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Shriram Transport Finance Corporation Directors Report, Shriram Trans Reports by Directors
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Shriram Transport Finance Corporation

BSE: 511218|NSE: SRTRANSFIN|ISIN: INE721A01013|SECTOR: Finance - Leasing & Hire Purchase
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Directors Report Year End : Mar '17    Mar 16

The Directors have pleasure in presenting their Thirty Eighth Annual Report and the Audited Statements of Accounts of the Company for the financial year ended March 31, 2017.

FINANCIAL HIGHLIGHTS

(Rs. in lacs)

Particulars

2016-17

2015-16

Profit Before Depreciation And Taxation

195,783.33

181,773.73

Less: Depreciation and amortization

3,390.78

3,630.61

Profit Before Tax

192,392.55

178,143.12

Less: Provision for taxation

66,658.30

60,323.36

Profit After Tax

125,734.25

117,819.76

Add: Balance brought forward from previous year

418,745.82

383,829.91

Add: Additions on account of amalgamation as on April 01, 2015

-

(3,503.89)

Balance available for appropriation

544,480.07

498,145.78

Appropriations

General reserve

12,600.00

12,000.00

Statutory reserve

25,200.00

24,000.00

Debenture redemption reserve

(15,945.04)

16,043.39

Dividend on equity shares of Rs.10/- each

9,075.31

22,688.27

Tax on dividend

1,847.52

4,668.30

Balance carried to Balance Sheet

511,702.28

418,745.82

DIVIDEND

Your Directors have maintained total dividend of Rs. 10/per equity share i.e. 100% for the financial year ended March 31, 2017 consisting of an interim dividend of Rs. 4/- per equity share i.e. 40% declared at the Board meeting held on October 25, 2016 and a final dividend of Rs. 6/- per equity share i.e. 60% recommended at the Board meeting held on April 27, 2017. The interim dividend was paid to the eligible shareholders on November 16, 2016.

TRANSFER TO RESERVES

The amounts proposed to be transferred to General Reserve and Statutory Reserve and from Debenture Redemption Reserve are mentioned in the Financial Highlights under the heading Appropriations’.

CAPITAL ADEQUACY RATIO

Your Company’s total Capital Adequacy Ratio (CAR), as of March 31, 2017, stood at 16.94 % of the aggregate risk weighted assets on balance sheet and risk adjusted value of the off-balance sheet items, which is above the regulatory minimum of 15%.

CREDIT RATING

The credit rating enjoyed by the Company as on March 31, 2017 is as follows:

Credit Rating Agency

Instruments

Ratings

CARE

Non-Convertible Debentures

CARE AA

CARE

Subordinated Debt

CARE AA

CRISIL

Fixed Deposit

CRISIL FAAA/Stable

CRISIL

Subordinated Debt

CRISIL AA /Stable

CRISIL

Non-Convertible Debentures

CRISIL AA /Stable

CRISIL

Short Term Debt

CRISIL A1

CRISIL

Bank Loan- Short Term

CRISIL A1

CRISIL

Bank Loan- Long Term

CRISIL AA / Stable

ICRA

Fixed Deposit

MAA with Stable outlook

India Ratings & Research Pvt. Ltd. (Formerly known as “FITCH”)

Non-Convertible Debentures

IND AA /Stable Outlook

India Ratings & Research Pvt. Ltd. (Formerly known as FITCH”)

Subordinated Debt

IND AA /Stable Outlook

Fitch Ratings

Long-Term Issuer Default Rating

BB /Stable Outlook

Fitch Ratings

Short-Term Issuer Default Rating

B

Standard & Poor’s Ratings

Long-Term Issuer Credit Rating

BB /Stable

Standard & Poor’s Ratings

Short-Term Issuer Credit Rating

B

Standard & Poor’s Ratings

Offshore Rupee Denominated Bond (Masala Bond)

BB

OPERATIONS & COMPANY’S PERFORMANCE

For the financial year ended March 31, 2017, your Company earned Profit Before Tax of Rs. 192,392.55 lacs as against Rs. 178,143.12 lacs in the previous financial year and the Profit After Tax of Rs. 125,734.25 lacs as against Rs. 117,819.76 lacs in the previous financial year. The total Income for the year under consideration was Rs. 1,083,061.23 lacs and total expenditure was Rs. 890,668.68 lacs. The revised NPAs norms stipulated by Reserve Bank of India which required higher provisioning in respect of Non-Performing loan assets in a phased manner had impacted the profitability of the Company during the current year.

