mercantile ventures ltd Directors report


The Board of Directors of your Company take pleasure in presenting the Annual Report of the Company together with the audited consolidated & standalone financial statements and the auditors Report thereon for the financial year ended March 31,2023.

1. FINANCIAL RESULTS

(Rs. in Lakhs)

Standalone

Consolidated

Description 2022-23 2021-22 2022-23 2021-22
Revenue from Operations 2076.84 1461.36 4714.90 3703.75
Other Income 594.62 748.31 659.27 1631.55
Profit/(Loss) Before Interest & Depreciation 837.09 998.63 993.28 1,852.09
Interest 34.78 21.28 104.48 108.01
Depreciation 96.02 95.23 98.15 99.01
Profit/(Loss) Before Tax 706.29 882.12 790.65 1645.07
Exceptional Items - - 91.96 -
Profit before tax and after Exceptional items 706.29 882.12 882.61 1645.07
Provision for taxation Current tax 217.25 259.21 249.49 287.81
Deferred tax (23.80) (24.81) (41.05) 208.87
Share of profit from LLP/Partnership Firms/Associate 172.52 279.26 988.12 491.06
Minority Interest - - (68.08) (489.64)
Profit/(Loss) After Tax 685.36 926.98 1594.21 1149.81
Other Comprehensive Income (1610.80) 1470.70 (2389.04) 1470.70
Total Comprehensive Income for the year (925.44) 2397.68 (794.83) 2620.51

2. Highlights of the Companys financial performance for the year ended March 31, 2023 Standalone

• Revenue from operations was Rs. 2076.84 lakhs (previous year Rs. 1461.36 lakhs)

• Profit after tax for the year was Rs. 685.36 lakhs (previous year Rs. 926.98 lakhs)

• Total Comprehensive Income was Rs (925.44) lakhs (previous Year Rs. 2397.68 lakhs)

Consolidated

• Revenue from operations was Rs. 4714.90 lakhs (previous year Rs. 3703.75 lakhs)

• Profit after tax for the year was Rs. 1594.21 lakhs (previous year Rs. 1149.81 lakhs)

• Total Comprehensive Income was Rs (794.83) lakhs (Previous Year Rs. 2620.51 lakhs)

3. Amount, if any, which the Board proposes to carry to any reserves

The Board of Directors has decided to retain the amount of profits for financial year 2022 - 23. Accordingly, the Company has not transferred any amount to the ‘Reserves for the year ended March 31,2023.

4. Dividend

The Board of Directors has not recommended any dividend for the year as the profits are conserved to fund the future plans of the Company.

Ventures Limited

5. Major events occurred during the year and till the date of the report

Amalgamation Order by Honble National Company Law Tribunal (NCLT)

Honble National Company Law Tribunal (NCLT), Division Bench-II, Chennai vide its Order dated June 28, 2023 has approved the Scheme of Amalgamation of "Cuningham Ventures Private Limited (Transferor Company-1), "Sahoj Ventures Private Limited (Transferor Company-2) and ‘Willingdon Ventures Private Limited (Transferor Company-3) with ‘Mercantile Ventures Limited (Transferee Company).

6. Change in Nature of Business, If Any;

There has been no change in the nature of business during the financial year.

7. Material Changes and Commitments

The appointed date of merger is 1-10-2021 and hence consequent to the Order of the NCLT the financial statements of the company will be restated during the financial year 2023-24 giving effect to the NCLT Order.

8. Changes in the capital structure of the company during the year

There is no change in the authorised, issued, subscribed and paidup share capital of the Company during the financial year. And also there is no reclassification or sub-division of the authorised share Capital and no reduction of share capital or buy back of shares during the year.

9. Investor Education and Protection Fund (IEPF)

There was no such instances requiring any transfer of any amount by the company to the IEPF as required under Sections 124 and 125 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.

10. Directors

There are no changes in the constitution of the Board of Directors of the Company during the year.

