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Manappuram Finance Ltd.

BSE: 531213 Sector: Financials
NSE: MANAPPURAM ISIN Code: INE522D01027
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OPEN 104.90
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VOLUME 262832
52-Week high 130.45
52-Week low 83.45
P/E 12.45
Mkt Cap.(Rs cr) 8,510
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 104.90
CLOSE 102.75
VOLUME 262832
52-Week high 130.45
52-Week low 83.45
P/E 12.45
Mkt Cap.(Rs cr) 8,510
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Manappuram Finance Ltd. (MANAPPURAM) - Director Report

Company director report

Dear Members

The Board of Directors of Manappuram Finance Limited have pleasure in presenting beforeyou the 25th Annual Report of the Company together with the Audited Consolidatedand Standalone Statements of Accounts for the financial year ended 31st March 2017.

1. FINANCIAL SUMMARY/HIGHLIGHTS AND STATE OF AFFAIRS

The standalone and consolidated financial highlights of your Company are as follows:

(Rs. in million)

Description Standalone Consolidated

2016-17

2015-16

2016-17

2016-17
Gross Income 30084.33 22148.89 34089.16 23712.35
Total Expenditure 18935.56 16959.77 22431.96 18228.52
Profit Before Tax 11148.77 5189.12 11657.20 5483.83
Provision for Taxes/Deferred tax 3888.43 1816.69 4072.30 1932.25
Minority interest 0.00 0.00 26.42 17.90
Net Profit 7260.34 3272.43 7558.48 3533.68
Profit b/f from previous year 3098.64 2848.66 3159.29 2851.54
Amount available for appropriations 10358.98 6221.09 10717.77 6385.22
Appropriations:
Transfer to Statutory Reserve 1452.07 674.49 1521.12 722.41
Transfer to General Reserve 0.00 0.00 0.00 0.00
Transfer to Debenture Redemption Reserve 102.26 169.91 102.26 169.91
Interim Dividend on Equity Shares 1262.56 1892.74 1262.56 1892.74
Tax on Interim Dividend 257.02 385.31 257.02 385.31
Proposed Equity Dividend 0.00 0.00 0.00 0.00
Tax on dividend 0.00 0.00 0.00 0.00
Balance carried forward to next year 7285.07 3098.64 7574.81 3159.29

During the Financial Year ("FY") 2016-17 under review total revenue of thecompany has gone up by 35.8% and Profit after tax has gone up by 115.3% in comparison tothe previous year. As of March 31 2017 the loan book of the company stood at Rs.115509.63 million as against Rs. 103055.98 million on March 31 2016. The positivegrowth in loan book was the consequence of multiple factors such as focus on growth ingold collateral and number of customers diversification of portfolios short term loanschemes macro-economic scenario and certainties in the regulatory environment for goldloan NBFCs. A system of regular periodical collection of interest is being followedacross our branches. Our improving credit and risk profile enabled us to lower our cost offunding significantly.

During FY 2016-17 the Company has undertaken several initiatives to facilitatecustomers to avail online gold loan. Customers can use the facility to remit interestrepay loan and even avail the loan sitting anywhere. The Online Gold Loan Facility forcustomers have increased ease of availing loan and hence has also contributed in theaccelerated growth in Net Profits. In creating an awareness among the customers to remitonline and repay loan various technology awareness campaign have been conducted acrossvarious branches in each and every state and significantly enhanced our marketing spendwith growing BTL & ATL activities.

During the year the company continued to offer customer friendly short tenure loanschemes with an option for the customers to choose the schemes based on their convenienceand requirement. Compared to longer tenure loan schemes in previous years these LoanSchemes also gives comfort to customers that interest sensitive customers can choose lowerinterest product LTV sensitive customers can choose higher LTV product.

Local marketing activities like village campaigns Loan Melas Shop visits Homevisits notice distribution were carried out extensively. Major 360-degree campaign forOnline Gold Loans were conducted on mass media which had accelerated acquiring of newcustomers during FY 2016-17 despite various extraneous challenges. Consistent review andmonitoring at field level was done to ensure business propensity. Employee motivationthrough incentives and other activities also contributed to the positive growth ofcompany. Local marketing activities were conducted on a scale ranging from mass marketingto individual marketing. Local marketing lies between these two levels and impliessegmentation on a local level and implies "Grassroots marketing" where inmarketing activities concentrate on getting close and personally relevant to individualcustomers’ possible level.

