Action Financial Services (I) Ltd Directors Report.

To,

The Members,

Action Financial Services (India) Limited,

Dear Members,

The Directors have pleasure in presenting the 26th Boards Report of your Company together with the Audited Financial Statements of your company for the financial year ended 31st March, 2019.

FINANCIAL RESULTS (in Rs.)

Particulars

Consolidated

Standalone

Current Year Previous Year Current Year Previous Year
Gross Income 46,065,761 44,314,248 45,788,918 44,042,529
Profit Before Interest and Depreciation 11,402,962 5,810,833 11,175,919 6,683,170
Finance Charges 8,005,898 8,938,921 8,005,898 8,920,695
Gross Profit 33,97,064 (3,122,088) 31,70,021 (2,237,525)
Provision for Depreciation 1,407,112 3,583,044 1,399,112 3,575,044
Net Profit Before Tax 1,989,952 (6,711,132) 1,770,909 (5,812,569)
Provision for Tax -Deferred Tax (430,051) 1,334,754 113,014 1,422,796
- Current Tax - - - -
- Earlier Tax - 15,655 - -
Net Profit After Tax 2,420,003 (8,030,231) 1,883,923 (7,235,365)
Balance of Profit brought forward - - - -
Balance available for appropriation 2,420,003 (8,030,231) 1,883,923 (7,235,365)
Proposed Dividend on Equity Shares - - - -
Tax on proposed Dividend - - - -
Transfer to General Reserve - - - -
Surplus carried to Balance Sheet 2,420,003 (8,030,231) 1,883,923 (7,235,365)

STATE OF AFFAIRS & FINANCIAL PERFORMANCE

The last quarter of FY19 witnessed the mega event of the democracy i.e. General elections 2019 and the markets were clouded with the pressure of uncertain outcome leading to the volatility. Markets faced the pressure from various global factors such as US-China trade tensions, possibility of no-deal Brexit, rift over sanctions on import of crude oil as well as domestic factors such as rising loan defaults and NPAs, geopolitical tensions, political uncertainty and slowdown in crucial sectors such as automobile, agriculture and IT. The retail investors, who form the major part of company s target customers remained susceptible to the outcome of above factors and preferred to stay back from new investments in the market for the major part of FY19. As a result, the company could not achieve its targets as it had expected. The re-election of the existing government with the bigger mandate than before is expected to bring the stability in the market in coming times.

The company has focused on carrying its business from strength to strength and improving its performance by adjusting itself to the market dynamics. The consolidated revenue for the financial year under review was Rs. 46,065,761 as against Rs. 44,314,248 for the previous financial year registering an increase of 3.95%. The Consolidated Profit after tax for the financial year under review was Rs. 2,420,003 as against the loss of Rs. 8,030,231 for the previous financial year. The Standalone revenue for the financial year under review was Rs. 45,788,918 as against Rs. 44,042,529 for the previous financial year registering an increase of 3.97%. The Standalone Profit after tax for the financial year under review was Rs. 1,883,923 as against the loss of Rs. 7,235,365 for the previous financial year. Therefore, the performance of the company was satisfactory despite of huge competition in the broking industry due to cost reduction approach followed by the company and focus on core business structures.

FUTURE OUTLOOK & EXPANSION PLAN

The core business model of the company is purely focused on retail brokerage and our new scheme which was launched few years back to tap the retail participation, could not achieve the expected results. The company is planning the measures to improve the marketing and implementation of the scheme for generating the expected results.

The market competition has been rising after the entry of discount brokers and they have dominated the market in terms of volume growth and market share. However, the company has managed the competition by focusing on maintaining its client base with the proven business model and rearranging its cost structures to bring them at par with the discount brokers.

The company in its endeavour to provide various services to its customers under one umbrella is planning to add the new services to its catalogue such as participation in Securities Lending and Borrowing, trading in Commodity derivatives and investing in Government Securities and bonds by retail investors in the coming financial year. The customers of the company will benefit from the introduction of these services and the company also expects to generate the additional revenue.

