VOL. 26 JANUARY 2013 ISSUE 1

SHRIRAMCity SOCIAL AUDIT – AMONG THE FIRST IN THE FINANCIAL SERVICES INDUSTRY

A Social Audit is a formal review of a company’s ShriramCity is uniquely positioned in its target endeavours in social responsibility. Such an audit looks market of Small business enterprises. In this endeavour at the activities of the firm which create a significant social ShriramCity has endeared itself to the cause of the impact to its stakeholders. Such activities may include: underserved and has developed the capability to assess charitable initiatives, volunteer activity, economical the needs of this category of customers and provide them energy consumption, transparency in all business appropriate financial products. ShriramCity, in its mission transactions, work environment and worker emoluments has been providing access to financial services to the credit and benefits to evaluate what kind of social and starved section of the society through its regular business environmental impact a company is having on its process and has contributed significantly to financial operations. A Social audit is usually carried out as a CSR inclusion. While this has resulted in making a significant activity of a firm. ShriramCity is amongst the first in the positive difference to its customers, ShriramCity has never financial services industry to carry out a social audit as a had a formal process of assessing the impact this strategy business activity, rather than a CSR activity. has had to its stakeholders. Thus, a scientific study on the

Shri. P. Chidambaram Honourable Union Finance Minister being welcomed by Shri. P. Chidambaram addressing the audience Shri. Arun Duggal, Chairman, Shriram Capital Ltd

ShriramCity’s Social Audit Report being unveiled Shri. K. R. Kamath, Chairman & Managing Director, Punjab National Bank receiving the first copy of the Report from the Hon’ble Union Minister JANUARY 2013 SHRIRAM NEWS 1 EDITORIAL

Dear Friend, Our greetings and best wishes to you and your family for a very happy and prosperous new year ! We have just come past what can be called ‘ the most significant year in the history of not only our country, but the entire world. Yes ! 2012 has indeed been a milestone year for all of us, though for various reasons. Man’s growing concern for the safety and security for himself as well as his family drives him either to educate himself about money, savings, investments and the like, or turn to whom he considers ‘experts’ in those fields to plan a secure financial future. And, more often he turns to Shriram for consultation and further action in one form or the other like deposits, mutual funds, stocks & shares etc., to help him decide on a course of action for a financially secure future for self and family. This is precisely what Shriram has been doing over the years. Educating and guiding people in what can be called ‘ financial literacy ’ and earning their trust and goodwill through an honest and sincere application of the group’s philosophy of ‘ empowering the common man’. Several of the group companies who have strived and succeeded have been recognized and rewarded for their good work. Read all about it in this issue. On a closing note I am tempted to say that ‘ the best is yet to come ’. Yours truly, Akhila Srinivasan Editor huge social impact created over the years was initiated l 64% of the customers earn around Rs.10,000/- through this Social Audit on ShriramCity. a month. Hon’ble Union Finance Minister Shri. P. Chidambaram, l 62% of the customers surveyed were availing released the Shriram City Union Finance Ltd Social loans for the first time in their lives. Audit Report (2010 - 12) in New Delhi on 23rd October l 60% of the employees are the sole bread winners 2012, amongst the presence of Shriram City’s Chairman, of their family. Directors, partners & business associates. The first copy l Through low operating costs with an average of the Report was presented to Shri. K. R. Kamath, transaction cost of Rs. 4 per transaction, the Chairman & Managing Director, Punjab National Bank. company has inculcated the philosophy of efficient Shri. Vijay Mahajan, Founder and Chairman, BASIX operations Group, was among the distinguished guests at the event. l Through a tool, SROI, the social value of During his speech, Hon’ble Union Finance Minister Rs.1 lent to a ShriramCity customer to fulfill his commended the efforts of the Group in reducing the myth business needs and aspirations is Rs. 2.05 which is perceived in serving the high risk, lower economic strata of the society. The event was well received by the This Audit for ShriramCity was conducted by Social audience besides getting a good media coverage. Audit Network (SAN) India, the recognized Indian chapter of Social Audit Network (SAN) UK, an independent Some findings of the Social Audit report: accredited agency that facilitates social accounting and audit practices internationally. Such an audit will also l ShriramCity has provided loans to 2.7 million self enable ShriramCity to benchmark itself for continuous employed customers who run micro and small ongoing enhancement of its strategy and processes year enterprises in the informal sector for their business on year. This is a pioneering effort within the group and development needs. will certainly be a harbinger for more such assessment of l Over 95% of the customers avail business purpose social impact of the various other businesses within the loans up to Rs.1 lakh. Shriram Group. JANUARY 2013 SHRIRAM NEWS 2 SHRIRAM TRANSPORT FINANCE COMPANY WINS CNBC TV18 BEST BANK AND FINANCIAL INSTITUTION AWARD 2012

