DIRECTORS' REPORT Dear Shareholders, Your Directors are pleased to present the Eighty Second Annual Report of the Company, together with the Audited Statements of Accounts for the year ended March 31, 2015. Results of operations and state of Company's affairs The Company has earned pre-tax profit of Rs. 439.25 lakhs during the year as compared to Rs.1689.70 lakhs in the previous year. The Revenue from operations during the year was Rs.1138.80 lakhs compared to Rs. 2019.04 lakhs in the previous year. The major portion of the Revenue is from interest income earned during the year. Provision of Rs. 130.11 lakhs has been made towards diminution in value of quoted long-term investments of the company as compared to Rs. 72.00 lakhs in the previous year. Business Overview The Company is registered with Reserve Bank of India (RBI) as a Non-Deposit taking Non-Banking Financial Company (NBFC). It has now become a 'Systemically Important Non-Deposit taking NBFC' with its total assets being more than Rs. 100 Crores. It is primarily a Holding Company, holding investments in its subsidiaries and other group Companies. The activities of the Company comprises of Investment in equity shares quoted as well as unquoted, units of mutual funds, Fixed deposits with renowned Banks, Inter-corporate Deposits and Loans to its Group Companies. The Board of Directors is apprised of the investments of the Company and it monitors the deployment of resources on regular basis. During the year under review, the Company has pruned its investment portfolio by selling certain quoted scripts where there was no remarkable appreciation or there was considerable erosion in the market values. The details of the Company's investments, including a portfolio summary and analysis of securities held are given in Note No. 2.8 to the Balance Sheet as on March 31, 2015. The loans to subsidiaries and other entities within the group and interest income on the same are disclosed in Note No. 2.24 to the Balance Sheet as on March 31, 2015. The market value of the Company's quoted investments, other than subsidiaries, as on March 31, 2015 was Rs. 340.82 lakhs, as compared to its cost of Rs. 1,507.48 lakhs. However, total provision of Rs. 985.74 lakhs made towards permanent diminution in value of investments has been considered adequate in view of investments being long term. Material changes and commitments occurred after the close of the year till date of this report which affects the financial position of the Company The Company has entered into Memorandum of Understanding (MOU) with four proposed buyers (One in the month of May 2015 and the remaining three after the quarter ended June 30, 2015) for the sale of part of Company's investment property situated at Atlanta Building, Nariman Point alongwith two car parking slots, at an aggregate consideration of about Rs. 8.18 Crores (approx.). Upon fulfilling of all the conditions precedent, the Company shall enter into Sale Agreement with the respective buyers. Dividend Your Directors are pleased to recommend dividend for the financial year 2014-2015 on (i) the Compulsorily Convertible Preference Shares (CCPS) of the face value of Rs. 10/- each on pro-rata basis at the rate of Rs. 1/- (i.e.10%) per CCPS of the Company ; and (ii) the Equity Shares of the Company of face value of Rs. 10/- each at the rate of Rs. 1/- (i.e.10%) per Equity Share of the Company (which includes 97,77,550 underlying Equity Shares issued against Global Depository Shares (gDS) and 7,20,000 Equity Shares issued upon conversion of 3rd and final tranche of CCPS on pro-rata basis). The dividend together with the tax on dividend will absorb a sum of Rs. 271.38 lakhs. Management Discussion and Analysis Management Discussion and Analysis comprising an overview of the financial results, operations / performance and the future prospects of the Company form part of this Annual Report. Change in Capital Structure In April 2014, the Company has converted the outstanding 7,20,000, 10% Compulsorily Convertible Preference Shares (CCPS) of Rs. 10/- each issued and allotted on preferential basis to the promoters namely N. N. Financial Services Private Limited and Nimbus India Limited into 7,20,000 Equity Shares of Rs. 10/-each. These Equity Shares rank pari passu in all respect with the existing Equity Shares of the Company. As on March 31, 2015, the issued, subscribed and paid up share capital of your Company stood at Rs. 22,54,75,500/-, comprising 2,25,47,550 Equity Shares of Rs. 10/- each. Consolidated Accounts The Consolidated Financial Statement of your Company for the financial year 2014-15, are prepared in compliance with applicable provisions of the Companies Act, 2013, Accounting Standard and Listing Agreement as prescribed by the Securities and Exchange Board of India (SEBI). The Consolidated Financial Statements have been prepared on the basis of audited financial statements of the Company, its subsidiaries, associate