paisalo digital ltd Directors report


<dhhead>Board’s Report</dhhead>

To

The Members of Paisalo Digital Limited

Your Board of Directors have pleasure in presenting the 31st Annual Report together with the Audited Standalone and Consolidated Financial Statements for the Financial Year ended March 31, 2023. This report read with Corporate Governance Report and Management Discussion & Analysis includes macro–economic scenario, governance philosophy, financial performance of the Company, business overview, opportunity and threats and various initiative taken by the Company.

FINANCIAL HIGHLIGHTS

The Standalone financial performance of the Company for the Financial Year 2022–23 is summarized below:

Particulars

FY 2022–23

FY 2021–22

Revenue from Operations

4,229.72

3,563.98

Less: Expenditure

2,945.53

2,500.06

Exceptional Item

45.89

0.02

Profit Before Tax (PBT)

1,238.30

1,063.91

Tax Expenses

321.38

276.76

Net Profit After Tax (PAT)

916.93

787.14

Total Comprehensive Income for the Period

916.93

787.14

Transfer to Reserve Fund U/S 45 IC(1) of the RBI Act, 1934

183.39

157.43

Transfer to General Reserve

630.0

550.00

Provisions of Standard Assets

(18.71)

(18.49)

Earnings per Share of Re. 1 each (EPS) (INR)

2.06

1.86

Net Worth

11,609.99

10,240.91

Assets Under Management (AUM)

32,203.70

24,719.40

 

RESULTS OF OPERATIONS AND STATE OF COMPANY’S AFFAIRS

Revenue from operations for the year ended March 31, 2023 has increased by 18.68 % at INR 4,229.72 Million over the corresponding previous year. The Net Profit of your Company for the financial year ended March 31, 2023 stood at INR 916.93 Million as against the Net Profit of INR 787.14 Million for the financial year ended March 31, 2022. Accordingly, the Net Profit for the financial year ended March 31, 2023 reflects a growth of 16.49 % over the corresponding Profit for the financial year ended March 31, 2022.

TRANSFER TO RESERVES

Under Section 45IC of the Reserve Bank of India Act, 1934, Non-Banking Financial Companies (NBFC) are required to transfer a sum not less than 20% of its net profits every year to Reserve Fund before declaration of any dividend. Accordingly, the Company has transferred INR 183.39 Million (previous year INR 157.43 Million) to Reserve Fund. Further, INR 630.00 Million has been transferred to General Reserve for financial year 2022–23.

SUBSIDIARY COMPANY

The Company has only one Wholly Owned Subsidiary viz. Nupur Finvest Private Limited, a registered Non–Deposit Taking Non–Banking Finance Company. Nupur Finvest Private Limited is engaged in finance activities. At the year ended March 31, 2023, the net worth of the Company stood at INR 561.47 Million. During the reporting period the subsidiary reported income of INR 502.18 Million and Profit Before Tax (PBT) and Profit After Tax (PAT) at INR 24.07

Million and INR 19.26 Million respectively.

During the FY 2023, no new subsidiary was incorporated/acquired. The Company does not have any Associate Company nor has entered into a Joint Venture with any other Company.

The Financial Statement of Subsidiary Company is also available in a downloadable format under the Investor section on the Company’s website at www.paisalo.in. Pursuant to the provisions of Regulation 16 of SEBI (LODR) Regulations, 2015, Company has adopted Policy for Determining of Material Subsidiary which is available at Company’s website at https://www.paisalo.in/pdf/ corporate_governance/Policy_for_determining_material_subsidiary.pdf

CONSOLIDATED FINANCIAL STATEMENTS

In compliance with the applicable provisions of Companies Act, 2013 including applicable Accounting Standard on Consolidated Financial Statements, this Annual Report also includes Consolidated Financial Statements for the Financial Year ended March 31, 2023.

Consolidated financial performance of the Company financial year ended March 31, 2023 is summarized below:

Particulars

FY 2022–23

FY 2021–22

Revenue from Operations

4,731.89

3,922.23

Less: Expenditure

3,424.24

2,850.69

Exceptional Item

45.29

0.33

Profit Before Tax (PBT)

1,262.37

1,071.22

Tax Expenses

326.19

278.71

Net Profit After Tax (PAT)

936.19

792.51

Total Comprehensive Income for the Period

936.19

792.51

Earnings per Share of Re. 1 each (EPS) (INR)

2.10

1.87

AUM

34927.92

26972.60

 

REVIEW OF OPERATIONS

The Company is providing a number of financial products like Business Loans, SME & MSME Loans, Income Generation Loans for business/self–employment purpose. During the year under review, Company has posted 16.49 % increase in the Net Profit after tax from the finance business of the Company.

KEY RATIO

The Key Ratio for Financial Year ended March 31, 2023:

Current Ratio

2.38

Debt– Equity Ratio

1.58

Debt Service Coverage Ratio

0.58

Return on Equity Ratio

7.90%

Net Capital Turnover Ratio

0.37

Net Profit Ratio

21.68%

Return on Capital Employed

10.07%

Return on Investments

0.14%

 

DISBURSEMENTS

During the Financial Year 2022–23, total disbursements reached to INR 25,995.97 Million.

