Mercantile Ventures Ltd Directors Report.

Your Directors are pleased to present the Annual Report and the Audited Financial Statements of the Company for the year ended 31 March 2020.

1. REVIEW OF OPERATIONS

The financial results for the year ended 31 March 2020 have been prepared in accordance with Indian Accounting Standards. During the year the company has reported a profit before tax and other comprehensive income of Rs. 686.80 lakhs (previous year Rs. 405.52 lakhs) and total comprehensive income of Rs. (142.73) lakhs (previous year Rs. 1365.11 lakhs).

2. FINANCIAL RESULTS

(Rs.Lakhs)

Description 2019-20 2018-19
Profit/(Loss) Before Interest & Depreciation 802.73 560.24
Interest 20.24 51.74
Depreciation 95.69 102.98
Profit/(Loss) Before Tax & Exceptional items 686.80 405.52
Exceptional items - -
Profit/(Loss) Before Tax 686.80 405.52
Provision for taxation Current tax 187.06 149.47
Deferred tax (354.00) (26.61)
Share of profit from LLP 731.71 -
Profit/(Loss) After Tax 1585.45 282.66
Other Comprehensive Income (1728.18) 1082.45
Total Comprehensive Income for the year (142.73) 1365.11
Amount transferred to reserves, if any Nil Nil

3. DIVIDEND

The Board of Directors has not recommended any dividend for the year as the profits are conserved to fund the future plans of the Company.

4. SHARES

The Company has not bought back any of its shares during the year under review. The Company also has not issued any sweat equity shares, bonus shares or stock option scheme during the year under review.

5. FIXED DEPOSIT

The Company has neither accepted nor renewed any deposits during the year under review.

6. MATERIAL CHANGES AND COMMITMENTS

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statement relates and the date of this report

7. CHANGE IN NATURE OF BUSINESS, IF ANY;

The Company has commenced the facility management and manpower supply services business during the financial year.

8. SUBSIDIARIES & ASSOCIATES

The Company monitors the performance of subsidiary company inter-alia, by the following means:

a) The Company has one material unlisted Indian subsidiary and compliance requirements as per SEBI (LODR) Regulations, 2015 has been ensured.

b) During the year the company became entitled to 92.21% of the voting rights of India Radiators Limited due to non-receipt of preference dividend for 2 years pursuant to sub section (2) of section 47 of the Companies Act 2013. Accordingly India Radiators Limited became a subsidiary of Mercantile Ventures Limited.

c) The Audit Committee reviewed the financial statements, in particular, the investments made by the unlisted subsidiary company.

d) Our Company formulated a policy on material subsidiary as required and uploaded in the website of the Company in the link "http://www.mercantileventures.co.in"

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements were prepared in accordance with section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies [Accounts] Rules, 2014. Also a separate statement containing the salient feature of the financial statements of the subsidiaries and associate in Form AOC-1 is attached to the financial statements.

PERFORMANCE AND FINANCIAL POSITION OF THE SUBSIDIARIES AND ASSOCIATES

As at the year end, the Company had one Wholly Owned Subsidiary, two Subsidiaries and one Associate entity. The detailed financials of all these Subsidiaries / Associates have been consolidated and the financial and other information have been furnished in the Consolidated Financial Statement (CFS) attached to this Report.

(Rs. in lakhs)

Particulars i3 Security Services Pvt Ltd India Radiators Limited $ Subsidiaries Chitaranjan Developers LLP National Trust Housing Finance Ltd Associate
% of shareholding held by MVL 100.00% 92.21 % 98.00% 49.00%
( voting right ) (Share of profits)
Total Income 2258.68 196.44 770.24 4423.57
Profit before tax 102.72 50.12 746.65 (141.43)
Current Tax 13.58 - - 157.55
Deferred tax liability 1.36 (144.96) - (779.13)
Profit / (Loss) after tax 87.78 195.08 746.65 480.15
Other Comprehensive Income (219.59) (665.10) - 11.08
Total Comprehensive Income (131.81) (470.02) - 491.23

$ The Company became entitled to 92.21% of voting rights in India Radiators Limited due to non-receipt of dividend for the period of 2 years for the investment made in 9% Cumulative Redeemable Preference Shares.

