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Sundaram Finance Ltd.

BSE: 590071 Sector: Financials
NSE: SUNDARMFIN ISIN Code: INE660A01013
BSE 00:00 | 19 Jul 1520.65 -20.80
(-1.35%)
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1519.00

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1537.95

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1515.05

NSE 00:00 | 19 Jul 1514.40 -21.20
(-1.38%)
OPEN

1537.00

HIGH

1539.40

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1510.00

OPEN 1519.00
PREVIOUS CLOSE 1541.45
VOLUME 192
52-Week high 1888.55
52-Week low 1418.77
P/E 31.71
Mkt Cap.(Rs cr) 16,894
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1519.00
CLOSE 1541.45
VOLUME 192
52-Week high 1888.55
52-Week low 1418.77
P/E 31.71
Mkt Cap.(Rs cr) 16,894
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sundaram Finance Ltd. (SUNDARMFIN) - Director Report

Company director report

Your directors have pleasure in presenting the 65th Annual Report together with auditedaccounts for the year ended 31st March 2018. The summarised financial results ofthe Company are presented hereunder:

FINANCIAL RESULTS:

Particulars Year ended March 31 2018 Year ended March 31 2017
Revenue from Operations 2618.29 2356.79
Other Income 78.05 101.49
Total Revenue 2696.34 2458.28
Less: Total Expenses 1889.55 1738.08
Profit before tax 806.79 720.20
Profit after Tax 532.95 495.35
Surplus brought forward 227.43 176.47
Amount available for appropriation 760.38 671.82
Appropriations to:
- Statutory Reserve 106.59 99.07
- General Reserve 243.39 222.90
Dividend* – Interim 2016-17 - 55.55
Final 2016-17 72.22 -
Dividend Tax 9.38 8.77
Surplus carried to balance sheet 328.80 285.53

* Interim Dividend for the financial year 2017-18 which was paid during May 2018 andFinal Dividend recommended for the financial year 2017-18 if approved by theShareholders will be recognised as a liability during the financial year 2018-19.

DIVIDEND

Your Company paid an interim dividend of Rs 5/- per share in May 2018. Your directorsare pleased to recommend a final dividend of Rs 7/- per share which together with theinterim dividend would aggregate to a total dividend of Rs 12/-per share (120% on theface value of Rs 10/-).

The Dividend Distribution Policy formulated in accordance with the provisions ofRegulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is attached as part of this report vide Annexure I.

AMALAGAMATION OF SUNDARAM INFOTECH SOLUTIONS LIMITED

Sundaram Infotech Solutions Limited (SISL) was amalgamated with your Company witheffect from the ‘Appointed Date' i.e. 1st April 2016 pursuant to the Order of theHon'ble National Company Law Tribunal (NCLT) Division Bench Chennai dated 26thSeptember 2017 under Sections 230 to 232 of the Companies Act 2013. Consequent to theAmalgamation the accounts for the financial year ended 31st March 2018 have been preparedafter taking into account the transactions of SISL and therefore the figures givenherein and elsewhere in the Annual Report are not strictly comparable with those of theprevious year.

COMPOSITE SCHEME OF ARRANGEMENT AND AMALGAMATION

Pursuant to the sanctioning of the Composite Scheme of Arrangement and Amalgamation(Scheme) by the Hon'ble National Company Law Tribunal (NCLT) Division Bench Chennaivide Order dated 12th January 2018 received by the Company on 18th January 2018 thefollowing matters as envisaged in the Scheme with effect from the ‘Appointed Date'i.e. 1st April 2016 have become operative:

a. Amalgamation of Sundaram Insurance Broking Services Limited and Infreight LogisticsSolutions Limited wholly-owned subsidiaries with your Company;

b. De-merger of the shared services business of Sundaram BPO India Limited (SundaramBPO) subsidiary into your Company; and

c. De-merger of the non-core business of the Company viz. training servicesidentified shared services including shared services vested from Sundaram BPO apart fromthe non-financial services investments together with related assets into SundaramFinance Holdings Limited (SFHL).

