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Muthoot Finance Ltd.

BSE: 533398 Sector: Financials
NSE: MUTHOOTFIN ISIN Code: INE414G01012
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VOLUME 88698
52-Week high 954.05
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P/E 10.05
Mkt Cap.(Rs cr) 27,156
Buy Price 679.00
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Sell Price 677.15
Sell Qty 1.00
OPEN 650.00
CLOSE 606.15
VOLUME 88698
52-Week high 954.05
52-Week low 477.50
P/E 10.05
Mkt Cap.(Rs cr) 27,156
Buy Price 679.00
Buy Qty 9.00
Sell Price 677.15
Sell Qty 1.00

Muthoot Finance Ltd. (MUTHOOTFIN) - Director Report

Company director report

Dear Stakeholders

Directors of your Company have pleasure in presenting the 21st AnnualReport of the Company together with the audited financial statements (standalone andconsolidated) for the year ended March 31 2018.

1. Financial Summary

The financial performance of your Company for the year ended March 312018 are summarized below:

(` in Crores)

Standalone

Consolidated

Particulars

Year ended 31st March 2018

Year ended 31st March 2017

Year ended 31st March 2018

Year ended 31st March 2017

Total Revenue

6243

5747

6705

5938

Total Expenses

3486

3826

3833

3980

Profit Before Tax

2757

1921

2872

1958

Tax expense

1037

741

1074

751

Profit for the year

1720

1180

1799

1207

Shareholders' Funds

7760

6516

7842

6538

Total Liabilities

23621

24197

26463

25646

Total Assets

31381

30713

34305

32184

2. Dividend

Directors of your Company has during the year at their meeting datedFebruary 8 2018 had declared an interim dividend of ` 10/- per equity share (100% of facevalue).

The dividend payout amount including the dividend distribution tax willbe ` 481Crs representing 27.97% of profit after tax for the year.

Directors of your Company decided to plough back the remaining profitafter tax for business activities and hence have not recommended any dividend for approvalof shareholders in Annual General Meeting.

Directors of your Company has approved a Dividend Distribution Policyas per Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 .The Details of the policy is available on the website ofthe Company at www.muthootfinance.com/policy/policy-investor and is attached to thisreport as Annexure 1.

The list of unpaid dividend is available on the Company's websitewww.muthootfinance.com. Shareholders are requested to check the said list and if anydividend due to them is remaining unpaid in the said list then shareholders can approachthe Company or Registrar and Transfer Agent of the Company for release of unpaid dividend.

As per Section 124(5) of the Companies Act 2013 the Company shalltransfer the dividend that remained unclaimed for a period of seven years from the date oftransfer to unpaid dividend account to the Investor Education and Protection fund (IEPF).Further as per Section 124(6) of the Companies Act 2013 the Company shall transfer allshares in respect of which the unclaimed dividend has been transferred to IEPF. No claimwill lie on Company on account of dividend after the dividend is transferred to IEPF.

3. Transfer to Reserves

Your Board of Directors has transferred an amount of

` 344 Crores to the Statutory Reserve maintained under Section 45IC ofthe RBI Act 1934. An amount of ` 501 Crores has been transferred to Debenture RedemptionReserve. Post transfer of profits to reserves and distribution of dividend your Boardproposes to retain

` 1449 Crores in the Profit and Loss Account.

4. Company's Performance

During the Financial Year Company saw 46% increase in itsprofitability with a net profit of ` 1720 Crores for the year ended March 31 2018 ascompared to ` 1180 Crores for the year ended March 31 2017. Profit before tax increasedby 44% to `2757 Crores. Total Income has increased from ` 5747 Crores for the year endedMarch 31 2017 to ` 6243 Crores for the year ended March 31 2018 which is mainly due toincrease in Interest Income of the Company. Interest income of the Company increased to `6053 Crores from previous year's interest income of ` 5654 Crores. Loan AssetsPortfolio of the

Company increased by ` 1860 Crores during the year reaching ` 29138crores as on March 31 2018 as against

` 27278 Crores as on March 31 2017. The Return on Average Loan Assetsincreased to 6.16% in FY 2017-18 as compared to 4.47% in FY 2016-17. The cost of fundsdeclined to 6.95% compared to 8.69% in fiscal 2016-17. Interest yield increased to 21.70%as compared to 21.43% in FY 2016-17. On account of the above the Net Interest Marginimproved to 14.75% as against 12.74% in FY 2016-17. The Company remitted to exchequer

` 1140 crores as taxes.

5. Resource Mobilization

(a) Non-Convertible Debentures:

Your Company successfully completed 17th Issue of Non-ConvertibleDebentures through Public Issue during FY 2017-18 raising ` 1969 Crores.

Directors of your Company are thankful to all investors who havesubscribed the debentures through Public Issue and shown their trust towards your Company.

