JANUARY 2013 SHRIRAM NEWS 1

VOL. 26 JANUARY 2013 ISSUE 1

SHRIRAMCity SOCIAL AUDIT – AMONG THE FIRST IN THE

FINANCIAL SERVICES INDUSTRY

ShriramCity is uniquely positioned in its targetmarket of Small business enterprises. In this endeavourShriramCity has endeared itself to the cause of theunderserved and has developed the capability to assessthe needs of this category of customers and provide themappropriate financial products. ShriramCity, in its missionhas been providing access to financial services to the creditstarved section of the society through its regular businessprocess and has contributed significantly to financialinclusion. While this has resulted in making a significantpositive difference to its customers, ShriramCity has neverhad a formal process of assessing the impact this strategyhas had to its stakeholders. Thus, a scientific study on the

A Social Audit is a formal review of a company’sendeavours in social responsibility. Such an audit looksat the activities of the firm which create a significant socialimpact to its stakeholders. Such activities may include:charitable initiatives, volunteer activity, economicalenergy consumption, transparency in all businesstransactions, work environment and worker emolumentsand benefits to evaluate what kind of social andenvironmental impact a company is having on itsoperations. A Social audit is usually carried out as a CSRactivity of a firm. ShriramCity is amongst the first in thefinancial services industry to carry out a social audit as abusiness activity, rather than a CSR activity.

Shri. P. Chidambaram addressing the audienceShri. P. Chidambaram Honourable Union Finance Minister being welcomed by

Shri. Arun Duggal, Chairman, Shriram Capital Ltd

ShriramCity’s Social Audit Repor t being unveiled Shri. K. R. Kamath, Chairman & Managing Director, Punjab National Bank receiving the

first copy of the Report from the Hon’ble Union Minister

JANUARY 2013 SHRIRAM NEWS 2

EDITORIAL

Dear Friend,

Our greetings and best wishes to you and your family for a very happy and prosperous new year !We have just come past what can be called ‘ the most significant year in the history of not only our country,

but the entire world. Yes ! 2012 has indeed been a milestone year for all of us, though for various reasons.Man’s growing concern for the safety and security for himself as well as his family drives him either to

educate himself about money, savings, investments and the like, or turn to whom he considers ‘experts’ in thosefields to plan a secure financial future.

And, more often he turns to Shriram for consultation and further action in one form or the other likedeposits, mutual funds, stocks & shares etc., to help him decide on a course of action for a financially securefuture for self and family.

This is precisely what Shriram has been doing over the years. Educating and guiding people in what can becalled ‘ financial literacy ’ and earning their trust and goodwill through an honest and sincere application of thegroup’s philosophy of ‘ empowering the common man’.

Several of the group companies who have strived and succeeded have been recognized and rewarded for theirgood work. Read all about it in this issue.

On a closing note I am tempted to say that ‘ the best is yet to come ’.Yours truly,

Akhila SrinivasanEditor

huge social impact created over the years was initiatedthrough this Social Audit on ShriramCity.

Hon’ble Union Finance Minister Shri. P. Chidambaram,released the Shriram City Union Finance Ltd SocialAudit Report (2010 - 12) in New Delhi on 23rd October2012, amongst the presence of Shriram City’s Chairman,Directors, partners & business associates. The first copyof the Report was presented to Shri. K. R. Kamath,Chairman & Managing Director, Punjab National Bank.Shri. Vijay Mahajan, Founder and Chairman, BASIXGroup, was among the distinguished guests at the event.During his speech, Hon’ble Union Finance Ministercommended the efforts of the Group in reducing the mythwhich is perceived in serving the high risk, lower economicstrata of the society. The event was well received by theaudience besides getting a good media coverage.

Some findings of the Social Audit report:

� ShriramCity has provided loans to 2.7 million selfemployed customers who run micro and smallenterprises in the informal sector for their businessdevelopment needs.

� Over 95% of the customers avail business purposeloans up to Rs.1 lakh.

� 64% of the customers earn around Rs.10,000/-a month.

