ECONOMIC REVIEW
a. Global Outlook
According to the World Bank, global GDP is projected to grow at 2.9 per cent in 2019, lower than the 3 per cent growth achieved in 2018. World Bank expects global growth to slow down further to 2.8 per cent in 2020. The International Monetary Fund (IMF) global growth forecasts, although slightly better than that of World Bank, indicate a slowdown nonetheless. IMF expects global economy to grow by 3.3 per cent in 2019, which is the weakest since 2009, after an estimated growth of 3.6 per cent in 2018. IMF however predicts global growth to recover to 3.6 per cent in 2020. Global economic growth has been slowing down since the second quarter of 2018 and there are no immediate signs of a pick-up. Growing trade tensions have contributed largely to this global slowdown.
The US economy registered strong growth in 2018, riding on the stimulus provided in terms of tax cuts. However, the positive effects of that stimulus seem to be fading and the US economy can slow down in the second half of 2019. The protectionist stance of the world’s biggest economy is causing trade friction. China, Europe, Japan, Mexico, India, and many others stand affected. Some of the affected nations have already started retaliating by imposing higher tariffs on goods exported by US. This, if continued, will have wider ramifications across the entire global supply chain.
There has been a sharp downturn in growth in Europe as well. The 19-nation Euro Area is experiencing a contraction in domestic demand along with a steep drop in industrial production. Germany and France together account for almost half of the Euro Area economy. Germany is experiencing a protracted slump in manufacturing, while household spending in France has remained virtually stagnant. The other major economy, Italy, is in a recession. In the UK, the uncertainty over Brexit continues to linger, but the possibility of a "hard Brexit" seems to have been averted, with the European Union extending the deadline for UK’s departure to 31st October, 2019.
Japan experienced impressive growth in 2017, but thereafter there has been a deceleration in consumer spending, investment and export throughout 2018. With no improvement in the various macroeconomic parameters, growth is likely to remain muted in 2019.
Several of the major emerging market and developing economies (EMDEs) like China, Russia, Brazil and South Africa have slowed down on account of subdued domestic and global demand. A new round of stimulus focusing on infrastructure creation is expected to revive growth in China. But in spite of the relative slowdown, it is the EMDEs which are expected to be the main drivers of global growth in 2019. According to World Bank forecasts, the EMDEs, after registering a 4.2 per cent growth rate in 2018, will clock another 4.2 per cent growth rate in 2019 and thereafter growth rate will strengthen to 4.5 per cent in 2020. Meanwhile, the advanced economies (AEs), after registering a growth of 2.2 per cent growth rate in 2018, are expected to decelerate to 2.0 per cent growth in 2019 and further slow down to 1.6 per cent in 2020.
While the international crude prices have continued to firm up during the year under review, this is unlikely to continue. A global slowdown will adversely impact international commodity prices, especially crude and industrial metals.
One positive development is the change in stance of the main central banks which had earlier started winding down the quantitative easing undertaken in the aftermath of the global financial crisis of 2008. The US Federal Reserve had started raising interest rates since 2015 which continued until last year, but its recent announcements indicate a switch to a more accommodative strategy. Bank of Japan is continuing with its asset purchase agenda and a negative interest rate policy. European Central Bank, after tapering its stimulus, has expressed its intent to keep interest rates low and, if situation demands, is even open to restart its bond purchase programme.
b. Indian Scenario
The Indian economy continues to be a bright spot in the world map. For one more year India has held on to its position of the fastest growing major economy in the world. According to Central Statistics Office (CSO), for 2018-19, India’s GDP growth rate has been estimated to be 7.0 per cent, down from the 7.2 per cent achieved in 2017-18. According to IMF, India’s GDP growth rate is expected to pick up to 7.3 per cent in 2019 and to 7.5 per cent in 2020. According to estimates by Asian Development Bank (ADB) and the Reserve Bank of India (RBI), the Indian economy will grow at 7.2 per cent in 2019-20. However, it is worth noting that IMF, ADB, RBI and CSO have reduced their growth forecasts for India in the wake of recent developments. In the October-December quarter of 2018, Indian economy grew at 6.6 per cent, its slowest in last five quarters.
Several high frequency indicators are hinting at a slowdown in the economy. In February, 2019, the industrial output growth slowed to a 20-month low of 0.1 per cent, mainly due to contraction in the manufacturing sector. During April-February 2018-19, the Index for Industrial Production (IIP) grew at 4 per cent as against 4.3 per cent in the same period of 2017-18. Capital goods output contracted by 8.8 per cent in February 2019 indicating a major slowdown in investment. Sales of commercial vehicles also contracted during February. Credit flow to micro, small and medium enterprises (MSMEs) remained tepid. While all these may indicate another slow quarterly GDP growth for January-
March 2019, this slowdown may be temporary and can be attributed to the upcoming General Elections. Once there is clarity on the composition of the next government, investments can once again pick up.
During the year under review, the Indian economy overtook France to become the world’s sixth largest economy. India also moved up to 77th position in the World Bank’s ‘Ease of Doing Business’ survey, up by 53 places in the last two years. The India growth story has remained attractive to the global investor community. Inflow of foreign direct investment (FDI) has remained steady. After recording a total FDI (equity + reinvested earnings + other capital) inflow of USD 61 billion in 2017-18, India has managed to attract FDI worth USD 46.6 billion during April-December 2018. Another notable achievement for the economy during the year under review is the total exports (goods and services combined) surpassing the USD 500 billion mark for the first time. While India, like many other EMDEs, can get affected by global developments, the foreign exchange reserve of USD 415 billion provides adequate buffer.
The government has been on the forefront of stepping up investment for the infrastructure sector. Private sector participation in infrastructure investment is yet to pick up despite a number of initiatives taken by the government.
Considerable progress has been made on the roll-out of the Goods & Services Tax (GST). Though the GST regime is still evolving, it has been successful in expanding the tax base and in drawing much of the erstwhile informal activity into the formal sector. With further rationalization of tax rates and expanding the coverage of GST to all sectors, entrepreneurship is likely to take off in a big way.
The jurisprudence in Insolvency and Bankruptcy Code (IBC) is still evolving, but it has ushered in a whole new credit culture in the country. The evolving and maturing of the IBC will address the ‘twin balance sheet’ problem more comprehensively. However, going forward, this must be followed up with structural reforms in the banking sector in order to improve the process of credit intermediation.
The domestic challenges are not insurmountable. The overall business environment today is much better than what it was during the last few years. The management of your Company is upbeat about India’s prospects and is convinced that India will continue to surge ahead of its peers.
NBFCs IN INDIA
In India, the Non Banking Financial Companies (NBFCs) play an active role in meeting the funding needs of those segments of the society who mostly remain unserved by the formal modes of institutional funding. NBFCs are essentially fuelling entrepreneurship by catering to the funding needs of the micro, small and medium enterprises (MSMEs) many of which are involved in the infrastructure sector in services like construction, transportation, etc. Thus, NBFCs are performing a dual role of promoting financial inclusion and nation building.
As on September, 2018, the number of NBFCs registered with the RBI stood at 10,190. Of those, 10,082 are non-deposit taking, which is more than 95 per cent of the total number.
The year under review has been a challenging one for the NBFC sector. Some isolated market events have significantly reduced the flow of funds to NBFCs from the institutional sources. RBI has tried to address the liquidity concerns of NBFCs, but more steps are needed.
The following were some of the important amendments made by the RBI to bolster the regulatory framework of the NBFCs and to provide them relief during the year under review:
• All banks, NBFCs and payment system providers were prohibited from dealing in virtual currencies.
• All exemptions granted to government-owned NBFCs were withdrawn, and as a result, they are also subject to all the regulatory norms as applicable to privately owned NBFCs.
• Systemically Important Non-Deposit Taking Core Investment Companies (CIC-NDSI) were permitted to hold the units of Infrastructure Investment Trust (InvIT) as a sponsor.
• To encourage formalization and growth of MSMEs, banks and NBFCs were temporarily allowed to classify their exposure as per the 180 days past due criteria, to all MSMEs, including those not registered under GST, as a standard asset.
• Co-origination of loans by banks and Systemically Important Non-Deposit Taking NBFCs (NBFC-NDSIs) for lending to the priority sector has been allowed.
• To provide liquidity, single borrower exposure limit for bank funding to NBFCs was increased from 10 per cent to 15 per cent of capital funds up to 31st December, 2018 and further extended to 31st March, 2019.
• Banks were allowed to treat their additional exposure (credit) to NBFCs and Housing Finance Companies (HFCs) as Level-1 high quality liquid assets (HQLA) within the mandatory statutory liquidity ratio (SLR) requirement.
• Securitization guidelines to NBFCs were relaxed, where the Minimum Holding Period (MHP) requirement in respect of loans of original maturity above 5 years, was reduced from 12 months to 6 months.
• Banks were allowed to provide Partial Credit Enhancement (PCE) to bonds issued by NBFC-NDSIs and HFCs.
n External Commercial Borrowings (ECB) framework was substantially relaxed in terms of eligible borrowers, recognized lenders, minimum average maturity period and merging of Tracks I and II as foreign currency denominated ECB and merging of Track III as rupee denominated ECB. ECB up to USD 750 million permitted under the automatic route.
• One-time restructuring of existing loans to MSMEs without a downgrade in the asset classification.
• With the objective of harmonization of different categories of NBFCs, Asset Finance Companies (NBFC-AFCs), Loan companies (NBFC-LCs) and Investment Companies (NBFC-ICs) have been merged into one new category called Investment and Credit Company (NBFC-ICC).
• NBFC-NDSIs are covered under the Government of India’s Interest Subvention Scheme for MSMEs.
• All bank exposures (funding) to all NBFCs except Core Investment Companies (CICs) will be risk weighted as per the ratings assigned by accredited credit rating agencies.
Yo u r C o m p a n y i s c o n t i n u o u s l y monitoring all these developments and is on the lookout for new opportunities. Your Company has been one of the most prestigious NBFCs in the country. Keeping in mind the recent challenges that have surfaced in the NBFC sector, your Company has stepped up its interactions with the government and the regulators.
BUSINESS OUTLOOK AND FUTURE PLANS
During the year under review, the government continued its efforts towards enhancing India’s attractiveness as an investment destination which resulted in:
• India climbing up 23 positions (from 100th in 2017 to 77th in 2018 among 190 countries) in the World Bank’s Ease of Doing Business Index
• India moving up 5 places (from 63rd in 2017 to 58th in 2018) in the Global Competitiveness Index of the World Economic Forum
• India’s rank improving from 60th in 2017 to 57th in 2018 on the Global
Innovation Index of World Intellectual Property Organization.
In order to sustain the growth momentum and to create jobs, the government has been proactively spending on infrastructure creation. According to the Interim Budget 2019-20, the total capital outlay for infrastructure in 2019-20 has been kept at Rs. 4.7 trillion (approximately USD 70 billion). Among infrastructure segments, railways and roads are the biggest beneficiaries for 2019-20.
