IIFL Finance Ltd.
|BSE: 532636||Sector: Financials|
|NSE: IIFL||ISIN Code: INE530B01024|
|BSE 00:00 | 24 Apr||IIFL Finance Ltd|
|NSE 05:30 | 01 Jan||IIFL Finance Ltd|
|Mkt Cap.(Rs cr)||2,817|
|Mkt Cap.(Rs cr)||2,817|
IIFL Finance Ltd. (IIFL) - Director Report
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Company director report
Your Directors present the Twenty Fourth Annual Report of IIFL FinanceLimited (formerly known as IIFL Holdings Limited) ('your Company/ the Company') togetherwith the Audited Financial Statements for the financial year ended March 31 2019. Asupdated you earlier the Company's Financial Statements reflect the effecting of theComposite Scheme of Arrangement as approved by the Hon'ble National Company Law Tribunalwith respect to demerger of Wealth business undertaking and Securities businessundertaking. The merger of India Infoline Finance Limited with the Company would beeffected after receipt of NBFC registration from Reserve Bank of India ("RBI")by the Company.
1. FINANCIAL RESULTS
A summary of the financial performance of your Company and its majorsubsidiaries for the financial year ended March 31 2019 is as under:
Consolidated Financial Results
A summary of the consolidated financial performance of your Companyfor the financial year ended March 312019 is as under:
*Previous periods figures have been regrouped/rearranged wherevernecessary
Standalone Financial Results:
A summary of the standalone financial performance of your Company forthe financial year ended March 312019 is as under:
*Previous periods figures have been regrouped/rearranged wherevernecessary
Transition to Ind AS
The Company has adopted Indian Accounting Standards ('Ind AS') notifiedunder section 133 of the Companies Act 2013 ('the Act') read with the Companies (IndianAccounting Standards) Rules 2015 from April 01 2018 (April 01 2017 being the transitiondate). Such transition has been carried out from the erstwhile Accounting Standardsnotified under the Act. Accordingly your Company has prepared financial statements whichcomply with Ind AS applicable for the year ended March 31 2019 together with thecomparative period data as at and for the year ended March 312018 as described in thesignificant accounting policies.
Transfer to Reserve
The Company during the year under review has not transferred any amountto General Reserve out of the Retained Earnings.
2. COMPOSITE SCHEME OF ARRANGEMENT
The Board of Directors of the Company at its meeting held on January31 2018 had approved the Composite Scheme of Arrangement amongst the Company IndiaInfoline Finance Limited ("India Infoline") India Infoline Media and ResearchServices Limited ("IIFL M&R") IIFL Securities Limited ("IIFLSecurities") IIFL Wealth Management Limited ("IIFL Wealth") IIFLDistribution Services Limited ("IIFL Distribution") and their respectiveshareholders under Sections 230 - 232 and other applicable provisions of the CompaniesAct 2013 ("Scheme"). The Scheme was filed with the National Stock Exchange ofIndia Limited ("NSE") and BSE Limited ("BSE") and the Companyreceived an observation letter from NSE on September 112018 and September 27 2018; andfrom BSE on September 14 2018 and September 28 2018. The proposed Scheme was then filedwith the Hon'ble National Company Law Tribunal Mumbai Bench ("NCLT") on October01 2018 pursuant to which the Hon'ble NCLT directed the Company to hold a meeting of itsequity shareholders on December 12 2018. The equity shareholders of the Company at theNCLT convened meeting on December 12 2018 approved the Composite Scheme of Arrangementwith requisite majority.
The Hon'ble NCLT vide its order passed on March 07 2019 sanctioned theComposite Scheme of Arrangement and the Company received the order on March 15 2019.
Further the Board of Directors of the Company at its meeting held onMay 13 2019 approved the implementation of the Scheme except for merger of India lnfolineFinance Limited with the Company. The said merger shall be made effective on receipt ofthe requisite licence/ registrations by the Company from RBI to carry on the lendingbusiness. Following parts of the Scheme were implemented:
1. Amalgamation of IIFL M&R with the Company;
2. Demerger of the Securities Business Undertaking of the Company intoIIFL Securities;
3. Demerger of the Wealth Business Undertaking of the Company into IIFLWealth;
4. Transfer of the Broking and Depository Participant BusinessUndertaking of IIFL Wealth to its wholly owned subsidiary i.e. IIFL Distribution on agoing- concern basis.
The Securities Business Undertaking Wealth Business Undertaking andBroking and Depository Participant Business Undertaking are defined in the Scheme and thescheme can be accessed on the website of the Company i.e. www.iifl.com
The Appointed Date for the amalgamation of IIFL M&R with theCompany was opening hours of April 01 2017 and for all the other steps the AppointedDate was opening hours of April 012018.
Pursuant to the Scheme the name of the Company was changed from'IIFLHoldings Limited"to"IIFL Finance Limited" upon receipt of fresh Certificateof Incorporation dated May 24 2019 issued by the Registrar of Companies Mumbai and theMain Object of the Company was amended to carry on the lending business activity as ofIndia Infoline Finance Limited.
Upon the Scheme coming into effect 18718281 & 45000000equity shares of face value Rs 10/- each & Rs 2/- each respectively held by theCompany in IIFL Securities and IIFL Wealth respectively were extinguished and cancelled.
