Cholamandalam Investment & Finance Company Ltd Directors Report.

Your directors have pleasure in presenting the forty second annual report together with the audited accounts of the company for the year ended 31 March, 2020.


Rs. in crores
Particulars 2019-20 2018-19
Gross Income 8,652.89 6,992.64
Profit Before Tax (PBT) 1,585.73 1,823.15
Profit After Tax (PAT) 1,052.37 1,186.15
One-time Provision for COVID and Macro 504.36 -
Profit Before Tax before one-time provisions 2,090.09 1,823.15
Profit after Tax before one-time provisions 1,387.09 1,186.15
Total Comprehensive income 988.92 1,190.24
Transfer to statutory and other reserves 720.00 840.00
Dividend - Equity 166.17 101.63
Tax on dividend 34.15 20.89


During the year, pursuant to the approval of shareholders by way of postal ballots on 13 January, 2020 and 24 February, 2020, the company had allotted 2,81,25,000 equity shares to 36 Qualified Institutions Buyers at Rs. 320 per equity share on 31 January, 2020 and 93,45,794 equity shares to Cholamandalam Financial Holdings Limited, a promoter entity by way of a preferential allotment at Rs. 321 per equity share on 7 March, 2020.

Further, there was an increase in paid up capital during the year by Rs. 7.56 crores, consequent to allotment of shares upon exercise of stock options by employees under the companys employee stock option schemes.

The total paid up equity share capital of the company as at 31 March, 2020 is Rs. 163.98 crores.

Upon approval by the shareholders and completion of other regulatory procedures for the sub-division of equity shares, the equity share of face value of Rs. 10 (Rupees Ten) fully paid up has been sub-divided into 5 equity shares of face value of Rs. 2 (Rupees Two) fully paid-up with effect from 18 June, 2019.


The financial year 2019-20 showed a slowdown in growth over previous year. It was also negative for the automotive industry with degrowth in commercial, passenger vehicles and two wheelers segment. Despite the slowdown, your company was able to grow year on year, in terms of volume with growth in passenger vehicles and two-wheeler segments. Your company has also increased its market share across all product segments except in heavy commercial vehicles. At the end of the year, we had the COVID-19 pandemic hit the global economy, bringing it to a standstill. Due to the wide-spread COVID-19 pandemic, government had announced a lock-down of all businesses and all activities effective 25 March, 2020 which impacted disbursements of Q4 of FY 20.

Pursuant to the moratorium announced by the Reserve Bank of India (RBI) on EMI repayments (initially till May 2020 and further extended to August 2020), the company has framed a Board approved policy, and accordingly offered moratorium to its customers.

As a matter of abundant caution, your company has factored in possibility of delay in customer payments post moratorium, in case the economic slowdown is long drawn. Accordingly,

the company has created a one-time contingency provision of Rs. 284 crores towards probable losses against loans which were extended the moratorium. Over and above this, the company has also created a macro provision of Rs. 250 crores to meet contingencies, if any that may arise post moratorium due to the global recession and economic slow-down. In total the company has set aside an additional provision of Rs. 534 crores (including Rs. 30 crores of macro provision created in FY 19) to meet any contingencies that may arise in future due to the COVID-19 business disruptions.

The company has not availed moratorium so far on its borrowings, and it does not plan to avail moratorium even during the second phase of the moratorium (June to August, 2020). The company had closed March, 2020 with a cash balance of Rs. 6,508 crores and also had sanctioned lines of Rs. 4,462 crores. This adequately covers the needs of the ALM process with no negative cumulative mismatches across all time buckets. Even after extending the moratorium to its customers, for the second phase, the cash position of the company is adequate to meet all its maturities and fixed obligations till September, 2020.

Inspite of the slowdown in the automotive sector, the lockdown of the entire nation in March, 2020, the high level of provisions made towards the COVID-19 pandemic and the provision towards macro factors, the company achieved a growth of 16% in assets under management (AUM). The profit after tax (PAT) before considering the impact of the one time provision for COVID-19 and the macro factors (one time provision) grew by 17%. The PAT registered a degrowth of 11% as compared to FY 19 after considering the one time provision.

Vehicle Finance (VF) business witnessed a disbursement decline of 6%. Disbursements in VF for the year were at Rs. 23,387.43 crores as against Rs. 24,983.24 crores in the previous year. The business recorded a growth of 9% in closing managed assets and profit before tax (PBT) declined by 26% after considering additional provision of Rs. 398 crores towards its share of one time provision. PBT before one time provision grew by 6% year on year.

