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Magma Fincorp Ltd.

BSE: 524000 Sector: Financials
NSE: MAGMA ISIN Code: INE511C01022
BSE 00:00 | 24 Apr 125.25 0.15






NSE 00:00 | 24 Apr 125.50 0.20






OPEN 122.30
52-Week high 193.50
52-Week low 81.00
P/E 12.82
Mkt Cap.(Rs cr) 3,373
Buy Price 125.25
Buy Qty 55.00
Sell Price 125.25
Sell Qty 15.00
OPEN 122.30
CLOSE 125.10
52-Week high 193.50
52-Week low 81.00
P/E 12.82
Mkt Cap.(Rs cr) 3,373
Buy Price 125.25
Buy Qty 55.00
Sell Price 125.25
Sell Qty 15.00

Magma Fincorp Ltd. (MAGMA) - Director Report

Company director report

Dear Shareholders

Your Directors have pleasure in presenting the 38th Annual Report along with theAudited Financial Statements of the Company for the financial year ended 31 March 2018.

Financial highlights is given below:

(Rs. in Lacs)

Consolidated Standalone
FY 2017-18 FY 2016-17 FY 2017-18 FY 2016-17
Total income 229858.65 240530.93 203710.89 202673.42
Profit before interest and depreciation 127274.12 122659.49 110339.50 100156.44
Less: Interest and finance charges 90546.05 113130.24 78467.49 94256.97
Less: Depreciation 4922.45 4850.13 4897.65 4828.66
Profit before tax 31805.62 4679.12 26974.36 1070.81
Tax Expense 8763.21 3405.89 6725.42 461.13
Profit after tax (Before Minority Interest) 1 23042.41 1273.23 20248.94 609.68
Minority Interest - (772.04) - -
Profit after tax (After Minority Interest) 23042.41 2045.27 20248.94 609.68
Add: Surplus brought forward 56403.47 55160.75 47606.42 47129.24
Add: Impact of pre-acquisition surplus on Merger - - 4309.84 -
Balance available for appropriation 79445.88 57206.02 72165.20 47738.92
- Statutory reserves 4589.95 800.05 4110.00 130.00
- General reserve 13832.22 - 13832.22 -
Dividend Paid
- On preference shares 0.75 2.08 0.75 2.08
- On equity shares 1895.79 - 1895.79 -
- Dividend tax 386.09 0.42 386.09 0.42
Balance carried forward 58741.08 56403.47 51940.35 47606.42

 1The Company had sold non-performing assets (NPAs) of Rs. 67802.19lacs which included NPAs greater than 2 years in asset backed portfolio and greater than 6months in mortgage portfolio. The aforesaid sale resulted in reduction of profit after taxbyRs. 14526.88 lacs for the quarter and year ended 31 March 2017.

Economic and Industry Overview

Global Economic Overview

According to the World Economic Outlook (December 2017 update) the global output wasprojected to expand by a healthy 3.7% in 2017. The pickup in the growth is broad basedlead by both developed and emerging economies. The forecast for 2018 is even higher at3.9% reflecting the back of a pick-up in investments.

A Global Economic Survey carried out amongst members of the Global Chamber Platform(GCP) has also increased confidence in the global economy. With optimistic growthfore-casts and an increase in business confidence for 2018 the global growth rate has ispicking up steam after signalled out the following challenges:

Protectionism and insufficient access to foreign markets.

Persistent trade barriers and the increasing risk of trade wars among the world'smajor economic blocs may have potential to undermine the expected positive growth for2018. global growth momentum on Political instability has been ranked as the second mainchallenge.

The tightening of global financial conditions the stability of the financial systemas well as the effects of climate change were considered as the other main challenges forthe global economy in the year ahead.

Indian Economic Overview

India's GDP is estimated to grow by 7.4% in FY2018 which makes the country the world'sfastest-growing major economy in 2018. This growth is driven by robust public and privateconsumption. Consumption was supported by lower energy costs public sector salary andfavourable monsoon rains. Economic activity also benefited from a pick-up in FDI and anincrease in public infrastructure spending. Some of the key factors driving growth are:

On implementing GST the Indian economy has initiated the process of transforming intoa formal economy improving the tax base. The tax collection for 11 months in FY 2018showed an increase in net direct taxes by 19.5% on y-o-y basis.

Foreign Direct Investment (FDI) inflows reached US$ 208.99 billion during April 2014 -December 2017 with maximum contribution from services computer software & hardwaretelecommunications construction trading and automobiles.

The foreign exchange reserves were US$ 422.53 billion in the week up to March 23 2018according to data from the RBI which is approximately 11 months of imports.

Merchandise exports grew 11% to US$ 273.73 billion and imports 21% to US$ 416.87billion on a y-o-y basis.

India has improved its ranking in the World Bank's Doing Business Report by 30 spotsover its 2017 ranking and is ranked 100 among 190 countries in 2018 edition of thereport.

Moody's upgraded India's sovereign rating after 14 years to Baa2 with a stableeconomic outlook.

However there are some concerns:

CPI inflation was at 4.4% in February 2018. In the last monetary policy review the RBIhas projected an increase in CPI inflation to 5.1-5.6% during the first half of FY2019.

There are headwinds from the higher bank NPAs elevated bond yields and tradeprotectionism may cause disruption.

The tightening of global financial markets in combination with the NPA-laden domesticbanking sector could affect international capital inflows.

In the first three quarters of FY2017-18 oil prices have been about 16% greater indollar terms than in the previous year.

It is estimated that a $10 per barrel increase in the price of oil will reduce growthby ~0.25bps and increase WPI inflation by ~1.7bps.

Industry Overview

NBFC Sector

NBFCs are vital intermediaries driving the last mile transmission of credit to sectorsthat have not had meaningful access to formal banking credit. They have made a significantcontribution towards supporting the government's agenda of extending financial inclusion.This role assumes an even greater significance at a time when banking institutionsespecially Public Sector Banks are struggling with growth and asset quality.