NUMBER OF CUSTOMERS

During the year under review the Customer outreach stood at 15,05,297.

CONVERSION OF FULLY CONVERTIBLE WARRANTS AND ISSUE OF EQUITY SHARES

In terms of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 and Special Resolution passed by the Shareholders of the Company at Extraordinary General Meeting held on March 8, 2021, on receipt of initial warrant subscription amount of INR 460.01 Million equivalent to 25% of the warrant issue price as prescribed by the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 for allotment of Fully Convertible Warrants (‘Warrants’), on March 20, 2021 the Company considered and allotted 26,10,000 Warrants to Promoter Group entities, on preferential basis. As per the terms of the issue of Warrants, conversion option can be exercised by Warrant holders at any time during the period of 18 (Eighteen) months from the date of allotment of warrants, in one or more tranches.

Out of total convertible warrants, 16,20,000 warrants had already been converted into equity shares during the financial year ended March 31, 2022 and balance 9,90,000 warrants had been converted during the reporting financial year. As on March 31, 2023, no convertible warrants/ convertible securities were outstanding.

SHARE CAPITAL

During the financial year ended March 31, 2023 Warrant Holders opted to exercise their right to convert the 9,90,000 warrants into equity shares and paid 75% of issue price to convert 9,90,000 warrants into equity shares. Accordingly, 85,55,000 equity shares of INR 1/– each at premium of INR 69.50/– each on September 3, 2022 and 13,45,000 equity shares of INR 1/– each at premium of INR 69.50/– each on September 12, 2022, allotted to the warrant holders on conversion of warrants. The Authorized Share Capital of the Company stood at INR 1,25,00,00,000.00 and consequent to allotment of equity shares on conversion of warrants, the Issued Share Capital of the Company, as on March 31, 2023, was stood at INR 44,91,46,990.00 consisting of 44,91,46,990 Equity Shares of face value of INR 1/– each and the Subscribed Share Capital of the Company, as on March 31, 2023, was stood at INR 44,90,84,490.00 consisting of 44,90,21,990 Equity Shares of face value of INR 1/– each and 1,25,000 forfeited equity shares of face value of INR 1/– each (amount originally paid–up @ INR 0.50 each) and the Paid–up Share Capital of the Company, as on March 31, 2023, was stood at INR 44,90,21,990.00 consisting of 44,90,21,990 Equity Shares of face value of INR 1/– each fully paid–up and INR 62,500 for 1,25,000 forfeited equity shares of face value of INR 1/– each (amount originally paid–up @ INR 0.50 each).

DISCLOSURE OF UTILIZATION OF FUNDS PURSUANT TO REGULATION 32(7A) OF SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015

During the year under review, the fund raised INR 523.46 Million (75% of issue price) through allotment of 99,00,000 equity shares of INR 1/- each on conversion of warrants had been utilized for general working capital, repay of borrowings and other corporate purpose as mentioned in the explanatory statement annexed to the Notice of Extra–Ordinary General Meeting, held on March 8, 2021 in which Special Resolution was passed by the Shareholders for preferential issue of Fully Convertible Warrants.

DEMATERIALIZATION OF EQUITY SHARES

Equity Shares of the Company are compulsorily tradable in demat form. As on March 31, 2023, 99.99% of the Equity Shares are held in demat form and only 40,060 Equity Shares of INR 1/- each out of total Equity Shares were held in physical form.

NET WORTH AND CAPITAL TO RISK ADJUSTED RATIO (CRAR)

The Net Worth of the Company (Standalone) increased to INR 11,609.99 Million as on March 31, 2023 from INR 10,240.91 Million as on March 31, 2022. The Capital to Risk Adjusted Ratio (CRAR) stood at 40.34 % as on March 31, 2023 as against 42.92 % as on March 31, 2022, which is much above the requirement as stipulated by Reserve Bank of India.

DIVIDEND DISTRIBUTION POLICY

In terms of Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Company had formulated a Dividend Distribution Policy of the Company, which sets out the parameters and circumstances to be considered by the Board in determining the distribution of dividend to its shareholders and/or retaining profit earned. The policy is available on the website of the Company at https://paisalo.in/pdf/corporate_governance/ Dividend_Distribution_Policy.pdf

DIVIDEND

Your Board is pleased to recommend a final dividend of 10% on each fully paid equity share for Financial Year 2022–23. The dividend, if declared, by the Members at the forthcoming Annual General Meeting (AGM) shall be paid to the eligible Members of the Company. The dividend recommended is in accordance with the Company’s Dividend Distribution Policy and framework laid down by the Reserve Bank of India vide its circular dated June 24, 2021 The dividend, if declared, at the ensuing AGM will be taxable in the hands of the Members of the Company pursuant to Income Tax Act, 1961.

