Sundaram Finance Ltd

DIVIDEND

Your Company paid an interim dividend of '14/- per share in March 2024. Your Directors are pleased to recommend a final dividend of '16/- per share, which, together with the interim dividend, would aggregate to a total dividend of ' 30/- per share (300% on the face value of '10/-), representing a dividend pay-out of 22.92%.

The Dividend Distribution Policy, formulated in accordance with the provisions of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been disclosed on the website of the Company under the weblink -

CORPORATE GOVERNANCE

Your Company has always focused on ensuring the highest standards for prudence, ethics and transparency in corporate governance over the decades. The Board of Directors serve as stewards of the performance and health of your Company. The Board's mandate is to oversee your Company's strategic direction, monitor your Company's & Group companies' performance, maintain highest ethical standards of governance, assess the adequacy of risk management measures, evaluate internal financial controls, authorise and monitor strategic investments, facilitate and review Board and senior management succession planning, and oversee regulatory compliance and corporate social responsibility activities. Their collective experience has been brought to bear to guide the Company through various challenges, including

the pandemic-related complications and their aftermath. The Directors' deep industry knowledge, functional specialization and decades of experience has helped your Company handle complex issues related to macroeconomic uncertainty, regulatory changes, technological & digital developments, market volatility & risk management and information security & cybersecurity threats.

The Corporate Governance Report of the Company provides information about the corporate philosophy, details of the Directors and their other directorships, number of Board Meetings and Committee Meetings held during 2023-24, various other details which evidence the fact that the Company is customer-oriented, respectful in letter and spirit of all the regulatory provisions, mindful of high quality standards in all areas and, above all, follows a time-tested approach that balances growth with quality and profitability.

A detailed report on corporate governance, together with a certificate from the Secretarial Auditor, in compliance with the relevant provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is attached as part of this report, vide Annexure I.

Compliance reports in respect of all laws applicable to the Company have been reviewed by the Board of Directors.

RELATED PARTY TRANSACTIONS

All transactions with related parties were in the ordinary course of business and on an arm's length basis. The Company did not enter into any material transaction with such related parties, under Section 188 of the Companies Act, 2013, during the year. Form AOC-2, as required under Section 134 (3) (h) of the Act, read with Rule 8 (2) of the Companies (Accounts) Rules, 2014, is attached as part of this report, vide Annexure II (i). The Company's Policy on Related Party Transactions is attached as part of this report, vide Annexure II (ii).

The Company did not have any transactions with any person or entity belonging to the promoter or promoter group and holding 10% or more shareholding in the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company, along with its subsidiaries and associates, has always proactively invested in a responsible manner to the growing needs of the communities in which it operates and has responded swiftly to health-related complications, weather & catastrophic events and other unexpected challenges that have impacted these communities. During the year, your Company has, in consonance with the CSR Policy of the Company, undertaken a number of initiatives that contribute to society at large, in the areas of healthcare, education, environmental sustainability and ecological balance, and preservation of the country's rich culture and heritage. The highlights of the CSR activities are:

1. Average Net Profit computation in accordance with Sec.135(5): '1,10,220.24 lakhs.

2. CSR Budget, Amount spent in CSR, amount un-spent, if

any and amount to be set off in the financial year, if any.

The Annual Report on CSR Activities undertaken by the Company for the 2023-24, is attached as part of this report, vide Annexure III.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

A Business Responsibility and Sustainability Report, as required under Regulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is enclosed as part of this report, vide Annexure IV.

DISCLOSURE UNDER THE PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE POLICY'

The Company has in place a policy for prevention of sexual harassment, in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to redress complaints. All employees (permanent, contractual, temporary, trainees) are covered under this policy. No complaints were received during the financial year nor were any complaints pending unresolved as on 31^st March 2024.

SECRETARIAL AUDIT

In terms of Section 204 of the Companies Act, 2013 and the Rules thereunder, the Company has appointed M/s Damodaran & Associates, Practising Company Secretaries, as the Secretarial Auditor of the Company. The Secretarial Audit Report and Secretarial Compliance Report, as provided by them, are attached as part of this report, vide Annexures V(i) and (ii) respectively.

REMUNERATION TO DIRECTORS / KEY MANAGEMENT PERSONNEL

Disclosure pursuant to Rule 5 (1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as part of this report, vide Annexure VI.

SUNDARAM FINANCE EMPLOYEE STOCK OPTION SCHEME (SFESOS)

Based on the recommendations of the Nomination, Compensation and Remuneration Committee, the Board has granted, subject to regulatory approvals where necessary, 15,003 Stock Options to select eligible employees, on 24^th May 2024. The disclosure required under SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 is furnished, vide Annexure VII.

EXTRACT OF ANNUAL RETURN

As required under Section 92 (3) of the Companies Act, 2013, read with Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, the link for the Extract of the Annual Return in E-form MGT-7 is

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, no significant and material orders were passed by the regulators, courts, or tribunals against the Company, impacting its going concern status or its future operations.

INFORMATION AS PER SECTION 134 (3) (m) OF THE COMPANIES ACT, 2013 READ WITH RULE 8 OF THE COMPANIES (ACCOUNTS) RULES, 2014

Your Company has no activity relating to conservation of energy or technology absorption. During 2023-24, expenditure in foreign currencies amounted to '0.10 cr. There were no earnings in foreign currency during the year.

