DIRECTORS' REPORT DEAR MEMBERS, Your Directors have pleasure in presenting the Twenty First Annual Report and the audited statement of accounts of your Company for the year ended March 31, 2015. RESULTS OF OPERATIONS AND STATE OF AFFAIRS The highlights of the performance during the year under review are as under: • Total Revenue increased by 15.64% to Rs.19,216.08 lacs (Previous year Rs. 16,617.84 lacs). • PBDT increased by 11.46% to Rs.13,946.47 lacs (Previous year Rs.12,512.79 lacs). • PAT increased by 4.19% to Rs.8,518.33 lacs (Previous year Rs.8,176.01 lacs). • Loan book increased by 29.28% to Rs.95,167.99 lacs (Previous year Rs.73,616.14 lacs). The increase in the Total Revenue, PBDT and PAT during the year is attributable to larger deployment of funds and recovery of dues during the year. The consolidated Total Revenue increased by 20.42% to Rs.20,607.96 lacs from Rs.17,113.71 lacs of previous year and the consolidated PBDT increased by 18.60% to Rs. 15,292.70 lacs from Rs.12,893.92 lacs of previous year. The consolidated PAT increased by 15.82% to Rs.9,523.65 lacs from Rs.8,222.89 lacs of previous year. Increased performance of the Company on consolidated basis is due to income on sales of investments held by the subsidiaries. The operations during the year were focused on growing the loan book of the Company by lending to both - the Corporate and Micro Small & Medium Enterprises sectors (MSME). MSME Lending vertical grew the loan book to Rs.44,592.37 lacs (Previous year Rs.23,105.44 lacs), while the Wholesale Lending vertical maintained a steady pace and achieved a book size of Rs.50,571.10 lacs (Previous year Rs.50,510.70 lacs). ASSET GROWTH Total Assets of the Company stood at Rs.1,13,252.34 lacs as compared to Rs.97,020.70 lacs during the last year, showing an increase of 16.73%. CAPITAL ADEQUACY RATIO Your Company's total Capital Adequacy Ratio (CAR), as of March 31, 2015, stood at 89.68% of the aggregate risk weighted assets on balance sheet and risk adjusted value of the off-balance sheet items, which is well above the regulatory minimum of 15%. STANDARD ASSETS' PROVISIONING Pursuant to the Notification No. DNBS.222/CGM (US)-2011 dated 17th January, 2011 issued by the RBI for making a general provision at 0.25% on the outstanding Standard Assets of NBFCs, your Company has made provision at 0.50% exceeding the statutory requirements. Further, the Company has decided to create additional Floating Provision @1.50% of Standard Assets over and above the statutory requirement, which would be available for adjustment against Provision on Sub-standard Assets. DIVIDEND The Directors of the Company have recommended a dividend of Rs.1.50/- (15%) per Equity Share for the financial year ended on March 31, 2015. The dividend on Equity Shares, if approved by the shareholders at the 21st Annual General Meeting, would amount to Rs.632.36 lacs (inclusive of dividend distribution tax amount of Rs.106.96 lacs) and will be paid to those members whose names appear on the Register of Members of the Company as on July 11, 2015. TRANSFER TO RESERVES The Company transferred an amount of Rs.700 lacs to the General Reserves during the year. MANAGEMENT DISCUSSION AND ANALYSIS The Management Discussion and Analysis of financial condition, including the results of operations of the Company for the year under review as required under Clause 49 of the Listing Agreement, is provided as a separate section forming part of the Annual Report. CONSOLIDATED FINANCIAL STATEMENTS The audited consolidated financial statement of the Company prepared in accordance with applicable Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 is provided in the Annual Report. SUBSIDIARY COMPANIES As on March 31, 2015, the Company has the following subsidiaries: 1. Capri Global Housing Finance Private Limited 2. Capri Global Investment Advisors Private Limited 3. Capri Global Distribution Company Private Limited 4. Capri Global Finance Private Limited 5. Capri Global Research Private Limited; and 6. Capri Global Resources Private Limited The audited financial statements, the Auditors Report thereon and the Board's Report for each of the Company's subsidiaries for the year ended March 31, 2015 are available on the website of the Company. