<dhhead>DIRECTORS’ REPORT</dhhead>
Dear Shareholders,
Your directors present the thirty-seventh Annual Report along with the
audited standalone and consolidated financial statements for 2023-24 (or FY2024).
Company overview
Bajaj Finance Ltd., is a public limited company incorporated on 25
March 1987 under the Companies Act, 1956 and has its registered office at Akurdi, Pune 411
035, Maharashtra, India. The Company changed its name from Bajaj Auto Finance Ltd. to
Bajaj Finance Ltd. in the year 2010. It is registered as a Deposit taking Non-Banking
Finance Company vide the Reserve Bank of India (‘RBI’) registration
number A-13.00243 dated 5 March 1998. The Company launched its initial public offering of
equity shares and was listed on the BSE Ltd. in the year 1994. Subsequently, listed on
National Stock Exchange of India in the year 2003. It is also a registered intermediary
within the meaning of Insurance Regulatory and Development Authority of India
(‘IRDAI’) as a corporate agent. The Company stood at 12th rank based on market
capitalisation as on 31 March 2024. It has been classified in the Upper Layer pursuant to
RBI Scale Based Regulations.
Financial Results
The highlights of the standalone financial results are given below:
(C in crore)
Particulars |
FY2024 |
FY2023 |
% change over FY2023 |
Interest income |
40,783 |
30,142 |
35 |
Interest and finance charge |
13,843 |
9,285 |
49 |
Net interest income |
26,940 |
20,857 |
29 |
Fees, commission, and other income |
6,163 |
5,548 |
11 |
Net Total Income |
33,103 |
26,405 |
25 |
Total operating expenses |
11,478 |
9,457 |
21 |
Pre-impairment operating profit |
21,625 |
16,948 |
28 |
Impairment on financial instruments |
4,572 |
3,066 |
49 |
Profit before tax |
17,053 |
13,882 |
23 |
Profit after tax |
12,644 |
10,290 |
23 |
Retained earnings as at the beginning of
the year |
25,060 |
18,038 |
39 |
Profit after tax |
12,644 |
10,290 |
23 |
Retained earnings before appropriations |
37,704 |
28,328 |
33 |
Appropriations |
|
|
|
Transfer to reserve fund u/s 45-IC (1) of the
RBI Act, 1934 |
2,530 |
2,060 |
23 |
Dividend paid |
1,815 |
1,207 |
50 |
Retained earnings as at the end of the
year |
33,359 |
25,060 |
33 |
Due to rounding off, numbers presented in above table may not add up
precisely to the totals provided.
Transfer to Reserve Fund
Under section 45-IC (1) of Reserve Bank of India (‘RBI’) Act,
1934, non-banking financial companies (‘NBFCs’) are required to transfer a sum
not less than 20% of its net profit every year to reserve fund before declaration of any
dividend. Accordingly, Bajaj Finance Ltd. (the 'Company', ‘Bajaj Finance’ or
‘BFL’) has transferred a sum of C 2,530 crore to its reserve fund.
Pursuant to provisions of Companies Act, 2013 (the ‘Act’)
read with relevant rules thereunder, the Company, being a NBFC, is exempt from creating
debenture redemption reserve in respect of privately placed debentures including the
requirement to invest up to 15% of the amount of debentures maturing during the next
financial year. However, the Company maintains sufficient liquidity buffer to fulfill its
obligations arising out of debentures. In case of secured debentures, an asset cover of at
least 100% is maintained at all times.
Dividend Distribution Policy
Pursuant to the provisions of regulation 43A of the Securities and
Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations,
2015 (the ‘SEBI Listing Regulations’), the Company had formulated a dividend
distribution policy, which sets out the parameters and circumstances to be considered by
the Board of Directors (‘Board’) in determining the distribution of dividend to
its shareholders and/or retaining profit earned. As a part of the review process, the
dividend distribution policy was amended at the meeting of the Board held on 20 March
2024. However, there were no changes to principles, criteria or parameters set out in the
dividend distribution policy basis which dividend is recommended or declared. The said
policy is annexed to this Report and is also available on the website of the Company at
https://cms-assets.bajajfinserv.in/is/
content/bajajfinance/dividend-distribution-policy-v1pdf?scl=1&fmt=pdf
Dividend
RBI vide its circular dated 24 June 2021 (including any
amendment thereof) has laid down a framework for declaration of dividend by NBFCs.
Accordingly, the Board after taking into account various aspects and in compliance with
the said circular, recommend for consideration of the members at the ensuing Annual
General Meeting (‘AGM’), payment of final dividend of C 36 per equity shares
(1800%) of face value of C 2. The total dividend for FY2024 is C 2,228.39 crore.
The dividend recommended is in accordance with the principles and
criteria set out in the Company’s dividend distribution policy. Total dividend
proposed for the year does not exceed the ceilings specified in said circular/ RBI Master
Directions.
The dividend, if declared, at the ensuing AGM will be taxable in the
hands of the members of the Company pursuant to Income Tax Act, 1961. For further details
on taxability, please refer Notice of AGM.
Scale Based Regulations
Reserve Bank of India issued a circular on “Scale Based Regulation
(SBR): A Revised Regulatory Framework for NBFCs” on 22 October 2021 (‘SBR
Framework’). As per the framework, based on size, activity, and risk perceived, NBFCs
are categorised into four layers, NBFC - Base Layer ('NBFC-BL'), NBFC - Middle Layer
('NBFC-ML'), NBFC - Upper Layer ('NBFC-UL') and NBFC - Top Layer ('NBFC-TL'). RBI has
categorised Bajaj Finance Ltd. as an NBFC in the Upper Layer for the year 2023-24 vide
its press release dated 14 September 2023. The Company is in compliance with RBI Scale
Based Regulations. With an endeavor to further strengthen the compliance culture across
business and functions, an integrated compliance framework has been put in place which
would be enhanced from time to time.
Working Results of the Company
On a consolidated basis, BFL recorded AUM growth of 34% and growth in
profit after tax of 26% in FY2024 as against AUM and profit after tax growth of 25% and
64%, respectively, in FY2023. With its strong AUM and profit growth in FY2024, BFL has
further increased its share in the financial services sector in India. Return on average
assets ('ROAA') and return on average equity ('ROAE') for FY2024 was 5.1% and 22.1%
respectively on a consolidated basis.
The Company’s business model continues to generate healthy
pre-impairment operating profits enabling it to withstand higher credit losses in times of
stress such as these. It remains well capitalised with a capital-to-risk weighted asset
ratio ('CRAR') of 22.52% as on 31 March 2024 making it among the best capitalised large
NBFCs in India.
As a result of its deeply embedded risk culture and robust risk
management practices, the Company’s portfolio quality as of 31 March 2024 continues
to remain strong. BFL’s consolidated Gross NPA at 0.85% and Net NPA at 0.37% are
among the lowest in the industry.
Using its robust risk management and portfolio monitoring framework,
BFL took enhanced credit costs based on emerging trends across its different portfolios.
It holds a management overlay provision on account of volatile macroeconomic factors of C
300 crore on consolidated basis as on 31 March 2024.
The consolidated performance highlights for FY2024 are given below:
• Number of new loans booked: 36.2 million
• AUM grew by 34% to C 330,615 crore
• Net interest income ('NII') rose by 29% to C 29,582 crore
• Net total income ('NTI') rose by 26% to C 36,258 crore
• Total operating expenses ('Opex') grew by 22% to C 12,325 crore
• Opex to NTI stood at 34%
• Pre-impairment operating profit rose by 28% to C 23,933 crore
• Impairment on financial instruments was C 4,631 crore
• Profit before tax ('PBT') increased by 24% to C 19,310 crore
• Profit after tax ('PAT') increased by 26% to C 14,451 crore
• Capital adequacy ratio as of 31 March 2024 was 22.52%, which is
well above the RBI norms. Tier I adequacy ratio was 21.51%.
With the experience of managing significant financial and operational
disruption emanating after the pandemic, the transformational journey that BFL has
embarked upon and the exit momentum of FY2024, the Company remains confident of a sound
growth trajectory in FY2025 and thereafter and, hence, remain a leading NBFC in India.
Resilience and agility are deeply embedded in BFL’s culture. These
cultural anchors have enabled BFL to make swift and calibrated changes to its risk and
debt management practices to regain its business momentum while maintaining strong vigil
on its portfolio quality and adapting to changing customer preferences of post pandemic
world.
For more details on the performance of the Company, business segments,
risk management framework and initiatives, refer Management Discussion and Analysis.
Operations
BFL is one of the largest and most diversified NBFCs in India. It has
worked with approximately 83.64 million customers since it started its transformational
journey in FY2008 from a mono-line captive lender to a diversified financial service
business.
BFL was among the early movers to transit to digital processes in the
financial services industry. It had already moved from ‘Physical’ to
‘Phygital’ in a seamless manner and has embarked to move to the last phase,
namely ‘Digital’, in the last five years.
The Company believes that each customer is a critical asset in its
growth journey and their satisfaction is BFL’s primary responsibility which it
thrives to achieve through an omnichannel strategy. Business transformation requires
significant changes in operating processes and core technology stack of the Company. It
focuses on building an ‘omnichannel’ model to deliver significant business
velocity, reduction in operating costs and significant improvement in customer experience.
