Bajaj Finserv Ltd.
|BSE: 532978||Sector: Financials|
|NSE: BAJAJFINSV||ISIN Code: INE918I01018|
|BSE 00:00 | 26 May||12473.05||
|NSE 00:00 | 26 May||12477.75||
|Mkt Cap.(Rs cr)||198,496|
|Mkt Cap.(Rs cr)||198496.12|
Bajaj Finserv Ltd. (BAJAJFINSV) - Director Report
Company director report
At the outset your Company's Board of Directors commiserates with thefamilies of all employees shareholders and others who succumbed to this dreadful COVID-19pandemic.
Your directors present their 14th Annual Report along with the auditedstandalone and consolidated financial statements for the year ended 31 March 2021. ThisReport read with the Management Discussion and Analysis includes the details ofmacro-economic scenario Company's performance various initiatives by the Company as wellas its approach to risk management.
Circulation of Annual Reports in electronic form
The Ministry of Corporate Affairs (MCA) through circulars dated 8 April2020 13 April 2020 5 May 2020 and 13 January 2021 read with SEBI circulars dated 12 May2020 and 15 January 2021 have provided an option to companies to conduct AGM during thecalendar year 2021 through 'VC or OAVM' and send financial statements (includingDirectors' report Auditors' Report and other documents to be attached therewith) throughemail.
Accordingly the financial statements (including Directors' ReportCorporate Governance Report Management Discussion & Analysis Auditors' Report andother documents to be attached therewith) are being sent through electronic mode to thoseshareholders whose email addresses are registered with the Company's share transfer agentviz. KFin Technologies Private Ltd. (KFin)/Depository Participants and whose namesappear in the Register of Members as on Friday 18 June 2021. The Company has also madearrangements for those shareholders who have not yet registered their email addresses toget the same registered by following the procedure prescribed in the Notice of AnnualGeneral Meeting (AGM).
The Annual Report for the year ended 31 March 2021 is also available onCompany's website https://www.bajajfinserv.in/ finserv-investor-relations-annual-reports
The financial results of the Company are elaborated in the ManagementDiscussion & Analysis Report.
The highlights of the standalone financial results are as follows:
Closing balances in reserve/other equity
Note: Detailed movement of above reserves can be seen in 'Statement ofChanges in Equity'.
The highlights of the consolidated financial results are as follows:
Presentation of standalone and consolidated financial statements
The financial statements of the Company for FY2021 on a standalone andconsolidated basis have been prepared in compliance with the Companies Act 2013 (the'Act') applicable Accounting Standards and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and amendments thereto ('SEBI Listing Regulations') andare disclosed in accordance with Schedule III of the Act. The consolidated financialstatements incorporate the audited financial statements of the subsidiaries and jointventures of the Company.
Indian Accounting Standards 2015
The annexed financial statements comply in all materials aspects withIndian Accounting Standards (Ind AS) notified under section 133 of the Act Companies(Indian Accounting Standards) Rules 2015 and other relevant provisions of the Act.
Dividend distribution Policy
As mandated under regulation 43A of SEBI Listing Regulations the Boardof Directors of the Company at its meeting held on 27 October 2016 adopted a DividendDistribution Policy for the Company which sets out the parameters and circumstances thatwill be taken into account by the Board in determining the distribution of dividend to itsshareholders. The said Policy is placed on Company's websitewww.bajajfinserv.in/miscellaneous-divident-policy.pdf
The Directors recommend for consideration of shareholders at theensuing AGM payment of a dividend of H 3 per equity share (60%) of face value of H 5 eachfor the year ended 31 March 2021 amounting to H 47.74 crore. The dividend recommended isin accordance with the principles and criteria as set out in the Dividend DistributionPolicy of the Company.
For the year ended 31 March 2020 the dividend paid was H 5 per equityshare (100%) of face value of H 5 each.
The amount of dividend and the tax thereon aggregated to H 79.57 crore.
In view of the amendment to the Income Tax Act 1961 through theFinance Act 2020 imposition of Dividend Distribution Tax has been abolished. Thedividend if declared at the ensuing AGM will be taxable in the hands of the shareholdersof the Company. For further details on taxability please refer to Notice of AGM.
