MANAGEMENT DISCUSSION AND ANALYSIS GLOBAL ECONOMY

The global economic recovery continued to be uneven during 2014-15, with low inflation turning into deflation in many countries. In its latest outlook, the IMF has projected global growth to remain steady at 3.5% in 2015 from 3.4% in 2014, a reversal of its more optimistic forecast at the beginning of the year. As a consequence, several countries, notably, China, the EU and Japan have already unveiled their versions of Quantitative Easing (QE). The Euro area has shown modest improvement, supported by increased demand, lower crude prices and the debrciation of the Euro, while growth turned positive in Japan in Q4 of 2014, thanks to lower oil prices and improved exports. On the other hand, China started to slowdown, amidst financial fragilities and macroeconomic imbalances.

INDIAN ECONOMY

There was room for cheer on some counts, in FY2015, on account of IIP growth. GDP growth, measured on the revised base year 2011-12 market prices, is estimated at 7.4% in 2014-15 as compared to 6.9% for 2013-14. The services sector grew by a robust 10.6% over the brvious year, aided by the financial, real estate, and professional services segment. Refreshingly, the growth appears to be broad-based, with most segments doing better on a year on year basis, and the critically important capital goods segment going from a negative 3.6% to 6.2% growth during FY2015. The Consumer durables segment was the exception, which, stifled by weak demand, has been sluggish for over two years. Low rural wage growth, a below normal summer crop, and relatively small increases in the government's Minimum Support Prices (MSP) for agricultural produce, have also had a negative impact on rural consumption. Retail inflation, measured by the changes in the consumer price index (CPI), has been declining month after month, coming in at 5.2% in March 2015. Wholesale price index (WPI) based inflation, meanwhile, was negative for five consecutive months through March, averaging a modest 2% in FY 2014-15, compared to 6% in FY14, largely owing to low energy price inflation; Food inflation, on the other hand, is starting to rise though it is well below brvious year's levels. The lower stock of food grains as on 1st April 2015 at 41 million tonnes, as compared to 48 million tonnes in the brvious year, could aggravate food inflation in the current year. Inflation in the manufactured products segment has also come down, from 5.4% in FY13 and 3.7% in FY14, to -0.19% over April-March 2014-15.

MSME SECTOR:

The long-term policy imperative of the country is to achieve inclusive growth. The current developmental problem facing India is exacerbated by the changing demographic profile of the country. Due to continuing high unemployment rate of which the proportion of the educated youth will be the largest. the need for strong, accelerated economic growth is now more acute than ever. India's economic growth has been led by the services sector in the last decade, particularly owing to the growth in information technology (IT) and business process outsourcing (BPO) industries. The manufacturing sector's importance has grown in the recent years with the advancement in its output. The sector offers huge potential for employment creation. Moreover, the importance of Micro, Small and Medium Enterprises (MSMEs) in the growth process is considered to be a key engine of economic growth in India. The MSME sector accounts for about 45 per cent of manufacturing output, 95 per cent of the industrial units and 40 per cent of exports. Besides, the sector provides employment to almost 60 million people, mostly in the rural areas of the country, making it the largest source of employment after the agriculture sector. Development of this sector, thus, holds key to inclusive growth and plays a critical role in India's future.

Significantly, the MSME sector has maintained a higher growth rate vis-a-vis the overall industrial sector during the past decade. According to a survey, exports from these enterprises have been on the rise, despite increased cost of raw materials, sluggish global demand and stiff international competition. Today, the sector produces a wide range of products, from simple consumer goods to high-brcision, sophisticated finished products. It has emerged as a major supplier of mass consumption goods as well as a producer of electronic and electrical equipment and drugs and pharmaceuticals. An impetus to the sector is likely to have a multiplier impact on economic growth.

OPERATING & FINANCIAL PERFORMANCE:

Currently the company is operating in 4 states in Northern India. Over 80 percent of the business of the Capital trust is in Western UP and Uttarakhand. UP and Uttarakhand are the states with lowest Credit-Deposit Ratio in the Central Region , as per RBI statistics. The company provides loans to MSE and micro finance customers and is managing a total portfolio pf Rs 204.50 Cr as on March 2015. Loans are provided for farming, dairy livestocks, small manufacturing firms, trade, etc. As a Business Correspondent of Yes Bank, company manages a microfinance portfolio of Rs 85.88 Cr as on March 31, 2015. The Company currently is experiencing rapid growth of business & profitability. The current portfolio size is Rs 204.50 Crores and Profit After Tax for the FY 2015 is Rs 9.65 Crores. GNPA & NNPA for the current year is 0.63% and 0.52% respectively which is comparatively lower than the ideal standard showing greater collection efficiency. The company is maintaining the adequate Capital Adequacy Ratio(CAR) of 21.09% as on Mar 2015 as against minimum of 15% brscribed by RBI.

