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Motilal Oswal Financial Services Ltd.

BSE: 532892 Sector: Financials
NSE: MOTILALOFS ISIN Code: INE338I01027
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OPEN 593.10
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VOLUME 15953
52-Week high 1212.65
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P/E 36.85
Mkt Cap.(Rs cr) 9,024
Buy Price 616.05
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Sell Price 623.00
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OPEN 593.10
CLOSE 579.45
VOLUME 15953
52-Week high 1212.65
52-Week low 549.75
P/E 36.85
Mkt Cap.(Rs cr) 9,024
Buy Price 616.05
Buy Qty 17.00
Sell Price 623.00
Sell Qty 125.00

Motilal Oswal Financial Services Ltd. (MOTILALOFS) - Director Report

Company director report

Dear Members

The Directors of your Company have the pleasure in presenting the Thirteenth Board'sReport together with the Audited Financial Statements for the financial year ended March31 2018.

Financial Results

The summary of the Company's financial performance both on a consolidated andstandalone basis for the Financial Year ("FY") 2017-18 as compared to theprevious FY 2016-17 is given below:

(Rs. in Lakhs)
Particulars

Consolidated

Standalone

2017-18# 2016-17# 2017-18# 2016-17#
Total Revenue 276968 192362 127274 13265
Profit before Interest Depreciation Taxation and exceptional items 129967 100860 52828 12539
Interest 49559 44226 9288 488
Depreciation 3749 3284 2942 692
Profit before Taxation and exceptional items 76659 53350 40598 11359
Add/(Less): Exceptional Items - (2788) - (2788)
Profit before taxation 76659 50562 40598 8571
Add/(Less) : Provision for Taxation
Current Tax (20278) (13611) 8278 663
Deferred Tax (212) (3097) (817) 355
Minimum Alternate Tax (138) 1458 530 (791)
Less : Tax for earlier year (s) 195 1141 267 (286)
Tax Expenses 20433 14109 8258 (59)
Profit after Taxation 56154 35997 32340 8630
Add: Balance brought forward from previous year 105107 77616 90580 4334
Profit Available for appropriation 161261 113613 122920 12964
Less: Appropriations
Transfer to Statutory Reserve (3879) (3368) (2594) (1726)
Interim Dividend/ Proposed dividend (10129) (3588) (10129) (3588)
Dividend Distribution Tax (966) (730) (966) (730)
Credit of Dividend Distribution Tax
Balance of Profit carried forward 145728 105107 109231 6920

# The figures for FY 2016-17 are of the standalone entity whereas the figures for FY2017-18 are updated after giving effect to Scheme of Amalgamation of Motilal OswalSecurities Limited ("Transferor Company/wholly owned subsidiary company") withMotilal Oswal Financial Services Limited ("Transferee Company/the Company") andtheir respective shareholders ("Scheme") pursuant to approval provided by theHon'ble National Company Law Tribunal Mumbai Bench ("NCLT") vide its Orderdated July 30 2018. The Scheme is made effective from August 21 2018. The appointed dateis April 01 2017. For details refer Notes to Financial Statements forming part of thisAnnual Report.

Financial Performance Standalone

The standalone performance is not presented since the comparison of performance of FY2016-17 vis-a-vis FY 2017-18 is not feasible due to amalgamation of Motilal OswalSecurities Limited ("Transferor Company/wholly owned subsidiary company") withMotilal Oswal Financial Services Limited ("Transferee Company/the Company") andtheir respective shareholders.

Consolidated

The consolidated revenues for the year were Rs.2770 Crores for the year FY 2017-18under review an increase of 43% as compared to the previous year.

- Broking revenues increased by 47% YoY to Rs.777 Crores. Average daily volumes in theequity markets were Rs.6.79 Lakh Crores in FY2018 up 67% from last year. Cash marketvolumes were up 38% YoY to Rs.32976 Crores. Within cash delivery was up 26% YoY toRs.9646 Crores. Derivative volumes were up 69% YoY to Rs.6.46 Lakh Crores. Withinderivatives futures rose up 28% YoY to Rs.79855 Crores. This year options were up 77%YoY to Rs.5.66 Lakh Crores. Amongst cash market participants prop registered a growth of47% YoY while retail was up 41% YoY. Domestic Institutional Investors ("DII")cash volumes increased 51% YoY led by renewed interest in equity mutual funds fromretail/HNI investors. The proportion of retail within cash volumes increased from 55.27%to 55.4% YoY while that of DII increased from 9.25% to 10.3% YoY. Our overall equitymarket share maintained at 2%. Due to our continued focus and investments into thisbusiness we succeeded in capturing a larger chunk of the incremental volumes this yearacross both cash and derivatives. As of March 31 2018 our client base included more than1050000 retail broking and distribution clients and 675 institutions. Our Pan-Indiadistribution reach stood at 2200+ business locations across 588 cities. Our depositoryassets was Rs.60710 Crores up 35% YoY and distribution AUM was Rs.7530 Crores up 71%YoY.

- Investment banking fee saw a 30% growth over the previous year to Rs.113.5 Crores.The IPO & QIP transactions gathered significant momentum this year. FY2018 saw thebusiness clock it's all time high revenues since inception.

