Muthoot Finance Ltd Directors Report.

Dear Stakeholders,

Your Board of Directors is pleased to share with you the 24th 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, 2021.

1. Financial Summary

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

Rs in millinn

Standalone

Consolidated

Particulars Year Ended March 31, 2021 Year Ended March 31, 2020 Year Ended March 31, 2021 Year Ended March 31, 2020
Total Income 105,743.59 87,227.91 115,664.19 97,072.67
Total Expenses 55,678.46 46,653.81 64,349.39 54,468.76
Profit Before Tax 50,065.13 40,574.10 51,314.80 42,603.91
Tax expense 12,843.35 10,391.10 13,126.10 10,917.10
Profit for the year 37,221.78 30,183.00 38,188.70 31,686.81
Equity 152,388.93 115,718.13 155,750.25 118,292.10
Total Liabilities 482,260.31 388,878.41 530,664.10 430,524.82
Total Assets 634,649.24 504,596.54 686,414.35 548,816.92

2. Dividend

Your Board has declared an interim dividend at 20 per equity share (200% of face value) for the financial year 2020-21 on April 12, 2021. The dividend payout amounted to 8,023.92 million representing 21.56% of profit after tax for the year. The Board has decided to plough 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") of the Company is available on the website at https://www. muthootfinance.com/sites/default/files/2020-08/ Policy%20on%20Dividend%20Distribution.pdf The list of unpaid dividend is available on the Companys 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 release of unclaimed dividend.

3. Transfer to Reserves

Your Board of Directors has transferred an amount of 7,444.35 millions to the Statutory Reserve maintained under Section 45 IC of the RBI Act, 1934. Post transfer of profits to reserves, your Board proposes to retain 61,749.04 millions in the Retained Earnings.

4. Companys Performance

During the Financial Year, Company achieved 23% increase in its profitability with a net profit of 37,221.78 millions for the year ended March 31, 2021 as compared to 30,183.00 millions for the year ended March 31, 2020. Profit before tax increased by 23% to 50,065.13 millions. Total Income has increased from 87,227.91 millions for the year ended March 31,2020 to 1,05,743.59 millions for the year ended March 31, 2021 which is mainly due to increase in Interest Income of the Company. Interest income of the Company increased to 1,03,285.29 millions from previous years interest income of 85,644.00 millions. Loan Assets Portfolio of the Company increased by 110,117.32 millions during the year reaching 526,223.37 millions as on March 31, 2021 as against 416,106.05 millions as on March 31, 2020. The Return on Average Loan Asset stood at 7.99% in FY 2020-21 as against 8.11%in FY 2019-20. Interest yield was 22.17% as compared to 23.03% in FY 2019-20. Net Interest Margin was 14.24% as compared to 15.52% in FY 201920. The Company remitted to exchequer 13,057.03 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 exercised by the Company. The Company has also not carried out any buy back of its equity shares during the year under review.

Employee Stock Options

During the year, your Company has allotted 1,58,530 equity shares of face value of 10/- each under Muthoot ESOP 2013 pursuant to exercise of 1,58,330 options of 50/- each for Growth Options and 200 options of 10/- each for Loyalty Options by employees of the Company.

The disclosures as required under Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 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 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 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 Employee Stock Option Schemes is 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 2020-21.

Investor Education and Protection Fund

During the financial year 2020-21, the Company has transferred the unclaimed dividends of 12,87,375 to Investor Education and Protection Fund. Further, 2,309 corresponding equity shares on which the dividends were unclaimed for seven consecutive years were transferred to Investor Education and Protection Fund ("IEPF") during the financial year 2020-21 as per the requirements of IEPF rules.

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

6. Resource Mobilization

(a) Non-Convertible Debentures:

Your Company successfully completed 23rd and 24th Issue of Non-Convertible Debentures through Public Issue during FY 2020-21 raising 22,929.86 millions. Company has raised 36,455.00 millions through Private Placement of Non-Convertible Debentures during the financial year.

Subordinated Debts represents long term source of funds for the Company and the amount outstanding as on 31st March, 2021 was 2,106.48 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) 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, 2021, borrowings from banks were 195,567.63 million as against 143,756.21 millions in the previous year.

(c) External Commercial Borrowings

Your Company has outstanding Senior Secured Notes of 6.125% USD 450 million issued in October 2019 for a period of 3 years and 4.40% USD 550 million 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 London Stock Exchange.

