Your directors have the pleasure in presenting the 39^th Annual Report together with the audited financial statements of the Company for the financial year ended March 31, 2023. The summarised financial results of the Company are presented hereunder:

Your Company has adopted Indian Accounting Standards (IND AS) notified under Section 133 of Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules 2015.

Material Developments Initial Public Offer

During the financial year ended March 31, 2023, your Company, has successfully completed Initial Public Offer (“IPO” or “Issue”) of the 33,512,901 equity shares of face value of INR 1 each at a price of INR 474.00 per equity share, including premium of INR 473.00 per equity share aggregating to INR 1588.51 Crores through offer for Sale of equity shares by TPG Asia VII SF Pte. Ltd, Matrix Partners India Investment Holdings II LLC, Matrix Partners India Investments II Extension LLC, SCI Investments V and Norwest Venture Partners X - Mauritius, as named in the prospectus, and the shares of the Company were listed in National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) w.e.f November 21, 2022. The Annual Listing Fees for the financial year 2023-24 has been paid by your Company to both the Stock Exchanges.

Despite the difficult market conditions under which the IPO got consummated, noteworthy investors subscribed to the issue which reflects their confidence in your Company. Your Directors wish to place on record their gratitude for the trust, faith and confidence reposed by the institutional investors, public, and other shareholders in the Company even during the challenging environment, thus making the IPO successful.

Your Directors also place on record their deep appreciation for the significant contribution and sincere efforts made in the IPO process by the Merchant Bankers, legal counsels to the offer, Registrar to the Offer, Advertising Agency, Syndicate Members, Monitoring Agency, Bankers to the Offer, the Reserve Bank of India, Registrar of Companies - Chennai, Stock Exchanges, Management Team and Employees of the Company.

Review of Operations

Your Company is registered as a Systemically Important Non-deposit taking Non-Banking Finance Company (NBFC-ND SI) with the Reserve Bank of India. Your Company provides secured financial solutions to micro

entrepreneurs, individuals involved in small businesses and self-employed individuals for their business needs, asset creation requirements and to meet the other significant economic needs of the household. Most of these borrowers are hitherto excluded from the formal financial ecosystem and their credit needs are met primarily by unorganised institutions, friends and family.

Given that these borrowers lack formal and structured evidences of their incomes, your Company has built a proprietary underwriting model to evaluate their cash flows backed by robust monitoring and strong recovery mechanisms. Your Company continues to meet the credit needs of these borrowers, helps them graduate to the formal lending ecosystem giving them access to relatively lower cost finance and enabling them to repay their loan over the stipulated tenure of their loan while indulging in fair and transparent lending and collections practices.

The operating and financial performance of your Company has been covered in detail in the Management Discussion and Analysis report (“MDA”), which forms a part of this report. During the year, your Company has achieved stellar results across operational and financial metrics, which are laid down below.

Operational Metrics Disbursements

The Company caters to the financing needs of individuals involved in small businesses and self-employed individuals who satisfy the underwriting requirements laid down by your Company based on various parameters such as customer profile, liquidity/cashflow of the borrower, credit history, debt burden ratio (DBR) and loan to value (LTV). During the financial year ended March 31, 2023, your Company has disbursed INR 3,391.44 Crores of Loans as against INR 1,756.24 Crores during the previous financial year, registering a year-on-year (YoY) growth of 93%. The average ticket size as on March 31, 2023, stood at INR 3.03 lakhs as against average ticket size of INR 2.66 lakhs for the disbursals during year ended March 31, 2022.

Branch Metrics

Your Company follows a contiguous branch expansion strategy, which was continued in the current financial year as well. During the financial year

ended March 31, 2023 your Company has added 73 new branches resulting in the branch network increasing to 373 from 300 during the previous financial year.

Your Company now operates in the states of Tamilnadu, Andhra, Karnataka, Telangana, Madhya Pradesh, Maharastra, Chhattisgarh and Uttar Pradesh.

