The Directors of your Company have the pleasure in presenting the Tenth Annual Reporttogether with the audited financial statements for the financial year ("FY")ended March 31 2018.
The summary of the Company's financial performance both on a consolidated andstandalone basis for the FY 2017-18 as compared to the previous FY 2016-17 is givenbelow:
| || || || ||( Rs in Lakh) |
|Particulars || |
| ||2017-18 ||2016-17 ||2017-18 ||2016-17 |
|Total Income ||1049994.08 ||857231.01 ||47837.11 ||31488.99 |
|Less: Total Expenses ||876011.69 ||749340.82 ||8368.76 ||6978.26 |
|Profit before Tax ||173982.39 ||107890.19 ||39468.35 ||24510.73 |
|Less: Tax Expense ||27483.30 ||3643.67 ||2684.52 ||(355.44) |
|Profit after Tax ||146499.09 ||104246.52 ||36783.83 ||24866.17 |
|Add: Share in profit of associate company ||83.39 ||574.73 ||- ||- |
|Add: Share of minority interest ||633.68 ||(602.58) ||- ||- |
|Profit for the year ||145948.80 ||104218.67 ||36783.83 ||24866.17 |
|Add: Balance brought forward from previous year ||184037.58 ||118752.54 ||16509.32 ||9065.58 |
|Balance Available ||329986.38 ||222971.21 ||53293.15 ||33931.75 |
|Appropriations || || || || |
|Statutory Reserve ||17665.98 ||8020.39 ||7356.77 ||4973.24 |
|Dividend paid for previous year ||14573.70 ||5.78 ||14573.70 ||5.78 |
|Dividend Distribution Tax ||7673.30 ||6713.05 ||- ||2104.46 |
|Interim dividend on Preference Shares ||9306.55 ||10677.49 ||9306.55 ||10338.95 |
|Transfer to/(from) Debenture Redemption Reserve ||4806.91 ||67.15 ||- ||- |
|Transfer to Reserve u/s 36(1)(viii) of Income Tax Act 1961 ||5300.40 ||9734.72 ||- ||- |
|Transfer to Reserve u/s 29-C of National Housing Bank ||3327.12 ||2729.93 ||- ||- |
|Unamortised loss on sale of loans ||1387.45 ||- ||- ||- |
|Share in Associates' Reserves ||- ||985.12 ||- ||- |
|Surplus in the Statement of Profit and Loss ||265944.97 ||184037.58 ||22056.13 ||16509.32 |
Being a Core Investment Company the Company's standalone revenue is substantiallydividend from its subsidiaries and hence it is meaningful to look at the consolidatedperformance.
Total income grew by 22% from Rs 857231.01 Lakh in FY 2016-17 to Rs 1049994.08 Lakhin FY 2017-18. Profit before taxes grew from Rs 107890.19 Lakh in FY 2016-17 to Rs173982.39 Lakh in FY 2017-18.
Profit for the year also grew from Rs 104218.67 Lakh in FY 2016-17 to Rs 145948.80Lakh in FY 2017-18.
During the year the net loan book size grew from Rs 6164849.99 Lakh to Rs7829922.00 Lakh reflecting a growth of 27%.
The Average Assets Under Management ("AAUM") of the Mutual Fund businessstood at Rs 6593164.73 Lakh for the quarter ended March 31 2018 as against Rs3930000.00 Lakh for the quarter ended March 31 2017 reflecting a growth of 68%.
The Average Assets Under Service ("AAUS") of the Wealth Management businessstood at Rs 1834711.22 Lakh for the quarter ended March 31 2018 as against Rs1362300.83 Lakh for the quarter ended March 31 2017 reflecting a growth of 35%.
Total income grew from Rs 31488.99 Lakh in FY 2016-17 to Rs 47837.11 Lakh inFY 2017-18.
Profit before tax grew from Rs 24510.73 Lakh in FY 2016-17 to Rs39468.35 Lakh in FY 2017-18.
Profit after tax grew from Rs 24866.17 Lakh in FY 2016-17 to Rs36783.83 Lakh in FY 2017-18.
