ujjivan financial services ltd share price Directors report


To the Members,

Your Directors are pleased to present the 19th Annual Report of Ujjivan Financial Services Limited together with the audited financial statements for the financial year ended March 31, 2023.

1. FINANCIAL RESULTS

The Directors submit the Annual Report of Ujjivan Financial Services Limited (the "Company" or "Ujjivan") together with the audited financial statements for the financial year (FY) ended March 31, 2023.

( in Crores)

Particulars

Standalone*

consolidated*

FY 2022-23 FY 2021-22 FY 2022-23 FY 2021-22
Operating Income 119 - 4,421 2,995
Other Income 8 7 257 97
Total Income 127 7 4,679 3,092
Less: Operational Expenses
Personnel Expenses 1 1 930 822
Administrative & CSR Expenses 3 3 662 502
Finance Charges - - 1,493 1,071
Depreciation 0 0 163 155
Impairment Losses on Financial Instruments - - (99) 846
Total Operational Expenses 3 4 3,148 3,396
ProFit/(Loss) Before Tax 124 3 1,531 (304)
Less: Income tax 16 1 308 1
Less: Deferred tax 0 0 83 (74)
ProFit/(Loss) After Tax 108 2 1,140 (231)

* as per Indian Accounting Standards (ind-AS)

2. DIvIDEND

In accordance with the Dividend Distribution Policy of the Company, the Company with the approval of its directors through their resolution passed on March 10, 2023 has declared and paid an interim dividend of 5 (50%) per equity share which translates to a Dividend Payout ratio of 56% for the FY 2022-23. The interim dividend amount of 61 Crores was distributed to the shareholders on March 28, 2023. The Dividend Distribution policy of the Company is available on the Companys website and can be accessed from the link https://www.uiiivan. com/assets/web pdfs/239/original/4.Dividend Distribution Policy 09022023.pdf

3. transfer to reserves

The Company transferred 22 Crores to Statutory Reserves. Transfer of 20% of the Profit after Tax to the statutory reserves is in accordance with the provisions of section 45 - IC Reserve Bank of India Act, 1934.

4. credit rating

The Company has zero debt; hence no rating has been obtained from any rating agencies during the year.

5. CAPITAL REQUIREMENTS

Adjusted Net Worth of a CIC-ND-SI shall at no point of time be less than 30% of its aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items as on the date of the last audited balance sheet as at the end of the financial year as per RBI CIC Master Directions.

The Company as of March 31, 2023 is in compliance with the below capital requirements and all other mandatory ratios as required under RBI CIC Master Directions:

Ratios RBI Requirement Actuals (%)
Adjusted Networth (ANW) >30% of RWA 188.87%
Investment ratio >90% of Net Assets 97.65%
Equity Investment Ratio >60% of Net assets 110.27%
Leverage Ratio <2.5 Times 0.00063

6. CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In accordance with SEBI LODR Regulations, Management Discussion and Analysis Report and Corporate Governance Report together with the

Certificate thereon From the Independent Practicing Company Secretary is provided separately and Forms part of this Directors Report.

7. EXTRACT OF ANNUAL RETURN

The Annual Return of the Company as on March 31, 2023 in Form MGT - 7 in accordance with Section 92(3) of the Act read with the Companies (Management and Administration) Rules, 2014, is available on the website of our Company at https://www.uiiivan. com/annual-return.

8. NO. OF MEETINGS OF THE BOARD DURING THE FY 2022-23

During the Financial Year 2022-23, our Board has met 9 (nine) times and the meetings of our Board of Directors were held on April 18, 2022, May 19, 2022, June 23, 2022, August 04, 2022, October 14, 2022, November 11, 2022, February 09, 2023. March 10, 2023 and March 17, 2023. For further details, please refer to the Corporate Governance Report, which forms part of this report.

9. DIRECTORS RESIGNATION / APPOINTMENT / REAPPOINTMENTS / RETIRING DIRECTOR

(a) Re-appointment of director retiring by rotation

As per the provisions of the Companies Act, 2013, Mr. Narayan Anand (DIN: 02110727) retires by rotation at the ensuing 19th AGM and being eligible, seeks his re-appointment. The Board recommends his reappointment. Please refer item no. 2 of the 19th AGM Notice for further details.

10. DIRECTORS RESPONSIBIUTY STATEMENT

Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors of the Company confirms and state that:

(i) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii) 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 and loss of the company for that period;

(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in

(iv) accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

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

(vi) they have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

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

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, audit of internal financial controls and the reviews performed by management and the audit committee of the board, the board is of the opinion that the Companys internal financial controls were adequate and effective during the FY 2022-23.

11. DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declarations of independence from each of its Independent Directors under section 149(7) of the Companies Act, 2013, that he/she meets the criteria of independent director envisaged in section 149 (6) of the Companies Act, 2013.

All Independent Directors have submitted the declaration of Independence, as required pursuant to Section 149(7) of the Act and including the added criteria prescribed under SEBI LODR Regulations, stating that they meet the criteria of Independence as provided in section 149(6) of the Companies Act, 2013 and they are not disqualified from continuing as Independent Directors of our Company.

In the opinion of the Board, all the Independent Directors meet the criteria with regards to integrity, expertise and experience as required under applicable laws.

The UFSL has also received from its directors a statement that they have complied with the Code of Conduct for Directors and Senior Management of the UFSL.

12. NOMINATION AND REMUNERATION POLIOY

The Company pursuant to the provisions of Section 178 of the Companies Act, 2013 has formulated and adopted a nomination and remuneration policy which is disclosed on our website at the below link- https://www.uiiivan.com/mandatorv-policies

13. STATUTORY AUDiTORS

The Company had appointed Varma & Varma, Chartered Accountants (FRN - 004532S) as the Statutory Auditors of the Company for a term of 3 (three) consecutive financial years from 2021- 22 to 2023-24 with the approval of the shareholders in the 17 th Annual General Meeting held on September 29, 2021.

14. EXPLANATIONS OR COMMENTS BY THE BOARD ON EVERY QUALIFICATION, RESERVATION OR ADVERSE REMARK OR DISCLAIMER MADE -

(i) Statutory Auditors Report

There are no disqualifications, reservations, adverse remarks or disclaimers in the auditors report for the FY 2022-23.

(ii) By the company secretary in practice in his secretarial audit report;

Secretarial Auditor

Mr. K. Jayachandran, Practicing Company Secretary (ACS No. 11309 and Certificate of Practice No. 4031) was appointed as the Secretarial Auditor of the Company to conduct secretarial audit of the Company for the year ended March 31,2023 as required under Section 204 of the Companies Act, 2013 and the Rules made thereunder. The secretarial audit report for FY 2022-23 is appended as "Annexure 1" to the Boards Report.

As required under regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate secretarial audit report for the year ended March 31,2023 given by the Secretarial Auditor Mr. K. Jayachandran, in the format as prescribed by SEBI in this regard is appended as "Annexure 2"

The Secretarial Audit Report does not contain any qualification, reservation or adverse remark made by the Secretarial Auditor.

Further, Mr. K. Jayachandran, Practicing Company Secretary (ACS No. 11309 and Certificate of Practice No. 4031) has through his certificate dated May 18, 2023 has certified that none of the directors on the Board of the

Company have been debarred or disqualified from being appointed or continuing as director of companies by the Board / Ministry of Corporate Affairs or any such statutory authority. The said certificate is appended as "Annexure 3" to the Boards Report and should also form a part of the Corporate Governance Report of the Board as required under the SEBI Listing Regulations.

15. COMPLIANCE WITH SECRETARIAL STANDARDS

The Company has complied with the provisions of Secretarial Standards specified by the Institute of Company Secretaries of India and notified by the Ministry of Corporate Affairs under Section 118(10) of the Companies Act, 2013.

16. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186

During the FY 2022-23, the Company has not given any loans and guarantees to any-body corporate and has not made any investment under Section 186.

17. TRANSACTION WITH RELATED PARTIES

Pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014, there are no transactions to be reported under Section 188(1) of the Act in Form AOC-2.

There were no contracts or arrangements or transactions entered into during the year ended March 31,2023, which were not at arms length basis. Your Directors draw attention of the members to Note 26 to the standalone Financial Statements which sets out other related party disclosures.

All Related Party Transactions as required under Accounting Standards AS-18 are reported in Note 26 - Notes to Accounts of the Standalone financial statements of the Company.

18. THE STATE OF THE COMPANYS AFFAIRS

The Company is registered with RBI as a Non Deposit taking Systemically Important Core Investment Company (NBFC-ND-SI-CIC). The Company is in compliance with the conditions of the Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016 as amended. Prior to its conversion to a Core Investment Company, the Company was one of the largest microfinance institutions in the country. The conversion was done based on the stipulation of the Reserve Bank of India while approving the Company to set up the small finance bank business.