As consideration to the shareholders of the Company for the demerger ofthe Securities Business Undertaking and Wealth Business Undertaking IIFL Securitiesissued and allotted 1 (One) fully paid up new equity share of Rs 2 each of IIFL Securitiesfor every 1 (One) equity share of Rs 2 each of the Company; and IIFL Wealth issued andallotted 1 (one) fully paid up new equity share of Rs 2 each of IIFL Wealth for every 7(seven) equity shares of Rs 2 each of the Company on June 06 2019 to the Shareholders ofthe Company holding equity shares on May 31 2019 fixed as Record Date for the saidpurpose. Accordingly 319234462 equity shares of Rs 2/- each of IIFL Securities and45604924 equity shares of Rs 2/- each of IIFL Wealth were issued and allotted inaggregate to the Shareholders of the Company.
IIFL Securities and IIFL Wealth have filed Listing Applications withBSE Limited ("BSE") and National Stock Exchange of India Limited("NSE") on July 06 2019. The trading of securities of IIFL Securities and IIFLWealth shall commence post listing approval of BSE NSE and SEBI.
3. REVIEW OF BUSINESS AND OPERATIONS AND STATE OF AFFAIRS OF YOURCOMPANY
During the year under review your Company's total income on aconsolidated basis amounted to Rs 50955.28 million. Profit before tax stood at Rs11296.47 million and Profit after tax stood at Rs 8043.27 million.
These results primarily reflect the results of the material subsidiaryviz. India Infoline Finance Limited and its subsidiaries after effecting the demerger ofthe wealth and securities business undertakings pursuant to the Composite Scheme ofArrangement as explained in Para 2 of this report.
During the year the income from the loans and mortgages business hasincreased by 28% y-o-y to Rs 50161.97 million. This was driven by growth in the loan AUMby 29% from Rs 270675.12 million in FY18 to Rs 349034.73 million in FY19. The AUM ofthe Housing Finance Company grew robustly by 27% to Rs 181578.31 million as of March 312019 as against Rs 143212.03 million in the previous year. The Company's subsidiarynamely Samasta Microfinance Limited has achieved a significant growth of 172% in its AUMto Rs 22852.41 million as on March 312019 as against Rs 8406.19 million as on March312018.
The primary drivers of the AUM growth were small ticket home loanswhich grew by 42% YoY Gold loans which grew by 53% YoY small ticket MSME loans whichgrew by 18% YoY and Micro-finance loans which grew by 172% YoY coming off a small base.On the other hand construction & real-estate finance LAP and Capital Market loanscontinue to have a declining share in the portfolio.
A strong characteristic of the loan book is the granularity; about 85%of the book is retail in nature. Moreover 41% of the loans are compliant with RBI'spriority sector lending norms. The large share of retail and PSL compliant loans are ofsignificant value in the prevailing environment as they can be Securitized/Assigned withbanks to raise long-term resources.
The NBFC sector with its steadfast growth over the last five years hasattracted recognition as a systemically important segment of the financial servicesindustry. However from the second half of the FY19 the industry witnessed turbulence dueto some of the large NBFCs HFCs defaulting followed by rating downgrades alarming assetliability mismatches leading to increased risk perception to the sector. This has leddrying up of funding resources and liquidity crunch among NBFCs and affected the lendingbusiness as well as growth. The Company's proactive agile approach along with itsdiversified funding mix comfortable liquidity position and efficient processes ensuredthat it confidently navigated through the challenges.
In a tough environment the Company took the following proactive stepsto combat the situation:
Reduced its CP exposure down from 24% of loans to 12% as onMarch 312019 despite 25% of the portfolio having maturity less than 6 months and 39% lessthan 12 months;
Increased share of securitized assets and bank loans for awell-diversified funding mix;
Maintained a positive ALM across all buckets with cumulativesurplus net cash flow;
Maintained adequate liquid investments and undrawn bank creditlines;
Ensured enhanced governance through a robust and agile riskmanagement model.
Despite the slowdown the Indian economy is expected to pick up growthin the latter half of the current year. Capital investment will be largely driven bypublic expenditure. Monetary and regulatory easing from RBI is expected to revive creditto the private sector. The decline in auto sales and the lag in the real estate sectorhave been mainly on account of the liquidity crunch faced by NBFCs. The government's andregulator's various active and ongoing measures the liquidity situation to this sector isexpected to ease from the second half of the current year and also investment and consumerdemand is expected to pick up soon particularly in MSME home loans and consumer loanssegments. Boosting aggregate demand especially private investment assumes the highestpriority at this juncture to generate growth. Overall the outlook for the NBFC sector isexpected to remain positive in the long run.
Change in nature of Business
In terms of the Composite Scheme of Arrangement the Main Object of theCompany was amended to carry on the lending business activity upon merger of IndiaInfoline Finance Limited subsidiary Company with the Company. The Company has filednecessary application with RBI for registration as a Non-Banking Financial Company and isawaiting its approval. Further the Merchant Banking Business of the Company wastransferred to IIFL Securities Limited and the Investment Advisory Business wastransferred to IIFL Wealth Management Limited.
4. MACROECONOMIC OVERVIEW
India has emerged as the fastest growing major economy in the worldmainly due to improvement in the performance of agriculture and manufacturing sectors. TheIndian economy grew at 7.1% in FY19 with a marginal reduction as compared to previousfiscal (Source: World Bank). Though government consumption had reduced it was offset bymore investments due to public infrastructure spending. India's urban consumption wassupported by a pickup of credit growth whereas rural consumption was hindered by softagricultural prices.
