Today's Top Gainer
Note:Top Gainer - Nifty 50 More
Your Directors present the Twenty Fourth Annual Report of IIFL Finance Limited (formerly known as IIFL Holdings Limited) (your Company/ the Company) together with the Audited Financial Statements for the financial year ended March 31, 2019. As updated you earlier, the Companys Financial Statements reflect the effecting of the Composite Scheme of Arrangement as approved by the Honble National Company Law Tribunal with respect to demerger of Wealth business undertaking and Securities business undertaking. The merger of India Infoline Finance Limited with the Company, would be effected after receipt of NBFC registration from Reserve Bank of India ("RBI") by the Company.
1. FINANCIAL RESULTS
A summary of the financial performance of your Company and its major subsidiaries, for the financial year ended March 31, 2019 is as under:
|(Rs in Million)|
|Name of the Company||Revenue||Profit After Tax|
|IIFL Finance Limited (Formerly known as IIFL Holdings Limited)||1,505.46||1,471.22|
|India Infoline Finance Limited||28,832.61||3,840.11|
|IIFL Home Finance Limited||18,457.36||3,063.93|
|Samasta Microfinance Limited||3,397.54||532.09|
Consolidated Financial Results
A summary of the consolidated financial performance of your Company, for the financial year ended March 31,2019 is as under:
|(Rs in Million)|
|Gross total income||50,955.28||64,660.34|
|Profit before Finance Cost, depreciation, share of loss of Joint Venture, exceptional items and taxation||36,428.85||42,430.57|
|Profit before share of loss of Joint Venture, exceptional items and tax||10,250.35||14,539.46|
|Share of loss from Joint Venture||-||58.18|
|Profit before exceptional items and tax||10,250.35||14,481.28|
|Profit before tax||11,296.47||14,481.28|
|Taxation - Current tax||3,219.78||5,315.66|
|- Deferred tax||30.45||(1,055.86)|
|- Short or excess provision for income tax||2.97||14.88|
|Net profit for the year||8,043.27||10,206.60|
|Other Comprehensive Income||(101.12)||(16.08)|
|Total Comprehensive Income before Non-Controlling Interest||7,942.15||10,190.52|
|Less: Share of Profit to Non-Controlling Interest||1,120.42||2,259.72|
|Net Profit after Taxes, Non-Controlling Interest and Share of profit of Joint Venture||6,821.73||7,930.80|
|Add/(Less): Non-Controlling interest||1,980.36||(149.77)|
|Dividend Distribution Tax||(191.66)||(262.59)|
|Transfer to/ from Other Reserves||(1,968.92)||(2,789.22)|
|On account of demerger||(3,757.47)||-|
|Add: Balance brought forward from the previous year||7,732.34||4,036.07|
|Balance to be carried forward||9,144.41||7,732.34|
*Previous periods figures have been regrouped/rearranged wherever necessary
Standalone Financial Results:
A summary of the standalone financial performance of your Company, for the financial year ended March 31,2019, is as under:
|(Rs in Million)|
|Gross total income||1,505.46||2,700.57|
|Profit before interest, depreciation and taxation||1,475.41||2,524.84|
|Interest and financial charges||-||50.50|
|Profit before tax||1,470.98||2,462.91|
|Taxation - Current tax||-||261.87|
|- Deferred tax||(0.90)||34.38|
|- Short or excess provision for income tax||0.66||19.75|
|Net profit for the year||1,471.22||2,146.91|
|Other Comprehensive Income||1.18||(0.98)|
|Total Comprehensive Income||1,472.40||2,145.93|
|Dividend Distribution Tax||(18.49)||(0.96)|
|Transfer to Debenture Redemption Reserve||-||(31.22)|
|Add: Balance brought forward from the previous year||2,900.14||2,378.77|
|On account of demerger||1.59||-|
|Balance to be carried forward||2,760.21||2,900.14|
*Previous periods figures have been regrouped/rearranged wherever necessary
Transition to Ind AS
The Company has adopted Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act 2013 (the Act) read with the Companies (Indian Accounting Standards) Rules, 2015 from April 01, 2018 (April 01, 2017 being the transition date). Such transition has been carried out from the erstwhile Accounting Standards notified under the Act. Accordingly, your Company has prepared financial statements which comply with Ind AS applicable for the year ended March 31, 2019, together with the comparative period data as at and for the year ended March 31,2018, as described in the significant accounting policies.
Transfer to Reserve
The Company during the year under review has not transferred any amount to General Reserve out of the Retained Earnings.
2. COMPOSITE SCHEME OF ARRANGEMENT
The Board of Directors of the Company at its meeting held on January 31, 2018, had approved the Composite Scheme of Arrangement amongst the Company, India Infoline Finance Limited ("India Infoline"), India Infoline Media and Research Services Limited ("IIFL M&R") IIFL Securities Limited ("IIFL Securities"), IIFL Wealth Management Limited ("IIFL Wealth"), IIFL Distribution Services Limited ("IIFL Distribution") and their respective shareholders, under Sections 230 - 232 and other applicable provisions of the Companies Act, 2013 ("Scheme"). The Scheme was filed with the National Stock Exchange of India Limited ("NSE") and BSE Limited ("BSE"), and the Company received an observation letter from NSE on September 11,2018 and September 27, 2018; and from BSE on September 14, 2018 and September 28, 2018. The proposed Scheme was then filed with the Honble National Company Law Tribunal, Mumbai Bench ("NCLT") on October 01, 2018, pursuant to which the Honble NCLT directed the Company to hold a meeting of its equity shareholders on December 12, 2018. The equity shareholders of the Company at the NCLT convened meeting on December 12, 2018 approved the Composite Scheme of Arrangement with requisite majority.
The Honble NCLT vide its order passed on March 07, 2019 sanctioned the Composite Scheme of Arrangement and the Company received the order on March 15, 2019.