As provided in the Scheme on 12th February 2018 all the shareholders of your Companywere allotted 1 (One) equity share of Rs 5/- each credited as fully paid-up in the capitalof SFHL for every 1 (One) fully paid-up equity share of

Rs 10/- held by them in your Company as on the record date i.e. 2nd February 2018.Pursuant to the said allotment the shareholding of your Company in SFHL got reduced from100% to 26.47% and SFHL became an associate of your Company. The equity shares of SFHLwere listed on the National Stock Exchange of India Limited with effect from 26th March2018.

The accounts for the financial year ended 31st March 2018 have been prepared aftergiving effect to the Scheme and therefore the figures given herein and elsewhere in theAnnual Report are not strictly comparable with those of the previous year.

CORPORATE GOVERNANCE

A detailed report on corporate governance together with a certificate from theSecretarial Auditors in compliance with the relevant provisions of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 is attached as part of thisreport vide Annexure II. Compliance reports in respect of all laws applicable to theCompany have been reviewed by the Board of Directors.

RELATED PARTY TRANSACTIONS

All transactions entered into by the Company with related parties were in the ordinarycourse of business and on an arm's length basis. The Company did not enter into anymaterial transaction with related parties under Section 188 of the Companies Act 2013during the year. Form AOC-2 as required under Section 134 (3)(h) of the Act read withRule 8(2) of the Companies (Accounts) Rules 2014 is attached as part of this reportvide Annexure III(i). Further the Company's policy on Related Party Transactions isattached as part of this report vide Annexure III(ii).

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company along with its subsidiaries and associates has always responded in aresponsible manner to the growing needs of the communities in which it operates. Duringthe year your Company has in consonance with the CSR policy of the Company undertaken anumber of initiatives that contribute to society at large in the areas of healtheducation environment and preservation of the country's rich culture and heritage.

The Annual Report on CSR Activities undertaken by the Company for the Financial Year2017-18 is annexed with this report vide Annexure IV.

BUSINESS RESPONSIBILITY REPORT

A Business Responsibility Report as required under Regulation 34(2)(f) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is enclosed as partof this report vide Annexure V.

DISCLOSURE UNDER THE ‘PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE POLICY'

The Company has in place a Policy for prevention of Sexual Harassment in line with therequirements of The Sexual

Harassment of Women at the Workplace (Prevention

Prohibition & Redressal) Act 2013. An Internal Complaints Committee (ICC) has beenset up to redress complaints. All employees (permanent contractual temporary trainees)are covered under this policy. No complaints were received during the year 2017-18.

SECRETARIAL AUDIT

In terms of Section 204 of the Companies Act 2013 and the rules thereunder theCompany has appointed M/s Damodaran & Associates as the Secretarial Auditor of theCompany. The Secretarial Audit Report as provided by them is annexed to this Report videAnnexure VI.

REMUNERATION TO DIRECTORS / KEY MANAGEMENT PERSONNEL

Disclosure pursuant to Rule 5(1) of Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is annexed vide Annexure VII.

SUNDARAM FINANCE EMPLOYEE STOCK OPTION SCHEME

Based on the recommendations of the Nomination Compensation and RemunerationCommittee your Board of Directors has granted subject to regulatory approvals wherenecessary 20000 stock options to select eligible employees on 25th May 2018. Thedisclosure required under SEBI (Share Based Employee Benefits) Regulations 2014 isfurnished vide Annexure VIII.

EXTRACT OF ANNUAL RETURN

As required under Section 92(3) of the Companies Act 2013 and Rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of the Annual Return inMGT-9 is annexed as part of this report vide Annexure IX.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review no significant and material orders were passed by theregulators courts or tribunals against the Company impacting its going concern status orits future operations.

INFORMATION AS PER SECTION 134(3)(M) OF THE COMPANIES ACT 2013 READ WITH RULE 8 OF THECOMPANIES (ACCOUNTS) RULES 2014

Your Company has no activity relating to conservation of energy or technologyabsorption. During 2017-18 expenditure in foreign currencies amounted to Rs 78.56 cr.Foreign Currency earnings amounted to Rs 6.46 cr.

