The Directors have pleasure in presenting their 22nd Annual Report
along with the Audited Accounts for the year ended March 31, 2008.
The financial results for the year under review are summarized below
for your consideration:
PARTICULARS Year ended Year ended
March 31 March 31
Income from Operations 17,381 13,840
Other Income 273 538
Expenditure (excluding interest) 8,699 3,329
Interest 12,700 10,631
Gross Profit/(loss) (1,745) 269
Depreciation 223 149
Provision for Taxation (604) 265
Prior Period (income)/Expense 169 (217)
Net Profit/(Loss) (1,532) 221
REVIEW OF OPERATIONS
Income from operations was Rs. 17,381 Lakhs, as against Rs. 13,840
Lakhs in the previous year. The total income of the Company was Rs.
17,654 Lakhs as compared to Rs. 14,378 Lakhs for the previous year.
The interest cost in the current year increased to Rs. 12,700 Lakhs
compared to Rs. 10,631 Lakhs in the previous year. The loss after tax
were Rs. 1,532 Lakhs for the year ended March 31, 2008 as against
profits of Rs. 221 Lakhs in the previous year.
Your Board of Directors regret their inability to recommend any
dividend in view of loss in the year under review.
MANAGEMENT DISCUSSION & ANALYSIS REPORT
Operational Performance-During the financial year ended March 31, 2008,
net earning assets of the Company increased to Rs. 161,790 Lakhs from
Rs. 125,950 Lakhs over the previous year, largely due to increased
disbursements. The growth in disbursements is on account of increased
focus on augmenting distribution network, optimizing manufacturer tie
ups - both in the Light Commercial Vehicle (LCV) and Medium & Heavy
Commercial Vehicle (MHCV) space in Commercial Vehicles. The Company
continues to focus on increasing its wallet share of existing customers
and acquiring new customers, in existing as well as new potential
Industry Outlook-For the past 3 years Construction Equipment business
has been growing at about 30% p.a till March 2008. This growth was
primarily fuelled largely by investments in Infrastructure Projects and
to some extent due to boom in the real estate market. However, the
growth rate has slowed down since April 2008, as a result of overall
slow down in the economy and higher interest rates. Indian construction
companies are now importing high end specialized equipment like Tunnel
Boring Machines, Drilling equipments, Crawler cranes etc.
Business outlook-To ensure that your Company secures its proper share
of this growth, it has reorganized its Sales & Risk personnel around
customers to ensure better alignment and ~ocus. As a result the
volumes have grown from Rs. 227 crores in 2007 to more than Rs. 491
crores in 2008. Your Company is targeting an equally impressive
performance in 2009 largely driven by increase in geographical reach,
tie-ups with leading manufacturers and increased workforce. Our 90+
days outstanding is at 0.74% of the portfolio, which is considered to
be amongst the best in the industry.
Challenges-A high margin retail business needs significant unfront
investment in distribution and infrastructure and hence, the key
challenge will be to enhance margins in an extensively competitive
Future Strategy-We intend to pursue with vigor, the focus on retail
segment. The retail sector primarily buys Standard Equipments, which
constitute a better asset risk.
This would be complemented and balanced with a continued focus on other
large specialized equipments.
Industry Outlook-Financial Year 2008 saw Commercial Vehicles sales grew
by appx 2%, which was way below the CAGR of upwards of 18% over past
few years. With economic growth being slower than expected, the year
saw increased stress on freight rates which impacted the retail
operators to an extent. Volatility and hardening of interest rates also
added to the costs of truck operators, thereby impacting their
profitablility. With diesel being the highest cost contributor and
given the volatility in crude oil prices, early part of Financial Year
2009 is unlikely to be any different, especially for market load
operators and small operators. Increasing investments in road
infrastructure and NHAI projects will continue to drive the shift from
medium to heavy trucks. We expect Commercial Vehicle sales to grow at
6-7% over Financial Years 2008-10.
Opportunities-Your Company is targeting a consolidated and compliant
growth in Financial Year 2009, primarily driven by strategic
manufacturer tie-ups. Over the last one year both collections and
underwriting infrastructure has been strengthened to meet the new
challenges. Manufacturer focused sourcing verticals have been put in
place across product lines, which will ensure greater manufacturer &
customer focus and depth of penetration.
