Your Directors present the 12th Annual Report and the audited financial statement for the financial year ended March 31 2020.
Financial Performance and State of Company's Affairs
The performance of the Company for the financial year ended March 31 2020 is summarised below: (Rs in crore)
|Particulars||March 31 2020||* March 31 2019|
|Total revenue||1602.91||2 002.59|
|Profit before depreciation and tax||(563.66)||104.98|
|Less: Depreciation & Amortisation||3.62||3.38|
|Profit before Tax||(567.28)||101.60|
|Net Profit after Tax||(375.32)||67.42|
|Amount transferred to||-||13.38|
|Special Reserve Fund|
*Previous year figures has been regrouped / reclassified wherever required.
The financial position of the Company is under severe stress on account of severe deterioration in our cash flows and adverse developments in the financial sector.
The Company has engaged with all its lenders for arriving at the debt resolution plan and majority of the lenders have also executed an inter-creditor agreement (ICA) dated July 6 2019 under the framework of the circular issued by the Reserve Bank of India on Prudential Framework for Resolution of Stressed Assets dated June 7 2019. The lenders at the steering committee meeting have appointed the resolution advisors cashflow monitoring agency forensic auditor valuers and legal counsel. The period of 180 days as envisaged in the Circular expired on January 3 2020 and the lenders agreed to extend the ICA till March 31 2020 and further to June 30 2020. The current operations of the Company are being directed reviewed and managed under the supervision of the lenders of the Company and such lenders are jointly deciding over the operational and strategic aspects of the Company including management of the cashflows through a cashflow monitoring agency. The Company subject to receipt of all applicable approvals is confident of implementing its Resolution Plan during Financial Year 2020-21.
Capital Adequacy Ratio
Your Company's Capital to Risk Assets Ratio (CRAR) calculated in line with the NHB Directions stood at 13 per cent well above the regulatory minimum requirement of 12 per cent.
Management Discussion and Analysis
Management Discussion and Analysis Report for the year under review as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 (the `Listing Regulations') and the Housing Finance Companies - Corporate Governance (National Housing Bank) Directions 2016 is presented in a separate section forming part of this Annual Report.
Resources and Liquidity
The Company's Net Worth as on March 31 2020 stood at Rs 1444.58 crore. The Company has raised Rs 124 crore during the financial year 2019-20 by issuance of Commercial Papers. As stated above the Lenders of the Company (Banks) have entered into an ICA for arriving at the debt resolution plan accordingly as directed by the Lead Bank the debt servicing by the Company is on a standstill leading to non-payment of interest / principal amount on NCDs Loans and other borrowings.
The Company's debt equity ratio as on March 31 2020 stood at 7.74:1.
During the year under review the Board of Directors have not recommended any dividend.
The Company has neither accepted nor renewed any fixed deposits during the year. There are no unclaimed deposits unclaimed / unpaid interest refunds due to the deposit holders or to be deposited to the Investor Education and Protection Fund as on March 31 2020.
Particulars of Loans Guarantees or Investments
The Company is registered as a Housing Finance Company with NHB. Thus the provision of Section 186 except sub-section (1) of the Act is not applicable to the Company.
The Company ceased to be a subsidiary of Reliance Capital Limited (RCap) with effect from March 5 2020 and the Company is now an associate of RCap. However there is no change in RCap's shareholding in the Company and also there is no change in the management and control of the Company.
The Company has received declarations from all the Independent Directors confirming that they meet the criteria of Independence as prescribed under the Act and the Listing Regulations.
The details of programme for familiarisation of Independent Directors with the Company nature of the industry in which the Company operates and related matters are put up on the website of the Company at the link https://www.reliancehomefinance. com/investor-relations.
The Company has appointed Mr. Sushilkumar Agrawal and Mr. Ashok Karnavat as Independent Directors on January 23 2020 subject to the approval of the members at the ensuing AGM. Mr. Ashok Karnavat will hold office as an Independent Director for a term of 5 (five) years. In terms of Regulation 17 of Listing Regulations Mr. Sushilkumar Agrawal will hold office as an Independent Director of the Company till he attains the age of seventy five years i.e. June 28 2023. The Company has received the notices in writing from members proposing their candidature for the office of Directors. The Company has received a Notice from a member under Section 160 of the Companies Act 2013 proposing the candidature of Mr. Sunil Wadikar as a Director of the Company liable to retire by rotation in place of Mr. Amit Bapna who retires by rotation at the ensuing AGM scheduled to be held on June 23 2020.
A brief resume of Directors proposed to be appointed at the ensuing AGM along with requisite details as stipulated under Regulation 36(3) of Listing Regulations is given in the section on Corporate Governance Report forming part of this Annual Report.
