Shriram Trans. Director Discussions


To the Members,

Your Directors have pleasure in presenting their Forty-Fourth Annual Report and the Audited Statements of Accounts for the Financial Year ended March 31, 2023.

COMPOSITE SCHEME OF ARRANGEMENT AND AMALGAMATION

The Board of Directors in its meeting held on December 13, 2021 approved a Composite Scheme of Arrangement and Amalgamation ("Scheme of Arrangement and Amalgamation"), inter-alia, involving amalgamation of (i) Remaining undertaking of Shriram Capital Limited (SCL) after de-merger of a few undertakings from the said SCL with the Company and (ii) Shriram City Union Finance Limited (SCUF) with the Company, under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 ("the Act"). The Members of the Company and Secured Creditors and Unsecured Creditors of the Company in their respective meetings held on July 04, 2022 approved the Scheme of Arrangement and Amalgamation with overwhelming majority. The Honble National Company Law Tribunal, Special Bench - II, Chennai vide its Common Order dated November 14, 2022 read with corrigendum dated November 17, 2022 to the Common Order sanctioned the Scheme of Arrangement and Amalgamation. The Appointed Date of the Scheme of Arrangement and Amalgamation is April 01, 2022.

In order to reflect the diversified business profile of the Company consequent upon coming into effect of the

Scheme of Arrangement and Amalgamation which has been expanded beyond financing of transportation vehicles, the name of the Company has been changed from "Shriram Transport Finance Company Limited" to "Shriram Finance Limited" with effect from November 30, 2022, pursuant to Clause 6.9 of the Scheme of Arrangement and Amalgamation and ‘Certificate of Incorporation pursuant to change of name issued by the Registrar of Companies, Chennai.

Post coming into effect of the Scheme of Arrangement and Amalgamation, your Companys nature of business continues to offer retail suite of financial products to customers with focus on serving the financially underbanked and under- served customer segments in India. Your Companys asset- based product offerings now include: (i) financing pre-owned and new commercial vehicles, commercial passenger vehicles, construction equipment, multi-utility vehicles, tractors, two and three-wheelers and tractors & farm equipment to First- Time Buyers (FTBs) and Small Road Transport Operators (SRTOs) (ii) financing to MSME customers typically consisting of self-employed professionals, wholesale and retail dealers, merchants, builders, small and medium scale manufacturing concerns and service providers; (iii) gold loans primarily to individuals who own gold jewellery, but do not have access to formal credit within a reasonable time or to whom credit may not be available at all to meet their short-term requirements; and (iv) personal loans to customer segments that do not have easy access to banks or other modes of financing for immediate short or medium- term funding requirements.

FINANCIAL HIGHLIGHTS

Upon coming into effect of the Scheme of Arrangement and Amalgamation and the Appointed Date being April 01, 2022, the financial performance figures contained in the financial statements for the year ended March 31, 2023 are not comparable with the financial performance figures for the previous year ended March 31, 2022.

(Rs. in crores)

Particulars F.Y. 2022-23 F.Y. 2021-22
Profit Before Depreciation And Taxation 8,709.07 3,684.62
Less: Depreciation, amortisation and impairment 524.18 135.37
Profit Before Tax 8,184.89 3,549.25
Less: Provision for taxation 2,205.55 841.32
Profit After Tax 5,979.34 2,707.93
Particulars F.Y. 2022-23 F.Y. 2021-22
Add: Balance brought forward from previous year 12,193.92 10,384.13
Balance available for appropriation 18,173.26 13,092.06
Appropriations
General reserve (597.94) (270.80)
Statutory reserve (1,195.87) (541.59)
Debenture redemption reserve (111.85) 614.13
Dividend on equity shares of Rs.10/- each (561.64) (699.88)
Effects of Business Combination (83.65) -
Amount transferred from share option outstanding on account of forfeiture of share options (0.90) -
Balance carried to Balance Sheet 15,623.21 12,193.92

CREDIT RATING

The credit rating of the securities/ instruments/ loans, credit facilities and other borrowings of the Company as on March 31, 2023 was as follows:

Name of Rating Agency Securities / Instruments/ Loans, Credit Facilities and other Borrowings Ratings
CRISIL Bank Loan Long Term CRISIL AA+/Stable
Bank Loan Short Term CRISIL A1+
Long Term Principal Protected Market Linked Debentures CRISIL PPMLD AA+/Stable
Non-Convertible Debentures CRISIL AA+/ Stable
Subordinated Debt CRISIL AA+/Stable
Commercial Paper CRISIL A1+
India Ratings & Research Private Limited Non-Convertible Debentures IND AA+/ Stable
Dual Recourse Bond IND AAA (CE)/Stable
Subordinated Debt IND AA+ /Stable
Commercial Paper IND A1+
Term deposits IND AA+/ Stable
Bank Loans IND AA+/ Stable
Principal protected market link debentures IND PP-MLD AA+/Stable
CARE Non-Convertible Debentures CARE AA+/Stable
Subordinated Debt CARE AA+/ Stable
Commercial Paper CARE A1+
ICRA Fixed Deposit [ICRA] AA+ (Stable)
Non-Convertible Debentures [ICRA] AA+ (Stable)
Name of Rating Agency Securities / Instruments/ Loans, Credit Facilities and other Borrowings Ratings
Standard & Poors Ratings Long-Term Issuer Credit Rating BB-/ Stable
Short-Term Issuer Credit Rating B
U.S. Dollar Senior Secured Notes BB-
Offshore Rupee Denominated Bond (Masala Bonds) BB-
Fitch Ratings Long-Term Issuer Default Rating BB/ Stable Outlook
Short-Term Issuer Default Rating B
U. S. Dollar Senior secured Notes BB
Local Currency Long Term Issuer Default Rating BB/ Stable Outlook
Offshore Rupee Denominated Bond (Masala Bonds) BB

