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കമ്പനിയുടെ പേരിലെ ആദ്യത്തെ കുറച്ച് അക്ഷരങ്ങള്‍ എന്റര്‍ ചെയ്യൂ, അതിന് ശേഷം 'ഗോ' എന്നതില്‍ ക്ലിക്ക് ചെയ്യൂ

Directors Report of Aavas Financiers Ltd.

Mar 31, 2023

The Board of Directors (“the Board”) have pleasure in presenting the 13th Annual Report on the operational and financial performance of Aavas Financiers Limited (“the Company” or “Aavas”) along with the Audited Standalone and Consolidated Financial Statements for the Financial Year ended March 31, 2023.

FINANCIAL PERFORMANCE

Your Company has witnessed growth and consistent performance during the Financial Year under review. Your Company is a leading affordable Housing Finance Company in India. The Company caters to the needs of customers belonging to low and middle income segment in semi-urban and rural areas and primarily in the un-served and un-reached markets.

The standalone financial performance for the Financial Year ended March 31, 2023 and a comparison with the previous year is summarized below:

(Hin crore)

Particulars

For the Year ended

For the Year ended

March 31, 2023

March 31, 2022

A

Total Income

1,610.15

1,305.56

Less:

- Total Expenditure before Depreciation & Amortization and provision

(1,020.01)

(804.34)

- Impairment on financial instruments

(12.42)

(22.61)

- Depreciation & Amortization

(28.72)

(23.76)

B

Total Expenses

(1,061.15)

(850.70)

C

Profit Before Tax (A-B)

548.99

454.86

D

Less: Provision for Taxations (Net of Deferred Tax)

(118.92)

(98.06)

E

Profit After Tax (C-D)

430.07

356.80

F

Add: Other Comprehensive Income (Net of Tax)

(1.79)

0.71

G

Total Comprehensive Income (E F)

428.28

357.51

Transfer to Statutory Reserve

85.66

71.50

Your Company has made a positive impact on the lives of countless customers in its 12 years of journey by providing housing finance to the customers and enabling them to own a home. Our distribution has been further strengthened to 346 branches across 13 States.

The key financial performance indicators for the Financial Year are as follows:

• Total Income for the Financial Year 2022-23 increased to H1,610.15 crore vis-a-vis H1,305.56 crore for the Financial Year 2021-22.

• Profit Before Tax for the Financial Year 2022-23 increased to H548.99 crore vis-a-vis H454.86 crore for the Financial Year 2021-22.

• Profit After Tax for the Financial Year 2022-23 increased to H430.07 crore vis-a-vis H356.80 crore for the Financial Year 2021-22.

• The Assets Under Management (AUM) as at March 31, 2023 amounted to H14,166.66 crore vis-a-vis H11,350.21 crore in the previous year; a year-on-year growth of 25%.

Further, during the Financial Year under review, there was no

change in nature of business of the Company.

AAVAS 3.0 Building a Lasting Institution

Your Company started its journey as Au Housing Finance Private Limited in 2011 as a subsidiary of Au Financiers India Limited (now AU small Finance Bank). It was the first phase of the Company’s journey where the proof of concept of affordable housing model was being tested (Aavas 1.0). Your Company was renamed as Aavas Financiers Limited in 2017 and since evolved into a standalone business under the ownership of Kedaara Capital and Partners Group with a professional management team and experienced Board that subsequently went public in 2018 (Aavas 2.0). Your Company is now continuing its evolution and has embarked on the journey to become India’s most trusted affordable housing finance player led by people and technology and emerge victorious in a highly competitive market, while maintaining the entrepreneurial spirit. The aim is to leverage technology, digital and analytics to drive growth and operating leverage. The Company’s investments in technology is expected to help the business deliver sustainable quality growth and superior customer experience (Aavas 3.0).

The Company continues to build India’s most trusted affordable housing finance business with proactive investments in people, processes and positions. The Company’s investments in futuristic technologies and analytics is expected to help the business deliver sustainable growth and enriched customer outcomes.

Aavas 3.0 is driven by a combination of organic growth and desire to attain scale. Aavas has established competence in customer acquisition and performance and going ahead, intends to deepen market penetration by entering diverse markets and segments.

DIVIDEND

Considering the capital intensive nature of the Company, your Directors felt it prudent to retain the earnings for the Financial Year under review to be ploughed back in business, which shall result in further augmentation of the Company’s growth and Shareholders’ wealth. Accordingly, no dividend has been recommended for the Financial Year ended March 31, 2023.

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/img/pdf/ dividend-distribution-policy.pdf and forms part of this Report as ‘Annexure-5’.

CAPITAL STRUCTURE Authorized Capital:

There was no change in the Authorized Capital of the Company during the Financial Year under review. The Authorized Capital of the Company is H85,00,00,000/- (Rupees eighty five crore only) divided into 8,50,00,000 (Eight crore fifty lakh) Equity Shares of H10/-(Rupees ten only) each.

Issued, Subscribed & Paid up Capital:

The issued, subscribed and paid up Capital of the Company as on March 31, 2023 stood at H79,05,68,740 (Rupees seventy nine crore five lakh sixty eight thousand seven hundred and forty only) consisting of 7,90,56,874 (Seven crore ninety lakh fifty six thousand eight hundred and seventy four) Equity Shares of H10/- (Rupees ten only) 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 1,20,423 Equity Shares of H10/-(Rupees ten only) 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 (UNDER SECTION 29C OF THE NHB ACT, 1987)

Your Company has transferred H85.66 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 engaged in carrying out the business of housing finance activities in India. The Company’s lending operations remained strong with the growing demand for housing loans. Your Company adopted contiguous on-ground expansion across regions; as of March 31, 2023, the Company conducted operations through 346 branches in 13 states.

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 details with respect to operating and financial performance of your Company has been covered in the Management Discussion and Analysis Report (MDAR), 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 23% to H1,610.15 crore for the Financial Year ended March 31, 2023 as compared to H1,305.56 crore for the previous Financial Year. Profit Before Tax (PBT) was 21% higher at H548.99 crore as compared to H454.86 crore for the previous Financial Year.

Profit After Tax (PAT) was 21% higher at H430.07 crore as compared to H356.80 crore for the previous Financial Year.

Sanctions

During the Financial Year under review, your Company has sanctioned housing loans for H5,168.83 crore as compared to H3,762.09 crore in the previous Financial Year with an annual growth of 37%. The cumulative loan sanctions since inception of your Company stood at H23,390.06 crore as at March 31, 2023. 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 H5,024.54 crore as compared to H3,602.24 crore in the previous Financial Year registering an annual growth of 39%. The cumulative loan disbursement since inception as at March 31, 2023 was H22,381.55 crore.

Assets Under Management (AUM)

The AUM of your Company stood at H14,166.66 crore (including assignment of H2,757.23 crore) as at March 31, 2023 as against H11,350.21 crore (including assignment of H2,343.78 crore) in the previous Financial Year, with a growth of 25%.

As of March 31, 2023, the average size of loan sanctioned was H8.90 lakh and average tenure was 198.2 months in the AUM (on origination basis).

Pradhan Mantri Awas Yojna (PMAY) Scheme

The Company has received subsidy under PMAY-CLSS worth H284.57 crore towards 13,518 beneficiaries during the Financial Year and the same has been credited to the respective customers’ loan accounts.

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. 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, 2023 were 0.92% and 0.68% respectively (against

0.99% and 0.77% respectively in the previous Financial Year).

CAPITAL ADEQUACY RATIO

Your Company’s Capital Adequacy Ratio as at March 31, 2023 was 46.96% (previous Financial Year 51.93%) which is far above the minimum required level of 15% as per the provisions of the RBI Master Directions showing strong position of the Company.

CREDIT RATING

The Credit Rating represent the highest degree of safety regarding timely servicing of financial obligations.

Your Company’s financial prudence is reflected in the strong credit rating assigned 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.

An upgrade in the credit rating signifies a significant improvement in the creditworthiness of the Company. Considering the steady growth, strong profitability and robust balance sheet, rating agencies upgraded the credit rating of the Company. During the Financial Year under review, the long-term credit rating of the Company has been upgraded from AA-/Positive to AA/Stable by both CARE Ratings and ICRA Limited. Outlook on both ratings is Stable. The Shortterm credit rating is reaffirmed to A1 by ICRA, CARE and India Ratings.

For more details on credit ratings, kindly refer Corporate Governance Report forming part of this report.

REGULATORY & STATUTORY COMPLIANCES

A crucial element in business and corporate management is compliance of applicable statutory provisions and adherence of a business to regulations and laws. Keeping that in view 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 circulars and notifications to keep the Board informed and report on actions initiated on the same. The Company also complies with the provisions of the Companies Act, 2013 including the Secretarial Standards issued by ICSI, SEBI LODR Regulations, SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, Income Tax Act 1961, and all other applicable statutory requirements.

Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs

The Reserve Bank of India in 2021 issued Scale Based Regulation (SBR) a revised regulatory framework for NBFC’s which is applicable to your Company being a NBFC HFC-category falling under middle layer.

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 and set of fresh regulations being introduced in respective timelines.

With respect to above, the RBI has issued various circulars/ guidelines in the Financial Year 2021-22 and 2022-23, which were duly implemented by the Company including formation of policies, implementing procedures and to review their outcome on periodic basis.

DEPOSITS

Your Company being a non-deposit taking Housing Finance 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

• Felicitated by Hon’ble Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman for Best NBFC for the year 2020-21 in FE India’s Best Banks Awards.

• Felicitated with the Economic Times Best BFSI Brands 2023.

• Pioneer in Self Built Green Housing-80 EDGE Certified Green Homes by Sintali, UK based certifier.

• Head Office of the Company certified with LEED Gold Certification.

RESOURCE MOBILIZATION

Your Company has in place a borrowing policy framework to cater its borrowings needs. The objective of the policy is to diversify the liability portfolio of the Company and to reduce risk of overdependence on any particular lenders and instrument. The Company has diverse set of lenders/investors that includes public sector bank, private sector bank, National Housing Bank and other financial institutions.

Your Company has vide Special Resolution passed on July 21, 2022, under Section 180 (1) (c) of the Companies Act, 2013, 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 H17,000 crore (Rupees seventeen thousand crore only) and the total amount so borrowed shall remain within the limits as prescribed by RBI.

The Weighted Average Borrowing Cost as at March 31, 2023 was 7.61% (including Securitization/ Assignment) as against 6.88% as at the end of the previous Financial Year. As at March 31, 2023, your Company’s sources of funding were primarily in the form of Long Term Loans from Banks and Financial Institutions (45%), followed by Securitization/Direct assignment (22%), NHB Refinance (20.8%), Debt capital market (12.2%).

Your Company has a comfortable liquidity position as on March 31, 2023 with Rs. 1381.6 crore (including FD’s). Further, the Liquidity Coverage Ratio (‘LCR’) for the Financial Year ended March 31, 2023 was 212.16% as against the regulatory requirement of 60%.

Term Loans from Banks and Financial Institutions

The Company, during the Financial Year, received aggregate fresh loan sanctions amounting to H3,200 crore and has availed loans aggregating to H2,765 crore. The outstanding term loans from Banks and Financial Institutions as at March 31, 2023 were H5,627.34 crore (excluding PTC and CC) with average tenure of 9.23 years.

Securitization/Assignment of Loan Portfolio

Your Company has actively tapped Securitization/Direct Assignment market, which has enabled it to create liquidity, diversify liability profile and minimizing asset liability mismatches.

During the Financial Year under review, your Company received purchase consideration of H954 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 H900 crore under the NHB refinance scheme. Your Company availed funds of H1,044 crore under various Refinance Schemes such as for Affordable Housing Fund,

Regular Refinance Scheme and Special Refinance Facility. Total outstanding refinance at the end of the current Financial Year stood at H2,603 crore.

Non-Convertible Debentures (NCDs)

Details of Non-convertible debentures are as following:

I. Multilateral/Development Financial Institutions

As on March 31, 2023, the Company’s outstanding NCDs stood at H683.14 crore as compared to H878.9 crore as on March 31, 2022.

II. Domestic Financial Institutions

As on March 31, 2023, the Company’s outstanding NCDs from Domestic Financial Institutions stood at H123.9 crore (including subordinate debt of H24.9 crore) as compared to H123.9 crore (including subordinate debt of H 24.9 crore) as on March 31, 2022.

III. Banks

As on March 31, 2023, the Company’s outstanding NCDs from Banks stood at H209.8 crore (including subordinate debt of H74.9 crore) as compared to H249.8 crore (including subordinate debt of H74.9 crore) as on March 31, 2022.

Your Company has not issued any Commercial Paper & Short Term Instrument during the Financial Year 202223 and as on March 31, 2023, the Company’s Commercial Paper outstanding is NIL.

Further, the Company has not issued any NCD during the Financial Year 2022-23.

Rupee Denominated External Commercial Borrowing

As on March 31, 2023 the outstanding balance of Rupee Denominated External Commercial Bond stood at H507.5 crore (including outstanding balance of social masala bond of H357.9 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 investors 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 Financial 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 Affairs (‘MCA’) dated June 05, 2020.

DISCLOSURE UNDER CHAPTER XI-GUIDELINES ON PRIVATE PLACEMENT OF NON-CONVERTIBLE DEBENTURES (NCDs) OF RBI MASTER DIRECTIONS:

(i) The total number of NCDs which have not been claimed by the Investors 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

The Company has appointed IDBI Trusteeship Services Limited as the Debenture Trustee for the benefit of the debenture holders. The details of Debenture Trustee are available on the Company’s website i.e. https://www.aavas.in/ details-of-debenture-trustee-rta-and-grievance.

BRANCH EXPANSION

The Company reinforced its go-to-market by setting up branches across India. The Company engaged in contiguous on ground expansion across regions. As of March 31, 2023, the Company conducted operations through 346 branches covering 13 states, comprising Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Haryana, Uttar Pradesh, Chhattisgarh, Delhi, Punjab, Uttarakhand, Himachal Pradesh, Karnataka and Odisha. The Company added 32 branches in Financial Year 2022-23.

Your Company has its Registered Office in Jaipur, Rajasthan and its branch network as on March 31, 2023 vis-a-vis the previous Financial Year is detailed hereunder:

State

Branches

Branches

(As on March

(As on March

31, 2023)

31, 2022)

Rajasthan

102

99

Maharashtra

48

45

Madhya Pradesh

49

45

Gujarat

44

42

Uttar Pradesh

27

24

Haryana

17

17

Karnataka

24

11

Uttarakhand

9

9

Chhattisgarh

9

8

Delhi

4

4

Himachal Pradesh

4

4

Odisha

6

4

Punjab

3

2

Total number of branches

346

314

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The composition of the Board is in accordance with Section 149 of the Act and Regulation 17 of SEBI LODR Regulations with an appropriate combination of Executive, Non-Executive and Independent Directors.

The Board of Directors of the Company plays a crucial role in overseeing how the management serves the short and long-term interests of stakeholders. This belief is reflected in Aavas governance practices, under which the Company strives to maintain an effective, informed and independent Board.

The Members of the Company’s Board of Directors are eminent persons of proven competence and integrity. Non-Executive Directors, including Independent Directors, play a critical role in imparting value to the Board processes by bringing an independent judgment in the areas of strategy, performance, resource management, financial reporting, the overall standard of Company’s conducts etc.

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 as on March 31, 2023 who bring in a wide range of skills and experience to the Board.

The composition of Board of the Company is as under:

Name of the Director

Designation

DIN

Mr. Sandeep Tandon

Chairperson and Independent Director

00054553

Mr. Sushil Kumar Agarwal*

Managing Director

03154532

Mr. Sachinderpalsingh Jitendrasingh Bhinder**

Managing Director and CEO

08697657

Mrs. Kalpana Iyer

Independent Director

01874130

Mrs. Soumya Rajan

Independent Director

03579199

Mr. Ramachandra Kasargod Kamath

Non-Executive Nominee Director

01715073

Mr. Vivek Vig

Non-Executive Nominee Director

01117418

Mr. Nishant Sharma

Promoter Nominee Director

03117012

Mr. Manas Tandon

Promoter Nominee Director

05254602

Mr. Kartikeya Dhruv Kaji

Promoter Nominee Director

07641723

‘Resigned w.e.f. May 03, 2023

** appointed as CEO w.e.f February 02, 2023 and Managing Director w.e.f. May 03, 2023 (MD and CEO).

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 Affairs (“IICA”). 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 Companies Act, 2013 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 Securities Exchange Board of India (“SEBI”)/Ministry of Corporate Affairs (“MCA”) or any such statutory authority. The same forms part of this Annual Report as ‘Annexure-1’.

DISCLOSURE UNDER SECTION 197(14) OF THE ACT

The Managing Director and CEO of the Company has not received any commission from the Company’s subsidiary company.

BOARD MEETINGS

There were 4 (four) Board meetings held during the Financial Year 2022-23. The particulars of the meetings held and attendance of the Directors in the meetings are detailed in the Corporate Governance Report, which is annexed as an integral 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 17 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 Evaluation is the most effective way to ensure that the Board understands its duties and to adopt effective corporate governance practices. 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 LODR 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 SEBI on January 5, 2017, requirements of Section 178 read with Clause VII of Schedule IV of the Act and SEBI LODR Regulations.

The evaluation process is carried out through a platform called “Goveva” which is a web based platform, to ease the process of board evaluation, to increase the efficiency and to automate report generation.

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 March 29, 2023 without the attendance of Non-Independent Directors and the Management of the Company. The Independent Director had discussed and reviewed the performance of the NonIndependent Directors and the Board as a whole, and also assessed 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.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

Pursuant to Regulation 25(7) of SEBI LODR Regulations, Schedule IV to the Companies Act, 2013 (hereinafter referred as “Applicable laws”), the Company conducts familiarization programme for the Independent Directors, to familiarize the Independent Directors with their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc., through various programmes.

The Board is also periodically briefed on the various changes, if any, in the regulations governing the conduct of Non -Executive Directors including independent directors.

The details of the familiarization programmes have been hosted on the website of the Company and can be accessed through following link: https://www.aavas.in/img/pdf/details-of-familiarization-programme-imparted-to-independent-directors.pdf.

POLICY ON DIRECTOR’S APPOINTMENT, REMUNERATION & OTHER DETAILS

The Company has in place 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 Companies Act, 2013 and Regulation 19 of SEBI LODR Regulations. Further, the Compensation policy of the Company is in line with the compensation guidelines issued by the Reserve Bank of India (RBI) pursuant to Scale Based 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 2022-23 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 is placed on the website of the Company and can be accessed at https://www.aavas.in/codes-and-policies.

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 (AC)

2. Nomination & Remuneration Committee (NRC)

3. Stakeholders Relationship Committee (SRC)

4. Corporate Social Responsibility Committee (CSR)

5. Risk Management Committee (RMC)

6. Asset Liability Management Committee (ALCO)

7. Information Technology (IT) Strategy Committee

8. Customer Service & Grievance Redressal Committee (CS&GR)

9. Executive Committee (EC)

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

Employee Stock Options have been recognised as an effective instrument to attract talent and align the interest of employees with that of the Company, providing an opportunity to the employees to share in the growth of the Company and to create long term wealth in the hands of employees, thereby acting as a retention tool.

ESOP 2016

Pursuant to the approval accorded by the Shareholders on February 23, 2017 the Company has approved and adopted

Employee Stock Option Plan for Employees-2016 (“ESOP-2016-I”).

During the Financial Year under review, the company made grant aggregating to 1,25,000 options on March 30, 2023 under ESOP-2016-I.

ESOP-2022

During the Financial Year under review, ‘Equity Stock Option Plan for Employees 2022’ (“ESOP-2022”) has been approved

by Members in the 12th AGM of the Company held on July 21, 2022.

The ESOP-2022 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 ESOP plans of the Company are in compliance with the provisions of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (‘SEBI SBEB and Sweat Equity Regulations’) as amended from time to time.

The Nomination & Remuneration Committee monitors the ESOP Schemes in compliance with the Act, SEBI SBEB and Sweat Equity Regulations and SEBI LODR Regulations.

A Certificate from Secretarial Auditors of the Company, confirming that the above ESOP Schemes have been implemented in accordance with the SEBI SBEB and Sweat Equity Regulations as amended from time to time 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.

Disclosure on various plans, details of options granted, shares allotted upon exercise, etc. as required under SEBI SBEB and Sweat Equity Regulations and Companies (Share Capital and Debentures) Rules, 2014 is available on the Company’s website at https://www.aavas.in/investor-relations/annual-reports.

AUDITORSStatutory Auditors and Auditors’ Report

As per Section 139 of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, the Members of the Company approved the appointment of M/s Walker Chandiok & Co LLP, Chartered Accountants (Firm’s Registration No. 001076N/N500013) as the Statutory Auditors 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. The Company has received certificate from the said auditors that they are not disqualified and are eligible to hold the office as Auditors of the Company.

The Statutory Auditors have not made any adverse comments or given any qualification, reservation or adverse remarks or disclaimer in their Audit Reports on the Financial Statements both standalone and consolidated for the Financial Year 202223 and the Reports are self-explanatory. The said Auditors’

Reports for the Financial Year ended March 31, 2023 on the Financial Statements of the Company forms part of this Annual Report.

Further, the Statutory Auditors have not reported any fraud in terms of Section 143(12) of the Act.

Secretarial Auditors 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: P1988DE002500) were appointed as Secretarial Auditors to conduct the Secretarial Audit of the Company for the Financial Year 2022-23. The Report of Secretarial Auditors in form MR-3 for the Financial Year 2022-23 is annexed to this Report as ‘Annexure-3’.

The Report of Secretarial Auditors is self-explanatory and there were no observations or qualifications or adverse remarks in their Report.

In addition to the above and pursuant to regulation 24A of SEBI LODR Regulations, a report on Annual Secretarial Compliance issued by M/s. Chandrasekaran Associates, Practicing Company Secretaries for the Financial Year 202223 has been submitted with the Stock Exchanges and forms part of this report as ‘Annexure-4’. There are no observations, or qualifications or adverse remarks in the report.

