The Directors of the Company are pleased to present their Thirty Second Annual Reporttogether with the annual audited consolidated and standalone financial statements for thefinancial year ended March 31 2017.
The summary of the consolidated and standalone financial highlights for the financialyear ended March 31 2017 and the previous financial year ended March 31 2016 is givenbelow:
| || || ||( ` ||in Crore) |
| ||Consolidated ||Standalone |
|Particulars || || || || |
| ||2016-17 ||2015-16 ||2016-17 ||2015-16 |
|Gross income ||2359.26 ||1684.66 ||162.95 ||157.77 |
|Profit before depreciation and amortisation expenses finance costs & tax expenses ||1777.01 ||1225.23 ||147.20 ||139.64 |
|Less: Depreciation and amortisation expenses ||23.32 ||20.29 ||0.67 ||0.38 |
|Finance costs ||781.96 ||512.09 ||39.60 ||27.15 |
|Profit before tax ||971.73 ||692.85 ||106.93 ||112.11 |
|Current tax ||343.75 ||224.48 ||- ||0.10 |
|Deferred tax ||(8.50) ||(2.03) ||0.14 ||(0.24) |
|Tax adjustments of earlier years (net) ||(0.41) ||(0.01) ||0.07 ||- |
|Profit a_er tax but before minority interest and share in associate companies ||636.89 ||470.41 ||106.72 ||112.25 |
|Less: Share of minority interest ||178.67 ||125.28 ||- ||- |
|Add: Share in profit of associates ||11.98 ||55.33 ||- ||- |
|Net Profit ||470.20 ||400.46 ||106.72 ||112.25 |
The consolidated turnover of JM Financial Group was higher by 40% at ` 2359.26 Crorefor the financial year ended March 31 2017 as against ` 1684.66 Crore during theprevious financial year. The Group made a consolidated net profit of ` 470.20 Crore forthe year ended March 31 2017 as compared to the net profit of ` 400.46 Crore in theprevious year registering an increase of 17%.
The consolidated financials reflect the cumulative performance of JM Financial Limitedalong with its various subsidiaries and associates. Detailed description about thebusiness carried on by these entities is contained in the Management Discussion andAnalysis report.
Being a Core Investment Company most of the Company's investments are in thesecurities of subsidiary and associate companies. Accordingly most of its revenue onstandalone basis is in nature of dividend income on investments in subsidiary companies.
The gross revenue of the Company stood at ` 162.95 Crore for the year ended March 312017 as against ` 157.77 Crore in the previous year. The Company made a net profit of `106.72 Crore for the year ended March 31 2017 as compared to the net profit of
` 112.25 Crore in the previous year.
The Directors are pleased to recommend a final dividend of
` 0.85 per share of the face value of ` 1/- each for the financial year 2016-17(previous year ` 0.85 per share). The Company has paid an interim dividend of ` 0.65 perequity share of the face value ` 1/- each (previous year ` 0.60 per share). With the aboverecommendation the total dividend works out to ` 1.50 per share (previous year ` 1.45 pershare). The total outgo on account of interim and final dividend would be ` 119.28 Crorefor the financial year 2016-17 as against ` 114.45 Crore in the previous year.
The final dividend if declared at the Thirty Second Annual General Meeting will bepaid on and from July 27 2017 to the eligible Members.
Pursuant to Regulation 43A of Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (hereina3er called "theListing Regulations") the Company has formulated Dividend Distribution Policy. Thesaid policy is appended as Annexure I to this Report.
The following appropriations have been made from the available profits of the Company:
| || || ||( ` ||in Crore) |
| ||Consolidated ||Standalone |
|Particulars || || || || |
| ||2016-17 ||2015-16 ||2016-17 ||2015-16 |
|Net Profit ||470.20 ||400.46 ||106.72 ||112.25 |
|Add: Balance profit brought forward from previous year ||1768.07 ||1597.08 ||991.61 ||1016.67 |
|Less: Transferred to minority interest ||(0.08) ||(0.08) ||- ||- |
|Profit available for appropriation ||2238.19 ||1997.46 ||1098.33 ||1128.92 |
|Less: Appropriations || || || || |
|Interim dividend ||51.59 ||47.33 ||51.59 ||47.33 |
|Proposed final dividend ||# ||67.12 ||# ||67.12 |
|Dividend distribution tax ||10.51 ||18.96 ||0.53 ||0.40 |
|Transfer to Statutory reserve ||116.87 ||95.98 ||21.35 ||22.46 |
|Transfer to Capital redemption reserve ||6.25 ||- ||- ||- |
|Surplus carried to balance sheet ||2052.97 ||1768.07 ||1024.86 ||991.61 |
# As per the requirements of revised AS 4 the Company is not required to provide fordividend proposed a3er the balance sheet date. Consequently no provision has been made inrespect of the final dividend recommended by the Board of Directors for the year endedMarch 31 2017.
