The directors present their thirty-first Annual Report and the standalone andconsolidated audited financial statements for FY2018.
The highlights of the standalone financial results are as under:
| || || ||(Rs. In Crore) |
|Particulars ||FY2018 ||FY2017 ||% change over FY2017 |
|Total income ||13329 ||9989 ||33 |
|Interest and finance charges ||4585 ||3803 ||21 |
|Net interest income ||8744 ||6186 ||41 |
|Operating expenses ||3618 ||2536 ||43 |
|CSR expenditure ||40 ||28 ||43 |
|Pre-provisioning operating profit ||5086 ||3622 ||40 |
|Loan losses and provisions ||1030 ||804 ||28 |
|Profit before tax ||4056 ||2818 ||44 |
|Profit after tax ||2647 ||1837 ||44 |
|Balance brought forward from previous year ||3692 ||2411 || |
|Profit available for appropriations ||6339 ||4247 || |
|Appropriations || || || |
|Transfer to Reserve Fund u/s 45-IC(1) of the RBI Act 1934 ||(530) ||(368) || |
|Transfer to General Reserve || ||(184) || |
|Transfer to Infrastructure Reserve || ||(3) || |
|Dividend paid ||(198) || || |
|Tax on dividend ||(40) || || |
|Adjustment of dividend to ESOP Trust ||1 || || |
|Balance carried to Balance Sheet ||5571 ||3692 || |
Due to rounding off numbers presented in above table may not add up precisely to thetotals provided.
A summary of consolidated financial performance for FY2018 consolidating the results ofwholly owned subsidiary Bajaj Housing Finance Ltd. (BHFL) along with its subsidiary BajajFinancial
|Securities Ltd. (BFinsec) is given below: || || |
| || ||(Rs. In Crore) |
|Particulars ||FY2018 ||FY2017 |
|Total income ||13466 ||9992 |
|Interest and finance charges ||4635 ||3804 |
|Net interest income ||8831 ||6188 |
|Operating expenses ||3690 ||2567 |
|Loan losses and provisions ||1045 ||804 |
|Profit before tax ||4096 ||2817 |
|Profit after tax ||2674 ||1836 |
Performance and financial position of subsidiaries
During FY2018 BHFL commenced operations and all incremental home loans-cum-mortgagebusiness was done through BHFL. There were no major business operations in BFinsec. TheProfit after tax for FY2018 of BHFL was H 22.31 crore as against H 0.12 crore for FY2017and of BFinsec was H 7.06 crore as against H 0.48 crore for FY2017.
The directors recommend for consideration of the members at the ensuing annual generalmeeting payment of dividend of H 4 per equity share (200%) of face value of H 2 forFY2018. The amount of dividend and tax thereon aggregate to H 278.71 crore.
Dividend paid for FY2017 was H 3.60 per equity share (180%) of face value of H 2. Theamount of dividend and tax thereon aggregated to H 238.26 crore.
During FY2018 pursuant to provisions of the SEBI (Issue of Capital and DisclosureRequirements) Regulations 2009 the Companies Act 2013 and the approval of members andof the Board of Directors the Company made Qualified Institutions Placement of 26627218equity shares of face value of H 2 at a price of H 1690 per equity share (inclusive ofpremium of H 1688 per equity share) to Qualified Institutional Buyers aggregating toapproximately H 4500 crore.
During FY2018 the Company allotted equity shares of face value of H 2 as follows:
a) 26627218 equity shares to Qualified Institutional Buyers under QualifiedInstitutions Placement.
b) 1451080 equity shares at the applicable grant prices to the Trustees of BFLEmployee Welfare Trust under the Employee Stock Option Scheme 2009.
As on 31 March 2018 paidup share capital of the Company stood at H 1155936776consisting of 577968388 equity shares of face value of H 2 fully paidup.
Increase in borrowing powers
During FY2018 pursuant to section 180(1)(c) of the Companies Act 2013 the Companyincreased the limit on the borrowing powers of the Board of Directors from H 75000 croreto H 100000 crore to meet its growing business needs.
