muthoot finance ltd share price Directors report


Dear Members,

Your Board of Directors is pleased to share with you the 25th Annual Report of Muthoot Finance Limited ("Company") enumerating the business performance along with the Audited Financial Statements (standalone and consolidated) for the financial year ended March 31, 2022.

1. Financial Summary

The summarized standalone and consolidated results for the Company with the previous years figures are given in the table below:

in Millions

Standalone

Consolidated

Particulars Year Ended March 31, 2022 Year Ended March 31, 2021 Year Ended March 31, 2022 Year Ended March 31, 2021
Total Income 1,10,983.93 1,05,743.59 1,22,374.62 1,15,701.96
Total Expenses 57,890.39 55,678.46 68,272.75 64,387.16
Profit Before Tax 53,093.54 50,065.13 54,101.87 51,314.80
Tax expense 13,550.50 12,843.35 13,788.64 13,126.10
Profit for the year 39,543.04 37,221.78 40,313.23 38,188.70
Equity 1,83,445.72 1,52,388.93 1,87,857.24 1,55,750.25
Total Liabilities 5,22,101.16 4,82,260.31 5,75,307.50 5,30,664.10
Total Assets 7,05,546.88 6,34,649.24 7,63,164.74 6,86,414.35

2. Dividend

Your Board has declared an interim dividend at 20 per equity share (200% of face value) for the financial year 2021-22 on April 18, 2022. The dividend payout amounted to 8,026.90 million representing 20.30% of profit after tax for the year. The Board has decided to plow back the remaining profit after tax for business activities during the Financial Year.

The Dividend distribution policy in terms of Regulation 43 A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirement) Regulations, 2015 ("SEBI Listing Regulations") is available on the website of the Company at https://www.muthootfinance.com/sites/default/ files/2020-08/Policy%20on%20Dividend%20 Distribution.pdf The list of unpaid dividend is available on the Company’s website at https://www. muthootfinance.com/transfer-of-shares. 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 the release of unclaimed dividends.

3. Transfer to Reserves

Your Board of Directors has transferred an amount of 7,908.62 millions to the statutory reserve maintained under Section 45 IC of the Reserve Bank of India Act, 1934. Post transfer of profits to reserves, your Board proposes to retain 85,359.55 millions in the Retained Earnings.

4. Companys Performance

During the Financial Year, Company achieved 6.24% increase in its profitability with a net profit of 39,543.04 millions for the year ended March 31, 2022 as compared to 37,221.78 millions for the year ended March 31, 2021. Profit before tax increased by 6.05% to 53,093.54 millions. Total Income has increased from 1,05,743.59 millions for the year ended March 31,2021 to 1,10,983.93 millions for the year ended March 31, 2022, which is mainly due to the increase in Interest Income of the Company. Interest income of the Company increased to 1,09,560.28 millions from the previous years interest income of 1,03,285.29 millions.

Loan Assets Portfolio of the Company increased by 54,308.39 millions during the year reaching 5,80,531.76 millions as on March 31, 2022, as against 5,26,223.37 millions as on March 31, 2021. The Return on Average Loan Asset stood at 7.24% in FY 2021-22 as against 7.99% in FY 2020-21. Interest yield was 20.06% as compared to 22.17% in FY2020-21. Net Interest Margin was 13.04 % as compared to 14.24% in FY 202021. The Company remitted to exchequer 15,547.23 millions as taxes.

5. Share Capital

During the financial year, no preferential issue of shares with differential rights as to dividend, voting as otherwise was carried out by the Company. The Company has also not carried out any buyback of its equity shares during the financial year under review.

Employee Stock Options

During the financial year, your Company allotted

1.49.410 equity shares of the face value of 10/- each under Muthoot ESOP 2013 pursuant to the exercise of 1.49.410 stock options at an exercise price of 50/- each by the employees.

The disclosures as required under Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 read with SEBI Circular CIr/cFD/POLICY CELL/2/2015 dated 16th June 2015 is attached to this report as Annexure 1 and is also available on the website of the Company at https:// www.muthootfinance.com/esop-disclosure. Please refer note 46 of Notes forming part of Standalone Financial Statements for further disclosures on ESOPs. The Company does not have any scheme to fund its employees for the purchase of shares of the Company.

Your Company has received the certificate from the Secretarial Auditor of the Company certifying that the ESOP scheme is implemented in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations,

2021 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 Employee Stock Option Scheme is in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and there have been no material changes to this plan during the Financial Year 2021-22.

