DIRECTORS' REPORT DEAR MEMBERS, Your Directors have pleasure in presenting their 21st Annual Report on the business and operations of the Company together with the Audited Financial Statement for the financial year ended on March 31, 2016. 2. State of Company's Affairs During the financial year under report, total income of the Company has increased to Rs. 714.60 Lacs as compared to Rs. 380.79 Lacs earned during the previous financial year showing an impressive growth of 87.66%. Profit before interest, depreciation and tax increased from Rs. 343.89 Lacs to Rs. 623.59 Lacs in the financial year ended on March 31, 2016. Net profit after tax increased by 50.13% attaining an amount of Rs. 282.67 Lacs. Net profit margin stands at 39.56% for the financial year under report. Overall your Company achieved a notable growth in both top and bottom lines of the financials for the financial year ended on March 31, 2016 and the Directors are optimistic to achieve newer heights in the upcoming years. Considering the enhanced business during the financial year under report, the total expenditure has also reported an increase of 188.49% as compared to previous financial year. Further, the enhanced business resulted an increase of 181.94% in the short term borrowings and the same has impacted the financial cost by hiking the same by 207.28% as compared to the previous financial year ended on March 31, 2015. The detailed analysis as to review of Company's operational and financial performance is given in the Management Discussion and Analysis Report. 3. Dividend Considering both the improved financial performance of the Company and conservation of resources for future purposes, your Directors are desirous of rewarding the shareholders by sharing the profit in the form of increased dividend as compared to the previous financial year. In continuance of the earlier trends of cash dividends, the Board of Directors are pleased to recommend a final dividend of Rs. 0.75 (Seventy Five Paisa Only) (i.e. 7.5%) per equity share of Rs. 10/- (Rupees Ten Only) each for the financial year ended on March 31, 2016. The final dividend recommended and declared for the financial year ended on March 31, 2015 was Rs. 0.50 (Fifty Paisa Only) (i.e. 5%) per equity share of Rs. 10/- (Rupees Ten Only) each. Further, the payment of dividend is subject to the approval of shareholders of the Company in the ensuing Annual General Meeting of the Company. The dividend, if declared at the ensuing Annual General Meeting, will be paid to those shareholders whose names appear in the register of members as on the record date. The amount of final dividend shall be Rs. 81.135 Lacs and the dividend distribution tax shall be Rs. 16.52 Lacs. 4. Transfer to Reserves The Company proposes to transfer Rs. 56.54 Lacs to the special reserve out of amount available for appropriations and an amount of Rs. 392.35 Lacs is proposed to be retained in the Statement of Profit and Loss. 5. Deposits During the financial year ended on March 31, 2016, the Company has not accepted any deposits from the public within the meaning of the provisions of the Non-Banking Financial Companies (Reserve Bank) Directions, 1977 and RBI's Notification No. DFC. 118DG(SPT)-98 dated January 31, 1998. Further, being a Non-Deposit Taking Non-Banking Financial Company, the disclosures with respect to deposits, required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014 read with the Companies (Acceptance of Deposits) Rules, 2014 and Section 73 of the Companies Act, 2013 are not applicable to it. 6. Share Capital During the financial year under report, the Company has neither made any issue of equity shares with differential voting rights, sweat equity shares or under employee stock options scheme nor it has made any provision of money for purchase of its own shares by employees or by trustees for the benefit of employees. 7. Details of Subsidiary / Joint Venture / Associate Companies The Company has not any subsidiary, joint venture or associate company. 8. Directors and Key Managerial Personnel (KMP) Director retiring by rotation Pursuant to the provisions of Section 152 of the Companies Act, 2013 and in accordance with the Articles of Association of the Company, Mr. Rajesh P. Khandwala, Managing Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment. The Board of Directors recommends his re-appointment. Independent Directors In terms of the definition of the Independent Director as prescribed under Regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 149(6) of the Companies Act, 2013, Mr. Devang M. Shah and Mr. Dharmendra N. Soni have been appointed as Non Executive Independent Directors on the Board of the Company. The Independent Directors have submitted the declaration, confirming that they meet the criteria of independence as prescribed under both the provisions of the relevant laws. Further, a separate meeting of Independent Directors of the Company was held on February 23, 2016 in accordance with the provisions of Clause VII of the Schedule IV of the Companies Act, 2013. Woman Director Pursuant to the provisions of Section 149 of the Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Mrs. Sonal R. Khandwala holds position of a Non Executive Woman Director of the Company. All of the Directors of the Company have confirmed that they are not disqualified under provisions of Section 164 of