For 2019-20, the railways are to undertake the highest-ever capital expenditure of Rs. 1.58 trillion (approximately USD 22 billion) which also involves an all-time high budgetary support of Rs. 646 billion (approximately USD 9 billion).
In the Interim Budget, Pradhan Mantri Gram Sadak Yojana (PMGSY), the flagship programme to construct rural roads, has been allocated Rs.19,000 crore (approximately USD 2.7 billion).
Other than these, the Interim Budget mentioned the plan to create one lakh digital villages over the next 5 (five) years and also announced a number of initiatives aimed at bolstering the rural infrastructure that will encourage entrepreneurship. In addition, the decision to exempt levy of notional income on a second property owned by a tax-payer is expected to provide a boost to the housing sector.
The year under review also witnessed several notable developments in the infrastructure sector :
• The average pace of highway construction scaled a new high of 30 km / day, with the average touching a record high of 31.87 km / day in December, 2018. With the HAM (hybrid annuity model) and EPC (engineering-procurement-construction) taking care of most of the construction risk, private sector participation in highway projects is growing. This augurs well for the Bharatmala programme under which
34,800 km of highways are being constructed at a cost of Rs. 5.35 trillion (USD 77 billion).
• T h e S a g a r m a l a p r o g r a m m e , which entails projects involving p o r t m o d e r n i s a t i o n , c a p a c i t y augmentation, port connectivity (including coastal shipping and inland waterways), port-led industrialisation a n d d e v e l o p m e n t o f c o a s t a l communities, involves investments of over Rs. 8 trillion (approximately USD 114 billion).
• With rising levels of income and affordability, air traffic is growing fast in India. While 103 airports are operational now, India is expected to require 150-200 airports by 2035. Under the UDAN (Ude Desh ka Aam Nagrik) scheme, India is expected to add 75 airports in the next 3-4 years.
In addition, during the year under review, the government has introduced a National Mineral Policy (for non-fuel and non-coal minerals), a Hydro Power Policy and a National Digital Communication Policy. These, along with some more sector-specific announcements in the Union Budget 2019-20 (once the new government takes office), are likely to set in motion the conceptualization and implementation of more infrastructure projects. Thus, there will be a steady pipeline of infrastructure projects in the years to come.
Demand for infrastructure equipment is expected to multiply as a result of all these. Thus, demand for financing of such assets is also bound to rise. Apart from demand for construction, mining and allied equipment, a spurt in demand for agriculture and healthcare equipment is also expected. All these open up huge opportunities for your Company.
Your Company is actively tracking all these developments and the management is confident that the business scenario will improve significantly during Financial Year 2019-20.
BUSINESS REVIEW
The business activities of your Company are categorised into Fund based and Fee based activities.
I. FUND BASED ACTIVITIES
INFRASTRUCTURE PROJECT FINANCE
Since infrastructure is responsible for propelling growth of other sectors and India’s overall development, the Government of India is giving huge impetus for the development of Infrastructure and construction services through focused policies such as open FDI norms, large budget allocation, Smart cities mission, etc. India has become a large market for Infrastructure and Construction activities with the contribution of US $ 738.5 Billion in FY 2017 and is expected to become 3rd largest market in the world by 2025 (KPMG Infrastructure Report).
Your Company has a diversified fund allocation across various infrastructure segments. Your Company believes that this acts as a hedge against headwinds in a particular industry.
Power
The Government of India has identified power sector as a key sector of focus so as to promote sustained industrial growth. Some initiatives by the Government of India to boost the Indian power sector:
• As of September, 2018, a draft amendment to Electricity Act, 2003 has been introduced. It discusses separation of content & carriage, direct benefit transfer of subsidy, 24*7 Power supply is an obligation, penalisation on violation of PPA, setting up Smart Meter and Prepaid Meters along with regulations related to the same.
• Ujwal Discoms Assurance Yojana (UDAY) was launched by the Government of India to encourage operational and financial turnaround of State-owned Power Distribution Companies (DISCOMS), with an aim to reduce Aggregate Technical & Commercial (AT&C) losses to 15 per cent by FY19.
• The Government of India approved National Policy on Biofuels – 2018, the expected benefits of this policy are health benefits, cleaner environment, employment g e n e r a t i o n , r e d u c e d i m p o r t dependency, boost to infrastructural investment in rural areas and additional income to farmers.
The Government of India has released its roadmap to achieve 175 GW capacity in renewable energy by 2022, which includes 100 GW of solar power and 60 GW of wind power. The Union Government of India is preparing a rent a roof policy for supporting its target of generating 40 gigawatts (GW) of power through solar rooftop projects by 2022.
Coal-based power generation capacity in India, which currently stands at 190 GW is expected to reach 330-441 GW by 2040.
Your Company has allocated about 29 per cent of its total allocation to this sector diversified into generation and transmission & distribution.
Roads
India has second largest road network in the world, spanning over a total of 5.5 million kms. The Indian road network carries around 65 per cent of the total freight traffic, while, 90 per cent of the total passenger traffic uses road network to commute.
Road sector has witnessed series of government initiatives to tackle execution woes and resurrect investor confidence over last four years. As per Union Budget 2019-20, the Government of India provided an outlay of Rs. 1.12 trillion (US$ 15.48 billion) under the Ministry of Road Transport and Highways.
Despite challenging fund raising environment, concerns regarding effective implementation of contractual reforms under Hybrid Annuity Model
SpecialZones have attractedEconomic total investment of over Rs. 5,00,000 crore and provided employment to over 20,00,000 people as on December, 2018.
(HAM) on ground and increase in time and cost for land acquisition the length of national highways constructed reached 6,715 km at a pace of 24.42 kms per day between April-December 2018.
Increase in pace of award and execution during FY19, acceptability of toll-operate-transfer (TOT) model amongst investors and favorable features of Hybrid Annuity Model (HAM) gave a boost to the investor confidence in the sector.
With various policy initiatives taken in FY19, the Government of India aims to complete 200,000 km national highways by 2022.
During the year, your Company has selectively participated in financing road projects by NHAI and State Authorities. Your Company has allocated about 18 per cent of its total allocation to this sector.
SEZ & Industrial Parks
The Special Economic Zone (SEZ) policy was introduced by the Government of India in year 2000 to overcome the shortcomings of the Export Processing Zones (EPZ) like size, infrastructure constraints, location handicaps and lack of policy framework.
As on March, 2019, formal approvals over 410 have been granted for setting up of Special Economic Zones, out of which around 350 SEZs have been notified and are in various stages of operation. Out of these, more than 230 are operational.
Special Economic Zones have attracted total investment of over Rs. 5,00,000 crore and provided employment to over 20,00,000 people as on December, 2018. Annual exports from Special Economic Zones have exceeded Rs. 50,00,000 crore p.a. since FY 2017.
During the year, your Company has selectively participated in financing projects in this sector. Your Company has allocated over 9 per cent of its total allocation to this sector.
Ports
According to the Ministry of Shipping, around 95 per cent of Indias trading by volume and 70 per cent by value is done through maritime transport.
India has 12 major and 205 notified minor and intermediate ports. Under the National Perspective Plan for Sagarmala, six new mega ports will be developed in the Country. The Indian ports and shipping industry plays a vital role in sustaining growth in the country’s trade and commerce. India is the sixteenth largest maritime country in the world, with a coastline of about 7,517 km.
Increasing investments and cargo traffic point towards a healthy outlook for the Indian ports sector. Providers of services such as operation and maintenance (O&M), pilotage and harbouring and marine assets such as barges and dredgers are benefiting from these investments.
The capacity addition at ports is expected to grow at a CAGR of 5-6 per cent till 2022, thereby adding 275-325 MT of capacity. Under the Sagarmala Programme, the government has envisioned a total of 189 projects for modernisation of ports involving an investment of Rs 1.42 trillion (US$ 22 billion) by the year 2035.
Your Company has exposure to this sector by financial participation in a mix of major ports, minor ports and captive ports. The port sector now comprises about 8 per cent of the portfolio.
Water & Sanitation
India accounts for 16 per cent and 15 per cent of global human and livestock population respectively while having access to less than 4 per cent of water resources thereby emphasising the importance and urgent need for investments in the water sector. With current annual investments of US$ 15bn per annum, largely by government, possibly falling short of the estimated US$ 291bn required till 2030, there is growing importance of attracting private financing in the sector. To attract private sector interest and significantly de-risk financing in the sector, projects in the water infrastructure and waste water treatment are increasingly being awarded under the tested and proven Hybrid Annuity Model (HAM).
During the year, your Company has selectively participated in financing projects in this sector. Your Company has allocated around 2 per cent of its total allocation to this sector.
Your Company aims to be a leader in providing advisory and funding solutions to companies that are operating in the infrastructure sector. Your Company continues to improve its capabilities and bring in best in class technology and solution to its customers.
INFRASTRUCTURE EQUIPMENT FINANCE - SREI EQUIPMENT FINANCE LIMITED
Srei Equipment Finance Limited (SEFL), a wholly owned subsidiary of your Company, is registered with the Reserve Bank of India (RBI) as a non-deposit taking NBFC (Category - Asset Finance) and is the leading financier in the Construction, Mining and allied Equipment ("CME") sector in India. In addition to CME, SEFLis also diversified into financing of tippers, IT and allied equipment, medical and allied equipment, farm equipment and other assets. The financial products and services comprise loans for new and used equipment, and leases.
Infrastructure sector has been a key driver for the Indian economy. Government is working towards enhancing India’s attractiveness as an investment destination. In order to sustain the growth momentum, government has been spending on infrastructure creation. In the recent years, Indian infrastructure has been enjoying high budgetary allocation, increased number of deals, and participation from the private sector, and greater foreign direct investment (FDI) in the sector.
In the interim Union Budget 2019-20, sectors such as railways, housing and urban affairs, and roads and highways have witnessed increased year-on-year (y-o-y) allocations (excluding Internal and Extra Budgetary Resources (IEBR)) by 21 per cent, 12 per cent, and 6 per cent respectively. The north east sector has received a special focus in the Interim Budget with an allocation of Rs. 58,166 crores, an increase of 21 per cent over the previous budget.
Amid the increased focus of the government in the infrastructure sector, the Indian infrastructure equipment sector is undergoing sweeping changes not just in terms of higher demand, but also due to the digitalization and intelligentization of manufacturing for rolling out highly advanced equipment. In view of the projected growth and government’s ‘Make in India’ initiative, most Original Equipment Manufacturer
( O E M s ) a r e u p g r a d i n g t h e i r manufacturing facilities in an intelligent and innovative way by using automation, robotic and advanced technologies and producing high-tech machines that meet global quality standards.
The construction, mining, and allied equipment (CME) industry is estimated to have grown by approximately 10 per cent year-on-year in Fiscal 2019 in terms of unit sales.
During the first half of the year under review, SEFL’s disbursement grew to Rs. 8,572 crores compared to Rs. 8,309 crores in the same period in the previous year. The Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA) reduced to 3.20 per cent and 1.93 per cent in the first half of the period under review compared to 4.93 per cent and 3.23 per cent, respectively, in the same period last year. In the first half of the year, SEFL’s total income and net profit grew by 35 per cent and 86 per cent, respectively, over the corresponding period in the previous financial year.