Home equity (HE) business also witnessed a disbursement decline of 5%. Disbursements in HE for the year were at Rs. 3,661.89 crores as against Rs. 3,836.55 crores in the previous year. The business recorded a growth of 11% in closing managed assets and a PBT decline of 20% after considering its share of one time provision of Rs. 90.56 crores. PBT before one time provisioning grew by 10% year on year.

Disbursements in home loans (HL) business were at Rs. 1,504.74 crores as against Rs. 1,156.88 crores in the previous year and Micro, Small and Medium Enterprise (MSME) business were at Rs. 537.11 crores as against Rs. 473.84 crores in the previous year.

The business AUM of the company as at 31 March, 2020 increased to Rs. 60,549 crores from Rs. 54,279 crores in the previous year, recording a growth of 12%.


Outlook for the coming financial year continues to remain uncertain, with the COVID-19 situation evolving each day. Apart from agriculture and related activities, most other sectors of the economy have been adversely impacted by the pandemic and are expected to show de-growth.

VF business will continue to be the mainstay for the company. HE portfolio has also been a significant contributor to the companys growth and profitability. HL is the rising star and has a great potential to be built into a solid portfolio considering the expertise of the company in handling typical customer profiles. The companys robust collection mechanism aided with a strong credit risk assessment framework will help us steer through the strong currents of the COVID-19 pandemic in FY 20-21.


Dividend distribution policy

The company has formulated a dividend distribution policy in compliance with regulation 43A of SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015 (Listing Regulations), copy of which is available on the website of the company. (weblink:

Payment of dividend

The board of directors, at their meetings held on 12 December, 2019 and 26 February, 2020 had declared interim dividends of Rs. 1 per equity share and Rs. 0.70 per equity share of the face value of Rs. 2 each respectively (aggregating 85% on Rs.2/- face value), for FY 20 (previous year declared 65% - Rs. 1.30 per share - at face value of Rs. 2 per share). The board of directors have recommended the same to be declared as final dividend for FY 20.


The company transferred a sum of Rs. 220 crores to statutory reserve as required under the Reserve Bank of India Act, 1934 and Rs. 500 crores to general reserves.


The company is an NBFC - Investment and Credit Company (NBFC-ICC). The company does not hold or accept deposits as of the date of balance sheet.


The companys capital adequacy ratio was at 20.7% as on 31 March, 2020 as against the statutory minimum capital adequacy of 15% prescribed by RBI.


ESOP 2016

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 three grants aggregating to 3,60,232 options to 8 employees. The total number of options issued as on 31 March, 2020 under ESOP 2016 is 40,82,637.

ESOP 2007

Pursuant to the approval accorded by the shareholders at the twenty ninth annual general meeting (AGM) of the company held on 30 July, 2007, the nomination and remuneration committee had formulated an employee stock option scheme 2007 (ESOP 2007). During the year, there have been no fresh grants under the scheme and there have been no changes in the scheme. Number of options outstanding as on 31 March, 2020 under the ESOP 2007 is 78,120.

The schemes are 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 the statutory auditors confirming that ESOP 2007 and ESOP 2016 have been implemented in accordance with the SEBI (SBEB) Regulations and shareholders resolutions has been obtained and will be available for the shareholders at the ensuing AGM.

The details of the schemes as on 31 March, 2020 are provided and disclosed on the website of the company (weblink: https://www. cholamandalam/esop.aspx).



During the year, the board at its meeting held on 30 July, 2019 had appointed Ms. Bhama Krishnamurthy as an additional director in the capacity of an independent director with effect from 31 July, 2019 and she shall hold office up to the date of ensuing AGM as an additional director. The appointment of Ms. Bhama as an independent director for a term of 5 years from the date of appointment has been recommended for the approval of shareholders at the ensuing AGM.

Further, the board at its meeting held on 5 November, 2019 had appointed Mr. Arun Alagappan as the managing director of the company for a period of five years effective 15 November, 2019. Mr. Ravindra Kumar Kundu was appointed as the executive director of the company for a period of five years effective 23 January, 2020. Both the appointments have been recommended for approval of the shareholders at the ensuing AGM of the company.