Further, the Board of Directors of the Company at its meeting held on May 13, 2019 approved the implementation of the Scheme except for merger of India lnfoline Finance Limited with the Company. The said merger shall be made effective on receipt of the requisite licence/ registrations by the Company from RBI to carry on the lending business. Following parts of the Scheme were implemented:
1. Amalgamation of IIFL M&R with the Company;
2. Demerger of the Securities Business Undertaking of the Company into IIFL Securities;
3. Demerger of the Wealth Business Undertaking of the Company into IIFL Wealth;
4. Transfer of the Broking and Depository Participant Business Undertaking of IIFL Wealth to its wholly owned subsidiary i.e., IIFL Distribution, on a going- concern basis.
The Securities Business Undertaking, Wealth Business Undertaking and Broking and Depository Participant Business Undertaking are defined in the Scheme and the scheme can be accessed on the website of the Company i.e. www.iifl.com
The Appointed Date for the amalgamation of IIFL M&R with the Company was opening hours of April 01, 2017 and for all the other steps, the Appointed Date was opening hours of April 01,2018.
Pursuant to the Scheme, the name of the Company was changed fromIIFL Holdings Limited"to"IIFL Finance Limited" upon receipt of fresh Certificate of Incorporation dated May 24, 2019 issued by the Registrar of Companies, Mumbai and the Main Object of the Company was amended to carry on the lending business activity as of India Infoline Finance Limited.
Upon the Scheme coming into effect, 1,87,18,281 & 4,50,00,000 equity shares of face value Rs 10/- each & Rs 2/- each respectively, held by the Company in IIFL Securities and IIFL Wealth respectively were extinguished and cancelled.
As consideration to the shareholders of the Company for the demerger of the Securities Business Undertaking and Wealth Business Undertaking, IIFL Securities issued and allotted 1 (One) fully paid up new equity share of Rs 2 each of IIFL Securities for every 1 (One) equity share of Rs 2 each of the Company; and IIFL Wealth issued and allotted 1 (one) fully paid up new equity share of Rs 2 each of IIFL Wealth for every 7 (seven) equity shares of Rs 2 each of the Company on June 06, 2019 to the Shareholders of the Company holding equity shares on May 31, 2019 fixed as Record Date for the said purpose. Accordingly, 31,92,34,462 equity shares of Rs 2/- each of IIFL Securities and 4,56,04,924 equity shares of Rs 2/- each of IIFL Wealth were issued and allotted in aggregate to the Shareholders of the Company.
IIFL Securities and IIFL Wealth have filed Listing Applications with BSE Limited ("BSE") and National Stock Exchange of India Limited ("NSE") on July 06, 2019. The trading of securities of IIFL Securities and IIFL Wealth shall commence post listing approval of BSE, NSE and SEBI.
3. REVIEW OF BUSINESS AND OPERATIONS AND STATE OF AFFAIRS OF YOUR COMPANY
During the year under review, your Companys total income, on a consolidated basis, amounted to Rs 50,955.28 million. Profit before tax stood at Rs 11,296.47 million and Profit after tax stood at Rs 8,043.27 million.
These results primarily reflect the results of the material subsidiary viz. India Infoline Finance Limited and its subsidiaries after effecting the demerger of the wealth and securities business undertakings pursuant to the Composite Scheme of Arrangement as explained in Para 2 of this report.
During the year, the income from the loans and mortgages business has increased by 28% y-o-y to Rs 50,161.97 million. This was driven by growth in the loan AUM by 29% from Rs 2,70,675.12 million in FY18 to Rs 3,49,034.73 million in FY19. The AUM of the Housing Finance Company grew robustly by 27% to Rs 1,81,578.31 million as of March 31, 2019 as against Rs 1,43,212.03 million in the previous year. The Companys subsidiary namely Samasta Microfinance Limited has achieved a significant growth of 172% in its AUM to Rs 22,852.41 million as on March 31,2019 as against Rs 8,406.19 million as on March 31,2018.
The primary drivers of the AUM growth were small ticket home loans, which grew by 42% YoY, Gold loans, which grew by 53% YoY, small ticket MSME loans, which grew by 18% YoY and Micro-finance loans, which grew by 172% YoY, coming off a small base. On the other hand, construction & real-estate finance, LAP and Capital Market loans continue to have a declining share in the portfolio.
A strong characteristic of the loan book is the granularity; about 85% of the book is retail in nature. Moreover, 41% of the loans are compliant with RBIs priority sector lending norms. The large share of retail and PSL compliant loans are of significant value in the prevailing environment as they can be Securitized/Assigned with banks to raise long-term resources.
The NBFC sector, with its steadfast growth over the last five years has attracted recognition as a systemically important segment of the financial services industry. However, from the second half of the FY19, the industry witnessed turbulence due to some of the large NBFCs, HFCs defaulting, followed by rating downgrades, alarming asset liability mismatches leading to increased risk perception to the sector. This has led drying up of funding resources and liquidity crunch among NBFCs and affected the lending business as well as growth. The Companys proactive, agile approach along with its diversified funding mix, comfortable liquidity position and efficient processes ensured that it confidently navigated through the challenges.
In a tough environment, the Company took the following proactive steps to combat the situation:
Reduced its CP exposure, down from 24% of loans to 12% as on March 31,2019 despite 25% of the portfolio having maturity less than 6 months and 39% less than 12 months;
Increased share of securitized assets and bank loans for a well-diversified funding mix;
Maintained a positive ALM across all buckets with cumulative surplus net cash flow;
Maintained adequate liquid investments and undrawn bank credit lines;
Ensured enhanced governance through a robust and agile risk management model.
