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Bajaj Finserv Ltd.

BSE: 532978 Sector: Financials
NSE: BAJAJFINSV ISIN Code: INE918I01018
BSE LIVE 15:52 | 22 Sep 5232.30 -252.90
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NSE 15:53 | 22 Sep 5231.65 -254.65
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OPEN 5467.80
PREVIOUS CLOSE 5485.20
VOLUME 22729
52-Week high 5835.00
52-Week low 2515.95
P/E 1453.42
Mkt Cap.(Rs cr) 83,267
Buy Price 5232.30
Buy Qty 62.00
Sell Price 0.00
Sell Qty 0.00
OPEN 5467.80
CLOSE 5485.20
VOLUME 22729
52-Week high 5835.00
52-Week low 2515.95
P/E 1453.42
Mkt Cap.(Rs cr) 83,267
Buy Price 5232.30
Buy Qty 62.00
Sell Price 0.00
Sell Qty 0.00

Bajaj Finserv Ltd. (BAJAJFINSV) - Director Report

Company director report

The directors present their Tenth Annual Report and audited financial statements forthe year ended 31 March 2017.

Financial results

The financial results of the Company are elaborated in the Management Discussion andAnalysis Report.

The highlights of the Standalone Financial Results are as under:

(H In Crore)
Particulars FY2017 FY2016
Total revenue* 165.00 251.45
Total expenses 61.00 56.64
Profit before tax* 104.00 194.81
Tax expense 33.98 31.68
Profit for the year* 70.02 163.13
Transfer to General reserve 16.31
Balance carried to Balance Sheet 70.02 118.97
Earnings per share (H) 4.4 10.3
Proposed dividend (%) 35% 35%
Dividend and tax thereon 27.85 27.85

* The Company received dividend of H 21.60 crore in FY2017 as compared to H 111.08crore in FY2016.

The highlights of the Consolidated Financial Results are as under:

(H In Crore)
Particulars FY2017 FY2016
Total revenue 24522.06 20533.62
Total expenses 19597.53 16729.57
Profit before tax 4924.53 3804.05
Tax expense 1474.82 1029.51
Profit after tax 3449.71 2774.54
Tax (debits)/credits pertaining to earlier years 0.02
Minority interest 1187.79 911.29
Profit for the year 2261.92 1863.27
Earnings per share (H) 142.1 117.1

Dividend

Your directors recommend for consideration of the shareholders at the ensuing AnnualGeneral Meeting payment of a dividend of H 1.75 per equity share (35%) of face value of H5 each for the year ended 31 March 2017. The amount of dividend and the tax thereon to theextent applicable aggregates to H 27.85 crore.

Interim Dividend paid in March 2016 which was declared as final dividend for the yearended 31 March 2016 was also H 1.75 per equity share (35%) of face value of H 5 each. Theamount of dividend and the tax thereon to the extent applicable aggregated to H 27.85crore.

Share capital

The paid-up equity share capital as on 31 March 2017 was H 79.57 crore. During theRights Issue of equity shares made by the Company in 2012 certain shares had been kept inabeyance as required by law. With resolution of a few cases during the year under reviewthe Company has allotted 327 equity shares of the face value of H 5 each at the originalRights Issue price of H 650 per share to the eligible shareholders.

There was no public issue rights issue bonus issue or preferential issue etc. duringthe year under review. The Company has not issued shares with differential voting rightsor sweat equity shares. It has not granted any stock options.

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

The Company having satisfied the criteria specified for being a CIC not requiringregistration with RBI pursuant to the provisions of section 45-IA of RBI Act 1934 hadapplied to RBI in this regard on 26 June 2015.

In response to the above RBI vide its Order dated 23 October 2015 has cancelled thecertificate of registration to carry on the business of NBFC issued to the Company and hasconfirmed the eligibility of the Company as a CIC not requiring registration with RBIpursuant to the provisions of section 45-IA of the RBI Act 1934.

Operations

Detailed information on the operations of the different business lines of the Companyand details on the state of affairs of the Company are covered in the ManagementDiscussion and Analysis which forms part of this Annual Report.

Adoption of Confederation of Indian Industry (CII) Charters

During the year under review CII had come out with a Model Code of Conduct for itsmember companies with basic principles of doing business ethically. The Company being amember of CII has adopted the said Model Code of Conduct.

