On behalf of the Board of Directors it is our pleasure to present the 14th(fourteenth) Annual Report together with the Audited Financial Statements of your Company("the Company" or "PTC India Financial Services Limited/ PFS") for thefinancial year ended 31st March 2020.
1. Financial Performance
The summarized standalone financial results of your Company are given in the tablebelow.
(Rs. in millions)
| ||FY 201920 ||FY 201819 |
|Total Income ||13697.10 ||13365.12 |
|Profit/(loss) before Finance Charges ||11268.26 ||12280.38 |
|Depreciation & Tax (EBITDA) || || |
|Finance Charges ||9484.46 ||9443.11 |
|Depreciation and Amortization ||63.42 ||27.27 |
|Provision for Income Tax ||620.39 ||968.57 |
|(including for earlier years) || || |
|Net Profit/(Loss) After Tax ||1099.99 ||1841.43 |
|Other Comprehensive Profit /(Loss) for the year ||(24.31) ||(336.12) |
|Total Comprehensive Profit /(Loss) for the year ||1075.68 ||1505.30 |
In FY 201920 the total income increased by 2.48% from Rs. 13365.12 million inFY201819 to Rs. 13697.10 million. In FY 201920 finance cost also increasedin line with interest income by 0.44% to Rs. 9484.46 million as compared to Rs. 9443.11million in FY 201819. The other expenses decreased by 11.69% to Rs. 288.63 millionduring FY 201920 as compared to Rs. 326.84 million in FY 201819. Other incomeincreased by 160.37% to Rs. 54.60 million during FY 201920 compared to Rs. 20.97million in FY 201819. Few of the loan accounts were referred for liquidation by NCLTand accordingly provision for Impairment on Financial Instruments has increased to Rs.1957.06 million in FY 201920 from Rs. 605.83 million in FY 201819. In FY1920 the Spread has improved to 2.62% from 2.52% on earning portfolio and NIM hasimproved from 2.99% to 3.31%
In FY 201920 PFS focused on diversified sources of borrowings and reduction incost of borrowings. Our Company has explored funding from various international financialinstitutions like IFC JICA OeEB OPIC etc. and have received letter of intent (LOI) ofUSD 115 million and is in discussion for credit lines of another USD100 million. During FY201920 PFS received fresh sanctions of longterm loans of Rs.5000 millioneach from existing lenders viz Bank of India and Canara Bank and a sanction of long-termloan of Rs.1000 million from the new lender United Bank of India. PFS was able to reducethe Debt : Equity ratio during the year to 4.43 from 5.28 in FY 201819 The ratio oflong term borrowings to short term borrowings has also improved to 91:9 in FY 201920from 76:24 in FY 201819 which indicates the strengthening of our asset liabilitycovergence and reduced payment obligations in the short term.
The COVID19 virus has caused a global pandemic that has affected the worldeconomy including India leading to significant decline in economic activity andvolatility in the financial markets. The Government of India (GOI) announced variousrelief packages to support all segments. In line with the Govt. initiative RBI notifiedguidelines relating to the COVID19 Regulatory Package dated March 27 2020 April17 2020 and May 23 2020 for moratorium of interest & principal LTRO TLTRO etc. theCompany has granted a moratorium of upto six months on the payment of all instalments and/ or interest as applicable falling due between March 1 2020 and August 31 2020 to theeligible borrowers who have applied for moratorium. Company allowed moratorium toborrowers which constitute approx. 50% of loan book. Even after allowing moratoriumCompany has sufficient liquidity in the form of HighQuality Liquid Assets (HQLA) andundrawn lines of credit to meet its financial obligations in the near future. The Companydoes not foresee any significant concern in the case of borrowers where projects have beencommissioned/ completed considering that 50% of loan book is constituted of renewableenergy assets which are commissioned projects and have must run status. However it wouldbe difficult to assess the impact on borrower's ability to service the debt where projectsare under construction and delay in meeting project milestones.
The Company has considered external information (i.e. valuation report onetimesettlement (OTS) proposal asset value as per their last financials with applicablehaircut as per expected credit loss (ECL methodology) to determine the impairment.However the eventual outcome for nonperforming assets (NPA) and stressed assets maybe different because of future economic conditions which may emerge due to the outbreak ofCOVID 19.
During the FY 201920 with the focused efforts of the management Gross NPAs havedecreased from Rs. 8046.80 million to Rs.7446.20 million and net NPA from Rs. 4032.23million to Rs. 3844.87 million. For FY 201920 Gross NPA as a % to gross advanceswas 6.74% and Net NPA as a % to net advances was 3.59% as compared to 6.04% and 3.12%respectively for FY 201819. PFS has resolved stress/ NPA loan accounts of close toRs. 6850 million. The company is continuously focusing on resolving the stress assets anddeploying them into income generating assets. The efforts may result in betterprofitability in coming years. Most of the NPA accounts belong to Thermal and Large Hydroprojects. Overtime the Company is shifting its focus on other areas including renewableenergy because of which the company exposure to thermal has reduced to 11% in FY201920 in comparison to 14% as at the beginning of the year.
The profit before tax (PBT) for FY 201920 stood at Rs. 1720.38 million comparedto Rs. 2810.00 million in FY 201819. The profit after tax (PAT) for FY 201920stood at Rs. 1099.99 million against Rs. 1841.43 million in FY 201819.
For ensuring robust quality of portfolio PFS continues to strengthen credit appraisalprocess and risk management function. PFS has further strengthened the project monitoringfunction and implemented early warning signal framework for early identification of stressin assisted projects and a special team has been set up to deal with and find resolutionof stressed assets.
2. Summary of Operations and State of Company's Affairs
PFS has been playing a crucial role in the development of the country's coreinfrastructure. By offering medium/longterm funds and credit it has been enablingthe funding and growth of the infrastructure projects across the country. PFS providesdebt assistance to projects in the entire energy value chain i.e. power generationprojects transmission and distribution projects fuel sources and related/otherinfrastructure.
The debt assistance sanctioned during FY 201920 stands at Rs. 30408 million anddisbursement at Rs. 25904 million as compared to Rs 51239 million and Rs. 40852 millionduring FY 201819.
