Central Depository Services (India) Ltd Directors Report.

Dear Shareholders,

Your Directors have pleasure in presenting the Twenty-second Annual Report on the business and operations of the Company [" Central Depository Services (India) Limited" or "CDSL" or "the Company" or "your company"], along with Audited Statement of Accounts of your company for the year ended March 31,2020 ("year under review").

Financial Highlights

(Rs. in Lakhs)

Particulars Consolidated Standalone
Year ended March 31, 2020 Year ended March 31,2019 Year ended March 31, 2020 Year ended March 31, 2019
Income from Operations 22,505.93 19,625.17 16,815.16 15,234.12
Other Income 5,919.06 4,919.38 4,323.78 3,612.88
Total Income 28,424.99 24,544.55 21,138.94 18,847.00
Expenditure 13,337.30 8,364.64 10,283.44 6,687.89
Profit before Depreciation and Taxation 15,087.69 16,179.91 10,855.50 12,159.11
Depreciation 1,173.24 991.53 868.69 825.51
Profit before contribution to IPF & Tax 13,914.45 15,188.38 9,986.81 11,333.60
Contribution to IPF 269.67 367.65 269.67 367.65
Profit Before Tax 13,644.78 14,820.73 9,717.14 10,965.95
Provision for Taxation 2,646.30 3,434.20 1,744.90 2,510.00
Provision for Deferred Tax for the year 326.66 (96.13) 240.43 18.22
Profit after Tax 10,671.82 11,482.66 7,731.81 8,437.73
Other Comprehensive Income (Net of Tax) 8.97 0.36 14.97 0.57
Total Comprehensive Income 10,680.79 11,483.02 7,746.78 8,438.30
Balance brought forward 55,269.38 48,330.45 42,708.42 38,679.60
Profit available for appropriation 65,950.17 59,813.47 50,455.20 47,117.90
Dividend 4,180.00 3,657.50 4,180.00 3,657.50
Dividend Distribution Tax (including surcharge and education cess) 859.35 751.98 859.35 751.98
Surplus carried to Balance Sheet 60,910.82 55,403.99 45,415.85 42,708.42

Financial Performance

1. Consolidated Results

On a consolidated basis, the operational income of the Company has increased from Rs. 19,625.17 Lakhs to Rs. 22,505.93 Lakhs, higher by 15 percent, resulting in an increase of total income from Rs. 24,544.55 Lakhs to Rs. 28,424.99 Lakhs.

Profit before Tax (PBT) for the year ended March 31,2020 is Rs. 13,644.78 Lakhs as against Rs. 14,820.73 Lakhs of previous year. Similarly, Profit after Tax (PAT) is at Rs. 10,671.82 Lakhs as against Rs. 11,482.86 Lakhs. Thus, Profit before Tax & Profit after Tax for the year ended March 31,2020 has decreased by 8% and 7% respectively over the previous year.

2. Standalone Results

On a standalone basis, the operational income of the Company has increased from Rs. 15,234.12 Lakhs to Rs. 16,815.16 Lakhs, higher by 10 percent, resulting in an increase of total income from Rs. 18,847.00 Lakhs to Rs. 21,138.94 Lakhs.

The income from Operations comprising of Transaction charges, Annual Issuers Charges, Account Maintenance Charges, Settlement Charges, Corporate Action Charges, etc. during the year 2019-20 increased from Rs. 15,234.12 Lakhs to Rs. 16,815.16 Lakhs, recording an increase of 10% over the year 2018-19. Pursuant to regulation 73 of the SEBI (Depositories & Participants) Regulations, 2018, transfer of Rs. 269.67 Lakhs is made to Investor Protection Fund (IPF). After contribution to Investor Protection Fund, Profit before Tax (PBT) for the year ended March 31,2020 is Rs. 9,717.14 Lakhs as against Rs. 10,965.95 Lakhs of previous year. Similarly, Profit after Tax (PAT) is at Rs. 7,731.81 Lakhs as against Rs. 8,437.73 Lakhs. Thus, Profit before Tax & Profit after Tax for the year ended March 31, 2020 has decreased by 11% and 8% respectively over the previous year.

Dividend

Considering the performance of the Company for the year under review, your Directors have recommended a final dividend of Rs. 4.5 per equity share of the face value of Rs. 10/- each, fully paid for the financial year ended March 31, 2020, subject to the approval of the shareholders.

The final dividend, if approved, would result in a cash outflow of Rs. 47,02,50,000 (Rupees Forty-Seven Crores Two Lakhs & Fifty Thousands only) with a dividend payout ratio at 60.82% of the standalone profits of the Company.

The Board of Directors of your Company has approved and adopted the dividend distribution policy of the Company and dividend declared/recommended during the year are in accordance with the said policy. The Policy can also be accessed on the Companys website at the www.cdslindia.com

Capital Structure and changes therein

Authorised Share Capital of your company is Rs. 1,50,00,00,000 divided into 15,00,00,000 equity shares of Rs. 10 each whereas the Issued and Paid Up Share Capital is Rs. 1,04,50,00,000 divided into 10,45,00,000 equity shares of 10 each. As of March 31, 2020, out of 10,45,00,000 shares, 10,44,99,690 shares are in demat mode and 310 shares are in physical mode.

