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Shriram Transport Finance Company Ltd.

BSE: 511218 Sector: Financials
NSE: SRTRANSFIN ISIN Code: INE721A01013
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NSE 15:43 | 19 Sep 1069.20 -15.35
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OPEN 1074.00
PREVIOUS CLOSE 1086.50
VOLUME 30307
52-Week high 1254.20
52-Week low 778.00
P/E 18.27
Mkt Cap.(Rs cr) 24,336
Buy Price 1072.65
Buy Qty 59.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1074.00
CLOSE 1086.50
VOLUME 30307
52-Week high 1254.20
52-Week low 778.00
P/E 18.27
Mkt Cap.(Rs cr) 24,336
Buy Price 1072.65
Buy Qty 59.00
Sell Price 0.00
Sell Qty 0.00

Shriram Transport Finance Company Ltd. (SRTRANSFIN) - Director Report

Company director report

Your Directors have pleasure in presenting their irty Eighth Annual Report and theAudited Statements of Accounts of the Company for the financial year ended March 31 2017.

FINANCIAL HIGHLIGHTS

(Rs. in lacs)
Particulars 2016-17 2015-16
Profit Before Depreciation And Taxation 195783.33 181773.73
Less: Depreciation and amortisation 3390.78 3630.61
Profit Before Tax 192392.55 178143.12
Less: Provision for taxation 66658.30 60323.36
Profit After Tax 125734.25 117819.76
Add: Balance brought forward from previous year 418745.82 383829.91
Add: Additions on account of amalgamation as on April 01 2015 - (3503.89)
Balance available for appropriation 544480.07 498145.78
Appropriations
General reserve 12600.00 12000.00
Statutory reserve 25200.00 24000.00
Debenture redemption reserve (15945.04) 16043.39
Dividend on equity shares of Rs.10/- each 9075.31 22688.27
Tax on dividend 1847.52 4668.30
Balance carried to Balance Sheet 511702.28 418745.82

DIVIDEND

Your Directors have maintained total dividend of Rs. 10/- per equity share i.e. 100%for the financial year ended March 31 2017 consisting of an interim dividend of Rs. 4/-per equity share i.e. 40% declared at the Board meeting held on October 25 2016 and afinal dividend of Rs. 6/- per equity share i.e. 60% recommended at the Board meeting heldon April 27 2017. The interim dividend was paid to the eligible shareholders on November16 2016.

TRANSFER TO RESERVES

e amounts proposed to be transferred to General Reserve and Statutory Reserve and fromDebenture Redemption Reserve are mentioned in the Financial Highlights under the heading‘Appropriations'.

CAPITAL ADEQUACY RATIO

Your Company's total Capital Adequacy Ratio (CAR) as of March 31 2017 stood at 16.94% of the aggregate risk weighted assets on balance sheet and risk adjusted value of theoff-balance sheet items which is above the regulatory minimum of 15%.

CREDITRATING

e credit rating enjoyed by the Company as on March 31 2017 is as follows:

Credit Rating Agency Instruments Ratings
CARE Non-Convertible Debentures CARE AA+
CARE Subordinated Debt CARE AA+
CRISIL Fixed Deposit CRISIL FAAA/Stable
CRISIL Subordinated Debt CRISIL AA+/Stable
CRISIL Non-Convertible Debentures CRISIL AA+/Stable
CRISIL Short Term Debt CRISIL A1+
CRISIL Bank Loan- Short Term CRISIL A1+
CRISIL Bank Loan- Long Term CRISIL AA+/ Stable
ICRA Fixed Deposit MAA+ with Stable outlook
India Ratings & Research Pvt. Ltd. (Formerly known as "FITCH") Non-Convertible Debentures IND AA+/Stable Outlook
India Ratings & Research Pvt. Ltd. (Formerly known as FITCH") Subordinated Debt IND AA+/Stable Outlook
Fitch Ratings Long-Term Issuer Default Rating BB+/Stable Outlook
Fitch Ratings Short-Term Issuer Default Rating B
Standard & Poor's Ratings Long-Term Issuer Credit Rating BB+/Stable
Standard & Poor's Ratings Short-Term Issuer Credit Rating B
Standard & Poor's Ratings OFFshore Rupee Denominated Bond (Masala Bond) BB+

OPERATIONS & COMPANY'S PERFORMANCE

For the financial year ended March 31 2017 your Company earned Profit Before Tax ofRs. 192392.55 lacs as against Rs. 178143.12 lacs in the previous financial year and theProfit After Tax of Rs. 125734.25 lacs as against Rs. 117819.76 lacs in the previousfinancial year. The total Income for the year under consideration was Rs. 1083061.23lacs and total expenditure was Rs. 890668.68 lacs. The revised NPAs norms stipulated byReserve Bank of India which required higher provisioning in respect of Non-Performing loanassets in a phased manner had impacted the Profitability of the Company during the currentyear.

