To the Members
Your Directors have pleasure in presenting their 12th Report together with the auditedFinancial Statements of your Company for the year ended 31st March 2017.
The Financial Highlights for the year are as under:
Motilal Oswal Financial Services Limited (Standalone)
|Particulars ||Year ended 31st March 2017 ||Year ended 31st March 2016 |
| || || |
|Total Revenue ||14235.71 ||11086.10 |
|Profit before Interest Depreciation Taxation and exceptional items ||12292.08 ||9101.23 |
|Interest ||(3638.08) ||(2952.64) |
|Depreciation ||(693.61) ||(802.14) |
|Profit before Taxation and exceptional items ||7960.39 ||5346.45 |
|Add/(Less): Exceptional Items ||610.81 ||- |
|Profit before taxation ||8571.20 ||5346.45 |
|Add/(Less) : Provision for Taxation || || |
|Current Tax ||(662.81) ||(1166.66) |
|Deferred Tax ||(354.86) ||494.85 |
|Minimum Alternate Tax ||790.46 ||- |
|Less : Tax for earlier year(s) ||285.70 ||- |
|Tax Expenses ||(58.49) ||671.81 |
|Profit after Taxation ||8629.69 ||4674.64 |
|Add: Balance brought forward from previous year ||4334.35 ||6312.79 |
|Profit Available for appropriation ||8629.69 ||4674.64 |
|Less: Appropriations || || |
|Transfer to Statutory Reserve ||(1725.94) ||(934.95) |
|Interim Dividend/ Proposed dividend ||(3588.13) ||(4987.17) |
|Dividend Distribution Tax ||(730.45) ||(1012.76) |
|Credit of Dividend Distribution Tax ||- ||281.80 |
|Balance of Profit carried forward ||6919.52 ||4334.35 |
Summary of Consolidated Financial results of the Company and its subsidiaries for theyear is as under:
Motilal Oswal Financial Services Limited - Consolidated
|Particulars ||Year ended 31st March 2017 ||Year ended 31st March 2016 |
|Total Revenue ||180870.87 ||108064.10 |
|Profit before Interest Depreciation Taxation and exceptional items ||91946.86 ||43324.46 |
|Interest ||44225.82 ||17376.61 |
|Depreciation ||3283.83 ||3494.28 |
|Profit before Taxation and exceptional items ||44437.60 ||22453.57 |
|Add: Exceptional Items ||6125.03 ||- |
|Profit before taxation ||50562.23 ||22453.57 |
|Add/(Less) : Provision for Taxation || || |
|Current Tax ||(13610.74) ||(6566.86) |
|Deferred Tax ||(3096.94) ||581.23 |
|Minimum Alternate Tax ||1458.24 ||(151.05) |
|Less: Tax for earlier year (s) ||(1140.63) ||(15.00) |
|Tax Expenses ||14108.82 ||6121.68 |
|Profit after Taxation before minority Interest ||36453.41 ||16331.89 |
|Minority interest in profits ||(1060.25) ||(255.37) |
|Share of profit from Associates ||603.87 ||831.08 |
|Profit after Taxation and minority Interest ||35997.03 ||16907.60 |
|Balance brought forward from previous year ||77615.78 ||68117.69 |
|Profit Available for appropriation ||113612.81 ||85025.30 |
|Add/(Less): Appropriations || || |
|Transfer to Statutory Reserve ||(3378.80) ||(1730.51) |
|Interim Dividend/ Proposed dividend ||(3588.13) ||(4974.83) |
|Dividend Distribution Tax ||(730.45) ||(730.96) |
|Capital Redemption Reserve ||(840.00) ||- |
|Prior Year dividend dividend distribution and other adjustments ||19.03 ||(12.31) |
|Prior Year Adjustments ||- ||40.54 |
|Balance of Profit carried forward ||105094.46 ||77617.22 |
State of Company's Affairs
Results: MOFSL Standalone
During the year under review the standalone revenues for the year were Rs. 142.36crores increase of 28.41% as compared to Rs. 110.86 crores last year. Interest incomedeclined 18.91% to Rs. 43.69 crores. Dividend income from subsidiary companies was Rs.48.53 crores as compared to Rs. 13.98 crores in the previous year. Profit on sale ofinvestments was Rs. 30.21 crores as compared to Rs. 27.81 crores last year. Rent incomewas Rs. 17.21 crores in FY2017 up 28.67%. Other operating income was Rs. 1.81 crores inFY2017 while other income was Rs. 90.07 lakhs.
Total expenses (before depreciation interest and exceptional items) decreased duringthe year from Rs. 19.84 crores a year back to Rs. 19.44 crores this year. Profit beforedepreciation interest exceptional item and taxation (EBITDA) increased by 35.06% thisyear from Rs. 91.01 crores to Rs. 122.92 crores. Interest and finance charges increasedfrom Rs. 29.53 crores to Rs. 36.38 crores.
Reported net profit increased by 84.60% to Rs. 86.30 crores. MOFSL Standalone'scommitments to our own mutual fund products stood at Rs. 381.51 crores as of March 2017.The unrealized gain on these investments is Rs. 195.56 crores as of March 2017. The sameis not reflected in the profit and loss account for the year.
The detailed results of operations of the Company are given in the ManagementDiscussion & Analysis forming part of this Report.
The consolidated revenues for the year were Rs. 1818.32 crores for the year underreview an increase of 66.25% as compared to the previous year.
- Broking revenues increased by 30.04% to Rs. 661.67 crores. Average daily volumes inthe equity markets were Rs. 4.07 lakh crores in FY2017 up 35.27% from last year. Cashmarket volumes were up 22.52% YoY to Rs. 24687.58 crores. Within cash delivery was up33.12% YoY to Rs. 8075.90 crores. Also cash volumes were 83.94% higher than the averageseen between FY2012-14. Delivery volumes were 106.78% higher than the FY2012-14 average.Within derivatives futures rose up 24.73% YoY to Rs. 62623.52 crores. This year optionswere up 38.68% YoY to Rs. 3.19 lakh crores a reversal from last year when options weredipped in the overall market volumes. Amongst cash market participants prop saw a declineof 2.43% YoY while retail was up 38.54% YoY. DII cash volumes increased 30.66% YoY led byrenewed interest in equity mutual funds from retail/HNI investors. The proportion ofretail within cash volumes increased from 48.88% to 55.27% YoY while that of DII increasedfrom 8.67% to 9.25% YoY. Our overall equity market share increased from 1.96% to 2.10% ona YoY basis. Due to our continued focus and investments into this business we succeededin capturing a larger chunk of the incremental volumes this year across both cash andderivatives. As of March 2017 our client base included more than 850000 retail brokingand distribution clients and 630 institutions. Our Pan-India distribution reach stood at2200+ business locations across 588 cities. Our depository assets was Rs. 44962.52crores up 75.78% YoY and distribution AUM was Rs. 4392.98 crores up 147.08% YoY.
- Investment banking fee saw a 254.20% growth over the previous year to Rs. 85.52crores. The IPO & QIP transactions gathered significant momentum this year. FY2017 sawthe business clock it's all time high revenues since inception.
- Asset management fees also saw significant traction increasing 67.59% to Rs. 375.11crores as compared to last year. Total assets under management/advice across mutualfunds PMS and private equity businesses was Rs. 23375.76 crores up 76.10% YoY. Withinthis the mutual fund AUM was Rs. 9289.82 crores PMS AUM was Rs. 10473.22 crores AIFAUM was Rs. 539.72 crores and private equity AUA was Rs. 3073.00 crores. The company sawincreased mobilization into its open-end equity mutual fund products and PMS products. Inthe private equity business the 3rd real estate fund - India Realty Excellence Fund IIIachieved its first close.
- Housing finance related income increased by 159.91% to Rs. 570.53 crores as thebusiness gained traction this year in terms of clients network banking lines and loanbook. HFC loan book was Rs. 4141.33 crores as compared to Rs. 2087.24 crores last year.
