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Bajaj Finance Ltd.

BSE: 500034 | NSE: BAJFINANCE |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE296A01024 | SECTOR: Finance - Leasing & Hire Purchase

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Annual Report

For Year :
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Director’s Report

Dear Members, The directors present their twenty eighth Annual Report and the audited financial statements for FY2015. Financial results The highlights of the standalone financial results are as under: (Rs. In Crore) Particulars FY2015 FY2014 Income from Operations 5,381.80 4,032.44 Other Income 36.43 41.91 Total Income 5,418.23 4,074.35 Expenses 1,392.83 1,121.93 Loan Losses and Provisions 384.56 258.83 Finance Costs 2,248.30 1,573.24 Depreciation and amortisation 35.60 29.19 Total Expenditure 4,061.29 2,983.19 Profit Before Taxation 1,356.94 1,091.16 Tax Expenses 459.07 372.15 Profit for the year after Taxation 897.87 719.01 Balance brought forward from previous year 1,171.91 764.36 Profit available for appropriations 2,069.78 1,483.37 Appropriations: Transfer to Reserve Fund (185.00) (144.00) Transfer to General Reserve (90.00) (72.00) Transfer to Infrastructure Reserve (2.10) (1.60) Provision for Proposed Dividend (90.27) (80.23) Provision for Dividend Tax (18.38) (13.63) Balance carried to Balance Sheet 1,684.03 1171.91 A summary of consolidated financial performance for FY2015 consolidating the results of wholly owned subsidiary Bajaj Housing Finance Limited alongwith its subsidiary Bajaj Financial Securities Limited is given below. Since the subsidiary was acquired in FY2015 there are no comparatives for FY2014. The operations of the subsidiaries in FY2015 were not significant and hence the consolidated profit of the Company almost equals its standalone profit. (Rs. In Crore) Particulars FY2015 Total income 5,418.28 Interest and finance charges 2,248.27 Net interest income 3,170.01 Operating expenses 1,428.50 Loan losses and provisions 384.56 Profit before tax 1,356.95 Profit after tax 897.88 On 1 November 2014, the Company acquired 100% shareholding in Bajaj Financial Solutions Limited [name changed to Bajaj Housing Finance Limited (BHFL) w.e.f. 14 November 2014] from Bajaj Finserv Limited. With the said acquisition, Bajaj Financial Securities Limited (BFinsec), being wholly owned subsidiary of BHFL, has also become a wholly owned subsidiary of the Company. Performance and financial position of subsidiaries There were no major business operations in BHFL (and its subsidiary BFinsec) in FY2015. The Profit after tax in FY2015 of BHFL was Rs. 78,920 (FY2014: Loss of Rs. 1,118,140) and of BFinsec was Rs. 154,642 (FY2014: loss of Rs. 988,451). Dividend The directors recommend for the consideration of the members at the ensuing annual general meeting, payment of dividend of Rs.18 per share of the face value of Rs.10 (180%) for FY2015. The amount of dividend and tax thereon aggregate to Rs. 108.65 crore. Dividend paid for FY2014 was Rs.16 per share (160%). The amount of dividend and tax thereon aggregated to Rs. 93.86 crore. Increase in borrowing powers During FY2015, pursuant to section 180(1)(c) of the Companies Act, 2013 the Company increased the limit on the borrowing powers of the Board of Directors from Rs. 30,000 crore to Rs. 50,000 crore, to meet its growing business needs. Working results The receivables under financing activity as on 31 March 2015 were Rs. 31,199 crore as compared to Rs. 22,971 crore as on 31 March 2014, an increase of 36% over the previous year. Total income during FY2015 increased to Rs. 5,418 crore from Rs. 4,074 crore during FY2014, an increase of 33% over the previous year. The profit before tax for FY2015 was Rs. 1,357 crore, as against Rs. 1,091 crore in FY2014, an increase of 24% over the previous year. The profit after tax for the year was Rs. 898 crore as compared to Rs.719 crore in FY2014, an increase of 25% over the previous year. This has been due to the Company''s healthy net interest margins, operating efficiencies and prudent risk management. The Company''s current provisioning standards are more stringent than Reserve Bank of India (RBI) prudential norms. In line with its conservative approach, the Company continues to strengthen its provisioning norms beyond the RBI regulation by accelerating the provisioning to an early stage of delinquencies based on the past experience and emerging trends. The Company had an excellent year aided by strong volume growth in Consumer lending and SME lending. Commercial lending declined due to the Company''s cautious stance on the infrastructure sector and also due to its decision to exit the Construction Equipment lending business. During FY2015, the Company launched various new products and variants to strengthen its business model and continue its strong growth momentum. The Company''s loan loss and provisions increased from Rs.259 crore in FY2014 to Rs.385 crore in FY2015 taking into account the increased