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Ujjivan Financial Services Ltd.

BSE: 539874 Sector: Financials
NSE: UJJIVAN ISIN Code: INE334L01012
BSE 00:00 | 17 Jul 377.65 4.55
(1.22%)
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379.90

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370.50

NSE 00:00 | 17 Jul 377.90 4.35
(1.16%)
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380.15

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OPEN 372.20
PREVIOUS CLOSE 373.10
VOLUME 24332
52-Week high 432.05
52-Week low 285.00
P/E 12588.33
Mkt Cap.(Rs cr) 4,568
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 372.20
CLOSE 373.10
VOLUME 24332
52-Week high 432.05
52-Week low 285.00
P/E 12588.33
Mkt Cap.(Rs cr) 4,568
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Ujjivan Financial Services Ltd. (UJJIVAN) - Director Report

Company director report

To the Members Overview

The Company was originally incorporated as Ujjivan Financial Services Private Limitedon December 28 2004 at Bengaluru Karnataka India as a private limited company under theCompanies Act 1956. Pursuant to a certificate issued by the Reserve Bank of India("RBI") on October 31 2005 the Company was permitted to commence operations asa non-banking financial company ("NBFC") under section 45 IA of the Reserve Bankof India Act 1934. Since financial year 2008-09 the Company has been classified as asystemically important non-deposit accepting NBFC. Pursuant to the RBI introduction of anew category of NBFC-Micro Finance Institution vide its circular BI/2013-14/49DNBS.(PD)CC.No. 347 /03.10.38/2013-14 dated July 01 2013 the Company was grantedNBFC-Microfinance Institution ("NBFC-MFI") status by the RBI on September 52013. Subsequently the Company was converted into a public limited company pursuant to aspecial resolution passed by its Shareholders at the extraordinary general meeting("EGM") held on November 3 2015 and the name of the Company was changed toUjjivan Financial Services Limited. A fresh certificate of incorporation consequent uponconversion to a public limited company was issued by the Registrar of CompaniesBangalore Karnataka ("ROC") on November 26 2015. Subsequently a freshcertificate of NBFC-MFI registration consequent upon the change of name of the Company wasissued by the RBI on March 4 2016. The Company has converted from an NBFC-MFI to NBFC-NonDeposit taking Systematically Important Core Investment Company (NBFC-ND-SI-CIC) andreceived a fresh certificate of registration dated October 10 2017 from the RBI; theconversion was done pursuant to the conditions prescribed by the RBI in their licenseletter dated November 11 2016 for setting up a Small Finance Bank.

Ujjivan Small Finance Bank Limited' (the wholly owned subsidiary of the Company) whichcommenced its small finance bank operations in February 2017 has been included in theSecond Schedule to the Reserve Bank of India Act 1934 vide Official Gazette Notificationon August 25 2017. This has granted the ‘Scheduled Bank' status to ‘UjjivanSmall Finance Bank Limited' from the date of the notification.

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 March 31 2018.

(Rs. in Crores)
Particulars Standalone Consolidated
Fy 2017-18 Fy 2016-17* Fy 2017-18 Fy 2016-17
Operating Income 0.00 1145.53 1443.36 1349.37
Other Income 7.74 42.00 138.34 48.25
Total Income 7.74 1187.53 1581.70 1397.62
Less: Operational Expenses
Personnel Expenses 1.52 220.87 366.45 271.62
Administrative Expenses 3.21 134.85 246.32 173.80
Finance Charges 0.01 432.76 604.90 542.72
Depreciation 0.01 7.53 41.38 12.63
Provision For Doubtful Debts 0.00 70.68 310.81 75.12
Total Operational Expenses 4.75 866.68 1569.86 1075.89
Profit/(Loss) Before Tax 2.99 320.85 11.83 321.74
Less: Income tax 2.56 135.54 33.88 136.96
Less Deferred tax 0.004 (22.33) (29.33) (22.90)
Profit/(Loss) After Tax 0.42 207.64 7.28 207.67

* includes the numbers for both discontinued as well as continued operations.

