TO THE MEMBERS
Your Directors have pleasure in presenting the Thirty Eighth Annual Report of theCompany together with the audited financial statements for the year ended March 31 2021.
1. (a) FINANCIAL SUMMARY OR HIGHLIGHTS/ PERFORMANCE OF THE COMPANY
| || ||(Rs in million) |
|Particulars ||Year ended 31.03.2021 ||Year ended 31.03.2020 |
|Profit before Interest Depreciation & Tax ||35.77 ||7.99 |
|Less: Finance Charge ||0.23 ||0.35 |
|Profit before Depreciation & Tax ||35.54 ||7.64 |
|Less: Depreciation / Amortization ||4.38 ||5.54 |
|Profit before Tax ||31.17 ||2.10 |
|Less: Tax Expenses Current / Earlier years ||2.99 ||1.02 |
|Less : Deferred Tax for the year ||26.02 ||(0.25) |
|Profit after Tax ||2.16 ||1.33 |
|Profit brought forward from earlier year : ||107.70 ||106.37 |
|Profit transfer from OCI Reserve: ||(10.88) ||- |
|Profit available for Appropriation ||98.98 ||107.70 |
|APPROPRIATIONS || || |
|Dividend including Dividend Tax ||- ||- |
|Profit carried to Balance Sheet ||98.98 ||107.70 |
(b) FINANCIAL AND OPERATIONAL PERFORMANCE
Operating profit (PBDIT) of the Company for the year was Rs 35.77 million (previousyear Rs7.99 million) an increase of 347.80 % over previous year. Profit after tax for theyear was Rs 2.16 million (Rs1.33 million in the previous year) an increase of 61.85 % overprevious year . Net worth of the Company as on March 31 2021 was Rs 1048.77 million(previous year Rs 1027.49 million).
The paid up Equity Share Capital as on March 31 2021 stood at Rs 55850000/- dividedinto 5585000 equity shares of Rs.10/- each.
In view of spread of second wave of COVID 19 and the likelihood of third wave comingyour Board of Directors consider it prudent to conserve cash and do not recommend anydividend for the year under review.
(e) TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the applicable provisions of the Companies Act 2013 read with IEPFAuthority (Accounting Audit Transfer and Refund) Rules 2016 all unpaid or unclaimeddividends are required to be transferred by the Company to the IEPF established by theCentral Government after the completion of seven years. Further according to the IEPFAuthority (Accounting Audit Transfer and Refund) Rules 2016 the shares in respect ofwhich the dividend has not been paid or claimed by the shareholders for seven consecutiveyears or more shall also be transferred to the demat account created by the IEPFAuthority. Accordingly the Company has transferred the unclaimed and unpaid dividend andshares.
Attention is also being drawn that the unclaimed/unpaid dividend for the Financial year2013-14 is due for transfer to Investor Education and Protection Fund during October/November 2021. In view of this Members of the Company who have not yet encashed theirdividend warrant(s) or those who have not claimed their dividend amounts may write to theCompany/ Company's Registrar and Transfer Agents M/s Maheshwari Datamatics PrivateLimited.
2. MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis of financial condition and of operations of theCompany for the year under review as required under Regulation 34 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 with the Stock Exchanges isgiven in the part on Corporate Governance elsewhere in the Annual Report marked as"Annexure A".
The Company continues to focus on judicious management of its working capital. TheCompany's long term debt as on 31st March 2021 was Rs. 1.76 million (Previous Year Rs.3.43 million )
The Company has not accepted any deposit falling within the ambit of Section 73 of theCompanies Act 2013 and The Companies (Acceptance of Deposits) Rules 2014 from thepublic.
3.2 PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The particulars of loans guarantees and investments have been disclosed in thefinancial statements.
4. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations.
The Internal Audit monitors and evaluates the efficacy and adequacy of internal controlsystem in the Company its compliance with operating systems accounting procedures andpolicies of the Company and its subsidiary. Based on the report of internal auditorscorrective action is undertaken in respective areas and thereby controls are strengthened.Significant audit observations and corrective actions taken thereon are presented to theAudit Committee of the Board.
