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Arman Financial Services Directors Report, Arman Financial Reports by Directors
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Arman Financial Services

BSE: 531179|NSE: ARMANFIN|ISIN: INE109C01017|SECTOR: Finance - Leasing & Hire Purchase
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Directors Report Year End : Mar '16    Mar 15

Dear Shareholders,

The Directors have pleasure in presenting the 24th Director''s Report of your Company together with the Audited Financial Statement for the year ended on 31st March, 2016.

You being our valued partners in the Company for a long time, we share our vision of growth with you and our guiding principles are a blend of optimism which has been and will be the guiding force of all our future endeavors.

The summary of operating results for the year and appropriation of divisible profits is given below: FINANCIAI PERFORMANCE

(Amount in Rs.)

Particulars

Consolidated

Standalone

2015-16

2014-15

2015-16

2014-15

Gross Income

406,923,839

296,114,209

159,174,647

152,556,194

Profit Before Interest and Depreciation

276,691,643

202,342,970

95,381,452

100,097,718

Finance Charges

153,831,667

107,354,489

56,715,827

55,600,592

Gross Profit

122,859,976

94,988,481

38,665,625

44,497,126

Provision for Depreciation

1,792,862

2,398,245

1,327,368

2,230,635

Net Profit Before Tax

121,067,114

92,590,236

37,338,257

42,266,491

Provision for Tax

41,090,474

31,017,933

12,406,393

14,464,908

Net Profit After Tax

79,976,640

61,572,303

24,931,863

27,801,583

Balance of Profit brought forward

141,696,010

104,024,926

106,176,811

95,276,447

Balance available for appropriation

221,672,650

165,597,229

131,108,674

123,078,030

Proposed Dividend on Equity Shares

9,694,514

8,309,584

9,694,514

8,309,584

Tax on proposed Dividend

1,973,575

1,691,635

1,973,575

1,691,635

Transfer to General Reserve

1,100,000

1,200,000

1,000,000

1,200,000

Transfer to Special Reserve U/s 45-IC of RBI Act

16,275,000

12,700,000

5,025,000

5,700,000

Surplus carried to Balance Sheet

190,673,749

141,696,010

113,415,585

106,176,811

COMPANY''S AFFAIRS AND FUTURE OUTLOOK

Your Company is engaged in the business of Asset Finance and Microfinance. The Parent Company, Arman Financial Services Limited, is engaged in Asset Finance, viz. Two-wheeler and Three-Wheeler finance; while the Microfinance business is managed through Arman''s wholly owned subsidiary, Namra Finance Limited. The financial statements of both Arman and Namra, as well as the consolidated financials of Arman are included within the Annual Report. The Company has performed admirably in a highly competitive business segment and this performance has been consistent over a period of many years.

Net interest income from operations during the year under review was RS.40.69 Crores against RS.29.61 Crores for the previous year, resulting in increase of 37.42%. Earnings before Interest & Taxes (EBIT) for the current year is RS.27.49 Crores (RS.19.99 Crores in previous year) thereby resulting in increased of 37.52%. Net Profit after Taxes amounted to RS.08.00 Crores (RS.6.16 Crores in previous year) thereby resulting increase of 30%. Earnings Per share were RS.11.27 (For RS.10 each). The Company''s consolidated Assets-Under-Management has crossed RS.175 Crores, and consolidated Disbursements totaled RS.348 Crores.

CHANGE IN NATURE OF BUSINESS, IF ANY

Your Company continues to operate the same business segment as that of previous year and there is no change in the nature of the business.

DIVIDEND

Your Directors are pleased to recommend a Dividend of RS.1.40/- (Previous Year RS.1.20) per equity share of RS.10/- each (i.e. 14%) for the year ended 31st March, 2016, subject to approval by the Members at the ensuing Annual General Meeting.

AMOUNTS TRANSFERRED TO RESERVES

The Board of the Company has transferred the amounts to reserve as under:

- Transfer to special reserve as required by section 45-IC of the Reserve Bank of India Act, 1934: RS.50,25,000

Transfer to general reserve: RS.10,00,000

CHANGES IN SHARE CAPITAL, IF ANY

There is no change in the share capital of the Company during the Year.

