idbi trusteeship services ltd Management discussions

IDBI TRUSTEESHIP SERVICES LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS Overview of the Economy: The year that has just passed by was a mixed experience, in the sense that while there was fair amount of recovery in the U.S. economy from the unprecedented slump, there were indeed signs of tremors in the economies of Europe; the North African nations; and the Middle East. Indian growth story is however intact and Indian economy has continued to witness robust growth. The segments of Debenture/Bond Trusteeship, were to a certain extent impacted by the fluctuations in the Bond market, and also the inhibition of the Corporates towards Debt papers post the raising of interest rates by the RBI. Similarly the Securitization market also had to face rough weather as this market shrunk in the period April10 to December 10 from Rs.28,200 crores during the corresponding period previous year to Rs.18,800 crores. The shrinkage in securitization activity was mainly due to RBI norms regarding seasoning of loans before they were packaged and sold; hardening of interest rates and liquidity concerns; coupled with the slowing down of micro finance activities. Outlook: The future seems one of uncertainties. The Indian economy is likely to be impacted by factors like inflation and rising interest rates which have the potency to affect growth and developmental activities. As per the Union Budget the Government is likely to infuse equity capital in many of the public sector Banks; also there is the long pending programme of the Government with regard to disinvestment in the selected public sector units. Both these are likely to meet the demand for funds of these companies in the short term. Therefore to that extent the demand for debt funds/bonds will be depressed thereby limiting ITSLs scope of activities. It is estimated that during the year 2011-12 the growth in number of assignments would be around 20%. Accordingly, the total assignments targeted are 1,000 numbers and total income targeted is Rs. 33.90 Lakhs. The Company is targeting 100 securitization transactions. The Company would adopt suitable marketing strategies to achieve the same. Bond/Debenture trustee function being traditional trusteeship business, the competition under this segment has become fierce, with low income potential. However, IDBI Trusteeship expects more than 55% market share in this segment. The Company would also target sunrise business area like Venture Capital/Private Trusteeship and Escrow/facility Agency. The Company through its unit at Satara (erstwhile WITECO) would continue to focus and penetrate the market of Private and Public Trusts, and also ESOP Trusts which is of late gaining popularity. Quality Policy: IDBI Trusteeship Services Ltd. with highly skilled workforce is fully geared and well positioned to service trusteeship needs of its clients. Today the Company is engaged in offering varied Corporate Trusteeship Services like Debenture Trusteeship, Security Trusteeship, Escrow Agency, Venture Capital Trustee, Trustees for Securitization and other allied trusteeship and agency services. Information Technology: The Company continues its successful utilization of information technology to improve its efficiency and is committed to work on best technology interfaces available to achieve client satisfaction. Ever since Company launched its website and ERP system, organization has come a long way in establishing other web enabled modules including finance and accounts to speed up its processes. Company Plans to integrate its Satara Operations with ERP and Finance Module under the consolidation plan and build a strong Central system, Company also aims to enhance its MIS which manages data and enables better decision making. Human Resources: Our people continue to be our greatest single strength. The past successes of the Company and rebounding performance in the year 2011 are entirely attributable to the remarkable commitment, dedication and hard work of our employees. Performance management systems is in place to ensure that everyone is focused on key objectives and key performance indicators. The Company encourages policies and practices based on ethical values, but at the same time not losing sight of vision and mission doctrines, which enshrine increased value creation for all its stakeholders. Training and skill development are given due importance. In house training sessions are organized by finance and legal professionals; and also specialists on soft skills development. The staff members are also deputed to various training sessions and seminars conducted by external institutions. The total employee strength is 36 including 8 employees in ITSL Satara Office. The relationship with employees continues to be cordial, healthy and helpful. The Company gives topmost priority to conducive office ambience and employee welfare. Financial Performance: Brief Particulars of the financial performance are as under: (Rs. Lac) F.Y. 2011 F.Y. 2010 Total Income 2,897 2,417 PBDIT 2,512 2,048 Depreciation 21 21 PBIT 2,492 2,027 PBT 2,384 1,836 TAX 790 630 PAT 1,594 11,207 Total Income increased by 19%. The Earnings per share for 2010-11 is Rs.106.15 as compared Rs. 119.05 for 2009-10 per share. This is consequent upon declaration of Bonus Equity Shares (5:1). The Company recommended equity dividend @ 55% on the increased capital i.e. Rs. 5.50/- per share or Rs. 10/- each for the year ended 31st March, 2011 as against 100% declared during the previous year. Internal Control Systems and their Adequacy: IDBI Trusteeship Services Limited adopts a rigorous system of Internal Control and Risk Management to ensure that transactions are authorized, recorded and reported quickly. The Companys internal controls are based on documented policies, guidelines and procedures supplemented by an extensive program of internal audits, review by management and also the Board committees, The internal control is designed to ensure that there are no financial irregularities, revenue leakage, and inadequacy in client servicing. The Internal audit is carried out by independent firms of Chartered Accountants and covers the key area of business operations, finance and accounts, IT and HR. All significant observations and follow up actions thereon are reported to the Audit Committee. The Statutory Audit is conducted by independent CA firms appointed by the C & AG. Besides C & AG also conducts its own audit annually. The Internal Control System has improved and been modified continuously to meet the changing business condition, statutory and accounting requirements. Corporate Governance: The Company attaches utmost importance to corporate governance and regulatory compliance. Board Committees having at least two Directors as members are in place, and they meet either on necessity or mandatorily for review. The Screening Committee is for vetting and approving New Business proposals; the HR & Remuneration Committee is for recommending to the Board any policy matter relating to staff; the Investment Committee for approving investment proposals, if any; and the Audit Committee performs the role as envisaged in clause 49 of the Listing agreement in respect of listed companies, although it must be made clear here that ITSL is not a listed entity. The Board meetings are held subject to availability of quorum, and during the year 2010-11 Five (5) Board Meetings were held. Similarly, the AGM and the EGM respectively were held strictly as per the provisions of the Companies Act. During the year care has been exercised to comply with all the requirements of the Company Law and SEBI guidelines. Cautionary Statement: Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking statement within the meaning of a applicable laws and regulations. Actual results might differ materially from those either expressed or implied.