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To the Members:
1. Presentation of the Annual Report
Your Directors have pleasure in presenting the Twenty Sixth Annual Report on the business and operations of the Company and the audited accounts for the financial year 2014–15.
3. Operational Performance
The Company has recorded profit after tax of Rs. 60.18 crore during the year under review, as against that of Rs. 58.50 crore, during the previous year recording growth of 2.87% over the previous year. The Company had sanctioned project related loan assistance aggregating to Rs. 807.32 crore as compared to Rs. 680.86 crore in the corresponding period of previous year. The project related sanctions registered growth of 19% over the previous year whereas disbursements recorded growth of 43% over the previous year. TFCI had disbursed Rs. 508.02 crore as compared to Rs. 354.63 crore in the previous year. The growth in profit after tax is not commensurate with growth in business as the Corporation reduced its base lending rate from 13.5% to 12.75% during the current year with a view to attract new business and ensure balance sheet growth. The balance sheet size has increased from Rs. 1361.79 crore to Rs. 1500.87 crore during the year under review. Further, the company has approved a sum of Rs. 1.46 crore for meeting its Corporate Social Responsibility. Despite difficult business environment, the company has been able to achieve modest growth in terms of its book size, income from operations and net profit. The company, during the year under review, deliberately decided to extend financial assistance to projects having sound fundamentals and increase its balance sheet size by concentrating on take–over financing for potentially viable projects so as to ensure quick disbursement. Further, TFCI decided to explore and exploit possibilities for diversification and expansion into adjacent and parallel financial areas to ensure continuous growth in business. TFCI has been in constant touch with its erstwhile customers who might have financial requirements for renovation, modernisation and/ or expansion. Further, TFCI is also on the lookout for providing short–term corporate loans to various borrowers having satisfactory financial background. Your Company, during the last few years, has been pursuing to expand its portfolio by not only extending financial assistance to hospitality projects but also actively pursuing consultancy assignments for private Sector and state governments and their agencies.
3.1. Asset Quality:
Your Company adhered to the prudential norms for Non–Performing Assets(NPAs) prescribed by the regulatory authority. During the year under review, with a view to reduce its NPAs, your Company sold its stake in one sub–standard asset to Asset Care Enterprise Ltd. (ACER). Further, your Company recovered an amount of Rs. 4.67 crore from other NPAs during 2014–15. Despite vigorous follow up, three accounts have slipped from standard to sub–standard category and recognized as NPA as on March 31, 2015. The Gross NPA's of your Company as on 31st March, 2015 were 3.29% of the total assets. Your Company is confident of realising the entire over–dues alongwith further interest/principal during the year. TFCI has adequate provisions in the books of accounts. The Net NPAs of the company were Rs.18.96 crore as on March 31, 2015.
4. Contribution to Tourism and Infrastructure Sector by TFCI
TFCI is the only institution in the country exclusively for funding tourism projects with more than 25 years of existence. The assistance provided by TFCI since its inception has catalysed the addition of 45910 rooms and provided direct employment to about 86465 persons in tourism industry. The assistance provided by TFCI has also led to catalysing investments to the tune of Rs. 25657 Crore in the tourism sector by providing assistance to more than 758 projects thereby contributing to the creation of required tourism infrastructure, which has direct bearing on the development of industry.
Awards and Recognitions
During the year under review, your Company was recognised in various ways by various Institutions and some of the awards presented to the Company are listed below:
1. Best Financial Institution to create Tourism Infrastructure by Today's Traveller Award 2014.
2. Indian Hospitality Award 2014 by Epicurus Hospitality.
3. Most Outstanding Financial Institution by Travel and Hospitality Award 2014.
4. MSME Banking Excellence Award 2014 to the Managing Director of the Company.
Your Directors have recommended and paid interim dividend of Rs.1 per Equity Share i.e. @ 10% on March 27, 2015 for the financial year ended March 31, 2015. The Board of Directors have further recommended final dividend of Rs.0.80 per Equity Share i.e. @ 8% on the paid–up Equity Share Capital for the financial year ended March 31, 2015. The aggregate payout due to payment of final dividend, if approved, will be Rs.7.75 Crore inclusive of dividend tax of Rs.1.29 Crore.