The COVID-19 pandemic which is a once in a lifetime occurrence hasbrought with it an unimaginable suffering to people and to almost all sections of theeconomy. The nationwide lockdowns to curtail the transmission of disease had put theglobal economy in extreme stress of the level not seen since the Great Depression andwould have a long-lasting economic impact. The recent surge in infections that startedwith the second wave beginning in early March 2021 brings with it greater challenges. Theimpact of the above on the performance of the Company and its subsidiaries have beendiscussed in detail in 'Management Discussion and Analysis'.
Employee stock option scheme
The Company grants share-based benefits to eligible employees with aview to attract and retain talent align individual performance with the Company'sobjectives and promoting increased participation by them in the growth of the Company.During the year 2018-19 the Company adopted the Bajaj Finserv Ltd. Employee Stock OptionScheme 2018 (BFS-ESOS) on 19 July 2018 and since then there has been no change in thescheme. 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 theCompany.
In line with regulation 14 of SEBI (Share Based Employee Benefits)Regulations 2014 a statement giving complete details as at 31 March 2021 is availableon the Company's website www.bajajfinserv.in/miscellaneous
Grant wise details of options vested exercised and cancelled areprovided in the notes to the standalone financial statements. The Company has not issuedany sweat equity shares or equity shares with differential voting rights during the year2020-21.
The paid-up equity share capital as on 31 March 2021 was H 79.57 croreconsisting of 159137444 fully paid-up equity shares of face value of H 5 each. Duringthe Rights Issue of equity shares made by the Company in 2012 certain shares had beenkept in abeyance as required by law. With resolution of a few cases during the year underreview the Company has allotted 154 equity shares of the face value of H 5 each at theoriginal Rights Issue price of H 650 per share to the eligible shareholders.
There was no public issue rights issue bonus issue or preferentialissue etc. during the year under review.
Classification as a Core Investment Company (CIC)
Under the Master Direction - Core Investment Companies (Reserve Bank)Directions 2016 the Company is termed as an Unregistered Core Investment Company (CIC)as per Reserve Bank of India Guidelines dated 13 August 2020.
Detailed information on the operations of the different business linesand state of affairs of the Company are covered in the Management Discussion and AnalysisReport.
Subsidiaries and joint venture
Following are the subsidiary and joint venture companies of the Companyas at 31 March 2021:
Detailed information on the performance and financial position of eachsubsidiary/joint venture of the Company is covered in the 'Management Discussion andAnalysis' and in Form AOC-1 of consolidated financial statements.
The financial statements of the subsidiary companies are also availableon the Company's websitehttps://www.bajajfinserv.in/finserv-investor-relations-annual-reports
The Company's Policy for determination of material subsidiary has beenplaced on the Company's websitehttps://www.bajajfinserv.in/policy-for-material-subsidiaries-13march.pdf
In terms of the said Policy BFL BAGIC BALIC and BHFL are materialsubsidiaries of the Company. During the year under review no company became or ceased tobe our subsidiary or joint venture company. The Company does not have any associatecompany.
Inclusion in S&P BSE Sensex
With effect from 22 June 2020 the Company has been included in theprestigious S&P BSE Sensex index of BSE Ltd.
Adoption of Confederation of Indian industry (CII) charters
The Company has established several policies covering the Code ofConduct for its directors and employees including anti-corruption clauses as well aspolicies for fair and responsible workplace practices. These policies are integrated intobusiness operations. The Company has also signed the following charters of CII in thisregard which further strengthens the Company's commitment to these policies.
1. Model Code of Conduct for Ethical Business Practices.
2. Charter on Fair & Responsible Workplace Guidelines forCollaborative Employee Relations.
3. Charter on Fair & Responsible Workplace Guidelines for ContractLabour.
Further details are available in our 'Business Responsibility Report'.
A copy of the annual return as provided under section 92(3) of the Actin the prescribed form which will be filed with the Registrar of Companies/MCA is placedon Company's website https://www.bajajfinserv.in/finserv-shareholder-download
Number of meetings of the Board
Six (6) meetings of the Board were held during the year under review asagainst the statutory requirement of four meetings. Details of the meetings and attendancethereat forms part of the 'Corporate Governance Report'.
