PNB Gilts Ltd

Dear Members,

Your Directors are pleased to present the 28th Annual Report together with the Company?s audited financial statements for the financial year ended March 31,2024.

1. RESULTS OF OUR OPERATIONS AND STATE OF AFFAIRS

The Company?s financial performance, for the year ended March 31,2024 is summarized below:

The benchmark 10-year yield in FYRs 24 remained volatile, particularly because of conflicting narratives centred around ‘persistent inflation? and the upcoming recession. The first decline in yield occurred in May?23 as RBI went in for a pause going against market expectation of a 25 bps hike in Apr?23. This, added with comfortable liquidity conditions, also supported yields. However, by Q2, bond yields began an upward climb, peaking in Sep?23. This was owing to RBI?s surprise mention of OMO sale in its policy to manage underlying liquidity conditions of the economy. But like the previous fall in yields, the increase was also short lived and notably since Oct?23, 10Y yield has been on downward journey. Lower than expected government borrowing target for FY 2024-25, pick up in foreign demand after bond index inclusion announcement and broadly favorable global backdrop together spurred rally in bonds in the last quarter of the year.

Against the afore mentioned backdrop, Company continued to fulfill all its obligations as a Primary Dealer mandated by RBI in Primary and Secondary markets. Against the backdrop of uncertain market conditions, the Company posted PBT of Rs 98.81 crore as on March 31,2024 as against ' (85.07) crore as on March 31,2023. PAT stood at Rs 69.41 crore as on March 31,2024 as against ' (77.22) crore as on March 31,2023. Capital adequacy remains strong with Capital to Risk Weighted Assets Ratio (CRAR) at 34.01 per cent as on March 31, 2024 as against 31.83 per cent as on March 31,2023, which is well above the regulatory minimum of 15 per cent for PDs. With regard to Treasury Bills commitment, the Company exceeded the stipulated success ratio of 40 per cent, achieving 44.14 per cent and 42.64 per cent in H1 and H2 respectively. In G-sec category, Company fulfilled the underwriting commitments, thereby supporting the government borrowing program. Company?s secondary market outright turnover for FY 2023-24 stood at 4.48 per cent of the average Central Government Dated Securities outright market turnover during the previous three financial years as against a mandate of 1 per cent.

Material Changes and Commitments

No material changes and commitments affecting the financial position of the Company have occurred after the close of the financial year till the date of this report.

Capital Adequacy

Capital adequacy ratio as on March 31,2024 stood at 34.01 per cent as against the RBI stipulation of 15 per cent. Dividend

Your Directors are pleased to recommend a final dividend of Rs 1/- (i.e. 10 per cent) per equity share of face value of Rs 10/-per share for the year ended 31st March, 2024, subject to approval in the ensuing Annual General Meeting.

The Dividend Distribution Policy, in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations" or "Listing Regulations") is available on the Company?s website on https://www.pnbgilts.com/uploads/corporate governance/Dividend Distribution Policy.pdf During the year, the policy was amended so to update the name of new applicable Master Direction (Reserve Bank of India (NonBanking Financial Company - Scale Based Regulation) Directions, 2023).

Transfer to Reserves

Your Directors propose to transfer a sum of Rs 1388.21 lacs in Statutory Reserve as required under the provisions of Section 45-IC of the Reserve Bank of India Act, 1934. Further, in terms of the first proviso to Section 123(1) of the Companies Act, 2013, the Company proposes not to transfer any sum in General Reserve.

2. CORPORATE GOVERNANCE

Corporate Governance for your Company means achieving high level of accountability, efficiency, responsibility and fairness in all areas of operations. Our workforce is committed towards the protection of the interest of the stakeholders including shareholders, creditors, investors, customers, employees, etc. Our policies consistently undergo improvements keeping in mind our goal i.e. maximization of value of all the stakeholders.

We comply with the SEBI and RBI guidelines on Corporate Governance. We have documented our internal code on Corporate Governance in compliance of SEBI and RBI guidelines. The Corporate Governance practices followed by the Company are given in the Corporate Governance section of this Annual Report. A certificate from M/s Pranav Kumar & Associates, Company Secretaries regarding compliance of conditions of Corporate Governance as stipulated in the SEBI Listing Regulations is enclosed with the ‘Report on Corporate Governance? forming part of the Board?s Report.

Number of meetings of the Board

The Board met five times during the financial year 2023-24 to review strategic, operational, technological and financial matters besides laying down policies and procedures for operational management of the Company. The details of such meetings are given in the ‘Report on Corporate Governance? that forms part of this Board?s Report.

