To the Members
The Board of Directors of Your Company presents the Twenty Fifth (25th) Annual Report of IFCI Ltd., together with the Audited Financial Statements for the year ended March 31, 2018.
FINANCIAL SUMMARY AND STATE OF COMPANY’S AFFAIRS
The financial statements of Your Company have been prepared in accordance with the applicable Accounting Standards, RBI Guidelines, Schedule III of the Companies Act, 2013 and other applicable laws/ regulations. During the year, despite increased business compared to previous year, there was reduction in operational income because of overall decline in loan assets due to prepayment of certain loans; increase in proportion of non-recognition of interest income on accrual basis, due to increase in NPAs, stricter RBI norms with regard to slippage of standard assets to NPAs and further down gradation within NPAs, as compared to norms in the previous year.
The operation wise segregation of operational income is depicted in the chart below:
The borrowing cost was lower compared to the previous year on account of reduction in interest rates of existing borrowing, fresh raising of funds at lower cost and prepayment of certain high cost borrowing.
During the year, Your Company paid dividend of ''0.24 crore on preference shares. However, in view of the loss incurred during the year and with a view to preserving capital and cash for future growth, no dividend has been recommended on equity shares. As per the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Dividend Distribution Policy which is enclosed at Annexure-I. The Dividend Distribution Policy is also available on the website of the Company at www.ifciltd.com.
As the overall economic environment and especially credit growth was subdued during FY 2017-18, IFCI’s performance was also affected in line with the overall financial sector. Though, the economy and credit growth started showing signs of recovery in the later part of FY 2017-18, its effect is expected to be visible in FY 2018-19.
Despite challenging environment and high NPAs, Your Company could achieve pre-provision profit of Rs,5 70 crore as compared to Rs,413 crore in the previous year. However, Your Company suffered a loss of Rs,1,008.51 crore during the year under report, which was mainly on account of large amount of provisioning made in respect of NPAs, especially the cases admitted in National Company Law Tribunal (NCLT).
The capital adequacy ratio was at 14.02% with Tier-I capital at 7.52% due to the loss incurred on account of provisions made for non-performing assets. As per RBI’s circular issued on February 12,
2018, all the existing restructuring mechanisms including CDR, SDR, S4A, JLF and 5/25 loan scheme were scrapped. Almost all the banks saw increased provisioning on account of fresh accretion to NPAs due to withdrawal of above schemes. IFCI’s NPA level also increased on account of above developments. With higher provisioning, the provision coverage ratio was at an enhanced level.
Insolvency and Bankruptcy Code (IBC) process is underway in many large NPAs, which are expected to be resolved during FY 2018-19, along with divestment of non-core assets which will improve the asset quality as well as cash flow of Your Company and also strengthening the balance sheet of Your Company.
sanction and Disbursements
During the year under consideration, Your Company focused on improvement of asset quality and made gross sanctions to the tune of Rs,7,216 crore vis-a-vis gross sanctions of Rs,7,923 crore in FY 2016-17. Subdued credit demand and slowdown in economic growth specifically during first half of FY 2017-18 contributed towards marginal decrease in gross sanctions on year on year (YoY) basis. However, disbursements registered a growth of 45.2% and aggregated to Rs,4,434 crore in FY 2017-18, as compared to disbursements of Rs,3,053 crore made in FY 2016-17.
Your Company focused very strongly on the recovery front, which led to proactive measures of suitable recovery/restructuring of stressed assets that resulted in recovery of Rs,949 crore along with recovery from NPA to the extent of Rs,854 crore. Recovery of non-recognised interest of Rs,109 crore from restructured assets was made during FY 2017-18. Further, resolution of certain large NPAs is expected through National Company Law Tribunal (NCLT) forum.
Treasury, Investment and Forex Operations
Global economy demonstrated recovery in FY 2017-18 with stronger activity and easing of recessionary conditions in commodity exporting large economies. International financial markets performed well on account of improving global growth prospects and broadly accommodative monetary policy stances of systemic central banks. However, markets turned cautious towards Q3 FY 2018 due to uncertainty over the pace of normalization of the US Fed monetary policy and the Fed interest rate hikes over the year. The domestic financial environment was impacted by adoption of GST regime, admission of key stressed accounts under Insolvency and Bankruptcy Code, exaltation of India’s sovereign rating and Public Sector Banks (PSBs) recapitalization by the Government. Led by consistent traction in policy reforms, increasing digitization and successful GST implementation, equity markets scaled fresh peaks in FY 2017-18, amidst a cautious return of investor appetite and capital flows. However, rupee weakened in later part of the year owing to US-China trade war and hardening of oil prices. The budget proposal towards institution of long term capital gains tax coupled with rise in US bond yields, impacted both foreign portfolio, retail investors and equity market corrected sharply on this event.
During second half of the year, the policy repo rate was decreased by 0.25% by RBI on the assessment of macro economic situation with the objective of achieving medium term target for CPI inflation of of 4% with a band of ±2%, while supporting growth. Economic and investment activity displayed revival and the GDP growth in FY 2018-19 is expected by RBI to be higher at 7.4% as compared with 6.7% in FY 2017-18. In the above backdrop, Your Company has been cautious in investing the surplus funds across diversified instruments with focus on safety while making every effort towards maximizing yield in consonance with liquidity management.
In rupee operation, the objective has been to manage the surplus fund effectively with minimum risk and deploying to optimize returns with availability of funds for business requirements. The underlying investment principle is safety, liquidity and risk containment. Therefore, Your Company invested the available liquidity mostly in Treasury Bills, Government Securities, Certificate of Deposit, Commercial Papers, Inter-Corporate Deposit / Short Term Deposit (STD) / AAARs, rated Bonds and Liquid Mutual Fund Schemes. Average Deployment during the FY 2017-18 was Rs,1,069.64 crore during the year against Rs,1,393.31 crore in FY 2016-17 and annualized return on funds deployed was 7.76%. Your Company has consistently generated returns higher than the average 91 days T-bill yield during FY 2017-18 from Treasury operations. During the year under report, Your Company registered an income of Rs,88 crore from Fixed Income Money Market operations as against Rs,112 crore in FY 2016-17 with 7.76% return p.a. as against average yield of 6.17% p.a. of 91 days T-bill. Taking advantage of surge in stock prices during the year, Your Company continued with the strategy of selective disinvestment of slow moving/illiquid stocks and booked profits from investments in blue chip stocks. Net investment portfolio of Your Company as on March 31, 2018 stood at Rs,6,637 crore as against Rs,6,394 crore as on March 31, 2017.
The foreign currency operations were confined to servicing of Foreign Currency (FC) liabilities and containing the exchange risks arising due to mismatch in the outstanding amount of FC assets and liabilities. The mismatches were covered through forward contracts, currency futures and principal only swap. The net mismatch position was restricted to below the limits approved by Board of Your Company by maintaining almost square position.
Keeping in view the debt servicing, disbursements and disinvestments made during the year under report, an amount of Rs,1,312.50 crore was mobilized through Term loans at the competitive rates. Your Company had emphasised to raise funds at the lowest possible cost. Consistent efforts are being made by Your Company to explore new avenues of fund raising. The total borrowing of Your Company were Rs,20,047 crore as on March 31, 2018 comprising of Rupee borrowing of Rs,19,575 crore and foreign currency loan of Rs,472 crore.
Investor service is all about maintaining a valuable relationship and trust with our stakeholders. Your Company has always believed in delivering highest level of services to investors, timely resolution of grievances of investor is our top priority. Investor grievances were taken up promptly and resolved to the investors’ satisfaction. FUNCTIONAL VERTICALs
During the year, under report appraisal of all the credit proposals was centralized and carried out by the Credit Appraisal Department at Head Office, which was further divided into two verticals viz. Infrastructure sector and Non-Infrastructure sector. Subsequently, the credit function was further reorganized and the Credit Appraisal and Credit Monitoring departments were merged into a single Credit Department which functioned under two verticals from November, 2017 onwards, wherein, the appraisal function was divided into Infrastructure and non-Infrastructure verticles, while monitoring of existing standard cases was divided among the verticals, zone-wise. The Credit Department was also actively engaged in formulation of Policy, refinement of processes and improvement in practices of credit appraisal and effective monitoring of the standard assets of IFCI. During the year, the primary focus was to bring in more good value clients into IFCI’s fold across sectors to augment quality of the portfolio.
(B) Monitoring and Recovery
Resolution of stressed & non-performing assets has been one of the major challenges to the overall credit and economic growth in the country. Realizing the gravity of the situation, efforts have been made even by the regulator viz. The Reserve Bank of India (RBI) in this regard by identifying large stressed accounts for reference to National Company Law Tribunal (NCLT) under the new Insolvency and Bankruptcy Code (IBC). The same has started yielding results and some of the stressed/NPA accounts have achieved successful resolution & other accounts are also going through various stages of the Corporate Insolvency Resolution Process. However, many accounts lost the benefit of “stand still” clause and slipped to NPA category due to withdrawal of earlier resolution schemes viz. Joint Lenders’ Forum, Corporate Debt Restructuring, Flexible Structuring of Existing Long Term Project Loans, Strategic Debt Restructuring, S4A etc. by RBI vide its guidelines issued in February, 2018 resulting in surge in NPA level in the FY 2017-18.
The Gross NPAs increased from Rs,7,553 crore as on March 31, 2017 to Rs,8,672 crore as on March 31, 2018, however, due to aggressive provisioning, the Net NPAs have shown a reduction at Rs,5,127 crore as on March 31, 2018 vis-a-vis Rs,5,882 crore as on March 31, 2017. While the Gross NPA and Net NPA stood at 40.97% and 29.56% respectively at the end of the FY 2017-18, the Provision coverage ratio improved from 42.03% as on March 31, 2017 to 55.52% as at the end of FY18. It is pertinent to highlight that in such a challenging time, Your
Company responded adequately by making higher recoveries in the FY 2017-18 as under :-
(Rs, in crore)
Recovery from NPAs
Sale of unquoted shares
Recovery from Stressed Assets
Your Company remains committed to expedite resolution of stressed and non-performing assets and maximize recoveries by making all out efforts through various strategies viz. one time settlements/ restructuring, sale of assets under SRFA & ESI, assignment of loans and other legal remedies available in the system.
On the legal front, Your Company has a full-fledged qualified and experienced legal team who carry out the legal functions for facilitation of sanctions and disbursements and has ensured compliance with statutory requirements during the year. Further, Your Company initiated prompt legal measures for recovery against the borrowers and was able to defend successfully before various judicial forums in India in the suits filed against it, during the FY 2017-18.
