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Karnavati Finance Ltd.

BSE: 538928 Sector: Financials
NSE: N.A. ISIN Code: INE554R01012
BSE 00:00 | 22 Oct 18.05 -0.94
(-4.95%)
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NSE 05:30 | 01 Jan Karnavati Finance Ltd
OPEN 18.85
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OPEN 18.85
CLOSE 18.99
VOLUME 6
52-Week high 21.90
52-Week low 10.90
P/E
Mkt Cap.(Rs cr) 18
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Karnavati Finance Ltd. (KARNAVATIFINANC) - Director Report

Company director report

To

The Shareholders

The directors have the pleasure in presenting 36th Annual Report of YourCompany with the Audited Financial Statements of the Company for the financial year endedon March 31 2020.

FINANCIAL RESULTS

 

(Amount in Rupees)

Particulars F.Y. 2019-20 F.Y. 2018-19
Revenue From Operations 27635915 32401510
Other operation Income 2500
Total Revenue 2 7638415 32401510
Less: Total Expenses before Depreciation Finance Cost & Tax 23506652 6625259
Operating Profits before Depreciation Finance Cost & Tax 4131763 25776251
Less: Depreciation 126187 144796
Finance cost 2610102 15763274
Profit/(Loss) Before Tax 1395474 9868181
Less: Current Tax 327932 2654325
Less: Deferred Tax Liability (Assets) (7479) (8319)
Profit/(Loss) after Tax 1075021 7222175

YEAR AT A GLANCE Financial Performance

During the financial year 2019-20 The Company has earned total income of Rs.27638415 from business activities as compared to Rs. 32401510 in previous year. Thetotal revenue of the company is decreased by 14.71%.

'During the financial year 2019-20 total 1 loan account was written off amounting toRs. 2963 as the same was 100.00% bad debt.

The total Profit before tax for the financial year 2019-20 stood at Rs. 1395474 andthe total net profit after tax for the financial year 2019-20 stood at Rs. 1075021.

The Directors of the Company are planning to expand the business of the Company inareas of providing loan against securities and opening of FFMC branches in various citiesin the current year and thus confident of presenting the better figures in the comingyears.

Dividend

To conserve resources for future prospect and growth of the Company your Directorsregret to declare Dividend for the Financial Year 2019-20 (Previous year - Nil).

Net Profit Transfer to Reserve

The Company has transferred Rs. 215004.24 to Statutory Reserve Fund in terms ofSection 45-1C of the Reserve Bank of India Act 1934.

Change in Nature of Business

During the year your Company has not changed its business or object and continues tobe in the same line of business as per main object of the Company.

Review of Business Operations & Future Prospects

The directors have taken various actions so as to expand the business of the companyand they are in process of opening various branched of FFMC in the state of Gujarat aswell as Maharashtra for expanding the activities of Full Fledged Money Changing in comingyears. Further they are also planning to open various branches of the company for thepurpose of expanding the business of financing including personal financing and lendingagainst securities thereby increasing the overall business of the company in a nearfuture.

SHARE CAPITAL

During the year under review the company has not issued any shares including equityshares shares with differential voting rights stock options sweat equity etc. Thecompany has not bought back any equity shares during the year 2019-20.

The paid up share capital of the company as on March 31 2020 was Rs. 10.05 crores.

Dematerialization of Shares

The Company has entered into Tripartite Agreement with the depositories NationalSecurities Depository Limited (NSDL) and Central Depository Service (India) Limited (CDSL)for providing Demat facility to its Shareholders. For this purpose the company hasappointed Satellite Corporate Services Private Limited as its registrar and ShareTransfer Agent.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

Constitution of Board

The Constitution of the Board of Directors and other disclosure of the Board ofDirectors are given in the Corporate Governance Report.

Board Meeting

Regular meetings of the Board are held at least once in a quarter inter-alia toreview the quarterly results of the Company. Additional Board meetings are convened asand when required to discuss and decide on various business policies strategies andother businesses. The Board meetings are generally held at corporate office of theCompany.

During the year under review Board of Directors of the Company met 06 (six) timesviz. April 05 2019 May 27 2019 June 28 2019 August 13 2019 November 13 2019 andFebruary 14 2020 respectively.

The details of attendance of each Director at the Board Meeting and Annual GeneralMeeting are given in the Corporate Governance Report.

Independent Directors

In terms of Section 149 of the Companies Act 2013 and rules made there under andListing Regulations the Company has three Non Promoter Independent Directors. In theopinion of the Board of Directors all three Independent Directors of the Company meet allthe criteria mandated by Section 149 of the Companies Act 2013 and rules made there underand Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 and they are Independent of Management.