DIVIDEND

Your Directors have declared interim dividend on the increased issued capital of the Company viz. 37,44,27,276 equity shares of face value of Rs.10/- each fully paid-up, resulting from issue of 17,43,44,710 new equity shares pursuant to the Scheme of Arrangement and Amalgamation to the eligible shareholders of the Amalgamating Companies viz. SCL and SCUF. The interim dividend was declared by the Board of Directors at its meeting held on December 24, 2022 @ Rs.15/- per equity share (i.e.150%) aggregating to Rs.5,616,409,140/- (gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders for the Financial Year 2022-23. The interim dividend to the eligible shareholders was paid on January 13, 2023.

The Board of Directors in its meeting held on April 27, 2023 has recommended a final dividend of Rs.20/- per equity share of face value of Rs.10/- each fully paid up i.e. 200% for the Financial Year 2022-23, subject to approval by Members in the ensuing 44th Annual General Meeting (44th AGM) of the Company.

Thus, the total dividend (including interim dividend paid) for the Financial Year 2022-23, if approved by the members, shall be Rs.35/- per equity share (i.e.350%) as against the total dividend of i.e. Rs.20/- per equity share (i.e. 200%) for the Financial Year 2021-22.

As stipulated in Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, ("Listing Regulations") the Dividend Distribution Policy forms part of the Corporate Governance Report and is also available on the website of the Company at https://tinyurl.com/5f4km2pm

TRANSFER TO RESERVES

The amounts proposed to be transferred to General Reserve, Statutory Reserve and Debenture Redemption Reserve are mentioned in the Financial Highlights under the heading ‘Appropriations.

CAPITAL ADEQUACY RATIO

Your Companys total Capital Adequacy Ratio (CAR), as on March 31, 2023 stood at 22.61% as compared to 22.97% as on March 31, 2022 of the aggregate risk weighted assets on balance sheet and risk adjusted value of the off-balance sheet items, which is well above the regulatory requirement of minimum 15%.

The Tier 1 ratio as on March 31, 2023 improved to 21.20% as against 20.70% as on March 31, 2022. Your Companys overall gearing (Debt/Tangible Net-worth) as on March 31, 2023 improved to 4.20x as against 4.67x as on March 31, 2022.

The Tier 2 ratio as on March 31, 2023 was 1.41% as against 2.27% as on March 31, 2022.

OPERATIONS AND COMPANYS PERFORMANCE

For the Financial Year ended March 31, 2023, your Company earned Profit Before Tax of Rs.8,184.89 crores as against Rs.3,549.25 crores in the previous Financial Year ended March 31, 2022. The Profit After Tax for the Financial Year ended March 31, 2023 was Rs. 5,979.34 crores as against Rs. 2,707.93 crores in the previous Financial Year. The total income for the year under consideration was Rs. 29,802.89 crores and total expenditure was Rs. 21,618 crores. The detailed analysis of income and expenditure and financial ratios is made in the Management Discussion and Analysis Report forming part of the Annual Report.

Mobilisation of funds during the year under review from following sources/ instruments was as under:

(Rs. in crores)

Sr. No. Particulars F.Y. 2022-23 F.Y. 2021-22
1 Non-Convertible Debentures - Institutional 7,961.70 8,800.00
2 Term loan/cash credit from Banks 36,136.96 25,210.41
3 Term Loans from Financial Institutions/ Corporates 3,100.00 3,200.00
4 Commercial Papers - 4,325.00
5 Fixed Deposits 16,360.88 11,273.18
6 Inter Corporate Deposits 24.61 99.43
7 External Commercial Borrowings (Loans) 5,424.68 187.35
8 U.S. Dollar Senior Secured Notes 1,233.00 3,512.86
9 Subordinated Debts 165.00 -

The total Assets Under Management stood at Rs. 185,682.86 crores. During the Financial Year 2022-23, the Company securitised its assets worth Rs. 16,965.25 crores (accounting for 9.14% of the total assets under management as on March 31, 2023). With securitisation, the Company ensures better borrowing profile, leading to lower interest liability owing to its lending to priority sector. The outstanding direct assigned portfolio stood at Rs. 2,344.44 crores as on March 31, 2023. The Company had 2,922 Branches and other offices across India as on March 31, 2023.

The Companys prudent liquidity management techniques and strategy of maintaining adequate liquidity buffer throughout the Financial Year 2022-23 not only ensured seamless lending for our business operations but also ensured meeting our liabilities on time, thereby further strengthening the trust and confidence reposed on us by our creditors, fixed deposit holders and security holders. This is evident from the success of our fund raising programme implemented during

the year under review from domestic as well as international market.

CAPITAL STRUCTURE Share Capital

Pursuant to the Scheme of Arrangement and Amalgamation coming into effect, the Authorised Share Capital of your Company has increased from Rs. 15,970,000,000 divided into 647,000,000 Equity Shares of face value of Rs.10/- each and 95,000,000 preference shares of Rs.100/- each to Rs.42,655,000,000 divided into 2,975,500,000 Equity Shares of face value of Rs.10/- each and 129,000,000 preference shares of Rs.100/- each.