Your Company has also been successful in obtaining a favourable order from the Hon’ble Supreme Court of India in the matter of sale of assets of hotel property at Goa. The Hon’ble Supreme Court of India vide its order dated 19th March, 2018 has upheld the sale made by IFCI of the hotel at Goa under SRFA&ESI Act.
(D) sugar Development Fund
Your Company has been acting as the “Nodal Agency” of the Government of India since inception of the Sugar Development Fund (SDF) for the purpose of disbursement, follow up and recovery of SDF loans sanctioned for modernisation / expansion of sugar factories, setting up of bagasse based cogeneration power projects, anhydrous alcohol or ethanol projects, zero-liquid discharge (ZLD) distillery projects and cane development scheme. Cumulative sanctions and disbursements under SDF up to March 31, 2018 stood at Rs,6,670 crore and Rs,5,409 crore respectively. The Agency Commission booked in FY 2017-18 was Rs,10.75 crore (excluding Service Tax).
(E) Credit Enhancement Guarantee scheme for scheduled Castes (CEGssC)
The Department of Social Justice & Empowerment under the aegis of Ministry of Social Justice & Empowerment, Government of India, has sponsored the “Credit Enhancement Guarantee Scheme for Scheduled Castes” under its social sector initiatives. The objective of the Scheme is to promote entrepreneurship amongst the Scheduled Castes, by providing Credit Enhancement Guarantee to Member Lending Institutions (MLIs), who shall be providing financial assistance to these entrepreneurs. The Government of India has initially allocated a corpus of Rs,200 crore for the Scheme while contributing annually Rs,0.01 crore, Government may further contribute depending upon utilization of funds. IFCI has been designated as the Nodal Agency under the Scheme, to issue the guarantee cover in favour of Member Lending Institutions, who shall be encouraged to finance Scheduled Caste entrepreneurs to boost entrepreneurship amongst the marginal strata of the Society.
The Scheme has commenced operations from the FY 2015-16 with registration of 25 Member Lending Institutions under it. Upto the FY 2017-18, loans aggregating to Rs,27.27 crore have been sanctioned by some of the Member Lending Institutions against which the total guarantee cover of Rs,18.95 crore has been provided by IFCI. Your Company is making all out efforts to promote this Scheme through wide publicity by conducting seminars, conferences and awareness programmes in co-ordination with various Chapters of Dalit Indian Chamber of Commerce and Industry (DICCI) and attending State Level Bankers Committee (SLBC) Meetings. The corpus of the fund has increased to Rs,240 crore as on March 31, 2018.
IFCI has launched a web portal of the above mentioned scheme (www.ifcicegssc.in) on 14th February, 2017 and the link is also available on website of Your Company i.e. www.ifciltd.com. Further, promotion of the CEGSSC Scheme is made through social media, linkedin, Facebook, twitter etc.
(F) Human Resources
Your Company believes that competent, energised and involved Human Resources pool provides foundation for performance driven culture and sustainable growth of any organisation. This tenet guides the Human Resource practices in Your Company.
In order to enhance competencies in different critical spheres, Your Company has continued to lay focus on development of knowledge, skills and attitudes through various interventions. Training & Development activities, regular interaction with key functionaries for sharing vision, mission, strategic, tactical and operational direction of the company along with exposure of employees to challenging assignments have been key pillars on which development of Human resources has progressed.
Your Company covered around 80% of its employees in various trainings/conferences. In all, there were 390 nominations, in the in-house training/workshops and external trainings, covering topics of functional and behavioral nature. Eight employees were also nominated to attend international trainings/conferences. Further, optimum utilization of Human Resources pool has also been a major focus area. In order to streamline various processes within the organization and reduce redundancies, rationalization of allocation of work and resources was done through organization restructuring.
To generate spirit of involvement in the company, Your Company organized various employee engagement activities like celebration of various occasions, birthdays etc. Responsiveness of Human Resource services to employees was also improved through introduction of online services regarding various facilities to employees during the year. Your Company also shows promptness in resolving grievances of employees through a well-established system.
Your Company also believes that employees who superannuate from IFCI, are its brand ambassadors with immense knowledge about its working and they need to be engaged in a constructive manner. Keeping this in view, Your Company has developed a portal for retired employees and also extended facilities like Holiday Homes to these employees. This has resulted in more positive engagement and in settlement of various issues and court cases which were pending for a long time.
(G) Information Technology
Information Technology (IT) has transformed the conduct of business in every sector of the economy. Financial sector is one such area where IT has been instrumental in enhancing the quality, efficiency and speed of delivery of financial services. The in-house team of IT professionals in Your Company has developed system namely Centralised Integrated Information System (CIIS) which largely consists of applications supporting major business functions as well as non-core functions. The system has been running successfully for over 20 years without any glitch & the system has constantly been upgraded in line with requirements. During the FY 2017-18, to meet the current and emerging business needs, the existing software applications were upgraded with enhanced/added features. New modules were developed in-house for different functions / products for better and effective seamless control over the processes being implemented and also to improve efficiency.
During the FY 2017-18, IT team of Your Company successfully developed and implemented Goods and Services Tax (GST) application along with automated returns generation w.e.f. July 1, 2017. The GST applications were also implemented in subsidiaries of Your Company viz. IFCI Venture Capital Funds Ltd. & IFCI Factors Ltd. The in-house system is periodically audited by external expert agencies for effective control and operating effectiveness of security mechanisms.
(H) Right to Information
Your Company has implemented the Right to Information Act, 2005 from 2013 onwards following the applicability of the RTI Act, 2005 to IFCI and has been providing desired information to the applicants under the provision of RTI Act. Necessary disclosures under Section 4 of the RTI Act has already been posted on the website of Your Company i.e. www.ifciltd.com. Your Company has nominated one Central Public Information Officer at Head Office, nine Assistant Central Public Information Officers at Regional Offices & one First Appellate Authority and Transparency Officer at Head Office under the provision of RTI Act.
During the FY 2017-18, Your Company has received 95 applications and 13 first appeals and were disposed of within the stipulated time frame.
(I) Promotion of Rajbhasha
During the year, Your Company continued its efforts to promote the use of Hindi in its official work. With a view to motivating and encouraging the officers to use Hindi in official work, Hindi workshops and competitions were organized at Head Office as well as other offices of the company. Special workshop was also conducted with the help of officials of Hindi Newspaper, “Business Standard”. Many officers of Your Company participated in various Hindi Competitions organized by Town Official Language Implementation Committee.
The Official Language Committee at Corporate Office monitored the use of Hindi in all Regional Offices and provided necessary guidelines. All the computers have Unicode facility and the website of Your Company has also been made bilingual for the benefit of the shareholders and to further promote use of Hindi.
(J) Nominee Directors
Your Company appoints Nominee Directors on the Boards of some of the assisted concerns by stipulating condition for appointment of Nominee Director under certain situations as per the Board approved Policy, wherever it is considered necessary to do so. This is in line with the established practice of lending Institutions and Banks to monitor the performance of the companies where they have provided financial assistance. The underlying objective of making such appointment is to help build professional management and facilitate effective functioning of the Board as well as formulation of proper corporate policies and strategies to improve productive efficiency and promote long term growth of the assisted companies, keeping in view the overall interest of the shareholders and financial institutions. The feedback received from Nominee Directors act as a tool for credit monitoring.
PERFORMANCE OF sUBsiDIARIEs AND AssOCIATEs PROMOTED
BY IFCI sUBsIDIARIEs
stock Holding Corporation of India Ltd. (sHCIL)
SHCIL, one of the largest Depository Participants, besides being the
country’s largest premier Custodian in terms of assets under custody, provides post trading and custodial services to institutional investors, mutual funds, banks, insurance companies, etc. It acts as a Central Record Keeping Agency (CRA) for collection of stamp duty in 19 States and Union Territories on Pan India basis. It is one of the largest Professional Clearing Member of the country. It distributes Fixed Deposits, Bonds & NCDs of reputed Institutes & Corporates, Mutual Fund Schemes, Initial Public Offers (IPOs) and National Pension System (NPS) etc. and is a corporate agent registered with IRDA for distribution of insurance products. SHCIL has its registered office at Mumbai, a world class main operations office at Navi Mumbai and operates through its 188 retail branches all over India and has been profit making and dividend paying company right from its inception. SHCIL has two wholly owned subsidiaries viz. (i) SHCIL Services Ltd. (SSL) and (ii) Stock Holding Document Management Services Ltd. (Stock Holding DMS).
- SSL, the broking arm of SHCIL, is providing stock broking services to retail and institutional clients across the country. SSL offers services in Cash & F&O segment of BSE & NSE.
- Stock Holding DMS is a Microsoft Gold certified partner for all its products and services and is ISO 9001:2008 and CMMI Level-3 certified company. DMS provides End to End Document Management Solutions.
As on date IFCI holds 52.86% shareholding in SHCIL, making it a subsidiary Company of IFCI.
IFCI Infrastructure Development Ltd. (IIDL)
IIDL was set up by IFCI in the year 2007 as its wholly owned subsidiary to venture into the real estate and infrastructure sector as an institutional player.
IIDL has completed a Serviced Apartments known as “Fraser suites” which is being run successfully through Frasers Hospitality Pte Ltd., Singapore. The project has Gold Standard, 9 storey and 92 luxurious Serviced Apartments comprising studios, one bedroom & two bedroom suites. It offers an ideal living environment that will impress even the most tech-savvy guests thus making it one of the most sought after luxury apartments.
On the residential front, IIDL has successfully developed two projects viz. 21st Milestones Residency, Ghaziabad, Uttar Pradesh and IIDL Aerie at Panampilly Nagar, Kochi, Kerala.
It was awarded a prestigious Financial City project spread over an area of 50 acres near Bengaluru International Airport, Karnataka for development. It has developed the said project and sub-leased the plots to Banks/Institutions for further development.
As on date IFCI holds 100% shareholding in IIDL, making it a subsidiary of IFCI.
IFCI Venture Capital Funds Ltd. (IVCF)
IVCF is at present managing 5 SEBI-registered private equity (PE) funds/Alternate Investment Funds (AIF) viz. India Automotive Component Manufacturers Private Equity Fund-1-Domestic (IACM-1-D), Green India Venture Fund (GIVF), India Enterprise Development Fund (IEDF), Venture Capital Fund for Scheduled Castes (VCF-SC) and Venture Capital Fund for Backward Classes (VCF-BC) with an aggregate corpus of ''848 crore. IVCF derives income from the fund management activities by way of management fee on the corpus/ outstanding amount of funds and by way of profit on these investments. Out of the above, three funds namely GIVF, IACM-1-D and IEDF are likely to close soon and all efforts are being made for optimizing recovery from outstanding investments.
