As on: May 30, 2023 06:33 AM
To,
The Shareholders,
AAVAS FINANCIERS LIMITED ("COMPANY")
Your Directors are pleased to present the 12th Annual Report on the operational and financial performance of Aavas Financiers Limited ("the Company" or "Aavas") together with the Audited Standalone and Consolidated Financial Statements for the Financial Year ended March 31,2022.
FINANCIAL PERFORMANCE
During the Financial Year under review, your Company has delivered yet another year of resilient performance.
The standalone financial performance for the Financial Year ended March 31, 2022 and a comparison with the previous year is summarized below:
(Rs in crore)
Your Company posted Total Income (Total Interest Income and Other Income) of Rs 1,305.56 crore and Total Comprehensive Income of Rs 357.51 crore for the Financial Year ended March 31, 2022, as against Rs 1,105.34 crore and Rs 290.33 crore respectively for the previous Financial Year.
COVID-19 AND ITS IMPACT
Operations and business continuity
The resurgence of COVID cases in first quarter of FY 2021-22 led to increase in challenges due to restricted movement and the disrupted economic cycle. The situation gradually improved by the end of the first quarter because of lower restrictions and increased pace of vaccination. The Company protected livelihoods through a policy of no retrenchment. It stipulated social distancing across the branches and permitted Employees to work from home. All the Employees of the Company are fully vaccinated. The Company opened 34 new branches even during the tough phase of COVID-19 and achieved milestones of crossing Rs 10,000 crore AUM during the FY 2021-22.
COVID-19 Regulatory Packages and Resolution Framework for COVID-19-related Stress
The RBI issued 'Resolution Framework for COVID-19-related Stress' ("Resolution Framework - 2.0") dated May 05, 2021, June 04, 2021 and August 06, 2021 for granting relief to borrowe Rs impacted by COVID-19, by providing the facility of rescheduling of payments and/or for conversion of outstanding interest accrued or to be accrued into a separate credit facility, revisions in working capital sanctions, granting of moratorium etc. The Company has in place a 'Policy on Resolution Framework for loans of borrowe Rs affected by COVID-19'.
DIVIDEND
The Board of Directors have considered to conserve the resources of the Company in order to build a strong reserve base for the long-term growth aspects of the Company and maintain a liquidity pool. Hence, the Board of Directors do not recommend any dividend for the Financial Year ended March 31,2022.
In terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, ('SEBI LODR Regulations') and Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021 (RBI Master Directions) the Board of Directors of the Company (the 'Board') formulated and adopted the Dividend Distribution Policy ('Policy'). The Policy is available on the website of the Company at https://www.aavas.in/dividend-distribution-policy and forms part of this Report as 'Annexure-5'.
CAPITAL STRUCTURE OF THE COMPANY
Authorized Capital:
There was no change in the Authorized Capital of the Company during the year under review. The Authorized Capital of the Company is Rs 85,00,00,000/- (Rupees Eighty Five crore Only) divided into Rs 8,50,00,000 (Eight crore fifty lakh) Equity Shares of Rs 10/- (Rupees Ten only) each.
Issued, Subscribed & Paid up Capital:
The issued, subscribed and paid up Capital of the Company as on March 31, 2022 stood at Rs 78,93,64,510 (Rupees Seventy eight crore ninety three lakh sixty four thousand five hundred and ten) consisting of 7,89,36,451 (Seven crore eighty nine lakh thirty six thousand four hundred and fifty one) Equity Shares of Rs 10/- each.
During the Financial Year under review, the paid-up Equity Share Capital of the Company has been increased on account of issuance and allotment of 4,31,900 Equity Shares of Rs 10/- each pursuant to the exercise of stock options by the eligible employees of the Company under Employee Stock Option Plans (ESOPs) of the Company.
SPECIAL RESERVE (U/S 29C OF THE NHB ACT, 1987)
Your Company has transferred Rs 71 .50 crore i.e. 20% of net profits to Statutory Reserves during the Financial Year under review as required under the provisions of Section 29C of the NHB Act, 1987 read with Section 36 (1) (viii) of Income Tax Act, 1961.
REVIEW OF OPERATIONS
Your Company is registered as a Housing Finance Company (HFC) with National Housing Bank (NHB) to carry out the housing finance activities in India. The Company chose to serve the growing needs of housing finance Customers in the low and middle income segments of sub-urban and rural India, going contrary to the industry's preference to serve the Customers in the metro cities and urban regions of the country. The majority of your Company's Customers have limited access to formal banking credit facilities. Aavas uses a unique appraisal methodology to assess these Customers individually and delive Rs financing solutions.
The details with respect to operating and financial performance of your Company has been covered in the Management Discussion and Analysis report (MDA), which forms part of this Annual Report.
During the Financial Year under review, your Company delivered a resilient performance, which is reflected in the following financial snapshot.
Income & Profits
Total Income grew by 18% to Rs 1,305.56 crore for the Financial Year ended March 31,2022 as compared to Rs 1,105.34 crore for the previous Financial Year. Profit before Tax (PBT) was 28.73% higher at Rs 454.86 crore as compared to Rs 353.33 crore for the previous Financial Year.
The Total Comprehensive Income for the Financial Year 202122 increased by 23.14% from Rs 290.33 crore in the previous Financial Year to Rs 357.51 crore in the current Financial Year.