7. 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+/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)
Moodys 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.

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 decentralized 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 according to Reserve Bank of India guidelines and are in nature of operation related frauds 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, 2021, the Company had 25,911 employees in its rolls at various level 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 customers.

Recognizing the employee friendly efforts that we have put in, our Company is certified as Great Place to work for the year 2021-22. The 2021-22 certification is an indication of how well Muthoot Finance has adapted to the challenges brought about by the COVID-19 pandemic.

Since the onset of the pandemic, your Company has carried out various employee welfare measures such as providing additional paid COVID leaves to employees, salaries to employees during lockdown period to ensure their well-being. Also, during the period of pandemic, your company has ensured that no job loss occurred. We have automated various HRMS modules to bring in efficiency in practices. Your Company has committed to hiring and retaining the best talent and being among the industrys leading employers have accelerated hiring offering them various roles in addition to promotion of existing employees during the financial year 2020-21.

During the COVID times, all the classroom training programs were moved to the virtual environment and the trainings were conducted online using video conferencing tools.

10. Major Marketing & Promotion Initiatives

As a leader in the business segment, it is incumbent upon us to take the lead in creating new consumer segments and growing the gold loan category by reinforcing and encouraging people to unlock the potential of their household gold ornaments by availing Gold Loans. And what better way to achieve this other than demonstrating inspiring stories of real men and women who had chosen to take a Gold Loan from Muthoot Finance and move ahead in life.

Our association with Shri. Amitabh Bachchan continued as we found strong relevance, correlation and fitment between the brand and Mr Bachchans values, pedigree, poise, respect, leadership, acceptability, association, success, philanthropy, and more attributes. The initiatives during the year were focussed on impressing upon people the prudence of opting for Gold Loans, telling great stories of people whove overcome challenges with a little help from us in the form of Gold Loans and for the first time consciously communicating and reaching out to high value customers.

(a) "Gold Loan Is Good" - Integrated Marketing Campaign

This campaign sought to dispel common fears and apprehensions in peoples minds about Gold Loans, as also a few things that they probably did not know about Gold Loan from Muthoot Finance. The campaign captured facilities or features unique to Gold Loan from Muthoot Finance, and also assured potential and current users about the long standing pedigree of Muthoot Finance in the category. The campaign garnered a tremendous response from all quarters, including prospective customers, media and other stakeholders.

(b) "Sunheri Soch" - Radio & Digital Marketing Campaign

This campaign captured testimonials of people whove benefited from Muthoot Finance Gold Loans. It brought to life extraordinary success stories of real-life people, men & women from different walks of life, across locations, economic background and other diversities. The campaign received an overwhelming response from our target customers and new loan seekers, as it inspired millions of other Indians to unlock the true potential of their emotional currency (household gold) and move ahead in life.

(c) "The Muthoot Group - Greater Kailash Metro Station" Branding

We extended our association with Delhi Metro Rail Corporation by renewing our semi- naming rights branding at Greater Kailash Metro Station in Delhi.

Over the least 3 years, this association helped us leverage a prominent and strategic location located on an arterial road in South Delhi; in the form of seminaming and complete branding of Greater Kailash Metro Station. The station branding beautifully showcases our Groups impeccable corporate credentials and key products and service offerings such as our 5000+ widespread branch network, +2.5 Lac customers served every day, Muthoot Big Business Loan, Muthoot Loan@Home facility.

(d) "Ayush Gold Loan" - Integrated Marketing Campaign

The unique product created as response to the pandemic situation, was created and launched in quick time, in Q2 FY 20-21, and was followed by an integrated marketing campaign.. The campaign featured Shri Amitabh Bachchan and the IPL franchisee Chennai Super Kings. The scheme provided a double benefit to customers, as they could now avail a Gold Loan and

take care of all their financial needs and at the same time we tied up with a reputed insurance company and along with our Gold Loan product, COVID insurance was also offered. An integrated marketing campaign across Print, Digital, TV, Outdoor and BTL media was executed. Full Page newspaper ads, were released in the most prominent regional papers to spread awareness on our unique scheme.

(e) Trust Only Muthoot Finance - CSK TVC Campaign

The Muthoot Group was the Principal Team Partner of Chennai Super Kings during FY 20-21, and launched three special TVCs during IPL 2020 (UAE), featuring Chennai Super Kings cricketing stars. Former Indian captain MS Dhoni took the lead in the these TVCs that highlighted how in three very important aspects of the game, some chances can be taken, but not when it comes to Gold Loan, pitching in the trusted name and No. 1 status of Muthoot Finance.

