directors’ report religare finvest limited · while things stood thus, rfl came to be in receipt...

1

DIRECTORS’ REPORT

Dear Members,

Religare Finvest Limited Your Directors have pleasure in presenting their 23rd Annual Report on the business and operations of the Religare Finvest Limited (“the Company”/“RFL”) along with the Audited Financial Statements for the financial year ended March 31, 2018.

FINANCIAL RESULTS

(Rupees in Lakh)

Particulars For the financial year ended

2017-2018

For the financial year

ended 2016-2017

Standalone

(Audited)

Consolidated

(Audited)

Standalone

(Audited)

Consolidated

(Audited)

Total Income 142,989.19 157,267.56 241,712.96

256,942.69

Total Expenditure 276,127.72 289,207.76 213,446.28

226,146.56

Profit before Tax (133,138.53) (131,940.20) 28,266.68 30,796.13

Exceptional Items

Loans / Sundry Balances written off

-

-

79,367.20 79,367.20

Profit / (Loss) before Tax

after exceptional items

(133,138.53)

(131,940.20)

(51,100.52) (48,571.07)

Provision for Tax

- Current Tax - 299.40 - 986.33

- Taxes for Earlier Years - (10.73) 311.11 315.25

- Deferred Tax (22,863.08) (22,768.55) (17,318.42) (17,415.66)

Profit / (loss) After Tax (110,275.46) (109,460.32) (34,093.21) (32,456.99)

Balance brought forward 11,409.08 18,739.55 45,502.29 51,401.07

Share of Profit Transferred to Minority

-

(101.89)

(204.53)

Profit available for

Appropriation

(98,866.38)

(90,822.66)

11,409.08

18,739.55

Appropriations:

Tax on Distributed Profits - - - -

Transfer to Statutory Reserve Fund u/s 45 -IC of the RBI Act, 1934

- - - -

Balance as at the end of the

year

(98,866.38) (90,822.66)

11,409.08 18,739.55

2

The annual disclosure as per Clause 53(f) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is attached herewith as Annexure- A and forms an integral part of this Report. RESULTS OF OPERATIONS (STANDALONE BASIS)

The revenue of your Company has decreased from Rs. 241,712.96 Lakh in financial year 2016-17 to Rs. 142,989.19 Lakh in financial year 2017-18. Loss before Tax increased from Rs. 51,100.52 Lakh in financial year 2016-17 to Rs. 133,138.53 Lakh in financial year 2017-18. The Net Loss after Tax also increased from Rs. 34,093.21 Lakh to Rs. 110,275.46 Lakh. Loss before tax has increased majorly on account of increase in Gross Non Performing Assets and due to reduction in total Loan Portfolio during the financial year under review. Total loan portfolio has decreased from Rs. 1,397,373.19 Lakh as at March 31, 2017 to Rs. 979,668.71 Lakh as at March 31, 2018. Gross Non Performing Assets has increased from Rs. 65,100.49 Lakh to Rs. 335,934.35 Lakh as at March 31, 2018.

STATE OF THE COMPANY’S AFFAIRS

The last financial year was an unprecedented year for the finance industry with multiple challenges. Owing to external as well as internal structural factors, the financial year FY 2017-18 was subdued for your company. With a view to improve its portfolio management, your company consolidated the losses of this tough financial year. Some key facts are shared below: 1. In Financial Year 2017-2018, RFL’s total income declined by 41% to INR 142,989

Lakhs. 2. Loss before Tax for the year increased by 161% to INR 133,139 Lakhs. 3. Loss after tax for the year increased by 223% to INR 110,275 Lakhs. 4. RFL’s Assets under Management (AUM) declined by 31% to INR 1,016,826 Lakhs. 5. Loan book size declined by 30% to INR 979,669Lakhs. 6. Capital Adequacy Ratio (CRAR) as on March 31, 2018 was 17.54% 7. RFL’s net NPAs were contained at 20.41% of total Book Size. Further, information on the Business Overview and Outlook and State of the affairs of the Company is discussed in detail in the Management Discussion & Analysis Report (MDNA). There is no change in the nature of business of the Company for the year under review.

PERFORMANCE OF THE SUBSIDIARIES

Your company holds 87.50% of the paid up equity share capital of Religare Housing Development Finance Corporation Limited (RHDFCL). RDHFCL is a Housing Finance Company registered with the National Housing Bank under section 29A of the National Housing Bank Act, 1987 and primarily engaged in lending of Housing Loans. In FY 2017-18, RHDFCL recorded a Total Income of Rs. 14,442.43 Lakh (FY 2016-17: Rs. 15,490.64 Lakh) and Profit After Tax of Rs. 815.14 Lakh (FY 2016-17: Rs. 1,636.22 Lakh). As on March 31, 2018, RHDFCL paid-up equity share capital was Rs. 3,999.80 Lakhs and Shareholders' Funds were Rs. 19,777.23 Lakh.

3

The key highlights of financial performance of Religare Housing Development Finance Corporation Limited, a subsidiary of RFL whose financials have been consolidated, are given below:

Particulars For the year ended

March 31, 2018

(Rs. in Lakh)

For the year ended

March 31, 2017

(Rs. in Lakh)

Total Income

14,442.43

15,490.64

Total Expenditure

13,244.10

12,961.18

Profit before Tax

1,198.33

2,529.45

Taxation-Current Tax

288.66

990.47

-Deferred Tax

94.52

(97.24)

Profit after Tax

815.14

1,636.22

Appropriations have been made as under:-

ok

Transfer to Special Reserve [under Section

29C of the National Housing Bank Act,

1987]

163.03

327.24

Balance transferred to Balance Sheet

652.11

1,308.98

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management's Discussion and Analysis Report for the year under review as stipulated under the Revised Regulatory Framework for NBFCs issued by the Reserve Bank of India on November 10, 2014, is presented in a separate section under Annexure - B and forms an integral part of this Report. PUBLIC DEPOSITS Your Company is a Systemically Important Non-Deposit Accepting NBFC (ND-SI- NBFC). The Company did not hold any public deposits at the beginning of the year nor it has accepted any public deposits during the year under review. TRANSFER TO RESERVES

Since the Company has incurred the losses during the financial year 2017-18, therefore the Company has not transferred any amount out of its profits to its General Reserve during the current financial year.

The details of the transfer to other reserves as part of regulatory requirements are given below:

4

a. Statutory Reserve Fund:

In accordance with the provisions of section 45-IC of the RBI Act, 1934, the Company is required to transfer an amount equivalent to 20% of profit after tax, to its Statutory Reserve. During the current and previous year, no amount has been transferred to the said Reserve account due to loss occurred during the current and previous year.

b. Debenture Redemption Reserve

The Company made Public issue of Series-1 of Non-Convertible Debentures (NCDs) (‘Series-1’) aggregating Rs. 7,538,049,000 during financial year 2011-12 and Series-2 of Non-Convertible Debentures (NCDs) (‘Series-2’) aggregating Rs. 3,320,489,000 during financial year 2012-13, of which Series-1 has been fully redeemed during the financial year 2016-17 and principal outstanding balance of Series -2 is Rs. 369,344,000 as on March 31, 2018. In terms of the provisions of Section 71 of the Companies Act, 2013 read with General Circular no.9/2002 dated April 18, 2002 as amended by General Circular No. 4/2013 dated February 11, 2013 issued by the Ministry of Corporate Affairs, the Company has created Debenture Redemption Reserve (DRR) on all outstanding publicly placed debentures. Accordingly the Company has transferred Rs. Nil (previous year Rs. Nil) to DRR out of Profit After Tax after transfer to Statutory Reserve, if applicable.

DIVIDEND

Your Company did not declare any interim dividend / final dividend during the year under review.

CAPITAL ADEQUACY RATIO

As against the minimum prescribed Capital Adequacy Ratio (CAR) of 15% as set out by the Reserve Bank of India (RBI), the Company has a Capital Adequacy Ratio of 17.54% as on March 31, 2018 (Previous Year 21.20%). SUBSIDIARY COMPANY

As on March 31, 2018, your Company has Religare Housing Development Finance Corporation Limited as its subsidiary. The statement containing salient features of the financial statement of subsidiaries/associate companies/joint ventures pursuant to first proviso to sub-section (3) of Section 129 read with Rule 5 of Companies (Accounts) Rules, 2014, in Form AOC-1, forms part of the consolidated financial statements of the Company and hence not repeated here for the sake of brevity. Pursuant to Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statements of the Company which shall be laid before the ensuing Annual General Meeting of the Company. The audited Consolidated Financial Statements together with Auditors’ Report form part of the Annual Report.

5

MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION

OF THE COMPANY

Your Board of Directors would like to state that there has been no Material Changes and Commitments, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate (March 31, 2018) and the date of the Board’s Report (i.e. September 11, 2018) which may impact the financial position of the Company.

However, the Board of Directors of your Company would like to draw your attention towards the following matters:

A) Fixed Deposits of RFL with Lakshmi Vilas Bank

RFL had made certain fixed deposits with Lakshmi Vilas Bank (“LVB”) in November 2016 and January 2017. LVB vide its letter dated 7th February 2018 had confirmed fixed deposits of Rs. 79,144.77 Lakhs to the Company.

RFL received a letter dated February 9, 2018 from LVB purporting to allude to certain loans disbursed by LVB to third parties allegedly in consideration of security of the RFL’s Fixed Deposits (“FDs”) with LVB. By means of this letter, LVB also purported to call upon RFL to execute the security documentation in connection with the alleged loans.

Vide its letter dated February 16, 2018, LVB was expressly informed that not only RFL was not party to any loans that were allegedly sanctioned or granted by LVB to any third party, as also that no authorization, sanction or approval had ever been provided by RFL to LVB permitting the creation of any security or encumbrance of the FDs for any third party loans or borrowings. LVB was also forewarned that any attempt to subject the FDs to illegal encumbrance would not only be violative of RFL’s rights, but also constitute deliberate contempt by LVB of the Order dated January 5, 2018 passed by the Hon’ble Delhi High Court, a copy of which was served on LVB vide Legal notice dated February 16, 2018.

While things stood thus, RFL came to be in receipt of a copy of the letter dated April 24, 2018 addressed by LVB to the statutory auditors of RFL that LVB had “closed the said deposits on 20.02.2018 to liquidate the loans availed” by third parties. This was contrary to the confirmation received by the Statutory Auditors in November 2017 via email confirming the fixed deposits. RFL at no point in time, instructed, authorized or consented to the liquidation of the fixed deposits or the adjustment thereof against loans availed of by any third parties or the creation of any encumbrance on the fixed deposits, whether by way of a lien, security, charge or pledge in connection with the loans availed of by any third parties. RFL has filed a suit for recovery of the Fixed Deposit amounts aggregating Rs. 79,144.77 lakhs appropriated by LVB before the Hon’ble Delhi High Court on May 31, 2018. On the next date of hearing i.e. July 19, 2018, LVB filed its written statement and served a copy to RFL. Matter was posted to July 31, 2018. On July 31, 2018 RFL pressed for the injunction applications pending before the court and both the parties were heard at length. RFL has filed its replication to the written statement filed by LVB. On August 14, 2018, case was partly argued by RFL and now the case is kept for further arguments on 7th September, 2018.

6

B) Corporate Loan Book of RFL

RFL has an exposure of Rs. 203,670 Lakhs towards the Corporate Loan Book. RBI has raised concerns in the past about the credit worthiness of the borrowers, credit appraisal and loan sanctioning mechanism followed by RFL in respect of this book. In view of RBI concerns, the first step the new Board/Management has taken immediately after taking charge was that it has reviewed the portfolio and the financial reports of the borrowers to determine the recoverability of the said loans. As a part of the recovery process, the management issued legal notices to the borrowers and has initiated corporate insolvency resolution process under Insolvency and Bankruptcy Code, 2016, against the said entities comprising the Corporate Loan Book. RFL has also appointed a reputed law firm to undertake a detailed diligence on this loan book. Post submission of the report and the steps outlined for recovery, RFL intends to pursue all legal means for recovering the loans.

In the interim based on the security available, maturity dates of the loans, recovery steps instituted and the financial reports of the borrowers, the RFL, on a prudent basis, made a provision of Rs. 101,285.00 Lakhs against this portfolio. Note: Corporate Loan Book herein refers to loans given to the erstwhile promoter group entities (excluding the loans given to Religare Enterprises Limited, Religare Comtrade Limited and Bharat Road Networks Limited).

C) Settlement Agreement with Strategic Credit Capital Private Limited(“SCCPL”)

As disclosed in previous year Annual Report 2016-17, RFL has, in the Statement of Profit and Loss for the half year ended September 30, 2016, written off of entire Rs. 5,199,151,636 due from SCCPL. Further, the loans given to Perpetual Credit Services Private Limited (“Perpetual”), (a group company of SCCPL) and loan Purchase from Nishu Finlease Pvt Ltd. of Rs. 2,737,568,540 were also written off.