Sanctions
During the Financial Year under review, your Company has sanctioned housing loans for Rs 3,762.09 crore as compared to Rs 2,812.94 crore in the previous Financial Year with an annual growth of 33.74%. The cumulative loan sanctions since inception of your Company stood at Rs 18,221.23 crore as at March 31, 2022. Your Company has not granted any loan against the collateral of Gold Jewellery.
Disbursements
During the Financial Year under review, your Company disbursed housing loans for Rs 3,602.24 crore as compared to Rs 2,656.85 crore in the previous Financial Year registering an annual growth of 35.58%.
The cumulative loan disbursement since inception as at March 31,2022 was Rs 17,357 crore.
Assets Under Management (AUM)
The AUM of your Company stood at Rs 11,350.21 crore (including assignment of Rs 2,343.78 crore) as at March 31,2022 as against Rs 9,454.29 crore (including assignment of Rs 2,004.68 crore) in the previous Financial Year, with a growth of 20.05%.
As of March 31,2022, the average size of loan sanctioned was Rs 8.64 lakh and average tenure was 178.33 months in the AUM (on origination basis).
Affordable Housing
The Company has received subsidy under PMAY of Rs 108.23 crore in respect of 4,923 beneficiaries and the same had been credited into the respective customer's loan account.
Non-Performing Assets (NPA)
Your Company is in adherence to the provisions of Indian Accounting Standards ("Ind AS") with respect to computation of Stage-3 Assets (NPA). Your Company's assets have been classified based on expected performance. Exposure at Default (EAD) is the total amount outstanding including accrued interest as on the reporting date. Further, in compliance with Ind AS accounting framework, interest earned on NPA's is recognized net of expected losses, if the present realisable value of the security is greater than the outstanding loan dues.
Using a pro-active collection and recovery management system supported by analytical decision making and consistent engagement with the Customers during the period, the GNPA and NNPA as at March 31,2022 were 0.99% and 0.76% respectively (against 0.98% and 0.71% respectively in the previous Financial Year).
CAPITAL ADEQUACY RATIO
Your Company's Capital Adequacy Ratio as at March 31,2022 was 51.93% (previous Financial Year 54.38%) which is far above the minimum required level of 15% as per the provisions of the RBI Master Directions.
CREDIT RATING
Your Company's financial prudence is reflected in the strong credit rating ascribed by rating agencies.The ratings also derive strength from adequate risk management and control systems put in place by the Company, pristine asset quality and strong corporate governance.
During the Financial Year under review, the long-term credit ratings of the Company has been upgraded from 'AA-/Stable to AA-/Positive' by both CARE Ratings and ICRA Limited.
Further, all the other credit ratings assigned to the Company have been reaffirmed by respective credit rating agencies. For more details please refer Corporate Governance Report forming part of this report.
REGULATORY & STATUTORY COMPLIANCES
The Company has complied with all the guidelines, circular, notification and directions issued by RBI and NHB from time to time. The Company also places before the Board of Directors at regular intervals all such circula Rs and notifications to keep the Board informed and report on actions initiated on the same.
The Company has also been following provisions of the Companies Act, 2013 including the Secretarial Standards issued by ICSI, SEBI LODR Regulations, 2015, SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, Income Tax Act 1961, and other applicable statutory requirements.
There were no orde Rs passed by any regulator/courts nor any fine/penalty levied on the Company during the year under review.
Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs
The contribution of NBFCs towards supporting real economic activity and their role as a supplemental channel of credit intermediation alongside banks is well recognized. Over the years, the sector has undergone considerable evolution in terms of size, complexity, and interconnectedness within the financial sector. Many entities have grown and become systemically significant and hence there is a need to align the regulatory framework for NBFCs keeping in view their changing risk profile.
The SBR framework encompasses different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulation, etc., the RBI decided to first issue an integrated regulatory framework for NBFCs under SBR providing a holistic view of the SBR structure, set of fresh regulations being introduced and respective timelines.
Regulatory structure for NBFCs comprises of four laye Rs based on their size, activity, and perceived riskiness. Your Company being a Housing Finance Company falls under Middle layer category. Detailed circula Rs will be issued in due course by the RBI on different facets of regulation and it will be implemented as per the timelines.
DEPOSITS
During the Financial Year under review, your Company has neither invited nor accepted nor renewed any fixed deposits from public within the meaning of Chapter V of the Act read with the Companies (Acceptance of Deposits) Rules, 2014. Therefore, the disclosure in terms of RBI Master Directions is not required.
AWARDS AND RECOGNITION
• Certified as "Great Place To Work" during the FY 2021-22.
• 1st NBFC to list its Social Masala Bond of Rs 360 crore on NSE- IFSC.
• Head Office certified with LEED Silver Certification.
• Awarded with "FE-EY Best Bank 2020-21 Award" under NBFC category.
RESOURCE MOBILIZATION
Your Company has in place a borrowing policy framework to cater its borrowings needs. The objective of this policy is to diversify the liability portfolio of the Company and to reduce risk of overdependence on any particular lende Rs and instrument.
Your Company has vide Special Resolution passed on August 10, 2021, under Section 180 (1) (c) of the Act, authorized the Board of Directors to borrow money upon such terms and conditions as the Board may think fit in excess of the aggregate of paid up share capital and free reserves of the Company up to an amount of Rs 14,000 crore (Rupees Fourteen thousand crore only) and the total amount so borrowed shall remain within the limits as prescribed by RBI.