MANAGEMENT DISCUSSION AND ANALYSIS Global Economy

The global economy displayed remarkable resilience in 2023-24 recovering from the aftermath of the pandemic, geopolitical tensions & hostilities, persistence of inflation at elevated levels, tight financial conditions and turmoil in the banking system in some advanced economies and appears to be gradually on the ascent as fears of recession have begun to fade. According to the International Monetary Fund (IMF), advanced economies experienced an estimated GDP growth of 1.5% in 2023 while emerging and developing economies are estimated to grow at 4.0% in 2023. Overall, global GDP growth is estimated by the IMF at 3.2% in 2023.

Inflation emerged as a prominent concern in the early part of 2023-24. Data from the World Bank indicates that inflation rates exceeded central bank targets in many countries, with an average inflation rate of 3.7% for advanced economies and 5.2% for emerging markets in 2023. Central banks responded by reassessing their monetary policies, with some considering tightening measures to curb inflationary pressures. The US Federal Reserve, for instance, signalled its intention to gradually raise interest rates to prevent overheating of the economy.

Leading indicators suggest an overall upturn in global economic activity with expansion in both the manufacturing and service sectors. There has been rapid technological advancement, driving digital transformations across industries and reshaping various sectors of the economy. E-commerce thrived, with global online retail sales reaching $4.9 trillion in 2023, a 21% increase from the previous year, according to eMarketer. Remote work became the norm for many industries, driving demand for digital collaboration tools

and infrastructure. The financial sector experienced a surge in digital payments and fintech innovations, with digital transaction volumes surpassing $8.1 trillion in 2023, as reported by Statista.

The improvement across major economies reflects broad- based growth and improvement in the confidence levels across governments and businesses. The emerging-market economies have also generally continued to grow at a solid pace, despite tighter financial conditions, reflecting the benefits of improved macroeconomic policy frameworks, strong investment in infrastructure in many countries, including India, and steady employment gains. The conflict in West Asia during the second half of 2023 raised some geopolitical concerns. While the war did not have any sustained impact on crude prices, it raised market concerns around asset allocation and saw a sharp increase in the price of gold. The pressure on global supply chains has eased, thereby reducing logistical challenges. Inflationary pressures seem to have been reasonably well contained through 2023-24, though there has been a slight surge during March 2024 in some of the larger economies.

Despite these positive trends, the global economy faced persistent challenges, including income inequality, rising debt levels, and geopolitical uncertainties. According to the OECD, income inequality widened, with the richest 10% of the population holding over 50% of global wealth. Additionally, the Institute of International Finance reported that global debt levels reached a record high of $296 trillion in 2023, posing risks to financial stability.

According to IMF, global growth, estimated at 3.2 percent in 2023, is projected to continue at the same pace in 2024 and 2025. Despite the healthy resilience exhibited by many economies and inflationary pressures having been reasonably contained, the IMF remains cautious in its outlook on the global economy. The expected sluggishness in pace is mainly attributed to high borrowing costs, withdrawal of fiscal support, impact of the conflict in Europe and West Asia, coupled with other geo-political and geo-economic uncertainties in other parts of the world, and extreme weather conditions caused by global warming.

Indian Economy

Against the backdrop of a cautious assessment of the global scenario, the Indian economy presents a picture of confidence, positivity and optimism, with strong momentum. As per the National Statistical Office's second advance estimates, real GDP growth for 2023-24 was at 7.6% on the back of buoyant domestic demand. Q3 of 2023-24 witnessed an impressive growth of 8.4% in the real GDP, fuelled by strong investment activity and a lower drag from net external demand. The growth in GDP has been boosted by a healthy growth of 10.7% in the construction sector and 8.5% in the manufacturing sector. Growth in industry has been estimated at 8.3% compared to a negative growth of 0.6% in 2022-23 and growth in the services sector has been estimated at 7.9%, compared to 9.9% in the previous year.

Inflation, which was 6.7% in 2022-23, improved significantly and moderated to 5.4% in 2023-24, within the upper tolerance level of the RBI's inflation-targeting framework. The Government's efforts to curtail retail inflation, such as reduction in customs and excise duties, restricting exports in select commodities and products, coupled with the decisive and timely monetary policy actions of the Reserve Bank of India (RBI) through appropriate policy rate and liquidity measures have played a crucial role in ensuring this recovery.

India's fiscal deficit, which was at 6.4% of GDP during the year 2022-23, is expected to reach 5.8% of GDP in 2023-24 (Revised Estimate) and has been estimated at 5.1% of GDP in 2024-25, thanks to prudent fiscal management by the Government and supported by appreciable increase in revenue collection over the last few years.

The International Monetary Fund (IMF) has raised India's growth forecast for 2024-25 to 6.8% from 6.5% on the back of strong domestic demand and continued investments. During 2023-24, the Indian Rupee remained steady within the range of '82-83.5 per US$, positioning it as one of the least volatile major currencies among both emerging markets and a few advanced economies. The relative stability of the rupee is a reflection of the robustness of India's strong macroeconomic fundamentals, financial stability and improvements in its external position.