Issue of shares arising out of Employee Stock Option Scheme
During the financial year 2016-17 an aggregate of 5539478 equity shares have beenallotted upon exercise of stock options by the eligible employees (the Employees')under the Employees' Stock Option Scheme Series 3 to Series 8.
Consequent to the allotment made to the Employees as above the paid-up equity sharecapital of the Company has increased to `3794525114 (comprising 794525114 equityshares of ` 1/- each) as on March 31 2017 from ` 788985636 as at the end of theprevious financial year (comprising 788985636 equity shares of
` 1/- each).
Additionally an aggregate of 1842618 equity shares have been allotted on May 2 2017to the Employees on exercise of stock options by them under Series 3 to Series 8.Subsequent to the said allotment the paid-up equity share capital of the Company hasincreased post March 31 2017 to ` 796367732 representing 796367732 equity shares ofthe face value of ` 1/- each.
EMPLOYEES' STOCK OPTION SCHEME
Out of the total number of stock options so far granted under Series 1 to 9 anaggregate of 21369736 (up to March 31 2017) stock options have been exercised by theEmployees and 14584135 stock options have lapsed. The aggregate number of stock optionsoutstanding as on March 31 2017 is 6067294.
The Nomination and Remuneration Committee at its meeting held on April 20 2017 hasfurther granted 2319636 stock options to the Employees under the Employees Stock OptionScheme Series 10.
The disclosures required to be made under applicable SEBI Regulations/Guidelines andSection 62(1) of the Companies Act 2013 (hereina3er called "the Act") read withRule 12(2) of the Companies (Share Capital and Debentures) Rules 2014 are covered in AnnexureII to this Report.
During the year under review the Company has neither invited nor accepted any depositsfrom the public. SUBSIDIARIES AND ASSOCIATES
As on March 31 2017 the Company had 16 subsidiaries (including step downsubsidiaries) one partnership firm and one associate company. These subsidiariespartnership firm and associate are:
|Subsidiary Companies || |
|1. JM Financial Institutional Securities Limited || |
|2. JM Financial Services Limited || |
|3. JM Financial Commtrade Limited || |
|4. JM Financial Overseas Holdings Private Limited (Mauritius) || |
|5. JM Financial Singapore Pte Limited (Singapore) |
|6. JM Financial Securities Inc. (Delaware America) ||- United States of |
|7. JM Financial Capital Limited || |
|8. JM Financial Products Limited || |
|9. JM Financial Asset Reconstruction ||Company Limited |
|(w.e.f. September 30 2016) || |
|10. JM Financial Home Loans Limited || |
|(w.e.f. December 16 2016) || |
|11. JM Financial Credit Solutions Limited || |
|12. JM Financial Investment Managers Limited |
|13. Infinite India Investment Management Limited |
|14. JM Financial Asset Management Limited || |
|15. JM Financial Properties and Holdings Limited |
|16. CR Retail Malls (India) Limited || |
|Partnership Firm || |
18. JM Financial Trustee Company Private Limited
JM Financial Insurance Broking Private Limited a subsidiary company was voluntarilywound up during the financial year 2016-17.
In accordance with Section 129(3) of the Act and Regulation 34 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 ("the ListingRegulations") the consolidated financial statements of the Company and all itssubsidiary/ associate companies have been prepared and form part of the Annual Report. Astatement containing salient features of the financial statements of subsidiary andassociate companies is also provided in the Annual Report at page no. 164 and 165.
The Annual Report of the Company containing inter alia its standalone and theconsolidated financial statements is uploaded on the website of the Company viz.www.jmfl.com in accordance with third proviso to Section 136(1) of the Act.
The audited financial statements of each of the subsidiaries have also been placed onthe website of the Company. Members interested in obtaining a copy of the auditedfinancial statements of the subsidiary companies may write to the Company Secretary at theCompany's registered o3ice.
The Company will make available the audited financial statements and relatedinformation of its subsidiaries to those members who wish to have copies of the same andthese documents will also be kept open for inspection by members at the registered o3iceof the Company on all working days except Saturdays between 2.00 p.m. and 4.00 p.m. upto the date of the Thirty Second Annual General Meeting.
RESTRUCTURINGOFENTITIESWITHINTHEGROUPTHROUGH SCHEME(S) OF AMALGAMATION AND ARRANGEMENT
The Board at its meeting held today has approved restructuring of the entities withinthe Group whereby two of the Company's Wholly Owned Subsidiaries viz. JM FinancialInstitutional Securities Limited and JM Financial Investment Managers Limited would bemerged with the Company subject to all the necessary approvals including the regulatoryapprovals as may be required.