- Asset management fees also saw significant traction increasing 87% YoY to Rs.696Crores as compared to last year. Total assets under management/advice across mutualfunds PMS and private equity businesses was Rs.40334 Crores up 72% YoY. Within thisthe mutual fund AUM was Rs.18159 Crores PMS AUM was Rs.14952 Crores AIF AUM wasRs.2417 Crores and private equity AUM was Rs.4694 Crores. The company saw increasedmobilization into its open-end equity mutual fund products and PMS products. In theprivate equity business the 3rd private equity fund - India Business Excellence Fund IIIlaunched during the year with target size of Rs.2000 Crores.

- Housing finance related income increased by 34% to Rs.651 Crores as the businessgained traction this year in terms of clients network banking lines and loan book. HFCloan book was Rs.4863 Crores as compared to Rs.4141 Crores last year.

- Fund based income increased by 69% to Rs.182 Crores. In line with the long termstrategy to grow Return on Equity sustainably the Company made strategic allocation ofcapital to long term RoE enhancing opportunities like Aspire Home Finance and sponsorcommitments to mutual fund and private equity funds of Motilal Oswal Group ("MOGroup"). The NBFC loan book previously run from equity capital is now being run asa spread business. The year also included profit earned on exits in the Private Equityfund in which the Company made sponsor commitments.

Total expenses (before interest and depreciation) for the year at Rs.1470 Croresregistered a 61% jump over previous year. People cost increased by 42% to Rs.500 Crores.Operating expenses increased by 63% to Rs.600 Crores. Other costs were Rs.370 Crores anincrease of 91% over previous year. The profit before depreciation interest exceptionalitems and taxation (EBITDA) increased by 29% to Rs.1300 Crores.

Reported net profit for the year after minority interest stood at Rs.561.50 Crores anincrease of 56%.

MO Group's commitments to our own mutual fund products stood at Rs.956 Crores as ofMarch 31 2018. The unrealized gain on these investments is Rs.376 Crores as of March 312018. The same is not reflected in the profit and loss account for the year. MO Group'scommitments to our alternative investment products stood at Rs.269 Crores as of March2018.

The detailed results of operations of the Company are given in the ManagementDiscussion & Analysis forming part of this Report.

Appropriations

The Company proposes to transfer Rs.2954 Lakhs (Previous year Rs.1726 Lakhs) toSpecial Reserves created u/s 45-IC of the Reserve Bank of India Act 1934.

Future Outlook

Our strategy to diversify our business model towards more annuity sources of earningsis showing definite results. The annuity nature of earnings in the new businesses likeasset based businesses and housing finance business has brought in visibility of ourearnings. Our businesses built scale during FY2018 while maintaining operatingparameters. Our brand is now being recognized across each of our businesses. We achieved a20%+ ROE in FY2018 and are well on course to achieve this on a sustainable basis. Theopportunity size in all our business segments is still huge and our businesses are wellplaced to benefit from the growth potential they offer.

Consolidated Financial Statement

As per Regulation 33 of the Listing Regulations and applicable provisions of theCompanies Act 2013 ("the Act") read with the Rules issued thereunder theConsolidated Financial Statement of the Company for the FY 2017-18 have been prepared incompliance with applicable Accounting Standards and on the basis of Audited FinancialStatement of the Company and its subsidiaries as approved by the respective Board ofDirectors.

The Consolidated Financial Statement together with the Auditors' Report forms part ofthis Annual Report.

Information on the State of Affairs of the Company

The Information on the State of Affairs of the Company has been given as part ofManagement Discussion & Analysis Report forming part of Annual Report of the Company.

Material Changes and Commitments

During the year under review the Board of Directors of the Company at its meeting heldon November 04 2017 had approved Scheme of Amalgamation of Motilal Oswal SecuritiesLimited ("Transferor Company/wholly owned subsidiary company") with MotilalOswal Financial Services Limited ("Transferee Company/the Company") and theirrespective shareholders ("Scheme").

Motilal Oswal Securities Limited ("MOSL") is the flagship company of theMotilal Oswal Group. MOSL is a member of BSE Limited National Stock Exchange of IndiaLimited Multi Commodity Exchange of India Ltd. & National Commodity & DerivativesExchange Limited and acts as a Stock Broker & Commodities Broker to executeproprietary trades and also trades on behalf of its clients which include retail customers(including high net worth individuals) mutual funds foreign institutional investorsfinancial institutions and corporate clients. It is registered with Central DepositoryServices (India) Limited and National Securities Depository Limited in the capacity ofDepository Participant. It is registered with SEBI in capacity of Research Analyst andInvestment Advisor and with various other Authorities like AMFI CERSAI KRA Agencies(CVL Dotex NDML CAMS Karvy and UIDAI).

The Scheme was filed by the Company with the Hon'ble NCLT on November 29 2017.

Pursuant to Order dated December 22 2017 passed by Hon'ble NCLT the Meeting of theMembers of the Company was held on February 20 2018 wherein the Scheme was approved bythe Members. Further the Members of the Company have provided their approval throughPostal Ballot Process on February 19 2018 for transferring the existing lending businessof the Company to Motilal Oswal Capital Markets Limited (Erstwhile Motilal Oswal CapitalMarkets Private Limited) ("MOCML") its wholly owned subsidiary as a goingconcern via slump sale.

Accordingly the entire lending business of the Company has been transferred to MOCMLon August 20 2018 by executing Business Transfer Agreement.