During the Financial Year under review, your Company continued to diversify its funding sources by exploring the Debt Capital Market through private placement of Secured NCDs to Mutual Funds, Issuance of Masala Bonds, NHB Refinance, Securitization/ Direct Assignment and banking products like Priority Sector/Non- Priority Sector Term Loans, Cash Credit Facilities and Working Capital Demand Loans.
The Weighted Average Borrowing Cost as at March 31, 2022 was 6.88% (including Securitization/ Assignment) as against 7.40% as at the end of the previous Financial Year. As at March 31,2022, your Company's sources of funding were primarily in the form of long Term Loans from Banks and Financial Institutions (37.8%), followed by Securitization/Direct assignment (22.8%), NHB Refinance (21.5%), Debt capital market (17.9%).
Term Loans from Banks and Financial Institutions
The Company, during the Financial Year, received aggregate fresh loan sanctions amounting to Rs 1,650 crore and has availed loans aggregating to Rs 1,635 crore. The outstanding term loans from Banks and Financial Institutions as at March 31,2022 were Rs 3,883.8 crore with average tenure of 9.15 years.
Securitization/Assignment of Loan Portfolio
Your Company has actively tapped Securitization/Direct Assignment market, which has enabled it to create liquidity, reduce the cost of funds and minimizing asset liability mismatches.
During the Financial Year under review, your Company received purchase consideration of Rs 778.37 crore from assets assigned in pool buyout transactions.
The pool buyout transactions were carried out in line with RBI guidelines on Securitization of Standard Assets and securitized assets were de-recognized in the books of the Company.
Refinance from National Housing Bank (NHB)
NHB continued to extend its support to your Company through refinance assistance and during the Financial Year under review, your Company has received fresh sanction of refinance assistance of Rs 750 crore under the NHB refinance scheme and Rs 417 crore under Special Refinance Scheme. Your Company availed funds of Rs 1,416 crore under various Refinance Scheme such as for Affordable Housing Fund, Regular Refinance Scheme and Special refinance Facility. As of March 31, 2022 the total outstanding refinance stood at Rs 2,206.76 crore.
Non-Convertible Debentures (NCDs)
During the Financial Year under review, your Company diversified its borrowing by raising funds through NCDs from Mutual Funds, details of which are as following:
I. Multilateral/Development Financial Institutions
As on March 31,2022, the Company's outstanding NCDs stood at Rs 878.86 crore as compared to Rs 911.38 crore as on March 31,2021.
II. Domestic Financial Institutions
As on March 31,2022, the Company's outstanding NCDs from Domestic Financial Institutions stood at Rs 98.92 crore as compared to Rs 109.41 crore as on March 31,2021.
III. Banks
As on March 31,2022, the Company's outstanding NCDs from Banks stood at Rs 174.86 crore as compared to Rs 244.9 crore as on March 31,2021.
As on March 31 , 2022, Your Company's outstanding subordinated debt in the form of NCDs stood at Rs 99.83 crore as compared to Rs 99.74 crore as on March 31,2021.
Your Company has not issued any Commercial Paper & ShortTerm Instrument during the Financial Year 2021-22 and as on March 31,2022, the Company's Commercial Paper outstanding is NIL.
Bonds issued to Multilateral/Development Financial Institutions
Masala Bond: As on March 31, 2022, your Company's outstanding balance of Masala Bonds issued to Multilaterals stood at Rs 199.29 crore.
Social Masala Bond: During the Financial Year, Company has issued Social Masala Bond to British International Investment ("erstwhile known as CDC"), the United Kingdom's Development Finance Institution amounting to Rs 360 crore under the External Commercial Borrowings Route which are listed on NSE-IFSC, Gift City. As on March 31, 2022 the outstanding balance of Social Masala bond stood at Rs 357.54 crore.
Further, the interest on Non-Convertible Debentures and Masala Bonds issued on private placement basis were paid by the Company on their respective due dates and there was no instance of interest amount not claimed by the investo Rs or not paid by the Company.
Your Company, being listed HFC, is exempted from the requirement of creating Debenture Redemption Reserve (DRR) on privately placed debentures. Therefore, your Company has not created DRR. Further the requirement to invest or deposit a sum of not less than 15% of the amount of debentures which are maturing during the year, ending on March 31 of the next year as provided under Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014 has been done away for listed Companies vide notification of Ministry of Corporate Affai Rs ('MCA') dated June 05, 2020.
DISCLOSURE UNDER CHAPTER XI-GUIDELINES ON PRIVATE PLACEMENT OF NONCONVERTIBLE DEBENTURES (NCDS) OF RBI MASTER DIRECTIONS:
(i) The total number of NCDs which have not been claimed by the Investo Rs or not paid by the Company after the date on which the non-convertible debentures became due for redemption: Nil
(ii) The total amount in respect of such debentures remaining unclaimed or unpaid beyond the date referred to in Paragraph (i) as aforesaid: Nil
DEBENTURE TRUSTEE
Debenture Trust Agreement(s) were executed in favour of IDBI Trusteeship Services Limited for NCDs issued by the Company on private placement basis.
