17-18 we will continue the stabilization of various initiatives and worktowards a continual improvement cycle.


The group had an overall objective plan to rectify the quality of the book and ensurethat the incremental business is of a superior quality. Larger focus was on collectionsand revamping and establishing a revised sales and under writing process through the year.Hence for Magma group in FY17 the key focus continued to be on Below-The-Line marketingactivations across targeted geographies where we had planned a larger share of thebudgeted disbursals. These activation programs were largely consisting of low-costvisibility at dealership level and engaging the target audience through well plannedseries of activities at local levels. In branch communications and events were focusedmore in order to achieve better cross sell and upsell to existing customers. Of coursekeeping in mind that we are seen as a ‘Multi-Product Loan

Solutions Provider'.

Through these events we have showcased all asset products from Magma stable –Vehicles new and used Unsecured SME lending and the Housing products. The key focus insales activities revolved around automation and tablet adoption to leverage the revampedsales process changes being undertaken across all loan products. Customer convenience andease of decision making to reduce the Turnaround times was the key deliverable of thesetechnology based solutions on tablets. The same had been truly appreciate by channels andcustomers both.

For Autolease business in FY 2016-17 we have been able to show significant growth.The same was achieved by increasing the penetration of the current set of corporates andalso by adding new customers. This was achieved with a lot of employee engagementactivities at these corporates working closely with the manufacturers and dealers.Special offers were worked out with the dealers for these corporates and we had new rangeof collaterals made to attract the eligible employees at these corporates to finalisetheir car lease option. We continued to work closely with the large brands within ourportfolio such as Honda Hyundai Mercedes BMW Ford etc. that helped us to get ahigher mindshare from targeted audience.

In the Housing business Magma focused on Affordable Housing projects by putting uphoardings at approved project locations and those funded by us for Construction loans. Weattended all National Housing Bank and builder association anchored events and in somesmaller locations even organized Builder meets to make them familiar with Magma Housingproducts and build relationships. "Shikhar" an in-branch Cross sellinginitiative was taken across all the states through-out the year where existing customer ofABF business were invited and availed spot sanctions on Home loans. As part of the PMAYschemes towards the end of the year we have geared up to promote these schemes veryproactively at some of the affordable housing projects. The branches were decorated aroundall key festivals when these events were conducted and entire ABF teams were alsoinvolved as the existing customers was the key target for this activity.

At MHDI like the other businesses the focus was more on local events and activitiesengaging both end consumers & intermediaries. At MHDI we revamped the Loyaltyprogram tied up with a new partner and renewed the relationship for a much superioroffering to our channel partners. We have created a new specially designed channel kitthat was shared with most of the Agents which was highly appreciated. Preferred partnerConclave was organized for our large channel and corporate partners in Delhi which saw anexceptional response. An Agent marketing application was developed in order to engage withthe agents with all possible details for the channels to be able to engage with their endcustomers.

In order to improve the brand recall and enhance our brand image and position the AapkeSapne Hamara Saath' campaign launched last year continued to be the key theme for ourcommunications strategy. To connect with our Rurban target audience the saidcommunication was executed in vernacular languages and to maintain uniform & cohesivecommunication we have already implemented this communication strategy across all internalconsumer & channel touch points. The channel portal a unique medium of communicationsand messaging to the channels has been in use this year. It is not being offered by anyother bank or NBFC to the extent we have with two way communications possible along withservicing and complaints as the key pillars of this portal each channel having its ownlog-in credentials to access the same. This is over and above the adoption of Tablets as afront end device for not just channel and customer visits but to log in the filesservice them and provide a stage wise update on the movement of the file at variousprocessing stages. The

Housing and SME business this year have also rolled out the same which is helping usto improve the service levels for channels and also our customers.


Magma has a diverse product portfolio across asset financing mortgage financing SMEfinancing general insurance and is well positioned to provide a one stop solution to awide range of financing requirements of its target customers. Magma's credit screens andprocesses are aligned to deliver superior customer service to the target customers who arelargely first time buyers and small customers in deeper catchments of rural and semi urbanIndia.