In the aftermath of demonetization the company as a part its commitment to its rootsengaged in intense on–ground digital literacy program "Project E-Valapad"in partnership with the Panchayat aimed at spreading digital financial literacy amonghouseholds in the Valapad village area. For this purpose a dedicated team consisting ofemployees of the company ward members and a batch of trained volunteer students from thenearby S.N. College Nattika fanned out to all the wards. They went door-to-door impartingtraining to all the households in the use of various online means of payments and otherfinancial transactions. The mission was to ensure that at least one member of each of the9809 households would become e-literate in terms of being conversant with the differentplatforms of making cashless transactions. The Project was completed successfully and theValapad Panchayat 89% households was declared fully literate village. The Panchayat coversan area of 16.33 sq. km with a population of about 35000 a literacy rate of 86.5% andwith the BPL population at 40% (2011 census). This also encouraged the customers from theValapad area to make interest payments and loan re-payment through electronic mode.

Employees’ motivation through incentives awards and other activities has alsocontributed to the positive growth of the company. The endeavour is to take forward moresuch initiatives to gain business growth through such community engagements besides massmedia and digital initiatives.

2. DIVERSIFICATION OF BUSINESS

In FY 2015 with its large net worth and access to debt capital on competitive termsyour Company decided to diversify its business by leveraging its vast numbers of existingand new customers’ relationship developed through its mainstay Gold Loans businessover the years. The objective of this diversification was to build at least 40 to 50percent of total Assets under Management from sources other than gold loans so as tomitigate the risk of being a single-product NBFC.

Your company’s diversification strategy offered three clear potential advantages:Firstly it sought to address the regulatory discomfort with mono-line NBFCs perceived asvulnerable to concentration risk. Secondly it would enable the company to cater toexisting and new customers with new products and services. Finally your company would beable to accelerate the government’s agenda for inclusion by addressing the needs ofthe underprivileged sections of the population.

Accordingly your company focused on three areas of affordable housing financecommercial vehicle loans and microfinance. The idea was that with home and commercialvehicle loans the company would reach out to the upwardly mobile customers. To cater tothe people at the bottom of the pyramid the company would take the microfinance routewith the collateral-free joint liability model. The Chennai based Asirvad MicrofinanceLimited. was acquired by your company in February 2015 pursuant to this strategy.

Over the last two years i.e. FY 2016 and FY 2017 the new business verticals have beensuccessful in rapidly scaling up their operations by leveraging (wherever required) yourCompany’s customer base branch network and the goodwill of the Manappuram Brand.During the year under reference the management was able to stabilise the businessprocesses scale up the operations (including network) enhance the manpower strength ofeach vertical and forge synergistic lead generation connections with the company’snetwork.

The key achievement for FY 2017 has been that having begun literally from scratch in FY2015 the company’s non-gold new businesses now contribute nearly 19 percent of thetotal assets under management. Over the last two years Asirvad Microfinance Limited hasgrown at a CAGR of 136 percent with its AUM growing from Rs. 3221 million in FY 2015 toRs. 17959 million in FY 2017. Your company’s housing subsidiary Manappuram HomeFinance Private Limited has ended the year with an AUM of Rs. 3104 million while thecommercial vehicle loans vertical has recorded an AUM of Rs. 3058 million. Importantlyhaving established a sound footing both home loans and vehicle loans are expected tocontinue to record strong growth in the coming years.

Microfinance:

Asirvad Micro Finance Limited (‘Asirvad’) has continued to strengthen itsMicrofinance business in FY 2017. Asirvad has relied upon its distribution capability todrive its growth. Despite the growth rates slowing down post demonetisation Asirvad hasachieved growth in AUM to Rs. 17959 million in FY 2017 as compared to Rs. 9988 millionin FY 2016. The healthy 80% growth rate is achieved by broad basing the customer base andventuring into newer geographies. This compares very favourably with the Industry growthrate of 26%. Asirvad is now present in 16 States & 2 Union Territories as comparedto13 States & 2 UT’s as of the end of the previous financial year. Asirvad hasbranch network of 763 branches located in these states efficiently serving 1.19 millioncustomers. With this phenomenal growth and also conversion of few large MFIs as SmallFinance Banks Asirvad has moved up 8 places in the MFIN rankings and is currently rankedas 6th largest NBFC MFI in India. The Credit ranking of Asirvad improved by 2 notches fromA- to A+ this year. The acquisition of majority stake of the company by Manappuram Financein Feb 2015 and further infusion of equity by it in March 2016 enabled Asirvad raise debtfrom Banks and NBFCs besides issue of various debt instruments at attractive interestrates thereby bringing down the cost of funds from 16% to 13%. Asirvad also passed on thisinterest benefit by reducing the lending rate to its borrowers from 26 % to 23% during theperiod. Asirvad also raised Tier II debt amounting to Rs. 1150 million from reputedInstitutions during FY 2017 which helped it improve its capital adequacy ratio to 20.6%.These positive factors will enable it to continue its growth momentum going forward.