India has retained its position as the third largest start-up base inthe world with over 4750 technology start-ups. Introduction of GST and demonetisation hasencouraged a shift from the informal to formal sector.
5. DIVIDEND ON EQUITY SHARES
During the year 2018-19 the Board of Directors of the Company declaredand paid an interim dividend of Rs 5/-per equity share (i.e. 2.5 times of face value of Rs2/- per equity share). This led to an outgo of Rs 1595.43 million owing to dividend(excluding dividend distribution tax). Your Directors recommend that the said interimdividend be considered as final. The dividend paid during the previous financial year2017-18 was Rs 5/- per equity share.
The dividend payout for the year under review is in accordance with theCompany's policy to pay sustainable dividend linked to long-term growth objectives of theCompany to be met by internal cash accruals.
Pursuant to Regulation 43A of SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 the Board of Directors of the Company hasadopted a Dividend Distribution Policy which is annexed as Annexure VI to this report andis available on the website of the Company i.e. www.iifl.com.
6. KEY INITIATIVES/DEVELOPMENTS
i. Slump Sale of Vehicle Financing Business of India Infoline FinanceLimited
During the year under review India Infoline Finance Limited amaterial subsidiary of the Company executed a definitive agreement for the sale of its"Vehicle Financing Business" as a going concern on a "slump salebasis" to IndoStar Capital Finance Limited in order to focus on scaling up otherexisting business segments viz. affordable Home Loans Gold Loans small-ticket BusinessLoans and Microfinance. The said transaction was completed on March 31 2019 for a cashconsideration of Rs 24147.18 Million.
ii. Public Issue of Debentures by India Infoline Finance Limited
During the year under review India Infoline Finance Limited amaterial subsidiary of the Company raised through Public Issue of Secured and UnsecuredRedeemable Non-Convertible Debentures ("NCDs") an amount aggregating to'11585.78 Million. These NCDs are listed and traded on the NSE and BSE.
iii. Masala Bond
India Infoline Finance Limited a material subsidiary of the Companyallotted INR (Rupee) Denominated Tier II Bonds ("Bonds") of the face value of Rs10 Million each aggregating to Rs 3250 Million to CDC Group Plc on June 28 2018.
iv. External Commercial Borrowing
During the year under review IIFL Home Finance Limited a materialsubsidiary of the Company availed USD 50 million of External Commercial Borrowings.
v. NHB Refinance
During the year under review IIFL Home Finance Limited a materialsubsidiary of the Company availed Rs 10000 million of refinance facility from NationalHousing Bank ("NHB") under various refinance schemes of NHB.
vi. Corporate Social Responsibility (CSR) Initiative
The Corporate Social Responsibility Committee of the Board hasformulated and recommended to the Board a Corporate Social Responsibility Policy (CSRPolicy) indicating the CSR activities which can be undertaken by the Company. The Boardapproved CSR Policy is available on the website of the Company i.e. https://
IIFL group has set-up India Infoline Foundation (generally referred toas "IIFL Foundation") a Section 8 Company under the Companies Act 2013 whichacts as the principal arm to undertake CSR initiatives on behalf of the Company & itssubsidiaries.
The group has identified focus areas for CSR initiatives which include:
a. Girl child illiteracy eradication program for out of school andilliterate girls.
b. Improving the quality of education in Government schools throughtechnological interventions.
c. Support to the differently abled.
d. River rejuvenation and rural transformation in Maharashtra.
e. Disaster Relief and Rehabilitation.
f. Financial Literacy and Financial Inclusion.
g. Preventive Health.
h. Integrated rural development drought relief and water conservation.
i. Protection of culture.
j. Measures for benefit of Armed Forces veterans war widows etc.
During the financial year your Company deployed 2% of its average netprofits (computed as per the relevant provisions of Companies Act 2013) of the precedingyears on CSR projects fully utilising the required amount.
vii. Investor Conference/Events
November 2018 Conclave:
India Infoline Finance Limited a material subsidiary of the Companysuccessfully concluded the "IIFL NBFC Conclave" on November 29 2018 at St.Regis Lower Parel Mumbai.
The highlight of the conclave was the keynote speaker Mr. R GandhiFormer Deputy Governor RBI who spoke on the Policy and Regulatory environment for NBFCSector followed by a presentation on 'IIFL's Credit Profile' by Mr. Krishnan SitaramanSr. Director Financial Sector & Structured Finance Ratings CRISIL Ltd.
June 2019 Conclave:
India Infoline Finance Limited a material subsidiary of the Companysuccessfully concluded the second edition of "IIFL NBFC Conclave" on June 032019 at Sofitel BKC Mumbai.
The primary agenda of the Conclave was to recognise the healthchallenges and opportunities for the NBFC Sector in India.
The highlight of the conclave was the keynote speaker Mr. S. S.Mundra Former Deputy Governor RBI who spoke on the 'Road & Regulations ahead in theNBFC sector' followed by a presentation on 'IIFL's Credit Profile' by Mr. KrishnanSitaraman Sr. Director Financial Sector & Structured Finance Ratings CRISIL Ltd.
viii. Awards and Recognitions
During the year under review following awards and accolades wereconferred by reputable organisations details of the same is as follows:-
IIFL Home Finance's ("KUTUMB") initiative won the best GreenInitiative in Affordable Housing segment at ET Now Green Future Leadership Awards 2019.
IIFL was awarded "Great Place to Work" for the year 2019-2020.
IIFL Home Finance was awarded "The Best Affordable Housing FinanceCompany of the year" at ABP News BFSI Awards 2018.