SUBSIDIARY

The Company has one wholly owned subsidiary, named Namra Finance Limited as on date. During the year no changes took place in the group corporate structure of your Company. The Company has formulated a policy for determining ''material'' subsidiaries pursuant to the provisions of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. The said policy is available at the Company website at the link http://armanindia.com/pdf/ Corporate Governance PDF/material_subsidiary.pdf

The consolidated financial statements presented by the Company include financial information of its subsidiary prepared in compliance with applicable accounting standards. The salient features of Namra Finance Limited in Form AOC-1 is attached hereunder as per Annexure-1 as required under section 129 (3) of the Companies Act, 2013.

UNCLAIMED DIVIDEND AS ON 31ST MARCH, 2016

The unclaimed dividend as on 31st March, 2016 was RS.15,26,542.20. No transfer of unclaimed/unpaid dividend was required to be made to the Investor Education And Protection Fund during the year.

MATERIAL CHANGES AND COMMITMENTS

The RIF NorthWest-2, a Institutional Investor of the Company has sold their entire holding through Stock Exchange on 30.06.2016 and transferred 12,04,474 Class A Ordinary Equity Shares (DVR) held by them to Namra Holdings & Consultancy Services Private Limited. Other than the above disclosure, no material changes and commitments have occurred after the close of the financial year till the date of this report, which affect the financial position of the Company.

LOANS, GUARANTEES AND INVESTMENTS

Except the loans, guarantees and investments made in subsidiary Company, there were no loans, guarantees or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review and hence the said provision is not applicable.

PUBLIC DEPOSITS

The Company has not accepted any deposits from the public within the meaning of the provisions of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1988.

DIRECTORS AND KMP

In accordance with the Articles of Association of the Company and pursuant to the provisions of Section 152 of the Companies Act, 2013, Smt. Ritaben Patel [DIN 00011818] and Shri Aalok Patel [DIN-02482747] will retire by rotation at the ensuing AGM and being eligible, offers themselves for reappointment.

Shri Aditya Bhandari, Nominee Director of RIF NorthWest-2, has resigned from the Board of Director of the Company. The Board has accepted his resignation in its meeting held on 11/08/2016.

The term of Shri Jayendra Patel, Managing Director has expired on 31/08/2016. On recommendation of Nomination & Remuneration Committee in their meeting held on 11/08/2016, your directors recommend his reappointment as Managing Director for further period of 5 (five) years on a remuneration as specified in the notice calling 24th Annual General Meeting.

Mr. Shashikant N. Thakar has resigned from the post of the Company Secretary of the Company and in place of him Mr. Jaimish G. Patel has been appointed as a Company Secretary of the Company w.e.f. 01st March, 2016.

The Board has identified the following officials as Key Managerial Personnel pursuant to Section 203 of the Companies Act, 2013:

1. Mr. Jayendra B. Patel - Managing Director and C.E.O.

2. Mr. Aalok Patel - Executive Director and C.F.O.

3. Mr. Amit Manakiwala - Whole Time Director.

4. Mr. Jaimish G. Patel - Company Secretary (w.e.f. 01.03.2016)

MEETING OF THE BOARD & AUDIT COMMITTEE

The Board during the financial year 2015-16 met eight times and Audit Committee met four times. All the recommendations made by the Audit Committee during the year were accepted by the Board. The details of the constitution and meetings of the Board and the Committees held during the year are provided in the Corporate Governance Report which forms part of this Annual Report.

NOMINATION AND REMUNERATION COMMITTEE

As per the Section 178 (1) of the Companies Act, 2013 the Company has constituted Nomination And Remuneration Committee, details of which are provided in the Corporate Governance Report which forms part of this Annual Report.

REMUNERATION POLICY

Remuneration to Executive Directors:

The remuneration paid to Executive Directors is recommended by the Nomination and Remuneration Committee and approved by Board in the Board meeting, subject to the subsequent approval of the shareholders at the ensuing Annual General Meeting and such other authorities, as may be required. The remuneration is decided after considering various factors such as qualification, experience, performance, responsibilities shouldered, industry standards as well as financial position of the Company.

