INDUS FINANCE LIMITED
Your Directors are pleased to present this 29th Annual Report of the Companytogether with the Audited Accounts for the year ended 31st March 2020
FINANCIAL HIGHLIGHTS AND PERFORMANCE
|PARTICULARS ||2019-20 ||2018-19 |
|Income from operations ||220.91 ||135.67 |
|Other Income ||20.00 ||105.74 |
|Gross Receipts ||240.91 ||241.41 |
|Expenses ||230.83 ||211.02 |
|Depreciation & Amortization ||2.22 ||2.28 |
|Total Expenses ||233.05 ||213.30 |
|PBT ||7.86 ||28.11 |
|TAX ||2.43 ||8.58 |
|PAT ||5.42 ||19.53 |
|Proposed Dividend/Dividend ||NIL ||NIL |
|Proposed Dividend Tax/Dividend Tax ||NIL ||NIL |
|Transfer to Statutory Reserve ||1.08 ||(0.38) |
During the Financial year your Company's income from operations was higher by 62%compared to the previous year. The steep increase is attributed to realisation of certainunrealised interest in the past years. In addition the Company had realisation of Rs20.00 lakh bad debt pertaining to earlier years. The fall in other income during the yearunder review Company done away with other assets generating other income at the end ofPrevious year to fall strictly in line with the regulatory norms prescribed by theRegulator. The net profit of the Company would have been higher by Rs 80.00 lakhs but forthe prudential provisioning/write of doubtful/bad debts pertaining to two borrowalaccounts. However the legal recovery efforts are in place and the management is confidentof recovering these bad debts in the coming years. In view of the inadequate profit yourCompany is not in a position to recommend dividend for the year under review.
The year 2020 experienced a turmoil in Financial Sector attributed to severe Globalrecession raise in unemployment nearly 50% fall in broad equity prices almost 25%decline in residential real estate price unprecedented stress in the corporate debtmarket as well as commercial real estate sector. Failure of certain large NBFCs resultedin huge liquidity crunch forcing the Government to introduce several reforms to liberaliseand RBI taking various measures to facilitate easy access to finance for MSMEs. Lenderswere finding ways to manage their books demand and stay in the business in long-run. Dueto this a
temporary shock appeared in the NBFC circle as banks tightened credit flows andliquidity squeeze reduced the pace of acceleration of credit as entities choose to focuson asset-liability management rather than just growing their portfolio. In additionMutual funds too reduced their exposure to NBFCs by 30% forcing the sector walk a tightrope while managing the funds requirement. The announcement by the Regulator [RBI] inAugust increasing the Bank's exposure to 20% from the existing 15% of their Tier I capitalto a single NBFC and easing of the priority sector norms by allowing the banks to lend toNBFCs for onward lending to Agriculture [up to Rs.1000 lakh] MEMEs [Rs.20 lakh] andhousing [Rs.20 lakh] to be covered under the priority sector lending also did notstimulate the sector to the anticipated level. IFL having no exposure to either bankborrowings or to public deposit saw one more financial year passing with asset sizefurther reducing attributing to recovery as well as wait & watch policy. The rapidspread of corona virus (COVID-19) has dramatic impacts on financial markets all over theworld. It has created an unprecedented level of risk causing investors & lenders tosuffer significant loses in a very short period. Even advanced economies entered thiscrisis with interest rates at historical lows unprecedented job loss and sharp&sudden fall in the GDP. If the liquidity crunch caused by the systemic failure ofcertain large sized NBFC and global recession are the root cause for the low growth in thefirst half the pandemic caused by Covid-19 worldwide and its negative impact on everybusiness sector in the 2nd half has overshadowed the minimal growth achieved inthe first half. With prediction of negative growth already in place across all regions ofthe world in both Advanced economies and Emerging markets and Developing economies(source: IMF world economic outlook April 2020) there left hardly anything toappreciate the performance of 2020.
After the Global Financial Crisis a decade ago the world is engulfed in a new crisiscaused by the COVID-19 pandemic with unimaginable impacts on health and economy. Thehealth crisis and poor healthcare system in the developing economies have severe impact onthe economic activities. According to most estimates the Indian economy is expected toregister a record contraction of over 4.5% in the current fiscal year due to the pandemic.The medium-term outlook for the Indian economy also appears to be very uncertain withsupply chains and demand yet to be restored fully while the trajectory of the corona virusspread and the length of its impact remain unknown. The Global economy is expected tocontract by 3 % in the current fiscal [April-March] and is expected to be much worse thanthe financial crisis of 2008-09. Effective policies to forestall the possibilities ofworse outcome and necessary measures to protect the lives are the need of the hour. TheCentral Government had announced several economic stimulus packages announcing significantfiscal support to heavily impacted sectors and workers. The future suggests that NBFCswill continue to experience normal growth if the credit flow does not stop and the riskmitigation mechanisms improve.
