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Ujjivan Financial Services Ltd.

BSE: 539874 Sector: Financials
NSE: UJJIVAN ISIN Code: INE334L01012
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VOLUME 114908
52-Week high 415.40
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P/E 230.07
Mkt Cap.(Rs cr) 2,042
Buy Price 167.80
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Sell Price 168.05
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OPEN 167.50
CLOSE 169.50
VOLUME 114908
52-Week high 415.40
52-Week low 124.55
P/E 230.07
Mkt Cap.(Rs cr) 2,042
Buy Price 167.80
Buy Qty 68.00
Sell Price 168.05
Sell Qty 232.00

Ujjivan Financial Services Ltd. (UJJIVAN) - Director Report

Company director report

To the Members

Your Directors are pleased to present the 15th Annual Report of Ujjivan FinancialServices Limited together with the audited financial statements for the financial yearended March 31 2019. For the benefit of all stakeholders the annual report for the FY2018-19 of the material wholly owned subsidiary ‘Ujjivan Small Finance Bank Limited'is also included in a separate section of this document.

1. Financial Results

The Directors' submit the Annual Report of Ujjivan Financial Services Limited (the"Company" or "Ujjivan") alongwith the audited financial statements forthe financial year (FY) ended

(Rs. in Crores)

Particulars Standalone* Consolidated*
FY 2018-19 FY 2017-18 FY 2018-19 FY 2017-18
Operating Income 22.00 - 1952.98 1514.78
Other Income 8.62 7.74 60.64 29.92
Total Income 30.62 7.74 2013.62 1544.70
Less: Operational Expenses
Personnel Expenses 1.63 0.93 540.53 373.35
Administrative Expenses 5.08 3.21 415.58 247.35
Finance Charges 0.00 0.01 727.03 601.56
Depreciation 0.02 0.01 60.62 41.38
Impairment Losses on Financial Instruments - - 65.76 236.43
Total Operational Expenses 6.73 4.16 1809.52 1500.07
Profit/(Loss) Before Tax 23.89 3.58 204.10 44.63
Less: Income tax 2.31 2.56 37.22 33.88
Less Deferred tax 0.00 0.01 16.44 -15.20
Profit/(Loss) After Tax 21.58 1.00 150.44 25.95

* as per Indian Accounting Standards (Ind-AS)

Profitability (Ind-AS versus IGAAP):

FY 2018-19 Ind-AS IGAAP
Standalone Consolidated Standalone Consolidated
Pre-Tax Profits (PBT) 23.89 204.10 23.46 269.88
Profit after Tax (PAT) 21.58 150.44 21.15 198.37
Total Comprehensive Income 21.58 149.83 NA NA

2. Dividend

In accordance with the Dividend Distribution Policy of the Company and in continuationto its dividend payment track record the Company with the approval of its directorsthrough their resolution passed on March 14 2019 has declared and paid an interimdividend of Rs. 0.85 (8.5%) per equity share for the FY 2018-19. The record date for thepurpose of determining the members eligible to receive the interim dividend was fixed asSaturday March 23 2019 and the interim dividend amount of Rs. 10.30 Crores wasdistributed to the shareholders on March 28 2019. after Tax to

Further the Directors are pleased to recommend a final dividend at the rate of Rs.0.45 per share (4.5%) for the FY 2018-19. The final dividend will be subject to theapproval by the members of the Company at the ensuing 15th Annual General Meeting("AGM") of the Company.

The aforesaid final dividend if approved by the shareholders would involve a cash Rs.7.2 Crores (including dividend distribution tax).

3. Transfer to reserves

The Company transferred Rs. 4.32 Crores to Statutory the Reserves. Transfer of 20% ofthe Profit statutory reserves in accordance with the provisions of section 45 IC ReserveBank of India Act 1934.

4. Credit Rating

The Company has zero debt; hence no rating has been obtained from any rating agenciesduring the year.

5. Capital Requirements

Adjusted Net Worth of a CIC-ND-SI shall at no point of time be less than 30% of itsaggregate risk weighted assets on balance sheet and risk adjusted value of off-balancesheet items as on the date of the last audited balance sheet as at the end of thefinancial year as per RBI CIC Master Directions.

The Company as of March 31 2019 is in compliance with the below capital requirementsand all other mandatory ratios as required under RBI CIC Master Directions:

Ratios RBI Requirement Actuals (%)
CAR >30% of RWA 98.46%
Investment ratio >90% of Net Assets 99.98%
Equity Investment Ratio >60% of Net assets 87.98%
Leverage Ratio <2.5 Times 0.0790%

6. Corporate Governance and Management

Discussion and Analysis Report

In accordance with SEBI LODR Regulations Management Discussion and Analysis Report andCorporate Governance Report together with the Certificate thereon from the IndependentPracticing Company Secretary is provided separately and forms part of this Directors'Report.

7. Extract of Annual Return

In accordance with Section 134(3)(a) of the Companies Act 2013 an extract of theAnnual Return in the prescribed format (MGT-9) is appended as "Annexure 1" tothe Board's Report. The complete annual report including the annual return is being placedon our website www.ujjivan.com.

8. Business Responsibility Reporting

The Board of the Company in its meeting held on May 30 2019 has approved the BusinessResponsibility Report ("BRR") of the Company as stipulated under Regulation 34(as amended) of SEBI Listing Regulations which mandates that top 500 listed companiesbased on market capitalization as on March 31 should include its BRR in its Annual Report.The Company is ranked 363 in the list as on March 31 2019.