The gross portfolio stood at Rs. 113950 million in FY 201920 as compared to Rs.142370 million in FY 201819. The fundbased portfolio stood at Rs. 110060million in FY 201920 as compared to Rs. 133210 million in FY 201819 andletters of comfort stood at Rs. 3890 million in FY 201920 as against Rs. 9160million in FY 201819. The equity investments made by the Company aggregated toanother Rs. 2469.21 million as at the year end. The cumulative gross aggregate debtassistance sanctioned by the Company in FY 201920 aggregated to Rs. 508164 millionand net of cancellations/loan closure the cumulative debt sanctioned aggregated to Rs.167116 million.
During FY 201920 PFS sanctioned new loans of Rs. 30408 million and madedisbursement of Rs. 25904 million to various Infrastructure projects. During FY201920 PFS sanctioned Rs 11600 million to solar projects Rs. 18808 million toother projects including road transmission distribution and new sustainable area such aswater treatment waste handling and drinking water system. As at 31st March2020 the renewable portfolio comprises the highest proportion in the outstanding loanbook at around 50% and thermal projects constitute about 11%. PFS will continue to focuson reduction of its thermal exposure and in FY 202021 its exposure is expected tobe not more than 5%. PFS has an exposure of 9% in the transmission sector and 8% in theroad sector as at 31st March 2020. Further the outstanding loan portfolio ofPFS has a 14% exposure to state power utilities and 5% exposure as structured loans toholding companies of private infrastructure groups.
As at 31st March 2020 the company has Rs 93064 million of projects which areoperational and commissioned and comprises 81% of its total outstanding loans projects ofRs. 63456 million have more than oneyear of satisfactory conduct post theircommissioning. The Company continues to regularly monitor the progress and operations ofthe assisted projects through its comprehensive project monitoring mechanisms. PFS hasimplemented an Early Warning Signal (EWS) Framework with an objective to identify stressin the loan portfolio and to avoid slippages of such loan accounts into NPA category andhas integrated the EWS Framework with the Internal Credit Grading Models
As at 31st March 2020 the nonperforming loans portfolio stood at Rs.7446 million. Stress accounts are a drain on any lending company's resources and are thusrequired to be resolved on a war footing. Considering the negative drag of stress accountson the financials of PFS a dedicated unit viz.' Special Asset Resolution Cell'(SARC) hasbeen formed. With a focused approach PFS in FY 1920 was able to resolve 5 stressaccounts with a principal outstanding of Rs. 6850 million which was around 38% of theprincipal outstanding of the total stressed assets at the start of the year. The amountrecovered was around 53% of the principal outstanding of the resolved accounts. Theaccounts were resolved under various resolution platforms like NCLT One Time Settlement(OTS) SARFAESI sale to ARC etc. The resolution of the stress accounts has led to amultipronged advantage to PFS on one hand the absolute figure of NPA has come down and onthe other hand the amount received under resolution has been ploughed back in theoperations of PFS which adds to its income.
3. Industry Scenario
India continues to remain the fastest growing economy in the world and with a nominalGDP of $2.61 trillion and with a GDP growth of 4.2 per cent in 2019. Infrastructuredevelopment plays a very crucial and critical role in economic growth of the country.There exists a very high correlation between infrastructure investment and economic growthand therefore massive investment is needed in infrastructure to achieve the targetedeconomic growth in the country. Promoting growth of the economy has always been the utmostpriority of the Government. The Government is continuously taking steps to facilitateproduction and GDP growth of the economy. The Government aims at creating a conduciveenvironment by streamlining the existing regulations and processes and eliminatingunnecessary requirements and procedures.
Power is one of the most important drivers of infrastructure crucial for the economicgrowth and welfare of nations. The level of availability and accessibility of affordableand quality power is also one of the main determinants of the quality of life. India hasthe fifth largest power generation capacity in the world after China USA European Unionand Japan. India ranks third globally in terms of electricity production as well aselectricity consumption only after China and USA. In FY1920
Electricity production in India reached 1252.61 Billion Units (BU). Indian Governmentis continuously giving priority to power sector considering the important role of powergeneration in nation building. As a result the installed generation capacity has risenfrom a mere 1300 megawatt (MW) at the time of Independence to 370 gigawatt (GW) mark. Thepower sector in the country has seen transformational growth in the last one decade withaddition of generation capacity primarily through solar and wind energy with policyinitiatives of the Government massive investments towards modernization of transmissioncapacity and distribution networks electrifying villages and extending power to allhouseholds. Between April 2000 and March 2020 the industry attracted US$ 14.98 billion inForeign Direct Investment (FDI) accounting for three per cent of the total FDI inflow inIndia.
Keeping in view commitment of a healthy planet and Nationally Determined Contributionsas per the Paris Accord on Climate Change when India made a pledge that by 2030 40% ofinstalled power generation capacity shall be based on clean sources it was determinedthat 175 GW of renewable energy capacity will be installed by 2022. Subsequently Govt. ofIndia has revised the target to 227 GW by year 2022. Therefore the Government's thrust onRenewable energy has made this sector as the fastemerging source of power in India.Wind energy is the largest source of renewable energy in India accounting for 43.21%(37.76 GW) followed by solar power accounting for 39.96% (34.92 GW) of the total installedrenewable capacity of 87.38 GW as on 31st May 2020. Ministry of New & Renewable Energy(MNRE) has set the target to increase the wind power generation capacity to 60 GW solarpower capacity to 100 GW and biomass & hydropower at 15 GW.
India has made important progress towards meeting the United Nations SustainableDevelopment Goals notably Goal 7 on delivering energy access. Both the energy andemission intensities of India's gross domestic product (GDP) have decreased by more than20% over the past decade. This represents commendable progress even as totalenergyrelated carbon dioxide (CO2) emissions continue to rise. India's per capitaemissions today are 1.6 tonnes of CO2 well below the global average of 4.4 tonnes whileits share of global total CO2 emissions is 6.4%.
