Spandana Sphoorty Financial Ltd

Dear Members,

Your Directors have pleasure in presenting the 21st Annual Report of the Company together with the audited financial statements for the financial year ended March 31, 2024.

1. FINANCIAL SUMMARY /PERFORMANCE OF THE COMPANY:

The standalone and consolidated financial statements for the financial year ended March 31, 2024 (‘FY24'), forming part of this Annual Report, have been prepared in accordance with the Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs.

Key highlights of financial performance of your Company are summarized below:

(Rs in crore)

During the year, the Income from operations of the Company was Rs. 2,299.76 crore. The Asset Under Management (AUM) of the Company was Rs. 11,198.72 crore as on March 31, 2024 as compared to Rs. 7,979.59 crore as on March 31,2023 and the Profit before Tax in FY24 was Rs. 626.02 crore as compared to Rs. 18.25 crore in FY23 driven by AUM growth and improvement in asset quality. Profit before Tax was lower in FY23 primarily due to higher impairment cost SMA and NPA bucket at the beginning of the year i.e. Apr-22.

During FY24, disbursements reached highest of Rs. 3,714.69 crore during Q4/FY 2023-24. Return on Asset ("RoA") stood at 5.46 % and Return on Equity ("RoE") stood at 14.20 % for FY24 on standalone basis. Capital Adequacy Ratio was at 31.95 % on standalone basis. Your Company has generated pre-provision operating profit ("PPOP") of Rs. 953.15 crore and Profit Before Tax ("PBT") of Rs. 670.57 crore in FY24 on a consolidated basis.

Your Company has strong distribution network of 1,559 branches spread across 408 Districts of 19 states and 1 union territory. On portfolio quality the

Collection Efficiency of portfolio was 99.27 % for the quarter ended March 31, 2024.

Your Company has AUM concentration norms at state, district & branch level which ensures low impact from region-specific issues.

1.1 Resource Mobilization

Your Company has raised Rs. 10,017.83 crore of debt during FY24. With the diversified lender base, your Company has raised Rs. 1,304.10 crore through issue of debentures, Rs. 5,177.99 crore through term loan, Rs. 2,682.15 crore through securitization and Rs. 853.58 crore through direct assignment. Your Company has a strong funding access with adequate cash and bank balances of Rs. 1,870.00 crore as on March 31, 2024. The issue proceeds from non-convertible debentures have been fully utilised as per the objects of the issue.

2. DIVIDENDS:

Considering your Company's growth, future strategy and plans, your Directors consider it prudent to conserve resources and do not recommend any dividend on equity shares for FY24.

3. OPERATIONAL HIGHLIGHTS AND FUNDRAISE:

The operational highlights of your company are as follows:

(Rs in crore)

• During FY24, the Company continued its operations in 19 states and 1 union territory (viz. Andhra Pradesh, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, Uttarakhand, West Bengal and Pondicherry).

• During FY24, the number of borrowers has increased from 22.57 lakhs to 33.19 lakhs on a consolidated basis. The number of branches grew from 1,227 to 1,642 across the states on a consolidated basis.

• Total disbursements is Rs. 10,688 crore for FY24 on consolidated basis.

• During Q4/FY24, on a consolidated basis total disbursement reached highest of Rs. 3,970 crore.

3.1 Securitization:

Your Company has used securitization to improve its asset and liability mix in line with extant guidelines of RBI on securitization. As of March 31, 2024, out of total AUM, securitized portfolio was Rs. 2,115.66 crore on a standalone basis.

3.2 Direct Assignment

During the year, your Company has sold loan portoflio of Rs. 853.58 crore through Direct Assignment. Assigned portfolio was Rs. 686.12 crore out of total AUM of Rs. 11,198.72 crore as of March 31, 2024 on a standalone basis.

3.3 Public Deposits:

Your Company is registered with the Reserve Bank of India (RBI), as a non-deposit accepting NBFC under section 45-1A of the Reserve Bank of India Act, 1934, (RBI Act, 1934) and reclassified as NBFC-MFI, effective from April 13, 2015. Your Directors hereby report that the Company has not accepted any public deposits during the year and it continues to be a non-deposit taking non-banking financial company in conformity with the RBI guidelines.