OPPORTUNITIES & THREAT
The pre Covid-19 situation with increased stress on asset quality liquidity crunch hadmade the NBFCs to focus on diversification and find alternate source of income. Thebiggest strength of the NBFC sector is their existing customer base distributioncapability and consumer understanding and they can leverage these for an alternatebusiness model. Subject to Regulatory approvals NBFCs can use their core strength indeveloping a market driven business platform.
According to a study on Indian Economic performance 2019-20 there are around 55-60million MSMEs in India contributing to about 30 per cent of India's GDP. This sector hada credit demand of about INR 45 lakh crore in 2018 out of which 40 per cent was served byinformal
credit. As a result there is big opportunity in the coming years for NBFCs to capturethis unserved population and partner in India's growth story. This is because banks oftenfind it expensive or unviable to serve these segment which new-age NBFCs are serving onthe back of advanced technology and better reach in the remote corners of the country.Another most affected social segments is the informal sector comprising small businesseslocal shopkeepers daily wage earners and farmers most of whom have been dealing with theNBFCs for ages. On the way to recovery all these business as well as individuals needfresh credit. Many of them being new to credit and there being no past credit history itis unlikely that the traditional or formal lenders would grab the opportunity by deviatingthe norms or match the speed with which a NBFCs delivers. Post COVID-19 this segment isexpected to be much bigger in size and NBFC should be able to grab this opportunity shouldthere be enough liquidity in the system. However as hitherto has been the case the realthreat lies in maintaining the quality of the portfolio and complying with the regulatorynorms. The challenge to maintaining and augmenting the deposit portfolio due to shakencustomer confidence post crisis of a large NBFC and stricter regulatory norms default inpayment by the existing borrowers in post covid-19 pandemic breakdown and resultant impacton liquidity mismatch and profitability may severely affect many small and mid-sizedNBFCs.
RISKS & CONCERNS
The disruption caused by Covid-19 has put most of the small and mid-sized NBFCsparticularly those having substantial exposure to public funds by way of debt &deposit as the large lenders (NBFCs) have an avenue to tap the "Targeted Long TermRefinancing operations [TLTRO] announced by the Regulator. With substantial quantum ofcommercial papers and NCDs becoming due during the current year mid-sized NBFCs will beforced to dip into the reserves to pay back the liabilities and may find it very difficultto raise funds. With this background it is likely that business models of some of theNBFCs undergo considerable changes within the regulatory framework given the uncertaintydue to lockdown. With auto sales having virtually coming to a standstill real estatesector experiencing unprecedented recession and MSME sector a paradise for these NBFCs yetto commence operations small and medium sized NBFCs will take lot of time to recuperate.Another major concern for the NBFCs in the near future is the significantly deterioratingasset quality as economic disruptions from the corona virus outbreak deepen an economicslowdown that has been underway in the past few years. According to rating agency Moody'sNon-banking financial companies (NBFCs) in the country are more vulnerable to the risksbrought on by the Covid-19 disruption than banks. The agency reported that "Stresseson the liquidity and asset-quality fronts are set to be exacerbated for nonbanklenders". With flattening of the covid-19 curve still uncertain and the completeeffect of outbreak of the pandemic unknown it is very difficult to imagine the bottomline of the NBFC sector at least in the next two fiscals.
The Covid-19 pandemic is truly an unprecedented event. No one would have imagined thatthe whole world would come to a standstill for a couple of months. The potential economicloss caused by the pandemic is as brutal as the loss of life. In addition to both internaland external risks hitherto experienced IFL also experienced one more risk "theeffect of Pandemic caused by covid-19" like the rest of the world. The managementfollowed all the statutory and regulatory guidelines issued in dealing with the situation.While Your company has suitable policies in place to manage the interest liquiditymarket and credit risk it has also evolved proper standard operating procedure [SOP] todeal with the Corona virus outbreak. As mentioned in our earlier year's reports thecautious wait & watch approach adapted by the Company for the last couple of years hasenabled to survive the vulnerable market conditions. Your company wishes to have the sameapproach for the current fiscal also.
DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS
The current ratio and Debt Equity Ratio is more by 28% and less by 46% as compared tothe previous financial year. The variance is due to repayment of loan.
The operating profit and Net profit is less by 67% and 72% respectively as compared tothe previous financial year. The negative variance is on account of increase in expenses.
DETAILS OF CHANGE IN RETURN ON NETWORTH
Return on Net worth was 1.15% for 2018-19 and less by 12% for 2019-20. The negativevariance is due to adjustment on account of Ind AS adoption.
NUMBER OF MEETINGS OF BOARD
Indus Finance Ltd held 4 Board Meetings during the year ended 31st March2020. These were on 30th May 2019 11th September 2019 7thNovember 2019 and 14th February 2020.
REAPPOINTMENT OF DIRECTORS RETIRING BY ROTATION
In terms of Section 152 of the Companies Act 2013 Mr. Bala V Kutti (DIN 00765036) isliable to retire by rotation at the ensuing Annual General Meeting and being eligibleoffers himself for re-appointment. The Board of Directors based on the recommendation ofNomination and Remuneration Committee has recommended the re-appointment of Mr. Bala VKutti (DIN 00765036) retiring by rotation.
TO CONTINUE THE DIRECTORSHIP OF INDEPENDENT DIRECTOR IRRESPECTIVE OF THE AGE
Mr. Niranjan R Jagtap was appointed as Independent Director to hold the office for 5consecutive years until the conclusion of the 30th AGM of the company. Pursuantto the Regulation 17 (1A) of SEBI (LODR) Regulation based on the recommendation of theNRC the Board recommends for the approval of the members through special resolution atthe ensuing AGM to continue to be a Non-Executive Independent Director of the Company upto the conclusion of 30th AGM of the Company being the date of expiry of hiscurrent term of office.
STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS' UNDER SECTION 149 (6) OFCOMPANIES ACT 2013
The Company has obtained declaration from the Independent Directors that they meet thecriteria of Independence as provided in section 149 (6) of the Companies Act 2013.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134 (3) (c) and 134 (5) of the Companies Act 2013 the Board ofDirectors hereby state that;
1. In the presentation of the Annual accounts applicable standards have been followedand there are no material departures.
2. The Directors have selected such accounting policies and apply them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at 31st March 2020 andprofit/loss for the Company for the year ended 31st March 2020.
3. The Directors have taken proper and sufficient care in the maintenance of adequateaccounting records in accordance with the provisions of the Act for safe guarding theassets of the Company and for preventing and detecting fraud and other irregularities.
4. The Directors have prepared the annual accounts on a going concern basis.
5. The Directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively and
6. The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
The details are furnished under the Corporate Governance Report (CGR) annexed to thisReport. All the recommendations of the Committee were accepted by the Board.
THE RATIO OF THE REMUNERATION OF EACH DIRECTOR TO THE MEDIAN REMUNERATION OF THEEMPLOYEES OF THE COMPANY FOR THE FINANCIAL YEAR 2019-20 ARE GIVEN BELOW
|Name of the Director ||Ratio to Median Employee Remuneration |
|Mr. Bala V Kutti - Executive Chairman ||36.00 |
|Mr. Niranjan R. Jagtap - Independent Director ||0.60 |
|Dr. K.R. Shyamsundar - Independent Director ||0.60 |
|Ms. Alice Chikkara - Non Executive Director ||- |
THE PERCENTAGE INCREASE IN REMUNERATION OF DIRECTORS KMP AND MEDIAN EMPLOYEE FOR THEFINANCIAL YEAR 2019-20
There is no increase in remuneration to the Directors KMP during the financial year2019-20.
THE KEY PARAMETERS FOR ANY VARIABLE COMPONENT OF REMUNERATION AVAILED BY THE DIRECTORS
THE RATO OF THE REMUNERATION OF THE HIGHEST PAID DIRECTOR TO THAT OF THE EMPLOYEES WHOARE NOT DIRECTORS BUT RECEIVE REMUNERATION IN EXCESS OF THE HIGHEST PAID DIRECTOR DURINGTHE YEAR
THERE ARE NO EMPLOYEES IN RECEIPT OF REMUNERATION MORE THAN THE STIPULATED AMOUNTMENTIONED UNDER RULE 5(2) OF COMPANIES (APPOINTMENT AND REMUNERATION) RULES 2014
AFFIRMATION THAT THE REMUNERATION IS AS PER THE REMUNERATION POLICY OF THE COMPANY
The Company affirms remuneration is as per the remuneration policy of the Company.