Further with a view to showcasing industry’s commitment to fair and ethicalpractices CII had also presented its members two charters on Fair and ResponsibleWorkplace Guidelines viz. Charters on Fair & Responsible Workplace Guidelines forCollaborative Employee Relations and Responsible Workplace Guidelines for Contract Labour.In support of the initiative taken by CII and with a view to striving towards reducing thedisparity in treatment between regular and contractual work force your Company hasadopted the above two charters during the year under review.

Extract of annual return

The extract of annual return as provided under sub-section (3) of section 92 of theCompanies Act 2013 in the prescribed form MGT-9 is annexed to this Report.

Number of meetings of the Board

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

Directors’ responsibility statement

As required under clause (c) of sub-section (3) of section 134 of the Companies Act2013 directors to the best of their knowledge and belief state that-

l in the preparation of the annual accounts the applicable Accounting Standards hadbeen followed along with proper explanation relating to material departures;

l the directors had selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that period;

l the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

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

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

l the directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

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

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

Declaration by independent directors

The independent directors have submitted the declaration of independence as requiredpursuant to section 149(7) of the Companies Act 2013 stating that they meet the criteriaof independence as provided in section 149(6) of the said Act.

Directors’ Remuneration Policy and criteria for matters under section 178

Information regarding Directors’ Remuneration Policy and criteria for determiningqualifications positive attributes independence of a director and other matters providedunder sub-section (3) of section 178 are provided in the Corporate Governance Report.

Particulars of loans guarantees or investments

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

Related party transactions

No Related Party Transactions (RPTs) were entered into by the Company during thefinancial year which attracted the provisions of section 188 of the Companies Act 2013.There being no ‘material’ related party transactions as defined under regulation23 of the SEBI Listing Regulations 2015 there are no details to be disclosed in formAOC-2 in that regard.

During the year 2016-17 pursuant to section 177 of the Companies Act 2013 andregulation 23 of the SEBI Listing Regulations 2015 all RPTs were placed before the AuditCommittee for its approval.

The policy on RPTs as approved by the Board is uploaded on the Company’s websitewww.bajajfinserv.in

Material changes and commitments

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

Conservation of energy and technology absorption

The Company is engaged in wind-farm activities in addition to its financial servicesactivities. A summary of the performance of the wind power division is available in theManagement Discussion and Analysis which forms part of this Annual Report. Beingessentially a financial services company there are no particulars regarding technologyabsorption required to be given in this Report.

Particulars regarding conservation of energy are given below:

a) Steps taken to conserve energy and utilise alternate sources of energy:

The Company has installed a renewable energy (wind) project with a capacity of 65.2 MW.During the year under review it generated 867 lakh units which it sold to third parties.It however is unable to make captive use of wind energy because new regulations do notpermit the same where monthly demand is less than 700 KW. The Company has installed LEDlamps in place of failed tube lights and CFL thereby reducing energy consumption inlighting by around 2 KW during the year.

b) Capital investment on energy conservation equipment:

Not applicable since BFS is a non-manufacturing company not coming under the notifiedindustries covered under Energy Conservation Act 2001. Also energy demand/connected loadof building utilised for the Company’s corporate/commercial activities etc. is lessthan 500 KW which is the minimum threshold for applicability of the Energy ConservationAct 2001.

Foreign exchange earnings and outgo

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

Total foreign exchange outflow during the year under review was H 0.62 crore same asin the previous year.

Risk Management Policy

Information on the development and implementation of a Risk Management Policy for theCompany including identification therein of elements of risk which in the opinion of theBoard may threaten the existence of the Company is given in the Corporate GovernanceReport.

Corporate Social Responsibility (CSR)

Detailed information on the CSR Policy developed and implemented by the Company on CSRinitiatives taken during the year pursuant to section 135 of the Companies Act 2013 isgiven in the annexed Annual Report on CSR activities.

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

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 theCorporate Governance Report.