(f) The Muthoot Group - Chennai Nandanam Metro Station Branding

The association with Chennai Metro Rail Limited was extended, by renewing the semi-naming rights branding at Nandanam Metro Station in Chennai. The association has helped the brand, by making our brand presence felt in a very prominent location of Chennai. The station branding includes our Groups impeccable corporate credentials and key products and services offering such as our widespread branch network, our Loan at home facility and the unique Gold Unlocker.

(g) "Loan at Home" Integrated Marketing Campaign

The "Loan at Home " service was actively supported by a campaign across media. Our brand ambassador Shri Amitabh Bachchan delivers the brand message powerfully, after a strong "need" is established in the multiple commercial films. The campaign showed the convenience and ease offered by our "Loan at Home" service, which allows our customers to avail Gold Loan from Muthoot Finance, now from the comfort and safety of their homes.

Loan at Home expands the services of Indias No 1 Most Trusted Financial Services Brand - Muthoot Finance, to beyond the 4632 branch network, to almost every customers doorstep.

(h) "Gold Unlocker" Integrated Marketing Campaign

Muthoot Finance Gold Unlocker campaign was launched in Q4 FY 20-21, featuring Revathy, the well known star from the film and now television industry. The campaign was focused on announcing the key nature and feature of this gold loan product, it being a

24x7 Credit Line that allows access to funds - Anytime, Anywhere. This campaign was targeted at prospects who would want to plan their expenses better, and be ready for any eventuality. Through imuthoot app, Gold Unlocker customers could have easy access to this credit line, whenever they needed it.

An integrated marketing campaign was executed across Print, TV, Digital, Outdoor and BTL media. The campaign on digital alone created a footprint of 12Cr+ views. The product is slowly getting accepted and changing the way people manage their finances.

(i) Awards & Recognitions

a. Sunehri Soch Radio Campaign was honoured with the Best Radio Campaign of the Year by Global Marketing Excellence Awards, 2020.

b. "Gold Loan is Good" Campaign was adjudged the Best Integrated Campaign and also for the Best Use of Celebrity / Influencer by Global Marketing Excellence Awards, 2020.

c. Extremely humbled to share that our hugely successful "Soch Badaliye" integrated marketing campaign that aimed at creating an attitudinal transformation in the way people perceive Gold Loans was awarded at the recently concluded Exchange4Medias Indian Content Marketing Awards 2020 in the Best Branded Content Marketing on TV Category

d. Muthoot Finance Limited was awarded Indias No. 1 Most Trusted Financial Services Brand for the 5th year in a row by Brand Trust Report 2020.

e. Our "Soch Badaliye aur Life Mein Aagey Badhiye" Campaign also won the prestigious Primetime Award 2020 for one of the Best Creative Campaigns in the BFSI Sector.

11. Capital Adequacy

Your Companys Capital Adequacy Ratio as of March 31, 2021 stood at 27.39% 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 26.31% and Tier II capital adequacy ratio stood at 1.08%.

12. Public Deposits

The Company is a Systemically Important Non-Deposit Taking NBFC and has not accepted any public deposits. Hence, disclosure regarding details of deposits covered under Chapter V of the Companies Act, 2013 ("Act") are not applicable.

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, 55, and 56 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, 2021, 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 Companys 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 form 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 which have become or ceased to be Subsidiaries/ Associates/ Joint Ventures of the Company during the Financial Year 2020-21.

There has been no material change in the nature of business of subsidiary companies during the financial year 2020-21.

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

As on March 31, 2021, 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 48 branches as on March 31, 2021, AAF has made considerable progress in its business. Its major financial parameters for Financial Year 2020-21 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 31.03.2021 -0.3677855; Average Exchange Rate of Financial Year 2020-21 - 0.393785 1,162.59 34.16 17.80 817.25 5,645.67 4828.42
Amounts in LKR (in millions) 2,952.34 86.75 45.20 2,222.08 15,350.43 13,128.35

AAF increased its loan portfolio during the year by 1.18% at LKR 14002.23 millions. Total Income for FY 21 stood at LKR 2,952.34 millions as against previous year total income of LKR 3,332.62 millions. It generated a profit after tax of LKR 45.20 millions during FY21 as against previous year profit after tax of LKR 70.15 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 2020-21 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 2,408.65 168.66 125.51 4,386.59 16,783.92 12,397.33