A separate meeting of Independent Directors was held on February 14 2020 to review theperformance of Non-Independent Directors and Board as whole and performance of Chairpersonof the Company including assessment of quality quantity and timeliness of flow ofinformation between Company management and Board that is necessary for the board ofdirectors to effectively and reasonably perform their duties.

The terms and conditions of appointment of Independent Directors and Code forIndependent Director are incorporated on the website of the Company atwww.karnavatifinancelimited.com.

The Company has received a declaration from the Independent Directors of the Companyunder Section 149(7) of Companies Act 2013 and 16(1)(b) of Listing Regulations confirmingthat they meet criteria of Independence as per relevant provisions of Companies Act 2013for financial year 2020-21. The Board of Directors of the Company has taken on record thesaid declarations and confirmation as submitted by the Independent Directors afterundertaking due assessment of the veracity of the same. In the opinion of the Board theyfulfill the conditions as Independent Directors and are independent of the Management.Further all the Independent Directors have registered themselves with IndependentDirectors' Data Bank.

None of Independent Directors have resigned during the year.

Information on Directors

During the financial year 2019-20 the Board of Directors at its meeting held on June28 2019 on the recommendation of Nomination and Remuneration Committee re-appointed Mr.Jay Morzaria as Chairman and Managing Director and Mr. Raman Morzaria as Whole-TimeDirector for a period of five (5) years w.e.f. July 1 2019. The approval of theshareholders were obtained at their 35th Annual General Meeting held onSeptember 25 2019.

After closure of financial year 2019-20 Ms. Vinita Ajaybhai Parekh was appointed asAdditional (Non-Executive Independent) Director of the Company by the Board of Directorson May 6 2020 effective from the date of allotment of a valid Director IdentificationNumber by Ministry of Corporate Affairs to her. Ms. Vinita Ajaybhai Parekh had obtainedthe Director Identification Number on May 6 2020 and she has been appointed as such sinceMay 6 2020. Furthermore Mr. Kashyap Bharatkumar Vyas was appointed as Additional(Non-Executive) Director of the Company by the Board of Directors on May 26 2020effective from the date of allotment of a valid Director Identification Number by Ministryof Corporate Affairs to him. Mr. Kashyap Bharatkumar Vyas had obtained the DirectorIdentification Number on May 26 2020 and he has been appointed as such since May 262020. In terms of provision of Section 161 of the Companies Act 2013 Ms. Vinita AjaybhaiParekh and Mr. Kashyap Bharatkumar Vyas hold office till the date of ensuing annualgeneral meeting of the Company. The Board of Directors recommends their appointment as NonExecutive Independent Director and Non-Executive Director respectively on the board ofthe Company and resolution to that effect have been proposed for the approval of themembers.

In accordance with the provisions of the Articles of Association and Section 152 of theCompanies Act 2013 Mr. Jay Ramanbhai Morzaria Chairman & Managing Director of theCompany retires by rotation at the ensuing annual general meeting. He being eligible hasoffered himself for re-appointment as such and seeks re-appointment. The Board ofDirectors recommends his appointment on the Board.

The relevant details as required under Regulation 36 (3) of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 ("SEBI Listing Regulations") andSecretarial Standards-2 issued by ICSI of the person seeking appointment/re-appointmentas Directors are annexed to the Notice convening the thirty sixth annual general meeting.

Key Managerial Personnel

In accordance with Section 203 of the Companies Act 2013 the Company has alreadyappointed Mr. Jay Morzaria as Chairman and Managing Director of the Company Mr. KushMorzaria as Chief Financial Officer and Ms. Nitixa Ramanuj as Company Secretary andcompliance officer of the Company. Further there was no change in the Key ManagerialPersonnel of the Company during the financial year 2019-20.

Performance Evaluation

The Board of Directors has carried out an annual evaluation of its own performanceboard committees and individual directors pursuant to the provisions of the Companies Act2013 and Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 in the following manners;

• The performance of the board was evaluated by the board after seeking inputsfrom all the directors on the basis of the criteria such as the board composition andstructure effectiveness of board processes information and functioning etc.

• The performance of the committees was evaluated by the board after seekinginputs from the committee members on the basis of the criteria such as the composition ofcommittees effectiveness of committee meetings etc.

• The board and the nomination and remuneration committee reviewed the performanceof the individual directors on the basis of the criteria such as the contribution of theindividual director to the board and committee meetings like preparedness on the issues tobe discussed meaningful and constructive contribution and inputs in meetings etc.

