CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LIMITED
ANNUAL REPORT 2011-2012
Your directors have pleasure in presenting the thirty fourth annual report
together with the audited accounts of the company for the year ended 31st
Rs. in crores
Gross income 1,766.60 1,201.83
Profit before tax 290.11 100.11
Profit after tax 172.54 62.18
Add: Balance brought forward 81.84 56.46
Amount available for appropriation 254.38 118.64
Transfer to statutory and other reserves 134.51 15.55
- Equity 31.15 17.89
- Preference 0.39
Tax on dividend 5.05 2.97
Balance carried forward 83.67 81.84
Total 254.38 118.64
During the year under review, the company with the approval of the
shareholders, increased the authorised capital from Rs. 420 crores to
Rs.450 crores and further made a fresh issue of 1,32,55,454 equity shares
of Rs. 10 each at Rs. 160 per equity share, being the price determined in
accordance with the SEBI ICDR Regulations, by way of a preferential issue
aggregating to Rs. 212 crores to the following investors:
Name of the Investor No. of equity Amount of
Rs. in crores
Creador 1 LLC 66,27,727 106
Multiples Private Equity FII I 48,13,718 77
Multiples Private Equity Fund 18,14,009 29
Total 1,32,55,454 212
During the year ended 31 March, 2012, the company recorded a significant
increase in its performance due to the sustained performance of the Vehicle
Finance and Home Equity business inspite of the slowdown in the economy
during the later part of the financial year. The reduction in loan losses
on account of the Personal loan portfolio which has completely run-down
also aided the effort. This resulted in:
* 190% growth in Profits before Tax
* 55% growth in disbursements
* 48% growth in closing managed assets
Disbursements in Vehicle Finance for the year were at Rs. 7,306 crores as
against Rs. 4,496 crores in the previous year recording a growth of 62.50%.
Home Equity business recorded a disbursement of Rs. 1,528 crores as against
Rs. 1,235 crores in the previous year recording a growth of 24%.
The newly launched gold loan business (launched in the month of Dec 2011)
recorded disbursements aggregating to Rs. 54 crores.
The total business assets under management (net of provisions) of the
company as at 31 March, 2012 increased to Rs. 13,462 crores from Rs. 9,124
crores in the previous year recording a growth of 48%.
The profit before tax for the year was at Rs. 290.11 crores as against
Rs.100.11 crores in the previous year. Profit after tax was at Rs. 172.54
crores for the year as compared to Rs. 62.18 crores in the previous year.
Your directors approved an interim dividend of 15% 1.50/- per equity share)
on 31 January, 2012 for the year ended 31 March, 2012, which has been since
Your directors are pleased to recommend a final dividend of 10% Rs.1/- per
equity share) of Rs. 10 each.
TRANSFER TO RESERVES:
Your company has transferred a sum of Rs. 34.51 crores to statutory reserve
as required by the Reserve Bank of India Act, 1934 and Rs. 100 crores to
The company is poised to grow at a steady phase as the growth potential of
the portfolio continues to remain robust. The vehicle finance business
predominantly focuses on the light commercial vehicles and small commercial
vehicles for which the demand continues to be high. Hence it is expected
that the demand will sustain for the commercial vehicles and the industry
growth momentum will be stable over the next 5 years. As per CRISIL
research the commercial vehicle industry is expected to record a growth
[CAGR] of 18% to 20% in disbursements and is targeted to reach a level of
about Rs. 98,700 crores by 2015-16. If the inflationary pressures are
contained without any significant monetary compression, the year ahead will
see the growth momentum sustained.
For the financial year 2012-13, the market for loan against property is
projected at Rs. 31,500 crores and is expected to maintain its growth
trajectory for the next few years.
The demand for home equity loans is derived from the demand for credit off-
take from its target customer segment. The target customer for home equity
loans is the self-employed non-professional (SENP) group which comprises of
small and medium scale industries / service providers, traders and SSI`s.
The gold loan business, currently operating out of 31 locations will be
evaluated taking into consideration the regulatory environment and market /
The company is planning to enter into affordable housing finance and
provide loan facilities to Micro, Small and Medium Enterprises (MSME) that
are associated with our group companies as vendors and suppliers.
The company is a systemically important non-deposit accepting non banking
finance company (SI-ND-NBFC). It ceased taking deposits from public
effective 1 November, 2006. At the time of conversion, the outstanding
unmatured deposits were transferred to an escrow account together with the
future interest payable thereon till the date of maturity and these are
being repaid on maturity. Accordingly, there have been no fresh deposits
accepted during the financial year 2011-12. Net of repayments, the matured
and unclaimed deposits (including interest accrued) as at 31 March, 2012
were Rs. 0.54 crores.