In our constant endeavor to provide excellence in customer relationship management& constantly improve our service delivery level we have revised the bar for superiorservice levels. The number of customer queries and complaints have been significantlyreduced. The call centre has been thrown open now to the entire country with customerscalling in from across all states on this toll free number. The promised service levels interms of Turnaround times have been significantly reduced as we strive towards a close to98% level of queries and complaints being resolved within the promised service levels ofturnaround time. The regular updates to customers over SMS for their loans duringprocessing or even servicing and closure has helped us to provide a quick almost instantupdate and transparency to our customers.

Events like "Shikhar" – the in branch invitation for spot sanction fornew Homeloans provided to our existing ABF and SME customers has continued to help usreach out and cross sell serve existing customers. The focus on Customer Service desk inall branches has helped us to tap online queries of our potential customers potentialchannel partners & potential employees & engage them through multiple initiatives.During the year we have also launched various customer feedback studies through our callcentre in-branch customer services short-code services & emailer campaigns.



Your directors at its meeting held on 13 August 2016 on the recommendation of theNomination and Remuneration Committee had appointed Mr. V K Viswanathan (DIN: 01782934) asthe Additional Director in the capacity of Non-Executive

Independent Director with effect from 13 August 2016. The shareholders of the Companyat the Annual General Meeting of the Company held on 19 September 2016 had approved theappointment of Mr. Viswanathan as an Independent Director of the Company with effect from13 August 2016.

Retirement by Rotation

In accordance with the provisions of the Companies Act 2013 and Regulation 36 of theListing Regulation the details of the director liable to retire by rotation is furnishedin the Notice of the ensuring Annual General Meeting (AGM) of the Company.

The Board of Directors of your Company recommends the reappointment of the Directorliable to retire by rotation at the ensuing Annual General Meeting (AGM).


Mr. Srenik Singhvi (DIN: 01320619) who was appointed as the Additional Director of theCompany in the capacity of the Non Executive Independent Director of the Company resignedfrom the Board of Directors with effect from 11 August 2016.

Chief Financial Officer

Mr. Kailash Baheti has been appointed as the Chief Financial Officer of the Companywith effect from 4 November 2016 in place of Mr. Atul Bansal who stepped down from thepost of Chief Financial

Officer of the Company with effect from close of business hours of

3 November 2016. The Nomination and Remuneration Committee and the Audit Committee ofthe Board has recommended the said appointment to the Board of Directors.

Independent Directors

The Company has received declarations pursuant to Section 149(7) of the Companies Act2013 from all the Independent Directors of the

Company confirming that they meet the criteria of independence as prescribed both underSection 149(6) of the Companies Act 2013 and in terms of Regulation 16 of ListingRegulations.

Familiarization programme

In compliance with the requirement of Regulation 25 of Listing Regulations the Companyhas put in place a familiarization programme for the Independent Directors to familiarizethem about the Company and their roles rights responsibilities in the Company. Thedetails of the familiarization programme are explained in the Corporate Governance Report.The same is also available on the website of the Company at

Performance Evaluation

The Board evaluated the effectiveness of its functioning that of the Committees and ofindividual directors by seeking their inputs on various aspects of Board/CommitteeGovernance through structured questionnaire.

The aspects covered in the evaluation included the contribution to and monitoring ofcorporate governance practices participation in the long-term strategic planning and thefulfilment of Directors' obligations and fiduciary responsibilities including but notlimited to active participation at the Board and Committee meetings.

The Chairman of the Board had one-on-one meetings with the Independent Directors andthe Chairman of the Nomination and Remuneration Committee had one-on-one meetings with theExecutive and Non-Executive Directors. Also the Nomination and Remuneration Committee hascarried out evaluation of every director's performance and reviewed the self evaluationsubmitted by the respective directors. These meetings were intended to obtain Directors'inputs on effectiveness of Board/

Committee processes.

The Board considered and discussed the inputs received from the Directors. Further theIndependent Directors at their meeting reviewed the performance and role ofnon-independent directors and the Board as a whole and Chairman of the Company. Furtherthe IDs at their meeting had also assessed the quality quantity and timeliness of flow ofinformation between the Company management and the Board that was necessary for the Boardto effectively and reasonably perform their duties.