As a green initiative a copy of the BRR has been hosted on the website of the Companyat www.ujjivan.com and can be accessed from the link belowhttp://ujjivan.com/html/ujjivan_policies.php

9. No. of Meetings of the Board during the FY 2018-19

During the Financial Year 2018-19 our Board has met 7 (seven) times and the meetingsof our Board of Directors were held on April 13 2018 April 23 2018 May 10 2018August 06 2018 November 14 2018 January 23 2019 and March 26 2019. For furtherdetails please refer to the Corporate Governance Report which forms part of this report.

10. Appointment / Reappointments / Retiring Director

(a) Appointment of Mr. Narayan Anand as Director

On the recommendation of the Nomination and Remuneration Committee the Board hasappointed Mr. Narayan Anand (DIN: 02110727) as an additional director (non-executivenon-independent) with effect from May 01 2019. He is holding office till the ensuing 15thAnnual General Meeting of shareholders of the Company. The proposal for his appointment isbeing placed for consideration of shareholders of the Company. Mr. Narayan is eligible forappointment and in respect of whom the Company has received a notice in writing from amember under Section 160(1) of the Act proposing his candidature for the office ofDirector of the Company. His office will be liable to retire by rotation. The Boardrecommends the shareholders to approve his appointment. Please refer item no. 4 of the15th AGM Notice for further details.

(b) Independent Director upcoming completion of tenure

Ms. Vandana Viswanathan (DIN: 05192578) was appointed as an Independent Director by theshareholders for a term of 5 years commencing from September 22 2014 to September 212019 in accordance with the provisions of the Companies Act 2013. She has communicatedher inability to be considered to be appointed for a second term on completion of hertenure due to other commitments.

Her office will be vacated on completion of her tenure on September 21 2019.

(c) Retiring Director opting for non-appointment

As per the provisions of the Companies Act 2013 Mr. Amit Gupta (DIN: 02282600)retires by rotation at the ensuing 15th AGM and though being eligible for re-appointmentis not seeking his re-appointment due to his other commitments. Hence Mr. Amit Gupta willretire at the ensuing 15th AGM of the Company.

11. Directors' Responsibility Statement

Pursuant to Section 134(5) of the Companies Act 2013 the Board of Directors of theCompany confirms and state that:

(i) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(ii) 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 profitand loss of the company for that period; sufficient for

(iii) they have taken proper and the maintenance of adequate accounting records inaccordance with the provisions of this Act for safeguarding the assets of the company andfor preventing and detecting fraud and other irregularities;

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

(v) they have laid down internal financial be followed by the company and that suchinternal financial controls are adequate and effectively; and

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

Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company audit of internal financial controls and thereviews performed by management and the audit committee of the board the board is of theopinion that the Company's internal financialcontrols were adequate and effective duringthe FY 2018-19.

12. Declaration by Independent Directors

The Company has received necessary declarations of independence from each of itsIndependent Directors under section 149(7) of the Companies Act 2013 that he/she meetsthe criteria of independent director envisaged in section 149 (6) of the Companies Act2013.

All Independent Directors have submitted the declaration of Independence as requiredpursuant to Section 149(7) of the Act and including the added criteria prescribed underSEBI Listing Regulations stating that they meet the criteria of Independence as providedin section 149(6) of the Companies Act 2013 and they are not disqualified from continuingas Independent Directors of our Company.

13. Nomination and Remuneration Policy

The Company pursuant to the provisions of Section 178 of the Companies Act 2013 hasformulated and adopted a nomination and remuneration policy which is disclosed on ourwebsite at the below link-http://ujjivan.com/html/ujjivan_policies.php

14. Statutory Auditors

Price Waterhouse Chartered Accountants LLP (FRN: 012754N/N500016) (hereinafter referredto as PW CA LLP) who were appointed as Statutory Auditors of the Company for a tenure offive years from the conclusion of the 13th AGM of the Company held on August 04 2017 hasvide their letter dated May 30 2019 tendered their resignation from the position ofStatutory Auditors from the conclusion of the ensuing 15th AGM of the Company scheduled tobe held on Friday August 02 2019.

PW CA LLP has offered to resign from their position of statutory auditor of the Companyas our Company is desirous of having same network of firms as auditors for both theCompany and its wholly owned subsidiary ‘Ujjivan Small Finance Bank Limited' formutual interests for both PW CA LLP and the Company. PW CA LLP has tendered theirresignation as the statutory auditors of the Company effective immediately afterconclusion of the annual general meeting for the FY 18-19 scheduled to be held on controlsAugust 02 2019. to

Ujjivan Small Finance Bank Limited contributes more were operating than 98% business(total income) of the Company at a consolidated level and that the audit function at thestandalone level of the Company has very minimal scope for financial audit as it is anon-operating holding Company registered as a Core Investment Company with the RBI. Therewill also be cost implications for the Company and the group overall as it willpresumably be more expensive to use two firmsof auditors to provide an audit opinioninstead of one for the same set of business since the Company derives almost all its valuefrom its investments in its wholly owned subsidiary.

