CFL Capital Financial Services Ltd Management Discussions

Your Directors hereby present their Thirtieth Annual Report together with the Audited Financial Statements of the Company for the year ended 31^st March 2015.

FINANCIAL RESULTS

		(Rs. in Lakhs)
	For the year ended 31-3-2015	For the year ended
		31-3-2014
Gross Income	108	43
Less: Expenditure	6678	5803
Less: Depreciation	5	6
Gross Profit/(Loss)	(6575)	(5766)
Less Exceptional items	109	50
Profit/(Loss) before tax	(6466))	(5716
Tax Expense relating to earlier years	76	-
Profit/(Loss) after tax	(6542)	(5716)
Add Depreciation of earlier years	2	-
Profit/(Loss) after Depreciation for earlier years	(6544)	(5716)
Add Balance brought forward from earlier years	(78640)	(72924)
Loss carried to Balance Sheet	(85184)	(78640)

In view of the losses the question of transfer of any amount to reserves does not arise.

DIVIDEND

In view of the continued losses, your Directors regret their inability to recommend any dividend on the Preference or Equity Shares.

INDUSTRY STRUCTURE, OPERATIONS AND DEVELOPMENT

There was improvement in the economy especially due to the growth of the services sector and a moderate growth in the manufacturing sector which resulted in improved GDP compared to the previous year with the inflation in moderate terms towards the later part of the year which helped fundamentally strong financial companies to register growth.

However, your Company could not cash in on the above positive background as it could not engage in any significant business activity primarily due to the cancellation of the Certificate of Registration as a Non-Banking Financial Company by the Reserve Bank of India and difficulty in entering into new business of non-banking non finance due to lack of funds and consequently your Company does not fall under any industry structure. The Company however has financial services as its main activity in its Memorandum of Association. The Board of Directors have, in the absence of the required financial support from the Banks and also due to ongoing recovery suits filed by them before various Debt Recovery Tribunals, have not been able to implement any viable Business Plan. This has resulted in continued losses and caused a tremendous pressure on the Company to meet operational expenses and payment of liabilities.

The Debt Recovery Tribunals have passed decrees in favour of the Banks and Financial Institutions in most of the cases filed by them for realisation of their outstanding dues. Pursuant thereto, Recovery Officers have taken over possession of the Company’s properties, charged to these Banks and Financial Institutions and have also disposed them off except 3 properites.

OPPORTUNITIES, THREATS, RISKS, CONCERNS, PERFORMANCE AND OUTLOOK

Though there is scope and opportunity for the Company to engage in constructive and profitable business activities in view of its experience and the promising outlook in the economy but lack of financial resources is preventing it from taking up any new measures to revive it. There is therefore a great amount of uncertainly regarding future outlook of the Company though your Directors are striving hard to take effective steps. Acute shortage of funds faced by the Company in the past is likely to continue at least in the near future unless there is capital infusion coupled with a restructuring exercise. The accumulated losses is a cause for concern which dissuades stake holders from participating in a restructuring exercise

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has in place an established internal control system designed to ensure proper recording of financial and operational information and compliance of various internal controls and other regulatory and statutory compliances. Self certification exercise is also conducted by which senior management certifies effectiveness of the internal control system of the Company. Internal Audit has been conducted throughout the organization by qualified Internal Auditors. Findings of the internal Audit Report are reviewed by the top Management and by the Audit Committee of the Board and proper follow up action are ensured wherever required. The Statutory Auditors have evaluated the system of internal controls of the Company and they have reported that the same are adequate and commensurate with the size of the Company and nature of its business.

DISCUSSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONS

Your attention is drawn specifically to the issues mentioned hereinbefore under the head ‘Industry Structure, Operations and Development’ and to the comments under the head ‘Opportunities, Threats, Risks, Concerns, Performance and Outlook’ hereinbefore. Your Company’s financial position is under extreme stress and needs a concerted effort from creditors, shareholders and third parties for any significant positive turnaround to emerge in the long run.

Subsidiary Company

The Company has prepared a Consolidated Financial Statement of the Company and its subsidiary namely Samudra Securities Limited in the form and manner as that of the Company in accordance with the provisions of Section 129 (3) of the Companies Act, 2013, the Rules made thereunder and in compliance with the applicable accounting standards and the listing agreement with the Stock Exchanges which has been duly audited by the Statutory Auditors of the Company. The Consolidated Financial Statement form part of this Report and the same shall be laid before the Annual General Meeting while laying the financial statements of the Company. A Report on the performance and financial position of the Subsidiary Company in form AOC-1 forms a part of the Consolidated Financial Statement In terms of Clause 49 of the Listing Agreements with the Stock Exchanges Samudra Securities Limited is a material subsidiary. As per the aforesaid Clause 49 the policy of the Company for determining material subsidiaries is posted on the website of the Company and may also be accessed at the link http://cflltd.in