IIFL was recognised as a 'Disruptor' in BFSI sector for innovationthrough technological intervention in NBFC space by ET Now and Broadcast One. IndiaInfoline Finance was awarded 'Best On- boarding Solution' at People Matters Learning andDevelopment Conference.
IIFL Home Finance was awarded 'Best Performing Primary LendingInstitution' under CLSS for EWS/ LIG.
IIFL Home Finance won 'Most Promising Brand for Housing Finance' byTimes Network.
IIFL Home Finance 'Jhatpat Loans' was awarded 'Technology Initiative ofthe Year' at ET NOW BFSI Awards.
IIFL was awarded 'Digital Innovation Award' under the Cloud Category atIndian Express Group BFSI Awards.
IIFL was awarded 'Best Customer Services Excellence in FinancialServices' for the Category- Customer Service and Loyalty at the World Quality Congress andAwards 2018.
IIFL MD Mr. R Venkataraman featured as the Best CEO in Business Worldlisting for large category firms.
7. SHARE CAPITAL
During the period under review the total paid up equity share capitalof the Company increased from Rs 637958052/- to Rs 638406184/- pursuant to allotmentof 224066 equity shares of Rs 2/- each under Employee Stock Option Scheme(s) of theCompany to the eligible employees.
8. EMPLOYEES STOCK OPTION SCHEMES (ESOS)
During the year under review 32870 stock options under ESOS 2008granted to employees have lapsed and the same have been added back to the pool which canbe used for further grant. Further no stock options were granted to the employees duringthe year under the ESOP Scheme.
Under the previous GAAP the stock options granted by the Company wereaccounted for as per the accounting treatment prescribed by SEBI (Employee Stock OptionScheme and Employee Stock Purchase) Guideline 1999/ SEBI (Share Based Employee Benefits)Regulations 2014 and the guidance note on accounting for stock options issued by theInstitute of Chartered Accountants of India whereby the intrinsic value of the optionswere recognised as deferred employee compensation and accordingly the requisitedisclosures were provided in the notes to Accounts and Schedule. However under Ind-ASequity settled share based payment transactions with employees are required to beaccounted for as per Ind-AS 102 "Share-based Payment" whereby the fair value ofoptions as on the grant date should be estimated and recognised as an expense over thevesting period. In accordance with above the Company has followed fair value method forequity options in its accounts effective the transition date i.e. April 12017.
There is no material change in Employees' Stock Option Scheme duringthe year under review and the Scheme is in line with SEBI (Share Based Employee Benefits)Regulations 2014 ("SBEB Regulations"). A certificate from the Auditors of theCompany that the Scheme has been implemented in accordance with the SBEB Regulations andthe resolution passed by the members would be placed at the ensuing AGM for inspection byMembers. The disclosures relating to ESOPs required to be made under the provisions of theCompanies Act 2013 and the SEBI (Share Based Employee Benefits) Regulations 2014 areprovided on the website of the Company i.e. www.iifl.com and the same is available forinspection by the members at the Registered Office of the Company on all working daysexcept Saturdays Sundays and Public Holidays during business hours up to the date of theensuing Annual General Meeting.
9. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Particulars of investments made loans given guarantees given andsecurities provided along with the purpose for which the loan or guarantee or security wasproposed to be utilised by the recipient are given at the respective places in theStandalone Financial Statement (please refer to Note 7 and 31 to the standalone financialstatement).
10. SUBSIDIARY COMPANIES
The Company is having following 4 (Four) subsidiaries (including stepdown subsidiaries) and does not have any Associate/Joint Venture.
Pursuant to the Composite Scheme of Arrangement approved by Hon'bleNCLT vide its order passed on March 07 2019 and the scheme becoming effective from May13 2019 the following Companies ceased to be subsidiary/step downsubsidiary/Associate/Joint Venture of the Company:
Note: Kindly refer Para 2 of the Directors Report for details onComposite Scheme of Arrangement.
As per the provisions of section 134 and 136 of the Companies Act 2013read with applicable Rules Regulation 33 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and applicable Indian Accounting Standards ("IndAS") the Board of Directors had at their meeting held on May 14 2019 approved theConsolidated Financial Statements of all the subsidiaries of the Company along with theCompany's financial statements. Copies of the Balance Sheet Profit and Loss AccountReport of the Board of Directors and Report of the Auditors of each of the subsidiarycompanies are not attached to the accounts of the Company for the financial year 2018-19.The Company will make these documents/details available upon request by any member of theCompany. These documents/details will also be available for inspection by any member ofthe Company at its registered office and at the registered offices of the concernedsubsidiaries i.e. except on Saturdays Sundays and Public Holidays. The Annual Reports ofall the subsidiaries are available on the website of the Company i.e.
A report on the performance and financial position of each of thesubsidiaries of the Company as per Companies Act 2013 is provided in the prescribed formAOC-1 as Annexure A of the Consolidated Financial Statements and hence not repeated herefor the sake of brevity.
Pursuant to regulation 16 and 24 of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 India Infoline Finance Limited IIFL WealthManagement Limited and IIFL Wealth Finance Limited and IIFL Home Finance Limited were theMaterial Subsidiaries of the Company for the financial year 2018-19. In accordance withthe Composite Scheme of Arrangement as explained in para 2 of the Directors Report IIFLWealth Management Limited and IIFL Wealth Finance Limited ceased to be subsidiary of theCompany and pursuant to aforesaid regulations India Infoline Finance Limited and IIFLHome Finance Limited shall remain Material Subsidiary for the financial year 2019-20. Thepolicy on determining the material subsidiary is available on the website of the Companyat i.e. www.iifl.com .
