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IDFC

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Directors Report Year End : Mar '16    « Mar 15
Dear Members,
 
 The Directors present herewith the Nineteenth Annual Report on the
 business and operations of the Company together with the audited
 financial statements for the financial year ended March 31, 2016.
 
 RESTRUCTURING
 
 IDFC Limited (IDFC or the Company) received an In-principle
 approval from the Reserve Bank of India ; (RBI) on April 9, 2014 to
 set up a new bank under the Guidelines for Licensing of New Banks in
 the Private Sector dated February 22, 2013. The terms and conditions
 contained in the said Guidelines required IDFC to Transfer/ Demerge all
 assets and liabilities of its lending businesses (Financing
 Undertaking) to IDFC Bank Limited (IDFC Bank). Accordingly, the
 Scheme of Arrangement amongst IDFC and IDFC Bank and their respective
 Shareholders and Creditors under Section 391 to 394 of the Companies
 Act, 1956 was filed with the Hon''ble High Court of Judicature at Madras
 which was sanctioned vide the Order dated June 25, 2015. (Demerger
 Scheme).
 
 Pursuant to the Demerger Scheme, DFC Bank allotted one (1) equity share
 having a face value of Rs. 10 each of IDFC Bank for every one (1) fully
 paid-up equity share of IDFC held by shareholders whose names were
 recorded in the Register of Members of IDFC as on the Record Date i.e.
 October 5, 2015.
 
 The net book value of assets which relate to the Financing Undertaking
 as on ; the Appointed date (i.e. October 1, 2015) was Rs. 6,234.56
 crore and the net worth of IDFC immediately before demerger was Rs.
 15,814.93 crore.
 
 OPERATIONS REVIEW AND FINANCIAL PERFORMANCE
 
 During the year under review, your Company transferred its Financing
 Undertaking into IDFC Bank effective October 1, 2015 post receipt of
 approval from Hon''ble High Court of Madras to Demerger Scheme and on
 fulfilment of all conditions mentioned in the Demerger Scheme and
 receipt of Universal Banking License by IDFC Bank.
 
 01 SUBSIDIARY COMPANIES
 
                                                                   %OF 
 SR.NO   NAME OF THE SUBSIDIARY    DIRECT / INDIRECT
                                   SUBSIDIARY             SHAREHOLDING
 
 A       DOMESTIC SUBSIDIARIES
 
 i.      IDFC Financial Holding 
         Company Limited           Direct                         100%
 
 ii.     IDFC Foundation (a 
         Company within the 
         meaning                   Direct                         100%
         of Section 8 of the 
         Companies Act, 2013)
 
 iii.    IDFC Projects Limited     Direct                         100%
 
 iv.     IDFC Bank Limited         Indirect through 
                                   IDFC FHCL              (approx) 53%
 
 v.      IDFC Infra Debt Fund 
         Limited                   Indirect through
                                   IDFC FHCL            (approx) 81.5%
 
 vi.     IDFC Alternatives 
         Limited                   Indirect through 
                                   IDFC FHCL                      100%
 
 vii.    IDFC Trustee Company  
         Limited                   Indirect through
                                   IDFC FHCL                      100%
 
 viii.   IDFC Securities Limited   Indirect through
                                   IDFC FHCL                      100%
 
 ix.     IDFC Asset Management 
         Company Limited           Indirect through 
                                   IDFC FHCL              (approx) 75%
 
 x.      IDFC AMC Trustee
         Company Limited           Indirect through 
                                   IDFC FHCL              (approx) 75%
 
 xi.     IDFC Finance Limited      Indirect through 
                                   IDFC Projects Limited          100% 
 
 B       FOREIGN SUBSIDIARIES
 
 xii.    IDFC Capital (Singapore) 
         Pte. Limited              Indirect through 
                                   IDFC Alternatives  
                                   Limited                        100%
 
 xiii.   IDFC Securities
         Singapore Pte. Limited    Indirect through IDFC
                                   Securities Limited             100%
 
 xiv.    IDFC Capital (USA) Inc.   Indirect through IDFC 
                                   Securities Limited             100% 
 
                                   Indirect through IDFC 
                                   Asset Management 
 xv.     DFC investment Managers 
        (Mauritius) Limited                               (approx) 75%
                                   Company Limited
                                                                           
 Till September 30, 2015, your Company operated as Infrastructure
 Finance Company, financing infrastructure projects in sectors like
 energy, telecommunication, transportation, commercial and industrial
 projects, including hospitals, education, tourism and hotels.
 