This model with an integrated offering of products and services, will enable BFL to become
a ‘moment of truth’ enterprise for its customers.
Further details regarding the operations, state of affairs and
initiatives of the Company are given in the Management Discussion and Analysis.
Subsidiaries, Associates and Joint Venture
The Company has the following subsidiaries and associate companies as
on 31 March 2024:
Sr. No. |
Name of entity |
% of equity stake |
Relationship |
Business activity |
1 |
Bajaj Housing Finance Ltd. |
100 |
Subsidiary |
Housing finance |
2 |
Bajaj Financial Securities Ltd. |
100 |
Subsidiary |
Stock broking and depository participant |
3 |
Snapwork Technologies Private Ltd. |
41.5* |
Associate |
Software development for financial services |
4 |
Pennant Technologies Private Ltd. |
26.53* |
Associate |
Software development for financial services |
*on fully diluted basis.
A. Subsidiaries:
(i) Bajaj Housing Finance Ltd. (‘BHFL’ or ‘Bajaj
Housing’), which is registered with National Housing Bank as a Housing Finance
Company (‘HFC’) and a registered intermediary within the meaning of IRDAI as a
corporate agent; and (ii) Bajaj Financial Securities Ltd. (‘BFinsec’), which is
registered with the Securities and Exchange Board of India (‘SEBI’) as a
stockbroker, depository participant and research analyst.
During FY2024, no new subsidiary was incorporated/acquired. The Company
has not entered into a joint venture with any other company.
The financial statements of the subsidiary companies are also available
in a downloadable format under the ‘Investor Relations’ section on the
Company’s website at
https://www.aboutbajajfinserv.com/finance-investor-relations-annual-reports The
Company’s policy for determination of material subsidiary, as adopted by the Board of
Directors, in conformity with regulation 16 of the SEBI Listing Regulations, can be
accessed on the Company’s website at
https://cms-assets.bajajfinserv.in/is/content/bajajfinance/policy-for-determining-material-subsidiaries-v3pdf?scl=1&fmt=pdf
In terms of the said policy and provisions of regulation 16 of the SEBI Listing
Regulations, BHFL is a material subsidiary of the Company.
Performance highlights of the subsidiaries are given below:
BHFL
• AUM as at 31 March 2024 was C 91,370 crore as compared to C
69,228 crore as at 31 March 2023, representing a growth of 32%
• NII rose by 22% to C 2,510 crore
• NTI rose by 19% to C 2,925 crore
• Total operating expenses ('Opex') grew by 12% to C 703 crore
• Opex NTI stood at 24%
• Pre-impairment operating profit rose by 22% to C 2,222 crore
• Impairment on financial instruments wasC 61 crore. BHFL holds a
management overlay provision of C 94 crore as of 31 March 2024 on account of volatile
macro-economic factors
• Gross NPA and Net NPA were at 0.27% and 0.10%, respectively,
amongst the lowest across all HFCs
• PBT increased by 27% to C 2,161 crore
• PAT grew by 38% to C 1,731 crore
• As on 31 March 2024, capital adequacy ratio was 21.28%, which is
well above the prescribed norms of 15% The Company has further invested in BHFL an amount
of approximately C 2,000 crore by subscribing to 1,107,419,709 shares of face value of C
10 at a price of C 18.06 per share.
As on date of this report, the total investment in BHFL is
approximately C 9,528 crore.
Initial Public Offering
Pursuant to press release dated 30 September 2022 issued by RBI,
wherein BHFL was classified by RBI as an NBFC in the Upper Layer. Accordingly, pursuant to
the applicable regulatory framework, BHFL is required to be mandatorily listed on or
before 30 September 2025. In order for BHFL to comply with the regulatory timelines
stipulated under the regulations applicable to companies classified as NBFC - UL, the
Board of Directors of BHFL is evaluating various option for the same, subject to
prevailing market conditions.
BFinsec
• Customer franchise as of 31 March 2024 was over 698,800
• Margin trade funding book stood at C 3,817 crore as of 31 March
2024
• NII for FY24 was C 112 crore
• NTI for FY24 was C 280 crore
• PAT for FY24 was C 56 crore
In order to support BFinsec to augment its business growth, facilitate
working capital requirements, and building proprietary trading book, the Company infused
capital to the tune of C 200 crore.
As on date of this report, the total investment in BFinsec is
approximately C 870.38 crore. For more detailed discussion on the performance of the
subsidiaries and their various segments, refer Management Discussion and Analysis.
B. Associates
Snapwork Technologies Private Ltd. (‘Snapwork’)
Snapwork continues to be an associate of the Company. The Company holds
41.5% stake on a fully diluted basis in Snapwork.
Snapwork is engaged in the business of software services primarily
focused on development of mobile apps and web portals. It has developed the Bajaj Finserv
App. The Company closely works with Snapwork to solve key technical priorities on
scalability, experience and performance. Snapwork has some of the leading financial
services companies in India as its clients.
Details of investment made in Snapwork also forms part of the financial
statements.
DuringFY2024,Snapworkmadeaprofit of C 15.01 crore, of which Company's
share of profit was C 6.23 crore.
Pennant Technologies Private Ltd.(‘Pennant’)
During FY2024, the Company advanced its technology strategy by
acquiring 26.53% stake on a fully diluted basis in Pennant for aggregate amount of C
267.47 crore. Accordingly, Pennant has become an associate of the Company effective 19
January 2024 pursuant to provision of section 2(6) of the Companies Act, 2013. Pennant is
engaged in providing end to end lending solutions with products like Loan Origination
System, Loan Management System, Collections, CRM, and key digital enablers. Pennant has
top tier NBFCs and banks as its clients. Going forward, Pennant will be the key Loan
Management System provider for the Company with all the products transitioned in FY2025.
Details of investment made in Pennant also forms part of the financial
statements.
Post-acquisition of shares by the Company, Pennant made a profit of C
5.32 crore, of which Company's share of profit was C 1.41 crore.
A separate statement containing the salient features of the
subsidiaries and associate in the prescribed form AOC-1 is attached to the consolidated
financial statements.
Other strategic investments
Bajaj Finserv Direct Ltd. (‘BFSD’ or 'BFS-Direct') has 2
synergistic divisions viz., Bajaj Markets, and Bajaj TechnologyServices.BajajMarketisa
that offers multiple financial services products across categories including - Loans,
Credit Cards, Insurances and Investments. It has over 80 onboarded partners with over 20
crore annual visitors on its digital properties. Bajaj Technology Services works in
digital and enterprise space offering niche technologies like Adobe, SalesForce,
Multi-cloud, Gen AI and Data analytics to BFSI companies across India and Middle East.
BFS-Direct is registered with IRDAI as a composite Corporate Agent for
distribution of insurance (life and general) products in India. The Company is also
registered with SEBI through its Investment Advisory Department as an Investment Advisor.
It offers various financial products and services to its customers, through its partners
listed on its digital platform.
As on 31 March 2024, Bajaj Finserv Ltd. (‘Bajaj Finserv’ or
'BFS'), holds 80.13% of the share capital of BFSD and the remaining 19.87% is held by the
Company.
Customer Engagement
Customer engagement and experience are crucial pillars of our
organisation and we are committed to customer fairness, in both form and spirit, in our
conduct. Additionally, proactive customer engagement enables institutions to gather
valuable insights, manage risks, ensure compliance, and integrate technology seamlessly.
Ultimately, prioritizing customer experience is essential for staying competitive,
building strong relationships, and thriving in the dynamic landscape.
To strengthen the customer engagement and monitoring process, the Board
has constituted a Customer Service Committee ('CSC'), in line with the requirements
applicable to Banks. It is headed by an independent director. The Committee consists of
following Board members:
Sr No. |
Name of director |
Category |
1. |
Pramit Jhaveri |
Chairman, non-executive, independent |
2. |
Dr. Naushad Forbes |
Non-executive, independent |
3. |
Sanjiv Bajaj |
Non-executive, non-independent |
4. |
Rajeev Jain |
Managing Director, executive |
The Customer Service Committee of the Board plays a pivotal role in
enhancing customer experience by overseeing strategies and initiatives aimed at improving
overall customer service quality and experience. Comprising members with diverse
expertise, the Committee collaborates with Management to identify areas for enhancement,
review customer feedback, and implement policies to address concerns promptly. By
prioritizing customer-centric practices and fostering a culture of responsiveness and
empathy, the Committee ensures the organisation continuously evolves to meet the dynamic
business needs and expectations of its customers, ultimately fostering loyalty and trust.
In order to strengthen and streamline the process of product program
approvals, during the year under review, the Board enhanced the scope of the Committee to
approve and recommend all new product programs and changes/modifications to key parameters
of an existing program to the Board.
The CSC would then based on the recommendations of the Product Program
Committee, further approve, and recommend to the Board all product programs or any changes
thereto.
The updated terms of reference of CSC can be accessed at
https://cms-assets.bajajfinserv.in/is/content/
bajajfinance/customer-service-committee-v1?scl=1&fmt=pdf During FY2024, the Committee
met thrice.
In addition, the Company has in place a Standing Committee of
Management for Customer Service. The CSC is updated on the discussions, actions, and other
recommendations of this Standing Committee. The suggestion, feedback, and guidance from
CSC is taken note of by the Standing Committee for necessary actions.