MANAGEMENT DISCUSSION AND ANALYSIS

GLOBAL ECONOMY

The global economy continued its strong growth in 2017. One notable aspect of lastyear's upswing was its geographic breadth. Growth accelerated in about three quarters ofcountries worldwide. Even more important some of the countries that have had highunemployment for some time including several in the euro area participated in the growthand are experiencing strong employment growth. Some of the larger emerging marketeconomies such as Argentina Brazil and Russia came out of their recessions. Equityvaluations continued to climb and are near record highs as central banks have maintainedaccommodative monetary policies due to weak inflation. However the paradoxes of growthremain. According to the World Bank "there were plenty of unsettling andupsetting events and trends. Catastrophic storms and flooding wrecked homes andlivelihoods from South Asia to the Caribbean. Education quality in many countries fellshort even as much of the world raced into the digital age. Yet extreme poverty continuesto decline. Innovation and technology are enhancing the quality of life. And human capitalis now the biggest driver of wealth in the world today."

As per the IMF's World Economic Outlook "Global economic growth strengthenedin 2017 to 3.8 % with GDP continuing to accelerate over much of the world in what is seenas the broadest cyclical upswing since the start of the decade with a notable rebound inglobal trade. It was driven by an investment recovery in advanced economies continuedstrong growth in emerging Asia a notable upswing in emerging Europe and signs ofrecovery in several commodity exporters. Global growth is expected to tick up to 3.9 %this year and next supported by strong momentum favourable market sentimentaccommodative financial conditions and the domestic and international repercussions ofexpansionary fiscal policy in the United States. The partial recovery in commodity pricesshould allow conditions in commodity exporters to gradually improve." The reporthowever goes on to add that "The global economic upswing that began aroundmid-2016 has become broader and stronger… advanced economies as a group willcontinue to expand above their potential growth rates this year and next beforedecelerating while growth in emerging market and developing economies will rise beforelevelling off. For most countries current favourable growth rates will not last.Policymakers should seize this opportunity to bolster growth make it more durable andequip their governments better to counter the next downturn."

INDIAN ECONOMY

India has emerged as one of the fastest growing major economies in the world as per theIMF and is expected to be amongst the top three economic powers of the world over the nexttwo decades backed by its strong democracy and partnerships. India's GDP is estimated tohave grown by 6.6 % in 2017-18 and is expected to grow at 7.3 % in 2018-19.

The Goods and Services Tax (GST) which involved merging all indirect taxes into onewith a view to mitigate cascading or double taxation was rolled out on July 1 2017. Asanticipated there have been myriad issues ranging from initial teething troubles toseveral technical issues. The first and most avoidable hiccups were the glitches on theGoods and Services Tax Network online portal (GSTN) which is the IT backbone for the newindirect tax regime which hit small businesses particularly hard. The technical glitcheson the GSTN forced the Government to extend the due date for various returns and forms ona number of occasions raising concerns on the functioning of the IT backbone of GST. Soalso the GST rates have been tinkered with time and again which has hampered smoothtransition and disrupted various sectors. However things appear to be falling in placealbeit gradually and it is to be hoped that things will settle down sooner than later.

The growth in India's GDP has to be viewed as satisfactory in the aftermath of twomajor events - demonetisation and GST. Gross tax collections for the period April 2017-February 2018 showed an increase of 15.8% year-on-year while net retention to the Centrein tax collections recorded a growth of 17%.

India's foreign exchange reserves stood at USD 424.4 billion at the end of March 2018as compared to USD 370 billion at the end of the previous year according to data from theRBI. However tepid export growth of 0.7 % and higher import growth of 7.1% primarilyattributable to oil-imports resulted in the current account deficit worsening to 2.0 %from 1.4 % in the previous year. Depending on the oil price movements this could worsenfurther.

