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Motilal Oswal Financial Services Ltd.

BSE: 532892 Sector: Financials
NSE: MOTILALOFS ISIN Code: INE338I01027
BSE 00:00 | 23 Jul 1055.85 -24.50
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NSE 00:00 | 23 Jul 1056.65 -23.10
(-2.14%)
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OPEN 1090.00
PREVIOUS CLOSE 1080.35
VOLUME 86753
52-Week high 1188.00
52-Week low 538.50
P/E 19.68
Mkt Cap.(Rs cr) 15,489
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1090.00
CLOSE 1080.35
VOLUME 86753
52-Week high 1188.00
52-Week low 538.50
P/E 19.68
Mkt Cap.(Rs cr) 15,489
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

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

Company director report

Dear Members

The Directors of your Company have the pleasure in presenting the Fifteenth Board'sReport together with the Audited Financial Statements for the financial year ended March31 2020.

Financial Results

The summary of the Company's financial performance both on a consolidated andstandalone basis for the Financial Year ("FY") 2019-20 as compared to theprevious FY2018-19 is given below:

(R in Lakhs)

Particulars

Consolidated

Standalone

2019-20 2018-19 2019-20 2018-19
Total Revenue 236541 246174 130639 124869
Profit before Interest Depreciation Taxation and exceptional items 81937 91870 35318 51579
Interest 49447 51685 12924 10428
Depreciation 3971 2395 2984 1801
Profit before taxation 28519 37790 19410 39350
Add/(Less) : Provision for Taxation
Current Tax 13371 18426 7056 8914
Deferred Tax (6424) (9100) (7326) (1927)
Less : Tax for earlier year(s) 32 (61) - -
Tax Expenses 6979 9265 (270) 6987
Profit after Taxation from Continuing Operations 21540 28526 19680 32363
Loss from discontinuing operations before tax - - - (186)
Tax on discontinuing operations - - - 54
Loss from discontinuing operations after tax - - - 132
Share of Profit from Associates and Joint Ventures (net of taxes) (2582) 1306 - -
Profit for the Period 18958 29831 19680 32231
Add/Less: Other Comprehensive Income (OCI)
Acturial gain/(loss) 201 190 57 34
Fair value gain/(loss) of investment held through FVOCI (6914) (470) (4489) (737)
Tax on OCI 727 (10) 499 74
Total Comprehensive Income 12972 29541 15747 31603
Less: Total comprehensive income attributable to (618) (436) -
Non-controlling interests
Total comprehensive income attributable to Owners of parent 12354 29105 15747 31603
Add: Balance brought forward from previous year 217715 205063 185181 167001
Profit Available for appropriation 12354 29105 15747 31602
Less: Appropriations
Transfer to Statutory Reserve (782) (42) - -
Transfer to Capital redemption Reserve - (245) - -
Interim Dividend and Final Dividend (12984) (12505) (12491) (12374)
Dividend Distribution Tax (2603) (2733) (2) (1048)
Expected Credit Loss Impairment reserve (62) - - -
Transfer to General Reserve 133 - - -
Transfer to Minority interest 1148 (928) - -
Balance of Profit carried forward 214919 217715 188435 185181

FINANCIAL PERFORMANCE Standalone

The standalone revenues in FY2019-20 stood at R 1306 crores vs R 1249 crores inFY2018-19. Total expenses (before interest and depreciation) for the year came in at R 953crores which increased by 30% over previous year. People cost increased 12% to R 312crores. Operating expenses increased by 5% to R 333 crores. Other costs were R 150 croresan increase of 11% over previous year. The profit before depreciation interestexceptional items and taxation (EBITDA) stood at R 353 crores. Reported net profit for theyear came in at R 197 crores.

Consolidated

The consolidated revenues during the year under review were R 2365 crores a decreaseof 4% as compared to the previous year.