Mr. K Gopalakrishnan (DIN: 00621061), who retires by rotation and being eligible, offers himself for re-appointment.

11. Key Managerial Personnel

After the end of the financial year 31st March 2023, Ms. V Padmapriya resigned from the position of Company Secretary of the Company w.e.f. 15th June 2023 and Mr. Oberoi Jangit M was appointed by the Board of Directors as Company Secretary of the Company w.e.f. 16th June 2023.

12. Declaration of Independent Directors and statement on compliance of code of conduct

The Independent Directors have submitted their declarations with respect to their independence to the Board as required under Section 149(6) of the Companies Act, 2013 so as to qualify themselves for the continuance as independent directors under the provisions of the Companies Act, 2013 and the relevant rules and they have complied with the Code for Independent Directors prescribed in Schedule IV to the Act.

13. Board Meetings

The Company had 7 (Seven) board meetings on 26.05.2022, 12.08.2022, 04.11.2022, 28.12.2022, 18.01.2023, 14.02.2023 and 24.03.2023 during the financial year under review. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013. Details of meetings held and attendance of directors are mentioned in the Corporate Governance Report, which forms part of this Report.

14. Board Committees

The following statutory Committees constituted by the Board function according to their respective roles and defined scope:

• Audit Committee

• Nomination and Remuneration Committee

• Stakeholders Relationship Committee

• Corporate Social Responsibility and Sustainability Committee

The Composition of Committees, number and dates of meetings of such committees held during the year are given in the Corporate Governance Report.

Risk Management Committee has been dissolved effective from August 14, 2023 as it is not a statutory requirement.

15. Companys Policy on Directors appointment and remuneration

The Companys Policies relating to appointment of directors, payment of managerial remuneration, directors qualifications, positive attributes, independence of directors and other related matters as provided under Section 178(3) of the Companies Act, 2013 are uploaded in the website of the Company in the following links. https://www.mercantileventures.co.in/wp-content/uploads/2019/07/CRITERIA-FOR-APPOINTMENT-OF-INDEPENDENT- DIRECTORS.pdf, https://www.mercantileventures.co.in/wp-content/uploads/2019/07/Remuneration-Policy.pdf

16. Familiarization Program

The details of the familiarisation programme for Independent Directors are available at the Companys website.

17. Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015, the Boards performance and performance of the non-independent Director were considered/evaluated by the independent directors at their meeting without the participation of the non-independent director and key managerial personnel.

These Meetings are conducted to assess the quality, quantity and timeliness of flow of information between the Companys Management and the Board that are necessary for the Board to effectively and reasonably perform its duties.

Pursuant to the provisions of the Companies act, 2013 and Regulation 17 of SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its various Committees.

18. Remuneration of Directors and Employees

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names of the top ten employees in terms of remuneration drawn and names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules forms part of this Report and are disclosed in the Annexure-I.

19. Directors Responsibility Statement

In accordance with the provisions of section 134(5) of the Companies Act, 2013 the Board hereby submits its Responsibility Statement:-

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 at the end of the financial year and of the profit and loss of the company for the year ended 31 March 2023;

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 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 devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively;

f. the Directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and operating effectively.

20. Internal Control Systems & their adequacy

Companys Internal Control System has been designed for providing accurate recording of transactions with internal checks and prompt reporting, adherence to applicable accounting standards and policies, compliance with applicable statutes, management policies and procedures, effective use of resources and safeguarding of assets.

The Internal audit was carried out periodically through a practicing chartered accountant. The observations arising out of the audit were periodically reviewed and compliance ensured. The summary of the internal audit observations and management responses were submitted to the Board after review by the Audit Committee.

21. Frauds Reported by Auditors as per Sec 143 (12) other than those which are reportable to the Central Government.

There were no frauds reported by Statutory Auditor, Secretarial Auditor to the Audit Committee/ Board.

