Your directors present the sixteenth Annual Report along with the financial statements for FY2024.
Company Overview
Bajaj Housing Finance Ltd. ('BHFL' or 'the Company) is registered with National Housing Bank ('NHB) as a Housing Finance Company ('HFC) engaged in the business of mortgage lending since 2017-18. It is a wholly owned subsidiary of Bajaj Finance Limited ('BFL'/'Holding Company). The Company offers financial solutions tailored to individuals and corporate entities for the purchase and renovation of homes and commercial spaces. The Company's mortgage product suite is comprehensive and comprises () home loans; (i) loans against property ("LAP'); (ii) lease rental discounting; and (iv) developer financing. Furthermore, our primary emphasis is on individual retail housing loans, complemented by a diversified collection of lease rental discounting and developer loans. Consequently, the financial products of the Company cater's to every customer segment, from individual homebuyers to large-scale developers. It is also a registered intermediary within the meaning of Insurance Regulatory and Development Authority of India ('IRDAI') as a corporate agent.
In terms of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('SEBI Listing Regulations), the Company is categorized as High Value Debt Listed entity ('HVD). The Company has been classified as Upper Layer NBFC under the Reserve Bank of India ('RBI) Scale Based Regulations.
Financial results
The key highlights of the financial results for FY2024 are given below:
(C in crore)
|
Particulars
|
FY2024
|
FY2023
|
% change over FY2023
|
|
Total income
|
7,618
|
5,665
|
34%
|
|
Interest and Finance charges
|
4,693
|
3,211
|
46%
|
|
Net total income
|
2,925
|
2,454
|
19%
|
|
Total operating expenses
|
703
|
630
|
12%
|
|
Pre-impairment operating profit
|
2,222
|
1,824
|
22%
|
|
Impairment on financial instruments
|
61
|
124
|
(51%)
|
|
Profit before tax (PBT)
|
2,161
|
1,700
|
27%
|
|
Profit after tax (PAT)
|
1,731
|
1,258
|
38%
|
|
Retained earnings as at the beginning of the year
|
2,335
|
1,325
|
76%
|
|
Profit after tax
|
1,731
|
1,258
|
38%
|
|
Other comprehensive income on defined benefit plan
|
(1)
|
4
|
(125%)
|
|
Retained earnings before appropriations
|
4,065
|
2,587
|
57%
|
|
Appropriations
|
|
|
|
Transfer to reserve fund u/s 29C of the NHB Act, 1987
|
346
|
252
|
37%
|
|
Retained earnings as at the end of the year
|
3,719
|
2,335
|
59%
|
Due to rounding off, numbers presented in above table may not add up precisely to the totals provided.
Working results of the Company
• Asset Under Management (AUM) as on 31 March 2024 was C 91,370 crore as compared to C 69,228 crore as on 31 March 2023, representing an increase of 32 % over the previous year.
• Loan receivables as on 31 March 2024 was C 79,301 crore as compared to C 62,114 crore as on 31 March 2023, an increase of 28 % over the previous year.
• Total income during FY2024 increased to C 7,618 crore from C 5,665 crore during FY2023 registering a growth of 34 % over the previous year.
• Total operating cost to net total income has decreased to 24.0 % from 25.7 % in FY2024.
• Impairment on financial instruments was C 61 crore. The Company holds management and macro-economic overlay of C 94 crore as at 31 March 2024.
• The Company ended FY2024 with a Gross NPA of 0.27 % and Net NPA of 0.10 % as against 0.22 % and 0.08 % respectively for FY2023.
• Profit before tax for FY2024 was C 2,161 crore as against C 1,700 crore for FY2023, an increase of 27 % over the previous year.
• The profit after tax for FY2024 was C 1,731 crore as compared to C 1,258 crore for FY2023, an increase of 38 % over the previous year. This is mainly due to the Company's healthy net interest margin, operating efficiencies and prudent risk management.
Share capital
a. Increase in Authorised Share Capital of the Company
The Shareholders of the Company at their Extra Ordinary General Meeting held on 24 April 2024 have approved the increase in authorized share capital from C 80,000,000,000 divided into 8,000,000,000 Equity shares of face value of C 10/- each to C 90,000,000,000 divided into 9,000,000,000 Equity shares of face value of C 10/- each.
b. Allotment of Equity shares through Rights Issue
On 3 April 2024, the Special Committee for Rights Issue constituted by the Board of Directors has allotted, on rights basis, 1,107,419,709 equity shares of face value of C 10/- each at premium of C 8.06 per equity share, aggregating to ~ C 2000 crore, to Bajaj Finance Limited.
Pursuant to the said allotment, the total issued and paid-up capital of the Company as on date is C 7,819.57 crore comprising of 7,819,575,273 equity shares of face value of C 10/- each fully paid-up.
During FY2024, the Company has not issued any convertible securities and there are no outstanding convertible securities as on 31 March 2024.
Dividend
Considering the capital-intensive nature of the business, the business plan of the Company and with a view to plough back the profits, your Board has not recommended dividend for consideration of the members at the ensuing Annual General Meeting ('AGM) in order to build a strong base for its long-term growth.
Transfer to Reserve Fund
Under section 29C of the National Housing Bank Act, 1987, Housing Finance Companies ('HFCs) are required to transfer a sum not less than 20% of their net profit every year to their reserve fund before declaration of any dividend. The Company has transferred a sum of C 346.25 crore to reserve fund, which is 20% of its net profit.