Information System Audit (IS Audit)

The objective of IS Audit is to provide an insight on the effectiveness of controls that are in place to ensure confidentiality, integrity and availability of System Application and Entity’s IT infrastructure. IS Audit identify risks and methods to mitigate risk arising out of System Application and IT infrastructure such as server architecture, local and wide area networks, physical and information security, telecommunications etc.

INTERNAL AUDIT & INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

The Reserve Bank of India has stipulated that all deposit taking and non-deposit taking HFCs are mandated to have a RBIA framework in place by June 30, 2022. The Company being a Non-Deposit taking HFC, the circular of RBIA becomes applicable accordingly, the Company has put in place RBIA framework within the timeline and has developed an in house team and appointed a Head of Internal Audit (HIA) to conduct audit of functional areas and operations of the Company.

The Internal Audit department is headed by the HIA who reports directly to the Audit Committee of the Board. The

primary responsibility of the HIA is to effectively manage the Internal Audit department and to ensure that it adds value to the entity and its objectives. HIA ensures compliance with the internal audit principles and standards and the entity’s independence of the Internal Audit department, its audit staff and its performance against key performance indicators, annually to the Audit Committee and the Board.

The Audit Committee reviews and evaluates adequacy and effectiveness of the Company’s internal control environment and monitors the implementation of audit 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 pertains to maintenance of records, provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements and 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.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS

During the year under review, there were no significant or material orders passed by the regulators or courts or tribunals against the Company nor any fine/penalty levied on the Company.

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, 2023 till the date of this report.

However, after the closure of the Financial Year 2022-23 and before the approval of this report, Mr. Sushil Kumar Agarwal resigned from the post of Managing Director w.e.f. May 03, 2023 and Mr. Sachinderpalsingh Jitendrasingh Bhinder has been appointed as the Managing Director and CEO of the Company w.e.f. May 03, 2023.

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

The Company has always been at the forefront in the housing finance industry in using technology to provide productivity tools to employees and field associates and to provide an integrated journey to customers for a smooth loan disbursal

experience.

In the recent past, the Company charted out a roadmap for technology led business transformation to make the Company ready for the next 10-year growth journey based on the following 3 pillars - enable sustainable growth with operating leverage, enhance technology capabilities and create a superior customer experience. Your Company has made significant progress along with the defined roadmap.

The Company wants to build a modern, innovative, and future-ready digital ecosystem to provide a 360-degree view from transaction origination to reporting. Technology is at the heart of the business transformation which is being driven at Aavas. Loan Origination System has been upgraded with Salesforce and Loan Management and Financial systems are being upgraded with ORACLE Flexcube Core banking and ORACLE Fusion ERP Applications. Using these platforms, the entire customer journeys on web/app platforms have been reimagined to create a best-in-class platform for loan disbursements. Using multiple fintech integrations, processing of the loan applications has been speeded up and cloud-based data and analytical infrastructure provide insights for further optimizations.

The Company has implemented robust cybersecurity measures and by working with IS Audit has complied with all regulations, external and internal audits and continues to monitor and update policies to remain compliant with evolving regulatory requirements.

HUMAN RESOURCE

The Company has always believed that its employees are its most valued resource and has always ensured their all-round development. 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 well renowned HRMS software called People Strong.

Human Capital represents an aggregate statement of the competencies, knowledge and experience of the employees. Aavas provides a work culture that encourages creativity; it has a diverse workforce, which ensures integrated and sustainable growth.

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. The Company’s permanent employee count stood at 6,034 as of March 31, 2023.

RISK MANAGEMENT FRAMEWORK

Your Company has in place a Board constituted Risk Management Committee as per the Regulation 21 of SEBI LODR Regulations and in compliance with the RBI regulations and guidelines as amended from time to time which assists the Board to establish a risk culture and risk governance framework in the Company. The details of the Committee and its terms of reference are set out in the Corporate Governance Report forming part of this Report.

The Risk Management Committee meets at least twice in the year and at such other times as the Board or Chairperson of the Committee shall require. The Committee ensure that appropriate methodology, processes and systems are in place to monitor and evaluate risks associated with the business of the Company and monitor and oversee implementation of the risk management policy, including evaluating the adequacy of risk management systems.

The Company has in place a Board approved Risk Management Policy and a Policy on Internal Capital Adequacy Assessment Process (ICAAP) pursuant to guidelines issued by RBI.

The key risks that Company is exposed to in the course of its business are Credit Risk, ALM Risk, Concentration Risk, Interest Rate Risk, Legal Risk, Reputation Risk, Technical Risk, Cybersecurity Risk, Fraud Risk, Regulatory Risk. These are measured and reported to the Risk Management Committee on a quarterly basis.

The Company 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 vendors as well as professionally qualified in-house team.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

Pursuant to Section 177(9) and (10) of the Companies Act, 2013, and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 the Company has formulated a Whistle Blower Policy for vigil mechanism of Directors and employees to report to the management about unethical behavior, fraud or violation of Company’s Code of Conduct. The mechanism provides for adequate safeguards against victimization of employees and Directors who use such mechanism and makes provision for direct access to the chairperson of the Audit Committee in exceptional cases. None of the personnel of the Company has been denied access to the Audit Committee. The whistle blower policy is placed on the website of the Company and can be accessed at https://www. aavas.in/img/pdf/Whistle-Blower-Policy.pdf.


DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

The Company has in place a policy for prevention of sexual harassment in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). The Company has complied with the provisions relating to constitution of Internal Complaints Committee (ICC) under the POSH Act. ICC has been set up to redress complaints received regarding sexual harassment. All employees are covered under this policy. During the year, the Company conducted workshops for employees creating awareness about POSH Act.

The details of complaints received and disposed during the Financial Year are provided in Corporate Governance Report forming part of this report.

CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING IN COMPANY’S SECURITIES

In accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 as amended from time to time, the Company has complied and formulated a Code of Conduct for Prevention of Insider Trading Policy, which prohibits trading in shares of the Company by insiders 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.

Further the Company has maintained a Structural Digital Database (SDD) pursuant to provisions of regulations 3 (5) and (6) of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.

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, 2023, 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 Statement 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 at https://www.aavas.in/investor-relations/annual-reports. Further, the Financial Statements of the subsidiary have also been placed on our website at https:// www.aavas.in/investor-relations/financial-subsidiary.

INVESTOR RELATIONS

Your Company always believes in leading from the front with emerging best practices in Investor Relations and building a relationship of mutual understanding and trust.

The Company communicates with its investors through meetings with analysts and discussions between Fund Managers and Management. The Company also participates at investor conferences from time to time. All interactions with institutional investors, fund managers and analysts are based on generally available information that is accessible to the public on a non-discriminatory basis. The presentations made to analysts and fund managers are placed on the Company’s website and are also submitted to Stock Exchanges. The transcripts of such meetings as well as the audio/video recordings are uploaded on the website.

Quarterly and Annual Earnings calls are scheduled through structured conference calls/weblinks to keep various stakeholders informed about the past performance and outlook of the industry, especially those having a bearing on the Company.

The investor relation section on Company’s website at www. aavas.in contains all important public domain information including Financial Results, various policies framed/approved by the Board, presentations made to the analysts and institutional investors, schedule and transcripts of earnings call with investors, matters concerning the shareholders, details of the contact persons, etc.

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 abovementioned rules, the names and particulars of the top ten employees in terms of remuneration drawn are set out in the ‘Annexure-8’ to this report. In terms of the provisions of Section 136(1) of the Act, the Directors’ Report including the said annexure is being sent to all Shareholders of the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company’s initiatives in society are focused on the realisation of the twin goals of Stakeholders‘ Value Enhancement and societal value creation in a mutually reinforcing and synergistic manner. The Company is mindful of the needs of the communities and strives to make a positive difference in the society. Your Company’s commitment to the society is sincere and longstanding.

The Vision of Company is to enhance value creation in the society and in the community in which it operates, through its services, conduct and CSR initiatives, to promote sustained growth for the society and community, in fulfillment of its role as a socially responsible corporate, with environmental concern.

The Annual Report on CSR Activities, is annexed as ‘Annexure-9’ to this report.

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 Regulations, the top 1000 (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.

Your Company, being a top thousand listed entity as per Market Capitalization and adhering to good Corporate Governance and for the amelioration of the society in which it operates the Business Responsibility and Sustainability Report (BRSR) describing the initiatives taken by the Company from an environmental, social and governance perspective, forms part of this Annual Report as ‘Annexure-11’.

ANNUAL RETURN

Pursuant to the provisions of Section 134(3) and Section 92(3) of the Act, read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014 the Annual Return in form MGT-7 as on March 31, 2023 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 Financial Year 2022-23 were on 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 SEBI LODR Regulations.

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/img/pdf/Policy-on-Materiality-of-related-party-transactions-and-on-dealing-with-related-party-transactions.pdf.

INTERNAL GUIDELINES ON CORPORATE GOVERNANCE

Your Company is committed towards achieving the highest standards of Corporate Governance right from its establishment by staying true to its core values of Customer first, transparency, fairness in action, accountability, integrity and equity in all its engagements. The Company’s Corporate Governance framework ensures that it makes timely and appropriate disclosures and shares factual and accurate information to its stakeholders so as to make an informed decision.

The Company has approved and adopted the Internal Guidelines on Corporate Governance. The Internal Guidelines on Corporate Governance has been framed in accordance with The Companies Act, 2013, SEBI LODR Regulations, 2015 (SEBI LODR, Regulations), RBI Master Directions, 2021 and other applicable rules and regulations.

The guideline is available on the website of the Company and can be accessed at https://www.aavas.in/img/pdf/internal-guidelines-on-corporate-governance.pdf.

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 affairs 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.

ACKNOWLEDGEMENTS AND APPRECIATION

The Board of Directors place on record their gratitude for valuable guidance and the support to all Stakeholders of

the Company including the Reserve Bank of India, National Housing Bank, the Ministry of Corporate Affairs, Securities and Exchange Board of India, Insurance Regulatory and Development Authority 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.


Mar 31, 2022

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:

(H in crore)

Particulars

For the Year ended March 31,2022

For the Year ended March 31,2021

A

Total Income

1,305.56

1,105.34

Less:

- Total Expenditure before Depreciation & Amortization and provision

(804.34)

(694.26)

- Impairment on financial instruments

(22.61)

(37.14)

- Depreciation & Amortization

(23.76)

(20.60)

B

Total Expenses

(850.70)

(752.01)

C

Profit Before Tax (A-B)

454.86

353.33

D

Less: Provision for Taxations (Net of Deferred Tax)

(98.06)

(63.83)

E

Profit After Tax (C-D)

356.80

289.50

F

Add: Other Comprehensive Income (Net of Tax)

0.71

0.83

G

Total Comprehensive Income (E F)

357.51

290.33

Transfer to Statutory Reserve

71.50

58.07

Your Company posted Total Income (Total Interest Income and Other Income) of H 1,305.56 crore and Total Comprehensive Income of H 357.51 crore for the Financial Year ended March 31, 2022, as against H 1,105.34 crore and H 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 H 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 borrowers 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 borrowers 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 H 85,00,00,000/- (Rupees Eighty Five crore Only) divided into H 8,50,00,000 (Eight crore fifty lakh) Equity Shares of H 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 H 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 H 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 H 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 H 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 delivers 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 H 1,305.56 crore for the Financial Year ended March 31,2022 as compared to H 1,105.34 crore for the previous Financial Year. Profit before Tax (PBT) was 28.73% higher at H 454.86 crore as compared to H 353.33 crore for the previous Financial Year.

The Total Comprehensive Income for the Financial Year 202122 increased by 23.14% from H 290.33 crore in the previous Financial Year to H 357.51 crore in the current Financial Year.

Sanctions

During the Financial Year under review, your Company has sanctioned housing loans for H 3,762.09 crore as compared to H 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 H 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 H 3,602.24 crore as compared to H 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 H 17,357 crore.

Assets Under Management (AUM)

The AUM of your Company stood at H 11,350.21 crore (including assignment of H 2,343.78 crore) as at March 31,2022 as against H 9,454.29 crore (including assignment of H 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 H 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 H 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 circulars 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 orders 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 layers based on their size, activity, and perceived riskiness. Your Company being a Housing Finance Company falls under Middle layer category. Detailed circulars 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 H 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 lenders 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 H 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 H 1,650 crore and has availed loans aggregating to H 1,635 crore. The outstanding term loans from Banks and Financial Institutions as at March 31,2022 were H 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 H 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 H 750 crore under the NHB refinance scheme and

H 417 crore under Special Refinance Scheme. Your Company availed funds of H 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 H 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 H 878.86 crore as compared to H 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 H 98.92 crore as compared to H 109.41 crore as on March 31,2021.

III. Banks

As on March 31,2022, the Company''s outstanding NCDs from Banks stood at H 174.86 crore as compared to H 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 H 99.83 crore as compared to H 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 H 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 H 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 H 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 investors 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 Affairs (''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 Investors 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:

State

Branches (As on

March 31,2022)

Branches (As on

March 31,2021)

Rajasthan

99

95

Maharashtra

45

44

Madhya Pradesh

45

40

Gujarat

42

39

Uttar Pradesh

24

21

Haryana

17

15

Karnataka

11

0

Uttarakhand

9

9

Chhattisgarh

8

7

Delhi

4

4

Himachal Pradesh

4

4

Odisha

4

0

Punjab

2

2

Total number of branches

314

280

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:

Name of the Director Designation DIN

Mr. Sandeep Tandon Chairperson and 00054553

Independent Director

Mr. Sushil Kumar Managing Director and 03154532

Agarwal CEO

Mrs. Kalpana Iyer Independent Director 01874130

Mrs. Soumya Rajan Independent Director 03579199

Mr. Ramachandra Non-Executive Nominee 01715073

Kasargod Kamath Director

Mr. Vivek Vig Non-Executive Nominee 01117418

Director

Mr. Nishant Sharma Promoter Nominee 03117012

Director

Mr. Manas Tandon Promoter Nominee 05254602

Director

Mr. Kartikeya Dhruv Kaji Promoter Nominee 07641723

Director

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 Affairs ("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

Appointment/

Reappointments

Resignation or Retirement

Directors Retiring by Rotation

Appointments/Resignations of the Key Managerial Personnel (KMP)

• During the Financial Year

• During the Financial

• Pursuant to the provisions of

• Mr. Sushil Kumar Agarwal-

under review, the Board at

Year under review,

Section 1 52 of the Act, Mr.

Managing Director and

its Meeting held on April

none of the Directors of

Nishant Sharma, Promoter

Chief Executive Officer (MD

29, 2021 reappointed

the Company resigned

Nominee Director and Mr.

& CEO), Mr. Ghanshyam

Mr. Sandeep Tandon,

from the Board of the

Vivek Vig, Nominee Director,

Rawat- Chief Financial

Independent Director

Company.

of the Company, retired

Officer and Mr. Sharad

of the Company as the

and being eligible, were re-

Pathak- Company Secretary

Chairperson of the Board

appointed with the approval

and Compliance Officer are

with effect from conclusion

of Members at the 11th AGM

the KMP in terms of Section

of 11 th Annual General

held on August 10, 2021.

2(51) of the Act.

Meeting (''AGM'') of the Company held on August 10, 2021, who shall hold office up to the date of ensuing AGM.

• Further, in accordance with the provisions of the Act,

No KMP has been appointed or resigned from

Mr. Ramachandra Kasargod Kamath, Nominee Director and Mr. Manas Tandon,

the Company during the Financial Year under review.

• The Members of the

Promoter Nominee Director

Company at 11th AGM

of the Company are liable to

held on August 10,

retire by rotation at the ensuing

2021 had approved

12th AGM of the Company.

the re-appointment of

They are eligible and have

Mrs. Kalpana Iyer as an

offered themselves for re-

Independent Director of the

appointment. Resolutions for

Company not liable to retire

their reappointment are being

by rotation, to hold office

proposed at the 12th AGM and

for a second term of 5 (Five)

their Profiles are included in

consecutive years effective

the Annexure to Notice of the

from June 23, 2021 till June 22, 2026.

12th AGM.


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 monitors the ESOP Schemes in compliance with the Act, SEBI SBEB Regulations and SEBI LODR Regulations.

A Certificate received from Secretarial Auditors 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 Auditors 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 Auditors 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 Auditors of the Company.

> Auditors'' Report

The Statutory Auditors 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 Auditors have not reported any fraud in terms of Section 143(12) of the Act.

> Secretarial Auditors 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 Auditors to conduct the Secretarial Audit of the Company for the Financial Year 2021-22. The Report of Secretarial Auditors in form MR-3 for the Financial Year 2021-22 is annexed to this Report as ''Annexure-4''.

The Report of Secretarial Auditors 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 monitors 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.

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 vendors 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 affairs 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

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

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 insiders 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 investors by uploading such information on the Company''s website under the Investors section. Your Company also intimates stock exchanges regarding upcoming events like earnings calls, declaration of quarterly & annual earnings with financial statements and other such matters 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:

Particular Remarks

A.

Conservation of energy

The Steps taken / impact on conservation of energy

As the nature of business of the Company is providing housing finance, at a corporate level, consumption of resources is limited to running the operations. The Company, however, extensively monitors energy consumption and waste generation as a part of its sustainability roadmap. The Company''s web portal as well as Mobile App facilitates online application of home loans to save time, energy, and resources in disbursal process.

Company have started the process of preparing baseline of its energy consumption and carbon emissions. Once the baseline is ready, we will work towards preparation of energy-based reduction targets for near future, to reduce our carbon footprints.

The Steps taken by the Company for utilizing alternate sources of energy

Your Company has taken various steps towards climate action and sustainable use of natural resources. Under Green Affordable Housing Program, the Company has in partnership with International Finance Corporation, a member of the World Bank Group, conducted research on the feasibility for affordable ''green homes'' in India, to tap into the potential of housing activity help in environmental amelioration. Under this study, the Company developed a definition of ''green home'' and conducted survey of 500 individual households to understand current perceptions and attitudes as well as willingness to pay for green features. The Company has also started full-fledged awareness campaign for suppliers, building contractors, masons, as well as individual households who wish to construct a new home in the near future, to educate the community about the meaning and benefits of green homes.

The Capital investment on energy conservation equipment

In view of the nature of the activities carried on by your Company, there is no capital investment on energy conservation equipment.

Particular Remarks

B.

Technology

absorption

the efforts made towards technology absorption

The Company recognize that a remarkable customer experience is critical to the sustained growth of our business, with this objective we have taken several steps during the year to enhance customer experience by leveraging digital capabilities such as upgrading our customer app and website, launching an AI driven conversational BOTs and other digital communication systems.

As of now over 70% of customer service happen through digital channels and 80% of them are self-serviced without human intervention which is more than double of the previous year. Similarly 80% of our initial money deposits and 60% of our part disbursal process happen digitally.

This year we have also initiated a major technology transformation journey to take our customer and employee experience to the next level and this program will be rolled out through 2022-23.

the benefits derived like product improvement, cost reduction, product development or import substitution

Company consistently monitor cost-to-income ratio, leveraging economies-of-scale, increasing manpower productivity with growing disbursements through the enhanced use of information technology and analytical systems, resulting in quicker loan turnaround time and reducing transaction costs.

in case of imported technology (imported during the last three years reckoned from the beginning of the Financial Year)

a.) the details of technology imported

NA

b). the year of import

NA

c). whether the technology has been fully absorbed

NA

d). if not fully

absorbed, areas where absorption has not taken place, and the reasons thereof

NA

the expenditure incurred on Research and Development

Company performed R&D on many new technology subjects such as Cloud, data, digital and several other areas and have now setup a dedicated technology transformation team within the company to drive innovation and transformation programs.

C.

Foreign exchange earnings and Outgo

During the Financial Year under review, your Company had no foreign exchange earnings and the aggregate of the foreign exchange outgo during the Financial Year under review was H 2,234.75 Lakhs. The aforesaid details are shown in the Note No. 38 of notes to the accounts, forming part of the Standalone Financial Statements. The Members are requested to refer to this Note.

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 affairs 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.

For and on behalf of the Board of Directors AAVAS FINANCIERS LIMITED

Sushil Kumar Agarwal Manas Tandon

Managing Director & CEO Promoter Nominee Director

(DIN: 03154532) (DIN: 05254602)

Date: May 05, 2022 Date: May 05, 2022

Place: Jaipur Place: Zug, Switzerland

Registered and Corporate Office:

201-202, 2nd Floor, South End Square,

Mansarover Industrial Area, Jaipur 302 020, Rajasthan, India

CIN: L65922RJ2011PLC034297

Tel: 91 141-4659239 Fax: 91 14 1661 8861

E-mail: [email protected] | Website: www.aavas.in


Mar 31, 2021

Your Directors are pleased to present the Eleventh Annual Report on the operational and business performance of the Company together with the Audited Financial Statements (Standalone and Consolidated) for the Financial Year ended March 31, 2021.

FINANCIAL PERFORMANCE

The summarized standalone financial performance for the Financial Year ended March 31, 2021 are as under:

(H in crore)

Particulars

For the Year ended

For the Year ended

March 31, 2021

March 31, 2020

A

Total Income

1,105.34

903.09

Less:

Total Expenditure before Depreciation & Amortization and provision

(694.26)

(566.14)

Impairment on financial instruments

(37.14)

(15.34)

Depreciation & Amortization

(20.60)

(19.56)

B

Total Expenses

(752.01)

(601.04)

C

Profit Before Tax (A-B)

353.33

302.05

D

Less: Provision for Taxations (Net of Deferred Tax)

(63.83)

(52.93)

E

Profit After Tax (C-D)

289.50

249.12

F

Add: Other Comprehensive Income (Net of Tax)

0.83

(0.05)

G

Total Comprehensive Income (E F)

290.33

249.07

Transfer to Statutory Reserve

58.07

49.81

Your Company posted Total Income (Total Interest Income and Other Income) of H1,105.34 crore and total Comprehensive Income of H290.33 crore for the Financial Year ended March 31, 2021, as against H903 09 crore and H249.07 crore respectively for the previous Financial Year.