BSE Limited, promoter of CDSL between November 28, 2019 and November 29, 2019 sold 41,80,000 equity shares of 10 each representing 4% of the total paid up equity share capital of the Company through a separate designated window of the National Stock Exchange of India Limited. Current holding of BSE Limited is 20% of the total paid up equity share capital of the Company.

The Capital Market Environment

The FY 2019-20 was one of the most challenging years for the Indian Economy, during FY 2019-20, BSE-30 Sensex opened at 38,858 on April 01,2019 and touched a high of 42,273 in January 2020 and thereafter closed at 29,468 on March 31,2020.

According to International Monetary Fund (IMF), Indias growth forecast for FY 2019-20 is slashed to 4.8 percent from the 6.1 percent which was projected earlier, citing a sharper-than- expected slowdown in local demand and stress in the NBFC Sector. Indias growth is projected to improve to 5.8 percent in 2020 and 6.5 percent in 2021(1.2 and 0.9 percentage point lower than in the October World Economic Outlook), supported by monetary and fiscal stimulus as well as subdued oil prices.

The World Bank (WB) has lowered Indias GDP growth forecast to five percent for the fiscal year 2020-21 from its earlier estimated six percent. WBs January 2020 Global Economic Prospects report said a "lingering" credit weakness emanating from non-banking financial companies (NBFCs) is one of the key reasons for the downgrade.

As per Prime Database, 39 public issues have raised Rs. 37,67,700 Lakhs (Rs. 37,677 crores) in FY 2019-20 as compared to 42 public issues mobilizing Rs. 36,40,500 Lakhs (Rs. 36,405 crores) in FY 2018-19.

Operational Performance

The capital market plays a significant role in building the economy as it channelizes domestic saving into sustainable financial assets. The Indian capital markets are robust and deep. The markets have witnessed diverse magnitude of volatility and growth levels based on global and domestic scenario and investor participation. The digitization of various processes has helped to have easier access to stock markets and depository services. In order to sustain the growth in its depository business, your company continues to focus on enhancement of operational efficiency, upgradation of technology, service quality and enhanced emphasis on investor education through seminars / workshops.

Beneficial Owner Accounts

During the year under review, 48.32 Lakh Beneficial Owner (BO) accounts were added, taking the total number of such accounts to 271.67 Lakhs with the net BO accounts at 211.81 Lakhs as on March 31,2020, making us the first depository to cross the 200 lakhs milestone. The comparative figures of gross and net BO accounts as on March 31,2019 and March 31,2020 are given in the following table:

BO Accounts Year ended March 31, 2020 Year ended March 31, 2019 %
Gross 2,71,67,320 2,23,35,222 22%
Net 2,11,81,937 1,73,86,276 22%

Securities admitted

Securities like equity shares, preference shares, mutual fund units, debt instruments, government securities, certificates of deposit, commercial papers and a host of other instruments are available for dematerialization by the investors. Details of the securities admitted with CDSL are given below:

Securities Year ended March 31, 2020 Year ended March 31, 2019 (%) change over the previous year
Equity Shares 14018 12049 16.34
Debt Instruments 8532 8207 3.96
Other Securities 25479 23880 6.69
Total 48029 44136 8.82

Position of Securities held in the System

The value and volume of securities held with CDSL in the year under review as compared to the previous year are indicated below:

Holding of Securities Year ended March 31, 2020 Year ended March 31, 2019 Increase over the previous year (%)
Value (in million ) 16,719,723 20,796,934 -19.60
Volume (in million) 455,726 362,030 25.88
(Number of Securities)

Depository Participants and Service Centers

As on March 31, 2020, 599 depository participants held valid registration certificates of Securities and Exchange Board of India (SEBI) as compared to 597 valid SEBI registrations as on March 31,2019. With a large DP network, investors spread across 28 States and 8 Union Territories can avail of CDSLs depository services. Further, investors have access to 20,352 DP service centers spread across India.

Investor Awareness / Education Seminars

CDSL regularly conducts Investor Awareness Programs in association with SEBI, Market Infrastructure Institutes (MIIs) and various market intermediaries. Capital Market Awareness for retail investors through such programs has been a major focus area. We believe investor education can become a significant key to achieving financial inclusion in the capital market. To this end, CDSL Investor Protection Fund (IPF) has conducted more than 470 Investor Awareness Programs (IAPs) in this year. Out of these more than 350 programs were conducted in tier 2 cities , tier 3 cities, tier 4 cities and towns. This initiative allowed investors across geographies, professions and age groups including students, corporate employees, government servants to come together and learn the basics of Capital Markets, advantages of holding securities in demat form, importance of Financial Planning, Investment avenues available, etc. CDSL IPF has also conducted IAPs in association with financial institutions, ICSI, Mutual Funds and regional Seminars & IAPs with SEBI in various cities. We have also conducted webinars to reach investors digitally. Although, these IAPs reach out to investors in major metros, we have focused to reach out to the investors in tier-2, tier-3 and tier-4 cities to inculcate the habit of investment in capital markets. CDSL IPF has tied up with various regional newspapers to attract large number of investors to attend these IAPs. During the IAPs, informative booklets in English, Hindi and other regional languages were distributed for the benefit of investors. They are available on the CDSL website at www.cdslindia.com

Investor Education and Protection Fund (IEPF) and Investor Awareness Activities by the Company

Contribution towards Investor Education and Protection Fund (IEPF)

Details of the transfer/s to the IEPF made during the year as mentioned below:

