DIRECTORS' REPORT Dear Members, Your Directors present the Twenty First Annual Report of your Company and the Audited Financial Statements for the year ended on 31st March, 2015 2. DIVIDEND The Company has incurred loss during the year and hence your Directors have decided not to recommend any Dividend for the year ended 31st March, 2015. 3. REVIEW OF OPERATIONS During the year under review, your Company recorded a total income of Rs. 10,380.32 Lac as compared to Rs.6,828.41 Lac in the previous financial year, up by 52.02%. The Loss for the same period stands at Rs.1,594.41 Lac as compared to the Net Loss of Rs. 521.10 Lac in the previous financial year. 4. EXTRACT OF ANNUAL RETURN As provided under Section 92(3) of the Act, the extract of annual return is given in "Annexure A" in the prescribed form MGT-9, which forms part of this report. 5. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS During the Financial Year 2014-15, 4 meetings were held on 22nd May, 2014, 13th August, 2014, 31st October, 2014 and 23rd January, 2015. 6. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 134(3)(c) of the Companies Act, 2013, the Directors confirm that: a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 loss of the Company for the year under review; c) 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; d) The Directors have prepared the annual accounts on a going concern basis; e) The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and f) The Directors have devised proper system to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively. 7. AUDIT COMMITTEE The details pertaining to composition of Audit Committee are included in the Corporate Governance Report, which forms part of this report. 8. NOMINATION, REMUNERATION AND COMPENSATION COMMITTEE The Company has already constituted Remuneration and Compensation Committee. Pursuant to Section 178 of the Companies Act, 2013, the nomenclature of the Remuneration / Compensation Committee has been changed to Nomination, Remuneration and Compensation Committee at the Board Meeting held on 22.05.2014. As per the Clause 49 (IV) of the Listing Agreement, Chairman of the Board shall not Chair the Nomination, Remuneration and Compensation Committee. Accordingly, Mr. G. C. Vasudeo, being Independent Director, has been appointed as a Chairman of the Committee in place of Mr. G. P. Gupta and Mr. Gupta will continue as a member of the said Committee. The Committee comprises of only Non-Executive Directors as its members. All the members of the Committee are Independent Director except Mr. S. K. Saboo who is Non-Executive Director. In accordance with Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, during the year, on the recommendations and approval of the Nomination, Remuneration and Compensation Committee, the Nomination and Remuneration Policy of the Company was adopted by the Company. The Company's Remuneration Policy is available on the Company's website i.e. www.emkayglobal com/Investorrelations. The details of composition, terms of reference of the Nomination, Remuneration and Compensation Committee, numbers and dates of meeting held, attendance of the, Directors and remuneration paid to them are given separately in the attached Corporate Governance Report forming part of the Boards' Report. 9. PERFORMANCE EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board at its meeting held on 23rd January, 2015 carried out an annual evaluation of its own performance, the Directors individually as well as the evaluation of the working of its committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. 10. AUDITORS Pursuant to the provisions of Section 139 and all other applicable provisions of the Companies Act, 2013 ("the Act") read with Rule 3(7) of the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), the Company appointed M/s.B. L. Sarda & Associates, Chartered Accountants, bearing Firm Registration Number 109266W with the Institute of Chartered Accountants of India (ICAI), as the Statutory Auditors of the Company to hold office from the conclusion of Twentieth Annual General Meeting held on 13th August, 2014 until the conclusion of Twenty Third Annual General Meeting of the Company to be held for the financial year 2016-17. However, such an appointment was subject to ratification at every AGM held after the Twentieth AGM. Hence, your Directors recommend for ratification of the appointment of M/s. B. L. Sarda & Associates, Chartered Accountant, Mumbai, as Statutory Auditor of the Company in the ensuing Annual General Meeting. Further, the Statutory Auditors have confirmed that they have subjected themselves to the peer review process of The Institute of Chartered Accountants of India (ICAI) and hold a valid certificate issued by the 'Peer Review Board' of the said Institute as required by Clause 41 of the Listing Agreement. There are no qualifications or observation or remarks made by the Auditors in their report. 