Kumbhat Fin. Director Discussions


Dear Members,

Your Directors have great pleasure in presenting the 30th Annual Report of the business and operations of the Company together with the audited statement of accounts for the year ended 31st March, 2023.

1. STATE OF COMPANYS AFFAIRS:

(A) Financial summary or highlights: (Amount in Rs Lakhs)

Particulars 2022-23 2021-22
Total Income 33.25 31.98
Total Expenditure 22.23 23.60
Profit (Loss) before interest, depreciation and tax 11.22 8.42
Finance cost - -
Depreciation 0.21 0.04
Profit (Loss) before Exceptional, Extra-ordinary items and tax 11.01 8.38
Exceptional & Extra-ordinary items -
Profit (Loss) after Exceptional & Extra-ordinary items & before tax 11.01 8.38
Provision for taxation (Net of deferred tax) 1.39 0.79
Profit (Loss) after tax 9.63 7.59
Amount available for appropriation 9.63 7.59
Appropriations
Transfer to Statutory Reserve maintained u/s 45IC of RBI Act, 1934 (including short provision for earlier years) 1.93 1,52
Proposed dividend - -
Tax on proposed dividend - -
Balance carried to Balance Sheet 7.70 6.07

(B) Operations:

The gross amount of loans provided by the Company stood at Rs.361.83 lakhs as on 31st March, 2023 as compared to Rs. 100.00 Lakhs as on 31st March, 2022.

(C) Adoption of Ind-AS Standards:

The Company being a Listed Non-Banking Finance Company, is required to prepare its financial statements in accordance with the Ind-AS standards with effect from April 1, 2019. Accordingly, your Directors have framed the required policy for such adoption and transition to Ind-AS standards. The current accounts have been prepared as per Ind-AS standards.

(D) The World Economic Scenario:

A series of severe and mutually reinforcing shocks — the COVID-19 pandemic, the war in Ukraine and resulting food and energy crisis, surging inflation, debt tightening, as well as the climate emergency — battered the world economy in 2023. Against this backdrop, world output growth is projected to decelerate from an estimated 3.0 per cent in 2022 to 1.9 per cent in 2023, marking one of the lowest growth rates in recent decades, according to the United Nations World Economic Situation and Prospects (WESP) 2023 In this scenario we had elected to have cautious approach in deploying our fund to avoid NPA.

2. EXTRACT OF ANNUAL RETURN (FORM MGT-9):

As required under section 134 (3) (a) of the Indian Companies Act, 2013, the Annual return for the financial year 2022-23 is put up on the Companys website and can be accessed at

http://kumbhatfinancialserviceslimited.com/wp-content/uploads/2023/05/Form-MGT-7-1.pdf

3. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW:

The Board met seven times during the financial year, the details of which are given hereunder. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Companies Act, 2013.

Quarter Date of Board Meeting
02.05.2022
1st April, 2022 to 30th June, 2022 23.05.2022
15.06.2022
1st July, 2022 to 30th September, 2022 08.08.2022
24.08.2022
1st October, 2022 to 31st December, 2022 07.11.2022
1st January, 2023 to 31st March, 2023 08.02.2023

4. COMPLIANCE WITH SECRETARIAL STANDARDS:

During the year under review, the Company has followed applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to Meetings of the Board of Directors and General Meetings respectively issued by the Institute of Company Secretaries of India.

5. DIRECTORS RESPONSIBILITY STATEMENT:

In accordance with the provisions of section 134(5) of the Companies Act, 2013, the Board hereby submits its responsibility statement:

(a) In the preparation of the annual accounts for the year ended 31st March, 2023, 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 and loss 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 this Act 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 such systems were adequate and operating effectively.

6. EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLOSURES MADE BY THE STATUTORY AUDITORS:

The observations made by the auditors in their report and notes to the accounts referred to in the Auditors Report are self-explanatory. There were no qualifications, reservations or adverse remarks made by the Auditors in their respective reports.

7. EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLOSURES MADE BY THE SECRETARIAL AUDITORS:

The Secretarial Auditors have made the following observations in thier report for the year ended 31st March,2023.

