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Manappuram Finance Ltd.

BSE: 531213 Sector: Financials
NSE: MANAPPURAM ISIN Code: INE522D01027
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VOLUME 142833
52-Week high 130.45
52-Week low 66.40
P/E 9.84
Mkt Cap.(Rs cr) 6,957
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 82.00
CLOSE 83.35
VOLUME 142833
52-Week high 130.45
52-Week low 66.40
P/E 9.84
Mkt Cap.(Rs cr) 6,957
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 26th Annual Report of the Company together with the Audited Consolidated andStandalone Statements of Accounts for the financial year ended 31st March 2018.

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
2017-18 2016-17 2015-16 2017-18 2016-17 2015-16
Gross Income 29498.59 30084.33 22148.89 34765.56 34089.16 23712.35
Total Expenditure 18833.04 18935.56 16959.77 24595.47 22431.96 18228.52
Profit Before Tax 10665.55 11148.77 5189.12 10170.09 11657.20 5483.83
Provision for Taxes/Deferred tax 3663.86 3888.43 1816.69 3486.01 4072.3 1932.25
Minority interest 0 0 0 -24.86 26.42 17.9
Net Profit 7001.69 7260.34 3272.43 6708.94 7558.48 3533.68
Profit b/f from previous year 7285.07 3098.64 2848.66 7574.79 3159.29 2851.54
Amount available for appropriations 14286.76 10358.98 6221.09 14283.73 10717.77 6385.22
Appropriations:
Transfer to Statutory Reserve 1400.34 1452.07 674.49 1400.34 1521.12 722.41
Transfer to General Reserve 0 0 0 0 0 0
Transfer to Debenture Redemption Reserve -676.68 102.26 169.91 -676.68 102.26 169.91
Interim Dividend on Equity Shares 1683.94 1262.56 1892.74 1683.94 1262.56 1892.74
Tax on Interim Dividend 342.81 257.02 385.31 343.27 257.02 385.31
Proposed Equity Dividend 0 0 0 0 0 0
Tax on dividend 0 0 0 0 0 0
Balance carried forward to next year 11536.35 7285.07 3098.64 11532.86 7574.81 3159.29

During the Financial Year ("FY") 2017-18 under review the Company'sconsolidated revenue from operations grew 1.10% to Rs. 34234.00 million and the Profitafter Tax fell by 11.2% to Rs. 6709.00 million. The profitability was impacted by aonetime provisioning of Rs. 120 million towards a legal case where the Company couldliquidate only half of the collateral that was handed over to it. The Company liquidatedthe rest of the collateral in the quarter ended 30th June 2018 following whichmanagement believes provisions are likely to normalise. The Company's consolidated AUMgrew by 15.4% to Rs. 157648.00 million during the year owing to rapid growth in themicrofinance (grew 35.7%) housing finance (grew 20.7%) and vehicle finance (grew 104.5%)AUMs. Gold loan AUMs grew 5.5% during the year. Addition of new customers increasingbranch activation for the non-gold businesses fall in average cost of borrowing andall-round improvement in asset quality were the key factors driving the Company'sfinancial performance during the year.

During the year the Company continued to augment its digital platforms to facilitatecustomers to avail loans at their convenience. In the gold loan business the Companyintroduced doorstep gold loans (pilot stage) and further leveraged its online gold lendingplatform which accounted for 32% of the total gold loan book. The Company also invested inramping up safety of the lockers by installing IOT-based keyless e-lockers which offermultiple benefits including monitoring of the lockers by the customer from a remotelocation. Similarly a host of other digital initiatives were implemented to drive greaterconvenience for the customers at every stage of their engagement with us – fromapplying for the loan to repaying it back. Healthy additions of new customers along withcontinued branch expansions and investments in branding and marketing activities aidedgrowth of the new businesses in the year. These businesses now form about a fourth of theCompany's consolidated AUMs as compared to 19% in the preceding year.