11. SECRETARIAL AUDIT 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 appointed M/s. Parikh & Associates, Company Secretaries, Mumbai to undertake the Secretarial Audit of the Company. The Secretarial Audit Report received from them is appended as "Annexure B" and forms part of this report. There are no qualifications or adverse comments made by the Secretarial Auditors in their report. 12. INTERNAL AUDIT As per the requirements of Section 138 of the Companies Act, 2013 and rules made thereunder, during the year, your Company appointed M/s Lovi Mehrotra & Associates, Chartered Accountants, Mumbai as Internal Auditors of the Company. The internal control systems are 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 Management Information System (MIS) forms an integral part of the Company's control mechanism. The Company has regular checks and procedures through internal audit periodically. The reports are deliberated and executive summary of the same along with action taken report (ATR) for steps taken by the Management to address the issues are placed before the Audit Committee meeting / Board meeting for their review. Reports of internal auditors are reviewed by the Audit Committee, and corrective measures, if any, are carried out towards further improvement in systems and procedures in compliance with Internal Control System. The Board also recognizes the work of the auditors as an independent check on the information received from the management on the operations and performance of the Company. 13. MANAGEMENT DISCUSSION AND ANALYSIS A detailed review of the operations, performance and future outlook of the Company and its businesses is given in the Management Discussion and Analysis, which forms part of the Annual Report. 14. PUBLIC DEPOSITS During the year, your Company has not accepted and/or renewed any public deposits in terms of the provisions of Section 73 and 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014. 15. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees or Investments covered under Section186 of the Companies Act, 2013, are given under notes to the Financial Statements. 16. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SECTION 188(1) OF THE COMPANIES ACT, 2013 The details of the related party transactions, as per requirement of Accounting Standards-18 are disclosed in notes to the financial statements of the Company for the financial year 2014-15. All the Directors have disclosed their interest in Form MBP-1 pursuant to Section 184 of the Companies Act, 2013 and as and when any changes in their interest take place, such changes are placed before the Board at its meetings. None of the transactions with any of the related parties was in conflict with the interest of the Company. The particulars of contracts or arrangements with related parties referred to in Section 188(1), in prescribed Form AOC - 2 under Companies (Accounts) Rules, 2014 are appended as "Annexure F". 17. MATERIAL CHANGES AND COMMITMENTS BETWEEN THE END OF FINANCIAL YEAR AND DATE OF THE REPORT With reference to the bonafide error trade executed on 5th October, 2012 and as per SAT order dated 26th March, 2015, the hon'ble SAT has disposed off the appeal by giving Order to National Stock Exchange of India Ltd. (NSE) to take on record the settlement proposed by the appellants and release the withheld payment to the parties in terms of the settlement. Accordingly, your company has received from NSE, in compliance to the hon'ble SAT's Order dated 26th March, 2015, a sum of Rs. 16.06 Crores being 50% amount of the payout withheld and Rs. 3.08 Crores as interest post TDS, a total Rs. 19.14 Crores has been received by your Company. 18. INFORMATION UNDER THE SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has constituted an Internal Complaint Committee under Section 4 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. During the year no complaint was filed before the said Committee. 19. CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The prescribed particulars of Conservation of Energy, Technology, Absorption and Foreign Exchange Earning and Outgo required under Section 134(3)(m)read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached as "Annexure E " and forms part of this Report of Directors. 20. BUSINESS RISK MANAGEMENT Pursuant to section 134(3)(n) of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Company has adhered to the principles of sound risk management and already has a Risk Management Policy in place. A detailed exercise is being carried out to identify, evaluate, manage and monitor both business and non-business risk. The Board periodically reviews the risks and suggests steps to be taken to control and mitigate the same through a properly defined framework. The details of the same are set out in the Corporate Governance Report forming part of the Boards' Report. 