Can Fin Homes Ltd Directors Report.

To the Members,

The Board of Directors hereby submit the report of business and operations of your Company, along with the audited financial statements, for the financial year ended March 31, 2021.

1. FINANCIAL RESULTS

The financial performance for the FY20-21 is summarised here below:

(Rs. in Lakh)
Particulars For the Year ended March 31, 2021 For the Year ended March 31, 2020
Profit before Tax & Provisions 68,611.18 57,860.22
Less: Impairment on financial instruments 6,853.17 6,031.57
Profit before Tax 61,758.02 51,828.65
Less: Tax expenses:
(a) Provision for Tax - Current Year 17,163.72 14,556.71
- Previous Year 143.50 461.81
(b) Deferred Taxation (1,155.23) (802.22)
Profit after Tax 45,606.03 37,612.35
Add: Other Comprehensive Income
A. Items that will not be reclassified to profit or loss
(i) Actuarial (Gain)/ loss 3.92 228.55
(ii) Income tax relating to items that will not be reclassified to profit or loss 0.99 (57.52)
B. Items that will be reclassified to profit or loss
(i) Income tax relating to items that will be reclassified to profit or loss 0 0.00
Other Comprehensive Income 2.94 171.03
Total Comprehensive Income for the period 45,603.10 37,441.32
Balance brought forward from previous year 13,126.55 5,937.64
58,729.64 43,378.96
Appropriations:
Impact on adoption of Ind AS 116 382.80
Transfer to Special Reserve u/s. 36(1)(viii) of the Income Tax Act, 1961 12,054.62 11,682.55
Transfer to General Reserve 9,120.62 7,488.26
Additional Reserve (u/s.29C of the NHB Act) 9,120.62 7,488.26
Proposed Dividend 2,663.08 2,663.08
Tax on Distributed Profits 0.00 547.45
Balance carried forward to Balance Sheet 25,770.70 13,126.55
58,729.64 43,378.96

Note: (1) Figures have been regrouped wherever necessary while preparing the statements as per IND-AS requirements.

(2) The proposed dividend of H2/- per equity share is not recognised as liability in the annual accounts as at March 31, 2021 (in compliance with IND AS 10 events occurring after the Balance sheet date). The same will be considered as liability on approval of shareholders at the 34th Annual General Meeting.

2. SHAREHOLDERS WEALTH

Particulars For the Year ended March 31, 2021 For the Year ended March 31, 2020
Earnings Per Share (EPS) (Rs.) 34.25 28.25
Dividend Rate 100% 100%
Market Price of shares (Rs.) 613.75 279.05
Market Capitalisation (Rs. in Crore) 8172.33 3715.67

3. BUSINESS PERFORMANCE HIGHLIGHTS

The Pandemic and the consequent lockdown from March 24, 2020 which curtailed operations partially in the last month of FY 2019-20, also negatively impacted businesses across the globe and in India for about 6 months.

The slump for the first half of the FY21 adversely affected the business of your Company. However, as the economy started to revive and the demand for houses resurfaced, the performance improved and the Company did exceedingly well in the last 2 quarters.

a) Sanctions

The Company sanctioned loans amounting to Rs.1256 crore in Q3 and Rs.2,257 crore in Q4. During the year, the Company has sanctioned loans amounting to Rs.4,631 Crore as compared to Rs.5,897 Crore in the previous year 87% of fresh loan approvals during the year were for housing. The cumulative loan sanctions since inception of your Company stood at Rs.48,602 Crore at the end of the FY21. Average ticket size of incremental housing loans and non-housing loans are Rs.20 Lakh and Rs.10 Lakh, respectively.

b) Disbursements

Disbursements during the third quarter amounted to Rs.1,106 crore and Rs.2,001 crore during Q4 FY 21, which is the highest in any single quarter, so far.

During the year, the Company has disbursed loans amounting to Rs.4,331 Crore as compared to Rs.5,481 Crore in the previous year. The cumulative loan disbursements from inception to the end of the FY21 was Rs.43,581 Crore.

c) Loans outstanding (Loan Book)

Your Directors are pleased to report that the total loan outstanding as at March 31, 2021 was Rs.22,105 Crore, recording a growth of around 7% over last year (previous year Rs.20,706 Crore). At a portfolio level, housing loan constitutes 90%, Top-up Loans-4% and Loans Against Property (LAP).

Non-Performing Assets (NPAs)

Your Companys focus on collections has been consistent. All efforts have been made to take care of the borrowers interests.

Guidelines were issued by the Reserve Bank of India on March 27, 2020 to grant moratorium to the for instalments falling due from March 01, 2020 to 31st May 31, 2020 and then extended it upto 31st August 2020 vide their directions dated May 23, 2020 and your Company granted Moratorium facility to customers accordingly.

The Gross NPA of your Company as on March 31, 2021 was Rs.201.91 Crore (previous year Rs.157.13 Crore). The net NPA as on March 31, 2021 was Rs.134.33 Crore, with the NPA Provision Coverage Ratio at 39% during the year. The gross NPA percentage as on March 31, 2021 stood at 0.91% compared to 0.76% as on March 31, 2020.

Profits

Your Directors are happy to inform that during the year under review, despite the constraints induced by the Pandemic, your Company recorded an Operating Profit of Rs.686.11 Crore (previous year Rs.578.60 Crore), Profit Before Tax (PBT) of Rs.617.58 Crore (previous year Rs.518.29 Crore) and Profit After Tax (PAT) of Rs.456.03 Crore (previous year Rs.374.41 Crore) registering YOY increase of 22% respectively.

During the year Company has made provisions for standard assets amounting to Rs.18.30 Crore. Out of Rs.18.30 crore, an amount of Rs.5.30 crore was provision for standard assets, Rs.7.65 crore was provision for restructured loans and balance Rs.5.35 crore additional provision. Provision for standard assets was Rs.7.92 Crore during the previous year.

Provision was made for Non-performing assets amounting to Rs.22.27 Crore (previous year Rs.15.85 Crore). General provision as per RBI circular on Covid-19 regulatory package amounting to v36.35 Crore and provisions for Taxation and Deferred Tax Asset amounting to Rs.161.52 Crore (previous year Rs.142.16 Crore) was made.

d) Reserves

For reserves during the year, please refer statement of changes in equity for the period ended March 31, 2021 forming part of Financial Statements 2021.

e) Dividend

Your Company has a consistent track record of dividend payments. Your directors, after giving due consideration to Capital Adequacy requirements, deferred tax liability, uncertainty on account of Covid-19, its impact on financial markets, the resultant impact on the Company and the Dividend Distribution Policy are happy to recommend a dividend of Rs.2/- per equity share (100%), for the financial year ended March 31, 2021, subject to the approval of the Shareholders at the ensuing Annual General Meeting of the Company. The amount of dividend recommended for payment for the year under review is H26.63 Crore.

As per section 194 of Income Tax Act, a company is required to deduct TDS @ 10% on dividend payment if it exceeds Rs.5000/-. However, no TDS shall be deducted in the case of any dividend payment to any Insurance Company and Mutual Funds specified u/s.10(23D) of Income Tax Act. Moreover, as per section 195 of the Act, TDS is required to be deducted @ 20% plus surcharge on payment of Dividend to Non-Residents. The Dividend Distribution Policy as required under regulation 43A of SEBI (LODR) Regulations, 2015, is available on the website of the Company (web link https:// www.canfinhomes.com/pdf/Dividend-Distribution- Policy-31012020.pdf).