Investor Education and Protection Fund

During the financial year 2021-22, the Company has transferred the unclaimed dividends of 6,06,782 to Investor Education and Protection Fund ("IEPF"). Further, 1,185 equity shares on which the dividends were unclaimed for seven consecutive years were transferred to IEPF during the financial year 2021-22 as per the requirements of IEPF Rules.

No claim will lie on Company on account of the dividend after the dividend is transferred to IEPF.

6. Resource Mobilization

(a) Non-Convertible Debentures:

Your Company has successfully completed the 25th Issue of Non-Convertible Debentures through Public Issue during FY 2021-22 raising 17,000 million. The company has raised 15,318 millions through Private Placement of Non-Convertible Debentures during the financial year.

Subordinated Debts represent long-term source of funds for the Company and the amount outstanding as on 31st March, 2022 stood at 1,430.79 millions. Subordinated Debts qualify 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) 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 31st March, 2022, borrowings from banks stood at 2,73,870.92 millions as against 1,95,567.63 millions in the previous year.

(c) External Commercial Borrowings

Your Company has outstanding Senior Secured Notes of 6.125% USD 450 millions issued in October 2019 for a period of 3 years and 4.40% USD 550 millions issued in March 2020 for a period of 3 % years falling under Regulation 144A / Regulation S of the US Securities Act, 1933. These Notes are listed in the International Securities Market of the London Stock Exchange.

7. Credit Rating

The Company has debt credit ratings as below:

Domestic Credit Ratings:

Credit Rating Agency Instruments Ratings
CRISIL Commercial Paper CRISIL A1+
Subordinated Debts CRISIL AA+/Stable
Non-Convertible Debentures CRISIL AA+/Stable
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)

International Credit Ratings:

Credit Rating Agency Ratings
Fitch Ratings BB(Stable)
S&P Global Ratings BB(Negative)
Moody’s Investor Service Ba2(Stable)

8. Internal Audit and Internal 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.

The Company has a well-structured Audit & Inspection department to perform timely and frequent internal audits to evaluate the adequacy of systems and procedures and also to evaluate the status of compliance with the Company’s guidelines and other statutory requirements. The department is manned by a team of over 1000 dedicated personnel who are constantly engaged in safeguarding your Companys assets, ensuring 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 decentralized through the 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 share their findings with the Audit & Inspection Department at the Registered Office of the Company.

The Audit Committee of the Board of Directors is the 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 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 the up-gradation of systems and controls on an ongoing basis.

At present, the Audit system prevalent in the Company is a completely autonomous function and built on the 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 according to Reserve Bank of India guidelines and are in nature of operation related frauds due to nature of business of the Company. The company has taken or is in the process of taking disciplinary/ legal action against such employees/customers.

9. Human Resources

As on March 31, 2022, the Company had 26,716 employees on its rolls at various levels of organizational structure. Our employees remain one of the companys greatest assets. We at Muthoot, believe in recognizing and appreciating employees for their valuable contribution and loyalty. We offer equal opportunities to all our employees irrespective of gender to learn and grow in the organization. For the convenience of our employees and bringing new ways of working, we are promoting digitalization for our employees as well as our customers.

We at Muthoot, focus on creating a performance- Focus and future-ready workplace which offers our people various opportunities to learn, grow and win together. We ensure the productivity of our people and their operational compliance through our best-inClass learning & Development Function. The Program delivers training primarily through two channels i.e a) in-person (Classroom) & b) E-learning (Online). We use the E-learning channel to transfer microlearning units directly to people at regular intervals.

To equip the young and dynamic fresh graduates with practical knowledge and skills required in their field of work, your Company has initiated a thoughtfully designed 6 month training program called "Pathshala" in line with the National Apprenticeship Promotion Scheme. These Graduates were deployed as "Interns " for practical training purposes in the branches. Upon successful completion of the training program, Letters of proficiency are issued to them by the Company and they are posted to branches as Jr. Relationship Executive after proper assessment in each case.

At Muthoot, we encourage our employees to take up managerial positions internally through fast- track promotion. Our philosophy is to give growth opportunities to our top performers, who exhibit potential and possess the behavioral competencies to take up new challenges. This helps employees progress in their careers and take on higher roles in the organization. It enables us to place role-fit resources who exhibit our core performance values. This is a very high point to motivate employees and provide them with opportunities to aim higher and move up the ladder faster. This also ensures that we get internally trained, quality candidates who are experts in our internal processes and performance requirements and fit for promotion to the next level.