Directors and Key Managerial Personnel

During the financial year 2023-24, following changes happened in the composition of Directors:

a. Sh. Ashutosh Choudhury (DIN: 09245804), Punjab National Bank (‘PNB?) nominated director, resigned as Non- Executive & Non-Independent Director of the Company with effect from May 3, 2023 on account of his elevation as Executive Director of Indian Bank. In his place, upon the nomination request received form PNB, the Board appointed Sh. Amit Kumar Srivastava (DIN: 08099846), Executive Director, Punjab National Bank (‘PNB?), as an Additional Director (Non-Executive & Non-Independent) of the Company with effect from December 26, 2023. Subsequently, the members had, vide resolution passed through postal ballot on March 8, 2024, approved the appointment of Sh. Amit Kumar Srivastava as a Non-Executive & Non-Independent Director of the Company with effect from December 26, 2023.

b. Members of the Company at their Annual General Meeting held on September 8, 2024, approved the following re-appointment of Sh. Satish Kumar Kalra (DIN: 01952165) and Dr. Tejendra Mohan Bhasin (DIN: 03091429) as Independent Directors for a second consecutive term of five years from September 15, 2023 to September 14, 2028 and from July 30, 2024 to July 29, 2029, respectively.

c. Sh. Satish Kumar Kalra (DIN: 01952165) resigned from the position of Non-Executive Independent Director of the Company w.e.f. closure of business hours of February 14, 2024 as RBI conveyed its approval to appoint him as MD/CEO of North East Small Finance Bank Limited for a period of two years and it was subject to his stepping down of directorships held by him. He has confirmed that there are no other material reasons other than those provided.

d. The Board of Directors had, on the recommendation of the Nomination & Remuneration Committee, at their meeting held on March 26, 2024 appointed Sh. Gopal Singh Gusain (DIN: 03522170) as Additional Director and designated him as an Independent Director of the Company with effect from March 26, 2024 for a term of 3 consecutive years, subject to approval of the members. Subsequently, the members had, vide resolution passed through postal ballot on June 5, 2024, approved the appointment of Sh. Gopal Singh Gusain as an Independent Director of the Company with effect from March 26, 2024, for a term of 3 consecutive years.

Your directors wish to place on record their appreciation for the contributions made by Sh. Ashutosh Choudhury and Sh. Satish Kumar Kalra during their respective associations with the Company.

Further, in accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Sh. Vikas Goel (DIN: 08322541) shall retire by rotation in the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

In the opinion of the Board, all the independent directors appointed/ re-appointed during the year are person of integrity and having requisite expertise, skills and experience (including the proficiency) required for their role.

None of the Directors are debarred from holding the office of Director pursuant to order of SEBI or any other authority.

There were no changes in key managerial personnel of the Company.

Performance Evaluation

In terms of the requirement of the Companies Act, 2013 and the SEBI Listing Regulations, an annual performance evaluation of the Board is undertaken where the Board formally assesses its own performance with the aim to improve the effectiveness of the Board and the Committees. The Board along with the Nomination and Remuneration Committee has laid down the criteria of performance evaluation of Board, its Committees and Individual Directors which is available on the website of the Company at https://www.pnbgilts.com/uploads/corporate governance/Directors Evaluation Policy.pdf These criteria are broadly based on the Guidance note on Board Evaluation issued by the Securities and Exchange Board of India on January 5, 2017.

The Board evaluated its performance after seeking inputs from all the Directors based on criteria such as the board composition and structure, effectiveness of board processes, information and functioning, etc. The performance of the Committees was evaluated by the Board after seeking inputs from the respective committee members based on criteria such as the composition of committees, effectiveness of committee meetings, etc.

The NRC reviewed the performance of individual directors on the basis of criteria such as the contribution of the individual director like commitment, contribution, initiative for growth of company etc. preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc.

In a separate meeting of independent directors, performance of (a) non-independent directors; (b) the board as a whole; and (iii) the Chairman of the Company was evaluated, taking into account the views of executive directors and non-executive directors.

In the Board meeting and meeting of Nomination and Remuneration Committee, the performance of the board, its committees, and individual directors was also discussed. Performance evaluation of independent directors was done by the entire board, excluding the independent director being evaluated.

The evaluation process endorsed the Board?s confidence in the ethics standards of the Company, cohesiveness amongst the Board members, flexibility of the Board and management in navigating the various challenges faced from time to time and openness of the management in sharing strategic information, if any, with the Board. The Committees are also functioning well.