2. Dividend

In accordance with the Dividend Distribution Policy adopted by the Board in its meetingheld on April 27 2017 and in continuation to the dividend payment track record of theCompany the directors are pleased to recommend for approval of the members a dividend ofRs. 0.50 per equity share for the FY 2017-18. The Board has recommended the aforesaiddividend out of the accumulated profits earned by it in the previous financial years andtransferred to free reserves and it is in accordance with the Companies (Declaration andPayment of Dividend) Rules 2014.

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

3. Transfer to reserves

The Company transferred Rs. 8.38 lacs to Statutory Reserves. Transfer of 20% of theProfit after Tax to the statutory reserves in accordance with the provisions of section 45– IC Reserve Bank 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 2018 is in compliance with the capital requirements and allother mandatory ratios as required under RBI CIC Master Directions.

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"to the Board's Report.

8. Business Responsibility Reporting

The Board of the Company in its meeting held on May 10 2018 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 391 in the list as on March 31 2018.

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 2017-18

During the Financial Year 2017-18 our Board has met 5 (five) times and the meetings ofour Board of Directors were held on April 27 2017 August 03 2017 November 02 2017February 05 2018 and March 28 2018. For further details please refer to the CorporateGovernance Report which forms part of this report.

10. Appointment / Reappointments

The Board accepted the resignation of Ms. Sudha Suresh from her position of ManagingDirector and Chief Executive Officer effective from June 30 2018. Based on therecommendation of the Nomination and Remuneration Committee the Board has appointed Mr.Ittira Davis (DIN: 06442816) as the Managing Director and Chief Executive Officer on theBoard of the Company with effect from July 01 2018 subject to the approval of the ReserveBank of India and the Members of the Company. Please refer item no. 4 of the 14th AGMNotice for further details. Our application is pending with the Reserve Bank of India. TheBoard hereby recommends his appointment.

As per the provisions of the Companies Act 2013 Mr. Jayanta Basu (DIN: 01268046)retires by rotation at the ensuing 14th AGM and being eligible seeks his appointment. TheBoard recommends his appointment. Please refer the item no. 3 of the 14th AGM Notice forfurther details.

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 theapplicable accounting standards had been followed along with proper explanation relatingto material departures; (ii) they have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the company at the end of thefinancial year and of the profit and loss of the company for that period; (iii) they havetaken proper and sufficient care for 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 theannual accounts on a going concern basis; (v) they have laid down internal financialcontrols to be followed by the company and that such internal financial controls areadequate and were operating effectively; and (vi) they have devised proper systems toensure compliance with the provisions of all applicable laws and that such systems wereadequate 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 risk management and audit committee of the boardthe board is of the opinion that the Company's internal financial controls were adequateand effective during the FY 2017-18.

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 stating that they meet the criteria of Independenceas provided in section 149(6) of the Companies Act 2013 and are not disqualified fromcontinuing as Independent Directors.

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

M/s Price Waterhouse Chartered Accountants LLP (FRN: 012754N/N500016) were appointedat the 13th Annual General Meeting as the Statutory Auditors of the Company forfive years till the conclusion of the 18th Annual General Meeting of theCompany. They have confirmed their eligibility for the FY 2018-19 under Section 141 of theCompanies Act 2013 and the Rules framed thereunder. The Companies Amendment Act 2017 hasomitted the requirement of ratification of the appointment of statutory auditors at everyannual general meeting; the relevant amendment made effective on May 07 2018. Hence theratification of appointment of Statutory Auditors at the ensuing 14th AGM isnot required.

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;Secretarial Auditor

Mr. K. Jayachandran Practicing Company Secretary (ACS No. 11309 and Certificate ofPractice No. 4031) was appointed as the Secretarial Auditor of the Company to conductsecretarial audit of the Company for the Financial Year 2017-18 as required under Section204 of the Companies Act 2013 and the Rules made thereunder. The secretarial audit reportfor FY 2017-18 is appended as "Annexure 2" to the Board's Report. TheSecretarial Audit Report does not contain any qualification reservation or adverse remarkmade by the Secretarial Auditor.

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 enteredinto during the year ended March 31 2018 which were not at arm's length basis.

Your Directors draw attention of the members to Note 19.3 to the Financial Statementswhich sets out other related party disclosures.

All Related Party Transactions as required under Accounting Standards AS-18 arereported in Note 19.3 - Notes to Accounts of the Standalone financial statements of theCompany.