9. 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, 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 the year ended 31 March 2020;

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 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. Internal financial control means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business including adherence to 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 information and

f. The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

10. DISCLOSURE ON COMPLIANCE WITH SECRETARIAL STANDARDS

Your Directors confirm that the Secretarial Standards issued by the Institute of Company Secretaries of India, have been complied with.

11. DIRECTORS & KEY MANAGERIAL PERSONNEL:

The Companys Board comprises of the following directors:

Mr. A. L Chandramouli,

Mr. B Narendran,

Ms. Sashikala Srikanth,

Mr. G D Sharma,

Mr. K Gopalakrishnan and

Mr. E N Rangaswami.

The Board of directors appointed Mr. K Gopalakrishnan and Mr. G D Sharma as additional directors on 12 June, 2020.

A statement regarding integrity, expertise and experience proposed independent director Mr. G D Sharma:

Mr. G D Sharma, is a Post Graduate in Personnel Management & Industrial Relations from Tata Institute of Social Sciences, is a Senior HR professional with over 39 years experience across industry verticals. He has enrolled himself in the online databank maintained by the institute.

The Key Managerial personnel of the Company are: Mr. E N Rangaswami - Whole-time Director, Mr. V Padmanabha Sarma - Chief Financial Officer and Mr. S. Yoganandhan Company Secretary.

12. BOARD AND COMMITTEE MEETINGS

The Company had six board meetings during the financial year under review. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. Details of the Board and Committee meetings are given in the Corporate Governance Report.

13. CORPORATE GOVERNANCE

A report on Corporate Governance as stipulated under Schedule V and Regulation 34(3) of the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015 forms part of this Annual Report. The requisite certificate from a practicing company secretary confirming compliance with the conditions of corporate governance as stipulated is annexed to this Report.

14. COMPANYS POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND DISCHARGE OF THEIR DUTIES

The Companys Policies relating to appointment of directors, payment of managerial remuneration, directors qualifications, positive attributes, independence of directors and other related matters as provided under Section 178(3) of the Companies Act, 2013 are uploaded in the website of the Company in the following links. https://www.mercantileventures.co.in/wp-content/uploads/2019/07/CRITERIA-FOR-APPOINTMENT-OF-INDEPENDENT-DIRECTORS.pdf, https://www.mercantileventures.co.in/wp-content/uploads/2019/07/Remuneration-Policy.pdf The Remuneration policy also forms part of the Corporate Governance Report

15. FAMILIARIZATION PROGRAM

The details are provided in the Corporate Governance report and on the website of the Company.

16. BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015, the Boards performance and performance of the non-independent Director were considered/evaluated by the independent directors at their meeting without the participation of the non-independent director and key managerial personnel.

They also assessed the quality, quantity and timeliness of flow of information between the Companys Management and that are necessary for the Board to effectively and reasonably perform its duties.

Pursuant to the provisions of the Companies act, 2013 and Regulation 17 of SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its various committees.

17. Internal Control Systems & their adequacy

Companys Internal Control System has been designed to provide for:

• Accurate recording of transactions with internal checks and prompt reporting.

• Adherence to applicable accounting standards and policies.

• Compliance with applicable statutes, management policies and procedures.

• Effective use of resources and safeguarding of assets.

The Internal audit was carried out periodically through a practicing chartered accountant. The observations arising out of the audit were periodically reviewed and compliance ensured. The summary of the internal audit observations and management responses were submitted to the Board after review by the Audit Committee.

18. FRAUDS REPORTED BY AUDITORS AS PER SEC 143 (12) OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT.

There were no frauds reported by auditors in their report.

19. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

All transactions entered by the Company with related parties were in the ordinary course of business and at arms length pricing basis. There were no materially significant transactions with related parties during the financial year 2019-20 which were in conflict with the interests of the Company.

The Board has approved the policy on related party transactions.

Details of transaction with related parties as required under Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 are provided in form AOC-2 and attached to the financial statement.

There are no transactions with entity belonging to promoter/promoter group which hold(s) 10% or more shareholding in the Company.

The policy has been uploaded on the Companys website, under the web link: http://mercantileventures.co.in

20. AUDITORS STATUTORY AUDITORS

M/s. DPV & Associates, Chartered Accountants have been appointed as the auditors of the company at the 16th Annual General Meeting to hold office till the conclusion of the 21st AGM to be held in the year 2022 as per Section 139 of the Companies Act, 2013.

SECRETARIAL AUDITOR

The Company has appointed Mr. R Kannan, Company Secretary in practice to undertake the Secretarial Audit of the Company.

