The directors present their thirtieth Annual Report and the standalone and consolidatedaudited financial statements for FY2017.
The highlights of the standalone financial results are as under:
|Particulars ||FY2017 ||FY2016 ||% change over FY2016 |
|Income from operations ||9977.36 ||7293.54 ||37 |
|Other income ||25.95 ||39.84 ||(35) |
|Total income ||10003.31 ||7333.38 ||36 |
|Expenses ||2464.69 ||1821.40 ||35 |
|Loan losses and provisions ||818.19 ||542.85 ||51 |
|Finance costs ||3803.37 ||2926.86 ||30 |
|Depreciation and amortisation ||71.16 ||56.34 ||26 |
|CSR expenditure ||28.38 ||21.36 ||33 |
|Total expenditure ||7185.79 ||5368.81 ||34 |
|Profit before tax ||2817.52 ||1964.57 ||43 |
|Tax expense ||980.97 ||686.05 ||43 |
|Profit for the year ||1836.55 ||1278.52 ||44 |
|Balance brought forward from previous year ||2410.85 ||1684.03 || |
|Profit available for appropriations ||4247.40 ||2962.55 || |
|Appropriations || || || |
|Transfer to Reserve Fund ||(368.00) ||(256.00) || |
|Transfer to General Reserve ||(184.00) ||(128.00) || |
|Transfer to Infrastructure Reserve ||(3.50) || || |
|Final dividend to Qualified Institutional Buyers || ||(5.89) || |
|Tax on final dividend to Qualified Institutional || || || |
|Buyers and ESOP Trust || ||(1.28) || |
|Adjustment of dividend to ESOP Trust ||0.17 ||1.57 || |
|Interim dividend || ||(96.97) || |
|Dividend tax on interim dividend || ||(19.74) || |
|Proposed dividend || ||(37.71) || |
|Provision for dividend tax on dividend || ||(7.68) || |
|Balance carried to Balance Sheet ||3692.07 ||2410.85 || |
A summary of consolidated financial performance for FY2017 consolidating the results ofwholly owned subsidiary Bajaj Housing Finance Ltd. (BHFL) along with its subsidiary BajajFinancial Securities Ltd. (BFinsec) is given below. The operations of the subsidiaries inFY2017 were not significant and hence the consolidated profit of the Company almost equalsits standalone profit.
| || ||(Rs. In Crore) |
|Particulars ||FY2017 ||FY2016 |
|Total income ||10006.53 ||7333.56 |
|Interest and finance charges ||3803.71 ||2926.85 |
|Net interest income ||6202.82 ||4406.71 |
|Operating expenses ||2567.22 ||1899.18 |
|Loan losses and provisions ||818.19 ||542.85 |
|Profit before tax ||2817.41 ||1964.68 |
|Profit after tax ||1836.38 ||1278.63 |
Performance and financial position of subsidiaries
During FY2017 there were no major business operations in BHFL and its subsidiaryBFinsec. The profit after tax for FY2017 of BHFL was Rs. 1169643 as against Rs. 529939for FY2016 for BFinsec the same was Rs. 4825578 as against Rs. 566846 for FY2016.
The directors recommend for consideration of the members at the ensuing annual generalmeeting payment of dividend of Rs. 3.60 per equity share of the face value of Rs. 2 each(180%) for FY2017. The amount of dividend and tax thereon aggregate to Rs. 238.26 crore.
Dividend paid (i.e. interim dividend of 180% and final dividend of 70%) for FY2016 wasRs. 25 per share (250%) on face value of Rs. 10 each. The amount of dividend and taxthereon aggregated to Rs. 162.10 crore.
Increase in authorised share capital
During FY2017 the Company increased its authorised share capital from Rs. 75 croreconsisting of 75000000 equity shares of face value of Rs. 10 each to Rs. 150 croreconsisting of 750000000 equity shares of face value of Rs. 2 each.
