DRAFT - DIRECTOR's REPORT OF BASE LAYER NBFC

DRAFT

Directors' Report

Dear Shareholders,

The Board of Directors (the "Board") takes pleasure in presenting this Annual Report of -----Limited (the "Company") together with the audited financial statements for the year ended 31^st March, 2025.

The Company being a private limited company, the required disclosures are made herein in compliance with the applicable provisions of the Companies Act, 2013 and the rules made thereunder including the amendments thereto.

The Company is a Micro Finance Institution (MFI) regulated & controlled by Reserve Bank of India (RBI) providing micro finance to the low-income group. The Company is a member of Self Regulatory Organisation – Sa-Dhan.

FINANCIAL HIGHLIGHTS

The financial performance of the Company is summarized below:

                                                                                                                (in Rs)

The net worth of the Company as on March 31, 2025 was Rs ---Lakhs and capital adequacy as on March 31, 2025 was ----%  well in excess of the mandated 15%. During the year, the Company’s revenue from operations and other income was  Rs ---- Lakhs with a net profit of Rs --- Lakhs.  As per the Company's provisioning policy for portfolio loans, the Company was constrained to make provision of Rs --- Lakhs for the FY 2024-25. (previous year – Rs. -- lakhs). The Company is focusing extensively on expanding the business and operational improvements through various strategic projects for operational excellence.

OPERATIONAL HIGHLIGHTS

The operational highlights of the Company are summarized below:

BUSINESS OVERVIEW

There is no change in the nature of businesses of the Company.  The microfinance industry is currently experiencing heightened financial stress, largely driven by higher borrower indebtedness. The sector is witnessing a contraction in its loan book, reflecting growing challenges in loan disbursement and repayment. Moreover, impairment levels remain significantly high, particularly among borrowers who have availed loans from multiple lenders, further intensifying financial strain and repayment risks. Profitability in the sector is under pressure due to rising credit costs and operational expenses. Growth in assets under management (AUM) is expected to decelerate as a result of operational disruptions and excessive borrower leverage. External factors including restrictions on microfinance indebtedness per borrower, have negatively impacted collection efficiencies. Nevertheless, the industry remains resilient, with stakeholders prioritizing risk mitigation strategies to navigate uncertainties and ensure long- term sustainability.

DIVIDEND

The Company has retained the net earnings to meet its internal operational requirements and hence the Board did not recommend dividend for the financial year 2024-25.

 RESOURCE MOBILISATION

The Company as an NBFC - MFI, mobilisation of resources at optimal cost and its deployment in the most profitable and secured manner constitutes the two important functions of the Company.

Management has been making continuous efforts to broaden the resource base of the Company so as to maintain its competitive edge.  The directors are confident that the Company will be able to raise adequate resources for onward lending in line with its business plans.

During the year under review, the Company has raised funds in the form of term loans from NBFC/ Bank aggregating to Rs --- crores. The overall borrowings are within the regulatory ceilings as well as aggregate borrowing limits of the Company as approved by the Board and Members of the Company.

BOARD OF DIRECTORS 

As on March 31, 2025, the Board of the Company comprises ---- Directors viz., one (1) executive director and ---- non[1]executive directors.

The Company is not required to appoint Independent Directors under Section 149(4) of the Companies Act, 2013 and the Companies (Appointment and Qualification of Directors) Rules, 2014 and hence obtaining of declaration from such persons does not arise.

APPOINTMENT AND RESIGNATION

-- Non Executive Director was appointed on the Board of Directors with effect from --- and his appointment was approved by the Shareholders of the Company at Annual General Meeting held on ----.

--  Director of the Company had tendered the resignation from the office of directorship with effect from -- The Board accepted resignation and placed on record its appreciation and deep gratitude for the valuable guidance and acknowledges integrity, fairness and prudent judgment as a members of the Board.