Housing Finance:

Manappuram Home Finance Pvt. Ltd. (MAHOFIN) is your Company’s dedicatedsubsidiary that has been set up to cater to the affordable housing space. Its overallobjective is to provide options for affordable home finance in the ticket size of aboutRs. 12-13 lacs majorly distributed into the outskirts of metros tier-II and tier-IIIcities. Your Company’s customer acquisition strategy focuses on the team’sability to understand the needs of the customer his net-worth and financial limits. Itsmanagement team is made up of seasoned people with core domain expertise and who possessmature appraisal methodologies and product structuring solutions that are friendly for acustomer to manage. In combination with its dedicated 35 branches the growth of the homeloans business and LAP will be based on fresh lead generation and on the cross-sellingstrategies within the Manappuram group’s network of branches and regional points ofcontacts. Having established its IT backbone and product configurations in the periodbetween FY 2015 to FY 2016 in FY 2017 the management essentially focused on establishingthe unit’s manpower strength through recruitment and training in robust businesspractices for building the business. During the year it established dedicated humanresources and branches in urban and semi-urban locations both in the South and the West.By the end of FY 2017 MAHOFIN achieved a loan book size of Rs. 3104 million. Thebusiness grew by 142% YoY and the loan portfolio has so far faced minimal delinquencieswith NPAs held down to 1.5%. Going forward your Company is now ready with its teamsproducts and branches to grow the loan book size steadily to touch Rs. 8000 million plusin FY 2018. Going forward with strong demand professional management and strong brandand network support of the parent MAHOFIN remains focused on delivering resultsresponsibly and achieving steady growth of business.

Commercial Vehicle Finance:

In order to diversify and de-risk portfolio your Company had entered into commercialvehicle financing activity in FY 15 primarily in the Southern and Western regionsand has recently launched operations in the Northern markets as well. The vehicle financeportfolio is about Rs. 3.06 billion spread across 43 hubs in 10 States as of March 312017. The portfolio comprises approximately 65% pre-owned vehicles and the balance beingnew vehicles. The vertical has a team of around 300 domain specialists and has establishedmarketing channels and networks for lead acquisition and processing. The business issupported by strong pre-screening methodologies and credit assessment.

Our strategy envisages financing Vehicle and Construction Equipment for the category ofcustomers who are largely from the unorganised sector the retail clientele that isunderserved by the big banks. Increased Infrastructure spends faster movement of goodsacross the country by e-retailers and availability of finance has resulted in growth inCV sales during FY 2017. Against the backdrop of good monsoon growth in the sector isexpected to be robust in FY 2018. The Construction segment continues to grow strongly dueto increase in road construction as contractors have started on ground execution ofprojects. The Coal and Iron Ore mining segment is also showing momentum and will supportincremental demand for Construction Equipment.

The Commercial Vehicle Finance vertical has its focus on digitisation for thetechnological functions across analytics lending platform and performance measurementtool for process efficiency competitiveness and customer satisfaction. With plans tofocus on construction equipment auto loans and two wheeler loans along with commercialvehicles your Company strongly believes that digital technology would be an integralcomponent of the business growth going forward.

3. SUBSIDIARIES

Your Company holds 90.38% equity shares of Asirvad Microfinance Limited and 100% equityshares of Manappuram Home Finance Private Limited and 100% equity shares of ManappuramInsurance Brokers Private Limited as on FY 2016-17.

Asirvad Microfinance Limited

Gross Income of the Company as at 31st March 2017 is Rs. 3634.20 Million ascompared to Rs. 1560.90 Million for the year ended 31st March 2016 and Profit after Taxhas gone up by 43% as at 31st March 2017 with Rs. 343.30 Million as compared to Rs.239.60 Million for the year ended 31st March 2016.

Manappuram Home Finance Private Limited

Gross Income of the Company as at 31st March 2017 is Rs. 368.36 Million ascompared to Rs. 98.62 Million for the year ended 31st March 2016 and net loss is Rs. 10.7Million for the year ended 31st March 2017 as compared to the net loss of Rs. 53.80Million as at 31st March 2016. AUM of the Company as at 31st March 2017 is Rs. 3100.14Million which is 2.27% of consolidated AUM.

Manappuram Insurance Brokers Private Limited

Gross Income of the Company as at 31st March 2017 is Rs. 20.28 Million as compared toRs. 18.98 Million as for the year ended 31st March 2016 and Loss for the year ended 31stMarch 2017 is Rs. 8.09 Million as compared to the Profit after tax of Rs. 1.36Million as at 31st March 2016.

Salient features of financial statements of the Company’s subsidiaries in formAOC-1 are annexed herewith as Annexure –I(a) and the highlights of performance ofsubsidiaries are annexed herewith as Annexure – I(b).

