The directors present their twenty ninth Annual Report and the standalone andconsolidated audited financial statements for FY2016.
The highlights of the standalone financial results are as under:
| || || ||(Rs. In Crore) |
|Particulars ||FY2016 ||FY2015 ||% change over FY2015 |
|Income from Operations ||7304.31 ||5381.80 ||36 |
|Other Income ||79.17 ||36.43 ||117 |
|Total Income ||7383.48 ||5418.23 ||36 |
|Expenses ||1871.50 ||1387.03 ||35 |
|Loan Losses and Provisions ||542.85 ||384.56 ||41 |
|Finance Costs ||2926.86 ||2248.30 ||30 |
|Depreciation and amortisation ||56.34 ||35.60 ||58 |
|CSR Expenditure ||21.36 ||5.80 ||268 |
|Total Expenditure ||5418.91 ||4061.29 ||33 |
|Profit Before Taxation ||1964.57 ||1356.94 ||45 |
|Tax Expenses ||686.05 ||459.07 ||49 |
|Profit for the year after Taxation ||1278.52 ||897.87 ||42 |
|Balance brought forward from previous year ||1684.03 ||1171.91 || |
|Profit available for appropriations ||2962.55 ||2069.78 || |
|Appropriations: || || || |
|Transfer to Reserve Fund ||(256.00) ||(185.00) || |
|Transfer to General Reserve ||(128.00) ||(90.00) || |
|Transfer to Infrastructure Reserve || ||(2.10) || |
|Dividend to Qualified Institutional Buyers ||(5.89) || || |
|Tax on dividend to Qualified Institutional || || || |
|Buyers and ESOP Trust ||(1.28) || || |
|Adjustment of dividend to ESOP Trust ||1.57 || || |
|Interim Dividend ||(96.97) || || |
|Dividend tax on Interim Dividend ||(19.74) || || |
|Provision for Proposed Final Dividend ||(37.71) ||(90.27) || |
|Provision for Dividend Tax on Final Dividend ||(7.68) ||(18.38) || |
|Balance carried to Balance Sheet ||2410.85 ||1684.03 || |
A summary of consolidated financial performance for FY2016 consolidating the results ofwholly owned subsidiary Bajaj Housing Finance Limited (BHFL) along with its subsidiaryBajaj Financial Securities Limited (BFinsec) is given below. The operations of thesubsidiaries in FY2016 were not significant and hence the consolidated profit of theCompany almost equals its standalone profit.
| || ||(Rs. In Crore) |
|Particulars ||FY2016 ||FY2015 |
|Total Income ||7383.66 ||5418.28 |
|Interest and Finance Charges ||2926.85 ||2248.27 |
|Net Interest Income ||4456.81 ||3170.01 |
|Operating Expenses ||1949.28 ||1428.50 |
|Loan Losses and Provisions ||542.85 ||384.56 |
|Profit Before Tax ||1964.68 ||1356.95 |
|Profit After Tax ||1278.63 ||897.88 |
Performance and financial position of subsidiaries
During FY2016 BHFL received a certificate of registration from National Housing Bankand is in the process of commencing housing finance business.
During FY2016 there were no major business operations in BHFL and its subsidiaryBFinsec. The Profit after tax for FY2016 of BHFL was Rs. 529939 as against Rs. 78920 forFY2015 and of BFinsec was Rs. 566846 as against Rs. 154642 for FY2015.
The directors of the Company at its meeting held on 9 March 2016 declared an interimdividend of Rs. 18 per equity share of the face value of Rs. 10 (180%) for FY2016. Theamount of dividend and tax thereon aggregate to Rs. 116.71 crore.
The directors recommend for consideration of the members at the ensuing annual generalmeeting payment of final dividend of Rs. 7 per equity share of the face value of Rs. 10(70%) for FY2016. The amount of final dividend and tax thereon aggregate to Rs. 45.39crore.
The interim dividend and the final dividend if declared aggregate to Rs. 25 perequity share of the face value of Rs. 10 (250%). The amount of interim dividend and thefinal dividend if declared and tax thereon aggregate to Rs. 162.10 crore.