Broking and related income grew 8% YoY to R 1225 crores. The average daily tradedvolumes (ADTO) for the equity markets during FY2019-20 stood at R 14.44 lakh crores up45% YoY from R 9.93 lakh crores in FY2018-19. The overall Cash market ADTO reported growthof 11% YoY at R 39068 crores in FY2019-20. Delivery saw growth of 3% YoY to R 9140crores v/s 8% de-growth in FY2018-19. Within derivatives future volumes increased 0.4%YoY to R 87950 crores while options rose 51% to R 13.17 lakh crores. Amongst cash marketparticipants retail constitutes 52% of total cash volume institution constitutes 25% oftotal cash volume and prop constitutes 23%. The proportion of DII in the cash market was10.1%. The increase in demat accounts during the year stood at 13% with total number ofaccounts as on March 2020 at 4.08 crores. The revival in market sentiments is expected togive push to the primary market activities and overall volumes.

- The company had more than 1448935 retail broking and distribution clients growingat a CAGR of 16% from FY2019-20. Client acquisition stood at ~242000 during the year+72% YoY.

- The distribution revenues contribute 15%/9.3% of the gross/net total incomerespectively with continual traction in distribution business. Our financial productdistribution AUM was R 9034 crores as of March 2020 with net sales of R 924 crores inFY2020.

- Investment banking fee saw a decline over the previous year to R 12 crores. Theoverall market volatility caused due to various issues like economic slowdown globaltrade war and the COVID-19 pandemic kept the IPO & QIP transactions muted during theyear. The pipeline remains robust and is likely to fructify once the pandemic ends.

- Asset management income declined by 4% YoY to R 556 crores as compared to last year.Total assets under management/advice across mutual funds PMS and private equitybusinesses was R 29691 crores down 24% YoY. Within this the mutual fund AUM was down20% YoY to R 15981 crores PMS AUM was down 27% YoY to R 11628 crores and AIF AUM was R1891 crores. The company entered into the arena of passive investing and launched sixindex funds this year.

- The private equity income excluding the share of lumpy profits on investment exitsstood at R 107 crores. The income from wealth management business stood at R 100.7 crores.The wealth management AUM continued to attract assets with closing AUM for FY2020 at R15624 crores.

- Housing finance related gross income of R 233 crores. The focus was more on improvingthe asset quality and risk management. HFC loan book was R 3667 crores as of March 2020

In line with the long term strategy to grow RoE sustainably Motilal Oswal FinancialServices Limited (MOFSL) had made strategic allocation of capital to long term RoEenhancing opportunities like Motilal Oswal Home Finance Limited and sponsor commitmentsto our mutual fund and private equity funds. As of March 2020 our total quoted equityinvestments stood at R 1220 crores. Unrealized gain on all investments was ~R 172 crores.

Total expenses (before interest and depreciation) for the year at R 1546 croresregistered a marginal increase of 0.2% over previous year. Profit before depreciationinterest exceptional items and taxation (EBITDA) stood at R 819 crores a decline of 11%from the previous year. Profit for the year (post minority interest) declined by 26% to R209 crores.

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

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 have stood strong in the volatile year of FY2020 whilemaintaining operating parameters. Our brand is now being recognized across each of ourbusinesses. The opportunity size in all our business segments is still huge and ourbusinesses are well placed to benefit from the growth potential they offer.

CONSOLIDATED FINANCIAL STATEMENT

As per Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("Listing Regulations") and applicable provisions of theCompanies Act 2013 ("the Act") read with the Rules issued thereunder (asamended from time to time) the Consolidated Financial Statement of the Company for theFY2019-20 have been prepared in compliance with applicable Indian Accounting Standards andon the basis of Audited Financial Statement of the Company and its subsidiaries asapproved by the respective Board of Directors.

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

COVID-19 - MOFSL POWERING AHEAD

The COVID-19 pandemic continues to spread rapidly across the globe including India. TheCOVID-19 outbreak was declared a global pandemic by the World Health Organization and hascaused social and economic disruption. As the human toll mounts so does the capitalmarkets damage.

The Indian government had announced nationwide lockdown in India. In this nation-widelock-down period though all the services across the nation were suspended (except thespecified essential services) some establishments including securities marketintermediaries could operate and were exempted from the lock-down. Accordingly yourCompany continued its operations through minimal staff working at office premises and restall working from home.