The Company is the promoter of Ujjivan Small Finance Bank Limited (hereinafter referred to as "USFB/Bank") and being a CIC the Company has its investments primarily in USFB. The Company as on March 31, 2023 holds 73.67% equity in USFB and holds preference shares of 200 Crores.

19. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR OF THE COMPANY TO which THE financial STATEMENTS RELATE AND THE DATE OF THE REPORT;

Proposed Reverse Merger

Pursuant to the Guidelines for licensing of "Small Finance Banks" in the private sector issued by RBI on November 27, 2014 ("SFB Licensing Guidelines"), Ujjivan Financial Services Limited (UFSL) (Promoter of the Bank) was required to reduce its shareholding in the Bank to 40% of the paid-up Equity Share capital of the Bank within a period of five years from the date of commencement of business operations by the Ujjivan Small Finance Bank Limited (hereinafter referred to as "USFB/Bank") i.e. by January 31, 2022 and thereafter required to reduce its shareholding in the Bank to 30% and 26% of its paid-up Equity Share capital within a period of 10 years and 12 years, respectively, from the date of commencement of the business operations.

RBI vide its letter dated July 09, 2021 permitted the Bank to apply for the amalgamation of holding company with small finance bank, in terms of provisions of Master Direction on Amalgamation of Private Sector Banks, Directions, 2016 dated April 21, 2016, Three (3) months prior to completing five years from the date of commencement of business of small finance bank.

Further, recommendations of the Internal Working Group to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks, dated October 20, 2020 and November 20, 2020 that, no intermediate sub-targets between five to 15 years may be required and that promoters may submit a dilution schedule which may be examined and approved by the RBI, were accepted by RBI without any modification vide its circular dated November 26, 2021.

Accordingly, the Bank has already initiated necessary steps for the reverse merger of Ujjivan Financial Services Limited with the Bank in accordance with applicable laws and guidelines. Merger of the Promoter entity with the Bank will suffice the requirement of promoter shareholding dilution.

The Bank submitted an application to SEBI on November 01, 2021 seeking their approval / exemption on the following:

• To relax three-year minimum promoter lock in requirements in the Bank under Regulation 16(1)(a) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 to the extent required to implement the Scheme of Amalgamation.

• For adopting proposed scheme of amalgamation as a method to achieve minimum public shareholding (MPS) by the Bank.

Subsequently, SEBI, vide its letter dated December 02, 2021 acceded to relax the three-year minimum promoter lock-in requirements in the Bank to the extent required to implement the Scheme soon after receiving final NCLT approval. However, SEBI advised the Bank to ensure compliance with MPS as prescribed by SEBI Circulars dated November 30, 2015 and February 22, 2018 and then proceed with the filing of the scheme documents with the exchanges.

Therefore, in order to achieve the aforesaid MPS, the Bank on September 15, 2022 allotted 22,61,90,476 equity shares by way of Qualified Institutions Placement (QIP), resultantly the promoter shareholding was brought down from 83.32% to 73.67%.

Basis the achievement of MPS the Banks Board on October 14, 2022, considered and approved a Scheme of Amalgamation ("Scheme") between UFSL and the Bank and their respective shareholders and creditors under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 and the rules made thereunder. The following table highlights the progress made in the Reverse Merger process during the financial year:

Sr Process Date
1. Approval of the Scheme of Amalgamation by the Board of Directors of USFB and UFSL October 14, 2022
2. Filing of the Scheme and applications with the Stock Exchanges October 19, 2022
3. Filing of the Scheme with the RBI for its No-Objection Certificate October 19, 2022
4. Receipt of No-Objection Certificate from RBI by Ujjivan Small Finance Bank Limited February 01, 2023
5. Receipt of No-Observation Letters from the Stock Exchanges March 09, 2023
6. Filing of Joint Application with the Honble National Company Law Tribunal (NCLT), Bengaluru Bench March 29, 2023

The Company now awaits the directions / orders From the Honble NCLT on the next course of action including holding of meetings of various stakeholders.

20. THE CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO, IN THE MANNER AS PRESCRIBED IN RULE 8(3) OF THE COMPANIES (ACCOUNTS) RULES, 2014

Conservation of energy and technology absorption

Since the Company does not own any manufacturing facility, the particulars relating to conservation of energy and technology absorption are not applicable.

The Foreign Exchange earnings and outgo

There was no Foreign Exchange inflow and outflow during the year.

21. DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY

The Company is a non-operating holding Company and its main objects are to carry on the business of making investments in group company(ies) in the form of securities and providing guarantees etc. and to carry on financial activities, whether in India or outside, in the nature of investment in bank deposits, money market instruments (including money market mutual funds and liquid mutual funds), government securities, and to carry on such other activities as may be permitted and prescribed by the relevant statutory authorities for core investment companies from time to time.

Since USFB is a listed entity, the Company can only have a distant oversight on the risk management practices adopted by USFB. The Company expects that the risk management committee of USFB adopts the best risk practices, reviews its risk management framework and verifies adherence to various risk parameters and compliances in the best possible way.

The Company has a duly constituted Risk Management Committee of the Board and has in place its risk management policy which highlights the functions, implementation and the role of the committee and the board. Please refer the Corporate Governance section for the composition and terms of reference of the Risk Management Committee.

22. CORPORATE SOCIAL RESPONSIBILITY

The Corporate Social Responsibility (CSR) programs were started by the Company in the year 2010 much before it was made mandatory under the Companies Act, 2013.

During, the year, the Company identified a beneficiary named Chinchpada Christian Hospital situated at Chinchpada P.O., Navapur Taluk, Nandurbar District, Maharashtra - 425417, a registered charitable organisation.

The Company granted a sum of 5 Lakhs towards medical assistance for poor patients, which was predominantly utilised towards their surgery cost. Please refer the "Annexure 4" on Corporate Social Responsibility in the annual report for a detailed write up on the CSR activities of the Company during the year.

A brief outline of the companys CSR policy is disclosed on our website at the below link https://www.uiiivan.com/mandatorv-policies

23. BOARD EVALUATION

The board of directors has carried out an annual evaluation of its own performance, board committees and individual directors pursuant to the provisions of the Companies Act, 2013 and the corporate governance requirements as prescribed by Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations 2015 ("SEBI Listing Regulations") and SEBI guidance note on Board Evaluation.

Performance evaluation criteria for Board, Committees of the Board and Directors were adopted by the Nomination Committee of the Board at its meeting held on March 17, 2023. Evaluation formats and criteria of evaluation duly incorporated the criteria and other parameters as suggested by SEBI vide their guidance note on evaluation through their circular dated January 05, 2017.

The Board was evaluated comprehensively inter alia on the structure of the Board, competency, experience and qualifications of directors, diversity in board, regularity of the board meetings, effectiveness of board processes, independence of Board, information sharing and overall functioning of the Board.

The performance of the board was evaluated by the board after seeking inputs from all the directors on each of the above parameters of evaluation and the performance of the committees was evaluated by the board after seeking inputs from the committee members on the basis of the above parameters of evaluation.

The Board committees were evaluated inter alia on the basis of their mandate, composition, attendance, functioning and independence.

INDEPENDENT DIRECTORS EVALUATION OF NONINDEPENDENT DIRECTORS

In a separate meeting of independent directors held on March 17, 2023, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated, taking into account the views of executive directors and non-executive directors. The Independent Directors also assessed the quality, quantity and timeliness of flow of information between the Company management and the Board.

Performance of independent directors was evaluated by the entire board, excluding the independent director being evaluated and was satisfied that each of the independent director fulfills the independence criteria as specified in SEBI regulations and that they are independent of the management.

24. DETAILS AS REQUIRED UNDER RULE 8 OF THE COMPANIES (ACCOUNTS) RULES, 2014

(i) The financial summary or highlights;

( in Crores)

Particulars Standalone* consolidated*
FY 2022-23 FY 2021-22 FY 2022-23 FY 2021-22
Operating Income 119 - 4,421 2,995
Other Income 8 7 257 97
Total income 127 7 4,679 3,092
Less: Operational Expenses
Personnel Expenses 1 1 930 822
Administrative & CSR Expenses 3 3 662 502
Finance Charges - - 1,493 1,071
Depreciation 0 0 163 155
Impairment Losses on Financial Instruments - - (99) 846
Total Operational Expenses 3 4 3,148 3,396
Profit/(Loss) Before Tax 124 3 1,531 (304)
Less: Income tax 16 1 308 1
Less: Deferred tax 0 0 83 (74)
Profit/(Loss) After Tax 108 2 1,140 (231)

* as per Indian Accounting Standards (ind-AS)

(ii) Highlights of performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company during the period

Ujjivan Small Finance Bank Limited ("USFB") is a material listed subsidiary of the Company and is a small finance bank licensed by the RBI in terms of Section 22 of the Banking Regulation Act, 1949. USFB was incorporated on July 04, 2016 and commenced its operations as a small finance bank w.e.f. February 01, 2017. The Company as on March 31, 2023 holds 73.67% equity in USFB.

