Muthoot Finance Ltd Directors Report.

Dear Stakeholders,

Directors of your Company have pleasure in presenting the 23rd Annual Report of Muthoot Finance Limited ("Company") together with the audited financial statements (standalone and consolidated) for the year ended March 31, 2020.

1.Financial Summary

The financial performance of your Company for the year ended March 31, 2020 are summarised below:

Standalone

Consolidated

Particulars Year Ended March 31, 2020 Year Ended March 31, 2019 Year Ended March 31, 2020 Year Ended March 31, 2019
Total Income 87,227.91 68,806.30 97,072.67 76,010.49
Total Expenses 46,653.81 38,038.14 54,468.76 43,415.21
Profit Before Tax 40,574.10 30,768.16 42,603.91 32,595.28
Tax expense 10,391.10 11,046.74 10,917.10 11,565.67
Profit for the year 30,183.00 19,721.42 31,686.81 21,029.61
Equity 115,718.13 97,927.19 118,292.10 99,312.00
Total Liabilities 388,878.41 282,759.81 430,524.82 318,035.99
Total Assets 504,596.54 380,687.00 548,816.92 417,347.99

2. Dividend

Your Board has declared an interim dividend at Rs. 15 per equity share (150% of face value) for the financial year 2019-20 on March 17, 2020. The dividend payout amount including the dividend distribution tax amounted to Rs. 7,249.38 millions representing 24.02% of profit after tax for the year. Directors of your Company decided to plough back the remaining profit after tax for business activities during the Financial Year.

The Dividend Distribution Policy required as per Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and approved by the Board is available on the website of the Company at www.muthootfinance.com/ policy/policy-investor and is attached to this report as Annexure 1.

The list of unpaid dividend is available on the Companys website www.muthootfinance.com. Shareholders are requested to check the said list and if any dividend due to them is remaining unpaid in the said list. Shareholders can approach the Company or Registrar and Transfer Agent of the Company for release of unpaid dividend.

As per Section 124(5) of the Companies Act, 2013, the Company is required to transfer the dividend remaining unclaimed for a period of seven years from the date of transfer to unpaid dividend account to the Investor Education and Protection fund ("IEPF"). Moreover, the

Company is also required to transfer all shares in respect of which the unclaimed dividend has been transferred to IEPF to the separate demat account of IEPF. No claim will lie on Company on account of dividend after the dividend is transferred to IEPF. During the financial year 2019-20, Company had transferred 5,186 equity shares to IEPF.

3. Transfer to Reserves

Your Board of Directors has transferred an amount of Rs. 5,273.28 millions to the Statutory Reserve maintained under Section 45 IC of the RBI Act, 1934. Post transfer of profits to reserves and distribution of dividend, your Board proposes to retain Rs. 31,971.63 millions in the Retained Earnings.

4. Companys Performance

During the Financial Year, Company saw 53% increase in its profitability with a net profit of Rs. 30,183.00 millions for the year ended March 31, 2020 as compared to Rs. 19,721.42 millions for the year ended March 31, 2019. Profit before tax increased by 32% to Rs. 40,574.10 millions. Total Income has increased from Rs. 68,806.30 millions for the year ended March 31,2019 to Rs. 87,227.91 millions for the year ended March 31, 2020 which is mainly due to increase in Interest Income of the Company. Interest income of the Company increased to Rs. 85,644.00 millions from previous years interest income of Rs. 67,570.12 millions. Loan Assets Portfolio of the Company increased by Rs. 73,644.85 millions during the year reaching Rs. 416,106.05 millions as on March 31, 2020

as against Rs. 342,461.20 millions as on March 31, 2019. The Return on Average Loan Asset stood at 8.11% in FY20 as against 6.31% in FY19. Interest yield was 23.03% as compared to 21.63% in FY19.

Net Interest Margin was 15.52% as compared to 14.47% in FY19. The Company remitted to exchequer Rs. 12,857.55 millions as taxes.

5. Resource Mobilisation

(a) Non-Convertible Debentures:

Your Company successfully completed 20th, 21st, and 22nd Issue of Non-Convertible Debentures through Public Issue during FY20 raising Rs. 21,015.24 millions. Company has raised Rs. 14,250.00 millions through Private Placement of debentures during the financial year.

Subordinated Debts represents long term source of funds for the Company and the amount outstanding as on March 31, 2020 was Rs. 2,989.79 millions. It qualifies as Tier II capital under the Non-Banking Financial Company- Systemically Important Non- Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.

(b) External Commercial Borrowings

Your Company has issued 6.125% Senior Secured Notes amounting to USD 450 millions (equivalent to Rs. 31,881.63 millions) on October 31, 2019 and issued 4.4% Senior Secured Notes amounting to USD 550 millions (equivalent to Rs. 40,293.03 millions) on March 2, 2020 under a USD 2 billions Global Medium Term Note Programme pursuant to Regulation 144A/ Regulation S of the US Securities Act 1933. These Notes are listed on the International Securities Market of London Stock exchange.