Pursuant to provisions of Companies Act, 2013 (the 'Act) read with relevant rules thereunder, the Company, being an HFC, is exempt from creating a debenture redemption reserve in respect of privately placed debentures including the requirement to invest up to 15% of the amount of debentures maturing during the next financial year. However, the Company maintains sufficient liquidity buffer to fulfil its obligations arising out of debentures. In case of secured debentures, an asset cover of at least 100% is maintained at all times.
Scale Based Regulations
The Reserve Bank of India issued a circular on "Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs" on 22 October 2021 ('SBR Framework). As per the SBR framework, based on size, activity, and risk perceived, NBFCs are categorised into four layers, NBFC - Base Layer (NBFC-BL), NBFC - Middle Layer (NBFC-ML), NBFC - Upper Layer (NBFC-UL) and NBFC - Top Layer (NBFC-TL). The RBI has categorised Bajaj Housing Finance Limited as an NBFC - Upper Layer (NBFC-UL) vide its press release dated 30 September 2022 and subsequently on 14 September 2023.
Listing
Pursuant to press release dated 30 September 2022 issued by the Reserve Bank of India ("RBI"), the Company was classified by the RBI as an NBFC - Upper Layer, thereby necessitating a requirement for the Company to be mandatorily listed on or before September 30, 2025. In order to comply with the regulatory timelines stipulated under the regulations applicable to companies classified as NBFC - Upper Layer, the Board of Directors at their meeting held on 24 April 2024 has given its approval for commencing the Initial Public Offering ('IPO) process including evaluation of various options subject to prevailing market conditions with respect to mandatory listing requirements by constituting an IPO Committee.
In view of the same, the Board of Bajaj Finance Ltd. ('BFL) at their meeting held on 25 April 2024 have also agreed to participate in the IPO through the Offer for Sale ('OFS) mechanism as per the SEBI Regulations.
The quantum and percentage of OFS to be offered is under evaluation and will be determined in consultation with the Board of BHFL, merchant bankers and other market intermediaries, based on various strategic considerations and market conditions.
Operations of the Company
Details regarding the operations of the Company and its state of affairs are covered in the 'Management Discussion and Analysis Report'.
Corporate Agent
The Company has received Certificate of Registration from the Insurance Regulatory and Development Authority of India ('IRDAI') to act as Corporate Agent (Composite) with validity of three years from 22 December 2023 to 21 December 2026.
Borrowings
The overall borrowing limit of the Company has been increased to C 1,00,000 crore by the shareholders at their Extra Ordinary General Meeting held on 19 May 2023.
As on 31 March 2024, the borrowings of the Company stood at C 69,129 crore. During FY2024, the Company has issued non-convertible debenture (NCDs) to the tune of C 8,602 crore (face value) and redeemed NCDs to the tune of C 4,300 crore (face value). Further, Company has also issued Commercial Papers (CPs) to the tune of C 7,600 crore (face value) and redeemed CPs to the tune of C 5,275 crore.
As per the Master Direction - Reserve Bank of India (Non-Banking Financial Company - Scale Based Regulations) Directions 2023, the Company was required to maintain a minimum Liquidity Coverage Ratio (LCR) of 85% from 1 December 2023 onwards. The daily average LCR of the Company during Q4 and for FY2024 stood at 142.62% and 131.38% respectively.
Subsidiaries, Associates and Joint Ventures
The Company does not have any subsidiary, associates, or joint ventures. Accordingly, the requirement of attaching form AOC-1 is not applicable to the Company.
SEBI vide its notification dated 7 September 2021 has amended the SEBI Listing Regulations requiring High Value Debt Listed Companies to adopt a policy for determining material subsidiaries.
The Company's policy for determination of material subsidiary, as adopted by the Board of Directors, in conformity with regulation 16 of the SEBI Listing Regulations, can be accessed on the Company's website at https://www.bajajhousingfinance.in/documents/37350/53075/annexure 3? policy for determining material subsidiaries.pdf
Further, the net worth of the Company exceeds 10% of the consolidated net worth of the immediately preceding accounting year of both Bajaj Finance Ltd. ('BFL) and Bajaj Finserv Ltd. ('BFS); and therefore, it is classified as material subsidiary of both the Companies.
Directors and Key Managerial Personnel (KMP)
As on 31 March 2024, the Board consisted of six Directors of whom three are Independent Directors. On 1 April 2024, two of the Independent Directors are also an independent director on the Board of the holding company viz., BFL.
A. Change in Directorate:
i. Appointment
Jasmine Chaney (DIN: 07082359)
On recommendation of the Nomination and Remuneration Committee ('NRC), the Board has appointed Jasmine Chaney as a Woman Independent Director of the Company for a period of 5 consecutive years effective from 1 April 2023. The same has been approved by the members vide their special resolution dated 19 May 2023.
The Board is of the opinion that Jasmine Chaney is a person of integrity, expertise, and possess competent experience and proficiency to serve the Company as an independent director that can strengthen the overall composition of the Board.
Jasmine Chaney has successfully completed the online proficiency self-assessment test as required under the provisions of rule 6(4) of the Companies (Appointment and Qualifications of Directors)
Rules, 2014, as amended.
She is a member of the Audit Committee, Risk Management Committee and IT Strategy Committee.
B. Directors liable for rotation:
Rajeev Jain, (DIN: 01550158) retires by rotation at the ensuing AGM, and being eligible, offers himself for re-appointment as a Non-Executive Director.
Brief details of Rajeev Jain, who is seeking re-appointment, are given in the Notice of sixteenth AGM.
C. Key Managerial Personnel (KMP):
During FY2024, there was no change in KMP.