The above restructuring would be carried out through the Scheme(s) ofamalgamation/arrangement/merger/demerger as will be in the best interests of the Company.
AWARDS AND RECOGNITION
The following subsidiaries of the Company have been conferred the awards andrecognition during the year as per the details given below:
JM Financial Services Limited
The BSE Ltd. at BSE Awards-2016 recognized and awarded JM Financial ServicesLimited as:
Top Performer in Primary Market Segment (IPO/FPO
Top Performer in Sovereign Gold Bonds
Ranked 1st in the Investments Category amongst India's Best Companies To WorkFor 2016' at the Great Places To Work For 2016 conducted by The Great Place to WorkInstitute.
Awarded for Best Performing National Financial Advisor (Institutional) at the UTIMF & CNBC-TV18's Financial Advisor Awards 2016.
The National Stock Exchange of India Limited recognized JM Financial ServicesLimited amongst Top Performers in the Cash Segment for the year 2015-16.
JM Financial Institutional Securities Limited
Emerged as QIP Dealmaker in the Business World-PWC I-banking Survey 2016.
JM Financial Asset Management Limited
Ranked amongst "India's 100 Best Companies to Work for 2016" at the GreatPlaces To Work For 2016 conducted by The Great Place to Work Institute India inpartnership with The Economic Times.
BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year Mr. Nimesh Kampani voluntarily retired from executive role as ManagingDirector of the Company from the close of business hours on September 30 2016 on turning70 years of age. Mr. Kampani continues as Non-executive Chairman of the Company and JMFinancial Group with e3ect from October 1 2016.
Mr. Kampani demonstrated exemplary leadership and business acumen during his tenure asManaging Director of the Company. The businesses in the JM Financial Group have immenselybenefited from Mr. Kampani's vast experience knowledge and insight of the financialmarkets.
The Directors place on record their deep appreciation for valuable contribution made byMr. Kampani during his tenure as Managing Director of the Company.
PursuanttorecommendationoftheNominationandRemuneration Committee the Board ofDirectors of the Company at its meeting held on September 23 2016 unanimously appointedMr. Vishal Kampani as Managing Director of the Company for a period of five years withe3ect from October 1 2016 subject to approval of the Members at the ensuing AnnualGeneral Meeting (AGM). Mr. Vishal Kampani is a relative (son) of Mr. Nimesh Kampani.
We are pleased to report that the transition of duties and responsibilities from Mr.Nimesh Kampani to Mr. Vishal Kampani has been extremely smooth and successful.
The necessary resolution for the appointment of Mr. Vishal Kampani along with his briefprofile and Additional Information required under the Listing Regulations is included inthe notice convening the Thirty Second AGM of the Company for shareholders' approval.
Mr. Vishal Kampani is also the Managing Director of JM Financial Products Limited amaterial subsidiary of the Company and draws remuneration from the said subsidiary.
As on March 31 2017 the Company had eight Directors on its Board comprising sixIndependent Directors the Managing Director and a Non-executive Director.
Mr. Vishal Kampani Managing Director is the Key Managerial Personnel (KMP) within themeaning of Section 203(1) of the Act. Mr. Prashant Choksi and Mr. Manish Sheth are theother KMPs designated as the Company Secretary and the Chief Financial O3icer (CFO)respectively.
DECLARATIONS GIVEN BY INDEPENDENT DIRECTORS
All the Independent Directors have confirmed to the Board that they meet the criteriaof independence as specified under Section 149(6) of the Act and that they qualify to beindependent directors pursuant to the Rule 5 of the Companies (Appointment andQualification of Directors) Rules 2014. They have also confirmed that they meet therequirements of Independent Director' as mentioned under Regulation 16(1)(b) of theListing Regulations.
The above confirmations were placed before the Board and noted by it.
The Board meets at regular intervals to discuss the Company's policies and strategyapart from other Board matters. The tentative annual calendar of the Board and Committeemeetings is circulated in advance to facilitate the Directors to plan their schedule andto ensure participation in the meetings. The notice for the Board/Committee meetings isalso given well in advance to all the Directors.
The Board of Directors met six times in the financial year 2016-17 viz. on May 132016; August 2 2016; September 23 2016; October 28 2016; December 20 2016; and January23 2017. The maximum time period between the two board meetings did not exceed 120 days.
POLICIES ON DIRECTORS' APPOINTMENT AND REMUNERATION
The Policies of the Company on Directors' appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a Directorand other matters provided under sub-section (3) of Section 178 of the Act are appendedas Annexure III(a) and III(b) to this Report.