The final dividend will be paid to those members holding shares in physical form, whose names appear in the Register of Members as on September 21, 2015 and in respect of shares held in dematerialized form, the dividend will be paid on the basis of beneficial ownership as per details to be furnished by the Depositories i.e National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL) as at the end of business on September 11, 2015.
6. Resource Mobilization
Your Company constantly monitors its resource base and taps the appropriate source in its endeavor to minimize the weighted average cost of funds. During the year, your Company met its fund requirements for disbursement as well as repayment/redemption of loans/ bonds by way of financial assistance from banks and internal accruals. Your Company redeemed high interest bearing loan aggregating Rs.80 crore during 2014–15 out of internal accruals and availed term loan of Rs.175 crores from banks. Further, your Company has tied up with various banks for financial assistance to meet its future disbursement obligations.
The Company has not invited any deposit from the public under Section 73 and 74 of the Companies Act, 2013 during the year under review. There was no public deposit outstanding as at the beginning or end of the year ended on March 31, 2015.
7. Regulatory Compliances
Your Company has been classified as Non–Deposit Accepting Non–Banking Financial Company. RBI has been issuing guidelines from time to time with regard to capital adequacy standards, income recognition, asset classification, provisioning and other related matters. The accounting policies of your Company conform to these guidelines. The capital adequacy for your Company stands at a very comfortable level of 37.65% as on the March 31, 2015 as against the prescribed norm of 15%.
8. Management's Discussion and Analysis Report
Management's Discussion and Analysis report containing Industry outlook, its environment, outlook for tourism and other details as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report.
9. Directors and Key Managerial Personnel
During the year under report, Ministry of Finance, Govt. of India appointed Shri M.M.Dawla as its nominee director on the Board of TFCI in place of Shri Sanjeev Kumar Jindal. Shri Subrahmoneyan Chandra Sekhar was appointed as additional director in the Independent category on March 18, 2015 by the Board of Directors for a period upto three consecutive years subject to the approval of the shareholders in the ensuing Annual General Meeting. Shri V.P.Singh, Independent Director has resigned from the Board w.e.f. May 8, 2015 due to personal reasons. Shri Anup Sankar Bhattacharya was appointed as additional director in the independent category by the Board of Directors w.e.f. August 8, 2015 for a period of three years subject to approval of shareholders in the ensuing Annual General Meeting. The Board appreciates the contribution made by the outgoing directors viz. Shri Sanjeev Kumar Jindal and Shri V.P. Singh during their tenure. In terms of the provisions of the Companies Act read with Article 135 of the Articles of Association of the Company, Shri Malay Mukherjee would retire at the forthcoming Annual General Meeting. The Board recommends the reappointment of Shri Malay Mukherjee and appointment of Shri Subrahmoneyan Chandra Sekhar and Shri Anup Sankar Bhattacharya in the forthcoming Annual General Meeting.
During the year under review, the members approved the appointments of Shri Niraj Agarwal and Shri Malay Mukherjee as Non–Executive Non–Independent Directors who are liable to retire by rotation and of Shri Vivek Nair, Shri S. Ravi, Shri S. Sridhar, and Shri V P. Singh (since resigned w.e.f. 8.5.2015) as Independent Directors who are not liable to retire by rotation. The members had also appointed Shri S.K. Sangar as the Managing Director. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as required under Section 149 of the Companies Act 2013 and Clause 49 of the Listing Agreement with the Stock Exchanges.
9.1 Performance Evaluation of the Board
The Companies Act, 2013 and clause 49 of the Listing Agreement entered with the Stock Exchanges stipulates the performance evaluation of the Directors including Chairperson, Board and its Committees. Accordingly, your Company has devised the process and the criteria for the performance evaluation which has been recommended by the Nomination & Remuneration Committee and approved by the Board. The process of evaluation has been stipulated for the entire Board for its own performance and that of its committees, independent directors and other directors based on the attendance; participation and contribution; responsibility towards stakeholders; exercised their duties with due and reasonable care, skill and diligence and have exercised independent judgment. The committee of independent directors will also evaluate the performance of non–independent directors including Chairman/Managing Director. On the basis of the report of performance evaluation, it shall be determined whether to extend or continue the term of appointment/ reappointment of the independent and other director(s).