business. The Company ended FY2015 with a net NPA of 0.45%. Share capital During FY2015, the Company allotted 4,925 equity shares to the trustees of BFL Employee Welfare Trust under Employee Stock Option Scheme, 2009. As on 31 March 2015, the paid-up share capital of the Company stood at Rs. 501,472,590 consisting of 50,147,259 equity shares of face value of Rs.10 each fully paid-up. Operations The operations of the Company are elaborated in the annexed ''Management Discussion and Analysis Report''. Conservation of energy and technology absorption The Company, being a non-banking finance company (NBFC), does not have any manufacturing activity. The directors, therefore, have nothing to report on ''conservation of energy and technology absorption''. Foreign currency Foreign currency expenditure amounting to Rs. 6.36 crore (FY2014 Rs. 4.41 crore) was incurred during FY2015. The Company did not have any foreign exchange earnings. Employee stock option scheme Disclosures pertaining to the Employee Stock Option Scheme 2009 of the Company are set out as an annexure to this Report. Fixed deposits During FY2015, the Company accepted fixed deposits of Rs. 828.28 crore. Fixed deposits outstanding at the year-end were Rs. 983.47 crore. As on 31 March 2015, there were no deposits which had matured but remained unclaimed. During FY2015, there was no default in repayment of deposits or payment of interest thereon. Adequacy of internal financial controls Internal financial controls with reference to the financial statements were adequate and operating effectively. Credit rating Despite a tough economic environment, the Company retained all its credit ratings owing to high capital adequacy, strong promoter support, tightened credit acceptance criteria and robust asset- liability management. CRISIL has re-affirmed the highest rating of FAAA/Stable for the fixed deposit programme of the Company. ICRA has also assigned MAAA/Stable rating to the fixed deposit programme of the Company. These ratings indicate highest degree of safety with regard to timely payment of interest and principal. The Company is one of the very few NBFCs which enjoys the highest rating for its fixed deposit programme. The Company also enjoys the highest rating of CRISIL A1 from CRISIL and (ICRA) A1 from ICRA for its short term debt programme for Rs.5,500 crore from each rating agency. The long term non-convertible debentures have been assigned CRISIL AA /Stable rating by CRISIL and [ICRA] AA (Stable) by ICRA indicating the high degree of safety with regard to timely payment of interest and principal for an amount of Rs.7,350 crore and Rs.5,000 crore respectively. The Company has also been assigned CRISIL AA /Stable rating by CRISIL and [ICRA] AA (Stable) by ICRA for Rs.700 crore lower tierII bond programme and Rs. 1,000 crore each for the subordinated debt programme. As regards the bank loan ratings tor the bank facilities stipulated by RBI, as a part of BASEL II guidelines, CRISIL has assigned CRISIL AA /Stable rating for the Company''s cash credit/working capital demand loan and long term bank facilities and CRISIL A1 rating for the short term bank facilities. The cumulative rating for the bank loan programme is Rs. 16,000 crore. RBI guidelines The 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 15%, the capital adequacy ratio of the Company was 17.97% as on 31 March 2015. In line with the RBI guidelines for asset-liability management (ALM) system for NBFCs, the Company has an Asset-Liability Committee which meets monthly to review its ALM risks and opportunities. Corporate social responsibility Detailed information report on corporate social responsibility policy developed and implemented by the Company on CSR initiatives taken during the year pursuant to section 135 of the Companies Act, 2013 is given in the annexed Annual Report on CSR activities. Formal annual evaluation During FY2015, evaluation of the performance of the Board, its Committees and individual directors was done on the basis of evaluation criteria approved by the Nomination and Remuneration Committee at its meeting held on 14 October 2014. Rating sheets were circulated to the directors for the purpose of evaluation of performance of the Board, its Committees and individual directors. A summary of performance evaluation of the Board, its Committees and individual directors was prepared on the basis of rating sheets received from the individual directors and the same was placed before the Board. Directors and Key Managerial Personnel (KMP) At the annual general meeting held on 16 July 2014, Gita Piramal (DIN 01080602) was appointed as an independent director of the Company pursuant to section 149 of the Companies Act, 2013 for a term of five consecutive years. The Board of Directors, at its meeting held on 23 March 2015, appointed Rajeev Jain (DIN 01550158) as an additional director with effect from 1 April 2015 and as a Managing Director for a period fof five years from that date. It is proposed to appoint