The Directors have pleasure in presenting the Twelfth Annual Report of your Company with the audited financial statements for the financial year ended March 31, 2017.
The highlights of the Consolidated and Standalone Financial Statements of the Company for the financial years 2016-17 and 2015-16 are as under:
(Rs, in Millions)
Profit Before Tax and exceptional items
Provision For Tax
Profit after tax from continuing operations
Profit/(Loss) after tax from Discontinuing operations
Profit for the year
Profit/(Loss) brought forward from previous Year
Profit available for appropriation
Transfer to Reserve Fund
45-IC of the RBI Act, 1934
Transfer to statutory reserve under Section 29C of the National Housing Bank Act, 1987
Proposed Dividend #
Dividend Tax thereon #
Transfer to General Reserve
Balance carried forward to Balance Sheet
# The proposed equity dividend and dividend distribution tax are not accounted as liabilities in fiscal 2017 in accordance with revised AS-4 ‘Contingencies and events occurring after the Balance Sheet date’.
The Company is focused on providing retail loans to MSMEs and consumers, including long term loans secured by property, business loans, personal loans, two-wheeler loans and consumer durable loans, which is expected to drive growth for the Company going forward.
During the year under review, the Company has successfully grown its outstanding Loan Assets under Management from Rs, 160.41 billion to Rs, 198.24 billion, a growth of 24%. The Retail Assets under Management has grown from Rs, 137.56 billion to Rs, 183.53 billion, a growth of 33%.
The Consolidated Net worth of the Company increased from Rs, 17.04 billion to Rs, 23.04 billion as at March 31, 2017.
Consolidated Net Interest Income increased by 59% from Rs, 8,181 million during the financial year ending March 31, 2016 to Rs, 13,008 million during the financial year ending March 31, 2017.
The profit after tax was up by 44% from Rs, 1,661 million to Rs, 2,389 million.
Keeping in mind the overall performance and the outlook for your Company, your Directors are pleased to recommend a dividend of Rs, 2.60/- (Rupees Two and sixty paise only) per share i.e. 26% on each Equity Share having face value of Rs, 10/- (Rupees Ten only) each.
DIVIDEND DISTRIBUTION POLICY
In accordance with the Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Dividend Distribution Policy. The Policy is hosted on the website of the Company and can be viewed at http://www.capitalfirst.com/ investor/corporate-governance
The Company''''s capital adequacy ratio was 20.34% as on March 31, 2017, which is significantly above the threshold limit of 15% as prescribed by the Reserve Bank of India (‘RBI'''').
During the year under review, the Company raised funds through issue and allotment of 47,80,000 Equity Shares of Rs, 10/- each on a preferential basis, pursuant to receipt of subscription amount of Rs, 3,40,67,06,000/- (Rupees Three Hundred and Forty Crores Sixty Seven Lakhs and Six Thousand only) issued at a price of Rs, 712.70/per Equity Share (face value of Rs, 10/- each and premium of Rs, 702.70/- per share) to Caladium Investment Pte. Ltd., which is indirectly wholly-owned by GIC (Ventures) Pte. Ltd., a Singapore''''s Sovereign Wealth Fund.
During the year under review, the Company had also issued and allotted 14,04,325 equity shares to the eligible employees of the Company under various Employee Stock Option Schemes of the Company. The paid up equity share capital of the Company as on date stands at Rs, 97,42,20,690/- comprising of 9,74,22,069 equity shares of Rs, 10/- each.
The Company being a Non-Deposit Accepting Non-Banking Finance Company has not accepted any deposits from the public during the year under review and shall not accept any deposits from the public without obtaining prior approval of the RBI.
As a Systemically Important Non-Deposit taking Non-Banking Finance Company, your Company always aims to operate in compliance with applicable RBI guidelines and regulations and employs its best efforts towards achieving the same.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
As required under Regulation 34 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) and Circular/ Notifications/Directions issued by RBI from time to time, the Management Discussion and Analysis of the financial condition and result of consolidated operations of the Company for the year under review is presented in a separate section forming part of the Annual Report.