 Financing Undertaking is the lending and financing business of IDFC
 including all assets and liabilities pertaining to financing
 undertaking.
 
 Residual Undertaking post demerger of Financing Undertaking comprises
 of holding shares in IDFC Financial Holding Company Limited (IDFC
 FHCL) and certain other entities, goodwill, intellectual property
 rights and windmill operations.
 
 To reflect the correct position post demerger, financial performance of
 the Company is shown as operations from continuing business (Residual
 Undertaking) and from discontinuing
 business (Financing Undertaking) in Standalone Financial Statements
 
 From October 1, 2015, your Company is operating as NBFC - Investment
 Company mainly holding investment in IDFC FHCL (NOFHC), which in turn,
 holds investments in IDFC Bank DFC Alternatives Limited, IDFC Asset
 Management Company Limited, IDFC Securities Limited and IDFC Infra Debt
 Fund Limited
 
 Balance Sheet size reduced from Rs. 86,520 crore as at March 31, 2015
 to Rs. 9,620 crore as at March 31, 2016 on account of transfer of all
 assets and liabilities pertaining to Financing Undertaking to IDFC
 Bank. Profit from continuing operations was Rs. 141.69 crore for FY16
 as compared to Rs. 66.63 crore for FY15. Loss from discontinuing
 operations (after exceptional item - refer note 28 in Standalone
 Financial Statements) was Rs. 1,969.48 crore for FY16 as compared to
 profit of Rs. 2,093.99 crore in FY15. As a result, the net loss for the
 year was Rs. 1,162.14 crore as compared to profit of Rs. 1,685.49 crore
 in previous year.
 
 During the year, the Company has transferred Rs. 200 crore (Previous
 year Rs. 480 crore) to Special Reserve u/s 36(1)(viii) of the Income
 Tax Act, 1961.
 
 Details of Business Overview and Outlook of the Company and it''s
 subsidiaries are appearing in the chapter Management Discussion and
 Analysis which forms part of this Annual Report.
 
 DIVIDEND
 
 In view of losses incurred during the year, the Directors did not
 recommend any dividend for FY16.
 
 SUBSIDIARY COMPANIES
 
 IDFC has Eleven direct / indirect domestic subsidiaries and Four
 indirect foreign subsidiaries, as on date which are given in Table 1.
 
 During the year under review the following changes took place in the
 group corporate structure of your Company:
 
 1. Transfer of subsidiaries from IDFC to IDFC FHCL
 
 IDFC received an In-principle approval from RBI on April 9, 2014 to set
 up a new bank in private sector and the terms and conditions contained
 in the Guidelines for Licensing of New Banks in the Private Sector
 dated February 22, 2013 mandated that new bank would need to be set up
 through a Non-Operative Financial Holding Company (NOFHC). The NOFHC
 was required to hold the Bank as well as all the other financial
 services entities of IDFC Group which are regulated by RBI or other
 financial sector regulators.  As per the said guidelines, IDFC FHCL was
 incorporated as a non-operative financial holding company. IDFC
 transferred the entire equity stake held in its regulated subsidiary
 companies engaged in financial activities i.e. IDFC Alternatives
 Limited, IDFC Trustee Company Limited, IDFC Securities Limited, IDFC
 Infra Debt Fund Limited, IDFC Asset Management Company Limited and IDFC
 AMC Trustee Company Limited to IDFC FHCL for consideration received in
 cash.
 