In general, the outcome of such evaluation process was found satisfactory.

Policy on Directors? Appointment and Remuneration etc.

The policies of the Company on Directors? Appointment and Remuneration formulates the criteria for determining qualifications, competencies, positive attributes and independence of a Director and other matters like remuneration of directors, key managerial personnel, senior management and other employees. The policy relating to the remuneration of Directors, Key Managerial Personnel and other employees is framed with the object of attracting, retaining and motivating talent which is required to run the Company successfully.

There was no change in these policies. The policies are available on the website of the Company at the link: https://www.pnbgilts.com/uploads/corporate governance/Eligibility Criteria Policy.pdf and

https://www.pnbgilts.com/uploads/corporate governance/Remuneration Policy.pdf

Declaration by Independent Directors

The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the provisions of Companies Act, 2013 and SEBI Listing Regulations. In terms of Regulation 25(8) of the Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties. The Board is of the opinion that the Independent Directors of the Company possess requisite qualifications, skills, experience (including proficiency) and expertise and they hold highest standards of integrity and are independent of the management.

Business Responsibility and Sustainability Report

Business Responsibility and Sustainability Report for the year under review, as stipulated under Regulation 34(2) (f) of SEBI Listing Regulations, forms part of the Board?s Report.

3. OTHER DISCLOSURES -

Details of Committees

The details in relation to the composition of Audit Committee, Corporate Social Responsibility Committee and other board level committees have been given in Report on Corporate Governance forming part of the Board?s Report.

All the recommendations made by the Audit Committee during the year were accepted by the Board. CSR

There was no change in the CSR Policy during FY 2023-24. The CSR policy of the Company is available at Company?s website at the link https://www.pnbgilts.com/uploads/corporate governance/CSR Policy 010423.pdf The CSR activity of the Company is carried out as per the instructions of the Committee and Board. The annual report on the CSR for the year 2023-24 in the prescribed format, inter-alia containing the brief of CSR Policy, CSR Committee along with objects and expenditure details, is presented at Annexure A to the Board?s Report.

Other details of above said and other Committees of the Board are given in the ‘Report on Corporate Governance? forming part of the Board?s Report.

Whistle Blower Policy (including Vigil Mechanism)

Your Company believes in conducting its affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. Your Company is committed to develop a culture where it is safe for directors and employees to raise concerns about any wrongful conduct.

The Board of Directors have approved a Whistle Blower Policy (including Vigil Mechanism), which provides a framework to promote a responsible and secure whistle blowing. It protects employees wishing to raise a concern about serious irregularities within the Company. The Audit Committee reviews the functioning of this mechanism. The mechanism also provides for direct access to the Audit Committee/Chairman of Audit Committee. During the year under review, no such matter has been reported to the Audit Committee. The said policy may be accessed on the Company?s website at the link https://www.pnbgilts.com/uploads/corporate governance/Whistle Blower Policy.pdf

Contracts and Arrangements with Related Parties

Details of all the contracts/ arrangements/transactions entered by the company which are (i) in ordinary course of business and not at arm?s length; and (ii) those which are material in nature are given in form AOC-2 at Annexure B. Company?s Policy/SOP on Related party Transactions can be accessed at the Company?s website at the link https://www.pnbgilts.com/uploads/corporate governance/SOP Policy on RPT.pdf

Subsidiaries

The Company is not having any subsidiary or associate or joint venture, it is not required to consolidate the financial statements in terms of Section 129 of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014. However, the financial statements of the Company for FY 2023-24 had already been considered by its parent bank i.e. Punjab National Bank for the purpose of consolidation.

Directors? Responsibility Statement

Pursuant to the requirements of Section 134(3)(c) of the Companies Act, 2013, your Directors confirm that:

(a) in the preparation of the annual accounts for the year ended March 31, 2024, the applicable accounting standards read with the requirements setout under the Schedule III to Companies Act, 2013, have been followed and there are no material departures from the same;

(b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that 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 and loss of the Company for the year ended on that date;

(c) the Directors had taken proper and sufficient care 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) the Directors had prepared the annual accounts on a going concern basis;

(e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Human Resource Management

Your Company treats its human resources as one of its most important assets. To ensure good human resource management in the Company, the Company focuses on all the aspects of employee life cycle. During their tenure in the Company, employees are motivated through various skill development and volunteering programmes. Recreational programmes are also conducted on regular basis so as to create stress-free environment. All the while, the Company also creates effective dialogues through various communication channels like face to face interactions so as to ensure that feed back reach the relevant teams. In house meetings and training sessions are also arranged to engage and develop the employees and to gather ideas around innovation.

