L&T Finance Holdings Ltd Directors Report.

Dear Members,

The Directors of your Company have the pleasure in presenting the Thirteenth Annual Report together with the audited financial statements for the financial year ("FY") ended March 31, 2021.

FINANCIAL RESULTS

The summary of the Companys financial performance, both on a consolidated and standalone basis, for FY 2020-21 as compared to the previous FY 2019-20 is given below:

Particulars Consolidated Standalone
2020-21 2019-20 2020-21 2019-20
Total Income 14,080.10 14,476.75 191.42 522.38
Less: Total Expenses 12,810.51 11,796.67 227.31 238.64
Profit before exceptional items and tax 1,269.59 2,680 (35.89) 283.74
Exceptional items 225.61 - 224.68 -
Profit before Tax 1,495.20 2,680.08 188.79 283.74
Less: Tax Expense 546.32 979.82 72.74 16.93
Profit after Tax 948.88 1,700.26 116.05 266.81
Add: Share in profit of associate company - - - -
Net profit after tax and share in profit of associate 948.88 1,700.26 116.05 266.81
company
Profit for the year (owners of the Company) 970.94 1,700.17 116.05 266.81
Actuarial gain on defined benefit plan (gratuity) net of income tax 2.76 (4.59) 0.11 (0.11)
Total comprehensive income for the year (owners of the Company) 973.70 1,695.58 116.16 266.70
Add: Balance brought forward from previous year 3,720.68 2,771.41 31.68 203.20
Transition impact of Ind AS 116 - (2.35) - (0.03)
Balance Available 4,694.38 4,464.64 147.84 469.87
Appropriations
Dividend paid (including dividend distribution tax) - 422.33 - 380.48
Transfer to/(from) Reserve u/s 45-IC of Reserve 35.86 225.06 23.21 53.36
Bank of India Act, 1934
Transfer to impairment reserve 12.54 15.82 0.59 4.35
Transfer to/(from) Debenture Redemption Reserve - - - -
Transfer to Reserve u/s 36(1)(viii) of Income Tax Act, 1961 - 80.75 - -
Transfer to Reserve u/s 29-C of National Housing Bank - - - -
Surplus in the Statement of Profit and Loss 4,645.98 3,720.68 124.04 31.68

FINANCIAL PERFORMANCE

Being a Core Investment Company, the Companys standalone revenue is, substantially, dividend from its subsidiaries and hence, it is meaningful to look at the consolidated performance.

Consolidated

Total income was Rs14,080.10 Cr in FY 2020-21 as compared to Rs14,476.75 Cr in FY 2019-20.

Profit before taxes was Rs1,495.20 Cr in FY 2020-21 as compared to Rs2,680.08 Cr in FY 2019-20.

Profit for the year attributable to owners of the

Company was Rs970.94 Cr in FY 2020-21 as compared to Rs1,700.17 Cr in FY 2019-20.

During the year, the net loan book declined from Rs91,324.63 Cr to Rs87,030.25 Cr.

The Average Assets Under Management ("AAUM") in the mutual fund business stood at Rs72,728 Cr for the quarter ended March 31, 2021 as against Rs71,056 Cr for the quarter ended March 31, 2020.

Standalone

Total income was Rs 191.42 Cr in FY 2020-21 as compared to Rs 522.38 Cr in FY 2019-20.

Profit before taxes was Rs 188.79 Cr in FY 2020-21 as compared to Rs 283.74 Cr in FY 2019-20.

Profit for the year was Rs 116.05 Cr in FY 2020-21 as compared to Rs 266.81 Cr in FY 2019-20.

Appropriations

The Company proposes to transfer Rs 23.21 Cr (previous year Rs 53.36 Cr) to Special Reserve created u/s 45–IC of the Reserve Bank of India Act, 1934.

Cost Records

The Company is not required to maintain cost records as per the provisions of Section 148(1) of the Companies Act, 2013 ("the Act").

INFORMATION ON THE STATE OF AFFAIRS OF THE COMPANY

The information on the affairs of the Company has been given as part of the Management Discussion & Analysis Report forming part of this Report.

MATERIAL CHANGES AND COMMITMENTS

In FY 2019-20, the Boards of Directors of L&T Finance Limited ("LTF"), L&T Infrastructure Finance Company Limited ("LTIF") and L&T Housing Finance Limited ("LTHF"), the wholly owned subsidiaries of the Company have approved the amalgamation of LTIF and LTHF with LTF by way of merger by absorption under the provisions of Sections 230 - 232 of the Act (including the rules thereunder) and other relevant provisions of the Act. Further, post receipt of the sanction orders from National Company Law Tribunal, Mumbai and National Company Law Tribunal, Kolkata and the approval of the Board of LTF, LTIF and LTHF merged with LTF w.e.f. April 12, 2021.