Pursuant to Order dated July 30 2018 the Hon'ble NCLT has approved the Scheme.Subsequently the Board of the Company at its meeting held on August 21 2018 has made theScheme effective from the said date i.e. August 21 2018. The appointed date for theScheme is April 1 2017.

De-Registration as Non Banking Financial Company

The Company is registered as Non-Banking Financial Company ("NBFC") underSection 45-IA of the Reserve Bank of India Act 1934.

However RBI does not accept any responsibility or guarantee about the present positionas to the financial soundness of the Company or for the correctness of any of thestatements or representations made or opinions expressed by the Company and for repaymentof deposits/ discharge of liabilities by the Company.

Further the Company has made an application for surrender of Certificate ofRegistration with Reserve Bank of India and transferred its lending business to MOCML as agoing concern via slump sale. Further subsequent to Scheme becoming effective theCompany is undertaking the broking business as its principal business activity.

Dividend

The Board of Directors of the Company has approved the Dividend Distribution Policy("Policy") in line with the requirements of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 ("Listing Regulations") (as amendedfrom time to time). The Policy is appended as "Annexure 1" to this AnnualReport and is also been uploaded on the Company's website at http://www .motilaloswalgroup.com/Downloads/IR/28010529Dividend-Distribution-Policv.pdf.

The Board of Directors of the Company at its meeting held on January 24 2018 haddeclared and paid an Interim Dividend of Rs.4/- per Equity Share for the FY 2017-18 outof the profits of the Company for the third quarter and nine months ended December 312017 on 144720783 Equity Shares of face value of R 1/- each aggregating toRs.578883132/-.

The Board of Directors of the Company at its meeting held on May 21 2018 haverecommended a Final Dividend of Rs.4.50 per Equity Share of face value of Rs.1/- each forFY 2017-18 subject to approval of the Members of the Company at the ensuing AnnualGeneral Meeting ("AGM").

The Final Dividend if approved at the ensuing AGM would be paid to those Memberswhose name appears in the Register of Members/Beneficial Holders as on record date i.e.September 21 2018.

Credit Rating

During the year CRISIL Limited reaffirmed the Credit Rating of "CRISIL A1+"and India Rating & Research has assigned Credit Rating of "IND A1+" to theCommercial Paper Programme of Rs.25000 Lakhs of the Company.

Share Capital

During the year under review the Company has allotted 626082 Equity Shares undervarious Employee Stock Option Schemes of the Company.

Pursuant to the allotment of the Equity Shares the paid up Equity Share Capital of theCompany as on March 31 2018 is Rs.145083558/- (Rupees Fourteen Crores Fifty LakhsEighty Three Thousand Five Hundred and Fifty Eight Only).

Pursuant to making the Scheme effective the Authorised Share Capital of the Companyhas been increased from Rs.13700 Lakhs divided into 870000000 Equity Shares of Rs.1/-each and 5000000 Preference Shares of Rs.100/- each to Rs.14900 Lakhs divided into925000000 Equity Shares of Rs.1/- each and 5650000 Preference Shares of Rs.100/-.

Debentures

During the year under review the Company has redeemed 500 Series C Secured RedeemableNon-Convertible Debentures ("NCDs") of Rs.10 Lakhs each amounting to Rs.5000Lakhs during the FY 2017-18. Accordingly all the NCDs of the Company stands redeemed ason March 31 2018.

However 2000 Secured Redeemable Non-Convertible Debentures of face value of Rs.10Lakhs each of MOSL are been transferred to the Company pursuant to the amalgamation.

Employee Stock Option Schemes

The disclosures required to be made under the SEBI (Share Based Employee Benefits)Regulations 2014 ("SBEB Regulations") (as amended from time to time) areavailable on the website of the Company at www.motilaloswalgroup.com.

The Certificate from the Statutory Auditors confirming compliance with the aforesaidprovisions would be placed before the Members at the ensuing AGM of the Company.

The Employee Stock Option Schemes are administered by the Nomination and RemunerationCommittee of the Board of the Company in accordance with the applicable SBEB Regulations.

Subsidiary Companies

The Company along with its subsidiaries offers a diversified range of financialproducts and services such as Loan against shares Investment activities Private wealthmanagement Broking and distribution Asset management business Housing financeInstitutional equities Private equity and Investment banking.

As of March 31 2018 the Company had 18 subsidiaries (including step downsubsidiaries). The details of these subsidiaries are set out in form MGT-9 forming part ofthe Annual Report. There are no associate companies or joint venture within the meaning ofSection 2(6) of the Act.

Material Subsidiaries

As required under Regulations 16(1)(c) and 46 of the Listing Regulations the Board ofDirectors has approved the Policy for determining Material Subsidiaries("Policy"). The said policy is available on the website of the Company at http://www.motilaloswalgroup.com/Downloads/IR/SUBSIDIARIES.pdf.Further pursuant to Regulation 16(1)(c) of Listing Regulations Motilal Oswal AssetManagement Company Limited ("MOAMC") has become material subsidiary of theCompany based on Consolidated Financial Statements for FY 2017-18. Accordingly theCompany has three Material subsidiaries namely Motilal Oswal Securities Limited("MOSL") Aspire Home Finance Corporation Limited ("AHFCL") and MOAMCas on March 31 2018.

Investment in Subsidiaries

During the year under review the Company and MOSL has acquired 60344826 and51724141 equity shares of Rs.1/- each respectively of AHFCL.