As on March 31, 2017, the outstanding hypothecation loans were Rs. 6,410,197.35 lacs. The total Assets Under Management had increased from Rs. 7,276,060.55 lacs as on March 31, 2016 to Rs. 7,876,093.08 lacs as on March 31, 2017. During the Financial Year 2016-17, the company securitized its assets worth Rs. 1,121,420.00 lacs (accounting for 14.24 % of the total assets under management as on March 31, 2017) as against Rs. 899,175.10 lacs during the Financial Year 2015-16. With securitization, the company ensures better borrowing profile, leading to lower interest liability owing to its lending to priority sector as per RBI. The outstanding securitized assets portfolio stood at Rs. 1,329,474.16 lacs as on March 31, 2017.

Mobilization of funds from following sources/instruments during the financial year ended March 31, 2017 was as under:

(Rs. in lacs)

Sr. No.

Particulars

Funds mobilized by the Company

1

Non-Convertible Debentures - Institutional

831,225.00

2

Subordinated Debts - Institutional

17,500.00

3

Term Loans from Banks - Secured

1,135,365.50

4

Term Loans from Banks - Unsecured

16,000.00

5

Term Loans from Financial Institutions / corporate - Secured

110,000.00

6

Commercial Papers

640,500.00

7

Fixed Deposit

278,542.69

8

Offshore Rupee Denominated Bonds (Masala Bonds)

135,000.00

The Company continued its focus on financing of pre-owned commercial vehicles. Our relationship based business model enabled us to maintain the leadership position in the preowned commercial vehicles financing segment. For further penetration into rural market, the Company opened 51 new Rural Centres and 65 new Branch Offices. With this the total number of Rural Centres has now increased to 854 and the total number of Branch offices across India has now increased to 918.

ISSUE OF SECURITIES Share Capital

There was no change in the paid up Equity Share Capital in the Financial Year 2016-17.

Issue of Masala Bonds

In order to diversify the borrowing portfolio of the Company and to open new market/avenue for borrowing, the Company issued Rs. 135,000 lacs 8.25% Senior Secured Notes Due 2020 which are listed on the Singapore Exchange Securities Trading Limited. The proceeds of Notes have been utilized in accordance with the guidelines issued by the Reserve Bank of India.

FIXED DEPOSITS

As on March 31, 2017, there were 15,150 fixed deposits aggregating to Rs. 13,039.67 lacs that have matured but remained unclaimed. There were no deposits, which were claimed but not paid by the Company. The unclaimed deposits have since reduced to 11,077 deposits amounting to Rs. 8,693.13 lacs. Appropriate steps are being taken continuously to obtain the depositors’ instructions so as to ensure renewal/ repayment of the matured deposits in time.

DIRECTORS AND KEY MANAGERIAL PERSONNEL Director retiring by rotation

Mr. Gerrit Lodewyk Van Heerde, Non-Executive Non Independent Director of the Company will retire by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offers himself for re-appointment.

Change in Directors

Mr. Ramakrishnan Subramanian resigned from the directorship of the Company on February 03, 2017. He was appointed as an Additional Director in the capacity of NonExecutive Non-Independent Director of the Company by the Board of Directors in its meeting held on July 27, 2016.

Mr. Jasmit Singh Gujral resigned as Managing Director & CEO of the Company and also from the directorship of the Company with effect from close of business hours on October 25, 2016. The Board of Directors have placed on record their appreciation of the services rendered by Mr. Jasmit Singh Gujral and Mr. Ramakrishnan Subramanian.

