Bajaj Finserv Ltd.
|BSE: 532978||Sector: Financials|
|NSE: BAJAJFINSV||ISIN Code: INE918I01018|
|BSE 15:54 | 19 Apr||9470.95||
|NSE 15:44 | 19 Apr||9469.90||
|Mkt Cap.(Rs cr)||150,721|
|Mkt Cap.(Rs cr)||150720.70|
Bajaj Finserv Ltd. (BAJAJFINSV) - Director Report
Company director report
The directors present their Thirteenth Annual Report and the audited standalone and consolidated financial statements for the year ended 31 March 2020.
The financial results of the Company are elaborated in the Management Discussion and Analysis Report.
The highlights of the Standalone Financial Results are as follows:
Note: Detailed movement of above reserves can be seen in `Statement of Changes in Equity'.
The highlights of the Consolidated Financial Results are as follows:
Dividend Distribution Policy
As mandated under regulation 43A of SEBI Listing Regulations 2015 for the top 500 companies as on 31 March 2016 by market capitalisation the Board of Directors of the Company at its meeting held on 27 October 2016 adopted a Dividend Distribution Policy for the Company. The Policy sets out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to its shareholders.
As a green initiative the Dividend Distribution Policy is placed on Company's website www.bajajfinserv.in/miscellaneous-divident-policy.pdf
A copy of the Policy will be made available by email to any shareholder on request.
The Board of Directors at their meeting held on 21 February 2020 declared an interim dividend of Rs 5 per equity share (100%) of face value of Rs 5 payable to shareholders holding shares as on the record date viz. 4 March 2020. The amount of interim dividend and tax thereon aggregate to Rs 79.57 crore.
The directors recommend for consideration of the shareholders at the ensuing Annual General Meeting (AGM) the above referred interim dividend as final dividend for the financial year ended 31 March 2020.
For the year ended 31 March 2019 the dividend paid was Rs 2.50 per share of face value of Rs 5 each (50%) and the total dividend and the tax thereon to the extent applicable aggregated to Rs 39.79 crore.
The paid-up equity share capital as on 31 March 2020 was Rs 79.57 crore consisting of 159137290 fully paid-up equity shares of face value of Rs 5 each. During the Rights Issue of equity shares made by the Company in 2012 certain shares had been kept in abeyance as required by law. With resolution of a few cases during the year under review the Company has allotted 1179 equity shares of the face value of Rs 5 each at the original Rights Issue price of Rs 650 per share to the eligible shareholders.
During the year under review the Company granted 164925 stock options pursuant to Bajaj Finserv Ltd. Employee Stock Option Scheme 2018 (BFS-ESOS).
There was no public issue rights issue bonus issue or preferential issue etc. during the year under review. The Company has not issued shares with differential voting rights or sweat equity shares.
Classification of the Company as a Core Investment Company (CIC)
The Company having satisfied the criteria specified for being a CIC not requiring registration with RBI pursuant to the provisions of section 45-IA of RBI Act 1934 had applied to RBI in this regard on 26 June 2015.
In response to the above RBI vide its Order dated 23 October 2015 has cancelled the certificate of registration to carry on the business of NBFC issued to the Company and has confirmed the eligibility of the Company as a CIC not requiring registration with RBI pursuant to the provisions of section 45-IA of the RBI Act 1934. The Company is thus a CIC under the said provisions.
Detailed information on the operations of the different business lines of the Company and details on the state of affairs of the Company are covered in the Management Discussion and Analysis Report.
Incorporation of Bajaj Finserv Health Ltd. a wholly-owned subsidiary
During the year under review the Company incorporated a wholly-owned subsidiary `Bajaj Finserv Health Ltd.' Over time this entity is expected to create a digital ecosystem in the healthcare segment connecting customers with service providers in the healthcare space such as doctors hospitals nursing homes pharmacies diagnostic centres and the like by offering a complete range of products including financial solutions such as distribution of insurance and healthcare finance.