As at 31 March, 2012 and as on the date of this report, there were 211
depositors whose deposits had matured but had not claimed the maturity
amount aggregating to Rs. 0.54 crores (along with interest accrued). As a
process, the company sends periodical reminders to these depositors before
transferring the sums due to the Investor Education and Protection Fund
(IEPF) under Section 205C of the Companies Act, 1956. During the year, the
company remitted a sum of Rs. 0.16 crores to IEPF under this head
representing unclaimed public deposits and interests thereon beyond seven
years. In respect of outstanding fixed deposit of Rs. 0.02 crores, the
repayment to the depositors has been stayed by courts/instruction from CBI
and not remitted to IEPF.
The company`s short term debt of Rs. 3,000 crores is rated as [ICRA] A1+ by
ICRA and for Rs. 250 crores is also rated as "CRISIL A1+" by CRISIL.
During the year, ICRA upgraded its long term rating on non convertible
debentures and lines of credit from banks from [ICRA]AA- to [ICRA]AA. The
outlook on the upgraded rating is "Stable".
CARE affirmed the rating of "CARE AA" to the non convertible debenture
programme of the company.
ICRA upgraded its long term rating on subordinated debt programme of the
company from [ICRA] AA- to [ICRA] AA. The outlook on the upgraded rating is
Fitch re-affirmed its existing rating of "Fitch AA-(ind)" with Stable
outlook on the subordinated debt programme of the company.
ICRA upgraded its long term rating on perpetual debt instrument from
[ICRA]A+ to [ICRA]AA-. The outlook on the upgraded rating is Stable.
CARE re-affirmed its existing rating of "CARE A+" on the perpetual debt
instrument of the company.
During the year, the company raised Perpetual Debt Instrument (PDI)
aggregating to Rs. 358 crores which were rated as [ICRA] A+ (Positive) or
[ICRA] AA- by ICRA and CARE A+ by CARE. Part of the issue will qualify as
Tier I capital and the balance will be considered as Tier II capital to
address the company`s capital adequacy requirements. The company also
raised subordinated debt to the tune of Rs. 225 crores which were rated as
[ICRA] AA- or [ICRA] AA by ICRA and Fitch AA-(Ind) by Fitch, which will be
used to meet the Tier II capital requirements as per RBI Guidelines.
ASSET FINANCING COMPANY
During the year, the company was categorised as an Asset Financing Company
(AFC) by Reserve Bank of India (RBI).
The company`s capital adequacy ratio was at 18.08% as on 31 March, 2012 as
against 16.67% as on 31 March, 2011. The minimum capital adequacy
prescribed by RBI for an Asset Finance Company is at 15%.
EMPLOYEE STOCK OPTION SCHEME:
Pursuant to the approval accorded by the shareholders at the twenty ninth
annual general meeting of the company held in July 2007, the compensation &
nomination committee had formulated the Employee Stock Option Scheme 2007.
During the year under review, 3,70,880 options were granted to the
employees of the company and its subsidiaries under the said scheme. As
required under the Securities and Exchange Board of India (Employees Stock
Option and Employees Stock Purchase Scheme) Guidelines, 1999 (SEBI
Guidelines), the following details of this scheme as on 31 March, 2012 are
Nature of Disclosure Particulars
a. Options granted 24,73,123 options in 10 tranches since 30 July,
2007. Each option gives the grantee a right to
subscribe to one equity share of Rs.10/- each
in the company.
b. The pricing formula The options were granted at an exercise price
equal to the latest available closing price of
the equity shares on the Stock Exchange in
which there was highest trading volume, prior
to the date of grant of the options.
c. Options vested 4,38,992
d. Options exercised 15,214
e. The total no. of 15,214
shares arising as
a result of exercise
f. Options lapsed/ 12,49,056
g. Variation of terms The compensation & nomination committee at its
of Option meeting held on 30 July, 2008 revised the
performance parameters of the employees for
vesting. No terms were varied during FY 2011-12.
