Your Directors have pleasure in presenting the Twenty-Fourth AnnualReport on the business and operations of the Company together with the audited financialstatements prepared under Ind-AS for the financial year ended March 31 2021.
Effective October 1 2015 post demerger of Financing Undertaking intoIDFC FIRST Bank Limited (earlier known as IDFC Bank) IDFC Limited ("IDFC" or"the Company") is operating as an NBFC Investment Company mainly holdinginvestment in IDFC Financial Holding Company Limited ("IDFC FHCL") which is anon-operative financial holding company. IDFC FHCL in turn holds investments in IDFC FIRSTBank and IDFC Asset Management Company Limited.
During the year Balance Sheet size decreased from Rs. 9331.88 croreas on March 31 2020 to Rs. 9303.78 crore as on March 31 2021. Profit after tax andother comprehensive income was lower at Rs. 8.87 crore for FY 2020-21 as compared to Rs.64.22 crore in FY 2019-20. Net worth of the Company increased from Rs. 9255.56 crore ason March 31 2020 to Rs. 9261.10 crore as on March 31 2021. During the year the Companytransferred Rs. 1.80 crore to Special Reserve u/s 45-IC of Reserve Bank of India("RBI") Act 1934. Details of business overview and outlook of the Company andits subsidiaries are appearing in the chapter Management Discussion and Analysis whichforms part of this report.
The Board of Directors has not recommended any dividend for FY21.
In accordance with the Regulation 43A of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 ("SEBI LODR Regulations") IDFC hadformulated a Dividend Distribution Policy. The policy was adopted to set out theparameters and circumstances that will be taken into account by the Board in determiningthe distribution of dividend to its Shareholders and / or retaining profits earned by theCompany. The said policy is hosted on the website of the Company and can be viewed athttp://www.idfc. com/investor_ relations/corporate_ governance_policies. htm.
The Company has seven domestic direct indirect subsidiaries oneforeign indirect Subsidiary Four Associate Companies and two Joint Ventures as on March31 2021 which are given in Table 1.
IDFC SECURITIES LIMITED
During FY20 IDFC & IDFC FHCL had entered into an understandingwith Mr. Dharmesh Mehta along with other investors ("Acquirers") to sale itsentire equity stake (100%) held in IDFC Securities Limited after obtaining the necessaryregulatory approvals. IDFC Securities was an indirect subsidiary company of IDFC Limitedas on March 31 2020. During the year on June 10 2020 IDFC transferred equity stake inIDFC Securities Limited to the Acquirers after obtaining all necessary regulatoryapprovals at a consideration of Rs. 86 crore. The same was informed to the stockexchanges. Accordingly as on March 31 2021 IDFC Securities Limited ceased to besubsidiary company of IDFC FHCL.
Consequently IDFC Securities Singapore Pte. Ltd and IDFC Capital USAwhich were subsidiaries of IDFC Securities Limited also ceased to be subsidiaries of thegroup.
IDFC Capital(Singapore) Pte.
Ltd. During the year an application was filed for liquidation ofIDFC Capital (Singapore) Pte Ltd which has since been liquidated on February 24 2021after obtaining all necessary regulatory approvals and completing all necessaryformalities.
CONSOLIDATED FINANCIAL STATEMENTS
The Board of Directors of IDFC reviews the affairs of its subsidiarycompanies regularly. In accordance with the provisions of Section 129(3) of the CompaniesAct 2013 ("the act") the Company has prepared Consolidated FinancialStatements including requisite details of all the subsidiaries. Further a statementcontaining the salient features of performance and financial positions of all thesubsidiary companies / associates/ joint ventures in the format AOC-I is appended as Annexure1.
In accordance with Section 136 of the Act the Audited FinancialStatements together with the Consolidated Financial Statements and related information ofthe Company and audited accounts of each subsidiary company are available on the websiteof the Company: www.idfc.com. Detailed analysis of the performance of IDFC and itsbusinesses including initiatives in the areas of Risk Management Human Resources andIDFC Foundation activities have been presented in the section on Management Discussion& Analysis which forms part of this Annual Report.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
IDFC had 6 employees as on March 31 2021 and 336 employees at thegroup level. In terms of the provisions of Section 197(12) of the Act read with Rules5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 as amended from time to time a statement showing the names and otherparticulars of the employees drawing remuneration in excess of the limits set out in thesaid rules is provided in this Annual Report. Having regard to the provisions of the firstproviso to Section 136(1) of the Act the Annual Report excluding the aforesaidinformation is being sent to the Shareholders of the Company. The said information isavailable for inspection at the Registered Office and Corporate Office of the Companyduring working hours and any Member interested in obtaining such information may write tothe Company Secretary and the same will be furnished on request.