EVALUATION OF BOARD OF DIRECTORS
The Board carried out formal annual evaluation of its own performance and that of itsCommittees viz. the Audit Committee Stakeholders' Relationship Committee Nomination andRemuneration Committee (NRC) Corporate Social Responsibility Committee and the AllotmentCommittee. The Board also carried out the evaluation of all the individual directors.Additionally NRC also carried out the evaluation of the performance of all the individualdirectors of the Company. The performance evaluation was carried out by way of obtainingfeedback from the Directors through a structured questionnaire prepared in accordance withthe policy adopted by the Board and the Guidance Note on Board Evaluation issued by SEBIvide its circular dated January 5 2017 separately for individual directors for the Boardas a whole and its various Committees.
The structured questionnaire prepared to evaluate the performance of individualdirectors contained inter alia parameters such as professional conduct roles andfunctions discharge of duties and their contribution to Board/ Committees/ SeniorManagement. The questionnaire prepared for evaluation of the Board and its Committeesinter alia covered various aspects such as structure and composition e3ectiveness ofboard process information and roles responsibilities and functioning of the Board andits Committees establishment and determination of responsibilities of Committees thequality of relationship between the board and the management and professional development.
The feedback received from the Directors in the above forms was reviewed by theChairman of the Board and the Chairman of the NRC and then discussed the same at themeetings of the Board and NRC. The performance evaluation of the Chairman ManagingDirector and the Board as a whole was carried out by the Independent Directors at theirseparate meeting held on December 20 2016.
The Board of Directors has constituted five Committees viz
1. Audit Committee
2. Stakeholders' Relationship Committee
3. Nomination and Remuneration Committee
4. Corporate Social Responsibility Committee
5. Allotment Committee
Details of all the Committees along with their composition terms of reference andmeetings held during the year are provided in Report on Corporate Governance.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirements under Section 134(3)(c) read with Section 134(5) of theAct with respect to Directors' Responsibility Statement the Directors hereby confirmthat:
(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed and that no material departures have been made in following the same;
(b) appropriate accounting policies have been selected and applied consistently andjudgements and estimates made are reasonable and prudent so as to give a true and fairview of the state of a3airs of the Company at the end of the financial year and of theprofit and loss of the Company for that period;
(c) proper and su3icient care for maintenance of adequate accounting records inaccordance with the provisions of Act have been taken for safeguarding the assets of theCompany and for preventing and detecting frauds and other irregularities if any;
(d) the annual accounts have been prepared on a going concern basis;
(e) internal financial controls to be followed by the Company have been laid down andthat such internal financial controls are adequate and were operating e3ectively; and
(f) proper systems have been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating e3ectively.
In terms of the provisions of Section 139 of the Act read with the Companies (Audit andAuditors) Rules 2014 an audit firm can hold o3ice as statutory auditors for two terms offive consecutive years each i.e. for a maximum period of ten years. They can bere-appointed a3er a cooling period of five years therea3er. In computing the period of tenyears the period for which the statutory auditors would have held o3ice before thecommencement of the Act i.e. before April 1 2014 is also to be taken into account.
M/s. Khimji Kunverji & Co. has been acting as the statutory auditors of theCompany for more than ten years and to comply with the provisions of the Act a newauditor must be appointed in their place to act as Statutory Auditors a3er the conclusionof Thirty Second AGM. The Board of Directors at its meeting held on May 2 2017 hastherefore recommended the appointment of Deloitte Haskins and Sells LLP CharteredAccountants Mumbai as the Statutory Auditors of the Company in place of M/s. KhimjiKunverji & Co. to hold o3ice from the conclusion of the ensuing AGM until theconclusion of the Thirty Seventh AGM of the Company subject to ratification by theMembers at every AGM. The resolution seeking shareholders' approval on this item isincluded in the Notice convening the AGM.
The Company has received a confirmation from Deloitte Haskins and Sells LLP that theirappointment if made at the Thirty Second AGM will be in accordance with Sections 139 and141 of the Act and Rules made thereunder. Accordingly the Members are requested toapprove the appointment of the
Statutory Auditors at the Thirty Second AGM. The Board on the recommendation made bythe Audit Committee has also approved the payment of audit fees of ` 13 lakh to the newauditors for the year 2017-18.
Pursuant to the requirements of Section 204(1) of the Act and Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hadappointed M/s. N L Bhatia & Associates Company Secretary in Practice to conduct thesecretarial audit for the financial year 2016-17.
The Secretarial Audit Report as received from M/s. N L Bhatia & Associates isappended as Annexure IV to this Report.
COMMENTS ON AUDITORS' REPORT
There are no qualifications reservations adverse remarks or disclaimers made by theStatutory Auditors in their Audit Report or by M/s. N L Bhatia & Associates CompanySecretary in Practice in their Secretarial Audit Report. The Statutory Auditors have notreported any incident of fraud to the Audit Committee of the Company during the financialyear 2016-17.
