Reliance Capital Ltd.
|BSE: 500111||Sector: Financials|
|NSE: RELCAPITAL||ISIN Code: INE013A01015|
|BSE 00:00 | 24 Apr 2020||Reliance Capital Ltd|
|NSE 05:30 | 01 Jan 1970||Reliance Capital Ltd|
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Reliance Capital Ltd. (RELCAPITAL) - Director Report
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Company director report
Your Directors have pleasure in presenting the 33rd AnnualReport and the audited financial statement for the financial year ended March 31 2019.
Financial Performance and State of Company's Affairs
The standalone performance of the Company for the financial year endedMarch 31 2019 is summarised below:
*Previous year figures has been regrouped / reclassified whereverrequired.
**Exchange Rate Rs 69.5509= US$ 1 as on March 31 2019 (Rs 65.0441 =US$1 as on March 31 2018). ***Pursuant to Section 45-IC of the Reserve Bank of India Act1934.
The Company's gross income for the financial year ended March 31 2019decreased to Rs 2317 crore from Rs 2587crore in the previous year. The operating profit(PBDIT) of the Company increased to Rs 2147 crore during the year from loss of Rs(3692) crore in the previous year. Depreciation and amortization expenses was at Rs 53crore as against Rs 22 crore in the previous year. The net profit for the year increasedto Rs 157 crore from loss of Rs (5760) crore in the previous year. An amount of Rs 31crore was transferred to the Statutory Reserve Fund pursuant to Section 45-IC of theReserve Bank of India Act 1934.
First-time adoption of Ind AS
In accordance with the Companies (Indian Accounting Standards) Rules2015 of the Companies Act 2013 (the 'Act') read with Section 133 of the Act the Companyhas adopted the Indian Accounting Standards (Ind AS) for preparation of its financialstatements with effect from April 1 2018 with comparative financials for the earlierperiod beginning April 1 2017.
For periods up to and including the year ended March 31 2018 theCompany prepared its financial statements in accordance with previous GAAP includingaccounting standards notified under the Companies (Accounting Standards) Rules 2006 asamended. The effective date of such transition is April 1 2017.
Core Investment Company
The Company is a Core Investment Company ('CIC') under Master Direction- Core Investment Companies (Reserve Bank) Directions 2016. The Company continues tocomply with the prudential norms applicable to CIC.
Resources and Liquidity
The Company's Net Worth as on March 31 2019 stood at Rs 8868 crore.The Company has raised Rs 6608 crore during the financial year 2018-19 by issuance ofCommercial Papers and Non-Convertible Debentures (NCDs).
During the year under review the Company has allotted 4220 equityshares arising out of the exercise of Employees Stock Options granted to the employees ofthe Company and its subsidiaries.
The Company's debt equity ratio as on March 31 2019 stood at 2.19:1.
During the year under review the Board of Directors has notrecommended any dividend on the Equity Shares of the Company.
The Company's Dividend Distribution Policy forms part of this AnnualReport.
Management Discussion and Analysis
Management Discussion and Analysis Report for the year under review asstipulated under the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 (the 'Listing Regulations') and Guidelines onCorporate Governance issued by the Reserve Bank of India is presented in a separatesection forming part of this Annual Report.
The Company has neither accepted nor renewed any fixed deposits duringthe year. There are no unclaimed deposits unclaimed / unpaid interest refunds due to thedeposit holders or to be deposited to the Investor Education and Protection Fund as onMarch 31 2019.
Particulars of Loans Guarantees or Investments
Pursuant to Section 186(11) of the Act loans made and acquisition ofsecurities by a Non-Banking Financial Company in the ordinary course of its business areexempted from disclosure in the Annual Report.
Subsidiary and Associate companies
During the year under review Gullfoss Enterprises Private Limitedbecame a subsidiary of the Company and Indian Commodity Exchange Limited ceased to be anassociate of the Company. The performance and financial position of the major subsidiarycompanies are presented in Management Discussion and Analysis Report forming part of thisAnnual Report. Also a report on the performance and financial position of each of thesubsidiary and associate companies as per the Act is provided in the consolidatedfinancial statement. The Policy for determining material subsidiary companies may beaccessed on the Company's website at http://www.reliancecapital.co.in/pdf/Policy-for-Determination-of-Material-Subsidiary.pdf.