4. RESERVES

During the FY 2016-17 the company has not transferred any amount to General Reservesand it remains same as last FY Rs. 3885.08 million. The total reserves and surplusas on March 31 2017 stands at Rs. 31423.73 million.

5. DEBENTURE REDEMPTION RESERVE

Pursuant to the provisions of the Companies Act 2013 ("Act") and therelevant circulars issue by the Ministry of Corporate Affairs the company is required tocreate a Debenture Redemption Reserve (DRR) to which amounts shall be transferred fromthe profits every year till the debenture is redeemed. The amount of DRR shall be 25percent of the NCDs issued through public issue in compliance with SEBI (Issue and Listingof Debt Securities) Regulations 2008 and no reserve is required in respect of NCDsissued through private placement.

As a matter of policy your company creates a reserve on a proportionate basis till theredemption of the debentures. Accordingly the company transferred a sum of Rs. 102.26Million to DRR during the year.

Furthermore the Act stipulates that the company has to invest on or before 30th Aprilof each year in the prescribed manner a sum equal to 15 percent of the NCDs maturingduring the year ending on the 31st March of the next year. The Company had duly depositedwith a Scheduled Bank Rs. 189.08 million in April 2016 w.r.t debentures matured during FY2016-17 and has also deposited Rs. 291.20 million in April 2017 w.r.t . debenturesmaturing in FY 2017-18.

6. RESOURCES

The Company as an NBFC mobilization of resources at optimal cost and its deployment inthe most profitable and secured manner constitutes the two important functions of thecompany. The main source of funding for the company continues to be credit lines from thebanks and financial institutions. Your company as at March 31 2017 availed various creditfacilities from 26 banks.

Management has been making continuous efforts to broaden the resource base of thecompany so as to maintain its competitive edge. The next important source of funding isthe issue of privately placed Secured Redeemable Non-Convertible Debentures (NCDs). Inaddition the Company also raised funds through the issue of Commercial Papers (CPs).

Your directors are confident that the company will be able to raise adequate resourcesfor onward lending in line with its business plans.

7. MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report is attached and forms an integral part of theAnnual Report. The report discusses in detail the overall industry situation economicdevelopments sector wise performance outlook and state of company’s affairs.

8. REPORT ON CORPORATE GOVERNANCE

The Company has been practicing principle of good Corporate Governance over the years.The endeavour of the Company is not only to comply with the regulatory requirements butalso adhere to good Corporate Governance standards that lays strong emphasis on integritytransparency and overall accountability. The report on corporate governance forms integralpart of this annual report.

9. BUSINESS RESPONSIBILITY REPORT

Business Responsibility Report in line with the National Voluntary Guidelines (NVG) onSocial Environmental and Economic Responsibilities of Business released by the Ministryof Corporate Affairs Government of India and as stipulated under Regulation 34 of theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 (‘SEBI LODR’) forms integral part of this Annual Report andthe same has been hosted on the website of the Company http://www.manappuram.com/public/uploads/editor-images/files/Manappuram_ BRR_16_17.pdf

Business Responsibility Report provides information on key initiatives undertaken bythe Company driven by the triple bottom line (people planet and Profit) aspects and isaligned with the nine principles of NVG. Your Company together with its subsidiaries viz.Manappuram Home Finance Pvt. Ltd Asirvad Microfinance Limited and Manappuram InsuranceBrokers Private Limited serves millions of customers in the financial services space.Your Company has moved towards enhancing the Business Responsibility framework to alignthem with the Business Responsibility Reporting guidelines/standards as per SEBI.

Your Company’s initiatives of Sustainability Corporate Social Responsibility(CSR) and Business Responsibility is driven from the top. Board-level CSR Committee isentrusted with formulating revising and updating our CSR Policy which governs theimplementation of all our CSR initiatives in compliance with Section 135 of Companies Act2013. Various policies including CSR Policy policies and Business responsibility policyguide our stringent adherence to compliance and governance. The business responsibilityperformance of the Company is assessed annually by the Board of Directors. Your Companybelieves in conducting its operations in a fair and transparent manner. Within theorganisation your Company works towards integrating community development responsiblegovernance stakeholder inclusiveness and environmental responsibility into businesspractices and operations.

Your Company seeks to differentiate itself by building a new age NBFC to serve thefinancial needs of all sections of society in India especially the less privileged/ underprivileged sections. This will be achieved by providing a basket of diversified productsand services backed by state of the art technology and driven through a culture thatvalues customer service.

10. DIRECTOR’S RESPONSIBILITY

STATEMENT:

Pursuant to section 134 of the Act the board of directors to the best of theirknowledge and ability confirm that:

i. in the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures;

ii. they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the profitof the Company for that period;

iii. they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities

iv. they have prepared the annual accounts on a going concern basis;;

v. they have laid down internal financial controls to be followed by the Company andsuch internal financial controls are adequate and operating effectively;

vi. they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory andsecretarial auditors and external consultants including audit of internal financialcontrols over financial reporting by the statutory auditors and the reviews performed bymanagement and the relevant board committees including the audit committee the board isof the opinion that the Company’s internal financial controls were adequate andeffective during FY 2016-17.