Your Company adopted several measures to fight against COVID-19 and to ensure businesscontinuity across its offices and branches. Some of the measures taken by the Company areas follows:

- Contribution of R 5 crores at Group level to Prime Minister's Relief Fund and R 1crore to Maharashtra Chief Minister's Relief Fund

- Payment of Bonus to reward the efforts put in by employees in FY2019-20 and Salarieswere credited in advance for the month of April 2020

- Implementation of various Operational Plans for Business Continuity and AssociateSafety

- 'Work from Home' facility for employees was provided 1 week in advance beforeannouncement of lockdown without compromising any commitments

- IT infrastructure support was rolled out overnight to help our employees shift tothis new work paradigm

- Necessary Food & Stay Arrangements at Office for Business Critical Employees(BCEs) i.e. employees working from Office Premises

- Providing Appreciation Certificate(s) to BCEs

- Conducting temperature checks of all employees/staffs/visitors at entry of alloffices/branches

- Various online contest/challenges were conducted to keep employees engaged motivatedand connected by allowing them to showcase their other skills/talents.

- Motivational mails sent by CEO/HR head and awareness mails circulated by HR team.

- Conducting Virtual Meetings

- Following of social distancing norms i.e. minimum 6 ft distance to be followed

- No entry in Offices/Branches for external visitors

- Provision of hand sanitizers and N95 masks compulsory hand sanitization for allindividuals at frequent intervals and daily periodic sanitization of offices work-areaetc.

- HR team personally ensuring the well-being of employees through calls

Your Company strongly believes that when the going gets tough; the tough get going.With a strong balance sheet a passionate team and a positive enterprising attitude; wehope to sail over any hurdle that come our way. Tough times don't last; tough people do.

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 AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no material changes and commitments affecting the financial positionof the Company which have occurred between the end of the financial year of the Companyand the date of this Report.

DIVIDEND

The Board of Directors of the Company has approved the Dividend Distribution Policy("Policy") in line with the requirements of the Listing Regulations. The Boardof Directors at its Meeting held on March 21 2020 has amended the policy thereby changingthe circumstances under which shareholders may not expect dividend and financialparameters mentioned in the Policy. The Policy is appended as "Annexure 1" tothe Board's Report and is also been uploaded on the Company's website athttps://www.motilaloswalgroup.com/Downloads/IR/206776066708.-Dividend-Distribution-Policy.pdf

The Board of Directors of the Company at its meeting held on January 22 2020 haddeclared and paid an Interim Dividend of R 4.00/- per Equity Share for the FY2019-20 outof the profits of the Company for the third quarter and nine months ended December 312019 on 147998193 Equity Shares of face value of R 1/- each aggregating to R591992772/-.

CREDIT RATING

During the year under review ICRA Limited reaffirmed the long term credit rating of[ICRA] AA" Rating with a stable outlook to the Non-Convertible Debentures("NCDs") Programme of R 350 crores of the Company.

CRISIL Limited reaffirmed the Credit Rating of "CRISIL A1+" and India Rating& Research Private Limited has also reaffirmed the Credit Rating of "INDA1+" to the Commercial Programme of R 1300 Crores of the Company. Accordingly therewas no revision in the credit ratings during the year under review. The ratings indicate avery strong degree of safety regarding timely servicing of financial obligations.

Further CRISIL has upgraded credit rating to AA- with a stable outlook from earlier A+(stable) for Long Tem Borrowings Programme of Motilal Oswal Home Finance Limited materialsubsidiary of the Company.

Further during the year under review the Company does not have any fixed depositprogramme or any scheme or proposal involving mobilization of funds in India or abroadduring the year under review.

SHARE CAPITAL

During the year under review the Company has allotted 1055432 Equity Shares undervarious Employee Stock Option Schemes of the Company. Further the Company has allotted1330928 equity shares under preferential allotment for consideration other than cash.

Pursuant to the allotment of the Equity Shares the paid up Equity Share Capital of theCompany as on March 31 2020 is R 148066718/- (Rupees Fourteen Crores Eighty LakhsSixty Six Thousand Seven Hundred and Eighteen only).

The Authorised Share Capital of the Company as on March 31 2020 is R 1490000000/-divided into 925000000 Equity Shares of R 1/- each and 5650000 Preference Shares of R100/- each.