Consolidated Financial Statement
The Audited Consolidated Financial Statement for the financial yearended March 31 2019 based on the financial statement received from subsidiary andassociate companies as approved by their respective board of directors have been preparedin accordance with the Companies (Indian Accounting Standards) Rules 2015 ('Ind AS')prescribed under Section 133 of the Act and other recognised accounting practices andpolicies.
Directors' Report Directors
Mr. Rajendra P. ChitaLe Mr. V. N. Kaul and Dr. Bidhubhusan Samal havebeen Independent Directors of the Company for over a decade and would be completing theirterm of office at the ensuing Annual General Meeting pursuant to the provisions of theCompanies Act 2013.
Mr. Rajendra P. Chitale an eminent Chartered Accountant Mr. V. N. Kaulpast Comptroller & Auditor General of India and Dr. Bidhubhusan Samal an Ex Member ofSecurities and Appellate Tribunal as Independent Directors have effectively contributedin a robust manner in building the Company.
The Board places on record their gratitude and deep sense ofappreciation for the guidance and contribution made by the eminent Directors in buildingthe Company over past decade. The term of office of Ms. Chhaya Virani as an IndependentDirector will expire on May 29 2020. The Board of Directors based on the performanceevaluation and as per the recommendations of the Nomination and Remuneration Committee andthe Board of Directors has recommended re-appointment of Ms. Chhaya Virani as anIndependent Director of the Company for a second term of 5 (five) consecutive years on theexpiry of her current term of office. The Board considers that given her backgroundexperience and contributions made by her during her tenure the continued association ofMs. Chhaya Virani would be beneficial to the Company.
The Company has appointed Mr. Rahul Sarin and Dr. Thomas Mathew as theIndependent Directors of the Company for a term of 5 (five) consecutive years commencingfrom August 16 2019.
The Company has received notices under Section 160 of the Act from amember proposing their candidature for the office of Directors.
The Company has received declarations from all the IndependentDirectors of the Company confirming that they meet the criteria of Independence asprescribed under the Act and the Listing Regulations.
The details of programme for familiarization of Independent Directorswith the Company nature of the industry in which the Company operates and related mattersare put up on the website of the Company at the link http://www.reliancecapital.co.in/Policies.aspx.
In terms of the provisions of the Act Ms. Ryna Karani is proposed tobe appointed as a Director of the Company liable to retire by rotation at the ensuingAGM.
The Company has received notices under Section 160 of the Act from amember proposing her candidature for the office of director of the Company liable toretire by rotation.
The Board of Directors on the recommendation of Nomination andRemuneration Committee has recommended the appointment.
A brief resume of Directors proposed to be appointed / re-appointed atthe ensuing Annual General Meeting along with requisite details as stipulated underRegulation 36(3) of the Listing Regulations is given in the Notice and section onCorporate Governance Report forming part of this Annual Report.
Key Managerial Personnel
During the year there was no change in the Key Managerial Personnel.
Evaluation of Directors Board and Committees
The Nomination and Remuneration Committee has devised a policy forperformance evaluation of the individual Directors Board and its Committees whichincludes criteria for performance evaluation.
Pursuant to the provisions of the Act and Regulation 17(10) of theListing Regulations the Board has carried out an annual performance evaluation of its ownperformance the Directors individually as well as the evaluation of the working of theCommittees of the Board. The Board performance was evaluated based on inputs received fromall the Directors after considering criteria such as Board composition and structureeffectiveness of Board / Committee processes and information provided to the Board etc.A separate meeting of the Independent Directors was also held during the financial yearfor the evaluation of the performance of non-independent Directors performance of theBoard as a whole and that of the Chairman of the Board.
The Nomination and Remuneration Committee has also reviewed theperformance of the individual Directors based on their knowledge level of preparation andeffective participation in meetings understanding of their roles as directors etc.
