The Directors of your Company have the pleasure in presenting the Eleventh AnnualReport together with the audited financial statements for the financial year("FY") ended March 31 2019.
The summary of the Company's financial performance both on a consolidated andstandalone basis for FY 2018-19 as compared to the previous FY 2017-18 is given below:
| || || || ||(र cr) |
|Particulars || |
| ||2018-19 ||2017-18 ||2018-19 ||2017-18 |
|Total income ||13301.52 ||10266.26 ||526.48 ||477.82 |
|Less: Total expenses ||10249.54 ||8820.50 ||222.45 ||185.12 |
|Profit before tax ||3051.98 ||1445.76 ||304.03 ||292.70 |
|Less: Tax expense ||819.95 ||168.24 ||36.97 ||26.65 |
|Profit after tax ||2232.03 ||1277.52 ||267.06 ||266.05 |
|Add: Share in profit of associate company ||- ||0.83 ||- ||- |
|Net profit after tax and share in profit of associate company ||2232.03 ||1278.35 ||267.06 ||266.05 |
|Profit for the year (owners of the Company) ||2226.30 ||1254.68 ||267.06 ||266.05 |
|Actuarial gain on defined benefit plan (gratuity) net of income tax ||(1.50) ||(0.94) ||(0.32) ||0.62 |
|Total comprehensive income for the year (owners of the Company) ||2224.80 ||1253.74 ||266.74 ||266.67 |
|Add: Balance brought forward from previous year ||1300.94 ||580.68 ||189.57 ||142.21 |
|Balance Available ||3525.74 ||1834.42 ||456.31 ||408.88 |
|Appropriations || || || || |
|Dividend paid ||199.71 ||145.74 ||199.70 ||145.74 |
|Additional tax on dividend paid ||70.67 ||76.73 ||- ||- |
|Transfer to Reserve u/s 45-IC of Reserve Bank of India Act 1934 ||295.32 ||176.66 ||53.41 ||73.57 |
|Transfer to Debenture Redemption Reserve ||62.41 ||48.07 ||- ||- |
|Transfer to Reserve u/s 36(1 )(viii) of Income Tax Act 1961 ||114.35 ||85.62 ||- ||- |
|Transfer to Reserve u/s 29-C of National Housing Bank Act 1987 ||11.87 ||0.66 ||- ||- |
|Surplus in the Statement of Profit and Loss ||2771.41 ||1300.94 ||203.20 ||189.57 |
Your Company has adopted Indian Accounting Standards ("Ind AS") pursuant tonotification dated March 30 2016 issued by the Ministry of Corporate Affairs("MCA") and under Section 133 of the Companies Act 2013 (the "Act")read with the Companies (Indian Accounting Standards) Rules 2015 from April 1 2018 andthe effective date of such transition is April 1 2017. Such transition has been carriedout from the erstwhile Accounting Standards notified under the Act read with relevantrules issued thereunder and guidelines issued by the Reserve Bank of India("RBI") (collectively referred to as the "Previous GAAP"). The figureshave been presented in accordance with the format prescribed for financial statements forNBFC whose financial statements are drawn up in compliance with the Companies (IndianAccounting Standards) Rules 2015 in Division III of Notification No. GSR1022 (E) datedOctobeर 11 2018 issued by MCA.
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 29.57% from र 10266.26 cr in FY 2017-18 to र 13301.52 crin FY 2018-19.
Profit before taxes grew from र 1445.76 cr in FY 2017-18 to र 3051.68 cr in FY2018-19.
Profit for the year attributable to owners of the Company also grew from R1254.68 cr in FY 2017-18 to र 2226.30 cr in FY 2018-19.
During the year the net loan book size grew from र 77088.34 cr to र 91324.63 crreflecting a growth of 18.47%.
The Average Assets Under Management ("AAUM") in the Mutual Fund businessstood at र 70944.36 cr for the quarter ended March 31 2019 as against र 65931.65 cr forthe quarter ended March 31 2018 reflecting a growth of around 8%.
The Assets Under Service ("AUS") of the Wealth Management business stood at R28164.05 cr for the quarter ended March 31 2019 as against र 18353.66 cr for thequarter ended March 31 2018 reflecting a growth of around 53%.
Total income grew by 10.18% from र 477.82 cr in FY 2017-18 to र 526.48 cr in FY2018-19.
Profit before taxes grew from र 292.70 cr in FY 2017-18 to र 304.03 cr in FY2018-19.
