The Directors have pleasure in presenting before you the Annual Report of the Company together with the Audited Statements of Accounts for the financial year ended March 31, 2015
The comparative operational results shown above summarise the financial performance of the Company for the year under report and for the previous year. Profit after tax for the year under review has gone up by 19.79 percent in comparison to the previous year despite a 6.20 percent decline in total revenue. As of March 31, 2015, the loan book of the Company stands at Rs. 92,693.50 million as against Rs. 81,630.70 million recorded on March 31, 2014. The positive growth in loan book was the consequence of multiple factors such as the good and efficient management decision, better utilisation of our workforce, diversification of portfolios, macro-economic scenario, certainties in the regulatory environment for gold loan NBFCs. A system of regular, periodical collection of interest has been introduced across our branches. Our improving credit and risk profile enabled us to lower our cost of funding significantly. All these enabled us to report encouraging results with a good increase in profits during financial year 2014-15.
During the year, the company implemented customer friendly short tenure loan schemes like 3 months, 6 months, 9 months and 12 months loan schemes with an option to the customers to choose the schemes based on their convenience and requirement, in lieu of longer tenure loan schemes in previous years; and these Loan Schemes are also gives comfort to customers that interest sensitive customers can choose lower interest product, LTV sensitive customers can choose higher LTV product. As on year end 70% of portfolio was consisting of short tenure loan schemes.
As a process of diversification, the company entered into several other categories such as Loan against Properties, Loan against Rent receivables, Micro Finance, Housing Finance, Financing Commercial Vehicles and also Inward remittance business. During the year, the company had started operations of Domestic Money Transfer business as well. Apart from Money Transfer business, the company is also into currency trading through its limited branches. During the last quarter of the year, the company acquired 85% of stakes in Asirvad Micro Finance Private Limited
2. DIVERSIFICATION OF BUSINESS
The Company had taken a policy decision last year to add new product offerings to cater to its existing customers. In pursuit of this objective, the Company has since entered into housing loans, vehicle finance and microfinance.
The rationale for the diversification is three fold. Firstly, the Company will utilise its surplus capital to build or acquire new lending products relevant to its existing retail customer base. It expects to leverage its 1.6 million strong customer base, its 3300 retail branch network, and the Manappuram brand name. Secondly, the Company hopes to diversify the revenue mix and improve structural return on equity (RoE). Over the next five years, the Company hopes to build at least 50 percent of total AUM from sources other than gold loans so as to mitigate the risk of being a single-product NBFC. Finally, the Company expects to capitalise on its proven operational capability to process large volume, small ticket lending transactions with semi-urban and rural customers.
Commercial vehicles: In line with the decision of your management to diversify into other asset classes, your company has launched loans against commercial vehicles, selectively in the South and West regions and propose to expand to other regions of the country in a phased manner. Commercial vehicle sales and financing activity is highly cyclical and the industry is expected to turnaround in the coming months with an improvement in the economic activity. The strategy envisages financing commercial vehicles to the underserved category of customers who are from largely unorganised sector without formal access to banking and other financial institutions, with a reasonable margin.
Housing Finance: As a first step towards entry into the Housing Finance Sector, your company acquired Milestone Home Finance Company Pvt. Ltd. (Milestone), a company possessing a valid Certificate of Registration from NationalHousing Bank, as a wholly- owned subsidiary company. Subsequently, the name of company was changed to Manappuram Home Finance Pvt. Ltd., and the revised Certificate of Registration from National Housing Bank was obtained in the name of Manappuram Home Finance Pvt. Ltd. (MAHOFIN) in September 2014. Subsequent to change in the name, the Company started its commercial operations in January 2015.
MAHOFIN has been set up to cater to the affordable housing space. Recent trends and progress of housing finance indicate a strong and buoyant demand in properties in the affordable housing space. Accordingly, MAHOFIN expects to tap the housing finance in this segment. During the year 2015-16, the Company plans to operate from branches in urban and semi-urban locations in South and West. The focus of MAHOFIN would be to tap this market segment, and provide high class service by implementing best practice in the industry. MAHOFIN has implemented IT Systems after a detailed system analysis to suit its needs. The strong IT backbone will provide high quality service to customers, and provide end-to-end solution to the business. MAHOFIN has introduced attractive home loan products, and specific tailor-made products would be soon introduced. With strong demand, professional management and strong brand and network support of the parent, MAHOFIN expects to scale up its business significantly during 2015-16.
