2.15 Provisions, contingent liabilities and contingent assets:

Provisions are recognised when there is a present obligation (Legal, or constructive) as a result of a past event, and it is probabLe that an outflow of resources embodying economic benefits wiU be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are reviewed at each ba,ance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed. Provisions are not recognised for future operating losses.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate

that reflects current market assessments of the time value of money and the risks specific to the liability

When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision is made. The disclosure of contingent liability is made when there is a possib,e ob,igation or present obligation that may, but probably will not, require an outflow of resources. The Company also discloses present obligation for which a reliable estimate cannot be made as a contingent liability. Contingent Liabilities are reviewed at each Balance Sheet date.

A contingent asset is disclosed where an inflow of economic benefit is probable. When some or aU economic benefits required to settle a provision are expected to be recovered from third party, a recievable is recognised as an asset, if it is virtually certian that reimbursement will be recieved and the amount can be measured reliably.

2.16 Leases :

The Company as a lessee -

As a lessee, the Company's lease asset class primarily consist of buildings or part thereof taken on lease for office premises, certain IT equipments and general purpose office equipments used for operating activities. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially aU of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.

At the date of commencement of the lease, the Company recognises a right-of-use asset ("ROU") and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (shortterm leases) and Low value leases. For these shortterm and Low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.

The carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term,

a change in the Lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such Lease payments) or a change in the assessment of an option to purchase the underlying asset. ROU assets and corresponding lease liabilities constitute lease contracts for office premises.

Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that option to extend will be exercised and option to terminate will not be exercised.

The right-of-use assets are initially recognised at cost which comprises of initial amount of lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. These are subsequently measured at cost less accumulated depreciation and impairment losses, if any. Right-of-use assets are depreciated from the commencement date on a straight-line basis over the lease term.

The lease liability is initially measured at amortised cost at the present value of the future lease payments that are not paid at the commencement date, discounted using the Company's incremental average borrowing rate. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment of whether it will exercise an extension or a termination option.

In the Balance Sheet, ROU assets have been included in Property, Plant and Equipment and Lease liabilities have been included in Other financial liabilities and the principal portion of lease payments have been classified as financing cash flows. The Company has used a single discount rate to a portfolio of leases with similar characteristics.

Where the Company is the lessor -

At the inception of the lease, the Company classifies each of its leases as either a finance lease or an operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.

The Company has given certain vehicles on lease where it has substantially retained the risks and rewards of ownership and hence these are classified as operating leases. These assets given on operating lease are included in PPE. Lease

income is recognised in the Statement of profit and loss as per contractual rental unless another systematic basis is more representative of the time pattern in which the benefit derived from the leased asset is diminished. Costs including depreciation are recognised as an expense in the Statement of profit and loss. Initial direct costs are recognised immediately in Statement of profit and loss.

In case of assets under Finance Lease, amount receivable from lessees are recognised at the net investment in the leases measured by using the interest rate implicit in the lease contract. All initial direct cost incurred to put the leased asset for intended use are included in the initial measurement of net investment.

In accordance with Ind AS 116, Leases, the financial information has been presented in the following manner.

a) ROU assets and lease liabilities have been included within the line items "Property, Plant and Equipment" and "Other financial liabilities" respectively in the Balance sheet;

b) Interest expenses on the lease liability and depreciation charge for the right-to-use asset have been included within the line items "Finance costs" and "Depreciation, amortisation and impairment" respectively in the statement of profit or loss;

c) Short-term lease payments and payments for leases of low-value assets, where exemption as permitted under this standard is availed, have been recognised as expense on a straight line basis over the lease term in the statement of profit or loss.

d) Cash payments for the principal of the lease liability have been presented within "financing activities" in the statement of cash flows;

The disclosures as required in accordance with Ind AS 116, Leases, are set out under note no. 40.

2.17 New standards or amendments to the existing standards and other pronouncements :

Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. As on 31 March 2024, there is no new standard notified or amendment to any of the existing standards under Companies (Indian Accounting Standards) Rules, 2015.

Other Equity

Description of the nature and purpose of Other Equity (refer Statement of Changes in Equity) :

Statutory reserve as per Section 45-IC of the RBI Act, 1934

Statutory reserve represents reserve fund created pursuant to Section 45-IC of the RBI Act, 1934 through transfer of specified percentage of net profit every year before any dividend is decLared. The reserve fund can be utiLised only for Limited purposes as specified by RBI from time to time and every such utilisation shall be reported to the RBI within specified period of time from the date of such utilisation.

Capital redemption reserve (CRR)

Capital redemption reserve represents reserve created pursuant to Section 55 (2) (c) of the Companies Act, 2013 by transfer of an amount equivalent to nominal value of the Preference shares redeemed. The CRR may be utilised by the Company, in paying up unissued shares of the Company to be issued to the members of the Company as fully paid bonus shares in accordance with the provisions of the Companies Act, 2013.

Securities premium

Securities premium is used to record the premium on issue of shares. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.

General reserve

General reserve is created through annual transfer of profits at a specified percentage in accordance with applicable regulations under the erstwhile Companies Act, 1956. Consequent to introduction of the Companies Act, 2013, the requirement to mandatorily transfer specified percentage of net profits to General reserve has been withdrawn. However, the amount previously transferred to the General reserve can be utilised only in accordance with the specific requirements of the Companies Act, 2013.

Employee stock options outstanding

The Employee Stock Options outstanding represents amount of reserve created by recognition of compensation cost at grant date fair value on stock options vested but not exercised by employees and unvested stock options in the Statement of profit and loss in respect of equity-settled share options granted to the eligible employees of the Company and its subsidiaries in pursuance of the Employee Stock Option Plan.

Retained earnings

Retained earnings or accumulated surplus represents total of all profits retained since Company's inception. Retained earnings are credited with current year profits, reduced by losses, if any, dividend pay-outs, transfers to General reserve or any such other appropriations to specific reserve.

Dividend distributions made and proposed

i) Dividend on equity shares decLared and paid during the year

35 Employee Stock Option Plan

The Company had allotted 48,45,025 Equity shares (face value of ^ 2/- each) under Employee Stock Option Scheme 2010 at par on 3^rd February 2011 to Mahindra and Mahindra Financial. Services Limited Employees' Stock Option Trust ("the Trust") set up by the Company. The Trust hoLds these shares for the benefit of the employees and issues them to the eLigibLe employees as per the recommendation of the Compensation Committee.

Pursuant to the Rights issue of one equity share for every equity share heLd as on record date, at an issue price of ^ 50 per Equity Share (including a premium of ^ 48 per Equity Share), made by the Company, 20,63,662 equity shares have been aLLotted to the Trust in respect of its rights entitlement on 17^th August 2020. ALL the option hoLders (beneficiaries) under existing grants have automatically became entitLed to additional options at ^ 50/- per option as rights adjustment and accordingly, the number of outstanding options stand augmented in the same ratio as the rights issue. ALL the terms and conditions appLicabLe to these additional options issued under rights issue shaLL remain same as originaL grant.