3.4 RBI Guidelines:

As on March 31, 2024, the Company is in compliance of the regulatory requirements of Net Owned Funds (‘NOF') and Capital to Risk Assets Ratio (‘CRAR'), as defined under section 45-IA of the RBI Act, 1934, to carry on the business of a Non-Banking Financial Institution (‘NBFI'). Your Company's Capital Adequacy Ratio is as follows:

(Rs in crore)

3.5 Statutory Reserve Fund:

As per section 45IC of RBI Act 1934, your Company has transferred Rs. 93.58 crore in Statutory Reserve Fund i.e. aggregating 20 % of its standalone net profit.

3.6 Asset Liability Management:

Your Company has a strong funding access with high quality liquid assets (HQLA) which covered the net cash outflow during FY24 in compliance with the RBI Circular on Liquidity Risk Management Framework for Non-Banking Financial Companies and Core Investment Companies dated November 04, 2019. Your Company continued to secure confidence from its lenders for providing funds for its business operations. Your Company has been maintaining a higher liquidity surplus with positive mismatch across all ALM buckets. Details of HQLA and LCR during FY24 are given below:

(Rs in crore)

4. SHARE CAPITAL/DEBENTURES:

During FY24, the Paid-Up Equity Share Capital of the Company has increased from Rs. 70,98,32,690/- (Rupees seventy crore ninety-eight lakh thirty-two thousand six hundred and ninety) consisting of 7,09,83,269 (Seven crore nine lakh eighty-three thousand two hundred sixty-nine) Equity shares of the face value of Rs. 10/- each to Rs. 71,29,74,440/- (Rupees seventy-one crore twenty-nine lakh seventy-four thousand four hundred and forty) consisting of 7,12,97,444 (Seven crore twelve lakh ninety-Seven thousand four hundred forty-four) Equity shares of the face value of Rs. 10/- each.

Allotment of shares under Employee Stock Options

Pursuant to the exercise of Employee Stock Options (ESOP's) by the eligible employees under the Spandana Employee Stock Option Scheme 2018 (ESOP Scheme 2018) and Spandana Employee Stock Option Scheme, 2021 (ESOP Scheme 2021) under Spandana Employee Stock Option Plan 2018 (ESOP Plan 2018); and under Spandana Employees Stock Option Scheme 2021- Series A under Spandana Employees Stock Option Plan 2021 - Series A (ESOP 2021 -Series A), the Company has allotted 3,14,175 (Three lakh fourteen thousand one hundred and seventy-five) Equity Shares of the face value of Rs. 10/- each during FY24.

Preferential issue of shares and warrants

During FY24, the Company has not made any issue of shares or warrants under preferential basis and the Company has not issued shares with differential voting rights nor granted sweat equity. Further, the Company has also not provided any money for the purchase of its own shares by employees or for the benefit of employees of the Company.

Details of Secured Debt Securities as on March 31, 2024:

@NCD- "Non-Convertible Debentures"; MLD - "Market Linked Debentures"

5. EMPLOYEE STOCK OPTION PLAN (ESOP PLAN) AND EMPLOYEE STOCK OPTION SCHEME (ESOP SCHEME):

Your Company had instituted Spandana Employees Stock Option Scheme, 2018 ("the "ESOP Scheme 2018") and Spandana Employees Stock Option Scheme, 2021 ("the "ESOP Scheme 2021") under Spandana Employees Stock Option Plan, 2018 (the "ESOP Plan 2018"); and Spandana Employees Stock Option Scheme 2021- Series A" under Spandana Employees Stock Option Plan 2021- Series A ("ESOP 2021 - Series A") to attract, retain, motivate the personnel for positions of substantial responsibility and to provide additional incentive to the Management team, Directors and Employees of the Company and its Subsidiaries. The Members of the Company have approved the ESOP Plan 2018 and ESOP Scheme 2018 by passing a special resolution at their Meeting held on June 14, 2018. ESOP

Scheme 2021 (under ESOP Plan 2018) was approved by the Members on March 26, 2021 by passing a special resolution through Postal Ballot. ESOP Scheme 2021 - Series A (under ESOP Plan 2021) was approved by the Members at the 18th Annual General Meeting ("AGM") of the Company held on September 28, 2021.

The NRC monitors the Plan in compliance with the Companies Act, 2013 ("the Act"), the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 {"SEBI (SBEB & SE) Regulations"} and related laws. A certificate from Secretarial Auditors of the Company that the Scheme has been implemented in accordance with SEBI (SBEB & SE) Regulations and are as per the resolutions passed by the Members of the Company is being placed at the ensuing Annual General Meeting. The disclosures as required under the SEBI (SBEB & SE) Regulations have been placed on the website of the Company at https://spandanasphoorty. com/investors.