5. SUBSIDARY COMPANY
As on March 31 2021 there is one wholly-owned subsidiary Company namely SMIFSCapital
Services Limited. Statement required under Section 129(3) of the Companies Act 2013 inrespect of the Subsidiary Company is attached herewith.
| || ||(Rs in million) |
|Particulars ||Year ended 31.03.2021 ||Year ended 31.03.2020 |
|Profit/(Loss) before Interest Depreciation & Tax ||0.71 ||(0.50) |
|Less: Finance Charge ||- ||- |
|Profit/(Loss) before Depreciation & Tax ||0.71 ||(0.50) |
|Less: Depreciation / Amortization ||0.05 ||0.06 |
|Profit/ (Loss) before Tax ||0.66 ||(0.56) |
|Less : Tax Expenses ||0.01 ||0.04 |
|Profit/ (Loss) after Tax ||0.65 ||(0.60) |
|Profit/(Loss) brought forward from earlier years : ||(6.04) ||(5.44) |
|Profit/(Loss) carried to Balance Sheet ||(5.39) ||(6.04) |
6. YEAR IN RETROSPECT AND FUTURE OUTLOOK
In view of the Pandemic spreading in the countries the Central Government imposednationwide lockdown in second half of March 2020. However beginning from May/June 2020the stringent lockdown conditions were gradually eased as per the phased reopeningguidelines in order to facilitate gradual normalisation of economic activity.
While the subsequent initial uptick in high frequency indictors such as power autosales PMI GST Collections and E-Way Bills was attributed to pent-up demand followed byheightened demand due to the festive season the positive growth momentum sustained overthe months thus reflecting a V-shaped recovery. Manufacturing PMI remained in theexpansionary zone for seven consecutive months while revenues from GST collections tillMay 2021 remained above the Rs1tn mark for 8 months in a row. The continued improvement inhigh frequency and forward indicators supported by a favourable monetary and fiscalpolicy framework coupled with recovering domestic & external demand conditionsimproved the short- and medium-term growth outlook. However the onslaught of Second Waveof the Pandemic from the beginning of April 2021 have again slowed down the economy andvarious states have resolved to lockdowns to curb the spread of the virus.
The stock market hit a multi-year low valuation at the end of March 2020 with thetrailing P/B at 1.7x and market cap/GDP at 49%. From there the market registered a swiftrecovery and has almost doubled from the trough not very different from the rest of theworld. Among the three domestic factors that helped the recovery in share prices was thestrong policy action from the government targeted at reviving private corporate profitsbetter-than-expected management of the pandemic resulting in less than the global averagecases and fatality rates and strong corporate action through the pandemic by way of costcutting initiatives. It is believed that the economy is at an inflection point that marksthe start of a new virtuous growth cycle post first quarter of financial year 2021-22.While rural consumption has remained resilient urban consumption started graduallypicking up pace. The improvement in domestic demand coupled with a pickup in global demandand favourable policy response from the government in turn set the stage for a revival inthe capex cycle. It is expected public capex will gather pace in the coming months andsubsequently crowd in private investments as well. As such it is estimated India's GDPwould grow at around 9.3% for FY 2022 and 7.9% for FY 2023. However the key risk hasagain arisen from COVID-19 related factors such as resurgence in cases mutation in thevirus and issues with efficacy and distribution of vaccines. Apart from this risks areemerging from the domestic and external side: namely the 1) a faster-than expected rise ininflation which could create pressure for preemptive tightening; 2) increase in creditstress domestically and wider credit spreads leading to tighter financial conditionsstalling growth recovery; 3) slowdown in global growth; 4) risk aversion in global capitalmarkets faster-than-anticipated tightening in global financial conditions; and 5) sharpup move in global commodity prices. With accelerating earnings and reasonable relativevaluations strong policy traction Indian economy should perform well once second wave ofpandemic comes under control. In spite of Pandemic seriously affecting our business andour clients your company has managed to earn reasonable profits for the year underreview. The second wave has impacted our business and our clients. This may adverselyaffect our performance in the financial year 2021 - 2022.