Upon exercise of stock options, including additional options issued as per Rights issue, under the scheme by eligible employees, the Trust had issued 65,50,154 equity shares to employees up to 31^st March 2024 (31^st March 2023: 57,62,513 equity shares), of which 7,87,641 equity shares (31^st March 2022: 6,42,714 equity shares) were issued during the current year. This has resuLted in an increase in equity share capitaL by ^ 0.16 crore for the year ended 31^st March 2024 (31^st March 2023 : ^ 0.13 crore).

f) Determination of expected volatility

The measure of voLatiLity used in the BLack-SchoLes option pricing model, is the annuaLised standard deviation of the continuousLy compounded rates of return on the stock over a period of time.

The determination of expected voLatiLity is based on historicaL voLatiLity of the stock over the most recent period that is generaLLy commensurate with the expected Life of the option being vaLued. The period considered for voLatiLity is adequate to represent a consistent trend in the price movements and the movements due to abnormal, events are evened out.

AccordingLy, since each vest has been considered as a separate grant, the modeL considers the voLatiLity for periods, corresponding to the expected Lives of different vests, prior to the grant date. VoLatiLity has been caLcuLated based on the daiLy cLosing market price of the Company's stock price on NSE over these years. SimiLar approach was foLLowed in determination of expected voLatiLity based on historicaL voLatiLity for aLL the grants under the scheme.

In respect of stock options granted under EmpLoyee Stock Option Scheme 2010 and MMFSL RSU PLAN 2023, the accounting is done as per the requirements of Ind AS 102 - Share-based payment. ConsequentLy, ^ 4.49 crore (31^st March 2023: ^ 4.55 crore) has been incLuded under 'EmpLoyee Benefits Expense' as 'Share-based payment to empLoyees' based on respective grant date fair vaLue, after adjusting for reversaLs on account of options forfeited. The amount incLudes cost reimbursements to the hoLding company of ^ 1.69 crore (31^st March 2023: ^ 1.05 crore) in respect of options granted to empLoyees of the Company and excLudes net recovery of ^ 0.01 crore (31^st March 2023: ^ 0.22 crore) from its subsidiaries for options granted to their empLoyees.

36 Employee benefits

General description of defined benefit plans Gratuity

The Company provides for the gratuity, a defined benefit retirement pLan covering quaLifying empLoyees. The pLan provides for Lump sum payments to empLoyees upon death whiLe in empLoyment or on separation from empLoyment after serving for the stipuLated period mentioned under The Payment of Gratuity Act, 1972. The Company makes annuaL contribution to the Gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity fund.

Post retirement medical cover

The Company provides for post retirement medicaL cover to seLect grade of empLoyees to cover the retiring empLoyee and their spouse up to a specified age through MedicLaim poLicy on which the premiums are paid by the Company. The eLigibiLity of the empLoyee for the benefit as weLL as the amount of medicaL cover purchased is determined by the grade of the empLoyee at the time of retirement.

Through its defined benefit pLans the Company is exposed to a number of risks, the most significant of which are detaiLed beLow:

Asset volatility -

The pLan Liabilities are caLcuLated using a discount rate set with references to government bond yieLds, if pLan assets underperform compared to this yieLd, this wiLL create or increase a deficit. The defined benefit pLans may hoLd equity type assets, which may carry voLatiLity and associated risk.

Change in bond yields -

A decrease in government bond yieLds wiLL increase pLan LiabiLities, aLthough this is expected to be partiaLLy offset by an increase in the vaLue of the pLan's investment in debt instruments.

Variability in withdrawal rates -

If actuaL withdrawaL rates are higher than assumed withdrawaL rate assumption then the gratuity benefits wiLL be paid earLier than expected. The impact of this wiLL depend on whether the benefits are vested as at the resignation date.

Regulatory Risk -

Gratuity Benefit must compLy with the requirements of the Payment of Gratuity Act, 1972 (as amended up-to-date). There is a risk of change in the reguLations requiring higher gratuity payments (e.g. raising the present ceiLing of ^ 20,00,000, raising accruaL rate from 15/26 etc.).

Inflation risk -

The present vaLue of some of the defined benefit pLan obLigations are caLcuLated with reference to the future saLaries of pLan participants. As such, an increase in the saLary of the pLan participants wiLL increase the pLan's LiabiLity. The post retirement medicaL benefit obLigation is sensitive to medicaL infLation and accordingLy, an increase in medicaL infLation rate wouLd increase the pLan's LiabiLity.

Life expectancy -

The present vaLue of defined benefit pLan obLigation is caLcuLated by reference to the best estimate of the mortaLity of pLan participants, both during and after the empLoyment. An increase in the Life expectancy of the plan participants wiU increase the plan's liability.

If actuaL mortaLity rates are higher than assumed mortaLity rate assumption than the gratuity benefits wiLL be paid earLier than expected. Since there is no condition of vesting on the death benefit, the acceLeration of cashfLow wiLL Lead to an actuariaL Loss or gain depending on the reLative vaLues of the assumed saLary growth and discount rate.

The estimate of future saLary increases, considered in actuarial, valuation, considers inflation, seniority, promotion and other reLevant factors, such as suppLy and demand in the employment market.

The pLan assets have been primarily invested in government securities and corporate bonds.

The cost of the defined benefit plans and other long term benefits are determined using actuarial valuations. Actuarial valuations involve making various assumptions that may differ from actual developments in the future. These includes the determination of the discount rate, future salary increases and mortality rate. Due to these complexity involved in the valuation it is highly sensitive to the changes in these assumptions. AH assumptions are reviewed at each reporting date. The present value of the defined benefit obligation and the related current service cost and planned service cost were measured using the projected unit cost method.

The Company's contribution to provident fund, superannuation fund and national pension scheme aggregating to ^ 78.39 crore (31^st March 2023: ^ 70.23 crore) has been recognised in the Statement of profit and loss under the head Employee benefits expense.

37 Additional disclosures

i) During the financial years ended 31^st March 2024 and 31^st March 2023, the Company has not granted any loans or advances in the nature of loans to promoters, directors, KMPs and the related parties (as defined under the Companies Act, 2013), either severally or jointly with any other person (a) repayable on demand or (b) without specifying any terms or period of repayment.

ii) There is no Benami Property held by the Company and there is no proceedings have been initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

iii) Disclosure of transactions with the companies struck off under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956

Integrated Report 2023-24 303

iv) There is no charges or satisfaction in relation to any debt / borrowings yet to be registered with ROC beyond the statutory period.

v) The Company has compLied with the number of Layers prescribed under cLause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.

vi) Utilisation of Borrowed funds and share premium:

A) The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shaLL -

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;

B) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shaLL -

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

vii) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

viii) There are no transactions which have not been recorded in the books of accounts and has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961. Also, there are no previously unrecorded income and related assets.

ix) All the secured non-convertible debentures of the Company including those issued during the year ended 31 March 2024 are fully secured by pari-passu charge on Aurangabad office (wherever applicable) and/or exclusive charge on present and/or future receivables under Loan contracts/Hire Purchase/Lease, owned Assets and book debts. Further, the Company in respect of secured listed nonconvertible debt securities maintains 100% security cover or higher security cover as per the terms of Term Sheet/Offer document/Information Memorandum and/or Debenture Trust Deed, sufficient to discharge the principal amount and the interest thereon.

The asset cover available as on 31^st March 2024 in respect of listed secured debt securities is 1.08 (March 2023: 1.09).

