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Indus Finance Ltd.

BSE: 531841 Sector: Financials
NSE: N.A. ISIN Code: INE935D01013
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VOLUME 311
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P/E
Mkt Cap.(Rs cr) 13
Buy Price 13.75
Buy Qty 222.00
Sell Price 16.00
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OPEN 13.75
CLOSE 15.00
VOLUME 311
52-Week high 23.15
52-Week low 8.56
P/E
Mkt Cap.(Rs cr) 13
Buy Price 13.75
Buy Qty 222.00
Sell Price 16.00
Sell Qty 50.00

Indus Finance Ltd. (INDUSFINANCE) - Director Report

Company director report

To

The Members

Your Directors are pleased to present this 25th Annual Report of the Company togetherwith the Audited Accounts for the year ended 31st March 2016.

FINANCIAL HIGHLIGHTS AND PERFORMANCE

(Rs. . in Million)

PARTICULARS 2015-16 2014-15
Income from Operations 32.63 36.83
Other Income 12.81 13.49
Gross Receipts 45.44 50.32
Expenses 36.01 38.66
Depreciation & Amortization 0.15 0.13
Total Expenses 36.16 38.79
PBT 9.28 11.53
TAX 2.67 3.95
PAT 6.61 7.58
Proposed Dividend / Dividend 3.70 3.70
Proposed Dividend Tax / Dividend Tax 0.75 0.75
Transfer to Statutory Reserve 1.32 1.51

FINANCIAL PERFORMANCE

The profit after tax achieved by your company during the period under review is almostsame as that of the previous year though the gross receipts is less than the previousyear. However for the fifth year in succession your Directors are pleased to recommend 4% dividend i.e. INR. 0.40 for every equity share of Rs.10/- each fully paid up for theyear 2015-16. The Dividend if approved by the Shareholders at the ensuing Annual GeneralMeeting will be paid to the equity share holders whose names appear in the Register ofMembers as per the provisions of the Companies Act 2013 in which case the dividend outgo would be INR. 3.70 Mn. and the dividend tax to be paid by the company would be INR.0.75 Mn.

ECONOMIC SCENARIO AND OUTLOOK

During the 3rd quarter of the financial year the Regulator RBI published its halfyearly financial stability report which carried out both qualitative and quantitativeanalysis of the current strength and resilience of the Indian Financial system. Thefinancial stability report also published certain matrices for NBFCs. The extract from thereport showed that;

• ?As of September 30 2015 there were 11781 non-banking financial companiesregistered with the Regulator.

•? Out of the above there are 212 deposit accepting [NBFCs-D] 11569 non-deposittaking [NBFCs-ND] with 210 systemically Important Non-deposit accepting NFFCs[NBFCs-ND-SI]

•? With the Union Government pushing for 'Make in India' campaign there wasdemand from the corporates and in turn the loans and advances of NBFCs increased by 14.2while total borrowings increased by 14.5 % as NBFCs borrowed more from Banks AMCs andinsurance companies.

•? The financial performance of NBFCs deteriorated during the quarter September2015 as compared to March 2015. So also the Gross NPA of the sector as a percentage tototal assets.

•? Due to the high provisions the net profit as a percentage to total incomedeclined from 18.8 per cent to 15 per cent between March and September 2015 leading toreduction of ROA sharply from 2.2% to 1.00 %.

•? The fall in the ROA also signifies the challenge NBFCs face on theprofitability front due to the deteriorating financial conditions of the corporates.

The report further said that "If we look the fine- print of the financialstability report and divide the NBFCs to non-deposit taking and deposit taking loans andadvances extended by the NBFCs-ND-SI showed a marginal improvement and primarilyconcentrated in infrastructure sector transport operator segment and medium & largescale Industries".

The Union Budget 2016-17 has cheered the NBFC sector by offering 5% deduction inrespect of provision for bad and doubtful debts and full-filled the long standing demand.Hitherto NBFCs were not allowed deduction under Income tax Act for NPA provisions.