The Company proposes to transfer Rs 7356.77 Lakh (previous year Rs 4973.24 Lakh) toSpecial Reserve created u/s 45IC of the Reserve Bank of India Act 1934.
INFORMATION ON THE STATE OF AFFAIRS OF THE COMPANY
The information on the affairs of the Company has been given as part of ManagementDiscussion & Analysis Report forming part of this Report.
MATERIAL CHANGES AND COMMITMENTS
There were no material changes and commitments affecting the financial position of theCompany which occurred between the end of the financial year to which these financialstatements relate and the date of this Report.
The Dividend Distribution Policy of the Company approved by the Board is in line withthe Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 ("SEBI Listing Regulations"). The Policyhas been uploaded on the Company's website at https://www.ltfs.com/investors.html.
The Board of Directors had declared and paid an interim dividend @ 9.00% (one option)8.40% (one option) 8.50% (one option) 8.35% (two options) and 8.15% (one option) pershare as applicable on the four series of Cumulative Compulsorily Redeemable PreferenceShares ("CCRPS") of face value of Rs 100 each of the Company for FY 2017-18entailing an outflow of Rs 9306.55 Lakh (excluding Dividend Distribution Tax).
The Board of Directors are pleased to recommend a final dividend of Rs 1 per EquityShare of Rs 10 each (previous year Rs 0.80 per share) subject to approval of theMembers in the ensuing Annual General Meeting ("AGM"). In terms of the revisedAccounting Standard (AS-4) Contingencies and events occurring after Balance Sheet'as notified by the Ministry of Corporate Affairs through amendments to Companies(Accounting Standards) Amendment Rules 2016 dated March 30 2016 proposeddividend of Rs 19956.77 Lakh and Dividend Distribution Tax (net) thereon is notrecognised as liability as on March 31 2018.
The dividend if approved at the ensuing AGM would be paid to those Members whose nameappears in the Register of Members / Beneficial Owners maintained by the depositories asstated in Notice of the ensuing AGM.
During the year under review CARE Ratings Limited ("CARE") and ICRA Limited("ICRA") reviewed the ratings on various debt instruments of the Company.Furthermore new rating was assigned by India Ratings and Research Private Limited("India Ratings") to the non-convertible debentures ("NCD") andcommercial papers of the Company.
CARE upgraded the long-term rating on NCDs to "CARE AAA/Stable"(Triple A; Outlook: Stable by CARE) from "CARE AA+/Positive" (Double A Plus;Outlook: Positive by CARE) and the rating on CCRPS was upgraded to "CARE AAA(RPS)/Stable" (Triple A [Redeemable Preference Shares]; Outlook: Stable byCARE) from "CARE AA+ (RPS)/Positive" (Double A Plus [RedeemablePreference Shares]; Outlook: Positive by CARE). These long-term ratings carried a"Stable" outlook as on March 31 2018. During the FY 2017-18 the outlook onthese ratings was revised to "Positive" from "Stable" in October2017 and subsequent to the upgrade in long-term ratings in February 2018 the outlook wasagain revised to "Stable" from "Positive". CARE has also reaffirmedthe rating assigned to the commercial papers issued by the Company at "CARE A1+"(A One Plus by CARE).
ICRA has reaffirmed its ratings on the rated NCD at "ICRA AA+/Stable" (DoubleA Plus; Outlook: Stable by ICRA). During the year under review ICRA has also assignedrating of "ICRA A1+" (A One Plus by ICRA) to the commercial papers issued by theCompany.
In January 2018 India Ratings assigned a rating of "IND AAA/Stable"(Triple A; Outlook: Stable by India Ratings) to the NCD issues and a rating of "INDA1+" (A One Plus by India Ratings) to the commercial paper issued by the Company.
The instruments/bank facilities with long term ratings of AAA are considered to havehighest degree of safety regarding timely servicing of financial obligations. Suchinstruments carry lowest credit risk.
The instruments/bank facilities with long term ratings of AA+ are considered to havehigh degree of safety regarding timely servicing of financial obligations. Suchinstruments carry very low credit risk.