 2.  Amalgamation of IDFC Investment Advisors Limited with IDFC Asset
 Management Company Limited
 
 DFC Investment Advisors Limited was amalgamated with IDFC Asset
 Management Company Limited w.e.f.  June 23, 2015 with the approval of
 Hon''ble High Court of Bombay.
 
 3.  Transfer of equity stake of IDFC Finance Limited to IDFC Projects
 Limited and amalgamation
 
 DFC Finance Limited (IFL), which was a Non - deposit taking
 Non-Banking Financial Company, surrendered the certificate of
 registration to the RBI during FY16. Post surrender of the
 registration, the entire share capital of FL was transferred by IDFC to
 IDFC Projects Limited (IPL). Thereafter, an application has been
 filed with the Hon''ble High Court of Bombay for amalgamation of IFL
 with IPL. The said application was admitted by Hon''ble High Court of
 Bombay on April 22, 2016.  The entire process of amalgamation is
 expected to be completed within 4 -5 months time.
 
 4.  Preferential allotment in IDFC Infra Debt Fund Limited
 
 DFC Infra Debt Fund Limited (IDFC IDF), a wholly owned subsidiary of
 IDFC FHCL, made a preferential allotment to Housing Development Finance
 Corporation Limited and SBI Life Insurance Company Limited. Post the
 preferential issue, the shareholding of IDFC FHCL in IDFC IDF stands
 diluted to 81.48%.
 
 JOINT VENTURES
 
 DFC Foundation, a company within meaning of Section 8 of the Companies
 Act, 2013 (the Act) and a wholly owned subsidiary of the Company has
 following four Joint Ventures:
 
 Delhi Integrated Multi-Modal Transit
 
 System Limited (DIMTS)
 
 Infrastructure Development Corporation (Karnataka) Limited (iDeCK)
 
 Uttarakhand Infrastructure Development Company Limited (UDeC)
 
 Rail Infrastructure Development Company (Karnataka) Limited (Joint
 Venture of iDeCK)
 
 ASSOCIATES
 
 DFC Projects Limited, a wholly owned subsidiary of IDFC, has one
 Associate Company namely Jetpur Somnath Tollways Private Limited.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 The Board of Directors of IDFC reviews the affairs of its subsidiary
 companies regularly. In accordance with the provisions of Section
 129(3) of the Act, the Company has prepared Consolidated Financial
 Statements including requisite details of all the subsidiaries.
 Further, a statement containing the salient features of the financial
 statements and all other requisite details of all the subsidiary
 companies in the format AOC-I is appended as Annexure 1. The statement
 also provides details of performance, financial positions of each of
 the subsidiary.
 
 In accordance with Section 136 of the Act, the audited Financial
 Statements together with the Consolidated Financial Statements and
 related information of the Company and audited accounts of each
 subsidiary company are available on the website of the Company -
 www.idfc.com.
 
 Detailed analysis of the performance of IDFC and its businesses,
 including initiatives in the areas of Risk Management, Human Resources,
 information Technology and IDFC Foundation activities, has been
 presented in the section on Management Discussion & Analysis of this
 Annual Report.
 
 SHARE CAPITAL UPDATE
 
 During the year, the Company issued and allotted 1,239,802 equity
 shares of the Company to eligible employees of DFC and its subsidiaries
 on exercise of options granted under Employee Stock Option Scheme 2007.
 As on March 31, 2016, the total paid up capita of IDFC was
 1,594,020,668 equity shares of Rs.10 each
 
 PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
 
 DFC had 13 employees as on March 31, 2016 and 2,776 employees at the
 group level
 
 The Disclosure pertaining to the provisions of Section 197(12) of the
 Act, 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 this
 Annual Report Having regard to the provisions of the first proviso to
 Section 136(1) of the Act, the Annual Report excluding the aforesaid
 information is being sent to the Members of the Company. The said
 information is available for inspection at the Registered Office and
 Corporate Office of the Company during working hours and any Member
 interested in obtaining such information may write to the Company
 Secretary and the same will be furnished on request.
 