BUY-BACK OF EQUITY SHARES

The Board of Directors at its Meeting held on March 21 2020 approved the proposal ofBuy-back of equity shares of the Company from the open market through the stock exchangesfor a total amount not exceeding R 1500000000/- at a price not exceeding R 650/- perequity share. The Buy-back period commenced on April 01 2020.

DEBENTURES

1500 NCDs of R 10 Lakhs each aggregating to R 150 Crores issued by the Company areoutstanding as on March 31 2020.

The details of the Debenture Trustee of the Company is as under:

Vistra ITCL (India) Limited

IL & FS Financial Centre

Plot No C22 G Block 7th Floor Bandra Kurla Complex

Bandra - East Mumbai - 400051

Direct: +91 22 6593662 Website: www.vistraitcl.com

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.

Further the Company confirms that all the Employee Stock Options Schemes of theCompany are falling under direct route and not Trust route and accordingly the provisionsrelated to Trust route as specified in the SBEB Regulations are not applicable to theaforesaid schemes of the Company. Further all the permanent employees (except the personsas mentioned in the regulations) of the Company its holding company and its subsidiarycompanies are entitled to participate in said schemes of the Company. Further the

Company confirms that the Company has not granted employee stock options equal to orexceeding one percent of the issued capital of the Company at the time of grant of stockoptions to any employees of the Company/Holding Company/Subsidiary Company.

The certificate from the Statutory Auditors confirming compliance with the aforesaidprovisions is available on the website of the Company at www.motilaloswalgroup.com

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 Securities Investment Activities PrivateWealth Management Broking and Distribution Asset Management Housing FinanceInstitutional Equities Private Equity and Investment Banking.

Further the Company has incorporated wholly owned subsidiary namely Glide TechInvestment Advisory Private Limited ("GTIAPL") at Mumbai on November 25 2019 toprovide registered investment advisory services through IT enabled platform.

As of March 31 2020 the Company had 19 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 as on March 31 2020.

Further pursuant to the provisions of Section 136(1) of the Act the financialstatement for the period ended March 31 2020 of each subsidiary of the Company isavailable on the website of the company at www.motilaloswalgroup.com.

MATERIAL SUBSIDIARIES

As required under Regulations 16(1)(c) and 46 of the Listing Regulations the Board ofDirectors has approved the Policy on Determination of Material Subsidiaries("Policy"). The said policy is available on the website of the Company athttps://www.motilaloswalgroup.com/Downloads/IR/212618793Policv-on-Determination-of-Material-Subsidiaries.pdf.Accordingly Motilal Oswal Home Finance Limited ("MOHFL") Motilal Oswal AssetManagement Company Limited ("MOAMC") and Motilal Oswal Finvest Limited("MOFL") are material subsidiaries of the Company.

INVESTMENT IN SUBSIDIARIES

During the year under review the Company paid the initial subscription money of R10000000/- comprising of 1000000 equity shares of R 10/- each towards incorporationof GTIAPL and R 24000000/- comprising of 2400000 equity shares of R 10/- each towardsincorporation of Motilal Oswal Finsec IFSC Limited and acquired 19883877 equity sharesof R 10/- each of MOFL wholly owned subsidiary of the Company.

Further the Company acquired 17963624 equity shares of R 1/- each of MOAMC 13200equity shares of R 1/- each of Motilal Oswal Wealth Management Limited ("MOWML")and 1274 equity shares of R 10/- each of MOPE Investment Advisors Private Limited("MOPE") subsidiaries of the Company from employees of MOAMC/MOWML/MOPErespectively in exchange of allotment of equity shares of the Company on preferentialbasis i.e. for consideration other than cash to said employees in accordance with swaparrangement entered by the Company with employees and respective aforesaid subsidiarycompanies.

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 the Board's 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. In accordance with provisions of Section 136 of Act theseparate audited financial statement in respect of each of the subsidiary company is alsoavailable on the website of your Company at www.motilaloswalgroup.com. These documentswill also be available for inspection in electronic mode.

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) Non-Executive Chairman 1(One) Managing Director & Chief Executive Officer 1 (One) Managing Director 1 (One)Whole-time Director and 4 (Four) Independent Directors. The complete list of Directors ofthe Company has been provided in the Report on Corporate Governance forming part of thisReport.