Policy on appointment and remuneration for Directors Key ManagerialPersonnel and Senior Management Employees
The Nomination and Remuneration Committee of the Board has devised apolicy for selection and appointment of Directors Key Managerial Personnel and SeniorManagement Employees and their Remuneration. The Committee has formulated the criteria fordetermining qualifications positive attributes and independence of a Director which hasbeen put up on the Company's website www.reliancecapital.co.in.The policy on the above is attached as Annexure - A.
Directors' Responsibility Statement
Pursuant to the requirements under Section 134(5) of the Act withrespect to Directors' Responsibility Statement it is hereby confirmed that:
i. In the preparation of the annual financial statement for thefinancial year ended March 31 2019 the applicable Accounting Standards had been followedalong with proper explanation relating to material departures if any;
ii. The Directors had selected such accounting policies and appliedthem consistently and made judgments and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the Company as at March 31 2019and of the profit of the Company for the year ended on that date;
iii. 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;
iv. The Directors had prepared the annual financial statement for thefinancial year ended March 31 2019 on a 'going concern' basis;
v. The Directors had laid down proper internal financial controls to befollowed by the Company and such financial controls are adequate and are operatingeffectively. The Company is taking constant steps to further strengthen the same; and
vi. The Directors had devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems are adequate and operatingeffectively.
Contracts and Arrangements with Related Parties
All contracts / arrangements / transactions entered into / by theCompany during the financial year under review with related parties were on an arm'slength basis and in the ordinary course of business.
There were no materially significant related party transactions whichcould have potential conflict with interest of the Company at large.
During the year the Company had not entered into any contract /arrangement / transaction with related parties which could be considered material inaccordance with the policy of the Company on materiality of related party transactions.
All Related Party Transactions were placed before the Audit Committeeas also the Board for approval. Prior omnibus approval of the Audit Committee was obtainedfor the transactions which were of a repetitive nature. The transactions entered intopursuant to the omnibus approval so granted were reviewed and statements giving details ofall related party transactions were placed before the Audit Committee and the Board ofDirectors on quarterly basis. The policy on Related Party Transactions as approved by theBoard is uploaded on the Company's website at the link
Material Changes and Commitments if any affecting the financialposition of the Company
The Company has entered into binding definitive agreements with NipponLife Insurance of Japan ('Nippon Life') to exit its stake in Reliance Nippon Life AssetManagement (RNAM).
Pursuant to the agreements Nippon Life has made an open offer to thepublic shareholders of RNAM at Rs 230 per share as required under SEBI Regulations andreach the maximum permissible promoter shareholding of 75% for listed companies.
The Company will receive proceeds of approx. Rs 6000 crore (US $ 860million) through sale of its shareholding to Nippon Life at Rs 230 a share and thesimultaneous Offer For Sale to other financial investors.
The entire proceeds of approx. Rs 6000 crore (US $ 860 million) willbe utilised to reduce Company's outstanding debt.
Meetings of the Board
A calendar of Meetings is prepared and circulated in advance to theDirectors. During the year seven Board Meetings were held details of meetings held andattended by each Director are given in the Corporate Governance Report.
The Audit Committee of the Board consists of Independent Directorsnamely Mr. Rajendra P. Chitale Chairman Dr. Bidhubhusan Samal Mr. V. N. Kaul Ms.Chhaya Virani Non-Independent Director Mr. Amitabh Jhunjhunwala and Executive DirectorMr. Anmol Ambani as Members. During the year all the recommendations made by the AuditCommittee were accepted by the Board.
M/s. Pathak H.D. & Associates Chartered Accountants and M/s. PriceWaterhouse & Co Chartered Accountants LLP ("PWC") Chartered Accountantswere appointed as Auditors of the Company for a term of 5 (five) consecutive years at theAnnual General Meeting of the Company held on September 27 2016 and September 26 20l7respectively. PWC has resigned as Statutory Auditor of the Company with effect from June11 2019 and subsequently filed form ADT-4 with Ministry of Corporate Affairs as per theprovisions of Section 143(12) of the Companies Act 2013.