UNCLAIMED DIVIDEND AND UNCLAIMED SHARES

Pursuant to Rule 5(8) of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, your company furnished a statement / information through Form IEPF 2 to the Ministry of Corporate A_airs, of the unclaimed dividends amounting to INR 1,48,881.00 as on the date of financial year ended on March 31, 2022. During the year under review, there was an amount of INR 26,860.00 of unpaid and unclaimed dividend for a period of 7 years from the date it was lying in the unpaid dividend, accordingly, pursuant to provisions of Section 124(5) of the Companies Act, 2013, INR 26,860.00 have been transferred in the Investor Education and Protection Fund (IEPF) of the Central Government in November 2022. And During the year Company has transferred 5870 equity shares of INR 1/- each against which dividends were not claimed/paid for the 7 consecutive years.

As on March 31, 2023 following amount was lying in the unclaimed dividend account:

Financial Year

Type of Dividend

%

Dividend per share (in INR)

Dividend Declared in

Date of Dividend Declaration

Unclaimed divided amount (in INR)

2015-16

Final

10

1.00

24th AGM

30–09–2016

20,451.00

2016-17

Final

10

1.00

25th AGM

26–09–2017

17,858.00

2017-18

Final

10

1.00

26th AGM

29–09–2018

12,633.00

2018-19

Final

10

1.00

27th AGM

10–08–2019

13,814.00

2019-20

Final

10

1.00

28th AGM

08–09–2020

21,556.00

2020-21

Final

10

1.00

29th AGM

25–09–2021

35,707.00

2021-22

Final

10

0.10

30th AGM

30–09–2022

11,588.38

 

DEPOSIT

During the year and review, the Company has not accepted any public deposits and as such, no amount on account of principal or interest on deposits from public, in terms of Section 73 of the Companies Act, 2013 was outstanding as on the date of the balance sheet.

BANK FINANCE

Your Company raised funds for its working capital and business requirements from various banks and the total amount of bank loan outstanding as on March 31, 2023 was INR 13,017.52 Million as against INR 10,261.10 Million on March 31, 2022.

During the year under review, your Company maintained banking relationships with 15 Banks.

FUND RAISING THROUGH ISSUE OF DEBENTURES

During the year under review, Company has raised INR 480.00 Million by issuing Unlisted Unsecured Unrated Non–Convertible Debentures on private placement basis. The fund raised from such issue were utilized for the financing activities and other general purpose.

TIMELY REPAYMENT OF DEBT LIABILITIES

During the year under review, the Company has duly serviced all its debts obligations in time.

During the year, the Company has also make payment of interest and principal amount on Non–Convertible Debentures as per the terms of issue.

CREDIT RATING

M/s Infomerics Valuation and Rating Pvt. Ltd. assigned following rating to Company’s instruments:

Sr No. Instrument/Facility Fund Based Facilities from Banks-

Amount (INR in Million)

Rating Assigned

1 Long Term

18000.00

IVR AA–/Stable Outlook (IVR Double A

Minus with Stable Outlook)

2 Non-Convertible Debentures

1150.00

3. Commercial Paper

1500.00

IVR A1+ (IVR A One Plus)

 

BOARD OF DIRECTORS, BOARD MEETINGS AND KEY MANAGERIAL PERSONNEL

The Company’s Board is duly constituted and is in compliance with the requirements of the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, RBI’s Corporate Governance provisions as applicable on the Company and provisions of the Articles of Association of the Company. The Company’s Board has been constituted with requisite diversity, wisdom and experience commensurate to the business of your Company.

APPOINTMENT/REAPPOINTMENT OF DIRECTORS

The Board of Directors based on recommendation of Nomination and Remuneration Committee in their meeting held on May 6, 2022 appointed Mr. Santanu Agarwal (DIN: 07069797) as Additional Director in the category of Executive Director designated as Deputy Managing Director for five years w.e.f. May 6, 2022. On June 10, 2022 Members of the Company passed the Special Resolution through Postal Ballot for the appointment of Mr. Santanu Agarwal as Deputy Managing Director of the Company.

As per the provisions of Section 149(10) of the Companies Act, 2013 and in terms of appointment of Mr. Gauri Shankar, as Non-Executive Independent Director, his tenure of five year was completing on July 21, 2022, Accordingly, based on the recommendation of Nomination and Remuneration Committee and keeping in the view the knowledge and experience of Mr. Gauri Shankar, the Board of Director, in their meeting held on May 6, 2022 recommended to the Members for reappointment of Mr. Gauri Shankar as Non-Executive Independent Director another term of three consecutive years from July 22, 2022 upto July 21, 2025. Members of the Company, on June 10, 2023, passed the Special Resolution through Postal Ballot for the reappointment of Mr. Gauri Shankar as Non-Executive Independent Director of the Company for three years commencing from July 22, 2022.

