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Explicit Finance Ltd.

BSE: 530571 Sector: Financials
NSE: N.A. ISIN Code: INE335G01019
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NSE 05:30 | 01 Jan Explicit Finance Ltd
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VOLUME 25
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P/E
Mkt Cap.(Rs cr) 2
Buy Price 1.81
Buy Qty 45.00
Sell Price 1.72
Sell Qty 95.00
OPEN 1.81
CLOSE 1.81
VOLUME 25
52-Week high 2.48
52-Week low 1.81
P/E
Mkt Cap.(Rs cr) 2
Buy Price 1.81
Buy Qty 45.00
Sell Price 1.72
Sell Qty 95.00

Explicit Finance Ltd. (EXPLICITFIN) - Director Report

Company director report

To

The Members

Your Directors have pleasure in presenting their Twenty Fifth (25th) AnnualReport on the business and operations of the company along with the Audited Financialaccounts for the Financial Year ended 31st March 2019.

FINANCIAL RESULTS

(Rs. In Lacs)

Particulars Year Ended 31st March 19 Year Ended 31st March 18
Total Income 454.75 1219.86
Profit/(Loss) before Depreciation and Tax (8.25) (12.90)
Less: Depreciation (0.23) (0.77)
Profit before Tax (8.48) (13.67)
Less: Provision for Income Tax - -
Profit after Tax (8.48) (13.67)
Balance brought forward from previous years (97.53) (83.86)
Balance carried to Balance Sheet (106.01) (97.53)

REVIEW OF OPERATION

During the financial year under review total income of the Company is Rs. 454.75 lacsas compared to last year's total income of Rs. 1219.86 lacs. Loss after tax decreased fromRs. 13.67 lacs in the previous year to Rs. 8.48 lacs (before other comprehensive income)during the year.

BUSINESS REVIEW

Explicit Finance Limited ("The Company") is a non-banking financial companythat fulfills aspirations of its Individual and Corporate clients by satisfying theirfinancial needs. We are engaged in Secondary capital market activities and provide Loansto Individuals/Corporates.

DIVIDEND

Due to carried forward losses and current year losses the Board does not recommend anydividend for the year ended 31st March 2019.

MANAGEMENT DISCUSSION ANALYSIS REPORT

The Management Discussion and Analysis forms an integral part of this Report and givesdetails of the overall industry structure economic developments performance and state ofaffairs of your Company's various businesses internal controls and their adequacy riskmanagement systems and other material developments during the financial year 2018-19.

A. INDUSTRY STRUCTURE & DEVELOPMENT

At the end of March 2019 there were approximately 10000 NBFCs registered with ReserveBank of India (RBI) of which 89 deposit accepting NBFC. The primary activities of NBFCsare providing consumer credit including automobile finance home finance and consumerdurable products finance wholesale finance products such as bills discounting for smalland medium companies and infrastructure finance and fee-based services such as investmentbanking and underwriting. NBFCs have carved niche business areas for them within thefinancial sector space and are also popular for providing customized products. Forinstance your Company providing finance for re-possessed vehicles at the doorstep of thecustomer. NBFCs bring the much-needed diversity to the financial sector. NBFCs play animportant role to promote financial inclusion agenda of the government by catering to thefinancial needs of people belonging to weaker section of the society.

The crisis faced by a large prominent financial institution of the country in Septemberled to drying-up bank lending thereby forcing NBFCs to scout for alternate sources offunding. In February 2019 Reserve Bank of India (RBI) had eased risk weight norms toincrease credit flow to NBFCs. The banks are now required to assign differentialrisk-weights to their exposures to NBFCs based on ratings assigned by credit ratingagencies as against the existing practice of a uniform risk weight of 100%.The move isaimed at not only freeing up capital for banks for further lending but also slashborrowing costs for well-rated NBFCs which have been grappling with a systemic liquiditycrisis triggered by a series of defaults by a large prominent financial institution andits subsidiaries.

In order to provide NBFCs with greater operational flexibility the RBI has merged thecategories of NBFCs classified as asset finance companies investment companies and loancompanies into a new category called NBFC - Investment and Credit Company("NBFC-ICC").