Pursuant to the provisions of section 129(3) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, a statement containing salient features of the financial statements of the Companys subsidiaries in Form AOC-1 is annexed as "Annexure 5" to this report.

Key business and financial performance highlights of the material listed subsidiary ujjivan small Finance Bank Limited (usFB) (in i-GAAP):

• Gross advances at 24,085 Crores as on March 31, 2023 as against 18,162 Crores as on March 31, 2022; growth of 33% Y-o-Y

• Disbursement during FY 2022-23 was 20,037 Crores as against 14,113 Crores during FY 2021-22; growth of 42%

• Total deposit of 25,538 as on March 31, 2023 as against 18,292 as on March 31, 2022; growth of 40%

• CASA increased by 35% from 4,993 Crores in March 2022 to 6,744 Crores in March 2023

• 76.9 Lakh customers in March 2023 as against 64.8 Lakh customers in March 2022

• 42.5 Lakh borrowers in March 2023 as against 37.9 Lakh borrowers in March 2022

• CRAR of 25.8% in March 2023 as against 19.0% in March 2022

• Number of branches increased to 629 in March 2023 as against 575 in March 2022. Number of ATMs increased from 492 to 517 during FY 2022-23

• Total income increased to 4,754 Crores in March 2023 from 3,173 Crores in March 2022; an increase of 50%

• Net interest income grew to 2,698 Crores in March 2023 from 1,774 Crores in March 2022; an increase of 52%

• Profit after Tax (PAT) for FY 2022-23 is 1,100 Crores as against (415) Crores in FY 2021-22

• Return on Asset (ROA) for FY 2022-23 is 3.9% as against (1.9%) in FY 2021-22

• Return on Equity (ROE) for FY 2022-23 is 31.4% as against (13.8%) in FY 2021-22

• GNPA at 2.6% in March 2023 as against 7.1% in March 2022

• NNPA at 0.04% in March 2023 as against 0.6% in March 2022

• Cost to income ratio decreased to 54.8% in FY 2022-23 from 70.1% in FY 2021-22

• Cost of fund declined marginally to 6.5% in March 2023 from 6.3% in March 2022, due to rise in interest rates

• 18 th IBA Technology Conference, Expo & Awards - Payment and small finance bank category:-

o Best IT Risk Management

o Special Prize - Best AI&ML Adoption Bank

o Special Prize - Best Fintech Collaboration

• India Fraud Risk Management Summit & Awards 2023: Best Transaction Fraud Monitoring and Decisioning

• IBSi Global FinTech Innovation Awards 2022: Best Risk Management Implementation Category:- Best Project Implementation Most Impactful project

USFB - Key Ratios as on March 31, 2023

( in Crores)

Particulars FY 2022-23
Average Yield - across segment 18.4%
Cost of Funds (CoF) 6.5%
Net Interest Margin (NIM) 9.5%
Return on Assets (ROA) 3.9%
Return on Equity (RoE) 31.4%
Cost to income 54.8%
Capital Adequacy (CRAR) 25.8%
NNPA 0.04%
LCR 180%

The Company currently carries on financial activity business in the nature of investments in bank deposits or other permissible securities and investment in shares of subsidiary and derives its value primarily from its investments in the Bank. The Bank contributes 99.78% of the consolidated total income of the Group.

(iii) The change in the nature of business, if any;

There is no change in the nature of the business of the Company during the FY 2022-23. The Company continues to be a Non Deposit taking Systemically Important Core Investment Company (NBFC-ND-SI-CIC).

(iv) The details of directors or key managerial personnel who were appointed or have resigned during the year;

Sr. Name Designation din /pan Date of Appointment/ change/ cessation Reason
1. Mr. Radhakrishnan Ravi CEO & CFO ADSPR7011F April 19, 2022 Appointment

(v) The names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year;

None

(vi) Deposits from public

During the year, the Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet.

However, the subsidiary of the Company Ujjivan Small Finance Bank Limited which is a Small Finance Bank has outstanding deposits of 25,538 Crores as on March 31,2023.

(vii) The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and companys operations in future;

None

(viii) The details in respect of adequacy of internal financial controls (iFc) with reference to the Financial Statements

In respect of internal financial control, the Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Companys policies, the safeguarding of its assets, the timely prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

Further, the management regularly reviews the control for any possible changes and takes appropriate actions.

25. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND:

As required under Section 124 of the Act, there were no amounts were transferred during the Financial Year 2022-23, to the Investor Education and Protection Fund established by the Central Government.

