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Karnavati Finance Ltd.

BSE: 538928 Sector: Financials
NSE: N.A. ISIN Code: INE554R01012
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OPEN 33.70
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VOLUME 1107
52-Week high 34.25
52-Week low 9.70
P/E 43.33
Mkt Cap.(Rs cr) 33
Buy Price 30.45
Buy Qty 50.00
Sell Price 32.50
Sell Qty 1.00
OPEN 33.70
CLOSE 33.70
VOLUME 1107
52-Week high 34.25
52-Week low 9.70
P/E 43.33
Mkt Cap.(Rs cr) 33
Buy Price 30.45
Buy Qty 50.00
Sell Price 32.50
Sell Qty 1.00

Karnavati Finance Ltd. (KARNAVATIFIN) - Director Report

Company director report

To

The Shareholders

The Directors have the pleasure of presenting the 32nd Annual Report of yourCompany with the Audited Financial Statements of the Company for the year ended March 312016.

Financial Results (Rs. In lakhs)
Particulars

F.Y. 2015-16

F.Y. 2014-15

Revenue from Operations 44.42 47.58
Other operating Income 19.03 -
Total Revenue 63.45 47.58
Less: Total Expenses (18.18) (80.81)
Operating Profits before Exception item Depreciation Interest and Tax 45.27 (33.23)
Less: Depreciation 1.58 1.57
Interest - -
Profit / (Loss) Before Tax 43.69 (34.80)
Less : Exceptional Items - -
Less: Current Tax 11.68 2.72
Less : Deferred Tax Liabilities/ (Assets) (4.81) -
Profit / (Loss) after Tax 36.82 (37.52)

Review of Business Operation

During the financial year 2015-16 The Company has earned total income of Rs. 63.45Lakhs from business activities (Finance Charge) compared to that of Rs. 47.58 Lakhsofprevious year which shows growth in Revenue from Operations by 33% over the previousyear.

Due to expansion of Business the overall revenue of the Company was increased.Further in the financial year 2015-16due to decrease in the loan losses and otherexpenses compared to previous year the performance of the Company was satisfactory duringthe financial year 2015-16.During the financial year 2015-16 there were no loans writtenoff and even provision for NPA was reduced by almost 80% compared to that of previousyear.

The total Profit before tax for the financial year 2015-16 stood at Rs. 43.69 Lakhcompared to loss before tax of Rs. 34.80 Lakh for the financial year 2014-15 making netprofit after tax of Rs. 36.82 Lakh for financial year 2015-16 compared to loss after taxof Rs. 37.52 Lakh for the financial year 2014-15.

The Directors of the Company are planning to expand the business of the Company in thecurrent year by providing the varied types of the financial services to the customers andthus confident of presenting the better figures in the coming years.

Dividend

To conserve resources for future prospect and growth of the Company your Directorsregret to declare Dividend for the Financial Year 2015-16 (Previous year - Nil).

Net Profit Transfer to Reserve

The Company has transferred Rs. 7.36 Lakh to Statutory Reserve Fund in terms of Section45-1C of the Reserve Bank of India Act 1934. The balance net profit was adjusted againstthe debit balance of carried forward loss of the Company.

Change in Nature of Business

During the year your Company has not changed its business or object and continues tobe in the same line of business as per main object of the Company.

License for Money Changer

The Company had made application to Reserve Bank of India for issue of license to carryon business for Full Fledge Money Changer. The Reserve Bank of India has considered theapplication and issued License No. 1916/2016 dated June 1 2016.

However the Company has not started the business of Full Fledge Money Changer tilldate. The Board of Directors is in planning to commence the business in the current year.

Information of Board of Directors and its Meetings

The Board of Directors of the Company consists of four (4) Directors; one (1) of whomis Promoter - Managing Director one (1) is Promoter - Whole-time Director and two (2) areNon-Executive Independent Directors.

The composition of Board complies with the requirements of the Companies Act 2013.Further in pursuance of Regulation 15(2) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 ("Listing Regulations") the Company is exemptedfrom requirement of having composition of Board as per Listing Regulations.

The Board of the Company comprises following Directors as on date of this report;

Name of Directors Category of Directorship

No. of Directorships

No. of Committee1 Membership/ Chairmanship in Companies Attendance at the AGM held on 21-09- 2015
Mr. Jay Morzaria Managing Director (Promoter) 4^ Member 2 Yes
Mr. Raman Morzaria Whole-time Director (Promoter) 4 - Yes
Mr. Jay Somaiya Non-Executive Independent Director 3 Chairman 2 Yes
Ms. HardikaMandavia Non-Executive Independent Director 2 Member 2 N.A.