The annual average WPI inflation for 2017-18 stood at 2.9% as against 1.7% in theprevious year while the headline inflation based on Consumer Price Index for 2017-18averaged 3.6% as compared to 4.5 % in 2016-17. The IIP increased by 4.3% during theperiod Apr to Feb 2018 as against 4.7% in the corresponding period of the previous year.The production of eight core industries registered a growth of 5.3% during the year asagainst 0.6 % in the corresponding period of previous year.

According to the World Bank's Doing Business Report India has improved its ranking by30 spots over its 2017 ranking and is now ranked 100 among 190 countries in the latestedition of the report.

AUTOMOTIVE SECTOR

The Commercial vehicle industry faced significant turbulence in 2017-18. The BS IVemission norms that went into effect from April 1 2017 meant that prices of commercialvehicles increased sharply. In addition the competing engine technologies EGR and SCRwith vehicle manufacturer's proclaiming the superiority of one over the other only addedto the confusion for the average transport operator. Shortly thereafter India entered theGST era which affected the movement of goods in the first few months and also increasedthe working capital requirements of transport operators. Against this backdrop it ishardly surprising that sales of Medium and Heavy commercial vehicles (M&HCV)registered a fall during the first half of the financial year compared to the previousyear. Considering the fact that industrial activity remained muted M&HCV demand inseveral states especially in Southern and Western India were markedly lower than theprevious year. However a turnaround in the second half of the year driven predominantlyby the continuing focus of the government on infrastructure robust demand in NorthernIndia and the substantial discounts that were on offer ensured that M&HCV salesregistered a growth of 12.5% for the year. The reduced turnaround times on account ofinter-state check posts being dismantled stricter implementation of overloading norms inseveral states and vastly improved highways resulted in a significant shift towardshigher tonnage vehicles owing to better operating economics for transport operators.

The relatively good monsoons of the last two years have led to increased prosperity inthe rural and semi urban areas of the country which has had a salutary effect on theirpurchasing power and a corresponding increase in demand for various goods and services.

Agrarian prosperity coupled with the creation of large new warehousing capacityacross the country the strengthening of the hub and spoke model thanks to GST and thecontinuing boom in E commerce provided a shot in the arm for Light and Small commercialvehicles which grew by over 13%. Sales of Passenger Cars and Utility vehicles grew 8%aided by the latter. However with the emergence of taxi aggregators such as Uber and Olaand the rapid development of Metro rail in several major cities some early signs ofchanges in buyer behaviour appear to be emerging. As per the Society of Indian AutomobileManufacturers (SIAM) the contribution of the top 20 cities that generate about 50% ofpassenger vehicle sales has shown slower growth in the last four to five years whilethere is greater demand from smaller towns and semi-urban areas. This could have majorimplications both for manufacturers and financiers in the longer term.

The tractor industry witnessed another year of strong growth. Multiple factors rangingfrom subsidy support for tractor purchase by several States a bountiful harvest onaccount of a good monsoon and the availability of retail finance saw the industry registera robust growth of 22% during the year.

OPERATING & FINANCIAL PERFORMANCE

Your Company's disbursements at Rs 15632 cr. (PY Rs 13196 cr.) registered ahealthy growth of 18% over the previous year notwithstanding the various disruptionsfaced by the automotive sector in the first half of the financial year. While sales ofM&HCVs revived only towards the later part of the year your Company increased itspresence in the rapidly growing construction equipment and tractor segments while alsodeepening its presence in newer geographical areas and market segments.

Pricing pressures continued unabated with several new players mostly private sectorbanks seeking to gain a foothold in the fiercely competitive vehicle finance segment.Your Company was largely able to counter this on account of the strong customerrelationships that it has built and nurtured over the decades its ability to raiseresources at or near the best rates in the debt markets and the deft management of itsliabilities portfolio thereby enabling it to maintain its strong market position.