6. AUDITORS:

6.1 Statutory Auditors:

As per Section 139 of the Act, read with the Companies (Audit and Auditors) Rules, 2014, the Members of the Company at the 19th Annual General Meeting held on September 21, 2022, had appointed Walker Chandiok & Co. LLP (Firm Registration No. 001076N/N500013), Chartered Accountants, as the Statutory Auditors of the Company for 2 consecutive years i.e., to hold office from the conclusion of the 19th AGM till the conclusion of the 21th AGM of the Company to be held in the year 2024.

The Audit Reports given by the Statutory Auditors on the Annual Audited Consolidated and Standalone Financial Statements of the Company for FY24 is unmodified and the same forms part of the Annual Report. The Auditors' Reports read along with the Notes on the Annual Audited Consolidated and Standalone Financial Statements are self-explanatory and do not call for any further clarifications under Section 134(3) (f) of the Act.

There has been no qualification, reservation or adverse remark or disclaimer in our Reports.

During FY24, the Auditors had not reported any matter under Section 143(12) of the Act, therefore no detail is required to be disclosed under Section 134(3) (ca) of the Act.

Term of the existing Statutory Auditors, M/s Walker Chandiok & Co. LLP, Chartered Accountants will end on the conclusion of 21st Annual General Meeting to be held on July 30, 2024. Therefore, the Board of Directors upon recommendation of the Audit Committee has further recommended appointment of BSR & Co. LLP, Chartered Accountants (Firm Registration No. 101248W/W-100022) as Statutory Auditors of the Company for a term of three (3) years commencing from conclusion of 21st Annual General Meeting till the conclusion of 24th Annual General Meeting of the Company subject to the approval of the Members of the Company. A proposal on the same forms part of the AGM Notice.

6.2 Secretarial Auditors:

Pursuant to the requirements of Section 204(1) of the Act read with Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s RPR & Associates, Practicing Company Secretaries, (CP No. 5360), were appointed as the Secretarial Auditor of the Company for FY24.

During FY24, the Secretarial Auditors had not reported any matter under Section 143(12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.

Further, in accordance with Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), M/s RPR & Associates, Practicing Company Secretaries, has issued the Annual Secretarial Compliance Report, confirming compliance of the applicable SEBI regulations and circulars / guidelines issued thereunder by the Company. The Secretarial Audit Report and Annual Secretarial Compliance Report for the financial year ended March 31, 2024, are annexed to this report as "Annexure I and Annexure II" respectively.

During FY24, your Company has complied with the provision of applicable Acts, Rules, Regulations, Guidelines and applicable Secretarial Standards issued by the Institute of Company Secretaries of India, etc. except in respect of the matters mentioned in Annexure A of Annual Secretarial Compliance Report along with the Company's response as mentioned therein.

6.3 Internal Auditors:

Your Company has its in-house Internal Audit team to conduct audits and also has a full-fledged audit team based out of Zonal and Regional/state offices. Each state has a State Audit Head, who has a team of Internal Auditors to manage the audit work of the state. The Internal Audit team follows the Annual Internal Audit plan, and all the branches are audited once a quarter which has operations till the previous quarter. The High-risk rated branches are audited twice in a quarter.

The scope of Internal Audit includes Customer Acquisition, Loan Sanction, Disbursement, Collection, Branch Administration and Compliance.

In terms of Section 138 of the Act, and Companies (Accounts) Rules, 2014, the Board of Directors at its Meeting held on May 02, 2023, upon recommendation of the Audit Committee, had appointed Laxminiwas & Co., as Internal Auditors of the Company, for the FY24, for conducting the internal audit.

6.4 Cost Auditors:

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

7. HOLDING / SUBSIDIARY COMPANIES / ASSOCIATES / JOINT VENTURES:

The Company has the following subsidiaries as on March 31, 2024:

The statement required to be provided with respect to subsidiaries, associate companies and joint ventures pursuant to the provisions of Section 129(3) of the Act and Rule 5 of the Companies (Accounts) Rules, 2014 in Form AOC - 1 is annexed herewith as "Annexure MI". During FY24, none of the Company ceased to be the Company's subsidiaries, joint ventures, or associate companies.

Regulation 16(1)(c) of the SEBI Listing Regulations, defines "material subsidiary" as a subsidiary whose income or net worth exceeds 20% of the consolidated income or net worth respectively, of the listed holding company and its subsidiaries at the end of the immediately preceding financial year. None of the subsidiaries mentioned hereinabove is a material subsidiary as per the thresholds laid down under the SEBI Listing Regulations.

