Gujarat State Financial Corporation Directors Report.

To the Members,

Your Directors have great pleasure in presenting the 59th Annual Report of the Corporation together with the audited accounts for the year ended 31st March, 2019.

1. Economic Scenario:

The Indian economy is the fastest growing major economy and is projected to grow faster in the coming years. The country witnessed its best phase of macro-economic stability during the last few years. From being 11th largest economy in the world in 2013-14, India today is the sixth largest in the world. Besides generating high growth rate, India contained double digit inflation and restored fiscal balance. The average inflation rate reduced to 4.6 per cent. India moved up by 23 places in the World Banks Ease of Doing Business Index 2018 and got 77th rank. Driven by favourable global conditions and commodity prices, the past five years have been fortunate for the Indian macro-economy. Inflation has been brought under control as a partial consequence of these global factors and the easy availability of global capital has helped finance the current account deficit. Easy inflation and low commodity prices have flattered the fiscal deficit, allowing the government to avoid painful belt-tightening. The government has kept growth alive through its spending. The current account deficit as ratio to gross domestic product is likely to have fallen in the January-March quarter of FY 2019 which would limit the leakage of growth impulse from the economy, while fiscal deficit has been gliding down to the targeted 3 per cent. An increase in foreign exchange reserves in Quarter 4 of FY 2019 on account of an improvement in trade balance has increased the import cover for the economy. Indian economy is expected to grow at 7 per cent in 2018-19, a tad lower from 7.2 per cent, a declining growth of private consumption, weak increase in fixed investment and muted exports are some reasons for the slowdown. The ambitious reform programmes continued by the Government will not only boost consumer sentiment but also help create the conditions for a revival in private investment and exports thereby containing the slowdown.

2. Financial results:

During the year under reference, interest on loans and advances reduced to just 37.61% at Rs.2.43 crore of Rs.6.46 crore reported in the previous year. The decline is due to change in accounting policy adopted by the Corporation in respect of income recognition on NPA accounts. Interest on deposits increased by 13.77% and stood at Rs.9.42 crore as against Rs.8.28 crore a year ago. Provision against NPA written back increased to Rs.9.20 crore during the year under reference, a 312.93% jump over Rs.2.94 crore reported in the previous year as a result of change in accounting policy. Other income also registered an increase of 225.81% at Rs.0.70 crore during the year under report over Rs.0.31 crore reported in the previous year. Total income of the Corporation for the year under reference increased by 21.02% and stood at Rs.21.76 crore compared to Rs.17.98 crore registered in the previous year.

As informed to the members in the previous Reports, Corporation is continuing with austerity measures to reduce the expenditure wherever possible. Personnel expenses stood at Rs.3.00 crore during the year under reference which is a reduction of 6.83% over Rs.3.22 crore reported in the previous year. Interest on borrowings increased marginally by 1.64% to Rs.128.05 crore over Rs.125.98 recorded in the previous year. Other expenses also increased by 22.40% to Rs.4.59 crore during the year under reference as against Rs.3.75 crore reported in the previous year. Total expenditure for the year under report registered a marginal increase of 2.33% and stood at Rs.136.62 crore compared to Rs.133.51 crore reported in the previous year. Loss for the year under reference reduced marginally and stood at Rs.114.87 crore compared to Rs.115.53 crore reported a year ago. The accumulated loss as on the last day of the report stood at Rs.2,687.30 crore as against Rs.2,572.43 crore recorded in the previous year. Due to loss, no dividend is recommended for the year under reference.

3. Change in Accounting Policy

During the year under reference, Corporation changed its accounting policy for income recognition in case of loanees opted for One Time Settlement. Details of the policy are given in Note 15 under clause (e) at Point No. A (02) Revenue Recognition. As a result of change in policy, receipts are apportioned in the order of principal and capitalized expenses, interest and penalty and other charges.

4. Borrowings:

During the year under report, no borrowing was resorted to by the Corporation. Borrowings remained static at Rs.661.68 crore payable to Government of Gujarat.

