Shardul Securities Ltd Directors Report.

To,

The Members of,

Shardul Securities Ltd.

Your Directors are pleased to present the Thirty-Fourth Annual Report and the Audited Accounts for the year ended March 31, 2019.

1. Financial Results: - (Rs. in lakhs)
2018-2019 2017-2018
Profit/(Loss) before Depreciation 314.19 319.99
Less: Depreciation 31.62 32.09
Profit/(Loss) before Taxation Less: Tax Expenses 282.57 287.90
Provision for tax 35.00 40.00
Deferred Tax 13.29 (5.26)
Profit/(Loss) after Taxation 234.28 253.16
Surplus/(Deficit) brought forward from previous years 4272.57 4070.04
Appropriations: 4506.85 4323.20
Statutory Reserve Fund as per RBI Guidelines 46.86 50.63
Proposed Dividend (including dividend tax) on Equity Shares 126.36 -
Balance carried to Balance Sheet 4333.63 4272.57

2. Dividend:-

Your Directors recommend a dividend of Re. 0.60 per Equity Share on 1,74,98,433 equity shares of Rs.10 each aggregating to Rs. 126.36 lakhs (including dividend tax) for the financial year ended 31st March 2019 which if approved at the ensuing Annual General Meeting, will be paid to (i) all those Equity Shareholders whose names appear in the Register of Members as on 05th September 2019 and (ii) to those whose names as beneficial owners are furnished by the National Securities Depositories Ltd., and Central Depositories Service (India) Ltd.

3. Transfer to Reserves:-

As per requirement of RBI regulations, the Company has transferred to Statutory Reserve Fund an amount of Rs. 46.86 Lakhs in Financial Year ended March 31, 2019.

4. Management Discussions and Analysis Report:-

(i) Financial Performance:

Despite the general trend being one of pessimism in the Non-Banking Finance Companys segment that has been going through a period of confidence crisis, your Company stayed afloat achieving a gross revenue of Rs.526 lakhs during the year under report and a net profit of Rs.234 lakhs. On a consolidated basis including the subsidiary, your company achieved a net profit of Rs.265 lakhs albeit the results were marginally lower compared to the previous financial year.

(ii) Industry Structure and developments:

The year under report passed through a critical and grueling period of uncertainty on the economic front, thanks to the impending General elections in the ensuing year coupled with reports of economic down turn, unemployment and job losses, slowdown in credit offtake and a lack of a booster by way of sizable investments either domestic or foreign to reverse the trend.

The global economy led the way with USA tightening on their imports with heavy levies and the so called principles of free market economy were set aside to bring about protective measures to encourage domestic production and consumption. This was further accentuated by hostile political stand off by USA against China, Iran for import of oil , Russia and partly India and certain other European countries as well on trade issues.

The NBFC sector in India faced liquidity crisis due to the impact created by the failure of ILFS to honor their debt commitments and there was also repercussion in the financial sector due to certain major frauds for huge amounts suffered by many banks. These were in addition to huge provisions for bad debts of Public Sector and some private sector banks.

The Industrial sector suffered due to the slowdown and the Airlines Industry was badly hit apart from other heavy, medium and small scale industries resulting in lowering of production, heavy accumulation of rolling stock, reduced profitability and job losses. The Agricultural sector continued to face uphill task to maintain the production levels without the base support price apart from drought like conditions prevailing in many parts of the country. It fell to 15% of GDP from around 17%.

The service sector and industrial sector, however, contributed marginally higher as during the previous years which enabled the GDP growth to hover around 6.8%. The steady crude oil prices in international market also helped the Government to marginally mobilize towards infrastructure developments.

The capital markets remained volatile though it appeared to be more index driven than real time appreciation in small and medium cap stocks. It was reported that many stocks in medium to small cap were trading well below their low levels during the previous years and trading was only concentrated mostly on index based stocks.

