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REPORT OF THE BOARD OF DIRECTORS
The Members of Shriram City Union Finance Limited
The Directors are pleased to present this 30th Annual Report with the audited standalone and consolidated financial statements of the Company for the Year ended March 31, 2016 ("Year"). The consolidated financial statements are presented as one part of this Annual Report. The report on corporate governance, management discussion and analysis and other annexures mentioned in the report form a part of this Annual Report.
2. APPROPRIATIONS AND TRANSFER TO RESERVE
The Board of Directors ("Board") propose to transfer amounts mentioned in the above table stating financial results to different reserve in compliance with the requirements of Reserve Bank of India ("RBI") regulations and the Companies Act, 2013 (Act).
Based on the financials of the Company, aspirations of the shareholders and to maintain a sustainable dividend linked to long term growth of the Company, the Board is pleased to recommend final dividend as mentioned below for the Year to be paid to those members, whose name appear on the register of members as on the record date for payment of dividend for the Year. The dividend paid for the Year ended March 31, 2015 and interim dividend paid for the Year are stated below for reference.
The Register of Members and Share Transfer Books will remain closed from July 22, 2016 to July 28, 2016 (both days inclusive) for the purpose of final dividend for the Year and for the Annual General Meeting ("AGM") scheduled to be held on July 28, 2016.
Section 125 of the Act, requires the companies to transfer dividend that has remained unclaimed for a period of seven Years from the date of its transfer to unpaid dividend account to Investor Education and Protection Fund ("IEPF"). Accordingly, during the Year an amount of Rs. 0.049 crores (2014–15: Rs. 0.007 crores) were transferred to IEPF. An amount of Rs. 0.73 crores (2014–15: Rs. 0.61 crores) is lying in unpaid equity dividend account of the Company. Shareholders are informed that there will be no claim lie on the Company on account of dividend after the dividend is transferred to IEPF.
4.ANNUAL RETURN, PARTICULARS OF LOANS AND CONTRACTS WITH RELATED PARTY
The extract of the Annual Return in the form MGT – 9 as required under Section 92 (3) and 134 (3) of the Act is attached to this Report as Annexure – 6. The particulars of loans, guarantees and investments covered under Section 186 of the Act are given under note no. 26 of the notes to accounts of the Financial Statements. All transactions or arrangements with related parties referred to in Section 188 (1) of the Act, entered into during the Year were on arm's length basis or were in ordinary course of business or with omnibus approval of the Audit and Risk Management Committee. There were no material related party transactions during the Year. The Company has formulated a policy on related party transactions approved by the Audit and Risk Management Committee and the Board, which is displayed on the web site of the Company at <http://www.shriramcity.in/files/RELATED–>PARTY–TRANSACTION–RPT–POLICY–NEW/index. html The particulars of contracts or arrangements with related parties as referred in section 188(1) of the Act is attached to this Report in prescribed form AOC – 2 as Annexure –5. The details of related parties and transactions with the related parties as required under Regulation 34(3) and 53(f) read with Para A of Schedule V of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 ["LODR"] appear in note no. 26 of the Notes to Accounts.
5. STATE OF AFFAIRS OF THE COMPANY
Non Banking Finance Companies ("NBFC") are an integral part of the Indian financial system, enhancing competition and diversification in the financial sector and complementing the banking system. NBFCs play a vital role in furthering the objective of financial inclusion by serving the credit demand of the small and medium scale and retail sectors. The Company specializes in financing small businesses and in financing retail asset predominantly in under–served areas.
During the Year, the total disbursements of loans under different products were Rs. 18,648.54 crores (2014–15: Rs. 17,202.45 crores). Income from operations for the Year grew by 10.13 percent to Rs. 3,834.87 crores and the same resulted in a profit before tax of Rs. 806.84 crores for the Year (2014 –15: Rs. 841.09 crores). As at March 31, 2016 the total assets under management stood at Rs. 19,575.82 crores (March 31, 2015: Rs. 16,717 crores).
During the Year, the total consolidated disbursements of loans under different products were Rs. 19,441.00 crores (2014–15 : Rs. 17,705.45 crores). Consolidated Income from operations for the Year grew by 12.26 percent to Rs. 3998.19 crores (2014 –15 : Rs. 3,561.69 crores) and the same resulted in a profit before tax of Rs. 849.37 crores for the Year (2014 –15 : Rs. 866.79 crores). As at March 31, 2016 the consolidated assets under management stood at Rs. 20,850.85 crores (March 31, 2015 : Rs. 17,454.20 crores).