(c) Bank Finance

Bank Finance remains an important source of funding for your Company. Commercial Banks continued their support to your Company during Financial Year.

As of March 31, 2020, borrowings from banks were Rs. 143,756.21 millions as against Rs. 129,781.58 millions in the previous year.

6. Credit Rating

The Company has debt credit ratings as below:

Domestic Ratings:

Credit Rating Agency Instruments Ratings
CRISIL Commercial Paper CRISIL A1+
Subordinated Debts CRISIL AA/Positive
Non-Convertible Debentures CRISIL AA/Positive
ICRA Commercial Paper [ICRA] A1+
Short Term Bank Borrowings [ICRA] A1+
Long Term Bank Borrowings [ICRA] AA/(Stable)
Subordinated Debts [ICRA] AA/(Stable)
Non-Convertible Debentures [ICRA] AA/(Stable)

During the year, your Company obtained for the first time credit ratings from three International Credit Rating agencies - Fitch Ratings, S&P Global Ratings and Moodys Investor Service. Their ratings stands as follows:

Credit Rating Agency Ratings
Fitch Ratings, BB(Negative)
S&P Global Ratings BB(Negative
Moodys Investor Service Ba2/(Negative)

7. Equity Share Issuances Employee Stock Options Schemes

During the year, your Company has allotted 3,76,010 equity shares of face value of Rs. 10/- each under Muthoot ESOP 2013 pursuant to exercise of 1,075 options of Rs. 10/- each for Loyalty Options and 374,935 options of Rs. 50/- each for Growth Options by Employees of the Company.

The disclosures as required under SEBI (Share Based Employee Benefits) Regulations, 2014 read with SEBI Circular CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 is attached to this report as Annexure 2. The same disclosure is available at Companys website www.muthootfinance.com/investors/disclosure-esop. Please refer note 46 of Notes forming part of Standalone Financial Statements for further disclosures on ESOP.

The Company does not have any scheme to fund its employees to purchase the shares of the Company.

Your Company has received the certificate from the Statutory Auditors of the Company certifying that the ESOP scheme is implemented in accordance with the applicable SEBI Guidelines/Regulations and is in accordance with the resolution passed by the members of the Company. The certificate would be placed at the Annual General Meeting for inspection by members.

The stock option schemes are in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and there have been no material changes to these plans during the Financial Year 2019-20.

8. Internal Audit and Financial Control

Over the years Company has evolved a robust, proper and adequate internal audit system in keeping with the size of the Company and its business model. Your Company has developed well documented internal audit and control system for meticulous compliance from all layers of the Company. The control system ensures that the Companys assets are safeguarded and protected.

The audit system also takes care to see that revenue leakages and losses to the Company are prevented and our income streams are protected. The control system enables reliable financial reporting.

Company has a well-structured Audit & Inspection department to perform timely and frequent internal audit to evaluate the adequacy of systems and procedures and also to evaluate the status of compliance to Companys guidelines and other statutory requirements. The department is manned by a team of over 900 dedicated personnel who constantly engaged in safeguarding your Companys assets, ensures the quality of assets pledged and also evaluates the adequacy of risk management systems at its operating units. In keeping with the huge network and geographic outreach of the operating units spread across the length and breadth of the country, the audit functions have been decentralised through setting up of Regional Audit offices in important Regional centers. The Regional Audit Offices exercise field level control over the branches through onsite visits and online audit systems. The field level Auditors report to Regional Audit offices who in turn shares their findings with the Audit & Inspection Department at the Registered Office of the Company.

Audit Committee of Board of Directors is apex Audit Authority of the Company. Under the present Audit Architecture, the Internal Audit Department reports to the Audit Committee regarding significant audit findings and also preventive and corrective measures to protect the interests of the Company. The audit Committee undertakes an evaluation of the adequacy and effectiveness of internal control systems. It also oversees the implementation of audit recommendations especially involving the risk management measures.

In addition to reviewing the internal control systems put in place by the Audit & Inspection Department, the Audit Committee also imparts guidance and crucial directions for upgradation of systems and controls on ongoing basis.

At present the Audit system prevalent in the Company is completely autonomous function and built on best corporate governance framework.

Reference is invited to Note 50 of Notes forming part of the standalone financial statements contained in the annual report regarding frauds committed by employees/customers of the Company which are dealt with Reserve Bank of India guidelines and are in nature of operation related forms due to nature of business of the Company. Company has taken or is in the process of taking disciplinary/ legal action against such employees/customers.

9. Human Resources

As on March 31, 2020, the Company had 25,554 employees in its rolls at various level of organisational structure. Your Company is always committed in providing employees with ample opportunities to learn and advance in career. Your company continued its efforts to attract the best talent from the market by following a robust talent acquisition system.

Our employees are the core strength of the organisation and represent our greatest assets and best brand ambassadors. Companys HR practices ensure a workplace that is fair, equitable, and responsive to the needs and aspirations of our employees.