The Company did not agree with the reasons given by PWC for theresignation which were grossly inadequate. The observations given by PWC were examined bythe continuing Statutory Auditor of the Company. As per the report of continuing StatutoryAuditor the provisions of Section 143(12) of the Companies Act 2013 did not gettriggered.
The Company had further obtained independent legal opinion from reputedlaw firm and a senior counsel re-confirming that there were no violations attractingSection 143(12) of the
Companies Act 2013.
M/s. Pathak H.D. & Associates Chartered Accountants whose term isvalid until conclusion of the Annual General Meeting for the year ended March 31 2021has confirmed that they will continue as the sole Statutory Auditor of the Company.
The observations and comments given by the Auditors in their Reportread together with notes on Financial Statements are self-explanatory and hence do notcall for any further comments under Section 134 of the Act.
Secretarial Audit and Secretarial Compliance Report
Pursuant to the provisions of Section 204 of the Act and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorshad appointed M/s. Aashish K. Bhatt & Associates Practicing Company Secretaries toundertake the Secretarial Audit of the Company. There is no qualification reservation oradverse remark made in their Secretarial Audit Report. The Audit Report of the SecretarialAuditor is attached as Annexure - B.
Pursuant to circular No. CIR/ CFD/ CMD1 / 27/ 201 9 dated February 82019 issued by SEBI the Company has obtained Secretarial Compliance Report fromPracticing Company Secretaries on compliance of all applicable SEBI Regulations andcirculars / guidelines issued thereunder and the copy of the same shall be submitted withthe Stock Exchanges within the prescribed due date.
During the year under review the Company has complied with theapplicable Secretarial Standards issued by The Institute of Company Secretaries of India.
Maintenance of Cost Records
The Central Government has not specified maintenance of cost recordsfor any of the products of the Company under Section 148(1) of the Act.
As required under Section 134(3)(a) of the Act the Annual Return forthe financial year 2017-18 and 2018-19 is put up on the Company's website and can beaccessed at https://www.reliancecapital.co.in/Annual-Reports.aspx.
Particulars of Employees and related disclosures
(a) Employees Stock Option Scheme(s)
Employees Stock Option Scheme(s) (ESOS 2015 and ESOS 2017) wereapproved and implemented by the Company and Options were granted to the employees inaccordance with guidelines applicable to ESOS. The Nomination and Remuneration Committeeof the Board monitors the Scheme. The existing ESOS Scheme and Plans are in compliancewith the Securities and Exchange Board of India (Share Based Employee Benefits)Regulations 2014 (SEBI Regulations).
The Company has received a certificate from the Auditors of the Companythat the ESOS 2015 and ESOS 2017 have been implemented in accordance with the SEBIRegulations and as per the resolution passed by the members of the Company authorisingissuance of the said Options. The details as required to be disclosed under SEBIRegulations are put on the Company's website at http://www.reliancecapital.co.in/ESOS-Disclosure.aspx.
(b) Other Particulars
In terms of the provisions of Section 197(12) of the Act read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014
as amended a statement showing the names and other particulars of theemployees drawing remuneration in excess of the limits set out in the said Rules areprovided in the Annual Report which forms part of this Report.
Disclosures relating to the remuneration and other details as requiredunder Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 as amended are also provided in theAnnual Report which forms part of this Report. However having regard to the provisionsof first proviso to Section 136(1) of the Act the Annual Report excluding the aforesaidinformation is being sent to all the members of the Company and others entitled thereto.The said information is available for inspection at the registered office of the Companyon all working days except Saturdays between 11:00 A.M. and 1:00 P.M. up to the date ofthe Meeting. Any member interested in obtaining the same may write to the CompanySecretary and the same will be furnished on request.
Conservation of Energy Technology Absorption and Foreign ExchangeEarnings and Outgo
The Company is a Non-Banking Financial Company and does not involve inany manufacturing activity most of the information as required under Section 134(3)(m) ofthe Act read with Rule 8 of the Companies (Accounts) Rules 2014 are not applicable.However the information as applicable has been given in Annexure - C forming part of thisReport.