h. Money realised by Rs. 4,35,887/-
exercise of options
d. Options exercised 15,214
i. Total no of Options 12,08,853
j. (i) Details of Options granted till date to senior management
Options granted to personnel are as follows:
Name & Designation of the No. of Options granted
Kaushik Banerjee, 69,995
D. Arul Selvan, 43,773
Sr. Vice President & CFO
Rohit Phadke, 43,773
Sr. Vice President &
Business Head-Home Equity
(ii) Any other employee Name & Designation of the No. of Options granted
who received a grant in Employee
any one year of
Option amounting to Pravin Salian 35,400
5% or more of Options Jaikumar K.P. 34,000
granted during the
(iii) Employees who were None
granted Options, during
any one year, equal to
or exceeding 1% of the
issued capital of the
company at the time
k. Diluted Earnings Per Rs. 14.39
Share (EPS) pursuant
to issue of shares
on exercise of Option
l. (i) Difference The employee compensation cost for the
between the year would have been higher by Rs.2.60
compensation cost crores had the company used the fair
using the intrinsic value of options as the method of
value of the stock accounting instead of intrinsic value.
Options (which is
the method of
accounting used by
the company) and
cost that would
recognized in the
accounts if the
fair value of
Options had been
used as the method
(ii) Impact of the The stock-based compensation cost calculated
difference as per the intrinsic value method upto 31
mentioned in (i) March, 2012 is Nil. If the stock-based
above on the compensation cost was calculated as per the
profits of the fair value method prescribed by SEBI, the
company total cost to be recognized in the financial
statements for the period ended 31 March,
2012 would be Rs.2,59,75,221/-.
(iii) Impact of the Had the company accounted the Options as
difference mentioned per fair value the diluted EPS would have
in (i) above on the been Rs.14.18 per share instead of Rs.14.39
EPS of the company per share.
m. (i) Weighted Rs.160.46
price of Options
(ii) Weighted average Rs.71.02
fair value of Options
n. (i) Method used Black Scholes Options Pricing model.
to estimate the fair
value of Options
(a) Risk-free interest 7.66%
(b) Expected life of 4.15 years
(c) Expected volatility 50.21%
(d) Expected dividend 3.64%
(e) Price of the Rs. 185.45
underlying share in
the market at the
time of Option grant
The certificate from the statutory auditor as required under the SEBI
Guidelines, confirming that the company`s Employees Stock Option Scheme
2007 has been implemented in accordance with the SEBI Guidelines and
shareholders resolution, will be placed before the shareholders at the
ensuing annual general meeting.
DIRECTORS` RESPONSIBILITY STATEMENT:
The directors` responsibility statement as required under Section 217(2AA)
of the Companies Act, 1956, reporting the compliance with the accounting
standards, is attached and forms a part of the directors` report.
CORPORATE GOVERNANCE REPORT:
A report on corporate governance, including the status of implementation of
mandatory and non-mandatory norms as per clause 49 of the listing agreement
and the corporate governance voluntary guidelines, 2009 issued by Ministry
of Corporate Affairs, is attached and forms part of the directors` report.
MANAGEMENT DISCUSSION AND ANALYSIS:
The management discussion and analysis report, highlighting the business-
wise details is attached and forms part of this report.
Mr. N. Srinivasan was appointed as vice chairman of the company at the
board meeting held on 31 January, 2012.
Mr. Indresh Narain and Mr. N. Srinivasan are liable to retire by rotation
at the ensuing annual general meeting and being eligible, have offered
themselves for re-appointment.
M/s. Deloitte Haskins & Sells, chartered accountants, retire at the ensuing
annual general meeting and are eligible for re-appointment.
INFORMATION AS PER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956:
The company has no activity relating to consumption of energy or technology
absorption. Foreign currency expenditure amounting to Rs. 2.79 crores
(including interest accrued but not due) was incurred during the year under
review. The company does not have any foreign exchange earnings.
PARTICULARS OF EMPLOYEES:
In accordance with the provisions of Section 217(2A) of the Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975 and the
Companies (Particulars of Employees) Amendment Rules, 2011, the name and
other particulars of employees are set out in the annexure to the
directors` report. However, having regard to provisions of Section 219 (1)
(b) (iv) of the Companies Act, 1956, the annual report is being sent to all
members of the company excluding the aforesaid information. Any member
interested in obtaining such particulars may write to the company secretary
at the registered office of the company.
Cholamandalam Securities Limited, Cholamandalam Distribution Services
Limited and Cholamandalam Factoring Limited are subsidiaries of the
company. The financial performance of the subsidiaries is given below.