the Companies Act, 2013 from being appointed / continue to hold position of Directors of the Company. Key Managerial Personnel Pursuant to provisions of Section 203 of the Companies Act, 2013, Mr. Bhavik J. Shah holds the position of Chief Financial Officer of the Company. Subsequent to the closure of the financial year under report, Ms. Krupa N. Joshi resigned from the post of Company Secretary cum Compliance Officer of the Company w.e.f. May 4, 2016 and the Board at its meeting held on May 24, 2016 has appointed Mr. Durgesh D. Soni in her place as the Company Secretary and Compliance Officer of the Company. The Board places on record its sincere appreciation for the valuable services rendered by Ms. Krupa N. Joshi during her tenure. Remuneration Policy The Company follows a policy on remuneration of Directors and Senior Management Employees. The policy has been approved by the Nomination & Remuneration Committee and the Board of Directors. More details on the same have been given in the Corporate Governance Report. The policy on Remuneration of Directors, Key Managerial Personnel and Senior Employees can be accessed on website of the Company at following web link: <http://kifsfinance.com/wp-content/uploads/2015/02/Nomination-Remuneration-policy-KIFS.pdf> 9. Number of meetings of the Board of Directors The Board of Directors met four times during the financial year under report, the details of which have been given in the Corporate Governance Report. The intervening gap between any two Board meetings did not exceed 120 days, as prescribed under the provisions of the law(s). 10. Committees of the Board Currently, the Company has four committees viz; Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Risk Management Committee which have been established as a part of the better corporate governance practices and are in compliance with the requirements of the relevant provisions of applicable laws and statutes. Apart from the above statutory committees, the Company also has a Managing Committee of the Board of Directors to look after the routine affairs of the Company. The details with respect to the compositions, terms of reference, scope and powers, roles, meetings etc. of the relevant committees are given in detail in the Corporate Governance Report forming part of this Annual Report. 11. Corporate Social Responsibility During the financial year under report, your Company has not met the criteria laid down under the provisions of Section 135(1) of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014 and accordingly the provisions including but not limited up to constitution of Corporate Social Responsibility Committee and formulation / implementation of a policy on Corporate Social Responsibility are not applicable to the Company. 12. Performance evaluation of the Board In accordance with the provisions of Regulation 17(10) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Schedule IV of the Companies Act, 2013, evaluation of performance of Independent Directors by the Non Independent Directors and review of performance of Non Independent Directors and the Board as a whole by the Independent Directors was made during the financial year under report. The Directors were satisfied with the evaluation results, which reflected the overall engagement of the Board and its Committees with the Company. This may be considered as a statement under provisions of Section 134(3)(p) of the Companies Act, 2013 and Rule 8(4) of the Companies (Accounts) Rules, 2014. More details on the evaluation mechanism are given in the Corporate Governance Report. 13. Vigil Mechanism / Whistle Blower Policy The Company promotes ethical behavior in all its business activities and has put in place a mechanism wherein the employees are free to report illegal or unethical behavior, actual or suspected fraud or violation of the Company's Codes of Conduct or Corporate Governance Policies, raise concerns against management and business practices, incorrect or misrepresentation of any financial statements and reports or any improper activity being negative in nature to the Chairman of the Audit Committee of the Company or Chairman of the Board. The Whistle Blower Policy has been appropriately communicated within the Company. Under the Whistle Blower Policy, the confidentiality of those reporting violation(s) is protected and they are not subject to any discriminatory practices. No personnel have been denied access to the Audit Committee. The functioning of the Vigil mechanism is reviewed by the Audit Committee from time to time. The Vigil Mechanism / Whistle Blower Policy has been uploaded on website of the Company and can be accessed at following web link: <http://kifsfinance.com/wp-content/uploads/2016/06/KIFS-FINANCIAL-Whistle-blower-policy-> 2016.pdf 14. Statement of Development & Implementation of Risk Management Policy The Company has developed and implemented a Risk Management Policy to meet the risks associated with the business of the Company. Business risk evaluation and management is an ongoing process within the Company. The assessment is periodically examined by the Risk Management Committee of the Board. The Company, while giving loan to its customers, follows the criteria and procedure laid down in policy and the credibility of the clients. 