The directors have pleasure in presenting the thirty seventh annual
report together with the audited accounts of the company for the year
ended 31 March, 2015.
Rs. in crores
Particulars 2014 - 15 2013 - 14
Gross Income 3691.19 3,262.84
Profit Before Tax 657.22 550.21
Profit After Tax 435.16 364.01
Add: Balance brought forward 305.32 123.64
Less: Adjustment for the year 2012-13
pursuant to the Scheme of Amalgamation - 0.49
Less: Deferred Tax adjustment for the
year 2012-13 consequent to the
Scheme of Amalgamation - 0.40
Amount available for appropriation 740.48 486.76
Adjustments / Appropriation:
Transfer to statutory and other reserves 490.00 122.81
Dividend - Preference 2.88 -
Dividend - Equity 50.30 50.11
Tax on dividend 10.68 8.52
Balance carried forward 186.62 305.32
TOTAL 740.48 486.76
During the year, the company increased the authorised share capital
from Rs. 540 crores to Rs. 740 crores by increasing the authorised
preference capital from Rs. 300 crores to Rs. 500 crores. The company
issued and allotted 1% compulsorily convertible preference shares
(CCPS) aggregating to Rs. 500 crores on a preferential basis to M/s.
Dynasty Acquisition (FDI) Ltd., a foreign corporate.
In a challenging year, your company achieved a 19% growth in profit
before tax. Closing managed assets grew by 9%. Given the muted economy
and pressure on portfolio quality, your company adopted a cautious
approach to disbursements, resulting in a slight dip of 2% in
disbursements as compared to the prior year.
At a division level, the continuing slowdown in the commercial vehicles
(CV) market reflected in a drop in disbursements in the vehicle finance
(VF) business to the tune of 8%. However, the division recorded a
growth of 3% in closing managed assets and a PBT growth of 7%. The home
equity (HE) business recorded healthy growth rates across all
parameters: PBT growth of 26%, closing managed assets growth of 24% and
disbursement growth of 8%.
Both divisions faced pressure on their portfolio quality, resulting in
higher gross non-performing assets (GNPA) percentages than the prior
year. However, collections performance was better in the last quarter
of the year and the deteriorating trend has been arrested. The GNPA
levels remained lower than the industry.
Disbursements in vehicle finance for the year were at Rs. 9,363 crores as
against Rs. 10,128 crores in the previous year. The home equity business
recorded a disbursement of Rs. 3,043 crores as against Rs. 2,810 crores in
the previous year. Disbursements in home loans were at Rs. 89 crores as
against Rs. 39 crores in the previous year and micro, small and medium
enterprise (MSME) were at Rs. 249 crores as against Rs. 137 crores in the
previous year. The gold loan vertical disbursed Rs. 62 crores during the
year, but given the external environment, volatile gold prices and
susceptibility to losses, your company stopped disbursements in this
product in the second quarter of the year.
The business assets under management (net of provisions) of the company
as at 31 March, 2015 increased to Rs. 25,452 crores from Rs. 23,253 crores
in the previous year, recording a growth of 9%.
During the year, the RBI issued revised regulatory framework for NBFCs,
progressively reducing the number of months overdue considered for
recognition of NPAs and increasing the standard asset provisioning
requirements starting FY16. A year ahead of the RBI mandatory
requirement, as a prudent and conservative measure, your company
decided to move to the next level of NPA recognition from the existing
6 months to 5 months overdue and increased its standard assets
provisioning from 0.25% to 0.30% in FY15.
The profit before tax for the year was at Rs. 657.22 crores as against Rs.
550.21 crores in the previous year.
Profit after tax grew by 20% and was at Rs. 435.16 crores for the year as
compared to Rs. 364.01 crores in the previous year.
The company paid an interim dividend on the equity shares at the rate
of 25% (Rs. 2.50 per equity share) and a pro rata preferential dividend
on 5,00,00,000 CCPS of Rs. 100 each at the rate of 1% per annum as
approved by the board on 27 January, 2015 for the year ended 31 March,
Your directors are pleased to recommend a final dividend of 10% (Rs. 1
per equity share) on the equity shares of the company. With this, the
total dividend will be 35% (Rs. 3.50 per equity share) for the year ended
31 March, 2015.
TRANSFER TO RESERVES
Your company has transferred a sum of Rs. 90 crores to statutory reserve
as required under the Reserve Bank of India Act, 1934 and Rs. 400 crores
to general reserves.