Pursuant to the approval of the Members of the Company on March 25, 2024, during FY24, the Company had invested Rupees one hundred crore in Criss Financial Limited by subscribing to the equity shares offered by Criss Financial Limited.

The Audited Financial Statements, the Auditors Reports thereon and the Board's Reports for the year ended March 31, 2024, of the subsidiary companies, shall be available for inspection by the Members of the Company at the registered office, during business hours on all working days up to the date of the ensuing Annual General Meeting. A Member who is desirous of obtaining a copy of the accounts of the subsidiaries companies is requested to write to the Company Secretary of the Company at secretarial@ spandanasphoorty.com. Further, pursuant to the provisions of section 136 of the Act, the financial statements, consolidated financial statements of the Company and separate financial statements along with auditors reports thereon of each of the subsidiary is available on the website of the Company at https:// spandanasphoorty.com/investors.

8. CONSOLIDATED FINANCIAL STATEMENTS:

The consolidated financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as prescribed in the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time and notified under section 133 of the Companies Act, 2013 (the Act), the circulars, guidelines and directions issued by the Reserve Bank of India (RBI) from time to time ("the RBI guidelines") and other accounting principles generally accepted in India.

9. DIRECTORS AND KEY MANAGERIAL PERSONNEL:

The composition of the Board is in accordance with the provisions of Section 149 of the Act and Regulation 17 of the SEBI Listing Regulations, with an optimum combination of Non-Executive Directors and Independent Directors. The affairs of your Company are being managed by a professional board comprising of eminent personalities having experience and expertise suited to guide the Company in the right direction. Details (including changes) of the Directors of your Company during FY 24 and till the date of this report are as below:

*Mr. Bharat Dhirajlal Shah, Independent Director of the Company retired w.e.f. April 12, 2023, upon completion of his term of office. "Mr. Deepak Calian Vaidya was re-appointed as an Independent Director for a second term of 3 (three) years with effect from June 06, 2023. This appointment was approved by the Members of the Company on August 01,2023.

**Ms. Dipali Hemant Sheth was appointed as an Independent Director of the Company for a period of 5 (five) years with effect from May 02, 2023. This appointment was approved by the Members of the Company on August 01, 2023.

$ Mr. Jagdish Capoor, Independent Director of the Company retired w.e.f. June 05, 2023, upon completion of his term of office. ""Mr. Vinayak Prasad was appointed as an Independent Director of the Company for a period of 5 years (five) years with effect from May 02, 2023. This appointment was approved by the Members of the Company on August 01 2023.

*Ms. Padmaja Gangireddy, Non-Independent Non-Executive Director of the Company resigned and ceased to be a director of the Company w.e.f. May 27, 2023.

"""Mr. Kartikeya Dhruv Kaji resigned and ceased to be a Non-Executive Nominee Director at the close of business hours on May 21, 2024. Ms. Saakshi Gera was appointed as NonExecutive Nominee Director with effect from May 22, 2024.

The terms and conditions of appointment of independent Directors are available on the website of the Company at https://spandanasphoorty. com/investors. The Board is of the opinion that the independent Directors of the Company possess requisite qualifications, experience, expertise and hold highest standards of integrity.

The profile of the Directors is provided in the beginning of the Annual Report. For more details of the Directors, please refer the Corporate Governance Report.

9.1 Rotation of Directors:

In terms of the provisions of Section 152 of the Act, Mr. Neeraj Swaroop and Mr. Sunish Sharma NonExecutive Nominee Directors of the Company, being longest in the office are liable to retire by rotation at the 21st Annual General Meeting and being eligible for reappointment, the Board of Director's at their meeting held on April 29, 2024 recommended the reappointment of Mr. Neeraj Swaroop and Mr. Sunish Sharma as the Non-Executive Nominee Directors to the Members of the Company.

Brief profile of Mr. Sharma and Mr. Swaroop along with Information as required under Regulation 36 of the SEBI Listing Regulations and SS-2 -Secretarial Standard on General Meetings with respect to Director's appointment forms part of the AGM Notice.