Over the last few decades NBFCs have developed and supported important infrastructuralrequirements driving economic growth – especially in the areas of transportation(commercial vehicle and auto finance) rural industry (tractors small equipment and smallsector finance) high potential medium & small scale industry (MSME) consumptionfinancing and home finance.

Overview of underlying asset class Automobile sector

All India sales of new Commercial Vehicles (CV) recorded a growth of 19.94% duringFY2017-18 as opposed to 4.2% growth in FY2016-17. The increase in demand has been in allsegments such as Medium & Heavy Commercial Vehicles (MHCV) Small Commercial (SCV) andLight Commercial (LCV) vehicles which witnessed growth of 11.2% 27.2% and 16.2%respectively.

Volume in the Construction Equipment (CE) segment increased by 24.8% in FY2017-18 asopposed to a decline of 12.5% in FY2016-17.

The sale of new passenger vehicles recorded a growth of 7.9% during FY2017-18 against9.2% growth recorded in FY2016-17. This was mainly due to a slower growth in the utilityvehicle segment. Within the Passenger Vehicles segment Passenger Cars Utility Vehiclesand Multipurpose Vehicles grew by 3.3% 21.0% and 5.8% respectively compared to thecorresponding previous year.

The revival in demand and rural growth led to 22.1% of volume growth in tractors duringFY2017-18 as compared to growth of 18.1% in FY2016-17 the demand for tractors wasstronger on back of increased farm activities with a normal monsoon forecast and improvedsoil moisture and reservoir levels. An upward revision in Minimum Support Price (MSP) andnon-agriculture demand also contributed to tractor growth in FY2017-18.

SME Sector

The MSME sector in India continues to demonstrate resilience in the face of testingglobal and domestic economic circumstances. The sector has sustained an annual growth rateof over 10% for the past few years. With its agility and dynamism the sector has showninnovativeness and adaptability to survive economic shocks.

The significance of MSMEs is attributable to their caliber for employment generationlow capital & technology requirement the promotion of industrial development in ruralareas the use of traditional or inherited skill the use of local resources mobilisationof resources and the exportability of products.

Further the MSME sector continues to have a huge unmet demand for credit. The NBFCsshare in MSME financing will continue to grow but competitive intensity is expected torise due to the entry of small finance banks and PSB recapitalisation.

Mortgage Sector

Last year the government announced various measures such as Pradhan Mantri Awas Yojana(PMAY) in addition to an extension of the credit-linked subsidy scheme to expand theaffordable housing sector. India's mortgage-to-GDP ratio is still low at 10% in Fiscal2017 compared to other developing countries but it has improved from 7.4% in Fiscal 2010given rising incomes improving affordability growing urbanisation including theemergence of tier 2 and tier 3 cities the evolution of the nuclear family concept taxincentives widening reach of financiers and faster loan sanctioning. Various structuraldrivers such as a young population smaller family sizes urbanisation rising incomelevels and widening reach of financiers provides immense growth prospects for NBFCs in thehousing space in medium to long term.

Overview of Company's Performance

The Company has shown significant of its business in FY2017-18. The new initiativestaken by the Company under a new leadership have shown positive impact during currentyear. The momentum of disbursement has shown good traction leading to steady asset growthon a quarterly basis.

Asset Quality

The consolidated GNPA ratio on 90 dpd basis on total AUM declined from 8.8% (restatedbased on new regulatory norms applicable for year ended 31 March 2018) in March 2017 to7.0% in March 2018. Similarly the NNPA ratio on total AUM has declined from 7.5% in March2017 to 5.2% in March 2018. This is a significant improvement which is the result ofvarious collection initiatives undertaken by the Company.

Disbursements and Loan Assets

During the year FY2017-18 the standalone disbursements grew by 12.7% from Rs. 596750lacs in FY2016-17 to Rs. 672581 lacs in FY2017-18. Similarly the consolidateddisbursements grew by 8.5% from Rs. 671582 lacs in FY2016-17 to Rs. 728680 lacs inFY2017-18. The growth in disbursement is mainly on the back of increase in disbursement ofUsed Assets Commercial Vehicles and the SME loans.

Total assets as on 31 March 2018 on standalone basis reached to Rs. 1195236 lacs agrowth of 4.70% on y-o-y basis and on consolidated basis it reached to Rs. 1370127 lacsan increase of 0.6% on y-o-y basis.

Total Loan assets as on 31 March 2018 on standalone basis increased by 1.9% y-o-y basisto Rs. 1376553 lacs. However the Total Loan Assets registered on consolidated basisregistered a decline of 3.4% to Rs. 1555474 lacs.

New Initiatives and Business Outlook

Asset Backed Finance (ABF) business has shown helathy growth on the backdrop ofvarious initiatives taken by the Company to return to the path of healthy growth with aclear focus on portfolio quality. The disbursement in ABF business has shown an increaseof 12% as Compared to last year.

Mortgages Business the Company continued its transition to sourcing directbusiness and disbursing lower ticket loans in

FY 2017-18. This strategic shift to direct origination and lower ticket size loansimpacted the Company's disbursement and loan growth of mortgage business in FY2017-18.With the transition being almost complete the Company expects steady growth in thebusiness going forward. The push for affordable housing by the Government of India willfurther expand the Company's current housing strategy.

SME Business continues to remain a bright spot for the Company.

With better yields and lower credit cost SME profitability is best among the productswhich we offer. Temporary disruption due secularprogressineacharea to demonetisation ledto lower disbursement in first half of fiscal 2017-18. In FY2017-18 SME disbursementincreased by 12% as compared to last year due to increased contribution of business fromtier 2/3 towns the build geo-cluster and industrial segment an increased contribution ofbusiness from Direct Sourcing - starting with pre-approved loans - on a large existingcustomer database.

Insurance business continues to be profitable in FY2017-18.

