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Updated:23 Aug, 2019, 15:58 PM IST

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Updated:23 Aug, 2019, 16:01 PM IST

DIRECTORS' REPORT

The directors present their Ninth Annual Report and audited financial statements for the year ended 31 March 2016

DIVIDEND

The Board at its meeting held on 9 March 2016 declared an interim dividend at the rate of Rs. 1.75 per share (35%) for the year ended 31 March 2016, which was paid to all the eligible shareholders as on 17 March 2016, being the record date for the purpose of dividend. The amount of dividend and the tax thereon to the extent applicable aggregated to Rs.  27.85 crore.

The directors recommend for consideration of the shareholders at the ensuing annual general meeting, the above–referred interim dividend as final dividend for the financial year ended 31 March 2016.

Dividend paid for the year ended 31 March 2015 was also Rs.  1.75 per share (35%). The amount of dividend and the tax thereon to the extent applicable aggregated to Rs.  27.85 crore.

Share capital

The paid up equity share capital as on 31 March 2016 was Rs.  79.57 crore. During the Rights Issue of equity shares made by the Company in 2012, certain shares had been kept in abeyance as required by law. With resolution of a few cases during the year under review, the Company has allotted 6,269 equity shares of the face value of Rs. 5 each at the original Rights Issue price of Rs.  650 per share to the eligible shareholders.

There was no public issue, rights issue, bonus issue or preferential issue, etc. during the year under review. The Company has not issued shares with differential voting rights, sweat equity shares nor has it granted any stock options.

Classification of the Company as a Core Investment Company (CIC)

The Company having satisfied the criteria specified for being a CIC, not requiring registration with RBI pursuant to the provisions of section 45–IA of RBI Act, 1934, had applied to RBI in this regard  on 26 June 2015.

In response to the above, RBI vide its Order dated 23 October 2015 has cancelled the certificate of registration to carry on the business of NBFC issued to the Company and has confirmed the qualification of the Company as a Core Investment Company, not requiring registration with RBI, pursuant to the provisions of section 45–IA of the RBI Act, 1934.

Operations

Detailed information on the operations of the different business lines of the Company and details on the state of affairs of the Company are covered in the Management Discussion and Analysis Report.

Extract of annual return

The extract of annual return as provided under sub–section (3) of section 92 of the Companies Act, 2013, in the prescribed Form MGT–9 is annexed to this Report.

Number of meetings of the Board

Seven meetings of the Board were held during the year. Detailed information is given in the Corporate Governance Report.

Directors' responsibility statement

As required under clause (c) of sub–section (3) of section 134 of the Companies Act, 2013, directors, to the best of their knowledge and belief, state that –

• in the preparation of the annual accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

• the directors had selected such accounting policies and applied them consistently and made

— ""judgments and estimates that are reasonable and prudent, so as to give a true and fair view_–

of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

• the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

• the directors had prepared the annual accounts on a going concern basis;

• the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls were adequate and were operating effectively; and

• the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and were operating effectively.

Details in respect of frauds reported by auditors under section 143(12)

During the year under review, there were no frauds reported by the auditors to the Audit Committee or the Board under section 143(12) of the Companies Act, 2013.

Declaration by independent directors

The independent directors have submitted the declaration of independence as required pursuant to section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in sub–section (6).

Directors' Remuneration Policy and criteria for matters under section 178

Information regarding directors' Remuneration Policy and criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub–section (3) of section 178 are provided in the Corporate Governance Report.

Particulars of loans, guarantees or investments

Information regarding loans, guarantees and investments covered under the provisions of section 186 of the Companies Act, 2013, are detailed in the financial statements.

Related party transactions

There were no Related Party Transactions (RPTs) entered into by the Company during the financial year, which attracted the provisions of section 188 of the Companies Act, 2013. There being no 'material' related party transactions as defined under regulation 23 of the SEBI Listing Regulations, 2015, there are no details to be disclosed in Form AOC–2 in that regard.

During the year 2015–16, pursuant to section 177 of the Companies Act, 2013, and regulation 23 of the SEBI Listing Regulations, 2015, all RPTs were placed before the Audit Committee for its approval.

The policy on RPTs as approved by Board is uploaded on the Company's website www.bajajfinserv.in

Material changes and commitments

There have been no material changes and commitments, affecting the financial position  of the Company, which have occurred between the end of the financial year of the Company  and the date of this Report.

Conservation of energy and technology absorption

The Company is engaged in wind–farm activities in addition to its financial services activities. Hence, the subject of conservation of energy is applicable to the Company only with regard to its wind–farm business for the Company. Being essentially a financial services company, there are no particulars regarding technology absorption required to be given in this Report.