The “Venture Capital fund for Scheduled Castes” (VCF-SC), is a Government of India initiative of Ministry of Social Justice and Empowerment (MoSJE) being the implementing agency. VCF-SC is a first of its kind Venture Capital Fund in India dedicated to promote entrepreneurship among the Scheduled Castes by providing concessional finance to them. During the year, Government contributed an amount of Rs,40 crore for VCF-SC fund. As a result, the corpus of VCF-SC fund has increased to Rs,330 crore including contribution of Rs,50 crore by Your Company. Recently Government of India had mandated IVCF to manage the Rs,Venture Capital Fund for Backward Classes’ (VCF-BC) and ''10 crore initial corpus has been received.
With a view to tapping further opportunities in PE/ VC space, IVCF is in the process of raising the next round of funds viz. Small & Medium Enterprises Advantage Fund (SMEAF) and Green India Venture Fund II (GIVF-II) for which Your Company has consented to act as the “Settlor” and “Sponsor” along with commitment of contribution of Rs,50 crore in each of the Funds. The Funds, having a target corpus of Rs,500 crore each, are floated as Trust Funds, registered under SEBI as Category II Alternative Investment Fund (AIF). The fund raising process for GIVF-II and SMEAF is being undertaken. Another Fund on Affordable Housing is also likely to be launched shortly.
Being an NBFC, IVCF also extends corporate loans to companies by raising funds through bank loans and bonds, with security of mortgage of property and/or shares of listed companies.
As on date IFCI holds 98.59% shareholding in IVCF, making it a subsidiary of IFCI.
IFCI Financial services Ltd. (IFIN)
IFIN is primarily involved in the business of Stock Broking, Currency Trading, Depository Participant Services, Merchant and Investment Banking, Insurance (Corporate agent for both life and General Insurance), Mutual Fund Products Distribution and Corporate Advisory Services.
IFIN is a registered member of SEBI, National Stock Exchange of India Limited (NSE), BSE Limited (BSE), Metropolitan Stock Exchange of India Limited (MCX-SX), National Commodity and Derivatives Exchange Limited (NCDEX), NSDL and CDSL. IFIN has three wholly-owned subsidiaries namely IFIN Securities Finance Ltd, IFIN Commodities Ltd and IFIN Credit Ltd.
IFIN Securities Finance Ltd, an NBFC is primarily engaged in the business of margin funding, providing loan against shares & property, promoter funding etc. to various clients. Being an NBFC, it is registered with RBI. IFIN Commodities Ltd, a registered member of the Multi Commodity Exchange of India Ltd (MCX), NCDEX and National Spot Exchange Limited (NSEL), is primarily engaged in the business of providing commodity market related transaction services. IFIN Credit Ltd is not engaged in any major business activity.
As on date, IFCI holds 94.78% shareholding in IFIN, making it a subsidiary of IFCI.
IFCI Factors Ltd. (IFL)
IFL is a major provider of factoring services in India. IFL also offers Corporate Loans for a tenor of upto five years.
The Government of India had notified a total of 196 systematically important NBFCs (including IFL), as ''Secured Lenders’ under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SRFA & ESI).
It is now focusing upon standard factoring deals with quality debtors and has done away with riskier variants. At the same time IFL is also targeting MSME customers having acceptable risk profile having quality debtors.
In view of Insolvency and Bankruptcy Code (IBC), 2016 being enacted, IFL, expects strengthening of recovery mechanism and reduction in NPAs. In terms of IBC, 2016, IFL has submitted its claims before the Resolution Professionals, in certain cases. It has also secured a line of $20 million from Exim Bank which would augment its Export Factoring business.
As on date, IFCI holds 99.89% shareholding in IFL, making it a subsidiary of IFCI Ltd.
MPCON Ltd. (MPCON)
MPCON is a premier consulting organization having base in Central India, providing quality consulting services. The company consolidated its project consultancy business and also enhanced its presence in the training and capacity building spheres. It has bagged skilling projects in 13 states of the country including Madhya Pradesh and Chhattisgarh from various Central & State Government Departments/ Corporations. Having status as NSDC partner, it is working with National Safai Karamcharis Finance & Development Corporation (A Government of India Undertaking, under the Ministry of Social Justice and Empowerment), National Handicapped Finance and Development Corporation (Department of Empowerment of Persons with Disabilities, Ministry of Social Justice and Empowerment, Government of India), Department of Science & Technology, Ministry of Science & Technology, Government of India, Development Commissioner (Handicraft), Ministry of Textiles, Government of India etc. for skilling division. Apart from Training and Skilling Development, the financial inclusion project has been expanded further to cover areas beyond Madhya Pradesh and started Corporate & Project Advisory services. It has also provided its expertise in other spheres of consultancy services such as Document Management System, Solid & Liquid Waste Management, Renewable Energy, Rural Development through specialization in CSR impact studies for NMDC and implementation of CSR for big PSU’s like NTPC Ltd., Power Finance Corporation Ltd. and Rural Electrification Corporation Ltd.
As on date, IFCI holds 79.72% shareholding in MPCON, making it a subsidiary of IFCI.
ASSOCIATES KITCO LTD. (KITCO)
KITCO is one of the premier Engineering, Management & Project consultancy firm in India. Some of the other fields where KITCO is a prominent player are Energy Studies, Skill Certification and Placement Services. The Company is also a dedicated provider of professional technical consultancy services to Small and Medium Enterprises (SME) sector. At present, KITCO is having 10 divisions viz., Infrastructure, Tourism, Aviation, Urban Planning, Process Engineering, Human Resource Development, Management and Financial Consultancy, Technical Services, Sea ports and Environmental Engineering. KITCO is the first consultancy organization in the State having EIA accreditation. The strength of KITCO is a core team of well qualified and experienced professionals in various branches of engineering and in management, media, marketing, economics, finance etc. numbering more than 260.
KITCO is continuing consultancy services for construction of three new medical colleges in Kerala. It is rendering consultancy services to its prestigious clients like Kannur International Airport Ltd, Cochin International Airport Limited and other airports, Directorate of Sports and Youth Affairs etc.
KITCO has been allotted major assignments during the year including providing consultancy services for construction of theatres for Kerala State Film Development Corporation, DPR for AMRUT Project- SWD-Kochi Corporation, Design and Engineering Consultancy Services for Development/ Re-development of Ernakulam Railway Station & land parcels for National Buildings Constructions Corp Ltd, Comprehensive Development at Aralam Farm, Kannur by Scheduled Tribes Development, the assignment for the preparation of DPR for Setting up of a Pharmaceutical Manufacturing Unit in Vietnam initiative by EXIM Bank, Consultancy service for Bengaluru Airport (BIAL), Design & Construction Service for Infra facilities for new AERDC complex at Bengaluru during the year.
As on date, IFCI holds 20.26% shareholding in KITCO, making it an Associate of IFCI.
IFCI sycamore Capital Advisors Pvt. Ltd. (IsCAPL)
Your Company has 50% interest in ISCAPL incorporated in November 2011 which is under voluntary liquidation and Official Liquidator has been appointed. The liquidator of ISCAPL repaid the amount of ''2.64 crore in the year 2016-17 towards Fully Convertible Debentures subscribed by the Your Company. Adequate provisions have been made against the equity investment, considering the probability and quantum of share in distribution upon liquidation of the Company. ISCAPL has not been considered for the purpose of consolidation of financial statements.
Institute of Leadership Development (ILD) ILD, was sponsored by IFCI as a society registered under the Rajasthan Societies Registration Act, 1958.
The campus was provided with the world class infrastructural/ technical facilities besides developing its picturesque settings amidst lush green Aravali ranges thereby making it a perfect integrated centre for teaching, learning, training, research in all areas across all sectors of leadership development and organising conferences/ Seminars/ Conclaves of national and international repute. The Institute is working on ''no profit no loss basis’.
Apart from Leadership programs, Education, Training, Research, Consultancy, Social change, Skill Development Trainings, Entrepreneurship development, Conferences, Seminars, Workshops and Interventions, Knowledge Creation, Awareness Programmes, Dialogue and Discourse are the key activities pursued by ILD.
During the year 2017-18, ILD, as Nodal agency, imparted skill training in textiles, technology, fashion technology, hospitality etc. to 2000 urban youth of various Districts of Rajasthan. ILD conducted 20 orientation workshops for the Panchayat Elementary Education Officers under the UNICEF sponsored Leadership Orientation Training Programme for the Panchayat Elementary Education Officers. ILD also conducted two programmes of two week duration on Renewal Energy -Solar for the ITI instructors from Electronic and Electrical field under the MOU signed amongst Government of Rajasthan, Schneider Electric India Foundation (SEIF) and ILD. Further, ILD also conducted training programmes for Entrepreneurship Development Institute of India (EDII), Rajasthan State Industrial Development & Investment Corporation of India (RIICO), Tourism Finance Corporation of India Ltd. (TFCI) and Assets Care & Reconstruction Enterprise Ltd. etc., during the year under report.
Management Development Institute (MDI)
MDI Gurgaon, one of the leading Business Schools in India is consistently ranked among the top B-schools of the country by reputed agencies and publications. MDI has the distinction of being the first internationally accredited Indian Business School having received international accreditation by Association of MBAs (AMBA) London in 2006.
MDI continues to be a flourishing cauldron of excellence in management education, high quality research, executive development and value added consultancy. More than 91,000 managers have been trained over 44 years of its existence. More than 100 specially designed executive development programmes are conducted for top, senior and middle level managers of different organizations every year.
Having established its footprints worldwide, MDI’s vision is to become one of the top business schools in the world by incorporating the world’s best academic practices in all its programmes for full time students and corporate executives. The institute as of now has 60 plus collaborative partnerships with leading B-schools in several regions of the world.
MDI’s offerings are continuously updated in keeping with the ever changing global business environment, while setting high standards for all our stakeholders.
This year’s Annual Convocation of MDI Gurgaon, held on 24th March, 2018 was graced by the presence of Shri G M Rao, Group Chairman, GMR Group. Total of 489 students from various Post Graduate Management Programmes and 5 Fellow Scholars received their diplomas on this momentous occasion. 24 Medals were awarded to the meritorious students for different courses.