The Report of the Secretarial Auditor is annexed to this report.

COST AUDITOR MAINTENANCE OF COST RECORDS

The business activity of the Company is not covered under rule 3 of The Companies (Cost Records and Audit) Rules, 2014. Accordingly, the maintenance of cost records under section 148(1) of the Companies Act, 2013 is not applicable.

21. RISK MANAGEMENT.

The Risk Management Committee has been formed comprising Ms. Sashikala Srikanth, Director as Chairperson of the committee and the other members are Mr. E N Rangaswami, Whole-time Director and Mr. V. Padmanabha Sarma, Chief Financial officer. Risk Management Committee ensures that the Company has an appropriate and effective risk management system which carries out risk assessment and ensures that risk mitigation plans are in place by validating the same at regular intervals. The Committee met periodically to study the risks, threats & concerns and submitted reports to the Board of Directors.

22. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The particulars of Loans, guarantees and investments covered under section 186 of the Companies Act 2013 are provided in the notes to the financial statements.

23. SEXUAL HARASSMENT

The Company has zero tolerance for sexual harassment at workplace. A policy is in place and an Internal Complaints Committee has been constituted which is monitoring the prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of POSH and the Rules made there under. There were no complaints reported under the POSH during the year under review.

24. AUDIT COMMITTEE AND WHISTLE BLOWER POLICY

The Audit Committee consists of three independent directors: Mr. AL Chandramouli, Mr. B Narendran and Ms. Sashikala Srikanth

As required under Section 177 of the Companies Act 2013, the Company has established Whistle Blower policy and the same has been uploaded in the following web link. https://www.mercantileventures.co.in/wp-content/uploads/2019/07/Whistle-blower-policy.pdf

25. CORPORATE SOCIAL RESPONSIBILITY

The company has complied with the provisions of Corporate Social Responsibility. The CSR Policy related disclosures are annexed to this report.

26. ANNUAL RETURN

The extracts of annual return in Form MGT 9 pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is annexed to this report.

The copy of annual return has been uploaded on the Companys website, under the web link: http://mercantileventures.co.in.

27. PARTICULARS OF EMPLOYEES

The Company has no employee whose salary exceeds the limits as prescribed under Rule (5)(2) of Companies (Appointment and

Remuneration of Key Managerial personnel) Rules, 2014

28. TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO Conservation of Energy and Technical Absorption:

The business of the Company is leasing of immovable properties. The particulars prescribed under Section 134 of the Companies Act, 2013 read with rule 8 (3) of the Companies (Accounts) Rules, 2014, relating to conservation of energy and technology absorption are not applicable to the business operations of the Company.

Foreign Exchange Earnings and Outgo:

(a) Foreign Exchange Inflow: Nil

(b) Foreign Exchange Outflow: Nil

29. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS OF THE COMPANY

There are no significant and material orders passed by the regulators or courts or tribunals which would impact the going concern status of the Company.

30. QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR REPORTS

There were no qualifications, reservations or adverse remarks in the reports of M/s DPV & Associates, Statutory Auditors and Mr. Kannan, Secretarial Auditor.

31. DECLARATION OF INDEPENDENT DIRECTORS

The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves for the continuance / appointment as independent directors under the provisions of the Companies Act, 2013 and the relevant rules.

32. MANAGEMENT DISCUSSION AND ANALYSIS REPORT Covid-19 Scenario

The Coronavirus pandemic has adversely affected the economy of the world in general. The management believes it has of the company. The functional and intensity of the considered all the factors that could impact the financial pandemic is uncertain. The management will continuously monitor the macro economic scenario as it plays out and take the appropriate action.

a) Industry Scenario

The leasing business and manpower supply business continues to be stable in the current fiscal year. However, in view of the Covid-19 pandemic the real estate market would be impacted.

b) Opportunities and Threats

Having assumed necessary security and discipline with the introduction of RERA, it is expected to create a platform for further growth in the real estate sector.

c) Segment-wise or produce-wise performance

The company is operating in leasing of properties and Manpower supply services.