Mobilization of funds from following sources/instruments during the financial yearended March 31 2017 was as under:

(Rs. in lacs)
Sr. No. Particulars Funds mobilized by the Company
1 Non-Convertible Debentures - Institutional 831225.00
2 Subordinated Debts - Institutional 17500.00
3 Term Loans from Banks - Secured 1135365.50
4 Term Loans from Banks - Unsecured 16000.00
5 Term Loans from Financial Institutions / corporates - Secured 110000.00
6 Commercial Papers 640500.00
7 Fixed Deposit 278542.69
8 OFFshore Rupee Denominated Bonds (Masala Bonds) 135000.00

As on March 31 2017 the outstanding hypothecation loans were Rs. 6410197.35 lacs.The total Assets Under Management had increased from Rs. 7276060.55 lacs as on March 312016 to Rs. 7876093.08 lacs as on March 31 2017. During the Financial Year 2016-17 thecompany securitised its assets worth Rs. 1121420.00 lacs (accounting for 14.24 % of thetotal assets under management as on March 31 2017) as against Rs. 899175.10 lacs duringthe Financial Year 2015-16. With securitisation the company ensures better borrowingproffle leading to lower interest liability owing to its lending to priority sector asper RBI. The outstanding securitised assets portfolio stood at Rs. 1329474.16 lacs as onMarch 31 2017.

e Company continued its focus on financing of pre-owned commercial vehicles. Ourrelationship based business model enabled us to maintain the leadership position in thepre-owned commercial vehicles financing segment. For further penetration into ruralmarket the Company opened 51 new Rural Centres and 65 new Branch Offices. With this thetotal number of Rural Centres has now increased to 854 and the total number of BranchOffices across India has now increased to 918.

ISSUE OF SECURITIES Share Capital

ere was no change in the paid up Equity Share Capital in the Financial Year 2016-17.

Issue of Masala Bonds

In order to diversify the borrowing portfolio of the Company and to open newmarket/avenue for borrowing the Company issued Rs. 135000 lacs 8.25% Senior SecuredNotes Due 2020 which are listed on the Singapore Exchange Securities Trading Limited. Theproceeds of Notes have been utilized in accordance with the guidelines issued by theReserve Bank of India.

FIXED DEPOSITS

As on March 31 2017 there were 15150 fixed deposits aggregating to Rs. 13039.67lacs that have matured but remained unclaimed. ere were no deposits which were claimedbut not paid by the Company. The unclaimed deposits have since reduced to 11077 depositsamounting to Rs. 8693.13 lacs. Appropriate steps are being taken continuously to obtainthe depositors' instructions so as to ensure renewal/ repayment of the matured deposits intime.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Director retiring by rotation

Mr. Gerrit Lodewyk Van Heerde Non-Executive Non–Independent Director of theCompany will retire by rotation at the ensuing Annual General Meeting (AGM) and beingeligible offers himself for re-appointment.

Change in Directors

Mr. Ramakrishnan Subramanian resigned from the directorship of the Company on February03 2017. He was appointed as an Additional Director in the capacity of Non-ExecutiveNon-Independent Director of the Company by the Board of Directors in its meeting held onJuly 27 2016. Mr. Jasmit Singh Gujral resigned as Managing Director & CEO of theCompany and also from the directorship of the Company with effect from close of businesshours on October 25 2016. The Board of Directors have placed on record their appreciationof the services rendered by Mr. Jasmit Singh Gujral and Mr. Ramakrishnan Subramanian.

On recommendation of Nomination and Remuneration Committee the Board of Directors inits meeting held on October 25 2016 has appointed Mr. Umesh Revankar as an AdditionalDirector and also as Managing Director & CEO of the Company. The Board of Directorsrecommend the resolutions contained in Notice of the ensuing AGM for his appointment asDirector and also as Managing Director & CEO of the Company. ere was no other changein Key Managerial Personnel of the Company during the year under review.