Cholamandalam Securities Limited (CSEC):
CSEC recorded a gross income of Rs.6.32 crores for the year ended 31 March,
2012. CSEC made a loss before tax of Rs. 2.58 crores as against a profit of
Rs. 0.49 crores in the previous year.
Cholamandalam Distribution Services Limited (CDSL):
CDSL recorded a gross income of Rs.11.76 crores for the year ended 31
March, 2012. CDSL made a loss before tax of Rs. 0.37 crores as against a
profit of Rs. 6.90 crores in the previous year.
Cholamandalam Factoring Limited (CFACT):
During the year, the company infused equity share capital aggregating to
Rs. 60 crores to strengthen the capital base of CFACT. CFACT recorded a
gross income of Rs. 0.02 crores for the year ended 31 March, 2012. CFACT
made a loss before tax of Rs. 61.29 crores as against a loss of Rs. 8.16
crores in the previous year.
The directors wish to thank the company`s customers, vehicle manufacturers,
vehicle dealers, banks, mutual funds, rating agencies and shareholders for
their continued support. The directors also thank the employees of the
company for their contribution to the company`s operations during the year
On behalf of the board
Date : 26th April, 2012 M.B.N. Rao
Place : Chennai Chairman
DIRECTORS` RESPONSIBILITY STATEMENT:
The directors accept the responsibility for the integrity and objectivity
of the statement of Profit & Loss Account for the year ended 31 March, 2012
and the Balance Sheet as at that date ("financial statements") and confirm
* In the preparation of the financial statements the generally accepted
accounting principles (GAAP) of India and applicable accounting standards
issued by the Institute of Chartered Accountants of India have been
* Appropriate accounting policies have been selected and applied
consistently and judgments and estimates that are reasonable and prudent
have been made so as to give a true and fair view of the state of affairs
of the company as at the end of the financial year and of the profit of the
company for that period.
* Proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act,
1956 for safeguarding the assets of the company and for preventing and
detecting fraud and other irregularities. To ensure this, the company has
established internal control systems, consistent with its size and nature
of operations, subject to the inherent limitations that should be
recognised in weighing the assurance provided by any such system of
internal controls. These systems are reviewed and updated on an ongoing
basis. Periodic internal audits are conducted to provide reasonable
assurance of compliance with these systems. The audit committee meets at
regular intervals to review the internal audit function.
* The financial statements have been prepared on a going concern basis.
On behalf of the board
Date : 26th April, 2012 M.B.N. Rao
Place : Chennai Chairman
MANAGEMENT DISCUSSION AND ANALYSIS
Cholamandalam Investment and Finance Company Limited (Chola) is one of
India`s premier asset financing non-banking finance company primarily
engaged in providing vehicle finance (VF), home equity (HE) loans and
corporate mortgage finance (CMF) loans. The company has robust sourcing,
underwriting, receivables management, collection and operations models
commensurate with the size and risks of the respective underlying asset
class. Through its subsidiaries, the company is engaged in the business of
broking and distribution of financial products.
During the year, the company focused on increasing and strengthening its
core businesses of vehicle finance and home equity by introducing process
changes aided by technology to improve productivity and profitability.
Also, the footprint of these businesses across the nation widened with a
substantial increase in branch network. The complete rundown of the
personal loan portfolio in FY 2011-12 resulted in lower loan losses leading
to manifold increase in the profitability of the company. The following are
some of the major initiatives during the FY 2011-12:
* Re-categorised as an asset financing company as per RBI guidelines.
* Infused equity share capital aggregating to Rs. 212 crores to strengthen
* Increased presence in 124 new locations in Tier III and Tier IV towns
and increased the total branch strength to 344 branches across India
towards growing its vehicle finance business.
* Invested in technology and process improvements aimed at enhancing
productivity levels and reducing operating costs in the years to come.
* Improved portfolio quality by focused collection across product lines.
* Raised long-term funds by way of Perpetual Debt Instrument (PDI) and
Subordinated Debt (SD) to enhance capital adequacy ratio.
* Strengthened the asset liability management, in a rising interest rate
* ICRA upgraded its long-term rating on non-convertible debentures and
lines of credit from banks from [ICRA]AA- to [ICRA]AA. The outlook on the
upgraded rating is Stable.
* Actively participated in investor meetings to distinctly improve
* Strengthened the technology platform to ensure faster turnaround time,
efficient controls and better MIS.
All these initiatives resulted in an impressive growth during the year
under review and the benefits of the same are expected to continue in the
years to come.