• In addition the chairman was also evaluated on the key aspects of his role.

Separate meeting of independent directors was held to evaluate the performance ofnon-independent directors performance of the board as a whole and performance of thechairman taking into account the views of executive directors and non-executivedirectors. Performance evaluation of independent directors was done by the entire boardexcluding the independent director being evaluated.

Director's Responsibility Statement

Pursuant to section 134(5) of the Companies Act 2013 the board of directors to thebest of their knowledge and ability confirm that:

a) In preparation of annual accounts for the year ended March 31 2020 the applicableaccounting standards have been followed and that no material departures have been madefrom the same;

b) The Directors had 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 or loss of the Company for that year;

c) The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

d) The Directors had prepared the annual accounts for the year ended March 31 2020 ongoing concern basis.

e) The Directors had laid down the internal financial controls to be followed by theCompany and that such Internal Financial Controls are adequate and were operatingeffectively; and

f) The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

COMMITTEES OF BOARD

The Board of Directors in line with the requirement of the act and ListingRegulations has formed various committees details of which are given hereunder.

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholder's Grievance & Relationship Committee

The composition of each of the above Committees their respective role andresponsibility are detailed in the Report of Corporate Governance annexed to this Report.

Audit Committee

The Company has formed audit committee in line with the provisions of Section 177 ofthe Companies Act 2013 and Regulation 18 of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015.

As at March 31 2020 the Audit Committee comprised Mr. Parth Maniar (Non-ExecutiveIndependent) as Chairperson and Mrs. Brimda Bilimoria (Non-Executive Independent) and Mr.Jay Morzaria (Executive) as Members. Details on dates of meetings and attendance ofMembers are detailed in the Report of Corporate Governance annexed to this Report.

Recommendations of Audit Committee wherever/whenever given have been accepted by theBoard of Directors.

Vigil Mechanism

The Company has established a vigil mechanism and accordingly framed a Whistle BlowerPolicy. The policy enables the employees to report to the management instances ofunethical behavior actual or suspected fraud or violation of Company's Code of Conduct.Further the mechanism adopted by the Company encourages the Whistle Blower to reportgenuine concerns or grievances and provide for adequate safe guards against victimizationof the Whistle Blower who avails of such mechanism and also provides for direct access tothe Chairman of the Audit Committee in exceptional cases. The functioning of vigilmechanism is reviewed by the Audit Committee from time to time. None of the Whistleblowers has been denied access to the Audit Committee of the Board. The Whistle BlowerPolicy of the Company is available on the website of the Company athttp://www.karnavatifinancelimited.com/files/whistleblowerpolicy.pdf.

Nomination and Remuneration Policy

Nomination and Remuneration Policy in the Company is designed to create a highperformance culture. It enables the Company to attract motivated and retained manpower incompetitive market and to harmonize the aspirations of human resources consistent withthe goals of the Company. The Company pays remuneration by way of salary benefitsperquisites and allowances to its Executive Directors and Key Managerial Personnel. Annualincrements are decided by the Nomination and Remuneration Committee within the salaryscale approved by the members and are effective from April 1 of each year.

The Nomination and Remuneration Policy as adopted by the Board of Directors is placedon the website of the Company athttp://karnavatifinancelimited.com/files/NRC-Applicable-01.04.2019.pdf and is annexed tothis Report as Annexure - A.

Remuneration of Directors

The details of remuneration/sitting fees paid during the financial year 2019-20 toExecutive Directors/Directors of the Company is provided in Form MGT-9 and Report onCorporate Governance which are the part of this report.

During the year under review the non-executive directors of the company had nopecuniary relationship or transaction with the company.

DEPOSITS

The company being Non-Deposit accepting Non-Banking Finance Company has not acceptedany deposits from the public. Hence the directives issued by the Reserve Bank of India& the Provision of Section 73 to 76 of the Company Act 2013 or any other relevantprovisions of the Act and the Rules there under are not applicable. Moreover the Companyis not holding any Deposit as at the financial year ended on March 31 2020.

PARTICULARS OF CONTRACTS OR ARRANGEMENT MADE WITH RELATED PARTY

All transactions to be entered by the Company with related parties will be in theordinary course of business and on an arm's length basis. However there were threetransaction which were not on arms' length basis. The detail of transaction entered withrelated parties is annexed to this Report as Annexure - B.

Further there were no related party transactions with the Company's PromotersDirectors Management or their relatives which could have had a potential conflict withthe interests of the Company.

