BAJAJ HOLDINGS Directors Report

Directors'''' Report


The directors present their Seventy Second Annual Report and audited financial statements for the year ended 31 March 2017.


Financial results


The financial results of the Company are elaborated in the Management Discussion and Analysis Report.


The highlights of the Standalone Financial Results are as under:


(RS, In Crore)





































































Particulars



FY2017



FY2016



Total revenue



888.43



1,401.28



Total expenses



215.94



42.72



Profit before tax



672.49



1,358.56



Tax expense



134.31



88.05



Profit for the year



538.18



1,270.51



Transfer to Reserve fund u/s 45-IC(1) of Reserve Bank of India Act, 1934



107.64



254.10



Transfer to General reserve



53.82



127.05



Balance carried to Balance Sheet



376.72



454.03



Earnings per share (H)



48.4



114.2



Proposed dividend (%)



325%



325%



Dividend and tax thereon



435.33



435.33



The highlights of the Consolidated Financial Results are as under:


(RS, In Crore)







































Particulars



FY2017



FY2016



Total revenue



850.08



476.69



Profit before tax



630.26



429.90



Share of profit after tax of associates



1,977.50



1,923.65



Profit for the year



2,473.19



2,265.24



Earnings per share (H)



222.2



203.5



Dividend


The directors recommend for consideration of the shareholders at the ensuing annual general meeting, payment of dividend of RS, 32.50 per equity share (325%) for the year ended 31 March 2017. The amount of dividend and the tax thereon to the extent applicable aggregate to RS, 435.33 crore.


For the year ended 31 March 2016, the total dividend paid (including interim dividend), was also RS, 32.50 per equity share of RS, 10 each (325%) and the total dividend and the tax thereon to the extent applicable also aggregated to RS, 435.33 crore.


Share Capital


The paid up equity share capital as on 31 March 2017 was RS, 111.29 crore. There was no public issue, rights issue, bonus issue or preferential issue etc. during the year. The Company has not issued shares with differential voting rights, sweat equity shares nor has it granted any stock options.


Registration as a Systemically Important Non-Deposit taking NBFC


The Company has been registered with the Reserve Bank of India as a Non-Banking Financial Institution (Non-Deposit taking). In terms of provisions of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, the Company is categorized as a ''''Systemically Important Non-Deposit taking Non-Banking Financial Company''''. The Company has not accepted public deposits during the year under review. The Company has formed Risk Management Committee and Asset Liability Management Committee in terms of the applicable directions/regulations of the Reserve Bank of India in this regard.


Operations


Detailed information on the operations of the Company and details on the state of affairs of the Company are covered in the Management Discussion and Analysis Report.


Extract of annual return


The extract of annual return as provided under sub-section (3) of section 92 of the Companies Act, 2013, in the prescribed form MGT-9 is annexed to this Report.


Number of meetings of the Board


There were six meetings of the Board held during the year. Detailed information is given in the Corporate Governance Report.


Directors'''' responsibility statement


As required under clause (c) of sub-section (3) of section 134 of the Companies Act, 2013, directors, to the best of their knowledge and belief, state that -


- in the preparation of the annual accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;


- 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 at the end of the financial year and of the profit and loss of the Company for that period;


- the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;


- the directors had prepared the annual accounts on a going concern basis;


- the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls were adequate and were operating effectively; and


- the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively.


Details in respect of frauds reported by auditors under section 143(12)


During the year under review, there were no frauds reported by the auditors to the Audit Committee or the Board under section 143(12) of the Companies Act, 2013.


Declaration by independent directors


The independent directors have submitted the declaration of independence, as required pursuant to section 149(7) of the Companies Act, 2013 stating that they meet the criteria of independence as provided in section 149(6) of the said Act.


Directors'''' Remuneration Policy and criteria for matters under section 178


Information regarding Directors'''' Remuneration Policy and criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178 are provided in the Corporate Governance Report.


Particulars of loans, guarantees or investments


Information regarding loans, guarantees and investments covered under the provisions of section 186 of the Companies Act, 2013 are detailed in the financial statements.


