The Directors present their Twentieth Annual Report together with the
Audited Accounts for the year ended on March 31, 2004.
Year ended Year ended
March 31, 2004 March 31, 2003
Total Income 322.08 401.45
Less: Expenditure 260.63 400.76
Profit/(Loss) before Depreciation 61.45 0.69
Depreciation 43.96 60.44
Extraordinary/Exceptional Items - 16.58
Profit/(Loss) Before Taxes 17.49 (76.33)
Provision for Taxes (0.07) (0.07)
Deferred Tax Asset Adjustment (0.66) 26.73
Profit/(Loss) After Taxes 16.76 (49.67)
Balance brought forward from previous year (559.96) (510.29)
Balance carried to Balance Sheet (543.20) (559.96)
The Company has earned profit of Rs. 17.49 crores during the current
year as compared to the loss of Rs. 76.33 crores in the previous year
principally by increasing disbursements, extensive restructuring & cost
cutting, bringing down the interest cost and securitising receivables.
In view of the accumulated losses, the Directors do not recommend any
dividend on its Preference and Equity Shares.
The total operating income for the year under review was Rs.322.08
crores, which reflected a reduction of 20% as compared to the previous
year. Although there was an increase in the disbursements of Asset
Finance business, the reduction in income was due to lower interest
rates charged as compared to the previous year, which was in line with
the general reduction in interest rates, as well as on account of
depletion of the lease and investment portfolios.
Asset Finance Division:
During the year, the total disbursals of the Asset Finance Division
comprising Commercial Vehicles, Construction Equipment, Cars and
Two-wheelers financing increased from Rs. 1028 crores to Rs. 1415
crores reflecting an increase of 38%.
Disbursals for Commercial Vehicle and Construction Equipment finance
increased to Rs. 774 crores reflecting an increase of over 48% over the
previous year. The number of contracts booked increased by over 42%
over the previous year.
The disbursals in motorcar segment were Rs. 344 crores reflecting an
increase of 43% over the previous year disbursals. The number of
contracts during the year also increased by over 37%. Car finance rates
have come down substantially because of intense competition in this
During the year, the disbursals of Two-wheeler finance were Rs. 297
crores. In March 2004, the Company securitised the receivables of the
The overdue levels showed a significant reduction as compared to the
previous year, as a result of special efforts being taken to improve
collections and reduce overdues.
Corporate Finance Division:
The Company has discontinued fresh financing activities for leasing as
well as corporate lending.As a result of repayments, the overall lease
portfolio size reduced from Rs. 212 crores as on March 31, 2003 to Rs.
163 crores as on March 31, 2004. The main focus of the Division is
effecting recoveries, and settlements to reduce NPAs.
The Company has power generation capacity of 21.95 MWs from 59 Wind
Turbine Generators which generated 36.28 million units during the
current year under review as against 34.66 million units in the
PROGRESS OF RESTRUCTURING PROGRAMME:
The Company continues to restructure its operations to ensure sustained
profitability. With this objective, some of the measures taken by the
Company during the year were as under:
* The Company, after obtaining shareholders and statutory approvals,
made a preferential issue of Equity Shares to Tata Sons Limited and
Tata Industries Limited against the advance of Rs.300 crores received
from them. As a result, the Company has achieved a capital adequacy of
over 20% as on March 31, 2004, which is well above the norm mandated by
the RBI's Prudential Norms.
* The Company focused its attention on vehicle financing and
accordingly, divested its holding in non core areas such as investment
in Tata Home finance Limited.
* During the year, the Asset Finance Division of Tata Finance Limited
and Bureau of Hire Purchase Credit (BHPC) of Tata Motors Limited formed
a joint marketing setup called Tata Motor Finance to exploit synergies
of both organisations which are functioning in complementary modes i.e.
direct channel and dealer channel respectively. The combined entity
would benefit from a larger market presence and lower cost on account
of sharing infrastructure and back office operations.
* The Company undertook extensive securitisation, including
securitisation of two-wheeler receivables, to consciously restrict size
of the balance sheet and reduce the cost of capital.