CORPORATE SOCIAL RESPONSIBILITY
The Board has constituted Corporate Social Responsibility (CSR) Committee in accordancewith Section 135 of the Act. The CSR Policy of the Company inter alia lists theactivities that can be undertaken or supported by the Company for CSR composition andmeetings of CSR Committee details of existing Charitable trusts within the JM Financialgroup annual allocation for CSR activities areas of CSR projects criteria for selectionof CSR projects modalities of execution/implementation of CSR activities and themonitoring mechanism of CSR activities/projects. The details of CSR activities undertakenby the Company are described in the prescribed format and are appended as Annexure Vto this Report.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Company has a well-defined risk management framework in place. Further it hasestablished procedures to periodically place before the Board the risk management andassessment measures.
The details of the risks faced by the Company and the mitigation thereof are discussedin detail in the Management Discussion and Analysis report.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There have been no material changes and commitments a3ecting the financial position ofthe Company which have occurred between the end of the financial year of the Company towhich the financial statements relate and the date of this Report.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS
During the financial year 2016-17 there were no significant and material orders passedby the regulators or courts or tribunals impacting the going concern status and Company'soperations in future.
REPORTS ON CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION & ANALYSIS
The reports on Corporate Governance and Management Discussion and Analysis forthe year under review as stipulated under Regulation 34 of the Listing Regulations formspart of this Report. The certificate from the Auditors of the Company confirmingcompliance with the conditions of Corporate Governance is annexed to the Report onCorporate Governance.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report in terms of Regulation 34(2) of the SEBI ListingRegulations describing the initiatives taken by the Company from an environmental socialand governance perspective forms part of this Annual Report.
PARTICULARS OF EMPLOYEES AND RELATED INFORMATION
In accordance with the provisions of Section 197(12) of the Act read with Rule 5 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 a statementcontaining the disclosures pertaining to remuneration and other details as required underthe Act and the above Rules are provided in the Annual Report. The disclosures asspecified under Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are appended to this Report as Annexure VI.
As per the provisions of Section 136 (1) of the Act the reports and accounts are beingsent to all the Members of the Company excluding the information regarding employeeremuneration as required pursuant to Rule 5(2) and Rule 5(3) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014. The same is available forinspection by Members at the registered o3ice of the Company on all working days exceptSaturdays between 2.00 p.m. and 4.00 p.m. up to the date of the Thirty Second AGM. AnyMember interested in obtaining such information may write to the Company Secretary and thesame will be furnished on such request.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The particulars of loans guarantees or investments under Section 186 of the Act arenot furnished since the provisions of Section 186 of the Act are not applicable to theCompany pursuant to subsection 11 thereof.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
The particulars of contracts or arrangements with related parties referred to inSection 188(1) of the Act as prescribed in Form AOC - 2 are appended as AnnexureVII to this Report.
EXTRACT OF ANNUAL RETURN
Pursuant to the requirements under Sections 92(3) and 134(3) of the Act read with Rule12 of Companies (Management and Administration) Rules 2014 an extract of Annual Returnin prescribed Form MGT-9 is appended as Annexure VIII to this Report.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars regarding Conservation of Energy and Technology Absorption are notfurnished since they are not applicable to the Company.
During the year the Company has not earned any foreign exchange on standalone basis;the details of the amount spent in foreign exchange is provided at note number 2.31 of thenotes to the standalone financial statements which forms part of the audited annualaccounts.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Company has established a vigil mechanism to provide appropriate avenues to theDirectors and employees to bring to the attention of the Management their genuineconcerns about behaviour of employees the details of which are included in the Report onCorporate Governance.
During the financial year 2016-17 no cases under this mechanism were reported to theCompany and/or to any of its subsidiaries/ associate.
POLICY FOR PREVENTION PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT OF WOMEN ATWORKPLACE
The Company's policy for prevention of sexual harassment is embodied both in the Codeof Conduct of JM Financial Group as also in a specifically written policy in accordancewith The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013.
During the financial year 2016-17 no cases in the nature of sexual harassment werereported at any workplace of the Company or any of its subsidiaries/associate.
CEO & CFO CERTIFICATION
Certificate from Mr. Vishal Kampani Managing Director and Mr.3Manish Sheth ChiefFinancial O3icer pursuant to Regulation 17(8) of the Listing Regulations for thefinancial year 2016-17 was placed before the Board of Directors of the Company at itsmeeting held on May 2 2017 and also forms part of Report on Corporate Governance.
