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LKP Finance Ltd.

BSE: 507912 Sector: Financials
NSE: LKPMERFIN ISIN Code: INE724A01017
BSE 00:00 | 18 Apr 118.85 4.60
(4.03%)
OPEN

114.60

HIGH

118.90

LOW

114.10

NSE 05:30 | 01 Jan LKP Finance Ltd
OPEN 114.60
PREVIOUS CLOSE 114.25
VOLUME 850
52-Week high 221.00
52-Week low 92.50
P/E 3.41
Mkt Cap.(Rs cr) 149
Buy Price 114.10
Buy Qty 50.00
Sell Price 118.80
Sell Qty 50.00
OPEN 114.60
CLOSE 114.25
VOLUME 850
52-Week high 221.00
52-Week low 92.50
P/E 3.41
Mkt Cap.(Rs cr) 149
Buy Price 114.10
Buy Qty 50.00
Sell Price 118.80
Sell Qty 50.00

LKP Finance Ltd. (LKPMERFIN) - Director Report

Company director report

The Directors present the Thirty Fourth Annual Report and Audited Accounts of theCompany for the year ended March 31 2018.

FINANCIAL RESULTS 2017 - 2018 2016 - 2017
(Rs. in lacs) (Rs. in lacs)
Profit before tax 2103.62 1235.41
Less: Tax expense for the year 350.00 310.00
Tax expenses for earlier year --- -21.45
Deferred Tax -8.22 -0.46
MAT credit entitlement 209.64 60.00
Profit after tax 1971.48 1007.32
Profit brought forward from previous year 1309.31 797.08
Amount available for appropriation 3280.79 1804.40
APPROPRIATIONS:
Transfer to Special Reserve Fund 394.30 201.46
Proposed Dividend -- 243.96
Tax on proposed Dividend -- 49.67
Balance carried to Balance Sheet 2886.49 1309.31

DIVIDEND

The Board of Directors are pleased to recommend a dividend @ Rs 2/- per equity share ofthe Company for the financial year ended 31st March 2018.

PERFORMANCE REVIEW

The Company's revenue from operation increased to Rs. 7631.53 lacs from Rs.4172.19 lacswhereas profit after tax increased to Rs. 1971.48 lacs from Rs. 1007.32 lacs in theprevious year due to buoyancy in Stock Market.

EMPLOYEES STOCK OPTION SCHEME

Pursuant to Employees Stock Option Scheme 2010 the Company has allotted 223500equity shares during the year. The Scheme is administered by the Nomination andRemuneration Committee of the Board of Directors.

Disclosures under the Companies (Share Capital and Debentures) Rules 2014 andSecurities And Exchange Board of India (Share Based Employee Benefits) Regulations 2014is annexed to this report herewith as "Annexure A".

FIXED DEPOSITS

The Company has no public deposits as of date and will not accept any deposits withoutprior approval of the Statutory Authorities concerned.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The scope and authority of the Internal Auditors' functionis defined in their letter of engagement. To maintain its objectivity and independencethe Internal Audit function reports to the Chairman of the Audit Committee of the Board& to the Executive Chairman .

The InternalAudit Department monitors and evaluates the efficacy and adequacy ofinternal control system in the Company its compliance with operating systems accountingprocedures and policies of the Company. Based on the report of internal audit functionprocess owners undertake corrective action in their respective areas and therebystrengthen the controls. Significant audit observations and recommendations along withcorrective actions thereon are presented to the Audit Committee of the Board.

SUBSIDIARY

As per the Circular No. 51/12/2007-CL-III dated 8th February 2011 issued byGovernment of India Ministry of Corporate Affairs the required financial information inthe consolidated balance sheet is given in respect of Company's subsidiaries i.e. GayatriCement and Chemical Industries Private Limited in Form AOC 1 annexed in Annual Report as"Annexure B".

The annual accounts of the aforesaid subsidiary and the related detailed informationshall be made available to shareholders of the Company seeking such information at anypoint of time. The annual accounts of the subsidiary company shall also be kept open forinspection by any shareholder at the Registered office at 203 Embassy Centre NarimanPoint Mumbai 400 021.