1 Committee includes Audit Committee and Shareholders’ GrievancesCommittee across all Public Companies.

^ One of the Companies is in process of Striking Off.

Board Meetings

During the year under review Board of Directors of the Company met 7 (Seven) timesviz. April 3 2015 May 30 2015 August 01 2015 August 24 2015 November 10 2015February 15 2016 and March 30 2016. The gap between two consecutive meetings was notmore than one hundred and twenty days as provided in section 173 of the Act.

The details of attendance of each Director at the Board Meeting and Annual GeneralMeeting are given below;

Name of Director

Mr. Jay Morzaria

Mr. Raman Morzaria

Mr. Jay Somaiya

Mr. Kaushal Ruparel

No. of Board Meeting held 7 7 7 7
No. of Board Meeting attended 7 7 5 5
Presence at the previous AGM Yes Yes Yes Yes

Independent Directors

In terms of Section 149 of the Companies Act 2013 ("The Act") and rules madethere under the Company has two Non-Promoter Independent Directors in line with the act.A separate meeting of Independent Directors was held on March 30 2016 to review theperformance of Non-Independent Directors and Board as whole and performance of Chairpersonof the Company including assessment of quality quantity and timeliness of flow ofinformation between Company management and Board. The terms and conditions of appointmentof Independent Directors and Code for Independent Director are incorporated on the websiteof the Company at www.karnavatifinancelimited.in.

The Company has received necessary declaration from each independent director underSection 149 (7) of the act that they meet the criteria of independence laid down inSection 149 (6) of the act.

Information on Directorate

During the year under review there was no change in the constitution of the Board ofDirectors. However after the closure of financial year 2015-16 Mr. Kaushal RuparelIndependent Director of the Company has resigned from the board w.e.f. April 13 2016. TheBoard of Directors had placed their appreciation to Mr. Kaushal Ruparel for providing hisservice as director of the Company.

In terms of Section 149 of the act the Board of Directors in their meeting held onApril 13 2016 has appointed Ms. HardikaMandaviaas an Additional (Non - Executive)Director of the company w.e.f. April 13 2016. In terms of provisions of Section 161 ofthe act she holds office up to the date of ensuing Annual General Meeting of the Company.A Notice under Section 160 of the act has been received from member proposing candidatureof Ms. HardikaMandavia for appointment as anIndependent Director of the Company. The Boardof Directors recommend her appointment as Non-Executive Independent Director designatedas Woman Director of the Company and resolution to that effect has been proposed forapproval of Members of the company at the ensuing Annual General Meeting.

In accordance with the provisions of the Articles of Association and Section 152 of theCompanies Act 2013 Mr. Jay Morzaria Managing Director of the Company retires byrotation at the ensuing annual general meeting. He being eligible has offered himselffor re-appointment as such and seeks re-appointment. The Board of Directors recommends hisappointment on the Board.

The relevant details as required under Regulation 36 (3) of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 ("SEBI Listing Regulations") ofthe person seeking re-appointment/ appointment as Director are also provided in Note No.23 of the Notice convening the 32ndannual general meeting.

None of the Director of the Company is serving as a Whole-Time Director in any ListedCompany and is holding position of Independent Director in more than 3 Listed Company andnone of the Director of the Company is holding position as Independent Director in morethan 7 Listed Company.Further none of the Directors of the Company is disqualified forbeing appointed as Director as specified in Section 164 (2) of the Companies Act 2013.

Key Managerial Personnel

In accordance with Section 203 of the Companies Act 2013 the Company has Mr. JayMorzaria who is acting as Managing Director of the Company. During the year the Companyhas not appointed/re-appointed any Key Managerial Personnel. Further no Key ManagerialPersonnel has resigned from the post.

Performance Evaluation

The Board of Directors has carried out an annual evaluation of its own performanceboard committees and individual directors pursuant to the provisions of the Act.

Further Nomination and Remuneration has also carried out the performance evaluation ofthe individual directors on the basis of the criteria such as the contribution of theindividual director to the board and committee meetings. In addition the chairman wasalso evaluated on the key aspects of his role.