� 62% of the customers surveyed were availingloans for the first time in their lives.

� 60% of the employees are the sole bread winnersof their family.

� Through low operating costs with an averagetransaction cost of Rs. 4 per transaction, thecompany has inculcated the philosophy of efficientoperations

� Through a tool, SROI, the social value ofRs.1 lent to a ShriramCity customer to fulfill hisbusiness needs and aspirations is Rs. 2.05

This Audit for ShriramCity was conducted by SocialAudit Network (SAN) India, the recognized Indian chapterof Social Audit Network (SAN) UK, an independentaccredited agency that facilitates social accounting andaudit practices internationally. Such an audit will alsoenable ShriramCity to benchmark itself for continuousongoing enhancement of its strategy and processes yearon year. This is a pioneering effort within the group andwill certainly be a harbinger for more such assessment ofsocial impact of the various other businesses within theShriram Group.

JANUARY 2013 SHRIRAM NEWS 3

SHRIRAM TRANSPORT FINANCE COMPANY WINS CNBC TV18 BEST BANK

AND FINANCIAL INSTITUTION AWARD 2012

Shriram Transport Finance Company Limited(STFC), the largest asset financing NBFC in the country,was chosen as the “Best NBFC” in “Asset BackedLending” category at “CNBC TV18 Best Bank andFinancial Institution Awards 2012” held on October 17,2012, at the ITC Grand Central, in Parel, Mumbai.

STF is a part of the Shriram conglomerate, whichhas a significant presence in financial services, viz.,commercial vehicle financing business, consumer finance,life and general insurance, stock broking, chit funds anddistribution of financial products such as life and generalinsurance products and units of mutual funds. Apart fromthese financial services, the group also has a significantpresence in non-financial services business such asproperty development, engineering projects andinformation technology.

Upon receiving the award, Mr. U.G. Revankar,Managing Director, Shriram Transport Finance CompanyLtd, said, “We are extremely honoured to receive thisprestigious award from CNBC TV18. This award signifiesthe hard work that Shriram Transport Finance Ltd hasbeen putting in over the years. We, at, STFC are now evenmore determined to reach greater heights in the future.”

This distinction was accorded to STFC by adistinguished panel of jurors, including Mr. JagdishCapoor, Former Deputy Governor at the RBIand Former Chairman of HDFC Bank and theBombay Stock Exchange (BSE), Mr. A.K. Purwar,

Mr. U.G. Revankar, Managing Director, Shriram Transpor t Finance Company Ltd,

receiving the award from Dr. C. Rangarajan, Chairman of the Prime Minister ’s

Economic Advisory Council

Chairman of India Venture Advisors Pvt. Ltd & FormerChairman of State Bank of India, Mr. H.N. Sinor, CEO,Association of Mutual Funds of India, Former CEO,Indian Banks Association and former MD of ICICI andMr. M.V. Nair, Former Chairman, Union Bank.

The jury round was preceded by a rigorous scoringprocess designed by KPMG. The KPMG team evaluatedall banks and financial institutions on criteria like growth,profitability, capital ratios and even softer qualities likeinvestor/customer care and compiled a short list. In thesecond stage, the short-listed companies were examinedby the jurors who then vigorously debated the variousnominations before coming to a unanimous conclusionon each category.

SANLAM EMERGING MARKETS and SHRIRAM CAPITAL LIMITED

South African financial services group Sanlam hasannounced the finalization of a further R 2 billion (2 billionSouth African Rands) investment in the country’s leadingfinancial services group, Shriram Capital Limited(SCL).

Sanlam’s proposed investment into SCL was firstannounced in September 2011 and has been subject to anumber of conditions and regulatory approvals. Thesehave since all been obtained which allowed for the finaldiscussion of the transaction. The investment in SCL hasbeen made by Sanlam Emerging Markets(SEM), thecluster within Sanlam responsible for financial servicesin emerging markets outside of South Africa. Theacquisition augments its existing portfolio of businessesin Africa and Asia, in support of the Group’s target ofsustainable value creation in these growth markets.

