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Geojit Financial Services Ltd.

BSE: 532285 Sector: Financials
NSE: GEOJITFSL ISIN Code: INE007B01023
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VOLUME 203
52-Week high 48.05
52-Week low 22.25
P/E 35.80
Mkt Cap.(Rs cr) 691
Buy Price 28.55
Buy Qty 142.00
Sell Price 29.05
Sell Qty 132.00
OPEN 29.00
CLOSE 29.05
VOLUME 203
52-Week high 48.05
52-Week low 22.25
P/E 35.80
Mkt Cap.(Rs cr) 691
Buy Price 28.55
Buy Qty 142.00
Sell Price 29.05
Sell Qty 132.00

Geojit Financial Services Ltd. (GEOJITFSL) - Director Report

Company director report

To

The Members

Your Directors have pleasure in presenting their 24th Annual Report of the Company forthe financial year ended 31st March 2018.

FINANCIAL HIGHLIGHTS

( Rs in crore)
Particulars Standalone Consolidated
2017-18 2016-17 Change 2017-18 2016-17 Change
(%) (%)
Total Revenue 334.18 266.75 25 367.95 305.76 20
Total Expenditure 232.74 192.71 21 252.74 214.31 18
Profit / (Loss) before tax 101.44 74.04 37 115.21 91.45 26
Exceptional Item - (10.00) 100 - - -
Provision for tax 33.96 25.73 32 37.60 30.19 25
Minority Interests - - - 4.49 5.26 (15)
Share of Profit/(loss) in Associate - - - 0.11 0.02 365
Profit after tax 67.49 38.31 76 73.24 56.02 31

FINANCIAL HIGHLIGHTS OF SUBSIDIARIES

Company Name FY 2017-18 FY 2017-18 FY 2017-18
Total income Total Expense Profit / (Loss) after tax
Indian Subsidiaries ( Rs in crores )
Geojit Technologies 30.11 15.07 11.84
Geojit Credits 1.62 1.83 (0.27)
Geojit Investment Services 0.81 0.29 1.12
Geojit Financial Management Services Pvt Ltd 0.09 0.008 0.06
Geojit Financial Distribution Pvt Ltd 0.28 0.006 0.20

Overseas Subsidiaries joint ventures & Associates

( Rs in crore)
Company Name FY 2017-18 FY 2017-18 FY 2017-18
Total income Total Expense Profit / (Loss) after tax
Barjeel Geojit Securities 10.18 7.33 2.85
Al-Oula Geojit Brokerage Co. 2.35 4.11 (1.76)
QBG Geojit Securities 3.32 2.59 0.73
BBK Geojit Securities 0.66 0.55 0.11

Note :

1. For Barjeel and Aloula (Joint ventures) the figures shown above are the share ofGFSL which is getting consolidated based on "Proportionate consolidationmethod"

2. Consolidation of BBK is on "equity method". Therefore the consolidatedprofit / (loss) is directly adjusted to the carrying amount of investments in the books.(ie. The total income and total expense do not directly get consolidated. Only the shareof GFSL in total gain / (loss) is consolidated into P&L.)

REVIEW OF PERFORMANCE

On a standalone basis your Company has recorded a total income of Rs 334.18 crores forthe financial year ended 31st March 2018 an increase of 25% compared to last year'sfigure of Rs 266.75 crores. The profit before tax is Rs 101.44 crores and the net profitafter tax is Rs 67.49 crores. Basic earnings per share work out to Rs 2.85 compared to Rs1.63 in the previous year.

On a consolidated basis your company earned a total income of Rs 367.95 crores for thefinancial year an increase of 20% over the previous year's figure of Rs 305.76 croresand profit before tax of Rs 115.21 crores and a net profit of Rs 73.24 crores.

A detailed analysis of the performance is given in the Management Discussion andAnalysis Report appended hereto.

DIVIDEND

The Board in its meeting held on 16th May 2018 has recommended a final dividend of Rs2 per equity share (200%) for the financial year 2017-18. The proposal is subject to theapproval of the shareholders of the Company at its ensuing Annual General Meeting to beheld on 2nd August 2018.