The company disbursed aggregate loans of Rs. 8,889 crores against Rs. 5,731
crores disbursed in the previous year. The aggregate disbursement of
Rs.7,306 crores in VF and Rs. 1,528 crores in HE verticals by the company
was the highest ever since inception. The company has disbursed Rs. 54
crores from its newly launched loan against gold business. The net managed
assets as on 31 March, 2012 increased to Rs. 13,462 crores (Rs. 9,124
crores as on 31 March, 2011) clocking a growth of 48% over the previous
year and is the highest ever achieved. Total assets (including off-balance
sheet assets) grew to Rs. 14,643 crores (Rs. 10,441 crores as on 31 March,
VF, which mainly constitutes funding against commercial vehicles and
tractors, continued to account for the largest share of the company`s asset
portfolio with an asset deployment of Rs. 9,841 crores, constituting 73% of
net managed assets.
HE, loan against property, enjoyed a successful ramp-up and closed the year
with an asset portfolio of Rs. 3,083 crores, constituting 23% of net
CMF, caters to the working capital needs of promoters, high net worth
individuals and corporate houses and closed the year with an asset base of
Rs. 491 crores constituting 4% of net managed assets.
The loan against gold business (commenced during the current financial
year) ended the fiscal with an asset portfolio of Rs. 42 crores which
constitutes less than 1% of the total asset book.
The discontinued consumer finance division, constituting unsecured personal
loans has a residual book of Rs. 5 crores.
The performance of the company can be considered highly satisfying as its
growth across the business verticals has been significantly higher than the
industry growth levels.
DIVISIONAL ANALYSIS VEHICLE FINANCE:
Sale of Commercial Vehicles (CV) witnessed a fairly healthy growth during
FY 2011-12, primarily in the light and small CV segments. The overall CV
segment registered a growth of 18.2% during April-March 2012 as compared to
31% during the same period last year, inspite of a subdued Index of
Industrial Production. The overall rate of growth of CV was lower than FY
2010-11, largely due to the sharp drop in the growth of heavy commercial
vehicles and also due to the impact of a higher base in 2010-11. Medium &
Heavy Commercial Vehicles (MHCV) registered a growth of 8%, while Light
Commercial Vehicles (LCV) grew at 27.36%.
As the focus of our VF business is predominantly in the LCV and SCV product
category, the VF business registered a substantial growth in disbursement
leveraging the demand for LCVs and SCVs. The division`s disbursements grew
by 63% over the previous year to Rs. 7,306 crores. New CV volumes recorded
a growth of 49% in unit terms, against the industry growth of 18%,
resulting in an increase in market share from 8% to 10% during the year.
Fee income registered an increase of 47% over the previous year and other
income increased by 26% during the same period.
The division continued to focus on ensuring that the asset quality remained
robust through careful sourcing and granular credit decisioning process,
supported by a strong and proactive collections approach. The individual
and collective strengths of the teams have resulted in a superior portfolio
performance as under:
1. Gross NPA was at 0.69%
2. Net NPA was at 0.26%
3. Stock level of repossessed vehicles was at 0.10% of overall assets
level. The key strategies adopted by the business during FY 2011-12
* Addition of 124 new branches to increase pan India footprint particularly
in the Tier III and IV towns, totaling the branch strength to 344;
* Supporting manufacturers through clear value addition in the middle and
bottom of the pyramid customer segments and increasing penetration in new
* Increasing productivity at all levels;
* Focusing on portfolio quality and revenue generation;
* Investment in technology and process improvement initiatives for
enhancing business efficiency.
The general outlook of the industry (in the relevant product segments) is
one of optimism and most indicators appear positive. Volumes are expected
to have a moderate growth rate of 12%-15%, albeit on a higher base of FY
The home equity business completed its fifth year of operations in FY 2011-
12 and is a significant part of the Chola`s growth story.
In FY 2011-12, the business disbursed Rs. 1,528 crores as compared to
Rs.1,235 crores in the previous financial year registering a growth of 24%.
The net managed asset book grew by 42% and stood at Rs. 3,083 crores as on
31 March, 2012 compared to Rs. 2,174 crores for the same period in the
previous financial year. The business commenced operations in nine new
locations and is currently present in 45 locations across the country. All
the 45 branches are co-located along with vehicle finance branches, thus
reducing operating expenses to a large extent. The company is actively
engaged in consolidating its presence at locations it already operates
thereby building a clean and profitable portfolio.