In the aftermath of the NBFC crisis that unfolded across India’s financial system in September 2018, liquidity was constrained in general across NBFCs. There was a marked slowdown in the second half of the year under review that resulted in a decline in disbursements to Rs. 5,109 crore compared to Rs. 8,680 crore during the same period in the previous year. In this second half of the year under review, there was a growth in SEFL’s total income by 21 per cent year-on-year and net profit declined 43 per cent year-on-year.
The consolidated impact of both the halves of the 2018-19 review period led to an increase of profit before tax and profit after tax by 3 per cent and 4 per cent, respectively, to Rs. 457 crores and Rs. 306 crore, respectively. The total Asset under Management (AUM) grew to Rs. 32,226 crores, representing an 8.93 per cent growth over last year. The Capital Adequacy Ratio (CAR) remained compliant at 16.08 per cent. In this challenging environment, SEFLhas focused on diversifying the liability portfolio to enhance liquidity for future growth and is re-engineering the business model through multiple stake holder partnerships with an endeavour to make the model sustainable.
In the forthcoming year, SEFLwould continue to leverage its growth opportunities through its latest capital light co-lending business model with both, public sector and the private sector banks which will enable SEFLto access enhanced liquidity as well as allow the Company to collaborate and widen its market and customer base, thereby helping it maintain its strong market position. While banks will have access to SEFL’s strong customer relationships, OEM relationship and programs, domain expertise, risk prognosis tools arising out of three decades of experience and the Company’s tested process and policies; it shall also offer customers a win-win scenario with access to affordable financial solutions and other banking products under one umbrella. This model will also enable SEFLto maximize fee income and maintain cost efficiency, thereby helping it deliver improved performance matrices. The co-lending arrangement shall operate through a digital platform for loan origination, loan dues collection, auction of equipment, valuation of equipment and several other facilities. Meanwhile, SEFLshall continue to conduct direct lending and leasing business activities with its SME and strategic customers. Further, SEFLwill remain focussed on upgrading its existing IT capabilities with automated, digitised and other technologically-enabled platforms.
II. FEE BASED ACTIVITIES
INFRASTRUCTURE PROJECT ADVISORY
The Infrastructure Project Advisory Division of your Company is expanding its spectrum as strategic advisors which provide services from concept to commissioning in different domains in Infrastructure.
In order to provide direct assistance to design, develop, manage and implement Smart City Projects as per Smart City Mission Guidelines of Government of India, your Company has been appointed by Muzaffarpur Smart City Ltd. in Bihar and Bareilly Smart City Ltd. in Uttar Pradesh as Project Management Consultant. Your Company has been providing support to the respective Special Purpose Vehicles (SPVs) in overall project management of Smart City projects, including designing, developing, managing and implementing smart city projects identified by the respective cities on two outputs, viz. Area Based Development and Pan-city Solution.
In order to provide houses to all eligible beneficiaries by 2022 under Housing for All Mission of the Government of India by providing assistance either to construct new houses or enhancement of existing houses, your Company has set up a State Level Technical Cell (SLTC) in West Bengal and deployed Technical Experts for providing strategic, operational, implementation and monitoring support as an extended arm of the State Level
Nodal Agency (SLNA) for efficient transfer of knowledge and resources under the scheme.
Ministry of Housing & Urban Affairs (MoHUA), Government of India has appointed your Company as Independent Review and Monitoring Agency (IRMA) for Rajasthan Cluster to carry out periodic review and monitoring of the projects under Atal Mission for Rejuvenation and Urban Transformation (AMRUT).
Urban Development Department, Government of Tripura has engaged your Company to formulate GIS-based Master Plan for 20 cities in Tripura with an objective to prepare Development Plan documents for the cities/ towns under the Tripura Town & Country Planning Act, 1975 along with Master Plans for Water Supply, Storm Water Drainage and Solid Waste Management.
Your Company continues to assist Government of Jharkhand by preparing Detailed Project Reports and providing Project Management Consultancy for implementation of Housing for All under centrally sponsored Scheme for a Cluster of 8 cities and towns viz., Jamshedpur, Adityapur, Jugsalai, Mango, Seraikela, Chakulia, Chaibasa and Chakradharpur.
For the Ministry of Food Processing Industries, Government of India, your Company has been working as Program Management Agency (PMA)
• for Mega Food Park Scheme to facilitate establishment of Mega Food Parks that will enable fresh investments into the food processing sector, increase realization for farmers and employment generation across the country.
• for the Scheme for creation of infrastructure for Agro Processing Clusters under the Central Sector Scheme – Kisan Sampada Yojana in order to create modern infrastructure for food processing, closer to production areas and to provide integrated and complete supply chain from farm gate to consumers.
• f o r t h e S c h e m e o f C r e a t i o n / Expansion of Food Processing/ Preservative Capacities (CEFPPC) under the Central Sector Scheme – Scheme for Agro-Marine Produce Processing and Development of Agro Clusters (SAMPADA) with an objective of creating and processing of preservative capacities and m o d e r n i s a t i o n / e x p a n s i o n o f existing units. This will result in higher processing & value addition, leading to reduction of wastage and enhancement of farmers’ income.
Your Company has been acting as Independent Engineer & Auditor for Food Corporation of India to oversee/ supervise setting up of Silos on Design, Build, Finance, Own & Operate (DBFOO) basis for storage of food grains at Sangrur in Punjab and Kannauj in Uttar Pradesh.
Your Company continues to work as Project Management Consultant (PMC) for implementation of Sewerage Scheme in Devorlim, Navelim Zone IV, Mandop Area, Porvorim additional sewerage area and trunk main sewer in Bardez Taluk in Goa for Sewerage & Infrastructural Development Corporation of Goa.
During the year under review, your Company has prepared pre-feasibility reports, detailed project reports and tender documents for full coverage of drinking water to rural population in two Packages viz., Ramgarh and Hazaribagh in Jharkhand. Your Company has also prepared Geographical Information System (GIS) based Master Plan as per Atal Mission for Rejuvenation and Urban Transformation (AMRUT) Guidelines of Government of India for Chas and Deoghar Municipal Corporations in Jharkhand.
Your Company has also been working as Transaction Advisor for (i) Madhya Pradesh Intercity Transport Authority to develop and upgrade bus terminals and their appurtenant infrastructure at six locations viz. Bhopal, Gwalior, Indore, Sagar, Rewa & Jabalpur in Madhya Pradesh to international standard on PPP basis and (ii) Madhya Pradesh
Warehousing & Logistic Corporation for development of ‘Trucking Hub’ at Saikheda (Sagar) and ‘Composite Logistics Hub’ at Ujjain in Madhya Pradesh through PPP mode.
Due to low growth in the manufacturing sector, major advisory firms operating in the Engineering Consultancy arena have been shifting their focus to Urban Infrastructure. This trend has led to increased competitive intensity and put pressure on revenue potential. Today, Government clients are designing Consultancy & Advisory projects focused on engaging a team of experts capable of providing end-to-end solutions. This has resulted in longer project durations, back-end fee payments and multi-functional team requirements. The opportunity now lies in Urban Infrastructure sectors like Smart City and AMRUT wherein major precincts of urban infrastructure are being clubbed together under one umbrella project. The ticket size of projects has been increasing as it operates on ‘clubbing’ all segments. To mitigate business risks and to enhance our position, the Advisory division is working to create synergy within the group and with other external specialized agencies.
Leveraging our core competency coupled with strategic planning for sectors like Urban Infrastructure, Tourism, Transportation, Industrial Park, GIS-based Master Plan, etc. your Company is working on initiatives for sustainable growth. It is the start of a new journey which we feel will result in expanding ourselves to new markets, new business precincts, and enrich our group’s capacity in delivering complex, multi-faceted advisory assignments.
Looking Forward
The changing market landscape requires a different approach. Your Company will position itself as an Integrated Solutions Provider. Considering its financing and operating experience, your Company endeavours to differentiate itself by providing higher value added services i.e. advisory services.
The Financial Solutions Group (FSG) advisory leverages your Company’s financing and operating experience of around 30 (Thirty) years to provide customised financing solutions. Our unique feature is an integrated offering to our customer base encompassing both financial advisory and capital market services. Additionally, your Company has developed a deep understanding of the Insolvency and Bankruptcy Code (IBC) process through our experienced in-house team and strong relationships with various stakeholders involved in the Corporate Insolvency Resolution Process (CIRP). The advisory services include an array of services ranging from transaction advisory, investment support (debt & equity) and capital market services throughout and subsequent to the CIRP process.
RESOURCES
The Treasury department of your Company has seamlessly managed the available resources at optimum level even during the challenging environment during the second half of last fiscal. The strong & long standing relationship with banks helped your Company to ensure proper asset liability match.
i. Bank Finance
Your Company is funded by a diversified consortium of 26 Indian banks with tied-up fund based working capital limit to Rs. 8,685 crores at the end of financial year. Further, your Company also successfully mobilised Long Term Loans aggregating to Rs. 500 crores during the year.
ii. Bonds / Debentures / Commercial Papers
Your Company has allotted perpetual debentures (Tier I Capital) aggregating to Rs. 320 crores by issue of long term Non-Convertible Debentures (NCDs) during the year under review through Private Placement. Your Company is
Company Yoi surfunded by a diversified consortium of 26 Indian banks with tied-up fund based working capital limit to Rs. 8,685 crores at the end of financial year.
focussing on diversifying liability mix and hence, going forward, NCDs will be one of the focus areas to augment long term resources. Your Company has also raised Rs. 2,656.85 crores through Commercial Papers during the year under review.
RISK MANAGEMENT
YourCompanycontinuestolayemphasis on risk management, especially in an environment which is characterised by increasing uncertainties. With your Company embarking on a strong business growth trajectory coupled with focus on enhancing shareholders value whilst maintaining high standard of asset quality through optimal asset allocation, risk management holds the key. The strategy of the your Company is based on a clear understanding of various risks, and adherence to well-laid out risk policies and procedures that are benchmarked with best practices prevailing in the industry. Your Company has developed robust systems and embraced adequate practices for identifying, measuring and mitigating various risks – business, strategic, operational, market, credit, liquidity, reputational and process risks and ensuring that they are contained within pre-defined threshold levels.
Governance Structure
The overall risk strategy and direction of your Company is enunciated by the Board of Directors and overseen by the Risk Committee of Board (RCB). Policies approved from time to time by the Board of Directors or the RCB in consultation with other sub-committees of the Board, viz. the Credit Committee (CC) and the Asset Liability Management Committee (ALCO), constitute the governing framework for various types of risk and business activities undertaken within this policy framework. Overall risk management is guided by well-defined procedures appropriate for the assessment and management of individual risk categories viz. credit risk, market risk, operational risk, liquidity risk, counterparty risk and group risk supplemented by periodic validations of the methods used. Under the guidance of RCB, the Risk department is responsible for assessing and managing risks on a regular and dynamic basis. This entails, as an imperative, garnering adequate knowledge of macroeconomic trends, insights into dynamics of various sectors, understanding of regulatory environment and application of quantitative and qualitative tools facilitating an accurate assessment of risk at all times.