Subordinated Debts represents long term source of funds for the Companyand the amount outstanding as on 31st March 2018 was ` 1124 Crores. It qualifies as TierII capital under the Non-Banking Financial Company- Systemically Important Non- Deposittaking Company and Deposit taking Company (Reserve Bank) Directions 2016.

(b) Bank Finance:

Bank Finance remains an important source of funding for your Company.Commercial Banks continued their support to your Company during Financial Year. As of 31stMarch 2018 borrowings from banks were ` 11183 Crores as against ` 9202 Crores in theprevious year.

Employee Stock Options Schemes

During the year your Company has allotted 565690 equity shares offace value of ` 10/- each under Muthoot ESOP 2013 pursuant to exercise of 13425 optionsof

` 10/- each for Loyalty Options and 552265 options of ` 50/- each forGrowth Options by Employees of the Company.

The disclosures as required under SEBI (Share Based Employee Benefits)Regulations 2014 read with SEBI Circular CIR/CFD/POLICY CELL/2/2015 dated 16th June 2015is attached to this report as Annexure 2. The same disclosure is available atCompany's website www. muthootfinance.com/investors/disclosure-esop. Please refernote 26(d) of Notes on Accounts in Standalone Financial Statements for further disclosureson ESOP. The Company does not have any scheme to fund its employees to purchase the sharesof the Company.

Your Company has received the certificate from the Statutory Auditorsof the Company certifying that the ESOP scheme is implemented in accordance with theapplicable SEBI Guidelines/Regulations and is in accordance with the resolution passed bythe members of the Company. The certificate would be placed at the Annual General Meetingfor inspection by members.

The stock option schemes are in compliance with Securities and ExchangeBoard of India (Share Based Employee Benefits) Regulations 2014 and there have been nomaterial changes to these plans during the Financial Year 2017-18.

7. Credit Rating

Your Company's debt instruments are rated by ICRA and CRISIL twoof the leading Credit Rating Agencies in the country.

6. Equity Share Issuances

The Credit Ratings assigned to various instruments of the Company as ofnow are as follows:

Credit Rating Instruments Ratings

Limit in

Agency

` in Crores

CRISIL Commercial Paper CRISIL A1+

4000

Subordinated Debts CRISIL AA/Stable

100

Non Convertible Debentures CRISIL AA/Stable

2000

ICRA Commercial Paper ICRA A1+

4000

Short Term Bank Borrowings* ICRA A1+

13213

Long Term Bank Borrowings* ICRA AA/Stable

10037

Subordinated Debts ICRA AA/Stable

100

Non Convertible Debentures ICRA AA/Stable

2000

*subject to overall rating of ` 14115 Crores for line of credit.

8. Internal Audit and Financial Control

In keeping with the size of the Company and its business model yourCompany has developed over the years a proper adequate and well documented internalaudit and control system. The control system ensures that the Company's assets aresafeguarded and protected. The audit system also takes care to see that revenue leakagesand losses to the Company are prevented and our income streams are protected. The controlsystem enables reliable financial reporting.

Company has a well-structured Audit & Inspection department toperform timely and frequent internal audit to evaluate the adequacy of systems andprocedures and also to evaluate the status of compliance to Company's guidelines andother statutory requirements. The department has on its rolls around 960 dedicatedpersonnel who relentlessly safeguard the safety of your Company's assets ensures thequality of assets pledged and also evaluates the adequacy of risk management systems atits operating units. In keeping with the huge network and geographic outreach of theoperating units spread across the length and breadth of the country the audit functionshave been decentralized through setting up of Regional Audit offices in important Regionalcenters. The Regional Audit Offices exercise field level control over the branches throughonsite visits and online audit systems. The field level Auditors report to Regional Auditoffices who in turn shares their findings with the Audit & Inspection Department atthe Registered Office of the Company.

Audit Committee of Board of Directors is apex Audit Authority of theCompany. Under the present Audit Architecture the Internal Audit Department reports tothe Audit Committee regarding significant audit findings and also preventive andcorrective measures to protect the interests of the Company. The audit Committeeundertakes an evaluation of the adequacy and effectiveness of internal control systems. Italso oversees the implementation of audit recommendations especially involving the riskmanagement measures.

In addition to reviewing the internal control systems put in place bythe Audit & Inspection Department the Audit Committee also imparts guidance andcrucial directions for upgradation of systems and controls on ongoing basis. The Auditsystem prevalent in the Company is reasonably autonomous function and built on bestcorporate governance framework.

Reference is invited to Note no.37 to the standalone financialstatements contained in the annual report regarding frauds committed by employees of the

Company. Company has taken or is in the process of taking disciplinary/legal action against such employees.

9. Human Resources

As on March 31 2018 the Company had 23455 employees in its rolls atvarious level of organizational structure. Your Company is always committed in providingemployees with ample opportunities to learn and advance in career.