The gross receivables managed by the Company stood at Rs 28648 cr. as against Rs 24036cr. a growth of 19% over the previous year. As always your Company's sustained focus onmaintaining superior asset quality ensured that its portfolio continued to be best inclass with Gross and Net NPAs which stood at 1.54% and 0.55% respectively in the previousyear coming down to 1.29% and 0.50% respectively as at 31st March 2018. The net profitfor the year after considering the effects of demerger was Rs 532.95 cr. asagainst Rs 460.57 cr. (adjusted net profit on demerger) in the previous year registeringa growth of 15.95% on a like to like basis. The company's net-worth stood at Rs 3970.85cr. as on 31.3.2018. Capital adequacy (CRAR) at 17.64% was comfortably higher than thestatutory requirement of 15%.

RESOURCE MOBILISATION

a) Deposits

During the year your Company mobilised fresh deposits aggregating to Rs 450.53 cr.Renewal of deposits during the year amounted to Rs 943.44 cr representing 79% of thematured deposits of Rs 1170.48 cr. Deposits outstanding at the year-end were at Rs 2499.33cr. as against Rs 2411.08 cr in the previous year. The Net accretion for the financialyear was Rs 88.25 cr.

As at 31st March 2018 4615 deposits amounting to Rs 32.67 cr. had matured forpayment and were due to be claimed or renewed. After close follow-up the figures arecurrently down to 2899 and Rs 16.17 cr. respectively. Continuous efforts are being made toarrange for repayment or renewal of these deposits. There has been no default in repaymentof deposits or payment of interest thereon during the year. Investor Relation Services– Deposits currently enjoy the ISO 9001:2008 Certification from Bureau Veritas(India) Private Limited. The certification process to the revised standard ISO 9001:2015is in progress and will be concluded in the second quarter.

b) Term Funding

During the year your Company raised term funding from Banks Mutual funds Insurancecompanies and others in the form of non-convertible debentures and term loans to the tuneof Rs 5545 cr. across various tenors.

c) Bank Finance

As part of the overall funding plan your Company's working capital limits withConsortium banks were increased to Rs 2750 cr. from Rs 2250 cr. During the yearyour Company also issued several tranches of commercial paper aggregating to Rs 14405 cr.The maximum amount outstanding at any time was Rs 4905 cr. and the amount outstanding atthe end of the year was Rs 2025 cr.

d) Assets Securitised / Assigned

During the year your Company raised resources to the extent of Rs 3879 cr. throughsecuritisation and assignment of receivables.

CREDIT RATINGS

During the year your Company's long term credit ratings have been upgraded from AA+ toAAA by both ICRA & CRISIL. The short term borrowings (including commercial paper) arerated "A1+"/P1+ (very strong degree of safety). Fixed Deposits are rated"AAA" (Highest Credit Quality) by ICRA and CRISIL. The long term borrowings arerated "AAA" (Highest Degree of Safety) with a "Stable outlook" byICRA and CRISIL and AA+ (High Degree of Safety) with a "Stable outlook" byIndia Ratings.

OUTLOOK

The main thrust of the Union Budget for 2018-19 is on uplifting the rural economy andstrengthening of the agriculture sector healthcare for the economically less privilegedinfrastructure creation and improvement in the quality of education. A total of Rs14.34 lakh crores along with specific allocation for North-East Industrial DevelopmentScheme is meant to improve livelihoods and infrastructure in rural areas; besides this anincreased budgetary allocation for infrastructure has been made at Rs 5.97 lakh crore for2018-19. These increased allocations are expected to have an overall salutary impact onthe Indian economy as a whole and the rural economy in particular.

SIAM expects the growth momentum of Commercial vehicle sales to continue at 10-12%(M&HCVs at 9-11% and LCVs at 10-12%) in 2018-19. The government's continuing emphasison infrastructure and a recovery in the mining sector bodes well for sales of tippers.Sales of passenger vehicles are expected to grow at 8-10% (utility vehicles at 14-15% andcars at 8-9%). As per a report by CRISIL tractor sales are projected to increase by11-13% in 2018-19 assuming a normal monsoon and increased government support. Demand insemi-urban towns and rural areas is expected to look up as the impact of demonetisationhas abated and a normal monsoon for a third year should bolster sales of passenger carsLCVs and especially tractors.