Financial Metrics

During the year under review, your Company has reported a total revenue from operations of INR 1,528.93 Crores, as against INR 1,256.17 Crores with a growth of 21.71% over previous financial year. Profit before tax was at INR 804.73 Crores as against INR 604.21 Crores with a growth of 33.19% over the previous financial year. Profit after Tax was at INR 603.50 Crores as against INR 453.54 Crores with a growth of 33.06% over the previous financial year. The Company’s net worth stood at INR 4,339.53 Crores as on March 31, 2023 (INR 3,710.35 Crores as of March 31, 2022).

The total loan assets under management as at March 31, 2023, increased to INR 6,914.83 Crores from INR 5,067.08 Crores during the previous financial year registering a growth of 36.47%.

Asset Quality

Your Company has a strong collection and proactive recovery management system leading to robust asset quality for the financial year ended March 31, 2023, when it had a Gross Stage 3 Assets of 1.36%, which is one of the best amongst companies operating in this customer segment. Despite the impact of 2 waves of COVID, your Company has managed to achieve one of the best asset qualities for the financial year, which is a testimony to your Company’s business model, rigorous underwriting norms, strong execution capability and the never-say-no attitude of an amazing team.

During the year ended March 31, 2023, your Company also implemented the daily DPD recognition and revised upgradation norms issued by RBI vide their circulars on Prudential Norms on Income recognition and Asset classification dated November 12, 2021 and February 15, 2022 (wherein implementation of upgradation norms were deferred to October 1, 2022), which are to be implemented by all Regulated Entities with effect from October 1, 2022.

Your Company is in adherence to the provision of Ind AS with respect to computation of Gross Stage 3 Assets. Your Company’s assets have been classified into various stages based on expected performance. Exposure at Default (EAD) is the total amount outstanding including accrued interest as on the reporting date. For the year ended March 31, 2023, your Company reported Gross Stage 3 Assets and Net Stage 3 Assets (under the revised Income Recognition and Asset Classification norms) of 1.36% and 0.69% respectively as against 1.05% and 0.68% respectively in the previous financial year (loans that are more than 90 days past due as at the end of the financial year classified as Gross Stage 3 Assets).

Resource Mobilization

Your Company’s overall borrowing is guided by a policy duly approved by the Board of Directors. Your Company has vide special resolution passed on April 22, 2021, under Section 180 (1)(c) of the Act, authorized the Board of Directors to borrow money upon such terms and conditions as the Board may think fit in excess of the aggregate of paid up share capital and free reserves of the Company up to an amount of INR 7000 Crores.

Your Company manages its borrowing structure through prudent Asset-Liability Management and takes various measures, which include diversification of funding sources, tenure optimization, and prudent borrowing timing to maintain its borrowing cost at optimum level.

During the financial year under review, your Company continued to broad base its funding sources by borrowing moneys from banks in the form of term loans, issuance of Secured Non-Convertible Debentures through the private placement route, and issuance of Pass-through Certificates as part of Securitization transactions. Your Company has also further diversified its borrowing by adding 4 (Four) new lenders/Financial Partners.

The weighted average borrowing cost as at March 31, 2023 was 10.12% (including Securitization transactions) as against 10.51% in the previous financial year. As at March 31, 2023, your Company’s sources of funding were primarily term loans from banks and financial institutions (62%), followed by Securitization (24%), Non-Convertible Debentures (12%), and External Commercial Borrowings (2%).

Term Loans from Banks and Financial Institutions

During the financial year under review, your Company has availed fresh borrowings aggregating to INR 3,103.56 Crores, including fresh Term Loans from Banks and Financial Institutions of INR 2,245.00 Crores. The outstanding Total Borrowings as at March 31, 2023 were INR 4,247.28 Crores. The weighted average tenure of fresh loans raised during the financial year under review was around 59 months.

Securitization of Loan Portfolio

Your Company has actively tapped the Securitization (PTC) market, which has enabled it to create liquidity, reduce the cost of funds and minimize asset liability mismatches.