38 Transactions in the nature of change in ownership in group entities

Pursuant to Share Purchase Agreement dated 21^st October 2022 entered into by the Company with Inclusion Resources Private Limited (IRPL) to acquire balance 20% equity stake in its subsidiary Mahindra Insurance Brokers Ltd (MIBL) and on receipt of approval from the Insurance Regulatory and Development Authority of India (IRDAI), the Company has completed the acquisition of 20,61,856 Equity shares of ^ 10 each of MIBL, at a price of ^ 1001 per share on 22^nd September 2023 involving a pay-out of ^ 206.39 crore which has resulted in an increase in equity investment of an equivalent amount. Consequent to this acquisition, MIBL has become a wholly owned subsidiary of the Company effective from 22^nd September 2023.

39 Capital management

The Reserve Bank of India vide its circular reference RBI/2019-20/170 DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated 13 March 2020 outlined the regulatory guidance in relation to Ind AS financial statements from financial year 2019-20 onwards. This included guidance for computation of 'owned funds', 'net owned funds' and 'regulatory capital'. Accordingly, effective from the financial year ended 31^st March 2020, the 'regulatory capital' has been computed in accordance with these requirements read with the requirements of the Master Direction DNBR. PD. 008/03.10.119/2016-17 dated 1^st September 2016 (as amended).

The Company's capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or convertible and/or combination of short term/long term debt as may be appropriate.

The Company determines the amount of capital required on the basis of operations, capital expenditure and strategic investment plans. The capital structure is monitored on the basis of net debt to equity and maturity profile of overall debt portfolio.

The Company is subject to the capital adequacy requirements of the Reserve Bank of India (RBI). Under RBI's capital adequacy guidelines, the Company is required to maintain a capital adequacy ratio consisting of Tier I and Tier II Capital. The total of Tier II Capital at any point of time, shall not exceed 100 percent of Tier I Capital. The minimum capital ratio as prescribed by RBI guidelines and applicable to the Company, consisting of Tier I and Tier II capital, shall not be less than 15 percent of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet.

The Company has compLied with aLL reguLatory requirements reLated to capitaL and capitaL adequacy ratios as prescribed by RBI.

"Tier I Capital' means owned fund as reduced by investment in shares of other non-banking financial companies and in shares, debentures, bonds, outstanding loans and advances including hire purchase and lease finance made to and deposits with subsidiaries and companies in the same group exceeding, in aggregate, ten per cent of the owned fund.

"Owned fund" means paid up equity capital, preference shares which are compulsorily convertible into equity, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of asset, excluding reserves created by revaluation of asset, as reduced by accumulated loss balance, book value of intangible assets and deferred revenue expenditure, if any.

“Tier II capital” includes the following -

(a) preference shares other than those which are compulsorily convertible into equity;

(b) revaluation reserves at discounted rate of fifty five percent;

(c) General provisions (including that for Standard Assets) and loss reserves to the extent these are not attributable to actual diminution in value or identifiable potential loss in any specific asset and are available to meet unexpected losses, to the extent of one and one fourth percent of risk weighted assets. 12 month expected credit loss (ECL) allowances for financial instruments i.e. where the credit risk has not increased significantly since initial recognition, shall be included under general provisions and loss reserves in Tier II capital within the limits specified by extant regulations. Lifetime ECL shall not be reckoned for regulatory capital (numerator) while it shall be reduced from the risk weighted assets;

(d) hybrid debt capital instruments; and

(e) subordinated debt to the extent the aggregate does not exceed Tier I capitaL.

Aggregate Risk Weighted Assets -

Under RBI Guidelines, degrees of credit risk expressed as percentage weightages have been assigned to each of the on-balance sheet assets and off- balance sheet assets. Hence, the value of each of the on-balance sheet

assets and off- baLance sheet assets requires to be muLtipLied by the relevant risk weights to arrive at risk adjusted value of assets. The aggregate sha! be taken into account for reckoning the minimum capital ratio.

40 Leases

I) In the cases where assets are taken on operating lease (as lessee) -

As a lessee, the Company's lease asset class primarily consist of buildings or part thereof taken on lease for office premises, certain IT equipments and general purpose office equipments used for operating activities.

In accordance with the requirements under Ind AS 116, Leases, the Company has recognised the lease liability at the present value of the future lease payments discounted at the incremental borrowing rate at the date of initial application as at 1^st April 2019, and thereafter, at the inception of respective lease contracts, ROU asset equal to lease liability is recognized at the incremental borrowing rate prevailed during that reLevant period subject to certain practical, expedients as allowed by the standard.

The weighted average incremental borrowing rate of 7.97% has been applied to lease liabilities recognised in the balance sheet at the date of initial application.

II) In the cases where assets are given on operating lease (as lessor) -

Key terms of the lease are as below :

i) Both New and Used vehicles are offered on Lease for a tenure ranging from 24 to 60 months.

ii) Customised leasing solutions are offered with value-added services like Fleet Management with regards to vehicle maintenance, Insurance management including claim settlement, pick-up and drop, replacement vehicle etc.

iii) The consideration payable is the monthly lease rental which varies based on the make / model of the vehicle and tenure leased.

Rental income arising from these operating leases is accounted for on a straight-line basis over the lease terms and is included in rental income in the Statement of profit and Loss. Costs, including depreciation, incurred in earning the lease income are recognised as an expense.

41 Operating segments

There is no separate reportabLe segment as per Ind AS 108 on 'Operating Segments’ in respect of the Company.

The Company operates in singLe segment only. There are no operations outside India and hence there is no externaL revenue or assets which require disclosure.

No revenue from transactions with a singLe externaL customer amounted to 10% or more of the Company's totaL revenue in year ended 31^st March 2024 or 31^st March 2023.

42 Frauds reported during the year

i) There were 160 cases (31^st March 2023: 91 cases) of frauds amounting to ^ 142.63 crore (31^st March 2023: ^ 2.68 crore) reported during the year. The Company has recovered an amount of ^ 5.34 crore (31^st March 2023: ^ 0.65 crore) and has initiated appropriate LegaL actions against the individuals invoLved. The cLaims for the un-recovered Losses have been Lodged with the insurance companies on merit basis.

The above fraud amounting to ^ 142.63 crore for the year ended 31^st March 2024 incLudes an amount of fraud instance mentoned under point ii) beLow.

ii) During the quarter and year ended 31^st March 2024, the Company detected a fraud at its Branch in AizawL, Mizoram ("the Branch"), in respect of retaiL vehicLe Loans disbursed by the Company. The fraud was perpetrated in the Branch through collusion amongst some Branch employees, with segregated duties, by forgery of KYC and asset reLated documents and invoLvement of other externaL peopLe incLuding vehicLe deaLers, Leading to embezzLement of the Company's funds.

The Company has appointed a Law firm and an accounting firm to undertake a fact-finding assessment of the aforesaid suspected irreguLarities ("Assessment"). Based on the resuLts of the Assessment by the accounting firm and the management, 2,887 Loan accounts were identified by the Management as potentiaLLy frauduLent in nature. These Loans had an outstanding net recoverabLe baLance of ^ 135.86 crore as of 31^st March 2024, which have been fuLLy provided.

