Your Directors have pleasure in presenting the 25th Director's Report of your Companytogether with the Audited Financial Statement for the year ended on 31st March2017.
You are our valued partners in the Company and we are happy to share our vision ofgrowth with you. Our guiding principles are a blend of optimism and conservatism whichhas been and will be the guiding force of all our future endeavors.
The summary of operating results for the year is given below:
1. FINANCIAL PERFORMANCE:
|Particulars || |
| ||2016-17 ||2015-16 ||2016-17 ||2015-16 |
|Total Revenue ||535944111 ||406923839 ||165775976 ||159174647 |
|Profit Before Interest and Depreciation ||326870879 ||276691643 ||86919162 ||95381452 |
|Finance Charges ||225246065 ||153831667 ||48001495 ||56715827 |
|Provision for Depreciation ||2942396 ||1792862 ||1106664 ||1327368 |
|Net Profit Before Tax ||98682417 ||121067113 ||37811003 ||37338257 |
|Provision for Tax ||36210000 ||42520000 ||13110000 ||12420000 |
|Deferred Tax Asset/(Liability) ||764020 ||1429526 ||277859 ||13607 |
|Net Profit After Tax ||63236437 ||79976639 ||24978862 ||24931863 |
Your Company is engaged in the business of Asset Finance MSME and Microfinance. TheParent Company Arman Financial Services Limited is engaged in Asset Finance viz.two-wheeler finance and MSME; while the Microfinance business is managed through Arman'swholly owned subsidiary Namra Finance Limited. The financial statements of both Arman andNamra as well as the consolidated financials of Arman are included within the AnnualReport. The performance of the Company was marginally impacted due to challenges inMicrofinance segment post demonetization since it is highly depended upon cash currency.However Asset finance segment and the new MSME segment were not materially impacted by thedemonetization. During the year 2016-17 Company has started its operation of micro financein the state of Uttar Pradesh and Maharashtra. As on 31.03.2017 the Company has total 80branches in micro finance division compared to 55 branches in last year.
Net interest income from operations during the year under review was H53.59 croresagainst H40.69 crores for the previous year resulting in increase of 31.70%. Earningsbefore Interest & Taxes (EBIT) for the current year is H32.39 crores (H27.49 crores inprevious year) thereby resulting in increased of 17.84%. Net Profit after Taxes amountedto H6.32 crores (H8.00 crores in previous year) thereby resulting decrease of 20.93% inthe fiscal year ended. The fourth quarter result was the primary reason for decrease innet profits due to the effects of demonetization on the Microfinance segment.
3. CHANGE IN NATURE OF BUSINESS:
During the financial year 2016-17 your Company has started new pilot project of MSMEto provide business loans of H50000 to H150000 to small business owners. By 31st March2017 Company has already opened up 7 branches of MSME and this segment has been performingextremely well. Other than that your Company continues to operate the same businesssegment as that of previous year and there is no change in the nature of the business.
Your Directors are pleased to recommend a Dividend of H1.00/- (Previous Year H1.40) perequity share of H10/- each (i.e. 10%) for the year ended 31st March 2017subject to approval by the members at the ensuing Annual General Meeting.
5. AMOUNTS TRANSFERRED TO RESERVES:
The Board of the Company has transferred the amounts to reserve as under:
Transfer to special reserve as required by section 45-IC of the Reserve Bank ofIndia Act 1934: H5100000/-
Transfer to general reserve:H1000000/
6. SUBSIDIARY ASSOCIATE AND JOINT VENTURE COMPANIES:
The Company has one wholly owned subsidiary named Namra Finance Limited as on date.During the year no changes took place in the group corporate structure of your Company.The Company has formulated a policy for determining 'material' subsidiaries pursuant tothe provisions of the SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015. The said policy is available at the Company website at the linkhttp://armanindia.com/pdf/ CorporateGovernancePDF/material_subsidiary.pdf
The consolidated financial statements presented by the Company include financialinformation of its subsidiary prepared in compliance with applicable accounting standards.The salient features of Namra Finance Limited in Form AOC-1 is attached hereunder as per"Annexure-1" as required under section 129 (3) of the Companies Act 2013.
7. UNCLAIMED DIVIDEND AS ON 31st MARCH 2017:
The unclaimed dividend as on 31st March 2017 was H1962913.40. No transferof unclaimed / unpaid dividend was required to be made to the Investor Education andProtection Fund during the year.
8. MATERIAL CHANGES AND COMMITMENTS:
No material changes and commitments have occurred after the close of the financial yeartill the date of this report which affect the financial position of the Company.
9. LOANS GUARANTEES AND INVESTMENTS:
Except the loans guarantees and investments made in subsidiary Company there were noloans guarantees or investments made by the Company under Section 186 of the CompaniesAct 2013 during the year under review and hence the said provision is not applicable.