Pursuant to the aforesaid resignation of PW CA LLP the Board based on therecommendation of the Audit Committee in its meeting held on May 30 2019 subject to theapproval of the shareholders has appointed MSKA & Associates Chartered Accountants(FRN - 105047W) as the Statutory Auditors of the Company for a period of 5 (five) yearscommencing from the conclusion of the ensuing 15th AGM till the conclusion of 20th AGM ofthe Company to be held in the year 2024. MSKA & Associates Chartered Accountants (FRN- 105047W) being the existing Statutory Auditors of Ujjivan Small Finance Bank Limitedthe Board considered it prudent to appoint MSKA & Associates Chartered Accountants(FRN - 105047W) as the Statutory Auditor of the Company as well for smooth consolidationof the financialsand also for commercial reasons. Please refer to item no. 3 of the 15thAGM notice for further details.

15. Explanations or comments by the Board on every qualification reservation oradverse remark or disclaimer made –

(i) Statutory Auditor's Report

There are no disqualifications reservations adverse remarks or disclaimers in theauditor's report

(ii) By the Company Secretary in practice in his secretarial audit report; SecretarialAuditor

Mr. K. Jayachandran Practicing Company Secretary commencing (ACS No. 11309 andCertificate of Practice No. 4031) was appointed as the Secretarial Auditor of the Companyto conduct secretarial audit of the Company for the Financial Year 2018-19 as requiredunder Section 204 of the Companies Act 2013 and the Rules made thereunder. Thesecretarial audit report for FY 2018-19 is appended as "Annexure 2" to theBoard's Report.

As required under regulation 24A of the SEBI(Listing Obligations and DisclosureRequirements)

Regulations 2015 a separate secretarial audit report given by the Secretarial AuditorMr. K. Jayachandran in the format as prescribed by SEBI in this regard is appended as"Annexure 3" The Secretarial Audit Report does not contain any qualificationreservation or adverse remark made by the Secretarial Auditor.

Further Mr. K. Jayachandran Practicing Company Secretary (ACS No. 11309 andCertificate of Practice No. 4031) has through his certificate dated May 30 2019 hascertified that none of the directors on the Board of the Company have been debarred ordisqualified from being appointed or continuing as director of companies by the Board /Ministry of Corporate Affairs or any such statutory authority. The said certificate isappended as "Annexure 4" to theBoard's Report.

16. Particulars of loans guarantees or investments under Section 186

The Company has not given any loans and guarantees to any-body corporate and has notmade any investment under Section 186.

17. Transaction with related parties

Pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies(Accounts) Rules 2014 there are no transactions to be reported under Section 188(1) ofthe Act in Form AOC-2.

There were no contracts or arrangements or transactions entered into during the yearended March 31 2019 which were not at arm's length basis.

Your Directors draw attention of the members to Note 28 to the Financial Statementswhich sets out other related party disclosures.

All Related Party Transactions as required underAccounting Standards AS-18 are reportedin Note 28 - Notes to Accounts of the Standalone financial statements of the Company.

18. The state of the Company's

The Company is registered with RBI as a Non Deposit taking Systemically Important CoreInvestment Company (NBFC-ND-SI-CIC). The Company is in compliance with the conditions ofthe Master Direction - Core Investment Companies (Reserve Bank) Directions 2016 asamended. Prior to its conversion to a Core Investment Company the Company was one of thelargest microfinance institutions in the country. The conversion was done based on thestipulation of the Reserve Bank of India while approving the Company to set up the smallfinance bank business.

The Company is the non-operating 100% holding Company of ‘Ujjivan Small FinanceBank Limited' and being a CIC the Company has its investments primarily in the bank. TheBoard of the Company has an effective oversight on the statutory and policy relatedcompliances which the Bank has to ensure in its day to day functioning.

19. Material changes and commitments if any affecting the financial position of thecompany which have occurred between the by end of the financial year of the companyto which the financial statements relate and the date of the report;

None

20. The conservation of energy technology absorption foreign exchange earnings andoutgo in the manner as prescribed in Rule 8(3) of the Companies (Accounts) Rules 2014

Conservation of energy and technology absorption

Since the Company does not own any manufacturing facility the particulars relating toconservation of energy and technology absorption are not applicable.

The Foreign Exchange earnings and outgo

There was no Foreign Exchange inflow and outflow during the year.

21. Development and implementation of risk management policy

The Company is a non-operating holding Company and its main objects are to carry on thebusiness of making investments in group company(ies) in the form of securities andproviding guarantees etc. and to carry on financial activities whether in India oroutside in the nature of investment in bank deposits money market instruments (includingmoney market mutual funds and liquid mutual funds) government securities and to carry onsuch other activities as may be permitted and prescribed by the relevant statutoryauthorities for core investment companies from time to time.

AsaCoreInvestmentCompanywithakeyinvestmentin the bank which is our 100% subsidiary theCompany's Board has an oversight function of USFB. We have entered into a Memorandum ofUnderstanding (MoU) which includes sharing of information related to business andperformance of SFB with the Company and to its Board to facilitate effective oversightand compliance with statutory and regulatory requirements under SEBI Listing Regulations.Thus a set of information including monthly and quarterly business and regulatory reportsand returns Board and committee meeting related minutes and other information issystematically shared by the bank and reviewed by the Board of the Company.

USFB has a Risk Management Committee in place which consists of well experiencedDirectors from diverse background who bring in the best risk practices to the organizationand that the Committee of the bank reviews its risk management framework and verifiesadherence to various risk parameters and compliances.

