Directors
To the Members of Kotak Securities Limited
Your Directors are pleased to present the 20th Annual Report and the Audited Accounts
for the year ended 31st March 2014.
FINANCIAL HIGHLIGHTS
(Rs. in Lakhs except per share data)
|
31st March, 2014 |
31st March, 2013 |
| Gross Income |
62,688.48 |
60,699.29 |
| Profit / (Loss) before Depreciation and Tax |
24,601.28 |
20,201.72 |
| Depreciation |
1,174.08 |
1,348.72 |
| Profit / (Loss) before Tax |
23,427.20 |
18,853.00 |
| Provision for Tax |
7,410.26 |
7,402.76 |
| Profit / (Loss) After Tax |
16,016.94 |
11,450.24 |
| Transfer from Debenture Redemption Reserve |
- |
- |
| Balance brought forward from previous year |
173,635.03 |
162,184.79 |
| Amount available for appropriation |
189,651.97 |
173,635.03 |
| Transfer to Debenture Redemption Reserve |
- |
- |
| Profit / (Loss) carried forward to the Balance Sheet |
189,651.97 |
173,635.03 |
| Earnings per share on equity shares of Rs. 10 each (Basic and Diluted) |
1,001.06 |
715.64 |
DIVIDEND
In order to further consolidate your companys position, your Board proposes to employ
the surplus resources to augment capital requirements, and does not recommend a dividend
for the financial year 2013-2014 (hereinafter referred to as current financial year).
OPERATIONS
Liquidity in financial markets continued to be a dominant factor in Indian capital
markets. Inflation and interest rates continued to remain high making debt instruments
attractive. The end of the first quarter and the beginning of the second quarter of the
financial year saw the Indian Rupee under severe pressure resulting in a volatile market.
While the Indian Rupee did stabilize towards the end of the second half of the year, the
adverse effect of a weak Indian Rupee on the economy and corporate performance played its
part on investor sentiment. During the year the price of gold came off its highs. Results
of assembly elections and anticipation of the results of general elections played some
part on investor sentiment in later part of the year. Overall it was another year in which
environment for equity investments was not conducive.
The Sensex which closed aRs. 18,836 at the end of the financial year - 2012-13
(hereinafter referred to as previous financial year) closed aRs. 22,386 at the end of
the current financial year with a high of 22,467 and low of 17,449. Similarly, the
benchmark Nifty which closed aRs. 5,683 at the end of the previous financial year closed
aRs. 6,704 at the end of the current financial year with a high of 6,730 and low of 5,119.
Market average daily volumes increased to Rs. 13,412 crores from Rs. 13,204 crores in
the previous financial year for the Cash Segment, and increased to Rs. 154,023 crores from
Rs. 127,995 crores in the previous financial year for Derivatives Segment. The shift in
mix from the Cash segment to Derivatives segment continued. It was skewed further in
favour of derivatives, with cash segment being less than 10% of the total traded market
volumes.
Retail Segment
There was no increase in retail investor participation in the Market as investors felt
more comfortable with debt, gold and real estate. There was no significant increase in
number of DP Accounts and most Mutual Funds reported steady withdrawals by the retail
segment. Some increased activity was seen towards the end of the financial year. Your
company has focused on increasing its share in the Cash Market Segment.
Customer acquisition resulted in addition of abouRs. 97,800 customers with a large part
of them being online trading customers. Your companys mobile trading application has
emerged as a market leader. The total outlets stood aRs. 1,157 at the end of the financial
year. The number of registered sub brokers/ authorized persons stood aRs. 1,896 for NSE
and 1,361 for BSE.
Institutional Equities
The Companys Institutional Equities division maintained its leading position in the
Broking Segment. The overall Institutional cash and derivatives market volume grew by
abouRs. 14% & 17% respectively however industry yields remained under pressure.
Derivatives market volume mix was largely in favour of the Option segment. The division
remained focused on derivatives segment and upgraded its systems and technology for
Algorithmic & Direct Market Access trading. The Institutional Equity Research
continued to be recognized for its in-depth high quality financial modeling, width of
stock coverage and valuable investment insights, winning valuable votes from its clients.