The Board of Directors in its meeting held on December 12, 2022 allotted 17,43,44,710 Equity Shares of face value of Rs.10/- each to the shareholders of erstwhile SCUF and erstwhile SCL as per the following details:

Name of the transferor company Number of Equity Shares held as on Record Date i.e. November 30, 2022 Share Exchange Ratio as per the Scheme of Arrangement and Amalgamation Number of new Equity Shares of face value of Rs.10/- each of the Company, fully paid-up allotted
SCUF 4,46,65,546 (excluding 2,23,71,594 Equity Shares held by SCL in SCUF out of total 6,70,37,140 Equity Shares) for every 100 equity shares of Rs.10/- each fully paid up of SCUF, 155 equity shares of Rs.10/- each fully paid up of the Company 6,92,31,596
SCL 107,44,13,131 for every 10,00,00,000 Equity Shares of Rs. l/- each fully paid up of SCL, 97,83,305 Equity Shares of Rs.10/- each fully paid up of the Company 10,51,13,114
TOTAL 17,43,44,710

Consequent to the above allotment of new Equity Shares and cancellation of 7,04,37,147 Equity Shares held by erstwhile SCL in the Company, the paid-up Share Capital of the Company stood increased from Rs.270,51,97,130/- (27,05,19,713 Equity Shares of Rs.10/- each fully paid-up) to Rs.374,42,72,760/- (37,44,27,276 Equity Shares of Rs.10/- each fully paid-up).

No Equity Shares were issued with differential rights as to dividend, voting or otherwise.

The Company has not resorted to any buy back of its Equity Shares during the year under review.

None of the Directors of the Company holds instruments convertible into Equity Shares of the Company.

No equity shares (including sweat equity shares) were issued to employees of the Company during the Financial Year 2022-23, under any scheme.

Shriram Finance Limited Employee Stock Option Scheme 2023 (No.1)

Consequent to amalgamation of erstwhile SCUF with the Company, all employees in the service of erstwhile SCUF were transferred to and became employees of the Company without interruption of their service and on the terms and conditions no less favourable than those on which they were engaged by erstwhile SCUF. The eligible employees of erstwhile SCUF were granted stock options under employee stock option plan of erstwhile SCUF titled Shriram City Union Finance Limited Employee Stock Option Scheme 2013 (SCUF ESOS 2013). As an integral part of the Scheme of Arrangement and Amalgamation and in order to continue the stock option benefits of the eligible employees of erstwhile SCUF, the Board of Directors of the Company in its meeting held on March 15, 2023 approved "Shriram Finance Limited Employee Stock Option Scheme 2023 (No.1)" or "SFL ESOS 2023 (No.1)" created in lieu of SCUF ESOS 2013. The Nomination and Remuneration Committee of the Company in its meeting held on April 26, 2023 (i) granted 21,26,875 Fresh Options under SFL ESOS 2023 (No.1) to the eligible employees in lieu of 13,71,779 unvested and unexercised stock options under the SCUF ESOS 2013 and (ii) vested 20,82,059 Fresh Options out of 21,26,875 Fresh Options granted under SFL ESOS 2023 (No.1) to the eligible employees taking into account the share exchange ratio as provided for in the Scheme of Arrangement and Amalgamation to restore the value of the stock options post amalgamation of erstwhile SCUF with the Company in the manner provided in terms of clause 3.35.17 of the Scheme of Arrangement and Amalgamation.

The SFL ESOS 2023 (No.1) is in line with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SBEB & SE Regulations"). Disclosure pursuant to the provisions of Regulation 14 of the SBEB & SE Regulations as at March 31, 2023 is annexed as Annexure-I. The same is also hosted on the website of the Company at https://www.shriramfinance.in/investors/ financials.

Non-Convertible Debentures

During the year under review, the Company has raised Rs. 7,961.70 crores through issuance of privately placed Listed, Secured, Redeemable, Non-Convertible Debentures. The proceeds of the issue have been utilised for financing of commercial vehicles, small enterprise finance segment, two wheelers, gold, auto loans, personal loans, refinancing of existing debt and other general purposes of the Company.

Subordinated Debts

During the year under review, the Company has raised Rs. 165.00 crores through issuance of subordinated, unsecured, rated, listed, privately placed, redeemable Non-convertible Debentures in the form of subordinated debt for inclusion as Tier II Capital.

External Commercial Borrowings (Senior Secured Notes & Loans)

Commitment towards socio-economic advancement is at the core of the Companys business. Your Company is primarily engaged in providing financial assistance to FTBs and SRTOs by offering affordable finance on pre-owned commercial vehicles who typically do not qualify for financial assistance from organised sources due to the lack of stable income. Your Company also provides financial services for the underbanked and under-served individuals, communities and micro, small and medium enterprises (MSMEs) that struggle to access conventional financial services in India. Considering the additional financing avenue, the Company had updated the Social Finance Framework in December 2022 for issuance of Social Bonds and/or availing Loans to finance or refinance a portfolio of new and/or existing Eligible Social Projects to promote sustainability. In the past the Company availed loans from various international agencies including Asian Development Bank (ADB), US Development Finance Corporation (DFC), MUFG International Financial Corporation, Proparco, OeEB etc. The Companys Social Finance Framework meets the criteria and guidelines for the allocation of proceeds of the Social Bonds as per International Capital Market Association ("ICMA") Social Bond Principles 2021 ("SBP") and Social Loan Principles 2021 ("SLP"). More details in this regard are available in the ESG Report forming part of the Annual Report. The Social Finance Framework is available on the Companys website at: https://tinyurl.com/ycxjjh8f

During the year, the Company availed Loans of USD 675 Million under the Companys Social Finance framework.