POLICY FOR SELECTION AND APPOINTMENT OF DIRECTORS AND THETR REMUNERATION
The details are available in the website of the Company at www.indusfinance.comPREVENTION OF INSIDER TRADING
The Company has adopted a Code of Conduct as per the Guidelines issued by theSecurities and Exchange Board of India for prevention of insider trading with a view toregulate trading in securities by the Directors and designated employees of the Company.The Code prohibits the purchase or sale of Company shares by the Directors and thedesignated employees while in possession of unpublished price sensitive information inrelation to the Company and during the period when the Trading Window is closed.
DETAILS OF DIRECTORS OR KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED OR HAVE RESIGNEDDURING THE YEAR
Mr.N Bhaskara Chakkera has been appointed as Chief Executive Officer (CEO) with effectfrom 30th May 2019.
Ms.Alice Chhikara has resigned from the post of Director on 14th February2020 of the Company during the year under review.
Ms.K.B.K.Vasuki has been appointed as Additional Director (Non-Executive &Independent) with effect from 29th July 2020 of the Company.
PARTICULARS OF LOANS GUARANTEE OR INVESTMENTS
Detailed information is provided in respect of loans under long term loans and advancesin Notes No.4 of Notes forming part of the financial statements similarly detailedinformation is provided under Non-Current Investments in Note No.5 of Notes forming partof the financial statements. As regards guarantee the Company has not provided anyguarantee to any person or Bodies Corporate.
BUSINESS RISK MANAGEMENT
The details are available in the website of the Company at www.indusfinance.com
Section 134 of the Companies Act 2013 states that formal evaluation needs to be madeby the Board of its own performance and that of its committees and the individualDirectors. Schedule IV of the Companies Act2013 and regulation 17(10) of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 states that the performanceevaluation of Independent Directors shall be done by the entire Board of Directorsexcluding the Directors being evaluated.
Pursuant to the Provisions of Section 134 (3) (p) of the Companies Act 2013 and SEBI(LODR) Regulations 2015 the Board has carried out an evaluation of its own performancethe Directors individually as well as the evaluation of the working of its Committees. Astructured questionnaire was prepared after taking into consideration inputs received fromthe Directors covering various aspects of the Board's functioning such as adequacy of thecomposition of the Board and its Committees Board culture execution and performance ofspecific duties obligations and governance. A separate exercise was carried out toevaluate the performance of individual Directors including the Chairman of the Board whowere evaluated on parameters such as level of engagement and contribution independence ofjudgment safeguarding the interest of the Company and its shareholders etc. The Directorsexpressed their satisfaction with the evaluation process.
During the year under review the company has not accepted any deposits from the publicwithin the ambit of section 73 of the companies Act 2013 and The companies (Acceptance ofDeposits) Rules 2014.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY ANY COURTS DURING THE UNDERREVIEW:
As required under Section 177 of Companies Act 2013 (the Act) and Regulation 22 of theSEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 the Company hasestablished a vigil mechanism for Directors and employees to report genuine concernsthrough the whistle blower policy of the Company as published in the website of theCompany. As prescribed under the Act and the Listing Regulations provision has been madefor direct access to the Chairperson of the Audit Committee in appropriate or exceptionalcases.
FINANCIAL STATEMENTS OF THE SUBSIDIARY COMPANY IF ANY
The Company does not have any Subsidiary
INDUSTRIAL RELATIONS AND PARTICULARS OF EMPLOYEES
As of 31st March 2020 Your Company has 8 employees on its rolls. Theemployees will be inducted in to permanent services of the Company after training to fillup vacancies as when arises. Your company has not issued any shares under Employees' StockOption Scheme during the year under review.