The Directors wish to place on record their sincere gratitude to the Reserve Bank ofIndia Securities and Exchange Board of India BSE Limited National Stock Exchange ofIndia Limited
Ministry of Finance Ministry of Corporate A3airs Registrar of Companies NationalSecurities Depository Limited Central Depository Services (India) Limited MetropolitanStock Exchange of India Limited National Commodity and Derivatives Exchange LimitedNational Housing Bank other government and regulatory authorities lenders financialinstitutions and the bankers of JM Financial group for the continued support provided bythem.
The Directors also place on record their sincere appreciation for the continued supportextended by the Company's stakeholders and trust reposed by them in the Company. TheDirectors sincerely appreciate the commitment displayed by the employees of the Companyand its subsidiaries/associate across all levels resulting in satisfactory performanceduring the year.
|For and on behalf of the Board of Directors |
|Place: Mumbai ||Nimesh Kampani |
|Date: May 2 2017 ||Chairman |
DIVIDEND DISTRIBUTION POLICY
Securities and Exchange Board of India vide its notification dated July 8 2016 hasinserted Regulation 43A a3er the Regulation 43 of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015. The saidRegulation requires every listed entity to formulate a dividend distribution policy.
Accordingly this Policy is formalized by the Board of Directors of JM FinancialLimited (the Company') at its meeting held on August 2 2016. This Policy will beapplicable e3ective from the financial year 2016-17.
2. Policy Objective and Considerations:
It is the Policy of the Board of Directors of the Company ("The Board") toreward the shareholders regularly by sharing profits earned by the Company by way ofdividend. The Board would also consider declaration of bonus shares at appropriate time bycapitalising accumulated profits and permissible reserves of the Company.
The Company is a Core Investment Company ("CIC") registered with Reserve Bankof India. Its subsidiaries and associates are engaged in the operating businesses.
Considering the regulatory requirement applicable to the Company as a CIC of deployinga minimum of 90% of its net assets as investments in / lending to its subsidiaries andassociates the income of the Company consists only of investment income in the form ofinterest dividend and capital gains if any most of which is received from thesubsidiaries. On a standalone basis the Company has very small income from bank depositsor other liquid investments.
Thus the Company is to a great extent dependent on the performance of its GroupCompanies as well as the decision of their respective Board of Directors torecommend/declare dividend out of the concerned company's profits.
In the above background the Board would consider recommendation/declaration ofdividend based on the consolidated profits of the Company. Since the applicableregulations require the accounts to be prepared on the basis of consolidation of theperformance of all operating businesses it is easy to appreciate the earnings in totalityand accordingly decide the quantum of dividend for shareholders.
However the regulations do not permit a seamless access to the cash earnings of thesubsidiaries and associates and therefore the Board is constrained to recommend/ declaredividend depending on dividend received from the Company's subsidiaries/associates andliquidity available from the same. The Board will also consider retention of capital tomaintain a healthy financial position to support liquidity capital adequacy and/or futuregrowth of the Company's various subsidiary and associate companies.
3. Utilisation of Retained Earnings:
Being in the financial services industry the Company follows the practice of sharing apart of its earnings with employees in the form of performance linked compensation.Accordingly the earnings that are available for distribution to shareholders and othercorporate needs are determined a3er the payment of performance linked compensation andcorporate taxes.
The Board will consider dividend distribution on the basis of various provisions of theCompanies Act 2013 and their assessment of the need to retain resources for growth ofoperating businesses capital adequacy and liquidity maintenance. The Board will endeavorto maintain a Dividend pay-out in the range of at least 25% to 30% of consolidated profitsa3er tax (PAT). The Company and its subsidiaries/ associates will pay applicable DividendDistribution Tax on the dividends declared and paid.
The Board may amend the pay-out range whenever considered appropriate by it keepingin mind the aforesaid factors. The Board may also consider paying a Special Dividend undercertain circumstances such as extraordinary profits if any a milestone in the journey ofthe Company etc.
If for any year there is inadequacy of profits liquidity constraint in the economyand similar situations and there is a need to preserve resources based on theseconsiderations and in this scenario if the Board is of the opinion that the Company shouldpreserve its resources it may recommend/ declare a lower or no dividend. The Board mayalso decide to recommend/declare a lower or no dividend in case they have made a decisionwhereby the Shareholders have been rewarded by a corporate action such as issue of bonusshares buy-back of shares etc.
4. Frequency of Dividend Distribution:
In normal course the Board will consider one interim dividend in addition to finaldividend for a financial year. The considerations applied for both types of dividend willbe same as enumerated above. The interim dividend will be usually paid based on thefinancial performance of 6 to 9 months and final dividend based on the financialperformance of the full year.
5. Types of Capital:
The Company has only equity share capital as on date. If in future the Company issuespreference share capital and if dividend is declared by the Board the preference sharecapital will have priority to receive dividend in accordance with the terms of its issuebefore any dividend is paid in respect of equity share capital in accordance with theapplicable provisions of the Companies Act 2013 and the Articles of Association of theCompany.