During the year under review the shareholders of the Company has appointed Ms. Chhaya Virani Ms. Rashna Khan Mr. Ashok Ramaswamy as Independent Directors of the Company for a period of 5 years with effect from April 1 2019 May 2 2019 and May 31 2019 respectively.
Lt Gen Syed Ata Hasnain (Retd) ceased to be the Director with effect from October 23 2019 and Mr. Ravindra Sudhalkar ceased to be an Executive Director with effect from January 24 2020 and he continues to be the Chief Executive Officer of the Company. Mr. Sachin Bora was appointed as a Non-executive Director w.e.f. December 3 2019 who held office as such till January 24 2020.
The Board place on record its deep sense of appreciation for the guidance and invaluable contribution made by the Directors during their tenure as Directors of the Company.
In the opinion of the Board the Independent Directors possess the requisite expertise and experience and are the persons of high integrity and repute. They fulfil the conditions specified in the Companies Act 2013 and the Rules made thereunder and are independent of the management.
Key Managerial Personnel
Mr. Vijesh B Thota was appointed as the Chief Financial Officer (CFO) and Mr. Pinkesh R. Shah ceased to be the CFO of the Company with effect from May 8 2020.
Evaluation of Directors Board and Committees
The Nomination and Remuneration Committee has devised a policy for performance evaluation of the individual Directors Board and its Committees which includes criteria for performance evaluation.
Pursuant to the provisions of the Act and Regulation 17(10) of the Listing Regulations the Board has carried out an annual performance evaluation of its own performance the Directors individually as well as the evaluation of the working of the Committees of the Board. The Board performance was evaluated based on inputs received from all the Directors after considering criteria such as Board composition and structure effectiveness of Board / Committee processes and information provided to the Board etc. A separate meeting of the Independent Directors was also held for the evaluation of the performance of non-independent Directors and performance of the Board as a whole. Pursuant to the Listing Regulations performance evaluation of independent directors was done by the entire board excluding the independent director being evaluated.
The Nomination and Remuneration Committee has also reviewed the performance of the individual Directors based on their knowledge level of preparation and effective participation in meetings understanding of their roles as directors etc.
Policy on appointment and remuneration for Directors Key Managerial Personnel and Senior Management Employees
The Nomination and Remuneration Committee of the Board has devised a policy for selection and appointment of Directors Key Managerial Personnel and Senior Management Employees and their Remuneration. The Committee has formulated the criteria for determining qualifications positive attributes and independence of a Director which has been put up on the Company's website at www.reliancehomefinance.com. The policy on the above is attached as Annexure - A.
Directors' Responsibility Statement
Pursuant to the requirements under Section 134(5) of the Act with respect to Directors' Responsibility Statement it is hereby confirmed that:
i. In the preparation of the annual financial statement for the financial year ended March 31 2020 the applicable Accounting Standards had been followed along with proper explanation relating to material departures if any;
ii. The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31 2020 and of the loss of the Company for the year ended on that date;
iii. The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
iv. The Directors had prepared the annual financial statement for the financial year ended March 31 2020 on a `going concern' basis;
v. The Directors had laid down proper internal financial controls to be followed by the Company and such financial controls are adequate and are operating effectively. The Company is taking constant steps to further strengthen the same; and
vi. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
Contracts and Arrangements with Related Parties
All contracts / arrangements / transactions entered into / by the Company during the financial year under review with related parties were on an arm's length basis and in the ordinary course of business.
There were no materially significant related party transactions which could have potential conflict with interest of the Company at large.
During the year the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.
All Related Party Transactions were placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee and the Board was obtained for the transactions which were of a repetitive nature. The transactions entered into pursuant to the omnibus approval so granted were reviewed and statements giving details of all related party transactions were placed before the Audit Committee and the Board of Directors on a quarterly basis.
The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website at the link https://www.reliancehomefinance.com/investor-relations. Your Directors draw attention of the members to Note No. 47 to the Financial Statement which sets out related party disclosures.
Material Changes and Commitments if any affecting the financial position of the Company
There were no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year and the date of this Report.
Meetings of the Board
A calendar of Meetings is prepared and circulated in advance to the Directors. During the year seven Board Meetings were held details of meetings held and attended by each Director are given in the Corporate Governance Report.
The Audit Committee of the Board consists of Independent Directors viz. Ms. Chhaya Virani Chairperson Ms. Rashna Khan Mr. Ashok Ramaswamy Mr. Sushilkumar Agrawal and Mr. Ashok Karnavat and Non-Independent Director Mr. Amit Bapna as Members. During the year all the recommendations made by the Audit Committee were accepted by the Board.
