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Karnavati Finance Ltd.

BSE: 538928 | NSE: | Series: | ISIN: INE554R01012 | SECTOR: Finance - Investments

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Annual Report

For Year :
2018 2015

Director’s Report

The Shareholders,

The directors have the pleasure in presenting 34th Annual Report of Your Company with the Audited Financial Statements of the Company for the financial year ended on March 31, 2018.

1. Financial Results

(Amount in Rupees)




Revenue From Operations



Other operation Income



Total Revenue



Less: Total Expenses before Depreciation, Finance Cost & Tax



Operating Profits before Depreciation, Finance Cost & Tax



Less: Depreciation



Finance cost



Profit/ (Loss) Before Tax



Less: Current Tax



Less: Deferred Tax Liability (Assets)



Profit/ (Loss) after Tax



2. Review of Business Operation

During the financial year 2017-18, The Company has earned total income of Rs. 208.58 Lakhs from business activities including income from other sources as compared to 122.70 Lakhs in previous year. The total revenue of the company is increased by 70.00%.

During the financial year 2017-18, total 32 loan accounts were written off amounting to Rs. 1.55 lakhs as the same was 100% bad debts.

The total Profit before tax for the financial year 2017-18 stood at Rs. 83.13 Lakh and the total net profit after tax for the financial year 2017-18 stood at Rs. 62.13 Lakh. Due to increase in business operations, our finance cost and employment expenses increased to 67.78 lakhs and 26.81 lakhs respectively.

The Directors of the Company are planning to expand the business of the Company in the current year by providing the varied types of the financial services to the customers along with the prospect of opening various branches in the metros and thus confident of presenting the better figures in the coming years.

3. Dividend

To conserve resources for future prospect and growth of the Company, your Directors regret to declare Dividend for the Financial Year 2017-18 (Previous year - Nil).

4. Net Profit Transfer to Reserve

The Company has transferred Rs. 12.43 Lakh to Statutory Reserve Fund in terms of Section 45-1C of the Reserve Bank of India Act, 1934.

5. Change in Nature of Business

During the year, your Company has not changed its business or object and continues to be in the same line of business as per main object of the Company.

6. License For Money Changer

The Company has commenced activities of Full Fledged Money Changing and earned revenue of Rs. Rs. 1.85 Lakh in the financial year 2017-18 as compare to that in previous financial year i.e. Rs. 1.37 Lakh. which shows business progress of the company in the said line of business activity. The Board of Directors are in planning to expand the activities of Full Fledged Money Changing Activities in coming years and thus increasing the line of business of the Company.

7. Share Capital

The paid up share capital of the company as on March 31, 2018 was Rs. 10.05 crores.

During the year under review, on April 29, 2017 the Authorized Share Capital of the Company was increased by the Members of the Company from Rs. 10,00,00,000/- (Rupees Ten Crore only) divided into 1,00,00,000 (One Crore only) Equity Shares of Rs. 10/- (Rupees Ten only) each to Rs. 10,50,00,000/-(Rupees Ten Crore Fifty Lakh only) divided into 1,05,00,000 (One Crore Five Lakh only) Equity Shares of Rs. 10/- (Rupees Ten only) each, by way of creation of an additional 5,00,000 (Five Lakhs only) Equity Shares of Rs. 10/- (Rupees Ten only) each ranking pari passu in all respect with existing equity shares of the company, aggregating to Rs. 50,00,000/- (Rupees Fifty Lakh only).

The board of directors had made allotment of 16, 90,000 Equity Shares on May 30, 2017 to promoters including promoter group and public on preferential allotment. The Company has received Listing and trading approval for the same by BSE Limited and the same was effective from Wednesday, June 21, 2017.

8. Migration of Listing

The Company had made application for Migration from SME Platform of BSE Limited to Main Board of BSE Limited and the application of the Company was approved by the stock exchange and the Equity Shares of the Company are available for the trading at Main Board of BSE Limited w.e.f. Wednesday, August 9, 2017.

9. Dematerialization of Shares

The Company has entered into Tripartite Agreement with the depositories, National Securities Depository Limited (NSDL) and Central Depository Service (India) Limited (CDSL) for providing Demat facility to its Shareholders. For this purpose, the company has appointed Satellite Corporate Services Private Limited, as its registrar and Share Transfer Agent.

10. Material Changes & Commitments

There are no material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statement relates and the date of this report.