The funding source for the Company was through private placement of non convertible debentures ("NCDs") with banks / institutions, Fixed deposits, commercial papers and borrowings from banks/ financial institutions by way of term loans as summarized below.
In addition, resources were mobilized through cash credit / working capital demand loans from banks. The profit before tax came down during the Year majorily due to enhanced provision for non performing assets due to change in regulations of RBI and due to additional impact of provision / payment of bonus due to change in Bonus Act.
Balance outstanding on cash credit as on March 31, 2016 was Rs. 845.28 crores (March 31, 2015: Rs. 1,067.45 crores) & Working capital demand loans as on March 31, 2016 was Rs. 25 crores (March 31, 2015: Rs. 25 crores)
There were 3506 no. of deposits amounting to Rs. 31.76 crores which had matured for payment and were due to be claimed or renewed. Subsequent follow–up for repayments/renewals resulted in the number reducing to 2362 number of deposits amounting to Rs. 19.86 crores as on April 27, 2016. There were no deposits which had matured and claimed, but were not paid by the Company. Steps are continuously taken to arrange for repayment/renewal of these unclaimed deposits. The Company stopped retail private placement of debentures and subordinated debts.
6. CAPITAL AND LISTING
During the Year 21,540 no (2014 – 15 : 41,340) of equity shares were allotted to the eligible employees of the Company on exercise of their option under Employees Stock Options Scheme 2006 ("Scheme") approved by the members at the Extra–Ordinary General Meeting ("EGM") held on October 30, 2006 in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 ("SEBI Guidelines") and Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 ("SEBI Regulations"). The ESOP Scheme, 2008 of the Company was not implemented as approved for non implementation by the members in the
Annual General Meeting ("AGM") held on July 28, 2015. The ESOP Scheme titled SCUF ESOP Scheme 2013 as approved by the members in the EGM held on May 31, 2013 has not been implemented.
The required disclosures under Regulation 13 under SEBI Regulations as on March 31, 2016 are set out in Annexure – 7 to this report.
The Company has received the certificate as attached in Annexure – 8 from the auditors of the Company certifying that the Scheme is implemented in accordance with the SEBI Guidelines, SEBI Regulations and in accordance with the resolution of the members passed at the general meeting.
The details with respect to the unclaimed equity shares as required under Regulation 34 (3) read with schedule V of SEBI (LODR) are as under
The listing fees to BSE Limited ("BSE") and National Stock Exchange of India Limited ("NSE") for the Year were paid on time.
7. HUMAN RESOURCE
The Company considers employees as most vital and valuable assets and major strength. The employees are trained for necessary soft and hard skills on a regular basis. Exciting growth opportunities combined with the ESOP Schemes help performance and retention of employees. The total employee strength of the Company as on March 31, 2016 stood at 25,472 with 9,856 number of employees added during the Year. The information required pursuant to Section 197(12) of the Act read with Rule – 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rule, 2014 and the details required under Rule – 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 on remuneration are attached as Annexure –9 to this Report.
8. SUBSIDIARY AND CONSOLIDATED FINANCIAL STATEMENTS
M/s Shriram Housing Finance Ltd ("SHFL") is the subsidiary company of the Company. SHFL is registered with National Housing Bank ("NHB") with registration number 08.0094.11 and is engaged in providing home loans, loans against property and loans for housing projects. With a firm belief in the philosophy of "Funding Ways to Finding Homes", SHFL has been catering to the largely under–served group of prospective homeowners from the lower– and middle–income strata in Tier 2 and Tier 3 locations in the country.
SHFL has seen a rapid growth in its portfolio since it started business in FY 2012. From a loan book of Rs. 4.90 crores in FY 2013, SHFL closed FY 2016 with assets under management of Rs. 1275.03 crores. Loans worth Rs. 792.45 crores were disbursed during FY 16, and the number of borrowers stood at 10,009. SHFL added seven branches during the Year making total number of branches 79. Employee strength grew to 590 during the Year (2014 – 15 : 501). Liabilities as on March 31, 2016 stood at Rs. 853.21 crores, of which 37% comprised of Secured Non–convertible Debentures and the balance were credit lines from commercial banks and refinance from NHB. With a retail–focused approach to business, SHFL expects to play its part in the Government of India's vision of "Housing for all by 2022".
