Equitas Holdings Ltd.
|BSE: 539844||Sector: Financials|
|NSE: EQUITAS||ISIN Code: INE988K01017|
|BSE 15:58 | 23 Jan||152.55||
|NSE 15:52 | 23 Jan||152.65||
|Mkt Cap.(Rs cr)||5,185|
|Mkt Cap.(Rs cr)||5185.17|
Equitas Holdings Ltd. (EQUITAS) - Director Report
Company director report
Equitas Holdings Limited
Your Directors have pleasure in presenting the Tenth Annual Report together with theaudited accounts of the Company for the Year ended March 31 2017 (FY 2016-17).
The summary of the Company's financial performance both on a consolidated basis andstandalone basis for FY 2016-17 compared to previous FY 2015-16 is given below:
(Rs. in lakh)
The Directors do not recommend any dividend for the year.
Transfer to Reserves
Your company has transferred a sum of Rs. 93.70 lakh to Statutory Reserve as requiredunder the Reserve Bank of India Act 1934.
The Capital Adequacy Ratio of the Company was 81.60% as of March 31 2017 as againstthe minimum capital adequacy requirements of 30% stipulated by RBI.
Material changes and commitments
There were no material changes and commitments affecting the financial position of theCompany which occurred between the end of the financial year to which these financialstatements relate to and the date of this Report.
The Company raised Rs. 720 crore through an Initial Public Offering (IPO) in April2016 to fund the capital requirements of the subsidiaries. The Equity Shares of theCompany were listed on BSE Limited and National Stock Exchange of India Limited on April21 2016. The entire proceeds of the IPO of the Company have been fully utilized in themanner specified in the prospectus as detailed in Note No. 30 of the standalone financialstatements for FY 2016-17.
During the year under review the Company has made fresh issue of 65454545 EquityShares in its IPO.
The Company has also issued in aggregate 2438834 Equity Shares to employees of theCompany and its Subsidiaries under the Equitas Employees Stock Option Scheme 2015.
Pursuant to the aforesaid issue and allotment of Equity Shares the paid-up sharecapital of the Company stood at Rs. 33781.37 lakh as at March 31 2017 as compared to'26992.04 lakh as at March 31 2016.
Investment in Subsidiaries
During the year under review the Company has infused capital in its followingsubsidiaries by subscribing to the Equity Shares offered by them:
* Merged with Equitas Finance Limited which was later re-named as Equitas SmallFinance Bank Limited with effect from September 2 2016.
Registration as a Core investment Company
The Company has been registered as a Non-Banking Financial Institution - Non-Deposittaking-Systemically Important Core Investment Company (CIC-ND-SI) pursuant to theCertificate of Registration issued by the Reserve Bank of India ("RBI") datedSeptember 1 2016 under Section 45-IA of the Reserve Bank of India Act 1934.
The Company is having a valid Certificate of Registration dated September 1 2016issued by the RBI under Section 45-IA of the Reserve Bank of India Act 1934. However theRBI does not accept any responsibility or guarantee about the present position as to thefinancial soundness of the Company or for the correctness of any of the statements orrepresentations made or opinions expressed by the Company and for discharge of anyliability by the Company.
Neither there is any provision in law to keep nor does the Company keep any part ofthe deposits with the Reserve Bank of India and by issuing a Certificate of Registrationto the Company the Reserve Bank of India neither accepts any responsibility norguarantees the payment of deposits to any depositor or any person who has lent any sum tothe Company.
The Company has not accepted any deposits from the public since inception.
The Company conducts its business through subsidiaries.
To meet the conditions prescribed by RBI while granting 'in-principle' approval forestablishing a 'Small Finance Bank' (SFB) the wholly owned subsidiaries of the Companyviz. Equitas Micro Finance Limited
(EMFL) and Equitas Housing Finance Limited (EHFL) were merged with another wholly ownedsubsidiary viz. Equitas Finance Limited (EFL) with effect from September 2 2016pursuant to Orders of Honourable High Court of Judicature at Madras (HC) Chennai datedJune 6 2016. The name of EFL was changed to Equitas Small Finance Bank Limited (ESFBL)and ESFBL commenced banking operations with effect from September 5 2016. In accordancewith the Court approved Scheme of Amalgamation EMFL and EHFL were dissolved vide ordersof the HC dated December 2 2016.
As at March 31 2017 the Company had the following two subsidiaries:
As required under Regulations 16(1)(c) & 46 of the Securities Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 ["SEBI(LODR) Regulations"] the Board of Directors had approved the Policy for
Performance and Financial Position of each Subsidiary Company
(Rs. in lakh)
Consolidated Financial Statements
In accordance with the requirements of the Companies Act 2013 ("the Act")the audited consolidated financial statements are provided in the Annual Report.
