Action Financial Services (India) Limited
The Directors have pleasure in presenting the 26th Board's Report of yourCompany together with the Audited Financial Statements of your company for the financialyear ended 31st March 2019.
FINANCIAL RESULTS (in Rs.)
|Particulars || |
| ||Current Year ||Previous Year ||Current Year ||Previous Year |
|Gross Income ||46065761 ||44314248 ||45788918 ||44042529 |
|Profit Before Interest and Depreciation ||11402962 ||5810833 ||11175919 ||6683170 |
|Finance Charges ||8005898 ||8938921 ||8005898 ||8920695 |
|Gross Profit ||3397064 ||(3122088) ||3170021 ||(2237525) |
|Provision for Depreciation ||1407112 ||3583044 ||1399112 ||3575044 |
|Net Profit Before Tax ||1989952 ||(6711132) ||1770909 ||(5812569) |
|Provision for Tax -Deferred Tax ||(430051) ||1334754 ||113014 ||1422796 |
|- Current Tax ||- ||- ||- ||- |
|- Earlier Tax ||- ||15655 ||- ||- |
|Net Profit After Tax ||2420003 ||(8030231) ||1883923 ||(7235365) |
|Balance of Profit brought forward ||- ||- ||- ||- |
|Balance available for appropriation ||2420003 ||(8030231) ||1883923 ||(7235365) |
|Proposed Dividend on Equity Shares ||- ||- ||- ||- |
|Tax on proposed Dividend ||- ||- ||- ||- |
|Transfer to General Reserve ||- ||- ||- ||- |
|Surplus carried to Balance Sheet ||2420003 ||(8030231) ||1883923 ||(7235365) |
STATE OF AFFAIRS & FINANCIAL PERFORMANCE
The last quarter of FY19 witnessed the mega event of the democracy i.e. Generalelections 2019 and the markets were clouded with the pressure of uncertain outcome leadingto the volatility. Markets faced the pressure from various global factors such as US-Chinatrade tensions possibility of no-deal Brexit rift over sanctions on import of crude oilas well as domestic factors such as rising loan defaults and NPAs geopolitical tensionspolitical uncertainty and slowdown in crucial sectors such as automobile agriculture andIT. The retail investors who form the major part of company s target customers remainedsusceptible to the outcome of above factors and preferred to stay back from newinvestments in the market for the major part of FY19. As a result the company could notachieve its targets as it had expected. The re-election of the existing government withthe bigger mandate than before is expected to bring the stability in the market in comingtimes.
The company has focused on carrying its business from strength to strength andimproving its performance by adjusting itself to the market dynamics. The consolidatedrevenue for the financial year under review was Rs. 46065761 as against Rs. 44314248for the previous financial year registering an increase of 3.95%. The Consolidated Profitafter tax for the financial year under review was Rs. 2420003 as against the loss of Rs.8030231 for the previous financial year. The Standalone revenue for the financial yearunder review was Rs. 45788918 as against Rs. 44042529 for the previous financial yearregistering an increase of 3.97%. The Standalone Profit after tax for the financial yearunder review was Rs. 1883923 as against the loss of Rs. 7235365 for the previousfinancial year. Therefore the performance of the company was satisfactory despite of hugecompetition in the broking industry due to cost reduction approach followed by the companyand focus on core business structures.
FUTURE OUTLOOK & EXPANSION PLAN
The core business model of the company is purely focused on retail brokerage and ournew scheme which was launched few years back to tap the retail participation could notachieve the expected results. The company is planning the measures to improve themarketing and implementation of the scheme for generating the expected results.
The market competition has been rising after the entry of discount brokers and theyhave dominated the market in terms of volume growth and market share. However the companyhas managed the competition by focusing on maintaining its client base with the provenbusiness model and rearranging its cost structures to bring them at par with the discountbrokers.
The company in its endeavour to provide various services to its customers under oneumbrella is planning to add the new services to its catalogue such as participation inSecurities Lending and Borrowing trading in Commodity derivatives and investing inGovernment Securities and bonds by retail investors in the coming financial year. Thecustomers of the company will benefit from the introduction of these services and thecompany also expects to generate the additional revenue.
REVIEW OF BUSINESS DIVISIONS
Broking Division and Depository Division:
The company operates its business in two primary divisions Broking division andDepository division under one broad segment of capital markets and is registered as aStock Broker with the Securities & Exchange Board of India in Capital market segmentin BSE and in Capital Market Future & Options and Currency derivatives Segments inNSE and as a Depository Participant with the NSDL.