The Assets Under Management (AUM) as on 31 March 2018 were H 80444 crore as comparedto H 60196 crore as on 31 March 2017 an increase of 34% over the previous year. Theconsolidated AUM as on 31 March 2018 stood at H 84033 crore an increase of 40% over theprevious year.
The receivables under financing activity as on 31 March 2018 were H 77125 crore ascompared to H 56834 crore as on 31 March 2017 an increase of 36% over the previous year.The consolidated receivables under financing activity as on 31 March 2018 stood at H80714 crore an increase of 42% over the previous year.
Total income during FY2018 increased to H 13329 crore from H 9989 crore duringFY2017 an increase of 33% over the previous year.
The profit before tax for FY2018 was H 4056 crore as against H 2818 crore forFY2017 an increase of 44% over the previous year. The profit after tax for FY2018 was H2647 crore as compared to H 1837 crore for FY2017 an increase of 44% over the previousyear. This has been due to the Company's healthy net interest margin operatingefficiencies and prudent risk management.
The Company had an excellent year aided by strong volume growth across all its lines ofbusinesses. During FY2018 the Company launched various new products and variants tostrengthen its business model and continue its growth momentum.
The Company's current provisioning standards are more stringent than RBI prudentialnorms. In line with its conservative approach the Company continues to strengthen itsprovisioning norms beyond the RBI regulations by accelerating the provisioning to an earlystage of delinquencies based on the past experience and emerging trends.
The Company's loan losses and provisions increased from H 804 crore in FY2017 to H1030 crore in FY2018 taking into account the increased business. The Company ended FY2018with a net NPA of 0.38%.
Detailed information on the operations of the different products of the Company anddetails on the state of affairs of the Company are covered in the ManagementDiscussion and Analysis'.
Extract of annual return
The extract of annual return as provided under section 92(3) the Companies Act 2013in the prescribed Form MGT9 is annexed to this Report.
Number of meetings of the Board
Eight meetings of the Board were held during FY2018 as per details given in theannexed Corporate Governance Report'.
Directors' responsibility statement
In compliance of section 134(5) of the Companies Act 2013 the directors state that: lin the preparation of the annual accounts the applicable accounting standards have beenfollowed along with proper explanation relating to material departures; l the directorshave selected such accounting policies and applied them consistently and made judgmentsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial year and of the profit of theCompany for that period; l the directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of theCompanies Act 2013 for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities; l the directors have prepared the annualaccounts on a going concern basis; l the directors have laid down internal financialcontrols to be followed by the Company and that such internal financial controls areadequate and are operating effectively; and l the directors have devised proper systems toensure compliance with the provisions of all applicable laws and that such systems areadequate and are operating effectively.
Declaration by independent directors
The independent directors have submitted the declaration of independence as requiredunder section 149(7) of the Companies Act 2013 stating that they meet the criteria ofindependence as provided in section 149(6) of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 (the ListingRegulations').
Policy on directors' appointment and remuneration
The policy on directors' appointment and remuneration is given in the annexedCorporate Governance Report'.
Particulars of loans guarantees and investments
The Company being a non-banking finance company registered with the RBI and engaged inthe business of giving loans is exempt from complying with the provisions of section 186of the Companies Act 2013 in respect of loans and guarantees. Accordingly thedisclosures of the loans given as required under the aforesaid section have not been madein this Report.
During FY2018 the Company made following significant strategic investments:
One MobiKwik Systems Pvt. Ltd. (MobiKwik) - approximately H 225 crore bysubscribing to the equity shares and Series D cumulative compulsorily convertiblepreference shares.
Bajaj Housing Finance Ltd. (a wholly owned subsidiary) - an amount of H 1200crore by subscribing to 1200000000 equity shares of the face value of H 10 on rightsbasis.
Information regarding investments covered under the provisions of section 186 of theCompanies Act 2013 is detailed in the financial statements.
Related party transactions
During FY2018 transactions with related parties were entered with the approval of theAudit Committee pursuant to provisions of Companies Act 2013 and the Listing Regulations.The details of such transactions were placed before the Audit Committee for noting/review.
