Ujjivan Financial Services Ltd Directors Report.

To the Members,

Your Directors are pleased to present the 15th Annual Report of Ujjivan Financial Services Limited together with the audited financial statements for the financial year ended March 31, 2019. For the benefit of all stakeholders, the annual report for the FY 2018-19 of the material wholly owned subsidiary ‘Ujjivan Small Finance Bank Limited is also included in a separate section of this document.

1. Financial Results

The Directors submit the Annual Report of Ujjivan Financial Services Limited (the "Company" or "Ujjivan") alongwith the audited financial statements for the financial year (FY) ended

(र in Crores)

Particulars Standalone* Consolidated*
FY 2018-19 FY 2017-18 FY 2018-19 FY 2017-18
Operating Income 22.00 - 1,952.98 1,514.78
Other Income 8.62 7.74 60.64 29.92
Total Income 30.62 7.74 2,013.62 1,544.70
Less: Operational Expenses
Personnel Expenses 1.63 0.93 540.53 373.35
Administrative Expenses 5.08 3.21 415.58 247.35
Finance Charges 0.00 0.01 727.03 601.56
Depreciation 0.02 0.01 60.62 41.38
Impairment Losses on Financial Instruments - - 65.76 236.43
Total Operational Expenses 6.73 4.16 1,809.52 1,500.07
Profit/(Loss) Before Tax 23.89 3.58 204.10 44.63
Less: Income tax 2.31 2.56 37.22 33.88
Less Deferred tax 0.00 0.01 16.44 -15.20
Profit/(Loss) After Tax 21.58 1.00 150.44 25.95

* as per Indian Accounting Standards (Ind-AS)

Profitability (Ind-AS versus IGAAP):

FY 2018-19 Ind-AS IGAAP
Standalone Consolidated Standalone Consolidated
Pre-Tax Profits (PBT) 23.89 204.10 23.46 269.88
Profit after Tax (PAT) 21.58 150.44 21.15 198.37
Total Comprehensive Income 21.58 149.83 NA NA

2. Dividend

In accordance with the Dividend Distribution Policy of the Company and in continuation to its dividend payment track record, the Company with the approval of its directors through their resolution passed on March 14, 2019 has declared and paid an interim dividend of र 0.85 (8.5%) per equity share for the FY 2018-19. The record date for the purpose of determining the members eligible to receive the interim dividend was fixed as Saturday, March 23, 2019 and the interim dividend amount of र 10.30 Crores was distributed to the shareholders on March 28, 2019. after Tax to

Further, the Directors are pleased to recommend a final dividend at the rate of र 0.45 per share (4.5%) for the FY 2018-19. The final dividend will be subject to the approval by the members of the Company at the ensuing 15th Annual General Meeting ("AGM") of the Company.

The aforesaid final dividend, if approved by the shareholders would involve a cash र 7.2 Crores (including dividend distribution tax).

3. Transfer to reserves

The Company transferred र 4.32 Crores to Statutory the Reserves. Transfer of 20% of the Profit statutory reserves 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, 2019 is in compliance with the below capital requirements and all other mandatory ratios as required under RBI CIC Master Directions:

Ratios RBI Requirement Actuals (%)
CAR >30% of RWA 98.46%
Investment ratio >90% of Net Assets 99.98%
Equity Investment Ratio >60% of Net assets 87.98%
Leverage Ratio <2.5 Times 0.0790%

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

In accordance with Section 134(3)(a) of the Companies Act, 2013, an extract of the Annual Return in the prescribed format (MGT-9) is appended as "Annexure 1" to the Boards Report. The complete annual report including the annual return is being placed on our website www.ujjivan.com.

8. Business Responsibility Reporting

The Board of the Company in its meeting held on May 30, 2019 has approved the Business Responsibility Report ("BRR") of the Company as stipulated under Regulation 34 (as amended) of SEBI Listing Regulations which mandates that top 500 listed companies based on market capitalization as on March 31 should include its BRR in its Annual Report. The Company is ranked 363 in the list as on March 31, 2019.

