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Religare Enterprises Ltd.

BSE: 532915 Sector: Financials
NSE: RELIGARE ISIN Code: INE621H01010
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OPEN 26.55
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VOLUME 7369
52-Week high 54.30
52-Week low 17.05
P/E
Mkt Cap.(Rs cr) 553
Buy Price 25.25
Buy Qty 20.00
Sell Price 25.45
Sell Qty 1.00

Religare Enterprises Ltd. (RELIGARE) - Director Report

Company director report

Directors’ Report

To

The Members

Religare Enterprises Limited

Your Directors have pleasure in presenting this 34th Annual Report on the business andoperations of the Company together with Audited Financial Statements for the financialyear ended March 312018.

FINANCIAL RESULTS AND BUSINESS OPERATIONS

The highlights of standalone and consolidated financial results of the Company for theFinancial Years 2017-18 and 2016-17 are as under:

PARTICULARS

STANDALONE

CONSOLIDATED

(Rs. in Crore)

(Rs. in Crore)

2017-18 2016-17 2017-18 2016-17
Total Income (Before Exceptional Items) 71.00 35.09 2693.14 3841.02
Total Expenditure 188.33 182.20 4270.99 3535.50
Profit / (Loss) Before Exceptional Items and Tax (117.33) (147.11) (1577.85) 305.52
Profit / (Loss) After Exceptional Items and Before Tax (117.33) (158.25) (1577.85) (136.40)
Profit / (Loss) After Tax Before Minority Interest and Share in Associate (110.18) (159.24) (1350.42) (123.36)
Adjustment: Share of (Profit) / Loss Transferred to Minority - - 157.92 (50.71)
Share of (Profit) / Loss in Associates (Net) - - - (0.20)
Profit / (Loss) After Tax and Minority Interest and Share in Associate (110.18) (159.24) (1192.50) (174.27)
Exceptional Items net oftax (including deferred tax) - (11.14) - (250.82)
Profit / (Loss) for the year before Exceptional Items (110.18) (148.10) (1192.50) 76.55

(i) Consolidated Results

We recorded a ‘Loss After Exceptional Items and Before Tax’ of Rs.1577.85crore for Financial Year 2017-18 as compared to Loss After Exceptional Items and BeforeTax’ of Rs.136.40 crore for Financial Year 2016-17. ‘Loss After Tax MinorityInterest and Share in Associates’ was Rs.1192.50 crore for Financial Year 2017-18 ascompared to ‘Loss After Tax Minority Interest and Share in Associates’ ofRs.174.27 crore for Financial Year 2016-17. However ‘Loss Before ExceptionalItems’ was Rs.1192.50 crore for Financial Year 2017-18 as compared to ‘ProfitBefore Exceptional Items’ of Rs.76.55 crore for Financial Year 2016-17. Reportedbasic earnings per share decreased to'(66.84) in Financial Year 2017-18 from'(9.79) inFinancial Year 2016-17. The Company has incurred a loss on consolidated basis during thefinancial year under reporting due to onetime provision of Rs.1017.85 crore taken byReligare Finvest Limited subsidiary company on its corporate loan book.

(ii) Standalone Results

We recorded a ‘Loss After Exceptional Items and Before Tax’ of Rs.117.33crore for Financial Year 2017-18 as compared to Loss After Exceptional Items and BeforeTax’ of Rs.158.25 crore for Financial Year 2016-17. ‘Loss After Tax’ wasRs.110.18 crore for Financial Year 2017-18 as compared to ‘Loss After Tax’ ofRs.159.24 crore for Financial Year 2016-17. ‘Loss before Exceptional Items’wasRs.110.18 crore for Financial Year 2017-18 as compared to Loss before Exceptional Items ofRs.148.10 crore for Financial Year 2016-17. Reported basic earnings per share increased to'(6.19) in Financial Year 2017-18 from '(8.94) in Financial Year2016-17.

(iii) Operating Performance of Businesses

In the Lending business our subsidiary Religare Finvest Limited ("RFL")which is focused primarily on providing debt capital to the SME segment had total loansand advances (net of repayments and assignments) of Rs.9797 crore as at March 31 2018 asagainst Rs.13974 crore at the end of the earlier year. The book size has declined becausefresh disbursements were significantly lower than the principal amounts of loans repaid.Further RFL has been put on Corrective Action Plan by RBI vide its letter dated January18 2018 through which RFL has been prohibited from expansion of credit/investmentportfolio

other than investment in government securities. RFL is working towards resolving allissues and restoring normalcy in its business operations at the earliest. RFL closed theyear with revenue of Rs.1430 crore and Loss after Tax of Rs.1103 crore. The loss waslargely on account of provision of Rs.1018 crore made against a sizable default inRFL’s corporate loan book compounded by a reduction in RFL’s book size.RFL’s subsidiary Religare Housing Development Finance Corporation Limited("RHDFC") which focuses on providing loans to the affordable housing segmentdisbursed loans totaling Rs.186 crore and the corresponding total loans outstanding as atMarch 31 2018 stood at Rs.898 crore and has established a network of 30 branches as atMarch 312018.

Our Health Insurance business Religare Health Insurance Company Limited("RHICL") crossed Rs.1100 crore of Gross Written Premium during the FinancialYear 2017-18 a growth of 53% over the previous financial year and reported a loss ofRs.16 crore during the financial year as against a profit of Rs.2 crore during theprevious financial year. As at March 312018 RHICL has established a pan-Indiadistribution network of 74 offices and has 14 approved products spanning retail healthgroup health excess of loss maternity travel insurance personal accident and criticalillness policies and various riders.

The Retail Broking business which comprises of Religare Broking Limited("RBL") Religare Commodities Limited ("RCL") and its subsidiariesreported a consolidated revenue of Rs.379 Crores which is lower than the earlier year on areported basis. Asubstantial portion of the decline was the effect of the Composite Schemeof Arrangement under which the erstwhile Religare Securities Limited broking entity wasmerged with the Company while the Broking business was demerged into RBL and as such thefinancial results for the year under review are not comparable with the earlier year. Onan operating basis the business was impacted by the financial challenges at thegroup-level. The broking business of RBL and RCL reported a Profit After Tax of Rs.12.63crores in FY 2017-18 as against Profit After Tax of Rs.6.71 crore during the earlieryear.

Furthermore an exceptional provision of Rs.129 crore was made owing to default inadvances given by Religare Comtrade Limited ("RCTL") a subsidiary of RCL.Consequently the subsidiary incurred a Loss after Tax of Rs.10.22 crore in FY 2017-18 ona reported basis as against Profit After Tax of Rs.139.07 crore during the earlier year.The value of investment of RCL in RCTL is not impaired as the Company is supporting RCTL.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management’s Discussion and Analysis Report for the year under review detailingeconomic scenario and outlook as stipulated under Schedule V of the SEBI (ListingObligations and Disclosures Requirements) Regulations 2015 ("SEBI LODRRegulations") is presented in a separate section and forms integral part ofthisReport.

DIVIDEND AND RESERVES

In view of the losses in the Company the Board of Directors has decided not torecommend any dividend for the financial year ended March 312018. Since there were lossesduring the period and no dividend was declared no amounts were transferred to reserves.