Shriram Transport Finance Company Limited Chairman of India Venture Advisors Pvt. Ltd & Former (STFC), the largest asset financing NBFC in the country, Chairman of State Bank of India, Mr. H.N. Sinor, CEO, was chosen as the “Best NBFC” in “Asset Backed Association of Mutual Funds of India, Former CEO, Lending” category at “CNBC TV18 Best Bank and Indian Banks Association and former MD of ICICI and Financial Institution Awards 2012” held on October 17, Mr. M.V. Nair, Former Chairman, Union Bank. 2012, at the ITC Grand Central, in Parel, Mumbai. The jury round was preceded by a rigorous scoring STF is a part of the Shriram conglomerate, which process designed by KPMG. The KPMG team evaluated has a significant presence in financial services, viz., all banks and financial institutions on criteria like growth, commercial vehicle financing business, consumer finance, profitability, capital ratios and even softer qualities like life and general insurance, stock broking, chit funds and investor/customer care and compiled a short list. In the distribution of financial products such as life and general second stage, the short-listed companies were examined insurance products and units of mutual funds. Apart from by the jurors who then vigorously debated the various these financial services, the group also has a significant nominations before coming to a unanimous conclusion presence in non-financial services business such as on each category. property development, engineering projects and information technology. Upon receiving the award, Mr. U.G. Revankar, Managing Director, Shriram Transport Finance Company Ltd, said, “We are extremely honoured to receive this prestigious award from CNBC TV18. This award signifies the hard work that Shriram Transport Finance Ltd has been putting in over the years. We, at, STFC are now even more determined to reach greater heights in the future.” This distinction was accorded to STFC by a distinguished panel of jurors, including Mr. Jagdish Capoor, Former Deputy Governor at the RBI and Former Chairman of HDFC Bank and the Mr. U.G. Revankar, Managing Director, Shriram Transport Finance Company Ltd, receiving the award from Dr. C. Rangarajan, Chairman of the Prime Minister’s Bombay Stock Exchange (BSE), Mr. A.K. Purwar, Economic Advisory Council

SANLAM EMERGING MARKETS and SHRIRAM CAPITAL LIMITED

South African financial services group Sanlam has announced the finalization of a further R 2 billion (2 billion South African Rands) investment in the country’s leading financial services group, Shriram Capital Limited(SCL). Sanlam’s proposed investment into SCL was first announced in September 2011 and has been subject to a number of conditions and regulatory approvals. These have since all been obtained which allowed for the final discussion of the transaction. The investment in SCL has Following the transaction, been made by Sanlam Emerging Markets(SEM), the SEM effectively owns cluster within Sanlam responsible for financial services 26% of SCL. The investment has in emerging markets outside of South Africa. The been funded from Sanlam’s acquisition augments its existing portfolio of businesses surplus capital. in Africa and Asia, in support of the Group’s target of At the release of Sanlam’s sustainable value creation in these growth markets. interim results for the six months JANUARY 2013 SHRIRAM NEWS 3 to the end of June 2012 on 6 September 2012, Sanlam entrenched to the long term benefit of both partners”, Group CEO Dr. Johan van Zyl reiterated Sanlam’s Mr. Werth said. strategic emerging market focus In Africa and India. He further added that whilst the economic Mr. Heinie Werth, CEO of environment in India is currently somewhat challenging, SEM, said concluding the he remains confident of its long term potential and that transaction with Shriram, means the investment in SCL will in time yield an attractive return. a more meaningful exposure for Sanlam has been in partnership with the Shriram Sanlam in India. Group in respect of life insurance (Shriram Life Insurance “The transaction will Company Limited) since 2005 and short term insurance strengthen our relationship with (Shriram General Insurance Limited) since 2008. Shriram. Strategically Sanlam Mr. G. S. Sundararajan, Director, Shriram Capital, previously entered into insurance joint ventures with the said, “Sanlam’s partnership with us has been catapulted to Shriram Group to participate in and benefit from the the next level with this investment. We, at the Shriram Group, growing financial services industry in India. This wholeheartedly welcome this mutually beneficial alliance.” transaction is an important and logical next step for SEM SCL, in which SEM has now acquired a 26% stake, in our relationship with Shriram as it will provide us with is the holding company for the financial services interests access to SCL’s wider financial services exposure in India of the Shriram Group. Following conclusion of the and will see SEM diversifying its earnings base. In transaction these consist of a 100% interest in the two particular, this includes exposure to credit businesses and insurers, as well as a 25% holding in Shriram Transport other distribution entities. We foresee synergies across all Finance Company Limited (STFC) - a listed commercial these businesses and more opportunities for client cross- vehicle financing business with an approximate selling”, he said. Rs. 60 billion loan book, a 30% holding in Shriram City “We are in particular proud to have concluded Union Finance (SCUF) - a listed retail financing business this transaction with the leadership of Shriram as our with an approximate Rs. 16 billion loan book,100% of partners. We see this transaction as a highlight in the a financial products distribution business employing relationship we have enjoyed with the Shriram Group thus 100,000 agents and a start-up wealth management and a far. The strong partnership that we have is further brokerage business.