18. The state of the Company's affairs

The Company is registered with RBI as a NBFC-ND-SI-CIC and received a certificate ofregistration on October 10 2017. The Company is in compliance with the conditions of theMaster Direction - Core Investment Companies (Reserve Bank) Directions 2016 as amended.Prior to its conversion to a Core Investment Company the Company was one of the largestmicrofinance institutions in the country. The conversion was done based on the stipulationof the Reserve Bank of India.

19. Material changes and commitments if any affecting the financial position of thecompany which have occurred between the end of the financial year of the company to whichthe 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 2014Conservation 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.

As a Core Investment Company with a key investment in the bank which is our 100%subsidiary The Company's Board has an oversight function of USFB. We have entered into aMemorandum of Understanding (MoU) which includes sharing of information related tobusiness and performance of SFB with the Company and to its Board to facilitateeffective oversight and compliance with statutory and regulatory requirements under SEBIListing Regulations. Thus a set of information including monthly and quarterly businessand regulatory reports and returns Board and committee meeting related minutes and otherinformation is systematically 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 itswholly owned subsidiary has a well-defined risk management strategy based on clearunderstanding of various risks disciplined risk assessment and continuous monitoring. Therisk management Committee of the subsidiary approves and makes recommendations to itsBoard regarding all its risk-related responsibilities including the review of major riskmanagement and regulatory compliances.

The Audit Committee and the Board of the Company periodically reviews the riskmanagement practices adopted by the Company and its subsidiary and evaluates itseffectiveness. The Company has in place an effective risk management policy whichhighlights the functions 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 theyear the Company has partnered with Parinaam Foundation and Piramal Foundation toundertake various community development programs free healthcare and clean drinking waterfacility for and on behalf of the Company. Please refer the separate section on CorporateSocial Responsibility in the annual report for a detailed write up on the CSR activitiesof 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 3" of the Board's Reportin the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules2014. For other details regarding the CSR Committee please refer to the CorporateGovernance Report 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("SEBI Listing 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 28 2018.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 on the following broad categories:

• Structure of the Board - Competency Experience and Qualifications of directorsDiversity in Board under various parameters Appointment Process

• Meetings of the Board - Regularity of meetings and adequacy discussions andrecording of dissent if any.

• Recording of minutes dissemination of information

• Functions of the Board - Role and responsibilities of the Board

• Strategy and performance evaluation

• Evaluation of Risks

• Grievance redressal for Investors

• Management of Conflict of interest

• Stakeholder value and responsibility

• Corporate culture and values

• Facilitation of independent directors

• Evaluation of performance of the management and feedback

• Independence of the management from the Board

• Access of the management to the Board and Board access to the management

• Secretarial support and fund availability for conducting its meeting effectively

• Succession planning

• Professional development

• Board Candor Collegiality Transparency and Board Education

• Ethics & Compliance

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.

Performance Evaluation of the Directors

The board and the nomination and remuneration committee reviewed the performance of theindividual directors on the basis of the criteria such as the contribution of theindividual director to the board and committee meetings like preparedness on the issues tobe discussed meaningful and constructive contribution and inputs in meetings etc. Inaddition the chairman was also evaluated on the key aspects of his role.

Evaluation of the Board Committees

The Board evaluated the performance of each of the Board Committees on the followingbroad categories:

• Mandate and composition

• Effectiveness of the Committee

• Structure of the Committee its functioning and attendance

• Discussion quality of agenda and action taken report

• Independence of the Committee from the Board

• Contribution of the Committees to the decisions taken by the Board

• Functioning of the committee in accordance with the terms of reference

The Board opined that the Board Committees' composition structure processes andworking procedures are well laid down and that the Board Committees members have adequateexpertise drawn from diverse functions industries and business and bring specificcompetencies relevant to the Company's business and operations.

Independent Directors' Evaluation of Non-Independent Directors

In a separate meeting of independent directors held on March 28 2018 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 of flow of information between the Company management and the Board.Performance evaluation of independent directors was done by the entire board excludingthe independent director being evaluated.