Automotive Sector

The automotive sector, a key contributor to the country's economic growth, recovered in 2022-23 to grow by 20%. On that base, the sector has posted a satisfactory performance in 2023-24 with domestic industry growing by 9-10%. While the first half of the financial year was uncharacteristically buoyant on economic activity and automotive sector growth, H2 was relatively more tepid with demand slowing down soon after the festival season. Overall, for the year, industry sales, while growing modestly over last year, came in well below expectations and inventory levels at dealerships continue to remain relatively high (at over 45-60 days across nearly all asset classes).

The growth in the domestic automobile industry was led primarily by the passenger vehicle segment, viz., Cars & Utility Vehicles, which registered a growth of 8.4%. According to the Society of Indian Automobile Manufacturers (SIAM), the growth in this segment was driven by strong demand for utility vehicles, including SUVs, which witnessed a significant growth of 25.8% primarily due to a shift in customer preferences and a slew of new model launches.

The commercial vehicle segment grew by a modest 2-3% in 2023-24. M&HCV sales grew by 3-4%, while retail commercial vehicles (including LCVs, ICVs and SCVs) grew by a more modest 1-2%. Haulage segment capacity utilisation remained relatively flat at 75-80% and a combination of better infrastructure, increased tonnage & axle load norms and relatively limited improvement in transporter viability led to supressed demand. The Government's infrastructure thrust aided tipper sales while return to work from office norms and school enrolment increasing supported a revival in the bus segment.

The Tractor & Farm Equipment (TFE) segment witnessed a negative growth of 11%. While the country had a nearnormal monsoon, the spatial and temporal variations in the monsoon were extreme which impacted agricultural yield, rural economic activity as well as rural sentiments, despite healthy overall procurement by the government. The shift to farm mechanisation is well underway but uncertain climatic conditions coupled with relatively high inflation levels resulted in muted demand for tractors. Farm equipment sales have substantially declined.

The Material Handling & Construction Equipment industry had a record-setting year with 26% increase in unit sales. This is primarily attributable to the Government's investments in infrastructure development and to pre-election impetus to projects. Consequently, all segments of the industry - earth

moving equipment, material handling equipment, concrete equipment and road construction equipment - witnessed robust growth in demand. Backhoe loaders and excavators are the dominant categories by way of numbers and 2023-24 saw the emergence of demand for mini-excavators in place of backhoe loaders in several markets.

The automotive industry demonstrated its commitment to sustainability by producing vehicles compliant with 20% Ethanol and achieving significant growth in electric passenger vehicles and two-wheelers. Customer acceptance is aiding the healthy pace of adoption of environment friendly vehicles. OEMs are expected to invest significantly in developing EV and other environment friendly platforms, and manufacturing capacities. However, the government's posture on continued FAME subsidies will impact the fortunes of the EV segment sales.

Exports continued to remain under stress and witnessed an overall decline of 5.5% during the financial year, due to the persisting global macroeconomic uncertainty. Except passenger vehicles, which grew marginally by 1.4%, there was a decline across segments. The last quarter of 2023-24 witnessed a healthy recovery, especially for two wheelers, indicating better prospects for the current financial year.

Operating & Financial Performance

Your Company's disbursements at ' 26,163 cr. (PY '20,966 cr.) have registered a healthy growth of 25% during the year under review reflecting the focused efforts of your Company. Disbursements across all asset classes, and across all geographies, have been consistent and registered strong growth. Gross receivables managed by your Company as of March 31, 2024, stood at '51,385 cr., as against '39,950 cr., recording a growth of 28.6% over the previous year. During

the year, overall margins have been under pressure due to the increase in interest rates, but your Company's “AAA” credit rating and the treasury team's ability to raise resources at competitive rates enabled your Company to maintain its cost of borrowings at a reasonable level. Competitive intensity and mix of price-sensitive commercial segments increasing caused yields to remain below expectations. Consequently, margins remained under pressure through the year in question.

Your Company's superior credit standards, strong customer relationships and systematic collection efforts have enabled it to ensure best-in-class performance on asset quality in the year in question. Stage III assets, Gross and Net of ECL provisions, stood at 1.26% (PY 1.66%) and 0.63% (PY 0.86%) respectively, as at 31^st March, 2024.

Your Company has been maintaining comfortable liquidity in the form of liquid investments and undrawn bank limits, to meet its maturing liabilities.

Your Company registered a net profit of '1,454 cr. compared to '1,088 cr. in the previous year, a growth of 33.64%. Excluding one-time gain through sale of shares in Sundaram Finance Holdings Limited, net profit closed at '1,334 cr., a growth of 22.61% over the previous year. Your Company's net worth stood at '9,472 cr., as on 31^st March 2024.

Capital adequacy (CRAR) at 20.50% was comfortably higher than the statutory requirement of 15%.

There are no significant changes in key financial ratios of the Company for 2023-24 as compared to 2022-23. Your Company's Return on Net Worth as on 31.03.2024 stood at 17.5% as compared to 14.9% as on 31.03.2023. The increase in return on net worth was because of an overall improvement in the business disbursements, asset quality and profitability, and boosted by higher dividends from group companies and a one-time gain through sale of shares.