DIRECTORS

Mr. Mahendra V. Doshi retires by rotation and being eligible offers himself forre-appointment. Your Directors recommend his reappointment.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed in Section 149(6) ofthe Companies Act 2013.

The information on the particulars of the Directors proposed for re-appointment hasbeen given in the Notice of the Annual General Meeting.

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and provisions of Regulations ofthe SEBI (Listing Obligations and Disclosure Requirements) Regulation 2015 the Board hascarried out an evaluation of its own performance the directors individually as well asthe evaluation of the working of its Audit Nomination & Remuneration Committees. Themanner in which the evaluation has been carried out has been explained in the CorporateGovernance Report.

Remuneration Policy

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Remuneration Policy is stated in the Corporate Governance Report.

Meetings

During the year five Board Meetings and Audit Committee Meetings were convened andheld. The details of which are given in the Corporate Governance Report. The interveninggap between the Meetings was within the period prescribed under the Companies Act 2013.

DIRECTORS' RESPONSIBILITY STATEMENT

The Board of Directors acknowledges the responsibility for ensuring compliance with theprovisions of section 134(3)(c) read with section 134(5) of the Companies Act 2013 in thepreparation of the annual accounts for the year ended on March 31 2018 and state that :

i. in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures if any;

ii. 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 at the end of the financial year and ofthe profit of the Company for that period;

iii. the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;

iv. the Directors have prepared the annual accounts on a going concern basis;

v. the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

vi. there is a proper system to ensure compliance with the provisions of all applicablelaws and that such systems are adequate and operating effectively.

STATUTORY AUDITORS

M/s. MGB & Co. LLP Chartered Accountants Firm Reg. No. 101169W/W100035 Mumbairetire at the conclusion of the forthcoming Annual General Meeting. The Company hasreceived a letter from them to the effect that their appointment if made would be withinthe provision prescribed under Section 139 of the Companies Act 2013. Your Directorsrecommend their re-appointment.

SECRETARIAL AUDIT

Pursuant provisions of section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the company hasappointed M/s V. R. Associates a firm of Company Secretaries in practice to undertake theSecretarial Audit of the Company. The Secretarial Audit report is annexed herewith as"Annexure C".

Due to sudden urgent travelling of one independent Director at the meeting held on 26thApril 2017 and 13th November 2017 requisite quorum as required underRegulation 18(2)(b) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 could not be complied with.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT-9 is annexedherewith as "Annexure D".

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The company has contributed funds for the promotion of education and medical andenvironmental sustainability etc. The contribution has been made to a registered trustwhich is mainly undertakes activities specified under Schedule VII of the Companies Act2013.

The report on CSR activities is annexed herewith as "Annexure E".

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were onarm's length basis and were in the ordinary course of the business. There are nomaterially significant related party transactions made by the Company with Promoters KeyManagerial Personnel or other designated persons which may have potential conflict withinterest of the Company at large except those related party transactions which weresanctioned by the shareholders vide Special Resolutions passed by postal ballot conductedduring the year under review. The requisite details are given in Form AOC 2 is annexedherewith as "Annexure F".

CODE OF CONDUCT

The Board of Directors has approved a Code of Conduct which is applicable to theMembers of the Board and all employees in the course of day to day business operations ofthe company. The Code has been placed on the Company's website www.lkpsec.com

The Code lays down the standard procedure of business conduct which is expected to befollowed by the Directors and the designated employees in their business dealings and inparticular on matters relating to integrity in the work place in business practices andin dealing with stakeholders.

All the Board Members and the Senior Management personnel have confirmed compliancewith the Code.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company is committed to the high standards of Corporate Governance and stakeholderresponsibility.

The Company has established a vigil mechanism to be known as the ‘Whistle BlowerPolicy' for its Directors and employees to report instances of unethical behavior actualor suspected fraud or violation of the Company's Code of Conduct. The aim of the policyis to provide adequate safeguards against victimization of whistle blower who avails ofthe mechanism and also provide direct access to the Chairman of the Audit Committee inappropriate or exceptional cases.

Accordingly ‘Whistle Blower Policy' has been formulated with a view to provide amechanism for the Directors and employees of the Company to approach the Chairman of theAudit Committee of the Company.