We have the following to state on the Secretarial Audit Observation.

1. Newspaper Advertisement.

The Secretarial Auditor has been auditing our compliance for more than three years. We have been giving advertisement in English in Vernacular edition of the Newspaper. Now that they have given their observation, we shall arrange to publish advertisement in the vernacular language of the relevant vernacular newspaper edition.

2. CLOSURE OF BOOKS:

Adeguate steps had been taken to avoid ambiguity by advising the CLOSURE OF REGISTER OF MEMBERS to the depositories Viz., CDSL and NDSL as from 04.08.2022 to 10.08.2022 by separate intimation in addition to the RTA. They are the ultimate agencies who control trading transactions. They will prevent any transaction on these dates. Moreover, we had not received any complaint from shareholders about the date being mentioned as 09.08.2022 in the advertisement. However, the error that occurred in the Newspaper Advertisement will be avoided in future.

The other observations made by the secretarial auditors are self-explanatory in nature and does not call for further expalantion. The Directors now assure its members that they are in the process of updating all its records and complying with various legal reguirements so as to make good the above Qualifications.

8. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013:

The Company being a Non-Banking Finance Company (NBFC) has in the ordinary course of business made loans or advances or given guarantees or provided securities or made investments in bodies corporate and other persons during the financial year. Your Directors would like to draw your attention to the notes to the financial statements which sets out the details of loans and investments made.

9. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES:

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and are at arms length basis. The Company presents a statement of all related party transactions before the Board of Directors of the Company for their approval. Your Directors would like to draw your attention to the notes to the financial statements which sets out related party disclosures. A statement in Form AoC-2 pursuant to the provisions of clause (h) of sub-section (3) of section 134 of the Act read with sub-rule (2) of rule 8 of the Companies (Accounts) Rules, 2014 is furnished in Annexure-1 and is attached to this report.

10. DETAILS OF AMOUNTS TRANSFERRED TO RESERVES:

During the financial year 2022-23, the Company has made a profit of Rs.9.63 Lakhs. The statutory provision relating to transfer of profits to statutory reserve maintained under section 45IC of the RBI Act has been made to the extent of Rs.1.93 lakhs during the financial rear 2022-23. Accordingly the year-end balance of such statutory reserve stands at Rs.52.17 lakhs.

11. DIVIDEND:

In view of inadequacy of profits, your Directors do not recommend any dividend for the financial year ended 31st March, 2023.

12. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND:

The Company was not required to transfer any amounts in unpaid dividend account, application money due for refund, matured deposits, matured debentures and the interest accrued thereon which have remained unclaimed or unpaid for a period of seven years to Investor Education and Protection Fund.

13. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT (01/04/2023 to 29/05/2023):

There were no material changes and commitments affecting the financial position of the Company between the periods 1st April, 2023 to 29th May, 2023.

14. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO UNDER SECTION 134(3)(m) OF THE COMPANIES ACT, 2013 READ WITH RULE 8(3) OF THE COMPANIES (ACCOUNTS) RULES, 2014:

In terms of clause (m) of sub-section (3) of section 134 of the Companies Act, 2013 and the rules framed thereunder, the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo is given below:

1). CONSERVATION OF ENERGY:

(i) the steps taken or impact on conservation of energy; Your company is not engaged in any manufacturing activity and thus its operations are not energy intensive. However, adequate measures are always taken to ensure optimum utilization and maximum possible saving of energy.
(ii) the steps taken by the Company for utilising alternate sources of energy;
(iii) the capital investment on energy conservation equipments;

2). TECHNOLOGY ABSORPTION:

(i) the efforts made towards technology absorption;
(ii) the benefits derived like product improvement, cost reduction, product development or import substitution;
(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year) - The Company has no activity relating to technology absorption.
(a) the details of technology imported;
(b) the year of import;
(c) whether the technology has been fully absorbed;
(d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof, and
(iv) the expenditure incurred on Research and Development.