We have been going through some of the toughest challenges ever faced by humanity owing to the outbreak of Covid 19. Your Company continues to support all its employees in all possible ways and means in these tough times. To encourage vaccination among all the employees, a one-time payment of 1500/- was given to all the eligible employees on completion of 2 doses of vaccination. Awareness Campaign on COVID-19 Hygiene and Precautions was also carried out during the year. As assistance to families of employees who passed away due to Covid-19, your Company provided financial support through a monthly fixed amount to the affected families for up to 2 years.

10. Marketing & Promotion Initiatives

In partnership with such leading celebrities the Brand has launched many tailor-made marketing communications with the primary objectives of growing the Gold Loan Category as a whole and creating significant business impact to the brand in terms of new customer acquisition; besides creating substantial brand awareness and brand recall.

Few of the notable marketing initiatives undertaken by the Company during the financial year 2021-22 include:

a. Haathi Pe Bharosa Karogey Toh Pakka Jeetogey Campaign

The marketing campaign titled "Haathi Pe Bharosa Karogey Toh Pakka Jeetogey!" is all about having belief and trust in the brand, which has two elephants in its logo which was anchored by the brands ambassador, Shri. Amitabh Bachchan;

b. "Muthoot Finance Sunheri Soch Season-2"

"Muthoot Finance Sunheri Soch Season-2" (golden thoughts) is a compilation of 5 truly inspiring real- life stories of common men & women, who realized their dreams by availing a gold loan from Muthoot Finance. These are people from humble backgrounds who transformed their lives & became self-reliant & successful business persons with timely help from us.

c. "Loan At Home" Integrated Marketing Campaign

The "Loan at Home "service launched in 2020, was actively supported by campaigns across media in FY 2021-22 also. After a strong "need" was established in the commercial films of Loan at Home, our brand ambassador Shri Amitabh Bachchan presented the brand message. The campaign showed the convenience and ease offered by our "Loan at Home" service, which allows our customers to avail of Gold Loan from Muthoot Finance, now from the comfort and safety of their homes

d. Chennai Nandanam Metro Station Branding

The semi-naming rights branding at Nandanam Metro Station in Chennai was renewed, extending the partnership with Chennai Metro Rail Limited. The partnership has aided us by establishing our brand presence in a key location in Chennai

Awards & Recognitions:

During the year, your company has received the following awards and recognitions as hereunder:

a. Exchange4media Indian Marketing Awards - Gold loan is good

b. Most Trusted Financial Services Brand for the year 2022 By TRAs Brand Trust Report 2022

c. Best use of TV - FSI "Gold Unlocker" TV campaign

d. Best use of Integrated Marketing - BFSI "Loan at Home " Campaign

e. Recognised as one of the Iconic Brands of India 2021’ by #ETIconicBrands

11. Capital Adequacy

Your Companys Capital Adequacy Ratio as of March 31, 2022, stood at 29.97% of the aggregate risk-weighted assets on the 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, the Tier I capital adequacy ratio stood at 29.10% and the Tier II capital adequacy ratio stood at 0.87%.

12. Public Deposits

The Company is a Systemically Important Non-Deposit Taking NBFC and 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, 54, and 55 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, 2022, your Company had seven subsidiaries namely Asia Asset Finance PLC, Muthoot Homefin (India) Limited, Muthoot Insurance Brokers Private Limited, Belstar Microfinance Limited, Muthoot Money Limited, Muthoot Asset Management Private Limited, and Muthoot Trustee Private Limited. Your Company’s subsidiaries have been contributing to the overall growth of your Company during the year.

As required under Section 136 of the Act, the audited financial statements, including the consolidated financial statements of your Company are available on the website of the Company. The audited financial statements of each of its subsidiaries are also available on the website of the Company at https://www.muthootfinance.com/ subsidiaries. The above documents will also be available for inspection at the Registered Office of the Company during business hours.

During the year under review, the Board of Directors reviewed the affairs of the subsidiaries. In accordance with Section 129 (3) of the Act, we have prepared the consolidated financial statements of the Company which forms part of the Annual Report. The statement containing the salient features of the financial statement of your Companys Subsidiaries in Form AOC 1 is annexed to Standalone Financial Statements of the Company as required under Rule 5 of The Companies (Accounts) Rules, 2014.

There are no other companies that have become or ceased to be Subsidiaries/ Associates/ Joint Ventures of the Company during the Financial Year 2021-22.

There has been no material change in the nature of business of subsidiary companies during the financial year 2021-22.

The Board of Directors of your Company has formulated a policy on material subsidiary, which is displayed on the website of the Company at https:// www.muthootfinance.com/sites/default/files/2020- 08/1472561568policy%20on%20material%20 subsidiary.pdf

As on March 31, 2022, 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 a business relating to lending against the collateral of gold jewellery and microfinance is presently contributing a significant part of loan portfolio and income. AAF has operations across Sri Lanka with 59 branches as on March 31, 2022, AAF has made considerable progress in its business.