 Disclosures pertaining to remuneration and other details as required
 under Section 197(12) of the Act, read with Rule 5(1) of the Companies
 (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are
 appended as Annexure 2.
 
 EMPLOYEE STOCK OPTION SCHEME
 
 Pursuant to the resolution passed by the Members at the AGM held on
 August 2, 2006, IDFC had introduced Employee Stock Option Scheme 2007
 (the ESOS Scheme) to enable the employees of IDFC and its
 subsidiaries to participate in the future growth and financial success
 of the Company.
 
 Out of 31,485,043 Options outstanding at the beginning of the current
 financial year, 35,64,400 Options lapsed / forfeited and 12,39,802
 Options were exercised during the year.  Additionally, during the year
 12,898,500 Options were granted to eligible employees under the ESOS
 Scheme.  Accordingly, 39,579,341 Options remain outstanding as of March
 31, 2016. All Options vested in graded manner and are required to be
 exercised within a specific period. The Company has used the intrinsic
 value method to account for the compensation cost of stock to employees
 of the Company. Intrinsic value is the amount by which the quoted
 market price of the underlying share on the date, prior to the date of
 the grant, exceeds the exercise price of the Option.
 
 The Nomination and Remuneration Committee (NRC) and the Board at
 their respective meetings held on April 29, 2016 approved the proposal
 for re-pricing and re-granting of Employee Stock Options (ESOPs)
 already granted under IDFC Employee Stock Option Scheme, 2007 and
 adoption of new IDFC Employee Stock Option Scheme, 2016 for granting
 ESOPs to employees of IDFC and it''s Subsidiary Companies. The approval
 of the shareholders was sought on the above proposals vide Postal
 Ballot notice dated May 20, 2016, details of which are given in the
 Corporate Governance Report which forms part of this Report.  The
 shareholders approved the new ESOP Scheme viz IDFC Employee Stock
 Option Scheme, 2016 (IDFC ESOS 2016) with requisite majority, for
 grant of stock options to the eligible employees of the Company and its
 subsidiaries.
 
 Further, during the year, there has been no material change in the IDFC
 ESOP Scheme and the said scheme is in compliance with SEBI (Share Based
 
 Employee Benefits) Regulations, 2014 as amended from time to time.
 
 The disclosure requirements under the Securities and Exchange Board of
 india (Share Based Employee Benefits) Regulations, 2014, for the
 aforesaid ESOP Scheme, in respect of the year ended March 31, 2016, is
 disclosed on the Company''s website - www.idfc.com.
 
 MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE
 
 In compliance with the provisions of Regulation 34(2)(e) of the SEBI
 (Listing Obligations and Disclosure Requirements) Regulations, 2015
 (SEBI LODR Regulations''), separate detailed chapters on Management
 Discussion & Analysis and Report on Corporate Governance forms part of
 this Annual Report.
 
 BUSINESS RESPONSIBILITY REPORT
 
 Business Responsibility Report as stipulated under Regulation 34 of the
 SEBI LODR Regulations has been hosted on the website of the Company -
 www.idfc.com. Any Member interested in obtaining a physical copy of the
 same may write to the Company Secretary.
 
 PUBLIC DEPOSITS
 
 During FY16, your Company has not accepted any deposits from the public
 within the meaning of the provisions of the Non-Banking Financial
 Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998
 or under Chapter V of the Act.
 
 PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
 
 The provisions of Section 186 of the Act are not applicable to loans
 made, guarantees given or securities provided or acquisition of
 securities by a company engaged in the business of financing of
 companies or of providing infrastructural facilities in the ordinary
 course of its business. Since IDFC was providing loans to
 infrastructure projects upto September 30, 2015, the said Section was
 not applicable for first six months of FY16.
 
 Pursuant to Demerger scheme, all the lending business of IDFC was
 transferred to IDFC Bank w.e.f.  October 1, 2015. Accordingly, post
 demerger, IDFC has remained as NBFC in the category of Investment
 Company and has obtained license from RBI to that effect. Being an
 Investment Company, the said Section is not applicable to IDFC.
 Accordingly, the requisite details of loans, gurantees and investments
 are not given.
 