9.2 Director Orientation Programme
The Company has established orientation program for its Independent directors (ID). The Directors are made aware on business models, nature of industry and its dynamism, the roles, responsibilities and liabilities of independent directors, etc. Further, business updates, legal updates and industry updates are made available to independent directors, especially to the Audit Committee members on an ongoing basis by internal teams, external consultants, statutory and internal auditors on a quarterly basis.
The details of programmes for familiarisation of independent directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link:http://www. tfciltd.com/policies.html
9.3 Details of Board meetings
During the year, 9 Board Meetings were held on April 9, 2014, May 9, 2014, May 27, 2014, July 7, 2014,
August 5, 2014, September 22, 2014, November 13, 2014, February 12, 2015 and March 18, 2015. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013. For the details of Audit Committee and other Committee meeting, please refer report on Corporate Governance of this Annual Report.
9.4 Appointments/Resignations of the Key Managerial Personnel
Shri S.K. Sangar was appointed Managing Director during the year under review; Shri B.M. Gupta, Chief Financial Officer and Shri Sanjay Ahuja, Company Secretary are the other Key Managerial Personnel as per the provisions of the Companies Act, 2013. None of the Key Managerial Personnel has resigned during the year under review.
9.5 Company's policy on appointment and remuneration
Your Company has constituted Nomination and Remuneration Committee of Directors and the Nomination and Remuneration Policy of your Company has been formulated in compliance of new guidelines and rules. The Nomination and Remuneration Committee undertakes a process of due diligence based on the criteria of qualifications, technical expertise, track record, integrity etc. for appointment of independent directors and other directors.The basic objective of ascertaining the fit and proper criteria is to put in place an internal supervisory process on a continuing basis and to determine the suitability of the person for appointment / continuing to hold appointment as a director on the board of the company.
I. Board Level Remuneration Structure
(a) For Managing Director/Whole–Time Director –
The remuneration is paid as approved from time to time, subject to the approval of the Board and Shareholders as the case may be and as per the applicable provisions of Companies Act, 2013 and any other Act/ Rules/ Regulations for the time being in force.
(b) In case of Non–Executive / Independent Directors
The Non–Executive Directors (except Government Servants) were paid sitting fees of Rs. 13,333/– (plus service tax) for attending a Meeting of the Board and Rs.6,667/–(plus service tax) for attending a meeting of the committee of directors. The sitting fees may be revised by the Board of Directors from time to time subject to the overall limits as prescribed under the applicable provisions. However, the sitting fee has been revised to Rs. 20,000 (plus service tax) and Rs. 10,000 (plus service tax) for the attending the meeting of Board and its committee respectively with effect from July 27, 2015.
No Director, who is a government employee is entitled to receive any remuneration except as authorized by the Government.
II. In case of Key Managerial Personnel and other Employees –
The pay structure, allowances, facility etc. of Key Managerial Personnel and all other regular employees are as per the pay scale, allowances and other facilities etc. as approved by the Board and its committee from time to time in line with the salary structure prevalent in other similar organization particularly IFCI Ltd. The Performance Linked Incentives both for the Managing Director/Senior Management / Other employees is as per the Board approved scheme.
10. Directors' Responsibility Statement
In compliance of Section 134(5) of the Companies Act, 2013, your Directors confirm:
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) 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;
(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
11. De–materialization of Shares and nomination facility and listing at Stock Exchanges
As per the Securities and Exchange Board of India (SEBI) directives, the transactions of the Company's shares must be compulsorily in dematerialized form. Your Company had entered into agreements with National Securities Depository Ltd. and Central Depository Services (India) Ltd. to facilitate holding and trading of shares in electronic form. Shareholders holding shares in physical form are requested to convert their holding into dematerialized form.
Shareholders may utilize the nomination facility available by sending duly filled form prescribed to our Registrar and Share Transfer Agent, M/s MCS Share Transfer Agent Limited.
Your Company's equity shares are listed with Bombay Stock Exchange Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE). The Company has paid the annual listing fees to said stock exchanges for the financial year 2014–15 and 2015–16. The addresses of the said stock exchanges are stated elsewhere in the Annual Report.