However rising diesel prices and higher interest rates could prove a dampener from thepoint of view of the transport operator's viability and consequently on commercial vehicleofftake. With inflation numbers trending upwards and liquidity tightening interest rateshave already shown an upward bias in the first few weeks of the current financial year.Pressure on inflation retail as well as wholesale is mounting. While the widely-trackedconsumer price index(CPI) based inflation rate rose to a three month high of 4.58% itswholesale price index (WPI) counterpart increased to a four-month high of 3.18% in April.This might justify the hawkish stance of the monetary policy committee (MPC). The generalexpectation is that RBI will start raising policy rates in the third quarter of 2018-19.However recent events notably the sharp increases in oil and commodity prices couldprompt them to raise rates even earlier. Although not an immediate concern the spectre ofBS VI emission norms and the vehicle scrappage policy both slated for implementation inApril 2020 looms on the horizon.

Your Company has taken these factors into account in drawing up its plans for the year.While concentrating on its core markets and product segments your company seessignificant opportunities in the rapidly growing construction equipment segment as alsothe LCV and tractor segments. Rising interest rates and intensifying competition arelikely to exert pressure on margins. Your company expects to manage this through financingan appropriate mix of higher and lower yielding assets while ensuring that asset qualitycontinues to remain best in class.

INTERNAL FINANCIAL CONTROLS

The Company has a well-established internal financial control and risk managementframework with appropriate policies and procedures to ensure the highest standards ofintegrity and transparency in its operations and a strong corporate governance structurewhile maintaining excellence in services to all its stakeholders. Appropriate controls arein place to ensure: (a) the orderly and efficient conduct of business including adherenceto policies (b) safeguarding of assets (c) prevention and detection of frauds / errors (d)accuracy and completeness of the accounting records and (e) timely preparation of reliablefinancial information.

RISK MANAGEMENT

Your Company has built a robust risk management framework over the years. Engaged asit is in retail financing the Company has to manage various risks including creditrisk liquidity risk interest rate risk and operational risk. The Risk ManagementCommittee and the Asset Liability Management Committee review and monitor these risks on aregular basis. The Company manages credit risk through stringent credit norms establishedthrough several decades of experience in retail lending and continues to follow the timetested practice of personally assessing every borrower before committing to a creditexposure. The Company monitors ALM on an ongoing basis to mitigate liquidity risk whileinterest rate risks arising out of maturity mismatch of assets and liabilities are managedthrough regular monitoring of the maturity profiles. The Company also measures theinterest rate risk by the duration gap method.

Operational risks arising from inadequate or failed internal processes people andsystems or from external events are adequately addressed by the internal control systems.These systems are continuously reviewed monitored and modified as necessary. A stableand experienced management team provides much needed continuity and expertise in managingthe dynamic changes in the market environment. Process improvements and quality controlare on-going activities and are built into the employees' training modules as well. TheCompany has well documented Standard Operating Procedures for all processes to ensurebetter control over transaction processing and regulatory compliance.

INTERNAL AUDIT

As part of the efforts to evaluate the effectiveness of the internal control systemsyour Company's internal audit department independently evaluates the adequacy of controlmeasures on a periodic basis and recommends improvements wherever appropriate. TheInternal Audit team plays a vital role in continuously monitoring the effectiveness of theStandard Operating Procedures and makes extensive use of software and analytical toolswhich enables effective offsite monitoring.

The internal audit department is manned by highly qualified and experienced personneland reports directly to the Audit Committee of the Board. The Audit Committee regularlyreviews the audit findings as well as the adequacy and effectiveness of the internalcontrol measures.

Additionally an Information Security Assurance Service is also provided by independentexternal professionals. Based on their recommendations the Company has implemented anumber of control measures both in operational and IT related areas apart frominformation security related measures.

