sbi home finance ltd Directors report

SBI HOME FINANCE LIMITED ANNUAL REPORT 2007-2008 DIRECTORS REPORT To the Members The Directors present the Twentieth Annual Report of the Company along with Audited Accounts for the year ended March 31, 2008. Financial Results (Rs. in Lacs) Particulars For the year ended 31st March 31st March, 2008 2007 Profit (Loss) before Tax (1824.58) (481.69) & Prior period Adjustments Provision for Tax - - Prior period adjustments (Net) - 14.38 Profit (Loss) after Tax (1824.58) (467.31) Transfer from - - Special Reserve Balance brought forward - - from General Reserve Balance brought forward (29407.77) (28940.46) from previous year Appropriations Adjustment against Special Reserve 276.25 - Transfer to General Reserve - - Proposed Dividend - - Dividend Tax - - Balance remaining in the Profit and Loss Account (30956.10) (29407.77) (30956.10) (29407.77) Dividend In the absence of profit, the Directors ale unable to recommend any dividend for the financial year ended 31st March 2008. Operations Having regard to the fact that the company lost its going concern status since a long time and that a conscious decision was taken to stop business operations, its major activities revolved round the expeditious realisation of the assets /receivables created and deconstruction of the liabilities/ provision contracted made in the past and discharging its maintenance function at low cost. As a result income generated by the company mostly represented the interest earned on realised funds temporarily parked with the Bank as fixed deposits and expenses covered the truncated needs of overheads, wages etc. There is, therefore, no performance indicator to highlight or to make any normal inter temporal comparison of the companys working results and other parameters from year to year. However, the net loss of the company increased during the year from Rs4.67 crores in the last year to Rs18.25 crores, as the earnings on realisations from receivables was not as huge as it was in the previous year. The total income for the year ended 31st March 2008 was Rs101.98 lacs. The Company paid off a sum of Rs.5.53 crores to State Bank of India as a portion of its current interest dues on loans taken from them. A look at the individual items of the profit and loss account of the company from year to year would also generally reveal a steady downward trend indicating that the companys control over administrative expenses had been quite strict. It would also be worth mentioning that with a view to taking the benefit of the provisions contained in Section 41(5) read with Section 72 of the Income Tax Act, 1961, at the advice of the Companys tax consultants, the item of Special Reserve for Rs. 276.25 crores was set off against the brought forward business loss of the Assessment year 2000-01 with the consequences that the brought forward loss in profit and loss account was correspondingly reduced in the current year. Relocation of the Registered office of the Company The companys Registered Office was shifted with t e approval of the Board from Jeevan Deep Building, 4th Floor. 1, Middleton Street, Kolkata- 700071 with effect from 2nd July 2007 to 4th Floor, SBI Ballygunge Branch Premises, 50A, Gariahat Road, Kolkata 700 019, as the space offered by the State Bank of India was urgently required by them for their own purpose. The new space, which was warehoused by the Bank has also been allowed to be used by The Company free of rent. The charge of address which was appropriately notified through newspaper for public information was also advised suitably to the Registrar of Companies, West Bengal, the Stock Exchanges, National Housing Bank (NHB) etc., Net Worth of the Company The Company lost its status, as a going concern in the year 2003-04 and there has been no change in the position since then. The net worth of the Company stands fully eroded and it is negative at Rs29456.10 lacs as at 31st March 2008. Public Deposits The Company during the year under review did not accept any deposit from the public within the meaning of section 58A of the Companies Act, 1956 or the rules made thereunder. The Companys liabilities on account of unclaimed public deposits including unencashed Refund/Interest warrants stood at Rs. 305.24 lacs during the current year (reduced from Rs.321.08 lakhs in the last year). The amount had been fully funded. Credit Rating Since the Public Deposits Scheme stood discontinued, credit rating thereof was not required. Various legal issues (i) Though the Company settled all issues relating to the payment of pension of its employees with the Regional Provident Fund Commissioner (RPFC) on the basis of an order passed by the Honble Calcutta High Court ,during the last year the former filed a stay application against the same order and the decision thereon is still pending. The company feels that no liability is likely to devolve on it on this score. (ii) Following the inspection of the companys books by the Department of Companies Affairs under Section 209A of the Complaint Act 1956 the Company and its Directors received show-cause notices for violation of provisions under section 625 read with section 211, 217(3), Section 301/299, etc. The Directors filed petitions/suits under section 633 of the Companies Act 1956, and the Calcutta High Court in term of an order, exonerated the concerned Directors in almost all the cases. (iii) The cases filed by the Law Enforcing Agencies viz., Police & CBI in regard to the frauds to the extent of Rs3.90 crores which took place during the earlier years are in the various stages of evidence. New Development (i) The companys Patna property was offered for sale on completion of all connected formalities in this behalf and the State Bank of India was found to be the only intending buyer. However, State Bank of India required that the original Agreement for Sale executed at the time of acquiring the property to be converted into registered sale deed before transferring the same to them. When the company approached the Registrar it came to light that Income Tax authorities