9.2 Regularisation of Directors:

Mr. Kartikeya Kaji resigned as the Non-Executive Nominee Director of the Company with effect from closure of business hours of May 21, 2024 due to personal reasons and preoccupations. In view of the same, Kedaara Capital i Limited, holding company of Corporate Promoter of the Company i.e. Kangchenjunga Limited proposed the candidature of Ms. Saakshi Gera to be appointed as a Non-Executive Nominee Director on the Board of the Company to fill the vacancy arising pursuant to resignation of Mr. Kaji. The Nomination and Remuneration Committee reviewed her eligibility and ‘fit and proper' status for proposed appointment, and further recommended the said appointment to the Board of Directors. The Board vide its resolution approved the appointment of Ms. Gera as an Additional Director under the category of Non-Executive Nominee Director of the Company, with effect from May 22, 2024, subject to the approval of the Members of the Company.

Brief profile of Ms. Gera along with Information as required under Regulation 36 of the SEBI Listing Regulations and SS-2 - Secretarial Standard on General Meetings with respect to Director's appointment forms part of the AGM Notice.

9.3 Declaration by Independent Directors:

The Company has received a declaration from all the Independent Directors of the Company, confirming that they meet the criteria of independence as prescribed under section 149 of the Act and have complied with the Code for independent Directors as prescribed in Schedule IV to the Act.

9.4 Change in the Key Managerial Personnel of the Company:

During FY24, the following changes have taken place: • Mr. Vinay Prakash Tripathi (ACS-18976) has been appointed as the Company Secretary of the Company w.e.f. January 23, 2024, in place of Mr. Ramesh Periasamy (ACS-26247).

Mr. Ramesh Periasamy continues to hold his office as Chief Compliance Officer as per RBI notification on Compliance Function and Role of Chief Compliance Officer (CCO) - NBFCs vide circular No. Ref.No.DoS. CO.PPG./SEC.01/11.01.005/2022-23 dated April 11, 2022

As of March 31,2024, your company has following Key Managerial Personnels:

- Mr. Shalabh Saxena- Managing Director and Chief Executive Officer

- Mr. Ashish Damani- President and Chief Financial Officer

- Mr. Vinay Prakash Tripathi- Company Secretary

10. MEETINGS OF THE BOARD OF DIRECTORS:

During FY24, 07 (Seven) Board Meetings were convened out of which 03 (Three) Board Meetings were convened thorough Audio-Visual Electronic Communication Means (AVEC) and 04 (Four) Board Meetings were convened physically. The details related to Board Meetings are provided in Corporate Governance Report forming part of this Report.

The intervening gap between the Board Meetings was within the period prescribed under the Act and SEBI Listing Regulations. The notice and agenda of the meeting is circulated to all Directors sufficiently well in advance. All material information and minimum information required to be made available to the Board under Regulation 17 read with Schedule II Part-A of the SEBI Listing Regulations, were made available to the Board of Directors.

11. CODE OF CONDUCT FOR ITS DIRECTORS AND SENIOR MANAGEMENT:

Pursuant to Regulation 17(5) of the SEBI Listing Regulations, the Company has a Code of Conduct for its Directors and Senior Management (Code). The Codes provides guidance and support needed for ethical conduct of business and compliance of law. The Codes reflect the core values of the Company viz. Customer Value, Ownership Mindset, Respect, Integrity, One Team and Excellence. The Code is available at the website of the Company at Code of Conduct:: Spandana Sphoorty.

The Code has been circulated to Directors and Senior Management Personnel, and its compliance is affirmed by them as per Regulation 26(3) of the SEBI Listing Regulations. A declaration signed by the Company's Managing Director to this effect forms part of this Report as Annexure IV.

12. CORPORATE SOCIAL RESPONSIBILITY (CSR):

In terms of Section 135 and Schedule VII of the Act read with rules made thereunder; the Board of Directors of your Company have constituted a CSR Committee. The composition of the Committee is provided in the Corporate Governance Report forming part of this Report.

The details of the Corporate Social Responsibility Policy adopted by the Company have been disclosed on the website of the Company at https://spandanasphoorty. com/policies and the details of various CSR initiatives taken by the Company have been disclosed on the website of the Company at https://spandanasphoorty. com/programs-Impact

The Annual Report on CSR activities is annexed to this report as "Annexure V".

13. DETAILS OF COMMITTEES OF THE BOARD OF DIRECTORS OF COMPANY:

The Committees of the Board of Directors focuses on certain specific areas and make informed decisions in line with the delegated authority. They facilitate debate on important issues and can be effective forums for decision making. The following Board Committees, constituted by the Board of Directors functions as per their respective roles and defined scope:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Corporate Social Responsibility Committee

4. Stakeholders' Relationship Committee

5. Risk Management Committee

6. IT Strategy Committee

7. Management Committee

8. Asset Liability Management Committee

The details of Committee's composition, terms of reference, number of meetings held including attendance for respective committee meetings are elaborated in the Report on Corporate Governance which forms a part of this Report.

