| Your Directors present the Fifteenth Annual Report of the business and
operations of the Company together with the audited accounts for the
year ended 31st March, 2005.
Financial Results:
The financial results of your Company for the year ended 31st March,
2005 as compared to the previous year have been summarised below:
31.03.2005 31.03.2004
(Rs. In crores) (Rs. in crores)
Gross Income * 17.07 17.21
Gross Profit/(Loss) before Provision for Tax (122.44) (95.28)
Provision for Tax
Net Profit/(loss) (122.42) (96.71)
Balance brought forward from Previous year (95.70) 1.01
Appropriations:
Statutory Reserve Fund
Balance carried to Balance Sheet (218.13) (95.70)
The year under review :
The Gross Income for the year under review is Rs.17.07 crores as
compared to Rs. 17.21 crores in the previous year. Your Company during
the year has incurred a toss of Rs. 122.42 crores as compared to loss
of Rs. 96.71 crores in the previous year.
Out of the total income of Rs. 17.07 crores, insurance income amounts
to Rs. 1.63 crores. During the year under review your Company has
processed 110452 policies.
Due to losses incurred your Directors do not recommend any dividend.
However as per the terms and conditions of 11% Redeemable Cumulative
Preference Shares of Rs.10/- each, the accumulated dividend would be
paid in the year of profit.
The main business of your company has been hire purchase financing of
Kinetic two wheelers with focus on the retail segment. Though the
operations of your company have been profitable in the past, and your
Company had achieved healthy growth in such financing of two wheelers
your Company is at present going through a crucial and critical phase.
Your Company is currently facing a very difficult financial situation
mainly due to stoppage of fund based business and very slow recovery
from its existing assets. There has been no lending business of your
Company due to lack of funds. The new age banks and other nationalised
banks have also ventured into rural and semi urban towns for retail
financing as retail financing and especially vehicle financing has been
identified as a major thrust area.
Your Company also faced stiff competition from the nationalised banks,
who themselves were offering loans to retail consumers at much lower
rates than the rates at which your Company were getting credit
facilities from these very Banks. Interest rates have fallen
substantially in the last two years for all types of consumer loans
with intense competition among the various players in the financial
sector. In fact, present yield on vehicle financing is much lower than
your Companys borrowing cost and hence discontinuation of fund-based
business was a very timely, sensible and unavoidable decision by your
Company
With the introduction of newer models by almost every two-wheeler
manufacturer, there has been a considerable tell in the value of those
second hand two-wheelers which are repossessed and sold, leading to
much higher losses in such cases. As a result of this, even though your
Company has been taking appropriate legal action in case of default,
the amount of realisation from sale of repossessed vehicles have been
declining and your Company has been incurring substantial losses on
sale of these two-wheelers. The introduction of new models at same or
reduced prices as compared to utility value of existing models has led
to more and more consumers going for newer models at the cost of
earlier two-wheelers financed which has resulted in a high level of
default in recovery of hire purchase instalments covering old models of
two wheelers. As a result of these factors, a large number of loan
accounts of your Company have become sticky. Also due to the small size
of individual finance, recovery cost is quite high in several cases
making recovery drive unviable Your Companys operations have also
suffered due to expenditure cut and other cost cutting measures adopted
by various Government bodies specially municipalities and health
departments, who are the institutional customers of your Company. Most
of these Government Institutional customers have been under tremendous
economic pressure due to their own precarious financial conditions and
have thus defaulted on the instalment payments of your Company Your
Company was earlier operational in about 400 locations including small
remote locations resulting in high cost of lending and collection
thereby making business from these areas as unviable.
Besides this, increasing instances of bad debts due to general economic
slowdown and change in the lending habits of consumers have also
contributed to the dip in the fortunes of your Company.
As aforesaid, being unviable your Company had to discontinue its fund
based business model. However your company has to continue its
infrastructure, else recovery from existing assets would have suffered.
Your Company had a network of twenty seven branches out of which some
unviable branches have been closed.
Though your Company has changed the business model from fund based to a
fee based, the new business model has not produced the desired results
till now and as a result, there has been drastic reduction in the
income of your Company and your Company is currently operating at
figures below break-even.
Current Operations and Future prospects :
Your Company has ventured into a new business model that is a fee-based
model by optimally utilizing the infrastructure available with your
Company. The new business model ensured that your Company would
continue to do business and therefore have adequate earnings to cover
the expenses of collection. Your Company had, in the past, operations
at around 400 locations all over India, which has now been reduced to
about 150 centres in view of identification of certain locations as
small and unviable. Though your company would save on operating costs
at these centres, it would incur additional expenditure on various
initiatives taken by your company for strengthening of its collection
mechanism. Your Company has also taken steps to reduce administrative
and other operational costs. All the branches/regional offices of
your Company have been given specific cost budgets.
