India Securities Ltd Merged Directors Report

INDIA SECURITIES LIMITED ANNUAL REPORT 2010-2011 DIRECTORS REPORT Dear Shareholders, Your Directors have pleasure in presenting the 27th Annual Report of your Company together with Audited Accounts for the year ended 31st March, 2011. Financial Results (Rs. in crores) Particulars For the year For the year ended March ended March 31, 2011 31, 2010 Gross Income 7.64 10.45 Profit (Loss) before Depreciation and tax 3.83 9.18 Less: Depreciation 0.53 0.94 Less: Goodwill on amalgamation 371.38 - written off Add: Provision for non performing asset 0.10 0.47 written back Profit/(Loss) before tax (367.98) 8.24 Less: Provision for tax (0.91) 1.41 Profit/(Loss) After tax (368.89) 6.83 Less: Transfer to reserve fund - 1.37 Add: Adjustment against securities 355.58 - premium account Surplus/(Deficit) carried to Balance (6.42) 6.90 Sheet DIVIDEND Your Directors do not recommend any dividend for the year ended 31st March, 2011. MANAGEMENT DISCUSSION AND ANALYSIS: Industry Structure & Developments During the F.Y 2010-11, Indian economy has shown growth rate of 8.6% marked by growth in agriculture and continued momentum in manufacturing and service sectors. However, high inflation and global economic scenario continues to pose serious threats for the growth in financial service sector and the general economic growth in the current fiscal. Opportunities & Threats Since focus of Company is to continue as investment holding company, management will look out for strategic investment opportunities in key emerging sectors and sustain the existing consultancy business. As Company has discontinued finance business, it will have isolated risk to market uncertainties. Operations and Financial Performance During the year under review, your Company has earned a Total Income of Rs. 7.64 crore from business operations, compared to Rs. 10.45 crore in the previous year. Company has sold the finance undertaking and is pursuing consultancy and advisory services business apart from being an investment holding company. The Honble High court of Judicature at Madras has approved the scheme of amalgamation of Essar Telecommunications Holdings Private Limited with the Company vide its order dated April 21, 2011. Both the companies have filed the copies of the court order with Registrar of Companies, Tamilnadu and the scheme of amalgamation has come into force w.e.f. May 6, 2011. Accordingly, Company was vested with 10.97% stake in Vodafone Essar Limited, Essars Telecom Venture in partnership with Vodafone Group (held through its subsidiary ETHL Communications Holdings Limited) and the Company has issued 67,62,30,000 equity shares of Re 1 each and 15,41,000 Non Cumulative Preference shares of Rs. 2000 each on May 10, 2011 in consideration for the amalgamation. The erstwhile Compulsorily Convertible Preference Shares(CCPS) issued by the Company have been converted into equity shares as a part of scheme of amalgamation with the permission of the holders of CCPS. In line with Essar Groups decision to exit from the telecom venture, on 1st July 2011, Companys subsidiary ETHL Communications Holding Limited has entered into definitive agreements to sell its 10.97% stake in Vodafone Essar Limited to Vodafone Group or its nominees for USD 1.26 billion. Subsequently, the sale of 5.485% stake is effected to the nominee of Vodafone for INR 2800 crores. The sale of balance 5.485% shall be consummated by 15th February 2012 and is secured by bank guarantee for the purchase consideration issued by ING Bank N. V. Hongkong. As approved by shareholders at the court convened meeting held on July 26, 2011, the scheme of amalgamation of ETHL Communications Holdings Limited with the Company is in final stage and awaits approval from Honble High court of Judicature at Chennai and at Mumbai. Delisting of Equity Shares The resolution for delisting of equity shares from Bombay Stock Exchange Limited has been duly approved with requisite majority through postal ballot declared on September 27, 2011. Company has also received in principle approval for the same from Bombay Stock Exchange Limited and is in process of completing the formalities for public announcement as required under SEBI (Delisting of Equity Shares) Regulations, 2009. Upon successful completion of delisting, the promoters intend to consolidate the company with unlisted group investment companies to form a single investment holding company focusing strategic investment in group companies. Shifting of Registered Office During the year under review, Company Law Board, Mumbai bench had passed an order approving the shifting of registered office of the Company from Mumbai in the State of Maharashtra to Chennai in the State of Tamilnadu w.e.f. May 31, 2010. Segmentwise Performance Company