Thereafter, in the financial year under reporting, RFL had entered into the Settlement Agreement with the counterparties pursuant to which the various cases against each other at various courts and tribunals were withdrawn on consent terms, however RFL retained its right to recover the amounts due from SCCPL and Perpetual. However, despite the settlement agreement, SCCPL has again filed suits against RFL at various forums. The matters are sub-judice as on date. Further, in this regard, your Board has decided to intiate all legal actions against SCCPL & its related parties including but not limited to filing insolvency petitions as may be advised by its external legal counsels in the matter and to re-open the SCCPL assignment transaction,

RFL is in the process of detailed diligence on these and connected transactions and is pursuing appropriate legal remedies to recover the amounts due to it and expect that there will not be any obligation on RFL out of these cases. CHANGES IN CAPITAL STRUCTURE

No changes have occurred in the Authorized and Paid-Up Share Capital of the Company during the Financial Year 2017-2018.

7

ANNUAL RETURN

The Annual Return extract in Form No. MGT 9 as required to be prepared in terms of Section 92(3) of the Companies Act, 2013 (‘Act’) is being uploaded on the website of the Company and can be accessed through the link https://www.religarefinvest.com/Extract-of-Annual-Return.aspx

DEBENTURES AND COMMERCIAL PAPERS

During the Financial Year 2017-18, your Company continued its focus on Debt Capital Markets (DCM) to meet its funding requirement. To this end, short-term debt through commercial papers aggregating to Rs. 120 Crore was raised during the financial year 2017-18. Further additional subscription for an amount aggregating to Rs. 665 Crore was received in financial year 2017-18 pursuant to the partly paid Non-Convertible Debentures (NCDs) issued on private placement basis in the financial year 2015-16, given that the outstanding borrowings at any time was within the respective limits set by the Board from time to time. The corresponding issues in Financial Year 2016-17 stood at Rs. 5,188 Crore under Commercial Paper and Rs. 1460 Crore under NCDs. Further, during Financial Year 2017-18, the Company has redeemed Rs. 1,872.78 Crore of NCDs, inclusive of privately placed and publicly placed debentures. The aggregate outstanding as on March 31, 2018 was Rs. 460.93 Crore under NCD program and there was Nil amount outstanding under commercial paper program of the Company. The break up for the outstanding NCD program as on March 31, 2018 is given below:

Outstanding amount in Rs

(in Crore)

Break-up

Total Secured Unsecured

Publicly placed NCDs 36.93 36.93 00.00

Privately placed NCDs 424.00 204.00 220.00

Total 460.93 240.93 220.00

Privately and Publicly Placed Secured Redeemable Non-Convertible Debentures (NCDs) outstanding as on March 31, 2018 are secured by the Company’s immovable property and first pari-passu charge over standard business receivables of the Company with asset cover of 1.1X as applicable. CREDIT RATINGS

The Company’s credit ratings by various agencies at March 31, 2018 are given below:

Type of Borrowing

Rating Agency Amount (Rs. Crore)

Rating

Commercial Paper

ICRA/India Ratings 2000/ 3,000

ICRA A3 (Rating Watch with Developing Implications) /

8

IND A3+ (Rating Watch Negative)

Long Term Debt ICRA/India Ratings 1000*/ 3000

ICRA BBB(Rating Watch with Developing Implications) / IND BBB (Rating Watch Negative)

Long Term Bank Loans

ICRA/India Ratings 11,400/ 15,000

ICRA BBB (Rating Watch with Developing Implications) / IND BBB (Rating Watch Negative)

Short Term Bank Loans

ICRA/India Ratings 600 / 3000

ICRA A3 (Rating Watch with Developing Implications) / IND A3+ (Rating Watch Negative)

Sub Debt India Ratings 750 IND BBB (Rating Watch Negative)

Long Term Debt CARE 36.93

CARE BBB (Credit Watch with Developing Implications

* Rated amount includes rating of Tier II bonds as well In the month of June, 2018 (i.e. subsequent to the end of the financial year under review), RFL has withdrawn the rating from CARE Ratings with respect to the Company’s publically placed Non-Convertible Debentures (NCDs) of Rs. 36.93 Crore.

DEBENTURE TRUSTEES

The details of the debenture trustees for the public issue debentures and privately placed debentures of the Company are given below: ------------------------------------------------------------------------------------------------------------

Public Issued Debentures Privately Placed Debentures

Vistra ITCL (India) Limited (formerly

IL&FS Trust Company Limited) Axis Trustee Services Limited

9

IL&FS Financial Centre, 2nd Floor, Axis House,

Plot C-22, G Block, Bombay Dyeing Mills Compound

Bandra-Kurla Complex, Pandurang Budhkar Marg, Worli,

Bandra(East),Mumbai-400051 Mumbai-400 025

Telephone Number : 022-26593927 Telephone Number:022-24255215/ 5216

EmailId:[email protected]

Email Id:[email protected]

------------------------------------------------------------------------------------------------------------ The details are available on the website of the Company at the link: http://www.religarefinvest.com/Trustee-Details.aspx

RELIGARE FINVEST LIMITED EMPLOYEES STOCK OPTION SCHEME

Human Resources are key to the growth and success of an organization, more so in financial services industry. It is therefore imperative to align the interests of the employees and shareholders of the Company. Employee Stock Option schemes have been universally accepted as retention and wealth creation tool that meets this objective. To attract, retain, motivate and incentivize the employees at all levels, your Board and Shareholders had approved RFL Employee Stock Option Scheme – 2010 and RFL Employee Stock Option Scheme - 2013 to issue stock options up to 7.5% of the expanded share capital of the Company. Further, during the financial year 2014-2015, a resolution was passed by the Board and special resolution by shareholders for increasing the dilution from 7.5% to 10% of the expanded share capital of the Company. During the year under review, no fresh options were granted. Number of stock options outstanding and vested (net of cancellations) as on March 31, 2018 was 1,22,25,000.

The disclosures required as per Rule 12(9) of Companies (Share Capital & Debentures) Rules, 2014 are given below:

(a) Options granted: NIL (b) Options vested: 1,22,25,000 (c) Options exercised: NIL (d) Total number of shares arising as a result of exercise of option: NIL (e) Options lapsed: 64,44,000 options lapsed during the financial year 2017-2018 (f) Exercise price: N.A. as no option has been exercised by any person till date (g) Variation of terms of options: None (h) Money realized by exercise of options: None (i) Total number of options in force: As on March 31, 2018, outstanding number of

options is 1,22,25,000 (j) Employee wise details of options granted to:

(i) Key managerial personnel: No fresh option granted during the year under review.

10

(ii) Any other employee who receives a grant of options in any one year of option

amounting to five percent or more of options granted during that year: No option granted during the year under review.

(iii) Identified employees who were granted option, during any one year, equal to or

exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grants: None

DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

a. Appointment of Directors and KMP in the Company

During the period under review, no new persons have been appointed as Directors/KMP in the Company. Further, subsequent to the end of the financial year March 31, 2018, following Directors have been appointed on the Board of the Company till the date of this report i.e. September 11, 2018:

S. No. Name of the Director Category Date of Appointment

1 Mr. Vikram Talwar Non-Executive Independent Director

April 05, 2018

2 Mrs. Sabina Vaisoha Non-Executive Independent Director

August 16, 2018

3 Mr. Malay Kumar Sinha Non-Executive Independent Director

August 16, 2018

Further, in the Board Meeting of RFL held on April 05, 2018, the Board of Directors had accorded their consent for appointment of following Directors on the Board of RFL: 1. Mr. Ashok Mehta (designated as Non-Executive Director); 2. Mr. Siddharth Mehta (designated as Non-Executive Director); 3. Mr. Pankaj Sharma (designated as Whole-Time Director (‘WTD’) and Key Managerial

Personnel (‘KMP’)) However, appointment of Mr. Ashok Mehta, Mr. Siddharth Mehta and Mr. Pankaj Sharma on the Board of RFL shall be effective only upon the receipt of approval from the RBI. In this regard, RFL had filed an application with the RBI on April 12, 2018 for seeking their approval for appointment of the abovementioned Directors on the Board of the Company. The approval of the RBI on the above said proposed appointments is still awaited as on date. Mr. Sanjay D. Palve has been appointed as Chief Executive Officer (CEO) of the Company after the end of the financial year 2017-18 (i.e. on August 17, 2018) and is also designated as Key Managerial Personnel (‘KMP’) under Section 203 of the Companies Act, 2013 (‘Act’). Further, the Board in its meeting held on 11 September 2018 has approved the appointment of Mr. Milind Patel as Non-Executive Non-Independent Director which will be effective upon receipt of approval from the RBI. The Company will submit the requisite application with RBI in the due course of time.

11

b. Resignation of Directors from the Board of the Company:

S.

No.

Name of the Director Category Date of Resignation

1. Mr. Nalin Nayyar Non-Executive Director June 28, 2017 2. Mr. Srinivas

Chidambaram Non- Executive Director July 25, 2017

3. Mr. Kavi Arora Managing Director & CEO November 12, 2017 4. Mr. Anil Saxena Non- Executive Director November 14, 2017

5. Mr. Maninder Singh Non- Executive Director November 14, 2017

6. Mr. A.C. Mahajan Non- Executive Independent Director

November 29, 2017

7. Mr. Daljit Singh Non-Executive Director January 29, 2018

8. Mrs. Sabina Vaisoha Non- Executive Independent Director

March 09, 2018

Note: Mr. Padam Bahl and Mr. R.K. Shetty have resigned as Non-Executive Independent Directors

from the board of RFL w.e.f. June 04, 2018 and June 30, 2018 respectively.

None of the Directors of your Company is disqualified as per provisions of Section 164(2) of the Companies Act, 2013. Your Directors have made necessary disclosures as required under various provisions of the Companies Act, 2013 and RBI norms. Each of the Independent Director, at the first meeting of the Board in which he/she participated as such has given a declaration that he/she meets the criteria of independence as provided under Section 149 of the Companies Act, 2013. Mr. Vikram Talwar was appointed on April 05, 2018 as Additional Non-Executive Independent Director and holds office up to the date of the ensuing Annual General Meeting (‘AGM’). The Company has not received requisite notice in writing from any member of the Company proposing the candidature for the appointment Mr. Vikram Talwar as Non-Executive Independent Director on the Board of the Company. BOARD EVALUATION

Your Company has Board Evaluation Policy in place to establish and follow best practices in governance of the Board. The purpose of the Policy is to give all Board members an opportunity to evaluate and discuss the Board’s performance with candor and from multiple perspectives. The Board believes the evaluation will lead to a closer working relationship among Board members, greater efficiency in the use of the Board’s time, and increased effectiveness of the Board as a governing body. The performance evaluation framework consists of three parts as per below: • Performance Evaluation of Committees; • Performance Evaluation of the Board as a whole; • Performance Evaluation of Individual Directors As a Board member, one’s role during evaluation is as follows:

• Complete self-evaluation of the Committee(s) one is part of; prior to the Annual Board Meeting;

• Complete self-evaluation of the Board as a whole; prior to the Annual Board Meeting;

12

• Take part in peer evaluation of all colleagues on the Board during the Annual Board Meeting.

Your Board of Directors would like to apprise you that there are three Independent Directors on

the Board of the Company at the moment and application has been submitted with RBI on April

12, 2018 for seeking their approval for appointment of below mentioned persons on the Board of

the Company:

1. Mr. Ashok Mehta (designated as Non-Executive Director);

2. Mr. Siddharth Mehta (designated as Non-Executive Director);

3. Mr. Pankaj Sharma (designated as Whole-Time Director and Key Managerial Personnel)

The Board had discussed and approved/agreed that Board Evaluation for the financial year

2017-2018 to be done, once RFL receive the RBI’s approval in relation to the above said proposed

appointments and committees have been reconstituted so that performance evaluation of

Committees, the Board as a whole and Individual Directors can be carried out/performed

effectively.

APPOINTMENT AND REMUNERATION POLICY

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Personnel and their remuneration. Director’s Appointment and Remuneration Policy

Your Company has Director’s Appointment and Remuneration Policy in place to regulate the appointment and remuneration of Directors (including the Independent Directors) based on the laws and regulations applicable on the Company. The Nomination & Remuneration Committee (NRC) determines the criteria of appointment to the Board and is vested with the authority to identify candidates for appointment to the Board of Directors. The NRC, along with the Board, on continuous basis will review appropriate skills, characteristics and experience required of the Board as a whole and its individual members. The objective is to have a Board with diverse background and experience in areas that is relevant for the company. In evaluating the suitability of individual Board member, the NRC will take into account multiple factors, including general understanding of the business, education, professional background, personal achievements, etc. Few important criteria against which each prospective candidate will also be evaluated are personal and professional ethics, integrity and values. He/she should be willing to devote sufficient time and effort in carrying out their duties and responsibilities effectively & must have the aptitude to critically evaluate management’s working as part of a team. The NRC will evaluate each prospective candidate with the objective of having a group that best enables the success of the Company’s business. Based on recommendation of the NRC, the Board will evaluate the candidate(s) and decide on the selection of the appropriate member. The Board through the MD & CEO /NRC will make an invitation to the new member to join the Board as a Director. On acceptance of the same, the new Director will be appointed by the Board.