Credit Risk
Credit risk assessment of your Company’s borrowers or lessees constitutes a major part of overall risk management strategy. The primary objective of credit risk management is to maximise risk-adjusted rate of return on capital by maintaining a high quality asset portfolio and managing the credit risk inherent at individual and at the portfolio level. Strong emphasis is placed on evaluation and containment of risk at the individual level and analysis of the portfolio behaviour. The contours of credit risk assessment are defined by a comprehensive and well-defined Consolidated Risk Policy which encompasses guidelines for monitoring and mitigating the risks associated with them, structured and standardised credit approval processes through proactive policies which are reviewed regularly and updated at frequent intervals to take into account evolution in the micro and macro economic environments.
Your Company has a strong framework for the appraisal and execution of credit facilities (both fund and non-fund) that involves a detailed evaluation of industry, business, financial, project and management factors including sponsor’s financial strength and experience. A team of well qualified and experienced individual examine the proposals at various levels and evaluate all information which are gathered from relevant sources during the assessment process to facilitate credit decisions of the Credit Committee. For every proposal, the key risks and mitigating factors are identified. Residual risks are addressed through various mechanisms, which may include creation of adequate security cover by way of debt service reserves, channelling revenues through a trust & retention account and taking additional credit comforts such as corporate or personal guarantees and/or a pledge of equity holding. Besides well defined procedures for credit sanctioning, there are robust mechanisms to monitor and review existing credit exposure at the portfolio and individual level. Portfolio level performance, including delinquency, is tracked very closely at regular intervals with main emphasis on detection of early warning signals of stress. The RCB periodically reviews the adherence to sector, borrower and group exposure limits and impact of the stress scenarios or drop in the asset values in case of secured exposures on the portfolio. Key sectors are analysed in details to suggest strategies considering both risks and opportunities.
Market risk
Market risk is the risk of diminution in the value of investments on account of extraneous market factors like inadequate market liquidity, or volatile interest rates and foreign exchange rates. As an integral part of the overall risk management system, your Company addresses different forms of market risks, viz., liquidity risk, interest rate risk and foreign exchange risk. Your Company has adopted a comprehensive approach for market risk that not only hedges against market risks, but also endeavours to maximise the risk-adjusted rate of return of the portfolio by keeping close track of macro-economic developments including changes and its impact on movement in interest rates, foreign exchange rates and liquidity position in the market.
Your Company’s market risk management is guided by well-laid policies, guidelines, processes and systems for the identification, measurement, monitoring and reporting of exposures against various risk limits set in accordance with the risk appetite of your Company. With a view to limit your Company’s exposure to liquidity and interest rate risks, risk limits are specified with the approval of the Board of Directors. Your Company’s Asset Liability Management Committee (ALCO) periodically reviews benchmark rates, your Company’s borrowing mix and liquidity, funding and currency risk, and monitors the actual risk positions. Based on these requirements, steps are taken to maintain a safe distance from these risks in accordance with the specified levels. Treasury Mid-Office independently monitors the risk limits stipulated in the market risk policy and reports deviations, if any, to the appropriate authorities as laid down in the policy.
Liquidity risk is two-dimensional: risk of being unable to fund portfolio of assets at appropriate maturity and rates (liability dimension) and the risk of being unable to liquidate assets in a timely manner at a reasonable price (asset dimension). The ALCO lays down a broad framework for liquidity risk management to ensure that it is in a position to meet its daily liquidity obligations as well as to withstand a period of liquidity stress from industry, market or a combination of them. The liquidity profile is analyzed on a static as well as on a dynamic basis by using the gap analysis technique supplemented by monitoring of key liquidity ratios and conduct of liquidity stress tests periodically. The Asset Liability Management (ALM) position of your Company is being periodically reported to ALCO, RCB and also to the RBI.
Interest rate risk is the possible change in portfolio value due to interest rate fluctuations. Your Company manages interest rate risk by adopting a floating rate mechanism by linking the lending rate of interest to Srei Benchmark Rate, which is reviewed periodically with changes in your Company’s cost of funds.
Foreign exchange risk management becomes an imperative as your Company borrows money in foreign currency and lends in domestic currency. Therefore, in order to optimise the cost of funds and diversify the funding mix, effective hedging strategies are put in place in keeping with the Company’s risk appetite; and limits pertaining to an open position are devised. Your Company uses statistical measures like Value at Risk (VaR) method, stress tests, back tests and scenario analyses and continuously monitors the market movements to effectively manage the exchange rate risk.
Operational risk
Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Your Company has adopted strict measures towards formulating an effective operational risk management strategy which involves identification, assessment, review, control and reporting of key operational risks.
Your Company has built into its operational process proper segregation of functions, clear reporting structures, well-defined processes, operating manuals, staff training, verification of high value transactions and strong audit trails to control and mitigate operational risks. New product and activity notes prepared by business units are reviewed by all concerned departments including compliance, risk management and legal. Measurement and reporting is also achieved through the various management information systems (MIS), providing easily retrievable information, intertwined with each operational process which are generated and monitored regularly. All concerned departments coordinate and discuss key operational risk issues involving people, process, and technology, external factors etc. so as to minimise them or ensure adequate controls over them.
Your Company has a well-defined approach to identify, measure and mitigate information technology (IT) risks. Risk registers across various processes are assessed for likelihood and vulnerability of threats, and their acceptability evaluated based on existing controls. Appropriate controls are adopted based on guidance provided by the globally accepted ISO27001:2013 standard. Your Company has been evolving towards a centralised control mechanism for better deployment and management of resources, an increasingly rigorous surveillance and classification of information to ensure a robust IT Risk management system.
Your Company has a well-designed Business Continuity Plan (BCP), whose effectiveness is gauged by proper testing mechanisms and which ensures continuity of business in the unlikely event of business disruption. In order to provide continued and uninterrupted service even during natural disasters, a Disaster Recovery (DR) Site is in place. All IT systems have been certified with the ISO27001:2013 standard, and comprise features like DR, security features covering firewalls, encryption technologies and spam-guards, which provide protection against disruption and modification of information. To further enhance the Standard Operating Procedures and various technological functions, your Company has been investing so as to keep its technological systems constantly updated across the various domain functions.
In addition, to manage operational risk prudently, Know Your Customer (KYC) and Anti-Money Laundering (AML) Policy are in place, which helps to prevent your Company from being used intentionally or unintentionally by criminal elements for money laundering.
Your Company’s risk management framework emphasises proper analysing and understanding the underlying risks before undertaking any transactions and changing or implementing processes and systems. This enables a proper assessment of all risks and ensures that the transactions and processes conform to your Company’s risk appetite and regulatory requirements. This is facilitated by a robust governance structure, which includes multi-tiered approval levels for all transactions and processes. This mechanism is aided by a regular review of the portfolio and control mechanisms, undertaking self-assessment programmes and monitoring of key risk indicators.
HUMAN RESOURCES ACTIVITIES
During the year under review, your Company continued with the three pillars of the people strategy that continued from last year. These were focussed on building organization capability, creating process excellence and working on strengthening the collaborative culture.
Your Company has continued to focus on leveraging technology and digitization as a key part of its people strategy, driven by HR.
Your Company partnered with India’s premier B-School – XLRI, Jamshedpur, to co-create a M&A Case Study Competition, SREI-XLRI DEALBOOK 2019. The response was overwhelming and a total of 80 colleges, 450+ registrations and 4958 views were received. The plan is to partner with XLRI more on such campus branding activities.
As a part of your Company’s Leadership Development initiatives, your Company together with Korn Ferry Hay Group will be working with selected senior leaders in building future-oriented leadership capabilities. Each leader will have an individual development plan which is based on assessments carried out in a Development Centre. The interventions include workshops, coaching, action learning projects, among others, as per individual needs.
Your Company has undertaken several people development interventions over the last year. In order to create "Robust People Bench Strength" across key functions, your Company has undertaken market mapping with NBFCs / Financial Services companies and a white paper on synergies and gaps, talent infusion to provide a blend of "new skills" and "existing skills" to its reservoir; 9 Box Model implementation to ascertain key talents of your Company. Interventions to build and strengthen people, process and product design in structured credit have also been undertaken.
In order to exponentially increase collaboration, idea sharing and engagement between employees, your Company had earlier launched Srei Sampark, an app based social media platform which also acts as a digital sensor for employee mood and engagement. This has gone from strength to strength. This platform has been used for several major initiatives including engagement activities, Employee Value Proposition (EVP), competitions, surveys etc.
For your Company, all employees form part of an extended family - the Srei Parivar and your Company has continued in its efforts to encourage wellness in mind, body and spirit. Through Swasth Srei, your Company continues to encourage wellness and healthy lifestyles of the employees.
The cloud based Human Resource Management System (HRMS) which was launched in the year 2016 has been extended to cover more areas of HR operations.
The employee count of your Company stands at 124 (One Hundred Twenty Four) as on March 31, 2019.
INFORMATION TECHNOLOGY
Information Technology (IT) in your Company has successfully imbibed new upcoming opportunity opened up in as Co-Lending operating model and thus have been able to grab newer avenues in the market place which will facilitate to retain the industry leadership. During the year your Company has also embarked upon analytics journey leveraging on nearly thirty years of business experience and to create reach data model to automate business acquisition process in the year to come. Major thrust has been given to enhance the ability to scan untapped business opportunities through analytics.
Your Company has been able to implement the requirements as prescribed in the Master Directions - the NBFC Sector dated June 08, 2017 issued by the Reserve Bank of India (RBI) and continue to take necessary actions accordingly.
Comprehensive security strategies have been framed, and the controls have been designed to mitigate the risk and enhance resistance to cyber-attacks. Your Company has revamped the risk management methodology by putting in place required cyber security risk management processes across all major IT applications through monitoring of logs and effective implementation of Security Operations Center (SOC).
Your Company has taken up initiative to upgrade the major business applications eying at enriched operating processes enhanced security features to ensure scalability step up in the technology curve. Your Company’s technology plan is now poised to boost up the market penetration program and Go-To-Market strategy focussed at improved customer experience through straight through processing and simplification as well as industrialisation of acquisition process. Your Company’s IT strategy has given emphasis on costs associated with IT performance with due understanding at all steps in the new implementation projects.
INTERNAL CONTROL AND AUDIT
Your Company’s vision, mission and core values have laid the foundation for internal controls. On the administrative controls side, your Company has a proper reporting structure, oversight committees and rigorous performance appraisal system to ensure checks and balances. On the financial controls side, your Company has in place segregation of duties and reporting mechanism to deter and detect misstatements in financial reporting.
Your Company’s Internal Control System is commensurate with the nature of its business and the size and complexity of its operations and ensures compliance with policies and procedures. The Internal Control Systems are being constantly updated with new / revised standard operating procedures.