Various interventions, to uphold BFL’s commitment towards the
customers, under the guidance of these Committees are undertaken. To list a few:
• Defining and reviewing key baseline metrics which are key to
customer service and experience;
• Implementation of FPC across all customers facing documents
including vernacular communications;
• Significant investments and progress in enabling digital
channels for engaging with customers;
• Branch Customer meeting scope enhanced with inclusion of Fixed
Deposits and Gold Loan branches;
• In FY2024, 552 customer meetings were conducted where 1,907
customers participated. These meetings were more inclusive and had 356 women and 109
senior citizen participation; and
• Customer education and awareness programs 10 offline programs
conducted on financial education, fraud awareness covering over 2,100 customers /
citizens, 12 digital campaigns with a total of 128 posts (89 static and 39 videos),
these collective efforts generated an overall impression of 16.67 lakh.
Initiatives of the Company towards customer engagement are detailed in
the Management Discussion and Analysis.
RBI has issued notification on ‘Appointment of Internal Ombudsman
by Non-Banking Financial Companies’ dated 15 November 2021 vide which NBFCs
are required to appoint an IO. Pursuant to the same, considering the scale of operations
and complexity of business, the Company has appointed two IOs. Keeping in view the tenure
of current IOs, appointment of an additional IO has also been approved by the Board during
the year under review. IOs are invited to the CSC meetings to offer their comments,
suggestions and share concerns, if any.
Risk Management
The Board of Directors has adopted a risk management policy for the
Company which provides for identification of key events/risks impacting the business
objectives of the Company and attempts to develop risk policies and strategies to ensure
timely evaluation, reporting and monitoring of key business risks.
This framework, inter alia, provides the set of components that
provide the foundations and organisational arrangements for designing, implementing,
monitoring, reviewing and continually improving Risk Management throughout the
organisation. It covers principles of risk management, risk governance with roles and
responsibilities, business control measures, principle risks and business continuity plan.
The Management identifies and controls risks through a defined framework in terms of the
aforesaid policy.
The Board is of the opinion that there are no elements of risk that may
threaten the existence of the Company. The current composition of Risk Management
Committee (‘RMC’) is as follows:
Sr. No. |
Name of director/member |
Category |
1. |
Pramit Jhaveri |
Chairman, non-executive, independent |
2. |
Anami N Roy |
Non-executive, independent |
3. |
Sanjiv Bajaj |
Non-executive, non-independent |
4. |
Rajeev Jain |
Managing Director, executive |
5. |
Deepak Bagati |
President - Debt Management Services |
6. |
Fakhari Sarjan |
Chief Risk Officer |
7. |
Sandeep Jain |
Chief Financial Officer |
Further details on RMC are furnished in the Report on Corporate
Governance.
More detailed discussion on the Company’s risk management and
portfolio quality is covered in the Management Discussion and Analysis.
Fraud monitoring and reporting
Pursuant to RBI Master Direction on Monitoring of Frauds in NBFCs
(Reserve Bank) Directions, 2016, the Company is required to report all frauds to RBI.
Further, the Company is required to have a policy/mechanism for dealing with frauds.
Pursuant to the Direction and Policy, the Company is required to report all frauds of C 1
lakh and above to Board and C 1 crore and above to the Audit Committee on their detection.
Based on the above, the Company has a process in place for monitoring
and reporting the instances of fraud. During the year under review, instances of frauds
were detected and reported by the Management to the Audit Committee and the Board as per
the RBI Directions. Among other things, details reported included modus operandi, amount
involved, identity of the perpetrators of fraud, action taken against them and remedial
actions taken to mitigate the risk. Further, the same was also reported to RBI and
Statutory Auditors. The Statutory Auditors, in turn, have also brought these cases to the
attention of the Audit Committee pursuant to circular issued by National Financial
Reporting Authority ('NFRA') dated 26 June 2023.
During the year under review, the amount involved in above said cases
were approximately C 27.87 crore in aggregate. The nature of the fraud covered
documentation fraud, identity theft and misappropriation of funds. Approximately C 12.42
crore has been recovered till date. The Company confirms that none of the above reported
frauds have involvement of the Management or an employee having a significant role in the
Company’s internal control system over financial reporting.
The Company has a comprehensive Risk Containment Unit ('RCU')
infrastructure. The risk containment and fraud control unit, through prevention and
deterrence actions, is responsible for preventing frauds perpetrated by customers,
sourcing channels and internal employees either alone or in connivance with others. It
ensures that most fraud checks are performed well before any disbursal of loan through an
inbuilt advanced fraud controls analytics in its loan origination system. The fraud check
rules are periodically updated based on emerging learnings.
Internal Capital Adequacy Assessment Policy (‘ICAAP’)
Pursuant to Master Direction Reserve Bank of India (Non-Banking
Financial Company Scale Based Regulation) Directions, 2023 issued by RBI on 19 October
2023 ('RBI Scale Based Regulations'), NBFCs are required to have an ICAAP in place. The
objective of ICAAP is to ensure availability of adequate capital to support all risks in
business and also to encourage NBFCs to develop and use better internal risk management
techniques for monitoring and managing their risks. Accordingly, the Company has framed an
ICAAP policy. This policy is developed considering the requirements of the SBR and is
based on the Pillar-2 requirements under Basel III Framework developed by the Basel
Committee on Banking Supervision (BCBS).
The objective of the policy is to provide an ongoing assessment of the
Company’s entire spectrum of risks and the methodology to assess current and future
capital, reckoning other mitigating factors and also to assist and apprise the Board on
these aspects and on Company’s internal capital adequacy assessment process and
Company’s approach to capital management.
Information Technology Governance and Cyber Security
RBI vide Master Direction dated 8 June 2017 has laid down an
Information Technology Framework for the NBFC sector. Accordingly, the Company has
constituted an Information Technology Strategy Committee (‘IT Strategy
Committee’) consisting of an Independent Director as Chairman and comprising Chief
Technology Officer and other members of the Management.
The RBI has issued Master Direction on Information Technology
Governance, Risk, Controls and Assurance Practices dated 7 November 2023 effective 1 April
2024. In line with said Directions, the terms of reference of the IT Strategy Committee
were revised during the year. The same, inter alia, includes the following:
• Review at least on an annual basis, the adequacy and
effectiveness of the Business Continuity Planning and Disaster Recovery Management;
• Review the assessment of IT capacity requirements and measures
taken to address the issues;
• Approve documented standards and procedures for access to
information assets; and
• Decide constitution of Information Security Committee ('ISC')
with Chief Information Security Officer ('CISO') and other representatives from business
and IT functions, etc.
Detailed terms of reference can be accessed at
https://cms-assets.bajajfinserv.in/is/content/bajajfinance/it-strategy-committee-1pdf?scl=1&fmt=pdf
The IT Strategy Committee met thrice during the year under review.
In terms of the aforementioned Directions, the Committee would now meet
at least on a quarterly basis. Pursuant to the said Directions, the Company has appointed
a CISO who shall be responsible for driving cyber security strategy and ensuring
compliance to the extant regulatory/statutory instructions on information/cyber security
and other roles and responsibilities as stipulated therein.
In accordance with IT Governance framework, the Company has put in
place policies which, inter alia, includes Business Continuity Policy, Information
Security Policy, Information Technology Policy, Cyber Security Policy, IT Outsourcing
Policy, Cyber Crisis Management Plan and Information Security Incident Management Policy.
During the year under review, a cyber security awareness program was conducted for the
Board members. It, inter alia, covered, industrialisation of cyber-crime
operations, new developments and issues relating to cyber and information security,
understanding of cyber security trends including recent cyber frauds and attacks,
Board’s responsibility in the events of change management and cyber security, etc.
Further, on an annual basis, the Senior Management and employees of the Company have
undergone IT security trainings.
The Company continues to enhance cyber security and information
security aspects while transforming to a customer-centric digital enterprise. It has
capability to offer remote access for identified IT vendors/partners enable full resources
for user support, data center support, application maintenance and testing. All IT systems
are compliant to ISO 27001 Information Security Management System and ISO 22301 Business
Continuity Standard. The Company also has a dedicated cyber security and information
security team to ensure technical expertise and regulatory as well as internal compliance
for Information Technology. In addition, an outsourcing compliance unit and third-party
security governance framework is also set up. As part of Omnipresence Strategy, the Bajaj
Finserv app is live now with recent version 9.0.5 (954) and the Company will continue its
journey towards a digital organisation.
A detailed discussion on information systems, cyber security and
information technology is covered under Management Discussion and Analysis.
Directors and Key Managerial Personnel (‘KMP’)
A. Change in Directors during the financial year
i. Appointments and re-designation
a. Dr. Arindam Bhattacharya (DIN: 01570746)
During the year under review, Dr. Arindam Bhattacharya has been
appointed as an independent director of the Company for the first term of five consecutive
years commencing from 1 April 2023.
The Board is of the opinion that Dr. Arindam Bhattacharya is a person
of integrity, expertise, and competent experience and proficiency to serve the Company as
an independent director that can strengthen the overall composition of the Board.