The instruments with short term ratings of A1+ are considered to have very strongdegree of safety regarding timely payment of financial obligations. Such instruments carrylowest credit risk.
The Company had allotted 63820990 Warrants ("Warrants") with each Warrantconvertible into one Equity Share of the face value of Rs 10 each at a price of Rs 74 perWarrant to BC Asia Growth Investments ("Investor") on December 18 2015 on apreferential basis. The Company had received 25% upfront money of total consideration fromthe Investor at the time of allotment of Warrants and balance 75% was received at the timeof exercise of notice for option to convert the Warrants. Pursuant to the said conversionof Warrants the Company has allotted 63820990 Equity Shares of face value of Rs 10each to Investor on May 17 2017. Further the Company also allotted 107810899 EquityShares of Rs 10 each at an issue price of Rs 185.51 to Larsen & Toubro Limitedthe Promoter of the Company by way of preferential issue under Chapter VII ofSecurities and Exchange Board of India (Issue of Securities and Disclosure Requirements)Regulations 2009 ("SEBI ICDR") on March 8 2018 and 63051702 Equity Sharesof Rs 10 each at an issue price of Rs 158.60 to the eligible qualifiedinstitutional buyers on a private placement basis under Chapter VIII of SEBI ICDRon March 15 2018.
During the year under review the Company has issued 1691008 Equity Shares and3580500 Equity Shares to employees of the Company and its subsidiary companies pursuantto the exercise of stock options under the Employee Stock Option Scheme - 2010 andEmployee Stock Option Scheme 2013 respectively.
During the year under review the Company also redeemed 17900000 CCRPS amounting toRs 17900 Lakh.
Pursuant to the allotment of the Equity Shares and subsequent redemption of CCRPS thepaid-up share capital of the Company was Rs 303007.70 Lakh (including preferenceshare capital of Rs 103440 Lakh) as at March 31 2018 as compared to Rs296912.19 Lakh (including preference share capital of Rs 121340 Lakh) as at March 312017.
INVESTMENT IN SUBSIDIARIES
During the year under review the Company has infused capital in its followingsubsidiaries by subscribing to the Equity Shares offered by them:
|Name of subsidiary company ||Amount of capital subscribed ( Rs in Lakh) |
| || |
|L&T Finance Limited ||140000 |
|L&T Housing Finance Limited ||60000 |
|L&T Infrastructure Finance ||45000 |
|Company Limited || |
|L&T Infra Debt Fund Limited ||1635 |
REGISTRATION AS A CORE INVESTMENT COMPANY
The Company is a registered Non-Banking Financial Institution - Core Investment Company("NBFC-CIC") pursuant to the receipt of Certificate of Registration from theReserve Bank of India ("RBI") dated September 11 2013 under Section45-IA of the Reserve Bank of India Act 1934.
The Company is having a valid Certificate of Registration dated September 11 2013issued by RBI under Section 45-IA of the Reserve Bank of India Act 1934. HoweverRBI does not accept any responsibility or guarantee about the present position as to thefinancial soundness of the Company or for the correctness of any of the statements orrepresentations made or opinions expressed by the Company and for repayment of deposits /discharge of liabilities by the Company.
The Company being a NBFC-CIC has not accepted any deposits from the public during theyear under review.
The composition of the Board is in accordance with the provisions of Section 149 of theCompanies Act 2013 ("the Act") and Regulation 17 of the SEBI ListingRegulations with an appropriate combination of Non-Executive Directors and IndependentDirectors. The complete list of Directors of the Company has been provided as part of theCorporate Governance Report.
During the year under review Mr. Y. M. Deosthalee ceased to be Director andChairperson of the Company with effect from May 31 2017 and Mr. S. V. Haribhakti wasappointed as Chairperson of the Company with effect from June 1 2017. Mr. Amit ChandraNominee Director and Mr. B. V. Bhargava an Independent Director of the Company resignedfrom the Board of Directors to devote time to other commitments and accordingly ceased tobe Directors of the Company with effect from June 15 2017 and August 31 2017respectively. The Board places on record its appreciation of the valuable servicesrendered by them during their tenure as the Directors of the Company.