MHILs loan portfolio stood at 17,041.70 millions. Total income for Financial Year 2020-21 stood at 2,408.65 millions as against previous year total income of 2,876.10 millions. It achieved a profit after tax of 125.51 millions in Financial Year 2020-21 as against previous year profit of 317.77 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 2020-21 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 467.38 424.09 316.37 846.99 863.82 16.83

MIBPL generated a First year premium collection amounting to 2,641.70 millions during Financial Year 2020-21 as against 2,059.02 in the previous year. It generated a Profit after Tax of 316.37 millions during Financial Year 2020-21 as against 103.98 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 2020-21, your Company holds 70.01% of the equity capital of BML. Its major financial parameters for Financial Year 2020-21 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 5,531.59 570.12 466.51 5,417.16 34,672.88 29,255.72

BML grew its loan portfolio during Financial Year 2020-21 by 25% reaching 32,998.59 millions. It achieved a profit after tax of 466.51 millions during Financial Year 2020-21 as against previous year profit after tax of 989.99 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 subsidiary of your Company. Its major financial parameters for Financial Year 2020-21 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 697.31 41.29 37.47 1,099.43 3,888.86 2,789.43

MMLs loan portfolio stood at 3,668.13 millions. Total income for Financial Year 2020-21 stood at 697.31 millions as against previous year total income of 703.62 millions. It achieved a net profit of 37.47 millions in Financial Year 2020-21 as against previous year profit of 26.90 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 2020-21 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 38.91 27.23 19.15 1,072.26 1,092.32 20.06

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 2020-21 are as follows:

Parameters Total Income Profit Before Tax Profit After Tax Equity Total Assets Total Outside Liabilities
Amount in INR (in millions) 523.22 (95.28) (95.00) 9,777.49 9,803.24 25.75

15. Particulars Of Loans, Guarantees Or Investments Under Section 186 of 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 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, 2021.

16. Annual Return

In accordance with the provisions of Section 92(3) read with Section 134(3) (a) of the Act, Annual Return of the Company is hosted on website of the Company at https://www.muthootfinance.com/themes/bartik/uploads/Annual_ Return_FY21.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.

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.

The details of Corporate Social Responsibility and Business Responsibility Committee is provided in the annual report on Corporate Social Responsibility annexed to this Report.

During the year under review, the Committee met four times on June 16, 2020, August 18, 2020, November 2, 2020 and February 08, 2021 respectively.

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/2020- 08/1472561629related-party-transaction%20policy. 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 arms 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 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 which 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

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 2020-21.

23. Vigil Mechanism

The Company has established a Vigil Mechanism/ Whistle Blower policy to enable Directors, 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 whistle blowers are protected against victimization/ any adverse action and/ or discrimination as a result of such a reporting and provides a 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 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

Cessation

Mr. M G George Muthoot, Chairman of the Company ceased to be a Director due to his demise on March 05, 2021. Mr. George Jacob Muthoot has been appointed as the Chairman of the Company effective June 02, 2021.

Appointments - Independent Directors

Ms. Usha Sunny was appointed as an additional and Independent Director effective November 30, 2020 for a period of three consecutive years to the Board of the Company subject to the approval of the shareholders at the ensuing Annual General Meeting. Your Board recommends the appointment of Ms. Usha Sunny as an Independent Director on the Board of Directors of the Company. The notice convening the 24th AGM sets out the detailed profile of Ms. Usha Sunny. In the opinion of the Board, Ms. Usha Sunny brings experience, integrity, proficiency and expertise in the domain of finance that will provide valuable insights in improving overall business and governance functions of the Company.

In order to comply with the Corporate Governance requirements of SEBI Listing Regulations and the Act, your Board proposes to appoint Mr. Abraham Chacko as Independent Director of the Company subject to approval of the shareholders in the upcoming Annual General Meeting. Mr. Abraham is an experienced banker by profession and had held senior most positions in various banks in the past including Executive Director in Federal Bank Limited, a BSE &

NSE listed and one of the oldest private sector bank in India. Detailed profile of Mr. Abraham Chacko is provided in the Notice of the AGM.