13

The form and amount of director’s remuneration will be recommended by the NRC to the Board for approval within the maximum amount permissible under the law. Employee directors will not be paid for Board membership in addition to their regular employee compensation. The NRC will conduct a review of director compensation on a periodic basis to ensure directors of the Company are compensated effectively in a manner consistent with the strategy of the Company, and to further ensure that the Company will be able to attract, retain and reward those who contribute to the success of the Company. Your Company has ‘Fit and Proper’ Policy in place for ascertaining the ‘fit and proper’ criteria to be adopted at the time of appointment of directors and on a continuing basis, pursuant to the Revised Regulatory Framework for NBFCs issued by the Reserve Bank of India in November 2014. KMP Appointment and Remuneration Policy

Your Company has KMP Appointment and Remuneration Policy in place to regulate the appointment and remuneration of KMP based on the laws and regulations applicable on the Company. The intent is to ensure the proper appointment and fairness in the remuneration process of the KMP of the Company and at the same time, to attract and retain the best suitable talent for the Company. The authority to identify right candidates for appointment of KMP’s is vested with the MD & CEO, who, along with HR Head, will identify candidates internally or externally, basis which the NRC will propose to the Board for its approval for appointment along with proposed remuneration. The remuneration proposed will be consistent with the strategy of the company and in line with the comparable market and internal remuneration benchmarks. In case of CEO’s appointment and remuneration, NRC will initiate the process of identifying the new Chief Executive Officer and propose the candidature to Board for its approval for appointment. CEO’s remuneration will be determined keeping in view the industry benchmark and the relative performance of the company to the industry performance; it will be proposed by NRC and subsequently approved by Board. In case of revision in remuneration of KMP post their appointment, the proposed revision is to be placed before the NRC for its approval/ratification, as the case may be. The remuneration proposed will be consistent with the strategy of the company and in line with the comparable market and internal remuneration benchmarks.

OTHERS’ EMPLOYEES APPOINTMENT AND REMUNERATION

Other employees’ appointment and remuneration is as per the HR policy of the Company.

BOARD MEETINGS

The Board met seven (7) times during the financial year 2017-2018 viz. on June 06, 2017, June 28, 2017, August 30, 2017, November 13, 2017, November 14, 2017, November 17, 2017 and February 17, 2018. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

14

Further, in accordance with Standard 9 of the Secretarial Standards-1 on “Meetings of the

Board of Directors”, the details on the number of meetings attended by each Director during financial year 2017-2018 is given below:

Name of the Director Category Number of meetings during

the financial year 2017 -2018

Held Entitled Attended

Mr. Kavi Arora1 Managing Director & CEO

7 3 3

Mr. Anil Saxena2 Non- Executive Director

7 4 4

Mr. Avinash Chander Mahajan3

Non- Executive Independent Director

7 6 5

Mr. Daljit Singh4 Non- Executive Director

7 6 3

Mr. Maninder Singh5 Non- Executive Director

7 4 4

Mr. Nalin Nayyar6 Non- Executive Director

7 1 0

Mr. Padam Narain Bahl Non- Executive Independent Director

7 7 6

Mr. Rama Krishna Shetty Non- Executive Independent Director

7 7 5

Mrs. Sabina Vaisoha7 Non- Executive Independent Director

7 7 7

Mr. Srinivas Chidambaram8 Non- Executive Director

7 2 2

BOARD COMMITTEES CONSTITUTED BY THE BOARD

The Company has several committees which have been established as a part of the best corporate governance practices. There are 9 Committees constituted by the Board namely Audit Committee, Loan/Investment and Borrowing Committee, Risk Management Committee, Nomination and 1 Mr. Kavi resigned as Managing Director & CEO w.e.f. November 12, 2017.

2 Mr. Anil Saxena resigned as Non-Executive Director w.e.f. November 14, 2017.

3 Mr. Avinash Chander Mahajan resigned as Non-Executive Independent Director w.e.f. November 29,

2017. 4 Mr. Daljit Singh resigned as Non-Executive Director w.e.f. January 29, 2018.

5 Mr. Maninder Singh resigned as Non-Executive Director w.e.f. November 14, 2017.

6 Mr. Nalin Nayyar resigned as Non-Executive Director w.e.f. June 28, 2017.

7 Mrs. Sabina Vaisoha resigned as Non-Executive Independent Director w.e.f. March 09, 2018.

8 Mr. Srinivas Chidambaram resigned as Non-Executive Director w.e.f. July 25, 2017.

15

Remuneration Committee, Asset Liability Committee, Share Allotment Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee and Review Committee for the identification of non-cooperative borrowers. Post resignations of few Board Members during the financial year 2017-2018 and in financial year 2018-2019, the Company is in the process for appointment of requisite number of directors on the Board and other Committees to comply with the statutory or regulatory requirement. Further, in the Board Meeting of the Company held on April 05, 2018, the Board of Directors had accorded their consent for appointment of following Directors on the Board of the Company: 1. Mr. Ashok Mehta (designated as Non-Executive Director); 2. Mr. Siddharth Mehta (designated as Non-Executive Director); 3. Mr. Pankaj Sharma (designated as Whole-Time Director and Key Managerial Personnel) However, appointment of Mr. Ashok Mehta, Mr. Siddharth Mehta and Mr. Pankaj Sharma on the Board of the Company shall be effective only upon the receipt of approval from the RBI. In this regard, RFL had filed an application with the RBI on April 12, 2018 for seeking their approval for appointment of the abovementioned Directors on the Board of the Company. The approval of the RBI on the above said proposed appointments is still awaited as on date. Further, Board Committees of RFL shall be reconstituted later on once the RFL Board is established. The composition of 9 Committees (as referred above) as on March 31, 2018 is provided below. Further, in accordance with Standard 9 of the Secretarial Standard-1 on “Meetings

of the Board of Directors”, the details on the number and dates of meetings of the Committees held during the financial year 2017-2018 indicating number of meetings attended by each Director is given below:

� Audit Committee

Four Audit Committee Meetings were held during the financial year 2017-2018 viz. on June 26, 2017, June 28, 2017, August 30, 2017 and November 13, 2017. The attendance of the members is as follows:


the financial year 2017-2018


Mr. Avinash Chander Mahajan9 Member 4 4 4

Mr. Maninder Singh10 Member 4 4 4

Mr. Padam Bahl Member 4 4 4

9 Mr. Avinash Chander Mahajan resigned as Non-Executive Independent Director w.e.f. November 29,

2017. 10

Mr. Maninder Singh resigned as Non-Executive Director w.e.f. November 14, 2017.

16

� Loan / Investment and Borrowing Committee (LIBC)

Three LIBC Meetings were held during the financial year 2017-2018 year viz. on April 28, 2017, May 30, 2017 and November 13, 2017. The attendance of the members is as follows:

Name of the Director /

Member

Category Number of meetings during




Mr. Daljit Singh12 Member 3 3 1

Mr. Kavi Arora13 Member 3 2 2 Mr. Maninder Singh14 Member 3 3 3

� Asset – Liability Committee (ALCO)

No ALCO Meeting was held in FY 2017-18. However, composition of ALCO Committee during FY 2017-18 is given below:

Name of the Director/Member Category Number of meetings during



Mr. Avinash Chander Mahajan Member NIL

Mr. Kavi Arora Member

Mr. Maninder Singh Member Mr. Nalin Nayyar Member

Note: Mr. Avinash Chander Mahajan resigned as Non-Executive Independent Director w.e.f. November 29, 2017. Mr. Kavi Arora resigned as Managing Director & CEO w.e.f. November 12, 2017.; Mr. Maninder Singh resigned as Non-Executive Director w.e.f. November 14, 2017and Mr. Nalin Nayyar resigned as Non-Executive Director w.e.f. June 28, 2017. Therefore, there were no members in this committee as on March 31, 2018. However, Board has reconstituted the ALCO Committee with Mr. Milind Patel, Mr. Sanjay D. Palve, Mr. Pankaj Sharma and Mr. Kapil Krishnan on September 11, 2018. � Risk Management Committee (RMC)

Eight Risk Management Committee Meetings were held during the financial year 2017-2018 viz. May 23, 2017, June 14, 2017, June 28, 2017, August 16, 2017, August 30, 2017, September 26, 2017, October 16, 2017 and November 13, 2017. The attendance of the members is as follows:

Name of the Director/Member Category Number of meetings during



Mr. Avinash Chander Mahajan15 Member 8 8 4 11

Mr. Avinash Chander Mahajan resigned as Non-Executive Independent Director w.e.f. November 29,

2017. 12

Mr. Daljit Singh resigned as Non-Executive Director w.e.f. January 29, 2018. 13

Mr. Kavi Arora resigned as Managing Director &CEO w.e.f. November 12, 2017. 14

Mr. Maninder Singh resigned as Non-Executive Director w.e.f. November 14, 2017.

17


Mr. Kavi Arora17 Member 8 7 7

Mr. Maninder Singh18 Member 8 8 8 Mr. Nalin Nayyar19 Member 8 2 0

� Nomination and Remuneration Committee (NRC)

One Meeting of NRC was held during the financial year 2017-2018 viz. June 28, 2017. The attendance of the members is as follows:






Mr. Padam Bahl Member 1 1 1 Mr. Sabina Vaisoha22 Member 1 1 0

Note: After the end of the financial year i.e. FY 2017-18 till the date of this report i.e. September 11, 2018 The Nomination and Remuneration Committee of the Company has been reconstituted with Mr. Vikram Talwar, Mrs. Sabina Vaiosha and Mr. Malay Kumar Sinha as Members of the Nomination and Remuneration Committee w.e.f. August 17, 2018.

� Share Allotment Committee (SAC)

No SAC Meeting was held during FY 2017-18. However, composition of SAC during FY 2017-18 is given below:




Mr. Kavi Arora Member NIL

Mr. Maninder Singh Member

Mr. Nalin Nayyar Member Note: Mr. Kavi Arora resigned as Managing Director & CEO w.e.f. November 12, 2017; Mr. Maninder Singh resigned as Non-Executive Director w.e.f. November 14, 2017and Mr. Nalin Nayyar resigned as Non-Executive Director w.e.f. June 28, 2017.. Therefore, there were no members in this committee as on March 31, 2018. 15


2017. 16


Mr. Kavi Arora resigned as Managing Director & CEO w.e.f. November 12, 2017. 18

Mr. Maninder Singh resigned as Non-Executive Director w.e.f. November 14, 2017. 19

Mr. Nalin Nayyar resigned as Non-Executive Director w.e.f. June 28, 2017. 20


2017. 21

Mr. Daljit Singh resigned as Non-Executive Directorw.e.f. January 29, 2018. 22

Mrs. Sabina Vaisoha became member of NRC Committee through a resolution by circulation approved by

the Board of RFL on January 30, 2018 and she resigned as Non-Executive Independent Director w.e.f.

March 09, 2018.

18

� Corporate Social Responsibility Committee (CSR)

One CSR Committee Meeting was held during FY 2017-18 viz. August 30, 2017. The attendance of the members is as follows:



Held Entitled Attended Mr. Daljit Singh23 Member 1 1 1

Mr. Kavi Arora24 Member 1 1 1

Mr. Padam Bahl Member 1 1 1

Note: The CSR Committee of the Company has been reconstituted with Mr. Vikram Talwar, Mrs. Sabina Vaiosha and Mr. Malay Kumar Sinha as Members on September 1, 2018. � Stakeholders Relationship Committee (SRC)

No SRC Meeting was held during FY 2017-18. However, composition of SRC during FY 2017-18 is given below:

Name of the Director /Member Category Number of meetings during



Mr. Kavi Arora Member NIL

Mr. Maninder Singh Member

Mr. Nalin Nayyar Member

Note: Mr. Kavi Arora resigned as Managing Director & CEO w.e.f. November 12, 2017;. Mr. Maninder

Singh resigned as Non-Executive Director w.e.f. November 14, 2017 and Mr. Nalin Nayyar resigned

as Non-Executive Director w.e.f. June 28, 2017. Therefore, there were no members in this committee

as on March 31, 2018.

� Review Committee for the identification of non-cooperative borrower- No meeting of this Committee was held during the financial year 2017-2018. However, the composition of the Committee as on March 31, 2018 is given below:

Name Designation

Mr. Kavi Arora25 Chairperson

Mr. Avinash Chander Mahajan26 Member Mr. Padam Bahl Member

These Committees function as per the terms of reference as approved by the Board for the respective Committees. 23





2017.

19

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established a Corporate Social Responsibility (CSR) Committee. The CSR Committee has formulated and recommended to the Board, a CSR Policy indicating the activities to be undertaken by the Company, which has been approved by the Board and the same has been put up on the Company’s website and available at the link: http://www.religarefinvest.com/Folders/resources/DownloadPdf/Corporate_Social_Responsibility_Policy_18082017.pdf The CSR policy was adopted on March 30, 2015 by the Company, Religare Finvest Limited

(RFL) and was further amended on June 28, 2017.

The belief and philosophy of the group is that being a responsible corporate citizen, it would strive to bring about overall positive impact in societies/local communities. The group has identified provision of healthcare assistance, and health and wellness related awareness relevant to the local underprivileged /marginalized communities as the areas of focus for CSR objectives. Earlier, the Religare group (including Religare Finvest Limited) had engaged the Fortis Charitable Foundation (FCF) as its implementation partner to pursue and drive the identified agenda/programs. However, subsequent to the end of the financial year under review, the Board of Directors of Religare Enterprises Limited (‘Religare’), the Holding Company of the Company, have reviewed the engagement with FCF and decided to terminate the CSR Agreement dated 14th Dec 2016 entered by Religare and its subsidiaries with Fortis Charitable Foundation. Further, the Board of Directors of your Company has also approved the termination of engagement with FCF. Now, the Company is exploring the options to spend CSR money through creation of Non-profit entity/ Trust within the group. For the year ended March 31, 2018, the Company was required to spend Rs. 21,334,360 under CSR for financial year 2017-18 as prescribed under Section 135 of the Companies Act, 2013. In light of the fact that Company has incurred losses during the FY 2016-2017 as well as in the financial year under review, the Board of Directors of the Company had decided not to contribute any amount on CSR Project in the financial year 2017-18. The statutory disclosures with respect to the CSR Committee, in terms of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, in the form of the annual report on CSR Activities is laid down in Annexure – C

which forms part of this Report.