Impact of Covid on business:

World Health Organisation had declared Covid-19 as a pandemic in March 2020 and the entire world has been grappling with the dreaded disease. The resilient human spirit endured and overcame the first wave. Between October 2020 to March 2021, lives, businesses and economies resumed with near normalcy. However, severity of the Pandemic during the first 6 months of the fiscal has definitely impacted performance of most business and corporate entities.

The Companys main business is providing loans for construction/ purchase of houses/ flats against the security of immovable property.

During the first two quarters, your Company continuously was in touch with customers, trying to understand their needs, impact on income due to Covid and well-being. Customers were educated regarding RBIs initiative of granting moratorium. This initiative helped customers choose the right option and also helped the Company manage portfolio effectively post Covid. Business picked up in the third quarter and Company performed well during the last 2 quarters.

In Q4, the Company disbursed Rs.2001 Crore which is an all-time high quarterly number in last 33 years. The Company registered 44% growth in Disbursements in Q4 YOY and disbursements increased sequentially by 81%. We were able to do well on the Collections front too and contained NPAs at 0.91%. Despite pandemic, the Company managed to deliver a good performance.

4. EXPANSION OF BRANCH NETWORK

Your Company has been continuously expanding its network of branches. Though our presence in Southern states is predominant, new branches have been opened in various parts of the country after examining the potential on the basis of surveys conducted.

During FY21, due to Covid-19 related restrictions, only 4 new branches were opened. As at the end of FY21, your Company has an expanded network of 200 branches spread across 21 states comprising 186 branches and 14 Satellite Offices.

During FY22, your Company has plans to open branches depending on the return to full normalcy, considering the growth potential of various locations.

5. TECHNOLOGY INITIATIVES

All the branches and the Registered Office are connected through a core-banking platform (Integrated Business Suite) with Cloud compute services. The Company has implemented Multiprotocol Label Switching (MPLS) links for a higher bandwidth, security and dedicated uptime.

In order to improve operational efficiency, your Company has embarked on technology initiatives like implementation of Central Know Your Customer (CKYC) and web-based Application software for Inspection & Audit. The website of your Company is interactive and user friendly.

Your Company has introduced digital meetings platform for Board and Committee meetings which is paperless, secure, efficient and cost effective. Further, the Company has also introduced digital platform for the tracking of Unpublished Price Sensitive Information (UPSI).

During the Pandemic, as per the new normal, several virtual meetings were conducted and your Company optimally utilized the Video Conferencing facility at various centres. Virtual review meetings with branches, clusters and interviews for recruitments were facilitated with the use of this technology.

The technological capabilities of the Company were quickly leveraged to ensure that operations were smooth and the employees were successfully able to work from home even during the lockdown.

Digitalization measures enabled your company to connect and engage with our Customers for business and collections during lockdown and even after, on account of the need for social distancing.

Thrust on cyber security was given and all employees have been regularly informed about security awareness and the dos and donts to safeguard the information assets of the Company.

Business continuity plan is tested to address disruption risks in the event of an unforeseen situation and in the unprecedented lockdown this enabled us to continue operations smoothly.

6. CUSTOMER FRIENDLY INITIATIVES

The Company follows transparent, fair and impartial practices covering all customers across branches. Information related to our Company, products, schemes and charges is made available in the website of the Company.

As per NHB/RBI Master Directions, the Fair Practices Code (FPC) and Most Important Terms and Conditions (MITC) are regularly updated and uploaded in the Companys website for ready reference of our customers. The customer portal on the website enables customers to access Income Tax provisional certificates and facilitates online money transfer.

The COVID-19 pandemic necessitated several safety measures to safeguard the health and welfare of the customers and your Company ensured that all the necessary steps were taken in this direction, including social distancing, provision of sanitizers in all branches, usage of masks by the staff, etc.

We have also ensured that most of their requirements have been met by way of telephonic discussions and mails in order to prevent avoidable visits during the course of the Pandemic.

As an environment friendly initiative, we have provided cotton cloth bags to our customers across the country through our branches, to discourage and discontinue the use of plastic which harms the ecosystem.

7. FINANCIAL RESOURCES

a) Refinance from National Housing Bank (NHB) and borrowings from Banks

During the year, your Company had availed fresh refinance amounting to Rs.500 Crore out of the sanctioned Rs.2,000 Crore (previous year Rs.1,500 Crore) under the NHB refinance scheme and Special Refinance Assistance of Rs.636 Crores. The cumulative NHB borrowings as on March 31, 2021 were Rs.3,954.94 Crore (previous year Rs.3,446.88 Crore), with the overall cost of borrowing (including the loans under Rural Housing and Urban Housing Schemes) of 6.41% p.a.

b) Borrowings from Banks

During the year, borrowings were diversified through a combination of short-term and long-term loans considering the asset liability management position to reap maximum benefit of interest rates. To diversify risks within banks, we had exposure from PSU/Private/Foreign banks. The aggregate bank borrowings (term loans plus overdraft) at the end of the financial year stood at Rs.13,856 Crore; the overall borrowings are within regulatory ceiling of 13 times of net owned funds.

The overall cost of borrowings from banks was 6.71% p.a. as on March 31, 2021. During the year, the longterm rating of the Company for term loans was [ICRA] AA+ (Pronounced as ICRA Double A Plus), signifying high degree of safety regarding timely servicing of financial obligations.

c) Debentures

(i) Secured Non-Convertible Debentures

The Company has issued Secured Redeemable Non-Convertible Non-Cumulative Taxable Debentures (SRNCD) during the year of Rs.275 Crores (previous year was H250 Crores). The debentures were secured by way of a floating charge on the assets i.e., loan receivables specifically earmarked for the purpose in favour of the Debenture Trustees. Most of the investors in these debentures comprised major insurance companies, public sector banks, corporates, PF Trusts and investors of repute, indicating their safety perception of your Companys fundamentals and prospects.

The tenure of the outstanding debentures is range bound for two to five years. The interest on these debentures was serviced regularly. The aggregate borrowings by way of Secured NCDs as on March 31, 2021 was Rs.1,298 Crore (previous year Rs.2,562 Crore) while the overall cost was 7.76% p.a. The debentures were rated, CARE AAA (Outlook Negative) by CARE Limited and [ICRA] AA+ by ICRA Limited, signifying high degree of safety regarding timely servicing of financial obligations and carry very low credit risk. These debentures were listed on the Wholesale Debt Market (WDM) segment of the National Stock Exchange of India Limited.

Your Company plans to raise Non - Convertible Debentures up to a maximum of Rs.4,000 Crore subject to cost benefit and asset liability management requirements and with the approval of members at ensuing Annual General Meeting.

(ii) Unsecured Non-Convertible Debentures

During FY14-15, your Company had issued 8.94% Unsecured Non-Convertible Debentures in the nature of Tier II Bonds aggregating Rs.100 Crore for a tenure of 10 years. These debentures are subordinated to present and future senior indebtedness of the Company and qualify as Tier II Capital under the National Housing Bank (NHB) guidelines for assessing Capital Adequacy Requirements. These Tier II Bonds were rated, CARE AAA (Outlook Negative) by CARE Limited and [ICRA] AA+ (Outlook Stable) by ICRA Ltd. Your Company has serviced the interest on the above debentures on the due date.