Your Company has started distributing various retail finance products
thereby widening the revenue stream of your Company.
Your Company also functions as service providers for insurance related
activities and the said function is a natural extension and
complementary for your Company.
Your Company is also envisaging that there shall be a huge demand for
service providers in the retail finance industry and your Company in
future shall look for such opportunities where it can leverage its
experience and learning in retail finance specially in the areas of
credit risk and back office support.
This new business model, though a move in the long-term interest of
your Company, would take some time to stabilize and returns can be
expected only over a period of time. The slow down of recoveries
coupled with the time required for building up the new business model
and the increase in legal and other expenses for effectively monitoring
the collection process has put a considerable strain on the bottom line
of your Company.
The above steps taken by your company is expected to yield results in
the future.
Fixed Deposits:
As on 31st March, 2005 your Company has no Fixed Deposit outstanding on
its books for which provision has not been made in the escrow account.
Since your Company does not have any Fixed Deposit outstanding on its
books your Company has been listed category "B" Company i.e. a Non
Public Deposit taking company by Reserve Bank of India.
Management Discussion and Analysis Report:
Management Discussion and Analysis Report, pursuant to Clause 49 of the
Listing Agreement entered into with the Stock Exchanges forms a part of
this report and the same is annexed as Annexure A.
Directors Responsibility Statement:
Pursuant to the requirement under Section 217(2AA) of the Companies
Act, 1956 with respect to Directors Responsibility Statement, your
Directors confirm that:
i)in the preparation of the annual accounts for the year ended
31.03.2005, the applicable accounting standards have been followed;
ii) appropriate accounting policies have been selected and applied
consistently and that in judgements and estimates due care has been
taken that the same are 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 ended as on
that date.;
iii) proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
iv) the annual accounts for the year ended 31st March, 2005 have been
prepared on a "going concern" basis.
Directors:
During the year Mr. R. Ramkumar and Mr. S.D. Joshi resigned from the
Board of Directors of the Company. Mr. G.S. Kulkarni has been
appointed as director in casual vacancy under section 262 of the
Companies Act, 1956. Appropriate resolution proposing the appointment
of Mr. G.S. Kulkarni as director of the Company appear in the notice of
the Annual General Meeting and your Directors recommend its adoption.
Mr. M.I. Kochar and Mr. D.M. Shingavi, Directors of the Company retire
by rotation at the ensuing Annual General Meeting and being eligible
offer themselves for reappointment.
Auditors:
M/s Lakhani & Co., Chartered Accountants, Mumbai Auditors of the
Company have resigned as Auditors of the Company vide their letter
dated 17th January, 20.05.
The members of the Company at the Extra Ordinary General meeting held
on 16.07.2005 have approved the appointment of M/s. Pawan Jain &
Associates, Chartered Accountants, Pune as Auditors of the Company to
fill casual vacancy caused by resignation of M/s Lakhani & Co.,
Chartered Accountants, Mumbai and to hold office until the conclusion
of the ensuing Annual General Meeting.
M/s Pawan Jain & Associates, Chartered Accountants, Pune hold office
until the conclusion of the ensuing Annual General Meeting and being
eligible have given their consent for re-appointment.
Corporate Governance:
As per the Listing Agreement with the Stock Exchanges, your Company has
implemented the various requirements of Corporate Governance. Your
Company had taken adequate steps to ensure compliance of the
requirements of Corporate Governance. A separate Report on Corporate
Governance is given in Annexure - B.
Particulars of Employees:
Particulars of employees as required under Section 217(2A) of the
Companies Act, 1956, read with Companies (Particulars of Employees)
Rules 1975, forms a part of this report. However as per the provisions
of Section 219(1)(b)(iv) of the Companies Act, 1956 the report and the
accounts are being sent to the shareholders of the Company excluding
the statement of particulars of employees under Section 217(2A) of the
Companies Act, 1956. Any shareholder interested in obtaining a copy of
the said statement may write to the Secretarial Department at the
Registered Office of the Company.
Information as per Section 217(1)(e) of the Companies Act, 1956 :
The Company has no activity relating to the conservation of energy or
technological absorption and also there was no foreign exchange
earnings and outgo.
Acknowledgement:
Your Directors place on record their grateful appreciation to the
Companys Bankers, Financial Institutions, Customers, Dealers,
Depositors, and Shareholders for their continued and whole hearted
support extended to the Company and also express their appreciation for
the dedicated service rendered by the employees of the Company.
FOR AND ON BEHALF OF THE BOARD OF DIRECTORS,
Place: Pune
Date : 15-10-2005 DIRECTOR | 