26. DETAILS OF LOANS FROM DIRECTORS AND THEIR RELATIVES:

During the financial the Company has not taken any loans from the Directors and their relatives of the Company.

27. CHANGE IN THE SHAREHOLDING OF THE COMPANY:

During the financial year there were no changes in the share Capital of the Company.

28. DETAILS IN RESPECT OF FRAUDS REPORTED BY THE AUDITORS UNDER SECTION 143(12) OF THE COMPANIES ACT 2013:

There have been no frauds reported by the auditors pursuant to Section 143 (12) of the Companies Act, 2013.

29. ESOP RELATED & OTHER DISCLOSURES

(i) Details of equity shares with differential rights

The Company has not issued any equity shares with differential rights during the year

(ii) Details of sweat equity shares issued

The Company has not issued any sweat equity shares during the year

(iii) Details of employee stock option scheme

The Company has established Employee Stock Option Plan (ESOP) For compensation to its employees, being ESOP 2006, ESOP 2007, ESOP 2008, ESOP 2010, MD-ESOP 2010 and ESOP 2015.

As on March 31, 2023, only ESOP 2015 scheme is active.

ESOP 2015

The ESOP 2015 pool comprises of 65,79,899 options which includes the original pool of 47,82,129 options and 17,97,770 options added from the lapsed options of ESOP 2006, ESOP 2007, ESOP 2008 and ESOP 2010 with the approval of the shareholders at their meetings held on November 03, 2015 and June 27, 2018.

As on March 31, 2023, out of the 55,15,880 options granted, 8,28,182 options has been exercised, 39,14,746 options are lapsed, 7,72,952 vested options are unexercised and there is no option left to be vested. The Board (including its authorised committee) has been authorised by the shareholders to include the lapsed / cancelled options under its ESOP 2010 and ESOP 2015 back to the pool of ESOP 2015 and that the Board is hereby authorised to grant such added back options to its eligible employees (which includes the employees of its subsidiary).

The vesting period for the options granted under ESOP 2015 is for a period of three years as under:

Tranche Year of Grant Options Granted Year 1 Year 2 Year 3
ESOP 2015 (Tranche 1) 2015 1,469,800 34% 33% 33%
ESOP 2015 (Tranche 2)* 2016 1,696,850 33% 33% 34%
ESOP 2015 (Tranche 3) 2018 2,337,670 34% 33% 33%
ESOP 2015 (Tranche 4) 2018 11,560 34% 33% 33%
Total 5,515,880

* Post IPO, options were granted subsequent to the ratification of the shareholders

No options were granted by the Company during the FY 2022-23.

The ESOP 2015 is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SEBI ESOP Regulations), the Companies Act, 2013, and is implemented in accordance with guidance notes issued by ICAI and the relevant accounting standards.

Revisions in the ESOP Schemes during the Year

None;

ESOP Schemes compliance Status

The ESOP 2015 is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SEBI ESOP Regulations) and the Companies Act, 2013. The Company has received a certificate from the Secretarial Auditors of the Company certifying that ESOP 2015 Scheme of the Company is being implemented in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and is in accordance with the resolutions passed by the Members of the Company at a general meeting. The certificate enclosed as Annexure 6

The ESOP Schemes are implemented in accordance with guidance notes issued by ICAI and the relevant accounting standards.

The weighted average fair value of the share options granted during the financial year ended March 31, 2023 and March 31, 2022 is Nil. Options were priced using Black and Scholes Model. Vested ESOPs can be exercised within three years from their corresponding dates of vesting. Vested ESOPs can be exercised between the dates of vesting and on or before option expiry dates. The term of the option is assumed to be the sum of a) duration till vesting; and b) the midpoint of the remaining exercise period from date of vesting, in absence of historical exercise pattern. While the Company has been listed since 2016, the period of listing up to the Grant Dates is not commensurate with the expected term of the granted ESOPs. Accordingly, volatility of comparable companies has been considered for the purposes of valuation.

ESOP arrangement with subsidiary

With effect From February 01, 2017, the business undertaking of the Company was transferred to USFB and all the employees of the Company except few identified personnel have been transferred to USFB as part of the transfer of the business undertaking. This has resulted in the transfer of options from the employees of the Company to the employees of USFB. As per Ind AS 102 Share-based Payment, stock options have to be fair valued on the grant date and expense has to be recognised over the vesting period. Pursuant to management decision, Impact of Ind AS 102 on account of options granted to the employees of subsidiary is treated as deemed investment in subsidiary in the Companys books.

