South Asian Financial Exchange Limited
Your Directors have pleasure in presenting the Twelfth Annual Report
together with the Audited Accounts of the Company for the year ended 31st
AMALGAMATION OF ONLINE FINANCIAL SERVICES LIMITED
The scheme of Amalgamation of Online Financial Services Ltd. (ONLINE) with
your Company, which was approved at the Extra Ordinary General Meeting of
the Company held on 9th March,1998 was approved by the High Court of
Judicature at Madras vide its Order dated 24th April, 1998 and the
Amalgamation is effective from 1st April, 1997. Accordingly, the Annual
accounts being presented to the Members are the merged accounts in which
the accounts of ONLINE for the year ended 31st March, 1998 have been
incorporated. As provided in the scheme of Amalgamation, the allotment of
the Company shares to erstwhile shareholders of ONLINE was made on 21st
REVIEW OF OPERATIONS
Your Company, as a matter of its corporate policy, has been extendiny
Lease/Hire Purchase finance mainly to the corporate segment. On account of
the liquidity constraints faced by this sector, there were defaults in
repayment of lease and hire purchase instalments resulting in significant
increase in the level of Non Performing Assets (NPAs) of your Company for
the year ended 31 st March,1998.
The low collections from the corporate segment together with the reduction
in Fixed Deposit base adversely affected the liquidity position of the
Company. Accordingly, your Company was forced to reduce the size of its
business, resulting in increase in the NPAs as a percentage of total
business done during the year under reference.
In January, 1998, Reserve Bank of India (RBI) had prescribed stricter
prudential norms with regard to provisioning for NPAs, income recognition,
capital adequacy ratio, etc. The cumulative problems faced by Non Banking
Finance Companies (NBFCs) during the last two years resulted in your
Company suffering a loss of Rs.9 crores for the year ended 31st March,
Your Company is seized of the problems and is exploring various
alternatives of its revival including the identification of a new Partner
who could help your Company to survive in a more competitive environment.
Your Directors are confident that with an improvement in the economy a
major portion of the overdues will be recovered and the provisions made
during the year under reference in accordance with the RBI guidelines
Your Company has recently reorganised its existing manpower with a view to
improving the collection performance. Your Company has also drawn up
strategies to downsize the business levels, reduction of overheads, etc.,
to improve the profitability and liquidity in the light of the changing
Your Directors are pleased to inform that the Foreign Investment Promotion
Board (FIPB), vide its letter No.3/ 69/SIA/NFC/97-NRI dated August 4, 1998,
has approved the investment of 12,50,000 - 7% Cumulative Convertible
Preference Shares of Rs.100/ - each aggregating Rs 12,50,00,000/- by Maika
Holdings Berhad, Malaysia, (MAIKA) in your Company. Despite the South East
Asian crisis, your Directors re confident of pursuing MAIKA to go through
In view of the losses incurred for the year ended 31st March, 1998, your
Board of Directors considered it prudent not to recommend dividend for the
The new regulatory framework issued by RBI also contained severe
restrictions on the mobilisation of deposits by the NBFCs. Your Company is
well positioned to meet the revised guidelines on deposits within the time
stipulated by RBI. The fixed deposits held on 31st March, 1998 stood at
Rs.3.81 crores (previous year Rs.7.77 crores). At the close of the year
there were deposits aggregating Rs.1.22 crores remaining unclaimed or due
to be renewed and efforts are being made to obtain the depositors
instructions. With continued apathy of depositors towards NBFCs, the refund
requests were in far excess of the renewals. As a result of this trend,
there had been a delay to meet the depositors' obligation on due dates.
Your Company, in fact, prematurely encashed investment in Government
Securities to pay off refund requests from depositors resulting in a
shortfall in the maintenance of liquid assets.
During the year, Messrs V. Srinivasan, Ram V. Tyagarajan, Manikam
Ramaswamy, S. Nandagopal and P.C.D. Nambiar resigned from the Board. The
Board places on record its appreciation of the valuable services rendered
by them during their tenure on the Board of the Company.
Mr. V.S. Narasimhan was appointed as an additional director, pursuant to
Section 260 of the Companies Act,1956. He vacates the office at the ensuing
Annual General Meeting and a Notice has been received from a Member
proposing his appointment on the Board of your Company.
Mr. M Narayanamurthi was appointed as a Managing Director for a period of
five years with effect from 1st July, 1998 at the Board Meeting held on
29th June, 1998. Mr M Narayanamurthi is also the Managing Director of
Premier Housing and Industrial Enterprises Limited .
Mr M Narayanamurthi, retires by rotation and is eligible for re-
M/s. Price Waterhouse, Chartered Accountants, Chennai, retire from the
office of Auditors and are eligible for re-appointment as Auditors of the
Company till the conclusion of the next Annual General Meeting.
The Auditors observations in paragraphs 2.1,2.2 and 2.3 of the Auditors'
Report refer to note nos.3,4 and 5 on Schedule 16 of the Accounts and are
self explanatory. With regard to the observation in paragraph 2.4, the
Company has obtained a legal opinion and is confident of winning the case
on appeal and there may not be any tax liability on this account. With
regard to paragraphs 2.5 and 2.6, your Directors are confident of
recovering the monies due and the requisite steps have already been
initiated in this direction.
PARTICULARS OF EMPLOYEES
Information as per Section 217(2A) of the Companies Act, 1956 read with
Companies (Particulars of Employees) Rules, 1975, forms part of this
report. However, as per the provisions of Section 219(1)(b) (iv) of the
Companies Act,1956, the Report and Accounts are being sent to all
shareholders of the Company excluding the statements of particulars of
employees under Section 217(2A) of the Act. Any shareholder interested in
obtaining a copy of the said statement may write to the Company Secretary
at the Registered Office of the Company.
INFORMATION AS PER SECTION 217(1)(e) OF THE COMPANIES ACT,1956
The Company has no activity relating to conservation of energy or
During the year under reference, the Company did not have any foreign
exchange earnings or outgo.
APPRECIATION Your Directors greatly appreciate the excellent assistance and
support of the Banks and Financial Institutions. Your Directors also wish
to place on record their appreciation of the devoted service rendered by
the employees of the Company at all levels.
On behalf of the Board
Chennai 600 008 M. Narayanamurthi
30th November 1998 Managing Director