During the year a sound foundation has been laid by the new management team. TheCompany has achieved improved loss ratios through portfolio correction measures ensuringthat the underwriting guidelines and processes are well defined. The insurance business isgrowing in a responsible and calibrated manner as per the plan. The Company has launchednew and innovative product "One health a comprehensive health insurance plan"in the health insurance segment to capture market share in the fast growing healthinsurance market. This would ensure that the Company remains cost-efficient in itsoperations. The Company also intends to launch new products and shall continue to investin technology to enhance the dealing experience for channel partners resulting in animproved customer experience.

Branch network

Magma has expanded its branch network to 305 branches in FY2018 as compared to 284branches in FY2017. The Company continues to exploit the untapped potential of existingbranches and ensured that more products are available across our branch network. Generalinsurance and mortgage finance products are available in 125 and 94 branchesrespectively.

Capital Raise

At the beginning of the year 2018-19 the Company has successfully raised Rs. 500Crores through a Qualified Institutional Placement (QIP). The QIP received an overwhelmingresponse getting 1.76 times oversubscription from many renowned and marque institutionalinvestors across India and Asia.

Financial Performance

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

The Company Profit afterTax (PAT) on consolidated basis increased to Rs. 23042 lacs inFY2017-18 compared to Rs. 1273 lacs in FY2016-17.

Better interest cost management and a prudent mix of products helped the Companyincrease its net interest margin (NIM) by 137 basis points from 7.4% to 8.8% duringFY2017-18. Even though average lending rates on earning loan assets declined by 7 basispoints to 16.24% it was offset by a decline in the cost of funds from 9.81% in FY2016- 17to 9.15%.

Net Income from Operations (i.e. total income less finance cost) on aconsolidated basis increased by 9.3% from Rs. 127401 lacs in FY2016-17 to Rs.139313Lacs in FY2017-18.

A decrease in volumes and also doing more business through direct sourcing resulted ina 14% decline in the Brokerage and commission expenses in FY2017-18 as compared to lastyear. However the overall opex ratio increased from 3.6% in FY 2016 -17 to 4.4% in

FY2017 -18 mainly due to lower Assets Under Management and higher investment in branchexpansion investments in technology investments in the existing business and increaseoutsourcing of collections in higher brackets.

On a Standalone basis the total Capital Risk Adequacy Ratio (CRAR) for the yearFY2017-18 was 20.7% against the RBI stipulated norm of 15% for non-deposit taking AssetFinance Companies. The recent capital infusion through Qualified Institutional Placementwill further strengthen the capital adequacy going forward.

Opportunities Challenges and Outlook


In the present economic system of India NBFCs have assumed a significant role inproviding accessible and affordable financial services

With the focus of NBFCs on segments traditionally neglected by banks (non-salariedprofessionals individuals traders and transporters) and with the ongoing stress onpublic-sector banks due to mounting bad debt NBFCs have a lucrative opportunity to expandtheir presence in the Indian financial story.

The success of NBFCs can be clearly attributed to their ability to assess the creditworthiness of customers with informal income superior product construct tailored to meetthe needs of identified customer segment excellent turn-around time (TAT) from lead todisbursement widerandeffective reach strong risk management capabilities to check andcontrol bad debts and an overall better

The success of NBFCs can be clearly attributed to their ability to assess the creditworthiness of customers with informal income superior product construct tailored to meetthe needs of identified customer segment excellent turn-around time (TAT from lead todisbursement wider and effective reach strong risk management capabilities to check andcontrol bad debts and an overall better understanding of their customer segments.

As the Indian customer evolves NBFCs would need to leverage new technologies toimprove the customer experience.

Increasingly financial transactions are conducted through electronic banking. As theconsumer acceptance of eKYC and biometric authentication increases fingerprintrecognition has the potential of becoming the most commonly used technology for customerinteractions. Adoption of the emerging and new technology would result in faster loanapprovals and enrich customer experience.


India's financial sector is facing considerable challenges. High non-performing assetsespecially of the Public Sector Banks and the slow deleveraging and repair of corporatebalance sheets are testing the resilience of the banking system holding back investmentand growth.

The year 2017-18 was the year of benign interest rates. However interest rates havesubstantially hardened towards the end of the financial year and have continued to hardenin FY2018-19.

Ensuring that the overall interest cost remains under control would be a big challengein FY2018-19.

The hardening of crude oil prices could lead to higher inflation during the yearputting further upward pressure on the interest rates.

There has been explosive growth in the financial services sector in the recent fewyears. The advent of the new generation banks full service banks small finance banks andpayment banks has opened multiple opportunities for the available talent. Ensuring thatthe available talent remains committed with the Company providing adequate careeropportunities to existing talent pool and continuously building back up talent pool wouldbe another key challenge for the industry.


The Indian economy has returned to become leading growth economy after twin disruptionscaused by demonetization and roll out of the Goods and Services Tax. The growth inFY2018-19 has been projected to be higher than the previous year. The third consecutivegood monsoon would provide further tailwind to the growth and specially augurs well forthe rural economy.

Over last two years the Company has gone through a transformation building blocks forreturning to secular quality growth. The emerging opportunities provide an excellentplatform to achieve sustainable growth.

Change in Nature of Business

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

Material Changes and commitments affecting financial position between the end of thefinancial year and date of the report

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

Consolidated Financial Statements

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.

Subsidiary and Joint Venture Companies

Magma Housing Finance Limited [Formerly Magma Housing Finance (A Public Company withUnlimited Liability)] (MHFL) is a wholly owned subsidiary of the Company. MHFL has madedisbursements of Rs. 56099 lacs against Rs. 47539 lacs in previous year. MHFL has earneda PBT of Rs. 3560 lacs for the year ended 31 March 2018 against Rs. 5198 lacs inprevious year.

The Company's Joint Venture with HDI Global SE for General Insurance Business in Indianamed Magma HDI General Insurance Company Limited (MHDI) (the ‘JV Company') hascompleted five full years of operation in the year ending 31 March 2018. MHDI has reportedGross Written Premium (GWP) of Rs. 56028 lacs in FY 2017-18 against Rs. 42288 lacs in FY2016-17. MHDI has earned PBT of Rs. 606 lacs for the year ended 31 March 2018 asagainst Rs. 717 lacs for the year ended 31 March 2017.