Corporate Governance Rating
CRISIL has reaffirmed 'CRISIL GVC Level 2' rating for the Company. This Governance andValue Creation (GVC) rating indicates very high capability of the Company with regard toCorporate Governance and value creation for all its stakeholders.
Management Discussion and Analysis Report Report on Corporate Governance and BusinessResponsibility Report
In accordance with SEBI (LODR) Regulations the Management Discussion and AnalysisReport Corporate Governance Report with auditor's certificate thereon and the BusinessResponsibility Report (BRR) form part of this report.
Corporate social Responsibility
The Company has laid down a Corporate Social Responsibility Policy which is disclosedon our website http://www .
During the Financial Year 2016-17 our Board has met five times.
Composition of audit committee
The Company has constituted an Audit & Risk Management Committee in terms of therequirements of the Act Regulation 18 of SEBI (LODR) and RBI Regulations. The compositionof the same is disclosed in the Corporate Governance Report.
Directors & Key Managerial Personnel change in directors
The Board of Directors of the Company appointed Dr Parthasarathi Shome as an AdditionalDirector with effect from (w.e.f.) July 22 2016 pursuant to the provisions of Section161 of the Act. He resigned from the Board of the Company w.e.f. the close of office hourson April 21 2017 due to extensive commitments abroad.
Mr Vasudevan P N Managing Director Mr Srinivasan N and Mr Vinod Kumar SharmaIndependent Directors resigned from the Board of the Company w.e.f. close of office hourson July 22 2016 to facilitate their joining the Board of Equitas Small Finance BankLimited.
Your Directors place on record their appreciation for the valuable advice and guidancerendered by Mr Vasudevan P N Mr Srinivasan N Mr Vinod Kumar Sharma and Dr ParthasarathiShome during their tenure as Directors of the Company.
The Board of Directors of the Company at its Meeting held on October 21 2016 hasappointed Mr Bhaskar S as a Whole-time Director of the Company designated as ExecutiveDirector & Chief Executive Officer (ED & CEO) w.e.f. October 21 2016.
The appointment of Mr Bhaskar S as Director has been included in the Notice of theAnnual General Meeting ("AGM"). Additional information and brief profile withrespect to appointment of a new director has been annexed to the Notice of the AGM.
As on the date of this report the Company has six Independent Directors including alady Director. The Company has familiarized the Independent Directors with the Companytheir roles and responsibilities in the Company nature of industry in which the Companyoperates business model of the Company etc. The details of the familiarization programmeimparted to Independent Directors are available on our website
The terms and conditions of appointment of Independent Directors are also availableon our website
Section 152 of the Act provides that unless the articles provide for the retirement ofall directors at every AGM not less than two-third of the total number of directors of apublic company shall be persons whose period of office is liable to determination byretirement of directors by rotation. For the purpose of determining the total number ofdirectors Independent Directors are required to be excluded. The only Non-IndependentDirector on the Board of the Company viz. Mr Bhaskar S has been appointed as Whole-timeDirector during the course of the year and his appointment as Director of the Company isbeing considered in the ensuing AGM. Hence there is no Director liable to retire byrotation in the ensuing AGM.
Declaration from independent Directors
The Board has received declarations from the Independent Directors as required underSection 149(7) of the Act and the Board is satisfied that the Independent Directors meetthe criteria of independence as mentioned in Section 149(6) of the Act.
Evaluation of Board Performance
The performance of the Chairman the Board Audit & Risk Management Committee(ARMC) Nomination Remuneration & Governance Committee (NRGC) Corporate SocialResponsibility Committee (CSRC) Stakeholders' Relationship Committee (SRC) and that ofindividual Directors for the Year 2016-17 were evaluated on the basis of criteria asapproved by the Board. All Directors were provided the criteria for evaluation which wereduly filled in. The feedback was then collated and shared in confidence with the Chairmanof the NRGC.
The Chairman of NRGC discussed the same at length with the other Members of theCommittee. Areas of improvement in the functioning of the Board and Committees wereidentified. Later at the Board Meeting the Chairman of NRGC shared the feedback with theChairman of the Board and the other Directors. Specific action points were drawn out.
Policy on Directors' appointment & remuneration and other details
Pursuant to the provisions of Section 178 of the Act the Company has formulated andadopted Policy on selection of Directors and Remuneration Policy which are disclosed onour website links of which are provided below.