DOWNSTREAM INVESTMENT REPORTING & COMPLIANCE
Your Company being a foreign owned and controlled Company has complied with the provisions of Foreign Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management (Non-debt Instruments) Rules, 2019 for the downstream investment made by it in any other Indian entity and the certificate from Statutory Auditor of the Company in respect to downstream investment compliance under FEMA has been obtained by the Company.
BRANCH EXPANSION
Your Company has been successful in continuous expansion of its branch network with a view to support its growth, deeper penetration in the states in which the Company operates and enhancing customer reach. During the Financial Year under review, the Company added 34 more branches and thereby expanded its branch network to 13 states with 314 branches as of March 31,2022. Your Company now operates in Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Haryana, Chhattisgarh, Delhi, Uttar Pradesh, Uttarakhand, Punjab and Himachal Pradesh, Odisha, Karnataka. Your Company has its Registered Office in Jaipur, Rajasthan, and its branch network as on March 31,2022 vis-a-vis the previous Financial Year is detailed hereunder:
DIRECTORS AND KEY MANAGERIAL PERSONNEL
The Members of the Company's Board of Directors are eminent persons of proven competence and integrity. Besides experience, strong financial acumen, strategic astuteness and leadership qualities, they have a significant degree of commitment towards the Company and devote adequate time to the meetings and preparation.
The Board of the Company comprises of 9 (Nine) Directors, consisting of 3 (Three) Independent Directors (including 2 (Two) Women Directors), 5 (Five) Non-Executive Nominee Directors and 1 (One) Executive Director-Managing Director and CEO as on March 31, 2022 who bring in a wide range of skills and experience to the Board.
The composition of Board of the Company as on March 31, 2022 is as under:
The Independent Directors have confirmed that they satisfy the criteria prescribed for Independent Directors as stipulated in the provisions of the Section 149(6) of the Act and Regulation 16(1)(b) & 25 of SEBI LODR Regulations. The names of all the Independent Directors of the Company have been included in the Independent Director's databank maintained by Indian Institute of Corporate Affai Rs ("IICA"). Two (2) of the Independent Directors of the Company have cleared the exam conducted by IICA and one (1) Independent Director has been exempted from appearing for the test. The Company has obtained declaration of independence from all the Independent Directors of the Company. None of the Directors have any pecuniary relationship or transactions with the Company. None of the Directors of the Company are related to each other and have confirmed that they are not disqualified from being appointed as Directors in terms of Section 164 of the Act and are not debarred from holding the office of Director by virtue of any SEBI order or any other such authority. Your Company has also obtained a certificate from a Company Secretary in practice confirming that none of the Directors on the Board of the Company have been debarred or disqualified from being appointed or continuing as Directors of companies by SEBI/MCA or any such statutory authority. The same forms part of this Annual Report as 'Annexure-1'.
APPOINTMENT & RESIGNATION OF DIRECTORS AND KMP
DISCLOSURE UNDER SECTION 197(14) OF THE ACT
The MD and CEO of the Company have not received any commission from the Company's subsidiary company.
NUMBER OF BOARD MEETINGS
During the Financial Year 2021-22, 6 (Six) Board Meetings were convened through Video Conference facility. Further, for the composition of Committees along with details relating to Committee Meetings, Board Meetings held during the year and details of attendance of Committee Members and Directors in such Meetings please refer to Corporate Governance Report forming part of this Report.
The Notice and Agenda including all material information and minimum information required to be made available to the Board under Regulation 1 7 read with Schedule II Part-A of the SEBI LODR Regulations, were circulated to all Directors, well within the prescribed time, before the Meeting or placed at the Meeting.
BOARD EVALUATION
The Board of Directors has carried out an annual evaluation of its own performance, board committees, and individual Directors pursuant to the provisions of the Act and SEBI Listing Regulations and as per the criteria defined in the said act and regulations.
The above criteria are broadly based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on January 5, 2017.
Further, your Company is adhering to the Fit and Proper Criteria as laid down under RBI Master Directions and also has in place a Board approved Policy for ascertaining the same at the time of appointment of Directors and on a continuing basis.
The Board and the Nomination and Remuneration Committee reviewed the performance of individual Directors on the basis of criteria such as the contribution of the individual director to the board and committee meetings, leadership scale, performance, value creation, governance & compliance.
MEETING OF INDEPENDENT DIRECTORS
During the Financial Year under review, a separate Meeting of the Independent Directors was held on November 01, 2021, without the attendance of Non-Independent Directors and the Management of the Company to review the performance of the Non-Independent Directors and the Board as a whole, after assessing the quality, quantity and timeliness of flow of information between the Management and the Board which is necessary for the Board to effectively and reasonably perform its duties.
POLICY ON DIRECTOR'S APPOINTMENT, REMUNERATION & OTHER DETAILS
The Board on the recommendation of the Nomination & Remuneration Committee adopted a 'Policy on Nomination & Remuneration for Directors, Key Managerial Personnel (KMP) and Senior Management', which, inter-alia, lays down the criteria for identifying the persons who are qualified to be appointed as Directors and/or Senior Management Personnel of the Company, along with the criteria for determination of remuneration of Directors, KMPs, Senior Management and their evaluation and includes other matters, as prescribed under the provisions of Section 178 of the Act and SEBI LODR Regulations.
The Remuneration paid to the Directors is in line with the Remuneration Policy of the Company. Details of Remuneration paid to all the Directors during the Financial Year 2021-22 is more particularly defined in Annual Return in form 'MGT-7' as available on the website of the Company and can be accessed at https://www.aavas.in/investor-relations/annual-reports.