24. Details as required under Rule 8 of the Companies (Accounts) Rules 2014 (i) Thefinancial summary or highlights:

(Rs. in Crores)
Particulars Standalone Consolidated
Fy 2017-18 Fy 2016-17* Fy 2017-18 Fy 2016-17
Operating Income 0.00 1145.53 1443.36 1349.37
Other Income 7.74 42.00 138.34 48.25
Total Income 7.74 1187.53 1581.70 1397.62
Less: Operational Expenses
Personnel Expenses 1.52 220.87 366.45 271.62
Administrative Expenses 3.21 134.85 246.32 173.80
Finance Charges 0.01 432.76 604.90 542.72
Depreciation 0.01 7.53 41.38 12.63
Provision For Doubtful Debts 0.00 70.68 310.81 75.12
Total Operational Expenses 4.75 866.68 1569.86 1075.89
Profit/(Loss) Before Tax 2.99 320.85 11.83 321.74
Less: Income tax 2.56 135.54 33.88 136.96
Less Deferred tax 0.004 (22.33) (29.33) (22.90)
Profit/(Loss) After Tax 0.42 207.64 7.28 207.67

* includes the numbers for both discontinued as well as continued operations.

O Strategic Highlights:

Receipt of fresh certificate of registration on October 10 2017 from theRBI for operating as a NBFC-Core Investment Company.

The wholly owned subsidiary ‘Ujjivan Small Finance Bank' was includedin the Second Schedule to the Reserve Bank of India Act 1934 vide Official GazetteNotification on August 25 2017. This has granted the ‘Scheduled Bank' status to‘Ujjivan Small Finance Bank Limited' from the date of the notification

Key Performance Highlights of the Wholly owned subsidiary ‘UjjivanSmall Finance Bank Limited'

Successfully emerged from shadows of demonetization and stabilized itsbusiness

Stabilized portfolio quality and contained credit cost

Mobilized institutional deposits to retire high cost legacy borrowings andreduced cost of funds

Established systems and processes for seamless transition to banking withmulti-channel network :

- 187 Banking Outlets ( including 47 URC); 25% URC compliance in Year 1

- 146 Biometric ATM's

- 7011 handheld devices for account opening

- 64 Seat Phone Banking unit and well received internet banking and mobile bankingapplication

Expanded non MF Business- MSE and Housing

Improved backend efficiencies and productivity

Progressive improvement in business profitability across quarters

Closed the year with a net profit of Rs.7 Crores despite all challenges

uSFB - Business and Operational Highlights

PAT for the Bank for the financial year ending March 31 2018 stands at Rs6.87 crores

Collection efficiency of new loans has improved to 99%

Overall PAR down to 4% which was at 10.2% in March 2017

Bank managed to repay 63% of the legacy borrowings

Cost of funds of the Bank went down from 10.4% to 9%

The Deposit business stood at Rs.3772.48 Crores spanning 883453 accounts atthe end of March 2018

CASA stood at Rs. 138.64 Crores of which 10659 staff savings/salaryaccounts constituted Rs.28.06 Crores

Time Deposits stood at Rs.1457.53 Crores of which institutional depositsstood at Rs.1178.85 Crores while Recurring deposits stood at Rs.10.06 Crores

Certificate of Deposits stood at Rs.2166.25 Crores

Operating Expense at 41.18% of total expense.

The Bank has a Long Term Credit Rating of A+ and a short term rating of A1+

Profitability: Pre-tax profits - Rs. 8.85 Crores and post- tax profits - Rs. 6.87Crores for the period ended March 31 2018.

Key Ratios: (Comparative ratios are annualized)

Particulars March 31 2018 March 31 2017
Interest income as a percentage to working funds 17.13% 15.13%
Non-interest income as a percentage to working funds 1.32% 0.95%
Operating profit as a percentage to working funds 3.74% 0.38%
Business (deposits plus gross advances) per employee (Rs.) 7936620 5914099
Profit per employee 6411 34

O Financial Performance: Consolidated PAT of Rs. 7.28 Crores in FY 2017-18 asagainst Rs.207.67 Crores in the FY 2016-17; this reduced profit was on account of creditcosts of Rs. 310.8 Crores in the FY 2017-18.

O Profitability:

(Rs. in Crores)
Particulars (Fy 2017-18) Standalone Consolidated
Pre-Tax Profits (PBT) 2.99 11.83
Profit after Tax (PAT) 0.42 7.28

(ii) highlights of performance of subsidiaries associates and joint venturecompanies and their contribution to the overall performance of the company during theperiod

‘Ujjivan Small Finance Bank Limited' ("USFB") is a wholly owned materialsubsidiary of the Company. USFB was incorporated on July 04 2016 and commenced itsoperations as a small finance bank w.e.f. February 01 2017.

