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Bajaj Finserv Ltd.

BSE: 532978 Sector: Financials
NSE: BAJAJFINSV ISIN Code: INE918I01018
BSE 00:00 | 16 Nov 5684.40 87.00
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NSE 00:00 | 16 Nov 5695.65 98.55
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OPEN 5600.00
PREVIOUS CLOSE 5597.40
VOLUME 9504
52-Week high 7200.00
52-Week low 4444.00
P/E 283.37
Mkt Cap.(Rs cr) 90,462
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 5600.00
CLOSE 5597.40
VOLUME 9504
52-Week high 7200.00
52-Week low 4444.00
P/E 283.37
Mkt Cap.(Rs cr) 90,462
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Bajaj Finserv Ltd. (BAJAJFINSV) - Director Report

Company director report

The directors present their Eleventh Annual Report and audited financial statements forthe year ended 31 March 2018.

Financial results

The financial results of the Company are elaborated in the Management Discussion andAnalysis Report.

The highlights of the Standalone Financial Results are as under:

(Rs. In Crore)
Particulars FY2018 FY2017
Total revenue 252.24 165.00
Total expenses 85.45 61.00
Profit before tax 166.79 104.00
Tax expense 25.45 33.98
Profit for the year 141.34 70.02
Balance carried to Balance Sheet 141.34 70.02
Earnings per share (H ) 8.9 4.4
Proposed dividend (%) 35% 35%
Dividend and tax thereon 27.85 27.85

The highlights of the Consolidated Financial Results are as under:

(Rs. In Crore)
Particulars FY2018 FY2017
Total revenue 30599.41 24507.72
Total expenses 24289.24 19583.19
Profit before tax 6310.17 4924.53
Tax expense 1970.29 1474.82
Profit after tax 4339.88 3449.71
Minority interest 1598.44 1187.79
Profit for the year 2741.44 2261.92
Earnings per share (H) 172.3 142.1

Dividend

Your directors recommend for consideration of the shareholders at the ensuing AnnualGeneral Meeting (AGM) payment of a dividend of Rs.1.75 per equity share (35%) of facevalue of Rs.5 each for the year ended 31 March 2018. The amount of dividend and the taxthereon to the extent applicable aggregate to Rs.27.85 crore.

For the year ended 31 March 2017 the dividend paid was also Rs.1.75 per equity share(35%) of face value of Rs.5 each. The amount of dividend and the tax thereon to the extentapplicable aggregated to Rs.27.85 crore.

Share capital

The paid-up equity share capital as on 31 March 2018 was Rs.79.57 crore consisting of159135097 fully paid-up equity shares of face value of Rs.5 each. During the RightsIssue of equity shares made by the Company in 2012 certain shares had been kept inabeyance as required by law. With resolution of a few cases during the year under reviewthe Company has allotted 3317 equity shares of the face value of Rs.5 each at theoriginal Rights Issue price of Rs.650 per share to the eligible shareholders.

There was no public issue rights issue bonus issue or preferential issue etc. duringthe year under review. The Company has not issued shares with differential voting rightsor sweat equity shares. It has not granted any stock options.

Classification of the Company as a Core Investment Company (CIC)

The Company having satisfied the criteria specified for being a CIC not requiringregistration with RBI pursuant to the provisions of section 45-IA of RBI Act 1934 hadapplied to RBI in this regard on 26 June 2015.

In response to the above RBI vide its Order dated 23 October 2015 has cancelled thecertificate of registration to carry on the business of NBFC issued to the Company and hasconfirmed the eligibility of the Company as a CIC not requiring registration with RBIpursuant to the provisions of section 45-IA of the RBI Act 1934. The Company is thus aCIC under the said provisions.

Operations

Detailed information on the operations of the different business lines of the Companyand details on the state of affairs of the Company are covered in the ManagementDiscussion and Analysis Report.

Inclusion in NIFTY 50 Index

With effect from 2 April 2018 the Company has been included in the NIFTY 50 Index ofNational Stock Exchange of India Limited.

Commencement of operations by Bajaj Finserv Direct Ltd.

During the year under review Bajaj Financial Holdings Ltd. a wholly-owned subsidiaryhas firmed up new business plans for undertaking activities on digital and online platformto augment the business of the Company's subsidiaries and has changed its name to BajajFinserv Direct Ltd. with effect from 27 February 2018.

Adoption of Confederation of Indian Industry (CII) Charters

Your Company being a member of CII has adopted the following Code/Charters:

1. Model Code of Conduct for Ethical Business Practices;

2. Charters on Fair & Responsible Workplace Guidelines for Collaborative EmployeeRelations; and

3. Charters on Fair & Responsible Workplace Guidelines for Contact Labour.

Extract of annual return

The extract of annual return as provided under sub-section (3) of section 92 of theCompanies Act 2013 in the prescribed form MGT-9 is annexed to this Report.