During FY2017 pursuant to the approval of the Board of Directors and members of theCompany the following changes have taken place in the share capital of the Company:
1. Sub division of equity shares
Each equity share of face value of Rs. 10 was sub divided into five equity shares offace value of Rs. 2 each as a result the number of equity shares in the authorised sharecapital issued share capital and paidup capital has increased by five times.
2. Allotment of equity shares a) 269360950 bonus equity shares wereallotted in the ratio of one fully paid bonus equity share of the face value of Rs. 2 eachfor every one equity share of the face value of Rs. 2 each held as on the record date asa result the number of equity shares in the issued share capital and paid-up share capitalhas increased two times.
b) 9250000 equity shares (as adjusted for sub division and bonus shares) of the facevalue of Rs. 2 each were allotted to promotor Bajaj Finserv Ltd. on conversion of warrantsand receipt of balance 75% of the issue price amounting to Rs. 306.08 crore.
c) 150 equity shares (as adjusted for sub division and bonus shares) of the face valueof Rs. 2 each were allotted in respect of the rights entitlement (in rights issue made in2013) held in abeyance on 1000 equity shares (as adjusted for sub division and bonusshares) transferred from the unclaimed suspense account.
d) 1918040 equity shares of the face value of Rs. 2 each were allotted to thetrustees of BFL Employee Welfare Trust under the Employee Stock Options Scheme 2009.
As on 31 March 2017 paidup share capital of the Company stood at Rs.1099780180 consisting of 549890090 equity shares of face value of Rs. 2 each fullypaidup.
Increase in borrowing powers
During FY2017 pursuant to section 180(1)(c) of the Companies Act 2013 the Companyincreased the limit on the borrowing powers of the Board of Directors from Rs. 50000crore to Rs. 75000 crore to meet its growing business needs.
The receivables under financing activity as on 31 March 2017 were Rs. 56832 crore ascompared to Rs. 42756 crore as on 31 March 2016 an increase of 33% over the previousyear.
Total income during FY2017 increased to Rs. 10003 crore from Rs. 7333 crore duringFY2016 an increase of 36% over the previous year.
The profit before tax for FY2017 was Rs. 2818 crore as against Rs. 1965 crore forFY2016 an increase of 43% over the previous year. The profit after tax for FY2017 was Rs.1837 crore as compared to Rs. 1279 crore for FY2016 an increase of 44% over theprevious year. This has been due to the Company's healthy net interest margins operatingefficiencies and prudent risk management.
The Company had an excellent year aided by strong volume growth across all its lines ofbusinesses. During FY2017 the Company launched various new products and variants tostrengthen its business model and continue its growth momentum.
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 regulations by acceleratingthe provisioning to an early stage of delinquencies based on past experience and emergingtrends.
The Company's loan loss and provisions increased from Rs. 543 crore in FY2016 to Rs.818 crore in FY2017 taking into account the increased business. The Company ended FY2017with a net NPA of 0.44%.
The operations of the Company are elaborated in the annexed Management Discussionand Analysis Report'.
Extract of annual return
An extract of annual return as provided under section 92(3) of the Companies Act 2013in the prescribed Form MGT9 is annexed to this Report.
Number of meetings of the Board
Seven meetings of the Board were held during FY2017 as per details given in theannexed Corporate Governance Report'.
Directors' responsibility statement
In compliance with 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.
Policy on directors' appointment and remuneration
The policy on directors' appointment and remuneration is given in the annexedCorporate Governance Report'.
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 made 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 FY2017 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 entered into during FY2017 were on an arm's length basisand in the ordinary course of business under the companies Act 2013 and not materialunder Securities and Exchange Board of India (Listing Obligations and DisclosuresRequirements) Regulations 2015 (the Listing Regulations) and hence did not requiremembers' prior approval under the Companies Act 2013 and the Listing Regulations. DuringFY2017 there were no related party transactions requiring disclosure under section 134 ofthe 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.
Material changes and commitments
There have been no material changes and commitments affecting the financial positionof the Company which have occurred between the end of the financial year of the Companyand the date of this 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 on conservationof energy and technology absorption.