Despite the slowdown, the Indian economy is expected to pick up growth in the latter half of the current year. Capital investment will be largely driven by public expenditure. Monetary and regulatory easing from RBI is expected to revive credit to the private sector. The decline in auto sales and the lag in the real estate sector have been mainly on account of the liquidity crunch faced by NBFCs. The governments and regulators various active and ongoing measures, the liquidity situation to this sector is expected to ease from the second half of the current year and also investment and consumer demand is expected to pick up soon, particularly in MSME, home loans and consumer loans segments. Boosting aggregate demand, especially private investment, assumes the highest priority at this juncture to generate growth. Overall, the outlook for the NBFC sector is expected to remain positive in the long run.
Change in nature of Business
In terms of the Composite Scheme of Arrangement, the Main Object of the Company was amended to carry on the lending business activity upon merger of India Infoline Finance Limited, subsidiary Company, with the Company. The Company has filed necessary application with RBI for registration as a Non-Banking Financial Company and is awaiting its approval. Further the Merchant Banking Business of the Company was transferred to IIFL Securities Limited and the Investment Advisory Business was transferred to IIFL Wealth Management Limited.
4. MACROECONOMIC OVERVIEW
India has emerged as the fastest growing major economy in the world, mainly due to improvement in the performance of agriculture and manufacturing sectors. The Indian economy grew at 7.1% in FY19, with a marginal reduction as compared to previous fiscal (Source: World Bank). Though government consumption had reduced, it was offset by more investments due to public infrastructure spending. Indias urban consumption was supported by a pickup of credit growth, whereas rural consumption was hindered by soft agricultural prices.
India has retained its position as the third largest start-up base in the world with over 4,750 technology start-ups. Introduction of GST and demonetisation has encouraged a shift from the informal to formal sector.
5. DIVIDEND ON EQUITY SHARES
During the year 2018-19, the Board of Directors of the Company declared and paid an interim dividend of Rs 5/-per equity share (i.e. 2.5 times of face value of Rs 2/- per equity share). This led to an outgo of Rs 1,595.43 million owing to dividend (excluding dividend distribution tax). Your Directors recommend that the said interim dividend be considered as final. The dividend paid during the previous financial year 2017-18 was Rs 5/- per equity share.
The dividend payout for the year under review is in accordance with the Companys policy to pay sustainable dividend linked to long-term growth objectives of the Company, to be met by internal cash accruals.
Pursuant to Regulation 43A of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Board of Directors of the Company has adopted a Dividend Distribution Policy which is annexed as Annexure VI to this report and is available on the website of the Company i.e. www.iifl.com.
6. KEY INITIATIVES/DEVELOPMENTS
i. Slump Sale of Vehicle Financing Business of India Infoline Finance Limited
During the year under review, India Infoline Finance Limited, a material subsidiary of the Company executed a definitive agreement for the sale of its "Vehicle Financing Business" as a going concern on a "slump sale basis" to IndoStar Capital Finance Limited in order to focus on scaling up other existing business segments viz. affordable Home Loans, Gold Loans, small-ticket Business Loans and Microfinance. The said transaction was completed on March 31, 2019 for a cash consideration of Rs 24,147.18 Million.
ii. Public Issue of Debentures by India Infoline Finance Limited
During the year under review, India Infoline Finance Limited, a material subsidiary of the Company, raised through Public Issue of Secured and Unsecured Redeemable Non-Convertible Debentures ("NCDs") an amount aggregating to 11,585.78 Million. These NCDs are listed and traded on the NSE and BSE.
iii. Masala Bond
India Infoline Finance Limited, a material subsidiary of the Company allotted INR (Rupee) Denominated Tier II Bonds ("Bonds") of the face value of Rs 10 Million each aggregating to Rs 3,250 Million to CDC Group Plc on June 28, 2018.
iv. External Commercial Borrowing
During the year under review, IIFL Home Finance Limited, a material subsidiary of the Company availed USD 50 million of External Commercial Borrowings.
v. NHB Refinance
During the year under review, IIFL Home Finance Limited, a material subsidiary of the Company availed Rs 10,000 million of refinance facility from National Housing Bank ("NHB") under various refinance schemes of NHB.
vi. Corporate Social Responsibility (CSR) Initiative
The Corporate Social Responsibility Committee of the Board has formulated and recommended to the Board a Corporate Social Responsibility Policy (CSR Policy) indicating the CSR activities which can be undertaken by the Company. The Board approved CSR Policy is available on the website of the Company i.e. https:// www.iifl.com/about-us/iifl-foundation .
IIFL group has set-up India Infoline Foundation (generally referred to as "IIFL Foundation") a Section 8 Company under the Companies Act, 2013, which acts as the principal arm to undertake CSR initiatives on behalf of the Company & its subsidiaries.
The group has identified focus areas for CSR initiatives which include:
a. Girl child illiteracy eradication program for out of school and illiterate girls.
b. Improving the quality of education in Government schools through technological interventions.
c. Support to the differently abled.
d. River rejuvenation and rural transformation in Maharashtra.
e. Disaster Relief and Rehabilitation.
f. Financial Literacy and Financial Inclusion.
g. Preventive Health.
h. Integrated rural development, drought relief and water conservation.
i. Protection of culture.
j. Measures for benefit of Armed Forces veterans, war widows etc.
During the financial year, your Company deployed 2% of its average net profits (computed as per the relevant provisions of Companies Act, 2013) of the preceding years on CSR projects, fully utilising the required amount.
vii. Investor Conference/Events
November 2018 Conclave:
India Infoline Finance Limited, a material subsidiary of the Company successfully concluded the "IIFL NBFC Conclave" on November 29, 2018 at St. Regis, Lower Parel, Mumbai.
The highlight of the conclave was the keynote speaker, Mr. R Gandhi, Former Deputy Governor, RBI, who spoke on the Policy and Regulatory environment for NBFC Sector followed by a presentation on IIFLs Credit Profile by Mr. Krishnan Sitaraman, Sr. Director, Financial Sector & Structured Finance Ratings, CRISIL Ltd.