Roads are part of an integrated multimodal system of transport which influences thepace structure and pattern of economic development. Road provides crucial links toairports railway stations ports and other logistical hubs and acts as a catalyst foreconomic growth by playing a critical role in the supply chain management. India has theworld's second largest road network after USA. The Government's policy to increase privatesector participation has proved to be a boon for the infrastructure industry with manyprivate players entering the business through the publicprivate partnership (PPP)model. With the Government permitting 100 per cent Foreign Direct Investment (FDI) in theroad sector several foreign companies have formed partnerships with Indian players tocapitalize on the sector's growth. Cumulative FDI in construction development stood at US$25.66 billion between April 2000 and March 2020. The Government's move to cut GST rates onconstruction equipment from 28 per cent to 18 per cent is expected to give boost to theindustry. In March 2020 NHAI (National Highways Authority of India) accomplished thehighest ever highway construction of 3979 kms.
In April 2020 the Government set a target of constructing roads worth Rs 15 lakh crore(US$ 212.80 billion) in the next two years. The Introduction ofTollOperateTransfer (TOT) model helps the Government to monetize operationalroad assets by giving tolling rights on operational road projects in return for an upfrontamount to the Government. The Infrastructure Investment Trust is also gaining popularityamong developers to unlock the capital and deleverage the balance sheet to explorefurther investment avenues.
NBFC's have played a crucial role as one of the key contributors to India economy byproviding a fillip to infrastructure employment generation wealth creation and access tofinancial services for the rural and weaker sections of society. However the outbreak ofnovel Coronavirus (COVID19) pandemic and consequent lockdown restrictions imposed byGovernment is causing significant slowdown of economic activities across the world. Thegrowth of PFS's business at the end of FY 20 has been adversely impacted due to lockdownsituation in entire country on account of COVID19.
The NBFC sector in India is going through a very rough phase which started with theunexpected default of IL&FS in September 2018. It further got aggravated with defaultsby NBFCs like DHFL ILFS & Altico capital. PTC India Financial Services Limited (PFS)has been affected due to NBFC crisis which has resulted in drying up of liquidity forNBFCs and resulted in an increase in the cost of borrowing. However PFS maintained itscredit rating despite liquidity issues with the NBFC sector. PFS's decision to shift itsliability mix from short term to long term has also helped the Company to tide over thecash flow mismatch situation. The Government has also launched a phased program for bankrecapitalization entailing infusion of capital to the public sector banks to the tune ofabout Rs. 2.11 lakh crores over two financial years which is expected to encourage banksto enhance lending.
The power sector is witnessing stress particularly in the case of thermal projects.Several thermal projects in the country (both operational and under construction) arefacing challenges related to fuel price and availability power tariff time and costoverruns along with equity infusion by promoters especially in the case of underconstruction projects. PFS also faces with challenges in respect of such projects. Thestress in power sector has been acknowledged and various efforts/initiatives are beingtaken by Govt./ Banks/ FIs to resolve the aforementioned stress in the sector.
Indian power sector is undergoing a significant change that has redefined the industryoutlook. Sustained economic growth continues to drive electricity demand in India. TheGovernment of India's focus on attaining Power for all' has accelerated capacityaddition in the country. At the same time the competitive intensity is increasing at boththe market and supply sides (fuel logistics finances and manpower). By 2022 windenergy is estimated to contribute 60 Gigawatt (GW) followed by solar power at 100 GW andbiomass and hydropower at 15 GW. The target for renewable energy has been increased to 175GW by 2022.
India is the fastestgrowing trilliondollar economy in the world after USAChina Japan Germany and United Kingdom driven by key structural reforms and furtherreduction in external vulnerabilities. Government of India has retained its focus onfiscal consolidation and implemented structural reforms for further growth in theinfrastructure sector in general.
The Government's recent move to allow Public Private Partnership in sectors like Watersanitation Railways and other sector has opened more avenues to private sector. The mixof Public Private Participation model is continuously increasing thereby increasingconfidence support and investment in the infrastructure sector. The infrastructure sectorhas become the biggest focus area for the Government of India. India plans to spend US$1.4 trillion on infrastructure during 201923 for the sustainable development of thecountry. Indian Infrastructure sector is facing a paradigm shift moving towards timelycompletion of projects as against the general phenomenon of delay in completion ofprojects due to delay in obtaining approval and clearances lack of coordinationbetween various departments and the resultant delay in project completion.
Power will remain as one of the most important components of infrastructure crucialfor economic growth and welfare of the country. The total installed capacity in thecountry crossed the 370 GW mark with an installed capacity of renewable energy of 87.38 MWas at 31st May 2020. The renewable power sector saw moderate capacity additionduring FY 20 on account of the Covid impact tariff renegotiations weak finances of statepower distribution companies and slowdown in tendering. However with the latestinitiatives by the Government including liquidity injection into discoms implementing thedirect benefit transfer (DBT) scheme in the electricity sector for better targeting ofsubsidies promoting retail competition and instilling financial discipline at discoms itis expected that the renewable sector will achieve its target capacity of 227 GW by 2022.
In addition to the renewable power sector other areas such as power transmissionroads and highways ports airports etc. are also witnessing increased activity.Infrastructure sector plays a very crucial role in the economic development and possessesthe potential for propelling the overall development of the country. The sector continuesto enjoy focus from Government both in terms of policy related initiatives and developmentof infrastructure in the country. New projects are being undertaken and the Government ispoised to ensure the development of the infrastructure sector of the country.
The Government's policy to increase private sector participation has proved to be aboon for the infrastructure industry with many private players entering the businessthrough the publicprivate partnership (PPP) model. With the Government permitting100 per cent Foreign Direct Investment (FDI) in the road sector several foreign companieshave formed partnerships with Indian players to capitalise on the sector's growth.Cumulative FDI in construction development stood at US$ 25.66 billion between April 2000and March 2020. The Government's move to cut GST rates on construction equipment from 28per cent to 18 per cent is expected to give boost to the industry. In March 2020 NHAI(National Highways Authority of India) accomplished the highest ever highway constructionof 3979 kms. In April 2020 the Government set a target of constructing roads worth Rs 15lakh crore (US$ 212.80 billion) in the next two years. Road corridor project Bharatmalaportlinked industrialization plan Sagarmala and UDAN Pradhan Mantri Gram SadakYojana will help improving transport infrastructure and bring fresh investment in thesector.