This year the placement of students was marked with not only 100% placement but a substantial increase in the average compensation. The highest international salary offered was ''55 lakh per annum and the highest domestic salary touched ''35 lakh per annum. The season witnessed an average salary of ''19.17 lakh per annum. A total of 119 companies visited the campus for recruitment, out of which 28 companies were first time recruiters at MDI. Our students have been placed in almost all areas across all sectors Rashtriya Gramin Vikas Nidhi (RGVN)
RGVN having its headquarters in Guwahati, Assam is an autonomous, non-profit organisation registered under the Society’s Registration Act XXI of 1860. RGVN is a national level multi - state development and support organization working in the states of Assam, Arunachal Pradesh, Meghalaya, Mizoram, Nagaland, Manipur, Tripura, Sikkim, Odisha, Jharkhand and Bihar, poverty stricken pockets of Eastern Uttar Pradesh, coastal Andhra Pradesh and Chhattisgarh. RGVN’s core strength comes from its network of NGOs and Self Help Groups, which are capable of handling large development projects. One of its domain has been hived off into an NBFC called RGVN (North East) Microfinance Ltd. which has also been given small finance bank license by the RBI. Over the years, RGVN has been able to groom and support small Community - based Organizations involved in a variety of livelihood enhancement programmes.
However, over the last few years, RGVN has effected a significant policy shift in its operations by implementing projects directly with funding support from Central and State Governments, Banks, Financial Institutions and Corporate Houses under their CSR activities or other social Programmes. International Donor Agencies have also contributed to its funding for poverty reduction projects. To effectively enhance the quality of life in the rural areas, RGVN is now working on the following major verticals including agriculture & livelihood generation, financial literacy & inclusion, drinking water, sanitation & hygiene, solar lighting and handloom & weaving.
IFCI social Foundation (IsF)
IFCI has always strived to conduct its business holistically and responsibly. At IFCI, along with economic performance, community and social stewardship have been key factors for its holistic business growth. IFCI has been an early adopter of Corporate Social Responsibility (CSR) initiatives and has been involved in socially relevant activities ever since its inception in 1948.
Today, it continues to work towards social and community development and areas needing focus and attention, through the IFCI social Foundation (IsF), a registered Trust,
established in 2014. ISF is functioning as an arm of IFCI for CSR activities of the IFCI Group. It aims at improving the socio-economic well-being of the society, particularly the underprivileged and vulnerable sections of the society, who are deprived to live up to the potential that they possess. It aims to create assets so as to deliver sustainable and measurable societal benefit to all the geographical regions of the country, without any regional, linguistic, caste, creed, religious or other barriers.
IFCI and ISF through its CSR projects have covered almost 19 states and Union Territories in India. ISF has been making efforts to take up long gestation, high impact projects from the budget allocated for CSR by IFCI and its subsidiaries. The trust is registered for exemptions u/s 12A & 80G of the Income Tax Act.
Some of the major CSR projects supported by ISF during FY 2017-18 are as under:
- Partnered with Hope Ek Asha for setting up Day Care Centre for Alzheimer patients.
- Partnered with Rama Krushna Temple Trust for construction of Shelter House and toilets - to give shelter to villagers during natural calamities in Odisha.
- Partnered with Save our Soul India under Swachhta Action Plan for construction of toilets and cleanliness drive in Nehru Place and Paschim Vihar.
- Partnered with Rashtriya Gramin Vikas Nidhi under Swachhta Action Plan for construction of 400 toilets in Bihar, Jharkhand, UP and Odisha.
- Partnered with Institute of Leadership Development for setting up Centre of Excellence in Textiles at Jaipur.
- Empowering women by giving means for livelihood by providing ASU Machines to Women weavers of Pochampalli sarees.
- Partnered with Aroh Foundation for construction of toilets in schools at Bihar.
- Partnered with Sulabh Sanitation Foundation Mission for construction of household toilets.
- Partnered with Akshayapatra by providing 3 meal vending vans.
- Providing infrastructure and stationery in schools situated in remote villages of Andhra Pradesh.
companies WHICH HAVE BECOME OR CEAsED TO BE sUBsIDIARIEs, JOINT VENTUREs OR AssOCIATE COMPANIEs DURING THE YEAR
Consequent to the transfer of shareholding by Your Company, North India Technical Consultancy Organisation Ltd., Himachal Consultancy Organisation Ltd. and Tourism Finance Corporation of India Limited, have ceased to be the associate companies. Details on performance and financial position of subsidiaries, associates and joint venture during the FY 2017-18 are provided in Annexure-II MANAGEMENT DIsCUssION AND ANALYsIs Industry structure and developments:-
1.1 Macro-Economic scenario & Developments:
The world economy grew at a fast pace in 2017 at 3.8% since 2011 as compared to 3.2% growth registered in 2016. The economic activity in 2017 was supported by a recovery in investment, picked up in second half of 2017 and ended on a high note with more than 4% growth, the strongest since the second half of 2010. Financial conditions also remained supportive, despite the recent volatility in equity markets and increase in bond yields following signs of firming inflation in advanced economies. However, financial stability is at a risk due to volatility of equity markets, downward trend in bond prices and international trade wars making the road ahead bumpy and could impede the growth trend. In South Asia, growth slowed to an estimated 6.5% in calendar year 2017 owing to temporary disruptions on account of adverse weather conditions across the region.
In India, growth slowed for the first 2 quarters of FY 2017-18, partly reflecting adjustments by businesses to GST.
In the second quarter of FY 2017-18, the slowdown in economic activity bottomed out at 6.3% (year-on-year) growth. With gradual stabilization of GST impact, in Q3 of FY 2017-18, GDP grew at 7% and it further accelerated to 7.7% in Q4 of FY 201718. Domestic demand continued to drive growth, with strong private consumption and a public infrastructure spending push in India. Overall FY 2017-18 was a mixed year for the Indian economy, as the implementation of GST affected the urban consumption through loss of output and employment in labour-intensive unorganized sector in the 1st half of FY 2017-18. However, Government’s continued support through expenditure boosted the industrial growth and pick-up in demand was observed in the 2nd half of FY 2017-18. Similarly, the growth in non-food credit was observed after nearly 2 years, specifically, growth in industry was observed from December 2017 onwards. Further, expansion in capital goods production and revival of construction activity is expected to support the growth trajectory of India’s GDP in FY 2018-19. Other initiatives such as recapitalization of public sector banks as well as the steps towards NPA resolution under the Insolvency and Bankruptcy Code are also expected to contribute to economic growth. On the other hand, the banking sector risks can be an impediment to sustainable growth.
1.2 Banking sector:
The Scheduled Commercial Banks’ (SCB) credit growth picked up on a year on-year basis across bank groups between September 2017 and March 2018. However, deposit growth decelerated for PSBs impacting the deposit growth of all SCBs. Their Capital to Risk-Weighted Assets Ratio (CRAR) as well as the Tier-I leverage ratio declined marginally between September 2017 and March 2018. SCBs’ profit after tax plummeted mainly due to higher risk provisions in 2018. The share of net interest income (NII) in total operating income increased from 63.7% in 2016-17 to 65.2% in 2017-18, whereas, their other operating income (OOI) declined. Among the components of OOI share of profit/loss due to securities trading showed significant decline in 2017-18 over 2016-17. Cost of interest bearing liabilities as well as return of interest earning assets for SCBs’ declined in 2017-18 as compared with 2016-17. Profitability ratios of SCBs’ turned negative mainly due to PSBs. The Asset quality of the SCBs’ also deteriorated during the FY 2017-18. The Gross Non-Performing Advances (GNPA) ratio rose from 10.2% in September 2017 to 11.6% in March 2018. However, their Net Non-Performing Advances (NNPA) ratio registered only a smaller increase during the period due to increase in provisioning. The GNPA ratio in the industry sector rose from 19.4% to 22.8% during the same period whereas stressed advances ratio increased from 23.9% to 24.8%.
1.3 NBFC sector:
Non-Banking Financial Companies (NBFCs) have been consistently increasing their share of lending in the Indian financial sector. While the Banks had the first mover advantage and were a main source of funding, off-late they have been saddled with their own issues such as high NPAs in the large ticket corporate and infrastructure lending. The NBFCs have been growing at a faster pace on account of their customised offerings, better market understanding and doorstep delivery to the customers. In 2017, NBFCs increased their share in the total credit market to 16%, from 13% in 2015. GNPAs of the NBFC sector as a percentage of total advances decreased from 6.1 percent in 2016-17 to 5.8 percent in 2017-18 .The CRAR of NBFC sector increased from 22.0 per cent in 2016-17 to 22.9 per cent in 2017-18.
As of March 2018, there were 11,402 NBFCs registered with The Reserve Bank of India, of which 156 were deposit accepting (NBFCs-D), and 249 were systemically important non-deposit accepting NBFCs (NBFCs ND-SI). All NBFC-D and NBFCs-ND-SI are subjected to prudential regulations such as capital adequacy requirements and provisioning norms along with reporting requirements.
1.4 Initiatives and Developments at IFCI
Your Company continued with the initiatives taken during previous year in the areas of information technology, cost cutting,
employee empowerment and took further initiatives during the year under report with primary objectives of consolidation of business and cost reduction. As per decision taken by the Board of Your Company, two more small regional offices at Chandigarh and Jaipur were closed in FY 2017-18 in continuation to closure of seven small regional offices at Bhopal, Bhubaneshwar, Kochi, Luck now, Patna, Raipur and Vijayawada in calendar year 2017 as per an earlier Board decision with an objective to reduce cost and effectively utilize the existing manpower. An organizational restructuring exercise was undertaken during the year under report, so as to ensure optimum utilisation of human resources and various functions were centralized with a view to increase speed and efficiency.
During FY 2017-18, the main focus was on improvement in asset quality. Therefore, the policies were revamped and lending was limited to the companies having good track records and higher credit ratings.
During the year under consideration, Your Company has been appointed for a period of 3 years, extendable for a further period of 3 years to act as a Verification Agency by the Ministry of Electronics & IT (MeitY), Government of India, for verification of claim applications under Modified Special Incentive Package Scheme (M-SIPS), with fee structure linked to incentives disbursed. A capex expenditure of Rs,32,000 crore has been approved by MeitY for about 160 cases on which 20% to 25% capital subsidy is committed by Government of India out of the fund amount of Rs,10,000 crore allocated towards the Scheme. Approximately Rs,170 crore has been disbursed so far under the Scheme as on 31st March, 2018 out of which, Your Company has enabled disbursements of Rs,128 crore for about 18 cases during the FY 2017-18. During the FY 2018-19, an amount of Rs,500 crore is targeted for disbursement of subsidy under the Scheme. This non-fund based activity not only fetches fee income, but also enhances the brand image of Your Company.