Jaguar Advisory Services Private Limited (JASPL) a Joint Venture with HDI Global SE isan Advisory Services Company domiciled in India. Presently JASPL provides manpowerservices. JASPL has earned a PBT of Rs. 1.36 Lacs for the year ended 31 March 2018against Rs. 1.92 Lacs in previous year.

Corporate Restructuring

Scheme of merger between your Company and Magma Advisory Services Limited

The Board of Directors of your Company approved the Scheme of merger between MagmaAdvisory Services Limited wholly owned subsidiary (‘Transferor Company') (MASL) andMagma Fincorp Limited (Transferee Company) (MFL) with the stated objectives of inter aliaachieving greater integration financial strength and flexibility; and achievingconsolidation of the activities of our Company. The Central Government through the

Regional Director Eastern Region Ministry of Corporate Affairs (the "RegionalDirector") has vide its confirmation order dated 15 January 2018 (the"Effective Date") approved the Scheme.

Consequently the Scheme became effective from 15 January 2018 with effect from 1April 2017 being the Appointed Date of the Scheme the entire business and undertaking(s)of MASL including all the debts liabilities duties and obligations and all assets havebeen transferred to MFL. MASL stands dissolved without winding-up on the effective dateand therefore ceases to be a wholly owned subsidiary Company of your Company. MagmaHousing Finance Limited which was at the time an indirect subsidiary held through MASLhas become a direct subsidiary of your Company.

Scheme of amalgamation between your Company and Magma ITL Finance Limited

The Board of Directors of your Company approved the Scheme of amalgamation betweenMagma ITL Finance Limited wholly owned subsidiary (‘Transferor Company') (MITL) andMagma Fincorp Limited (Transferee Company) (MFL) with the stated objectives of inter aliaachieving greater integration financial strength and flexibility and achievingconsolidation of the activities of our Company. The Hon'ble National Company Law TribunalKolkata Bench (NCLT) has vide its order dated 8 May 2018 approved the Scheme.

Consequently the Scheme becoming effective from 8 May 2018 with effect from 1 October2017 being the Appointed Date of the Scheme the entire business and undertaking(s) ofMITL including all the debts liabilities duties and obligations and all assets have beentransferred to MFL. MITL stands dissolved without winding-up on the effective date andtherefore ceases to be wholly owned subsidiary Company of your Company.

Statement containing salient features of Accounts of the Company's subsidiary and jointventure 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 subsidiaryand 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 in place the Dividend Distribution Policywhich is available on the Company's website at its weblink i.e.

In accordance with the Policy the Board would endeavour to maintain a total dividendpay-out ratio in the range of 10% to 20% of the annual standalone PAT of the Company. YourDirectors have recommended dividend @40% on Equity Shares i.e Re. 0.80 per Equity Share ofthe face value of Rs. 2/- each to deliver sustainable value to its shareholders. Thepayment of the dividend is subject to declaration by the members at the ensuing AnnualGeneral Meeting of the Company.

Transfer to Reserve

The Company proposes to transfer a sum of Rs. 4110.00 lacs to Statutory Reserve asrequired by RBI. An amount of Rs. 51940.35 lacs is proposed to be retained in the SurplusAccount as at the end of FY 2017-18.


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.

Employee stock option Scheme

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 amendmentsthereto (‘SEBI Guidelines/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 2018 along with otherparticulars as required by Regulation 14 of the SEBI (Share Based Employee Benefits)Regulations 2014 is available on the website of the Company at the Auditors' Certificate would be placed at the forthcoming Annual General Meetingpursuant to Regulation 13 of the said Regulations.

Share Capital

Equity Shares

During the year the following changes were effected in the Share Capital of theCompany:

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

During the year 69000 Equity Shares of the face value of Rs. 2/- each were allottedto the eligible employees at a price of Rs. 60/- per Equity Share (including a premium ofRs. 58/- per Equity Share) upon the exercise of stock options by the employees.

After the close of financial year

Issue of Equity shares through Qualified Institutional Placement (QIP) under theprovisions of Chapter VIII of Securities and Exchange Board of India (Issue of Capital andDisclosure Requirements) Regulations 2009 as amended Your Company raised capitalamounting to Rs. 500 crores approximately through the Qualified Institutional Placement(QIP) route by way of issuing and allotting 32258064 Equity Shares of face value Rs. 2each for cash at issue price of Rs. 155 per Equity Share (including a premium of Rs. 153per Equity Share) to a host of renowned and marque Institutional Investors who areQualified Institutional Buyers.

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

Consequent to the issue of the additional Equity Shares as above the issuedsubscribed and paid up Equity Share Capital of the Company stands increased to Rs.5385.73 lacs divided into 269286736 (Twenty Six Crore Ninety Two Lacs Eighty SixThousand Seven Hundred and Thirty Six) Equity Shares of Rs. 2/- each as on date.


Secured Debt

During the year the Company issued 1600 Nos. Secured Redeemable Non-Convertible Debtin the nature of Debentures of face value Rs. 10 lacs each aggregating to Rs. 16000Lacs. In addition the Company also issued 200 Nos. Secured Redeemable Non-ConvertibleDebt in the nature of Debentures of face value Rs. 100 lacs each of which 15% (partlypaid) of the face value aggregating to Rs. 3000 Lacs. Total amount raised through SecuredRedeemable Non-Convertible Debt Instruments is Rs. 19000 lacs.

Unsecured Subordinated Debentures

During the year the Company issued 200 Nos. Unsecured Redeemable Non-ConvertibleSubordinated Debt in the nature of Debentures of face value of Rs. 10 lacs eachaggregating to Rs. 2000 lacs. Total amount raised through Unsecured RedeemableNon-Convertible Subordinate Debt Instruments is Rs. 2000 lacs.

Perpetual Debt Instrument

During the year the Company issued 10 Nos. of Unsecured Redeemable Non-ConvertiblePerpetual Debt in the nature of Debentures of face value of Rs. 10 lacs each aggregatingto Rs. 100 lacs .Total amount raised through Unsecured Redeemable Non-ConvertiblePerpetual Debt instruments is Rs. 100 lacs.