Merger of Ayusha Dairy Private Limited
Ayusha Dairy Private Limited a wholly owned subsidiary of SamastaMicrofinance Limited ("Samasta") a step down subsidiary of the Company wasmerged with Samasta in terms of scheme of arrangement by way of Fast Track Merger approvedby Regional Director vide its order dated August 06 2018 pursuant to the provisions ofSection 233 of the Companies Act 2013.
11. BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report in terms of Regulation 34(2)(f) ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 describing theinitiatives taken by IIFL Group from an environmental social and governance perspectiveis attached as part of the Annual Report.
12. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
In accordance with Regulation 34 of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Management Discussion and Analysis Reportforms part of this report.
13. DIRECTORS AND KEY MANAGERIAL PERSONNEL a. Directors
The Board comprises Mr. Nirmal Jain and Mr. R. Venkataraman asExecutive Directors of the Company in their capacity of Chairman and Managing Directorrespectively. Mr. Nilesh Vikamsey Mr. A. K. Purwar Mr. Vijay Kumar Chopra and Ms. GeetaMathur are Independent Directors. Mr. Chandran Ratnaswami and Mr. Nagarajan Srinivasan arethe Non-executive Directors of the Company.
Appointment/Re-appointment of Directors
In accordance with Section 152 of the Companies Act 2013("Act") read with Article 157 of the Articles of Association of the Company Mr.Chandran Ratnaswami is liable to retire by rotation at the ensuing Annual General Meeting("AGM") and being eligible has offered himself for re-appointment. The Boardrecommends the same for the approval of Shareholders.
Mr. A.K. Purwar and Mr. Nilesh Vikamsey upon completion of their firstterm of appointment as Independent Directors on March 312019 are eligible forre-appointment for another term of five consecutive years with effect from April 012019subject to approval of the Members by special resolution in the ensuing AGM. Further Ms.Geeta Mathur upon completion of her first term of appointment as Independent Director onSeptember 17 2019 is eligible for re-appointment for another term of five consecutiveyears with effect from September 18 2019 subject to approval of the Members by specialresolution in the ensuing AGM.
Mr. Vijay Kumar Chopra was appointed by the Board as an AdditionalDirector (Independent Director) and Mr. Nagarajan Srinivasan was appointed by the Board asan Additional Director (Non Executive Director) of the Company w.e.f. May 212019 whoshall hold office up to the date of the AGM. Approval of the Members for regularisation ofthe appointment of the aforesaid Directors as Independent Director and Non ExecutiveDirector respectively has been sought in the Notice convening ensuing Annual GeneralMeeting of the Company.
Pursuant to Regulation 17(1 A) of the SEBI (Listing Obligations andDisclosure Requirements) (Amendment) Regulation 2018 ("LODR") inter aliaprovides that "no Listed Company shall appoint a person or continue the directorshipof any person as a Non- Executive Director who has attained the age of 75 years unless itis approved by the Shareholders by passing Special Resolution to that effect".Accordingly Mr. A. K. Purwar will attain the age of 75 in May 2021 and Mr. Vijay KumarChopra will attain the age of 75 in March 2021 and hence their appointment beyond 75 yearsshall require approval of shareholders by way of special resolution. Accordingly theapproval has been sought in the Notice convening ensuing Annual General Meeting of theCompany.
Mr. Nirmal Jain and Mr. R Venkataraman were appointed as Whole TimeDirector and Managing Director respectively w.e.f. April 23 2015 for a period of fiveyears and their tenure will be expiring on April 22 2020. In view of the above it isproposed to re-appoint Mr. Nirmal Jain and Mr. R Venkataraman as Whole Time Director andManaging Director respectively in the ensuing AGM.
Mr. R Venkataraman Managing Director of the Company was also appointedas whole time director of India Infoline Finance Limited subsidiary company and hisentire remuneration was paid by India Infoline Finance Limited. However considering thedemerger of Securities business undertaking in terms of Composite Scheme of Arrangementthe designation / capacity of Mr. R Venkataraman has been changed to Non ExecutiveDirector in India Infoline Finance Limited and he has been appointed as Managing Directorof IIFL Securities Limited w.e.f. May 15 2019. Accordingly he is drawing his entireremuneration from IIFL Securities Limited and no remuneration is being paid to him by theCompany or its subsidiary Company.
Mr. Kranti Sinha and Mr. S Narayan Independent Directors of the Companyresigned from the Board of Directors of the Company w.e.f. May 21 2019 with respect tothe Composite Scheme of Arrangement India Infoline Finance Limited shall merge with theCompany and majority of its Directors were appointed on the Board of the Company. TheBoard placed on recorded its deep appreciation and gratitude for the valuable contributionmade by them.
b. Key Managerial Personnel
Mr. Nirmal Jain- Chairman Mr. R. Venkataraman- Managing Director Mr.Prabodh Agrawal- Chief Financial Officer and Mr. Gajendra Thakur- Company Secretary arethe Key Managerial Personnel as per the provisions of the Companies Act 2013 and rulesmade thereunder. There is no change in the Key Managerial Personnel during the year underreview.
The Remuneration and other details of the Key Managerial Personnel forthe year ended March 31 2019 are mentioned in the Extract to the Annual Return in FormMGT-9 which is attached as "Annexure II" and forms a part of this report of theDirectors.