DECLARATIONBY INDEPENDENT DIRECTORS

e Board has received the declaration from all the Independent Directors as per theSection 149(7) of the Companies Act 2013 (the ‘Act') and the Board is satisfied thatall the Independent Directors meet the criteria of independence as mentioned in Section149(6) of the Companies Act 2013.

POLICIESON APPOINTMENT OF DIRECTORSAND REMUNERATION

e Company's Policy on Board Diversity provides criteria for appointment of directors.The Company's Remuneration Policy provides for remuneration of Managing Director &CEO Independent Director Key Managerial Personnel Employees etc. ese Policies areannexed to this report as Annexure I and II. The Nomination and Remuneration Committeealso takes into account the Fit and Proper criteria for appointment of directors asstipulated by Reserve Bank of India.

NUMBEROF MEETINGSOF THE BOARD

During the year five Board Meetings were held. The details of the Board and variousCommittee meetings are given in the Corporate Governance Report.

BOARD EVALUATION

Pursuant to the provisions of the Act and Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 (Listing Regulations)the Board has carried out an annual performance evaluation of its own performance thedirectors individually as well as the evaluation of the working of its various Committees.The evaluation was conducted on the basis of a structured questionnaire which comprisesperformance criteria such as performance of duties and obligations independence ofjudgement level of engagement and participation contribution in enhancing the Board'soverall effectiveness etc. The Board of Directors has expressed its satisfaction onfunctioning and performance of Board and Committees and the performance of individualdirectors.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(3)(c) of the Act the Directors confirm thatto the best of their knowledge and belief: a) In the preparation of the Annual Accountsthe applicable Accounting Standards have been followed along with proper explanationrelating to material departures; b) at such accounting policies as mentioned in note 2.1to the financial statements have been selected and applied consistently and judgments andestimates have been made that are reasonable and prudent so as to give a true and fairview of the state of Affairs of the Company as at March 31 2017 and of the Profit of theCompany for the year ended on that date; c) at proper and sufficient care has been takenfor the maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding the assets of the Company and for preventing and detecting fraudand other irregularities; d) e Annual Accounts have been prepared on a going concernbasis. e) e Company had followed the internal financial controls laid down by thedirectors and that such internal financial controls are adequate and were operatingeffectively. f) e directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

RBI GUIDELINES

e Company continues to comply with all the requirements prescribed by the Reserve Bankof India from time to time.

BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34(2)(f) of the Listing Regulations Business ResponsibilityReport is annexed and forms part of the Annual Report

CORPORATE SOCIAL RESPONSIBILITY fiCSRfi

e Report on CSR activities for the Financial Year 2016-17 is annexed to this report asAnnexure-III. The composition of CSR Committee is included in the Report on CSRactivities. The CSR Policy is uploaded on the Company's website at the web link:http://stfc.in/pdf/Corporate-Social-Responsibility-Policy.pdf

DISCLOSURES AS PER THE SECTION 134 OF THE ACT READ WITH RULE 8 OF THE COMPANIESfiACCOUNTSfi RULES 2014 Extract of Annual Return

e extract of the annual return in the Form MGT 9 is annexed to this report asAnnexure-IV.

Conservation of Energy Technical Absorption and Foreign Exchange Earnings and Outgo

e information pursuant to Section 134(3)(m) of the Act read with the Companies(Accounts) Rules 2014 is as follows: a. The Company has no activity involvingconservation of energy or technology absorption. b. The Company does not have any ForeignExchange Earnings. c. Outgo under Foreign Exchange – Rs. 1367.99 lacs.

Loans guarantee or investments

Pursuant to Section 186(11)(a) of the Act read with Rule 11(2) of the Companies(Meetings of Board and its Powers) Rules 2014 the loan made guarantee given or securityprovided in the ordinary course of business by a Non- Banking Financial Company (NBFC)registered with Reserve Bank of India are exempt from the applicability of provisions ofSection 186 of the Act. As such the particulars of loans and guarantee have not beendisclosed in this Report.

During the year under review the Company has invested surplus funds in varioussecurities in the ordinary course of business. For details of the Current Investments andNon-Current Investments of the Company refer to Note 10 & 14 respectively of thefinancial statements.