Based on performance of the employees management has introduced newmeans of payouts and increased the percentage of payout for existing incentives. Themanagement is also rewarding employees with foreign trips to exquisite locations based ontheir achievement.

Your Company has offered multiple training programs to employees tohelp in their development. The programs includes product/process related trainings so_skill trainings leadership trainings and certification trainings for different group ofemployees. Company imparts training through two premium training establishments of theCompany and 70 Regional Learning Centers .

Your Company has robust mechanism for identifying performers andPerformance Score card method of performance assessment has been implemented for astructured and unbiased performance assessment model. Company has taken steps to promoteeligible employees to the next level based on the above performance assessment model. .

Your Company offers various other benefits to employees includingEmployee Stock Options and various Statutory and Non Statutory Staff Welfare Measures. Alleligible employees are covered under statutory provisions namely EPF ESI MaternityBenefits Gratuity etc. Employees were enrolled under the National Pension System (NPS)with Company also making contribution along with their contribution.

10. Major Marketing & Promotion Initiatives AB-CSK MarketingCampaign

The year 2018 started with the grand association of The Muthoot Groupwith the biggest and legendary superstar of Bollywood and entertainment industry PadmaVibhushan Shri Amitabh Bachchan who has a huge fan following not just in India but worldover. He touches the heart and soul of one and all.

In yet another one of its kind partnership The Muthoot Group hassigned the one of the most successful IPL teams of all times - Chennai Super Kings led bythe legendary former Indian Captain Padma Bhushan Shri

Mahendra Singh Dhoni as "Prinicipal Team Partner". Team CSKwas coming back into IPL after a gap of two years. This association allowed us to reachcloser to our customers as well as the huge cricket fans of this country and even abroadin a more exciting & acceptable manner more especially in the southern part of India.

These two major associations of the year with two mega stars –Shri Amitabh Bachchan and Chennai Super Kings cover two of the most followed passions inour country – Bollywood and Cricket thereby giving us the opportunity to leveragethese associations and touch the lives of millions of more Indians across North EastWest and South India.

11. Capital Adequacy

Your Company's Capital Adequacy Ratio as of March 31 2018 stoodat 26.59% of the aggregate risk weighted assets on balance sheet and risk adjusted valueof the o_-balance sheet items which is well above the regulatory minimum of 15%. Out ofthe above Tier I capital adequacy ratio stood at 24.75% and Tier II capital adequacyratio stood at 1.84%.

12. Public Deposits

The Company is a Systemically Important Non-Deposit Taking NBFC andhence has not accepted any public deposits.

13. RBI Guidelines

Your Company has complied with all the applicable regulationsprescribed by the Reserve Bank of India from time to time. Please refer note 41 and 42 ofNotes on Accounts in Standalone Financial Statements for additional disclosures requiredunder RBI Guidelines applicable to the Company.

14. Subsidiaries/ Associates/ Joint Ventures

As on March 31 2018 your Company has four subsidiaries namely M/s.Asia Asset Finance PLC

M/s. Muthoot Homefin (India) Limited M/s. Muthoot Insurance BrokersPrivate Limited and M/s. Belstar Investment and Finance Private Limited. YourCompany's subsidiaries have considerably contributed to the overall growth of yourCompany during the year. As per Section 136 of the Companies Act 2013 the auditedfinancial statements including the consolidated financial statements of your Company andthe audited accounts of each of its subsidiaries are available on the website of theCompany at www.muthootfinance.com/ corporate/our_subsidary. The above documents will alsobe available for inspection at the Registered Office of the Company during business hours.

The Board of Directors of your Company has formulated a policy onmaterial subsidiary which is displayed on the web site of the Company atwww.muthootfinance.com/ policy/policy-investor.

Financial Performance & position of Subsidiaries a. Asia AssetFinance PLC:

Asia Asset Finance PLC (AAF) a Company listed in Colombo StockExchange is a subsidiary of your Company from December 31 2014. AAF where your Companyholds 60% of equity capital is a registered Financial Company with Central Bank of SriLanka and is mainly engaged in Vehicle Finance and Hire Purchase Activities. The Companywhich has also started business relating to lending against collateral of gold jewelleryand micro finance is presently contributing a significant part of loan portfolio andincome. AAF has operations across Sri Lanka with 17 branches as on March 31 2018. AAF hasmade considerable progress in its business. Its major financial parameters for FinancialYear 2017-18 are as follows:

Parameters

Total Income

Profit Before Taxation

Profit After Taxation

Shareholder's Funds

Total Assets

Total Outside Liabilities

Amount in INR (in Crores)LKR/INR as on 31.03.2018–0.417365 / Average

108*

11*

8*

78

513

435

Exchange Rate -0.42017*
Amounts in LKR (in crores)