Further, in accordance with the latest legislation, your Company’s Internal Financial Controls (IFC) have been reviewed and actions have been taken to strengthen financial reporting and overall risk management procedures. Further, an Information System (IS) Audit of the internal systems and processes is conducted at least once in a year to assess operational risks faced by your Company.
Your Company has a dedicated and independent Internal Audit Department reporting directly to the Audit Committee of the Board. The purpose, scope, authority and responsibility of the Internal Audit Department are delineated in the Audit Charter approved by the Audit Committee. Internal Audit Department influences and facilitates improvements in the control environment by constantly evaluating the risk management and internal control systems.
Furthermore, the Audit Committee of your Company evaluates and reviews the adequacy and effectiveness of the internal control systems and suggests improvements. Significant deviations are brought to the notice of the Audit Committee and corrective measures are recommended for implementation. Based on the internal audit report, process owners undertake corrective action in their respective areas. All these measures help in maintaining a healthy internal control environment.
ENVIRONMENTAL AND SOCIAL MANAGEMENT SYSTEM
Environmental & Social Management System (ESMS) is followed by your Company as the process of sustainable business practice to adequately meet, respond to and enhance benchmarks in Environmental and Social (E&S) management. E&S risks associated with a proposal considered for investment and its existing portfolio are adequately taken care of by ESMS, which has been adopted to reduce the business risk of its portfolio related to E&S issues and adhere to Sustainable Finance Practice, which has been integrated as
Company Yoh ua s r revamped the risk management methodology by putting i n p l a c e r e q u i r e d c y b e r s e c u r i t y r i s k management processes across all major IT applications through monitoring of logs and effective implementation of Security Operations Center (SOC).
a part of overall Credit & Risk Policy. This management system is aimed at properly evaluating, assessing and ensuring customer compliance with relevant Environmental, Social, Health & Safety requirements during construction and operation of infra projects/activities and encourages clients to initiate corrective action & mitigation plans against the identified E&S risks.
The core elements of ESMS of your Company are a self-declared E&S Policy Framework, due-diligence (rapid, sustainability, client risk assessment, project/activity risk categorization and if required site inspection), appraisal (analysis of E&S impacts, suggesting of E&S impacts and client’s capacity & commitment to address them), mitigation measures, action plans, monitoring & review of ongoing / invested projects, training & workshop and continuous improvement of the system. By following ESMS practice, your Company has been able to create branding of your Company and awareness in the market regarding relevance of E&S risks and their impacts on the society and the environment.
A full scale E&S due-diligence is carried out in your Company for any business activity as per International Finance Corporation (IFC) Performance Standards, World Bank Environmental & Social Framework (ESF) guidelines and Country’s E&S laws, rules & notifications, based on which a ‘go’ or ‘no go’ decision is given by ESMS team for a loan proposal. Your Company maintains an international standard exclusion list and your Company neither participates nor invests in the activities and industries which fall under this exclusion list. Your Company only invests in the projects/ activities, which comply with the applicable environmental & social norms and laws of the Country.
As a part of sustainability strategy, y o u r C o m p a n y e n t e r e d i n t o a Capacity Development Agreement with Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO) [Netherlands Development Finance Company] and Oesterreichische E n t w i c k l u n g b a n k A G ( O e E B ) [Development Bank of Austria] to launch a corporate roll-out programme for its clients called Environmental & Social Management System - Corporate Rollout Programme (ESMS – CRP). The purpose of the programme is to control the business risk out of different E&S issues from its own and its clients’ portfolio, gain control over third party risks and carry out the business with a better E&S risk management. In the process, your Company’s brand image in the market is enhanced.
Under this ESMS-CRP, your Company prepared sector specific ESMS policy manual based on IFC PS & Country’s E&S Standards for its clients’ business and facilitated Health, Safety and Environmental (HSE) training program. In post implementation stages, your Company helped the clients in E&S monitoring and audit of their ESMS performance improvement. Adoption of ESMS-CRP for the clients of your Company has been made mandatory from FY 2016 onwards for any fresh exposure. This programme reduced business risk out of any E&S issues substantially from your Company’s portfolio and helped your Company to gain third party control. Your Company implemented ESMS-CRP with 15 (fifteen) Clients and delivered them sector specific ESMS Policy framework and Risk toolkits, HSE trainings and mock sustainability audit for these clients to carry out their business with better understanding & mitigation of E&S risks. To evaluate the impact of the ongoing ESMS practice and implemented ESMS CRP, your Company has appointed a sustainable consultant for total programme audit this FY, which is still under progress.
Over the past years, your Company has been able to successfully manage, reduce and control the E&S risks associated with its portfolio. Your Company has encouraged sustainable development by investing in various renewable energy projects. Your Company monitors & reviews the invested projects on a regular basis whereas shortfalls or misconducts are rectified by framing and implementing E&S action plans for the same. Your Company continuously updates and upgrades the ESMS policy framework from time to time. Over the past years, your Company has been able to successfully manage, reduce and control the E&S risks associated with its portfolio.
Your Company believes in a Sustainable Finance Business Approach by considering conservation, management & sustainable use of human & natural resources. This endeavour creates a strong & confident long term relationship with all stakeholders for several years.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Corporate Social Responsibility (CSR) Committee of your Company has been constituted in line with the provisions of Section 135 of the Companies Act, 2013. During the year, the Board of Directors of your Company at its meeting held on September 05, 2018 designated Mr. Sandeep Lakhotia, Company Secretary, as the Secretary to the Committee in place of Mr. Madhusudan Dutta. The Committee presently comprises Mr. Hemant Kanoria, Chairman, Mr. Sunil Kanoria, Non-Executive Director and Mr. Shyamalendu Chatterjee, Independent Director. Mr. Hemant Kanoria, Chairman of your Company acts as the Chairman of the CSR Committee. Mr. Sandeep Lakhotia, Company Secretary acts as the Secretary to the CSR Committee.
4 (four) meetings of the CSR Committee were held during the year 2018-19 on April 24, 2018, September 03, 2018, November 15, 2018 and March 23, 2019.
The CSR Committee has formulated the CSR Policy which describes the multiple lines around which the CSR activities of your Company are positioned being education and skill development, social and economic welfare, environmental sustainability and such other activities included in Schedule VII of the Companies Act, 2013 as may be identified by the CSR Committee from time to time. The said Policy is available on your Company’s website at https://www.srei.com/investor/ corporate-policies/pdf/corporate-social-responsibility-policy.pdf.
Your Company perceives Corporate Social Responsibility (CSR) as an opportunity to contribute towards uplifting the society at large, empowering individuals, making them self-reliant. The CSR philosophy of your Company is embedded in its commitment to all stakeholders namely consumers, employees, environment and society while your Company’s approach extends both to external community as well as to your Company’s large and diverse internal employee base and their families. Your Company’s sustainable approaches towards practicing humble service to Humanity on a sustainable basis, has enabled it to continue fulfilling its commitment to be a socially responsible corporate citizen.
The total amount available for CSR spending, being 2 (two) per cent of the average net profits of your Company made during the 3 (three) immediately preceding financial years, during the financial year 2018-19 aggregated to approximately Rs. 2.74 Crores.
Recognising its social responsibility, your Company has granted donation of Rs. 1,00,00,000/- (Rupees One Crore only) during the financial year 2018-19 to Srei Foundation, a public charitable trust established with the objective of granting scholarships and other financial assistance to deserving and talented candidates. The Fund also supports setting up of schools, colleges, medical and scientific research institutions. Donations to Srei Foundation qualify for deduction under Section 80G of the Income Tax Act, 1961.
Your Company is fully aware of the fact that as a corporate citizen, it is also entrusted with the responsibility to contribute for the betterment of the society at large. During the year under review, your Company extended support to Sonata Foundation towards operational expenses for smooth running of Animal Mobile Clinics used extensively for welfare of animals, with a sum of Rs. 2,40,000/- (Rupees Two Lacs and Forty Thousand only).
Your Company further supported IISD Edu World, formed with the object of imparting, promoting and spreading education for underprivileged children and weaker sections of the society, towards sponsorship fees for students, with a contribution of Rs. 50,00,000/- (Rupees Fifty Lacs only) during the year.
Further, contribution of Rs. 1,25,00,000/- (Rupees One Crore and Twenty Five Lacs only) was made to Srihari Global School Foundation towards development of education, healthcare & wellness and social & economic upliftment. Srihari Global School Foundation is a company incorporated and registered under Section 25 of the Companies Act, 1956 (Section 8 of the Companies Act, 2013) and formed with the aim of extending world-class education across India with a vision to create world citizens with 21st century skills to face the challenges of an unpredictable, rapidly-changing world.
During this year, your Company spent an aggregate amount of Rs. 2,77,40,000/- (Rupees Two Crores Seventy Seven Lacs and Forty Thousand only), being 2.03 per cent of the average net profits of last 3 (three) years, towards CSR activities pursuant to CSR Policy of your Company, which is more than the minimum statutory requirement, being 2 (two) per cent of the average net profits of last 3 (three) years being Rs. 2,73,91,002/- (Rupees Two Crores Seventy Three Lacs Ninety One Thousand and Two only). The manner in which the CSR amount was spent during the financial year is set out as an annexure to the Directors’ Report and forms part of this Annual Report.
BUSINESS
RESPONSIBILITY REPORT
The Business Responsibility (BR) Report as stipulated under Regulation 34(2) (f) of SEBI Listing Regulations, 2015, describing the initiatives taken by your Company from an environmental, social and governance perspective, forms part of the Annual Report.
Further, your Company has formulated a BR Policy approved in line with the provisions of SEBI Listing Regulations, 2015. The policy describes the principles of sustainable business that delivers value for its stakeholders including but not limited to its shareholders, employees, clients, business partners and the wider community.
SREI WEBSITE
The website of your Company www.srei. com has been developed on the new responsive technology based platform known as ‘Drupal’, ensuring uniform display across all devices like mobile, tablet, desktop etc. and all the operating systems. The website has an inbuilt sophisticated and customized content management system for easy change in content. A simple, improved navigation system needs a lesser number of clicks to reach the information available in the different sections of the website. The contemporary and smart look of the website ensures a customer centric approach catering to the requirements of prospective customers, investors, employees and other stakeholders. The website of your Company also has ‘Live Stock Ticker’ with dynamic display of current stock prices in BSE and NSE with respective market caps, along with a link to your Company’s YouTube channel. The site carries a comprehensive database of information of interest to the investors including the financial results of your Company, dividend declared, unclaimed dividend list, shareholding pattern, any price sensitive information disclosed to the regulatory authorities from time to time, analysts’ reports, investor presentations, standard downloadable forms, media coverage, corporate profile and business activities of your Company and the services rendered by your Company to its investors. Some useful features like Online Resume Management System to pull the best talents and Online NCD Application Form download system as a part of fund raising initiatives are functional in the system. An auto generate functionality with unique form ID for Non-Convertible Debenture (NCD) form was created in 2017. Your Company’s integration of the customer portal in the corporate website still enables customers to access their account and download the essential documents directly from the website. By introducing the download facility of MySREIApp mobile application from the website, your Company extends the By download introducing facility the of MySREIApp mobile application from the website, your Company extends the digital services and creates an ‘anywhere anytime’ experience like never before.
digital services and creates an ‘anywhere anytime’ experience like never before. The multiplatform mobile app empowers customers to raise service request, contact relationship managers, send request for new finance etc. The links to different social media i.e. Facebook, YouTube, Twitter, LinkedIn is embedded in the home page of the website to get access of the key initiatives and achievements of your Company.