HUMAN RESOURCES

In an environment that is rapidly becoming technology and digital oriented yourCompany continues to invest in long term people development for organisationalexcellence. Part of the enduring Sundaram Finance tradition over the decades has beenour adherence to the ‘Sundaram Way'- the value system that has formed the bedrock ofthe Company and the percolation of these values to successive generations of employees.For talent development we have a healthy mix of learning programmes addressing bothdomain knowledge and soft skills. During the year 48% of programmes were for domainknowledge and 52% in the area of soft skills involving 4600 man hours of learning. YourCompany launched the Sundaram Finance Centre of Excellence (CoE) in 2016-17 with a viewto effectively leverage technology to accelerate the pace of institutional knowledgetransfer across the Sundaram Finance landscape while still retaining the spirit of ourGurukulam system. The response has been very enthusiastic and over 1600 employees took theexams under various modules of the CoE during the year. The ‘Educator OrientationProgrammes' for the senior managers who act as guides and facilitators to those who takethe CoE examinations every month has been institutionalised.

INFORMATION TECHNOLOGY

During the year the Board of Directors formed the IT Strategy Committee as requiredby RBI. The Committee has since framed the policies and procedures relating to CyberSecurity Business Continuity Outsourcing and Information Security / Technology in linewith its terms of reference.

Your Company has a State of the Art Data Centre catering not only to its own needs butalso those of its subsidiaries and associates with a capacity of over 300 serversmanaged by professionals providing 24/7 support with over 99.99% uptime. The Data Centreis accredited for ISO/IEC 27001:2013 by TUV Rheinland for Information Security ManagementSystem. The Disaster Recovery Site for all critical applications is hosted at a separatefacility located in a different seismic zone with near real-time data replication. Yourcompany has implemented various protocols for managing Information and Cyber securityacross the organization.

The internal IT Team has mastered a complex landscape of current technologiesmarketing approaches and operational capabilities to cater to the various businessapplications within the Company. Digital services and operations are raising thecompetitive bar in every sector. Your Company's digital strategy is driven by the twinobjectives of making life easier for our employees and enhancing the customer experience.Our digital initiatives address these very objectives by providing a host of digitaloptions for our customers to interact and transact with us and a number of productivityenhancements through process automation which free up our people to deliver the unique‘Sundaram Experience' to our customers.

We are a relationship centric business and have consciously adopted digital to augmentthese relationships and be digitally available for our customers as and when they need usto be.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129(3) of the Companies Act 2013 theConsolidated Financial Statements drawn up in accordance with the applicable AccountingStandards form part of the Annual Report. A separate statement containing the salientfeatures of the financial statements of Subsidiaries and Associates in Form AOC-1 formspart of the Annual Report.

The annual accounts of all the Subsidiary Companies have been posted on your Company'swebsite – www.sundaramfinance.in. Detailed information including the annualaccounts of the Subsidiary Companies will be available for inspection by the members atthe registered office of the Company and will also be made available to the members uponrequest.

SUBSIDIARIES

Sundaram BNP Paribas Home Finance Limited

The company approved loans aggregating to Rs 2996 cr. (Previous year Rs 2077 cr.).Disbursements during the year were higher by 43% at Rs 2626 cr. (PY Rs 1831 cr.).

The company earned a gross income of Rs 898 cr. (PY Rs 923 cr.) and reported aprofit after tax at Rs 136 cr. (PY Rs 154 cr.). The loan portfolio under management as at31st March 2018 stood at Rs 8336 cr. as against Rs 7639 cr. in the previous year. Thegross and net NPA stood at 3.27% and 1.09% respectively as of 31.03.2018. The companyproposed a dividend of Rs 3.50 per share for the year (PY 35%).

Royal Sundaram General Insurance Co. Ltd (Royal Sundaram)

Royal Sundaram reported a robust increase of 19.9% in

Gross Written Premium (GWP) at Rs 2643 cr. as compared to Rs 2205 cr. in the previousyear. Profit after tax for the year was Rs 83.00 cr. as against Rs 43.05 cr. in theprevious year.