MAJOR EVENTS

Religare Finvest Limited is an SME focused debt capital provider and has built a robust NBFC platform to enable small and medium enterprises to chart higher growth trajectories. Our vision is to be a trusted partner for our customers and be an enabler in their growth stories.

20

RFL undertook several initiatives to engage effectively with our customers and target audience in FY17-18.

• Customer Connect Program - SME CoLab:

SME CoLab is a unique platform created by Religare Finvest Limited with significant investments in knowledge and people to create a sustainable community of professionals and customers. This ecosystem has successfully positioned RFL as a thought leader in the lending industry. An SME CoLab was organised in Ludhiana, Punjab on 25th May, 2017, where eminent industry personalities shared their knowledge and experience on topics of most interest to our customers – GST, Digitisation and RERA 2017.

(The panelists at the SME CoLab held in Ludhiana, Punjab on 25th May, 2017)

(CA Mudit Goyal (Sr. Consultant-GST & Indirect Tax and Director, SixAce Global Consultancy

LLP) speaking on ‘How & Why of GST and Complete Digitisation’)

21

• Customer acquisition activities:

At RFL, we partner with various industry associations to connect with SMEs and MSMEs proactively, as part of our outreach efforts to identify their needs and to enhance our visibility. RFL participated in the below listed programs during FY 17-18.

1. Business Development Event in association with NRIWA in May 2017 at Narela,

Delhi

As a part for our business development and footprint enhancement initiative in the SME belts, Religare Finvest Limited collaborated with Narela Reallocation Industrial Welfare Association (NRIWA). The platform gave our Delhi team an opportunity to support sales efforts and promote our brand amongst Narela based SMEs.

(The RFL team at NRIWA)

2. 17th International Industrial Trade Fair June 2017 organised by CODISSIA at

Coimbatore

The Coimbatore District Small Industries Association (CODISSIA) organised the 17th International Industrial Trade Fair at Coimbatore from 1st to 5th June 2017. INTEC is a congregation of various industries exhibiting their finest innovations and services and attracts a footfall of around 1,00,000 visitors from varied industries and sectors. The RFL team used this platform to connect with existing and potential customers.

22

(The RFL team at INTEC 2017)

3. Knowledge Forum organised in July 2017 at Faridabad

With an aim to impart knowledge to our customers about the new GST regime, RFL organised the GST – CLAP (GST Course & Learning Awareness Program) at Faridabad, Haryana. The one day training session saw an attendance of 120 customers and prospects. The RFL team addressed concerns around GST dynamics and how it would impact the working capital requirements for different industries. The team also spoke about customisable product

23

offerings.

(The RFL team presenting their products to a milieu of customers and prospects at the GST-

CLAP event)

AWARDS

At RFL, we believe our employees are the key differentiators and have thus undertaken various initiatives to attract, develop and build an employer brand, all the while retaining the right talent to create a high performance culture. For the FY 17-18, Religare Finvest Limited has been Great Place to Work-Certified™ for successfully achieving the milestone of building and sustaining a High-Trust, High-Performance Culture™.

Great Place to Work® Institute has conducted pioneering research on the characteristics of great workplaces for over 25 years. Their methodology is recognised as rigorous and objective and considered the gold standard for assessing and certifying great workplace cultures. It believes that all organisations can become great workplaces, and it is their mission to help them succeed.

Great Place To Work® partners with more than 8000 organisations from over 50 countries every year around the world to help create and sustain a High-Trust, High-Performance Culture™ and get them Great Place to Work-Certified™. The findings are published annually in prestigious media channels across the globe, such as Fortune, Handesblatt, The Economic Times and Le Figaro Economie. They represent the definitive employer-of-choice and workplace quality recognition any organisation can receive. Becoming Great Place to Work-Certified™ is a great accomplishment—in part because each one of one of us, at RFL, has contributed to create a better work environment.

24

STATUTORY AUDITORS

In the Annual General Meeting of the Company held on September 28, 2017, Shareholders of the company by passing an ordinary resolution had appointed M/s S.S. Kothari Mehta & Co., Chartered Accountants (Firm Registration No.: 000756N) as the Statutory Auditors of the Company in place of M/s Price Waterhouse, Chartered Accountants (Firm Registration No. 301112E), erstwhile statutory auditors of the Company, to hold office for a period of five consecutive years commencing from the financial year 2017-18 i.e. from the conclusion of 22nd Annual General Meeting until the conclusion of the 27th Annual General Meeting of the Company to be held in the year 2022, (subject to ratification by the Members at every Annual General Meeting). However, in accordance with the Companies Amendment Act, 2017, enforced on May 07, 2018 by Ministry of Corporate Affairs, the appointment of Statutory Auditors is not required to be ratified at every Annual General Meeting.

AUDITORS’ REPORT Management’s response on the Statutory Auditors' Qualification / Comments on

the Company’s standalone/consolidated financial statements:

(i) Qualification pertaining to Fixed Deposits of RFL with Lakshmi Vilas Bank:

RFL had made certain fixed deposits with Lakshmi Vilas Bank (“LVB”) in November 2016 and January 2017. LVB vide its letter dated 7th February 2018 had confirmed fixed deposits of Rs. 79,144.77 Lakhs to RFL. RFL received a letter dated February 9, 2018 from LVB purporting to allude to certain loans disbursed by LVB to third parties allegedly in consideration of security of the RFL’s Fixed Deposits (“FDs”) with LVB. By means of this letter, LVB also purported to call upon RFL to execute the security documentation in connection with the alleged loans.

Vide RFL’s letter dated February 16, 2018. LVB was expressly informed that not only RFL was not party to any loans that were allegedly sanctioned or granted by LVB to any third party, as also that no authorization, sanction or approval had ever been provided by RFL to LVB permitting the creation of any security or encumbrance of the FDs for any third party loans or borrowings. LVB was also forewarned that any attempt to subject the FDs to illegal encumbrance would not only be violative of RFL’s rights, but also constitute deliberate contempt by LVB of the Order dated January 5, 2018 passed by the Hon’ble Delhi High Court, a copy of which was served on LVB vide Legal notice dated February 16, 2018.

While things stood thus, RFL came to be in receipt of a copy of the letter dated April 24, 2018 addressed by LVB to the statutory auditors of RFL that LVB had “closed the said deposits on 20.02.2018 to liquidate the loans availed” by third parties. This was contrary to the confirmation received by the Statutory Auditors in November 2017 via email confirming the fixed deposits. RFL at no point in time, instructed, authorized or consented to the liquidation of the fixed deposits or the adjustment thereof against loans availed of by any third parties or the creation of any encumbrance on the fixed deposits, whether by way of a lien, security, charge or pledge in connection with the loans availed of by any third parties. RFL has filed a suit for recovery of the Fixed Deposit amounts aggregating Rs. 79,144.77 lakhs appropriated by LVB before the Hon’ble Delhi High Court on May 31, 2018. On the next date of hearing i.e. July 19, 2018, LVB filed its

25

written statement and served a copy to RFL. Matter was posted to July 31, 2018. On July 31, 2018 RFL pressed for the injunction applications pending before the court and both the parties were heard at length. RFL has filed its replication to the written statement filed by LVB. On August 14, 2018, case was partly argued by RFL and now the case is kept for further arguments on 7th September, 2018. ii) Qualification pertaining to Corporate Loan Book of RFL:

RFL has an exposure of Rs. 203,670 Lakhs towards the Corporate Loan Book. RBI has raised concerns in the past about the credit worthiness of the borrowers, credit appraisal and loan sanctioning mechanism followed by RFL in respect of this book. The management of RFL has reviewed the portfolio and the financial reports of the borrowers to determine the recoverability of the said loans.

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

In the interim based on the security available, maturity dates of the loans, recovery steps instituted and the financial reports of the borrowers, the RFL, on a prudent basis, made a provision of Rs. 101,285.00 Lakhs against this portfolio.

iii) Disclaimer of opinion in the report on the below mentioned points:

(i) Material weakness in Internal Financial Control over Financial Reporting in the Credit

evaluation process in respect of Corporate Loan Book and loan against property & shares;

In RFL adequate controls exist for loans granted under Loans against property (SME-Secured Loans) and SME Unsecured Loans. The growth and performance of the SME business at RFL over the period of years is satisfactory and credit underwriting & risk control mechanism is par with the industry standard. With respect to Corporate Loan Book, the company has taken corrective measures to ensure that under no circumstances this will be repeated and is working towards the revamp of entire credit systems and approval process.

(ii) Updated documentation for Micro Small & Medium Enterprises as MSMED Act 2006 and

control over Information Technology General Controls;

There is an existing policy to ensure appropriate documentation as required for Micro, Small and Medium Enterprises as MSMED Act 2006. As per the directives of Reserve Bank of India, the mmanagement has identified the gaps in Information Technology General Controls and is in the process of implementing corrective action in due course

(iii) Strengthening of internal control process in respect of regular updation of risk control

matrix, comprehensiveness for coverage of all process:

RFL has strong risk and approval system in place, which is reflected in the healthy SME book growth over the years .With respect to Corporate Loan Book, the company has taken corrective

26

measures to ensure that under no circumstances this will be repeated and is working towards the revamp of entire credit systems and approval process. SECRETARIAL AUDITOR & SECRETARIAL AUDIT REPORT

As per the provisions of Section 204 of the Companies Act, 2013, the Board of Directors of the Company has appointed M/s P I & Associates as the Secretarial Auditor of the Company to conduct the Secretarial Audit. The Secretarial Audit Report for the financial year ended March 31, 2018, is annexed to this Report as Annexure-D.

Management comments on qualifications given by auditors in the report are as follows:

(a) Non-compliance with Secretarial Standards issued by the Institute of Company

Secretaries of India: The Company has complied with Secretarial Standards except in few cases where draft and signed minutes were circulated to the Board members beyond prescribed timelines due to frequent changes at Board and management level during year under review. The management will take steps to ensure that same is not repeated in future.

(b) Delayed submission of audited financial results to Stock Exchanges for the half and

annual year ended March 31, 2017: For financial year ended March 31, 2017, finalization of annual audited accounts has taken more than anticipated time. Hence, the Company was not able to declare its audited financial results within the prescribed timelines under SEBI Listing Regulations. The Company declared its audited financial results approved on June 28, 2017.

(c) Non -Appointment of CFO, MD /WTD / Manager /CEO under Section 203: Subject to the RBI’s approval, the Company has appointed Whole Time Director on 5 April 2018 and the application has been filed with RBI in the month of April 2018 and the approval from RBI is awaited till the date of Directors’ Report. Further, the CEO has been appointed by the Board on August 17, 2018. The office of CFO became vacant on May 15, 2017. The Company was required to appoint CFO within six months i.e. by November 14, 2017. The Company is actively searching for suitable candidate for office of CFO with vast and diversified rich experience in the financial services sector and shall appoint the same at the earliest.

(d) Non Appointment of minimum number of Board members: There were only two board members as on March 31, 2018 due to resignation of Ms. Sabina Vaisoha as Independent Director on March 9, 2018. . To comply with the statutory requirement, in the Board Meeting of RFL held on April 05, 2018, the Board of Directors had accorded their consent for appointment of three Directors on the Board of RFL namely Mr. Ashok Mehta (designated as Non-Executive Director); Mr. Siddharth Mehta (designated as Non-Executive Director); Mr. Pankaj Sharma (Whole-Time Director (‘WTD’) . However, the said appointments shall be effective only upon the receipt of approval from the RBI. In this regard, RFL had filed an application with the RBI in the month of April 2018 for seeking approval. The approval of the RBI on the above said proposed appointments is still awaited as on date. Further, Mr. Malay Kumar Sinha and Ms. Sabina Vaisoha have also been appointed as Independent Directors on August 16, 2018. Hence, the composition of the Board w.r.t. minimum number of directors is in compliance with the statutory requirement as on date.

27

(e) Filing of various returns to RBI: While the Company is generally regular in filing the various prescribed returns with RBI however in few cases the returns were filed beyond prescribed timelines due to frequent changes at Board and management level during year under review. The management will take steps to ensure that same is not repeated in future.

PARTICULARS OF INVESTMENTS, LOANS AND GUARANTEES

The Company being a Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India (RBI) primarily engaged in the business of lending to MSME segments is exempted from provisions of Section 186 of the Companies Act, 2013 (“Act”). Accordingly, there are no details of particulars of loans, guarantees or investments that are required to be provided as per Section 134(3) (g) of the Act.