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard. Performance and Financial Position of each of the subsidiaries A report on the performance and financial position of each of the subsidiaries as per the Companies Act, 2013 is provided as Annexure -I to the Consolidated Financial statement and hence not repeated here. Material subsidiaries There are no material subsidiaries of the Company. The Policy for determining material subsidiaries as approved by the Board may be accessed on the Company's website at link: <http://www.cgcl.co.in/images/Downloads/Policy%20on%20> Material%20Subsidiaries_1.pdf Merger of subsidiaries with the Company The Board of Directors of the Company at its meeting held on December 17, 2014 has approved the Scheme of Amalgamation ('Scheme') of Capri Global Distribution Company Private Limited, Capri Global Finance Private Limited, Capri Global Investment Advisors Private Limited and Capri Global Research Private Limited with Company and their respective shareholders and creditors under Sections 391 to 394 of the Companies Act, 1956. The Appointed Date for the merger is April 1, 2015. The Scheme has already received the Observation Letter from the Bombay Stock Exchange Limited & National Stock Exchange of India Limited and the approval of RBI. The Company has filed an Application with the Hon'ble Bombay High Court and is awaiting further instructions from the Hon'ble Court. The Scheme is subject to various regulatory approvals including the Bombay High Court. The merger of four subsidiaries with the Company would result in consolidation of resources with the Company and saving on cost of compliance and administration. DIRECTORS' RESPONSIBILITY STATEMENT In terms of Section 134(5) of the Companies Act, 2013, your Board of Directors states that: a) in preparation of the annual financial statements for the year ended March 31, 2015, the applicable accounting standards have been followed and there are no material departures from the same; b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profit of the Company for the year ended on that date; c) 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 irregularities; d) the Directors have prepared the annual accounts on a 'going concern basis'; e) the Directors have laid down proper internal financial controls to be followed by the Company and that such financial controls are adequate and are operating effectively; f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that the systems are adequate and are operating effectively. CORPORATE GOVERNANCE The Company has been observing best governance practices and is committed to adhere to the Corporate Governance requirements on an ongoing basis. A separate section on Corporate Governance and a certificate from the Practicing Company Secretary regarding compliance of conditions of Corporate Governance, as stipulated under Clause 49 of the Listing Agreement forms part of this Annual Report. Further, as required under Clause 49 of the Listing Agreement, a certificate from the Executive Director and Associate Director - Head of Finance & Accounts on the financial statements of your Company for the year ended on March 31, 2015, was placed before the Board at its meeting held on May 09, 2015. RELATED PARTY TRANSACTIONS All contracts /transactions entered by the Company during the year with related parties were on an arm's length basis and were in the ordinary course of business. During the year, the Company has not entered into any transactions which can be considered material in accordance with the policy of the Company. The policy dealing with related party transaction as approved by the Board may be accessed on the Company's website at the link: <http://www.cgcl.co.in/images/Downloads/Policy%20> on%20Related%20Party%20Transactions_1.pdf. Your Directors would like to draw attention of members to Note 26 to the financial statement which sets out details of related party transactions. CORPORATE SOCIAL RESPONSIBILITY The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Company's website at the link: <http://www.cgcl.co.in/images/Downloads/CSR_> Policy_Website.pdf As part of its initiatives under"Corporate Social Responsibility" (CSR), the Company has undertaken projects in the area of education and vocational training of the unprivileged, women and differently-abled. These projects are in accordance with Schedule VII of the Companies Act, 2013. The Annual Report on CSR activities is annexed herewith marked as Annexure I to this Report. RISK MANAGEMENT The Board of Directors of the Company has constituted Risk Management Committee in addition to the Assets Liability Management Committee ('ALCO') which is entrusted with the responsibility to assist the Board in identification and mitigation of risks associated with the business of the Company. The details of the functioning of the Risk Management Committee and ALCO are provided in the Report on Corporate Governance forming part of this Annual Report. The Company follows a proactive risk management policy, aimed at protecting its assets and employees while at the same time ensuring growth and continuity of its business. Regular updates are made available to Board at the Board Meetings and in special cases on ad-hoc basis. A detailed discussion on the identified risks and mitigation strategies is contained in the Management Discussion and Analysis forming part of the Annual Report. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has in place adequate internal controls commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence, the Internal Auditors report to the Chairman of the Audit Committee of the Board. Internal Auditors monitor and evaluate the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of Internal Auditors, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. DIRECTORS AND KEY MANAGERIAL PERSONNEL In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Articles of Association of the Company Mr. Rajesh Sharma, retires by rotation at the ensuing Annual General Meeting and offers himself for re-appointment. During the year under review, the members approved the re-appointment of Mr. Quintin E. Primo III as a Nonexecutive Non-independent Director who is liable to retire by rotation and appointment of Mr. Beni Prasad Rauka, Mr. Bhagwati Prasad, Mr. Mukesh Kacker, Ms. Bhagyam Ramani and Mr. T R Bajalia as Independent Directors who are not liable to retire by rotation. The members have also appointed Mr. Sunil Kapoor as an Executive Director of the Company for a term of one year which expired on January 23, 2015 and the Board has re-appointed him for another term of one year starting from January 24, 2015, which is proposed to be approved by the members at the ensuing Annual General Meeting. During the year under review, Mr. Anand Agarwal was appointed as Chief Financial Officer of the Company w.e.f. October 16, 2014 and he resigned on December 29, 2014. Declaration by Independent Director(s) The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of Independence prescribed both under the Companies Act, 2013 and Clause 49 of the Listing Agreement. Formal Annual Performance Evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of Independent Directors, Board, Committees and other individual Directors, process of evaluation was followed as per the Policy laid down in this regard. The manner in which the evaluation has been carried out has been explained in the Report on Corporate Governance . Nomination and Remuneration Policy The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection of Directors, determining Directors independence and payment of remuneration to Directors, Key Managerial Personnel and other employees. The Nomination and Remuneration Policy is stated in the Report on Corporate Governance. Familiarization Program On appointment, the concerned Director is issued a Letter of Appointment setting out in detail, the terms of appointment, duties, responsibilities and expected time commitments. The details of program for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company and related matters are put up on the website of the Company at link: <http://www.cgcl.co.in/images/Downloads/> Familiarisation%20Programme%20for%20Independent%20 Directors.pdf EMPLOYEES STOCK OPTION PLAN The Nomination and Remuneration Committee of the Board of Directors of the Company inter alia administers and monitors the Employees Stock Options Scheme in accordance with the applicable SEBI guidelines. During the year under review, no fresh Options were granted and 21,600 Stock Options granted earlier were vested and exercised during the year by the employees. The applicable disclosure as stipulated under the SEBI guidelines as on March 31, 2015 with regard to Employees Stock Options Scheme are provided in Annexure II to this Report. The Company has received a certificate from the Auditors of the Company that the Employees Stock Options Scheme has been implemented in accordance with the SEBI guidelines and the resolution passed by the members. The certificate would be placed at the Annual General Meeting for inspection by members. AUDITORS AND AUDITORS' REPORT STATUTORY AUDITORS M/s. Karnavat & Co, Chartered Accountants, Statutory Auditors of the Company, holds office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. They have confirmed their eligibility to the effect that their re-appointment, if made, would be within the prescribed limits under the Companies Act, 2013 and that they are not disqualified for re-appointment. The Notes on financial statements referred to in the Auditors Report are self-explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remark. SECRETARIAL AUDITOR Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Alwyn D'souza & Co, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith marked as Annexure III to this Report. The Secretarial Audit Report does not contain any qualification, reservations or adverse remark. DISCLOSURES Audit Committee The Audit Committee comprises Independent Directors namely Mr. Beni Prasad Rauka (Chairman), Ms. Bhagyam Ramani, Mr. Mukesh Kacker and