The foreign exchange reserves continued to remain at a level exceeding $ 400 Billion mark though an air of discomfort and uncertainty was hanging over waiting for the political developments in the country. Even after this got cleared, it could be seen that markets reacted adversely to the New Budget announcements on direct taxes on high income group. The FDIs remittances increased by 6% to 42 billion dollars, FIIs PNote remittances exceeded Rs 81000 Crores during the year.

The Exports for the year stood at $330 billion while the imports increased to $ 514 billions thus widening the gap further. The Current account deficit was at 2.5% of GDP while the Fiscal deficit was contained at 3.4%. The inflation fell too low for a developing economy causing widespread discontent particularly in the Agriculture sector.

(iii) Business Review:

Despite the economic slowdown, high volatility in Capital markets, and other uncertainties your company could achieve comparable results with that of the previous year. While the markets are looking up to the Govt to provide impetus for a higher level of growth in coming months, certain measures initiated by the Govt on taxes especially in the capital market segment appear to be backfiring to the detriment of the investors.

India is going through a kind of economic down turn and it is not clear to forecast how the year will turn out to be and when the situation might reverse. We are watching the markets and the developments and would take appropriate steps to ensure that we put our resources to optimum use.

(iv) Opportunities and Threats:

The GDP is projected at 7.2 percent for the current year but the Governments finances might be under severe stress due to fall in GST collections, a downward trend in Direct tax collections, slackness in FDI inflows and lack of investment in infrastructure due to funds constraint. The Government has projected huge investments but the availability of resources is not clear. It remains to be seen if the Government would be able to reach its targets depending on which the spur in the Economy might happen.

(v) Segment-wise - Product-wise reporting:

As there has been no change in your companys business activities and broking activities there are no separate reportable segment.

(vi) Outlook:

Your company expects the capital markets continuing to be volatile in view of the present down turn in economy and would like to be guarded in making projections for the year. However, if the anticipated Government expenditure to boost the economy takes place, the market might become vibrant and your company should be able to achieve better results for the coming year.

(vii) Risks and Concerns:

Your companys activities which are essentially in the capital market segments and the risk perception of our activity could be discerned as under:

Market Risk: Your companys major investments are mostly in capital market instruments like shares, mutual funds and bonds and any volatility could erode the capital value of the investments. No doubt, your company would keep a close vigil on movement of prices and take appropriate steps to minimize this risk.

Interest risk: The changes in interest rates by RBI and Banks could result in fluctuations in prices and consequently the income of various investments and borrowings by the company may vary. Your company has put in measures to hedge this risk but this cannot be eliminated totally.

Operation Risk: The stock market operations are fraught with certain risks associated with market judgments by operational executives and their decision making process based on certain perceptions prevailing at any given time and these could change suddenly resulting in unexpected adverse positions.

(viii) Internal Financial Control Systems and their Adequacy:

Your company has in place adequate interest control measures. There is continuous monitoring of all the activities and necessary creative measures are taken periodically to manage any unforeseen risk factors.

(ix) Human Resources:

Your company has adequate trained professionals to manage the affairs of the company in the most prudent manner.

(x) Details of significant changes in key financial ratios are given in Annexure D to Board Report.

5. Subsidiaries:-

Shriyam Broking Intermediary Limited, a wholly owned subsidiary of the company achieved a modest profit in its working results during the year under report. The net profit for the year was at Rs. 23 lakhs as compared to Rs. 89 lakhs during the previous year. The market factors would determine the performance in coming year though all efforts would be made to improve the bottomline. Shriyam Realtors Private Limited a wholly owned subsidiary of Shriyam Broking Intermediary Limited was incorporated on 15th December 2016. However the company has not yet started any business activities.

6. Names of Companies which have become or ceased to be its subsidiaries, joint ventures or associate companies during the year:-

During the year under review no company has ceased to be its subsidiaries. The Company doesnt have any joint ventures or associate company.

7. Directors:-

i) Mr. Kantilal Maganlal Shah has resigned from the Directorship (in the Capacity of Independent Director) of the Company with effect from 1st April, 2019, due to personal reason.