Related party transactions


No related party transactions (RPTs) were entered into by the Company during the financial year, which attracted the provisions of section 188 of the Companies Act, 2013.


There being no ''''material'''' related party transactions as defined under regulation 23 of the SEBI Listing Regulations, 2015, there are no details to be disclosed in Form AOC-2 in that regard.


During the year 2016-17, pursuant to section 177 of the Companies Act, 2013 and regulation 23 of the SEBI Listing Regulations, 2015, all RPTs were placed before the Audit Committee for its approval.


The Policy on RPTs as approved by the Board is uploaded on the Company''''s website www.bhil.in


Material changes and commitments


There have been no material changes and commitments, affecting the financial position of the Company, which have occurred between the end of the financial year of the Company and the date of this Report.


Conservation of energy, technology absorption, foreign exchange earnings and outgo


The Company primarily being an investment company and not involved in any industrial or manufacturing activities, has no particulars to report regarding conservation of energy and technology absorption as required under section 134 of the Companies Act, 2013 and Rules made there under. During the year under review, the Company did not have any foreign exchange earnings, whereas the foreign exchange outgo amounted to RS, 1.30 crore.


Risk Management Policy


Information on the development and implementation of a Risk Management Policy for the Company including identification therein of elements of risk, which in the opinion of the Board may threaten the existence of the Company, is given in the Corporate Governance Report.


Corporate Social Responsibility (CSR)


Detailed information on the Corporate Social Responsibility Policy developed and implemented by the Company on CSR initiatives taken during the year pursuant to section 135 of the Companies Act, 2013 is given in the Annual Report on CSR activities.


Formal annual evaluation of the performance of the Board, its Committees and Directors


Information on the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual directors is given in the Corporate Governance Report.


Subsidiary/joint venture/associates


Following are the companies, which are subsidiary/joint venture/associate companies of the Company:


































Name of the company



% shareholding of BHIL and its subsidiary



Status



Bajaj Auto Ltd.



31.54%



Associate



Bajaj Finserv Ltd.



39.29%



Associate



Bajaj Auto Holdings Ltd.



100%



Subsidiary



Maharashtra Scooters Ltd.



24%



Joint Venture



Detailed information on the performance and financial position of subsidiary, associates and joint venture of the Company is covered in the Management Discussion and Analysis Report.


As regards Maharashtra Scooters Ltd. (MSL), a company jointly promoted by the Company (erstwhile Bajaj Auto Ltd.) and Western Maharashtra Development Corporation Ltd. (WMDC), WMDC had offered to sell its 27% shareholding in MSL and the Company had confirmed its willingness to purchase these shares.


As reported in the past, in the matter of Appeal No.153 of 2010, concerning the Award of the Arbitrator between BHIL and WMDC, passed on 14 January 2006, the Division Bench of the Hon''''ble Bombay High Court had pronounced its Order on 8 May 2015, inter alia, stipulating the following:


1. The Company''''s Appeal No.153 of 2010 is allowed and the impugned order of the Single Judge dated 15 February 2010 is set aside in so far as it set aside the arbitral Award on the ground that clause 7 of the Protocol Agreement was in the nature of a restriction on free transferability of the shares and was therefore contrary to section 111A of the Companies Act, 1956.


2. The Cross Objections filed by the Respondent (WMDC) have no merit and therefore stand dismissed.


3. In the peculiar circumstances of the case and in the interest of justice, the Appellant (BHIL), for the purchase of the 3,085,712 equity shares of MSL, shall pay to the Respondent (WMDC) a sum of RS, 46.79 crore (calculated at Arbitral Award price of RS, 151.63 per share) together with simple interest @ 18% per annum from 14 January 2006 (date of Arbitral Award) till payment.


WMDC has subsequently filed a Special Leave Petition (SLP) in the Supreme Court on


15 September 2015 which is registered as SLP No.- 27194-95 of 2015, against the impugned Division Bench judgment of the Hon''''ble Bombay High Court dated 8 May 2015, challenging the judgment amongst other grounds, on the basis of validity of the Protocol Agreement in the context of section 111A of the Companies Act, 1956, prescribing free transferability of shares.