Dr. Arindam Bhattacharya has successfully passed the online proficiency
self-assessment test as required under the provisions of rule 6(4) of the Companies
(Appointment and Qualifications of Directors) Rules, 2014, as amended.
b. Anup Saha (DIN: 07640220)
Anup Saha, Deputy CEO, was appointed as Executive Director of the
Company for a period of five years with effect from 1 April 2023. He was classified as KMP
within the meaning of section 2(51) of the Act. The Board, based on the recommendation of
Nomination and Remuneration Committee ('NRC'), redesignated Anup Saha as Deputy Managing
Director of the Company effective from 1 April 2024. The re-designation has been approved
by the members vide resolution passed through postal ballot on 19 March 2024.
The Board is of the opinion that Anup Saha is an outstanding leader,
and this advancement exceptional contributions and confidence in his leadership abilities
as the Company embarks on new challenges and opportunities.
c. Tarun Bajaj (DIN: 02026219)
On the recommendation of the NRC, the Board at its meeting held on 25
April 2024 proposed the appointment of Tarun Bajaj as an independent director of the
Company for a period of 5 years effective from 1 August 2024.
The Board is of the opinion that Tarun Bajaj is a person of integrity,
expertise, and competent experience and proficiency to serve the Company as an independent
director strengthening overall composition of the Board.
Tarun Bajaj has successfully passed the online proficiency
self-assessment test as required under the provisions of rule 6(4) of the Companies
(Appointment and Qualifications of Directors) Rules, 2014, as amended.
ii. Resignation:
Rakesh Bhatt (DIN: 02531541), Deputy CEO, was appointed as Executive
Director of the Company for a period of five years with effect from 1 April 2023 and was
classified as KMP within the meaning of section 2(51) of the Act.
However, Rakesh Bhatt resigned as an Executive Director of the Company
with effect from close of business hours on 31 January 2024 in order to pursue new career
opportunities outside the Company. The Board accepted the resignation and placed on record
its sincere appreciation for the valuable contribution made by him during his long
association with the Company and the group, including his tenure as director on the Board
of the Company.
iii. Sad demise of Independent Director:
Your directors express their profound grief on the sudden demise of D J
Balaji Rao.
He was an independent director on the Board of the Company since 22
October 2008. He was Chairman of Stakeholders Relationship Committee. He passed away on 28
November 2023 and consequently ceased to be a director of the Company. The Board places on
record its sincere appreciation for the invaluable guidance, services and mentorship
provided by him in his tenure as an independent director of the Company.
iv. Re-appointments:
a. Anami N Roy (DIN: 01361110)
The Board, on recommendation of the NRC and after evaluating
performance of Anami N Roy during his tenure as an independent director, recommended his
re-appointment as an independent director of the Company for second term of five
consecutive years commencing from 1 April 2024 till 31 March 2029. The Board also
recommended continuation of his directorship upon him attaining the age of 75 years on 15
May 2025. The same has been approved by the members vide special resolutions passed
through postal ballot on 19 March 2024.
The Board is of the opinion that Anami N Roy is a person of integrity,
expertise, and competent experience and proficiency to serve the Company as an independent
director.
b. Dr. Naushad Forbes (DIN: 00630825)
The Board, on recommendation of the NRC and after evaluating
performance of Dr. Naushad Forbes during his first tenure as an independent director,
recommended his re-appointment as an independent director of the Company for second term
of five consecutive years commencing from 1 April 2024 till 31 March 2029. The same has
been approved by the members vide special resolution passed through postal ballot
on 19 March 2024.
The Board is of the opinion that Dr. Naushad Forbes is a person of
integrity, expertise, and competent experience and proficiency to serve the Company as an
independent director.
B. Directors liable to retire by rotation
Rajeev Jain (DIN: 01550158) retires by rotation at the ensuing AGM,
being eligible, offers himself for re-appointment.
Brief details of Rajeev Jain, who is seeking re-appointment, are given
in the Notice of 37th AGM.
C. Continuation of non-retiring director
SEBI vide its notification dated 14 June 2023, amended SEBI
Listing Regulations effective from 15 July 2023. Pursuant to said notification, a new sub
-regulation 17(1D) was inserted which provides that with effect from 1 April 2024, the
continuation of a director serving on the Board of a listed entity shall be subject to the
approval by the shareholders in a general meeting at least once in every five years.
Further, any director serving on the board as on 31 March 2024, without the approval of
the shareholders for the last five years or more shall be subject to the approval of
shareholders in the first general meeting to be held after 31 March 2024.
The shareholders at their meeting held on 17 July 2012 had appointed
Sanjiv Bajaj (DIN: 00014615), non-executive director, as a director not liable to retire
by rotation pursuant to provisions of the erstwhile Companies Act, 1956. He continues on
the Board as a non-executive director not liable to retire by rotation since then.
Pursuant to regulation 17(1D), the Board at its meeting held on 20
March 2024, on the recommendation of NRC, approved continuation of Sanjiv Bajaj on the
Board of the Company. In terms of said SEBI
Regulations, approval of the members is being sought at the ensuing
AGM.
D. KMPs
Save and except as stated above, there are no other changes in the KMPs
during FY2024. For details on changes in senior management, please refer Report on
Corporate Governance.
Declaration by independent directors
All the independent directors have submitted a declaration of
independence, stating that they meet the criteria of independence provided under section
149(6) of the Act read with regulation 16 of the SEBI Listing Regulations, as amended.
They also confirmed compliance with the provisions of rule 6 of Companies (Appointment and
Qualifications of Directors) Rules, 2014, as amended, relating to inclusion of their name
in the databank of independent directors.
The Board took on record the declaration and confirmation submitted by
the independent directors regarding them meeting the prescribed criteria of independence,
after undertaking due assessment of the veracity of the same in terms of the requirements
of regulation 25 of the SEBI Listing Regulations.
In the opinion of the Board, the independent directors fulfil the
conditions specified in the Act read with rules made thereunder and have complied with the
code for independent directors prescribed in Schedule IV to the Act.
Remuneration Policies
1. Policy on Directors’ Appointment and Remuneration
Pursuant to section 178(3) of the Companies Act, 2013 and regulation
19(4) read with Part D of schedule II of the SEBI Listing Regulations, the Board has
framed a Remuneration Policy. This policy, inter alia, lays down:
• The criteria for determining qualifications, positive
attributes, and independence of directors; and
• Broad guidelines of compensation philosophy and structure for
non-executive directors, key managerial personnel and other employees.
In view of detailed RBI Guidelines for NBFCs concerning compensation of
KMP and Senior Management ('SMT'), the Company has in place a specific policy to this
effect. Accordingly, this remuneration policy has to be read along with the specific
policy adopted pursuant to RBI Guidelines as regards compensation of KMP and SMT, which is
detailed below.
2. Policy for Compensation of KMP and SMT pursuant to RBI
Guidelines
RBI has vide its circular dated 29 April 2022 issued Guidelines
on Compensation of Key Managerial Personnel and Senior Management in NBFCs pursuant to RBI
Scale Based Regulations. Accordingly, the Company has adopted a Board approved policy
exclusively governing compensation payable to KMP and SMT. This policy lays down detailed
framework, inter alia, encompassing the following:
• Principles of compensation;
• Compensation components;
• Principles of variable pay;
• Deferral of variable pay;
• Compensation for control and assurance function personnel; and
• Provisions for malus and clawback and circumstances under which
application of malus and clawback is to be considered.
The aforesaid policies can be accessed at
https://cms-assets.bajajfinserv.in/is/content/bajajfinance/
remuneration-policy-companies-act-2013-v1pdf?scl=1&fmt=pdf and
https://cms-assets.bajajfinserv.in/
is/content/bajajfinance/remuneration-policy-rbi-v1pdf?scl=1&fmt=pdf As per the
requirements of the RBI Master Directions and SEBI Listing Regulations, details of all
pecuniary relationship or transactions of the non-executive directors vis-a-vis the
Company are disclosed in the Report on Corporate Governance.
Compliance with Code of Conduct
All Board members and Senior Management personnel have affirmed
compliance with the Company’s Code of Conduct for FY2024.
A declaration to this effect signed by the Managing Director is
included in this Annual Report.
Annual Return
A copy of the Annual Return as provided under section 92(3) of the Act,
in the prescribed form, which will be filed with the Registrar of Companies/MCA, is hosted
on the Company’s website and can be accessed at
https://www.aboutbajajfinserv.com/finance-investor-relations-annual-reports
Number of Meetings of the Board
Eight (8) meetings of the Board were held during FY2024. Details of the
meetings and attendance thereat forms part of the Report on Corporate Governance.
Directors’ Responsibility Statement
The financial statements are prepared in accordance with the Indian
Accounting Standards ('Ind AS') under historical cost convention on accrual basis except
for certain financial instruments, which are measured at fair value pursuant to the
provisions of the Act and guidelines issued by SEBI/RBI. Accounting policies have been
consistently applied except where revision to an existing Accounting Standard requires a
change in the accounting policy.
In accordance with the provisions of section 134(3)(c) of the Act and
based on the information provided by the Management, the Directors state that: i. in the
preparation of the annual accounts, the applicable Accounting Standards have 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 of the Company for FY2024;
iii. they have taken proper and sufficient care 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; iv.
they have prepared the annual accounts on a going concern basis; v. they have laid down
internal financial controls to be followed by the Company and that such internal financial
controls are adequate and are operating effectively; and vi. they have devised proper
systems to ensure compliance with the provisions of all applicable laws and that such
systems are adequate and are operating effectively.
