DIRECTORS’ REPORT The Directors present the Thirty Second Annual Report and Audited Accounts of the Company for the year ended March 31, 2016. DIVIDEND The Company paid an interim dividend during the financial year ended 31st March, 2016, Rs. 7/- per equity share (70%) on the equity share capital in March, 2016, amounting to Rs. 8,53,86,161/- (exclusive of tax on dividend). The Board of Directors did not recommend any final dividend on the Equity Shares and accordingly, the aforesaid payment of interim dividend shall be considered as dividend for the Financial Year ended March 31, 2016. PERFORMANCE REVIEW The Company’s total income decreased to Rs. 4538.44 lacs from Rs.8370.41 lacs and profit after tax to Rs. 887.25 lacs from Rs. 1773.68 lacs in the previous year. The above significant decrease in total income and profit due to adverse capital market conditions. SCHEME OF DEMERGER The Company's petition seeking approval for Scheme of demerger of SEBI Registered Intermediaries Business of the Company into LKP Securities Ltd under sections 391 to 394 of the Companies Act, 1956 and sections 52 and 55 of the Companies act 2013 is pending as on date before the Honourable Bombay High Court. As per the Scheme the equity shareholders of LKP Finance Ltd. shall be allotted 6 fully paid equity shares of Rs.2/- each in LKP Securities Ltd. for every one equity share of Rs.10/- each held by them in LKP Finance Ltd. EMPLOYEES STOCK OPTION SCHEME Pursuant to the approval of shareholders, your Company has instituted the Employees Stock Option Scheme 2010 and 2014. The Scheme is administered by the Nomination and Remuneration Committee of the Board of Directors. The detail of Options granted during the year under review is annexed to this report. Disclosures under the Companies (Share Capital and Debentures) Rules, 2014 and Securities And Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 is annexed to this report herewith as “Annexure A”. FIXED DEPOSITS The Company has no public deposits as of date and will not accept any deposits without prior approval of the Statutory Authorities concerned. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Auditors function is defined in their letter of engagement. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board & to the Executive Chairman. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies of the Company. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board. SUBSIDIARIES Your Company’s subsidiary, LKP Securities Ltd. has expanded its geographical reach and now has more than 2500 outlets across India. As per the Circular No. 51/12/2007-CL-III dated 8th February, 2011 issued by Government of India, Ministry of Corporate Affairs, the required financial information in the consolidated balance sheet is given in respect of Company’s subsidiaries i.e. LKP Securities Limited, LKP Wealth Advisory Private Limited and Gayatri Cement and Chemical Industries Private Limited, in Form AOC 2 annexed in Annual Report. The annual accounts of the aforesaid subsidiaries and the related detailed information shall be made available to shareholders of the Company and it’s subsidiaries, seeking such information at any point of time. The annual accounts of the subsidiary companies shall also be kept open for inspection by any shareholder at the Registered office at 203 Embassy Centre, Nariman Point, Mumbai 400 021. DIRECTORS Mr. Mahendra V. Doshi retires by rotation and being eligible offers himself for re-appointment. Your Directors recommend his reappointment. During the year under review Mr. Hariharan Padmanabahan resigned from the Board due to his preoccupation. His resignation was accepted effective from 3rd August 2015. The Board of Directors record their appreciation of the services rendered by Mr. Hariharan Padmanabahan during his term as a Director of the Company. The Board of Directors appointed Mr. Sajid Mohamed (holding DIN 06878433) as an Additional Directors with effect from 3rd August 2015 pursuant to section 161 of the Companies Act, 2013 and Article 64 of Articles of Association of the Company. As Additional Director he holds offi ceonly upto the date of the ensuing annual general meeting. The company has received a notice under section 160(1) of the Companies Act, 2013 proposing candidature of Mr. Sajid Mohamed to the office of Director along with the requisite deposit. In accordance with the requirements of Section 149 and 152 of the Companies Act, 2013 appointment of Mr. Saji Mohamed as an Independent Director on the Board of the Company requires approval of the member of the Company. The requisite Resolution for the appointment of Mr. Sajid Mohamed as an Independent Director, is being proposed in the Notice of the ensuing Annual General Meeting for the approval of the Members. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed in Section 149(6) of the Companies Act, 2013. The information on the particulars of the Directors proposed for appointment/ re-appointment has been given in the Notice of the Annual General Meeting. Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and provisions of Regulations of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 the Board has carried out an evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. Remuneration Policy The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report. Meetings During the year six Board Meetings and five Audit Committee Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. DIRECTORS’ RESPONSIBILITY STATEMENT The Board of Directors acknowledges the responsibility for ensuring compliance with the provisions of section 134(3)(c) read with section 134(5) of the Companies Act, 2013 in the preparation of the annual accounts for the year ended on March 31, 2016 and state that : i. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; ii. the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period; iii. the Directors have 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 have prepared the annual accounts on a going concern basis; v. the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and vi. there is a proper system to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. AUDITORS’ REPORT M/s. Ford, Rhodes, Parks & Co. LLP, Chartered Accountants Firm Reg. No. 102860W/W100089, Mumbai, retire at the conclusion of the forthcoming Annual General Meeting. The Company has received a letter from them to the effect that their appointment, if made, would be within the provision prescribed under Section 139 of the Companies Act, 2013. Your Directors recommend their reappointment. SECRETARIAL AUDIT Pursuant provisions of section 204 of the Companies Act 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the company has appointed M/s V. R. Associates, a firm of Company Secretaries in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit report is annexed herewith as “Annexure B”. The observation made in the report with regard to appointment of at least one common Independent Director of Holding Company on the Board of Subsidiaries of the Company as required under Regulation 24(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is self explanatory. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as “Annexure C”. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES The company has contributed funds for the promotion of education and medical aid, environmental sustainability etc. The contribution has been made to a registered trust which is mainly undertakes activities specified under Schedule VII of the Companies Act, 2013. The report on CSR activities is annexed herewith as “Annexure D”. RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the financial year were on arm’s length basis and were in the ordinary course of the business. There are no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large. The requisite details are given in Form AOC 2 is annexed herewith as 'Annexure E'. CODE OF CONDUCT: The Board of Directors has approved a Code of Conduct which is applicable to the Members of the Board and all employees in the course of day to day business operations of the company. The Code has been placed on the Company’s website www.lkpsec.com The Code lays down the standard procedure of business conduct which is expected to be followed by the Directors and the designated employees in their business dealings and in particular on matters relating to integrity in the work place, in business practices and in dealing with stakeholders. All the Board Members and the Senior Management personnel have confirmed compliance with the Code. VIGIL MECHANISM / WHISTLE BLOWER POLICY The Company is committed to the high standards of Corporate Governance and stakeholder responsibility. The Company has established a vigil mechanism to be known as the ‘Whistle Blower Policy’ for its Directors and employees, to report instances of unethical behaviour, actual or suspected, fraud or violation of the Company’s Code of Conduct. The aim of the policy is to provide adequate safeguards against victimization of whistle blower who avails of the mechanism and also provide direct access to the Chairman of the Audit Committee, in appropriate or exceptional cases. Accordingly, ‘Whistle Blower Policy’ has been formulated with a view to provide a mechanism for the Directors and employees of the Company to approach the Ethics Counsellor or the Chairman of the Audit Committee of the Company. The purpose of this policy is to provide a framework to promote responsible and secure whistle blowing. It protects employees willing to raise a concern about serious irregularities within the Company. 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 pre-clearance 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. The Board is responsible for implementation of the Code. All Board Directors and the designated employees have confirmed compliance with the Code. INFORMATION PURSUANT TO SECTION 134(3) OF THE COMPANIES ACT, 2013 The information required pursuant to rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms a part of this report. However, as per the first proviso to section 136(1) and second proviso of rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the report and the financial statements are being sent to the members of the Company excluding statement of particulars of employees under rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. If any member is interested in obtaining the copy of the said statement may write to the Company Secretary in advance. The requisite information pursuant to Rule 5 (1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as 'Annexure F' The prescribed particulars of Conservation of Energy, Technology Absorption do not apply to your Company. There are no foreign exchange earnings & outgo during the year under report. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements are furnished herewith and form part of this Report and Accounts. These statements have been prepared on the basis of audited financial statements received from the Subsidiary Companies as approved by their Board of Directors. CORPORATE GOVERNANCE The Report on Corporate Governance along with a Certificate of compliance from the Practising Company Secretaries and Management Discussion and Analysis Report forms part of this Report. ACKNOWLEDGEMENT Your Directors would like to place on record their sincere appreciation to Shareholders, Bankers, Institutions and Employees for their cooperation and support. For and on behalf of the Board of Directors (M. V. Doshi) Executive Chairman Date: 2nd May, 2016 Place ; Mumbai |