RESOURCE MOBILISATION

a) Deposits

During the year, your Company mobilised fresh deposits aggregating to '1,352.30 cr., a new high in the Company's history. Renewal of deposits during the year amounted to '1,835.26 cr. representing 85% of the matured deposits of '2,153.63 cr. Deposits outstanding at the year-end were at '5,584.93 cr. as against '4,709.17 cr. in the previous year. The net accretion for the financial year was '875.76 cr. As at 31^st March 2024, 3,259 Term Deposit Receipts (TDRs) amounting to '36.39 cr. had matured for payment and were due to be claimed or renewed. After close follow-up, these figures are currently 2,193 and '18.12 cr. respectively. Continuous efforts are being made to arrange for repayment or renewal of these deposits. There has been no default in repayment of deposits or payment of interest thereon during the year.

In our continued digital journey, through our online customer portal and mobile app, our Depositors can place additional deposits, renew their TDRs, initiate payment requests, furnish Form 15G/H, initiate change in address and bank details.

b) Term Funding

During the year, your Company raised term funding from Banks, Mutual funds, Insurance companies and others in the form of non-convertible debentures and term loans to the tune of '12,700 cr., across varying tenors.

c) Bank Finance

As part of the overall funding plan, your Company's working capital limits with consortium banks were retained at '3,500 cr. During the year, your Company also issued several tranches of commercial paper aggregating to '8,975 cr. The maximum amount of outstanding commercial papers at any time was '5,275 cr. and the amount outstanding at the end of the year was '1,975 cr.

d) Assets Securitised / Assigned

During the year, your Company raised resources to the extent of '3,191 cr. through securitisation and assignment of receivables.

CREDIT RATINGS

Your Company's long term credit ratings have been retained at “AAA” (Highest Degree of Safety) with a “Stable Outlook”, by both ICRA and CRISIL. The short-term borrowings (including commercial paper) are rated “A1+” by both ICRA and CRISIL. Fixed Deposits are rated “AAA” (Highest Credit Quality) by both ICRA and CRISIL.

OUTLOOK

India's economy is poised to be among the fastest-growing major economies in 2024-25, driven by robust domestic factors and bolstering macroeconomic fundamentals. The Government's investments in infrastructure activities for the year remain significant with '11.11 lakh crores earmarked for infrastructure and construction activities in the interim budget presented in February 2024. The general elections in April & May 2024 have slowed down new project mobilization as well as the pace of existing projects. The manufacturing and services sectors are expected to maintain the growth momentum on the back of sustained profitability.

The Indian Meteorological Department (IMD) predicts a normal monsoon with El Nino effects waning. Despite the IMD's prediction of a warmer than normal summer (which could impact agricultural prospects), rural demand is expected to revive. Coupled with rising consumer confidence and optimism on employment and income, it is expected that private consumption will receive a boost. Business optimism, together with increased Governmental thrust on capital expenditure, healthy corporate and bank balance sheets and upturn in private capital expenditure cycle can be expected to give further boost to domestic investment activity. Improving global growth and international trade prospects are also likely to provide thrust to external demand.

According to the RBI's enterprise surveys conducted during January to March 2024, the demand conditions in H1 of 2024-25 for the manufacturing and infrastructure firms are expected to remain stable. In the case of the services sector, conditions are expected to improve significantly. Additionally, the broader measures of economic activity such as decline in unemployment rate and steady bank credit growth point to favourable conditions. A key external factor impacting the RBI's economic outlook in 2024-25 is the onset of a normal monsoon, which would help bolster the output performance of agriculture, rural demand and moderate inflation pressures.

With all that said, several risks remain. Inflationary pressures remain with food price uncertainties continuing to weigh on the inflation outlook. The forecast of a warmer-than-usual summer and the increasing incidence of climatic shocks presents a risk to food price inflation. Household financial savings declined for a third straight year and household debt reached a record high of ~40% of GDP, indicating elevated household debt burden.

The persisting conflicts in Europe and West Asia and overall geo-political tensions, volatility in the international financial markets and geo-economic fragmentation across different corners of the world, pose risks to the outlook. The recent firming up of international crude prices is a key monitorable.

Considering the above factors, the Reserve Bank of India has projected the real GDP growth for 2024-25 at 7%. Further, CPI inflation has been projected at 4.5% in 2024-25, down from 5.4% in 2023-24 and 6.7% in 2022-23. The Monetary Policy Committee of the RBI characterizes the risks as evenly balanced.

Demand in the automotive industry in the near term is expected to remain steady, with growth across segments expected to vary in 2024-25, mainly due to differing base levels. While two-wheeler, passenger vehicle, and three-wheeler segment volumes are projected to continue trending upward supported by demand drivers, the commercial vehicle industry is expected to see flat volumes due to a healthy base and muted demand. Uncertainty arises from the deferment of new project awards during the general elections in Q1 2024-25 and slower mobilisation of projects due to monsoons in Q2 2024-25, likely resulting in a softer H1 for 2024-25.

Commercial Vehicles (CV)

The Commercial Vehicle industry witnessed robust growth in volumes in 2022-23 and on the elevated base, the growth in the current financial year was marginal, with the overall industry volumes approaching pre-pandemic levels. The domestic CV industry is expected to witness flat to low single digit increases during 2024-25.