Audit Committee
The Audit Committee comprise of four independent directors viz., Anami
N Roy (DIN: 01361110), Chairman, Dr. Naushad Forbes (DIN: 00630825), Pramit Jhaveri (DIN:
00186137) and Dr. Arindam Bhattacharya (DIN: 01570746), members. Dr. Arindam Bhattacharya
was inducted as member of the Committee with effect from 1 April 2023.
The composition of Audit Committee is over and above the minimum
requirement prescribed under the Act, SEBI Listing Regulations, and the RBI Regulations
for NBFCs (the ‘NBFC Regulations’) of having a minimum of two-thirds of
independent directors, including the Chairman. All members of the Committee are considered
financially literate and are deemed to have necessary terms of SEBI Listing Regulations.
During FY2024, all recommendations of the Audit Committee were accepted
by the Board.
The brief terms of reference and attendance record of members are given
in the Report on Corporate Governance.
Particulars of Loans, Guarantees and Investments
The Company, being an NBFC registered with the RBI and engaged in the
business of giving loans in the ordinary course of its business, is exempt from complying
with the provisions of section 186 of the Act with respect to loans, guarantees and
investments. Accordingly, the Company is exempted from complying with the requirements to
disclose in the financial statement the full particulars of the loans given, investment
made, guarantee given, or security provided.
In addition to investment in subsidiaries, associates and group
companies which is covered above, details of other major strategic investments are as
under:
1. One MobiKwik Systems Ltd. (‘MobiKwik’):
The Company continues to stay invested in MobiKwik. Total investment in
MobiKwik as on 31 March 2024 is approximately C 296.89 crore.
The total equity shares held by the Company in MobiKwik is 7,979,440
equity shares representing 13.07% of its capital on a fully diluted basis.
MobiKwik has filed its draft red herring prospectus ('DRHP') for an IPO
with SEBI, aiming to raise approximately C 700 crore. The IPO is an entirely fresh equity
share issue without an offer for sale component.
2. RBL Bank Ltd.:
The Company continues to stay invested in RBL Bank Ltd.
3. RMBS Development Company Ltd.:
With the objective of promoting and developing residential
mortgage-backed securities in the country, RMBS Development Company Ltd. ('RMBS Ltd.') has
been established by National Housing Bank (‘NHB’). The entity will act as a
market intermediary for residential-mortgage-backed-security (‘RMBS’) by
investing in RMBS, facilitating investment/issuance/trade of RMBS, extend credit
enhancement (including second loss credit enhancement) for RMBS transactions, provide
liquidity support in the secondary market for RMBS transactions, set-up an information
repository of RMBS transactions, develop standards and guidelines to ensure
standardisation of RMBS transactions, create securitisation documents for RMBS
transactions, leverage a platform to enable price discovery for RMBS transactions, where
ecosystem participants come together and finalise securitisation of RMBS transactions,
provide warehouse financing, and related advisory and structuring services.
The Board at its meeting held on 26 April 2023 approved an investment
up to C 180 crore in RMBS Ltd. Pursuant to the shareholders’ agreement with NHB and
other investors, the Company has agreed to acquire up to 7% equity stake in RMBS Ltd. The
acquisition would enable the Company and its subsidiary, BHFL to penetrate and support in
developing the RMBS market.
Further details of investments are provided in the financial
statements.
Employee Stock Options (‘ESOP’)
The Company offers stock options to select employees of the Company and
its subsidiaries to foster a spirit of ownership and an entrepreneurial mindset. Because
of their nature, stock options help to build a holistic, long- term view of the business
and a sustainability focus in the Senior Management team. Stock options are granted to
tenured employees in managerial and leadership positions upon achieving defined thresholds
of performance and leadership behaviour. This has contributed to the active involvement of
the leadership and senior team who are motivated to ensure long-term success of the
Company. Grant of stock options also allows the Company to maintain the right balance
between fixed pay, short-term incentives, and long-term incentives to effectively align
with the risk considerations and build the focus on consistent long-term results.
As per the Employee Stock Option Scheme of the Company, the total
options which could be granted is 35,071,160. During the year under review, the scheme has
been amended, inter alia, to expand the categories and base of employees who could
be eligible for grant of options in line with to SEBI (Share Based Employee Benefits and
Sweat Equity) Regulations, 2021, ('ESOP Regulations'). The scheme was also amended to
include enabling provisions for treatment of stock options in case of retirement, death,
permanent incapacity, transfers, and deputation. The same has been approved by the special
resolutions passed by the shareholders through postal ballot on 19 March 2024. The amended
scheme is in compliance with the ESOP Regulations.
A statement giving complete details, as at 31 March 2024, under
regulation 14 of the ESOP Regulations, is available on the website of the Company and can
be accessed at https://www.aboutbajajfinserv.com/finance-investor-relations-annual-reports
Grant wise details of options vested, exercised, and cancelled are provided in the notes
to the standalone financial statements. The Company has not issued any sweat equity shares
or equity shares with differential voting rights during FY2024.
Share Capital
During FY2024, pursuant to the approval of the Board of Directors and
members of the Company, the following changes have taken place in the share capital of the
Company:
a) Qualified Institutions Placement of equity shares ('QIP')
Pursuant to provisions of the SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2018 (‘SEBI ICDR Regulations’) and the Act, the
Company made a QIP of 12,104,539 equity shares of face value of C 2 at a price of C 7,270
per equity share (inclusive of premium of C 7,268 per equity share), representing a
discount of C 263.81 to the floor priceof C 7,533.81 per share, to Qualified Institutional
Buyers aggregating to approximately C 8,800 crore.
b) Preferential allotment of Warrants (‘PI’)
Pursuant to provisions of the SEBI ICDR Regulations and the Act,
preferential allotment of 1,550,000 convertible warrants was made to Bajaj Finserv,
promoter and the holding company, amounting to approximately C 1,200 crore.
In accordance with the terms of issue, 25% of issue price amounting to
C 297.21 crore was received on application.
Pursuant to SEBI ICDR Regulations, the Company appointed CARE Ratings
Ltd. as monitoring agency to monitor the utilisation of issue proceeds of both QIP and PI.
The net proceeds have been utilised for the purpose stated in the offer document. There
has been no deviations in the use of proceeds as stated in the offer document. Details of
utilisation of funds raised through QIP and PI as per regulation 32(7A) are given in the
Report on Corporate Governance.
c) Allotment to ESOP Trust
The Company has issued and allotted 1,462,548 equity shares of the face
value of C 2 each at respective grant prices to the trustees of BFL Employee Welfare Trust
under the Employee Stock Options Scheme, 2009.
As on 31 March 2024, the paid-up share capital of the Company stood at
C 123.80 crore consisting of 618,996,320 equity shares of face value of C 2 fully paid-up.
Related Party Transactions
All contracts/arrangement/transactions entered by the Company during
FY2024 with related parties were in compliance with the applicable provisions of the Act
and SEBI Listing Regulations. Prior omnibus approval of the Audit Committee is obtained
for all related party transactions which are foreseen and of repetitive nature. Such
transactions are reviewed by the Audit Committee on a quarterly basis.
All related party transactions entered during FY2024 were in the
ordinary course of business, at arm’s length and not material under the Act and SEBI
Listing Regulations. None of the transactions required members’ prior approval under
the Act or SEBI Listing Regulations.
Details of transactions with related parties during FY2024 are provided
in the notes to the financial statements. There were no transactions requiring disclosure
under section 134(3)(h) of the Act. Hence, the prescribed Form AOC 2 does not form a part
of this Report.
The policy on materiality of related party transactions and on dealing
with related party transactions is available on the website of the Company at
https://cms-assets.bajajfinserv.in/is/content/bajajfinance/policy-on-materiality-of-and-dealing-with-related-party-transactions-v1pdf?scl=1&fmt=pdf
and also forms a part of the Report on Corporate Governance.
Succession Planning
The Company has in place a succession planning framework to address
anticipated, as well as unscheduled changes in leadership. The plan is revisited,
re-evaluated, and updated every year. The key attribute of the plan involves:
• Organisational level Long Range Strategy wherein talent required
to fulfil the Company’s strategy and annual operating plan is discussed and planned.
• Performance appraisal system which helps identifying people
demonstrating leadership behaviours in line with our cultural anchors.
• Talent Management framework is a bi-annual exercise under which
a Talent Card is made for every Senior Management team member.
• Job Rotation Policy with the intent of providing movement and
enhancements to senior leaders in the organisation.
Material Changes and Commitments
There were no material changes and commitments affecting the financial
position of the Company which occurred between the end of the financial year and the date
of this Report.
Conservation of Energy
The operations of the Company are not energy intensive. The Company
implements various energy conservation measures across all its functions and value chain,
which are highlighted in the Business Responsibility and Sustainability Report.
Technology Absorption
The details pertaining to technology absorption have been explained in
the Management Discussion and Analysis.
Considering the nature of services and businesses, no specific amount
of expenditure is earmarked for Research and Development. However, the Company on an
ongoing basis strives for various improvements in the products, platforms, and processes.
Foreign Exchange Earnings and Outgo
During FY2024, the Company did not have any foreign exchange earnings
and the foreign exchange outgo in terms of actual outflow amounted toC 1,437 crore.