Appointments - Whole Time Directors

Your Board, on the recommendation of the Nomination and Remuneration Committee, proposes the appointment of Mr. George Muthoot George, Mr George Muthoot Jacob, and Mr George Alexander as Directors liable to retire by rotation and Whole Time Directors in the Board of Directors with effect from October 01, 2021. The proposed appointment will bring in more youthful energy and experience into the Board of Directors of the Company.

As per the provisions contained in Circular DNBR (PD) CC. No. 065/03.10.001/2015-16 dated July 09, 2015, approval of the Reserve Bank of India is required for the appointment of the three whole time directors on the Board of the Company since such appointment results in change in more than 30 percent of the directors excluding the independent directors. Currently, your Board has 4 non-independent directors on the Board and the appointment of 3 new directors on the Board would result in more than 30 percent change in the Board of Directors as mentioned in the said circular. Your Company has made applications to the Reserve Bank of India seeking its approval for the proposed appointment on the Board of Directors. Hence, the appointment of Mr. George Muthoot George, Mr. George Alexander and Mr. George Muthoot Jacob as Whole Time Directors on the Board of Directors of the Company would be subject to receipt of approval from the Reserve Bank of India and will be effective from October 01, 2021 or such other date Reserve Bank of India provide its approval, whichever is later.

Necessary resolutions seeking shareholders approval for the proposed appointments are provided in the notice calling the Annual General Meeting.

Directors Liable to retire by rotation

Mr. George Jacob Muthoot, Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, offer himself 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 recommends the respective appointment/ re-appointments. Your Board believes that the proposal for appointment/ re-appointment 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 are available on the website of the Company at https://www. muthootfinance.com/our-directors

Pursuant to Clause C(2)(i) of Schedule V read with Regulation 34(3) of SEBI Listing Regulations, in the opinion of the Board the independent directors fulfill the conditions as specified in the Listing Regulations and are independent of the management.

26. Meetings of the Board

During the Financial Year 2020-21, your Board of Directors met eight times on June 17, 2020, July 18, 2020, August 19, 2020; September 05, 2020; November 03, 2020, November 30, 2020, February 09, 2021 and February 19, 2021. 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 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. 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 the Act. The policy is available on the Companys 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 Corporate Governance Report circulated along with this report.

b) Performance evaluation of Board, Committees and Directors

The SEBI Listing Regulations and the Act require the evaluation of the performance of the Board, its Committees and the individual directors. The Board carried out an 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 Directors appear in Annual Report of the Company.

c) Independent Directors Meeting

During the year, a meeting of Independent Directors was held on February 9, 2021 as required under the Act and in Compliance with requirement under Schedule IV of the Act and as per requirements of SEBI Listing Regulations 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 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 instituted an Environmental, Social and Governance Committee ("ESG Committee"), with effect from August 06, 2021, 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 successfully implemented many digital transformation initiatives during the year providing great customer experience, improved business efficiencies, ease of operations and effective risk management.

A few of the IT initiatives undertaken are given below.

Seamless Integration with Multiple Partner Systems through APIs

The Company established application programming interface (API) enabling seamless and secure exchange of data between various internal and external systems. More than 150 APIs were developed and deployed by the Company for providing customers seamless experience on a real-time basis.

Despite the ferocity with which the pandemic are now hitting us, the Company was able to provide uninterrupted services to its stakeholders thereby exhibiting harmonious business continuity. With work from home becoming the new normal, utmost care was taken in ensuring that our employees enjoy a seamless work environment while working remotely. The implementation of Google Work Space across the organization has contributed tremendously to build a more tech savant environment to communicate and collaborate.

Digital Initiatives

The in-house IT team could integrate the widely used WhatsApp platform with CBS backend for reaching

out to customers through alert mechanism like, SMS, e-mail, Click-to-Call, etc for doing transactions. This has been found widely used by customers across.

KYC Data Capture & Validation

The Company has been a forerunner in using video KYC solution by integrating with its core banking and in Loan@home customer-facing application, obviating the need for them to visit the branch physically for onboarding. Other initiatives such as Digital KYC and customer bank account verification using the Penny Drop integration was completed as part of the KYC data enrichment programme.

AI Driven Development Initiative

Considering the vast array of possibilities of Artificial Intelligence (AI), your Company has initiated its usage in various areas and processes. As part of first step, signature verification in the pledge process has been performed successfully. Inception of RPA (Robotics Process Automation) in various money transfer transactions reconciliation has been a crucial step undertaken by the Company, resulting in all daily transactions reconciled with the vendor systems automatically now.