During the year under review the Board of Directors at its Meeting held on July 312019 appointed Mr. Raamdeo Agarawal as Non-Executive Chairman of the Company w.e.f.October 14 2019 at the remuneration of R 12 lacs per annum by way of monthly commissionof R 1 lac per month as his term as Joint Managing Director has expired on closure ofbusiness hours of October 13 2019 and he continues as Non-Executive Director of theCompany.

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. Navin Agarwal Managing Director will retire by rotation at the ensuingAGM and being eligible has offered himself for re-appointment. The details of Mr. NavinAgarwal is stated in the notice of the AGM of the Company.

The resolution for the re-appointment of Mr. Navin Agarwal as detailed in the Notice ofAGM would be placed for your approval at the ensuing AGM.

MEETINGS AND COMPOSITION OF BOARD OF DIRECTORS AND COMMITTEE(S)

The details of the Meetings of the Board and Committee(s) of the Company held duringFY2019-20 are disclosed in the Report on Corporate Governance forming part of AnnualReport of the Company.

The Composition of Board and Committee(s) as on March 31 2020 are disclosed in theReport on Corporate Governance.

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. Further all the Independent Directors have confirmed theirregistration on Independent Directors Databank. These declarations/confirmations have beenplaced before the Board.

DISCLOSURE ON MAINTENANCE OF COST RECORDS

The Company engaged in Stock Broking Activity during the year under review is notrequired 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 athttps://www.motilaloswalgroup.com/Downloads/IR/315816220Familiarization-Programmes-for-Independent-Director2020.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 due to the appointment of Mr. Raamdeo Agarawal asNon-Executive Chairman of the Company he ceases to be the Key Managerial Personnel of theCompany w.e.f. October 14 2019.

As at March 31 2020 the Company has the following Key Managerial Personnel:

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

2) Mr. Navin Agarwal - Managing Director

3) Mr. Ajay Menon - Whole-time Director

4) Mr. Shalibhadra Shah - Chief Financial Officer

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

COMPANY'S POLICY ON DIRECTOR'S 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 Nomination and RemunerationCommittee ("NRC") to formulate a Policy relating to the remuneration for theDirectors Key Managerial Personnel ("KMP") Senior Management and otheremployees of the Company and recommend the same for approval of the Board.

Accordingly in compliance to provisions to the aforesaidprovisions the Nomination andRemuneration Policy ofthe Company is available on the website of the Company athttps://www.motilaloswalgroup.com/Downloads/IR/724496156Nomination-and-Remuneration-Policv.pdf.The salient features of the Policy are given below:-

Appointment criteria and qualifications:

1. The Committee shall identify and ascertain the integrity qualification expertiseand experience of the person for appointment as Director KMP or Senior Management andrecommend to the Board his/her appointment.

2. 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.

3. 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.

• Evaluation:

The performance evaluation shall be carried out as given below:-

Performance Evaluation by Of Whom
Nomination and Remuneration Committee Every Director's performance
Board of Directors - All Directors and Board and Committees as a whole

- All Independent Directors excluding the Director being evaluated

Independent Directors Review the performance of Non Independent Directors and Chairman of the Company

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 internal policy of the Company. The Board will have thediscretion to retain the Director KMP Senior Management in the sameposition/remuneration or otherwise even after attaining the retirement age for thebenefit of the Company.

PROVISIONS RELATING TO REMUNERATION OF MANAGERIAL PERSON KMP AND SENIOR MANAGEMENT

• General:

1. The remuneration/compensation/commission etc. to Managerial Person KMP and SeniorManagement will be determined by the Committee and recommended to the Board for approval.The remuneration/compensation/commission etc. shall be subject to the prior/post approvalof the shareholders of the Company and such other approval wherever required.

2. The remuneration and commission to be paid to Managerial Person shall be as per thestatutory provisions of the Act and Listing Regulations and the rules made there underfor the time being in force.

3. Increments to the existing remuneration/compensation structure may be recommended bythe Committee to the Board which should be within the slabs approved by the Shareholdersin the case of Managerial Person.

4. The remuneration structure will have a right mix of guaranteed (fixed) pay pay forperformance and long term variable pay based on business growth and other factors such asgrowth in shareholder value to ensure that it is competitive and reasonable

5. Where any insurance is taken by the Company on behalf of its Managerial Person KMPand for Senior Management for indemnifying them against any liability the premium paid onsuch insurance shall not be treated as part of the remuneration payable to any suchpersonnel.