Members may refer to the notes to the accounts for details of related partytransactions entered as per Indian Accounting Standard - 24. The Board of Directors of theCompany has on the recommendation of the Audit Committee adopted a policy to regulatetransactions between the Company and its Related Parties in compliance with theapplicable provisions of the Companies Act 2013 the Rules thereunder and the SEBI LODRRegulations.

The Policy on Materiality of and dealing with Related Party Transactions as approved bythe Board is uploaded on the Company's website and can be accessed at the Web-link:http://www.karnavatifinancelimited.com/files/Related-Party-Transaction-Policy.pdf. CONSERVATIONOF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS & OUTGO A. Conservation ofenergy -

i.) The steps taken or impact on conservation of energy:

Company ensures that the operations are conducted in the manner whereby optimumutilisation and maximum possible savings of energy is achieved.

ii.) The steps taken by the Company for utilizing alternate sources of energy:

No alternate source has been adopted.

iii.) The capital investment on energy conservation equipment:

No specific investment has been made in reduction in energy consumption.

B. Technology absorption -

i.) The effort made towards technology absorption: Not Applicable.

ii.) The benefit derived like product improvement cost reduction product developmentor import substitution: Not Applicable

iii.) in case of imported technology (imported during the last three years reckonedfrom the beginning of the financial year) -

a. The details of technology imported: Nil.

b. The year of import: Not Applicable.

c. Whether the technology has been fully absorbed: Not Applicable.

d. If not fully absorbed areas where absorption has not taken place and thereasons thereof: Not Applicable.

iv.) The expenditure incurred on Research and Development: Nil

C. Foreign Exchange Earnings & Expenditure:

i. ) Details of Foreign Exchange Earnings: Nil

ii. ) Details of Foreign Exchange Expenditure: Nil

EXTRACTS OF ANNUAL RETURN

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of theCompanies Act 2013 read with Rule 12 of Companies (Management and Administration) Rules2014 the extract of the Annual Return as at March 31 2020 in Form MGT-9 is annexed tothis Report as Annexure - C.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

Details of Loans Guarantees Investments and Security covered under the provisions ofSection 186 of the Companies Act 2013 are given in the notes to the Financial Statement.

PARTICULAR OF EMPLOYEES

The ratio of the remuneration of each whole-time director to the median of employees'remuneration as per Section 197(12) of the Companies Act 2013 read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed tothis Report as Annexure - D.

The statement containing top ten employees in terms of remuneration drawn and theparticulars of employees as required under Section 197(12) of the Act read with Rule 5(2)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 isprovided in a separate annexure forming part of this report. Further the report and theaccounts are being sent to members excluding this annexure. In terms of Section 136 of theAct the said annexure will be available for inspection in electronic form. Anyshareholder interested in obtaining a copy of the same may write to Company Secretary.

INTERNAL FINANCIAL CONTROL SYSTEM AND THEIR ADEQUACY

During the year under review the company has appointed M/s. Suresh Tejwani & Coas an Internal Auditor to look after the internal financial control and their adequacy.

The details on Internal Financial Control and their adequacy are provided in ManagementDiscussion and Analysis Report forming part of Annual Report 2019-20.

MATERIAL CHANGES & COMMITMENTS

There are no material changes and commitments affecting the financial position of thecompany which have occurred between the end of the financial year of the company to whichthe financial statement relates and the date of this report.

Note: For better transparency accountability and for good governance of listed entitySecurities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI) had mandatedcertain disclosure including impact of covid-19 on the business and operations of thecompany by listed entity in a stipulated time frame. So in line with the said circularcompany had made necessary compliances as required by SEBI and RBI to be compliant companyin letter as well spirit too.

DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION ANDREDERESSAL) ACT 2013

To foster a positive workplace environment free from harassment of any nature we haveinstitutionalized the Anti-Sexual Harassment Initiative (ASHI) framework through which weaddress complaints of sexual harassment at the all workplaces of the Company. Our policyassures discretion and guarantees non-retaliation to complainants. We follow agender-neutral approach in handling complaints of sexual harassment and we are compliantwith the law of the land where we operate. The Company has setup an Internal ComplaintsCommittee (ICC) for redressal of Complaints.

During the financial year 2019-20 the Company has received Nil complaints on sexualharassment out of which Nil complaints have been disposed of and Nil complaints remainedpending as of March 31 2020.

NAMES OF THE COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES JOINTVENTURES OR ASSOCIATE COMPANIES DURING THE YEAR

There is no subsidiary joint venture or associate company as on March 31 2020 andhence the same is not applicable to the company.