The information required to be disclosed under Section 197(12) and Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided at Annexure C.

The information required pursuant to Section 134 read with rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Board report and shall be provided to the members upon specific request. In terms of Section 136 of the Act, the report and accounts are being sent to members excluding the information on employee?s particulars which is available for inspection by the members at the registered office of the Company during business hours on working days of the Company up to the date of the ensuing General Meeting. Interested members may write to the Company. No employee is related to any Director of the Company.

Sexual Harassment at Workplace

Your Company has complied with provisions relating to the Sexual harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has constituted Internal Complaints Committee and has put in place a formal policy for prevention of sexual harassment of its employees at workplace. There were no pending complaints in the beginning of FY 2023-24 and no cases were filed pursuant to the said Act in the said financial year.

Particulars of Loans given, investment made, guarantees given and securities provided

The Company, being a non-banking financial company registered with RBI and engaged in the business of acquisition of securities, is exempt from complying with the provisions of Section 186(4) of the Companies Act, 2013 in respect of loans given, investments made, security provided and guarantees given. Accordingly, the disclosures required under the aforesaid section have not been made in this Report.

Annual Return

As per Section 134(3)(a) of the Companies Act, 2013, the Annual Return referred to in Section 92(3) of the Companies Act, 2013 has been placed on the website of the Company and can be accessed at https://www.pnbgilts.com/investors-relations#annual report

Deposits

During the year ended March 31,2024, the Company has not accepted any deposit from the public and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

Risk Management

In terms of RBI guidelines for NBFCs and Primary Dealers, Risk Management Committee of the Board has been entrusted with the responsibility by the Board in laying down procedures for risk assessment and minimization. The Committee also reviews these procedures periodically to ensure that executive management is implementing and controlling the risks through means of a properly defined risk framework. The composition of the said Committee and terms of reference are given in Report on Corporate Governance forming part of the Board?s Report.

The Company also have an Asset-Liability Committee (ALCO) of executives of the Company comprising of the Managing Director & CEO, Deputy CEO, CFO and other executives of the Company.

Risk Management Policy is reviewed annually by the Risk Management Committee and on the basis of the recommendation of this Committee, the Board approves the same.

The Risk Management Committee, IT Strategy Committee and Audit Committee, on periodic basis, oversees all the risks that the Company faces such as strategic, financial, market, liquidity, security, property, IT, cyber security, legal, regulatory and other identified risks along with the implementation of risk management policy. There is an adequate risk management infrastructure in place capable of addressing the possible risks. Thus, in the opinion of the Board, there are no such risks, which may threaten the existence of the Company. For further details Business Responsibility and Sustainability Report may also be referred, which forms integral part of this Report.

Significant and material orders

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company?s operations in future.

Issue of Shares

There was no issue of shares during the year neither with differential rights as to dividend, voting or otherwise nor to employees of the company.

Management Discussion and Analysis

Management Discussion and Analysis comprising an overview of the financial results, operations/performance and future aspects forms part of this Board?s Report.

Secretarial Standards

The Company has complied with all mandatorily applicable Secretarial Standards.

Non-applicability of Section 148 of Companies Act, 2013

The Company is not required to maintain cost records in accordance with Section 148 of the Companies Act 2013.

Others

No application has been made under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) ("the IBC, 2016"), hence, the requirement to disclose the details of application made or any proceeding pending under the IBC, 2016 during the year along with their status as at the end of the financial year is not applicable

The requirement to disclose the details of difference between amount of the valuation done at the time of onetime settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof, is not applicable.

4. AUDITORS, INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY Statutory Auditor

The Comptroller and Auditor General of India had appointed M/s Batra Deepak & Associates, Chartered Accountants (Firm Reg. No.005408C) as the Statutory Auditor of the Company for the financial year ended March 31,2024. Pursuant to the provisions of Section 143(12) of the Companies Act, 2013, the Statutory Auditor of the Company has not reported any incident of fraud during the FY 2023-24. The Auditor Report is selfexplanatory and does not contain any qualification, reservation or adverse remark etc.

Comments of Comptroller & Auditor General of India (C&AG)

The financial statements for the Financial Year ended March 31,2024 along with auditors? report thereon were submitted to the C&AG for supplementary audit. The C&AG have conducted supplementary audit and issued NIL comments. The NIL comment certificate is attached in this Annual Report before the financial statements.

