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Sundaram Finance Ltd.

BSE: 590071 Sector: Financials
NSE: SUNDARMFIN ISIN Code: INE660A01013
BSE 00:00 | 12 May 2400.75 -8.45
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2398.80

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2413.70

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NSE 00:00 | 12 May 2406.80 1.50
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2415.00

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2417.00

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2370.00

OPEN 2398.80
PREVIOUS CLOSE 2409.20
VOLUME 396
52-Week high 2883.95
52-Week low 1165.00
P/E 36.50
Mkt Cap.(Rs cr) 26,672
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 2398.80
CLOSE 2409.20
VOLUME 396
52-Week high 2883.95
52-Week low 1165.00
P/E 36.50
Mkt Cap.(Rs cr) 26,672
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 67th Annual Report together with auditedaccounts for the year ended 31st March 2020. The summarised financial results ofthe Company are presented hereunder:

FINANCIAL RESULTS: STANDALONE

Particulars Year ended Year ended
March 31 2020 March 31 2019
Revenue from Operations 3842.09 3321.51
Other Income 84.85 20.56
Total Revenue 3926.94 3342.07
Less: Total Expenses 2981.82 2446.79
Profit before exceptional items and tax 945.12 895.28
Add: Exceptional item NIL 592.43
Profit before tax 945.12 1487.71
Profit after Tax 723.95 1126.31
Other Comprehensive Income 55.92 (4.02)
Surplus brought forward 444.76 767.20
Less: Transfer to COVID-19 Reserve (net of deferred tax) 20.34
Amount available for appropriation 1204.28 1889.49
Appropriations to:
- Statutory Reserve 144.79 225.26
- General Reserve 246.75 997.30
Dividend
- Interim 2017-18 55.55
- Final 2017-18 77.77
- Interim 2018-19 55.55
- Final 2018-19 138.88
- Interim 2019-20 111.10
Dividend Tax 43.25 33.30
Surplus carried to balance sheet 519.51 444.76

DIVIDEND

Your Company paid an interim dividend of Rs10/- per share in February 2020. Yourdirectors are pleased to recommend a final dividend of Rs3/- per share which togetherwith the interim dividend would aggregate to a total dividend of Rs13/-per share (130 %on the face value of Rs10/-) representing a dividend pay-out of 22.90% (includingdividend d istribution tax)

The Dividend Distribution Policy formulated in accordance with the provisions ofRegulation 43A of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is attached as part of this report vide Annexure I.

CORPORATE GOVERNANCE

A detailed report on corporate governance together with a certificate from theSecretarial Auditor 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 the Company have been reviewedby 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 such related parties under Section 188 of the Companies Act2013 during the year. Form AOC-2 as required under Section 134 (3) (h) of theAct read with Rule 8 (2) of the Companies (Accounts) Rules 2014 is attached as part ofthis report vide Annexure III (i). Further the Company's policy on Related PartyTransactions is attached as part of this report vide Annexure III (ii).

The Company did not enter into any transactions with any person or entity belonging tothe promoter or promoter group and holding 10% or more shareholding in the Company.

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 Year2019 – 2020 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) Act2013. An Internal Complaints Committee (ICC) has been set up to redress complaints. Allemployees (permanent contractual temporary trainees) are covered under this policy. Nocomplaints were received during the financial year nor were any pending unresolved as on31st March 2020.

SECRETARIAL AUDIT

In terms of Section 204 of the Companies Act 2013 and the rules thereunder theCompany has appointed M/s Damodaran & Associates Practising Company Secretaries asthe Secretarial Auditor of the Company. The Secretarial Audit Report as provided by themis annexed to this Report vide Annexure 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 9375 stock options to select eligible employees on 29th May 2020. 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 in MGT-9 is annexed aspart 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 OFTHE COMPANIES (ACCOUNTS) RULES 2014

Your company has no activity relating to conservation of energy or technologyabsorption. During 2019 - 2020 expenditure in foreign currencies amounted to Rs85.14 cr.Foreign currency earnings amounted to Rs2.60 cr.