D. Continuation of non-retiring director:
SEBI vide its notification dated 14 June 2023, amended SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 effective from 15 July 2023. Pursuant to said notification a new sub-regulation 17(1D) was inserted which provided that with effect from 1 April 2024, the continuation of a director serving on the Board of a listed entity shall be subject to the approval by the shareholders in a general meeting at least once in every five years.
Further, any Director serving on the board as on 31 March 2024, without the approval of the shareholders for the last five years or more shall be subject to the approval of shareholders in the first general meeting to be held after 31 March 2024.
The shareholders at their meeting held on 15 June 2022 have appointed Sanjiv Bajaj (DIN: 00014615),
Non- Executive Director as a director not liable to retire by rotation pursuant to provisions of the Companies Act, 2013. He continues on the Board as a non-executive director not liable to retire by rotation.
A brief profile of directors is available on the website of the Company at https://www.bajajhousingfinance. in/directors-board.
Declaration by Independent Directors
All the Independent Directors have submitted a declaration of independence, stating that they meet the criteria of independence provided under section 149(6) of the Act read with regulation 16 of the SEBI Listing Regulations, as amended. They also confirmed compliance with the provisions of rule 6 of Companies (Appointment and Qualifications of Directors) Rules, 2014, as amended, relating to inclusion of their name in the databank of Independent Directors.
The Board took on record the declaration and confirmation submitted by the Independent Directors regarding them meeting the prescribed criteria of independence, after undertaking due assessment of the veracity of the same in terms of the requirements of regulation 25 of the SEBI Listing Regulations.
Remuneration Policies
a. Policy on Directors' Appointment and Remuneration
Pursuant to Section 178(3) of the Companies Act, 2013 and Regulation 19(4) read with Part D of Schedule II of the SEBI Listing Regulations, the Board has framed a remuneration policy. This policy, inter alia, lays down:
a) The criteria for determining qualifications, positive attributes and independence of directors; and
b) Broad guidelines of compensation philosophy and structure for Non-Executive Directors, key managerial personnel and other employees.
In view of detailed RBI Guidelines for NBFCs concerning compensation of Key Managerial Personnel and Senior Management ('SMT'), the Company has adopted a specific policy to this effect. Accordingly, this remuneration policy has to be read along with the specific policy adopted pursuant to RBI Guidelines as regards compensation of KMPs and SMTs, which is detailed below.
b. Policy for Compensation of KMP and SMT pursuant to the RBI Guidelines
The RBI has vide its circular dated 29 April 2022 issued Guidelines on Compensation of Key Managerial Personnel and Senior Management in NBFCs pursuant to Scale Based Regulatory Framework. Accordingly, the Company has adopted a Board approved policy exclusively governing compensation payable to KMP and SMT. This policy lays down detailed framework, inter alia, encompassing the following:
• Principles of Compensation;
• Compensation Components;
• Principles of Variable pay;
• Deferral of variable pay;
• Compensation for Control and assurance function personnel;
• Provisions for Malus and Clawback and circumstances under which application of Malus and Clawback is to be considered.
The Board at its meeting held on 24 April 2024 amended the policy to provide the reference of the Company's ESOP scheme.
The aforesaid policies can be accessed at https://www.bajajhousingfinance.in/documents/37350/53075/ Remuneration Policy - Companies Act.pdf and https://www.bajajhousingfinance.in/ documents/37350/53075/Remuneration policy - RBI.pdf.
During FY2024, there were no pecuniary relationship/transactions of any of the Non-Executive Directors with the Company apart from sitting fees and profit linked Commission, payable to them as directors.
Formal annual evaluation of the performance of the Board, its Committees and Directors
Pursuant to Section 178 of the Act, the Board decided that the evaluation shall be carried out by the Board and the NRC shall only review its implementation and compliance.
Further as per Schedule IV of the Act and provisions of the SEBI Listing Regulations, the performance evaluation of Independent Directors shall be done by the entire Board of Directors excluding the Director being evaluated, on the basis of performance and fulfillment of criteria of independence and their independence from management.
Based on the report of the performance evaluation, it shall be determined whether to extend or continue the term of appointment of Independent Director.
Accordingly, the Board has carried out an annual performance evaluation of its own performance, that of its Committees, Chairperson and Individual Directors.
The manner in which formal annual evaluation of performance was carried out by the Board for FY2024 is given below:
• The NRC at its meeting held on 15 March 2024, reviewed the criteria for performance evaluation.
• Based on the said criteria, a questionnaire-cum-rating sheet was deployed using an IT platform for seeking feedback of the directors with regards to the performance of the Board, its Committees, the Chairperson and individual directors. As advised by the NRC and Board, an option for qualitative feedback, was introduced.
• From the individual ratings received from the directors, a report on summary of ratings in respect of performance evaluation of the Board, its Committees, Chairperson and individual directors for the year 202324 and a consolidated report thereof was arrived at.
• The NRC reviewed the implementation and compliance of the performance evaluation at its meeting held on 15 March 2024.
• The report of performance evaluation so arrived at was then discussed and noted by the Board at its meeting held on 15 March 2024.
• Based on the report and evaluation, the NRC and Board at their respective meetings held on 15 March 2024, determined that the appointment of all Independent Directors may continue.
• Details on the evaluation of Board, Non-Independent Directors and Chairperson of the Company as carried out by the Independent Directors at their separate meeting held on 15 March 2024 have been furnished in a separate paragraph elsewhere in this report.
• During FY2024, the process followed by the Company was reviewed by the NRC, which opined these to be in compliance with the applicable provisions and found it to be satisfactory.