The Company is satisfied that its wholly owned subsidiary has a well-defined riskmanagement strategy based on clear understanding of various risks disciplined riskassessment and continuous monitoring.

The risk management Committee of the subsidiary approves and makes recommendations toits Board regarding all its risk-related responsibilities including the review of majorrisk management and regulatory compliances.

As required under the Regulation 21(5) of the SEBIListing Regulations the Company hasconstituted the Risk Management Committee of the Board with effect from April 01 2019 andits terms of reference comprises of the following:

(i) To review its investment in its subsidiary Ujjivan Small Finance Bank and toevaluate overall risks faced by its subsidiary and help in mitigating the risks

(ii) To oversee the risk management policies and procedures of its subsidiary

(iii) As the listed holding Company of the Bank to closely monitor the reputationalrisk of both entities

(iv) To do such other acts deeds and things as may be directed by the Board andrequired to comply with the applicable laws

The Company has in place an effective risk management policy which highlights thefunctions implementation and the role of the committee and the board.

22. Corporate Social Responsibility

The Corporate Social Responsibility (CSR) programs were started by the Company in theyear 2010 much before it was made mandatory under the Companies Act 2013.

During the year the Company has continued its partnership with Parinaam Foundation andPiramal Foundation to undertake various community development programs free healthcareand clean drinking water facility for and on behalf of the Company. Please refer wflotheofseparate informationsection between on Corporate Social Responsibility in the annualreport for a detailed write up on the CSR activities of the Company during the year.

A brief outline of the company's CSR policy is disclosed on our website at the belowlink- http://ujjivan.com/html/ujjivan_policies.php The initiatives undertaken by theCompany on CSR activities are out in "Annexure 4" of the Board's Report in theformat prescribed in the Companies (Corporate Social Responsibility Policy) Rules 2014.For other details regarding the CSR Committee please refer to the Corporate GovernanceReport which forms part of the Board's Report.

23. Board Evaluation

The board of directors has carried out an annual evaluation of its own performanceboard committees and individual directors pursuant to the provisions of the Companies Act2013 and the corporate governance requirements as prescribed by Securities and ExchangeBoard of India (Listing Obligations and Disclosure Requirements) Regulations 2015("SEBIListing Regulations") and SEBI guidance note on Board Evaluation.

Performance evaluation criteria for Board Committees of the Board and Directors wereapproved by the Nomination Committee of the Board at its meeting held on March 26 2019.Evaluation formats and criteria of evaluation duly incorporated the criteria and otherparameters as suggested by SEBI vide their guidance note on evaluation through theircircular dated January 05 2017.

The Board was evaluated comprehensively inter aliaonthestructureoftheBoardcompetencyexperience and qualifications of directors diversityin board regularity of the board meetings effectiveness of board processes independenceof Board information sharing and overall functioning of the Board.

The performance of the board was evaluated by the board after seeking inputs from allthe directors on each of the above parameters of evaluation and the performance of thecommittees was evaluated by the board after seeking inputs from the committee members onthe basis of the above parameters of evaluation.

The Board committees were evaluated inter alia on the basis of their mandatecomposition attendance functioning and independence.

Independent Directors' Evaluation of Non-Independent Directors

In a separate meeting of independent directors held on March 26 2019 performance ofnon-independent directors performance of the board as a whole and performance of thechairman was evaluated taking into account the views of executive directors andnon-executive directors. The Independent Directors also assessed the quality quantity andtimeliness theofCompany management and the Board.

Performance of independent directors was evaluated by the entire board excluding theindependent director being evaluated and was satisfied that each of the independentdirector fulfils the independence criteria as specified in SEBI regulations and that theyare independent of the management.

24. Details as required under Rule 8 of the Companies (Accounts) Rules 2014

(i) The financial summary or highlights;

( Rs. in Crores)

Particulars Standalone* Consolidated*
FY 2018-19 FY 2017-18 FY 2018-19 FY 2017-18
Operating Income 22.00 - 1952.98 1514.78
Other Income 8.62 7.74 60.64 29.92
Total Income 30.62 7.74 2013.62 1544.70
Less: Operational Expenses
Personnel Expenses 1.63 0.93 540.53 373.35
Administrative Expenses 5.08 3.21 415.58 247.35
Finance Charges 0.00 0.01 727.03 601.56
Depreciation 0.02 0.01 60.62 41.38
Impairment Losses on Financial Instruments - - 65.76 236.43
Total Operational Expenses 6.73 4.16 1809.52 1500.07
Profit/(Loss) Before Tax 23.89 3.58 204.10 44.63
Less: Income tax 2.31 2.56 37.22 33.88
Less Deferred tax 0.00 0.01 16.44 -15.20
Profit/(Loss) After Tax 21.58 1.00 150.44 25.95

* as per Indian Accounting Standards (Ind-AS)

Key Performance Highlights of the wholly owned subsidiary ‘Ujjivan Small FinanceBank Limited' (USFB):

USFB Business and Operational Highlights

• Loan Book at Rs. 11049 Crores in March 2019 as against Rs. 7560 Crores inMarch 2018; growth of 46%

• Disbursement for FY 2018-19 at Rs. 11089 Crores as against Rs. 8047 Crores inFY 2017-18; an increase of 38%