1. amount of unclaimed/unpaid dividend and the corresponding shares; Not Applicable
2. amount of matured deposits, if any; Not Applicable
3. application money received for allotment of any securities and due for refund along with interest accrued; Not Applicable
4. Year wise amount of unpaid/ unclaimed dividend lying in the unpaid account upto the Year and the corresponding shares, which are liable to be transferred to the IEPF and the due dates for such transfer; Please refer the table below

Amount of unpaid and unclaimed Dividend

Particulars Financial Year
2017-18 (Final Dividend) 2018-19 (Final Dividend)
Amount 594202 1047836
Shares 169772 261959
Due date for transfer of unpaid dividend amount June 25, 2025 July 7, 2026
Due date for transfer of corresponding shares July 25, 2025 August 6, 2026

Credit Rating of Securities

Nil

New Initiatives

International Financial Service Centre, GIFT City

CDSL is the first and only depository in India which has been approved by SEBI to launch its IFSC (International Financial Service Centre) branch located in IFSC, GIFT City (Gujarat International Finance Tech-City), Gandhinagar, Gujarat.

CDSLs IFSC branch intends to contribute to the growth of the financial markets with the introduction of delivery-based trading to the existing suite of the products traded on the exchanges at IFSC.

Now IFSC based Exchanges can have investment products such as Depository Receipts, Bonds etc. which will attract foreign investors participation and create new business opportunities for existing capital market entities in GIFT IFSC.

Application Program Interface (API)

CDSL has developed APIs for its Depository Participants (DPs), which will help DPs to automate their processes and back-office operations. APIs have been developed for Account Opening, Common Transaction Upload (Which includes Off-market, On- Market, Early Pay-in & Inter Depository Transactions), Pledge/ Unpledge/Confiscation transactions and your company has advised its DPs to get in touch with their RMs to get to know the entire suite of transactions on which APIs are made available. This will lead to ease in operations of all the CDSL DPs and the market participants.

ChatBot

CDSL has launched a Chatbot facility on website www.cdslindia.com which aims to assist demat account holders in a better and faster way. Demat account holders can enter questions or keywords and using artificial intelligence, Chatbot will answer the same.

Currently, Chatbot facility enables CDSL demat account holders to resolve their queries related to Demat account opening, Dematerialisation, Rematerialisation, Settlement and other queries related to demat account and internet-based facility easi/ easiest. Demat account holders will also have the facility of selecting their query from the multiple questions made available on the Chatbot. Over 24,000 queries from customers have been answered successfully by the chatbot.

Consolidated Account Statement (CAS)

Your company provides to a demat account holder holding mutual fund units in Statement of Account (SOA) form the CAS with information about transactions and securities held across multiple demat accounts with various Depository Participants - across depositories along with mutual fund units held in SOA form. The CAS also provides additional information with respect to mutual fund investments like total purchase value / cost of investment in each scheme of mutual fund in monthly transaction CAS and information like the amount of actual commission paid by AMCs/Mutual Funds (MFs) to distributors (in absolute terms) during the half-year period against the concerned investors total investments in each MF scheme, the schemes average Total Expense Ratio (in percentage terms) for the half-year period, etc. CDSL also provides a facility to its demat account holders to access its website and download CAS after providing certain security information. The demat account holders can also update/ modify the email ID and opt for receipt of electronic CAS using CDSLs website.

System Enhancements

CDSL believes in the power of digitization and continuously tries to enhance its systems to increase the efficacy of processes. Some of the important system enhancements are enumerated below -

a. To strengthen the integrity of system in processing of dematerialization requests in respect of remaining physical shares, systems were enhanced to enable RTAs to upload the details of their members holding shares in physical form of listed companies, so that dematerialization requests can be validated against the said details.

b. Standardization of reason codes for off-market including inter-depository transactions.

c. Release of new facility for granting accreditation to the investor as an Accredited Investor for the limited purpose of Innovators Growth Platform ("IGP").

d. Enabling on-market Inter-depository transfers of Government securities including Central Government Securities, State Development Loans, Treasury Bills and Sovereign Gold Bonds issued by RBI on behalf of Central and State Governments.

e. Introduction of PMS Pool Account and facilitating PMS transactions through PMS Pool Account for Portfolio Management Services.

f. System developed to enable CMs to move (1) unpaid securities to designated Client Unpaid Securities Account (CUSA) and (2) client securities provided as collateral to its TM/CM by transferring it to designated CM/TMs Client Collateral Account.

g. System enhanced to link Unique Client Code with clients demat account provided by Stock Exchanges.

Transaction Cum Holding Statements

As of March 31, 2020, 218 Depository Participants (DPs) have availed of the service of dispatch of transaction cum holding statements (DOTS and e-DOTS). In 2019-20, CDSL has processed 23.52 Lakh statements.

Corporate Bond database

The Corporate Bond database maintained by your company as mandated by SEBI vide its Circular No. CIR/IMD/DF/17/2013 dated October 22, 2013, contains information of over 28,311 bonds issued in demat form by over 3,364 Issuers. The database provides comprehensive information on the corporate debt instruments including details of Issuers, Instruments issued along with the listing status, Redemption details, Names of Debenture Trustees and Credit Ratings along with the names of the Rating Agencies.

The credit rating agencies CRISIL, CARE, ICRA and India Rating are accessing your companys corporate bond database through the secure login and are verifying the credit rating displayed and also updating subsequent rating migrations. The comprehensive and updated information disseminated by your company at a single place provides valuable information to the investors and assists them in taking a more informed investment decision.