Note: For better transparency, accountability and for good governance of listed entity, Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI) had mandated certain disclosure by listed entity in a stipulated time frame. So line with the said circular company had made necessary compliances as required by SEBI and RBI to be compliant company in letter as well spirit too.

11. Review of Business Operations & Future Prospects

The directors have taken various actions so as to expand the business of the company and they are in planning to start a FinTech collaborations with another companies so as to have a better growth of the company. Further, they are also planning to open various branches of the company in the state of Gujarat and Maharastra for the purpose of expanding the business of money changing and thereby increasing the overall business of the company in a near future.

12. Corporate Governance

Details regarding Corporate Governance Report of the Company regarding compliance of the conditions of Corporate Governance pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are annexed herewith as “Annexure-I.

13. Deposits

The company being Non-Deposit accepting Non-Banking Finance Company has not accepted any deposits from the public. Hence, the directives issued by the Reserve Bank of India & the Provision of Section 73 to 76 of the Company Act, 2013 or any other relevant provisions of the Act and the Rules there under are not applicable. Moreover, the Company is not holding any Deposit as at the financial year ended on March 31, 2018.

14. Director''s Responsibility Statement

Pursuant to section 134(5) of the Companies Act, 2013, the board of directors, to the best of their knowledge and ability, confirm that:

a) In preparation of annual accounts for the year ended March 31, 2018, the applicable accounting standards have been followed and that no material departures have been made from the same;

b) 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 or loss of the Company for that year;

c) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) The Directors had prepared the annual accounts for the year ended March 31, 2018 on going concern basis.

e) The Directors had laid down the internal financial controls to be followed by the Company and that such Internal Financial Controls are adequate and were operating effectively; and

f) 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.

15. Statutory Auditor & their Report

During the financial year 2017-18, the company has received Resignation Letter from its existing Statutory Auditor i.e. M/S Maharishi & Co. Chartered Accountant, Jamnagar (FRN:124872W) stating that they are not willing to act as a statutory auditor from October 04, 2017.

The Board of Directors at its meeting held on October 4, 2017 and as per the recommendation of the Audit Committee, and pursuant to the provisions of Section 139, 140(4), 142 and other applicable provisions, if any, of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014 and other applicable provisions if any, recommended the appointment M/s. Doshi Maru & Associates, Chartered Accountants, Mumbai (FRN: 0112187W) as statutory auditor of the Company to fill up the casual vacancy caused due to resignation of M/s. Maharishi & Co. Chartered Accountants (FRN: 124872W) Jamnagar.

The Company has also received consent and eligibility certificate from M/s. Doshi Maru & Associates, Chartered Accountants, Mumbai (FRN: 0112187W), to act as Statutory Auditors of the Company along with a confirmation that, their appointment, if made, would be within the limits prescribed under the Companies Act, 2013.

In terms of provisions of Section 139(8) of the Companies Act, 2013; M/ s. Doshi Maru & Associates, Chartered Accountants, Mumbai (FRN: 0112187W) shall hold office as statutory auditor of the Company till the conclusion of 34th Annual General Meeting of the Company.

The report of statutory auditor is self-explanatory and need not require any further clarification, explanations and there is no adverse impact or observation or qualification made by the statutory auditor for the financial year 2017-18.

Note: Members of company had also given their consent for appointment of M/s. Doshi Maru & Associates in their meeting held on Wednesday, January 03, 2018 by way of passing ordinary resolution for their appointment.

16. Management Discussion and Analysis Report

Management Discussion and Analysis, for the year under review, as stipulated under Regulations 27(2) of the SEBI (LODR), 2015, is attached to this report as an Annexure-II

17. Extracts of Annual Return

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of the Companies Act, 2013 read with Rule 12 of Companies (Management and Administration) Rules, 2014 the extract of the Annual Return as at March 31, 2018 in Form MGT-9, forms part of this Annual Report as Annexure - III.

18. Particulars Of Remuneration of Directors and Key Managerial Personnel

The details of remuneration paid during the financial year 2017-18 to Executive Director and Key Managerial Personnel of the Company is provided in Form MGT-9 (Annexure - III) which is the part of this report.

19. Secretarial Auditor & their Report

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mrs. Ankita Patel, Practicing Company Secretary, Ahmedabad to carry out the Secretarial Audit for the financial year ended on March 31, 2018. Secretarial Audit Report is attached to this report as Annexure - IV.

20. Particulars of contracts or arrangement made with Related Party

All transactions to be entered by the Company with related parties will be in the ordinary course of business and on an arm''s length basis. Further, there are few transactions which may not be on Arms'' Length Basis, the detail of which is given in Annexure - V in Form AOC-2 and the same forms part of this report.