Further, Board of Directors of the Company appointed Mr. Nirmal Chand (DIN: 10041305) as an Additional Director of the Company in the category of Non-Executive Independent Director, not liable to retire by rotation for a term of three consecutive years w.e.f. March 27, 2023 subject to approval of Members of the Company. On May 5, 2023, Members passed Special Resolution through Postal Ballot for appointment of Mr. Nirmal Chand as Independent Director of the Company.

CHANGE IN DESIGNATION

During the year Members of the Company, on June 10, 2023, passed the Special Resolution through Postal Ballot for the appointment of Mr. Vijuy Ronjan n (DIN: 09345384), who was appointed as an Additional Director in the category of Non-Executive Independent Director by the Board w.e.f. October 8, 2021, as Non-Executive Independent Director of the Company for three years from his initial date of appointment as Non-Executive Independent Director viz. October 8, 2021.

The Board of Directors in their meeting held on May 6, 2022 changed the designation of Mr. Santanu Agarwal from Deputy CEO to Deputy Managing Director, the Members of the Company passed the Ordinary Resolution through Postal Ballot for appointment of Mr. Santanu Agarwal as Deputy Managing Director and for his remuneration as Deputy Managing Director on June 10, 2022.

CESSATION OF DIRECTOR

With deep regret, we report the sad demise of our Independent Director Mr. Pradeep Agarwal on August 2, 2022. Your Board would like to place on record their highest gratitude and appreciation for the guidance given by Mr. Pradeep Agarwal to the Board during his tenure as a Director. Paisalo benefited immensely from his invaluable guidance over the years. We knew him as a man of great intellect and vision who leaves behind a legacy of incredible commitment, dedication and a passion for business excellence. He was a true Karmayogi and a source of inspiration to all those whose lives he touched. He will remain in our memories for the rest of our lives.

RETIREMENT OF DIRECTOR BY ROTATION

During the year under review, Mr. Harish Singh (DIN: 00039501), who retired at the 30th Annual General Meeting, was re–appointed as an Executive Director of the Company.

In terms of Section 152 of Companies Act, 2013, Mr. Anoop Krishna, Executive Director (DIN 08068261), is liable to retire by rotation at the forthcoming Annual General Meeting and being eligible for re–appointment, o_ers himself for re–appointment as Director. The Board Directors of the Company in its meeting held on July 24, 2023 based on the recommendation of Nomination and Remuneration Committee recommended to the Members re–appointment of Mr. Anoop Krishna as a Director of the Company, liable to retire by rotation. Brief particulars of Mr. Anoop Krishna as required under the Secretarial Standard on General Meetings issued by the Institute of Company Secretaries of India and Regulation 36 of the SEBI (Listing Obligations and Disclosure Requirements Regulations, 2015 is provided in the Notice convening the 31st Annual General Meeting of the Company.

KMPS

There was no change in the KMPs of the Company during the year 2022-23

DECLARATION OF INDEPENDENCE BY INDEPENDENT DIRECTORS

All Independent Directors of the Company have declared to the Board of Directors that they meet the criteria of Independence as laid down in Sections 149(6) and 149(7) of the Companies Act, 2013; Regulation 16(1) (b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and RBI Corporate Governance Norms as applicable on the Company. In the opinion of the Board, the Independent Directors possess the requisite expertise and experience and are the person of integrity and repute. They fulfil the conditions specified in the Companies Act, 2013 and the Rules made thereunder and are independent of the management of the Company. The Board also places on records its deep appreciation for their continuous guidance, support and contribution to the Management of the Company.

EVALUATION OF BOARD OF DIRECTORS

The Board has carried out an annual evaluation of its own performance, the Board committees and individual Directors pursuant to the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Through a structured questionnaire, feedback from Directors was obtained as a part of performance evaluation. This questionnaire and criteria of performance was broadly based on the guidance note on the Board evaluation issued by SEBI on January 5, 2017.

Basis on the feedback received from the directors, the Board and the Nomination and Remuneration Committee reviewed the performance of the individual directors, the Managing Director including various committees established by the Board at their respective meetings.

The performance evaluation of the individual Directors including the Managing Director, inter alia, was done based on the criteria such as professional conduct, roles and functions, discharge of duties, their contribution to Board/ Committees/senior management, preparedness on the issues to be discussed, contribution to the decision making, etc. The performance evaluation of the Board as a whole and its committees was made after seeking inputs from the Directors/committee members on various criteria such as structure and composition, e_ectiveness of the Board process, information, roles and responsibilities, professional development, functioning of the Board and its committees, establishment and determination of responsibilities of committees, and the quality of relationship between the Board and the management.

The performance evaluation of the Non–Independent Directors viz., Managing Director and Executive Directors and the Board as a whole was also carried out by the Independent Directors at their separate meeting held on February 9, 2023, considering the views of the Executive and the Non–Executive Directors.