Profit for the year also grew from र 266.05 cr in FY 2017-18 to र 267.06 cr inFY 2018-19.
The Company proposes to transfer र 53.41 cr (previous year र 73.57 cr) to SpecialReserve created u/s 45-IC of the Reserve Bank of India Act 1934.
The Company is not required to maintain cost records as per the provisions of Section148(1) of the Act.
INFORMATION ON THE STATE OF AFFAIRS OF THE COMPANY
The information on the affairs of the Company has been given as part of the 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 Policy hasbeen 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% 8.50% 8.35%8.15% and 8.95% per share (on a pro rata basis for the issuances made during the year) asapplicable on the five series of Cumulative Compulsorily Redeemable Non-ConvertiblePreference Shares ("CCRPS") of face value of र 100 each of the Company duringFY 2018-19 entailing an outflow of र 88.60 cr (excluding Dividend Distribution Tax).
The Board of Directors is pleased to recommend a final dividend of र 1 per Equity Shareof र 10 each (previous year र 1 per Equity Share) subject to approval of the Members inthe ensuing Annual General Meeting ("AGM"). In terms of Ind AS-10 events afterthe reporting period as notified by the MCA the proposed dividend of र 199.88 cr is notrecognised as liability as on March 31 2019.
The dividend if approved at the ensuing AGM would be paid to those Members whosenames appear in the Register of Members / Beneficial Owners maintained by the depositoriesas stated in Notice of the ensuing AGM.
During the year under review CARE Ratings Limited ("CARE") ICRA Limited("ICRA") and India Ratings and Research Private Limited ("IndiaRatings") reviewed the ratings on various debt instruments of the Company.
CARE reaffirmed its rating on the Non-Convertible Debentures ("NCD") at"CARE AAA / Stable" (Triple A; Outlook: Stable by CARE) and the rating on CCRPSwas reaffirmed at "CARE AAA (RPS) / Stable" (Triple A [Redeemable PreferenceShares]; Outlook: Stable by CARE). CARE has also reaffirmed the rating on the commercialpapers issued by the Company at "CARE A1+" (A One Plus by CARE).
ICRA upgraded its ratings on NCDs to "ICRA AAA / Stable" (Triple A; Outlook:Stable by ICRA) from "ICRA AA+ / Stable" (Double A Plus; Outlook: Stable byICRA). ICRA has also reaffirmed the rating on the commercial papers issued by the Companyat "ICRA A1+" (A One Plus by ICRA).
India Ratings has reaffirmed its rating on NCDs at "IND AAA / Stable" (TripleA; Outlook: Stable by India Ratings) and a rating of "IND A1+" (A One Plus byIndia 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 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.
During the year under review the Company has issued 385800 Equity Shares and2749600 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 ("ESOP Scheme") respectively.
During the year under review to maintain adequate working capital including redemptionof Preference Shares and funding the operation of the Company and that of itssubsidiaries the Company had issued 25000000 CCRPS of face value र 100 each for cashat par aggregating to र 250 cr on a private placement basis which were subsequently listedon BSE Limited in accordance with the Securities and Exchange Board of India (Issue andListing of Non-Convertible Redeemable Preference Shares) Regulations 2013.
During the year under review 25000000 CCRPS amounting to र 250 cr which were duefor redemption were duly redeemed by the Company.
Pursuant to the allotment of Equity Shares under ESOP Scheme and CCRPS and subsequentredemption of CCRPS the paid-up share capital of the Company was र 3033.21 cr (includingpreference share capital of र 1034.40 cr) as at March 31 2019 as compared to र 3030.08cr (including preference share capital of र 1034.40 cr) as at March 31 2018.
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 the subsidiary company ||Amount of capital subscribed (R cr) |
|L&T Infrastructure Finance Company Limited ||265.39 |
|L&T Capital Markets (Middle East) Limited ||5.41 |
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 the RBIdated Septembeर 11 2013 under Section 45-IA of the Reserve Bank of India Act 1934.
The Company is having a valid Certificate of Registration dated Septembeर 11 2013issued by RBI under Section 45-IA of the Reserve Bank of India Act 1934. However RBIdoes 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 non-deposit taking NBFC-CIC has not accepted any deposits from thepublic during the year under review.