During the financial year under review, your Company has securitised receivables worth INR 901.50 Crores for a sale consideration of INR 809.56 Crores. These Securitisation transactions were carried out in line with RBI guidelines on Securitization of Standard Assets and accounted in line with Indian Accounting Standards.

Debentures

During the financial year, your Company has issued INR 49 Crores fresh Non-Convertible Debentures (NCDs). Further, your Company has been very prompt in payment of its interest and principal obligations for the financial year ended March 31, 2023, and has complied with all the disclosure requirements stipulated under SEBI (LODR) Regulations, 2015.

Commercial Paper (CP)

Your Company has not issued any Commercial Paper & Short-Term Instrument during the financial year.

Prospects

The credit business has large potential in India, particularly in respect to lending to micro-entrepreneurs and self-employed individuals, who do not have access to formal means of financing. The CRISIL report on market potential, which is part of the Offer documents of your Company, pegs this demand at 22 trillion. Your directors are confident that the knowledge/ experience gained so far in this segment will augur well towards building a robust portfolio. Further details with respect to industry and Company prospects and other aspects relating to your Company’s operations have been covered in the Management Discussion and Analysis section, which forms part of this report.

Statutory and Regulatory Compliances

Your Company is a Non Deposit Taking Systematically Important NonBanking Financial Company (NBFC-ND-SI). The Company has complied

with and continues to comply with all applicable regulations, directions and prudential norms of the Reserve Bank of India.

Your Company has complied with the applicable regulations under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI (LODR), 2015) and Foreign Exchange Management Act (FEMA), 1999, Rules and Regulations thereunder.

Your Company has also complied with the applicable provisions of the Secretarial Standards issued by the Institute of Company Secretaries of India and has complied with all applicable compliances as required under the Companies Act, 2013.

Scale Based Regulation (SBR) - Revised Regulatory Framework for NBFCs

The Reserve Bank of India issued its final directions on Scale Based Regulatory Framework, which becomes effective from October 1, 2022. Recognising contribution of NBFCs towards supporting real economic activity and their role as a supplemental channel of credit intermediation alongside banks, RBI has identified the need to align the regulatory framework for NBFCs keeping in view their changing risk profile.

The SBR framework encompasses different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulation, etc. and RBI has come out with an integrated regulatory framework for NBFCs under SBR providing a holistic view of the SBR structure, set of fresh regulations being introduced and respective timelines.

Regulatory structure for NBFCs shall comprise of four layers based on their size, activity, and perceived riskiness. Given the asset size of your Company, it falls under the Middle Layer category. Your Company has also complied with all the relevant regulations under this new regulatory framework.

Change in Nature of Business

There was no change in the nature of business of your Company during the financial year ended March 31, 2023.

Dividend Distribution Policy

Your Company has formulated a Dividend Distribution Policy, with an objective to provide the dividend distribution framework to the Stakeholders of the Company. The policy sets out various internal and external factors, which shall be considered by the Board in determining the dividend pay-out. The policy is available on the website of the Company at https://fivestargroup.in/investors/.

Dividend

Your Directors have decided not to recommend any dividend for the financial year ended March 31, 2023, and the profit for the year will be deployed back into the business.

Transfer to Reserves

Your Company has transferred a sum of INR 120.70 Crores to the statutory reserve as required under the Reserve Bank of India Act, 1934.

Deposits

Your Company is a non-deposit taking Company. The Company has not accepted any public deposits during the financial year under review and has passed a Board resolution acknowledging the non-acceptance of deposits from public.

Capital Adequacy Ratio

Capital Adequacy Ratio of your Company as at March 31, 2023 under Ind-AS stood at 67.17%, as against the minimum requirement of 15% stipulated by Reserve Bank of India.