Rajeev Jain as a director liable to retire by rotation at the extra ordinary general meeting to be held on 20 May 2015. The Company has received a notice under section 160 of the Companies Act, 2013, from Rajeev Jain, in respect of his candidature as a director. According to the Companies Act, 2013, at least two-thirds of the total number of directors (excluding independent directors) shall be liable to retire by rotation. Rajiv Bajaj, director (DIN 00018262), being the longest in the office amongst the three directors liable to retire by rotation, retires from the Board by rotation this year and, being eligible, has offered his candidature for re-appointment. Necessary resolution for this purpose is being proposed in the notice of the ensuing annual general meeting for the approval of the members. As required under clause 49 of the Listing Agreement with the stock exchanges, the information on the particulars of director proposed for re-appointment has been given in the notice of annual general meeting. The Company has following KMP: 1. Rajeev Jain, Managing Director 2. Rajesh Viswanathan, Chief Financial Officer (appointed w.e.f. 1 August 2014) 3. Anant Damle, Company Secretary Number of meetings of the Board There were eight meetings of the Board held during the year, details of which are given in the annexed ''Corporate Governance Report''. Directors'' responsibility statement In compliance of section 134(5) of the Companies Act, 2013, the directors state that: - in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; - 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; - 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; - the directors have prepared the annual accounts on a going concern basis; f the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and - the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively. Declaration by independent directors The independent directors have submitted the declaration of independence, as required under section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in section 149(6) of the Companies Act, 2013. Extract of annual return The extract of annual return as provided under sub-section (3) of section 92 of the Companies Act, 2013, in the prescribed form MGT 9 is annexed to this Report. Policy on directors'' appointment and remuneration The policy on directors'' appointment and remuneration is given in the Annual Report under a separate section of ''Corporate Governance Report''. Presentation of financial statements The financial statements of the Company for the year ended 31 March 2015 have been disclosed as per schedule III to the Companies Act, 2013. Consolidated financial statements The directors also present the audited consolidated financial statements incorporating the duly audited financial statements of the subsidiaries and as prepared in compliance with the Accounting Standards and Listing Agreement as prescribed by Securities and Exchange Board of India. A separate statement containing the salient features of its subsidiaries in the prescribed form AOC-1 is attached to the standalone financial statements. Statutory disclosures The summary of the key financials of the Company''s subsidiaries is included in this Annual Report. A copy of audited financial statements for each of the subsidiary companies will be made available to the members of the Company, seeking such information at any point of time. The audited financial statements for each of the subsidiary companies will be kept for inspection by any member of the Company at its registered office during business hours. The same are placed on the Company''s website www.bajajfinserv.in/finance As required under the provisions of section 197(12) of the Companies Act, 2013, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, particulars of employees are set out in the annexure to the Directors'' Report. As per the provisions of section 136 of the said Act, this Report is being sent to all the members excluding the particulars of the employees. These particulars will be made available to any member on request. Directors'' responsibility statement as required by section 134(5) of the Companies Act, 2013 appears in a preceding paragraph. Certificate from auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report. Disclosures as prescribed by Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and other NBFC regulations have been made in this Annual Report. A Cash Flow Statement for FY2015 is attached to the Balance Sheet. The Company has a policy on prevention of sexual harassment at workplace. There was no case of sexual harassment reported during the year under review. Particulars of loans, guarantees and investments The Company, being a non-banking finance company registered with the Reserve Bank of India and engaged in the business of giving loans, is exempt from complying with the provisions of section 186 of the Companies Act, 2013. Accordingly, the disclosures of the loans given as required under the aforesaid