All related party transactions entered into during FY2018 were on an arm's length basisand in the ordinary course of business under the Companies Act 2013 and not materialunder the Listing Regulations and hence did not require members' prior approval under theCompanies Act 2013 and the Listing Regulations. During FY2018 there were no relatedparty transactions requiring disclosure under section 134 of the Companies Act 2013.
A policy on materiality of related party transactions and dealing with related partytransactions is placed on the Company's websitehttps://www.bajajfinserv.in/finance-investor-relations-policies-and-documents and is alsoincluded in this Annual Report.
Material changes and commitments
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.
Conservation of energy
The Company has taken inter alia following measures to reduce energyconsumption:
switched from conventional lighting systems to LED lights at most of thebranches in metro areas.
selecting and designing offices to facilitate maximum natural light utilisation.
The details pertaining to technology absorption have been explained in the annexedManagement Discussion and Analysis'.
Foreign exchange earnings and outgo
During FY2018 the Company did not have any foreign exchange earnings and foreignexchange outgo amounted to H 31.54 crore (FY2017 H 17.56 crore).
The Board of Directors has adopted a risk management policy for the Company whichprovides for identification assessment and control of risks which in the opinion of theBoard may threaten the existence of the Company. The Management identifies and controlsrisks through a properly defined framework in terms of the aforesaid policy.
Corporate social responsibility
During FY2018 the Company spent H 39.56 crore on corporate social responsibility(CSR). Detailed information report on the CSR policy and the CSR initiatives taken duringFY2018 is given in the annexed Annual Report on CSR activities'.
Formal annual evaluation
Information on the manner in which formal annual evaluation has been made by the Boardof its own performance and that of its Committees Chairperson and individual directors isgiven in the annexed 'Corporate Governance Report'.
Directors and key managerial personnel (KMP)
According to the provisions of the Companies Act 2013 Rajeev Jain (DIN 01550158)Managing Director retires from the Board by rotation this year and being eligible hasoffered his candidature for reappointment.
Brief details of Rajeev Jain Managing Director who is seeking reappointment aregiven in the notice of annual general meeting.
There was no change in the directors and KMP during the FY2018.
Significant and material orders
During FY2018 no significant and material orders were passed by any regulator or courtor tribunal impacting the going concern status and Company's operations in future.
Adequacy of internal financial controls
The Company has documented its internal financial controls considering the essentialcomponents of various critical processes physical and operational which include itsdesign implementation and maintenance along with periodical internal review ofoperational effectiveness and sustenance.
This ensures orderly and efficient conduct of its business including adherence toCompany's policies safeguarding of its assets prevention of errors accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation.
The internal financial controls with reference to the financial statements wereadequate and operating effectively.
Employee stock option scheme
During FY2018 there has been no change in the Employee Stock Option Scheme 2009(the ESOP scheme') of the Company. The ESOP Scheme is in compliance with the SEBI(Share Based Employee Benefits) Regulations 2014 (the SBEB Regulations').
Disclosures pertaining to the ESOP Scheme pursuant to the SBEB Regulations are placedon the Company's websitehttps://www.bajajfinserv.in/finance-investor-relation-annual-reports Grant wise details ofoptions vested exercised and cancelled are provided in the notes to the standalonefinancial statements.
During FY2018 the Company accepted fixed deposits (FDs) of H 3662.23 crore. FDsoutstanding at the year end were H 5705.02 crore. As on 31 March 2018 there were six FDsamounting to H 4.44 lakh which had matured and remained unclaimed.
Pursuant to provisions of the RBI Act 1934 the Company has created a charge onstatutory liquid assets amounting to H 612.67 crore in favour of the trustee for FDholders.
During FY2018 the Company accepted inter corporate deposits (ICDs) of H 2377.33crore. ICDs outstanding as on 31 March 2018 were H 1863.98 crore.
Overall deposits outstanding as on 31 March 2018 were H 7569 crore.
During FY2018 there was no default in repayment of deposits or payment of interestthereon.