Contracts or Arrangements with Related Parties

e Related Party Transactions (RPTs) were entered in ordinary course of business on anarm's length basis and were in compliance with the provisions of the Act and the ListingRegulations. The statement of RPTs was reviewed by the Audit Committee on a quarterlybasis. Omnibus approval of the Audit Committee was obtained for the RPTs of repetitivenature. As required under the Master Direction - Non-Banking Financial Company -Systemically Important Non-Deposit taking Company and Deposit taking Company (ReserveBank) Directions 2016 the Policy on Materiality of Related Party Transactions anddealing with Related Party Transactions as approved by the Board is annexed to this reportas Annexure-V and is also uploaded on the Company's website at the web link: http://stfc.in/pdf/Policy-on-Materiality-of-Related-Party-Transactions-and-dealing-with-Related-Party-Transactions-v1.pdf.

ere are no materially significant related party transactions made by the Company withPromoters Directors Key Managerial Personnel or other designated persons which may havea potential confiict with the interest of the Company at large. Accordingly particularsof contracts or arrangements with related parties referred to in Section 188(1) of the Actalong with the justification for entering into such contract or arrangement in Form AOC-2does not form part of the report. None of the Directors has any pecuniary relationships ortransactions vis--vis the Company save and except the payment of sitting fees andcommission to Independent Directors. For details of the transactions with Related Partyrefer to the note 27 to the financial statements.

Risk Management

e Company's Risk Management Policy deals with identification mitigation and managementof risks across the organization. The same has been dealt with in the ManagementDiscussion and Analysis Report annexed to the Annual Report.

Whistle Blower Policy/ Vigil Mechanism

e Company's Whistle Blower Policy provides a mechanism under which an employee/directorof the Company may report unethical behaviour suspected or actual fraud violation ofcode of conduct and personnel policies of the Company. The Vigil Mechanism ensuresstandards of professionalism honesty integrity and ethical behavior. The Whistle BlowerPolicy/Vigil Mechanism is uploaded on the Company's website: http://www.stfc.in/pdf/Whistle-Blower-Policy-Vigil-Mechanism-2017.pdfFinancial summary/highlights

e details are spread over in the Annual Report as well as are provided in the beginningof this report.

Subsidiaries joint ventures or associate companies

Shriram Automall India Limited (SAIL) Wholly Owned subsidiary of the Company throughits 67 Automalls located across the Country provides fee-based facilitation services forthe sale of pre-owned commercial and passenger vehicles agricultural and constructionequipments dealer's stock of pre-owned two wheelers etc. repossessed by banks and

financing companies. For the year ended March 31 2017 SAIL's total income fromoperations was Rs. 8030.53 lacs as against Rs. 7452.95 lacs in the previous year 2015-16and the Net Profit of Rs. 829.15 lacs as against net Profit of Rs. 542.07 lacs in theprevious year 2015-16. Eleven new Automalls were opened during the Financial Year 2016-17.

e annual report and the annual accounts of SAIL and the related detailed informationshall be made available to shareholders of the Company seeking such information. Theannual accounts of the SAIL shall also be kept for inspection by shareholders at theRegistered Office of the Company and of the SAIL. The annual accounts of SAIL shall beavailable on the website of the Company viz. http://www.stfc.in/annual-reports.aspxe Company shall furnish hard copy of details of accounts of the SAIL to any shareholder ondemand. No Company has become or ceased to be its Subsidiary joint venture or associatecompany during the year.

Internal Financial Control System

e Company's well defined organisational structure documented policy guidelinesdefined authority matrix and internal financial controls ensure eficiency of operationsprotection of resources and compliance with the applicable laws and regulations. Moreoverthe Company continuously upgrades its systems and undertakes review of policies. Theinternal financial control is supplemented by extensive internal audits regular reviewsby management and standard policies and guidelines to ensure reliability of financial andall other records to prepare financial statements and other data. The Audit Committee ofthe Board reviews internal audit reports given along with management comments. The AuditCommittee also monitors the implemented suggestions.

Composition of Audit Committee

e Audit Committee comprises of four directors namely Mr. S. Sridhar – ChairmanMrs. Kishori Udeshi Mr. S. M. Bafna and Mr. Puneet Bhatia.