14. CORPORATE GOVERNANCE:

In terms of Regulation 34(3) read with Schedule V of the SEBI Listing Regulations, the detailed Report on Corporate Governance along with a certificate on compliance of Corporate Governance conditions, received from Mr. Y Ravi Prasada Reddy, Practicing Company Secretary, Hyderabad, forms part of this report as "Annexure VIM".

15. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

The Management Discussion and Analysis Report as required under Schedule V of the SEBI Listing Regulations, forms part of this Report.

16. BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT:

In pursuance of Regulation 34 of SEBI Listing Regulations, the Business Responsibility and Sustainability Report for FY24 is annexed to this report as "Annexure IX".

17. THE ANNUAL RETURN:

Pursuant to sub-section (3)(a) of Section 134 and subsection (3) of Section 92 of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014, a copy of Annual Return as at March 31, 2024 is available on the website of the Company at the link: https://spandanasphoorty.com/investors.

18. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

Information required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 for the financial year ended March 31, 2024, are as follows:

18.1 Conservation of Energy:

Your Company operations are not energy intensive. However, measures are being undertaken to reduce energy consumption by using energy-efficient computers and electrical equipment. The Company believes in the optimum utilization of resources to reduce usage and conserve energy. Your Company is also exploring products to promote the use of renewable energy sources among clients in their households.

18.2 Research and Development (R&D):

Research and Development (R&D) remains a perpetual endeavour for our company, encompassing social research and the creation of novel products and methodologies. This endeavour serves to elevate our service quality and bolster borrower satisfaction by fostering continuous innovation. Within the framework of Microfinance Institution (MFI) norms, your company has been tailoring diverse lending product versions to fulfil customer needs and thus reinforcing our commitment to serving our customers effectively.

18.3 Technology absorption, adaptation, and innovation:

As we continue to evolve in the digital age, it is imperative that we embrace technology to drive efficiency, enhance customer experience and maintain our competitive edge. Your company is focused on modernizing core business solutions coupled with digitization and automation, leverage transformation solutions to drive cost and process efficiencies, enable analytics to reduce NPA, minimize credit loss, increase profitability, leverage insights driven data to upsell / cross sell products, manage risks effectively, design and deliver a scalable infrastructure to address expansion, build a secured environment to ensure no data breaches and comply with regulatory requirements.

To ensure successful technology absorption, the company prioritizes continuous learning and training for our team members. By investing in their skill development and providing access to relevant resources, we empower our workforce to adapt to new technologies and drive innovation within the organization.

In adapting technology and innovations to support business needs, the company focuses on implementing solutions that are specifically tailored to meet the unique needs and challenges of our industry and bring efficiency in the ecosystem. The Company is in the process of developing micro-services-based architecture to make all applications fully capable of becoming agile in change management processes as per continuously changing business needs of the industry.

The Company additionally recognizes the importance of customizing and integrating technology solutions to seamlessly fit into our existing processes and infrastructure. By working closely with technology partners and vendors, we ensure that the solutions we implement enhance efficiency and effectiveness across the Organization.

18.4 Foreign exchange earnings and outgo:

During the year under review, the foreign exchange outgo was equivalent to Rs. 19.71 crore towards term loan interest payments to foreign lenders, procurement of software license and travelling expenses etc.

19. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:

The ratio of the remuneration of each director to the median's employee's remuneration and other details in terms Section 197(12) of the Act read with Rule 5(1) of the Companies (Companies Appointment and Remuneration of Managerial Personnel) Rules, 2014, has been annexed herewith as "Annexure VI" to this Report.

The details of employee remuneration as required under Section 197(12) of the Act, read with Rule 5 (2) and 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and second proviso to Section 136 of the Act are available for inspection without any fee, up to the date of the ensuing AGM and shall also be made available to any Member upon request. Members seeking to inspect such documents can send an email to secretarial@spandanasphoorty.com.

None of these employees is a relative of any Director of the Company.

20. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE:

During FY24, there were no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and Company's operations in future, therefore the disclosure under Rule 8 (5)(vii) of Companies (Accounts) Rules, 2014, is not applicable to the Company.

21. DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES:

The details of Vigil mechanism are covered in the Corporate Governance Report forming part of this Report.