43 On 16^th March 2024, the Company experienced a cyber security incident resuLting in non-avaiLabiLity of certain appLications and systems for a period of 4 days. The Company engaged cybersecurity speciaLists to assist in the investigation of and response to the incident and remediation and restoration of the impacted appLications and systems. By 22^nd March 2024, the Company buiLt back the impacted appLications and systems from immutabLe backups. The core systems remained unimpacted and peripheraL systems were restored by 25 March 2024. The investigation by the cybersecurity speciaLists has been compLeted and they have confirmed that aLL the servers containing data pertaining to books of accounts have no evidence of unauthorised access or exfiLtration.

45 Transfer of financial assets

Transferred financial assets that are not derecognised in their entirety

The Company has transferred certain pooLs of fixed rate Loan receivabLes backed by underLying assets in the form of tractors, vehicLes, equipments etc. by entering in to securitisation transactions with the SpeciaL Purpose VehicLe Trusts ("SPV Trust") sponsored by CommerciaL banks for consideration received in cash at the inception of the transaction.

The Company, being Originator of these Loan receivabLes, aLso acts as Servicer with a responsibiLity of coLLection of receivabLes from its borrowers and depositing the same in CoLLection and Pay-out Account maintained by the SPV Trust for making scheduLed pay-outs to the investors in Pass Though Certificates (PTCs) issued by the SPV Trust. These securitisation transactions aLso requires the Company to provide for first Loss credit enhancement in various forms, such as corporate guarantee, cash coLLateraL, subscription to subordinated PTCs. as credit support in the event of shortfaLL in coLLections from underLying Loan contracts. By virtue of existence of credit enhancement, the Company is exposed to credit risk, being the expected Losses that wiLL be incurred on the transferred Loan receivabLes to the extent of the credit enhancement provided.

In view of the above, the Company has retained substantiaLLy aLL the risks and rewards of ownership of the financiaL asset and thereby does not meet the de-recognition criteria as set out in Ind AS 109. Consideration received in this transaction is presented as "Associated liability related to Securitisation transactions" under Note no.16.

The foLLowing tabLe provide a summary of financiaL assets that have been transferred in such a way that part or aLL of the transferred financiaL assets do not quaLify for de-recognition, together with the associated LiabiLities:

46 Corporate Social Responsibility (CSR)

The Corporate Social. Responsibility Committee ('CSR Committee' Board LeveL) is responsible to formuLate and recommend to the Board the CSR Policy indicating the activities faUing within the purview of Schedule VII to the Companies Act, 2013, to be undertaken by the Company, to recommend the amount to be spent on CSR activities presented by the Financial Services Sector CSR Council ('FSS CSR Council') and to monitor the CSR PoLicy periodically.

Funding and Allocation:

For achieving the CSR objectives through implementation of meaningful and sustainable CSR Projects, the CSR Committee wiU aHocate for its Annual CSR Budget, 2% of the average net profits of the Company made during the three immediately preceding financial years, calculated in accordance with the relevant Sections of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014.

The Company may spend up to 5% of the total CSR expenditure in one financial year on building CSR capabilities. The Company may also make contributions to its Corporate Foundations/Trusts i.e. K. C. Mahindra Education Trust and Mahindra Foundation, towards its corpus for projects approved by the Board. The CSR Committee wiU approve the CSR budget annually on receiving the recommendations from FSS CSR Council. Any unspent amount at the end of the financial year wiU be treated as per the provisions of the existing CSR Law. Any surplus arising out of the CSR Projects or Programs or activities shaU not form part of the business profit of the Company.

The Company has set up the Mahindra Finance CSR Foundation (incorporated on 2^nd April, 2019) as a wholly-owned subsidiary company registered under Section 8 of the Companies Act, 2013 to promote and support CSR projects and activities of the Company and its subsidiary companies. The Company implements its CSR programs through the Mahindra Finance CSR Foundation.

The Company has identified CSR Thrust Areas for undertaking CSR Projects/programs/activities in India. The actual distribution of the expenditure among these thrust areas wiU depend upon the local needs as may be determined by the need identification studies or discussions with local government/Gram panchayat/ NGOs. The Company shaU give preference to the local area and areas around which the Company operates for CSR spending. Thrust areas include health, education, environment and other activities.

The amount spent or contribution/donations made towards CSR activities is charged to Corporate Social Responsibility (CSR) expenses, in the statement of Profit and Loss.

The CSR activities of the Company shaU include, but not limited to any or aU of the sectors/activities as may be prescribed by Schedule VII of the Companies Act, 2013 amended from time to time. Further, the Company reviews the sectors/activities from time to time and make additions/deletions/darifications to the above sectors/ activities.

During the year ended 31 March 2024, the Company has incurred an expenditure of ^ 24 crores (31 March 2023: ^ 41 crores) towards CSR activities which includes contribution/donations made to the trusts which are engaged in activities prescribed under section 135 of the Companies Act, 2013 read with Schedule VII to the said Act and expense of ^ 1.23 crore (31^st March 2023: ^ 3.50 crore) towards the CSR activities undertaken by the Company.

b) Currency Risk

Currency Risk is the risk that the vaLue of a financiaL instrument wiLL fLuctuate due to changes in foreign exchange rates. Foreign currency risk arise majorLy on account of foreign currency borrowings. The Company's foreign currency exposures are managed in accordance with its derivative Risk Management PoLicy which has been approved by its Board of Directors. The Company manages its foreign currency risk by entering into forward contract, cross currency swaps, principaL and interest rate swaps. Other derivative Instruments may be used if deemed appropriate.

The carrying amounts of the Company's foreign currency exposure at the end of the reporting period are as foLLows :

50 Financial Risk Management Framework

In the course of its business, the Company is exposed to certain financial, risks nameLy credit risk, interest risk, currency risk & Liquidity risk. The Company's primary focus is to achieve better predictability of financiaL markets and seek to minimize potentiaL adverse effects on its financiaL performance.

The financiaL risks are managed in accordance with the Company's risk management poLicy which has been approved by its Board of Directors.

Board of Directors of the Company have estabLished Asset and LiabiLity Management Committee (ALCO), which is responsibLe for deveLoping and monitoring risk management poLicies for its business. The Company's financiaL services business is exposed to high credit risk given the unbanked ruraL customer base and diminishing vaLue of coLLateraL. The credit risk is managed through credit norms estabLished based on historicaL experience.

50.1 Market Risk

Market risk is the risk that the fair vaLue or future cash flows of financiaL instruments wiLL fluctuate due to changes in market variabLes such as interest rates, foreign exchange rates, etc. The objective of market risk management is to manage and controL market risk exposures within acceptabLe parameters, whiLe maximizing the return.

a) Pricing Risk

The Company's Investments in CommerciaL Papers, Certificate of Deposits with Banks and MutuaL Funds are exposed to pricing risk. A 5 percent increase in market price wouLd increase profit before tax by approximateLy ^ 88.90 crores (31 March 2023 : ^ 103.36 crores). A simiLar percentage decrease wouLd have resulted equivalent opposite impact.

c) Interest Rate Risk

The Company uses a mix of cash and borrowings to manage the Liquidity & fund requirements of its day-to-day operations. Further, certain interest bearing liabilities carry variable interest rates.

Interest Rate risk on variabLe rate borrowings is managed by way of interest rate swaps, wherever necessary.

Interest Rate sensitivity

The sensitivity anaLysis beLow have been determined based on exposure to interest rate for both derivative and non-derivative instruments at the end of reporting period. For floating rate LiabiLities, anaLysis is prepared assuming the amount of LiabiLity outstanding at the end of the reporting period was outstanding for the whoLe year.