14. MEETING OF DIRECTORS & COMMITTEE/BOARD EFFECTIVENESS
Meetings of the Board of Directors
The Board met Five (5) times during the year to discuss and approvevarious matters including financials appointment of auditor declaration of dividendreview of audit reports and other board businesses. For further details please refer tothe report on Corporate Governance.
Committees of the Board
In accordance with the applicable provisions of the Companies Act 2013and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Boardconstituted the following Committees:
Nomination and Remuneration Committee
Corporate Social Responsibility Committee
Stakeholders Relationship Committee ^ Risk Management Committee AuditCommittee
The Audit Committee comprises Mr. Nilesh Vikamsey IndependentDirector Mr. Vijay Kumar Chopra Independent Director Ms. Geeta Mathur IndependentDirector and Mr. R. Venkataraman Managing Director.
The role terms of reference and powers of the Audit Committee are inconformity with the requirements of the Companies Act 2013 and SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 and the same has been provided in theCorporate Governance Report.
The Committee met during the year under review and discussed on variousmatters including financials internal audit reports and Audit Report. During the periodunder review the Board of Directors of the Company accepted all the recommendations ofthe Audit Committee.
The details of Committee meeting held during the year under review andthe terms of reference of Audit Committee are provided in the Corporate Governance Report.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee comprises three IndependentDirectors viz. Mr. Vijay Kumar Chopra Independent Director Mr. Nilesh VikamseyIndependent Director and Mr. A K Purwar Independent Director as members of theCommittee.
The role terms of reference and powers of the Nomination andRemuneration Committee are in conformity with the requirements of the Companies Act 2013and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and the samehas been provided in the Corporate Governance Report.
The Board has on the recommendation of the Nomination &Remuneration Committee framed a Nomination and Remuneration policy in compliance with theaforesaid provisions for selection and appointment of Directors KMP senior managementpersonnel of the Company. The Nomination and Remuneration policy is available on thewebsite of the Company i.e. www.iifl.com
The said policy the details of Committee meetings and the terms ofreference of Nomination and Remuneration Committee held during the year under review areprovided in the Corporate Governance Report.
Corporate Social Responsibility Committee
As per Section 135 of Companies Act 2013 the Company has constitutedCorporate Social Responsibility (CSR) Committee comprises Mr. Nilesh VikamseyIndependent Director Mr. Nirmal Jain Whole Time Director and Mr. R. VenkataramanManaging Director.
The Committee has approved CSR Policy of the Company and the same isavailable on the website of the Company i.e. www.iifl.com .The Annual Report on CSR activities in accordance with Companies (Corporate SocialResponsibility Policy) Rules 2014 is attached as "Annexure I" to this report.
The role details of Committee meeting held during the year and theterms of reference of CSR Committee are provided in the Corporate Governance Report.
Stakeholders Relationship Committee
The Stakeholders Relationship Committee comprises Mr. A. K. PurwarIndependent Director Mr. Nirmal Jain Whole Time Director and Mr. R VenkataramanManaging Director.
The role and terms of reference of the Stakeholders RelationshipCommittee are in conformity with the requirements of the Companies Act 2013 andRegulation 20 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015and the same has been provided in the Corporate Governance Report.
The details of Committee meeting held during the year under review andstatus of complaints are provided in the Corporate Governance Report.
Risk Management Committee
The Risk Management Committee comprises Mr. A. K. Purwar IndependentDirector Mr. Nilesh Vikamsey Independent Director and Mr. Nirmal Jain Whole-timeDirector.
The role and terms of reference of the Risk Management Committee are inconformity with the requirements of Regulation 21 of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 and the same has been provided in the CorporateGovernance Report.
The details of Committee meeting held during the year under review andthe terms of reference of Risk Management Committee is provided in the CorporateGovernance Report.
Familiarisation Program for the Independent Directors
In compliance with the requirements of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Company has put in place a FamiliarisationProgramme for Independent Directors to familiarise them with the working of the Companytheir roles rights and responsibilities vis-a-vis the Company the industry in which theCompany operates and business model etc.
On a quarterly basis presentations are made at the meeting of Boardand Committees on business operations and performance updates of the Company and thegroup important developments in the subsidiaries relevant statutory and regulatorychanges applicable to the Company update on important legal matters pertaining to theCompany and its subsidiaries.
Details of the Familiarisation Programme are provided in the CorporateGovernance Report and are also available on the website of the Company i.e.
Pursuant to the provisions of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 and SEBI Circular noSEBI/HO/CFD/CMD/ CIR/P/2017/004 dated January 05 2017 the Board of Directors has carriedout an annual performance evaluation of its own performance the Directors individuallyincluding Independent Directors based out of the criteria and framework adopted by theBoard. The Board approved the evaluation results as collated by Nomination andRemuneration Committee ("NRC"). The evaluation process manner and performancecriteria for independent directors in which the evaluation has been carried out by isexplained in the Corporate Governance Report.
The Board considered and discussed the inputs received from theDirectors. Also the Independent Directors at their meeting held on March 22 2019reviewed the following:
(a) Performance of Non-Independent Directors various Committee ofBoard and the Board as a whole.
(b) Performance of the Chairperson of the Company.
(c) Assessed the quality quantity and timeliness of flow ofinformation between the Company's management and the Board which is necessary for theBoard to effectively and reasonably perform their duties.