The highlights of the financial performance of USFB are as under:

(Rs. in Crores)
Standalone
Particulars
F y 2017-18 F y 2016-17
Operating Income 1466.65 212.71
Other Income 112.70 13.39
Total Income 1579.35 226.10
Less: Operational Expenses
Personnel Expenses 364.93 50.74
Administrative Expenses 244.10 55.57
Finance Charges 609.33 109.36
Depreciation 41.37 5.10
Provision For Doubtful Debts 310.77 4.44
Total Operational Expenses 1570.50 225.21
Profit/(Loss) Before Tax 8.85 0.89
Less: Income tax 31.32 1.42
Less Deferred tax (29.34) (0.57)
Profit/(Loss) After Tax 6.87 0.04

uSFB - Financial Highlights

PAT for the Bank for the financial year ending March 31 2018 stands at Rs6.87 crores

Collection efficiency of new loans has improved to 99%

Overall PAR down to 4% which was at 10.2% in March 2017

NNPA down to 0.7% from 3.1% in March 2017

Bank managed to repay 63% of the legacy borrowings

Cost of funds of the Bank went down from 10.6% to 9%

The Deposit business stood at Rs.3772.48 Crores spanning 883453 accounts atthe end of March 2018

CASA stood at Rs. 138.64 Crores of which 10659 staff savings/salaryaccounts constituted Rs.28.06 Crores

Time Deposits stood at Rs.1457.53 Crores of which institutional depositsstood at Rs.1178.85 Crores while Recurring deposits stood at Rs.10.06 Crores

Certificate of Deposits stood at Rs.2166.25 Crores

Operating expense ratio at 41.18%

The Bank has a Long Term Credit Rating of A+ and a short term rating of A1+

Please also refer to the full standalone financials of the USFB which is separatelyincluded in this annual report.

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

The Company has converted from an NBFC-MFI to NBFC-Non Deposit taking SystematicallyImportant Core Investment Company (NBFC-ND-SI-CIC) and received a fresh certificate ofregistration dated October 10 2017 from the RBI; the conversion was done pursuant to theconditions prescribed by the RBI in their license letter dated November 11 2016 forsetting up a Small Finance Bank.

Ujjivan Small Finance Bank Limited' (the wholly owned subsidiary of the Company) whichcommenced its small finance bank operations in February 2017 has been included in theSecond Schedule to the Reserve Bank of India Act 1934 vide Official Gazette Notificationon August 25 2017. This has granted the ‘Scheduled Bank' status to ‘UjjivanSmall Finance Bank Limited' from the date of the notification.

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

Sr. No. Name Designation DIN Date of Appoint- ment/Change/ Cessation Reason
1 Mr. Venkatesh Natarajan Non-Executive Director 02453219 February 05 2018 Resignation
2 Mr. Hiren Shah CFO (KMP) N.A. October 09 2017 Resignation
3 Mr. Deepak Khetan CFO (KMP) N.A. March 29 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 SmallFinance Bank Limited' which is a Small Finance Bank has outstanding deposits of Rs. 3772Crores as on March 31 2018.

(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 themanagement regularly reviews the control for any possible changes and takes appropriateactions.

25. Other disclosures

(i) Details of equity shares with differential rights

The Company has not issued any equity shares with differential rights during the year

(ii) Details of sweat equity shares issued

The Company has not issued any sweat equity shares during the year

(iii) Details of employee stock option scheme

The Company has established Employee Stock Option Plan (ESOP) for compensation to itsemployees being ESOP 2006 ESOP 2007 ESOP 2008 ESOP 2010 MD-ESOP 2010 and ESOP 2015.

ESOP 2006

The Company pursuant to resolutions passed by the Board and Shareholders on March 292006 and May 12 2006 respectively adopted the ESOP 2006. The ESOP 2006 was for a totalof 64000 Equity Shares for all the eligible employees of the Company. In accordance withthe ESOP 2006 each option on exercise would be eligible for one Equity Share on paymentof exercise price. As on March 31 2018 out of the 64000 options granted 28629 optionshas been exercised and 35371 options were lapsed.