Vigil Mechanism Policy/Whistle Blower Policy

In compliance with the provisions of Section 177(9) of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Company has framed a vigil mechanism policy and system of vigil mechanism to deal with instances of fraud and mismanagement, if any, and concerns about violation of Company’s policies. The details of the Vigil Mechanism and Whistle Blower Policy are also posted on the website of the Company and may be accessed at the link http://cflltd.in

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

Considering the nature of your Company’s activities during the year under review your Company did not consume energy of any significant level nor there was much scope for taking any measures for energy conservation, research and development, technology absorption, and making any additional investment for the above purposes and no comment is made in this regard. There has been no foreign exchange earnings or outgo during the year under review.

Public Deposits

The Company had repaid all deposits which were claimed by the deposit holders in terms of the Schemes sanctioned by the Hon’ble Company Law Board except 3,624 deposits with a principal amount of Rs.4,41,63,804 and a maturity amount of Rs.5,43,90,485 which were not claimed by the deposit holders in spite of the Company sending reminders to them at periodic intervals. The unclaimed deposits are being paid as and when the same are claimed and an amount of Rs.000 has been paid since 31^st March, 2015.

Number of meetings of the Board of Directors

There were 6 meetings of the Board of Directors held during the financial year 2014-15 and the details are mentioned in the Corporate Governance Report attached to this Report.

Directors’ Responsibility Statement

Pursuant to Section 134(3) ( c ) of the Companies Act, 2013, the Directors to the best of their knowledge and belief and according to the information and explanations obtained confirm that:

(i) in the preparation of the Annual accounts for the year ended 31^st March, 2015, the applicable accounting standards had been followed along with proper explanations relating to material departures, if any;

(ii) they had selected such accounting policies and applied them and made judgements and estimates that were 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 that period;

(iii) they had taken proper and sufficient care for the maintenance of 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;

(iv) the Accounts had been prepared on a going concern basis;

(v) proper financial controls were in place and that the financial controls were adequate and were operating effectively and

(vi) proper systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

Declaration by Independent Directors

Mr B N Tripathi, Mr Sujit Datta and Mr A V Sudhakaran are Independent Directors on the Board of the Company. The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of Independence as prescribed both under the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Audit Committee

The Audit Committee of the Board of Directors consist of Mr Sujit Datta, Mr.B N Tripathi and Mr A V Sudhakaran and the Company Secretary is the Secretary of the Committee. The Managing Director, Chief Financial Officer and Auditors are permanent invitees to the Committee meetings. The details of terms of reference of the Committee, number and dates of meetings held and other details are given separately in the Corporate Governance Report. Your Company has a well structured internal audit system commensurate with its size and operation. During the year there was no occasion when the Board had not accepted the recommendations of the :Audit Committee

Stakeholders’ Relationship Committee

The Company has a Stakeholders’ Relationship Committee for reviewing the complaints of investors in the Company. The members of the Committee are Mr.Sujit Datta, Mr.H C.Mathur and Mr A V Sudhakaran The number of meetings held and other details are given separately in the Corporate Governance Report.

Corporate Social Responsibility

The provisions of the Companies Act, 2013 regarding Corporate Social Responsibility are not applicable to the Company due to continuous losses suffered by the Company.

Nomination and Remuneration Committee

The Company has a Nomination and Remuneration Committee consisting of Mr A V Sudhakaran, Mr B N Tripathi and Mr Sujit Datta as its members. The details of terms of reference of the Committee and number of meetings held and the brief outline of the remuneration policy of the Company are given separately in the attached Corporate Governance Report. The Company Secretary acts as the Secretary of the Committee.

Directors

Mr H C Mathur was re-appointed as Managing Director of the Company for a further period of one year with effect from 1^st May, 2015, subject to the approvals of the shareholders and the Central Government on the expiry of his earlier term on 30^th April, 2015. Necessary Special Resolution has been proposed in the Notice of the Annual General Meeting for this purpose.

As per the provisions of the Companies Act, 2013 and the revised Corporate Governance stipulations of the Stock Exchanges it was necessary to appoint a woman director on the Board of Directors of the Company. The Board has accordingly appointed Mrs.Jostna Shrestha as an Additional Director of the Company with effect from 31^st March, 2015 who will vacate her office at the ensuing Annual General Meeting pursuant to Section 161 of the Companies Act, 2013. The Company has received a notice from a member under section 160(1) of the Companies Act, 2013 proposing Mrs Jostna Shreshta as a candidate for the office of Director of the Company.