On March 29, 2023, the Company issued USD 150,000,000 Senior Secured Floating Rate Notes due 2026 (Social Bonds) equivalent to Rs.12,326,445,000/- under the USD 3,500,000,000 Global Medium Term Note Programme through updated Offering Circular dated March 23, 2023 to the eligible investors outside United States under Regulation S of the U.S. Securities Act, 1933. The said Social Bonds are listed on the India International Exchange (IFSC) Limited (‘India INX).

The proceeds of Loans and Senior Secured Notes issued have been utilised by the Company to finance investments in Eligible Social Projects in accordance with International Capital Market Association Social Bond Principles 2021 and Social Loan Principles 2021 as permitted by the ECB Guidelines.

All External Commercial Borrowings are fully hedged to mitigate risk of exchange rate volatility.

FIXED DEPOSITS

The mobilisation of funds of the Company is broad-based through diversified sources. The fixed deposits mobilisation during the Financial Year ended March 31, 2023 continues to be encouraging on account of popularity of the Companys Fixed Deposit Schemes due to its long track record of offering better return and safety of investment and giving good services to fixed deposit holders.

During the Financial Year ended March 31, 2023, the Companys fund mobilisation from fixed deposits was higher at Rs. 16,360.88 crores as against Rs.11,273.18 crores in the Financial Year ended March 31, 2022. As on March 31, 2023, there were 9,275 fixed deposits aggregating to Rs.134.21 crores that have matured but remained unclaimed. There were no deposits, which were claimed but not paid by the Company. The unclaimed deposits have since reduced to 6,424 deposits amounting to Rs.74.67 crores. Appropriate steps are being taken continuously to obtain the depositors instructions so as to ensure renewal/ repayment of the matured deposits in time.

In accordance with the Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016, the Company has created a floating charge on the statutory liquid assets comprising of investment in government securities (face value) to the extent of Rs.5,346.44 crores in favour of trustees on behalf of the public deposit holders of the Company.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Appointment of Directors

The Board of Directors based on the recommendation of the Nomination and Remuneration Committee and in terms of Article 21 of the Articles of Association of the Company and Section 161(1) of the Act in its meeting held on December 04, 2022 appointed Mr. Jugal Kishore Mohapatra (DIN 03190289) and Mrs. Maya S. Sinha (DIN 03056226) as Additional Directors of the Company, in the category of Non-executive Independent Directors, not liable to retirement by rotation, for a term of 3 (three) consecutive years and 2 (two) consecutive years respectively with effect from December 04, 2022, subject to approval of Members of the Company. On February 21, 2023, the Members of the Company passed the Special Resolutions through Postal Ballot for the appointment of Mr. Jugal Kishore Mohapatra (DIN 03190289) and Mrs. Maya S. Sinha (DIN 03056226) as Independent Directors of the Company.

Mr. Y. S. Chakravarti, was Managing Director & CEO of erstwhile SCUF. He also held directorship of the Company in the capacity of non-executive, non-independent director from December 13, 2021. The Board of Directors in its meeting held on December 04, 2022 appointed Mr. Y. S. Chakravarti (DIN 00052308) as Managing Director & CEO of the Company from December 05, 2022, subject to approval of the Members of the Company. On February 21, 2023, the Members of the Company passed the Ordinary Resolution through Postal Ballot for the appointment of Mr. Y. S. Chakravarti (DIN 00052308) as Managing Director & CEO of the Company and payment of remuneration to him w.e.f. December 05, 2022.

Change in designation of Director

The Board of Directors in its meeting held on December 04, 2022 re-designated Mr. Umesh Revankar (DIN 00141189) as Executive Vice Chairman of the Company. On February 21, 2023, the Members of the Company passed the Ordinary Resolutions through Postal Ballot for re-designation of

Mr. Umesh Revankar (DIN 00141189) as Executive Vice Chairman of the Company and for restructuring and revision of remuneration of Mr. Umesh Revankar w.e.f. December 05, 2022.

Cessation of Directors

Mr. S. Lakshminarayanan (DIN 02808698), Independent Director and Chairman of the Board and Mrs. Kishori Udeshi (DIN 01344073), Independent Director resigned from directorship of the Company with effect from commencement of business hours on December 05, 2022. Mr. S. Lakshminarayanan was associated with the Company as director for more than 13 years from September 22, 2009, out of which he was Chairman of the Board for about 8 years. Mrs. Kishori Udeshi held directorship of the Company for more than 10 years from October 30, 2012. The Company and senior management was immensely benefited from their mature advice and guidance. The Board had expressed its sincere gratitude and placed on record its appreciation of their significant contribution during their tenure as Directors of the Company.

Retirement of director by rotation

Mr. D. V. Ravi (DIN 00171603), non-executive, non- independent director of the Company will retire by rotation at the ensuing 44th AGM and being eligible, offers himself for re-appointment. The Board of Directors in its meeting held on April 27, 2023 based on the recommendation of Nomination and Remuneration Committee recommended to the Members re-appointment of Mr. D. V. Ravi as a director of the Company retiring by rotation.