The foLLowing tabLe demonstrates the sensitivity to a reasonabLy possibLe change in interest rates on that portion of Loans and borrowings affected. With aLL other variabLes heLd constant, the Company's profit before tax is affected through the impact on floating rate borrowings, as foLLows:

ii) Inputs considered in the ECL model

In assessing the impairment of financial. Loans under Expected Credit Loss (ECL) Model, the assets have been classified into three stages. The three stages reflect the general pattern of credit deterioration of a financial instrument. The differences in accounting between stages, relate to the recognition of expected credit losses and the measurement of interest income.

The Company categorises Loan assets (except Trade advances) into stages primarily based on the Days Past Due status.

Stage 1 : 0-30 days past due

Stage 2 : 31- 90 days past due

Stage 3 : More than 90 days

The Company categorises Trade advances into stages primarily based on the Days Past Due status. Stage 1 : 0-60 days past due Stage 2 : 61- 90 days past due Stage 3 : More than 90 days

The Company appLies the simplified approach to providing for expected credit Losses prescribed by Ind AS 109, which permits the use of the lifetime expected Loss provision for trade advances, and other receivabLes. The Company has computed expected credit Losses based on a provision matrix which uses historical credit Loss experience of the company.

iii) Definition of default

The Company considers a financial asset to be in "default" and therefore Stage 3 (credit impaired) for ECL calculations when the borrower account becomes more than 90 days past due on its contractual payments.

Since the Company's portfolio predominantly includes retaiL vehicLe Loan portfolio with around 3 miLLion Loan accounts making it difficuLt to define defauLt at an individuaL Loan account, the Company has considered the event of defauLt when overdue is more than 90 days past due. The same is aLso in Line with the reguLator's definition of defauLt when overdue is more than 90 days past due.

iv) Exposure at default

"Exposure at DefauLt" (EAD) represents the gross exposure baLance when defauLt had occurred. EAD is subject to impairment caLcuLation for Stage 3 assets. Future Expected Cash fLows (PrincipaL and Interest) for future years has been used as exposure for Stage 2.

v) Estimations and assumptions considered in the ECL model

The Company has made the foLLowing assumptions in the ECL ModeL:

a) Loss Given Default (LGD):

- LGD represents expected Losses on the EAD given the event of defauLt, taking into account, among other attributes, the mitigating effect of coLLateraL vaLue at the time it is expected to be reaLised and the time vaLue of money determined based on appropriate discount rate. It is an estimate of the Loss from a transaction given that a defauLt occurred.

Generaly common LGD is applied on the exposures in aU the three stages.

WhiLe, the generaL approach/methodoLogy remains the same, the measurement of ECL on retaiL vehicLe Loans is done on a sLightLy differentiated approach as mentioned here beLow.

- For Stage 3 assets with an ageing more than 18 months (540 DPD) (stressed portfoLio), provision is calculated by applying LGD at higher rate. Higher LGD rate is determined based on the historicaL Loss that has occurred during the tenor of individuaL assets forming part of specific portfoLio of contracts with an ageing of more than 18 months (540 DPD) at the historicaL period end date (i.e. 42 months from the reset/reporting date) based on the average Life of the portfoLio and is considered as modeL provision for ECL caLcuLation instead of seperate cLassification as overLay provision;

- For Stage 3 assets with an ageing up to 18 months (540 DPD), provision is caLcuLated by appLying the Composite LGD rate#;

- For Stage 1 and Stage 2 assets, continue to derive and appLy Composite LGD rate in caLcuLation of Loss aLLowances.

# Composite LGD rate : It is an estimate of the Loss from a transaction given that a defauLt occurs. It is based on the historicaL Loss on the portfoLio that has occurred during the tenor of the individuaL assets forming part of the portfoLio. For caLcuLating LGD, the Company takes into consideration the Stage 2 assets that have reached 90 DPD in the past and Stage 3 cases of historicaL period end date (i.e. 42 months from the reset /reporting date) based on the average Life of the portfoLio. ActuaL cash fLows pertaining to this portfoLio from the first defauLt date to current reset/reporting date are then discounted at Loan EIR rate for arriving at this Loss rate.

b) Probability of Default (PD):

- It is an estimate of LikeLihood or risk of defauLt occurring over a particuLar time horizon.

- For Stage 1 assets, 12 months PD is caLcuLated .

- For Stage 2 assets , Life time PD is caLcuLated for which a PD term structure is buiLt.

- PD is appLied on Stage 1 and Stage 2 assets on a portfoLio basis;

- For Stage 3 assets, PD is aLways at 100% as these are impaired assets.

The underLying methodoLogy of HistoricaL PD caLcuLation remains the same for both Stage 1 and Stage 2 assets.

(vi) Measurement of ECL

The assessment of credit risk and estimation of ECL are unbiased and probabiLity weighted.

It incorporates aLL information that is reLevant including information about past events, current conditions and reasonabLe forecasts of future events and economic conditions at the reporting date. In addition, the estimation of ECL takes into account the time vaLue of money. Forward Looking economic scenarios determined with reference to externaL forecasts of economic parameters that have demonstrated a Linkage to the performance of respective portfoLios over a period of time have been appLied to determine impact of macroeconomic factors.

ECL aLLowance (or provision) on Stage 1 and Stage 2 assets is measured using portfoLio approach, whereas impairment provisions on Stage 3 assets is measured at each individual asset / instrument LeveL.

- Financial assets that are not credit impaired at the reporting date:

ECL for Stage 1 : Gross exposure is muLtipLied by PD and Composite LGD percentage to arrive at the ECL aLLowance;

- Financial assets that have had a significant increase in credit risk (SICR) since initial recognition (unless they have low credit risk at the reporting date) but that do not have objective evidence of impairment:

ECL for Stage 2 : Future Expected Cash fLows (PrincipaL and Interest) for respective future years is multiplied by respective years Marginal PDs and Composite LGD percentage and thus arrived ECL alowance is then discounted with the respective loan EIR to calculate the present value of ECL aLLowance. In addition, in case of BiLLs discounting and ChanneL finance, as the average Lifetime is of 90 days, a time to maturity factor of 0.25 is used in the ECL computation.

- Financial assets that are credit impaired at the reporting date:

ECL for Stage 3: Difference between the gross exposure at reporting date and computed carrying amount considering EAD net of LGD and PV of actuaL cash fLows tiLL reporting date incLuding compounded interest at loan EIR on net carrying value.

For Stage 3 assets in retaiL portfoLio, ECL aLLowance is caLcuLated separateLy as foLLows:

- Stage 3 assets with ageing up to 18 months (< =540 DPD)

ECL allowance = (Gross exposure on reporting date less Required Carrying value-A)

Required Carrying vaLue-A =[EAD Less ECL aLLowance at Composite LGD rate Less PV of actuaL cashfLows tiLL reporting date pLus interest compounded @ Loan EIR]

- Stage 3 assets with ageing more than 18 months (>540 DPD)

ECL allowance = (Gross exposure on reporting date less Required Carrying value-B)

Required Carrying vaLue-B ={EAD Less ECL aLLowance at Higher LGD rate Less PV of actuaL cashfLows tiLL reporting date pLus interest compounded @ Loan EIR]

- Undrawn Loan commitments:

ECL on undrawn Loan commitments is caLcuLated basis the Stage in which that particular customer aLready exists.