Your Company was also mandated to be nodal agency to manage the Venture Capital Fund for Scheduled Castes which is in operation since January, 2015, in order to promote entrepreneurship among the Scheduled Castes (SC) and to provide concessional finance. The Fund is being managed by one of the subsidiaries of Your Company namely IFCI Venture Capital Funds Ltd (IVCF). since inception. The total Corpus under the scheme as on 31st March, 2018 is Rs,330.01 crore out of which Your Company has provided Rs,50 crore and balance has been provided by Ministry of Social Justice and Empowerment, GoI. As on 31st March, 2018, aggregate sanctions funds of Rs,240 crore to 66 companies and disbursements worth Rs,169 crore to 52 beneficiaries has taken place under the scheme.
Based on IFCI Venture’s performance with regard to VCF-SC, the Ministry of Social Justice and Empowerment (MoSJE), Government of India has mandated IVCF, a subsidiary of Your Company to manage the ''Venture Capital Fund for Backward Classes’. The target corpus of Rs,200 crore has been earmarked towards the scheme and the scheme has been set up as Category
II Alternative Investment Fund under the SEBI (Alternative Investment Funds) Regulations, 2012. The fund has already received an initial contribution of Rs,10 crore from MoSJE, GoI towards the corpus in FY 2017-18. IVCF has also contributed ''5 crore as Sponsor Investor. Marketing efforts have already been initiated for creating awareness of the said Fund. The scheme related details can also be viewed on website of IVCF at www. ifciventure.com/Venture-Capital-Fund-for-Backward-Classes. pdf.
During the year under consideration, IFCI exited from some of the non-core assets with a view to leverage good returns on long term investments and to focus on its core business activities.
Focus on the use of Information Technology to streamline and standardize the various processes continued during current year. Various new applications in credit monitoring and other areas were developed by IT Dept. Website of IFCI as well as that of IFCI Social Foundation was also revamped to enhance the user experience, by utilising in-house capabilities. A portal for retired employees was also launched in order to facilitate dissemination of required information and online application for various purposes. Further, automation was updated for accounting and taxation, so as to strengthen regulatory compliances under GST regime.
2. strengths, Weakness, Opportunities & Challenges
Over the long existence for seven decades, Your Company has gained rich experience and developed core expertise in serving the corporate clients. Your Company has provided financial assistance across all major sectors of economy and built a well-diversified portfolio in infrastructure, real estate, manufacturing, services, and NBFC sector.
Your Company is uniquely positioned as one of the ''sector agnostic’ large NBFC, which would be advantageous for harnessing emerging opportunities across sectors. While keeping in view the Government’s initiatives to boost infrastructure development and to provide thrust to the core industries, Your Company plays a pivotal role to fill the investment gap by financing these segments due to the core competencies developed over the years.
Your Company faces stiff competition in lending business as the borrowing cost is higher compared to the banks and peer NBFCs, due to lower credit rating. Further downgrading of credit rating of Your Company during the year has added pressure on resource raising at competitive cost. Also, worsening of the legacy asset quality leading to high provisioning requirements, net losses and consistent shrinkage in the loan portfolio adds to the constraints being faced by Your Company. However, the new loans sanctioned in FY 2017-18 were of better quality, the average credit rating being “A”.
As Government of India is the Promoter and the largest equity shareholder, it offers additional comfort and confidence to the stakeholders of Your Company. In this direction, the Government has reposed its confidence and commitment with further equity infusion of Rs,100 crore during financial year 2017-18.
In the wake of the fall in overall consumption and investment in the economy, the entire financial sector is grappling with sustained pressure on portfolio quality and dwindling balance sheets besides an all-time high NPAs. Your Company is also affected with this phase of economic cyclic pressures accentuated by recent policy developments for cleaning of stressed assets expeditiously. To phase out the above challenges, Your Company has given focused attention to contain further slippage in the portfolio and has, therefore, constituted a dedicated team to expedite recovery from non-performing accounts. Your Company is optimistic for faster resolution of non-performing accounts after introduction of time bound and efficient resolution process under Insolvency and Bankruptcy Code, 2016. Further, Your Company has been making sincere efforts in reducing lending rate to competitive levels to attract higher rated borrowers and downsizing the financial exposures to the corporate borrowers in order to improve the asset quality and to reduce concentration risk. The immediate objective of Your Company is to reduce the level of NPAs through aggressive recovery and improvement in quality of portfolio.
3. segment-wise or Product-wise Performance
During FY 2017-18, Your Company strived to perform better, despite facing challenging macro-economic and subdued credit offtake. Your Company sanctioned project finance as well as corporate loans of various maturities, with emphasis on lower maturities. It also continued providing short term loans to corporates with good track record and higher credit ratings. During the year, Your Company sanctioned and disbursed short term loans worth Rs,710 crore and Rs,475 crore, respectively which constituted 9.84% and 10.71% share in the aggregate sanctions and disbursements at Rs,7,216 crore and Rs,4,434 crore, respectively. The overall sanctions and disbursements were well diversified across borrower groups as well as sectors.
4.1 Global developments & outlook:
Global growth outlook for 2018 remains positive despite some recent softness. Spillover risk from advanced financial markets to emerging markets, however, has increased. Tightening of liquidity conditions in the developed markets alongside expansionary US fiscal policy and a strong US dollar have started to adversely impact emerging market currencies, bonds and capital flows. Firming commodity prices, evolving geopolitical developments and rising protectionist sentiments pose added risks.
The International Monetary Fund (IMF) projects global economic growth to be robust during 2018. Growth is expected to be broad-based with the Advanced Economies (AEs) growing above their potential and Emerging Markets and Developing Economies (EMDEs) also posting higher growth. Latest indicators such as Purchasing Managers’ Index (PMI) and Organisation for Economic Cooperation and Development (OECD) Composite leading indicators suggest some moderation in the underlying drivers of economic growth. On balance, however, the global economic growth outlook remains positive. Consequently, financial conditions in advanced economies have tightened. A stronger US dollar is rattling emerging market currencies. At the same time, crude oil prices, partly reflecting geopolitical risks, have firmed up. Thus, the underlying global macro-financial conditions coupled with geopolitical uncertainty have potentially increased spillover risk to EMDEs.
Driven by an investment-led recovery in AEs, global trade growth rebounded in 2017 after two years of weakening. However, notwithstanding talks of inward looking policies, trade intensity of global growth rose in 2017. The IMF Direction of Trade Statistics indicates that the decline in exports to AEs which was evident till January 2016 has been arrested. On the other hand, in the backdrop of growing trade tensions with the US, China posted a trade deficit in March, 2018 which has, however, since been reversed. Going forward, changing protectionist rhetoric into reality could pose a significant risk to global growth.
4.2 Domestic developments & outlook:
India’s growth prospects appears promising, with household consumption expected to remain strong, exports expected to recover, and investment projected to revive with the support of structural reforms. Continuing improvements in infrastructure are further expected to aid growth. A normal monsoon is projected for FY 2018-19 which would auger well for agriculture and allied sectors and would help in generating stable rural demand. Due to improvement in capacity utilization in manufacturing sector owing to pick up in demand, both credit off take and investments are expected to improve in FY 2018-19.
As per World Economic Outlook, the Emerging and Developing Asia region grew by 6.5% in 2017. Similar level of growth rate i.e. 6.5% is expected in 2018 as well.
India’s Gross Domestic Product (GDP) growth at 7.7% in Q4: 2017-18 shows that the Indian economy is well on the recovery track on the back of a sharp pick-up in gross fixed capital formation. Further, there has been an uptick in capacity utilization with some industries such as steel closing the gap. The aggregate demand composition indicates a broad-based growth with revival of investment.
Growth in India is expected to be balanced with both rural and urban consumption projected to support the economic activity. Private investment is also expected to revive on account of expansion in formal economy due to GST, increase in infrastructure spending, subsidy reforms, fiscal consolidation and a stable balance of payment situation. The present situation of higher debt in capital intensive sectors, is expected to be mitigated with the help of the efforts of the Government and RBI. Further, the Government’s focus on enhancing ease of doing business are expected to create an environment conducive to attract higher levels of foreign direct investment. The recapitalization package for public sector banks announced by the Government of India is expected to strengthen the balance sheets of public sector banks so that they can continue to provide requisite credit support to various sectors of the economy.
The major risks to the aforesaid outlook include fiscal slippage, further deterioration in asset quality of public sector banks, rise in crude oil prices and tightening of global liquidity.
Also, the Government has shown a significant commitment to fiscal consolidation. Gross fiscal deficit of the Central Government was brought down from 4.1% of GDP in 2014-15 to 3.9% in 2015-16 and further to 3.5% in 2016-17, and remained at 3.5% in 2017-18. It is budgeted to decline to 3.3% of GDP in 2018-19. There could, however, be challenges on the fiscal front unless there is a buoyancy in tax receipts and/or a restraint on expenditure.
5. Risks and Concerns
Risk is an inherent part of business of any financial institution, including IFCI, which makes it susceptible to credit risks that arise when a borrower is expecting future cash flows to pay a current debt. Effective management of credit risk is a critical component of comprehensive risk management and necessary for long term success of a financial institution. The goal of credit risk management is to maximize a FI’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters.
In order to address risks, Your Company has put in place an Integrated Risk Management Policy (IRMP) which addresses Credit Risk, Market Risk & Operational Risk as a part of comprehensive risk management framework which is integrated with its business model.
The General Lending policy, IRMP (comprising Credit Risk Management, Market Risk Management, Operational Risk Management and Asset-Liability Management) of Your Company are reviewed periodically, keeping in view the changing economic and business environment. The Risk Management Vision Statement and Qualitative Risk Appetite Statements of IFCI have also been put in place. Parameters included in the Quantitative Risk Appetite statement are tested periodically. Integrated Risk Management Department (IRMD) manages transaction level risks by way of carrying out risk assessment of all new credit proposals and assigning an internal risk rating after due consideration by the Rating Committee. Portfolio level risks are assessed by way of monitoring exposure against prudential limits, annual rating migration analysis, rating distribution, portfolio rating highlighting the portfolio quality, mapping of internal & external ratings, analysis of NPA cases and Risk Adjusted Return on Capital (RAROC) estimation. IRMD also ensures compliance of all pre-disbursement terms and conditions of sanction, prior to disbursements of loans.
Market and Liquidity risks are monitored by Risk and Asset Liability Management Committee of Executives (RALMCE), through analysis of dynamic liquidity position, structural liquidity gaps and interest rate sensitivity positions. The midoffice function of Integrated Treasury has started reporting to IRMD and acts as an independent risk monitoring functionary. Scientific methodology for fixing IFCI Bench mark Rate for long and short term loans has been evolved. Methodology for risk based pricing and fixing risk premium over benchmark rate for each rating grade has also been put in place.