10 YEARS OF A GLORIOUS JOURNEY

On February 22, 2021, your Company completed 10 years of establishment. Since inception, the Company focused on catering to the housing needs of low-and-middle income self-employed and salaried customers in semi-urban and rural areas. Through these 10 years, your Company fulfilled the dreams of lakhs of customers.

Major events and milestones of this journey are as follows:

Calendar Year

Details

2011

Incorporated as “Au Housing Finance Private Limited”, a wholly owned subsidiary of AU Small Finance Bank Limited (formerly, Au Financiers (India) Limited) (“AU Bank”)

Registered with National Housing Bank (“NHB”) as a ‘housing finance institution without accepting public deposits’ and started business operations from Rajasthan

2012

Received first rating “BBB /Stable” from CRISIL for long term bank facilities

2013

Converted into a public limited company

Received its first refinancing assistance from NHB

Expanded operations to states of Maharashtra, Gujarat and Madhya Pradesh

2014

Issued first Non-Convertible Debentures (“NCDs”) to raise debt

Expanded its operations to Delhi NCR

2015

Entered into its first Assignment/ Securitisation transaction of retail loans

Identified as a ‘financial institution’ under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI”)

Manpower strength crossed the mark of 1000

Asset under Management (“AUM”) crossed the mark of H1,000 crore and active loan accounts grown to 17,000

2016

AU Bank divested its majority stake in the Company to “Kedaara Capital” and “Partners Group”.

Received the ASSOCHAM Excellence Award for being the “Best Housing Finance Company” in the affordable housing segment

Received its first subsidy from NHB under ‘Credit Linked Subsidy Scheme - Pradhan Mantri Awas Yojana’ (CLSS-PMAY)

AUM crossed the mark of H2,000 crore

2017

Name changed to “Aavas Financiers Limited” from “Au Housing Finance Limited”

Manpower strength crossed the mark of 3000

Branch network crossed the mark of 100

AUM crossed the mark of H3,000 crore

2018

Launched Initial Public Offer (IPO) and listed its shares on stock exchanges

Upgradation of long term rating to A by rating agencies

Expanded its presence in 10 states and branch network crossed the mark of 200

Active loan accounts grown to 50,000

AUM crossed the mark of H5,000 crore

2019

Active loan accounts grown to 75,000

AUM crossed the mark of H7,000 crore

Upgradation of CARE rating to “CARE AA-/Stable” for long term facilities

2020

AUM crossed the mark of H8,000 crore

Manpower strength crossed the mark of 5000

Multilateral/Development Financial Institutions such as Asian Development Bank (“ADB”), International Finance Corporation (IFC) and CDC Group PLC extended credit lines to the Company

Mr. Ghanshyam Rawat, Chief Financial Officer was awarded with the best “CA-CFO” of the Year under the category of “Emerging Corporate (BFSI)” by ICAI

Active loan accounts grown to 1,00,000

Expanded its branch network to 11 states with 280 branches

2021

AUM crossed the mark of H9,400 crore

Active loan accounts grown to 1,25,000

Mr. Sushil Kumar Agarwal, Managing Director & CEO was conferred with the prestigious EY (Ernst and Young) Entrepreneur of the Year Award in the Financial Services category

Upgradation of ICRA rating to “ICRA AA-/Stable” for long term facilities

With a decade of history in business, the Company experienced multiple business cycles. In each instance in the past such as demonetization, liquidity tightness and implementation of Goods and Service Tax (“GST”) law, the Company not only demonstrated agility in responding to those challenges but also converted them into opportunities and grew its business.

In the current pandemic situation also, your Company remained confident to emerge stronger. The Company’s expanding presence across un-served and underserved geographies will be instrumental in driving the growth. Your Directors express their gratitude to the Customers, Regulators, Employees, Lenders, Shareholders and other Stakeholders for their continued support in achieving this milestone.

COVID-19 - A GLOBAL PANDEMIC AND THE COMPANY’S APPROACH

The year 2020-21 was challenging. The COVID-19 pandemic had a significant impact on lives, livelihoods and the businesses. In compliance with the lockdown order announced by the Government and local authorities from time to time, certain branches temporarily remained closed and business operations were managed remotely to the extent possible as per Business Continuity Plan of the Company.

We summarise here below the impact of COVID-19 on the business of your Company and the Company‘s approach.

Operations and business continuity

The challenges increased due to restricted movement and the disrupted economic cycle. The situation gradually improved from the end of the first quarter as the restrictions were lifted in a phased manner. As the second wave of the pandemic unfolded in April 2021, your Company focused on protecting the health and safety of employees and customers, while ensuring minimum business disruption.

The Company believed that going digital is the future, not only for business growth but also for product and service differentiation. During the Financial Year under review, your Company focused on digital offerings, made its processes and decision-making through data analytics for faster customer service, paperwork reduction, improved turnaround time and better risk management.

COVID-19 - Regulatory Packages and Resolution Framework for COVID-19-related Stress

The Reserve Bank of India (RBI) issued ‘COVID-19 -Regulatory Packages’ dated March 27, 2020, April 17, 2020 and May 23, 2020 to mitigate the impact of COVID-19 pandemic on the financial services sector. Under stipulated guidelines, the Company implemented a ‘Policy on Deferment of PEMI/ EMI (COVID-19)’ and offered moratorium on the payment of installments and/or interest, as applicable, falling due between March 01, 2020 and August 31, 2020 to all eligible borrowers of the Company.

The RBI issued ‘Resolution Framework for COVID-19 related Stress’ dated August 06, 2020 for granting relief to borrowers impacted by COVID-19, by providing the facility of rescheduling of loans and/or for conversion of outstanding interest into a separate credit facility. The Company framed and implemented a ‘Policy on Resolution Framework for loans of borrowers affected by COVID-19’.

Order of Supreme Court of India on declaring accounts as Non-Performing Asset (NPA)

The matter of declaring defaulting accounts as NPAs (not declared as NPAs till August 31, 2020 as per RBI guidelines) was kept on hold by the Hon’ble Supreme Court of India vide orders dated September 03, 2020 and September 28, 2020. Accordingly, the Company did not classify any account covered under the said orders as NPA. Thereafter the Hon’ble Supreme Court of India in Small Scale Industrial Manufactures Association (Regd.) vs Union of India and others vide a judgment dated March 23, 2021 (“Judgement”) directed that the interim order granted on September 03, 2020 stands vacated. In this regard, RBI vide its circular dated April 07, 2021 issued instructions in accordance to which your Company resumed recognizing overdue accounts as NPA as per regulatory guidelines.

Scheme for Grant of ex-gratia payment

To provide relief to the borrowers in difficulty due to COVID-19, the Central Government on October 23, 2020, approved to provide ex-gratia payment of difference between compound interest and simple interest by way of relief for the period from March 01, 2020 to August 31, 2020 to borrowers in specified loan categories. In accordance with the above, the Company implemented the ‘Policy on Scheme for Grant of Ex-gratia Payment’ to extend the benefit to eligible borrowers of the Company.

Further in conformity with the judgment, the RBI vide its circular dated April 07, 2021, advised all lending institutions to refund/adjust the ‘interest on interest’ charged to all the borrowers during the moratorium period, i.e. March 1, 2020 to August 31, 2020. In accordance with the above, the Company implemented the ‘Policy on refund/adjust the Interest on interest’ to extend the benefit to all the borrowers of the Company.

DIVIDEND

Your Directors have considered reinvesting the profits in the business of the Company in order to build a strong base for the long-term growth of the Company and maintain a liquidity cushion due to ongoing COVID-19 pandemic. Accordingly, no dividend has been recommended for the Financial Year ended March 31, 2021.

Your Company has formulated Dividend Distribution Policy in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations,

2015 (‘SEBI LODR Regulations’) for bringing transparency in the matter of declaration of dividend and to protect the interest of investors. The Dividend Distribution 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’.

SHARE CAPITAL

The issued and paid-up Equity Share Capital of the Company as on March 31, 2021 stood at H78,50,45,510 (Rupees Seventy eight crore fifty lakh forty five thousand five hundred and ten) consisting of 7,85,04,551 (Seven crore eighty five lakh four thousand five hundred and fifty one) Equity Shares of H10/-each as compared to H78,32,26,610 (Rupees Seventy eight crore thirty two lakh twenty six thousand six hundred and ten) consisting of 7,83,22,661 (Seven crore eighty three lakh twenty two thousand six hundred and sixty one) Equity Shares of H10/- each in the previous year.

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 1,81,890 Equity Shares of H10/-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 transferred H58.07 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 NHB to carry out the housing finance activities in India.

To build a quality loan book, your Company endeavors to adopt superior underwriting practices backed by robust monitoring and recovery mechanism. Your Company is committed towards improving efficiency in all its processes and service levels for its customers.

Your Company’s thrust continues to be the affordable housing segment, with its focus on catering to the aspirations of low and middle-income Indian families who dream to own their homes. Your Company has been facilitating credit access to the low and middle-income self-employed customers in semi-urban and rural areas in India. The majority of your Company’s customers have limited access to formal banking credit facilities.

The operating and financial performance of your Company has been covered in detail 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 22% to H1,105.34 crore for the Financial Year ended March 31, 2021 as compared to H90309 crore for the previous Financial Year. Profit Before Tax (PBT) was 17% higher at H353 33 crore as compared to H302.05 crore for the previous Financial Year.

The Total Comprehensive Income for the Financial Year 2020-21 increased by 17% from H249.07 crore in the previous Financial Year to H290.33 crore in the current Financial Year.

Sanctions

During the Financial Year under review, your Company sanctioned housing loans for H2,812.94 crore as compared to H3,034.00 crore in the previous Financial Year registering a de-growth of 7% due to subdued disbursements in the first half of the Financial Year. The cumulative loan sanctions since inception of your Company stood at H14,45914 crore as at March 31, 2021. 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 H2,656.85 crore as compared to H2,930.39 crore in the previous Financial Year and recorded a de-growth of 9% in disbursements.

The cumulative loan disbursement since inception as at March 31, 2021 was H13,754.76 crore.

Assets Under Management (AUM)

The AUM of your Company stood at H9,454.29 crore (including assignment of H2,004.68 crore) as at March 31, 2021 as against H7,796.09 crore (including assignment of H1,739.64 crore) in the previous Financial Year, with a growth of 21%. As of March 31, 2021, the average size of loan sanctioned was H8.49 lakh and average tenure was 184.53 months in the AUM (on origination basis).

Affordable Housing

Over the last Financial Year, your Company developed an experienced, trained and exclusive team for catering to the PMAY (Urban) product focusing on Economically Weaker Sections (“EWS”) and Low Income Group (“LIG”) segments and Mid Income Group (MIG) 1 and 2.

Your Company signed a Memorandum of Understanding (“MOU”) with various State Governments for the CLSS under the PMAY for EWS, LIG and MIG segments.

Since the inception of the Scheme, your Company received CLSS subsidy of H152.17 crore with respect to 7576 beneficiaries and the same was passed on to customers.

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 strategy, consistent engagement with the customers during the lockdown and recovery management system supported by analytical decision making, your Company was able to contain its gross NPAs at H7391 crore (0.98% of the loan assets) as at March 31, 2021. Your Company reviews the delinquency and loan portfolio on regular basis.

Your Company conforms to a defined policy with proper procedures to address delinquencies and collections. As a result, Gross NPA and Net NPA as at March 31, 2021 were 0.98% and 0.71% respectively (against 0.46% and 0.34% respectively in the previous Financial Year).

Further, the business overview, outlook, and state of affairs of your Company have been discussed in detail in the MDA, which forms a part of this Annual Report.

PRUDENTIAL NORMS FOR THE HFCs ISSUED BY RBI

The Finance Act, 2019 (the “Finance Act”), passed by the Parliament and which has received the assent of the President of India, has introduced various amendments to legislations. Amongst others, the Finance Act includes amendments to the NHB Act, 1987 which has transferred the regulation authority over the housing finance sector from NHB to RBI. The Amendments to the NHB Act have come into force with effect from August 9, 2019. RBI on June 17, 2020, issued a draft for review of extant regulatory framework for HFCs and had invited comments from the stakeholders on the same. After considering the inputs received, the RBI, on October 22, 2020 issued the revised Regulatory Framework for HFCs (‘RBI Regulations’).

Subsequently, RBI issued the Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021 on February 17, 2021 (“RBI Master Directions”). The Directions broadly accumulate the regulatory requirements, from the Regulations notified on October 22,

2020, erstwhile Master Circular for Housing Finance Companies (NHB) Directions, 2010 and other applicable circulars on HFCs.

Your Company continues to comply with the guidelines issued by RBI from time to time including but not limited to accounting guidelines, prudential norms for asset classification, income recognition, provisioning, capital adequacy, concentration of credit/investments, credit rating, Know Your Customer (KYC) guidelines, Anti Money Laundering (AML) standards, fair practices code, Asset Liability Management (ALM) system, Most Important Terms & Conditions (MITC), Grievance Redressal Mechanism, recovery of dues, real estate and capital market exposures norms. Further, your Company has taken steps for effective management of operational risk including technology risk as outlined in the Information Technology framework for HFCs. Your Company has also put a reporting system in place for recording frauds as stipulated in Master Direction - Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016 issued by RBI.

The recognition of income and impairment on financial instruments (Expected Credit Loss) has been made in the books as per the Ind AS.

No significant or adverse remarks have been made by the NHB and RBI with respect to any regulatory compliance and inspection of the Company carried out during the Financial Year. Further, RBI and NHB have not levied any penalty on the Company during the Financial Year.

CAPITAL ADEQUACY RATIO

As per the provisions of the clause 6.1 of Chapter IV- Capital of RBI Master Directions, your Company was required to maintain a minimum capital adequacy of 14% on a standalone basis on March 31, 2021.

Your Company’s Capital Adequacy Ratio as at March 31, 2021 was 54.38% (previous Financial Year 55.86%) which is far above the minimum required level of 14%.

CREDIT RATING

During the Financial Year under review, ICRA Limited has upgraded the long-term ratings of the Company from ‘ICRA A /Positive to ICRA AA-/Stable’.

Despite lot of challenges and headwinds faced during the COVID-19 pandemic, upgradation of existing credit ratings from ICRA Limited is a positive reflection of the Company’s comfortable liquidity and resource profile and its leadership position in affordable housing segment, its experienced management team and strong brand equity in the regional markets where it has presence. The ratings also derive strength from adequate risk management and control systems put in place by the Company, asset quality as well as good growth opportunities in the affordable housing segment.

Further, all the other credit ratings assigned to the Company have been reaffirmed by respective credit rating agencies. The details of the same are mentioned below:

Rating Agency

Rating Type

Nature of Borrowing

External Credit Rating

CARE

Long Term Rating

Long Term Banking Facilities, Non-Convertible Debentures (‘NCDs’) and Instrument-Subordinated Debt

‘CARE AA- / Stable’

Short Term Rating

Commercial Paper

‘CARE A1 ’

ICRA

Long Term Rating

Long Term Banking Facilities and Non-Convertible Debentures (‘NCDs’)

‘ICRA AA- /Stable’

Short Term Rating

Commercial Paper

‘ICRA A1 ’

India Ratings

Short Term Rating

Commercial Paper

‘IND A1 ’

Regulatory & Statutory Compliances

During the Financial Year under review, the RBI and NHB have issued various notifications, circulars and guidelines to Housing Finance Companies.

The circulars and the notifications issued by RBI and NHB were also placed before the Board of Directors at regular intervals to update the Board Members and report on actions initiated on the same, and your Company has adhered to all the Circulars, Notifications and Guidelines issued by RBI and NHB from time to time.

The Government of India has set up the Central Registry of Securitization, Asset Reconstruction and Security Interest of India (CERSAI) under Section 21 of the SARFAESI Act, 2002 to have a central database of all mortgages created by lending institutions. The object of this registry is to compile and maintain data relating to all transactions secured by mortgages. Accordingly, your Company is registered with CERSAI and has been submitting data in respect of its loans.

Your Company is also in compliance with the provisions of the Companies Act, 2013 (“the Act”) including the Secretarial Standards, SEBI LODR Regulations and other applicable statutory requirements.

During the Financial Year, no penalty was imposed on the Company by any regulator/ supervisor/ enforcement authority.

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

• Mr. Sushil Kumar Agarwal, Managing Director & CEO of the Company was conferred with the prestigious EY (Ernst and Young) Entrepreneur of the Year Award in the

Financial Services category. The award ceremony held

virtually on March 25, 2021 where it celebrated ‘The Unstoppables’ winners who stand for extraordinary stories of a strong mission and purpose backed with continuous innovation in their respective category.

• Your Company continued to enjoy following ISO certifications for its key customer facing departments and workflow processes from TUV Nord India reflecting the superior customer experience:

ISO 9001:2015 for Lending process; e-disbursements and client servicing including Grievance Redressal Mechanism and;

ISO 10002:2014 for customer satisfaction and complaint handling process.

RESOURCE MOBILIZATION

Your Company’s overall borrowing is guided by a policy duly approved by the Board of Directors. Your Company has vide Special Resolution passed on July 22, 2020, 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 H12,500 crore and the total amount so borrowed shall remain within the limits as prescribed by RBI.

Your Company manages its borrowing structure through prudent asset-liability management and takes various measures, which include diversification of the funding sources, tenure optimization, structured interest rates and prudent timing of borrowing to maintain its borrowing cost at optimum level.

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 and Banks, 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, 2021 was 7.40% (including Securitization/ Assignment) as against

8.44% as at the end of the previous Financial Year. As at March 31, 2021, your Company’s sources of funding were primarily in the form of long Term Loans from Banks and Financial Institutions (34.1%), followed by Securitization/Direct assignment (24.3%), NHB Refinance (22.7%), NCDs issued to Multilateral/ Development Financial Institutions (11.0%), NCDs issued to Banks and Domestic Financial Institutions (4.3%), Masala Bonds issued to Multilateral Institutions (2.4%) and Subordinated Debts (1.2%).

Term Loans from Banks and Financial Institutions

The Company, during the Financial Year, received aggregate fresh loan sanctions amounting to H1550 crore and has availed loans aggregating to H840 crore. The outstanding term loans from Banks and Financial Institutions as at March 31, 2021 were H2818.98 crore with average tenure of 912 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 H549.59 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 H850 crore under the NHB refinance scheme and H366 crore under Special Refinance Scheme. Your Company availed funds of H1161 crore under various Refinance Scheme such as for Affordable Housing Fund, Regular Refinance Scheme and Special refinance Facility. Total outstanding refinance at the end of the current Financial Year stood at H1872.39 crore (previous year H951.29 crore).

Non-Convertible Debentures (NCDs)

During the Financial Year under review, your Company diversified its borrowing by raising funds through NCDs from banks. During the previous Financial Year, the Company’s funding through NCDs were as following:

I. Multilateral/Development Financial Institutions

As on March 31, 2021, the Company’s outstanding NCDs stood at H91138 crore as compared to H90986 crore as on March 31, 2020.

II. Domestic Financial Institutions

As on March 31, 2021, the Company’s outstanding NCDs from Domestic Financial Institutions stood at H109.41

crore as compared to H5992 crore as on March 31, 2020. Your Company’s Debentures are listed on Wholesale Debt Market segment of the BSE Ltd.

III. Banks

During the Financial Year under review, your Company issued Rated, Secured, Listed and Redeemable NCD’s to Kotak Mahindra Bank and Central Bank of India.

As on March 31, 2021, the Company’s outstanding NCDs from Banks stood at H244.9 crore as compared to H Nil as on March 31, 2020. Your Company’s Debentures are listed on Wholesale Debt Market segment of the BSE Ltd.

As on March 31, 2021, Your Company’s outstanding

subordinated debt in the form of NCDs stood at H 9974 crore as compared to H 99.66 crore as on March 31, 2020.

Your Company has not issued any Commercial Paper & ShortTerm Instrument during the Financial Year 2020-21 and as on March 31, 2021, the Company’s Commercial Paper outstanding is NIL.

Masala Bonds issued to Multilateral/Development Financial Institutions

As on March 31, 2021, your Company’s outstanding balance of Masala Bonds issued to Multilaterals stood at H 198.97 crore.

During the Financial Year under review, the interest on NonConvertible 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 investors 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 Affairs (“MCA”) dated June 05, 2020.

Disclosure under Chapter XI-Guidelines on Private Placement of Non-Convertible Debentures (NCDs) of RBI Master Directions:

(i) The total number of NCDs which have not been claimed by the Investors 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 Trustees

Debenture Trust Agreement(s) were executed in favour of IDBI Trusteeship Services Limited and Catalyst Trusteeship Limited for NCDs issued by the Company on private placement basis.

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 30 more branches and thereby expanded its branch network to 11 states with 280 branches as of March 31, 2021. Your Company now operates in Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Haryana, Chhattisgarh, Delhi, Uttar Pradesh, Uttarakhand, Punjab and Himachal Pradesh. Your Company has its Registered Office in Jaipur, Rajasthan, and its branch network as on March 31, 2021 vis-avis the previous Financial Year is detailed hereunder:

State

Branches (As on March 31, 2021)

Branches (As on March 31, 2020)

Rajasthan

95

88

Maharashtra

44

42

Gujarat

39

37

Madhya Pradesh

40

36

Haryana

15

14

Chhattisgarh

7

5

Delhi

4

4

Uttar Pradesh

21

15

Uttarakhand

9

8

Punjab

2

1

Himachal Pradesh

4

-

Total number of branches

280

250

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board of the Company comprises nine Directors, consisting of three Independent Directors (including two Women Directors), five Non-Executive Nominee Directors and a Managing Director and CEO as on March 31, 2021 who bring in a wide range of skills and experience to the Board.