had camped a general attachment order on all properties belonging to the original seller notwithstanding that Agreement for Sale was subsisting at the material time. However, with the cooperation of the seller and with the active assistance of SBI Patna local office, the company has been advised that the attachment order has been vacated and arrangements are in hand to effect transfer and registration of the property soon. (ii) The company received a legal notice from its only secured creditor viz., State Bank of India demanding full payment of their dues to the latter aggregating Rs. 316.38 crores including interest upto 31.03.2008. The company sent a suitable reply stating its inability to make refund of the entire amount because of its severe financial distress. Howevar, a payment of Rs. 7.00 crores on account of interest dues has since been made in response to the aforesaid notice. Corporate Governance The report on Corporate Governance as required under clause 49 of the Listing Agreement with Stock Exchanges together with a Certificate from the Companys Auditors confirming compliance is set out as a part of this Annual Report. Management Discussion & Analysis Report As per the requirement of the Listing Agreement with Stock Exchanges, a separate report on Management Discussion & Analysis for the year under review is attached to this report. Directors During the year, Shri FK.Bhattacharjee, Chairman & Director who retired on 18th April, 2008 was re-appointed on 19th April, 2008 as nominated by State Bank of India. Shri Ashok Mukand, nominee Director of SBI consequent upon his transfer on promotion, resigned from the Board on the 16th January 2008 and in his stead Shri Jayanta Kumar Sinha Chief General Manager, State Bank of India, Kolkata LHO, was nominated by SBI as Director from 17th January 2008. The Board places on record its appreciation for the valuable services rendered by Shri Mukand during his tenure as Director of the Company. Shri M. K. Ray Chaudhuri who retired by rotation on the date of the last AGM held on 6th June 2007 was reappointed as Director on the Board from the same date. Shri K. Rama Mohan Rao Managing Director retired from the Board on 18th December 2007 on his being repatriated to his parent Organisation i.e., State Bank of India and Shri G.I.Mondal on deputation from State Bank of India has been appointed in his stead as Managing Director from 19th December 2007. The Board placed its appreciation for the valuable sei vice rendered by Shri Rao as Managing Director of the Company. None of the Directors (both Executive and NonExecutive) are holding any shares (both own or held by / for other persons on beneficial basis) in the Company. Exccpt the above, there has been no change in the composition of the Board of Directors of the Company since the last report of the Directors on 7th May 2007. The Directors of the Company are persons of eminence having vast and varied experience in the field of Banking, Finance and other allied areas. The Board confirms that none of the Directors of the Company is disqualified from being appointed as Director in terms of section 274(1)(g) of the Companies Act, 1956 and necessary declaration in this regard has been obtained from them. Listing Particulars The Companys shares are listed on the Stock Exchanges at Kolkata, Mumbai and at National Stock Exchange of India Limited, Mumbai. The annual Listing fees in respect of all the Stock Exchanges have been paid upto date. The trading of snares continues to stand suspended by the Stock Exchanges. As continuation of listing of the shares with the above Stock Exchanges yields no benefits either to the investors or to the Company, the Directors intend delisting of the shares from these Stock Exchanges, for which a suitable Resolution has been proposed for the Members approval. Directors Responsibility Statement: Pursuant to Section 217 (2AA) of the Companies Act, 1956 Directors to the best of their knowledge and behalf of confirm that: (i) in the preparation of the Annual Accounts for the financial year ended 31st March, 2008, all the applicable accounting standards prescribed by the Institute of Chartered Accountants of India have been followed along with proper explanation relating to material departures, if any. (ii) the Directors have adopted such accounting policies and have applied them consistently and have made judgements and estimates that are reasonable and prudent to 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) the Directors have taken proper and sufficient care of 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) the Directors have prepared the accounts for the financial year ended 31st March, 2008 on the basis of the fact that the Company is no longer a going concern, as the operations of the Company were discontinued in the year 2003-2004. Investor Services Company has an Investor Grievance Committee to specially look into the redress of investor grievances and the queries are dealt with expeditiously. The Company continues to be a client of National Securities Depository Limited and Central Depository Services (India) Limited and the ISIN no. allotted to the Companys shares is INE 627A01012. Future Outlook It is very unlikely that the Company in its present form, would be able to rehabilitate itself in the near future. With the snowballing of the losses from year to year and the total erosion of its net worth, the Company lost its status as a fining concern and there is every possibility that sooner or later the Company would be taken forward to its logical end. In the absence of any concrete plan of financial and organisational restructuring and without any ray of hope of recommencement of its business operations the future outlook of the company seems bleak. The action of the creditor- bank recalling their entire loan granted to the company also further aggravated the issue. Auditors The Auditors M/s S.N. Mukherji & Co. will retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. M/s S.N. Mukherji & Co., have informed the Company that their appointment if made, would