They were no other material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year to which these financial statements relate and the date of this Report.

DIVIDEND

The Dividend Distribution Policy of the Company approved by the Board is in line with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI

Listing Regulations"). The Policy has been uploaded on the websiteoftheCompanyatwww.ltfs.com/investors.html. (click-Dividend Distribution Policy).

The Board of Directors had declared and paid an interim dividend @ 8.95%, 8.15%, 8.00%, 7.95% (four options), 7.60% and 7.50% (two options) per share on the nine series of Cumulative Compulsorily

Redeemable Non-Convertible Preference Shares ("CCRPS") of face value of Rs 100 each of the Company, during FY 2020-21, in accordance with the provisions of the respective Information Memoranda entailing an outflow of Rs 95.96 Cr (excluding Dividend Distribution Tax). For the year ended on March 31, 2021, your Company has not considered the proposal to pay dividend, in view of the current challenging times arising on account of COVID-19 pandemic as the focus has been on strengthening the balance sheet and making it more robust.

CREDIT RATING

During the year under review, CRISIL Limited ("CRISIL"), CARE Ratings Limited ("CARE"), India Ratings and

Research Private Limited ("India Ratings") and ICRA Limited ("ICRA") have reviewed the ratings on various debt instruments of the Company and reaffirmed the ratings as given below.

Rating agencies
Instruments CRISIL CARE India Ratings ICRA
Non- convertible Debentures CRISIL AAA/Stable (Triple A; Outlook: Stable by CRISIL) CARE AAA/ Stable (Triple A; Outlook: Stable by CARE) IND AAA/ Stable (Triple A; Outlook: Stable by India Ratings) ICRA AAA/ Negative (Triple A: Outlook: Negative by ICRA)
CCRPS CRISIL AAA/Stable (Triple A; Outlook: Stable by CRISIL) CARE AAA (RPS)/ Stable (Triple A [Redeemable Preference Shares]; Outlook: Stable by CARE) - -
Commercial Papers CRISIL A1+ (A One Plus by CRISIL) CARE A1+ (A One Plus by CARE) IND A1+ (A One Plus by India Ratings) ICRA A1+ (A One Plus by ICRA)

The instruments / bank facilities with long term ratings of AAA are considered to have highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.

The instruments with short term ratings of A1+ are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk.

FUND RAISING Rights Issue

During the year under review, the Board of Directors of the Company issued 46,13,25,021 Equity Shares of face value of Rs 10 each on rights basis to eligible equity shareholders of the Company who were on the Register of Members as on January 22, 2021, being the record date fixed for the purpose ("Eligible Equity Shareholders") at an issue price of Rs 65 per fully paid-up equity share (including a premium of Rs 55 per equity share). The rights entitlement ratio was 17:74 (i.e. 17 Equity Shares were offered for every 74 shares fully paid-up Equity Shares held by the Eligible Equity Shareholders of the Company).

There has been no deviation in the utilisation of rights issue proceeds from the objects stated in the letter of offer dated January 19, 2021.

Non-Convertible Debentures

During the year under review, the Company issued 1,950 Unsecured, Redeemable, Non-Convertible Debentures ("NCDs") of face value Rs 10,00,000 each, aggregating to R195 Cr on a private placement basis.

CHANGES TO SHARE CAPITAL

During the year under review, the Company has allotted 46,13,25,021 Equity Shares of face value of Rs 10 each to the Eligible Equity Shareholders under rights issue at an issue price of Rs 65 per Equity Share (including premium of Rs 55 per Equity Share), thereby raising funds aggregating to Rs 2,998.61 Cr.

Further, the Company has issued 6,84,500 Equity Shares and 26,02,573 Equity Shares to employees of the Company and its subsidiary companies pursuant to the exercise of stock options under the Employee Stock Option Scheme – 2010 and Employee Stock Option

Scheme 2013 ("ESOP Scheme") respectively. Also, 6,00,00,000 CCRPS amounting to Rs 600 Cr, which were due for redemption were duly redeemed by the Company.

Pursuant to allotment of Equity Shares under Rights issue, ESOP Scheme and subsequent redemption of CCRPS, the paid-up share capital of the Company was

Rs 3,593.55 Cr (including preference share capital of R1,124.10 Cr) as at March 31, 2021 as compared to Rs 3,728.93 Cr (including preference share capital of R1,724.10 Cr) as at March 31, 2020.

EMPLOYEE STOCK OPTION SCHEME

The disclosures required to be made under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 is available on the website of the Company at https://www.ltfs.com/investors.html

(click-ESOP Disclosure). The certificate from the Statutory Auditors, confirming compliance with the aforesaid provisions has been appended as Annexure A to this Report.