During the year under review the Company appointed Ms. Nishi Vasudeva and Ms. VaishaliKasture as Independent Directors in accordance with the provisions of Sections 149 152and 161 of the Act and Mr. Pavninder Singh as the Nominee Director in accordancewith the provisions of Section 161 of the Act not being liable to retire by rotation witheffect from June 15 2017 pursuant to approval of the Members at the Ninth AGMheld on August 28 2017.
Section 152 of the Act provides that unless the Articles of Association provide for theretirement of all directors at every AGM not less than two-third of the total number ofdirectors of a public company (excluding the independent directors) shall be persons whoseperiod of office is liable to determination by retirement of directors by rotation.Accordingly Mr. Dinanath Dubhashi Director will retire by rotation at the ensuing AGMand being eligible has offered himself for re-appointment. The terms and conditions ofappointment of Independent Directors are also available on the website of the Company at https://www.ltfs.com/investors.html.
Declaration by Independent Directors
All Independent Directors have submitted the declaration of independence as requiredpursuant to provisions of the Section 149(7) of the Act stating that they meet thecriteria of independence as provided in Section 149(6) of the Act and Regulation16(1)(b) of the SEBI Listing Regulations and are not disqualified from continuing asIndependent Directors.
The Company has familiarized the Independent Directors with the Company their rolesresponsibilities in the Company nature of industry in which the Company operatesbusiness model of the Company etc. The details relating to the familiarizationprogramme are available on the website of the Company at https://www.ltfs.com/investors.html.
Fit and Proper Criteria & Code of Conduct
All the Directors meet the fit and proper criteria stipulated by RBI.
All the Directors and Senior Management of the Company have affirmed compliance withthe Code of Conduct of the Company.
KEY MANAGERIAL PERSONNEL ("KMPs")
There was no change in the KMPs of the Company during the year under review. As atMarch 31 2018 the Company had the following KMPs:
1) Mr . Dinanath Dubhashi Managing Director & Chief Executive Officer
2) Mr . Sachinn Joshi Chief Financial Officer
3) Ms. Apurva Rathod Company Secretary
COMPANY'SPOLICYONDIRECTOR'SAPPOINTMENT AND REMUNERATION FOR DIRECTORS KEY MANAGERIALPERSONNEL AND OTHER EMPLOYEES
A. Background and Objectives
Section 178 of the Act and Regulation 19 read with Part D of Schedule II of the SEBIListing Regulations as amended from time to time requires the Nomination andRemuneration Committee ("NRC") to formulate a policy relating to theremuneration for the Directors Senior Management/KMPs and other employees of the Companyand recommend the same for approval of the Board.
Further Section 134 of the Act stipulates that the Board's Report is required toinclude a statement on Company's Policy on Directors' appointment and remunerationincluding criteria for determining qualifications positive attributes independence ofdirector and remuneration for KMPs and other employees.
The Board of Directors has based on the recommendation of the NRC of the Companyapproved the policy on Directors' appointment and remuneration for Directors KMPs andother employees.
B. Brief framework of the Policy
The objective of this Policy is:
a) to determine inter-alia qualifications positive attributes and independence of aDirector;
b) to guide on matters relating to appointment and removal of Directors and SeniorManagement;
c) to lay down criteria/evaluate performance of the Directors; and
d) to guide on determination of remuneration of the Directors Senior Management/KMPsand other employees.
C. Appointment of Director(s) Criteria identification
The NRC identifies and ascertains the integrity professional qualification expertiseand experience of the person who is proposed to be appointed as a director andappropriate recommendation is made to the Board with respect to his/her appointment.
Appointment of Independent Directors is subject to the provisions of Section 149 of theAct read with Schedule IV and rules made thereunder and the SEBI Listing Regulations. TheNRC satisfies itself that the proposed person satisfies the criteria of independence asstipulated under Section 149(6) of the Act and the SEBI Listing Regulations before theappointment as an Independent Director.
No person is eligible to be appointed as a Director if he/she is subject to anydisqualifications as stipulated under the Act or any other law(s) for the time being inforce.