ESOP 2007

Pursuant to resolutions passed by the Board and Shareholders on June 9 2007 and July21 2007 respectively the Company instituted the ESOP 2007. The ESOP 2007 was for atotal of 189440 Equity Shares for all the eligible employees of the Company. Inaccordance with the ESOP 2007 each option on exercise would be eligible for one EquityShare on payment of exercise price. As on March 31 2018 out of the 189400 optionsgranted 138660 options has been exercised 44500 options lapsed and 6280 valid optionsare left to be exercised.

ESOP 2008

Pursuant to resolutions passed by the Board and Shareholders on July 23 2008 andAugust 18 2008 respectively the Company approved the ESOP 2008. The ESOP 2008 was for atotal of 396680 Equity Shares for all the eligible employees of the Company. Inaccordance with the ESOP 2008 each option on exercise would be eligible for one EquityShare on payment of exercise price. As on March 31 2018 out of the 396680 optionsgranted 234170 options has been exercised 154130 options lapsed and 8380 validoptions are left to be exercised.

ESOP 2010 and MD-ESOP 2010

Pursuant to resolution passed by the Board and Shareholder resolutions dated May 172010 and July 12 2010 respectively the Company approved the ESOP 2010 and MD ESOP 2010and granted 3384300 options under ESOP 2010 and 871060 options under MD-ESOP 2010.Further pursuant to the Shareholders resolution dated July 12 2010 the exercise periodunder the ESOP 2006 ESOP 2007 and ESOP 2008 was aligned with the exercise period timeframe mentioned in ESOP 2010. Pursuant to sub-division of the face value of the equityshares from face value of Rs. 100 each to Rs. 10 each on October 12 2010 and inaccordance with ESOP 2010 maximum number of shares available for being granted under ESOP2010 stood modified and the cumulative face value prior to sub-division remainedunchanged. Pursuant to resolution passed by the Board on August 12 2011 additionalgrants were approved under the MD-ESOP 2010 amounting to 378112. Accordingly the totaloptions granted under MD-ESOP 2010 were increased to 1249172 options.

In accordance with the ESOP 2010 and MD-ESOP 2010 each option on exercise would beeligible for one Equity Share on payment of exercise price.

Thereafter pursuant to resolution passed by the Board and Shareholders on August 82012 and September 12 2012 respectively the Company approved creation of a pool of1243233 options under the ESOP 2010 for the Financial Year 2011-12.

As on March 31 2018 out of the 3384300 options granted under ESOP-2010 1491181options has been exercised 1563769 options lapsed and 329350 valid options are leftto be exercised.

As on March 31 2018 out of the 1249172 options granted under MD-ESOP 2010 809172options were exercised during the year and no option is left to be exercised.

ESOP 2015

The Company pursuant to resolutions passed by the Board and the Shareholders datedSeptember 29 2015 and November 3 2015 respectively has adopted ESOP 2015. The totalemployee stock option pool available under ESOP 2015 is 5561188 options. In accordancewith the ESOP 2015 each option on exercise would be eligible for one Equity Share onpayment of the exercise price. In compliance with Regulation 12 of Securities and ExchangeBoard Of India (Share Based Employee Benefits) Regulations 2014 (SEBI ESOP Regulations)the Company got its ESOP Scheme 2015 ratified by its shareholders subsequent to the IPO intheir AGM held on August 10 2016. Subsequent to the ratification the Company granted1696850 options to its employees under the ESOP 2015 on September 14 2016.

As on March 31 2018 the Company has granted 3166650 options under the ESOP 2015(including 1696850 options granted to eligible employees during the FY 2016-17 onSeptember 14 2016). No options were granted during the FY 2017-18. Further as on March31 2018 out of the 3166650 granted options under ESOP 2015 297796 vested options hasbeen exercised 455388 options has lapsed 1027237 options are vested and 1386229options are yet to be vested.