Trade Repository of Corporate Bonds

Your company has data of about 11,753 ISINs for primary market issuances and about 11,252 ISINs pertaining to secondary market being traded in the stock exchanges.

Technology Initiatives

As a part of continual upgradation process, CDSL continuously works on upgrading the technology, features and functionalities of the Depository applications. Further considering growth over the next 3 years, CDSL has upgraded its server infrastructure with latest virtualization technology at its Main and DR site. CDSL has always benchmarked its practices against ISO standards and accordingly has undergone periodic audits for ISO 27001:2013 Information Security Management System (ISMS) and ISO 22301:2012 (Business Continuity Management System) BCMS conducted by M/s DNV and has been recommended for continuity of these certificates. CDSLs e-Voting services has also undergone periodic audit for ISO 9001:2015 certification and has been recommended for continuity of the certificate. CDSL has also implemented the appropriate cyber security framework as prescribed by SEBI from time to time to mitigate the cyber security risks.

Major IT Developments

• Server upgradation with latest virtualization technology with new hardware and enhanced capacity

• Core depository application is being migrated to latest .net core technology

• Deception Technology to protect the organization from attackers by means of network decoys

• Detecting insider threats, lateral movement and ransomware attacks

• ISO27001/22301- Continuation of certification Awards & Recognition

1. IDC Insight Award for Excellence in Operation, awarded by IDC

2. IT Architect for Digital Workspace, awarded by VM Ware Forum 2019

3. BFSI IT Leadership Award, awarded by Elets Technomedia

4. Data Centre Award for Innovation and Infrastructure management, awarded by UBS Forum

5. BIG 40 Awards - World AI Show BFSI & NBFC for Technology Innovation, awarded by Trescon

6. CSO 100 Award for IT Security, awarded by IDG (International Data Group)

7. Technology Senate Award for Intelligent Enterprise, awarded by the Indian Express Group

8. BFSI Gamechanger Award under Exemplary leadership innovation, awarded by Elets Technomedia

Steps taken pursuant to COVID 19 Pandemic

On March 20, 2020, the Ministry of Corporate Affairs issued an Advisory to all companies /LLPs to implement the "Work from home" policy in their headquarters and field offices to the maximum extent possible, including by conduct of meetings through video conference or other electronic/ telephonic/ computerized means. It was further advised that even with the essential staff on duty, staggered timings may be followed so as to minimize physical interaction. Apart from that, the other preventive measures, including Dos & Donts advised by public health authorities may be strictly followed.

Keeping in view the safety of the staff members of CDSL, work from home policy was implemented with effect from March 23, 2020 and staff members were provided with secure means to connect to CDSL applications to carry out their daily operations and to ensure that Depositorys and its subsidiaries operations are carried out smoothly. The administration department is also ensuring that during this period housekeeping and deep cleaning of the premises are being regularly carried out, so as to ensure a clean and safe office space is available to the employees once lockdown restrictions are removed.

Continuing Professional Education (CPE) Programs - Depository Operations Certification Examination (DOCE)

National Institute of Securities Markets (NISM) has been offering Continuing Professional Education (CPE) Programs for Associated Persons in the Securities Market Intermediaries.

CDSL, as a NISM Accredited CPE Provider for conducting CPE Programs, has successfully carried out 22 programs for 439 participants during the year.

e-Voting

As on March 31, 2020, 5,630 companies have signed agreements with CDSL to conduct e-Voting. So far, the e-Voting system recorded 25,139 instances of voting carried out by 4,943 companies.

e-Notices

In the light of Green Initiative in the Corporate Governance by Ministry of Corporate Affairs, CDSL has started offering the services to companies for sending documents to its shareholders electronically. As on March 31,2020, a total of 350 companies have signed for availing these services.

Corporate Social Responsibility (CSR)

The Board has framed a CSR Policy in compliance with the requirements of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. In accordance with its CSR philosophy and the specified activities under the Act, the CSR activities of the Company has thrust areas including eradicating extreme hunger and poverty; promotion of education; promoting gender equality and empowering women; reducing child mortality and improving maternal health; combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases; ensuring environmental sustainability; employment enhancing vocational skills; social business projects; contribution to the Prime Ministers National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women. Your company has constituted a robust and transparent governance structure to oversee the implementation of its CSR Policy.

The Corporate Social Responsibility Policy can be accessed on website of the Company www.cdslindia.com.

The Company has been actively associated with various NGOs in providing various facilities involving capital expenditure for a sustainable impact of CSR activities. During the FY 2019-20, your company has sponsored various projects and the report on CSR activities pursuant to section 135 and Schedule VII of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014 is given in Annexure A.

Risk Management Policy

The risk management policy identifying the various elements of risk is explained in detail in the Management Discussion and Analysis Report attached as Annexure G. The Risk Management Policy of your company can be accessed on the website of the Company www.cdslindia.com.

Change in the Nature of Business

The Company has not undergone any changes in the nature of the business during the Financial Year 2019-2020.

Material changes affecting the financial position which have occurred between the end of the financial year and the date of the report

No material changes affecting the financial position have occurred between the end of the financial year and the date of the report.