The Board of Directors of the Company comprises:

Name of the Director

Designation

DIN

Mr. Sandeep Tandon

Chairperson and Independent Director

00054553

Mr. Sushil Kumar Agarwal

Managing Director and CEO

03154532

Mrs. Kalpana Iyer

Independent Director

01874130

Mrs. Soumya Rajan

Independent Director

03579199

Mr. Ramchandra Kasargod Kamath

Non-Executive Nominee Director

01715073

Mr. Vivek Vig

Non-Executive Nominee Director

01117418

Mr. Nishant Sharma

Promoter Nominee Director

03117012

Mr. Manas Tandon

Promoter Nominee Director

05254602

Mr. Kartikeya Dhruv Kaji

Promoter Nominee Director

07641723

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 Affairs (“IICA”). 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 Appointments

During the Financial Year under review, the Board at its Meeting held on May 14, 2020 reappointed Mr. Sandeep Tandon, Independent Director of the Company as Chairperson of the Board with effect from conclusion of Tenth Annual General Meeting (‘AGM’) of the Company held on July 22,

2020, who shall hold office up to the date of ensuing AGM.

The Members of the Company at 10th AGM held on July 22, 2020 had approved the appointment of Mrs. Soumya Rajan as an Independent Director of the Company not liable to retire by rotation, to hold office for a term of 5 (five) consecutive years effective from August 29, 2019 till August 28, 2024.

Reappointments

The Board at its Meeting held on April 29, 2021, on the basis of recommendation of Nomination & Remuneration Committee, reappointed Mrs. Kalpana Iyer as an Independent Director of the Company not liable to retire by rotation, to hold office for a second term of 5 consecutive years effective from June 23,

2021. Her reappointment is being proposed at the ensuing AGM of the Company. Mrs. Iyer presently serving as Chairperson of Audit Committee and Member of CSR Committee. Your Board believes that it would be in the beneficial interest of the Company to continue to avail her services as an Independent Director viewing her vast experience and contribution to the Company. Her reappointment as an Independent Director of the Company is placed before the Shareholders for consideration and approval.

Resignation or Retirement

During the Financial Year under review, none of the Directors of the Company resigned from the Board of the Company.

Directors Retiring by Rotation

Pursuant to the provisions of Section 152 of the Act, Mr. Kartikeya Dhruv Kaji and Mr. Manas Tandon, Promoter Nominee Directors of the Company, retired and being eligible, were re-appointed with the approval of Members at the 10th AGM held on July 22, 2020.

Further, in accordance with the provisions of the Act, Mr. Nishant Sharma, Promoter Nominee Director and Mr. Vivek Vig, Nominee Director of the Company are liable to retire by rotation at the ensuing 11th AGM of the Company. They are eligible and have offered themselves for re-appointment. Resolutions for their reappointment are being proposed at the 11th AGM and their Profiles are included in the Notice of the 11th AGM.

Appointments/Resignations of the Key Managerial Personnel (KMP)

Mr. Sushil Kumar Agarwal- MD and CEO, Mr. Ghanshyam Rawat- Chief Financial Officer and Mr. Sharad Pathak-Company Secretary and Compliance Officer are the KMP in terms of Section 2(51) of the Act.

No KMP has been appointed or resigned from the Company during the Financial Year under review.

Disclosure under Section 197(14) of the Act

The MD and CEO of the Company has not received any commission from the Company’s holding or subsidiary company.

Number of Board Meetings held during the Financial Year

During the Financial Year 2020-21, 4 (Four) Board Meetings were convened and held through Video Conference facility. By taking precautionary measures against COVID-19, MCA has allowed holding Meetings through Video Conferencing. MCA issued circulars to extend the time period for conducting Board Meetings through Video Conference /Other Audio-Visual Means for approving financial statements, Board’s Report, Prospectus and other restricted agenda items by its notifications dated March 18, 2020, June 23, 2020, September 28, 2020 and December 30, 2020 respectively. MCA as a onetime relaxation extended the gap between two consecutive meetings of the Board to 180 days instead of 120 days as required under the Act, but your Company standing by its philosophy, complied with all the earlier provisions and the Board Meetings were scheduled with a gap, not exceeding 120 days between any two Meetings during the year under review. The details related to the Board Meetings are appended in 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 17 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.

Performance Evaluation of the Board

Your Company is following the most effective way to ensure that Board Members understand their duties and adopt good governance practices. In furtherance to this, the Directors of your Company commit to act in good faith to promote the objects of the Company for the benefit of its Employees, the Stakeholders including Shareholders, the Community and for the protection of environment.

Your Company has defined the manner of evaluation as per the provisions of the Act, SEBI LODR Regulations for the Evaluation of performance of the Board, Committees of Board & Individual Directors.

The ‘Policy on Nominations & Remuneration for Directors, Key Managerial Executives, Senior Management and Other Employees’ (“Remuneration Policy”) of the Company is placed on the website of the Company.

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 2020-21 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 Nomination & 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. Executive Committee

9. Customer Service & Grievance Redressal (CS&GR) 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.

EMPLOYEE STOCK OPTION (ESOP) SCHEMES ESOP-2020

During the Financial Year under review, ‘Equity Stock Option Plan for Employees 2020’ (“ESOP-2020”) has been approved by Members in the 10th AGM of the Company held on July 22, 2020.

The ESOP-2020 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.

The above manner is based on the Guidance Note on Board Evaluation issued by SEBI on January 05, 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 carried out the evaluation of Directors performance and its own performance and Statutory Board Committees namely, Audit Committee, Nomination & Remuneration Committee, Corporate Social Responsibility (“CSR”) Committee, Stakeholders Relationship Committee and Risk Management Committee and all the Independent Directors without the presence of the Director being evaluated. The Board expressed its satisfaction on performance evaluation.

During the Financial Year under review, a separate Meeting of the Independent Directors was held on October 16, 2020, 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.

Major aspects of Board evaluation included who is to be evaluated, process of evaluation including laying down of objectives and criteria to be adopted for evaluation of different persons, feedback to the persons being evaluated and action plan based on the results. The manner in which the evaluation has been carried out, has been explained in the Report on Corporate Governance forming part of this Report as ‘Annexure-2’. As required under the SEBI LODR Regulations, a certificate from Mr. Manoj Maheshwari, Practicing Company Secretary (Membership No. FCS 3355), partner of M/s V. M. & Associates, Company Secretaries, certifying that the Company has complied with the provisions of Corporate Governance as stipulated by SEBI LODR Regulations has been obtained. The said certificate forms part of the Directors’ Report as ‘Annexure-3’.

Company’s Policy on Director’s Appointment, Remuneration & Evaluation

The Board on the recommendation of the Nomination & Remuneration Committee adopted a ‘Policy on Nominations & Remuneration for Directors, Key Managerial Executives, Senior Management and Other Employees’, 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 other employees and their evaluation and includes other matters, as prescribed under the provisions of Section 178 of the Act and SEBI LODR Regulations.

Other ESOP Schemes

Sl.

No.

Particulars

Equity Stock Option Plan for Employees 2016

Equity Stock Option Plan for Management Team 2016

Equity Stock Option Plan for Directors 2016

ESOP 2019

A

Date of

Shareholders’

approval

The Schemes was approved by the Shareholders of the Company by a Special Resolution passed on February 22, 2017.

The scheme was approved by the Shareholders of the Company by a Special Resolution passed on August 01, 2019.

B

Authorization

The schemes empowers the Board and Nomination & Remuneration Committee to execute the scheme.

C

Variation (if any)

During the Financial Year under review, there have been no changes in the schemes.

All the above stated ESOP plans are in compliance with the provisions of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (‘SEBI SBEB Regulations’).

The Nomination & Remuneration Committee monitors the ESOP Schemes in compliance with the Act, SEBI SBEB Regulations and SEBI LODR Regulations. The Company shall make available at the ensuing AGM a certificate received from its Auditors confirming that the above ESOP Schemes have been implemented in accordance with the SEBI SBEB Regulations and are as per the Resolutions passed by the Members of the Company for the inspection of the Members of the Company by electronic means. The disclosures as required under the SEBI SBEB Regulations have been placed on the website of the Company at https://www.aavas.in/investor-relations/annual-reports.

AUDITORS

Statutory Auditors

M/s S.R. Batliboi & Associates LLP, Chartered Accountants (Firm Registration No: 101049W/E300004) Statutory Auditors of the Company were appointed by the Members of the Company in the 7th AGM of the Company held on July 26, 2017 to hold office as Statutory Auditors from conclusion of the 7th AGM to the conclusion of 12th AGM of the Company to be held in the Calendar Year 2022.

The RBI on April 27, 2021 issued the fresh guidelines for appointment of Statutory Auditors. The provisions of guidelines states that Statutory Audit firm is required to be rotated after completion of a period of 3 years. The guidelines have to be adopted from the second half of Financial Year 2021-22 onwards. Since M/s S.R. Batliboi & Associates LLP, Chartered Accountants has completed the specified time period as the Statutory Auditors, the Company would have to appoint new audit firm for conducting the Statutory Audit for a continuous period of three years from Financial Year 2021-22. The Company is in the process of identifying suitable audit firms and the requisite approval of the Members will be sought at a future date. Meanwhile, the existing Statutory Audit firm will continue to act as Statutory Auditors of the Company as per

Auditors’ Report

The Statutory Auditors have not made any adverse comments or given any qualification, reservation or adverse remarks or disclaimer in their Audit Report on the Financial Statements for the Financial Year 2020-21 and the Report is self-explanatory.

Further, the Statutory Auditors have not reported any fraud in terms of Section 143(12) of the Act.

Secretarial Auditors 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 V. M. & Associates, Company Secretaries (Firm Registration No: P1984RJ039200) were appointed as Secretarial Auditors to conduct the Secretarial Audit of the Company for the Financial Year 2020-21. The Report of Secretarial Auditors for the Financial Year 2020-21 is annexed to this Report as ‘Annexure-4’.

The Report of Secretarial Auditors is self-explanatory and there were no observations or qualifications or adverse remarks in their Report.

Further, the Secretarial Auditors have not reported any fraud in terms of Section 143(12) of the Act.

The Board of Directors of the Company at its meeting held on April 29, 2021, appointed M/s. Chandrasekaran Associates, Practicing Company Secretaries as Secretarial Auditors of the Company for the Financial Year 2021-22.

INTERNAL AUDIT & INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

Your Company has an Internal Audit Department supported by Independent Internal Auditors who conduct comprehensive audit of functional areas and operations of the Company to examine the adequacy of compliance with policies, procedures, statutory and regulatory requirements.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company.

Significant audit observations and corrective actions thereon are presented to the Audit Committee at periodic intervals.

The Audit Committee reviews and evaluates adequacy and effectiveness of the Company’s internal control environment and monitors the implementation of audit recommendations.

The Audit Committee and Board of Directors have approved a documented framework for the internal financial control to be followed by the Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to 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 and disclosures. The Audit Committee periodically reviews and evaluates the effectiveness of internal financial control system.

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, 2021 till the date of this report.

There has been no change in the nature of business of your Company.

No significant or material orders have been passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and / or the Company’s operations in future.

MAINTENANCE OF COST RECORDS

Being an HFC, the Company 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 and backbone of the Company’s business operations. Your Company has created robust technology framework for seamlessly conducting all its business operations across sourcing, underwriting, disbursement, collections, and customer service functions. ’Customer First’ has been the theme for Financial Year 2020-21, as a part of which, the Company has taken several initiatives to deliver greater customer experience by leveraging multiple digital channels and it has helped service our customers uninterruptedly even during multiple lockdowns.

Employees of the Company are equipped with technology systems to service customers without location constraints. Multi-lingual call center teams of the Company are able to operate remotely and service customers from wherever they are.

Your Company worked in connecting with existing Customers, Employees and business partners by involving them to refer business leads under various referral programs. It leveraged the power of technology with a seamless flow of information across frontline digital systems and backend operational systems to make this possible. This led to a swifter conversion of leads to loans and resulted in gradual increase in volume of lead flow and disbursements through such emerging channels.

Your Company strongly believes that technology will continue to be a key business enabler going forward and it would like to leverage new-age technologies to the best possible level.

The RBI has mandated the applicability of Master Direction - Information Technology Framework for the NBFC Sector dated June 08, 2017 on HFCs in order to enhance the safety, security, efficiency in processes leading to benefits for HFCs and their customers.

Your Company is in compliance with the aforesaid guidelines.

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 DEVELOPMENT

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.

Your Company has a team of dedicated individuals and qualified professionals like Chartered Accountants, Management Professionals, Company Secretaries, Lawyers, Engineers and

Software Developers having academic qualifications from various premier institutions and relevant industry experience to strengthen and grow the business of the Company. Across all its business operations, your Company had a workforce of 4336 permanent employees as on March 31, 2021.

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 specialied functions. Further, the Company sponsors its employees to pursue professional courses from reputed institutes such as Indian Institutes of Management to ensure career enrichment and personal development.

The outbreak of COVID-19 pandemic resulted in lot of fear, insecurity and desperation across the world. During these tough times, the Company prioritized safety and wellbeing of its employees. In strict adherence to the local guidelines, the Company incorporated a culture of social distancing across all its branches and allowed employees to work from home. The Company also engaged doctors, who were readily available on-call for employees seeking medical advice. The Company offered cashless medical facilities and assistance in cases where any employee or family member tested COVID positive, including treatment at home, hospitalization, plasma arrangement and medicines. While a lot of work was being done virtually, the Company also made sincere efforts to keep in touch with employees and inquire about their wellbeing with the help of HR Connect and COVID-awareness webinars.

During the Financial Year under review, your Company implemented COVID-19 relief policies for its employees. In case any employee contracts COVID-19, the policy provides for reimbursement of COVID-19 testing expenses and financial assistance for medical treatment. In case of an eventuality of death of an employee due to COVID-19, the policy provides for Ex-gratia payment of monthly support to the family of deceased employees up to 24 months, compassionate employment to Spouse or Adult Child (18 Years & above) of deceased employee on merit and early vesting of ESOPs. In addition, all the Company’s employees are covered under Group Term Life Insurance Plan, which provides an adequate safeguard to family of deceased employees

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 has set up a policy framework for

ensuring better management of various risk associated with the business. The principle business risks (assessed function-wise) are credit risk, concentration risk, market risk, asset-liability management risk, liquidity risk and reputation risk. These are measured and reported to the Risk Management Committee on a quarterly basis.

Your Company gives due importance to prudent lending practices and has put in place suitable measures for risk mitigation, which include, verification of credit history from credit information bureaus, personal verification of customer’s business place and residence, in house technical and legal verification, conservative loan to value parameters, and insurance coverage. The Risk management framework of your Company seeks to minimize adverse impact of risks on the key business objectives and enables your Company to leverage market opportunities effectively.

In compliance with the clause 51 of Chapter IX- Corporate Governance of Non-Banking Financial Company -Housing Finance Company (Reserve Bank) Directions, 2021, Mr. Ashutosh Atre is designated as Chief Risk Officer (CRO) of the Company who has direct reporting to MD & CEO of the Company.

In accordance with the above referred directions, 4 (Four) separate Meetings were held between Mr. 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 affairs 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 need be. 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 READ WITH RULES

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. Your Company recognizes and promotes the right of women to get protection from sexual harassment and the right to work with dignity as enshrined under the Constitution of India and the Convention on the Elimination of all forms of Discrimination against Women (CEDAW).

Pursuant to the requirements of Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 read with Rules there under, the Internal Complaints Committee of the Company has not received any complaint of sexual harassment during the Financial Year under review.

The following is a summary of sexual harassment complaints received and disposed of during the Financial Year 2020-21:

No. of complaints received: Nil

No. of complaints disposed of: Nil

CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING IN COMPANY’S SECURITIES

Your Company has formulated Code of Conduct for Prevention of Insider Trading in Company’s Securities (‘Code’) in accordance with SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended. 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.

The Shareholder having the substantial interest in the Company is Lake District Holdings Limited.

As on March 31, 2021, 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 has an effective Investor Relations Program through which the Company continuously interacts with the investment community through various communication channels viz Periodic Earnings Calls, Annual Investors/Analysts Day, Individual Meetings, Videoconferences, Participation in conferences, One-on-One interaction.

Your Company ensures that critical information about the Company is made available to all its investors by uploading such information on the Company’s website under the Investors section. Your Company also intimates stock exchanges regarding upcoming events like earnings calls, declaration of quarterly & annual earnings with financial statements and other such matters having bearing on the share price of the Company.

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-7’ 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 136(1) of the Act, the Directors’ Report including the said annexure is being sent to all Shareholders of the Company.

CSR INITIATIVE

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 health care, promoting gender equality, empowering women, education, promoting traffic rules, regulation and road safety, providing safe drinking water and promoting Sports which are in accordance with the Schedule VII of the Act and CSR Policy of the Company.

The national and local impact of the COVID-19 crisis was highly heterogeneous, with significant implications for crisis management and policy responses not only at the company

In view of the nature of the activities carried on by your Company, there is no capital investment on energy conservation equipment.

B) Technology absorption:

(i) the efforts made towards technology absorption:

The Company took a major leap in terms of technology integrations in customer service, which resulted in automation of partial disbursement flow and enabled the customers to request their next disbursal tranche while sitting in the comfort of their homes. It has real time connection with the Bharat Bill Payment System (BBPS) and customers of the Company can now pay their dues digitally through various UPI Payment Apps in India.

As the Company took steps forward in Digitization, it is proud to state that more than 25% of our customer service requests are addressed via various digital channels and a significant volume of loan enquiries are flowing through digital channels, given the nature of customer segment that we are serving.

The Company amalgamated technology with advanced analytics, having launched a variety of machine-learning and AI-powered tools from early days to assess risks and probability of defaults. Its enterprise data and analytics platforms give real time view of the business and enable to track productivity at every level. It has adopted a highly advanced technology governance standards and cyber security framework as per industry best practices.

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution: The Company consistently monitored its cost-to-income ratio, leveraging economies-of-scale, increasing manpower productivity with growing disbursements through the enhanced use of information technology systems, resulting in quicker loan turnaround time and reducing transaction costs.

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the Financial Year)

a) the details of technology imported: N.A.

b) the year of import: N.A.

c) whether the technology has been fully absorbed: N.A.

d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof: N.A.

(iv) the expenditure incurred on Research and Development: N.A.

level but also at community level. The Company being a responsible Corporate has supported the community since lockdown. It focuses its CSR efforts on such areas where it could provide maximum benefits to adversely affected groups. During the previous Financial Year, it worked with Government Medical department towards arranging and supplying oxygen concentrators, PPE kits, sanitizers and masks and gloves to corona warriors, supplying cooked food to impacted community, starting awareness programs and producing more than 80,000 cotton masks for distribution in the community, with the help of women residing in rural areas, in order to support their livelihood. The Company devoted its best efforts to support migrant workers and others who suffered the most during lockdown.

The Company shall 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, which forms part of the Directors’ Report, is annexed as ‘Annexure-8’ to this report.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

In accordance with the provisions of Sec 134 (3) (m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 the requisite information relating to your Company are as under:

A) Conservation of energy:

(i) The Steps taken / impact on conservation of energy:

The operations of the Company, being financial services do not require intensive consumption of electricity. However, your Company is taking necessary steps to reduce its consumption of energy.

(ii) The Steps taken by the Company for utilizing alternate sources of energy:

Your Company has procured the Energy Saving Green IT Equipments and power saving lamps, LEDs that have been installed in branches as a measure for conservation of energy. Your Company has installed High-end Copier Machine in High Print volume in Branches to reduce the Carbon Footprint.

As a part of Save Green efforts, a lot of paper work at branches and the registered office has been reduced by suitable leveraging of technology and promoting digitization.

(iii) The Capital investment on energy conservation equipment:

C) Foreign exchange earnings and Outgo:

During the Financial Year under review, your Company had no foreign exchange earnings and the aggregate of the foreign exchange outgo during the Financial Year under review was H1,829.26 lakh. The aforesaid details are shown in the Note No. 39 of notes to the accounts, forming part of the Standalone Financial Statements. The Members are requested to refer to this Note.

BUSINESS RESPONSIBILITY REPORTING

As required under Regulation 34(2)(f) of SEBI LODR Regulations, Business Responsibility Report describing the initiatives taken by the Company from an environmental, social and governance perspective, forms part of this Annual Report as ‘Annexure-10’.

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, 2021 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 has 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.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

In accordance with the provisions of Section 188 of the Act and rules made thereunder, the transactions entered with related parties are in the ordinary course of business and on an arm’s length pricing basis, the details of which are included in the notes forming part of the financial statements.

During the Financial Year under review, your Company had not entered into any arrangements, which constitutes Related Party Transactions covered within the purview of Section 188(1) of the Act. Accordingly, requirement of disclosure of Related Party Transactions in terms of Section 134(3)(h) of the Act is provided in Form AOC-2 is not applicable to the Company.

Further as required by RBI Master Directions, ‘Policy on transactions with Related Parties’ is given as ‘Annexure-9’ 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 affairs of the Company at the end of the Financial Year and of the profit and loss of the Company for that period.

Your Directors would like to acknowledge the role of all its Stakeholders viz., Shareholders, Debenture holders, Bankers, s Lenders, Borrowers, Debenture Trustees and all others for the s continued support, confidence and faith they have reposed in the Company amidst the ongoing COVID-19 pandemic.

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 acknowledge and appreciate the guidance and

; support extended by all the Regulatory authorities including

RBI, NHB, SEBI, MCA, Insurance Regulatory and Development

Authority of India (IRDAI), Registrar of Companies-Rajasthan, s

l BSE, National Stock Exchange of India Limited, National Securities Depository Limited and Central Depository Services (India) Limited.

Your Directors thank the Rating Agencies (ICRA, CARE and India Ratings & Research Ltd.), local /statutory authorities and s all others for their whole-hearted support during the Financial Year and look forward to their continued support in the years ahead.

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.

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.

ACKNOWLEDGEMENTS

Your Directors would like to place on record their gratitude for the valuable guidance and support received from the NHB and RBI.

For and on behalf of the Board of Directors AAVAS FINANCIERS LIMITED

Sushil Kumar Agarwal Manas Tandon

Managing Director & CEO Promoter Nominee Director

(DIN: 03154532) (DIN: 05254602)

Date: April 29, 2021 Date: April 29, 2021

Place: Jaipur Place: Mumbai

Registered and Corporate Office:

201-202, 2nd Floor, South End Square,

Mansarover Industrial Area, Jaipur 302 020, Rajasthan, India

CIN: L65922RJ2011PLC034297

Tel: 91 14 1661 8800 Fax: 91 14 1661 8861

E-mail: [email protected] | Website: www.aavas.in


Mar 31, 2019

The Directors are pleased to present the Ninth Annual Report on the operational and business performance of the Company together with the Audited Financial Statements (standalone and consolidated) for the financial year ended March 31, 2019.