MANAGEMENT DISCUSSION AND ANALYSIS

Global Economy

The IMF in its World Economic Outlook (WEO) Update of January 2020 estimated globaloutput to grow at 2.9 per cent in 2019 declining from 3.6 per cent in 2018 and 3.8 percent in 2017 representing the slowest growth since the global financial crisis of 2009arising from a geographically broad-based decline in manufacturing activity and trade. Theongoing strains in trade relations between China and the US have contributed significantlyto the decline of world output and trade. The growth of advanced economies and OECDcountries declined from 2.5 per cent in 2017 to 2.2 per cent in 2018 and was estimated tofurther decline to 1.7 per cent in 2019.

The IMF Outlook had projected a rebound in global economic growth in 2020 with a modestuptick to 3.3 per cent. However the COVID-19 outbreak altered everything within a fewshort weeks. The COVID-19 pandemic is a global health crisis like none other in livingmemory. It has triggered the most severe global economic recession in nearly a century andis causing untold damage to people's lives and livelihoods. As per an OECD Report theglobal economy is now experiencing the deepest recession since the Great Depression of the1930s with GDP declines of more than 20% and a surge in unemployment in many countries.Even in countries where containment measures have been relatively light early data isalready showing that the economic and social costs of COVID-19 will be significant.

Indian Economy

Amidst a weak global environment for manufacturing and trade India's GDP growthmoderated to 4.8 per cent in H1 of 2019-20 from 6.2 per cent in H2 of 2018-19 and is nowprojected at 4.2% for the year 2019-20. On the other hand India's external sector faredbetter with the Current Account Deficit (CAD) narrowing to 0.2% of GDP in the thirdquarter of the 2019-20 from 2.7% in the same period a year ago mainly driven by theeasing of crude oil prices. This was accompanied by impressive Foreign Direct Investment(FDI) and portfolio inflows resulting in a healthy accretion to foreign exchange reserveswhich stood at USD 474 billion at the end of March 2020 as compared to USD 412 billion atthe end of the previous year as per RBI data.

The gross fiscal deficit increased to 3.8% for the year ending March 2020 reflecting aslowing economy and revenue collection pressures as compared to 3.4% for the year2018-19. The Rupee witnessed a depreciation of 8.3% against the dollar ending the fiscalyear at Rs74.35.

With the onset of COVID-19 cases in India mobility constraints on international travelwere imposed even before a national "Lockdown" from 25th March 2020. Soon afterthe lockdown was announced the Government came out with a relief package targetedprimarily at low income households and MSMEs. This relief took the form of cash transferssubsidised food grains free gas cylinders and interest free loans besides variousmeasures by RBI to encourage bank lending to the MSMEs small NBFCs and other sectorswhere resources for restart or revival were critically needed.

On 27th March 2020 RBI reduced the policy (repo) rate by 75 basis points to 4.4%. Inorder to boost liquidity RBI unveiled total liquidity support of Rs375000 crores(roughly US$50 billion or 1.7% of GDP) across programs including the targeted longer-termrefinancing operations (TLTRO). The RBI also permitted all lending institutions includingNBFCs to offer a moratorium of three months to their borrowers on repayment of all termloan instalments falling due between March and May 2020.

On 17th April 2020 RBI added to its liquidity measures by announcing a second round ofTLTRO aimed specifically at providing liquidity to NBFCs. On 22nd May 2020 RBI reducedthe policy rate by a further 40 basis points to 4% and the reverse repo rate by 40 basispoints to 3.35%. RBI also permitted the moratorium to be extended for a further period ofthree months ending August 31 2020.

The year was also significant from the standpoint of tax reforms with the governmentannouncing several changes of which the significant ones were:

• Reduction of the effective corporate tax rate from 34.9% to 25.17% (inclusiveof cess and surcharge) for all domestic companies subject to the condition that theywould not be eligible for any other incentives or exemptions.

• Introduction of Sabka Vishwas Legacy Dispute Resolution

Scheme and Vivad Se Vishwas Scheme to reduce litigation in Indirect and Direct taxes.

• Dividends to be taxed in the hands of individuals; Dividend distribution taxscrapped – both effective 1st April 2020.