Auditors and Auditors' Report
M/s. Dhiraj & Dheeraj Chartered Accountants were appointed as Statutory Auditors of the Company for a term of 5 (five) consecutive years at the Annual General Meeting of the Company held on September 30 2019. The Auditors' in their Report to the Members have given the following qualified opinions and the response of your Directors with respect to them are as follows:-
(i) Opinion on proportion of total loan portfolio and concern about Company continuing as a Housing Finance Company. Response - During the financial year the proportion of non-housing loan is more than the proportion of housing loan; there has been substantial rundown / down sell of book. Also negligible disbursements have been made and the Company has discontinued fresh sanctioning and disbursement since May 2019.
(ii) Opinion on loan advanced under the `General-Purpose Corporate Loan' product with significant deviations to certain bodies corporate including group companies security creation and end use of funds. Response - During the financial year the Company had advanced loans under the `General Purpose Corporate Loan' product to certain bodies corporate including some of the group companies. All the lending transactions undertaken by the Company are in the ordinary course of business the terms of which are at arms' length basis and the same do not constitute transactions with related parties. However the Company's borrowers in some cases have undertaken onward lending transactions and it was noticed that the end use of the borrowings from the Company included borrowings by or repayment of financial obligations to some of the group companies. However the Company has discontinued sanctioning and disbursement under this product since May 2019.
Secretarial Audit and Secretarial Compliance Report
Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directors had appointed M/s. Aashish K. Bhatt & Associates Practicing Company Secretaries to undertake the Secretarial Audit of the Company. The Audit Report of the Secretarial Auditor is attached as Annexure - B.
Pursuant to circular No. CIR/ CFD/ CMD1/ 27/ 2019 dated February 8 2019 issued by Securities and Exchange Board of India (SEBI) the Company has obtained Secretarial Compliance Report from Practicing Company Secretaries on compliance of all applicable SEBI Regulations and circulars / guidelines issued thereunder and the copy of the same shall be submitted with the Stock Exchanges within the prescribed due date.
The observations and comments given by the Secretarial Auditor in their Report are self-explanatory and hence do not call for any further comments under Section 134 of the Act.
During the year under review the Company has complied with the applicable Secretarial Standards issued by The Institute of Company Secretaries of India.
Maintenance of Cost Records
The Central Government has not specified maintenance of cost records for any of the products of the Company under Section 148(1) of the Act.
As required under Section 134(3)(a) of the Act the Annual Return for the financial year 2018-19 and 2019-20 is put up on the Company's website and can be accessed at https://www. reliancehomefinance.com/investor-relations-Annual Return 2018-19 and https://www.reliancehomefinance.com/investor-relations - Annual Return 2019-20.
Particulars of Employees and related disclosures
(a) Employees Stock Option Scheme
Employees Stock Option Scheme (ESOS Scheme) was approved and implemented by the Company and Options were granted to the employees in accordance with guidelines applicable to ESOS Scheme. The Nomination and Remuneration Committee of the Board monitors the Scheme.
The existing ESOS Scheme is in compliance with the Act read with Rules made thereunder and the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations 2014 (SEBI Regulations).
The Company has received a certificate from the Auditors of the Company that the ESOS Scheme have been implemented in accordance with the Act and the SEBI Regulations and as per the resolution passed by the members of the Company authorising issuance of the said Options. The details as required to be disclosed under SEBI Regulations are put on the Company's website at https:// www.reliancehomefinance. com/investor-relations.
(b) Other Particulars
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules are provided in the Annual Report which forms part of this Report. Disclosures relating to the remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended are also provided in the Annual Report which forms part of this Report. However having regard to the provisions of first proviso to Section 136(1) of the Act the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. The said information is available for inspection up to the date of the Meeting on the website of the Company. Any member interested in obtaining the same may write to the Company Secretary and the same will be furnished on request.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
The Company is a Housing Finance Company and does not involve in any manufacturing activity most of the information as required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules 2014 are not applicable. However the information as applicable has been given in Annexure - C forming part of this Report.
The Company has adopted `Reliance Group - Corporate Governance Policies and Code of Conduct' which sets out the systems process and policies conforming to the international standards. The report on Corporate Governance as stipulated under Regulation 34(3) read with Para C of Schedule V of the Listing Regulations and the Housing Finance Companies - Corporate Governance (National Housing Bank) Directions 2016 as amended from time to time is presented in separate section forming part of this Annual Report.
A Certificate from M/s. Aashish K. Bhatt & Associates Practicing Company Secretaries confirming compliance to the conditions of Corporate Governance as stipulated under Para E of Schedule V of the Listing Regulations is enclosed to this Report.
Ombudspersons & Whistle Blower (Vigil Mechanism)
The Company has formulated an Ombudspersons & Whistle Blower (Vigil Mechanism) policy to address the genuine concerns if any of the Directors and employees the policy has been overseen by audit committee. No person has been denied for direct access to the Chairperson of the Audit Committee. The details of the same have been stated in the Report on Corporate Governance and the policy can be accessed on the Company's website.