A Report on Corporate Governance as required under Listing Regulations forms part of the Annual Report.
A Certificate from M/s. Makarand M. Joshi & Co., Practicing Company Secretaries, confirming compliance with the conditions of Corporate Governance as stipulated under the Listing Regulations, also forms part of the Annual Report.
BUSINESS RESPONSIBILITY REPORT
In accordance with Regulation 34(2)(f) of the Listing Regulations, the inclusion of Business Responsibility Report (BRR) as a part of the Annual Report is mandated for top 500 listed entities for the year 2016-17 based on the market capitalization.
Since Capital First Ltd. is one of the top 500 listed companies by way of market capitalization as on March 31, 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
Company''''s BRR will be available on its website at the web link http://www.capitalfirst.com/investor/corporate-governance. Any shareholder interested in obtaining a physical copy of the same may write to the Company Secretary of the Company.
CHANGE OF REGISTERED OFFICE
During the year under review, the Company shifted its registered office from 15th Floor, Tower-2, India bulls Finance Centre, Seagate Bapat Marg, Elphinstone (West), Mumbai - 400 013 to One Indiabulls Centre, Tower 2A & 2B, 10th Floor, Senapati Bapat Marg, Lower Parel (West), Mumbai - 400 013 with effect from November 21, 2016.
DIRECTORS & KEY MANAGERIAL PERSONNEL
During the year under review, the Board of Directors at its Meeting held on April 04, 2016 appointed Mr. Apul Nayyar (DIN 01738973) and Mr. Nihal Desai (DIN 03288923) as Additional Directors who shall act as Whole Time Directors and Key Managerial Personnel of the Company as per provisions of Companies Act, 2013 and applicable law and both were designated as ‘Executive Director'''' for a period of two years effective from April 04, 2016. The aforesaid appointment of Mr. Apul Nayyar and Mr. Nihal Desai was approved by the members in their 11th Annual General Meeting of the Company held on July 05, 2016.
During the year under review, the term of Mr. N. C. Singhal (DIN 00004916), Mr. M. S. Sundara Rajan (DIN 00169775) and Mr. Hemang Raja (DIN 00040769), Non-Executive Independent Directors of the Company who were appointed for a term of three years with effect from April 01, 2014 expired on March 31, 2017. The Board of Directors at their Meeting held on March 29, 2017 on recommendation of Nomination & Remuneration Committee had reappointed Mr. N. C. Singhal, Mr. M. S. Sundara Rajan and Mr. Hemang Raja as Non-Executive Independent Directors of the Company for a term of five years with effect from April 01, 2017 to hold office up to March 31, 2022 and they shall not be liable to retire by rotation. The aforesaid re-appointment of Independent Directors is subject to the approval of members in the 12th Annual General Meeting of the Company.
c. Retire by Rotation
In accordance with Section 152 and other applicable provisions of Companies Act, 2013, Mr. Vishal Mahadevia (DIN 01035771), being Non-Executive Director, retires by rotation and being eligible offers himself for re-appointment at the ensuing Annual General Meeting. The Board recommends his re-appointment.
Based on the confirmation/disclosures received from the Directors and on evaluation of the relationships disclosed, the following Non-Executive Directors are Independent in terms of Section 149(6) of the Companies Act, 2013 and the requirements of Listing Regulations :-
1. Mr. N. C. Singhal (DIN 00004916)
2. Mr. M. S. Sundara Rajan (DIN 00169775)
3. Mr. Hemang Raja (DIN 00040769)
4. Dr. (Mrs.) Brinda Jagirdar (DIN 06979864)
5. Mr. Dinesh Kanabar (DIN 00003252)
NUMBER OF MEETINGS OF THE BOARD
The Board met 7 times during the financial year 2016-17 viz., on April 04, 2016, May 13, 2016, August 03, 2016, November 09, 2016, November 11, 2016, January 31, 2017 and March 29, 2017. The maximum interval between any two meetings did not exceed 120 days.