Following the transaction,SEM effectively owns26% of SCL. The investment hasbeen funded from Sanlam’ssurplus capital.

At the release of Sanlam’sinterim results for the six months

JANUARY 2013 SHRIRAM NEWS 4

to the end of June 2012 on 6 September 2012, SanlamGroup CEO Dr. Johan van Zyl reiterated Sanlam’sstrategic emerging market focus In Africa and India.

Mr. Heinie Werth, CEO ofSEM, said concluding thetransaction with Shriram, meansa more meaningful exposure forSanlam in India.

“The transaction willstrengthen our relationship withShriram. Strategically Sanlam

previously entered into insurance joint ventures with theShriram Group to participate in and benefit from thegrowing financial services industry in India. Thistransaction is an important and logical next step for SEMin our relationship with Shriram as it will provide us withaccess to SCL’s wider financial services exposure in Indiaand will see SEM diversifying its earnings base. Inparticular, this includes exposure to credit businesses andother distribution entities. We foresee synergies across allthese businesses and more opportunities for client cross-selling”, he said.

“We are in particular proud to have concludedthis transaction with the leadership of Shriram as ourpartners. We see this transaction as a highlight in therelationship we have enjoyed with the Shriram Group thusfar. The strong partnership that we have is further

entrenched to the long term benefit of both partners”,Mr. Werth said.

He further added that whilst the economicenvironment in India is currently somewhat challenging,he remains confident of its long term potential and thatthe investment in SCL will in time yield an attractive return.

Sanlam has been in partnership with the ShriramGroup in respect of life insurance (Shriram Life InsuranceCompany Limited) since 2005 and short term insurance(Shriram General Insurance Limited) since 2008.

Mr. G. S. Sundararajan, Director, Shriram Capital,said, “Sanlam’s partnership with us has been catapulted tothe next level with this investment. We, at the Shriram Group,wholeheartedly welcome this mutually beneficial alliance.”

SCL, in which SEM has now acquired a 26% stake,is the holding company for the financial services interestsof the Shriram Group. Following conclusion of thetransaction these consist of a 100% interest in the twoinsurers, as well as a 25% holding in Shriram TransportFinance Company Limited (STFC) - a listed commercialvehicle financing business with an approximateRs. 60 billion loan book, a 30% holding in Shriram CityUnion Finance (SCUF) - a listed retail financing businesswith an approximate Rs. 16 billion loan book,100% ofa financial products distribution business employing100,000 agents and a start-up wealth management and abrokerage business.

* Mr. Dhruv Mehta, is apracticing independent financialAdvisor (IFA), since 2003 and isbased out of Mumbai.

* He is managing surplusesof over US$ 200 Mn for variousfamily offices, Corporates andHigh Net worth Individuals.

This includes over $ 25 million in direct equities. He hasdeveloped a deep and diverse relationship with themanufacturers of financial products including the33 Mutual Fund Houses in India. He has been ranked asone of the top performers by the large Mutual Funds inthe category of an Independent Financial Advisor.

* Professionally, he is qualified as a CharteredAccountant and Cost and Works Accountant (India) with25 years of diverse work experience in diverse roles andresponsibilities:

— He has spent 2 years with A F Ferguson andCompany – a well-known accounting and audit firm

Mr. DHRUV MEHTA - PROFILE

— He has spent 5 years in the Corporate FinanceDepartment in Searle India Limited, apharmaceutical and Agrochemicals Multinational

— He has spent 14 years as a Financial Controllerwith the Savita Group, a leader in PetroleumSpecialties

* He is also the Director on Shriram Wealth AdvisorsLimited (SWAL) – a knowledge platform for the ShriramUniverse of investors. SWAL is part of the well -knownand respected Shriram Group of Chennai, in FinancialServices Industry. He has also joined the Board of ShriramAsset Management Company.

* Have been involved over the last decade in theAnnual Wealth Creation Study conducted by Mr. RaamdeoAgrawal of Motilal Oswal (India’s leading FinancialServices company).