Foreign currency expenditure amounting to Rs. 17.56 crore (FY2016 Rs. 14.83 crore) wasincurred during FY2017. The Company did not have any foreign exchange earnings.
The Board of Directors has adopted a risk management policy for the Company whichprovides for identification assessment and control of risks that 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.
Corporate social responsibility
During FY2017 the Company spent Rs. 28.38 crore on corporate social responsibility(CSR). A detailed information report on the CSR policy and the CSR initiatives takenduring FY2017 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)
According to the Companies Act 2013 Madhur Bajaj (DIN 00014593) non-executivedirector retires from the Board by rotation this year and being eligible has offeredhis candidature for reappointment.
Brief details of Madhur Bajaj (DIN 00014593) non-executive director who is seekingreappointment are given in the notice of annual general meeting.
There was no change in the directors and KMP during FY2017.
Significant and material orders
During FY2017 the Company has received an order from the Commissioner of Service TaxPune confirming the demand of service tax of Rs. 644.65 crore on the interestsubsidy' along with interest of Rs. 303.50 crore and penalty of Rs. 198.95 croreaggregating to Rs. 1147.10 crore. The Company is in the process of filing an appealbefore the Central Excise and Service Tax Tribunal Mumbai.
The Company had taken opinions in the past from eminent counsels and tax consultants onthe taxability of the interest subsidy and they had confirmed that the same is not liableto service tax in the hands of the Company.
Adequacy of internal financial controls
The Company has documented its internal financial controls considering the essentialcomponents of various critical processes physical and operational which include itsdesign implementation and maintenance along with periodic internal review of operationaleffectiveness and sustenance.
This ensures orderly and efficient conduct of its business including adherence toCompany's policies safeguarding of its assets prevention of errors accuracy andcompleteness 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.
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 FY2017 the Company accepted fixed deposits (FDs) of Rs. 2353.75 crore. FDsoutstanding at the year end were Rs. 3518.97 crore. As on 31 March 2017 there were fourFDs amounting to Rs. 0.60 lakh which had matured and remained unclaimed.
Pursuant to the provisions of the Reserve Bank of India Act 1934 the Company hascreated a charge on statutory liquid assets amounting to Rs. 557.38 crore in favour of thetrustee for FD holders.
During FY2017 the Company accepted Inter Corporate Deposits (ICDs) of Rs. 764.27crore. ICDs outstanding as on 31 March 2017 were Rs. 609.18 crore.
Overall deposits outstanding as on 31 March 2017 were Rs. 4128.15 crore.
During FY2017 there was no default in repayment of deposits or payment of interestthereon.
Despite a tough economic environment the Company retained or upgraded its creditratings owing to high capital adequacy strong promoter support tightened creditacceptance criteria and robust asset liability management. During FY2017 the Company hasbeen assigned "CARE AAA/Stable" for its long term debt programme from CARERatings.
CRISIL and ICRA have reaffirmed the highest rating of "FAAA/Stable" and"MAAA(Stable)" for the fixed deposit programme of the Company. These ratingsindicate the highest degree of safety with regard to timely payment of interest andprincipal. The Company is amongst the few NBFCs in India which enjoys the highest ratingfor 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. 10000 crore fromeach rating agency.
CRISIL has upgraded the Company's long term debt programme from "CRISILAA+/Positive" to "CRISIL AAA/Stable" in October 2016 with a size of Rs.10052.80 crore for the non-convertible debenture (NCD) programme. The Company has alsobeen assigned "CARE AAA/Stable" for its long term debt programme from CARERatings with a size of Rs. 2545 crore and
"IND AAA/Stable" rating by INDIA RATINGS with a size of Rs. 10000 crore forthe NCD programme. ICRA has revised the rating outlook for the long term debt programmefrom "ICRA AA+(Stable)" to "ICRA AA+(Positive)" in July 2016 for asize of Rs. 8000 crore for the NCD programme. All of the above ratings indicate a highdegree of safety with regard to timely payment of interest and principal.