Prevention of Money Laundering Act

The Prevention of Money Laundering Act, 2002 (PMLA) has been brought into force with effect from July 1, 2005. Subsequent amendments were made to the PMLA Act 2002 and Prevention of Money-laundering (Maintenance of Records) Rules 2005 vide SEBI circular CIR/MIRSD/1/2014 dated March 12, 2014. CDSL , its depository participants and CVL fall under the category of intermediaries under section 12 of the SEBI Act and hence, PMLA and the policy guidelines issued by the regulators to combat money laundering are applicable to depository operations.

As required under the guidelines, CDSL has designated a Principal Officer, Alternate Officer and Designated Director to ensure compliance with these guidelines. CDSL has prepared policy guidelines for implementation of PMLA and the same is reviewed periodically.

CDSL conducted training programs across the country and updates depository participants and their internal auditors on compliance with PMLA provisions and filing of Suspicious Transaction Reports

Details of Subsidiary Companies

Your company has following subsidiary companies as on March 31,2020

1. CDSL Ventures Limited (CIN U93090MH2006PLC164885)

2. CDSL Insurance Repository Limited (CIN U74120MH2011PLC219665)

3. CDSL Commodity Repository Limited (CIN U74999MH2017PLC292113)

• CDSL Ventures Limited (CVL)

Your companys wholly owned subsidiary, CDSL Ventures Limiteds main business continues to be KYC business for the capital market intermediaries. CVL continues to be the largest KYC Registration Agency (KRA) controlling about 60% of the market share in the KYC of capital market. In addition to its core business of being a KRA for capital market, CVL has also initiated work on the following business lines, which are in various stages of implementation / completion.

1. C-KYC Processing

2. RTA Activity

3. GST Suvidha Provider Services

4. Claim registry for life insurance companies that offer Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

5. Project related to refund to investors pursuant to Justice (Retd.) R M Lodha Committee

6. eSign (electronic signature based on aadhaar number)

7. eKYC using Aadhaar

• CDSL Insurance Repository Limited (CIRL)

Your Company had under the "Guidelines on Insurance repositories and electronic issuance of insurance policies" issued by IRDAI, floated a separate subsidiary viz:- CDSL Insurance Repository Ltd. ("CIRL"), in the year 2011 to provide policyholders a facility to keep insurance policies in electronic form and to undertake changes, modifications and revisions in the insurance policy with speed and accuracy in order to bring about efficiency, transparency and cost reduction in the issuance and maintenance of insurance policies. Leading public sector and private sector insurance companies have contributed to the equity capital of CIRL. At the time of launch in August 2013 the insurance repository services was restricted only to Life insurance policies. However, later on IRDAI has extended the scope of services to Health insurance policies and Motor insurance policies and thereafter to all other types of general insurance. Further, initially the insurance was applicable only to individuals but had subsequently been extended to corporates.

As on March 31, 2020, the repository has opened nearly 5.50 lakh e-Insurance Accounts (e-IA). CIRL holds over 3.0 lakh insurance policies in electronic form -2.96 lakhs life insurance, 10,366 health insurance and 261 motor insurance policies. CIRL has tied up with twenty-two life insurance companies, five health insurance companies and fifteen general insurance companies that is a total of forty-two insurance companies, for holding policies in electronic form.

• CDSL Commodity Repository Limited (CCRL)

Your company has floated a subsidiary in the name and style of CDSL Commodity Repository Limited (CCRL) to establish and run a Commodity Repository on the lines of a Securities Depository. Warehousing Development and Regulatory Authority (WRDA) is the regulator for CCRL. CCRL received the certificate of commencement of business / registration from WDRA on September 26, 2017 and commenced operations from September 30, 2017. Multi Commodity Exchange of India Ltd. (MCX) and BSE Investments Ltd. have each taken up 24% of the stake in CCRL in May, 2018 and August, 2018 respectively.

CCRL today exclusively serves three derivative commodity exchanges for their derivative trades in Agri-commodities. These are Multi commodity Exchange, BSE Limited and Indian Commodity Exchange Limited. As on March 31, 2020, CCRL has opened close to 1500 client accounts and has issued about 15,000 Electronic Negotiable Warehouse Receipts.

During the year, the Board of Directors of the Company reviewed the affairs of its subsidiaries. In accordance with section 129 (3) of the Companies Act, 2013, your company has prepared the consolidated financial statements of the Company and of all its subsidiaries companies in the same form and manner as that of its own and in accordance with applicable accounting standards, which forms part of this Annual Report. Further a separate statement containing the salient features of the financial statement of our subsidiaries in the prescribed form AOC-1 is appended as Annexure B to the Boards report. The statement also provides details of the performance and financial position of each of the subsidiary.

In accordance with section 136 of the Companies Act, 2013, the audited financial statements including the consolidated financial statements and all other related documents and information of the Company and separate audited accounts in respect of each of the subsidiary are available on our website www.cdslindia.com. These documents will be available for inspection till the date of AGM during business hours at the registered office of the Company.

Your company has not accepted any deposits within the meaning of Section 73 & 76 of the Companies Act, 2013 and the Rules made thereunder. There are no deposits remaining unpaid or unclaimed as at the end of the year and there has been no default in repayment of deposits or payment of interest thereon during the year.

Details of Deposits not in compliance with the requirements of the Act

Since the Company has not accepted any deposits during the Financial Year ended on March 31,2020, there has been no noncompliance with the requirements of the Companies Act, 2013.