Changes in Equity Share Capital

During the financial year, your Company has:

a. Allotted 4,000 fully paid-up equity shares of INR 1 each on June 8, 2022, pursuant to Five-Star Associate Stock Option Scheme 2015

b. Allotted 19,000 fully paid-up equity shares of INR 1 each on June 8, 2022, pursuant to Five-Star Associate Stock Option Scheme 2018

The Company has only one class of equity shares and the authorised share capital of the Company as on March 31, 2023, was INR 55,00,00,000/-divided into 55,00,00,000 equity shares of INR 1 each, subscribed, issued & paid-up capital as on said date is 29,13,66,120 equity shares of INR 1 each.

Subsidiaries, Joint Ventures, Associate Companies

During the financial year ended March 31, 2023, your Company does not have a subsidiary / Associate / Joint Venture Company. Also, the Company did not become a part of any Joint Venture during the year.

Related Party Transactions

The Company has in place a policy on related party transactions as approved by the Board and the same is available on the website of the Company at https://fivestargroup.in/investors/.

All related party transactions that were entered into during the financial year were on arm’s length basis and in ordinary course of business. There were no materially significant transactions made by the Company with promoters, directors, key managerial personnel or other designated

Information as per Section 134(3)(m) of the Companies Act, 2013

The provisions of Section 134(3)(m) of the Companies Act, 2013, read along with the rules made thereunder relating to conservation of energy and technology absorption do not apply to your Company as it is not a manufacturing Company. However, your Company has been increasingly using information technology in its operations and promotes conservation of resources.

During the financial year ended March 31, 2023, the foreign currency expenditure of your Company stood at INR 6.22 Crores and there were no foreign currency earnings.

Information as per clauses (xi) and (xii) of Rule 8(5) of the Companies (Accounts) Rules, 2014

There was no application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 in respect of the Company during the financial year ended March 31, 2023, and there was no such application made or any proceeding as at March 31, 2023.

The Company has not entered into any one-time settlement with its lenders during the financial year ended March 31, 2023, and therefore the requirements of clause (xii) of Rule 8(5) of the Companies (Accounts) Rules, 2014 are not applicable.

Significant and Material Orders passed by the Regulators or Courts or Tribunals

There are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of your Company’s and its future operations.

Risk Management

Successful lending calls for timely identification, careful assessment and effective management of the credit, operational, market (interest-rate and liquidity) and reputation risks. The Company has adopted efficient risk management policies, systems and processes that seek to strike an appropriate balance between risk and returns.

The Company has also introduced appropriate risk-management measures, such as having multiple applicants for the loan, accessing all the applicants’ credit history from credit information bureaus, field investigation of the applicants’ credentials, multiple verification layers, adoption of prudent loan to value ratio and analysis and adoption of a conservative debt-service capacity of the borrowers, thorough in-house scrutiny of legal documents, which helps to understand and assess the borrowers’ intention and ability to repay.

Your Company has constituted a Risk Management Committee (RMC) which interalia lays down the review of procedures relating to risk assessment & risk minimization to ensure that the executive management controls risk through means of a properly defined framework and review of Credit & Portfolio Risk Management and Operational & Process Risk Management. Your Company also has a Chief Risk Officer, who is responsible for identification, measurement and mitigation of risks and also sensitizing the Board, Committees and Management to any potential risks that may arise on account of Company-specific factors or macro-economic factors.

RMC reviews the credit policy and practices to ensure that all portfolio related risks are well mitigated. The Company has given high importance to prudential lending practices and has put in place suitable measures for risk mitigation.

Your Company has also constituted an Asset Liability Committee (ALCO) which ensures that the liquidity and interest-rate risks are contained within the limits laid down by the Company.

Being dynamic, the risk management framework continues to evolve in line with the emerging risk perceptions.

Human Resource Development

Your Company’s success largely depends on the quality and competence of its human capital. Attracting, remunerating and retaining talented professionals is therefore a key element of your Company’s business strategy. Your Company has a strong Management team comprising of professionals with relevant experience and expertise in their domain areas, which is supplemented by an enthusiastic execution team at the branch level, who, with their superior execution skills, are able to bring the right results.