FINANCIAL PERFORMANCE

The summarized financial performances for the financial year ended March 31, 2019 are as under:

(Rs. in crore)

Particulars

For the Year ended March 31, 2019

For the Year ended March 31, 2018

A

Total Income

710.97

494.44

Less:

- Total Expenditure before Depreciation & Amortization and provision

(434.66)

(351.92)

- Impairment on financial instruments

(8.90)

(2.59)

- Depreciation & Amortization

(9.72)

(5.63)

B

Total Expenses

(453.28)

(360.14)

C

Profit Before Tax (A-B)

257.69

134.31

D

Less: Provision for Taxations (Net of Deferred Tax)

81.78

41.21

E

Profit After Tax (C-D)

175.91

93.09

F

Add: Other Comprehensive Income (Net of Tax)

0.23

0.07

G

Total Comprehensive Income (E F)

176.14

93.16

Transfer to Statutory Reserve

35.23

20.17

Your Company posted Total Income (Total Interest Income and Other Income) of RS.710.97 crore and Total Comprehensive Income of RS.176.14 crore for the financial year ended March 31, 2019, as against RS.494.44 crore and RS.93.16 crore respectively for the previous financial year.

IND AS IMPLEMENTATION

Your Company has adopted Indian Accounting Standards (“Ind AS”) notified under Section 133 of the Companies Act, 2013 (“the Act”) read with the Companies (Indian Accounting Standards) Rules, 2015 from April 01, 2018 and the effective date of such transition is April 01, 2017. Such transition has been carried out from the erstwhile accounting standards notified under the Act, read with relevant rules issued thereunder and guidelines issued by National Housing Bank (“NHB”) (collectively referred to as ‘the Previous GAAP’). Accordingly, the impact of transition has been recorded in the opening reserves as at April 01, 2017 and the corresponding financial figures presented in this Report have been restated/reclassified.

DIVIDEND

Your Directors have considered reinvesting the profits into the business of the Company in order to build a strong reserve base for the long-term growth aspects of the Company. Accordingly, no dividend has been recommended for the financial year ended March 31, 2019.

MODIFICATION IN ARTICLES OF ASSOCIATION

The Members of the Company vide Special Resolution passed at the Extraordinary General Meeting held on June 11, 2018 have adopted new set of Articles of Association of the Company (“Articles”) in accordance to the provisions of the Act.

Further, the Members of the Company vide Special Resolution passed by means of Postal ballot concluded on December 30, 2018 have also ratified the Articles of Association post listing of the Equity Shares of the Company.

INITIAL PUBLIC OFFERING

Your Company made its Initial Public Offer (“IPO”) of 1,99,79,503 Equity Shares of face value of RS.10/- each for cash at a price of RS.821 per Equity Share (including a share premium of RS.811 per Equity Share). The offer comprised of fresh issue of 43,84,897 Equity Shares by your Company and Offer for Sale of 1,55,94,606 Equity Shares by Lake District Holdings Limited and Partners Group ESCL Limited (“Promoters”), by Kedaara Capital Alternative Investment Fund-Kedaara Capital AIF 1 (“Existing Investor”), by Partners Group Private Equity Master Fund LLC (“Members of Promoter Group”), by Mr. Sushil Kumar Agarwal, Managing Director and CEO and Mr. Vivek Vig, Non-Executive Nominee Director.

The Equity Shares of your Company were successfully listed on the BSE Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”) with effect from October 08, 2018. The Annual Listing Fees for the financial year 2019-20 has been paid by your Company to both the Stock Exchanges.

Your Directors wish to place on record their gratitude for the trust, faith and confidence reposed by the public, institutions, customers and business partners in the Company even during the challenging environment; thus making the IPO successful.

Your Directors also places on record their deep appreciation for the significant contribution and sincere efforts made in the IPO process by the Merchant Bankers, all legal counsels to the offer, Statutory Auditors of the Company, Registrar to the Offer, Advertising Agency, Syndicate Members, Monitoring Agency, Bankers to the Offer, NHB, Registrar of Companies-Jaipur, Stock Exchanges, Management Team and Employees of the Company.

SHARE CAPITAL

The Issued and paid-up Equity Share Capital of the Company as on March 31, 2019 stood at RS.78,10,79,010 (Rupees Seventy eight crore ten lakh seventy nine thousand ten) consisting of 7,81,07,901 (Seven crore eighty one lakh seven thousand nine hundred one) Equity Shares of RS.10/- each as compared to RS.69,17,28,346 (Rupees Sixty nine crore seventeen lakh twenty eight thousand three hundred and forty six) consisting of 6,99,50,891 (Six crore ninety nine lakh fifty thousand eight hundred ninety one) Equity Shares of RS.10/- each in previous year.

During the financial year under review, the Paid-up Equity Share Capital of the Company has been increased on account of the following:

- Conversion of 7,20,094 partly paid Equity Shares into the fully paid Equity Shares of face value of RS.10/- each, consequent upon receipt of balance call money of RS.6 per share.

- Conversion of 4,32,500 partly paid Equity Shares into the fully paid Equity Shares of face value of RS.10/- each consequent upon receipt of balance call money of RS.8 per share.

- Conversion of 8,00,000 convertible share warrants into fully paid Equity Shares of face value of RS.10/- each.

- Issuance and allotment of 29,72,1 1 3 Equity Shares pursuant to the exercise of stock options by the eligible employees of the Company under ESOP plans of the Company.

- Issuance and allotment of 43,84,897 Equity Shares of RS.10/- each by way of issue of fresh Equity Shares through IPO .

REVIEW OF OPERATIONS

Your Company is registered as a Housing Finance Company with NHB to carry out the housing finance activities in India.

In order to build a high-quality loan book, your Company endeavors to adopt superior underwriting practices backed by robust monitoring and recovery mechanisms. Your Company is always committed towards improving efficiency in all its processes and service levels for its customers.

Your Company’s main thrust continues to be the affordable housing segment, with its focus on catering to the aspirations of low and middle-income Indian families who dream to own their homes. Your Company has been conducting its business as a housing finance institution enabling credit access to the low and middle income self-employed customers in semi-urban and rural areas in India. The majority of your Company’s customers have limited access to formal banking credit facilities.

The operating and financial performance of your Company has been covered in detail in the Management Discussion and Analysis report (“MDA”) which forms part of this Annual Report.

During the financial year under review, your Company has delivered yet another year of resilient performance, which is reflected in the following Company’s financial snapshot:-

Income & Profits

Total Income grew by 43.79% to RS.710.97 crore for the financial year ended March 31, 2019 as compared to RS.494.44 crore for the previous financial year. Profit Before Tax (PBT) was 91.87% higher at RS.257.69 crore as compared to RS.134.31 crore for the previous financial year.

The Total Comprehensive Income for the financial year 2018-19 has increased by 89.06% from RS.93.16 crore in the previous financial year to RS.176.14 crore in the current financial year.

Sanctions

During the financial year under review, your Company sanctioned housing loans for RS.2710.82 crore as compared to RS.2216.98 crore in the previous financial year with an annual growth of 22.28%. The cumulative loan sanctions since inception of your Company stood at RS.8612.20 crore as at March 31, 2019. Your Company has granted no loan against the Collateral of Gold Jewellery.

Disbursements

During the financial year under review, your Company disbursed housing loans for RS.2672.35 crore as compared to RS.2051.16 crore in the previous financial year and recorded a growth of 30.28% in disbursements.

The cumulative loan disbursement since inception as at March 31, 2019 was RS.8167.52 crore.

Assets under Management (AUM)

The AUM of your Company stood at RS.5941.61 crore (including assignment of RS.1357.46 crore) as at March 31, 2019 as against RS.4073.02 crore in the previous financial year, with a growth of 45.88%.

As of March 31, 2019, the average loan sanctioned was RS.8.59 lakh and Average tenure was 180.63 months in the AUM (on origination basis).

Affordable Housing

Your Company has experienced, trained and exclusive team for catering the product and to focus on Economically Weaker Sections (EWS) and Low Income Group (LIG) segments. This customer segment have a prime aspiration of owning their own houses.

Your Company has signed MOU’s with Local Government authorities of various State Governments for the Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana for EWS, LIG and Middle Income Group (MIG) segments.

During the financial year under review, your Company has been an active contributor to the same and has benefited Customers by providing CLSS Subsidy of Rs. 36.56 crore througRs.1907 loan accounts and credited the subsidy to the respective customers’ loan accounts.

Since the inception of the scheme, your Company has received CLSS subsidy of RS.42.90 crore in respect of 2342 beneficiaries and same has been passed on to the customers.

The majority of the claims submitted are in respect of the EWS and LIG customers.

Non-Performing Assets

Your Company is in adherence to the provision of Ind AS with respect to computation of Non-Performing Assets (“NPAs”). 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 Interest income on NPAs which was not accrued earlier is now recognized as part of Ind AS adjustment, if the security is adequate and the present value of realization of the security is greater than the outstanding loan dues.

Using a pro-active collection and recovery management system supported by analytical decision making, your Company was able to contain its gross NPAs at RS.22.27 crore (0.47% of the loan assets) as at March 31, 2019. Your Company reviews the delinquency and loan portfolio on regular basis.

Your Company conforms to a defined policy with procedures to address delinquencies and collections. As a result, Gross NPA and net NPA as at March 31, 2019 were 0.47% and 0.37% respectively (against 0.46% and 0.39% respectively in the previous financial year).

Further, the information on the Business overview and outlook and state of the affairs of your Company have been discussed in detail in the MDA which forms part of this Annual Report.

CAPITAL ADEQUACY RATIO

As required under NHB Directions, 2010, your Company is presently required to maintain a minimum capital adequacy of 12% on a stand-alone basis.

Further, the NHB vide its note dated March 04, 2019 has proposed certain amendments which includes to raise the capital adequacy ratio for HFCs from 12% to 15% by March 2022.The capital adequacy ratio of HFCs is to be increased from 12% to 13% by March 2020, 14% by March 2021 and 15% by March 2022 as per the said proposal.

Your Company’s Capital Adequacy Ratio as at March 31, 2019 was 67.77% (previous financial year 61.55%) which is far above the minimum required level of 12% as well as the proposed level of 15%.

DEPOSITS

During the period 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.

CREDIT RATING UPGRADES

During the financial year under review, your Company’s Long-Term Credit rating was upgraded by CARE Ratings Limited to the CARE AA- with a stable outlook from CARE A with a positive outlook, reflecting Company’s financial strength and growth outlook.

Further ICRA has upgraded the rating outlook of your Company from “ICRA A ”/Stable to “ICRA A ”/ Positive.

India’s renowned rating agencies have assigned ratings to your Company, the details of the same are mentioned below:-

Rating Agency

Rating Type

Nature of Borrowing

External Credit Rating

CARE

Long Term Rating

Long Term Banking Facilities and Instrument -Subordinated Debt

“CARE AA- / Stable”

Short Term Rating

Commercial Paper

“CAREA1 ”

ICRA

Long Term Rating

Long Term Banking Facilities and Non-Convertible Debentures

“ICRA A / Positive”

Short Term Rating

Commercial Paper

“ICRA A1 ”

CRISIL

Long Term Rating

Long Term Banking Facilities

“CRISIL A / Stable”

The ratings continue to reflect your Company’s healthy earning profile, adequate capitalization, strong net worth base, and steady improvement in its scale of operations.

The assigned ratings are a positive reflection of Company’s leadership position in affordable housing segment, its experienced management team and strong brand equity in the regional markets where it has presence. The rating also derives strength from comfortable liquidity and resource profile and adequate risk management & control systems put in place by the Company as well as good growth opportunities in the affordable housing segment.

ISO CERTIFICATIONS

Your Company has received following ISO certifications for its key customer facing departments and workflow process from TUV Nord India reflecting the superior customer experience.

- ISO 9001:2015 for Lending process; e-disbursements and client servicing including Grievance Redressal Mechanism and;

- ISO 10002:2014 for customer satisfaction and complaint handling process.

RESOURCE MOBILIZATION

Your Company’s overall borrowing is guided by a policy duly approved by the Board of Directors. Your Company has vide special resolution passed on May 30, 2018, 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.7,000 crore and the total amount so borrowed shall remain within the limits as prescribed by NHB.

Your Company manages its borrowing structure through prudent Asset-Liability Management and takes various measures, which include diversification of the funding sources, tenure optimization, structured interest rates and prudent borrowing timing to maintain its borrowing cost at optimum level.

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 Non-Convertible Debentures; Issuance of Rupee denominated masala bond via ECB Route to mutilates, NHB Refinance, Securitization/Direct assignment, and banking products like Priority Sector/Non-Priority Sector Term loans, Cash Credit Facilities and Working Capital Demand loans. Your Company has also further diversified its borrowing by adding 2 (Two) new lenders/Financial Partners.

The weighted average borrowing cost as at March 31, 2019 was 8.74% (including Securitization/ Assignment) as against 8.63% in the previous financial year. As at March 31, 2019, your Company’s sources of funding were primarily from banks and financial institutions (42.22%), followed by Securitization/Direct assignment (28.03%), NHB Refinance (18.57%), Masala Bond issued to Multilaterals (6.83%), Non-Convertible Debentures issued to Domestic Financial Institutions (2.28%), and Subordinated Debts (2.07%).

Term Loans from Banks and Financial Institutions

During the financial Year under review, your Company received fresh sanctions from banks amounting to RS.630 crore and has availed loans aggregating to RS.645 crore. The outstanding term loans from Banks and Financial Institutions as at March 31, 2019 were RS.2,041 crore. Average Tenure of term loan raised during the financial year under review is 9.23 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 has received purchase consideration of RS.680.16 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 have been 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 sanction of fresh refinance assistance of RS.400 crore in addition to the approval of undrawn limit of RS.100 crore pertaining to FY 2017-18, under the NHB refinance scheme to Housing Finance Companies. Your Company availed funds from NHB under the Refinance Scheme for “Special Urban Low-Income Housing”, “Urban Housing Fund”, “Affordable Housing Fund” and “Regular Refinance Scheme” and outstanding at the end of the current financial year stood at RS.897.21 crore (previous year RS.365.10 crore).

Your Company has availed funds of RS.231.70 crore under subsidized scheme of NHB (Affordable Housing Fund and Urban Housing Fund) and reduced the effective rate of interest for the eligible customers to 8.36% being fixed for next 7 years.

Masala Bond issued to Multilaterals

During the financial Year under review, your Company has issued rupee denominated Masala Bond of RS.200 crore in the nature of senior subordinated debt to CDC Group PLC (“CDC”), the United Kingdom’s Development Finance Institution. This is your Company’s maiden Masala Bond issue and can be listed on London Stock Exchange or any other international stock exchanges in future. Your Company is fourth HFC to issue Masala Bond.

As on March 31, 2019, your Company’s outstanding balance of Masala Bond issued to Multilaterals stood at RS.198.40 crore.

Non-Convertible Debentures (“NCDs”) issued to Domestic Financial Institutions

During the financial year under review, your Company has raised RS.10 crore through the issue of Rated, Secured, Redeemable, Non-Convertible Debentures on private placement basis to Domestic Financial Institutions.

Your Company has redeemed Secured NCD’s amounting to RS.150 crore before their maturity and RS.10 crore on maturity during the financial year under review.

As on March 31, 2019, the Company’s outstanding NCDs stood at RS.238.65 crore as compared to RS.388.20 crore as on March 31, 2018. Your Company’s Debentures are listed on Wholesale Debt Market segment of BSE Limited.

As on March 31, 2019, the Company’s outstanding subordinated debt in the form of NCDs stood at RS.99.58 crore as compared to RS.99.48 crore as on March 31, 2018.

During the financial year under review, the interest on Non-Convertible Debentures issued on private placement basis were paid by the Company on their respective due dates and there were no instances of interest amount not claimed by the investors or not paid by the Company.

Your Company, being Housing Finance Company (HFC), is exempted from the requirement of creating Debenture Redemption Reserve (DRR) on privately placed debentures. Therefore, DRR has not been created by your Company.

The security details of the aforesaid borrowings of the Company are mentioned in Note No. 11, 12 and 13 of the Notes to accounts forming part of the audited (standalone) financial statements for the financial year ended March 31, 2019.

Disclosure under Housing Finance Companies issuance of Non-Convertible Debentures on private placement basis (NHB) directions, 2014:

(i) The total number of non-convertible debentures which have not been claimed by the investors 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 of such Debentures become due for redemption:

- Nil

Commercial Paper (CP)

Your Company has not issued any Commercial Paper & Short-Term Instrument during the financial year 2018-19.

Debenture Trustees

Debenture Trust Agreement(s) were executed in favour of IDBI Trusteeship Services Limited and Catalyst Trusteeship Limited for NCDs issued by the Company on private placement basis.

BRANCH EXPANSION

Your Company has been successful in continuous expansion of its Branch network with a view to support its disbursement growth, deeper penetration in the states in which Company operates and enhancing customer reach. During the financial year under review, the Company has expanded its Branch network to 10 states througRs.210 Branches as of March 31, 2019 and plans to scale up its operation to newer geographies in FY 2019-20. Your Company now operates in the states of Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Haryana, Delhi, Chhattisgarh, Uttar Pradesh, Uttarakhand and Punjab.

Your Company has its registered office in Jaipur, Rajasthan and its branch network as on March 31, 2019 vis-a-vis the previous financial year is detailed hereunder:

State

No. of Branches (As on March 31, 2019)

No. of Branches (As on March 31, 2018)

Rajasthan

78

72

Maharashtra

38

33

Gujarat

32

27

Madhya Pradesh

32

24

Haryana

11

3

Chhattisgarh

5

3

Delhi

2

2

Uttar Pradesh

6

1

Uttarakhand

5

-

Punjab

1

-

Total number of branches

210

165

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board of Directors of the Company comprises of Nine Directors, consisting of three Independent Directors (including one Woman Director), five Non-Executive Nominee Directors and one Whole Time Director* and CEO as on March 31, 2019 who bring in a wide range of skills and experience to the Board.

The Board of Directors of the Company are:-

Name of the Director

Designation

DIN

Mr.Krishan Kant Rathi

Chairperson and Independent Director

00040094

Mr. Sushil Kumar Agarwal

Managing Director and CEO*

03154532

Mrs. Kalpana Iyer

Independent Director

01874130

Mr. Sandeep Tandon

Independent Director

00054553

Mr. Ramachandra Kasargod Kamath

Non-Executive Nominee Director

01715073

Mr. Vivek Vig

Non-Executive Nominee Director

01117418

Mr. Nishant Sharma

Non-Executive Nominee Director

03117012

Mr. Manas Tandon

Non-Executive Nominee Director

05254602

Mr. Kartikeya Dhruv Kaji

Non-Executive Nominee Director

07641723

* Subject to the approval of Members of the Company, Board of Directors of the Company at their meeting held on May 03, 2019 has approved the change in designation of Mr. Sushil Kumar Agarwal to Managing Director and Chief Executive Officer (“MD and CEO”) of the Company from Whole Time Director and Chief Executive Officer (“WTD and CEO”), with effect from May 03, 2019 till the expiry of his current term i.e. upto January 09, 2024.

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 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI LODR Regulations”). 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/Ministry of Corporate Affairs or any such statutory authority. The same forms part of this Annual Report as “Annexure-1” to the Directors Report.

Appointment & Resignation of Directors

Appointments

During the financial year under review, the Board at its meeting held on June 08, 2018 appointed Mr. Krishan Kant Rathi, Independent Director of the Company as Chairperson of the Board with effect from June 08, 2018, who shall hold office up to the date of ensuing AGM as Chairperson of the Board.

Re-appointments

During the financial year under review, Mr. Sushil Kumar Agarwal has been reappointed as Whole Time Director and Chief Executive Officer of the Company for a period of five years, with effect from January 10, 2019 by the Members of the Company vide a postal ballot concluded on December 30, 2018.

Change in Designation

Subject to the approval of Members of the Company, Board of Directors of the Company in their meeting held on May 03, 2019 has approved to change designation of Mr. Sushil Kumar Agarwal to Managing Director and Chief Executive Officer (“MD and CEO”) of the Company from Whole Time Director and Chief Executive Officer (“WTD and CEO”), with effect from May 03, 2019 till the expiry of his current term i.e. upto January 09, 2024.

During the year, no Director of the Company has resigned from the Board of the Company.

Directors Retiring by Rotation

In accordance with the provisions of the Act, Mr. Ramachandra Kasargod Kamath and Mr. Vivek Vig, Non-Executive Nominee Directors of the Company are liable to retire by rotation at the ensuing 9th Annual General Meeting of the Company. They are eligible and have offered themselves for re-appointment. Resolutions for their reappointment are being proposed at the 9th Annual General Meeting and their Profiles are included in the Notice of the 9th Annual General Meeting.

Appointments/Resignations of the Key Managerial Personnel

Mr. Sushil Kumar Agarwal- Managing Director and CEO, Mr. Ghanshyam Rawat- Chief Financial Officer and Mr. Sharad Pathak - Company Secretary and Compliance Officer are the Key Managerial Personnel in terms of section 2(51) of the Act.

Further Subject to the approval of the Members of the Company, Board of Directors of the Company at their meeting held on May 03, 2019 has approved the change in the designation of Mr. Sushil Kumar Agarwal to Managing Director and Chief Executive Officer (“MD and CEO”) of the Company from Whole Time Director and Chief Executive Officer (“WTD and CEO”), with effect from May 03, 2019 till the expiry of his current term i.e. upto January 09, 2024.

Apart from above, none of the Key Managerial Personnel of the Company has been appointed or resigned from the Company during the financial year under review.

Number of Board Meetings held during the Financial Year

During the financial year 2018-19, 10 (Ten) Board Meetings were convened and held. The details related to Board Meetings are appended in Corporate Governance Report forming part of this Report.