Performance and Financial Position of Subsidiaries

As required under Rule 5 and Rule 8(1) of the Companies (Accounts) Rules 2014 areport on the highlights of performance of subsidiaries associates and joint venturecompanies and their contribution to the overall performance of the Company has beenappended as "Annexure 2" to this Annual Report. Pursuant to theprovisions of Section 129(3) of the Act a statement containing salient features offinancial statement of subsidiaries in Form AOC-1 is annexed to the Consolidated FinancialStatement in the Annual Report. Your Company will also make available copy of separateaudited financial statement in respect of each of the subsidiary company upon request byany Member of the Company interested in obtaining the same. In accordance with provisionsof Section 136 of the Act the separate audited financial statement in respect of each ofthe subsidiary company is also available on the website of your Company at www.motilaloswalgroup.com.These documents will also be available for inspection at the Registered Office of theCompany during the business hours on working days of the Company up to the date of theensuing AGM.

Public Deposits

During the year under review the Company has not accepted any deposits from thepublic.

Board of Directors

The composition of the Board of Directors of the Company is in accordance with theprovisions of Section 149 of the Act and Regulation 17 of the Listing Regulations with anappropriate combination of Executive Non-Executive and Independent Directors.

The Company has 8 (Eight) Directors comprising of 1 (One) Chairman Managing Director& Chief Executive Officer 2 (Two) Joint Managing Directors 1 Whole-time Director and4 (Four) Independent Directors. The list of Directors of the Company as on March 31 2018has been provided in the Report on Corporate Governance forming part of this Report.

The Board of Directors at its meeting held on August 21 2018 has subject to approvalof the Members of the Company approved the appointment of Mr. Navin Agarwal as theManaging Director of the Company for the period of 5 years commencing from August 21 2018to August 20 2023.

Further the Board at its meeting held on August 21 2018 has appointed Mr. Ajay Menonand Ms. Rekha Shah as Additional Director of the Company w.e.f. August 21 2018 under theprovisions of Section 161 of the Act and will hold the office up to the date of theensuing AGM of the Company. Further the Board has subject to approval of the Members ofthe Company approved the appointment of Mr. Ajay Menon as the Director of the Companyw.e.f. August 21 2018 and as Whole-time Director of the Company for the period of 5 yearscommencing from August 21 2018 to August 20 2023. The Board has subject to approval ofthe Members of the Company approved the appointment of Ms. Rekha Shah as an IndependentDirector of the Company for the period of 5 years commencing from August 21 2018 toAugust 20 2023.

A brief profile of Mr. Navin Agarwal Mr. Ajay Menon and Ms. Rekha Shah is provided inthe Notice of the ensuing AGM of the Company.

The Shareholders are requested to consider the appointment of Mr. Navin Agarwal asManaging Director Mr. Ajay Menon as Whole-time Director liable to retire by rotation andMs. Rekha Shah as an Independent Director in the ensuing AGM.

Section 152 of the Act provides that unless the Articles of Association provide for theretirement of all directors at every AGM not less than two-third of the total number ofdirectors of a public company (excluding the Independent Directors) shall be persons whoseperiod of office is liable to determination by retirement of directors by rotation.Accordingly Mr. Motilal Oswal Chairman & Managing Director will retire by rotationat the ensuing AGM and being eligible has offered himself for re-appointment. The detailsof Mr. Motilal Oswal is provided in the Notice of the ensuing AGM of the Company.

The resolutions for the appointment/re-appointment of Directors as detailed in theNotice of the ensuing AGM would be placed for your approval at the ensuing AGM.

The terms and conditions of appointment of Independent Directors are also available onthe website of the Company at www.motilaloswalgroup.com.

Meetings and Composition of Board of Directors and Committee(s):

The details of the Meetings of the Board and Statutory Committee(s) of the Company heldduring FY 2017-18 are disclosed in the Report on Corporate Governance forming part ofAnnual Report of the Company.

The Composition of Board and Committee(s) as on March 31 2018 are disclosed in theReport on Corporate Governance. Further pursuant to aforesaid changes in composition ofthe Board please find below changes in composition of Statutory Committee(s) w.e.f.August 21 2018:

Sr. No. Name of Committee Name of Member Designation Nature of Changes (Cessation/ Appointment)
1 Audit Committee Ms. Rekha Shah Independent Director Appointment
2 Nomination and Remuneration Committee(1) Mr. Navin Agarwal Managing Director Cessation
Mr. Praveen Tripathi Independent Director Appointment
3 Stakeholders Relationship Committee Ms. Rekha Shah Independent Director Appointment

(1) The nomenclature has been changed to Nomination and Remuneration Committee("NRC") from Nomination and Remuneration/Compensation Committee w.e.f. August21 2018.

Declaration by Independent Directors

All Independent Directors have submitted the declaration of independence as requiredpursuant to provisions of the Section 149(7) of the Act stating that they meet thecriteria of independence as provided in Section 149(6) of the Act and Regulation 16(1)(b)of the Listing Regulations and are not disqualified from continuing as IndependentDirectors of the Company.

Disclosure on Maintenance of Cost Records

The Company engaged in Non-Banking Financial Activity during the year under review isnot required to maintain cost records in accordance with the provisions of the Act.