- Fund based income increased by 4.14% to Rs. 117.41 crores. In line with the long termstrategy to grow Return on Equity sustainably MOFSL made strategic allocation of capitalto long term RoE enhancing opportunities like Aspire Home Finance and sponsor commitmentsto mutual fund and private equity funds of MOFSL group. The NBFC loan book previously runfrom equity capital is now being run as a spread business. The year also included profitearned on exits in the Private Equity fund in which MOFSL made sponsor commitments.
- Other income increased by 72.84% YoY to Rs. 8.07 crores.
Total expenses (before interest and depreciation) for the year at Rs. 889.23 croresregistered a 37.36% jump over last year. People cost increased by 35.87% to Rs. 340.98crores. This was largely owing to an increase in hiring in housing finance business.Operating expenses increased by 53.17% to Rs. 356.12 crores. Other costs were Rs. 192.13crores an increase of 17.19% over last year. The profit before depreciation interestexceptional items and taxation (EBITDA) increased by 108.17% to Rs. 929.09 crores.
Reported net profit for the year after minority interest stood at Rs. 359.99 crores anincrease of 112.91%.
MOFSL group's commitments to our own mutual fund products stood at Rs. 642.95 croresas of March 2017. The unrealized gain on these investments is Rs. 333.91 crores as ofMarch 2017. The same is not reflected in the profit and loss account for the year. MOFSLgroup's commitments to our alternative investment products stood at Rs. 257.00 crores asof March 2017.
To sum up our strategy to diversify our business model towards more annuity sources ofearnings is showing definite results. The annuity nature of earnings in the new businesseslike asset based businesses and housing finance business has brought in visibility of ourearnings. Our businesses built scale during FY2017 while maintaining operatingparameters. Our brand is now being recognized across each of our businesses. We achieved a20%+ ROE in FY2017 and are well on course to achieve this on a sustainable basis. Theopportunity size in all our business segments is still huge and our businesses are wellplaced to benefit from the growth potential they offer.
During the year CRISIL Limited reaffirmed the Credit Rating of "CRISILA1+"to the Commercial Programme of Rs. 250 crores of the Company. ICRA Limitedassigned the credit rating of [ICRA] AA" Rating with a stable outlook to the NCDProgramme of Rs. 150 crores of the Company. ICRA Limited assigned the credit rating of[ICRA] AA" Rating with a stable outlook to the NCD Programme of Rs. 50 crores ofMotilal Oswal Securities Limited (MOSL) a wholly owned subsidiary of the Company. CRISILLimited also reaffirmed the Credit Rating of "CRISIL A1+"to the CommercialProgramme of Rs. 700 crores of MOSL. The ratings indicate a very strong degree of safetyregarding timely servicing of financial obligations. ICRA Limited assigned the creditrating of [ICRA]A1+ to the Commercial Paper Programme of Rs. 700 crores of Aspire HomeFinance Corporation Limited (AHFCL) material step down subsidiary of the Company. ICRALimited assigned the long term credit rating of [ICRA]AA- with a Stable Outlook and CRSILLimited assigned "CRISIL A+/Stable" Rating to the NCD Programme of Rs. 500crores ofAHFCL.
Dividend and Reserves
The Company at the Meeting of its Board of Directors held on 30th January 2017 haddeclared an interim dividend of Rs. 2.50 per Equity Share out of the profits of theCompany for the third quarter and nine months ended 31st December 2016 on 143525725Equity Shares of R 1.00 each aggregating to Rs. 358814313/-.
As per the requirement of the Reserve Bank of India Guidelines your Company hastransferred a sum of Rs. 17.26 crores to the Statutory Reserves. Further during the yearunder review the Company has not transferred any amount to the General Reserves.
During the year under review the Company allotted 2283401 equity shares undervarious employee stock option schemes of the Company.
Accordingly the paid up share capital of the Company as on 31st March 2017 is Rs.144457476 (Rupees Fourteen Crores Forty Four Lakhs Fifty Seven Thousand and FourSeventy Six only).
The Company has redeemed 500 Series A Secured Redeemable Non-Convertible Debentures ofRs. 10 lakhs each amounting to Rs. 50 crores during the year 2016-2017.
The disclosures in compliance with Section 62 of the Companies Act 2013 read with Rule12 of Companies (Share Capital and Debentures) Rules 2014 SEBI (Share Based EmployeeBenefits) Regulations 2014 are set out to the report as "Annexure 1".
The Employee Stock Option Scheme is administered by the Nomination andRemuneration/Compensation Committee of the Board of the Company in accordance with theapplicable SEBI (Share Based Employee Benefits) Regulations 2014.
Since your Company is the non deposit taking Non Banking Financial Company it has notaccepted any deposits under Chapter V of Companies Act 2013 during the year under review.
During the year under review Motilal Oswal Investment Advisors Limited subsidiary ofthe Company became Public Limited Company on 31st March 2017. Motilal Oswal CapitalLimited was incorporated on 19th September 2016 as Wholly Owned Subsidiary of MotilalOswal Asset Management Company Limited.
Further Motilal Oswal Securities Limited (MOSL) material wholly owned subsidiary ofthe Company has issued and allotted 500 Non Convertible Debentures (NCDs) of face valueofV 10 lakhs each aggregating to Rs. 50 crores on private placement basis during the saidfinancial year. The said debentures are listed on BSE Limited. Pursuant to the listing ofsaid debentures MOSL is now categorized as listed entity as per Listing Regulations2015.
Accordingly as on March 31 2017 the Company has the following subsidiary companies:
|Sr. No. ||Name of the subsidiaries |
|1. ||Mohlal Oswal Securihes Limited (MOSL) |
|2. ||Mohlal Oswal InvestmentAdvisors Limited |
|3. ||MOPE Investment Advisors Private Limited (MOPE) |
|4. ||Mohlal Oswal Commodihes Broker Private Limited |
|5. ||Mohlal Oswal Insurance Brokers Private Limited |
|6. ||Mohlal Oswal Capital Markets Private Limited (Subsidiary of MOSL) |
|7. ||Mohlal Oswal Asset Management Company Limited (MOAMC) (Subsidiary of MOSL) |
|8. ||Mohlal Oswal Trustee Company Limited (Subsidiary of MOSL) |
|9. ||Mohlal Oswal Wealth Management Limited (Subsidiary of MOSL) |
|10. ||Mohlal Oswal Securihes Internahonal Private Limited (Subsidiary of MOSL) |
|11. ||Mohlal Oswal Capital Markets (Hong Kong) Private Limited (Subsidiary of MOSL) |
|12. ||Mohlal Oswal Capital Markets (Singapore) Pte. Limited. (Subsidiary of MOSL) |
|13. ||Aspire Home Finance Corporahon Limited (Subsidiary of MOSL) |
|14. ||Mohlal Oswal Real Estate Investment Advisors Private Limited (MORE) (Subsidiary of MOPE Investment Advisors Private Limited) |
|15. ||Mohlal Oswal Real Estate Investment Advisors II Private Limited (Subsidiary of MORE) |
|16. ||India Business Excellence Management Co. (Subsidiary of MOPE Investment Advisors Private Limited) |
|17. ||Mohlal Oswal Asset Management (Maurihus) Private Limited (Subsidiary of MOAMC) |
|18. ||Mohlal Oswal Capital Limited (Subsidiary of MOAMC) |
The policy for determining material subsidiaries as approved by the Board is displayedon the Company's website at www.mohlaloswalgroup.com.
Pursuant to the provisions of Sechon 129(3) of the Companies Act 2013 a statementcontaining salient features of financial statement of subsidiaries in Form AOC-1 isannexed to the Financial Statement in the Annual Report. Your Company will also makeavailable copy of separate audited financial statement in respect of each of thesubsidiary companies upon request by any Member of the Company interested in obtaining thesame. In accordance with sechon 136 of the Companies Act 2013 the separate auditedfinancial statement in respect of each of the subsidiary companies is also available onthe website of your Company at www.mohlaloswalgroup.com. These documents will also beavailable for inspechon hll the date of AGM during the business hours at our registeredoffice of the Company.
The financial performance of each of the subsidiary included in the consolidatedfinancial statement of your Company is annexed herewith to this Report as "Annexure2".
