L&T Finance Holdings Ltd Directors Report.

Dear Members,

The Directors of your Company have the pleasure in presenting the Eleventh Annual Report together with the audited financial statements for the financial year ("FY") ended March 31, 2019.

FINANCIAL RESULTS

The summary of the Companys financial performance, both on a consolidated and standalone basis, for FY 2018-19 as compared to the previous FY 2017-18 is given below:

(र cr)
Particulars

Consolidated

Standalone

2018-19 2017-18 2018-19 2017-18
Total income 13,301.52 10,266.26 526.48 477.82
Less: Total expenses 10,249.54 8,820.50 222.45 185.12
Profit before tax 3,051.98 1,445.76 304.03 292.70
Less: Tax expense 819.95 168.24 36.97 26.65
Profit after tax 2,232.03 1,277.52 267.06 266.05
Add: Share in profit of associate company - 0.83 - -
Net profit after tax and share in profit of associate company 2,232.03 1,278.35 267.06 266.05
Profit for the year (owners of the Company) 2,226.30 1,254.68 267.06 266.05
Actuarial gain on defined benefit plan (gratuity) net of income tax (1.50) (0.94) (0.32) 0.62
Total comprehensive income for the year (owners of the Company) 2,224.80 1,253.74 266.74 266.67
Add: Balance brought forward from previous year 1,300.94 580.68 189.57 142.21
Balance Available 3,525.74 1,834.42 456.31 408.88
Appropriations
Dividend paid 199.71 145.74 199.70 145.74
Additional tax on dividend paid 70.67 76.73 - -
Transfer to Reserve u/s 45-IC of Reserve Bank of India Act, 1934 295.32 176.66 53.41 73.57
Transfer to Debenture Redemption Reserve 62.41 48.07 - -
Transfer to Reserve u/s 36(1 )(viii) of Income Tax Act, 1961 114.35 85.62 - -
Transfer to Reserve u/s 29-C of National Housing Bank Act, 1987 11.87 0.66 - -
Surplus in the Statement of Profit and Loss 2,771.41 1,300.94 203.20 189.57

FINANCIAL PERFORMANCE

Your Company has adopted Indian Accounting Standards ("Ind AS") pursuant to notification dated March 30, 2016 issued by the Ministry of Corporate Affairs ("MCA") and under Section 133 of the Companies Act, 2013 (the "Act") read with the Companies (Indian Accounting Standards) Rules, 2015 from April 1, 2018 and the effective date of such transition is April 1, 2017. Such transition has been carried out from the erstwhile Accounting Standards notified under the Act, read with relevant rules issued thereunder and guidelines issued by the Reserve Bank of India ("RBI") (collectively referred to as the "Previous GAAP"). The figures have been presented in accordance with the format prescribed for financial statements for NBFC whose financial statements are drawn up in compliance with the Companies (Indian Accounting Standards) Rules, 2015, in Division III of Notification No. GSR1022 (E) dated Octobeर 11, 2018, issued by MCA.

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 grew by 29.57% from र 10,266.26 cr in FY 2017-18 to र 13,301.52 cr in FY 2018-19.

• Profit before taxes grew from र 1,445.76 cr in FY 2017-18 to र 3,051.68 cr in FY 2018-19.

• Profit for the year attributable to owners of the Company also grew from R 1,254.68 cr in FY 2017-18 to र 2,226.30 cr in FY 2018-19.

During the year, the net loan book size grew from र 77,088.34 cr to र 91,324.63 cr reflecting a growth of 18.47%.

The Average Assets Under Management ("AAUM") in the Mutual Fund business stood at र 70,944.36 cr for the quarter ended March 31, 2019 as against र 65,931.65 cr for the quarter ended March 31, 2018, reflecting a growth of around 8%.

The Assets Under Service ("AUS") of the Wealth Management business stood at R 28,164.05 cr for the quarter ended March 31, 2019 as against र 18,353.66 cr for the quarter ended March 31, 2018, reflecting a growth of around 53%.

Standalone

• Total income grew by 10.18% from र 477.82 cr in FY 2017-18 to र 526.48 cr in FY 2018-19.