Remuneration Policy

The Board has on the recommendation of the Nomination and Remuneration Committeeadopted the Remuneration Policy which inter-alia includes policy for selection andappointment of Directors Key Managerial Personnel Senior Management Personnel and theirremuneration. The Remuneration Policy is stated in the Corporate Governance Report.


To the best of our knowledge and belief your Directors make the following statementsin terms of Section 134 (5) of the Companies Act 2013:

a. that in the preparation of the annual accounts for the year ended 31 March 2017 theapplicable accounting standards have been followed along with proper explanation relatingto material departures if any;

b. that such accounting policies as mentioned in Notes to the annual accounts have beenselected and applied consistently and judgement and estimates have been made that arereasonable and prudent so as to give a true and fair view of the state of affairs of theCompany as at 31 March 2017 and of the profit of the Company for the year ended on thatdate;

c. that proper and sufficient maintenance of adequate accounting records in accordancewith the provisions of the Companies Act 2013 for safeguarding the assets of the Companyand for preventing and detecting fraud and other irregularities;

d. that the annual accounts have been prepared on a going concern basis;

e. that proper internal financial controls are in place and that the financial controlsare adequate and are operating effectively; and

f. that proper systems to ensure compliance with the provisions of all applicable lawsare in place and that such systems are adequate and operating effectively.


Minimum four pre-scheduled Board meetings are held annually. Additional Board meetingsare convened by giving appropriate notice to address the Company's specific needs. In caseof business exigencies or urgency of matters resolutions are passed by circulation.

During the year four Board Meetings and four Audit Committee Meetings were convened andheld the details of which are given in the Corporate Governance Report. The interveninggap between the meetings was within the period prescribed under the Companies Act 2013and Listing Regulations.

Audit Committee

Pursuant to induction of Mr. V K Viswanathan the Audit Committee was reconstituted andpresently comprises of Mr. Narayan K Seshadri who serves as the Chairman of the Committeeand Mr. Nabankur Gupta Mr. Satya Brata Ganguly Mr. Sanjay Nayar and Mr. V K Viswanathanas other members. The terms of reference of the Audit Committee has been furnished in theCorporate Governance Report. All the recommendations made by the Audit Committee duringthe year were accepted by the Board.

Nomination and Remuneration Committee

Pursuant to induction of Mr. V K Viswanathan the Nomination and Remuneration Committeewas reconstituted and presently comprises of Mr. Nabankur Gupta who serves as the Chairmanof the Committee and Mr. Narayan K Seshadri Mr. Mayank Poddar Mr. Satya Brata GangulyMs. Ritva Kaarina Laukkanen and Mr. V K Viswanathan as other members. The terms ofreference of the Nomination and Remuneration Committee has been furnished in the CorporateGovernance Report.

Stakeholders' Relationship Committee

The composition and terms of reference of the Stakeholders' Relationship Committee hasbeen furnished in the Corporate Governance Report.

Corporate Social Responsibility (CSR) Committee

The Corporate Social Responsibility Committee comprises of Mr. Mayank Poddar who servesas the Chairman of the Committee and Mr. Sanjay Chamria and Mr. Satya Brata Ganguly asother members.

The Annual Report on CSR activities is annexed herewith and marked as Annexure 1.


All transactions with Related Parties are placed before the Audit Committee forapproval. All related party transactions that were entered into during the financial yearwere on an arm's length basis and in the ordinary course of business the particulars ofsuch transactions are disclosed in the notes to the financial statements. Further therehas been no materially significant related party transactions between the Company and itsdirectors their relatives subsidiaries or associates hence the Company is not requiredto provide the details of form AOC-2.

The Policy on Related Party Transactions has been posted on the Company's website atits weblink i.e.


There were no significant material orders passed

/ Courts / Tribunals which would impact the going concern status of the Company and itsfuture operations.