For 2024-25, Medium & Heavy Commercial Vehicles (M&HCV) and Intermediate Commercial Vehicles (ICV) volumes are expected to grow only 4-5% since capacity utilisation headroom is still available and economic activity is likely to be adversely impacted in H1 2024-25. While the recent diesel price reduction has helped viability, the relatively flat freight rates have compressed transporter viability. Increasing technological sophistication and changing emission norms are forces that M&HCV segment operators are adapting to. Parcel delivery, interstate ancillary transportation, and building materials are expected to have a positive outlook for ICVs and mining sector, especially coal and import of coal, will support an increase in the sale of Tippers.

The retail commercial vehicle segment, comprising Light Commercial Vehicles (LCV), Small Commercial Vehicles (SCV) and Three-wheeler cargo (3W), will continue to face headwinds on demand during 2024-25 and a low single digit growth is expected in 2024-25. As in passenger vehicles, there is a clear shift towards higher-end and higher tonnage vehicles with demand for the sub-1 ton segment on the decline. Rural sentiments improving and introduction of newer EV models by both existing and new OEMs are likely to give some fillip to the segment.

Passenger Vehicles

The passenger cars and utility vehicles segment reached an all-time high volume of ~4.2 million units during 2023-24.

While the demand for utility vehicles, particularly SUVs, continues to be on the rise, the demand for entry-car segment is muted. Improving road infrastructure, a burgeoning upper middle class, recovery in rural sentiment are positive drivers for continued growth. Further, the penetration of vehicles running on alternative fuels such as EV, CNG, etc., is steadily increasing, thanks to the availability of newer models, wider network and better infrastructure like charging stations. An increase in the cost of vehicles in this segment, caused by higher commodity prices and revision in emission norms (BS 6.2) continues to be a cause of concern. The demand for used cars has witnessed a significant increase driven by the emergence of organised channels, enhanced accessibility and reliable services/products. Despite robust demand, this segment is likely to grow at a moderate level of 5-7% (on an elevated base).

Tractors & Farm Equipment

The agricultural scenario in India is expected to improve in 2024-25 with a withdrawal of El Nino in the first quarter of 2024-25. IMD forecasts normal rainfall in India this year but the distribution is forecast to be diverse and inequitable for this season. Farm mechanisation trends continue to improve and the Government's thrust to increase farm incomes substantially (through improved productivity, firmer procurement and providing fillip to farmer incomes through dairy-based white revolution and bio ethanol blending opportunities) are positives. That said, inventory in dealerships is at higher

levels and demand is likely to be back ended in H2 2024-25. Consequently, tractor and farm equipment sales are expected to be flat at best and may, in fact, witness a decline if there are any negative surprises.

Material Handling & Construction Equipment

The Government's commitment to the nation's infrastructure development received a strong endorsement through an unprecedented '11.11 lakh crore budgeted spend for 2024-25 announced in the annual budget presentation. This outlay represents 3.4% of the GDP. Continued urbanisation and industrialisation also provide impetus to the segment. And a reviving rural sentiment will also support demand.

That said, the general elections in Q1 2024-25 and the onset of normal monsoons in Q2 2024-25 will likely impact the MHCE segment the most. And thanks to the record-setting 2023-24, a high base has been established. As a result, the industry is expected to witness only a 5-6% increase in units in 2024-25, with the volumes likely to improve during the second half of the financial year.

Despite short-term challenges for the MHCE segment, long-term prospects remain robust, with India set to double its infrastructure spending, reaching '143 lakh crore by 2030. The Vikshit Bharath 2047 programme of the Government commits ambitious milestones in infrastructure development and construction in the country's journey to becoming a developed nation.

Overall, with risks evenly balanced for FY25, remaining focused on delivering near-term performance and simultaneously building robust long-term health of the organisation is central to continuing the Company's tradition of being a long-term oriented, customer-obsessed, values-driven and employee-friendly organisation.

INTERNAL FINANCIAL CONTROLS

The Company has a well-established internal financial control and risk management framework to ensure the highest standards of integrity and transparency in its operations and a strong corporate governance structure. Appropriate controls are in place to ensure:

a) the orderly and efficient conduct of business, including adherence to policies;

b) safeguarding of assets;

c) prevention and detection of frauds/errors;

d) accuracy and completeness of accounting records; and

e) timely preparation of reliable financial information.

Additionally, as part of RBI's Risk Based Internal Audit (RBIA) requirement, your Company has adopted appropriate policy and operating guidelines. Along with the Risk Management team and Internal Audit department, the functional and operational risk control matrices have been designed to ensure that adequate controls as may be required are in place and operating effectively and efficiently.

RISK MANAGEMENT

Your Company has built a robust risk governance and risk management framework over the years. The Audit Committee, Risk Management Committee, Asset Liability Management Committee and IT Strategy Committee review and monitor the risks on a regular basis.

The risk management process of the Company is underpinned by a strong and long-standing organisational culture and sound operating procedures involving our Sundaram values, competencies, internal control culture and effective internal reporting.