Credit Rating

During FY 2017-18 Credit Analysis & Research Limited (‘CARE') reaffirmed itsratings on the Company's Short term debt instruments at CARE A1+ Bank Facilities longterm Secured and Subordinated Debt instruments at CARE AA- and Perpetual Debt instrumentsat CARE A+. The long term Secured Debt instruments and Bank Facility ratings of theCompany have been reaffirmed ICRA Limited & India Ratings & Research PrivateLimited at ICRA AA - and IND AA- respectively. AA- reflects that these instruments havehigh degree of safety regarding timely payment of financial obligations and carry very lowcredit risk. CARE Ratings & ICRA Limited have also revised upwards its rating outlookon long term facilities to Stable from Negative. SMERA and Brickwork ratings hasreaffirmed the rating for Unsecured Subordinated Debt Instrument at AA.

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 AA- CARE
Banks AA- ICRA
AA- India Ratings
Short Term Debt (Commercial Paper) A1+ CARE/CRISIL
Secured Redeemable Long Term AA- CARE
Bond/Note AA- ICRA
AA- India Ratings
Unsecured Subordinate Tier II Bonds AA- CARE
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 of theCompany.

Particulars of Loans Guarantee and Investments outstanding during the Financial Year

Particulars of loans guarantee and investments outstanding during the financial yearis furnished in note nos. 14 19 30 33 and 42 to the standalone financial statements ofthe Company.

Risk Management

The Risk Management Committee (RMC) functions in line with the Non-Banking FinancialCompanies – Corporate Governance (Reserve Bank) Directions 2015. The Committee metthree times during the year its terms of reference and functioning are set out in theCorporate Governance Report. The Company understands that risk evaluation and riskmitigation is a function of the Board of the Company and the Board of Directors are fullycommitted to developing a sound system for identification and mitigation of applicablerisks viz. systemic and non-systemic. The Company has also implemented /adopted RiskManagement Policy.

To make the current Risk Management practice more robust and aligned to the industrypractice the management has set up an

Integrated Risk Management (IRM) Framework encompassing both the Credit Risk as well asthe Market & Interest Risk of the organisation. The said framework helps to manage therisks through constant monitoring of key parameters within the organisation. Involvementof the Senior Management team in implementation of the IRM framework ensures achievementof overall organisational objectives across all business units.

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 organisation's own risk appetite and historical portfolioperformance.

Challenges of Portfolio quality faced in last two years have largely been overcome inFY 2018 through a robust hind-sighting process hawk like focus towards resolution ofearly warning indicator (EWI) and Continuous Portfolio Monitoring Indicator (CPMI) cases.The initial results are very encouraging.

Regular portfolio reviews by Magma's Risk Department that eventually reports to theRisk 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.

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. CPI Inflation

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

Operational risk management

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 undergoes transaction testing to evaluate internal compliance and thereby laydown processes for further improvement. Thus the approach is "bottom-up"ensuring acceptance of findings and faster adoption of corrective actions if any toensure 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

• Separate credit function to enable unbiased credit assessment

• 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 andoperating guidelines 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 tenure 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 with regard to its tenure and interest rates.

Foreign exchange risk

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

Liquidity risk management

Magma over a period of 3 decades has worked meticulously to diversify its borrowingprofile and set of institutions it borrows from. Such diversified and stable fundingsources emanate from several segments of lenders such as Banks Insurance CompaniesMutual Funds Pension funds Financial and other institutions including Corporates. Inaddition to this the Company has established a formidable track record in its access tothe securitization / 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 fundsand sensitivity of forecasted cash flows 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.

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

People Risk

Our intent is to be proactive in identifying and addressing risk aspects around peopleand address them in a timely and comprehensive manner. Risks that Magma focuses oninclude:

Risks associated with recruitment:

• Delay in hiring due to non-availability of candidates with appropriatequalifications & experience at the right cost and in the location required

• Hiring candidates who are not aligned with our culture

Risks associated with attrition or underperformance: Losing high performers / people incritical roles

• Lack of timely action against non-performers

• Ethical and fraud related issues

Risks associated with redeploying or letting people go include: Job loss due toorganization restructuring

Internal Control System

Internal Control and Audit

Magma has an adequate system of internal control in place. The Company has documentedits policies controls and procedures covering all financial and operating activities ITgeneral controls designed to provide a reasonable assurance with regard to reliability onfinancial reporting monitoring of operations protecting assets from unauthorised use orlosses compliances with regulations prevention and detection of fraudulent activitiesetc. The Company continues its efforts to align all its processes and controls withleading practices.

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

The Company's well defined organisational structure documented policies guidelinesdefined authority matrix and internal financial controls ensure efficiency of operationsprotection of resources and compliance with the applicable laws and regulations.

Moreover the Company continuously upgrades its systems and undertakes review ofpolicies. The internal financial control is supplemented by extensive internal auditsregular reviews by management and standard policies and guidelines to ensure reliabilityof financial and all other records to prepare financial statements its reporting andother data. The Audit Committee of the Board reviews internal audit reports given alongwith management responses. The Audit Committee also monitors the implemented suggestions.The Company has in material respect an adequate internal financial control overfinancial reporting and such controls are operating effectively. The statutory auditors ofthe Company have also certified on the existence and operating effectiveness of theinternal financial controls relating to financial reporting as of March 2018.

Vigil Mechanism/ Whistle Blower Policy

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 victimisation 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 isavailable on the website of the Company www. at

Human Resource-People Count at every step

At Magma we know that our employees are key in ensuring consistent business success.Our aim is to provide a conducive work environment and enhance their skills so that theycan meet their aspirations while contributing to the Company. We are consistentlyassessing market trends and understanding our employee requirements to adopt new processesand policies or simplifying and modifying existing ones.