The Company had formulated and approved a Dividend Distribution Policy ("thePolicy") pursuant to the requirement under the SEBI (Listing Obligations andDisclosure Requirement) (Second Amendment) Regulations 2016 in its meeting held onOctober 26 2016. Details of the same have been uploaded on the website of the Company andcan be accessed through the link i.e. http://www.reliaare.com/pdf/RelDividend PolicvNov2016.pdf

SUBSIDIARIES

As at March 312018 your Company has 27 direct and indirect subsidiaries. During theyear under review there have been no material changes in the business of the subsidiariesexcept for Religare Finvest Limited which has been explained elsewhere in this report. Interms of Section 129(3) of the Companies Act 2013 ("Act") your Company hasprepared a statement containing the salient features of the Financial Statements of oursubsidiaries in the prescribed format AOC-1 which is attached to the ConsolidatedFinancial Statements of the Company. The said statement contains a report on theperformance and financial position of each of the subsidiaries and hence is not repeatedhere for the sake of brevity. Further the details of major subsidiaries of the Companyand their business operations during the year under review are covered in theManagement’s Discussion and Analysis Report.

During the year under review the following companies ceased to be subsidiaries of theCompany:

1. Charterpace Limited

2. Religare Heal Fund Advisors LLP

3. Cerestra Advisors Private Limited

4. Religare Commodity DMCC

5. Religare Securities Limited*

6. Religare Commodity Broking Private Limited*

7. RGAM Investment Advisers Private Limited*

8. Religare Venture Capital Limited*

9. Religare Arts Investment Management Limited*

10. Religare Capital Finance Limited*

11. RGAMCapitallndiaLimited*

12. Religare Investment Advisors Limited*

13. Religare Support Services Limited*

14. Religare Arts Initiative Limited*

15. Religare Capital Markets (India) Limited*

*merged into the Company pursuant to the Composite Scheme of Arrangement

Subsequent to March 312018 Argil Advisors LLP a subsidiary of the Company has beenstruck off from the register of Limited Liability Partnerships w.e.f. April 06 2018 andaccordingly ceased to be subsidiary of the Company.

Religare Finvest Limited

1. Settlement Agreement with Strategic Credit Capital Private Limited("SCCPL")

As disclosed in previous year Annual Report 2016-17 RFL has in the Statement ofProfit and Loss for the half year ended September 30 2016 written off of entireRs.5199151636 due from SCCPL. Further the loans given to Perpetual Credit ServicesPrivate Limited ("Perpetual") (a group company of SCCPL) and loan purchasedfrom Nishu Finlease Pvt Ltd. of Rs.2737568540 were also written off.

Thereafter in the financial year under reporting RFL had entered into the SettlementAgreement with the counterparties pursuant to which the various cases against each otherat various courts and tribunals were withdrawn on consent terms however RFL retained itsright to recover the amounts due from SCCPL and Perpetual. However despite the settlementagreement SCCPL has again filed suits against RFL at various forums. The matters aresub-judice as on date.

RFL is in the process of detailed diligence on these and connected transactions and ispursuing appropriate legal remedies to recover the amounts due to it and expect that therewill not be any obligation on RFL out of these cases.

2. Fixed Deposits with Lakshmi Vilas Bank

RFL had made certain fixed deposits with Lakshmi Vilas Bank ("LVB") inNovember 2016 and January 2017. LVB vide its letter dated 7th February 2018 had confirmedfixed deposits of Rs.79144.77 Lakhs to the Company.

RFL received a letter dated February 9 2018 from LVB purporting to allude to certainloans disbursed by LVB to third parties allegedly in consideration of security of theRFL’s Fixed Deposits ("FDs") with LVB. By means of this letter LVB alsopurported to call upon RFL to execute the security documentation in connection with thealleged loans.

Vide RFL’s letter dated February 16 2018 LVB was expressly informed that notonly RFL was not party to any loans that were allegedly sanctioned or granted by LVB toany third party as also that no authorization sanction or approval had ever beenprovided by RFL to LVB permitting the creation of any security or encumbrance of the FDsfor any third party loans or borrowings. LVB was also forewarned that any attempt tosubject the FDs to illegal encumbrance would not only be violative of RFL’s rightsbut also constitute deliberate contempt by LVB of the Order dated January 5 2018 passedby the Hon’ble Delhi High Court a copy ofwhich was served on LVB vide Legal noticedated February 16 2018.

While things stood thus RFL came to be in receipt of a copy of the letter dated April24 2018 addressed by LVB to the statutory auditors of RFL that LVB had "closed thesaid deposits on 20.02.2018 to liquidate the loans availed" by third parties. Thiswas contrary to the confirmation received by the Statutory Auditors in November 2017 viaemail confirming the fixed deposits.

RFLat no point in time instructed authorized or consented to the liquidation of thefixed deposits or the adjustment thereof against loans availed of by any third parties orthe creation of any encumbrance on the fixed deposits whether by way of a lien securitycharge or pledge in connection with the loans availed of by any third parties. RFL hasfiled a suit for recovery of the Fixed Deposit amounts aggregating Rs.79144.77 lakhsappropriated by LVB before the Hon’ble Delhi High Court on May 31 2018.

3 Corporate Loan Book

RFL has an exposure of Rs.203670 Lakhs towards the Corporate Loan Book. Reserve Bankof India ("RBI") has raised concerns in the past about the credit worthiness ofthe borrowers credit appraisal and loan sanctioning mechanism followed by RFL in respectof this book.

In view of RBI concerns the first step the new Board/management has taken immediatelyafter taking charge was that it has reviewed the portfolio and the financial reports ofthe borrowers to determine the recoverability of the said loans. As a part of the recoveryprocess the management issued legal notices to the borrowers and has initiated corporateinsolvency resolution process under Insolvency and Bankruptcy Code 2016 against the saidentities comprising the Corporate Loan Book.

RFL has also appointed a reputed law firm to undertake a detailed diligence on thisloan book. Post submission of the report and the steps outlined for recovery RFL intendsto pursue all legal means for recovering the loans.

In the interim based on the security available maturity dates of the loans recoverysteps instituted and the financial reports of the borrowers the RFL on a prudent basismade a provision of Rs.101285.00 Lakhs against this portfolio.

Religare Capital Markets Limited

As disclosed in previous yearAnnual Report 2016-17 the Company has taken itsshareholders’ approval for Religare Capital Markets Limited (‘RCML’)capitalization through postal ballot on September 11 2017 since it was a materialrelated party transaction in terms of SEBI (LODR) Regulations 2015 but no money has beeninfused in RCML pursuant to this approval by the Company till date.

Further Axis Bank has filed an original application ("OA") before the DRT-IIfor recovery of approx. Rs.313 Cr. under Standby Letter of Credit Facility (‘SBLCfacility’) of US$72.5 million availed by Religare Capital Markets International(Mauritius) Limited ("RCMIML") an indirect wholly owned subsidiary of RELthrough RCML which is inter alia secured by personal guarantees executed by Mr. MalvinderMohan Singh and Mr. Shivinder Mohan Singh hypothecation ofa capitalization agreementbetween RHC Holding Pvt Ltd and RCML as well as shares of the Company and FortisHealthcare Limited owned by certain promoter group companies. The Company has not providedany guarantee or security in relation the facility. The Company has been made a party tothe proceedings based on a Non-Disposal Undertaking in favour of Axis Bank. The DRT haspassed an interim order dated 21.3.2018 directing that Mr. Malvinder Mohan Singh and Mr.Shivinder Mohan Singh ("Promoters") to deposit Rs.313 Cr with the DRT within 3days failing which inter alia certain assets of defendants shall stand attached. Such sumshave not been deposited by the Promoters. REL has recently filed two applications fordeletion of REL as a party and recall of the order dated 21.03.2018 against REL. Axis Bankhas filed its replies to the two applications pursuant to which REL has filedrejoinders.