Your Company continued its effort to train the employees at all levels by conducting multiple training programs to employees to help in their development. Various training programs include product/process related trainings, soft skill trainings, leadership trainings and certification trainings for different group of employees. Company imparts training through two premium training establishments of the Company and several Regional Learning Centers spread across the country.

Your Company has established a robust performance management system and use Performance Score Card system to grade performance of each of the employees.

A quarterly PSC report is prepared with all the grades and shared with supervisory and non-supervisory cadre in respective regions. This enables the regional leaders to identify the performers in each region and plan action accordingly for an orderly development of nonperformances. Company has been taking various steps to promote eligible employees to the next level based on the above performance assessment model.

Your Company has continued to engage with all its employees throughout the year and continued to connect with the employees at all levels. Apart from offering the best remuneration package in the industry in which we operate, your Company offers various other benefits to employees including Employee Stock Options and various Statutory and Non Statutory Staff Welfare Measures. All eligible employees are covered under statutory provisions including EPF, ESI, Maternity Benefits, Gratuity etc. Employees were enrolled under the National Pension System (NPS) with Company also making contribution along with their contribution.

10. Major Marketing & Promotion Initiatives

(a) Built stronger ties with Shri Amitabh Bachchan & Chennai Super Kings:

Company continued its strong association with one of Bollywoods greatest superstars and legendary personalities Padma Vibhushan Shri Amitabh Bachchan Ji for the third year thereby sustaining the momentum so gathered from two years of association.

Company also continued its ongoing Principal Team Partnership with one of IPLs most successful teams - Chennai Super Kings, led by the legendary former Indian Captain Padma Bhushan Shri M S Dhoni. The

CSK association not only helped us reach closer to our customers but also millions of cricket fans in India and others parts of the world.

Overall, these two partnerships have enabled the brand reach greater heights and create a strong brand recall amongst its existing and prospective target audiences.

(b) Launched Integrated Marketing Campaign with 1 Visit Loan Series:

Taking forward our association with Mr. Bachchan, Company also launched a mega integrated marketing campaign across all ATL & BTL channels to showcase the unique aspect of disbursing gold loans in just one visit. Titled Muthoot Finance "One Visit Loan", the campaign was a series of 4 different communications showcasing Mr. Bachchan in different regional characters. The campaign received overwhelming response from customers, media and all other stakeholders equally.

(c) Launched South-centric Campaigns with Shri Amitabh Bachchan & Smt. Revathy:

Company launched the "Dont Break Your Savings" Campaign across South India showcasing Shri Amitabh Bachchan and Smt. Revathy in an interesting storyline. The campaign encouraged people to avail a Gold Loan to fulfil their dreams. It created awareness amongst people to avoid breaking their fixed deposits and other savings and instead utilise their unused gold ornaments to move ahead in life. Company also launched "Best Gold Loan Deal" Campaign across South India, spreading the message of the most superior gold loan deal by Muthoot Finance, Indias No 1 Most Trusted Financial services brand.

(d) Flagged-off "The Muthoot Group Nandanam Metro Station" in Chennai:

After successfully completing the semi-naming rights led branding at "The Muthoot Group Greater Kailash Metro Station" in Delhi, we took a step forward and repeated a similar feat at Chennai. With humble pride, we became the first brand to collaborate with Chennai Metro Rail Limited (CMRL) to launch its first semi-naming rights led branding station called "The Muthoot Group Nandanam Metro Station". Situated in the heart of Chennai City, The Muthoot Group Nandanam Metro Station beautifully depicts our strong brand stature and distinguished credentials in a vibrant manner.

(e) Launched Chennai Super Kings-led Campaign for Other Financial Products:

Leveraging our association as a Principal Team Partner for Chennai Super Kings, the Company also carried out a series of communications to showcase our range of other financial products such as Home Loan, Personal Loan, Insurance, Money Transfer, Gold Coins, Foreign Exchange, Travel Services and Leisure & Hospitality.

These uniquely crafted communications were amplified on digital channels and helped reinforce the Groups strong credentials as a Financial Supermarket.

(f) Stadium Branding at M A Chidambaram Stadium, Chennai:

Taking our CSK association further, we also carried out extensive stadium branding of M A Chidambaram Stadium, Chennai to reinforce our strong partnership with the team during IPL 2019 Season.

(g) Awards & Recognitions:

a. Momentum gained last year was sustained this year with a number of awards and accolades bagged by the Marketing Department. The Muthoot Group received the prestigious "Economic Times BFSI Excellence Award 2019 for Mass Consumer Outreach" for the "Muthoot Finance Vishwaas Ki Tijori" initiative carried out at the Kumbh Mela in Prayagraj in Mar19.

b. Our Kumbh Initiative Muthoot Finance Vishwaas Ki Tijori also bagged Gold in the Innovative Creation of a New Medium Category at the 10th edition of "NEONS Out Of Home Awards 2020"

c. Muthoot Finance was also awarded the coveted Primetime Awards 2019 in the Banking, Financial Services & Insurance category for its creative & integrated marketing campaign "Soch Badaliye Aur Life Mein Aagey Badhiye"

11. Capital Adequacy

Your Companys Capital Adequacy Ratio as of March 31, 2020 stood at 25.47% of the aggregate risk weighted assets on balance sheet and risk adjusted value of the off-balance sheet items, which is well above the regulatory minimum of 15%. Out of the above, Tier I capital adequacy ratio stood at 24.30% and Tier II capital adequacy ratio stood at 1.17%.