Primary Market
Primary market issuances were virtually absent for the equity segment. Given the
investor appetite for debt and the higher interest rates, a number of Debt issuances took
place. This covered private as well as public sector companies/ corporations. The
deadline, by SEBI, for promoters to decrease their holdings in their companies was June
2013. The first quarter saw a flurry of activity as there were a large number of Offers
for Sale by promoters to meet the deadline. In the current financial year, your Company
was associated with the distribution of 5 Equity Public Offer Issues, 33 Debt Public Offer
Issues and 75 Offer for Sale.
AWARDS AND RECOGNITIONS
Your Company has received following awards during current financial year for its
performance:
a) NSDL Star Performers Award 2013 - Top Performer in New Accounts Opened (Non-Bank
Category)
b) Best Equity Broking House: Dun & Bradstreet Equity Broking Awards 2013
c) Depository Participant of the year: Dun & Bradstreet Equity Broking Awards 2013
d) Kotak Institutional Equities - Analysts ranked #1 in The Best Analysts of the Year;
#3 in Institutional Investors All-India Research Team survey - 2013
e) Best Domestic Equity House by Asiamoney - 2013
f) Best Brokerage House - India in The Asset Country Awards - 2013
g) Best Local Brokerage in the Asiamoney Brokers Poll - 2013
> Indias Best Local Brokerage - for the 8th year in a row
> Ranked #1 for Most Independent Research Brokerage amongst all domestic and foreign
brokerages
> Ranked #2 for Best Overall Country Research amongst all domestic and foreign
brokerages
> Ranked #2 for Best Execution amongst all domestic and foreign brokerages
> Ranked #3 for Best in Sales Trading amongst all domestic and foreign brokerages
FUTURE OUTLOOK
The benchmark Index, NIFTY and Sensex have shown a growth of ~17% over the previous
financial year end, with major gains in the month of March 2014. GDP, IIP, Inflation and
some of the other economic indicators continued to be under stress. With elections being
announced, no major changes were introduced in the finance budget for Financial Year
2014-15. The economic indicators being under stress led to a virtual run on the Indian
Rupee which saw a rapid drop to almost INR 69 to 1 USD. A number of steps taken by the
Reserve Bank of India as well as some other factors saw the INR stabilizing at around INR
60 to 1 USD.
While the Rupee weakened, inflation continued to remain a concern for large part of the
last year. However the last quarter has seen an easing of the inflation rate. Easing of
inflation as well as stabilizing of the Rupee should help corporates in managing input
costs. Oil prices have been stable and price of gold has also reduced both of which would
have a positive impact on the demand for USD from an Indian perspective. Reduction in
inflation could also signal lower interest rates and a positive for equity investments. In
the Indian context, the outlook would be influenced by the outcome of the general
elections. The third week of May would be crucial from this stand point.
US economy seems to have ridden the worst period and economic indicators seem to
suggest that there are clear signs of recovery. US Capital Market indices also seem to
suggest the same. Europe is still lagging behind and has also had other worries such as
unrest in Turkey and more recently Ukraine. Tensions concerning Iran has reduced but the
Syrian crisis continues. On the other hand North Korea continues with its aggressive
nuclear stand. Global markets continue to see a mixed bag of performance.
Cash market volumes have declined further in last year as a proportion to the total
market volumes. A stable government, post elections may result in an increase in Cash
Market volumes. Post the rapid weakening of the Rupee, certain limits were imposed on the
currency derivatives. With the Rupee stabilizing, it is expected that these limits would
be removed leading to more volumes in this segment. Two new products have been introduced
-Interest Rate Futures and Volatility Index Futures. Volumes in these segments will take
some time to increase.
Regulatory changes are focused on ensuring greater onus on members on issues such as
implementing new trading related software, surveillance alerts, KYC, greater transparency
in dealing with clients and risks associated with Capital Markets. Your company has always
been in the forefront while dealing with these issues and will continue to ensure
compliance to such changes. Your company continues to focus on ensuring a high quality of
service to clients while keeping a close watch on costs. In an industry with over
capacity, realization rates are still under pressure. Your company being among the leaders
in the industry is well positioned to meet future growth.
DIRECTORS
Mr. Uday Kotak, Mr. C. Jayaram and Mr. Narayan S. A. retire by rotation at the ensuing
Annual General Meeting and are eligible for re-appointment. Mr. K.V.S Manian was appointed
as Director on the Board of the company w.e.f. 19th June, 2013.