During FY2018 the Company retained or upgraded its credit ratings owing to highcapital adequacy strong promoter support tightened credit acceptance criteria and robustasset liability management. During FY2018 the Company has been upgraded from "ICRAAA+(Positive)" to "ICRA AAA (Stable)" for its long term debt programme fromICRA Ratings.
The Company enjoys the following ratings from various credit rating agencies.
Long term debt rating
l "CRISIL AAA/Stable" for its long term borrowing programme which comprisesof H 22052.80 crore for the non-convertible debenture (NCD) programme H 3300 crore forthe lower tier II bond/subordinate debt programme H 21000 crore for its bank loan ratingprogramme and "FAAA/Stable" for the fixed deposit programme. l "ICRAAAA(Stable)" for its long term borrowing programme which comprises of H 3238 crorefor the NCD programme and H 1700 crore for the lower tier II bond/subordinate debtprogramme and "MAAA(Stable)" for the fixed deposit programme. l "INDAAA/Stable" for its long term borrowing programme which comprises of H 10000 crorefor the NCD programme H 2000 crore for the subordinate debt programme and H 30000 crorefor its bank loan rating programme. l "CARE AAA/Stable" for its long termborrowing programme which comprises of H 1545 crore for the NCD programme H 3455 crorefor the subordinate debt programme.
Short term debt rating
"CRISIL A1+" for its short-term debt programme with a programme sizeof H 15000 crore
"CRISIL A1+" for its short-term bank loan facilities
"ICRA A1+" for its short-term debt programme with a programme size ofH 15000 crore
"IND A1+" for its short-term bank loan facilities
All of the above ratings indicate a high degree of safety with regard to timely paymentof interest and principal.
The Company continues to fulfill all the norms and standards laid down by the RBIpertaining to nonperforming assets capital adequacy statutory liquidity assetsetc. As against the RBI norm of 15% the capital adequacy ratio of the Company was 24.71%as on 31 March 2018. In line with the RBI guidelines for asset liability management (ALM)system for NBFCs the Company has an Asset Liability Committee which meets monthly toreview its ALM risks and opportunities.
The Company is also in compliance with the NBFC Corporate Governance (ReserveBank) Directions 2015.
Policy on dividend distribution
The policy on dividend distribution is given in the annexed Corporate GovernanceReport'.
Presentation of financial statements
The financial statements of the Company for the year ended 31 March 2018 have beendisclosed as per schedule III to the Companies Act 2013.
Consolidated financial statements
The directors also present the audited consolidated financial statements incorporatingthe duly audited financial statements of the subsidiaries prepared in compliance with theCompanies Act 2013 Accounting Standard-21 and the Listing Regulations.
A separate statement containing the salient features of its subsidiaries in theprescribed Form AOC1 is attached to the standalone financial statements.
A summary of the key financials of the Company's subsidiaries is included inthis Annual Report. A copy of audited financial statements for each of the subsidiarycompanies will be made available to the members of the Company seeking such informationat any point of time.
The audited financial statements for each of the subsidiary companies will bemade available for inspection by any member of the Company at its registered office during10.00 a.m. to 12 noon.
The financial results are placed on the Company's websitehttps://www.bajajfinserv.in/ finance-investor-relations-financial-information
Details as required under the provisions of section 197(12) of the CompaniesAct 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as amended are annexed to this Report.
Details as required under the provisions of section 197(12) of the CompaniesAct 2013 read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 as amended which form part of the Directors' Reportwill be made available to any member on request as per provisions of section 136(1) ofthe said Act.
The directors' responsibility statement as required by section 134(5) of theCompanies Act 2013 appears in a preceding paragraph.
Pursuant to the provisions of the Companies Act 2013 no fraud was reported byauditors of the Company to the Audit Committee during FY2018.
Disclosures as prescribed by NonBanking Financial (Deposit Accepting orHolding) Companies Prudential Norms (Reserve Bank) Directions 2007 and other NBFCregulations have been made in this Annual Report.