In FY 2011-12, the company undertook several initiatives focused on
enhancing customer engagement and quality of the asset book. These
initiatives have resulted in an enhanced customer relationship and
significant reduction in delinquent accounts.
With more banks and NBFCs entering the space and strengthening their
presence, the home equity business is facing intense competition. However,
the business has established itself in this space and is viewed today, as
one of the most competitive and profitable industry player. The business
expects robust growth in FY 2012-13 in this segment fuelled by healthy
credit off take in our target customer segments.
The business continues to focus on self-occupied residential properties as
the preferred asset class as it is considered to be the safest class to
lend. The target customer segment continues to be the self-employed non-
professional customers and the business has built an expertise in
understanding and assessing this particular customer segment.
CORPORATE AND MORTGAGE FINANCE:
In this business, the loans are given to promoters of corporates, high net
worth individuals (HNI) and corporate houses for tenure of one to two
years. The past year witnessed highly volatile capital markets with Sensex
fluctuating between 15,135 and 19,811 levels.
These loans are secured by way of collaterals such as listed equity shares,
property and current assets. The division closed the year with an asset
float of Rs. 491 crores, which constituted close to 4% of the net managed
assets of the company. These loans are collateralised and the company
possesses stringent evaluation and online control mechanism for any adverse
movement in stock price.
The book is secured 68% by way of equity shares and 32% by way of
combination of property/assets and shares. Almost 52% of the book is from
south-based clients while 34% of the float is from Mumbai and 14% from
Delhi. The business continues its focus on the promoter financing book as
the key profit driver. The south markets offer opportunities in the HNI
space for additional growth.
The company has realigned the business to reduce the Finance Against Shares
(FAS) exposure and accordingly the FAS book is brought down in view of the
revised focus and strategy in this business line.
The company launched gold loan business as a pilot project during the
current financial year and commenced operations with its first branch
launch in Chennai on 14 December, 2011.
The business closed the year with 31 branches and disbursements of Rs. 54
crores. The asset book as on 31 March, 2012 was Rs. 42 crores with a
customer base of 1,673. Depending on the experience in the pilot phase, the
company will form its revised strategy on this business.
The personal loan asset book was brought down to Rs. 5 crores as on 31
March 2012, after fully providing for all overdues. No further losses are
envisaged in this book and efforts will be continued in FY 2012-13 to
collect the delinquent accounts, which is estimated to result in some
recovery, though it may be minimal.
Total investments of Rs. 62 crores include investments in subsidiaries of
Rs. 56 crores (net of provisions) and investments of Rs. 4 crores (net of
provisions) in government securities.
During the year, the company recapitalised its subsidiary, Cholamandalam
Factoring Limited to the tune of Rs. 60 crores and provided Rs. 57.50
crores as impairment provision since the capital is almost fully eroded on
account of the losses incurred in the subsidiary.
The company also provided Rs. 9 crores for impairment in investments made
in Cholamandalam Securities Limited due to continued business losses on
account of highly volatile stock markets.
RESOURCES AND TREASURY:
During the year, the company focused on mobilising funds to sustain the
aggressive growth of its VF and HE business. This was done by maintaining a
right mix of long and short term assets in a suitable ratio to maintain a
healthy asset liability position throughout the year.
During the year, the company mobilised Rs. 1,795 crores of medium-term
loans and Rs. 733 crores of working capital and cash credit facilities from
During the year, the company raised commercial papers (CP) worth Rs.3,032
crores and repaid Rs. 3,377 crores of CP. CP outstanding as at the end of
the year was Rs. 235 crores. The company also mobilised medium/long-term
Non-Convertible secured Debentures (NCD) to the tune of Rs. 2,160 crores at
competitive rates to address its medium-to-long term funding requirements.
As at the end of FY 2011-12, outstanding NCD were Rs. 2,543 crores.
Tier I and Tier II Capital:
During the year, the company raised equity share capital of Rs. 212 crores.
The company raised Rs. 358 crores of perpetual debt instruments and Rs. 225
crores of subordinated debt to meet its capital adequacy requirements. As
at the end of FY 2011-12, perpetual debt instrument outstanding was Rs. 508
crores and subordinated debt was Rs. 928 crores. The proportion of Tier II
Capital was increased from 5.88% to 7.08%.