* Currently, Mr. Mehta is also Chairman ofFederation of Independent Financial Advisors (FIFA) apan India association of IFAs.

JANUARY 2013 SHRIRAM NEWS 5

LIQUID FUNDS - CASH ON CALL : SECOND IN A SERIES OF ARTICLES BY Mr. DHRUV MEHTA

Liquid funds are an equally good alternative to asavings/current account…

While searching for different investment options, youmight have come across the term ‘Liquid Funds’. Thereare many of us who might have wondered what these fundsare and many more who might not be aware of these fundsas alternatives to a savings/current account with the bank.

When we try and understand the term ‘liquid’ infinancial terms, it means an asset which is as good as hardcash.An investment is declared as liquid or illiquiddepending on its ability to get converted into cash withouta significant loss in value.Bank deposits generally are themost liquid whilst Real estate would be amongst the less‘liquid’. Liquid Funds schemes of mutual funds are alsoamongst the most liquid investment option similar to banksavings account. Money invested in a Liquid fund isavailable at 24 hours’ notice. Liquid funds get theirname from this trait and hence are anideal option to parkshort-term money.

All surplus funds of households/corporates aregenerally parked in savings/current account so as to meetfuture liabilities/consumption needs. In a savings bankaccount, the investor earns a marginal interest rate on theaverage monthly balance in the account and is assured ofgetting the funds as and when needed. Similarly, in a liquidfund an investor can park surplus money for future needsand can redeem within 24 hours.

For SMEs and local businessman, liquid funds canbe very useful as they park their surplus funds in Current

account which offers no return. Rather they can use liquidfunds for investing money which is not needed in 1-2 daysand can earn daily returns on that surplus.

Liquid funds invest in treasury bills, governmentsecurities, call money, repo and reverse repos and othersuch instruments that are quite safe in nature and have ashort maturity.

Liquid funds are getting increasingly popular thesedays because of the key features like liquidity, enoughsafety and better returns.

Liquid funds are available in India for more than 15years now and till date there have been no defaults in theseschemes. Also, the investment has given better return thansavings bank account. Another advantage is the dividendoption available on liquid fund investment which is notavailable on savings bank account.

Besides liquidity and risk, one should alwaysconsider the tax aspect of an investment. It is this thatadds to the attractiveness of the investment from anindividual’s point of view. An individual will have to paya lower tax on the liquid funds return compared to Bankdeposit return. From a corporate’s point of view, Long-term capital gains are taxed at a rate of 20 per cent withoutindexation and 10 per cent with indexation. The dividendfrom these funds is taxed at the rate of 25 per cent plus 10per cent surcharge plus 3 per cent education cess. Whilethe surcharge and education cess stays the same, corporatespay tax at the rate of 30 per cent.

Key features of a liquid fund:

No Entry and Exit load (sometimes exit load is charged if redeemed before the lock in period)

Low annual fee 0.30 to 0.70%

Variable Minimum investment amount according to scheme

Great tax benefit, Easy liquidation, hence the name

Liquid funds have the restriction that they can only have 10 per cent or less mark-to-market component, indicatinga lower interest rate risk.

Savings Bank Deposit Liquid FundsReturns on investments range between 4-6% Returns on investments range between 6-9%

The interest on Fixed deposit is taxed by If you opt for a dividend option the dividendadding it to the assessee’s income. is tax free in the hands of the investor

Returns are fixed Returns are not fixed

Interest paid on average monthly balance Interest paid on daily basis

Has the past performance been good?

In the last one year, liquid funds have returnedaround 9 to 9.5 percent compared to savings depositreturn of between 4 to 6 percent. Recent data shows thatbanks are taking fresh exposures in liquid funds which

indicate a high degree of safety and confidence inliquid funds.

This shows that liquid funds are a good product toinvest in if you are looking to fulfill some short-term goals.

How does it compare to a savings bank deposit?