21. Particulars of Employees

The ratio of the remuneration of each whole-time director to the median of employees'' remuneration as per Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this Report as Annexure - VI.

- Statement containing the names of top 10 employees in terms of remuneration drawn shall be made available on request

- Details of employees posted in India throughout the fiscal and in receipt of a remuneration of Rs. 1.02 crore or more per annum. -Not Applicable since there was no such employee employed by the Company during F.Y. 2017-18.

- Details of employees posted in India for part of the year and in receipt of Rs.8.5 lakh or more a month. Not Applicable since there was no such employee employed by the Company during F.Y. 2017-18.

- Employees employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company. Not Applicable since there was no such employee employed by the Company during F.Y. 2017-18.

- There are no employees posted outside India.

22. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings & Outgo

The details of conservation of energy, technology absorption etc. as required to be given under section 134(3)(m) of the Companies Act 2013 read with the Companies (Accounts) Rules, 2014, are not applicable to our Company, as the Company is not carrying on any manufacturing activities.

Further, there was no foreign exchange earnings and outgo during the financial year 2017-18 (Previous Year - Nil).

23. Board Evolution

The Board of Directors has carried out an annual evaluation of its own performance, board committees and individual directors pursuant to the provisions of the Act.

Further, Nomination and Remuneration Committee has also carried out the performance evaluation of the individual directors on the basis of the criteria such as the contribution of the individual director to the board and committee meetings. In addition, the chairman was also evaluated on the key aspects of his role.

Separate meeting of independent directors was held to evaluate the performance of non-independent directors, performance of the board as a whole and performance of the chairman, taking into account the views of executive directors and non-executive directors.

24. Particulars of loans, guarantees or Investments made under section 186 of the Companies Act, 2013

Details of Loans, Guarantees, Investments and Security covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statement.

25. Internal Financial Control System and their Adequacy

The details on Internal Financial Control and their adequacy are provided in Management Discussion and Analysis Report.

Note: During the year under review, the company has appointed M/S Suresh Tejwani & Co, as an Internal Auditor to look after the internal financial control and their adequacy.

26. Risk Management Policy

A well-defined risk management mechanism covering the risk mapping and trend analysis, risk exposure, potential impact and risk mitigation process is in place. The objective of the mechanism is to minimize the impact of risks identified and taking advance actions to mitigate it. The mechanism works on the principles of probability of occurrence and impact, if triggered. A detailed exercise is being carried out to identify, evaluate, monitor and manage both business and non-business risks.

27. Vigil Mechanism

The detailed vigil mechanism is provided in Annexure - I Corporate Governance Report- under the title Audit Committee.

28. Prevention of Insider Trading

The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires preclearance for dealing in the Company''s shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. All the Board of Directors and designated employees have confirmed compliance with the Code.

29. Disclosure Under Sexual Harassment Of Women At Workplace (Prevention, Prohibition And Rederessal) Act, 2013

There were no incidences of sexual harassment reported during the year under review, in terms of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 as there are no woman employees employed by the Company during the Financial Year 2016-17.

30. Names Of The Companies Which Have Become Or Ceased To Be Its Subsidiaries, Joint Ventures Or Associate Companies During The Year

There is no subsidiary, joint venture or associate company as on March 31, 2018 so the same is not applicable to the company.

31. Pecuniary Relationship Or Transactions Of Non-Executive Directors

During the year under review, the non-executive directors of the company had no pecuniary relationship or transaction with the company.

32. General Disclosure

Your Directors state that the Company has made disclosures in this report for the items prescribed in section 134(3) of the Act and Rule 8 of The Companies (Accounts) Rules, 2014 to the extent the transactions took place on those items during the year.

Your Directors further state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details of Annual Report on Corporate Social Responsibility as Company is not falling within the criteria as prescribed u/s 135 of the Companies Act, 2013

2. Issue of Equity Shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and ESOS.

4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s operations in future.

33. Acknowledgement

Your Directors take this opportunity to place on record the valuable co-operation and support extended by the banks, government, business associates and the shareholders for their continued confidence reposed in the Company and look forward to having the same support in all future endeavors.

For and on behalf of Board of Directors

Karnavati Finance Limited

Place: Mumbai Jay Morzaria Raman Morzaria

Date: August 13, 2018 Managing Director Whole-Time Director

DIN: 02338864 DIN: 00203310

Director’s Report