Automotive Sector

The year under review continued to be a difficult one for the automotive industry.Among the various segments commercial vehicles (CV) were the worst affected due toslowing economic growth and excess capacity in the system. The decline in Commercialvehicle sales that began in October 2018 following the announcement of the revised axleload norms in July 2018 continued relentlessly through 2019-20. Overall CV salesdeclined 29% with Medium & Heavy Commercial Vehicles and Light Commercial Vehiclesdeclining 56% and 19% respectively versus the previous year. Demand for commercialvehicles which was tepid to begin with remained depressed during the first half of thefinancial year. Deferrals and cancellations of projects and delayed release of funds tocontractors by various state governments resulted in tight liquidity conditions for themwhile natural calamities in a few states also added to the woes of the road transportoperators. The expected improvement during the latter part of the year did notmaterialise nor did the widely anticipated ‘Pre buying' ahead of the imminenttransition to the BS 6 emission norms from April 1 2020. Passenger vehicle sales (PV)declined 18% reflecting the depressed consumer sentiment. Within PVs Utility vehiclesperformed better registering zero growth while cars declined 24% year on year.

Operating & Financial Performance

Your Company's disbursements at Rs 15175 cr. (PY Rs17170 cr.) were down by11.62% during the year under review reflecting the marked decline in sales across theautomotive sector. Disbursements against Commercial Vehicles declined 18% in unit terms ascompared to the market drop of 29%; disbursements against passenger cars and utilityvehicles also declined 18% mirroring the overall market.

The fourth quarter of the financial year normally witnesses a surge in sales of bothcommercial vehicles and passenger cars. However the general slowdown in economicactivity coupled with the impending switchover to the BS 6 norms and the COVID-19 impactin March 2020 proved to be a significant dampener. Gross receivables managed by theCompany as at March 31 2020 stood at Rs35088 cr. as against Rs33447 cr. agrowth of 4.91% over the previous year. Your Company's tight rein on operating costs andits ability to raise resources at competitive rates enabled it to maintain itsmargins at a reasonably healthy level.

Reflecting the economic slowdown and the cash flow strains faced by its customers theCompany's delinquencies increased during the year. Further the year-end recovery effortswere severely hampered by the nationwide lockdown in March 2020. Stage III assetsGross and net of ECL provisions stood at 2.47% (1.33%) and 1.65% (0.83%) respectively asat 31st March 2020.

In accordance with the COVID-19 Regulatory Package announced by RBI on 27th March 2020your Company has extended the benefit of moratorium for payment of instalments duringMarch 2020 to May 2020 to all eligible customers. Approximately 42% of the customerscovering 64% of the instalments due have opted for the moratorium. In line with the RBInotification dated 17th April 2020 your Company has made the entire standstill provisionof 10% amounting to

Rs 27.18 Cr. wherever asset classification benefit was extended as on 31st March 2020.RBI has since extended the moratorium for a further three months ending 31stAugust 2020. Your company has accordingly decided to extend the moratorium to all eligiblecustomers.

Your company has been maintaining comfortable liquidity in the form of liquidinvestments and undrawn bank limits to meet its maturing liabilities and has not optedfor moratorium in respect of its debt obligations to its lenders.

As per the RBI notification on implementation of Ind AS where the provisions made asper Ind AS 109 are less than the provisions required under the IRAC (income recognitionand asset classification) norms of RBI NBFCs are required to create an ‘impairmentreserve' to provide for such shortfall in provisions. However your Company has notcreated such a reserve as the overall provisions are in excess of the regulatoryrequirements.

The net profit for the year was Rs723.95 cr. as against

Rs604.05 cr. (excluding the exceptional profit (net of tax) of Rs522.26 cr. onsale of 25.9% stake in Royal Sundaram General Insurance Co. Limited) in the previous year.The company's networth stood at Rs5547.36 cr. as on 31.3.2020. Capital adequacy (CRAR) at18.37% was comfortably higher than the statutory requirement of 15%.