Its major financial parameters for Financial Year 2021-22 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 31.03.2022 - 0.2570685 ; Average Exchange Rate of Financial Year 2021-22 - 0.365634 1,163.35 73.96 43.14 708.35 4,972.16 4,263.81
Amounts in LKR (in millions) 3,181.73 202.28 118.00 2,755.51 19,341.79 16,586.28

AAF increased its loan portfolio during the year by 23.87% at LKR 17,345.01 millions. Total Income for FY 22 stood at LKR 3,181.73 millions as against previous year total income of LKR 2,952.34 millions. It generated a profit after tax of LKR 118.00 millions during FY22 as against previous year profit after tax of LKR 45.20 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 2021-22 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 2,136.84 100.97 84.04 4,470.76 12,825.97 8,355.21

MHILs loan portfolio stood at 14,698.72 millions, a decrease of 14% during the year mainly on account of the cautious approach taken by the management on fresh disbursement due to uncertainities arising out of pandemic.. Total income for Financial Year 2021-22 stood at 2,136.84 millions as against previous year total income of 2,446.42 millions. It achieved a profit after tax of 84.04 millions in Financial Year 2021-22 as against previous year profit of 125.51 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 2021-22 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 450.12 371.62 276.44 1,123.21 1,145.30 22.09

MIBPL generated a First year premium collection amounting to 3,268.99 millions during Financial Year 2021-22 as against 2,641.70 in the previous year. It generated a Profit after Tax of 276.44 millions during Financial Year 2021-22 as against 316.37 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 2021-22, your Company holds 60.69% of the equity capital of BML. Its major financial parameters for Financial Year 2021-22 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 7,284.31 561.46 451.29 8,559.33 45,602.86 37,043.53

BML grew its loan portfolio during Financial Year 2021-22 by 32.30% reaching 43,657.79 millions. It achieved a profit after tax of 451.29 millions during Financial Year 2021-22 as against previous year profit after tax of 466.51 millions.

e. Muthoot Money Limited

M/s. Muthoot Money Ltd (MML), a registered Non-Banking Finance Company licensed by Reserve Bank of India is a Wholly- Owned Subsidiary Company of your Company. Its major financial parameters for Financial Year 2021-22 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 455.58 (88.46) (65.72) 1,035.21 2,268.08 1,232.87

MMLs loan portfolio stood at 2,070.54 millions, a decrease of 44% during the year mainly on account of the cautious approach taken by the management on fresh disbursement due to uncertainities arising out of pandemic. Total

income for Financial Year 2021-22 stood at 455.58 millions as against previous year total income of 697.31 millions. It had loss of 65.72 millions in Financial Year 2021-22 as against previous year profit of 37.47 millions mainly on account of decrease in interest income consequent to post covid impact.

f. Muthoot Asset Management Private Limited

Your Company has incorporated a wholly owned subsidiary Muthoot Asset Management Private Limited ("MAMPL") which is yet to commence commercial operations. Its major financial parameters for Financial Year 2021-22 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 41.48 30.28 22.55 1,094.81 1,095.10 0.29

g. Muthoot Trustee Private Limited

Your Company has incorporated a wholly owned subsidiary Muthoot Trustee Private Limited ("MTPL") which is yet to commence commercial operations. Its major financial parameters for Financial Year 2021-22 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in thousands) 324.35 225.90 169.05 9,946.54 9,973.54 27.00

15. Particulars of Loans, Guarantees, or Investments Under Section 186 of the Act

Pursuant to Section 186(11) (a) of 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 guarantees 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, 2022.

16. Annual Return

In accordance with the provisions of Section 92(3) read with Section 134(3) (a) of the Act, the Annual Return of the Company is hosted on the website of the Company at https://www.muthootfinance.com/themes/bartik/pdf/ Annual-Return-2022.pdf

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 Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Act, is provided in the Annual Report.

18. Risk Management

The Board of Directors of the Company has formed a Risk Management Committee to frame, implement and monitor the risk management plan for the Company. The Committee is responsible for monitoring and reviewing the risk management plan and ensuring its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The development and implementation of risk management policy has been covered in the Management Discussion and Analysis, which forms part of this report. The Company has adopted and implemented a Risk Management Policy framework within the organization.

19. Corporate Social Responsibility

The Companys CSR policy is committed towards CSR activities as envisaged in Schedule VII of the Act. The Details of CSR policy of the Company are available on the website of the Company at https:// www.muthootfinance.com/sites/default/files/pdf/ CSR_Policy_May_2021.pdf. The Annual Report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached to this report as Annexure 2.