Remuneration to Non Executive Directors:

The Non-Executive Directors are paid sitting fees for each meeting of the Board and Committee of Directors attended by them.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The information required pursuant to Section 197(12) read with Rule 5(1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is furnished hereunder as per Annexure-2.

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, as amended from time to time, a statement showing the names and other particulars of the employees is furnished as per Annexure-3.

DISCLOSURES AS PER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and no complaint has been received on sexual harassment during the financial year 2015-16.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3) (c) of the Companies Act, 2013 the Board of Directors of the Company confirms that-

a) In the preparation of the annual accounts for the year ended on 31st March, 2016, the applicable accounting standards had been followed along with proper explanation relating to material departures;

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 31st March, 2016 and of the profit and loss 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) That the Directors have laid down internal financial controls to be followed by the Company and that the financial controls are adequate and are operating effectively; and

f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DECLARATION BY INDEPENDENT DIRECTORS

A declaration of independence in compliance with Section 149(6) of the Companies Act, 2013, has been taken on record from all the independent directors of the Company.

STATUTORY AUDITORS

M/s J. T Shah & Co, Chartered Accountants, Ahmedabad (FRN No-190616W) were appointed as a Statutory Auditors of the Company with the approval of members at the 23rd Annual General Meeting to hold office till the conclusion of the 25th Annual General Meeting. The Board, in terms of Section 139 of the Act, on the recommendation of the Audit Committee, has recommended for the ratification of the Members, the appointment of M/s J. T Shah & Co., Chartered Accountants, Ahmedabad from the conclusion of the ensuing Annual General Meeting till the conclusion of the 25th Annual General Meeting for such a remuneration that may be determined by the Board of Directors of the Company on recommendation of Audit Committee.

SECRETARIAL AUDITORS

M /s Pinaki n Sha h & Co. , Practicing Company Secretary, Ahmedabad were appointed to conduct secretarial audit under section 204 of the Companies Act, 2013 for the financial year 2015-16. The Secretarial Audit report is annexed herewith as Annexure-4. The Secretarial Audit report does not contain any qualification, reservation or adverse remark.

The Board has appointed M/s Pinakin Shah & Co., Practicing Company Secretary as a Secretarial Auditors of the Company for the financial year 2016-17.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were on an arm''s length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large and Approval of the Board of Directors & shareholders was obtained wherever required. Further all the necessary details of transaction entered with the related parties are attached herewith in Form No- AOC-2 as Annexure-6.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board, may be accessed on the Company''s website at the link http://armanindia.com/pdf/CorporateGovernancePDF/ related_party_transaction.PDF

RISK MANAGEMENT

Periodic assessments to identify the risk areas are carried out and management is briefed on the risks in advance to enable the Company to control risk through a properly defined plan. The risks are classified as financial risks, operational risks and market risks. The risks are taken into account while preparing the annual business plan for the year. The Board is also periodically informed of the business risks and the actions taken to manage them. The Company has formulated a policy for Risk management with the following objectives:

Provide an overview of the principles of risk management

Explain approach adopted by the Company for risk management

Define the organizational structure for effective risk management

- Develop a risk culture that encourages all employees to identify risks and associated opportunities and to respond to them with effective actions.

Identify access and manage existing and new risks in a planned and coordinated manner with minimum disruption and cost, to protect and preserve Company''s human, physical and financial asset.

INTERNAL CONTROL SYSTEM

The Company has in place, adequate systems of Internal Control to ensure compliance with policies and procedures. It is being constantly assessed and strengthened with new / revised standard operating procedures and tighter information technology controls. Internal audits of the Company are regularly carried out to review the internal control systems. The Audit Reports of Internal Auditor along with their recommendations and implementation contained therein are regularly reviewed by the Audit Committee of the Board. Internal Auditor has verified the key internal financial control by reviewing key controls impacting financial reporting and overall risk management procedures of the Company and found the same satisfactory. It was placed before the Audit Committee of the Company.