B. OPPORTUNITIES & THREATS

Opportunities

• Demographic changes.

• Large untapped rural and urban markets.

• Use of digital solutions for business/collections.

• Partnerships with private financiers for enhancement of reach withoutsignificant investments

• Penetration into rural markets for financing

• On boarding customers on technology platform

Threats

• High cost of funds.

• Rising Non-performing Assets (NPAs).

• Restrictions on deposit taking NBFCs.

• Competition from other NBFCs and small banks.

• Growing number of Finance companies.

• Inadequate availability of bank finance and upsurge in borrowing cost

• External risks associated with liquidity stress political uncertainties fiscalslippage concerns etc.

C. RISKS AND CONCERNS

• The cash crunch is in stark contrast to the banking sector which has notfaced significant liquidity pressure or deposit withdrawals despite asset-quality andcapital weaknesses.

• NBFC's liquidity is sensitive to market sentiment as their business models relyon short-term wholesale funding which can dry up fast if market sentiment turns negativeit said. Fitch further said funding models of housing finance companies and loancompanies which have become increasingly reliant on short-term funding to fundlonger-term assets have been particularly affected by the liquidity squeeze.

• The sector pressures have led India's top NBFCs to explore other sources offunding and to start positioning themselves to tap the US dollar bond market.

• The funding squeeze has contributed to higher funding costs and a slowdown inloan growth for NBFC sector Fitch said. NBFCs are an important channel for extendingcredit to the wider economy given their wide distribution networks which are often moreextensive across rural India than those of banks

• The NBFC sector's role as a credit provider became outsized as the Indianbanking system was forced to deal with its weak asset quality Fitch added. Banksparticularly public-sector banks were undercapitalized and had limited capacity to lendmore. NBFCs now account for nearly 20 per cent of credit to the economy compared withabout 15 per cent five years ago.

• During the year Non- Banking Finance Companies (NBFCs) faced several challengesas banks curtailed lending to these institutions

D. OUTLOOK

• The International Monetary Fund (IMF) expects the global economy to slowdown further in 2019 before stabilizing at 3.6% in 2020. This is mainly due to significantrevisions in the eurozone especially in Germany where production difficulties in theauto sector and lower external demand will weigh on growth in 2019. In Italy toosovereign and financial risks are hampering economic growth.

• Additionally there is increasing uncertainty due to trade protectionism andBrexit. However further monetary policy adaptation and policy-easing measures by Chinawould account for a soft landing.

• India has a lot of un-banked and under-banked consumers and businesses. Hencethere is a lot of potential for NBFCs which can still be tapped. The NBFCs and HousingFinance Companies (HFCs) are being recognized as being vital for growth. Regardless of therecent panic NBFCs are here to stay and play an important role in economic growth andfinancial inclusion. Given the crisis and despite concerns surrounding the sector NBFCswith robust business models strong liquidity mechanisms governance and risk managementstandards are well positioned to take benefit of the market opportunity.

E. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Internal Control measures and systems are established to ensure the correctness ofthe transactions and safe guarding of the assets. Considering the size and nature ofactivities the company has adequate internal control system covering both accounting andadministrative control. In addition the internal audit is carried out periodically. Themanagement ensuring an effective internal control system so that the financial statementsand reports give a true and fair view and during the year under review no material orserious observation has been received from the Internal Auditors of the Company forinadequacy or ineffectiveness of such control.

F. HUMAN RESOURCES

The company always regards human resources as its most valuable asset andcontinuously evolves policies and process to attract and retain its substantial pool ofmanagerial resources through friendly work environment that encourages initiatives byindividuals and recognizes their performance.

G. CAUTIONARY NOTE

Certain Statements in the Management Discussion and Analysis describing thecompany's views about the industry expectations objectives etc. may be understood'forward looking statement' within the meaning of applicable laws and regulations. Factorslike changes in Government regulations tax laws and other factors such as industrialrelations and economic developments etc. may further influence the company's operations orperformance. Actual results may differ substantially or materially from those expressed orimplied.

RESERVES

Due to current year and brought forward losses the company does not proposes totransfer funds to the statutory reserves.

