DIRECTORS’ REPORT TO THE MEMBERS OF MODERN SHARES AND STOCK BROKERS LIMITED (CIN: L45200MH1939PLC002958) 1.The Directors take pleasure in presenting the Seventy Seventh Annual Report together with the audited financial statements for the year ended March 31, 2016. 2. BUSINESS ACTIVITIES AND OPERATIONS The Company’s operations resulted in a gross profit of Rs. 24.09 Lakhs as against Rs. 59.53 Lakhs in the previous year. After providing for depreciation of Rs. 4.21 Lakhs (previous year Rs. 6.28 Lakhs) and making net provision for taxation of Rs. 6.72 Lakhs (Previous year Rs. 15.67 Lakhs) the Company has earned a net profit of Rs. 13.16 Lakhs as against net profit of Rs. 37.58 Lakhs in the previous year. The year gone by had been tough for both our company and the stock markets. After a very good run in 2014-15, the stock market witnessed a gradual fall over 11 months in 2015-16. The markets have recovered from March 2016 and we are seeing some stability. In the period from April 2015 to March 2016, we have seen large outflows by foreign funds from the Indian stock markets. Fortunately, Domestic Mutual Funds have seen large inflows in this same period which has helped to offset some of the pain from the Foreign Fund selling. In addition, since March 2016 the foreign inflows have been positive. The company has seen a sharp decline in profits from the previous year due to the poor market conditions. We are hoping for a good monsoon, which help boost the performance of stocks and thus improve the brokerage business environment. We expect the first half of the year to be challenging; however from the third quarter onwards we are bullish that overall market sentiment will improve and we should see a better performance in the current year. Although the economy is facing some challenges, we are confident that the measures taken by the RBI and the government will eventually lead to a pickup in demand and thus we expect overall business conditions to improve going forward. The regulation regarding NPA’s of banks and the Bankruptcy bill are clear positive steps taken by the government which should bear fruits in the next few years. The lower interest rates and inflation will help maintain a good GDP growth over the next three years which should be a good sign for the stock markets. 3. DIVIDEND Your Directors recommend a Dividend of 5% (previous year 10%) for the year ended 31st March 2016. The dividend will absorb Rs. 14,65,563/- tax free in the hands of shareholders. If approved, such dividend will be paid to those shareholders, whose names appear in the Register of Members as 4th July, 2016. 4. DIRECTORS The Board of Directors of the company is duly constituted and no appointment and resignation of directors have been made during the period under review. In accordance with the Articles of Association of the Company Mr. Ghansham Shewakramani and Mrs. Roshan Salim Patheria, retire by rotation and being eligible for re-appointment; have indicated their willingness to serve, if re-appointed. All independent directors have given declaration that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and Regulation 25 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. 5. BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Regulation 25 (4) & 26 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, 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 Audit, Nomination & Remuneration, and stakeholders Committees. The manner in which the evaluation has been carried out has been explained herein below: The Board has carried out the annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination and Remuneration and Stakeholders Committees. A structured questionnaire was prepared after inputs received from the Directors, covering various aspects of the Board†s functioning such as adequacy of the composition of the Board and its committees, Board culture, execution and performance of specific duties, obligation and governance. A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as level of engagement and contribution, independence judgment, safeguarding the interest of the Company and its stakeholders etc. The performance evaluation of independent Directors was carried out by the entire Board. The performance of the Chairman and non independent Directors was carried out by the independent Directors who also reviewed the performance of the compliance department. The Directors expressed their satisfaction with the evaluation process. ? Number of Board Meetings held: The Board of Directors duly met 4 (Four) times during the financial year from 1st April, 2015 to 31st March, 2016. 6. DIRECTORS’ RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(5)(c) of the Companies Act, 2013: a) that in the preparation of the annual financial statements for the year ended March 31, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b) that such accounting policies as mentioned in Notes to the Financial Statements have been selected and applied consistently and judgment 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, 2016 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 Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) that the annual financial statements have been prepared on a going concern basis; e) that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively, and f) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. 7. BUSINESS RISK MANAGEMENT Although the company has long been following the principle of risk minimization as is the norm in every industry, it has now become a compulsion. Therefore, in accordance with Regulation 21 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Board members were informed about risk assessment and minimization procedures after which the Board formally adopted steps for framing, implementing and monitoring the risk management plan for the company. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk related issues. In today s challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risks inter alia are: Regulations, competition, Business risk, Technology obsolescence, Investments, retention of talent and expansion of facilities. Business risk, inter-alia, further includes financial risk, political risk, fidelity risk, legal risk. As a matter of policy, these risks are assessed and steps as appropriate are taken to mitigate the same. 8. 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 Audit (IA) function is to maintain its objectivity and independence, the Internal Audit function reports to the Chairperson of the Audit Committee of the Board. 