21. CORPORATE SOCIAL RESPONSIBILITY As per the provisions of Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility) Rules, 2014, your Company is not required to comply with CSR norms as per the threshold limits. However, the Company has evolved a Corporate Social Responsibility Policy and is actively practicing the same. The objectives of CSR Policy are to contribute to social and economic development of the communities in which the Company operates, provide opportunities to employees to contribute to society through service and contributions, monetary and otherwise and to generate, through its CSR initiatives, a community goodwill for the Company and help reinforce a positive and socially responsible image of the Company as a corporate entity. 22. VIGIL MECHANISM / WHISTLE BLOWER POLICY The Company has implemented a Vigil Mechanism Policy to deal with instance of fraud and mismanagement, if any. The policy also provides for adequate safeguards against victimization of persons who use such mechanism and makes provision for direct access to the chairperson of the Audit Committee in all cases. The details of the policy is posted on the website of the Company under the link <http://www.emkayglobal.com/investorrelations>. There were no complaints during the year 2014-15. 23. DIRECTORS & KEY MANAGERIAL PERSONNEL In accordance with the provisions of Section 152 of the Companies Act, 2013 read with Companies (Management & Administration) Rules, 2014 and Articles of Association of the Company, Mr. S. K. Saboo (DIN 00373201), Non-Executive Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment and your Board recommends his re-appointment. During the year, Ms. Preeti Kacholia has been appointed as an Additional Director (Woman Director) of the Company with effect from 30th March, 2015. As per provisions of Section 161 of the Companies Act, 2013 and Articles of Association of the Company, Ms. Kacholia holds office upto the date of the forthcoming 21st Annual General Meeting and is eligible for appointment. The Company has received a notice along with requisite deposit from a member of the Company under Section 160 of the Companies Act, 2013 proposing her candidature for the office of Director of the Company. Your Board recommends her appointment. The above appointment / re-appointment forms part of the Notice of the forthcoming 21st Annual General Meeting and the respective resolution is recommended for your approval. A brief profile of Directors as required under Clause 49 of the Listing Agreement is given in the Notice of the 21st Annual General Meeting. All independent directors have given declarations that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The following three persons were formally noted as Key Managerial Personnel of the Company in compliance with the provisions of Section 203 of the Companies Act, 2013. • Mr. Krishna Kumar Karwa - Managing Director & CFO • Mr. Prakash Kacholia - Managing Director • Mr. Vaibhav Purohit - Company Secretary 24. PARTICULARS OF REMUNERATION: Details of the ratio of remuneration of each Director to the median employee's remuneration is provided in "Annexure - D". 25. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations 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. Pursuant to the provisions of the Section 134(5)(f) of the Act, the Company during the year devised proper systems to ensure compliance with the provisions of all applicable laws. Each department of the organization ensured that it had complied with the applicable laws and furnished its report to the head of department who then along with the Company Secretary discussed on the compliance status of the department. Any matter that required attention was immediately dealt with. The Company Secretary reported to the Audit Committee and the Board on the overall compliance status of the Company. In effect, such compliance system was largely found to be adequate and operating effectively. The Directors have in the Directors Responsibility Statement under paragraph (f) also confirmed the same to this effect. 26. SUBSIDIARY COMPANIES Emkay Commotrade Limited (ECL) - a 100% subsidiary: Emkay Commotrade Limited offers commodity futures trading to its clients. It is a member of major commodity exchanges viz. Multi Commodity Exchange of India Limited (MCX), National Commodity and Derivatives Exchange Limited (NCDEX) and National Spot Exchange Limited (NSEL) and has a net worth of Rs. 44.25 Lac as on 31st March, 2015. Emkay Fincap Limited (EFL) - a 100% subsidiary: Emkay Fincap Limited is a RBI registered Non Deposit taking NBFC. EFL has a net worth of Rs.3,586.81 Lac as on 31st March, 2015. Emkay Insurance Brokers Limited (EIBL) - a 100% subsidiary: Emkay Insurance Brokers Limited is registered with Insurance Regulatory and Development Authority (IRDA) as a Direct Insurance Broker and focuses on life and non-life businesses. EIBL has a net worth of Rs. 100.69 Lac as on 31st March, 2015. Emkay Investment Managers Limited (EIML) - a 100% subsidiary: EIML is registered with Securities and Exchange Board of India (SEBI) for conducting the business of Portfolio Management Services and has commenced the business of Portfolio Management Services with effect from 1st January, 2011. EIML has a net worth of Rs.446.28 Lac as on 31st March, 2015. The Consolidated Financial Statements presented by the Company include financial results of its Subsidiary Companies. The Company will make available the annual accounts of the Subsidiary Companies and the related information to any member of the Company who may be interested in obtaining the same. The annual accounts of the said Subsidiary Companies are also available for inspection by any member of the Company at its Corporate Office situated at Paragon Centre, C-6, Ground Floor, Pandurang Budhkar Marg, Worli, Mumbai - 400 013. The Statement containing financial information of the aforesaid Subsidiaries is included in the Consolidated Accounts forming part of the Annual Report of the Company. 