RELATED PARTY TRANSACTIONS

There is no detail required to be provided in Form AOC-2 prescribed under clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014. All Related Party Transactions are placed before the Audit Committee for approval as per the Related Party Transactions Policy of the Company as approved by the Board. Further, details of all transactions with related parties are provided in the accompanying financial statements of the Company. Regulatory Disclosures on Related Party Transactions required under RBI’s Revised Regulatory Framework for NBFCs are as follows:

� The Company has policy in place on dealing with Related Party Transactions and the policy may be accessed on the Company’s website at the link: http://www.religarefinvest.com/Folders/resources/DownloadPdf/Related_Party_Transaction_Policy29jan2016.pdf

� The details on the material Related Party Transactions of the Company, identified as per the Company’s Policy on Related Party Transactions framed pursuant to the RBI’s Revised Regulatory Framework for NBFCs are provided below. These transactions were at an arms-length and in the ordinary course of business.

S.

No.

Name of the

Related

Party

Nature of

Relationship

Nature of Related

Parties

Transaction

Material

terms of the

Contract/

Arrangement

Amount (Rs.)

1 RHC Holding

Private

Limited

Group Company as per RBI’s Revised Regulatory Framework for NBFCs

Investment in Commercial Papers including Interest Earned

As per the agreed arrangements 4,500,000,000

RISK MANAGEMENT

The Company has a Board adopted Risk Management Policy in place. The Board constituted Risk Management Committee is responsible for framing, implementing and

28

monitoring various types of risks including strategic risk, operational risk, financial risk, compliance-regulatory-legal risk, reputational risk, investment risk, interest rate risk, market risk, concentration risk etc. The Company has laid down procedures to inform the Risk Management Committee members about risk assessment & mitigants to minimize the identified risks. This involves reviewing operations, processes & controls of the organization, identifying potential threats and likelihood of their occurrence, and taking appropriate actions to address the most likely threats. The status of all the identified risks is periodically put up to the Risk Management Committee which critically evaluates the same and provides necessary guidance. This procedure paves the way for effective risk management to safeguard the interest of the Company. VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The Company has a vigil mechanism named Whistle Blower Policy (“Policy”) to deal with instances of unethical practices, fraud and mismanagement or gross misconduct with regards to business operations, if any that can lead to financial loss or reputational risk to the organization. The Company takes strong exception to any untoward business practices and encourages its stakeholders to make disclosures whether they are Directors, permanent/contractual employees, customers, contractors, vendors, suppliers, customers or any other person having an association with the Company. The Policy which is displayed on the Company’s website, also provides for protection to the whistleblower as well as the procedure for investigation, decision and reporting regarding a disclosure made. As per the guidelines for making a disclosure, the person making a disclosure has to do so in physical writing or email to the ombudsperson as per the details specified in the Policy. The ombudsperson acknowledges the receipt of the disclosure and takes appropriate action depending on whether or not it constitutes a malpractice. The process varies slightly in terms of corrective action to be taken as per situation applicable, depending on the seniority level of the person against whom action is sought to be taken.

During the year under review, the Company has taken various steps to further strengthen the vigil mechanism in light of SCCPL transaction details of which has been provided elsewhere in the report. Few of them are as follows:

1. Banner has been put on HR portal to drive attention of employees and create further awareness

2. Policy is explained in detail as part of regular employee induction for new employees. 3. Policy has been circulated periodically through e-mail and banner has been placed on

intranet website of the Company. 4. Drop boxes are being kept at all major locations (wherever we have 100+ employees) for

employees to drop their complaints in the boxes. 5. Electronic Direct Mailers (EDMs) giving specific details and ‘call to action’ being

circulated to create further awareness.

6. Company is also evaluating an International Ethics & Compliance electronic platform to

make the process robust.

During the year, 1 complaint was received from a Customer under the Whistle Blower

29

mechanism and the same was reported to the Audit Committee meeting and the said complaint/case has been disposed off.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Act, the board of directors, to the best of their knowledge and ability, confirm that: (a) in the preparation of the annual financial statements for the year ended March 31, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures; (b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period; (c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) they have prepared the annual accounts on a going concern basis ; (e) they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively for the loans other than CLB; and (f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

INTERNAL CONTROL SYSTEM AND INTERNAL FINANCIAL CONTROLS

The Company has an Internal Control System in place, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit function is defined in the Internal Audit Manual. The Company has appointed M/s KPMG as the Internal Auditor of the Company. To maintain its objectivity and independence, the Internal Auditor reports to the Audit Committee. The Audit Committee has the responsibility for establishing the audit objectives and determines the nature, timing and extent of audit procedures as well as the locations where the work needs to be carried out. The Internal Audit Department monitors and evaluates the efficacy & adequacy of internal financial controls & internal control system in the Company to mitigate the risks faced by the organization and thereby achieve its business objective. Broadly the objectives of the project assigned are:-

• Review the adequacy and effectiveness of the transaction controls;

• Review the operation of the Control Supervisory Mechanisms;

• Recommend improvements in processes and procedures;

• Surface significant observations and recommendations for process improvement in a concise report for discussion with senior management;

• Review the compliance with operating systems, accounting procedures and policies

30

Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee. The management has taken various policy decisions to strengthen the internal controls including Operational Risk Framework encompassing processes, systems, people and external events implemented for SME business thereby strengthening control environment in the organization. Organization started conducting the trainings at organization level for successful implementation of Operational Risk Management framework. The Incidents reporting & Loss data reporting have been started. Any incidents /Loss data reported by any employee is tracked for corrective and preventive action. All new process and process changes are routed through the Operational Risk Management team for reviews , improvements and collation at single location. This has helped the organization to strengthen the business process manual and various underlying controls. Steps taken by RFL/the Company to strengthen the internal controls and Corporate Governance

Additionally some of the continuing efforts / steps taken by RFL/the Company to strengthen internal controls, corporate governance, underwriting process and the risk management framework etc. are as follows:

(a) Religare has taken various steps to enhance the corporate governance and compliance at

group level which encompasses from change in top management including appointment of Group CEO in Religare Enterprises Limited (‘REL’) and Group Compliance Head at REL level, appointment of CEO in the Company and re-organization of Boards and Board Committees of subsidiary of the Company.

(b) For the core business of SME, an exposure cap of Rs.25 crores for existing customers and

Rs. 10 crores for new customers has been put in place.

(c) CMF business has been put on liquidation with the current portfolio being progressively brought down to Rs. 364.10 CR as of Mar 18

(d) Implemented application score-card (developed by CRISIL using our portfolio

performance and CRISIL’s own industry experience) for Unsecured SME lending along with tighter policy overlay to improve portfolio quality, standardization in underwriting and improved TAT.

(e) Operational Risk Framework encompassing processes, systems, people and external

events implemented for SME business thereby strengthening control environment in the organization and strengthening the due diligence process for valuation of securities and enforcing mechanism of securities. On-ground trainings have been conducted for branches during the financial year to ensure successful implementation of the framework. The abovementioned steps were taken earlier when new lending business was being booked. Since, no new lending business is allowed as directed by RBI vide its letter dated 18 January 2018 wherein RBI has put RFL under Corrective Action Plan (CAP) and hence RFL shall operationalize these steps again when business restarts.

(f) Further, the Company has a vigil mechanism named Whistle Blower Policy to deal with instance of unethical practices, fraud and mismanagement or gross misconduct by the

31

employees of the Company, if any, that can lead to financial loss or reputational risk to the organization. The Company has taken various steps at group level to further strengthen the vigil mechanism in light of SCCPL transaction. Few of them are as follows: (i) Banner has been put on HR portal to drive attention of employees and create

further awareness. (ii) Policy is explained in detail as part of regular employee induction for new

employees. (iii) Policy has been circulated periodically through e-mail and banner has been

placed on intranet website of the Company. (iv) Drop boxes are being kept at all major locations (wherever we have 100+

employees) for employees to drop their complaints in the boxes. (v) Electronic Direct Mailers (EDMs) giving specific details and ‘call to action’ being

circulated to create further awareness. (vi) Company is also evaluating an International Ethics & Compliance electronic

platform to make the process robust.

Development and implementation of Risk Control Matrix (RCM) Key component of an organization’s risk management framework is the Risk Control Matrix (‘RCM’) which systematically captures key risks (operational, regulatory and financial) and mitigating internal controls. It enables assessment of key controls through testing of data pertaining to each control - control description and key attributes alignment to COSO framework, financial statement assertions, test procedures, management action plans, etc. Backward integration of RCMs with existing risk-control assurance platforms would assist in addressing key requirements of Internal Financial Controls (‘IFC’), under the Companies Act, 2013 Key benefits of RCM

• Structured and consistent process for management of risk

• Information is recorded and auditable

• Quick and effective means of formally capturing key business risks

• Demonstrates organization’s ability to manage / mitigate risk in a comprehensive and timely manner.

Key Elements of Risk Control Matrix

• Contains key risks by type / category and corresponding controls for mitigation

• Linkages with process documentation through control references

• Identification of risk and control ownership

• Control design and testing, including results thereof

• Coverage of Internal Financial Controls

• Addressing financial statement assertions � Completeness � Existence / Occurrence � Accuracy � Valuation � Rights & Obligations � Presentation & Disclosures

32

Key Activities - Strengthening the Risk Control Matrices Preparation / Updation of RCMs for key businesses and support functions

� Process framework based on COSO 2013, Companies Act 2013, ICAI Guidance Notes

� Capture of additional risks and key controls � Linkages to financial assertions / IFC � Mitigating controls.

Testing of RCMs and integration with Internal Audit (‘IA’)

� Quarterly test of key controls captured in RCMs based on risk grading / prioritization and its alignment to IA testing (as per quarterly scope of work) for integrated coverage.

Reporting to Risk Committee

� Reporting on controls testing (including high level view of key risks and controls) to be combined as part of quarterly IA reporting

� Reporting to Risk Committee on half-yearly basis. � Updated RCMs to be provided to management.

CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Even though operations of the Company are not energy intensive, the management has been highly conscious of the importance of conservation of energy and technology absorption at all operational levels and efforts are made in this direction on a continuous basis. In view of the nature of activities which are being carried on by the Company, the particulars as prescribed under Section 134(3)(m) of the Companies Act, 2013 read with rule 8 of the Companies (Accounts) Rules, 2014 regarding Conservation of Energy and Technology Absorption are not applicable to the Company and hence not been provided.

FOREIGN EXCHANGE EARNINGS AND OUTGO

The Company has continued to maintain focus and avail of export opportunities, as may be permissible from time to time, based on economic considerations. The Company has not earned any foreign exchange during the year under review. Further the amount of foreign exchange outgo is given below: Earnings : Nil Outgo : Rs. 30,654.00 MAINTAINANCE OF COST RECORDS

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

33

STATUTORY DISCLOSURES ON REMUNERATION OF EMPLOYEES

The information as required in accordance with Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 read with the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016, as applicable, is appended herewith as Annexure – E and Annexure –F and forms an integral part of this Report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE RESERVE BANK OF INDIA

(RBI) AND OTHER REGULATORS OR COURTS

The Company has been put on Corrective Action Plan (CAP) by the RBI vide its letter dated January 18, 2018 through which RFL has been prohibited from expansion of credit/investment portfolio other than investment in government securities. In this regard, the Company is taking all the necessary corrective measures as advised by RBI and is in regular communication with the RBI for removal of CAP. CODE OF CONDUCT FOR THE PREVENTION OF INSIDER TRADING

In accordance with the requirements of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (notified by SEBI on January 15, 2015, effective from May 15, 2015), the Board of Directors of RFL in its meeting held on May 27, 2015 approved the Code of Practices and Procedures for fair disclosure of Unpublished Price Sensitive Information; Code of Conduct for Prevention of Insider Trading to regulate, monitor and report of the company’s securities trading by its directors, key managerial personnel, designated employees and other connected persons. The said Code of Conduct is available on the website of the Company – www.religarefinvest.com.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT THE WORK PLACE

(PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place an Anti-Sexual Harassment Policy (‘Policy’) in line with the requirements of The Sexual Harassment of Women at the Work Place (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set-up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under the Policy. During the year 2017 – 18, there was no case reported to the committee for investigations. We have implemented Prevention of Sexual Harassment E-Learning module on our learning platform Religare Academy for all employees. The policy document has been recirculated to all employees. Policy details are available to all employees on the intranet as required for anytime access.

GENERAL DISCLOSURES

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

34

1. Issue of equity shares with differential rights as to dividend, voting or otherwise. 2. Issue of sweat equity shares 3. The Managing Director & CEO of the Company did not receive any remuneration or commission from its holding or subsidiary company. 4. Disclosures required under Section 67 of the Companies Act, 2013 Further, no disclosures on details on deposits as covered under Chapter V of the Act given since the Company is a non-deposit accepting NBFC registered with the RBI.

ACKNOWLEDGEMENTS

Your Directors would like to express their sincere appreciation for the co-operation and assistance received from the Bankers, Regulatory Bodies, Stakeholders including Financial Institutions, Distributors and other business associates who have extended their valuable sustained support and encouragement during the year under review. Your Directors take this opportunity to recognize and place on record their gratitude and appreciation for the commitment displayed by all executives, officers and staff at all levels of the Company. We look forward for your continued support in the future.