Directors and Key Managerial Personnel
The Company has 6 (Six) Directors comprising of 1 (One) Chairman Managing Director& Chief Execuhve Officer 1 (One) Joint Managing Director 1 (One) Non-executiveDirector and 3 (Three) Independent Directors.
Mr. Navin Agarwal rehres by rotahon at the forthcoming Annual General meeting and beingeligible offer himself for reappointment. The details of Mr. Navin Agarwal is stated inthe nohce of the Annual General meeting of the Company.
The Company has received necessary declarations from Mr. Vivek Paranjpe Mr.PraveenTripathi and Ms. Sharda Agarwal Independent Directors of the Company under sechon149(7) of the Companies Act 2013.
In accordance to the provisions of Companies Act 2013 Mr. Vivek Paranjpe Mr. PraveenTripathi and Ms. Sharda Agarwal were appointed as Independent Directors of Company for theperiod of 3 years for holding office as Independent Director from the conclusion of 9thAnnual General meeting (AGM) hll the conclusion of ensuing 12th Annual General meeting(AGM). Pursuant to recommendation of Nominahon and Remunerahon/Compensahon Committee andbased on the performance evaluahon report members of the Board recommended theirreappointment in Board meeting dated 27th April 2017 subject to approval of the membersfor the second term of three years for holding office as Independent Director of theCompany from conclusion of forthcoming AGMhll the conclusion of 15th AGM of the Company.
The Appropriate resolutions for the appointment/re-appointment of Directors as detailedin the notice of forthcoming AGM would be placed for your approval at the forthcoming AGM.
Key Managerial Personnel
In accordance to the provisions of Companies Act 2013 Mr. Motilal Oswal ChairmanChief Executive Officer and Managing Director Mr. Raamdeo Agarawal Joint ManagingDirector Mr. Shalibhadra Shah Chief Financial Officer and Mr. Murali Krishnan IyerCompany Secretary and Compliance Officer are Key Managerial Personnel of the Company.
Mr. Shalibhadra Shah has been appointed as the Chief Financial Officer of the Companywith effect from 27th April 2017 in place of Mr. Sameer Vasudev Kamath who stepped downfrom the position of Chief Financial Officer with effect from 27th April 2017. Furtherin accordance to the provisions of Section 203 of the Companies Act 2013 Mr. Shah hasalso been designated as Key Managerial Personnel of the Company.
Committees of the Board
The details of all the Committees of the Board along with their charters compositionand meetings held during the year are provided in the Report on Corporate Governancewhich forms part of this Annual Report. The Board has accepted all the recommendations ofthe Audit Committee.
Corporate Social Responsibility (CSR)
The Company Motilal Oswal Financial Services Limited recognizes the responsibilitiestowards society and strongly intends to contribute towards development of knowledge basedeconomy.
The Company has also framed the Corporate Social Responsibility (CSR) Policy containingthe details of activities to be undertaken under CSR prohibited activities under CSR CSRProjects and Implementation Schedule Budgeting and Allocation of funds monitoring andevaluation of CSR activities.
As the part of the initiatives under Corporate Social Responsibility during the yearunder review the Company has made contribution in area of education and drought relief.The details of contribution is stated in Annual Report on CSR activities as annexedherewith to this Report as "Annexure 3".
The Company has made direct contribution and also through Motilal Oswal Foundation anot-for-profit charitable company incorporated under Section 25 of the Companies Act1956.
Further Motilal Oswal Foundation has also executed the Memorandum of Understandingwith Kalinga Institute of Social Sciences (KISS) for construction of residential schoolfor tribal students.
Pursuant to the provisions of section 134(3)(p) of the Companies Act 2013 and ScheduleIV of the Companies Act 2013 and in accordance to Regulation 17(10) 25(4) of the ListingRegulations 2015 the Board has carried out the annual performance evaluation of theBoard as a whole various Committees of the Board and of the Directors. The performanceevaluation of the Independent Directors was carried out by the entire Board. The Directorsexpressed their satisfaction with the evaluation process. The manner in which theevaluation has been carried out has been explained in the Corporate Governance Reportannexed to this Report.
A declaration to the effect that they meet the criteria of independence as provided insub-section (6) of Section 149 of the Companies Act 2013 has also been received fromIndependent Directors of the Company.
The Board and the Nomination and Remuneration /Compensation Committee reviewed theperformance of the individual Directors on the basis of the criteria such as TransparencyPerformance etc.
In a separate meeting of Independent Directors performance of non-independentDirectors performance of the Board as a whole and performance of the Chairman wasevaluated taking into account the views of the executive directors and nonexecutivedirectors. The same was discussed in the Board meeting that followed the meeting ofindependent directors at which the performance of the Board its committee and individualDirectors was also discussed.
A separate report on Corporate Governance is annexed to this Report. The certificatereceived from the Auditors of the Company confirming compliance to the conditions ofCorporate Governance as stipulated in Regulation 34 and Schedule V to the ListingRegulations 2015 is annexed to Report on Corporate Governance.
Management Discussion and Analysis
The Management Discussion and Analysis Report for the year under review as stipulatedin Regulation 34 of the Listing Regulations 2015 is annexed to this Report.
Vigil Mechanism / Whistle Blower Policy
The Company has established the Vigil Mechanism/Whistle Blower Policy for the Directorsand employees for reporting the genuine concerns or grievances significant deviationsfrom key management policies and reports any non-compliance and wrong practices e.g.unethical behavior fraud violation of law inappropriate behavior / conduct etc.
The functioning of the vigil mechanism is reviewed by the Audit Committee from time totime. None of the Directors or employees have been denied access to the Audit Committee ofthe Board.
The Vigil Mechanism/Whistle Blower Policy is uploaded on the Website of the Company atwww.motilaloswalgroup.com.
Business Responsibility Report
In accordance with the provisions of SEBI (Listing Obligations and DisclosureRequirements) (Amendment) Regulations 2015 the Company has prepared the BusinessResponsibility Report for initiatives taken by the Board from an environmental Social andGovernance perspective.
The Company has also constituted the Business Responsibility Committee to overview theBusiness Responsibility Report and frame and overview such polices as may be required fromtime to time.
The separate Business Responsibility Report is annexed to this Report and said Reportis also uploaded on the website of the Company at www.motilaloswalgroup.com.
Dividend Distribution Policy
In pursuant to the provisions of SEBI (Listing Obligations and Disclosure Requirements)(Second Amendment) Regulations 2015 the Company has framed the Dividend DistributionPolicy including the various parameters as stated in the regulations.
The dividend distribution policy is annexed to this report as "Annexure 9"and said Policy is also uploaded on the website of the Company atwww.motilaloswalgroup.com.
Business Risk Management
The Company realizes the importance of Enterprise Risk Management (ERM) framework andhad taken early initiatives towards its implementation.
A systematic approach has been adopted that originates with the identification of riskcategorization and assessment of identified risk evaluating effectiveness of existingcontrols and building additional controls to mitigate risk and monitoring the residualrisk through effective Key Risk Indicators (KRI).The implementation is being carried outin phased manner with the objective to encompass the entire line of businesses.
Effective ERM involves a robust implementation of three lines of defense-first line ofdefense is the front-line employees the second line of defense is the risk and compliancefunction and the third line of defense is external and internal auditors. To build aneffective risk culture significant effort has been made towards robustness of these linesof defense.
In the opinion of Board there are no elements of risks threatening the existence ofthe company.
Internal Financial Controls
The Internal Financial Controls with reference to financial statements as designed andimplemented by the Company are adequate. The Internal Financial Control procedure adoptedby the Company are adequate for safeguarding its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information. During the year under review the InternalFinancial Controls were operating effectively and no material or serious observation hasbeen received from the Auditors of the Company for inefficiency or inadequacy of suchcontrols.
Particulars of Loans Guarantees or Investments
Your Company being the Non Banking Financial Company having the principal business ofproviding loans is exempted from the provisions of Section 186 of the Companies Act 2013to the extent of providing loans giving guarantee and providing security in connectionwith loan.