The Remuneration Policy can be accessed through the following link https://www.aavas.in/remuneration-policy
COMMITTEES OF THE BOARD
The Company has the following Nine (9) Board level Committees, which have been constituted in compliance with the requirements of the business and relevant provisions of applicable laws and statutes:
1. Audit Committee
2. Nomination & Remuneration Committee (NRC)
3. Stakeholders Relationship Committee (SRC)
4. Corporate Social Responsibility (CSR) Committee
5. Risk Management Committee (RMC)
6. Asset Liability Management Committee (ALCO)
7. IT Strategy Committee
8. Customer Service & Grievance Redressal (CS&GR) Committee
9. Executive Committee
During the Financial Year under review, all recommendations made by above Committees were accepted by the Board.
The details with respect to the composition, terms of reference, number of Meetings held, etc. of these Committees are given in the Report on Corporate Governance, which forms part of this Report as 'Annexure 2'.
EMPLOYEE STOCK OPTION (ESOP) SCHEMES ESOP-2021
During the Financial Year under review, 'Equity Stock Option Plan for Employees 2021' ("ESOP-2021") has been approved by Members in the 11th AGM of the Company held on August 10. 2021.
The ESOP-2021 empowers the Board and Nomination & Remuneration Committee to execute the scheme.
During the Financial Year under review, there have been no changes in the scheme.
All the above stated ESOP plans are in compliance with the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014 ('SEBI SBEB Regulations') as amended from time to time.
The Nomination & Remuneration Committee monito Rs the ESOP Schemes in compliance with the Act, SEBI SBEB Regulations and SEBI LODR Regulations.
A Certificate received from Secretarial Auditor's of the Company, confirming that the above ESOP Schemes have been implemented in accordance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and are as per the resolutions passed by the Members of the Company will be available for the inspection of the Members of the Company.
Disclosures on various plans, details of options granted, shares allotted upon exercise, etc. as required under SEBI SBEB Regulations are available on the Company's website at https://www.aavas.in/investor-relations/annual-reports
AUDITORS
Statutory Auditors
M/s S.R. Batliboi & Associates LLP, Chartered Accountants, (FRN: 101049W/E300004) were appointed as Statutory Auditor's of the Company, in the 7th AGM held on July 26, 2017, for a period of 5 (Five) years to hold office upto 12th AGM of the Company to be held in Calendar Year 2022.
The Reserve Bank of India (RBI) on April 27, 2021 issued guidelines on appointment of Statutory Auditor (s) by Non Banking Company (NBFC) to be adopted from second half of the Financial Year 2021-22. As per the guidelines the Statutory audit firm is required to be rotated after completion of a period of 3 years.
With respect to the aforesaid circular, M/s. Walker Chandiok & Co LLP, Chartered Accountants(Firm's Registration No. 001076N/N500013) were appointed as the Statutory Auditor's of the Company for a period of 3 (three) consecutive years to hold office with effect from December 02, 2021 until the conclusion of the 14th AGM of the Company to be held in the calendar year 2024.
Further, they have also given their eligibility certificate for the FY 2022-23, in terms of aforesaid RBI circular to the effect that they are eligible to continue as Statutory Auditor's of the Company.
> Auditors' Report
The Statutory Auditor's have not made any adverse comments or given any qualification, reservation or adverse remarks or disclaimer in their Audit Report on the Financial Statements both standalone and consolidated, for the Financial Year 2021-22 and the Report is self-explanatory. The said Auditors' Reports for the Financial Year ended March 31, 2022 on the Financial Statements of the Company forms part of this Annual Report.
Further, the Statutory Auditor's have not reported any fraud in terms of Section 143(12) of the Act.
> Secretarial Auditor's and Secretarial Audit Report
In accordance with Section 204 of the Act and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, M/s. Chandrasekaran Associates, Practicing Company Secretaries (Firm Registration No: P1 988DE002500) were appointed as Secretarial Auditor's to conduct the Secretarial Audit of the Company for the Financial Year 2021-22. The Report of Secretarial Auditor's in form MR-3 for the Financial Year 2021-22 is annexed to this Report as 'Annexure-4'.
The Report of Secretarial Auditor's is self-explanatory and there were no observations or qualifications or adverse remarks in their Report.
In addition to the above and pursuant regulation 24A of SEBI LODR Regulations, a report on annual Secretarial Compliance issued by M/s. Chandrasekaran Associates, Practicing Company Secretaries for FY 2021 -22 has been submitted with the Stock Exchanges. There are no observations, reservations or qualifications in that report.
INTERNAL AUDIT & INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY
The Company has a robust internal audit programme, where the internal auditors, an independent firm of Chartered Accountants, conduct a risk based audit with a view to not only test adherence to policies and procedures but also to suggest improvements in processes and systems. Their audit program is agreed upon by the Audit Committee. Internal audit observations and recommendations are reported to the Audit Committee, which monito Rs the implementation of such recommendations.
The Company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal financial control over financial reporting includes those policies and procedures that:
1 . Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company
2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and Directors of the Company.
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
RBI, through its circular dated 3 February 2021, has introduced risk based internal audit (RBIA) for NBFCs, by which applicable NBFCs shall put in place a RBIA framework by March 31,2022. Further RBI on June 11,2021 issued circular that the provision of RBIA shall be applicable on deposit taking and non-deposit taking HFC's and HFC's shall put in place a RBIA framework by June 30, 2022.