10. PUBLIC DEPOSITS:
During the year under review your Company has not accepted or renewed any Depositwithin the meaning of Section 73 of the Companies Act 2013 read with the Companies(Acceptance of Deposits) Rules 2014. Hence the requirement of furnishing details ofdeposits which are not in compliance with Chapter V of the Companies Act 2013 is notapplicable.
11. DIRECTORS AND KMP:
The Board of Directors consists of 8 members of which 3 are Independent Directors. TheBoard also comprises of one women Director. In accordance with the Articles of Associationof the Company and pursuant to the provisions of Section 152 of the Companies Act 2013Shri Aakash Patel [DIN: 02778878] and Shri Jayendra Patel [DIN: 00011814] will retire byrotation at the ensuing AGM and being eligible offer themselves for reappointment.
As approved by the shareholders at 24th Annual General Meeting held on 22.09.2016 Mr.Jayendra Patel (DIN: 00011814) was appointed as Managing Director of the Company for aperiod of five years with effect from 01.09.2016.
During the year Shri Aditya Bhandari Nominee Director of RIF NorthWest-2 hasresigned from the Board of Director of the Company as RIF NorthWest-2 had sold its sharesof the Company in the open market. The Board has accepted his resignation in its meetingheld on 11.08.2016.
The Present term of Shri Amit Manakiwala as Whole Time Director has expired on30.06.2017. As Shri Amit Manakiwala is approaching retirement age he has expressed hisdesire not to renew his term for a further period and therefore he has given hisresignation from the post of his Directorship w.e.f. 31.08.2017. The Board of Director hasaccepted his resignation in its Board Meeting held on 05.08.2017. Your Directors place onrecord their appreciation for the valuable service advice and guidance rendered by ShriAmit Manakiwala as a member of core management team for last 25 years.
The Board has identified the following officials as Key Managerial Personnel pursuantto Section 203 of the Companies Act 2013:
1. Jayendra Patel - Managing Director and C.E.O.
2. Amit Manakiwala- Whole Time Director (upto 31.08.2017)
3. Aalok Patel - Executive Director and C.F.O.
4. Jaimish Patel - Company Secretary
12. MEETING OF THE BOARD & AUDIT COMMITTEE:
The Board during the financial year 2016-17 met five times and Audit Committee met fourtimes. All the recommendations made by the Audit Committee during the year were acceptedby the Board. The details of the constitution and meetings of the Board and the Committeesheld during the year are provided in the Corporate Governance Report which forms part ofthis Annual Report.
13. NOMINATION AND REMUNERATION COMMITTEE:
As per the Section 178(1) of the Companies Act 2013 the Company has constitutedNomination and Remuneration Committee details of which are provided in the CorporateGovernance Report which forms part of this Annual Report.
14. REMUNERATION POLICY:
Remuneration to Executive Directors:
The remuneration paid to Executive Directors is recommended by the Nomination andRemuneration Committee and approved by Board in the Board meeting subject to thesubsequent approval of the shareholders at the ensuing Annual General Meeting and suchother authorities as may be required. The remuneration is decided after consideringvarious factors such as qualification experience performance responsibilitiesshouldered industry standards as well as financial position of the Company.
Remuneration to Non Executive Directors:
Non-Executive Directors are paid sitting fees for each meeting of the Board andCommittee of Directors attended by them.
15. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:
The information required pursuant to Section 197(12) read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is furnishedhereunder as per "Annexure-2".
However the information required pursuant to Section 197(12) of the Companies Act2013 read with Rule 5(2) and 5(3) of The Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 in respect of employees of the Company will be providedupon request. In terms of Section 136(1) of the Companies Act 2013 the Report andAccounts are being sent to the Members and others entitled thereto excluding theinformation on employees' particulars which is available for inspection by the Members atthe Registered office of the Company during business hours on working days of the Companyup to the date of the ensuing Annual General Meeting. If any Member is interested inobtaining a copy thereof such Member may write to the Company Secretary in this regard.
16. DISCLOSURES AS PER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013:
The Company has zero tolerance for sexual harassment at workplace and has adopted apolicy on prevention prohibition and redressal of sexual harassment at workplace in linewith the provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and no complaint has been received on sexualharassment during the financial year 2016-17.
17. DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to Section 134(5) of the Companies Act 2013 the Board of Directors of theCompany confirms that-
a) In the preparation of the annual accounts for the year ended on 31stMarch 2017 the applicable accounting standards had been followed along with properexplanation relating to material departures;
b) The Directors have 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 as at 31st March 2017 and ofthe profit and loss of the Company for the year ended on that date;
c) The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d) The Directors have prepared the annual accounts on a going concern basis;
e) That the Directors have laid down internal financial controls to be followed by theCompany and that the financial controls are adequate and are operating effectively; and
f) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
18.DECLARATION BY INDEPENDENT DIRECTORS:
A declaration of independence in compliance with Section 149(6) of the Companies Act2013 has been taken on record from all the independent directors of the Company.