On recommendation of Nomination and Remuneration Committee, the Board of Directors in its meeting held on October 25, 2016 has appointed Mr. Umesh Revankar as an Additional Director and also as Managing Director & CEO of the Company. The Board of Directors recommend the resolutions contained in Notice of the ensuing AGM for his appointment as Director and also as Managing Director & CEO of the Company. There was no other change in Key Managerial Personnel of the Company during the year under review.

DECLARATION BY INDEPENDENT DIRECTORS

The Board has received the declaration from all the Independent Directors as per the Section 149(7) of the Companies Act, 2013 (the ‘Act’) and the Board is satisfied that all the Independent Directors meet the criteria of independence as mentioned in Section 149(6) of the Companies Act, 2013.

POLICIES ON APPOINTMENT OF DIRECTORS AND REMUNERATION

The Company’s Policy on Board Diversity provides criteria for appointment of directors. The Company’s Remuneration Policy provides for remuneration of Managing Director & CEO, Independent Director, Key Managerial Personnel, Employees, etc. These Policies are annexed to this report as Annexure I and II. The Nomination and Remuneration Committee also takes into account the Fit and Proper criteria for appointment of directors as stipulated by Reserve Bank of India.

NUMBER OF MEETINGS OF THE BOARD

During the year five Board Meetings were held. The details of the Board and various Committee meetings are given in the Corporate Governance Report.

BOARD EVALUATION

Pursuant to the provisions of the Act and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its various Committees. The evaluation was conducted on the basis of a structured questionnaire which comprises performance criteria such as performance of duties and obligations, independence of judgment, level of engagement and participation, contribution in enhancing the Board’s overall effectiveness, etc. The Board of Directors has expressed its satisfaction on functioning and performance of Board and Committees and the performance of individual directors.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(3)(c) of the Act, the Directors confirm that, to the best of their knowledge and belief:

a) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

b) That such accounting policies as mentioned in note

2.1 to the financial statements have been selected and applied consistently, and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2017 and of the profit of the Company for the year ended on that date;

c) That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) The Annual Accounts have been prepared on a going concern basis.

e) The Company had followed the internal financial controls laid down by the directors and that such internal financial controls are adequate and were operating effectively.

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.

RBI GUIDELINES

The Company continues to comply with all the requirements prescribed by the Reserve Bank of India, from time to time.

BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34(2)(f) of the Listing Regulations, Business Responsibility Report is annexed and forms part of the Annual Report

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Report on CSR activities for the Financial Year 2016-17 is annexed to this report as Annexure-III. The composition of CSR Committee is included in the Report on CSR activities. The CSR Policy is uploaded on the Company’s website at the web link:http://stfc.in/pdf/Corporate-Social-Responsibility-Policy.p df

DISCLOSURES AS PER THE SECTION 134 OF THE ACT, READ WITH RULE 8 OF THE COMPANIES (ACCOUNTS) RULES, 2014

Extract of Annual Return

The extract of the annual return in the Form MGT 9 is annexed to this report as Annexure-IV.

Conservation of Energy, Technical Absorption and Foreign Exchange Earnings and Outgo

The information pursuant to Section 134(3)(m) of the Act read with the Companies (Accounts) Rules, 2014 is as follows:

a. The Company has no activity involving conservation of energy or technology absorption.

b. The Company does not have any Foreign Exchange Earnings.

c. Outgo under Foreign Exchange - Rs. 1,367.99 lacs. Loans, guarantee or investments

Pursuant to Section 186(11)(a) of the Act read with Rule 11(2) of the Companies (Meetings of Board and its Powers) Rules, 2014, the loan made, guarantee given or security provided in the ordinary course of business by a Non- Banking Financial Company (NBFC) registered with Reserve Bank of India are exempt from the applicability of provisions of Section 186 of the Act. As such the particulars of loans and guarantee have not been disclosed in this Report.

During the year under review the Company has invested surplus funds in various securities in the ordinary course of business. For details of the Current Investments and Noncurrent Investments of the Company refer to Note 10 & 14 respectively of the financial statements.