section have not been given in this Report. Related party transactions Transactions with related parties, during the year under review, were entered into pursuant to the prior/omnibus approval of the Audit Committee. The details of such transactions were placed before the Committee for noting/review. All related party transactions which were entered into during the year were on an arm''s length basis, in the ordinary course of business and not material under clause 49 of Listing Agreement and hence did not require members'' prior approval under the Companies Act, 2013 and Listing Agreement. During the year there were no related party transactions which require disclosure under section 134 of the Companies Act, 2013. A policy on materiality of related party transactions and dealing with related party transactions is placed on the website of the Company www.bajajfinserv.in/finance Raising of funds The Board of Directors, at its meeting held on 21 April 2015, has approved, inter alia, the following proposals subject to the approval of the members at the extra ordinary general meeting scheduled on 20 May 2015: 1. Issue of securities for an aggregate amount up to Rs. 1,400 crore through Qualified Institutions Placement in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 to Qualified Institutional Buyers. 2. Preferential issue of warrants up to 925,000 warrants convertible into equivalent number of equity shares to Bajaj Finserv Limited, the promoter, in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. Risk management The Board of Directors, at its meeting held on 14 May 2014, has adopted risk management policy for the Company which provides for identification, assessment and control of risks which in the opinion of the Board may threaten the existence of the Company. The Management identifies and controls risks through a properly defined framework in terms of the aforesaid policy. Corporate governance Pursuant to clause 49 of the Listing Agreement with stock exchanges, a separate section titled ''Corporate Governance'' has been included in this Annual Report, along with the Reports on ''Management Discussion and Analysis'' and ''General Shareholder Information''. All Board members and Senior Management personnel have affirmed compliance with the code of conduct for FY2015. A declaration to this effect signed by the Managing Director of the Company is contained in this Annual Report. The Managing Director and Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as specified in clause 49 of the Listing Agreement and the said certificate is included in this Annual Report. Secretarial standards of ICSI Pursuant to the approval from the Ministry of Corporate Affairs, the Institute of Company Secretaries of India (ICSI) has on 23 April 2015, notified the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) to be effective from 1 July 2015. The Company is complying with the same. Auditors Pursuant to the provisions of section 139 of the Companies Act, 2013, Dalal & Shah, Chartered Accountants, were appointed as statutory auditors of the Company at the 27th annual general meeting (AGM) of the Company for a period from the conclusion of the said AGM till the conclusion of the 30th AGM subject to ratification of their appointment by the members at every AGM held thereafter. A resolution for ratification of appointment of Dalal & Shah, Chartered Accountants, as auditors for the period from the conclusion of the ensuing 28th AGM till the conclusion of the 29th AGM and for fixation of their remuneration for the year 2015-16 is being proposed in the notice of the ensuing AGM for the approval of the members. The Company has received from Dalal & Shah a written consent for ratification of their appointment from the conclusion of the 28th AGM till the conclusion of the 29th AGM and a certificate to the effect that their appointment shall be in accordance with the prescribed conditions and that the firm is not disqualified under the Companies Act, 2013. The Audit Report does not contain any qualification, reservation or adverse remark or disclaimer. Secretarial auditor Pursuant to the provisions of section 204 of the Companies Act, 2013, the Board has appointed Shyamprasad D. Limaye, (Membership No. 1587) company secretary in practice, to undertake secretarial audit of the Company. A report from secretarial auditor is annexed to this Report. The same does not contain any qualification, reservation or adverse remark or disclaimer. Acknowledgement The Board of Directors takes the opportunity to express its sincere appreciation for the support and co-operation from its members, Reserve Bank of India, banks, financial institutions and the trustees for debenture holders and FD holders. The Board of Directors also places on record its sincere appreciation of the commitment and hard work put in by the Management and employees of the Company and thanks them for another On behalf of the Board of Directors Rahul Bajaj Chairman Pune. 20 May 2015

Director’s Report