The customer acquisition, credit delivery, collection process and manpower strength of Non-Banking Financial Companies operating in similar customer profile were studied to align our staff strength after duly factoring for the differences in the business models of other entities. Accordingly, the staff strength at the regions and branches were streamlined, keeping in mind our acquisition process and market segment, adding people across functional verticals wherever required.

This approach has been working well for your Company to achieve the right level of productivity and growth. Apart from imparting advanced training to all front-line sales and marketing, credit and other staff which included the KYC and FPC training, employees were given on-the-job and off-the-job training programs.

Your Company has also benchmarked its compensation levels with the market, thus being in a position to attract and retain necessary talent, which is essential for growing the business in the years to come.

Your Company has continued to attract high quality professionals as part of the middle and senior management team and has also been in a position to get the right resources at the branches as well. As of March 31, 2023, your Company had 7,347 employees across branches, regional offices, and head office.

Directors

Your Company has a well diversified Board in terms of experience and expertise and the members of your Company’s Board are eminent persons of proven competence and integrity. They also have a strong commitment to your Company and devote adequate time to the meetings and preparation.

The Board of Directors comprises of 8 (eight) directors, consisting of 4 (Four) Independent Directors (including 1 woman Director), 3 Non-Executive Directors and 1 Executive Director - Chairman & Managing Director, as on March 31, 2023. The composition of the Board of your Company as on March 31, 2023 is given below:

During the financial year under review, the following changes took place in the composition of the Board of Directors:

• Mr Ramanathan Annamalai (DIN: 02645247) has stepped down as an Independent Director w.e.f May 25, 2022 due to completion of his term as Independent Director.

• Mr Ramkumar Ramamoorthy (DIN: 07936844) has been appointed as an independent Director (additional Director) for a term of 5 years by the board at its meeting held on June 8, 2022, and later his appointment as an independent Director was approved by the shareholders at the Annual General meeting held on September 2, 2022.

• Mr Lakshmipathy Deenadayalan, Chairman & Managing Director (DIN: 01723269) was re-appointed as CMD for a further period of 5 years with effect from June 01, 2022 by the Board of Directors at its meeting held on April 27, 2022, and the same was approved by the shareholders at the Annual General Meeting held on September 2, 2022

• During the last Annual General Meeting held on September 2, 2022, Mr Vikram Vaidyanathan, Non-Executive Director retired by rotation and being eligible offered himself for reappointment.

Further, following changes took place in the composition of the Board of Directors between the financial year end and the date of this report:

- In terms of Section 152 of the Companies Act, 2013, Mr Thirulokchand Vasan retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for reappointment. Based on the recommendation of the Nomination & Remuneration Committee and in the opinion of your Board, Mr Thirulokchand Vasan has requisite qualifications and experience and therefore, your directors recommend his reappointment in the ensuing Annual General Meeting.

Declaration from Independent Directors

Pursuant to Section 149(7) of the Companies Act, 2013 read along with Rule 6 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 of the Companies Act, 2013 and Regulation 25(8) of the SEBI (LODR) Regulations, 2015, the Company has received necessary declarations/ disclosures from each of the Independent Director of the Company stating that he/she meets the criteria of independence as required under Section 149(6) of the Companies Act, 2013 and that he/she has a valid certificate of registration for his/her enrollment into the data bank for Independent Directors.

In the opinion of the Board of Directors, the Independent Directors of your Company satisfy the necessary attributes as to integrity, experience (including proficiency) and high levels of skill and expertise.

Formal Annual Evaluation

As per the provisions of the Companies Act, 2013, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Committees. A structured exercise was carried out based on the criteria for evaluation forming part of the Directors Appointment, Remuneration & Evaluation Policy, including framework for performance evaluation of Directors, Board & Committees, Criteria for Evaluation and the inputs received from the Directors, covering various aspects of the Board’s functioning such as adequacy of the composition of the Board and its Committee, attendance at meetings, Board culture, duties of directors, and governance. The aforesaid policy is available on the website of the Company at https://fivestargroup.in/investors/.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as level of engagement and contribution, independence of judgment, safeguarding the interest of the Company and its stakeholders etc. The Directors have expressed their satisfaction with the evaluation process.