Sundaram Asset Management Company Limited

Sundaram Asset Management Company Limited reported a gross income of Rs 308.04 cr. asagainst Rs 260.52 cr. in the previous year. Profit after tax was significantly higher atRs 38.24 cr. as compared to Rs 30.73 cr. during the previous year. The Average Assetsunder Management amounted to Rs 34306 cr. for the year 2017-18 as compared to Rs 28260cr. in the previous year. The company recommended a dividend of Rs 4/- per share for theyear on the paid-up capital of Rs 35 cr.

Sundaram Trustee Company Limited

Sundaram Trustee Company Limited earned a gross income of Rs 1.50 cr. as against Rs1.23 cr. in the previous year and reported a profit after tax of Rs 0.80 cr. for theyear as against Rs 0.58 cr. in the previous year. The company recommended a dividend ofRs 100/- per share for the year.

LGF Services Limited

During the year LGF Services Limited reported a gross income of Rs 1.90 cr. as againstRs 4.39 cr. in the previous year. The profit after tax for the year was Rs 0.34 cr. asagainst Rs 0.83 cr. in the previous year. The company proposed a dividend of Rs 25/- pershare for the year same as during the previous year.

Sundaram BNP Paribas Fund Services Limited

Sundaram BNP Paribas Fund Services Limited earned an income of Rs 40.96 cr.during the year an increase of 25.03% over the previous year. The company's reported losswas lower at Rs 0.22 cr. during the year as against Rs 4.62 cr. in the previous year.

BOARD & AUDIT COMMITTEE

The details regarding number of board meetings held during the financial year andcomposition of Audit Committee are furnished in the Corporate Governance Report.

DIRECTORS

Sri S. Viji and Sri S. Ram retire by rotation and being eligible offer themselves forre-election.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Companies Act 2013 that the Independent Directors ofthe Company meet with the criteria of their Independence laid down in Section 149(6).

ANNUAL EVALUATION BY THE BOARD

The Board has made a formal evaluation of its own performance and that of itscommittees and individual directors as required under Section 134(3)(p) of the CompaniesAct 2013.

DIRECTORS' RESPONSIBILITY STATEMENT

Your directors confirm that:

1. In the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

2. The Company has selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the company at the end of the financial year and of theprofit of the company for that period;

3. Proper and sufficient care has been exercised for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;

4. The annual accounts have been prepared on a going concern basis;

5. Adequate internal financial controls have been put in place and they are operatingeffectively; and

6. Proper systems have been devised to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.

AUDITORS

M/s Sundaram & Srinivasan Chartered Accountants Chennai were appointed asStatutory Auditors of your Company to hold office for a term of five (5) consecutiveyears from the conclusion of the 64th Annual General Meeting until the conclusion of the69th Annual General Meeting. Their appointment for periods subsequent to the conclusion ofthe 65th Annual General Meeting shall be subject to one time ratification by the membersat the ensuing Annual General Meeting at such remuneration as may be mutually agreedbetween the Board of Directors of the Company and the Statutory Auditors.

A certificate from the Auditors that they satisfy the conditions prescribed under theCompanies Act 2013 and the Rules made thereunder (including satisfaction of criteriaunder Section 141 of the Companies Act 2013) has been received from them.

AWARDS AND RECOGNITION

Your Company was chosen for Mahindra Transport Excellence Award instituted by Mahindra& Mahindra Limited in the category ‘Enablers of Social Change' in recognitionof the outstanding contribution made by your Company in fostering and developing thetransport ecosystem especially single truck owners and small fleet owners over severaldecades.

ACKNOWLEDGEMENT

Your directors gratefully acknowledge the support and cooperation extended to yourCompany by all its customers depositors shareholders and bankers as also the variousmutual funds insurance companies automotive manufacturers and dealers.

Your directors also place on record their special appreciation of Team Sundaram fortheir dedication and commitment in delivering the highest quality of service to every oneof our valued customers.

For and on behalf of the Board
Chennai 600 002 S VIJI
25.05.2018 Chairman