cholamandalam investment & finance company ltd share price Directors report


Your directors have pleasure in presenting the forty fifth annual report together with the audited accounts of the company for the year ended 31 March, 2023.

FINANCIAL RESULTS

Particulars 2022-23 2021-22
Gross Income: 12,977.98 10,138.77
Profit Before Tax (PBT) 3,599.69 2,890.94
Profit After Tax (PAT) 2,666.20 2,146.71
Total Comprehensive income 2,700.01 2,267.95
Appropriation:
Transfer to statutory and other reserves 1,540.00 1,430.00
Dividend – Equity 164.36 164.14

SHARE CAPITAL

During the year, there was an increase in paid up capital by Rs. 0.20 crores, consequent to allotment of shares upon exercise of stock options by employees under the companys employee stock option scheme.

OPERATIONS

Indian economy has moved on after its encounter with the COVID-19 pandemic, staging a full recovery in FY 22 ahead of many developing nations and positioned itself to ascend to pre-pandemic growth path in FY 23. Yet in the current year, India also faced the challenge of reigning in inflation that the European strife accentuated. RBI raised policy rates cumulatively by 250 bps during the financial year. Despite high inflation and high interest rates, release of pent-up demand was reflected in the housing market as demand for housing loans picked up. Sales of commercial vehicles have come close to pre-pandemic levels of over a million units in FY 23 due to improved fleet utilizations and passenger vehicles registering highest ever sales with nearly 3.9 million units sold in FY 23.

Your company has achieved its highest ever disbursals, collections and profitability in FY 23. The disbursements for FY 23 grew by 87% to Rs. 66,532 crores. Disbursements in Vehicle

Finance (VF) business grew by 56% in FY 23 to Rs. 39,699 crores. Disbursements in Loan against property (LAP) business grew by 68% to Rs. 9,299 crores in FY 23. Disbursements in Home Loans (HL) stood at Rs. 3,830 crores in FY 23, which is a growth of 102% Year on Year (YoY). Disbursements in Small and Medium Enterprises (SME) stood at Rs. 6,388 crores in FY 23 which is a growth of 232% YoY. Disbursements in Consumer and Small Enterprise Loans (CSEL) and Secured Business & Personal Loans (SBPL) launched last year stood at Rs. 6,865 crores and at Rs. 451 crores respectively in FY 23.

The business AUM of the company stood at Rs. 1,06,498 crores which is a growth of 38% YOY.

The profit before tax of the company for the year FY 23 is Rs. 3,599.69 crores as against Rs. 2,890.94 crores for FY 22, which is a growth of 24% YoY.

The company continued to hold a strong liquidity position with Rs. 5,042 crores as cash balance as at end of 31 March, 2023 (including Rs. 1,542 crore in Government securities and Rs. 1,536 crore invested in T-bill shown under investments), with a total liquidity position of Rs. 9,119 crores (including undrawn sanctioned lines). The Asset Liability Management (ALM) is comfortable with no negative cumulative mismatches across all time buckets.

OUTLOOK

GDP for the country is projected to grow at 6.5% during FY 24 supported by solid domestic demand and pick up in capital investment. The company will look to scale up through new product segments (CSEL, SME and SBPL) as well as improving efficiencies in existing segments (VF, LAP and HL). The companys strong sales and collections set-up combined with digital initiatives and branch reach will also support in improving efficiencies.

DIVIDEND

Dividend distribution policy

The company has formulated a dividend distribution policy in compliance with regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), a copy of which is available on the website of the company. (weblink: https://cholamandalam.com/files/dividend_distribution_policy)

Payment of dividend

The company paid an interim dividend on the equity shares at the rate of 65% (Rs. 1.30 per equity share) as approved by the Board on 31 January, 2023 for the year ended 31 March, 2023.

Your directors are pleased to recommend a final dividend of 35% ( Rs. 0.70 per equity share) on the equity shares of the company. With this, the total dividend will be 100% (Rs. 2.00 per equity share) for the year ended 31 March, 2023.

TRANSFER TO RESERVES

The company transferred a sum of Rs. 540 crores to statutory reserve as required under the Reserve Bank of India Act, 1934 and

Rs. 1,000 crores to general reserves.

FIXED DEPOSITS

The company is a non deposit taking NBFC. The company does not hold or accept deposits as of the date of balance sheet.

RBI LICENSE

The company is an NBFC - Investment and Credit Company (NBFC-ICC). During the year, the company has also obtained a license to carry on factoring business. The company has been notified as an NBFC in Upper Layer (NBFC-UL) by the Reserve Bank of India under the recently implemented Scale Based Regulatory Framework for NBFCs.