Microfinance: During the current year, your company had also diversified into the business of Microfinance through the acquisition of a majority stake in Asirvad Microfinance Private Limited, one of the leading Microfinance Institutions in the state of Tamil Nadu. Your Company aims to contribute to the broader agenda of financial inclusion through this acquisition. Asirvad Microfinance is an 8-year old NBFC - MFI (Non banking financial company - Microfinance Institution) headquartered in Tamil Nadu with operations in the states of Tamil Nadu, Kerala and Karnataka. Your Company is proud to venture into this space as it helps improve the standard of life of the people who don't have access to formal channels of credit. Your Management firmly believes that the synergy achieved through this acquisition would help scale the Microfinance portfolio in a sustainable and effective manner for the benefit of all stakeholders.
The Company has paid four interim dividends in the financial year 2014-15 with an amount of 0.45 paise per equity share (face value Rs. 2.0 per share) in each quarter. The aggregate amount of Rs. 1.80/- per shares paid as dividend in the financial year 2014-15, amounts to 90 percent of the paid up value of the shares.
4. RAISING OF ADDITIONAL CAPITAL
Company has not allotted any shares during the financial year 2014-15.
During the year, the Company has not transferred any amount to General Reserves and it remain same as 3,885.05 million. The total reserve and surplus as on March 31, 2015 stands at Rs. 24,591.29 million.
6. DEBENTURE REDEMPTION RESERVE
Pursuant to the provisions of the Companies Act, 2013 and the relevant circulars issue by the Ministry of Corporate Affairs, the Company is required to create a Debenture Redemption Reserve (DRR), to which amounts shall be transferred from the profits every year till the debenture is redeemed. The amount of DRR shall be 25 percent of the NCDs issued through public issue in compliance with SEBI (Issue and Listing of Debt Securities) Regulation 2008, and no reserve is required in respect of NCDs issued through private placement. As a matter of policy, your company creates a reserve on a proportionate basis till the redemption of the debentures. Accordingly, the Company transferred a sum of Rs. 435.14 million to DRR during the year. Further, the Company has to invest, in the prescribed manner, a sum equal to 15 percent of the NCDs maturing on or before March 31, 2015 towards which the Company has deposited Rs. 68.34 million with a Scheduled Bank.(Subsequent to the year end has deposited Rs. 255.13 million)
As an NBFC, mobilisation of resources at optimal cost and its deployment in the most profitable and secured manner constitutes the two important functions of the Company. The main source of funding for the Company continues to be credit lines from the banks and financial institutions. Your company currently enjoys credit facilities from about 33 banks.
Management has been making continuous efforts to broaden the resource base of the Company so as to maintain its competitive edge. The next important source of funding is the issue of Secured Redeemable Non Convertible Debentures (NCDs). Your company issues NCDs under the listed 8 unlisted private placement route to Institutional Investors and to high net worth individuals. During the year under review, the Company has fully repaid the NCDs raised during the public issue of January 2014 amounting to Rs. 511.05 million (along with applicable interest). We are pleased to inform you that your company has successfully completed another rounds of public issues during the year, raising Rs. 2,785.52 million, including the exercise of the green shoe option. Incidentally, both the issues were oversubscribed. In addition, the Company also raised funds through the issue of Commercial Paper (CPs).
The Board of Directors are confident that the Company will be able to raise adequate resources for onward lending in line with its business plans.
As you are aware, the Company had stopped acceptance of deposits from the public in 2007. Your company had converted itself into a non deposit taking Category 'B' NBFC. All amounts due to deposit holders have been transferred to an ESCROW account opened with Punjab National Bank. The balance outstanding as on March 31, 2015 was Rs. 74,007.
As on the date of this report, there were no deposits which are due for transfer to the IEPF Account of the Central Government on the expiry of seven years after maturity. There is regular follow up on the part of the Company to redeem unclaimed deposits.
9. COMPLIANCE WITH NBFC REGULATIONS
The Company has complied with all the regulatory provisions of the Reserve Bank of India applicable to Non-Banking Financial Companies. As on March 31, 2015, the Capital Adequacy Ratio of the Company is 25.64 percent, well above the statutory requirement of 15 percent.
There was no ESOP exercised during the Financial Period 2014-15. Microfinance: During the current year, your company had also diversified into the business of Microfinance through the acquisition of a majority stake in Asirvad Microfinance Private Limited, one of the leading Microfinance Institutions in the state of Tamil Nadu. Your Company aims to contribute to the broader agenda of financial inclusion through this acquisition. Asirvad Microfinance is an 8-year old NBFC - MFI (Non banking financial company - Microfinance Institution) headquartered in Tamil Nadu with operations in the states of Tamil Nadu, Kerala and Karnataka. Your Company is proud to venture into this space as it helps improve the standard of life of the people who don't have access to formal channels of credit. Your Management firmly believes that the synergy achieved through this acquisition would help scale the Microfinance portfolio in a sustainable and effective manner for the benefit of all stakeholders.