• Non-Micro Finance book at 15% as against 7% in March 2018

• Deposit of Rs. 7379 Crores in March 2019 as against Rs. 3772 Crores in March2018; growth of 96%; Traction in senior citizen and long tenure term deposits (TDs) –47% and 43% respectively of total TDs

• Retail deposit at 37% in March 2019 as against 11% in March 2018; significantgrowth in retail deposits

• CASA at 11% in March 2019 as against 4% in March 2018

• 46.1 Lakhs unique active customers in March 2019 as against 38.7 Lakhs in March2018

• 27..4 Lakhs active liability customers in March 2019 as against 7.7 Lakhs inMarch 2018

• Profit after Tax of (PAT) of Rs. 199 Crores (IGAAP) as against Rs. 7 Crores inFY 17-18

• ROA of 1.7% for FY 18-19 as against 0.1% in FY 2017-18

• ROE of 11.5% for FY 2018-19 as against 0.4% in FY 2017-18

• Cost of Funds for FY 2018-19 at 8.6% as against 9.0% in FY 17-18

• CRAR of 19% in March 2019 as against 23% in March 2018

• GNPA at 0.9% in March 2019 as against 3.7% in March 2018;

• NNPA at 0.3% in March 2019 as against 0.7% in March 2018

• Write-off Rs178 Crores in FY 18-19 as againstRs.177 Crores in FY 17-18

• Exponential growth in Housing & MSE coupled with robust growth in MicroBanking

• Forayed in to new business segments - Rural Banking FIG Lending & PersonalLoans

• Expansion of Banking Branch network

• New product launches across verticals

• Expansion of digital services suite

• Penetration of Internet & Mobile Banking • Improved portfolio quality

• Diversified funding and Cost of funds at 8.6% down from 9.0% in FY 2018

• 16th Best Place to Work for in Asia by Great Place To Work

• Profitability (Ind-AS versus IGAAP):

FY 2018-19 Ind-AS IGAAP
Standalone Consolidated Standalone Consolidated
Pre-Tax Profits (PBT) 23.89 204.10 23.46 269.88
Profit after Tax (PAT) 21.58 150.44 21.15 198.37
Total Comprehensive Income 21.58 149.83 NA NA

(ii) highlights of performance of subsidiaries associates and joint venture companiesand their contribution to the overall performance of the company during the period

‘Ujjivan Small Finance Bank Limited' ("USFB") is a wholly owned materialsubsidiary of the Company. USFB is a small finance bank licensed by the RBI in terms ofSection 22 of the Banking Regulation Act 1949. USFB was incorporated on July 04 2016 andcommenced its operations as a small finance bank w.e.f. February 01 2017.

The highlights of the financial performance of USFB (in I-GAAP) are

(Rs. in Crores)
Particulars FY 18-19 FY 17-18 Variance %
Income from Loans & Advances 1849 1442 28%
Other Income 189 137 38%
Total Income 2038 1579 29%
Finance Cost 726 607 (19)%
Operating Cost 1003 653 (54)%
Total Cost 1729 1260 (37)%
Credit Cost 110 313 (65%)
Profit/(Loss) Before Tax 268 9 2878%
Profit After Tax 199 7 2787%

Key Ratios - USFB

Particulars FY 18-19
Actual
Yield 20.0%
Cost of Funds (CoF) 8.6%
Net Interest Margin (NIM) 10.9%
Return on Assets (ROA) 1.7%
Return on Equity (RoE) 11.5%
Cost to income 76.5%
Capital Adequacy (CRAR) 19.0%

USFB contributes 98.5% of the consolidated total income of the Company. Please alsorefer to the full standalone financials of the USFB which is separately included in thisannual report.

(iii) The change in the nature of business if any;

There is no change in the nature of the business of the Company during the FY 2018-19.The Company continues to be a Non Deposit taking Systemically Important Core InvestmentCompany (NBFC-ND-SI-CIC).

(iv) The details of directors or key managerial personnel who were appointed or haveresigned during the year;

Sr. No. Name Designation DIN Date of Appointment/ Change/ Cessation Reason
1 Ms. Sudha Suresh MD & CEO 06480567 June 30 2018 Resignation
2 Mr. Ittira Davis MD & CEO 06442816 July 01 2018 Appointment

(v) The names of companies which have become or ceased to be its Subsidiaries jointventures or associate companies during the year;

None

(vi) Deposits from public

During the year the Company has not accepted any deposits from public and as such noamount on account of principal or interest on deposits from public was outstanding as onthe date of the balance sheet.

However the subsidiary of the Company ‘Ujjivan Small Finance Bank Limited' whichis a Small Finance Bank has outstanding deposits of Rs. 7379 Crores as on March 31 2019.

(vii) The details of significant and material orders passed by the regulators or courtsor tribunals impacting the going concern status and company's operations in future;

None

(viii) The details in respect of adequacy of internal financial controls (IFC) withreference to the Financial Statements

In respect of internal financial control the Board has adopted the policies andprocedures for ensuring the orderly and efficient conduct of its business includingadherence to the Company's policies the safeguarding of its assets the timely preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information.

Further the management regularly reviews the control for any possible changes andtakes appropriate actions.

