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Lakshmi Trade Credits Ltd.

BSE: 512537 Sector: Financials
NSE: N.A. ISIN Code: N.A.
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Lakshmi Trade Credits Ltd. (LAKTRADECRED) - Director Report

Company director report

LAKSHMI TRADE CREDITS LIMITED DIRECTORS' REPORT TO SHAREHOLDERS Your Directors have pleasure in submitting the TWENTIETH ANNUAL REPORT together with the Audited Accounts for the year ended 31st March 1998. APPROPRIATIONS In January 1998 the Reserve Bank of India came out with stringent guidelines regulating the functioning of NBFCs vis-vis fixing ceilings on acceptance of deposits interest payment and spelling out prudential norms. However in practice these guidelines could not be complied with most of the NBFCs particularly by those solely engaged in Hire Purchase and Leasing Business. The Reserve Bank of India and the Union Finance Ministry are engaged in an exercise for the past several months to find out a practical and realistic solution to the consequential problems of NBFCs now faced by them. There is no other go but to redefine new norms for accepting fresh deposits availing of Bank Credits under liberalised priority lending policy delinking credit rating for the purpose of accepting deposits etc. OPERATIONS Severe liquidity problems, collapse of the capital money market, the onset of recession crippling the economy, recessionary trend in automobile industry and unprecedented demand for repayment of deposits have affected our normal operations considerably. There is a steep decline in the revenue from the Hire Purchase in trucks. Due to the escalation in the cost of commercial vehicles fuel and accessories etc, the truck operators tend to postpone the repayments of their monthly instalments to NBFCs. The Industrial units which have availed of leasing credits are preferring to lay off their factories. The financial institutions/banks continue to be shy in extending fresh term loan/refinance limits of NBFCs. As on 31/03/98, the total deposits stands at Rs.30.35 crores and now the level of deposits has come down to Rs.23.25 crores as on 20th August 1998. Because of the oppressive operations of the guidelines referred above, the negative growth in the economy, the failure of certain established NBFCs a fear physcios has been injected in the minds of depositors and today the Company`s depositors stand confused and panic driven. Due to non acceptance of fresh deposits and to meet the unprecedent withdrawal of deposits forced the company not to initiate actions for disbursement of fresh Hire Purchase and Lease advances. The profitability of the company has been severely affected by the following factors. 1. No fresh income from business operations 2. High interest cost not matched by increase in income. 3. Higher provisioning for NPA and doubtful debts and non recognition to income as per RBI guidelines. 4. Extreme mismatch of deposits to advances tenure wise. 5. Reduction in other income. The Capital Market has almost become non-existence in India: the company has surrendered its licence to function as Merchant Banker Category 1. The full fledged Foreign Exchange Money Changing operations of the company particularly in Chennai has improved as compared to the previous year. The Foreign currencies transacted during the year was around Rs.44 Crores. After due evaluation your company has been appointed as one of their agents by Western Union Financial Services International with Head Quarters at New Jersey, USA for money transfer segment (inward remittances). Reserve Bank of India, Mumbai has accorded permission for the purpose. DIVIDEND The company incurred losses due to provision and Non Recognition of income for Non Performing Assets. Hence dividend could not be recommended for the year. FUTURE PROSPECTS The company is determined to remain in the business of Hire Purchase and Leasing. The liquidity crunch and recession in the Indian economy should be taken as a temporary phase. The oppressive guidelines imposed on NBFCs unilaterally will have to be redefined so as to make them practical and realistic. The company assured of good management will with the patronage of its depositors ,of its depositors share holders and bankers and it will succeed in adjusting its operations suitably and before long your company will come out to re-establish asset as a viable and vibrant Non Banking Hire Purchase Finance Company. PRUDENTIAL NORMS FOR NON-BANKING FINANCIAL COMPANIES Your Directors are happy to reopen that your Company has complied with the revised prudential norms prescribed by Reserve Bank of India as per Notification No.DFC 125/ED(G)-98 dated 12.05.1998 for income recognition and provision for Non performing Assets. While complying with the relative stringent norms almost all the NBFCs are showing negative growth and booking losses. RBI REGISTRATION Your company has applied to Reserve Bank of India (RBI) for issue of certificate of registration in June 1997 to carry on the business as required under Section 45 -1A (2) of the Reserve Bank of India Act 1934. The Company`s books has already been scrutinised by the Auditors deputed by Reserve Bank of India for the purpose. We are awaiting their decision in the manner of issuing us Registration Cerificate. DIRECTORS Shri P.G.Saranyan and Air Marshal R.S.Naidu AVSM VM (Red) retire by rotation and are eligible for re-appoinment. LISTING OF SHARES OF THE COMPANY Your Company`s shares are currently listed at Madras, Coimbatore and Mumbai Stock Exchanges. However keeping in view of no trading for the past few years at the Mumbai Stock Exchange, it has been decided by the Board to delist the shares from the Stock Exchange at Mumbai. The Shares will however continue to remain listed at Madras Stock Exchange and Coimbatore Stock Exchange. INFORMATION AS PER SECTION 217 (1) (E) OF THE COMPANIES ACT, 1956 Your Company has no activities relating to conservation of energy or technology absorption. The Company does not have any foreign exchange earnings or outgo. AUDITORS The Auditors M/s K.G.Purushothaman & Co. Chartered Accountants, Chennai retires and are eligible for re-appointment. AUDITORS' OBSERVATION As regards the observation by the Auditors in Para 2(b)(i) to (iii) of their report the notes numbered 2, 3 and 6 relating to this matter are self explanatory. With regard to Note No.2 we have to report that the matter relating to getting certificate of registration for some of the vehicles financed under hire purchase agreements steps have been taken to obtain the same. With regard to Note No.3, in Notes of Accounts relating to opening confirmation of balances from Debtors and Creditors the same are being pursued and except a few cases confirmation have been obtained in all. Needless to point out the hirers have executed very many documents in favour of the Company with continuing clauses. With regard to Note No.6 there has been a continuous pressure for repayment of deposit on maturity and several cases on account of pre-closure. Under these circumstances the company could not enhance maintenance of statutory liquidity reserve from 10% to 15% at short notice. The company shall be taking effective steps to comply with the statutory requirement as soon as reasonable improvement in liquidity position is attained. PARTICULARS OF EMPLOYEES None of the personnel in the Company was in receipt of remuneration in excess of the limits prescribed in Section 217(2A) of the Companies Act 1956 during the year under review. PROJECTION VS PERFORMANCE The decline in performance is mainly due to non availability of funds for business operation owing to monetary policy affecting NBFCs in particular and due to over all prevailing general recessionary trend throughout the industry and provisioning made as per RBl s directions for Non Performing Assets. ACKNOWLEDGEMENT Your Directors wish to thank the Banks Customers and Depositors and place on record their appreciation of the good work done by all the employees of the Company. Registered Office: For and on behalf of the Board of Directors 624,Anna Salai, P.G. SARANYAN Chennai- 600 006 Chairman Date : 20th August, 1998.