The company continues to focus and grow its two main business lines -
vehicle finance and home equity while seeding new business lines like
home loans, corporate finance and rural finance.
India''s commercial vehicle industry faced significant challenges in
FY15, with sales dropping by 2.8% over the previous year. LCV sales
dropped by 11.6% in the same period. However, the sector showed signs
of revival in the second half of FY15. While the revival is currently
limited to the strategic segment, it is widely expected that the uptick
will be felt in the other segments as well. Many factors influence
this belief - expected improvement in industrial activity, enhanced
agricultural output, faster execution of infrastructure projects,
improvement in consumption expenditure etc. A growth rate of 7-9% is
projected for the CV industry in FY16 and the industry is expected to
grow at a compounded annual growth rate (CAGR) of 10-13% till FY20
(source: CRISIL Research). Therefore, the outlook for the vehicle
finance business is positive both in the short and medium term. The
recent line extensions in the division such as two wheelers and
construction equipment are also expected to grow rapidly and supplement
the growth in the traditional product lines.
Competition has been rapidly increasing in this product with almost all
the private sector banks and a number of public sector banks increasing
their focus on loan against property (LAP) as an exclusive offering. An
aggressive pricing strategy by the new entrants is expected to put
downward pressure on the industry''s net interest margin (NIM).
Entrenched players are scaling up operations to tap the market
potential from tier III and tier IV cities. However, your company has
established itself in the market place as a trusted and reliable
partner for customers seeking a LAP loan with a quick turnaround time
and customer friendly service. Building on this momentum, your company
expects to grow this product line at a healthy pace in FY16.
The company is a systemically important non-deposit accepting
non-banking finance company (SI - ND - NBFC). It ceased taking deposits
from the public effective 1 November, 2006. At the time of conversion,
the outstanding unmatured deposits were transferred to an escrow
account together with the future interest payable thereon till the date
of maturity and these are being repaid on maturity. Accordingly, there
have been no fresh deposits accepted during FY15.
As at 31 March, 2015 there were 30 depositors whose deposits had
matured but had not claimed the maturity amount aggregating to Rs. 8.44
lakhs (along with interest accrued). As a process, the company sends
periodical reminders to these depositors before transferring the sums
due to the investor education and protection fund (IEPF) under section
125 of the Companies Act, 2013 (corresponding to section 205C of the
Companies Act, 1956). During the year, the company remitted a sum of Rs.
5.54 lakhs to IEPF under this head representing unclaimed public
deposits and interests thereon beyond seven years.
ASSET FINANCE COMPANY
During the year, the company retained its categorisation as an asset
finance company (AFC) under the RBI Regulations.
The company''s capital adequacy ratio was at 21.24% as on 31 March, 2015
as against the statutory minimum capital adequacy of 15% prescribed by
EMPLOYEE STOCK OPTION SCHEME
Pursuant to the approval accorded by the shareholders at the twenty
ninth annual general meeting of the company held on 30 July, 2007, the
nomination and remuneration committee had formulated the Employee Stock
Option Scheme 2007. During the year under review, the employees
exercised 6,41,513 options and there were no fresh options granted. As
required under the Securities and Exchange Board of India Regulations
(SEBI Regulations) and the Companies Act, 2013, the following details
of this scheme as on 31 March, 2015 are being provided:
Mr. N. Srinivasan retires by rotation at the ensuing annual general
meeting and being eligible, has offered himself for re-appointment.
Ms. Bharati Rao and Mr. M.M. Murugappan were appointed as additional
directors of the company during the year and they hold office up to the
ensuing annual general meeting of the company.
Your company has received required notices under the provisions of
section 160 of the Companies Act, 2013 (the Act) proposing the
candidature of Ms. Bharati Rao and Mr. Murugappan as directors and your
board recommends the appointment of Mr. Murugappan as a non-executive
director of the company liable to retire by rotation and Ms. Rao as an
independent director for a term as proposed in the notice of the
ensuing annual general meeting.