COMMITTEES OF THE BOARD
In accordance with the Companies Act, 2013 and Listing Regulations, the Company has following Committees in place:
- Audit Committee
- Stakeholders Relationship Committee
- Corporate Social Responsibility Committee
- Nomination and Remuneration Committee
Details of the said Committees along with their charters, composition and meetings held during the financial year, are provided in the “Report on Corporate Governance”, as a part of this Annual Report.
COMPANY’S POLICY ON DIRECTORS’ APPOINTMENT, REMUNERATION AND EVALUATION
Pursuant to the provisions of the Companies Act, 2013 (“the Act”), Listing Regulations and requirements of the Reserve Bank of India, Policy on Nomination and Remuneration of Directors,
Key Managerial Personnel, Senior Management and other employees had been formulated including criteria for determining qualifications, positive attributes, Independence of a Director and other matters as required under the said Act and Listing Regulations.
The evaluation framework for assessing the performance of Directors comprises of the following key areas:
- Objectivity and Independence;
- Guidance and support in context of life stage of the Company;
- Understanding of the Company''''s business;
- Understanding and commitment to duties and responsibilities;
- Willingness to devote the time needed for effective contribution to Company;
- Participation in discussions in effective and constructive manner;
- Responsiveness in approach;
- Ability to encourage and motivate the Management for continued performance and success.
The evaluation involves Self-Evaluation by the Board Member and subsequent assessment by the Board of Directors. A member of the Board will not participate in the discussion of his/her evaluation.
Accordingly, a process of evaluation was followed by the Board for its own performance and that of its Committees and individual Directors and also the necessary evaluation was carried out by Nomination and Remuneration Committee and Independent Director at their respective meetings held for the purpose.
DIRECTORS’ RESPONSIBILITY STATEMENT
Pursuant to the requirements of Section 134(5) of the Companies Act, 2013, with respect to Directors'''' Responsibility Statement, it is hereby stated that:
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) the Directors have 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;
(c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets 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 controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and
(f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Board of Directors at its meeting held on May 08, 2014 had constituted Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of Companies Act, 2013 read with rules formulated therein. The Company had carried out its CSR activities/ programs on the recommendation of the CSR Committee and duly approved by the Board and in accordance with the policy on CSR as per the identified core areas.
The Company chooses its CSR programs among many options in the CSR Committee and the Board Meeting(s) and does not get persuaded by any external influences other than those short listed in the best of spirit and which can add the social value in the pragmatic and idealistic sense.
The details of contents of CSR Policy of the Company and the details about the development of CSR Policy and initiatives taken by the Company on CSR during the financial year have been appended as Annexure 3 to this Report.
RISK MANAGEMENT POLICY AND INTERNAL CONTROL
The Company has adopted a Risk Management Policy duly approved by the Board and also has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Risk Management Committee, Audit Committee and the Board of Directors of the Company. The Company''''s internal control systems are commensurate with the nature of its business and the size and complexity.
The detailed note on Risk Management and Internal Controls forms part of Management Discussion and Analysis Report.
During the year, Brickwork Ratings India Private Limited (Brickwork) upgraded the long term rating to “BWR AAA” (Triple A) from “BWR AA ” (Double A Plus) of your Company. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry very lowest credit risk. During the year, Credit Analysis & Research Limited (CARE) reaffirmed the long term rating of “AA ” (Double A Plus) of your Company. Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
Long-term Bank Loan Facilities: During the year, Brickwork assigned a rating of “BWR AAA” (Triple A) and the Company''''s rating of “CARE AA ” (Double A Plus) by CARE was reaffirmed.
Secured Redeemable Non-Convertible Debentures (NCDs): During the year, Brickwork upgraded the rating to “BWR AAA” (Triple A) from “BWR AA ” (Double A Plus) and the rating of “CARE AA ” (Double A Plus) was reaffirmed by CARE.
Subordinated Non-Convertible Debentures (NCDs): During the year, Brickwork upgraded the rating to “BWR AAA” (Triple A) from “BWR AA ” (Double A Plus) and CARE reaffirmed the rating of “CARE AA ” (Double A Plus).