Mr. DHRUV MEHTA - PROFILE * Mr. Dhruv Mehta, is a — He has spent 5 years in the Corporate Finance practicing independent financial Department in Searle India Limited, a Advisor (IFA), since 2003 and is pharmaceutical and Agrochemicals Multinational based out of Mumbai. — He has spent 14 years as a Financial Controller * He is managing surpluses with the Savita Group, a leader in Petroleum of over US$ 200 Mn for various Specialties family offices, Corporates and * He is also the Director on Shriram Wealth Advisors High Net worth Individuals. Limited (SWAL) – a knowledge platform for the Shriram This includes over $ 25 million in direct equities. He has developed a deep and diverse relationship with the Universe of investors. SWAL is part of the well -known manufacturers of financial products including the and respected Shriram Group of Chennai, in Financial 33 Mutual Fund Houses in India. He has been ranked as Services Industry. He has also joined the Board of Shriram one of the top performers by the large Mutual Funds in Asset Management Company. the category of an Independent Financial Advisor. * Have been involved over the last decade in the * Professionally, he is qualified as a Chartered Annual Wealth Creation Study conducted by Mr. Raamdeo Accountant and Cost and Works Accountant (India) with Agrawal of Motilal Oswal (India’s leading Financial 25 years of diverse work experience in diverse roles and Services company). responsibilities: * Currently, Mr. Mehta is also Chairman of — He has spent 2 years with A F Ferguson and Federation of Independent Financial Advisors (FIFA) a Company – a well-known accounting and audit firm pan India association of IFAs. JANUARY 2013 SHRIRAM NEWS 4 LIQUID FUNDS - CASH ON CALL : SECOND IN A SERIES OF ARTICLES BY Mr. DHRUV MEHTA

Liquid funds are an equally good alternative to a account which offers no return. Rather they can use liquid savings/current account… funds for investing money which is not needed in 1-2 days While searching for different investment options, you and can earn daily returns on that surplus. might have come across the term ‘Liquid Funds’. There Liquid funds invest in treasury bills, government are many of us who might have wondered what these funds securities, call money, repo and reverse repos and other are and many more who might not be aware of these funds such instruments that are quite safe in nature and have a as alternatives to a savings/current account with the bank. short maturity. When we try and understand the term ‘liquid’ in Liquid funds are getting increasingly popular these financial terms, it means an asset which is as good as hard days because of the key features like liquidity, enough cash.An investment is declared as liquid or illiquid safety and better returns. depending on its ability to get converted into cash without Liquid funds are available in India for more than 15 a significant loss in value.Bank deposits generally are the most liquid whilst Real estate would be amongst the less years now and till date there have been no defaults in these ‘liquid’. Liquid Funds schemes of mutual funds are also schemes. Also, the investment has given better return than amongst the most liquid investment option similar to bank savings bank account. Another advantage is the dividend savings account. Money invested in a Liquid fund is option available on liquid fund investment which is not available at 24 hours’ notice. Liquid funds get their available on savings bank account. name from this trait and hence are anideal option to park Besides liquidity and risk, one should always short-term money. consider the tax aspect of an investment. It is this that All surplus funds of households/corporates are adds to the attractiveness of the investment from an generally parked in savings/current account so as to meet individual’s point of view. An individual will have to pay future liabilities/consumption needs. In a savings bank a lower tax on the liquid funds return compared to Bank account, the investor earns a marginal interest rate on the deposit return. From a corporate’s point of view, Long- average monthly balance in the account and is assured of term capital gains are taxed at a rate of 20 per cent without getting the funds as and when needed. Similarly, in a liquid indexation and 10 per cent with indexation. The dividend fund an investor can park surplus money for future needs from these funds is taxed at the rate of 25 per cent plus 10 and can redeem within 24 hours. per cent surcharge plus 3 per cent education cess. While For SMEs and local businessman, liquid funds can the surcharge and education cess stays the same, corporates be very useful as they park their surplus funds in Current pay tax at the rate of 30 per cent. Key features of a liquid fund: No Entry and Exit load (sometimes exit load is charged if redeemed before the lock in period) Low annual fee 0.30 to 0.70% Variable Minimum investment amount according to scheme Great tax benefit, Easy liquidation, hence the name Liquid funds have the restriction that they can only have 10 per cent or less mark-to-market component, indicating a lower interest rate risk. Has the past performance been good? indicate a high degree of safety and confidence in In the last one year, liquid funds have returned liquid funds. around 9 to 9.5 percent compared to savings deposit This shows that liquid funds are a good product to return of between 4 to 6 percent. Recent data shows that invest in if you are looking to fulfill some short-term goals. banks are taking fresh exposures in liquid funds which How does it compare to a savings bank deposit? Savings Bank Deposit Liquid Funds Returns on investments range between 4-6% Returns on investments range between 6-9% The interest on Fixed deposit is taxed by If you opt for a dividend option the dividend adding it to the assessee’s income. is tax free in the hands of the investor Returns are fixed Returns are not fixed Interest paid on average monthly balance Interest paid on daily basis