June 2019 Conclave:
India Infoline Finance Limited, a material subsidiary of the Company successfully concluded the second edition of "IIFL NBFC Conclave" on June 03, 2019 at Sofitel BKC, Mumbai.
The primary agenda of the Conclave was to recognise the health, challenges and opportunities for the NBFC Sector in India.
The highlight of the conclave was the keynote speaker, Mr. S. S. Mundra, Former Deputy Governor, RBI, who spoke on the Road & Regulations ahead in the NBFC sector followed by a presentation on IIFLs Credit Profile by Mr. Krishnan Sitaraman, Sr. Director, Financial Sector & Structured Finance Ratings, CRISIL Ltd.
viii. Awards and Recognitions
During the year under review following awards and accolades were conferred by reputable organisations, details of the same is as follows:-
IIFL Home Finances ("KUTUMB") initiative won the best Green Initiative in Affordable Housing segment at ET Now Green Future Leadership Awards 2019.
IIFL was awarded "Great Place to Work" for the year 2019 -2020.
IIFL Home Finance was awarded "The Best Affordable Housing Finance Company of the year" at ABP News BFSI Awards 2018.
IIFL was recognised as a Disruptor in BFSI sector for innovation through technological intervention in NBFC space by ET Now and Broadcast One. India Infoline Finance was awarded Best On- boarding Solution at People Matters Learning and Development Conference.
IIFL Home Finance was awarded Best Performing Primary Lending Institution under CLSS for EWS/ LIG.
IIFL Home Finance won Most Promising Brand for Housing Finance by Times Network.
IIFL Home Finance Jhatpat Loans was awarded Technology Initiative of the Year at ET NOW BFSI Awards.
IIFL was awarded Digital Innovation Award under the Cloud Category at Indian Express Group BFSI Awards.
IIFL was awarded Best Customer Services Excellence in Financial Services for the Category- Customer Service and Loyalty at the World Quality Congress and Awards 2018.
IIFL MD Mr. R Venkataraman featured as the Best CEO in Business World listing for large category firms.
7. SHARE CAPITAL
During the period under review, the total paid up equity share capital of the Company increased from Rs 63,79,58,052/- to Rs 63,84,06,184/- pursuant to allotment of 2,24,066 equity shares of Rs 2/- each under Employee Stock Option Scheme(s) of the Company to the eligible employees.
8. EMPLOYEES STOCK OPTION SCHEMES (ESOS)
During the year under review 32,870 stock options under ESOS 2008 granted to employees have lapsed and the same have been added back to the pool, which can be used for further grant. Further, no stock options were granted to the employees during the year under the ESOP Scheme.
Under the previous GAAP, the stock options granted by the Company were accounted for as per the accounting treatment prescribed by SEBI (Employee Stock Option Scheme and Employee Stock Purchase) Guideline, 1999/ SEBI (Share Based Employee Benefits) Regulations, 2014 and the guidance note on accounting for stock options issued by the Institute of Chartered Accountants of India, whereby the intrinsic value of the options were recognised as deferred employee compensation and accordingly the requisite disclosures were provided in the notes to Accounts and Schedule. However, under Ind-AS, equity settled share based payment transactions with employees are required to be accounted for as per Ind-AS 102 "Share-based Payment" whereby the fair value of options as on the grant date should be estimated and recognised as an expense over the vesting period. In accordance with above, the Company has followed fair value method for equity options in its accounts effective the transition date, i.e., April 1,2017.
There is no material change in Employees Stock Option Scheme during the year under review and the Scheme is in line with SEBI (Share Based Employee Benefits) Regulations, 2014 ("SBEB Regulations"). A certificate from the Auditors of the Company that the Scheme has been implemented in accordance with the SBEB Regulations and the resolution passed by the members would be placed at the ensuing AGM for inspection by Members. The disclosures relating to ESOPs required to be made under the provisions of the Companies Act, 2013 and the SEBI (Share Based Employee Benefits) Regulations, 2014 are provided on the website of the Company i.e. www.iifl.com and the same is available for inspection by the members at the Registered Office of the Company on all working days, except Saturdays, Sundays and Public Holidays, during business hours up to the date of the ensuing Annual General Meeting.
9. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Particulars of investments made, loans given, guarantees given and securities provided along with the purpose for which the loan or guarantee or security was proposed to be utilised by the recipient are given at the respective places in the Standalone Financial Statement (please refer to Note 7 and 31 to the standalone financial statement).
10. SUBSIDIARY COMPANIES
The Company is having following 4 (Four) subsidiaries (including step down subsidiaries) and does not have any Associate/Joint Venture.