M/s V.C. Gautam & Co., Chartered Accountants (Registration No 000365N) has been appointed by the Comptroller & Auditor General of India (C & AG) as Statutory Auditors of Your Company for FY 2015–16.
12.1 Auditors' Report
The Auditors' Report along with the Notes on Accounts referred to in the Auditors' Report is self–explanatory and does not call for any further comments or explanation. There are no adverse remarks or qualifications in the Audit Report.
12.2 Secretarial audit
In terms of Section 204 of the Act and Rules made there under, M/s Arun Kumar Gupta & Associates, Practicing Company Secretary, have been appointed as Secretarial Auditors for the year 2014–15. The report of the Secretarial Auditors is enclosed as Annexure 4 to this report. The report is self–explanatory and do not call for any further comments.
13. Particulars of Employees
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, no employees is drawing remuneration in excess of the limits set out in the said rules.
The ratio of the remuneration of each director to the median employee's remuneration and other details in terms of sub–section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure 1. Committee on Sexual Harassment Your company is fully committed to take appropriate measures against Sexual Harassment of Women at Workplace as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. No Complaints has been received about the sexual harassment cases during the year.
14. Energy Conservation, Technology Absorption and Foreign Exchange Earning and outgo
The particulars relating to energy conservation and technology absorption, as required to be disclosed under Section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 is not required as your Company's operations do not involve in manufacturing or processing activities. However, while vetting the proposals received for sanction of financial assistance, the aspect of energy conservation, in case of assisted concerns, is given due consideration. The particulars regarding Foreign Exchange earnings and outgo are as follows:
i) Total foreign exchange outgo : Nil
ii) Total foreign exchange earnings : Nil
15. Transfer of amount to Investor Education and Protection Fund
Your Company did not have any funds lying unpaid or unclaimed for a period of seven years as required under Section 124 of the Companies Act 2013.
Therefore there were no funds which were required to be transferred to Investor Education and Protection Fund (IEPF). The Company has already filed the necessary form and uploaded the details of unpaid and unclaimed amounts lying with the Company, as on the date of last AGM (i.e September 22, 2014), with the Ministry of Corporate Affairs.
16. Corporate Social Responsibility
Your Company has constituted Corporate Social Responsibility (CSR) Committee of Directors and the CSR Policy of your Company has been formulated for implementation in Compliance with the provision of Section 135 of the Companies Act, 2013 and Rules made thereunder.The Corporate Social Responsibility Policy (CSR Policy) may be accessed on the Company's website at the link: http://www.tfciltd.com/policies.html
The Corporate Social Responsibility (CSR) policy has been approved with a philosophy:–
• To support activities aimed at development of human skills particularly needed for tourism sector.
• To support activities/projects which would promote tourism in the country including protection of national heritage of art and culture, restoration of building and sites of heritage importance, work of art, promotion and development of traditional art, handicraft etc.
• To support activities which help cleaner, greener and healthier environment and thereby enhancing TFCI's perception as a socially responsible entity.
Your Company during the year under review has undertaken CSR activities/projects amounting Rs. 1.46 crore (2% of the average net profit of the last three years)
in compliance with CSR objectives and policy of the Company. Out of total CSR approved projects of Rs. 1.46 crore, Rs. 1.27 crore was spent and unspent amount of Rs. 18.63 lakh is linked with the progress of the projects wherein advance payment to implementing agencies was made and project progress is being monitored. The residual expenditure has also been provided for. The detailed report on the CSR contribution made during the year 2014–15 is annexed as Annexure 2. 17. Corporate Governance and other disclosures
Your Directors reaffirm their continued commitment to good corporate governance practices and endorse such practices in accordance with the provisions of Clause 49 of the Listing Agreement. Your company has complied with all the mandatory requirements. The Report on the Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. The requisite Certificate from the M/s Arun Kumar Gupta & Associates, Practicing Company Secretary, confirming compliance with the conditions as stipulated under the aforesaid Clause 49 is attached to this report.