Particulars regarding conservation of energy are given below:

a) The steps taken on conservation of energy and for utilising alternate sources of energy:

The Company has installed renewable energy (wind) project with a capacity of 65.2MW. During the year under review, it generated 772 lakh units which it sold to third parties. It, however, is unable to make captive use of wind energy, because new regulations do not permit the same where monthly demand is less than 700 KW. The Company has installed LED lamps in place of failed tube lights and CFL, thereby reducing energy consumption in lighting by around 2 KW during the year.

b) The capital investment on energy conservation equipment:

Not applicable, since BFS is a non–manufacturing company, not coming under the notified industries covered under Energy Conservation Act, 2001. Also, energy demand/connected load of building utilised for the Company's corporate/commercial activities, etc. is less than 500 KW, which is the minimum threshold for applicability of the Energy Conservation Act, 2001.

Foreign exchange earnings and outgo

Total foreign exchange earned by the Company was Nil during the year under review, as well as during the previous year.

Total foreign exchange outflow during the year under review was H 0.62 crore, as against H 1.53 crore during the previous year.

Risk Management Policy

Information on the development and implementation of a Risk Management Policy for the

Company including identification therein of elements of risk which in the opinion of the

Board may threaten the existence of the Company is given in the Corporate Governance Report.

Corporate Social Responsibility (CSR)

Detailed information on the Corporate Social Responsibility Policy developed and implemented by the Company on CSR initiatives taken during the year pursuant to section 135 of the Companies Act, 2013, is given in the annexed Annual Report on CSR activities.

Formal annual evaluation of the performance of Board, its Committees and Directors

Information on the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual directors is given in the Corporate Governance Report.

Subsidiary and Joint Venture

Following are the subsidiary and joint venture companies of the Company as at 31 March 2016

During the year under review, the Company has subscribed to 925,000 warrants, fully convertible into equity shares issued by its subsidiary, Bajaj Finance Ltd. at a conversion price of H 4,412 per share, pursuant to the provisions of Chapter VII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

For this purpose, the Company has invested H 102 crore in June 2015, i.e., 25% of issue price of warrants at the time of subscription as initial payment and balance H 306 crore will be invested at the time of conversion on or before 1 December 2016, i.e., within a period of 18 months from the date of allotment of the warrants.

During the year under review, Bajaj Housing Finance Ltd. received the certificate of registration from National Housing Bank and is in the process of setting up its housing finance business.

Detailed information on the performance and financial position of each subsidiary/joint venture of the Company is covered in the annexed Management Discussion and Analysis Report.

Directors and Key Managerial Personnel – Changes

The directors regret to report the sad demise of S H Khan, an independent director of  the Company, on 12 January 2016. The directors record their whole–hearted appreciation of  the valuable contribution made by him during his long tenure as director in the Company.

In light of the provisions of the Companies Act, 2013, Madhur Bajaj retires from the Board by rotation this year and being eligible, offers himself for reappointment. The information as required to be disclosed under regulation 36(3) of the SEBI Listing Regulations, 2015, in case of reappointment of the director is provided in the Notice of the ensuing annual general meeting."

There was no other change in the Directors and Key Managerial Personnel during the year under review.

As decided by the Board at its meeting held on 3 February 2016, Naresh Chandra took over as the Chairman of the Nomination and Remuneration Committee in place of S H Khan, and Dr. Gita Piramal was appointed as the Chairperson of the Stakeholders Relationship Committee in place of Nanoo Pamnani, who however, continued as its member.

Nanoo Pamnani took over as an independent director on the board of insurance subsidiaries in place of S H Khan under regulation 24(1) of the SEBI Listing Regulations, 2015.

Detailed information on the directors is provided in the Corporate Governance Report.

Significant and material orders passed by the regulators or courts

During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals, which may impact the going concern status of the Company and its operations in future.

Details of internal financial controls with reference to the financial statements

The Company has documented its internal financial controls considering the essential components of various critical processes, physical and operational, which includes its design, implementation and maintenance along with periodical internal review of operational effectiveness and sustenance.

This ensures orderly and efficient conduct of its business, including adherence to the Company's policies, safeguarding of its assets, prevention of errors, accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

The internal financial controls with reference to the financial statements were adequate and operating effectively.

Presentation of financial statements

The financial statements of the Company for the year ended 31 March 2016, have been disclosed as per Schedule III to the Companies Act, 2013.

Consolidated financial statements

The directors also present the audited consolidated financial statements incorporating the duly audited financial statements of the subsidiaries and joint ventures and as prepared in compliance with the Companies Act, 2013, applicable Accounting Standards and the SEBI Listing Regulations, 2015.