As a green initiative, a copy of the BRR has been hosted on the website of the Company at www.ujjivan.com and can be accessed from the link below http://ujjivan.com/html/ujjivan_policies.php

9. No. of Meetings of the Board during the FY 2018-19

During the Financial Year 2018-19, our Board has met 7 (seven) times and the meetings of our Board of Directors were held on April 13, 2018, April 23, 2018, May 10, 2018, August 06, 2018, November 14, 2018, January 23, 2019 and March 26, 2019. For further details, please refer to the Corporate Governance Report, which forms part of this report.

10. Appointment / Reappointments / Retiring Director

(a) Appointment of Mr. Narayan Anand as Director

On the recommendation of the Nomination and Remuneration Committee, the Board has appointed Mr. Narayan Anand (DIN: 02110727) as an additional director (non-executive, non-independent) with effect from May 01, 2019. He is holding office till the ensuing 15th Annual General Meeting of shareholders of the Company. The proposal for his appointment is being placed for consideration of shareholders of the Company. Mr. Narayan is eligible for appointment and in respect of whom the Company has received a notice in writing from a member under Section 160(1) of the Act proposing his candidature for the office of Director of the Company. His office will be liable to retire by rotation. The Board recommends the shareholders to approve his appointment. Please refer item no. 4 of the 15th AGM Notice for further details.

(b) Independent Director upcoming completion of tenure

Ms. Vandana Viswanathan (DIN: 05192578) was appointed as an Independent Director by the shareholders for a term of 5 years commencing from September 22, 2014 to September 21, 2019 in accordance with the provisions of the Companies Act, 2013. She has communicated her inability to be considered to be appointed for a second term on completion of her tenure due to other commitments.

Her office will be vacated on completion of her tenure on September 21, 2019.

(c) Retiring Director opting for non-appointment

As per the provisions of the Companies Act, 2013, Mr. Amit Gupta (DIN: 02282600) retires by rotation at the ensuing 15th AGM and though being eligible for re-appointment is not seeking his re-appointment due to his other commitments. Hence, Mr. Amit Gupta will retire at the ensuing 15th AGM of the Company.

11. Directors Responsibility 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; sufficient for (iii) they have taken proper and the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (iv) they have prepared the annual accounts on a going concern basis;

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

(vi) 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 financialcontrols were adequate and effective during the FY 2018-19.

12. 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 Listing 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.

13. Nomination and Remuneration Policy

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-http://ujjivan.com/html/ujjivan_policies.php

14. Statutory Auditors

Price Waterhouse Chartered Accountants LLP (FRN: 012754N/N500016) (hereinafter referred to as PW CA LLP), who were appointed as Statutory Auditors of the Company for a tenure of five years from the conclusion of the 13th AGM of the Company held on August 04, 2017 has vide their letter dated May 30, 2019 tendered their resignation from the position of Statutory Auditors from the conclusion of the ensuing 15th AGM of the Company scheduled to be held on Friday, August 02, 2019.

PW CA LLP has offered to resign from their position of statutory auditor of the Company as our Company is desirous of having same network of firms as auditors for both the Company and its wholly owned subsidiary ‘Ujjivan Small Finance Bank Limited for mutual interests for both PW CA LLP and the Company. PW CA LLP has tendered their resignation as the statutory auditors of the Company effective immediately after conclusion of the annual general meeting for the FY 18-19 scheduled to be held on controls August 02, 2019. to

Ujjivan Small Finance Bank Limited contributes more were operating than 98% business (total income) of the Company at a consolidated level and that the audit function at the standalone level of the Company has very minimal scope for financial audit as it is a non-operating holding Company registered as a Core Investment Company with the RBI. There will also be cost implications for the Company and the group overall, as it will presumably be more expensive to use two firmsof auditors to provide an audit opinion instead of one for the same set of business since the Company derives almost all its value from its investments in its wholly owned subsidiary.

Pursuant to the aforesaid resignation of PW CA LLP, the Board based on the recommendation of the Audit Committee in its meeting held on May 30, 2019, subject to the approval of the shareholders, has appointed MSKA & Associates, Chartered Accountants (FRN - 105047W) as the Statutory Auditors of the Company for a period of 5 (five) years commencing from the conclusion of the ensuing 15th AGM till the conclusion of 20th AGM of the Company to be held in the year 2024. MSKA & Associates, Chartered Accountants (FRN - 105047W) being the existing Statutory Auditors of Ujjivan Small Finance Bank Limited, the Board considered it prudent to appoint MSKA & Associates, Chartered Accountants (FRN - 105047W) as the Statutory Auditor of the Company as well for smooth consolidation of the financialsand also for commercial reasons. Please refer to item no. 3 of the 15th AGM notice for further details.