Considering the issues in the thermal sector PFS as conservative approach has nottaken further exposure in thermal generation projects and has significantly diversifiedinto renewable energy portfolio and in other infrastructure sectors such as roads andports through calibrated approach. PFS is also diversifying into other infrastructuresector like Power Transmission Roads and Highways Water Sewage Treatment WasteManagement Facility Electric Vehicle Charging Station etc.
PFS believes that with infrastructure sector being the biggest focus area and also thefinancial support provided to the Infrastructure sector in the same combined with thelatest initiatives by the Government including liquidity injection into discomsimplementing the direct benefit transfer (DBT) scheme in the electricity sector for bettertargeting of subsidies promoting retail competition and instilling financial disciplineat state discoms will help to boost the investors' confidence in NBFC sector andwill also help NBFCs to contribute to the Government's target of achieving its targetcapacity of 227 GW in renewable sector by 2022.
PFS also believes that public private partnership in infrastructure development offersgood potential and company continues to evaluate these business proposals in these areas.The debt commitments and disbursements have been moderated during the year due to theongoing issues with the NBFC sector and also because of the COVID impact which hasimpacted the development of new projects/ projects under construction. The power andinfrastructure sector are witnessing stress and several projects in the country (bothoperational and under construction) are facing challenges. The Company is continuouslyengaged in resolution of such loans and is working proactively with the consortiummembers. Regular lenders' meetings are conducted detailed feedback obtained from lenders'independent engineers and financial advisors to assess that project development activitiesare taken. Discussions are held with promoters' and other stakeholders to work out afinancially viable solution. The Company also engages consultants / professional agenciesfor working out effective solutions / resolution for such cases. The Company continues topartner with credible players in the industry who can help all the stakeholders to benefitmutually PFS believes that the infrastructure development and renewable energy area offersgood potential and Company continues to evaluate these business proposals in these areas.
5. Net Owned Funds and Earnings Per Share (EPS)
The Net Owned Funds of the Company aggregated to Rs. 18977 million and the totalCapital Funds aggregated to Rs. 19457 million as at 31st March 2020. Thepercentage of aggregate risk weighted assets on the balance sheet and the risk adjustedvalue of off balance sheet items to Net Owned Funds is 23.61% as at 31st March2020.
EPS of the Company for FY 201920 stands at Rs.1.71 per share in comparison to Rs.2.87 per share for FY 201819.
Out of the profits earned during FY 201920 the Company has transferred an amountof Rs. 219.99 million to Statutory Reserve in accordance with the requirements of Section45IC of the Reserve Bank of India Act 1934 and Rs. 576.87 million to the ImpairmentReserve.
Based on Company's performance the Board of Directors of your Company are pleased torecommend for your consideration and approval a dividend at the rate of 4.5% (which islower than the earlier recommendation of 8% in last year) i.e. Rs. 0.45/ per equityshare of face value Rs. 10/ for the financial year 20192020.
The dividend on equity shares if approved by the members at the ensuing Annual GeneralMeeting ("AGM") would involve the cash outflow of Rs.289.03 million.
The dividend will be paid to the members whose names appear in the Register of Membersas on a record date and in respect of shares held in dematerialized form whose names arefurnished by National Securities Depositories Limited ("NSDL") and CentralDepository (India) Limited ("CDSL") as beneficial owners as on record date.
8. Fixed Deposits/Public Deposits
Your Company has not accepted any deposits during the year from public in terms ofprovisions of Companies Act 2013 ("the Act"). Further at the end of thefinancial year there were no unclaimed unpaid or overdue deposits.
9. Capital adequacy ratio
The Capital Adequacy Ratio as on 31st March 2020 stood at 23.61% compared to21.92% as on 31st March 2019. No adverse material changes affecting thefinancial position of the Company have occurred during the financial year.
10. Material changes and commitments if any affecting the financial position ofthe Company
There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year of the Company towhich the financial statements relate (i.e. 31st March 2020) and the date ofthe report. No adverse Material changes affecting the financial position of the Companyhave occurred during the Financial Year.
11. Particulars of loans guarantees and investments under Section 186
The particulars of loans guarantees and investments forms part to the notes of thefinancial statements provided in this Annual Report.
12. Share Capital/ Finance
During the period under review no change has taken place with regard to capitalstructure of the Company.
As on 31st March 2020 PFS has a paidup share capital aggregates toRs. 6422.83 million comprising of 642283335 equity shares of Rs. 10/ eachfully paidup. The promoter i.e. PTC India Limited holds 64.99% of the paid up sharecapital of the Company as on 31st March 2020. The equity shares of the Companyare listed on the National Stock Exchange of India Limited ("NSE") and BSELimited ("BSE").
13. Extract of Annual Return
As provided under section 92(3) of the Act and rule 12(1) of the Companies (Managementand Administration) Rules 2014 extract of annual return is given in Annexure Iin the prescribed Form MGT9 which forms part of this report.
14. Directors and Key Managerial Personnel
In accordance with provisions of the Act and Articles of Association of the CompanyShri Naveen Kumar shall retire by rotation at the ensuing AGM and being eligible offershimself for reappointment. The Board recommends his reappointment. Aresolution seeking shareholders' approval for his reappointment forms part of theNotice.
During the financial year ended 31st March 2020 Shri Chinmoy Gangopadhyayand Shri Harbans Lal Bajaj ceased to be the Directors with effect from 30thApril 2019 and 29th June 2019 respectively. Details of changes in thecomposition of Board during the period under review have been specifically mentioned inthe report on the Corporate Governance which is annexed with this report.