Others

There were no material changes and commitments affecting the financial position of theCompany which has occurred between the end of the financial year of the Company and thedate of the Directors' report.

There are no significant and material orders passed by the Regulators or courts ortribunals impacting the going concern status and company's operations in future.

There was no change in the nature of business of the Company. The company continues tobe an Asset Finance Company.

During the year under review there were no cases filed under the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013.

Disclosure regarding details relating to Deposits covered under Chapter V of the Act isnot applicable since our company is a Non-Banking Financial Company regulated by ReserveBank of India. The Company accepts deposits as per Master Direction - Non-BankingFinancial Companies Acceptance of Public Deposits (Reserve Bank) Directions 2016.

CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Section 129 of the Act read with Rule 5 to the Companies (Accounts) Rules2014 Statement comparing salient features of the financial statement of Subsidiary (FormAOC-1) and a statement on consolidated financial position of the Company with that of thesubsidiary is attached to the Annual Report. The consolidated financial statementsattached to this Annual Report are prepared in compliance with the applicable AccountingStandards and Listing Regulations.

PARTICULARS OF EMPLOYEES

e Company has not employed any individual whose remuneration falls within the purviewof the limits prescribed under the provisions of Section 197 of the Act read with Rule5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.The Disclosure required as under Rule 5(1) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 as amended is annexed to this report as Annexure-VI.

AUDITORS

M/s. S. R. Batliboi & Co. LLP Chartered Accountants Mumbai (ICAI FirmRegistration No. 301003E / E300005) and M/s. G. D. Apte & Co. Chartered AccountantsMumbai (ICAI Firm Registration No. 100515W) Auditors of the Company will retire at theconclusion of the ensuing AGM. In compliance with mandatory rotation of Auditors as perprovision of Section 139 of the Act and the Companies (Audit and Auditors) Rules 2014 theCompany is required to appoint new Auditors in place of the retiring joint Auditors at theensuing AGM.

e Audit Committee and the Board of Directors have recommended appointment of M/sHaribhakti & Co. LLP Chartered Accountants Mumbai (Firm Registration No.103523W/W100048) and M/s Pijush Gupta & Co. Chartered Accountants Kolkata (FirmRegistration No. 309015E) as new joint Auditors Certificates have been received from themto the effect that their appointment as Auditors of the Company if made would be withinthe limits prescribed under Section 139 and 141 of the Act. ey have also confirmed thatthey hold a valid peer review certificate as prescribed under Listing Regulations. TheBoard of Directors recommend passing of the resolution for appointment of new jointAuditors at the ensuing AGM.

e Auditors' Report to the Shareholders for the year under review does not contain anyqualification.

SECRETARIAL AUDIT

e Board had appointed Mr. P. Sriram Practicing Company Secretary (Certificate ofPractice No.3310) (Membership No. FCS 4862) to carry out Secretarial Audit under theprovisions of Section 204 of the Act for the financial year 2016-17. The Secretarial AuditReport is annexed to this report as Annexure-VII. The report does not contain anyqualification.

CORPORATE GOVERNANCE

Pursuant to Schedule V of the Listing Regulations the following Reports/Certificatesform part of the Annual Report:

the Report on Corporate Governance;

the Certificate duly signed by the Managing Director

& CEO and Chief Financial Officer on the Financial Statements of the Company forthe year ended March 31 2017 as submitted to the Board of Directors at their meeting heldon April 27 2017;

the declaration by the Managing Director & CEO regarding compliance by the Boardmembers and senior management personnel with the Company's Code of Conduct ; and

the Management Discussion & Analysis Report

e Auditors' Certificate on Corporate Governance is annexed to this report asAnnexure-VIII.

ACKNOWLEDGEMENT

e Board of Directors would like to place on record their gratitude for the guidance andcooperation extended by Reserve Bank of India and the other regulatory authorities. TheBoard takes this opportunity to express their sincere appreciation for the excellentpatronage received from the Banks and Financial Institutions and for the continuedenthusiasm total commitment dedicated efiorts of the executives and employees of theCompany at all levels. We are also deeply grateful for the continued confidence and faithreposed on us by the Shareholders Depositors Debenture holders and Debt holders.

For and on behalf of the Board of Directors
S. Lakshminarayanan
Mumbai Chairman
April 27 2017 (DIN: 02808698)