The borrowing profile of the company as on 31 March, 2012 is given below
Movement in Interest Cost:
The company`s interest cost as a percentage of average borrowings increased
from 8.52% to 10.19% due to increase in bank base rates consequent to the
sustained hike in key policy rates by RBI as well as the prevailing
liquidity crunch in the market. The base rates of most of the banks were
raised by 1.75% and the market rate for CP and NCD had significantly
increased as compared to the previous year. The increase in cost of funds
was clearly visible among all competitors in the market and the company
adopted various measures to minimise the impact of the same such as:
a) Renegotiating the interest rates with various lenders
b) Prepaying high cost loans
c) Bilateral assignment/securitisation of priority sector assets
Base Rate of SBI increased by 1.75% while Chola borrowing cost increased by
CAPITAL ADEQUACY RATIO:
The company improved its Capital Adequacy Ratio (CAR) to 18.08% as on 31
March, 2012 compared to 16.67% in the previous financial year.
ASSET LIABILITY MANAGEMENT:
During the year, the company significantly strengthened the asset liability
management by improving the proportion of long term borrowings in the form
of bank term loans and market instruments. The ALM position was maintained
with no negative carry in any of the buckets upto 1 year.
The company`s short-term debt is rated as [ICRA]A1+ by ICRA and `CRISIL
A1+` by CRISIL.
During the year, ICRA upgraded its long-term rating on non convertible
debentures and lines of credit from banks from [ICRA]AA- to [ICRA]AA. ICRA
upgraded its long-term rating on subordinated debt programme of the company
from [ICRA]AA- to [ICRA]AA. ICRA upgraded its long term rating applicable
to perpetual debt instrument from [ICRA]A+ to [ICRA] AA-. The outlook on
the above upgraded ratings are `Stable`.
CARE re-affirmed the rating of `CARE AA` to the non-convertible debentures
programme of the company. CARE re-affirmed its existing rating of `CARE A+`
on the perpetual debt instrument of the Company.
Fitch re-affirmed its existing rating of `Fitch AA-(ind)` with stable
outlook on the subordinated debt programme of the Company.
The company employed 1,405 employees as on 31 March, 2012. During the year,
it launched various organisational development and engagement initiatives
including a few critical initiatives like leadership coaching for senior
leaders, 360 degree assessment and feedback to aid in developing the
individual development plan for managers, competency identification and
definition exercise for all roles in the core businesses. The online human
resources (HR) portal `People Power` was implemented during the year.
Employees who have been with the company for more than five years were
given service awards. The training team efficiently organised five virtual
training centres which enabled the company to achieve more than 7,800
training man-days during the fiscal.
During the year, several technological initiatives such as comprehensive
lead management and customer service modules were implemented to improve
productivity, reduce turnaround time for better controls and governance.
Pilot program on mobile applications to improve productivity of the sales
and collection teams were launched. These enhancements are expected to
result in significant improvements in productivity and easier access to
Risk is inherent in any business transactions and in financial sector, in
particular, as it manifests in many ways due to diverse activities executed
by numerous people from many locations.
An organization should be capable of identifying and managing the risks in
order to achieve its strategic objectives. Hence, an effective risk
management is fundamental and critical component of the overall objectives
of the organisation.
Like any other financial service company, your company has identified the
risk management objectives which help in controlling and mitigating the
risks through incessant risk management initiatives. The company faces
various types of risks like credit risk, liquidity risk, interest rate
risk, operational risk, reputational risks and regulatory issues.
As these are highly interrelated, your company has adopted a robust risk
management framework to effectively manage them and is driven by the
* Identification of key risks
* Evaluating the probability of occurrences and their impact
* Positioning tolerance limits and establishing adequate review mechanisms
to monitor and control the risks
* Incorporating robust reporting mechanism and adoption of appropriate
As risk management is an integral part of the company`s business process,
it is well embedded in the Standard Operating Procedures (SOP) of all
activities of the business units/functions. The risk management department
is ably complemented by the Internal Audit team which evaluates the extent
of SOP compliance with the objective of locating gaps. The company`s Asset
Liability Committee (ALCO) facilitates to manage the market related risks
and to adopt various strategies related to assets and liabilities in line
with the risk management framework of the company. The fraud control unit
of the company also helps to manage the risks related to fraud and
During the year, the board reconstituted the Risk Management Committee
(RMC) by inducting two more directors into the committee besides managing
director, various business and functional heads of the company as its
members in order to further improve the focus and strengthen the processes
within the company.
INTERNAL CONTROL SYSTEMS:
The company has adopted extensive internal controls to mitigate risks. The
company has established procedures including a clear delegation of
authority and SOP for all business parts. The in-house internal audit
department as well as M/s. KPMG, internal auditors of the company,
incessantly review the adequacy and effectiveness of controls.