11. MEETINGS OF THE BOARD

During the financial year 2016-17 Board of Directors met on six occasions. For furtherdetails of these Board Meetings please refer to the Corporate Governance Section of thisReport.

12. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS

Your Company has received necessary declarations from all Independent Directors of theCompany confirming that they meet criteria as mentioned in Section 149 of the Act and SEBILODR. Your Company has also received undertaking and declaration from each director on fitand proper criteria in terms of the provisions of Non-Banking Financial Company -Systemically Important Non-Deposit taking Company and Deposit taking Company (ReserveBank) Directions 2016 ("RBI NDSI Master Directions 2016").

13. POLICY ON BOARD COMPOSITION COMPENSATION

The Board of Directors has adopted a policy on director’s appointment andremuneration for directors Key Managerial Personnel and other employees includingcriteria for determining qualification positive attributes and independence of directorsas laid down by the Nomination Committee of the board in compliance with the provisions ofSection 178 of the Act. The policy can be viewed at http://www.manappuram.com/public/uploads/editor-images/files/Policy%20on%20Board%20composition%20and%20Compensation..pdf and is also annexed to this report as Annexure II.

14. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are provided in Note-1113 14 and 32 to the StandaloneFinancial Statements

15. PARTICULARS OF CONTRACTS OR ARRANGEMENT WITH RELATED PARTIES

ll contracts / arrangements / transactions entered by the Company during the FY 2016-17with related parties under Section 188 of the Act were in ordinary course of business andon arm’s length basis. During the year the Company had not entered into any contract/ arrangement / transaction with related parties which could be considered material inaccordance with the provisions of Regulation 23 of SEBI LODR and the Company’s policyon related party transactions. Therefore particulars of contracts / arrangements withrelated parties under Section 188 in Form AOC-2 is not annexed with this report.

Your Directors draw attention of the members to Note 24 to the Standalone FinancialStatement which sets out related party disclosures.

The Policy on related party transactions as approved by the Board which is annexed tothis report as Annexure III may be accessed on the Company’s website at thehttp://www. manappuram.com/public/uploads/editor-images/files/Policy%20on%20Board%20composition%20and%20Compensation..pdf

16. DIVIDEND

Three interim dividends were declared at the rate of 50 paise per equity share duringthe financial year 2016-17 on 09th August 2016 10th November 2016 and 08th February2017 respectively.

An aggregate of Rs. 1.5/- per equity share amounting to 75 percent of the paid-upvalue of the shares was paid by the Company during the financial year 2016-17.

During FY 2016-17 the Board of Directors has approved a Dividend Distribution Policyas per the SEBI LODR which is available at the following link: http://www.manappuram.com/public/uploads/editor-images/files/Dividend%20Distribution%20 Policy-090816.pdf

17. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO:

These details are provided as Annexure IV to this report.

18. RISK MANAGEMENT POLICY

TheCompanyhasaBoardofDirectorsapprovedRiskManagement Policy wherein material risksfaced by the Company including Operational Risk Regulatory Risk Price Interest RateRisk and

Credit Risk are identified and assessed. The Risk Management Committee periodicallyreviews the various risks faced by the Company and advises the Board on risk mitigationplans. Risk Management policy may be accessed on the Company’s website at the link:http://www.manappuram.com/public/uploads/editor-images/files/20-Risk-Management-Policy.pdf.

19. CORPORATE SOCIAL RESPONSIBILTY POLICY

The Corporate Social Responsibility Policy (CSR Policy) indicating the activities to beundertaken by the Company have been formulated by the Board based on the recommendation ofthe Corporate Social Responsibility Committee (CSR Committee). The CSR Policy may beaccessed on the Company’s website at the link:http://www.manappuram.com/public/uploads/editor-images/files/04-CSR-Policy.pdf

The Corporate Social Responsibility initiatives taken by the Company during the FY2016-17 is detailed in the Report on CSR activities which is annexed herewith marked asAnnexure V.

