Nomination and Remuneration Policy

Remuneration Policy for Directors, Key Managerial Personnel, Senior Management and other employees

1. Compensation Philosophy:

The remuneration philosophy of Kosamattam Finance Limited (“Company”) for its Directors, Key Managerial Personnel (“KMP”), and employees is founded on the objective of promoting leadership built on trust and accountability. The Company’s remuneration policy is designed in alignment with philosophy.

This Remuneration Policy has been formulated in accordance with the provisions of Section 178(3) of the Companies Act, 2013 (“the Act”), and the various guidelines issued by the Reserve Bank of India (“RBI”) and the Securities and Exchange Board of India (“SEBI”). In the event of any inconsistency between the provisions of the applicable laws and this Remuneration Policy, the provisions of the relevant laws shall prevail, and the Company shall comply with such applicable laws and regulations.

This Policy may also be regarded as fulfilling the requirements prescribed by the RBI with respect to the Compensation Policy. While formulating this Policy, the Nomination and Remuneration Committee (“NRC”) has duly taken into consideration the factors specified under Section 178(4) of the Act, which include the following:

(a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully;

(b)  relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and

(c)  remuneration to Directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals.”

2. Definitions:

• Whole time Directors: The Managing Director and the Executive Director would be addressed as Whole time Directors in this policy.
• Key Managerial Personnel (KMPs):  Key managerial personnel", in relation to the company, means-

(i) the Chief Executive Officer or the managing director or the manager;

(ii) the company secretary;

(iii) the whole-time director;

(iv) the Chief Financial Officer; 

(v) such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and

(vi) such other officer as may be prescribed by the Statutory Authorities

• Senior Management: mean the officers and personnel of the issuer who are members of its core management team, excluding the Board of Directors, and shall also comprise all the members of the management one level below the Chief Executive Officer or Managing Director or Whole Time Director or Manager (including Chief Executive Officer and Manager, in case they are not part of the Board of Directors) and shall specifically include the functional heads, by whatever name called and the Company Secretary and the Chief Financial Officer.

3. Key Principles

Key principles governing this remuneration policy are as follows:

Remuneration for Managing Director (“MD”) / Executive Directors (“ED”)

1. The extent of overall remuneration should be sufficient to attract and retain talented and qualified individuals suitable for every role. Hence remuneration should be:

• Market competitive (market for every role is defined as Companies from which the Company attracts talent or Companies to which the Company loses talent).
• Driven by the role played by the individual.
• Reflective   of  size   of  the  Company,    complexity  of the sector/industry/Company’s operations and the Company’s capacity to pay.
• Consistent with recognized best practices.
• Aligned to any regulatory requirements.

2. In terms of remuneration mix or composition:

• The remuneration mix for the MD/EDs is as per the contract approved by the shareholders. In case of any change, the same would require the approval of the shareholders.
• Basic/fixed salary is provided to all employees to ensure that there is a steady income in line with their skills and experience.
• The Company provides retirement benefits as applicable.
• In addition to the basic/fixed salary, benefits, perquisites and allowances as provided above, the Company provides MD/EDs such remuneration by way of commission, calculated with reference to the net profits of the Company in a particular financial year, as may be determined by the Board, subject to the overall ceilings stipulated in Section 197 of the Act. The specific amount payable to the MD/EDs would be based on performance as evaluated by the Board or the NRC and approved by the Board.

Remuneration  for Independent  Directors and Non-Independent Non-Executive Directors

• Independent Directors (“ID”) and Non-Independent Non-Executive Directors (“NED”) may be paid sitting fees (for attending the meetings of the Board and of Committees of which they may be members) within regulatory limits.
• Within the parameters prescribed by law, the payment of sitting fees and commission will be recommended by the NRC and approved by the Board.
• Overall remuneration (sitting fees and commission) should be reasonable and sufficient to attract, retain and motivate Directors aligned to the requirements of the Company (taking into consideration the challenges faced by the Company and its future growth imperatives).
• Overall remuneration should be reflective of size of the Company, complexity of the sector/industry/Company’s operations and the Company’s capacity to pay the remuneration.
• Overall remuneration practices should be consistent with recognized best practices.
• Quantum of sitting fees may be subject to review on a periodic basis, as required.
• The aggregate commission payable to all the NEDs and IDs will be recommended by the NRC to the Board based on Company performance, profits, return to investors, shareholder value creation and any other significant qualitative parameters as may be decided by the Board.
• The NRC will recommend to the Board the quantum of commission for each Director based upon the outcome of the evaluation process which is driven by various factors including attendance and time spent in the Board and Committee meetings, individual contributions at the meetings and contributions made by Directors other than in meetings.
• In addition to the sitting fees and commission, the Company may pay to any Director such fair and reasonable expenditure, as may have been incurred by the Director while performing his/her role as a Director of the Company. This could include reasonable expenditure incurred by the Director for attending Board/Board Committee meetings, general meetings, court convened meetings, meetings with shareholders/ creditors/management, site visits, induction and training (organized by the Company for Directors) and in obtaining professional advice from independent advisors in the furtherance of his/her duties as a Director.

Remuneration payable to Director for services rendered in other capacity

The remuneration payable to the Directors shall be inclusive of any remuneration payable for services rendered by such Director in any other capacity unless:

a)   The services rendered are of a professional nature; and

b)   The NRC is of the opinion that the Director possesses requisite qualification for the practice of the profession.

c)The payment of such remuneration is made in compliance with, and subject to, the covenants or conditions stipulated in agreements entered into with the existing secured creditors of the Company.