The Company is in compliance with the provisions of the Housing Finance Companies Issuance of Non-Convertible Debentures on private placement basis (NHB) Directions, 2014

and RBI HFC Directions as applicable and has been regular in payment of principal and interest on the NCDs. Details of borrowings are provided in the notes to accounts.

The Company affirms that there has been no deviation or variation in the utilisation of proceeds of Non- Convertible debentures from the objects stated in the offer document or explanatory statement to the notice for the general meeting, as applicable. During the year there were no public issues.

The Company confirms that the non-convertible debentures which became due for redemption, have been paid in full and there are no unclaimed or unpaid non-convertible debentures as on date.

d) Commercial Paper

Your Company mobilises funds through Commercial Paper (CP) for leveraging cost of borrowing to the extent of undrawn Bank limits. The outstanding at the end of the March 2021 was Rs.3,594 Crore (previous year Rs.1,247 Crore). The effective cost of funds raised through CP was 4.95% p.a. The CP issued by your Company was rated at the maximum [ICRA] A1+ rating by ICRA Ltd., and CARE A1 + by CARE Limited. Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations.

The Company affirms that there has been no deviation or variation in the utilisation of proceeds of Commercial Papers, from the objects stated in the offer document

e) Deposits

During the year your Company accepted deposits of H368 Crore (Previous year H195 Crore). The outstanding balance of deposits (including interest accrued, but not due) as of March 31, 2021 was Rs.442 Crore (previous year Rs.305 Crore). The rate of interest on public deposits ranged from 6% to 7.50% while the overall cost (average) of deposits was 7.38% p.a. as on March 31, 2021.

As on March 31, 2021, a sum of H11.88 Crore relating to 729 accounts of public deposits (H13.91 Crore as on March 31, 2020 relating to 879 accounts) remained unclaimed/ overdue. Of this amount, a sum of H6.87 Crore relating to 244 accounts (previous year H11.39 Crore relating to 252 accounts) were claimed and

renewed/settled up to June 30, 2021. Depositors were intimated regarding the maturity of deposits with a request to either renew or claim their deposits. Where the deposit remains unclaimed, reminder letters/sms are sent to depositors periodically and follow up action is initiated through the concerned branch. Your Company has not defaulted in repayment of deposits or interest during the year. The Company has complied with the requirements under Chapter V of the Companies Act, 2013 to the extent applicable.

During the year, the deposit schemes of your Company have been rated MAAA Stable (pronounced as M Triple A), by ICRA Ltd., indicating highest credit- quality and that the rated deposit programme carried the lowest credit risk. Your Company, being a Housing Finance Company registered with National Housing Bank (NHB), has complied with the Directions/Guidelines issued by the NHB and RBI with regard to deposit acceptance and renewal. Your Company is exempted from the applicability of the Companies (Acceptance of Deposits) Rules 2014.

f) Mortgage-backed securities

Your Company did not opt for securitisation during the year under review. There were no securitised assets outstanding as on March 31, 2021.

8. REGULATORY COMPLIANCES

Compliance with Directions/ Guidelines of National Housing Bank (NHB)/RBI and other statutes

Your Company has complied with the Housing Finance Companies (NHB) Directions, 2010 and other directions/ guidelines prescribed by NHB and as amended from time to time till February 17, 2021 i.e., issue of Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021 by RBI. Your Company has adhered to the prudential guidelines/norms for non- performing assets (NPAs) and directions issued by NHB on withdrawal of pre-closure charges for all loans, asset classification of credit/ investments, credit rating, acceptance of deposits, Fair Practices Code (FPC), Most Important Terms and Conditions (MITC), Customer Complaints Redressal Mechanism, Know Your Customer (KYC), Anti-Money Laundering (AML) Guidelines, Asset Liability Management, Capital Adequacy Ratio (CAR) norms, Information Technology frameworks, CERSAI, Implementation of Indian Accounting Standards (Ind AS), Guidelines on Reporting and Monitoring of Frauds

in Housing Finance Companies, INGRAM software, constitution of IT Strategy Committee, Guidelines on reporting and monitoring of Frauds in Housing Finance Companies and other related instructions issued by the National Housing Bank (NHB) were implemented in letter and spirit with an explicit notification on the website of your Company, to the extent applicable.

In August 2019, the central government conferred the powers of regulation of Housing Finance Companies (HFCs) to RBI from NHB. NHB continues to carry out the function of supervision of HFCs.

In October 2020, RBI issued the regulatory framework for HFCs in supersession of the corresponding regulations by NHB. The objective of the framework was to facilitate regulatory transition in a phased manner with least disruption.

During the year, RBI introduced certain regulatory changes for HFCs such as the principal business criteria for housing finance, definition of housing finance, minimum net owned fund requirements, guidelines on liquidity risk management framework and liquidity coverage ratio, amongst others.

Further, on February 17, 2021, RBI issued Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021 (RBI HFC Directions). These directions came into force with immediate effect. As mentioned in the notification, RBI has issued the subject Regulations to all Housing Finance Companies (HFCs), considering it necessary in the public interest, and being satisfied that, for the purpose of enabling the Bank to regulate the financial system to the advantage of the country and to prevent the affairs of HFCs from being conducted in a manner detrimental to the interest of investors and depositors or in any manner prejudicial to the interest of such HFCs.

Key changes in the regulations are detailed in the Management Discussion & Analysis report.

In terms of the Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021 Housing Finance Companies - Corporate Governance (NHB) Directions, 2016, the Company has attached the Related Party Transactions Policy at the end of this Annual Report.

During the year, the NHB conducted regular inspection of your Company in November 2020, for the position as at March 2020. The replies on the observations were submitted within the prescribed time to NHB, which were reviewed by the Audit Committee and the Board.

During 2020-21, NHB vide its letter dated October 15, 2020 had imposed a penalty of ?5,900 (inclusive of GST@18%) for alleged contravention of section 29 of the NHB Act, 1987, relating to creation of floating charge on SLR investments in favour of the Deposit Trustee, on SLR investment maintained to an extent of more than 13% (requirement 13%) on the total public deposit outstanding as on the last day of 2nd preceding quarter. The Company had sent a reply and remitted the amount.

Your Company has complied with other related statutory Guidelines/Directions/Policies as applicable to the Company from time to time. Compliance of all Regulatory directions/ guidelines of NHB/RBI other statutes are periodically reviewed by the Audit Committee and the Board.

Your Company has complied with Indian Accounting Standards (Ind AS) as notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standard) Amendment Rules, 2016 as applicable read with Section 133 of the Companies Act, 2013 and guidelines issued by National Housing Bank.

IRDAI Compliance

The Company is registered with IRDAI for carrying on the Insurance Agency Business and has complied with the applicable compliances under Insurance Regulatory and Development Act, 1999 and IRDAI (Registration of Corporate Agent) Regulations 2015, as amended from time to time. During the year the Company has implemented an appropriate policy on maintenance of records and destruction of old records. Being an insurance intermediary, Company is maintaining all the required information as per IRDAI rules.

Other Compliances

The Company, on 04/04/2018, had obtained the Legal Entity Identifier No.335800EJ9Y3XDP5ZDH81 as required under the RBI Circular -No.RBI/2017- 18/82 - DBR. No.BP.92/21.04.048/2017-18 dated November 02, 2017 and as advised by NHB. The same has been renewed for the year 2021-22.