Learning and development

In continuation of our efforts to create an ecosystem of learning for our employees weachieved 14000 man-days of training covering 4500 employees. We launched 21 new trainingprograms across classroom and on-line learning platform. One of our key initiativesamongst these was "Maitree" our signature 0-90 day on-boarding program for newjoiners; 90% of them went through the program. "Learnsmart24x7" our new onlineLearning

Management System found resonance with the employees and 4500 of them got certifiedacross various mandatory and functional learning courses. The portal is a savvy platformavailable anytime anywhere and on any device. Through our Sales skill programs aimed atfrontline employees and customised to the role we covered 87% employees.

The involvement of business leaders in training was truly a positive step towardsbuilding a culture of learning. A series of Train the Trainer programs were launched tocreate a pool of functional trainers in Business. This model helped build ownership andinvolvement of managers across levels and they not just attended training but also trainedtheir teams.

"Learning Friday" our in branch training model is one of the continuouslearning programs where the 1st Friday of every month is dedicated to learning andproviding positive strokes to teams. 10 editions of the program through the year coveredall frontline employees and first level supervisors in ABF business.

The key focus during the year was to build skills that improve job performances andhelp employees attain success on a continuous basis.

Driven by technology

We are progressing in a concerted manner to embed technology in areas that simplifylives of our employees and enable productivity.

Our onsite PeopleSoft platform today has all modules live including employeeconfirmation separation and recruitment. To create a great new joinee experience eMilaapa portal to upload new hire documents went live earlier this year.

Going forward we will focus on mobility options while strengthening dashboards for ourleaders to leverage. We also plan to embrace new age platforms such as chatbots that willallow our employees especially those in the field to get real time responses on keypolicy queries.

Incentive schemes

Incentive schemes can be an important driver for business outperformance. We have theseschemes for all employees in line (revenue generating customer facing) roles. Our schemesare sharp with clear key performance indicators (KPIs) for our line staff to ensureaccountability and understanding. The scheme design incorporates channel nuances to ensurethat each plan is aligned with the specific objectives of the department and channel ofbusiness.

At the frontline we have monthly incentive schemes while at supervisory roles thefrequency is quarterly and annually.

These are dynamic schemes that reflectchanges in the external business environment andrevisited each year.

Employee retention endeavors

Sustained business success is best enabled when our performing and critical employeesremain with us for extended periods of time. Hence retention has been an area of focus. Tostrengthen the process we emphasise on:

• Maintaining work-life balance.

• Personally communicating with our employees to understand their problems

• Strengthening employee touch points with HR via branch visits open house

• Clarifying career aspirations for key talent so that they remain aware of theirgrowth within Magma.

• Ensuring that remuneration is appropriately benchmarked and aligned with therole.


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

Use values as the bedrock in everything that we do. - Launch values based recognitionplatform Magma STARS

- Celebrate Magma values during the year

Talent management

- Structured talent management framework to create an internal succession planningpipeline

- Embed career roadmaps for frontline and supervisory roles

Enhance HR processes

- Contemporary suite of policies across the employee life cycle

- Drive automation and technology creating a WOW employee experience through PeopleSoftand other satellite systems

- Adopt practices creating a more balanced work-life approach

Enable efficiencies and performance

- Sharper Performance Improvement Program (PIP) to address consistent issues ofunderperformance

- Robust performance management architecture that is system enabled

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 deterany acts of sexual harassment at workplace and to provide the procedure for the redressalof complaints pertaining to sexual harassment thereby providing a safe and healthy workenvironment in line with the provisions of Sexual Harassment of Women at Workplace(Prevention Prohibition & Redressal) Act 2013 and the rules thereunder. During theyear under review one case of sexual harassment was reported which was then resolved bythe Company. To build awareness and appreciation of this area we have implemented anonline knowledge module leveraging our learning management system.

Information Technology

Magma has been an innovator and an early adopter of technology.

Information Technology has been in the process of transforming from a business enablerto a key business driver in FY 17-18. This year Information Technology focused on businesstransformation which has direct impact on the way Magma does business embracing digitalpayment channels implementing innovative solutions improving employee satisfaction andenhancing operational efficiency.

In Fiscal 17-18 Magma has been building a Credit decision engine which would helpautomate the credit decision at the front end. This will help Magma in serving thecustomer much faster to maintain a high quality portfolio and enable sales team to makedecisions on real time basis. Customer needs and customer satisfaction are key drivers forall the solutions Magma has implemented this year. As rural customer landscape is changingconstantly and as they are embracing and adopting digital technology Magma introduced amobile payment gateway. Customers can now pay their EMIs without going to the branches.The mobile payment gateway supports Debit card transaction net banking UPI and 2 paymentbanks. This year Magma collected EMIs of the tune of Rs. 5880 lacs through 40956transactions. Customer service team was enabled with streamlined and customised systemworkflow for reaching their business targets and to serve customer in a better way.

GST and Demonetisation were major unruly events which affected all the NBFCs this yearInformation Technology has enabled business to tackle these events by enhancing the CoreApplication and making it GST compliant. From Demonetisation point of view the Point ofCollections systems has been upgraded quickly to accommodate the disruptive changes.

To improve its internal employee satisfaction Magma has implemented innovativesolutions such as Chatbots to automate

Helpdesk activities which helped in improving employee productivity and enhanced ITissue management. Employee on-boarding process was digitised to give a best in classonboarding experience to new employees. HR and Admin team have adopted Magma Service Desk(MSD) in a big way in FY2018 which has helped streamline their daily operational support.Travel management system has been re-engineered to provide flexibility for employees tomanage their travel activities. These initiatives improved employee satisfactionproductivity and reduced internal operational cost.

Magma has moved its email platform to cloud based services from Microsoft (Office 365Exchange Online services for its Email collaboration services) making it a disaster proofservice which is highly scalable and secure. As per the master guidelines issued by RBIfor ‘IT Management framework' an IT Strategy Committee has been formed whichconnects on a quarterly basis and reviews the Information Technology and Technologysecurity initiatives.

A Technology Vulnerability Management program has been put in place to ensure allbusiness applications go through rigorous security scans before going into production.