Being a Non-Deposit taking HFC, the circular of RBIA becomes applicable on the Company and Company is in process of implementing the same within the timeline provided in the circular.
MATERIAL CHANGES/EVENTS AND COMMITMENTS, IF ANY
There are no material changes and commitments affecting the financial position of the Company, which have occurred after March 31,2022 till the date of this report.
There has been no change in the nature of business of your Company.
MAINTENANCE OF COST RECORDS
The Company being a HFC is not required to maintain cost records as per sub-section (1) of Section 148 of the Act.
INFORMATION TECHNOLOGY
Technology is a key enabler of any business growth, and Company have in place a robust technology framework across the entire business value chain including sourcing, underwriting, disbursement, collection, customer service and Back office operations.
Your Company has created a significant digital presence in the recent years through Apps, Conversational Bots,Social Media, and AI backed contact center to enable a true Omnichannel customer experience. Our upgraded Customer App is one of the best rated in the industry, enabling Customers to self-service most requirements at their comfort. The employees and associates in the field are enabled with productivity Apps which are closely integrated with digital systems, giving consistent user journeys. We have leveraged advanced analytics capabilities at various levels through data science backed algorithms and decisioning engines.
This year with the help of a leading consulting Company, Your Company has charted out a technology transformation roadmap program for the next 3 - 5 years to prepare the organization for the next 10 years journey. As part of this roadmap, we have initiated multiple projects. One of them is a major digital transformation to consolidate multiple applications in the loan origination and customer service front, leveraging a globally leading customer experience platform. This transformation will be a game changer as it will help create the next level of customer experience and operational efficiency across the organization.
Company has a focused cyber security and IT Governance practice complying to all regulatory guidelines and best practices which are regularly audited and certified by external experts.
Your Company conducts audit of its IT systems through external agencies at regular intervals. The external agencies' suggestions and recommendations are reported to the IT Strategy Committee and Audit Committee and implemented wherever found feasible.
FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS
The Familiarization Programme of your Company aims to familiarize Independent Directors with the Housing industry scenario, the Socio-economic environment in which your Company operates, the business model, the operational and financial performance of your Company, to update the Independent Directors on a continuous basis on significant developments in the Industry or regulatory changes affecting your Company, so as to enable them to take well informed decisions in a timely manner. The familiarization programme also seeks to update the Independent Directors on their roles, responsibilities, rights and duties under the Act and other relevant legislations.
The details of the familiarization programmes have been hosted on the website of the Company and can be accessed via the following link: https://www.aavas.in/familiarization-programme.
HUMAN RESOURCE
Your Company's success depends largely upon the quality and competence of its human capital. Attracting and retaining talented professionals is therefore a key element of the Company's strategy and a significant source of competitive advantage. The Company invested in a technology-driven HR department workflow, supported by a HR firm management company called People Strong.
The Company's people possess multi-sectoral experience, technological experience and domain knowledge. The Company's HR culture is rooted in its ability to subvert age-old norms in a bid to enhance competitiveness. The Company always takes decisions in alignment with the professional and personal goals of employees, achieving an ideal work-life balance and enhancing pride in association. Across all its business operations, your Company had 5,222 permanent employees as on March 31,2022.
Your Company provides induction training to all its new recruits to help them better understand the mission, vision and values of the Company and to help them align with its culture. The Company has been organizing regular in-house training programmes for all its employees besides also nominating employees to attend external training programmes across various specialized functions. The HR team always conduct various employee engagement activities to maintain healthy work life balance and to create positivity among employees.
With the efforts of Human Resource Team and work culture of the Company, your Company has been certified with "Great Place To Work".
RISK MANAGEMENT FRAMEWORK
Your Company has in place a Board constituted Risk Management Committee. The details of the Committee and its terms of reference are set out in the Corporate Governance Report forming part of this Report.
Your Company has Board approved Risk Management Policy wherein risks faced by the Company are identified and assessed.
Your Company believes that our opportunity lies in risk. Since inception Company has philosophy to create its niche and build profitable business which reflects in the financials with consistency similarly on liquidity. Company has clarity on how to deal with the asset liability issue of typical housing finance business, kept very conservative approach towards liquidity and always preferred long term debts.
There are five principle risks in the Company's business namely Credit risk, ALM risk, Market risk, Reputation risk and Regulatory risk. These are measured and reported to the Risk Management Committee on a quarterly basis.
Aavas has created a Risk framework around the business this includes underwriting, legal, valuation and operational risks and all the verticals are mutually exclusive and reporting structure does not get culminated at middle management level. Aavas has developed an institutional intelligence for underwriting methodology which is executed by qualified and experienced team hosting majority of Chartered Accountants. Legal, technical and operations risks have vendo Rs as well as professionally qualified in-house team.
Aavas has acquired technology support for document verification, automated deal movement, data entry i.e. all activities which does not need manual intervention is automated.
In compliance with the clause 51 of Chapter IX- Corporate Governance of Non-Banking Financial Company -Housing Finance Company (Reserve Bank) Directions, 2021, the Company has designated Mr. Ashutosh Atre as Chief Risk Officer (CRO) of the Company who has direct reporting to MD & CEO of the Company. Further, in terms of the said circular, an independent meeting of the CRO with the Board without the presence of MD & CEO is organized on a quarterly basis.