As required under Section 215 of the Insolvency and Bankruptcy Code, 2016, the Company has registered itself with National e-governance Services Limited (NeSL) authorized by IBBI obtained registration No.9160743937431514312. Further, we have executed an agreement with NeSL on February 28, 2019. We are authenticating the request by our creditors on NeSL on regular basis.

The Company has registered on TReDS Platform through Receivables Exchange of India Limited (RXIL) vide registration No.CA0000876.

As per RBI/2015-16/96 Master Circular No.15/2015- 16 i.e. Master Circular on Foreign Investment in India and as per RBI/2017-18/194 A.P (DIR Series) Circular No.30 dated June 07, 2018 i.e. Foreign Investment in India, all types of Companies which have foreign investment are required to report through FIRMS - Reporting in Single Master Form. Your Company has registered as required under the above circular.

9. COMPLIANCE UNDER THE COMPANIES ACT, 2013

Your Company has complied with the requirements of the applicable provisions of the Companies Act, 2013 and related Rules during the FY 20-21. As per the requirements of Section 92(3) of the Act and Rules framed thereunder, the extract of the Annual Return for FY 2020-21 is uploaded on the website of the Company and the same is available at Events Page. The link for the same is canfinhomes.com/pdf/Events/34-AGM/ Provisional%20Form%20MGT-7%20for%20FY%202021. pdf For more details regarding Compliances, please refer the Secretarial Audit Report enclosed to this Report as Annexure-1.

Significant and material orders

There are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and the Companys operations in future. The details of penalty levied by the Regulator NHB are provided in the Report on Corporate Governance.

There are no material changes and commitments affecting the financial position of the Company which have occurred after March 31, 2021 till the date of this report.

CSR activity: The Company has contributed Rs.4 Crore to Prime Ministers Citizen Assistance & Relief in Emergency Situations Fund (PM-CARES) and Rs.1 Crore to Karnataka State Disaster Management Authority.

As a socially responsible Company, our CSR activities are carried out throughout the year. In FY 2020-21, the CSR activities involved extending aid for the purpose of education including special education, provision of educational tabs, water filters etc for Government schools, construction of class room blocks for schools, renovation of anganwadis, awarding scholarships for the under privileged, girl child and to special differently abled students for pursuing higher education. Basic equipment was provided to differently abled old and homeless destitutes, construction of library building, toilets etc.

The Companys CSR measures also give a thrust to healthcare and has provided advanced medical equipment and ambulances to Hospitals. The details of CSR activities are given separately as Annexure....

10. CAPITAL ADEQUACY

The Capital Adequacy Ratio (CAR) of your Company as at March 31, 2021 stood at 25.46% (previous year 22.26%) as against the Regulatory benchmark of 14% prescribed by the National Housing Bank (NHB).

11. DEPRECIATION

Depreciation was calculated on the Written Down Value Method based on useful life, in the manner prescribed in Schedule II to the Companies Act, 2013.

12. DEFERRED TAX ASSET (DTA)

During the year, Deferred Tax Asset (net) of Rs.11.55 Crore (previous year 8.02 Crore) was considered in the Statement of Profit & Loss, on account of various components of asset & liabilities. The DTA outstanding at the end of the March 2021 was Rs.45.45 Crore (previous year Rs.33.89 Crore).

13. RECOVERY ACTION UNDER SECURITISATION & RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (SARFAESI ACT)

As at the beginning of the year, action was in progress in respect of 1079 NPA accounts under Securitisation and Reconstruction of Financial Asset and Enforcement of Security Interest (SARFAESI) Act, 2002 and received H34 Crore (previous year H50 Crore) from borrowers. There was no progress in recovery under SARFAESI Act due to the pandemic.

14. LISTING OF SECURITIES:

The equity shares of the Company continued to be listed on the BSE Limited (BSE), Mumbai, and the National Stock Exchange of India Ltd. (NSE), Mumbai.

The non-convertible debentures issued on private placement are listed on National Stock Exchange of India Ltd.

As per SEBI Circular SEBI/HO /DDHS/DDHS/ CIR/P /2019/115 dated October 22, 2019, captioned "Framework for listing of Commercial Paper" the Company has also listed its Commercial Papers (CPs) on BSE Limited (BSE).

15. HUMAN RESOURCES DEVELOPMENT

The total number of employees of the Company was 887 (756 regular and 131 on contract) as on March 31, 2021 as against 838 (652 regular and 186 on contract) as at the end of the previous year.

Employees form the backbone of the Company. Their knowledge, dedication, aptitude, skills are of primary importance. The Company therefore ensures that the employees are fully equipped to discharge their duties effectively and efficiently and provide the necessary support in this direction by organizing orientation sessions, imparting on the job training, enabling them to take part in relevant webinars etc. conducted by Regulatory authorities and reputed institutions.

During the year, training in credit, information technology, human relations, customer service, Grievance redressal, finance, taxation, marketing, fraud prevention, KYC & AML and other topics of importance was imparted to employees and executives. Our employees are quite adept at the use of technology and could therefore adapt to the work from home scenario, when warranted.

Your Company has put in place a series of HR measures including promotions and appropriate reward schemes. Industrial relations in your Company continued to be cordial during the year.

During FY 20-21, no employee, other than the Managing Director who earns a remuneration of H12.5 Lakhs per month, was employed for a part of the year with a remuneration of H8.5 Lakh or more per month. The ratio of remuneration of each Director to the median of employees remuneration and such other details as required under Sec 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 and 2016 are furnished below:

(i) Ratio of remuneration of each director to the median employees remuneration for FY 2021

The ratio of the remuneration of Managing Director to the median remuneration of the employees (regular employees) of the Company for the FY 2020-21 was 18.72 :1

The ratio of the remuneration of Dy. Managing Director to the median remuneration of the employees (regular employees) of the Company for the FY2020-21 was 4.79: 1

Non-executive Directors and Independent Directors are eligible for sitting fee only. The details of sitting fee paid to the Directors for the meetings of Board and Committees are given in the Report of Directors on Corporate Governance.

(ii) Percentage increase in the remuneration of each Director and Key Managerial Personnel in FY 2021

The percentage increase in remuneration in the financial year for the Managing Director & CEO was NIL and that of the Deputy Managing Director was 30%. The other Key managerial personnel of the Company are the General Manager, the Chief Financial Officer and the Company Secretary and the percentage increase in their remuneration was 8.30%, 7.75% and 8.33% respectively.

(iii) Percentage increase in the median remuneration of employees in FY 2021

The total number of permanent employees of the Company were 756 as on March 31, 2021. Apart from the permanent employees, there were 131 employees on contract as on March 31, 2021.

The percentage increase in the median remuneration of employees in the financial year was 25.88%

(iv) Average percentile increase already made in salaries of employees other than managerial personnel in last financial year and its comparison with the percentile increase in managerial remuneration.

Average percentage increase in remuneration of the employees other than managerial personnel in the last financial year was 11.95% and that of Managerial remuneration was 5.38% during the period under review.

The average increase in the remuneration of both, the managerial and non-managerial personnel was determined based on the Annual Performance Evaluation and also based on the remuneration policy as recommended by the Nomination Remuneration & HR Committee of Directors and approved by the Board of Directors. There were no exceptional circumstances which warranted an increase in managerial remuneration which was not justified by the overall performance of the Company. The Company affirms that the remuneration is as per the remuneration policy of the Company.