BUDGET PROVISION

•? Non-banking financial companies shall be eligible for deduction to the extentof 5% of its income in respect of provision for bad and doubtful debts (NPAs).

•? FDI will be allowed beyond the 18 specified NBFC activities in the automaticroute in other activities which are regulated by financial sector regulators.

•? To augment infrastructure spending further Government will permit mobilizationof additional finances to the extent of Rs. 31300 crore by NHAI PFC REC IREDA NABARDand Inland Water Authority through raising of Bonds during 2016-17

With the NPA of schedule commercial Banks having increased sharply the effect is verymuch expected to spill over on the overall performance of the NBFC sector also as most ofthe corporate sector funding has been alongside of SCB lending. Thus it is feared thatduring the financial year 2016-17 the NPA level of loans in NBFC sector is likely toincrease by 15% over the present position. NBFCs with higher exposure to the rural economyare also likely to see increased stress until the agricultural economy revises. Theconcentration on single product by some of the NBFCs did not go well and are expected todiversify gradually into other asset based lending more secure in nature.

•? Competitive pressures on retail-focused NBFCs are to intensify while banks areincreasing focus on retail segments due to the pressures on corporate credit according toa report released by credit rating agency ICRA.

•? "Banks which account for 56 percent of industry retail credit are alsoincreasing their focus on retail segments due the pressures on corporate credit.Competitive pressures on retail-focused NBFCs are to intensify" it said addingpublic sector banks which are under pressure by weak asset quality and earnings and largecapital requirements could increase lending to the less capital intensive retail segment.

•? "Retail credit from non-banking finance companies (NBFCs) is expected togrow by 19-22 percent in the 2016-17 fiscal starting from April this year" it said.

•? According to the agency retail credit growth is likely to be picked up byimprovement in commercial vehicle segments better growth for gold loans and microfinancesector along with unsecured loans and loans against property.

•? Retail credit from NBFCs stood at Rs.4.7 trillion at the end of calendar year2015 with a year-on-year growth of nearly 19 percent.

•? The agency estimates NBFCs will need to mobilize Rs.2.2-2.4 trillion funding in2016-17 out of which bond mobilization could be to the extent of Rs.600-700 billion.

By financial year 2017-18 NBFCs will have to shift to 90 days NPA recognition normwhich will bring them at Par with the banks.

The extension of the provisions of the SARFAESI Act to the NBFC s with asset size of Rs500.00 crore and above sector will go a long way towards the orderly growth anddevelopment of the sector. However non-inclusion of all NBFCs [with lesser size] will notenable the growth of the other disciplined players in the sector and deprive of them alevel playing field.

The NBFC segment too needs to be watchful on the quality of assets front. A change inthe course of the economy good monsoon is the need of the hour. "India Ratings"expects NBFCs to account for 17.1 percent of the total credit in the country by 2018-19compared with 13.1 per cent at the end of 2014-15 and 9.4 percent in 2005-06.

National Bank of Agriculture and Rural Development [NABARD] said that it had disbursedRs 2500.00 crore in refinance to non-banking lenders in the first year of starting thefacility. Most of the support is said to be to NBFCs MFIS.

FUTURE OUTLOOK

Your company having adopted a cautious approach for the last couple of years still willpractice the "wait & watch" approach for one more year. With market beingvery volatile most of the infrastructure projects not showing the signs of earlyrecovery IFL does not wish to be aggressive in the lending market [it may be recalledthat IFL is classified as a loan company as per Regulator definition and can carry onlysuch activities that are permitted under the classification]. During the ensuing financialyear IFL will concentrate much on recovery and redeployment in secured lending. Howeverany opportunity to raise resources at cheaper rate will not be allowed to go waste anddeployed judiciously. The features mentioned in economic scenario & outlook are mostlyapplicable to large sized NBFCs though the smaller NBFCs are required to use them as rolemodels/guidelines.