The Company conducts a Board Evaluation process for the Board of Directors as a whole, Board Committees and also for the Directors individually through self–assessment and peer assessment. Performance of the Board of Directors, its Committees and Individual Directors Mounting stakeholders’ expectations, challenges faced by the Companies to operate under fluctuating economic conditions and increased regulatory requirements have brought the quality of performance of the Board of Directors under greater scrutiny. The Board of Directors has recognized that it would be important for them to continually assess how e_ectively they are performing their roles against the objectives and the goals they have set for themselves. This growing recognition has resulted in Board evolutions as a critical structural tool for assessing Board e_ectiveness and e_iciency.

The Directors expressed satisfaction with the evaluation process. The performance of the Director individually and collectively and performance of the Committees are found satisfactory.

With the spirit of wealth creation for the Stakeholders of the Company, your Directors are committed to give their e_orts towards the development of the Company.

BOARD & COMMITTEES OF THE COMPANY BOARD OF DIRECTORS

As on March 31, 2023, there are ten members on the Board of the Company, out of ten members six are Non–

Executive Independent Directors. Board members of the Company having experience in the field of finance, banking, taxation, legal and compliance.

MEETINGS OF BOARD

During the year under review, a total of Six Meetings of the Board of Directors of the Company were held, i.e., on May 6, 2022; August 5, 2022; September 3, 2022; September 12, 2022; November 10, 2022 and February 10, 2023. Details of Board composition and Board Meetings held during the financial year 2022–23 have been provided in the Corporate Governance Report which forms part of this Report.

AUDIT COMMITTEE

The Audit Committee of the Board consists of Independent Directors namely Mr. Gauri Shankar, as Chairperson and Mr. Naresh Kumar Jain and Executive Director Mr. Harish Singh as Members. The composition, terms of reference and details of meetings held during the year are disclosed in the Report on Corporate Governance. All the recommendations made by the Audit Committee were accepted by the Board of Directors.

STAKEHOLDERS RELATIONSHIP COMMITTEE

The Stakeholder Relationship Committee of the Board consists of Independent Directors namely Mr. Naresh Kumar Jain, as Chairperson and Mr. Gauri Shankar and Mr. Raman Aggarwal as Members. The composition, terms of reference and details of meetings held during the year are disclosed in the Report on Corporate Governance.

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee (‘NRC’) recommends to the Board the suitability of candidates for appointment as Director/Managing Director, Key Managerial Personnel and the remuneration packages payable to them. The composition, terms of reference and details of meetings held during the year are disclosed in the Report on Corporate Governance.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The Company strives to maintain an appropriate combination of Executive, Non–Executive and Independent Directors. The Nomination & Remuneration Committee of the Company leads the process for Board appointments in accordance with the requirements of Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and other applicable rules or guidelines. All the Board appointments are based on meritocracy. Generally, the Managing Director and Whole–time Directors (Executive Directors) are appointed for a period of five years. Independent Directors of the Company are appointed to hold their o_ice for a term of up to five consecutive years on the Board of your Company. Based on their eligibility for reappointment, the outcome of their performance evaluation and the recommendation by the Nomination and Remuneration Committee, the Independent Directors may be re–appointed by the Board for another term of five consecutive years, subject to approval of the Shareholders of the Company. The Directors, Key Managerial Personnel and Senior Management Personnel shall retire as per the applicable provisions of the Companies Act, 2013 and the policy of the Company. The potential candidates for appointment to the Board are inter–alia evaluated on the basis of personal and professional ethics, standing, integrity, values and character; appreciation of the Company’s vision, mission, values; prominence in business, institutions or professions; professional skill, knowledge and expertise; financial literacy and such other competencies and skills as may be considered necessary.

In addition to the above, the candidature of an Independent Director is also evaluated in terms of the criteria for determining independence as stipulated under Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, guidelines issued by RBI and other applicable regulations or guidelines. In case of re–appointment of Director, the Board shall take into consideration the results of the performance evaluation of the Directors and their engagement level. The Company has Remuneration Policy for Directors, KMPs and other employees, which is reviewed by the Board of Directors of the Company, time to time, the policy represents the overarching approach of the Company for the remuneration of Director, KMPs and other employees.

COMPLIANCE WITH THE CODE OF CONDUCT OF BOARD OF DIRECTORS AND SENIOR MANAGEMENT

The Board of Directors and Senior Management of the Company have complied with the Company’s Code of Conduct applicable to Board of Directors and Senior Management. In this regard declaration signed by the Managing Director is annexed and forms part of this Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c), read with Section 134(5) of the Companies Act, 2013 with respect to Directors’ Responsibility Statement, the Directors, to the best of their knowledge and belief, hereby confirm that: a) In the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departure has been made in following the same; b) Appropriate accounting policies have been selected and applied consistently and judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of a_airs of the Company at the end of the financial year and of the profit of the Company for that period; c) Proper and su_icient care for maintenance of adequate accounting records in accordance with the provisions of Companies Act, 2013 have been taken for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; d) The annual accounts have been prepared on a going concern basis; e) Internal financial controls to be followed by the Company had been laid down and such internal financial controls are adequate and operating e_ectively; and f) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating e_ectively.

