CHOLAMANDALAM FINANCIAL HOLDINGS LIMITED

ANNUAL REPORT 2018-19

Cholamandalam Financial Holdings Limited CIN: L65100TN1949PLC002905 'Dare House', No. 234, NSC Bose Road, 600 001, India Phone: 044-42177770-5; Fax: 044-42110404 E-mail : [email protected] Website: www.cholafhl.com

Founded in 1900, the INR 369 Billion (36,893 Crores) Murugappa Group is one of India's leading business conglomerates. The Group has 28 businesses including nine listed companies traded in NSE & BSE. Headquartered in Chennai, the major companies of the Group include Ltd., Cholamandalam Financial Holdings Ltd., Cholamandalam Investment and Finance Company Ltd., Cholamandalam MS General Insurance Company Ltd., Ltd., Coromandel Company Ltd., E.I.D. Parry (India) Ltd., Parry Agro Industries Ltd., Shanthi Gears Ltd., Tube Investments of India Ltd. and Wendt (India) Ltd.

Market leaders in served segments including , Auto Components, Transmission systems, Cycles, Sugar, Farm Inputs, Fertilisers, Plantations, Bioproducts and Nutraceuticals, the Group has forged strong alliances with leading international companies such as Groupe Chimique Tunisien, Foskor, Mitsui Sumitomo, Morgan Advanced Materials, Sociedad Química y Minera de Chile (SQM),Yanmar & Co. and Compagnie Des Phosphat De Gafsa (CPG). The Group has a wide geographical presence all over India and spanning 6 continents.

Renowned brands like BSA, Hercules, Montra, Mach City, Ballmaster, Ajax, Parry’s, Chola, Gromor, Shanthi Gears and Paramfos are from the Murugappa stable. The Group fosters an environment of professionalism and has a workforce of over 50,000 employees.

For more details, visit www.murugappa.com

CAUTIONARY STATEMENT: Certain expectations and projections regarding the future performance of the Company referenced in the Annual Report constitute forward-looking statements. These expectations and projections are based on currently available competitive, financial and economic data, along with the Company's operating plans and are subject to certain future events and uncertainties, which could cause actual results to differ materially from those indicated by such statements. Corporate Overview Management Reports Financial Statements

C NTENTS

CORPORATE OVERVIEW

Corporate Information ...... 02 Chairman’s Message ...... 03 Board of Directors ...... 04

MANAGEMENT REPORTS

Board’s Report & Management Discussion and Analysis ...... 08 Report on Corporate Governance ...... 17 General Shareholder Information ...... 30 Business Responsibility Report ...... 38

FINANCIAL STATEMENTS

Standalone Financial Statements ...... 55 Consolidated Financial Statements ...... 94

1 CORPORATE INFORMATION

BOARD OF DIRECTORS M M Murugappan Shubhalakshmi Panse Ashok Kumar Barat B Ramaratnam Sridharan Rangarajan V Ravichandran

MANAGER & CHIEF FINANCIAL OFFICER N Ganesh

SECRETARY E Krithika

AUDITORS M/s S.R. Batliboi & Associates LLP Chartered Accountants 6th Floor - ‘A’ Block, , No. 4, , Taramani, Chennai - 600 113

REGISTERED OFFICE 'Dare House', No. 234, NSC Bose Road, Chennai 600 001, Phone: 044-42177770-5; Fax: 044-42110404 E-mail : [email protected] Website: www.cholafhl.com

CORPORATE IDENTIFICATION NUMBER L65100TN1949PLC002905

REGISTRAR & SHARE TRANSFER AGENT Karvy Fintech Private Limited Karvy Selenium Tower B, Plot 31-32, Financial District, Gachibowli, Hyderabad - 500 032, Telangana Phone : 040-67161514; Fax: 040-23420814 Toll free : 1800-345-4001 E-mail : [email protected] Website : www.karvyfintech.com

2 Corporate Overview Management Reports Financial Statements

CHAIRMAN’S MESSAGE

Investment and Finance Company Limited (CIFCL), a listed NBFC, offering vehicle finance, home loans and home equity loans, in which the Company holds 46.4% stake has performed well during the year. CIFCL recorded an overall disbursement of ` 30450.95 Crore and profit before tax of ` 1823.15 Crore in FY 19. In the insurance sector, the Gross Direct Premium of non- life insurers (excluding Standalone Health & Specialised insurers) reported a growth of around 13% over the previous year. Motor, Health and Crop segments continued to constitute a significant portfolio at about 80% of the total business. Cholamandalam MS General Insurance Company Limited (Chola MS), a general insurance company, in which the Company holds 60% stake, recorded a Gross Direct Premium of ` 4541.10 Crore in FY 19. Besides, CIFCL and Chola MS, the Company holds investment in Cholamandalam MS Risk Services Limited, a joint venture engaged in risk management and environmental solutions. The Company’s revenue predominantly consists of dividend income from these companies and royalty income from brand usage rights. Dear Shareholders During the year, the Company was rechristened as Financial Year 2019 (FY19) started off on an optimistic “Cholamandalam Financial Holdings Limited”. Profit of the note with tailwinds from smooth functioning of the Goods Company for FY 19 was ` 66.53 Crore and at a consolidated and Services Tax (GST) framework, thrust to the rural level, ` 1414.83 Crore. I am glad to inform you that the and infrastructure sectors in the Union Budget 2018-19, Board recommended a final dividend of ` 0.65 per equity recapitalization of public sector banks and resolution of share of ` 1/- each, subject to shareholders’ approval at the distressed assets under the Insolvency and Bankruptcy forthcoming AGM, in addition to an interim dividend which Code. Gross Domestic Product (GDP) grew close to 7.5% was paid at the rate of ` 0.60 per share. during the first half of FY 19, driven by healthy demand With strong macro-economic fundamentals, inflation under across sectors. However, risk aversion and tight liquidity control, ’s continued support to conditions decelerated the global & domestic economy boost liquidity and possible vehicle purchases in advance during the second half. Domestic growth slowed-down due to Bharat Stage-VI implementation next year, the to 6.2% accentuated by subdued private consumption, financial services sector is expected to bounce back in slower growth in fixed investment and muted exports in FY 20. IRDA’s move of making long-term policies for cars the second half of FY 19. The financial services sector and two-wheelers mandatory, is also a welcome change faced liquidity constraints due to default on payment by providing impetus to the general insurance sector. few finance companies and a slow-down in auto and real We are confident that with better growth prospects, the estate sectors. Company will continue its focus towards financial service Growth in the Company’s NBFC segment was primarily businesses thereby building on its core strengths and supported by the Commercial Vehicles (CV) industry. enhancing shareholders value. Following a healthy demand from freight generation sectors On behalf of the Board, I thank all our stakeholders - our and infrastructure pick-up, CV industry delivered strong customers, employees, business partners and vendors growth in the first half year. The adverse impact due to for their trust, support and encouragement towards the tightening of financing following the liquidity crunch, higher Company’s development and progress. I would also like to fuel costs and weak freight rates affected CV demand in express my gratitude to you - our shareholders, for your the second half year. Despite this, the comme