Directors' Responsibility statement
The Board of Directors of the Company to the best of their knowledge and beliefconfirm that:
1) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures if any;
2) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2017 and of the profit ofthe Company for that period;
3) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
4) the Directors have prepared the annual accounts on a going concern basis;
5) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and operating effectively;
6) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
Whistle Blower Policy/Vigil Mechanism
The Company has devised a Vigil mechanism for Directors and employees through theadoption of Whistle Blower Policy details whereof is available on our website http://www.equitas.in/sites/default/flles/EHL-Whistle-Blower-Policy.pdf.
Key Managerial Personnel
During the year under review Mr Vasudevan S was appointed as the Chief FinancialOfficer of the Company w.e.f. October 21 2016 in the place of Mr Bhaskar S who wasappointed as ED & CEO of the Company on the same date. As at March 31 2017 theCompany had the following KMPs:
Details of all elements of remuneration paid to all the Directors are given in theCorporate Governance Report. The NonExecutive Directors of the Company are not entitled tostock options.
Details of remuneration as required to be provided under Section 197 of the CompaniesAct 2013 read with Rule 5 of Companies (appointment and Qualification of ManagerialPersonnel) Rules 2014
None of the employees drew remuneration beyond the limits specified under Rule 5(2) ofCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
M/s Deloitte Haskins & Sells Chartered Accountants who were appointed as Auditorsof the Company for two years till the conclusion of the 10th Annual General Meeting to beheld in the year 2017 complete their tenure of 10 years with the Company. In view of thesame the Board at its Meeting held on May 5 2017 pursuant to the recommendation of theAudit & Risk Management Committee and subject to approval of the shareholders hasappointed M/s. S R Batliboi & Associates LLP Chartered Accountants as StatutoryAuditors of the Company for a period of four years i.e. from the conclusion of the TenthAGM till the conclusion of the Fourteenth AGM. Your Company has received writtenconsent(s) and certificate(s) of eligibility in accordance with Sections 139 141 andother applicable provisions of the Act and Rules issued thereunder (including anystatutory modification(s) or re-enactment(s) for the time being in force) from M/s. S RBatliboi & Associates LLP. Further they have confirmed that they hold a validcertificate issued by the Peer Review Board of the Institute of Chartered Accountants ofIndia (ICAI) as required under SEBI (LODR) Regulations.
Details in respect of frauds if any reported by Auditors:
There have been no frauds reported during the Financial Year ended March 31 2017.secretarial Auditor:
The Board appointed M/s B Ravi & Associates Practising Company Secretaries as theSecretarial Auditors to conduct an audit of the secretarial records for the FinancialYear 2016-17. The Secretarial Audit Report for the Financial Year ended March 31 2017 isgiven in this Report as Annexure - II
Explanations or comments by the Board on every qualification reservation or adverseremark or disclaimer made -
(i) Statutory Auditor's report
There are no qualifications reservations adverse remarks or disclaimers in theauditor's report.
(ii) Secretarial Auditor's Report
The Secretarial Audit Report does not contain any qualification reservation or adverseremarks.
Information as per section 134 (3) (q) of the companies Act 2013 read with Rule 8 ofthe companies (Accounts) Rules 2014
The Company has no activity relating to conservation of energy or technologyabsorption. However the Company has been continuously using technology in its operations.
During the year the Company did not have any foreign currency earnings. Foreigncurrency expenditure of Rs. 51.4 lakh was incurred by the Company mainly towards legal andprofessional fee in connection with the IPO and reimbursement of travel expenses.
Details of employee stock option scheme
The Nomination Remuneration & Governance Committee constituted by the Board ofDirectors of the Company administers the Employees Stock Option Schemes formulated bythe Company from time to time.
On December 17 2007 the Company implemented the Equitas Employees Stock Option Scheme2007 ("ESOP Scheme 2007"). Under the plan the Company was authorized to issueupto 5620000 Equity Shares of Rs. 10/- each to eligible employees of the Company and itsSubsidiaries. Employees covered by the plan were granted options to purchase shares of theCompany subject to the terms and conditions of the Scheme.
Effective November 10 2012 the Company established a new employee stock option schemetitled Equitas Employees Stock Option Scheme 2012 ("ESOP Scheme 2012"). Underthe plan the Company was authorized to issue upto 1000000 Equity Shares of Rs. 10/-each to eligible employees of the Company and its Subsidiaries. ESOP Scheme 2007 wassubsequently terminated and the outstanding options under ESOP Scheme 2007 have beentransferred and made available for grant under ESOP Scheme 2012.
Effective July 8 2014 the Company established a new employee stock option schemetitled Equitas Employees Stock Option Scheme 2014 ("ESOP Scheme 2014"). Underthe plan the Company is authorized to issue upto 10500000 (Post bonus in the ratio of2:1) Equity Shares of Rs. 10/- each to eligible employees of the Company and itssubsidiaries as per the terms and conditions of the Scheme. ESOP Scheme 2012 wassubsequently terminated. Further the outstanding options under ESOP Scheme 2012 have beentransferred and made available for grant under ESOP Scheme 2014.