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, each department under take corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. In order to strengthen the system of Internal Control and provide board of directors with an added ability to oversee Internal controls, Internal Financial Control (IFC) system was put in place in accordance with the requirements of Section 134(5) (e) of Companies Act 2013. Systems of Internal Control were implemented, considering the framework suggested in Guidance Note on Audit of Internal Financial Controls over the Financial Reporting issued by the institute of Chartered Accountants of India, to address its operational and financial risk. 9. VIGIL MECHANISM / WHISTLE BLOWER POLICY In pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013, a Whistle Blower Policy for directors and employees to report genuine concerns has been established. The Policy has been uploaded on the website of the Company at www.modernshares.com under investors/policy documents/Vigil Mechanism Policy link. 10. RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the financial year were on an arm’s length basis and were in the ordinary course of business. An Omnibus Approval was taken for 1 Year from Audit Committee and Board at their Meeting held on 29.05.2015. 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. None of the Directors has any pecuniary relationships or transactions vis-àvis the Company. In compliance under the provisions of New Companies Act, 2013 Transactions with related parties entered by the Company in the normal course of business are periodically placed before the Audit Committee for its omnibus approval and the particulars of contracts entered during the year as per Form AOC-2 is enclosed as Annexure- A to this report. 11. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS There are no orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. 12. AUDITORS 12.1 STATUTORY AUDITORS M/s. Bhandari Dastur Gupta & Associates, Chartered Accountants, (Firm Registration No. 119739W), Mumbai have been appointed as statutory auditors of the company in the Annual General Meeting held on 24.09.2014 for a period of three years subject to ratification by members at every consequent Annual General Meeting. Therefore, ratification of their appointment as Statutory Auditors is being sought from the members of the Company at the ensuing AGM. 12.2 SECRETARIAL AUDITORS & EXPLANATION IN QUALIFICATION IN SECRETARIAL REPORT Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Janak A. Pandya, Company Secretary in Practice (CP No.: 5940, ACS: 10841), to undertake the secretarial audit of the company. The Secretarial Audit Report is annexed herewith as ‘Annexure B’. Explanation to the Observations in Secretarial Audit report The Company did not have Company Secretary in employment as its paid- upcapital is Rs. 2.93 crore only, which was less than prescribed paid up capital of Rs. 5 Crore under the erstwhile Companies Act, 1956. The New Companies Act, 2013 requires every listed company to have a Company Secretary in employment as KMP. The Company is looking for a suitable person to fill in the post to commensurate with its size and area of operations. Presently, the Secretarial department is being headed by CFO cum compliance officer having experience of almost 31 years in finance & law looking after compliances in the Company under all the laws including the Companies Act, 2013 and the rules made there under with the help of a Practicing Company Secretary. 12.3 INTERNAL AUDITORS M/S. Jayant Associates, Chartered Accountants performs the duties of internal auditors of the company and their report is reviewed by the audit committee from time to time. 13. FIXED ASSETS The Fixed Assets of the Company as at the close of the year stood at Rs. 16.01 Lakhs (Previous year Rs. 19.03 Lakhs). In compliance with Accounting Standard AS-28 relating to “Impairment of Assets”, the company has reviewed the carrying amount of its fixed assets as at the end of the year. 14. CORPORATE GOVERNANCE As per Regulation 27 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Corporate Governance is required if the Paid-up Capital of the Company is Rs. 10 Crore and above or Net Worth is Rs. 25 Crore or more at any time in the history of the Company. Since the Company does not fall under the criteria mentioned above Regulations relating to Corporate Governance is not applicable to the Company. 15. EXTRACT OF ANNUAL RTURN The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as “Annexure C”. There were 19 permanent employees on the rolls of the company as on 31 March, 2016. 17. DISCLOSURE The particulars of the conservation of energy, technology and absorption, foreign exchange earnings and outgo as required u/s. 134(3)(m) of the Companies Act, 2013 and Rule 8(3) of the Companies (Accounts) Rules, 2014, the same are not applicable to the Company. The information required pursuant to Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, is not given as none of the employees of the company exceeds the limit. 18. DEMATERIALISATION OF SHARES 96.46% of the Company’s paid up equity share capital is in dematerilised form as on 31st March, 2016 and balance 3.54% is in physical form. The Company’s Registrar and Share transfer agent is M/s Link Intime India Pvt. Ltd. having office at C/ 13 Pannalal Silk Mills Compound, LBS Marg Bhandup west Mumbai 400078. 19. ACKNOWLEDGEMENTS The Board of Directors takes this opportunity to thank the employees for their dedicated service and contribution towards the growth of the Company, our sincere appreciation to Institutional, Retail Clients for their patronage to our Company. 20. CAUTIONARY STATEMENT The statements in the Board’s Report contain certain statements relating to the future and therefore are forward looking within the meaning of applicable securities, laws and regulations. Various factors such as economic conditions, changes in government regulations, tax regime, other statues, market forces and other associated and incidental factors may however lead to variation in actual results. By Order of the Board of Directors For Modern Shares and Stockbrokers Limited Sd/- Anil Sugno Manghnani Whole Time Director(DIN-00012806) Sd/- Roshan Salim Patheria Director (DIN-00651144) Mumbai, dated May 20, 2016 Registered Office: Wankhede Stadium, North Stand, Staircase No. 13, D. Road, Churchgate, Mumbai - 400020 CIN: L45200MH1939PLC002958 Website: www.modernshares.com |