Religare Health Insurance Company Limited

Arbitration proceedings in relation to the Health Insurance business

On April 9 2017 your Company had entered into definitive agreements with a consortiumof investors led by True North an India based private equity fund (formerly known asIndia Value Fund Advisors) to divest its entire stake in its subsidiary Religare HealthInsurance Company Limited. On January 11 2018 your Company entered into a supplementalagreement and deed of novation for increase in the consideration and extension oflong-stop date among other changes in certain terms and conditions of sale. Certainconditions precedent including regulatory and third party approvals were not received tillthe extended long-stop date triggering automatic termination of the agreement. In March2018 certain parties of the buyer consortium filed a petition under Section 9 of theArbitration and Conciliation Act 1996 in the Delhi High Court seeking ad interiminjunctive relief including towards extension of the Long Stop Date and also invokedarbitration under the definitive agreement. The Hon’ble Delhi High Court in May2018 dismissed the petition seeking interim relief and directed the petitioners toproceed with arbitration. The arbitration tribunal has been constituted by LCIA. Howeverarbitration proceedings have not commenced since the parties have not placed a fee depositwith the LCIA yet.

MAJOR EVENTS Issue of Warrants

On March 19 2018 your Company approved issue of 175559960 convertible warrants at aprice of Rs.52.20 each ("Warrant Issue Price") on a preferential basis tovarious persons / entities entitling the subscribers to an equal number of equity sharesaggregating over Rs.916 crore ("Preferential Issue"). The Warrant Issue Pricewas later on revised to Rs.52.30 each due to revision of minimum allotment price ofWarrants from Rs.52.18 each to Rs.52.28 each in terms of Chapter VII of the SecuritiesExchange Board of India (Issue of Capital and Disclosure Requirements) Regulations 2009.

Subsequent to the end of the year under review your Company allotted 111497914warrants to 38 resident Indian subscribers and received Rs.145.78 crore as upfront paymentwhich is equivalent to 25% of the total consideration as per the terms of the PreferentialIssue.

Furthermore six resident subscribers have exercised conversion option on 18825621warrants by paying the balance 75% of the consideration aggregating Rs.73.84 crore andhave been allotted an equivalent number of equity shares in the Company. The Company hadapplied to the Department of Economic Affairs ("DoEA") Ministry of Finance forapproval of foreign investment in respect of 63601510 warrants intended to be subscribedto by two foreign investors. The said approval was not acceded to by the DoEA citingreasons of various investigations by multiple Government agencies / regulators. TheCompany is considering to re-submit the application to the DoEA in the matter.

Divestment of Cerestra Advisors Pvt. Ltd.

During the year under review your Company divested its stake in Cerestra Advisors Pvt.Ltd. ("Cerestra Advisors") part of the erstwhile Global Asset Managementbusiness. Cerestra Advisors is the fund manager to the Cerestra Edu Infra Fund whichinvested in education infrastructure assets. The financial impact of the divestment isaccounted for in the financial statements for year ended March 312018.

Composite Scheme of Arrangement

In order to simplify the Company’s corporate structure the composite scheme ofarrangement ("Scheme") was filed by the Company with the Hon’ble NationalCompany Law Tribunal ("NCLT") on March 31 2017. The Scheme was approved by theNCLT vide order dated December 08 2017.

The Scheme was filed with the Registrar of the Companies NCT of Delhi & Haryana("ROC") on December 29 2017. Consequently eleven (11) wholly ownedsubsidiaries direct or indirect of Religare Enterprises Limited namely ReligareSecurities Limited (excluding broking business which was demerged into Religare BrokingLimited a wholly owned subsidiary of the Company) Religare Commodity Broking PrivateLimited RGAM InvestmentAdvisers Private Limited Religare Venture Capital LimitedReligare Arts Investment Management Limited Religare Capital Finance Limited RGAMCapital India Limited Religare InvestmentAdvisors Limited Religare Support ServicesLimited ReligareArts Initiative Limited and Religare Capital Markets (India) Limitedmerged with/into Religare Enterprises Limited w.e.f. December 29 2017. The Appointed Dateof the Scheme was April 012016.

The members are informed that Roto Power Private Limited ("RPPL") filed awinding up petition no. 150/2016 against Religare Support Services Limited("RSSL") formerly known as (REL Infrafacilities Limited) on December 17 2015alleging recovery of Rs.7205937 (Rupees Seventy Two Lakhs Five Thousand Nine HundredThirty Seven Only) which RPPL claims to be due for payment for services provided by itunder agreements/arrangement between the RPPL and RSSL. RSSL invoked arbitration againstRPPL under a service provider agreement entered into between RPPL and RSSL for anaggregate claim amount of Rs.1.09 Cr. Pursuant to Scheme RSSL merged into the Company.Clause 18 of the Scheme provides that on and from the April 1 2016 being the AppointedDate all suits actions claims and legal proceedings by or against the TransferorCompanies pending and/or arising on or before the Effective Date being December 29 2017shall be continued and / or enforced as desired by the Transferee Company and on and fromthe Effective Date shall be continued and / or enforced by or against the TransfereeCompany as effectually and in the same manner and to the same extent as if the same hadbeen originally instituted and/or pending and/or arising by or against the TransfereeCompany. In view of the provisions of the scheme of arrangement the winding up petitionreferred to above shall continue against the Company.

REGULATORY UPDATES

During the year under review your Company was subject to various inspections /investigations by the Regulatory / Government authorities as under:

Reserve Bank of India ("RBI")

RBI conducted an ad-hoc inspection of the Company under section 45N of the Reserve Bankof India Act 1934 in the month of January 2018. Further thereafter in the month of July2018 an inspection was again carried out by the RBI for the records of the Company for theFY 2017-18. The Company is yet to receive the final reports of RBI on these inspections.

Securities and Exchange Board of India ("SEBI")

The Company has received a Summons dated February 22 2018 from the SEBI inter-aliarequesting the Company’s cooperation in relation to an investigation in the matter ofCompany. SEBI has asked the Company to provide factual data and information pertaining tothe Company its associates and subsidiaries. The Summons is issued only for seekinginformation from the Company which is being provided and and there are no accusations orany observations made against the Company. SEBI has also appointed an external agency forcarrying out the further investigation to which the Company is providing the requisiteinformation.

Serious Fraud and Investigations Office ("SFIO")

The Company has received a letter dated February 28 2018 from the SFIO Ministry ofCorporate Affairs ("MCA") Government of India intimating the Company that theMCA has ordered an investigation into the affairs of the Company by the SFIO. The Letteris issued only for seeking information from the Company which is being provided and thereare no accusations or any observations made against the Company or any other companies.Vide letter dated May 30 2018 SFIO sought further information in the matter which hasbeen provided by the Company.

EQUITY SHARE CAPITAL

Consequent to the Scheme getting effective on December 29 2017 as stated above theAuthorized Share Capital of the Company was increased from Rs.3500000000/- (RupeesThree Hundred and Fifty Crores only) divided into 250000000 (Twenty Five Crores) EquityShares of Rs.10/- (Rupees Ten only) each and 100000000 (Ten Crores) RedeemablePreference Shares of Rs.10/- (Rupees Ten only) each to Rs.8164500000/- (Rupees EightHundred Sixteen Crores Forty Five Lakhs only) divided into 654450000 (Sixty Five CroresForty Four Lakhs and Fifty Thousand) Equity Shares of Rs.10/- (Rupees Ten only) each and162000000 (Sixteen Crores Twenty Lakhs) Redeemable Preference Shares of Rs.10/- (RupeesTen only) each.

During the year under review the Company has allotted 120750 equity shares under ESOPscheme 2006 on May 19 2017. Post allotment the issued subscribed and paid up equityshare capital of the Company was increased from Rs.1783344980/- (Rupees One HundredSeventy Eight Crores Thirty Three Lakhs Forty Four Thousand Nine Hundred and Eighty only)to Rs.1784552480/- (Rupees One Hundred Seventy Eight Crores Forty Five Lakhs Fifty TwoThousand Four Hundred and Eighty only).