Thereafter effective September 7 2015 the Equitas Employees Stock Option Scheme2015 ("ESOP Scheme 2015") was implemented. ESOP Scheme 2015 was for a total of22200000 Equity Shares. ESOP Scheme 2014 was subsequently terminated and all optionsthat had lapsed cancelled withdrawn recalled or surrendered (including those havinglapsed by forfeiture) or outstanding under ESOP Scheme 2014 have been transferred and madeavailable for grant under ESOP Scheme 2015.
Information as required under Section 62 of the Companies Act 2013 and Rule 12 of theCompanies (Share Capital and Debentures) Rules 2014 and sEBi (share Based EmployeeBenefits) Regulations 2014 (sEBi Regulations):
Employee-wise details of options granted during the year to
1. Key Managerial Personnel
2. any other employee who receives a grant of options in any one year of optionsamounting to five percent or more of options granted during that year:
3. Identified employees who were granted options during any one year equal to orexceeding one percent of the issued capital (excluding outstanding warrants andconversions) of the company at the time of grant
Other details relating to Stock Options as required under SEBI (Share Based EmployeeBenefits) Regulations 2014 are displayed on our website www.equitas.in/sites/default/flles/ESOS-Information-2016-17.pdf.
The Company has not issued any Equity Shares with differential rights or Sweat EquityShares during the financial year. Particulars of contracts or arrangements with relatedparties
Pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies(Accounts) Rules 2014 there are no transactions to be reported under Section 188(1) ofthe Act in Form AOC-2.
All Related Party Transactions as required under Accounting Standards AS-18 arereported in Note 23 - Notes to Accounts of the Standalone financial statements of yourCompany.
The Company's Policy on dealing with Related Party Transactions is available on ourwebsite http://www.equitas.in/sites/default/flles/EHL-Policy-on-Related-Party-Transactions.pdf
The Company is a Core Investment Company ("CIC") and its operations arelimited to being a CIC. The risks therefore relate to investments made in itssubsidiaries. The operations of each of the subsidiaries the risks faced by them and therisk mitigation tools followed to manage them are reviewed periodically by the AuditCommittees and the Boards of the respective subsidiaries. The same are considered by theBoard of the Company as well. Details of the same are covered in the ManagementDiscussion and Analysis Report.
internal Financial controls
The Company has clear delegation of authority and standard operating procedures. Theseare reviewed periodically by the Audit & Risk Management Committee. These measureshelp in ensuring adequacy of internal financial controls commensurate with the nature andscale of operations of the Company.
Loans / Guarantees / investments
During the year the Company had given fresh loans amounting to Rs. 176.70 crore to itswholly owned subsidiaries. The amount of loans outstanding from these subsidiaries as onMarch 31 2017 is Rs. 121.70 crore. The guarantees outstanding on the loans availed by itswholly owned subsidiaries and other companies amount to Rs. 339.53 crore as on March 312017.
Disclosure under the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013
The Company has in place a Policy on Prevention of Sexual Harassment in line with therequirements of The Sexual Harassment of Women at Workplace (Prevention Prohibition &Redressal) Act 2013. Internal Complaints Committee has been set up to redress complaintsreceived under the Policy. No complaint has been received by the Company under this Policyduring the year 2016-17.
Significant and Material orders Passed by the Regulators or courts
There have been no significant and material orders passed by Regulators or Courts orTribunals impacting the going concern status and the future operations of the Company.Further no penalties have been levied by the RBI /any other Regulators during the yearunder review.
Extract of annual Return as required and prescribed under section 92(3) of the act andRules made thereunder
The extract of Annual Return in MGT-9 as required under Section 92(3) of the Act andprescribed in Rule 12 of the Companies (Management and Administration) Rules 2014 isappended as annexure - III to this Report.
As the Members are aware the Company's Equity Shares are tradable in electronic form.As on March 31 2017 out of the Company's total equity paid-up share capital comprisingof 337813746 Equity Shares only 4572417 Equity Shares were in physical form and theremaining shares are in electronic form. In view of the numerous advantages offered by theDepository System the Members holding shares in physical form are advised to avail of thefacility of dematerialization.
The Directors thank the investors for reposing confidence in Equitas. The Directors arealso grateful to the Financial Institutions and Banks associated with the Company and thesubsidiaries for their support. The Directors also thank the employees of the Company andthe Subsidiaries for their commitment and contribution towards the Mission and Vision ofthe organisation.