Dividend paid for FY2015 was Rs. 18 per share (180%). The amount of dividend and taxthereon aggregated to Rs. 115.82 crore and includes dividend and tax thereon in respect ofequity shares allotted after 31 March 2015 till the date of book closure for the purposeof dividend.
Pursuant to the provisions of Securities and Exchange Board of India (Issue of Capitaland Disclosure Requirements) Regulations 2009 the Companies Act 2013 and the approvalof members and of the Board of Directors the Company raised funds through:
a) Preferential issue of warrants On 2 June 2015 the Company allotted 925000warrants to the promoter Bajaj Finserv Limited (BFS) at a price of Rs. 4412 perwarrant which are convertible into equivalent number of equity shares of face value ofRs. 10 each within 18 months from the date of allotment of warrants i.e. on or before 1December 2016. The Company has received from BFS an amount of Rs. 102.03 crore being 25%of the issue price of warrants.
b) Qualified Institutions Placement (QIP) On 11 June 2015 the Company allotted3274853 equity shares of face value of Rs. 10 each at a price of Rs. 4275 per equityshare (inclusive of premium of Rs. 4265 per equity share) to Qualified InstitutionalBuyers aggregating to about Rs. 1400 crore.
The receivables under financing activity as on 31 March 2016 were Rs. 42756 crore ascompared to Rs. 31199 crore as on 31 March 2015 an increase of 37% over the previousyear.
Total income during FY2016 increased to Rs. 7384 crore from Rs. 5418 crore duringFY2015 an increase of 36% over the previous year.
The profit before tax for FY2016 was Rs. 1965 crore as against Rs. 1357 crore forFY2015 an increase of 45% over the previous year. The profit after tax for FY2016 was Rs.1279 crore as compared to Rs. 898 crore for FY2015 an increase of 42% over the previousyear. This has been due to the Company's healthy net interest margins operatingefficiencies and prudent risk management.
The Company's current provisioning standards are more stringent than Reserve Bank ofIndia (RBI) prudential norms. In line with its conservative approach the Companycontinues to strengthen its provisioning norms beyond the RBI regulation by acceleratingthe provisioning to an early stage of delinquencies based on the past experience andemerging trends.
The Company had an excellent year aided by strong volume growth in Consumer lending andSME lending. During FY2016 the Company launched various new products and variants tostrengthen its business model and continue its growth momentum.
The Company's loan loss and provisions increased from Rs. 385 crore in FY2015 to Rs.543 crore in FY2016 taking into account the increased business. The Company ended FY2016with a net NPA of 0.28%.
During FY2016 the Company allotted equity shares of face value of Rs. 10 each asfollows:
a) 3274853 equity shares to Qualified Institutional Buyers under QualifiedInstitutions Placement.
b) 450063 equity shares to the trustees of BFL Employee Welfare Trust under theEmployee Stock Options Scheme 2009.
c) 15 equity shares in respect of the rights entitlement (in rights issue made in 2013)held in abeyance on 100 equity shares transferred from the unclaimed suspense account.
As on 31 March 2016 the paidup share capital of the Company stood at Rs.538721900 consisting of 53872190 equity shares of face value of Rs. 10 each fullypaidup.
The operations of the Company are elaborated in the annexed Management Discussionand Analysis Report'.
Conservation of energy and technology absorption
The Company being a nonbanking finance company (NBFC) does not have anymanufacturing activity. The directors therefore have nothing to report onconservation of energy and technology absorption'.
Foreign currency expenditure amounting to Rs. 14.83 crore (FY2015 Rs. 6.36 crore) wasincurred during FY2016. The Company did not have any foreign exchange earnings.
Employee stock option scheme
Disclosures pertaining to the Employee Stock Option Scheme 2009 of the Companypursuant to the Securities and Exchange Board of India (Share Based Employee Benefits)Regulations 2014 are placed on the Company's websitehttps://www.bajajfinserv.in/finance/investor-relations/ annual-reports.aspx Grant wisedetails of options vested exercised and cancelled are provided in the notes to thestandalone financial statements.
During FY2016 the Company accepted fixed deposits (FDs) of Rs. 1597.70 crore. FDsoutstanding at the year end were Rs. 2243.29 crore. As on 31 March 2016 there were 8 FDsamounting to Rs. 0.01 crore which had matured and remained unclaimed.