The Company has laid down a Risk Management Policy defining Risk profiles involving Strategic Technological Operational Financial Credit Organisational Legal and Regulatory risks within a well-defined framework. The Risk Management Policy acts as an enabler of growth for the Company by helping its businesses to identify the inherent risks assess evaluate and monitor these risks continuously and undertake effective steps to manage these risks.
The Risk Management Committee comprises of Ms. Chhaya Virani as Chairperson and Ms. Rashna Khan Mr. Ashok Ramaswamy Mr. Sushilkumar Agrawal Mr. Ashok Karnavat and Mr. Amit Bapna as Members the Committee periodically reviews the robustness of the Risk Management Policy. The periodical update on the risk management practices and mitigation plan of the Company are presented to the Audit Committee and Board of Directors. The Audit Committee and Board periodically review such updates and findings and suggest areas where internal controls and risk management practices can be improved. More details on Risk Management indicating development and implementation of Risk Management Policy including identification of elements of risk and their mitigation are covered in Management Discussion and Analysis section which forms part of this Report.
Asset Liability Committee (ALCO) consisting of senior management executives monitors liquidity and interest rate risks of the Company. The functioning of ALCO is reviewed by the RMC which meets quarterly and reports to the Board of Directors.
To enable resilient models for working and conducting business during times of uncertainty and crisis the Company has a certified ISO 22301:2013 business continuity plan (BCP) in place since 2013. The Company manages risks and build business continuity plans that allow us to focus on resilience in our day-to-day business operations. The Company has invoked BCP from March 18 2020 after assessing the magnitude of the impact caused by the COVID-19 and are providing strategic support to ensure continuation of critical activities. The Company has ensured protecting employee's health & safety by implementing work-from-home and at the same time ensuring continuation of business operations. The businesses are greatly adjusting to the changing needs of its employees customers and suppliers while navigating the financial operational and cyber security challenges during & post COVID-19.
Compliance with provisions of Sexual Harassment of Women at workplace (Prevention Prohibition and Redressal) Act 2013
The Company is committed to uphold and maintain the dignity of women employees and it has in place a policy which provides for protection against sexual harassment of women at work place and for prevention and redressal of such complaints. During the year no such complaints were received. The Company has also constituted an Internal Complaint Committee under the Sexual Harassment of Women at workplace (Prevention Prohibition and Redressal) Act 2013.
Corporate Social Responsibility
The Company has constituted Corporate Social Responsibility (CSR) Committee in compliance with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules 2014. The CSR Committee has formulated a Corporate Social Responsibility Policy (CSR policy) indicating the activities to be undertaken by the Company. The CSR policy may be accessed on the Company's website at the link: https://www.reliancehomefinance.com/corporate-governance/policies.
As on March 31 2020 the CSR Committee consists of Ms. Chhaya Virani as Chairperson Mr. Ashok Karnavat and Mr. Amit Bapna as Members. The disclosures with respect to CSR activities is given in Annexure - D.
During the year 2019-20 the Company was required to spend an amount of Rs 3.23 crore on CSR activities. The Company is facing severe financial stress and accordingly the Lenders have entered into an Inter Creditor Agreement (ICA) in terms of RBI Circular No. DBR.No.BP.BC.45/21.04.048/2018-19 dated June 7 2019 on July 6 2019. As part of the same all cashflows of the Company are under direct supervision and control of the Lenders for the purpose of debt resolution. Further the Hon'ble Delhi High Court vide its Order dated November 20 2019 has placed restraint on the Company on incurring expenses other than in ordinary course of business. In view of the aforesaid the Company has not spent the amount on CSR activities this year. The Company is committed to spend on CSR in the long term.
Order if any passed by Regulators or Courts or Tribunals
Pursuant to Order dated November 20 2019 passed by the Hon'ble Delhi High Court in the matter of OMP(I) COMM. 419/2019 and OMP(I) COMM. 420/2019 the Company is prohibited to dispose off alienate encumber either directly or indirectly or otherwise part with the possession of any assets.
Internal Financial Controls and their adequacy
The Company has in place adequate internal financial controls across the organization. The same is subject to review periodically by the internal audit cell for its effectiveness. As regards the qualified opinion of auditors on the Internal Financial Control it is stated that the Company is taking constant steps to further strengthen its credit policy and make it more broad based well defined and robust and also to extend the scope of Internal Auditors to commensurate with the size and nature of Company's business and operations. Also pursuant to the qualifications in the Auditors' Report for 2018-19 the Company has discontinued fresh sanctioning and disbursement under the General-Purpose Corporate Loan product since May 2019.
Your Directors would like to express their sincere appreciation for the co-operation and assistance received from shareholders debenture holders bankers financial institutions regulatory bodies and other business constituents during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the commitment displayed by all executives officers and staff.
For and on behalf of the Board of Directors
|Chhaya Virani||Amit Bapna|
|May 22 2020|