JANUARY 2013 SHRIRAM NEWS 5 BEING A BUSINESSMAN AND A FAMILY MAN

Prasad Kona was no ordinary person in Vijayawada. of a life insurance policy from creditors, tax authorities He was a third generation businessman employing around and relatives by creating a ring fence for the policy amount. forty people in his business. He was a dealer in decorative When a policy is taken under MWP Act, the proceeds of paints, wholesaler of pharmaceuticals and also had the policy will go to the beneficiaries only and creditors interests in real estate. He had some deposits and an cannot access it. This ensures that the welfare of the insurance policy with us. He was quite an influential man beneficiaries is taken care of. and in his early forties at that time. One day…. he passed The beneficiaries can be: away... Yes. It was as simple as that. He neither had a disease ever nor an indication of any disease. It just 1. The wife alone happened suddenly. His wife found him dead on their sofa 2. The children alone at around 8.00 am in the morning with the newspaper still 3. The wife and children together in his hand. It was the beginning of a series of woes she had to endure along with her two children. The benefits of the policy proceeds can be mentioned Less than a month after his death, people claiming as specific percentages to each beneficiary or as equal as partners in the business came, consoled her and told amounts. The main advantage for beneficiaries, apart her some arithmetic. She never understood it. In fact, she from being immune to attachment by creditors, is that didn’t even know whether they were partners. But the the policy cannot be surrendered or assigned for taking message was clear enough – Prasad owed them money more loans. and they would sacrifice it on Who can be a trustee? compassionate grounds but she should refrain herself from business matters. One Each policy will be considered as a more month passed and the bankers came. separate trust. The trustees can be the wife or A similar message got replayed – that he adult children or a third person or an entity had taken business loans. A few more (like a bank dealing in trusts). The beneficiary months went by and she was informed that can also be appointed as a trustee. The policy there are rival claims on his insurance holder can change the trustees at any point in policy from a bank and we suggested her time. to take the legal recourse. And ultimately the tax Who should take a policy under MWP act? authorities, with multiple prefixes, had come. It was a very All businessmen running small and medium long ordeal for her. In the end, everything that belonged businesses are advised to take their life insurance policies to her late husband was either inappropriately confiscated under MWP. by relatives or lawfully attached by the creditors and tax authorities. What are the eligible plans? For people engaged in business, especially in All plans including traditional plans, ULIPs, regular proprietorship and partnership concerns, there is unlimited premium and single premium plans can be taken under liability in case of a loss. This means in the event of the MWP act. A simple addendum to your insurance winding up of the business or in case of a loss, the creditors proposal can free you from the agony of relentless have the right to sell all the assets of the owners and their thinking about the financial security of your family in families to recover their loans. We all know that the your absence. chances of a business defaulting and going for a toss are Merely taking a life insurance policy will not more when the businessman dies. In case the businessman necessarily take care of your wife and children. You need has a long list of creditors waiting at his doorstep when to ensure that the benefits are passed on to them. If this he dies, his investments will be distributed amongst them purpose is to be achieved in its fullness, you must create a with a court settlement. Then the question of financial rock-solid benefit for them and taking a policy under the security to his family haunts his survivors. MWP Act is perhaps the simplest and the most inexpensive But there is statutory relief from this trauma. Married way of ensuring it. Women’s Property Act (MWP Act) can secure the benefits Dr. R. Varun Kishore JANUARY 2013 SHRIRAM NEWS 6 HYDERABAD AUTOMALL INAUGURATED IN NOVEMBER 2012