ECL on Lease business portfolio:

The customer segment catered under Leasing business consist of empLoyees of corporates (EmpLoyee Lease Programs) and B2B segment which includes business entities, firms, trusts and societies, fleet operators, commercial vehicles, construction equipment etc.

Since the Lease business comprising Operating and Finance lease was relatively new line of business, there is limited history of collection and Loss data for the completed life cycle for these portfolios which is needed for determining PD and LGD parameters for computation of ECL aLLowance.

In view of the above, the Company has adopted Industry LeveL benchmark, i.e. ECL coverage rate, for estimating ECL aLLowance on operating and finance Lease portfoLio considering the similarities in products offered, customer segments catered and average tenure of Lease contracts.

(vii) Forward Looking adjustments

The Historical PDs are converted into forward Looking Point-in-Time PDs using statistical modeL incorporating the forward Looking economic outLook, as required by Ind AS 109.

The macroeconomic variabLes considered by the Company are robust reflections of the state of economy which resuLt into systematic risk for the respective product categories.

Additionally, three different scenarios have been considered for ECL caLcuLation. ALong with the actuaL numbers (considered for Base case scenario), other scenarios take care of the worsening as weLL as improving forward Looking economic outLook.

(viii) Assessment of significant increase in credit risk

When determining whether the credit risk has increased significantLy since initiaL recognition, the Company considers both quantitative and qualitative information and analysis based on the Company's historical experience, incLuding forward-Looking information. The Company considers reasonable and supportabLe information that is reLevant and avaiLabLe without undue cost and effort. The Company's accounting poLicy is not to use the practicaL expedient that the financiaL assets with 'Low' credit risk at the reporting date are deemed not to have had a significant increase in credit risk (SICR). As a resuLt, the Company monitors aLL financiaL assets and Loan commitments that are subject to impairment for SICR.

As per Ind AS 109, Loans are required to be moved from Stage 1 to Stage 2 if and onLy if they have been the subject of a SICR. A SICR occurs when there has been a significant increase in the risk of a defauLt occurring over the expected Life of a financiaL instrument. In case of government endorsed instaLment moratoriums, it cannot be assumed that those borrowers that are granted moratoriums have suffered a SICR. In Line with BaseL guidance on ECL, the definition of defauLt and the convention for counting days past due adopted for accounting purposes wiLL be guided by the definition used for reguLatory purposes. Therefore, we consider that use of government-endorsed instaLment moratoriums by a borrower wouLd not on its own trigger the counting of days past due for the 30 days past due backstop used to determine SICR or the 90 days past due backstop used to determine defauLt.

Moreover, the acceptance of such moratorium may indicate short-term Liquidity or cash fLow probLems but is LikeLy to provide LittLe information to differentiate borrower's Lifetime credit risk. Thus, the grant of such moratorium cannot be considered as the soLe indicator that SICR has occurred or even as the basis to adjust the borrower's probabiLity of defauLt.

As a part of the quaLitative assessment of whether a customer is in defauLt, the Company aLso considers a variety of instances that may indicate unLikeLiness to pay. In such instances, the Company treats the customer at defauLt and therefore assesses such Loans as Stage 3 for ECL caLcuLations. Such quaLitative factors incLude:

i. A Stage 3 customer having other Loans which are in Stage 1 or 2.

ii. Not to consider UncLeared cheques as on reporting date for outstanding DPD caLcuLation for retail vehicle loans

iii. RetaiL vehicLe Loans, where asset has been repossessed.

iv. Cases where Company suspects fraud and LegaL proceedings are initiated.

v. SME loans where the Company has resorted to its rights under the SARFAESI Act.

Further, the Company cLassifies certain category of exposures in to Stage 3 and makes acceLerated provision up to 100% based on quaLitative assessment impLying the significant deterioration in asset quaLity or increase in credit risk on seLective basis.

The Company regularly reviews it's ECL model based on actual Loss experience and update the parameters used for ECL caLcuLations.

(ix) Policy for write off of Loan Assets

The gross carrying amount of a financiaL asset is written off when there is no reaListic prospect of further recovery. This is generaLLy the case when the Company determines that the debtor does not have assets or sources of income that couLd generate sufficient cash fLows to repay the amounts subject to the write- off. However, financiaL assets that are written off couLd stiLL be subject to enforcement activities under the Company's recovery procedures, taking into account LegaL advice where appropriate. Any recoveries made from written off assets are netted off against the amount of financiaL assets written off during the year under "Bad debts and write offs" forming part of "Impairment on financiaL instruments" in Statement of profit and Loss.

(x) Inputs to the model

a. Observed DefauLt Rates (ODRs) over past 60 months for each product category

b. Macro economic variabLes provided by Economist InteLLigence Unit (EIU)# for the past 5 years

c. Macro economic variabLes projected by EIU for the next 5 years

# The Economist InteLLigence Unit (EIU) is the research and anaLysis division of the Economist Group, providing forecasting, macro-economic anaLysis and advisory services through research and anaLysis, such as monthLy country reports, five-year country economic forecasts, country risk service reports, and industry reports.

A. Model process

a. Macro economic historicaL variabLes are tested for statisticaL robustness and filtered

b. These are converted into quarterly numbers appLying cubic spLine technique

c. VariabLes that are acceptable are regressed with historicaL ODRs, considering 3 variabLes at a time.

d. These combinations are further tested for statisticaL robustness.

e. Those that pass the test are sorted on R squared (fitness) and the best fit is seLected.

f. This combination is passed through the Vasicek modeL to derive scaLars that are used to project future PDs.

B. I n the seLection of macro-economic variabLes, the management considers best combination of variabLes for its respective product categories based on statisticaLLy tested modeL output representing higher LeveL of correLation and as weLL as those which have business reLevance as per management assessment.

C. In the seLection of macro-economic variabLes for the best combination, the foLLowing parameters are considered:

a. AgricuLture is considered as one of 3 variabLes compuLsoriLy.

b. Second Variable is from GDP / Government consumption related below parameters: Description

Real. GDP (% change pa)

NominaL GDP (PPP$)

ReaL government consumption (LCU)

ReaL GDP (PPP US$ at 2010 prices)

Nominal GDP (LCU)

Nominal government consumption (LCU)

Nominal GDP (US$)

Nominal government consumption (US$)

c. Third VariabLe is seLected by modeL

D. Where scalars derived are beyond reasonable levels, a cap and a floor is applied to reduce variabiLity.

E. Where reasonable scalars are not available, as measured by R square, the scalars of the nearest other portfolio are applied.

Impairment loss

The expected credit loss allowance provision for Retail Loans including Finance lease is determined as follows:

50.3 Liquidity Risk Management

Ultimate responsibility for Liquidity risk management rests with the board of directors, which has established Asset and Liability Management Committee (ALCO) for the management of the Company's short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

a) Maturity profile of non-derivative financial liabilities

The following tables detail the Company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The amount disclosed in the tables have been drawn up based on the undiscounted contractual cash flows of financial liabilities based on the earLiest date on which the Company can be required to pay. The tabLes incLude both interest and principal cash flows.

To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.