12. Public Deposits

The Company is a Systemically Important NonDeposit Taking NBFC and hence has not accepted any public deposits.

13. RBI Guidelines

Your Company has complied with all the applicable regulations prescribed by the Reserve Bank of India from time to time. Please refer note 52,53 and 54 of Notes forming part of Standalone Financial Statements for additional disclosures required under RBI Guidelines applicable to the Company.

14. Subsidiaries/ Associates/ Joint Ventures

As on March 31, 2020, your Company had seven subsidiaries namely M/s. Asia Asset Finance PLC,

M/s. Muthoot Homefin (India) Limited, M/s. Muthoot

Insurance Brokers Private Limited, M/s. Belstar Microfinance Limited, M/s. Muthoot Money Limited,

M/s. Muthoot Asset Management Private Limited and M/s. Muthoot Trustee Private Limited. Your Companys subsidiaries have been contributing to the overall growth of your Company during the year. As per Section 136 of the Companies Act, 2013 the audited financial statements, including the consolidated financial statements of your Company and the audited accounts of each of its subsidiaries are available on the website of the

Company at www.muthootfinance.com/corporate/our_ subsidary. The above documents will also be available for inspection at the Registered Office of the Company during business hours.

The Board of Directors of your Company has formulated a policy on material subsidiary, which is displayed on the web site of the Company at www.muthootfinance.com/ policy/policy-investor. As on March 31, 2020, Company did not have any material subsidiary.

Financial Performance & position of Subsidiaries

a. Asia Asset Finance PLC:

Asia Asset Finance PLC, (AAF), a Company listed in Colombo Stock Exchange, is a subsidiary of your Company from December 31, 2014. AAF, where your Company holds 72.92% of equity capital, is a registered Financial Company with Central Bank of Sri Lanka and is mainly engaged in Vehicle Finance and Hire Purchase Activities. The Company which has also started business relating to lending against collateral of gold jewellery and micro finance is presently contributing a significant part of loan portfolio and income. AAF has operations across Sri Lanka with 29 branches as on March 31, 2020 AAF has made considerable progress in its business. Its major financial parameters for Financial Year 2019-20 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions)LKR/INR as on 31.03.2020 -0.388758 / Average Exchange Rate -0.392860 1,309.25 36.66 27.56 844.17 5891.47 5047.30
Amounts in LKR (in millions) 3,332.62 93.32 70.15 2,171.45 15,154.59 12,983.14

AAF increased its loan portfolio during the year by 10% at LKR 13,838.55 millions. Total Income for FY20 stood at LKR 3,332.62 millions as against previous year total income of LKR 2,868.76 millions. It generated a profit after tax of LKR 70.15 millions during FY20 as against previous year profit after tax of LKR 100.93 millions.

b. Muthoot Homefin (India) Ltd:

M/s. Muthoot Homefin (India) Ltd (MHIL), a registered Housing Finance Company licensed by National Housing Bank is a wholly owned subsidiary of your Company. Its major financial parameters for Financial Year 2019-20 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR 2,876.00 424.37 317.77 4,260.05 18,849.53 14,589.48
(in millions)

MHIL increased its loan portfolio by Rs. 638.13 millions at Rs. 19,769.44 millions during the year. Total income for Financial Year 2019-20 stood at Rs. 2,876.00 millions as against previous year total income of Rs. 2257.29 millions. It achieved a profit after tax of Rs. 317.77 millions in Financial Year 2019-20 as against previous year profit of Rs. 362.65 millions.

c. Muthoot Insurance Brokers Private Limited:

Muthoot Insurance Brokers Private Limited (MIBPL), is an unlisted Private Limited Company holding a license to act as Direct Broker from Insurance Regulatory and Development Authority of India (IRDA) since 2013. MIBPL is a Wholly- Owned Subsidiary Company of your Company. Its major financial parameters for Financial Year 2019-20 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR 237.14 140.62 103.98 530.64 541.79 11.15
(in millions)

MIBPL generated a First year premium collection amounting to Rs. 2,059.02 millions during Financial Year 2019-20 as against Rs. 1,737.66 in the previous year. It generated a Profit after Tax of Rs. 103.98 millions during Financial Year 2019-20 as against Rs. 150.46 millions in the previous year.

d. Belstar Microfinance Limited:

M/s. Belstar Microfinance Limited ( BML) is a micro finance Company. At end of the Financial Year 2019-20, your Company holds 70.01% of the equity capital of BML. Its major financial parameters for Financial Year 2019-20 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR 5,007.47 1,332.45 989.99 4,978.28 25,187.88 20,209.60
(in millions)

BML grew its loan portfolio during Financial Year 2019-20 by 43% reaching Rs. 26,310.27 millions. It achieved a profit after tax of Rs. 989.99 millions during Financial Year 2019-20 as against previous year profit after tax of Rs. 728.53 millions. Its Stage III Asset on Gross Loan Asset % as on March 31, 2020 stood at 0.91%.

e. Muthoot Money Limited

M/s. Muthoot Money Ltd (MML), a registered Non-Banking Finance Company licensed by Reserve Bank of India is a subsidiary of your Company. During the Financial Year 2019-20, your Company acquired 100% of the equity capital making it wholly owned subsidiary. Its major financial parameters for Financial Year 2019-20 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR 703.62 38.66 26.90 1,061.65 5,384.98 4,323.33
(in millions)

MML increased its loan portfolio by Rs. 1,982.37 millions at Rs. 5,089.78 millions during the year. Total income for Financial Year 2019-20 stood at Rs. 703.62 millions as against previous year total income of Rs. 156.19 millions. It achieved a net profit of Rs. 26.90 millions in Financial Year 2019-20 as against previous year profit of Rs. 2.82 millions.

f. Muthoot Asset Management Private Limited

Your Company has incorporated a wholly owned subsidiary M/s. Muthoot Asset Management Private Limited ("MAMPL") which is yet to commence commercial operations. Its major financial parameters for Financial Year 2019-20 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR 84.51 70.28 50.88 1,053.11 1,088.62 35.51
(in millions)

g. Muthoot Trustee Private Limited

Your Company has incorporated a wholly owned subsidiary M/s. Muthoot Trustee Private Limited ("MTPL") which is yet to commence commercial operations. Its major financial parameters for Financial Year 2019-20 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR 757.52 (99.41) (130.27) 9872.49 9897.49 25.00
(in thousands)

The statement containing the salient features of the financial statement of your Companys Subsidiaries is attached as Annexure to Standalone Financial Statements of the Company as required under Rule 5 of The Companies (Accounts) Rules 2014.

There are no other Companies which have become or ceased to be Subsidiaries/ Associates/ Joint Ventures of the Company during the Financial Year 2019-20.

15. Particulars Of Loans, Guarantees Or Investments Under Section 186 of The Companies Act, 2013

Pursuant to Section 186(11)(a) of the Companies Act,

2013 (the ‘Act) read with Rule 11(2) of the Companies (Meetings of Board and its Powers) Rules, 2014, the loan made, guarantee given or security provided in the ordinary course of business by a Non- Banking Financial Company (NBFC) registered with Reserve Bank of India are exempt from the applicability of provisions of Section 186 of the Act. As such the particulars of loans and guarantee have not been disclosed in this Report. The details of the Investments of the Company are furnished under Note 9 of Notes forming part of the Standalone Financial Statements for the year ended March 31, 2020.

16. Extract of Annual Return

Extract of Annual Return as required under Companies Act, 2013 is annexed as Annexure 3.

17. Consolidated Financial Statements

The audited consolidated financial statements of the Company along with its subsidiaries AAF, MHIL, BML, MML, MAMPL, MTPL and MIBPL prepared in accordance with the IndAS to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules,

2014 and the relevant provisions of the Companies Act, 2013, is provided in the Annual Report.

18. Risk Management and Risk Management Policy

Your Company has a Board approved Risk Management Policy which has laid down a framework for identifying, assessing, measuring various elements of risk involved in

the business and formulation of procedures and systems for mitigating such risks.

Risk Management Committee of the Board of Directors of your Company constituted in accordance with the Reserve Bank of India guidelines has overall responsibility for overseeing the risk management activities of the Company, approving measurement methodologies and appropriate risk management procedures across the organisation.

The Risk Management Committee was reconstituted on November 13, 2019 and the Committee currently comprises of:

Name of the Director Designation in Nature of
the Committee Directorship
Jose Mathew Chairman Independent Director
V A George Member Independent Director
George Alexander Muthoot Member Managing Director

Risk Management Department periodically places its report on risk management to the Risk Management and Audit Committee of the Board of Directors. During the year, your Company has incorporated various practices and suggestion as directed by the Risk Management and Audit Committee which helped the Company in attaining an improved vigilance and security system, improved security of gold jewellery and cash, improved system of grading of branches, Regional Offices etc. IT based risk management initiatives are discussed in section related to Technology Absorption in this report of Board of Directors.

In line with the requirements of RBI notification, your Company has appointed Chief Risk Officer to oversee the risk management practices within the organisation.

