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Model Financial Corporation Ltd.

BSE: 530877 Sector: Financials
NSE: N.A. ISIN Code: INE166B01019
BSE 05:30 | 01 Jan Model Financial Corporation Ltd
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Model Financial Corporation Ltd. (MODELFINANCIAL) - Director Report

Company director report

FINANCIAL CORPORATION LIMITED ANNUAL REPORT 2000-2001 DIRECTORS' REPORT To the Members Your Directors' have pleasure in presenting the Fourteenth Annual Report and Audited Accounts of the Company for the year ended 30th September, 2001. (i.e. for a period of 15 months). DIVIDEND As the operations of the company during the year could not result in profit, your Directors were unable to recommend Dividend for the Financial Year 20002001. BUSINESS OPERATIONS During the year under report, the company could make a total business of Rs.721.95 lacs of which two wheeler and three wheeler financing amounted to 66%. Notwithstanding the innumerable odds faced by the NBFC Sector, your company has been able to continue its Hire Purchase business in financing two wheelers and Tata & Zip Telecom Services. The tie up arrangements made with TVS Suzuki, LML Ltd for two wheeler financing and with Tata Teleservices Ltd. for establishing their kiosks have been strengthened during the year. The business done in these segments has proved to be more beneficial to the company compared to the Industrial Financing even though the volume of business in this segment has come down drastically during the year under report FUTURE PROSPECTS The NBFC sector in the country is still passing through excruciating ordeals and uncertainties leading most NBFCs, barring a very few to down their shutters. The prevailing economic slow-down has also impacted adversely on the Capital Market, which in turn has led to a chain reaction and created ripples in all segments of industrial activity. In this backdrop. it cannot be expected that the NBFC sector will get any new impetus in the near future. Your company has therefore considered it necessary to take up a complete restructuring of the organisation and with this in view appointed the world renowned consulting firm M/s Deloitte, Haskins & Sells as consultants to make a detailed study of various options available and suggest suitable measures to achieve a turnaround. Realizing the present situation and future prospects of fund based activities for our size of companies and in the interest of all the stakeholders, the Board felt that it should take the following meaures in restructuring its large debt. The Company proposed a restructuring of its debt liability towards bond holders, i.e the liability towards bond holders of about Rs. 28 crores (along with interest upto 30th Sept, 2002) would be taken over by a closely held public company Model Chit Corp Limited. This proposal will result in reduction of total debt and also interest. M/s. Deloitte, Haskins & Sells, have valued the Equity Shares of Model Chit Corp Limited at Rs. 40/- per share. According to their suggestion 25% of the liability would be reduced by 1st October, 2002, another 25% will be repaid by 1st October, 2003. The balance of 50% of the liability would be addressed by way of shares in Model Chit Corp Limited of Rs. 10/- each at a fair value of Rs. 40/-. The detailed scheme as per the legal requirements has been submitted to the Hon'ble High Court of Andhra Pradesh under section 391 read with 394 in March, 2002. Accordingly, a special meeting of the Shareholders and Bondholders was held on 29th April, 2002 and the Chairperson will prepare a report and submit the same to the High Court. After approval of the scheme by High, Court the same will be implemented. On completion of this restructuring process, the liability of the company will be substantially reduced and continuance of operations will be smoother. Your company intends to focus on non-fund based activities in the future for which it is already in various stages of negotiations with a few leaders in insurance (both life and non-life) and among NBFCs for representing across the state of Andhra Pradesh. Substantial business is expected to be generated on account of these arrangements, which inturn will help turning around the company over the next few years. DEPOSITS As informed in the last AGM, your company ceased to be a deposit-accepting company w.e.f. 01.04.1998. However, the deposits held till that date had to be refunded before 31.12.2001 as per RBI directives. Accordingly, all the outstanding deposits as at 31st December, 2001 had been cleared through Escrow Account opened for the purpose and the company is no longer a deposit holding company with effect from 1st January, 2002. MODEL SECURED BONDS The Model Secured Bonds introduced in April, 1998 are being continued to supplement our finances. Although the company has been going through testing times, every effort is being made to discharge its obligation towards the repayment of matured Bonds. MOTIVE DIVISION As the members are aware, the IT education field has received a serious set back in the recent past and there has been less response to our centre opened at Hyderabad. As this centre had become unviable, it was closed and the centre at Vijayawada which has been doing well is being continued. However, a relook is being taken at this centre as well in relation to the future prospects. DEPOSITORY SYSTEM As the members are aware the SEBI has made it compulsory for clematerialised trading of shares of your company w.e.f. 25.5.2000. To facilitate dealing in electronic mode, your company has joined NSDL and CDSL w.e.f. 22.03.2000 and 08-04.2000 respectively. The company has so far clematerialised 8,09,000 shares representing 20.22% of