Pursuant to the provisions of Reserve Bank of India Act 1934 the Company has createda charge on statutory liquid assets amounting to Rs. 347.11 crore in favour of the trusteefor FD holders.
During FY2016 there was no default in repayment of deposits or payment of interestthereon.
Adequacy of internal financial controls
The Company has documented its internal financial controls considering the essentialcomponents of various critical processes physical and operational and which includes itsdesign implementation and maintenance along with periodical internal review ofoperational effectiveness and sustenance.
This ensures orderly and efficient conduct of its business including adherence toCompany's policies safeguarding of its assets prevention of errors accuracy &completeness of the accounting records and the timely preparation of reliable financialinformation.
The internal financial controls with reference to the financial statements wereadequate and operating effectively.
Despite a tough economic environment the Company retained all its credit ratings owingto high capital adequacy strong promoter support tightened credit acceptance criteriaand robust asset liability management.
CRISIL has reaffirmed the highest rating of "FAAA/Stable" for the fixeddeposit programme of the Company. ICRA has also assigned "MAAA/Stable" rating tothe fixed deposit programme of the Company. These ratings indicate highest degree ofsafety with regard to timely payment of interest and principal. The Company is one of thevery few NBFCs which enjoys the highest rating for its fixed deposit programme.
The Company also enjoys the highest rating of "CRISIL A1+" from CRISIL and"(ICRA) A1+" from ICRA for its short term debt programme for Rs. 6500 crorefrom each rating agency.
The long term nonconvertible debentures have been assigned "INDAAA/Stable" rating by INDIA RATINGS "CRISIL AA+/Positive" rating by CRISILand "[ICRA] AA+(Stable)" by ICRA indicating the high degree of safety withregard to timely payment of interest and principal for an amount of Rs. 4000 crore Rs.9350 crore and Rs. 8000 crore respectively.
The Company has also been assigned "IND AAA/Stable" by INDIA RATINGS"CRISIL AA+/Positive" rating by CRISIL and "[ICRA] AA+(Stable)" byICRA for Rs. 1000 crore Rs. 1700 crore and Rs. 1700 crore respectively for thesubordinated debt programme.
As regards the bank loan ratings for the bank facilities stipulated by RBI as a partof BASEL II guidelines INDIA RATINGS has assigned "IND AAA/Stable" and CRISILhas assigned "CRISIL AA+/Positive" rating for the Company's cash credit/workingcapital demand loan and long term bank facilities. INDIA RATINGS has assigned "INDA1+" rating and CRISIL has assigned "CRISIL A1+" rating for the short termbank facilities. The cumulative rating for the bank loan programme is Rs. 30000 croreunder INDIA RATINGS and Rs. 21000 crore under CRISIL Ratings.
The Company continues to fulfill all the norms and standards laid down by the RBIpertaining to nonperforming assets capital adequacy statutory liquidity assetsetc. As against the RBI norm of 15% the capital adequacy ratio of the Company was 19.50%as on 31 March 2016. In line with the RBI guidelines for asset liability management (ALM)system for NBFCs the Company has an Asset Liability Committee which meets monthly toreview its ALM risks and opportunities.
The Company is also in compliance with the NBFC Corporate Governance (ReserveBank) Directions 2015.
Corporate social responsibility
During FY2016 the Company spent Rs. 21.36 crore on corporate social responsibility(CSR). Detailed information report on the CSR policy and the CSR initiatives taken duringthe year is given in the annexed Annual Report on CSR activities.
Formal annual evaluation
Information on the manner in which formal annual evaluation has been made by the Boardof its own performance and that of its Committees and individual directors is given in theannexed 'Corporate Governance Report'.
Directors and Key Managerial Personnel (KMP)
The Board of Directors at its meeting held on 23 March 2015 appointed Rajeev JainCEO (DIN 01550158) as an additional director w.e.f. 1 April 2015 and as a ManagingDirector for a period of five years from that date. Members of the Company at their extraordinary general meeting held on 20 May 2015 appointed Rajeev Jain (DIN 01550158) as adirector liable to retire by rotation and also approved his appointment as ManagingDirector for a period of five years w.e.f. 1 April 2015.
