DIRECTORS' REPORT TO THE SHAREHOLDERS Dear Members, Your Directors are pleased to present the Twenty-Sixth Annual Report together with the Audited Financial Statements for the year ended March 31, 2015, Operational Review In 2014-15, your Company's total Income from Operations stood at Rs. 1704.60 lacs as against Rs. 1314.96 lacs during the previous year, an increase of 29.63% over last year. Your Company continued its focus on fee based activities (Investment Banking) and income there from was Rs. 845.47 lacs as against Rs. 1124.10 lacs during the previous year, recording 24.79% decline due to adverse market condition. It continues to be the thrust area for the Company. Income from Capital Market Operation for the year has been Rs. 192.81 lacs as against Rs. 117.74 lacs during the previous year, an increase of 63.76% over last year. Income from Other Sources was at Rs. 66.15 lacs as against Rs. 70.82 lacs during the previous year. There has not been any change in the nature of business of the Company Dividend & Reserves Taking into consideration the overall profitability position, the Board of Directors is pleased to recommend a dividend of 80 paise per share (8%) for the year ended March 31, 2015, subject to the approval of the Members at the Annual General Meeting. During the year under review, no amount was transferred to General Reserve. STOCK EXCHANGE LISTINGS The Equity Shares of the Company are listed on the Stock Exchanges at Kolkata and Mumbai. SFSL EMPLOYEES STOCK OPTION SCHEME, 2011 The Company had approved the Employee Stock Option Scheme at its Annual General Meeting on 24th March, 2011 which was further amended on 09th November, 2013 and 18th January, 2014. Disclosure pursuant to Clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is annexed hereto - Annexure - I. MANAGEMENT DISCUSSION AND ANALYSIS REPORT In terms of requirements of Clause 49 of the Listing Agreement with Stock Exchanges, a management Discussion and Analysis Report is attached a Annexure - II forming part of this Report. REPORT ON CORPORATE GOVERNANCE In terms of requirements of Clause 49 of the Listing Agreement with Stock Exchanges, a Report on Corporate Governance together with Auditors' Certificate regarding compliance of Conditions of Corporate Governance are attached as Annexure - III and Annexure - IV, forming part of this Report. SUBSIDIARY & ASSOCIATE COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS As required under Section 129 (3) of the Companies Act, 2013 (the Act) and Clause 41 of the Listing Agreement with the Stock Exchanges, Consolidated Financial Statements of the Company and its following Subsidiary and Associate Companies prepared in accordance with the applicable Accounting Standards issued by The Institute of Chartered Accountants of India are appended in the Annual Report. There has not been any addition or cessation or change in the Subsidiary and Associate Companies during the year under review. The Company is not having any joint venture. Accordingly a statement in Form AOC-1 is attached to the Financial Statements of the Company for your information. During the year under review the Company has formulated a Policy for determining "Material Subsidiary" and the same is disclosed on the website of the Company and can be accessed at <http://www.sumedhafiscal.com/material_subsidiary.pdf>. The performance of the subsidiary and associate companies are summarized below for your information. SFSL Commodity Trading Pvt. Ltd. - Subsidiary During the year the Company recorded Total Revenue of Rs. 13,86,547/- (previous year Rs. 17,98,027/-) and Net Profit of Rs. 3,00,725/- for the year ended 31st March, 2015 (Previous Year : Rs. 3,94,577/-). The company continues to explore growth opportunities. PERFORMANCE OF ASSOCIATE COMPANIES Capita Finance Services Ltd. During the year the Company recorded Total Revenue of Rs. 3,26,397/- (previous year Rs. 2,61,048/-) and Net Profit of Rs. 2,10,861/- for the year ended 31st March, 2015 (Previous Year : Rs. 1,31,594/-). The company continues to explore growth opportunities. SFSL Insurance Advisory Services Pvt. Ltd. During the year the Company recorded Total Revenue of Rs. 2,38,086/- (previous year Rs. 1,64,383/-) and Net Profit of Rs. 64,430/- for the year ended 31st March, 2015 (Previous Year: Rs. 24,080/-). The company continues to explore growth opportunities. SFSL Risk Management Services Pvt. Ltd. During the year the Company recorded Total Revenue of Rs. 1,62,760/- (previous year Rs. 1,05,975/-) and Net Profit of Rs. 36,054/- for the year ended 31st March, 2015 against loss in the Previous Year of Rs.16,018/-. The company continues to explore growth opportunities. US Infotech Pvt. Ltd. During the year the Company recorded Total Revenue of Rs. 19,62,269/- (previous year Rs. 17,99,536/-) and Net Profit of Rs. 4,71,225/- for the year ended 31st March, 2015 (Previous Year : Rs. 3,33,718/-). The company continues to explore growth opportunities. CORPORATE SOCIAL RESPONSIBILITY The Company is not yet required to comply to with the requirement associated with Section 135 of the Companies Act, 2013. DIRETORS RESPONSIBILITY STATEMENT To the best of knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134(3)(c) of the Companies Act. 2013: (i) that in the preparation of the Annual Accounts for the year ended march 31, 2015, the applicable accounting standards have been followed and there are no material departure; (ii) 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 profits of the Company for the year ended on that date; (iii) that Directors have 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; (iv) the annual accounts have been prepared on a going concern basis; (v) that