Directors and KMPs

The SEBI (Depositories and Participants) Regulations, 2018 were notified on October 3, 2018. As per regulation 25 of SEBI (Depositories and Participants) Regulations, 2018, the appointment and re-appointment of all Shareholder Directors on the board of depository shall be with the prior approval of SEBI. The Public Interest Directors on the board shall be nominated by SEBI. As per Regulation 24(9) of the SEBI (Depositories and Participants) Regulations, 2018, no depository participant or their associates and agents, irrespective of the depository of which they are members shall be on the governing board of the depository.

Category Name
Public Interest Director Shri Balkrishna V Chaubal - Chairperson
Public Interest Director Prof (Dr.) Bimalkumar N Patel
Public Interest Director Smt. Preeti Saran
Public Interest Director Shri Sidhartha Pradhan
Public Interest Director Prof. Umesh Bellur
Shareholder Director Shri Masil Jeya Mohan P.
Shareholder Director Shri Nayan Mehta
Managing Director & CEO Shri Nehal Vora

Number of meetings of the Board of Directors:

Ten meetings of the Board of Directors were held during the year under review. For details of meetings of the Board, please refer to the Corporate Governance Report, which is enclosed as Annexure F.

Change in composition during the year:

The changes taken place in the constitution of the Board of Directors and KMPs of CDSL during the FY 2019-20 are as follows:

Name of the Director Date of Appointment Date of Cessation Reason for Cessation
Smt. Usha Narayanan, Public Interest Director - July 1,2019 Deceased
Shri Aravamudan Krishnakumar, Public Interest Director July 29, 2019 Expiry of term
Shri Rajender Mohan Malla, Public Interest Director July 29, 2019 Expiry of term
Shri Bontha Prasada Rao, Public Interest Director - October 20, 2019 Expiry of term
Shri Nehal Vora, Shareholder Director September 23, 2019 SEBI approved his candidature as MD & CEO of CDSL.
Shri Balkrishna V Chaubal, Public Interest Director July 30, 2019
Shri Nehal Vora, MD & CEO September 24, 2019 - -
Prof (Dr.) Bimalkumar N Patel, Public Interest Director September 27, 2019 -
Smt. Preeti Saran, Public Interest Director November 29, 2019 - -
Shri Sidhartha Pradhan, Public Interest Director November 29, 2019 - -
Prof. Umesh Bellur, Public Interest Director November 30, 2019 - -
Shri Nayan Mehta, Shareholder Director November 28, 2019 - -
Shri Masil Jeya Mohan P., Shareholder Director October 10, 2019 - -

Shri Balkrishna V. Chaubal was appointed as Public Interest Director of the Company w.e.f. July 30, 2019 vide SEBI letter dated July 5, 2019 and was appointed as Chairperson of the Company w.e.f. December 24, 2019 vide SEBI letter dated December 24, 2019.

Prof (Dr.) Bimalkumar N Patel was appointed as Public Interest Director of the Company w.e.f. September 27, 2019 vide SEBI letter dated September 27, 2019.

Shri Nehal Vora resigned as Shareholder Director (BSE Ltd.) w.e.f. September 23, 2019 due to SEBI approving candidature of MD & CEO of CDSL vide SEBI letter dated September 18, 2019. He was appointed as Managing Director and Chief Executive Officer of CDSL w.e.f. September 24, 2019.

Shri Masil Jeya Mohan P., Additional Executive Director Investment, Operations, Life Insurance Corporation of India was appointed as Shareholder Director w.e.f. October 10, 2019 vide SEBI letter dated October 9, 2019.

Smt. Preeti Saran was appointed as Public Interest Director of the Company w.e.f. November 29, 2019 vide SEBI letter dated November 29, 2019.

Shri Sidhartha Pradhan was appointed as Public Interest Director of the Company w.e.f. November 29, 2019 vide SEBI letter dated November 29, 2019.

Prof. Umesh Bellur was appointed as Public Interest Director of the Company w.e.f. November 30, 2019 vide SEBI letter dated November 29, 2019.

Shri Nayan Mehta, Shareholder Director was originally appointed on November 29, 2016. Shri Nayan Mehta was liable to retire by rotation at the 21st AGM of the Company held on September 17, 2019. Accordingly, the members approved his appointment. Further, SEBI had also approved appointment of Shri Nayan Mehta with effect from December 31,2019.

Shri Joydeep Dutta, Executive Director and Chief Technology Officer of the Company retired by superannuation on December 31,2019.

Shri Bharat Sheth, Chief Financial Officer of the Company retired by superannuation on December 31,2019. liable to retire by rotation and being eligible offered himself to be reappointed was considered for being re-appointed as Directors at the ensuing Annual General Meeting. A brief resume of Shri Nayan Mehta is enclosed as an Annexure C.

During the year, Shri Lalit Sharma, VP-Legal and Company Secretary and Compliance Officer resigned w.e.f. September 30, 2019 and Smt. Amita Paunikar was appointed as VP-Legal and Company Secretary and Compliance Officer w.e.f. November 18, 2019.

Nomination & Remuneration Policy for Directors

The Nomination & Remuneration Policy was approved by SEBI on December 6, 2018 and the same can be accessed on website of the Company www.cdslindia.com.