The recently held Automall inauguration at equipments, spread across several acres of landscape. Hyderabad made waves across the transport fraternity of The service is the first initiative of its kind in the region. the nation. India’s largest multi-city automobile fair was Hundreds of articles were traded during the event unveiled in Hyderabad. The Auto show enchanted the and more items were added right up to the end of the day, auto enthusiasts, transportation community and sizeable every item reaching the highest bidder. number of media persons who had a foretaste of the mega show organized by Shriram Automall. It also fascinated Even hours before the formal inaugural ceremony, the huge of Hyderabad. a steady stream of hopefuls thronged the open yard, examined the interiors and exteriors, checking a few body parts, examining the tyres etc., to get a feel of the vehicles. The Automall also offers various allied services like Parking, Documentation, Finance, Refurbishment, Insurance, Valuation, etc. Followed by the Hyderabad Automall launch, Jammu also saw a similar successful opening. The company is coming up with five more major Automall openings in Faizabad, Tirunelveli, Jaipur, Kolkata, and Kota in the near future. Mr. Vinod Dasari, Managing Director, Ashok Leyland inaugurating the Automall An extravaganza, full of action, pomp and festivities, Automall 2012 hosted some of the best automobile brands in the country. The event further complimented the exhibition of modified and refurbished trucks and equipments at prudent prices. The Automall was inaugurated by the Chief Guest Mr. Vinod Dasari, Managing Director, Ashok Leyland. The Guest of Honour for the event was Mr. Arun Duggal,

Chairman, Shriram Capital Ltd. and the other special Mr. Vinod Dasari, Lighting the Lamp, while Mr. Arun Duggal, Chairman, Shriram Capital Limited and Mr. Umesh G. Revankar, Managing Direcor, STFC Ltd. look on Shriram Automall is a pioneer in the country, providing such holistic solutions. It is the first one to take cognizance of the needs of used vehicle traders. In fact, the Automall has come to the customers rather than the customers coming to it, Shriram Automall, so far has no competition whatsoever.

Visitors viewing the vehicles at the Automall guests at this mega event were Mr. Umesh G. Revankar (Managing Director, Shriram Transport Finance Company Ltd.), and Mr. R. Duruvasan, (Managing Director, Shriram City Union Finance Ltd.). This Automall is by far the nation’s biggest yard for housing a large number of commercial vehicles and A night view of the Automall JANUARY 2013 SHRIRAM NEWS 7 SHRIRAM EPC BAGS $230 MILLION ORDER IN IRAQ Source : TE Narasimhan, Business Standard

Shriram EPC Limited (SEPC) consortium has bagged along with road works in the area. The project is scheduled order worth $230 million for the supply and laying of for completion in 3 years. basic sanitary systems in Basra, Iraq in a joint venture Commenting on the contract, Mr. T. Shivaraman, with the Mokul Group of Companies, according to Managing Director & CEO of Shriram EPC Limited, said statement released by the company. Shriram EPC, which “this is our first order in the Middle East and adds to our is part of Shriram Group, is an integrated entity in portfolio of international projects. It is a sizeable order designing, engineering, procurement, construction and for our municipal services vertical and will result in project management services for power plants, renewable sustained revenues over the 3 year execution period. energy projects, process and metallurgical plants and This is also one of the first major public infrastructure municipal service sector projects. projects in Southern Iraq which aims to improve basic The scope of work entails engineering, supply and infrastructure in the country. Successful execution of this installation of a primary sanitary sewer system, storm contract would open up new opportunities for us in Iraq.” sewer system and trunk sewer system with connected Over the past several months, SEPC has witnessed pumping stations and road works. good momentum in its order book, particularly in Shriram EPC will oversee the laying of municipal services and this order adds to its order backlog approximately 240 kms of Sewer Pipe Line, 160 kms of of Rs 2,923 crore as at the end of September 2012, as per Storm Pipe Line and 8 KM of Trunk Sewer Pipe Line the statement.

Season’s Greetings

Editor : BOOK POST Akhila Srinivasan Published by : Shriram Ownership Trust Mookambika Complex, II Floor, 4, Lady Desika Road, Mylapore, Chennai - 600 004. India. Printed at : Sai Shriram Printers, Chennai - 600 097.

JANUARY 2013 SHRIRAM NEWS 8