Cholamandalam Financial : Annual Report 2022 - 2023

DIRECTORS' REPORT TO MEMBERS

Your Board of Directors takes pleasure in presenting the Twenty Eighth Annual Report of Cholamandalam MS Risk Services Limited ("Company") together with the audited financial statements for the year ended March 31, 2023.

FINANCIAL HIGHLIGHTS

(Rs. in million)

	Year	ended	Year	ended
Particulars	March	31,	March	31,
	2023		2022
Income		649.26		596.85
Expenses		557.31		525.39
Profit Before Tax		91.95		71.46
Profit After Tax		68.23		53.19
Other Comprehensive income / (loss)		(1.45)		(0.03)
Total Comprehensive Income		66.78		53.17
Add: Balance b/f from Previous Year		131.10		130.43
Total		197.88		183.6
Dividend-Equity		2.50		2.50
Transfer to Retained Earnings		50.00		50.00
Profit carried to Balance Sheet		142.88		131.10

OPERATIONS

The Company reported a total income of Rs.649.2 million, (Rs.596.85 million in the previous year) and profit before tax of Rs.91.95 million (Rs.71.46 million in the previous year). The Company has recorded around 11% increase in income and around 28% increase in profit before tax compared to the previous financial year.

The Company has further increased its order book during the year with new orders amounting to 700 million. With the orders carried forward, the Company's total order book will be around Rs. 613 million.

During the year, the Company expanded its service offering by launching a number of Strategic Projects in the area of 'Behavioural Science Based Safety' (BSBS) and 'Alliance Water Stewardship' (AWS) and has executed projects.

The Company has expanded its footprint to around 89 sites across the country, including resources deployed at various client project sites. Around 130 construction safety professionals and 104 logistics safety specialists are deployed at various locations for different companies. More than 325+ assignments in Process safety,

170+ in electrical and 50+ in environment were carried out successfully during the FY 2022-23.

During the year, the Company has strengthened its relationship with strategic alliance partners. Currently Business has association with the listed Strategic Alliance Partners namely 1) MSI, 2) Inogen, 3) EIC - Dubai, 4) NUTC - Abu Dhabi, and 5) Denxpert. The Company is also in discussion with Map My India, GHD & DGE to engage and explore opportunities in the area of Health, Sustainability, Safety & Risk (HSSR) Consulting. Business also continuing the local agent agreement with BPC Consultancy for executing Kuwait Projects. Engagement with educational institutions like Rajiv Gandhi Institute of Petroleum Technology (RGIPT) also continued during the year and preparing to introduce safety courses for the next year.

As a demonstration of Cholamandalam MS Risk Services (CMSRS) commitment to Environmental Health & Occupational Safety, the Company also upgraded its ISO certification by obtaining the ISO 14001 - 45001 during the year.

The Company continues to serve Cholamandalam MS General Insurance Company Limited and its clients through value-added services like Thermography, Safety Audits, and Cargo Loss Minimizations Studies.

The Company has crossed 375 resources mark and backed by a strong technical team of multidisciplinary and certified professionals having exposure to domestic and international markets.

The Joint Venture Partner, Mitsui Sumitomo Insurance Company Limited, Japan, continues to support the Company by introducing Japanese companies in the Indian market for risk management services.

During the year, the Company has contributed to CSR initiatives/ projects by undertaking 1) the cost of poison Centre specialists of Christian Medical College, Vellore, 2) towards Provision of Medical equipment to Mehta Hospital, Chennai (Dr Mehta's Medical Trust, Chennai), 3) Contribution towards documentation of Adai designs -Kalakshetra Foundation, Chennai.

PLANNING FOR 2023-24 AND THEREAFTER

The Company starts the new FY 2023-24 with a strong order book around Rs.613 million.

The Company looks forward to expanding its existing customer base through a targeted marketing and branding strategy in the domestic market and leveraging the customer base of its strategic alliance partners. The key initiatives planned include the implementation of an organizational restructuring that will enable the company to adapt to future requirements.

The Company is known for providing Engineering solutions to address safety, risk and sustainability. The Company plans to enter new areas such as green hydrogen and support companies in the energy transition. The Company will also focus on building its capabilities in the areas of Net zero consulting with its Inogen partners and planning to become active in the Environmental, Social and Governance (ESG) and reporting market.

A structural and forward-looking capability building programme will also be promoted across all verticals. Key Initiatives highlighted in the business plan in the form of new services, focusing emerging sectors, investing in startups to support digitalization offerings and strengthening execution excellence will be implemented in a planned manner.

DIVIDEND AND RESERVES

Your Directors are pleased to recommend a dividend of Rs.2.50 per equity share of Rs.10/- each resulting in a payment of Rs.5 million towards dividend for the FY 2022- 23.

An amount of Rs. 50 million has been transferred to General Reserve for the FY 2022- 23.