• Profit before taxes grew from र 292.70 cr in FY 2017-18 to र 304.03 cr in FY 2018-19.

• Profit for the year also grew from र 266.05 cr in FY 2017-18 to र 267.06 cr in FY 2018-19.

Appropriations

The Company proposes to transfer र 53.41 cr (previous year र 73.57 cr) to Special Reserve created u/s 45-IC of the Reserve Bank of India Act, 1934.

The Company is not required to maintain cost records as per the provisions of Section 148(1) of 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

There were no 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 Companys website at https://www. ltfs.com/investors.html.

The Board of Directors had declared and paid an interim dividend @ 9.00%, 8.50%, 8.35%, 8.15% and 8.95% per share (on a pro rata basis for the issuances made during the year), as applicable, on the five series of Cumulative Compulsorily Redeemable Non-Convertible Preference Shares ("CCRPS") of face value of र 100 each of the Company, during FY 2018-19, entailing an outflow of र 88.60 cr (excluding Dividend Distribution Tax).

The Board of Directors is pleased to recommend a final dividend of र 1 per Equity Share of र 10 each (previous year र 1 per Equity Share) subject to approval of the Members in the ensuing Annual General Meeting ("AGM"). In terms of Ind AS-10, events after the reporting period as notified by the MCA, the proposed dividend of र 199.88 cr is not recognised as liability as on March 31, 2019.

The dividend, if approved at the ensuing AGM, would be paid to those Members whose names appear in the Register of Members / Beneficial Owners maintained by the depositories as stated in Notice of the ensuing AGM.

CREDIT RATING

During the year under review, CARE Ratings Limited ("CARE"), ICRA Limited ("ICRA") and India Ratings and Research Private Limited ("India Ratings") reviewed the ratings on various debt instruments of the Company.

CARE reaffirmed its rating on the Non-Convertible Debentures ("NCD") at "CARE AAA / Stable" (Triple A; Outlook: Stable by CARE) and the rating on CCRPS was reaffirmed at "CARE AAA (RPS) / Stable" (Triple A [Redeemable Preference Shares]; Outlook: Stable by CARE). CARE has also reaffirmed the rating on the commercial papers issued by the Company at "CARE A1+" (A One Plus by CARE).

ICRA upgraded its ratings on NCDs to "ICRA AAA / Stable" (Triple A; Outlook: Stable by ICRA) from "ICRA AA+ / Stable" (Double A Plus; Outlook: Stable by ICRA). ICRA has also reaffirmed the rating on the commercial papers issued by the Company at "ICRA A1+" (A One Plus by ICRA).

India Ratings has reaffirmed its rating on NCDs at "IND AAA / Stable" (Triple A; Outlook: Stable by India Ratings) and a rating of "IND A1+" (A One Plus by India Ratings) to the commercial paper issued by the Company.

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.

SHARE CAPITAL

During the year under review, the Company has issued 3,85,800 Equity Shares and 27,49,600 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.

During the year under review, to maintain adequate working capital including redemption of Preference Shares and funding the operation of the Company and that of its subsidiaries, the Company had issued 2,50,00,000 CCRPS of face value र 100 each for cash at par aggregating to र 250 cr on a private placement basis which were subsequently listed on BSE Limited in accordance with the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013.

During the year under review, 2,50,00,000 CCRPS amounting to र 250 cr, which were due for redemption were duly redeemed by the Company.

Pursuant to the allotment of Equity Shares under ESOP Scheme and CCRPS and subsequent redemption of CCRPS, the paid-up share capital of the Company was र 3,033.21 cr (including preference share capital of र 1,034.40 cr) as at March 31, 2019 as compared to र 3,030.08 cr (including preference share capital of र 1,034.40 cr) as at March 31, 2018.

INVESTMENT IN SUBSIDIARIES

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

Name of the subsidiary company Amount of capital subscribed (R cr)
L&T Infrastructure Finance Company Limited 265.39
L&T Capital Markets (Middle East) Limited 5.41

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 RBI dated Septembeर 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 Septembeर 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, Ms. Vaishali Kasture resigned from the Board of Directors due to personal reasons and other commitments and accordingly, ceased to be a Director of the Company with effect from May 29, 2018. Mr. Harsh Mariwala, an Independent Director whose term expired on March 31, 2019, did not seek re-appointment as an Independent Director of the Company due to other commitments and ceased to be an Independent Director effective April 1, 2019.