Separate meeting of independent directors was held to evaluate the performance ofnon-independent directors performance of the board as a whole and performance of thechairman taking into account the views of executive directors and non-executivedirectors.

Directors’ Responsibility Statement

Pursuant to section 134(5) of the Companies Act 2013 the board of directors to thebest of their knowledge and ability confirm that:

a) In preparation of annual accounts for the year ended March 31 2016 the applicableaccounting standards have been followed and that no material departures have been madefrom the same;

b) The Directors had 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 at the end of the financial year and ofthe profit or loss of the Company for that year;

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

d) The Directors had prepared the annual accounts for the year ended March 31 2016 ongoing concern basis.

e) The Directors had laid down the internal financial controls to be followed by theCompany and that such Internal Financial Controls are adequate and were operatingeffectively; and

f) The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

Committee of Board

The Board of Directors in line with the requirement of the act has formed variouscommittees details of which are given hereunder.

A. Audit Committee

The Company has formed audit committee in line with the provisions Section 177 of theCompanies Act 2013. Audit Committee meeting is generally held for the purpose ofrecommending the half yearly and yearly financial result. Additional meeting is held forthe purpose of reviewing the specific item included in terms of reference of theCommittee. During the year under review Audit Committee met 4 (Four) times viz on May 302015 August 24 2015 November 10 2015and February 15 2016.

The composition of the Committee and the details of meetings attended by its membersare given below:

Name of the Director Category Designation

No. of Meetings Attended

Mr. Jay Somaiya Independent Director Chairman 4
Mr. Kaushal Ruparel Independent Director Member 4
Mr. Jay Morzaria Managing Director Member 4

The representative of Statutory Auditors of the Companywas invited in the meeting ofthe Committee whenever required.

Mr. Jay Somaiya the Chairman of the Committee had attended last Annual General Meetingof the Company held on September 21 2015.

Recommendations of Audit Committee have been accepted by the Board wherever/whenevergiven.

Composition of the Audit Committee was revised w.e.f. April 13 2016 due to resignationof Mr. Kaushal Ruparel. Ms. HardikaMandavia Independent Director of the Company wasinducted as Member of the Committee in place of Mr. Kaushal Ruparel.

Vigil Mechanism

The Company has established a vigil mechanism and accordingly framed a Whistle BlowerPolicy. The policy enables the employees to report to the management instances ofunethical behavior actual or suspected fraud or violation of Company’s Code ofConduct. Further the mechanism adopted by the Company encourages the Whistle Blower toreport genuine concerns or grievances and provide for adequate safe guards againstvictimization of the Whistle Blower who avails of such mechanism and also provides fordirect access to the Chairman of the Audit Committee in exceptional cases. Thefunctioning of vigil mechanism is reviewed by the Audit Committee from time to time. Noneof the Whistle blowers has been denied access to the Audit Committee of the Board. TheWhistle Blower Policy of the Company is available on the website of the Company atwww.karnavatifinancelimited.in.

B. Stakeholders’ Grievances and Relationship Committee

The Company has constituted Stakeholder’s Grievance & Relationship Committeemainly to focus on the redressal of Shareholders’ / Investors’ Grievances ifany like Transfer / Transmission / Demat of Shares; Loss of Share Certificates;Non-receipt of Annual Report; Dividend Warrants; etc. During the year under reviewStakeholder’s Grievance & Relationship Committee met 4 (Four) times viz on May30 2015 August 24 2015 November 10 2015and February 15 2016.

The composition of the Committee and the details of meetings attended by its membersare given below:

Name of the Director Category Designation

No. of Meetings Attended

Mr. Jay Somaiya Independent Director Chairman 4
Mr. Kaushal Ruparel Independent Director Member 4
Mr. Jay Morzaria Managing Director Member 4

Composition of the Stakeholders’ Grievances and Relationship Committee was revisedw.e.f. April 13 2016 due to resignation of Mr. Kaushal Ruparel. Ms. HardikaMandaviaIndependent Director of the Company was inducted as Member of the Committee in place ofMr. Kaushal Ruparel.

Complaint

During the year the Company had not received any complaints from the Shareholders.There was no complaint pending as on March 31 2016.

Nomination and Remuneration Committee

The Company has formed Nomination and Remuneration committee. Nomination andRemuneration Committee meetingsare generally held for identifying the persons who arequalified to become Directors and may be appointed in senior management and recommendingtheir appointments and removal. During the year under review Nomination and RemunerationCommittee met 1 (One) time viz on March 30 2016 for performance evaluation of individualdirectors.

