REPORT OF THE DIRECTORS AND MANAGEMENT DISCUSSION
AND MANAGEMENT DISCUSSION & ANALYSIS
Your Directors are pleased to present this, 23rd Annual Report of the
Company along with the Audited Accounts of the Company for the year ended 31st
(Rs.. in Million)
|Income from Operations
|Depreciation & Amortization
|Transfer to Statutory Reserve
The profit after tax achieved by your Company during the period under review is almost
double than that of the previous year though the gross receipts are less than previous
year. Therefore for the third year in succession, your Directors are pleased to recommend
5 % dividend i.e. Rs.. 0.50 for every equity share of Rs. 10/- each fully paid up for the
year 2013-14. The Dividend, if approved by the Shareholders at the ensuing
Annual General Meeting will be paid to the equity share holders, whose names appear in
the Register of Members, as per the provisions of the Companies Act 2013. In which case,
the dividend out go would be Rs. 4.63 Mn. and the dividend tax to be paid by the Company
would be Rs..0.79 Mn.
NBFCs in India have played a significant role in financing various sectors of the
economy, particularly those that have been underserved by the banks. Non-banking finance
companies (NBFC) which operated mostly in unorganized sectors and under-serviced segments
of the economy have been regulated to a large extent post reforms. Close Customer
Interaction, deep understanding of the client, specialized field expertise and low cost
infrastructure are the typical features of a NBFC business model. NBFCs supplement the
role of the banking sector in meeting the increasing financial need of the corporate
sector, delivering credit to the unorganized sector and to small local borrowers.
The fact that NBFCs as a whole account for more than 12.5% [for 2012-13 it was 12.7%as
per economic survey] of the assets of the total financial system indicate the significant
role NBFCs have in the financial sector. However the frequent restrictive regulations for
the sector seem to be imposing regulatory burdens and causing jerks to the growth of the
segment. Owing to the regulatory uncertainty and general macroeconomic lull, NBFC segment
has witnessed a slower growth, slow-down in construction equipment, commercial vehicle and
gold loan portfolios and building of delinquencies and lowering of interest margins.
The significant change in the Regulatory frame work in the last few years has helped us
to be very prudent resulting in achieving the desired goal. While your Company has
maintained a perfect record of compliance of regulatory norms, as assured in the earlier
years maintained a healthy credit portfolio consisting of a select number of clients.
Though the outstanding credit as on 31.03.2014 declined by 10% compared to corresponding
period, the reduction is attributed to timely closure of certain borrowal accounts as per
contract. With the Regulator having classified the NBFCs based on their nature of
business, your Company falls under the category "Loan Company" and the
activities are restricted to lending only. IFCL being non-deposit accepting, loan company
and having decided to continue the status further ,will be looking for alternate resources
available within the regulatory framework to meet the growing demand of the credit
OPPORTUNITIES & THREATS
The role of NBFCs has become increasingly important from both the macroeconomic
perspective and the structure of the Indian financial system. It is a proven fact, that
only those NBFCs which fall under the regulatory norms and serious about being in the
finance business survived. To survive and constantly grow, NBFCs have to focus on their
core strengths while improving on weaknesses. They have to either constantly search for
new products and services in order to remain competitive or exhibit highest ethical
standards in conducting their business. The coming years will be testing ground for the
NBFCs and only those who will face the challenge and prove themselves will survive in the
There have been several committees in the past acknowledging the role and importance of
NBFCs in India and their complimentary role to banks in financial intermediation. Yet
there being no level playing field, it is likely that the NBFCs will be very cautious and
concentrate much on the secured transaction. Any sudden spurt in the growth depends upon
the monetary policies of the new Government at the Center. Since there are several credit
starved and under-serviced segments in the economy, the NBFCs have a definite long term
role, the beginning of which is expected during 2014-15. NBFCs have immense business
potential from the segment untapped by the commercial banks.
