mukunda industrial finance ltd Directors report

MUKUNDA INDUSTRIAL FINANCE LIMITED ANNUAL REPORT 2010-2011 DIRECTORS REPORT Dear Shareholders, Your Directors have pleasure in presenting the Companys 26th Annual Report together with the Audited Statement of Accounts for the year ended 31st March, 2011. 1. FINANCIAL PERFORMANCE: (Rs. in lacs) Particulars 31-03-2011 31-03-2010 1 Gross Income 16.14 29.10 2 Staff Cost and Operative Expenses 46.97 73.54 3 Interest 2.04 61.09 4 Profit (Loss) before Depreciation and Provisions (32.87) (105.53) 5 a) Depreciation 33.08 47.80 b) Deferred Revenue Expenditure 10.40 10.40 c) Deferred Tax - 19.40 d) Provisions as per RBI Norms - (97.22) 6 Profit (Loss) after tax for the year (76.35) (280.35) 7 Carried forward Loss (601.64) 525.29 The company has incurred a loss after tax of Rs. 76.35 lacs for the year as against a loss of Rs. 280.35 lacs in the previous year. No provision has been made for NPAs as against a provision of Rs. 99.22 lacs made in the previous year. There is a deferred revenue expenditure of Rs. 10.40 lacs in this year. Interest expenses for the year substantially declined to Rs. 2.04 lacs from Rs.61.09 lacs in the previous year due to non-provisioning of interest on deposits. There was a decrease in Depreciation, which was Rs. 33.08 lacs as against Rs. 47.80 lacs in the previous year. The carried forward loss now stands at Rs. 601.64 lacs. Your Directors regret their inability to recommend any dividend in view of the accumulated losses. 2) OPERATIONAL REVIEW This year the Company has incurred a Loss before depreciation, provisions and taxes to the extent of Rs. 32.87 lacs as against a Loss of Rs. 105.53 lacs in the previous year. NBFCs are facing basic questions about the viability of their business model. Several firms are finding it difficult to operate in an environment where money is scarce, defaults are becoming common, and asset-liability mismatches have become more the norm than the exception. At the heart of the problems being faced by NBFCs is the growing reluctance of banks to lend to such companies because the risks involved in doing so have increased. NBFCs have seen considerable business model shift over last decade because of regulatory environment and market dynamics. Majority of NBFCs were not able to face the pressure created on and were wiped out. However, over a period NBFCs have been able to expand their resource profile by diversifying the funding avenues. Further a strict control on asset quality and overheads, coupled with use of innovative borrowing tools such as securitization has resulted in improved profitability of NBFCs. As your company faces a serious liquidity crisis and of late has not been able to carry out any business activity the positive developments in the sector also will make sense only if the Company undergoes restructuring and resumes its normal business activities. 3. DEPOSITS The total public deposits as on 31st March, 2011, were Rs. 373.95 lacs as compared to Rs. 379.09 lacs as on 31st March, 2010. The interest rates as revised with effect from 21st December, 2007 were in force throughout the financial year. The rate of interest paid on public deposits is within the ceiling rate prescribed by RBI. As on 31st March, 2011, out of the public deposits, 627 accounts amounting to Rs. 335.16 lacs had matured for repayment and the claimed deposits could not be repaid due to the financial constraints. However, efforts are being made to repay these deposits at the earliest. In view of the directions of RBI, the Company, as a matter of policy, has stopped accepting fresh deposits with effect from 5th March 2009. After the Balance Sheet date (31.03.2011) the Reserve Bank of India vide its letter No. DNBS (BG) No. 1897/CMD / 01.02.166/2010-11 dated May 23, 2011, communicated to the Company that the Certificate of Registration has been cancelled under Section 45-IA(6) of the RBI Act, 1934. 4. RBI REGULATIONS The Company has generally complied with the applicable regulations of the Reserve Bank of India. Important Circulars/Directions issued by RBI from time to time are: a) Services to Persons with Disability: In terms of DNBS.CC.PD.No. 191/ 03.10.01/2010-11 dated July 27, 2010, NBFCs were advised that there shall be no discrimination in extending products and facilities including loan facilities to the physically/visually challenged applicants on grounds of disability and that they may also advise their branches to render all possible assistance to such persons for availing of the various business facilities. NBFCs were also directed to ensure redressal of grievances of persons with disabilities under the Grievance Redressal Mechanism already set up by them. b) Provision of 0.25% for standard assets of NBFCs: In terms of Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, and Non-Banking Financial (Non- Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, all NBFCs are required to make necessary provisions for non-performing assets. In the interests of counter cyclicality and so as to ensure that NBFCs create a financial buffer to protect them from the effect of economic downturns, RBI has decided to introduce provisioning for standard assets also. c) Regulation of excessive interest charged by NBFCs: The directions