The composition of the Committee and the details of meetings attended by its membersare given below:

Name of the Director Category Designation

No. of Meetings Attended

Mr. Jay Somaiya Independent Director Chairman 1
Mr. Kaushal Ruparel Independent Director Member 1
Mr. Jay Morzaria Managing Director Member 1

Composition of the Nomination and Remuneration Committee was revised w.e.f. April 132016 due to resignation of Mr. Kaushal Ruparel. Ms. HardikaMandavia Independent Directorof the Company was inducted as Member of the Committee in place of Mr. Kaushal Ruparel.

Nomination and Remuneration Policy

The Company has adopted the Nomination and Remuneration Policy. Key points of theNomination and Remuneration Policy are;

a. Policy on Appointment of Directors Key Managerial Personnel and Senior ManagementPersonnel: The policy is formulated to identify and ascertain the integrityqualification expertise and experience of the person for appointment as Director KeyManagerial Personnel and Senior Management personnel and recommend to the Board for his /her appointment.

o A person should possess adequate qualification expertise and experience for theposition he/ she is considered for appointment.

o In case of appointment of Independent Director the Committee shall satisfy itselfwith regard to the independent nature of the Director vis--vis the Company so as toenable the Board to discharge its function and duties effectively.

b. Policy on remuneration of Director KMP and Senior Management Personnel

The Company’s remuneration policy is driven by the success and performance ofDirector KMP and Senior Management Personnel vis--vis the Company. The Company’sphilosophy is to align them with adequate compensation so that the compensation is used asa strategic tool that helps us to attract retain and motivate highly talented individualswho are committed to the core value of the Company. The Company follows mixed of fixedpay benefits and performance based variable pay. The Company pays remuneration by way ofsalary benefits perquisites and allowance. The remuneration and sitting fees paid by theCompany are within the salary scale approved by the Board and Shareholders.

The Nomination and Remuneration Policy as adopted by the Board of Directors is placedon the website of the Company at www.karnavatifinancelimited.in.

Remuneration of Director

The details of remuneration paid during the financial year 2015-16 to ExecutiveDirector of the Company is provided in Form MGT-9 which is the part of this report.

Public Deposit

The company being Non-Deposit accepting Non-Banking Finance Company has not acceptedany deposits from the public. Hence the directives issued by the Reserve Bank of India& the Provision of Section 73 to 76 of the Company Act 2013 or any other relevantprovisions of the Act and the Rules there under are not applicable.

Particulars of Loans Guarantees Investments & Security

Details of Loans Guarantees Investments and Security covered under the provisions ofSection 186 of the Companies Act 2013 are given in the notes to the Financial Statement.

Contracts or Arrangements with Related Parties

All transactions to be entered by the Company with related parties will be in theordinary course of business and on an arm’s length basis. The Company has enteredinto one related party transaction details of which are given in "AnnexureA" in Form AOC-2 and the same forms part of this report.

Extract of Annual Return

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of theCompanies Act 2013 read with Rule 12 of Companies (Management and Administration) Rules2014 the extract of the Annual Return as at March 31 2016 in Form MGT-9 forms part ofthis Annual Report as "Annexure - B " .

Particular of Employees

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said rules will be available for inspection at theRegistered Office of the Company during working hours and any member interested inobtaining such information may write to the Company Secretary and the same will befurnished on request.

Having regard to the provisions of the first proviso to Section 136(1) of the Act andas advised the Annual Report excluding the aforesaid information is being sent to themembers of the Company.

Disclosures relating to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are provided as an "Annexure C"which forms part of this Report.

Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo

The details of conservation of energy technology absorption etc. as required to begiven under section 134(3)(m) of the Companies Act 2013 read with the Companies (Accounts)Rules 2014 are not applicable to our Company as the Company is not carrying on anymanufacturing activities. Further there was no foreign exchange earnings and outgo duringthe financial year 2015-16 (Previous Year Nil).

Material Changes and commitment affecting financial position of the Company

There are no material changes and commitments affecting the financial position of theCompany which has occurred between and after the end of financial year of the Company tillthe date of Director’s Report i.e. September 5 2016.

Sexual Harassment of women at workplace

There were no incidences of sexual harassment reported during the year under review interms of the provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 as there are no woman employees employed by theCompany during the Financial Year 2015-16.