(v) Prevention of Sexual Harassment of Women at the Workplace

The Company has a Policy on Prevention of Sexual Harassment of Women at Workplace and matters connected therewith or incidental thereto covering all the aspects as contained under the Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013. During FY20-21 no cases of sexual harassment were reported.

The Company has in place "Equal Opportunity Policy" as per Section 21(1) of Rights of the Persons with Disabilities Act, 2018.

The Company has laid down a Code of Conduct for Prevention of Insider Trading, in accordance with the requirements under the Securities and Exchange Board of India (Prevention of Insider Trading) Regulations, 2015 and Companies Act, 2013, with a view to regulate trading in Securities of the Company by its directors, designated persons and employees. The same is made available on the website of the Company. For related link, please refer Annexure 7

(vi) Affirmation that the remuneration is as per the Remuneration Policy of the Company:

It is affirmed that the remuneration paid is as per the Remuneration Policy, applicable for Directors, Key Managerial Personnel and other employees, adopted by the Company.

16. TRANSFER OF UNCLAIMED AND UNPAID DIVIDEND/ DEPOSIT AMOUNTS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

In terms of section 124 and 125 of the Companies Act, 2013, the amounts (dividend, deposits etc., with interest) that remained unclaimed and unpaid for more than 7 years from the date they first became due for payment, should be transferred to IEPF. As an investor- friendly measure, your Company has been intimating the respective shareholders/depositors/investors to encash their dividend warrant/renew matured deposits or lodge their claim for payment of due, if any, from time to time and claims made are settled. As per the statutory requirements, the details of such amounts are made available on the website of MCA-IEPF as well as on the Companys website. In order to receive prompt payment of dividend, the members/ investors are requested to DEMAT the shares held in physical mode, register bank account particulars, opt for ECS facility, register nomination and intimate change of address, if any, to the Company/ Depository Participants promptly.

a) Unclaimed dividends

As at March 31, 2021, dividends aggregating to H185.52 Lakh (Previous year H173.02 Lakh) relating to dividends declared for the years FY13-14 to

FY19-20 (of which H32.43 Lakh related to dividend for the year 2020), had not been claimed by shareholders. As an investor friendly measure, your Company has intimated shareholders to lodge their claims and related particulars were provided in the annual reports each year as well as on the website of your Company. The dividend pertaining to 201213, which remained unclaimed/unpaid amounting to Rs.13.28 Lakh (in respect of 2,222 shareholders), was transferred to IEPF on September 10, 2020, after the settlement of claims by members received in response to the individual reminder letters sent by your Company to the respective members. The dividend pertaining to 2013-14 remaining unclaimed and unpaid, amounting to H20.23 Lakh (in respect of 1,977 shareholders) as on March 31, 2021, would be transferred to IEPF during July 2021 after settlement of the claims received up to the date of completion of seven years i.e. on July 31, 2021.

The Company takes various initiatives to reduce the quantum of unclaimed dividend and has been periodically intimating the concerned shareholders, requesting them to encash their dividend before it becomes due for transfer to the IEPF.

b) Transfer of shares to IEPF Demat account

Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and refund) Amendment Rules, 2017 was notified by the Ministry of Corporate Affairs (MCA) on October 13, 2017. As per Rule 6 of the said Rules, the shares, in respect of which dividend amounts have not been paid or claimed for 7 consecutive years, are required to be transferred to IEPF demat Account of IEPF Authority. On verification of records of unclaimed dividend amounts from 2006 to 2012, which have already been transferred to IEPF on lapse of 7 years (during 2013 to 2019 respectively), 7 shareholders had not claimed dividend for consecutive 7 years and their shares 4,000 Nos. have been transferred to IEPF demat account within the prescribed period and the details are provided on the website of the Company. For more details, please refer General Information to shareholders in this report.

In terms of the above Rules, reminder letters were sent by the Company to all the shareholders who had not claimed their dividends for a consecutive period of 7 years, informing that their shares will be transferred to IEPF suspense account on the due date, September 03, 2021, if they do not place their claim for unclaimed dividend amounts before the Company. Your Company has provided the related details on its website (Investors page).

c) Unclaimed deposits

Deposits remaining unclaimed for a period of seven years from the date they became due for payment have to be transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government. The concerned depositor can claim the deposit from the IEPF. As required under Section 125 of the Companies Act, 2013, the unclaimed and unpaid deposits together with interest for the year 2012-13 amounting to Rs.16.94 Lakh (previous year Rs.0.60 Lakh) that remained unclaimed and unpaid for a period of 7 years were transferred to IEPF during the year under review.

17. PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND EXPENDITURE

During the year, your Company did not earn any income or incur any expenditure in foreign currency/exchange other than payment of Dividend 2020 to NRIs on repatriation basis to an extent of H14.50 Lakh through authorised dealers.

Since your Company is a Housing Finance Company and does not own any manufacturing facility, the requirement relating to providing the particulars relating to conservation of energy and technology absorption as per Sec 134 (3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules 2014, are not applicable. Also the Company does not use energy intensively. The Company is conscious of the importance of imbibing measures towards optimum energy utilisation and conservation. However, the Company as its responsibility towards the society, has taken measures towards optimum energy utilisation and conservation, like installation of Solar Power systems, Solar UPS and power saving lamps like LED lights instead of conventional CFL & Fluorescent lamps in some of its branches.

As a part of Save Green efforts and leverage of technology, a lot of paper work at branches and the Registered Office has been reduced (also refer para 5).

As a green initiative, the Company has started availing the services of Dess Digital Software for sharing the soft copies of agenda papers pertaining to all the Board and Committee meetings, with the Directors and executives.

18 DIRECTORS & KEY MANAGERIAL PERSONNEL APPOINTMENTS/ RE- APPOINTMENTS:

The Board of Directors made the following appointments/ re-appointments based on the recommendations of the Nomination Remuneration & HR Committee on fit and proper criteria and performance evaluation of the Directors:

Shri Girish Kousgi was appointed as the Managing Director and CEO of the Company at the Annual General Meeting held on August 26, 2020 for a tenure of 5 years.

Shri Satish Kumar Kalra was appointed as an Independent Director at the Annual General Meeting held on August 26, 2020 for a tenure of 3 years up to the conclusion of the Annual General Meeting of the Company for the financial year 2022-23.

Smt Shubhalakshmi Panse was appointed as an Independent Director at the Annual General Meeting held on August 26, 2020 for a tenure of 3 years up to the conclusion of the Annual General Meeting of the Company for the financial year 2022-23.

Shri Lingam Venkata Prabhakar, MD & CEO of Canara Bank was appointed at the Annual General Meeting held on August 26, 2020 as a Director and Chairperson (Nonexecutive Promoter) liable to retire by rotation for a tenure upto December 31, 2022.

(1) Shri Amitabh Chatterjee has been appointed as an Additional Director (Executive Promoter) by the Board of Directors of the Company on July 15, 2021.

(2) Shri Ajai Kumar has been appointed as an Additional Director (Non-executive Independent) by the Board of Directors of the Company on July 31, 2021.

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Shri Debashish Mukherjee is liable to retire by rotation at the ensuing AGM. He is eligible for re-appointment. The agenda relating to re-appointment of Shri Debashish Mukherjee as Director, Shri Amitabh Chatterjee as Director (Deputy Managing Director) and Shri Ajai Kumar as Director (Non-executive Independent) are included in the Notice of the ensuing Annual General Meeting and complete particulars of the Directors are provided in the Explanatory Statements forming part of the said Notice.