VARIATIONS TN THE MARKET CAPITALISATION OF THE COMPANY PRICE EARNINGS RATIO AS AT THECLOSING DATE OF THE CURRENT FINANCIAL YEAR AND PREVIOUS FINANCIAL YEAR
|Particulars ||March 31 2020 ||March 31 2019 ||% Change |
|Market Capitalization (Rs.) ||82584036/- ||124987050/- ||(33.93)% |
|Price earnings ratio ||6.99 ||64.29 ||(89.13)% |
PERCENTAGE OF INCREASE OR DECREASE IN THE MARKET QUOTATION OF THE SHARES IN COMPARISONTO THE RATE AT WHICH THE COMPANY CAME OUT WITH THE LAST PUBLIC OFFER
Price of public offer Rs. 30/- Market price as on 31.03.2020 Rs. 8.92/- difference(Rs. 21.08) (70.27%)
Your Company has complied with the requirements regarding Corporate Governance asrequired under SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. AReport on the Corporate Governance in this regard is made as a part of this Annual Reportand a certificate from the Auditors of your company regarding compliance of the conditionsof the Corporate Governance is attached to this report.
LISTING OF EQUITY SHARES
Your Company's equity shares are continued to be listed on the Bombay Stock ExchangeLtd Mumbai during the year under review.
As per section 139 (2) of the Companies Act 2013 M/s. Sanjiv Shah & AssociatesChartered Accountants Chennai having (ICAI Firm Registration No. 003572S) be and arehereby appointed as Statutory Auditors of the Company (in place of M/s. Ramaratnam &Co Chartered Accountants the retiring Auditors) to hold the office from the conclusionof this Annual General Meeting until the conclusion of the next Annual General Meeting ofthe Company.
RESPONSE TO THE AUDITORS' BASIS OF QUALIFIED OPINION:
As regards Auditors' basis of qualified opinion mentioned in their report dt. 29thJuly 2020 your Directors wish to state as under:
Company has been informed by Indowind Energy Ltd that the winding up petition filed onbehlf of a section of bondholders before the Hon'ble High Court of Madras is allowed.However Indowind Energy Limited has preferred an appeal challenging the said admissionwhich has been numbered before the registry of Hon'ble High Court of Madras. It is alsoinformed that the petitioner is seeking a proposal for the redressal of petitioners'grievance. We have also analyzed the subject order admitting the winding up petition andthe grounds of admission do not seem to be sustainable under the law. Hence a consciousdecision has been taken to wait till the outcome of the appeal or any other subsequentappeal before the higher Courts by either parties.
EXTRACT OF ANNUAL RETURN
As provided in Sec 92 (3) of the Act the extract of annual return is given in Annexure(1) of this report in the format Form MGT-9 which forms part of this report.
TRANSACTIONS WITH RELATED PARTIES
The particulars of contracts or arrangements with related parties referred to insection 188(1) and applicable rules of the Companies Act 2013 is provided with respect tothe list of Related Parties under note No.23 of the Notes on accounts and with respect totransactions with related parties are given in detailed under note No.23 of the notes onaccounts in the format Form AOC-2 which forms part of this report in Annexure (2).
SECRETARIAL AUDIT REPORT-
Mr.R.Kannan PCS is the Secretarial Auditor of the company for the year under reviewand his report is attached with this report in Form No. MR-3 under Annexure (3). Asregards the observation of the Secretarial Auditor in his report your company is takingsteps for appropriate solution.
ADEQUACY OF INTERNAL CONTROL
Your Company has effective and adequate internal control systems in combination withdelegation of powers. The control system is also supported by internal audits andmanagement reviews with documented policies and procedures.
M/s. Kailash Jain & Associates are the Internal Auditors who continuously monitorand strengthen the financial control procedures in line with the operations of theCompany.
PARTICULARS REQUIRED UNDER SECTION 134 OF THE COMPANIES ACT 2013 AND COMPANIES(ACCOUNTS) RULES 2014
The particulars required to be given in terms of section 134 of the Companies Act 2013and Companies (Accounts) Rules 2014 regarding conservation of Energy TechnologyAbsorption Foreign Exchange Earnings and Foreign Exchange outgo are not applicable toyour company.
The Directors wish to place on record their sincere thanks and gratitude to all itsShareholders Bankers State Governments Central Government and its agencies statutorybodies and customers for their continued co-operation and excellent support extended tothe Company from time to time.
Your Directors place on record their utmost appreciation for the sincere and devotedservices rendered by the employees at all levels.
The management Discussion and Analysis contained herein is based on the informationavailable to the Company and assumptions based on experience in regard to domestic andglobal economy on which the Company's performance is dependent. It be may materiallyinfluenced by changes in economy government policies environment and the like on whichthe Company may not have any control which could impact the views perceived or expressedherein.
For and on behalf of the Board of INDUS FINANCE LIMITED
|Place: Chennai - 600 034 ||Bala V Kutti |
|Date: 29th July 2020 ||Director |