15. 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

(ii) By the Company Secretary in practice in his secretarial audit report; Secretarial Auditor

Mr. K. Jayachandran, Practicing Company Secretary commencing (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 Financial Year 2018-19 as required under Section 204 of the Companies Act, 2013 and the Rules made thereunder. The secretarial audit report for FY 2018-19 is appended as "Annexure 2" to the Boards Report.

As required under regulation 24A of the SEBI(Listing Obligations and Disclosure Requirements)

Regulations, 2015, a separate secretarial audit report given by the Secretarial Auditor Mr. K. Jayachandran, in the format as prescribed by SEBI in this regard is appended as "Annexure 3" 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 30, 2019 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 4" to theBoards Report.

16. Particulars of loans, guarantees or investments under Section 186

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, 2019, which were not at arms length basis.

Your Directors draw attention of the members to Note 28 to the Financial Statements which sets out other related party disclosures.

All Related Party Transactions as required underAccounting Standards AS-18 are reported in Note 28 - Notes to Accounts of the Standalone financial statements of the Company.

18. The state of the Companys

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 non-operating 100% holding Company of ‘Ujjivan Small Finance Bank Limited and being a CIC the Company has its investments primarily in the bank. The Board of the Company has an effective oversight on the statutory and policy related compliances which the Bank has to ensure in its day to day functioning.

19. Material changes and commitments, if any, affecting the financial position of the company which have occurred between the by end of the financial year of the company to which the financial statements relate and the date of the report;

None

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.

AsaCoreInvestmentCompanywithakeyinvestmentin the bank which is our 100% subsidiary, the Companys Board has an oversight function of USFB. We have entered into a Memorandum of Understanding (MoU) which includes sharing of information related to business and performance of SFB, with the Company and to its Board, to facilitate effective oversight and compliance with statutory and regulatory requirements under SEBI Listing Regulations. Thus a set of information including monthly and quarterly business and regulatory reports and returns, Board and committee meeting related minutes and other information is systematically shared by the bank and reviewed by the Board of the Company.

USFB has a Risk Management Committee in place which consists of well experienced Directors from diverse background who bring in the best risk practices to the organization and that the Committee of the bank reviews its risk management framework and verifies adherence to various risk parameters and compliances.

The Company is satisfied that its wholly owned subsidiary has a well-defined risk management strategy based on clear understanding of various risks, disciplined risk assessment and continuous monitoring.

The risk management Committee of the subsidiary approves and makes recommendations to its Board regarding all its risk-related responsibilities, including the review of major risk management and regulatory compliances.

As required under the Regulation 21(5) of the SEBIListing Regulations, the Company has constituted the Risk Management Committee of the Board with effect from April 01, 2019 and its terms of reference comprises of the following:

(i) To review its investment in its subsidiary, Ujjivan Small Finance Bank and to evaluate overall risks faced by its subsidiary and help in mitigating the risks

(ii) To oversee the risk management policies and procedures of its subsidiary

(iii) As the listed holding Company of the Bank, to closely monitor the reputational risk of both entities

(iv) To do such other acts, deeds and things as may be directed by the Board and required to comply with the applicable laws

The Company has in place an effective risk management policy which highlights the functions, implementation and the role of the committee and the board.

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 has continued its partnership with Parinaam Foundation and Piramal Foundation to undertake various community development programs, free healthcare and clean drinking water facility for and on behalf of the Company. Please refer wflo theofseparate informationsection between 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- http://ujjivan.com/html/ujjivan_policies.php The initiatives undertaken by the Company on CSR activities are out in "Annexure 4" of the Boards Report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. For other details regarding the CSR Committee, please refer to the Corporate Governance Report, which forms part of the Boards Report.

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 ("SEBIListing Regulations") and SEBI guidance note on Board Evaluation.