Adoption of Confederation of Indian Industry (CII) Charters
Your Company has established several policies covering Code of Conduct for directors and employees including anti-corruption clauses as well as policies for fair and responsible workplace practices. These policies are integrated into business operations. The Company has also signed the following charters of CII in this regard which strengthens the Company's commitment to these policies.
1. Model Code of Conduct for Ethical Business Practices
2. Charter on Fair & Responsible Workplace Guidelines for Collaborative Employee Relations
3. Charter on Fair & Responsible Workplace Guidelines for Contact Labour.
Further details of these policies are available in our Business Responsibility Report.
Extract of annual return
The extract of annual return as provided under sub-section (3) of section 92 of the Companies Act 2013 (`the Act') in the prescribed form MGT-9 is annexed to this Report and also placed on the Company's website https://www.bajajfinserv.in/finserv-investor-relations-annual-reports
Number of meetings of the Board
Six meetings of the Board were held during the year as against the statutory requirement of four meetings. Detailed information is given in the Corporate Governance Report.
Directors' responsibility statement
As required under clause (c) of sub-section (3) of section 134 of the Act directors to the best of their knowledge and belief state that:
l in the pr eparation of the annual accounts the applicable Accounting Standards had been followed along with proper explanation relating to material departures;
l the dir ectors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;
the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
the directors had prepared the annual accounts on a going concern basis;
the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Details in respect of frauds reported by auditors under section 143(12)
During the year under review there were no frauds reported by the Statutory Auditors to the Audit Committee or the Board under section 143(12) of the Act.
Declaration by independent directors
The independent directors have submitted a declaration of independence as required pursuant to section 149(7) of the Act stating that they meet the criteria of independence as provided in section 149(6) of the Act and regulation 16 of SEBI Listing Regulations 2015.
The Board took on record the declaration and confirmation submitted by the independent directors regarding them meeting the prescribed criteria of independence after undertaking due assessment of the veracity of the same as required under regulation 25 of SEBI Listing Regulations 2015.
The Ministry of Corporate Affairs vide its circular dated 22 October 2019 further amended the Companies (Appointment and Qualification of Directors) Rules 2014 by requiring an independent director to apply online within 1 May 2020 to the Indian Institute of Corporate Affairs for inclusion of his/her name in the data bank for such period till he/she continues to hold office of an independent director in any company. The independent directors were also required to submit a declaration of compliance in this regard. All the independent directors of the Company have submitted the declaration with respect to the same.
Directors' Remuneration Policy and criteria for matters under section 178
The salient features of the Policy on directors' appointment and remuneration forms a part of the `Corporate Governance Report'. The said policy is placed on the Company's website www.bajajfinserv.in
Particulars of loans guarantees or investments
Information regarding loans guarantees and investments covered under section 186 of the Act are detailed in the financial statements.
Related party transactions
No Related Party Transactions (RPTs) were entered into by the Company during the year under review which attracted the provisions of section 188 of the Act. Further there being no `material' RPTs as defined under regulation 23 of SEBI Listing Regulations 2015 there are no details to be disclosed in form AOC-2 in that regard.
During the year 2019-20 pursuant to section 177 of the Act and regulation 23 of SEBI Listing Regulations 2015 all RPTs were placed before the Audit Committee for its approval. All related party transactions during the year were conducted at arms' length and were in the ordinary course of business.
The revised Policy on materiality of RPTs and also on dealing with RPTs has been formulated by the Board at its meeting held on 16 July 2014 and amended on 14 October 2014. The said Policy was further amended inter alia stipulating the threshold limits on 12 March 2019 and the same is placed on the Company's website www.bajajfinserv.in
Material changes and commitments
There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company and the date of this Report.
Conservation of energy and technology absorption
Particulars regarding conservation of energy are as follows:
The Company is engaged in wind-farm activities in addition to its financial services activities. A summary of the performance of the wind power division is available in the Management Discussion and Analysis which forms part of this Annual Report. Being essentially a financial services Company no particulars regarding technology absorption are required to be given in this Report.