As per the provisions of Section 139 of the Companies Act 2013 the term of office ofM/s J. T Shah & Co. Chartered Accountants Ahmedabad (FRN No: 109616W) as StatutoryAuditors of the Company will conclude from the close of the forthcoming Annual GeneralMeeting of the Company. The Board of Directors places on record its appreciation for theservices rendered by M/s J. T. Shah & Co. as the Statutory Auditors of the Company.
Subject to the approval of the Members the Board of Directors of the Company hasrecommended the appointment of M/s Samir M. Shah & Associates Chartered Accountants(FRN: 122377W) as the Statutory Auditors of the Company pursuant to Section 139 of theCompanies Act 2013. Member's attention is drawn to a Resolution proposing the appointmentof M/s Samir M. Shah & Associates Chartered Accountants as Statutory Auditors of theCompany which is included at Item No. 5 of the Notice convening the Annual GeneralMeeting. Further the report of M/s J. T Shah & Co. the Statutory Auditors alongwith notes to Financial Statements is enclosed to this annual report.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s Pinakin Shah & Co. a firm of Company Secretaries in practice toconduct the Secretarial Audit of the Company for the financial year 2016-17. TheSecretarial Audit Report is annexed herewith as "Annexure-3". The SecretarialAudit Report does not contain any qualification reservation or adverse remarks.
21.RELATED PARTY TRANSACTIONS:
All the related party transactions are entered on arm's length basis in the ordinarycourse of business and are in compliance with the applicable provisions of the CompaniesAct 2013 and the SEBI (Listing Obligations & Disclosure Requirements) Regulations2015. There are no materially significant related party transactions made by the Companywith Promoters Directors or Key Managerial Personnel etc. which may have potentialconflict with the interest of the Company at large or which warrants the approval of theshareholders. Accordingly no transactions are being reported in Form AOC-2 in terms ofSection 134 of the
Act read with Rule 8 of the Companies (Accounts) Rules 2014. However the details ofthe transactions with Related Party are provided in the Company's financial statements inaccordance with the Accounting Standards.
All Related Party Transactions are presented to the Audit Committee and the Board.Omnibus approval is obtained for the transactions which are foreseen and repetitive innature. A statement of all related party transactions is presented before the AuditCommittee on a quarterly basis specifying the nature value and terms and conditions ofthe transactions.
The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company's website at thelink http://armanindia.com/pdf/CorporateGovernancePDF/ related_party_transaction.PDF
Periodic assessments to identify the risk areas are carried out and management isbriefed on the risks in advance to enable the Company to control risk through a properlydefined plan. The risks are classified as financial risks operational risks and marketrisks. The risks are taken into account while preparing the annual business plan for theyear. The Board is also periodically informed of the business risks and the actions takento manage them. The Company has formulated a policy for Risk management with the followingobjectives:
Provide an overview of the principles of risk management
Explain approach adopted by the Company for risk management
Define the organizational structure for effective risk management
Develop a "risk" culture that encourages all employees to identifyrisks and associated opportunities and to respond to them with effective actions.
Identify access and manage existing and new risks in a planned and coordinatedmanner with minimum disruption and cost to protect and preserve Company's human physicaland financial asset.
23.INTERNAL CONTROL SYSTEM:
The Company has in place adequate systems of Internal Control to ensure compliancewith policies and procedures. It is being constantly assessed and strengthened with new /revised standard operating procedures and tighter information technology controls.Internal audits of the Company are regularly carried out to review the internal controlsystems. The Audit Reports of Internal Auditor along with their recommendations andimplementation contained therein are regularly reviewed by the Audit Committee of the
Board. Internal Auditor has verified the key internal financial control by reviewingkey controls impacting financial reporting and overall risk management procedures of theCompany and found the same satisfactory. It was placed before the Audit Committee of theCompany.
24.INTERNAL FINANCIAL CONTROL:
The Company has laid down certain guidelines processes and structure which enablesimplementation of appropriate internal financial controls across the organisation. Suchinternal financial controls encompass policies and procedures adopted by the Company forensuring the orderly and efficient conduct of business including adherence to itspolicies safeguarding of its assets prevention and detection of frauds and errors theaccuracy and completeness of accounting records and the timely preparation of reliablefinancial information. Appropriate review and control mechanisms are built in place toensure that such control systems are adequate and are operating effectively. Because ofthe inherent limitations of internal financial controls including the possibility ofcollusion or improper management override of controls material misstatements in financialreporting due to error or fraud may occur and not be detected. Also evaluation of theinternal financial controls is subject to the risk that the internal financial control maybecome inadequate because of changes in conditions or that the compliance with thepolicies or procedures may deteriorate.