The composition of the Board is in accordance with the provisions of Section 149 of theAct and Regulation 17 of the SEBI Listing Regulations with an appropriate combination ofNon-Executive Directors and Independent Directors. The complete list of Directors of theCompany has been provided as part of the Corporate Governance Report.
During the year under review Ms. Vaishali Kasture resigned from the Board of Directorsdue to personal reasons and other commitments and accordingly ceased to be a Director ofthe Company with effect from May 29 2018. Mr. Harsh Mariwala an Independent Directorwhose term expired on March 31 2019 did not seek re-appointment as an IndependentDirector of the Company due to other commitments and ceased to be an Independent Directoreffective April 1 2019.
The Board places on record its appreciation of the valuable services rendered by Ms.Kasture and Mr. Mariwala during their tenure as Independent Directors of the Company.
During the year under review the Company appointed Dr. (Mrs.) Rajani R. Gupte as anIndependent Director in accordance with the provisions of Sections 149 152 and 161 of theAct and Mr. Prabhakar B. as the Non-Executive Director in accordance with the provisionsof Sections 152 and 161 of the Act with effect from June 28 2018 pursuant to approvalof the Members at the Tenth AGM held on August 28 2018.
Mr. S. V. Haribhakti and Mr. P. V. Bhide were appointed as Independent Directors of theCompany at the Sixth AGM held on July 24 2014 for a term of 5 consecutive years fromApril 1 2014 to March 31 2019. Pursuant to the provisions of Section 149 of the Act readwith relevant rules made thereunder an Independent Director can hold the office for aterm of upto 5 consecutive years on the Board of a company but is eligible forre-appointment on passing of a special resolution by the company based on the report ofevaluation of their performance for another term of upto 5 years. No independent directorcan hold office for more than two consecutive terms.
Further to the aforesaid and based on the recommendation of the Nomination andRemuneration Committee of the Company ("NRC") the Board at its Meeting held onMarch 19 2019 has approved the re-appointment of Mr. S. V. Haribhakti and Mr. P V. Bhideas Independent Directors for a second term of upto 5 consecutive years from April 12019to March 312024 subject to the approval of the shareholders by way of a specialresolution and continuation of Mr. S. V. Haribhakti as the Non-Executive Chairman of theCompany.
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 ofwhich one-third are liable to retire by rotation. Accordingly Mr. R. Shankar RamanNon-Executive Director will retire by rotation at the ensuing AGM and being eligible hasoffered himself for re-appointment.
The terms and conditions of appointment of Independent Directors are also available onthe 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 the provisions of Section 149(7) of the Act stating that they meet thecriteria of independence as provided in Section 149(6) of the Act and Regulations 16(1)(b)and 25(8) of the SEBI Listing Regulations and are not disqualified from continuing /getting appointed as Independent 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 familiarization programmeare 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 2019 the Company had 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'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION FOR DIRECTORS KEYMANAGERIAL PERSONNEL 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 requires the NRC to formulate a policy relating to the remunerationof the Directors Senior Management / KMPs and other employees of the Company andrecommend 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 KMP andother employees which is available on the website of the Company at https://www.ltfs.com/investors.html.
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 thereunder and SEBI Listing Regulations. The NRCsatisfies itself that the proposed person satisfies the criteria of independence asstipulated under Section 149(6) of the Act and 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 Wholetime Director is subject to the provisions ofSections 196 197 198 and 203 of the Act read with Schedule V and rules thereunder. TheNRC ensures that a person does not occupy the position as a Managing Director / Whole-timeDirector beyond the age of seventy years unless the appointment is approved by a specialresolution passed by the Company in general meeting. No re-appointment is made earlierthan one year before the expiry 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-ExecutiveDirectors every year ending March 31st on the basis of the following criteria:
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 Performance Indicators("KPIs") which are identified well in advance for EDs and weights assigned foreach measure of performance keeping in view the distinct roles of EDs. The identified KPIsfor EDs are approved by the Board pursuant to recommendation of the NRC if 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 are identifiedwell in advance at the commencement of the financial year. Performance benchmarks are setand evaluation of employees is done by the respective reporting Manager(s) / Management /Department Head(s) to determine whether the performance benchmarks are achieved. Thepayment of remuneration / annual increment to the aforementioned persons is determinedafter the satisfactory completion of evaluation process.
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 programmes on a need basisare provided to employees whose performance during any financial year does not meet thebenchmark criteria.