Challenges-Increased volatility in interest rates, crude oil prices and
sluggish Indian Industrial Production growth has increased stress on
transporters profitability. This is likely to impact sales of new
Commercial Vehicles. However, increasing road infrastructure and shift
in distribution strategies is likely to support growth of heavy and
small trucks respectively.
Outlook-Your Company is confident about its portfolio quality, as well
as of its sourcing, underwriting and collection infrastructure.
Besides being largely a Heavy commercial vehicle player, we are
confident to come out stronger. Increased focus on refinance and
selective exposures on the fast growing Light Commercial vehicles will
help increase margin.
Your Company currently has one of the lowest delinquencies and has
achieved the same on the basis of excellent underwriting policies, a
deep understanding of the customers, and a well aligned approvals and
collection strategy. The Company is also strengthening its collection
and risk teams to manage the challenges emerging from the changed
Credit Rating for Commercial Papers-The Company has got its credit
rating enhanced from Rs. 700 crores as on last year to Rs. 1,000 crores
this year from ICRA Ltd. ICRA Ltd. has assigned an A1+ (pronounced A
one plus) rating to the Rs. 1,000 crores Commercial Paner Programme of
the Company. The rating of A1+ is the highest-credit-quality rating
assigned by ICRA Ltd. to short- term debt instruments. Instruments
rated in this category carry the lowest credit risk in the short term.
The Company had Rs. 795.6 crores of commercial paper outstanding as on
March 31, 2008.
Human Resources-The Companys human resources system has kept pace with
the changes in the industry. The Company fosters a culture that values
high performance and maintains high professional standards. There were
189 employees as on March 31, 2008.
Internal Control-Your Company has an internal control system
commensurate with its the size and nature of business.
COMPLIANCE WITH CAPITAL ADEQUACY NORMS
Your Company is registered as a non-banking financial Company and falls
within the category of systemically important non-deposit accepting
non-banking financial companies (NBFC-ND-SIs) as per the
notification on Financial Regulation of Systemically Important NBFCs
and Bank Relationships with them dated December 12,2006 (NBFC
Guidelines) issued by Reserve Bank of India (RBI). In terms of the
NBFC Guidelines, NBFC-ND-SIs are required to maintain a minimum
capital to risk weighted assets ratio (CRAR) of 10%.
The Board of Directors of the Company on June 27, 2008 has determined
that a sale of substantial portion of risk weighted assets is the best
way to comply with the prescribed CRAR norms. The Company has received
a letter dated June 26, 2008, from GE Capital Services India indicating
an interest in purchasing the existing portfolio of loan assets of the
Company, at fair value. The Board of Directors has proposed the sale,
assignment or disposal of a substantial portion of its existing
portfolio of loan assets aggregating to a sum of Rs. 1,520 crores
(Assets) along with a substantial portion of its existing liabilities
aggregating to a sum of Rs. 860 crores (Liabilities) for a
consideration which is higher of (a) the book value of the Net Assets
(Net Assets shall mean the difference between the aggregate Assets and
aggregate Liabilities); or (b) the value of the Net Assets as
determined by an independent firm of Chartered Accountants (a big four
firm based in India), to any person or entity, related or affiliated to
the Company or otherwise, including GE Capital Services India. This
proposal was submitted to the shareholders of the Company by way of a
postal ballot. The postal ballots notices have been sent to the
shareholders of the Company on June 30, 2008. The results of the postal
ballot will be announced on July 31, 2008.
The Company has appointed Pricewaterhouse Coopers Pvt. Ltd., on July 1,
2008 to determine the value of the Net Assets.
The Company further intends to infuse additional capital as per RBIs
prudential norms directions issued to all NBFCs dated February 22,
2007. On successful transfer of the Assets and Liabilities, and on
infusion of further Tier II capital, the Company shall become compliant
with the CRAR norms as prescribed under the NBFC Guidelines.
The Board of Directors, at the meeting held on September 7, 2007 had
proposed to undertake a rights issue under the provisions of section
81(1) of the Companies Act, 1956 in order to meet the capital adequacy
norms prescribed by the RBI. The Company had filed a draft letter of
offer with Securities and Exchange Board of India on December 28, 2007
and also received the final observations on April 22, 2008. However,
the Board of Directors of the Company on June 27, 2008 has resolved to
withdraw the aforesaid rights issue.