Steps taken to conserve energy and utilise alternate sources of energy:
The Company has installed a renewable energy (wind) project with a capacity of 65.2 MW. During the year under review it generated 792 lakh units which it sold to third parties.
It however is unable to make captive use of wind energy because new regulations do not permit the same where monthly demand is less than 700 KW. The Company has installed LED lamps in place of tube lights and CFL thereby reducing energy consumption in lighting by around 864 units during the year.
Further details of initiatives taken by the Company are provided in the annexed Business Responsibility Report.
Foreign exchange earnings and outgo
Total foreign exchange earned by the Company was Rs Nil during the year under review as well as during the previous year.
Total foreign exchange outflow during the year under review was Rs 0.64 crore as against Rs 0.85 crore during the previous year.
Risk Management Policy
Information on the development and implementation of a Risk Management Policy for the Company including identification therein of elements of risk which in the opinion of the Board may threaten the existence of the Company is given in the Corporate Governance Report.
Corporate Social Responsibility (CSR)
Detailed information on the CSR Policy developed and implemented by the Company on CSR initiatives taken during the year in compliance with section 135 of the Act and Rules made thereunder is given in the annexed Annual Report on CSR activities.
Formal annual evaluation of the performance of the Board its Committees Chairperson & Individual Directors
Information on the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees Chairperson and Individual Directors is given in the annexed `Corporate Governance Report'.
Following are the subsidiary and joint venture companies of the Company as at 31 March 2020
*Incorporated on 5 July 2019
Detailed information on the performance and financial position of each subsidiary/joint venture of the Company is covered in the Management Discussion and Analysis Report and in Form AOC-1 of consolidated financial statements.
Directors and Key Managerial Personnel-Changes
A. Change in Directorate
i. Sad demise of Chairman and Independent Director
Your directors express their profound grief on the sudden demise of Nanoo Pamnani.
He was an independent director of the Company since January 2008 and was appointed as Chairman of the Company with effect from 17 May 2019. He was member/chairman of various Board Committees. He passed away on 22 February 2020 and consequently ceased to be a director of the Company. The Board places on record its sincere appreciation for the invaluable guidance services and mentorship provided by him as an independent director and Chairman of the Company.
ii. Appointment of Chairman
In view of the sad demise of Shri Nanoo Pamnani the Board of Directors accorded its approval by way of circular resolution for the appointment of Sanjiv Bajaj Managing Director & CEO of the Company as Chairman of the Company with effect from 17 March 2020 in place of Nanoo Pamnani.
iii. Retirement by Rotation
T he independent directors hold office for a fixed term not exceeding five years from the date of their appointment and are not liable to retire by rotation. The Companies Act 2013 mandates that at least two-thirds of the total number of directors (excluding independent directors) shall be liable to retire by rotation and one-third of such directors shall retire from office at every AGM. Accordingly Rajiv Bajaj (DIN 00018262) director being the longest in the office amongst the three directors liable to retire by rotation retires from the Board by rotation this year and being eligible has offered his candidature for re-appointment. Prescribed details of Rajiv Bajaj director who is seeking re-appointment are given in the Notice of AGM.
B. Change in KMP
There was no change except as above in Key Managerial Personnel during the year under review.
Detailed information on the directors is provided in the Corporate Governance Report.
Significant and material orders passed by the regulators or courts
During the year under review no significant and material orders passed by any regulator or court or tribunal which may impact the going concern status of the Company and its operations in future.
The COVID-19 pandemic has caused a huge disruption creating an unprecedented impact on the financial well-being of nations corporations and individuals. The assessment of impact of COVID-19 on the operations of the Company forms a part of the Management Discussion and Analysis Report.