CAPITAL ADEQUACY

The companys capital adequacy ratio was at 17.13% as on 31 March, 2023 as against the statutory minimum capital adequacy ratio of 15% prescribed by RBI. The Common Equity Tier 1 (CET1) capital was at 13.70% and Tier I capital was at 14.78% as against the statutory minimum requirement of 9% and 10% respectively. Tier II capital was at 2.35% as on 31 March, 2023.

EMPLOYEE STOCK OPTION (ESOP) SCHEME

Pursuant to the approval accorded by the shareholders on

3 January, 2017 the nomination and remuneration committee had formulated an employee stock option scheme 2016 (ESOP 2016).

During the year, the company made grants aggregating to 21,03,500 options to 242 employees. The total number of options issued as on 31 March, 2023 under ESOP 2016 scheme is at 54,03,455.

The scheme is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SEBI (SBEB) Regulations) and the Companies Act, 2013 (the Act).

The certificate from secretarial auditor M/s. R. Sridharan & Associates, company secretaries confirming implementation of ESOP 2016 scheme in accordance with the SEBI (SBEB) Regulations and shareholders resolutions has been obtained and will be available for inspection of the shareholders at the ensuing annual general meeting (AGM). The details of the scheme as on 31 March, 2023 are disclosed on the website of the company. ( weblink : https://cholamandalam.com/files/esop_scheme_chola)

DIRECTORS

Re-appointment

Mr. M A M Arunachalam, director who retires by rotation at the ensuing AGM and being eligible, has offered himself for reappointment and is recommended to the shareholders for approval. Mr. N Ramesh Rajan and Mr. Rohan Verma, independent directors complete their first term of 5 years on 29 October, 2023 and 28 March, 2024 respectively and being eligible have offered themselves for re-appointment for a second term of 5 years and are recommended to the shareholders for approval.

Retirement / Resignation

Mr. Ashok Kumar Barat, independent director retired from the board with effect from the close of business hours of 30 October, 2022, upon completion of his five-year term. Mr. Bharath Vasudevan, independent director resigned from the board with effect from the close of business hours of 31 March, 2023 to comply with his new employment terms. The disclosure relating to his resignation is available on the Companys website at https://cholamandalam. com/files/resignation_of_independent_director

ThecompanyhasreceivedconfirmationfromMr.BharathVasudevan that there are no other material reasons for his resignation other than what has been stated in the resignation letter.

The board places on record its deep appreciation for the guidance and significant contributions made by Mr. Ashok Kumar Barat and Mr. Bharat Vasudevan during their tenure on the Board and as members of various committees.

DECLARATION FROM INDEPENDENT DIRECTORS

All the independent directors (IDs) have submitted their declaration of independence, as required pursuant to section 149(7) of the Act, confirming that they meet the criteria of independence as provided in section 149(6) of the Act. In the opinion of the board, the IDs fulfil the conditions specified in the Act and the rules made there under for appointment as IDs including integrity, expertise and experience and confirm that they are independent of the management. All the IDs of the company have registered their names with the data bank of IDs and are in the process of completion of online pro_ciency self-assessment test as per the timeline notified by the Ministry of Corporate Affairs (MCA).

KEY MANAGERIAL PERSONNEL

Pursuant to the provisions of section 203 of the Act read with the rules made there under, the following employees are the whole time key managerial personnel of the company during FY 23: a) Mr. Ravindra Kumar Kundu, Executive Director b) Mr. D. Arulselvan, Chief Financial Officer and c) Ms. P. Sujatha, Company Secretary

DIRECTORS RESPONSIBILITY STATEMENT

The directors responsibility statement as required under section 134(5) of the Act, reporting the compliance with accounting standards, is attached and forms part of the boards report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

There are no significant and material orders passed by the regulators or courts or tribunals which would impact the going concern status of the company and its future operations.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no significant material changes and commitments affecting the financial position of the company that occurred between the end of financial year and the date of this report.

MANAGEMENT DISCUSSION AND ANALYSIS

Themanagementdiscussionandanalysisreport(MDA),highlighting the business-wise details are attached and forms part of this report. MDA also contains the details of the risk management framework of the company including the development and implementation of risk management policy and the key risks faced by the company.

CORPORATE GOVERNANCE REPORT

A report on corporate governance as per the Listing Regulations is attached and forms part of this report. The report also contains the details as required to be provided on the composition and category of directors, number of meetings of the board, composition of the various committees, annual board evaluation, remuneration policy, criteria for board nomination and senior management appointment, whistle blower policy / vigil mechanism, disclosure of relationships between directors inter-se, state of companys affairs, etc. The executive director and the chief financial officer have submitted a compliance certificate to the board regarding the financial statements and other matters as required under regulation 17(8) of the Listing Regulations.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

The company being in top 1000 listed entities based on market capitalization, in terms of Regulation 34(2)(f) of SEBI Listing Regulations read with SEBI circular dated May 10, 2021, a business responsibility and sustainability report is attached and forms part of this report.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements have been prepared in accordance with the Act and the relevant accounting standards and forms part of this annual report.

