1. The Directors present their Twenty-first Annual
Report and the Audited Statement of Accounts for the year ended 31st
2. Financial Results 2007-08 2006-07
Rs. million Rs.million
Income from Operations 4,096.7 3,527.6
Other Income 930.8 490.3
Total 5,027.5 4,017.9
Provision for Doubtful Debts and 1,091.8 808.8
Bad Debts written off, net
Depreciation 48.5 30.3
Profit before Taxation 299.8 712.5
Provision for Taxation 98.6 240.3
[including Deferred Tax Credit and FBT]
Profit for the year after Taxation 201.2 472.2
Disposable surplus after earlier 205.8 476.4
Transfer to Reserve Fund 41.5 96.0
Transfer to Debenture Redemption 90.0 207.5
Provision for Proposed Dividend 36.6 106.0
Provision for Dividend Tax 6.2 18.0
Balance carried to General Reserve/ 31.5 48.9
3. Dividend :
The Directors recommend for the consideration of the Members at the
Annual General Meeting, payment of Dividend of Re.1/- per Share (10 per
cent) for the year ended 31st March, 2008 on the enhanced capital of
Rs.366 million, after the conversion of balance warrants issued to the
Promoters on preferential basis into equity shares during the year. The
total Dividend outgo including tax thereon will be Rs.42.82 million.
Dividend paid for the year ended 31st March, 2007 was Rs.3/- per share
(30 per cent) and the total Dividend outgo including tax thereon was
The Dividend recommended by the Board for the year 2007-08, apart from
decline in profits, is also lower due to the legal requirements
relating to creation of Debenture Redemption Reserve and rules
pertaining to transfer of profits to reserves.
During the year 2007-08, your company deployed a total amount of
Rs.30,363 million, of which Rs.27,406 million were under various
financing schemes and Rs.2,957 million in AAA rated securitized retail
asset pools which is a new business initiative by the company. As
against this, during the previous year 2006-07, the total amount
deployed was Rs.26,313 million, thus recording an increase of 1 5% over
the previous year.
The Assets under Finance, Loan and Securitized Retail Asset Pool
receivables as on 31st March, 2008 were Rs.33,319 million as compared
to Rs.27,610 million as on 31st March, 2007.
The profit before tax for the year was at Rs.299.8 million, as against
Rs.712.5 million in the previous year and the profit after tax for the
year was Rs.201.2 million as compared to Rs.472.2 million in the
previous year. This has been primarily because of reduced subvention
offers from the two wheeler manufacturer (Rs.59 million in 2007-08
against Rs.337 million in 2006-07), increased provision for doubtful
debts and bad debts written off, net (Rs. 1,092 million in 2007-08
against Rs.809 million in 2006-07) due to the companys increased focus
on semi-urban and rural markets in the last 2-3 years.
5. Prospects :
In the backdrop of strong GDP growth witnessed in the last few years,
the retail finance business is continuously growing at a rapid pace.
This strong growth is also aided by changes in demographic profiles,
expanding base of potential consumers, higher disposable incomes and
increased product/ brand choices available to the customer. This high
growth level has attracted banks and other multi- national players into
retail finance business, thereby resulting in increased competition.
However, there are some concerns at the end of the year with regard to
increasing inflationary pressures and slowdown of economy, which could
have an adverse impact on the demand for two wheelers, consumer
durables and other retail lending products. It could result in a slow
down in retail finance services and if prolonged, it could adversely
affect the future financial performance of financial services companies
After a fast paced growth over the last few years, the retail finance
industry in general is currently witnessing stress in its portfolio
quality. This current trend in provisioning and bad debts is expected
to prevail in the near term.
The company during the year added about 500 permanent employees
including some employees at a senior level in various specialised
business/ operational areas, the benefits of which will be realised in
next few quarters.
The company expects to maintain satisfactory growth during the current
year and aims to remain a leading player in the retail financial
services business in the country through appropriate product strategy,
leveraging on its expertise, enhancing its risk management capabilities
in order to control delinquencies and launching new business
6. New Initiatives :
Since the third quarter of the year 2007-08, the company has launched
various new business initiatives like acquisition of AAA rated
securitized retail asset pools of reputed banks/ NBFCs, IPO financing,
insurance distribution to its customers, cross sell of personal loans
to existing customers with clean repayment history, financing to SMEs/
reputed educational institutions and universities for personal
computers etc. The company is repositioning itself as a full-service
NBFC offering wide range of products.
7. Share Capital :
The company on 18th January, 2006, had allotted 3,006,540 Warrants to
promoters - Bajaj Auto Ltd., on preferential basis, each Warrant being
convertible at the option of Bajaj Auto Ltd., within 18 months from the
date of allotment, into one fully paid Equity Share of Rs.10/- each on
payment of an aggregate price of Rs.410/- per share.
During the year under review, 1,247,940 Equity Shares were allotted to
Bajaj Auto Ltd., on 17th July, 2007, on conversion of the balance
Warrants on receipt of full consideration. With this allotment, the
entire,3,006,540 Warrants allotted to them on preferential basis, now
stand converted into Equity Shares. Earlier, 1,758,600 Warrants were
converted into equity shares in March, 2007.