In compliance with the requirements set out under Section 178 of the Companies Act, 2013 and Regulation 19(4) read with Part D of Schedule II of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI (Depositories and Participants) Regulations, 2018, the Nomination and Remuneration Policy has been framed in order to set our principles, parameters and governance framework for the appointment and remuneration of Shareholder Directors, Public Interest Directors, Managing Director & CEO and Key Managerial Personnel of the Company. The Policy encompasses the various factors laid down under Section 178(4) of the Companies Act, 2013 including the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully; relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and remuneration to Directors and Key Managerial Personnel involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals. The Policy also includes the criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178.

The Board has placed on record its appreciation for the valuable services rendered to CDSL by the aforesaid Directors who have deceased during their term / completed their term and the Key Managerial Personnel who have retired on account of superannuation.

The Company has received necessary declaration from the Independent Directors as required under sub-section (6) of Section 149 of the Companies Act, 2013 and under clause (b) of sub-regulation (1) of regulation 16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

As per the provisions of Section 152(6) (d) of the Companies Act, 2013, Shri Nayan Mehta, the Shareholder Director being

Statutory Auditors & Audit Report

M/s. S. R. Batliboi & Co. LLP (Firm Registration No. 301003E/ E300005), Chartered Accountants, Mumbai were appointed as Statutory Auditors of the Company in the twentieth Annual General Meeting held on August 20, 2018 to hold office from the conclusion of the 20th Annual General Meeting till the conclusion of the 25th Annual General Meeting. Accordingly, M/s. S. R. Batliboi & Co. LLP are the Statutory Auditors of the Company for the financial year 2019-20 and shall continue as Statutory Auditors of the Company till the conclusion of the 25th Annual General Meeting.

There are no qualifications, reservations or adverse remarks or disclaimer made by M/s. S. R. Batliboi & Co. LLP, Chartered Accountants, Mumbai, Statutory Auditors in their report. There are no frauds reported by auditors under sub-section (12) of section 143 of the Companies Act, 2013.

Internal Auditors

In terms of the provisions of Section 138 of the Companies Act, 2013 read with Rule 13 of the Companies (Accounts) Rules, 2014, the Company had appointed M/s. Ray & Ray, (Firm Registration No. 301072E), Chartered Accountants as Internal Auditors & Concurrent Auditors of the Company for the FY 2019-20.

There are no qualifications, reservations or adverse remarks or disclaimer made by the Internal Auditors and Concurrent Auditors in their report.

Secretarial Auditors and Secretarial Audit Report

M/s. Ragini Choksi & Company (C.P.No.1436/Membership No. 2390), Practicing Company Secretaries, Mumbai was appointed as Secretarial Auditor of the Company for the FY 2019-20. In accordance with Section 204(1) of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a copy of the secretarial audit report issued in form MR-3 by M/s. Ragini Choksi & Company, Secretarial Auditors is enclosed as an Annexure D to this report. The secretarial audit report of CDSL Ventures Limited, a material unlisted subsidiary of the Company issued in form MR-3 by M/s. Ragini Choksi & Company, Secretarial Auditors also forms part of Annexure D to this report.

There are no qualifications, reservations or adverse remarks or disclaimer made by M/s. Ragini Choksi & Company, Practicing Company Secretaries, Mumbai, in their report.

Related party transactions

All related party transactions entered during the financial year 2019-20 were in the ordinary course of business and on an arms length basis.

Disclosure of related party transactions pursuant to section 134 (3) (h) read with Rule 8(2) of the Companies (Accounts) Rules, 2014 in form AOC 2 are attached as Annexure E.

The Disclosures of Related Party Disclosures for annual results pursuant to clause 2 of para A of Schedule V of the SEBI (LODR) Regulations, 2015 are stated below:

1 In the Accounts of Central Depository Services (India) Limited (CDSL) (Holding Company)

Loans and advances in the nature of loans to subsidiaries by name and amount. Loans and advances in the nature of loans to associates by name and amount. Loans and advances in the nature of loans to firms/companies in which directors are interested by name and amount.
Subsidiary Name Amount (Rs. in Lakhs) Associate Name Amount (Rs. in Lakhs) Companies where directors are interested Amount (Rs. in Lakhs)
CDSL Ventures Limited NIL Not applicable NIL Not applicable NIL
CDSL Insurance Repository Limited NIL
CDSL Commodity Repository Limited NIL

2 In the Accounts of Central Depository Services (India) Limited (CDSL) (Subsidiary Company)

Loans and advances in the nature of loans to subsidiaries by name and amount. Loans and advances in the nature of loans to associates by name and amount. Loans and advances in the nature of loans to firms/companies in which directors are interested by name and amount.
Subsidiary Name Amount Associate Name Amount Companies where directors are interested Amount
(Rs. in Lakhs) (Rs. in Lakhs) (Rs. in Lakhs)
Not applicable NIL Not applicable NIL Not applicable NIL

3 In the Accounts of Central Depository Services (India) Limited (CDSL) (Holding Company)

Investments by the loan in the shares of parent company and subsidiary company, when the company has made a loan or advance in the nature of loan. NIL

The Disclosures of transactions of the Company with any person or entity belonging to the promoter/promoter group which hold(s) 10% or more shareholding in the listed entity, in the format prescribed in the relevant accounting standards for annual results pursuant to clause 2A of para A of Schedule V of the SEBI (LODR) Regulations, 2015 are stated below:

(Rs. in Lakhs)

Particulars As on March 31, 2020 As on March 31, 2019
BSE Limited
Rendering of services 172.61 107.12
Receiving of services 62.03 68.89
Dividend Paid 1,003.20 877.80
Loans and advances - opening deposit received - 72.77
Balances outstanding at the end of the year
Receivable/ (Payable) 53.39 12.31

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Considering the nature of operations of your company, the provisions of Section 134(3) (m) of the Companies Act, 2013 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, relating to information to be furnished on conservation of energy and technology absorption are not applicable though the Company uses all the possible ways in conserving energy. The Company has, however, used information technology extensively in its operations.