Secretarial Auditor

The Board had appointed M/s Pranav Kumar & Associates, Company Secretaries, to conduct the Secretarial Audit for the financial year 2023-24. The Secretarial Audit Report for the financial year ended March 31,2024, is annexed as Annexure D to this Report. The Report is self-explanatory and does not contain any qualification, reservation, adverse remark or disclaimer etc. except that the National Stock Exchange of India Limited ("NSE") vide its? email dated March 1,2024, imposed a penalty of Rs 5,000/- for delayed reporting of demat accounts i.e. one week of the opening of such accounts which is not in consonance with the provisions of SEBI Circular No. SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016.

In this connection, it is to be noted that the Company has responded diligently to the email and has requested NSE for clarification on the reporting of accounts that are not related to stock broker business and has also requested to condone the delay and waiver of penalty for the event in the absence of clarity. The NSE has not charged a penalty for the designated bank account till the approval of the Board?s Report.

Internal financial control systems and their adequacy

The Company considers the internal control systems to be a very significant part of its Corporate Governance practices. Your Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company?s policies, the safeguarding of its assets, prevention and detection of frauds etc. The Company?s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance with corporate policies. The Company has a well-defined delegation of power with authority limits for approving transactions/contracts including expenditure. Processes for formulating and reviewing annual and long term business plans have been laid down. M/s Batra Deepak & Associates, the statutory auditor of the Company has audited the financial statements included in this annual report and have issued a report on our internal control over financial reporting (as defined in section 143 of Companies Act 2013).

As a part of this control system, your Board appoints Internal Auditor and other auditors as well. Accordingly, these internal controls are routinely tested and certified by the auditors.

Your Board appointed M/s Lodha & Co LLP as the Concurrent Auditor of the Company and also framed a separate Internal Audit Function, headed by Head of Internal Audit, of the Company in compliance with RBI circular no. DoS.CO.PPG./SEC.05/11.01.005/2020-21 dated February 3, 2021. Your Company also has in place a Risk Based Internal Audit (RBIA) Policy, in line with the RBI directions.

The scope of concurrent audit included audit of treasury transactions on a monthly basis and reporting to the Audit Committee of the Board that the company has operated within the limits of various risk parameters laid down by the Board, Reserve Bank of India and other statutory authorities. Besides, the said firm also audited and reviewed the related party transactions on monthly basis and key business processes, including IT systems of the Company, on quarterly basis. The Internal Audit department as part of Risk Based Internal Audit does the testing of controls at regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information.

All the reports of the Concurrent Auditor and Internal Auditor were submitted to the Audit Committee. Timeliness of submission of all the periodic statutory returns/forms etc. to regulatory bodies was also checked by the Concurrent Auditor. The Audit Committee reviews adequacy and effectiveness of the Company?s internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Company?s risk management policies and systems.

5. DETAILS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The Company is a Primary Dealer as defined and regulated by the Reserve Bank of India and is not a manufacturing company, hence the particulars required to be disclosed with respect to conservation of energy and technology absorption in terms of Section 134(3)(m) of the Companies Act, 2013 and the Rules made there under are not applicable/ Nil.

However, every endeavor is made to ensure optimal use of energy, avoid wastages and conserve energy as far as possible. Some of these measures include switching off lights and computer systems when not in use, creating awareness among employees about the necessity of energy conservation etc. Your Company has installed the integrated treasury management software and RBI?s Negotiated Dealing System with the help of The Institute for Development and Research in Banking Technology (IDRBT) and reputed IT companies. The Company recognizes the growing importance of Information Technology in the emerging business environment. The Company has also implemented Business Continuity Plan (BCP) and Disaster Recovery Plan (DRP) with the help of IDRBT (consultants for implementation of BCP and DRP)to identify and reduce risk exposures and pro actively manage any contingencies.

Your Company has neither used nor earned any foreign exchange during the year under review.

Acknowledgements

Your Directors thank the Government of India, Reserve Bank of India, Securities and Exchange Board of India, National Stock Exchange of India Ltd., BSE Ltd.,Parent Bank, Commercial Banks, Cooperative & Regional Rural Banks, Financial Institutions, PF Trusts, Public Sector Undertakings, Private Sector Corporate Bodies and other valued clients for their whole-hearted support. We acknowledge the sincere and dedicated efforts put in by the employees of the Company at all levels.