Other than the Chairman of the Board and NRC, no other Director has access to the individual ratings given by directors.
Meeting of Independent Directors
Pursuant to Section 149(8) read with Schedule IV of the Act, and Regulation 25(3) of SEBI Listing Regulations, the Independent Directors shall hold at least one meeting in a financial year without the presence of Non-Independent Directors and members of the management. The meeting of Independent Directors of the Company was held on 15 March 2024. Anami N Roy chaired the said meeting.
The Independent Directors at the meeting, inter alia:
• noted the report of performance evaluation of the Board & its Committees for the year 2023-24.
• reviewed the performance of Non-Independent Directors and the Board as a whole.
• reviewed the performance of the Chairman of the Board taking into account the views of executive directors and non-executive directors; and
• assessed the quality, quantity and timeliness of flow of information between the Company's Management and the Board that is necessary for the Board to effectively and reasonably perform their duties.
Number of Board Meetings
The Board met five times during FY2024 on 24 April 2023, 24 July 2023, 16 October 2023, 25 January 2024 and 15 March 2024. The gap between any two consecutive meetings was less than one hundred and twenty days.
Directors' Responsibility Statement
The financial statements are prepared in accordance with the Indian Accounting Standards ('Ind AS') under historical cost convention on accrual basis except for certain financial instruments, which are measured at fair values pursuant to the provisions of the Act and guidelines issued by the SEBI/RBI/NHB. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy. These form a part of the notes to the financial statements.
In accordance with the provisions of section 134(3) (c) of the Act, the Directors state that:
i. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;
ii. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as 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 of the Company for FY2024;
iii. they have 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;
iv. they have prepared the annual accounts on a going concern basis;
v. they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and
vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.
Audit Committee
The Company has an Audit Committee fulfilling the requirements under the Act, RBI Master Direction -NonBanking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021 ("RBI Regulations") and SEBI Listing Regulations.
The Committee comprises of Anami N Roy (DIN: 01361110), Chairman, Dr. Arindam Kumar Bhattacharya (DIN: 01570746), Rajeev Jain (DIN: 01550158), Jasmine Chaney (DIN: 07082359).
The composition of Audit Committee is over and above the minimum requirement prescribed under the Act,
SEBI Listing Regulations, and RBI Regulations of having a minimum of two-thirds of Independent Directors, including the Chairman. All members of the Committee are considered financially literate and are deemed to have necessary accounting or financial management related expertise in terms of SEBI Listing Regulations.
All recommendations of the Audit Committee were accepted by the Board.
The composition, brief terms of reference and attendance record of members are given in the Corporate Governance Report.
Nomination and Remuneration Committee
The Company has a Nomination and Remuneration Committee fulfilling the requirements prescribed under the Act, RBI Regulations and SEBI Listing Regulations.
The Committee comprises of Dr. Arindam Kumar Bhattacharya (DIN: 01570746), Chairman, Anami N Roy (DIN: 01361110), Rajeev Jain (DIN: 01550158).
The composition, brief terms of reference and attendance record of members are given in the Corporate Governance Report.
Risk Management Committee
The Company has a Risk Management Committee fulfilling the requirements prescribed under the Act, RBI Regulations and SEBI Listing Regulations.
The Committee comprises of Dr. Arindam Kumar Bhattacharya (DIN: 01570746), Chairman, Sanjiv Bajaj (DIN:00014615), Anami N Roy (DIN: 01361110), Rajeev Jain (DIN: 01550158), Atul Jain (DIN:09561712), Jasmine Chaney (DIN: 07082359), Niraj Adiani, Gaurav Kalani, Vijay Solanki and Ajita Kakade.
The composition of Risk Management Committee is as per the requirement prescribed under the SEBI Listing Regulations, and the RBI Regulations. The Committee consists of ten members with majority of them being members of the Board of Directors, including an Independent Director. The Chairperson of the Committee is a member of the Board of Directors.
The Board of Directors have adopted a risk management policy for the Company under which management identifies and controls risks through a properly defined framework in terms of the aforesaid policy.
The composition, brief terms of reference and attendance record of members are given in the Corporate Governance Report.
Particulars of Loans, Guarantees and Investments
The Company, being a housing finance company registered with the NHB and engaged in the business of providing loans in ordinary course of its business, is exempt from complying with the provisions of section 186 of the Act with respect to loans. Accordingly, the Company is exempted from complying with the requirements to disclose in the financial statement the full particulars of the loans given, investment made, guarantee given, or security provided.
Employee Stock Options ('ESOP')
The Board of your Company at its meeting held on 24 April 2024 approved the first ever Employee Stock Option Scheme of the Company. Thereafter, the shareholders at its meeting dated 24 April 2024 through special resolution approved the said scheme.
Through the scheme, the Company offers stock options to eligible employees of the Company. Because of their nature, stock options help to build a holistic, long- term view of the business and a sustainability focus among the Senior Management team. Options are granted to tenured employees in managerial and leadership positions upon achieving defined thresholds of performance and leadership behaviour. Grant of stock options also allows
the Company to maintain the right balance between fixed pay, short-term incentives and long-term incentives to effectively align with the risk considerations and build the focus on consistent long-term results.
Material Changes and Commitments
There were no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year and the date of this report.
Conservation of Energy
Though the operations of the Company are not energy intensive, the Company implements various energy conservation measures across all its functions, verticals and value chain partners. Key initiatives of the Company include the following:
• Switching from conventional lighting system to LED lights at most of the branches in metro areas;
• Selecting and designing offices to facilitate maximum natural light utilization; and
• Use of cloud based virtual servers to increase energy efficiency and data security.
