HSBC InvestDirect India Ltd Directors Report

Directors Report

The Members

HSBC InvestDirect (India) Limited

The Directors of your Company present the twenty first Annual Report along with the Audited Financial Statements for the financial year ended 31 March 2018.

FINANCIAL HIGHLIGHTS

The performance of your Company for the financial year 2017-18 on standalone and consolidated basis are summarized below:

(Rupees in Million)

	Standalone Financials		Consolidated Financials
Particulars	For the year ended 31.03.2018	For the year ended 31.03.2017		For the year ended 31.03.2017 For the year ended 31.03.2018
Total Income	119.30	87.89	431.06	418.21
Total Expenses	42.01	25.20	132.98	110.72
Profit before Tax	77.29	62.69	298.08	307.49
Less: Provision for Tax (including Current and Deferred Tax)	29.47	27.65	94.57	111.59
Profit after Tax	47.82	35.04	203.52	195.90

DIVIDEND

In the absence of adequate profits, Directors are unable to recommend dividend for the financial year 2017-18. REDUCTION OF PAID UP CAPITAL

Pursuant to the delisting offer, the equity shares of your Company are not listed on any stock exchanges. Since the shares of your Company are not easily tradable securities, this significantly impairs the realisable value of the shares for the. shareholders. There is no market to buy and sell the equity shares held by the shareholders. The investments made by these shareholders are locked up and they find it difficult to dispose off their shareholding. Upon examination and analysis of various options available, the Board of Directors at its meeting held on 27 June 2018 has come to the conclusion that in the absence of adequate commercially attractive acquisition opportunities, the restructuring of your Companys existing capital structure becomes imperative.

Accordingly, the Board proposes to return capital to identified equity shareholders in accordance with Section 66 of the Companies Act, 2013, whereby, the shares held by the public shareholders i.e. the holders of the equity shares other than HSBC Securities and Capital Markets (India) Private Limited, HSBC Violet Investments (Mauritius) Limited and SBI Capital Markets Ltd - HIDIL Delisting Escrow Account, shall be cancelled and extinguished after paying a price per share as indicated below: "

316,914 equity shares of Rs. 10 each fully paid-up at a price per share of Rs. 116.90 per equity share.

SUBSIDIARIES AND ASSOCIATE COMPANIES

As on 31 March 2018, your Company has two subsidiaries, namely, HSBC InvestDirect Financial Services (India) Limited (HIFSL) and HSBC InvestDirect Sales & Marketing (India) Limited (HISML) and one associate company, namely, HSBC InvestDirect Securities (India) Private Limited (HISL).

The Financial Statements of HIFSL, HISL and HISML have been consolidated with the Financial Statements of your Company, as required under Accounting Standard 21 - "Consolidated Financial Statements" notified by Companies (Accounting Standards) Rules, 2006. During the financial year 2017-18, your Company undertook business of securities related financing through HIFSL.

HSBC InvestDirect Financial Services (India) Limited

HIFSL, a Non-Banking Finance Company (NBFC) is a wholly owned subsidiary of your Company engaged in securities related financing. During the financial year 2017-18, HIFSL made a net profit after tax of Rs. 156 million as against net profit after tax of Rs. 159 million in the financial year 2016-17. The revenue from operations Jias increased marginally by 1% from Rs. 293 million in the financial year 2016-17 to Rs. 297 million in the financial year 2017-18. Though, the average loan book has increased from Rs. 3,829 million as at 31 March 2017 to Rs. 4,179 million as at 31 March 2018, the revenue has not increased significantly as average interest rate has decreased to 8.60% in financial year 2017-18 from 9.32% in the financial year 2016-17. As on 31 March 2018, loan asset book increased to Rs. 4,455 million from Rs. 3,902 million as on 31 March 2017.

HSBC InvestDirect Sales & Marketing (India) Limited

During the financial year 2017-18, HISML earned net profit of Rs. 0.26 million as against net profit of Rs. 0.17 million earned in the previous year.

HISML has discontinued its business operations in the earlier years and accordingly, the Financial Statements for the financial year ended 31 March 2018, have not been prepared under the going concern assumption and all assets and liabilities have been stated at their estimated realizable value.

HSBC InvestDirect Securities (India) Private Limited

During the financial year 2017-18, HISL has incurred net loss of Rs. 0.70 million as against net profit of Rs. 2.23 million earned in the previous year.

As HISL has discontinued its business operations since December 2013, the Financial Statements for the financial year ended 31 March 2018 have not been prepared under the going concern assumption and all assets and liabilities have been stated at their estimated realizable value.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT 9 is attached as Annexure A.