Familiarization Programmes

The Company has familiarized the Independent Directors with the Company their rolesresponsibilities in the Company nature of industry in which the Company operatesbusiness model of the Company various businesses in the group etc. The details of thefamiliarization programmes are available on the website of the Company at http://www.motilaloswalgroup.com/Downloads/IR/16069033Familiarization-Programmes-for-Independent-Director.pdf.

Code of Conduct

Pursuant to Regulation 26(3) of the Listing Regulations all the Directors of theCompany have affirmed compliance with the Code of Conduct of the Company.

Key Managerial Personnel

During the year under review consequent to resignation of Mr. Sameer Kamath as ChiefFinancial Officer of the Company with effect from April 27 2017 Mr. Shalibhadra Shah isappointed as Chief Financial Officer of the Company with effect from April 27 2017.Further consequent to resignation of Mr. Murli Krishnan Iyer as the Company Secretary& Compliance Officer of the Company with effect from September 13 2017 Mr. KailashPurohit is appointed as Company Secretary & Compliance Officer of the Company witheffect from November 4 2017.

As at March 31 2018 the Company has the following Key Managerial Personnel:

1) Mr. Motilal Oswal - Chairman Managing Director & Chief Executive Officer

2) Mr. Raamdeo Agarawal - Joint Managing Director

3) Mr. Shalibhadra Shah - Chief Financial Officer

4) Mr. Kailash Purohit - Company Secretary & Compliance Officer

Company's Policy on Director Appointment and Remuneration

Section 178 of the Act and Regulation 19 read with Part D of Schedule II of the ListingRegulations as amended from time to time requires the NRC to formulate a Policy relatingto the remuneration for the Directors Key Managerial Personnel ("KMP") SeniorManagement and other employees of the Company and recommend the same for approval of theBoard.

Accordingly in compliance to provisions to the aforesaid provisions the Nominationand Remuneration Policy of the Company is available on the website of the Company at http://motilaloswalgroup.com/Downloads/IR/756054990MOFSL-Nomination-and-Remuneration-Policv-Final.pdf. The salient features of the Policy are given below:-

I. Appointment and Removal of Director KMP and Senior Management

- Appointment criteria and qualifications:

a. The Committee shall identify and ascertain the integrity qualification expertiseand experience of the person for appointment as Director KMP or at Senior Managementlevel and recommend to the Board his/her appointment.

b. A person should possess adequate qualification expertise and experience for theposition he/she is considered for appointment. The Committee has discretion to decidewhether qualification expertise and experience possessed by a person aresufficient/satisfactory for the concerned position.

c. The Company shall not appoint or continue the employment of any person as ManagingDirector/Whole-time Director/ Manager who has attained the age of seventy years.

Provided that the term of the person holding this position may be extended beyond theage of seventy years with the approval of shareholders by passing a special resolutionbased on the explanatory statement annexed to the notice for such motion indicating thejustification for extension of appointment beyond seventy years.

- Term/Tenure:

a. Managing Director/Whole-time Director/Manager (Managerial Person):

- The Company shall appoint or re-appoint any person as its Managerial Person for aterm not exceeding five years at a time. No re-appointment shall be made earlier than oneyear before the expiry of term.

b. Independent Director:

- An Independent Director shall hold office for a term up to five consecutive years onthe Board of the Company and will be eligible for reappointment on passing of a specialresolution by the Company and disclosure of such appointment shall be made in the Board'sreport.

- No Independent Director shall hold office for more than two consecutive terms butsuch Independent Director shall be eligible for appointment after expiry of three years ofceasing to become an Independent Director.

Provided that an Independent Director shall not during the said period of three yearsbe appointed in or be associated with the Company in any other capacity either directlyor indirectly.

- Evaluation:

The Committee shall carry out evaluation of performance of every Director at regularinterval (yearly).

- Removal:

Due to reasons for any disqualification mentioned in the Act rules made there under orunder any other applicable Act rules and regulations the Committee may recommend to theBoard with reasons recorded in writing removal of a Director KMP or Senior Managementsubject to the provisions and compliance of the said Act rules and regulations.

- Retirement:

The Director KMP and Senior Management shall retire as per the applicable provisionsof the Act and the prevailing policy of the Company. The Board will have the discretion toretain the Director KMP Senior Management in the same position/remuneration or otherwiseeven after attaining the retirement age for the benefit of the Company.

II. Provisions relating to Remuneration of Managerial Person KMP and Senior Management

- Remuneration to Managerial Person KMP and Senior Management:

a. Fixed pay:

Managerial Person KMP and Senior Management shall be eligible for a monthlyremuneration as may be approved by the Board on the recommendation of the Committee inaccordance with the statutory provisions of the Act and the rules made there under forthe time being in force. The break-up of the pay scale and quantum of perquisitesincluding employer's contribution to P.F pension scheme medical expenses club fees etc.shall be decided and approved by the Board on the recommendation of the Committee andapproved by the shareholders and Central Government wherever required.

b. Variable Pay:

The Company may in its discretion structure any portion of remuneration to link rewardsto corporate and individual performance fulfilment of specified improvement targets orthe attainment of certain financial or other objectives set by the Board. The amountpayable shall be based on performance against pre-determined financial and non-financialmetrics.

c. Provision for excess remuneration:

If in any financial year the Company has no profits or its profits are inadequatethe Company shall pay remuneration to its Managerial Person in accordance with theprovisions of Schedule Rs.of the Act and if it is not able to comply with such provisionswith the prior approval of the Central Government. If any Managerial Person draws orreceives directly or indirectly by way of remuneration any such sums in excess of thelimits prescribed under the Act or without the prior sanction of the Central Governmentwhere required he/she shall refund such sums to the Company and until such sum isrefunded hold it in trust for the Company.