The Company appreciates the valuable Services rendered by him during his tenure as an Independent Director of the Company.

ii) Mr. Charul Abuwala was appointed as an Independent Non-Executive Director of the Company by the members at the 29th AGM of the Company held on 5th September, 2014 for a period of five consecutive years.

The Board of Director of the Company based on recommendation of Nomination and Remuneration Committee and in terms of the provisions of Sections 149, 150, 152 read with Schedule IV and any other applicable provisions of the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, has proposed to reappoint Mr. Charul Abuwala as an Independent Director for second term of five consecutive years upto the conclusion of the 39th Annual General Meeting of the Company in the calendar year 2024, subject to approval of Shareholder at Annual General Meeting.

iii) The Board of Director of the Company, at its meeting held on 27th May, 2019 has appointed Mr. Lalit Shah as Additional Director designated as an Independent Director of the Company with effect from 6th June, 2019

Brief Profile:

Mr. Lalit Shah aged about 59 years holds a B. Com degree from Mumbai University and is a member of Chamber of Tax Consultants. He has more than 30 Years of experience in the field of Taxation, Accountancy and Audit. He is a partner in two Tax Consultancy firms M/s. Shah & Associates and M/s. Shah & Bhuta Associates. He is active in many social programmes and is a part of such organizations.

Necessary resolutions for the appointment /re-appointment of the aforesaid directors have been included in the notice convening the ensuing AGM and details of the proposal for appointment/re-appointment are mentioned in the explanatory statement of the notice.

Your directors recommend their appointment.

Brief resume of the Directors proposed to be appointed/ reappointed, nature of their experience in specific functions and area and number of companies in which he/she hold membership/chairmanship of Board Committees as stipulated regulation 36(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are provided in the Report of Corporate Governance forming part of the Annual Report.

All independent directors have given declaration that they meet the criteria of independence as laid under section 149(6) of the Companies Act, 2013 and regulation 16 (1) B of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

8. Board Evaluation:-

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015, the Board has carried out an evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

9. Remuneration Policy:-

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report.

10. Number of Meetings of the Board:-

Five Meetings of the Board of Directors were held during the year and the details of such meetings forms part of the Corporate Governance Report.

11. Audit Committee:-

The Audit Committee as on 31st March 2019 comprises of Independent Directors namely Mr. Devesh Vasavada (Chairman), Mr. Kantilal Shah, Mr. Charul Abuwala and Mr. Yogendra Chaturvedi (Executive Director) as other members. All the recommendations made by the Audit Committee were accepted by the Board.

12. Extract of Annual Return:-

The details forming part of the extract of the Annual Return in form MGT-9 as required under section 92 of the Companies Act 2013, is included in this Report as Annexure -A and forms as integral part of this Report.

13. Taxation:-

In opinion of Directors, the provision for Income Tax is made as per the provisions of the Income Tax Act, 1961.

14. Cash flow:-

As required by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Cash Flow Statement is appended with this report.

15. Directors Responsibility Statement:-

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013:

a) that in the preparation of the annual financial statements for the year ended March 31,2019, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) that such accounting policies as mentioned in Notes to the Financial Statements have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2019 and of the profit of the Company for the year ended on that date;

c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) that the annual financial statements have been prepared on a going concern basis;

e) that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively.

f) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

16. Statutory Auditor and Auditors Report:-

M/s J. Kala & Associates, Chartered Accountants, (Firm Registration No: 118769W have conducted audit for the F.Y 2018-19. The Auditors Report for F. Y. 2018-19 does not contain any qualification, reservation or adverse remark. The Auditors Report is enclosed with the financial statement in this Annual Report.

The notes to the Financial Statement referred to in the Auditors Report are self-explanatory and, therefore, do not call for any further comments.

17. Secretarial Audit:-

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed M/s Dhirendra Maurya & Associates, Company Secretary in Practice to undertake Secretarial Audit of the Company. The Secretarial Audit Report is included in Annexure - B and forms an integral part of this Report.

There is no secretarial audit qualification for the year under review.