|1||India Infoline Finance Limited|
|2||IIFL Home Finance Limited (formerly known as India Infoline Housing Finance Limited)|
|3||Samasta Microfinance Limited|
|4||Clara Developers Private Limited|
Pursuant to the Composite Scheme of Arrangement approved by Honble NCLT vide its order passed on March 07, 2019 and the scheme becoming effective from May 13, 2019, the following Companies ceased to be subsidiary/step down subsidiary/Associate/Joint Venture of the Company:
|1||IIFL Securities Limited|
|2||IIFL Wealth Management Limited|
|3||IIFL Commodities Limited (Formerly known as India Infoline Commodities Limited)|
|4||India Infoline Foundation|
|5||IIFL Insurance Brokers Limited (Formerly known as India Infoline Insurance Brokers Limited)|
|6||IIFL Management Services Limited (Formerly known as India Infoline Insurance Services Limited)|
|7||India Infoline Media and Research Services Limited|
|8||IIFL Asset Reconstruction Limited|
|9||IIFL Facilities Services Limited (Formerly known as IIFL Real Estate Limited)|
|10||IIFL Wealth (UK) Limited|
|11||IIFL Capital Inc.|
|12||IFL Asset Management (Mauritius) Limited|
|13||IIFL (Asia) Pte. Limited|
|14||IIFL Capital Pte. Limited|
|15||IIFL Securities Pte. Limited|
|16||IIFL Capital (Canada) Limited|
|17||IIFL Securities Services IFSC Limited|
|18||IIFL Wealth Securities IFSC Limited|
|19||IIFL Altiore Advisors Private Limited (Formerly known as Altiore Advisors Private Limited)|
|20||IIFL Wealth Advisors (India) Limited (Formerly known as Wealth Advisors (India) Private Limited)|
|21||IIFL Trustee Limited (Formerly known as India Infoline Trustee Company Limited)|
|22||IIFL Alternate Asset Advisors Limited|
|23||IIFL Distribution Services Limited|
|24||IIFL Investment Adviser and Trustee Services Limited|
|25||IIFL Wealth Finance Limited (Formerly known as Chephis Capital Markets Limited)|
|26||IIFL Private Wealth Hong Kong Limited|
|27||IIFL Private Wealth Management (Dubai) Limited|
|29||IIFL Asset Management Limited (Formerly known India Infoline Asset Management Company Limited)|
|30||Meenakshi Towers LLP|
Note: Kindly refer Para 2 of the Directors Report for details on Composite Scheme of Arrangement.
As per the provisions of section 134 and 136 of the Companies Act, 2013 read with applicable Rules, Regulation 33 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and applicable Indian Accounting Standards ("Ind AS"), the Board of Directors had at their meeting held on May 14, 2019 approved the Consolidated Financial Statements of all the subsidiaries of the Company along with the Companys financial statements. Copies of the Balance Sheet, Profit and Loss Account, Report of the Board of Directors and Report of the Auditors of each of the subsidiary companies are not attached to the accounts of the Company for the financial year 2018-19. The Company will make these documents/details available upon request by any member of the Company. These documents/details will also be available for inspection by any member of the Company at its registered office and at the registered offices of the concerned subsidiaries i.e. except on Saturdays, Sundays and Public Holidays. The Annual Reports of all the subsidiaries are available on the website of the Company i.e. www.iifl.com . The Companys financial statements including the accounts of its subsidiaries which forms part of this Annual Report is prepared in accordance with the Companies Act, 2013 and Ind AS- 110.
A report on the performance and financial position of each of the subsidiaries of the Company, as per Companies Act, 2013 is provided in the prescribed form AOC-1 as Annexure A of the Consolidated Financial Statements and hence not repeated here for the sake of brevity.
Pursuant to regulation 16 and 24 of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015, India Infoline Finance Limited, IIFL Wealth Management Limited and IIFL Wealth Finance Limited and IIFL Home Finance Limited were the Material Subsidiaries of the Company for the financial year 2018-19. In accordance with the Composite Scheme of Arrangement as explained in para 2 of the Directors Report, IIFL Wealth Management Limited and IIFL Wealth Finance Limited ceased to be subsidiary of the Company and pursuant to aforesaid regulations, India Infoline Finance Limited and IIFL Home Finance Limited shall remain Material Subsidiary for the financial year 2019-20. The policy on determining the material subsidiary is available on the website of the Company at i.e. www.iifl.com .
Merger of Ayusha Dairy Private Limited
Ayusha Dairy Private Limited, a wholly owned subsidiary of Samasta Microfinance Limited ("Samasta"), a step down subsidiary of the Company was merged with Samasta in terms of scheme of arrangement by way of Fast Track Merger approved by Regional Director vide its order dated August 06, 2018 pursuant to the provisions of Section 233 of the Companies Act, 2013.
11. BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report, in terms of Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, describing the initiatives taken by IIFL Group from an environmental, social and governance perspective is attached as part of the Annual Report.
12. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
In accordance with Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis Report forms part of this report.
13. DIRECTORS AND KEY MANAGERIAL PERSONNEL a. Directors
The Board comprises Mr. Nirmal Jain and Mr. R. Venkataraman as Executive Directors of the Company in their capacity of Chairman and Managing Director respectively. Mr. Nilesh Vikamsey, Mr. A. K. Purwar, Mr. Vijay Kumar Chopra and Ms. Geeta Mathur are Independent Directors. Mr. Chandran Ratnaswami and Mr. Nagarajan Srinivasan are the Non-executive Directors of the Company.
Appointment/Re-appointment of Directors
In accordance with Section 152 of the Companies Act, 2013 ("Act") read with Article 157 of the Articles of Association of the Company, Mr. Chandran Ratnaswami is liable to retire by rotation at the ensuing Annual General Meeting ("AGM") and being eligible has offered himself for re-appointment. The Board recommends the same for the approval of Shareholders.
Mr. A.K. Purwar and Mr. Nilesh Vikamsey upon completion of their first term of appointment as Independent Directors on March 31,2019, are eligible for re-appointment for another term of five consecutive years with effect from April 01,2019 subject to approval of the Members by special resolution in the ensuing AGM. Further, Ms. Geeta Mathur upon completion of her first term of appointment as Independent Director on September 17, 2019, is eligible for re-appointment for another term of five consecutive years with effect from September 18, 2019 subject to approval of the Members by special resolution in the ensuing AGM.
Mr. Vijay Kumar Chopra was appointed by the Board as an Additional Director (Independent Director) and Mr. Nagarajan Srinivasan was appointed by the Board as an Additional Director (Non Executive Director) of the Company w.e.f. May 21,2019, who shall hold office up to the date of the AGM. Approval of the Members for regularisation of the appointment of the aforesaid Directors as Independent Director and Non Executive Director respectively has been sought in the Notice convening ensuing Annual General Meeting of the Company.