 VIGIL MECHANISM / WHISTLE BLOWER POLICY
 
 IDFC had already adopted a Whistle Blower Policy, which included
 reporting to the Management instances of unethical behaviour, actual or
 suspected fraud or violation of the Company''s Code of Conduct or Ethics
 Policy. The Whistle Blower Policy was modified in light of the
 provisions of Vigil Mechanism prescribed under the Act and regulation
 22 of SEBI LODR Regulations to ensure that the Audit Committee directly
 oversees the Vigil Mechanism.
 
 The details of Vigil Mechanism are posted on the website of the Company
 - www.idfc.com
 
 FOREIGN EXCHANGE
 
 There were no foreign exchange earning as on March 31, 2016. The
 particulars regarding foreign exchange expenditure are furnished at
 Item Nos. 29 in the Notes forming part of the Standalone Financial
 Statements.
 
 PARTICULARS REGARDING CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
 
 The particulars regarding conservation of energy, technology absorption
 and other particulars as required by the Companies (Accounts) Rules,
 2014 are not applicable, hence not given.
 
 DIRECTORS AND KEY MANAGERIAL PERSONNEL
 
 With profound grief and sadness we deeply regret the demise of one of
 our respected Director Late Mr. S. H. Khan (DIN: 00006170) on January
 12, 2016.  He was associated with IDFC from February 11,1998 to August
 10, 2015.
 
 Late Mr. S. H. Khan was actively involved with IDFC Group and will
 always be remembered for his wealth of knowledge and experience. His
 sudden death is an irreparable loss to us.
 
 We, at IDFC Group convey our sincere and deep felt condolences to Late
 Mr. S. H. Khan''s family.
 
 There is no Director who is liable to retire by rotation at this AGM.
 
 The Board appointed Mr. Vinod Rai (DIN: 01119922) as an Additional
 Director of the Company in the category of ID on June 30, 2015. The
 same was approved by the Shareholders of the Company at the 18th AGM
 held on July 30, 2015.  Mr. Vinod Rai was appointed as a Non- Executive
 Independent Chairman w.e.f.  October 31, 2015.
 
 During the year, as a part of group restructuring, Dr. Rajiv B. Lall
 (DIN: 00131782) and Dr. Omkar Goswami (DIN: 00004258 ) resigned as
 Directors of the Company w.e.f. September 30, 2015 and August 06, 2015,
 respectively.
 
 Mr. Gautam Kaji (DIN: 02333127) resigned as ID of the Company w.e.f.
 August 05, 2015 and was appointed as an Additional Director of the
 Company in the category of ID w.e.f.  October 1, 2015 to hold office
 till the conclusion of the 21st AGM of the Company to be held for FY18.
 
 On October 31, 2015, Mr. Joseph Dominic Silva (DIN: 06388807) resigned
 as a Nominee Director and Mr. Chintamani Bhagat (DIN: 07282200) was
 appointed in his place as an Additional Director n the category of
 Nominee Director representing Domestic and Foreign institutional
 Investors.
 
 The Company places on record its sincere appreciation for the valuable
 contribution and services rendered by the outgoing Directors.
 
 The approval of the Shareholders is sought for the appointment of Mr.
 Gautam Kaji and Mr. Chintamani Bhagat at the ensuing AGM.
 
 The Shareholders of the Company, at the AGM held on July 29, 2014, had
 approved the appointment of Mr. Donald Peck (DIN: 00140734) as D to
 hold office till the conclusion of 19th AGM to be held for FY16. The
 Board of Directors at its meeting held on April 29, 2016, reappointed
 Mr. Donald Peck as ID to hold office till the conclusion of the 21st
 AGM to be held for FY18. The approval of the Shareholders is sought for
 the reappointment of Mr. Donald Peck at the ensuing AGM.
 