Disclosure pertaining to remuneration & other details as requiredunder section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 as amended from time to time areappended as Annexure 2.
SHARE CAPITAL UPDATE
There was no change in the share capital of the Company during FY21. Ason March 31 2021 the total paid up capital of IDFC was 1596358316 equity shares of Rs. 10 each.
MANAGEMENT DISCUSSION ANALYSIS AND REPORT ON CORPORATE GOVERNANCE
In compliance with Regulation 34 of SEBI LODR Regulations separatedetailed chapters on Management Discussion & Analysis Report on Corporate Governanceand Additional Shareholder Information forms part of this Annual Report.
O1 SUBSIDIARY COMPANIES
|SR. || || |
|NO. NAME OF THE SUBSIDIARY ||DIRECT / INDIRECT SUBSIDIARY ||% OF SHAREHOLDING |
|Domestic Subsidiaries || || |
|i. IDFC Financial Holding Company Limited ("IDFC FHCL") ||Direct ||100% |
|ii. IDFC Foundation ||Direct ||100% |
|(a Company within the meaning of section 8 of the Act) || || |
|iii. IDFC Projects Limited ||Direct ||100% |
|iv. IDFC Alternatives Limited ||Direct ||100% |
|v. IDFC Trustee Company Limited ||Direct ||100% |
|vi. IDFC AMC Trustee Company Limited ||Indirect through IDFC FHCL ||100% |
|vii. IDFC Asset Management Company Limited ("IDFC AMC") ||Indirect through IDFC FHCL ||99.96% |
|Foreign Subsidiaries || || |
|i. IDFC Investment Managers (Mauritius) Ltd. ||Indirect through IDFC AMC ||99.96% |
|Associate || || |
|i. Novopay Solutions Private Limited ||Direct ||23.83% |
|ii. IDFC FIRST Bank Limited ||Indirect through IDFC FHCL ||39.98% |
|iii. IDFC FIRST Bharat Limited ||Indirect through IDFC FIRST Bank ||39.98% |
|iv. Jetpur Somnath Tollways Private Limited ||Indirect through IDFC Projects Limited ||26% |
|Joint Ventures || || |
|i. Delhi Intigrated Multi - Modal Transit System Limited ||Indirect through IDFC Foundation ||50% |
|ii. Infrastructure Development Corporation (Karnataka) ||Indirect through IDFC Foundation ||49.49% |
|Limited ("iDeck") || || |
BUSINESS RESPONSIBILITY REPORT
As per Regulation 34(2)(f) of SEBI LODR Regulations and Notificationsissued from time to time a separate report called Business Responsibility Report("BRR") describing the initiatives taken by IDFC from an environmental socialand governance perspective is hosted on the Company's website: www.idfc.com whichforms part of this Annual Report.
During FY21 your Company has not accepted any deposits from the publicwithin the meaning of the provisions of the Non-Banking Financial Companies Acceptance ofPublic Deposits (Reserve Bank) Directions 1998 or under Chapter V of the Act.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
Post demerger of financing undertaking into IDFC Bank w.e.f. October 12015 IDFC is registered with RBI as NBFC Investment Company. Being an investmentcompany the provisions of Section 186 of the Act are not applicable to IDFC. Hence therequisite details of loans guarantees and investments are not given.
VIGIL MECHANISM / WHISTLE
BLOWER POLICY IDFC has put in place a Whistle Blower Policy whichincludes reporting to the Management instances of unethical behaviour actual or suspectedfraud or violation of the Company's Code of Conduct. The Audit Committee directlyoversees the Vigil Mechanism. The provisions of the policy are also in line with theprovisions of Section 177 (9) & (10) of the Act. The details of Whistle Blower Policy/Vigil Mechanism are posted on the website of the Company: www.idfc.com.
There were no foreign exchange earnings or expenditure during the yearunder review.
PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
Since the Company does not carry out any manufacturing activity theparticulars regarding conservation of energy technology absorption and other particularsas required by Section 134(3) (m) of the Act read with the Companies (Accounts) Rules2014 are not applicable to IDFC.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year Government of India Ministry of Finance Departmentof Financial Services withdrew nominations of Mr. Anshuman Sharma (DIN: 07555065) and Mr.Soumyajit Ghosh (DIN: 07698741) as Nominee Directors from the Board of IDFC Limited videits letter dated March 25 2021 with immediate effect.
The Board places on record its sincere appreciation for the valuablecontribution and services rendered by them.
The Shareholders of the Company vide a special resolution passed at its23rd AGM held on September 25 2020 reappointed Mr. Sunil Kakar (DIN: 03055561) asManaging Director & Chief Executive Officer of IDFC Limited wef July 16 2020 tillSeptember 30 2022.
The Shareholders of the Company at its 23rd AGM held on September 252020 approved the appointment of Mr. Ajay Sondhi (DIN: 01657614) as an IndependentDirector of the Company for a period of 3 (three) consecutive years from w.e.f. November08 2019 to November 07 2022.
The Shareholders of the Company at its 21st AGM held on July 31 2018appointed Mr. Vinod Rai (DIN : 00041867) as an Independent Non-executive Chairman for thesecond term for a period of 3 (three) consecutive years from July 31 2018 to July 302021. The Nomination and Remuneration Committee and Board of Directors of IDFC Limited atits respective meetings held on May 25 2021 proposed the appointment of Mr. Vinod Rai asa Non-Executive Director (Non-Independent) on the Board of IDFC Limited with immediateeffect up to May 22 2023.
The Nomination and Remuneration Committee and Board of Directors ofIDFC Limited at its respective meetings held on May 25 2021 also proposed theappointment of Dr. Jaimini Bhagwati (DIN: 07274047) and Mr. Anil Singhvi (DIN: 00239589)as Additional Directors in the category of Independent Director of the Company withimmediate effect for a consecutive period of 3 (three) years.
The Company has only 6 (six) directors out of which 4 (four) areIndependent Directors. Apart from Managing Director whose term is upto September 2022only Non-Independent Director is Mr. Rai whose appointment will be considered byshareholders at this AGM. Accordingly there is no Director who is liable to retire byrotation at this AGM.
The Shareholders of the Company are requested to approve theappointment of Mr. Vinod Rai Dr. Jaimini Bhagwati and Mr. Anil Singhvi which forms partof the Notice for convening the ensuing AGM.
APPOINTMENT OF DIRECTORS
The Company has in place a framework for Board Diversity Fit &Proper Criteria and Succession Planning for appointment of Directors on the Board of theCompany.
DECLARATION OF INDEPENDENCE
The Company has received a declaration from all IDs that they meet thecriteria of independence specified under Section 149 of the Act read with Rule 5 of theCompanies (Appointment and Qualification of Directors) Rules 2014 and Regulation 16(1)(b)of SEBI LODR Regulations for holding the position of ID and that they shall abide by the"Code for Independent Directors" as per Schedule IV of the Act. Pursuant toIICA Companies (Accounts) Amendments Rules 2019 Companies (Creation and Maintenance ofDatabank of Independent Directors) Rules 2019 and Companies (Appointment andQualification of Directors) Fifth Amendment Rules 2019 dated 22nd October 2019 allIndependent Directors on the Board of the Company completed registration on Data Bank.
The Board of Directors recommends the following items under specialbusiness for approval of the Shareholders at the ensuing AGM: i. Appointment of Mr. VinodRai ii. Appointment of Dr. Jaimini Bhagwati as an Independent Director iii. Appointment ofMr. Anil Singhvi as an Independent Director iv. Payment of commission to Non-ExecutiveDirectors
SHAREHOLDERS' UPDATE BOARD AND ITS COMMITTEES
During the year 9 (Nine) Board Meetings and 4 (four) Audit CommitteeMeetings were held. The Audit Committee was reconstituted on June 09 2021. The Committeeis chaired by Mr. Anil Singhvi (DIN: 00239589) and has Ms. Ritu Anand (DIN: 05154174) Mr.Vinod Rai (DIN: 00041867) and Mr. Ajay Sondhi (DIN: 01657614) as its Members All therecommendations made by the Audit Committee during the year were accepted by the Board.The details of the constitution and meetings of the Board Audit Committee and otherCommittees held during the year are provided in the Corporate Governance Report whichforms part of this Annual Report.