Committees of the Board

Your Company has the following Board level Committees, which have been constituted in compliance with the requirements of the business and other regulatory prescriptions:

1. Audit Committee (AC)

2. Nomination & Remuneration Committee (NRC)

3. Stakeholders Relationship Committee (SRC)

4. Risk Management Committee (RMC)

5. Corporate Social Responsibility Committee (CSR)

6. IT Strategy Committee

7. Business & Resource Committee (BRC)

8. Asset Liability Committee (ALCO)

During the year under review, all recommendations made by the aforesaid Committees have been accepted by the Board.

The details of Committee composition, terms of reference, number of meetings held, etc are given in the Corporate Governance Report.

Key Managerial Personnel

Pursuant to the provisions of Section 203 of the Companies Act, 2013 read with the rules made there under, the following employees are the wholetime key managerial personnel of the Company as on March 31, 2023:

a. Mr Lakshmipathy Deenadayalan, Chairman and Managing Director (DIN: 01723269)

b. Mr Rangarajan Krishnan, Chief Executive Officer

c. Mr Srikanth Gopalakrishnan, Chief Financial Officer

d. Ms Shalini Baskaran, Company Secretary

There are no changes in the composition of Key Managerial Personnel between the financial year end date and the date of this report.

Internal Financial Controls

The Company has a well-established and adequate internal financial control framework, with appropriate policies and procedures, to ensure the highest standards of integrity and transparency in its operations and a strong corporate governance structure, while maintaining excellence in services to all its stakeholders. 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 the accounting records and (e) timely preparation of reliable financial information.

Internal control framework including clear delegation of authority and standard operating procedures are established and laid out across all businesses and functions. These are reviewed periodically at all levels. The risk and control matrices are reviewed on a periodic basis and control measures are tested and documented. These measures have helped in ensuring the adequacy of internal financial controls commensurate with the scale of operations of the Company.

The Company has employed an independent consultancy firm to develop and periodically update risk control metrices, develop test plans and carry out independent testing procedures to evaluate the effectiveness of the controls. Their findings are presented to the Audit Committee, which helps the Committee to understand the strength of the controls and any improvements that may be required, as the Company keeps ramping up its operations.

Your Company has also built a strong Internal Audit mechanism, where audits are done on regular basis by in house Internal Audit team and External Internal Auditors of the Company.

The Audit Committee of the Company regularly reviews and monitors systems, internal controls, risk management measures, accounting procedures, financial management and operations of the Company and also the findings and recommendations presented by the Internal Audit team and External Internal Auditors as part of their periodic reports.

RBI, through its circular dated February 3, 2021, had introduced Risk based Internal Audit (RBIA) framework for NBFCs. NBFCs were required to put in place a RBIA framework by March 31, 2022. Your Company has complied with this circular, whereby a detailed RBIA policy, outlining the audit scope, audit framework and audit frequency, which will all be determined based on the risk inherent in each of the underlying processes, has been put in place and approved by the Audit Committee and by the Board of Directors. Your Company had also recruited a Chief Audit Officer, with significant years of audit experience in 2 of the big 4 Audit firms, who has been handling the RBIA function of your Company during the financial year under review.

Auditors

Statutory Auditors

Pursuant to Section 139 of the Companies Act, 2013 read with guidelines issued by Reserve Bank of India dated April 27, 2021, with regard to the appointment of Statutory Central Auditors (SCAs)/ Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs), M/s S R Batliboi & Associates LLP have been appointed as the Statutory Auditors of your Company for a period of three consecutive financial years viz 2021-22, 2022-23 and 2023-24 to hold office until the conclusion of the 40th Annual General Meeting, subject to their satisfaction of the eligibility criteria every year.

The Statutory Auditors have confirmed that they meet eligibility criteria prescribed under Companies Act 2013 & RBI Guidelines.