Directors' responsibility statement
The financial statements are prepared in accordance with the provisionsof the Act and guidelines issued by SEBI and the Indian Accounting Standards (Ind AS)under historical cost convention on accrual basis except for certain financialinstruments which are measured at fair values. Accounting policies have been consistentlyapplied except where a newly issued Accounting Standard is initially adopted or a revisionto an existing Accounting Standard requires a change in the accounting policy. These forma part of the Notes to the Financial Statements.
In accordance with the provisions of section 134(3)(c) of the Act andbased on the information provided by the Management the directors state that:
(i) in the preparation of the annual accounts the applicableAccounting Standards have been followed along with proper explanation relating to materialdepartures;
(ii) they have 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 of the Company for the year ended 31 March 2021;
(iii) they have 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;
(v) they have laid down internal financial controls to be followed bythe Company and that such internal financial controls are adequate and are operatingeffectively; and
(vi) they have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and are operatingeffectively.
Declaration by independent directors
The independent directors have submitted their declaration ofindependence as required under section 149(7) of the Act stating that they meet thecriteria of independence as provided in section 149(6) of the Act and regulation 16 ofSEBI Listing Regulations. The independent directors have also confirmed compliance withthe provisions of rule 6 of Companies (Appointment and Qualifications of Directors) Rules2014 as amended relating to inclusion of their name in the databank of independentdirectors.
The Board took on record the declaration and confirmation submitted bythe independent directors regarding the meeting the prescribed criteria of independenceafter undertaking due assessment of the veracity of the same as required under regulation25 of SEBI Listing Regulations.
Policy on directors' appointment and remuneration
The salient features of the Remuneration Policy on directors'appointment and remuneration forms a part of the 'Corporate Governance Report'. The saidPolicy is placed on the Company's website https://www.bajajfinserv.in/remuneration-policy-21.pdf
Particulars of loans guarantees or investments
Information regarding loans guarantees and investments covered undersection 186 of the Act are detailed in the financial statements.
Related party transactions
No Related Party Transactions (RPTs) were entered into by the Companyduring the year under review which could have attracted the provisions of section 188 ofthe Act. Further there being no 'material' RPTs as defined under regulation 23 of SEBIListing Regulations there are no details to be disclosed in form AOC-2 in that regard.
During the year 2020-21 pursuant to section 177 of the Act andregulation 23 of SEBI Listing Regulations all RPTs were placed before the Audit Committeefor its prior approval. These were reviewed by the Audit Committee on quarterly basis.Details of transactions with related parties during the year under review are provided inthe notes to the financial statements. All related party transactions during the year wereconducted at arms' length and were in the ordinary course of business.
The revised Policy on materiality of RPTs and also on dealing with RPTshave been formulated by the Board at its meeting held on 16 July 2014 and amended on 14October 2014. The Policy was further amended on 12 March 2019 inter alia by stipulatingthreshold limits. The said Policy is available on Company's websitehttps://www.bajajfinserv.in/bfs-signed-material-rpt-policy-12-march-2019.pdf
Material changes and commitments
There have been no material changes and commitments affecting thefinancial position of the Company which have occurred between the end of the financialyear 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 itsfinancial services activities. A summary of the performance of the wind power division isavailable in the 'Management Discussion and Analysis Report' which forms part of thisAnnual Report. Being essentially a financial services company no particulars regardingtechnology 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 acapacity of 65.2 MW. During the year under review it generated 639 lakh units which itsold to third parties.
It however is unable to make captive use of wind energy because newregulations do not permit the same where monthly demand is less than 700 KW. The Companyhas installed LED lamps in place of tube lights and CFL thereby reducing energyconsumption in lighting by around 3338 units during the year.
The Company implements various energy conservation measures andinitiatives which are highlighted in the 'Business Responsibility Report' of the Company.
Foreign exchange earnings and outgo
Total foreign exchange earned by the Company was nil during the yearunder review as well as during the previous year. Total foreign exchange outflow duringthe year under review was H 0.88 crore as against H 0.64 crore in the previous year.
Risk Management Policy
Information on the development and implementation of a Risk ManagementPolicy for the Company including identification assessment and control of elements ofrisk which in the opinion of the Board may threaten the existence of the Company isgiven in the 'Corporate Governance Report'.