Mr. D. V. Ravi is the Vice Chairman and Managing Director of Shriram Capital Private Limited (formerly known as Shriram Financial Ventures (Chennai) Private Limited), Promoter of the Company. He has been part of the Shriram Group since 1992 and has an extensive experience and expertise in the financial services and insurance domains and has gained expertise in Corporate Strategies, Building Teams and creating Synergy, Mergers & Acquisitions, Risk Management, Corporate Finance, Leadership development and Technology initiatives. Your Company continues to immensely benefit from his guidance in strategic matters and expert knowledge and advice. His profile is given in the Notice of the ensuing 44th AGM forming part of the Annual Report.

The Nomination and Remuneration Committee and the Board of Directors recommends to the Members passing of the ordinary resolution for re-appointment of Mr. D. V. Ravi as a director retiring by rotation.

Declaration by Independent Directors

Pursuant to the provisions of Section 149 of the Act the independent directors have submitted declarations that each of them meets the criteria of independence as provided in Section 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) of the Listing Regulations. There has been no change in the circumstances affecting their status as independent directors of the Company.

Policies on appointment of Directors and Remuneration

The management of the Company is immensely benefitted from the guidance, support and mature advice from members of the Board of Directors who are also members of various committees. The Board consists of directors possessing diverse skill, rich experience to enhance quality of its performance. The Company has adopted a Policy on Board Diversity formulated by the Nomination and Remuneration Committee. The Companys Remuneration Policy is framed for remuneration of Directors (Executive and Non-Executive), Key Managerial Personnel and Senior Management Personnel in line with the requirement of the Section 178 of the Act, Regulation 19 read with Part D of Schedule II of the Listing Regulations and Scale Based Regulation framework issued by the Reseve Bank of India ("RBI") and as per the Guidelines on Compensation of Key Managerial Personnel and Senior Management in NBFCs issued by RBI. These Policies are available on the Companys website at the weblink: https://tinyurl.com/ycxf4rnj and https://tinyurl.com/45y352cc. The Company has formulated policy on Succession Planning for Directors and Key Managerial Personnel for continuity and smooth functioning of the Company.

Number of Meetings of the Board

10 (Ten) Board Meetings were held during the Financial Year 2022-23. The details of the Board and various Committee meetings are given in the Corporate Governance Report.

Performance evaluation at Board and Independent Directors Meetings

The Board, the Committees of the Board and independent directors continuously strive for efficient functioning of Board and its Committees and better corporate governance practices. A formal performance evaluation was carried out at the meeting of the Board of Directors held on March 15, 2023 where the Board made an annual evaluation of its own performance, the performance of directors individually as well as the evaluation of the working of its various Committees for the Financial Year 2022-23 on the basis of a structured questionnaire on performance criteria. The Board expressed its satisfaction with the evaluation process. The observations made during the evaluation process were noted and based on the outcome of the evaluation and feedback of the Directors, the Board and the management agreed on various action points to be implemented in subsequent meetings.

The evaluation process endorsed cohesiveness amongst directors, the openness of the management in sharing the information with the Board and placing various proposals for the Boards consideration and approval.

The Independent Directors met on March 16, 2023 without the presence of other directors or members of Management. All the Independent Directors were present at the meeting. In the meeting, the Independent Directors reviewed performance of Non-Independent Directors, the Board as a whole and the Chairman. They assessed the quality, quantity and timeliness of flow of information between the Management of the Company and the Board. The Minutes of the Independent Directors meeting were placed before the Board Meeting held on April 27, 2023 and the same were noted by the Board. The Independent Directors expressed satisfaction over the performance and effectiveness of the Board, individual Non Independent Directors and the Chairman.

They also expressed satisfaction with regard to the flow of information between the Management of the Company and the Board. The Management took note of various suggestions made in the meeting of Independent Directors.

The Independent Directors played active role in Board as well as Committee Meetings in which they are members. The members of the Audit Committee without the presence of members of Management had a separate meeting with the Joint Statutory Auditors which covered Audit issues in general and the framework and the process of Internal Audit in specific. The members of the Audit Committee without the presence of members of Management also had a separate meeting with credit rating agencies.

KEY MANAGERIAL PERSONNEL

Mr. Vivek Achwal, Company Secretary & Compliance Officer retired from services of the Company upon attaining the age of superannuation with effect from the close of business hours on August 31, 2022.

The Board of Directors in its meeting held on July 28, 2022 placed on record its appreciation of his performance, knowledge, skills and commitment demonstrated by him during his tenure as Company Secretary & Compliance Officer of the Company and appointed Mr. U Balasundararao as Company Secretary & Compliance Officer of the Company on the recommendation of the Nomination and Remuneration Committee with effect from September 01, 2022.

The Nomination and Remuneration Committee periodically reviews career growth plan of senior management personnel who possess ability to build teams and nurture leaderships for future growth plans of the Company. The Board of Directors at its meeting held on December 04, 2022, on the recommendation of Nomination and Remuneration Committee, appointed/designated Mr. R. Chandrasekar, Joint Managing Director & Chief Compliance Officer, Mr. G M Jilani, Joint Managing Director, Mr. K. Srinivas, Joint Managing Director and Mr. Aseem Gandhi, Executive Director as Key Managerial Personnel of the Company pursuant to Section 2(51) of the Act in addition to the existing Key Managerial Personnel.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(3)(c) and Section 134(5) of the Act the Directors confirm that, to the best of their knowledge and belief:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) That such accounting policies as mentioned in note 1 to 7 to the Standalone financial statements and note 1 to 8 to the Consolidated financial statements have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2023 and of the profit of the Company for the year ended on that date;

c) That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) The annual accounts have been prepared on a going concern basis;

e) The Company had followed the internal financial controls laid down by the directors and that such internal financial controls are adequate and were operating effectively; and

f) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

RBI GUIDELINES

The Company continues to comply with the Master Direction for Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and all the applicable laws, regulations, guidelines, etc. prescribed by RBI from time to time.