15. Dividend Distribution Policy
As per regulation 43A of Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015 ("SEBI Listing Regulations") theCompany has adopted the Dividend Distribution Policy to set out the parameters andcircumstances that will be taken in to account by the Board while determining thedistribution of dividend to its shareholder. The policy is enclosed as AnnexureIIto the Board Report and is also available on Company's website at :http://www.ptcfinancial.com/ upload/pdf/Dividend%20Distribution%20PolicyPFS.pdf
16. Details of Board meetings
Twelve Board Meetings were held during the financial year ended on 31stMarch 2020. The intervening gap between any two meetings was within the period prescribedby the Act and SEBI Listing Regulations. The details of which are given below:
|Sl. No. ||Date of the meeting ||No. of Directors attended the meeting |
|1 ||26th April 2019 ||9 |
|2 ||04th May 2019 ||8 |
|3 ||26th June 2019 ||8 |
|4 ||01st August 2019 ||7 |
|5 ||27th September 2019 ||8 |
|6 ||23rd October 2019 ||10 |
|7 ||18th December 2019 ||9 |
|8 ||23rd December 2019 ||10 |
|9 ||23rd January 2020 ||10 |
|10 ||27th January 2020 ||10 |
|11 ||14th February 2020 ||10 |
|12 ||24th March 2020 ||10 |
Further the attendance of each director is more specifically mentioned in the reporton the Corporate Governance Report which is a part of this Report.
17. Committees of Board
As on 31st March 2020 the Board had all Statutory Committees that are givenbelow:
1) Audit Committee
2) Nomination and Remuneration Committee
3) Corporate Social Responsibility Committee
4) Stakeholders' Relationship Committee
5) Risk Management Committee
6) IT Strategy Committee
Further Committees of the Board and Group of Directors are formed from time to timefor specific purpose.
The details of the Committees their meetings and other disclosures are mentioned inthe Corporate Governance report which forms part of this report.
18. Corporate Social Responsibility
As a good corporate citizen the Company is committed to ensuring its contribution tothe welfare of the communities in the society where it operates through its CorporateSocial Responsibility ("CSR") initiatives.
The Corporate Social Responsibility Committee has formulated and recommended to theBoard a Corporate Social Responsibility Policy ("CSR Policy") indicating theactivities to be undertaken by the Company which has been approved by the Board.
The objective of PFS's CSR Policy is to consistently pursue the concept of integrateddevelopment of the society in an economically socially and environmentally sustainablemanner and at the same time recognize the interests of all its stakeholders.
To attain its CSR objectives in a professional and integrated manner PFS shallundertake the CSR activities as specified under the Act. As on 31st March 2020the composition of the CSR Committee consists of 1. Shri Deepak Amitabh 2. Dr. PawanSingh 3. Mrs. Pravin Tripathi and 4. Dr. Nagesh Singh. The details of meetings andattendance thereof are mentioned in the Corporate Governance report which forms part ofthis report.
The CSR Policy is available at the link at website of the Company at http://www.ptcfinancial.com/upload/pdf/corporate_social_responsibility_policy.pdf
Further the report on CSR Activities/ Initiatives is annexed with this report at AnnexureIII.
19. Vigil mechanism/Whistle Blower Policy
The Company believes in the conduct of the affairs of its constituents in a fair andtransparent manner by adopting highest standards of professionalism honesty integrityand ethical behavior. In compliance with requirements of the Act and SEBI ListingRegulations the Company has established a mechanism called Whistle Blower Policy'for employees to report to the management instances of unethical behavior actual orsuspected fraud or violation of the Company's code of conduct or ethics policy.Whistleblowing' is the confidential disclosure by an individual of any concernencountered in the workplace relating to a perceived wrongdoing. The policy has beenframed to enforce controls so as to provide a system of detection reporting preventionand appropriate dealing of issues relating to fraud unethical behavior etc. The policyprovides for adequate safeguards against victimization of director(s) / employee(s) whoavail of the mechanism and also provides for direct access to the Chairman of the AuditCommittee in exceptional cases. During the year under review no complaint has beenreceived.
The Whistle Blower policy is available at http://www.ptcfinancial.com/upload/pdf/whistle_blower_policy.pdf
20. Directors' Responsibility Statement
Pursuant to the requirement clause (c) of subsection (3) of Section 134 read withsection 134(5) of the Act your Directors to the best of their knowledge confirms that:
(a) in the preparation of the annual accounts for the year ended 31st March2020 the applicable accounting standards had been followed along with proper explanationrelating to material departures;
(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year ended 31stMarch 2020 and of the profit and loss of the Company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively.
(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
21. Statutory Auditors their Report and Notes to Financial Statements
M/s. MSKA & Associates Chartered Accountants were appointed as Statutory Auditorsof your Company in the 13th AGM of the Company for a period of five years tillconclusion of 18th AGM of the Company. Now as per the Companies (Amendment)Act 2017 the provisions of ratification of appointment of Statutory Auditors have beendone away with and there is no requirement of ratification till the expiry of the term ofthe Statutory Auditors.
The Statutory Auditors have audited the Accounts of the Company for the year ended 31stMarch 2020 and the same is being placed before members at the ensuing AGM for theirapproval. Audited Financial Statements (both standalone and consolidated) comprisingBalance Sheet as at 31st March 2020 the Statement of Profit and Loss and theCash Flow Statement along with a summary of significant accounting policies & otherexplanatory information together with Auditor's Report thereon are annexed to this report.The Auditors' Report does not contain any qualification reservation or adverse mark.
Further the Auditors of the Company while performing their duties as such has notfound any fraud which was required to be reported to the Board of Directors or CentralGovernment.
22. Secretarial audit
Pursuant to provisions of Section 204 of the Act and rules mentioned thereunder theBoard of Directors of the Company appointed M/s. Agarwal S. and Associates PracticingCompany Secretary to conduct the Secretarial Audit of records and documents of theCompany for the financial year 20192020.
The Secretarial Audit Report for financial year 201920 does not contain anyqualification reservation or adverse remark. The Secretarial Audit Report is annexed tothe Board's Report at Annexure IV.
23. Related party transactions
During the financial year 20192020 the Company has given a term debt of Rs. 100crores to PTC Energy Limited (Group Company) for which the approval of the Audit Committeeand the Board as per provisions of Section 188 of the Act and SEBI Listing Regulations hasbeen taken. Apart from this the Company has not entered into any other related partytransactions which attracts the provision of Section 188 of the Act and SEBI ListingRegulations except as per details given in schedule of the Audited Accounts of theCompany. During the year the Company had not entered into any contract/ arrangement/transaction with related parties which could be considered material in accordance with thepolicy of the Company on materiality of related party transactions. The Policy onMateriality of Related Party Transactions and Dealing with Related Party Transactions asapproved by the Board is available on the Company's website at the link:
Further all the transactions are made in the ordinary course of business and on anarm's length basis.