Corporate Social Responsibility (‘CSR’)
The CSR Committee comprises of three directors viz., Dr. Naushad
Forbes, Chairman, Sanjiv Bajaj and Rajeev Jain, members.
The CSR interventions for the year focused on Child education, Child
protection, Child health, Youth skilling and inclusion of People with disability. The
salient features of the CSR policy and impact assessment report forms part of the Annual
Report on CSR activities. The CSR policy has been hosted on the website of the Company and
can be accessed at
https://cms-assets.bajajfinserv.in/is/content/bajajfinance/corporate-social-responsibilitypdf?scl=1&fmt=pdf
'Bajaj Beyond' is the Bajaj Group's new identity for all its corporate social
responsibility and charitable programmes with focus on youth skilling. The initiatives
will benefit the youth and enable them to take advantage of employment and entrepreneurial
opportunities offered by India's growing economy in the years’ to come. The CSR
obligation of the Company for FY2024 is C 185.70 crore. As on 31 March 2024, total amount
spent on CSR activities by Company is C 179.52 crore.
As per section 135 of the Act read with Companies (Corporate Social
Responsibility Policy) Rules, 2014, as amended, the Company is required to transfer any
unspent amount, pursuant to any ongoing project undertaken by the Company in pursuance of
its CSR policy, within a period of thirty days from the end of the financial year to a
special account opened by the Company in that behalf for that financial year in any
scheduled bank called Unspent Corporate Social Responsibility Account.
Due to delay in commencement of project, some part of the mandatory
spend for few ongoing projects remained unspent as on 31 March 2024, thereby requiring it
to be transferred to an Unspent Corporate Social Responsibility Account. Accordingly, the
Company has opened prescribed bank account to transfer unspent amount of C 6.19 crore.
Pursuant to Rule 8(1) of Companies (Corporate Social Responsibility
Policy) Rules, 2014,Annual Report on CSR activities is annexed to this Report.
Further, the Chief Financial Officer has certified that the funds
disbursed have been utilised for the purpose and in the manner approved by the Board for
FY2024.
Formal Annual Evaluation of the performance of the Board, Committees,
and directors
Pursuant to section 178 of the Act, the NRC and the Board has decided
that the evaluation shall be carried out by the Board only and the NRC will only review
its implementation and compliance.
Further, as per Schedule IV of the Act and provisions of the SEBI
Listing Regulations, the performance evaluation of independent directors shall be done by
the entire Board excluding the directors being evaluated, on the basis of performance and
fulfilment of criteria of independence and their independence from Management. On the
basis of the report on performance evaluation, it shall be determined whether to extend or
continue the term of appointment of independent director.
Accordingly, the Board has carried out an annual performance evaluation
of its own performance, that of its Committees, Chairperson and individual directors.
The manner in which formal annual evaluation of performance was carried
out by the Board for the year 2023-24 is given below:
• The NRC at its meeting held on 16 March 2023, reviewed the
criteria for performance evaluation. The criteria is available on the website of the
Company at https://cms-assets.bajajfinserv.in/is/content/
bajajfinance/performance-evaluation-criteria-for-board-committees-of-board-chairperson-and-directors-v1pdf?scl=1&fmt=pdf
• Based on the said criteria, a questionnaire-cum-rating sheet was
deployed using an IT platform for seeking feedback of the directors with regards to the
performance of the Board, its Committees, the Chairperson, and individual directors. As
advised by the NRC and Board, an option for qualitative feedback was introduced. Further,
the Management was advised to benchmark the processes and criteria with best practices.
• From the individual ratings received from the directors, a
report on summary of ratings in respect of performance evaluation of the Board, its
Committees, Chairperson, and individual directors for the year 2023-24 and a consolidated
report thereof were arrived at.
• The report of performance evaluation so arrived at was then
discussed and noted by the Board at its meeting held on 20 March 2024.
• The NRC reviewed the implementation and compliance of the
performance evaluation at its meeting held on 20 March 2024.
• Based on the report and evaluation, the Board and NRC at their
respective meetings held on 20 March 2024, determined that the appointment of all
independent directors may continue.
• Details on the evaluation of the Board, non-independent
directors, and Chairperson of the Company as carried out by the independent directors at
their separate meeting held on 20 March 2024 have been furnished in a separate paragraph
elsewhere in this Report.
• During FY2024, the process followed by the Company was reviewed
by the NRC, which opined these to be in compliant with applicable provisions and found it
to be satisfactory.
Other than Chairman of the Board and NRC, no other director has access
to the individual ratings given by directors.
Significant and Material Orders passed by the Regulators or Courts
During FY2024, there were no significant or material orders passed by
any regulator or court or tribunal impacting the going concern status and Company’s
operations in future.
Though not affecting going concern status, following orders were passed
by RBI:
• RBI has passed an order against the Company under section 45 (1)
(b) of the Reserve Bank of India Act, 1934 on 15 November 2023. Vide the said
order, the Company has been directed to stop sanction and disbursal of loans under its two
lending products namely, ‘eCOM’ and ‘Insta EMI Card’, with immediate
effect, particularly with respect to non-issuance of Key Facts Statements to the borrowers
under these two lending products and the deficiencies in the Key Facts Statement issued in
respect of other digital loans sanctioned by the Company. For further details, refer
Management Discussion and Analysis.
• RBI vide its order dated 28 September 2023 has imposed a
penalty of C 8.5 lakh for delay in reporting of frauds under paragraph 1 (iv) and 1 (v) of
Chapter lV of Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016 for the
Financial Year 2021-22.
Internal Financial Controls
Internal Financial Controls laid down by the Company is a systematic
set of controls and procedures to ensure orderly and efficient conduct of its business
including adherence to the Company’s policies, safeguarding of its assets, prevention
and detection of frauds and errors, accuracy and completeness of the accounting records
and timely preparation of reliable financial information. Internal financial controls not
only require the system to be designed effectively but also to be tested for operating
effectiveness periodically.
The Board is of the opinion that internal financial controls with
reference to the financial statements are adequate and operating effectively. The internal
financial controls are commensurate with the size, scale, and complexity of operations.
Internal Control Systems and their adequacy has been discussed in more
detail in Management Discussion and Analysis.
Deposits
The Company accepts deposits from retail and corporate clients. As on
31 March 2024, it had a standalone deposit book of C 59,966.66 crore, delivering an annual
growth of 35% in FY2024. Deposits contributed to 27% of BFL’s standalone borrowings
versus 27.52% as at the end of FY2023.
The consolidated deposits book as on 31 March 2024 stood at C 60,150.92
crore, delivering an annual growth of 35% in FY2024. Deposit contributed to 21% of its
consolidated borrowings as on FY2024 versus 21% as at the end of FY2023.
Break-up of deposits raised on a consolidated basis:
(C in crore)
Sr. No. |
Type |
Amount raised |
Outstanding as on 31 March
2024 |
1. |
Public deposit |
18,023.35 |
38,012.62 |
2. |
Corporate deposit |
20,330.31 |
19,470.04 |
3. |
Other deposit |
2,236.48 |
2,484.01 |
Pursuant to provisions of the RBI Act, 1934, the Company has created a
charge on statutory liquid assets amounting to C 6,738.01 crore in favour of the trustee
for Public Fixed Deposit (‘FD’) holders. During FY2024, there was no default in
repayment of deposits or payment of interest thereon. With a view to reduce unclaimed
deposits, the Company adopted the following process:
• Wherever payment of deposit amount and interest thereon is
rejected by bank of the deposit holder, Customer Service Team calls the depositor to
inform about rejection reason and advise them the process for change of linked bank
account;
• In addition, SMS/Email/Physical letter are also sent to
depositors to inform them of rejection reason(s) and advise them to initiate appropriate
action for change of bank details;
• Account payee cheque along with covering letter in the name of
the deposit holder for unclaimed amount is dispatched at depositor’s communication
address (excluding deceased cases, where settlement is to be done as per
nomination/survivorship clause);
• In case deposit holder is not contactable, a field verification
is initiated reach out the depositor;
• In case of death of depositors, claim settlement process is
advised to joint depositors/nominee/legal heir, as the case may be; and
• Wherever resident status of the depositors has changed from
Resident to Non-Resident, they are advised to submit updated FATCA/CRS declaration along
with residential status change request.
As on 31 March 2024, there were 29 deposits amounting to C 35.69 lakh
which had matured and remained unclaimed and interest on matured deposits amounting to C
4.16 lakh and interest on active deposits amounting to C4.38 lakh had also remained
unclaimed.
Borrowings
To augment resources for the potential growth, the borrowing limit has
been increased from C 225,000 crore to C 375,000 crore during the year under review. The
same has been approved by shareholders vide special resolution passed on 19 March
2024 through postal ballot.
The total borrowing as on 31 March 2024 is C 220,378.65 crore. The
break-up of the same is as under:
(C in crore)
Particulars |
Deposits |
Bank Loans (TL/CC/
OD/WCDL) |
Non- Convertible
Debentures |
Subordinate Liabilities |
Short-term Borrowings |
External Commercial
Borrowing |
Amount |
59,966.66 |
47,460.59 |
69,174.98 |
3,577.90 |
34,180.07 |
6,018.45 |
% to total borrowing |
27.21 |
21.54 |
31.39 |
1.62 |
15.51 |
2.73 |
Credit Rating
The brief details of the ratings received from credit rating agencies
by the Company for all its outstanding instruments are given in General Shareholder
Information.