Pursuant to SEBI LODR Regulations and the Act the process indicatingthe manner in which formal annual evaluation of the Chairman Directors Board as a wholeand Board level committees is given in the Corporate Governance Report which forms partof this Annual Report.
REMUNERATION COMMITTEE / REMUNERATION POLICY
The Company has a policy in place for identification of independencequalifications and positive attributes of Directors. IDFC has put in place a RemunerationPolicy for the Directors Key Managerial Personnel Senior Management and Other Employees.
The remuneration of the Executive Director and KMPs is recommended byNRC to the Board for its approval.
At the 20th AGM of the Company held on July 28 2017 the Shareholdershad approved the appointment of Price Waterhouse & Co Chartered Accountants LLP (FRN304026E/ E300009) ("PWC") as Statutory Auditors for a period of 5 years to holdoffice from the conclusion of the 20th AGM till the conclusion of the 25th AGM of theCompany.
As per the guidelines issued by RBI vide RBI/ 2020-21/25 ref no.DOS.CO.ARG/ SEC.01/08.091.001/2021-22 dated April 27 2021 for appointment/reappointmentStatutory Central Auditors (SCAs)/ Statutory Auditors (SAs) of Commercial Banks excludingRegional Rural Banks (RRBs) United Co-operative Banks (UCBs) and NBFCs including HousingFinance Companies (HFCs) entities regulated by the Reserve Bank of India have tomandatorily rotate Statutory Auditors at the end of 3 (three) years. The said guidelineswould be applicable for FY 2021-22 and onwards. NBFCs shall have flexibility to adoptthese guidelines from H2(second half) of FY 2021-22. Accordingly The Audit Committee andBoard of Directors of IDFC Limited at its respective meeting held on July 28 2021 andAugust 11 2021 proposed the appointment of Khimji Kunverji Co LLP as Statutory Auditorsof the IDFC Limited for a period of 3 years' . The Shareholders of the Company arerequested to approve the appointment of Khimji Kunverji Co LLP which forms part of theNotice for convening the ensuing AGM.
In terms of the Section 148 of the Companies Act 2013 read with Rule 8of the Companies (Accounts) Rules 2014 the Company is not required to undertake costaudit.
Pursuant to the provisions of Section 204 of the Act and Rule 9 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhad appointed M/s. BNP & Associates Company Secretaries to undertake the SecretarialAudit of the Company for FY21. The Secretarial Audit Report is appended as Annexure 3. Thereare no qualifications or observations or adverse remarks made by the Statutory Auditorsand Secretarial Auditors in their respective reports.
COMPLIANCE WITH SECRETARIAL STANDARDS
Pursuant to the Secretarial Standard-I issued by the Institute ofCompany Secretaries of India pertaining to Board of Directors the Company confirms thatall applicable Secretarial Standards have been duly complied with during the period underreview.
INTERNAL CONTROL SYSTEMS
The Company has in place adequate systems of Internal Control toensure compliance with policies and procedures. It is being constantly assessed andstrengthened with new / revised standard operating procedures and tighter InformationTechnology controls. Internal Audit of the Company is regularly carried out. The AuditReports of Internal Auditors i.e. M/s Grant Thornton India LLP ("GT") alongwith their recommendations and implementation contained therein are regularly reviewed bythe Audit Committee.
GT verified the key Internal Financial Control by reviewing keycontrols impacting financial reporting and overall risk management procedures of theCompany and found the same satisfactory. Subsequently it was placed before the AuditCommittee of the Company.
RISK MANAGEMENT POLICY
IDFC as a group has a robust risk management practice that enables itto book manage and mitigate risks in all its businesses. The Company has a comprehensiveEnterprise Risk Management framework which has been adopted across all entities in thegroup and covers all three types of riskscredit market and operational risks. TheBoard through its Risk Management Committee monitors and reviews risk management of thegroup on a regular basis. The details of Risk Management Framework are provided inManagement Discussion and Analysis.
MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THECOMPANY
There are no material changes and commitments affecting the financialposition of IDFC which has occurred between the end of FY21 and the date of thisBoard's report.
INSTANCES OF FRAUD REPORTED BY THE AUDITORS
There have been no instances of fraud reported by the Auditors underSection 143(12) of the Act.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS /TRIBUNALS
During the year under review there were no significant and materialorders passed by the Regulators / Courts / Tribunals.