3). FOREIGN EXCHANGE EARNINGS AND OUTGO:

(Amount in Rs Lakhs
Particulars 2022-23 2021-22
Value of exports calculated on FOB basis - -
Value of Imports calculated on CIF basis:
Raw Materials - -
Components and Spare parts - -
Capital Goods - -
Expenditure in Foreign Currency:
Travel - -
Others - -

15. DETAILS OF CHANGE IN NATURE OF BUSINESS, IF ANY:

There was no change in the nature of business of the Company during the financial year.

16. CHANGES IN DIRECTORS AND KEY MANAGERIAL PERSONNEL:

In accordance with the provisions of section 152 of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and the Companys Articles of Association, Shri. SANJAY KUMBHAT (DIN: 03077193), retires by rotation at the forthcoming Annual General Meeting and he being eligible, offers himself for re-appointment. The Board recommends the re-appointment.

17. EVALUATION OF THE BOARDS PERFORMANCE:

In compliance with the Companies Act, 2013 and regulation 17 of the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015, the performance evaluation of the Board, its Committees and individual Directors was carried out during the year under review. Questionnaire approach was adopted for said evaluations.

The Nomination and Remuneration Committee (NRC) at its meeting carried out a separate exercise for evaluating every Directors performance. The evaluation of Independent Directors was carried out without the presence of the said Directors. A separate meeting of the Independent Directors was convened which reviewed the performance of the Board (as a whole), the non-independent directors and the Chairman. The said meeting was held on 24.08.2022 during the financial year.

Some of the key criterias for performance evaluation were as follows:

Performance evaluation of Board and Committees:

1. Degree of fulfilment of key responsibilities;

2. Board structure and composition;

3. Effectiveness of Board processes, information and functioning;

4. Board Culture and Dynamics;

5. Quality of relationship between the Board and the Management; and

6. Establishment and delineation of responsibilities to committees.

Performance evaluation of Directors:

1. provide meaningful and constructive contribution and inputs in meetings;

2. display a good degree of understanding of the company, industry, sector, geography; and

3. display independence of judgment.

18. FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS:

The Independent Directors of the Company are persons of integrity, possessing rich experience and expertise in the field of corporate management, finance, capital market, economic and business information.

The Company has issued appointment letter to the Independent Directors setting out in detail, the terms of appointment, duties, roles & responsibilities and expectations from the appointed Director. The Board of Directors has complete access to the information within the Company. Presentations are regularly made to the Board of Directors / Audit Committee / Nomination & Remuneration Committee / Stakeholders Relationship Committee on various related matters, where Directors have interactive sessions with the Management.

19. SUBSIDIARY:

The Company does not have any subsidiary companies or associate companies or joint ventures.

20. INTERNAL FINANCIAL CONTROLS:

The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of business, including adherence to the Companys 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 reliable financial disclosures. The Company has in place adequate internal financial controls with reference to financial statements. During the year under review, such controls were tested and no reportable material weaknesses in the design or operation were observed.

This is further strengthened by periodical review of the accounts and systems by Internal Auditors, M/s R V J & Company, the internal auditors of the company.

21. DEPOSITS:

Your Company has neither accepted nor renewed any deposits from public within the meaning of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 during the financial year and as such, no amount of principal or interest was outstanding as on the Balance Sheet date.

22. MATERIAL ORDERS PASSED BY REGULATORY AUTHORITIES:

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

23. RISK MANAGEMENT POLICY:

A series of severe and mutually reinforcing shocks — the COVID-19 pandemic, the war in Ukraine and resulting food and energy crises, surging inflation, debt tightening, as well as the climate emergency — battered the world economy in 2022-2023. The central banks of leading western world hiked the base rate and the RBI too increased the REPO rate making cost of borrowing more dearer.In the light of the above developments, our Risk Management Committee met two times and have identified the following risks and have drawn the attention of the Board on the same.

The Committee reviewed the debt situation taking into account the downslide in economy due to the global pandemic.The committee observed that while a few NBFCs exhibited robust growth, most disruptive and conservative NBFCs werent left unscathed by the current downtime. And though the government has created reforms and policies to get NBFCs back on track, the road ahead is neither short nor smooth, making it important to strengthen their risk management frameworks.