and joint venture companies, as approved by their respective Board of Directors. Subsidiary, Associate and Joint Ventures Companies Pursuant to sub-section (3) of section 129 of the Act, the statement containing the salient features of the financial statement of company's subsidiaries, associate and joint venture Companies is given as Annexure 2. Brief particulars about the business of each of the Subsidiaries and Joint Venture / Associate Companies is given hereunder:- Subsidiary Companies: a. IIT Investrust Limited (IITIL) IITIL is into Stock Broking and Depository facilities. Besides that, IITIL also provides Advisory and Consultancy services to various Body Corporates. b. IITL Projects Limited - (IITLPL) IITLPL is listed on Bombay Stock Exchange and certified as ISO 9001:2008 Company. IITLPL is engaged in Real Estate business, construction of residential complex in the National Capital Region (NCR). It has acquired a plot of land on long term lease, under Builders Residential Scheme (BRS) of the Greater Noida Industrial Development Authority (GNIDA). Apart from constructing its own project, IITLPL is also engaged in construction of residential flats through Special Purpose Vehicles (SPVs) and these SPVs have been allotted plots of land on long term lease, under Builders Residential Scheme (BRS) of the New Okhala Industrial Development Authority (NOIDA) and Yamuna Expressway Authority (YEA). The total lease hold area allotted to the Company alongwith SPVs is around 2,65,000 sq. meters and the projects are under various stages of construction. Project developed by the Company: Express Park View I: This project is completed and the flats are being allotted to the buyers. Projects being developed by the Company alongwith SPVs: 1) The Hyde Park 2) The Golden Palms 3) Express Park View-II 4) The Golden Palm Village c. IIT Insurance Broking and Risk Management Private Limited (IIT Insurance) IIT Insurance had filed an application with Insurance Regulatory and Development Authority (IRDA) for voluntarily surrendering the Direct Broker License for Category (Life) in June 2014. However, subsequently IIT Insurance decided to continue with the business as Direct Broker License for Category (Life) and requested IRDA for withdrawal of the request for surrender of the Direct Broker License for Category (Life). IIT Insurance is awaiting the approval of IRDA. During the year under review, few non-performing branches were closed and operations of the closed branches were merged with the remaining operating branches. The total number of operational offices at the year end stood at 6. d. IITL Marketing Management Private Limited (IMMPL) (Formerly known as IIT Media and Entertainment Private Limited (IMEPL) In November 2014, the name of IIT Media and Entertainment Private Limited was changed to IITL Marketing Management Private Limited alongwith its object clause to carry on business of direct marketing, online marketing, multilevel marketing, network marketing and to provide high quality of services in hospitality, catering, tourism and products to clients and consumers. IMMPL has yet not commenced any business and is scouting for making investment in some avenues in online marketing and others. e. IITL Corporate Insurance Services Private Limited (IITL Corporate Insurance) In January 2014, the Company had incorporated a wholly owned subsidiary viz. IITL Corporate Insurance Services Private Limited (ICISPL) for undertaking the business of corporate agency (for category Life) of Future Generali India Life Insurance Company Limited (FGILICL). In view of IIT Insurance Broking and Risk Management Private Limited continuing with the business of Direct Broking (for category Life), it was considered prudent to withdraw the proposal for undertaking Corporate Agency business of FGILICL. Accordingly the Company made an application to FGILICL for withdrawal of the proposal for undertaking Corporate Agency business (Category: Life). Joint Venture / Associate Companies: a. Future Generali India Life Insurance Company Limited (FGILICL), a Joint Venture : The Company has made an investment of Rs. 340 Crores in Future General India Life Insurance Company Limited, a joint venture of the company acquiring 22.5% of its equity capital. The management views this as a long term investment and in positive light, as insurance industry plays a crucial role in growth and development of the overall economy. The other major shareholders are Participatie Maatschappij Graafschap Holland NV and Future Group. b. World Resorts Limited, an Associate Company: The Company has made an investment of Rs. 15.52 Crores in World Resorts Limited (WRL), an associate company acquiring 25% of its equity capital and Rs. 25 Crores in Preference Shares Capital of the Company. WRL is into the business of hospitality and owns and operates a Five Star Resort by the name "Golden Palms Hotel & Spa" at Tumkur Road, Bangalore. It also manages and