As per Section 149 and other applicable provisions of the Companies Act, 2013 your Directors are seeking re-appointment of Mrs Jostna Shreshta as an Independent Director of the Company to hold office for a term of five consequtive years upto the conclusion of Thirty-fifth Annual General Meeting of the Company. Details of the proposal for her appointment are mentioned in the Explanatory Statement set out in the annexed Notice. adequate

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement 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 Audit, Nomination and Remuneration and other Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

Risk Management

Risk Management is the process of identification, assessment and prioritization of risks followed by coordinated efforts to minimize, monitor, mitigate and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. The procedures are reviewed to ensure that executive management controls risk through means of a well thought framework. The Company has appointed a Risk Management Committee in terms of the requirement of the provisions in the Listing Agreement with the Stock exchange regarding Corporate Governance and the members of the Committee are Mr Sujit Datta, Mr H C Mathur and Mr A V Sudhakaran.

Particulars of employees and key managerial personnel (KMP)

The following are the Key Managerial Personnel of the Company in terms of Section 203 of the Companies Act, 2013:

Mr.Harish Chandra Mathur	Managing Director (re-appointed w.e.f. 1st May, 2015 for a period of one year on expiry of his earlier term on 30th April, 2015)
Mr.Ramulu Marampilly	Chief Financial Officer (Appointed w.e.f. 1st March, 2015)
Mr Rama Chandra Kurup	Company Secretary

Pursuant to Section 134 (3) (q) read with Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the details of Key Managerial Personnel required to be furnished as per the said Rules are annexed to this Report. There were no employees who were drawing remuneration in excess of the limit provided in Rule 5 (2) of the aforesaid Rules

Details of significant and material orders passed by the Regulators, Courts and Tribunals

No significant and material order has been passed by any Regulator, Court or Tribunal impacting the going concern status and Company’s operation in future

Particulars of Loans, Guarantee or Investments

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

Related Party Transactions

All related party transactions that were entered into during the financial year were on arms’ length basis and were in the ordinary course of business. There were no materially significant related party transactions made by the Company with promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All related party transactions are placed before the Audit Committee and given in the notes annexed to and forming part of this Financial Statement.

Extract of Annual Return

The details forming part of the extract of the Annual Return in Form MGT 9 as required under Section 92 of the Companies Act, 2013 are annexed to this Report.

Corporate Governance

In accordance with the requirements of the Listing Agreements with the Stock Exchanges, a Report on Corporate Governance along with a certificate of the Auditors confirming compliance is set out in the Annexure forming part of this Annual Report

Human Resources

The Company’s relations with the employees continued to be cordial.

Efforts to maximize utilization of scarce resources was a continuous process throughout the year. The Company received some innovative ideas from a few employees for achieving greater efficiencies, cost control and recoveries and those with substance are being implemented.

Auditors and Audit Report

Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the rules framed there under Messrs Tarmaster & Co., Chartered Accountants, (Firm Registration No.302016E) were appointed as the Statutory Auditors of the Company by the Shareholders on 29^th September, 2014 at the Twenty ninth Annual General Meeting of the Company to hold office till the date of the Thirty second Annual General Meeting, subject to ratification of their appointment at the thirtieth and thirty first Annual General Meetings. Accordingly a Resolution seeking Members ratification for their appointment is included in item 2 of the Notice convening the Annual General Meeting.

Regarding comments of the Auditors regarding non compliance of the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms(Reserve Bank) Directions, 2007 and the Company not being able to maintain minimum Capital Risk Asset Ratio (CRAR) as prescribed by the aforesaid

Directions the comments of the Board are as under:

The Company’s net worth had become negative in March, 2002 due to continued losses. Later Reserve Bank of India cancelled the NBFC Registration. Hence the maintenance of CRARand other compliances of the Directions are no more applicable to the Company.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 Messrs Ranjit Ghosh & Co., Company Secretaries (Membership No.FCS 3724) were appointed to carry out a secretarial audit of the Company. The Secretarial Audit Report is attached in the Annexure forming part of this Annual Report. As regards the comments of the Secretarial Audit Report your Board’s reply is as follows:

1)The Company could not increase the minimum public shareholding due to the distressing financial position of the Company which in turn has rendered it extremely difficult to plan any exercise in this regard due to the anticipated reluctance of the public to take up Promoters shares for divestment and the non feasibility of making a further issue of shares to the public.

2)The Company’s application to National Stock Exchange of India for delisting its Equity Shares is still pending for which no reasons have been furnished to the Company in spite of numerous complaints to the Exchange and to the concerned Regulator and hence the Company has withheld the payment of listing fees to the said Exchange.

ACKNOWLEDGEMENT

Your Directors wish to record their appreciation of the encouragement, support,assistance and co-operation received from the Company’s bankers, financial institutions, shareholders, depositors and employees throughout the year

		For and on behalf of the Board
	(H.C.Mathur)	(Sujit Datta)
	Managing Director	Director
	(DIN: 00054757)	(DIN:00337464)
Kolkata
Dated: 27th May, 2015