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Gujarat State Financial Corporation.

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OPEN 3.88
CLOSE 3.70
52-Week high 3.90
52-Week low 2.56
Mkt Cap.(Rs cr) 35
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Gujarat State Financial Corporation. (GUJSTATFIN) - Director Report

Company director report


To the Members,

Your Directors present the 52nd Annual Report of the Corporation together with theaudited statements of Accounts for the year ended 31st March 2012.

1.0 Economy :

The developments over the last year in major economies of the world have not beenencouraging. The global economy witnessed fresh spells of crisis during 2011-12 withdomestic business and consumer confidence dampening on the back of deepening sovereigndebt crisis in Europe. The crisis percolated into Indian economy and growth in India ismoderating more than expected earlier. The inflation, though moderated in last quarter,remained sticky and stood at 6.9% in March 2012. Average inflation for fiscal 2012 was8.8% as compared to 9.5% in fiscal 2011. During April-March 2011-12, Index of IndustrialProduction (IIP) growth was 2.8% as compared to 8.2% during April-March 2010-11. TheIndian economy saw moderation in economic activity during fiscal 2012, following domesticmacroeconomic conditions of high interest rates and slowdown in investments. The overallgrowth of GDP at factor cost at constant prices, as per Advanced Estimates, is estimatedat 6.9% in 2011-12 as compared to the revised growth of 8.4% during 2010-11. The growth inreal GDP is placed at 6.1% in the third quarter of 2011-12. Weakening industrial growthand global economic situation has adversely affected the growth of Indian economy.

2.0 Operational Results/Financial Highlights :

Since last more than one decade, Corporation is solely concentrating on recovery ofdues. In order to boost recovery, Corporation has extended the validity of various OneTime Settlement schemes upto 31.3.2012. During the year under reference, aggregaterecovery of the Corporation stood at Rs. 31.69 crore as against Rs. 38.35 crore during thelast financial year 2010-11.

During the year under report, the total income of the Corporation including exceptionalitems stood at Rs. 56.71 crore as against Rs. 64.21 crore during the last year. The totalexpenditure for the period under reference came to Rs. 265.63 crore whereas the same forthe last year was Rs. 221.12 crore. Corporation recorded a net loss of Rs. 208.92 croreduring the year under report as against Rs. 156.91 crore in the previous year. Theaccumulated loss of the Corporation as on 31st March, 2012 stood at Rs. 1913.97 crore.

Corporation redeemed bonds guaranteed by the State Government totaling face value ofRs. 2.95 crore during the year under report besides meeting liability of Public SectorBonds amounting to Rs. 1.92 crore. The outstanding Government guaranteed bonds as on31/03/2012 stood at Rs. 1.25 crore as against Rs. 4.20 crore at the end of previous year.

3.0 Resources :

Corporation is receiving active support of Government of Gujarat by way of budgetaryallocation of funds to meet its liabilities. During the year under report, Corporation hasreceived loan of Rs. 4.20 crore from Government of Gujarat.

4.0 Recovery :

During the year 2011-12, total recovery of the Corporation amounted to Rs. 31.69 croreas against Rs. 38.35 crore during FY 2010-11.

5.0 Human Resource :

During the year under reference, keeping in pace with the requirement, Corporationattempted to recast the organization structure. Under the organization structure approvedand implemented during the year, the Regional Office is manned by an officer who has beendesignated functionally as Regional Manager inspite of the cadre in which he belongssupported by ministerial staff designated functionally. As for Head Office, the number ofdepartments has been pruned down to six by way of merger of various departments. Eachrestructured department at Head Office is headed by an officer known as "ExecutiveOfficer" supported by Junior Executive Officer and other ministerial staff. There wasan attrition of 5 personnel during the year due to retirement, resignation etc. The totalstaff strength as on 31/03/2012 is as under:

1. Grade ‘A’ Officers 08
2. Grade ‘B’ officers 95
3. Grade ‘C’ employees 26
Total 129

Out of 129 employees, 45 staff are on deputation/loan service to other officesGovernment.

6.0 Audit :

As recommended by RBI under the provisions of Section 37 (I) of the SFCs Act, 1951 andapproved by the members in the 51st Annual General Meeting, M/s. Mahendra N Shah &Co., Chartered Accountants, Ahmedabad, were re-appointed as Statutory Auditors to conductaudit of the Books of Accounts of the Corporation for FY 2011-12. They, being eligible,have given their consent to continue to act as Auditors of the Corporation for FY 2012-13.RBI has also confirmed their eligibility for re-appointment. Members are requested toconsider their re-appointment as Statutory Auditors of the Corporation for the currentyear 2012-13.