DECLARATION FROM INDEPENDENT DIRECTORS
The independent directors (IDs) have submitted a declaration of
independence, as required pursuant to section 149(7) of the Act,
stating that they meet the criteria of independence as provided in
section 149(6). In the opinion of the board, these IDs fulfil the
conditions specified in the Act and the rules made thereunder for
appointment as IDs and confirm that they are independent of the
KEY MANAGERIAL PERSONNEL
Pursuant to the provisions of section 203 of the Act read with the
rules made thereunder, the following employees are the whole-time key
managerial personnel of the company:
1. Mr. Vellayan Subbiah, Managing Director
2. Mr. D. Arul Selvan, Chief Financial Officer and
3. Ms. P. Sujatha, Company Secretary
DIRECTORS'' RESPONSIBILITY STATEMENT
The directors'' responsibility statement as required under section
134(3)(c) of the Act, reporting the compliance with accounting
standards, is attached and forms part of the board''s report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
There are no significant material orders passed by the regulators or
courts or tribunals which would impact the going concern status of the
company and its future operations.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report, highlighting the
business-wise details is attached and forms part of this report. The
report also contains the details of the risk management framework of
the company including the development and implementation of risk
management policy and the key risks faced by the company.
CORPORATE GOVERNANCE REPORT
A report on corporate governance as per clause 49 of the listing
agreement is attached and forms part of this report. The report also
contains the details as required to be provided on the number of
meetings of the board, composition of the various committees including
the audit committee and corporate social responsibility committee,
annual board evaluation, remuneration policy, criteria for board
nomination and senior management appointment, whistle blower policy /
vigil mechanism, etc.
The managing director and the chief financial officer have submitted a
certificate to the board regarding the financial statements and other
matters as required under clause 49 of the listing agreement.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements prepared in accordance with the
Act and the relevant accounting standards form part of this annual
Pursuant to the provisions of section 139 of the Act and the rules
framed thereunder, M/s. Deloitte Haskins & Sells, chartered
accountants, were appointed as statutory auditors of the company in the
last annual general meeting held on 31 July, 2014 for a period of 3
years commencing from the conclusion of the thirty sixth annual general
meeting till the conclusion of the thirty ninth annual general meeting
subject to ratification by members at every AGM. Accordingly, your
directors recommend the ratification of the appointment of M/s.
Deloitte Haskins & Sells, as statutory auditors of the company from the
conclusion of the thirty seventh annual general meeting till the
conclusion of the thirty eighth annual general meeting of the company.
The statutory auditors have confirmed their eligibility for
Pursuant to the provisions of the Act and the rules framed thereunder,
the company appointed M/s. R. Sridharan & Associates, company
secretaries to undertake the secretarial audit of the company for FY15.
The audit report is attached and forms part of this report and does not
contain any qualification.
EXTRACT OF ANNUAL RETURN
In accordance with section 134(3)(a) of the Act, the extract of the
annual return in form MGT-9 is attached and forms part of this report.
CORPORATE SOCIAL RESPONSIBILITY
The murugappa group is known for its tradition of philanthropy and
community service. The group''s philosophy is to reach out to the
community by establishing service-oriented philanthropic institutions
in the field of education and healthcare as the core focus areas. The
company upholds the group''s tradition by earmarking a part of its
income for carrying out its social responsibilities.
The company has been carrying out corporate social responsibility (CSR)
activities for many years now and has been earmarking 0.5% of its net
profits to CSR activities till last year. With the enactment of the CSR
provisions in the Act, the company has put in place a CSR policy
incorporating the requirements therein which is also available on the
company''s website, www.cholamandalam.com.
As per the provisions of the Act, the company is required to spend
atleast 2% of the average net profits of the company made during the
three immediately preceding financial years. This amount aggregates to
Rs. 860.74 lakhs and the company has entered into commitments with
various NGOs to spend the entire amount. This being the first year of
implementation of CSR activity, there was lead time involved in setting
up the internal team and identification of implementing agencies and
beneficiaries. Hence, out of the committed amount, the company spent Rs.
573.94 lakhs towards CSR activities during FY15, the details of which
are annexed to and form part of this report. The company will continue
with the remaining commitments in FY16.