Pursuant to Regulation 17(1 A) of the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulation, 2018 ("LODR"), inter alia, provides that "no Listed Company shall appoint a person or continue the directorship of any person as a Non- Executive Director who has attained the age of 75 years unless it is approved by the Shareholders by passing Special Resolution to that effect". Accordingly Mr. A. K. Purwar will attain the age of 75 in May 2021 and Mr. Vijay Kumar Chopra will attain the age of 75 in March 2021 and hence their appointment beyond 75 years shall require approval of shareholders by way of special resolution. Accordingly, the approval has been sought in the Notice convening ensuing Annual General Meeting of the Company.
Mr. Nirmal Jain and Mr. R Venkataraman were appointed as Whole Time Director and Managing Director, respectively w.e.f. April 23, 2015 for a period of five years and their tenure will be expiring on April 22, 2020. In view of the above it is proposed to re-appoint Mr. Nirmal Jain and Mr. R Venkataraman as Whole Time Director and Managing Director respectively in the ensuing AGM.
Mr. R Venkataraman, Managing Director of the Company was also appointed as whole time director of India Infoline Finance Limited, subsidiary company and his entire remuneration was paid by India Infoline Finance Limited. However, considering the demerger of Securities business undertaking in terms of Composite Scheme of Arrangement, the designation / capacity of Mr. R Venkataraman has been changed to Non Executive Director in India Infoline Finance Limited and he has been appointed as Managing Director of IIFL Securities Limited w.e.f. May 15, 2019. Accordingly he is drawing his entire remuneration from IIFL Securities Limited and no remuneration is being paid to him by the Company or its subsidiary Company.
Mr. Kranti Sinha and Mr. S Narayan Independent Directors of the Company resigned from the Board of Directors of the Company w.e.f. May 21, 2019, with respect to the Composite Scheme of Arrangement, India Infoline Finance Limited shall merge with the Company and majority of its Directors were appointed on the Board of the Company. The Board placed on recorded its deep appreciation and gratitude for the valuable contribution made by them.
b. Key Managerial Personnel
Mr. Nirmal Jain- Chairman, Mr. R. Venkataraman- Managing Director, Mr. Prabodh Agrawal- Chief Financial Officer and Mr. Gajendra Thakur- Company Secretary are the Key Managerial Personnel as per the provisions of the Companies Act, 2013 and rules made thereunder. There is no change in the Key Managerial Personnel during the year under review.
The Remuneration and other details of the Key Managerial Personnel for the year ended March 31, 2019 are mentioned in the Extract to the Annual Return in Form MGT-9 which is attached as "Annexure II" and forms a part of this report of the Directors.
14. MEETING OF DIRECTORS & COMMITTEE/BOARD EFFECTIVENESS
Meetings of the Board of Directors
The Board met Five (5) times during the year to discuss and approve various matters including financials, appointment of auditor, declaration of dividend, review of audit reports and other board businesses. For further details please refer to the report on Corporate Governance.
Committees of the Board
In accordance with the applicable provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board constituted the following Committees:
Nomination and Remuneration Committee
Corporate Social Responsibility Committee
Stakeholders Relationship Committee ^ Risk Management Committee Audit Committee
The Audit Committee comprises Mr. Nilesh Vikamsey, Independent Director, Mr. Vijay Kumar Chopra, Independent Director, Ms. Geeta Mathur, Independent Director and Mr. R. Venkataraman, Managing Director.
The role, terms of reference and powers of the Audit Committee are in conformity with the requirements of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the same has been provided in the Corporate Governance Report.
The Committee met during the year under review and discussed on various matters including financials, internal audit reports and Audit Report. During the period under review, the Board of Directors of the Company accepted all the recommendations of the Audit Committee.
The details of Committee meeting held during the year under review and the terms of reference of Audit Committee are provided in the Corporate Governance Report.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee comprises three Independent Directors viz. Mr. Vijay Kumar Chopra, Independent Director, Mr. Nilesh Vikamsey, Independent Director and Mr. A K Purwar, Independent Director, as members of the Committee.
The role, terms of reference and powers of the Nomination and Remuneration Committee are in conformity with the requirements of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the same has been provided in the Corporate Governance Report.
The Board has, on the recommendation of the Nomination & Remuneration Committee framed a Nomination and Remuneration policy in compliance with the aforesaid provisions for selection and appointment of Directors, KMP, senior management personnel of the Company. The Nomination and Remuneration policy is available on the website of the Company i.e. www.iifl.com
The said policy, the details of Committee meetings and the terms of reference of Nomination and Remuneration Committee held during the year under review are provided in the Corporate Governance Report.
Corporate Social Responsibility Committee
As per Section 135 of Companies Act 2013, the Company has constituted Corporate Social Responsibility (CSR) Committee, comprises Mr. Nilesh Vikamsey, Independent Director, Mr. Nirmal Jain, Whole Time Director and Mr. R. Venkataraman, Managing Director.
The Committee has approved CSR Policy of the Company and the same is available on the website of the Company i.e. www.iifl.com . The Annual Report on CSR activities in accordance with Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as "Annexure I" to this report.
The role, details of Committee meeting held during the year and the terms of reference of CSR Committee are provided in the Corporate Governance Report.
Stakeholders Relationship Committee
The Stakeholders Relationship Committee comprises Mr. A. K. Purwar, Independent Director, Mr. Nirmal Jain, Whole Time Director and Mr. R Venkataraman, Managing Director.
The role and terms of reference of the Stakeholders Relationship Committee are in conformity with the requirements of the Companies Act, 2013 and Regulation 20 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the same has been provided in the Corporate Governance Report.
The details of Committee meeting held during the year under review and status of complaints are provided in the Corporate Governance Report.
Risk Management Committee
The Risk Management Committee comprises Mr. A. K. Purwar, Independent Director, Mr. Nilesh Vikamsey, Independent Director and Mr. Nirmal Jain, Whole-time Director.