Performance evaluation criteria for Board, Committees of the Board and Directors were approved by the Nomination Committee of the Board at its meeting held on March 26, 2019. 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 onthestructureoftheBoard,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 Non-Independent Directors

In a separate meeting of independent directors held on March 26, 2019, 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 theofCompany 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 fulfils 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;

( र in Crores)

Particulars Standalone* Consolidated*
FY 2018-19 FY 2017-18 FY 2018-19 FY 2017-18
Operating Income 22.00 - 1,952.98 1,514.78
Other Income 8.62 7.74 60.64 29.92
Total Income 30.62 7.74 2,013.62 1,544.70
Less: Operational Expenses
Personnel Expenses 1.63 0.93 540.53 373.35
Administrative Expenses 5.08 3.21 415.58 247.35
Finance Charges 0.00 0.01 727.03 601.56
Depreciation 0.02 0.01 60.62 41.38
Impairment Losses on Financial Instruments - - 65.76 236.43
Total Operational Expenses 6.73 4.16 1,809.52 1,500.07
Profit/(Loss) Before Tax 23.89 3.58 204.10 44.63
Less: Income tax 2.31 2.56 37.22 33.88
Less Deferred tax 0.00 0.01 16.44 -15.20
Profit/(Loss) After Tax 21.58 1.00 150.44 25.95

* as per Indian Accounting Standards (Ind-AS)

Key Performance Highlights of the wholly owned subsidiary ‘Ujjivan Small Finance Bank Limited (USFB):

USFB Business and Operational Highlights

• Loan Book at र 11,049 Crores in March 2019 as against र 7,560 Crores in March 2018; growth of 46% • Disbursement for FY 2018-19 at र 11,089 Crores as against र 8,047 Crores in FY 2017-18; an increase of 38%

• Non-Micro Finance book at 15% as against 7% in March 2018

• Deposit of र 7,379 Crores in March 2019 as against र 3,772 Crores in March 2018; growth of 96%; Traction in senior citizen and long tenure term deposits (TDs) – 47% and 43% respectively of total TDs • Retail deposit at 37% in March 2019 as against 11% in March 2018; significant growth in retail deposits • CASA at 11% in March 2019 as against 4% in March 2018 • 46.1 Lakhs unique active customers in March 2019 as against 38.7 Lakhs in March 2018 • 27..4 Lakhs active liability customers in March 2019 as against 7.7 Lakhs in March 2018 • Profit after Tax of (PAT) of र 199 Crores (IGAAP) as against र 7 Crores in FY 17-18 • ROA of 1.7% for FY 18-19 as against 0.1% in FY 2017-18 • ROE of 11.5% for FY 2018-19 as against 0.4% in FY 2017-18 • Cost of Funds for FY 2018-19 at 8.6% as against 9.0% in FY 17-18 • CRAR of 19% in March 2019 as against 23% in March 2018 • GNPA at 0.9% in March 2019 as against 3.7% in March 2018; • NNPA at 0.3% in March 2019 as against 0.7% in March 2018 • Write-off Rs178 Crores in FY 18-19 as againstर177 Crores in FY 17-18 • Exponential growth in Housing & MSE, coupled with robust growth in Micro Banking

• Forayed in to new business segments - Rural Banking, FIG Lending & Personal Loans

• Expansion of Banking Branch network

• New product launches across verticals

• Expansion of digital services suite

• Penetration of Internet & Mobile Banking • Improved portfolio quality

• Diversified funding and Cost of funds at 8.6% down from 9.0% in FY 2018

• 16th Best Place to Work for in Asia by Great Place To Work

• Profitability (Ind-AS versus IGAAP):

FY 2018-19 Ind-AS IGAAP
Standalone Consolidated Standalone Consolidated
Pre-Tax Profits (PBT) 23.89 204.10 23.46 269.88
Profit after Tax (PAT) 21.58 150.44 21.15 198.37
Total Comprehensive Income 21.58 149.83 NA NA

(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 wholly owned material subsidiary of the Company. USFB 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 highlights of the financial performance of USFB (in I-GAAP) are