Whistle Blower Policy/Vigil Mechanism
The Company has a Whistle Blower Policy encompassing vigil mechanism
pursuant to the requirements of section 177(9) of the Act and regulation 22 of the SEBI
Listing Regulations. The whistle blower framework has been introduced with an aim to
provide employees, directors, and value chain partners with a safe and confidential
channel to share their inputs about such aspects which are adversely impacting their work
environment. The policy/vigil mechanism enables directors, employees, and value chain
partners to report their concerns about unethical behaviour, actual or suspected fraud or
violation of the Company’s Code of Conduct or ethics policy and leak or suspected
leak of unpublished price sensitive information.
The concerns may be reported anonymously either through email or
through a ‘Confidential Feedback Mechanism’, which is reviewed by a Committee
comprising of Senior Management representatives. Pursuant to the Whistle Blower Policy,
the summary of incidents investigated, actioned upon, founded and unfounded are reviewed
by the Audit Committee on a quarterly basis. Further, the Committee from time to time
reviews the functioning of the whistle blower mechanism and measures taken by the
Management to encourage employees to avail of the mechanism to report unethical practices.
The Whistle Blower Policy is uploaded on the website of the Company and
can be accessed at
https://cms-assets.bajajfinserv.in/is/content/bajajfinance/whistle-blower-policy-v3pdf-1?scl=1&fmt=pdf
More details are given in the Report on Corporate Governance.
Investor Education and Protection Fund ('IEPF')
The details pertaining to the transfer of unclaimed dividend amount and
shares to IEPF have been provided in General Shareholder Information, which forms part of
this Annual Report.
R Vijay, Company Secretary is the Nodal Officer of the Company,
appointed pursuant to rule 7(2A) of the Investor Education and Protection Fund Authority
(Accounting, Audit, Transfer and Refund) Rules, 2016, the details of which are available
on the website of the Company at
https://www.aboutbajajfinserv.com/finance-investor-relations-shareholders-information-listing-on-stock-exchange
Independent Directors’ Meeting
Pursuant to the Act and SEBI Listing Regulations, the independent
directors must hold at least one meeting in a financial year without attendance of
non-independent director and members of the Management. Accordingly, independent directors
of the Company met on 20 March 2024 and: • noted the report of performance evaluation
from the Chairman of the Board for the year 2023-24; • reviewed the performance of
non-independent directors and the Board as a whole; • reviewed the performance of the
Chairman of the Board, taking into account the views of executive and non-executive
directors; and • assessed the quality, quantity, and timeliness of flow of
information between the Company’s Management and the Board that is necessary for the
Board to effectively and reasonably perform their duties. In addition, the independent
directors have a separate meeting with the SMT, during which the SMT is encouraged to
express their views and concerns pertaining to the business. Suggestions from the
directors are noted by the Management.
RBI Guidelines
The Company continues to fulfil all the norms and standards laid down
by RBI pertaining to non-performing assets, capital adequacy, statutory liquidity assets,
etc. As against the RBI norm of 15%, the capital to risk-weighted assets ratio of the
Company was 22.52% as on 31 March 2024. In line with the RBI guidelines for asset
liability management ('ALM') system for NBFCs, the Company has an asset liability
committee, which meets monthly to review its ALM risks and opportunities. Further, BFL
exceeds the regulatory requirement of liquidity coverage ratio ('LCR') introduced by the
RBI in FY2020. As against the LCR requirement of 85%, BFL’s LCR as on 31 March 2024
was 168.91%.
The Company continues to be in compliance with the RBI Scale Based
Regulations.
Corporate Governance
In terms of the SEBI Listing Regulations, a separate section titled
Report on Corporate Governance has been included in this Annual Report, along with the
Management Discussion and Analysis and General Shareholder Information.
The Managing Director and the Chief Financial Officer have certified to
the Board in relation to the financial statements and other matters as specified in the
SEBI Listing Regulations.
A certificate from auditors of the Company regarding compliance of
conditions of corporate governance is annexed to this Report.
Business Responsibility and Sustainability Report (‘BRSR’)
Pursuant to the SEBI circular dated 10 May 2021 and amendment in SEBI
Listing Regulations, top 1,000 listed entities based on market capitalisation are required
to submit BRSR with effect from FY2023.
SEBI, vide its circular dated 12 July 2023 introduced BRSR Core.
BRSR Core is a sub-set of the BRSR, consisting of a set of Key Performance Indicators
('KPIs') under nine ESG attributes. Further, top 150 listed entities are required to
mandatorily undertake reasonable assurance of the BRSR Core. The Company, from FY2022, has
been voluntarily taking limited assurance on BRSR and GHG data. In compliance with the
SEBI requirements, the Company has appointed DNV Business Assurance India Pvt. Ltd.
('DNV') as an Assurance provider for carrying out the Reasonable Assurance for BRSR Core
(including GHG data) and Limited Assurance on rest of the BRSR, for FY2024.
The Company has adopted a Policy for Responsible and Sustainable
Business Conduct. The Board has in place an executive level cross functional ESG Committee
headed by the Deputy Managing Director. The Committee chalks out plans and other
initiatives keeping in view the leading practices and the requirements. It also monitors
the implementation of the ESG related initiatives and reporting thereof.
The BRSR in the updated format (including new KPIs of BRSR Core)
prescribed by SEBI is annexed to the Annual Report. A detailed ESG Report describing
various initiatives, actions and process of the Company towards the ESG endeavor can be
accessed at https://www.aboutbajajfinserv.com/impact-environmental-social-and-governance
Changes to the constitutional documents
a. Memorandum of Association
In order to provide an explicit authorisation for issuance of pre-paid
instruments, clause 3B of the Memorandum of Association was amended vide special
resolution passed by the members at its Extraordinary General Meeting held on 31 October
2023. Details of the same can be accessed on the website of the Company at
https://cms-assets.bajajfinserv.in/is/content/bajajfinance/altered-copy-of-memorandum-of-associationpdf-1?scl=1&fmt=pdf
b. Articles of Association
SEBI vide its notification dated 2 February 2023 amended SEBI
(Issue and Listing of Non-Convertible Securities) Regulations, 2021 by inserting
sub-regulation (6) in regulation 23 which mandates an issuer to ensure that its Articles
of Association (‘AoA’) require its Board of Directors to appoint a person
nominated by the Debenture Trustee (‘DT’) upon occurrence of any of the events
of default as per regulation 15(1)(e) of the SEBI (Debenture Trustees) Regulations, 1993
(‘DT Regulations’). In order to comply with above requirements, the AoA of the
Company was amended to enable DT to appoint their Nominee on the Board upon occurrence of
any of the event specified in regulation 15(1)(e) of the DT
Regulations vide special resolution passed by shareholders on 26
July 2023. Details of the same can be accessed on the website of the Company at
https://cms-assets.bajajfinserv.in/is/content/bajajfinance/
articles-of-associationpdf-1?scl=1&fmt=pdf
Secretarial Standards of ICSI
The Company has complied with the requirements prescribed under the
Secretarial Standards on meetings of the Board of Directors and General Meetings read with
the MCA circulars.
Internal Audit
The internal audit function provides an assurance to the Audit
Committee/Board of Directors and the Senior Management on the quality and effectiveness of
BFL’s internal controls, risk management and governance related systems and
processes. In line with RBI’s guidelines on Risk Based Internal Audit, the Company
has implemented a Risk Based Internal Audit Policy.
At the beginning of each financial year, an audit plan is rolled out
after approval of the Audit Committee. The Audit Committee on a quarterly basis reviews
the internal audit reports based on the approved plan, which includes audit observations,
corrective and preventive actions. The Committee also reviews adequacy and effectiveness
of internal controls based on such reports.
The Committee also has independent meetings with the internal auditor
without the presence of Management.
As per RBI guidelines, quality assurance and improvement program
(‘QAIP’) is required to be carried out at least once a year covering all aspects
of internal audit function. Accordingly, QAIP was carried out by an external agency for
FY2023 to assess functioning of the internal audit function, adherence to the internal
audit policy, objectives and expected outcomes. Similarly, QAIP for FY2024 will be carried
out by an external auditing partner.
Statutory Auditors
In line with the RBI requirements, the Board of Directors, based on the
recommendation of the Audit Committee, at their meeting held on 16 September 2021,
appointed Deloitte Haskins & Sells, Chartered Accountants, (Firm Registration No.
302009E) (‘Deloitte’) and G. M. Kapadia & Co., Chartered Accountants, (Firm
Registration No.104767W) (‘G. M. Kapadia’) as Joint Statutory Auditors for a
period of 3 years to conduct audit of the financial statements of the Company for the
financial years 2022, 2023 and 2024. The said appointment was also approved by the
shareholders.
The Audit Report given by Deloitte and G.M. Kapadia, Joint Statutory
Auditors for FY2024 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, the Joint Statutory Auditors have
also submitted an additional Report dated 26 July 2023, for FY2023 which has been filed
with RBI. There were no comments or adverse remarks in the said Report as well. Reserve
Bank of India, through its circular dated 27 April 2021, issued Guidelines for Appointment
of Statutory Auditors (the 'Guidelines'/'circular'), mandating NBFCs (including HFCs) with
an asset size of C 15,000 crore and above to appoint minimum two audit firms as joint
auditors for a continuous period of three years. Further, the Guidelines also specifies
that an auditor who has completed a period of three years (counted as one tenure) as on
the date of the circular shall not be eligible for re-appointment in the same entity for
six years (two tenures) after completion of one tenure of three years.