The Company shall not waive recovery of such sum refundable to it unless permitted bythe Central Government.

- Remuneration to Non-Executive/Independent Director:

a. Remuneration/Commission:

The remuneration/commission if any shall be in accordance with the statutoryprovisions of the Companies Act 2013 and the rules made there under for the time beingin force.

b. Sitting Fees:

The Non-Executive/Independent Director may receive remuneration by way of fees forattending meetings of Board or Committee thereof.

Provided that the amount of such fees shall not exceed the maximum amount as providedin the Act per meeting of the Board or Committee or such amount as may be prescribed bythe Central Government from time to time.

c. Limit of Remuneration/Commission:

Remuneration/Commission may be paid within the monetary limit approved by shareholderssubject to the limit not exceeding 1% of the net profits of the Company computed as perthe applicable provisions of the Companies Act 2013.

Performance Evaluation

Pursuant to the provisions of section 134(3)(p) of the Act and Schedule IV of the Actand in accordance to Regulation 17(10) 25(4) of the Listing Regulations the Board hascarried out the annual performance evaluation of the Board as a whole various Committeesof the Board and of the individual Directors. The performance evaluation of theIndependent Directors was carried out by the entire Board. The Directors expressed theirsatisfaction with the evaluation process. The manner in which the evaluation has beencarried out has been explained in the Report on Corporate Governance annexed to thisReport.

A declaration to the effect that they meet the criteria of independence as provided insub-section (6) of Section 149 of the Act has also been received from IndependentDirectors of the Company.

The Board and the NRC reviewed the performance of the Individual Directors on the basisof the criteria such as Transparency Performance etc.

In a separate meeting of Independent Directors performance of Non-IndependentDirectors performance of the Board as a whole and performance of the Chairman wasevaluated taking into account the views of the Executive Directors and Non-ExecutiveDirectors. The same was discussed in the Board Meeting followed by the meeting ofIndependent Directors at which the performance of the Board its Committee(s) andIndividual Directors was also discussed.

Particulars of Employees

In accordance with the provisions of Section 197(12) of the Act the ratio of theremuneration of each Director to the median employee's remuneration and other details interms of sub-section 12 of Section 197 of the Act read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are forming part ofthis report and has been appended as "Annexure 3" to this Annual Report.

In terms of first proviso to Section 136 of the Act the Report and FinancialStatements are being sent to the Members and others entitled thereto excluding theinformation on employees' particulars as required pursuant to provisions of Rule 5(2) and5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.

In accordance with the provisions of Section 197 of the Act read with Rule 5(2) and5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014the annexure pertaining to the names and other particulars of employees is available forinspection at the Registered Office of the Company during the business hours on workingdays of the Company up to the date of the ensuing AGM. Any shareholder interested inobtaining a copy of the said Annexure may write to the Company Secretary & ComplianceOfficer in this regard.

The Board of Directors affirms that the remuneration paid to employees of the Companyis as per the Nomination and Remuneration Policy of the Company.

Report on Corporate Governance

The Report on Corporate Governance for the year under review is forming part of theAnnual Report. The Certificate from the Statutory Auditors of the Company confirmingcompliance with the conditions of Corporate Governance as stipulated in Regulation 34 andSchedule Rs.to the Listing Regulations is annexed to the Report on Corporate Governance.

Business Responsibility Report

In terms of Regulation 34(2)(f) of the Listing Regulations top 500 listed entitiesbased on their market capitalisation as on financial year end are required to prepare aBusiness Responsibility Report ("BRR") forming part of the Annual Report.

Accordingly the Company has prepared the BRR describing the initiatives taken by theBoard from an Environmental Social and Governance perspective and has also constitutedthe Business Responsibility Committee to overview the Business Responsibility Report andframe and overview such polices as may be required from time to time.

The said BRR is forming part of Annual Report of the Company and is also uploaded onthe website of the Company at www.motilaloswalgroup.com

Statutory Auditors

Pursuant to the provisions of Section 139(2) of the Act and the rules made thereunderthe Members at their Twelfth AGM held on July 27 2017 had appointed M/s. Walker Chandiok& Co. LLP Chartered Accountants as the Statutory Auditors of the Company for a termof five years i.e. from the conclusion of Twelfth AGM till the conclusion of theSeventeenth AGM subject to ratification of appointment by Members in every subsequent AGMof the Company.

However the said requirement is dispensed with according to related provision ofCompanies Amendment Act 2017 becoming effective and accordingly the appointment ofAuditors is not to be ratified by the Members in the AGM and hence M/s. Walker Chandiok& Co. LLP Chartered Accountants will continue to be remain the Statutory Auditors ofthe Company till the Seventeenth AGM of the Company without further ratification by theMembers.

Mr. Sudhir N. Pillai Partner Walker Chandiok & Co. LLP Chartered AccountantsStatutory Auditors has signed the Audited Financial Statements of the Company.

Statutory Auditors' Report

The Statutory Auditors' Report for the year under review does not contain anyqualification. The Notes to the Accounts referred to in the Auditors' Report areself-explanatory and therefore do not call for any further clarifications under Section134(3)(f) of the Act.

Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 (as amended from time to time) theCompany had appointed M/s. U. Hegde and Associates Practicing Company Secretaries toundertake the Secretarial Audit of the Company for the FY 2017-18.

The Secretarial Audit Report is appended as "Annexure 4" to thisAnnual Report.

There is no adverse remark qualifications or reservation in the Secretarial AuditReport.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo

Considering the Company's Non-Banking Financial activities during the year underreview the particulars regarding conservation of energy and technology absorption asrequired to be disclosed pursuant to the Rule 8(3) of the Companies (Accounts) Rules 2014are not relevant to its activities.

Details of the foreign exchange earnings and outgo are given in the Note No. 44 to theFinancial Statements.

Transfer of Shares Pertaining to Unclaimed/Unpaid Dividend to Investor Education andProtection Fund

Pursuant to Investor Education and Protection Fund Authority (Accounting AuditTransfer and Refund) Rules 2016 the shares of the shareholders in respect of whom thedividend is unpaid/unclaimed for seven consecutive years are required to be transferred toInvestor Education and Protection Fund ("IEPF") after giving an opportunity toshareholders to claim the said unpaid/unclaimed dividend.

Accordingly the Company issued the reminder letters to such shareholders to claim thedividend and also published the notice to such effect in the leading newspaper in Englishand regional language having wide circulation and accordingly informed them that in theevent of failure to claim said divided the unpaid/unclaimed dividend along with sharespertaining to unpaid/unclaimed dividend would be transferred to IEPF.

Subsequently the Company has transferred 2309 Equity Shares to IEPF during the yearunder review. The details of such shares are available on the website of the Company at http://www.motilaloswalgroup.com/Downloads/IR/10447015List-of-shareholders-In-Respect-of-Unclaimed-Dividend 2009-10.pdf. The concerned shareholders are requestedto claim the said shares by directly approaching IEPF Authority.

Disclosure of Details of Unclaimed Equity Shares in the Suspense Account:

Pursuant to Regulation 34 and Schedule Rs.of Listing Regulations the Company reportsthe following details in respect of unclaimed Equity Shares that are kept in SpecificDemat Accounts.

Particulars No. of Shareholders No. of Equity shares
Aggregate Number of Shareholders and the outstanding shares in the suspense account lying as on April 1 2017 6 615
Number of Shareholders who approached the Company for transfer of shares from suspense account during the year 1 40
Number of Shareholders to whom shares were transferred from the suspense account during the year 1 40
Aggregate Number of Shareholders and the outstanding shares in the suspense account lying as on March 31 2018 5 575

Depository System

The Equity Shares of the Company are compulsorily tradable in electronic form. As onMarch 31 2018 out of the Company's total paid-up Equity Share Capital comprising of145083558 Equity Shares only 53336 Equity Shares are in physical form and theremaining shares are in electronic form (demat form). In view of the numerous advantagesoffered by the Depository System the Members holding shares in physical form are advisedto avail the facility of dematerialization.

Directors' Responsibility Statement

Pursuant to the provisions of Section 134(5) of the Act the Board of Directors confirmthat to the best of its knowledge and belief:

1) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures if any;

2) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2018 and of the profit ofthe Company for that period;

3) the Directors 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;

4) the Directors have prepared the annual accounts on a going concern basis;

5) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and operating effectively;

6) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

Internal Financial Controls

The Internal Financial Controls with reference to financial statements as designed andimplemented by the Company are adequate. The Internal Financial Control procedure adoptedby the Company are adequate for safeguarding its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information. During the year under review the InternalFinancial Controls were operating effectively and no material or serious observation hasbeen received from the Auditors of the Company for inefficiency or inadequacy of suchcontrols.

Vigil Mechanism/Whistle Blower Policy

Pursuant to Rule 7 of the Companies (Meetings of Board and its Powers) Rules 2014 readwith Section 177(9) of the Act and as per Regulation 22 of the Listing Regulations (asamended from time to time) the Company has framed Vigil Mechanism/Whistle Blower Policy("Policy") to enable directors and employees to report genuine concerns orgrievances significant deviations from key management policies and reports anynon-compliance and wrong practices e.g. unethical behavior fraud violation of lawinappropriate behavior /conduct etc.

The functioning of the Vigil Mechanism is reviewed by the Audit Committee from time totime. None of the Directors or employees have been denied access to the Audit Committee ofthe Board.

The objective of this mechanism is to maintain a redressal system which can process allcomplaints concerning questionable accounting practices internal controls or fraudulentreporting of financial information.

The Policy framed by the Company is in compliance with the requirements of the Act andListing Regulations and available on the website of the Company at http://www.motilaloswalgroup.com/Downloads/IR/1062112783VigilMechanism Policy.pdf

Corporate Social Responsibility

The Company recognizes the responsibilities towards society and strongly intends tocontribute towards development of knowledge based economy.

In accordance with the requirements of the provisions of Section 135 of the Act theCompany has constituted a Corporate Social Responsibility ("CSR") Committee. Thecomposition and terms of reference of the CSR Committee is provided in the CorporateGovernance Report forming part of Annual Report.

The Company has also formulated a CSR Policy which is available on the website of theCompany at http://www.motilaloswalgroup. com/Downloads/IR/1129307840CSRPolicv.pdf.

An Annual Report on activities as required under Companies (Corporate SocialResponsibility Policy) Rules 2014 (as amended from time to time) has been appended as "Annexure5" to this Annual Report.