6. Disclosure of this Policy:
The Company shall disclose this policy on its website and in its Annual Report.
7. Amendment to this Policy:
The Board may amend this Policy as and when deemed fit. Any and all provisions of thisPolicy shall be amended as needed due to business and economic conditions or regulatorychanges from time to time.
Details of Employee Stock Option Scheme as stipulated under SEBI (Share Based EmployeeBenefits) Regulations 2014 and the Companies Act 2013
|1. Options granted during the year (FY 2016-17) : ||1255515 |
|2. Pricing formula : ||As determined by the Nomination and Remuneration Committee |
|3. Options vested during FY 2016-17 : ||2920403 |
|4. Options exercised during FY 2016-17 : ||1955000 (Exercise Price ` 54.80) |
| ||3592478 (Exercise Price ` 1.00*) |
|5. Total number of shares arising as a result of exercise of Options : during FY 2016-17 ||5539478 (8000 Stock Options exercised by the eligible employee were pending allotment as on March 31 2017). |
|6. Options lapsed during FY 2016-17 : ||101969 |
|7. Variation of terms of Options : ||None |
|8. Money realised from the Employees by exercise of Options during : ||` 107134000/- |
|FY 2016-17 ||` 3592478/-* |
|9. Total Options in force as on March 31 2017 : ||6067294 |
|10. Employee wise details of Options granted to: ||1057245 Stock Options have been granted to 16 senior managerial personnel (eligible employees/directors of the Company and/or its subsidiaries). |
|(i) senior managerial personnel : || |
|(ii) any other employee who received a grant in any one year of Option : amounting to 5% or more Options granted during that year ||None |
|(iii) identified employees who were granted Options during : any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant ||None |
|11. Diluted Earnings Per Share (EPS) pursuant to issue of shares on : exercise of Options calculated in accordance with Accounting Standard (AS) - 20 Earnings Per Share'. ||Standalone ` 1.34 |
| ||Consolidated ` 5.89 |
|12. Di3erence between the employee compensation cost using intrinsic : ||a. On Standalone basis |
|value method and fair value method. || |
| ||Particulars As reported As adjusted |
|The impact of this di3erence on profits and on EPS of the Company. ||Net profit (` in Crore) 106.73 106.73 Basic EPS (`) 1.35 1.35 Diluted EPS (`) 1.34 1.34 b. On Consolidated basis Particulars As reported As adjusted Net profit (` in Crore) 470.20 472.98 Basic EPS (`) 5.93 5.96 Diluted EPS (`) 5.89 5.92 |
|13. Weighted-average exercise prices and weighted average fair values : of Options for Options whose exercise price is either equal to or exceeds or is less than the market price of the stock Options. 14. A description of the method and significant assumptions used : during the year to estimate the fair values of Options including the following weighted-average information: ||Weighted average exercise price ` 54.80 for 1955000 options ` 1.00 for 3592478 options Weighted average value of option ` 32.33 Black-Scholes-Merton model |
|i. Risk-free interest rate : ||7.80% |
|ii. Life of options : ||7 years |
|iii. Expected volatility : ||51.38% |
|iv. Expected dividend yield : ||3.55% |
|v. The price of the underlying share in market at the time of Option : grant : ||` 42.20 |
*In addition to ` 3592478/- received from eligible employees an aggregate amount of` 71116733 being the di3erence between the exercise price and market price on the dateof grant has been reimbursed by the subsidiary companies with which the eligible employeesare/were employed/associated.
POLICY ON SELECTION AND APPOINTMENT OF DIRECTORS
Pursuant to the provisions of Section 178 of the Companies Act 2013 (the Act) theNomination and Remuneration Committee of a company is required to formulate the criteriafor determining the qualifications positive attributes and independence of a directorproposed to be appointed as a director on the board of the company.
This Policy document records the criteria for selection and appointment of directors onthe Board of the Company.
This Policy is applicable to selection and appointment of directors on the Board of theCompany.
Criteria for selection of Directors:
The Nomination and Remuneration Committee (the Committee') of the Board of theCompany to keep the following criteria in mind while assessing the suitability of anindividual as a director on the Board of the Company:
Demonstration of independence integrity high personal and professional ethics;
Ability and willingness to commit sufficient time to the responsibilities as a Boardmember;
Understanding of the Company's/Group's business and related industry;
General understanding of marketing finance and other disciplines relevant to thebusiness of the Company/Group;
Educational and professional background professional qualification and/or experience ofhaving run a business at senior management and decision making level;
Age giving sufficient experience as well as length of service available;
Ability to assessment the conflict of interest if any;
Personal accomplishments and ability to influence decisions.