INCREASE IN SHARE CAPITAL

During the year under review the paid up share capital of the Company increased fromRs 235544665/- divided into 235544665 equity shares of Rs 1/- each to Rs237869523/- divided into 237869523 equity shares of Rs 1/- each consequent to theissue of 2324858 equity shares to employees upon exercise of stock options underEmployee Stock Option Plan- 2010 of the Company.

STATE OF COMPANY'S AFFAIRS AND OPERATIONS

Your Company's income is largely driven by equity brokerage. But the Company'sstrategic move to the active distribution of Mutual Fund SIP has also shown impressivegrowth. Your Company has re-entered the commodity broking business after 10 years and hasobtained trading cum clearing membership of MCX India NCDEX and NMCE for commoditiesderivatives broking. Sensing a potential for passive funds in India the Company has alsoinitiated the process of setting up an AMC. The Company will also focus on building thePMS business.

CONSOLIDATED FINANCIAL STATEMENT

The Consolidated Financial Statements of the Company are prepared in accordance withSection 129 of the Companies Act 2013 read with relevant Accounting Standards issued bythe Institute of Chartered Accountants of India and forms part of this Annual Report.

SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES

As on 31st March 2018 following are the subsidiaries/associate/ jointventures of the Company:

Subsidiaries :

i. Geojit Credits Private Limited

ii. Geojit Investment Services Limited

iii. Geojit Financial Management Services Private Limited

iv. Qurum Business Group Geojit Securities LLC

v. Geojit Technologies Private Limited

vi. Geojit Financial Distribution Private Limited

Joint Ventures :

i. Barjeel Geojit Securities L.L.C

ii. Aloula Geojit Capital Company

Associates :

i. BBK Geojit Securities KSC

The Board of Directors of the company proposed a scheme of merger with GeojitInvestment Services Limited (wholly owned subsidiary) pursuant to section 230 - 233 ofCompanies Act2013 and Rules made thereunder .

The Board of Directors of two wholly owned subsidiary companies viz Geojit FinancialManagement Services Private Limited and Geojit Financial Distribution Private Limitedproposed a scheme of merger with Geojit Investment Service Ltd (another wholly ownedsubsidiary) pursuant to the provisions of Sections 391-394 of Companies Act 1956( pendingnotifications of the corresponding provisions of the Companies Act 2013). A Petition wasfiled seeking sanction of the Scheme of Amalgamation between the said companies. Meetingsof the shareholders for approval of the scheme of merger were held on 10 March 2016 aftergiving due notice and publication in accordance with the directions of the High Court.

The petition has been transferred to National Company Law Tribunal (NCLT) and iscurrently pending with NCLT.

DIRECTORS AND KEY MANAGERIAL PERSONNEL I. CHANGE IN DIRECTORS

Mr. Rakesh Jhunjhunwala resigned as the Director of the Company w.e.f 25th July 2017.Mr. Radhakrishnan Nair was appointed as an Independent Director (Additional) w.e.f. 25thOctober 2017.

II. CHANGE IN KEY MANAGERIAL PERSONNEL

Mr. Joe Peter Chief Financial Officer of the company resigned from the company w.e.f30 September 2017 .The Board has appointed Mr. Sanjeev Kumar Rajan as the Chief FinancialOfficer of the company w.e.f 25th October 2017.

III. RETIREMENT BY ROTATION

In accordance with Article 80 of the Articles of Association of the Company Mr.Punnoose George Non-Executive Director (DIN 00049968) will retire by rotation at theensuing Annual General Meeting of the company and being eligible Offers himself forre-appointment. The Board recommends his re-appointment.

ANNUAL EVALUATION OF THE BOARD ITS COMMITTEE AND INDIVIDUAL DIRECTORS

Pursuant to the provisions of Companies Act 2013 and the Listing Regulations theBoard of Directors has carried out an annual evaluation of its own performance itsCommittee and individual Directors. Assessment sheets for evaluation of performance ofBoard its committees and individual directors were prepared based on various aspectswhich among other parameters included composition of the Board and its Committeesconducting of Board Meetings effectiveness of its governance practices etc.