the total paid Up Capital of the company. M/s. Satguru Management Consultants (P) Ltd., Hyderabad, have been appointed as our Electronic Registrars for clematerialisation of shares. SUBSIDIARY COMPANY As required under Section 212 of the Companies Act, 1956 necessary particulars of Model Projects Ltd, a Subsidiary of your Company, are attached to the Balance Sheet. DIRECTORS During the year, Sri C.W. Mirchandani,Sri V. Subba Rao and Sri K P Sastry have resigned from the Board and APIDC has withdrawn the appointment of Shri V S N Murthy as their Nominee Director on the Board of the company. The Board accepted their resignations and placed on record its appreciation to the contribution made by them during their tenure. Sri A. Hanumantha Rao, Director would retire by rotation at this meeting and being eligible he offers himself for reappointment. The tenure of Sri V. Mahadevan's Directorship will expire at this AGM and he has not sought re-election as a Director. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed: 1) That in the presentation of the accounts for the financial year ended 30th September, 2001, the applicable accounting standards have been followed along with proper explanation relating to material departures; 2) That the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the company for the year under review: 3) That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; 4) That the Directors have prepared the accounts for the financial yearencled 30th September 2001 on a'going concern'basis. AUDITORS M/s. Satyanarayana & Co, Chartered Accountants, Secunderabad, the present Auditors of the Company will retire at this AGM and being eligible, are recommended for reappointment. Conservation of Energy, Technology Absorption, Foreign Exchange earnings and Outgo Information required to be furnished under the Companies (Disclosure of particulars in the Report of Board of Directors) Rule, 1988 is furnished below : a. Conservation of Energy : The operations of the Company are not power intensive. Nevertheless, the Company continues its efforts to conserve energy whenever practicable by economizing the use of power. b. Technical Absorption : Nil C. Foreign Exchange earnings and out go : Nil PARTICULARS OF EMPLOYEES In terms of the provisions of Section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as amended recently, no employee in the Company was in receipt of remuneration of Rs. 12 lacs and above per ammount or Rs.1,00,000 per month or above during the year. LISTING The Equity shares of the company are listed on The Hyderabad, Madras and Mumbai Stock Exchanges. The requisite Annual Listing Fee to each of the above three Stock Exchanges has been paid in time. CORPORATE GOVERNANCE The Members were informed in the last AGM that as per the schedule of implementation of Corporate Governance norms, your company has to implement the same within the Financial Year 2002-2003, but not later than 31.03.2003, Your Directors assure you that necessary measures will be taken to ensure compliance with the Corporate Governance before 31st March, 2003. a) Meetings of the Board The Board met 8 times during the Calendar year 2000 on 5.1.2000, 25.1.2000, 31.1.2000, 29.4.2000, 31.8.2000, 28.9.2000, 31.10.2000 and 21.12.2000. b) Grievances from shareholders During the year, no complaints were received. The transfer and transmission of shares have been attended to promptly within the stipulated period. c) 13th Annual General Meeting The last AGM was held on 21st December 2000 at Bharatiya Vidya Bhavan, King Koti, Hyderabad. As the company has taken up the financial restructuring, the 14th AGM could not be held before December, 2001. The ROC who was approached for extension of time for holding the AGM, has granted time upto 21st June, 2002 for holding this meeting. MANAGEMENT'S REPLIES TO THE QUALIFICATIONS IN THE AUDITORS REPORT Pointwise clarification where ever applicable : (5) Sri V Subba Rao and Sri V Mahadevan have not submitted the certificate called for by the auditors under section 274(1)(g) of the Companies Act, 1956. Sri V Subba Rao has since resigned from the Board whereas Sri V.Mahadevan will retire at the ensuing Annual General Meeting. (6) (i) We have written to our debtors calling for confirmation of Balances. Few of the Debtors who have defaulted in the payment of Instailments have neglected to reply to our letters (ii) As per RBI directions all the deposits and to be refunded by 31st December 2001. This has been done by opening an Escrow Account. The Company is no longer a deposit accepting and deposit holding Company. (iii) We confirmed that we have approached the Hon'ble High Court of Andhra Pradesh for the Scheme of Arrangement as per Section 391 read with Section 394 of the Companies Act, 1956, In compliance with the directions of the High Court a meeting of the Shareholders as well as the Bond holders was held on 29th April, 2002. The formal report of the Chairperson appointed by the High Court would be submitted in the first week of June, 2002. No provision has been made on the erstwhile NPA's as they are no longer carried in the books of the Company. (XIII) The annual return of deposits is being compiled and it would be filed in due course. (XVIII) Income Tax liability amounting to Rs. 13.06 lacs has been provided for in the year under review. ACKNOWLEDGEMENTS Your Directors wish to place on record their sincere appreciation for the continued assistance and support extended by the Company's Bankers and APIDC. Your Directors also wish to thank all the employees, shareholders, depositors and Bondholders for their active support and unstinted cooperation. For and on behalf of the Board A. KRISHNA MURTY CHAIRMAN Place : Hyderabad Date : 20.05.2002