OPPORTUNITIES & THREATS

One of the biggest opportunities available to the sector is the scope to acquire newbusiness. The recent Discussion Paper placed by RBI on its website on a Proposed Frameworkfor enhancing Credit Supply for Large Borrowers through the Market Mechanism might give anopportunity for large NBFCs to take exposure in certain blue-chip corporates. If theproposal is through then RBI's effort to include the NBFCs in the joint lending forumswill become a reality. Use of SARFAESI by NBFCs with more than Rs. 500 crore asset willclean the system and enable some of the large NBFCs to perform better than even some ofthe small size SCBs. However non-inclusion of small size NBFCs who have played a pivotalrole in filling the gap once again leaves behind a 'no level playing field ".

RISKS & CONCERNS

NBFCs are required to maintain a minimum capital consisting of Tier-I and Tier-IIcapital of not less than 15% of their aggregate risk weighted assets. NBFCs are alsofacing the risk on the capital front as well and may not have sufficient funds availablewith them in case of any exigency if the NPA levels are not brought down under control.NBFCs particularly are yet to overcome the poor image that resulted on account of failureof many NBFCs-D. The unabated increase in NPA of the commercial banks is also a concern toNBFCs as the sector cannot survive at the cost of the downfall of another sector. EveryFinancial Institution irrespective of the size is subject to various kinds of business aswell as financial risk. With the business risk is more concerned with the operatingenvironment falling or deteriorating economy will increase the risk associated with thebusiness. The asset quality liquidity and profitability define the financial riskassociated with a business. IFL has been consistently recognized these risks throughwell-defined System & Policy which enable us to mitigate them at right time.

NUMBER OF MEETING OF BOARD

Indus Finance Ltd held 5 Board Meetings during the year ended 31st March 2016. Thesewere on 27th May 2015 15th June 2015 (Adjourned Meeting) 5th August 2015 13th November2015 and 12th February 2016.

DIRECTORS

Mr. Bala V Kutti is retiring in the forth-coming 25th AGM of the company and beingeligible offers himself for re-appointment. Your company has received a notice from amember proposing Mr. Niranjan R Jagatp as Independent Director for the period of fiveyears and the information regarding their reappointment and appointment are provided inthe notice convening the 25th AGM of the company.

STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTOR UNDER SECTION 149 (6) OFCOMPANIES ACT 2013

The Company has obtained declarations from the Independent Directors that they meet thecriteria of Independence has provided in section 149 (6) of the Companies Act 2013

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134 (3) (c) and 134 (5) of the Companies Act 2013 the Board ofDirectors hereby state that;

1. In the presentation of the Annual accounts applicable standards have been followedand there are no material departures.

2. The Directors have selected such accounting policies and apply them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at 31st March 2016 and profit for theCompany for the year ended 31st March 2016.

3. The Directors have taken proper and sufficient care in the maintenance of adequateaccounting records in accordance with the provisions of the Act for safe guarding 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 are operatingeffectively

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.

POLICY FOR SELECTION AND APPOINTMENT OF DIRECTORS AND THEIR REMUNERATION

The Nomination and Remuneration (N&R) Committee has adopted a Charter which interalia deals with the manner of selection of Board of Directors and CEO & ManagingDirector and their remuneration. This policy is accordingly derived from the said charter.

1. Criteria of Selection of Non-Executive Directors

a. The Non-Executive Directors shall be of high integrity with relevant expertise andexperience so as to have a diverse Board with Directors having expertise in the fields ofmanufacturing marketing finance taxation law governance and general management.

b. In case of appointment of Independent Directors the N&R Committee shall satisfyitself with regard to the independent nature of the Directors vis-a-vis the Company so asto enable the Board to discharge its function and duties effectively.

c. The N&R Committee shall ensure that the candidate identified for appointment asa Director is not disqualified for appointment under Section 164 of the Companies Act2013.

d. The N&R Committee shall consider the following attributes / criteria whilstrecommending to the Board the candidature for appointment as Director.

i. Qualification expertise and experience of the Directors in their respective fields.ii. Personal Professional or business standing: iii. Diversity of the Board.

e. In case of re-appointment of Non-Executive Directors the Board shall take intoconsideration the performance evaluation of the Director and his engagement level.