SUBSIDIARY COMPANIES
The Statement in Form AOC-1 containing the salient features of the financial statement of your Company’s subsidiaries and associates pursuant to first proviso to Section 129(3) of the Companies Act, 2013 (Act) read with Rule 5 of the Companies (Accounts) Rules, 2014, forms part of the Annual Report. Further, in line with Section 129(3) of the Act read with the aforesaid Rules, SEBI Listing Regulations, 2015 and in accordance with (Indian Accounting Standards) Rules, 2015 (IND AS Rules) of Schedule III to the Companies Act, 2013, Consolidated Financial Statements prepared by your Company includes the financial information of its subsidiary and associate companies.
A Report on the performance and financial position of each of the Subsidiaries and Associate Companies included in the Consolidated Financial Statements prepared by your Company as per Rule 8(1) of the Companies (Accounts) Rules, 2014, forms part of the annual accounts of each of the Subsidiary and Associate Companies which have been placed on the website of your Company www.srei. com and also forms part of Form AOC-1 pursuant to Rule 5 of the Companies (Accounts) Rules, 2014, which is set out as an annexure to the Directors’ Report and forms part of this Annual Report. Members interested in obtaining a copy of the annual accounts of the Subsidiaries and Associate Companies may write to the Company Secretary at your Company’s Registered Office. The said Report is not repeated here for the sake of brevity.
The names of companies which have become or ceased to be subsidiaries, joint ventures or associate companies during the year are given below:
| Name | Status |
| A t t i v o E c o n o m i c Z o n e | Ceased to be an Associate w.e.f. 29.09.2018. |
| (Mumbai) Private Limited | |
| Bharat Road Network Limited | Became an Associate w.e.f. 21.01.2019 and ceased to be an Associate w.e.f. 30.01.2019. |
| Quippo Energy Limited | Ceased to be a wholly owned Subsidiary w.e.f. 28.03.2019. |
| Quippo Oil & Gas Infrastructure Limited | Ceased to be a wholly owned Subsidiary w.e.f. 31.03.2019. |
| Quippo Drilling International | Ceased to be a wholly owned step down Subsidiary (100%) w.e.f. 23.08.2018, but continued to be a step down Subsidiary (74%). Subsequently, ceased to be a step down Subsidiary w.e.f. 31.03.2019. |
| Private Limited |
Highlights of the performance of subsidiaries and associate companies and their contribution to the overall performance of the Company during the period under report are given below:
Name of the Subsidiary / Associate Turnover / Total Profit After % Contribution % Contribution Income for Tax (PAT) for on Turnover / on PAT for the Financial the Financial Total Income for the Financial Year ended Year ended the Financial Year ended 31.03.2019 31.03.2019 Year ended 31.03.2019 (Rs. In Lacs) (Rs. In Lacs) 31.03.2019
Srei Capital Markets Limited 961.18 35.98 0.1486 0.0739
Srei Alternative Investment Managers Limited 505.49 33.56 0.0781 0.0689 (SAIML)
Hyderabad Information Technology Venture 3.32 (5.98) 0.0005 -Enterprises Limited (Subsidiary of SAIML)
Cyberabad Trustee Company Private Limited 0.42 0.03 0.0001 0.0001 (Subsidiary of SAIML)
Srei Asset Finance Limited (Formerly Srei Asset 1.87 0.04 0.0003 0.0001 Reconstruction Private Limited)
Bengal Srei Infrastructure Development Limited 92.04 2.56 0.0142 0.0053 Controlla Electrotech Private Limited 160.00 (33.13) 0.0247 -Srei Mutual Fund Trust Private Limited 0.21 (6.81) 0.0000 -
Srei Mutual Fund Asset Management Private 105.20 (168.07) 0.0163 -Limited
Srei Insurance Broking Private Limited 781.75 123.01 0.1208 0.2527 Srei Equipment Finance Limited (SEFL) 4,36,684 30,638 67.4967 62.9401 Sahaj e-Village Limited 8,869.24 (5,246.53) 1.3709 -IIS International Infrastructure Service GmbH* 68.33 (493.46) 0.0106 -
*Under liquidation
MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION
There is no such material change and commitment affecting the financial position of your Company which have occurred between the end of the financial year of your Company to which the financial statements relate and the date of the Report.
POLICY FOR DETERMINING ‘MATERIAL’ SUBSIDIARIES
As on March 31, 2019, Srei Equipment Finance Limited (SEFL), a wholly owned subsidiary of your Company is a listed ‘material’ subsidiary of your Company with its, debt securities being listed on the Stock Exchanges in India. However, your Company does not have any material unlisted subsidiary. Your Company has formulated a Policy for determining Material Subsidiaries in accordance with SEBI Listing Regulations, 2015. The said
Policy was last revised on February 04, 2019 and is available on your Company’s website at https://www.srei.com/investor/ corporate-policies/pdf/Policy_on_ determining_Material_Subsidiaries.pdf.
KEY MANAGERIAL PERSONNEL (KMPs)
During the year, 4 (four) senior executives of your Company were voluntarily designated by the Board of Directors as Key Managerial Personnel (KMPs) of your Company w.e.f. April 28, 2018, namely, Mr. Sanjeev Sancheti, Chief Strategy Officer, Mr. Chandrasekhar Mukherjee, Group Chief People Officer, Mr. Debashis Ghosh, Internal Auditor and Mr. Samir Kumar Kejriwal, Senior Vice President of your Company, pursuant to the provisions of Section 2(51) of the Companies Act, 2013 as amended by the Companies (Amendment) Act, 2017. Due to organizational change, the list of additional KMPs was revised by the Board of Directors of your Company at its meeting held on February 04, 2019 whereby Mr. Sanjeev Sancheti, Chief Strategy Officer, only continued to be designated as the additional KMP of your Company. Subsequently, Mr. Sanjeev Sancheti ceased to be the KMP of your Company w.e.f. May 20, 2019 and Mr. Shashi Bhushan Tiwari, Chief Risk Officer, was additionally designated as KMP of your Company w.e.f. May 20, 2019, with the approval of the Board of Directors at its meeting held on that date.
Mr. Sandeep Kumar Sultania was appointed as the Chief Financial Officer (CFO) of your Company w.e.f. July 05, 2018. Further, Mr. Sameer Sawhney resigned as Chief Executive Officer (CEO) w.e.f. the close of business hours of September 05, 2018 and Mr. Rakesh Kumar Bhutoria was appointed as the CEO of your Company w,e,f, November 16, 2018.
The following directors/executives of your Company are whole-time Key Managerial
Personnel (KMPs) in accordance with the provisions of Section 2(51) read with Section 203 of the Companies Act, 2013 -
| Name | Designation |
| M r . H e m a n t | Chairman |
| Kanoria | |
| M r . R a k e s h | Chief Executive |
| Kumar Bhutoria | Officer |
| M r. S a n d e e p | Chief Financial |
| Kumar Sultania | Officer |
| M r. S a n d e e p | Company Secretary |
| Lakhotia | |
| M r . S h a s h i | Chief Risk Officer |
| Bhushan Tiwari |
NOMINATION AND REMUNERATION COMMITTEE
The Board of Directors of your Company have constituted a Nomination and Remuneration Committee in accordance with the provisions of Section 178 of the Companies Act, 2013 read with Regulation 19 of SEBI Listing Regulations, 2015. The Committee was reconstituted by the Board of Directors of your Company on May 20, 2019 by cessation of Mr. Sunil Kanoria, Non-Executive Director, as Member and induction of Mr. Balaji Viswanathan Swaminathan, Non-Executive Director, as Member of the Committee. The Committee comprises Mr. Shyamalendu Chatterjee, Mr. S. Rajagopal, Independent Directors and Mr. Balaji Viswanathan Swaminathan, Non-Executive Director. Mr. Shyamalendu Chatterjee acts as the Chairman of the Nomination and Remuneration Committee. Mr. Sandeep Lakhotia, Company Secretary of your Company acts as the Secretary to the Nomination and Remuneration Committee. The Terms of Reference of the Committee has been provided in the Corporate Governance Section forming part of this Report.
5 (five) meetings of the Nomination and Remuneration Committee of your Company were held during the year 2018-19 on April 28, 2018, June 23,
2018, September 05, 2018, November 16, 2018 and February 04, 2019.
The Committee has formulated the Nomination and Remuneration Policy (‘Srei Nomination and Remuneration Policy’) which broadly laid down the various principles of remuneration being support for strategic objectives, transparency, internal & external equity, flexibility, performance-driven remuneration, affordability and sustainability and covers the procedure for selection, appointment and compensation structure of Board members, Key Managerial Personnel (KMPs) and Senior Management Personnel (SMPs) of your Company. The said Policy was last revised on February 04, 2019 and is available on your Company’s website at https://www. srei.com/investor/corporate-policies/pdf/ Srei_Nomination_and_Remuneration_ Policy.pdf.
WHISTLE BLOWER POLICY (VIGIL MECHANISM)
Your Company has formulated a codified Whistle Blower Policy incorporating the provisions relating to Vigil Mechanism in terms of Section 177 of the Companies Act, 2013 and Regulation 22 of SEBI Listing Regulations, 2015, in order to encourage Directors and Employees of your Company to escalate to the level of the Audit Committee any issue of concerns impacting and compromising with the interest of your Company and its stakeholders in any way. Your Company is committed to adhere to highest possible standards of ethical, moral and legal business conduct and to open communication and to provide necessary safeguards for protection of employees from reprisals or victimisation, for whistle blowing in good faith. The said Policy was last revised on February 04, 2019 and is available on your Company’s website at https://www.srei.com/investor/corporate-policies/pdf/Whistle_Blower_Policy.pdf.
Further, no complaints were reported under the Vigil Mechanism during the year.
POLICY AGAINST SEXUAL AND WORKPLACE HARASSMENT
Your Company is committed to provide and promote a safe, healthy and congenial atmosphere irrespective of gender, caste, creed or social class of the employees. Your Company in its endeavour to provide a safe and healthy work environment for all its employees has developed a policy to ensure zero tolerance towards verbal, physical, psychological conduct of a sexual nature by any employee or stakeholder that directly or indirectly harasses, disrupts or interferes with another employee’s work performance or creates an intimidating, offensive or hostile environment such that each employee can realize his / her maximum potential.