22. INVESTOR RELATION:

Your Company has set up an Investor Relations Program through which the Company on a regular basis keep all its investors updated on all the crucial information by disseminating the same on the Company's website. The Company also informs the National Stock Exchange of India Ltd. (NSE) and BSE Limited (BSE) regarding earnings call, investors meet, press release on the financial results of the Company and such other matters having direct/indirect bearing on the share price of the Company, in compliance with the SEBI Listing Regulations.

23. BORROWER GRIEVANCES:

Your Company has a dedicated Borrower Grievance Cell to receive and handle the day-to-day grievances of the borrowers. Further, details of the Customer Support Service, Grievance Redressal Officer of MFIN (Microfinance Institution Network), Grievance Redressal Officer of Sa-dhan and Principal Nodal Officer are also mentioned on the website of the Company, and a toll-free number is also displayed at every branch for the borrowers to lodge their complaints, if any. The borrowers can also directly reach out to the grievance redressal cell through the tollfree number to raise their concerns. All the grievances of borrowers are dealt expeditiously, in a fair and transparent manner.

The Board of Directors have also appointed an Internal Ombudsman as per RBI notification CO.CEPD.PRS. NO.S874/13-01 -008/2021-2022 dated November 15, 2021.

24. CODE OF CONDUCT FOR INSIDER TRADING:

Your Company has duly formulated and adopted a Code of Conduct for Prohibition of Insider Trading and Internal Procedure in accordance with SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended. The objective of this Code is to regulate, monitor and report trading by its Designated Persons and Immediate Relatives of Designated Persons towards achieving and protecting the interest of the Stakeholders at large.

This Code of Conduct is available on the Company's website at https://spandanasphoorty.com/code-of- conduct.

25. FAIR PRACTICE CODE:

Your Company has duly formulated and adopted Fair Practice Code (FPC) in compliance with the guidelines issued by RBI, to deliver quality services to the borrowers by maintaining highest levels of transparency and integrity. It also aims to provide valuable information to the borrowers for making an informed decision. The FPC (in English, Hindi, Oriya, Gujarati, Kannada, Bengali, Malayalam, Marathi, Tamil, Telugu Version) is available on the Company's website at https://spandanasphoorty.com/code-of-conduct.

26. RISK MANAGEMENT:

Risk management is ingrained in the Company's operational framework. Proper processes are in place for risk identification, measurement, reporting and management. The Company has a Risk Management Policy, wherein risk management practices are integrated into governance and operations and has developed a strong risk culture within the Organization. Further, the risk management process is continuously reviewed, improved and adapted in the context of changing risk scenario and the agility of the risk management process is monitored and reviewed for its appropriateness in the changing risk landscape. The process of continuous evaluation of risks includes taking stock of the risk landscape on an event-driven basis. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

The Board of Directors has constituted Risk Management Committee to identify, monitor and review all the elements of risk associated with the Company. The detail of the Risk Management Committee and its terms of reference are elaborated in the Report on Corporate Governance which forms a part of this Report.

27. DIVIDEND DISTRIBUTION POLICY:

Your Company has formulated a Dividend Distribution Policy in accordance with SEBI Listing Regulations, for bringing transparency in the matter of declaration of dividend and to protect the interest of investors. The Dividend Distribution Policy is available on the website of the Company at https://spandanasphoorty.com/ policies.

28. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE ACT:

Pursuant to the provisions of Section 186 (11) of the Act, disclosure requirement w.r.t. particulars of loans given, investments made or guarantee given or securities provided is not applicable to the Company.

29. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

Your Company has formulated a policy on Related Party Transactions (RPT Policy) and is available on Company's website at https://spandanasphoorty. com/policies.

This Policy deals with the review and approval of Related Party Transactions. The Board of Directors of the Company has approved the criteria for granting the omnibus approval by the Audit Committee within the overall framework of the RPT Policy. Prior omnibus approval is obtained for Related Party Transactions which are of repetitive nature and entered in the ordinary course of business and on an arm's length basis.

As per Regulation 23 of the SEBI Listing Regulations, any transaction with a Related Party shall be considered material, if the transaction(s) entered into/ to be entered into individually or taken together with the previous transactions during a financial year, exceeds Rs. 1,000 crore or 10% of annual consolidated turnover as per the last audited financial statements of the Company, whichever is lower, and the same requires prior approval of Members by means of an ordinary resolution. The said limits are applicable, even if the transactions are in the ordinary course of business of the concerned company and undertaken on an arm's length basis. The annual consolidated turnover of the Company for the Financial Year 202223 was Rs. 1,477.03 crore and accordingly, the limit applicable to the Company is Rs. 147.70 crore (‘applicable threshold for Material RPTs').