Internal Audit:

The company has strong Audit & Compliance procedure. This is well established and followed meticulously. This is extremely important as many of our borrowers do not have any assets and also do not have adequate literacy skills

The Audit Department reports to the MD and conducts both routine and as well as surprise audits and special audits. The audit recommendations are actively followed up and implemented. As part of the effort to evaluate the effectiveness of the internal control systems, our Company's internal audit department reviews all the control measures on a periodic basis and recommends improvements, wherever appropriate. The co. has inhouse Internal audit team.

Information technology:

The company conducts all its operations through a web-based application. This captures complete details of each account, all the operations and generates all the operational, management and other reports in real time. The company operates on an online real time basis Tablet Banking System for which one Tablet is provided to every Branch Manager.

It Currently uses the latest Web Based technology which is developed in Java j2ee with its backend on an SQL Server. Its web server is on Tomcat with a Sonic-Wall Firewall. The company has various Application and Database servers with a mirror backup on cloud for disaster recovery. Java, an open source technology, is used as the programming language of software.

Our Company has a State of the MIS Centre catering to its own needs .The Company uses Micap softare applications. The Company has developed robust business applications on the JAVA SEQUEL Technology platform, catering to various business products such as secured enterprise loans, Micro enterprise loans, For Financial Accounting and Reporting, the Company is using Tally and certain modules developed in the Micap applications. The Company has taken several initiatives in developing mobile applications including an application designed to process collections, which enables our Executives in the field to serve our customers at their door step. Extensive MIS and Dashboards developed in Micap, the Company's proprietary software platform, serve as key decision support tools.

Human resource:

Our Company believes that its greatest assets are its people and Training is an investment in long term people development, for organisational excellence. During the year under review, our Company has taken several new initiatives to ensure that the knowledge and wisdom gained over decades is handed down to the next generation of employees. A well balanced mix of domain knowledge and behavioural training was taken up towards talent transformation. These initiatives have paid rich dividends in the form of a strong group of in house facilitators of domain knowledge and a highly motivated team of employees geared to fulfilling the needs of our Company's valued customers.

Risks management:

Our Company, being in the business of financing of Small medium enterprises has to manage various risks. These risks include credit risk, liquidity risk, interest rate risk and operational risk. The Risk Management Committee review and monitor these risks at periodic intervals. The Company manages credit risk through stringent credit norms established through several years of experience in this line of business and continues to follow the time tested practice of personally assessing every borrower, before committing to a credit exposure. This process ensures that the expertise in lending operations acquired by the Company over decades is put to best use and acts to mitigate credit risks. Liquidity risk and interest rate risk arising out of maturity mismatch of assets and liabilities are managed through regular monitoring of the maturity profiles. The Company also measures the interest rate risk by the duration gap method. Operational risks arising from inadequate or failed internal processes, people and systems or from external events are adequately addressed by the internal control systems and are continuously reviewed and monitored by a dedicated team of people. Process improvements and quality control are on-going activities and are built into the employee's training modules, as well.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (brVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy. No complaints were received during the year 2014-15.

BOARD & AUDIT COMMITTEE

The details regarding number of board meetings held during the financial year and composition of Audit Committee is furnished in the Corporate Governance Report.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declaration from each Independent Director of the Company under 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).

ANNUAL EVALUATION BY THE BOARD

The Board has made a formal evaluation of its own performance and that of its committees and individual directors as required under Section 134(3) (p) of the Companies Act, 2013.

AUDITORS

M/s SGR & Associates, Chartered Accountants, Delhi, retire and are eligible for re-appointment. A certificate from the Auditors that they satisfy the conditions brscribed under the Companies Act, 2013 and the Rules made thereunder (including satisfaction of criteria under Section 141 of the Companies Act, 2013), has been received from them.

INFORMATION AS PER SECTION 134 (3) (m) OF THE COMPANIES ACT, 2013 READ WITH RULE 8 OF THE COMPANIES (ACCOUNTS) RULES, 2014

Our Company has no activity relating to conservation of energy or technology absorption.

PERSONNEL

In accordance with the provisions of first proviso to Section 136 (1) of the Companies Act, 2013, the Directors' Report is being sent to all the shareholders of the Company excluding the statement brscribed under Rule 5 (2) & (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The said statement is available for inspection by the Members at the Registered Office of the Company during office hours till the date of the Annual General Meeting.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year 2014-15, no significant and material Orders were passed by the Regulators or Courts or Tribunals impacting the going concern status and company's operations in future.

Internal Financial Controls

The Company has a well-established internal financial control and risk management framework, with appropriate policies and procedures, to ensure the highest standards of integrity and transparency in its operations and a strong corporate governance structure, while maintaining excellence in services to all its stakeholders. Appropriate controls are in place to ensure: (a) the orderly and efficient conduct of business, including adherence to policies, (b) safeguarding of assets, (c) brvention and detection of frauds / errors, (d) accuracy and completeness of the accounting records and (e) timely brparation of reliable financial information.