The issued subscribed and paid up equity share capital as on March 31 2018 isRs.1784552480/-consisting of 178455248 (Seventeen Crores Eighty Four Lakhs FiftyFive Thousand Two Hundred and Forty Eight) equity shares of Rs.10/- (Rupees Ten only)each.

Subsequent to the end of Financial Year on April 19 2018 the Company has allotted111497914 convertible warrants at a price of Rs.52.30 each on a preferential basis tovarious entities/persons entitling them to subscribe to an equivalent number of equityshares of face value of Rs.10/- each at a premium of Rs.42.30 per share as per provisionsof Chapter VII of ICDR Regulations.

Thereafter the Company allotted 3824091 equity shares on May 292018454556 equityshares on June 29201812746974 equity shares on July 26 2018 and 1800000 equityshares on July 30 2018 upon the exercise of rights for conversion of warrants into equityshares by six warrant holders to whom warrants were allotted on April 19 2018.

Consequently the paid up equity share capital of the Company has been increased fromRs.1784552480/- (Rupees One Hundred Seventy Eight Crores Forty Five Lakhs Fifty TwoThousand Four Hundred and Eighty only) to Rs.1972808690/- (Rupees One Hundred andNinety Seven Crores Twenty Eight Lakhs Eight Thousand Six Hundred and Ninety) comprisingof 197280869 equity shares of the face value of Rs.10/- each .

During the financial year under reporting no funds were raised by way of public issuerights issue preferential issue etc. by stating any object in the offer document orexplanatory statement to the notice for the general meeting. Therefore no explanation isrequired to be given in this report pursuant to Regulation 32(4) of SEBI LODR Regulations.However the process of Preferential Issue of Convertible warrants by the Company wasinitiated during the financial year the proceeds from which were received by the Companysubsequent to the end of the financial year. The complete details of said issue areprovided in the Major Events section of this report.

NON-CONVERTIBLE DEBENTURES

During the period under review your Company made a scheduled redemption of 1361Non-Convertible Debentures of face value of Rs.1000000/- each on June 30 2017 allottedunder ISIN INE621H07017.

On August 28 2017 the Company has allotted 300 Zero coupon Unsecured Unrated UnlistedNon-Convertible Redeemable Non-Convertible Debentures ("NCDs") of face value ofRs.1000000/- each having 11% yield and maturity of 15 months on a private placementbasis to one of its then existing wholly-owned subsidiary i.e. Religare Securities Limited("RSL"). However said NCDs got cancelled upon the merger of the said whollyowned subsidiary RSL into the Company pursuant to the Composite Scheme of Arrangement asexplained elsewhere in this report.

Interest on all outstanding non-convertible debentures was duly paid on time. There areno outstanding non-convertible debentures as on date.

PUBLIC DEPOSITS

Your Company has neither invited nor accepted any deposits from public within themeaning of Section 73 of the Companies Act 2013 read with Companies (Acceptance ofDeposits) Rules 2014 during the period under review.

ANNUAL RETURN

The Annual Return extract in Form No MGT 9 as required to be prepared in terms ofSection 92(3) of the Act is being uploaded on website of the Company and can be accessedthrough the link http://www.reliaare.com/Annual-Returns.aspx

CAPITAL ADEQUACY

Your Company is registered with the Reserve Bank of India ("RBI")1 as aNon-Deposit Taking Systemically Important Core Investment Company ("CIC-ND-SI")vide Certificate No. N-14.03222 dated June 03 2014. The Company primarily functions as aninvestment holding company with more than 90% of its total assets consisting ofinvestments in shares of subsidiary companies/ joint venture companies.

As a CIC-ND-SI the Company is required to -

a. maintain minimum Adjusted Net Worth of 30% of its aggregate risk weighted assets onbalance sheet and risk adjusted value of off-balance sheet items as on the date of thelast audited balance sheet as at the end of the financial year; and

b. restrict the outside liabilities up to 2.5 times of its Adjusted Net Worth as on thedate of the last audited balance sheet as at the end of the financial year.

The Company is in compliance with the abovementioned requirements as at March 312018.

RELIGARE EMPLOYEES STOCK OPTION SCHEMES - 2006 2010 & 2012

Nomination and Remuneration Committee of the Board of Directors of the Company interalia administers and monitors the Employees’ Stock Option Schemes of the Company inaccordance with the Securities and Exchange Board of India (Share Based Employee Benefits)Regulations 2014 (erstwhile Securities and Exchange Board of India (Employee Stock OptionScheme and Employee Stock Purchase Scheme) Guidelines 1999) (‘the SEBIGuidelines’). Details as required under the SEBI Guidelines for Religare EmployeesStock Option Scheme 2006 Religare Employees Stock Option Scheme 2010 and ReligareEmployees Stock Option Scheme 2012 have been uploaded on the website of the Company andcan be accessed through the link http://www.reliaare.com/Emplovee-Stock-Qption-Schemes.aspx.

During the year under review the Religare Enterprises Limited Employees Stock OptionScheme 2006 which became effective on 15th November 2006 was terminated w.e.f. June 292017as per the terms of the said scheme.

There is no other material change in the ESOP schemes of the Company during the year.

1 RBI Disclaimer: (a) Reserve Bank of India does not accept anyresponsibility or guarantee about the present position as to the financial soundness ofthe company or for the correctness of any of the statements or representations made oropinions expressed by the company and for discharge of liability by the company; (b)Neither is there any provision in law to keep nor does the company keep any part of thedeposits with the Reserve Bank and by issuing the Certificate of Registration to thecompany the Reserve Bank neither accepts any responsibility nor guarantee for the paymentof the public funds to any person/ body corporate.

Certificate from Auditors confirming that schemes have been implemented in accordancewith the SEBI Regulations will be placed at the forthcoming Annual General Meeting of theCompany for inspection by the members.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Act and Regulations 16 SEBI LODRRegulations.

Following changes occurred in the directorships / key managerial positions (KMP) of theCompany during the FY 2017-18:

Sr.No. Name of Director / Key Managerial Personnel Particulars of Change (Appointment / Resignation/Others) Effective Date of change
1 Mr. Ravi Mehrotra Resigned as Non-Executive Director April 12 2017
2 Mr. Monish Kant Dutt Resigned as Nominee Director - International Finance Corporation April 24 2017
3 Mrs. Sangeeta Talwar Resigned as Non-Executive Independent Director July 28 2017
4 Mr. Sunil Godhwani Resigned as Whole Time Director of the Company September 06 2017
5 Mr. Virendra Kumar Madan Resigned as Non-Executive Director September 29 2017
6 Mrs. Sabina Vaisoha Appointed as Non-Executive Independent Director October 04 2017
7 Mr. Malvinder Mohan Singh Stepped down as Non-Executive Chairman of the Company but continues as Non-Executive NonIndependent Director on the Board November 14 2017
Resigned as Non-Executive Director February 14 2018
8 Mr. Rashi Dhir Resigned as Non-Executive Independent Director November 14 2017
9 Mr. Subramanian Lakshminarayanan Appointed as Executive Chairman of the Company & designated as KMP November 14 2017
Ceased to be Executive Chairman and Director pursuant to resignation January 22 2018
10 Mrs. Kishori Udeshi Appointed as Non-Executive Independent Director November 14 2017
Ceased to be Non-Executive Independent Director pursuant to resignation January 22 2018
11 Mr. Francis Daniel Lee Appointed as Executive Director November 17 2017
Re-designated from Executive Director to NonExecutive Director January 24 2018
Resigned as Non-Executive Director February 13 2018
12 Mr. Avinash Chander Mahajan Resigned as Non-Executive Independent Director November 29 2017
13 Mr. Ashok Mehta Appointed as Non-Executive Independent Director January 24 2018
14 Mr. Krishnan Subramanian Appointed as CFO and designated as KMP November 14 2017
Stepped down from position of CFO and elevated as Whole Time Director in capacity of Director-Finance January 24 2018
15 Mr. Harpal Singh Resigned as Non-Executive Director January 24 2018
16 Mr. Tejpreet Singh Chopra Resigned as Non-Executive Independent Director January 30 2018
17 Mr. Shivinder Mohan Singh Resigned as Non-Executive Director and ViceChairman of the Company February 14 2018
18 Mr. Vikram Talwar Appointed as Non-Executive Independent Director February 17 2018
19 Mr. P. Vijaya Bhaskar Appointed as Non-Executive Independent Director February 17 2018
20 Mr. Maninder Singh Resigned as Group CEO November 14 2017
21 Mr. Anil Saxena Resigned as Group CFO November 14 2017
22 Mr. Mohit Maheshwari Stepped down as Company Secretary and Compliance Officer November 14 2017
23 Mrs. Reena Jayara Appointed as Company Secretary and Compliance Officer November 17 2017