Details of the Corporate Social Responsibility and Business Responsibility Committee are provided separately in the Report on Corporate Governance annexed to the Board’s Report.

20. Business Responsibility Report

Regulation 34 of the SEBI Listing Regulations mandates the inclusion of the Business Responsibility Report ("BRR") as part of the Annual Report for top 1000 listed entities based on their market capitalization. The BRR is attached to this report as Annexure 3.

21. Particulars of Contracts or Arrangements made with Related Parties

The Board of Directors of your Company has put in place a policy for related party transactions, (Policy on Related Party Transactions and Materiality of Related Party Transactions), which has been approved by the Board of Directors. The policy provides for identification of RPTs, necessary approvals by the Audit Committee/ Board /Shareholders, reporting and disclosure requirements in compliance with the Act and provisions of the SEBI Listing Regulations. Policy is available on the website of the Company at https:// www.muthootfinance.com/sites/default/files/2022-02/ muthoot-finance-rpt-policy-v5_0.pdf.

All contracts executed by the Company during the financial year, with related parties, were on arms length basis and in the ordinary course of business.

All such related party transactions were entered into in accordance with the Policy on Related Party Transactions and Materiality of Related Party Transactions of the Company.

Prior omnibus approval was obtained for related party transactions, under Section 188 (1) of the Act, which are of repetitive nature and entered in the ordinary course of business and at arm’s length. All related party transactions were 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 the 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 on Related Party Transactions and Materiality of Related Party Transactions. Further, there were no material related party transactions that required approval of shareholders as required under Chapter IV of SEBI Listing Regulations. The disclosure of related party transactions as required under Section 134(3) (h) of the Act in Form AOC 2 is attached to this report as Annexure 4.

The details of related party 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

Your Company has constituted an Audit Committee in accordance with the requirements of the Companies Act, 2013, RBI directions, and SEBI Listing Regulations. Details on Audit committee, terms of reference and meetings appear on the Report on Corporate Governance annexed to this report. All recommendations of Audit Committee were accepted by your Board during the financial year 2021-22.

23. Vigil Mechanism

The Company has established a Vigil Mechanism/ Whistle Blower policy to enable Directors, and Stakeholders, including individual employees and their representative bodies to report, in good faith, unethical, unlawful or improper practices, acts, or activities. The said mechanism ensures that the whistleblowers are protected against victimization/ any adverse action and/ or discrimination as a result of such a reporting and provides direct access to the Chairman of the Audit Committee in exceptional cases. The Company hereby affirms that none of its personnel have been denied access to the Audit Committee. The whistle blower policy is available at website of the Company at https:// www.muthootfinance.com/vigil-mechanism.

24. Listing

Equity Shares of your Company are listed on National Stock Exchange of India Ltd and BSE Limited. NonConvertible Debentures issued by the Company through public issues and Private Placements are listed on BSE Ltd. Your Company has paid applicable listing fees to Stock Exchanges.

Senior Secured Notes issued by the Company are listed on the International Securities Market of London Stock Exchange.

25. Changes in Directors and Key Managerial Personnel

Appointments

Mr. Abraham Chacko was appointed as Independent Director of the Board effective September 18, 2021 pursuant to the resolution passed by the shareholders of the Company at the 24th Annual General Meeting. Further, Mr. George Muthoot George, Mr. George Muthoot Jacob, and Mr. George Alexander were appointed as Whole Time Directors on the Board with effect from December 15, 2021.

In order to comply with the Corporate Governance requirements of SEBI Listing Regulations and the Act, your Board proposes to appoint Mr. Chamacheril Abraham Mohan as Independent Director of the Company subject to approval of the shareholders in the upcoming Annual General Meeting. Mr. Chamacheril Abraham Mohan is a senior finance professional and a Chartered Accountant who has diversified experience for many years in the fields of finance and chartered accountancy. Detailed profile of Mr. Chamacheril Abraham Mohan is provided in the Notice of the AGM.

Cessation

The term of office of Mr.Pratip Chaudhuri 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 and gratitude to Mr.Pratip Chaudhuri for the guidance and support extended during the two consecutive term of directorship in the Company.

Directors Liable to retire by rotation

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

Your Board and the Nomination and Remuneration Committee has evaluated the eligibility criteria under RBI guidelines, the Act and Listing Regulations, of all directors seeking appointment / re-appointment at the ensuing Annual General Meeting and has recommended the appointment / re-appointments.