be in conformity with the provisions of Section 224(1B) of the Companies Act, 1956. The Directors recommend their appointment. Auditors Observations The observations made by the Auditors in their Report have been fully explained in the Notes to the Accounts. However, our further comments on the Auditors Report are as under: i) Para 3 of Auditors Report Since the Company ceased to be operational and is also not a going concern from the year 2003-04, the figures for accumulated losses and negative net worth further deteriorated because of losses sustained by the Company during the current year too, as explained in Note No. 1 (Schedule No. 13). It is not possible for the company with its current limitation, to alter the position. ii) Para (i) (c) of Annexure to Auditors Report Please refer to our remarks in item (i) above. In addition, as indicated in Note 8 of the Notes to the Accounts, the treatment of fixed assets has been done on the basis of the fact that the Company is not a going concern. The Auditor statement reflects the factual position. iii) Para (vii) of Annexure to Auditors Report The Company stopped its operations, closed its branches, discontinued its loans and deposits businesses by virtue of the fact that it is not a going concern. Hence the need for putting in place a separate internal audit system has not been felt. However, sufficient control mechanism is in place commensurate with the present level of operations of the Company. iv) Para (x) of Annexure to Auditors Report The Auditors statement reflects the factual position. v) Para (xii) of Annexure to Auditors Report As the Company has been incurring losses on a continuing basis and stopped all business operations and is also not a going concern, sufficient cash was not available to enable it to repay its dues to the Bank fully. However the Company made part payment of interest dues of this year from out of the tax refunds received in the previous year. In 2006-2007 the total amount of tax-refund (with interest) amounted to Rs.25.53 corers and the interest on the loan according to our estimate was Rs.66.74 crores. Hence, the company would not have been able to meet the full payment obligation in any case because of shortage of cash. Besides, a reference is invited to para (x) of the Annexure to Auditors Report. As the Income Tax Appellate Tribunals decision in our favour was likely to be contested in the Supreme Court with the permission of the Committee on Dispute it was necessary for us to retain some contingency fund with us in the event the former had allowed the matter and the Supreme Court verdict went against the Company. The amount had, however, been used to make part-payment of the interest dues to the bank during the current year as stated earlier after the Committee on Dispute withheld their permission. A further amount of Rs. 7.00 crores has also been paid recent to SBI to reduce the interest dues as stated earlier. Statutory Information Since the Company does not own any manufacturing facility, the provisions of the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are not applicable. There is no foreign exchange earning and outgo. Particulars of Employees At present the Company does not have any employees working with them. Appreciation The Directors wish to place on record their appreciation for the valuable support received from the State Bank of India. They also wish to place on record their gratitude to the National Housing Bank for their very valuable support to the Company. The Directors would also like to place on record their appreciation and gratitude to its shareholders who are with the Company during its bad days. On behalf of the Board of Directors Place : Kolkata P.K. Bhattacharjee Dated : 16th July, 2008 Chairman MANAGEMENT DISCUSSION AND ANALYSIS REPORT Financial Performance The financial performance of the Company during this year related basically to the management of the realisation of funds locked up in the past in various receivables as a conscious decision was taken as far back as in 2003 to stop booking fresh businesses in its books. Hence the bottomline was simply an outcome of a run down of the receipt of meagre interest income on bank deposits and the expenses incurred towards Companys maintenance. The operating income thus represented interest income on realised funds parked with bank for temporary periods and the other income arising from miscellaneous sources like refund of excess stamp duty duly paid in the past and reversal of certain liabilities which were no longer considered necessary during this year particularly. Loss / Profit As expected the company recorded an increase in loss from Rs. 4.67 crores to Rs.18.25 crores, which was due to non accrual of sufficient income because of the fact that sources thereof were gradually getting dried up. The accumulated losses stood at Rs.309.56 crores. Risk Management Since the Company ceased to be an operational entity, its income and expenses are more or less on the anticipated lines and are not very much subject to uncertainties and widespread variances. Accordingly, the risk content of the truncated activities are negligible. The Company had been taking appropriate steps to guard against the systemic and other identified risks. Internal Control Systems and their adequacy Adequate internal control system commensurate with the size and the limited activities of the company was put in place. Future Outlook With huge debt burden, continued losses and insignificant income, the future for the Company, in short, continues to look gloomy. Declaration by the CEO on affirmation by Directors and Senior Management Personnel of compliance with the code of conduct I, G.I. Mondal, Managing Director and CEO of the company declare that all the Members of the Board of Directors and Senior Management Personnel have for the year ended 31st March 2008 complied with the code of conduct laid down by the Board of Directors in terms of the Listing Agreement with the Stock Exchanges. Sd/- Place : Kolkata (G.I. Mondal) Dated : 16th July, 2008 Managing Director & CEO