to NBFCs were issued by Reserve Bank of India on January 2, 2009 vide Notification No. DNBS. 204/ CGM (ASR)-2009. According to the said Notification the Board of each NBFC shall adopt an interest rate model taking into account relevant factors such as cost of funds, margin and risk premium etc., and determine the rate of interest to be charged for loan and advances. The rate of interest and the approach for gradations of risk and rationale for charging different rates of interest to different categories of borrowers shall be disclosed to the borrower or customer in the application form and communicated explicitly in the sanction letter. The rate of interest should be annualized rates so that the borrower is aware of the exact rates that would be charged to the account. The Company has a Manual of the Lending Policy as approved by the Board of Directors. d) Reclassification of NBFCs: Earlier, the classification of NBFCs was Equipment Leasing, Hire Purchase, Investment Companies and Loan Companies. Consequent upon reclassification by RBI, companies financing real/physical assets for productive/economic activity are to be classified as Asset Finance Company and the remaining companies will continue to be classified as loan/investment companies. In the new structure the categories emerge as Asset Finance Company, Investment Company and Loan Company. According to Circular No. DNBS.PD.CC No. 128/ 03.02.059/2008-09 dated September 15, 2008 it has been decided that erstwhile EL/HP NBFCs should duly supported by Statutory Auditors Certificate as on March 31, 2008 approach the Regional Office for appropriate classification latest by December 31, 2008 after which NBFCs which have not opted for the classification would be deemed to be loan companies. Since our company has been in the business of Leasing and Hire Purchase Financing and more than 60% of the operational income comprised of income from leasing and hire purchase activities and the companys fixed assets comprised more than 60% of leased assets, the Company was classified as AFC-D and a fresh Certificate of Registration bearing No. 02.00071 dated August 28, 2007 was issued by the RBI. However, subsequently the Company has been classified as a Loan Company by the Reserve Bank of India vide its letter DNBS (BG) No. 2774/01.02.166/2009-10 dated 8th March, 2010. e) Monitoring of frauds in NBFCs: RBI had issued Company Circular No. 121 dated July 1, 2008, which was revised on August 14, 2008 vide Circular No. DNBS.PD.CC. No. 127/03.10.42/2008-09. As a result, NBFCs may also report frauds perpetrated in their subsidiaries and affiliates/joint ventures. Updated guidelines for reporting frauds to RBI, Board and the police were issued alongwith the Circular. Obligations of NBFCs under Prevention of Money Laundering Act (PMLA), 2002: NBFCs were advised by RBI vide Circular DNBS(PD).CC 68/03.10.042/200506 dated April 5, 2006 to go through the provisions of PMLA, 2002 and the Rules notified there under and take all necessary steps to ensure compliance with Section 12 of PMLA, 2002 and report information in respect of all transactions referred to in Rule 3 to the Director, Financial Intelligence Unit-India (FIU-IND). NBFCs were also advised to ensure electronic filing of Cash Transactions Report (CTR) and Suspicious Transactions Report (STR) to FIU-IND. CTR should contain only the transactions carried out by the NBFCs on behalf of their clients/customers excluding transactions between the internal accounts of the NBFC. All cash transactions, where forged or counterfeit Indian currency notes have been used as genuine should be reported to FIU- IND immediately in the prescribed format. These cash transactions should also include transactions where forgery of valuable security or documents has taken place and may be reported in plain text form. No transaction of suspicious nature or otherwise reportable has come to the notice of the Company. The Prevention of Money Laundering (Amendment) Act, 2009 has come into force with effect from June 01, 2009 as notified by the RBI vide DNBS(PD). CC 164/03.10.042/ 2009- 10 dated November 13, 2009. In terms of Sub-Section 2(a) of Section 12 of The Prevention of Money Laundering (Amendment) Act, 2009, the records referred to in clause (a) of Sub-Section (1) of Section 12 shall be maintained for a period of ten years from the date of transaction between the clients and the banking company and in terms of Sub-Section 2(b) of Section 12 of the Act ibid, the records referred to in clause (c) of Sub-Section (1) of Section 12 shall be maintained for a period of ten years from the date of cessation of transaction between the clients and the banking company. Accordingly, in modification of paragraph 4 of the Master Circular No.152/03.10. 