Further the Board of Directors in its meeting held on February 17 2018 has alsoapproved the following appointments subject to RBI approval and effective date of samewill be the date on which RBI approves the appointment:

Sr.No. Name of Director Designation
1 Mr. Siddharth Mehta Appointed as Non-Executive Non-Independent Director subject to the approval of RBI
2 Mr. Ashok Mehta Appointed as Whole-time Director and Interim CEO subject to the approval of RBI

Following changes occurred in the directorships / key managerial positions (KMP) of theCompany subsequent to the end of the financial year

Sr.No. Name of Director Particulars of Change (Appointment / Resignation/Others) Effective Date of change
1 Mr. Ashok Mehta Resigned as Independent Director & appointed as an Interim CEO (without being on the Board) April 17 2018
2 Mr. P. Vijaya Bhaskar Ceased to be Independent Director of the Company due to sudden and sad demise May 042018
3 Mrs. Vijayalakshmi Rajaram Iyer Appointed as Non-Executive Independent Director May 08 2018
4 Mr. Deepak Ramchand Sabnani Resigned as Non-Executive Independent Director May 18 2018
5 Mr. Malay Kumar Sinha Appointed as Non-Executive Independent Director May 28 2018
6 Mr. Padam Narain Bahl Resigned as Non-Executive Independent Director June 04 2018
7 Mr. Rama Krishna Shetty Resigned as Non-Executive Independent Director June 30 2018
8 Mr. Ashok Mehta Being Interim CEO appointed as KMP in place of Mr. Krishnan Subramanian May 16 2018
9 Mr. Sushil Chandra Tripathi Appointed as Non-Executive Independent Director August 012018

Mrs. Sabina Vaisoha Mr. Vikram Talwar Mrs. Vijayalakshmi Rajaram Iyer Mr. MalayKumar Sinha Mr. Krishnan Subramanian and Mr. Sushil Chandra Tripathi hold office up tothe date of the ensuing Annual General Meeting. The Company has received requisite noticesin writing from member(s) of the Company proposing the candidature of IndependentDirectors of the Company and other Executive Director(s) of the Company.

Brief resume and other details relating to the directors who are to be appointed/re-appointed as stipulated under Regulation 36(3) of the SEBI LODR Regulations andSecretarial Standards issued by ICSI are furnished in the Notice of Annual GeneralMeeting forming part of the Annual Report.

BOARD EVALUATION

Pursuant to the provisions of the Act and SEBI LODR Regulations the Board is requiredto carry out an annual performance evaluation of its own performance the performance ofthe directors individually as well as the evaluation of the working of its Committees.

However during the year under review there have been many changes in the compositionof the Board of Directors of the Company so much so that the majority of the Directors onthe Board at the time of carrying the evaluation exercise were newly appointed. Theevaluation exercise for FY 2017-18 was initiated by the Company but same could not becompleted as the Board decided that considering the short span of the current directors onthe Board of the Company they are not in a position to complete the evaluation exerciseforfunctioning the Committees Board as a whole and individual directors. Accordingly theperformance evaluation exercise was deferred which will be done in current year. The Boardhas also reviewed the current Board Evaluation Policy of the Company.

REMUNERATION POLICY

Remuneration Policy formed by the Board on the recommendation of the Nomination andRemuneration Committee is in place for selection and appointment of Directors KeyManagerial Personnel and their remuneration as well as policy on other employees’remuneration. The Remuneration Policy is stated in the Corporate Governance Report. Therelevant Policy(ies) have been uploaded on the website of the Company and can be accessedthrough the link http://www.reliaare.com/pdf/DirectorsAppointment and Remuneration Policv.odf

BOARD/COMMITTEE COMPOSITION AND MEETINGS

A calendar of meetings is prepared and circulated in advance to the Directors. Thedetails of composition of Board and Committee and their meetings held during the year aregiven in the Corporate Governance Report. The intervening gap between the Meetings waswithin the period prescribed under the Act and the SEBI LODR Regulations.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

In compliance with Section 135 of the Act read with the Companies (Corporate SocialResponsibility Policy) Rules 2014 the Company has established a Corporate SocialResponsibility (CSR) Committee. The CSR Committee has formulated and recommended to theBoard a CSR Policy indicating the activities to be undertaken by the Company which hasbeen approved by the Board. The strategic intent was to adopt a unified cause across theReligare Group and hence the CSR policy and program to be supported was cascaded acrossall Group entities.

The belief and philosophy of the group is that being a responsible corporate citizenit would strive to bring about overall positive impact in societies/local communities. Thegroup has identified provision of healthcare assistance and health and wellness relatedawareness relevant to the local underprivileged /marginalized communities as the areasoffocus for CSR objectives.

Earlier the group had engaged the Fortis Charitable Foundation ("FCF") asits implementation partner to pursue and drive the identified agenda/programs. Howeversubsequent to the end of the financial year under review the Board of Directors reviewedthe engagement with FCF and decided to terminate the same. The Company will be looking fora new agency for undertaking the CSR activities of the group.

For the year ended March 31 2018 the Company was not required to spend amount underCSRfor FY 2017-18 as prescribed under Section 135 of the Act.

Annual Report on CSR in the format prescribed in Companies (Corporate SocialResponsibility) Rules 2014 is attached as Annexure A".