20. FORMAL ANNUAL EVALUATION

The board of directors have carried out annual evaluation of its own performance boardcommittees and individual directors pursuant to the provisions of the Act and thecorporate governance requirements as prescribed by SEBI LODR. The following were theperformance evaluation parameters during the year;

Board Committees Individual Director
Board Structure and Composition Committee Structure and Composition Attendance
Effectiveness of Board processes information and functioning Degree of fulfilment of key responsibilities Professional Conduct
Establishment and delineation of responsibilities to Committees Effectiveness of meetings Role and functions
Quality of relationship between the Board and the Management Committee dynamics Duties
Quality of relationship of the Committee with the Board and the management Contribution to the Board/ Committees/ Senior management

The board and the Nomination Committee reviewed the performance of the individualdirectors on the basis of the criteria such as attendance level of participationcontribution to the meetings and its decision making continuity on the board andperformance appraisal questionnaire etc. In addition the chairman was also evaluated onthe key aspects of his role..

The performance of the board was evaluated by the board after seeking inputs from allthe directors on the basis of the criteria such as the board composition and structureeffectiveness of board processes information and functioning etc.

The performance of the committees was evaluated by the board after seeking inputs fromthe committee members on the basis of the criteria such as the composition of committeeseffectiveness of committee meetings etc.

In furtherance to above performance evaluation parameters pertaining to individualDirectors

Nomination Committee and Board has evaluated performance of Managing Director andWhole-time Director based on the performance of additional criteria as detailed in theCorporate Governance Report. In a separate meeting of independent directors performanceof non-independent directors performance of the board as a whole and performance of thechairman was evaluated taking into account the views of executive directors. Performanceevaluation of independent directors was done by the entire board excluding theindependent director being evaluated..

The board of Directors has confirmed that all existing Directors are fit and proper tocontinue to hold the appointment as Directors on the Board as reviewed and recommended bythe Nomination Committee on fit and proper criteria under RBI NDSI Master Directions2016.

21. DETAILS OF REMUNERATION / COMMISSION RECEIVED BY MD OR ED FROM SUBSIDIARIES.

During the FY 2016-17 Mr. B.N.Raveendra Babu (Executive Director) has receivedremuneration by way of sitting fee Rs. 43 million for attending Board/Committeesmeetings of the subsidiary Manappuram Insurance Brokers Private Limited and Mr. V. PNandakumar (Managing Director & CEO) has not received any remuneration or commissionfrom any of the subsidiaries of the Company for the FY 2016-17.

22. AUDIT AND AUDITORS REPORT:

S.R. Batliboi & Associates LLP Chartered Accountants (Firm Reg. No. 101049W) hasbeen continuing as Auditors from FY 2007-08 and on applicability of Act they werere-appointed from 22nd AGM to hold office up to forthcoming 25th AGM.

As per Section 139 no Listed Company shall appoint or reappoint as Auditor an AuditFirm for a period of more than 3 years which has already completed a term of 7 years ormore as on the commencement of the Act.

Accordingly Board of Directors at its meeting held on May 25 2017 have approved theappointment of Deloitte Haskins & Sells LLP Chartered Accountants as the StatutoryAuditors subject to the approval of shareholders at the ensuing AGM to hold office fromthe conclusion of this AGM up to the conclusion of 30th AGM subject to ratification byshareholders each year.

The notes annexed to the Standalone and Consolidated financial statements referred inthe Independent Auditors’ Reports are self-explanatory and do not call for anyfurther comments.

There were no frauds reported by the statutory auditors to Audit Committee or Boardunder Section 143 of the Act.

Secretarial Audit

The Board appointed KSR & Co. Practicing Company Secretaries LLP to conductSecretarial Audit for the financial year 2016-17.

Secretarial audit report for year ended on March 31 2017 as provided by KSR & Co.Practicing Company Secretaries LLP Indus chambers Ground floor No.101 Govt ArtsCollege Road Coimbatore-641018 is annexed to this Report as Annexure- VI.

The reports issued by Statutory Auditor and Secretarial Auditor does not contain anyqualification reservation adverse remark or disclaimer .

23. DIRECTORS AND KEY MANANGERIAL PERSONNEL CHANGE IF ANY:

Mr. Pradeep Saxena Director Nominee of Hudson Equity Holdings Limited had retired asa director of the board with effect from 24th Annual General Meeting held on August 092016.

There were no other changes in Directors or Key Managerial Personnel during the FY2016-17.

24. SHARE CAPITAL

During the year 2016-17 the Company has allotted 692500 equity shares of Rs. 2 eachpursuant to exercise of stock options. Consequently the paid-up equity share capital ofthe Company stood as on 31.03.2017 at Rs. 1683.80 million consisting of 841899636equity shares of Rs. 2 each..

During the year under review the Company has not issued shares with differentialvoting rights bonus shares and sweat equity shares.

25. DEPOSITS

As you are aware your company had stopped acceptance of deposits from the public sinceFY 2009-10. Your company had converted itself into a non deposit taking Category‘B’ NBFC. During FY 2016-17 the Company has not accepted deposits as per ChapterV of the Act..