INVESTMENT IN SUBSIDIARIES

During the year under review, the Company infused capital in its following subsidiaries by subscribing to the Equity/Ordinary Shares offered by them:

Name of subsidiary company Amount of capital subscribed (R in Cr)
L&T Capital Markets (Middle East) Limited 2.52

REGISTRATION AS A CORE INVESTMENT COMPANY

The Company is a registered Non-Banking Financial Institution - Core Investment Company ("NBFC-CIC") pursuant to the receipt of Certificate of Registration from the Reserve Bank of India ("RBI") dated September 11, 2013, under Section 45-IA of the Reserve Bank of India Act, 1934.

STATUTORY DISCLAIMER

The Company is having a valid Certificate of Registration dated September 11, 2013 issued by RBI under Section 45-IA of the Reserve Bank of India Act, 1934. However, RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the Company or for the correctness of any of the statements or representations made or opinions expressed by the Company and for repayment of deposits / discharge of liabilities by the Company.

FIXED DEPOSITS

The Company being non-deposit taking NBFC-CIC, has not accepted any deposits from the public during the year under review.

DIRECTORS

The composition of the Board is in accordance with the provisions of Section 149 of the Act and Regulation 17 of the SEBI Listing Regulations, with an appropriate combination of Non-Executive Directors and Independent Directors. The complete list of Directors of the Company has been provided as part of the Corporate Governance Report.

During the year under review, Mr. Thomas Mathew T. was re-appointed, for a second term of 5 consecutive years with effect from July 1, 2020 to June 30, 2025, as an Independent Director in accordance with the provisions of Sections 149 and 152 of the Act and the appointment was approved by the Members at the Twelfth Annual General Meeting ("AGM") held on July 28, 2020. The tenure of Mr. Dinanath Dubhashi who was appointed as a Whole-time Director, designated as Deputy Managing Director of the Company, with effect from April 14, 2016 upto and including July 21, 2016 and as Managing Director for the period July 22, 2016 upto and including April 13, 2021, on the terms and conditions approved by the Members at their Eighth AGM held on August 23, 2016, was expiring on April 13, 2021.

In views of the aforesaid and pursuant to the

AnnuAl RepoRt 2020-21 43 provisions of Sections 196, 197, 203 read with Schedule V of the Act and any other applicable provisions of the Act read with relevant rules made thereunder and based on the recommendation of the Nomination and Remuneration Committee of the Company ("NRC"), the Board at its Meeting held on March 19, 2021 approved the re-appointment of Mr. Dinanath Dubhashi as the Managing Director and Chief Executive Officer of the Company, for another term of five consecutive years i.e., with effect from April 14, 2021 to April 13, 2026, subject to the approval of the Members at the ensuing AGM.

Section 152 of the Act provides that unless the Articles of Association provide for retirement of all directors at every AGM, not less than two-third of the total number of directors of a public company (excluding the Independent Directors) shall be persons whose period of office is liable to determination by retirement of directors by rotation, of which one-third are liable to retire by rotation. Accordingly, Mr. R. Shankar Raman, Non-Executive Director will retire by rotation at the ensuing AGM and being eligible, has offered himself for re-appointment.

The terms and conditions of appointment of Independent Directors are available on the website of the Company at https://www.ltfs.com/investors.html

(click-Appointment of ID).

The Board is of the opinion that the Independent Directors of the Company possess requisite qualifications, experience, expertise and hold highest standards of integrity.

Declaration by Independent Directors

All Independent Directors have submitted the declaration of independence, pursuant to the provisions of Section 149(7) of the Act and Regulation 25(8) of the SEBI Listing Regulations, stating that they meet the criteria of independence as provided in Section 149(6) of the Act and Regulations 16(1)(b) of the SEBI Listing Regulations and they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact his/ her ability to discharge his/ her duties with an objective independent judgement and without any external influence.

Familiarization Programme

The Company has familiarized the Independent Directors with the Company, their roles, responsibilities in the Company, nature of industry in which the Company operates, business model of the Company, etc. The Company had conducted familiarization programme on ESG Framework for the Board of Directors of the Company. The details relating to the familiarization programme are available on the website of the Company at www.ltfs.com/investors.html

(click-Familiarization Programme).

Fit and Proper Criteria & Code of Conduct

All the Directors meet the fit and proper criteria stipulated by RBI. All the Directors and Senior Management of the Company have affirmed compliance with the Code of Conduct of the Company.