2. Remuneration

The Non-Executive Directors shall be entitled to receive remuneration by way of sittingfees reimbursement of expenses for participation in the Board / Committee meetings.

i. A Non-Executive Director shall be entitled to receive sitting fees for each meetingof the Board or Committee of the Board attended by him of such sum as may be approved bythe Board of Directors within the overall limits prescribed under the Companies Act 2013and the Companies (Appointment and Remuneration of Managerial Personnel Rules 2014).

ii. The Independent Directors of the Company shall not be entitled to participate inthe Stock Option Scheme of the Company if any introduced by the Company.

3. CEO Managing Director / Whole Time Director Criteria for selection /appointment

For the purpose of selection of the CEO Managing Director / Whole Time Director theN&R Committee shall identify persons of integrity who possess relevant expertiseexperience and leadership qualities required for the position and shall take intoconsideration recommendation if any received from any member of the Board.

The Committee will also ensure that the incumbent fulfills such other criteria withregard to age and other qualifications as laid down under the Companies Act 2013 or otherapplicable laws.

Remuneration for the CEO Managing Director / Whole Time Director

i. At the time of appointment or re-appointment the CEO Managing Director / WholeTime Director shall be paid such remuneration as may be mutually agreed between theCompanies (which includes the N&R Committee and the Board of Directors) and the CEOManaging Director / Whole Time Director within the overall limits prescribed under theCompanies Act 2013.

ii. The remuneration shall be subject to the approval of the Members of the Company inGeneral Meeting.

iii. The remuneration of the CEO Managing Director / Whole Time Director componentcomprises salary allowances perquisites amenities and retrial benefits.

Remuneration Policy for the Senior Management Employees

1. In determining the remuneration of the Senior Management Employees (i.e. KMPs andExecutive Committee Members) the N&R Committee shall ensure / consider the following:

i. The relationship of remuneration and performance benchmark is clear;

ii. The remuneration component comprising salaries perquisites and retirementbenefits;

iii. The remuneration including annual increment is decided based on the criticality ofthe roles and responsibilities the Company's performance vis-a-vis the annual budgetachievement.

iv. N&R Committee will carry out the individual performance review based on thestandard appraisal matrix and shall take into account the appraisal score card and otherfactors whilst recommending the annual increment.

AUDIT COMMITTEE

A qualified and independent Audit Committee of the Board of the company is functioning.It monitors and supervises the Management's financial reporting process with a view toensure accurate and proper disclosure transparency and quality of financial reporting.The committee reviews the financial and risk management policies and also the adequacy ofinternal control systems and holds discussions with Statutory Auditors and InternalAuditors. This is enhancing the credibility of the financial disclosures of the companyand also provides transparency.

The company continues to derive immense benefit from the deliberation of the AuditCommittee comprising of Mr. T.S. Raghavan Dr. K.R. Shyamsundar Mr. Bala V Kutti and Mr.Niranjan R Jagtap who are highly experienced and having knowledge in project financeaccounts and company law. Mr. T.S. Raghavan was the Chairman of the Audit Committee up to19th September 2015 and thereafter Mr. Nirajan R. Jagtap became the Chairman of AuditCommittee. The Company Secretary acts as the Secretary of the Audit Committee. The minutesof each Audit Committee meeting are placed before and discussed in the full by the Board.