The role and terms of reference of the Risk Management Committee are in conformity with the requirements of Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the same has been provided in the Corporate Governance Report.
The details of Committee meeting held during the year under review and the terms of reference of Risk Management Committee is provided in the Corporate Governance Report.
Familiarisation Program for the Independent Directors
In compliance with the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has put in place a Familiarisation Programme for Independent Directors to familiarise them with the working of the Company, their roles, rights and responsibilities vis-a-vis the Company, the industry in which the Company operates and business model etc.
On a quarterly basis, presentations are made at the meeting of Board and Committees, on business, operations and performance updates of the Company and the group, important developments in the subsidiaries, relevant statutory and regulatory changes applicable to the Company, update on important legal matters pertaining to the Company and its subsidiaries.
Details of the Familiarisation Programme are provided in the Corporate Governance Report and are also available on the website of the Company i.e. www.iifl.com .
Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI Circular no, SEBI/HO/CFD/CMD/ CIR/P/2017/004 dated January 05, 2017, the Board of Directors has carried out an annual performance evaluation of its own performance, the Directors individually including Independent Directors based out of the criteria and framework adopted by the Board. The Board approved the evaluation results as collated by Nomination and Remuneration Committee ("NRC"). The evaluation process, manner and performance criteria for independent directors in which the evaluation has been carried out by is explained in the Corporate Governance Report.
The Board considered and discussed the inputs received from the Directors. Also, the Independent Directors at their meeting held on March 22, 2019 reviewed the following:
(a) Performance of Non-Independent Directors, various Committee of Board and the Board as a whole.
(b) Performance of the Chairperson of the Company.
(c) Assessed the quality, quantity and timeliness of flow of information between the Companys management and the Board, which is necessary for the Board to effectively and reasonably perform their duties.
The Independent Directors expressed their satisfaction with overall functioning and implementations of their suggestions.
The evaluation process endorsed the Board Members confidence in the ethical standards of the Company, the cohesiveness that exists amongst the Board Members, the two-way candid communication between the Board and the Management and the openness of the Management in sharing strategic information to enable Board Members to discharge their responsibilities.
Declaration by Independent Directors
The Company has received necessary declaration from each Independent Director of the Company that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and 16(1 )(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The above declarations were placed before the Board and in the opinion of the Board all the Independent Director fulfils the conditions specified under the Act and the Listing Regulation and are Independent to the Management.
The Company recognises and embraces the importance of a diverse Board in its success. The Company believes that a truly diverse Board will leverage difference in thought, perspective, knowledge, skills, regional and industry experience, cultural and geographical backgrounds, age, ethnicity, race, gender that will help us retain our competitive advantage. The policy adopted by the Board sets out its approach to diversity. The policy is available on the website of the Company i.e. www.iifl.com
15. DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement under Section 134(5) of the
Companies Act, 2013, it is hereby confirmed 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) the directors 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 of the Company for that period;
c) the directors had 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 the Company and for preventing and detecting fraud and other irregularities;
d) the directors had prepared the annual accounts on a going concern basis;
e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and
f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
16. RISK MANAGEMENT
The Company has in place a Risk Management Committee constituted in accordance with the SEBI (Listing Obligations and Disclosure Requirements), 2015 to assist the Board in overseeing the Risk Management activities of the Company, approving measurement methodologies and suggesting appropriate risk management procedures mitigating all the risks that the organisation faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks which have been identified and assessed. There is an adequate risk management infrastructure in place capable of addressing those risks.
The Companys management monitors and reports principal risks and uncertainties that can affect its ability to achieve its strategic objectives. The Companys management systems, organisational structures, policy, processes, standards, and code of conduct together form the risk management governance system of the Company.
The Company has in place a Risk Management Policy and introduced several measures to strengthen the internal controls systems and processes to drive a common integrated view of risks and optimal and mitigation responses. This integration is enabled through a dedicated team and Risk Management, Internal Control and Internal Audit systems and processes.
17. INTERNAL FINANCIAL CONTROLS
The Company has in place adequate internal controls with reference to financial statements and operations and the same are operating effectively. The Internal Auditors tested the design and effectiveness of the key controls and no material weaknesses were observed in their examination. Further, Statutory Auditors verified the systems and processes and confirmed that the Internal Financial Controls system over financial reporting are adequate and such controls are operating effectively.
18. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
The Company has put in place a policy for Related Party Transactions (RPT Policy), which has been approved by the Board of Directors. The policy provides for identification of Related Party Transactions (RPTs), necessary approvals by the Audit Committee/Board/Shareholders, reporting and disclosure requirements in compliance with Companies Act, 2013 and provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
All contracts executed by the Company during the financial year with related parties were on arms length basis and in the ordinary course of business. All such Related Party Transactions were placed before the Audit Committee/ Board for approval, wherever applicable.
During the year, the Company has not entered into any contract / arrangement / transaction with related parties, which could be considered material in accordance with Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the policy of the Company on materiality of related party transactions. The policy for determining material subsidiaries and the policy on materiality of Related Party Transactions and dealing with Related Party Transactions as approved by the Board may be accessed on the website of the Company i.e. www.iifl.com . You may refer to Note no. 35 to the Standalone Financial Statement, which contains related party disclosures. Since all related party transactions entered into by the Company were on an arms length basis and in the ordinary course of business and the Company had not entered into any material related party contracts, Form AOC-2 disclosure is not required to be provided.
Pursuant to the Composite Scheme of Arrangement ("Scheme"), approved by Honble National Company Law Tribunal, merger of India Infoline Finance Limited with the Company shall be made effective on receipt of requisite license/registration by the Company from Reserve Bank of India ("RBI") to carry on the lending business. The lending book of India Infoline Finance Limited consists of diversified products, customer segments, geographies and varying tenors (Short Term and Long Term) and accordingly India Infoline Finance Limited enters into various related party transactions in the ordinary course of business.