The directors had filed their consent(s) and declaration(s) that they are not disqualified to become directors in terms of the provisions of Companies Act, 2013 and related Rules. The directors have intimated to the Company that they are not holding any shares or taken any loan(s) from the Company. The agenda relating to appointments/re-appointments of Directors are provided in the Notice of the 34th Annual General Meeting of the Company seeking approval from the members. The particulars relating to the Directors and all other relevant information are provided in the explanatory statement(s) forming part of the said Notice for the information of members.

Brief profile of all the Directors are provided in page Nos. 22 to 25 of this Annual Report.

Key Managerial Personnel:

Shri Girish Kousgi (DIN-08524205) was appointed as the Managing Director & CEO and Key Managerial Personnel of the Company for a tenure of 5 (five) years from September 05, 2019 to September 04, 2024.

Shri Amitabh Chatterjee has been appointed as an Additional Director (Deputy Managing Director) and Key Managerial Personnel of the Company for a tenure of 3 (three) years (Executive Promoter) by the Board of Directors of the Company on July 15, 2021.

Resignation/Vacation of Office:

1. Shri S Subramanian (Chief General Manager, Canara Bank) has laid down his Office w.e.f. May 31, 2020 on attainment of superannuation. Consequently, he has tendered his resignation as Director (Non-executive Promoter Director) of the Company and hence ceased to be the director of the Company w.e.f. June 04, 2020.

2. The tenure of the Office of Smt Bharati Rao (DIN-01892516), the Non-Executive Independent Director and Chairperson of the Board was completed on conclusion of the 33rd Annual General Meeting of the Company held on August 26, 2020.

3. Shri Shreekant M Bhandiwad (DIN- 08120906), Deputy Managing Director (Whole Time Director & Key Managerial Personnel) of the Company has vacated office on completion of tenure on April 27, 2021.

Retirement by rotation and re-appointment:

In terms of Section 152 and all other applicable provisions of the Companies Act, 2013, and the Articles of Association of the Company, Shri Debashish Mukherjee, Director (Non- executive and Promoter), retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The agenda relating to re-appointment of Shri Debashish Mukherjee forms part of the notice convening the ensuing Annual General Meeting and all other relevant information as per SEBI Regulations are provided in the explanatory statement.

All the appointments and re-appointments of Directors are made by the Board of Directors on the recommendations of the Nomination Remuneration & HR Committee on fit and proper criteria and also based on the performance evaluation of the Directors.

All the appointments and re-appointments mentioned above, which form part of the Notice of the ensuing Annual General Meeting of the Company, are recommended by your Directors to the members for appointment/re- appointment/approval.

19. MEETINGS OF THE BOARD

During the Financial year 2020-21, ten meetings of the Board of Directors were held and the related details, including that of various committees constituted by the Board, are made available in the Report of Directors on Corporate Governance forming part of this annual report placed before the members. Your Company has complied with all the requirements as applicable under Companies Act, 2013 and related rules, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and also HFCs Corporate Governance (NHB) Directions, 2016 (now part of Master Direction-Non-Banking Financial Company-Housing Finance Company (Reserve Bank) Directions, 2021), in relation to the Board of Directors and the Committees of the Board.

Committees of the Board:

Currently the Board has seven Committees viz. the Audit Committee, the Nomination, Remuneration & HR Committee, the Corporate Social Responsibility Committee, the Stakeholders Relationship Committee, the Risk Management Committee, the Management Committee and the IT Strategy Committee.

A detailed note on the composition of the Board and its Committees and other related particulars are provided in the Report of Directors on Corporate Governance forming part of this Annual Report.

20. DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of section 134(3)(c) read with Section 134(5) of the Companies Act, 2013 and based on the information provided by the management and review of the draft statement by the Audit Committee, the

Board of Directors confirm/ state that-

a) In the preparation of the annual accounts for the year ended on March 31, 2021, the applicable accounting standards have been followed and there are no material departures;

b) The Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company for the financial year ended on March 31, 2021 and of the profit of the Company for that period;

c) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) The Directors had prepared the annual accounts on an ongoing concern basis;

e) This being a listed Company, the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively and

f) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Declaration by Independent Directors:

The Independent Directors have given declarations to the Company in terms of Section 149(7) and 149(8) of the Companies Act, 2013 and Regulation 25(8) of SEBI (LODR) Regulations, 2015 that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of SEBI (LODR), 2015. There has been no change in the circumstances affecting their status as Independent Directors of the Company.

All the Independent Directors of the Company are persons of integrity, expertise and experience and have obtained certificates from the Institute notified under Section 150(1) of the Act, either by completing the online proficiency self-essessment test or by way of exemptions from taking the tests. Since they were Directors for more than 10 years from the date specified.

Code of Conduct:

In terms of Regulation 26(3) of the SEBI (LODR) Regulations, 2015, all the members of the Board and Senior Management Personnel have affirmed compliance with the Code of Conduct of Board of Directors and Senior Management for the FY20-21. As required under Schedule V (D) of the said Regulations, a declaration signed by the Managing Director & Chief Executive Officer of the Company stating that the members of the Board and the Senior Management Personnel have affirmed compliance of their respective Codes of Conduct, is an Annexure to Corporate Governance Report.

21. NOMINATION REMUNERATION AND HR (NRC) POLICY

Your Company has constituted a Nomination Remuneration and HR Committee (NRC) of the Board in terms of Section 178 of the Act, Regulation 19 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and Para 3(II) of NHB Corporate Governance (National Housing Bank) Directions, 2016. This Committee identifies persons who are qualified to become Directors of the Company. The appointment, renewal, reappointment, re-categorisation and/ or removal of the Directors so identified, including extension or continuation of the term of appointment, will be recommended by the NRC to the Board. This Committee has also laid down the criteria to identify persons who may be appointed to the senior management of the Company. The NRC has formulated the criteria for determining qualifications, positive attributes and independence of a Director, carrying out evaluation of every Directors performance, performance of the Board and that of the Committees. The NRC Policy of the Company covering all the above aspects is made available on the official website of the Company at https://www.canfinhomes.com/ pdf/ Nomination-Remuneration-and-HR-Policy-120419.pdf, in terms of Section 134(3) of the Companies Act, 2013. The Board ensures the annual evaluation of the performance of the Board, its Committees and of its individual directors through the meeting of independent directors, the NRC and evaluation by each of the directors independently.

22. CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

Your Company constituted a Corporate Social Responsibility (CSR) Committee of the Board as prescribed under Section 135 of the Companies Act 2013 and has put the CSR policy in place. The Company has focused in Promoting education including special education, Construction of class room blocks for Government schools, procurement of tabs and construction/renovation of Toilets, Safety Grill work, water filters, sanitary pad vending machines to Government schools, renovation of anganwadis, Scholarships for under privileged, Scholarships for girl child education, Scholarships for higher education for special and disabled students. The Company also focuses on healthcare by donating advanced medical equipment to Hospitals during Covid-19 pandemic. Company has also donated three ambulances to three government Hospitals. Company has supported for Construction of Fitness cum sports centre for tribal students. Company has also contributed for nutritional expenses, Procurement of basic Fixed assets for old age homes, orphanages and residential homes for differently abled people. Contribution to Prime Ministers Citizen Assistance and Relief in Emergency Situations Fund (PM CARES) and Karnataka State Disaster management Authority during COVID-19 pandemic to provide relief to those affected by any kind of emergency or distress situation like COVID19 also forms part of its CSR activities.