The annual financial statements of SHFL together with auditors report thereon are attached to this Report as Annexure – 16. Consolidated financial statements of the Company prepared as per Section 129(3) of the Act and in compliance with applicable accounting standards and LODR are audited by the statutory auditors of the Company. The consolidated financial statements along with the report of the auditors of the Company thereon are attached to this Report (Annexure – 17).
The annual accounts, annual reports and the related detailed information of SHFL shall be made available to the share holders of the Company and the share holders of SHFL seeking such information at any point of time. In accordance with Section 136 of the Act, the audited annual financial statements including consolidated financial statements and related information of the Company and audited accounts of SHFL are displayed on the web site of the Company at <http://www.shriramcity.in/PDF/Inv_AnnualReport/> SHFL–AR–FY2015–16.pdf and shall be kept at the Registered Office of SHFL for inspection by any shareholder during business hours. Shriram Capital Limited and SHFL continued as promoter and subsidiary of the Company respectively.
9. RESERVE BANK OF INDIA ("RBI") GUIDELINES
The Company continues to comply with all applicable regulations of RBI. The Company was classified as Loan Company from Asset Finance Company effective July 27, 2015 and the change was endorsed on the certificate of registration by RBI.
The net worth of the Company increased by Rs. 399 crores and the Capital Adequacy and Reserve Ratio (CRAR) stood at 26.14 percent as on March 31, 2016 which is above 15 percent as prescribed by RBI vide its Notification dated March 27, 2015. The Risk weighted assets stood at Rs. 18,927.70 crores. The Company complied with RBI regulations during the Year
10. CORPORATE GOVERNANCE
The Company adheres to high standard of corporate governance. Report on corporate governance forming part of this Report as required under Regulation 34(3) of LODR together with the certificate from the auditors of the Company as required under Para E of Schedule V of LODR, confirming the compliance with the corporate governance are attached to this Report (Annexure – 1). As required under Regulation 34 (2) (e) and 34 (3) LODR, the Management and Discussion Analysis on the business of the Company forming part of this report is attached as Annexure – 3.
Further, as required under Regulation 17 (8) of the LODR, a compliance certificate, duly signed by the Managing Director and Chief Executive Officer and Chief Financial Officer on the financial statements of the Company for the Year, was submitted to the Board of Directors at their meeting held on April 27, 2016. The same certificate is attached as Annexure –4. The relevant provisions of the voluntary guidelines are adopted in the areas deemed appropriate.
1. CORPORATE SOCIAL RESPONSIBILITY ("CSR")
Section 135 of the Act on CSR applies to the Company. Accordingly, the Company has constituted a CSR Committee consisting of three Directors including two Independent Directors. The details of the CSR Committee appear on the report on corporate governance and Annual Report on CSR activities as required under Rule 9 of the Companies CSR Policy Rules, 2014 of the Act is attached to this report as Annexure – 10.
The CSR policy of the Company as recommended by the CSR Committee, was reviewed and approved by the Board and is displayed on the website of the Company.
The Company undertook CSR Projects on health, education, skill development and environment directly and through Implementing Agent. The spend on CSR during the Year was approved by the Board of Directors of the Company as recommended by the CSR Committee.
During the Year, the Company had spent Rs. 6.50 crores on the above said CSR activities of the
Company (2014 – 15 : Rs. 0.09 crores). Though, the CSR spend during the Year increased substantially over last Year, there was a short fall of Rs. 8.75 crores as the Company was in the process of evaluating CSR projects. The Board affirms that the CSR activities are implemented in accordance with CSR Policy.
DIRECTORS AND MEETING OF THE BOARD
The number of meetings of the Board held during the Year along with details of such meetings is mentioned in the report of Corporate Governance attached as Annexure – 1 to this Report. In compliance with Section 178 of the Act, the Board has constituted Nomination and Remuneration Committee ("NRC"). As required under Section 149 (7) of the Act, the Company received necessary declaration from each independent director about his/her meeting the criteria of independence as laid down under the Act and LODR. A statement by the Managing Director confirming receipt of this declaration from each independent director of the Company is attached as Annexure – 11 . The Board on the recommendation of the NRC has formulated a policy for selection, appointment and remuneration of directors, senior management personnel as required under Section 178 (3) of the Act, the details of which appear in the Annexure – 13. The Board carried out annual performance evaluation of it's own Committees and individual directors based on the criteria and frame work adopted by the Board. The results of such evaluation were placed before the Board. The induction, training, appointment, resignation and retirement of directors are dealt with in the report on corporate governance attached as Annexure –1. The brief profile of each director appear in the Annual Report. Each Director has given his/her declaration to the Company for not holding any shares in the Company and having no relation intersewith any Director. Sri Khushru Burjor Jijina (DIN – 00209953) and Sri Shashank Singh (DIN – 02826978) who were appointed as additional directors during the Year, retire at the ensuing AGM. Sri Khushru Burjor Jijina and Sri Shashank Singh have expressed their intention and confirmed eligibility to be appointed as Directors of the Company. The details on their appointment as directors form a part of the agenda of the ensuing AGM. As per provisions of the Act and Articles of Association of the Company, Sri Gopalasamudram Srinivasaraghavan Sundararajan (DIN – 00361030) and Sri Ranvir Dewan (DIN – 01254350) retire by rotation at the ensuing AGM. Sri Ranvir Dewan being eligible offers himself for re–appointment. Sri Gopalasamudram Srinivasaraghavan Sundararajan has expressed that he would not be available for directorship in the Company. Hence he has not sought for re–appointment at the ensuing AGM.
13. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Sections 134 (3) (c) and 134 (5) of the Act with respect to Directors' responsibility statement, the Directors of the Company hereby confirm, in the preparation of annual accounts for the Year that :
(i) the applicable accounting standards have been followed and proper explanations have been made in notes to accounts for material departures, if any;
(ii) the accounting policies have been selected and applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at March 31, 2016 and statement of the profit and loss of the Company for the Year ended on that date;
(iii) proper and sufficient care have been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern basis.
(v) internal financial controls to be followed were laid down, which were adequate and were operating effectively during the Year.
(vi) proper systems had been devised to ensure compliance with provisions of applicable laws, which were adequate and were operating effectively during the Year.
Risk Management Policy was implemented during the year as reviewed and approved by the Board on the recommendation of the Audit and Risk Management Committee.
14. SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS OR COURT
There are no material order passed by Regulators/ Courts, which would impact the going concern status of the Company and it's future operations.
15. AUDIT AND AUDITORS
The auditors of the Company have submitted report (standalone and consolidated) to the members of the Company for the Year, which is unqualified, without any reservation or adverse remark or disclaimer. The same report of the auditors is attached to the financial statements forming a part of this Report. Therefore, Board does not have any explanation or comment. Pursuant to Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s P. Sriram & Associates, Company Secretaries in practice were appointed by the Company as the Secretarial Auditor of the Company for the Year. The same Secretarial Auditor conducted audit and submitted report as attached in Annexure – 14 to the Members, which is unqualified, without any reservation or adverse remark or disclaimer. Therefore, Board does not have any explanation or comment on such Secretarial Audit Report. The Board has appointed M/s P.Sriram & Associates, Company Secretary in practice as secretarial auditor of the Company for the financial Year 2016–17.
The Auditors M/s Pijush Gupta & Co., Firm Registration No – 309015E Chartered Accountants, Kolkata retire at the conclusion of the ensuing AGM and have confirmed their eligibility under Section 141 of the Act and willingness to accept the office, if re–appointed. Necessary resolution for their re–appointment till conclusion of the 31st AGM is proposed at the ensuing AGM.
16. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUT GO DURING THE YEAR
The information on conservation of energy, technology absorption, foreign exchange earnings and out go as stipulated under Section 134 (3) (m) of the Act read with Rule 8 of the Companies (Accounts) Rules 2014 are furnished below
The operations of the Company are not energy intensive. However, adequate measures for conservation of energy, usage of alternate sources of energy and investments for energy conservation, wherever required have been taken.
The Company has not absorbed any technology. There were no foreign exchange earnings. There was an outgo of foreign exchange of Rs. 98.77 crores during the Year (2014 – 15 : NIL).
The Board expresses its deepest appreciation and gratitude for the guidance and cooperation extended to the Company by RBI, statutory authorities and regulators. The Board also thanks the banks and financial institutions for their timely financial assistance to the Company and helping the Company to reach out to customers across the country. The Board thanks the auditors to the Company for their guidance. Special thanks are due to the employees of the Company who contributed their skills, enthusiasm, commitment and dedication which have over the years helped the Company to earn prominence. The Board is grateful to the shareholders, depositors, debenture holders and debt holders of the Company for their patronage.
18. STATEMENT OF CAUTION
Any of the numbers or statements expressed in this Report may mean forward looking within the provisions of LODR and other regulations, which are not intended as such. Actual results, which are dependent on many factors, may be different.
For and on behalf of the Board of Directors
Place : Chennai
Date : April 27, 2016