42/2009-10 dated July 1, 2009, NBFCs were advised to maintain for at least ten years from the date of transaction between the NBFC and the client, all necessary records of transactions. However, records pertaining to the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, utility bills etc.) obtained while opening the account and during the course of business relationship, would continue to be preserved for at least ten years after the business relationship is ended. f) Investments in FDs of SIDBI and NABARD: RBI amended the earlier Directions issued vide Notification No. DFC.121/ED(G)-98 dated January 31, 1998 by new Notification No. DNBS (PD).205/CGM(PK)-2009 dated February 13, 2009 issued to all NBFCs accepting public deposits so as to allow investments in fixed deposits of SIDBI and NABARD for meeting the requirements of Section 45IB of Reserve Bank of India Act, 1934. However, the aggregate of the amount invested in unencumbered approved securities, term deposits and the bonds shall not be less than 15% of public deposits, as earlier. g) NBFCs Auditors Report : The directions to the auditors of Non-Banking Financial Companies were issued by Reserve Bank of India on January 2, 1998 vide Notification No. DFC.117/DG (SPT)-98. The Directions have been consolidated and in supersession of the said Directions viz. the Non- Banking Financial Companies Auditors Report (Reserve Bank) Directions, 1998 the new Directions were issued vide Notification No. DNBS(PD)201/DG(VL)/2008 dated September 18, 2008. According to the new Directions, in addition to every report made by the auditor under Section 227 of the Companies Act, 1956 on the accounts, the auditor shall also make a separate report to the Board of Directors of the Company on the specified matters. Where, in the Auditors Report, there is any unfavourable or qualified statement or in the opinion of the auditor the company has not complied with specified provisions and/or about the non-compliance, it shall be the obligation of the auditor to make a report containing the details of such statement to the concerned Regional Office of the Department of Non-Banking Supervision of the Reserve Bank of India under whose jurisdiction the registered office of the company is located. The Auditors Report dated 5th December, 2011 made as per the said directions does contain a few unfavourable or qualified statements, some of which are similar to the ones mentioned in the Auditors Report to the members of the Company and replies thereto have been given in this Report elsewhere. 5. DIRECTORS Sri Niranjan Gupta and Dr. Diliprao More resigned from the Board with effect from 14th June, 2011. The Board places on record its appreciation for their contribution and support during their tenure of office. Pursuant to Section 260 of the Companies Act, 1956 and Article 96 of the Articles of Association of the Company the Board of Directors appointed Sri M.S. Bhanuprakash and Sri H.M. Prashanth as Additional Directors with effect from 14th June, 2011. They are proposed to be appointed as Directors in the ensuing Annual General Meeting. A brief profile of the Directors is given in the Explanatory Statement to the Notice convening the Annual General Meeting. Necessary resolutions are submitted for your approval. 6. AUDITORS The statutory auditors M/s. Venkat & Vasan, Chartered Accountants, hold office until conclusion of the ensuing Annual General Meeting and are recommended for re-appointment. A certificate from the auditors has been received to the effect that the re-appointment, if made, would be in accordance with Section 224(1B) of the Companies Act, 1956. REPLY TO AUDITORS QUALIFICATIONS/RESERVATIONS The auditors have commented in point no. 1.d. of the Annexure to Auditors Report that the management has capitalised under fixed assets Accumulated Lease Equalisation Net of Lease Adjustment Account to the extent of Rs. 47.01 lacs, which in their opinion should have been written off. Your Directors have to state that the capitalisation was not done during the current year but has been brought over a period of several financial years consistently in accordance with the Companys accounting policy. However, the management has decided to consider the recommendation of the auditors in the future years depending on the profitability of the Company keeping in view recognition of income as per AS-19 effective from 1.4.2001 and prior to 1.4.2001 and live and extended leases and realisation on transfer. In point no. 3.d. of the Annexure to Auditors Report the auditors have commented that there are overdue amounts in respect of loans/deposits given by the Company as specified in Notes on accounts under point 2(d). Your Directors have to state that the interest on ICDs has not been recognised in view of the fact that the amount is no longer realisable. With regard to item 6 of the Annexure to Auditors Report your Directors have to state that all efforts are being made for repayment of deposits and interest on deposits received from small depositors under section 58AA of the Companies Act, 1956. Necessary steps will be taken to comply with the provisions of applicable laws. Similarly, the Company will comply with the directives issued by the Reserve Bank of India vide their letter No. 2774/ 01.02.166/2009-10 dated 8.3.2010. With regard to item 7 of Annexure to Auditors Report that no internal audit or EDP audit was carried out during the financial year, your Directors have to state that in view of the fact that the Company was incurring losses it was not considered expedient to continue with the internal audit system as it was expensive. However, necessary steps will be taken to resume the internal audit in future. The auditors have listed out and commented in point no 9(a) of