22. Consolidated Financial Statements

In accordance with the section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, Listing regulations and Ind AS 110, the consolidated audited financial statement forms part of the Annual Report in addition to the standalone audited financial statement of the company.

23. Disclosures relating to Subsidiaries, Associates and Joint Ventures

A Report on performance and financial position of the subsidiaries and associates highlighting the performance of each and their contribution to the overall performance of the company is attached to the Financial Statements of the Company in form AOC-1.

There are no Joint Ventures for the Company.

24. Companies which have become or ceased to be subsidiaries, associates and joint ventures

The Honble National Company Law Tribunal (NCLT) vide its order dated 28th June 2023 have approved the merger of ‘Cuningham Ventures Private Limited (Transferor-1), ‘Sahoj Ventures Private Limited (Transferor-2) and ‘Willingdon Ventures Private Limited (Transferor-3) with ‘Mercantile Ventures Limited (Transferee Company) and the transferor companies will cease to be the subsidiaries of the company from the effective date.

25. Deposits

The Company has neither accepted nor renewed any deposits during the year under review.

26. Particulars of Loans, Guarantees or Investments

The particulars of Loans, guarantees and investments covered under section 186 of the Companies Act 2013 are provided in the notes to the financial statements.

27. Particulars of Contracts or Arrangements made with Related Parties.

All transactions entered by the Company with related parties were in the ordinary course of business and at arms length pricing basis. There were no materially significant transactions with related parties during the financial year 2022-23 which were in conflict with the interests of the Company.

The Board has approved the policy on related party transactions.

Details of transactions with related parties as required under Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 are provided in Form AOC-2 in Annexure-II.

The policy has been uploaded on the Companys website, under the web link: http://mercantileventures.co.in.

28. Corporate Social Responsibility

The company has complied with the provisions of Section 135 of the Companies Act 2013. The details of CSR activities of the company containing details of CSR Committee Members, brief outline of the CSR policy, overview of the CSR initiatives, prescribed expenditure, amount spent etc. that form part of this Report are furnished in Annexure-III.

The CSR policy is available in the website of the Company.

29. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

The business of the Company is leasing of immovable properties and Manpower supply services. The particulars prescribed under Section 134 (3) (m) of the Companies Act, 2013 read with rule 8 (3) of the Companies (Accounts) Rules, 2014, relating to conservation of energy and technology absorption are not applicable to the business operations of the Company.

Foreign Exchange Earnings and Outgo:

Foreign Exchange Inflow : Nil

Foreign Exchange Outflow : Nil

30. Risk Management.

The Company has an appropriate and effective risk management system which carries out risk assessment and ensures that risk mitigation plans are in place by validating the same at regular intervals. The Board reviews the risks, threats & concerns.

Risk Management Committee has been dissolved effective from August 14, 2023 as it is not a statutory requirement. However the Board will review the risk profile at regular intervals.

31. Vigil Mechanism

Pursuant to Section 177(9) of the Act, a vigil mechanism was established for directors and employees to report to the management instances of unethical behaviour, actual or suspected, fraud or violation of the Companys code of conduct or ethics policy. The Vigil Mechanism provides a mechanism for employees of the Company to approach the Chairman of the Audit Committee of Directors of the Company for redressal. No person has been denied access to the Chairman of the Audit Committee of Directors and provides adequate safeguards against victimisation, if any.

The Whistle Blower policy has been uploaded in the following web link. https:// www.mercantileventures.co.in/ wp-content/ uploads/2019/07/Whistle-blower-policy.pdf

32. Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of the company

There are no significant and material orders passed by the regulators or courts or tribunals which would impact the going concern status of the Company and its future operations.

33. Auditors Statutory Auditors

M/s. Venkatesh & Co., Chartered Accountants (Firm Registration No.004636S) were appointed as statutory auditors of the Company by the members in the 21st Annual General Meeting held on 22nd September 2022 pursuant to the provisions of Sections 139, 142 and other applicable provisions of the Companies Act 2013 and shall hold office till the conclusion of the 26th AGM to be held in the year 2027, at a remuneration of Rs.4,50,000/- (Rupees Four Lakhs and Fifty Thousand only) plus reimbursement of out of pocket expenses and applicable taxes.