INTERNAL FINANCIAL CONTROLS
Internal control framework including clear delegation of authority and
standard operating procedures are available across all businesses and
functions. These are reviewed periodically at all levels. The company
adopts a co-sourced model of internal audit. The risk and control
matrices are reviewed on a quarterly basis and control measures are
tested and documented. These measures have helped in ensuring the
adequacy of internal financial controls commensurate with the scale of
operations of the company.
RELATED PARTY TRANSACTIONS
The company has in place a policy on related party transactions as
approved by the board and the same is available on the website of the
All related party transactions other than exempted transactions that
were entered into during the financial year were on an arm''s length
basis and were in the ordinary course of business. 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.
All proposed related party transactions are placed before the audit
committee and also the board for approval at the beginning of the
financial year. The transactions entered into pursuant to the approval
so granted are placed before the audit committee for its review and
ratification for modifications, if any, on a quarterly basis. None of
the directors has any pecuniary relationship or transaction vis-a-vis
INFORMATION AS PER SECTION 134(3)(m) OF THE ACT
The company has no activity relating to consumption of energy or
technology absorption. Foreign currency expenditure amounting to Rs. 5.17
crores was incurred during the year under review. Foreign currency
remittances during the year was Rs. 2.88 crores towards preference
dividend and Rs. 2.01 crores towards purchase of fixed assets. The
company does not have any foreign exchange earnings.
PARTICULARS OF EMPLOYEES
In accordance with the provisions of section 197 of the Act read with
rule 5 of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014, the information in respect of the employees of
the company will be provided upon request. In terms of section 136 of
the Act, the report and accounts are being sent to the members and
others entitled thereto, excluding the aforesaid information which is
available for inspection by the members at the registered office of the
company during business hours on working days of the company. If any
member is interested in obtaining a copy, such member may write to the
company secretary in this regard.
DISCLOSURE OF REMUNERATION
The disclosure with respect to remuneration as required under section
197 of the Act read with rule 5 of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 is attached and forms
part of this report.
CHOLAMANDALAM SECURITIES LIMITED (CSEC)
CSEC recorded a gross income of Rs. 14.44 crores for the year ended 31
March, 2015 and made a profit before tax of Rs. 3.42 crores as against a
loss before tax of Rs. 0.40 crores in the previous year.
CHOLAMANDALAM DISTRIBUTION SERVICES LIMITED (CDSL)
CDSL recorded a gross income of Rs. 13.13 crores for the year ended 31
March, 2015 and made a profit before tax of Rs. 5.58 crores as against a
profit before tax of Rs. 4.68 crores in the previous year.
The directors wish to thank the company''s customers, vehicle
manufacturers, vehicle dealers, channel partners, banks, mutual funds,
rating agencies and shareholders for their continued support. The
directors also thank the employees of the company for their
contribution to the company''s operations during the year under review.
Directors'' Responsibility Statement
The directors accept the responsibility for the integrity and
objectivity of the Statement of Profit & Loss and the Cash Flow
Statement for the year ended 31 March, 2015 and the Balance Sheet as at
that date (financial statements) and confirm that:
- in the preparation of the financial statements the generally
accepted accounting principles (GAAP) of India and applicable
accounting standards have been followed and no material departures have
been made from the same;
- appropriate accounting policies have been selected and applied
consistently and judgments and estimates that are reasonable and
prudent have been made so as to give a true and fair view of the state
of affairs of the company as at the end of the financial year and of
the profits and the cash flows of the company for the year;
- proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 2013 for safeguarding the assets of the company and for
preventing and detecting fraud and other irregularities. To ensure
this, the company has established internal control systems, consistent
with its size and nature of operations, subject to the inherent
limitations that should be recognised in weighing the assurance
provided by any such system of internal controls. These systems are
reviewed and updated on an ongoing basis. Periodic internal audits are
conducted to provide reasonable assurance of compliance with these
systems. The audit committee meets at regular intervals to review the
internal audit function;
- the financial statements have been prepared on a going concern
- adequate internal financial controls have been laid down to be
followed by the company and such internal financial controls are
- proper systems are in place to ensure compliance with the
provisions of all applicable laws and such systems are adequate and
On behalf of the board
Place: Chennai M.B.N. Rao
Date : 24 April, 2015 Chairman