27. EMPLOYEE STOCK OPTION SCHEMES With a view to remain a preferred employer, the Company had granted Stock Options under two Schemes viz. ESOP 2005 & ESOP 2007 and another scheme Employee Stock Option Plan - 2010- through trust route to the employees of the Company and the Subsidiary Companies. (a) ESOP 2005 During the year 2014-2015, ESOP Scheme-2005 has been exercised by the employees and whatever options remain unexercised have been lapsed and as on 31st March, 2015 the balance is nil. (b) ESOP 2007 The Company had granted 1,442,000 Options on 17th January, 2008 to the employees (each option carrying entitlement for one share of the face value of Rs. 10 each) at an exercise price of Rs. 363 per option which was later reprised at Rs. 63 per option. Further, the Company granted 244,000 Options on 19th June, 2009, 207,500 Options on 24th July, 2009, 1,00,000 Options on 4th May, 2010, 6,11,500 Options on 27th July, 2010 and 2,00,000 Options on 21st January, 2012 at an exercise price of Rs. 63, Rs. 61, Rs. 93, Rs. 77 and Rs. 37 per option respectively. During the Financial Year 2014-15, the Nomination, Remuneration and Compensation Committee has not allotted any Equity Shares to the employees under the ESOP 2007 The paid up Equity Capital of the Company is Rs.24,43,77,500/- as of date. The disclosures required to be made in the Directors' Report in respect of the aforesaid ESOP Schemes, in terms of the SEBI (Share Based Employee Benefits) Regulations, 2014 are contained in "Annexure C" forming part of the Directors' Report. (c) EMPLOYEE STOCK OPTION PLAN - 2010 THROUGH TRUST ROUTE On the recommendation of the Nomination, Remuneration and Compensation Committee of your Company, the trustees of Emkay Employee Welfare Trust have granted 5,55,000 Options on 21st October, 2010 to the eligible employees (each option carrying entitlement for one share of the face value of Rs. 10 each) at an exercise price of Rs.93/- per option. Further, the Nomination, Remuneration and Compensation Committee/Emkay Employees Welfare Trust granted 27,000 Options on 2nd May, 2011, 15,000 Options on 22nd October, 2011 and 50,000 Options on 21st January, 2012 at an exercise price of Rs. 63, Rs. 48, and Rs. 37 respectively per option 28. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND Pursuant to the provisions of Section 205C of the Companies Act, 1956, the amounts which remained unpaid or unclaimed for a period of 7 years have been transferred by the Company to the Investor Education and Protection Fund (IEPF). In compliance with the provisions Companies Act, 2013, a sum of Rs. 38,605/- being the dividend lying unclaimed was transferred to the Investor Education and Protection Fund (IEPF) of the Central Government on 19th September, 2014 after giving notice to the concerned shareholders. 29. CORPORATE GOVERNANCE REPORT The Company adheres to the principles of Corporate Governance mandated by the Securities and Exchange Board of India and has implemented all the prescribed stipulations thereof. As stipulated in Clause 49X of the Listing Agreement, a detailed report on Corporate Governance and the requisite Auditor's Certificate confirming compliance with the conditions of Corporate Governance, forms part of the Annual Report. 30. PARTICULARS OF EMPLOYEES The particulars of employees required under Section 197 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed hereto in "Annexure D". 31. LISTING WITH STOCK EXCHANGES The Equity shares of the Company are listed on National Stock Exchange of India Ltd. and BSE Ltd. 32. ACKNOWLEDGEMENT Your Directors would like to take this opportunity to express sincere gratitude to the customers, bankers and other business associates for the continued cooperation and patronage. Your Directors gratefully acknowledge the ongoing co-operation and support provided by the Government, Regulatory Bodies and the Stock Exchanges. Your Directors place on record their deep appreciation for the exemplary contribution made by employees at all levels. The Directors also wish to express their gratitude to the valued shareholders for their unwavering trust and support. On behalf of the Board of Directors Krishna Kumar Karwa Managing Director & CFO Prakash Kacholia Managing Director Place: Mumbai Date: 22nd June, 2015 |