THE RATIO OF THE REMUNERATION OF EACH DIRECTORS TO THE MEDIAN REMUNERATION OF THEEMPLOYEES OF THE COMPANY FOR THE FINANCIAL YEAR 2015-16 ARE GIVEN BELOW

Name of the Directors Ratio to Median Employee remuneration
Mr. Bala V Kutti - Executive Chairman 3.24
Dr. K.R. Shyamsundar Independent Director 0.10
Mr. Niranjan R Jagtap Independent Director 0.04
Mr. T.S. Raghavan Independent Director 0.06
Ms. Alice Chikkara Non Executive Director 0.06

THE PERCENTAGE INCREASE IN REMUNERATION OF DIRECTOS KMP AND MEDIAN EMPLOYEE FOR THEFINANCIAL YEAR 2015-16

There is no increase in remuneration to the Directors KMP and median employee duringthe financial year 2015-16.

DETAILS OF DIRECTORS OR KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED OR HAVE RESIGNEDDURING THE YEAR

Mr. T.S. Raghavan Independent Director of the company resigned with effect from 19thSeptember 2015 and Mr. Niranjan R Jagtap was appointed as additional Director of theCompany with effect from 13th November 2015 and there is no appointment or resignation ofKMP of the Company during the under review.

INDUSTRIAL RELATIONS AND PARTICULARS OF EMPLOYEES

As of 31st March 2016 Your Company has 6 employees on its rolls. The employees will beinducted in to permanent services of the Company after training to fill up vacancies aswhen arises. Your company has not issued any shares under Employees' Stock Option Schemeduring the year under review.

VARIATIONS IN THE MARKET CAPITALISATION OF THE COMPANY PRICE EARNINGS RATIO AS AT THECLOSING DATE OF THE CURRENT FINANCIAL YEAR AND PREVIOUS FINANCIAL YEAR.

Particulars March 31.3.2016 March 31.3.2015 % Change
Market Capitalization Rs. 92583000/- 195813045/- (52.72)
Price Earnings Ratio 14.08 25.79 (45.41)

PERCENTAGE OF INCREASE OR DECREASE IN THE MARKET QUOTATION OF THE SHARES IN COMPARISONTO THE RATE AT WHICH THE COMPANY CAME OUT WITH THE LAST PUBLIC OFFER

Price of Public offer Rs. 30 Market Price as on 31.3.2016 - Rs. 10.00 difference(Rs.20.00) (66.67%)

THE KEY PARAMETERS FOR ANY VARIABLE COMPONENT OF REMUNERATION AVAILED BY THE DIRECTORS

None.

THE RATIO OF THE REMUNERATION OF THE HIGHEST PAID DIRECTOR TO THAT OF THE EMPLOYEES WHOARE NOT DIRECTORS BUT RECEIVE REMUNERATION IN EXCESS OF THE HIGHEST PAID DIRECTOR DURINGTHE YEAR

None.

LIST OF EMPLOYEES WHO ARE IN RECEIPT OF REMUNERATION MORE THAN THE STIPULATED AMOUNTMENTIONED UNDER RULE 5 (2) OF COMPANIES (APPOINTMENT AND REMUNERATION) RULES 2014

None.

AFFIRMATION THAT THE REMUNERATION IS AS PER THE REMUNERATION POLICY OF THE COMPANY

The Company affirms that the remuneration is as per the remuneration policy of theCompany.

CORPORATE GOVERNANCE

Your Company has complied with the requirements regarding Corporate Governance asrequired under SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015entered in to with the Stock exchanges where the Company's shares are listed. A Report onthe Corporate Governance in this regard is made as a part of this Annual Report and acertificate from the Auditors of Your Company regarding compliance of the conditions ofthe Corporate Governance is attached to this report.

LISTING OF EQUITY SHARES

Your Company's equity shares are continued to be listed on the Bombay Stock ExchangeLtd Mumbai during the year under review.

PARTICULARS OF LOANS GUARANTEE OR INVESTMENTS

Detailed information is provided in respect of loans under long term loans and advancesin notes No. 10 (d) of Notes forming part of the financial statements similarly detailedinformation is provided under Non-Current Investments in Note No. 9 of Notes forming partof the financial statements. As regards guarantee the Company has not provided anyguarantee to any person or Bodies Corporates.