Business is leveraging the real time decision making capabilities driven by dataanalytics and business intelligence dashboards. Daily and monthly dashboards are built forall key employees across the organization which enable them to track the business growthand take informed decisions based on data insights.

During FY2018-19 Information Technology will continue its focus on improving the topline growth and impacting bottom line directly by implementing solutions that fall underfive strategic themes namely "Digital" "Operational Efficiency ""Analytics" "Collaboration" and "Security".The focus will be on delivering business value fast and securely by constantly challengingthe status quo experimenting evolving and delivering solutions that are simple reliableand innovative.

Corporate Image Building & Engaging Target Audience

On the marketing and communications front for Magma group in FY2018 the key focuscontinued to be on Below-The-Line activations across targeted geographies. Theseactivation programs were largely consisting of low-cost visibility at dealership level andengaging the target audience through well planned series of activities at locations. Inbranch communications and events were focused more in order to achieve better cross-saleand up-sale to existing customers. This also helped reinforce the idea that

Magma offers a wide basket of financial solutions to the customers.

Through these events we show-cased the asset finance products Vehicles new and usedUnsecured SME lending and the Housing products. The key focus in sales activities revolvedaround automation and tablet adoption to leverage the revamped sales process changesbeing undertaken across all loan products. Customer convenience and ease of decisionmaking to reduce the Turnaround time was one of the key deliverables. We continued toemphasise on the quality of servicing to our existing customers to make them happy.

FY 17-18 considered to be the most dynamic year for Leasing industry because of theintroduction of GST. GST was expected to consolidate the vehicle leasing market in Indiaand fuel to roaring leasing vehicle sector but instead unexpected climb in the tax ratejolted the entire leasing sector & same was experienced by Magma Auto lease. Due tothe prevailing uncertainty and high cost impact some of the clients decided to move outof the leasing arrangement. However due to high level of customer engagement

Auto lease business managed to retain most of its client base with a live fleet of 4000Vehicles. In order team has undergone structural change which will give us greaterengagement with our existing customers & position as a preferred leasing partner fornew acquisitions at Pan India Level.

In the Housing business Magma focused on Affordable Housing projects by putting upsmaller hoardings at approved project locations. We attended all National Housing Bankbuilder association/CREDAI and industry bodies like FICCI anchored events and in somesmaller locations even organised Builder meets to make them familiar with Magma Housingproducts and build relationships. "Shikhar" and "Apna Ghar Utsav"in-branch Cross selling initiatives were taken up where existing customers of ABF businesswere invited and provided spot sanction for Home loans. We have also started promotingPradhan Mantri Awas Yojana (PMAY) and Credit Linked Subsidy Scheme (CLS) very proactivelyat all our branches and also at some of the affordable housing projects.

At Magma HDI apart from series of local events and engagement activities for Customersand Intermediaries throughout the year the highlight was the multi-city mega launch ofOneHealth at 4 zonal headquarters - Mumbai Kolkata Hyderabad & Raipur followed bysmaller events at 35 locations covering 1600 Intermediaries. The events were covered byall leading media houses around the country. We have also partnered with leading corporatebroking houses and industry associations to organise thought leadership seminars at Delhiand Hyderabad.

Customer Relationship Management

Magma aims to be the most trusted and accessible financial services institutionpromoting financial inclusion and creating value for all its stakeholders. CustomerService is a key focus area for your Company. Your Company also believes in integritygood governance professionalism transparency and client satisfaction.

In our endeavour to lay down clear guidelines for dealing with customers and ensuringfair treatment plus superior customer experience to our customers this year we havecreated the Group Wide Customer Services Policy. This policy includes the regulatoryrequirements and leading market practices to enhance the customer experience and havebetter customer retention. The policy aims to create a framework for: Ensuringcourteousness fairness and reasonableness in all the dealings with the customers

• Ensuring transparent communication of information pertaining to productsservices and related procedures

• Ensuring privacy and confidentiality of customer information

• Handling customer complaints quickly and empathetically

In FY 18 we initiated a structured project for improving customer experience. Weconducted a customer journey mapping and identifying 104 moments of truth and prioritisedimprovement projects for 37 key areas where customer experience needed to be enhanced. Asa result of these initiatives customer complaints across ABF SME and HFC verticalshave reduced significantly by 62%. We have also commenced work on identifying the rightCustomer Record Management solution for the business with the objective of having oneunique customer id across the Group. Other initiatives taken during the year includeregular updates to customers over SMS for their loans during processing or even servicingand closure which has helped us to provide a quick almost instant update and transparencyto our customers.

Events such as "Shikhar" – the in-branch invitation for spot sanctionfor new home loans provided to our existing ABF and SME customers has continued to helpus reach out and cross-sell our existing customers. The focus on Customer Service desk inall branches has helped us to tap online queries of our potential customers and engagethem through multiple initiatives. During the year we have also launched various customerfeedback studies through our call centre in-branch customer services short-code services& emailer campaigns.

Directors Appointment

Your directors vide a resolution passed by circulation on 29 August 2017 on therecommendation of the Nomination and Remuneration Committee had appointed Ms. MadhumitaDutta-Sen (DIN: 07885010) as the Additional Director in the capacity of Non-ExecutiveDirector with effect from 29 August 2017. Ms. Dutta-Sen is serving as a nominee ofInternational Finance Corporation ("IFC") on the Board of the Company. Her termsand conditions of the appointment are governed by the Subscription and Policy RightsAgreement dated 24 June 2011 and Amendment to the said Agreement dated 29 September 2014entered into by and between the Company and IFC.

By virtue of the provisions of Articles of Association of your Company and Section 161of the Companies Act 2013 Ms. Dutta-Sen will vacate office at the ensuing Annual GeneralMeeting (AGM) of your Company. Your Directors have recommended for the approval of theMembers the appointment of Ms. Dutta-Sen as Non-Executive Director of the Company liableto retire by rotation with effect from the date of the ensuing AGM of your Company.