The Board places on record its appreciation of the valuable services rendered by Ms. Kasture and Mr. Mariwala during their tenure as Independent Directors of the Company.

During the year under review, the Company appointed Dr. (Mrs.) Rajani R. Gupte as an Independent Director in accordance with the provisions of Sections 149, 152 and 161 of the Act and Mr. Prabhakar B. as the Non-Executive Director in accordance with the provisions of Sections 152 and 161 of the Act, with effect from June 28, 2018, pursuant to approval of the Members at the Tenth AGM held on August 28, 2018.

Mr. S. V. Haribhakti and Mr. P. V. Bhide were appointed as Independent Directors of the Company at the Sixth AGM, held on July 24, 2014 for a term of 5 consecutive years, from April 1, 2014 to March 31, 2019. Pursuant to the provisions of Section 149 of the Act read with relevant rules made thereunder, an Independent Director can hold the office for a term of upto 5 consecutive years on the Board of a company, but is eligible for re-appointment on passing of a special resolution by the company, based on the report of evaluation of their performance for another term of upto 5 years. No independent director can hold office for more than two consecutive terms.

Further to the aforesaid and based on the recommendation of the Nomination and Remuneration Committee of the Company ("NRC"), the Board at its Meeting held on March 19, 2019 has approved the re-appointment of Mr. S. V. Haribhakti and Mr. P V. Bhide as Independent Directors for a second term of upto 5 consecutive years from April 1,2019 to March 31,2024, subject to the approval of the shareholders by way of a special resolution, and continuation of Mr. S. V. Haribhakti as the Non-Executive Chairman of the Company.

Section 152 of the Act provides that unless the Articles of Association provide for the 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 also available on the website of the Company at https://www.ltfs.com/investors.html.

Declaration by Independent Directors

All Independent Directors have submitted the declaration of independence, as required pursuant to the provisions of Section 149(7) of the Act, stating that they meet the criteria of independence as provided in Section 149(6) of the Act and Regulations 16(1)(b) and 25(8) of the SEBI Listing Regulations and are not disqualified from continuing / getting appointed as Independent Directors.

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 details relating to the familiarization programme are available on the website of the Company at https://www. ltfs.com/investors.html.

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, 2019, the Company had following KMPs:

1) Mr. Dinanath Dubhashi - Managing Director & Chief Executive Officer

2) Mr. Sachinn Joshi - Chief Financial Officer

3) Ms. Apurva Rathod - Company Secretary

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 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 https://www. ltfs.com/investors.html.

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; and

d) to guide on determination of remuneration of the Directors, Senior Management / KMPs and other employees.

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 the 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 Wholetime Director is subject to the provisions of Sections 196, 197, 198 and 203 of the Act read with Schedule V and rules thereunder. The NRC ensures that a person does 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; and

e) 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 a 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

NRC while determining and / or recommending the criteria for remuneration / remuneration for Directors, Senior Management / KMPs and other employees ensure 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 changes as mandated under regulatory provisions have been duly carried out in 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 has to be made.

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.

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.

The certificate from the Statutory Auditors, confirming compliance with the aforesaid provisions has been appended as Annexure A to this Report.

SUSTAINABILITY REPORT AND BUSINESS RESPONSIBILITY REPORT

The Company has issued its first Sustainability Report for FY 2018-19. The information disclosed is aligned to the Global Reporting Initiatives (GRI) Standards for sustainability reporting, and is in accordance with the core option. The principles applied for defining contents of the report and quality are as prescribed by the GRI Standards. The detailed Sustainability Report is available on the website of the Company at https://www. ltfs.com/investors.html.

Further, in terms of Regulation 34(2)(f) of the SEBI Listing Regulations, top 500 listed entities based on their market capitalisation as on March 31, 2019 are 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 has been hosted on the website of the Company at https://www. ltfs.com/investors.html. Any Member interested in obtaining a copy of the BRR may write to the Company Secretary of the Company at the registered office address.