15. Loans / Guarantees or Investment in Securities Being a Non Banking Financial Company pursuing loan business in its ordinary course of business, the disclosures relating to the details of loans made, guarantees given, securities provided or subscription / acquisition of securities, pursuant to the provisions of Section 186(11) of the Companies Act, 2013 and Rule 11 of the Companies (Meetings of Board and its Powers) Rules, 2014 are not required to be given. 16. Contracts or Arrangements with Related Parties All related party transactions that were entered during the financial year under report were in the ordinary course of business of the Company and were on arm's length basis. There were no materially significant related party transactions entered by the Company with its Promoters, Directors, Key Managerial Personnel or other persons, which may have a potential conflict with the interest of the Company. All such related party transactions are being quarterly placed before the Audit Committee for its review. Omnibus approval has been obtained from the Audit Committee & Board of Directors for all the related party transactions (including transactions which are foreseen and repetitive in nature). Since no material related party transactions were entered by the Company and all the transactions entered into by the Company with its related parties were in the ordinary course of business and on an arm's length basis, disclosure in the Form AOC-2 is not required to be given. The Policy on Related Party Transactions as approved by the Board has been uploaded on the Company's website at the web link: <http://kifsfinance.com/wp-content/uploads/2015/02/RPT-Policy-KIFS.pdf> 17. Internal Financial Control Systems and their adequacy The Company has internal control systems, commensurate with the size, scale and complexity of its operations. Your Company has laid down set of standards, processes and structure which enable it to implement internal financial control systems across the organization and ensure that the same are adequate and operating effectively. Internal financial control systems of the Company provide a reasonable assurance with regard to maintaining of proper accounting controls, monitoring of operations, protecting assets from unauthorized use or losses, compliance with regulations and for ensuring reliability of financial reporting. 18. Extract of Annual Return Pursuant to the provisions of Section 134(3)(a) and Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the Extract of the Annual Return as at March 31, 2016, in the Form MGT - 9 is enclosed herewith as Annexure 1. 19. Disclosure as per the Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 The details as per Rule 5(1) of the aforesaid Rule are enclosed herewith as Annexure - 2. 20. Auditors Statutory Auditors M/s. Shailesh C. Parikh & Co., Chartered Accountants, Ahmedabad, Statutory Auditors of the Company were appointed at the 19th Annual General Meeting of the Company for a period of three years (including transitional period). In accordance with the provisions of Section 139 of the Companies Act, 2013 and Rules framed there under, the Board recommends the members to ratify their appointment up to the conclusion of next Annual General Meeting. Secretarial Auditors Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rules framed thereunder, the Board has re-appointed the existing Secretarial Auditors of the Company, M/s. Anamika Jajoo & Co., Practicing Company Secretary, Ahmedabad for conducting the Secretarial Audit for the financial year ending on March 31, 2017. Secretarial Audit Report issued by the Secretarial Auditor of the Company for the financial year ended on March 31, 2016 is attached to the Directors' Report as Annexure - 3. Explanations or comments by the Board on qualification / reservation / adverse remark or disclaimer made by the Statutory Auditors in their Audit Report and by the Secretarial Auditor in her Secretarial Audit Report Both the Statutory Auditors' Report and Secretarial Audit Report are self explanatory and no comment from the Board of Directors of the Company is required as no qualification, reservation or adverse remark or disclaimer is given by any of both of the Auditors of the Company. Internal Auditors In accordance with the provisions of Section 138 of the Companies Act, 2013 and Rules framed there under, your Company has appointed M/s. SMPK & Associates LLP, Ahmedabad, as the Internal Auditors of the Company in the Board meeting held on May 24, 2016 to conduct the internal audit of the functions and activities of the Company for the financial year ending on March 31, 2017. 21. Investment Advisory Business With a view to having expansion of Company's present scope of operations, your Company has also got itself registered as an Investment Advisor under the SEBI (Investment Advisers) Regulations, 2013 vide Registration No. INA000001852 during the financial year ended on March 31, 2015. The said business is yet to be commenced by the Company. 22. Material changes and commitments affecting financial position of the Company There are no material changes and commitments, affecting the financial position of the Company which have been occurred between the end of the financial year i.e. March 31, 2016 and the date of signing of the Directors' Report i.e. May 24, 2016. Further, no significant or material orders have been passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and / or the Company's operations in future. 