The Board of Directors has vide its resolution dated June 27, 2008 has
taken on record the proposal dated June 27, 2008 received from GE
Capital (Mauritius) Investment Company Limited, the promoter of your
Company, to initiate a voluntary delisting of the shares of the Company
from the Bombay Stock Exchange Limited, in accordance with the
provisions of the Securities and Exchange Board of India (Delisting of
Securities) Guidelines, 2003. The Board has submitted the delisting
proposal to the shareholders for their consideration by way of postal
ballot. The postal ballots notices have been sent to the shareholders
of the Company on June 3C, 2008. The results of the postal ballot will
be announced on Jul/ 31, 2008
As you are aware, your Company has stopped accepting deposits from the
public from July 15,1999 and is now a non-deposit taking Company.
During the year ended March 31, 2008, your Company has deposited an
amount of Rs. 1,88,021/- (One Lakh Eighty Eight Thousand and Twenty One
only) representing unclaimed amount of deposits along with the interest
due on the deposits with the Investor Education and Protection Fund in
accordance with the provisions of Section 205C of the Companies Act,
1956 and the rules framed there under. As on March 31, 2008, an amount
of Rs. 1,70,871/- (Rupees One Lakh Seventy Thousand Eight Hundred
Seventy One only) is still remaining as unclaimed deposit.
Mr. Kanwarpal Singh Bindra was appointed as an additional director
w.e.f. November 30,2007 and Chairman w.e.f. December 21, 2007
In accordance with the provisions of Sections 256 and 257 of the
Companies Act, 1956 and the Articles of Association of your Company,
Mr. Tejpreet S Chopra retires by rotation at the ensuing Annual General
Meeting and being eligible has offered himself for re-appointment.
Brief resume of the directors, nature of their expertise in specific
functional areas and names of companies in which they hold
directorships and the membership/Chairmanship of Committees, of the
Board as stipulated under clause 49 of the Listing Agreement with the
Stock Exchanges, are given in the section of Corporate Governance in
the Annual Report.
None of the directors of the Company are disqualified from being
appointed as directors as specified in Section 274(l)(g) of the
Companies Act, 1956 as amended by the Companies (Amendment) Act, 2000.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
a. that in the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper explanation
relating to material departures, if any
b. that appropriate accounting policies have been selected and applied
consistently, and that the judgment and estimates made 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, 2008 and of the loss of the Company for
the said period;
c. that proper and sufficient care has been taken 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 irregularities;
d. that the annual accounts have been prepared on a going concern
M/s. BSR& Co., Chartered Accountants, retire at the conclusion of the
Annual General Meeting and are eligible for re-appointment. A
certificate has been obtained from them to the effect that their
appointment, if made, would be within the prescribed limits under
section 224(1B) of the Companies Act, 1956.
The Auditors Report to the shareholders is enclosed with the Accounts
for the year ended March 31, 2008.
PARTICULARS OF EMPLOYEES
Information in accordance with sub section (2A) of Section 217 of the
Companies Act, 1956 read with the Companies (Particulars of Employees)
Rule, 1975 forms part of this report. However, as per the provisions of
Sec. 219(l)(b)(iv) of the Companies Act, 1956, the report and the
accounts are being sent to all the members excluding the statement of
particulars under Section 217(2A). Any member interested in obtaining a
copy of the statement may write to the Company.
PARTICULARS OF CONSERVATION OF ENERGY, TECHNO- LOGY ABSORPTION AND
FOREIGN EXCHANGE EARNINGS AND OUTGO
Since your Company is not engaged in any manufacturing activity, the
particulars relating to conservation of energy and technology
absorption stipulated in the Companies (Disclosure of particulars in
the Report of the Board of Directors) Rules, 1988 are not applicable
and hence no disclosure is being made in this report:. In the current
year, the foreign exchange earning and outflow were nil respectively.
GE Capital Asset Management Limited, a subsidiary of the Company is
under members voluntary winding up and the Company is filing the
liquidation accounts with the Registrar of Companies, hence, no
consolidated accounts have been prepared.
A separate section on Corporate Governance and certification on
compliance as stipulated in the Clause 49 of the Listing Agreement with
the Stock Exchanges is annexed hereto and forms part of the Directors
Your Directors would like to express their sincere appreciation for the
assistance and co-operation received from the Banks, The Reserve Bank
of India, Government Authorities, Customers, Vendors and Shareholders
during the year. Your directors also wish to place on record their deep
sense of appreciation for the committed services of the employees.
for and on behalf of the Board of Directors
Place : Gurgaon Tejpreet S Chopra Rajan Ray
Dated : July 4, 2008 Director Director