Contracts or Arrangements with Related Parties

The Related Party Transactions (RPTs) were entered in ordinary course of business on an arm’s length basis and were in compliance with the provisions of the Act and the Listing Regulations. The statement of RPTs was reviewed by the Audit Committee on a quarterly basis. Omnibus approval of the Audit Committee was obtained for the RPTs of repetitive nature. As required under the Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, the Policy on Materiality of Related Party Transactions and dealing with Related Party Transactions as approved by the Board is annexed to this report as Annexure-V and is also uploaded on the Company’s website at the web link:

http://stfc.in/pdf/Policy-on-Materiality-of-Related-

Party-Transactions-and-dealing-with-Related-Party- Transactions-v1.pdf.

There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act along with the justification for entering into such contract or arrangement in Form AOC-2 does not form part of the report. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company save and except the payment of sitting fees and commission to Independent Directors. For details of the transactions with Related Party refer to the note 27 to the financial statements.

Risk Management

The Company’s Risk Management Policy deals with identification, mitigation and management of risks across the organization. The same has been dealt with in the Management Discussion and Analysis Report annexed to the Annual Report.

Whistle Blower Policy/ Vigil Mechanism

The Company’s Whistle Blower Policy provides a mechanism under which an employee/director of the Company may report unethical behaviour, suspected or actual fraud, violation of code of conduct and personnel policies of the Company. The Vigil Mechanism ensures standards of professionalism, honesty, integrity and ethical behavior. The Whistle Blower Policy/Vigil Mechanism is uploaded on the Company’s website: http://www.stfc.in/pdf/Whistle-Blower-Policy-Vigil-Mechanism-2017.pdf Financial summary/highlights

The details are spread over in the Annual Report as well as are provided in the beginning of this report.

Subsidiaries, joint ventures or associate companies

Shriram Automall India Limited (SAIL), Wholly Owned subsidiary of the Company through its 67 Automalls located across the Country provides fee-based facilitation services for the sale of pre-owned commercial and passenger vehicles, agricultural and construction equipments, dealer’s stock of pre-owned two wheelers, etc. repossessed by banks and financing companies. For the year ended March 31, 2017, SAIL’s total income from operations was Rs. 8,030.53 lacs as against Rs. 7,452.95 lacs in the previous year 2015-16 and the Net Profit of Rs. 829.15 lacs as against net profit of Rs. 542.07 lacs in the previous year 2015-16. Eleven new Automalls were opened during the Financial Year 2016-17.

The annual report and the annual accounts of SAIL and the related detailed information shall be made available to shareholders of the Company seeking such information. The annual accounts of the SAIL shall also be kept for inspection by shareholders at the Registered Office of the Company and of the SAIL. The annual accounts of SAIL shall be available on the website of the Company viz. http://www.stfc.in/annual-reports.aspx The Company shall furnish hard copy of details of accounts of the SAIL to any shareholder on demand.

No Company has become or ceased to be its Subsidiary, joint venture or associate company during the year.

Internal Financial Control System

The Company’s well defined organizational structure, documented policy guidelines, defined authority matrix and internal financial controls ensure efficiency of operations, protection of resources and compliance with the applicable laws and regulations. Moreover, the Company continuously upgrades its systems and undertakes review of policies. The internal financial control is supplemented by extensive internal audits, regular reviews by management and standard policies and guidelines to ensure reliability of financial and all other records to prepare financial statements and other data. The Audit Committee of the Board reviews internal audit reports given along with management comments. The Audit Committee also monitors the implemented suggestions.

Composition of Audit Committee

The Audit Committee comprises of four directors namely, Mr. S. Sridhar - Chairman, Mrs. Kishori Udeshi, Mr. S. M. Bafna and Mr. Puneet Bhatia.

Others

- There were no material changes and commitments, affecting the financial position of the Company which has occurred between the end of the financial year of the Company and the date of the Directors’ report.