The Company also implemented multiple campaigns to increase awareness among thecustomers about the benefits of digital transactions. Through its local marketinginitiatives the Company covered individuals belonging to the masses segment andconcentrated on getting close and personally relevant to understand the financial needs ofthe people in these sections. Consistent review and monitoring at field level was alsodone to ensure business propensity.

During the year the Company undertook various employee engagement initiatives tomotivate them and improve their efficiencies. These efforts played a prominent role in theCompany's growth during the year. The Company will continue to engage in such initiativesin the future to serve its customers better and thereby achieve higher growth.

2. DIVERSIFICATION OF BUSINESS

Since 2014 with its large net worth and access to debt capital on competitive termsyour Company in the verge of diversification its business by leveraging its vast numbersof existing and new customers' relationship developed through its mainstay Gold Loansbusiness over the years. The objective of this diversification was to build at least 40 to50% of total Assets under Management from sources other than gold loans so as to mitigatethe 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 of theunderprivileged sections of the population.

Accordingly your Company is focusing on affordable housing finance vehicle andequipment finance which includes commercial vehicle loans two-wheeler loans tractor& car loans microfinance SME finance project and industrial finance corporatefinance and insurance broking. The idea was that with home and vehicle and equipmentfinance the Company would reach out to the upwardly mobile customers. To cater to thepeople at the bottom of the pyramid the Company would take the microfinance route withthe collateral-free joint liability model.

Over the last three years i.e. FY 2016 FY 2017 & FY 2018 the new businessverticals have been successful in steadily scaling up their operations by leveraging(wherever required) your Company's customer base branch network and the goodwill of theManappuram Brand. During the year under reference the management was able to stabilisethe business processes scale up the operations (including network) enhance the manpowerstrength of each vertical and forge synergistic lead generation connections with theCompany's network.

The key achievement for FY 2018 has been that having begun literally from scratch in FY2015 the Company's non-gold new businesses now contribute 25.5% of the total assets undermanagement. Over the three two years Microfinance AUM has grown from Rs. 3221 million inFY 2015 to Rs. 24372 million in FY 2018. Your Company's divisions vehicle and equipmentfinance and corporate finance have ended the year with an AUM of Rs. 6254 million and Rs.5513 million respectively. Your Company's housing subsidiary Manappuram Home FinanceLimited has ended the year with an AUM of Rs. 3747 million while insurance brokingsubsidiary has contributed a revenue of Rs. 19.6 million. Importantly having establisheda sound footing home loans microfinance corporate loans and vehicle & equipmentloans are expected to continue to record strong growth in the coming years.

Microfinance

Asirvad Microfinance Limited took steps to consolidate the operations by addressing theissues arising out of demonetisation event during November/December 2016. The fullfinancial effect of that event spilled over to this financial year resulting in loss ofRs. 323 million. Most of the geographies where Asirvad operates bounced back topre-demonetisation repayment levels except for few States like Karnataka and Haryana.

Asirvad is ranked 6th All India as NBFC MFIs. The Company has a network of 832 branchesacross 20 States with presence in 245 districts and 145394 centres. It pursues thepolicy of continuing re-assessment of concentration risk & diversification. During theyear the Company passed on the reduction in interest rate charged by banks/FinancialInstitutions by reducing interest rate charged to customers from 23% to 22.25%.

Asirvad AUM grew by 36% to Rs. 24372 million in FY 17-18 from

Rs. 17959 million in FY16-17 Active loan accounts grew by 21% to 2.3 million from 1.9million in March 2017. 1.6 million Loan accounts were disbursed during the financial yearand these loans have 99.4% repayment rate.

Total Operational Revenue grew by 28% to Rs. 4372 million for period FY17-18 comparedwith Rs. 3428 million for period FY 16-17 Pre provisional profit of Rs. 1083 million forperiod FY 17-18 compared to Rs. 1045 million for corresponding period. Provision for loanloss/Bad debt written off stood at Rs. 1583 million including standard provision of Rs.205 million made for period FY17-18 as per Company policy. Had the Company followed RBInorms provision Rs. 240 million less provision would have created during the financialyear.