257

22

18

186

1173

987

AAF increased its loan portfolio during the year by 15% at LKR 995crs.Total revenue for FY18 stood at LKR 256crs as against previous year total revenue of LKR213crs . It generated a profit after tax of LKR 18crs during FY18 as against previous yearprofit after tax of LKR 28crs. b. Muthoot Homefin (India) Ltd:

M/s. Muthoot Homefin (India) Ltd (MHIL) a registered Housing FinanceCompany licensed by National Housing Bank is a subsidiary of your Company. During theFinancial Year 2017-18 your Company increased its shareholding in MHIL to 100% of theequity capital making it wholly owned subsidiary. Its major financial parameters forFinancial Year 2017-18 are as follows:

Profit Before

Profit After

Shareholder's

Parameters

Total Income

Total Assets

Total Outside

Taxation

Taxation

Funds

Liabilities

Amount in INR (in Crores)

126

42

28

216

1587

1371

MHIL increased its loan portfolio by ` 1024crs at ` 1465crs during theyear. Total revenue for Financial Year 2017-18 stood at ` 126crs as against previous yeartotal revenue of `24cr. It achieved a net profit of `28crs in Financial Year 2017-18 asagainst previous year profit of `3crs. c. Muthoot Insurance Brokers Private Limited:

Muthoot Insurance Brokers Private Limited (MIBPL) is an unlistedPrivate Limited Company holding a license to act as Direct Broker from InsuranceRegulatory and Development Authority of India (IRDA) since 2013. MIBPL is a Wholly- OwnedSubsidiary Company of your Company. Its major financial parameters for Financial Year2017-18 are as follows:

Parameters

Total Income

Profit Before Taxation

Profit After Taxation

Shareholder's Funds

Total Assets

Total Outside Liabilities

Amount in INR (in Crores)

18

15

11

27

29

2

MIBPL generated a First year premium collection amounting to ` 101crsduring Financial Year 2017-18 as against ` 70crs in the previous year. It generated aProfit after Tax of `11crs during Financial Year 2017-18 as against `6crs in the previousyear. d. Belstar Investment and Finance Private Limited:

M/s. Belstar Investment and Finance Private Limited (BIFPL) is a microfinance Company. At end of the Financial Year 2017-18 your Company holds 66.61% of theequity capital of BIFPL. Its major financial parameters for Financial Year 2017-18 are asfollows:

Parameters

Total Income

Profit Before Taxation

Profit After Taxation

Shareholder's Funds

Total Assets

Total Outside Liabilities

Amount in INR (in Crores)

219

50

34

159

1342

1183

BIFPL grew its loan portfolio during Financial Year 2017-18 by 97%reaching ` 1137crs. It achieved a profit after tax of `34crs during Financial Year 2017-18as against previous year profit after tax of `10crs. Its Gross and Net NPA stood at 0.76%and 0.30% as on March 312018.

The statement containing the salient features of the financialstatement of your Company's Subsidiaries is attached as Annexure – A toStandalone Financial Statements of the Company as required under Rule 5 of The Companies(Accounts) Rules 2014.

There are no other Companies which have become or ceased to beSubsidiaries/ Associates/ Joint Ventures of the Company during the Financial Year 2017-18.

15. Particulars Of Loans Guarantees Or Investments Under Section 186of The Companies Act 2013

Pursuant to Section 186(11)(a) of the Companies Act 2013 (the‘Act') read with Rule 11(2) of the Companies (Meetings of Board and its Powers)Rules 2014 the loan made guarantee given or security provided in the ordinary course ofbusiness by a Non- Banking Financial

Company (NBFC) registered with Reserve Bank of India are exempt fromthe applicability of provisions of Section 186 of the Act. As such the particulars ofloans and guarantee have not been disclosed in this Report. The details of the CurrentInvestments and Non- Current Investments of the Company are furnished under Note no. 10forming part of the Standalone Financial Statements for the year ended March 31 2018.

16. Extract of Annual Return

Extract of Annual Return as required under Companies Act 2013 isannexed as Annexure 3.

17. Consolidated Financial Statements

The audited consolidated financial statements of the Company along withits subsidiaries AAF MHIL BIFPL and MIBPL prepared in accordance with the GenerallyAccepted Accounting Principles in India (Indian GAAP) to comply with the AccountingStandards specified under Section 133 of the Companies Act 2013 read with Rule 7 of theCompanies (Accounts) Rules 2014 and the relevant provisions of the Companies Act 2013 isprovided in the Annual Report.

18. Risk Management and Risk Management Policy

Your Company has a Board approved Risk Management Policy which has laiddown a framework for identifying assessing measuring various elements of risk involvedin the business and formulation of procedures and systems for mitigating such risks.