AUDITORS & AUDIT REPORTS

STATUTORY AUDITOR AND STATUTORY AUDIT REPORT

In terms of Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) issued by Reserve Bank of India vide its notification RBI/2021–22/25 Ref. No. DoS. CO. ARG/SEC.01/08.91.001/2021–22 dated April 27, 2021 and provisions of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Members of the Company appointed M/s Manish Goyal & Co. Chartered Accountants, having Firm Registration no. 006066C, as the Statutory Auditors of the Company at the 30th Annual General Meeting held on September 30, 2022 to hold o_ice from conclusion of 30th Annual General Meeting till the conclusion of 32nd Annual General Meeting of the Company to conduct the audit of accounts for the financial year ending March 31, 2023 and March 31, 2024. M/s Manish Goyal & Co. Chartered Accountants, has audited the Company’s Financial Statements for the financial year ended March 31, 2023. The Notes on financial statements referred to in the Auditors Report are self–explanatory and do not call for any further comments under Section 134 of the Companies Act, 2013. The Auditors’ Report to the Members for the year under review is unmodified, i.e. it does not contain any qualification, reservation or adverse remark.

The Report given by the Statutory Auditor M/s Manish Goyal & Co., Chartered Accountants, on the Financial Statement of the Company for the financial year 2022–23 is part of the Annual Report.

SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT

In accordance with the provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and as a measure of good Corporate Governance practice, Board of Directors in their Meeting held on February 10, 2023 has appointed M/s. Satish Jadon & Associates, Practicing Company Secretaries, as Secretarial Auditor of the Company to conduct Secretarial Audit of the Company for financial year ended March 31, 2023 and to submit Secretarial Audit Report in Form No. MR–3.

A copy of the Secretarial Audit Report received from M/s. Satish Jadon & Associates in the prescribed Form No. MR–3 is annexed to this Board’s Report and marked as Annexure A.

Pursuant to circular No. CIR/CFD/CMD1/27/2019 dated February 8, 2019, issued by the Securities and Exchanges Board of India and Regulation 24A(2) of SEBI (LODR) Regulations, 2015, the Company has obtained Secretarial Compliance Report for financial year ended March 31, 2023, from Practicing Company Secretary on compliance of all applicable SEBI Regulations and circular/ guidelines issued thereunder and the copy of same has been submitted with the Stock Exchanges within the prescribed due date. There are no qualifications, reservations, adverse remarks or disclaimer in the above Secretarial Audit Report.

SECRETARIAL STANDARDS

During the year under review, the Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

MAINTENANCE OF COST RECORDS

The cost records as specified by the Central Government under Section 148(1) of the Act are not required to be maintained by the Company.

FRAUD REPORTED BY AUDITORS UNDER SECTION 143(12) OTHER THAN THOSE WHICH ARE REPORTED TO THE CENTRAL GOVERNMENT

Pursuant to provisions of Section 143(12) of the Companies Act, 2013, the Auditors of the Company have not reported about any fraud, which is being or has been committed in the Company by its o_icers or employees.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF COMPANIES ACT, 2013

Being RBI registered Non–Banking Financial Company, pursuant to Section 186(11) of the Companies Act, 2013 the provisions of Section 186, except Sub–Section 1 of the said Section, shall not apply on the Company, hence disclosure under Section 134 (3) (g) of the Companies Act, 2013, of particulars of the loans given securities provided under Section 186 of the Companies Act, 2013 is not applicable to the Company. The details of Investment made by the Company have been disclosed in the note no. 6 of the Standalone Financial Statement for the year ended March 31, 2023. The Company has given its guarantee only for the credit facilities availed by its Wholly Owned Subsidiary M/s. Nupur Finvest Private Limited.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

During the financial year ended March 31, 2023, transactions with the Related Parties as defined under the Companies Act, 2013 read with Rules framed thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 were in the ‘ordinary course of business’ and ‘at arm’s length’ basis. During the year under review, your Company did not enter into any Related Party Transactions which require prior approval of the Members. All Related Party Transactions of the Company had approval of the Audit Committee and the Board of Directors, as required under Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Subsequently, the Audit Committee and the Board have reviewed the Related Party Transactions on a quarterly basis. The Company has an internal mechanism for the purpose of identification and monitoring of Related Party Transactions. During the year under review, there has been no materially significant Related Party Transactions having potential conflict with the interest of the Company. Since all Related Party Transactions entered into by your Company were in the ordinary course of business and also on an arm’s length basis, therefore details required to be provided under the provisions of Section 134(3)(h) of the Companies Act, 2013 in the prescribed Form AOC–2 is not applicable to the Company. The Directors draw attention of the Members to note no. 37 of the Notes to the Financial Statements for the year ended March 31, 2023 which sets out details of related party transactions. Policy on materiality of related party transactions and on dealing with related party transactions is displayed on the website of the Company at https://paisalo.in/pdf/corporate_governance/Policy_on_related_party_transactions. pdf

MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There were no material changes and commitments a_ecting the financial position of the Company which occurred between the end of the financial year and the date of this Report.