KEY MANAGERIAL PERSONNEL ("KMPs")

There was no change in the KMPs of the Company during the year under review. As at March 31, 2021, the Company had following KMPs:

1) Mr. Dinanath Dubhashi – Managing Director & Chief Executive Officer ("MD & CEO")

2) Mr. Sachinn Joshi – Chief Financial Officer

3) Ms. Apurva Rathod – Company Secretary

Duringtheyear,Mr.DinanathDubhashiwasre-appointed as MD & CEO and designated as KMP for another term of five years with effect from April 14, 2021 up to April 13, 2026, subject to the approval of the Members at the ensuing AGM.

COMPANYS POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION FOR DIRECTORS, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES

A. Background and objectives

Section 178 of the Act and Regulation 19 read with

Part D of Schedule II of the SEBI Listing Regulations, requires the NRC to formulate a policy relating to the remuneration of the Directors, Senior Management / KMPs and other employees of the Company and recommend the same for approval of the Board. Further, Section 134 of the Act stipulates that the Boards Report is required to include a statement on the Companys Policy on Directors appointment and remuneration including criteria for determining qualifications, positive attributes, independence of director and remuneration for KMPs and other employees. The Board of Directors has, based on the recommendation of the NRC of the Company, approved the policy on Directors appointment and remuneration for Directors, KMP and other employees, which is available on the website of the Company at www.ltfs.com/investors.html (click-Policy on Directors Appointment).

B. Brief framework of the Policy

The objective of this Policy is: a) to determine inter-alia, qualifications, positive attributes and independence of a Director; b) to guide on matters relating to appointment and removal of Directors and Senior Management; c) to lay down criteria / evaluate performance of the Directors; d) to guide on determination of remuneration of the Directors, Senior Management / KMPs and other employees; and e) to ensure relationship of remuneration to performance is clear and meets appropriate performance benchmarks.

C. Appointment of Director(s) – Criteria Identification

The NRC identifies and ascertains the integrity, professional qualification, expertise and experience of the person, who is proposed to be appointed as a director and appropriate recommendation is made to the Board with respect to his / her appointment. Appointment of Independent Directors is subject to the provisions of Section 149 of the Act read with Schedule IV and rules thereunder and SEBI Listing Regulations. The NRC satisfies itself that the proposed person satisfies the criteria of independence as stipulated under Section 149(6) of the Act and SEBI Listing Regulations, before appointment as an Independent Director.

No person is eligible to be appointed as a Director, if he / she is subject to any disqualifications as stipulated under the Act or any other law(s) for the time being in force.

Appointment of Managing Director and Whole-time Director is subject to the provisions of Sections 196, 197, 198 and 203 of the Act read with Schedule V and rules thereunder. A person shall not occupy the position as a Managing Director / Whole-time Director beyond the age of seventy years, unless the appointment is approved by a special resolution passed by the Company in general meeting. No re-appointment is made earlier than one year before the expiry of term.

D. Evaluation criteria of Directors and Senior Management / KMPs / Employees

Independent Directors / Non-Executive Directors

The NRC carries out evaluation of performance of Independent Directors / Non-Executive Directors every year ending March 31st on the basis of the following criteria: a) Membership & Attendance - Board and Committee Meetings; b) Contribution during such meetings; c) Active participation in strategic decision making; d) Inputs to executive management on matters of strategic importance;

e) Performance of the directors; f) Fulfillment of the independence criteria and their independence from the management; and g) Such other matters, as the NRC / Board may determine from time to time.

Executive Directors

The NRC carries out evaluation of performance of Executive Directors ("EDs") every year ending March 31st. The evaluation is on the basis of Key Performance Indicators ("KPIs"), which are identified well in advance for EDs and weights assigned for each measure of performance keeping in view the distinct roles of EDs. The identified KPIs for EDs are approved by the Board, pursuant to recommendation of the NRC, if required.

Senior Management / KMPs / Employees

The HR Department carries out the evaluation of the aforementioned persons every year ending March 31st, with the Department Head(s) /

Management concerned. KPIs are identified well in advance at the commencement of the financial year. Performance benchmarks are set and evaluation of employees is done by the respective reporting Manager(s) / Management/ Department Head(s) to determine whether the performance benchmarks are achieved. The payment of remuneration / annual increment to the aforementioned persons is determined after the satisfactory completion of evaluation process.

The HR Department of the Company is authorised to design the framework for evaluating the EDs / Senior Management /

KMPs / employees. The objective of carrying out the evaluation by the Company is to identify and reward those with exceptional performances during the financial year. Training and Development Orientation programmes on a need basis are provided to employees, whose performance during any financial year does not meet the benchmark criteria.

E. Criteria for Remuneration

The NRC, while determining and / or recommending the criteria for remuneration / remuneration for Directors, Senior Management / KMPs and other employees ensures that: a. 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; b. relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and c. remuneration to Directors, Senior Management

/ KMPs 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.