The Company has also been assigned "IND AAA/Stable" by INDIA RATINGS"CRISIL AAA/Stable" rating by CRISIL "CARE AAA/Stable" by CARERatings and "[ICRA] AA+/Positive" by ICRA for Rs. 2000 crore Rs. 2700 croreRs. 2455 crore and Rs. 1700 crore respectively for the subordinated 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 AAA/Stable" 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 20.30%as on 31 March 2017. 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.
Policy on dividend distribution
The policy on dividend distribution is given in the annexed Corporate GovernanceReport'.
Presentation of financial statements
The financial statements of the Company for the year ended 31 March 2017 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.
A summary of the key financials of the Company's subsidiaries is included inthis Annual Report. A copy of audited financial statements for each of the subsidiarycompanies will be made available to the members of the Company seeking such information atany point of time.
The audited financial statements for each of the subsidiary companies will bekept open for inspection by any member of the Company at its registered office during10.00 a.m. to 12 noon.
The financial results 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 CompaniesAct 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as amended are annexed to this Report.
Details as required under the provisions of section 197(12) of the CompaniesAct 2013 read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 as amended which form part of the Directors' Reportwill be made available to any member on request as per the provisions of section 136(1)of the said Act.
The directors' responsibility statement as required under section 134(5) of theCompanies Act 2013 appears in a preceding paragraph.
Pursuant to the provisions of the Companies Act 2013 no fraud was reported byauditors of the Company to the Audit Committee during FY2017.
Disclosures as prescribed by NonBanking Financial (Deposit Accepting orHolding) Companies Prudential Norms (Reserve Bank) Directions 2007 and other NBFCRegulations have been made in this Annual Report.
Cash Flow Statement for FY2017 is attached to the Balance Sheet.
The Company has a policy on prevention of sexual harassment at the workplace. Nocase of sexual harassment was reported during FY2017.
Best Audit Committee award 2016
The Asian Centre for Corporate Governance and Sustainability has awarded the BestAudit Committee Award 2016' to the Company in recognition of its commitment to the bestpractices of good governance.
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 FY2017. 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 ListingRegulations.
A certificate from the auditors of the Company regarding compliance with the conditionsof corporate governance is annexed to this Report.
Business responsibility report
Pursuant to the provisions of the Listing Regulations the Company being in the top500 companies by market capitalisation on National Stock Exchange of India Ltd. and BSELtd. as on 31 March 2016 is required to give a Business Responsibility Report' (theBRR) in the Annual Report.
As a green initiative the BRR for FY2017 has been hosted on the Company's websitehttps://www.bajajfinserv.in/finance/investor-relations/annual-reports.aspxA physical copyof 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 & ShahLLP Chartered Accountants were appointed as statutory auditors of the Company at the27th annual general meeting (AGM) of the Company for a period from the conclusion of thesaid AGM till the conclusion of the 30th AGM subject to ratification of their appointmentby the members at every AGM held thereafter. The term of the existing auditors expiresafter the conclusion of the ensuing AGM.
A resolution for appointment of S R B C & CO LLP Chartered Accountants asauditors and fixation of their remuneration for the year 201718 is proposed in thenotice of the ensuing AGM for the approval of the members.
The Company has received from S R B C & CO LLP a certificate to the effect thattheir appointment shall be in accordance with the prescribed conditions and that the firmis not disqualified under the Companies Act 2013.
The Audit Report submitted by Dalal & Shah LLP for FY2017 does not contain anyqualification reservation or adverse remark or disclaimer.
Pursuant to the provisions of section 204 of the Companies Act 2013 the Board hasre-appointed Shyamprasad D Limaye company secretary in practice (FCS No. 1587 CP No.572) to undertake secretarial audit of the Company for FY2018.
A report from the secretarial auditor in the prescribed Form MR-3 is annexed to thisReport. The same does not contain any qualification reservation or adverse remark ordisclaimer.
The Board of Directors takes this 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: 17 May 2017