Your Company has put in place a ‘Policy on Prevention of Sexual Harassment’ as per The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Policy is meant to sensitize the employees about their fundamental right to have safe and healthy environment at workplace. As per the Policy, any employee may report his / her complaint to the Internal Complaints Committee constituted for this purpose. The said Policy is available on your Company’s website at https:// www.srei.com/investor/corporate-policies/pdf/policy-on-prevention-of-sexual-harassment.pdf.
Your Company affirms that during the year under review adequate access was provided to any complainant who wished to register a complaint under the Policy and that your Company has complied with the provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
During the year, your Company has not received any complaint on sexual harassment from any of the employees of your Company.
PARTICULARS OF
LOANS, GUARANTEES OR INVESTMENTS
Your Company is exempted from the applicability of the provisions of Section 186 of the Companies Act, 2013 read with Rule 11 of the Companies (Meetings of Board and its Powers) Rules as your Company is engaged in the business of financing of companies or of providing infrastructural facilities.
PERFORMANCE EVALUATION
The Nomination and Remuneration Committee (NRC) of your Company at its meeting held on February 04, 2019 formulated and laid down the revised criteria and manner for Performance Evaluation of the Board (including Committees) and every Director (including Independent Directors, and Chairman) pursuant to provisions of Section 134, Section 149 read with Code of Independent Directors (Schedule IV) and Section 178 of the Companies Act, 2013 and Regulation 19(4) read with Part D of Schedule II of SEBI Listing Regulations, 2015, covering inter-alia the following parameters namely:
i) Board Evaluation - degree of fulfillment of key responsibilities; Board culture and dynamics, amongst others.
ii) Board Committee Evaluation - effectiveness of meetings; Committee dynamics amongst others.
iii) Individual Director Evaluation ( i n c l u d i n g C h a i r m a n a n d I n d e p e n d e n t D i r e c t o r s ) - Attendance, Contribution at Board Meetings, Guidance/support to management outside Board/ Committee meetings, etc.
Further, the Chairman is additionally evaluated on key aspects of the role which includes inter-alia effective leadership to the Board, adequate guidance to the CEO etc. Independent Directors are additionally evaluated based on fulfillment of Independence criteria as specified in SEBI Listing Regulations, 2015 and Companies Act, 2013 and their independence from the management.
During the year under review, the Board carried out annual evaluation of its own performance as well as evaluation of the working of various Board Committees viz. Audit Committee, Stakeholders Relationship Committee, Nomination and Remuneration Committee and Corporate Social Responsibility Committee and Individual Directors (including Chairman, Independent Directors and Non Independent Non-Executive Directors). This exercise was carried out through a structured questionnaire prepared separately for Individual Board Members (including the Chairman) and above mentioned Board Committees based on the criteria as formulated by the NRC and in context of the Guidance note dated January 05, 2017 issued by SEBI. The said questionnaire was circulated to the Directors in physical mode and the same was also made available to the Directors on their I-Pads under the ‘Diligent Boards’ (Diligent) Application to carry out performance evaluation for the Financial Year 2018-19 on the broad parameters as laid down by the NRC.
Based on the above mentioned criteria, the performance of the Board, various Board Committees viz. Audit Committee, Stakeholders Relationship C o m m i t t e e , N o m i n a t i o n a n d Remuneration Committee and Corporate Social Responsibility Committee, and Individual Directors (including Chairman, Independent Directors and Non Independent Non-Executive Directors) was evaluated and found to be satisfactory. It was also noted that given the changing external environment, there is need for better allocation of time for business reviews, periodic refreshers for the Board on key strategic thrusts.
During the year under review, the Independent Directors of your Company reviewed the performance of Non-Independent Directors, the Board as a whole and Chairperson of your Company, taking into account the views of Executive Director and Non-Executive Directors.
Further, the Independent Directors hold unanimous opinion that the Non-Independent Directors as well as the Chairman bring to the Board, abundant knowledge in their respective field and are experts in their areas. Besides, they are insightful, convincing, astute, with a keen sense of observation, mature and have a deep knowledge of your Company.
The Board as a whole is an integrated, balanced and cohesive unit where diverse views are expressed and dialogued when required, with each Director bringing professional domain knowledge to the table. All Directors are participative, interactive and communicative.
The Chairman has abundant knowledge, experience, skills and understanding of the Board’s functioning, possesses a mind for detail, is meticulous to the core and conducts the Meetings with poise and maturity.
The information flow between your Company’s Management and the Board is complete, timely with good quality and sufficient quantity.
FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS (IDs)
In terms of Regulation 25(7) of SEBI Listing Regulations, 2015, your Company endeavors to familiarize the Independent Directors (IDs) about your Company including nature of industry in which your Company operates, business model of your Company, roles, rights and responsibilities of IDs and any other relevant information.
The details of familiarisation programmes conducted for Independent Directors during the year, are furnished in the Corporate Governance Report and are also available on your Company’s website at https://www.srei.com/investor/ corporate-policies/pdf/Familiarisation_ Programme_for_Independent_Directors. pdf.
Yournot entered into anyCompany has material related party transactions with any of its related parties during the FY 2018-19.
In addition to the above, the Board of Directors are continuously encouraged to participate in various external training sessions to ensure that the Board members are kept up to date.
EXTRACT OF ANNUAL RETURN
An extract of Annual Return as on the financial year ended on March 31, 2019 in Form No. MGT-9 as required under Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014 is set out as an annexure to the Directors’ Report and forms part of this Annual Report. Further, the Annual Return of the Company can be accessed at https://www.srei.com/investor/financial-reports/financial-statement.
PARTICULARS OF CONTRACTS/ ARRANGEMENTS WITH RELATED PARTIES
All the related party transactions of your Company are entered in the ordinary course of business and are on arm’s length basis and are in compliance with the applicable provisions of the Companies Act, 2013 and SEBI Listing Regulations, 2015. There are no materially significant transactions entered into by your Company with Promoters, Directors or Key Managerial Personnel (KMPs), which have potential conflict with the interest of your Company at large. Your Company has not entered into any material related party transactions with any of its related parties during the FY 2018-19. Members may refer to the notes to the financial statements for details of related party transactions.
Since all related party transactions entered into by your Company were in the ordinary course of business and were on an arm’s length basis, Form AOC-2 is not applicable to your Company. The related party transactions are entered into based on considerations of various business exigencies, such as synergy in operations, sectoral specialization and your Company’s long-term strategy for sectoral investments, optimization of market share, profitability, legal requirements, liquidity and capital r e s o u r c e s o f s u b s i d i a r i e s a n d associates.
In terms of Regulation 23(2) of SEBI Listing Regulations, 2015, your Company obtained prior approval of the Audit Committee for entering into transactions with related parties, as applicable. A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of the transactions.
A Related Party Policy has been formulated by your Company for determining the materiality of transactions with related parties and dealings with them. The said Policy was last revised on February 04, 2019 and is available on your Companys website at https://www.srei.com/investor/ corporate-policies/pdf/Related_Party_ Transactions_Policy.pdf.
PARTICULARS OF EMPLOYEES
T h e p r e s c r i b e d p a r t i c u l a r s o f remuneration of employees pursuant to Section 197(12) read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are set out as annexures to the Directors’ Report and forms part of this Annual Report.
PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTFLOW
Your Company has no activity relating to Conservation of Energy and Technology Absorption as stipulated in Rule 8(3) of Companies (Accounts) Rules, 2014. However, your Company uses information technology extensively in its operations and also continues its endeavour to improve energy conservation and utilisation, safety and environment.
During the year under review, the total foreign exchange earnings and expenditure of your Company was NIL and Rs. 6,228 Lacs, respectively (previous year Rs. NIL and Rs. 6,383 Lacs, respectively).
AUDIT COMMITTEE
The Audit Committee of your Company has been constituted in line with the provisionsofSection177oftheCompanies Act, 2013 read with Regulation 18 of SEBI Listing Regulations, 2015. During the year, the Audit Committee was reconstituted by induction of Mr. Ram Krishna Agarwal and Mr. Malay Mukherjee, Independent Directors, as Members of the Committee by the Board of Directors at its meetings held on September 05, 2018 and February 04, 2019, respectively. The Audit Committee presently comprises Mr. Shyamalendu Chatterjee, Mr. Srinivasachari Rajagopal, Mr. Ram Krishna Agarwal, Mr. Malay Mukherjee, Independent Directors and Mr. Sunil Kanoria, Non-Executive Director. Mr. Shyamalendu Chatterjee, Independent Director of your Company is the Chairman of the Audit Committee.
The Company Secretary of your Company acts as the Secretary to the Audit Committee. The Terms of Reference of the Audit Committee has been provided in the Corporate Governance Section forming part of this Report.
6 (six) meetings of the Audit Committee were held during the year 2018-19 on April 28, 2018, June 23, 2018, September 05, 2018, November 16, 2018, January 21, 2019 and February 04, 2019.
During the year under review, there were no such instances wherein the Board had not accepted any recommendation of the Audit Committee.
AUDITORS
At the 30th Annual General Meeting (AGM) of your Company held on
August 01, 2015, Haribhakti & Co. LLP, Chartered Accountants, having Firm Registration No. 103523W / W100048 allotted by The Institute of Chartered Accountants of India (ICAI), were appointed as Statutory Auditors of your Company to hold office for a term of 5 (Five) years from the conclusion of 30th AGM (subject to ratification of such appointment by the Members at every AGM) till the conclusion of the 35th AGM of your Company. The requirement of seeking ratification of the Members for continuance of their appointment has been withdrawn consequent upon the changes made by the Companies (Amendment) Act, 2017 effective from May 07, 2018. Hence, the resolution seeking ratification of the Members for their appointment is not being placed at the ensuing Annual General Meeting (AGM). The Statutory Auditors hold a valid peer review certificate as prescribed under Regulation 33(1)(d) of SEBI Listing Regulations, 2015.
The Auditors’ Report does not contain any qualification, reservation or adverse remark or disclaimer. Further, the Statutory Auditors have not reported any incident of fraud during the year under review to the Audit Committee of your Company.
SECRETARIAL AUDIT REPORT
Your Company appointed Dr. K. R. Chandratre, Practising Company Secretary, holding membership of The Institute of Company Secretaries of India (Membership No. FCS 1370; Certificate of Practice No. 5144) as the Secretarial Auditor of your Company for FY 2018-19 to conduct the Secretarial Audit pursuant to Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
The Secretarial Audit Report confirms that your Company has complied inter alia with all the applicable provisions of the Companies Act, 2013 and the Rules made thereunder, the Securities Contracts (Regulation) Act, 1956 and
Rules made thereunder, Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder, Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Secretarial Standards issued by The Institute of Company Secretaries of India (Secretarial Standards with respect to Meetings of Board of Directors (SS-1) and General Meetings (SS-2) issued by The Institute of Company Secretaries of India), Securities Contracts (Regulation) Act, 1956 and all the Regulations and Guidelines of the Securities and Exchange Board of India (SEBI) as applicable to the Company, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, SEBI (Prohibition of Insider Trading) Regulations, 2015, the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, the SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993, SEBI (Delisting of Equity Shares) Regulations, 2009 and the Reserve Bank of India Directions, Guidelines and Circulars applicable to Systemically Important Non-Deposit Accepting or Holding NBFCs (NBFC – ND – SI).