The purpose of this policy is to provide a framework to promote responsible and securewhistle blowing. It protects employees willing to raise a concern about seriousirregularities within the Company.

Annexure A to the Directors' Report

Disclosure regarding Employees Stock Option Plan pursuant to SEBI (Share BasedEmployees Benefits) Regulations 2014 and Rule 12(9) of the Companies (Share Capital andDebentures) Rules 2014 forming part of the Directors' Report for the year ended March 312018

(A) The Company has issued stock options to its permanent employees in accordance withthe Company's Employee Stock Option Scheme 2010 and 2014. Both the Schemes areadministered by the Compensation Committee / Nomination and Remuneration Committee (NRC)constituted pursuant to SEBI (Share based employee benefits) Regulations 2014. All thepermanent employees of the company and the subsidiaries including Directors but excludingpromoters of the Company are eligible to participate in the Schemes. The Committee grantsstock options to the employees at its discretion depending upon criteria such asrole/designation of the employee length of service with the company past performancerecord future potential of the employee and/or such other criteria that may be determinedby the Committee.

ESOP Scheme Members approval Number of options approved
ESOP Scheme-2010 March 17 2010 905000
ESOP Scheme-2014 January 02 2015 775000

The stock option vested / shall be vest proportionately as may be decided by NRCcommittee at the time of grant over the period of 3 to 5 years after the firstanniversary from the date of grant. Under ESOP Scheme 2010 390000 options were grantedto Identified Employee at the exercise price up to 5 % discount on the average of theclosing price of the Company's shares in the BSE during the last 15 days preceding thedate of grant of options at Rs. 117.50 per option and 447000 options were granted at Rs.80/- per Option higher than the market price. Under ESOP Scheme 2014 - 775 000 Optionswere granted at Rs. 80/- per Option higher than the market price. The entire optionsgranted under the Scheme 2014 were lapsed/ forfeited/ surrendered/ cancelled. The exerciseprice in cash is paid/ to be paid by the employee at the time of exercise of the stockoption. No stock option is granted in lieu of cash. The option lapses if not exercisedwithin a period of 5 years from the date of vesting of option. The lapsed option isavailable for being re-granted / re-issue at a future date. The maximum number of optionsthat may be granted to any specific employee is upto 390000 under Scheme 2010 and410000 under ESOP Scheme 2014. Every one stock option if exercised is allotted oneequity shares of Rs. 10/- each.

The Company had been using intrinsic value method of accounting ESOP expenses asprescribed by SEBI (Share based employee benefits) Regulations 2014 and the Guidance Noteon Accounting for Employee Share-based Payments to account for stock options issued underthe Company's stock option schemes. Under this method compensation expenses are recordedon the basis of excess of the market price of share at the date of grant of option overexercise price of the option.

There would be no impact on the profit or earnings per share had the company used thefair value of the options as the method of accounting instead of intrinsic value as thefair value is less than the intrinsic value of the option.

(B) Summary of stock options

Options outstanding at the beginning of the year 501800
Options granted during the year Nil
Options forfeited / lapsed during the year 131200
Options vested during the year --
Options exercised during the year 223500
Shares arising as a result of exercise of options 223500
Source of shares Primary
Money realized by exercise of options (Rs.) 17880000/-
Loan repaid by the trust during the year from exercise price received N.A.
Options outstanding at the end of the year 147100
Options exercisable at the end of the year 147100
Variation in terms of options Nil
Employee-wise details of options granted during the year to
(i) KMP / Senior managerial personnel Nil
(ii) Other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year Nil
(iii) Employees who received the options during the year equal to or exceeding 1% of the issued capital of the Company at the time of grant Nil
Diluted EPS

(C) Weighted average shares price on the date of exercise of the options is Rs. 110.20(Previous year Rs. 70.93)

(D) Weighted average fair value of options: The fair value of each option is estimatedusing the Black Scholes model after applying the following weighted average assumptions:-

For the year ended March 31 2018
Risk free interest rate *
Expected life *
Expected Volatility (%) *
Expected Dividend (%) *
Price of underlying shares in the market at the time of option grant *

*Not applicable since the Company has not granted stock options during the year.