 The Shareholders of the Company had appointed Mr. Vikram Limaye (DIN:
 00488534) as Managing Director & CEO at the AGM held on July 29, 2013,
 for a period of Three years w.e.f. May 2, 2013. Considering the vast
 and valuable experience of Mr. Vikram Limaye and progress made by the
 Company under his leadership and based on the recommendation of NRC and
 subject to the approval of the Members at the ensuing AGM, the Board of
 Directors at its meeting held on April 29, 2016, approved the
 reappointment of Mr. Vikram Limaye as Managing Director & CEO for a
 further period of 3 years with effect from May 1, 2016, on the terms
 and conditions as set out in the Notice of ensuing AGM circulated along
 with this report.
 
 It is proposed to approve the reappointment of Mr. Vikram Limaye as
 Managing Director & CEO at the ensuing AGM
 
 Further, as a part of restructuring of IDFC Group, Mr. Sunil Kakar and
 Mr. Mahendra Shah stepped down as Chief Financial Officer (CFO) and
 Company Secretary (CS), respectively of IDFC w.e.f. October 31, 2015.
 Further Mr. Bipin Gemani & Mr. Ketan Kulkarn were appointed as CFO and
 CS, respectively w.e.f. October 31, 2015
 
 DECLARATION OF INDEPENDENCE
 
 The Company has received a declaration from IDs, at the time of their
 respective appointments and also at the first meeting of the Board of
 Directors held in FY16, that they meet the criteria of independence
 specified under sub- section (6) and (7) of Section 149 of the Act,
 read with Rule 5 of the Companies (Appointment and Qualification of
 Directors) Rules, 2014 and SEBI LODR Regulations, for holding the
 position of IDs and that they shall abide by the Code for Independent
 Directors as per Schedule IV of the Act
 
 BOARD AND ITS COMMITTEES
 
 The details of the constitution and meetings of the Board and its
 Committees held during the year are provided in the Corporate
 Governance Report which forms part of this Annual Report.
 
 During the year Six Board meetings were held. The Board has accepted
 all recommendations of Audit Committee.  The composition of Audit
 Committee is as under:
 
 i.  Mr. Gautam Kaji—Chairperson
 
 (DIN: 02333127)
 
 ii. Mr. Vinod Rai—Member
 
 (DIN: 01119922)
 
 iii. Ms. Marianne Okland—Member
 
 (DIN: 03581266)
 
 iv. Mrs. Snehlata Shrivastava—
 
 Member (DIN: 06478173)
 
 BOARD EVALUATION
 
 Pursuant to SEBI LODR Regulations and the Act, the process indicating
 the manner in which formal annual evaluation of the Chairperson,
 Directors, Board as a whole and Board level committees are given in the
 Corporate Governance Report, which forms part of this Annual Report.
 
 REMUNERATION POLICY
 
 The Board approved the Remuneration Policy for the Directors, Key
 Managerial Personnel, Senior Management Personnel and other Employees,
 which is formulated in line with the requirements of the Act and SEBI
 LODR Regulations.  Details of the said policy are given in the
 Corporate Governance Report which forms part of this Annual Report.
 
 APPROVAL OF THE BORROWING LIMITS OF THE COMPANY, INCLUDING ISSUE OF
 NCDS
 
 The Company, at its 17th AGM held on July 29, 2014, approved the
 proposal to borrow monies up to Rs. 80,000 crore under Section
 180(1)(c) of the Companies Act, 2013. Post demerger, since the Company
  is now operating as Non-Banking Financial Company in the category of an
 Investment Company, the borrowing requirements have reduced.
 Accordingly, approval of the Shareholders is sought by way of special
 resolution, to borrow money(ies) not exceeding a sum of Rs.  10,000
 crore outstanding at any point of time, including by way of issue of
 non-convertible securities on private placement basis.
 