5. Recovery:

Corporation is focusing its operation on recovery of dues. As a measure to attract defaulting units, Corporation continued to operate liberal One Time Settlement Schemes for various loans so as to maximize recovery and reduce NPA. Relentless efforts made by the Corporation yielded results and the recovery of dues during the year surpassed the target of Rs.10.00 crore fixed by the Corporation registering an increase of 17.11% at Rs.11.71 crore. Compared to recovery of previous year of Rs.8.66 crore, the growth in the year under report is 35.22%.

6. Human Resource:

During the year under report, 6 employees have retired on attaining the age of superannuation and an employee resigned from the services of the Corporation. The staff strength on the pay-roll of the Corporation declined to 49 on the last day of the year under report as against 56 reported in the previous year. The break-up of staff strength is as under:-

Sr. No. Category Total
1 ‘A Grade officers 4
2 ‘B Grade employees 36
3 ‘C Grade employees 9
Total 49

Of the 49 staff, two are on loan service and 16 are on deputation with other Government departments. The effective staff strength of the Corporation stood at 31 spread over three Regional Offices and Head Office.

7. Corporate Governance:

The Corporation has put in place governance practices as prevalent in the industry. The Corporate Governance Report and the certificate regarding compliance of corporate governance are made part of the Annual Report.

Management Discussion and Analysis Report and declaration by Managing Director that the Board of Directors and Senior Management Personnel have complied with the Code of Conduct are also form part of Annual Report.

8. Auditors:

M/s. Priyam M Shah & Associates, Chartered Accountants (FRN/Mem. No. 118421W), were appointed as the statutory auditors of the Corporation to hold office from the conclusion of 58th Annual General Meeting till the conclusion of next Annual General Meeting by the members at the AGM held on 14th September, 2018 in conformity with 37 (1) of SFCs Act, 1951. Since M/s. Priyam R Shah & Associates are eligible for reappointment and Reserve Bank of India confirmed their eligibility and suitability of reappointment, proposal to re-appoint the said auditors as recommended by the Board is placed before the shareholders at the ensuing Annual General Meeting.

The statutory auditors have submitted their Independent Auditors Report on the financial statements of the Corporation for the year ended 31st March, 2019 which contains qualifications. Qualifications and Managements views on it are given in Addendum to this Report and also form part of the Annual Report.

9. Board of Directors:

Government of Gujarat in Finance Department, vide Office Order dated 26th December, 2018, nominated Shri Kamleshbhai K Patel, Deputy Secretary (Pension), Finance Department as Director on the Board of Directors of the Corporation in place of Shri Hurbert Christian, Financial Advisor (Ind.). Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, brief resume of Shri Kamleshbhai K Patel is furnished in the Corporate Governance Report attached to this Report.

The Board places on record its appreciation for the valuable services rendered by Shri Hurbert Christian during the tenure as Director as well as Member of Audit Committee and Chairman of Stakeholders Relationship Committee.

10. Directors Responsibility Statement

The Directors, based on the representations received from the Operations Departments and to the best of their knowledge and ability, hereby confirm that:

1. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

2. they 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 Corporation at the end of the financial year ended 31st March, 2019 and of the profit and loss of the Corporation for that period;

3. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the regulatory provisions for safeguarding the assets of the Corporation and for preventing and detecting fraud and other irregularities;

4. the annual accounts for the year ended 31st March 2019 has been prepared on a going concern basis,

5. they have laid down internal financial controls to be followed by the Corporation and that such internal financial controls are adequate and were operating effectively during the year ended 31st March, 2019; and

6. proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively during the year ended 31st March, 2019.

11. Acknowledgement:

The Board places on record its gratitude to the Government of Gujarat and its various departments for their valuable guidance and support extended to the Corporation. The Board also places on record its appreciation for the cooperation and support received from Small Industries Development Bank of India, Mumbai and Ahmedabad offices. The Board wishes to place on record its sincere appreciation for the assistance and guidance provided by the Directors during the course of the year. The Board also expresses its gratitude to the stakeholders for their confidence reposed in the Corporation. The Board is also thankful to commercial banks, valued customers and other forums for rendering support to the Corporation. Finally, the Board would like to place on record its appreciation to the contribution made by officers and staff at all levels.

For and on behalf of the Board of Directors,
Place : Gandhinagar (Mamta Verma, IAS)
Date : 20-05-2019 Managing Director