Risk Management Committee of the Board of Directors of your Companyconstituted in accordance with the Reserve Bank of India guidelines has overallresponsibility for overseeing the Risk Management activities of the Company approvingmeasurement methodologies and appropriate risk management procedures across theorganization.

The Risk Management Committee comprises of:

Name of the Director Designation in the Committee Nature of Directorship
George Joseph Chairman Independent Director
Jose Mathew Member Independent Director
George Alexander Muthoot Member Managing Director

Risk Management Department periodically places its report on riskmanagement to the Risk Management and Audit Committee of the Board of Directors. Duringthe year your Company has incorporated various practices and suggestion as directed bythe Risk Management and Audit Committee which helped the Company in attaining an improvedvigilance and security system improved security of gold jewellery and cash improvedsystem of grading of branches Regional Offices etc. IT based risk management initiativesare discussed in section related to ‘Technology Absorption' in this report ofBoard of Directors.

19. Corporate Social Responsibility

Your Board has constituted a Corporate Social Responsibility (CSR)& Business Responsibility Committee to support the Company in achieving the CSRobjectives of the Company. The CSR and Business Responsibility Committee of the Board ofDirectors comprises of the following:

Name of the Designation in Nature of Director the CommitteeDirectorship

K. George John Chairman Independent Director John K Paul MemberIndependent Director George Alexander Member Managing Director Muthoot

The Company's CSR policy is committed towards CSR activities asenvisaged in Schedule VII of the Companies Act 2013. The Details of CSR policy of theCompany are available on the website of the Company at www.muthootfinance.com/policy/policy-investor. The Annual Report on CSR activities as requiredunder Companies (Corporate Social Responsibility Policy) Rules 2014 is attached to thisreport as Annexure 4.

In terms of Section 135 of the Companies Act 2013 read with Companies(Corporate Social Responsibility) Rules 2014 as amended ("CSR Rules") and inaccordance with CSR Policy during the year the Company has spent ` 20 crores towards CSRprojects/ programs.

20. Business Responsibility Report

The Securities and Exchange Board of India (Listing Obligations andDisclosures Requirements) Regulations 2015 mandates the inclusion of the BusinessResponsibility Report (BRR) as part of the Annual Report for top 500 listed entities basedon their market capitalization. The BRR is attached to this report as Annexure 5.

21. Particulars Of Contracts or Arrangements made with Related Parties

The Board of Directors of your Company has formulated a policy onrelated party transactions which is displayed on the web site of the Company at www.muthootfinance.com/policy/policy-investor. This policy deals with review of the relatedparty transactions and regulates all transactions between the Company and its RelatedParties.

Prior omnibus approval is obtained for related party transactions whichare of repetitive nature and entered in the ordinary course of business and at arm'slength. All related party transactions are placed before the Audit Committee for reviewand approval.

All transactions or arrangements with related parties referred to inSection 188 (1) of the Act entered into during the year were on arm's length basisor were in ordinary course of business or with approval of the Audit Committee.

During the year your Company had not entered into any contract /arrangement / transaction with related parties which could be considered material inaccordance with the policy of the Company on materiality of related party transactions.Further there were no material related party transactions which required approval ofshareholders as required under Chapter IV of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. Accordingly the disclosure of related party transactionsas required under Section 134(3) (h) of the Companies Act 2013 in Form AOC 2 is notapplicable to your Company.

The details of related party and transactions with the related partiesas required under chapter IV of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 appears on the Note no. 35 of the Notes to Accounts of the StandaloneFinancial Statements of the Company.

22. Audit Committee The Audit Committee of our Board wasreconstituted vide board resolution dated November 08 2017 pursuant to Section 177 of theCompanies Act 2013. The Audit Committee comprises of:

Name of the Director Designation in the Committee Nature of Directorship
George Joseph Chairman Independent Director
John K Paul Member Independent Director
Jose Mathew Member Independent Director
George Alexander Muthoot Member Managing Director

All recommendations of Audit Committee are accepted by your Board anddetails on Audit committee appear on the report on Corporate Governance.

23. Vigil Mechanism

To conduct affairs of your Company and its various constituents in afair and transparent manner and as part of Vigil Mechanism and providing whistle blowersa safe and reliable way of sharing information your Company has formulated a WhistleBlower Policy in compliance with Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015. There is graded reporting structure under thePolicy and also provides provision for direct access to Chairman of Audit Committee. Thewhistle blower policy is available at website of the Company at www.muthootfinance.com/policy/policy-investors.

24. Listing

Equity Shares of your Company are listed on NSE India Ltd and BSE Ltd.Your company has paid required listing fees to Stock Exchanges.

25. Changes in Directors and Key Managerial Personnel

Mr. John K Mathew Independent Director of your Company retired at the20th Annual General Meeting of shareholders held during the Financial Year 2017-18. Termof Ms. Pamela Anna Mathew as Independent Director expired at the 20th Annual GeneralMeeting was re-appointed as Independent Director for a further period of three years.