Your Company is registered as Category I Merchant Banker and executes assignments inareas of Mergers and Acquisitions Debt Syndication Placement of Equity Shares and Bonds.
7. LISTING OF THE SECURITIES OF THE COMPANY
Equity Shares of your Company continue to be listed on BSE Limited and The CalcuttaStock Exchange Limited and the listing fees for the year 2020-21 have been paid and 99.13per cent of the equity shares of your Company are held in dematerialized form.
8. DIRECTOR'S RESPONSIBILITY STATEMENT
Pursuant to the requirement under section 134(3)(c) of the Companies Act 2013 withrespect to Directors' Responsibility Statement it is hereby confirmed that:
(a) in the preparation of the Annual Accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures.
(b) the directors have selected such accounting policies and applied them consistentlyand made judgement and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and theprofit and loss of the company for that period.
(c) the directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provision of this act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities.
(d) the directors have prepared the annual accounts on a going concern basis.
(e) the directors have laid down internal financial control to be followed by thecompany and that such internal financial control are adequate and were operatingeffectively and
(f) the directors have devised proper systems to ensure compliance with the provisionof all applicable laws and that such system were adequate and operating effectively.
9. RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the financial year wereon an arm's length basis and were in the ordinary course of business. There are nomaterially significant related party transactions made by the Company with PromotersDirectors Key Managerial Personnel or other designated persons which may have a potentialconflict with the interest of the Company at large.
All Related Party Transactions are placed before the Audit Committee as also the Boardfor approval. Prior omnibus approval of the Audit Committee is obtained on a yearly basisfor the transactions which are foreseen and are of repetitive nature. The transactionsentered into pursuant to the omnibus approval so granted are of audited and a statementgiving details of all related party transactions is placed before the Audit Committee andthe Board of Directors for their approval on a yearly basis. The policy on Related PartyTransactions as approved by the Board is uploaded on the Company's website. None of theDirectors have any pecuniary relationship or transactions vis--vis the Company.
10. VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES
The Company has a Vigil Mechanism to deal with instance of fraud and mismanagement ifany. The details of the Vigil Mechanism is explained in the Corporate Governance Reportand also posted on the website of the Company.
11. DISCLOSURE OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONREDRESSAL) ACT 2013
In accordance with The Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013 to provide for the effective enforcement of the basic human rightof gender equality and guarantee against sexual harassment and abuse more particularlyagainst sexual harassment at work place your Company has a Policy on Prevention of SexualHarassment at the Workplace duly approved by the Board of Directors.
During the year no complaint was reported under The Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013.
12. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE
EARNING AND OUTGO
Particulars required under Section 134(3)(m) of the Act read with Rule 8 of theCompanies (Accounts) Rules 2014 under the heads (a) conservation of energy; and (b)technology absorption are not applicable to the Company.
During the year there was no foreign exchange earnings (previous year nil). ForeignExchange outgo during the year aggregated to Nil. (previous year Nil).
Composition of the Board of Directors of your Company fulfills the criteria fixed byRegulation 17 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015with fifty per cent of the Directors being Independent Directors. Your Board comprises of6 (six) directors out of which 3 (three) are independent directors.
Mr. Utsav Parekh is the Non- Executive Chairman. The three-year term of Mr. Kishor Shahas Managing Director ended on March 31 2021 and on recommendation of the Nomination andRemuneration Committee and approval of the Board of Directors in its meeting held onFebruary 12 2021 subject to the same being ratified by the members at the ensuing AnnualGeneral Meeting by passing a Special Resolution Mr. Kishor Shah has been re-appointedManaging Director of the Company with effect from April 1 2021 for a further period of 3(three) years. Terms of appointment include payment of managerial remuneration as per theprovisions of Sections
196 197 203 and other applicable provisions if any read with Schedule V Part IISection II (A) to the Companies Act 2013.