Integrated Report 2023-24 333

Short-term financial assets and liabilities

For financial, assets and financial. Liabilities that have a short-term maturity (Less than tweLve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include: cash and baLances, trade receivabl.es, baLances other than cash and cash equivalents, trade payables and investment & borrowings in commercial papers. Such amounts have been classified as LeveL 2 on the basis that no adjustments have been made to the baLances in the baLance sheet.

Loans and advances to customers

The fair values of loans and receivables are calculated using a portfolio-based approach, grouping loans as far as possible into homogenous groups based on similar characteristics. The fair value is then extrapolated to the portfolio using discounted cash flow models that incorporate interest rate estimates considering aU significant characteristics of the loans. This fair value is then reduced by impairment allowance which is aLready caLcuLated incorporating probabiLity of defauLts and Loss given defauLts to arrive at fair vaLue net of risk.

Financial Investments

For Government Securities, the market value of the respective Government Stock as on date of reporting has been considered for fair value computations. Since market quotes are not available in the absence of any trades, the carrying amount of Secured redeemable non-convertible debentures is considered as the fair vaLue.

Issued debt

The fair value of issued debt is estimated by a discounted cash flow model incorporating interest rate estimates from market-observable data such as secondary prices for its traded debt itself.

Deposits from public

The fair value of deposits received from public is estimated by discounting the future cash flows considering the interest rate applicable on the reporting date for that class of deposits segregated by their tenure and cumulative/ non-cumuLative scheme.

Except for the above, carrying value of other financial assets/UabiUties represent reasonable estimate of fair vaLue.

51 Maturity analysis of assets and liabilities

The table below shows the maturity analysis of assets and liabilities according to when they are expected to be recovered or settLed.

b) Exchange Traded Interest Rate (IR) Derivatives

The Company is not carrying out any activity of providing Derivative cover to third parties.

c) Disclosures on Risk Exposure in Derivatives

Qualitative Disclosures -

i) The Company undertakes the derivatives transaction to prudently hedge the risk in context of a particular borrowing or to diversify sources of borrowing and to maintain fixed and floating borrowing mix. The Company does not induLge into any derivative trading transactions. The Company reviews, the proposed transaction and outLine any considerations associated with the transaction, including identification of the benefits and potential risks (worst case scenarios); an independent analysis of potential savings from the proposed transaction. The Company evaluates all the risks inherent in the transaction viz., Counter Party Risk, Market Risk, Operational Risk, Basis Risk etc.

ii) Credit risk is controlled by restricting the counterparties that the Company deals with, to those who either have banking relationship with the Company or are internationally renowned or can provide sufficient information. Market/Price risk arising from the fluctuations of interest rates and foreign exchange rates or from other factors shall be closely monitored and controlled. Normally transaction entered for hedging, will run till its life, irrespective of profit or loss. However in case of exceptions it has to be un-winded only with prior approval of M.D / CFO / Treasurer. Liquidity risk is controlled by restricting counterparties to those who have adequate facility, sufficient information, and sizable trading capacity and capability to enter into transactions in any markets around the world.

iii) The respective functions of trading, confirmation and settlement should be performed by different personnel. The front office and back-office role is well defined and segregated. All the derivatives transactions is quarterly monitored and reviewed by CFO and Treasurer. all the derivative transactions have to be reported to the board of directors on every quarterly board meetings including their financial positions.

b) Details of Financial. Assets soLd to Securitisation / Reconstruction Company for Asset Reconstruction

During the current year and the previous year, the Company has not sold any financial assets to Securitisation /Reconstruction Company for asset reconstruction.

V) Disclosures relating to loans transferred / acquired through assignment / novation and loan participation

During the current year and the previous year, the Company has not transferred or acquired any loan exposures through assignment / novation and Loan participation.

During the current year and the previous year, the Company has not transferred or acquired any stressed Loans.

VI) Exposures

a) Exposure to Real Estate Sector [refer note no. 56 (A) (1)]

b) Exposure to Capital Market [refer note no. 56 (A) (2)]

c) Details of financing of parent company products

Of the total financing activity undertaken by the Company during the financial year 2023-24, 51 % (31^st March 2023: 50%) of the financing was towards parent company products.

d) Details of Single Borrower Limit (SGL) /Group Borrower Limit (GBL) exceeded by the NBFC

During the current year and the previous year, the Company has not exceeded the prudentiaL exposure limits for Single Borrower Limit (SGL) /Group Borrower Limit (GBL).

e) Unsecured Advances

As at 31^st March 2024, the amount of unsecured advances stood at ^ 5,027.31 crore (31^st March 2023: ^ 4,638.98 crore). There are no advances secured against intangibLe assets.

VII) Miscellaneous

a) Registration obtained from other financial sector regulators

During the current year and the previous year, the Company has not obtained any registration from other financiaL sector regulators.

b) Disclosure of Penalties and strictures imposed by RBI and other regulators

During the year under review, monetary penaLty of ^ 6.77 crore was Levied by the RBI vide its order dated 5^th ApriL 2023 for deficiencies in reguLatory compLiances with the RBI directions on fair practices which was reported in note. no. 53 (VII)(b)(ii) of StandaLone FinanciaL Statements of the Company for the year ended 31^st March 2023.

c) Related Party Transactions

(Refer note no. 52)

d) Rating assigned by credit rating agencies and migration of ratings during the year Credit Rating -

During the year under review, CRISIL Ratings Limited (CRISIL), has reaffirmed the credit rating of the Company's Long Term Bank FaciLities, Non- ConvertibLe Debentures, Subordinated Debt, Bank FaciLities and Fixed Deposit as 'CRISIL AAA/ StabLe'. The rating on the Company's Short-term Bank faciLities and CommerciaL Paper has been reaffirmed at 'CRISIL A1 ' which indicates very strong degree of safety regarding timeLy payment of financiaL obLigations. Such securities carry Lowest credit risk.

During the year under review, India Ratings & Research Private Limited (IND), which is part of Fitch Group, reaffirmed the rating of Company's Long-term Debt instruments, Subordinated Debt programme, Bank

FaciLities and Fixed Deposit Programme as 'IND AAA/StabLe' and PrincipaL protected market Linked debenture as IND PP-MLD AAA /Stable. The Company's Short Term Bank Loans, Commercial Paper has been rated at IND A1 .

During the year under review, CARE Ratings, also reaffirmed the 'CARE AAA; Stable' rating to Company's Long-term debt instrument and Subordinated Debt programme.

During the year under review, Brickwork Ratings India Private Limited (BWR) has, reaffirmed the 'BWR AAA/stabLe' rating of the Company's Long-term Subordinated Debt Issue.

The 'AAA' ratings denote the highest degree of safety regarding timely servicing of financiaL obligations. Such instruments carry Lowest credit risk.

'A1 ' ratings indicate very strong degree of safety regarding timeLy payment of financiaL obLigations. Such securities carry Lowest credit risk.

VIII) Net Profit of Loss for the period .prior period items and change in accounting policies

There are no such materiaL items which require discLosures in the notes to Accounts in terms of the reLevant Accounting Standard.

IX) Revenue Recognition

Refer note no. 2.6 under Summary of MateriaL Accounting PoLicies.