BOARD AND COMMITTEE MEETINGS

During the financial year 2017-18, five meetings of the Board of Directors of your Company were held on the following dates:

Date of Board Meetings	Directors present
19 April 2017	Mr. R S Rajagopalan - Chairman
	Mr. Animesh Raizada
	Mr. Arvind Sethi 1
	Mr. Dilip Mehta - Managing Director
	Ms. Leena Gidwani
28 June 2017	Mr. R S Rajagopalan - Chairman
	Mr. Arvind Sethi
	Mr. Dilip Mehta - Managing Director
	Ms. Leena Gidwani
	Ms. Sharada Sangekar
	Mr. Vipul Malkan
19 July 2017	Ms. Sharada Sangekar- Chairperson
	Mr. Arvind Sethi
	Mr. Dilip Mehta - Managing Director
	Ms. Leena Gidwani
	Mr. R S Rajagopalan
	Mr. Vipul Malkan
9 November 2017	Ms. Sharada Sangekar - Chairperson
	Mr. Arvind Sethi
	Mr. Animesh Raizada
	Mr. Dilip Mehta - Managing Director
	Ms. Leena Gidwani
	Mr. R S Rajagopalan
	Mr. Roshanraj Seetahul w.e.f 9 November 2017
	Mr. Vipul Malkan
29 January 2018	Ms. Sharada Sangekar - Chairperson
	Mr. Arvind Sethi
	Ms. Leena Gidwani
	Mr. R S Rajagopalan
	Mr. Roshanraj Seetahul
	Mr. Shantanu Shankar - Managing Director w.e.f. 29 January 2018
	Mr. Vipul Malkan

During the financial year 2017-18, four meetings of Audit Committee of your Company were held on the following dates:

Date of Audit Committee Meetings	Members present
28 June 2017	Mr. Arvind Sethi - Chairman
	Ms. Leena Gidwani
	Mr. Vipul Malkan
19 July 2017	Mr. Arvind Sethi - Chairman
	Ms. Leena Gidwani
	Mr. Vipul Malkan
9 November 2017	Mr. Arvind Sethi - Chairman
	Ms. Leena Gidwani
	Mr. Vipul Malkan
29 January 2018	Mr. Arvind Sethi - Chairman
	Ms. Leena Gidwani
	Mr. Vipul Malkan

During the financial year 2017-18, one meeting of Nomination and Remuneration Committee of your Company was held on the following date:

Date of Nomination and Remuneration Committee Meeting	Members present
19 July 2017	Mr. Arvind Sethi - Chairman
	Ms. Leena Gidwani
	Ms. Sharada Sangekar

During the financial year 2017-18, one Corporate Social Responsibility Committee meeting of your Company was held on following date:

Date of Corporate Social Responsibility Committee Meeting	Members present
29 January 2018	Mr. Shantanu Shankar - Chairman
	Ms. Leena Gidwani
	Ms. Sharada Sangekar

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013 and based on the information provided by the Management, the

Directors state that:

i. in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;

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 your Company as at 31 March 2018 and of the profit of your Company for the year ended on that date;

iii. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

iv. the Directors have prepared the annual accounts on a going concern basis; and

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

REMUNERATION POLICY

The Board basis the recommendation of the Nomination and Remuneration Committee framed a policy relating to the

remuneration for the Directors, Key Managerial Personnel and other employees. The said policy is attached as Annexure B.

LOANS, GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments are given in the notes to the Financial Statements.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

Your Company has not entered into any contracts or arrangements with related parties pursuant to Section 188 of the Companies Act, 2013.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, EXPORT & FOREIGN EARNINGS AND OUTGO

There are no foreign exchange expenditure/outgo during the financial year 2017-18. Since your Company does not own any manufacturing facility, the statement giving details of conservation of energy and technology absorption in accordance with provisions of Section 134(3)(m) of the Companies Act, 2013 is not applicable. However, your Company has been using Information Technology in its operations and promotes conservation of resources.

RISK MANAGEMENT POLICY

Your Company is a Core Investment Company. The operating subsidiary of your Company has in place a robust and matured Risk Review framework in line with HSBC Group guidelines. Risk Forums at various levels, as defined in the framework, exists to regularly review risks, likely to impair business. Key component of the risk management framework are as under:

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR Committee comprises Mr. Shantanu Shankar, Ms. Leena Gidwani and Ms. Sharada Sangekar as its Members as on 31 March 2018. Due to resignation of Mr. Prasanna Padhye and Mr. Dilip Mehta as Directors, Ms. Sharada Sangekar and Mr. Shantanu Shankar were appointed as Members of CSR Committee during the financial year 2017-18.

During the financial year 2017-18, your Company was eligible to spend 2% of net profit in CSR activities and had spent Rs. 1,398,512 towards CSR activities in order to comply with Section 135 of the Companies Act, 2013. The said amount was utilized for providing education to working adults and children through Masooms night school project.

Your Company has framed its CSR Policy, the details of which are given in Annexure C.

BOARD PERFORMANCE EVALUATION

Pursuant to the provisions of the Companies Act, 2013, 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 Committees.

A structured questionnaire was prepared covering various aspects of the Boards functioning such as role of the Board and Committee; Board composition, skills and application; Board procedures and practices; Board culture and behavior.

An exercise was carried out to evaluate the performance of the Board, Committees and Individual Directors, who were evaluated on parameters such as level of engagement and contribution, independence of judgement, safeguarding the interest of your Company and other stakeholders. The Directors expressed their satisfaction with the evaluation process.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the financial year 2017-18, Mr. Dilip Mehta resigned as Managing Director with effect from close of business hours on 29 December 2017 and Mr. Prasanna Padhye had resigned as Director with effect from 18 April 2017.

