SRS Finance Ltd Management Discussions

THE INDIAN ECONOMY

India has an expanded financial sector comprising of commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds etc., pre-eminently dominated by banking sector with commercial banks accounting for more than 64 per cent of the total assets. Creation of emerging entities e.g. payments banks would further add diversity in the sector.

INDUSTRY/FINANCIAL SERVICES SECTOR OVERVIEW

Mergers and Acquisitions (M&A) in India rose 125 per cent over a year ago period - US$ 32.5 billion across 445 deals during January-September 2016. Domestic M&A deal value stood at US$ 7.3 billion across 137 deals during July-September 2016, which is around 65 per cent of the total M&A deal value of US$ 11.3 billion during the quarter.

Private Equity (PE) investments in real estate sector in India have amplified 22 per cent in the first nine months of 2016 to reach Rs.283 billion (US$ 4.24 billion).

The Indian life insurance industry has begun to recover and is likely to report 12-15 per cent growth in FY 2016-17. Indias life insurance sector is the biggest in the world with about 360 million policies, expected to increase at a Compounded Annual Growth Rate (CAGR) of 12-15 per cent over the next five years.

INVESTMENTS/DEVELOPMENTS

The first ever rupee-denominated bond in the world by an Indian company, coined as Masala bond, has been listed on the London Stock Exchange by the Housing Development Finance Corporation Limited (HDFC Ltd)

IFMR Capital, a debt finance provider, has successfully raised US$ 17 million from British banking and financial services firm Standard Chartered Private Equity (SCPE), set to be used for product innovation and increase its client base.

Paytm, an online payments firm, plans to invest Rs.600 crore (US$ 90 million) over the next 10 months to expand its QR code-based payment network, to successfully add 10 million merchants by December 2017.Paytms e-commerce unit raised US$ 200 million in a funding round led by Chinese e-commerce giant, Alibaba and existing investor, SAIF Partners, to become the latest Indian unlisted company to be valued at over a billion dollars.

Kotak Mahindra Bank Limited has bought 19.9 per cent stake in Airtel M-Commerce Services Limited (AMSL) for Rs.98.38 crore (US$ 14.75 million) to set up a payments bank. AMSL provides semi-closed prepaid instrument and offers services under the Airtel Money brand name.

Tata Capital, the financial services arm of Tata Group, plans to raise Rs.2,000 crore (US$ 300 million) for its real estate fund, from State General Reserve Fund (SGRF), the sovereign wealth fund of Oman.

GOVERNMENT INITIATIVES

In the Union Budget 2017-18, the Government of India has announced a slew of reforms like abolition of Foreign Investment Promotion Board in 2017-18, Introduce bill for curbing illicit deposit schemes, establish a Computer Emergency Response Team for financial sector (CERT-Fin) and so on.

The RBI has introduced trading in Interest Rate Options (IRO), effective from January 31, 2017, which will provide another avenue to market participants to hedge and speculate on interest rate risk.

SEBI has relaxed norms for registered foreign portfolio investors (FPIs) in India, allowing them to operate through the

International Financial Services Centre (IFSC) without undergoing any extra documentation or prior approval process.

SEBI, in its endeavour to digitise the distribution processes for all financial products, plans to allow investors to effect mutual funds transactions worth up to Rs 50,000 (US$ 750) a month through digital wallets. It also has plans for credit of proceeds on redemption of liquid mutual fund investments to investors bank accounts on real-time basis to attract future inflows, thus, augmenting the market.

Government of Indias Jan Dhan initiative for financial inclusion is gaining momentum. Under Pradhan Mantri Jan Dhan

Yojana (PMJDY), 217 million accounts have been opened and 174.6 million RuPay debit cards have been issued.

The Department of Industrial Policy and Promotion (DIPP) has allowed 100% Foreign Direct Investment (FDI) in Asset Reconstruction Companies (ARC) under automatic route, which will facilitate banks to identify and arrest the NPAs and to cleanse their financial portfolio with overall improved asset quality.

ROAD AHEAD

It is also expected that bank credits will grow at a Compound Annual Growth Rate (CAGR) of 17 per cent in the medium term leading to better credit penetration. Life Insurance Council, the industry body of life insurers in the country also projects a CAGR of 12 15 per cent over the next few years for the financial services segment.

Also, the relaxation of foreign investment rules has received a positive response from the insurance sector, with many companies announcing plans to increase their stake in joint ventures with Indian entities. Over the coming quarters there could be a series of joint venture deals between global insurance giants and local players.

The Launch of "Housing for all by 2022" scheme by Honble Prime Minister which provides for affordable housing to 2 Crore urban poor, will generate jobs and increase demand for raw materials used in construction, providing a major fillip to economy and especially to cement and steel sectors. This in turn, will help in increasing volumes of our Companys business as there would be huge scope of financing

COMPANY OVERVIEW

SRS Finance Limited, registered with Reserve Bank of India as a Non-Deposit Taking Systemically Important Non-Banking Finance Company (NBFC-NDSI), has now been categorised as a Non-Deposit Taking Non-Systemically Important Non-Banking Finance Company (NBFC-ND-NSI) in terms of extant RBI Guidelines. SRS Finance Limited came into existence with the objective to run the business of financing and trading in securities & investments.