The Company has been identified for categorisation as NBFC-Upper Layer under Scale Based Regulation (SBR), a Revised Regulatory Framework for NBFCs as per the list issued by RBI in its Press Release 2022-2023/975 dated September 30, 2022. In compliance with the requirement of Scale Based Regulatory Framework read with Notification dated April 11, 2022 for Compliance Function and Role of Chief Compliance Officer (CCO) - NBFCs, the Company has appointed Mr. R. Chandrasekar, Joint Managing Director as Chief Compliance Officer of the Company for a period of 3(three) years with effect from December 04, 2022.

The Board of Directors have framed various policies as applicable to the Company including Risk based internal audit policy. The Board periodically reviews the policies and approves amendments as and when necessary.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

Pursuant to Regulation 34(2)(f) of the Listing Regulations, the Business Responsibility and Sustainability Report is annexed and forms part of the Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR Committee comprises of following directors namely, Mr. Umesh Revankar - Chairman, Mr. Pradeep Kumar Panja and Mr. Y. S. Chakravarti. The CSR Report for the Financial Year 2022-23 is annexed to this report as Annexure-II. The details of the ongoing CSR projects/ programmes/ activities are included in the CSR Report/section. The CSR Policy is uploaded on the Companys website at the web link: https://tinyurl.com/8uypxf76

ANNUAL RETURN

In accordance with the provisions of Section 92(3) of the Act, Annual Return in Form No. MGT-7 of the Company is hosted on website of the Company at https://tinyurl.com/4e2upet9.

DISCLOSURES AS PER THE SECTION 134 OF THE COMPANIES ACT, 2013 READ WITH RULE 8 OF THE COMPANIES (ACCOUNTS) RULES, 2014

Conservation of Energy, Technical Absorption and Foreign Exchange Earnings and Outgo

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

a. The Company continues its initiatives for conservation of energy, the details of which are given in Business Responsibility and Sustainability Report. The Companys business operations do not involve any activity for technology absorption.

b. The Company earned Foreign Exchange Earnings of Rs. 1.17 crores.

c. Outgo under Foreign Exchange - Rs. 109.21 crores.

Loans, guarantee or investments in securities

The loan made, guarantee given or security provided in the ordinary course of business by a NBFC registered with RBI are exempt from the applicability of the provisions of Section 186 of the Act. As such, the particulars of loans and guarantee have not been disclosed in this Report.

During the year under review, the Company has invested surplus funds in various securities in the ordinary course of business. For details of the investments of the Company, refer to Note 13 of the financial statements.

Contracts or Arrangements with Related Parties

All the related party transactions were entered into in the ordinary course of business on an arms length basis. Hence, no disclosure in Form AOC-2 is necessary and the same does not form part of this report. For details of the transactions with related party entered into in the ordinary course of business on an arms length basis, refer to Note 50 to the financial statements.

As required under the Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, the policy on materiality of related party transactions and dealing with related party transactions as approved by the Board is uploaded on the Companys website at the web link: https://tinyurl.com/zuwy4knp

There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. None of the Directors has any pecuniary relationship or transaction vis-a-vis the Company save and except the payment of sitting fees and commission paid to the Independent Directors, remuneration to Directors apart from transactions in the ordinary course of business and on arms length basis at par with any member of general public. The Company did not advance any loans to any of its Directors. The details of the transactions with Related Parties are provided in the Note 50 to the Financial Statements.

Whistle Blower Policy/ Vigil Mechanism

The Companys Whistle Blower policy provides a mechanism under which an employee/director of the Company may report unethical behaviour, suspected or actual fraud, violation of code of conduct and personnel policies of the Company. The Vigil Mechanism ensures standards of professionalism, honesty, integrity and ethical behaviour. The Whistle Blower Policy/Vigil Mechanism is uploaded on the Companys website: https://tinyurl.com/hrtapv3s

Financial summary/highlights

Income for the Financial Year 2022-23 increased by 54.63% to Rs.29,802.89 crores as compared to Rs.19,274.23 crores in the previous Financial Year 2021-22;

Income from operations for the Financial Year 2022-23 was Rs.29,772.16 crores as compared to Rs.19,255.17 crores in the previous Financial Year 2021-22, a growth of 54.62%;

Profit before tax for the Financial Year 2022-23 was Rs.8,184.89 crores as compared to Rs.3,549.25 crores in the previous Financial Year 2021-22;

Profit after tax for the Financial Year 2022-23 was Rs.5,979.34 crores as compared to Rs.2,707.93 crores in the previous Financial Year 2021-22.

The overall disbursement during Financial Year 2022-23 stood at Rs.1,11,848.44 crores as compared to Rs. 61,808.60 crores in the previous Financial Year 2021-22.

Our interest income increased by 53.42% from Rs.18,646.26 crores for the year ended March 31, 2022 to Rs. 28,607.36 crores for the year ended March 31, 2023.

Finance costs increased by 28.88 % from Rs.9,734.31 crores for the year ended March 31, 2022 to Rs.12,545.76 crores for the year ended March 31, 2023.

Other expenses increased from Rs.905.61 crores for the year ended March 31, 2022 to Rs.1,579.17 crores for the year ended March 31, 2023.

Our fees and commission expenses for the financial year 2022-23 was Rs.303.61 crores as compared to Rs.91.74 crores in FY 2021-22.