The Report of the Statutory Auditors with an unmodified opinion to the members is annexed and forms part of the financial statements and the same does not contain any qualification, reservation, adverse remark or disclaimer. There were no frauds detected or reported by the Auditors under sub-section (12) of section 143 of the Companies Act, 2013 during the financial year ended March 31, 2023.

Internal Auditor

To carry out internal audit of its operations, your Company has engaged M/s Sundaram & Srinivasan, Chartered Accountants, as its External Internal Auditors. Their audit is complemented by an In-house audit team. Between them, they cover the entire Internal Audit Scope which covers the activities carried out at Corporate Office and across branches of the Company. As a part of its efforts to evaluate the effectiveness of the internal control systems, your Company’s audit teams evaluate the adequacy of control measures on a periodic basis and recommends improvements, wherever appropriate.

The Audit Committee reviews the internal audit functions, scope of internal audit, as well as the adequacy and effectiveness of the internal systems and controls.

Secretarial Auditor

M/s S Sandeep & Associates, Practicing Company Secretaries were appointed to conduct the secretarial audit of the Company for the financial year 2022-23, as required under Section 204 of the Companies Act, 2013 and rules made thereunder & Regulation 24A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The secretarial audit report for the financial year ended March 31, 2023, forms part of this report as Annexure B and does not contain any qualification, reservation or adverse remarks.

Cost Records and Cost Audit

Maintenance of cost records and requirements of cost audit as prescribed under the provisions of section 148(1) of the Act is not applicable for the business activities carried out by your Company.

Information Technology

Over the past few years, technology has become an integral part of every Company’s business operations. In line with this, your Company has also put in place a robust technology framework, which provides for seamless business operations across the entire business value chain including sourcing, lead generation, underwriting, sanction, disbursement, collections and other back-office operations. Your Company has and will continue to make significant investments in technology to leverage the strengths of API infrastructure built by third party service providers, work towards building a robust credit scoring model and use data analytics and machine learning extensively for underwriting and portfolio analysis, which will help maintain strong asset quality. We expect these initiatives to make faster and more effective decisions and also better customer engagement and faster turnaround time.

On the security front, the IT Strategy Committee of your Company has laid down a comprehensive policy relating to Cyber Security, Business Continuity, Outsourcing and Information Security / Technology, in line with its terms of reference. In its continuous efforts to ensure a secure environment, your Company has built a robust infrastructure and carries out periodic comprehensive vulnerability assessments and penetration testing, to identify and minimize external threats. An independent Information Systems audit has been carried out during the financial year.

Corporate Social Responsibility (CSR)

Pursuant to Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, your Company has adopted a Policy on CSR which is placed on the website of the Company at https://fivestargroup.in/investors/.

As per Section 135 of the Companies Act, 2013, Your Company was required to spend an amount of INR 9.61 Crores equivalent to 2% of the average net profits of the last three (3) financial years as CSR contribution. During the FY 2022-23, your Company has spent an amount of INR 9.61 Crores as against prescribed CSR Expenditure of INR 9.61 Crores.

The Annual Report on CSR activities for the financial year ended March 31, 2023, is attached as Annexure C to this Report.

Whistle Blower Policy & Vigil Mechanism

As per the provisions of Section 177(9) of the Companies Act, 2013, and Regulation 22 of the SEBI (LODR) Regulations, 2015, your Company has established a Vigil Mechanism and has adopted a Whistle Blower Policy for directors and employees to report their genuine concerns. The Whistle Blower Policy has been formulated with a view to provide a mechanism for employees and directors to approach the Audit Committee of the Company. The said policy is available on the website of the Company at https://fivestargroup.in/investors/.

The Vigil mechanism of the Company is overseen by the Audit Committee and provides adequate safeguard against victimization of employees and directors and also provides direct access to the Chairperson of Audit Committee in exceptional circumstances.

During the year under review, no complaints were received by the Company and no complaints are outstanding as on March 31, 2023.