Further the Independent Directors at their meetings held during the year reviewed theperformance of the Board the non Independent Directors and the Chairman.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

The Independent Directors of the Company are persons of integrity possessing richexperience and expertise in the field of corporate management finance capital marketeconomic and business information. The company has issued appointment letter to theIndependent Directors setting out in detail the terms of appointment duties roles &responsibilities and expectations of the Independent Director. The Board of Directors hascomplete access to the information within the Company. Presentations are regularly made tothe Board of Directors / Audit Committee / Nomination & Remuneration Committee /Corporate Social Responsibilities Committee / Stakeholders Relationship Committee onvarious related matters where Directors have interactive sessions with the Management.

The details on the Company's familiarization programme for Independent Directors can beaccessed at http://www.geojit.com/pdfs/ FAMILIARIZATIONPROGRAMMEFORINDEPENDENTDIRECTORS.pdf

REMUNERATION POLICY

The company follows a policy on remuneration of Directors Key Managerial Personnel(KMP) Senior Management Personnel (SMP) and other employees of the Company. The policywas approved by the Nomination & Remuneration Committee of the Company.

The Non-Executive Directors of the Company shall be entitled to receive remuneration byway of sitting fees for attending meeting of the Board and Committees thereof.

The remuneration to KMP's and SMP's and employees shall include direct remuneration andindirect remuneration primarily and strategic remuneration which can be Performance Linkedand/or Profit linked incentive.

Remuneration Policy of the Company is given as Annexure VIII to the Directors Report.

RISK MANAGEMENT POLICY

Risks are an integral part of business and it is imperative to manage these risks atacceptable levels in order to achieve business objectives. The risks to which the Companyis exposed are both external and internal. Your company has formulated a Risk ManagementPolicy to provide an integrated and standardized approach in managing all aspects of riskto which your Company is exposed. An Internal Risk Management Committee monitors theEnterprise risk management policy with participation from Officers responsible for riskmanagement and to take appropriate steps to ensure that these risks are at acceptablelevels.

WHISTLE BLOWER POLICY & VIGIL MECHANISM

Your Company has laid down a Vigil Mechanism and formulated a Whistle Blower Policy inorder to provide a framework for responsible and secure whistle blowing mechanism. ThePolicy aims to provide an avenue for Employees and Directors to raise their concerns aboutunethical behavior actual or suspected fraud or violation of the company's code ofconduct and it also empowers the Audit Committee of the Board of Directors to investigatethe concerns raised by the employees.

All Directors and Employees of the Company are eligible to make protected disclosuresunder the Policy addressed to the Vigilance Officer of the Company in relation to mattersconcerning the Company. We further afirm that no employee of the Company was deniedaccess to the Audit Committee. The details on the Company's Whistle Blower Policy andVigil Mechanism can be accessed at http://www.geojit.com/pdfs/VIGIL_MECHANISM%20_%20Final%20Draft_Revised.pdf

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

Loans guarantees and investments covered under Section 186 of the Companies Act 2013forms part of the notes to the financial statements provided in this Annual Report.

INTERNAL CONTROL SYSTEM

The Company has put in place an adequate system of internal control commensurate withits size and nature of business. These systems provide a reasonable assurance in respectof providing financial and operational information complying with applicable statutessafeguarding of assets of the Company and ensuring compliance with corporate policies.

The scope and authority of the Internal Audit activity are well defined in the InternalAudit Charter approved by the Audit Committee. The Company has a dedicated Internal Auditteam with skills commensurate with the size nature & complexity of operations of theCompany. Internal Audit reports functionally to the Audit Committee of Board which reviewsand approves risk based annual internal audit plan. Audit Committee periodically reviewsthe performance of internal audit function. During the year the Audit Committee metregularly to review reports submitted by the Internal Audit department. All significantaudit observations and follow-up actions there on were reported to the Audit Committee.

The Company's Board & Audit Committee reviews adherence to internal controlsystems internal audit reports and legal compliances. The Audit Committee reviews allquarterly and yearly financial results of the Company and recommends the same to Board forits approval.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO IEPF

Pursuant to the provisions of Section 124 of the Companies Act 2013 money transferredto the Unpaid Dividend Account of the Company and which has remained unpaid or unclaimedfor a period of seven years from the date of transfer has been transferred by the Companyto the Investor Education and Protection Fund ("IEPF") established by theCentral Government pursuant to Section 125 of the said Act.

MANAGEMENT'S DISCUSSION & ANALYSIS

The Management's Discussion and Analysis is given separately and forms part of thisBoard's Report.