The company initially entered the consumer durables finance space. However, with the intent to improve margins, it focused majorly on corporate finance and investments.

Under the financing division, the company provides, to a major extent, business loans for the SME, MSMEs through a host of products e.g. Term Loans, Capex Loans, Working Capital Business Loans, Bridge Loans, Loans against Property etc. This is a segment the company is very confident about, as with increased government and private investments in the coming times, MSMEs will be the driving force to reckon with. The company, in turn, stands to gain by way of improved margins, the threshold for sustenance of growth and profitability.

Under the Securities & Investments division, the company is trading in securities, wherein it trades directly in stocks and does not act as a broker for external clients. The capital for funding comes through the companys own funds and financial assistance from NBFCs.

Of late, the company is reducing its portfolio of trading in stocks in a phased manner and is more focussed on financing MSME Sector under the financing activity. It is on this score that the revenue from the Securities and Investing division has been declining. It reduced from Rs.2304.51 lacs to Rs.771.37lacs during the financial year 2016-17.

Further, demonetization abruptly announced by the Central Govt. further put a dent on the liquidity available with the public at large and SRS Finance Ltd. was no exception. The company caters to self employed segment, SMEs and other small businesses which transact primarily in cash. Under the impact of demonetisation, this business segment had disruption in its collection cycle on account of inordinate delays in payment due to difficulties experienced by their customers in converting their holding within the stipulated timeframe.

The company closed the financial year 2016-17 with an operating loss of Rs.268.65 lacs. The revenue of the company declined to Rs.1,795.30 lacs from Rs.5,294.43 lacs, a year ago, thereby registering a reduction in revenue by around 66%. This is also reflected in the down slide of companys loan book size which declined to Rs.17,799.54 lacs from Rs.22,204.81 lacs, a year ago, i.e. a reduction by 19.84% approx.

Cash credit limits from Corporation Bank, Bank of Baroda and Karnataka Bank have continued at the existing level of Rs.35.00 Crore, Rs.65.00 Crore and Rs.10.00 Crore respectively. Since the company has been facing acute liquidity crisis during FY 2016-17, account with each of the lending Banks turned irregular at different intervals and had to be classified as NPA as on 31 March, 2017 due to non-servicing of Interest in terms of extant RBI Guidelines on Income Recognition and Asset Classification. Besides, rating of SRS Finance Limited has been reaffirmed as D by the rating agency SAMERA Ratings Limited.

In order to revive the position in the current fiscal 2017-18, management is also negotiating with customers/borrowers by offering them options, including but not limited to restructuring the accounts of companys clients, One time Settlement (OTS) etc and in case the stalemate continues, the company will not hesitate resorting to initiation of recovery proceedings through legal action for an expeditious resolution.

However, the management of the company is exploring all avenues including but not limited to funding options to turnaround the company and further expand the business through creation of dedicated Branch network.

The company takes utmost care to abide by all regulatory compliances and follows good corporate governance practices.

RISK MANAGEMENT

Risk Management is an ongoing process at the Company. The Board of Directors has constituted a Risk Management Committee and has also defined the role and responsibilities of the Risk Management Committee. The risk management systems of the Company remain ever strong, and yet, all the more focus is being laid on them so that the Company is able to smoothly move to the next level, with a far bigger loan book and exposure across greater number of clients and entities.

HUMAN RESOURCES

The Company considers its employees to be the most valuable asset and is committed to provide a conducive work environment to enable each individual employee to fully realize his or her potential. One of the cornerstones of the company culture is teamwork and continuous learning. To promote this, the company focussed on supporting people to unlock their potentials and to enable them to work with a superior team spirit. The Companys HR measures revolve around this philosophy. As on 31 March, 2017, there were 13 employees on the payrolls of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has proper and adequate system of internal controls to ensure that all assets are safe guarded and protected against loss from unauthorized use or disposition, and that transactions are authorized, recorded and reported correctly and adequately.

The Internal control system provides for well documented policies, guidelines, authorizations and approval procedures. The internal control is designed to ensure that financial and other records are reliable for preparing financial information and for maintaining accountability of assets. All financial and audit control systems are also reviewed by the Audit Committee of the Board of Directors of the company.

CAUTIONARY STATEMENTS

This presentation and the following discussion may contain "forward looking statements" by SRS Finance Limited ("SRS" or "the Company") that are not historical in nature. These forward looking statements, which may include statements relating to future state of affairs, results of operations, financial condition, business prospects, plans and objectives, are based on the current beliefs, assumptions, expectations, estimates, and projections of the management of SRS about the business, industry and markets in which the Company operates.

These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors, some of which are beyond SRS control and difficult to predict, that could cause actual results, performance or achievements to differ materially from those in the forward looking statements.

Such statements are not, and should not be construed, as a representation as to future performance or achievements of SRS. In particular, such statements should not be regarded as a projection of future performance of SRS. It should be noted that the actual performance or achievements of SRS may vary significantly from such statements.