In accordance with the above referred directions, 4 (Four) separate Meetings were held between Mr. Ashutosh Atre and the Board without the presence of MD and CEO of the Company.
During the Financial Year under review, the Risk Management Committee reviewed the risks associated with the business of your Company, undertook its root cause analysis and monitored the efficacy of the measures taken to mitigate the same.
VIGIL MECHANISM/ WHISTLE BLOWER POLICY
Your Company believes in conducting its affai Rs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. Your Company is committed to develop a culture, which provides a platform to Directors and employees to raise concerns about any wrongful conduct.
The Board of Directors has approved the vigil mechanism/ whistle blower policy of the Company, which provides a framework to promote a responsible and secure whistle blowing. It protects Directors/ employees wishing to raise a concern about serious irregularities within the Company. It provides for a vigil mechanism to channelize reporting of such instances/ complaints/ grievances to ensure proper governance. The Audit Committee oversees the vigil mechanism. Employees have been facilitated direct access to the Chairperson of Audit Committee, if needed. The whistle blower policy is placed on the website of the Company and can be accessed at https://www.aavas.in/vigil-mechanism-policy.
DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013
Your Company has zero tolerance towards any action on the part of any of its employees, which may fall within the ambit of 'Sexual Harassment' at workplace. The company has complied with the provisions related to constitution of Internal Complaints Committee.
The Internal Complaints Committee of the Company has not received any complaint of sexual harassment during the Financial Year under review and no complaint was pending as on March 31, 2022. The Annual report as required under section 21 of the act read with rules of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 has been submitted to the respective authority.
CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING IN COMPANY'S SECURITIES
In compliance of the SEBI PIT Regulations, as amended from time to time, the Company has formulated a Code of Conduct- Prevention of Insider Trading Policy which prohibits trading in shares of the Company by inside Rs while in possession of unpublished price sensitive information in relation to the Company. The objective of this Code is to protect the interest of Shareholders at large, to prevent misuse of any price sensitive information and to prevent any insider trading activity by way of dealing in securities of the Company by its Designated Persons. Mr. Sharad Pathak, Company Secretary and Compliance Officer of the Company is authorized to act as Compliance Officer under the Code.
PARTICULARS OF HOLDING/SUBSIDIARY/ ASSOCIATE COMPANIES
Your Company doesn't have any Holding Company or Joint Ventures.
The Shareholder having the substantial interest in the Company is Lake District Holdings Limited.
As on March 31,2022, your Company has one unlisted wholly owned subsidiary named 'Aavas Finserv Limited'. The subsidiary Company has not started any business operations as on the date of this Report.
Pursuant to the provisions of Section 129(3) of the Act, your Company has prepared Consolidated Financial Statements of the Company, which forms part of this Annual Report. Further, a Statement containing salient features of financial statements of the Subsidiary, in the prescribed format AOC-1, pursuant to Section 129(3) of the Act read with the Companies (Accounts) Rules, 2014, is annexed as 'Annexure-6' to this Report.
In accordance with Section 136 (1) of the Act, the Annual Report of your Company containing inter alia, Financial Statements including Consolidated Financial Statements, has been placed on our website: www.aavas.in. Further, the Financial Statements of the subsidiary have also been placed on our website: www.aavas.in.
INVESTOR RELATIONS
Your Company is seen as a benchmark in its outreach to investors, its transparency and disclosures viz Periodic Earnings Calls, Annual Investors/Analysts meet, Video-conferences, Participation in conferences, One-on-One interaction.
Your Company ensures that critical information about the Company is made available to all its investo Rs by uploading such information on the Company's website under the Investo Rs section. Your Company also intimates stock exchanges regarding upcoming events like earnings calls, declaration of quarterly & annual earnings with financial statements and other such matte Rs having bearing on the share price of the Company.
PARTICULAR OF EMPLOYEE REMUNERATION
The statement containing Particulars of employees as required under Section 197 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, annexed as 'Annexure-8' to the Directors' Report.
In accordance with the provisions of Rule 5(2) of the above- mentioned rules, the names and Particulars of the top ten employees in terms of remuneration drawn are set out in the Annexure to this report. In terms of the provisions of Section 1 36(1 ) of the Act, the Directors' Report including the said annexure is being sent to all Shareholders of the Company.
CORPORATE SOCIAL RESPONSIBILITY
The fundamental idea of Corporate Social Responsibility ''is that business and society are inter- woven rather than distinct entities'' and that business must therefore meet particular societal expectations regarding their social, environmental, and economic activities. The Company is committed towards its works and its CSR policy by making a big and lasting difference, through sustainable measures, by actively contribute to the Social, Economic and Environmental development of the community in which we operate ensuring participation from the community and thereby create value for the nation.
In line with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules 2014, Aavas Foundation- a Public Charitable Trust settled by the Company for the purpose of carrying its CSR Activities has undertaken various CSR projects in the area of Skill Development,
Women Empowerment, Rural Development, Reducing inequalities faced by socially and economically backward groups, Healthcare & Wellness, Environment conservation and Ecological balance, promoting education which are in accordance with the Schedule VII of the Act and CSR Policy of the Company.