Housing Finance

Manappuram Home Finance Limited (MAHOFIN) is your Company's dedicated subsidiary thathas been set up to cater to the affordable housing space. Its overall objective is toprovide options for affordable home finance in the ticket size of about Rs. 8-11 lacsmajorly distributed into the outskirts of metros tier-II and tier-III cities. YourCompany's customer acquisition strategy focuses on the team's ability to understand theneeds of the customer his net-worth and financial limits. Its management team is made upof seasoned people with core domain expertise and who possess mature appraisalmethodologies and product structuring solutions that are friendly for a customer tomanage. In combination with its dedicated 35 branches the growth of the Home Loansbusiness and Loan Against Property will be based on fresh lead generation and on thecross-selling strategies within the Manappuram group's network of branches and regionalpoints of contacts. Having established its IT backbone and product configurations in theperiod between FY 2015 to FY 2017 in FY 2018 the management essentially focused onestablishing the unit's manpower strength through recruitment and training in robustbusiness practices for building the business. During the year it established dedicatedhuman resources and branches in urban and semi-urban locations both in the South and theWest. By the end of FY 2018 MAHOFIN achieved a loan book size of Rs. 3746 million. Thebusiness grew by 20.8% YoY and the loan portfolio has so far faced minimal delinquencieswith NPAs held to 4.8%. Going forward your Company is now ready with its teams productsand branches to grow the loan book size steadily to touch Rs. 7773 million plus in FY2019. Going forward with strong demand professional management and strong brand andnetwork support of the parent MAHOFIN remains focused on delivering results responsiblyand achieving steady growth of business.

Manappuram Insurance Brokers

Manappuram Insurance Brokers Limited (MAIBRO) a 100% Subsidiary of Manappuram FinanceLimited has closed the year at Rs. 91 crore of Total Business. The Company has done a newBusiness of Rs. 84.5 crore. The Company has in 2017-2018 launched various products acrossprotection health and motor to cater to various sections of the society.

The Company has the distinction of covering 16.7 lakh customers in 2017-2018. TheCompany covered 50000 families with a Health cover and 15.5 lakh customers through a Deathcover. MAIBRO today has presence across the length and breadth of the country. The Companyhas used the parents brand and strength to its advantage and provided new products acrossall Branches of the parent company and the Group companies.

In 2017-2018 MAIBRO has exclusively setup a renewal and claims team to cater to itscustomers. The Company has improved its 13 month persistency to 71% and has been able tosettle 95% of claims reported. The renewal and claims team regularly call up the customerto either collect the renewal premiums or help the customers get the benefits of theclaims. MAIBRO is poised to achieve newer heights in 2018-2019.

Vehicle and Equipment Finance

In order to diversify and de-risk portfolio your Company had entered into commercialvehicle financing activity in FY 15 operating from southern and western regions andsubsequently into other regions. The vehicle finance portfolio is about Rs. 6.28 billionspread across 116 locations in 20 States as on Mar 31 18.

The Commercial Vehicle and construction equipment portfolio comprises of approximately70% pre-owned vehicles and balance new vehicles with portfolio of Rs. 5.33 billion with10030 live contracts as at the end of Mar 3118. The two-wheeler finance portfolio is ofRs. 0.64 billion with more than 15000 live contracts and other vehicle loans comprises ofa portfolio of around Rs. 0.31 billion.

The team consists of domain specialists and has established marketing channels andnetworks for lead acquisition processing and receivable management. The business issupported by strong pre-screening methodologies and credit assessment for a healthyportfolio mix.

Our strategy envisages financing customers who are largely from unorganised sector theretail clientele that is underserved by the formal banking channels. With the backgroundof good monsoon prediction and increased government outlay for infrastructure projectsthe growth of vehicle loan portfolio is expected to be robust in FY 19.