• Remuneration to Managerial Person KMP and Senior Management:

1. 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 for thetime being in force. The break-up of the pay scale and quantum of perquisites includingemployer's contribution to Provident Fund(s) pension scheme(s) medical expenses clubfees etc. shall be decided and approved by the Board on the recommendation of theCommittee and approved by the shareholders and such other approval wherever required.

2. 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.

3. 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 V of the Act. If any Managerial Person draws or receives directlyor indirectly by way of remuneration any such sums in excess of the limits prescribedunder the Act or without such approval wherever required he/she shall refund such sumsto the Company and until such sum is refunded hold it in trust for the Company.

• Remuneration to Non-Executive/Independent Director:

1. Remuneration/Commission:

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

2. 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 fromtime to time.

3. Limit of Remuneration/Commission:

Remuneration/Commission may be paid to Non-Executive Directors within the monetarylimit approved by shareholders subject to the limit not exceeding 1% of the net profitsof the Company computed as per the applicable provisions of the Act.

PERFORMANCE EVALUATION

Pursuant to the provisions of section 134(3)(p) and Schedule IV of the Act and inaccordance to Regulation 17(10) 25(4) of the Listing Regulations the Board has carriedout the annual performance evaluation of the Board as a whole various Committees of theBoard and of the individual Directors. The performance evaluation of the IndependentDirectors was carried out by the entire Board. The Directors expressed their satisfactionwith the evaluation process. The manner in which the evaluation has been carried out hasbeen explained in the Corporate Governance Report annexed to this Report.

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 Nomination and Remuneration Committee reviewed the performance of theindividual Directors on the basis of 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 nonexecutivedirectors. The same was discussed in the Board meeting that followed the meeting ofindependent directors at which the performance of the Board its committee and individualDirectors 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 Companies Act 2013 read with Rule 5(1) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 areforming part of this report and has been appended as "Annexure 3" to theBoard's 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 in electronic mode. Any shareholder interested in obtaining a copy of the saidAnnexure may write to the Company Secretary & Compliance Officer 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 V 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 1000 listed entitiesbased on their market capitalisation as on March 31 are required to prepare a BusinessResponsibility 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 Annual General Meeting ("AGM") held on July 272017 had appointed M/s. Walker Chandiok & Co. LLP Chartered Accountants as theStatutory Auditors of the Company for a term of five years i.e. from the conclusion ofTwelfth AGM till the conclusion of the Seventeenth AGM.

Mr. Sudhir 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 issued by Walker Chandiok & Co. LLP for the yearunder review does not contain any qualification reservations or adverse remarks. TheNotes to the Accounts referred to in the Auditors' Report are self-explanatory andtherefore do not call for any further clarifications under Section 134(3)(f) of the Act.Further pursuant to Section 143(12) of the Act the Statutory Auditors of the Companyhave not reported any instances of frauds committed in the Company by its officers oremployees.

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 FY2019-20.

The Secretarial Audit Report is appended as "Annexure 4" to theBoard's Report.

Further the Secretarial Compliance Report for the financial year ended March 31 2020was obtained from M/s. U. Hegde and Associates Practicing Company Secretaries inrelation to compliance of all applicable SEBI Regulations/circulars/guidelines issuedthereunder pursuant to requirement of Regulation 24A of Listing Regulations.

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

Further pursuant to the provisions of Regulation 24A of Listing Regulations theSecretarial Audit Report of MOHFL and MOAMC is available at website of the Company atwww.motilaloswalgroup.com. However since MOFL became material subsidiary from April 012020 the secretarial audit report of MOFL will be annexed with Board's Report ofFY2020-21.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The initiatives take by the Company for conservation of energy and technologyabsorption is provided in Business Responsibility Report annexed to this Report.

Details of the foreign exchange earnings and outgo are given in the Note No. 47 to theFinancial Statement.

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 1243 equity shares to IEPF on September 162019 and 55 equity shares on November 29 2019 under review. The details of such sharesare available on the website of the Company athttps://www.motilaloswalgroup.com/Investor-Relations/Disclosures/IEPF. The concernedshareholders are requested to claim the said shares by directly approaching IEPFAuthority.