After this allotment, the companys Paid-up Equity Share Capital is now
8. Repurchase of Debentures
The company under its Rights Issue, had allotted 5,248,365 - 6% Non
Convertible Debentures (NCDs) of the face value of Rs.500/- each
aggregating Rs.2,624.2 million on 9th February, 2007. Of these, the
company, as a treasury operation, repurchased 2,186,380 fully paid NCDs
from the open market, at an average price of Rs.469.60 per NCD, in
terms of the Letter of Offer dated 1st December, 2006.
9. Fixed Deposits :
Your company received fresh deposits of Rs. 1.2 million and with
renewals of Rs.6.8 million, the total deposits mobilised during the
year under review, stood at Rs.8 million. Public Deposits outstanding
at the year-end were Rs.61.1 million and the number of depositors was
2,539. At the end of the financial year under review, there were 191
deposits aggregating Rs.3.00 million which matured but remained
unclaimed as on that date. The company had written to these depositors
and as on date, deposits aggregating Rs.0.7 million have been
10. Credit Rating :
CRISIL has re-affirmed the highest rating of FAAA/Stable for the
Fixed Deposit programme of your company. This rating indicates very
strong degree of safety with regard to timely payment of interest and
principal. Your company is one of the very few Non-Banking Finance
Companies (NBFCs) which enjoys the highest rating.
The company also enjoys the highest rating of P1 + from CRISIL for
Rs.7,000 million Commercial Paper programme.
The Non-Convertible Debentures allotted on Rights basis to the
shareholders have been assigned AA+/Stable rating by CRISIL and
LAA+ rating by ICRA.
As regards the Bank Loan Ratings for the bank facilities stipulated by
RBI, as a part of BASEL II guidelines, CRISIL has assigned AA+/Stable
rating for the companys Cash Credit/ Working Capital Demand Loan
amounting to Rs.5,850 million and Long Term Loan facilities amounting
to Rs.2,510 million and P1 + rating for the Short Term Loan
facilities amounting to Rs.4,000 million.
11. RBI Guidelines :
Your company continues to fulfill all the norms and standards laid down
by the Reserve Bank of India (RBI) pertaining to non-performing assets,
capital adequacy, statutory liquidity ratio etc. As against the RBI
norm of 12 per cent, the capital adequacy ratio of your company is
40.69 per cent.
In line with the RBI guidelines for Asset-Liability Management (ALM)
system for NBFCs, the company has in place an Asset-Liability
12. Statutory Disclosures :
As required under the provisions of Section 217(2A) of the Companies
Act, 1956, read with the Companies (Particulars of Employees) Rules,
1975, as amended, particulars of employees are set out in the Annexure
to the Directors Report. As per the provisions of Section 219(1
)(b)(iv) of the said Act, these particulars will be made available to
any shareholder on request.
The company, being a Non-Banking Finance Company, not having any
manufacturing or foreign exchange activity, the Directors have nothing
to report on Conservation of Energy, Technology Absorption, Foreign
Exchange earnings and outgo.
13. Directors Responsibility Statement :
In compliance of Section 217(2AA) of the Companies Act, 1956, your
Directors state that:
(i) In the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper explanation
relating to material departures;
(ii) 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 at the end of the financial year and of the profit of
the company for that period;
(iii) The Directors have taken proper and sufficient care 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
(iv) The Directors have prepared the annual accounts on a going concern
14. Directors :
Shri Dipak Poddar, in view of his pre-occupation, resigned as the
Managing Director of the company with effect from 1st April, 2008. Mr.
Poddar has been the Managing Director of the company since its
inception in 1987 and has been a key force in bringing the company to
the present status of one of the leading retail finance company in
India from a very small beginning. Although Mr. Poddar has ceased to be
the Managing Director, he continues as a Director on the Board of the
company and hence his valuable advice would always be available. The
Board places on record its sincere appreciation for the valuable
contribution made by Shri Dipak Poddar during his tenure as Managing
Director of the company.
Shri Rahul Bajaj, Shri Sanjiv Bajaj and Shri Madhur Bajaj, Directors,
retire from the Board by rotation this year and being eligible, offer
themselves for re- appointment.
The information on the particulars of Directors seeking appointment /
re-appointment as required under Clause 49 of the Listing Agreement
with the Stock Exchanges has been given under the report on Corporate
1 5. Appointment of Manager under the Companies Act, 1956 :
Subject to the approval of the shareholders, the Board of Directors
have appointed Shri Rajeev Jain, Chief Executive Officer (CEO) of the
company as the Manager under the Companies Act, 1956 for a period of
three years with effect from 1 st April, 2008, on the terms of
remuneration set out in the resolution in the Notice for the ensuing
Annual General Meeting. The resolution is recommended for approval of
the shareholders at the Annual General Meeting.
16. Auditors :
You are requested to appoint auditors for the period from the
conclusion of the ensuing Annual General Meeting till the conclusion of
the next Annual General Meeting and to fix their remuneration.
17. Corporate Governance :
Your company complies with all the mandatory requirements pertaining to
Corporate Governance, in terms of Clause 49 of the Listing Agreement
with the Stock Exchanges. A detailed report on Corporate Governance has
been included in this report along with a certificate from the auditors
of the company regarding compliance of conditions of Corporate
Governance. Further, a separate Management Discussion and Analysis
report is also given in this report.
On behalf of the Board of. Directors
Pune Rahul Bajaj
21st May, 2008 Chairman