Administration of ESOP Schemes

The Governance, Nomination and Remuneration Committee of the Board administer the Employee Stock Option Schemes, formulated by the Company from time to time.

Mandatory ESOP Disclosures

Disclosures as required under Section 62 of the Companies Act, 2013 (to be read with Rule 12 of the Companies (Share Capital and Debenture) Rules, 2014, and SEBI ESOP Regulations:

Sr. Particulars March 31, 2023
1. Number of options granted and outstanding at the beginning of the year (A) 16,80,888
2. Number of options granted during the year (B) Nil
3. Number of options vested during the year Nil
4. Number of options exercised during the year Nil
5. Number of shares arising as a result of exercise of options (C) Nil
6. Money realised during the year by exercise of options (in ) Nil
7. Number of options Forfeited/Expired during the year (D) 907,936
8. The exercise price of the outstanding options (in ) 385.05
9. Number of options granted and in force at the end of year = (A)+(B)-(C)-(D) 772,952
10. Weighted average of remaining contractual life (years) at the year end 0.37
11. Variation of terms of the options None

* Please refer to note 25 of the standalone financials for further details on ESOP data

OPTIONS GRANTED TO KEY MANAGERIAL PERSONNEL (KMP) DURING THE YEAR

No option was granted to any of the KMP or to any other employee of the Company or its subsidiary (USFB) during the year.

However, USFB on January 27, 2023 has granted its stock options to below KMP of the Company to be vested in 4 years i.e. 20% each in in first 2 years and 30% each in next 2 years.

Any other employee who receives a grant of options in any one year of options amounting to five percent or more of options granted during that year:

- None

Identified employees who were granted options during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant

- None

employee Name Designation Options granted Exercise Price (in )
Shashidhara S Company Secretary 27221 27.5

30. VIGIL MECHANISM

The Company in compliance with Section 177 of the Companies Act, 2013 has a duly constituted Audit Committee of the Board. The composition of the Audit Committee is as under:

Sr. Directors No. Designation
1. Mr. Sunil Vinayak Patel Chairman (Independent Director) Independent Director Independent Director Non-Independent, Non-Executive
2. Mr. K.R. Ramamoorthy
3. Ms. Mona Kachhwaha
4. Mr. Samit Ghosh

Please refer to the Section on Corporate Governance for further details on the Board Committees.

Further in compliance to Section 177 of the Companies Act, 2013 and Regulation 22 of SEBI Listing Regulations, the Company has established a Whistle Blower policy / Vigil Mechanism for the directors and employees to report genuine concerns or grievances about unethical behavior, actual or suspected fraud or violation of the companys Code of Conduct or Ethics Policy. The Company has a vigil mechanism process wherein the employees are free to report violations of laws, rules, regulations or unethical conduct to the whistle and ethics officer of the Company. Further, this policy also specifically enables the employees of the Company and those of its subsidiary to report instances of any leak of unpublished price sensitive information by the employees of the Company and its subsidiary to any outsider which is not for legitimate business purposes. This is to ensure the compliance of SEBI (Prohibition of Insider Trading) Regulations, 2015 and Code of Conduct for Prevention of Insider Trading of the Company.

Name and Address of the Whistle and Ethics Officer

Mr. Shashidhara S - Company Secretary and Compliance Officer

Ujjivan Financial Services Limited

Grape Garden, No. 27, 3rd A Cross, 18th Main, 6th

Block, Bangalore - 560095, Karnataka

Email- shashidhara.s@uiiivanfin.com

Protected Disclosure against the Whistle and Ethics Officer in the absence of the Managing Director should be addressed to the Chairman of the Company and the Protected Disclosure against the Chairman of the Company should be addressed to the Chairman of the Audit Committee.

Name and Address of the Chairman of the Company:

Mr. Samit Ghosh

Ujjivan Financial Services Limited

Grape Garden, No. 27, 3rd A Cross, 18th Main, 6th

Block, Bangalore - 560095, Karnataka

Email: samit.ghosh@uiiivanfin.com

name and Address of the chairman (Audit committee):

mr. sunil vinayak Patel

G-1, Avant Garde 193, 6th Main Road, Defence Colony, Indiranagar, Bengaluru 560038, Karnataka Email: cpcon.blr@gmail.com

The confidentiality of those reporting violations is maintained and they are not subiected to any discriminatory practice

The whistle blower policy of the Company is disclosed on our website at the below link- https://www.uiiivan.com/mandatory-policies