- There are no significant and material orders passed by the Regulators or courts or tribunals impacting the going concern status and company’s operations in future.

- There was no change in the nature of business of the Company. The company continues to be an Asset Finance Company.

- During the year under review, there were no cases filed under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

- Disclosure regarding details relating to Deposits covered under Chapter V of the Act is not applicable since our company is a Non-Banking Financial Company regulated by Reserve Bank of India. The Company accepts deposits as per Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016.

CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Section 129 of the Act read with Rule 5 to the Companies (Accounts) Rules, 2014, Statement comparing salient features of the financial statement of Subsidiary (Form AOC-1) and a statement on consolidated financial position of the Company with that of the subsidiary is attached to the Annual Report. The consolidated financial statements attached to this Annual Report are prepared in compliance with the applicable Accounting Standards and Listing Regulations.

PARTICULARS OF EMPLOYEES

The Company has not employed any individual whose remuneration falls within the purview of the limits prescribed under the provisions of Section 197 of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The Disclosure required as under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended is annexed to this report as Annexure-VI.

AUDITORS

M/s. S. R. Batliboi & Co. LLP, Chartered Accountants, Mumbai (ICAI Firm Registration No. 301003E / E300005) and M/s. G. D. Apte & Co., Chartered Accountants, Mumbai, (ICAI Firm Registration No. 100515W), Auditors of the Company will retire at the conclusion of the ensuing AGM. In compliance with mandatory rotation of Auditors as per provision of Section 139 of the Act and the Companies (Audit and Auditors) Rules 2014, the Company is required to appoint new Auditors in place of the retiring joint Auditors at the ensuing AGM.

The Audit Committee and the Board of Directors have recommended appointment of M/s Haribhakti & Co. LLP, Chartered Accountants, Mumbai (Firm Registration No. 103523W/W100048) and M/s Pijush Gupta & Co. Chartered Accountants, Kolkata (Firm Registration No. 309015E) as new joint Auditors Certificates have been received from them to the effect that their appointment as Auditors of the Company, if made would be within the limits prescribed under Section 139 and 141 of the Act. They have also confirmed that they hold a valid peer review certificate as prescribed under Listing Regulations. The Board of Directors recommend passing of the resolution for appointment of new joint Auditors at the ensuing AGM.

The Auditors’ Report to the Shareholders for the year under review does not contain any qualification.

SECRETARIAL AUDIT

The Board had appointed Mr. P. Sriram, Practicing Company Secretary (Certificate of Practice No.3310) (Membership No. FCS 4862) to carry out Secretarial Audit under the provisions of Section 204 of the Act for the financial year 2016-17. The Secretarial Audit Report is annexed to this report as Annexure-VII. The report does not contain any qualification.

CORPORATE GOVERNANCE

Pursuant to Schedule V of the Listing Regulations the following Reports/Certificates form part of the Annual Report:

-the Report on Corporate Governance;

- the Certificate duly signed by the Managing Director & CEO and Chief Financial Officer on the Financial Statements of the Company for the year ended March 31, 2017 as submitted to the Board of Directors at their meeting held on April 27, 2017;

- the declaration by the Managing Director & CEO regarding compliance by the Board members and senior management personnel with the Company’s Code of Conduct ; and

- the Management Discussion & Analysis Report

The Auditors’ Certificate on Corporate Governance is annexed to this report as Annexure-VIII.

ACKNOWLEDGEMENT

The Board of Directors would like to place on record their gratitude for the guidance and cooperation extended by Reserve Bank of India and the other regulatory authorities. The Board takes this opportunity to express their sincere appreciation for the excellent patronage received from the Banks and Financial Institutions and for the continued enthusiasm, total commitment, dedicated efforts of the executives and employees of the Company at all levels. We are also deeply grateful for the continued confidence and faith reposed on us by the Shareholders, Depositors, Debenture holders and Debt holders.

For and on behalf of the Board of Directors

S. Lakshminarayanan

Mumbai Chairman

April 27, 2017 (DIN : 02808698)

Source : Dion Global Solutions Limited
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