(र in Crores)
Particulars FY 18-19 FY 17-18 Variance %
Income from Loans & Advances 1,849 1,442 28%
Other Income 189 137 38%
Total Income 2,038 1,579 29%
Finance Cost 726 607 (19)%
Operating Cost 1003 653 (54)%
Total Cost 1,729 1,260 (37)%
Credit Cost 110 313 (65%)
Profit/(Loss) Before Tax 268 9 2878%
Profit After Tax 199 7 2787%

Key Ratios - USFB

Particulars FY 18-19
Actual
Yield 20.0%
Cost of Funds (CoF) 8.6%
Net Interest Margin (NIM) 10.9%
Return on Assets (ROA) 1.7%
Return on Equity (RoE) 11.5%
Cost to income 76.5%
Capital Adequacy (CRAR) 19.0%

USFB contributes 98.5% of the consolidated total income of the Company. Please also refer to the full standalone financials of the USFB which is separately included in this annual report.

(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 2018-19. 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. No. Name Designation DIN Date of Appointment/ Change/ Cessation Reason
1 Ms. Sudha Suresh MD & CEO 06480567 June 30, 2018 Resignation
2 Mr. Ittira Davis MD & CEO 06442816 July 01, 2018 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 र 7,379 Crores as on March 31, 2019.

(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. 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. For all ESOP Schemes, each option on exercise is eligible for one equity share on payment of exercise price.

ESOP 2006

The ESOP 2006 was for a total of 64,000 Equity Shares for all the eligible employees of the Company. As on March 31, 2019, out of the 64,000 options granted, 28,629 options has been exercised and 35,371 options were lapsed. All the 35,371 lapsed options have been added to the pool of ESOP 2015 with the approval of the shareholders at their meetings held on November 03, 2015 and June 27, 2018. There is no outstanding option left to be exercised under ESOP 2006.

ESOP 2007

The ESOP 2007 was for a total of 189,440 Equity Shares for all the eligible employees of the Company.

As on March 31, 2019, out of the 189,400 options granted, 1,41,390 options has been exercised, 44,500 options lapsed and 3,550 valid options are left to be exercised. All the 44,500 lapsed options have been added to the pool of ESOP 2015 with the approval of the shareholders at their meetings held on November 03, 2015 and June 27, 2018.

ESOP 2008

The ESOP 2008 was for a total of 396,680 Equity Shares for all the eligible employees of the Company.

As on March 31, 2019, out of the 396,680 options granted, 2,38,360 options has been exercised, 1,54,130 options lapsed and 4,190 valid options are left to be exercised. All the 1,54,130 lapsed options have been added to the pool of ESOP 2015 with the approval of the shareholders at their meetings held on November 03, 2015 and June 27, 2018.

ESOP 2010

The ESOP 2010 was for a total of 3,384,300 Equity shares for all the eligible employees of the Company.

As on March 31, 2019, out of the 3,384,300 options granted, 16,03,893 options has been exercised, 15,68,973 options lapsed and 2,12,944 valid options are left to be exercised. Our of the 15,68,973 lapsed options 15,63,769 options have been added to the pool of ESOP 2015 with the approval of the shareholders at their meetings held on November 03, 2015 and June 27, 2018.

MD-ESOP 2010

The MD-ESOP 2010 was for a total of 1,249,172 options. As on March 31, 2019, all the 1,249,172 granted options under MD-ESOP 2010 have been exercised. There is no outstanding option left to be exercised under MD-ESOP 2010.

ESOP 2015

The ESOP 2015 was for a total of 5,561,188 options. In compliance with Regulation 12 of Securities and Exchange Board Of India (Share Based Employee Benefits) Regulations, 2014 (SEBI ESOP Regulations), the Company got its ESOP Scheme 2015 ratified by its shareholders subsequent to its IPO in their AGM held on August 10, 2016. Further, pursuant to the shareholders approval at their AGM held on June 27, 2018, 10,18,711 options lapsed under ESOP 2006, ESOP 2007, ESOP 2008 and ESOP 2010 were added to the pool of ESOP 2015.