E. Criteria for Remuneration
NRC while determining and / or recommending the criteria for remuneration /remuneration for Directors Senior Management / KMPs and other employees ensure 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) relationship of remuneration to performance is clear and meets appropriateperformance benchmarks; and
c) remuneration to Directors Senior Management / KMPs involves a balance between fixedand incentive pay reflecting short and long-term performance objectives appropriate to theworking of the Company and its goals.
During the year under review the changes as mandated under regulatory provisions havebeen duly carried out in the Policy.
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) Board and Committee Evaluation:
Evaluation of Board as a whole and the Committees is done by the individualdirectors / members followed by submission of collation to NRC and feedback to the Board.
b) Independent / Non-Executive Directors Evaluation:
Evaluation done by Board members excluding the Director being evaluated issubmitted to the Chairperson of the Company and individual feedback provided to eachDirector.
c) Chairperson / Managing Director & Chief Executive Officer Evaluation:
Evaluation as done by the individual directors is submitted to the Chairpersonof the NRC and Chairperson of the NRC provides feedback to the NRC and subsequently to theBoard.
EMPLOYEE STOCK OPTION SCHEME
The disclosures required to be made under the Securities and Exchange Board of India(Share Based Employee Benefits) Regulations 2014 is available on the website of theCompany at 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.
SUSTAINABILITY REPORT AND BUSINESS RESPONSIBILITY REPORT
The Company has issued its first Sustainability Report for FY 2018-19. The informationdisclosed is aligned to the Global Reporting Initiative's (GRI) Standards forsustainability reporting and is in accordance with the core option. The principlesapplied for defining contents of the report and quality are as prescribed by the GRIStandards. The detailed Sustainability Report is available on the website of the Companyat https://www. ltfs.com/investors.html.
Further in terms of Regulation 34(2)(f) of the SEBI Listing Regulations top 500listed entities based on their market capitalisation as on March 31 2019 are required tosubmit a Business Responsibility Report ("BRR") as a part of the Annual Report.The Company'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 address.
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 Numbeर 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 Eighth AGM till the conclusion of the Thirteenth AGM. JointStatutory 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 the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 and Regulation 24A of the SEBI ListingRegulations the Company had appointed Ms. Naina R. Desai Practicing Company Secretary toundertake the Secretarial Audit of the Company for FY 2018-19.
Further in terms of the provisions of the Circular No. CIR/CFD/CMD1/27/2019 datedFebruary 8 2019 issued by SEBI Ms. Desai has issued the Annual Secretarial ComplianceReport confirming compliance by the Company of the applicable SEBI Regulations andcirculars / guidelines issued thereunder.
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 said Annexure isavailable for inspection by the Members at the registered office of the Company during thebusiness hours on any working day of the Company till the date of the ensuing AGM. If anyMember is interested in obtaining a copy thereof such Member may write to the CompanySecretary at the registered office address.
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 is in accordance with the requirements of the Act and SEBIListing Regulations and none of the employees listed in the said Annexure are related toany Directors of the Company.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Considering that the Company is a Core Investment Company carrying out its activitiesthrough its subsidiaries the particulars regarding conservation of energy and technologyabsorption as required to be disclosed pursuant to the Rule 8(3) of the Companies(Accounts) Rules 2014 are not relevant to its activities.
Some of the steps taken at the group level for conservation of energy includes:
- Installation of sensor-based lighting within the office premises which automaticallyturns the lights off when not in use.
- Set up of variable frequency drives for air handling units and pumps for optimum useof electricity.
- Installation of LED-based energy efficient lighting fixtures in the office premises.
- Installation of a sewage treatment plant for treatment of waste water to be reusedfor gardening and air conditioning.
There were no foreign exchange earnings during the year (previous year also Nil); whilethe expenditure in foreign currency by the Company during the year was र 0.30 cr (previousyear र 1.47 cr) towards professional fees and travelling expenses.
The Company's Equity Shares are compulsorily tradable in electronic form. As on March31 2019 out of the Company's total equity paid-up share capital comprising of1998812360 Equity Shares only 7926 Equity Shares were in physical form and theremaining capital is in dematerialized form. As per SEBI Notification No.SEBI/LAD-NRO/GN/2018/24 dated June 8 2018 and further amendment vide Notification No.SEBI/LAD- NRO/GN/2018/49 dated Novembeर 30 2018 requests for effecting transfer ofsecurities (except in case of transmission or transposition of securities) cannot beprocessed from April 1 2019 unless the securities are held in the dematerialized formwith the depositories. Therefore Members are requested to take necessary action todematerialize their holdings.