The Company has laid down a Comprehensive Risk assessment and minimization procedure which is reviewed by the Board from time to time. These procedures are reviewed to ensure that executive management controls risks through means of a properly defined framework. Key business risks and their mitigation are also considered in the annual / strategic business plans and in periodic management reviews.

The Board and the Risk Management committee adopted the following Risk Management Process to evaluate risk:

Step 1: Identify the Risk.

Step 2: Analyze the Risk.

Step 3: Evaluate the Risk or Risk Assessment. Step 4: Treat the Risk.

Step 5: Monitor and Review the Risk.

Fortunately the company ensured that the interests are collected in time and no outstanding loans were overdue.

Although the Company does not have a formal risk management policy but a formal enterprise- wide approach to Risk Management is being adopted by the Company and key risks will now be managed within a unitary framework.

24. DETAILS OF REVISION OF FINANCIAL STATEMENTS:

There was no revision of the financial statements of the company during the financial year.

25. SHARES AND SHARE CAPITAL:

a. CAPITAL STRUCTURE:

As at 31st March, 2023 the Authorised Share Capital of your Company was Rs.1500 lakhs comprising of 150 lakhs Equity Shares of Rs.10/- each and the Paid-up Share Capital was Rs.475 lakhs comprising of 47.5 lakhs Equity Shares of Rs.10/- each.

b. BUY-BACK OF SHARES:

The Company has not bought back any of its securities during the financial year.

c. SWEAT EQUITY:

The Company has not issued any Sweat Equity Shares during the financial year.

d. BONUS SHARES:

No Bonus Shares were issued during the financial year.

e. EMPLOYEES STOCK OPTION PLAN:

The Company has not provided any Stock option Scheme to the employees during the financial year.

26. STATUTORY AUDITORS:

M/s. MARDIA & ASSOCIATES (FRN: 007888S), Chartered Accountants, Chennai were appointed for a period of 5 (five) consecutive years from the conclusion of the 26th Annual General Meeting held in the calendar year 2019 till the conclusion of the 31st Annual General Meeting to be held in the calendar year 2024.

27. SECRETARIAL AUDITORS:

In accordance with the provisions of section 204 of the Companies Act, 2013, the Board has appointed M/s. MUNDHARA & CO, Company Secretaries in Whole-time Practice, Chennai as the Secretarial Auditors for the financial year 2022-2023. The report of the Secretarial Auditors is annexed to this report.

28. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

Your Company has always believed in providing a safe and harassment free workplace for every individual working in the Companys premises through various interventions and practices. The Company always endeavours to create and provide an environment that is free from discrimination and harassment including sexual harassment.

The Company has adequate measures including checks and corrections in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment.

The following is a summary of sexual harassment complaints received and disposed off during the financial year:

- No. of Complaints received : NIL
- No. of Complaints disposed off : NIL
- No. of cases pending for more than 90 days : NIL
- No. of workshops / awareness programmes carried out : NIL
- Nature of action taken by the employer / DO : Not Applicable

29. RESERVE BANK OF INDIA REGULATIONS:

Your Company is generally complying with the directions of the Reserve Bank of India regarding prudential norms of accounting, capital adequacy ratio, provisions for bad and doubtful debts and other requirements as per the directions issued from time to time.

30. CORPORATE GOVERNANCE:

Report of Corporate Governance for the financial year and Management Discussion and Analysis are forming part of this Annual report.

31. COMPOSITION OF AUDIT COMMITTEE:

The Board has constituted the Audit Committee, which comprises of Shri. SAKTHIVEL MURUGAN-Independent Director as Chairman, Shri. S. RAMABADRAN, Independent Director and Shri. SANJAY KUMBHAT as the members of the committee. More details on the committee are given in the Corporate Governance Report.