At the beginning of each financial year an audit plan is rolled out after the same has been approved by Audit Committee. The audit plan is aimed at evaluation of the efficacy and adequacy of internal control systems and compliance thereof robustness of internal processes policies and accounting procedures compliance with laws and regulations. Based on the reports of internal audit function process owners undertake corrective action in their respective areas. Significant audit observations and corrective actions thereon are presented to the Audit Committee of Board. More details on Audit Committee on composition and functioning of Audit Committee are given in Corporate Governance Report.
Details of internal financial controls with reference to the financial statements
The Company has documented its internal financial controls considering the essential components of various critical processes physical and operational. This includes its design implementation and maintenance along with periodical internal review of operational effectiveness and sustenance which are commensurate with the nature of its business and the size and complexity of its operations.
This ensures orderly and efficient conduct of its business including adherence to the Company's policies safeguarding of its assets prevention of errors accuracy and completeness of the accounting records the timely preparation of reliable financial information and prevention and detection of frauds and errors.
The internal financial controls with reference to the financial statements were adequate and operating effectively.
During the year 2019-20 approval of shareholders was sought for the below businesses through a Postal Ballot. All the resolutions were passed by overwhelming majority:
Amendment to Articles of Association
The Articles of Association of the Company were amended in its entirety as per the form specified in Table F in Schedule I to the Act including insertion of an enabling provision for appointment of any person who has rendered significant or distinguished services to the Company or to the industry to which the Company's business relates or in the public field as `Chairman Emeritus'.
Investment limit of Foreign Portfolio Investors' (FPIs)
A s per the Foreign Exchange Management (Non-debt Instruments) Rules 2019 the existing FPI limit with effect from 1 April 2020 will be the sectoral cap i.e. 100 per cent in case of the Company. The said limit be changed to 24 or 49 or 74 per cent with approval of the Board and the shareholders before 31 March 2020. Accordingly pursuant to the approval of the shareholders by means of a special resolution through a Postal Ballot the investment limit of Foreign Portfolio Investors was fixed at 24 per cent. As per the said Rules the said limit of 24% can be enhanced to 49 per cent 74 per cent or 100 per cent but cannot be reduced.
Maintenance of cost records
Provisions relating to maintenance of cost records as specified by the Central Government under section 148 of the Act are applicable to the Company and the same have been complied with for the financial year 2019-20.
Presentation of financial statements
The financial statements of the Company for the year ended 31 March 2020 have been disclosed as per Division III of Schedule III to the Act.
Indian Accounting Standards 2015
The annexed financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under section 133 of the Act. Companies (Indian Accounting Standard) Rules 2015 and other relevant provisions of the Act.
Consolidated financial statements
The directors also present the audited consolidated financial statements incorporating the duly audited financial statements of the subsidiaries and joint ventures and as prepared in compliance with the Act applicable Ind AS and SEBI Listing Regulations 2015.
A separate statement containing the salient features of our subsidiaries and joint ventures in the prescribed Form AOC-1 is annexed.
Employee stock option scheme
During the year 2018-19 the Company adopted BFS ESOS on 19 July 2018 and since then there has been no change in the BFS ESOS. The BFS ESOS is in compliance with SEBI (Share Based Employee Benefits) Regulations 2014 and the same has been certified by the Statutory Auditors of the Company.
A statement giving complete details as at 31 March 2020 pursuant to regulation 14 of the SEBI (Share Based Employee Benefits) Regulations 2014 is available on the website of the Company and can be accessed at www.bajajfinserv.in/miscellaneous
Details of options vested exercised and cancelled are provided in the annexed notes to the financial statements.
The summary of the key financials of the Company's subsidiaries and joint venture in Form AOC-1 is included in this Annual Report. A copy of the audited financial statements for each of the subsidiary companies will be emailed to members of the Company seeking such information at any point of time. The audited financial statements for each of the subsidiaries will be kept for inspection by any member of the Company at its registered office during business hours. The same are placed on the Company's website www.bajajfinserv.in
Details as required under section 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 containing inter alia ratio of remuneration of directors and KMP to median remuneration of employees percentage increase in the median remuneration are annexed to this Report.