Remuneration for Key Managerial Personnel

The remuneration payable to the Key Managerial Personnel (KMPs) of the Company shall be determined by the Nomination and Remuneration Committee (“NRC”) and recommended to the Board of Directors for approval, in accordance with the provisions of the Companies Act, 2013 and other applicable laws and regulations.

While determining the remuneration of KMPs, the NRC shall consider various factors including the qualifications, experience, roles and responsibilities of the individual, the performance of the Company and the individual and industry benchmarks.

The remuneration shall be structured in a manner that is reasonable, competitive, performance-driven, and aligned with the long-term interests and growth objectives of the Company.

Remuneration for Senior management and other employees (other than Directors and KMPs) 

The remuneration of Senior Management personnel and other employees of the Company shall be determined in accordance with the Company’s human resource policies.

While determining the remuneration, due consideration shall be given to factors such as the employee’s qualifications, experience, level of responsibility, performance, contribution to the Company, industry benchmarks, and the overall financial position and performance of the Company.

The remuneration structure may include fixed pay, performance-based incentives, bonuses, allowances, perquisites, and other benefits as may be determined by the management from time to time. The remuneration shall be designed to attract, retain, and motivate competent personnel and shall be in line with the Company’s long-term objectives and growth strategy.

4. Compensation Structure

The compensation structure shall broadly comprise of the following components.

• Fixed Pay
• Variable Pay

Fixed Pay:

The company will ensure that the fixed portion of compensation is reasonable, taking into account all relevant factors including the industry practice. In order to follow the aforementioned principles, the company will take into consideration the following parameters

i.  Role Complexity and Size

ii.  Vintage and experience of the incumbent

iii.  Profile and prominence of leadership among industry leaders

iv.  Comparison with peer NBFCs i.e. market competitiveness of pay

v.  Consistency of the company’s performance over the years on key parameters such as profitability, growth and level of Non-Performing Assets (NPA’s) in relation to its own past performance and that of its peer entities.

The Fixed Pay of the organization would typically consist of elements like Base Salary, Allowances, Perquisites, Benefits and Retirement benefits.

In addition to the various cash components (salary, allowances etc.) the organization would also offer certain perquisites. The perquisites extended would be in the nature of Company Car, Hard Furnishing, Company Leased Accommodation, Club Memberships and such other benefits or allowances in lieu of such perquisites/benefits as may be defined in the Bank’s Human Resources policy and as may be approved by the Board. The quantum of fixed pay based on the above considerations will be approved by the Nomination and Remuneration Committee.

Keeping in mind the organization’s belief in providing post-retirement benefits as well as to meet its statutory obligations as an employer the organization will provide the following Defined Contribution and Defined Benefit Plans.

i.  Provident Fund – Statutory, Defined Contribution Plan

ii.  Superannuation – Non Statutory, Defined Contribution Plan

iii.  Gratuity – Statutory, Defined Benefit Plan

iv.  Any other additional benefit as approved by the Nomination and Remuneration Committee of the Board.

The above shall be maintained and managed as per the prevailing Statutory Rules and Trust Rules governing them.

In case of absence or inadequacy of profit in any financial year, the aforesaid remuneration and perquisites shall be paid to the Whole time Director as minimum remuneration. The organization would like to define inadequacy of profits in the following manner

In the event the cumulative fixed remuneration of Whole time Directors, in a given financial year, exceeds or is equal to 10% (or any such cumulative limit as prescribed by the Companies Act, 2013 and as amended from time to time) of the profits, as computed under section 198 of the Companies Act 2013, for the given financial year, the profits in such a year shall be deemed to be inadequate.

Variable Pay:

The company recognizes the importance of variable pay in reinforcing a pay for performance culture. Variable pay stimulates employees to stretch their abilities to exceed expectations. Variable pay is discretionary and may be even zero.

Retention: In the event, an employee does not spend three years or more with the Company, the variable pay shall be subject to recovery as per below table-

Quantum: The quantum of the variable pay will be as per the commitment made at the time of offer, however the quantum will not exceed 30%-50% of the offered annual gross pay (without band perks and cost of loans) of the employee.

5. Employee Stock Option Scheme (ESOP) / Employee Stock Option Scheme (ESOS)

The Company may introduce and implement Employee Stock Option Schemes (ESOP) or Employee Stock Option Plans (ESOS) from time to time with the objective of attracting, retaining, motivating, and rewarding employees, Key Managerial Personnel (KMPs), and eligible Directors for their contribution to the growth and performance of the Company.

The grant, vesting, exercise, and administration of stock options under such schemes shall be in accordance with the provisions of the Companies Act, 2013, the applicable rules framed thereunder, the regulations and guidelines issued by the Securities and Exchange Board of India (SEBI), where applicable, and any other relevant regulatory requirements.

The terms and conditions of the ESOP/ESOS, including eligibility, number of options, vesting period, exercise price, and other related matters, shall be determined by the Nomination and Remuneration Committee (“NRC”) and approved by the Board of Directors and shareholders of the Company, wherever required under applicable laws.

Policy implementation

The NRC is responsible for recommending the remuneration policy to the Board. The Board is responsible for approving and overseeing implementation of the remuneration policy