To manage the operational risks, there are adequate internal controls and systems in place, aided and assisted by internal audit, remote back-up of data, disaster management policy, IT security, physical security and suitable insurance of insurable assets of Your Company, as well as of the assets mortgaged to Your Company.
Besides, mechanism for stress testing of loan portfolio and liquidity position has also been put in place, to assess likely impact on CRAR, profitability and liquidity. Impact of interest rate risk on net interest income and market value of equity of IFCI, under stress scenarios are also assessed on a periodic basis and remedial measures taken, as deemed necessary.
In line with the industry best practices and to ensure proper credit evaluations and monitoring standards, Your Company carries out credit audit of all standard exposures. The main objectives of the credit audit exercise includes, detection of weaknesses in outstanding exposures, initiation of timely corrective action, compliance with internal sanction and disbursement norms and follow-up and monitoring of cases, which serves as a tool for senior management to assess portfolio quality with constant endeavor for asset quality improvement.
Risk management is expected to play a more prominent role in future because of on-going liberalization, deregulation and global integration of financial markets, which would add newer dimensions to risks faced by the Banks and NBFCs. Interrelationships and associations amongst various risk categories and mushrooming of new risks, will require more proactive and efficient management of risks which will determine the strength and resilience of financial institutions. Your Company would continue to work on various initiatives aimed at strengthening credit risk standards, post sanction monitoring of the portfolio to mitigate any adverse impact on the loan portfolio of Your Company. Your Company would also strive to develop a strong culture for risk management and awareness within the organisation.
6. Internal Control systems and Internal Audit
Your Company has adequate Internal Control Systems commensurate with size, scale and complexity of its business and allied operations. The efficacy of these internal controls is being verified by the Internal Audit Department on a regular basis through “Risk based Internal Audit” process. The internal audits are being carried out by the Internal Audit Department through external established and reputed Chartered Accountant Firms. The periodicity of such audits varied from quarterly to yearly depending upon the criticality and materiality of transactions after scope was approved by the Audit Committee of Directors. Based on the observations of internal auditors, corrective actions were undertaken by the process owners in their respective areas thereby strengthening the control systems.
7. Material Development in Human Resources, Industrial Relations Front, including number of people employed
Your Company believes that a pool of competent, involved, energised and satisfied Human Resources provides foundation for performance driven culture and sustainable growth of any organisation. Your Company has continued to lay focus on development of knowledge, skills and attitudes through various interventions. Training & Development activities, regular interaction with key functionaries for sharing vision, mission, strategic, tactical and operational direction of the company along with exposure of employees to challenging assignments have been key pillars on which development of Human resources has progressed. Your Company covered around 80% of its employees in various trainings/conferences. In all, there were 390 nominations, in the in-house training/workshops and external trainings, covering topics of functional and behavioural nature. Eight employees were also nominated to attend international trainings/conferences. Apart from training and development, Your Company also gave sufficient attention to healthcare of its employees and their families and initiated various measures to create an environment of happiness and satisfaction for enhanced productivity.
As on March 31, 2018, the number of people employed was 242.
8. Environmental Protection and Conservation, Technological Conservation, Renewable Energy Developments, Foreign Exchange Conservation.
Your Company has made sincere efforts for conservation of foreign exchange. During the year under report, the amount of foreign exchange outgo was only to the tune of Rs,3.99 crore mainly on account of payment of interest on foreign currency borrowings. Your Company has also put in sincere efforts to protect and conserve the environment and promote community development. Besides, Your Company has been actively engaged in financing of renewable energy projects which are sustainable and environment friendly. Further, Your Company has, through its CSR Projects contributed to environment cleanliness by constructing number of toilets in unreachable areas.
9. Corporate social Responsibility (CsR)
The Corporate Social Responsibility Committee of Directors formulates the CSR Policy and recommends to the Board of Directors on activities to be undertaken by the Company as specified in Schedule VII of Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules,
2014. The CSR Committee recommended the amount to be incurred on the activities and earmarked funds for the envisaged priority areas, as per vision of the Company for a particular financial year. To associate with the CSR Activities of IFCI and its Subsidiaries and Associates, a Trust, by the name of “IFCI Social Foundation” has been established. The investment in CSR activities is mostly project based and for every project, time frame and periodic milestones are set at the outset. Some of the CSR activities undertaken includes contribution to The Akshaya Patra Foundation for purchase of 3 meal distribution Vans in Bhubaneswar, Vishakhapatnam, and Mangalgiri, A.P.; Contribution to Rashtriya Gramin Vikas Nidhi, for construction of toilets in UP, Bihar, Jharkhand and Odisha under Govt.’s Swachhta Action Plan; Contribution to Kalyanam Karoti for construction of toilet complex for differently abled students (both boys and girls) as part of Govt.’s Swachhta Action Plan; Contribution to Asu Machines for providing innovative Asu machines to women weavers of Pochampalli tradition in the state of Telangana; Contribution to Ramakrushna Temple Trust for building of Shelter house/ Shed and toilet for socially and economically backward people of Tunda Village of District Cuttack, Odisha, etc.
Certain Statements in Management Discussion and Analysis describing the Company’s objectives, estimates and expectations may be ''forward looking’ within the meaning of applicable laws and regulations. Actual results might differ materially from those expressed or implied.
OWNERSHIP / CAPITAL STRUCTURE / CHANGE IN SECURITIES
An allotment of 3,39,55,857 number of equity shares of face value of ''10/- each was made to The Government of India (GoI) on March 31, 2018 on preferential basis. Also, during the Financial Year 2017
18, 3,88,43,100 number of preference shares were redeemed as per schedule. As on March 31, 2018, GoI, being the Promoter, held 52.94% in the paid-up share capital of Your Company. Apart from this, there has been no other change in the capital structure of the Company.
The Change in the debt structure of the Company is as under:
Total number of securities at the beginning of the year
Issued during the year
Redemption made during the year
Total number of securities at the end of the year
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
Conservation of Energy-The Company’s operations do not involve any manufacturing or processing activities. It provides financial assistance to the industries, thereby requires normal consumption of electricity. Accordingly, the provisions of Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 (3) of Companies (Accounts) Rules, 2014 are not applicable on the Company.
Technology Absorption-Information Technology (IT) has transformed the conduct of businesses in every sector of the economy. Financial sector is one such area where IT has been instrumental in enhancing the quality, efficiency and speed of delivery of financial services.
During the FY 2017-18, to meet the current and emerging business needs, the existing software applications were upgraded with enhanced/added features. New modules were developed in-house for different functions / products for better and effective seamless control over the processes being implemented and also to improve efficiency.
Your Company has also taken other technologically progressive measures for digitisation of records and digital receipt or remittance of money.
Foreign Exchange Earnings
The details in respect of foreign expenditure / earnings are as follows:
(Rs, in crore)
Year End 31.03.2018
Year End 31.03.2017
Expenditure in Foreign Currencies:
Interest on borrowings
Earning in Foreign Currencies:
Earning in Foreign Currency
INTERNAL FINANCIAL CONTROLs
Your Company has adequate Internal Control Systems commensurate with size, scale and complexity of its business and allied operations. The efficacy of these internal controls is being verified by the Internal Audit Department on a regular basis through “Risk based Internal Audit” process. The internal audits are being carried out by the Internal Audit Department through external established and reputed Chartered Accountant Firms. The periodicity of such audits varied from quarterly to yearly depending upon the criticality and materiality of transactions after the scope was approved by the Audit Committee of Directors. Based on the observations of internal auditors, corrective actions were undertaken by the process owners in their respective areas thereby strengthening the control systems.
In association with an external consultant of repute, the framework of Internal Financial Control was designed and implemented in FY 2016-17. The operative effectiveness of such controls were tested by Internal and Statutory Auditors during the financial year and was found to be satisfactory. The areas of controls with gaps were identified and bridged or decided for closure within finite period. DECLARATION BY INDEPENDENT DIRECTOR As on March 31, 2018, there was no Independent Director on the Board of the Company. However, during the Financial Year
2017-18, the declaration of Independence was obtained from Prof Arvind Sahay who ceased to be an Independent Director w.e.f. September 12, 2017.
DETAILs OF DIRECTORs AND KEY MANAGERIAL PERsONNEL (KMP) APPOINTED OR REsiGNED DURING THE YEAR
During the year 2017-18, Dr Emandi Sankara Rao (DIN: 05184747) was appointed as Managing Director and Chief Executive Office (MD & CEO) of the Company w.e.f. August 17, 2017. Further, on October 30, 2017, Prof N Balakrishnan (DIN: 00181842) and Prof Arvind Sahay (DIN: 03218334) were appointed as Additional Directors by the Board, and being eligible they have offered themselves to be appointed at the ensuing AGM as Directors whose offices are liable to retire by rotation.
Shri Sanjeev Kaushik, DMD (DIN: 02842527) ceased to be on the Board of the Company w.e.f. December 12, 2017 upon completion of his tenure. Besides, Shri R N Dubey (DIN: 07561054), Government Director ceased to be on the Board of the Company w.e.f. April 01, 2018 vide order of the Government of India dated May 03, 2018. The Government of India vide its Order dated May 11, 2018, nominated Dr Bhushan Kumar Sinha (DIN: 08135512) on the Board of the Company. Accordingly, Dr Bhushan Kumar Sinha was appointed as Director on the Board of the Company w.e.f. May 21, 2018.
Apart from the above, there has been no other change in the Composition of the Board of Directors and Key Managerial Personnel during the year under report.
However, the Board of Directors at its Meeting held on May 23, 2018, had designated Ms Jhummi Mantri, as the interim Chief Financial Officer (CFO) w.e.f. May 24, 2018 in place of Shri B N Nayak. DIRECTOR LIABLE TO RETIRE BY ROTATION Ms Kiran Sahdev (DIN: 06718968) whose office is liable to retire by rotation at this Annual General Meeting, and being eligible has offered herself for re-appointment.
NUMBER OF MEETINGs OF THE BOARD OF DIRECTORs
The details of the Meetings of the Board of Directors forms part of the Corporate Governance Report appearing separately in the Annual Report.
COMPOsITION OF AUDIT COMMITTEE
The details of Composition of Audit Committee forms part of the Corporate Governance Report appearing separately in the Annual Report. There has been no instance where the Board has not accepted recommendations of the Committee.
During the Financial Year 2017-18, Your Company was in compliance of submission of all returns / data / statements as advised by RBI, SEBI and other Regulatory Authorities.