17.1 Vigil Mechanism
Pursuant to the requirement of the Companies Act 2013 and Listing Agreement, the Company has a Vigil Mechanism and Whistle Blower Policy under which the employees are free to report violations of applicable laws and regulations and the Code of Conduct. The reportable matters can be disclosed to the Audit Committee. Employees can also report directly to the Chairman of the Audit Committee. During the year under review, no employee was denied access to the Audit Committee. The policy on Vigil Mechanism and Whistle Blower Policy may be accessed on the Company's website at the link: http://www.tfciltd.com/policies.html
17.2 Related Party Transactions
All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis.
There were no materially significant related party transactions entered by the Company with promoters, directors, key managerial personnel or other persons which may have a potential conflict with the interest of the Company during the year. The Company's related party transactions are generally with its associates. The related party transactions are entered into based on synergy in operations, long–term strategy for sectoral investments and profitability. All related party transactions are on an arms length basis, and are intended to further the Company's interests. Your Directors draw attention of the members to Note 24 to the financial statement which sets out related party disclosures.
The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Audit Committee and the Board may be accessed on the Company's website at the link: http://www. tfciltd.com/policies.html
17.3 Extract of Annual Return
Pursuant to section 92(3) of the Companies Act, 2013 ('the Act') and rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of annual return is attached as Annexure 3.
17.4 Statement containing salient features of financial statements of subsidiaries
Your Company does not have any subsidiary or holding company.
17.5 Risk Management Policy
The Company has developed and implemented the Risk Management Policy and Asset Liability Management Policy and the Board/Audit Committee of the Board reviews the same periodically. Your Company has also constituted ALM Committee (ALCO) and Risk Management Committee for reviewing/implementing ALM policies and for managing the liquidity risk as well as interest–rate and other risks. ALCO meets every month and reviews the cash flows as well as the prevailing interest rate scenario, its likely impact on the profitability and the steps to be initiated for effectively meeting the liabilities on the due dates. ALCO is also responsible for ensuring adherence of limits set by the Board as well as deciding business strategies of TFCI in line with the overall budget and risk management policy. The Company manages, monitors and reports on the principal risks and uncertainties that can impact its ability to achieve its planned objectives. The Company's management systems, structures, processes, standards, code of conduct and behaviours together form the system that governs how it conducts the business of the Company and manages associated risks.
17.6 Significant and material orders passed by the regulators
During the year under review, no significant and/or material orders were passed by the regulators or courts or tribunals impacting the going concern status and company's operations.
17.7 Internal financial controls
The Company has in place set of standards, processes and structure which enables it to implement internal control system and ensure that same are adequate and operating effectively. During the year, such controls were tested and no reportable material weakness in the design or operation was observed.
17.8 Particulars of Loans given, Investments made, Guarantees given and Securities provided
Your Company is a specialised financial institution registered as Non–Banking Finance Company (NBFC–ND–SI) with RBI. It provides financial assistance to tourism related/other projects in the ordinary course of business. The detailed particulars may be referred to in the financial statements.
17.9 Segment Reporting
Accounting Standard 17 regarding Segment–wise Reporting does not apply to your Company since revenues are primarily derived from only one segment i.e.financing of projects by way of loan or investments.
17.10 Material Changes and Commitment Affecting Financial Position of the Company
There are no material changes and commitments, affecting the financial position of the Company which has occurred between the end of the financial year of the Company i.e. March 31, 2015 and the date of the Directors' report i.e. July 27, 2015.
The Board expresses and places on record their gratitude for the consistent support and guidance given by the promoter institutions namely IFCI Ltd., LIC, SBI and others Banks.
Your Directors wish to place on record their sincere gratitude to valued customers, bankers and members for their continued patronage.
The Board also acknowledges and appreciates the guidance and co–operation extended by the Ministry of Finance, Ministry of Tourism, Government of India, and Reserve Bank of India, Securities & Exchange Board of India, Stock Exchanges and Depositories. The Board also appreciates and acknowledges the contribution made by the employees whose concerted efforts and dedicated services contributed to sustained growth and performance of the Company.
For and on behalf of the Board of Directors
S. Ravi (Director)
S.K. Sangar (Managing Director)
Place: New Delhi.
Date : August 20, 2015