REVIEW OF BUSINESS DIVISIONS

Broking Division and Depository Division:

The company operates its business in two primary divisions, Broking division and Depository division under one broad segment of capital markets and is registered as a Stock Broker with the Securities & Exchange Board of India in Capital market segment in BSE and in Capital Market, Future & Options and Currency derivatives Segments in NSE and as a Depository Participant with the NSDL.

Both the divisions registered a satisfactory performance during the year under review. The broking division of company is going through a transition due to various measures introduced by the SEBI during the last couple of years. Under Depository division, the company during the year under review has registered itself with the SPEED-E service of NSDL facilitating the direct & hassle-free processing of Delivery instruction slips.

Currently, DP Division caters to 25 clearing Members Pool Account and maintains 38 Promoters Accounts. The number of demat accounts opened in India has exponentially grown during the last couple of years due to rising number of retail participants in the equity market. The company has positioned itself to attract the customers for new demat account with its established business model and cost-effective rate structure.

Cost-effectiveness and digitalization are the key factors driving the competition in the market. The company has re-arranged its tariff structures to meet the goal of cost-effective and efficient service delivery to the clients and tackle the competition in the industry through competitive & attractive rate structure. The Company has provided the facility to the clients to view their holding, transaction and ledger balances and also open an account with the company through its website.

OVERVIEW

The future outlook for the economy of country seems to be positive on the back of more policy and macro-economic reforms due to stable government with growth & development on top of the agenda. The market sentiment seems to be positive and the markets are expected to respond well to the reforms introduced by the government.

The policy measures introduced by the government to curb the financial frauds and safeguard investors from the market misconduct are expected to accelerate the retail participation in the coming years. The company with its proposal of lowest brokerage is expected to gain a good share from the new account openings. FY20 will be a crucial year for the company with the prospective of better financial performance.

DIVIDEND

The Board has not recommended any dividend for the year ended 31st March, 2019.

TRANSFER TO RESERVE

The Company did not transfer any amount to reserve this year.

SHARE CAPITAL

The paid-up Capital of the Company as on 31st March, 2019 is Rs. 13,33,25,000/-divided into Rs. 12,50,45,000/- Equity Shares and Rs. 82,80,000/- Preference Shares. During the year under review, the Company has not issued any shares with differential voting rights nor granted stock options nor sweat equity.

REPORT ON PERFORMANCE OF SUBSIDIARIES, ASSOCIATES COMPANIES AND JOINT VENTURES:

As on 31st March, 2019, the Company had two Indian wholly owned non material subsidiaries. There has been no change in the number of subsidiaries or in the nature of business of the subsidiaries, during the year under review. In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report. The statement containing the salient features of the financial statement of a company s subsidiaries under the first proviso to sub-section (3) of section 129 is set out as Annexure A in Form AOC-1.

There is neither new incorporation nor Cessation of any Company as a subsidiary, associate company or joint venture during the year.

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

The provisions of Section 125(2) of the Companies Act, 2013 do not apply as there is no unclaimed dividend.

MATERIAL CHANGES AND COMMITMENTS

Other than stated elsewhere in this report, there are no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this report.

CONSOLIDATED FINANCIAL STATEMENTS:

The consolidated Financial Statements of the Company along with its subsidiary companies are attached herewith and form part of this annual report. These have been prepared in accordance with the provisions of the Companies Act, 2013, the SEBI (Listing Obligations and Disclosures Requirement) Regulations, 2015, the Accounting Standard 21 (AS-21) on Consolidated Financial Statements and Accounting Standard 23 - (AS-23) on Accounting for Investments in Associates in Consolidated Financial Statements based on Audited Financial Results for the year ended 31st March, 2019.

DEPOSITORY SYSTEM

As the Members are aware, the Company s shares are tradable compulsorily in electronic form and your Company has established connectivity with both the depositories, i.e. National Securities Depository Limited and Central Depository Services (India) Limited. As on 31st March 2019, 97.64% of the company s total paid-up capital representing 12,504,500 Shares is in dematerialized form.

SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 mandate that the transfer, except transmission and transposition, of securities shall be carried out in dematerialized form only with effect from 1st April 2019. In view of the numerous advantages offered by the Depository system, members holding shares in physical mode are requested to avail the facility of dematerialisation of the Company s shares from either of the aforesaid depositories.

FINANCE

The Company has availed credit facilities from Bank of India during the year under review.

DEPOSITS

Your Company has not accepted any deposits in terms of the provisions of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014 as amended, from time to time, during the year under review.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Ketan Mehta (DIN: 02903954), Independent Director, has resigned as a director w.e.f. 08th August, 2018. Mr. Harbhajan Singh Dhillon (DIN: 05322003) has ceased to be an Independent director of the company, on expiry of the 1st term of his appointment, as on 31st March, 2019 and the Company has re-appointed him as an Independent director at the Board meeting held on 27th May, 2019 subject to the approval of member by way of special resolution. Mr. Raja Gupta (DIN: 07034154) was appointed as an Independent Director w.e.f. 10th August, 2018.

Mr. Jayantilal Suthar (Mem. No.: FCS-8779) resigned as the Company Secretary w.e.f. 1st January, 2019. Mr. Siddheshwar Thorat (Mem. No.: ACS-57378) was appointed as the Company Secretary w.e.f. 31st January, 2019.

Further, In accordance with the requirements of the Companies Act 2013, Mr. Milan R. Parekh (DIN: 00108368) will retire by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment.

BOARD INDEPENDENCE

In terms of Section 149 of the Companies Act, 2013 and Regulation 25 of the SEBI (LODR) Regulations, 2015 and based on the confirmation/disclosures received from the Independent Directors and on evaluation of the relationships disclosed, the following Non-Executive Directors are Independent in terms of Regulation 25 of the SEBI (LODR) Regulations, 2015 and Section 149(6) of the Companies Act, 2013:-

a) Mr. Raja Gupta

b) Mr. Harbhajan Singh Dhillon

c) Mrs. Parul Doshi

The terms and conditions of appointment of the Independent Directors are in compliance with the provisions of the Companies Act, 2013 and are placed on the website of the Company at https://www.actionfin.com/download.aspx.

ANNUAL EVALUATION BY THE BOARD

The evaluation of all the directors, committees, Chairman of the Board and the Board as a whole was conducted based on the criteria and framework adopted by the Board.

The evaluation framework for assessing the performance of Directors comprises of the following key areas:

i. Attendance of Board Meetings and Board Committee Meetings.

ii. Quality of contribution to Board deliberations.

iii. Strategic perspectives or inputs regarding future growth of Company and its performance.

iv. Providing perspectives and feedback going beyond information provided by the management.

v. Commitment to shareholder and other stakeholder interests.

The evaluation involves Self-Evaluation by the Board Member and subsequently assessment by the Board of Directors. A member of the Board will not participate in the discussion of his/her.

DIRECTORS RESPONSIBILITY STATEMENT

The 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) they 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 that period;

(c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) they had prepared the annual accounts on a going concern basis; and

(e) they had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

(f) they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

NUMBER OF MEETINGS OF THE BOARD

The Board meets at regular intervals to discuss and decide on Company/business policy and strategy apart from other Board business. The notice of Board meeting is given well in advance to all the Directors. Usually, meetings of the Board are held in Mumbai. The Agenda of the Board / Committee meetings is circulated at least 7 days prior to the date of the meeting. The Agenda for the Board and Committee meetings includes detailed notes on the items to be discussed at the meeting to enable the Directors to take an informed decision.

The Board met 7 (Seven) times in the financial year 2018-2019 and the maximum interval between any two meetings did not exceed 120 days as follows;

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
28.05.2018 10.08.2018 13.11.2018 01.01.2019
31.01.2019
13.02.2019
25.03.2019

Further, in terms of Schedule IV of the Companies Act, 2013, the Separate meeting of the Independent Directors was held on 13th February, 2019 and all Independent Directors were present.