Both the divisions registered a satisfactory performance during the year under review.The broking division of company is going through a transition due to various measuresintroduced by the SEBI during the last couple of years. Under Depository division thecompany during the year under review has registered itself with the SPEED-E service ofNSDL facilitating the direct & hassle-free processing of Delivery instruction slips.
Currently DP Division caters to 25 clearing Members Pool Account and maintains 38Promoters Accounts. The number of demat accounts opened in India has exponentially grownduring the last couple of years due to rising number of retail participants in the equitymarket. The company has positioned itself to attract the customers for new demat accountwith its established business model and cost-effective rate structure.
Cost-effectiveness and digitalization are the key factors driving the competition inthe market. The company has re-arranged its tariff structures to meet the goal ofcost-effective and efficient service delivery to the clients and tackle the competition inthe industry through competitive & attractive rate structure. The Company has providedthe facility to the clients to view their holding transaction and ledger balances andalso open an account with the company through its website.
The future outlook for the economy of country seems to be positive on the back of morepolicy and macro-economic reforms due to stable government with growth & developmenton top of the agenda. The market sentiment seems to be positive and the markets areexpected to respond well to the reforms introduced by the government.
The policy measures introduced by the government to curb the financial frauds andsafeguard investors from the market misconduct are expected to accelerate the retailparticipation in the coming years. The company with its proposal of lowest brokerage isexpected to gain a good share from the new account openings. FY20 will be a crucial yearfor the company with the prospective of better financial performance.
The Board has not recommended any dividend for the year ended 31st March 2019.
TRANSFER TO RESERVE
The Company did not transfer any amount to reserve this year.
The paid-up Capital of the Company as on 31st March 2019 is Rs. 133325000/-dividedinto Rs. 125045000/- Equity Shares and Rs. 8280000/- Preference Shares. During theyear under review the Company has not issued any shares with differential voting rightsnor granted stock options nor sweat equity.
REPORT ON PERFORMANCE OF SUBSIDIARIES ASSOCIATES COMPANIES AND JOINT VENTURES:
As on 31st March 2019 the Company had two Indian wholly owned non materialsubsidiaries. There has been no change in the number of subsidiaries or in the nature ofbusiness of the subsidiaries during the year under review. In accordance with Section129(3) of the Companies Act 2013 the Company has prepared a consolidated financialstatement of the Company and all its subsidiary companies which is forming part of theAnnual Report. The statement containing the salient features of the financial statement ofa company s subsidiaries under the first proviso to sub-section (3) of section 129 is setout as Annexure A in Form AOC-1.
There is neither new incorporation nor Cessation of any Company as a subsidiaryassociate company or joint venture during the year.
TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND
The provisions of Section 125(2) of the Companies Act 2013 do not apply as there is nounclaimed dividend.
MATERIAL CHANGES AND COMMITMENTS
Other than stated elsewhere in this report there are no material changes andcommitments affecting the financial position of the Company between the end of thefinancial year and the date of this report.
CONSOLIDATED FINANCIAL STATEMENTS:
The consolidated Financial Statements of the Company along with its subsidiarycompanies are attached herewith and form part of this annual report. These have beenprepared in accordance with the provisions of the Companies Act 2013 the SEBI (ListingObligations and Disclosures Requirement) Regulations 2015 the Accounting Standard 21(AS-21) on Consolidated Financial Statements and Accounting Standard 23 - (AS-23) onAccounting for Investments in Associates in Consolidated Financial Statements based onAudited Financial Results for the year ended 31st March 2019.
As the Members are aware the Company s shares are tradable compulsorily in electronicform and your Company has established connectivity with both the depositories i.e.National Securities Depository Limited and Central Depository Services (India) Limited. Ason 31st March 2019 97.64% of the company s total paid-up capital representing 12504500Shares is in dematerialized form.
SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 mandate thatthe transfer except transmission and transposition of securities shall be carried out indematerialized form only with effect from 1st April 2019. In view of the numerousadvantages offered by the Depository system members holding shares in physical mode arerequested to avail the facility of dematerialisation of the Company s shares from eitherof the aforesaid depositories.
The Company has availed credit facilities from Bank of India during the year underreview.