By order of the Board of Directors

For Religare Finvest Limited

Sd/- Sd/-

Place: Gurugram Malay Kumar Sinha Sabina Vaisoha

Date: September 11, 2018 Director

DIN: 08140223 Address:B-1503, Antriksh Nature, Sector-52, Gautam Buddha Nagar, Noida 201301, Uttar Pradesh

Director

DIN: 00207306 Address:C-18, South Extension- Part- 1, New Delhi-110049

35

ANNEXURE –A

Religare Finvest Limited - Details required as per clause 53(F) of Securities and

Exchange Board of India (Listing Obligations And Disclosure Requirements)

Regulations, 2015 for Financial Year 2017-2018

1 Details for Religare Finvest Limited (as a Parent company )

(A) Loans and Advance to Subsidiary by name and amount

(Rs. In Lacs)

Sr.

No.

Particulars As at

March 31

2018

Maximum

Balance

During

the Year

As at

March 31

2017

Maximum

Balance

During the

previous Year

1 Religare Housing Development Finance Corporation Limited

-

-

-

-

(B) Loans and advances in the nature of loans to Associates by name and

amount.

Nil

(C) Loans and advances in the nature of loans to firms / companies in which

directors are interested by name and amount . (Section 184 of Companies Act

2013).

Nil

2 Details for Religare Finvest Limited (as a Subsidiary company)

Details of Transactions with Religare Enterprises Limited

(Rs. In Lakhs)

Sr.

No.

Particulars As at

March

31

2018

Maximum

Balance

During the

current Year

As at

March 31

2017

Maximum

Balance

During the

previous Year

1 Investment in Commercial Paper

- 22,456.45

6,274.79

6,274.79

2 Inter Corporate Loans Given

18,550 18,550 - -

36

3 Investments by the loanee (borrower) in the shares of Parent Company

(Religare Finvest Limited) and Subsidiary Company (Religare Housing

Development Finance Corporation Limited), when the company has made a

loan or advance in the nature of loan- Loan to Religare Enterprises Limited (Holding Company) and investment as below:

4 (A) Shareholding Pattern of Religare Finvest Limited is provided

below:

Name of Shareholder No. of

Shares Held

as at

March 31

2018

% of Holding

Religare Enterprises Limited (Holding Company) and its nominees.

224,454,083

85.64%

NYLIM Jacob Ballas India Fund III LLC 21,509,260

8.21%

Resurgence PE Investments Limited 16,131,944

6.15%



Sd/- Sd/-




Director


37

Annexure – B

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A. Industry Structure & Development:

NBFCs have been an integral part of the Indian financial system, fuelling small enterprises and have been on an upward growth trajectory over the past few years. NBFCs have been complementing the banking sector with customised loan offerings, wider and effective reach, prudent risk policies and deep customer profiling. NBFCs today are striving hard to resonate with their customer and build a loyal base so as to increase the service consideration set for the customer. All of this has led to their success in not only their traditional bastions like commercial vehicle finance, but they have also managed to build a book on personal finance and housing finance sector which were earlier typically furnished by retail banks. Strengthened by their robust distribution network, NBFCs have been fulfilling the credit demands where the traditional banks have been wary to serve and this, along with the latent credit demand of emerging India will give immense opportunity to NBFCs to increase their book size. NBFCs have also quickly adopted technological advancements and this has put them ahead in the digital disruption race. Right from lead generation to loan disbursement, technology and data have started playing a crucial rule in the lending industry. Conventional practices are giving way to new innovations and one of them is the immense use of alternate data for credit worthiness analysis which is in addition to traditional credit score checks done by default in the industry. FinTechs and payments banks too have now arrived to further revolutionise the evolving landscape of financial services industry and future collaborations between the two are foreseen, which can result in exciting times for the customer. According to a report, NBFCs are also fast becoming the go-to-lenders for customers in the age group of 21-35 years and this can be validated by their current market share of 49% in this age group. This can be attributed to the fact that NBFCs are now significantly focusing on small ticket size loans and offering early credit life stage products to these customers. They are catching them young and aim to become their preferred credit partner in the long term. Not to forget, India is poised to become the largest generation of youngsters in the working age group by 2020. NBFCs typically offered commercial and used vehicle financing in the earlier days. But they are now rapidly diversifying their loan portfolio by offering products ranging from personal loans, consumer durable financing to SME loans, LAP, home loans, etc. In addition to strengthening their hold in the retail credit market, they have also started focusing on the commercial segment.

• Overall domestic credit: Size, Composition and Growth Trends

At the end of December 2017, the total managed retail NBFC credit stood at approximately INR 7.0 trillion and grew by 18.3% over December 31, 2016. Commercial vehicles (CV), unsecured credit (including microfinance) and LAP+SME together constitute 60% of the total NBFC outstanding as of December 2017. And hence the credit growth in these key asset classes supported the overall NBFC-retail credit growth. However, the growth took a dip post demonetisation and remained muted for first two quarters of FY17-18 because of the uncertainties around the impact of GST implementation. The self-employed and small businesses are the key target borrower segment of NBFCs and since a sizeable share of their business is

38

based on cash transactions, they got impacted to a large extent because of the above mentioned measures.

Source: ICRA Research and Estimates Figure 1: Segmental growth and outlook

NBFCs’ and HFCs’ overall share in the financial services industry stood at 44% till Mar’17 and during FY17-18, the NBFCs’ overall share in the financial services industry also got impacted to a certain extent due to conversion of some NBFCs to small finance banks/ universal banks.

Source: ICRA Research and Estimates

Figure 2: Share in retail credit

SCBs

HFCs

NBFCs

Mar - 17

39

The overall Indian retail credit market constituting of Scheduled Commercial Banks (SCBs), Non-banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) stood at INR 32.5 trillion as on December 31, 2017 registering a YoY growth of about 20%. NBFC and SCB retail credit growth revived in third quarter of FY17 and registered a 19% YoY growth, while the HFCs registered the healthiest YoY growth of 23%. Supported by the revival in retail credit growth, share of retail credit in the overall credit (SCB+NBFC+HFC) improved to 33% as compared with ~31% in December 2016.

Source: RBI, financials of NBFCs & Mortgage lenders; ICRA research

Figure 3: Share of the Pie: Total Industry Credit as on December 31, 2017

B) Opportunities and Threats (All facts, figures and statistics in this section have been taken

from ICRA Report: 9MFY2018 Performance-Update and Industry Outlook)

• Large unmet demand to drive credit growth

MSME credit represents a sizeable chunk in the NBFC credit outstanding and as of March 31,

2017 it stood at INR 16 trillion. The MSME segment is also a growing sector with an increasing

credit growth rate that stood at a CAGR of 12% during April 2014-March 2017. The count of

MSMEs in the country is approximately 55 million and this segment contributes approximately

31% to the nation’s GDP. Thus, this segment is strategically important and subsequently the

scope for credit growth is immense here. However, the credit penetration in this segment is quite

low with only 7% of the MSMEs having availed of credit. Only 5% of all MSMEs have funding from

institutional sources (Source: SIDBI, AR 2015-16). Therefore, there is a large credit demand-

supply gap here which makes this segment quite attractive for the entities focused on credit

40

supply to the MSMEs. There is ample scope of growth in the medium term for these entities and

additionally the entry of new players and FinTechs would help accelerate the penetration levels

and support non-bank credit growth in this segment.

• Share of non-banks to increase

The share of non- banks in MSME credit stood at 16% in March 2017 and according to reports

this number is expected to reach to 22-23% by March 2022. Taking into account the recent public

sector bank recapitalization programme, it is expected that the banks will focus on the growth of

MSME segment over the medium term. But at the same time, they are saddled with higher NPAs

in this segment and in the light of the recent fraud involving a big nationalized bank, the banks

are being highly cautious and this is expected to result in a muted credit flow to this segment, at

least in the near term. This provides non-banks a great opportunity to fill the gap with their

customised loan offerings and faster turnarounds and thereby becoming the lender of choice in

this segment.

• Growth of FinTechs

There has been an emergence of new age FinTechs and they bring with them innovations in

technology, sourcing, underwriting, etc. Hence, a collaboration with these FinTechs seems to be

the next logical step for NBFCs. This can result in better quality and lower cost of origination,

more focused identification of customers, and expansion of the target market segment.

Experience and monetary backing that the traditional NBFCs hold, coupled with technological

innovations of these FinTechs can result in a very dynamic and mutually beneficial partnership

for both.

• Maintaining asset quality remains a key challenge

Asset quality deterioration remains a key concern both for banks as well as non-banks. While the

bank-MSME credit NPA stood at 8.4%, for NBFCs and HFCs the 90+dpds stood at 5.0% and 1.4%,

respectively. MSME segment was mostly a cash driven market and demonetisation impacted

their cash flows and dampened their business sentiments. Additionally, although introduction of

GST was a good consolidation move, it posed logistical challenges for these MSMEs which further

dampened their spirit. According to few reports, the borrowers in this segment resorted to

refinancing of loans with new lenders to manage liquidity pressure. But this practice slowed

down with more stringent credit appraisal processes being followed by lenders on account of

asset quality pressures.

Though secured loans are typically seen as safer, a downward movement in security/property

prices could expose lenders to higher levels of credit risk. The disbursements by non-banks in

this asset class have significantly picked up only in the past five to six years and hence the asset

quality of non-banks is yet to stabilise. Thus, while non-bank asset quality might decline, the

extent of deterioration may be lower than that witnessed in banks.

• Margin compression for non-banks

Non-banks face competitive pressure from not just other non-banks but private and public sector

banks too, as well as FinTechs players in some segments. Business yields have moderated quite

sharply over the last two to three years (approximately 2.0-2.5%) with the entrance of these

newer players. Also the asset quality moderation has affected segmental profitability. With a view

41

to moderate the asset quality, non- banks are now focusing on better profiles and smaller ticket

loans. They are shifting their focus on volume play by moving towards bulk smaller ticket size

loans. At the same time, they are cautious of the quality too and strive to build a healthy loan

book. This ability to diversify to smaller ticket loans without compromising on quality or

operational efficiencies and credit costs would be crucial for their incremental profitability.

• Government Initiatives

The Government of India has placed significant importance to the MSME segment and has

introduced various reforms to regulate and enhance this industry, including measures to

facilitate easy access of finance to MSMEs. In a bid to improve the extent of financial inclusion, the

government has launched the Micro Unit Development and Refinance Agency (MUDRA) to fund

and promote Microfinance Institutions (MFIs). Additionally, there are Credit-linked Capital

Subsidy Scheme (CLSS) for MSMEs and Credit Guarantee Fund Trust For Micro And Small

Enterprises (CGTMSE) to streamline the credit flow for life-cycle funding requirements of

MSMEs. In 2017, a new portal named 'Udyami Mitra' was also launched by the Small Industries

Development Bank of India (SIDBI) with the aim of improving credit availability to MSMEs.

• RBI vide its letter dated 18 January 2018 addressed to RFL, has put RFL under Corrective Action Plan (CAP) through which RFL has been prohibited from expansion of credit/investment portfolio other than investment in government securities. No new lending business is allowed as directed by RBI until the restriction is removed by RBI. In this regard, the Company is taking all the necessary corrective measures as advised by RBI and is in regular communication with the RBI for removal of CAP.

B. Company Overview - Religare Finvest Limited

Religare Enterprises Limited established Religare Finvest Limited (RFL) as its subsidiary in the year 2006, and since its inception, the company has been delivering steadily and strongly on its vision of setting the standards of excellence for the commercial financial services industry. RFL is a non-deposit taking systemically important Non-Banking Finance Company with a robust vintage of twelve years. To propel the growth of SMEs and MSMEs remains at the core of the company’s ideology and we have year on year fuelled and nurtured the dreams of small business owners. With an ISO certification 9001:2008 and a wide network of 35 branches across India, RFL is committed to providing debt capital in the form of small and medium enterprises (SMEs) financing. The experienced leadership is complemented with a committed employee base and together the organisation has strived to provide value-based innovative products and services through streamlined processes, bolstered by robust underwriting capabilities and high standards of customer service. With the strong belief that the customer’s success is our success, the company has played a vital role in nurturing its customer’s business while growing to a book size of over INR 9796.69 Crore (value as on March 31, 2018). Change is the only constant and with changing times, one has to evolve to thrive. And RFL has been in the forefront of embracing these changes with ease. The socio-economic, political and regulatory changes come with its own set of challenges but our agile framework and committed mindset has insulated us from deep impacts. While the changes outside are not under our control but internally we have constantly aimed to improve and evolve our processes, services and offerings. In FY 17-18, we envisioned and formulated various strategic initiatives at different

42

levels in the organisation. We were successful in creating a sturdy system replete with contemporary policies and practices in areas pertaining to technology, innovation and automation. This zeal has helped us to maintain cost optimisation and has put RFL at par with other competitive players in the industry. RFL’s culture which is driven by its five core values - passion, teamwork, diligence, innovation and ambition, not only accelerates the success of its customers but also of its employees. RFL was certified by the Great Place To Work Institute® for FY 17-18 and this recognition is a testimony of a high trust and high performance culture that the company cultivates thereby making it a winning workplace!