Subsidiary and Joint Venture

Following are the subsidiary and joint venture companies of the Company as at 31 March2017:

Name of the company % Shareholding Status
Bajaj Allianz Life Insurance Company Ltd. 74% Subsidiary
Bajaj Allianz General Insurance Company Ltd. 74% Subsidiary
Bajaj Finance Ltd. 57.80% Subsidiary
Bajaj Housing Finance Ltd.
Subsidiary
(100% subsidiary of Bajaj Finance Ltd.)
Bajaj Financial Securities Ltd.
Subsidiary
(100% subsidiary of Bajaj Housing Finance Ltd.)
Bajaj Financial Holdings Ltd. 100% Subsidiary
Bajaj Allianz Financial Distributors Ltd. 50% Joint Venture
Bajaj Allianz Staffing Solutions Ltd.
Joint Venture
(100% subsidiary of Bajaj Allianz Financial Distributors Ltd.)

On 23 November 2016 the Company exercised its right to convert 9250000 warrants of

Bajaj Finance Ltd. into equity shares at an exercise price of H 441.20 per warrant uponpayment of balance 75% amount aggregating to H 306.08 crore. 25% of the subscriptionamount aggregating to H 102.03 crore had already been paid at the time of allotment ofwarrants in June 2015.

Detailed information on the performance and financial position of each subsidiary/jointventure of the Company is covered in the annexed Management Discussion and AnalysisReport.

Directors and Key Managerial Personnel-Changes

Sanjiv Bajaj was appointed as Managing Director of the Company with effect from 1 April2012 to hold office up to 31 March 2017. The Board at its meeting held on 14 March 2017has re-appointed Sanjiv Bajaj as the Managing Director of the Company for a period of fiveyears with effect from 1 April 2017 up to 31 March 2022 and at its meeting held on 17 May2017 has fixed his remuneration based on the recommendations made by the Nomination andRemuneration Committee and in accordance with the Remuneration Policy of the Company. Thematter is being put up for shareholders’ approval through the Notice of the ensuingTenth Annual General Meeting of the Company.

In light of the provisions of the Companies Act 2013 Rahul Bajaj retires from theBoard by rotation this year and being eligible offers himself for re-appointment. Theinformation as required to be disclosed under regulation 36(3) of the SEBI ListingRegulations 2015 in case of re-appointment of the director is provided in the Notice ofthe ensuing Annual General Meeting.

There was no other change in the Directors and Key Managerial Personnel during the yearunder review except as above.

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

Significant and material orders passed by the regulators or courts

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

Global Depository Receipts (GDRs)

During the year under review the Company terminated its GDR programme with effect from1 February 2017. Detailed information about the same is given in the annexed GeneralShareholder Information.

Details of internal financial controls with reference to the financial statements

The Company has documented its internal financial controls considering the essentialcomponents of various critical processes physical and operational. This includes itsdesign implementation and maintenance along with periodical internal review ofoperational effectiveness and sustenance which are commensurate with the nature of itsbusiness and the size and complexity of its operations.

This ensures orderly and efficient conduct of its business including adherence to theCompany’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.

Presentation of financial statements

The financial statements of the Company for the year ended 31 March 2017 have beendisclosed as per Schedule III (Division I) 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 and joint ventures and asprepared in compliance with the Companies Act 2013 applicable Accounting Standards andthe SEBI Listing Regulations 2015.

A separate statement containing the salient features of our subsidiaries and jointventures in the prescribed form AOC-1 is annexed.

Statutory disclosures

The summary of the key financials of the Company’s subsidiaries and joint venturein form AOC-1 is included in this Annual Report. A copy of the audited financialstatements for each of the subsidiary companies will be made available to the members ofthe Company seeking such information at any point of time. The audited financialstatements for each of the subsidiaries will be kept for inspection by any member of theCompany at its registered office during business hours. The same are placed on theCompany’s website www.bajajfinserv.in

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 as amended are annexed to this Report.

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 as amended which forms part of the Directors’ Report willbe made available to any shareholder on request as per the provisions of section 136(1)of the said Act.

A Cash Flow Statement for the year 2016-17 is attached to the Balance Sheet.

Pursuant to the legislation 'The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013' the Company has a Policy on Prevention of SexualHarassment at Workplace. There was no case reported during the year under review under thesaid Policy.