However the details of investments covered under the provisions ofSection 186 of theCompanies Act 2013 are given in note no. 11 to the financial statement.
The particulars of loans / advances in the nature of loans to subsidiaries required tobe disclosed in the annual accounts of the Company as stipulated in Regulation 34 andSchedule V to the Listing Regulations 2015 are annexed to the financial statement in theAnnual Report.
All related party transactions entered into during the financial year were on an arm'slength basis and in the ordinary course of business.
All Related Party Transactions were placed before the Audit Committee for priorapproval. Prior omnibus approval of the Audit Committee is obtained for the transactionswhich are of unforeseen or repetitive in nature. The details of all such related partytransactions entered into pursuant to the omnibus approval of the Committee were placedbefore the Audit Committee on a quarterly basis for its review.
Details of particulars of material contracts or arrangements or transactions enteredinto by the Company under section 188(1) of the Companies Act 2013 with related partiesin form AOC-2 are provided in "Annexure 4" as required under Section 134(3)(h)of Companies Act 2013 and Rules made there under.
The policy on Materiality of Related Party Transactions as approved by the Board isuploaded on the Company's Website at www.motilaloswalgroup.com.
Your Company has appointed M/s. Haribhakti & Co. LLP Chartered Accountants asStatutory Auditors for the period of three years at its Annual General Meeting held on22nd August 2014. However it was mandatory for the Company to rotate the StatutoryAuditors of the Company on completion of maximum term under Section 139 of Companies Act2013. Hence due to expiry of term of existing Auditor of the Company in accordance to theprovisions of Section 139 of Companies Act 2013 the members of the Audit Committee andBoard in its Meeting on 27th April 2017 recommended the appointment of M/s. WalkerChandiok & Co. LLP (Auditing arm of Grant Thornton) as Statutory Auditor of theCompany for the period of five years to hold the office from the conclusion of 12th AGMtill the conclusion of 17th AGM of the Company. Accordingly the members will be requiredto approve the terms & conditions ofappointment including remuneration in consultationwith Auditors.
There were no qualifications reservations adverse remarks or disclaimers in thereport of Statutory Auditors of the Company.
In accordance with the provisions of Section 204 of the Companies Act 2013 read withrules there under the Company had appointed M/s. U. Hegde and Associates PracticingCompany Secretaries for conducting the secretarial audit of the Company for the FinancialYear 2016-17.
There were no qualifications reservations adverse remarks or disclaimers in theSecretarial Audit Report of the Company.
The secretarial audit report is annexed to this Report as "Annexure 5".
Particulars of employees as required under Section 197 of the Companies Act 2013 andRules framed there under
In accordance with the provisions of Section 197(12) of Companies Act 2013 the ratioof the remuneration of each Director to the median employee's remuneration and otherdetails in terms of sub-section 12 of Section 197 of the Companies Act 2013 read withRule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 are forming part of this report as "Annexure 6".
In accordance with the provisions of Section 197 of the Companies Act 2013 read withRule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 the annexure pertaining to the names and other particulars of employees isavailable for inspection at the Registered Office of the Company. Any shareholderinterested in obtaining a copy of the said Annexure may write to the Company Secretary& Compliance Officer at the Registered Office of the Company.
Directors' Responsibility Statement
Pursuant to Section 134(3)(c) read with Section 134(5) of the Companies Act 2013 yourDirectors confirms that:
a. in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
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 and loss of the Company for that period;
c. the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d. the directors had prepared the annual accounts on a going concern basis;
e. the directors had laid down 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.
Extract of Annual Return
The details forming part of extract of annual return of the Company in Form MGT 9 isannexed herewith to the report as "Annexure 7".
Number of Board Meetings
Four Board Meetings were held during the year under review. The details of such BoardMeetings are stated in Corporate Governance Report forming part of this Annual Report.
Significant and Material Orders
There were no significant and material orders passed by the Regulators or Courts orTribunals impacting the going concern status and company's operations in future during theyear 31st March 2017.
Material changes and commitments affecting the financial position of the Company
There have been no material changes and commitments affecting the financial positionof the Company which have occurred between the end of the financial year of the Companyand the date of this Report.
Nomination and Remuneration Policy
The Board has on the recommendation of Nomination and Remuneration/CompensationCommittee framed a policy on Directors' appointment and remuneration of Directorsincluding criteria for determining qualification positive attributes independence ofdirectors and remuneration for Directors Key Managerial Personnel and other employees.The policy is annexed to this report as "Annexure 8".
Conservation of Energy and Technology Absorption and Foreign Exchange Earnings andOutgo
In view of the nature of activities which are being carried on by the Company Rule8(3) of the Companies (Accounts) Rules 2014 concerning conservation of energy andtechnology absorption respectively are not applicable to the Company.
There was no inflow or outflow of foreign exchange during the year under review.
Transfer of Shares pertaining to Unclaimed / Unpaid Dividend to Investor Education andProtection Fund
Pursuant to Investor Education and Protection Fund Authority (Accounting AuditTransfer and Refund) Rules 2016 the shares of the shareholders in respect of whom thedividend is unpaid/unclaimed for seven consecutive years are required to be transferred toInvestor Education and Protection Fund (IEPF) after giving an opportunity to shareholdersto claim the said unpaid/unclaimed dividend.
Accordingly Company issued the reminder letters to such shareholders to claim thedividend and also published the notice to such effect in the leading newspaper in Englishand regional language having wide circulation and accordingly informed them that in theevent of failure to claim said dividend the unpaid/unclaimed dividend alongwith sharespertaining to unpaid/unclaimed dividend would be transferred to IEPF.
Your Directors take this opportunity to thank the Authorities Bankers Shareholdersand the Customers of the Company for their continued support to the Company. The Directorsalso place on record their sincere appreciation of the contributions made by every memberof the MOFSL family for their dedicated efforts that made these results achievable.
For and on behalf of the Board of Motilal Oswal Financial Services Limited
Chairman & Managing Director (DIN:00024503)
Mumbai 27th April 2017
ANNEXURE 1 TO THE BOARD'S REPORT
Information disclosed in compliance to Section 62 of the Companies Act 2013 read withRule 12 of Companies (Share Capital and Debentures) Rules 2014 and SEBI (Share BasedEmployee Benefits) Regulations 2014 as at 31st March 2017:-
|Sr. No. ||Particulars ||'Motilal Oswal Financial Services Limited- Employees' Stock Option Scheme (V 2) - III' (ESOS-III) || |
'Motilal Oswal Financial Services Limited- Employees' Stock Option Scheme (VS)-IV' (ESOS - IV)
'Motilal Oswal Financial Services Limited - Employees' Stock Option Scheme (R 1)-V' (ESOS-V)
'Motilal Oswal Financial Services Limited - Employees' Stock Option Scheme (R 1) - VI' (ESOS-VI)
'Motilal Oswal Financial Services Limited- Employees' Stock Option Scheme (R 1)-VII' (ESOS-VII)
|a) ||Options granted ||1261500 || |
|b) ||The pricing formula ||Price at which shares are issued to Private Equity Investor i.e. at the Rate of Rs. 518.90 pershare. || |
Price arrived at with reference to the expected Issue Price i.e. at Rs.775 pershare.
The closing price of the Company's Equity Shares quoted on the BSE Limited immediately preceding the date of Grant of the Stock Options which for this purpose shall be the date on which the Committee grant the Stock Options discounted by such percentage as may be determined by the Committee in the best interest of the various stakeholdersinthe prevailing market conditions.
The closing price of the Company's Equity Shares prior to the date of grant of the Options on the Stock Exchanges where the highest trading volume is recorded discounted /increased by such percentage as may be determined by the Committee.