COMMITTEES
• Audit Committee
The Committee consisted of Mr. Uday Kotak, Mr. C. Jayaram and Mr. Narayan S. A. as its
members with Mr. Uday Kotak as the Chairman. The Committee was reconstituted on 19th June,
2013 consisting of Mr. Uday Kotak as chairman, Mr. C. Jayaram and Mr. K.V.S. Manian.
During the year three meetings were held and all the members attended the meetings.
• Routine & Administrative Function (RAF) Committee :
The Committee consisted of Mr. Narayan S. A., Mr. D. Kannan and Mr. C. Jayaram as its
members with Mr. Narayan S. A. as the Chairman. The Committee was reconstituted on 19th
June, 2013 consisting of Mr. K.V.S. Manian as chairman, Mr. C. Jayaram and Mr. D. Kannan.
During the year nine meetings were held and all members attended the meetings.
• First Tier Audit Committee (FTAC)
The Committee consisted of Mr. C. Jayaram, Mr. Narayan S.A, Mr. D. Kannan and Mr.
Jaimin Bhatt. The Committee was reconstituted on 19th June, 2013 consisting of Mr. C.
Jayaram as chairman, Mr. K.V.S. Manian, Mr. D. Kannan and Mr. Jaimin Bhatt. During the
year three meetings were held. Mr. Jaimin Bhatt attended two meetings and other members
attended all the meetings.
• Nomination Committee
The Committee consisted of Mr. Narayan S.A., Mr. D. Kannan and Mr. C. Jayaram. . The
Committee was reconstituted on 19th June, 2013 consisting of Mr. C. Jayaram as chairman,
Mr. K.V.S. Manian and Mr. D. Kannan. During the year one meeting was held and all the
members attended the meeting.
• Risk Management Committee (Board)
The Committee consisted of Mr. Narayan S.A, Mr. D. Kannan, Mr. C. Jayaram, as its
members with Mr. C. Jayaram as the Chairman. The Committee was reconstituted on 19th June,
2013 consisting of Mr. C. Jayaram as chairman, Mr. K.V.S. Manian and Mr. D. Kannan. During
the year one meeting was held and all the members attended the meeting.
• Risk Management Committee (Operations)
The committee consisted of Mr. D. Kannan, Mr. Trivikram Kamath and Mr. Mukul Rathi, as
its members with Mr. D. Kannan as the Chairman. During the year two meetings were held and
all the members attended the meetings.
AUDITORS
The companys auditors, M/s Price Waterhouse, Chartered Accountants, Mumbai, retire at
the ensuing Annual General Meeting and are eligible for re-appointment.
STATUTORY INFORMATION
The information required under Section 217(2A) of the Companies Act, 1956 read with the
Companies (Particulars of Employees) Rules, 1975 as amended, is given in the Annexure
appended hereto and forms part of this Report.
During the year under review, your Company did not accept any deposits from the public.
Foreign exchange earnings and outgo during the current financial year were Rs. 735.21
Lakhs (Rs. 530.14 Lakhs in previous financial year) and Rs. 1,856.34 Lakhs (Rs. 1,682.03
Lakhs in previous financial year) respectively. The other particulars under the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are not
applicable since your Company is not a manufacturing company.
DIRECTORS RESPONSIBILITY STATEMENT
Based on representations from the management, the Directors state, in pursuance of
Section 217 (2AA) of the Companies Act, 1956, that:
i) The Company has, in the preparation of the annual accounts for the year ended 31st
March 2014, followed the applicable accounting standards along with proper explanations
relating to material departures, if any;
ii) The Directors have 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 as aRs. 31st March 2014 and of the profit
of the Company for the financial year ended 31st March 2014.
iii) The Directors have taken proper and sufficient care to the best of their knowledge
and ability, for the maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities; and
iv) The Directors have prepared the annual accounts on a going concern basis.
ACKNOWLEDGEMENTS
The Directors wish to thank Securities and Exchange Board of India, the Stock
Exchanges, the Depositories and the Companys Bankers for their support. The Directors
commend the employees of the Company for their dedicated efforts.
|
For and on behalf of the Board of Directors |
|
Uday S. Kotak |
|
Chairman |
| Place: Mumbai |
|
| Dated: April 23, 2014 |
|
+91-9892691696