M/s. B S R & Co. LLP Chartered Accountants Bangalore bearing Registration No.101248W/W-100022 have been appointed as the Statutory Auditors of the Company for a periodof 5 years from the conclusion of the 36th AGM (for FY 2015-16) till the conclusion of the41st AGM (for FY 2020-21). The Board now recommends the appointment of M/s. B S R &Co. LLP for ratification by the

Members at the Annual General Meeting for the FY 2017-18.

Statutory Auditors' Observations

The notes on financial statements referred to in the Auditors'

Report are self-explanatory and do not call for any further comments. The AuditorsReport does not contain any qualification reservation adverse remark or disclaimer.


Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorsof the Company has appointed M/s. MKB & Associates Practicing Company Secretaries[Membership No-7596] to conduct the Secretarial Audit for the FY 2016-17. The SecretarialAudit Report for the financial year ended 31 March 2017 is annexed herewith and marked asAnnexure-2. The Secretarial Audit Report does not contain any qualification reservationor adverse remark.


As stipulated in Regulation 34(2)(f) of the Listing Regulations the BusinessResponsibility Report describing the initiatives taken by the Company from environmentalsocial and governance perspective forms part of this Report.


Your Company complies with the provisions laid down in Corporate Governance laws. Itbelieves in and practices good corporate governance. The Company maintains transparencyand also enhances corporate accountability. In terms of regulation 34 of ListingRegulations read with Schedule V the following forms part of this Report:

(i) Declaration regarding compliance of Code of Conduct by Board Members and SeniorManagement Personnel;

(ii) Report on the Corporate Governance; and

(iii) Auditors' Certificate regarding compliance of conditions of

Corporate Governance.


Your Company does not have any activity requiring conservation of energy or technologyabsorption and the foreign exchange earnings and the foreign exchange outgo of the Companyis furnished in note no. 34 to the standalone financial statement.


The details forming part of the extract of the Annual Return in form MGT 9 forms partof this Report and is annexed herewith and marked as Annexure-3.


In terms of the provisions of Section 197(12) of the Companies

Act 2013 (‘the Act') read with Rules 5(2) and 5(3) of the Companies

(Appointment and Remuneration of Managerial Personnel) Rules 2014 and Companies(Appointment and Remuneration of Managerial Personnel) Amendment Rules 2016 a statementshowing the names and other particulars of the employees drawing remuneration in excess ofthe limits set out in the said rules are provided in this Report and marked as Annexure-4.

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 and Companies (Appointment and Remuneration ofManagerial Personnel) Amendment Rules 2016 are provided in this Report and marked asAnnexure-4.


Pursuant to the provisions of the Companies Act 2013 relevant amount which remainedunpaid or unclaimed for a period of seven years have been transferred by the Company fromtime to time on due dates to the Investor Education and Protection Fund (IEPF). Duringthe year under review your Company has transferred Rs 173935/- (Rupees One lacs SeventyThree Thousand Nine Hundred Thirty Five Only) to IEPF.

Pursuant to the provisions of Investor Education and Protection Fund (Uploading ofinformation regarding unpaid and unclaimed amounts lying with companies) Rules 2012 theCompany has uploaded the details of unpaid and unclaimed amounts lying with the Company ason 19 September 2016 (date of last Annual General Meeting) on the Company's website( as also on the Ministry of Corporate Affairs' website.


There was no fraud reported by the Auditors of the Company under section 143(12) of theCompanies Act 2013 to the Audit Committee or the Board of Directors during the yearunder review.


Your Directors would like to record their appreciation of the hard work and commitmentof the Company's employees and warmly acknowledge the unstinting support extended by itsbankers alliance partners and other stakeholders in contributing to the results.


Statements in the Board's Report and Management Discussion and Analysis describing theCompany's objectives outlook opportunities and expectations may constitute "ForwardLooking Statements" within the meaning of applicable laws and regulations. Actualresults may differ from those expressed or implied expectations or projections amongothers. Several factors make a significant difference to the Company's operationsincluding the government regulations taxation and economic scenario affecting demand andsupply natural calamity and other such factors over which the Company does not have anydirect control.

For and on behalf of the Board

Narayan K Seshadri Sanjay Chamria
Chairman Vice Chairman and Managing Director
DIN: 00053563 DIN: 00009894
11 May 2017