Your Company has adopted the ERM Framework, which is based on 3 lines of defence:

a. First pillar: Function-heads who are the risk owners and responsible and accountable for assessing, controlling and mitigating risks;

b. Second pillar: Chief Risk Officer and his team who assist through facilitating risk awareness, risk reviews, providing analysis and reports including creating a proactive forward looking approach;

c. Third pillar: Internal Auditors and Statutory Auditors who provide assurance to the senior management on risk governance through the effectiveness of internal controls and the monitoring mechanisms.

Your Company has a robust first line of defense in the form of sensitised and aware functional teams. Active operational engagement on risk management is enabled through two levels of internal teams that review operational risks on an ongoing basis: i) Functional Working Group on operational risks comprised of 62 operating executives across the Company and ii) a Core Working Group on Risk Management comprised of 11 functional heads of various departments of the Company. These groups are convened by our second line of defense, the Risk Management department, which ensures meetings on a regular basis to review status on various risks, anticipate emerging risks and define a proactive action plan for containing incipient risk.

The internal audit team reviews the processes and controls to ensure the design effectiveness and to assure adequacy of controls to mitigate risk. Your Company has well-documented standard operating procedures and risk control matrices for all processes to ensure superior control over transaction processing and regulatory compliance. Periodical review of the same ensures that the risks including technology risks are under control. This apart, policies are reviewed and approved by the Board and its Committees that facilitate review of identification of risks and controls and guidance to manage the risks across business that ensures a sustainable and ethical business environment, reflected in our risk management process.

The risk management process fulfils the requirement under Section 134 of the Companies Act, 2013 and also the provisions of Regulation 21, read with Schedule II to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Above all, your Company's values and culture that are enshrined in the Sundaram Way of doing business and the obligations and commitment to our customers, employees, deposit holders and the community are the foundations on which its risk framework rests.

A few principal financial risks of your Company have been furnished in the Notes to the Accounts under Note 38, for your information.

In the year in question, your Company has also conducted a quality assurance exercise of the internal audit function, as required by regulations, through an empowered group of senior functional leaders of the Company overseen by the Audit Committee of the Board. As part of the quality assurance exercise, the group has developed an Audit Quality Maturity Model (SF-AMM), which evaluates the quality assurance activities using five practice areas, viz., strategy, structure & communication, people, process & technology, and regulatory matters and 38 underlying parameters across these practice areas.

INFORMATION TECHNOLOGY

Your Company recognizes Information Technology as a critical pillar to run and grow its business. Significant investments continue to be made in IT infrastructure and applications to expand the breadth and depth of technology availability to your Company's staff and customers, to enhance the unique ‘Sundaram Experience' to all stakeholders. Ensuring the reliability, security and integrity of your Company's systems and data is the highest priority.

Your Company has a state-of-the-art Data Centre with a capacity of over 350 servers, managed by professionals providing 24/7 support, with over 99.99% uptime. The Data Centre, recently accredited for the updated ISO/IEC 27001:2022 Standards by TUV Rheinland for Information Security Management System, effectively meets the needs of your Company and also caters to its subsidiaries and associates. A disaster recovery site for all critical applications is hosted at a separate facility located in a different seismic zone, with near real-time data replication. Together with a secure and scalable IT infrastructure for

INTERNAL AUDIT

Your Company's internal audit department independently evaluates the adequacy of control measures on a periodic basis and recommends improvements, wherever appropriate to suit the changes in business and control environment. The effectiveness and efficiency of the controls, and the design are regularly measured through process reviews and risk assessment. The internal audit department is staffed by qualified and experienced personnel and reports directly to the Audit Committee of the Board. The Audit Committee regularly reviews the audit findings as well as the adequacy and effectiveness of the internal control measures.

Additionally, an Information Security Assurance Service is also provided by independent external professionals. Based on their recommendations, the Company has implemented a number of control measures both in operational and IT-related areas, apart from information security related measures.

Your Company has rolled out Risk Based Internal Audit (RBIA) Policy with effect from 1^st April 2022 as required by the RBI. The primary focus of Risk Based Internal Audit is to provide reasonable assurance to the Board and the Senior Management about the adequacy and effectiveness of the risk management and control framework of the Company. The internal audit function assesses and contributes to the overall improvement of the organization's governance, risk management, and control processes using a systematic and disciplined approach. Audits are conducted encompassing all the functional areas of the branch network and Head office in such a manner that it serves as an important tool of internal control. remote working (work from home), business continuity during adversities is assured. Your Company's strategy for leveraging Cloud technology strives to achieve a balance of opportunity, risk and cost. These are being reflected appropriately in our Data Centre investments.

Your Company adopts a proactive stance on Cyber security and makes continuing investments in this critical area. In April '24, your Company appointed a Chief Information Security Officer (CISO) in a full-time position as required by extant regulations. Your Company operates a 24x7 Security Operations Centre (SOC) for real-time threat monitoring and alerting. Periodic vulnerability assessment and penetration testing are carried out on the applications as well as the infrastructure to ascertain the effectiveness of the practices laid down by your Company. Your Company engages in regular discussions with external consultants and industry experts to validate its approaches to transformation and to reinforce Information & Cyber Security methodologies.