INSIDER TRADING REGULATIONS

Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations2015 as amended from time to time the Company has adopted a Code of Conduct forPrevention of Insider Trading and Code of Corporate Disclosures which is applicable to allDirectors and the Designated Employees of the Company. The Code lays down the guidelineswhich advices on the procedures to be followed and disclosures to be made while dealing inshares of the Company and indicate the consequences of non-compliance. A copy of the Codehas been put on the Company's website.

CODE OF CONDUCT FOR DIRECTORS & SENIOR OFFICERS

The Board has adopted a Code of Conduct for Directors & Senior Management inaccordance with the provisions of the Companies Act 2013 and Regulation 17(5) of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015. The Code alsoincorporates the duties of Independent Directors. All the Board Members and SeniorManagement Personnel have confirmed compliance with the Code. A declaration to that effectsigned by the Managing Director forms part of the Corporate Governance Report. A copy ofthe Code has been put on the Company's website.

HUMAN RESOURCES

As a service Company the Company's operations are heavily dependent on qualified andcompetent personnel. As on 31st March 2018 the Company had 2460 permanent employees onits rolls. Your Company takes significant effort in training all employees at variouslevels.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

The Company presently have three Employee Stock Option Schemes viz ESOS 2010 ESOS2016 and ESOS 2017. The Nomination & Remuneration Committee at its meetings heldduring the year granted 1223568 options under ESOS 2016 and 1073780 options underESOS 2017 . The Board of Directors of the Company has allotted total 2324858 equityshares of Re.1/- each under ESOS 2010 Scheme to its employees who exercised the stockoptions on various dates at various exercise prices in accordance with the terms andconditions of ESOS. The aforesaid ESOS schemes are in compliance with SEBI (Share BasedEmployees Benefits) Regulations 2014 and the details are attached as Annexure I to thisreport and also available on our website and can be accessed at https://www.geojit.com/pdfs/ESOSDisclosure.pdf

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Corporate Social Responsibility Committee has formulated and recommended to theBoard a Corporate Social Responsibility Policy (CSR Policy) indicating activities to beundertaken by the Company which has been approved by the Board. The Company established acharitable trust namely Geojit Foundation and carry the CSR activities of the companythrough the foundation.

The Company has identified Education and Health as key focus areas of engagement forCSR activities. The Company would also undertake other initiatives in compliance with theSection 135 read with Schedule VII of the Companies Act 2013. The Annual Report on CSRactivities is annexed herewith and marked as Annexure IV to this report. The CSR Policy ofthe company is available on website of the company at https://www.geojit.com/pdfs/CSR_Policy_17-5-2018.pdf

PARTICULARS OF EMPLOYEES

Particulars of employees covered by the provisions of Section 197 of the Companies Act2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is given as Annexure III to this Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to requirement of Section 134(3)(c) and Section 134(5) of the Companies Act2013 and based on the representations received from the Management your Directors statethat :

i. in the preparation of the annual accounts for the financial year ended 31stMarch 2018 the applicable accounting standards have been followed and there are nomaterial departures from the same;

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 as at 31st March 2018 and ofthe profit of the company for the year ended on that date;

iii. the Directors 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;

iv. the Directors have prepared the annual accounts on a going concern basis;

v. the Directors have laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively; and

vi. the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

The company ensures optimized and efficient consumption of energy in all the 512Offices located across India. With the implementation of its digital initiatives thecompany has also substantially reduced its paper consumption.

The Company has been at the forefront of using technology absorption and has alwaysleveraged technological innovations to improve our operational efficiency and satisfy andretain our customer base. During the year interalia the Company started providingsolutions for automating customer on boarding process in line with SEBI guidelines and ithas been approved by the depositories. Launching Fundsgenie an innovative app that usesadvanced technology to enable investors to take informed decisions to invest in multiplemutual funds through a single gateway enrolling with UIDAI as KYC user agency were othermajor digital initiatives during the year.

The details regarding foreign exchange earnings and outgo are given as Annexure II tothis Report.

CORPORATE GOVERNANCE

Your Company has complied with the Corporate Governance requirements under CompaniesAct 2013 and as stipulated under the provisions of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015. A detailed Report on Corporate Governance isgiven as Annexure V to this Report. A certificate of Statutory Auditor confirmingcompliance of the Corporate Governance requirements by the Company is attached to theReport on Corporate Governance.