No deposit which was due for repayment or payment of interest and all unclaimed depositamounts have been transferred to an ESCROW account opened with Punjab National BankPalace Road Branch Thrissur. The balance unclaimed amount as on March 31 2017 is Rs.0.062 Million.

As on the date of this report there were no deposits which are due for transfer to theIEPF Account of the Central Government on the expiry of seven years after maturity. Thereis regular follow up on the part of the Company to redeem unclaimed deposits

26. COMPLIANCE WITH NBFC REGULATIONS

Your Company has complied with all the regulatory provisions of the Reserve Bank ofIndia applicable to Non-Banking Financial Company - Systemically Important Non-Deposittaking Company. As on March 31 2017 the Capital Adequacy Ratio of the Company is 26.12percent well above the statutory requirement of 15 percent. The Company has not issuedany Perpetual Debt Instruments.

27. EMPLOYEE STOCK OPTION SCHEME (ESOS)

In order to retain the best available talent ensure long term commitment to theCompany and encourage individual ownership Company has instituted employee stock optionsplans from time to time.

Presently the Company has the following stock option schemes:

1) Employee Stock Option Scheme 2009(‘ESOS-2009’).

2) Employee Stock Option Scheme 2016 (‘ESOS-2016’).

In respect of ESOS 2009 Nomination Committee had reissued the lapsed options duringthe FY 2014-15 to Senior Management Personnel which had been vested and exercised duringthe FY 2015-16 and 2016-17. During the year no options were granted by the NominationCommittee under ESOS 2009.

During the FY 2016-17 ESOS 2016 was approved by the shareholders vide specialresolution dated July 05 2016 and Nomination Committee had granted 13750466 number ofoptions at an exercise price of Rs. 86.45 per option at its meeting held on August 082016. Such Stock Options also include the options granted to employees of subsidiaries ofthe Company under ESOS 2016.

The stock option schemes are in compliance with Securities and Exchange Board of India(Share Based Employee Benefits) Regulations 2014 ("SEBI SBEB Regulations") andthere have been no material changes to these plans during the FY 2016-17.

Disclosures in terms of ‘Guidance note on accounting for employee share basedpayments’ issued by ICAI and diluted EPS in accordance with Accounting Standard 20 -Earnings Per Share are provided in note 23 of Standalone Financial Statements in thisAnnual Report..

Details related to stock option schemes as required under SEBI SBEB Regulations readwith Securities and Exchange Board of India circular no. CIR/CFD/POLICY CELL/2/2015 datedJune 16 2015 are provided in Note 23 of the Standalone Financial Statements in thisAnnual Report and Annexure VII of this report and are also available on Company’swebsite at http://www. manappuram.com/investors/annual-reports.html

Your Company has received a certificate from S.R. Batliboi & Associates LLPChartered Accountants (Firm Reg. No. 101049W) Statutory Auditors confirming that theESOS 2009 and ESOS 2016 has been implemented in accordance with the SEBI SBEB Regulationsand the respective resolutions passed by the Company in General Meetings. The certificateswould be placed in the ensuing Annual General Meeting for inspection by the members.

28. DISCLOSURE:

Composition of CSR Committee

Name of the Member Position Category of Directors
Mr. Rajiven.V.R Chairman Independent Non-Executive
Mr. V.P. Nandakumar Member Non-Independent Executive
Adv.V.R. Ramachandran Member Independent Non-Executive
Dr. Amla Samanta Member Independent Non-Executive

Composition of Audit Committee

Name of the Member Position Category of Directors
Mr. P. Manomohanan Chairman Independent Non-Executive
Dr. Shailesh J Mehta Member Independent Non-Executive
Mr. E.A. Kshirsagar Member Non-Independent Non-Executive
Mr. V.R. Rajiven Member Independent Non-Executive
Dr. Amla Samanta Member Independent Non-Executive

Whistle Blower Policy and Vigil Mechanism

The Vigil Mechanism of the Company provides adequate safeguards against thevictimisation of any directors or employees or any other person who avail the mechanismand also provides direct access through an e-mail or dedicated telephone line or a letterto the Chairperson and a Member (Woman Director) of the Audit Committee.

No person has been denied access to the Chairman and a Member (Woman Director) of theaudit committee. Company has ensured that its employees are well aware of the content andprocedure of the policy and fully protected. The Whistle Blower Policy and Vigil Mechanismmay be accessed on the Company’s website at the link:http://www.manappuram.com/public/uploads/editor-images/files/22-Whistle-blower-Policy-v2.pdf

29. EXTRACT OF ANNUAL RETURN:

Extract of annual return in Form MGT-9 is annexed herewith as Annexure- VIII.