Your Company is in the course of building a scorecard model for a quicker customerassessment process and disbursements reducing the end to end turnaround time. With plansto focus on existing customer base for consumer vehicle loans your Company stronglybelieves that digital technology would be an integral component for the growth of thebusiness in coming years.

MSME Lending

Micro small and medium enterprise (MSME) sector is a vibrant and dynamic sectorpromising high growth potential for the Indian Economy. MSME's play a critical role in theeconomy by providing large employment opportunities while contributing significantly tothe Gross Domestic product (GDP) and exports of India. There are close to 51 million MSMEunits in the country that employ about 117 million people across various sectorsconstituting 40% of the workforce. The MSME share to the total GDP is about 37% and theyalso contribute to 43% of exports based on the data maintained by Ministry of Commerce.Apart from being a key contributor to the Indian economy the MSME sector also has thefastest growing exposures in the commercial lending space with low delinquency (NPA)rates.

To participate in the robust growth demonstrated by the MSME sector and to address itsever-increasing credit demand your Company has decided to foray into MSME lending by wayof introducing tailored products for meeting working capital demands of MSME's whichwould be different than traditional secured financing options available. A focusedapproach customised product offerings and a healthy mix of target geographies willenable your Company to build a good quality book in this segment.

Corporate Lending

Manappuram corporate lending vertical caters to financing small and mid size NBFC'swhich are mainly into housing micro

finance vehicle and SME lending. It targets transactions ranging from Rs. 2 crore to40 crore. Borrowers benefit from a range of products at competitive rates eachcustomisable in terms of repayment schedule and security. The attractiveness of lending tosuch companies is that they fetch better yield. In corporate loans Manappuram focuses onproviding funds to other NBFC's for their portfolio origination. Corporate loan portfolioprimarily consists of fund based product i.e. Term Loan.

Currently all such loans are sourced through Northern Arc Capital (earlier known asIFMR Capital) who go beyond what the rating agencies do they do a lot of field levelstudy and based on that Manappuram also have its own internal set of criteria forevaluation. Such corporate lenders are typically companies which have some externalprivate equity investments so that one can be assured of the corporate governance and alsogood auditors and a professional promoter so these are kind of companies which normallyManappuram lends.

Forex and Payments

Your Company has started taking baby steps in the payments landscape. Broadly thePayments division in MAFIL includes Inward Remittances under Money Transfer ServiceScheme Domestic Remittances under Banking Correspondent and PrePaid Instrument OutwardRemittances and Money Changing. The Company has recently raised its profile by becoming anRBI licensed Principal Agent. The Company already offers MTSS services through its networkof branches. It has tied up with Western Union as a principal agent to bring in more focuson this business.

Your Company has a PPI license and a digital wallet offering "MAKASH" to itscustomer. The Company is also a Banking Correspondent through its tie up with Yes Bank.Your Company offers this service to its gold loan customers. The Company intends to bringin focus by adding innovative features in its wallet proposition.

Your Company is an AD Category 2 license holder from Reserve Bank of India. RBI hadalso increased the limit outward remittances by an individual to USD 250000 per annum inJan 2016 under the LRS scheme. The sub segments of "travel abroad" and"Studies abroad" have grown the maximum. Your Company intends to enter thismarket in a focused way by starting this business in a few branches and then growing it inphase-wise manner.

3. SUBSIDIARIES

Your Company holds 90.38% equity shares of Asirvad Microfinance Limited and 100% equityshares of Manappuram Home Finance Limited and 100% equity shares of Manappuram InsuranceBrokers Limited as on FY 2017-18.

Asirvad Microfinance Limited

Gross Income of the Company as at 31st March 2018 is Rs. 4683.28 million as comparedto Rs. 3634.20 million for the year ended 31st March 2017 and Loss after Tax 31st March2018 with Rs. 323.01 million as compared to Rs. 343.32 million for the year ended 31stMarch 2017.