Corporate governance

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

All Board members and Senior Management Personnel have affirmed compliance with theCode of Conduct for the year 2016-17. A declaration to this effect signed by the ManagingDirector of the Company is contained in this Annual Report.

The Managing Director (CEO) and CFO have certified to the Board with regard to thefinancial statements and other matters as required under regulation 17(8) of the SEBIListing Regulations 2015.

Certificate from the Statutory Auditors of the Company regarding compliance ofconditions of corporate governance is annexed to this Report.

Business Responsibility Report

Regulation 34(2) of the SEBI Listing Regulations 2015 inter alia provides that theannual report of the top 500 listed entities based on market capitalisation (calculated ason 31 March of every financial year) shall include a Business Responsibility Report(BRR).

Since BFS is one of the top 500 listed entities the Company as in the previous yearhas presented its BRR for the financial year 2016-17 which is part of this Annual Report.As a green initiative the BRR has been hosted on the Company’s websitewww.bajajfinserv.in

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

Secretarial standards of ICSI

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

Auditors

Statutory Auditor

The current Statutory Auditors viz. Dalal & Shah LLP Chartered Accountants (firmregistration no. 102021W/W100110) were last re-appointed by the members at their AnnualGeneral Meeting held on 16 July 2014 to hold the office of Statutory Auditors from theconclusion of the Seventh Annual General Meeting till the conclusion of this Tenth AnnualGeneral Meeting.

As per the provisions of section 139 of the Companies Act 2013 no listed companyshall appoint an audit firm as Statutory Auditors for more than two terms of fiveconsecutive years. The Act also provided for a transition period of three years from thecommencement of the Act i.e. 1 April 2014.

The current Statutory Auditors Dalal & Shah LLP had completed a period of sevenyears at the commencement of the said Act. Hence on their completing the transitionperiod of three years provided under the Act the term of the current Statutory Auditorsexpires at the conclusion of the ensuing Annual General Meeting.

The Board of Directors at its meeting held on 17 May 2017 based on the recommendationof the Audit Committee has recommended for approval of shareholders the appointment ofS R B C & CO LLP Chartered Accountants (firm registration no.324982E/E300003) asStatutory Auditors of the Company to hold office for a term of five years from theconclusion of the ensuing Annual General Meeting till the conclusion of the FifteenthAnnual General Meeting to be scheduled in 2022.

S R B C & CO LLP Chartered Accountants have consented to the said appointment andconfirmed that their appointment if made would be within the limits specified undersection 141(3)(g) of the Act and that they are not disqualified to be appointed asStatutory Auditors.

The members are therefore requested to appoint S R B C & CO LLP CharteredAccountants (firm registration no. 324982E/E300003) as Statutory Auditors of the Companyto hold office for a term of five years from the conclusion of the ensuing Annual GeneralMeeting till the conclusion of the Fifteenth Annual General Meeting to be scheduled in2022 subject to ratification at every annual general meeting and to fix theirremuneration for the year 2017-18.

The Statutory Audit Report for the year 2016-17 does not contain any qualificationreservation or adverse remark or disclaimer made by the Statutory Auditors.

Secretarial Auditor

Pursuant to the provisions of section 204 of the Companies Act 2013 and the Rulesmade thereunder the Company has re-appointed Shyamprasad D Limaye Practising CompanySecretary (membership no. 1587) to undertake the secretarial audit of the Company. TheSecretarial Audit Report for the year 2016-17 as issued by him in the prescribed form MR-3is annexed to this Report.

The said Secretarial Audit Report does not contain any qualification reservation oradverse remark or disclaimer made by the Secretarial Auditor.

Cost Auditor

Pursuant to section 148 of the Companies Act 2013 and the Rules made thereunder theBoard of Directors had on the recommendation of the Audit Committee re-appointedDhananjay V Joshi & Associates (firm registration no. 000030) Cost Accountants toaudit the cost accounts of the Company for the financial year 2017-18 on a remuneration ofH 55000 plus service tax out-of-pocket and travel and living expenses subject toratification by the shareholders at the ensuing Annual General Meeting. Accordingly aresolution seeking members’ ratification for the remuneration payable to the CostAuditor is included in the Notice convening the Annual General Meeting.

On behalf of the Board of Directors

Rahul Bajaj

Chairman

Pune: 17 May 2017