KEY MANAGERIAL PERSONNEL:

In terms of the provisions of Sections 203 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, following are the Key Managerial Personnel as on 31st March, 2025:

MD

CFO

CS

NUMBER OF MEETINGS OF THE BOARD AND SHAREHOLDERS

Board of Directors:

The Board met --- times during the year 2024-2025 on ------ as against the statutory requirement of at least four meetings. The requisite quorum was present at all the Board Meetings. The maximum time gap between any two Meetings was not more than one hundred and twenty days. These Meetings were well attended.

• Annual General Meeting

Annual General Meeting of the company was held on  --.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act,  2013 with respect to Directors’ Responsibility Statement, it is hereby confirmed that:

a) in the preparation of the accounts for the year ended 31^st March, 2025, the applicable accounting standards have been followed and there are no material departures from the same;

b) the Directors had selected such accounting policies and applied them consistently, and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31^st March, 2025 and of the profit of the Company for the year under review;

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

d) the Directors had prepared annual accounts of the Company on a ''going concern'' basis;

e) 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; and

f)  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.

STATUTORY AUDITORS

M/s. ---- Associates, Chartered Accountants, (Firm Registration No.---) were appointed by the shareholders of the company as Statutory Auditors of the company for a period of 5 years from the financial year --- at their Annual General Meeting held on ---.They would be completing their tenure by the conclusion of ensuing Annual General Meeting (“AGM”).

There are no qualifications, reservations or adverse remarks made by the Statutory Auditors, M/s.---- Associates, Chartered Accountants (Firm Registration No. ---), in their report for the financial year ended 31^st March, 2025. During the financial year under review, the said Statutory Auditors have not reported any fraud as required to be reported under Section 143(12) of the Companies Act, 2013.

APPOINTMENT OF NEW STATUTORY AUDITOR:       

Further, the Board of Directors have recommended the appointment of M/s. ----, Chartered Accountants (Firm Registration No-----) as the Statutory Auditor of the Company, subject to the approval of members of the company for a period of 5 (five) consecutive years from the financial year 2025 - 2026 and to hold office till the conclusion of Annual General Meeting to be held for the year 2030 at such remuneration and reimbursement of travelling and out of pocket expenses incurred by them for the purpose of audit. The Company is seeking approval of the members of the Company for appointment of M/s ----, Chartered Accountants (ICAI Firm Regn. No. -----) as statutory auditors of the Company.

INVESTMENTS, LOANS, GUARANTEES AND SECURITIES GIVEN 

In reference to Section 186(11) and Section 134(3)(g) of the Companies Act, 2013, the Company has not made any investments, not given any loans or guarantees or provided any securities to other body corporates or entities.

RELATED PARTY TRANSACTIONS

There are no related party transactions during the period under review covered under the provisions of Section 188 of the Companies Act, 2013 and the rules made thereunder.

SUBSIDIARIES, JVs OR ASSOCIATE COMPANIES

The Company does not have any subsidiary, joint venture or associate companies in any form.

MATERIAL EVENTS OCCURRED AFTER THE BALANCE SHEET DATE

There are no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company ie., 31^st March, 2025 and the date of this Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO UNDER SECTION 134(3)(m) OF THE C0MPANIES ACT, 2013

The provisions of Section 134(3)(m) of the Companies Act, 2013 relating to conservation of energy and technology absorption do not apply to the Company. The Company has, however, used information technology extensively in its operations.

During the year under review, there were no earnings and outgo in foreign exchange for the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company does not come under the purview of Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules 2014, in respect of compliance of Corporate Social Responsibility (CSR) activities and hence it is not required to formulate CSR policy or CSR committee therefor.

DEPOSITS

The Company is registered with Reserve Bank of India (RBI) as Non-Deposit Accepting NBFC under Section 45-IA of the RBI Act, 1934 and is classified as NBFC-MFI. The Board of Directors hereby confirm that the Company has not accepted any deposits as defined under the Companies Act, 2013.