Number of meetings of the Board

Six meetings of the Board were held during the year. Detailed information is given inthe Corporate Governance Report.

Directors' responsibility statement

As required under clause (c) of sub-section (3) of section 134 of the Companies Act2013 directors to the best of their knowledge and belief state that:

• in the preparation of the annual accounts the applicable Accounting Standardshad been followed along with proper explanation relating to material departures;

• the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit and loss of the Company for that period;

• the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother 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 theCompany and that such internal financial controls are adequate and were operatingeffectively; and

• the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

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 Auditorsto the Audit Committee or the Board under section 143(12) of the Companies Act 2013.

Declaration by independent directors

The independent directors have submitted the declaration of independence as requiredpursuant to section 149(7) of the Companies Act 2013 stating that they meet the criteriaof independence as provided in section 149(6) of the said Act.

Directors' Remuneration Policy and criteria for matters under section 178

Information regarding Directors' Remuneration Policy and criteria for determiningqualifications positive attributes independence of a director and other matters providedunder sub-section (3) of section 178 are provided in the Corporate Governance Report.

Particulars of loans guarantees or investments

Information regarding loans guarantees and investments covered under section 186 ofthe Companies Act 2013 are detailed in the financial statements.

Related party transactions

No Related Party Transactions (RPTs) were entered into by the Company during thefinancial year which attracted the provisions of section 188 of the Companies Act 2013.There being no ‘material' related party transactions as defined under regulation 23of the SEBI Listing Regulations 2015 there are no details to be disclosed in form AOC-2in that regard.

During the year 2017-18 pursuant to section 177 of the Companies Act 2013 andregulation 23 of the SEBI Listing Regulations 2015 all RPTs were placed before the AuditCommittee for its approval.

The policy on RPTs as approved by the Board is uploaded on the Company's websitewww.bajajfinserv.in

Material changes and commitments

No material changes and commitments affecting the financial position of the Companyoccurred between the end of the financial year and the date of this Report.

Conservation of energy and technology absorption

The Company is engaged in wind-farm activities in addition to its financial servicesactivities. A summary of the performance of the wind power division is available in theManagement Discussion and Analysis which forms part of this Annual Report. Beingessentially a financial services Company no particulars regarding technology absorptionare required to be given in this Report.

Particulars regarding conservation of energy are given below:

a) 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 734 lakh units which it sold to third parties.

It however is unable to make captive use of wind energy because new regulations donot permit the same where monthly demand is less than 700 KW. The Company has installedLED lamps in place of failed tube lights and CFL thereby reducing energy consumption inlighting by around 16507 KWh units during the year.

b) Capital investment on energy conservation equipment:

Not applicable since BFS is a non-manufacturing Company not coming under the notifiedindustries covered under Energy Conservation Act 2001. Also energy demand/ connectedload of building utilised for the Company's corporate/commercial activities etc. is lessthan 500 KW which is the minimum threshold for applicability of the Energy ConservationAct 2001.

Foreign exchange earnings and outgo

Total foreign exchange earned by the Company was H Nil during the year under review aswell as during the previous year.

Total foreign exchange outflow during the year under review was Rs.0.67 crore asagainst Rs.0.62 crore during the previous year.

Risk Management Policy

Information on the development and implementation of a Risk Management Policy for theCompany including identification therein of elements of risk which in the opinion of theBoard may threaten the existence of the Company is given in the Corporate GovernanceReport.

Corporate Social Responsibility (CSR)

Detailed information on the CSR Policy developed and implemented by the Company on CSRinitiatives taken during the year pursuant to section 135 of the Companies Act 2013 isgiven in the annexed Annual Report on CSR activities.

Formal annual evaluation of the performance of the Board its Committees Chairpersonand Individual Directors

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 Corporate Governance Report.

Subsidiary and Joint Venture

Following are the subsidiary and joint venture companies of the Company as at 31 March2018

Name of the company % Shareholding Status
Bajaj Allianz Life Insurance Company Ltd. 74% Subsidiary
Bajaj Allianz General Insurance Company Ltd. 74% Subsidiary
Bajaj Finance Ltd. 54.99% Subsidiary
Bajaj Housing Finance Ltd. (100% subsidiary of Bajaj Finance Ltd.) Subsidiary
Bajaj Financial Securities Ltd. (100% subsidiary of Bajaj Housing Finance Ltd.) Subsidiary
Bajaj Finserv Direct Ltd.* (formerly known as Bajaj Financial Holdings Ltd.) 100% Subsidiary
Bajaj Allianz Financial Distributors Ltd. 50% Joint Venture
Bajaj Allianz Staffing Solutions Ltd. (100% subsidiary of Bajaj Allianz Financial Distributors Ltd.) Joint Venture

*Name has changed with effect from 27 February 2018

Detailed information on the performance and financial position of each subsidiary/jointventure of the Company is covered in the Management Discussion and Analysis Report.