31. REMUNERATION DETAILS OF DIRECTORS, KMPS, EMPLOYEES

Sr. Particulars Disclosures
1. The ratio of the remuneration of each Whole time director to the median remuneration of the employees of the company for the financial year Not applicable since the Company does not have whole time director
2. The percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year kmp % increase in remuneration
Mr. Radhakrishnan Ravi NIL
Mr. Shashidhara S 12.6%
3. The percentage increase in the median remuneration of employees in the financial year; 12.6% increase in the median remuneration (only one employee received an increase in remuneration for FY2022-23).
4. The number of permanent employees on the rolls of company as on March 31, 2023 3
5. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration The average increase in the salaries of employees (other than managerial personnel) was Nil and the average increase in the managerial remuneration during the last financial year was 12.6%.
6. Affirmation that the remuneration is as per the remuneration policy of the company Yes

A statement showing the name of every employee of the company other than disclosed above, whoa. if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one Crore and two Lakhs rupees;

- None

b. if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than eight Lakhs and fifty thousand rupees per month;

- None

c. if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.

- None

information as per Rule 5(2) of chapter Xiii, the companies (Appointment and Remuneration of Managerial Personnel) rules, 2014

The names of the top ten employees in terms of remuneration drawn:

The Company during the year ended March 31, 2023 had only the following employees:

Sr. Particulars Radhakrishnan Ravi Shashidhara S. Aakash Jaiswal*
i. Designation Chief Executive Officer & Chief Financial Officer Company Secretary and Compliance Officer Manager - Investor Relations
ii. Remuneration received 3,420,000 2,084,960 318,139
iii. nature of employment, whether contractual or otherwise; Permanent Permanent Permanent
iv. qualifications and experience of the employee CA, B.Sc (Maths), Member of The Institute of Internal Auditors, Florida, USA 35+ years experience CS, LLB, M.Com 14+ years experience MBA (Finance) 5 years experience
v. date of commencement of employment April 19, 2022 November 01, 2017 January 23, 2023
vi. the age of such employee 60 37 31
vii. the last employment held by such employee before joining the company Calega Resources Investment LLC GMR Ose Hungund Hospet Highways Pvt Ltd. State Bank of India, Ujjivan Financial Services Limited
viii. the percentage of equity shares held by the employee in the company 0.00% 0.00% 0.00%
ix. whether any such employee is a relative of any director or manager of the company No No No

* Joined w.e.f January 23, 2023

32. BUSINESS RESPONSIBILITY SUSTAINABILITY REPORTING ("BRSR")

The Board of the Company in its meeting held on May 18, 2023 has approved the Business Responsibility Sustainability Report ("BRSR") of the Company as stipulated under Regulation 34 (as amended) of SEBI Listing Regulations which mandates that top 1000 listed companies based on market capitalisation as on March 31 should include its BRSR in its Annual Report. The Company is ranked 615 in the list as on March 31, 2023.

A copy of the BRSR is appended as "Annexure 7" and has also been hosted on the website of the Company at www.ujjivan.com and can be accessed from the link below https://www.uiiivan.com/mandatorv- policies

Compliance of Sexual Harassment of Women at Workplace (Prevention, Prohibition and redressal) Act, 2013

The Company has only 2 employees as on March 31, 2023 and the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 is not applicable.

Disclosures in relation to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:

a. Number of complaints filed during the year : Nil

b. Number of complaint dismissed during the year : Nil

c. Number of complaint pending as on end of the financial year: Nil

Other disclosures

• The Company is not required to maintain cost records as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013.

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

• There are no applications made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year.

Green initiatives

Electronic copies of the Annual Report for the FY 2022-23 and the Notice of the 19th AGM are being sent to all the members whose email addresses are registered with the Company / Depository Participants. As per the relaxation given by SEBI on account of Covid situation, physical copies of the Annual Report are not being sent to members who have not registered their email address with their depositories.

Acknowledgement

Your Directors wishes to gratefully acknowledge the assistance and guidance received from the RBI, ROC, Investors, Banks, Auditors, Lawyers, Accountants, Vendors, Partner NGOs, Institutions and Foundations and Government Authorities and all our well-wishers. The Board also wishes to place on record their warm appreciation for the creative and dedicated efforts of staff at all levels.

For and on behalf of the Board of Directors
Samit Ghosh sunil vinayak Patel
Chairperson Independent Director (Audit Committee Chairman)
DIN:00185369 DIN: 00050837
Date: May 18, 2023
Place: Bangalore