19. Corporate Social Responsibility

Your Board has constituted a Corporate Social Responsibility (CSR) & Business Responsibility Committee to support the Company in achieving the CSR objectives of the Company. The CSR and Business

Responsibility Committee of the Board of Directors was reconstituted on September 28, 2019 and currently the Committee comprises of the following members:

Name of the Director Designation in the Committee Nature of Directorship
Justice (Retd) Jacob Benjamin Koshy Chairman Independent Director
Jose Mathew Member Independent Director
George Alexander Muthoot Member Managing Director

The Companys CSR policy is committed towards CSR activities as envisaged in Schedule VII of the Companies Act, 2013. The Details of CSR policy of the Company are available on the website of the Company at www. muthootfinance.com/policy/policy-investor. The Annual Report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached to this report as Annexure 4.

In terms of Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility) Rules,

2014 as amended ("CSR Rules") and in accordance with CSR Policy, during the year, the Company has spent Rs. 559.10 millions towards CSR projects/ programs.

20. Business Responsibility Report

The Securities and Exchange Board of India (Listing Obligations and Disclosures Requirements) Regulations,

2015 mandates the inclusion of the Business Responsibility Report ("BRR") as part of the Annual Report for top 500 listed entities based on their market capitalisation. The BRR is attached to this report as Annexure 5.

21. Particulars of Contracts or Arrangements made with Related Parties

The Board of Directors of your Company has formulated a policy on related party transactions, which is displayed on the web site of the Company at www. muthootfinance.com/policy/policy-investor. This policy deals with review of the related party transactions and regulates all transactions between the Company and its Related Parties.

Prior omnibus approval is obtained for related party transactions, under Section 188 (1) of the Companies Act, 2013, which are of repetitive nature and entered in the ordinary course of business and at arms length. All related party transactions are placed before the Audit Committee for review and approval.

All transactions or arrangements with related parties referred to in Section 188 (1) of the Act, entered into

during the year were on arms length basis or were in ordinary course of business or with approval of the Audit Committee. During the year, your Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. Further, there were no material related party transactions which required approval of shareholders as required under Chapter IV of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The disclosure of related party transactions as required under Section 134(3) (h) of the Companies Act, 2013 in Form AOC 2 is attached to this report as Annexure 6.

The details of related party and transactions with the related parties entered into during the financial year are disclosed in Notes to Standalone Financial Statements of the Company.

22. Audit Committee

The Audit Committee of the Board of Directors was reconstituted on November 13, 2019 and currently the Committee comprises of following members:

Name of the Director Designation in the Committee Nature of Directorship
Jose Mathew Chairman Independent Director
V A George Member Independent Director
Pamela Anna Mathew Member Independent Director
George Alexander Muthoot Member Managing Director

All recommendations of Audit Committee are accepted by your Board and details on Audit committee appear on the report on Corporate Governance.

23. Vigil Mechanism

To conduct affairs of your Company and its various constituents in a fair and transparent manner and as part of Vigil Mechanism, and providing whistle blowers a safe and reliable way of sharing information, your Company has formulated a Whistle Blower Policy in compliance with Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. There is graded reporting structure under the Policy and also provides provision for direct access to Chairman of Audit Committee. The whistle blower policy is available at website of the Company at www. muthootfinance.com/policy/policy-investors.

24. Listing

Equity Shares of your Company are listed on National Stock Exchange of India Ltd and BSE Ltd. Your Company has paid required listing fees to Stock Exchanges.

25. Changes in Directors and Key Managerial Personnel

The term of office of Mr. Jose Mathew and Justice Jacob Benjamin Koshy, as Independent Directors is getting completed at the ensuing 23rd Annual General Meeting. The Nomination and Remuneration Committee and the Board of Directors have recommended their reappointment for a second consecutive term as Independent Directors on the Board of Directors of the Company. Relevant resolutions and explanatory statements with respect to their reappointment forms part of the Notice of Annual General Meeting of the Company.

Mr. George Alexander Muthoot and Mr. George Thomas Muthoot, Directors of the Company retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment.

Term of office of Ms. Pamela Anna Mathew as Independent Director on the Board of the Company is expiring at the ensuing Annual General Meeting.

The Board places on record its sincere appreciation to Ms. Pamela Anna Mathew for the guidance and support extended during the two consecutive term of directorship in the Company.

Mr. Alexander M George was appointed as Whole Time Director for a period of 5 years with effect from September 30, 2015 and his present term is getting completed on September 30, 2020. Mr. Alexander M George is a key contributor in overall Management of the Company. His vast experience and his association would be of immense benefit to the Company and it is desirable to continue to avail his services as Whole Time Director. Your Board believes his re-appointment will benefit the Company through his role as Whole Time Director. Necessary resolution along with required disclosures for the re-appointment of Mr. Alexander M George as the Whole Time Director of the Company for a period of 5 years are included in the notice calling the Annual General Meeting of the Company.