During the year the Company had entered into facility management and man power supply services business. The prospects for this line of business is considered good and the company is expected to generate decent revenue from the aforesaid activities.

d) Future Outlook and state of the companys affairs

The main business of the Company is investment in properties for leasing and Manpower supply services. The revenue stream from the operations is expected to remain stable in the current fiscal year.

e) Risk and concerns

As per the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015, the Risk Management Committee has to be set up by top 100 listed entities, determined on the basis of market capitalisation, as at the end of the immediate previous financial year. As per this regulation the Company is not required to constitute a Risk Management Committee. The Company however has constituted a Risk Management Committee to constantly review the technical and commercial risks the company has to face so that the interests of the shareholders are protected.

f) Internal control systems and adequacy.

The company has an adequate internal control system.

g) Material developments in Human Resources / Industrial Relations front, including number of people employed. - Nil

h) Details of significant changes in key financial ratios (Change of 25% or more as compared to the immediately previous financial year).

During the year, on a standalone basis the significant changes in the financial ratios of the Company, which are more 25% as compared to the previous year are summarized below:.

Standalone
Financial ratio FY 19-20 FY 18-19 Change % Reason for change
Debtors turnover ratio 7.14 4.18 70.62 Manpower service activity started in May-19.
Interest coverage ratio 34.93 8.84 295.27 Increase in profit due to manpower service activity and due to repayment of loan.
Net profit margin 41.34 29.32 41.00 Starting of manpower activities during the year and reduction in other expenses.

i) Any change in return of net worth as compared to the immediately previous financial year.

The details of return of net worth as compared to the immediately previous financial year are provided in the financial statements.

INFORMATION PURSUANT TO RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014.

The ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year – 2019-20 Mr. E N Rangaswami, Whole-time Director 7.49
The percentage increase in remuneration of each director, Mr. E N Rangaswami, Whole-time Director -
Mr. V Padmanabha Sarma, Chief Financial Officer 19.78
Chief Financial Officer, Company Secretary in the financial year – 2019-20. Mr. S Yoganandhan, Company Secretary. 17.61
The percentage decrease in the median remuneration of employees in the financial Year 2019-20. 5.71
The number of permanent employees on the rolls of Company as on 31.03.2020 3
Average percentage increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentage increase in the managerial remuneration and justification thereof Average percentage decrease already made in the salaries of employees other than the key managerial personnel in the FY 2019-20. 18.80
Average percentage increase already made in the salaries of the key managerial personnel in the FY 2019-20 5.51

INFORMATION PURSUANT TO RULE 5(2) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014: DETAILS OF EMPLOYEES IN TERMS OF REMUNERATION RECEIVED DURING THE YEAR

Details of top 10 employees in terms of remuneration received during the year.

Name Designation Remuneration Qualification Experience Date of Joining Age Last Employment
(Rs. in Lakhs)
E N . Rangaswami Whole-Time Director 48.00 B.Sc., ACA 41 Years 05/12/2012 64 Manali petrochemicals Ltd, General Manager (Finance)
V Padmanabha Sarma Chief Financial Officer 16.65 B.Com., ACA 44 Years 01/12/2012 70 MCC Finance Ltd, Senior Vice president Proactive Solutech
S. Yoganandhan Company Secretary 6.41 B. Com., ACS 11 Years 02/11/2018 33 India Private Limited
V M Aruncahalam Assistant Manager (Accounts) 7.96 B.Com., 32 Years 12/06/2013 53 Company Secretary SPIC SMO, Accounts Manager
L S Venkataraman Assistant Manager (Accounts) 5.49 BA., 43 Years 09/11/2012 67 Manali Petrochemicals Ltd, executive
Gopichand Koduri Asst. Manager 1.47 B.Com CA (Inter) 7 Months 09/12/2019 24 IBM India Private Ltd.

Note –

1. As per the disclosure available with the Company, none of the above employees is related to any director and does not hold any shares in the Company except Mr. V. Padmanabha Sarma.

2. The remuneration shown above includes contributions to provident and other funds.

AFFIRMATION THAT THE REMUNERATION IS AS PER THE REMUNERATION POLICY

Company is adopting remuneration guidelines for fixing the remuneration as per the Remuneration policy.

ACKNOWLEDGEMENT

Your directors express their grateful thanks for the assistance, co-operation and support extended to the Company by promoters, shareholders and the bankers and appreciation for their continued support. The Directors also place on record their appreciation of the good work put in by the employees of the company.

By order of the Board
For Mercantile Ventures Limited
E N Rangaswami B. Narendran
Place: Chennai (DIN: 06463753) (DIN 01159394)
Date: 13 August 2020 Whole-time Director Director