SIGNIFICANT AND MATERIAL LITIGATIONS / ORDERS

During the financial year 2022–23, there were no significant and material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. Further, no penalties have been levied by the RBI or any other regulator during the year under review.

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

As the Company is engaged in the financial services activities, its operations are not energy intensive nor does it require adoption of specific technology and hence information in terms of Section 134(3)(m) of the Act read with the Companies (Accounts) Rules, 2014, to the extent applicable, are as follows: - being a Non–banking Finance Company, the particulars regarding conservation of energy and technology absorption as required to be disclosed pursuant to the Rule 8(3) of the Companies (Accounts) Rules, 2014 are not relevant to its activities.

- Foreign Exchange earnings for the Company during the financial year under review was nil and Company’s Foreign Exchange outgo during the financial year under review was INR 2,31,219/–

CORPORATE SOCIAL RESPONSIBILITY

In accordance with the provisions of Section 135 of the Companies Act, 2013 read with rules made thereunder, Company has constituted a Corporate Social Responsibility Committee, which framed a CSR Policy for the Company and same has been approved by the Board of Directors of the Company, which is available on the website of the Company. CSR Policy of the Company is reviewed, time to time, For the financial year 2022–23 the Board of Directors of the Company in their meeting held on May 6, 2022 approved INR 17.45 Million as the budget for CSR activities. During the Year Company has spent INR 17.60 Million, CSR fund in various activities which are disclosed in the Annual Report on CSR activities for financial year ended March 31, 2023 annexed with this report as Annexure B. Composition of CSR Committee is disclosed in Corporate Governance Section of this Annual Report as part of Board’s Report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

Pursuant to Regulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, read with SEBI Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562 dated May 10, 2021, top 1,000 listed entities based on market capitalisation are required to submit a BRSR with e_ect from the FY2023 Accordingly, the Company has adopted a Policy on BRSR and other ESG initiatives. A detailed BRSR in the format prescribed by SEBI describing various initiatives, actions and process of the Company towards the ESG endeavor has been hosted on Company’s website and can be accessed at https://www.paisalo.in/ and also annexed with this report as Annexure C

INTERNAL FINANCIAL CONTROL

The Company remains committed to improve the e_ectiveness of Internal Financial Controls and processes which would help in e_icient conduct of its business operations ensure security to its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information.

The Company has put in place adequate internal controls with reference to accuracy and completeness of the accounting records and timely preparation of reliable financial information, commensurate with the size, scale and complexity of operations and ensures compliance with various policies and statutes in keeping with the organizations pace of growth, increasing complexity of operations, prevention and detection of frauds and errors. The Internal Financial Controls with reference to the financial statements are adequate in the opinion of the Board of Directors.

The internal control is supplemented by an extensive program of internal, external audits and periodic review by the Management. This system is designed to adequately ensure that financial and other records are reliable for preparing financial information and other data and for maintaining accountability of assets. Competent professionals have been engaged by the Company for conducting internal audit, to examine and evaluate the adequacy and e_ectiveness of internal financial control system of the Company. The Internal Audit team is responsible to assist the Audit Committee and Risk Management Committee on an independent basis with a complete review of the risk assessments and associated management action plans. The Internal Audit Reports and Risk related report are reviewed periodically by the Audit Committee and Risk Management Committee of the Company. E_icacy of internal control systems are tested periodically by Internal Auditors and Internal Control over financial reporting is tested and certified by Statutory Auditors.

Internal Financial Control System of the Company is modified continuously in accordance with the dynamic changes in the business conditions and to comply with the applicable laws, regulations, statutory and accounting requirements.

During the year, no material or serious observations have been highlighted for ine_iciency or inadequacy of such controls.

RISK MANAGEMENT

Risk management forms an integral part of the Company’s business operations and monitoring activities. The Company and its subsidiaries are exposed to a variety of risks, including liquidity risk, interest rate risk, market risk, credit risk, technology risk, operational risk, regulatory and compliance risk, reputational risk, business continuity risk, legal risk, competition risk, risks pertaining to pandemic, among others. NBFCs are required to ensure that a proper framework on Risk Management System is formulated and put in place. For this purpose, the Company, in addition to Audit Committee, has also constituted Assets Liability Management Committee and Risk Management Committee, the details of the functioning of these Committees and its frequency of meetings are provided in Report on Corporate Governance forming part of this Report. These Committees are constituted to facilitate the Board to address the risk associated with the business of the Company and developed and implemented a Risk Management Policy to ensure sustainable business growth with stability and promote a proactive approach in reporting, evaluating and resolving risks associated with the Company’s business. The Policy also highlights the functions, responsibilities and role of the Committees and Board to address the risks associated with the Company and to mitigate/reduce the impact of the risk on the Company. The Company follows a disciplined risk management process and takes business decisions with balanced risk reward paradigm.