The above mentioned SLP filed by WMDC is currently pending before the Supreme Court.


Directors and Key Managerial Personnel-changes


Sanjiv Bajaj was appointed as Managing Director of the Company w.e.f. 1 April 2012 for a period of five years, up to 31 March 2017. The Board at its meeting held on 16 March 2017, approved the re-appointment of Sanjiv Bajaj as Managing Director for a fresh term of five years and fixed his remuneration at its meeting held on 18 May 2017, based on the recommendations of the Nomination and Remuneration Committee, subject to necessary approvals of the shareholders. The matter is being separately put up for shareholders'''' approvals through the Notice of the ensuing seventy second annual general meeting of the Company.


There was no change in the non-executive directors and other Key Managerial Personnel during the year under review.


In light of the provisions of the Companies Act, 2013, Madhur Bajaj retires from the Board by rotation this year and being eligible, offers himself for re-appointment. The information as required to be disclosed under regulation 36(3) of the SEBI Listing Regulations, 2015 in case of re-appointment of the director is provided in the Notice of the ensuing annual general meeting.


Detailed information on the directors is provided in the Corporate Governance Report.


Significant and material orders passed by the regulators or courts


During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals, which may impact the going concern status of the Company and its operations in future.


Global Depository Receipts (GDRs)


During the year under review, the Company terminated its GDR programme w.e.f. 20 March 2017 and these GDRs were consequently delisted from the London Stock Exchange w.e.f. 24 March 2017. Detailed information about GDRs is given in the chapter on General Shareholder Information.


Details of internal financial controls with reference to the financial statements


The Company has documented its internal financial controls considering the essential components of various critical processes, physical and operational. This includes its design, implementation and maintenance, along with periodical internal review of operational effectiveness and sustenance, which are commensurate with the nature of its business and the size and complexity of its operations.


This ensures orderly and efficient conduct of its business, including adherence to the Company''''s policies, safeguarding of its assets, prevention of errors, accuracy and completeness of the accounting records and the timely preparation of reliable financial information.


The internal financial controls with reference to the financial statements were adequate and operating effectively.


Presentation of financial statements


The financial statements of the Company for the year ended 31 March 2017 have been disclosed as per Division I of Schedule III to the Companies Act, 2013.


Consolidated financial statements


The directors also present the audited consolidated financial statements incorporating the duly audited financial statements of the subsidiaries, including the associates and joint venture and as prepared in compliance with the Companies Act, 2013, applicable Accounting Standards and SEBI Listing Regulations, 2015.


A statement containing the salient features of the subsidiaries (including associates and joint venture) in the prescribed form AOC-1 is annexed separately.


Statutory disclosures


The summary of the key financials of the Company''''s subsidiary, associate companies and joint venture (Form AOC-1) is included in this Annual Report. A copy of the audited financial statements of the said companies will be made available to the members of the Company seeking such information at any point of time. The audited financial statements of the said companies will be kept for inspection by any member of the Company at its registered office during business hours. The same are placed on the Company''''s website www.bhil.in


Details as required under the provisions of section 197(12) of the Companies Act, 2013, read with rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended are annexed to this Report.


Details as required under the provisions of section 197(12) of the Companies Act, 2013, read with rule 5(2) and 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, which form part of the Directors'''' Report, will be made available to any shareholder on request, as per provisions of section 136(1) of the said Act.


Disclosures as prescribed under the Non-Banking Financial Company-Systemically Important Non Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and other applicable NBFC Regulations have been made in this Annual Report.


A Cash Flow Statement for the year 2016-17 is attached to the Balance Sheet.


Pursuant to the legislation ''''The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013'''', the Company has a Policy on Prevention of Sexual Harassment at Workplace. There was no case reported during the year under review under the said Policy.


Corporate governance


Pursuant to the SEBI Listing Regulations, 2015, a separate chapter titled ''''Corporate Governance'''' has been included in this Annual Report, along with the reports on Management Discussion and Analysis and General Shareholder Information.