COMPLIANCE WITH sECRETARIAL sTANDARDs Your Company is in compliance with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India and approved by the Central Government under Section 118 (10) of the Companies Act, 2013.
A detailed report on Corporate Governance as stipulated under Listing Regulations is forming part of the Annual Report. Certificate from Practicing Company Secretary regarding compliance with the conditions of Corporate Governance as stipulated in Listing Regulations and under Guidelines on Corporate Governance for Central Public Sector Enterprises, 2010 has been obtained and is annexed at the end of Corporate Governance Report.
DOCUMENTs PLACED ON THE WEBsITE
Pursuant to the provisions of the Companies Act, 2013, Listing Regulations, the Company is required to place various Policies / Documents / Details on the Website of the Company. The Company has a functional website i.e. www.ifciltd.com and all the requisite information are being uploaded thereat.
DIsCLOsURE OF NOMINATION AND REMUNERATION POLICY
Pursuant to the provisions of the Companies Act, 2013 and Listing Regulations, wherever applicable, the Company has put in place a Nomination and Remuneration Policy. Vide Notification No. F.No. 1/2/2014-CL.V dated June 5, 2015, in case of Government Companies, Section 134 (3) (e) of the Companies Act, 2013 shall not apply. Accordingly, the requisite Policy has not been made part of Board’s Report.
EXTRACT OF ANNUAL RETURN
Pursuant to the provisions of the Companies Act, 2013, the extract of the Annual Return in the prescribed format of Form MGT - 9 is at Annexure - III.
CORPORATE SOCIAL RESPONSIBILITY
The Disclosure of contents of Corporate Social Responsibility Policy in the Board’s Report pursuant to the provisions of Companies (Corporate Social Responsibility Policy) Rules, 2014 is at Annexure -IV. PARTICULARs OF EMPLOYEEs AND REMUNERATION
The requisite details, envisaged under the provisions of Rule V of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed with this report at Annexure-V. DISCLOSURE ON RELATED PARTY TRANSACTIONS Disclosure on Related Party Transactions during FY 2017-18 in the prescri
prescribed Form AOC-2 is provided in Annexure-VI.
POLICY ON DEALING WITH RELATED PARTY TRANSACTIONS
I. Approval by Audit Committee
1. All Related Party Transactions (RPTs) (including any subsequent modifications thereof) shall require prior approval of the Audit Committee of Directors.
2. The Audit Committee of Directors may grant omnibus approval for the RPTs proposed to be entered into by the Company.
The Conditions for granting Omnibus approval are as under:
All related party transactions shall require approval of the Audit Committee and the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the Company subject to the following conditions, namely:-
1. The Audit Committee shall, after obtaining approval of the Board of Directors, specify the criteria for making the omnibus approval which shall include the following, namely:-
(a) maximum value of the transactions, in aggregate, which can be allowed under the omnibus route in a year;
(b) the maximum value per transaction which can be allowed;
(c) extent and manner of disclosures to be made to the Audit Committee at the time of seeking omnibus approval;
(d) review, on quarterly basis or at such intervals as the Audit Committee may deem fit, related party transaction entered into by the Company pursuant to each of the omnibus approval made;
(e) transactions which cannot be subjected to the omnibus approval by the Audit Committee.
2. The Audit Committee shall consider the following factors while specifying the criteria for making omnibus approval, namely:-
(a) repetitiveness of the transactions (in past or in future);
(b) justification for the need of omnibus approval.
3. The Audit Committee shall satisfy itself on the need for omnibus approval for transactions of repetitive nature and that such approval is in the interest of the Company.
4. The omnibus approval shall contain or include the following:-
(a) name of the related parties;
(b) nature and duration of the transactions;
(c) maximum amount of transaction that can be entered into;
(d) the indicative base price or current contracted price and the formula for variation in the price, if any; and
(e) any other information relevant or important for the Audit Committee to take a decision on the proposed transaction:
Provided that where the need for related party transaction cannot be foreseen and the aforesaid details are not available, audit committee may make omnibus approval for such transactions subject to their value not exceeding ''1 crore per transaction.
5. Omnibus approval shall be valid for a period not exceeding one financial year and shall require fresh approval after the expiry of such financial year.
6. Omnibus approval shall not be made for transactions in respect of selling or disposing of the undertaking of the Company.
7. Any other conditions as the Audit Committee may deem fit.
II. Approval by Board of Directors Except with the consent of the Board of Directors given by a resolution at a meeting of the Board, IFCI shall not enter into any contract or arrangement with a related party with respect to:
(a) Sale, purchase or supply of any goods or materials;
(b) Selling or otherwise disposing of, or buying, property of any kind;
(c) Leasing of property of any kind;
(d) Availing or rendering of any services;
(e) Appointment of any agent for purchase or sale of goods, materials, services or property;
(f) Such related party’s appointment to any office or place of profit in the company, its subsidiary company or associate company; and
(g) Underwriting the subscription of any securities or derivatives thereof, of the company:
Provided that nothing of the above shall apply to any transactions entered into by IFCI in its ordinary course of business other than transactions which are not on an arm’s length basis.
The expression “office or place of profit” means any office or place: Where such office or place is held by a Director, if the Director holding it receives from IFCI anything by way of remuneration over and above the remuneration to which he is entitled as Director, by way of salary, fee, commission, perquisites, any rent free accommodation, or otherwise;
Where such office or place is held by an individual other than a Director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it receives from IFCI anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
The expression “arm’s length transaction” means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.
III. Approval by shareholders
1. Except with the prior approval of the company by a special/ordinary resolution, as may be specified under the Companies Act, 2013 or the Regulations, IFCI shall not enter into a transaction(s), where the transaction(s) to be entered into:
(a) as contracts or arrangements with respect to clauses (a) to (e) of sub-section (1) of Section 188 of the Companies Act 2013, with criteria as mentioned below:
(i) Sale, purchase or supply of any goods or materials, directly or through appointment of agent, amounting to 10% or more of the turnover of the company or Rs,100 crore, whichever is lower, as mentioned in clause (a) and clause (e) respectively of sub-section (1) of Section 188;
(ii) Selling or otherwise disposing of or buying property of any kind, directly or through appointment of agent, amounting to 10% or more of net worth of the company or Rs,100 crore, whichever is lower, as mentioned in clause (b) and clause (e) respectively of sub-section (1) of Section 188;
(iii) leasing of property of any kind amounting to 10% or more of the net worth of the company or 10% or more of turnover of the company or Rs,100 crore, whichever is lower, as mentioned in clause (c) of sub-section (1) of Section 188;
(iv) availing or rendering of any services, directly or through appointment of agent, amounting to 10% or more of the turnover of the company or Rs,50 crore, whichever is lower, as mentioned in clause (d) and clause (e) respectively of sub-section (1) of Section 188.
Explanation: It is hereby clarified that the limits specified in sub-clauses (i) to (iv), as above, shall apply for transaction or transactions to be entered into either individually or taken together with the previous transactions during a financial year.
(b) Is for appointment to any office or place of profit in the Company, its subsidiary company or associate company at a monthly remuneration exceeding Rs,2.5 lakh as mentioned in clause (f) of sub-section (1) of Section 188; or
(c) Is for remuneration for underwriting the subscription of any securities or derivatives thereof of the company exceeding 1% of the net worth as mentioned in clause (g) of sub-section (1) of Section 188.
(1) The Turnover or Net Worth referred in the above sub rules shall be computed on the basis of the Audited Financial Statement of the preceding financial year.
(2) In case of a wholly owned subsidiary, the special resolution passed by IFCI shall be sufficient for the purpose of entering into the transactions between the wholly owned subsidiary and IFCI.
2. All the related parties shall abstain from voting on such resolutions.
3. No Member of IFCI shall vote on such Special/ Ordinary Resolution (as the case may be), to approve any contract or arrangement which may be entered into by the Company, if such member is a related party.
Proviso: The above clauses II and III, with respect to the Approval of Board and shareholder’s, respectively will not be applicable in the following cases:
1. Transactions entered into between two Government Companies.
2. Transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.
Qualifications, Reservation or Adverse Remark or Disclaimer made by the statutory Auditors
There were no qualifications or reservations or adverse remarks made by the Statutory Auditors of Your Company for the standalone financial statements. However, the auditors have made following observations:
For standalone Financial statements:
Emphasis of Matter:
We draw attention to Note No 33 of the standalone financial statements related to change in appropriation policy of the company regarding amount recovered from borrowers which has resulted in increase of net loss by ''32.17 crore.
For Consolidated Financial statements:
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid consolidated financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of affairs of the Group and its associates as at March 31, 2018, and their consolidated loss and their consolidated cash flow for the year ended on that date, subject to the qualified opinion and disclaimer reported by Statutory Auditors of one subsidiary company i.e. M/s IFCI Factors limited which are reproduced herein below:
Basis of Qualified opinion
A. Company has identified two cases as NPA i.e. (i) Concast Steel and Power Limited (Rs,15.69 crore) (ii) Concast Exim Limited (Rs,10.30 crore) during the year as on 31.12.2017 which were identified by us in the previous year i.e. 2016-17 as on 31.03.2017 and made provisions @15%. In our opinion, 100% provision of the unsecured portion amounting of Rs,19.29 crore should have been made since an asset becomes doubtful that has remained sub-standard for a period exceeding 12 months for the financial year ending March 31, 2018. Hence Rs,15.54 crore less provision has been made on account of NPA. So the income as well as advances has been overstated by Rs,15.54 crore. Our audit opinion on the financial statements for the year ended March 31, 2018 was also qualified in respect of this matter.
In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the issues stated in the “Basis for Qualified opinion” paragraph above the aforesaid financial statements, give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the company as at 31st March 2018 and its Loss and its cash flow for the year ended on that date.
In this regard, the Management’s response was that as per books of accounts of IFCI Factors Ltd, they have classified the cases as NPA on 31st December 2017 and accordingly 15% provision has been made as per their policy.
Basis of Disclaimer of Opinion
A. Note No. 25 to the financial statements regarding recognition of Deferred Tax Assets on account of provisions of Non-Performing Assets. In case of Deferred Tax Assets of Rs,95.58 crore as on 31.03.2018, in the opinion of management there is reasonable certainty of availability of future taxable income to realize the deferred tax assets. Considering the past accumulated losses and further stressed standard assets and nature of factoring business, we are unable to comment on the sufficiency of the future taxable profits of the company which can realize the deferred tax assets.
As a result of this matter, we are not been able to obtain sufficient appropriate audit evidence on the said matter to state whether any adjustments would be required to the information included in the financial statements and impact thereof.