The activities undertaken by the Company under CSR is Pan India basis and the projects are executed by Registered Office and our branches in those areas. The total amount/ budget under CSR for the FY 2020-21 was H1281 lakh, (including H317 lakh of previous year), out of which, total amount spent under the CSR activities is Rs.1108 lakh. The balance amount of H173 Lakh is already sanctioned and will be transferred to Unspent CSR Account as per provisions of Companies Act and will be disbursed as per the progress of the work. A summary of CSR activities as on March 31, 2021 is given below:

Sl No. Activities undertaken No. of Projects Rupees in Lakh
1 Construction/ repair & renovation of Schools/ Hostels/Hospitals 7 187.22
2 Desks & Benches/ Tables/ Almirah/ Green Board/ Chairs/Bags/ Books etc. 2 6.19
3 Drinking water facility/ supply of other articles of necessity etc. 2 2.39
4 Scholarship 8 77.82
5 Medical Equipment to Hospitals 20 289.24
6 Welfare measures for differently abled ,old, homeless/Equipment to old age homes 7 23.71
7 Disaster Management 2 500.00
8 Promoting Tribal Sports 1 21.00
Total 49 1107.57

The Annual Report on CSR activities including brief contents are provided as Annexure-2 to this report.

23. RISK MANAGEMENT POLICY

The Company has a structured Group Risk Management Framework, designed to identify, assess and mitigate risks appropriately. Your Company has constituted a Risk Management Committee with four directors, Chief Risk Officer (CRO), Chief Compliance Officer (CCO) and two senior executives of the Company. In terms of Section 134(3)(n) of the Act, your directors wish to state that your Company has adhered to the Risk Management Policy. The above policy was reviewed during the year. For web link please refer Annexure 5.

24. AUDIT AND INTERNAL CONTROL

Your Company strengthened existing internal control systems for reviews at periodical intervals and introduced measures for minimising operational risks commensurate with the nature of its business and size of operations. Further, your Company has reviewed delegation of authorities and streamlined standard operating procedures for all areas of its business/ operations/ functions, strengthened the Offsite Transaction Monitoring System (OTMS) to track transactions/ early-warning signals across all branches by introducing innovative monitoring tools. The National Housing Bank conducts inspection of your Company on an annual basis. During the year, the NHB conducted regular inspection of your Company during Nov-2020 for the position as at March 31, 2020. The compliance on the observations were submitted within the prescribed time to the NHB, which were reviewed by the Audit Committee and the Board.

Your Company has also put in place a well- defined policy on Risk Based Internal Audit (RBIA) and as per the said policy, 186 branches and 4 CPCs were audited in the FY 20-21. Apart from the RBIA, considering the volume of business, 132 branches were also subjected to quarterly/ half yearly internal audit by appointed audit firms. During the year, 19 loan accounts pertaining to 6 branches, amounting to Rs.370.39 lakhs have been suspected to be fraudulent and have been reported to the authorities/ regulators. The Audit Committee reviewed the audit reports/remarks/ observations and replies/ compliances including the compliance of KYC norms.

Regular inspection and IS audit of your Company for review period August 01, 2018 to August 31, 2020 was conducted by Canara Bank. The compliance on the observations were submitted which were reviewed by the Audit Committee and the Board. Management Audit by Canara Bank was conducted during February-2021 for the review period August 01, 2018 to August 31, 2020.

Reporting of Frauds

There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and/or to the Board as required under Section 143(12) of the Act and the rules made thereunder.

25. SECRETARIAL AUDIT & SECRETARIAL COMPLIANCE

As required under section 204 of the Companies Act, 2013 and Rules thereof, the Board appointed M/s Kedarnath & Associates, Practising Company Secretaries, for conducting the Secretarial Audit of the Company and for submission of the Annual Compliance Report for the financial year 2020-21. The Secretarial Audit for FY 20-21 was conducted as required u/s.204 of the Companies Act 2013, Regulation 24A of SEBI (LODR) Regulation 2015 and SEBI Circular No. CIR/CFD/CMD1/27/2019 dated February 08, 2019, by Shri S. Kedarnath, FCS, Practising Company Secretary and his team. The report does not contain any qualification, reservation or adverse remarks. The Secretarial Audit Report issued by the Practising Company Secretaries is enclosed to the Report of Directors (Annexure 1) in terms of Section 134(3) (f) read with Section 204(1) of the Act.

In addition to the Secretarial Audit Report, Secretarial Compliance Report has also been issued by the PCS as per the SEBI Circular No. CIR/CFD/CMD1/27/2019 dated February 02, 2019, and the said report has been submitted to the Stock Exchanges.

Secretarial Standards

The Company complies with the mandatory Secretarial Standards i.e. SS-1 and SS-2 issued by the Institute of Company Secretaries of India and has referred to Secretarial Standards SS-3 and SS-4 for good governance.

Loans, Guarantees or Investments:

There are no particulars of loans, guarantees or investments made during the year in terms of Section 186(1) and 186(2) of the Act requiring disclosure to be made in the report of Directors as required under Section 134(3)(g) of the Act. In terms of Section 186(11) (a) the requirement relating to the disclosure is not applicable to a loan made, guarantee given or security provided by a Housing Finance Company.

Since the Company is a NBFC-HFC, the disclosures regarding particulars of the loans given, guarantees given and securities provided is exempt under the provisions of Section 186 (11) of the Companies Act, 2013. As regards investments made by the Company, the details of the same are provided in notes to the financial statements of the Company for the year ended March 31, 2021 (note 10).

Related Party Transactions:

The particulars of contracts or arrangements with the Related Parties referred to in sub-section (1) of Section 188 of the Act are furnished in Note No.43 of the Notes forming part of the financial statements for FY20-21, forming a part of the Annual Report. The particulars of Related Party Transactions as required u/s sec 134(3)(h) in the prescribed format (AOC-2) is attached to this Report as Annexure-3.

26. STATUTORY AUDITORS

The Companys current Statutory Auditors M/s Varma & Varma, Chartered Accountants (Firm Reg.No.004532S) were appointed as Statutory Auditors of the Company, to hold office for a period of five consecutive years from the conclusion of the 30th Annual General Meeting for a tenure up to the conclusion of the 35th Annual General Meeting to be held for the Financial Year 2021-22.

Pursuant to the Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) dated April 27, 2021 issued by the Reserve Bank of India (RBI Guidelines), the Company may appoint the SCAs/SAs for a continuous period of three years, subject to satisfaction of eligibility norms and independence criteria prescribed.

Since M/s Varma & Varma, Chartered Accountants (Firm Regis. No: 004532S) have completed four years of continuous audit, as per the above RBI circular, they will be ineligible to continue as Statutory Auditors of the Company beyond September 30, 2021.

Further, the RBI Guidelines mandate that for Companies with asset size of Rs.15,000 crore and above as at the end of previous year, the statutory audit should be conducted under joint audit of a minimum of two audit firms. Accordingly, the Company needs to appoint minimum of two joint statutory auditors.

Accordingly, the Board of Directors, on the recommendation of the Audit Committee, has finalized and recommended to shareholders for approval, the name of M/s. B Srinivasa Rao & Co (Registration No.:

0 08763S) and M/s. B K Ramadhyani & Co. LLP, Chartered Accountants (Registration No.: 002878S/S200021) to act as joint Statutory Central Auditors of the Company for a period of three years from FY 2021-22 till FY 2023-24, subject to approval of the shareholders at the ensuing AGM. Appropriate resolutions in this regard are also being proposed at the ensuing AGM.