SHARE CAPITAL

The Company had not issued any equity shares either with or without differential rightsduring the F.Y. 2018 - 2019 and hence the disclosure requirements under Section 43 andRule 4 (4) of the Companies (Share Capital and Debentures) Rules 2014 are notapplicable.

DEPOSITIS

The Company has neither accepted nor renewed any deposits from public or membersduring the year under review under Section 73 of the Companies Act 2013 read with ChapterV of the Companies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014. Thereare no unclaimed deposits unclaimed / unpaid interest refunds due to the deposit holdersor to be deposited to the Investor Education and Protection Fund as on March 31 2019.

DIRECTORS

In accordance with the provisions of section 152 of the Companies Act 2013 andarticles of association of the Company Mr. Gopal Dave (DIN: 00334120) (Non Executive NonIndependent) of the company retires by rotation in the ensuring Annual General Meetingand being eligible has offered himself for re-appointment.

Brief resume of the director seeking appointment/re-appointment is given in the noticeto the annual general meeting.

None of the Directors of your Company is disqualified under provisions of Section164(2)(a) and (b) of the Companies Act 2013.

CHANGES IN KEY MANAGERIAL PERSONNEL (KMP'S) DURING THE YEAR 2018-19

There were no changes in Key Managerial Personnel category during the period underreview.

DIRECTOR'S RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) & 134(5) of the Companies Act 2013 the Board ofDirectors of the Company hereby confirm that:

i. in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

ii. the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit of the company for that period;

iii. proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;

iv. proper annual accounts have been prepared on a going concern basis;

v. internal financial controls to be followed by the company and that such internalfinancial controls are adequate and were operating effectively; and

vi. proper systems to ensure compliance with the provisions of all applicable laws andthat such systems were adequate and operating effectively.

DECLARATION BY INDEPENDENT DIRECTOR

All Independent Directors have submitted the declaration of Independence as requiredpursuant to Section 149(7) of the Act stating that they meet the criteria of Independenceas provided in section 149(6) of the Companies Act 2013 and are not disqualified fromcontinuing as Independent Directors.

EVALUATION OF DIRECTORS COMMITTEE AND BOARD

Pursuant to the provisions of the Companies Act 2013 and the Listing Regulations theBoard of Directors has carried out evaluation of the Board its Committees and IndividualDirectors. The evaluation process has been explained in the Report on CorporateGovernance which forms part of this Board's Report.

Also the Independent Directors at their meeting reviewed the performance of theBoard its Chairman and Non-Executive Directors of the Company.

NUMBER OF BOARD MEETINGS HELD DURING THE PERIOD

A notice of the Board Meeting is circulated well in advance with Agenda includingdetailed explanation to be discussed to enable the Board to take an informed decision.

The intervening gap between the meetings was within the period prescribed under theCompanies Act 2013 and the Listing Agreement/Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015. Further 04 (Four)Board Meetings were held during the year ended 31st March 2019 the dates are30th May 2018 9th August 2018 14th November 2018 31stJanuary 2019. Detailed information on the Board Meetings with regard to attendanceof each of the Directors thereat have been included in the Corporate Governance Reportwhich forms part of this Board Report.

Additionally during the financial year ended 31st March 2019 a separatemeeting of the Independent Directors was held on 23rd January 2019 incompliance with the requirements of Schedule IV of the Companies Act 2013 and Regulation25(3) and 25(4) of the Listing Regulations

Post the Independent Directors Meeting the collective feedback of each of theIndependent Director was scaled and measured on defined ratings thereby covering theperformance of Board as a whole performance of the non-independent directors andperformance of the Chairman.

COMMITTEES OF THE BOARD

The Board of Directors has constituted various committees in compliance with theprovisions of the Companies Act 2013 and Listing Regulations.

• Audit Committee

• Nomination & Remuneration Committee

• Stakeholder Relationship Committee

All decisions pertaining to the constitution of Committees appointment of members andfixing of terms of reference/ role of the committees are taken by the Board of Directors.A detailed note on the Board and its Committees is provided under the Corporate GovernanceSection in this Annual Report.