Manappuram Home Finance Limited

Gross Income of the Company as at 31st March 2018 is

Rs. 535.27 million as compared to Rs. 368.36 million for the year ended 31st March2017 and net loss is Rs. 8.05 million for the year ended 31st March 2018 as compared tothe net loss of

Rs. 10.7 million as at 31st March 2017. AUM of the Company as at 31st March 2018 isRs. 3746.61 million which is 2.43% of consolidated AUM.

Manappuram Insurance Brokers Limited

Gross Income of the Company as at 31st March 2018 is Rs. 49764635/- as compared toRs. 20284414/- as for the year ended 31st March 2017 and Profit for the year ended31st March 2018 is Rs. 13479858/- as compared to the Loss of Rs. 8098768/- as at 31stMarch 2017.

Salient features of financial statements of the Company's subsidiaries in form AOC-1are annexed herewith as Annexure

– I(a) and the highlights of performance of subsidiaries are annexed herewith asAnnexure – I(b).

4. RESERVES

During the FY 2017-18 the Company has not transferred any amount to General Reservesand it remains same as last FY

Rs. 3885.08 million. The total reserves and surplus as on March 31 2018 stands at Rs.36459.76 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 25% ofthe NCDs issued through public issue in compliance with SEBI (Issue and Listing of DebtSecurities) Regulations 2008 and no reserve is required in respect of NCDs issuedthrough 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. 676.68million from 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% of the NCDs maturing during theyear ending on the 31st March of the next year The Company had duly deposited with aScheduled Bank Rs. 291.20 million in April 2017 w.r.t debentures matured during FY2017-18 and has also deposited Rs. 2.62 million in April 2018 w.r.t. debentures maturingin FY 2018-19.

6. RESOURCES

The Company as an NBFC mobilisation 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 2018 availed various creditfacilities from 20 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 and thesame has been hosted on the website of the Companyhttps://manappuram.com/public/uploads/editor-images/files/Manappuram%20BRR%2014-21%20Pages%20%281%29.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 Limited Asirvad Microfinance Limited and Manappuram InsuranceBrokers Limited serves millions of customers in the financial services space. YourCompany has moved towards enhancing the Business Responsibility framework to align themwith the Business Responsibility Reporting guidelines/standards as per SEBI.

Your Company's initiatives of Sustainability Corporate Social Responsibility (CSR) andBusiness Responsibility is driven from the top. Board-level CSR Committee is entrustedwith formulating revising and updating our CSR Policy which governs the implementation ofall our CSR initiatives in compliance with Section 135 of Companies Act 2013. Variouspolicies including CSR Policy policies and Business responsibility policy guide ourstringent adherence to compliance and governance. The business responsibility performanceof the Company is assessed annually by the Board of Directors. Your Company believes inconducting its operations in a fair and transparent manner. Within the organisation yourCompany works towards integrating community development responsible governancestakeholder inclusiveness and environmental responsibility into business practices andoperations.

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 and effectiveduring FY 2017-18.

11. MEETINGS OF THE BOARD

During the financial year 2017-18 Board of Directors met on seven occasions. Forfurther details of these Board Meetings please refer to the Corporate Governance Sectionof this Report.

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 and remunerationfor directors Key Managerial Personnel and other employees including criteria fordetermining qualification positive attributes and independence of directors as laid downby the Nomination Committee of the board in compliance with the provisions of Section 178of the Act. The policy can be viewed at https://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-1214 15 and 33 to the StandaloneFinancial Statements

15. PARTICULARS OF CONTRACTS OR ARRANGEMENT WITH RELATED PARTIES contracts /arrangements / transactions entered by the Company during the FY 2017-18 with relatedparties under Section 188 of the Act were in ordinary course of business and on arm'slength basis. During the year the Company had not entered into any contract / arrangement/ transaction with related parties which could be considered material in accordance withthe provisions of Regulation 23 of SEBI LODR and the Company's policy on related partytransactions. Therefore particulars of contracts / arrangements with related partiesunder Section 188 in Form AOC-2 is not annexed with this report.