7.0 Board of Directors :

During the course of the financial year 2011-12, Shri DN Pandey, IAS, Commissioner(Public Sector Enterprises) & Ex-officioSecretary, Finance Department, Govt. ofGujarat was nominated on the Board of the Corporation with effect from 17.9.2011 in placeof Shri CL Meena, IAS.

The Board of Directors places on record their appreciation and thanks for the valuableservices rendered by Shri CL Meena, IAS, during his tenure as Director of the Corporation.

8.0 Corporate Governance :

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, ManagementDiscussion and Analysis Report, Corporate Governance Report and Certificate regardingcompliance of conditions of Corporate Governance are annexed hereto and form part of theAnnual Report.

9.0 Directors’ Responsibility Statement :

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956, the Boardof Directors, based on the representations received from the Accounts Department, herebyconfirms that :

1. In the preparation of the annual accounts for the year ended 31st March 2012, theapplicable accounting standards have been followed along with proper explanation relatingto material departures, if any.

2. Such accounting policies as mentioned in Note 16 of the Annual Accounts have beenselected and applied consistently and judgments and estimates that are reasonable andprudent are made so as to give a true and fair view of the state of affairs of theCorporation at the end of the financial year ended 31st March 2012 and of the loss of theCorporation for that year.

3. Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 1956 for safeguarding theassets of the Corporation and for preventing and detecting fraud and other irregularities.

4. The annual accounts for the year ended 31st March 2012 has been prepared on a goingconcern basis.

10.0 Acknowledgement :

The Board of Directors gratefully acknowledge the valuable advice and support extendedby various Ministries of the Government of Gujarat, particularly the Finance Departmentand Industries & Mines Department and Small Industries Development Bank of India andits office at Ahmedabad. The Board thanks various Banks for extending their support andco-operation.

Your Directors also convey their gratitude to the shareholders of the Corporation forthe confidence reposed by them in the Corporation. The Board also commends the hard workand dedicated efforts put in by the employees of the Corporation.

For and on behalf of the Board
Place : Gandhinagar (Arvind Agarwal)
Date : 03/08/2012 Managing Director



Point No. (IV)

There are two bondholders in the category of Non-guaranteed Bonds who have notresponded to the proposal of the Corporation to restructure the debts. They have alreadyshown willingness to settle the dues and the accounts will be settled in the current year2012-13. Thus, the default has not been recognized.

As regards dues payable to Government of Gujarat, Corporation has been gettingassistance by way of loan from Government of Gujarat till the year under reference torepay Government guaranteed obligations. The financial position of the Corporation was notadequate to meet with the fund requirements. Under the circumstances, default in duespayable to Government of Gujarat has taken place.

Point No. (V)

Interest provision of Rs. 12,65,000/- on PSB bonds IV has not been made due to the factthat no interest is payable after the original date of maturity of the bonds. Since thesebonds have already been matured and bondholders who have not agreed for restructuring inthe past have now come forward for settlement, interest provision has not been made.

Point No. (VI) Reconciliation of General Ledgers and Sub-ledgers

Some credit balances have come because of loanees are paying in advance. Reconciliationis an ongoing exercise and most of the accounts have already been reconciled with thegeneral ledger. Since the amount under review is insignificant compared to the total assetblock, it hardly makes any difference in the provisions.


Corporation provides depreciation as per the provisions of Income Tax Act. Corporationhas decided to calculate profit or loss on the assets sold where the nature of assets aresignificant, outdated irreparable computers where the gain hardly makes any difference andrequired lengthy calculation. The gain or loss is recognized and suitable adjustments aremade in the respective accounts.


The securities under question are acquired long back. Some companies are not inexistence. The shares are not tradable in the open market. Under these circumstances,Corporation could not dispose off the securities though more than 7 years have passed.However, Corporation has made provision for diminution in value on investment keepingaside a token value of Rs. 1/- in abeyance.


The provisions of SFCs Act are applicable to the Corporation instead of Companies Act.Further, Regulation 58 (iv) empowers the Corporation to retain the dividend. Since thereis a specific provision under the governing regulations framed under the applicable Act,unpaid dividend has not been transferred to Investor Education & Protection Fund.


Corporation has more than 5000 units under doubtful category scattered in State ofGujarat where valuation of each unit is not feasible. Moreover, Corporation has alreadymade provision for 99.55% of the loan assets classified as doubtful category. As aprevailing practice, Corporation gets valuation done from outside valuers for those unitswhich are under possession of the Corporation.