COMMITTEES OF THE BOARD

The Board of Directors constituted Four Committees of the Board, as follows:

Audit Committee

Nomination and Remuneration Committee Stakeholders Relationship Committee Risk Management Committee

Details of all the Committees along with their charters, composition and meetings held during the year, are provided in the Report on Corporate Governance , a part of this Annual Report.

AUDIT COMMITTEE:

The Board of Directors constituted an Audit Committee as per the Regulation 18 of the SEBI (LODR) Regulations, 2015 and in terms of Section 177 of the Companies Act, 2013.

REMUNERATION POLICY

Remuneration to Executive Directors:

The remuneration paid to Executive Directors is recommended by the Nomination and Remuneration Committee and approved by Board of Directors at the Board meeting, subject to the subsequent approval of the members at the General Meeting and such other authorities, as may be required. The remuneration is decided after considering various factors such as qualification, experience, performance, responsibilities shouldered, industry standards as well as financial position of the Company.

Remuneration to Non Executive Directors:

The Non Executive Directors are paid remuneration by way of Sitting Fees for each meeting of the Board and Committee of Directors attended by them.

CORPORATE GOVERNANCE

The Corporate Governance is about maximizing members value legally, ethically and sustainably. The Company is committed to maintaining the highest standards of Corporate Governance and adhering to the Corporate Governance requirements as set out by Securities and Exchange Board of India. The Report on Corporate Governance form part of this Annual Report.

CEO & CFO CERTIFICATION

The Certificate from Mr. Milan Parekh, Managing Director & CEO and Mr. Bakul Parekh, Jt. Managing Director & Chief Financial Officer, pursuant to Regulation 17(8) of the SEBI (LODR) Regulations, 2015, for the year under review was placed before the Board of Directors of the Company at its meeting held on 27thMay, 2019.

A copy of the certificate on the financial statements for the financial year ended 31st March, 2019 is annexed along with this Report.

MANAGEMENTS DISCUSSION AND ANALYSIS REPORT

The Management s Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(2)(e) of the SEBI (LODR) Regulations, 2015, is annexed to this report.

AUDITORS

M/s Ambavat Jain & Associates LLP (Firm Registration No. 109681W), Chartered Accountants, Mumbai, were appointed as Statutory Auditors for a period of 5 consecutive years in the Annual General Meeting held on 29th September, 2017. M/s. Ambavat Jain & Associates LLP (Firm Registration No. 109681W), Chartered Accountants, Mumbai, resigned as the statutory auditors of the company w.e.f. 28th January, 2019.

M/s. Jain Chowdhary & Co. (FRN: 113267W), Chartered Accountants, Mumbai were appointed as the Statutory auditors of the company w.e.f. 31st January, 2019 to fill the casual vacancy caused by the resignation of M/s Ambavat Jain & Associates LLP and the same was approved by the members of the company in the Extra-ordinary General Meeting held on 26th April, 2019.

The Audit Committee and Board of Directors of the Company at their meeting held on 27th May, 2019 has recommended the appointment M/s. Jain Chowdhary & Co. (FRN: 113267W), as the Statutory Auditors of the Company for the period of four (4) years pursuant to Section 139 of the Companies Act, 2013. Accordingly, the Board seeks approval of Members of the company for the appointment of Statutory Auditors as mentioned in the notice of the Annual General Meeting.

The Company has received letter from M/s. Jain Chowdhary & Co. to the effect that their appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified from appointment.

There are no qualifications or adverse remarks in the Auditors Report for the year ended 31st March, 2019 which requires any clarification/ explanation. The Notes on financial statements are self-explanatory, and needs no further explanation.

REPORTING OF FRAUDS BY AUDITORS

During the year under review, the statutory auditors and secretarial auditor have not reported to the Audit Committee under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Board s Report.

COST RECORDS AND COST AUDIT

Maintenance of cost records and requirement of cost audit as prescribed under the provisions of Section 148(1) of the Companies Act, 2013 are not applicable to the business activities carried out by the company.

SECRETARIAL AUDIT REPORT

The Board of Directors of the Company has appointed M/s. Jagdish Patel & Co., Company Secretaries to conduct the Secretarial Audit and their Report on Company s Secretarial Audit is annexed to Director s Report as Annexure B.