 SPECIAL BUSINESS
 
 The Board of Directors recommends the following items under special
 business for approval of the Shareholders at the ensuing AGM:
 
 a. Appointment of Mr. Gautam Kaji (DIN: 02333127) as ID;
 
 b. Appointment of Mr. Chintamani Bhagat (DIN: 07282200) as a Nominee
 Director;
 
 c.  Reappointment of Mr. Vikram Limaye (DIN: 00488534) as Managing
 Director & CEO;
 
 d.  Reappointment of Mr. Donald Peck (DIN: 00140734) as ID; and
 
 e.  Approval of the Borrowing limits of the Company, including by way
 of issue of non-convertible securities on private placement basis.
 
 AUDITORS
 
 STATUTORY AUDITORS
 
 Deloitte Haskins & Sells LLP, Chartered Accountants (DHS)
 (Registration No.  117366W / W-100018), will retire as the Statutory
 Auditors of the Company at the ensuing AGM.
 
 DHS, the retiring Auditors, have confirmed that their appointment, if
 made, would be in conformity with the provisions of Sections 139(1) and
 141 of the Act, read with Rule 4 of the Companies (Audit and Auditors)
 Rules, 2014 and have given their consent to be appointed as Statutory
 Auditors of IDFC for FY17.
 
 The approval of the Members is sought, by passing an Ordinary
 Resolution, to reappoint DHS as Statutory Auditors of the Company to
 hold office from the conclusion of ensuing AGM till the conclusion of
 the next AGM of the Company.
 
 SECRETARIAL AUDIT
 
 Pursuant to the provisions of Section 204 of the Act and Rule 9 of the
 Companies (Appointment and Remuneration of Managerial Personnel) Rules,
 2014, the Company had appointed M/s. BNP & Associates, Company
 Secretaries to undertake the Secretarial Audit of the Company for FY16.
 The Secretarial Audit Report is appended as Annexure 3.
 
 There are no qualifications or observations or other remarks made by
 the Statutory Auditors and Secretarial Auditors in their respective
 reports.
 
 RELATED PARTY TRANSACTIONS
 
 The Company has in place the policy on Related Party Transactions and
 the same has been uploaded on the website of the Company -
 www.idfc.com. The details pertaining to Related Party transactions and
 related policies are provided in the Corporate Governance Report which
 forms part of this Annual Report.
 
 Since all related party transactions entered into by the Company were
 in the ordinary course of business and were on an arm''s length basis,
 Form AOC-2 is not applicable to the Company.
 
 INTERNAL CONTROL SYSTEMS
 
 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 audit
 of the Company is regularly carried out to review inter alia the
 Internal Control Systems.  Recommendations made by Internal Auditors in
 their reports on improving internal controls are regularly reviewed by
 the Audit Committee of the Board.
 
 RISK MANAGEMENT
 
 DFC has robust risk management practices that enable it to book, manage
 and mitigate risks in it''s business and the businesses of its
 subsidiaries.  The Company has a comprehensive Enterprise Risk
 Management framework which covers all three types of risks- credit,
 market and operational risks. The Board through its Risk Management
 Committee monitors and reviews Risk Management of the Company and its
 subsidiaries on a regular basis.
 
 MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE
 COMPANY
 
 There are no material changes and commitments, affecting the financial
 position of IDFC which has occurred between the end of FY16 and the
 date of the Board''s report.
 
 INSTANCES OF FRAUD, IF ANY REPORTED BY THE AUDITORS
 
 There have been no instances of fraud reported by the Auditors under
 Section 143(12) of the Act.
 
 SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS /
 TRIBUNALS
 
 The Hon''ble High Court of Judicature at Madras, vide it''s Order dated
 June 25, 2015, sanctioned the Scheme of Arrangement among IDFC and IDFC
 Bank and their respective Shareholders and Creditors under Sections 391
 to 394 of the Companies Act, 1956.
 
 Pursuant to the Demerger Scheme Long Term Infrastructure Bonds
 (LTIBs) which formed part of the Financing Undertaking were required
 to be transferred from IDFC to IDFC Bank.  The Ministry of Finance,
 Department of Financial Services, Government of india vide its letter
 dated August 7, 2015 granted its approval to transfer the said LTIBs
 from IDFC to IDFC Bank.  Accordingly, LTIBs were transferred to IDFC
 Bank with effect from October 1, 2015.
 