Mr. T R Bajalia as other members. The Audit Committee played an important role during the year. It coordinated with the Statutory Auditors, Internal Auditors and other key personnel of the Company and has rendered guidance in the areas of internal audit and control, finance and accounts. All the recommendations made by the Audit Committee were accepted by the Board. Six meetings of the Audit Committee were held during the year. STAKEHOLDERS' RELATIONSHIP COMMITTEE The Committee has met four times during the year. With the compulsory dematerialization of the Company's shares and electronic mode of transfers, postal dispatches which led to usual complaints, have been minimized. At the year end, 99.94% of the total shares were dematerialized with no unresolved pending investor grievances. Nomination & Remuneration Committee The Nomination and Remuneration Committee recommends to the Board the suitability of candidates for appointment as Key Managerial Personnel, Directors and the remuneration packages payable to them and other employees. The Nomination and Remuneration Committee met five times during the year. Vigil Mechanism / Whistle Blower Policy The Company has a vigil mechanism named Whistle Blower Policy (WBP) to deal with instance of fraud and mismanagement, if any, the details of the WBP is explained in the Report on Corporate Governance. The WBP may be accessed on the Company's website at the link: <http://www>. cgcl.co.in/images/Downloads/Whistle%20Blower%20Policy-website_1.pdf Meetings of Board Six meetings of the Board of Directors were held during the year, the details of which are provided in Report on Corporate Governance. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013. Particulars of Loans, Investments, Guarantees Not applicable being a Non-Banking Finance Company. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo The provisions of Section 134(3)(m) of the Companies Act, 2013, relating to conservation of energy and technology absorption are not applicable to the Company. However, the Company has been continuously and extensively using technology in its operations. There were no foreign exchange earnings during the year. There was foreign exchange outgo of Rs.15.23 lacs during the year. Extract of Annual Return The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith marked as Annexure -IV to this Report. Particulars of Employees Disclosures pertaining to remuneration and other details as required under 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 the Annual Report and is marked as Annexure VA to this Report. In terms of the provisions of Section 197(12) of the Companies Act, 2013, read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annual Report and is marked as Annexure VB to this Report. Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. Reserve Bank of India Directions Your Company is categorized as a non deposit taking systematically important (ND-SI) non-banking finance company (NBFC). Accordingly, during the year, your Company has not accepted any deposits from the public and there were no deposits which become due for repayment or renewal. Your Company has complied with the directives issued by the Reserve Bank of India under the Non Banking Financial Companies (Reserve Bank of India) Directions, 2007, as amended from time to time. Increase in share Capital During the year, your Company has allotted 27,408 Equity shares of Rs.10/- each fully paid-up to the warrant holders on conversion of Warrants of the Company during the 5th Warrant exercise period and has allotted 21,600 Equity Shares of Rs.10/- each fully paid-up on exercise of Stock Options by the employees of the Company. During the year under review, the Company has not issued shares with differential voting rights nor has issued any sweat equity. As on March 31, 2015, none of the Directors of the Company hold any convertible instruments of the Company. Disclosure under sexual Harassment of Women Company has Sexual Harassment Policy in place and available on Company's intranet portal. During the year under review, there were no complaints from any of the employee. ACKNOWLEDGMENTS The Board of Directors wish to place on record their appreciation for the support extended by the bankers, business associates, clients, consultants, advisors, shareholders, investors and the employees of the Company and subsidiaries for their continued co-operation and support. The Board of Directors would also like to place on record their sincere appreciation for the co-operation received from the Reserve Bank of India, SEBI, NSE & BSE and all other statutory and/or regulatory bodies. For and on behalf of the Board SD/- SUNIL KAPOOR Executive Director DIN: 01436404 SD/- RAJESH SHARMA Director DIN: 00020037 Place : Mumbai Date: May 09, 2015 |