annexure of their CARO report that statutory dues of PF, ESI, Profession Tax, TDS and KVAT amounting to Rs. 24.41 lacs have not been paid. Your directors have to state that the Company has since paid the KVAT dues of Rs. 5.12 lacs, however the other statutory dues could not be paid due to acute financial stringency faced by the Company and lack of working capital. The Company continues to face serious problems in respect of working capital. However, the management has issued instructions to the concerned department of the company to remit the dues on priority. The internal accruals of the Company have considerably reduced. All these factors made financial situation of the company very critical and the Company had to approach its bankers for one time settlement as a part of corporate debt restructuring to resolve the liquidity crisis. However, it will be the endeavour of the company to make payment of above dues once the Company recovers from the current liquidity crisis. In point no. 10 the Auditors have commented about non-provisioning of Rs. 440.63 lacs in respect of unsecured and doubtful advances and deposits, Net Investment on lease of Rs. 280.37 lacs and Rs. 16.36 lacs in respect of interest on deposits. Your Directors are of the opinion that some of these advances are still good in nature and would be recovered in due course. However, suitable provisions will be made in the future years depending on profitability of the Company to comply with the recommendation of the Auditors. The Auditors have commented in point no. 11 of Annexure of their report that the Bank (ING Vysya Bank Ltd) has filed a suit before the Debt Recovery Tribunal and obtained a decree against the Company. Your Directors have to state that the Company has already settled the dues to ING Vysya Bank Ltd under One Time Settlement scheme and the Bank has withdrawn the suit. The Company has also approached Karur Vysya Bank Ltd for One Time Settlement of their dues and the Bank has accepted our request. 7. PARTICULARS OF EMPLOYEES None of the employees of the Company employed throughout the year or part of the year is in receipt of remuneration exceeding the limit prescribed under section 217(2A) of the Companies Act, 1956. 8. ADDITIONAL INFORMATION Particulars pursuant to section 217(1)(e) of the Companies Act, 1956 and Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988. A. CONSERVATION OF ENERGY AND TECHNOLOGY The Company has no activity relating to consumption of energy or technology absorption. B. FOREIGN EXCHANGE EARNING AND OUTGO There was no foreign exchange earning or outgo during the year. 9. STATUTORY DISCLOSURE None of the Directors of the company is disqualified under the provisions of Section 274(1)(g) of the Companies Act, 1956. Your Directors have made necessary disclosures as required under various provisions of the Companies Act, 1956 and Clause 49 of the Listing Agreement. 10. DIRECTORS RESPONSIBILITY STATEMENT The directors accept the responsibility for the integrity and objectivity of the Profit & Loss Account for the year ended March 31, 2011 and the Balance Sheet as at that date. As required under Section 217(2AA) of the Companies Act, 1956, the Directors of the Company hereby state that 1. In preparation of Annual Accounts for the year 2010-11, applicable Accounting Standards have been followed along with the proper explanation relating to material departures. 2. They have 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 loss of the Company for that year. 3. They have 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. 4. They have prepared the annual accounts on a going concern basis. 11. CORPORATE GOVERNANCE A Report on Corporate Governance is given as Annexure-B to this report. 12. MANAGEMENT DISCUSSION AND ANALYSIS The Report on Managements Discussion and Analysis forming part of this Annual Report is given as Annexure - A to this report. 13. ACKNOWLEDGEMENT Your directors take this opportunity to place on record their appreciation for the support and co-operation extended by all the shareholders, depositors, hirers, lessees, other customers, bankers and look forward to their continued cooperation. Your directors also wish to place on record their appreciation for the support and cooperation extended by every member of Mukunda family at all levels and look forward to their continued support. On behalf of the Board of Directors B.R. Viswanath Setty Chairman, & Managing Director Place: Bangalore Dated: 5th December, 2011 ANNEXURE- A MANAGEMENT DISCUSSION AND ANALYSIS 1) INDUSTRIAL STRUCTURE AND DEVELOPMENT The Indian economy has continued to recover robustly in 2010-11, recording one of the fastest growth rates in the world and climbing back to near pre- crisis levels. Growth in the current fiscal is broad based, which portends well for a stronger than estimated economic prospect. Abundant late rainfall is ensuring a rapid recovery in agriculture, boosting supply, and will lower inflation which has finally turned downwards. Externally, both exports and imports registered strong growth, supporting economic activity. This was accompanied by record inflows of capital that were attracted by faster growth; in turn, they financed (and were well utilized) by slightly larger current account deficits (CAD). Stock markets gained (although they remained relatively volatile) and credit growth was sustained. The Governments policy responses played a crucial role in supporting this path of sustained recovery with greater stability. The Governments policy response included a carefully balanced mix of gradual exit from fiscal stimulus measures to allow private- sector recovery more space, while not withdrawing stimulus support too abruptly; faster adjustment of monetary policies to ensure that persistent inflationary pressures abate; and enhanced public spending directed at expanded and targeted social spending and critical infrastructure needs to ensure jobs and incomes. The global economy grew at 3.7% in 2010-11, belying earlier expectations of higher growth. While the Asian economies, with the exception of Japan, grew in excess of 7%, the developed economies such as the US, UK and Europe reported lower growth in the range of 3 to 4%. The Asian economies, it may be recalled, were less affected by the recession during the last two years thereby enabling a faster return to normalcy. Further, these economies were supported by strong domestic demand and rapid growth in service exports. The Japanese economy, which was slowly progressing towards recovery, was badly affected by the recent earthquake, tsunami and nuclear accidents. These tragedies are likely to affect the global economy as well, especially the automobile sector. All the emerging economies were impacted by rising oil, food and commodity prices forcing several Central Banks to take a series of anti-inflationary measures. Indias GDP growth in 2010-11 has been estimated at 8.6% with the agriculture, industry and services sectors registering growth rates of 5.4%, 7.8% and 9.5% respectively. GDP growth is estimated to average 8.2% over the 11th Plan as against 7.7% during the previous Plan. Though the performance fell short of the 9% target at the beginning of the Plan, it is to be viewed in light of the unprecedented crisis which derailed the global economy. GDP growth during the 12th Plan period has been indicated in the range of 9 to 9.5%, reflective of the growth imperatives of an emerging economy. According to the Economic Survey 2010-11, it has been reported that NBFCs as a whole account for 11.2 per cent of assets of the total financial system. With the growing importance assigned to financial inclusion, NBFCs have come to be regarded as important financial intermediaries particularly for the small-scale and retail sectors. In the multi-tier financial system of India, importance of NBFCs in the Indian financial system is much discussed by various committees appointed by RBI in the past and RBI has been modifying its regulatory and supervising policies from time to time to keep pace with the changes in the system. NBFCs have turned out to be engines of growth and are integral part of the Indian financial system, enhancing competition and diversification in the financial sector, spreading risks specifically at times of financial distress and have been increasingly recognized as complementary of banking system at competitive prices. The Banking sector has always been highly regulated, however simplified sanction procedures, flexibility and timeliness in meeting the credit needs and low cost operations resulted in the NBFCs getting an edge over banks in providing funding. Since the 90s crisis the market has seen explosive growth, as per a Fitch Report the compounded annual growth rate of NBFCs was 40% in comparison to the CAGR of banks being 22% only. NBFCs have been pioneering at retail asset backed lending, lending against securities, microfinance etc., and have been extending credit to retail customers in under-served areas and to unbanked customers. This year has been one of the most challenging years and the Company faced a lot of challenges due to internal and external factors associated with the business. 2) RISKS AND CONCERNS Your company lays great emphasis on risk management, primarily in the areas of credit risk, interest rate and liquidity risk and operational risk. Lending involves a number of risks, largely related to the credit- worthiness of the borrowers. Credit risk involves inability or unwillingness of a customer or his guarantor to meet their commitments. This is inherent and most dominant of the risks in the financing business. The credit risk to which the company is exposed is minimized by following the prudential norms prescribed by Reserve Bank of India and the comprehensive credit policies laid down by the Board of Directors of the Company. The Credit and Recovery Committees constituted by the Board generally monitor the risk management framework on an ongoing basis with a view to ensure that risk parameters are within defined limits. However, as the Company was unable to generate any significant business during the financial year these Committees did not function. The Company has a standardized framework for evaluating loan proposals. The proposals are evaluated on various quantitative and qualitative parameters. The loan portfolios are continuously monitored post disbursement, to proactively address credit related issues and initiate appropriate measures for recovery. By following the above norms and the policies