Ms. Dutta-Sen is not disqualified from being appointed as a Director as specified interms of Section 164 of the Companies Act 2013.

Notice under Section 160 of the Companies Act 2013 have been received from a Memberof the Company proposing candidature of Ms. Dutta-Sen. Appropriate resolution seeking yourapproval to the aforesaid appointment along with brief profile of Ms. Dutta-Sen isappearing in the Notice convening the 38th AGM of your Company.

Retirement by Rotation

In accordance with the provisions of the Companies Act 2013 and Regulation 36 of theListing Regulations Mr. Mayank Poddar (DIN: 00009409) retires at the ensuing AGMand being eligible offers himself for re-appointment. The brief resume / details relatingto Director who is to be re-appointed is furnished in the Notice of the ensuing AGM.

The Board of Directors of your Company recommends the reappointment of the Directorliable to retire by rotation at the ensuing AGM.


During the financial year Ms. Ritva Kaarina Laukkanen (DIN: 01782934) who was theNon-Executive Director of the Company and a nominee of IFC has resigned from the Board ofDirectors with effect from 15 May 2017.

After the close of the financial year Mr. Sanjay Nayar (DIN:00002615) Non-ExecutiveDirector of the Company and a nominee of Zend Mauritius VC Investments Limited (Zend) hasresigned from his office as a Director from the of the Company with effect from 19 April2018. The above resignation was consequent upon termination of the Investment Agreementwith Zend.

The Board of Directors placed on record their deep appreciation for the assistance andguidance provided by Ms. Ritva Kaarina Laukkanen and Mr. Sanjay Nayar during their tenureas Directors of the Company. The Company benefitted immensely from their rich managementexperience.

The Board of Directors also placed on record their appreciation to Zend for theirsustained support during the transformation journey of your Company for over the last 7years.

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 thecriteria of independence as prescribed both under Section 149(6) of the Companies Act2013 and in terms of Regulation 16 of Listing Regulations.

Familiarisation programme

In compliance with the requirement of Regulation 25 of Listing Regulations the Companyhas put in place a familiarisation programme for the Independent Directors to familiarisethem about the Company and their roles rights responsibilities in the Company. Thedetails of the familiarisation 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 and that of the Committees andof individual 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 Independent Directors at their meeting had also assessed the quality quantity andtimeliness of flow of information between the Company management and the Board that wasnecessary for the Board to 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.

Directors' Responsibility Statement

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 2018 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 2018 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 meetings are convened by giving appropriate notice to address theCompany's specific needs. In case of business exigencies or urgency of mattersresolutions are passed by circulation.

During the year six Board Meetings and five 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 resignation of Mr. Sanjay Nayar 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 and Mr. V K Viswanathan as other members.The terms of reference of the Audit Committee has been furnished in the CorporateGovernance Report. All the recommendations made by the Audit Committee during the yearwere accepted by the Board.

Nomination and Remuneration Committee

Pursuant to resignation of Ms. Ritva Kaarina Laukkanen and Mr. Sanjay Nayar theNomination and Remuneration Committee was reconstituted and presently comprises of Mr.Nabankur Gupta who serves as the Chairman of the Committee and Mr. Narayan K Seshadri. Mr.Satya Brata Ganguly and Mr. V K Viswanathan as other members. The terms of reference ofthe Nomination and Remuneration Committee has been furnished in the Corporate GovernanceReport.

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.

Contracts or Arrangements with Related Parties

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 is available on the Company's website at itsweblink i.e.

Significant and Material Orders Passed by The Regulators or Courts or Tribunals

There were no significant material / Courts / Tribunals which would impact the goingconcern status of the Company and its future operations.

Statutory Auditors

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).

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.

Secretarial Audit

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 2017-18. The SecretarialAudit Report for the financial year ended 31 March 2018 is annexed herewith and marked asAnnexure-2. The Secretarial Audit Report does not contain any qualification reservationor adverse remark.

Secretarial Standard

The Company complies with all applicable Secretarial Standard.

Business Responsibility Report (BRR)

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.

Corporate Governance

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 Senior Management Personnel;

(ii) Report on the Corporate Governance; and

(iii) Auditors' Certificate regarding compliance of conditions of Corporate Governance.

Particulars of Conservation of Energy Technology Absorption and Foreign ExchangeEarning and Outgo

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 orderspassedbytheRegulators furnished in note no. 34 to the standalone financialstatement.

Extract of Annual Return

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.

Particulars of Employees and Related Disclosures

In terms of the provisions of Section 197(12) of the Companies Act 2013 (‘theAct') read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 and Companies (Appointment and Remuneration ofManagerial Personnel) Amendment Rules 2016 a statement showing the names and otherparticulars of the employees drawing remuneration in excess of the limits set out in thesaid 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.

Transfer of Amount to Investor Education and Protection Fund

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. 194084/- (Rupees One Lac NinetyFour Thousand and Eight Four Only) to IEPF.

Pursuant to Rule 6 of the Investor Education and Protection Fund Authority (AccountingAudit Transfer and Refund) Rules 2016 (as amended from time to time) read withapplicable provisions of the Companies Act 2013 all the underlying shares in respect ofwhich dividends are not claimed/paid for the last seven consecutive years or more areliable to get transferred to the IEPF DEMAT Account with a Depository Participant asidentified by the IEPF Authority. Accordingly during the year under review 282336equity shares of face value of Rs. 2 each were transferred to IEPF DEMAT Account.

The Company has uploaded the details of unpaid and unclaimed amounts lying with theCompany as on 2 August 2017 (date of last Annual General Meeting) and also the details ofequity shares transferred to IEPF DEMAT Account on the Company's website( as also on the Ministry of Corporate Affairs' website.

Fraud Reporting

During the year under review neither the Statutory Auditors nor the SecretarialAuditors has reported to the Audit Committee under Section 143(12) of Companies Act 2013any instances of fraud committed against the Company by its officers or employees thedetails of which needs to be mentioned in the Board's Report.


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.

Cautionary Statement

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
9 May 2018