30. DETAILS OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS AND INTERNAL AUDIT

Your company has put in place well defined and adequate Internal Control Systemand Internal Financial Control (IFC) mechanism commensurate with size scale andcomplexity of its operations to ensure control of entire business and assets. Thefunctioning of controls is regularly monitored to ensure their efficiency in mitigatingrisks. A comprehensive internal audit department functions in house to continuously auditand report gaps if any in the diverse business verticals and statutory compliancesapplicable.

During the year Internal Financial Controls were reviewed periodically by themanagement and Audit Committee. Key areas were subject to various statutory and internalaudits in order to review the adequacy and strength of IFC followed by the Company. As perthe assessment Controls are strong and there are no major concerns. The internalfinancial controls are adequate and operating effectively so as to ensure orderly andefficient conduct of business operations.

Your Company has an independent internal audit function which carries out regularinternal audits to test the design operations adequacy and effectiveness of its internalcontrol processes and also to suggest improvements to the management. KPMG was appointedin terms of Section 138 to conduct internal audit of functions. Their observations alongwith management response are periodically reviewed by Audit Committee and Board andnecessary actions are taken.

31. LISTING WITH STOCK EXCHANGES:

Your Company confirms that it has paid the Annual Listing Fees for the financial year2017-18 to Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) where theCompany’s shares are listed..

32. SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

During the year under review there were 4 cases filed with the Internal ComplaintsCommittee of the Company pursuant to the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the same were investigated andresolved. No complaints were pending more than 90 days during FY 2016-17.

33. CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Act SEBI LODR and Accounting Standard (AS) – 21 onConsolidated Financial Statements the audited consolidated financial statement isprovided in the Annual Report.

34. CREDIT RATING

Your Company holds valid credit rating from Brickwork CRISIL ICRA and CARE forNon-Convertible Debentures Short Term and Long Term Bank Facilities and Short Term Debtas follows:

a. CRISIL rated Bank Loan Facilities amounting to Rs. 2500 Million as CRISIL AA-/Stable

b. CRISIL rated Non-Convertible Debentures amounting to Rs. 23075 Million asCRISIL AA-/ Stable

c. CRISIL rated Short Term Debt of Rs. 22500 Million as CRISIL A1+Stable

d. ICRA rated Non-Convertible Debentures amounting to Rs. 4429.7 Million as [ICRA]AA-(Stable)

e. ICRA rated Short Term Debt of Rs. 5000 Million as [ICRA] A1+

f. CARE rated Bank Loan Facilities for Long Term amounting to Rs. 56800 Million asCARE AA-Stable

g. CARE rated Bank Loan Facilities for Short Term amounting to Rs. 33200 Million asCARE A1+Stable

h. CARE rated Non-Convertible Debentures amounting to Rs. 4900 Million as CAREAA-Stable

i. Brickwork rated Non-Convertible Debentures amounting to Rs. 547 Million as BWR AA-

35. DETAILS OF AUCTIONS HELD DURING THE YEAR 2016-17

Additional disclosures as required by RBI NDSI Master Directions 2016:

Year Number of Loan Accounts Principal Amount outstanding at the dates of auctions (A) Interest Amount outstanding at the dates of auctions (B) Total (A+B) Value fetched
(Rs. In Million) (Rs. In Million) (Rs. In Million) (Rs. In Million)
March 31 2017 305439 9289.54 1466.29 10755.83 10704.05
March 31 2016 702038 19319.03 4890.18 24209.21 22094.92

Note: No sister concerns participated in the auctions during the year ended March 312017 and March 31 2016

36. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURE

Particulars of employees and related disclosures are annexed herewith as Annexure IX asper Section 197 of the Act.

37. AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE

A certificate from Statutory Auditor in compliance with the conditions of corporategovernance by the Company for the year ended on March 31 2017 as stipulated in Part E ofSchedule V of SEBI LODR is annexed as Annexure - X.

38. SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS

There were no such significant / material orders passed by the Regulators during thefinancial year 2016-17.

39. MATERIAL EVENT SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENT

There have been no material changes and commitments affecting the financial positionof the Company which occurred between the end of the FY 2016-17 and the date of thisreport.

40. ACKNOWLEDGEMENT

Your Directors express sincere appreciation and gratitude to the employees of thecompany at all levels for their dedicated service and commitments to the Reserve Bank ofIndia Rating Agencies Stock Exchanges Debenture Trustees RTA’s DepositoriesCentral and State Governments and its statutory bodies for the support guidance andco-operation. Your Directors wish to thank the Customers Investors ShareholdersDebenture holders Bankers Auditors Scrutiniser and other financial institutions andother stakeholders for the whole hearted support and confidence reposed on the company andthe management and to the general public at large for their blessings and good wishes.

For and on behalf of the Board of directors of
Manappuram Finance Limited
Sd/-
Jagdish Capoor
Date: May 25 2017 DIN: 00002516
Place: Valapad Chairman