and decisions of the Board Committees, the Company is able to minimize the credit risks by resolving aspects relating to asset concentration, client and group exposure, prudential limits, various financial parameters, standards for Security, guarantee and collaterals. The company reviews the lending rates and the interest rate paid on deposits accepted by the company regularly in order to minimize the Interest Rate Risks and also to be competitive in lending and to ensure that the company has required funds for its business activities. The Investments of the company may be grouped as Statutory Liquid Reserve (SLR) Investment and Other Investments. The Company is required to maintain SLR Investments, as per RBI directions @ 15% of the public deposits in government and other specified securities. Both SLR and other investments are closely monitored to mitigate the risks arising there from and timely decisions are taken about such investments keeping in view the statutory requirement and the objective is to strike a balance between risk and return. The assets of the company have also been covered by Insurance. The financial sector industry is becoming increasingly competitive and the Companys growth will depend on its ability to compete effectively. Multinational Banks, Financial Institutions and Private Sector Banks have also entered into retail business and vehicle financing. These institutions have huge capital base and wide network. If the NBFCs are to compete with them, they need to have equity funds to match with their plans/ expansions. Moreover, your Company is undergoing a severe financial crisis. 3) INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY Your Company believes that internal control is a necessary concomitant of the principle of governance that freedom of management should be exercised within a framework of appropriate checks and balances. Your company remains committed to ensuring an effective internal control environment that provides assurance on the efficiency of operations and security of assets. The company has defined organizational and authority structure, and an in- built Internal Control System covering all the activities of the company, supported by efficient integrated computer system. All the activities of the company are covered by policy guidelines. The Internal Control system in the company ensures that all the transactions are properly authorised, after which they are recorded and reported accurately and they also ensure optimum utilization of the resources of the company and they have been tested for their effectiveness or relevancies periodically which ensure efficiency at all times. The internal control procedures are periodically analyzed and redefined. The Audit Committee reviews, inter alia, the adequacy and effectiveness of the internal control environment. The Internal Control Systems are upgraded to keep them at par with best practices. 4) HUMAN RESOURCES Our people are our biggest asset and we are proud of our team members at all levels within your Company. The companys employees are from varied fields of knowledge and experience. The Company believes that the growth of the company, to a large extent is dependent on the quality of its employees. The employees have been provided with opportunities for acquiring new skills and competencies, which help them to increase, both their personal and career growth. They have also been encouraged to work across multiple functions and disciplines. We are not inducting any new staff to allow natural attrition to downsize. We are thankful to our reduced team which has been working with dedication to beat the downturn. We hope to reward them more handsomely as soon as the situation permits. As on 31st March, 2011 the strength of the employees of the company was 14. 5) OPPORTUNITIES AND FUTURE PROSPECTS The high growth in disbursements that the asset financing NBFCs enjoyed during the earlier boom period now moderated largely due to the meltdown in the automobile sector. The fortunes of these companies predominantly rested on the auto sector (commercial vehicles, two wheelers and three wheelers) which witnessed significant fall in volumes. As in the case of banks, the asset quality of the NBFCs too has seen slippages in the last fiscal year. Their portfolio is secured in the form of asset financed by them which would help them limit their credit losses. But provisions for bad debts affected their profits. It is expected that asset quality may get worse before getting better. The company is exploring the avenues for expanding the business operations mcluding franchisee business, mterisifying marketing activities for identifying a larger pool of prospective customers and strengthening the recovery division through well experienced personnel. 6. DISCLAIMER The information and opinion expressed in this section of the annual report consists of certain forward looking statements which the Management believes are true to the best of its knowledge. The Management shall not be liable for loss which may arise as a result of any action taken on the basis of the information contained herein. On behalf of the Board of Directors B.R. Viswanath Setty Chairman and Managing Director Place: Bangalore Dated: 5th December, 2011