SECRETARIAL AUDIT REPORT

In accordance with the provisions of Section 204 of the Companies Act 2013 the Boardhas appointed M/s. Satheesh & Remesh - Company Secretaries in Whole Time PracticeKochi as the Secretarial Auditor for the financial year 2017-18. The report of theSecretarial Auditor for the FY 2017-18 is annexed to this report as Annexure VI.

There are no audit qualifications reservations disclaimers or adverse remarks in thesaid Secretarial Audit Report.

AUDITORS

At the Annual General Meeting held on 4th August 2016 M/s. B S R & AssociatesLLP Chartered Accountants were appointed as statutory auditors of the Company to holdOffice till the conclusion of the Twenty Seventh Annual General Meeting to be held in thefinancial year 2021.

The Auditors' Report to the Shareholders for the year under review does not contain anyqualification.

EXTRACT OF ANNUAL RETURN

The extract of the Annual return in Form MGT - 9 is given as Annexure VII to thisReport.

NUMBER OF BOARD MEETINGS

The Board of Directors met 6 (six) times in the financial year 2017-18. The details ofthe board meetings and the attendance of the Directors are provided in the CorporateGovernance Report.

COMPOSITION OF AUDIT COMMITTEE

The Audit Committee is constituted with three Non- Executive Independent Directorscomprising of Mr. R Bupathy as the Chairman Mr. A.P. Kurian and Mr. Mahesh Vyas as otherCommittee Members.

RELATED PARTY TRANSACTIONS

All contracts/arrangements/transactions entered by the Company during the financialyear with the related parties were in the ordinary course of business and on an arm'slength basis. During the year the company had not entered into any contract/ arrangement/transaction with any related party which could be considered material in accordance withthe policy of the company on materiality of related party transactions. Thus disclosure inForm AOC-2 is not required.

The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company's website.

Your Directors draw attention of the members to Note 39 to the financial statementwhich sets out related party disclosures.

POLICY RELATING TO DIRECTORS APPOINTMENT

The Company with the approval of Nomination & Remuneration Committee has adopted apolicy on Board diversity and the recommendation of candidature for Board appointment willbe based on merit that complements and expands the skills experience and expertise of theBoard as a whole taking into account gender age professional experience andqualifications cultural and educational background and any other factors that the Boardmight consider relevant and applicable from time to time towards achieving a diverseBoard.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declaration from each Independent Director underSection 149(7) of the Companies Act 2013 that he meets the criteria of Independence laiddown in Section 149(6) of the Companies Act 2013 and in terms of SEBI (Listing Obligation& Disclosure Requirements) Regulations 2015.

DISCLOSURE AS PER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE( PREVENTION PROHIBITION ANDREDRESSAL ) ACT 2013.

The Company has zero tolerance for sexual harassment at work place and has adopted apolicy on prevention prohibition and redressal of sexual harassment at workplace in linewith the provision of Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 and the rules framed thereunder. As required under the Law aninternal complaints committee has been constituted for reporting and conducting inquiryinto the complaints made by the victim on the harassments at the work place.

Your Directors further state that during the year under review one complaint wasreceived pursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013 and the same was investigated in accordance with the proceduresprescribed and adequate steps were taken to resolve them.

GENERAL

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review.

a. Details relating to deposits covered under Chapter V of the Companies Act 2013.

b. Issue of equity shares with differential right as to dividend voting or otherwise

c. Issue of shares (including sweat equity shares) to employees of the company underany scheme save and except ESOS referred to in this report.

d. No significant or material orders were passed by the regulators or Courts ortribunals which impact the going concern status and Company's operation in future.

ACKNOWLEDGEMENTS

Your Directors wish to acknowledge the valuable guidance and assistance received fromSecurities and Exchange Board of India Stock Exchanges Depositories & otherRegulatory Authorities BNP Paribas KSIDC our clients and business partners. We lookforward to receiving their continued support and encouragement. The Board of Directorswishes to extend their thanks and appreciation and express their gratitude for thecontinuing commitment and dedication of employees at all levels. The Directors arethankful to the esteemed shareholders for their support and the confidence reposed in theCompany.

For and on behalf of the Board of Directors
Place : Kochi A P Kurian
Date : 16.05.2017 Chairman