The intervening gap between the Board Meetings was within the period prescribed under the Act and SEBI LODR Regulations. The notice and agenda including all material information and minimum information required to be made available to the Board under Regulation 17 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.

Performance Evaluation of the Board

Your Company is following the most effective way to ensure that Board Members understand their duties and adopt good governance practices. In furtherance to this, the Directors of your Company commit to act in good faith to promote the objects of the Company for the benefit of its employees, the Stakeholders including Shareholders, the community and for the protection of environment.

Your Company has designed a mechanism as per the provisions of the Act, SEBI LODR Regulations and “Housing Finance Companies-Corporate Governance (National Housing Bank) Directions, 2016” for the Evaluations of performance of Board, Committees of Board & Individual Directors.

The above mechanism is 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 by NHB 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 Nomination & Remuneration Committee carried out the evaluation of every Director’s performance and the Board additionally carried out an evaluation of its own performance, Statutory Board Committees namely Audit Committee, Nomination & Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders Relationship Committee and Risk Management Committee and all the Individual Directors without the presence of the Director being evaluated.

During the financial year under review, separate Meeting of the Independent Directors was held on January 30, 2019, without the attendance of Non- Independent Directors and the Management of the Company to review the performance of the Non- Independent Directors and 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.

Major aspects of Board evaluation included who is to be evaluated, process of evaluation including laying down of objectives and criteria to be adopted for evaluation of different persons, feedback to the persons being evaluated and action plan based on the results. The manner in which the evaluation has been carried out has been explained in the Report on Corporate Governance forming part of this Report as “Annexure-2”. As required under the SEBI LODR Regulations, a certificate from Mr. Manoj Maheshwari, Practicing Company Secretary (Membership No. FCS 3355) certifying that the Company has complied with the conditions of Corporate Governance as stipulated by SEBI LODR Regulations has been obtained. The said certificate forms part of the Directors Report as “Annexure-3”.

Company’s Policy on Director’s Appointment, Remuneration & Evaluation

The Board on the recommendation of the Nomination & Remuneration Committee adopted a “Policy on Nominations & Remuneration for Directors, Key Managerial Executives, Senior Management and Other Employees”, 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 other employees and their evaluation and includes other matters, as prescribed under the provisions of Section 178 of the Act and SEBI LODR Regulations.

The “Policy on Nominations & Remuneration for Directors, Key Managerial Executives, Senior Management and Other Employees”, ‘Remuneration Policy’ of the Company are placed on the website of the Company. The Remuneration paid to the Directors is in line with the Remuneration Policy of the Company.

The Nomination & Remuneration Policy can be accessed through the following link https://www.aavas.in/ remuneration-policy.

Details of Remuneration paid to all the Directors during the financial year 2018-19 is more particularly defined in extract of Annual Return in form “MGT-9” attached to this report as “Annexure-9”.

COMMITTEES OF THE BOARD

The Company has the following Ten (10) 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 and Remuneration Committee

3. Stakeholders Relationship Committee

4. Corporate Social Responsibility (CSR) Committee

5. Risk Management Committee

6. Asset Liability Management Committee (ALCO)

7. IT Strategy Committee

8. Executive Committee

9. Customer Service & Grievance Redressal (CS&GR) Committee

10. IPO Committee

During the financial year under review, 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.

PRUDENTIAL NORMS FOR THE HOUSING FINANCE COMPANY

Your Company continues to comply with the guidelines issued by NHB, from time to time including but not limited to accounting guidelines, prudential norms for asset classification, income recognition, provisioning, capital adequacy, concentration of credit/investments, credit rating, Know Your Customer (KYC) guidelines, Anti Money Laundering (AML) standards, fair practices code, Asset Liability Management (ALM) system, Most Important Terms & Conditions (MITC), Grievance Redressal Mechanism, recovery of dues, real estate and capital market exposures norms. Further, your Company has taken steps for effective management of operational risk including technology risk as outlined in the Information Technology framework for HFCs. Your Company has also put a reporting system in place for recording frauds as stipulated in guidelines dated February 5, 2019 issued by NHB.

The recognition of Income and Impairment on financial instruments (Expected Credit Loss) has been made in the books as per the Ind AS.

Your Company’s Capital Adequacy Ratio stood at 67.77% as against the minimum requirement of 12%.

NHB has not passed any significant or adverse remarks against the Company in their inspection carried out during the financial year. Further it has not levied any penalty on the Company during the financial year.

Regulatory & Statutory Compliances

During the financial year under review, the NHB has issued various Notifications, Circulars and Guidelines to Housing Finance Companies.

The Circulars and the Notifications issued by NHB were also placed before the Board of Directors at regular intervals to update the Board members on compliance of the same, and your Company has adhered to all the Circulars, Notifications and Guidelines issued by NHB from time to time.

The Government of India has set up the Central Registry of Securitization, Asset Reconstruction and Security Interest of India (CERSAI) under Section 21 of the SARFAESI Act, 2002 to have a central database of all mortgages created by lending institutions. The object of this registry is to compile and maintain data relating to all transactions secured by mortgages. Accordingly, your Company is registered with CERSAI and has been submitting data in respect of its loans.

Your Company is also in compliance with the provisions of the Act including the Secretarial Standards, SEBI LODR Regulations and other applicable statutory requirements.

EMPLOYEE STOCK OPTION PLANS-2016 (ESOP-2016)

Your Company has instituted Stock Option Plans to attract and retain, reward and motivate the Management team, Directors and Employees of the Company.

The Members of the Company have by passing the special resolution at their Meeting held on February 23, 2017 approved three plans (Collectively called “ESOP-2016”) as following:

1. EQUITY STOCK OPTION PLAN FOR EMPLOYEES 2016 (“ESOP 2016-I”)

2. EQUITY STOCK OPTION PLAN FOR MANAGEMENT TEAM 2016 (“ESOP 2016-II”)

3. EQUITY STOCK OPTION PLAN FOR DIRECTORS 2016 (“ESOP 2016-III”)

These three plans empower the Board and Nomination & Remuneration Committee to execute the said ESOP-2016.

Pursuant to the resolution passed by the Members on June 11, 2018, the Equity Stock Option Plan for Directors 2016 (“ESOP 2016-111”) was amended in order to enable early/accelerated vesting of stock options under the said plan. Further pursuant to requirements of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (“SEBI SBEB Regulations”) read with SEBI LODR Regulations, the Members of the Company ratified the “ESOP-2016” subsequent to the IPO of the Company. All the above stated ESOP plans are in compliance with the SEBI SBEB Regulations.

The Nomination & Remuneration Committee monitors the Plans in compliance with the Act, SEBI SBEB Regulations and SEBI LODR Regulations. The Company shall place a certificate received from its Auditors confirming that the above Plans have been implemented in accordance with the SEBI SBEB Regulations and is as per the resolutions passed by the Members of the Company. at the ensuing AGM for the inspection of the Members of the Company. The disclosures as required under the SEBI SBEB Regulations have been placed on the website of the Company at https://www.aavas.in/investor-relations/ annual-reports.

SPECIAL RESERVE (U/S 29C OF THE NATIONAL HOUSING BANK ACT, 1987)

Your Company has transferred RS.35.23 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.

AUDITORS

Statutory Auditors

M/s S.R. Batliboi & Associates LLP Chartered Accountants (Firm Registration No: 101049W/E300004) Statutory Auditors of the Company were appointed by the Members of the Company in the 7th Annual General Meeting (AGM) of the Company held on July 26, 2017 to hold office as Statutory Auditors from conclusion of the 7th AGM to the conclusion of 12th AGM of the Company.

As per the provisions of the NHB Notification No. NHB. HFC.CG-DIR.1/MD&CEO/2016, partner of the audit firm needs to be rotated in every three year.

Members are requested to note that the Ministry of Corporate Affairs vide notification dated May 7, 2018, inter-alia, notified an amendment to Section 139(1) of the Act whereby the requirement of placing appointment of the Statutory Auditors for ratification by the Members of the Company at every Annual General Meeting has been omitted. Accordingly, the Board has not proposed any ratification for the appointment of Statutory Auditors in the forthcoming AGM. However the Board has noted the confirmation received from M/s S.R. Batliboi & Associates LLP, Chartered Accountants, to the effect that their appointment is in compliance of Sections 139 and 141 of Act and rules made thereunder.

Auditor’s Report

The Statutory Auditors have not made any adverse comments or given any qualification, reservation or adverse remarks or disclaimer in their Audit Report on the financial statements for FY 2018-19.

Further, the Auditors have not reported any fraud in terms of Section 143(12) of the Act.

Secretarial Auditors 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 V M. & Associates, Practicing Company Secretaries (Firm Registration No: P1984RJ039200) were appointed as Secretarial Auditors to conduct the Secretarial Audit of the Company for the FY 2018-19. Your Company has provided all assistance and information to the Secretarial Auditors for conducting their audit. The Report of Secretarial Auditors for the FY 2018-19 is annexed to this Report as “Annexure-4”.

The Report of Secretarial Auditors is self-explanatory and there were no major observations or qualifications or adverse remarks in their Report except that expenditure on CSR activities were below the prescribed limit. The Management has responded, saying that your Company is in the process of gradually building and developing the internal CSR appraisal mechanism, for appraising CSR projects, as it intends to contribute towards genuine projects and partner with only reputed implementation agencies with proven track record.

Further, your Company has constituted a separate legal entity named as “Aavas Foundation” to effectively channelize CSR Funds to provide impetus on philanthropic initiatives of your Company. Your Company plans to drive CSR initiatives directly as well as through the Aavas Foundation to spend maximum available funds for CSR for promoting growth and equality, responsive to relevant needs of communities in which your Company operates.

INTERNAL AUDIT & INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

Your Company has an Internal Audit Department supported by Independent Internal Auditors who conduct comprehensive audit of functional areas and operations of the Company to examine the adequacy of compliance with policies, procedures, statutory and regulatory requirements.

Significant audit observations and follow up actions thereon are reported to the Audit Committee of the Board. The Audit Committee reviews and evaluates adequacy and effectiveness of the Company’s internal control environment and monitors the implementation of audit recommendations.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Significant Audit observations and corrective actions thereon are presented to the Audit Committee every quarter or at periodic intervals.

The Audit Committee and Board of Directors have approved a documented framework for the internal financial control to be followed by the Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to 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 and disclosures. The Audit Committee periodically reviews and evaluates the effectiveness of internal financial control system.

MATERIAL CHANGES/EVENTS AND COMMITMENTS, IF ANY

There were no material changes and commitments, affecting the financial position of your Company which had occurred between the end of the Financial Year i.e. March 31, 2019 and the date of the Director’s Report i.e. May 03, 2019.

There has been no change in the nature of business of your Company.

No significant or material orders have been passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and / or the Company’s operations in future.

MAINTENANCE OF COST RECORDS

Being a Housing Finance Company, the Company is not required to maintain cost records as per provisions of the Act.

INFORMATION TECHNOLOGY

Your Company has developed a fully equipped “Core Housing Finance Solutions Platform” which is a step towards aligning technology to the projected business growth.

All branches of your Company and the corporate office are linked through a centralized data-based platform that enriches data management, strengthens service delivery and serves the customer(s) in an efficient manner, which is an integral part of the control mechanism.

New initiatives taken by your Company in Information Technology are as follows:-

a) Document Digitization

b) Device Location Tracking

c) Procurement of Energy Saving Green IT Equipment

d) Refilling Outsourced with High-end Copier Machine in High Print volume Branches to reduce the Carbon Footprint.

During the financial year under review, the NHB had notified Information Technology Framework for HFCs (“Guidelines”) vide its notification no. NHB/ND/DRS/ Policy Circular No. 90/2017-18 dated June 15, 2018 in order to enhance the safety, security, efficiency in processes leading to benefits for HFCs and their customers.

Your Company is in compliance with the aforesaid guidelines.

Your Company conducts audit of its IT systems through external agencies at regular intervals. The external agencies suggestions and recommendations are reported to the Audit Committee and implemented wherever found feasible.

FAMILIARISATION 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 on the link: https://www.aavas.in/familiarization-programme.

HUMAN RESOURCE DEVELOPMENT

Your Company’s success depends largely upon the quality and competence of its management team and key personnel. Attracting and retaining talented professionals is therefore a key element of the Company’s strategy and a significant source of competitive advantage.

Across all its business operations, your Company had a workforce of 2384 people on permanent role as on March 31, 2019.

Human resource development is considered vital for effective implementation of business plans. Constant endeavor is being made to offer professional growth opportunities and recognitions, apart from imparting training to the employees at all levels. Your Company has also provided the sales training to the new recruits to provide them better understanding of the Company and align them towards the working culture of the Company.

Your Company hired professionals at senior positions as Functional Heads for heading the various Departments of the Company, having relevant industry experience and expertise to strengthen and grow the housing finance business of the Company. Your Company has a team of dedicated individuals and qualified professionals like Chartered Accountants, Company Secretaries, Engineers and Software Developers having degrees from top technical institutions including IITs and MBAs from premier institutes like IIMs.

In pursuance of your Company’s commitment to develop and retain the best available talent, your Company has been organizing in house training programmes on regular basis for its employees covering various specialized functions viz lending operations, Underwriting & Due diligence, KYC & AML norms, Risk Management, Information Technology, Recoveries, CLSS, PMAY, Grievance Redressal and soft skills.

During the financial year under review, your Company has nominated employees to attend the external training programmes conducted by NHB and other institutions on KYC-FPC, Customer Service, Legal Support for Recoveries, NPA Management, Grievance Registration & Information Database (GRIDS), Central Registry of Securitization, Asset Reconstruction & Security Interest of India (CERSAI), PMAY, Credit Linked Subsidy Scheme (CLSS) Loans-Credit Appraisal and Risk Management.

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 all material risks faced by the Company are identified and assessed. Your Company has set up a policy framework for ensuring better management of its asset & liability profile. Your Company gives due importance to prudent lending practices and has put in place suitable measures for risk mitigation, which include, verification of credit history from credit information bureaus, personal verification of customer’s business and residence, in house technical and legal verification, conservative loan to value parameters, and compulsory term cover for insurance. The Risk management framework of your Company seeks to minimize adverse impact of risks on the key business objectives and enables your Company to leverage market opportunities effectively.

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 affairs 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 where it is safe for all the 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. No employee has been denied access to the Chairperson of Audit Committee. The whistle blower policy is placed on the website of the Company and can be accessed at https://www.aavas.in/vigil-mechanism-policy.

During the financial year under review, in accordance with the SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018, the scope of Vigil Mechanism/ Whistle Blower Policy was further extended by including the provision of reporting the instances of leakages of unpublished price sensitive information.

CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING IN COMPANY’S SECURITIES

Your Company has formulated Code of Conduct for Prevention of Insider Trading in Company’s Securities (“Code”) in accordance with SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended. 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.

During the financial year under review the code was amended in line with the SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2019 and SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018.

DIVIDEND DISTRIBUTION POLICY

Your Company has formulated Dividend Policy in accordance with SEBI LODR Regulations, for bringing transparency in the matter of declaration of dividend and to protect the interest of investors. The Dividend Policy is available on the website of the Company at https://www. aavas.in/dividend-distribution-policy and form part of this Report as “Annexure-5”.

PARTICULARS OF HOLDING/SUBSIDIARY/ ASSOCIATE COMPANIES

Your Company doesn’t have any holding Company.

The Shareholder having the Substantial interest in the Company is Lake District Holdings Limited.

As on March 31, 2019, 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. The Company will make available physical copies of these documents upon written request by any Shareholder of the Company.

INVESTOR RELATIONS

Your Company has an effective Investor Relations Program through which the Company continuously interacts with the investment community through various communication channels viz Periodic Earnings Calls, Annual Investor/Analyst Day, Individual Meetings, Videoconferences, Participation in conferences, One on One interaction.

Your Company ensures that critical information about the Company is made available to all its investors by uploading such information on the Company’s website under the Investors section. Your Company also intimates exchanges regarding upcoming events like earnings calls, declaration of quarterly & annual earnings with financial statements and other such matters having bearing on the share price of the Company.

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-7” to the Directors’ Report.

In accordance with the provisions of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and particulars of the top ten employees in terms of remuneration drawn and of the aforesaid employees are set out in the Annexure to this report. In terms of the provisions of Section 136(1) of the Act read with the rule, the Directors’ Report is being sent to all Shareholders of the Company excluding the said annexure. Any Shareholder interested in obtaining a copy of the annexure may write to the Company at [email protected].

CORPORATE SOCIAL RESPONSIBILITY INITIATIVE

In line with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules 2014, your Company has undertaken various CSR projects in the area of health, promoting gender equality, empowering women, Education, promoting traffic rules, Regulation and Road Safety, Providing Safe Drinking Water and Promoting Sports which are in accordance with the Schedule VII of the Act and CSR Policy of the Company.

During the financial year under review, your Company has constituted a separate legal entity named as “Aavas Foundation” to effectively Channelize CSR Funds to provide impetus on philanthropic initiatives of the Company. Your Company has planned to drive CSR initiatives directly as well as through the Aavas Foundation to spend maximum available funds for CSR for promoting growth and equality, responsive to relevant needs of communities in which your Company operates.

The Annual Report on CSR Activities, which forms part of the Directors Report, is annexed as “Annexure-8” to this report.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

In accordance with the provisions of Sec 134 (3) (m) of the Act, read with Rule 8 of the Companies (Accounts) Rules 2014 the requisite information relating to your Company are as under:-

A) Conservation of energy:

(i) The Steps taken / impact on conservation of energy: The operations of the Company, being financial services doesn’t require intensive consumption of electricity. However, your Company is taking every necessary step to reduce its consumption of energy.

(ii) The Steps taken by the Company for utilizing alternate sources of energy:

Your Company has procured the Energy Saving Green IT Equipment’s and power saving lamps, LEDs that have been installed in branches so far as a measure for conservation of energy. Your Company has installed High-end Copier Machine in High Print volume in Branches to reduce the Carbon Footprint.

As a part of Save Green efforts, a lot of paper work at branches and the registered office has been reduced by suitable leveraging of technology and promoting digitization.

(iii) The Capital investment on energy conservation equipment:

In view of the nature of the activities carried on by your Company, there is no capital investment on energy conservation equipment.

B) Technology absorption:

(i) the efforts made towards technology absorption: Your Company has developed a fully equipped “Core Housing Finance Solutions Platform” which is a step towards aligning technology to the projected business growth.

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution: Nil

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)

a) the details of technology imported: N.A.

b) the year of import: N.A.

c) whether the technology has been fully absorbed: N.A.

d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof: N.A.

(iv) the expenditure incurred on Research and Development: N.A.

C) Foreign exchange earnings and Outgo:

During the financial year under review, your Company had no foreign exchange earnings and the aggregate of the foreign exchange outgo during the financial year under review was RS.608.86 lakh. The aforesaid details are shown in the Note No. 38 of notes to the accounts, forming part of the Standalone Financial Statements. Members are requested to refer to these Notes.

BUSINESS RESPONSIBILITY REPORTING

As required under Regulation 34(2)(f) of SEBI LODR Regulations Business Responsibility Report describing the initiatives taken by Company from an environmental, social and governance perspective, forms part of this Annual report and is annexed to this report.

EXTRACTS OF ANNUAL RETURN

Pursuant to sub-section 3(a) of Section 134 and subsection (3) of Section 92 of the Act, read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014 the extract of the Annual Return in form MGT-9 as at March 31, 2019 forms part of this report as “Annexure-9”.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT 2013 READ WITH RULES

Your Company has zero tolerance towards any action on the part of any of its officials, which may fall under the ambit of ‘Sexual Harassment’ at workplace. Your Company recognizes and promotes the right of women to protection from Sexual Harassment and the right to work with dignity as enshrined under the Constitution of India and the Convention on the Elimination of all forms of Discrimination against Women (CEDAW).

Pursuant to the requirements of Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act 2013 read with Rules there under, the Internal Complaint Committee of the Company has not received any complaint of Sexual Harassment during the financial year under review.

The following is a summary of Sexual Harassment complaints received and disposed off during the year 2018-19:

No. of complaints received: Nil No. of complaints disposed of: Nil

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Since the Company is a Housing Finance Company, 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.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

In accordance with the provisions of section 188 of the Act and rules made thereunder, the transactions entered with related parties are in the ordinary course of business and on an arm’s length pricing basis, the details of which are included in the notes forming part of the Financial Statements.

During the financial year under review, your Company had entered into an arrangement with Aavas Finserv Limited, Wholly owned unlisted subsidiary of the Company, which constitutes Related Party Transactions covered within the purview of Section 188(1) of the Act, accordingly, requirement of disclosure of Related Party Transactions in terms of Section 134(3)(h) of the Act is provided in Form AOC-2 as “Annexure-10”.

Further as required by NHB notification no. NHB.HFC. CG-DIR.1/MD&CEO/2016 dated February 9, 2017, “Policy on transactions with Related Parties” is given as “Annexure-11” 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 Housing Finance Companies-Corporate Governance (NHB) Directions, 2016, 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 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 affairs 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 have 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.

ACKNOWLEDGEMENTS

Your Directors would like to place on record their gratitude for the valuable guidance and support received from the NHB.

Your Directors would like to acknowledge the role of all its Stakeholders viz., Shareholders, Debenture holders, Bankers, Lenders, Borrowers, Debenture Trustees and all others for the continued support, confidence and faith they have always reposed in the Company.

Your Directors further take this opportunity to appreciate and thank the Kedaara Capital and Partners Group for their invaluable and continued support and guidance.

Your Directors acknowledge and appreciate the guidance and support extended by all the Regulatory authorities including NHB, Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), Registrar of Companies-Jaipur, BSE Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”), NSDL and CDSL.

Your Directors thank the Rating Agencies (ICRA, CARE, CRISIL and India Ratings & Research Ltd., [Fitch group]), local /statutory authorities and all others for their whole hearted support during the financial year and look forward to their continued support in the years ahead.

Your Directors also wish to place on record their appreciation for the commitment displayed by all the Members of the Audit, Nomination & Remuneration, Corporate Social Responsibility Committees, Stakeholders Relationship Committee, Risk Management Committee and other Committees of the Board, executives, officers, staff and the Senior Management team, in recording an excellent performance by the Company during the financial year.