The Company is expected to receive RBI approval shortly. Keeping in view the present position of the proposed merger, the Company will be/continue entering into certain Related Party Transactions in the ordinary course of business and accordingly the Company has sought approval from shareholders for Material Related Party Transactions and details of same can be sought from the Notice Convening the Annual General Meeting of the Company.
19. ANNUAL RETURN
The details forming part of the extract of the Annual Return of the Company in form MGT - 9 is annexed herewith as "Annexure - II". Further, the Annual Return is also available on the website of the Company i.e. www.iifl.com .
20. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There have been no material changes and commitments affecting the financial position of the Company, except the Composite Scheme of Arrangement approved by Honble National Company Law Tribunal and implemented by the Company as mentioned in Para No. 2 of this report, which had occurred between the end of the financial year of the Company to which the financial statements relate and the date of this annual report.
21. SECRETARIAL AUDIT
The Board had appointed M/s. Nilesh Shah & Associates, Practicing Company Secretaries to conduct Secretarial Audit of the Company for the financial year 2018-19. The Auditor had conducted the audit and their report thereon was placed before the Board. The report of the Secretarial Auditor is annexed herewith as "Annexure - III" to this report. There are no qualifications or observations in the Report.
22. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The additional information on energy conservation, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is appended as "Annexure - IV" and forms part of this Report
23. WHISTLE BLOWER POLICY/ VIGIL MECHANISM
In Compliance of the Companies Act, 2013 and Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has adopted a Whistle Blower Policy and has established the necessary vigil mechanism for Directors, Employees and Stakeholders to report genuine concerns about unethical behaviour, actual or suspected fraud or violation of the Companys code of conduct or ethics policy. The Company has disclosed the policy on the website of the Company i.e. www.iifl.com.
24. PREVENTION OF SEXUAL HARASSMENT
Your Company recognises its responsibility and continues to provide a safe working environment for women, free from sexual harassment and discrimination. In Compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has put in place a Policy on prevention of Sexual Harassment of Women at workplace and has duly constituted an Internal Complaints Committee under the same.
The details of complaints received pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 are provided in the Corporate Governance Report.
25. PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in "Annexure - V" to this report.
Further, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits as set out in the Rules 5(2) and 5(3) of the aforesaid Rules, forms part of this report. However, in terms of first proviso to Section 136(1) of the Act, the Annual Report and Accounts are being sent to the members and others entitled thereto, excluding the aforesaid information. The said information is available for inspection by the members at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent.
26. STATUTORY AUDITORS
Pursuant to the provisions of Section 139(2) of the Companies Act, 2013 and the rules made thereunder, the Members at their 22nd Annual General Meeting ("AGM") held on July 22, 2017, had appointed M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (ICAI Firms Registration Number 117366W/W-100018) as the Statutory Auditors of the Company for a term of five years, i.e. from the conclusion of the 22nd AGM till the conclusion of the 27th AGM subject to ratification of their appointment by the Members at every intervening Annual General Meeting held thereafter. However, pursuant to the notified Section of Companies Amendment Act (2017), the requirement related to annual ratification of appointment of Auditors by members is omitted. Accordingly the Company is not required to seek ratification of appointment of Auditors at the ensuing AGM and the Auditor shall continue their term till the conclusion of twenty seventh AGM.
The Notes to the financial statements referred in the Auditors Report are self-explanatory and therefore do not call for any comments under Section 134 of the Companies Act, 2013. The Auditors Report is enclosed with the financial statements in the Annual Report.
27. REPORTING OF FRAUDS BY AUDITORS
During the year under review, the Statutory Auditors and the Secretarial Auditor have not reported any instances of frauds committed in the Company by its Officers or Employees to the Audit Committee under section 143(12) of the Companies Act, 2013, details of which needs to be mentioned in this Report.
28. RBI/FEMA COMPLIANCE
The Reserve Bank of India vide its press release dated June 10, 2016 had notified FII/ FPI investment limit of up to 80% in the paid up capital of the Company under the Portfolio Investment Scheme.
The Company has in place the system of ensuring compliance with RBI Master Direction on Foreign Investment in India and for certification from the Statutory Auditors of the Company on an annual basis.
29. CORPORATE GOVERNANCE
The Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by SEBI. The Company has also implemented several best Corporate Governance practices as prevalent globally. The report on Corporate Governance as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms an integral part of this Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance.
30. COMPLIANCE WITH THE SECRETARIAL STANDARDS
The Board of Directors affirms that the Company has complied with the applicable mandatory Secretarial Standards issued by the Institute of Company Secretaries of India.
Your Directors state that during the financial year 2018-19:
1. The Company did not accept/renew any deposits within the meaning of Section 73 of the Companies Act, 2013 and the rules made there under and as such, no amount of principal or interest was outstanding as on the balance-sheet date.
2. The Company has not issued equity shares with differential rights as to dividend, voting or otherwise.
3. The Company has not issued any sweat equity shares during the year.
4. There are no significant and material orders passed against the Company by the Regulators or Courts or Tribunals, which would impact the going concern status of the Company and its future operations.
5. The Central Government has not prescribed the maintenance of cost records for any of the products of the Company under sub-section (1) of section 148 of the Act and the rules framed there under.
Your Directors place on record their sincere appreciation for the assistance and guidance provided by the government, regulators, stock exchanges, other statutory bodies, Companys bankers and employees for the assistance, cooperation and encouragement extended to the Company.
Your Directors also gratefully acknowledge all stakeholders of the Company viz. customers, members, dealers, vendors, banks and other business partners for the excellent support received from them during the year. Our employees are instrumental in helping the Company scale new heights, year after year. Their commitment and contribution is deeply acknowledged. Your involvement as shareholders is also greatly valued. Your Directors look forward to your continuing support.
For and on behalf of the Board
|Date: September 03, 2019|