Your Directors draw attention of the members to Note 25 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 the https://www.manappuram.com/public/uploads/editor-images/files/POLICYONRELATEDPARTYTRANSACTIONS080217.pdf.

16. DIVIDEND

Four interim dividends were declared at the rate of 50 paise per equity share duringthe financial year 2017-18 on 25th May 2017 10th August 2017 7th November 2017 and 08thFebruary 2018 respectively.

An aggregate of Rs. 2.00/- per equity share amounting to 100% of the paid-up value ofthe shares was paid by the Company during the financial year 2017-18.

The Dividend Distribution Policy as per the SEBI LODR is available at the followinglink: https://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

The Company has a Board of Directors approved Risk Management Policy wherein materialrisks faced by the Company including Operational Risk Regulatory Risk Price InterestRate Risk and Credit Risk are identified and assessed. The Risk Management Committeeperiodically reviews the various risks faced by the Company and advises the Board on riskmitigation plans. Risk Management policy may be accessed on the Company's website at thelink: https://www.manappuram.com/public/uploads/editor-images/files/20-Risk-Management-Policy.pdf

19. CORPORATE SOCIAL RESPONSIBILITY 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:https://www.manappuram.com/public/uploads/editor-images/files/CSR%20Policy.pdf

The Corporate Social Responsibility initiatives taken by the Company during the FY2017-18 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;

Non-Executive Directors
Board Committees (including Independent Director)
Board Composition and Quality Function and Duties Participation at Board/ Committee Meetings.
Board Meetings and Procedure Committee Meetings and Procedures Relationship Knowledge and Skill
Board Strategy and Risk Management Overall rating of Board Performance Overall rating of Board Committees Independence

The board and the Nomination Committee reviewed the performance of the Non-Executivedirectors (including Independent Director) on the basis of the criteria such asattendance level of participation contribution to the meetings and its decision makingcontinuity on the board and performance appraisal questionnaire etc. In addition thechairman was also evaluated on the 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 Non-Executivedirectors (including Independent Director)Nomination Committee and Board has evaluatedperformance of Managing Director and Whole-time Director based on the performance ofadditional criteria as detailed in the Corporate Governance Report. In a separate meetingof independent directors performance of non-independent directors performance of theboard as a whole and performance of the chairman was evaluated taking into account theviews of executive directors. Performance evaluation of independent directors was done bythe entire board excluding the independent 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 2017-18 Mr. B.N.Raveendra Babu (Executive Director) has receivedremuneration by way of sitting fee

Rs. 0.32 million for attending Board/Committees meetings of the subsidiary ManappuramInsurance Brokers Limited and Mr. V. P Nandakumar (Managing Director & CEO) has notreceived any remuneration or commission from any of the subsidiaries of the Company forthe FY 2017-18.

22. AUDIT AND AUDITORS REPORT

Deloitte Haskins & Sells LLP Chartered Accountants have been appointed as theStatutory Auditors by shareholders at the 25th AGM to hold office up to the conclusion of30th AGM.

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

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 2017-18.

Secretarial audit report for year ended on March 31 2018 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 MANAGERIAL PERSONNEL CHANGE IF ANY

Mr.Gautam Ravi Narayan has been appointed as Additional Director on 08.02.2018. TheBoard recommends his appointment subject to approval by the Shareholders at the ensuingAnnual General Meeting.

There were no other changes in Directors or Key Managerial Personnel during the FY2017-18.

24. SHARE CAPITAL

During the year 2017-18 the Company has allotted 636126 equity shares of Rs. 2 eachpursuant to exercise of stock options.

Consequently the paid-up equity share capital of the Company stood as on 31.03.2018 atRs. 1685.07 million consisting of 842535762 equity 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 2017-18 the Company has not accepted deposits as per Chapter V of theAct..