The above are the broad parameters for assessing the candidate's suitability. TheCommittee has the discretion to apply additional or di3erent criteria as it may deem fit.
The Committee may also consider the contributions that a board candidate can beexpected to make to the collective functioning of the Board based upon the totality of thecandidate's credentials experience and expertise the composition of the Board at thetime and other relevant circumstances.
The Committee will also keep in mind regulatory requirements in this regard. Forexample a person cannot serve on more than seven public listed company boards in additionto the Company. Also a person who serves as the Managing Director/Chief Executive O3icer(or equivalent position) of any company cannot serve on the Board of more than threeadditional public listed companies.
The Company may appoint or re-appoint any person as the Managing Director and/orWhole-time Director for a term not exceeding five years at a time. Further they shall notbe reappointed earlier than one year before the expiry of their term.
An Independent Director can hold o3ice for a term up to five consecutive years on theBoard of the Company and he is eligible for re-appointment on passing of a specialresolution by the Company and disclosure of such appointment in the Board's report.
No Independent Director can hold o3ice for more than two consecutive terms of fiveyears but such Independent Director is eligible for appointment a3er expiry of threeyears of ceasing to become an Independent Director. Provided that an Independent Directorshall not during the said period of three years be appointed in or be associated withthe Company in any other capacity either directly or indirectly.
The Committee shall assist the Board in ensuring Board nomination process with thediversity of gender thought experience knowledge and perspective in the Board.
Persons to be considered for appointment as directors are selected by the Nominationand Remuneration Committee in accordance with the policies and principles above and underthe Act and the Listing Agreement. The invitation to join the Board may be extended by theChairman of the Board.
POLICY ON PERFORMANCE EVALUATION AND REMUNERATION OF THE DIRECTORS
All members of the Board of Directors
To assist in the process of assessing the participation and contribution in the Boardlevel deliberations by the directors of JM Financial Limited
To monitor and evaluate the attainment of the Board objectives
To provide the Directors an opportunity to reflect on and assess their areas ofstrength and development
Evaluation Process for Independent Directors:
JM Financial Group follows annual 360 degree evaluation for its Key Managerial Personsand other eligible employees including the senior management team. A process modelled onthis method has been designed for evaluation of Directors. Under this process the CompanyManagement team will:
help define criteria for evaluations
formulate the process for evaluating and rating each Director
design the evaluation templates/questionnaire and implementation process
coordinate and collate feedback received from each Director
analyse feedback received from each Director and prepare summary thereof
share the evaluation summary with the Chairman of the
Nomination and Remuneration Committee
share the feedback with the Chairman of the Board
The above process will be implemented and controlled from the Chairman's o3ice and thesummary will be prepared without attributing any comment to the person who made it. Suchsummary of observations will be shared with the directors in confidence.
Key Evaluation Criteria
Providing effective leadership and strategic guidance to the management
Understanding the Business including the Risks and regulatory landscape
Attendance at and active engagement in the discussion of business performancecompetitive landscape and strategies
Development and monitoring of leadership teams
Compliance focus and insistence on ethical business practices
Nudging for long term focus areas such as Succession
Planning Business Continuity Planning etc.
Management of conflicts in Board discussion
Management of Conflict of Interest
Criteria for determination of Remuneration of Directors
The Non-executive Directors and Independent Directors will receive remuneration by wayof sitting fees for attending meetings of the Board and/or Committee thereof as decidedby the Board from time to time subject to the limits specified under the Companies Act2013 (the Act) including any amendments thereto. In addition to the sitting fees theNon-executive and Independent Directors may also be paid commission as may be determinedby the Board subject to the limits specified under the Act.
The remuneration of Non-executive Directors and Independent Directors will be governedby the role assumed number of meetings of the Board and the committees thereof attendedby the directors the position held by them as the Chairman and member of the committeesof the Board and overall contribution to the business. Besides these the determination ofremuneration of independent directors will also depend on the external competitiveenvironment track record individual performance of the directors and performance of theCompany as well as the industry standards.
The compensation structure for Executive Director consists of two parts Fixedand Variable:
The objective of fixed compensation is to ensure internal and external parity. Thefixed component is reviewed annually and a market aligned fixed compensation structure isproposed.
Apart from the fixed component Executive Directors are eligible for a performancelinked variable compensation component i.e. Discretionary Bonus'. The payout of thiscomponent depends on Executive Director's individual performance and performance of theCompany.
The compensation strategy of the Company is meritocracy-based and the remunerationpolicy is designed to encourage high performance culture while aligning itself to thehighly competitive business environment.
The compensation structure of the Executive Director is also being reviewed by theNomination and Remuneration Committee and approved by the Shareholders of the Company.
The Fixed and Variable compensation of Executive Director is determined on the basisof:
Performance of the Company