Your Company's in-house technology team leverages its expertise across multiple technologies and in-depth business & domain knowledge for delivering differentiated solutions. Contemporary technology and architecture practices are now at the core of its digital capabilities. With the advantage of having created a strong digital foundation, your Company is poised to take its technology base to the next level. The key priorities are employing digital and intelligent solutions to enable customer service and acquisition, faster introduction of new products, reducing cost-to-serve, deepening usage of analytics and creating superior customer experience.

By working closely with the business functions, the technology team has implemented process improvements that have shortened turnaround time, enabled straight through processing, ensured timely decisioning leading to superior customer experience. Digitising documents at source by leveraging AI/ML technologies is a key theme that is being implemented in the loan journey, to provide safe, secure and environmentally friendly experience to customers. Your Company has relaunched a simplified customer app that gives an integrated and total view of the customer's portfolio.

Your Company is in a relationship-centric business and has a time-tested and differentiated strength - the Sundaram experience - that relies on physical interactions with customers and other stakeholders. The digital strategy has consciously been adapted to create the right blend of high touch and high tech to deepen the customer and stakeholder relationships.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements, drawn up in accordance with the applicable Accounting Standards, form part of the Annual Report as required by the provisions of Section 129 (3) of the Companies Act, 2013. A separate statement containing the salient features of the financial statements of Subsidiaries and Associates in Form AOC-I forms part of the Annual Report.

The Consolidated profit after tax is '1,842.36 cr. as against '1,509.51 cr. in the previous year. The total comprehensive income for the year was '3,210.76 cr. as against ' 1,782.84 cr.

The consolidated net worth for the year stood at '11,078.22 cr., as against '9,919.80 cr. in the previous year.

The annual accounts of all the Subsidiary Companies have been posted on your Company's website - www.sundaramfinance.in . Detailed information, including the annual accounts of the Subsidiary Companies will be available for inspection by the members, through a digital platform which would be provided by the Company. The same will also be made available in physical form to the members upon request.

SUBSIDIARIES

• Sundaram Finance Holdings Limited

Sundaram Finance Holdings Limited reported a gross income of '390.32 cr. as against '130.61 cr. in the previous year. Profit after tax was '321.57 cr. as compared to '94.75 cr. in the previous year. The Board of Directors have also recommended a Final Dividend of '2.05/- per share (41%). This together with the 1^st interim dividend of '2/- per share (40% on the face value of '5/-) paid on 28^th February 2024 and 2^nd interim dividend of '3.65/- per share (73% on the face value of '5/-) payable on 18^th June 2024, aggregate to a total dividend of '7.70/- per share (154% on the face value of '5/-) for the year 2023-24.

During March 2024, your Company transferred 79,73,529 equity shares of '5/- each, representing 3.59% stake in SFHL, to Trichur Sundaram Santhanam and Family Private Limited, and other companies and individuals forming part of the promoter group. Pursuant to the said transfer, SFHL has ceased to be a subsidiary of your Company as on 31^st March 2024.

• Sundaram Home Finance Limited

Sundaram Home Finance Limited, during the year approved loans aggregating to '5,581 cr. (PY '4,310 cr.). Disbursements during the year were higher by 29% at '5,029 cr. (PY '3,901 cr.). The company earned a gross income of '1,411 cr. (PY '1,140 cr.) and reported a profit after tax at '235.83 cr. (PY '215.41 cr.). The loan portfolio under management as at 31^st March 2024 stood at '13,812 cr. as against '11,181 cr. in the previous year. Gross Stage 3 assets stood at 1.16% (PY 2.26%) and net of ECL provisions stood at 0.50% (PY 1.13%), as at 31^st March, 2024. The Net Stage 3 assets, excluding restructured assets, stood at 0.26% as at 31^st March 2024. The Board of Directors have recommended a final dividend of0.058/- per share (0.58%) for the year ended 31^st March 2024. This together with interim dividend of 5.765 per share (57.65%), would aggregate to a total dividend of '5.823/- per share (58.23%).

• Sundaram Asset Management Company Limited (On consolidated basis)

The company reported a consolidated gross income of '456.95 cr. as against '372.71 cr. in the previous year. Consolidated Profit after tax was '111.91 cr. as compared to '85.30 cr. during the previous year. The Average Assets under Management amounted to '72,013 cr. for the year 2023-24 as compared to '55,648 cr. in the previous year. The Company had declared an interim dividend of '10/- per share on 1^st February 2024 and has decided to consider the same as final dividend with the approval of shareholders for the year 2023-24.

The Hon'ble National Company Law Tribunal, Mumbai, vide order dated 25^th August 2023, approved the dissolution of SAMC Support Services Private Limited, wholly-owned subsidiary of Sundaram Asset Management Company Limited, through Voluntary Liquidation. The Tribunal, Chennai, vide order dated 04^th October 2023, approved the Scheme of Arrangement for the de-merger of the fund accounting business of Sundaram Fund Services Limited, into Sundaram Asset Management Company Limited.

• Sundaram Trustee Company Limited

Sundaram Trustee Company Limited earned a gross income of ' 2.80 cr., as against ' 2.27cr., in the previous year and reported a profit after tax of '1.59 cr. for the year, as against '1.26 cr. in the previous year. The company recommended a dividend of '319/- per share for the year ended 31^st March 2024.