32. CERTIFICATE FROM MANAGING DIRECTOR AND CHIEF FINANCIAL OFFICER:

A certificate has been obtained from Shri. SANJAY KUMBHAT (DIN: 03077193), Managing Director and Smt. V.PREMALATHA (PAN : ANWPP2996F), Chief Financial officer as required under regulation 34(3) of the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015 on Corporate Governance which is enclosed and is forming part of this Report.

33. LISTING AT STOCK EXCHANGE:

The Equity Shares of the Company continue to be listed on The Bombay Stock Exchange Limited. With regard to other stock exchanges where the shares of the Company were earlier listed, viz., The Madras Stock Exchange Limited, The Hyderabad Stock Exchange Limited, The Coimbatore Stock Exchange Limited and The Ahmedabad Stock Exchange Limited, your Directors would like to state that the said exchanges have been closed by the orders of Securities and Exchange Board of India (SEBI) and any communications with the said exchanges are returned undelivered.

34. CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE UNDER THE LISTING AGREEMENT AND THE SEBI (LISTING OBLIGATIONS & DISCLOSURE REQUIREMENTS) REGULATIONS, 2015:

A certificate from the Statutory Auditors of the Company regarding compliance with the Code of Corporate Governance is forming part of this annual report.

35. MANAGEMENTS DISCUSSION AND ANALYSIS:

In terms of the provisions of regulation 34(3) of the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015, the required Managements Discussion and Analysis is set out in this Annual Report.

36. DECLARATION BY INDEPENDENT DIRECTORS:

The Company has received necessary declaration from each independent director under section 149(7) of the Companies Act, 2013 that he/she meets the criteria of independence laid down in section 149(6) of the Companies Act, 2013 and regulation 17 of the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015.

37. EMPLOYEE REMUNERATION:

The ratio of the remuneration of each director to the median employees remuneration and other details in terms of sub-section (12) of section 197 of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are forming part of this report and are annexed as Annexure-2 to this report.

38. CORPORATE SOCIAL RESPONSIBILITY:

The provisions of section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 are not applicable to the Company.

39. WITHDRAWAL OF OPEN OFFER BY ACQUIRERS:

Pursuant to Share Purchase Agreement (SPA) and Preferential Allotment, the acquirers have made an Open Offer to acquire 35,75,000 (Thirty five lacs Seventy Five Thousand only)fully paid equity shares of your company on 31.03.2021 ( The open offer published in Newspapers on 03.04.2021) subject to clearance from RBI, as Kumbhat Financial Services Limited is a Non-Banking Finance Company , being regulated by RBI. Accordingly the company made an application to RBI. However the RBI has not acceded to the application vide their letter dated 08.02.2023. As a result the acquirers had withdrawn the Open Offer on 21.04.2023 after considering all the legal possibilities in this regard.

They have published the withdrawal on 21.04.2023 in Financial Express (ENGLISH)-All editions, Jansatta (HINDI) -All editions, Mumbai Lakshadweep (MARATHI) - Mumbai and Makkal Kural (TAMIL) - Chennai .

40. ACKNOWLEDGEMENTS:

Your Directors wish to acknowledge all their stakeholders and are grateful for the excellent support received from the shareholders, bankers, and financial institutions, government authorities, esteemed clients, customers and other business associates. Your Directors recognize and appreciate the hard work and efforts put in by all the employees of the Company and their contribution to the growth of the Company in a very challenging environment.

For and on behalf of the Board,
(SANJAY KUMBHAT) (SARIKA KUMBHAT) (V.PREMALATHA) (S. MOHANRAJ)
Managing Director Director Chief Financial Officer Company Secretary
DIN:03077193 DIN:08032091 PAN: ANWPP2996F PAN: AANPM0947K
Block A, B Bungalow, Block A, B Bungalow, No. 3/568, Manaikara No. 9/1442, I Block,
No. 234, Doshi Royale, No. 234, Doshi Royale, Street,Perumuchi 1st Floor, 33rd Street,
Kilpauk Garden Road, Kilpauk Garden Road, Arakkonam, Anna Nagar West,
Chennai - 600 010. Chennai - 600 010. Vellore- 631002. Chennai - 600 040.
Place: Chennai
Date : 29.05.2023