There are no significant changes in key financial ratios of the Company for F.Y.2019-20 as compared to F.Y. 2018-19 except for the following;

Net Profit Margin( %) Return on Net Worth(%)
March 2020 March 2019 Variance March 2020 March 2019 Variance
Ratios (including exceptional items) 18.44% 28.63% (34.35%) 13.67% 24.55% (44.30%)
Ratios (excluding exceptional items) 18.44% 18.07% 2.00% 13.67% 13.96% (2.06%)

RESOURCE MOBILISATION

a) Deposits

During the year your Company mobilised fresh deposits aggregating to Rs 925.41 cr.Renewal of deposits during the year amounted to Rs 1174.09 cr. representing 86% of thematured Deposits of Rs1374.10 cr. Deposits outstanding at the year-end were at Rs 3676.19cr. as against Rs2975.16 cr. in the previous year. The Net accretion for thefinancial year was Rs 701.03 cr. representing the highest ever in the history of yourCompany. As at 31st March 2020 4372 deposits amounting to Rs52.00 cr. had matured forpayment and were due to be claimed or renewed. After close follow-up these figures arecurrently 4014 and

Rs43.12 cr. respectively. Continuous efforts are being made to arrange for repayment orrenewal of these deposits. There has been no default in repayment of deposits or paymentof interest thereon during the year. Investor Relation Services – Deposits continueto enjoy the ISO 9001:2015 Certification from Bureau Veritas (India) Private Limited.

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 Rs7182 cr. across varying tenors.

c) Bank Finance

As part of the overall funding plan your Company's working capital limits withConsortium banks were retained at Rs3000 cr. During the year your Company alsoissued several tranches of commercial paper aggregating to Rs9160 cr. The maximum amountoutstanding at any time was Rs5735 cr. and the amount outstanding at the end of the yearwas Rs3700 cr.

d) Assets Securitised / Assigned

During the year your Company raised resources to the extent of Rs3106 cr. throughsecuritisation and assignment of receivables.

CREDIT RATINGS

Your Company's long term credit ratings have been retained at "AAA" (HighestDegree of Safety) with a "Stable Outlook" by both ICRA & CRISIL. The shortterm borrowings (including commercial paper) are rated "A1+" (very strong degreeof safety) by both ICRA and CRISIL. Fixed Deposits are rated "AAA" (HighestCredit Quality) by ICRA and CRISIL.

COVID-19

The widespread disruption caused by the nationwide lockdown posed several challengesboth in terms of people safety and technology. As a customer facing business your Companyhad to quickly reorient its approach and processes to respond to the emerging situation.While the primary objective was to ensure the safety of our employees and customers itwas vitally important to ensure that customer service levels were not compromised. Takinga cue from developments in other parts of the country your Company took a number of stepsto enable a ‘Work from home' environment ahead of the nationwide lockdown on 25thMarch 2020. This included putting in place adequate IT security measures to safeguard thetechnology environment while providing access to nearly 3000 users on a real time basis.This ensured continuity of operations and service to customers especially our depositors.All deposit maturities as well redemption of other liabilities were met on or before duedates.

All borrowers were kept continuously informed about the regulatory developmentsespecially regarding the grant of moratorium. This was done entirely using digital methodsand last mile servicing was done by our employees using telephones and digitalcommunications. The digital tools deployed were enhanced to improve the customerexperience.

With the staggered resumption of activity across our branches regional offices andHead office detailed safety protocols were put in place to ensure that workingmethodologies including deep cleaning and fumigation educating and training the staff towear masks importance of social distancing and hand sanitisation / washing withsoap and avoiding physical contact were widely communicated to all our employees. Posterscommunicating the above were printed and are displayed at branches for the benefit ofemployees customers and visitors. Employees were also encouraged to download the AROGYASETHU app.

Your Company also harnessed the power of technology to disseminate extensive trainingto its employees relating to both safety and various functional areas through digitalplatforms. Digital technology was actively used in regular communication with theemployees all over the country as much to ensure adherence to safety standards as to keeptheir morale high.

In April 2020 the Company made a contribution of Rs8 crores towards COVID-19 reliefwork Rs4 crores each to PM CARES FUND and the Tamil Nadu State Government's CMPRF aspart of its CSR commitment for the Financial Year 2020-21.