Mr. Utsav Parekh Non- Executive Chairman retires by rotation in accordance with therequirements of Companies Act 2013 and Articles of Association of the Company. He beingeligible offers himself for re-appointment.
Brief resume of Mr. Utsav Parekh nature of his expertise in specific functional areasnames of companies in which he holds directorships and/or memberships/chairmanships ofcommittees of Board his shareholdings are furnished in section on Corporate Governanceelsewhere in the Annual Report.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.
13.1 ANNUAL PERFORMANCE EVALUATION OF THE BOARD
Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Board has carried out an annualperformance evaluation of its own performance the directors individually Key ManagerialPersonnel (KMP) Senior Management as well as the evaluation of the working of its AuditNomination & Remuneration Committees and Stakeholders Relationship Committee. Themanner in which the evaluation has been carried out has been explained in the CorporateGovernance Report.
13.2 NOMINATION & REMUNERATION POLICY
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration the contents of which are placed on the website of the Company atwww.smifscap.com
During the year five Board Meetings and four Audit Committee Meetings were convened andheld the details of which are given in the Corporate Governance Report. The interveninggap between the Meetings was within the period prescribed under the Companies Act 2013.
14.1 STATUTORY AUDITORS
The Statutory Auditor of the Company have changed their constitution and name from M/sS K Agarwal and Co to M/s S K Agarwal and Co Chartered Accountants LLP w.e.f. 31stDecember 2020 and further their amended Firm's Registration No. which would be E300272 andLLP Registration No. would be AAV-2926.
M/s S K Agarwal and Co Chartered Accountants LLP Statutory Auditors of the Companyhold office in accordance with the provisions of the Companies Act 2013.
M/s S K Agarwal and Co Chartered Accountants LLP were appointed as the StatutoryAuditors of the Company for a term of 4 years from the conclusion of the Thirty FifthAnnual General Meeting until the conclusion of the Thirty Nineth Annual General Meeting ofthe Company subject to the ratification by the Members at every Annual General Meeting at a remuneration to be decided by the Board of Directors.
Since the first proviso of Section 139 has been omitted w.e.f. May 7 2018 by theCompanies (Amendment) Act 2017 which requires companies to place the appointment ofStatutory Auditors for ratification before the members at every Annual General Meeting ofthe Company the ratification of appointment of M/s S K Agarwal and Co CharteredAccountants LLP as the Statutory Auditors of the Company will not be placed before theMembers at the ensuring Annual General Meeting of the Company.
The observation made in the Auditor's Report are self-explanatory and therefore do notcall for any further comments under Section 134(3)(f) of the Act.
14.2 SECRETARIAL AUDIT
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hadappointed Mr. Sadhansu Sekhar Panigrahi Company Secretary in Practice to undertake theSecretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as"Annexure B".
15. AUDITORS' QUALIFICATION
(i) STATUTORY AUDITORS' QUALIFICATIONS
Qualifications contained in the Auditors' Report if any have been dealt with in theNotes to financial statements and are self-explanatory.
(ii) SECRETARIAL AUDITORS' QUALIFICATIONS
Qualifications contained in the Secretarial Auditors' Report if any have been dealtwith in the Notes to Form MR-3 and are self-explanatory.
16. PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 read with Rule 5 ofThe Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company is given in "Annexure C".
17. EXTRACT OF ANNUAL RETURN
Extract of Annual Return in Form MGT-9 is available at the website of the Company atwww.smifscap.com
18. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant material orders passed by the Regulators/Courts which wouldimpact the going concern status of the Company and its future operation
Your Directors express their sincere appreciation of the co-operation and assistancereceived from the shareholders bankers regulatory bodies and other business constituentsduring the year under review.
| ||For and on behalf of the Board of Directors |
|Regd. Office: || |
|Vaibhav' (4F) 4 Lee Road ||Sd/- |
|Kolkata - 700 020 ||(UTSAV PAREKH) |
| ||Chairman |
|The 29th day of June 2021 ||(DIN No. 00027642) |