Corporate Social Responsibility (CSR)
The CSR Committee comprises of three directors viz. Sanjiv Bajaj Dr.Naushad Forbes and Anami Roy. During the year 2020-21 the Committee met once. Theattendance record of members is given in the Annual Report on CSR activities. Section 135of the Act and the Companies (Corporate Social Responsibility Policy) Rules 2014 havebeen amended substantially with effect from 22 January 2021.
In terms of the provisions of the Act read with amended Companies(Corporate Social Responsibility Policy) Rules 2014 the 'Annual Report on CSRactivities' in the format prescribed under Annexure II of the said Rules is annexed tothis Report.
In line with the said amendments the Board at their meeting held on28 April 2021 amended the existing CSR Policy.
The Policy including the composition of the CSR Committee is uploadedon the Company's website https://www.bajajfinserv.in/policies-and-codes
The Chief Financial Officer has certified that the funds disbursed havebeen utilised for the purpose and in the manner approved by the Board for FY2021.
Formal annual evaluation of the performance of the board itscommittees chairperson and individual directors
Information on the manner in which a formal annual evaluation has beenmade by the Board of its own performance and that of its Committees Chairperson andIndividual directors is given in the 'Corporate Governance Report'.
Directors and key managerial personnel-changes
A. Director liable to retire by rotation
The independent directors hold office for a fixed term not exceedingfive years from the date of their appointment and are not liable to retire by rotation.The Act mandates that at least two-thirds of the total number of directors (excludingindependent directors) shall be liable to retire by rotation and one-third of suchdirectors shall retire from office at every AGM. Accordingly Madhur Bajaj (DIN 00014593)director being the longest in the office among the three (3) directors liable to retireby rotation retires from the Board this year and being eligible has offered hiscandidature for reappointment. Prescribed details of Madhur Bajaj are given in the Noticeof AGM.
B. Key Managerial Personnel
There was no change in Key Managerial Personnel during the year underreview.
As per the requirements of SEBI Listing Regulations details of allpecuniary relationship or transactions of the non-executive directors vis-a-vis theCompany are disclosed in the 'Corporate Governance Report'.
Significant and material orders passed by the regulators or courts
During the year under review no significant or material orders passedby any regulator or court or tribunal impacting the going concern status and Company'soperations in future.
At the beginning of each financial year an audit plan is rolled outafter it has been approved by the Company's Audit Committee. The plan is aimed atevaluation of the efficacy and adequacy of internal control systems and compliancethereof robustness of internal processes policies and accounting procedures andcompliance with laws and regulations. Based on the reports of internal audit functionprocess owners undertake corrective action in their respective areas. Significant auditobservations and corrective actions thereon are presented to the Audit Committee onquarterly basis.
Details of internal financial controls with reference to the financialstatements
The Company has documented its internal financial controls consideringthe essential components of various critical processes both physical and operational.This includes its design implementation and maintenance along with periodic internalreview of operational effectiveness and sustenance and whether these are commensuratewith the nature of its business and the size and complexity of its operations.
This ensures orderly and efficient conduct of its business includingadherence to the Company's policies safeguarding of its assets prevention of errorsaccuracy and completeness of the accounting records the timely preparation of reliablefinancial information and prevention and detection of frauds and errors. Internalfinancial controls with reference to the financial statements were adequate and operatingeffectively.
Maintenance of cost records
Provisions relating to maintenance of cost records as specified by theCentral Government under section 148 of the Act are applicable to the Company. These havebeen complied with for FY2021.
The financial statements of the Company and its subsidiaries are placedon the Company's websitehttps://www.bajajfinserv.in/finserv-investor-relations-annual-reports
Details as required under section 197(12) of the Act read with rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014containing inter alia ratio of remuneration of directors and KMP to median remunerationof employees percentage increase in the median remuneration are annexed to this Report.
Details of top ten (10) employees in terms of the remuneration andemployees in receipt of remuneration as prescribed under rule 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 containing detailsprescribed under Rule 5(3) of the said Rules which form part of the Directors' Reportwill be made available to any member on request as per provisions of section 136(1) ofthe Act.