Information on transactions with related parties pursuant to section 134(3) (h) of theAct read with rule 8(2) of the Companies (Accounts) Rules 2014 are given in Annexure V in Form AOC2 and the same forms part of this report.
24. Human Resources
Your Company treats its "human resources" as one of its most importantassets. Your Company continuously invests in attraction retention and development oftalent on an ongoing basis. A holistic assessment of manpower needs led to freshrecruitment at various level. A number of individual employee specific group of employeespecific and organizational wise programs that provide focused people attention arecurrently underway.
Your Company's thrust is on the development of talent internally through jobenlargement rotation and development.
Your Company's thrust on development of all levels of the employees has helped yourorganization achieve employee's loyalty and attachment to the Company. There is a hugeopportunity for all of us to learn practice and perform. Though the expectation from theemployees are realistic each employee get to work on challenging assignments and achance to learn innovate and perform. Handholding guidance & mentoring has a specialplace for a young team and organization. Sharing of knowledge and learning from theexperience of seniors has helped us grow steadily.
Your Company's focus of human resource development is at all levels of organizationincluding nonexecutive and support staff. The human resource development is criticalto implementation organizational strategy and to make organization humble and responsiveto the customers need. Employees are encouraged to participate and be part of theorganizational growth and development strategy. Lateral entry at different levels keepsthe organization vibrant.
25. Industrial Relations
Your Company has always maintained healthy cordial and harmonious industrial relationsat all levels. Despite competition the enthusiastic efforts of the employees have enabledthe Company to grow at a steady pace.
26. Risk Management Policy
PFS has put in place a comprehensive policy framework for management of risks whichincludes the following:
Risk Management Policy: The Risk Management Framework of PFS encompasses credit riskmarket risk as well as operational risk management. The Risk Management Policy evolvedunder the guidance of Risk Management Committee and duly approved by the Board ofDirectors is refined periodically based on emerging market trends and own experience. TheRisk Management Committee is headed by an Independent Director.
Asset Liability Management Policy: The objectives of Asset Liability
Management Policy are to align market risk management with overall strategicobjectives articulate current interest rate view and determine pricing mix and maturityprofile of assets and liabilities. The Asset Liability Management Policy involvespreparation and analysis of liquidity gap reports and ensuring preventive and correctivemeasures. It also addresses the interest rate risk by providing for duration gap analysisand control by providing limits to the gaps.
Foreign Exchange Risk Management Policy: The policy covers the management of foreignexchange risk related to existing and future foreign currency loans or any other foreignexchange risks derived from borrowing and lending. The objective of the policy is to serveas a guideline for transactions to be undertaken for hedging of foreign exchange relatedrisks. It also provides guiding parameters within which the Asset Liability ManagementCommittee can take decisions for managing the above mentioned risks.
Interest Rate Policy: Interest rate policy provides for risk based pricing of the debtfinancing by the Company. It provides the basis of pricing the debt and the manner inwhich it can be structured to manage credit risk interest rate risk and liquidity riskwhile remaining competitive.
Policy for Investment of Surplus Funds: The policy of investment of surplus funds i.e.treasury policy provides the framework for managing investment of surplus funds. Realizingthat the purpose of mobilization of resources in the Company is to finance equity as wellas loans to power sector projects the prime focus is to deploy surplus funds with a viewto ensure that the capital is not eroded and that surplus funds earn optimal returns.
Operational Risk Management Policy: The Operational Risk
Management Policy recognizes the need to understand the operational risks in generaland those in specific activities of the Company. Operational risk management is notunderstood as a process of eliminating such risks but as a systematic approach to managesuch risk. It seeks to standardize the process of identifying new risks and designingappropriate controls for these risks minimize losses and customer dissatisfaction due topossible failure in processes.
27. Employees' Stock Option Scheme
The Shareholders' approval was obtained at the AGM held on 27th October 2008 forintroduction of Employee Stock Option Plan at PTC India Financial Services Limited. Allthe ESOPs made under the Employees' Stock Option Scheme2008 have been surrenderedand as on date no claim is outstanding.
. Declaration given by Independent Directors
The Company has received necessary declaration from each Independent Director underSection 149(7) of the Act that he/she meets the criteria of independence laid down inSection 149(6) of the Act and Regulation 25 of the SEBI Listing Regulations. TheIndependent Directors have also confirmed that they have complied with the Company's codeof conduct for Directors and Senior Management Personnel.
All the Independent Directors of the Company have registered themselves in the databank maintained with the Indian Institute of Corporate Affairs Manesar (IICA'). Interms of Section 150 of the Act read with Rule 6(4) of the Companies (Appointment &Qualification of Directors) Rules 2014 the Independent Directors are required toundertake online proficiency selfassessment test conducted by the IICA within aperiod of one (1) year from the date of inclusion of their names in the data bank. TheIndependent Directors whosoever is required shall undertake the said proficiency test.
In the opinion of the Board all Independent Directors possess strong sense of integrityand having requisite experience qualification and expertise. For further details pleaserefer the Corporate Governance report.
Based on the declarations received from the Independent Directors the Board ofDirectors has confirmed that they meet the criteria of independence as mentioned underRegulation 16(1)(b) of the SEBI Listing Regulations and that they are independent of themanagement.
. Company's policy on appointment and remuneration of Senior Management and KMPs
As per the requirements of the Act the Board of Directors of your Company hasconstituted a Nomination and Remuneration Committee'. The Committee's role is to besupported by a policy for nomination of Directors and Senior Management Personnelincluding Key Managerial Personnel as also for remuneration of Directors Key ManagerialPersonnel Senior Management Personnel and other employees.
The Policy of the Company on Nomination and Remuneration & Board Diversity is alsoplaced on the website of the Company i.e. www.ptcfinancial. com and is also annexed tothis report at Annexure VI.