Board & its Committees

During the financial year ended March 31, 2023, 15 (Fifteen) Board Meetings were held on April 27, 2022, May 12, 2022, June 8, 2022, July 26, 2022, October 6, 2022, October 12, 2022, October 13, 2022, November 01, 2022, November 2, 2022, November 7, 2022, November 15, 2022, November 17, 2022, November 28, 2022, January 28, 2023 and February 25, 2023, and not more than 120 days elapsed between any two meetings.

The details of composition of the Board and its Committees, terms of reference of the Committees and the details of meetings held during the financial year are furnished in the Corporate Governance Report.

Corporate Governance

Your Company is committed to maintain the highest standards of Corporate Governance and adheres to Corporate Governance requirements set out by regulators. A report on Corporate Governance is enclosed and form part of this report as Annexure D.

The Chief Executive Officer and the Chief Financial Officer have submitted a compliance certificate to the board regarding the financial statements and other matters as required under regulation 17(8) of the SEBI (LODR) 2015.

A Certificate from Practicing Company Secretary affirming the compliance of Corporate Governance norms as required under SEBI (LODR) 2015 is annexed to the Corporate Governance report.

Management Discussion and Analysis

A report on the Management Discussion and Analysis (MDA), highlighting the business-wise details is attached and forms part of this report as Annexure E.

Business Responsibility and Sustainability Reporting

As per Regulation 34(2)(f) of SEBI LODR regulations, top 1,000 (one thousand) listed entities based on market capitalization, shall attach a Business Responsibility and Sustainability Report (BRSR) with the Annual Report, describing the environmental, social and governance initiatives undertaken by the listed entities.

In line with this regulation, your Company has put together a BRSR report (along with an Environmental, Social & Governance (ESG) report) which outline the initiatives undertaken by your Company to be a respectable lender across these 3 parameters. The BRSR report also forms part of this report as Annexure F.

Disclosures under POSH Act, 2013

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 and Redressal) Act, 2013 (POSH Act) and the same is available on the website of the Company at https://fivestargroup.in/investors/. Your Company has complied with the provisions relating to the constitution of Internal Complaints Committees (ICC) under POSH Act. ICC has been set up to redress complaints received regarding sexual harassment.

During the year under review, no complaints were received. None was pending unresolved as on March 31, 2023.

Particulars of Employees and Related Disclosures

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, necessary disclosures are provided in the Annual Report as Annexure G.

Code of Conduct

The board has laid down a “Code of Conduct” for all the Board Members and the senior management of the Company and the same has been posted on the website of the Company.

All Board members and senior management personnel have affirmed compliance with the Company’s code of conduct for the financial year 2022-23. A declaration to this effect is included in Corporate Governance report forming part of this Annual Report.

Code for Prevention of Insider Trading

In compliance with the PIT guidelines issued by SEBI, as amended from time to time, your Company has adopted the following policies / codes of conduct:

a. Code of Conduct for Regulating, Monitoring and Reporting of Trading by Insiders

b. Company’s Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information (UPSI)

to regulate, monitor and report trading by insiders in securities of the Company. The objective of this code is to protect the interest of the shareholders at large, to prevent misuse of any price sensitive information and prevent insider trading. The board has further approved policy governing the procedure of inquiry in case of actual or suspected leak of unpublished price sensitive information. The code has also been hosted on the website of the Company.

Investor Relations

In order to ensure that your Company stays engaged with all the investors (current and potential) and analysts, your Company has put together an Internal Investor Relations team, which will ensure transparent and adequate disclosures viz. periodic earnings calls, video-conferences, conference participations and one-on-one meetings. The intent to be seen as a benchmark in terms of investor outreach.

Your Company also ensures that critical information is made available to all the investors through upload of such information on the website. Your Company also intimates Stock exchanges regarding upcoming events like earnings calls, declaration of quarterly and annual results and such other information which could potentially have a bearing on the share price of the Company. Additionally, your Company also discloses to the Stock exchanges, any potential meetings with investors / analysts who have evinced their interest to meet up with the Management team.