BUSINESS RISKS MANAGEMENT

The Company has developed a Risk Management Policy by identifying the elements of riskwhich are mentioned below. The risk management approach at various levels incliningdocumentation and reporting seeks to create transparency minimize adverse impact on thebusiness objectives and enhance the company's competitive advantage.

The Business risk is associated with operating environment ownership structureManagement System & Policy and Corporate Governance.

The Financial risk lies in Asset Quality Liquidity Profitability and CapitalAdequacy IFL recognizes these risks and makes best effort to mitigate them in time.

One of the major concerns for the sector is the deteriorating asset quality in thebanking sector which has certain indirect impact on the asset qualities of NBFCs also. Anynegative growth of the industry irrespective of the sector has some adverse effect on theworkings of the NBFCs. IFL has always kept in mind the uncertainties and their mitigationwhile conducting the business.

BOARD EVALUATION

Pursuant to the provisions of the companies Act 2013 and Schedule V of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Board has carried out anannual performance evaluation of its own performance the directors individually as well asthe evaluation of the of its Audit nomination and remuneration and compliance committees.The manner in which the valuation has been carried out has been explained in the CorporateGovernance report.

DEPOSITS

During the year under review the company has not accepted any deposits from the publicwith in the ambit of section 73 of the companies Act 2013 and The companies (Acceptanceof Deposits) Rules2014.

There is no significant / material order passed by the Judicial / Regulatoryauthorities during the year under review.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY ANY COURTS DURING THE UNDER REVIEW

None.

WHISTLE BLOWER POLICY

The Company has a whistle blower policy to deal with instance of fraud andmismanagement if any. The detail of the policy is explained in the Corporate GovernanceReport and posted on the website of the company

FINANCIAL STATEMENTS OF THE SUBSIDIARY COMPANY IF ANY

None

AUDITORS

M/s.V.Ramaratnam & Co. retires at the conclusion of this Annual General Meeting andare eligible for reappointment.

EXTRACT OF ANNUAL RETURN

As provided in Sec 92 (3) of the Act the extract of annual return is given in AnnexureI of this report in the format Form MGT 9 which forms part of this report.

TRANSACTIONS WITH RELATED PARTIES

Detailed information is provided with respect to the list of Related parties andtransactions with them are provided in note No. 18.4 of Notes forming part of thefinancial statements and also in the form no. AOC 2 under Annexure II.

SECRETARIAL AUDIT

Mr. R. Kannan PCS is the secretarial auditor of the company for the year under reviewand his report is attached with this report under Annexure III. As regards the observationof the Secretarial Auditor in his report Your company wish to state that Your company istaking all initiatives to find a suitable CFO and will shortly comply with thisrequirement

ADEQUACY OF INTERNAL CONTROL

Your Company has effective and adequate internal control systems in combination withdelegation of powers. The control system is also supported by internal audits andmanagement reviews with documented policies and procedures.

M/s. S. Vasudevan & Associates are the Internal Auditors to continuously monitorand strengthen the financial control procedures in line with the growth operations of theCompany.

PARTICULARES REQUIRED UNDER SECTION 134 OF THE COMPANIES ACT 2013 AND ITS COMPANIES(ACCOUNTS) RULES 2014

The particulars required to be given in terms of section 134 of the Companies Act 2013and its Companies (Accounts) Rules 2014 regarding conservation of Energy TechnologyAbsorption Foreign Exchange Earnings and Foreign Exchange outgo are not applicable toYour Company.

ACKNOWLEDGEMENT

The Directors wish to place on record their sincere thanks and gratitude to all itsShare holders RBI Bankers State Governments Central Government and its agenciesstatutory bodies suppliers and customers for their continued co-operation and excellentsupport extended to the Company from time

For and on behalf of board of directors of
INDUS FINANCE LIMITED
Sd/-
Place: Chennai - 600 034. Bala V Kutti
Date: 24th May 2016 Chairman