REPORT ON CORPORATE GOVERNANCE

The Report on Corporate Governance for the year under review, is forming part of the Annual Report. The certificate 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. B. K. Khare & Co., Chartered Accountants (ICAI Firms Registration Numbeर 105102W) and M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (ICAI Firms Registration Number 117366W/W-100018) 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. Joint Statutory Auditors have confirmed that they are not disqualified from continuing as Auditors of the Company.

AUDITORS REPORT

The Auditors Report to the Members for the year under review does not contain any qualification. 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 to undertake the Secretarial Audit of the Company for FY 2018-19.

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 at the registered office of the Company during the business hours on any working day of the Company till the date of the ensuing AGM. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary at the registered office address.

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 at the group level 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 र 0.30 cr (previous year र 1.47 cr) towards professional fees and travelling expenses.

DEPOSITORY SYSTEM

The Companys Equity Shares are compulsorily tradable in electronic form. As on March 31, 2019, out of the Companys total equity paid-up share capital comprising of 1,99,88,12,360 Equity Shares, only 7,926 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/LAD- NRO/GN/2018/49 dated Novembeर 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 are requested to take necessary action to dematerialize their holdings.

SUBSIDIARY COMPANIES

The Company conducts its business through its subsidiaries in the various business segments. As of March 31, 2019, the Company had 12 subsidiaries (including step down subsidiaries).

L&T Capital Markets (Middle East) Limited, wholly owned subsidiary of the Company was incorporated under the Companies Law, Dubai International Financial Centre (DIFC) Law No. 2 of 2009 on July 1, 2018. Dubai Financial Authority Services Authority has granted a license to L&T Capital Markets (Middle East) Limited to operate as an authorized firm w.e.f. Decembeर 12, 2018.

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 https://www. ltfs.com/investors.html.

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 31,2019 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 L&T Financial Services Group ("LTFS") monitors and evaluates the efficacy and adequacy of the internal control system in the Company and its compliance with operating systems, accounting procedures and policies of the Company. 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 Audit Committee ("AC") of the Company from time to time.

BOARD MEETINGS

The details of the Board meetings held during FY 2018-19 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") Committee. The composition and terms of reference of the CSR 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 https://www.ltfs.com/csr.html. During the year under review, the Policy has been updated to include some components within the already approved thrust areas like providing aid to women entrepreneurs, digital financial inclusion and adding of sustainable development goals as per United Nations. 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 Chief Internal Auditor of LTFS acts as an Ombudsman. The role of Ombudsman is to review the grievance at the initial stage and in case the grievance is material, the same is forwarded to the Committee, for investigation. After investigation, the complaint with investigation report is forwarded to AC / Managing Director / Whole-time Director as the case may be. 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 https://www. ltfs.com/investors.html.

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 Companys website at https://www.ltfs.com/investors.html. 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 Board and Shareholders is as under:

a) 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.

b) Shareholders:

All material RPTs require prior approval of the shareholders, based on recommendation of the Board, through ordinary resolution passed at the general meeting.

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 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.

The related parties are abstained from voting on such resolutions whether the entity is a related party to the particular transaction or not.

• All RPTs that were entered into during FY 2018-19 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 SEBI Listing Regulations. The details of the same 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 subsidiaries.

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 work place. Further, the Company has constituted an Internal Complaints 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 AND RULES MADE THEREUNDER

The extract of Annual Return in Form MGT-9 as required under Section 92(3) of the Act and as prescribed in Rule 12 of the Companies (Management and Administration) Rules, 2014, is enclosed as Annexure F to this Report.

The Annual Return in Form MGT-7 as required under Section 92(3) of the Act shall be hosted on the website of the Company viz. https://www.ltfs.com/investors.html.

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 31,2019.

OTHER DISCLOSURES

During the year under review, except as specified in this Report, 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 Reserve Bank of India, 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, resulting in successful performance during the year.

For ; and on behalf of the Board of Directors
S. V. Haribhakti Dinanath Dubhashi
Place: Mumbai Chairperson Managing Director &
Date: April 28, 2019 DIN: 00007347 Chief Executive Officer
DIN: 03545900