The Company has adopted 'Reliance Group-Corporate Governance Policiesand Code of Conduct' which sets out the systems processes and policies conforming to theinternational standards. The report on Corporate Governance as stipulated under Regulation34(3) read with Para C of Schedule V of the Listing Regulations and Guidelines onCorporate Governance issued by the Reserve Bank of India is presented in separate sectionforming part of this Annual Report.
A Certificate from M/s. Aashish K. Bhatt & Associates PracticingCompany Secretaries confirming compliance to the conditions of Corporate Governance asstipulated under Para E of Schedule V of the Listing Regulations is enclosed to thisReport.
Ombudspersons & Whistle Blower (Vigil Mechanism)
The Company has formulated an Ombudspersons & Whistle Blower (VigilMechanism) policy to address the genuine concerns if any of the Directors and employees.The details of the same have been stated in the Report on Corporate Governance and thepolicy can be accessed on the Company's website.
The Company has laid down a robust Risk Management Policy definingRisk profiles involving Strategic Technological Operational Financial CreditOrganisational Legal and Regulatory risks within a well defined framework. The RiskManagement Policy acts as an enabler of growth for the Company by helping its businessesto identify the inherent risks assess evaluate and monitor these risks continuously andundertake effective steps to manage these risks.
The Risk Management Committee consisting of Mr. V. N. Kaul Chairmanand Ms. Chhaya Virani as Member periodically reviews the robustness of the RiskManagement Policy. The periodical update on the risk management practices and mitigationplan of the Company and subsidiaries are presented to the Audit Committee and Board ofDirectors. The Audit Committee and Board periodically review such updates and findings andsuggest areas where internal controls and risk management practices can be improved. Moredetails on Risk Management indicating development and implementation of Risk ManagementPolicy including identification of elements of risk and their mitigation are covered inManagement Discussion and Analysis section which forms part of this Report.
Compliance with provisions of Sexual Harassment of Women at workplace(Prevention Prohibition and Redressal) Act 2013
The Company is committed to uphold and maintain the dignity of womanemployees and it has in place a policy which provides for protection against sexualharassment of women at work place and for prevention and redressal of such complaints.During the year no such complaints were received. The Company has also constituted anInternal Complaints Committee under the Sexual Harassment of Women at workplace(Prevention Prohibition and Redressal) Act 2013.
Corporate Social Responsibility
The Company has constituted Corporate Social Responsibility (CSR)Committee in compliance with the provisions of Section 135 of the Act read with theCompanies (Corporate Social Responsibility Policy) Rules 2014. The CSR Committee hasformulated a Corporate Social Responsibility Policy (CSR policy) indicating the activitiesto be undertaken by the Company. The CSR policy may be accessed on the Company's websiteat the link; http://www.reliancecapital.co.in/pdf/Group_CSR_Policy_Document.pdf.
The CSR Committee consists of Dr. Bidhubhusan Samal as Chairman Mr.Amitabh Jhunjhunwala Mr. V. N. Kaul and Mr. Anmol Ambani as Members. The disclosureswith respect to CSR activities is given in Annexure - D.
Order if any passed by Regulators or Courts or Tribunals Noorders have been passed by the regulators or courts or tribunals impacting the goingconcern status and the Company's operations.
Internal Financial Controls and their adequacy
The Company has in place adequate internal financial controls acrossthe organization. The same is subject to review periodically by the internal audit cellfor its effectiveness. During the year such controls were tested and no reportablematerial weakness in the design or operation were observed. The Company is taking constantsteps to strengthen its loan sanctioning processing and documentation processes.
Business Responsibility Statement
Business Responsibility Report for the year under review as stipulatedunder the Listing Regulations is presented in the separate section forming part of thisAnnual Report.
Your Directors would like to express their sincere appreciation for theco-operation and assistance received from shareholders debenture holders debenturetrustee bankers financial institutions regulatory bodies and other businessconstituents during the year under review. Your Directors also wish to place on recordtheir deep sense of appreciation for the commitment displayed by all executives officersand staff resulting in the successful performance of the Company during the year.