Your Board has evaluated the eligibility criteria under RBI guidelines, Companies Act, 2013 and Listing Regulations, of all directors seeking re-appointment at the ensuing Annual General Meeting and recommends the respective re-appointments. Your Board believes that the proposal for re-appointment will have the support of shareholders. Necessary disclosures as required under the Listing Regulations and Companies Act, 2013 are provided in the notice calling the Annual General Meeting.

Mr. Rajesh A was appointed as the Company Secretary of the Company with effect from September 28, 2019 in place of Mr. Maxin James who resigned from the position of Company Secretary of the Company with effect from September 28, 2019.

26. Meetings of the Board

During the Financial Year 2019-20, your Board of Directors met seven times on April 05, 2019, May 13, 2019, August 12, 2019; September 28, 2019; November 13, 2019, February 14, 2020 and March 17, 2020.

Details of various meetings of the Board are given in the Corporate Governance Report which is a part of this report.

27. Declaration from Independent Directors

The Independent Directors have submitted necessary disclosures that they meet the criteria of independence as provided under Section 149(6) of Companies Act, 2013 and SEBI Regulations. A statement by Managing Director confirming receipt of this declaration from Independent Directors is annexed to this report as Annexure 7. There has been no change in the circumstances affecting their status as independent directors of the Company.

During the year under review, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company other than the sitting fees, commission, if any and reimbursement of expenses incurred for the purpose of attending the meetings of the Board or Committees of the Company.

28. Policy on Appointment and Remuneration of Directors and Performance evaluation of Board, Committees and Directors

a) Policy on Appointment and Remuneration of Directors

Board of Directors of your Company, on the recommendation of Nomination and Remuneration Committee, has formulated a policy for selection, appointment and remuneration of the directors, senior management personnel as required under Section 178(3) of Companies Act, 2013. Details of the said Policy is annexed to this report as Annexure 8.

The Nomination and Remuneration Committee which was reconstituted on September 28, 2019 comprises of the following directors:

Name of the Director Designation in the Committee Nature of Directorship
Jacob Benjamin Koshy Chairman Independent Director
Pamela Anna Mathew Member Independent Director
Jose Mathew Member Independent Director

Terms of reference of the Nomination and Remuneration Committee and other relevant details of Nomination and Remuneration Committee are provided in the Corporate Governance Report circulated along with this report.

b) Performance evaluation of Board, Committees and Directors

The SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 and the Companies Act, 2013 require the evaluation of the performance of the Board, its Committees and the individual directors. The Board carried out annual evaluation of its own performance, its Committees and individual Directors based on criteria and framework adopted by the Board and in accordance with existing regulations. The details of training, appointment, resignation and retirement of Directors, if any, are dealt with in the report of Corporate Governance. Brief details of profile of each Director appear in Annual Report of the Company.

c) Independent Directors Meeting

During the year, a meeting of Independent Directors was held on February 14, 2020 as required under Companies Act, 2013 and in Compliance with requirement under Schedule IV of the Act and as per requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and discussed matters specified therein.

29. Corporate Governance Report

Your Company has complied with the Corporate Governance norms as stipulated in Chapter IV of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. As per Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the detailed report on Corporate Governance is attached to this Report as Annexure 9.

30. Management Discussion and Analysis Statement

Management Discussion and Analysis on the business of the Company is attached to this Report as Annexure 10.

31. Conservation of energy, technology absorption, foreign exchange earnings and outgo:

The information pursuant to Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 is as follows:

a) Conservation of energy

Your Company being a Non-Banking Finance Company, its activities are not energy intensive. However, your Company has taken adequate measures for conservation of energy and usage of alternative source of energy, wherever required.

b) Technology Absorption

Your Company being a Non-Banking Finance Company, its activities do not require adoption of any specific technology. However, your Company has been in the forefront in implementing latest information technology and tools towards enhancing our customer convenience.

Few of the initiatives taken by the Company in information technology for improved business efficiency, ease of operation, improved risk management practice and for providing best stakeholders experience based are as follows:

API Integration: Application programming interface(API)s allow seamless and secure exchange of information between our systems and external ones.

This enables us to access essentially required data from connected external systems for integrating with our platforms so as to provide our customers seamless service on a realtime basis. During the year, API integrations could be successfully done with multiple Insurance, Money transfer and Payment gateways with the CBS system.

Mobile Apps Development

Company continued to develop and deploy user-friendly mobile apps to enable the customers and employees access various systems and do transactions securely with the flexibility of time and place. The following apps were developed and implemented during the year:

iMuthoot Phase- 2: Introduced new user interface to ensure better user experience to end customers . Addition of new functionalities such as bank account linking, enquiry on Home loan, Personal loan and Vehicle loan thru CRM for creating leads were enabled.

Door-to-Door Collections App: The app developed for door step collection is a flexible and user-friendly one for loan interest collection, installment collection, renewal, etc. The app is integrated with the CBS for real-time updation of transactions.

Sales App - SalesNxt application is used by Company loan sales team for generating instant leads, customer creation, and assessing gold loan requirements of customers. Geo-tagging facility integrated in the solution to map location and activities of the sales team anytime.