Appointment of Managing Director and Whole-time Director is subject toprovisions of Sections 196 197 198 and 203 of the Act read with Schedule V and rulesthereunder. The NRC ensures that a person does not occupy position as a Managing Director/ Whole-time Director beyond the age of seventy years unless the appointment is approvedby a special resolution passed by the
Company in general meeting. No re-appointment is made earlier than one year before theexpiry of term.
D. Evaluation criteria of Directors and Senior Management / KMPs / Employees
Independent Directors / Non-Executive Directors
The NRC carries out evaluation of performance of Independent Directors / Non-Executive
Directors every year ending March 31st on the basis of the followingcriteria:
a) Membership & Attendance - Board and Committee Meetings;
b) Contribution during such meetings;
c) Active participation in strategic decision making;
d) Inputs to executive management on matters of strategic importance; and
e) Such other matters as the NRC / Board may determine from time to time.
The NRC carries out evaluation of performance of Executive Directors ("EDs")every year ending March 31st. The evaluation is on the basis of Key PerformanceIndicators ("KPIs") which are identified well in advance for EDs and weightsassigned for each measure of performance keeping in view the distinct roles of EDs. Theidentified KPIs for EDs are approved by the Board pursuant to recommendation of the NRCif required.
Senior Management / KMPs / Employees
The HR Department carries out the evaluation of the aforementioned persons every yearending March 31st with the Department Head(s) / Management concerned. KPIs areidentified well in advance at the commencement of the financial year. Performancebenchmarks are set and evaluation of employees is done by the respective reportingManager(s) / Management/DepartmentHead(s)todetermine whether the performancebenchmarks are achieved. The payment of remuneration / annual increment to theaforementioned persons is determined after the satisfactory completion of evaluationprocess.
The HR Department of the Company is authorised to design the framework for evaluatingthe EDs / Senior Management / KMPs / employees. The objective of carrying out theevaluation by the Company is to identify and reward those with exceptional performancesduring a financial year. Training and Development Orientation programs on a need basis areprovided to employees whose performance during any financial year does not meet thebenchmark criteria.
E. Criteria for Remuneration
NRC while determining the criteria for remuneration for Directors Senior Management /KMPs and other employees ensures that:
a) the level and composition of remuneration is reasonable and sufficient to attractretain and motivate Directors of the quality required to run the Company successfully;
b) r elationship of remuneration to is clear and meets appropriate performancebenchmarks; and
c) r emuneration to Directors Management / KMPs involves a balance between fixed andincentive pay reflecting short and long-term performance objectives appropriate to theworking of the Company and its goals.
Pursuant to the provisions of the Act and the SEBI Listing Regulations the Board hascarried out an annual evaluation of its own performance performance of the Directorsindividually and the Committees of the Board.
Manner of Evaluation
The NRC and the Board have laid down the manner in which formal annual evaluation ofthe performance of the Board its Committees and individual directors has to be made.
It includes circulation of evaluation forms separately for evaluation of the Board andits Committees Independent Directors / Non-Executive Directors / Managing Director andChief Executive Officer and Chairperson of the Company.
The process of the annual performance evaluation broadly comprises:
a) Boar d and Committee Evaluation: Evaluation of Board as a whole and theCommittees is done by the individual directors/ members followed by submission ofcollation to NRC and feedback to the Board.
b) Independent / Non-Executive Directors Evaluation:
Evaluation done by Board members excluding the Director being evaluated is submitted tothe Chairperson of the Company and individual feedback provided to each Director.
c) Chairperson / Managing Director & Chief Executive Officer Evaluation:
Evaluation as done by the individual directors is submitted to the Chairperson of theNRC and Chairperson of the NRC provides feedback to the NRC and subsequently to the Board.
EMPLOYEE STOCK OPTION SCHEME
The disclosures required to be made under the Securities and Exchange Board of India(Share Based Employee Benefits) Regulations 2014 and any amendments thereof is availableon the website of the Company atSenior https://www.ltfs.com/investors.html.
The certificate from the Statutory Auditors confirming compliance with the aforesaidprovisions has been appended as Annexure A to this Report.