. Formal Annual Evaluation
The Board of Directors has carried out an annual evaluation of its own performanceBoard Committees and individual Directors pursuant to the provisions of the Act and thecorporate governance requirements as prescribed by SEBI Listing Regulations.
The Company pays performance linked remuneration to its WTDs/MD. It is ensured that theremuneration is determined in a way that there exists a fine balance between fixed andincentive pay. On the basis of Policy for Performance Evaluation of Independent Directorsa process of evaluation is being followed by the Board for its own performance and that ofits Committees and individual Directors. The performance evaluation process and relatedtools are reviewed by the "Nomination & Remuneration Committee" on a needbasis and the Committee may periodically seek independent external advice in relation tothe process. The Committee may amend the Policy if required to ascertain itsappropriateness as per the needs of the Company.
The performance of the Board was evaluated by the Board after seeking inputs from allthe Directors on the basis of the criteria such as the Board composition and structureeffectiveness of Board processes information and functioning etc. The performance of theCommittees was evaluated by the Board after seeking inputs from the Committee members onthe basis of the criteria such as the composition of Committees effectiveness ofCommittee meetings etc. The Board and the Nomination and Remuneration Committee reviewedthe performance of the individual Directors on the basis of the criteria such as thecontribution of the individual Director to the Board and committee meetings likepreparedness on the issues to be discussed meaningful and constructive contribution andinputs in meetings etc. In addition the Chairman was also evaluated on the key aspectsof his role.
In a separate meeting of Independent Directors performance of NonIndependentDirectors performance of the Board as a whole and performance of the Chairman wasevaluated taking into account the views of Executive Directors and NonExecutiveDirectors. The same was discussed in the Board meeting that followed the meeting of theIndependent Directors at which the performance of the Board its Committees andindividual Directors was also discussed. Performance evaluation of Independent Directorswas done by the entire Board excluding the Independent Director being evaluated.
31. Disclosure under the Sexual Harassment of Women at the workplace (PreventionProhibition and Redressal) Act 2013
An Internal Complaints Committee has been constituted to look into grievance/complaintsof sexual harassment lodged by employees as per Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013. Further no complaints were receivedduring the year and no complaint is pending on 31st March 2020.
32. Internal financial controls and Internal Auditor
The internal financial controls with reference to the Financial Statements arecommensurate with the size and nature of business of the Company.
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The scope and authority of the Internal Audit function isdefined by the Audit Committee. The Company has appointed M/s Grant Thornton India LLP asInternal Auditors of the Company. To maintain its objectivity and independence theInternal Auditor reports to the Audit Committee. The Audit Committee has theresponsibility for establishing the audit objectives and determines the nature timing andextent of audit procedures as well as the locations where the work needs to be carriedout.
The Internal Auditor monitors and evaluates the efficacy & adequacy of internalfinancial controls & internal control system in the Company that has been put in placeto mitigate the risks faced by the organization and thereby achieves its businessobjectives. Broadly the objectives of the project assigned are:
Review the adequacy and effectiveness of the transaction controls;
Review the operation of the Control Supervisory Mechanisms;
Recommend improvements in process management;
Review the compliance with operating systems accounting procedures and policies
The internal control and compliance are ongoing processes. Based on the findings andreport of the internal auditor process owners undertake corrective action that may berequired in their respective areas for further strengthening the controls and controlenvironment. Significant audit observations and corrective actions thereon are presentedto the Audit Committee. The internal auditors also independently carry out the designevaluation and testing of controls related to requirements of Internal Financial Controls.The evaluation of design effectiveness and testing of controls for various businessactivities processes and sub processes was carried out and found satisfactory.
33. Cost Auditors
Cost Audit is not applicable to the Company.
34. Details of Holding Subsidiaries Associates and Joint Ventures
Your Company continues to be the subsidiary of PTC India Limited. Further theCompany has two associate companies namely M/s. R.S. India Wind Energy Private Limited andM/s. Varam Bio Energy Private Limited.
The statement of performance and financial position of each of the associate companiesis given in Form AOC1 as Annexure VII.
The policy for determining material subsidiaries as approved may be accessed on theCompany's website following link:
35. Corporate Governance Report
The Company is committed to maintain the highest standards of corporate governance andadhere to the corporate governance requirements set out by Securities and Exchange Boardof India ("SEBI"). A separate report on Corporate Governance along withcertificate from M/s. MSKA & Associates Statutory Auditors on compliance with theconditions of Corporate Governance as stipulated under SEBI Listing Regulations isprovided as part of this Annual Report.
36. Management Discussion and Analysis
The Management Discussion and Analysis comprising an overview of the financial resultsoperations / performance and the future prospects of the Company form part of this AnnualReport.
37. Business Responsibility Report
Pursuant to the Regulation 34(2)(f) of the SEBI Listing Regulations the BusinessResponsibility Report describing the initiatives taken by the Company from anenvironmental social and governance perspective in the format as specified by the SEBI isgiven as Annexure VIII.
38. Particulars of Employees
The information pertaining to the remuneration and other details as required underSection 197 of the Act read with rule 5(1) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 are given below:
A. Particulars of Top 10 employees in terms of remuneration a. The ratio of theremuneration of each director to the median remuneration of the employees of the companyfor the financial year 201920; (Rs in lakhs)
Median Remuneration Ratio Name of Director Director's of employeesRemuneration
Dr Pawan Singh 96.87 22.31 4.34 times Shri Naveen Kumar 80.58 22.31 3.61 times
Note: In addition to the above Dr Ashok Haldia ExMD&CEO (retired on18.09.2018) was paid Rs 921057/ towards Performance Related Pay (PRP) for the FY201819 paid in FY 201920.
b. The percentage increase in remuneration of each director Chief Financial OfficerChief Executive Officer Company Secretary or Manager if any in the financial year;
Name %age Increase
Dr Pawan Singh 13.94% Shri Naveen Kumar # 23.10% Shri Sanjay Rustagi 10.58%Shri Vishal Goyal ## 27.95%
# Performance Related Pay (PRP) was paid in full in FY201920 & on proratebasis in FY201819 (joined on 25.09.2017).
## % increase in compensation also includes increase due to Earned Leave Encashment asper policy of the Company
c. The median remuneration of the employees has increased to Rs.22.31 lakhs duringFY201920 from Rs.19.26 lakhs during FY201819.