* The Company reduced its unprovided exposure to Niskalp Investments &
Trading Co. Ltd. (NITCL) to Rs. 80 crores. During the year the Company
received payment of Rs.75 crores towards part repayment of outstanding
ICDs due from NITCL.
* The number of employees has been reduced from 693 as on March 31,
2003 to 491 as on March 31, 2004.
As part of the Balance Sheet restructuring, the Company has consciously
reduced the size of its assets and borrowings. While the total Capital
employed reduced by Rs.385 crores (approx.) as mentioned earlier, total
loans reduced by Rs.360 crores by disposal of assets.
The Company repaid Fixed Deposits to the extent of Rs. 229.58 crores
(including accrued interest of Rs. 47.59 crores). As a result, the
Fixed Deposit portfolio has been brought down to Rs. 67.35 crores
(including accrued interest of Rs.13.62 crores) as on March 31, 2004.
The Company has stopped accepting fresh deposits or renewing fixed
deposits since December 2001.
As on March 31, 2004, 12,003 deposits aggregating to Rs. 14.24 crores
were unclaimed. Out of the unclaimed deposits, 6,992 deposits
aggregating to Rs.8.13 crores have been repaid till July 20, 2004. The
Company sends periodic reminders to the depositors who have not claimed
The credit rating for the various borrowing instruments given by CRISIL
are as follows:
Non-Convertible Debenture Issues BBB (Positive Outlook)
Fixed Deposit Programme FA - (Positive Outlook)
CRISIL has revised the rating outlook from stable to positive
during the financial year. This is based on the successful execution of
the Company's recapitalisation plan and also on the continued
improvement in the Company's core vehicle finance business and
improvement in the earning's profile.
The rating also centrally reflects the Tata Group's publicly-affirmed
and demonstrated capital, liquidity and management support to the
Company and the expectation that such support would continue in future.
DEVELOPMENT ON LEGAL CASES:
As reported earlier, your Company had initiated Civil & Criminal
proceedings against the former Managing Director, Mr. D.S. Pendse and
others on the basis of legal advice received with regard to certain
fraudulent transactions. The Company had contested the closure of
criminal cases by the Mumbai Police before the Metropolitan Magistrate.
Vide Order dated August 8,2003, the Magistrate rejected the application
of the Mumbai Police to close the criminal investigation and ordered
re-investigation by a different Investigating Officer.Your Company
thereupon filed a Writ Petition in the Bombay High Court for seeking
transfer of investigation from the Mumbai Police to the Central Bureau
of Investigation (CBI) so that a comprehensive investigation is
undertaken into several fraudulent transactions undertaken by the
former Managing Director and his accomplices.
The Bombay High Court vide its Judgement dated October 17, 2003 has
ordered the transfer of investigation to the CBI, which Order has been
subsequently upheld by the Supreme Court on January 6, 2004.
The Company's affiliate, Inshaallah Investments Limited had also filed
two complaints with the Economic Offences Wing of the Delhi Police
against Mr. Pendse& others for commission of various criminal offences
within the jurisdiction of Delhi. The Delhi Police had registered two
FIRs and have completed the investigation.They have filed comprehensive
charge-sheets in both the FIRs against Mr. Pendse & others. Mr. Pendse
has been in police and judicial custody for a major part of last year,
since his arrest by the Delhi Police.
The Company has also filed several complaints with the Securities and
Exchange Board of India (SEBI) for the alleged violation of various
securities laws by the former Managing Director and his
accomplices.These complaints are pending at various stages of
investigation by SEBI. SEBI has filed criminal complaints, during the
year, against Mr. D. S. Pendse and others in the Metropolitan
Magistrates'Court at Mumbai for the violation of the SEBI Insider
Trading Regulations, 1992 and other Securities laws.
a) With reference to Note (5) of Auditor's Report on the Consolidated
Financial Statements, please refer to Note 11 of Schedule 18 of the
Consolidated Financial Statements, which is self explanatory.
b) With reference to Note (6) of Auditor's Report on the Consolidated
Financial Statements, please refer to Note 12 of Schedule 18 of the
Consolidated Financial Statements, which is self explanatory.
c) With reference to Note (7) of Auditor's Report on the Consolidated
Financial Statements, please refer to Note 13 of Schedule 18 of the
Consolidated Financial Statements, which is self explanatory.
d) The Auditors have also drawn attention to the accounts of one of the
subsidiaries viz. Tata Finance Merchant Bankers Limited (TFMB) not
being prepared on a going concern basis and also about excess payment
of remuneration effected by TFMB to its former Manager in earlier year,
which have been dealt with in Note 1A(iv) and Note 10 respectively of
the Consolidated Financial Statements, which are self-explanatory.