As on March 31, 2019, the ESOP 2015 pool comprises of 65,79,899 (including the original pool of 5,561,188 options plus 10,18,711 options added back from the lapsed options of ESOP 2006, ESOP 2007, ESOP 2008 and ESOP 2010)

The Company has granted 23,49,230 options under the ESOP 2015 to eligible employees during the financial year 2018-19 at exercise price of र 385.05 (23,37,670 options) and र 290.60 (11,560 options). . As on March 31, 2019, out of the 55,15,880 options granted, 4,83,080 options has been exercised, 8,61,798 options are lapsed, 15,58,904 vested options are left to be exercised. Further, 26,12,098 options are yet to be vested. Out of the 8,61,798 options which are lapsed, 4,55,388 options were added back to the pool of ESOP 2015 with the approval of the shareholders at the AGM held on June 27, 2018. The Board (including its authorized committee) has been authorized 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 authorized 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 14,69,800 34% 33% 33%
ESOP 2015 (Tranche 2)* 2016 16,96,850 33% 33% 34%
ESOP 2015 (Tranche 3) 2018 23,37,670 34% 33% 33%
ESOP 2015 (Tranche 4) 2018 11,560 34% 33% 33%
Total 55,15,880

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

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; however during the year shareholders approval was sought at their AGM held on June 27, 2018 for adding back 10,18,711 lapsed options under ESOP 2006, ESOP 2007, ESOP 2008 and ESOP 2010 to the pool of ESOP 2015. Further, in compliance with the SEBI ESOP Regulations, shareholders approval by way of a separate special resolution at their AGM held on June 27, 2018 was obtained by the Company for extending the benefits of the ESOP 2015 to the employees of its subsidiary Company.

ESOP Schemes Compliance Status

ESOP 2006, ESOP 2007, ESOP 2008, ESOP 2010 and MD-ESOP 2010 were adopted prior to the commencement of the Companies Act, 2013.

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

Under Ind AS, the Company has to account for ESOPs on the basis of fair value of options instead of intrinsic value of options under older GAAP. The fair value of options has been computed by the independent consultant appointed by the Company and the fair valuation report has been relied upon. As per older GAAP, the Company was recharging the expenditure relating to ESOPs given to the employees of the subsidiary Bank. However, under Ind-AS, the Company has exercised the accounting policy choice and treated this as cost of investment in subsidiary. The weighted average fair value of the share options granted during the FY 2018-19 is र 132.33. Options were priced using Black and Scholes Model. Vested ESOPs can be exercised within three years from their corresponding dates of vesting. ESOPs vested can be exercised between date of vesting and on or before option expiry date. 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 May 10, 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.

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, 2019
1. Number of options granted and outstanding at the beginning of the year (A) 27,58,986
2. Number of options granted during the year (B) 23,49,230
3. Number of options vested during the year 8,31,645
4. Number of options exercised during the year 3,04,916
5. Number of shares arising as a result of exercise of options (C) 3,04,916
6. Money realized during the year by exercise of options (in र) 3,32,60,112
7. Number of options Forfeited/Expired during the year (D) 4,11,614
8. The exercise price of the options (in र) 10, 12.5, 28, 40, 57, 146.35, 417.15, 385.05 & 290.60
9. Number of options granted and in force at the end of year = (A)+(B)-(C)-(D) 43,91,686
10. Weighted average of remaining contractual life (years) at the year end 3.09
11. Variation of terms of the options None

* Please refer to note 24 of the standalone financials for further details on ESOP

Options Granted to Key Managerial Personnel during the year

Employee Name Designation Options Granted Exercise Price (in )
Mr. Ittira Davis MD & CEO (w.e.f. July 01, 2018) 20,920 385.05
Mr. Sanjeev Barnwal CS and Compliance Officer 10,270 385.05
Mr. Deepak Khetan Chief Financial Officer 5,580 385.05

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

26. 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. No. Directors Designation
1. Mr. K.R. Ramamoorthy Chairman (Independent Director)
2. Mr. Abhijit Sen Independent Director
3. Mr. Jayanta Basu Non-Independent, Non-Executive

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 to any outsider which is not for legitimate business purposes. This is to ensure the compliance of SEBI (Prohibition of Insider Trading) Regulations, 2015, including the amendments carried out in 2018 and made effective from April 01, 2019 and Code of Conduct for Prevention of Insider Trading of Ujjivan Financial Services Limited.