For and on behalf of the Board of Directors

AAVAS FINANCIERS LIMITED

Sushil Kumar Agarwal Manas Tandon

Managing Director & CEO Nominee Director

(DIN: 03154532) (DIN: 05254602)

Date: May 03, 2019

Place: Jaipur


Mar 31, 2018

To,

The Shareholders,

AAVAS FINANCIERS LIMITED (“COMPANY”)

(Formerly Known as “Au Housing Finance Limited”)

The Directors are pleased to present the Eighth Annual Report on the operations of the Company together with the Audited Financial Statements (standalone and consolidated)for the year ended March 31, 2018.

FINANCIAL PERFORMANCE

The summarized financial performances for the year ended March 31, 2018 are as under:

(Rs. in Crores)

Particulars

For the Year ended March 31, 2018

For the Year ended March 31, 2017

Total Income

457.24

305.49

Less: Total Expenditure before Depreciation & Amortization and provision

307.96

207.39

Less: Provisions & Write offs

1.90

6.68

Less: Depreciation & Amortization

5.63

2.77

Total Expenses

315.49

216.84

Profit Before Tax

141.75

88.65

Less: Provision for Taxations (Net of Deferred Tax)

48.82

30.80

Profit After Tax

92.93

57.85

Transfer to Statutory Reserve

20.17

12.86

Company posted Total Income (Total Interest Income and Other Income) of RS.457.24 Crores and Net Profit of RS.92.93 Crores for the year ended March 31, 2018, as against RS.305.49 Crores and RS.57.85 Crores respectively in the previous year.

DIVIDEND

Your Directors have considered reinvesting the profits into the business of the Company to build a strong reserve base in the long-term interests and to support the growth of the business of the Company. Accordingly, no dividend has been recommended for year ended March 31, 2018.

SHARE CAPITAL

During the year under review, pursuant to the approval of the Members of the Company, the Authorized Share Capital of the Company was increased from RS.650,000,000/-(Rupees Sixty Five Crores) to RS.850,000,000/-(Rupees Eighty Five Crores).

The Paid-up Share Capital of the Company as on 31st March, 2018 stood at RS.691,728,346 (Sixty Nine Crore Seventeen Lakhs Twenty Eight Thousand Three Hundred Forty Six) consisting of 69,950,891 (Six Crore Ninety Nine Lakh Fifty Thousand Eight Hundred Ninety One) Equity Shares of RS.10/- each as compared to RS.581,635,818 (Fifty Eight Crore Sixteen Lakh Thirty Five Thousand Eight Hundred Eighteen) consisting of 58,739,657 (Five Crore Eighty Seven Lakh Thirty Nine Thousand Six Hundred Fifty Seven) Equity Shares of RS.10/- in previous year.

During the year under review, the Paid up equity share Capital of the Company has mainly increased due to the issuance and allotment of equity shares through the preferential basis, Right basis and upon exercise of Stock options to the existing as well as new shareholders of the Company.

During the Reported period, the Company has issued and allotted the fully and partly paid up equity shares and Convertible Share Warrants, the details of which are as below:-

1. EQUITY SHARES

Fully Paid up Equity Shares

- 264,662 (Two Lakh Sixty Four Thousand Six Hundred Sixty Two) Equity Shares of RS.10/- Per share aggregating to RS.86,809,136/- (Eight Crore Sixty Eight Lakh Nine Thousand one hundred Thirty Six) on Preferential issue Basis.

- 9,291,521 (Ninety Two Lakh Ninety One Thousand Five Hundred Twenty One) Equity Shares of RS.10/-Per share aggregating to RS.3,999,999,791/- (Three Hundred Ninety Nine Crore Ninety Nine Lakh Ninety Nine Thousand Seven Hundred Ninety one) on Rights Basis.

- 1,222,551 (Twelve Lakh Twenty Two Thousand Five Hundred Fifty One) Equity shares of RS.10/- per share aggregating to RS.263,154,103/- (Twenty Six Crore Thirty One Lakh Fifty Four Thousand One Hundred Three) pursuant to the Exercise of Stock Options.

Partly Paid up Equity Shares

During the Year under Review, Company has issued and allotted 432,500 (Four Lakh Thirty two thousand five Hundred) Equity Shares of RS.10/- per share aggregating to RS.28,372,000/- (Two Crore Eighty Three Lakhs Seventy Two Thousand) on preferential issue basis. Further the Company has received RS.2/- per share as application money.

Receipt of Call Money

During the Year under Review, Company has received RS.2/- per share aggregating to RS.31,000,047/- (Three Crore Ten Lakh Forty Seven) as 1st call Money in respect to the 720,094 (Seven Lakh twenty Thousand Ninety Four) Partly Paid up equity shares of RS.10/- each.

2. CONVERTIBLE SHARE WARRANTS

During the Year under Review, Company has issued and allotted 360,000 (Three Lakh Sixty Thousand) and 440,000 (Four Lakh Forty Thousand) Share warrants convertible into equity shares of RS.328/-and RS.430.50/-per share respectively. Further the Company has received RS.3/- per Convertible share warrant as warrant subscription money.

REVIEW OF OPERATIONS

AAVAS FINANCIERS LIMITED (“Company”) is registered with National Housing Bank (“NHB”) to carry on housing finance activities in India.

Your Company endeavors towards adopting the benchmark underwriting practices backed up by robust monitoring and recovery mechanisms. The Company’s committed in its efforts towards improving efficiency and service level in its operations.

The Company’s main thrust continues to be focused on the affordable Housing Segment, catering to the aspirations of low and mid income Indian Families who dreams to own a home.

Your Company would work on the philosophy of Housing Financial Institution enabling credit access to the low and middle income segment for purchasing the affordable housing units.

The operating and financial performance of your Company has been covered in the Management Discussion and Analysis report which forms part of this Annual Report.

During the year, your company has delivered yet another year of resilient performance through achieving the below business figures:-

Sanctions

During the year under review, the Company sanctioned housing loans for RS.2216.98 Cr as compared to RS.1494.00 Cr in the previous year with a growth of 48.39% over the previous year. The cumulative loan sanctions since inception of the Company stood at RS.5901.38 Cr as at March 31, 2018. The Company has granted no loan against the Collateral of Gold Jewellery.

Disbursements

During the year under review, Company disbursed housing loans for RS.2051.16 Cr as compared to RS.1391.60 Cr in the previous year and recorded a growth of 47.40% in disbursements.

The cumulative loan disbursement from inception stood at March 31, 2018 was RS.5495.17 Cr.

Affordable Housing

We have built an exclusive team for the product and trained the ground staff to focus on Low Income Households Customers of EWS and LIG segment. This segment has one prime aspiration of owning their own house and thereby creating an affordable environment for their family members to live in. We thrive to create an environment and provide proper financing schemes to these families of EWS/LIG segment residing across Semi Urban and Urban areas across most of the cities of India.

Your Company has signed the MOU with the Government of India for the Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana for EWS, LIG and MIG segments. Company has been an active contributor to the scheme and has disbursed RS.4.41 Cr during the year in respect of 256 loans and credited the subsidy to the respective customers’ loan accounts.

Since inception of the scheme, company has disbursed loans wherein customers are eligible for CLSS subsidy in respect of loan amount of RS.25.32 Cr of which company has received claim of RS.6.36 Cr in respect of 441 loans.

The majority of the claims submitted are in respect of the EWS and LIG customers.

Assets under Management (AUM)

During the year under review, the AUM stood at RS.4073.02 Cr (including assignment of RS.900.65 Cr) as against RS.2693.52 Cr in the previous year, with the growth of 51.22%.

As of 31st March, 2018, the average sanctioned amount of our AUM was RS.8.62 Lakhs and Average tenure was 168.94 Months (on origination basis).

Income & Profits

Total Income grew by 49.67% to RS.457.24 Cr for the year ended 31st March, 2018 as compared to RS.305.49 Cr for the previous year. Profit before Tax (PBT) was 59.90% higher at RS.141.75 Cr as compared to RS.88.65 Cr for the previous year.

The net profit after tax for the year has increased by 60.64% from RS.57.85 Cr in the previous year to RS.92.93 Cr in the current year.

The operating and financial performance of your Company has been covered in the Management Discussion and Analysis Report which forms part of this Annual Report.

Non-Performing Assets and Provisions for Contingency

Your Company adhered to the Prudential guidelines for NonPerforming Assets (NPAs)issued by National Housing Bank under the NHB Directions, 2010, as amended from time to time. The Company did not recognize income on such NPAs and further created provisions for contingencies on standard as well as non- performing housing loans in accordance with the National Housing Bank Directions. The Company has also made additional provisions to meet unforeseen contingencies.

During the year, NHB vide notification No. NHB.HFC. DIR.18/MD&CEO/ 2017 dated August 2, 2017 reduced the provisioning requirement on Standard Individual Housing Loans from 0.40% to 0.25%.

Using a pro-active collection and recovery management system supported by analytical decision making, your company was able to contain its gross Non-Performing Assets at RS.10.69 Cr (0.34% of the portfolio) as at 31st March, 2018. The Company reviews the delinquency and loan portfolio on regular basis.

The Company coupled a defined policy with procedures to address delinquencies and collections. As a result of which Gross NPA and net NPA as at 31st March, 2018 were 0.34% and 0.26% respectively (against 0.79% and 0.60% respectively in the previous year).

Further information on the Business overview and outlook and State of the affairs of the Company is discussed in detail in the Management Discussion & Analysis

CAPITAL ADEQUACY RATIO

As required under Housing Finance Companies (NHB) Directions, 2010, [NHB Directions, 2010] your Company is presently required to maintain a minimum capital adequacy of 12% on a stand-alone basis.

Company’s Capital Adequacy Ratio as at 31st March, 2018 was 61.55% (previous year 46.72%) which is well above the minimum required level of 12% as prescribed.

DEPOSITS

During the period under review, your Company has neither invited nor accepted nor renewed any fixed deposits from public within the meaning of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.

RESOURCE MOBILIZATION

Your Company’s borrowing policy is under the control of the Board. The Company has vide special resolution passed on July 26, 2017, under Section 180 (1) (c) of the Companies Act, 2013, 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.4500 Cr and the total amount so borrowed shall remain within the limits as prescribed by National Housing Bank.

Your Company manages its borrowing structure through prudent Asset-Liability Management and takes the various measures, which includes the diversification of funding sources, tenure optimization, structured interest rates and prudent borrowing timing to maintain its borrowing cost at optimum level.

During the year under review, company continued to diversify its funding sources by exploring the Debt Capital Market through private placement of Secured and Unsecured NonConvertible Debentures; Securitization/Direct assignment, fully hedged FCNR Loans and banking products like Priority Sector/Non-Priority Sector Term loans, Cash Credit Facilities and Working Capital Demand loans. The company has also further diversified by adding 8 (Eight) new lender/Financial Partners.

The weighted average borrowing cost as at March 31, 2018 was 8.65% as against 9.48% in the previous year. As at March 31, 2018, your Company’s sources of funding were primarily from banks and financial institutions (49.87%), followed by securitization/direct assignment (25.63%),Non-convertible debentures (11.17%), Refinancing from NHB (10.46%), and subordinated debts (2.87%).

Term Loans from Banks and Financial Institutions

During the Year, Company received fresh sanctions from banks amounting to RS.910 Cr of which Company has availed loans aggregating to RS.753 Cr. The outstanding bank term loans as at March 31, 2018 were RS.1708 Cr. Average Tenure of Bank term loan raised during the period under review is 9.29 Years

Refinance from National Housing Bank (NHB)

NHB continued its support to your company through refinance and during the year under review, your Company received refinance sanction of RS.300 Cr (previous year RS.200 Cr) under the NHB refinance scheme to Housing Finance Companies. The company availed funds from NHB under the Refinance Scheme for “Special urban Low income Housing”, “Urban Housing Fund” and “Regular Refinance Scheme” and outstanding at the end of the current year stood at RS.365.10 Cr (previous year RS.173.04 Cr).

Your company is one of the major participant to run the Pilot under “Special Urban Housing Refinance Scheme for Low Income Households” launched by NHB with assistance from International Development Association (IDA) an Arm of World Bank aimed for extension of credit for housing to lower income segments having informal sources of income secured either by mortgageable title over the land / property or by alternative security.

Non-Convertible Debentures (“NCDs”)

During the year under review, your Company has raised RS.130 Cr through the issue of Secured, Redeemable, NCDs and RS.100 Cr through the issue of Unsecured, Sub-ordinated Tier II, Redeemable, NCDs on private placement basis and policy of private placement of NCDs of the Company formulated as per the guidelines issued by National Housing Bank.

As on 31st March, 2018, the Company’s outstanding balance of Debentures stood at RS.490 Cr as compared to RS.335 Cr as on 31st March, 2017. The Company’s Debentures are listed on Wholesale Debt Market segment of BSE Limited.

In an environment where Market is experiencing an upward trend into cost of fund, we believe that we have been able to access cost-effective debt financing due to our stable credit history, strong financial performance and conservative risk management policies, resulted A rating with Stable outlook by ICRA, A rating with Positive outlook by CARE and A rating with Stable outlook by India Rating & Research.

During the financial year under review, the interest on NonConvertible Debentures issued on private placement basis were paid by the Company on their respective due dates and there were no instances of any interest amount which were not claimed by the investors or not paid by the Company after the date on which the same became due for payment.

Your Company being Housing Finance Company (HFC) is exempted from the requirement of creating Debenture Redemption Reserve (DRR) on privately placed debentures. Therefore DRR has not been created by your company.

Disclosure under Housing Finance Companies issuance of Non-Convertible Debentures on private placement basis (NHB) directions, 2014:

(i) The total number of non-convertible debentures which have not been claimed by the investors 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 of such debentures become due for redemption : Nil

Debenture Trustee

Debenture Trust Agreement(s) were executed in favour of IDBI Trusteeship Services Limited for NCDs issued on private placement basis. Following are details of IDBI TRUSTEESHIP SERVICES LIMITED.

IDBI TRUSTEESHIP SERVICES LIMITED

Regd. Office: Asian Building, Ground Floor, 17, R. Kamani Marg, Ballard Estate, Mumbai - 400 001. Tel: 91 22 4080 7015 / Fax: 91 22 6631 1776 Website: www.idbitrustee.co.in

Securitization/Assignment of Loan Portfolio

Your company has actively tapped Securitization/Direct Assignment market, which enables it to create liquidity, reduce the cost of funds and minimizing asset liability mismatches.

During the year under review, your Company securitized its loan portfolio of RS.593.51 Cr through pool buyout transactions

The Securitization transaction was carried out in line with RBI guidelines on Securitization of Standard Assets and securitized assets have been de-recognized in the books of the Company.

Commercial Paper (CP)

During the year, your company has issued Commercial Paper amounting to RS.50 Cr. Company’s Commercial papers are rated “ICRA A1 ” and “CARE A1 ” indicating that instrument have very strong degree of safety regarding timely payment of financial obligations. As on 31st March 2018 Commercial Papers o/s is Nil.

ALTERATION IN OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATION (‘MOA’)

During the year under review, your Company has altered its Object Clause of Memorandum of Association (MOA) as per the suggestions given by the National Housing Bank during its onsite Annual inspection.

Further the altered MOA is available at the registered office of the Company in the Business hours.

BRANCH EXPANSION

Your Company has been continuously successful in establishing its branch network with a view to support its Disbursement growth, enhancing customer base and Services. During the year under review, the Company has expanded its branch network to 165 branches as of 31st March, 2018 and plans to scale up its operation to newer geographies in 2018-19.

The company has nearly doubled the branch network within the short span of time and strengthened its business in the states of Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Haryana, Delhi, Chhattisgarh and Uttar Pradesh.

The Company has its registered office in Rajasthan and its branch network comparison with the previous year is detailed hereunder:

State

No. of Branches

No. of Branches

(As on 31st March, 2017)

(As on 31st March, 2018)

Rajasthan

41

72

Maharashtra

18

33

Gujarat

16

27

Madhya Pradesh

16

24

Haryana

01

03

Chhattisgarh

-

03

Delhi

01

02

Uttar Pradesh

01

01

Total number of branches

94

165

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board of Directors of the Company comprises of Nine Directors,consisting of three Independent Directors, five Nominee Directors and One Whole Time Director as on 31st March, 2018 who bring in a wide range of skills and experience to the board.

The Board of Directors of the Company are as follows:-

Name of the Director

Designation

DIN

Category

Mr.Krishan Kant Rathi

Independent Director

00040094

Independent Non-Executive

Mrs. Kalpana Iyer

Independent Director

01874130

Independent Non-Executive

Mr. Sandeep Tandon

Independent Director

00054553

Independent Non-Executive

Mr. K R Kamath

Nominee Director

01715073

Non-Executive

Mr. Vivek Vig

Nominee Director

01117418

Non-Executive

Mr. Nishant Sharma

Nominee Director

03117012

Non-Executive

Mr. Manas Tandon

Nominee Director

05254602

Non-Executive

Mr. Sushil Kumar Agarwal

Whole Time Director & CEO

03154532

Executive

Mr. Kartikeya Dhruv Kaji

Nominee Director

07641723

Non-Executive

The Independent Directors have confirmed that they satisfy the criteria prescribed for an Independent Director as stipulated in the provisions of the Section 149(6) of the Companies Act, 2013. None of the Directors have any pecuniary relationships or transactions with the Company. None of the directors of the Company are related to each other and confirmed that they are not disqualified from being appointed as directors in terms of section 164 of the Companies Act, 2013.

Appointment & Resignation of Directors

During the Year under Review, two Directors have been appointed on the Board of the Company. As required under section 160 of the Companies Act, 2013, a Notice has been received from a member proposing the name of the Directors and all directors are appointed by the members of the Company.

Directors Appointed during the Year under Review are as follows:-

Name of the Director

Date of appointment

DIN

Category

Mr. Sandeep Tandon

27-07-2017

00054553

Independent Director

Mr.Kartikeya Dhruv Kaji*

27-07-2017

07641723

Nominee Director

*Mr.Kartikeya Dhruv Kaji-Nominee Director on Board representing Kedaara Capital Alternative Investment Fund - Kedaara Capital AIF 1 and Lake District Holdings Limited.

During the year, No Director of the Company has resigned from the Board of the Company.

Directors Retiring by Rotation

In terms of Section 152 of the Companies Act, 2013, Mr. Manas Tandon, Nominee Director was retired by rotation and was reappointed by the Members in the Previous Annual General Meeting of the Company held on 26th July, 2017.

Further, Mr. Nishant Sharma, Nominee Director being longest in the office shall retire at the ensuing Annual General Meeting and being eligible for re-appointment, offers himself for re-appointment.

Appointments/Resignations of the Key Managerial Personnel

Mr. Sushil Kumar Agarwal-Whole-Time Director & CEO; Mr. Ghanshyam Rawat- Chief Financial Officer and Mr. Sharad Pathak-Company Secretary are the Key Managerial Personnel in terms of section 2(51) of the Company.

During the year, No Key Managerial Personnel of the Company has been appointed and resigned from the Company.

Number of Board Meetings held during the Financial Year

During the financial year 2017-18, 6 (Six) Board Meetings were convened and held. The intervening gap between the Board Meetings was within the period prescribed under the Companies Act, 2013.The details related to Board Meeting are appended in Corporate Governance Report forming part of this Annual Report.

Performance Evaluation of the Board

Your Company is following the most effective way to ensure Board members to understand their duties and to adopt effective good governance practices. In furtherance to this the directors of a company shall act in good faith to promote the objects of the Company for the benefit of its employees, the shareholders, the community and for the protection of environment.

Your Company has designed a mechanism as per the provisions of the Companies Act, 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘SEBI LODR’)and “Housing Finance Companies - Corporate Governance (National Housing Bank) Directions, 2016” for the Evaluations of performance of Board, Committees of Board & Individual Directors.

Further your company is adhered towards the Fit and Proper Criteria which includes Board approved Fit and proper policy for ascertaining the Fit and Proper Criteria of the directors at the time of appointment and on a continuing basis.

The Nomination & Remuneration Committee carried out the evaluation of every Director’s performance and the Board additionally carried out a formal evaluation of its own performance, Statutory Board Committees namely Audit Committee, Nomination & Remuneration Committee and Corporate Social Responsibility Committee and all the Individual Directors without the presence of the Director being evaluated.

During the year, Independent Directors of the Company also held separate meetings to review the performance of the Non- Independent Directors and Board as a whole, after assessing the quality, quantity and timeliness of flow of information between the Company management and the Board which is necessary for the Board to effectively and reasonably perform their duties.

Major aspects of board evaluation includes who is to be evaluated, process of evaluation including laying down of objectives and criteria to be adopted for evaluation of different persons, feedback to the persons being evaluated and action plan based on the results. The Corporate Governance Report is annexed to this report as “Annexure-1 ”.

Company’s Policy on Directors Appointment, Remuneration & Evaluation

The Board on the recommendation of the Nomination & Remuneration Committee of the Board adopted a “Nomination & Remuneration Policy”, 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 and other employees and their evaluation and includes other matters, as prescribed under the provisions of Section 178 of Companies Act, 2013.

The“Nomination & Remuneration Policy”of the Company is placed on the website of the Company. The Remuneration paid to the Directors is in line with the remuneration policy of the Company.

The Nomination & Remuneration Policy can be accessed through the following link www.aavas.in/remuneration-policy.

Details of Remuneration paid to the all Directors during the financial year 2017-18 is more particularly mentioned in extract of annual Return in form “MGT-9”.

PRUDENTIAL NORMS FOR THE HOUSING FINANCE COMPANY

Your Company continues to comply with the guidelines issued by NHB regarding accounting guidelines, prudential norms for asset classification, income recognition, provisioning, capital adequacy, concentration of credit/ investments, accounting standards credit rating, Know Your Customer(KYC) guidelines, Anti Money Laundering (AML) standards, fair practices code, Most Important Terms & Conditions (MITC), grievance redressal mechanism, recovery of dues real estate and capital market exposures norms

The recognition of income and provision for non-performing asset has been made in the books as per the Guidelines on Prudential Norms applicable as of 31st March, 2018.