Directors and Key Managerial Personnel-Changes

The directors regret to inform the sad demise of Naresh Chandra an independentdirector of the Company on 9 July 2017. The directors record their very sincereappreciation of the valuable services rendered by him during his long tenure in theCompany. In his place pursuant to section 149 of the Companies Act 2013 and regulation17(1)(b) read with regulation 25(6) of the SEBI Listing Regulations 2015 Dr. NaushadForbes was appointed as an additional director in the category of non-executiveindependent director of the Company in the meeting of the Board held on 13 September2017 to hold office up to the date of the ensuing Annual General Meeting (AGM) of theCompany. Resolution for appointment of Dr. Naushad Forbes is put up for the approval ofshareholders in the Notice of ensuing AGM.

Pursuant to the provisions of the Companies Act 2013 Dr. Naushad Forbes if appointedat the ensuing AGM shall be an independent director under the said Act for a period of 5years with effect from 13 September 2017.

As per the provisions of the Companies Act 2013 Rajiv Bajaj retires from the Board byrotation this year and being eligible offers himself for re-appointment. The informationas required to be disclosed under regulation 36(3) of the SEBI Listing Regulations 2015in case of re-appointment of the director is provided in the Notice of the ensuing AnnualGeneral Meeting.

There was no other change in the Directors and Key Managerial Personnel during the yearunder review except as above.

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 there were no significant and material orders passed bythe regulators or courts or tribunals which may impact the going concern status of theCompany and its operations in future.

Details of internal financial controls with reference to the financial statements

The Company has documented its internal financial controls considering the essentialcomponents of various critical processes physical and operational. This includes itsdesign implementation and maintenance along with periodical internal review ofoperational effectiveness and sustenance which are commensurate with the nature of itsbusiness and the size and complexity of its operations.

This ensures orderly and efficient conduct of its business including adherence to theCompany'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.

Presentation of financial statements

The audited financial statements of the Company for the year ended 31 March 2018 havebeen disclosed as per Schedule III (Division I) 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 and joint ventures and asprepared in compliance with the Companies Act 2013 applicable Accounting Standards andthe SEBI Listing Regulations 2015.

A separate statement containing the salient features of our subsidiaries and jointventures in the prescribed form AOC-1 is annexed.

Statutory disclosures

The summary of the key financials of the Company's subsidiaries and joint venture inform AOC-1 is included in this Annual Report. A copy of the audited financial statementsfor each of the subsidiary companies will be made available to members of the Companyseeking such information at any point of time. The audited financial statements for eachof the subsidiaries will be kept for inspection by any member of the Company at itsregistered office during business hours. The same are placed on the Company's websitewww.bajajfinserv.in

Details as required under section 197(12) of the Companies Act 2013 read with rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014are annexed to this Report.

Details as required under section 197(12) of the Companies Act 2013 read with rule5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 as amended which forms part of the Directors' Report will be made availableto any shareholder on request as per the provisions of section 136(1) of the said Act.

A Cash Flow Statement for the year 2017-18 is attached to the Balance Sheet.

Pursuant to the legislation 'The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013' the Company has a Policy on Prevention of SexualHarassment at Workplace. There was no case reported during the year under review under thesaid Policy.

Corporate governance

Pursuant to the SEBI Listing Regulations 2015 a separate chapter titled CorporateGovernance has been included in this Annual Report along with the reports on ManagementDiscussion and Analysis and General Shareholder Information.

All Board members and Senior Management Personnel have affirmed compliance with theCode of Conduct for the year 2017-18. A declaration to this effect signed by the ManagingDirector & CEO of the Company is contained in this Annual Report.

The Managing Director & CEO and CFO have certified to the Board with regard to thefinancial statements and other matters as required under regulation 17(8) of the SEBIListing Regulations 2015.

The Certificate from the Statutory Auditors of the Company regarding compliance ofconditions of corporate governance is annexed to this Report.

Business Responsibility Report

Regulation 34(2) of the SEBI Listing Regulations 2015 inter alia provides that theannual report of the top 500 listed entities based on market capitalisation (calculated ason 31 March of every financial year) shall include a Business Responsibility Report (BRR).

Since BFS is one of the top 500 listed entities the Company as in the previous yearshas presented its BRR for the financial year 2017-18 which is part of this Annual Report.As a green initiative the BRR has been hosted on the Company's websitewww.bajajfinserv.in

A physical copy of the BRR will be made available to any shareholder on request.

Secretarial standards of ICSI

Pursuant to the approval given on 10 April 2015 by the Central Government to theSecretarial Standards specified by the Institute of Company Secretaries of India (ICSI)the Secretarial Standards on Meetings of the Board of Directors (SS-1) and GeneralMeetings (SS-2) came into effect from 1 July 2015. The said standards were amended witheffect from 1 October 2017. The Company is in compliance with the same.