ANTI SEXUAL HARASSMENT POLICY
The Company has in place the policy on Anti Sexual Harassment. TheCompany undertakes ongoing trainings to create awareness on this policy. There were noinstances of Sexual Harassment that were reported during the period under review. TheCompany has constituted an Internal Complaints Committee for redressal of complaints andto prevent sexual harassment.
DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to theinformation and explanations obtained by them your Directors make the followingstatements in terms of Section 134(3)(c) of the Act: O In that in the preparationof the annual financial statements for the year ended March 31 2021 the applicableaccounting standards have been followed along with proper explanation relating to materialdepartures if any; O In that such accounting policies have been selected andapplied consistently and judgement and estimates have been made that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as atMarch 31 2021 and of the Profit of the Company for the year ended on that date; O Inthat proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities; O In thatthe annual financial statements have been prepared on a going concern basis; O Inthat proper internal financial controls were in place and that the financial controls wereadequate and were operating effectively; O In that systems to ensure compliancewith the provisions of all applicable laws were in place and were adequate and operatingeffectively.
In accordance with the Green Initiative' the Company hasbeen sending the Annual Report / Notice of AGM in electronic mode to those Shareholderswhose e-mail Ids are registered with the Company and / or the Depository Participants.
Your Directors are thankful to the Shareholders for their activeparticipation in this Green Initiative.
An Annual Return of the Company is available on the website:www.idfc.com
CORPORATE SOCIAL RESPONSIBILITY
The Corporate Social Responsibility ("CSR") wasre-constituted on June 09 2021. Dr. Jaimini Bhagwati was inducted as the Chairman of theCSR Committee wef June 09 2021. The CSR Committee consists of three Directors:
i. Dr. Jaimini Bhagwati (DIN: 07274047) Chairman ii. Mr. Ajay Sondhi(DIN: 01657614) iii. Mr. Sunil Kakar ( (DIN: 03055561)
The disclosure of contents of the Corporate Social ResponsibilityPolicy of the Company as prescribed in the Companies (Corporate Social ResponsibilityPolicy) Rules 2014 forms part of the Board's Report and appended as Annexure 4.
Pursuant to MCA circular read with The Companies (amendment) Act 2020the Company had made contribution of Rs. 0.55 crore to PM CARES fund as CSR activities inaddition to the minimum prescribed requirement for FY20 which was offset against the CSRobligation arose in FY21.
RELATED PARTY TRANSACTIONS
The Company has in place the policy on Related Party Transactions andthe same has been uploaded on the website of the Company i.e. www.idfc.com. In all relatedparty transactions that were entered into during the financial year an endeavour was madeconsistently that they were on an arm's length basis and were in the ordinary courseof business. IDFC has always been committed to good corporate governance practicesincluding matters relating to Related Party Transactions.
Since all related party transactions entered into by the Company werein the ordinary course of business and were on an arm's length basis Form AOC-2 isnot applicable to the Company. No Material Related Party Transactions i.e. transactionsexceeding 10% of the annual consolidated turnover of the Company as per the last auditedfinancial statements were entered during the year by your Company.
EMPLOYEE STOCK OPTION SCHEME
Pursuant to the resolution passed by the Members through Postal Ballotdated June 25 2016 IDFC introduced IDFC Employee Stock Option Scheme 2016 ("IDFCESOS 2016") to enable the employees of IDFC and its subsidiaries to participate inthe future growth and financial success of the Company. The Scheme is in compliance withthe SEBI (Share Based Employee Benefits) Regulations 2014.
The Company determines the fair value of options using the black shoesmodel which takes into account the excercise price the term of the option share price atgrant date expected price volatility dividend yield and risk free interest rate for theterm of the option.
The fair value so determined is charged to profit & loss account asemployee benefit expense over the vesting period of the grant.
Disclosures as required under the SEBI (Share Based Employee Benefits)Regulations 2014 are hosted on the Company's website: www.idfc.com which forms partof this Annual Report.
We are grateful to the Government of India State Governments RBISEBI Stock Exchanges various Ministries and other domestic and overseas regulatorybodies for their continuous collaboration and support. We would like to thank all ourShareholders Banks for their co-operation and assistance during the year under review.
We would like to express our deep sense of appreciation for the hardwork and efforts put in by the employees at all levels of the Group.
FOR AND ON BEHALF OF THE BOARD
|Vinod Rai |
|Non-Executive Chairman |
|New Delhi |
|Date: June 14 2021 |