AUDITORS

M/s. Price Waterhouse LLP, and M/s. Sundaram & Srinivasan, chartered accountants are the joint statutory auditors of the company. They were appointed as joint statutory auditors at the 43rd AGM held on 30 July, 2021 for a period of three years commencing from the conclusion of 43rd AGM till the conclusion of 46th AGM. The statutory audit report is attached with financial statements and forms part of this report and does not contain any qualification, reservation or adverse remarks.

SECRETARIAL AUDIT

Pursuant to the provisions of the Act and the rules framed there under, M/s. R. Sridharan & Associates, company secretaries had undertaken a secretarial audit of the company for FY 23. The secretarial audit report is attached and forms part of this report and does not contain any qualification, reservation, or adverse remarks.

COST RECORD AND COST AUDIT

Maintenance of cost records and requirements of cost audit as prescribed under the provisions of section 148(1) of the Act is not applicable for the business activities carried out by the company.

ANNUAL RETURN

In accordance with sections 134(3)(a) and 92(3) of the Act, the annual return in form MGT-7 is placed on the website of the company and is available on the weblink: https://cholamandalam.com/files/annual-return-fy-2022-2023.

CORPORATE SOCIAL RESPONSIBILITY

The Murugappa group is known for its tradition of philanthropy and community service. The groups philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. The company upholds the groups tradition by earmarking a part of its income for carrying out its social responsibilities.

The company has been carrying out corporate social responsibility (CSR) activities for many years even before it was mandated under the Act. The company has in place a CSR policy. The policy along with composition of CSR committee and projects approved by the board are available on the website of the company. (Weblink: https://cholamandalam.com/files/csr_policy).

As per the provisions of the Act, the company is required to spend at least 2% of the average net profits of the company made during the three immediately preceding financial years. This amount aggregated to Rs. 43.43 crores and the company had spent a marginally higher amount of Rs. 43.63 crores towards CSR activities during FY 23, the details of which are annexed to and forms part of this report.

INTERNAL FINANCIAL CONTROLS

Internal control framework including clear delegation of authority and standard operating procedures are established and laid out across all businesses and functions. The framework is reviewed periodically at all levels. The risk and control matrices are reviewed on a quarterly basis and control measures are tested and documented. These measures have helped in ensuring the adequacy of internal financial controls commensurate with the scale of operations of the company. The internal financial controls with reference to the financial statements were tested and reported adequate.

RELATED PARTY TRANSACTIONS

The company has in place a policy on related party transactions as approved by the board and the same is available on the website of the company (weblink: https://cholamandalam.com/files/policy_on_ related_partyfitransactions).

All transactions with related parties that were entered into during the financial year were in the ordinary course of business and were on an arms length basis. There were no materially significant transactions with promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large. There were no contracts or arrangements entered into with related parties during the year to be disclosed under sections 188(1) and 134(h) of the Act in form AOC-2. All proposed transactions with related parties were placed before the audit committee for prior approval at the beginning of the financial year/quarter. Omnibus approval for transactions that cannot be foreseen or envisaged were obtained as permitted under the applicable laws and the thresholds are periodically reviewed. The transactions entered into pursuant to the approval so granted were placed before the audit committee for its review on a quarterly basis.

INFORMATION AS PER SECTION 134(3)(m) OF THE ACT

During the year under review, the company had no major impact on account of conservation of energy or technology absorption. Foreign currency expenditure / remittances amounting to

Rs. 1,725.48 crores towards repayment of overseas borrowing and interest, software license fees and other professional charges were incurred during the year under review. The company does not have any foreign exchange earnings.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Being an NBFC, the disclosures regarding particulars of loans given, guarantees given and security provided is exempted under the provisions of section 186(11) of the Act. With regard to investments made by the company, the details of the same are provided under Note 10 in standalone financial statements and Note 12 in consolidated financial statements of the company for the year ended 31 March, 2023.

DISCLOSURE OF REMUNERATION

The disclosure with respect to remuneration as required under section 197 of the Act read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached and forms part of this report.

PARTICULARS OF EMPLOYEES

In accordance with section 136 of the Act, the financial statements are being sent to the members and others entitled thereto. The statement prescribed under rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is available for inspection of the shareholders at the ensuing annual general meeting (AGM). If any member is interested in obtaining a copy, such member may send an e-mail to the company secretary in this regard.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS

The company has complied with all the provisions of secretarial standards issued by the Institute of Company Secretaries of India in respect of meetings of the board of directors and general meetings held during the year.