Disclaimer of Opinion:
Because of significance of these matter described in the basis of Disclaimer of Opinion paragraph, we are unable to express our opinion for the same.
With respect to the disclaimer of Opinion, the Management’s response was that there is reasonable certainty of availability of future taxable income to realize the deferred tax assets.
Emphasis of Matter
(a) The holding company holds investment in six companies to the extent of 20% or more of their respective total share capital and accordingly these companies are the associates of the holding company as per the Companies Act, 2013. For the reasons stated in the Note No. 26.1 of the financial statement, these associates have not been consolidated in the preparation of the consolidated financial statements of the Group. Our report is not modified on the matter.
(b) We draw attention to Note No. 31 of the consolidated financial statements related to litigation of subsidiary company. Pending adjudication of the matter by the Honourable Supreme Court, in the opinion of the management, no provision or adjustment is required in the books of accounts of subsidiary company. Our report is not modified in respect of this matter.
M/s KPMR & Associates (DE0637) (Firm Reg. No. 02504N) was appointed by the Comptroller & Auditor General of India (C&AG) as Statutory Auditors of Your Company for FY 2017-18. C&AG has appointed M/s KPMR & Associates (DE0637) (Firm Reg. No. 02504N) as Statutory Auditors for the Financial Year 2018-19 as well.
Qualifications, Reservation or Adverse Remark or Disclaimer made by the secretarial Auditor
M/s Navneet K. Arora & Co LLP Company Secretaries was appointed as Secretarial Auditor of the Company for the Financial Year 2017-18. The observations of the Secretarial Auditor are as under:
1. Constitution of the Board, Audit Committee, & Nomination & Remuneration Committee without appointment of minimum number of Independent Directors by the Administrative Ministry of the Government of India during the period from 01st April 2017 to 31st March 2018, due to cessation of Independent Directors namely Smt Savita Mahajan (DIN- 06492679) Shri K S Sreenivasan (DIN-05273535) and Shri S V Ranganath (DIN- 00323799) after completion of their tenure w.e.f 1st April 2017 and Corporate Social Responsibility Committee after completion of tenure of Prof Arvind Sahay (DIN- 03218334) w.e.f 12th September, 2017. Further, no Meeting of the Independent Directors was held during the financial year for carrying out the evaluation of performance of Directors, due to non-availability of minimum number of independent directors on the Board of the Company.
2. Delay in filing of e-returns in Form No(s). NBS-7 for the quarter ended 30th June 2017, 30th September 2017 & 31st December2017with Reserve Bank of India.
3. Imposition of Penalty by the Securities and Exchange Board of India (SEBI):
SEBI Adjudication Officer vide Order no. RA/JP/257/2017 dated 22nd December, 2017, in exercise of its powers, imposed a penalty of ''14 lakh on the Company U/S 15 A (b) of the SEBI Act, 1992, in the matter of Glodyne Technoserve Limited for violation of certain provisions w.r.t. disclosures requirements under SEBI (Substantial Acquisition of Shares and Takeovers) Regulation, 2011 and SEBI (Prohibition of Insider Trading) Regulations, 2015.
The point -wise management reply to the observations made by the secretarial Auditor as above is as under:
1. In terms of Section 149(6) of the Companies Act, 2013, the Department of Financial Services (DFS), Ministry of Finance (MOF), Government of India (GOI) being the administratively in charge of the Company, is the Competent Authority to appoint Independent Directors (IDs). Requests were made for appointment/nomination of IDs on the Board of the Company. The appointments were awaited.
2. The e-return NBS-7 was filed only after Board approval of the accounts for the respective periods. Reserve Bank of India was informed of the same, who had not objected to the request of the company, considering the facts. Further, the Company being a listed entity, the result which is part of NBS-7 return, cannot be disclosed prior to the same is provided to Stock Exchanges, where the shares of the Company are listed.
3. The Company had filed appeal against the above order before Securities Appellate Tribunal (SAT), Mumbai and vide its order dated 25th April, 2018, SAT was pleased to quash and set aside the order passed by Adjudicating Officer of SEBI dated 22nd December, 2017 imposing the penalty of ''14 lakh on IFCI Limited and restored the matter to the file of the Adjudicating Officer (AO) of SEBI for fresh decision on merit in accordance with Law, on the ground that SEBI has inadvertently not considered certain pleadings of IFCI Limited.
The Secretarial Audit Report for FY 2017-18 in Form MR-3 is annexed at Annexure-VII.
The performance evaluation of the Board, its Committees and individual Directors was conducted by the Nomination and Remuneration Committee and the Board. Since, there was only
1 Independent Director on the Board of the Company for part of the financial year 2017-18 who ceased to hold office w.e.f. September 12, 2017, no Meeting of the Independent Directors could be held. Communications requesting appointment of requisite number of Independent Directors have been sent to the Ministry of Finance, being the Administrative Ministry.
disclosure as PER sexual harassment OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDREssAL) ACT, 2013
An Internal Complaint Committee has been formed and the Members of the said Committee, at present are as under:
1. Ms Parul Khosla - External Member
2. Ms Jhummi Mantri, General Manager
3. General Manager (Human Resources) - Presiding Officer
4. Ms Anamika Ranawat, Deputy General Manager (Law)
5. Mr Ravish Jain, Assistant General Manager
In the absence of any of the aforesaid Members, Ms Sapna Jain, AGM (Law) would be the alternate Member. disclosure ON LOAN, GUARANTEEs OR INVEsTMENT UNDER sECTION 186 OF THE COMPANIEs ACT, 2013.
As the Company is primarily engaged in the business of financing Companies in the capacity of being a Non-Banking Financial Company, the provisions of Section 186 [except for sub-section (1)] of the Companies Act, 2013 are not applicable to the Company.
RISK MANAGEMENT POLICY
DISCLOSURE INDICATING DEVELOPMENT AND IMPLEMENTATION OF A RISK MANAGEMENT POLICY IS PROVIDED IN THE MANAGEMENT DISCUSSION AND ANALYSIS REPORT FORMING PART OF THIS REPORT. DISCLOSURE ON RECEIPT OF COMMISSION BY A DIRECTOR FROM SUBSIDIARY COMPANY
No Director of the Company, including the MD&CEO and DMD, was paid any commission during the FY 2017-18 from any of the subsidiary of Your Company, on whose Boards they were Directors as nominees of Your Company.
Your Company did not raise any public deposit during the year. There was no public deposit outstanding as at the beginning or end of the Financial Year 2017-18.
DISCLOSURE OF SIGNIFICANT OR MATERIAL ORDERS PASSED BY REGULATORS OR COURT IMPACTING THE GOING CONCERN STATUS OF THE COMPANY
In the matter of Blue Coast Hotels, upon the default of the borrower in the repayment of dues of the IFCI Ltd., IFCI had sold the mortgaged assets in the year 2015 for an amount of Rs,515.44 crore (approx.) to ITC Limited under the provisions of SRFAESI Act, 2002. Upon challenge by the borrower, the sale was set aside by the Hon’ble High Court of Bombay vide its Order dated 23.03.2016. Being aggrieved, IFCI had filed SLP before the Hon’ble Supreme Court of India. The Hon’ble Supreme Court of India, vide its Order dated 19.03.2018, had dismissed all the objections raised by the borrower and had confirmed the sale of the mortgaged property in favour of ITC Limited. As a consequence, the matter of dispute has been fully settled.
During 2017-18, Vigilance manual of the company was reviewed by the Board and updated for due compliance of CVC guidelines. Vigilance Department conducted regular structured meetings with IFCI management and meetings with Head of subsidiary Companies to discuss vigilance matters and to acquaint them with latest CVC circulars and guidelines.
During the year, Vigilance Department organized following training /workshop programmes for vigilance awareness in the company:
(i) Preventive Vigilance on Credit Appraisal.
(ii) CVC guidelines for procurement of good and services.
(iii) Preventive Vigilance with the theme of learning’s from recent frauds.
The Vigilance Department also undertook following initiatives for improvement in system and procedures in the company:
(i) Vigilance manual reviewed and updated for due compliance with CVC guidelines.
(ii) Integrity Pact approved by the Board of Directors.
(iii) e-Auction route for sale of fixed assets made compulsory and e-Procurement made mandatory.
(iv) Various systemic improvements pertaining to due diligence process while accepting Valuation of Security, no acceptance of unlisted equity as security, avoidance of moratorium in Short Term / Corporate Loans and timely creation of security before disbursement were suggested.
CHANGE IN NATURE OF BUSINESS AND MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OF THE FINANCIAL YEAR AND REPORTING DATE.
There has been no change in the business of the Company during the reporting period. Further, there have been no material changes and commitments which affect the financial position between the end of financial year and date of Board’s Report.
DIRECTORs RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 134 of the Companies Act 2013, with respect to Directors’ Responsibility Statement, it is hereby confirmed that:
(i) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(ii) The Directors had 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 and loss of the company for that period;
(iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(iv) The Directors had prepared the annual accounts on a going concern basis;
(v) The Directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively;
(vi) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Details of Debenture Trustees
As per the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the relevant details of the Debenture Trustees are as under:
2nd Floor - E, Axis House
Bombay Dyeing Mills Compound
P&ndurang Budhkar Marg
Worli, Mumbai - 400025
Asian Building, Ground Floor 17, R. Kamani Marg, Ballard Estate Mumbai - 400001 E-mail: email@example.com Website: www.idbitrustee.in
3rd Floor (East Wing)
Central Bank of India, MMO Building 55 M G Road Mumbai - 400001 E-mail: firstname.lastname@example.org Website: www.cfsl.in
Comments of Comptroller & Auditor General of India
The comments of Comptroller & Auditor General of India (C&AG) and the response of the Management are at Addendum. Appreciation
Your Directors wish to express gratitude for the cooperation, guidance and support from the Ministry of Finance, various other Ministries and Departments of the Government of India, The Reserve Bank of India, The Securities and Exchange Board of India, Stock Exchanges and other regulatory bodies, The Comptroller & Auditor General of India and State Governments. Your Directors also acknowledge the valuable assistance and continued cooperation received from all banks, financial institutions, overseas correspondent banks, other members of the banking fraternity and investors. Your Directors would also like to express their appreciation for the efforts and dedicated service put in by the employees of Your Company at all levels.
Dr Emandi sankara Rao Ms Kiran sahdev
Managing Director & Non-Executive Director
Chief Executive Officer DIN: 06718968
Address: IFCI Tower
Address: IFCI Tower 61 Nehru Place
61 Nehru Place New Delhi - 110019 New Delhi - 110019
Dated: July 27, 2018