JANUARY 2013 SHRIRAM NEWS 6

Prasad Kona was no ordinary person in Vijayawada.He was a third generation businessman employing aroundforty people in his business. He was a dealer in decorativepaints, wholesaler of pharmaceuticals and also hadinterests in real estate. He had some deposits and aninsurance policy with us. He was quite an influential manand in his early forties at that time. One day…. he passedaway... Yes. It was as simple as that. He neither had adisease ever nor an indication of any disease. It justhappened suddenly. His wife found him dead on their sofaat around 8.00 am in the morning with the newspaper stillin his hand. It was the beginning of a series of woes shehad to endure along with her two children.

Less than a month after his death, people claimingas partners in the business came, consoled her and toldher some arithmetic. She never understood it. In fact, shedidn’t even know whether they were partners. But themessage was clear enough – Prasad owed them moneyand they would sacrifice it oncompassionate grounds but she shouldrefrain herself from business matters. Onemore month passed and the bankers came.A similar message got replayed – that hehad taken business loans. A few moremonths went by and she was informed thatthere are rival claims on his insurancepolicy from a bank and we suggested herto take the legal recourse. And ultimately the taxauthorities, with multiple prefixes, had come. It was a verylong ordeal for her. In the end, everything that belongedto her late husband was either inappropriately confiscatedby relatives or lawfully attached by the creditors and taxauthorities.

For people engaged in business, especially inproprietorship and partnership concerns, there is unlimitedliability in case of a loss. This means in the event ofwinding up of the business or in case of a loss, the creditorshave the right to sell all the assets of the owners and theirfamilies to recover their loans. We all know that thechances of a business defaulting and going for a toss aremore when the businessman dies. In case the businessmanhas a long list of creditors waiting at his doorstep whenhe dies, his investments will be distributed amongst themwith a court settlement. Then the question of financialsecurity to his family haunts his survivors.

But there is statutory relief from this trauma. MarriedWomen’s Property Act (MWP Act) can secure the benefits

BEING A BUSINESSMAN AND A FAMILY MAN

of a life insurance policy from creditors, tax authoritiesand relatives by creating a ring fence for the policy amount.When a policy is taken under MWP Act, the proceeds ofthe policy will go to the beneficiaries only and creditorscannot access it. This ensures that the welfare of thebeneficiaries is taken care of.

The beneficiaries can be:

1. The wife alone

2. The children alone

3. The wife and children together

The benefits of the policy proceeds can be mentionedas specific percentages to each beneficiary or as equalamounts. The main advantage for beneficiaries, apartfrom being immune to attachment by creditors, is thatthe policy cannot be surrendered or assigned for takingmore loans.

Who can be a trustee?

Each policy will be considered as aseparate trust. The trustees can be the wife oradult children or a third person or an entity(like a bank dealing in trusts). The beneficiarycan also be appointed as a trustee. The policyholder can change the trustees at any point intime.

Who should take a policy under MWP act?

All businessmen running small and mediumbusinesses are advised to take their life insurance policiesunder MWP.

What are the eligible plans?

All plans including traditional plans, ULIPs, regularpremium and single premium plans can be taken underthe MWP act. A simple addendum to your insuranceproposal can free you from the agony of relentlessthinking about the financial security of your family inyour absence.

Merely taking a life insurance policy will notnecessarily take care of your wife and children. You needto ensure that the benefits are passed on to them. If thispurpose is to be achieved in its fullness, you must create arock-solid benefit for them and taking a policy under theMWP Act is perhaps the simplest and the most inexpensiveway of ensuring it.

Dr. R. Varun Kishore

JANUARY 2013 SHRIRAM NEWS 7

HYDERABAD AUTOMALL INAUGURATED IN NOVEMBER 2012

The recently held Automall inauguration atHyderabad made waves across the transport fraternity ofthe nation. India’s largest multi-city automobile fair wasunveiled in Hyderabad. The Auto show enchanted theauto enthusiasts, transportation community and sizeablenumber of media persons who had a foretaste of the megashow organized by Shriram Automall. It also fascinatedthe huge of Hyderabad.