During the year under review, the Policy was amended to include the retirement age of Executive Director / Managing Director of the Company. Also, the changes required under regulatory provision were carried out to the Policy.

PERFORMANCE EVALUATION

Pursuant to the provisions of the Act and the SEBI

Listing Regulations, the Board has carried out an annual evaluation of its own performance, performance of the Directors individually and the Committees of the Board.

Manner of Evaluation

The NRC and the Board have laid down the manner in which formal annual evaluation of the performance of the Board, its Committees and individual directors is required to be carried out.

It includes circulation of evaluation forms separately for evaluation of the Board and its Committees, Independent Directors / Non-Executive Directors / Managing Director and Chief Executive Officer and Chairperson of the Company.

The process of the annual performance evaluation broadly comprises: a) Board and Committee Evaluation:

Evaluation of Board as a whole and the

Committees is done by the individual directors /members, followed by submission of collation to NRC and feedback to the Board. b) Independent/ Non-Executive Directors Evaluation:

Evaluation done by Board members excluding the Director being evaluated is submitted to the Chairperson of the Company and individual feedback provided to each Director. c) Chairperson / Managing Director & Chief Executive Officer Evaluation:

Evaluation as done by the individual directors is submitted to the Chairperson of the NRC and Chairperson of the NRC provides feedback to the NRC and subsequently to the Board.

SUSTAINABILITY REPORT AND BUSINESS RESPONSIBILITY REPORT

The detailed Sustainability Report will be available on the website of the Company at https://www.ltfs.com/csr.html.

The information disclosed in the Sustainability Report is aligned to the Global Reporting Initiative ("GRI") Standards for sustainability reporting. The principles applied for defining contents of the report and quality are as prescribed by the GRI Standards. Additionally, on a voluntary basis the Company has provided cross referencing to Business Responsibility and Sustainability Report ("BRSR") disclosures specified by SEBI in its circular SEBI/HO/CFD/CMD-2/P/

CIR/2021/562 dated May 10, 2021 in its Sustainability Report.

Further, in terms of Regulation 34(2)(f) of the SEBI Listing Regulations the Company is required to submit a Business Responsibility Report ("BRR") as a part of the Annual Report. The Companys BRR describing the initiatives taken by the Company is hosted on the website of the Company at www.ltfs.com/investors.html (click-Business Responsibility Report).

REPORT ON CORPORATE GOVERNANCE

The Report on Corporate Governance for the year under review,isformingpartoftheAnnualReport.Thecertificate from the Statutory Auditors of the Company confirming compliance with the conditions of Corporate Governance is appended to the Corporate Governance Report.

STATUTORY AUDITORS

Pursuant to the provisions of Section 139(2) of the Act and the rules made thereunder, the Members at their Eighth AGM held on August 23, 2016, had appointed M/s. Deloitte Haskins & Sells LLP,

Chartered Accountants (ICAI Firms Registration Number 117366W/W-100018) and M/s. B. K. Khare & Co., Chartered Accountants (ICAI Firms Registration Number 105102W) as the Joint Statutory Auditors of the Company for a term of five years, i.e. from the conclusion of Eighth AGM till the conclusion of the Thirteenth AGM.

In view of the aforesaid, M/s. Deloitte Haskins & Sells

LLP, Chartered Accountants and M/s. B. K. Khare & Co.,

Chartered Accountants would cease to be the Joint Statutory Auditors of the Company at the conclusion of the ensuing AGM. In view of the aforesaid, the Board, on the recommendation of the Audit Committee ("AC") recommended the appointment of M/s Khimji Kunverji and Co LLP, Chartered Accountants (ICAI Firms

Registration Number 105146W/W100621) as the Statutory Auditors of the Company for a term of three years in accordance with the requirements stipulated by the RBI, the Companys regulator, to hold office from the conclusion of the ensuing AGM i.e. Thirteenth AGM till the conclusion of the Sixteenth AGM, subject to the approval of the Members at the ensuing AGM of the Company.

M/s Khimji Kunverji and Co LLP, Chartered Accountants have confirmed that their appointment, if made, will comply with the eligibility criteria in terms of Section 141(3) of the Act and RBI regulations. Further, the Auditors have confirmed that they have subjected themselves to Peer Review process by the Institute of

Chartered Accountants of India ("ICAI") and hold valid certificate issued by the Peer Review Board of ICAI.