Segment Wise – Product Wise Performance

� SME FINANCING:

The Company has stated its objective to be an SME lending company. The SME financing constitutes over 72% of RFL’s lending business. The Company offers SME Loans for working capital and capacity expansion requirements and therefore acts as a ‘growth capital provider’ to the SME segment. RFL’s SME loan book has decreased to INR 6,934 Crore as of March 31, 2018 from INR 11,385 Crore in FY 2017. Several measures were undertaken during FY 17-18 as a part of portfolio consolidation and the need to build a more granular portfolio. 2343 Short Term Trade Finance & 1564 SME customers were acquired during the financial year by the Company. SME - Secured: This product enables our customers to acquire funds against their residential or commercial property. Loans offered under this product may be utilised towards different business purposes including business expansion and purchase of plant and machinery. This product caters to individuals and corporates across various sectors & industries. As on March 31, 2018, RFL’s SME Mortgage loan book was at INR 6,412 Crore with 3697 no. of active accounts. SME - Secured (INR Crore) (ENR):

SME - Unsecured: This product caters to the working capital and other financial requirements of medium and small enterprises. Loans are granted following an in-depth and detailed financial analysis and credit underwriting of the SME. This is a high yielding product and is non- revolving in nature with a maximum tenor of up to 3 years.

43

SME – Unsecured (INR Crore) (ENR):

As on March 31, 2018, RFL’s SME Working Capital Loan book stood at INR 522 Crore with 5,913 live accounts. Under this the Company acquired 2343 customer from Short Term Trade Finance (STTF) offering and 1387 customers under SME financing.

� CAPITAL MARKET FINANCING: In line with the Company’s SME focused strategy, incremental lending under capital market products was discontinued during the year and the portfolios under Loans against Securities (LAS) and Promoter Finance stood at INR 1 cr. and INR 363 cr. respectively. The portfolios will run-off with loan maturity and attrition.

SME Portfolio by Industry segment

SME Portfolio by Zone

44

CMF – Loans Against Securities (INR Crore) (ENR):

CMF – Promoter Funding (INR Crore) (ENR):

C. Business Outlook:

The Indian Economy is poised to emerge as one of the leading economies of the world with a $5trillion economy by 2025. The present government’s impetus on ‘Make in India’ to strengthen the manufacturing sector, has given the MSME sector a major push. The sudden announcement of demonetisation opened the floodgates of digital payments and forced the common man to do a double take on digitisation. With GST on the anvil, the push for digitisation will be further strengthened and will help streamline even the most unorganised sectors of the economy. The MSME sector has long been regarded as the backbone of the economy and the above initiatives will push them to evolve and compete on a global platform. The introduction of the ‘One Nation –One Tax’ GST Bill was a watershed moment in the history of India’s economy and revolutionize the MSME sector to compete on an equal footing. RFL looks to FY 18-19, with a positive outlook riding on the back of the above progressive reforms.

D. Risks and concerns

The primary target segment for RFL are the self-employed borrowers who mobilize loans for business needs. In a scenario, where the business environment is not conducive, there is likelihood of an impact on the repayment capacity of these borrowers. In challenging operating

45

environments, these medium to small enterprises are more prone to high volatility in cash flows, with the result that the level of default tends to be higher for them. However, in case of SME Secured loans the company has sufficient security coverage to ensure the recoverability of the loans. The borrowers have significant stake in the underlying securities and hence they tend to ensure the timely repayment of the loan. Also as a part of the risk control mechanism, there is a continued focus on obtaining information on industries as well as micro and macro-economic developments on a real time basis. There is also a real time evolution of the due-diligence/underwriting parameters for better on-boarding quality. Further, RBI vide its letter dated 18 January 2018 addressed to RFL, has put RFL under Corrective Action Plan (CAP) through which RFL has been prohibited from expansion of credit/investment portfolio other than investment in government securities. No new lending business is allowed as directed by RBI until the restriction is removed by RBI. In this regard, the Company is taking all the necessary corrective measures as advised by RBI and is in regular communication with the RBI for removal of CAP.

E. Internal control systems and their adequacy:

The Company has an Internal Control System in place, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit function is defined in the Internal Audit Manual. The Company has appointed M/s KPMG as the Internal Auditor of the Company. To maintain its objectivity and independence, the Internal Auditor reports to the Audit Committee. The Audit Committee has the responsibility for establishing the audit objectives and determines the nature, timing and extent of audit procedures as well as the locations where the work needs to be carried out. The Internal Audit Department monitors and evaluates the efficacy & adequacy of internal financial controls & internal control system in the Company to mitigate the risks faced by the organization and thereby achieve its business objective. Broadly the objectives of the project assigned are:-

• Review the adequacy and effectiveness of the transaction controls;

• Review the operation of the Control Supervisory Mechanisms;

• Recommend improvements in processes and procedures;

• Surface significant observations and recommendations for process improvement in a concise report for discussion with senior management;

• Review the compliance with operating systems, accounting procedures and policies Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee. The management has taken various policy decisions to strengthen the internal controls including Operational Risk Framework encompassing processes, systems, people and external events implemented for SME business thereby strengthening control environment in the organization. Organization started conducting the trainings at organization level for successful implementation of Operational Risk Management framework. The Incidents reporting & Loss data reporting have been started. Any incidents /Loss data reported by any employee is tracked for corrective and preventive action. All new process and process changes are routed through the Operational Risk

46

Management team for reviews , improvements and collation at single location. This has helped the organization to strengthen the business process manual and various underlying controls. Steps taken by RFL/the Company to strengthen the internal controls and Corporate Governance

Additionally some of the continuing efforts / steps taken by RFL/the Company to strengthen internal controls, corporate governance, underwriting process and the risk management framework etc. are as follows:

(a) Religare has taken various steps to enhance the corporate governance and compliance at

group level which encompasses from change in top management including appointment of Group CEO in Religare Enterprises Limited (‘REL’) and Group Compliance Head at REL level, appointment of CEO in the Company and re-organization of Boards and Board Committees of subsidiary of the Company.

(b) For the core business of SME, an exposure cap of Rs.25 crores for existing customers and

Rs. 10 crores for new customers has been put in place.

(c) CMF business has been put on liquidation with the current portfolio being progressively brought down to Rs. 364.10 CR as of Mar 18

(d) Implemented application score-card (developed by CRISIL using our portfolio

performance and CRISIL’s own industry experience) for Unsecured SME lending along with tighter policy overlay to improve portfolio quality, standardization in underwriting and improved TAT.

(e) Operational Risk Framework encompassing processes, systems, people and external

events implemented for SME business thereby strengthening control environment in the organization and strengthening the due diligence process for valuation of securities and enforcing mechanism of securities. On-ground trainings have been conducted for branches during the financial year to ensure successful implementation of the framework. The abovementioned steps were taken earlier when new lending business was being booked. Since, no new lending business is allowed as directed by RBI vide its letter dated 18 January 2018 wherein RBI has put RFL under Corrective Action Plan (CAP) and hence RFL shall operationalize these steps again when business restarts.

(f) Further, the Company has a vigil mechanism named Whistle Blower Policy to deal with instance of unethical practices, fraud and mismanagement or gross misconduct by the employees of the Company, if any, that can lead to financial loss or reputational risk to the organization. The Company has taken various steps at group level to further strengthen the vigil mechanism in light of SCCPL transaction. Few of them are as follows: (i) Banner has been put on HR portal to drive attention of employees and create

further awareness. (ii) Policy is explained in detail as part of regular employee induction for new

employees. (iii) Policy has been circulated periodically through e-mail and banner has been

placed on intranet website of the Company. (iv) Drop boxes are being kept at all major locations (wherever we have 100+

employees) for employees to drop their complaints in the boxes.

47

(v) Electronic Direct Mailers (EDMs) giving specific details and ‘call to action’ being circulated to create further awareness.

(vi) Company is also evaluating an International Ethics & Compliance electronic platform to make the process robust.

Development and implementation of Risk Control Matrix (RCM) Key component of an organization’s risk management framework is the Risk Control Matrix (‘RCM’) which systematically captures key risks (operational, regulatory and financial) and mitigating internal controls. It enables assessment of key controls through testing of data pertaining to each control - control description and key attributes alignment to COSO framework, financial statement assertions, test procedures, management action plans, etc. Backward integration of RCMs with existing risk-control assurance platforms would assist in addressing key requirements of Internal Financial Controls (‘IFC’), under the Companies Act, 2013 Key benefits of RCM

• Structured and consistent process for management of risk

• Information is recorded and auditable

• Quick and effective means of formally capturing key business risks

• Demonstrates organization’s ability to manage / mitigate risk in a comprehensive and timely manner.

Key Elements of Risk Control Matrix

• Contains key risks by type / category and corresponding controls for mitigation

• Linkages with process documentation through control references

• Identification of risk and control ownership

• Control design and testing, including results thereof

• Coverage of Internal Financial Controls

• Addressing financial statement assertions � Completeness � Existence / Occurrence � Accuracy � Valuation � Rights & Obligations � Presentation & Disclosures

Key Activities - Strengthening the Risk Control Matrices Preparation / Updation of RCMs for key businesses and support functions

� Process framework based on COSO 2013, Companies Act 2013, ICAI Guidance Notes

� Capture of additional risks and key controls � Linkages to financial assertions / IFC � Mitigating controls.

48

Testing of RCMs and integration with Internal Audit (‘IA’)

� Quarterly test of key controls captured in RCMs based on risk grading / prioritization and its alignment to IA testing (as per quarterly scope of work) for integrated coverage.

Reporting to Risk Committee

� Reporting on controls testing (including high level view of key risks and controls) to be combined as part of quarterly IA reporting

� Reporting to Risk Committee on half-yearly basis. � Updated RCMs to be provided to management.

F. Financial Performance & Operational Performance

� During the year 2017-18, the Company’s total income declined by 41% to INR 1429.89 Crore,

as compared to INR 2417.13 Crore in 2016-17. The Company’s Loss after Tax Increased to INR 1102.75 Crore, from INR 340.93 crore. The Gross NPAs and net NPAs for the year under review stood at 34.29% and 20.41% respectively. The Company’s net spread for the year under review stood at -0.41%.

� Capital Adequacy Ratio (CRAR): The Company maintained a CRAR of 17.54% during 2017-18 against a minimum 15% as required by RBI norms.

� Borrowing Profile: The Company’s total external borrowings decreased from INR 13,333.40 Crore as of March 31, 2017 to INR 8735.43 Crore as of March 31, 2018.

� Assets under Management (AUM): The total Assets under Management (AUM) as on March 31, 2018 stood at INR 10,168.26 Crore against INR 14,725.81 Crore as on March 31, 2017.

� Securitisation/Assignment: During financial year 2017-18 the Company has not assigned any of its assets as against INR 375.49 Crore securitisation during 2016-17.

G. Material developments in Human Resources / Industrial Relations front, including

number of people employed

As on 31st March 2018, the employee strength of the Company was 856. The year gone by has been a challenging year as there were multiple changes at the businesses level and we also faced certain senior management exits. However, the company is now focused on reinventing itself and with the positive transformations being made at the holding company level, in the corporate governance structure, business management and leadership, we are well set to rebuild the business and establish a strong platform from where we can offer our valued customers, an integrated suite of financial services. The HR strategy is also undergoing realignment with the new organization strategy to ensure strong synergy and clear orientation with the new business requirements. We are in the process of appointing experienced senior management to steer these changes.

49

Based on our HR initiatives in the areas of talent management, employee engagement and improving workplace health and wellness, the Company became Great Place to Work-Certified™ for successfully achieving the milestone of building and sustaining a High-Trust, High-Performance Culture™ for the year April 2017 – March 2018.



Sd/- Sd/-




Director


50

Annexure- C

ANNUAL REPORT ON CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES

(i) A brief outline of the company's CSR Policy, including overview of projects or programs

proposed to be undertaken and a reference to the web-link to the CSR Policy and projects

or programs.

Company has adopted its CSR Policy. It aims at supplementing the role of the Government in enhancing the welfare measures for the underprivileged communities and aims to ensure that the communities receive good quality healthcare facilities. It also aims at promoting holistic health awareness and education to empower communities thus helping them lead a fuller and healthier life at large. CSR Policy of the Company provides the overview of projects or programs which are proposed to be undertaken by the Company. The latest CSR Policy can be accessed at the below link on our website: http://www.religarefinvest.com/Folders/resources/DownloadPdf/Corporate_Social_Responsibility_Policy_18082017.pdf

(ii) The Composition of the CSR Committee as on March 31, 2018 :

a) Mr. Padam Bahl (Non-Executive Independent Director)- Member

(iii) Average net profit of the company for last three financial years:

Average Net Profit: Rs. 1,066,717,634

(iv) Prescribed CSR Expenditure (two per cent. of the amount as in item 3 above):

Rs. 21,334,360

(v) Details of CSR spent during the financial year.

a) Total amount to be spent for the financial year: Rs. 21,334,360/- b) Amount unspent, if any*: Rs. 21,334,360/- c) Manner in which the amount spent during the financial year is detailed below*-

S.

No

CSR

project or

activity

identified

Sector in

which

the

project is

covered

Projects

or

program

me:

(i) Local

area or

other

(ii)

Specify

the

Amount

outlay

(Budget)

project

or

program

me

wise

Amount

spent on

project

or

programs

:

Sub head:

1. Direct

expendit

ure on

Cumulat

ive

expendit

ure

up to the

date of

reportin

g

Amount

spent:

Direct or

through

impleme

nting

agencies

51

State or

District

where

the

projects

or

program

mes was

undertak

en

project

or

program

me;

2.