25. ESOP related & other disclosures

(i) Details of equity shares with differential rights The Company has not issued anyequity shares with differential rights during the year

(ii) Details of sweat equity shares issued The Company has not issued any sweat equityshares during the year (iii) Details of employee stock option scheme The Companyhas established Employee Stock Option Plan (ESOP) for compensation to its employees beingESOP 2006 ESOP 2007 ESOP 2008 ESOP 2010 MD-ESOP 2010 and ESOP 2015. For all ESOPSchemes each option on exercise is eligible for one equity share on payment of exerciseprice.

ESOP 2006

The ESOP 2006 was for a total of 64000 Equity Shares for all the eligible employees ofthe Company. As on March 31 2019 out of the 64000 options granted 28629 options hasbeen exercised and 35371 options were lapsed. All the 35371 lapsed options have beenadded to the pool of ESOP 2015 with the approval of the shareholders at their meetingsheld on November 03 2015 and June 27 2018. There is no outstanding option left to beexercised under ESOP 2006.

ESOP 2007

The ESOP 2007 was for a total of 189440 Equity Shares for all the eligible employeesof the Company.

As on March 31 2019 out of the 189400 options granted 141390 options has beenexercised 44500 options lapsed and 3550 valid options are left to be exercised. All the44500 lapsed options have been added to the pool of ESOP 2015 with the approval of theshareholders at their meetings held on November 03 2015 and June 27 2018.

ESOP 2008

The ESOP 2008 was for a total of 396680 Equity Shares for all the eligible employeesof the Company.

As on March 31 2019 out of the 396680 options granted 238360 options has beenexercised 154130 options lapsed and 4190 valid options are left to be exercised. Allthe 154130 lapsed options have been added to the pool of ESOP 2015 with the approval ofthe shareholders at their meetings held on November 03 2015 and June 27 2018.

ESOP 2010

The ESOP 2010 was for a total of 3384300 Equity shares for all the eligible employeesof the Company.

As on March 31 2019 out of the 3384300 options granted 1603893 options has beenexercised 1568973 options lapsed and 212944 valid options are left to be exercised.Our of the 1568973 lapsed options 1563769 options have been added to the pool of ESOP2015 with the approval of the shareholders at their meetings held on November 03 2015 andJune 27 2018.

MD-ESOP 2010

The MD-ESOP 2010 was for a total of 1249172 options. As on March 31 2019 all the1249172 granted options under MD-ESOP 2010 have been exercised. There is no outstandingoption left to be exercised under MD-ESOP 2010.

ESOP 2015

The ESOP 2015 was for a total of 5561188 options. In compliance with Regulation 12 ofSecurities and Exchange Board Of India (Share Based Employee Benefits) Regulations 2014(SEBI ESOP Regulations) the Company got its ESOP Scheme 2015 ratified by its shareholderssubsequent to its IPO in their AGM held on August 10 2016. Further pursuant to theshareholders' approval at their AGM held on June 27 2018 1018711 options lapsed underESOP 2006 ESOP 2007 ESOP 2008 and ESOP 2010 were added to the pool of ESOP 2015.

As on March 31 2019 the ESOP 2015 pool comprises of 6579899 (including the originalpool of 5561188 options plus 1018711 options added back from the lapsed options ofESOP 2006 ESOP 2007 ESOP 2008 and ESOP 2010)

The Company has granted 2349230 options under the ESOP 2015 to eligible employeesduring the financial year 2018-19 at exercise price of Rs. 385.05 (2337670 options) andRs. 290.60 (11560 options). . As on March 31 2019 out of the 5515880 options granted483080 options has been exercised 861798 options are lapsed 1558904 vested optionsare left to be exercised. Further 2612098 options are yet to be vested. Out of the861798 options which are lapsed 455388 options were added back to the pool of ESOP2015 with the approval of the shareholders at the AGM held on June 27 2018. The Board(including its authorized committee) has been authorized by the shareholders to includethe lapsed / cancelled options under its ESOP 2010 and ESOP 2015 back to the pool of ESOP2015 and that the Board is hereby authorized to grant such added back options to itseligible employees (which includes the employees of its subsidiary).

The vesting period for the options granted under ESOP 2015 is for a period of threeyears as under:

Tranche Year of Grant Options Granted Year 1 Year 2 Year 3
ESOP 2015 (Tranche 1) 2015 1469800 34% 33% 33%
ESOP 2015 (Tranche 2)* 2016 1696850 33% 33% 34%
ESOP 2015 (Tranche 3) 2018 2337670 34% 33% 33%
ESOP 2015 (Tranche 4) 2018 11560 34% 33% 33%
Total 5515880

* Post IPO options were granted subsequent to the ratification of the shareholders

The ESOP 2015 is in compliance with Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulations 2014 (SEBI ESOP Regulations) the Companies Act 2013 andis implemented in accordance with guidance notes issued by ICAI and the relevantaccounting standards.

Revisions in the ESOP Schemes during the Year

None; however during the year shareholders' approval was sought at their AGM held onJune 27 2018 for adding back 1018711 lapsed options under ESOP 2006 ESOP 2007 ESOP2008 and ESOP 2010 to the pool of ESOP 2015. Further in compliance with the SEBI ESOPRegulations shareholders' approval by way of a separate special resolution at their AGMheld on June 27 2018 was obtained by the Company for extending the benefits of the ESOP2015 to the employees of its subsidiary Company.

ESOP Schemes Compliance Status

ESOP 2006 ESOP 2007 ESOP 2008 ESOP 2010 and MD-ESOP 2010 were adopted prior to thecommencement of the Companies Act 2013.