Pursuant to RBI Master Direction-Information Technology Framework for the NBFCsector the Company has constituted an IT Strategy Committee to review the IT strategiesin line with the corporate strategies board policy reviews cyber security arrangementsand any other matter related to IT governance.
Cash Flow Statement for FY2018 is attached to the Balance Sheet.
The Company has a policy on prevention of sexual harassment at the workplace. Nocase of sexual harassment was reported during FY2018.
Inclusion in NIFTY 50 Index
With effect from 29 September 2017 the Company has been included in the NIFTY 50 Indexof National Stock Exchange of India Ltd.
Mint Corporate Strategy Award - Shaping' category
During FY2018 BFL has been conferred the prestigious Mint Corporate Strategy Award -Shaping' category in recognition of excellence in corporate governance.
The nominated firms are evaluated for one of the four strategic environments namely Classic Adaptive Shaping and Renewal. The parameters of evaluation were Grosssales (CAGR) Profit margin (%) Return on Capital Employed (ROCE) (%) Debt Equity Ratio(D/E) and Soft score.
Pursuant to the Listing Regulations a separate section titled CorporateGovernance' has been included in this Annual Report along with the Reports onManagement Discussion and Analysis' and General Shareholder Information'.
All Board members and Senior Management personnel have affirmed compliance with thecode of conduct for FY2018. A declaration to this effect signed by the Managing Directorof the Company is included in this Annual Report.
The Managing Director and Chief Financial Officer have certified to the Board withregard to the financial statements and other matters as specified in the ListingRegulations.
A certificate from auditors of the Company regarding compliance of conditions ofcorporate governance is annexed to this Report.
Business responsibility report
Pursuant to the provisions of the Listing Regulations the Company is required to giveBusiness Responsibility Report (BRR') in the Annual Report.
As a green initiative the BRR for FY2018 has been placed on the Company's websitehttps://www.bajajfinserv.in/finance-investor-relation-annual-reports A physical copy ofthe BRR will be made available to any members on request.
Secretarial standards of ICSI
Pursuant to the approval from the Ministry of Corporate Affairs (MCA) the Institute ofCompany Secretaries of India (ICSI) has on 14 June 2017 revised the SecretarialStandards on Meetings of the Board of Directors (SS1) and General Meetings(SS2) effective from 1 October 2017. The Company is compliant with the same.
Pursuant to the provisions of section 139 of the Companies Act 2013 S R B C & COLLP Chartered Accountants were appointed as statutory auditors of the Company at the30th annual general meeting (AGM) of the Company for a period from the conclusion of thesaid AGM till the conclusion of the 35th AGM subject to ratification of their appointmentby the members at every AGM held thereafter.
MCA vide its notification dated 7 May 2018 has brought into effect certain provisionsof the Companies (Amendment) Act 2017 thereby amending provisions of the Companies Act2013 including section 139 of the Act whereby the requirement of ratification ofappointment of statutory auditors at every subsequent AGM has been done away with.
However pursuant to the provisions of Companies Act 2013 a resolution to delegatethe authority to the Board of Directors to fix the remuneration of statutory auditors ofthe Company for the years 2018-19 onwards is proposed in the notice of the ensuing AGM forthe approval of the members.
The Audit Report submitted by S R B C & CO LLP for FY2018 does not contain anyqualification reservation or adverse remark or disclaimer.
Pursuant to the provisions of section 204 of the Companies Act 2013 the Board hasre-appointed Shyamprasad D Limaye company secretary in practice (FCS No. 1587 CP No.572) to undertake secretarial audit of the Company.
A report from the secretarial auditor in the prescribed Form MR-3 is annexed to thisReport. The same does not contain any qualification reservation or adverse remark ordisclaimer.
The Board of Directors takes this opportunity to express its sincere appreciation forthe support and cooperation from its members RBI and other regulators banksfinancial institutions and the trustees for debenture holders and FD holders.
The Board of Directors also places on record its sincere appreciation of the commitmentand hard work put in by the Management and the employees of the Company and thanks themfor yet another excellent year.
On behalf of the Board of Directors
Pune: 17 May 2018