Details of top ten employees in terms of the remuneration and employees in receipt of remuneration as prescribed under rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 containing details prescribed under rule 5(3) of the said Rules which form part of the Directors' Report will be made available to any member on request as per provisions of section 136(1) of the Act.
The directors' responsibility statement as required by section 134(5) of the Act appears in a preceding paragraph.
A Cash Flow Statement for the year 2019-20 is attached to the Balance Sheet.
Pursuant to the legislation `The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013' the Company has a Policy on Prevention of Sexual Harassment at Workplace and has constituted an Internal Complaints Committee. There was no case reported during the year under review under the said Policy.
Pursuant to SEBI Listing Regulations 2015 a separate chapter titled `Corporate Governance' has been included in this Annual Report along with the reports on Management Discussion and Analysis and General Shareholder Information.
All Board members and Senior Management Personnel have affirmed compliance with the Code of Conduct for the year 2019-20. A declaration to this effect signed by the Chairman & Managing Director of the Company is contained in this Annual Report.
The Chairman & Managing Director and Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as required under regulation 17(8) of SEBI Listing Regulations 2015.
A Certificate from the Statutory Auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.
Business Responsibility Report
Regulation 34(2) of SEBI Listing Regulations 2015 inter alia provides that the annual report of the top 1000 listed entities based on market capitalisation (calculated as on 31 March of every financial year) shall include a Business Responsibility Report (BRR).
Since Bajaj Finserv is one of the top 1000 listed entities the Company as in the previous years has presented its BRR for the year 2019-20 which is part of this Annual Report.
For the first time this BRR also includes elements of Environmental Social & Governance for the Company and its subsidiaries.
As a green initiative this BRR being part of this Annual Report has been placed on the Company's website https://www.bajajfinserv.in/finserv-investor-relations-annual-reports
A copy of the BRR will be made available by email to any shareholder on request.
Secretarial standards of ICSI
Pursuant to the approval given on 10 April 2015 by the Central Government to the Secretarial Standards specified by the Institute of Company Secretaries of India (ICSI) the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) came into effect from 1 July 2015. The said standards were amended with effect from 1 October 2017. The Company is in compliance with the same.
Pursuant to the provisions of section 139 of the Act the members at the 10th AGM of the Company held on 19 July 2017 appointed S R B C & CO LLP Chartered Accountants (firm registration no. 324982E/E300003) as Statutory Auditor of the Company from the conclusion of 10th AGM till the conclusion of 15th AGM covering one term of five consecutive years.
The Statutory Audit Report for the year 2019-20 being unmodified does not contain any qualification reservation or adverse remark or disclaimer by the Statutory Auditor.
Pursuant to the provisions of section 204 of the Act and the Rules made thereunder the Board has re-appointed Shyamprasad D Limaye Practising Company Secretary (FCS No. 1587 CP No. 572) to undertake the secretarial audit of the Company. The Secretarial Audit Report for the year 2019-20 as issued by him in the prescribed form MR-3 is annexed to this Report.
Pursuant to amendments under SEBI Listing Regulations 2015 and SEBI circular dated 8 February 2019 a report on secretarial compliance as required under regulation 24A is being submitted to stock exchanges as obtained from Shyamprasad D Limaye for the financial year 2019-20.
The said Reports do not contain any qualification reservation or adverse remark or disclaimer by the Secretarial Auditor.
Pursuant to section 148 of the Act and the Rules made thereunder the Board of Directors had on the recommendation of the Audit Committee re-appointed Dhananjay V Joshi & Associates (firm registration no. 000030) Cost Accountants to audit the cost accounts of the Company for the financial year 2020-21 on a remuneration of Rs 60000 plus taxes out-of-pocket travelling and living expenses subject to ratification by the shareholders at the ensuing AGM. Accordingly a resolution seeking members' ratification for the remuneration payable to the Cost Auditor is included in the Notice convening the AGM.
On behalf of the Board of Directors
Chairman & Managing Director
Pune: 21 May 2020