OUTLOOK

Growth prospects will depend on many factors not least how the pandemic evolves theprospect of future shutdowns the impact of social distancing norms and the implementationof fiscal and monetary policy support. Uncertainty will likely prevail for an extendedperiod. COVID-19 has triggered the deepest global recession in decades. According to theWorld Bank the pandemic will result in contractions across the vast majority of emergingmarket and developing economies. It will also do lasting damage to labour productivity andpotential output. In India output is projected to contract by 3.2% in FY 2020-21 whenthe impact of the pandemic will largely hit. Stringent measures to control the spread ofthe virus will heavily curtail activity despite some support from fiscal and monetarystimulus. Spill overs from weaker global growth and balance sheet stress in the financialsector will also weigh on activity.

The switch over to BS 6 norms effective April 1 2020 could not have come at a worsetime for the Indian automotive industry. Commercial vehicle sales were already projectedto be muted in light of the economic slowdown and the capacity overhang in the haulagesegment. With theCOVID-19 imposed lockdown coming into play this situation has beengreatly exacerbated. While demand in the first two months of the current financial yearhas been virtually non-existent supply chains have been severely affected as well.Unfortunately the prospects of an early turnaround in CV sales seem dim and will dependheavily on a sustained revival in economic activity and improvement in the movement ofgoods and passengers. The Infrastructure sector could offer a big opportunity. Budgetaryallocations for this sector are significant and if the various projects get underway theycould provide a boost to CV sales.

Passenger Cars after a dismal performance in the previous year were expected to stagea revival in the current financial year but the pandemic intervened. There is a school ofthought that with social distancing set to become the norm demand for ‘Personaltransportation' could see a surge especially in the entry level segments. If thishypothesis is proved right it might provide a boost to car sales especially in the latterhalf of the year.

Much of the credit demand in the near term however will be for working capital ratherthan asset acquisition. Small businesses including transport operators whose livelihoodshave been frozen for nearly two months will need working capital to restart theirbusinesses and regain their livelihoods.

Rural India has thus far been relatively unaffected by the pandemic. A bountiful rabiharvest followed by efficient procurement the recently announced increase in MSP and theprospect of a normal monsoon in the current year augur well for the agricultural sectorand should lead to a growth in sales of tractors and associated farm equipment.

INTERNAL FINANCIAL CONTROLS

The Company has a well established internal financial control and risk managementframework to ensure the highest standards of integrity and transparency in its operationsand a strong corporate governance structure. Appropriate controls are in place to ensure:

a) the orderly and efficient conduct of business including adherence to policies.

b) safeguarding of assets

c) prevention and detection of frauds/errors.

d) accuracy and completeness of accounting records and

e) timely preparation of reliable financial 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 can arise due to changes in business environment or changes inprocesses affecting the control effectiveness. The Internal audit team reviews theprocesses and controls to ensure the design effectiveness and adequacy of controls tomitigate risk. A stable and experienced management team provides much needed continuityand expertise in managing the dynamic changes in the market environment. The company haswell documented standard operating procedures for all processes to ensure better controlover transaction processing and regulatory compliance and periodical review of the sameensures that the risks including technology risks are mitigated. While meeting thestrategic objectives is the key driver our values and culture that are enshrined in theSundaram Way of doing business and the obligations and commitment to our customersemployees deposit holders and the community around us are the foundations on which ourrisk framework rests. The detailed Risk Management Framework of your Company has beenfurnished in the Notes to the Accounts under Note.38 for your information.

In November 2019 Reserve Bank of India revised the extant guidelines on liquidity riskmanagement for NBFCs in order to strengthen the Asset Liability Management (ALM)framework applicable to these entities. Amongst several other requirements the guidelinesmainly prescribe adherence to Liquidity Coverage Ratio (LCR). LCR seeks to ensure thatNBFCs have an adequate stock of unencumbered High-Quality Liquid Assets (HQLA) that can bereadily and immediately converted into cash to meet the liquidity needs for a 30calendar-day time horizon under a significantly severe liquidity stress scenario. LCRrequirement shall be binding on NBFCs from December 1 2020 with the minimum HQLA to beheld being 50% of the LCR progressively reaching up to the required level of 100% byDecember 1 2024. Your Company is in the process of implementing the liquidity riskframework as required by the regulations.