e. The average remuneration increased to Rs 27.78 lakhs in FY 201920 from Rs.25.41 lakhs in FY 201819.
f. The average remuneration of Key Managerial Personnel decreased to Rs 58.93 lakhs inFY201920 from Rs. 67.99 lakhs in FY201819. This decrease is because there werethree WTD in FY 201819 as against two WTD in FY 201920.
|Sl. No. Name & Designation ||Nature of Employment ||Remuneration Received (amount in Rs) ||Qualification and Experience ||Date of Commencement of Employment in the Company ||Age ||Last Employment ||% of Quantity of shares held in the Company ||If relative of any director or manager name of such director or manager |
|1 Pawan Singh ||Fixed Term ||9686851 ||MBA Ph D/ 37 years ||01.02.2012 ||58 yrs 6 months ||DirF in PTC India Financial Services Limited ||Nil ||NA |
|2 Naveen Kumar ||Fixed Term ||8058180 ||BSc (Engg); MBA; LLB/ 39 years ||25.09.2017 ||60 years 9 months ||Executive Director (Projects) in Power Finance Corporation Limited ||Nil ||NA |
|3 Vijay Singh Bisht ||Regular ||7712021 ||BE & MBA/ 35 years ||01.08.2008 ||57 years 1 month ||DGM in PFC ||Nil ||NA |
|4 Sitesh Kumar Sinha ||Regular ||7151799 ||B.E & PGDBM/ 21 years ||22.03.2011 ||44 years 3 months ||DGM in Lahmeyer International (India) Pvt Ltd ||Nil ||NA |
|5 Vishal Goyal # ||Regular ||5769192 ||CS LLB & MBA/ 15 years ||01.08.2008 ||39 yrs 8 months ||Co Secy cum Fin Manager in International PrintOPac Ltd ||Nil ||NA |
|6 Sanjay Rustagi ||Regular ||5034361 ||B.Com (Hons.) CA & CWA/20 years 7 months ||24.06.2016 ||45 yrs 6 months ||AVP in GE Capital Services India ||Nil ||NA |
|7 Devesh Singh ||Regular ||4885379 ||B.Com Dip in Business Finance & MBA/ 15 years ||03.10.2011 ||41 years 2 months ||Manager in PTC India ||Nil ||NA |
|8 Rohit Gupta ## ||Regular ||4179667 ||B.Com & MBA/ 13 years ||01.04.2010 ||35 years 4 months ||Junior Manager PTC India Ltd ||Nil ||NA |
|9 Shray Shikhar ||Regular ||4033097 ||BE & MBA/ 15 years ||15.10.2015 ||39 years 11 months ||Senior Associate Sembcorp Green Infra Ltd ||Nil ||NA |
|10 Ankur Bansal ||Regular ||3836544 ||BE & MBA / 15 years ||13.07.2018 ||38 years 5 months ||Associate Director KPMG ||Nil ||NA |
B. No employee was in receipt of remuneration of not less than one crore and two lakhrupees if employed throughout the year or eight lakh and fifty thousand per month in caseemployed for part of the year.
C. It is affirmed that:
I. The remuneration is as per the remuneration policy of the Company; and
II. There was no employee in the Company who was in receipt of the remuneration morethan that of its managing director/ whole time director and holds by himself or throughhis/ her relatives not less than two percent of equity shares.
39. Details of conservation of energy technology absorption
Since PFS is engaged in business of investment and lending activities particularsrelating to conservation of energy and technology absorption are not applicable to it.
40. Foreign Exchange earnings & outgo
The Company has incurred expenditure of Rs. 986.01 million (previous year Rs. 1009.69million) in foreign exchange during the financial year ended 31st March 2020.
41. Significant and material orders
There were no significant or material orders passed by Regulators or Courts orTribunals which impacts the going concern status and Company's future operations.
42. Transfer of Amounts to Investor Education and Protection Fund (IEPF)
Pursuant to the provisions of the Investor Education and Protection Fund (AccountingAudit Transfer and Refund) Rules 2016 the Company has already filed the necessary formand uploaded the details of unpaid and unclaimed amounts lying with the Company as on thedate of last AGM (i.e. 30th September 2019) with the Ministry of CorporateAffairs.
Your Directors state that no disclosure or reporting in respect of the followingitems as there were no transactions on these items during the year under review:
Issue of equity shares with differential rights as to dividend voting orotherwise;
Issue of shares (including sweat equity shares) to employees of the Companyunder any scheme; and
Neither Managing Director nor the Whole time Directors of the
Company receive any remuneration or commission from any of other Company.
No change in the nature of the business of the Company happened during the financialyear under review.
44. Compliance with Applicable Secretarial Standards
During the period under review the Company has complied with the provisions of the SS 1 (Secretarial Standard on meeting of the Board of Directors) & SS 2(Secretarial Standard on General Meeting) issued by the Institute of Company Secretariesof India and approved by the Central Government under Section 118 of the Act.
The Board of Directors acknowledge with deep appreciation the cooperation received fromits Directors Ministry of Power (MoP) Ministry of Finance (MoF) Reserve Bank of India(RBI) Securities and Exchange Board of India (SEBI) National Stock Exchange of IndiaLimited (NSE) BSE Limited (BSE) PTC India Limited (PTC) and other stakeholdersInternational Finance Corporation (IFC) DEG FMO and OeEB various Banks/FIs Consortiumpartners and Officials of the Company.
The Board also acknowledge with deep appreciation the cooperation received from itsDirectors who retire as Director during the year.
The Board also conveys its gratitude to the shareholders credit rating agencies forthe continued trust and confidence reposed by them in the Company. Your Directors wouldalso like to convey their gratitude to the clients and customers for their unwaveringtrust and support.
The Company is also thankful to the Statutory Auditor Internal Auditor and SecretarialAuditor for their constructive suggestions and cooperation.
We would also like to place on record our appreciation for the untiring efforts andcontributions made by the employees to ensure all round performance of your Company.