INTERNAL COMPLAINTS COMMITTEE

The company has in place a policy for prevention of sexual harassment in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). The company has complied with the provisions relating to constitution of internal complaints committee (ICC) under the POSH Act. ICC has been set up to redress complaints received regarding sexual harassment. All employees including contract workers, probationer, trainee, apprentice or any person so employed at the workplace called by any other such name are covered under this policy. During the year, the company conducted workshops for employees creating awareness about POSH Act. During the calendar year ended 31 December, 2022 there were no referrals received by ICC.

OTHER DISCLOSURES

There was no fraud reported by auditors of the company as given under Section 143(12) of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014. During the year ended 31 March, 2023, the company had not made any application under the Insolvency and Bankruptcy Code, 2016 ("the Code"). As at 31 March, 2023, total number of applications filed and pending under the Code are 10 cases amounting to

Rs. 49.65 crores. No proceeding is pending against the company under the Code. During the year, the company had not made any one-time settlement with banks or financial institutions.

HIGHLIGHTS OF PERFORMANCE OF SUBSIDIARIES / ASSOCIATES AND JOINT VENTURES

CHOLAMANDALAM SECURITIES LIMITED (CSEC)

In FY 23, CSEC focused on (i) emerging as an integrated financial services player through Cholas trusted brand and deep-rooted reach across India by leveraging the Chola ecosystem (ii) creating customer journeys and technology enabled platforms for both sales assisted and direct to customer for onboarding, equity trading and mutual fund transactions (iii) expanded presence across the 4 zones to leverage on Chola ecosystem. CSEC achieved a gross income of Rs. 51.54 crores for the year ended 31 March, 2023 and made a PBT of Rs. 8.68 crores as against a PBT of Rs. 7.48 crores in the previous year. The mutual fund AUM was at Rs. 791 crores. CSEC did not declare any dividend during the year.

CHOLAMANDALAM HOME FINANCE LIMITED (CHFL)

CHFL recorded a gross income of Rs. 81.87 crores for the year ended

31 March, 2023 and made a profit before tax of Rs. 7.66 crores as against profit of Rs. 9.19 crores in the previous year. CHFL did not declare any dividend during the year. The company continues its focus on insurance corporate agency business.

WHITE DATA SYSTEMS INDIA PRIVATE LIMITED (WDSI)

WDSI recorded a gross income of Rs. 5.26 crores for the year ended 31 March, 2023 and made a loss of Rs. 5.41 crores as against a loss of Rs. 0.24 crores in the previous year. WDSI did not declare any dividend during the year.

During the year, the company had entered into a Share Swap Agreement with TVS Supply Chain Solutions Limited (TVSSCSL) for sale of 12,75,917 equity shares constituting 30.87% of the equity shares held by the company in WDSI to TVSSCSL at a price of _ 315.34 per share. As consideration for sale of WDSI shares, the company was issued 22,35,265 compulsory convertible preference shares of TVSSCSL with a face value of _ 1 each with a yield of 0.0001% at an issue price of _ 180 per share (with a conversion ratio of 1:1 where each compulsorily convertible preference share will convert into one equity share of _ 1 each of TVSSCSL) through preferential allotment via private placement. The transaction was completed on 20 April, 2023 and consequently WDSI ceased to be an associate of the company.

VISHVAKARMA PAYMENTS PRIVATE LIMITED (VPPL)

The company forms part of the consortium for retail payments – Vishvakarma Payments Private Limited (VPPL) that had applied for a New Umbrella Entity (NUE) License for retail payments with Reserve Bank of India in the year March 2021. The company holds 21% of equity share capital of VPPL. The application is pending for approval.

PAYSWIFF TECHNOLOGIES PRIVATE LIMITED (PTPL)

PTPL recorded a gross consolidated income of Rs. 230.27 crores for the year ended 31 March, 2023 and made a loss of Rs. 12.03 crores as against a loss of Rs. 42.51 crores in the previous year. The company made an additional investment of Rs. 6.81 crores during the year and holds 74.80% of the equity share capital of PTPL.

ACKNOWLEDGEMENT

The directors wish to thank the companys customers, vehicle manufacturers, vehicle dealers, channel partners, banks, mutual funds, other lenders, rating agencies and shareholders for their continued support. The directors also thank the employees of the company for their contribution to the companys operations during the year under review.

On behalf of the board
Place : Chennai

Vellayan Subbiah

Date : 3 May, 2023 Chairman