SHARE CAPITAL

During the year under review, there was no change in the Authorized Capital as well as Paidup Capital of the Company and the same stood at Rs.20 million.

DIRECTORS

Mr. V Suryanarayanan (DIN: 01416824), who was liable to retire by rotation, was reappointed as Director, by the shareholders at the Twenty Seventh Annual General Meeting (AGM) of the Company held on July 27, 2022.

Mr. Naoki Takeda (DIN: 09524037) and Mr. Tsutomo Aoki (DIN: 09568125) were appointed as Directors (liable to retire by rotation) by the Shareholders of the Company at the Twenty Seventh AGM held on July 27, 2022.

Mr. Makoto Hattori (DIN: 09130710) resigned from the office of Director with effect from closing of business hours on March 31, 2023.

The Board places on record its deep appreciation and gratitude to Mr. Makoto Hattori for his guidance and valuable contributions to the Company during his tenure.

Mr. Sridharan Rangarajan (DIN: 01814413), retires by rotation at the ensuing annual general meeting and being eligible, offers himself for re-appointment. Your Directors recommend his re-appointment.

Mr. Hayaki Ezaki (DIN: 10126414) was appointed as an Additional Director of the Company by the Board with effect from April 27, 2023, in place of Mr. Makoto Hattori. The office of Mr. Hayaki Ezaki as an Additional Director comes to an end at the conclusion of the ensuing annual general meeting. Your directors recommend his appointment as Director in the ensuing AGM.

KEY MANAGERIAL PERSONNEL

Pursuant to the provisions of Section 203 of the Companies Act, 2013 the Key Managerial Personnel of the Company as on March 31, 2023, are:

• Mr. N V Subba Rao, Chief Executive
• Mr. M Sundar, Company Secretary

BOARD MEETINGS

The Board of Directors meet at regular intervals with an annual calendar of meetings circulated at the beginning of the year. The dates of the Board meetings are fixed in advance for the full calendar year to enable maximum attendance from Directors.

During the year, five Board meetings were convened and held on the following dates: April 27, 2022, July 27, 2022, October 27, 2022, January 24, 2023 and March 17, 2023. The intervening gap between meetings did not exceed 120 days.

STATUTORY AUDITORS

The shareholders, at the twenty sixth AGM held on July 29, 2021, had re-appointed M/s Brahmayya & Co., Chartered Accountants, (Regn No. 000511S) as the statutory auditors of the Company to hold office for a period of five years commencing from the conclusion of the twenty sixth AGM till the conclusion of thirty first AGM. M/s Brahmayya & Co. have confirmed on satisfaction of the eligibility criteria prescribed under the Companies Act, 2013.

FRAUDS REPORTED BY AUDITORS

During the year under review, no fraud has been reported by the Statutory Auditor, under Section 143(12) of the Companies Act, 2013, against the Company by its officers or employees.

RELATED PARTY TRANSACTIONS

During the financial year ended March 31, 2023, all related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of Business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. Details of related party transactions are dealt with in note 29 in notes to accounts.

SUBSIDIARY/JOINT VENTURE/ASSOCIATE COMPANIES

The Company does not have any Subsidiary Company, Joint Venture and Associate Company during the Financial Year under review in terms of Companies Act, 2013.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

There are no significant material orders passed by the regulators / courts / tribunals which would impact the going concern status and the future business operations of the Company.

PUBLIC DEPOSITS

The Company has not accepted any public deposits during the year under review.

LOANS, GUARANTEES AND INVESTMENTS

The Company has not extended any loans, guarantees. Investments made as per the provisions of section 186 of the Companies Act, 2013, are given below:

				Rs. million
	Description	As on March 31,	Movement (Net	As on March 31,
		2022	of Deletions)	2023
	Investments made	1.65	-	1.65
	by the Company
MAINTENANCE OF COST RECORDS

The provisions of Section 148 of the Companies Act, 2013, and Rules framed thereunder pertaining to maintenance of cost records as well as appointment of Cost Auditors are not applicable to the Company.

RISK MANAGEMENT AND ADEQUACY OF INTERNAL FINANCIAL CONTROLS

The Board while considering the Business plan every year takes into account the business risks associated with it. No risk has been identified which would threaten the existence of the Company. The Company has in place internal control framework to provide reasonable assurance to ensure compliance with internal policies, regulatory matters and to safeguard reliability of financial reporting and its disclosures. The key observations, recommendations and compliance status of the previous key audit findings of internal auditors are presented to the Board at its quarterly meetings.

CORPORATE SOCIAL RESPONSIBILITY

Pursuant to Section 135 of the Companies Act, 2013 read with Schedule VII to the Act and the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board has approved and adopted a Corporate Social Responsibility (CSR) Policy. Various CSR activities have been undertaken by the Company during the year under review in accordance with the CSR Policy.