The closing price of the Company's Equity Shares prior to the date of grant of the Options on the Stock Exchanges where the highest trading volume is recorded discounted/increased by such percentage as may be determined by the Committee.
|c) ||Options vested ||1015975 || |
|d) ||Options exercised ||643175 || |
|e) ||Exercise Price of shares exercised during the year ||- || |
|No. of Options ||Exercise Price ||No. of options || |
|No. of options |
| || || || || |
|125000 ||85 ||1212150 || |
| || || || || |
|9150 ||165 ||418971 || |
| || || || || |
|10000 ||172.85 ||59960 || |
| || || || || |
|120000 ||Total ||1691081 || || |
| || || || || |
|8760 || || || || |
| || || || || |
|8500 || || || || |
| || || || || |
|281410 || || || || |
|f) ||The total number of shares arising as a result of exercise of option ||1286350 || |
|g) ||Options lapsed (as at 31.03.17) ||609075 || |
|h) ||Variation of terms of options ||N. A. || |
|The exercise period of the 1398500 stock options for ESOP Scheme V and 3286800 stock options for ESOP Scheme VI were extended from one year to three years by the Nomination and Remuneration /Compensation Committee of the Board. || |
| || || || ||Due to the considerable fall in the share price of the Company the ESOP exercise price of Rs. 208.70 per stock option had become unattractive to the option holders. Therefore the Committee pursuant to provisions of Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines re-priced 90000 options from ESOP Scheme V and 497800 options from ESOP Scheme VI to Rs. 165 per stock option from Rs. 208.70 per stock option. This was approved by the shareholders in the Annual General Meeting of the Company on 27th July 2013. || |
|i) ||Money realised by exercise of options || |
|j) ||Total number of options in force (as at 31.03.17) || |
|k) ||Employee-wise details of options granted to: || |
| ||(i) Senior managerial personnel duringthatyear || |
| ||(ii) Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted duringthatyear || |
| ||(iii) Identified employees who were granted option during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company atthe time ofgrant || |
|1) ||Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 'Earnings per Share' || |
|m) ||Where the company has calculated the employee compensation cost using the intrinsic value of the stock options the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognised if it had used the fair value of the options shall be disclosed. The impact of this difference on profits and on EPSofthe companyshallalso be disclosed. || |
|The Company has calculated the employee compensation cost using the intrinsic value of stock options. Had the fair value method been used in respect of stock options granted under ESOS-V ESOS-VI and ESOS-VII the employee compensation cost would have been higher by Rs. 140221451/- Profit after tax lower by Rs. 91693611/- and the basic earnings per share would have been lower by R 0.63. |
|n) ||Weighted-average exercise prices and weighted average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock. || |
I. Optiongrantdate: i. 30th January 2017 for 88075 options ii. Exercise price: Rs. 572.30 per option. iii. Fair Value: Rs. 219.69
I. Optiongrantdate: i. 30thJanuary 2017 for 145150 options ii. Exercise price: Rs. 572.75 per option iii. Fair Value:Rs. 219.86
I. Option Grant Date ii. 21st July 2016 for 15000options ii. Exercise price: Rs. 420.45 peroption. iii. FairValue: Rs. 155.68
| || || || || || || |
II. Option Grant Date
| || || || || || || |
i. 30thJanuary 2017 for 592750 options
| || || || || || || |
ii. Exercise Price: Rs. 572.75 per option
| || || || || || || |
iii. Fair Value: Rs. 219.85
|) ||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:- || || || |
The fair value of the stock options granted on 30th January 2017 has been calculated using Black Scholes Options Pricing Formula and the significant assumptions made in this regard are as follows:
The fair value of the stock options granted on 30th January 2017 has been calculated using Black Scholes Options Pricing Formula and the significant assumptions made in this regardareasfollows:
The fair value of the stock options granted on 21st July 2015 and 30th January 2017 has been calculated using Black Scholes Options Pricing Formula and the significant assumptions made in this regard are asfollows:
| ||(i) risk-free interest rate ||N.A. || |
5.05% - 7.80%
5.05% - 7.80%
5.97% - 8.40%
| ||(ii) Expected life ||N.A. || |
i. 3.00Years ii. 4.01Years
| ||(iii) expected volatility ||N.A. || |
| ||(iv) expected dividends and ||N.A. || |
| ||(v) the price of the underlying share in market at the time of option grant. ||The Company was an unlisted company at the time of grant. However the Options were granted at the price at which Shares were issued to Private Equity Investor i.e. Rs. 518.90 per share. || |
The Company was an unlisted company at the time of grant. However the Options were granted at the price which was determined with reference to the expected Issue Price.
i. Rs. 419.85 ii. Rs. 574.90
| ||For and on behalf of the Board of |
| ||Motilal Oswal Financial Services Limited |
| ||Motilal Oswal |
|Place: Mumbai || |
Chairman & Managing Director
|Date: 27th April 2017 ||(DIN: 00024503) |
ANNEXURE 2 TO THE BOARD'S REPORT
The financial performance of each of the subsidiaries included in the Consolidatedfinancial statement are detailed below:-
|Name of the Subsidiary || |
Profit / Loss before tax
Profit / Loss after Tax
| ||Current |
|Growth % ||Current |
|(A) INDIAN SUBSIDIARIES || || || || || || || || || |
|1 Motilal Oswal Securities Limited ||71966.22 ||54960.16 ||31% ||14289.37 ||7939.90 ||80% ||10880.59 ||6054.57 ||80% |
|2 Motilal Oswal Investment Advisors Limited ||8723.38 ||2489.57 ||250% ||5543.59 ||187.40 ||2858% ||3719.75 ||78.87 ||4616% |
|3 MOPE Investment Advisors Private Limited ||8016.83 ||2492.01 ||222% ||6224.38 ||976.77 ||537% ||5045.80 ||592.31 ||752% |
|4 Motilal Oswal Commodities Broker Private Limited ||1756.11 ||1110.53 ||58% ||343.52 ||(137.65) ||-350% ||195.54 ||(100.52) ||-295% |
|5 Motilal Oswal Insurance Brokers Private Limited ||90.44 ||284.69 ||-68% ||(11.55) ||180.18 ||-106% ||(40.56) ||123.64 ||-133% |
|6 Motilal Oswal Capital Markets Private Limited ||418.49 ||360.00 ||16% ||207.59 ||156.32 ||33% ||144.73 ||107.53 ||35% |
|7 Motilal Oswal Asset Management Company Limited ||34134.53 ||18518.41 ||84% ||7588.71 ||3539.44 ||114% ||4975.54 ||2643.13 ||88% |
|8 Motilal Oswal Trustee Company Limited ||9.86 ||12.22 ||-19% ||4.81 ||8.76 ||-45% ||3.45 ||6.06 ||-43% |
|9 Motilal Oswal Wealth Management Limited ||7204.53 ||4440.08 ||62% ||2053.03 ||1094.39 ||88% ||1322.76 ||714.69 ||85% |
|10 Motilal Oswal Securities International Private Limited ||189.07 ||199.41 ||-5% ||(7.41) ||26.23 ||-128% ||(16.40) ||18.12 ||-191% |
|11 Aspire Home Finance Corporation Limited ||57078.47 ||21946.63 ||160% ||12566.94 ||6132.18 ||105% ||8208.93 ||3999.94 ||105% |
|12 Motilal Oswal Real Estate Investment Advisors Private Limited ||0.19 ||0.14 ||35% ||(24.32) ||(28.01) ||-13% ||(24.34) ||(28.01) ||-13% |
|13 Motilal Oswal Real Estate Investment Advisors II Private Limited ||1811.19 ||1563.87 ||16% ||339.78 ||(33.41) ||-1117% ||225.73 ||(25.96) ||-970% |
|14 Motilal Oswal Capital Limited (Incorporated on 19.09.2016) ||- ||- ||NA ||(1.24) ||- ||NA ||(0.97) ||- ||NA |
|(B) COMPANIES INCORPORATED OUTSIDE INDIA || || || || || || || || || |
|1 Motilal Oswal Capital Markets (Hong Kong) Private Limited ||0.00 ||0.00 ||-34% ||(87.69) ||(86.34) ||2% ||(87.69) ||(86.34) ||2% |
|2 Motilal Oswal Capital Markets (Singapore) Private Limited ||180.69 ||139.75 ||29% ||23.57 ||18.23 ||29% ||25.62 ||16.39 ||56% |
|3 Motilal Oswal Asset Management (Mauritius) Private Limited ||5.19 ||- ||100% ||(66.98) ||(36.15) ||85% ||(66.98) ||(36.15) ||85% |
|4 Indian Business Excellence Management Company ||1121.00 ||1777.86 ||-37% ||5505.36 ||514.84 ||969% ||5484.93 ||499.28 ||999% |
Form No. AOC-2
(Pursuant to clause (h) of sub-section (3)of section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014)
Form for disclosure of particulars of contracts / arrangements entered into by thecompany with related parties referred to in subsection (1) of section 188 of the CompaniesAct 2013 including certain arms length transactions under third proviso thereto