BUSINESS RESPONSIBILITY REPORT
In terms of Regulation 34(2)(f) of the SEBI Listing Regulations top 500 listedentities based on their market capitalisation as on March 31 2018 are required to submita Business Responsibility Report ("BRR") as a part of the Annual Report. TheCompany's BRR describing the initiatives taken by the Company has been hosted on thewebsite of the Company at https://www.ltfs.com/investors.html. Any Memberinterested in obtaining a copy of the BRR may write to the Company Secretary of theCompany at the registered office.
REPORT ON CORPORATE GOVERNANCE
The Report on Corporate Governance for the year under review is forming part of theAnnual Report. The certificate from the Statutory Auditors of the Company confirmingcompliance with the conditions of Corporate Governance is appended to the CorporateGovernance Report.
Pursuant to the provisions of Section 139(2) of the Act and the rules made thereunderthe Members at their Eighth AGM held on August 23 2016 had appointed M/s. B.K. Khare& Co. Chartered Accountants (ICAI Firm's Registration Number 105102W) and M/s.Deloitte Haskins & Sells LLP Chartered Accountants (ICAI Firm's Registration Number117366W/W-100018) as the Joint Statutory Auditors of the Company for a term of five yearsi.e. from the conclusion of the Eighth AGM till the conclusion of the Thirteenth AGM.Joint Statutory Auditors have confirmed that they are not disqualified from continuing asAuditors of the Company.
The Auditors' Report to the Members for the year under review does not contain anyqualification. The Notes to the Accounts referred to in the Auditors' Report areself-explanatory and therefore do not call for any further clarifications under Section134(3)(f) of the Act.
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Company had appointed Ms. Naina R.Desai Practicing Company Secretary to undertake the Secretarial Audit of the Company forFY 2017-18.
The Secretarial Audit Report is appended as Annexure B to this Report.
There is no adverse remark qualification reservation or disclaimer in the SecretarialAudit Report.
PARTICULARS OF EMPLOYEES
The information required pursuant to the provisions of Section 197 of the Act read withRule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 in respect of employees of the Company has been appended as Annexure C to thisReport.
In terms of first proviso to Section 136 of the Act the Report and Accounts are beingsent to the Members and others entitled thereto excluding the information on employees'particulars as required pursuant to provisions of Rule 5(2) and 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014. The saidAnnexure is available for inspection by the Members at the registered office of theCompany during the business hours on any working day of the Company till the date of theensuing AGM. If any Member is interested in obtaining a copy thereof such Member maywrite to the Company Secretary at the registered office.
The Board of Directors affirms that the remuneration paid to the employees of theCompany is as per the Policy on Directors' appointment and remuneration for DirectorsKMPs and other employees and none of the employees listed in the said Annexure are relatedto any Directors of the Company.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Considering the Company's activities as Core Investment Company carrying out itsactivities through its subsidiaries the particulars regarding conservation of energy andtechnology absorption as required to be disclosed pursuant to the Rule 8(3) of theCompanies (Accounts) Rules 2014 are not relevant to its activities. There were no foreignexchange earnings during the year (previous year Rs Nil); the foreign exchange outgo bythe Company during the year was Rs 146.82 Lakh (previous year Rs 485.89 Lakh) towardsprofessional fees travelling expenses and Directors' sitting fees.
The Company's Equity Shares are compulsorily tradable in electronic form. As on March31 2018 out of the Company's total equity paid-up share capital comprising of1995676960 Equity Shares only 20313 Equity Shares were in physical form and theremaining capital is in dematerialized form. In view of the numerous advantages offered bythe Depository System the Members holding shares in physical form are advised to availthe facility of dematerialization.
The Company conducts its business through subsidiaries its the various businesssegments in which it operates. As of March 31 2018 the Company had 11 subsidiaries(including step down subsidiaries).
MERGER - SUBSIDIARY COMPANY
During the year under review L&T Access Distribution Services Limited(CIN:U65100MH2011PLC284632) wholly owned subsidiary of the Company was merged withL&T Capital Markets Limited (CIN:U67190MH2013PLC240261) another wholly ownedsubsidiary of the Company with effect from November 10 2017.