• The company has adopted strategy to minimize usage of non-production workload during night hours which helps in cost optimization and reduce greenhouse effect.
Technology Absorption
The Company adopts technologies for acquisition and servicing. The Company host entire enterprise IT ecosystem on cloud leading to flexible architecture for its business applications, data warehousing and analytics. It enables performance, scalability, cost effective and secure architecture. The Company has improvised its stack of web-based applications compatible across computing devices enabling mobility along with API gateways for seamless integration.
The company continues to strengthen Information Security posture through increased monitoring over attack surface, fine tuning processes and by proactively mitigating identified gaps.
The Company has also improvised productivity in areas of business operations and customer service by leveraging robotic process automation and artificial intelligence coupled with machine learning.
Foreign Exchange Earnings and Outgo
During FY2024, the Company did not have any foreign exchange earnings in terms of actual inflow and the foreign exchange outgo in terms of actual outflow amounted to C 20.18 lakh.
Corporate Social Responsibility (CSR)
The CSR Committee comprises of three directors viz. Anami N Roy (Chairman) (DIN: 01361110), Sanjiv Bajaj (DIN: 00014615) and Rajeev Jain (DIN: 01550158).
The CSR interventions for the year focused on youth skilling for employment, livelihood initiatives, child education, child health, child protection and inclusion for persons with disability. The salient features of the CSR Policy and impact assessment report forms part of the Annual Report on CSR activities. The CSR policy has been hosted on the website of the Company and can be accessed at https://www.bajajhousingfinance.in/ documents/37350/5324874/CSR Policy.pdf.
'Bajaj Beyond' is the Group's new identity for all its Corporate Social Responsibility and charitable programmes with focus on youth skilling. The initiatives aim to benefit the youth and enable them to take advantage of employment and entrepreneurial opportunities offered by India's growing economy in the years to come. Pursuant to Rule 8(1) of Companies (Corporate Social Responsibility Policy) Rules, 2014, Annual Report on CSR activities is annexed to this Report.
The CSR obligation of the Company for FY2024 is C 20.67 crore. As on 31 March 2024, the Company has fully spent the CSR obligation for FY2024.
Further, the Chief Financial Officer has certified that the funds disbursed have been utilised for the purpose and in the manner approved by the Board for FY2024.
Annual Return
A copy of the annual return as provided under section 92(3) of the Act, in the prescribed form, which will be filed with the Registrar of Companies/MCA, is hosted on the Company's website and can be accessed at https://www.bajajhousingfinance.in/annual-reports
Risk Management
The Board of Directors have adopted a Risk Management Policy for the Company which provides for identification of key events/risks impacting the business objectives of the Company and attempts to develop risk policies and strategies to ensure timely evaluation, reporting and monitoring of key business risks.
This framework, inter alia, provides the set of components that provide the foundations and organizational arrangements for designing, implementing, monitoring, reviewing and continually improving Risk Management throughout the organization. It covers principles of risk management, risk governance with roles and responsibilities, business control measures, principle risks and business continuity plan. The Management identifies and controls risks through a defined framework in terms of the aforesaid policy.
The Board is of the opinion that there are no elements of risk that may threaten the existence of the Company.
The RBI, vide its circular dated 22 October 2020, reviewed the regulatory framework for HFCs wherein, all nondeposit taking HFCs with asset size of more than C 100 crore shall pursue liquidity risk management which, inter alia, should cover adherence to gap limits. The Board has in place a Liquidity Risk Management framework encompassing, inter alia, strategies and practices, internal controls, maturity profiling, liquidity coverage ratios and high-quality liquid assets.
Pursuant to RBI Scale based framework, NBFCs are required to have an Internal Capital Adequacy Assessment Process ('ICAAP') in place. The objective of ICAAP is to ensure availability of adequate capital to support all risks in business as also to encourage NBFCs to develop and use better internal risk management techniques for monitoring and managing their risks. Accordingly, the Company has framed a ICAAP policy. This policy is developed considering the requirements of the SBR and is based on the Pillar -2 requirements under Basel III Framework developed by the Basel Committee on Banking Supervision (BCBS).
The objective of the policy is to provide an ongoing assessment of the Company's entire spectrum of risks and the methodology to assess current and future capital, reckoning other mitigating factors and also to assist and apprise the Board on these aspects and on Company's ICAAP and Company's approach to capital management.
In terms of NHB Circular on Risk Management System - Appointment of Chief Risk Officer dated 29 May 2019, the Committee also has an independent meeting with the Chief Risk Officer without the presence of management.
More detailed discussion on the Company's risk management and portfolio quality is covered in the Management Discussion and Analysis Report.
Significant and Material Orders Passed by the Regulators and Courts
During FY2024, there were no significant or material orders passed by any regulator or court or tribunal impacting the going concern status or the Company's operations in future.
Internal Audit
Internal Audit function provides an independent view to Audit Committee on the quality and efficacy of the internal controls, governance systems and processes.
In line with the RBI's guidelines on Risk Based Internal Audit (RBIA), the Company has adopted a Risk Based Internal Audit policy.
Pursuant to RBIA framework, Internal Audit is aligned in such a manner that assurance is provided to the Audit Committee and Board of Directors on quality and effectiveness of the internal controls, and governance related systems and processes.
At the beginning of each financial year, an audit plan is rolled out after approval of the Audit Committee. The Audit Committee regularly reviews the internal audit reports along with the corrective and preventive actions thereon. Significant audit observations, corrective and preventive actions thereon are presented to the Audit Committee on a quarterly basis.