The auditors report for the FY 2020-21 annexed to the financial statement for the year under review does not contain any qualifications.

27. COST RECORDS AND COST AUDIT

Maintenance of cost records and requirement of cost audit as prescribed under the provisions of Section 148(1) of the Companies Act, 2013 are not applicable for the business activities carried out by the Company.

28. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Regulation 34(2) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis Report forms part of this Annual Report.

29. CORPORATE GOVERNANCE

As required under the Companies Act, 2013, Regulation 34 read with Schedule V of the SEBI (LODR) Regulations, 2015 and Housing Finance Companies - Corporate Governance (National Housing Bank) Directions, 2016, the Report of Directors on Corporate Governance for the year FY20-21 is placed in this Annual Report.

The said Report covers in detail the Corporate Governance Philosophy of the Company, Board Diversity, Directors appointment and remuneration, declaration by Independent Directors, Board evaluation, familiarisation programme, vigil mechanism etc. The Auditors Certificate on Corporate Governance is provided with this report as Annexure-4.

Business Responsibility Report:

The SEBI (LODR) Regulations, 2015, mandates inclusion of Business Responsibility Report (BRR) in the prescribed format, as a part of the Annual Report for top 1000 listed entities based on the market capitalisation. In compliance with the said Regulations, the BRR is provided as a part of this Report as Annexure 5.

Board Evaluation:

The Board of Directors has carried out an annual evaluation of its own performance, board committees, and individual directors pursuant to the provisions of the Act and SEBI Listing Regulations. In terms of Regulation 17(10) of the SEBI (LODR) Regulations, 2015 read with the SEBI Circular No. SEBI/HO/CFD/ CMD/ CIR/P/2017/004 dated January 05, 2017, your Company has put in place the Board and Directors Evaluation Policy laying down a framework for evaluation of the Board, its Committees and of the individual directors with defined attributes for evaluation. The Board has evaluated the performance of the independent directors including their criteria of independence as specified in the said regulations and their independence from the management. The directors who were subject to evaluation did not participate in their own evaluation. The results of the evaluation exercise were shared with the Board in subsequent Board Meeting(s).

30. SAVE GREEN EFFORTS & RESPONSIBILITY TOWARDS SOCIETY

In recognition and support to the green initiative taken by the Ministry of Corporate Affairs (MCA), Government of India, your Company is sending AGM notices, annual reports, correspondence with the stakeholders etc. to the respective e-mail IDs of stakeholders. To facilitate paperless banking, initiatives taken by your Company include ECS/NACH facility for repayment of loans, streamlining the systems and procedures for reporting by the branches and at the Registered Office through Integrated Business Suite (IBS), networking of branches with the Registered Office, harnessing solar energy for lighting and computer operations in 16 branches. The digital storage of data is being increasingly adopted and therefore, the usage of paper is curtailed to the minimum.

As in the previous years, we continue to publish only the statutory disclosures in the print version of the Annual Report. Electronic copies of the Annual Report, Annual General Meeting Notices, and such other notices are being sent to all members whose e-mail addresses are registered with the Company/ Depository participants. Further as per MCA circular dated 13/04/2020 notices for the General meeting may be given only through e-mails registered with the Company/DP/RTA. As per SEBI Circular SEBI/HO/CFD/CMD1/ CIR/P/2020/79 dated 12/05/2020, the requirements of Reg.36 (1)(b) and (c) and Reg.58 (1)(b) &(c) of the LODR are dispensed with for listed entities who conduct their AGMs during the calendar year 2020 (i.e. till 31/12/2020). Accordingly, the Company conducted the AGM through VC/OAVM facility. Further, MCA General Circular No. 02/2021 dated

January 13, 2021 and SEBI Circular SEBI/HO/CFD/CMD2/ CIR/P/2021/11 dated January 15,2021 has further extended relaxations to companies to conduct their AGMs through Video Conferencing (VC) or through other audio-visual means (OAVM) till 31/12/2021.

[Regulation 36 (1)(b) and (c) of the LODR prescribes that a listed entity shall send a hard copy of the statement containing salient features of all the documents, as prescribed in Section 136 of the Companies Act, 2013 to the shareholders who have not registered their email addresses and hard copies of full annual reports to those shareholders, who request for the same, respectively. Regulation 58 (1) (b) &(c) of the LODR extend similar requirements to entities which have listed their NCDs and CPs.

Through our CSR activities in the field of healthcare, education and empowerment of the downtrodden, we have strived to improve the lives of lakhs of our country men, women and children. We have sanctioned Rs.10.47 Crore for FY 2020-21 and spent Rs.11.08 Crore (H9.05 crore from FY 2020-21 and H2.03 Crore from Previous Years) towards various activities which have been detailed in point no.23 of this report.

31. OUTLOOK FOR 2021-22

The country is trying to tackle Covid-19 and the vaccination drive is expected to ease the situation soon.

With gradual lifting of lockdown measures and reopening of economy, the housing finance activity is on the trajectory of revival. Distinct signs of green shoots in housing finance sector was witnessed after the slump in April and May and improved credit offtake from HFCs is observed.

Various schemes launched and introduced by the Government are anticipated to act as catalysts for revival of the economy and for giving a thrust to the real estate market.

As done in the past, your company is committed to maintain high level of standards in all the business conducted in the normal course.

With change in pricing strategy, the ROI on loans was reduced several times during the fiscal and margin of difference between bank rates and our rates has reduced and is bound to help us increase volumes.

Our focus on lending to the salaried class will continue. Your Company will concentrate on lending for the Affordable and mid-segment Housing. Qualitative growth and thrust on collections will be an on-going exercise and will strengthen our resolve to maintain good Asset Quality.

The cost of funds will be monitored continuously to enhance profitability. Your Company will continue to focus on growth, profitability, asset quality and liquidity.

32. APPRECIATIONS

Your Directors would like to thank Canara Bank, the promoter, for their continuous support.

Your Directors would like to acknowledge the role of all its stakeholders viz., shareholders, debenture holders, CP holders, depositors, bankers, lenders, borrowers, merchant bankers, insurance partners, Statutory and Branch Auditors, Secretarial Auditors, panel advocates, panel valuers, agents and all others for their continuous support to your Company and the confidence and faith that they have always reposed.

Your Directors acknowledge and appreciate the guidance and support extended by all the Regulatory authorities including National Housing Bank (NHB), Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (IRDAI), Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), Registrar of Companies, Karnataka, Stock Exchanges, NSDL and CDSL.

Your Directors thank the Rating Agencies, viz. ICRA, CARE, India Ratings & Research Ltd., (FITCH), the Registrars & Share Transfer Agents, Debenture Trustees and Trustees of public deposits of your Company, Government(s), local/ statutory authorities, and all others for their wholehearted support during the year and look forward to their continued support in the years ahead.

The Directors mourn the loss of lives of two employees due to COVID-19 pandemic, are deeply grateful and have immense respect for all persons who risked their lives and safety to fight this pandemic.

Your Directors value the professionalism of all the employees who have proved themselves in a challenging environment and whose efforts have stood the Company in good stead and taken it to present level.

For and on behalf of the Board of Directors
Sd/-
Place: Bengaluru Venkata Prabhakar
Date : July 31, 2021 Chairperson