As required under Regulations 16(1)(c) and 46 of the SEBI Listing Regulations theBoard of Directors has approved the Policy for determining Material Subsidiaries("Policy"). The details of the Policy are available on the website of theCompany at https://www.ltfs.com/investors.html.
PERFORMANCE AND FINANCIAL POSITION OF EACH SUBSIDIARY / ASSOCIATE AND JOINT VENTURECOMPANIES
As required under Rule 5 and Rule 8(1) of the Companies (Accounts) Rules 2014 areport on the performance and financial position of each of the subsidiaries andassociates of the Company has been appended as Annexure D to this Report. Thecontribution of the subsidiaries is given as a part of the Management Discussion &Analysis Report forming part of this Report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of Section 134(5) of the Act the Board of Directorsconfirms that to the best of their knowledge and belief:
1) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures if any;
2) the Dir ectors have selected such accounting and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at March 31 2018 and of the profit of theCompany for that period;
3) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
4) the Dir ectors have prepared the annual a going concern basis;
5) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and operating effectively;and
6) the Dir ectors have devised proper systems to compliance with the provisions of allapplicable laws including applicable secretarial standards and that such systems wereadequate and operating effectively.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an internal control system commensurate with the size scale andcomplexity of its operations. Testing of such systems forms a part of review by theInternal Audit ("IA") function. The scope and authority of the IA function isdefined in the IA Charter.
The IA function of L&T Financial Services Group ("LTFS") monitors andevaluates the efficacy and adequacy of theinternalcontrolsystemintheCompanyanditscompliance with operating systems accountingprocedures and policies of the Company. Based on the report of the IA functionprocess owners undertake corrective action if any in their respective areas and therebystrengthen the controls. Significant audit observations and corrective actions thereon arepresented to the Audit Committee ("AC") of the Company from time to time.
The details of the Board meetings held during FY 2017-18 are disclosed in theCorporate Governance Report appended to this Report.
COMPOSITION OF AUDIT COMMITTEE
The Company has constituted an AC in terms of the policies requirements of the ActRegulation 18 of the SEBI Listing Regulations and RBI Regulations. The details of the sameare disclosed in the Corporate Governance Report.
CORPORATE SOCIAL RESPONSIBILITY
In accordance with the requirements of the provisions of Section 135 of the Act theCompany has constituted a Corporate Social Responsibility ("CSR") Committee. Thecomposition and terms of reference of the CSR Committee is provided in the CorporateGovernance Report. accounts onThe Company has also formulated a CSR Policy which isavailable on the website of the Company at https://www.ltfs.com/csr.html. Anannual report on activities as required under Companies (Corporate Social ResponsibilityPolicy) Rules 2014 has been appended as Annexure E to this Report.
Pursuant to Rule 7 of the Companies (Meetings of Board and its Powers) Rules 2014 readwith Section 177(9) of the Act the Company has adopted a Vigil MechanismFramework under which the "Whistle Blower Investigation Committee" ("theCommittee") has been set up. The objective of the policy is to establish aredressal forum which addresses all concerns raised on questionable practices andthrough which the Directors and employees can raise actual or suspected violations.
The Head of IA of LTFS acts as an Ombudsman. The role of Ombudsman is to review thegrievance at the initial stage and in case the grievance is material the same isforwarded to the Committee for investigation. After investigation the complaint withInvestigation Report is forwarded to AC/Managing Director/ Whole-time Director as the casemay be. At the AC brief update is presented to the Members for their review. TheCommittee takes necessary actions of maintaining confidentiality within the organizationon matters brought to its attention.
The mechanism framed by the Company is in compliance with the requirements of the Actand SEBI Listing Regulations and the same is available on the website of the Company at https://www.ltfs.com/investors.html.
PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN OR SECURITY PROVIDED BYTHE COMPANY
Details of loans guarantees and investments are given in the Notes to theFinancial Statements as applicable.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
The Board of Directors has approved the policy on transactions with related parties("RPT Policy") pursuant to the recommendation of the AC. In line with therequirements of the Act RBI Regulations and the SEBI Listing Regulations the Company hasformulated the RPT Policy which is also available on the Company's website at https://www.ltfs.com/investors.html.The RPT Policy intends to ensure that proper reporting approval and disclosure processesare in place for all transactions between the Company and the related parties.