18. Internal Audit:-

The Companys internal control system is commensurate with its size, scale and complexities of the operations. The internal audit is entrusted to M/s Anil B Jain & Associates, Chartered Accountants. The Audit Committee of the Board of Directors and Statutory Auditors are periodically apprised of the internal audit findings and corrective actions taken.

19. Significant and material orders passed by the regulators or courts:-

There are no significant material orders passed by the Regulators/Courts which would impact the going concern status of the Company and its future operations.

20. Corporate Governance:-

Report on Corporate Governance stipulated under Regulation 34(3) read with Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with Stock Exchange form part of this annual report. A certificate from the auditors of the Company M/s J. Kala & Associates, Chartered Accountants, confirming compliance of conditions of Corporate Governance as stipulated under aforesaid regulation is annexed to and forms part of this Report.

21. Consolidated Accounts:-

In accordance with the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Accounting Standard -21 prescribed by the Institute of Chartered Accountants of India, Company had made additional disclosure in respect of Consolidated Financial Statements and Accounting Standard-18 for Related Party transactions.

22. Particulars of loans, guarantees or investments by the Company:-

Details of Loans, guarantees or investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to Financial Statements.

23. Related Party Transactions:-

There were no materially significant related party transactions, which could have had a potential conflict with the interests of the Company.

As required under Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated policy on dealing with Related Party Transactions. The Policy is available on the website of the Company.

Weblink of the same is: http://www.shardulsecurities.com/related%20party%20transaction%20policy.pdf

24. Whistle blower policy and vigil mechanism:-

The Company has established a whistle blower policy and vigil mechanism for directors and employees to report concerns about unethical behavior, actual or suspected fraud or violation of the companys code of conduct policy. The mechanism provides for adequate safeguards against victimization of directors and employees. None of the personnel have been denied access to the Audit Committee of the Board. The details of Whistle Blower Policy are available on the website of the Company www.shardulsecurities. com.

Weblink of the same is: http://www.shardulsecurities.com/vigil%20mechanism%20policy.pdf

25. Corporate Social Responsibility Committee:-

Provisions of Section 135 of the Companies Act, 2013, are not applicable to the Company during the period under review.

26. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:-

The Company has in place a requisite policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. All employees (permanent, temporary, trainees) are covered under the policy. There was no compliant received from any employee during the financial year 2018-19 and hence no complaint is outstanding as on 31.03.2019 for redressal.

27. Other Statutory information:-

a. Particulars of Employees:

Information pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, in respect of the employees of the Company are annexed to this report as Annexure C.

In terms of provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, none of the employees are in receipt of remuneration in excess of the limits set out in the said Rules.

b. Conservation of Energy, Technology Absorption and foreign Exchange earnings and outgo:

i) Provisions pertaining to conservation of Energy and Technology Absorption are not applicable or not relevant to the working of Company. The Directors keep themselves acquainted with ongoing seminars and research papers.

ii) The Company has neither earned nor spent any amount by way of Foreign Exchange.

c. Deposits:

i) There are no deposits covered under Chapter V of the Act, which has remained unclaimed or claimed but not paid for which information is required to be given in this report. The Company neither hold any Public Deposits nor is accepting any deposits.

ii) The Company has complied with various requirements in terms of the capital adequacy under the guidelines issued by the Reserve Bank of India for the Non-Banking Financial Companies.

28. CEO/CFO Certification:-

The Chief Executive Officer and Chief Financial Officer have issued a certificate pursuant to the provisions SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 certifying that the financial statements do not contain any untrue statement and these statements represent a true and fair view of the Companys affairs. The said certificate is annexed and forms part of the Annual Report.

29. Acknowledgment: -

Your Directors appreciate the co-operation and support extended by the Shareholders, Employees, Financial Institutions and Banks.

For and on behalf of the Board

Place: Mumbai Yogendra Chaturvedi Daya Bhalia
Date: 27th May 2019 Executive Director & CEO Executive Director and Company Secretary
Regd. Office:
G-12, Tulsiani Chambers
212, Nariman Point
Mumbai 400 021