AWARDS & RATINGS

The company and its subsidiaries have received the following awards and recognitionsduring the period under review - AWARDS

• Religare Health Insurance Co. Ltd. : ‘Bancassurance Leader of theYear’ - The Insurance India Summit & Awards 2018

• Religare Health Insurance Co. Ltd.: ‘Best Claims Service Provider ofthe Year’ - The Insurance India Summit & Awards 2018

Religare Health Insurance Co. Ltd.: ‘Bronze Skoch Award’ in theMicro Insurance Category for ‘Grameen Swaasthya Suraksha’

Religare Health Insurance Co. Ltd.: "India’s Most Preferred TravelInsurance Product’ for the Product - Explore ‘India’s Most PreferredTravel & Tourism Brands’

Religare Broking Ltd. : ‘Pension Champion Trophy’ for achievingtargets under the National Pension System (NPS) campaign (Non- Bank Category)

• Religare Securities Ltd. : ‘NSDL Star Performer Awards - 2017’ TopPerformer in New Account Opened (Non- Bank Category)

• Religare Commodities Ltd. : ‘Krishi Pragati Award 2017’ by NCDEXfor Outstanding Contribution’ in NCDEX Agri

• Mr. Jayant Manglik President- Retail Distribution Religare Securities Ltd. :‘Top Equity Personality of the Year Award’ - BSE COMMODITY EQUITY OUTLOOK(CEO) Weekend Awards 2017

Religare Commodities Ltd. : ‘Skoch BSE Award - Order ofMerit 2017’ under the category Training and Innovation’

Religare Finvest Ltd. : ‘Great Place toWork-Certified™’ by the Great Place to Work Institute

Religare Finvest Ltd. : ‘CIBIL Commercial Bureau Data QualityAward 2017’ underthe NBFC’ category RATINGS

In July 2017 India Ratings & Research Private Limited (‘Ind-Ra’ a FitchGroup Company) revised the Long Term Issuer Rating and the rating for the Company’ssecured redeemable non-convertible debentures to "IND A/Watch Negative" whilethe rating for the Company’s short term debt was revised to "IND A". Ind-Rastated that the rating downgrade reflected revision in ratings of REL’s principaloperating subsidiary RFL. Further the Company has voluntarily withdrawn the ratingassigned to the Company’s Commercial Paper/Short Term Debt by ICRA Limited as therewas no amount outstanding against the rated instrument.

In January 2018 Ind-Ra further downgraded the Long Term Issuer Rating to "INDBBB-/ Rating Watch Negative" for the Company. Ind-Ra attributed the downgrade to thedowngrade in ratings of RFL.

Following the downgrade of the Company’s issuer rating ratings for specificissuances of the Company were downgraded by Ind-Ra:

• The Company’s Rs. 176 cr. secured redeemable non-convertible debentures:"IND BBB-/ Rating Watch Negative".

• The Company’s Short Term Debt Facility/Commercial Paperof Rs. 50 cr.:"IND A3/ Rating Watch Negative".

However the Company has no outstanding NCDs as on March 312018or thereafter till thedate of adoption of this report. LISTING ON STOCK EXCHANGES

The Equity Shares of the Company are listed on National Stock Exchange of India Limitedand BSE Limited. The annual listing fees for the year 2018-19 have been paid to both theStock Exchanges.

STATUTORY DISCLOSURES

None of the Directors of your Company is disqualified as per provision of section164(2) of the Act. The Directors of the Company have made necessary disclosures asrequired under various provisions of the Act and the SEBI LODR Regulations.

CONSOLIDATED FINANCIAL STATEMENTS

As required underthe Regulation 34 of SEBI LODR Regulations and Section 129(3) of theAct consolidated financial statements of the Company and its subsidiaries are attached tothe Annual Report. The consolidated financial statements have been prepared in accordancewith Accounting Standard 21 Accounting Standard 23 and Accounting Standard 27 issued byThe Institute of Chartered Accountants of India. The audited consolidated financialstatements together with Auditor’s Report forms part of the Annual Report.

In terms of the tripartite agreement between the Company Religare Capital MarketsLimited ("RCML" a subsidiary of the Company) and RHC Holding Private Limited("RHCPL") severe long term restrictions have been imposed on RCML. Thefinancial

statements of RCML and its subsidiaries have been excluded from the consolidatedfinancial statements of the Company w.e.f. October 01 2011 in accordance with Para 11(b)ofAccounting Standard-21 - ‘Consolidated Financial Statements’("AS-21") and the investment held by the Company in equity and preference sharecapital of RCML has been accounted for as long term investment in accordance withAccounting Standard-13 - ‘Accounting for Investments’ in compliance with Para 23of AS-21.

Therefore the Consolidated Financial Statements presented by your Company pursuant toAS-21 includes financial information of all its subsidiaries excluding RCML andRCML’s subsidiaries have been duly audited by the Statutory Auditors and the same ispublished in your Company’s Annual Report.

CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Even though operations of the Company are not energy intensive the management has beenhighly conscious of the importance of conservation of energy and technology absorption atall operational levels and efforts are made in this direction on a continuous basis. Inview of the nature of activities which are being carried on by the Company theparticulars as prescribed under Section 134(3)(m) of the Act read with rule 8 of theCompanies (Accounts) Rules 2014 regarding Conservation of Energy and TechnologyAbsorption are not applicable to the Company and hence have not been provided.

FOREIGN EXCHANGE EARNINGS AND OUTGO

The Company has incurred expenditure of Rs.1.23 crore (previous year: Rs.0.24 crore) inforeign exchange and earned Nil (previous year: nil) in foreign exchange during the yearunder review on a standalone basis.

MAINTAINANCE OF COST RECORDS

The Company is in the financial services industry. In view of the nature of activitieswhich are being carried on by the Company the maintenance of cost records as specified bythe Central Government under sub-section (1) of section 148 of the Act is not applicableon the Company and hence such accounts and records are not maintained.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

Amount of Rs.208918/- lying unpaid in the Unpaid Dividend Account of the Company inrespect of dividend declared in year 2010 and not claimed within seven years from the dateof transfer to the Company’s Unpaid Dividend Account which was due to be transferredto the fund on April 08 2017 has been transferred to the Investor Education andProtection Fund pursuant to Section 125 of the Act on April 21 2017.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Act the Board of Directors to the best of theirknowledge and ability confirm that:

(a) in the preparation of the annual financial statements for the year ended March 312018 the applicable accounting standards have been followed along with proper explanationrelating to material departures ;

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

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

(d) they have prepared the annual accounts on a going concern basis ;

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

(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.

CORPORATE GOVERNANCE

The Company is committed to uphold the highest standards of Corporate Governance andadhere to the requirements set out by the Securities and Exchange Board of India.

The Company’s Board has taken various steps to enhance the corporate governanceand compliance at group level which encompasses from change in top management includingappointment of a new interim CEO and Group Compliance Head at REL level to re-organizationof Boards of subsidiaries of the Company.

A detailed report on Corporate Governance along with the Certificate of M/s SanjayGrover & Associates Company Secretaries confirming compliance with conditions ofCorporate Governance as stipulated in Part C of Schedule V of the SEBI LODR Regulationsforms integral part of this Report.

The members may please note that for the financial year ended March 31 2017finalisation of annual audited accounts had taken more than anticipated time. Hence theCompany was not able to declare its audited financial results within the prescribedtimelines under SEBI LODR Regulations. The Company declared its audited financial resultson June 29 2017.

Further BSE & NSE vide their respective letters dated June 152017 had levied afine of Rs.2142841 and Rs.1863345 respectively as on June 152017on the Company fornon-compliance of Regulation 33 of SEBI LODR Regulations 2015by not submitting itsaudited financial results within 60 days from end of financial year ended March 312017.The Company has paid the fines.

NSE further vide its letter dated October 06 2017 raised the demand for balance fineof Rs.70000 which was paid on October 13 2017.

Members are also apprised that NSE & BSE vide their respective communications datedJune 15 2018 & June 18 2018 respectively levied the fine of Rs.5000/- and 5900/-respectively for delayed submission offinancials for the period ended March 312018 by oneday. In view of the fact that the meeting of the Board of Directors to consider andapprove the Audited Financial Results for the FY 2017-18 held on May 30 2018 commenced at10:30 a.m. on May 30 2018 and ended at 2.30 a.m. on Thursday May 312018 the Companyhas requested to waive off the fine imposed on the Company by condoning the marginal delayof approximately three hours in submission of the Audited Annual Financials. The Companyis yet to receive any further communications from the exchanges in the matter.