Company Capital Adequacy Ratio stood at 61.55% as against the minimum requirement of 12%.

The National Housing Bank Act, 1987, empowers NHB to levy a penalty on Housing Finance Companies for contravention of the Act or any of its provisions. Your company has complied with the said provisions;

National Housing Bank (NHB) has not raised any stricture or direction in their inspection carried out during the year. NHB has not levied any penalty on Company during the year

Regulatory & Statutory Compliances

During the Year under review, the NHB has issued various Notifications, Circulars and Guidelines to Housing Finance Companies.

The Circulars and the Notifications issued by NHB are also placed before the Board of Directors at regular intervals to update the Board members on compliance of the same, and your Company has adhered to all the Circulars, Notifications and Guidelines issued by NHB from time to time.

The Government of India has set up the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI) under Section 21 of the SARFAESI Act, 2002 to have a central database of all mortgages created by lending institutions. The object of this registry is to compile and maintain data relating to all transactions secured by mortgages. Accordingly, Company is registered with CERSAI and has been submitting data in respect of its loans.

EMPLOYEE STOCK OPTION PLANS-2016 (ESOP-2016)

Your Company has instituted Stock Option Plans to attract and retain the personnel for positions of substantial responsibility and to provide additional incentive to the Management team, Directors and Employees of the Company.

During the year 2016-17 ,the Company has approved the three Stock option plans named as Equity Stock Option Plan for Employees 2016 (“ESOP 2016-I”), Equity Stock Option Plan for Management Team 2016 (“ESOP 2016-II”), and Equity Stock Option Plan for Directors 2016 (“ESOP 2016-III”) (hereinafter collectively referred to as “ESOP-2016”) Employee Stock Option Plans-2016 (ESOP-2016) at its Extra Ordinary General Meeting held 23rd Feb, 2017,empowering the Board and Nomination & Remuneration Committee of the Board to execute the said ESOP- 2016.

The above referred ESOP-2016 was further amended by the members in their meeting held on 22nd February, 2018,considering to align ESOP-2016 in accordance with the provisions of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 “SEBI (SBEB) Regulations, 2014”, as amended from time to time, in order to support the Company’s effort to proactively adopt the best corporate governance practices and transparency.

In addition, during the current year, the Company has granted 4,24,687 options under ESOP 2016-I. The options granted entitle the employees to purchase options at an exercise price of RS.328/- per option as determined by the Nomination and Remuneration Committee.

The Nomination & Remuneration Committee monitors the Plan in compliance with the Companies Act, 2013 and related laws.

The applicable disclosures for stock options ES0P-2016 as stipulated under the Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014 as on March 31, 2018 are given below:

Particulars

ESOP 2016 I (A)

ESOP 2016 I (B)

ESOP 2016 II

ESOP 2016 III

Scheme Name

Equity stock option plan for Employees 2016

Equity stock option plan for Employees 2016

Equity stock option plan for Management Team 2016

Equity stock option plan for Directors 2016

No. of options approved

1,647,901

1,647,901

3,445,610

719,084

Date of grant

23-Feb-17

24-Jan-18

23-Feb-17

23-Feb-17

No. of options granted

980,118

424,687

3,445,610

719,084

Exercise price per option (in H)

215.25

328

215.25

215.25

Total No. of Options Vested

154,608

0

3,445,610

71,908

Options Exercised During the Year

0

0

1,222,551

-

Total No. of Shares arising as a Result of Exercise of Option

0

0

1,222,551

Options Lapsed*

116,904

-

-

-

Variation of Terms of Options

The options approved under the equity stock option plan for Management team 2016 (ESOP 2016 II) originally has same fixed and conditional vesting schedule as the equity stock option plan for Directors 2016 (ESOP 2016 III). However, pursuant to the Board approval dated January 25, 2018, all options granted under this plan were vested with immediate effect with no further conditions attached to them.

Money Realized by Exercise of Options

0

0

263,154,103

Total number of options in force;

863,214

424,687

2,223,059

719,084

Exercise period

Four Years from the date of each Vesting.

Note:-

1) During the year, Shareholders of the Company at their meeting held on 22nd February, 2018 has accorded their consent to amend the Equity Stock Option Plan For Employees 2016 (“ESOP 2016-I”) in such a manner that share pool stands reduced by 3,60,000 un-granted options.

2) 116,904 options lapsed due to the resignation of the certain employees from the Company.

Employee wise details of options granted to:-1) Key Managerial Personnel:

i) Mr. Sushil Kumar Agarwal (Whole Time Director & CEO) :- 20,97,328

ii) Mr. Ghanshyam Rawat (Chief Financial Officer) :- 7,49,046

iii) Mr. Sharad Pathak (Company Secretary) :- 15,000

2) Any other employee who receives a grant of options in any one year of option amounting to five percent or more of options granted during that year:

i) Mr. Sushil Kumar Agarwal (Whole Time Director & CEO) :- 20,97,328

ii) Mr. Ghanshyam Rawat (Chief Financial Officer) :- 7,49,046

iii) Mr. Vivek Vig (Nominee Director) :- 5,99,236

3) Identified employees who were granted option, during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant;

i) Mr. Sushil Kumar Agarwal (Whole Time Director & CEO) :- 20,97,328

ii) Mr. Ghanshyam Rawat (Chief Financial Officer) :- 7,49,046

iii) Mr. Vivek Vig (Nominee Director) :- 5,99,236

SPECIAL RESERVE (U/S 29C OF THE NATIONAL HOUSING BANK ACT, 1987)

Your company has transferred RS.48.21 Crores i.e. 20 % of net profits amounting to Statutory reserves as required under the provisions of section 29C of The National Housing Bank Act, 1987 read with section 36 (1) (viii) of Income Tax Act, 1961.

CREDIT RATING

During the year under review, on account of strong leadership, Experienced management team, Robust Capitalization, Better asset quality & Collections, scaling up business, Improved margins, Strong asset liability management and mobilization of funds at Optimum cost, ratings of the Company has been increased.

CARE has upgraded the outlook of the Company from “ICRA A ” / Stable to “ICRA A ” / Positive

Further during the year under review ICRA has upgraded the long term rating of the Company from “ICRA A” / Positive to “ICRA A ” / Stable

India’s renowned rating Agencies have assigned ratings as per below:-

Rating Agency

Rating Type

External Credit Rating

CARE

Long Term Rating

“CARE A (Positive)”

Short Term Rating

CARE A1

ICRA

Long Term Rating

“ICRA A ” / Stable

Short Term Rating

ICRA A1

India Ratings & Research (FITCH)

Long Term Rating

IND A

CRISIL

Long Term Rating

“CRISIL A Stable”

The ratings continue to reflect Company’s healthy earning profile, adequate capitalization, and steady improvement in its scale of operations. These rating strengths are partially offset by the susceptibility of the Company’s asset quality to risks related to the limited seasoning in its loan portfolio.

The assigned ratings are a positive reflection of Company talented management team, the Company’s leadership position in affordable housing segment and strong brand equity in its regional markets. The ratings also derive strength from Company comfortable financial risk profile, growth in scale of operations and efficient operational strengths.

AUDITORS

Statutory Auditors

M/s S. R. BATLIBOI & Associates LLP Chartered Accountants (Firm Registration No: 101049W/E300004) the Statutory Auditors of the Company were Re-appointed by the members in the seventh Annual General Meeting (AGM) of the Company held on 26th July, 2017 to hold office from conclusion of the seventh AGM to the Conclusion of the 12th AGM of the Company (subject to ratification of the appointment by the Members at every subsequent Annual General Meeting), in accordance with the provisions of the Companies Act, 2013.

As per the provisions of the NHB Notification No. NHB.HFC.CG-DIR.1/MD&CEO/2016, partner of the audit firm needs to be rotated in every three year.

Further Based on the recommendation of the Audit Committee, the Board of Directors, at their meeting held on April 27, 2018, recommended the ratification of appointment of M/s S. R. BATLIBOI & Associates LLP Chartered Accountants (Firm Registration No: 101049W/E300004) as the Statutory Auditors of the Company and that the necessary resolution in this respect is being included in the notice of the Eighth (08th) Annual General Meeting for the approval of the Members of the Company. M/s S. R. BATLIBOI & Associates LLP furnished written consent and a confirmation to the effect that they are not disqualified to be appointed as the Statutory Auditors of the Company in terms of the provisions of Companies Act, 2013 and rules framed thereunder.

Auditors Report

The observation of the auditors, in their reports are self-explanatory and therefore, in the opinion of the Directors, do not call for further comments.

Secretarial Auditors and Secretarial Audit Report

In accordance with Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, M/s V. M.& Associates, Practicing Company Secretaries were appointed as Secretarial Auditors to conduct the Secretarial Audit of the Company for the 2017-18. Company has provided all assistance and facilities to the Secretarial Auditor for conducting their audit. The Report of Secretarial Auditor for 2017-18 is annexed to this report as “Annexure-2”.

The Report is self - explanatory there were no major observations or qualifications or adverse remarks in the Auditor’s Report except that expenses on CSR activities were below the prescribed limit, Thus in response to this Management has responded that shortfall in CSR funding is on account,that company considers social responsibility as an integral part of its business activities and endeavors to utilize allocable CSR budget for the benefit of society.

Thus the Company is in the process of gradually building and developing the CSR appraisal mechanism, for appraising CSR projects internally, as it intends to contribute towards genuine projects and partner with only reputed implementation agencies with proven track record.

INTERNAL AUDIT & INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

Your Company has an Internal Audit Department supported by Internal Auditor who conducts comprehensive audit of functional areas and operations of the Company to examine the adequacy of and compliance with policies, procedures, statutory and regulatory requirements.

Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews and evaluates adequacy and effectiveness of the Company’s internal control environment and monitors the implementation of audit recommendations.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board every quarter or at periodic intervals.

The Audit Committee and Board of Directors have approved a documented framework for the internal financial control to be followed by the Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to 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 and disclosures. The Audit Committee periodically reviews and evaluates the effectiveness of internal financial control system.

MATERIAL CHANGES/EVENTS AND COMMITMENTS, IF ANY

There were no material changes and commitments, affecting the financial position of the Company which had occurred between the end of the financial year i.e. 31st March, 2018 and the date of the Director’s report i.e. 27th April, 2018.

However, Company has incorporated the Company named “AAVAS FINSERV LIMITED” as wholly owned Subsidiary.

Aavas Finserv Limited was incorporated on 30th November, 2017 under the Companies Act, 2013 as a public limited company with the Registrar of Companies, Jaipur, Rajasthan having Corporate Identification Number U65929RJ2017PLC059623.Registered office is located at 203-205, 2nd Floor, Southend Square Mansarovar Industrial Area, Jaipur 302 020, India.

The authorized share capital of Aavas Finserv Limited is RS.45,000,000 divided into 4,500,000 equity shares of RS.10 each and its paid-up share capital is RS.45,000,000 divided into 4,500,000 equity shares of RS.10 each.

During the year, company has obtained the Certificate of registration dated December 8, 2017, issued to our company by the Insurance Regulatory Development Authority of India (IRDAI) to act as a corporate agent (Registration No.CA0537).

There has been no change in the nature of business of the Company.

No significant or material Orders have been passed by the regulators or Courts or Tribunals impacting the going concern status of the Company and / or the Company’s operations in future.

INFORMATION TECHNOLOGY

Your Company has developed a fully equipped “core housing finance solutions Platform” which is a step towards aligning technology to the projected business growth.

All our branches of the Company and the corporate office are linked through a centralized data based platform that enriches data management, strengthens service delivery and serves the customer(s) in an efficient manner, which is an integral part of the control mechanism.

New initiatives taken by your company in Information Technology are as follows:-

a) Document Digitization

b) Device Location Tracking

c) Procurement of Energy Saving Green IT Equipment

d) Refilling Outsourced with High-end Copier Machine in High Print volume Branches to reduce the Carbon Footprint.

Company carries out audit of its IT systems from external agency at regular intervals. The external agency’s suggestions and recommendations are reported to Audit Committee and implemented where found necessary.

HUMAN RESOURCE DEVELOPMENT

The Company’s success depends largely upon the quality and competence of its management team and key personnel. Attracting and retaining talented professionals is therefore a key element of the Company’s strategy and a significant source of competitive advantage.

Across all its business operations, Company had a workforce of 1,862 people as on March 31, 2018.

Human resource development is considered vital for effective implementation of business plans, constant endeavor is being made to offer Professional Growth opportunities and recognitions, apart from imparting training to the Employees, Company has also provided the sales Training to the new recruits to have better understanding towards the Company and make them compatible towards the working culture of the Company.

The Company hired professionals at Senior positions/ Functional Heads representing the various Departments of the Company having relevant industry experience and qualification to strengthen and grow housing finance business. The Company recruited people from prestigious institutes like the Institute of Chartered Accountants of India (‘ICAI’) and the Institute of Company Secretaries of India (‘ICSI’)besides recruiting from other reputed Business Schools.

In pursuance of the Company’s commitment to develop and retain the best available talent, the Company had been sponsoring in house training programmes on regular basis for its employees on lending operations, Underwriting & Due diligence, KYC & AML norms, Risk Management, Information Technology, recoveries, CLSS, PMAY and Grievance Redressal.

During the period under review, company has nominated their employees to attend the external training programmes conducted by NHB and other institutions on KYC-FPC, Customer Service, Legal Support for Recoveries, NPA Management, Grievance Registration & Information Database (GRIDS), Central Registry of Securitization, Asset Reconstruction & Security Interest of India (CERSAI), PMAY Credit Linked Subsidy Scheme (CLSS) Loans-Credit Appraisal and Risk Management.

TRADEMARK

During the year under review, the Company has received the Trade Mark Registration certificate for the registration of the Trademark from the Trade Marks Registry, Government of India.

INSURANCE PROTECTION

Company has tied up with Kotak Mahindra Old Mutual Life Insurance Limited, HDFC Standard Life Insurance Company Limited & Bajaj Allianz Life Insurance Co. Ltd. for providing group credit life insurance of the Insured.

Company also tied up with Shriram General Insurance Company Limited and IFFCO Tokyo General Insurance for providing property insurance of the mortgaged property. “Standard Fire & Special Perils Policy” which provide coverage against Fire, Flood, Earthquake and other perils mentioned in the policy on reinstatement basis.

RISK MANAGEMENT FRAMEWORK

The Company has in place a Board Constituted Credit and Risk Management Committee. Details of the Committee and its terms of reference are set out in the Corporate Governance Report forming part of this report.

Company has Board Approved Credit and Risk Management Policies wherein all material risks faced by the Company are identified and assessed. Company has set up a policy framework for ensuring better management of its asset & liability profile. Company has given due importance to prudent lending practices and put in place suitable measures for risk mitigation, which include, verification of credit history from credit information bureaus, personal verification of customer’s business and residence, in house technical and legal verification, conservative loan to value, and compulsory term cover for insurance. The Risk management framework of the Company seeks to minimize adverse impact of risks on our key business objectives and enables the Company to leverage market opportunities effectively.

During the year, the committee reviewed the risks associated with the business of the Company, its root causes and the efficacy of the measures taken to mitigate the same.

VIGIL MECHANISM CUM WHISTLE BLOWER POLICY

Your Company believes to conduct its affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. The Company is committed to developing a culture where it is safe for all 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 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. No employee has been denied access to the Audit Committee. The policy is placed on the website of the Company and can be accessed at www.aavas.in/vigil-mechanism-policy

PARTICULARS OF HOLDING/SUBSIDIARY/ASSOCIATE COMPANIES

Your Company is the Direct Subsidiary of Lake District Holdings Limited and Indirect Subsidiary of the Holding Company of Lake District Holdings Limited i.e. Kedaara Capital I Limited.

The Shareholders having the Substantial interest in the Company is Partners Group ESCL Limited.

As on 31st March, 2018 Your Company has incorporated the Company named “AAVAS FINSERV LIMITED” as wholly owned Subsidiary, the Company has not started any operations during the year.

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, 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 Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, is annexed as Annexure-3 to this Report.

EMPLOYEE REMUNERATION

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. In terms of Section 136 of the Companies Act, 2013 the same is open for inspection at the Registered Office of your company.

The ratio of the remuneration of each director to the median employee’s remuneration and other details in terms of sub-section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as “Annexure-4”.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVE

In line with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014; the Company has undertaken the projects in the area of Health, promoting gender equality, empowering women, Education, promoting Traffic Rules, Regulation and Road Safety, Providing Safe Drinking Water and Promoting Sports which are in accordance with the Schedule VII of the Companies Act, 2013 and CSR Policy of the Company.

The Annual Report on CSR Activities, which forms part of the Directors Report, is annexed as “Annexure - 5” to this report.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

In accordance with the provisions of the Sec 134 (3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 by your company are as under:-

A) Conservation of energy:

(i) The Steps taken / impact on conservation of energy:

The operations of the Company, being financial services doesn’t require intensive consumption of electricity. However, the Company is taking every necessary step to reduce its consumption of energy.

(ii) The Steps taken by the Company for utilizing alternate sources of energy:

Company has procured the Energy Saving Green IT Equipment’s and power saving lamps, LEDs that have been installed in branches so far as a measure for conservation of energy. Your Company has installed High-end Copier Machine in High Print volume in Branches to reduce the Carbon Footprint.

As a part of Save Green efforts, a lot of paper work at branches and the registered office has been reduced by suitable leveraging of technology and Digitization.

(iii) The Capital investment on energy conservation equipment:

In view of the nature of the activities carried on by the Company, there is no capital investment on energy conservation equipment.

B) Technology absorption:

(i) the efforts made towards technology absorption: Nil

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution: Nil

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)

a) the details of technology imported: N.A.

b) the year of import: N.A.

c) whether the technology been fully absorbed: N.A.

d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof: N.A.

(iv) the expenditure incurred on Research and Development: N.A.

C) Foreign exchange earnings and Outgo:

Further, Company does not have any Foreign Exchange Earnings and there was no outgo during the Financial Year ended 31st March 2018.

EXTRACTS OF ANNUAL RETURN

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of the Companies Act 2013, read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014 the extracts of the Annual Return in form MGT-9 as at 31st March, 2018 forms part of this report as “Annexure-6”.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT 2013 READ WITH RULES

The Company has zero tolerance towards any action on the part of any of its officials, which may fall under the ambit of ‘Sexual Harassment’ at workplace. Company promotes and recognizes the right of women to protection from sexual harassment and the right to work with dignity as enshrined under the Constitution of India and the Convention on the Elimination of all Forms of Discrimination against Women (CEDAW).

Pursuant to the requirements of Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act 2013 read with Rules there under, the Internal Complaint committee of the Company has not received any complaint of sexual harassment during the year under review.

The following is a summary of sexual harassment complaints received and disposed of during the year 2017-18:

No of complaints received: Nil No of complaints disposed of: Nil

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS U/S 186

Since the Company is a Housing Finance Company, the disclosure regarding particulars of loans given, guarantees given and security provided is exempted under the provisions of Section 186 (11) of the Companies Act, 2013.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

In accordance with the provisions of section 188 of the Companies Act, 2013 and rules made thereunder, the transactions entered with related parties are in the ordinary course of business and on an arm’s length pricing basis, the details of which are included in the notes forming part of the financial statements.

During the year under Review, your Company had not entered into any Related Party Transactions covered within the purview of Section 188(1) of the Companies Act, 2013, accordingly, requirement of disclosure of Related Party Transactions in terms of Section 134(3)(h) of the Companies Act, 2013 in Form AOC - 2 is not applicable to the Company.

Further as required by NHB notification no. NHB.HFC.CG-DIR.1/MD&CEO/2016 dated February 9, 2017,a policy on Transactions with Related Parties is given as “Annexure-7” to this report and can accessed on the website of the Company at www.aavas.in/policy-on-transactions-with-related-parties

SECRETARIAL STANDARDS

The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards and that such systems are adequate and operating effectively.

INTERNAL GUIDELINES ON CORPORATE GOVERNANCE

During the year under review, your Company has formulated and adopted the Internal Guidelines on Corporate Governance in accordance with Housing Finance Companies - Corporate Governance (National Housing Bank) Directions, 2016, 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 can be accessed on the website of the Company at www. aavas.in/investor-relations/internal-guidelines-on-corporate-governance.

DIRECTOR’S RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, 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 had been followed along with proper explanation relating to material departures.

(b) We have 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 affairs of the Company at the end of the Financial Year and of the profit and loss of the Company for that period

(c) We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(d) We have prepared the annual accounts on a going concern basis.

(e) We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively; and

(f) We have 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

A detailed business review is appended in the Management Discussion and Analysis Section of Annual Report.

ACKNOWLEDGEMENTS

The Directors would like to place on record their gratitude for the valuable guidance and support received from the National Housing Bank.

Your Directors would like to acknowledge the role of all its Stakeholders viz., Shareholder, Debenture holders, Bankers, Lenders, Borrowers, Debenture Trustees and all others for their continued support to the Company and the confidence and faith that they have always reposed in the Company.

Your Directors acknowledge and appreciate the guidance and support extended by all the Regulatory authorities including National Housing Bank (NHB), Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), Registrar of Companies, Rajasthan, the Bombay Stock Exchange, NSDL and CDSL.

Your Directors thank the Rating Agencies (ICRA, CARE, CRISIL and India Ratings & Research Ltd., [Fitch group]),local/statutory authorities and all others for their whole-hearted support during the year and look forward to their continued support in the years ahead.

Your Directors also wish to place on record their appreciation for the commitment displayed by all the members of the Audit, Nomination & Remuneration and Corporate Social Responsibility Committees of the Board, executives, officers, staff and the Senior Management team, in performance of the Company during the year.

For and on behalf of the Board of Directors of

AAVAS FINANCIERS LIMITED

(Formerly known as “Au Housing Finance Limited”)

sd/- sd/-

Sushil Kumar Agarwal Manas Tandon

(Whole Time Director & CEO) (Nominee Director)

(DIN:03154532) (DIN: 05254602)

Date: April 27, 2018

Place: Jaipur

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