X) Indian Accounting Standard 27 (Ind AS 27) - Consolidated and Separate Financial Statements (CFS)

ALL the subsidiaries of the Company have been consoLidated as per Ind AS 27. Refer consoLidated financiaL statements (CFS)

vi) Institutional set-up for liquidity risk management

The Liquidity Risk Management framework of the Company is governed by its Liquidity Risk Management PoLicy and Procedures approved by the Board. The Asset LiabiLity Committee of the Board (ALCO) and Asset Liability Management Committee (ALMCO) oversee the implementation of liquidity risk management strategy of the Company and ensure adherence to the risk tolerance/limits set by the Board.

The Company maintains a robust funding profile with no undue concentration of funding sources. In order to ensure a diversified borrowing mix, concentration of borrowing through various sources is

monitored. The Company maintains a positive cumulative mismatch in aLL buckets. As on 31^st March 2024, the Company maintained a liquidity buffer of approximately ^ 7,963 crore.

Definition of terms as used in the table above:

a) Significant counterparty:

A "Significant counterparty" is defined as a singLe counterparty or group of connected or affiLiated counterparties accounting in aggregate for more than 1% of the NBFC's totaL Liabilities.

b) Significant instrument/product:

A "Significant instrument/product" is defined as a singLe instrument/product of group of simiLar instruments/products which in aggregate amount to more than 1% of the NBFC's totaL LiabiLities.

c) Total liabilities:

TotaL LiabiLities incLude aLL externaL LiabiLities (other than equity).

d) Public funds:

"PubLic funds" incLudes funds raised either directLy or indirectLy through pubLic deposits, intercorporate deposits, bank finance and aLL funds received from outside sources such as funds raised by issue of CommerciaL Papers, Debentures etc. but excLudes funds raised by issue of instruments compuLsoriLy convertible into equity shares within a period not exceeding 5 years from the date of issue. It incLudes totaL borrowings outstanding under aLL types of instruments/ products.

e) Other short-term liabilities:

ALL short-term borrowings other than CPs and NCDs with originaL maturity Less than 12 months.

56) Disclosure requirements under Scale Based Regulation (SBR) - A Revised Regulatory Framework for NBFCs as per circular RBI/2022-23/26 DOR.ACC.REC.No.20/21.04.018/2022-23 dated 19^th April 2022

The Reserve Bank of India, vide its circuLar RBI/2021-22/112 DOR.CRE.REC.No.60/03.10.001/2021-22 dated 22^nd October 2021 outLined the ScaLe Based ReguLation (SBR): A Revised ReguLatory Framework for NBFCs and thereafter issued another circuLar RBI/2022-23/26 DOR.ACC.REC.No.20/21.04.018/2022-23 dated 19^th ApriL 2022, requiring NBFCs to make certain additionaL discLosures in their financiaL statements in accordance with the SBR framework.

5) Unhedged foreign currency exposure

Details of its unhedged foreign currency exposures :

As at 31^st March 2024:NiL As at 31^st March 2023: NiL

Policies to manage currency induced risk:

Currency Risk is the risk that the value of a financial, instrument wiLL fluctuate due to changes in foreign exchange rates. Foreign currency risk arise majorly on account of foreign currency borrowings. The Company's foreign currency exposures are managed in accordance with its Foreign Exchange Risk Management PoLicy which has been approved by its Board of Directors. The Company manages its foreign currency risk by entering into forward contract and cross currency swaps.

I cpi CiCI I Lj U 1C V_LVJr)ll Ig UdlClI ILC Ul luai I dC_C_WU.l I Lj dO Ul I _J_L I Idl V_l I

59 The Company is in the category of Upper Layer (NBFC-UL) as per the criteria defined by the Reserve Bank of India under ScaLe Based Regulations (SBR). The Company has put in pLace a Board approved poLicy and implemented the enhanced reguLatory framework for adhering to new set of regulations under SBR framework.

60 As required under the Companies (Audit and Auditors) Amendment Rules, 2021, read with sub-section 3 of Section 143 of the Companies Act, 2013 which was effective from 1^st April 2023, the Company has used accounting software for maintaining its books of account for the financial year ended 31^st March 2024 which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for aU relevant transactions recorded in the software except that audit trail feature was not enabled at the database level to log any direct data changes, wherein adequate alternate control tools have been deployed to monitor the direct data changes effected at the data base level.

Further, as required under proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014, the audit trail has been preserved by the company as per the statutory requirements for record retention.

iii) Policy for sales / transfers out of amortized cost business model portfolios Sale/ transfer of portfolios out of amortized cost business model:

As a short-term financing arrangement, the Company has been transferring or selling certain pools of fixed rate Loan receivabLes backed by underlying assets in the form of tractors, vehicLes, equipments etc. by entering in to securitization transactions with the SpeciaL Purpose VehicLe Trusts ("SPV Trust") sponsored by Commercial banks for consideration received in cash at the inception of the transaction. As a part of annual budgetary planning and with the objective of better liquidity and risk management, the Company, at the beginning of the year, obtains approval of Asset Liability Committee and Risk Management Committee of the Board of Directors for undertaking securitization transactions of certain value of standard assets comprising the coLLateraL based Loan receivabLes at appropriate times during the year.

These transactions are carried out after complying with RBI guidelines on securitization of standard assets. The consideration received through such securitization transactions is utilized for funding regular vehicle loan disbursements to customers who service their loans through fixed instalments over a specified period of loan tenor. Besides using securitization as alternate financing tool, it is also being used as a effective Balance Sheet management through better liquidity and risk management by transfer of assets from risk averse to risk takers.

When the assets in the form of loan receivables are sold / transferred to an SPV/Bank through securitization transaction, then on a consolidated portfolio level, such sale/transfer does not change the Company's business objective of holding financial assets to collect contractual cash flows.

The Company remains exposed to credit risk, being the expected losses that will be incurred on the securitized loan portfolio to the extent of the credit enhancement provided. Any increase in losses as compared to the expected Loss shaLL require the Company to present its credit enhancement / cash coLLateraL to heLp compensate the investors. This is as per the requirement of the Reserve Bank of India. Thus, the Company as per Ind AS 109 has retained substantially all the risks and rewards of ownership of the financial asset.

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.

If the Company enters into transactions whereby it transfers assets recognized on its balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognized.

Accordingly, these financial assets are not de-recognized by the Company from the financial statements prepared under Ind AS. Since the contractual terms of these financial assets give rise to cash flows, that are solely payments of principal and interest, on specified dates, these assets meet the SPPI criterion and are thus continued to be recognized in the books at amortized cost.

62 Events after the reporting date

There have been no other events after the reporting date that require disclosure in these financial statements.

63 Previous year figures have been regrouped /reclassified wherever necessary to conform to current year presentation.

Signatures to Notes 1 to 63

In terms of our report attached.

For Deloitte Haskins & Sells For and on behalf of the Board of Directors

Chartered Accountants Mahindra & Mahindra Financial Services Limited

Firm's Registration No: 117365W

Rupen K. Bhatt Amarjyoti Barua Raul Rebello

Partner Director Managing Director & CEO

Membership No: 046930 [DIN: 09202472] [DIN: 10052487]

For Mukund M. Chitale & Co. Vivek Karve Brijbala Batwal

Chartered Accountants Chief Financial Officer Company Secretary

Firm's Registration No: 106655W Membership No. F5220

M. M. Chitale

Partner

Membership No: 14054

Place: Mumbai Place: Mumbai

Date: 4 May 2024 Date: 4 May 2024