Annexure - A
Policy on appointment and remuneration for Directors Key ManagerialPersonnel and Senior Management Employees
1.1 Reliance Capital Limited considers human resources as itsinvaluable assets. This policy aims to harmonise the aspirations of the directors /employees with the goals of the Company.
1.2 Human capital is a strategic source of value creation. As part ofour progressive HR philosophy it is necessary to have in place a comprehensiveCompensation Policy which is in line with the industry trend and is employee friendly.
2.1 Ensuring that the quantum and composition of remuneration isreasonable and sufficient to attract retain and motivate employees to run the Companysuccessfully.
2.2 Ensuring that relationship of remuneration to performance is clearand meets the performance benchmarks.
2.3 Ensure that annual compensation review considers industry/ businessoutlook and strategies adopted by industry peers differentiates employees based on theirperformance/skill sets and also protects employees particularly those in junior cadreagainst inflationary pressures.
2.4 Retention of high performers at all levels and those playingcritical roles.
The Board has constituted the "Nomination and RemunerationCommittee" in line with the requirements under the provisions of the Companies Act2013. This Policy sets out the broad guiding principles for the Committee for recommendingto the Board the appointment and remuneration of the directors key managerial personneland senior managerial personnel of the Company.
4.1 "Director" means a director appointed to the Board of theCompany.
4.2 "Key Managerial Personnel" means
(i) the Chief Executive Officer or the Managing Director or theManager;
(ii) the Company Secretary;
(iii) the Whole-time Director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed under the Companies Act2013.
4.3 ''Senior Management'' means personnel of the Company who aremembers of its core management team excluding Board of Directors comprising of allmembers of management one level below the executive directors if any.
5.1 Appointment of Directors/ Key Managerial / Senior Managementpersonnel
The Nomination and Remuneration Committee inter-alia considersqualifications positive attributes areas of expertise and number of Directorships andMemberships held in various committees of other companies by such persons for selection.The Board considers the recommendation of the Committee's and takes appropriate decisions.The Company also considers the requirement of skills and effectiveness of personscontributing to the Company's business and policy decisions.
5.2 Remuneration to Directors/ Key Managerial Personnel
5.2.1 The remuneration of the Directors/ Managing Directors/ Whole-timeDirectors and Managers etc. will be governed as per provisions contained in the CompaniesAct 2013 and Rules made therein from time to time.
5.2.2 Non-Executive Directors shall be entitled to sitting fees forattending the meetings of the Board and the Committees thereof as approved by the Board ofDirectors from time to time. The Non-Executive Directors shall also be entitled to profitrelated Commission if approved by the Board in addition to the sitting fees.
5.2.3 The Board on the recommendation of the Nomination andRemuneration Committee shall review and approve the remuneration payable to theDirectors/ Key Managerial Personnel/ Senior Management Personnel of the Company within theoverall limits if any approved by the shareholders.
5.2.4 The remuneration structure shall include the followingcomponents:
(i) Basic Pay
(ii) Perquisites and Allowances
(iii) Stock Options if any.
(iv) Commission (Applicable in case of Executive Directors/ Directors)
(v) Retiral Benefits
(vi) Performance Linked Incentives
5.2.5The Annual Plan Objectives financial results of the Companyshall be reviewed by the Nomination and Remuneration Committee and performance incentivesincrement revision in remuneration etc. will be proposed based on the achievements.
5.3 Remuneration to other employees
Employees shall be assigned grades/bands according to theirqualifications and work experience competencies as well as their roles andresponsibilities in the organization. Individual remuneration shall be determined withinthe appropriate grade/ bands and shall be based on various factors such as job profileskill sets seniority experience performance and prevailing remuneration levels forequivalent jobs.
6. Retention Features as part of Compensation Package
Based on the organizational need for retaining performing employees andthose in critical roles certain retention features may be rolled out as part of theoverall compensation package. These may take form of Retention Bonuses (RBs) SpecialMonetary Programs (SMPs) Long-term Incentives (LTIs) Employee Stock Options etc.
7. Modification and Amendment
The policy is subject to modification amendment and alterations by themanagement at any time without assigning any reasons.
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