Overhead

1 Umeed-Dhadkan and Umeed-Smile Initiatives of the Aanchal program

Healthcare and Health related education and awareness

All India level

Rs. 21,334,360/-

Nil Nil Nil

* For the financial year ended March 31, 2018, the Company was required to spend Rs. 21,334,360 under CSR for financial year 2017-18 as prescribed under Section 135 of the Companies Act, 2013. However, the same was constrained due to the losses in the Company in the FY 2016-17. In light of the fact that Company has incurred loss during the FY 2016-2017, the Board of Directors of the Company had decided not to contribute any amount on CSR Project in the financial year 2017-18.

(vi) In case the company has failed to spend the two per cent of the average net profit of the

last three financial years or any part thereof, the company shall provide the reasons for

not spending the amount in its Board report.

For the financial year ended March 31, 2018, the Company was required to spend Rs. 21,334,360 under CSR for financial year 2017-18 as prescribed under Section 135 of the Companies Act, 2013. In light of the fact that Company has incurred loss during the FY 2016-2017 as well as in the financial year under review, the Board of Directors of the Company had decided not to contribute any amount on CSR Project in the financial year 2017-18. Earlier, the Religare group (including Religare Finvest Limited) had engaged the Fortis Charitable Foundation (FCF) as its implementation partner to pursue and drive the identified agenda/programs. However, subsequent to the end of the financial year under review, the Board of Directors of Religare Enterprises Limited (‘Religare’), the Holding Company of the Company, have reviewed the engagement with FCF and decided to terminate the CSR Agreement dated 14th Dec 2016 entered by Religare and its subsidiaries with FCF. Further, the Board of Directors of your Company has also approved the termination of engagement with FCF. However, the Company is exploring the options to spend CSR money through creation of Non-profit entity/ Trust within the group.

52

(vii) CSR Committee hereby confirms that the implementation and monitoring of CSR Policy, is

in compliance with CSR objectives and CSR Policy of the Company.

Date: September 11, 2018 Place: Gurugram

:

Sd/-

Sanjay Palve

Sd/-

Sabina Vaisoha

Chief Executive Officer Chairman– CSR Committee

PAN: AHDPP9854H DIN: 00207306 Address: Saptarshi Apartments, Building No. 17, Room No. 6/NL-6, Near Nerul Railway Station, Sector No. 8, Navi Mumbai- 400706, Maharashtra

Address: C-18, South Extension- Part- 1, New Delhi-110049

CORPORATE OFFICE

D – 28, South Extn. Part – I, New Delhi – 110049 India I T: +91 11 40622200 I F: + 91 11 40622201 I E :[email protected]

LOCATIONS

Hyderabad I Trivandrum I Vadodara

FORM MR - 3

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED MARCH 31, 2018

[Pursuant to section 204(1) of the Companies Act, 2013 and Rule no.9 of the Companies (Appointment and

Remuneration of Managerial Personnel) Rules, 2014]

To,

The Members,

Religare Finvest Limited

(U74999DL1995PLC064132)

We have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the

adherence to good corporate practices by Religare Finvest Limited (hereinafter called “the Company”).

Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate

conducts/statutory compliances and expressing my opinion thereon.

Based on our verification of the Company, books, papers, minute books, forms and returns filed and other

records maintained by the company and also the information provided by the Company, its officers, agents

and authorized representatives during the conduct of Secretarial Audit, we hereby report that in our opinion,

during the audit period covering the financial year ended on March 31, 2018, the Company has complied with

the statutory provisions listed hereunder and also that the Company has proper Board-processes and

compliance-mechanism in place to the extent based on the management representation letter/ confirmation, in

the manner and subject to the reporting made hereinafter.

We have examined the books, papers, minute books, forms and returns filed and other records maintained by

the Company for the financial year ended on March 31, 2018, according to the provisions of:

(i) The Companies Act, 2013 (‘the Act’) and the rules made thereunder;

(ii) The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the rules made thereunder;

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder;(not applicable to the

Company during the audit period)

sanjay.joshi

Typewritten Text

sanjay.joshi

Typewritten Text

ANNEXURE-D

sanjay.joshi

Typewritten Text

sanjay.joshi

Typewritten Text

CORPORATE OFFICE


LOCATIONS


(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent

of Foreign Direct Investment;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India

Act, 1992 (‘SEBI Act’):-

a. The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)

Regulations, 2011; (not applicable to the Company during the audit period)

b. The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;

c. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)

Regulations, 2009;(not applicable to the Company during the audit period)

d. The Securities and Exchange Board of India (Share Based Employees Benefits) Regulations,

2014; (not applicable to the Company during the audit period)

e. The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations,

2008 (not applicable to the Company during the audit period);

f. The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer

Agents) Regulations, 1993 regarding the Companies Act;

g. The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009;(not

applicable to the Company during the audit period)

h. The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;(not

applicable to the Company during the audit period)

i. The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)

Regulations, 2015.

(vi)We, based upon the Management Representation, further report that there are adequate systems and

processes in the Company commensurate with the size and operations of the Company to monitor and

ensure compliance with the following pertinent laws, rules, regulations and guidelines as specifically

applicable to the Company:-

• The Reserve Bank of India Act, 1934 (RBI) to the extent it is applicable to NBFC;

• RBI Master Directions on NBFC-ND-SI, 2016;

• RBI Master Directions- KYC Directions, 2016; and

• RBI’s Miscellaneous Instructions to NBFC-ND-SI.

CORPORATE OFFICE


LOCATIONS


We have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards issued by The Institute of Company Secretaries of India:

We noted that the Company is generally regular in complying with the standards except in few

occasions.

(ii) The Listing Agreements entered into by the Company with the Stock Exchange(s).

During the period under review, the Company has complied with the provisions of the Act, Rules, Regulations,

Guidelines, Standards, etc. mentioned above except to the extent as mentioned below:-

1. Whereas in terms of Regulation 52 of the SEBI (Listing Obligations and Disclosure Requirements),

Regulations 2015, the Company did not submit the annual audited financial results for the half and

annual year ended March 31, 2017 within the sixty days thereof.

2. Whereas in terms of the provisions of Section 203 of the Companies Act, 2013, the Company was

required to appoint Chief Financial officer and Managing Director/ Manager/ Chief Executive Officer/

Whole Time Director but these Key Managerial Personnel have not been appointed.

3. As at March 31, 2018, the Company’s Board of Directors consists of 2(two) Directors instead of

minimum 3(three). Hence, the composition of the committees (i.e. Audit, Nomination & Remuneration

and Corporate Social Responsibility Committee)which was not in Compliance of the Act. Further, the

office of woman director has also been vacated.

4. With respect to NBFC Master Directions 2016, the Company is generally regular in filing returns to

Reserve Bank of India within prescribed timeline except for few returns.

We further report that:

The Board of Directors of the Company is not duly constituted with proper balance of Executive Directors and

Non-Executive Directors except Independent Directors. The changes in the composition of the Board of

Directors that took place during the period under review were carried out in compliance with the provisions of

CORPORATE OFFICE


LOCATIONS


the Companies Act, 2013.However, pursuant to NBFC Master Directions, 2016, the Company has filed an

application to the RBI for obtaining its prior approval to the appointment of three non-executive non-

independent directors which is pending as on date.

Adequate notice is given to all directors to schedule the Board Meetings. Agenda and detailed notes on

agenda were sent at least seven days in advance except that of few Board Meetings which were held on

shorter notice, and a system exists for seeking and obtaining further information and clarifications on the

agenda items before the meeting and for meaningful participation at the meeting.

Majority decision is carried through while the dissenting members’ views are captured and recorded as part of

the minutes.

We further report that there are adequate systems and processes in the company commensurate with the

size and operations of the company to monitor and ensure compliance with applicable laws, rules, regulations

and guidelines, as per the management representation letter.

We further report thatthe Lakshmi Vilas Bank (LVB) has adjusted Fixed Deposit of Rs. 75,000 lakhs

(representing Rs. 79,145 lakhs as per financial statement as on March 31, 2018) due to the Company against

the loans granted by LVB to RHC Holding Pvt. Ltd and Ranchem Pvt. Ltd; Company has claimed the

reinstatement of the said fixed deposits and has filed a suit before to the Hon’ble Delhi High Court for

declaration and recovery. The matter is sub-judice in the court.

We further report that the Reserve Bank of India (‘RBI’) in its letter dated January 27, 2017 to the Company,

had also raised concerns about the credit worthiness of the borrowers, credit appraisals and loan sanctioning

mechanism. The RBI further directed the Company to reduce its Corporate Loan Book (CLB) portfolio and to

submit action plan to this effect. The Company was required to submit an action plan approved by Board for

ensuring that unsecured loans to corporates are not sanctioned in future.

In this regard, as informed by the management and reply filed on August 21, 2018, the Company was updating

RBI about the CLB portfolio from time to time and has discontinued extending loans under CLB. It has also

initiated various legal proceedings against all borrowers forming part of CLB portfolio in order to recover their

CORPORATE OFFICE


LOCATIONS


dues. As a part of the recovery process, the Company has issued legal notices to the borrowers and has also

initiated corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.

We further report that during the audit period the company has following events.

i. That the Company in its Annual General Meeting held on September 28, 2017 had passed the

resolution under Section 180 (1) (c) of the Companies Act, 2013 to borrow money upto the sum of

Rs. 55,000,000,000 (Rupees Fifty Five Hundred Crores Only) on a private placement basis, in one or

more tranches by issuing Non – Convertible Redeemable Debentures (NCDs).

ii. That the RBI vide its order dated October 11, 2017 imposed penalty of Rs. 2,000,000 (Rupees Twenty

Lakhs Only) on the Company pursuant to the show cause notice dated November 07, 2016 issued

with respect to the assignment transaction with Strategic Credit Capital Private Limited (SCCPL).

Further, the Company has also paid the amount to the RBI.

For PI & Associates,

Company Secretaries

Sd/-

NiteshLatwal

Partner

ACS No.: 32109

C P No.: 16276

Date: September 4, 2018

Place: New Delhi

This report is to be read with our letter of even date which is annexed as “Annexure A” and forms an integral

part of this report.

CORPORATE OFFICE


LOCATIONS


“Annexure A”

To,

The Members,

RELIGARE FINVEST LIMITED

Our Secretarial Audit Report of even date is to be read along with this letter.

1. Maintenance of secretarial records is the responsibility of the management of the Company. Our

Responsibility is to express an opinion on these secretarial records based on our audit.

2. We have followed the audit practices and processes as were appropriate to obtain reasonable

assurance about the correctness of the contents of the secretarial records. The verification was done

on test basis to ensure that correct facts are reflected in secretarial records. We believe that the

processes and practices, we followed provide a reasonable basis for our opinion.

3. We have not verified the correctness and appropriateness of financial records and Books of Accounts

of the Company.

4. Where ever required, we have obtained the Management representation about the compliance of

laws, rules and regulation and happening of events etc.

5. The compliance of the provisions of corporate and other applicable laws, rules, regulations, standards

are the responsibility of management. Our examination was limited to the verification of procedures on

test basis.

6. The Secretarial Audit Report is neither an assurance as to future viability of the Company nor of the

efficacy or effectiveness with which the management has conducted the affairs of the Company.

For PI & Associates,

Company Secretaries

Sd/-

NiteshLatwal

Partner

ACS No.: 32109

C P No.: 16276

Date:September 4, 2018

Place: New Delhi

53

Annexure - E

Details in terms of sub-section 12 of Section 197 of the Companies Act, 2013 read with

Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel)

Rules, 2014 read with the Companies (Appointment and Remuneration of Managerial

Personnel) Amendment Rules, 2016.

I. Ratio of the remuneration of each Director to the median remuneration of the

employees of the Company for the financial year 2017-18:

S.

No.

Name of Director Remuneration of

Director*

Ratio of remuneration of each

director to the median

remuneration of the

employees

1 Mr. Kavi Arora (MD & CEO till November 12, 2017)**

INR 38,075,843 81.16 x

*excludes stock options

** Remuneration paid to Mr . Kavi Arora, MD & CEO, was for the period April 1, 2017 to

November 12, 2017 due to his resignation w.e.f. November 12, 2017. Payment toward

Gratuity and Leave encashment on account of resignation have not been considered in the

above information.

II Percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year

MD & CEO

-----------------------

CFO

----------------------

CS

0%

-----------

NA, as he resigned and hence, not eligible for Annual Increment

-----------

21%

III Percentage increase in the median remuneration of employees in the financial year

In the financial year, there was a decrease by 7% in the median remuneration of employees.

IV The number of permanent employees on the rolls of the Company

There were 855 permanent employees on the rolls of the Company as on March 31, 2018.

V 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

Average percentage change made in the salaries of employees other than the managerial personnel in the last financial year was 6.5%. There have been exits in the Key Managerial Personnel this FY, hence the comparison with managerial remuneration will be not applicable.

VI Affirmation that the remuneration is as per the remuneration policy of the Company

It is hereby affirmed that the remuneration paid is as per the

54

Remuneration Policy for Directors, Key Managerial Personnel and other Employees.

Further, the following disclosure is annexed as Annexure – F forming part of this Report. Statement showing the name of the top ten employees in terms of remuneration drawn and the name of every employee, who (i) if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one Crore and two lakh rupees; disclosed in Annexure -F (ii) if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than eight lakh and fifty thousand rupees per month; disclosed in Annexure-F (iii) if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company: No such case falling under this category



Sd/- Sd/-




Director


directors’ report religare finvest limited · while things stood thus, rfl came to be in receipt...

Documents