Corporate Governance

Your Company strives to incorporate the appropriate standards for corporate governance.However pursuant to Regulation 15(2) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company is not required to mandatorily comply with theprovisions of certain regulations of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and therefore the Company has not provided a separatereport on Corporate Governance although few of the information are provided in thisreport of Directors under relevant heading.

Management Discussion and Analysis

Management Discussion and Analysis for the year under review as stipulated underRegulations 27(2) of the SEBI (LODR) 2015 is presented in a separate section formingpart of this Annual Report.

Risk Management

A well-defined risk management mechanism covering the risk mapping and trend analysisrisk exposure potential impact and risk mitigation process is in place. The objective ofthe mechanism is to minimize the impact of risks identified and taking advance actions tomitigate it. The mechanism works on the principles of probability of occurrence andimpact if triggered. A detailed exercise is being carried out to identify evaluatemonitor and manage both business and non-business risks.

Internal Financial Control Systems and their Adequacy:

The details on Internal Financial Control and their adequacy are provided in ManagementDiscussion and Analysis Report.

Auditors

Statutory Auditor & their report

The Company’s Auditor M/s. Maharishi & Co. Chartered Accountants Jamnagar(FRN:124872W) were appointed as the Statutory Auditors’ of the Company for a periodof 3 years from the conclusion of 31st (Thirty First) Annual General Meetingtill the 34th (Thirty Forth) Annual General Meeting subject to ratification atevery ensuing Annual General Meeting from members.

The resolution for the ratification of their appointment has been put in the Noticeconvening the 32nd (Thirty Second) Annual General Meeting of the Members fortheir approval.

The Board of Directors based on recommendation made by the Audit Committee hasrecommended the ratification of appointment of M/s. Maharishi & Co. CharteredAccountants Jamnagar (FRN: 124872W) as the Statutory Auditors of the Company to hold theoffice from the ensuing AGM till the conclusion of the 33rd AGM of the Companyon such remuneration as may be determined by the Board in consultation with the auditors.

The Auditors’ Report on the accounts of the Company for the accounting year endedMarch 31 2016 is self-explanatory and do not call for further explanations or commentsthat may betreated as adequate compliance of Section 134 of the Companies Act 2013 exceptthe auditor has state that they are unable to obtain sufficient appropriateaudit evidenceto provide a basis for our opinion whether the Company had adequate internalfinancialcontrols were operating effectively as at March 31 2016.

Your Director stated that the company is in process ofestablishment of its internalfinancial control over financial reporting on criteria based on or considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India.

Secretarial Auditor & their report

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Company has appointed Mr. Anand SLavingia Practicing Company Secretary Ahmedabad to carry out the Secretarial Audit forthe financial year ended on March 31 2016. Secretarial Audit Report is attached to thisreport as "Annexure D".

The Secretarial Auditors’ Report of the Company for the Financial Year ended March31 2016 contains annotations relating to appointment of Key Managerial Personnel i.e.Company Secretary and Chief Financial Officer Woman Director and Internal Auditor asrequired under Companies Act 2013.

The Board of Directors states thatthe Board has taken adequate steps to find a suitablepersons having work experience in finance Company. The Company is in process to appointthe key managerial personnel. In fact the Company has appointed Ms. HardikaMandaviaIndependent Director designated as Woman Director of the Company.

Further the Company is in process to align the activities of the Company is line withthe statutory requirement applicable to the Company.

General Disclosure

Your Directors state that the Company has made disclosures in this report for the itemsprescribed in section 134(3) of the Act and Rule 8 of The Companies (Accounts) Rules 2014to the extent the transactions took place on those items during the year.

Your Directors further state that no disclosure or reporting is required in respect ofthe following items as there were no transactions on these items during the year underreview:

1. Details of Annual Report on Corporate Social Responsibility as Company is notfalling within the criteria as prescribed u/s 135 of the Companies Act 2013

2. Issue of Equity Shares with differential rights as to dividend voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company underany scheme save and ESOS.

4. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company’s operations in future.

Acknowledgement

Your Directors take this opportunity to place on record the valuable co-operation andsupport extended by the banks government business associates and the shareholders fortheir continued confidence reposed in the Company and look forward to having the samesupport in all future endeavors.

For and on behalf of Board of Directors
Karnavati Finance Limited
Jay Morzaria Raman Morzaria
Place: Jamnagar Managing Director Whole time Director
Date: September 5 2016 DIN: 02338864 DIN: 00203310