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

Pursuant to Regulation 34 and Schedule V of Listing Regulations the Company reportsthe following details in respect of unclaimed equity shares that are kept in SpecificDemat Accounts of Motilal Oswal Financial Services Limited.

Particulars Number of Shareholders Number of Equity shares
Aggregate Number of Shareholders and the outstanding shares in the suspense account lying as on April 1 2019 5 575
Number of Shareholders who approached the Company for transfer of shares from suspense account during the year - -
Number of Shareholders to whom shares were transferred from the suspense account during the year - -
Aggregate Number of Shareholders and the outstanding shares in the suspense account lying as on March 31 2020 5 575

DEPOSITORY SYSTEM

The Equity Shares of the Company are compulsorily tradable in electronic form. As onMarch 31 2020 out of the Company's total paid-up Equity Share Capital comprising of148066718 Equity Shares only 27060 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 2020 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 theCompany has framed Vigil Mechanism/Whistle Blower Policy ("Policy") to enableDirectors and employees to report genuine concerns or grievances significant deviationsfrom key management policies and reports any non-compliance and wrong practices e.g.unethical behavior fraud violation of law inappropriate 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 athttps://www.motilaloswalgroup.com/Downloads/IR/1677814951Vigil-MechanismWhistle-Blower-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 https://www.motilaloswalgroup.com/Downloads/IR/148712535002.-CSR-Policv.pdf.Further the detailed CSR initiatives undertaken by the Company is available athttps://www.motilaloswal.com/foundation/

In the wake of COVID-19 pandemic the Company extended and will continue to extend fullsupport and co-operation in adhering to the directives issued by from the Government andsteps taken by the Government to overcome the crisis. In order to further strengthen theefforts your Company alongwith other group companies has contributed R 5 crores toPM-CARES fund and R 1 crore to Maharashtra Chief Minister's Relief Fund. Additionallyyour Company is also supporting local Non-Government Organisations (NGOs) and groups toprovide food and other essential services to needy people. Further your Company supported"Stand with Daily Wage Earners' initiative and raised R 10 lacs through contributionby employees friends and family.

During the year under review as a part of the on-going social commitment your Companysupported several educational projects across the country. The Company is delighted withthe inauguration of Motilal Oswal- KISS Residential School (Bolangir Odisha) which willprovide free education to 2000 tribal children. Your Company has also joined a collectivephilanthropic effort of building a world class university at Punjab to offer new agetechnological education and simultaneously also sponsoring the expansion of hostelfacility for Chartered Accountant aspirants in Mumbai. Further the Company is tirelesslyworking towards improving the quality of education in the schools of Wada district nearMumbai. We assure you that your Company will continue to work towards

its social commitment and contribute in nation building with the same zeal.

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

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 the Board's Report.

PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN OR SECURITY PROVIDED BYTHE COMPANY

The details of loans guarantees and investments are given in the Notes to theFinancial Statement forming part of Annual Report of the Company.

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

https://www.motilaloswalgroup.com/Downloads/IR/1568199502MOFSLPolicv-on-Materialitv-and-Dealing-with-Related-Partv-Transactions.pdf All related partytransactions entered into during the FY2019-20 were on an arm's length basis and in theordinary 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 pursuant to Section 188 ofAct and accordingly Form AOC-2 is not applicable.

The Directors draw attention of the Members to Note No. 52 to the Standalone FinancialStatement which sets out related party disclosures.

COMPLIANCE WITH SECRETARIAL STANDARD - 1

The Company has complied with Secretarial Standard-1 (SS-1) on meeting of Board ofDirectors.

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 Workplace. 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 not received any complaint in thisregard.

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. The details of said Committee iscovered in the Report on Corporate Governance forming part of Annual Report of theCompany.

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 the Board's Report. The Annual Return will beuploaded on the website of the Company at www.motilaloswalgroup.com.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There were no significant and material orders passed by the Regulators or Courts orTribunals impacting the going concern status and company's operations in future during theyear under review.

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
Raamdeo Agarawal
Place : Mumbai Chairman
Date: May 11 2020 (DIN: 00024533)

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