On recommendation of Board shareholders have inducted three newdirectors - Mr. Jacob Benjamin Koshy Mr. Pratip Chaudhuri and Mr. Jose Mathew in theBoard as Independent Directors in the 20th Annual General Meeting. However Mr. PratipChaudhuri was unable to join Board of Directors of your Company post his induction bymembers and has submitted his resignation during the Financial Year 2017-18 and Board ofDirectors has accepted his resignation.

After evaluating the eligibility criteria under Reserve Bank of Indiaguidelines Companies Act 2013 and SEBI LODR Regulations 2015 your Board recommendsreappointment of George Alexander Muthoot and George Thomas Muthoot as Directors of theCompany who are retiring by rotation and eligible for reappointment and has offeredthemselves for re-appointment. Detailed profile of the above Directors is annexed to thenotice calling Annual General Meeting of members of the Company.

26. Meeting of the Board

During the Financial Year 2017-18 your Board of Directors met sixtimes on 18.05.2017 08.08.2017 08.11.2017 08.02.2018 13.03.2018 and 31.03.2018.

27. Declaration from Independent Directors

The Independent Directors have submitted disclosure that they meet thecriteria of independence as provided under Section 149(6) of Companies Act 2013 and SEBIRegulations. A statement by Managing Director confirming receipt of this declaration fromIndependent Directors is annexed to this report as Annexure 6.

28. Policy on Appointment and Remuneration Of Directors and Performanceevaluation of Board Committees and Directors a) Policy on Appointment and Remuneration OfDirectors

Board of Directors of your Company on recommendation of Nomination andRemuneration Committee has formulated a policy for selection appointment andremuneration of the directors senior management personnel as required under Section178(3) of Companies Act 2013. Details of the said Policy is annexed to this report asAnnexure 7. The Nomination and Remuneration Committee which was reconstituted on November08 2017 comprises of the following directors:

Name of the Director Designation in the Committee Nature of Directorship
John K Paul Chairman Independent Director
K. George John Member Independent Director
Jose Mathew Member Independent Director

Terms of reference of the Nomination and Remuneration Committee includethe following:

1. Identifying persons who are qualified to become Directors and whomay be appointed in Senior

Management in accordance with Criteria as laid down and recommend toBoard their appointment and removal.

2. Ensure persons proposed to be appointed on the Board do not su_erany disqualifications for being appointed as a director under the Companies Act 2013.

3. Ensure that the proposed appointees have given their consent inwriting to the Company;

4. Review and carry out every Director's performance thestructure size and composition including skills knowledge and experience required of theBoard compared to its current position and make recommendations to the Board with regardto any changes;

5. Plan for the succession planning for directors in the course of itswork taking into account the challenges and opportunities facing the Company and whatskills and expertise are therefore needed on the Board in the future;

6. Be responsible for identifying and nominating for the approval ofthe Board candidates to fill board vacancies as and when they arise;

7. Keep under review the leadership needs of the organization bothexecutive and non-executive with a view to ensuring the continued ability of theorganization to compete efficiently in the market place; and

8. Ensure that on appointment to the Board non-executive directorsreceive a formal letter of appointment setting out clearly what is expected of them interms of committee services and involvement outside board meetings.

9. Determine and agree with the Board the framework for broad policiesfor criteria for determining qualifications positive attitudes and independence of adirector and recommend to the Board policies relating to remuneration for the DirectorsKey Managerial Personnel and other employees.

10. Review the on-going appropriateness and relevance of theremuneration policy.

11. Ensure that contractual terms of the agreement that Company entersinto with Directors as part of their employment in the Company are fair to the individualand the Company.

12. Ensure that all provisions regarding disclosure of remuneration andRemuneration Policy as required under the Companies Act 2013 or such other acts rulesregulations or guidelines are complied with.

13. Formulate ESOP plans and decide on future grants.

14. Formulate terms and conditions for a suitable Employee Stock OptionScheme and to decide on followings under Employee Stock Option Schemes of the Company:

(i) the quantum of option to be granted under ESOP Scheme(s) peremployee and in aggregate;

(ii) the condition under which option vested in employees may lapse incase of termination of employment for misconduct;

(iii) the exercise period within which the employee should exercise theoption and that option would lapse on failure to exercise the option within the exerciseperiod;

(iv) the specified time period within which the employee shall exercisethe vested options in the event of termination or resignation of an employee;

(v) the right of an employee to exercise all the options vested in himat one time or at various points of time within the exercise period;

(vi) the procedure for making a fair and reasonable adjustment to thenumber of options and to the exercise price in case of rights issues bonus issues andother corporate actions;

(vii) the grant vest and exercise of option in case of employees whoare on long leave; and

(viii) the procedure for cashless exercise of options.