Foreign Exchange Earnings and Outgo

Details of foreign exchange earnings and outgo during the year under review are as under:

(Rs. in Lakhs)

Particulars Year ended March 31, 2020 Year ended March 31, 2019
Earnings Nil Nil
Travel expenses 19.98 63.08
Others 10.44 12.15
Total 30.42 75.23

Cost Records

The Company is not required to maintain cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 and accordingly such accounts and records are neither made nor maintained.

Directors Responsibility Statement

Pursuant to Section 134(3)(c) and 134(5) of the Companies Act, 2013, the Board of Directors reports that:

i) in preparation of the annual accounts, the applicable accounting standards have been followed and proper explanations relating to material departure, if any, have been provided;

ii) accounting policies have been selected and applied them consistently and the judgements and estimates made 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;

iii) proper and sufficient care has been taken 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 frauds and other irregularities;

iv) the annual accounts have been prepared on a going- concern basis;

v) internal financial controls to be followed by the Company are laid down and that such internal financial controls are adequate and were operating effectively;

vi) proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Corporate Governance Report

The Corporate Governance Report for the year ended March 31, 2020 is enclosed as Annexure F.

Management Discussion and Analysis Report

The Management Discussion and Analysis Report for the year ended March 31,2020 is enclosed as Annexure G.

Board Evaluation

The Board of Directors of the Company carried out annual evaluation of its own performance, Committees of the Board and individual Directors pursuant to section 178(2) of the Companies Act, 2013 as well as regulation 17, 19 and Schedule II of the SEBI (LODR) Regulations, 2015 and based on the SEBI circular dated January 5, 2017 which contained a guidance note on the process of board evaluation ("SEBI Guidance Note").

The Company has implemented a policy of evaluating performance of the Board of Directors and of its Committees and individual Directors on the basis of a structured questionnaire, drafted in accordance of the guidelines issuedby SEBI, which comprises evaluation criteria taking into consideration various performance related aspects. The detailed criteria for evaluation for each of the above has been mention in the Corporate Governance report enclosed as Annexure F.

Disclosures under SEBI (Depository and Participants) Regulations, 2018

The disclosures required to be made under the provisions of the SEBI (Depository and Participants) Regulations, 2018 are part of the Corporate Governance Report enclosed as Annexure F.

Report by Internal Complaints Committee

Your company has constituted Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

During the year the Committee did not receive any complaints in this regard.

Particulars of Employees

Information as required under Sec. 197(12) read with Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed to this report as Annexure H.

Human Resource Development

The Company recognizes its Human assets as a critical resource essential for the growth of the Company. It, therefore, accords high importance to human resource development and consciously endeavors to enhance the quality and competence of its employees across cadres. It conducts induction programme for new entrants. Nominating employees for training at reputed institutions and for attending seminars in India and abroad in capital market related areas, particularly relating to depositories, has always been a part of human resource development programme of the Company. Industrial relations during the year continued to be cordial.

Business Responsibility Report

As stipulated under Regulation 34 of the SEBI (LODR) Regulations, 2015, the Business Responsibility Report describing the initiatives taken by the Company from an environmental, social and governance perspective is attached as a part of this Annual Report.

Particulars of Loans, Guarantees or Investments under section 186

Details of Loans, Guarantees or Investments under section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and companys operations in future

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and companys operations in future.

Annual Return

In accordance with provisions of section 134(3)(a) of the Companies Act, 2013, the Annual Return referred to in subsection (3) of section 92 will be placed on the website of the Company www.cdslindia.com.

Extract of Annual Return

Pursuant to section 92 (3) of the Companies Act, 2013 the extract of the annual return to be in Form MGT-9 is enclosed to this report as Annexure I.

Corporate Policies

The details of the policies approved and adopted by the Board are mentioned in the Corporate Governance Report enclosed as Annexure F.

Adequacy of internal financial controls

The details in respect of adequacy of internal financial controls with reference to the Financial Statements forms part of the Management Discussion and Analysis Report enclosed as Annexure G.

Audit Committee Recommendations

During the year, all recommendations of Audit Committee were approved by the Board of Directors.

Secretarial Standards

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India

Acknowledgement

Your Directors place on record their sincere gratitude for the support, guidance and cooperation the company received from Ministry of Finance, Ministry of Corporate Affairs, Securities and Exchanges Board of India (SEBI), Reserve Bank of India (RBI), Insurance Regulatory Development Authority (IRDA), Warehousing Development Regulatory Authority (WDRA), UIDAI and other regulatory agencies. The Directors also acknowledge with thanks the continued support of the BSE Ltd, the Promoter, all other shareholders, Beneficial Owners, Depository Participants, Market Infrastructure Institutions like the Stock Exchanges, Clearing Corporations, Depository, Commodities Exchanges, Issuers, and Registrar and Transfer Agents. The Directors also express their appreciation for the unflinching dedication of the employees whose performance, professionalism and commitment for rendering high quality services to the clientele of the Company has been commendable.