1. Details of contracts or arrangements or transactions not at arm's length basis
|Name(s) of the related partyand nature of relationship ||Nature of contracts / arrangements / transactions ||Duration of thecontracts / arrangements / transactions ||Salientterms of the contracts or arrangements ortransactions includingthe value if any ||Justification for entering into such contracts or arrangements or transactions ||Date(s) of approval byt he Board ||Amount paid as advances if any: ||Date on which the special resolution was passed in general meeting as required under first proviso to section 188 |
2. Details of material contracts or arrangement or transactions at arm's length basis
|Sr. No. ||Name(s) of the related party and nature of relationship ||Nature of contracts / arrangements / transactions ||Duration of the contracts / arrangements / transactions ||Salient terms of the contracts or arrangements or transactions including the value if any: ||Date(s) of approval by the Board if any: ||Date(s) of approval by the Members ||Amount paid as advances ifany: |
|1 ||M/s. Motilal Oswal Securities Limited - Wholly Owned Subsidiary of the Company ||Availing loan facility ||Ongoing ||Obtaining loans from Motilal Oswal Securities Limited wholly owned subsidiary of the Company and further for providing the investments held by the Company in its name in favor of Motilal Oswal Securities Limited as collateral against the loan drawn upto Rs. 1000 crores ||19th July 2014 ||22nd September 2014 || |
|2 ||M/s. Motilal Oswal Securities Limited - Wholly Owned Subsidiary of the Company ||Providing Company's immovable property as securityforloans availed by Motilal Oswal Securities Limited from Banks ||Ongoing ||Providing security by mortgaging its immovable properties create charge on its movable properties or create hypothecation and provide guarantee or security for loan facilities obtained by Motilal Oswal Securities Limited from Banks Financial Institutions upto Rs. 1000crores ||19th July 2014 ||22nd September 2014 || |
| ||For and on behalf of the Board of |
| ||Motilal Oswal Financial Services Limited |
| ||Motilal Oswal |
|Place: Mumbai || |
Chairman & Managing Director
|Date: 27th April 2017. ||(DIN: 00024503) |
ANNEXURE 6 TO THE BOARD'S REPORT
Statement of Disclosure of Remuneration under Section 197 of Companies Act 2013 andRule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014
(i) Ratio of the remuneration of each Executive Director to the median remuneration ofthe Employees of the Company for the financial year 2016-17 the percentage increase inremuneration of Chief Executive Officer Chief Financial Officer and other ExecutiveDirector and Company Secretary during the Financial year 2016-17.
|Sr. No ||Name of Director/KMP ||Designation ||Ratio of Remuneration of each Director to median remuneration of Employees ||Percentage Increase in Remuneration |
|1. ||Mr. Motilal Oswal ||Managing Director and Chief Executive Officer ||2:1 ||Nil |
|2. ||Mr. Raamdeo Agarawal ||Joint Managing Director ||2:1 ||15* |
|3. ||Mr. Vivek Paranjpe ||Independent Director || || |
|4. ||Mr. Praveen Tripathi ||Independent Director ||0.38:1@ ||Nil@ |
|5. ||Ms. Sharda Agarwal ||Independent Director || || |
|6. ||Mr. Sameer Kamath ||Chief Financial Officer (Till 26.04.2017) ||N.A. ||186.19%** |
|7. ||Mr. Murli Krishnan Iyer# ||Company Secretary and Compliance Officer ||N.A. ||N.A. |
|* ||The percentage increase in remuneration is due to 15% increase in perquisite value payable to Mr. Raamdeo Agarawal as compared to previous financial year |
|** ||The percentage increase in the remuneration is due to inclusion of perquisite value on exercise of employee stock options |
|# ||Mr. Murli Iyer was appointed as Company Secretary on 5th October 2015 and hence it is not feasible to calculate the % increase in managerial remuneration |
|@ ||Sitting fees is not forming part of remuneration in aforesaid calculation |
(i) The Non-Executive Directors of the Company are entitled for siffing fee andcommission as per the statutory provisions and within the limits approved by theshareholders. The details of remuneration paid to Non-Executive Directors during the yearunder review are provided in the Annexure 7 to the Board Report and Corporate GovernanceReport.
(ii) The percentage increase in the median remuneration of employees for the financialyear under review was 32.20%.
(iii) The Company has 18 permanent employees on the rolls of Company as on 31st March2017;
(iv) Average percentile increase already made in the salaries of employees otherthan the managerial personnel in the last financial year and its comparison with thepercentile increase in the managerial remuneration and justification thereof and point outif there are any exceptional circumstances for increase in the managerial remuneration
The average increase in salaries of non-managerial employees is 97.06%. The increase inremuneration percentage is due to high perquisite value due to exercise of employee stockoptions.
There are no exceptional circumstances for the increase in managerial remuneration.
(v) It is hereby affirmed that the remuneration paid during the year is as per theNomination and Remuneration Policy of the Company.
ANNEXURE 8 TO THE BOARD'S REPORT
Nomination and Remuneration Policy
Pursuant to Section 178 of the Companies Act 2013 and clause 49 of the ListingAgreement the Board of Directors of the Company shall constitute the Nomination andRemuneration/Compensation Committee comprising of at least three non executive Directorsout of which not less than one half are independent directors as required under CompaniesAct 2013 and the Listing Agreement. The Chairman of the Company (whether executive ornon-executive) may be appointed as a member of the Nomination andRemuneration/Compensation Committee but shall not Chair such Committee.
This Committee and the Policy is formulated in compliance with Section 178 of theCompanies Act 2013 read along with the applicable rules thereto and Clause 49 of theListing Agreement.
The Nomination and Remuneration/Compensation Committee and this Policy shall be incompliance with Section 178 of the Companies Act 2013 read along with the applicablerules thereto and Clause 49 of the Listing Agreement. The objective of this policy is tolay down a framework in relation to remuneration of directors KMP and Senior Management.The Key Objectives of the Committee would be:
1.1. To guide the Board in relation to appointment and removal of Directors KeyManagerial Personnel and Senior Management.
1.2. Formulate the criteria for determining qualifications positive attributes andindependence of a director and recommend to the Board a policy relating to theremuneration of Directors key managerial personnel and other employees.
1.3. Formulation of criteria for evaluation of Independent Director and the Board.
1.4. To evaluate the performance of the members of the Board.
1.5. To recommend to the Board on Remuneration payable to the Directors Key ManagerialPersonnel and Senior Management.
1.6. To provide to Key Managerial Personnel and Senior Management reward linkeddirectly to their effort performance dedication and achievement relating to theCompany's operations.
1.7. To retain motivate and promote talent and to ensure long term sustainability oftalented managerial persons and create competitive advantage.
1.8. To devise a policy on Board diversity
- "Board" means Board of Directors of the Company.
- "Company" means "Motilal Oswal Financial Services Limited."
- "Independent Director" means a director referred to in Section 149(6) ofthe Companies Act 2013.
- "Key Managerial Personnel" (KMP) means
(i) Chief Executive Officer or the Managing Director or the Manager
(ii) Company Secretary
(iii) Whole-time Director
(iv) Chief Financial Officer and
(v) Such other officer as may be prescribed.
- "Nomination and Remuneration/Compensation Committee" (NRC) shall mean aCommittee of Board of Directors of the Company constituted in accordance with theprovisions of Section 178 of the Companies Act 2013 and Listing Agreement.
- "Policy or This Policy" means Nomination and Remuneration Policy.
- "Remuneration" means any money or its equivalent given or passed to anyperson for services rendered by him and includes perquisites as defined under theIncome-tax Act 1961.