A separate statement containing the salient features of the subsidiaries and joint ventures in the prescribed form (AOC–1) is annexed separately.

Statutory disclosures

The summary of the key financials of the Company's subsidiaries and joint venture (Form AOC–1), is included in this Annual Report. A copy of the audited financial statements of the said companies will be made available to members of the Company seeking such information at any point of time. The audited financial statements for each of the subsidiaries will be kept for inspection by any member of the Company at its registered office during business hours. The same are placed on the Company's website www.bajajfinserv.in

Details as required under the provisions of section 197(12) of the Companies Act, 2013, read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are placed on the Company's website www.bajajfinserv.in  as an annexure to the Directors' Report. A physical copy of the same will be made available to any shareholder on request.

Details as required under the provisions of section 197(12) of the Companies Act, 2013, read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, which form part of the Directors' Report, will be made available to any shareholder on request, as per provisions of section 136(1) of the said Act.

A Cash Flow Statement for the year 2015–16 is attached to the Balance Sheet.

Pursuant to the legislation 'Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace Act, 2013', introduced by the Government of India, which came into effect from 9 December 2013, the Company has framed a Policy on Prevention of Sexual Harassment at Workplace. There was no case reported during the year under review under the said Policy.

Corporate governance

Pursuant to the SEBI Listing Regulations, 2015, a separate section titled 'Corporate Governance' has been included in this Annual Report, along with the reports on Management Discussion and Analysis and General Shareholder Information.

All Board members and Senior Management Personnel have affirmed compliance with the Code of Conduct for the year 2015–16. A declaration to this effect signed by the Managing Director of the Company is contained in this Annual Report.

The Managing Director (CEO) and CFO have provided to the Board the compliance certificate with regard to the financial statements and other matters as required under regulation 17(8) of the SEBI Listing Regulations, 2015.

A certificate from the auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

Business Responsibility Report

Regulation 34(2) of the SEBI Listing Regulations, 2015, inter alia, provides that the annual report of the top 100 listed entities based on market capitalisation (calculated as on 31 March of every financial year), shall include a Business Responsibility Report (BRR).

Since BFS is one of the top 100 listed companies by way of market capitalisation as on 31 March 2015, the Company has presented its maiden BRR for the financial year 2015–16, which is part of this Annual Report. As a green initiative, the BRR has been hosted on the Company's website www.bajajfinserv.in

A physical copy of the BR Report will be made available to any shareholder on request.

Secretarial standards of ICSI

Pursuant to the approval given on 10 April 2015 by the Central Government to the Secretarial Standards specified by the Institute of Company Secretaries of India, the Secretarial Standards on Meetings of the Board of Directors (SS–1) and General Meetings (SS–2) came into effect from 1 July 2015. The Company is in compliance with the same.

Auditors Statutory Auditor

Pursuant to the provisions of section 139 of the Companies Act, 2013, and the Rules made thereunder, the current auditors of the Company, Dalal & Shah LLP, Chartered Accountants (registration number: 102021W/W100110) were appointed by the members at the 7th Annual General Meeting to hold office until the conclusion of the 10th Annual General Meeting, subject to ratification by members at each annual general meeting.

The members are requested to ratify the appointment of Dalal & Shah LLP, Chartered Accountants (registration number: 102021W/W100110) as statutory auditors of the Company and to fix their remuneration for the year 2016–17.

The statutory audit report does not contain any qualification, reservation or adverse remark or disclaimer made by statutory auditor.

Secretarial Auditor

Pursuant to the provisions of section 204 of the Companies Act, 2013, and the Rules made thereunder, the Company has re–appointed, Shyamprasad D Limaye (membership number 1587), Company Secretary in Practice to undertake the secretarial audit of the Company. The Secretarial Audit Report for the year 2015–16 as issued by him in the prescribed form MR–3 is annexed to this Report.

The said Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer made by the secretarial auditor.

Cost Auditor

Pursuant to section 148 of the Companies Act, 2013, and the Rules made thereunder, the Board of Directors had, on the recommendation of the Audit Committee, reappointed Dhananjay V Joshi & Associates (firm registration number: 000030), Cost Accountants, to audit the cost accounts of the Company for the financial year 2016–17 on a remuneration of H 50,000 plus service tax, out–of pocket and travel and living expenses, subject to ratification by the shareholders at the annual general meeting. Accordingly, a resolution seeking members' ratification for the remuneration payable to the cost auditor is included in the Notice convening the annual general meeting.

On behalf of the Board of Directors

Rahul Bajaj

Chairman

Palce : Pune:

date : 24 May 2016

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