The ESOP 2015 is in compliance with Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulations 2014 (SEBI ESOP Regulations) and the Companies Act 2013.The Company has received a certificate from the Statutory Auditors of the Companycertifying that ESOP 2015 Scheme of the Company is being implemented in accordance withthe Securities and Exchange Board of India (Share Based Employee Benefits) Regulations2014 and is in accordance with the resolutions passed by the Members of the Company at ageneral meeting.

The ESOP Schemes are implemented in accordance with guidance notes issued by ICAI andthe relevant accounting standards.

Under Ind AS the Company has to account for ESOPs on the basis of fair value ofoptions instead of intrinsic value of options under older GAAP. The fair value of optionshas been computed by the independent consultant appointed by the Company and the fairvaluation report has been relied upon. As per older GAAP the Company was recharging theexpenditure relating to ESOPs given to the employees of the subsidiary Bank. Howeverunder Ind-AS the Company has exercised the accounting policy choice and treated this ascost of investment in subsidiary. The weighted average fair value of the share optionsgranted during the FY 2018-19 is Rs. 132.33. Options were priced using Black and ScholesModel. Vested ESOPs can be exercised within three years from their corresponding dates ofvesting. ESOPs vested can be exercised between date of vesting and on or before optionexpiry date. The term of the option is assumed to be the sum of a) duration till vesting;and b) the midpoint of the remaining exercise period from date of vesting in absence ofhistorical exercise pattern. While the Company has been listed since May 10 2016 theperiod of listing up to the Grant Dates is not commensurate with the expected term of thegranted ESOPs. Accordingly volatility of comparable companies has been considered for thepurposes of valuation.

Administration of ESOP Schemes

The Governance Nomination and Remuneration Committee of the Board administer theEmployee Stock Option Schemes formulated by the Company from time to time.

Mandatory ESOP Disclosures

Disclosures as required under Section 62 of the Companies Act 2013 (to be read withRule 12 of the Companies(Share Capital and Debenture) Rules 2014 and SEBI ESOPRegulations:

Sr. Particulars March 31 2019
1. Number of options granted and outstanding at the beginning of the year (A) 2758986
2. Number of options granted during the year (B) 2349230
3. Number of options vested during the year 831645
4. Number of options exercised during the year 304916
5. Number of shares arising as a result of exercise of options (C) 304916
6. Money realized during the year by exercise of options (in Rs.) 33260112
7. Number of options Forfeited/Expired during the year (D) 411614
8. The exercise price of the options (in Rs.) 10 12.5 28 40 57 146.35 417.15 385.05 & 290.60
9. Number of options granted and in force at the end of year = (A)+(B)-(C)-(D) 4391686
10. Weighted average of remaining contractual life (years) at the year end 3.09
11. Variation of terms of the options None

* Please refer to note 24 of the standalone financials for further details on ESOP

Options Granted to Key Managerial Personnel during the year

Employee Name Designation Options Granted Exercise Price (in Rs.)
Mr. Ittira Davis MD & CEO (w.e.f. July 01 2018) 20920 385.05
Mr. Sanjeev Barnwal CS and Compliance Officer 10270 385.05
Mr. Deepak Khetan Chief Financial Officer 5580 385.05

Any other employee who receives a grant of options in any one year of options amountingto five percent or more of options granted during that year – - None

Identified employees who were granted options during any one year equal to orexceeding one percent of the issued capital (excluding outstanding warrants andconversions) of the Company at the time of grant - None

26. Vigil Mechanism

The Company in compliance with Section 177 of the Companies Act 2013 has a dulyconstituted Audit Committee of the Board. The composition of the Audit Committee is asunder:

Sr. No. Directors Designation
1. Mr. K.R. Ramamoorthy Chairman (Independent Director)
2. Mr. Abhijit Sen Independent Director
3. Mr. Jayanta Basu Non-Independent Non-Executive

Please refer to the Section on Corporate Governance for further details on the BoardCommittees.

Further in compliance to Section 177 of the Companies Act 2013 and Regulation 22 ofSEBI Listing Regulations the Company has established a Whistle Blower policy / VigilMechanism for the directors and employees to report genuine concerns or grievances aboutunethical behavior actual or suspected fraud or violation of the company's Code ofConduct or Ethics Policy. The Company has a vigil mechanism process wherein the employeesare free to report violations of laws rules regulations or unethical conduct to thewhistle and ethics officer of the Company. Further this policy also specificallyenables the employees of the Company and those of its subsidiary to report instances ofany leak of unpublished price sensitive information by the employees of the Company to anyoutsider which is not for legitimate business purposes. This is to ensure the complianceof SEBI (Prohibition of Insider Trading) Regulations 2015 including the amendmentscarried out in 2018 and made effective from April 01 2019 and Code of Conduct forPrevention of Insider Trading of Ujjivan Financial Services Limited.

Name and Address of the Whistle and Ethics Officer Mr. Sanjeev Barnwal CompanySecretary and Compliance Officer (w.e.f. April 27 2017)

Ujjivan Financial Services Limited

Grape Garden No. 27 3rd A Cross 18th Main

6th Block Bangalore 560095 Karnataka

Email- sanjeev.barnwal@ujjivanfin.com

Protected Disclosure against the Whistle and Ethics Officer should be addressed to theMD & CEO of the Company and the Protected Disclosure against the MD & CEO of theCompany should be addressed to the Chairman of the Audit Committee.