DISCLOSURE OF REMUNERATION OF EMPLOYEES COVERED UNDER RULE 5(2) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

None of the employee of the Company, who was employed throughout the financial year, was in receipt of remuneration in aggregate of Rupees One Crore and Two Lakhs or more or if employed for the part of the financial year was in receipt of remuneration of Rupees Eight Lakh & Fifty Thousand or more per month.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY OPERATIONS IN FUTURE

There has been no significant and material orders passed by the Regulators, Courts or Tribunals impacting the going concern status of the Company and its future operations.

INTERNAL FINANCIAL CONTROLS

The Company has adequate internal controls and processes in place with respect to its operations, which provide reasonable assurance regarding the reliability of the preparation of financial statements and financial reporting as also functioning of other operations. These controls and processes are driven through various policies and procedures.

SHARE CAPITAL

AUTHORISED SHARE CAPITAL

The Authorised Share Capital of the Company is Rs. 20 crores consisting of 20,00,000 Equity shares of Rs. 100 each. During the year under review, there was no change in the Authorised Share Capital.

PAID UP CAPITAL

The Paid Up Share Capital of the Company is Rs. 10crores consisting of 10,00,000 Equity shares of Rs. 100 each. During the year under review, there was no change in the Paid Up Share Capital.

MAINTENANCE OF COST RECORDS

The provisions of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 relating to Cost Audit and maintaining cost audit records is not applicable to the Company.

COMPLIANCE WITH SECRETARIAL STANDARDS

The Company has in place proper systems to ensure compliance with the provisions of the applicable secretarial standards issued by The Institute of Company Secretaries of India and such systems are adequate and operating effectively.

CORPORATE INSOLVENCY RESOLUTION PROCESS INITIATED UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (IBC)

No application was made and no proceeding is pending under the Insolvency and Bankruptcy Code, 2016 during the year.

DETAILS OF DIFFERENCE BETWEEN VALUATION AMOUNT ON ONE TIME SETTLEMENT AND VALUATION WHILE AVAILING LOAN FROM BANKS AND FINANCIAL INSTITUTIONS

During the Financial year under review, there were NO one time settlement of Loans taken from Banks and Financial institutions.

AMOUNT TRANSFERRED TO STATUTORY RESERVES

During the year under review the Company had profit and accordingly during the year the Company has transferred an amount of Rs ---- Lakhs to Statutory Reserve as required (20% of Profit after Tax) under Section 45-IC of RBI Act, 1934.

CAPITAL ADEQUACY

The Company’s Capital Adequacy Ratio as of March 31, 2025, stood at ---% of the aggregate risk-weighted assets on the balance sheet and risk-adjusted value of the off-balance sheet items, which is well above the regulatory minimum of 15%. Out of the above, the Tier I capital adequacy ratio stood at ----% and the Tier II capital adequacy ratio stood at ----%

POLICY ON VIGIL MECHANISM

The Company has established a vigil mechanism to deal with instances of fraud and mismanagement and to provide appropriate avenues to the directors and employees to report genuine concerns about unethical behaviour, actual or suspected fraud and to bring to the attention of the management, their genuine concerns and grievances about the behaviour of the employees. A copy of the Policy is published on the website of the Company.

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

The company has in place a Policy for prevention of Sexual Harassment at the Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. The Company has constituted Internal Compliants Committee to redress complaints received regarding s*xual harassment. All employees are covered under this policy. The details of number of complaints received and disposed of during the year ending March 31, 2025 is given below

(a) Number of complaints pending at the beginning of the year: Nil

(b) Number of complaints received during the year: Nil

(c) Number of complaints disposed off during the year: Nil

(d) Number of cases pending at the end of the year: Nil

MATERNITY BENEFIT PROVIDED BY THE COMPANY UNDER MATERNITY BENEFIT ACT 1961

The Company confirms that it has followed the Maternity Benefit Act, 1961. All eligible women employees received the required benefits, including paid leave, continued salary and service, and post-maternity support like nursing breaks and flexible work options.