11. MEETINGS OF THE BOARD
During the financial year 2014-15, the Board met on seven occasions viz. 15-05-2014, 25-07-2014, 23-09-2014, 30-102014, 23-12-2014, 03-02-2015 and 17-03-2015.
12. DIRECTORS AND KEY MANANGERIAL PERSONNEL, CHANGE, IF ANY :
1. Mr. V.M. Manoharan resigned as Director w.e.f. July 25, 2014.
2. There was change in designation Mr. I Unnikrishnan from Executive Director to Non-Executive Director w.e.f. from November 30, 2014.
3. Dr. Amla Samanta was appointed in the Board as Additional Director w.e.f March 17, 2015.
4. Mr. Rajesh Kumar, Company Secretary of the Company resigned from office w.e.f. March 31, 2015 and Mr. Ramesh Periasamy, has been appointed as Company Secretary w.e.f. from May 2, 2015.
13. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS
The Company has received necessary declaration from each Independent Director of the Company as per Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section 149(6).
14. DIRECTOR'S RESPONSIBILITY STATEMENT:
In pursuance of section 134 (5) of the Companies Act, 2013, the Directors hereby confirm that:
(a) i n the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) t he directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the director, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.
(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively
16. EXTRACT OF ANNUAL RETURN:
Extract of annual return is annexed herewith as annexure- I
17. AUDIT AND AUDITORS REPORT:
The statutory Auditors M/s S.R. Batliboi 8 Associates, Chartered Accountants, Firm Registration Number- 101049W, TIDEL
Park, 6th and 7th Floor - A Block, Module 601, 701-702, No 4
Rajiv Gandhi Salai, Taramani , Chennai 600 113, India are being reappointed as the auditors of the Company to hold office from the conclusion of last Annual General Meeting to the conclusion of the Twenty Fifth Annual General Meeting of the Company.
The notes of financial statements referred in the Auditors' Report are self-explaining and do not call for any further comments.
The Board appointed M/s KSR 8 Co. Company Secretaries LLP, to conduct Secretarial Audit for the financial year 2014-15.
The Secretarial audit report as provided by M/s KSR 8 Co. Practicing Company Secretaries LLP, Indus chambers, Ground floor, No 101, Govt Arts College Road, Coimbatore-641018, is annexed to this Report as annexure- II.
18. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO:
(A) Conservation of energy & technology absorption:
The Company is engaged in the financial services sector and therefore conservation of energy, technology absorption etc. have a limited application. However, the Company follows a practice of purchase and use of energy efficient electrical and electronic equipment and gadgets in its operations.
I n respect of technology, the company was one of the first NBFCs to build and operate a centrally managed software application and all its branches across the country operate online with direct access to the centrally hosted applications, through wide area data network. In order to obtain best of the world technological knowhow and systems stability, the complete IT ecosystem of the company ranging from end user device support, wide area network management to data centre and applications management, are managed by IBM. IBM is also in the process of implementing Oracle EBS based ERP system for finance and HRMS, as part our organisational transformation strategy. The company continues to differentiate itself from other market competitors by continuously developing new technological platforms like launching of online payment portal, to offer ease of operations and transparency for its customers.
The company has also embarked on development of a network enabled keyless eLocker systems for storage of gold, using cutting edge internet of things(IoT) and machine to machine(M2M) protocols, that can be remotely operated by centrally managed software applications residing in the data centre which will enable reducing the size of existing branches to small gold loan kiosks, reducing the operational and energy costs even further. Together with online gold loan platform, these next-gen innovations are poised to completely transform the gold loan industry itself. In order to drive the company's strategy to use technology as the prime driver of its business, the company established a new institution called Manappuram Centre of Excellence and Innovations (MaCE Inn) at Bangalore. The optimal use of technology is also lead to substantial conservation of energy.
(B) Foreign exchange earnings and Outgo
The Company holds AD Category II licence from the Reserve Bank of India for its foreign exchange operations. Following are the details of foreign exchange earnings and outgo during the period covered by this report:
Foreign Exchange Earning: Nil
Foreign Exchange Outgo: 0.27 million towards foreign travel and training expenses Nil towards import of capital goods
19. DETAILS OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS
The Company has established controls covering operational and financial aspects. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed.
20. RISK MANAGEMENT POLICY
The Company has a Board approved Risk Management Policy wherein all material risks faces by the Company viz. Credit Risk, Operational Risk, Regulatory Risk, Price and Interest rate Risk are identified and assessed. Risk Management Department headed and managed by competent professionals for identification, assessment and managing/mitigating risk related issues across the organisation. For each of the Risks identified in the process, corresponding controls are assessed and policies and procedure are put in place for monitoring, mitigating and reporting risk on a periodic basis.
21. PARTICULARS OF CONTRACTORS AND ARRANGEMENT WITH RELATED PARTIES
All contracts / arrangements / transactions entered by the Company during the financial year with related parties were on an arm's length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.