INTERNAL AUDIT

As part of its 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 or remote auditing. A robust process ensures that theInternal Audit team regularly updates its skills and knowledge base in order to analyseassess mitigate and monitor the controls and guard against inadequacies that could pose athreat to the company's strategic objectives. Systematic identification of risks on aproactive basis enables quick decision making on strengthening and redesigning thecontrols where required through agile audit plans. The internal audit function is fullygeared to meet the emerging challenges in the post COVID-19 era.

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. To ensure adequate strengthening of controlssurrounding information security and mitigate technology risks external informationsystems auditors carry out audits on both network and application systems. They work alongwith Internal Audit teams to ensure adequate independence while reviewing IT applicationsinfrastructure and network management.

In the wake of COVID-19 the Internal audit team along with the information systemsauditors are redefining the scope of coverage to address future risks as part of the riskmitigation strategy and to facilitate strengthening of the internal IT control systems.

INFORMATION TECHNOLOGY

The IT Strategy Committee of the Company has laid down a comprehensive policy relatingto Cyber Security Business Continuity Outsourcing and Information Security andTechnology in line with its terms of reference.

Your Company is strictly following the IT Framework Master Directions laid down by RBIon Information and Cyber Security where effective IT Governance involves leadershipsupport organisational structure and processes.

Your Company has a State-of-the-Art Data Centre catering not only to its own needs butalso to 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 continues to scale up and modernise its IT infrastructure to provide best-in-classcapabilities to support the business needs. Your company has implemented various protocolsfor managing Information and Cyber security across the organization. In its continuousefforts to ensure a secure environment your Company has built a robust infrastructure andcarries out comprehensive vulnerability assessments and penetration testing periodicallyto identify and minimise external threats.

The in house 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 enriching our employee's jobs on the one hand while enhancing the customerexperience on the other. Our digital initiatives address these very objectives byenhancing our speed of response to our customers and providing them a host of digitaloptions to interact and transact with us and a number of productivity enhancementsthrough process automation which free up our people to deliver the unique ‘SundaramExperience' to our customers. Your company is continuously investing in updating its ITapplication platforms to ensure reliability and minimise any risks of obsolescence.

We are a relationship centric business and have consciously adopted a digital strategyto augment these relationships and be digitally available for our customers as and whenthey need us.

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-I formspart of the Annual Report.

The Consolidated profit after tax is Rs791.54 cr. as against

Rs1160.85 cr. of the previous year. The total comprehensive income for the year wasRs754.81 cr. as against Rs1012.79 cr.

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

SUBSIDIARIES

Sundaram Finance Holdings Limited

Sundaram Finance Holdings Limited reported a gross income of Rs94.35 cr. as againstRs120.71 cr. in the previous year. Profit after tax was Rs61.39 cr. as compared to Rs84.93cr. in the previous year a clear reflection of the downturn in the automotive sector. Thecompany has recommended a final dividend of Rs0.50 per share (10%) for the year ended 31stMarch 2020. This together with Interim dividend amounting to Rs0.75 per share (15%)already paid would aggregate to a total dividend of Rs1.25 per share (25% on the facevalue of Rs5/- per share).

Sundaram Home Finance Limited (Formerly

Sundaram BNP Paribas Home Finance Limited)

The company approved loans aggregating to Rs2240 cr. (Previous year Rs2672 cr.).Disbursements during the year were lower by 14% at Rs2113 cr. (PY Rs2449 cr.). The companyearned a gross income of Rs1078.87 cr. (PY Rs1006.27 cr.) and reported a profitafter tax at Rs218.15 cr. (including one-time reversal of deferred tax liability ofRs60.25 cr.). (PY Rs 145.47 cr.). The loan portfolio under management as at 31st March2020 stood at Rs9456 cr. as against Rs9064 cr. in the previous year. Stage III assetsGross and net of ECL provisions stood at 3.77% and 1.63% respectively as at 31st March2020. The company has recommended a final dividend of Rs3.00 per share (30%) for the yearended 31st March 2020. This together with Interim dividend amounting to Rs1.20 per share(12%) already paid would aggregate to a total dividend of Rs4.20 per share (42%).

During the year your Company acquired the 49.9% equity stake held by BNP ParibasPersonal Finance S.A. France in Sundaram BNP Paribas Home Finance

Limited (SHFL) for a consideration of Rs99966.92 lakhs. Consequently SHFL became awholly-owned subsidiary of your company effective 30th September 2019 and was rechristenedas Sundaram Home Finance Ltd effective 18th November 2019.