According to the Companies Act 2013 at least twothirds of the total number ofdirectors (excluding independent directors) shall be liable to retire by rotation. RahulBajaj (DIN 00014529) Chairman being the longest in the office amongst the four directorsliable to retire by rotation retires from the Board by rotation this year and beingeligible has offered his candidature for reappointment. Necessary resolution forthis purpose is proposed in the notice of the ensuing annual general meeting for theapproval of the members.
Brief details of Rahul Bajaj (DIN 00014529) Chairman who is seekingreappointment has been given in the notice of annual general meeting.
Sandeep Jain Head Business Reengineering and Investor Relations wasappointed as Chief Financial Officer w.e.f. 4 February 2016 in place of Rajesh Viswanathanwho has resigned w.e.f. 3 February 2016.
Number of meetings of the Board
There were nine meetings of the Board held during FY2016 as per details given in theannexed Corporate Governance Report'.
Directors' responsibility statement
In compliance of section 134(5) of the Companies Act 2013 the directors state that:
in the preparation of the annual accounts the applicable accounting standardshave been followed along with proper explanation relating to material departures;
the directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit of the Company for that period;
the directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
the directors have prepared the annual accounts on a going concern basis;
the directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and
the directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and are operatingeffectively.
Declaration by independent directors
The independent directors have submitted the declaration of independence as requiredunder section 149(7) of the Companies Act 2013 stating that they meet the criteria ofindependence as provided in section 149(6) of the Companies Act 2013.
Extract of annual return
The extract of annual return as provided under section 92(3) the Companies Act 2013in the prescribed Form MGT9 is annexed to this Report.
Policy on directors' appointment and remuneration
The policy on directors' appointment and remuneration is given in the annexedCorporate Governance Report'.
Presentation of financial statements
The financial statements of the Company for the year ended 31 March 2016 have beendisclosed as per schedule III to the Companies Act 2013.
Consolidated financial statements
The directors also present the audited consolidated financial statements incorporatingthe duly audited financial statements of the subsidiaries prepared in compliance with theAccounting Standard 21.
A separate statement containing the salient features of its subsidiaries in theprescribed Form AOC1 is attached to the standalone financial statements.
Summary of the key financials of the Company's subsidiaries is included in this AnnualReport. A copy of audited financial statements for each of the subsidiary companies willbe made available to the members of the Company seeking such information at any point oftime. The audited financial statements for each of the subsidiary companies will be keptopen for inspection by any member of the Company at its registered office during businesshours. The same are placed on the Company's websitehttps://www.bajajfinserv.in/finance/investor-relations/annual-reports.aspx
Details as required under the provisions of section 197(12) of the Companies Act 2013read with rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are placed on the Company's websitehttps://www.bajajfinserv.in/finance/investor-relations/ annual-reports.aspx as an annexureto the Directors' Report. A physical copy of the same will be made available to any memberon request.
Details as required under the provisions of section 197(12) of the Companies Act 2013read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 which form part of the Directors' Report will be made availableto any member on request as per provisions of section 136(1) of the said Act.
Directors' responsibility statement as required by section 134(5) of the Companies Act2013 appears in a preceding paragraph.
Certificate from auditors of the Company regarding compliance of conditions ofcorporate governance is annexed to this Report.
Pursuant to the provisions of the Companies Act 2013 no fraud was reported by auditorsof the Company to the Audit Committee during FY2016.
Disclosures as prescribed by NonBanking Financial (Deposit Accepting or Holding)Companies Prudential Norms (Reserve Bank) Directions 2007 and other NBFC regulations havebeen made in this Annual Report.
A Cash Flow Statement for FY2016 is attached to the Balance Sheet.
The Company has a policy on prevention of sexual harassment at workplace. There was nocase of sexual harassment reported during FY2016.
Significant and material orders
During FY2016 no significant and material orders were passed by any regulator or courtor tribunal impacting the going concern status and Company's operations in future.
Particulars of loans guarantees and investments
The Company being a non-banking finance company registered with the Reserve Bank ofIndia and engaged in the business of giving loans is exempt from complying with theprovisions of section 186 of the Companies Act 2013 in respect of loans and guarantees.Accordingly the disclosures of the loans given as required under the aforesaid sectionhave not been given in this Report.