The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: <http://www.manappuram.com/files/Related_Party_Policy.pdf> Your Directors draw attention of the members to Note 24 to the financial statement which sets out related party disclosures.
22. CORPORATE SOCIAL RESPONSIBILTY POLICY
The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Company's website at the link: <http://www.manappuram.com/files/CSR_Policy.pdf>
The Report on CSR activities is annexed herewith marked as Annexure III
23. LISTING WITH STOCK EXCHANGES
The Company confirms that it has paid the AnnualListing Fees for the financial year 2015-16 to NSE and BSE where the Company's Shares are listed.
24. CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION:
The Company has been practicing principle of good Corporate Governance over the years. The endeavour of the Company is not only to comply with the regulatory requirements but also practice good Corporate Governance that lays strong emphasis on integrity, transparency and overall accountability.
The report on corporate governance forms integral part of this annual report. A certificate from statutory Auditors of the company confirming the compliance with the conditions of corporate governance as stipulated under clause 49 of the listing agreement is attached to this report as annexure IV.
25. MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis Report is attached and forms an integral part of the Report of the Board of Directors.
26. SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
The Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARY
Performance and financialposition of subsidiary is annexed herewith as annexure - V
29. INFORMATION ABOUT SUBSIDIARY/ JV/ ASSOCIATE COMPANY
Details of the Companies which have become / ceased to be its Subsidiary/ JV/ Associate Company.
The Company has subscribed 13398013 equity shares of Asirvad Microfinance Pvt. Ltd during the financial year 2014-15, at present company holding 85% of its shares.
The Company has acquired 3,39,00,000 equity shares of Manappuram Home Finance Private Limited during the financial year 2014-15, at present company holding 100% of its shares.
Information about subsidiary/ joint venture /associate company is annexed herewith as annexure - VI
30. CONSOLIDATE FINANCIAL STATEMENTS
I n accordance with the Companies Act, 2013 ("the Act") and Accounting Standard (AS) - 21 on Consolidated Financial Statements read with AS - 23 on Accounting for Investments in Associates and AS - 27 on Financial Reporting of Interests in Joint Ventures, the audited consolidated financial statement is provided in the Annual Report.
31. CREDIT RATING
The Company holds valid ratings from CRISIL and ICRA for long term and short term borrowing programs. Short term rating from CRISIL is A1+ (Stable). During the financial year 2014-15 CARE rating had upgraded the long term credit rating of the Company to AA-. Management is hopeful that the improved ratings will enable the Company to access resources at a more competitive price.
33. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURE
Particulars of Employees and Related Disclosure is Annexed herewith as Annexure VII (Sec-197(12)
34. POLICY ON BOARD COMPOSITION COMPENSATION AND EVALUATION CRITERIA AND RELATED DISCLOSURE
The Board of Directors has adopted a policy on directors appointment and remuneration for directors, KMP and other employees including criteria for determining qualification, positive attributes, and independence of directors as laid down by the nomination and remuneration committee of the board which is annexed to this report as Annexure VIII. The Board has also adopted criteria for evaluating its own performance and of its committees and individual directors as laid down by the nomination and remuneration committee. The evaluation processes carried out on the following parameters:
(a) Board reply on audit qualification
There were no such audit qualifications during the financial year 2014-15.
(b) Details relating to deposit
The Company has not accepted any deposit during the financial year 2014-15
(c) Significant & Material orders passed by the regulators
There were no such significant orders passed by the Regulators during the financial year 2014-15.
36. MATERIAL EVENT SUBSEQUENT TO THE
DATE OF FINANCIAL STATEMENT
Mr. Ramesh Periasamy has been appointed as Company Secretary w.e.f. from May 2, 2015 by vide Board Resolution dated March 17, 2015.
37. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Particulars of Loans, Guarantees or Investments are annexed herewith as Annexure IX
38. BOARD REPLY ON SECRETARIAL AUDIT QUALIFICATION/OBSERVATION
Reply to the observation made in Secretarial Audit report on commission to non-executive directors: The particulars of commission paid to non-executive directors will be placed before the ensuing annual generalmeeting for its ratification by the members.
Your Directors acknowledge and place on record its sincere appreciation and gratitude to the employees of the Company at all levels for their dedicated service and commitments, to the Reserve Bank of India, Rating Agencies, Stock Exchanges, Governments and its statutory agencies for the support, guidance and co-operation, to the Investors, shareholders Bankers and other financial institutions and customers for the whole hearted support and confidence reposed on the Company and the management and to the general public at large for their blessings and good wishes the Company has been receiving in good measure over the years.
For and On Behalf of the Board of Directors of
Manappuram Finance Limited
Sd/- Jagdish Capoor
Date: May 14, 2015