the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) that the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. DIRECTORS The Board of Directors had on the recommendation of Remuneration and Nomination Committee appointed Mrs. Garima Maheshwari as a Non-Executive Director of the Company, with effect from November 8, 2014. Her tenure in office expires at the forthcoming Annual General Meeting (AGM). The Board of Directors had on the recommendation of Remuneration and Nomination Committee also appointed Mr. Prabhat Agarwala as an Independent Director of the Company with effect from May 16, 2015 for a period of five consecutive years, subject to approval of the Members at the forthcoming Annual General Meeting of the Company. The Company has received respective Notices pursuant to Section 160 of the Companies Act, 2013 along with required deposits proposing appointment of Mrs. Garima Maheshwari and Mr. Prabhat Agarwala at the forthcoming AGM. In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Company's Articles of Association, Mr. Anil Kumar Birla and Mr. Bijay Murmuria, Directors, retire by rotation at the forthcoming Annual General Meeting and, being eligible offer themselves for re-appointment. The company has duly received Declarations from all the Independent Directors pursuant to Section 149(6) & (7) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. During the year under review the Company has formulated a Familiarisation Programme for Directors and the same is disclosed on the website of the Company and can be accessed at <http://www.sumedhafiscal.com/familiarization_programe.pdf>. BOARD EVALUAI1ON 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 and as prescribed by Securities and Exchange Board of India under Clause 49 of the Listing Agreements. The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of the criteria such as the Board composition and structure, effectiveness of Board processes, information and functioning, etc. The performance of the Committees was evaluated by the Board after seeking inputs from the Committee members on the basis of the criteria such as the composition of Committees, effectiveness of Committee meetings, etc. The Board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the individual Directors on the basis of the criteria such as the contribution of the individual director to the Board and Committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In addition, the Chairman was also evaluated on the key aspects of his role. In the separate meeting of Independent Directors, performance of non-independent Directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into account the views of executive director and non-executive directors. The same was discussed in the board meeting that followed the meeting of the Independent Directors, at which the performance of the Board, its Committees and individual Directors was also discussed. AUDIT COMMITTEE The Audit Committee of the Board as on 31st March 2015 consisted of Mr. Prashant Sekhar Panda (Chairman) and Mr. Atul Chandra Varma, both Independent Directors and Mr. Bijay Murmuria, Non-Executive Director. Mr. Prabhat Agarwala, Independent Director, joined the Audit Committee on May 16, 2015. The Company has established a vigil mechanism / whistle blower policy, commensurate with its size and nature of business, and oversees through the Audit Committee, the genuine concerns expressed by the employees and other Directors. The Company has also made provisions for adequate safeguards against victimisation of employees and Directors who express their concerns. The Company has also provided direct access to the chairman of the Audit Committee on reporting issues concerning the interests of the employees and the Company. The vigil mechanism / whistle blower policy of the Company has been uploaded on the website of the Company and can be accessed at <http://www.sumedhafiscal.com/whistle_blower_policy.pdf>. NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee of the Board as on 31st March, 2015 comprised of Mr. Prashant Sekhar Panda, a Non-Executive Independent Director, as the Chairman, Mr. Atul Chandra Varma, Non-Executive Independent Director, Mr. Vijay Maheshwari and Mr. Bijay Murmuria, Non-Executive Promoter Directors, as its Members. Mr. Prabhat Agarwala, a non-executive Independent Director, has joined the Committee on May 16, 2015. The Company's Policy relating to appointment of Directors, payment of managerial remuneration, Directors' qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013 and clause 49 of the Listing Agreement is attached to this report as Annexure - V. LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees and Investments covered under the provisions of Section 186(4) of the Companies Act, 2013 [the Act] are provided in the Notes to Financial Statements. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES The particulars of Contracts or Arrangements made with related parties pursuant to subsection (1) of Section 188 of the Companies Act, 2013 furnished in Form AOC -2, is attached to this report as Annexure - VI. During the year under review the Company has formulated a Policy for Related Party Transaction and the same is disclosed on the website of the Company and can be accessed at <http://www.sumedhafiscal.com/policy_on_rpt.pdf>. DEPOSITS The Company has neither accepted nor renewed any deposits during the year under review. CASH FLOW STATEMENT Cash Flow Statement for the year ended 31st March, 2015 pursuant to Clause 32 of the Listing Agreements with Stock Exchanges is annexed herewith. GOING CONCERN STATUS No significant and material orders have been passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and its operation in the future. MATERIAL CHANGES AND COMMITMENTS There has not been any material change and commitment affecting the financial position of the Company occurred between the end of the end of the financial year 2014-15 and the date of the Report. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY Your Company has an effective internal control and risk-mitigation system, which are constantly assessed and strengthened with revised standard operating procedures. The Company's internal control system is commensurate with its size, scale and complexities of its operations. The internal and operational audit is entrusted to firms of Chartered Accountants. The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Company has an effective Management Information System, which is an integral part of the control mechanism. The Company is also having well-defined internal compliances structure comprising of vertical heads (as responsibility centers) for ensuring statutory compliance in their respective areas. Department wise quarterly compliance certificates/status reports issued by every Department are placed before the Audit Committee for review. The Audit Committee of the Board of Directors, Statutory Auditors and the Department Heads are periodically apprised of the internal audit findings and corrective actions taken. Internal Audit plays a key role in providing assurance to the Board of Directors. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee. COMPLIANCE SYSTEM Based on the Reports of Statutory Compliance from Departmental Heads/Responsibility Centres, as aforesaid, the Company Secretary issues Certificate under Section 205 of the Companies Act, 2013 (Act) and Rules made there under. The Certificate is also endorsed by the Wholetime Director and Chief Financial Officer of the Company. The status of Statutory Compliance is verified by the Internal Auditors and Secretarial Auditors pursuant to Sections 138 and 204 of the Act. ANNUAL RETURN The extract of Annual Return pursuant to the provisions of Section 92 of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is attached to this Report as Annexure - VII. SECRETARIAL AUDIT In terms of the requirements of Section 204 of the Companies Act, 2013 the Secretarial Audit of the Company for the year ended 31st March 2015 was conducted by Mr. Babu Lal Patni, Company Secretary in Practice. The Secretarial Auditors' Report is attached to this Report as Annexure - VIII and forms part of the Directors' Report. There is no qualification or reservation or adverse remark or disclaimer made by the Secretarial Auditor in the Report. COST AUDIT The Company is not engaged in production of goods or providing services pursuant to Section 148 of the Act and therefore not required to comply with the requirements thereunder. AUDITORS AND AUDIT REPORT Messrs. ARSK & Associates, Chartered Accountants, hold office as the Auditors of the Company up to the conclusion of the forthcoming Annual General Meeting and are eligible, for reappointment. The Company has received a letter from them to the effect that their reappointment, if made, would be within the prescribed limits under the Companies Act, 2013 and that they are not disqualified for reappointment. There is no qualification, reservation or adverse remark made by Messrs. ARSK & Associates, the Statutory Auditors of the Company in their Report pertaining to the year ended 31st March 2015. The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company for the year under review. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION Since the Company does not own any manufacturing facility, the other particulars relating to conservation of energy and technology absorption stipulated in the Companies (Accounts) Rules, 2014 are not applicable. FOREIGN EXCHANGE EARNING AND OUTGO Foreign Exchange earnings and outgo during the year under review were Rs. 7.75 lacs (previous year Rs. 18.09 lacs) and Rs. 0.94 lac (previous year Rs. 5.75 lacs), respectively. RISK MANAGEMENT The Company, as an Intermediary registered with the Securities and Exchange Board of India (SEBI), is required to comply with the prescribed risk management measures. Accordingly, the quarterly status of various risks being faced by the Company and measures for mitigation thereof are placed before the Audit Committee and Board of Directors of the Company, for review and appropriate measures. Further details about the pertinent risks are contained the in the statement of Management Discussion and Analysis (Annexure - II). PARTICULARS OF EMPLOYEES The ratio of the remuneration of each Director to the median employee's remuneration and other particulars or details of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached to this Report as Annexure - IX. None of the employees of the Company is in receipt of remuneration coming under purview of the said Section/Rule. EMPLOYEE RELATIONS Work atmosphere of the Company has been harmonious. In terms of requirements of Section 4 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Rehabilitation) Act, 2013, the Company has formed Internal Complaints Committees. During the year, no complaint regarding sexual harassment was received by the said Committee. APPRECIATION We acknowledge our appreciation to Shareholders, Bankers, Regulators, National Stock Exchange, Multi-Commodity Exchange, Bombay Stock Exchange, and Clients for their continued support. The Board also takes this opportunity to express its whole-hearted appreciation of the efforts put in by the employees at all levels. We look forward to the future with confidence and stand committed to creating a brighter future for all shareholders. On Behalf of the Board Ratan Lal Gaggar Chairman Place: Kolkata Date: 16th May, 2015 |