operates hotels under the brand "Golden Palms". Internal financial controls The Company has in place adequate financial controls with reference to financial statements. The Internal financial controls commensurate with the size and nature of business of the Company. During the year, such controls were tested and no reportable material weakness in the design or operation were observed. Directors and Key Managerial Personnel The Board of Directors on the recommendation of the Nomination and Remuneration Committee in its Meeting held on March 30, 2015 had appointed Mrs. Bhagyam Ramani as an Additional Director in the category of Independent Woman Director with effect from March 30, 2015. We seek your confirmation for appointment of Mrs. Bhagyam Ramani as an Independent Director for a term upto five consecutive years with effect from September 16, 2015 up to the 87th Annual General Meeting of the Company to be held in 2020 for the year ended March 31, 2020. The Company has received Notice in writing from a Member alongwith the deposit of the requisite amount under Section 160 of the Act proposing the candidature of Mrs. Bhagyam Ramani for the office of Independent Director of the Company. Dr. B. Samal was appointed as Executive Chairman of the Company for a period of 3 years w.e.f. January 24, 2013 to January 23, 2016. In accordance with the Articles of Association of the Company, Dr. B. Samal, Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Nomination and Remuneration Committee in its meeting held on August 04, 2015 has recommended his appointment for a further period of 3 years w.e.f. January 24, 2016 to January 23, 2019. The Board in its meeting held on even date has granted its approval for the appointment of Dr. B. Samal as Executive Chairman of the Company for a further period of 3 years subject to the approval of the members at the ensuing Annual General Meeting and subject to any other approval as required by Law. At the Board Meeting held on May 20, 2014, Dr. B. Samal, Executive Chairman, Mrs. Cumi Banerjee, CEO & Company Secretary were designated as "Key Managerial Personnel" of the Company, pursuant to Sections 2(51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Familarisation Programme The Company has formulated a Familiarisation Programme for Independent Directors with an aim to familiarize the Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc., to provide them with better understanding of the business and operations of the Company and so as to enable them to contribute significantly to the Company The details of programme for familiarization of Independent Directors with the Company are disclosed on the website of the Company under the web link <http://www.iitlgroup.com/newStatic/> AboutUs.aspx Meetings of the Board Six meetings of the Board of Directors were held during the year. For further details, please refer Report on Corporate Governance. Directors' Responsibility Statement Pursuant to Section 134(3)(C) of the Companies Act, 2013, your Directors, to the best of their knowledge and belief, make following statements that: (a) In preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; (b) Such accounting policies have been selected 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 as at March 31, 2015 and profit of the Company for the year ended on that date; (c) Proper and sufficient care has been taken 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 annual accounts have been prepared on a going concern basis; (e) The proper internal financial controls were in place and that such internal financial controls are adequate and were operating effectively; (f) The systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively. Corporate Governance Your Company has been practising the principles of good Corporate Governance over the years and it is a continuous and ongoing process. A detailed Report on Corporate Governance practices followed by your Company, in terms of Clause 49 of the Listing Agreement together with a Certificate from the Auditors confirming compliance with the conditions of Corporate Governance are provided separately in this Annual Report. Declaration by Independent Directors The Company has received declarations from all the Independent Directors of the Company, confirming that, they meet the criteria of independence as prescribed both under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges. Nomination and Remuneration Policy The Board of the Directors has framed the policy which lays down a framework in relation to Remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. This policy also lays down criteria for selection and appointment of Board Members. The Nomination and Remuneration Policy is annexed at the end of the Corporate Governance Report. Secretarial Audit Pursuant to the Provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed M/s. Chandanbala Jain & Associates, Practicing Company Secretary (CP No. 