15. Any other matter which may be relevant for administration of ESOPScheme including allotment of shares pursuant to exercise of options from time to time.

b) Performance evaluation of Board Committees and Directors

The SEBI (Listing Obligations and Disclosures Requirements)Regulations 2015 and the Companies Act 2013 require the evaluation of the performance ofthe Board its Committees and the individual directors. The Board carried out annualevaluation of its own performance its Committees and individual Directors based oncriteria and framework adopted by the Board and in accordance with existing regulations.The details of training appointment resignation and retirement of Directors if any aredealt with in the report of Corporate Governance. Brief details of profile of eachDirector appear in Annual Report of the Company.

c) Independent Directors Meeting

During the year a meeting of Independent Directors was held asrequired under Companies Act 2013 and in Compliance with requirement under Schedule IV ofthe Act and as per requirements of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and discussed matters specified therein.

29. Corporate Governance Report

Your Company has complied with the Corporate Governance norms asstipulated in Chapter IV of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015. As per Regulation 34 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Detailed report on Corporate Governance is attachedto this Report as Annexure 8.

30. Management Discussion and Analysis Statement

Management Discussion and Analysis on the business of the Company isattached to this Report as Annexure 9.

31. Conservation of energy technology absorption foreign exchangeearnings and outgo:

The information pursuant to Section 134(3)(m) of the Companies Act2013 read with the Companies (Accounts) Rules 2014 is as follows:

a) Conservation of energy

Your Company being a Non-Banking Finance Company its activities arenot energy intensive. However your Company has taken adequate measures for conservationof energy and usage of alternative source of energy wherever required.

b) Technology Absorption

Your Company being a Non-Banking Finance Company its activities do notrequire adoption of any specific technology. However your Company has been in theforefront in implementing latest information technologies & tools towards enhancingour customer convenience.

Few of the initiatives taken by the company in IT for improved businessefficiency ease of operation improved risk management practice and for providing beststakeholders experience based are as follows:

Through the implementation and continuous enhancement of the corebanking solution (CBS) and customer relationship management(CRM) systems across ourbranches over the last couple of years the Company could achieve substantially improvedefficiency control and customer convenience. With a view to leveraging technology andmoving towards paperless systems for the preservation of the environment the Company hastransitioned to the digital platforms mainly the Web and Android based for automation ofvarious processes involved in our business operations.

A few of the key initiatives that are strengthened our digitalcapabilities are given below.

a. API Integrations with Service Providers and Business Verticals

API integration has been enabled in Core Banking Solution during lastyear for International Money Transfers Domestic Money Transfers and other services etc.

b. Virtual Bank Account for Gold Loan: This facilitates Customerto remit their Gold Loan repayments through various banking channels such as IMPS NEFTRTGS etc with their Virtual bank account number provided in the Gold Loan pledge form.

c. Online Gold Loan (OGL) Integration with C-DAC & NSDL eSignFunctionality: OGL has been enabled for 24x7 availability of Gold Loan for customersthrough iMuthoot Mobile App and Muthoot Online portal.

d. eKYC: The eKYC project has been enabled for customeronboarding through the CRM Solution. Presently most of new KYCs are being created througheKYC.

e. B2C Self Service Platforms: Online Gold Loan through CustomerBank Account and IVR based Gold-ATM facility has been provided. Using this facilitycustomers having difficulty in accessing Internet can withdraw the money from any IMTenabled ATMs across India.

f. Internal Credit Rating platform: The existing CBS computingengine has been enhanced to generate Credit Scores of customers. Accordingly the systemcan also allocate loyalty points to the customers.

g. Mobile App Development

The inhouse Mobile App development team has been developing variousApps in both in Android and IoS platforms for B2C and B2E Enterprise Mobility Platformsand internal process automations. A few of the features of the Apps are given below.

iMuthoot: Gold Loan customers can login to iMuthoot Appwith their existing web online username and password. Currently more than 5 lakh customershave downloaded the App and around 3 lakh have registered for availing gold loan servicesthrough the iMuthoot channel.

Loan@Home for Customer/Enterprise: This providesflexibility to the customer to avail of gold loan without visiting a branch.

MapMe: Branch GPS mapping for our branches for theconvenience of customers.

MIS: Business position and trend chart for managers andsenior executives

HRMS: Employees can apply for leave through the AndroidApp.

CBS Transaction Approval: This help the mangers andapproving authorities to approve the CBS transaction requests while on the move.