SECRETARIAL STANDARDS

The company continues to comply with all the applicable Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).

DECLARATION BY INDEPENDENT DIRECTOR

The Company has received Declarations of Independence as stipulated under Section 149(7) of the Companies Act, 2013 from all the Independent Directors confirming that he/she is not disqualified from appointing/continuing as Independent Director.

INSURANCE

All the properties of your Company including Office Premises Furniture & Fixtures Office Equipments and Computer are adequately insured.

PARTICULARS OF REMUNERATION

The ratio of remuneration of each director to the median of employees remuneration as per Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are set out in the Annexure C to the Directors Report.

The list of top 10 employees of the Company in terms of remuneration drawn specified in Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to Director s report as Annexure D.

PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars regarding foreign exchange earnings and outgo appear as separate items in the notes to the Accounts. Since the Company does not own any manufacturing facility, the other particulars relating to conservation of energy and technology absorption stipulated in the Companies (Accounts) Rules, 2014 are not applicable.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return as required under Section 92(3) is annexed to the Director s Report in Form MGT-9 as Annexure E. and the same shall also be available on the website of company at https://www.actionfin.com/investor-relation.aspx?pagename=factsheet.

PARTICULAR OF LOANS, GUARANTEES & INVESTMENTS

Loans, guarantees and Investments covered under the provisions of section 186 of the Companies Act, 2013 forms part of the Notes to the Financial Statements.

DISCLOSURE OF RELATED PARTY TRANSACTION

All related party transactions that were entered into during the financial year were on arm s length basis and were in the ordinary course of the business. There are no materially significant related party transactions made by the company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the company at large and all such other transactions are disclosed in the notes to Financial Statements of the company in the format prescribed in the relevant accounting standards. Information on transactions with related parties pursuant to section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 is given in Form AOC-2 and the same is annexed to the Director s Report as Annexure F.

RISK MANAGEMENT POLICY

The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives & functions. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

INTERNAL CONTROL SYSTEM

The Company s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors. Significant audit observations and follow up actions thereon are reported to the Audit Committee.

CODE OF CONDUCT

The Board of Directors has approved a Code of Conduct which is applicable to the Members of the Board and all employees in the course of day to day business operations of the company. The Code has been placed on the Company s website at https://www.actionfin.com/download.aspx.

The Code lays down the standard procedure of business conduct which is expected to be followed by the directors and the designated employees in their business dealings and in particular on matters relating to integrity in the work place, in business practices and in dealing with stakeholders.

All the Board Members and the Senior Management personnel have confirmed compliance with the Code under 26(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

PREVENTION OF INSIDER TRADING

The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre-clearance for dealing in the Company s shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed.

The Board is responsible for implementation of the Code.

All the directors and the designated employees have confirmed compliance with the Code under Regulation 9 of the SEBI (Prohibition of Insider Trading) Regulations, 2015.

CHANGE IN THE NATURE OF BUSINESS

There is no change in the nature of business within the meaning of Sections 134 (3) of the Companies Act, 2013 and sub rule 8(5) of the Companies (Accounts) Rules, 2014. The nature of the business of the Company continues to remain the same as previous year.

CORPORATE SOCIAL RESPONSIBILITY

The provisions of section 135 of the Companies Act, 2013 are not applicable to the Company.

VIGIL MECHANISM

The Company has established a vigil mechanism for employees to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE AUTHORITIES

During the year under review, there were no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) Act, 2013

The Company has in place a Policy on Prevention of Sexual Harassment of Women Employees in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013.

Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. During the year under review, no complaint of sexual harassment was received by the ICC.

ACKNOWLEDGEMENT

Your Directors would take this opportunity to express its deep appreciation for the co-operation and assistance received from the members, Company s clients, suppliers, bankers and other authorities during the year under review. Your Directors also wish to place on record their appreciation for the services rendered by all the employees of your Company.

For and on Behalf of the Board of Directors

Milan R. Parekh
Chairman & Managing Director
(DIN: 00108368)
Place: Mumbai
Date: 27thMay, 2019