The critical audit observations are shared with the audit committee on a
quarterly basis for effective monitoring of controls and implementation of
recommendations. On compliance matters, a methodical system of monthly self
assessment exists in all functions. The company possesses a robust
mechanism of fraud control, fraud detection and prevention. The
investigations are reviewed by a disciplinary committee comprising senior
management members and chaired by the managing director. The company has a
strong IT security system and audit to ensure information security.
The company possesses sound documentation and framework as envisaged in
Clause 49 of listing agreement. Clear segregation of duties exists between
various functions. Key operational process (finance and operations) are
centralised at the head office for better control. Capital/revenue expenses
are subjected to approved budgets.
RESULT OF OPERATIONS:
The balance sheet size of the company has significantly grown compared to
previous year and a summarised version is given below:
Rs. in crores
Particulars Mar-12 Mar-11 Growth %
Business Assets 12,322 8,600 43%
Other Assets 1,101 1,078 2%
Total 13,423 9,678 39%
Networth 1,417 1,072 32%
Borrowings 11,444 7,949 44%
Other Liabilities 562 657 -15%
Total 13,423 9,678 39%
Statement of Profit & Loss
The profit before exceptional items significantly increased from Rs. 124
crores to Rs. 324 crores during the year. This was primarily achieved by
increase in net margin by 23% and reduction in provisions and losses by
90%. The summarized version is given below:
Rs. in crores
Particulars Mar-12 Mar-11 Growth %
Disbursements 8,889 5,731 55%
Income 1,767 1,202 47%
Cost of Funds (988) (568) 74%
Net Margin 779 634 23%
Operating Expenses (437) (334) 31%
Provisions & Losses (18) (176) -90%
PBT before exceptional items 324 124 161%
All key ratios have shown considerable improvement as given in the table
Rs. in crores
Particulars Mar-12 Mar-11 Growth %
Return on Equity-PAT 13.86% 6.70% 107%
Return on Total Assets-PAT 1.38% 0.65% 111%
Total Assets under Management 14,643 10,441 40%
EPS-Basic in Rs. 14.39 5.67 154%
Market Price-Closing in Rs. 185.05 172.60 7%
Market Capitalisation 2,452.92 2,058.84 19%
CAR 18.08% 16.67% 8%
GNPA % to Total Assets 0.80% 2.61% -
NNPA % to Total Assets 0.25% 0.33% -
Operating Expenses to Income 24.72% 27.79% 11%
Profit Before Exceptional 18.32% 10.33% 77%
items to Income
GNPA-Gross Non-Performing Assets
NNPA-Net Non-Performing Assets
% on Total Assets
Particulars Mar-12 Mar-11
GNPA - Company 0.80% 2.61%
GNPA - Personal Loans 0.12% 1.93%
GNPA - Other Businesses 0.68% 0.69%
NNPA - Company 0.25% 0.33%
NNPA - Personal Loans 0.00% 0.00%
NNPA - Other Businesses 0.25% 0.33%
Provision for Standard Assets:
During the year, the company made a standard assets provision aggregating
to Rs. 12.90 crores (previous year Rs. 20.97 crores) on its standard assets
in accordance with the guidelines issued by RBI in this regard.
The company increased its presence to 375 branches as on 31 March, 2012
compared to 236 branches as on 31 March, 2011. Most of these branches are
in Tier II, Tier III and Tier IV locations across India.
KEY PARTNERSHIPS AND PREFERRED FINANCIERS:
Life insurance business Tata AIG Life Insurance company Limited
General insurance business Cholamandalam MS General Insurance Company
Preferred financiers for Tata Motors Limited
Mahindra & Mahindra Limited
Force Motors Limited
VE Commercial Vehicles Limited
(Formerly Eicher Motors Limited)
The securities business incurred a loss before tax of Rs. 2.58 crores as
against a profit of Rs.0.49 crores in the previous year. The distribution/
wealth management business made a loss before tax of Rs. 0.37 crores as
against a profit of Rs. 6.90 crores in the previous year. Cholamandalam
Factoring Limited, made a loss before tax of Rs. 61.29 crores as against a
loss of Rs. 8.16 crores in the previous year.
The consolidated profit after tax for the year was Rs. 168.99 crores as
against Rs. 84.58 crores in the previous year.
On behalf of the board
Date : 26th April, 2012 M.B.N. Rao
Place : Chennai Chairman