Your Company has not accepted any deposits in terms of the provisions of Section 73 ofthe Companies Act 2013 and The Companies (Acceptance of Deposits) Rules 2014 as amendedfrom time to time during the year under review.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. Ketan Mehta (DIN: 02903954) Independent Director has resigned as a directorw.e.f. 08th August 2018. Mr. Harbhajan Singh Dhillon (DIN: 05322003) has ceased to be anIndependent director of the company on expiry of the 1st term of his appointment as on31st March 2019 and the Company has re-appointed him as an Independent director at theBoard meeting held on 27th May 2019 subject to the approval of member by way of specialresolution. Mr. Raja Gupta (DIN: 07034154) was appointed as an Independent Director w.e.f.10th August 2018.
Mr. Jayantilal Suthar (Mem. No.: FCS-8779) resigned as the Company Secretary w.e.f. 1stJanuary 2019. Mr. Siddheshwar Thorat (Mem. No.: ACS-57378) was appointed as the CompanySecretary w.e.f. 31st January 2019.
Further In accordance with the requirements of the Companies Act 2013 Mr. Milan R.Parekh (DIN: 00108368) will retire by rotation at the ensuing Annual General Meeting andbeing eligible has offered himself for re-appointment.
In terms of Section 149 of the Companies Act 2013 and Regulation 25 of the SEBI (LODR)Regulations 2015 and based on the confirmation/disclosures received from the IndependentDirectors and on evaluation of the relationships disclosed the following Non-ExecutiveDirectors are Independent in terms of Regulation 25 of the SEBI (LODR) Regulations 2015and Section 149(6) of the Companies Act 2013:-
a) Mr. Raja Gupta
b) Mr. Harbhajan Singh Dhillon
c) Mrs. Parul Doshi
The terms and conditions of appointment of the Independent Directors are in compliancewith the provisions of the Companies Act 2013 and are placed on the website of theCompany at https://www.actionfin.com/download.aspx.
ANNUAL EVALUATION BY THE BOARD
The evaluation of all the directors committees Chairman of the Board and the Board asa whole was conducted based on the criteria and framework adopted by the Board.
The evaluation framework for assessing the performance of Directors comprises of thefollowing key areas:
i. Attendance of Board Meetings and Board Committee Meetings.
ii. Quality of contribution to Board deliberations.
iii. Strategic perspectives or inputs regarding future growth of Company and itsperformance.
iv. Providing perspectives and feedback going beyond information provided by themanagement.
v. Commitment to shareholder and other stakeholder interests.
The evaluation involves Self-Evaluation by the Board Member and subsequently assessmentby the Board of Directors. A member of the Board will not participate in the discussion ofhis/her.
DIRECTORS' RESPONSIBILITY STATEMENT
The directors confirm that:
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
(b) they had selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the company at the end of the financial year and of the profitand loss of the company for that period;
(c) they 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) they had prepared the annual accounts on a going concern basis; and
(e) they had laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and were operating effectively.
(f) they had devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
NUMBER OF MEETINGS OF THE BOARD
The Board meets at regular intervals to discuss and decide on Company/business policyand strategy apart from other Board business. The notice of Board meeting is given well inadvance to all the Directors. Usually meetings of the Board are held in Mumbai. TheAgenda of the Board / Committee meetings is circulated at least 7 days prior to the dateof the meeting. The Agenda for the Board and Committee meetings includes detailed notes onthe items to be discussed at the meeting to enable the Directors to take an informeddecision.
The Board met 7 (Seven) times in the financial year 2018-2019 and the maximum intervalbetween any two meetings did not exceed 120 days as follows;
|1st Quarter ||2nd Quarter ||3rd Quarter ||4th Quarter |
|28.05.2018 ||10.08.2018 ||13.11.2018 ||01.01.2019 |
| || || ||31.01.2019 |
| || || ||13.02.2019 |
| || || ||25.03.2019 |
Further in terms of Schedule IV of the Companies Act 2013 the Separate meeting ofthe Independent Directors was held on 13th February 2019 and all Independent Directorswere present.
COMMITTEES OF THE BOARD
The Board of Directors constituted Four Committees of the Board as follows:
Nomination and Remuneration Committee Stakeholders Relationship Committee RiskManagement Committee
Details of all the Committees along with their charters composition and meetings heldduring the year are provided in the Report on Corporate Governance a part of thisAnnual Report.
The Board of Directors constituted an Audit Committee as per the Regulation 18 of theSEBI (LODR) Regulations 2015 and in terms of Section 177 of the Companies Act 2013.
Remuneration to Executive Directors:
The remuneration paid to Executive Directors is recommended by the Nomination andRemuneration Committee and approved by Board of Directors at the Board meeting subject tothe subsequent approval of the members at the General Meeting and such other authoritiesas may be required. The remuneration is decided after considering various factors such asqualification experience performance responsibilities shouldered industry standards aswell as financial position of the Company.