HUMAN RESOURCES

Company’s industrial relations continued to be harmonious during the period under review. The Company strives to provide the best work environment with ample opportunities to grow and explore. Healthy, cordial and harmonious industrial relations have been maintained by the Company at all levels.

DISCLOSURES AS PER THE PROVISION OF SECTION 197 (12) OF COMPANIES ACT, 2013

The information required pursuant to the provisions of Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company has been appended as Annexure D of this Report. In terms of first proviso to Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employee’s particulars as required pursuant to provisions of Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The said information is available for inspection by the Members at the Registered O_ice of the Company during business hours on working days of the Company up to the date of the ensuing AGM. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary at cs@paisalo.in in this regard and same will be furnished on such request.

COMPLIANCE WITH PROVISIONS OF SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

The Company is committed to providing and promoting a safe and healthy work environment for all its employees. The Company has a detailed policy in place in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (the "POSH"), Internal Complaints Committees (the "ICC") has been set up to redress complaints, if any, received regarding sexual harassment and the Company has complied with provisions relating to the constitution of ICC under the POSH. During the financial year 2022–23, no complaints was received from any of the employees.

COMPLIANCE OF RESERVE BANK OF INDIA GUIDELINES

Your Company is categorized as a Non–Deposit taking Systemically Important Middle Layer Non–Banking Finance Company. Accordingly, during the year, the Company has not accepted any deposits from the public and there were no deposits which become due for repayment or renewal. The Company has complied with the ‘Master Direction–Non–Banking Financial Company– Systemically Important Non–Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, as amended from time to time and all other applicable Directions of RBI during FY 2022–23.

ANNUAL RETURN

In accordance with the provisions of Section 92(3) read with Section 134(3) (a) of the Act and the applicable rules, Annual Return of the Company as on March 31, 2023, in the prescribed form, which will be filed with Registrar of Companies/MCA, is hosted on website of the Company at https://paisalo.in/pdf/annual_report/MGT-7_ PAISALO_2022-23.pdf

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis report for the year under review as required under Regulation 34(2)(e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is provided as a separate section forming part of the Annual Report.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The vigil mechanism as envisaged in the Companies Act, 2013, the rules prescribed thereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is implemented through the Company’s Whistle Blower Policy to enable the Directors and Employees of the Company to report genuine concerns, to provide for adequate safeguards against victimisation and make provision for direct access to the Chairman of the Audit Committee. Details of vigil mechanism/whistle blower are included in the Corporate Governance Report, forming part of this Report. During the financial year 2022–23, no cases under this mechanism have been reported.

PREVENTION OF INSIDER TRADING

The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Company has also taken software containing structural digital database for maintaining names of persons with whom unpublished price sensitive information is shared. The software contains details of information shared and the names of such persons with whom information is shared under this regulation along with the Permanent Account Number.

The Code requires pre-clearance for dealing in the Company’s securities and prohibits the purchase or sale of Company securities by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the trading window is closed. The Board is responsible for implementation of the Code. The Code is available on the website of the company at https://www.paisalo.in/pdf/corporate_governance/Code_of_conduct_for_prevention_of_insider_trading.pdf

CORPORATE GOVERNANCE

Your Company believes that good corporate governance is the basis for sustainable growth of the business and e_ective management of relationship among constituents of the system and always works towards strengthening this relationship through corporate fairness, transparency and accountability. Your Company give prime importance to reliable financial information, integrity transparency, fairness, empowerment and compliance with law in letter and spirit.

In compliance with the provisions of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 read with Schedule V to the said Regulations, the Report on Corporate Governance forms an integral part of this report and is set out as separate section of this Report. The certificate from the Secretarial Auditor of the Company confirming compliance with the conditions of Corporate Governance is annexed to the Report on Corporate Governance.

CERTIFICATE FROM THE MANAGING DIRECTORS AND CHIEF FINANCIAL OFFICER

The certificate received from Mr. Sunil Agarwal, Managing Director and Mr. Harish Singh, Executive Director and Chief Financial O_icer with respect to the financial statements and other matters as required under Part B of Schedule II to the the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 forms part of this Report.

ACKNOWLEDGMENTS

Your Board acknowledges the support and co–operation received from all regulatory authorities of the Central Government and all State Governments in India. Your Board takes this opportunity to thank all its Banks and other stakeholders as it considers them essential partners in progress.

Your Board acknowledges and appreciates the relentless e_orts of the employees and sta_ including the management team headed by the Executive Directors who always lead from the front in achieving a commendable business performance year on year despite a challenging business environment. Your Board is indebted for the unstinted support and trust reposed by you, the Members. Your Board wishes to place on record its deep appreciation of the Non–Executive Directors of the Company for their immense contribution by way of strategic guidance, sharing of knowledge, experience and wisdom, which helps your Company to take right decisions in achieving its business goals. Your Board is also looking forward to continued support and co–operation in future.