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

year Options Granted year 1 year 2 year 3
ESOP 2015 (Tranche 1) 1469800 34% 33% 33%
ESOP 2015 (Tranche 2) 1696850 33% 33% 34%
Total 3166650

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

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 Securitiesand Exchange Board of India (Share Based Employee Benefits) Regulations 2014 (SEBI ESOPRegulations) and the Companies Act 2013. The company has received a certificate from theStatutory Auditors of the Company certifying that ESOP 2015 Scheme of the Company is beingimplemented in accordance with the Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulations 2014 and is in accordance with the resolutions passed bythe Members of the Company at a general meeting.

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

The guidance note issued by the Institute of Chartered Accountants of India requiresthe disclosure of pro forma net results and Earnings Per Share (EPS) both basic &diluted had the Company adopted the fair value method amortising the stock compensationexpense thereon over the vesting period such expense for the year ended March 31 2018amounts to Rs 80235588/- and the basic and diluted EPS would have been revised to Rs(0.63).

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:

Particulars March 31 2018
1. Number of options granted and outstanding at the beginning of the year (A) 4473626
2. Number of options granted during the year (B) Nil
3. Number of options vested during the year 921914
4. Number of options exercised during the year 1484709
5. Number of shares arising as a result of exercise of options (C) 1484709
6. Money realized during the year by exercise of options (in Rs.) 95231052
7. Number of options Forfeited/Expired during the year (D) 229931
8. The exercise price of the options (in Rs.) 10 12.5 28 40 47 & 146.35
9. Number of options granted and in force at the end of year = (A)+(B)-(C)-(D) 2758986
10. Weighted average of remaining contractual life (years) at the year end 1.74
11. Variation of terms of the options None

No option was granted to any of the Key Managerial Personnel or to any other employeeof the Company or its subsidiary during the year. The Board has approved the cancellationof options which are lapsed and valid under existing ESOP Schemes 2006 2007 2008 2010and 2015 and for adding back the cancelled options to the ESOP 2015 Pool. Please refer toitem no. 5 of the AGM notice wherein the approval of the shareholders is being sought.Further the Board has also sought for approval from the shareholders for the grant ofstock options to the employees (present and future) of the wholly owned subsidiary‘Ujjivan Small Finance Bank Limited' under ESOP Scheme 2015. Please refer item no. 6of the AGM Notice for further details.

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.

Name and Address of the Whistle and Ethics Officer

Mr. Sanjeev Barnwal – Company Secretary and Compliance Officer (w.e.f. April 272017)

Ujjivan Financial Services Limited

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

Ms. Sudha Suresh

Ujjivan Financial Services Limited

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

Bangalore - 560095

Karnataka

Email: sudha.suresh@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

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: 2.95x
2. The percentage increase in remuneration of each director Chief Financial Officer Chief Executive Officer Company KMP % increase in remuneration
Secretary or Manager if any in the financial year Ms. Sudha Suresh Nil
(Since she got appointed as the MD & CEO effective February 01 2017 at an increased remuneration of 25%; hence during the year no increment was given)
Mr. Sanjeev Barnwal - CS 15%
Mr. Hiren Shah – CFO (resigned October 09 2017) 15%
Mr. Deepak Khetan – CFO (appointed as the CFO w.e.f. March 29 2018) Nil
3. The percentage increase in the median remuneration of employees in the financial year; 14% increase in the median remuneration of employ- ees in the FY 2017-18.
4. The number of permanent employees on the rolls of company as on March 31 2018 5
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 The average increase in the salaries of employees was 10% and the average increase in the managerial remuneration during the last financial year was also 10%
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 whoa. if employedthroughout the financial year was in receipt of remuneration for that year which in theaggregate was not less than one crore and two lakh rupees;

- None b. if employed for a part of the financial year was in receipt of remunerationfor any part of that year at a rate which in the aggregate was not less than eight lakhand fifty thousand rupees per month;

- 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 2018 had only the following 5 (five) employees:

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

The Company has only 5 employees as on March 31 2018 and the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013 is not applicable.However the Company has a prevention of sexual harassment policy in place. The Directorsfurther state that during the year under review there was no case filed pursuant to theSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.

Green Initiatives

Electronic copies of the Annual Report for the FY 2017-18 and the Notice of the 14thAGM 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.

For and on behalf of the Board of Directors

K.R. Ramamoorthy Sudha Suresh
Chairperson Managing Director & Chief Executive Officer
DIN: 00058467 DIN: 06480567
Date: May 10 2018
Place: Bangalore