Perpetual Non-Convertible Debentures (NCDs): During the year, Brickwork upgraded the rating to “BWR AA ” (Double A Plus) from “BWR AA” (Double A) and CARE reaffirmed the “CARE AA” (Double A) rating.
Short-term borrowing program: During the year under review, CARE reaffirmed the “A1 ” (A One Plus) rating for the short term borrowing program. The rating is the highest rating issued by CARE for short-term debt instruments and indicates strong capacity for timely payment of short term debt obligations and further indicates that the borrowing carries the lowest credit risk.
CONSOLIDATED FINANCIAL STATEMENTS
The Audited Consolidated Financial Statements are provided in this Annual Report which have been prepared in accordance with relevant Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI).
STATUTORY AUDITORS AND THEIR REPORT
The term of M/s. S. R. Batliboi & Co. LLP, Chartered Accountants, having ICAI Firm Registration No. 301003E/E300005 who was appointed as Statutory Auditors of your Company at the Ninth
Annual General Meeting (AGM) held on June 18, 2014 expires at conclusion of Twelfth Annual General Meeting.
Accordingly, the Board of Directors of the Company at its Meeting held on November 09, 2016, on the recommendation of the Audit Committee have appointed M/s. B S R & Co. LLP, Chartered Accountants bearing Firm Registration No. 101248W/W-100022 as the Statutory Auditors of the Company for a term of five years from conclusion of Twelfth Annual General Meeting till conclusion of Seventeenth Annual General Meeting subject to the approval of shareholders at the Twelfth Annual General Meeting in accordance with the applicable provisions of the Companies Act, 2013 read with the Rules issued there under and the Listing Regulations and applicable law.
The Company has received the certificate(s) of eligibility in accordance with Section 139, Section 141 and other applicable provisions of the Companies Act, 2013 and Rules there under, from M/s. B S R & Co. LLP, Chartered Accountants.
The Statutory Auditor''''s Report on financial statements for the financial year 2016-17 does not contain any qualification, reservation or adverse remark.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Details of Loans, Guarantees and Investments are given in the notes to the Financial Statements.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SECTION 188
During and subsequent to the year under review, the contracts or arrangements with related parties have been on arm''''s length and in ordinary course of business and they were not material in nature. Accordingly, the particulars of the transactions as prescribed in Form AOC - 2 of the rules prescribed under Chapter IX relating to Accounts of Companies under the Companies Act, 2013 are not required to be disclosed as they are not applicable.
The disclosures as required by Circular No. DNBS.CC.PD.No. 356/03.10.01/2013-14 dated September 16, 2013 issued by RBI, regarding reporting of the Gold Auctioned during the financial year 2016-17 are provided at Note No. 38 of Notes to the Standalone Financial Statements.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in Form MGT 9 is annexed herewith as Annexure 2 to this Directors'''' Report.
SECRETARIAL AUDITORS AND THEIR REPORT
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rules made there under, the Company had appointed M/s. Makarand M. Joshi & Co., Practicing Company Secretaries, to undertake the Secretarial Audit of the Company for the financial year 2016-17. The Secretarial Audit Report for financial year 201617, has been appended as Annexure 5 to this Report.
The Secretarial Auditor''''s Report does not contain any qualification, reservation or adverse remark.
The Board of the Directors at their Meeting held on May 10, 2017 have reappointed M/s. Makarand M. Joshi & Co., Practicing Company Secretaries, to undertake the Secretarial Audit of the Company for the financial year 2017-18.
Your Company has established a ‘Whistle Blower Policy and Vigil Mechanism'''' for Directors and employees to report to the appropriate authorities concerns about unethical behavior, actual or suspected, fraud or violation of the Company''''s code of conduct policy and provides safeguards against victimization of employees who avail the mechanism and also provide for direct access to the Chairman of the Audit Committee. The said policy has been uploaded on the website of the Company.
DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT
2013 READ WITH RULES
Pursuant to the requirements of Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rules there under, the Company did not receive any complaint of sexual harassment during the year under review.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
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 to which the financial statements relate and the date of the report.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY’S OPERATIONS IN FUTURE
There have been no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and company''''s operations in future.
PARTICULARS OF ENERGY CONSERVATION, TECHNOLOGY ABSORPTION, EXPENDITURE ON RESEARCH AND DEVELOPMENT, FOREIGN EXCHANGE INFLOW/ OUTFLOW, ETC.
The requirements of disclosure with regard to Conservation of Energy in terms of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014, are not applicable to the Company since it doesn''''t own any manufacturing facility.
However, the Company makes all efforts towards conservation of energy, protection of environment and ensuring safety.
The details of the earnings and outgoing Foreign Exchange during the year under review are provided in Note No. 35 to the Standalone Financial Statements as at March 31, 2017. The Members are requested to refer to the said Note for details in this regard.
PARTICULARS OF EMPLOYEES, EMPLOYEES STOCK OPTION SCHEME (ESOS) AND EMPLOYEES STOCK PURCHASE SCHEME (ESPS)
The details in terms of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure 4. The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 may be obtained by the members by writing to the Company Secretary of your Company.
The Stock Options have been granted to the employees under various CFL - Employees Stock Option Schemes. The said schemes are in compliance with the SEBI (Share Based Employee Benefits) regulations, 2014 as amended from time to time (SEBI Regulations). The details and disclosures with respect to ESOS /ESPS as required under SEBI Regulations are provided on the website of the Company and web link for the same is http:// www.capitalfirst.com/investor/corporate-governance.
Subsequent to the year under review, Board of Directors of the Company at its Meeting held on May 10, 2017, on the recommendation of Nomination and Remuneration Committee approved the ‘CFL Stock Option Scheme - 2017'''' subject to the approval of Members of the Company.
Your Company and Chairman & Managing Director won several award/achieved rankings. Select few awards/rankings are enumerated hereunder:
- Mr. Vaidyanathan received ‘Outstanding Entrepreneur Award'''' in Asia Pacific Entrepreneurship Award 2016.
- Capital First featured in Dun & Bradstreet: India''''s Top 500 companies wherein achieved Rank of 381 in total income & Rank 20 in NBFC space.
- Capital First debuted in Fortune India''''s Next 500 companies whereby achieved Rank 70 in overall category & Rank 2 in NBFC space.
- Capital First received ‘Best Electronic Banking Implementation'''' recognition in Asset Triple A Treasury, Trade and Risk Management Awards.
- Capital First debuted in the Most Valuable Companies 2016 by Business Today whereby Company was ranked at 274th place.
- Capital First debuted in India''''s future ready companies by ET 500 whereby Company ranked at 466th place
- Mr. Vaidyanathan received ‘Most Promising Leaders in Asia Award'''' in Economic Time''''s Asian Business Leaders Conclave.
- Capital First featured amongst ‘India''''s Most Trusted Financial Brands'''' by World Consulting & Research Corporation Media Initiative (WCRC).
- Capital First received ‘Asia Innovator of the Year'''' Award by CNBC in India Business Leader Awards from Hon. Finance Minister Shri. Arun Jaitley.
We are grateful to the Government of India, the Reserve Bank of India, the Securities and Exchange Board of India, the Stock Exchanges, Insurance Regulatory and Development Authority of India, National Housing Bank and other regulatory authorities for their valuable guidance and support and wish to express our sincere appreciation for their continued co-operation and assistance. We look forward to their continued support in future.
We wish to thank our bankers, investors, rating agencies, debenture trustees, customers and all other business associates for their support and trust reposed in us.
Your Directors express their deep sense of appreciation for all the employees whose commitment, co-operation, active participation, dedication and professionalism has made the organization''''s growth possible.
Finally, the Directors thank you for your continued trust and support.
On behalf of the Board of Directors
Place : Mumbai Chairman & Managing Director
Date : May 10, 2017 DIN: 00082596