DigiMuthoot Security Access: This is designed as a commonSecurity framework for all individual modules of Muthoot mobile digital plat form ensuringaccess controls and management for all Muthoot digital platforms.

c) Total Foreign Exchange Earned : ` 1.33 Crores

Total Foreign Exchange Used : ` 0.12 Crores

32. Audits a) Statutory Audit under section 139

On recommendation of Board of Directors of the Company members of theCompany appointed M/s. Varma & Varma Chartered Accountants Kochi (Firm Reg No.004532 S) as Statutory Auditor of the Company at the 20th Annual General Meeting of theCompany for a term of 5 consecutive years i.e till the conclusion of 25th Annual GeneralMeeting pursuant to Section 139 of the Companies Act 2013.

Pursuant to notification issued by the Ministry of Corporate Affairs onMay 07 2018 amending section 139 of the Companies Act 2013 the mandatory requirementfor ratification of appointment of auditors by the members at every AGM does not arise.

The Company has received a certificate from the above Auditors to theeffect that they are eligible to continue as Auditors in accordance with the provisions ofSection 141 of the Companies Act 2013.

The Report given by M/s M/s. Varma & Varma Chartered AccountantsStatutory Auditors on the financial statement of the Company for the year 2017-18 is partof the Annual Report

. b) Secretarial Audit under Section 204

The Board had appointed M/s KSR & Co. Company Secretaries LLPCoimbatore to conduct Secretarial Audit for the Financial Year 2017-18. The SecretarialAudit report is annexed to this report as Annexure 10.

c) Explanations or comments by the Board on qualification reservationor adverse remark or disclaimer on audits for financial year 2017-18

There are no qualifications reservation or adverse remark ordisclaimer on audits under Section 139 and Section 204 of Companies Act 2013 forfinancial year 2017-18.

33. Reporting on Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013

The Internal Complaints Committee constituted by your Company under theSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013looks into the complaints of aggrieved women employees if any and is instrumental in:

• promoting gender equality and justice and the universallyrecognized human right to work with dignity

• prevention of sexual harassment of women at the workplace

There were 6 reported cases of sexual harassment wherein ladyofficials had complained against harassment by their senior official in theirBranch/Region. Action taken was prompt following investigation by the Internal ComplaintsCommittee. Evidence was examined and the erring officials were heard. On finding truth inthe complaints a Report was sent to HRD Department. Disciplinary action was initiatedbased on the Report against the officials concerned and disciplinary procedures werecompleted speedily.

34. Personnel

The Disclosure required under the provisions of Section 197 of theCompanies Act 2013 read with Rule 5 (1) and Rule 5(2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is annexed to this report as Annexure11.

35. Significant and material Orders passed by Regulators or Courts orTribunals

There are no significant and material orders passed by the regulatorsor courts or tribunals which would impact the going concern status of your Company andits future operations.

36. Material Changes and Commitments affecting the financial positionof the Company between the end of the financial year to which Financial Statements relateand the date of the report

No material changes and commitments affecting the financial position ofyour Company occurred between the end of the financial year to which this financialstatements relate and the date of this report.

37. Directors' Responsibility Statement

In accordance with the provisions of Section 134(5) of the CompaniesAct 2013 with regard to Director's Responsibility Statement Directors statethat:—

(a) in the preparation of the annual accounts the applicableaccounting standards had been followed along with proper explanation relating to materialdepartures;

(b) the directors had selected such accounting policies and appliedthem consistently and made judgments and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the company at the end of thefinancial year and of the profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the company and for preventing and detecting fraud andother irregularities;

(d) the directors had prepared the annual accounts on a going concernbasis;

(e) the directors had laid down internal financial controls to befollowed by the company and that such internal financial controls are adequate and wereoperating effectively.

(f) the directors had devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively.

38. Disclosure pursuant to Part A of Schedule V of SEBI LODR

Disclosure pursuant to Part A of Schedule V read with Regulation 34(3)and 53(f) of SEBI is attached as Annexure 12 of this report.

39. Acknowledgement

Your Directors thank the Company's stakeholders in large includinginvestors customers banks financial institutions rating agencies debenture holdersdebenture trustees and well-wishers for their continued support during the year. YourDirectors place on record their appreciation of the contribution made by the employees ofyour Company and its subsidiaries at all levels. Your Company's consistent growth wasmade possible by their hard work solidarity cooperation and support. The Board sincerelyexpresses its gratitude to Reserve Bank of India Securities and Exchange Board of Indiaand Ministry of Corporate Affairs for the guidance and support received from themincluding officials there at from time to time.

40. Forward Looking Statements

This Report(s) contains certain forward looking statements within theprovisions of Listing agreements and hence reasonable caution is to be exercised bystakeholders while relying on these statements.

For and on behalf of the Board of Directors

M. G. George Muthoot

George Alexander Muthoot

Chairman

Managing Director

Place: Kochi

Date: August 14 2018

Registered Office:

2nd Floor Muthoot Chambers Opposite Saritha Theatre Complex BanerjiRoad Kochi – 682 018