Your Board believes that the proposal for appointment / re-appointment of Directors will have the support of shareholders. Necessary disclosures as required under the SEBI Listing Regulations and the Act are provided in the notice calling the Annual General Meeting.

The brief profiles of Directors seeking re-appointment are also available on the website of the Company at https://www.muthootfinance.com/our-directors

All the Directors of the Company have confirmed that they satisfy the Fit and Proper Criteria as prescribed under Chapter XI of Reserve Bank of India Master Direction- Non-Banking Financial Company- Systemically Important Non-Deposit taking Company and Deposit Taking Company (Reserve Bank) Directions, 2016, as amended, and that they are not disqualified from being appointed/continuing as Directors in terms of Section 164(2) of the Act.

During the year under review, there were no changes in the Key Managerial Personnel appointed pursuant to Section 203 of the Companies Act, 2013.

26. Meetings of the Board

During the Financial Year 2021-22, your Board of Directors met six times on April 12, 2021, June 02,

2021, August 06, 2021; November 04, 2021, November 19, 2021 and February 12, 2022. Details of various meetings of the Board are given in the Report on Corporate Governance 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 the Act and Regulation 16 (1) (b) of the SEBI Listing Regulations.

A statement by Managing Director confirming receipt of this declaration from Independent Directors is annexed to this report as Annexure 5. In the opinion of the Board, there has been no change in the circumstances which may affect their status as Independent Directors of the Company and the Board is satisfied of the integrity, expertise, and experience (including proficiency in terms of Section 150(1) of the Act and applicable rules thereunder) of all Independent Directors on the Board. Further, in terms of Section 150 read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended, Independent Directors of the Company have included their names in the data bank of Independent Directors maintained with the Indian Institute of Corporate Affairs.

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 the Act. The policy is available on the Company’s website at the weblink https:// www.muthootfinance.com/sites/default/ files/2020-08/1452753862Nomination%20and%20 Remuneration%20Policy.pdf

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

b) Performance evaluation of Board, Committees and Directors

In compliance with the regulatory requirements, the Board carried out an annual evaluation of its own performance, its Committees, and of the individual Directors based on criteria and framework adopted by the Board and in accordance with regulations.

The details of training, appointment, resignation, and retirement of Directors, if any, are dealt with in the report on Corporate Governance. Brief details of profile of each director appear in the Annual Report of the Company.

c) Independent Directors Meeting

During the year, a meeting of Independent Directors was held on March 30, 2022 as required under the Act and in compliance with the requirements under Schedule IV of the Act and SEBI Listing Regulations, and discussed and deliberated matters specified therein.

29. Report on Corporate Governance

Your Company has complied with the Corporate Governance norms as stipulated in Chapter IV of SEBI Listing Regulations. As per Regulation 34 of SEBI Listing Regulations, the detailed report on Corporate Governance is attached to this Report as Annexure 6.

30. Management Discussion and Analysis Statement

Management Discussion and Analysis detailing the industry developments, segment wise/ product wise performance and other matters is attached to this Report as Annexure 7.

31. Environmental, Social, and Governance ("ESG")

The Board has instituted an Environmental, Social and Governance Committee ("ESG Committee") to discharge its oversight responsibility on matters related to organization-wide ESG initiatives, priorities, and leading ESG practices. Details of the constitution of the ESG Committee and its terms of reference are provided in the Report on Corporate Governance.

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

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

a) Conservation of energy

Your Company being a Non-Banking Finance Company, has no activities involving conservation of energy. 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, has no activities involving 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.

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:

The Company continued its focus on various digital transformation initiatives during the year providing a great customer experience, improved business efficiencies, ease of operations, and effective risk management.

A few of the digital initiatives undertaken by the Company include:

Digital Channels and Digital Footprints

As the pioneer and leader in gold loan business, we at Muthoot Finance believe in extending the digital interface to our customers through various channels for better reach and convenience. Zero touch and transact hassle free is the vision for spreading our digital channels. Customers can perform the KYC creation process now using Video KYC, pledge the ornaments from the comfort of their homes using the Loan @Home option, top-up or repay using different digital channels and through Loan@ Home option to close the active loans. We have added BBPS (Bharath Bill Payment System) interface for allowing the customer to transact with us using any platform integrated with BBPS or even allowing cash transactions through various Agents of BBPS.

AI-powered Chat engine integrated with our core system to enhance the chat experience for the customers and allow them to do real time transactions through the WhatsApp interface. This intuitive option allows customers with just basic digital experience also be part of our digital journey. We have enabled our communication of reminders using Whatsapp/E-mail/SMS. Initiatives like "Deep Link" allow customers to make repayment with a single click from our reminder SMS links.