Security Surveillance System

Taking into consideration the necessity of physical security in our branches, a powerful video surveillance system was developed and implemented with central monitoring capabilities. The Smart Eye software solution has the AI and advanced computer vision technologies for effective protection of the valuable assets stored in the branches.

Mobile Applications Development and Roadmap

Mobile applications developed in-house enabled Muthoot Finance to engage with the customers in a more prudent way and identify appropriate customer touchpoints to create and enhance personalized experience. We have built a suite of mobility applications ranging from lead creation, loan repayment, loan top-up, customer onboarding, customer engagements, collections, and various add-on apps that can act as extensions of our Core Banking Software (CBS). Widely used payment channels such as PhonePe, PayTM and BBPS (Bharath Bill Payment) channels could be added for better customer convenience.

Enhancements in Intranet Portal MINE A new module was enrooted in the knowledge management intranet portal MINE for the continual updation of employees on various operational areas, new products and services. This has a dedicated facility for learning and online tests done by the HR

Department. Learning materials are regularly posted and updated on the platform prior to and conduct of tests. Individual scores are arrived at by the system automatically which are used by HR department for their various reviews.

c) Foreign exchange earnings and outgo

Particulars in Million
Total Foreign Exchange earned Nil
Total Foreign Exchange expended 4,776.35

33. 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 Act.

The Report given by M/s. Varma & Varma, Chartered Accountants, Statutory Auditors, on the financial statement of the Company for the FY 2020-21 is part of the Annual Report.

Reserve Bank of India on April 27, 2021 vide notification no. DoS.CO.ARG/SEC.01/08.91.001/2021- 22 issued Guidelines for Appointment of Statutory Central Auditors /Statutory Auditors of Commercial Banks (excluding RRBs), UCBs and NBFCs, (including HFCs). In compliance with the guidelines, the Company is required to appoint two new statutory Auditors as "Joint Auditors" in the second half of the financial year 2021-22. In compliance with the FAQs on the above notification published by RBI, the existing statutory Auditors M/s Varma & Varma, Chartered Accountants will continue as the statutory auditor of the Company till the appointment of new statutory Auditors in the second half of the financial year 2021-22. Your Board will appoint the new Statutory Auditors in the second half of the financial year 2021-22 in due compliance with the provisions of the said guidelines issued by RBI and the relevant provisions of the Companies Act, 2013.

b) Secretarial Audit under Section 204

M/s KSR & Co., Company Secretaries LLP, Coimbatore was appointed as Secretarial Auditors of the Company for the financial year 2020-21 pursuant to Section 204 of the Act. The Secretarial Audit report submitted by them is annexed to this report as Annexure 8.

c) Annual Secretarial Compliance Report

The Company has undertaken an audit for the financial year 2020-21 for all applicable compliances as per SEBI Regulations and Circulars/ Guidelines issued thereunder.

The Annual Secretarial Compliance Report has been submitted to the stock exchanges within 60 days of 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 2020-21 is enclosed as an annexure to the Boards report.

f) Auditors certificate on ESOP

The auditors certificate on the implementation of share based schemes in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, will be made available at the AGM for inspection electronically.

g) Explanations or comments by the Board on qualification, reservation or adverse remark or disclaimer on audits for financial year 2020-21

There are no qualifications, reservation or adverse remark or disclaimer on audits under Section 139 and Section 204 of the Act for financial year 2020-21.

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 2020-21 are as under:

Number of complaints pending at the beginning of the financial year 2020-2021 1
Number of complaints filed during the financial year 2020-2021 2
Number of complaints disposed of during the financial year 2020-2021 3
Number of complaints pending as on end of the financial year 2020-2021 0

35. Personnel

The Disclosure required under the provisions of Section 197 of the Act read with Rule 5 (1) & Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this report as Annexure 9.

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 are 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 2020-21 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.

41. Acknowledgement

Your Directors place on record its respect and homage to Late Chairman Mr. M G George Muthoot. Mr. M G George Muthoot was the Mentor and Visionary leader who played pivotal leadership role through his long career in building one of the most trusted financial powerhouses in the Country.

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 them and their family 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, Ministry of Corporate Affairs, and Stock Exchanges including various officials thereat 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, 2021
Registered Office:
2nd Floor, Muthoot Chambers,
Opposite Saritha Theatre Complex,
Banerji Road,
Kochi - 682 018