Remuneration to Non Executive Directors:
The Non Executive Directors are paid remuneration by way of Sitting Fees for eachmeeting of the Board and Committee of Directors attended by them.
The Corporate Governance is about maximizing members value legally ethically andsustainably. The Company is committed to maintaining the highest standards of CorporateGovernance and adhering to the Corporate Governance requirements as set out by Securitiesand Exchange Board of India. The Report on Corporate Governance form part of this AnnualReport.
CEO & CFO CERTIFICATION
The Certificate from Mr. Milan Parekh Managing Director & CEO and Mr. BakulParekh Jt. Managing Director & Chief Financial Officer pursuant to Regulation 17(8)of the SEBI (LODR) Regulations 2015 for the year under review was placed before theBoard of Directors of the Company at its meeting held on 27thMay 2019.
A copy of the certificate on the financial statements for the financial year ended 31stMarch 2019 is annexed along with this Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT
The Management s Discussion and Analysis Report for the year under review asstipulated under Regulation 34(2)(e) of the SEBI (LODR) Regulations 2015 is annexed tothis report.
M/s Ambavat Jain & Associates LLP (Firm Registration No. 109681W) CharteredAccountants Mumbai were appointed as Statutory Auditors for a period of 5 consecutiveyears in the Annual General Meeting held on 29th September 2017. M/s. Ambavat Jain &Associates LLP (Firm Registration No. 109681W) Chartered Accountants Mumbai resigned asthe statutory auditors of the company w.e.f. 28th January 2019.
M/s. Jain Chowdhary & Co. (FRN: 113267W) Chartered Accountants Mumbai wereappointed as the Statutory auditors of the company w.e.f. 31st January 2019 to fill thecasual vacancy caused by the resignation of M/s Ambavat Jain & Associates LLP and thesame was approved by the members of the company in the Extra-ordinary General Meeting heldon 26th April 2019.
The Audit Committee and Board of Directors of the Company at their meeting held on 27thMay 2019 has recommended the appointment M/s. Jain Chowdhary & Co. (FRN: 113267W) asthe Statutory Auditors of the Company for the period of four (4) years pursuant to Section139 of the Companies Act 2013. Accordingly the Board seeks approval of Members of thecompany for the appointment of Statutory Auditors as mentioned in the notice of the AnnualGeneral Meeting.
The Company has received letter from M/s. Jain Chowdhary & Co. to the effect thattheir appointment if made would be within the prescribed limits under Section 141(3)(g)of the Companies Act 2013 and that they are not disqualified from appointment.
There are no qualifications or adverse remarks in the Auditors Report for the yearended 31st March 2019 which requires any clarification/ explanation. The Notes onfinancial statements are self-explanatory and needs no further explanation.
REPORTING OF FRAUDS BY AUDITORS
During the year under review the statutory auditors and secretarial auditor have notreported to the Audit Committee under Section 143 (12) of the Companies Act 2013 anyinstances of fraud committed against the Company by its officers or employees the detailsof which would need to be mentioned in the Board s Report.
COST RECORDS AND COST AUDIT
Maintenance of cost records and requirement of cost audit as prescribed under theprovisions of Section 148(1) of the Companies Act 2013 are not applicable to the businessactivities carried out by the company.
SECRETARIAL AUDIT REPORT
The Board of Directors of the Company has appointed M/s. Jagdish Patel & Co.Company Secretaries to conduct the Secretarial Audit and their Report on Company sSecretarial Audit is annexed to Director s Report as Annexure B.
The company continues to comply with all the applicable Secretarial Standards issued bythe Institute of Company Secretaries of India (ICSI).
DECLARATION BY INDEPENDENT DIRECTOR
The Company has received Declarations of Independence as stipulated under Section149(7) of the Companies Act 2013 from all the Independent Directors confirming thathe/she is not disqualified from appointing/continuing as Independent Director.
All the properties of your Company including Office Premises Furniture & FixturesOffice Equipments and Computer are adequately insured.
PARTICULARS OF REMUNERATION
The ratio of remuneration of each director to the median of employees remuneration asper Section 197(12) of the Companies Act 2013 read with Rule 5(1) of Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are set out in theAnnexure C to the Directors Report.
The list of top 10 employees of the Company in terms of remuneration drawn specified inRule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is annexed to Director s report as Annexure D.