The Secretarial Audit Report for the financial year ended March 31, 2019 does not contain any qualification, reservation or adverse remark or disclaimer and the same forms part of the Annual Report.
CORPORATE POLICIES
The details of Policies adopted by your Company along with salient features and summary of key changes, if any, during the year are provided as annexure to the Directors’ Report and forms part of this Annual Report.
CORPORATE GOVERNANCE
Your Company has always practised sound corporate governance and takes necessary actions at appropriate times for enhancing and meeting stakeholders’ expectations while continuing to comply with the mandatory provisions of Corporate Governance.
As required under Regulation 34(3) read with Schedule V of SEBI Listing Regulations, 2015, a separate section on Corporate Governance and a Certificate from the Auditors of your Company confirming compliance with the requirements of Corporate Governance, forms part of the Annual Report.
MEETINGS OF THE BOARD
The Board meets at regular intervals to discuss and decide on policy and strategy apart from other Board business. However, in case of a special and urgent business need, the Board’s approval is taken by passing resolutions through circulation, as permitted by law, which are confirmed in the subsequent Board meeting.
6 (six) Board meetings were held during the year 2018-19 on April 28, 2018, June 23, 2018, September 05, 2018, November 16, 2018, January 21, 2019 and February 04, 2019. The maximum time gap between any two consecutive meetings did not exceed 120 (one hundred twenty) days.
DIRECTORS
D u r i n g t h e y e a r u n d e r r e v i e w, your Company appointed Mr. Malay Mukherjee (DIN 02272425) as an Independent Director of your Company to hold office for a period of 5 (five) consecutive years from the date of the Thirty-Third Annual General Meeting (AGM) of your Company held on July 21, 2018. Your Company further redesignated Mr. Ram Krishna Agarwal (DIN 00416964) as Independent Director of your Company to hold office for a period of 5 (five) consecutive years from the date of the Thirty-Third AGM of your Company held on July 21, 2018. In this regard, your Company issued formal letter of appointment to the Independent Directors stating inter alia the terms and conditions of their appointment and the same is also hosted on the website of your Company www.srei.com.
The Board of Directors of your Company, based on recommendation of the Nomination and Remuneration Committee, appointed Mr. Balaji Viswanathan Swaminathan (DIN 01794148) as an Additional Director (Category – Non Executive and Non Independent Director) of your Company, liable to retire by rotation, with effect from September 05, 2018 to hold office as such upto the date of 34th (Thirty-Fourth) Annual General Meeting (AGM) of your Company. The Board recommends appointment of Mr. Balaji Swaminathan as Non Executive Director of your Company subject to approval of Members at the ensuing Annual General Meeting (AGM) of your Company.
Based on recommendation of the N o m i n a t i o n a n d R e m u n e r a t i o n Committee, the Board of Directors of your Company further appointed Dr. Tamali Sengupta (DIN 00358658) as an Additional Director (Category – Non Executive and Independent Director) of your Company with effect from February 04, 2019 to hold office as such upto the date of 34th (Thirty-Fourth) Annual General Meeting (AGM) of your Company. Subject to approval of the Members of your Company, the Board recommends appointment of Dr. Tamali Sengupta as Non Executive and Independent Director of your Company for a period of 5 (five) consecutive years from the date of the 34th (Thirty-Fourth) AGM of your Company.
Your Company has received individual notices from Members pursuant to Section 160 of the Companies Act, 2013, signifying their intention to propose the candidatures of Mr. Balaji Viswanathan Swaminathan and Dr. Tamali Sengupta, for the office of Directors.
The Board of Directors of your Company appointed Mr. Hemant Kanoria (DIN 00193015) as the Chairman of your Company, in whole time capacity, for a period of 5 (five) years w.e.f. April 01, 2019, liable to retire by rotation, on existing terms and conditions based on the recommendation of the Nomination and Remuneration Committee of your Company and subject to approval of Members at the ensuing Annual General Meeting (AGM) of your Company.
Pursuant to Regulation 17(1A) as inserted vide SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 effective from April 01, 2019, no listed entity shall appoint a person or continue the directorship of any person as a non-executive director who has attained the age of 75 (seventy five) years unless a special resolution is passed to that effect, in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such a person.
Mr. Srinivasachari Rajagopal (DIN 00022609), was appointed as an Independent Director of your Company for a period of 5 (five) consecutive years from the date of the 29th (Twenty-Ninth) Annual General Meeting (AGM) of your Company held on August 02, 2014 till August 01, 2019. Mr. Rajagopal has already attained the age of 75 years. Therefore, approval of the Members was sought through Postal Ballot for continuance of the directorship of Mr. Rajagopal in your Company for his present tenure expiring on August 01, 2019, which was approved vide Special resolution dated March 21, 2019.
Based on recommendation of the N o m i n a t i o n a n d R e m u n e r a t i o n Committee and subject to approval of the Members of your Company, the Board of Directors of your Company further recommend re-appointment of Mr. Shyamalendu Chatterjee (DIN: 00048249), Mr. Srinivasachari Rajagopal (DIN: 00022609) and Dr. Punita Kumar Sinha (DIN: 05229262), as Independent Directors of your Company, not liable to retire by rotation to hold office for a second term of 5 (five) consecutive years from the date of the 34th (Thirty-Fourth) Annual General Meeting (AGM) of your Company.
Your Company has received individual notices from Members pursuant to Section 160 of the Companies Act, 2013, signifying their intention to propose the candidatures of Mr. Shyamalendu Chatterjee, Mr. Srinivasachari Rajagopal and Dr. Punita Kumar Sinha, for the office of Independent Directors for a second term of 5 (five) consecutive years.
In accordance with the provisions of Section 152 of the Companies Act, 2013 (Act) and the relevant Rules and your Company’s Articles of Association, Mr. Sunil Kanoria (DIN 00421564) retires by rotation at the ensuing AGM and being eligible, offers himself for reappointment.
The brief resume / details relating to Directors who are proposed to be appointed / re-appointed are furnished in the Notice of the ensuing AGM. The Board of Directors of your Company recommends the appointment / reappointment of the above Directors.
Your Company has received declaration from each of the Independent Directors under Section 149(7) of the Companies Act, 2013 that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 16 of SEBI Listing Regulations, 2015 and that he/she is not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact his/her ability to discharge his/her duties with an objective independent judgment and without any external influence. All requisite declarations were placed before the Board.
In terms of SEBI Listing Regulations, 2015, your Company identified the list of core skills/expertise/competencies as is required in the context of the Company’s business(es) and sector(s) for it to function effectively and those which are actually available with the Board and mapped such skills to the Individual Directors of your Company. Details of such skills/expertise/competencies identified are furnished in the Corporate
Governance Report and forms part of this Annual Report.
Pursuant to Regulation 16(b) of SEBI Listing Regulations, 2015 and Section 197 of the Act read with the Rules framed thereunder, your Company has approved payment of remuneration of Rs. 48 (Forty Eight) Lacs by way of commission on net profits computed under Section 198 of the Act to Non-Executive Directors and Independent Directors of your Company for the financial year 2018-19. The payment is within the limit of 1 (One) per cent of the net profits of your Company for the financial year 2018-19 as approved by the Members of your Company at the AGM held on August 02, 2014 and in accordance with the applicable provisions of SEBI Listing Regulations, 2015 and the Act read with the Rules framed thereunder.
Further, Mr. Hemant Kanoria, Chairman and Mr. Sunil Kanoria, Vice Chairman of your Company, are also the managerial personnel of Srei Equipment Finance Limited (SEFL), a wholly owned subsidiary of your Company and are in receipt of remuneration (including commission) for the Financial Year 2018-19 from SEFLas per the details given below:
Name of Director Remuneration (Rs. in Lacs) Hemant Kanoria 756.58 Sunil Kanoria 761.45
Further, Mr. Shyamalendu Chatterjee, Independent Director of your Company, is the Chairman (Non – Executive) of Srei Capital Markets Limited, wholly owned subsidiary of your Company and is in receipt of sitting fees from the said subsidiary company. Mr. Balaji Swaminathan, Non Executive Non Independent Director of your Company, is also associated with your Company in the capacity of Strategic Advisor and is being paid Advisory Fees by your Company.
F u r t h e r, d u r i n g t h e y e a r, M r. Shyamalendu Chatterjee was also an Independent Director of SEFLand was in receipt of sitting fees of Rs. 1.25 Lacs from SEFL. Mr. Chatterjee thereafter resigned as an Independent Director of SEFLw.e.f. May 17, 2019.
Apart from the above, none of the Directors of your Company have received any remuneration or commission from any of your Company’s subsidiaries or holding company during the Financial Year 2018-19.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS / TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND YOUR COMPANY’S OPERATIONS IN FUTURE
There are no such orders passed by the regulators / courts / tribunals impacting the going concern status and your Company’s operations in future.
DIRECTORS’ RESPONSIBILITY STATEMENT
In terms of provisions of Section 134(5) of the Companies Act, 2013 (Act), your Board of Directors to the best of their knowledge and ability confirm that:
(i) in the preparation of the annual accounts for the financial year ended March 31, 2019, the applicable accounting standards have been followed along with proper explanation relating to material departures;
(ii) they have selected such accounting p o l i c i e s a n d a p p l i e d t h e m consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for the year;
(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;
(iv) they have prepared the annual accounts for the financial year ended March 31, 2019 on a going concern basis;
(v) they have laid down internal financial controls to be followed by your Company and that such internal financial controls are adequate and are operating effectively;
(vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws to your Company and the systems are adequate and operating effectively.
Your Company has complied with all applicable provisions of the Secretarial Standards issued by The Institute of Company Secretaries of India (ICSI) on Board Meetings and General Meetings.
GENERAL DISCLOSURES
Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:
n Issue of equity shares with differential rights as to dividend, voting or otherwise
n Issue of sweat equity shares
n Your Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees
n There was no revision in the Financial Statements
n There was no change in the nature of business
n Maintenance of Cost records is not applicable to your Company.
AWARDS AND RECOGNITION
During the year, your Company has completed the assessment conducted by Great Place to Work Institute, India and has been certified as a "Great Place to Work" for the period March, 2019 to February, 2020. Further, your Company has won the "West Bengal – Best Employer Brand" award in October, 2018.
ACKNOWLEDGEMENT
Your Directors would like to express their grateful appreciation for the excellent support and co-operation received from the Financial Institutions, Banks, Central & State Government Authorities, RBI, SEBI, MCA, Stock Exchanges, Depositories, Credit Rating Agencies, Customers, Manufacturers, Vendors, Suppliers, Business Associates, Members, Debenture holders, Debenture Trustees and other Stakeholders during the year under review. Your Directors also place on record their deep appreciation for the valuable contribution of the employees for the progress of your Company during the year and look forward to their continued co-operation in realisation of the corporate goals in the years ahead.
On behalf of the Board of Directors
Hemant Kanoria
Chairman
DIN 00193015
Kolkata, May 25, 2019
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