The Independent Directors expressed their satisfaction with overallfunctioning and implementations of their suggestions.
The evaluation process endorsed the Board Members' confidence in theethical standards of the Company the cohesiveness that exists amongst the Board Membersthe two-way candid communication between the Board and the Management and the openness ofthe Management in sharing strategic information to enable Board Members to discharge theirresponsibilities.
Declaration by Independent Directors
The Company has received necessary declaration from each IndependentDirector of the Company that they meet the criteria of independence laid down in Section149(6) of the Companies Act 2013 and 16(1 )(b) of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.
The above declarations were placed before the Board and in the opinionof the Board all the Independent Director fulfils the conditions specified under the Actand the Listing Regulation and are Independent to the Management.
The Company recognises and embraces the importance of a diverse Boardin its success. The Company believes that a truly diverse Board will leverage differencein thought perspective knowledge skills regional and industry experience cultural andgeographical backgrounds age ethnicity race gender that will help us retain ourcompetitive advantage. The policy adopted by the Board sets out its approach to diversity.The policy is available on the website of the Company i.e. www.iifl.com
15. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement under Section 134(5) of the
Companies Act 2013 it is hereby confirmed that:
a) in the preparation of the annual accounts the applicable accountingstandards had been followed along with proper explanation relating to material departures;
b) the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit of the Company for that period;
c) the directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of theCompanies Act 2013 for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities;
d) the directors had prepared the annual accounts on a going concernbasis;
e) the Directors had laid down internal financial controls to befollowed by the Company and that such internal financial controls are adequate and areoperating effectively; and
f) the Directors had devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems are adequate and operatingeffectively.
16. RISK MANAGEMENT
The Company has in place a Risk Management Committee constituted inaccordance with the SEBI (Listing Obligations and Disclosure Requirements) 2015 to assistthe Board in overseeing the Risk Management activities of the Company approvingmeasurement methodologies and suggesting appropriate risk management procedures mitigatingall the risks that the organisation faces such as strategic financial credit marketliquidity security property IT legal regulatory reputational and other risks whichhave been identified and assessed. There is an adequate risk management infrastructure inplace capable of addressing those risks.
The Company's management monitors and reports principal risks anduncertainties that can affect its ability to achieve its strategic objectives. TheCompany's management systems organisational structures policy processes standards andcode of conduct together form the risk management governance system of the Company.
The Company has in place a Risk Management Policy and introducedseveral measures to strengthen the internal controls systems and processes to drive acommon integrated view of risks and optimal and mitigation responses. This integration isenabled through a dedicated team and Risk Management Internal Control and Internal Auditsystems and processes.
17. INTERNAL FINANCIAL CONTROLS
The Company has in place adequate internal controls with reference tofinancial statements and operations and the same are operating effectively. The InternalAuditors tested the design and effectiveness of the key controls and no materialweaknesses were observed in their examination. Further Statutory Auditors verified thesystems and processes and confirmed that the Internal Financial Controls system overfinancial reporting are adequate and such controls are operating effectively.
18. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
The Company has put in place a policy for Related Party Transactions(RPT Policy) which has been approved by the Board of Directors. The policy provides foridentification of Related Party Transactions (RPTs) necessary approvals by the AuditCommittee/Board/Shareholders reporting and disclosure requirements in compliance withCompanies Act 2013 and provisions of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
All contracts executed by the Company during the financial year withrelated parties were on arm's length basis and in the ordinary course of business. Allsuch Related Party Transactions were placed before the Audit Committee/ Board forapproval wherever applicable.
During the year the Company has not entered into any contract /arrangement / transaction with related parties which could be considered material inaccordance with Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and the policy of the Company on materiality of related partytransactions. The policy for determining 'material' subsidiaries and the policy onmateriality of Related Party Transactions and dealing with Related Party Transactions asapproved by the Board may be accessed on the website of the Company i.e.
Pursuant to the Composite Scheme of Arrangement ("Scheme")approved by Hon'ble National Company Law Tribunal merger of India Infoline FinanceLimited with the Company shall be made effective on receipt of requisitelicense/registration by the Company from Reserve Bank of India ("RBI") to carryon the lending business. The lending book of India Infoline Finance Limited consists ofdiversified products customer segments geographies and varying tenors (Short Term andLong Term) and accordingly India Infoline Finance Limited enters into various relatedparty transactions in the ordinary course of business.
The Company is expected to receive RBI approval shortly. Keeping inview the present position of the proposed merger the Company will be/continue enteringinto certain Related Party Transactions in the ordinary course of business and accordinglythe Company has sought approval from shareholders for Material Related Party Transactionsand details of same can be sought from the Notice Convening the Annual General Meeting ofthe Company.
19. ANNUAL RETURN
The details forming part of the extract of the Annual Return of theCompany in form MGT - 9 is annexed herewith as "Annexure - II". Further theAnnual Return is also available on the website of the Company i.e.
20. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITIONOF THE COMPANY
There have been no material changes and commitments affecting thefinancial position of the Company except the Composite Scheme of Arrangement approved byHon'ble National Company Law Tribunal and implemented by the Company as mentioned in ParaNo. 2 of this report which had occurred between the end of the financial year of theCompany to which the financial statements relate and the date of this annual report.
21. SECRETARIAL AUDIT
The Board had appointed M/s. Nilesh Shah & Associates PracticingCompany Secretaries to conduct Secretarial Audit of the Company for the financial year2018-19. The Auditor had conducted the audit and their report thereon was placed beforethe Board. The report of the Secretarial Auditor is annexed herewith as "Annexure -III" to this report. There are no qualifications or observations in the Report.
22. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO
The additional information on energy conservation technologyabsorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) ofthe Companies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 isappended as "Annexure - IV" and forms part of this Report
23. WHISTLE BLOWER POLICY/ VIGIL MECHANISM
In Compliance of the Companies Act 2013 and Regulation 22 of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Company hasadopted a Whistle Blower Policy and has established the necessary vigil mechanism forDirectors Employees and Stakeholders to report genuine concerns about unethicalbehaviour actual or suspected fraud or violation of the Company's code of conduct orethics policy. The Company has disclosed the policy on the website of the Company i.e.www.iifl.com.
24. PREVENTION OF SEXUAL HARASSMENT
Your Company recognises its responsibility and continues to provide asafe working environment for women free from sexual harassment and discrimination. InCompliance with the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 the Company has put in place a Policy on prevention of SexualHarassment of Women at workplace and has duly constituted an Internal Complaints Committeeunder the same.
The details of complaints received pursuant to the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013 are provided in theCorporate Governance Report.
25. PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as requiredunder Section 197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are provided in"Annexure - V" to this report.
Further a statement showing the names and other particulars ofemployees drawing remuneration in excess of the limits as set out in the Rules 5(2) and5(3) of the aforesaid Rules forms part of this report. However in terms of first provisoto Section 136(1) of the Act the Annual Report and Accounts are being sent to the membersand others entitled thereto excluding the aforesaid information. The said information isavailable for inspection by the members at the Registered Office of the Company duringbusiness hours on working days up to the date of the ensuing Annual General Meeting. Ifany member is interested in obtaining a copy thereof such member may write to the CompanySecretary whereupon a copy would be sent.
26. STATUTORY AUDITORS
Pursuant to the provisions of Section 139(2) of the Companies Act 2013and the rules made thereunder the Members at their 22nd Annual General Meeting("AGM") held on July 22 2017 had appointed M/s. Deloitte Haskins & SellsLLP Chartered Accountants (ICAI Firm's Registration Number 117366W/W-100018) as theStatutory Auditors of the Company for a term of five years i.e. from the conclusion ofthe 22nd AGM till the conclusion of the 27th AGM subject to ratification of theirappointment by the Members at every intervening Annual General Meeting held thereafter.However pursuant to the notified Section of Companies Amendment Act (2017) therequirement related to annual ratification of appointment of Auditors by members isomitted. Accordingly the Company is not required to seek ratification of appointment ofAuditors at the ensuing AGM and the Auditor shall continue their term till the conclusionof twenty seventh AGM.
The Notes to the financial statements referred in the Auditors Reportare self-explanatory and therefore do not call for any comments under Section 134 of theCompanies Act 2013. The Auditors' Report is enclosed with the financial statements in theAnnual Report.
27. REPORTING OF FRAUDS BY AUDITORS
During the year under review the Statutory Auditors and theSecretarial Auditor have not reported any instances of frauds committed in the Company byits Officers or Employees to the Audit Committee under section 143(12) of the CompaniesAct 2013 details of which needs to be mentioned in this Report.
28. RBI/FEMA COMPLIANCE
The Reserve Bank of India vide its press release dated June 10 2016had notified FII/ FPI investment limit of up to 80% in the paid up capital of the Companyunder the Portfolio Investment Scheme.
The Company has in place the system of ensuring compliance with RBIMaster Direction on Foreign Investment in India and for certification from the StatutoryAuditors of the Company on an annual basis.
29. CORPORATE GOVERNANCE
The Company is committed to maintain the highest standards of CorporateGovernance and adhere to the Corporate Governance requirements set out by SEBI. TheCompany has also implemented several best Corporate Governance practices as prevalentglobally. The report on Corporate Governance as stipulated under the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 forms an integral part of thisReport. The requisite certificate from the Auditors of the Company confirming compliancewith the conditions of Corporate Governance is attached to the report on CorporateGovernance.
30. COMPLIANCE WITH THE SECRETARIAL STANDARDS
The Board of Directors affirms that the Company has complied with theapplicable mandatory Secretarial Standards issued by the Institute of Company Secretariesof India.
Your Directors state that during the financial year 2018-19:
1. The Company did not accept/renew any deposits within the meaning ofSection 73 of the Companies Act 2013 and the rules made there under and as such noamount of principal or interest was outstanding as on the balance-sheet date.
2. The Company has not issued equity shares with differential rights asto dividend voting or otherwise.
3. The Company has not issued any sweat equity shares during the year.
4. There are no significant and material orders passed against theCompany by the Regulators or Courts or Tribunals which would impact the going concernstatus of the Company and its future operations.
5. The Central Government has not prescribed the maintenance of costrecords for any of the products of the Company under sub-section (1) of section 148 of theAct and the rules framed there under.
Your Directors place on record their sincere appreciation for theassistance and guidance provided by the government regulators stock exchanges otherstatutory bodies Company's bankers and employees for the assistance cooperation andencouragement extended to the Company.
Your Directors also gratefully acknowledge all stakeholders of theCompany viz. customers members dealers vendors banks and other business partners forthe excellent support received from them during the year. Our employees are instrumentalin helping the Company scale new heights year after year. Their commitment andcontribution is deeply acknowledged. Your involvement as shareholders is also greatlyvalued. Your Directors look forward to your continuing support.
For and on behalf of the Board