Name and Address of the Whistle and Ethics Officer Mr. Sanjeev Barnwal Company Secretary and Compliance Officer (w.e.f. April 27, 2017)

Ujjivan Financial Services Limited

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

6th Block, Bangalore 560095, Karnataka

Email- sanjeev.barnwal@ujjivanfin.com

Protected Disclosure against the Whistle and Ethics Officer should be addressed to the MD & CEO of the Company and the Protected Disclosure against the MD & CEO of the Company should be addressed to the Chairman of the Audit Committee.

Name and Address of MD & CEO of the Company:

Mr. Ittira Davis

Ujjivan Financial Services Limited

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

Block, Bangalore 560095, Karnataka

Email: ittira.davis@ujjivanfin.com

Name and Address of the Chairman (Audit Committee):

Mr. K. R. Ramamoorthy

D - 302, Mantri Gardens, Jayanagar, 1st Block, Bangalore - 560011, Karnataka Email: ram@bankconsult.co.in

The confidentiality of those reporting violations is maintained and they are not subjected to any discriminatory practice The whistle blower policy of the Company is disclosed on our website at the below link-http://ujjivan.com/html/ujjivan_policies.php

27. 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 MD & CEO: 3.29x
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
Ms. Sudha Suresh – MD & CEO (until June 30, 2018) Nil
Mr. Ittira Davis – MD & CEO (appointed w.e.f. July 01, 2018) Nil
Mr. Sanjeev Barnwal – CS 20%
Mr. Deepak Khetan – CFO (appointed w.e.f. March 14, 2018) Nil
3. The percentage increase in the median remuneration of employees in the financial year; 6% increase in the median remuneration of employees in the FY 2018-19.
4. The number of permanent employees on the rolls of company as on March 31, 2019 5
The average increase in the salaries of employees was 13.5% and the average increase in the managerial remuneration during the last financial year was also
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 6.67%.
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, who

a. if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one Crores 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 - 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 as on March 31, 2019 had only the following 5 (five) employees:

Sr. Particulars Ittira Davis Sanjeev Barnwal Deepak Khetan Shashidhara S. Aditya Das
i. Designation MD & CEO Company Secretary and Compliance Officer Chief Financial Officer Assistant Company Secretary Assistant Manager – Investor Relations
ii. Remuneration received 67,50,000 (for the period July 01, 2018 to Mar 31, 2019) 43,20,590 45,69,600 10,56,744 2,23,754 (for the period Dec 05, 2018 to Mar 31, 2019)
iii. nature of employment, whether contractual or otherwise; Permanent Permanent Permanent Permanent Permanent
iv. qualifications and experience of the employee MBA (IIM Ahmedabad) 36+ years experience CS, LLB, DBM 15+ years experience PGDBM (Finance) 12 years experience CS, LLB, M.Com 11 years experience MBA (Finance) 2 years experience
v. date of commencement of employment July 01, 2018 August 12, 2014 March 14, 2018 November 01, 2017 Dec 05, 2018
vi. the age of such employee 64 37 35 34 28
vii. the last employment held by such employee before joining the company Ujjivan Small Finance Bank Limited SMC Capitals Limited Welspun Corp Limited GMR Ose Hungund Hospet Highways Private Limited None
viii the percentage of equity shares held by the employee in the company 0.04%* Negligible Nil Nil Nil
ix. whether any such employee is a relative of any director or manager of the company No No No No No

*as a second holder with his wife Ms. Anna Ittira Davis

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

The Company has only 5 employees as on March 31, 2019 and the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 is not applicable. However, the Company has a policy for prevention of sexual harassment at workplace.

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

Green Initiatives

Electronic copies of the Annual Report for the FY 2018-19 and the Notice of the 15th AGM are being sent to all the members whose email addresses are registered with the Company / Depository Participants. For members who have not registered their email address, physical copies are sent in the permitted mode.

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.

K. R. Ramamoorthy For and on behalf of the Board of Directors of Ittira Davis
Chairperson Managing Director & Chief Executive Officer
DIN: 00058467 DIN: 06442816
Date: May 30, 2019
Place: Bengaluru