Auditors

Statutory Auditor

Pursuant to the provisions of section 139 of the Companies Act 2013 the members atthe Annual General Meeting of the Company held on 19 July 2017 appointed S R B C & COLLP Chartered Accountants (firm registration No. 324982E/E300003) as Statutory Auditorsof the Company from the conclusion of 10th Annual General Meeting till the conclusion of15th Annual General Meeting covering one term of five consecutive years subject toratification by the members at each intervening annual general meeting.

In view of the amendment to the said section 139 through the Companies (Amendment) Act2017 notified on 7 May 2018 ratification of auditors' appointment is no longer required.However under section 142 of the Companies Act 2013 a proposal is put up for approvalof members for authorising the Board of Directors of the Company to fix Auditors'remuneration for the year 2018-19 and thereafter. The members are requested to approve thesame.

The Statutory Audit Report for the year 2017-18 does not contain any qualificationreservation or adverse remark or disclaimer made by the Statutory Auditors.

Secretarial Auditor

Pursuant to the provisions of section 204 of the Companies Act 2013 and the Rulesmade thereunder the Company has re-appointed Shyamprasad D Limaye Practising CompanySecretary (membership no. 1587) to undertake the secretarial audit of the Company. TheSecretarial Audit Report for the year 2017-18 as issued by him in the prescribed form MR-3is annexed to this Report.

The said Secretarial Audit Report does not contain any qualification reservation oradverse remark or disclaimer made by the Secretarial Auditor except that the Company hadissued to its shareholders Rights Equity Shares in the year 2012. Out of this issue 3317rights equity shares earlier kept in abeyance were allotted on 16 October 2017.Application for listing of these shares was filed with BSE and NSE in 30 days and 29 daysrespectively from the date of allotment which was beyond the prescribed 20 days' period.The delay was due to certain interpretational issues and for technical reasons. NSE andBSE levied a fine of Rs.180000 and Rs.200000 respectively which the Company paid underprotest.

Cost Auditor

Pursuant to section 148 of the Companies Act 2013 and the Rules made thereunder theBoard of Directors had on the recommendation of the Audit Committee re-appointedDhananjay V Joshi & Associates (firm registration no. 000030) Cost Accountants toaudit the cost accounts of the Company for the financial year 2018-19 on a remuneration ofRs.55000 plus service tax out-of-pocket travelling and living expenses subject toratification by the shareholders at the ensuing Annual General Meeting. Accordingly aresolution seeking members' ratification for the remuneration payable to the Cost Auditoris included in the Notice convening the Annual General Meeting.

On behalf of the Board of Directors

Rahul Bajaj

Chairman

Pune: 17 May 2018

Annexure to Directors' Report

Remuneration Details under Rule 5(1) of Companies (Appointment & Remuneration ofManagerial Personnel) Rules 2014 (as amended) for the year ended 31 March 2018

Name of Director/KMP Ratio of Remuneration of director to Median Remuneration of employees % increase in the financial year
(A) Whole-time director/Managerial Personnel
Sanjiv Bajaj-Managing Director & CEO 19.39 4.99
(B) Non-Executive directors1
Rahul Bajaj 0.17 50.00
Madhur Bajaj 0.12 0.00
Rajiv Bajaj 0.08 (33.33)
Nanoo Pamnani 0.27 (6.67)
Naresh Chandra3 0.06 (75.00)
D J Balaji Rao 0.21 22.22
Dr. Gita Piramal 0.21 83.33
Dr. Naushad Forbes4 0.10 0.00
(C) Key Managerial Personnel
Sanjiv Bajaj Managing Director & CEO 4.99
S Sreenivasan CFO 63.52
Sonal R Tiwari Company Secretary 18.27
(D) Remuneration of Median Employee (other than whole-time director) 3.26
(E) Permanent employees as on 31 March 2018: 24

1 (a) Remuneration payable to Non-executive directors is based on the number ofmeetings of the Board and its Committees attended by them as members during the year. (b)Remuneration to directors does not include sitting fee paid to them for attendingBoard/Committee meetings.

2 'Permanent employees' does not include trainees probationers and contract employees.

3 Naresh Chandra expired on 9 July 2017 and hence figures in his case are notcomparable.

4 Dr. Naushad Forbes was appointed with effect from 13 September 2017. Figures in hiscase are therefore not comparable.

Notes on Disclosures under Rule 5

A In 2017-18 the remuneration of median employee other than Whole-time Directorincreased by 3.26% over the previous year.

B Increase in the remuneration of Managerial Person which was 4.99% during the yearunder review was given keeping in view the trends of remuneration in industry.

C The remuneration paid as above was as per the Remuneration Policy of the Company.