is continuing only Advisory & Consultancy Business and other Financial Services. However, since finance business was carried out only for the part of the year, segment wise performance has been provided under note no. 8 of the notes to accounts annexed to balance sheet. Outlook The outlook for the year 2011-12 continues to be of cautious optimism. PUBLIC DEPOSITS: There are no unclaimed/unpaid deposits as on 31.03.2011. CORPORATE GOVERNANCE: Pursuant to clause 49 of the Listing Agreement with the Stock Exchange, a compliance report on Corporate Governance forms a part of the Annual Report along with Certificate from Practising Company Secretary on its compliance. HOLDING COMPANY: Essar Capital Limited continues to be Holding Company of your Company. Essar Capital Holdings (India) Limited continues to be the ultimate Holding Company. SUBSIDIARY COMPANY: ETHL Communications Holdings Limited has become subsidiary of your Company pursuant to amalgamation of Essar Telecommunications Holdings Private Limited with the Company. The audited financials of the subsidiary alongwith its Directors and Auditors Report for the financial year ended on March 31, 2011 and a statement as required under section 212 (3) of the Companies Act, 1956 are forming part of this Annual Report. DIRECTORS: Mr. S.V. Venkatesan, Mr. Vikash Saraf and Mr. M. P Mehrotra continues to be director of your Company. Mr. V. G. Raghavan was inducted on the Board as additional Director at the Meeting of Board of Directors held on August 9, 2011. Company has received a letter from shareholder nominating him for the post of Director of the Company liable to retire by rotation. Mr. M. P Mehrotra retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Mr. S.M. Lodha, Mr. A.S. Ruia and Mr. S. N. Ruia resigned from the directorship of the Company w.e.f. May 31, 2011, June 13, 2011 and June 22, 2011 respectively. Mr. Manoranjan Mahapatra also resigned as Manager of the Company within the meaning of section 2(24) of the Companies Act, 1956. w.e.f. August 9, 2011. DIRECTORS RESPONSIBILITY STATEMENT: Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956, with respect to Directors Responsibility Statement, it is hereby confirmed: (i) That in the preparation of the annual accounts for the financial year ended 31st March, 2011, the applicable accounting standards had been followed along with proper explanation relating to material departures; (ii) That the Directors had selected such accounting policies and applied them consistently and made judgements 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 loss of the Company for that period; (iii) That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) That the directors had prepared the accounts for the financial year ended 31st March, 2011 on a going concern basis. AUDITORS: M/s. Nisar and Kumar, Chartered Accountants, Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting of the Company. The Company has received confirmation to the effect that their appointment, if made, would be within the limits prescribed under section 224(1B) of the Companies Act, 1956. Accordingly, the Members approval is being sought to their appointment as the Auditors of the Company at the ensuing Annual General Meeting. ADEQUACY OF INTERNAL CONTROLS: The Company has a proper and adequate system of internal controls. The internal control system is supplemented by a program of internal audits and review by the Management. The internal control system is designed to ensure that the financial and other records are reliable, for preparing financial statements and other data. PERSONNEL AND HUMAN RESOURCE DEVELOPMENT: Your Directors wish to place on record their appreciation for the devotion to duty and sincere efforts put in by the workforce of your Company. There is no significant employee strength of the Company and almost all employees are on deputation from parent group. There are no employees drawing the salary exceeding the limits mentioned in the provisions of section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO: Particulars under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 on conservation of energy, technology absorption etc. are not applicable. There has been no foreign exchange earnings or outgo during the year under review. CAUTIONARY STATEMENT: Estimation & expectation made in the report may differ from actual performance due to various economic conditions, Government policies and other related factors. ACKNOWLEDGEMENTS: The Board wishes to place on record their gratitude for the co-operation and assistance received from the financial institutions, banks, shareholders and customers and thank them for their continued support. For and on behalf of the Board S.V. Venkatesan Chairman Place: Mumbai Date : December 1, 2011