NOMINATION & REMUNERATION POLICY

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The appointment and Remuneration Policy is stated in the CorporateGovernance Report of the Company that forms part of the Annual Report.

PARTICULARS OF EMPLOYEES AND REMUNERATION

Information as required under the provisions of Section 197(12) of the Companies Act2013 and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 (including any statutory modification(s)/amendment(s)/re-enactment thereoffor the time being in force) is set out in Annexure-I hereto which forms part ofthis Board's Report.

DETAILS OF SUBSIDIARY/JOINT VENTURES/ASSOCIATE COMPANY

The Company does not have any subsidiary or associate company and has not entered intojoint venture with any other company during the financial year ended 31st March2019. Accordingly a statement under the provisions of Section 129(3) of the CompaniesAct 2013 containing salient features of the financial statements of the Company'ssubsidiary(ies) in Form AOC-1 is not enclosed.

CORPORATE GOVERNANCE REPORT

As stipulated under the provision of Regulation 34 (3) read with Schedule V (c) of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 a separate reporton Corporate Governance Report forms integral part of this Board Report. The requisitecompliance certificate as required under Part E of Schedule V of the Listing Regulation isissued by the Auditors pertaining to the compliance of the conditions of CorporateGovernance is Annexed thereto.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return pursuant to the provisions of Section 92 read withRule 12 of the Companies (Management and Administration) Rules 2014 is annexed herewithas Annexure -II to this report. The weblink for the same is www.explicitfinance.net

STATUTORY AUDITORS

M/s S C Mehra & Associates LLP Chartered Accountants (FRN: 106156W) were appointedas the Statutory Auditors of the Company during the 24th AGM held on 14thSeptember 2018 for a period of five years as per the provisions of Section 139 of theCompanies Act 2013. However with the Notification dated May 7th 2018 issuedby the Ministry of Corporate Affairs (‘MCA') the first proviso to Section 139(1) ofthe Companies Act 2013 pertaining to the requirement of annual ratification ofappointment of Auditors by member is omitted.

Accordingly as per the companies (Amendment) Act 2017 ratification of the appointmentof Statutory Auditors during their period of appointment will not be considered.

AUDITORS' REPORT

Independent Auditor's Report

There are no qualifications reservation or adverse remark or disclaimer in theIndependent Auditor's Report provided by M/s S C Mehra & Associates LLP CharteredAccountants for the F.Y. 2018-2019. The notes to accounts forming part of financialstatements are self-explanatory and need no further clarification.

Secretarial Audit Report

Pursuant to Provision of Section 204 of the Companies Act 2013 and Rules framed thereunder Board of Directors have appointed M/s Vishal Manseta Practicing Company Secretariesto conduct Secretarial Audit. The Secretarial Audit Report for the Financial Year ended 31stMarch 2019 forms the integral part of the Board Report as Annexure-III. There areno qualifications reservation or adverse remark or disclaimer in Secretarial AuditReport.

Details in respect of frauds reported by auditors under sub-section (12) of section 143other than those which are reportable to the central government

There are no such frauds committed by the Company which are reported by Auditors.

PARTICULARS OF LOANS GUARAUNTEES OR INVESTMENTS

Pursuant to Section 186 (11) of the Companies Act 2013 read with Rule 11(2) of theCompanies (Meetings of Board and its Powers) Rules 2014 the loan made guarantee givenor security provided in the ordinary course of business by a Non- Banking FinancialCompany (NBFC) registered with Reserve Bank of India are exempt from the applicability ofprovisions of Section 186 of the Act.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were onarm's length basis and were in the ordinary course of the business. There are nomaterially significant related party transactions made by the company with Promoters KeyManagerial Personnel or other designated persons which may have potential conflict ofinterest with the company at large. Accordingly disclosures of related party transactionsin Form AOC-2 have not been furnished. All Related Party Transactions were placed beforeAudit Committee and Board for their approval. Your Company has formulated policy ofRelated Party Transaction which is also available on the website of the Companywww.explicitfinance.net

MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY

No material changes and commitments which could affect the Company's financial positionhave occurred till date of this report.

TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

The Company does not have any funds lying unpaid or unclaimed for a period of sevenyears. Therefore there were no funds which were required to be transferred to InvestorEducation and Protection Fund (IEPF).

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

• Conservation of Energy & T echnology Absorption

The Company is not engaged in manufacturing activities and therefore provisionsrelating to conservation of energy and technology absorption are not applicable to it.However efforts are being made to minimize consumption of energy wherever possible.

• Foreign Exchange Earnings and Outgo

During the year under review there were no Foreign Exchange earnings and outgo.

RISK MANAGEMENT POLICY

The Board of Directors of the Company has approved Risk Management policy andguidelines wherein all material risks faced by the company are identified and assessed.Moreover in the said Risk Management Policy the Board has defined a structured approach tomanage uncertainty cultivating the same in their decision making pertaining to allbusiness divisions and corporate functions. For each of the risks identifiedcorresponding controls are assessed and policies and procedures are put in place formonitoring mitigating and reporting on periodic basis.

CORPORATE SOCIAL RESPONSIBILITY

The provisions of Corporate Social Responsibility are not applicable to the company ascompany does not fall into ambit of the provisions of section 135 of Companies Act 2013and Companies (Corporate Social Responsibility Policy) Rules 2014 .

ADEQUACY OF INTERNAL FINANCIAL CONTROL WITH REFERENCE TO FINANCIAL STATEMENTS

In respect of internal financial control the Board has adopted the policies andprocedures for ensuring the orderly and efficient conduct of its business includingadherence to the Company's policies the safeguarding of its assets the timely preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information. Further themanagement regularly reviews the control for any possible changes and takes appropriateactions.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The details in respect of internal control systems and their adequacy are included inthe Management Discussion and Analysis Report which forms part of this report.

CHANGES IN NATURE OF BUSINESS IF ANY

During the year under review there is no change in the nature of business of theCompany.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

In pursuant to the provisions of section 177(9) and (10) of the Companies Act 2013 aWhistle Blower Policy / Vigil Mechanism for directors and employees to report genuineconcerns has been established by the Company in order to maintain highest standards ofethical moral and legal conduct adopted Vigil Mechanism/Whistle Blower policy to providean avenue to its employees to raise concerns of any violations of legal or regulatoryrequirements incorrect or misrepresentations of any financial statements and reportsetc. The Audit committee of the company oversees the said mechanism from time to time.None of the Company personnel has been denied access to the Audit Committee. The WhistleBlower Policy of the Company is also available on the website of the Companywww.explicitfinance.net

DISCLOSURE UNDER THE HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION ANDREDRESSAL) ACT 2013

The company has in place an Anti-Harassment policy in line with the requirements of Thesexual harassment of women at the workplace (Prevention Prohibition & Redressal) Act2013. Internal Complaints Committee (ICC) has been set up to redress complaints receivedregarding sexual harassment. All employees (permanent contractual temporary trainees)are covered under this policy. During the year under review company has not received anySexual Harassment Complaints. Company has zero tolerance policy in case of sexualharassment at workplace and is committed to provide a healthy environment to each andevery employee of the company.

RBI GUIDELINES

The company continues to comply with all the requirements prescribed by the ReserveBank of India from time to time as applicable.

SIGNIFICANT ORDERS PASSED BY REGULATORS COURTS OR TRIBUNALS IMPACTING GOING CONCERNAND COMPANY'S OPERATIONS

No orders have been passed by any Regulator or Court or Tribunal which can have animpact on the going concern status and the Company's operations in future.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETING

Pursuant to Clause 9 of the Revised Secretarial Standard-1(SS-1) and Standard-2 (SS-2)your company has complied with applicable Secretarial Standard issued by the Institute ofCompany Secretaries of India during the financial year under review.

ACKNOWLEDGEMENT

The Directors takes this opportunity to thank all their colleagues at Explicit FinanceLtd. for their professionalism and dedication to the task at hand. The board also wishesto place on record their appreciation for valuable support given by the Bankers Clientsand Shareholders.

For and on behalf of the Board of Directors
Swati Dave Avinash Mainkar
Managing Director Director
DIN: 003299627 DIN:001986289
Mumbai dated 14th August 2019