6400), to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is included as Annexure 5 and forms an integral part of this report. The said Report does not contain any adverse observation or qualification requiring explanation or comments from the Board under Section 134(3) of the Companies Act, 2013. Particulars of Loans given, Investments made, Guarantees given and Securities provided: The details of loans given, investments made, guarantees given and securities provided are given in the Notes to the Financial Statements. Capital Adequacy Ratio Your Company's Capital to Risk Assets Ratio (CRAR) calculated in line with Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 ("RBI Directions") stood at 84.32% above the regulatory minimum of 15%. Your Company's asset size is Rs. 537.18 crores. The Company has received a certificate from the Auditors of the Company, M/s. Deloitte Haskins and Sells, Chartered Accountants, pursuant to Non-Banking Financial Companies Auditors' Report (Reserve Bank of India) Directions, 2008 confirming compliance of the conditions with respect to Systemically Important Non-Deposit taking Non-Banking Financial Companies. Conservation of energy, technology absorption, foreign exchange earnings and outgo: The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows: (A) Conservation of energy: Not Applicable (B) Technology absorption: Not Applicable (C) Foreign exchange earnings and Outgo: During the year under review, the Company did not earn any foreign exchange. Expenditure in foreign currency equivalent to Rs. 7,69,833/- was incurred towards business promotion expenses. Risk Management The Company has formulated a Risk Management Policy. The Company through the Committee for Investments / Loans and Risk Management identifies, evaluates, analyses and prioritise risks in order to address and minimize such risks. This facilitates identifying high level risks and implement appropriate solutions for minimizing the impact of such risks on the business of the Company. The Committee submits its recommendations and comments for Board's review and necessary action. Corporate Social Responsibility (CSR) The Corporate Social Responsibility Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy is disclosed on the Company's website <http://> www.iitlgroup.com/newStatic/AboutUs.aspx As part of CSR initiatives, your Company during the financial year 2014-15 has made its contribution to Prime Minister's National Relief Fund for the Socio Economic Development and Relief and funds for welfare of scheduled caste, scheduled tribes, other backward classes, minorities and women as prescribed under Schedule VII of the Companies Act, 2013. The report on CSR activities is attached as Annexure 4 to this Report. Vigil Mechanism / Whistle Blower Policy The Company has a Vigil Mechanism / Whistle Blower Policy to report to the management instances of unethical behavior, actual or suspected, fraud or violation of the Company's code of conduct. The details of the Vigil Mechanism policy have been provided in the Corporate Governance Report and also disclosed on the website of the Company viz <http://www.iitlgroup.com/newStatic/> AboutUs.aspx. Board Evaluation: Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Company has devised the policy for performance evaluation of the Independent Directors, Board, Committees and other individual Directors, which includes criteria for performance evaluation of non-executive directors and executive directors. The evaluation of all the directors and Board as a whole was conducted based on the criteria and framework adopted by the Board. The evaluation process has been explained in Corporate Governance Report section in this Annual Report. The Board approved the evaluation results as collated by the nomination and remuneration committee. Extract of Annual Return Pursuant to section 92(3) of the Companies Act, 2013 ('the Act') and rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of annual return is Annexed as Annexure 1. Audit M/s. Deloitte Haskins & Sells, Chartered Accountants (Firm Registration No.117365W), who are the Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting of the Company. It is proposed to re-appoint M/s. Deloitte Haskins & Sells, Chartered Accountants, as Auditors of the Company from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting of the Company. M/s. Deloitte Haskins & Sells have, under Section 139(1) of the Companies Act, 2013 and the Rules framed there under furnished a certificate of their eligibility and consent for reappointment. There are no qualifications or adverse remarks in the Auditors' Report which require any clarification or explanation. Related Party Transactions The Company has laid down a Related Party Transaction Policy for purpose of identification and monitoring of such transactions. The policy on Related Party Transaction as approved by the Board is uploaded on the Company's weblink viz. <http://www.iitlgroup>. com/newStatic/AboutUs.aspx. All Related Party Transactions are placed before the Audit Committee and also the Members/Board for their approval, wherever necessary. During the year there were no new Related Party Transactions as well as no materially significant Related Party Transactions. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company. Significant and material orders passed by the regulators During the period under review, there were no significant and material orders passed by the regulators/ courts or tribunals that would impact going concern status of the Company and its future operations. Transfer of Amounts to Investor Education and Protection Fund In terms of Section 205C of the Companies Act, 1956, a sum of Rs. 6,59,342 lying with the Company as unclaimed dividend for the year 2006 - 2007 i.e. for a period of seven years from the date they became due for payment, were transferred during the period under review to the Investor Education and Protection Fund. Pursuant to the provisions of the Investor Education Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has already filed the necessary form and uploaded the details of unpaid and unclaimed amounts lying with the Company, as on the date of last AGM (i.e. August 30, 2014), with the Ministry of Corporate Affairs. Notes:- i) Median remuneration of employees of the Company during the financial year 2014-2015 was Rs. 424,903/-. ii) Median remuneration of employees of the Company during the financial year 2013-2014 was Rs. 475,380/-. In the financial year, there was a decrease of 11% in the median remuneration of employees due to resignation tendered by a senior managerial person. iii) There were 13 confirmed employees on the rolls of the Company as on March 31, 2015. iv) Relationship between average increase in remuneration and company performance- Average Remuneration increased during the year 2014-2015 by 8.54% whereas the Company's PAT decreased by 77.66%. v) a) Variation in the market capitalization of the company: The market capitalization as on 31st March 2015 was Rs. 168.66 Crores (Rs.124.85 Crores as on 31st March 2014) b) Price Earning Ratio of the Company was 53.81 as at 31st March 2015 and was 8.76 as at 31st March 2014. c) Percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer: The Company had come out with initial public offer (IPO) in 1934. The closing price of the Company's equity shares on the NSE and BSE as of March 31, 2015 was Rs. 72/-and Rs. 80.60 respectively, representing a 620% (NSE) and 706% (BSe) increase over the IPO price, adjusted for stock splits and bonus to date. An amount of Rs. 1,000 invested in the said IPO would be worth Rs. 1.82 lakh as on March 31, 2015 (Ref: BSE Closing Price as on March 31, 2015). vi) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year i.e. 2014-15 was 10.36% whereas the increase in the managerial remuneration for the same financial year was 54.29%. vii) The key parameters for the variable component of remuneration availed by the directors are considered by the Board of Directors based on the recommendations of the Nomination and Remuneration Committee as per the Remuneration Policy for Directors, Key Managerial Personnel and other employees. viii) The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year:- During fiscal year 2014-2015, no employee received remuneration in excess of the highest-paid Director. ix) It is hereby affirmed that the remuneration paid is as per the Remuneration Policy for Directors, Key Managerial Personnel and other employees. B) Details of every employee of the Company as required pursuant to rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014: During the year under consideration, none of the employees of the company was in receipt of remuneration in excess of limits prescribed under clause 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Hence particulars as required under 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have not been provided. Public Deposits During the year under review, the Company has not accepted any deposits from the public. Disclosures under Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 In accordance of the provisions of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013, Internal Complaints Committee (ICC) has been set up to redress complaints. ICC has not received any complaints during the financial year 2014-15. Acknowledgement Your Directors place on record their appreciation for employees at all levels, who have contributed to the growth and performance of your Company. Your Directors thank the bankers, shareholders and advisers of the Company for their continued support. Your Directors also thank the Central and State Governments and other statutory authorities / regulators for their continued support. For and on behalf of the Board Industrial Investment Trust Limited Dr. B. Samal Chairman (DIN: 00007256) Date : August 04, 2015 Place : Mumbai |