The Company has in all material respects an adequate internal financial controlssystem and such internal financial controls were operating effectively based on theinternal control criteria established by the Company considering the essential componentsof internal control stated in the Guidance Note on Audit of Internal Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India.
25.CORPORATE SOCIAL RESPONSIBILITY:
The Company does not meet the criteria of Section 135 of Companies Act 2013 read withthe Companies (Corporate Social Responsibility Policy) Rules 2014 so there is norequirement to constitute Corporate Social Responsibility Committee. However Namra FinanceLimited wholly owned subsidiary has conducted the CSR program at modasa in collaborationwith 'BLIND PEOPLE'S ASSOCIATION (INDIA)' a charitable association for Cataractoperation and eye check-up for senior citizens. The Company hopes to continue such eventsin the years to come.
26. ANNUAL EVALUATION:
Pursuant to the provisions of the Companies Act 2013 the Board has carried out anannual performance evaluation of its own performance the directors individually as wellas the evaluation of its Audit Committee & Nomination & Remuneration Committee.
A separate exercise was carried out to evaluate the performance of individual Directorsincluding the Chairman of the Board who were evaluated on parameters such as level ofengagement and contribution and independence of judgment to safeguard the interest of theCompany and its minority shareholders. The performance evaluation of the IndependentDirectors was carried out by the entire Board. The performance evaluation of the Chairmanand the Non Independent Directors was carried out by the Independent Directors.
27. CORPORATE GOVERNANCE:
We strive to maintain high standards of Corporate Governance in all our interactionswith our stakeholders. The Company has conformed to the Corporate Governance code asstipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. A separate section on Corporate Governance along with a certificate from the M/sPinakin Shah & Co. Practicing Company Secretary confirming the level of complianceis attached and forms a part of the Board's Report.
28. WHISTLE BLOWER POLICY / VIGIL MECHANISM:
The Company has implemented a Whistle Blower Policy whereby employees and otherstakeholders can report matters such as generic grievances corruption misconductillegality and wastage / misappropriation of assets to the Company. The policy safeguardsthe whistle blowers to report concerns or grievances and also provides direct access tothe Chairman of the Audit Committee. The details of the Whistle Blower Policy areavailable on Company's website at the link:http://www.armanindia.com/pdf/CorporateGovernancePDF/whistle_blower_policy.pdf
29. GREEN INITIATIVE:
In accordance with the 'Green Initiative' the Company has been sending the AnnualReport / Notice of AGM in electronic mode to those shareholders whose Email ids areregistered with the Company and / or the Depository Participants. Your Directors arethankful to the shareholders for actively participating in the Green Initiative.
30. EXTRACT OF ANNUAL RETURN:
The Extract of Annual Return as required under section 92(3) of the Companies Act 2013and rule 12(1) of the Companies (Management and Administration) Rules 2014 in Form MGT-9is annexed herewith as "Annexure-5" for your kind perusal and information.
31. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO:
A. Conservation of energy and technology absorption: Since the Company does not carryout any manufacturing activity the particulars regarding conservation of energytechnology absorption and other particulars as required by the Companies (Accounts) Rules2014 are not applicable.
B. Foreign exchange earnings and outgo:
There were no foreign exchange earnings and outgo during the year under review.
Buy Back of Securities:
The Company has not bought back any of its securities during the year under review.
The Company has not issued any Sweat Equity Shares during the year under review.
No Bonus Shares were issued during the year under review.
Employees Stock Option Plan:
The Company has not provided any Stock Option Scheme to the employees during thefinancial year 2016-17. However during the current financial year 2017-18 the Company hasgranted 97500 stock options to the eligible employees of the Company / Subsidiary Companyon 26.05.2017.
33. CHANGES IN SHARE CAPITAL:
There is no change in the share capital of the Company during the Year.
34. CODE OF CONDUCT:
The Code of Conduct for all Board members and Senior Management of the Company havebeen laid down and are being complied with in words and spirit. The compliance ondeclaration of code of Conduct signed by Managing Director & CEO of the Company isincluded as a part of this Annual Report.
35. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
Management's discussion and analysis forms a part of this annual report and is annexedto the Board's report.
36. ANY SIGNIFICANT AND MATERIAL ORDER PASSED BY REGULATORS OR COURTS OR TRIBUNALS:
There is no significant material order passed by the Regulators / Courts which wouldimpact the going concern status of the Company and its future operations.
The Board expresses its sincere thanks to all the employees customers suppliersinvestors lenders regulatory / government authorities and stock exchanges for theircooperation and support and look forward to their continued support in future.
| ||For and on behalf of the Board |
|Date: 05.08.2017 ||Chinubhai R. Shah |
|Place: Ahmedabad ||Chairman |
| ||DIN:00558310 |