The members may please also note that the Board of Directors of the Company hadformulated and approved a Dividend Distribution Policy ("the Policy") pursuantto the requirement under the SEBI (Listing Obligations and Disclosure Requirement) (SecondAmendment) Regulations 2016 in its meeting held on October 26 2016. Same was uploaded onthe website of the Company i.e. http://www.reliaare.com/pdf/RelDividend PolicvNov2016.pdf. However Company inadvertently missed to make a referenceof the Policy in its Annual Report for the year ended March 31 2017. Accordingly theCompany is issuing a corrigendum to the Annual Report 2017 giving intimations to theshareholders about the placement of the Policy on the website of the Company.

AUDITORS

M/s S.S. Kothari Mehta & Co. Chartered Accountants (Firm Registration No.000756N) were appointed as statutory auditors of the Company by the shareholders at the33rd Annual general Meeting of the Company ("AGM") held on September 212017 tohold office for a period of five consecutive years commencing from the financial year2017-18 i.e. from the conclusion of 33rd AGM until the conclusion of the 38th AGM of theCompany to be held in the year 2022 (subject to the ratification of appointment ateveryAGMas perprovisions ofSection 139(1)of the Act).

However in accordance with the Companies Amendment Act 2017 enforced on May 07 2018by Ministry of Corporate Affairs the appointment of Statutory Auditors is not required tobe ratified at every Annual General Meeting.

AUDITORS’ REPORT

Management’s response on the Statutory Auditors’ Qualification IComments on the Company’s standalone financial statements

a. Qualification in the report on internal financial controls regarding:

(i) material weakness in Internal Financial Control over Financial Reporting in thecredit evaluation process in respect of Corporate Loans;

As a strategy the management has decided not to extend any further loans underCorporate Loan Book

(ii) Review of process of identification and updatation of documentation of Micro Small& Medium Enterprises as MSMED Act 2006 and Information Technology General Control;

Management has identified the gaps. The systems and processes have already beenimplemented to identify and categorize the vendors under MSMED Act 2006.

(iii) Strengthening of internal control process in respect of process of initiatingpayment accounting entries and closure of outstanding entries in Bank ReconciliationStatements:

Management has identified the gaps. The systems and processes are being implemented tomitigate the pendency of overdue open items if any in Bank Reconciliation Statements.

Management’s response on the Statutory Auditors’ Qualification / Comments onthe Company’s consolidated financial statements

a. Qualification pertaining to Lakshmi Vilas Bank adjusting the fixed deposits ofReligare Finvest Ltd. subsidiary of the Company (RFL): RFL had made certain fixeddeposits with Lakshmi Vilas Bank ("LVB") in November 2016 and January 2017. LVBvide its letter dated 7th February 2018 had confirmed fixed deposits of Rs.79144.77 Lakhsto RFL. RFL received a letter dated February 9 2018 from LVB purporting to allude tocertain loans disbursed by LVB to third parties allegedly in consideration of security ofthe RFL’s Fixed Deposits ("FDs") with LVB. By means of this letter LVBalso purported to call upon RFL to execute the security documentation in connection withthe alleged loans.

Vide RFL’s letter dated February 16 2018 LVB was expressly informed that notonly RFL was not party to any loans that were allegedly sanctioned or granted by LVB toany third party as also that no authorization sanction or approval had ever beenprovided by RFL to LVB permitting the creation of any security or encumbrance of the FDsfor any third party loans or borrowings. LVB was also forewarned that any attempt tosubject the FDs to illegal encumbrance would not only be violative of RFL’s rightsbut also constitute deliberate contempt by LVB of the Order dated January 5 2018 passedby the Hon’ble Delhi High Court a copy ofwhich was served on LVB vide Legal noticedated February 16 2018.

While things stood thus RFL came to be in receipt of a copy of the letter dated April24 2018 addressed by LVB to the statutory auditors of RFL that LVB had "closed thesaid deposits on 20.02.2018 to liquidate the loans availed" by third parties. Thiswas contrary to the confirmation received by the Statutory Auditors in November 2017 viaemail confirming the fixed deposits. RFL has now filed a suit for recovery of the FixedDeposit amounts aggregating Rs.79144.77 Lakhs appropriated by LVB before the Hon’bleDelhi High Court.

b. Qualification pertaining to Corporate Loan Book of Religare Finvest Ltd. subsidiaryof the Company (RFL): RFL

has an exposure of Rs.203670 Lakhs towards the Corporate Loan Book. RBI has raisedconcerns in the past about the credit worthiness of the borrowers credit appraisal andloan sanctioning mechanism followed by RFL in respect of this book. The management of RFLhas reviewed the portfolio and the financial reports of the borrowers to determine therecoverability of the said loans.

As a part of the recovery process RFL has already issued legal notices to theborrowers and has initiated corporate insolvency resolution process under Insolvency andBankruptcy Code 2016 against the said entities forming part of Corporate Loan Book ofRFL. RFL has also appointed a law firm of repute to undertake a detailed diligence on thisloan book. Post submission of the report and the steps outlined for recovery RFL intendsto pursue all legal means for recovering the loans.

In the interim based on the security available maturity dates of the loans recoverysteps instituted and the financial reports of the borrowers the RFL on a prudent basismade a provision of Rs.101285.00 Lakhs against this portfolio.

c. Disclaimer of opinion in the report on internal financial controls pertaining to RFL

(i) Material weakness in Internal Financial Control over Financial Reporting in theCredit evaluation process in respect of Corporate Loan Book and loan against property& shares;

As a strategy RFL management has decided not to extend any further loans underCorporate Loan Book and loan against shares. Further adequate controls exist for loansgranted under Loans against property (SME-Secured Loans) and Loans against shares. As amatter of fact during FY 2017-18 a total of Rs.94 Crores of SME secured loans weredisbursed. No loan against shares was disbursed during FY 2017-18.

(ii) Updated documentation for Micro Small & Medium Enterprises as MSMED Act 2006and control over Information Technology General Controls; RFL Management hasidentified the gaps. The systems and processes have already been implemented to identifyand categorize the vendors under MSMED Act 2006.

(iii) Strengthening of internal control process in respect of regular updation of riskcontrol matrix comprehensiveness for coverage of all process: RFL management hasidentified material weaknesses in Internal Financial Control over Financial Reporting inrespect of certain specific segments and steps have been taken to strengthen controls anddesign a robust evaluation process.

SECRETARIAL AUDITOR REPORT

As per provisions of Section 204 of the Act the Board of Directors of the Company hasappointed M/s P I & Associates as the Secretarial Auditor of the Company to conductthe Secretarial Audit. The Secretarial Audit Report for the financial year ended March 312018 is annexed to this Report. Management comments on qualifications given by auditorsin the report are as follows:

(a) Non-compliance with Secretarial Standards issued by The Institute of CompanySecretaries of India: The Company has complied with Secretarial Standards except infew cases where draft and signed minutes were circulated to the Board members beyondprescribed timelines due to frequent changes at Board and management level during yearunder review. The management will take steps to ensure that same is not repeated infuture.

(b) Non-disclosure of Dividend Distribution Policy in Annual Report 2016-17: TheCompany inadvertently missed to make a reference of the Policy in its Annual Report forthe year ended March 312017. Accordingly the Company is issuing a corrigendum to theAnnual Report 2017 giving intimations to the shareholders about the placement of thePolicy on the website of the Company along with address.