Sundaram Asset Management Company

Limited (On consolidated basis)

The Company reported a consolidated gross income of

Rs300.50 cr. as against Rs330.28 cr. in the previous year. Consolidated Profit aftertax was Rs32.69 cr. as compared to Rs28.84 cr. during the previous year. The AverageAssets under Management amounted to Rs36920 cr. for the year 2019-2020 as compared toRs35677 cr. in the previous year. The company has recommended a final dividend of Rs7.50per share (75%) for the year ended 31st March 2020.

Sundaram Trustee Company Limited

Sundaram Trustee Company Limited earned a gross income of Rs1.49 cr. as against Rs1.51cr. in the previous year and reported a profit after tax of Rs 0.80 cr. for the year asagainst Rs0.80 cr. in the previous year. The company recommended a dividend of Rs 140 pershare (1400%) for the year ended 31st March 2020.

LGF Services Limited

During the year the Company reported a gross income of

Rs0.19 cr. as against Rs 0.38 cr. in the previous year. The profit after tax for theyear was Rs0.11cr. as against Rs0.25 cr. in the previous year. The company recommended adividend of Rs6 per share for the year.

Sundaram Fund Services Limited (Formerly Sundaram BNP Paribas Fund Services Limited)

Sundaram Fund Services Limited (formerly Sundaram BNP Paribas Fund Services Limited)earned an income of Rs5.31cr. during the year as against and Rs35.25 cr. in the previousyear. The company reported a profit after tax at Rs0.58 cr. from continuing operations andRs15.84 cr. from discontinued operations as against a loss of Rs8.68 cr. in the previousyear.

During the year your Company acquired the 49% equity stake held by BNP ParibasSecurities Services France in Sundaram BNP Paribas Fund Services Limited (SBFS) for aconsideration of Rs150 lakhs. Consequently SBFS became a wholly-owned subsidiary of yourCompany on 31st July 2019 and its name was subsequently changed to Sundaram FundServices Ltd.

In August 2019 the company entered into a slump sale arrangement pursuant to which ittransferred its Business comprising a) Services of a Registrar to an Issue and ShareTransfer Agent for Mutual Fund unit schemes and back office functions in relation theretoand b) Back office and Fund Accounting services to alternative investment funds/ PrivateEquity to KFin Technologies Private Limited.

JOINT VENTURE

Royal Sundaram General Insurance Co. Ltd

(Royal Sundaram)

Royal Sundaram reported a robust increase of 16% in Gross Written Premium (GWP) atRs3710 cr. as compared to Rs3196 cr. in the previous year. The company however reporteda loss after tax of Rs76 cr. for the year as against a profit after tax of Rs113 cr. inthe previous year. The current year's results were adversely affected as the Companyprovided Rs164.11 cr. (net of tax) towards impairment in respect of its debt exposure andMTM on equity investments (Previous year Rs7.71 cr.).

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.

KEY MANAGEMENT PERSONNEL

Sri A N Raju Director (Operations) was reappointed for a period of five years witheffect from 1st April 2019

DIRECTORS

Sri A. N. Raju and Sri Harsha Viji Directors retire by rotation and being eligibleoffer themselves for re-election. Based on the recommendations of the NominationCompensation and Remuneration Committee Sri Rajiv C Lochan an Independent Director onthe board of your Company has been appointed as a Wholetime Director with effect from 3rdJune 2020 and designated as Director - Strategy. The Company would be takingnecessary steps to bring the composition of the Board in line with the regulatoryprescriptions within the timelines prescribed under the regulatory framework.

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 have been appointed asStatutory Auditors of your

Company to hold office for a term of five (5) consecutive years from the conclusion ofthe 64th Annual General Meeting until the conclusion of the 69th Annual General Meeting atsuch remuneration as may be mutually agreed between the Board of Directors of the Companyand the Statutory Auditors.

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 for itsdedication and commitment in delivering the highest quality of service to every one of ourvalued customers.

For and on behalf of the Board
Chennai 600 002 S VIJI
29.05.2020 Chairman

.