The Directors place on record their sincere appreciation for the valuable contribution made by Mr. Mehta and Mr. Padhye during their tenure as Directors.

Based on the recommendation of the Nomination and Remuneration Committee (NRC) of your Company, the Board of Directors appointed Mr. Roshanraj Seetahul as an Additional Director with effect from 9 November 2017 to hold the office upto the date of ensuing Annual General Meeting. Further, based on the recommendation of the NRC, the Board appointed Mr. Shantanu Shankar as a Managing Director with effect from 29 January 2018 subject to Members approval.

Mr. Arvind Sethi and Ms. Leena Gidwani were re-appointed as Independent Directors by the Board for second term for a period of 3 years with effect from 31 March 2018 subject to Members approval. Further, Mr. Arvind Sethi and Ms. Leena Gidwani, Independent Directors have given declarations that they meet the criteria of independence as laid down in Section 149(6) of the Companies Act, 2013.

Pursuant to provisions of the Companies Act, 2013, Mr. Animesh Raizada, Director of your Company, retire by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment.

The required resolutions appointing/reappointing the aforesaid Directors at the ensuing Annual General Meeting are included in the Notice of the said Annual General Meeting.

DEPOSITS

Your Company has not accepted any deposits from the public or employees during the financial year 2017-18.

MATERIAL CHANGES COMMITMENTS

There have been no material changes and commitments affecting the financial position of your Company which have occurred between the end of the financial year, i.e. 31 March 2018 to which the Financial Statements relate and the date of the report.

CHANGE IN THE NATURE OF BUSINESS

During the financial year 2017-18, there has been no change in the nature of the business of your Company.

AUDIT COMMITTEE

The Audit Committee comprises Mr. Arvind Sethi, Ms. Leena Gidwani and Mr. Vipul Malkan as its Members as on 31 March 2018. Mr. Sethi, an independent Director, is a Chairman of the Audit Committee.

INTERNAL COMPLAINTS COMMITTEE

Your Company is committed to creating and maintaining an atmosphere in which employees can work together, without fear of sexual harassment, exploitation and intimidation. Accordingly, your Company has in place a Policy for Prohibition, Prevention & Redressal of Sexual Harassment of Women at the Workplace and an Internal Complaints Committee is set up to redress complaints received regarding sexual harassment. During the financial year 2017-18, no complaints were received.

SIGNIFICANT AND MATERIAL ORDERS

There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companys operations in future.

AUDITORS AND AUDITORS’ REPORT

The Auditors, Price Waterhouse Chartered Accountants LLP (Firm Registration No. F012754N/N500016), Mumbai, had been appointed as Auditors, in the eighteenth Annual General Meeting held on 22 September 2015, for a period of five years. The Auditors had confirmed that, their appointment was in accordance with the Section 139 of the Companies Act, 2013 and the Rules made there under and that they are not disqualified in terms of Section 141 of the Companies Act, 2013. Further, the Auditors report does not contain any qualification, reservation or adverse remarks.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Rules made there under, the Board has appointed M/s. A. K. Jain & Co., Practicing Company Secretary to conduct Secretarial Audit of your Company. The Secretarial Auditor had conducted the audit and their report thereon was placed before the Board. The report of the Secretarial Audit is attached as Annexure D. There are no qualifications or observations in the Report.

PERSONNEL

None of the employees of your Company were drawing remuneration which requires disclosure under the provisions of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 including any amendments/modifications from time to time.

FRAUDS REPORTED BY AUDITORS

During financial year 2017-18, there were no frauds committed by your Company and no material frauds were committed on your Company by its officers or employees. Further, during financial year 2017-18, there were no frauds reported by the Auditors to the Audit Committee or the Board under Section 143(12) of the Companies Act, 2013.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS

Your Company has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of the reliable financial disclosures.

Your Company has appointed B. K. Khare & Co., Chartered Accountant, to conduct internal audit covering all areas of operations and the reports were placed before the Audit Committee.

Further, the Auditors had identified significant business processes of your Company to perform Internal Financial Control over Financial Reporting (IFCFR) audit on the basis of materiality.

Based on the testing performed by them, they have opined that your Company had in all material aspects, an adequate Internal Financial Controls system over financial reporting and such controls were operating effectively as at 31 March 2018.

CORPORATE PHILOSOPHY AND COMPLIANCE

Your Company firmly believes that strong corporate governance and compliance practices are of paramount importance to maintain the trust and confidence of its stakeholders and the reputation of your Company. To ensure transparency, fairness and objectivity in the organisations functioning and unquestioned integrity of all personnel involved, your Company has proactively adopted best practices with regard to corporate governance and compliance.

ACKNOWLEDGEMENTS

Your Company maintained cordial relationships with Regulatory Authorities, Financial Institutions and Banks during the financial year 2017-18.

The Directors are grateful for the support extended by them and look forward to receiving their continued support and encouragement.

	For and on behalf of the Board of Directors
	Sharada Sangekar
	Chairperson
Place : Mumbai	(DIN 07788255)
Date : 27 June 2018