REPORT OF THE DIRECTORS AND MANAGEMENT DISCUSSION
AND MANAGEMENT DISCUSSION & ANALYSIS
Your Directors are pleased to present this, 22nd Annual Report of the
Company along with the Audited Accounts of the Company for the year ended 31st
(Rs. in Lacs)
|Profit before Depreciation and Tax
|Deferred Tax Asset
|Profit after Tax
|Amount available for appropriation
|Transfer to Statutory Reserve
|Transfer to Profit and Loss Account
The total income achieved by your company for the period under review is Rs.732.74 lacs
as against the total income of Rs.1074 .97 lacs in the previous year. The income was
higher during the previous year due to the settlement proceeds received in respect of the
dispute with ICICI Bank ltd which was Rs.594 lacs Excluding this income, the total income
achieved by your company during the year under review shows 52% rise as compared to the
previous year. The depreciation for the period under review is Rs.247.58 as against
Rs.811.19 lacs for the previous year. Your company has registered a net profit of Rs
.45.63 lac for the period under review as against Rs.38.79 lacs of previous year.
For the third year in succession, your Directors are pleased to recommend 3.5% dividend
i.e. Rs. 0.35 for every equity share of Rs.10/- each fully paid up for the year
2012-13.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 1956. In which case, the dividend out
go would be Rs.32.40 lacs and the dividend tax to be paid by the company would be Rs.5.25
While NBFCs have witnessed substantial growth over the years, they have played an
important role by providing finance to activities which are not served by the organized
banking sector. 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. With NBFC regulations having undergone tremendous refinement over
the past decade, there emerged a large number of non-deposit taking companies having
inter-linkage with the broader financial system. The regulator termed this NBFCs
Systemically important and brought in sharper supervision with introduction of capital
adequacy and exposure norms. This 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. IFCL has achieved modest gains in terms of Gross Income. Your company
is in the process of obtaining credit rating from a leading, recognized rating agency.
IFCL being a non deposit accepting, loan company 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 portfolio.
Although considerable improvement has been witnessed during the last decade in the
functioning and survival of the NBFC sector, particularly after global financial crisis
and stringent regulatory norms, the overall growth of this sector may remain subdued,
considering the significant slowdown in the economy, structural challenges such as
increased refinancing risk, declining margins. The Company is planning to counter its
challenges through quality advance portfolio and committed workforce, tight control on
liquidity and margins, cost effective resources and working towards creating better value
for all the stakeholders in the most competitive manner.
OPPORTUNITIES & THREATS
Non-banking financial companies constitute an important segment of the financial
system. They play very crucial role in channelizing the scare financial resources to
capital formation. NBFCs have more flexible structure than banks, can take quick decisions
and take greater risks.
NBFC undertake a wide range of activities like hire-purchase finance, vehicle
financing, equipment lease finance, personal loans, working capital loans, consumer loans,
housing loans, loans against shares and investment, etc. While NBFC s have immense
business potential from the segment untapped by the commercial banks, the organised sector
particularly the infrastructure development companies seem to be very comfortable with
NBFC sector for their project funding. With the successive Governments aiming better
infrastructure in the country, there is tremendous scope and opportunity for the NBFCs for
their activities in the form of both lending and equipment financing.
Though the functions of NBFCs are almost similar to that of banks, there are few
differences between both the institutions.
1. NBFCs do not have access to public demand deposit.
2. NBFCs are not part of payment & settlement system
3. There is no insurance cover like DICGC cover available to banks.
The increasing number of existing bank branches and the new banking license being
issued by the RBI will further increase the competition in the financial market. Banks are
bound to expand their horizon particularly the rural area which is now subjected to
expansion. While these banks are expected to grab a major share of NBFC business in the so
far unbanked area, the latest advice of the RBI to NBFCs to reduce dependence on the
public deposit will have adverse impact on their capacity to mobilize resources and cater
the demand, thus having severe impact on the profitability.
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
NBFC s less effective compared to commercial banks though both are engaged in similar
Your Company has not ventured into riskier segments such as unsecured loans, purchase
finance for used commercial vehicles, capital market lending, etc. which could have
adverse impact on the financial health.
RISKS AND CONCERNS
An RBI working group has recommended higher capital norms for non-banking financial
companies (NBFCs), increased risk weights for NBFC lending to commercial real estate and
capital markets sectors. The group has also recommended that accounting norms and
provisions that are currently applicable to banks be applied to NBFCs also in a phased
manner. The working group has also recommended that the NBFCs may be given the benefit
under SARFAESI Act, 2002.
IFCL 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. IFCL recognizes these risks and makes best
effort to mitigate them in time.
THE RBI NORMS AND ACCOUNTING STANDARDS
To comply with RBI directions, your company closed its accounts for the full year
ending March 2013, 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 section 217 (2AA) of the Companies (Amendment) Act 2000, the Directors
1. In the preparation of Annual Accounts for the year ended 31st March 2013,
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 2013 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, 1956 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.
Mr. T.S. Raghavan , retires at the end of this meeting and being eligible , offers
himself for reappointment.
DELISTING OF SHARES FROM MADRAS STOCK EXCHANGE LTD AND COIMBATORE STOCK EXCHANGE LTD.,
You are aware that pursuant to the approval of the shareholders for voluntary delisting
of 2009 of SEBI in their Annual General Meeting held on 30-9-2011, the company has
submitted the application for delisting of shares to the respective stock exchanges in
February 2012, MSE has intimated their approvals for delisting of shares from MSE. However
no reply has been received from CSE. As per the said regulation, it is deemed to have been
approved, on the expiry of thirty working days from the date of submission of the such
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.
Your company does not have any employee drawing salary in excess of the amount
stipulated under Section 217 (2A) of the Companies Act, 1956.
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
||Bala V. Kutti
|Date: 10th August 2013.