- "Senior Management" means personnel of the Company who are members of itscore management team excluding Board of Directors and including all members of managementone level below the executive directors including all the functional heads.
- "Members of management one level below the executive directors" means theemployees designated as Vice President and above and who are directly reporting to theExecutive Directors.
Unless the context otherwise requires words and expressions used in this policy andnot defined herein but defined in the Companies Act 2013 as may be amended from fime tofime shall have the meaning respectively assigned to them herein.
VI. Role of the Committee
The role of the Committee inter alia will be the following:
a) To formulate a criteria for determining qualifications positive attributes andindependence of a Director.
b) Formulate criteria for evaluation of Independent Directors and the Board.
c) Identify persons who are qualified to become Directors and who may be appointed inSenior Management in accordance with the criteria laid down in this policy.
d) To carry out evaluation of every Director's performance.
e) To recommend to the Board the appointment and removal of Directors and SeniorManagement.
f) To recommend to the Board policy relating to remuneration for Directors KeyManagerial Personnel and Senior Management.
g) Ensure that level and composition of remuneration is reasonable and sufficientrelationship of remuneration to performance is clear and meets appropriate performancebenchmarks.
h) To carryout any other function as is mandated by the Board from time to time and/orenforced by any statutory notification amendment or modification as may be applicable.
i) To devise a policy on Board diversity.
j) To perform such other functions as may be necessary or appropriate for theperformance of its duties.
VII. Membership of the Committee
a) The Committee shall comprise of at least three (3) Directors all of whom shall benon-executive Directors and at least half shall be Independent. The Chairman of theCompany (whether executive or non-executive) may be appointed as a member of theNomination and Remuneration/Compensation Committee.
b) The Board shall reconstitute the Committee as and when required to comply with theprovisions of the Companies Act 2013 and applicable statutory requirement.
c) Minimum two (2) members shall constitute a quorum for the Committee meeting.
d) Membership of the Committee shall be disclosed in the Annual Report.
e) Term of the Committee shall be continued unless terminated by the Board ofDirectors.
a) Chairman of the Committee shall be an Independent Director.
b) Chairperson of the Company may be appointed as a member of the Committee but shallnot Chair the Committee.
c) In the absence of the Chairman the members of the Committee present at the meetingshall choose one amongst them to act as Chairman.
d) Chairman of the Nomination and Remuneration/Compensation Committee could be presentat the Annual General Meeting or may nominate some other member to answer theshareholders' queries.
IX. Frequency of Meetings
The meeting of the Committee shall be held at such regular intervals as may berequired.
XIV. Minutes of Committee Meeting
Proceedings of all meetings must be minuted and signed by the Chairman of the saidmeeting or the Chairman of the next succeeding meeting. Minutes of the Committee Meetingwill be tabled at the subsequent Board and Committee meeting.
X. Committee Members' Interests
a) A member of the Committee is not entitled to be present when his or her ownremuneration is discussed at a meeting or when his or her performance is being evaluated.
b) The Committee may invite such executives as it considers appropriate to be presentat the meetings of the Committee.
a) Matters arising for determination at Committee meetings shall be decided by amajority of votes of Members present and voting and any such decision shall for allpurposes be deemed a decision of the Committee.
b) In the case of equality of votes the Chairman of the meeting will have a castingvote.
XII. Appointment and removal of Director KMP and Senior Management
Appointment criteria and qualifications:
1. The Committee shall identify and ascertain the integrity qualification expertiseand experience of the person for appointment as Director KMP or at Senior Managementlevel and recommend to the Board his / her appointment.
2. A person should possess adequate qualification expertise and experience for theposition he / she is considered for appointment. The Committee has discretion to decidewhether qualification expertise and experience possessed by a person are sufficient /satisfactory for the concerned position.
3. The Company shall not appoint or continue the employment of any person as ManagingDirector/Whole-time Director/ Manager who has attained the age of seventy years.
Provided that the term of the person holding this position may be extended beyond theage of seventy years with the approval of shareholders by passing a special resolutionbased on the explanatory statement annexed to the notice for such motion indicating thejustification for extension of appointment beyond seventy years.
1. Managing Director / Whole-time Director / Manager (Managerial Person):
- The Company shall appoint or re-appoint any person as its Managerial Person for aterm not exceeding five years at a time. No re-appointment shall be made earlier than oneyear before the expiry of term.
2. Independent Director:
- An Independent Director shall hold office for a term up to five consecutive years onthe Board of the Company and will be eligible for reappointment on passing of a specialresolution by the Company and disclosure of such appointment shall be made in the Board'sreport.
- No Independent Director shall hold office for more than two consecutive terms butsuch Independent Director shall be eligible for appointment after expiry of three years ofceasing to become an Independent Director.
Provided that an Independent Director shall not during the said period of three yearsbe appointed in or be associated with the Company in any other capacity either directlyor indirectly.
The Committee shall carry out evaluation of performance of every Director at regularinterval (yearly).
Due to reasons for any disqualification mentioned in the Companies Act 2013 rulesmade there under or under any other applicable Act rules and regulations the Committeemay recommend to the Board with reasons recorded in writing removal of a Director KMPor Senior Management subject to the provisions and compliance of the said Act rules andregulations.
The Director KMP and Senior Management shall retire as per the applicable provisionsof the Companies Act 2013 and the prevailing policy of the Company. The Board will havethe discretion to retain the Director KMP Senior Management in the same position /remuneration or otherwise even after attaining the retirement age for the benefit of theCompany.
XIII. Provisions relating to Remuneration of Managerial Person KMP and SeniorManagement
1. The remuneration / compensation / commission etc. to Managerial Person KMP andSenior Management Personnel will be determined by the Committee and recommended to theBoard for approval. The remuneration / compensation / commission etc. shall be subject tothe prior / post approval of the shareholders of the Company and Central Governmentwherever required.
2. The remuneration and commission to be paid to Managerial Person shall be as perthestatutory provisions of the Companies Act 2013 and the rules made there under for thetime being in force.
3. Increments to the existing remuneration / compensation structure may be recommendedby the Committee to the Board which should be within the slabs approved by theShareholders in the case of Managerial Person.
4. Where any insurance is taken by the Company on behalf of its Managerial Person KMPand any other employees for indemnifying them against any liability the premium paid onsuch insurance shall not be treated as part of the remuneration payable to any suchpersonnel. Provided that if such person is proved to be guilty the premium paid on suchinsurance shall be treated as part of the remuneration.
Remuneration to Managerial Person KMP and Senior Management:
1. Fixed pay:
Managerial Person KMP and Senior Management shall be eligible for a monthlyremuneration as may be approved by the Board on the recommendation of the Committee inaccordance with the statutory provisions of the Companies Act 2013 and the rules madethere under for the time being in force. The break-up of the pay scale and quantum ofperquisites including employer's contribution to P.F pension scheme medical expensesclub fees etc. shall be decided and approved by the Board on the recommendation of theCommittee and approved by the shareholders and Central Government wherever required.
2. Variable Pay:
The Company may in its discretion structure any portion of remuneration to link rewardsto corporate and individual performance fulfilment of specified improvement targets orthe attainment of certain financial or other objectives set by the Board. The amountpayable shall be based on performance against pre-determined financial and non-financialmetrics.
3. Provision for excess remuneration:
If in any financial year the Company has no profits or its profits are inadequatethe Company shall pay remuneration to its Managerial Person in accordance with theprovisions of Schedule V of the Companies Act 2013 and if it is not able to comply withsuch provisions with the prior approval of the Central Government.
4. Provisions for excess remuneration:
If any Managerial Person draws or receives directly or indirectly by way ofremuneration any such sums in excess of the limits prescribed under the Companies Act2013 or without the prior sanction of the Central Government where required he/she shallrefund such sums to the Company and until such sum is refunded hold it in trust for theCompany.
The Company shall not waive recovery of such sum refundable to it unless permitted bythe Central Government.
Remuneration to Non-Executive / Independent Director:
1. Remuneration / Commission:
The remuneration/commission if any shall be in accordance with the statutoryprovisions of the Companies Act 2013 and the rules made there under for the time beingin force.