Secretarial Auditor

The Company has appointed M/s. KRA & Associates, Company Secretaries in practice to undertake the Secretarial Audit of the Company. As required under provisions of Section 204 of the Companies Act, 2013 and pursuant to Regulation 24A of Listing Regulations, the Secretarial Audit reports (Form MR -3) in respect of the Secretarial Audit of the Company and its Material Unlisted Company ‘i3 Security Private Limited for FY 2022-23 carried out by M/s. KRA & Associates, Practicing Company Secretaries, forms part to this report in Annexure - IV.

Cost Auditor

The business activity of the Company is not covered under rule 3 of The Companies (Cost Records and Audit) Rules, 2014. Hence, the maintenance of cost records and requirement of cost audit under section 148(1) of the Companies Act, 2013 are not applicable.

34. Qualifications, reservations or adverse remarks or disclaimers made by the statutory auditor and the practicing company secretary in their reports

There were no qualifications, reservations or adverse remarks in the reports of M/s. Venkatesh & Co, Statutory Auditors.

Reply to the Observations in Secretarial Audit Report (MR-3) provided by M/s. KRA & Associates, Secretarial Auditors of the Company:

(i) Regulation 31-The Promoters shareholding has not been dematerialised to the extent of 0.22% of the total Promoters shareholding.

Reply: Steps are being taken to dematerialise promoters shareholding.

(ii) Regulation 30 read with Schedule III -The company has to disclose to the stock exchange the brief profile of the auditors in the prescribed format.

Reply: The Company has filed with the Stock Exchange the details of new auditor at the time of filing the Outcome of the Board meeting in which the new auditor was appointed and also in the Explanatory statement of the 21st Annual General Meeting Notice which was also intimated to the Stock Exchange.

35. Disclosure on Compliance with Secretarial Standards

Your Directors confirm that the Secretarial Standards issued by the Institute of Company Secretaries of India, have been complied with.

36. Corporate Insolvency Resolution Process Initiated under the Insolvency and Bankruptcy Code, 2016 (IBC)

There are no applications filed for corporate insolvency resolution process, by any financial or operational creditor or by the company itself under the IBC before the NCLT during the financial year.

37. Annual Return

The copy of annual return of the Company as on March 31,2023 is available on the Companys website under the web link: http://mercantileventures.co.in.

38. Corporate Governance

A report on Corporate Governance as stipulated under Schedule V and Regulation 34(3) of the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015 forms part of this Annual Report. The requisite certificate from a practicing company secretary confirming compliance with the conditions of corporate governance as stipulated is annexed to this Report.

39. Sexual Harassment

The Company has zero tolerance for sexual harassment at workplace. A policy is in place and an Internal Complaints Committee has been constituted which is monitoring the prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of POSH and the Rules made there under. There were no complaints reported under the POSH during the year under review.

40. Management Discussion And Analysis Report

a) Industry Structure and developments

After a protracted period of economic stagnation the real estate sector has witnessed a considerable upswing despite rising costs and a series of hikes in repo rates. The sector has seen robust growth in the commercial office and residential segments and the momentum is expected to be sustained in the year ahead

b) Opportunities and Threats

With soaring demand, the commercial real estate market is set to see double digit growth in the office and residential segments with increasing absorption and diminishing vacancy rates.

The series of hikes in interest rates announced by the RBI have pushed up home loan rates and this had an impact on demand and customer sentiments. However, with the flexible payment plans, the innovative products and thoughtful designs being offered by developers, the demand supply dynamics are expected to be resilient in the year ahead.