• LGF Services Limited

During the year, the company reported a gross income of ' 0.19 cr. as against ' 0.08 cr. in the previous year. The profit after tax for the year was ' 0.11 cr. as against ' 0.03 cr. in the previous year. The company recommended a dividend of '4/- (40%) per share for the year.

• Sundaram Fund Services Limited

Sundaram Fund Services Limited (formerly Sundaram BNP Paribas Fund Services Limited) earned an income of '1.28 cr. during the year as against '1.00 cr. in the previous year. The company reported a profit after tax of '0.28 cr. as against a negative profit of '0.19 cr. in the previous year.

During the year, a petition has been filed with the National Company Law Tribunal, Chennai, for reduction of paid-up equity share capital of Sundaram Fund Services Limited, pursuant to Section 66, read with Section 52 of the Companies Act, 2013.

JOINT VENTURE

• Royal Sundaram General Insurance Co. Ltd (Royal Sundaram)

Royal Sundaram reported a Gross Written Premium (GWP) of '3,825 cr. as compared to '3,517 cr. in the previous year, representing a growth of 9%. The Company reported a profit after tax (as per IND AS) of '169 cr. for the current year as against '44 cr. in the previous year. The current year's profit (as per IND AS) was higher than previous year mainly due to “mark to market gain” of '53 cr. (net of tax) on equity investments compared to “mark to market loss” of '78 cr. (net of tax). The Company recommended a dividend of '0.70/- (7%) per share for the year ended 31^st March 2024 (PY 7% dividend). The Company's solvency ratio as at March 31, 2024 was at 2.42 times (PY 2.27 times) as against the mandated threshold of 1.50 times.

BOARD & AUDIT COMMITTEE

The details regarding number of Board Meetings held during the financial year and composition of Audit Committee are furnished in the Corporate Governance Report. The details of all other Committees are also furnished in the Corporate Governance Report.

DIRECTORS

Mr. S. Prasad, Mr. P. N. Venkatachalam and Ms. Shobhana Ramachandran, Independent Directors, completed their second term of five years as Independent Directors of the Company on 31^st March 2024. Mr. S Mahalingam, Independent Director, will be completing his second term of five years as Independent Director of the Company on 25^th May 2024. Your Directors place on record, with deep gratitude, the significant contributions made and valuable guidance provided by them to the Company during their tenure as Independent Directors.

During the year, the following Independent Directors were appointed on the Board:

Mr. R. Raghuttama Rao was re-appointed as an Independent Director on the Board with effect from 1^st April 2024. Mr. S. Viji and Mr. Srivats Ram, Directors, retire by rotation and being eligible, offer themselves for re-election.

KEY MANAGERIAL PERSONNEL

During the year, Mr. P. N. Srikant, Secretary and Compliance Officer, was re-designated as Chief Compliance Officer & Company Secretary with effect from 11.08.2023.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declaration from each Independent Director of the Company under Section 149 (7) of the Companies Act, 2013 that they meet with the criteria of their Independence laid down in Section 149 (6).

ANNUAL EVALUATION BY THE BOARD

The Board has made a formal evaluation of its own performance and that of its committees and individual Directors as required under Section 134(3) (p) of the Companies Act, 2013.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors confirm that:

1. In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2. The Company has 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 that period;

3. Proper and sufficient care has been exercised 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;

4. The annual accounts have been prepared on a going concern basis;

5. Adequate internal financial controls have been put in place and they are operating effectively; and

6. Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

AUDITORS

M/s B.K. Khare & Co., Chartered Accountants, Mumbai (Regn. No. 105102W) and M/s N.C. Rajagopal & Co., Chartered Accountants, Chennai (Regn. No. 003398S), who had been appointed as Joint Statutory Auditors of your Company, to hold office for a term of three (3) consecutive years from the conclusion of the 68^th Annual General Meeting to the conclusion of the 71^st Annual General Meeting, in accordance with the RBI Guidelines for Appointment of Statutory Auditors of Banks and NBFCs notified on 27^th April 2021 (RBI Guidelines), would be demitting office as the Joint Statutory Auditors of the Company at the conclusion of the 71^st Annual General Meeting, in compliance with the RBI Guidelines.

Your Company has identified M/s Brahmayya & Co., Chartered Accountants, Chennai (Regn. No. 000511S) and M/s R.G.N Price & Co., Chartered Accountants, Chennai (Regn. No. 002785S) for being appointed as the Joint Statutory Auditors of the Company, from the conclusion of the 71^st Annual

General Meeting to the conclusion of the 74^th Annual General Meeting. The appointment of the Joint Statutory Auditors will be subject to the approval of the shareholders of the Company and will take effect from the conclusion of the 71^st Annual General Meeting.

ACKNOWLEDGEMENT

Your Directors gratefully acknowledge the support and co-operation extended to your Company by all its customers, depositors, shareholders, and bankers, as also the various mutual funds, insurance companies, automotive manufacturers and dealers, oil marketing companies and other stakeholders.

Your Directors also place on record their special appreciation of Team Sundaram for its dedication and commitment in delivering the highest quality of service to every one of our valued customers.

For and on behalf of the Board