Risk Management and Internal Financial Control System

The Companys Risk Management Policy deals with identification, mitigation and management of risks across the organisation. This has been dealt with the Management Discussion and Analysis annexed to the Annual Report.

The Companys well-defined organisational structure, documented policy guidelines, defined authority matrix and internal financial controls ensure operational effectiveness, reliability of financial data and compliance with applicable laws, regulations and Companys policies.

The financial control framework includes internal controls, delegation of authority procedures, segregation of duties, system access controls and document filing and storage procedures. The Internal Auditor ensures the continued effectiveness of the Companys internal control system. The Audit Committee reviews internal financial control reports prepared by the internal auditor. The Company has framed risk based internal audit policy as part of its oversight function. The objective of risk based internal audit review is to identify the key activities and controls in the business processes, review effectiveness of business processes and controls, assess the operating effectiveness of internal controls and provide recommendations for business process and internal control improvement.

Composition of Audit Committee

The Audit Committee comprises of the following Independent Directors namely, Mr. S. Sridhar - Chairman, Mr. Pradeep Kumar Panja and Mrs. Maya S. Sinha.

Others

• There were no material changes and commitments, affecting the financial position of the Company which has occurred between the end of the financial year of the Company and the date of the Directors report.

• There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and companys operations in future. For other orders, please refer to Note 49 of the financial statement containing details of the contingent liabilities.

• There was no fraud reported by the Statutory Auditors and the Secretarial Auditors of the Company under the Section 143(12) of the Act to the Audit Committee.

• Your Company adopted ISO 27001 standards, practices its processes and upgrades its implementation on regular basis to maintain the information security as per the market trend. The Company is prepared to face emerging cyber threats such as Zero-day attacks, remote access threats and targeted threats. Your company has established disaster recovery centers and various security controls in place to mitigate risks, also safeguard the Company against security breaches and technological lapses located in different seismic zones, periodic upgrading of servers and data storage, adopting new technology for data management. On regular basis different type of system audits is conducted by the external and internal auditors. Board represented strategy committee governs the security policies and its implementation as per the Companys corporate governance process.

• The Company has a policy for prevention of Sexual Harassment for Women at Workplace. An Internal Complaints Committee has been constituted in line with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (‘POSH). During the year under review, there were no cases filed under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. On February 01, 2023, the Company had arranged an online orientation programme, for its Internal Committee Members under POSH Act, at PAN India Level, in order to make them proficient to discharge their duties. The training was attended by all the Internal Committee Members at PAN India. The Company has in place a Module on "PREVENTION OF SEXUAL HARASSMENT IN WORKPLACE (POSH) in - MyCoach E-Learning Platform, for sensitising the employees with the provisions under the POSH.

• Disclosure regarding details relating to deposits covered under Chapter V of the Act is not applicable since our Company is a Non-Banking Financial Company regulated by RBI. The Company accepts deposits as per the Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016.

• The Company has obtained a certificate from the statutory auditor certifying that the Company has complied with the requirements of the Regulation 9 of the Master Direction - Foreign Investment in India with regard to downstream investments.

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

• The Company, in the capacity of Financial Creditor, has not filed any applications with National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 during the Financial Year 2022-23 for recovery of outstanding loans against any customer being Corporate Debtor.

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

• The provision of Section 148 of the Act relating to maintenance of cost records and cost audit are not applicable to the Company.

• The Company has not defaulted in repayment of loans from banks and financial institutions. There were no delays or defaults in payment of interest/principal of any of its debt securities.

• The equity shares of the Company were not suspended from trading during the year on account of corporate actions or otherwise.

• Disclosures pursuant to RBI Master Directions, unless provided in the Directors Report and Corporate Governance Report, form part of the notes to the standalone financial statements.

CONSOLIDATED FINANCIAL STATEMENTS

Consequent to the Scheme coming into effect, Shriram Housing Finance Limited, unlisted subsidiary of erstwhile SCUF became a subsidiary of the Company. Shriram Housing Finance Limited CIN - U65929TN2010PLC078004 ("SHFL") is a housing finance company registered with the National Housing Bank and regulated by RBI (Registration Number- 08.0094.11). The equity shares of SHFL are not listed on any stock exchange, but has its debt securities listed on BSE Limited. The primary operation of SHFL is providing loans for the purchase or construction of residential space and loans against property.

SHFL is not a material subsidiary within the meaning of the Listing Regulations. The Companys policy for determination of material subsidiary, as adopted by the Board of Directors, in conformity with Regulation 16 of the Listing Regulations, can be accessed on the Companys website at https://tinyurl.com/tkn8vhbu Provision of Regulation 24 of the Listing Regulations relating to subsidiary companies, to the extent applicable, have been duly complied with.

Mr. Y. S. Chakravarti, Managing Director & CEO of the Company is a Non-Executive, Non-Independent Director on the Board of SHFL.

SHFL has 131 branches as on March 31, 2023 across India. SHFL has 35,575 customers with loans in its portfolio as on March 31, 2023. The total employee strength of SHFL as on March 31, 2023 was 1,748. The CAGR of loan disbursement of SHFL over last five years was around 40% with total disbursement during the year being Rs.4,146 crores. The total borrowings of SHFL as on March 31, 2023 was Rs.6,296.06 crores out of which Rs.1,252.42 crores was by way of issuance of NCDs and the balance amount of Rs.5,043.64 crores was through borrowings from Banks, National Housing Bank, Financial Institutions and securitisation through banks & financial institutions.

