Dear members,
The directors have pleasure in presenting the 23rd annual report on the business and operations of the company together with the audited financial statement for the financial year ended on March 31, 2018.
1. Financial summary
(Rs. in lacs except EPS)
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Particulars
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2017-18
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2016-17
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Revenue from operations
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604.97
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848.25
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Other income
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0.40
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0.55
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Total income
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605.37
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848.80
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Total expenditure
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190.52
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354.82
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Profit / (loss) before exceptional items & provision for tax
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414.85
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493.97
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Exceptional items
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0.00
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0.00
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Profit / (loss) before tax
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414.85
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493.97
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Tax expenses
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114.73
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158.64
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Net profit
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300.11
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335.34
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EPS - basic & diluted (Rs.)
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2.77
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3.10
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2. State of company’s affairs
During the financial year under report, total income of the company stands to Rs. 605.37 lacs comprised of Rs.604.97 lacs as revenue from operations and Rs.0.40 lacs as other income as compared to Rs.848.80 lacs comprised of Rs.848.25 lacs as revenue from operations and Rs.0.55 lacs as other income generated during the previous financial year. Profit before interest, depreciation and tax also stands at Rs.530.80 lacs as compare to Rs.789.68 lacs in the financial year ended on March 31, 2017. Net profit after tax has also been reduced to Rs.300.11 lacs as compared to Rs.335.34 lacs for the financial year 2016-17 showing year on year decrease of 10.50%. However, the net profit margin has been increased by 25.48% i.e. from 39.51% for the financial year 2016-17 to 49.58% for the financial year 2017-18. The total expenditure has also reported a significant decrease of 46.30% year on year basis. Total expenditure for the financial year 2017-18 stands at Rs.190.52 lacs as compared to Rs.354.82 lacs for the financial year 2016-17. The directors of your company are optimistic to achieve newer heights in the upcoming years.
The detailed analysis as to review of company's operational and financial performance is given in the management discussion and analysis report.
3. Dividend
Your directors propose to reward the shareholders by sharing the profits at a consistent rate of dividend with that of previous financial year i.e. final dividend of Rs.0.90 (ninety paisa only) (9.00%) per equity share of Rs.10/- (rupees ten only) each for the financial year ended on March 31, 2018.
Further, the payment of dividend is subject to the approval of shareholders 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 will be Rs.97.362 lacs and the dividend distribution tax will be Rs.19.82 lacs.
4. Transfer to reserves
The company proposes to transfer Rs.60.02 lacs to the special reserve out of amount available for appropriations and an amount of Rs.666.34 lacs is proposed to be retained in the statement of profit and loss.
5. Deposits
During the financial year ended on March 31, 2018, the company has not accepted any deposits from the public within the meaning of the provisions of applicable directions and notifications issued by the Reserve Bank of India in this respect.
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 doesn't have 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 26, 2018 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. Rajesh P. Khandwala holds position of managing director, Mr. Durgesh D. Soni holds position of company secretary and Mr. Bhavik J. Shah holds the position of chief financial officer of the company.
During the financial year under report, at the 22nd annual general meeting of the shareholders of the company held on September 22, 2017, Mr. Rajesh P. Khandwala was re-appointed as a managing director of the company for a period of five years effective from February 4, 2018.
Remuneration policy
The company follows a policy on remuneration of directors and senior management employees. The policy has been approved both 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
At present, 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 the 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 day to day 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 did not meet the criteria laid down under the provisions of section 135(1) of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 and accordingly the provisions including but not limited upto 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. Long term and short term loans and advances made are enumerated in note 8 and 11 respectively of the notes to the financial statements of the company.
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 and shareholders of the company 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 arm's length basis, disclosure in the form AOC-2 is not being 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, 2018, 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) and 5(2) of the aforesaid rules are enclosed herewith as Annexure - 2.
20. Auditors
Statutory auditors
Pursuant to expiration of term of M/s. Shailesh C. Parikh & Co., chartered accountants, Ahmedabad, shareholders at their 22nd annual general meeting appointed M/s. Bimal Shah Associates, chartered accountants, Ahmedabad as statutory auditors of the company for a period of 5 years i.e. upto conclusion of 27th annual general meeting of the company.
The said appointment of statutory auditors has been made in accordance with the provisions of rule 6 of the Companies (Audit and Auditors) Rules, 2014 i.e. manner of rotation of auditors by the companies on expiry of their term.
In accordance with the provisions of the Companies (Amendment) Act, 2017, requirement of placing the matter of ratification of appointment of statutory auditors at every annual general meeting has been omitted.
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, 2019.
Secretarial audit report issued by the secretarial auditor of the company for the financial year ended on March 31, 2018 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 the auditors of the company.
Internal auditors
In accordance with the provisions of section 138 of the Companies Act, 2013 and rules framed thereunder, your company has appointed M/s. SMPK & Associates LLP, Ahmedabad, as the internal auditors of the company in the board meeting held on May 22, 2018 to conduct the internal audit of the functions and activities of the company for the financial year ending on March 31, 2019.
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.
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, 2018 and the date of signing of the directors' report i.e. May 22, 2018. 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
The managing director of the company, Mr. Rajesh P. Khandwala also occupies the office of the managing director in KIFS Housing Finance Private Limited, a group company to the Khandwala group. Mr. Khandwala was paid remuneration to the tune of Rs.6,00,000/- (rupees six lacs only) from your company during and for the financial year ended on March 31, 2018. The company does not have any subsidiary company.
The material terms and conditions of re-appointment and remuneration of Mr. Khandwala are enumerated in the explanatory statement to the notice of 22nd annual general meeting of the 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 the sexual harassment.
A policy framed and adopted by the board of directors of the company on prevention of sexual harassment is uploaded on the company website at below web link:
http://kifsfinance.com/wp-content/uploads/2016/09/SEXUAL-HARASSMENT-POLICY.pdf
25. Listing
Presently, the equity shares capital of your company are listed at the Bombay Stock Exchange Limited (BSE) (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 BSE.
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, directions 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 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, 2018 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, employees, shareholders and other stakeholders 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)
Ahmedabad, May 22, 2018
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