NOTICE

Notice is hereby given that 23 Annual General Meeting (AGM) of the members of SRS Finance Limited will be held as scheduled below:-

Day :	Wednesday
Date :	27 September, 2017
Time :	10:00 A.M
Venue :	"Eternity" Auditorium
	SRS Tower, 8 Floor,
	Near Metro Station Mewla Maharajpur,
	G.T. Road, Faridabad-121003

to transact the following business:

ORDINARY BUSINESS

1. To receive, consider and adopt the Audited Accounts of the Company for the year ended 31 March, 2017 and the Report of the Directors and Auditors thereon.

2. To appoint a Director in place of Sh. Bishan Bansal (DIN: 00013705), who retires by rotation and being eligible, offers himself for reappointment.

3. To appoint Auditors and fix their remuneration by passing the following resolution as an Ordinary Resolution, with or without modification(s): -

"RESOLVED THAT pursuant to the provisions of Section 139 & other applicable provisions of the Companies Act, 2013 and the Companies (Audit & Auditors) Rules, 2014, and pursuant to the recommendations of the Audit Committee of the Board of Directors, the appointment of M/s. SVP & Associates, Chartered Accountants (FRN:003838N), as Statutory Auditors of the Company be and is hereby ratified and that the said Auditors will hold office from the conclusion of this Annual General Meeting (AGM) until the conclusion of the Three consecutive AGMs (subject to ratification by members at every AGM held after this AGM) and that the Board of Directors be and is hereby authorized to fix the remuneration as may be recommended by the Audit Committee in consultation with the Auditors."

SPECIAL BUSINESS

4. APPOINTMENT OF SH. DEEPAK GARG (DIN: 00237116) AS WHOLE TIME DIRECTOR & CFO

To consider and if thought fit, to pass with or without modification(s), the following resolution as an ordinary resolution:

"RESOLVED THAT in accordance with the provisions of Section 196, 197 and 203 read with Schedule V and any other applicable provisions, if any, of the Companies Act, 2013 and the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, consent of the Company be and is hereby accorded for appointment of Sh. Deepak Garg (DIN:00237116) as Whole-Time Director & CFO of the Company, whose office shall be liable to retire by rotation, for a period of three (3) years w.e.f 24 February 2017 at the remuneration of Rs.1,00, 000/- p. m. as recommended by Audit & Nomination & Remuneration Committees and on the terms & conditions as mentioned in the Explanatory Statement annexed to this Notice.

RESOLVED FURTHER THAT in the event of absence or inadequacy of profits in any financial year, Sh. Deepak Garg will be paid the salary and perquisites as minimum remuneration not exceeding the limits specified under Section II of Part II of Schedule V of the Act by making such compliances as provided in the Schedule.

RESOLVED FURTHER THAT the Board of Directors be and is hereby authorized to do all such acts, deeds, things and execute all such documents, instruments and writings as, in its absolute discretion, may be considered necessary, expedient, desirable including power to sub delegate, in order to give effect to the foregoing resolution and to alter or vary the terms and conditions of the said appointment including the remuneration which shall not exceed Rs.1, 50, 000/- p. m, subject to the same not exceeding the limits specified under Section 197 read with Schedule V of the Companies Act, 2013".

5 APPOINTMENT OF SH. NARESH GOYAL (DIN:00122331) AS A DIRECTOR, LIABLE TO RETIRE BY ROTATION

To consider and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:

"RESOLVED THAT Sh. Naresh Goyal (DIN: 00122331), who was appointed as an Additional Director of the Company by the Board on 24 February, 2017 in accordance with the provisions of the Companies Act, 2013 and whose tenure of office expires at the ensuing Annual General Meeting pursuant to the provisions of Section 161 of the Companies Act, 2013 and in respect of whom a notice from a member proposing his candidature for the office of Director of the Company, has been received along with a deposit of Rs.1,00,000/- under the provisions of Section 160 of the Companies Act, 2013, be and is hereby appointed as Director of the Company, liable to retire by rotation."

6. FEES FOR DELIVERY OF ANY DOCUMENT THROUGH A PARTICULAR MODE OF DELIVERY TO A MEMBER

To consider and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:

"RESOLVED THAT pursuant to provisions of Section 20 and other applicable provisions, if any, of the Companies Act, 2013 and relevant rules prescribed there under, the consent of the Company be and is hereby accorded to charge from a member in advance, a sum equivalent to the estimated actual expenses of delivery of the documents through a particular mode if any request has been made by such member for delivery of such document to him through such mode of service provided such request along with the requisite fee has been duly received by the Company at least one week in advance of the dispatch of the document by the Company.

RESOLVED FURTHER THAT the Board of Directors of the Company be and are hereby authorized to do all acts and take all such steps as may be necessary, proper or expedient to give effect to this resolution."

	By Order of the Board
	For SRS Finance Ltd.
	(Rakhi Mehta)
Place: Faridabad	Company Secretary
Date: 12 July, 2017	M.No.-19978