An extravaganza, full of action, pomp and festivities,Automall 2012 hosted some of the best automobile brandsin the country. The event further complimented theexhibition of modified and refurbished trucks andequipments at prudent prices.

The Automall was inaugurated by the Chief GuestMr. Vinod Dasari, Managing Director, Ashok Leyland.The Guest of Honour for the event was Mr. Arun Duggal,Chairman, Shriram Capital Ltd. and the other special

guests at this mega event were Mr. Umesh G. Revankar(Managing Director, Shriram Transport Finance CompanyLtd.), and Mr. R. Duruvasan, (Managing Director, ShriramCity Union Finance Ltd.).

This Automall is by far the nation’s biggest yard forhousing a large number of commercial vehicles and

equipments, spread across several acres of landscape.The service is the first initiative of its kind in the region.

Hundreds of articles were traded during the eventand more items were added right up to the end of the day,every item reaching the highest bidder.

Even hours before the formal inaugural ceremony,a steady stream of hopefuls thronged the open yard,examined the interiors and exteriors, checking a few bodyparts, examining the tyres etc., to get a feel of the vehicles.The Automall also offers various allied services likeParking, Documentation, Finance, Refurbishment,Insurance, Valuation, etc.

Followed by the Hyderabad Automall launch, Jammualso saw a similar successful opening. The company iscoming up with five more major Automall openings inFaizabad, Tirunelveli, Jaipur, Kolkata, and Kota in thenear future.

Shriram Automall is a pioneer in the country,providing such holistic solutions. It is the first one to takecognizance of the needs of used vehicle traders. In fact,the Automall has come to the customers rather than thecustomers coming to it, Shriram Automall, so far has nocompetition whatsoever.

Mr. Vinod Dasari, Managing Director, Ashok Leyland inaugurating the Automall

Visitors viewing the vehicles at the Automall

Mr. Vinod Dasari, Lighting the Lamp, while Mr. Arun Duggal, Chairman,

Shriram Capital Limited and Mr. Umesh G. Revankar, Managing Direcor, STFC Ltd. look on

A night view of the Automall

JANUARY 2013 SHRIRAM NEWS 8

Editor :Akhila Srinivasan

Published by :Shriram Ownership TrustMookambika Complex, II Floor, 4, Lady Desika Road,Mylapore, Chennai - 600 004. India.

Printed at : Sai Shriram Printers, Chennai - 600 097.

BOOK POST

SHRIRAM EPC BAGS $230 MILLION ORDER IN IRAQ

Shriram EPC Limited (SEPC) consortium has baggedorder worth $230 million for the supply and laying ofbasic sanitary systems in Basra, Iraq in a joint venturewith the Mokul Group of Companies, according tostatement released by the company. Shriram EPC, whichis part of Shriram Group, is an integrated entity indesigning, engineering, procurement, construction andproject management services for power plants, renewableenergy projects, process and metallurgical plants andmunicipal service sector projects.

The scope of work entails engineering, supply andinstallation of a primary sanitary sewer system, stormsewer system and trunk sewer system with connectedpumping stations and road works.

Shriram EPC will oversee the laying ofapproximately 240 kms of Sewer Pipe Line, 160 kms ofStorm Pipe Line and 8 KM of Trunk Sewer Pipe Line

along with road works in the area. The project is scheduledfor completion in 3 years.

Commenting on the contract, Mr. T. Shivaraman,Managing Director & CEO of Shriram EPC Limited, said“this is our first order in the Middle East and adds to ourportfolio of international projects. It is a sizeable orderfor our municipal services vertical and will result insustained revenues over the 3 year execution period.This is also one of the first major public infrastructureprojects in Southern Iraq which aims to improve basicinfrastructure in the country. Successful execution of thiscontract would open up new opportunities for us in Iraq.”

Over the past several months, SEPC has witnessedgood momentum in its order book, particularly inmunicipal services and this order adds to its order backlogof Rs 2,923 crore as at the end of September 2012, as perthe statement.

Source : TE Narasimhan, Business Standard

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