Shriram Automall India Limited (SAMIL), associate of the Company provides fee-based facilitation services for the sale of pre-owned commercial and passenger vehicles, agricultural and construction equipment, dealers stock of pre-owned two wheelers, etc. repossessed by banks and financing companies. SAMIL has 136 Automalls (Feeder Yards and Park and Sale point Yards) located across the Country. As per the audited financial statements of SAMIL for the year ended March 31, 2023, its total income from operations and Net Profit was Rs.223.02 crores and Rs.19.20 crores respectively, on consolidated basis. The said financial statements of SAMIL will be made available to Members on request.

Pursuant to Section 129 of the Act read with Rule 5 to the Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statement of subsidiary and associate company in Form AOC-1 forms part of the Annual Report. The consolidated financial statements forming part of this Annual Report are prepared in compliance with the applicable Indian Accounting Standards and Listing Regulations. Pursuant to the provisions of Section 136 of the Act, the financial statements of the Company and its subsidiary (SHFL) are placed on the Companys website at https://www.shriramfinance.in/investors/financials.

The annual report and the annual accounts of SHFL shall be made available to the Members of the Company seeking such information. The annual accounts shall also be kept for inspection by the Members at the Registered Office of the Company and of SHFL. The Company shall furnish hard copy of details of accounts of SHFL to any shareholder on demand.

During the Financial Year 2022-23, there was no other entity which became or ceased to be subsidiary, joint venture or associate company of the Company.

PARTICULARS OF EMPLOYEES AND REMUNERATION

Disclosures required under the provisions of Section 197(12) ofthe Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, containing, inter-alia, the ratio of remuneration of directors to median remuneration of employees, percentage increase in the median remuneration, are annexed to this Report as Annexure-III.

Statement containing the particulars of top ten employees and the employees drawing remuneration in excess of limits prescribed under Section 197(12) of the Act read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is an annexure forming part of this Report. In terms of the proviso to Section 136(1) of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid annexure. The said statement is available for inspection with the Company. Any Member interested in obtaining a copy of the same may write to the Company Secretary at secretarial@shriramfinance.in

The Managing Director & CEO of the Company as per the terms of his appointment, does not draw any commission or remuneration from SHFL, subsidiary company. Hence, no disclosure as required under section 197(14) of the Act has been made.

AUDITORS

In compliance with the RBI Guidelines on appointment of statutory auditor(s) by Non-Banking Financial Company ("NBFC") vide Circular RBI/2021-22/25 Ref. No. DoS. CD.ARG/SEC.01/08.91.001/2021-22 dated April 27, 2021 ("RBI Guidelines") and pursuant to Section 139(8)(i) of the Act, the Members of the Company appointed M/s. Sundaram & Srinivasan Chartered Accountants, Chennai (ICAI Firm Registration No. 004207S) and KKC & Associates LLP, Mumbai (ICAI Firm Registration No. 105146W/ W-100621) as the Joint Statutory Auditors of the Company at the 43rd Annual General Meeting held on Thursday, June 23, 2022 to hold office from conclusion of 43rd Annual General Meeting till the conclusion of 45th Annual General Meeting of the Company to conduct the audit of accounts of the Company for the financial year ending March 31, 2023 and March 31, 2024 on such remuneration plus out of pocket expenses, if any, as may be mutually agreed upon between the Board of Directors of the Company and the said Joint Statutory Auditors. The Joint Statutory Auditors holds a valid peer review certificate as prescribed under Listing Regulations.

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 or disclaimer.

In terms of the RBI Master Directions - Non-Banking Financial Companies Auditors Report (Reserve Bank) Directions, 2016, Joint Statutory Auditors have also submitted an additional report dated April 27, 2023, for the Financial Year 2022-23 which has been filed with RBI. There were no comments or adverse remarks in the said report as well.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 24A of the Listing Regulations, the Secretarial Audit Report in Form MR-3 for the Financial Year 2022-23 issued by SPNP & Associates, Practicing Company Secretaries (Peer Review No.: 1913/2022) is annexed to this report as Annexure-IV. The report does not contain any qualification, reservation or adverse remark.

CORPORATE GOVERNANCE

Pursuant to Schedule V of the Listing Regulations the following Reports/ Certificates form part of the Annual Report:

• the Report on Corporate Governance;

• the Certificate duly signed by the Managing Director & CEO and the Joint Managing Director & Chief Financial Officer on the Financial Statements of the Company for the year ended March 31, 2023 as submitted to the Board of Directors at its meeting held on April 27, 2023;

• the declaration by the Managing Director & CEO regarding compliance by the Board members and senior management personnel with the Companys Code of Conduct; and

• the Management Discussion & Analysis Report

The Auditors Certificate on Corporate Governance is annexed to this report as Annexure-V.

ACKNOWLEDGEMENT

The Board of Directors would like to place on record their gratitude for the guidance and co-operation extended by RBI and the other regulatory authorities. The Board of Directors also thank the Shareholders, Secured Creditors and Unsecured Creditors for having approved the Scheme of Arrangement and Amalgamation with overwhelming majority. The Board takes this opportunity to express its sincere appreciation for the excellent patronage received from the Banks and Financial Institutions and for the continued enthusiasm, total commitment, dedicated efforts of the executives and employees of the Company at all levels. We are also deeply grateful for the continued confidence and faith reposed on us by all the Stakeholders including Shareholders, Depositors, Debenture holders and Debt holders.

For and on behalf of the Board of Directors
Jugal Kishore Mohapatra
New Delhi Chairman
April 27, 2023 (DIN 03190289)