Information regarding investments covered under the provisions of section 186 of thesaid Act are detailed in the financial statements.
Related party transactions
During FY2016 the Company entered into transactions with related parties pursuant toapproval of the Audit Committee. The details of such transactions were placed before theCommittee for noting/review.
All related party transactions which were entered into during FY2016 were on an arm'slength basis in the ordinary course of business and not material under clause 49 of theerstwhile listing agreement/Securities and Exchange Board of India (Listing Obligationsand Disclosures Requirements) Regulations 2015 (SEBI Listing Regulations 2015) and hencedid not require members' prior approval under the Companies Act 2013 and the erstwhilelisting agreement/ SEBI Listing Regulations 2015. During FY2016 there were no relatedparty transactions requiring disclosure under section 134 of the Companies Act 2013.
A policy on materiality of related party transactions and dealing with related partytransactions is placed on the Company's websitehttps://www.bajajfinserv.in/finance/investor-relations/ policies-and-documents.aspx and isalso included in the Annual Report.
The Board of Directors has adopted a risk management policy for the Company whichprovides for identification assessment and control of risks which in the opinion of theBoard may threaten the existence of the Company. The Management identifies and controlsrisks through a properly defined framework in terms of the aforesaid policy.
Pursuant to the Listing Regulations a separate section titled CorporateGovernance' has been included in this Annual Report along with the Reports onManagement Discussion and Analysis' and General Shareholder Information'.
All Board members and Senior Management personnel have affirmed compliance with thecode of conduct for FY2016. A declaration to this effect signed by the Managing Directorof the Company is included in this Annual Report.
The Managing Director and Chief Financial Officer have certified to the Board withregard to the financial statements and other matters as specified in the SEBI ListingRegulations 2015.
Business responsibility report
Pursuant to the provisions of the SEBI Listing Regulations 2015 the Company being inthe top 100 companies by market capitalisation on National Stock Exchange of India Limitedas on 31 March 2015 is required to give Business Responsibility Report (BRR) in theAnnual Report. As a green initiative the BRR for FY2016 has been hosted on the Company'swebsite https://www.bajajfinserv.in/finance/investor-relations/annual-reports.aspx Aphysical copy of the BRR will be made available to members on request.
Secretarial standards of ICSI
Pursuant to the approval from the Ministry of Corporate Affairs the Institute ofCompany Secretaries of India (ICSI) has on 23 April 2015 notified the SecretarialStandards on Meetings of the Board of Directors (SS1) and General Meetings(SS2) effective from 1 July 2015. The Company is compliant with the same.
Pursuant to the provisions of section 139 of the Companies Act 2013 Dalal & ShahChartered Accountants were appointed as statutory auditors of the Company at the 27thannual general meeting (AGM) of the Company for a period from the conclusion of the saidAGM till the conclusion of the 30th AGM subject to ratification of their appointment bythe members at every AGM held thereafter. W.e.f. 21 December 2015 the auditors' firm hasbeen converted into a limited liability partnership having registration no.102021W/W100110.
A resolution for ratification of appointment of Dalal & Shah LLP CharteredAccountants as auditors and fixation of their remuneration for the year 201617 isproposed in the notice of the ensuing AGM for the approval of the members.
The Company has received from Dalal & Shah LLP a certificate to the effect thattheir appointment shall be in accordance with the prescribed conditions and that the LLPis not disqualified under the Companies Act 2013.
The Audit Report does not contain any qualification reservation or adverse remark ordisclaimer.
Pursuant to the provisions of section 204 of the Companies Act 2013 the Board hasreappointed Shyamprasad D. Limaye company secretary in practice (FCS No. 1587 CP No.572) to undertake secretarial audit of the Company.
A report from the secretarial auditor is annexed to this Report. The same does notcontain any qualification reservation or adverse remark or disclaimer.
The Board of Directors takes the opportunity to express its sincere appreciation forthe support and cooperation from its members Reserve Bank of India and otherregulators banks financial institutions and the trustees for debenture holders and FDholders.
The Board of Directors also places on record its sincere appreciation of the commitmentand hard work put in by the Management and employees of the Company and thanks them foryet another excellent year.
On behalf of the Board of Directors
Pune: 24 May 2016