Gold Unlocker

This new intuitive product facilitate our customers to use the power of plastic card for all e-commerce transactions or even for ATM cash withdrawals. Partnered with Yes bank and e-Wire, we have launched this product for better customer convenience.

KYC Data refinement and customer data protection

At Muthoot Finance, the privacy and security of our customer data is of utmost importance and we constantly strengthen our applications to enhance the veracity of customer data attributes. For ensuring the accuracy of customer bank accounts, we have added multiple bank account verification channels, Digital KYC verification interfaces, Customer biometric Authentication used to ensure the customer data updates are genuine and authentic. Through our agent mobile application, we continually enhance the customer address updates.

iMuthoot application

The revamped version of iMuthoot mobile App Version 3.0 a One App for All Loan Application & Repayment offers the facility to customers to request for Gold loan, Personal Loan, from the comfort of their own homes. This enhanced version of the mobile application is a stepping stone to provide an enriched Omni channel experience to our customers. The users of the iMuthoot mobile App are offered a significant convenience of interoperability of all their digital transactions without having to visit the branch.

Loan@Home application

The loan at home is an app-based digital service, with which a customer can apply for a gold loan through the ‘Loan@Home’ mobile app and web portal. As soon as the inquiry is verified and accepted, an agent gets assigned instantly. An appointment is made by the Muthoot Finance agent to visit the customer’s home. The customer can avail of a gold loan from the comfort of their home without having to visit the branch at any stage of the procedure. Using loan at home application, an agent can perform loan initiation till the disbursement of the loan by sitting at customer premises.

Muthoot online

The Online payment system is an extension portal of Muthoot Core Banking System that can act independently as an online payment system as well. It is a dynamic, independent delivery channel which can be plugged in to any Core Banking System.

c) Foreign exchange earnings and outgo

Particulars in Million
Total Foreign Exchange earned Nil
Total Foreign Exchange expended 4,705.65

33. Audits

a) Statutory Audit under Section 139 of the Act

Reserve Bank of India issued guidelines on appointment of statutory auditor(s) by Non-Banking Financial Company ("NBFC") vide Circular RBI/2021-22 /25 Ref. No. DoS. CD.ARG/SEC.01/ 08.91.001/2021-22 dated April 27, 2021 ("RBI Auditor Guidelines"). Pursuant to RBI Auditor Guidelines, the Audit Firms completing a tenure of three financial years in the NBFC were not eligible to continue to hold office as Statutory Auditors of the NBFC. Since the RBI Guidelines were being implemented for the first time for NBFCs from Financial Year 2021-22 and in order to ensure that there is no disruption, the RBI had given flexibility to NBFCs to appoint new Statutory Auditors in the second half of the financial year ending March 31, 2022.

Pursuant to the RBI Auditor Guidelines, M/s Varma & Varma, Chartered Accountants, statutory auditors of the Company resigned with effect from November 10, 2021, owing to their ineligibility to continue as auditors of the Company as they have already exceeded the maximum tenure of three financial years stipulated therein for the statutory auditors of the Company.

M/s Elias George & Co (FRN: 000801S) and M/s Babu A. Kallivayalil & Co. (FRN: 05374S), Chartered Accountants, were appointed as Joint Statutory Auditors of the Company effective November 19, 2021, in compliance with the Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) (the "Guidelines"/ "Circular"). As per the Provisions of Section 139 (8) (i) of the Companies Act, 2013, the Shareholders of the Company had also approved the Appointment of Joint Statutory Auditors vide their Ordinary resolution passed through postal ballot dated December 27, 2021.

The Joint Statutory Auditors were appointed to hold their first term of office from November 19, 2021, till the conclusion of the 25th Annual General Meeting of the Company. The Board has recommended for the approval of the Members for the re-appointment of of M/s Elias George & Co (FRN: 000801S) and M/s Babu A. Kallivayalil & Co. (FRN: 05374S), Chartered Accountants as the Joint Statutory Auditors for a further period of 2 years commencing from the conclusion of the 25th Annual General Meeting till the conclusion of the 27th Annual General Meeting of the Company to be held in the year 2024. The Audit Committee of the Company has evaluated the eligibility criteria of the Joint Statutory Auditors and has also recommended their re-appointment for conducting the statutory audits for the financial year 2022-23 and financial year 2023-24.