The Committee also has an independent meeting with the internal auditor without the presence of management. As per RBI guidelines, quality assurance and improvement program ('QAIP') is required to be carried out at least once a year covering all aspects of internal audit function. Accordingly, QAIP was carried out by an external agency for FY2023 to assess functioning of the internal audit function, adherence to the internal audit policy, objectives and expected outcomes. Similarly, QAIP for FY2024 will be carried out by an external auditing partner.
Internal Financial Controls
The Company has in place Internal Financial Control considering the essential components of various critical processes, physical and operational, which also includes its design, implementation, and maintenance along with periodical internal review of operational effectiveness and sustenance. The Company has in place adequate financial controls commensurate with its size, scale and complexity of operations. These have been designed with the aim to provide reasonable assurance regarding recording and providing financial information, ensuring integrity in conducting business, accuracy and completeness in maintaining accounting records, prevention and detection of frauds and errors.
The Audit Committee and Board reviewed the Internal Financial Control and are of the opinion that internal financial controls with reference to the financial statements are adequate and operating effectively.
Information System Audit
In terms of RBI Master Direction on Information Technology Governance, Risk, Controls and Assurance Practices dated 7 November 2023, the Company is required to put in place IS Audit Policy which shall inter alia contain a clear description of its mandate, purpose, authority, audit universe, periodicity of audit etc. Accordingly, the Company has adopted a Board approved IS Audit Policy at its meeting held on 15 March 2024.
During the year under review, an IT system audit was conducted by a CERT-in empaneled audit firm (Ernst & Young). The areas audited were IT General Controls, Cyber Security Controls and Information Security Controls aligned with ISO 27001 and the regulatory framework applicable to the Company.
Audit revealed no major observations. Necessary continuous improvement actions have been taken in line with the audit observations. ISO transition and re-certification audit with latest ISO standard was conducted by BSI. We have successfully re-certified with latest ISO standard and received ISO 27001-2022 certificate.
Information Technology Governance, Business Continuity and Cyber Security
The RBI has issued Master Direction on Information Technology Governance, Risk, Controls and Assurance Practices dated 7 November 2023 effective 1 April 2024. In line with said Directions, the terms of reference of the IT Strategy Committee were revised during the year. The same, inter alia, includes the following:
• Review at least on annual basis, the adequacy and effectiveness of the Business Continuity Planning and Disaster Recovery Management;
• Review the assessment of IT capacity requirements and measures taken to address the issues;
• Approve documented standards and procedures for access to information assets; and
• Decide constitution of Information Security Committee (ISC), with Chief Information Security Officer (CISO) and other representatives from business and IT functions, etc.
Detailed terms of reference can be accessed at https://www.bajajhousingfinance.in/ documents/37350/5324874/Terms of Reference.pdf.
The IT Strategy Committee met thrice during the year under review.
In terms of the aforementioned Directions, w.e.f. 1 April 2024 Committee shall meet at least on a quarterly basis.
Pursuant to the said Directions, the Company has appointed a Chief Information Security Officer (CISO) who shall be responsible for driving cyber security strategy and ensuring compliance to the extant regulatory/ statutory instructions on information/cyber security and other roles and responsibilities as stipulated therein.
In accordance with IT Governance framework, the Company has put in place policies which, inter alia, includes Business Continuity Policy, Information Security Policy, Information Technology Policy, Cyber Security Policy, IT Outsourcing Policy, Cyber Crisis Management Plan, Information Security Incident Management Policy.
The IT Strategy Committee has also constituted the IT Steering Committee and Information Security Committee consisting of senior executives of the Company in accordance with the RBI Directions. The role of IT Steering Committee is to assist the IT Strategy Committee in strategic IT planning, oversight of IT performance, and aligning IT activities with business needs, ensuring implementation of a robust IT architecture meeting statutory and regulatory compliance. The Information Security Committee is constituted for managing cyber/ information security under the oversight of IT Strategy Committee comprising of Chief Information Security Officer (CISO) and other representatives from business(es), finance and IT functions headed by personnel from risk management vertical.
To enable user to work from home in secure manner, the Company implemented VPN functionality. The Company also enabled remote access for identified partners to enable full resources for user support, cloud support, application maintenance and testing using privilege access management technology connecting to the Company servers. Cloud infrastructure has been built with DR capabilities and is capable of running applications during any disaster situation.
The Company's cloud first IT strategy helps to manage the demand with elastic scalability and rapid provisioning while reducing total cost of ownership and turnaround time.
The Company's Cyber security strategy consists of a plan of actions designed to improve the security and resilience of cloud infrastructures and services. It is a high-level top-down approach to cyber security that establishes a range of organization objectives and priorities that should be achieved in a specific timeframe.
As a critical component in cyber security, the Company is working on improving awareness among employees using a learning platform and simulation exercises.
The Company has a documented Business Continuity Management Policy which has been designed to ensure continuity of critical processes during any disruption. A robust Disaster Recovery framework has been put in place to manage business and technology interruption risk, minimize interruptions in operations and service to customers.
During the year under review, the Directors were briefed and appraised on cyber security. These, inter alia, involved understanding of cyber security incidents and industrialization of cybercrime operations, assessing new developments and issues relating to cyber and information security, understanding of cyber security trends including recent cyber frauds and attacks, Board's responsibility in the events of change management, Board oversight responsibility for cyber security, etc. Further, on an annual basis, the senior management of the Company have undergone IT security trainings.