RISK MANAGEMENT POLICY

A well-defined risk management mechanism covering the risk mapping and trend analysisrisk exposure potential impact and risk mitigation process is in place. The objective ofthe mechanism is to minimize the impact of risks identified and taking advance

actions to mitigate it. The mechanism works on the principles of probability ofoccurrence and impact if triggered. A detailed exercise is being carried out to identifyevaluate monitor and manage both business and non-business risks.

PREVENTION OF INSIDER TRADING

The Company has adopted a Code of Conduct for Prevention of Insider Trading with a viewto regulate trading in securities by the Directors and designated employees of the Companyand the same is hosted on the website of the company i.e. www.karnavatifinancelimited.com.The Code requires pre-clearance for dealing in the Company's shares and prohibits thepurchase or sale of Company shares by the Directors and the designated employees while inpossession of unpublished price sensitive information in relation to the Company andduring the period when the Trading Window is closed. All the Board of Directors anddesignated employees have confirmed compliance with the Code.

CORPORATE GOVERNANCE

Your Company strives to incorporate the appropriate standards for corporate governance.As stipulated in Schedule V of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 Report on Corporate Governance and Certificate of the PracticingCompany Secretary with regards to compliance with the conditions of Corporate Governanceis annexed to the Board's Report as Annexure - E.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report for the year under review as stipulatedunder Schedule V of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is presented in a separate section forming part of this Annual Report.

MAINTENANCE OF COST RECORD

Since the company is not falling under prescribed class of Companies our Company isnot required to maintain cost record.

STATUTORY AUDITOR & THEIR REPORT

In terms of provisions of section 139 of the companies act 2013 and companies (Auditand Auditors) Rules 2014 M/s. D G M S & Co. Chartered Accountants (formerly knownas M/s. Doshi Maru & Associates) were appointed as a statutory auditor of the companyin 34th AGM for a period of 5 years till the conclusion of 39th AGMof the company subject to ratification of their appointment at every annual generalmeeting. However in terms of provisions of companies Act (Amendments) 2017 therequirement for ratification of the auditors at every annual general meeting has beendispensed with.

The notes on financial statement referred to in the Auditor's Report areself-explanatory and do not call for any further comments. Further the Auditor's Reportdoes not contain any qualification reservation or adverse remark that requiresclarification or justification.

Reporting of frauds by auditors

During the year under review neither the statutory auditor nor the secretarial auditorhas reported to the audit committee under section 143 (12) of the Companies Act 2013 anyinstances of fraud committed against the company by its officers or employees the detailsof which would need to be mentioned in the Board's Report.

SECRETARIAL AUDITOR & THEIR REPORT

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Company has appointed Ms. PayalDhamecha Practicing Company Secretary Ahmedabad to carry out the Secretarial Audit forthe financial year ended on March 31 2020. Secretarial Audit Report is annexed to theBoard's Report as Annexure - F-1.

Further as per Regulation 24A of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and necessary amendments thereto every listed entity andit's material unlisted subsidiaries incorporated in India is required to submit AnnualSecretarial Compliance Report to the concern stock exchange within 60 days from theclosure of respective financial year regarding the status of compliances done by thelisted entity as prescribed under SEBI (LODR) Regulations 2015.

For compliance of Regulation 24A of SEBI (LODR) Regulations 2015 the company hasappointed Mr. Anand Lavingia Practicing Company Secretary for the purpose of availingAnnual Secretarial Compliance Report and submitted the same with BSE Limited and the copyof the same is annexed to the Board's Report as Annexure - F-2.

Secretarial Standard

The company complies with all applicable mandatory secretarial standards issued by theInstitute of Company Secretaries of India.

GENERAL DISCLOSURE

Your Directors state that the Company has made disclosures in this report for the itemsprescribed in section 134(3) of the Act and Rule 8 of The Companies (Accounts) Rules 2014to the extent the transactions took place on those items during the year.

Your Directors further state that no disclosure or reporting is required in respect ofthe following items as there were no transactions on these items during the year underreview:

1. Details of Annual Report on Corporate Social Responsibility as Company is notfalling within the criteria as prescribed u/s 135 of the Companies Act 2013

2. Issue of Equity Shares with differential rights as to dividend voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company underany scheme and ESOS.

4. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations in future.

APPRECIATIONS AND ACKNOWLEDGEMENT

Your Directors take this opportunity to place on record the valuable co-operation andsupport extended by the banks government business associates and the shareholders fortheir continued confidence reposed in the Company and look forward to having the samesupport in all future endeavors.

.