RBI GUIDELINES

The Company has complied with and continues to comply with all applicable Laws, Rules, Circulars, Regulations, etc. including Directions of RBI for a NBFC-MFI and it does not carry on any activities other than those specifically permitted by RBI for NBFC-MFI.  In terms of the NBFC Regulations, the particulars as applicable to the Company are appended to the Balance Sheet.

FAIR PRACTICE CODE

The Company has in place a Fair Practice Code (FPC) approved by the Board in compliance with the guidelines issued by RBI, to ensure better service and provide necessary information to customers to take informed decisions. The Board also reviews the FPC on a regular basis to ensure levels of adequacy and appropriateness. The same is available on the Company’s website.

CUSTOMER GRIEVANCE

The Company has a dedicated Customer Grievance Cell for receiving and handling customer complaints/grievances and ensuring that the customers are always treated fairly and without any bias. All issues raised by the customers are dealt with courteously and redressed expeditiously.

GRADING:  

SMERA -  SMERA MFI M2

CREDIT RATING:

ACUITE have upgraded credit rating as BBB+ Stable

WEBSITE LINK OF ANNUAL RETURN

Pursuant to the provisions of Section 134(3)(a) and Section 92(3) of the Act read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the Annual Return of the Company is available on the Company’s website.

AUDIT TRAIL APPLICABILITY (AUDIT AND AUDITORS) RULES 2014 - RULE 11 OF THE COMPANIES ACT 2013.

The Company has used accounting software for maintaining its books of account for the financial year ended March 31, 2025 which has a feature of recording audit trail (edit log) facility and the same has operated for all relevant transactions recorded in the software.

RISK MANAGEMENT POLICY

The Company is in the process of implementing and developing Risk Management policy.

APPOINTMENT OF DESIGNATED PERSON (MANAGEMENT AND ADMINISTRATION) RULES 2014 - RULE 9 OF THE COMPANIES ACT 2013.

In accordance with Rule 9 of the Appointment of Designated Person (Management and Administration) Rules 2014, it is essential for the company to designate a responsible individual for ensuring compliance with statutory obligations. The company appointed ----, CS as a Designated person for furnishing information and extending co-operation to ROC in respect of beneficial interest in shares of the Company to ensure compliance with MCA notification on this matter.

OBTAINING ISIN BY NON-SMALL COMPANIES - COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) SECOND AMENDMENT RULES, 2023 OF THE COMPANIES ACT 2013.

Recent amendments under the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023, stipulate that non-small private companies must obtain an International Securities Identification Number (ISIN) for their securities to facilitate smoother trading and enhance marketability. Shareholders are encouraged to convert their physical shareholdings into dematerialised (demat) form. The Directors also recommend this transition for enhanced security, ease of transfer, faster settlement and to eliminate the risks associated with loss, theft, or damage of physical share certificates. The demat system allows such changes to be electronically recorded with accuracy and efficiency.

 The Company had obtained ISIN - for equity shares. The company has appointed ------ as RTA for providing electronic connectivity services with depository NSDL / CDSL for equity shares.

Dematerialization of Shares:

The Company has admitted its equity shares to the depository system of National Securities Depositories Limited (NSDL) and CDSL for dematerialization. As on 31st March, 2025, 100% of equity shares of the Company are in dematerialized form. Equity shares held in demat and physical mode as on 31st March, 2025 are as below:

ACKNOWLEDGEMENT

The Directors take this opportunity to express their deep and sincere gratitude to the shareholders, lenders, Bankers, Financial Institutions, vendors and customers for their trust, confidence and patronage, as well as to the Reserve Bank of India, the Ministry of Corporate Affairs and Regulatory Authorities for their cooperation, support and guidance. The Directors would like to express a profound sense of appreciation for the commitment shown by the employees in supporting the Company in its endeavor of scaling up the operations.

For and on behalf of the Board of Directors

                                                                                                                                                                                                                                                                                            Director (DIN) 1

Director (DIN) 2

n   2025