The Statutory Audit Report issued by M/s Elias George & Co (FRN: 000801S) and M/s Babu A. Kallivayalil & Co. (FRN: 05374S), Joint Statutory Auditors of the Company, on the financial statements of the Company for the year 2021-22 forms part of the Annual Report.

b) Secretarial Audit under Section 204 of the Act

M/s KSR & Co., Company Secretaries LLP, Coimbatore was appointed as Secretarial Auditors of the Company for the financial year 2021-22 pursuant to Section 204 of the Act. The Secretarial Audit report issued by the Secretarial Auditors is annexed to this report as Annexure 8.

c) Annual Secretarial Compliance Report

The Company has undertaken an audit for the financial year 2021-22 for all applicable compliances as per SEBI Regulations and Circulars/ Guidelines issued thereunder.

The Annual Secretarial Compliance Report was submitted to the stock exchanges within 60 days from the end of the financial year.

d) Cost records and Cost Audit

Maintenance of cost records and requirement of cost audit as prescribed under the provisions of Section 148(1) of the Act are not applicable for the business activities carried out by the Company.

e) Auditors certificate on Corporate Governance

The Auditors certificate confirming compliance with the conditions of corporate governance as stipulated under the SEBI Listing Regulations for financial year 2021-22 is provided along with the Report on Corporate Governance.

f) Secretarial Auditors certificate on ESOP

The secretarial auditors’ certificate on the implementation of share based schemes in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, will be made available at the AGM for inspection electronically.

g) Certificate on Non-Disqualification of Directors

Certificate on Non-Disqualification of Directors issued by M/s Sunil Sankar & Associates, Practising Company Secretaries is enclosed along with the Report on Corporate Governance.

h) Explanations or comments by the Board on qualification, reservation or adverse remark or disclaimer on audits for financial year 2021-22

There are no qualifications, reservation or adverse remark or disclaimer in the audit reports issued under Section 139 and Section 204 of the Act for financial year 2021-22.

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

The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at workplace as per the requirement of the Sexual Harassment of Women at workplace (Prevention, Prohibition & Redressal) Act, 2013 (POSH Act) and Rules made thereunder.

With the objective of providing a safe environment, the Company has constituted Internal Committee to redress complaints received regarding sexual harassment. All employees - permanent, contractual, temporary and trainees are covered under this Policy.

Details of cases reported to Internal Complaints Committee during the financial year 2021-22 are as under:

Number of complaints pending at the beginning of the financial year 2021-22 0
Number of complaints filed during the financial year 2021-22 3
Number of complaints disposed of during the financial year 2021-22 3
Number of complaints pending as on end of the financial year 2021-22 0

35. Personnel

The Disclosure required under the provisions of Section 197 of the Act read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this report as Annexure 9. The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of the Directors Report. Further, the Directors Report and the Accounts are being sent to the Members excluding the aforesaid statement. In terms of Section 136 of the Act, the said statement will be open for inspection upon request by the Members. Any Member interested in obtaining such particulars may write to the Company Secretary.

36. 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.

37. 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 Financial Statements relate and the date of this report.

38. Directors Responsibility Statement

Pursuant to Section 134(5) of the Act, the Board of Directors, to the best of its knowledge and ability, confirm 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) they 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 at the end of the financial year and of the profit of the Company for that period;

(c) they have 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) they have prepared the annual accounts on a going concern basis;

(e) they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively.

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

39. Disclosure pursuant to Part A of Schedule V of SEBI Listing Regulations

Disclosure pursuant to Part A of Schedule V read with Regulation 34(3) and 53(f) of SEBI Listing Regulations is attached as Annexure 10 of this report.

40. Others

• The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meetings, Annual General Meetings and Dividend.

• The Company, in the capacity of Financial Creditor, has not filed any application with National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 during the financial year 2021-22 for recovery of outstanding loans against any customer being Corporate Debtor.

• The details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof- Not Applicable.

• There has been no material change in the nature of business of the Company during the year under review.

• During the year under review, there were no instances of any frauds reported by the Statutory Auditors under section 143(12) of the Act.

41. Acknowledgement

Your Directors thank the Companys stakeholders 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 Board reassures that in these challenging times, your Company will continue to support you and your family at all levels. Your Company’s 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, Ministry of Corporate Affairs, and Stock Exchanges including various officials there at for the guidance and support received from them from time to time.

Your Directors mourn the loss of life due to COVID-19 pandemic and are deeply grateful and have immense respect for every person who risked their safety and life to fight this pandemic.

42. 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/-
George Jacob Muthoot George Alexander Muthoot
Chairman & Whole Time Director Managing Director
Place: Kochi
Date: August 06, 2022
Registered Office:
2nd Floor, Muthoot Chambers,
Opposite Saritha Theatre Complex,
Banerji Road,
Kochi - 682 018