Name and Address of MD & CEO of the Company:

Mr. Ittira Davis

Ujjivan Financial Services Limited

Grape Garden No. 27 3rd A Cross 18th Main 6th

Block Bangalore 560095 Karnataka

Email: ittira.davis@ujjivanfin.com

Name and Address of the Chairman (Audit Committee):

Mr. K. R. Ramamoorthy

D - 302 Mantri Gardens Jayanagar 1st Block Bangalore - 560011 Karnataka Email:ram@bankconsult.co.in

The confidentiality of those reporting violations is maintained and they are notsubjected to any discriminatory practice The whistle blower policy of the Company isdisclosed on our website at the below link-http://ujjivan.com/html/ujjivan_policies.php

27. Remuneration details of Directors KMPs employees

Sr. Particulars Disclosures
1. The ratio of the remuneration of each Whole time director to the median remuneration of the employees of the company for the financial year MD & CEO: 3.29x
2. The percentage increase in remuneration of each director Chief Financial Officer Chief Executive Officer Company Secretary or Manager if any in the financial year KMP % increase in remuneration
Ms. Sudha Suresh – MD & CEO (until June 30 2018) Nil
Mr. Ittira Davis – MD & CEO (appointed w.e.f. July 01 2018) Nil
Mr. Sanjeev Barnwal – CS 20%
Mr. Deepak Khetan – CFO (appointed w.e.f. March 14 2018) Nil
3. The percentage increase in the median remuneration of employees in the financial year; 6% increase in the median remuneration of employees in the FY 2018-19.
4. The number of permanent employees on the rolls of company as on March 31 2019 5
The average increase in the salaries of employees was 13.5% and the average increase in the managerial remuneration during the last financial year was also
5. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration 6.67%.
6. Affirmation that the remuneration is as per the remuneration policy of the company Yes

A statement showing the name of every employee of the company who

a. if employed throughout the financial year was in receipt of remuneration for thatyear which in the aggregate was not less than one Crores and two Lakhs rupees; - None

b. if employed for a part of the financial year was in receipt of remuneration for anypart of that year at a rate which in the aggregate was not less than eight Lakhs andfifty thousand rupees per - None

c. if employed throughout the financial year or part thereof was in receipt ofremuneration in that year which in the aggregate or as the case may be at a rate whichin the aggregate is in excess of that drawn by the managing director or whole-timedirector or manager and holds by himself or along with his spouse and dependent childrennot less than two percent of the equity shares of the company. - None

Information as per Rule 5(2) of Chapter XIII the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 The names of the top ten employees interms of remuneration drawn:

The Company as on March 31 2019 had only the following 5 (five) employees:

Sr. Particulars Ittira Davis Sanjeev Barnwal Deepak Khetan Shashidhara S. Aditya Das
i. Designation MD & CEO Company Secretary and Compliance Officer Chief Financial Officer Assistant Company Secretary Assistant Manager – Investor Relations
ii. Remuneration received 6750000 (for the period July 01 2018 to Mar 31 2019) 4320590 4569600 1056744 223754 (for the period Dec 05 2018 to Mar 31 2019)
iii. nature of employment whether contractual or otherwise; Permanent Permanent Permanent Permanent Permanent
iv. qualifications and experience of the employee MBA (IIM Ahmedabad) 36+ years' experience CS LLB DBM 15+ years' experience PGDBM (Finance) 12 years' experience CS LLB M.Com 11 years' experience MBA (Finance) 2 years' experience
v. date of commencement of employment July 01 2018 August 12 2014 March 14 2018 November 01 2017 Dec 05 2018
vi. the age of such employee 64 37 35 34 28
vii. the last employment held by such employee before joining the company Ujjivan Small Finance Bank Limited SMC Capitals Limited Welspun Corp Limited GMR Ose Hungund Hospet Highways Private Limited None
viii the percentage of equity shares held by the employee in the company 0.04%* Negligible Nil Nil Nil
ix. whether any such employee is a relative of any director or manager of the company No No No No No

*as a second holder with his wife Ms. Anna Ittira Davis

Compliance of Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013

The Company has only 5 employees as on March 31 2019 and the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013 is not applicable.However the Company has a policy for prevention of sexual harassment at workplace.

Disclosures in relation to the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013:

a. Number of complaints filed during the year : Nil
b. Number of complaint dismissed during the year : Nil
c. Number of complaint pending as on end of the financial year : Nil

Green Initiatives

Electronic copies of the Annual Report for the FY 2018-19 and the Notice of the 15thAGM are being sent to all the members whose email addresses are registered with theCompany / Depository Participants. For members who have not registered their emailaddress physical copies are sent in the permitted mode.

Acknowledgement

Your Directors wishes to gratefully acknowledge the assistance and guidance receivedfrom the RBI ROC Investors Banks Auditors Lawyers Accountants Vendors PartnerNGOs Institutions and Foundations and Government Authorities and all our well-wishers.The Board also wishes to place on record their warm appreciation for the creative anddedicated efforts of staff at all levels.

K. R. Ramamoorthy For and on behalf of the Board of Directors of Ittira Davis
Chairperson Managing Director & Chief Executive Officer
DIN: 00058467 DIN: 06442816
Date: May 30 2019
Place: Bengaluru