 ANTI SEXUAL HARASSMENT POLICY
 
 The Company has in place a policy on Anti Sexual Harassment. The
 Company undertakes ongoing trainings to create awareness on this
 policy. No instances of Sexual Harassment were reported during the
 period under review.
 
 TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
 
 Pursuant to the applicable provisions of Companies Act, 1956 / 2013,
 the dividend / refund of applications which remains unclaimed / unpaid
 for a period of seven years from the date of transfer to the unpaid
 dividend / refund account was required to be transferred to the
 Investor Education and Protection Fund (IEPF) established by the
 Central Government and no claim shall lie against the Company.
 
 Accordingly, an amount of Rs. 2,089,855 being unclaimed / unpaid
 dividend for FY08 and which remained unpaid and unclaimed for a period
 of 7 years has been transferred by the Company to IEPF.
 
 The Company updates the details of unclaimed / unpaid dividend on the
 Company''s website - www.idfc.com and on MCA website - www.mca.gov.in
 from time to time.
 
 Further, the unpaid dividend amount pertaining to FY09 will be
 transferred to IEPF during FY17.
 
 EXTRACT OF ANNUAL RETURN
 
 The extract of the Annual Return in the prescribed Form No. MGT 9 is
 appended as Annexure 4.
 
 CORPORATE SOCIAL RESPONSIBILITY
 
 Corporate Social Responsibility (CSR) Committee was re-constituted
 during the year comprising of
 
 i.  Mr. Vikram Limaye (DIN: 00488534)—Chairperson ii.  Mr. S. S. Kohli
 (DIN: 00169907) iii. Mr. Donald Peck (DIN: 00140734) Pursuant to
 Section 135 and Schedule VII of the Act and the Companies (Corporate
 Social Responsibility Policy) Rules, 2014, as amended from time to time
 and on recommendation of the CSR Committee, the Board of IDFC approved
 the revised CSR Policy. The disclosure of contents of the CSR Policy is
 appended as Annexure 5.
 
 DIRECTORS'' RESPONSIBILITY STATEMENT
 
 To the best of their knowledge and belief and according to the
 information and explanations obtained by them, your Directors make the
 following statements in terms of Section 134(3)(c) of the Act:
 
 - that in the preparation of the annual financial statements for the
 year ended March 31, 2016, the applicable accounting standards have
 been followed along with proper explanation relating to material
 departures, if any;
 
 - that such accounting policies have been selected and applied
 consistently and judgement and estimates have been made 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, 2016 and of the profit / loss
 of the Company for the year ended on that date;
 
 - that proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Act for safeguarding the assets of the Company and for preventing and
 detecting fraud and other irregularities;
 
 - that the annual financial statements have been prepared on a going
 concern basis;
 
 - that proper internal financial controls were in place and that the
 financial controls were adequate and were operating effectively;
 
 - that systems to ensure compliance with the provisions of all
 applicable laws were in place and were adequate and operating
 effectively.
 
 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.
 
 Directors are thankful to the Shareholders for actively participating
 in the Green Initiative.
 
 ACKNOWLEDGEMENTS
 
 We are grateful to the Government of india, State Governments, RBI,
 SEBI, Stock Exchanges, Hon''ble High court of Madras, Hon''ble High Court
 of Bombay, National Highways Authority of India, various Ministries and
 other domestic and overseas regulatory bodies for their continuous
 collaboration and support.
 
 We would like to thank all our Shareholders, Bondholders, Banks and
 Financial Institutions for their co- operation and assistance during
 the year under review.
 
 We would like to express our deep sense of appreciation for the hard
 work and efforts put in by the employees of the Company.
 
 FOR AND ON BEHALF OF THE BOARD
 
 Vinod Rai
 
 Non-executive Independent Chairman
 
 Mumbai, June 25, 2016
Source : Dion Global Solutions Limited
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