All the Board members and Senior Management personnel have affirmed compliance with the Code of Conduct for the year 2016-17. A declaration to this effect signed by the Managing Director (CEO) of the Company is contained in this Annual Report.


The Managing Director (CEO) and CFO have certified to the Board with regard to the financial statements and other matters as required under regulation 17(8) of the SEBI Listing Regulations, 2015.


Certificate from the auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.


Business Responsibility Report


Regulation 34(2) of the SEBI Listing Regulations, 2015, which was amended on 22 December 2015 to come into force from 1 April 2016, inter alia, provides that the annual report of the top 500 listed entities based on market capitalization (calculated as on 31 March of every financial year), shall include a Business Responsibility Report (BRR).


Since BHIL is one of the top 500 listed companies by way of market capitalization as on 31 March 2016, the Company has presented its maiden BRR for the financial year 2016-17, which is part of this Annual Report. As a green initiative, the BRR has been hosted on the Company''''s website www.bhil.in


A physical copy of the BR Report will be made available to any shareholder on request.


Secretarial Standards of ICSI


Pursuant to the approval given on 10 April 2015 by Central Government to the Secretarial Standards specified by the Institute of Company Secretaries of India, the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) came into effect from 1 July 2015. The Company is in compliance with the same.


Auditors


Statutory auditor


The current auditors, viz. Dalal & Shah LLP, Chartered Accountants (Firm Registration No. 102021W/W100110) were last re-appointed by the members at their annual general meeting held on 17 July 2014 to hold the office of auditor from the conclusion of the sixty ninth annual general meeting till the conclusion of this seventy second annual general meeting.


As per the provisions of section 139 of the Companies Act, 2013, no listed company shall appoint an audit firm as auditors for more than two terms of five consecutive years. The Act also provided for an additional transition period of three years from the commencement of the Act i.e. 1 April 2014. The current auditors had completed a period of ten years at the commencement of the said Act, hence on their completing the additional transition period of three years provided under the Act, the term of the current auditors expires at the conclusion of the ensuing annual general meeting.


The Board at its meeting held on 18 May 2017, based on the recommendation of the Audit Committee has recommended the appointment of S R B C & Co LLP, Chartered Accountants (Firm Registration No. 324982E/E300003), as the statutory auditors of the Company for approval by the members.


S R B C & Co LLP, Chartered Accountants have consented to the said appointment and confirmed that their appointment, if made, would be within the limits specified under section 141(3)(g) of the Act and that they are not disqualified to be appointed as statutory auditors in terms of section 143 of the Act.


S R B C & Co LLP, Chartered Accountants will be appointed as the statutory auditors of the Company from the conclusion of seventy second annual general meeting till the conclusion of seventy seventh annual general meeting, covering one term of five consecutive years, subject to ratification by the members at each intervening annual general meeting, on a remuneration, out-of-pocket expenses, etc. incurred in connection with the audit as may be decided by the Board in consultation with the auditors from year to year.


The members are therefore requested to appoint S R B C & Co LLP, Chartered Accountants (Firm Registration No. 324982E/E300003), as auditors of the Company for a term of five years from the conclusion of the ensuing annual general meeting till the conclusion of the seventy seventh annual general meeting, to be scheduled in 2022, subject to ratification at each annual general meeting and to fix their remuneration for the year 2017-18.


The statutory audit report for the year 2016-17 does not contain any qualification, reservation or adverse remark or disclaimer made by statutory auditor.


Secretarial auditor


Pursuant to the provisions of section 204 of the Companies Act, 2013 and Rules made there under, the Company has re-appointed, Shyamprasad D Limaye, Practising Company Secretary (Membership No. 1587) to undertake the secretarial audit of the Company.


Secretarial audit report for the year 2016-17 as issued by him in the prescribed form MR-3 is annexed to this Report.


The said secretarial audit report does not contain any qualification, reservation or adverse remark or disclaimer made by the secretarial auditor.


On behalf of the Board of Directors


Rahul Bajaj Chairman


Pune: 18 May 2017

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