Loan@Home Customer Mobile application: The loan at home is an app-based digital service, through which a customer can apply for a gold loan using the Loan@ Home mobile app and web portal.

Ensuring Business Continuity during the Pandemic

Companys digitalisation initiatives proved beneficial in the times of Covid-19 spread. Since the mandatory lockdown due to Covid-19 pandemic, customers could continue doing all transactions online such as interest/ loan amount payment, top up of loan, etc except new pledge and release of ornaments.

All the critical business applications such as core banking solution (CBS), HR systems, etc were ensured running smoothly. The entire IT teams involved in monitoring and support are provided work from

home(WFH) with appropriate information security controls in place. Also to protect the data, VPN and DLP tools were used for the WFH client devises.

c) Total Foreign Exchange Earned: Rs. 9.19 millions Total Foreign Exchange Used : Rs. 288.49 millions

32. Audits

a) Statutory Audit under Section 139

On recommendation of Board of Directors of the Company, members of the Company appointed M/s. Varma & Varma, Chartered Accountants, Kochi (Firm Reg No. 004532 S) as Statutory Auditor of the Company at the 20th Annual General Meeting of the Company for a term of 5 consecutive years i.e. till the conclusion of 25th Annual General Meeting pursuant to Section 139 of the Companies Act, 2013.

Pursuant to notification issued by the Ministry of Corporate Affairs on May 07, 2018, amending Section 139 of the Companies Act 2013, the mandatory requirements for ratification of appointment of auditors by the members at every AGM does not arise.

The Auditors are eligible to continue as Auditors in accordance with the provisions of Section 141 of the Companies Act, 2013.

The Report given by M/s. Varma & Varma, Chartered Accountants, Statutory Auditors, on the financial statement of the Company for the year 2019-20 is part of the Annual Report.

b) Secretarial Audit under Section 204

The Board had appointed M/s KSR & Co., Company Secretaries LLP, Coimbatore to conduct Secretarial Audit for the Financial Year 2019-20. The Secretarial Audit report is annexed to this report as Annexure 11.

c) Explanations or comments by the Board on qualification, reservation or adverse remark or disclaimer on audits for financial year 2019-20

There are no qualifications, reservation or adverse remark or disclaimer on audits under Section 139 and Section 204 of Companies Act, 2013 for financial year 2019-20.

33. Reporting on Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Internal Complaints Committee constituted by your Company under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 looks into the complaints of aggrieved women employees, if any, and is instrumental in:

• promoting gender equality and justice and the universally recognised human right to work with dignity

• prevention of sexual harassment of women at the workplace

Details of cases reported to Internal Complaints Committee during the financial year 201920 are as under:

Number of complaints filed during the financial year 01
Number of complaints disposed of during the financial year Nil
Number of complaints pending as on end of the financial year 01

34. Personnel

The Disclosure required under the provisions of Section 197 of the Companies Act, 2013 read with Rule 5 (1) and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this report as Annexure 12.

35. Significant and material Orders passed by Regulators or Courts or Tribunals

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

36. Material Changes and Commitments affecting the financial position of the Company between the end of the financial year to which Financial Statements relate and the date of the report

No material changes and commitments affecting the financial position of your Company occurred between the end of the financial year to which this financial statements relate and the date of this report.

37. Directors Responsibility Statement

In accordance with the provisions of Section 134(5) of the Companies Act, 2013 with regard to Directors Responsibility Statement, Directors state that.

(a) in the preparation of the annual accounts, the applicable Indian Accounting Standards had been followed. There were no material departures from applicable Indian Accounting Standards;

(b) the directors had 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 at the end of the financial year and of the profit of the Company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

38. Disclosure pursuant to Part A of Schedule V of SEBI LODR

Disclosure pursuant to Part A of Schedule V read with Regulation 34(3) and 53(f) of SEBI is attached as Annexure 13 of this report.

39. Acknowledgement

Your Directors thank the Companys stakeholders in large including investors, customers, banks, financial

institutions, rating agencies, debenture holders, debenture trustees and well-wishers for their continued support during the year. Your Directors place on record their appreciation of the contribution made by the employees of your Company and its subsidiaries at all levels. Your Companys consistent growth was made possible by their hard work, solidarity, cooperation and support. The Board sincerely expresses its gratitude to Reserve Bank of India, Securities and Exchange Board of India and Ministry of Corporate Affairs for the guidance and support received from them including officials there at from time to time.

40. Forward Looking Statements

This Report(s) contains certain forward-looking statements within the provisions of Listing agreements and hence reasonable caution is to be exercised by stakeholders while relying on these statements.

For and on behalf of the Board of Directors
Sd/- Sd/-
M G George Muthoot George Alexander Muthoot
Chairman Managing Director
Place: Kochi,
Date: September 05, 2020
Registered Office:
2nd Floor, Muthoot Chambers,
Opposite Saritha Theatre Complex,
Banerji Road,
Kochi - 682 018