Consolidation of business by the public sector banks, fast expansion by the new
generation banks and further banking license being issued by the Regulator appear to push
the NBFCs to a corner. Non-availability of a level playing field on account of absence of
a strong & effective recovery tool like the SARFAESI act (available to the banks) made
the NBFCs less effective compared to commercial banks though both are engaged in similar
activities. The activity oriented classification & definition and in turn the
restrictions has forced the NBFCs to live with only one activity thus restricting to only
few select products. The Regulatory guidelines to the NBFCs to reduce the dependence on
public deposit has already curtailed the capacity of the sector to raise funds and in turn
Your Company operating only in major cities and having not accepted any public deposit
has not ventured into any riskier segments. Proper systems and procedures are in place to
analyse and mitigate the threats.
RISK & CONCERNS
Your Company being a NBFC is subjected to both Business and Financial risk. While the
business risk is associated with operating environment, ownership structure, Management,
System & Policy and Corporate Governance, the financial risk lies in Asset Quality,
Liquidity, Profitability and Capital Adequacy. Your Company recognizes these risks and
makes best effort to mitigate them in time.
One of the major concerns for the sector is the deteriorating asset quality in the
banking sector which has certain indirect impact on the asset qualities of NBFCs also. Any
negative growth of the Industry, irrespective of the sector has some adverse effect on the
workings of the NBFCs. Your Company has always kept in mind the uncertainties and their
mitigation while conducting the business.
THE RBI NORMS AND ACCOUNTING STANDARDS
To comply with RBI directions, Your Company closed its accounts for the full year
ending March 2014, and your Company continues to comply with the directives issued as well
as the norms prescribed by Reserve Bank of India for NBFCs.
INFORMATION AS PER SECTION 217 (1) (e) OF THE COMPANIES ACT, 1956
Your Company is a Non-Banking Finance Company and is not engaged in manufacturing
activity of any kind. The disclosure of information relating to conservation of energy and
technology absorption are therefore not applicable to your Company. There were no foreign
exchange earnings or outgo for your Company during the year.
DIRECTORS` RESPONSIBILITY STATEMENT
Pursuant to provisions under section 134(5) of the Companies Act, 2013, the Board of
Directors hereby state that;
1. In the preparation of Annual Accounts for the year ended 31st March 2014,
all the applicable accounting standards have been followed along with proper explanation
relating to material departures.
2. The Directors have selected such accounting policies and applied them consistently
and made judgments and estimates that were reasonable and prudent so as to give a true and
fair view of the state of affairs of the Company as at 31st March 2014 and of
the Profit or Loss of the Company for the year under review.
3. The Directors have taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act, 2013 for
safeguarding the assets of the Company and for preventing and detecting fraud and other
4. The Directors have prepared the Annual Accounts for the current financial year on a
`going concern` basis.
5. 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
6. The Directors have devised proper systems to ensure complaints with the provisions
of all applicable laws and that such system were adequate and operating effectively.
Mr. Bala V. Kutti, retires at the end of this meeting and being eligible, offers
himself for reappointment.
Your Company provides considerable importance to good Corporate Governance and
complying with the Code of Corporate Governance introduced by SEBI. A detailed report on
Corporate Governance together with a certificate from the Statutory Auditors in compliance
of Clause 49 of the Listing Agreement has been annexed as part of the Annual Report.
Management Discussion and Analysis Report highlighting the performance of the Company is
attached forming part of the Directors` Report.
M/s.V.Ramaratnam & Co. retire at the conclusion of this Annual General Meeting and
are eligible for reappointment. Necessary resolutions are placed before the Shareholders
for their approval.
Your Directors wish to place on record their sincere appreciation and gratitude to the
bankers of the company and various Government agencies for their support, assistance and
co-operation and look forward for their continued support.
||For and on behalf of Board of
||INDUS FINANCE CORPORATION LTD
|Place: Chennai - 600 034.
|Date: 30th May 2014.