Whistle-Blower Policy/ Vigil Mechanism
The Company has a whistle-blower policy encompassing vigil mechanism pursuant to the requirements of the Section 177(9) of the Act and Regulation 22 of the SEBI Listing Regulations and Regulation 9A of SEBI (Prohibition of Insider Trading) Regulations, 2015.
The whistle-blower framework has been introduced with an aim to provide employees, directors and value chain partners with a safe and confidential channel to share their inputs about such aspects which are adversely impacting operations of the Company. The policy/vigil mechanism enables directors, employees and value chain partners to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company's code of conduct or ethics policy and leak or suspected leak of unpublished price sensitive information.
Concerns may be reported anonymously either through e-mail or through a 'Confidential Feedback Mechanism', which is reviewed by a Whistle-Blower Committee comprising senior management from within and outside the organization. The Audit Committee reviews the functioning of the vigil mechanism/whistleblower policy once a year. It provides safeguards against victimization of directors/employees/ value chain partners who avail the mechanism and allows for direct access to the Chairperson of the Audit Committee by writing to [email protected].
Policy has been hosted on the Company's website and can be accessed at https://www.bajajhousingfinance.in/ documents/37350/53075/vigil mechanism policy.pdf
Employees of the Company are required to undergo mandatory online learning module on code of conduct which includes whistle-blower policy and affirm that they have understood and are aware of vital aspects of the policy.
During FY2024, no person was denied access to the Audit Committee or its chairperson under this policy and 4 complaints were received under the vigil mechanism of the Company which have been investigated and addressed as per the policy of the Company.
Business Responsibility and Sustainability Report ('BRSR')
Pursuant to the SEBI circular dated 10 May 2021 and amendment in SEBI Listing Regulations, top 1000 listed entities based on market capitalisation are required to submit Business Responsibility and Sustainability report with effect from FY2023. The Company has voluntarily prepared BRSR for FY2024 and obtained limited assurance on BRSR and GHG data. The Company has appointed DNV Business Assurance India Pvt. Ltd. as an assurance provider for carrying out the limited assurance for BRSR (including GHG data) for FY2024. The Company has adopted a Policy for Responsible and Sustainable Business Conduct which covers all the nine principles of the National Guidelines on Responsible Business Conduct (NGRBC). The BRSR in the format prescribed by SEBI is annexed to the Annual Report. The detailed ESG Report describing various initiatives, actions, and process of the Company towards the ESG endeavour can be accessed at https://www.bajajhousingfinance.in/annual-reports.
Changes to the Constitutional Documents
a. Memorandum of Association
The members vide special resolution dated 19 May 2023 had approved an amendment to the Memorandum of Association ('MoA') by insertion of Clause 7A. The clause provides for carrying on the business of advertising contractors and agents to acquire and dispose of advertising time, space or opportunities in any media, to undertake advertising and promotional campaigns of every nature, to acquire and provide promotional requisites.
The Members also vide ordinary resolution dated 24 April 2024 had approved an increase in authorised share capital of the Company from C 8000 crore to C 9000 crore. Consequent to the increase in authorised share capital, the clause V of Memorandum of Association stands altered to reflect the change in authorised share capital.
b. Articles of Association
Securities and Exchange Board of India (SEBI) vide its notification dated 2 February 2023 amended SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 by inserting sub-regulation (6) in regulation 23 which mandates an issuer to ensure that its Articles of Association ('AoA') require its Board of Directors to appoint a person nominated by the Debenture Trustee('DT') upon occurrence of any of the events of default as per regulation 15(1)(e) of the SEBI (Debenture Trustees) Regulations, 1993 ('DT Regulations'). In order to comply with above requirements, the AOA of the Company was amended to enable DT to appoint their Nominee on the Board upon occurrence of any of the event specified in regulation 15(1) (e) of the DT Regulations vide special resolution passed by shareholders on 24 July 2023.
Corporate Governance
In terms of the SEBI Listing Regulations, a separate section titled 'Report on Corporate Governance' has been included in this Annual Report, along with the Management Discussion and Analysis Report and General Shareholder Information.
The Managing Director and the Chief Financial Officer have certified to the Board in relation to the financial statements and other matters as specified in the SEBI Listing Regulations.
A certificate from Statutory Auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.
Secretarial Standards
The Company has complied with the requirements prescribed under the Secretarial Standards on meetings of the Board of Directors (SS-1) and General Meetings (SS-2) read with the MCA Circulars.
Auditors and Auditors' Report Statutory auditors
In line with the RBI guidelines, the Board of Directors, based on the recommendation of the Audit Committee at its meeting held on 25 October 2021, approved appointment of M/s. Khandelwal Jain & Co. (Firm Registration No. 105049W) and M/s. G D Apte & Co. (Firm Registration No. 100515W) as Joint Statutory Auditors of the Company for a consecutive period of three years to conduct audit of the financial statements of the Company for the financial years 2022, 2023 and 2024. The said appointment was also approved by the shareholders.
The audit report by M/s. Khandelwal Jain & Co. and M/s. G D Apte & Co., for FY2024 is unmodified, i.e., it does not contain any qualification, reservation, adverse remark or disclaimer.
In terms of the Master Direction - Non Banking Financial Company - Housing Finance Company (Reserve Bank) Direction, 2021, Joint Statutory Auditors have submitted an additional report dated 24 April 2023 and 24 April 2024, for FY2023 & FY2024 respectively. There were no comments or adverse remarks in the said report.
In line with the RBI guidelines, the Board of Directors, based on the recommendation of the Audit Committee at its meeting held on 24 April 2024, approved appointment of M/s. Mukund M. Chitale & Co. (Firm Registration No. 106655W) and M/s. Singhi & Co. (Firm Registration No. 302049E) as joint statutory auditors of the Company for a consecutive period of three years.