Accordingly, Deloitte and G.M. Kapadia, Joint Statutory Auditors,
present joint statutory auditors will cease to be the auditors on completion of three-year
term.
In line with the RBI requirements, the Board of Directors, based on the
recommendation of the Audit Committee, at their meeting held on 25 April 2024, have
proposed the appointment of Price Waterhouse LLP, Chartered Accountants, (Firm
Registration No. 301112E/E300264) (‘PWC’) and Kirtane & Pandit LLP,
Chartered Accountants, (Firm Registration No. 105215W/W100057) as Joint Statutory Auditors
for a period of 3 years to conduct audit of the
financialstatementsoftheCompanyforthefinancial years 2025, 2026 and 2027. Profile and
other details of the proposed joint statutory auditors forms part of the AGM notice.
Pursuant to the provisions of section 139(1) of the Act, approval of the members of the
Company will be sought for their appointment as joint statutory auditors for a period of 3
years at the ensuing annual general meeting scheduled in July 2024. If approved, they will
hold office as Joint Statutory Auditor from the conclusion of the 37th AGM till the
conclusion of the 40th AGM for the financial years ending 31 March 2025, 31 March 2026 and
31 March 2027 respectively.
The information under section 143(12) read with section 134(3)(ca) of
the Act is given in the section ‘Fraud monitoring and reporting.’
Secretarial Auditor
Pursuant to the provisions of section 204 of the Act and the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has
appointed Shyamprasad D. Limaye, Practicing Company Secretary (FCS No. 1587, CP No. 572),
to undertake secretarial audit of the Company.
A Report from the secretarial auditor in the prescribed Form MR-3 is
annexed to this Report.
As per regulation 24A(1) of SEBI Listing Regulations, a listed company
is required to annex a secretarial audit report of its material unlisted subsidiary to its
Annual Report. The secretarial audit report of BHFL, a material subsidiary (a high value
debt listed company) for FY2024 is annexed herewith.
In addition, secretarial audit report pursuant to section 204 of the
Act for BFinsec, a non-material subsidiary is also annexed herewith.
Pursuant to regulation 24A(2) of the SEBI Listing Regulations, a Report
on secretarial compliance for FY2024 has been issued by Shyamprasad D. Limaye and the same
will be submitted with the stock exchanges within the given timeframe. The Report will be
made available on the website of the Company.
There are no observations, reservations, qualifications or adverse
remark or disclaimer made in any of the aforesaid Reports.
The secretarial auditor has not reported any matter under section
143(12) of the Act, and therefore, no details are required to be disclosed under section
134(3)(ca) of the Act.
Other Statutory Disclosures
• In this report, any reference to the statutory or regulatory
guidelines, acts, circulars, regulations, notifications and directions, unless the context
otherwise requires, be construed to include any amendments, modifications, updations or
re-enactment thereof as the case may be.
• The financial statements of the Company and its subsidiaries are
placed on the Company’s website athttps://
www.aboutbajajfinserv.com/finance-investor-relations-annual-reports
• Details required under the provisions of section 197(12) of the
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 director to median remuneration of employees, percentage increase in the
median remuneration, are annexed to this Report.
• Details of top ten employees in terms of the remuneration and
employees in receipt of remuneration as prescribed under rule 5(2) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, containing
details prescribed under rule 5(3) of the said rules, which form part of the
Directors’ Report, will be made available to any member on request, as per provisions
of section 136(1) of the Act.
• The Company being an NBFC, the provisions relating to Chapter V
of the Act, i.e., acceptance of deposit, are not applicable. Disclosures as per NBFC
regulations have been made in this Annual Report.
• 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 a policy on prevention of sexual harassment at
the workplace. The policy is gender neutral. The Company has complied with the provisions
relating to the constitution of Internal Complaints Committee under Sexual Harassment of
Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Details of the
composition of the Committee is given in the said policy. The number of complaints
received, disposed of, and pending during FY2024 is given in the Report on Corporate
Governance. The policy can be accessed at
https://cms-assets.bajajfinserv.in/is/content/bajajfinance/prevention-of-sexual-harassment-policy-v1pdf?scl=1&fmt=pdf
• There is no change in the nature of business of the Company
during FY2024.
• The Company has completed all corporate actions within the
specified time limits. The securities were not suspended from trading during the year due
to corporate actions or otherwise.
• 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.
• During FY2024, the Company has issued non-convertible debenture
to the tune of C 24,972.90 crore and redeemed non-convertible debentures and subordinate
liability to the tune of C 11,766 crore and C 50 crore respectively. In addition, the
Company also raises funds for business purposes through issuance of Commercial Papers
('CPs'). As on 31 March 2024, the total outstanding amount raised through CPs stands at C
18,421.11 crore.
• SEBI vide its circular no.
SEBI/HO/DDHS/DDHS-RAC-1/P/CIR/2023/176 dated 8 November 2023 (‘the Circular’),
has prescribed the procedural framework for dealing with unclaimed interest and redemption
amounts lying with entities having listed non-convertible securities and manner of
claiming such amounts by investors. The circular requires such companies to formulate a
policy specifying the process to be followed by investors for claiming their unclaimed
amounts. Accordingly, a policy titled ‘ Policy for claiming Unclaimed Amounts with
respect to Non-Convertible Debentures from Escrow Account’ has been framed by the
Company. The policy can be accessed at
https://cms-assets.bajajfinserv.in/is/content/bajajfinance/
policy-for-unclaimed-amounts-ncds-8-march-2024pdf?scl=1&fmt=pdf The Company Secretary
has been designated as the Nodal Officer for the purposes of this circular. As on 31 March
2024, there is no amount remaining unclaimed in respect of non-convertible debentures.
• Disclosures under section 197(14) of Companies Act, 2013:
? Rajeev Jain, Managing Director (DIN: 01550158)
Rajeev Jain, Managing Director, is also on the Board of BHFL as its
Non-Executive Vice Chairman. In his capacity as a non-executive director, he draws sitting
fees and commission from BHFL at par with other non-executive directors in terms of its
remuneration policy. The total remuneration (sitting fees and commission) drawn for FY2024
is C 63 lakh. Apart from the above, he does not draw any commission from any other
subsidiary company.
He has been awarded one time grant of ESOPs of BFS, holding company
during FY2023. All options will vest entirely post completion of 5 years from the grant
date.
? Anup Saha, Deputy Managing Director (DIN: 07640220)
Anup Saha is not on the Board of any subsidiary or group companies and
does not draw any commission or remuneration from any of these companies.
He has been awarded one time grant of ESOPs of BFS during FY2023. The
options will vest entirely post completion of 5 years from grant date.
? Rakesh Bhatt, Executive Director (DIN: 02531541)
Rakesh Bhatt ceased to be a director of the Company from close of
business hours on 31 January 2024. During his tenure as director, he did not draw any
commission or remuneration from any of the subsidiary companies.
He was awarded one time grant of ESOPs of BFS during FY2023. However,
since the options would vest entirely post completion of 5 years from grant date. He would
not be eligible to exercise the said options on account of cessation.
He was also granted stock option of BFS as per the details given below
during his association with BFS-Direct:
Grant Date |
Vesting Schedule |
Option Granted |
Exercise Price (in K) |
16 May 2019 |
25% each year post 1 year from |
156,250 |
745.47 |
21 May 2020 |
date of grant |
257,250 |
470.21 |
28 April 2021 |
|
131,000 |
1,009.14 |
• Neither any application was made, nor any proceeding is pending
under the Insolvency and Bankruptcy Code, 2016, against the Company.
• During FY2024, there was no instance of one-time settlement with
Banks or Financial Institutions. Therefore, as per rule 8(5)(xii) of Companies (Accounts)
Rules, 2014, reasons of difference in the valuation at the time of one-time settlement and
valuation done while taking loan from the Banks or Financial Institutions are not
reported.
• The voting rights are exercised directly by the employees in
respect of shares allotted under the Employee Stock Option Scheme of the Company. Thus,
the disclosure requirements pursuant to Rule 16(4) of the Companies (Share Capital and
Debentures) Rules, 2014 is not applicable.
• Disclosures pursuant to RBI Master Directions, unless provided
in the Directors’ Report, form part of the notes to the standalone financial
statements and Report on Corporate Governance.
• The Company has in place various Board approved policies
pursuant to Companies Act, 2013, SEBI Regulations, RBI Directions, and other regulations.
These policies are reviewed from time to time keeping in view the operational requirements
and the extant regulations. The Report on Corporate governance contains web-link for
policies hosted on website.
Acknowledgement
The Board of Directors places its gratitude and appreciation for the
support and cooperation from its members, the RBI and other regulators, banks, financial
institutions, trustees for debenture holders and fixed deposit holders.
The Board of Directors also places on record its sincere appreciation
for the commitment and hard work put in by the Management and the employees of the
Company, its subsidiaries and associates and thanks them for yet an excellent year of
performance.
On behalf of the Board of Directors,
Sanjiv Bajaj |
Chairman |
DIN: 0014615 |
Pune: 25 April 2024 |
|