Mr. M.M. Murugappan, chairman and non-executive director retires by rotation at the ensuing AGM and being eligible, has offered himself for re-appointment.


Ms. Bharati Rao retired at the conclusion of the 41st AGM held on 30 July, 2019. The board places on record its deep appreciation for the immense contribution made by Ms. Bharati Rao during her tenure on the board and as a member of the various committees.


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 fulfill the conditions specified in the Act and the rules made there under for appointment as IDs including the 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 proficiency self-assessment test as per the timeline notified by the Ministry of Corporate Affairs (MCA).


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 20:

1. Mr. Arun Alagappan, Managing Director

2. Mr. Ravindra Kumar Kundu, Executive Director (from 23 January, 2020)

3. Mr. D. Arul Selvan, Chief Financial Officer and

4. Ms. P. Sujatha, Company Secretary


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.


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.


The management discussion and analysis report (MDA), highlighting the business-wise details is 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.


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 managing 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.


A business responsibility report is attached and forms part of this report.


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


M/s. S.R. Batliboi & Associates LLP, chartered accountants are the statutory auditors of the company. They were appointed as statutory auditors of the company at the 39th AGM held on 27 July, 2017 for a period of five years commencing from the conclusion of 39th AGM till the conclusion of 44th AGM.


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 20. The secretarial audit report is attached and forms part of this report and does not contain any qualification.


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.


In accordance with section 134(3)(a) of the Act, the extract of the annual return in form MGT-9 is attached and forms part of this report.


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 now even before it was mandated under the Act. The company has put in place a CSR policy and is available on the website of the company (weblink: www.

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. 28.87 crores and the company spent Rs.28.88 crores towards CSR activities during FY 20, the details of which are annexed to and forms part of this report.

In April, 2020 the company, contributed a sum of Rs. 1 crore to The Prime Ministers Citizen Assistance and Relief in Emergency Situations Fund and Rs. 3 crores to Government of Tamil Nadu - Chief Ministers Public Relief Fund for COVID-19 relief activities.


Internal control framework including clear delegation of authority and standard operating procedures are established and laid out across all businesses and functions. These are reviewed periodically at all levels. The company has a co-sourced model of internal audit. 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 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: company-policies.aspx).

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 are no materially significant transactions made by the company 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 are 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 transactions with related parties were placed before the audit committee for prior approval at the beginning of the financial year. The transactions entered into pursuant to the approval so granted were placed before the audit committee for its review on a quarterly basis. None of the directors has any pecuniary relationship or transaction vis-a-vis the company.


The company has no activity relating to consumption of energy or technology absorption. Foreign currency expenditure amounting to Rs. 129.40 crores was incurred during the year under review. Foreign currency remittances made during the year was Rs. 11.02 crores towards purchase of fixed assets. The company does not have any foreign exchange earnings.


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.

As regards investments made by the company, the details of the same are provided under note 10 in standalone financial statements and notes 12 and 45 in consolidated financial statements of the company for the year ended 31 March, 2020.


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.


In accordance with section 136 of the Act, the report and accounts 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. If any member is interested in obtaining a copy, such member may send an e-mail to the company secretary in this regard.


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.


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 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, 2019, there were no referrals received by ICC.



During the year CSEC focused on creating three distinct business lines for enhancing revenues and productivity - broking, wealth and insurance distribution. The broking business grew 9%, wealth business dropped by 32% due to cap on upfront income and insurance distribution business was scaled up significantly. CSEC achieved a gross income of Rs. 23.58 crores for the year ended 31 March, 2020 and made a PBT of Rs. 3.28 crores as against a PBT of Rs. 3.31 crores in the previous year. The Mutual Fund AUM was at Rs. 846 crores. CSEC did not declare any dividend during the year.


CHFL recorded a gross income of Rs. 38.61 crores for the year ended 31 March, 2020 and made a loss before tax of Rs. 0.77 crores as against a loss of Rs. 11 crores in the previous year. CHFL did not declare any dividend during the year. The company had made an application to National Housing Bank (NHB) for registration as a Housing Finance Company (HFC) in June 2018 and currently engaging with RBI the new regulator for HFCs to obtain license to operate as HFC. Currently, the company continues its focus on growing insurance corporate agency business.


The directors wish to thank the companys customers, vehicle manufacturers, vehicle dealers, channel partners, banks, mutual funds, 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 M.M. Murugappan
Date : June 3, 2020 Chairman