At the ensuing AGM, approval of the members is being sought for their appointment as Joint Statutory Auditor for term of three years from the conclusion of the 16th AGM till the conclusion of the 19th AGM to audit the accounts of the Company i.e., for the financial year ending 31 March 2025, 31 March 2026 and 31 March 2027.
Secretarial auditor
Pursuant to the provisions of section 204 of the Act, the Board has appointed Shyamprasad D Limaye, practicing company secretary (FCS No. 1587, CP No. 572), to undertake secretarial audit of the Company. A report from the secretarial auditor in the prescribed Form MR-3 for the year ended 31 March 2024 is annexed to this Report.
Pursuant to Regulation 24A (2) of SEBI Listing Regulations, a report on secretarial compliance for FY2024 has been issued by Shyamprasad D Limaye and the same has been submitted with the stock exchange within the prescribed timelines. The said report is available on the website of the Company.
There are no observations, reservations, qualifications or adverse remark in any of the aforesaid report. The auditors, i.e., Statutory Auditors and Secretarial Auditors, have not reported any matter under section 143 (12) of the Act, and therefore, no detail is required to be disclosed under section 134(3) (ca) of the Act.
Other Statutory Disclosures
• There is no change in the nature of business of the Company during FY2024.
• The provisions of section 148 of the Act relating to cost accounts and cost audit are not applicable to the Company.
• During FY2024, no amount has remained unclaimed pursuant to debentures redeemed during the year.
• During FY2024, debentures of the Company were not suspended from trading on account of any corporate action or otherwise.
• Pursuant to Rule 2A of the Companies (Specification of Definitions Details) Rules, 2014, public companies which have not listed their equity shares on a recognized stock exchange but have listed their non-convertible debt securities issued on private placement basis in terms of SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, shall not be considered as listed company in terms of the Act. Hence, Section 197 (12) read with rules 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are not applicable.
• Atul Jain, Managing Director is also eligible for grant of ESOPs of Bajaj Finance Limited, holding company and Bajaj Finserv Limited, ultimate holding company (herein after referred to as 'holding companies'), as per applicable SEBI regulations, performance criteria and compensation practices.
• The Company being a non-deposit accepting housing finance company, the provisions relating to Chapter V of the Act, i.e., acceptance of deposit, are not applicable. The Board has also passed a resolution confirming non-acceptance of public deposits.
• The Company has no transaction that qualify under the contracts and arrangements with related parties referred in Section 188 (1) of the Act.
• For the details about the policy developed and implemented by the Company on CSR initiatives taken during the year, refer the Annual Report on CSR activities annexed to the Report.
• The Company has a policy on prevention of sexual harassment at the workplace. The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under Sexual Harassment of
Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The number of complaints received, disposed off and pending during FY2024 is given in the annexed 'Corporate Governance Report'.
• The Company has not defaulted in repayment of loans from any banks and financial institutions. There were no delays or defaults in payment of interest/principle of any of its debt securities.
• SEBI vide its circular SEBI/HO/DDHS/DDHS-RAC-1/P/CIR/2023/176 dated 8 November 2023 ('the Circular'), has prescribed the procedural framework for dealing with unclaimed interest and redemption amounts lying with entities having listed non-convertible securities and manner of claiming such amounts by investors.
The circular requires such companies to formulate a policy specifying the process to be followed by investors for claiming their unclaimed amounts. Accordingly, a policy titled 'Policy for claiming unclaimed amounts with respect to Non-Convertible Debentures from Escrow Account' has been framed by the Company.
The policy can be accessed at https://www.bajajhousingfinance.in/documents/37350/53075/BHFI Policy for unclaimed amounts-NCDs %781 %29.pdf. The Company Secretary has been designated as the Nodal Officer for the purposes of this circular. As on 31 March 2024, there is no amount remaining unclaimed in respect of non-convertible debentures.
• Neither any application was made, nor any proceeding is pending under the Insolvency and Bankruptcy Code, 2016 against the Company.
• During FY2024, there was no instance of one-time settlement with Banks or Financial Institutions
• The Company has issued a formal letter of appointment to Independent Directors in the manner provided under the Act.
• Disclosures pursuant to the RBI Master Directions, unless provided in the Directors' Report, form part of the notes to the standalone financial statements and Report on Corporate Governance.
• For FY 2024, the Company did not have any ESOP scheme. Being subsidiary of Bajaj Finance Limited, holding company and Bajaj Finserv Limited, ultimate holding company (herein after referred to as 'holding companies'), employees of the Company are eligible for stock options of holding companies.
• The Company has complied with Section 62(1) (a) of Companies Act, 2013 and applicable rules thereunder while issuing fresh equity shares under Rights issue.
• The Company has in place various Board approved policies pursuant to Companies Act, 2013, SEBI Regulations, RBI/NHB Directions and other regulations. These policies are reviewed from time to time keeping in view the operational requirements and the extant regulations. The Report on Corporate governance contains web-link for policies hosted on website.
Acknowledgement
The Board places its gratitude and appreciation for the support and co-operation from its members, the Reserve Bank of India, the National Housing Bank, the IRDAI and other regulators, banks, financial institutions and trustees for debenture holders.
The Board also places on record its sincere appreciation for the commitment and hard work put in by the Management and the employees of the Company.
On behalf of the Board of directors Sd/-
Sanjiv Bajaj
Chairman DIN: 00014615 Date: 24 April 2024
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