The balance unclaimed deposit as on March 31 2017 was Rs. 0.062 million and the samehas been transferred to IEPF in accordance with the provisions of Companies Act 2013during FY 2017-18. There is NIL balance unclaimed deposit as on March 31 2018.

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 2018 the Capital Adequacy Ratio of the Company is 26.60%well above the statutory requirement of 15%. The Company has not issued any Perpetual DebtInstruments.

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 Employee Stock Option Scheme 2016 (‘ESOS-2016').

Board at its meeting held on August 10 2017 has canceled the ESOS 2009 and 448500lapsed options under ESOS 2009 based on the recommendation of the Nomination Compensationand Corporate Governance Committee with effect from August 10 2017 and the same has beenintimated to the stock exchanges.

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 24 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 24 of the Standalone Financial

Statements in this Annual Report and Annexure VII of this report and are also availableon Company's website at https:// manappuram.com/investors/annual-reports.html

A certificate from Deloitte Haskins and Sells LLP Statutory Auditors (Firm'sRegistration No.117366W/W-100018) Statutory Auditors confirming that ESOS 2016 has beenimplemented in accordance with the SEBI SBEB Regulations and that the respectiveresolutions passed by the Company in General Meetings would be placed in the ensuingAnnual 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 Non-Independent Non-Executive
Dr. Amla Samanta Member Non-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:https://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 System andInternal Financial Control (IFC) mechanism commensurate with size scale and complexity ofits operations to ensure control of entire business and assets. The functioning ofcontrols is regularly monitored to ensure their efficiency in mitigating risks. Acomprehensive internal audit department functions in house to continuously audit andreport 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 2017-18.

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 Commercial Paperas follows: a. CRISIL rated Bank Loan Facilities amounting to Rs. 2500 million as CRISILAA- / Stable. b. CRISIL rated Non – Convertible Debentures amounting to Rs. 25075million as CRISIL AA- / Stable. c. CRISIL rated Commercial Paper of Rs. 35000 million asCRISIL A1 + Stable d. ICRA rated Non – Convertible Debentures amounting to 2701.2million as [ICRA] AA- (Stable) e. CARE rated Bank Loan Facilities for Long Term amountingto Rs. 56800 million as CARE AA;- Stable (Double A; Stable) f. CARE rated Bank LoanFacilities for Short Term amounting to Rs. 33200 million as CARE A1+ (A One Plus) g. Carerated Non-Convertible Debentures amounting to Rs. 5800 million as CARE as AA-;Stable h.Care rated Commercial Paper of Rs. 35000 million as CARE A1+ (A 1 Plus) i. Brickworkrated Non – Convertible Debentures amounting to Rs. 547 million as BWR AA-

35. DETAILS OF AUCTIONS HELD DURING THE YEAR 2017-18

Additional disclosures as required by RBI NDSI Master Directions 2016:

Year Number of Loan Accounts Principal Amount outstanding at the dates of auctions (A) ( Rs. In Million) Interest Amount outstanding at the dates of auctions (B) ( Rs. In Million) Total (A+B) ( Rs. In Million) Value fetched ( Rs. In Million)
March 31 2017 305439 9289.54 1466.29 10755.83 10704.05
March 31 2018 332767 9045.30 1126.70 10172.00 10585.50

Note: No sister concern participated in the auctions during the year ended March 312017 and March 31 2018

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 2018 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 2017-18.

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 2017-18 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 Depositories Centraland State Governments and its statutory bodies for the support guidance and co-operation.Your Directors wish to thank the Customers Investors Shareholders Debenture holdersBankers Auditors Scrutiniser and other financial institutions and other stakeholders forthe whole hearted support and confidence reposed on the Company

For and on behalf of the Board of directors of
Manappuram Finance Limited
Sd/-
Jagdish Capoor
Place: Valapad DIN: 00002516
Date: May 18 2018 Chairman