The Company conducts its business through its subsidiaries in the various businesssegments. As of March 31 2019 the Company had 12 subsidiaries (including step downsubsidiaries).
L&T Capital Markets (Middle East) Limited wholly owned subsidiary of the Companywas incorporated under the Companies Law Dubai International Financial Centre (DIFC) LawNo. 2 of 2009 on July 1 2018. Dubai Financial Authority Services Authority has granted alicense to L&T Capital Markets (Middle East) Limited to operate as an authorized firmw.e.f. Decembeर 12 2018.
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. Thehighlights of performance of subsidiaries and the contribution by such subsidiaries isgiven as a part of the Management Discussion & Analysis Report forming part of thisReport.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of Section 134(5) of the Act the Board of Directorsconfirms that to the best of its 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 Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 312019 and of the profit ofthe Company 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 Directors have prepared the annual accounts on 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 Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws including applicable secretarial standards and that such systemswere adequate 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 the internal control system in the Company and itscompliance with operating systems accounting procedures and policies of the Company.Based on the report of the IA function process owners undertake corrective action ifany in their respective areas and thereby strengthen the controls. Significant auditobservations and corrective actions thereon are presented to the Audit Committee("AC") of the Company from time to time.
The details of the Board meetings held during FY 2018-19 are disclosed in the CorporateGovernance Report appended to this Report.
COMPOSITION OF AUDIT COMMITTEE
The Company has constituted an AC in terms of the requirements of the Act Regulation18 of the SEBI Listing Regulations and RBI Regulations. The details of the same aredisclosed 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 are provided in the CorporateGovernance Report.
The Company has also formulated a CSR Policy ("Policy") in accordance withthe requirements of the Act and containing details specified therein which is available onthe website of the Company at https://www.ltfs.com/csr.html. During the yearunder review the Policy has been updated to include some components within the alreadyapproved thrust areas like providing aid to women entrepreneurs digital financialinclusion and adding of sustainable development goals as per United Nations. An annualreport on activities as required under Companies (Corporate Social Responsibility Policy)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 Mechanism Framework underwhich the "Whistle Blower Investigation Committee" ("the Committee")has been set up. The objective of the framework is to establish a redressal forum whichaddresses all concerns raised on questionable practices and through which the Directorsand employees can raise actual or suspected violations.
The Chief Internal Auditor of LTFS acts as an Ombudsman. The role of Ombudsman is toreview the grievance at the initial stage and in case the grievance is material the sameis forwarded to the Committee for investigation. After investigation the complaint withinvestigation report is forwarded to AC / Managing Director / Whole-time Director as thecase may be. At the AC brief update is presented to the Members for their review. TheCommittee takes necessary actions to maintain confidentiality within the organization onmatters 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 the FinancialStatements 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 ACof the Company 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 ordinary resolution in thegeneral meeting it is to be ratified by the Board or 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 2018-19 were on an arm's length basisand were in the ordinary course of business and disclosed in the Financial Statements.There were no materially significant RPTs made by the Company with Promoters DirectorsKMPs or Body Corporate(s) which had a potential conflict with the interest of the Companyat large. 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. The details of the sameare 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.
PREVENTION PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE
The Company has in place a policy for prevention prohibition and redressal of sexualharassment at work place. Further the Company has constituted an Internal ComplaintsCommittee under the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 where employees can register their complaints against sexualharassment. Appropriate reporting mechanisms are in place for ensuring protection againstsexual harassment and the right to work with dignity.
During the year under review the Company has not received any complaints in thisregard.
ANNUAL RETURN AS PRESCRIBED UNDER THE ACT AND RULES MADE THEREUNDER
The extract of Annual Return in Form MGT-9 as required under Section 92(3) of the Actand as prescribed in Rule 12 of the Companies (Management and Administration) Rules 2014is enclosed as Annexure F to this Report.
The Annual Return in Form MGT-7 as required under Section 92(3) of the Act shall behosted on the website of the Company viz. https://www.ltfs.com/investors.html.
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 March312019.
During the year under review except as specified in this Report the Company has notobtained any registration / license / authorisation by whatever name called from anyother financial sector 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 the 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 |
|Place: Mumbai ||Chairperson ||Managing Director & |
|Date: April 28 2019 ||DIN: 00007347 ||Chief Executive Officer |
| || ||DIN: 03545900 |