The directors' responsibility statement as required by section 134(5)of the Act appears in this report.
There is no change in the nature of business of the Company duringFY2021.
A Cash Flow Statement for FY2021 is attached to the Balance Sheet.
Pursuant to the legislation 'The Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013' the Company has a Policy onPrevention of Sexual Harassment at Workplace and has constituted an Internal ComplaintsCommittee. There was no case reported during the year under review.
Pursuant to SEBI Listing Regulations a separate chapter titled 'Reporton Corporate Governance' has been included in this Annual Report along with the reportson 'Management Discussion and Analysis' and 'General Shareholder Information'.
All Board members and Senior Management Personnel have affirmedcompliance with the Code of Conduct for the year 2020-21. A declaration to this effectsigned by the Chairman & Managing Director of the Company is included in this AnnualReport.
The Chairman & Managing Director and Chief Financial Officer havecertified to the Board with regard to the financial statements and other matters asrequired under regulation 17(8) of SEBI Listing Regulations.
A certificate from the statutory auditors of the Company regardingcompliance of conditions of corporate governance is annexed to this Report.
Business Responsibility Report
Regulation 34(2) of SEBI Listing Regulations inter alia provides thatthe annual report of the top 1000 listed entities based on market capitalisation(calculated as on 31 March of every financial year) shall include a BusinessResponsibility Report (BRR) describing the initiatives taken by them from an environmentsocial and governance perspective.
Since Bajaj Finserv is such a listed entity the Company as in theprevious years has presented its BRR for 2020-21 which is part of this Annual Report.
This BRR highlights the initiatives actions processes and the way theCompany and its subsidiaries conducts its business in line with its environmental socialand governance obligations.
As a green initiative this BRR has been placed on the Company'swebsite https://www.bajajfinserv.in/finserv-investor-relations-annual-reports
A copy of the BRR will be made available by email to any shareholder onrequest.
Secretarial standards of ICSI
The Company has complied with the requirements prescribed under theSecretarial Standards on meetings of the board of directors (SS-1) and general meetings(SS-2) read with the MCA circulars granting exemptions in view of the COVID-19 pandemic.
In terms of section 139 of the Act S R B C & CO LLP CharteredAccountants (Firm Registration No. 324982E/E300003) were appointed as statutory auditorsof the Company to hold office from the conclusion of the 10th AGM till the conclusion ofthe 15th AGM. The statutory auditors have confirmed they are not disqualified fromcontinuing as auditors of the Company.
The statutory audit report for the year 2020-21 is unmodified doesnot contain any qualification reservation or adverse remark or disclaimer by thestatutory auditor.
Pursuant to the provisions of section 204 of the Act and the Rules madethereunder 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. Thesecretarial audit report for the year 2020-21 as issued by him in the prescribed form MR-3is annexed to this Report. Further pursuant to amendments under SEBI Listing Regulationsand SEBI circular dated 8 February 2019 a report on secretarial compliance as requiredunder regulation 24A is being submitted to the stock exchanges as obtained fromShyamprasad D Limaye for FY2021. These reports do not contain any qualificationreservation or adverse remark or disclaimer.
As per regulation 24A of SEBI Listing Regulations a listed company isrequired to annex a secretarial audit report of its material unlisted subsidiary to itsAnnual Report. In line with this and as a green initiative the secretarial audit reportof BALIC BAGIC and BHFL (though a debt listed company) for FY2021 is placed on Company'swebsite https://www.bajajfinserv.in/finserv-investor-relations-annual-reports
Following section 148 of the Act 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 FY2022 on a remuneration of H 65000 plustaxes out-of-pocket travelling and living expenses subject to ratification by theshareholders at the ensuing AGM.
Accordingly a resolution seeking members' ratification for theremuneration payable to the Cost Auditor is included in the Notice of AGM.
The auditors i.e. statutory auditors secretarial auditors and costauditors have not reported any matter under section 143(12) of the Act and therefore nodetails are required to be disclosed under section 134(3)(ca) of the Act.
The Board places its gratitude and appreciation for the support andco-operation from its members and other regulators.
The Board also places on record its sincere appreciation for thecommitment and hard work put in by the Management and the employees in these trying times.