PARTICULARS REGARDING CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGNEXCHANGE EARNINGS AND OUTGO
The particulars regarding foreign exchange earnings and outgo appear as separate itemsin the notes to the Accounts. Since the Company does not own any manufacturing facilitythe other particulars relating to conservation of energy and technology absorptionstipulated in the Companies (Accounts) Rules 2014 are not applicable.
EXTRACT OF ANNUAL RETURN
The extract of Annual Return as required under Section 92(3) is annexed to the Directors Report in Form MGT-9 as Annexure E. and the same shall also be available on the websiteof company at https://www.actionfin.com/investor-relation.aspx?pagename=factsheet.
PARTICULAR OF LOANS GUARANTEES & INVESTMENTS
Loans guarantees and Investments covered under the provisions of section 186 of theCompanies Act 2013 forms part of the Notes to the Financial Statements.
DISCLOSURE OF RELATED PARTY TRANSACTION
All related party transactions that were entered into during the financial year were onarm s length basis and were in the ordinary course of the business. There are nomaterially significant related party transactions made by the company with Promoters KeyManagerial Personnel or other designated persons which may have potential conflict withinterest of the company at large and all such other transactions are disclosed in thenotes to Financial Statements of the company in the format prescribed in the relevantaccounting standards. Information on transactions with related parties pursuant to section134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules 2014 is givenin Form AOC-2 and the same is annexed to the Director s Report as Annexure F.
RISK MANAGEMENT POLICY
The Company has in place a mechanism to identify assess monitor and mitigate variousrisks to key business objectives & functions. Major risks identified by the businessesand functions are systematically addressed through mitigating actions on a continuingbasis.
INTERNAL CONTROL SYSTEM
The Company s internal control systems are commensurate with the nature of its businessand the size and complexity of its operations. These are routinely tested and certified byStatutory as well as Internal Auditors. Significant audit observations and follow upactions thereon are reported to the Audit Committee.
CODE OF CONDUCT
The Board of Directors has approved a Code of Conduct which is applicable to theMembers of the Board and all employees in the course of day to day business operations ofthe company. The Code has been placed on the Company s website athttps://www.actionfin.com/download.aspx.
The Code lays down the standard procedure of business conduct which is expected to befollowed by the directors and the designated employees in their business dealings and inparticular on matters relating to integrity in the work place in business practices andin dealing with stakeholders.
All the Board Members and the Senior Management personnel have confirmed compliancewith the Code under 26(3) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.
PREVENTION OF INSIDER TRADING
The Company has adopted a Code of Conduct for Prevention of Insider Trading with a viewto regulate trading in securities by the Directors and designated employees of theCompany. The Code requires pre-clearance for dealing in the Company s shares and prohibitsthe purchase or sale of Company shares by the Directors and the designated employees whilein possession of unpublished price sensitive information in relation to the Company andduring the period when the Trading Window is closed.
The Board is responsible for implementation of the Code.
All the directors and the designated employees have confirmed compliance with the Codeunder Regulation 9 of the SEBI (Prohibition of Insider Trading) Regulations 2015.
CHANGE IN THE NATURE OF BUSINESS
There is no change in the nature of business within the meaning of Sections 134 (3) ofthe Companies Act 2013 and sub rule 8(5) of the Companies (Accounts) Rules 2014. Thenature of the business of the Company continues to remain the same as previous year.
CORPORATE SOCIAL RESPONSIBILITY
The provisions of section 135 of the Companies Act 2013 are not applicable to theCompany.
The Company has established a vigil mechanism for employees to report their genuineconcerns details of which have been given in the Corporate Governance Report annexed tothis Report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE AUTHORITIES
During the year under review there were no significant material orders passed by theRegulators / Courts which would impact the going concern status of the Company.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) Act 2013
The Company has in place a Policy on Prevention of Sexual Harassment of Women Employeesin line with the requirements of The Sexual Harassment of Women at the Workplace(Prevention Prohibition & Redressal) Act 2013.
Internal Complaints Committee (ICC) has been set up to redress complaints receivedregarding sexual harassment. All employees (permanent contractual temporary trainees)are covered under this policy. During the year under review no complaint of sexualharassment was received by the ICC.
Your Directors would take this opportunity to express its deep appreciation for theco-operation and assistance received from the members Company s clients suppliersbankers and other authorities during the year under review. Your Directors also wish toplace on record their appreciation for the services rendered by all the employees of yourCompany.
For and on Behalf of the Board of Directors
| ||Milan R. Parekh |
| ||Chairman & Managing Director |
| ||(DIN: 00108368) |
|Place: Mumbai || |
|Date: 27thMay 2019 || |