(c) Delayed submission of audited financial results to Stock Exchanges for the quarterand year ended March 31 2017 : For financial year ended March 31 2017 finalisationof annual audited accounts has taken more than anticipated time. Hence the Company wasnot able to declare its audited financial results within the prescribed timelines underSEBI Listing Regulations. The Company declared its audited financial results on June 292017. Further BSE & NSE vide their letter dated June 15 2017 had levied a fine ofRs.2142841 and Rs.1863345 respectively as on June 15 2017 on the Company fornon-compliance of Regulation 33 of SEBI Listing Regulations 2015 by not submitting itsaudited financial results within 60 days from end of financial year ended March 312017.The Company has paid the fine. NSE further vide its letter dated October 06 2017 raisedthe demand for balance fine of Rs.70000 which was paid on October 13 2017.

(d) Appointment of CFO : The office of CFO became vacant on January 24 2018. TheCompany was required to appoint CFO within six months i.e. by July 23 2018. The Companyis actively searching for suitable candidate for office of CFO with vast and diversifiedrich experience in the financial services sector and shall appoint the same at theearliest to meet the statutory requirements of the Act.

PARTICULARS OF INVESTMENTS LOANS AND GUARANTEES

The Company being an NBFC is exempted from the provisions of Section 186 [exceptsub-section (1)] of the Act. Accordingly details of particulars of loans guarantees orinvestments as required to be provided as per Section 134(3)(g) of the Act are notprovided.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were onan arm’s length basis and were in the ordinary course of business. There are nomaterially significant related party transactions entered by the Company with relatedparties which may have a potential conflict with the interest of the Company.

All Related Party Transactions are placed before the Audit Committee for approval asper the Related Party Transactions Policy of the Company as approved by the Board. Thepolicy is also uploaded on the website of the Company & can be accessed through thelink http://www.reliaare.com/pdf/ReliaareRPTPolicvMav16.PDF

Since all related party transactions that were entered into during the financial yearwere on an arm’s length basis and were in the ordinary course of business and therewas no material related party transaction entered by the Company during the year as perRelated Party Transactions Policy no details are required to be provided in Form AOC-2prescribed under clause (h) of sub-section (3) ofsection 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014.

The details of the transactions with related parties are provided in the notes toaccompanying standalone financial statements.

RISK MANAGEMENT

The Board of Directors of the Company has constituted a Risk Management Committeewhich is responsible for framing implementing monitoring and periodically review theeffectiveness of the risk management plan and make appropriate changes as and whennecessary. The details of the Committee are set out in the Corporate Governance Reportforming part of the Board’s Report.

The Company / REL is not an operating company and therefore major risk lies withmanagement and operation of its subsidiary / group companies. The Company being aninvestment holding company has a comprehensive Risk Management framework and overarchingRisk Management policy which is adopted by each of the key subsidiaries while formulatingtheir Risk Policy. Risk Management Policy is aimed at identification evaluationmitigation monitoring and reporting of identifiable risks. Respective functional headand/or risk management department of subsidiaries are responsible for implementation ofthe Risk Management system and maintenance of record of risk and mitigation plan in Risk& Control Matrix (RCM) which is tested and updated periodically. Therefore the riskframework defines the risk management approach across the enterprise at various levelsincluding documentation and reporting. The framework has different risk models which helpin identification of risks and their classification in High Medium and Low categories onthe basis of likelihood impact and velocity..

The subsidiary company’s Risk Management Committee authorized by the respectiveBoard or in its absence the respective Audit Committee reviews the risk managementpolicy and appropriateness of systems and controls in this regard and submits its reportto the Risk Management Committee of your Company on periodical basis.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The Company has a vigil mechanism named Whistle Blower Policy to deal with instance ofunethical practices fraud and mismanagement or gross misconduct by the employees of theCompany if any that can lead to financial loss or reputational risk to the organization.The details of the Whistle Blower Policy are explained in the Corporate Governance Reportand also posted on the website of the Company & can be accessed through the link http://www.reliaare.com/pdf/ReliaareWhistle Blower Policy 10072018.pdf

In order to further strengthen the vigil mechanism the Company has been doing thefollowing activities at the group level:

1. In order to ensure awareness among the employees of the organization the policy isexplained in detail as part of the employee induction for new employees the details arementioned on the HR portal/ intranet the policy is periodically circulated to allemployees through e-mail and Electronic Direct Mailers (EDMs) giving specific details and‘call to action’ are regularly circulated

2. Drop boxes have been kept at all major locations for employees to drop theircomplaints in the boxes During the year no complaint pertaining to the Company wasreceived under the Whistle Blower mechanism.

INTERNAL FINANCIAL CONTROLS AND INTERNAL CONTROL SYSTEM

The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The scope and authority of the Internal Audit function isdefined in the comprehensive agreement with the internal audit agency which is reviewedand approved by the Audit Committee of the Company and its respective subsidiaries. TheCompany has appointed M/s KPMG as the Internal Auditor of the Company as approved by theAudit Committee. KPMG also assist the Company and its key subsidiaries in testing andreporting of Internal Financial Controls (IFC) on quarterly basis through an integratedsystem of internal audit and IFC testing. To maintain its objectivity and independencethe Internal Auditor agency directly reports to the Audit Committee.

The Internal Auditor evaluates the efficacy and adequacy of the internal control systemand internal Financial Controls in the Company its compliance with operating systemsaccounting procedures policies and regulatory requirements at all locations of theCompany and its subsidiaries. Based on the integrated report of internal audit functionand IFC process owners undertake corrective action in their respective areas and therebystrengthen the internal controls. Significant audit observations and corrective actionsthereon along with IFC dashboard are presented to the Audit Committee on periodical basis.

HUMAN RESOURCES

This year has been a challenging year for a few Businesses and they have gone throughhigh volatility during the year that has reflected in the organization’s capacity toperform to its potential. However as part of our transformational effort there have beenpositive changes at the Religare Board and Management level with greater focus beingbrought on corporate governance

compliance and service standards. We are well set to rebuild the institution andestablish a strong platform from where we can offerourvalued customers an integratedsuite offinancial services.

Employees are our vital and most valuable assets. Over this period we have developed astrong culture of transparency through constant employee communication. In order to booststhe employee morale the organization has recognized the commitment loyalty andcontribution of its internal stakeholders. Our employee partnership ethos reflects theCompany’s longstanding business principles with the prime focus to identify assessgroom and build leadership potential for future.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT THE WORK PLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013

The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the Work Place (Prevention Prohibition andRedressal) Act 2013 and rules made thereunder. An Internal Complaints Committee (ICC) isin place as per the requirements of the said Act to redress complaints received regardingsexual harassment. All employees (permanent contractual temporary trainees) are coveredunder this policy. No case has been reported during the year under review.

PARTICULARS OF EMPLOYEES

The details required under Section 197(12) of the Act read with Rule 5(1) & 5(2) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 areannexed as "Annexure B" to this report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant or material orders passed by the Regulators/Courts which wouldimpact the going concern status of the Company and its operations in future.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION

There are no material changes and commitments adversely affecting the financialposition of the Company which have occurred between the end of the financial year of theCompany to which the financial statement relate (i.e. March 312018) and as of date of thereport i.e. August 012018.

ACKNOWLEDGEMENTS

Your Directors would like to express their sincere appreciation for the co-operationand assistance received from the Company’s Bankers Regulatory Bodies Stakeholdersincluding Financial Institutions and other business associates who have extended theirvaluable sustained support and encouragement during the year under review.

Your Directors also wish to place on record their deep sense of gratitude andappreciation for the commitment displayed by all executives officers and staff at alllevels of the Company during the year under review. Your Directors would also like tothank all shareholders for their continued faith in the Company and look forward to yourcontinued support in the future.

By order of the Board of Directors Religare Enterprises Limited

Sd /- Sd/-
Place: Gurugram Krishnan Subramanian Malay Kumar Sinha
Date: August 012018 Director-Finance Director