2. Sitting Fees:
The Non-Executive / Independent Director may receive remuneration by way of fees forattending meetings of Board or Committee thereof.
Provided that the amount of such fees shall not exceed the maximum amount as providedin the Companies Act 2013 per meeting of the Board or Committee or such amount as may beprescribed by the Central Government from time to time.
3. Limit of Remuneration / Commission:
Remuneration / Commission may be paid within the monetary limit approved byshareholders subject to the limit not exceeding 1% of the net profits of the Companycomputed as per the applicable provisions of the Companies Act 2013.
XV. Guiding Principles
The Policy ensures that
- The level and composition of remuneration is reasonable and sufficient to attractretain and motivate Directors of the quality required to run the Company successfully.
- Relationship of remuneration to performance is clear and meets appropriateperformance benchmarks and
- Remuneration to Directors Key Managerial Personnel and Senior Management involves abalance between fixed and incentive pay reflecting short and long term performanceobjectives appropriate to the working of the Company and its goals.
XVI. Deviations From This Policy
Deviations on elements of this policy in extraordinary circumstances when deemednecessary in the interests of the Company will be made if there are specific reasons todo so in an individual case.
XVII. Review and Amendment
i. The NRC or the Board may review the Policy as and when it deems necessary.
ii. The NRC may issue the guidelines procedures formats reporting mechanism andmanual in supplement and better implementation to this Policy if it thinks necessary.
iii. This Policy may be amended or substituted by the NRC or by the Board as and whenrequired.
| ||For and on behalf of the Board of |
| ||Motilal Oswal Financial Services Limited |
| ||Motilal Oswal |
|Place: Mumbai || |
Chairman & Managing Director
|Date: 27th April 2017. ||(DIN: 00024503) |
ANNEXURE 9 TO THE BOARD'S REPORT
Dividend Distribution Policy
The Securities and Exchange Board of India ("SEBI") has notified the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations") which shall be applicable to all listed entity with effect fromDecember 01 2015.
Subsequently SEBI has issued the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) (Second Amendment) Regulations 2016 containingthe additional Regulation 43A consisting of provisions for formulation of DividendDistribution Policy which shall be applicable to top five hundred listed entities based onmarket capitalization as on March 31 of every financial year.
Accordingly in compliance to the provision of aforesaid Regulation the Board ofDirectors of the Company at its meeting held on 26th October 2016 has approved theDividend Distribution Policy effective from 26th October 2016.
1. Need for the Policy
Predictability of returns is a very important factor driving shareholder valuecreation. Motilal Oswal Financial Services Limited has always believed in shareholdervalue creation and this policy is one of the means of achieving the objective ofshareholder value maximisation.
2.1 This policy is aimed at giving a general guidance to the equity shareholders("Shareholder") of the Company on the dividend including interim dividendpay-out by the Company in various performance scenarios.
2.2 This policy is in no way intended to minimise or prejudice the rights of the Boardof Directors ("Board") and/or the Shareholders' to declare dividends at the rateat which they in their absolute discretion deem necessary in the interest of the Companyand its Shareholders.
3. Policy Statement
3.1 The Shareholders' may refer to the various circumstances parameters andfactors as referred to in Clause 3.2 Clause 0 and Clause 3.4 respectively for theguidance on the likelihood of declaration of dividend by the Board and the Company. TheBoard of the Company shall be guided by all of the factors and parameters as referred toaforementioned clauses for proposing quantum and rate ofdividend declaration.
3.2 Circumstances under which the Shareholders of the Company;
3.2.1 May expect dividend
The Shareholders may expect dividend in all financial years where the Company has bothon a standalone and consolidated basis earned a net profit after tax ("Profit").The Company will strive to pay steadily rising dividend every year in lieu of increase inprofits. The dividend pay-out will be calibrated in the range up to 25% to 35% of theconsolidated net profits of the Company and subject to the financial parameters referredto in Clause 3.3 and internal and external factors referred to in Clause 3.4.
3.2.2 May not expect dividend
In circumstances where the financial position of the Company is such that the Companyhas no profits or retained earnings available for distribution as dividend it will beprudent for the Shareholders to not expect any dividend declaration.
3.3 Financial parameters that shall be considered while declaring dividend:
a) Profit in absolute terms-The profits earned by the Company is the major factor ofconsideration in case of payment of dividend.
b) Growth Rate - The growth rate is the percentage change in profit during the specifictime period.
c) Outstanding Capital Commitments-The Company set aside the certain amount for meetingthe outstanding capital commitments of the Company.
d) Availability of surplus funds for:
(i) Additional investments in Subsidiaries of the Company - The Company make NonCurrent investments in Subsidiaries of the Company on regular basis
(ii) Working capital requirements-The funds are also utilised for meeting the workingcapital requirements of the Company
(iii) Capital expenditure requirement
(iv) The Company also makes investment in various products of its group companies
3.4 Internal and external factors that shall be considered for declaration of dividend:
3.4.1 Past Dividend History-The dividend paid by the Company in past is major factorconsidered for payment of dividend
3.4.2 Impact of dividend declaration on share price of the Company-The dividenddeclaration also impact the share price of the Company since it encourages investors topurchase shares of the Company.
3.4.3 Sector performance and industry trend -The Company also consider the area ofeconomy in which businesses share the same or a related service i.e. trend followed in thefinancial services industry
3.4.4 Taxation and other regulatory concern - The taxation and other regulatory aspectsare also considered
3.4.5 Markets Risks - The market risk exposure impacting the Company is measured fordeclaration of dividend
3.4.6 Stipulations/Covenants of loan agreements
3.4.7 Any other relevant factors that the Board may deem fit to consider beforedeclaring Dividend
3.5 Policy as to how the retained earnings shall be utilized Retained earnings shallunless transferred to any reserves (other than general reserves) be available for disposalby the Board as they deem fit in their absolute discretion in the interest of allShareholders and may be utilized for distribution of dividends in accordance with pastdividend distribution trend of the Company after considering the factors and parameters asreferred to in Clause 0 and Clause 3.4.
3.6 Parameters that shall be adopted with regard to various classes of shares
3.6.1 Non-cumulative Preference Shares: The Company shall declare dividend tononcumulative preference shareholders in accordance with the terms of the issue of suchpreference shares. In case if the terms of such preference shares provide an option to theCompany to not declare any dividend in case of a year in which the Company has earnedprofit then the Board shall be guided by the same parameters and factors for equityshareholders as provided in Clause 0 to Clause 3.4 in determining whether dividend shouldbe declared and the quantum and rate of dividend declaration.
3.6.2 Cumulative Preference Shares: The Company shall declare dividend to cumulativepreference shareholders in accordance with the terms of the issue of such preferenceshares. In case if the terms of such preference shares provide an option to the Company tonot declare any dividend in case of a year in which the Company has earned profit then theBoard shall be guided by the same parameter and factors for equity shareholders asprovided in Clause 0 to Clause 3.4 in determining whether dividend should be declared andthe quantum and rate of dividend declaration. In case of cumulative preference sharesapart from the above the Board shall also consider and have regard to the negative impacton the equity shareholders in case of the preference shareholders being entitled to votingrights due to non-payment of dividend.
3.6.3 Shares with differential rights or other shares: The Board of Directors shalldecide on a case to case basis for any other category of shares whether all or any of thefactors and parameters as specified in Clause 0 to Clause 3.4 should be made applicablefor such other class of shares in order to determine the quantum and rate of dividenddeclaration.
4. Amendment in Policy
To the extent any change/amendment is required in terms of any applicable law theManaging Director/Chief Financial Officer/ Company Secretary of the Company shall beseverally authorised to review and amend the Policy to give effect to any such changes/amendments. Such amended Policy shall be periodically placed before the Board for notingand necessary ratification immediately after such changes.
| ||For and on behalf of the Board of Motilal Oswal Financial Services Limited |
|Place: Mumbai Date: 27th April 2017. ||Motilal Oswal |
Chairman & Managing Director (DIN: 00024503)