Key features of the RPT Policy are as under:
All transactions with related parties ("RPTs") are referred to the AC of theCompany for approval irrespective of its materiality. The AC also approves anysubsequent modification in the RPTs. The process of approval of RPTs by the Board andShareholders is as under:
Generally all RPTs are in the ordinary course of business and at arm's length price.
RPTs which are not at arm's length and which are not in the ordinary course of businessare approved by the Board.
All material RPTs require prior approval of the shareholders based on recommendationof the Board through ordinary resolution passed at the general meeting.
Where any contract or arrangement is entered into by a director or any other employeewithout obtaining the consent of the Board or approval by a ordinary resolution in thegeneral meeting it is to be ratified by the Board or by the shareholders at a meeting asthe case may be within three months from the date on which such contract or arrangementwas entered into.
The related parties are abstained from voting on such resolutions whether the entity isa related party to the particular transaction or not.
All RPTs that were entered into during FY 2017-18 were on an arm's length basis andwere in the ordinary course of business and disclosed in the Financial Statements. Therewere no materially significant RPTs made by the Company with Promoters Directors KMPs orBody Corporate(s) which had a potential conflict with the interest of the Company atlarge. Accordingly the disclosure of RPTs as required under the provisions of Section134(3)(h) of the Act in Form AOC-2 is not applicable. The Directors draw attention of theMembers to Notes to the Financial Statements which sets out related party disclosures.
RISK MANAGEMENT FRAMEWORK
The Company has constituted a Risk Management Committee ("RMC") in terms ofthe requirements of Regulation 21 of the SEBI Listing Regulations and RBI Regulations. Thedetails of the same are disclosed in the Corporate Governance Report.
The Company and its subsidiaries have a risk management framework and Board members areinformed about risk assessment and minimization procedures and periodical review to ensuremanagement controls risk by means of a properly designed framework. The AC is keptapprised of the proceedings of the meetings of the RMC and also apprised about the riskmanagement framework at subsidiaries.
POLICY FOR PREVENTION PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE
The Company has in place a policy for prevention prohibition and redressal of sexualharassment at workplace. Appropriate reporting mechanisms are in place for ensuringprotection against sexual harassment and the right to work with dignity.
During the year under review the Company has not received any complaints in thisregard.
EXTRACT OF ANNUAL RETURN AS REQUIRED AND PRESCRIBED UNDER SECTION 92(3) OF THE ACT ANDRULES MADE THEREUNDER
The extract of Annual Return in Form No. MGT-9 as required under Section 92(3) of theAct and as prescribed in Rule 12 of the Companies (Management and Administration) Rules2014 is enclosed as Annexure F to this Report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the Regulators / Courts whichwould impact the going concern status of the Company and its future operations.
Further no penalties have been levied by RBI / any other Regulators during the yearunder review.
The Company has complied with all the applicable regulations of RBI as on March 312018.
During the year under review the Company has not obtained anyregistration/license/authorisation by whatever name called from any other financialsector regulators.
The Directors express their sincere gratitude to the Reserve Bank of India Securitiesand Exchange Board of India BSE Limited National Stock Exchange of India LimitedMinistry of Finance Ministry of Corporate Affairs Registrar of Companies othergovernment and regulatory authorities lenders financial institutions and the Company'sbankers for the ongoing support extended by them. The Directors also place on record theirsincere appreciation for the continued support extended by the Company's stakeholders andtrust reposed by them in your Company. The Directors sincerely appreciate the commitmentdisplayed by the employees of the Company and its subsidiaries across all levelsresulting in successful performance during the year.
|For and on behalf of the Board of Directors |
|S. V. Haribhakti ||Dinanath Dubhashi |
|Chairperson ||Managing Director & |
|DIN: 00007347 ||Chief Executive Officer |
| ||DIN: 03545900 |
|Place: Mumbai || |
|Date: May 3 2018 || |