The Company has made contribution through Motilal Oswal Foundation a not-for-profitcharitable company incorporated under Section 25 of the Companies Act 1956.

Particulars of Loans given Investments made Guarantees given or Security provided bythe Company:

Details of loans guarantees and investments covered under the provisions of Section186 of the Act are given in the Notes to the Financial Statement.

Particulars of Contracts or Arrangements with Related Parties:

The Board of Directors has approved the policy on transactions with related parties("RPT Policy") pursuant to the recommendation of the Audit Committee. In linewith the requirements of the Act and Listing Regulations the Company has formulated theRPT Policy which is also available on the Company's website at http://www.motilaloswalgroup.com/Downloads/IR/96263605RPTPolicy.pdf

All related party transactions entered into during the FY 2017-18 were on an arm'slength basis and in the ordinary course of business.

All Related Party Transactions were placed before the Audit Committee for priorapproval. Prior omnibus approval of the Audit Committee is obtained for the transactionswhich are of unforeseen or repetitive in nature. The details of all such related partytransactions entered into pursuant to the omnibus approval of the Committee were placedbefore the Audit Committee on a quarterly basis for its review.

During the year under review there were no material contracts or arrangements ortransactions entered into by the Company with related parties and accordingly Form AOC-2is not applicable.

The Directors draw attention of the Members to Note No. 50 to the Financial Statementswhich sets out related party disclosures.

Business Risk Management

The Company realizes the importance of Enterprise Risk Management ("ERM")framework and had taken early initiatives towards its implementation. The Company has alsoformulated group Risk Management Policy.

A systematic approach has been adopted that originates with the identification of riskcategorization and assessment of identified risk evaluating effectiveness of existingcontrols and building additional controls to mitigate risk and monitoring the residualrisk through effective Key Risk Indicators ("KRI"). The implementation is beingcarried out in phased manner with the objective to encompass the entire line ofbusinesses.

Effective ERM involves a robust implementation of three lines of defense - first lineof defense is the front-line employees the second line of defense is the risk andcompliance function and the third line of defense is external and internal auditors. Tobuild an effective risk culture significant effort has been made towards robustness ofthese lines of defense.

In the opinion of Board there are no elements of risks threatening the existence ofthe Company.

Policy for Prevention Prohibition and Redressal of Sexual Harassment at Workplace

The Company has in place a Policy for Prevention Prohibition and Redressal of SexualHarassment at Work Place. Appropriate reporting mechanisms are in place for ensuringprotection against Sexual Harassment and the right to work with dignity.

During the year under review the Company has received one complaint in this regard andthe same has been resolved during the year under review.

Further the Company has complied with the provisions relating to the constitution ofInternal Complaints Committee under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.

Extract of Annual Return as Required and Prescribed under Section 92(3) of the Act andRules made thereunder

The Section 134(3) (a) of the Act has been amended vide notification of Section 36 ofthe Companies (Amendment) 2017 with effective from July 31 2018 by the Ministry ofCorporate Affairs ("MCA") which requires company to provide "the webaddress if any where annual return referred to in Section 92(3) has been placed".Further as the amendment to Section 92(3) of the Act vide provisions of Section 23 of theCompanies (Amendment) 2017 is not yet notified by the MCA as on date of this Report theextract of Annual Return in MGT-9 as required under Section 92(3) of the Act andprescribed in Rule 12 of the Companies (Management and Administration) Rules 2014 isappended as "Annexure 6" to this Annual Report.

Significant and Material Orders passed by the Regulators or Courts

The Hon'ble NCLT vide its Order dated July 30 2018 has approved the Scheme ofAmalgamation of Motilal Oswal Securities Limited ("Transferor Company/wholly ownedsubsidiary company") with Motilal Oswal Financial Services Limited ("TransfereeCompany/ the Company") and their respective shareholders.

Further no penalties have been levied by the RBI/any other Regulators during the yearunder review.

Compliance with RBI Regulations

During the year under review the Company was registered as NBFC and has complied withall the applicable regulations of RBI as on March 31 2018.

Other Disclosures

During the year under review the Company has not obtained anyregistration/license/authorisation by whatever name called from any other financialsector regulators.

However the Company has voluntarily surrendered its Certificate of Registration issuedby Reserve Bank of India.

Further the Company is in the process of making application with various financialsectors regulators for carrying out the Broking business. In interim pursuant to theprovisions of the Scheme the Company is carrying the business in the name and style inwhich Motilal Oswal Securities Limited was undertaking its business.

Acknowledgement

The Directors express their sincere gratitude to the Reserve Bank of India Securitiesand Exchange Board of India BSE Limited National Stock Exchange of India LimitedMinistry of Finance Ministry of Corporate Affairs Registrar of Companies othergovernment and regulatory authorities lenders financial institutions and the Company'sBankers for the ongoing support extended by them. The Directors also place on record theirsincere appreciation for the continued support extended by the Company's stakeholders andtrust reposed by them in your Company. The Directors sincerely appreciate the commitmentdisplayed by the employees of the Company and its subsidiaries across all levelsresulting in successful performance during the year.

For and on behalf of the Board of
Motilal Oswal Financial Services Limited
Motilal Oswal
Place : Mumbai Chairman and Managing Director
Date : August 21 2018 (DIN: 00024503)