The Company will continue its engagement with stakeholders including NGOs, professional bodies/ forums and the Government and would take up such CSR activities in line with the Government's intent, to maximize the support to societies affected due to COVID-19 pandemic.
The Annual Report on CSR Activities, is annexed as 'Annexure-9' to this report.
PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The Particulars of energy conservation, technology absorption and foreign exchange earnings and outgo is provided as under in terms of Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014:
ENVIRONMENT HEALTH AND SAFETY (EHS) PROTECTION
Your Company is committed to high Environmental and Social (ES) Standards in its business and will continue to develop its investment decision making processes and procedures so as to reflect the requirements of Indian ES legislation, as well as relevant international standards (specifically IFC Performance Standards) as applicable to our housing finance and MSME business lines. The Company always ensures that healthy and safe working environment is provided to all employees of the Company.
BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORTING
As per Regulation 34(2)(f) of SEBI LODR Regulation, the top one thousand listed entities based on market capitalization, shall attach a Business Responsibility Report with the Annual report describing the initiatives taken by the listed entity from an environmental, social and governance perspective. Provided that the requirement of submitting a business responsibility report shall be discontinued after the Financial Year 2021-22 and with effect from the Financial Year 2022-23, the top one thousand listed entities based on market capitalization shall submit a business responsibility and sustainability report.
However even during the Financial Year 2021-22, the top one thousand listed entities may voluntarily submit a business responsibility and sustainability report in place of the mandatory business responsibility report.
Hence your Company, being a top thousand listed entity and adhering to good Corporate Governance and for the amelioration of the society in which it operates has voluntarily submitted Business Responsibility and Sustainability Report (BRSR) describing the initiatives taken by the Company from an environmental, social and governance perspective, as 'Annexure-11'.
EXTRACTS OF ANNUAL RETURN
Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of the Act, read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014 the Annual Return in form MGT-7 as at March 31, 2022 is available on the website of the Company and can be accessed at https://www.aavas.in/investor-relations/annual-reports
ADDITIONAL DISCLOSURES UNDER COMPANIES (ACCOUNTS) RULES, 2014
a. The details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the Financial Year:
During the Financial Year under review, the Company made neither any application nor any Proceeding is pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016), therefore, it is not applicable to the Company.
b. The details of difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.
During the Financial Year under review, it is not applicable to the Company.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Since the Company is an HFC, the disclosure regarding Particulars of loans given, guarantees given and security provided in the ordinary course of business is exempted under the provisions of Section 186(11) of the Act.
However, the details of loans, guarantees, and investments made as required under the provisions of Section 186 of the Act and the rules made thereunder are set out in the Notes to the Standalone Financial Statements of the Company.
CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
In accordance with the provisions of Section 188 of the Act and rules made thereunder, all related party transactions entered during FY 21-22 were on an arm's length basis and in the ordinary course of business under the Act and were not material under the SEBI Listing Regulations, the details of which are included in the notes forming part of the financial statements.
The details as required to be provided under Section 134(3)(h) of the Act are disclosed in Form AOC-2 as 'Annexure-7' which forms part of this Report.
A list of all related party transactions is placed before the Audit Committee as well as the Board. The Audit Committee has granted omnibus approval for related party transactions as per the provisions of the Act and the Listing Regulations. Disclosures relating to related party transactions are filed with the stock exchanges on a half-yearly basis.
Further as required by SEBI and RBI Master Directions, 'Policy on transactions with Related Parties' is given as 'Annexure-10' to this Report and can be accessed on the website of the Company at https://www.aavas.in/policy-on-transactions-with-related-parties.
INTERNAL GUIDELINES ON CORPORATE GOVERNANCE
During the Financial Year under review, your Company adhered to the Internal Guidelines on Corporate Governance adopted in accordance with clause 55 of chapter IX-Corporate Governance of RBI Master Directions, which inter-alia, defines the legal, contractual and social responsibilities of the Company towards its various stakeholders and lays down the Corporate Governance practices of the Company.
The said policy is available on the website of the Company and can be accessed at https://www.aavas.in/internal-guidelines-on- corporate-governance.
DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 134(3)(c) read with Section 134(5) of the Act, and based on the information provided by the Management, the Board of Directors report that:
a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures.
b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the state of affai Rs of the Company at the end of the Financial Year and of the profit and loss of the Company for that period.
c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.
d) the Directors had prepared the annual accounts on a going concern basis.
e) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively; and
f) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.
BUSINESS OVERVIEW & FUTURE OUTLOOK
A detailed business review & future outlook of the Company is appended in the Management Discussion and Analysis Section of Annual Report.
ACKNOWLEDGEMENT AND APPRECIATION
Your Board of Directors take this opportunity to express their appreciation to all stakeholders of the Company including the RBI, NHB, the Ministry of Corporate Affairs, Securities and Exchange Board of India, Stock Exchanges and other Regulatory Authorities, Bankers, Lenders, Financial Institutions, Members, Credit Rating agencies, National Securities Depository Limited, Central Depository Services (India) Limited, NSE IFSC Limited and Customers of the Company for their continued support and trust.
Your Directors further take this opportunity to appreciate and convey their thanks to the Kedaara Capital and Partners Group for their invaluable and continued support and guidance.
Your Directors also wish to place on record their appreciation for the commitment displayed by all the executives, officers, staff and the Senior Management team of the Company, in recording an excellent performance by the Company during the Financial Year.