Accordingly, during FY24, the Company obtained approval from the Members of the Company for entering into certain material Related Party Transactions and the details of the postal ballot and business transacted thereto are mentioned in the Corporate Governance Report forming part of this Report.

There are no materially significant Related Party Transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large. All Related Party Transactions are placed before the Audit Committee for approval. The details of the Related Party Transactions are disclosed as per Indian Accounting Standard (IND AS) - 24 and set out in the notes to the Financial Statements forming part of this annual report.

Particulars of contracts/ arrangements with Related Parties under Section 188 of the Act in Form AOC-2 is annexed with this report as "Annexure VII".

30. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has a sound Internal Control System, commensurate with the nature, size, scale and complexity of its operations, which ensures that transactions are recorded, authorized and reported correctly. The Company has put in place policies and procedures for continuously monitoring and ensuring the orderly and efficient conduct of the business, including adherence to the Company's Policies, for safeguarding its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records. The Audit Committee periodically reviews and evaluates the effectiveness of internal financial control system.

31. DEBENTURE TRUSTEE:

To protect the Interest of the Debenture Holders of the Company, your Company has appointed the below mentioned Debenture Trustees:

Catalyst Trusteeship Limited

Registered Office: GDA House, Plot No. 85, Bhusari

Colony (Right), Paud Road, Pune-411038

Tel: +91 (020) 25280081/Fax: 91 (020) 25280275

dt@ctltrustee.com

Website: www.catalysttrustee.com

IDBI Trusteeship Services Limited

Registered Office: Ground Floor,

Universal Insurance Building,

Sir Phirozshah Mehta Road,

Fort, Bazargate,

Mumbai, Maharashtra - 400001

Tel: +(91) (22) 40807068 naresh.sachwani@idbitrustee.com

Website: www.idbitrustee.com

32. INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013:

Your Company has constituted an Internal Committee as required to be formed under Section 4 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder which were notified on December 09, 2013. The Company has zero tolerance towards sexual harassment at the workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder. The Company had also conducted several awareness programs for the employees during the year. During FY24, no complaints were received by the Committee under the aforesaid Act. The policy on Prevention of Sexual Harassment at workplace is available on the website of the Company at https://spandanasphoorty.com/policies.

33. DIRECTORS' RESPONSIBILITY STATEMENT:

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Act:

a) that in the preparation of the annual financial statements for the financial year ended March 31, 2024; the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) that such accounting policies as mentioned in Note no. 1 of the Notes to the Financial Statements have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2024 and of the profit of the Company for the year ended on that date;

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

d) that the annual financial statements for the financial year ended March 31, 2024 have been prepared on a going concern basis;

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

f) that the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

34. CREDIT RATING (INCLUDING REVISION):

During FY24, your Company has obtained credit ratings for Bank facilities and debt instruments. The details of the same as on March 31, 2024, are provided below:

During the year, ICRA Limited and CRISIL reaffirmed the rating and revised outlook to Positive from Stable. Further, the Company was assigned a new rating of A+ Stable by CARE Ratings Limited. This is the highest credit rating that has been assigned to the Company amongst all the Rating Agencies.

35. APPLICATION UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016:

The Company has not made any application under the Insolvency and Bankruptcy Code, 2016 during FY 2023-24.

DONE WHILE TAKING LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF:

The Company has not made any such valuation during the FY 2023-24.

37. OTHER DISCLOSURES:

• The Company has not revised Financial Statements as mentioned under Section 131 of the Act during FY24.

• There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year to which these financial statements relate and the date of this Report.

• The information on the affairs of the Company has been provided in the Management Discussion and Analysis Report forming part of this Report.

• Details of Penalty or Strictures are disclosed in Corporate Governance Report forming part of this Report.

38. GRATITUDE AND ACKNOWLEDGEMENT:

Your Board expresses its deep sense of gratitude to the Government of India, Reserve Bank of India, Stock Exchanges, Depositories and other Regulators for the valuable guidance and support, the Company has received from them during the year. The Board would also like to express its sincere appreciation of the co-operation and assistance received from its Stakeholders, Members, Bankers, Service Providers and other Business Constituents during the year. The Board places on record its appreciation of the dedicated services and contributions made by the employees for the overall performance of the Company.

For & on behalf of the Board of Directors