AUDITORS REPORT

The Auditors Report to the Members for the year under review is unmodified/ clean. The Notes to the Accounts referred to in the Auditors Report are self-explanatory and therefore do not call for any further clarifications under Section 134(3)(f) of the Act.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Act, the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 24A of the SEBI Listing Regulations, the

Company had appointed Ms. Naina R. Desai, Practicing

Company Secretary (Membership No.: F1351; Certificate of Practice No.: 13365) to undertake the Secretarial

Audit of the Company for FY 2020-21.

Further, in terms of the provisions of the Circular No. CIR/CFD/CMD1/27/2019 dated February 8, 2019 issued by SEBI, Ms. Desai has issued the Annual Secretarial Compliance Report, confirming compliance by the Company of the applicable SEBI Regulations and circulars / guidelines issued thereunder. The Secretarial Audit Report is appended as Annexure B to this Report. There is no adverse remark, qualification, reservation or disclaimer in the Secretarial Audit Report.

PARTICULARS OF EMPLOYEES

The information required pursuant to the provisions of Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company has been appended as Annexure C to this Report.

In terms of first proviso to Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees particulars as required pursuant to provisions of Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial

Personnel) Rules, 2014. The said Annexure is available for inspection by the Members.

The Board of Directors affirms that the remuneration paid to the employees of the Company is as per the

Policy on Directors appointment and remuneration for Directors, KMPs and other employees and is in accordance with the requirements of the Act and SEBI Listing Regulations and none of the employees listed in the said Annexure are related to any Directors of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Considering that the Company is a Core Investment Company carrying out its activities through its subsidiaries, the particulars regarding conservation of energy and technology absorption as required to be disclosed pursuant to the Rule 8(3) of the Companies (Accounts) Rules, 2014 are not relevant to its activities.

Some of the steps taken by L&T Financial Services ("LTFS") for conservation of energy includes:

- Installation of sensor-based lighting within the office premises which automatically turns the lights off when not in use.

- Set up of variable frequency drives for air handling units and pumps for optimum use of electricity.

- Installation of LED-based energy efficient lighting fixtures in the office premises.

- Installation of a sewage treatment plant for treatment of waste water to be reused for gardening and air conditioning.

There were no foreign exchange earnings during the year (previous year also Nil); while the expenditure in foreign currency by the Company during the year was Rs 0.69 Cr towards professional fees and nil travelling expenses (previous year Rs 0.79 Cr and Rs 0.08 Cr respectively).

DEPOSITORY SYSTEM

The Companys Equity Shares are compulsorily tradable in electronic form. As on March 31, 2021, out of the Companys total equity paid-up share capital comprising of 2,46,94,45,704 Equity Shares, only 4,701 Equity Shares were in physical form and the remaining capital is in dematerialized form.

As per SEBI notification no. SEBI/LAD-NRO/GN/2018/24 dated June 8, 2018 and further amendment vide notification no. SEBI/LADNRO/ GN/2018/49 dated November 30, 2018, requests for effecting transfer of securities (except in case of transmission or transposition of securities) cannot be processed from April 1, 2019 unless the securities are held in the dematerialized form with the depositories.

Therefore, Members holding securities in physical form are requested to take necessary action to dematerialize their holdings.

SUBSIDIARY COMPANIES

The Company conducts its business through its subsidiaries in various business segments. As of March 31, 2021, the Company had 10 subsidiaries (including step down subsidiaries) and as on the date of this report, the Company had 8 subsidiaries (including step down subsidiaries).

During the year under review, pursuant to a Share Purchase Agreement, the Company completed the sale of its investment in L&T Capital Markets Limited to IIFL Wealth Finance Limited on April 24, 2020 and accordingly, L&T Capital Markets Limited ceased to be a subsidiary of the Company.

During the year under review, the Board of Directors of the Company at their meeting held on July 16, 2020, had approved the proposal to voluntarily winding-up L&T Capital Markets (Middle East) Limited, the wholly owned subsidiary of the Company (carrying on the offshore wealth management business), subject to applicable laws of United Arab Emirates. L&T Capital Markets (Middle East) Limited was voluntarily liquidated with effect from December 17, 2020 post completion of all regulatory requirements and accordingly, ceased to be a subsidiary of the Company. In FY 2019-20, the Boards of Directors of L&T Finance Limited ("LTF"), L&T Infrastructure Finance Company Limited ("LTIF") and L&T Housing Finance Limited ("LTHF"), the wholly owned subsidiaries of the Company have approved the amalgamation of LTIF and LTHF with LTF by way of merger by absorption under the provisions of Sections 230 - 232 of the Act (including the rules thereunder and other relevant provisions of the Act. Further, post receipt of the sanction orders from National Company Law Tribunal, Mumbai and National Company Law Tribunal, Kolkata and the approval of the Board of LTF, LTIF and LTHF merged with LTF w.e.f. April 12, 2021.