With the interest rates likely to soften in the years ahead, the market is expected to respond positively and maintain the growth trajectory. But a continued tight money policy of RBI could dampen the demand for residential and commercial real estate space.

c) Segment-wise or produce-wise performance

The company is operating in the segment of leasing of properties and Manpower supply services.

The prospects for this line of business is considered good and the company is expected to maintain the revenue streams from the aforesaid activities in future also.

d) Future Outlook and state of the companys affairs

The main business of the Company is investment in properties for leasing and Manpower supply services. The revenue stream from these operations is expected to remain stable in the current fiscal year also.

e) Risk and concerns

The Company has an appropriate and effective risk management system which carries out risk assessment and ensures that risk mitigation plans are in place by validating the same at regular intervals. The Board reviews the risks, threats & concerns.

The company has an adequate internal control system.

f) Internal Controls and adequacy

The company has an adequate internal control system by having a independent Internal Audit team with well-established risk management processes both at the business and corporate levels. Internal Auditor submits their reports,directly to the Chairman of the Audit Committee of the Board of Directors, which ensures process independence. The Company believes that every employee has a role to play in fostering an environment in which controls, assurance, accountability and ethical behaviour are accorded high importance. This complements the Internal Audits conducted to ensure total coverage during the year. The company developed a robust internal control framework which ensures the operations being carried effectively and are aligned to the strategic goals. The internal control framework is intended to ensure correct, reliable, complete and timely financial reporting and management information.

g) Discussion on financial performance with respect to operational performance A review for the financial performance is given under review of operations.

h) Material developments in Human Resources / Industrial Relations front, including number of people employed - Nil

i) Details of significant changes in key financial ratios (Change of 25% or more as compared to the immediately previous financial year).

During the year, on a standalone basis the significant changes in the financial ratios of the Company, which are more than 25% as compared to the previous year are summarized below:

Particulars 2022-23 2021-22 Change % Reason for change
(a) Current Ratio 5.14 10.67 (107.67)% Due to a significant reduction in Current investments and Loans and Advances
(b) Debt Equity Ratio - - - -
(c) Debt Service Coverage Ratio - - - -
(d) Return on Equity 2.27 2.98 (31.23)% Due to an increase in Other Expenses -Bad Debts written off and expected credit loss on advances recognised and sharp reduction in Profit from LLP
(e) Inventory Turnover Ratio - - - -
(f) Trade Receivables Turnover Ratio 5.11 4.02 21.28% -
(g) Trade Payables Turnover Ratio - - - -
(h) Net Capital Turnover Ratio 0.40 0.12 70.72% Due to increase in operating revenue and sharp reduction in Current Investments and Loans and advances
(i) Net Profit Ratio 33.00 63.43 (92.22)% Due to reduction in PAT caused by increase in other expenses and reduction in share of profit from LLP and increase in operational revenue
(j) Return on capital employed 2.25 2.95 (31.39)% Due to reduction in PAT caused by increase in other expenses and reduction in share of profit from LLP
(k) Return on Investment 2.16 2.83 (31.40)% Due to reduction in PAT caused by increase in other expenses and reduction in share of profit from LLP

j) Any change in return of net worth as compared to the immediately preceding financial year.

The details of return of net worth as compared to the immediately preceding financial year are provided as given below:

(Rs. In Lakhs)
S. No. Net worth FY 2022-23 Net worth FY 2021-22 (previous financial year) Changes Explanation
30,176.50 31,101.94 (925.44) The steep fall in the market value of investments has impacted adversely on the Other Comprehensive Income of the company and consequently its net worth.

41. Acknowledgement

Your directors express their grateful thanks for the assistance, co-operation and support extended to the Company by promoters, shareholders and the bankers for their continued support. The Directors also place on record their appreciation of the good work put in by the employees of the company.

By order of the Board

For MERCANTILE VENTURES LIMITED

E N Rangaswami B. Narendran
Place: Chennai DIN:06463753 DIN: 01159394
Date: 14 August, 2023 Whole Time Director Director