TATA FINANCE MERCHANT BANKERS LIMITED (TFMB):
(Under voluntary winding up)
During the year ended March 31, 2004, TFMB has made a loss of Rs. 4.52
The shareholders at the Extraordinary General Meeting of TFMB held on
October 20, 2003 resolved that TFMB be voluntarily wound up and Mrs.
Jayshree S. Joshi of M/s. Jayshree Dagli & Associates, Company
Secretaries, was appointed as the Liquidator of TFMB.
TATA HOMEFINANCE LIMITED (THFL):
THFL ceased to be a subsidiary company of Tata Finance Limited with
effect from September 8, 2003 consequent upon the sale of its
shareholding in THFL to Industrial Development Bank of India (IDBI).
In accordance with the provisions of the Companies Act, 1956 and
Articles of Association of the Company, Mr. F. J. da Cunha and Mr. Ravi
Parthasarathy retire by rotation and are eligible for reappointment.
Managerial Remuneration: Due to the losses made by the Company in the
earlier years, the Company can only pay minimum remuneration to its
Executive Director as per Schedule XIII to the Companies Act, 1956.
As per Clause 49 of the Listing Agreements with Stock Exchanges, your
Company was required to implement the Code of Corporate Governance.
Accordingly, your Company has complied in all material respects with
the features of the said Code. A report on the same is given
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors,
based on the representations received from the Operating Management,
(a) in the preparation of the annual accounts, the applicable
accounting standards have been followed and that there are no material
(b) they have, in the selection of the Accounting Policies, consulted
the Statutory Auditors and have applied them consistently and made
judgements and estimates that are reasonable and prudent so as to give
a true and fair view of the state of affairs of the Company at the end
of the financial year and of the profit of the Company for that year;
(c) they have taken proper and sufficient care to the best of their
knowledge and ability 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) they have prepared the annual accounts on a going concern basis.
PARTICULARS REQUIRED TO BE FURNISHED BY THE COMPANIES (DISCLOSURE OF
PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988:
Parts A and B pertaining to Conservation of Energy and Technology
Absorption are not applicable to the Company.
Foreign Exchange earnings and outgoings - The Company has not earned
any foreign exchange during the year under review. There has been
foreign exchange outgo of Rs. 9.58 lakhs in respect of fees paid to
American Express Limited (previous year Rs. 75.34 lakhs), Rs. 1851.88
lakhs in respect of purchase of shares of Tata Homefinance Limited from
Abbey National Treasury Services Overseas Holdings (previous year -
nil) and Rs. 268.82 lakhs towards interest on FCNR loans (previous year
- Rs. 613.97 lakhs).
M/s. N. M. Raiji & Company, Chartered Accountants, who had been the
Auditors of the Company, have confirmed their eligibility to be
re-appointed as Auditors of the Company at the ensuing Annual General
Meeting.The Board of Directors recommend appointment of M/s. N. M.
Raiji & Co., Chartered Accountants, as Auditors of the Company for the
approval of the Members and to fix their remuneration.
Particulars of employees as required under Section 217(2A) of the
Companies Act, 1956, read with the Companies (Particulars of Employees)
Rules, 1975, as amended, have been given as an annexure to the Report
and forms part of it.
The Directors place on record their appreciation for the faith and
trust reposed by the Bankers, Shareholders, Fixed Depositors and all
other lenders. The Directors wish to thank the Reserve Bank of India
for its continued support and guidance. The Directors also appreciate
the support and contributions made by the employees during the year.
For and on behalf of the Board,
TATA FINANCE LIMITED
Mumbai, July 20, 2004 Chairman