23. Remuneration given to the Managing Director from Holding / Subsidiary Company The Managing Director of the Company, Mr. Rajesh P. Khandwala also occupied the office of the Managing Director in the erstwhile Holding Company of the Company viz; M/s. KIFS Securities Private Limited (now amalgamated) and accordingly total managerial remuneration to the tune of Rs. 9,00,000/- (Rupees Nine Lacs Only) was paid to him from the aforesaid Holding Company. Apart from this, Mr. Rajesh P. Khandwala also received total Rs. 5,00,000/- (Rupees Five Lacs Only) towards managerial remuneration from your Company. The Company does not have any Subsidiary Company. 24. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 A policy under the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 has been laid down and circulated to every employee of the Company so as to inform them about the redressal mechanism available to them against any kind of harassment. Your Directors state that during the financial year under report, there were no cases filed or compliant received from any employee pertaining to sexual harassment. 25. Listing Presently, the equity share capital of your Company is listed at the Bombay Stock Exchange Limited (Scrip Code: 535566). The Company's equity shares are available for trading in demat form by all the investors on BSE which is having trading terminals in various cities affording to the investors convenient access to trade and deal in the Company's equity shares across the country. The Company is regular in complying with the requirements of the Listing Agreement / Regulations and has duly paid the requisite Listing Fees to the Bombay Stock Exchange Limited. 26. Code of Conduct The Board has laid down a Code of Conduct ("Code") for Board Members, Managerial Personnel and for Senior Management Employees of the Company. This Code has been posted on the Company's website at <http://kifsfinance.com/code-of-conduct-policy/>. All the Board Members and Senior Management Personnel have affirmed compliance with this Code. A declaration by the Managing Director to this effect forms part of the Corporate Governance Report. The Board has also laid down a Code of Conduct for Independent Directors pursuant to Section 149(8) and Schedule IV to the Companies Act, 2013 via terms and conditions for appointment of Independent Directors, which is a guide to professional conduct for Independent Directors and has been uploaded on the website of the Company at following web link: <http://kifsfinance.com/wp-content/uploads/2013/03/Terms-of-appointment-of-Independent->Directors.pdf 27. Corporate Governance Your Company practices a culture that is built on core values and ethical governance practices and is committed to transparency in all its dealings. A Report on Corporate Governance along with a Certificate from Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance, as stipulated under provisions of Regulation 34(3) and Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to this Report. 28. Management Discussion and Analysis Report A detailed analysis of the Company's performance is made in the Management Discussion and Analysis Report, which forms part of this Annual Report. 29. Compliance with the Reserve Bank of India Guidelines The Company being a Non Banking Financial Company categorized as a Loan Company continues to comply with all the applicable regulations and guidelines issued by the Reserve Bank of India from time to time. 30. Particulars regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The disclosures required to be made under Section 134(3)(m) of the Companies Act, 2013 read with Rule (8)(3) of the Companies (Accounts) Rules, 2014 pertaining to the conservation of energy, technology absorption and foreign exchange earnings and outgo are not applicable to the Company as the Company being a Non Banking Financial Company, is neither involved in any manufacturing, processing activities nor any of its transactions involves foreign exchange earnings and outgo. 31. Directors' Responsibility Statement Pursuant to the provisions of Section 134(3)(c) of the Companies Act, 2013, your Directors, based on the representations received from the head of the various departments, and after due inquiry, confirm that: a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b) the Directors had 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 for the financial year ended on March 31, 2016 and of the profit and loss of the Company for that period; c) the Directors had 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; d) the Directors had prepared the annual accounts on a going concern basis; e) 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 f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 32. Acknowledgement Your Directors take this opportunity to express their deep and sincere gratitude to the Clients, Customers and Shareholders of the Company for their trust and patronage, as well as to the various Bankers, Reserve Bank of India, Securities and Exchange Board of India, Bombay Stock Exchange, Government of India and other Regulatory Authorities for their continued co-operation, support and guidance. For and on behalf of the Board of Directors KIFS Financial Services Limited Rajesh P. Khandwala (Chairman & Managing Director) (DIN: 00477673) PLCE : Ahmedabad, DATE : May 24, 2016 |