MATERIAL SUBSIDIARIES

As required under Regulations 16(1)(c) and 46 of the SEBI Listing Regulations, the Board of Directors has approved the Policy for determining Material Subsidiaries ("Policy"). The details of the Policy are available on the website of the Company at www.ltfs.com/investors.html (click-Policy for determining Material Subsidiaries)

PERFORMANCE AND FINANCIAL POSITION OF EACH SUBSIDIARY / ASSOCIATE AND JOINT VENTURE COMPANIES

As required under Rule 5 and Rule 8(1) of the Companies (Accounts) Rules, 2014, a report on the performance and financial position of each of the subsidiaries and associates of the Company has been appended as Annexure D to this Report. The highlights of performance of subsidiaries and the contribution by such subsidiaries is given as a part of the Management Discussion & Analysis Report forming part of this Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(5) of the Act, the Board of Directors confirms that, to the best of its knowledge and belief: 1) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; 2) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2021 and of the profit of the Company for that period; 3) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; 4) the Directors have prepared the annual accounts on a going concern basis; 5) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively; and 6) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws including applicable secretarial standards and that such systems were adequate and operating effectively.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an internal control system, commensurate with the size, scale and complexity of its operations. Testing of such systems forms a part of review by the Internal Audit ("IA") function. The scope and authority of the IA function is defined in the IA Charter. The IA function of LTFS monitors and evaluates the efficacy and adequacy of the internal control system in the Company to ensure that financial reports are reliable, operations are effective and efficient and activities comply with applicable laws and regulations. Based on the report of the IA function, process owners undertake corrective action, if any, in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the AC of the Company from time to time.

BOARD MEETINGS

The details of the Board meetings held during FY 2020-21 are disclosed in the Corporate Governance Report appended to this Report.

COMPOSITION OF AUDIT COMMITTEE

The Company has constituted an AC in terms of the requirements of the Act, Regulation 18 of the SEBI Listing Regulations and RBI Regulations. The details of the same are disclosed in the Corporate Governance Report.

CORPORATE SOCIAL RESPONSIBILITY

In accordance with the requirements of the provisions of Section 135 of the Act, the Company has constituted a Corporate Social Responsibility ("CSR") and ESG Committee. The composition and terms of reference of the CSR and ESG Committee are provided in the Corporate Governance Report.

The Company has also formulated a CSR Policy ("Policy") in accordance with the requirements of the Act and containing details specified therein which is available on the website of the Company at www.ltfs.com/csr.html (click-CSR Policy). The Policy of the Company is a clear alignment with the United Nations global development agenda of Sustainable Development Goals (SDG) particularly ‘No Poverty (SDG 1), ‘Gender equality (SDG 5), ‘Sustainable cities and Communities (SDG 11), ‘Climate Action (SDG 13) and ‘Partnership for the Goals (SDG 17). The inclusion of all stakeholders based on a priority matrix is clearly articulated in the Policy and all the programmes are passed through this matrix before being implemented on the ground for creating maximum stakeholder value. Our key initiatives are woven around Sustainable Livelihoods of Rural communities facilitated by focused areas of intervention – Digital Financial Inclusion, Disaster Management and other programmes. During the year under review, the Policy has been updated as below:

Revision in thrust areas based on strategy

Amendments as a result of the

(Corporate Social Responsibility Policy) Amendment Rules, 2021

Further, considering that there is no aggregate net profit for the preceding three financial years calculated pursuant to provisions of Section 135 of the Act, the Company was not required to contribute any amount on CSR activities during FY 2020-21. An annual report on activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 has been appended as Annexure E to this Report.

VIGIL MECHANISM

Pursuant to Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 read with Section 177(9) of the Act, the Company has adopted a Vigil Mechanism Framework, under which the Whistle Blower Investigation Committee ("the Committee") has been set up. The objective of the framework is to establish a redressal forum, which addresses all concerns raised on questionable practices and through which the Directors and employees can raise actual or suspected violations.

The Vigil Mechanism Framework empowers all levels of employees including top management to raise voice against actual/ suspected violations. The implementation of the framework is monitored through the Committee which meets on a quarterly basis and all cases are discussed in detail before its presented to the AC. It addresses all concerns raised on questionable practices. The framework ensures protection to the whistle-blower to avoid any sort of unfair or prejudicial employment practices. The Chairperson of the AC has direct access to all complaints raised through the framework. At the AC, brief update is presented to the Members for their review. The Committee takes necessary actions to maintain confidentiality within the organization on matters brought to its attention. The mechanism framed by the Company is in compliance with the requirements of the Act and SEBI Listing Regulations and the same is available on the website of the Company at www.ltfs.com/investors.html

(click-Vigil Mechanism Policy).

PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED BY THE COMPANY

Details of loans, guarantees and investments are given in the Notes to the Financial Statements, as applicable.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The Board of Directors has approved the policy on transactions with related parties ("RPT Policy"), pursuant to the recommendation of the AC. In line with the requirements of the Act, RBI Regulations and the SEBI Listing Regulations, the Company has formulated the RPT Policy which is also available on the website of the Company at www.ltfs.com/investors. html (click-RPT Policy). The RPT Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and the related parties.

Key features of the RPT Policy are as under:

All transactions with related parties ("RPTs") are referred to the AC of the Company for approval, irrespective of its materiality. The AC, also approves any subsequent modification in the RPTs. The process of approval of RPTs by the AC, Board and Shareholders is as under:

a) Audit Committee:

RPTs irrespective of whether they are in All the ordinary course of business or at an arms length basis require approval of AC.

b) Board:

Generally, all RPTs are in the ordinary course of business and at arms length price.

RPTs which are not at arms length and which are not in the ordinary course of business are approved by the Board.

c) Shareholders:

All material RPTs require prior approval of the All shareholders, based on recommendation of the Board, through ordinary resolution passed at the general meeting. However, approval of the shareholders is not required to be obtained by the Company if the proposed transaction is to be entered into with its wholly owned subsidiaries.

Where any contract or arrangement is entered into by a director or any other employee without obtaining the consent of the Board or approval by ordinary resolution in the general meeting, it is required to be ratified by the Board or the shareholders at a meeting, as the case may be, within three months from the date on which such contract or arrangement was entered into.

All RPTs that were entered into during FY 2020- 21 were on an arms length basis and were in the ordinary course of business and disclosed in the Financial Statements. There were no materially significant RPTs made by the Company with Promoters, Directors, KMPs or Body Corporate(s), which had a potential conflict with the interest of the Company at large. Accordingly, the disclosure of RPTs as required under the provisions of Section 134(3)(h) of the Act in Form AOC-2 is not applicable. The Directors draw attention of the Members to Notes to the Financial Statements which sets out related party disclosures.

RISK MANAGEMENT FRAMEWORK

The Company has constituted a Risk Management Committee ("RMC") in terms of the requirements of Regulation 21 of the Listing Regulations and has also adopted a Risk Management Policy. The details of the

RMC are disclosed in the Corporate Governance Report. The Company and its subsidiaries have a risk management framework and Board members are informed about risk assessment and minimization procedures and periodical review to ensure management controls risk by means of a properly designed framework. The AC is kept apprised of the proceedings of the meetings of the RMC and also apprised about the risk management framework at its subsidiaries. The Company, as it advances towards its business objectives and goals, is often subjected to various risks. Credit risk, market risk, liquidity risk and operational risk are some of the risks that your Company is exposed to and details of the same are provided in the Management Discussion and Analysis Report.

PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE

The Company has in place a policy for prevention, prohibition and redressal of sexual harassment at workplace. Further, the Company has constituted an Internal Committee under the Sexual Harassment of

Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, where employees can register their complaints against sexual harassment. Appropriate reporting mechanisms are in place for ensuring protection against sexual harassment and the right to work with dignity.

During the year under review, the Company has not received any complaints in this regard.

ANNUAL RETURN AS PRESCRIBED UNDER THE ACT

The Annual Return in Form MGT-7 as required under Section 92(3) of the Act is available on the website of the Company at www.ltfs.com/investors.html

(click-Annual Return).

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. Further, no penalties have been levied by RBI / any other Regulators during the year under review.

RBI REGULATIONS

The Company has complied with all the applicable regulations of RBI as on March 31, 2021.

OTHER DISCLOSURES

During the year under review, the Company has not obtained any registration/ license / authorisation, by whatever name called from any other financial sector regulators.

ACKNOWLEDGEMENT

The Directors express their sincere gratitude to the RBI, Securities and Exchange Board of India, BSE Limited, National Stock Exchange of India Limited, Ministry of Finance, Ministry of Corporate Affairs, Registrar of Companies, other government and regulatory authorities, lenders, financial institutions and the Companys bankers for the ongoing support extended by them. The Directors also place on record their sincere appreciation for the continued support extended by the Companys stakeholders and trust reposed by them in the Company. The Directors sincerely appreciate the commitment displayed by the employees of the Company and its subsidiaries across all levels, for exhibiting outstanding performance during such challenging times.

For and on behalf of the Board of Directors L&T Finance Holdings Limited

Shailesh Haribhakti Dinanath Dubhashi
Chairperson Managing Director &
DIN: 00007347 Chief Executive Officer
DIN: 03545900
Place: Mumbai
Date: June 24, 2021