INTERNAL FINANCIAL CONTROLS

The Company has laid down certain guidelines, processes and structure, which enables implementation of appropriate internal financial controls across the organization. Such internal financial controls encompass policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of business, including adherence to its policies, safeguarding of its assets, prevention and detection of frauds and errors, the accuracy and completeness of accounting records and the timely preparation of reliable financial information. Appropriate review and control mechanisms are built in place to ensure that such control systems are adequate and are operating effectively. Because of the inherent limitations of internal financial controls, including the possibility of collusion or improper management override of controls, material misstatements in financial reporting due to error or fraud may occur and not be detected. Also, evaluation of the internal financial controls is subject to the risk that the internal financial control may become inadequate because of changes in conditions, or that the compliance with the policies or procedures may deteriorate.

The Company has, in all material respects, an adequate internal financial controls system and such internal financial controls were operating effectively based on the internal control criteria established by the Company considering the essential components of internal control, stated in the Guidance Note on Audit of Internal Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.

CORPORATE SOCIAL RESPONSIBILITY

The Company does not meet the criteria of Section 135 of Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 so there is no requirement to constitute Corporate Social Responsibility Committee.

ANNUAL EVALUATION

Pursuant to the provisions of the Companies Act, 2013, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of its Audit Committee & Nomination & Remuneration Committee.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as level of engagement and contribution and independence of judgment to safeguard the interest of the Company and its minority shareholders. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors.

CORPORATE GOVERNANCE

We strive to maintain high standards of Corporate Governance in all our interactions with our stakeholders. The Company has conformed to the Corporate Governance code as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A separate section on Corporate Governance along with a certificate from the M/s. Pinakin Shah & Co. Practicing Company Secretary, Ahmedabad confirming the level of compliance is attached and forms a part of the Board''s Report.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

The Company has implemented a Whistle Blower Policy, whereby employees and other stakeholders can report matters such as generic grievances, corruption, misconduct, illegality and wastage/misappropriation of assets to the Company. The policy safeguards the whistle blowers to report concerns or grievances and also provides direct access to the Chairman of the Audit Committee. The details of the Whistle Blower Policy are available on Company''s website at the link: http://www.armanindia.com/pdf/ Corporate GovernancePDF/whistle_blower_policy.pdf

GREEN INITIATIVE

In accordance with the ''Green Initiative'', the Company has been sending the Annual Report/Notice of AGM in electronic mode to those Shareholders whose Email ids are registered with the Company and / or the Depository Participants.

Your Directors are thankful to the Shareholders for actively participating in the Green Initiative.

EXTRACT OF ANNUAL RETURN

The Extract of Annual Return as required under section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, in Form MGT-9 is annexed herewith as Annexure-7 for your kind perusal and information.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO:

A. Conservation of energy and Technology absorption

Since the Company does not carry out any manufacturing activity, the particulars regarding conservation of energy, technology absorption and other particulars as required by the Companies (Accounts) Rules, 2014 are not applicable.

B. Foreign exchange earnings and outgo

There were no foreign exchange earnings and outgo during the year under review.

SHARES

Buy Back of Securities

The Company has not bought back any of its securities during the year under review.

Sweat Equity

The Company has not issued any Sweat Equity Shares during the year under review.

Bonus Shares

No Bonus Shares were issued during the year under review. Employees Stock Option Plan

The Company has not provided any Stock Option Scheme to the employees.

CODE OF CONDUCT

The Code of Conduct for all Board members and Senior Management of the Company have been laid down and are being complied with in words and spirit. The compliance on declaration of code of Conduct signed by Managing Director and CEO of the Company is included as a part of this Annual Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management''s discussion and analysis forms a part of this annual report and is annexed to the Board''s report.

ANY SIGNIFICANT AND MATERIAL ORDER PASSED BY REGULATORS OR COURTS OR TRIBUNALS

The Company has received demand order from the Income Tax Department under the scrutiny of the assessment year 2012-13 amounting RS.7.42 Crores. The assessing officer has added an investment of RS.15 Crore made by RIF North West-2 in the Company, as an unexplained income of the Company.

The Company has also filed an appeal to challenge the said demand order before Commissioner of Income Tax, which is pending.

ACKNOWLEDGEMENT

The Board places on record their appreciation of the support of all stakeholders.

For, and on behalf of the Board

Date: 11/08/2016 Chinubhai Shah

Place: Ahmedabad Chairman

DIN: 00558310

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