Director's Report
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Bajaj Finserv LtdIndustry : Finance & Investments
BSE Code:532978
ISIN Demat:INE918I01018
Book Value(Rs):180.96
NSE Symbol:BAJAJFINSV
Div & Yield %:0.02
Market Cap (Rs Cr.):113005.02
P/E(TTM):0
EPS(TTM):9.02
Face Value(Rs):5
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The directors present their Eleventh Annual Report and audited financial statements for the year ended 31 March 2018.

Financial results

The financial results of the Company are elaborated in the Management Discussion and Analysis Report.

The highlights of the Standalone Financial Results are as under:

(Rs. In Crore)
Particulars FY2018 FY2017
Total revenue 252.24 165.00
Total expenses 85.45 61.00
Profit before tax 166.79 104.00
Tax expense 25.45 33.98
Profit for the year 141.34 70.02
Balance carried to Balance Sheet 141.34 70.02
Earnings per share (H ) 8.9 4.4
Proposed dividend (%) 35% 35%
Dividend and tax thereon 27.85 27.85

The highlights of the Consolidated Financial Results are as under:

(Rs. In Crore)
Particulars FY2018 FY2017
Total revenue 30,599.41 24,507.72
Total expenses 24,289.24 19,583.19
Profit before tax 6,310.17 4,924.53
Tax expense 1,970.29 1,474.82
Profit after tax 4,339.88 3,449.71
Minority interest 1,598.44 1,187.79
Profit for the year 2,741.44 2,261.92
Earnings per share (H) 172.3 142.1

Dividend

Your directors recommend for consideration of the shareholders at the ensuing Annual General Meeting (AGM) payment of a dividend of Rs.1.75 per equity share (35%) of face value of Rs.5 each for the year ended 31 March 2018. The amount of dividend and the tax thereon to the extent applicable aggregate to Rs.27.85 crore.

For the year ended 31 March 2017, the dividend paid was also Rs.1.75 per equity share (35%) of face value of Rs.5 each. The amount of dividend and the tax thereon to the extent applicable aggregated to Rs.27.85 crore.

Share capital

The paid-up equity share capital as on 31 March 2018 was Rs.79.57 crore consisting of 159,135,097 fully paid-up equity shares of face value of Rs.5 each. During the Rights Issue of equity shares made by the Company in 2012, certain shares had been kept in abeyance as required by law. With resolution of a few cases during the year under review, the Company has allotted 3,317 equity shares of the face value of Rs.5 each at the original Rights Issue price of Rs.650 per share to the eligible shareholders.

There was no public issue, rights issue, bonus issue or preferential issue, etc. during the year under review. The Company has not issued shares with differential voting rights or sweat equity shares. It has not granted any stock options.

Classification of the Company as a Core Investment Company (CIC)

The Company having satisfied the criteria specified for being a CIC, not requiring registration with RBI pursuant to the provisions of section 45-IA of RBI Act, 1934, had applied to RBI in this regard on 26 June 2015.

In response to the above, RBI vide its Order dated 23 October 2015 has cancelled the certificate of registration to carry on the business of NBFC issued to the Company and has confirmed the eligibility of the Company as a CIC, not requiring registration with RBI, pursuant to the provisions of section 45-IA of the RBI Act, 1934. The Company is thus a CIC under the said provisions.

Operations

Detailed information on the operations of the different business lines of the Company and details on the state of affairs of the Company are covered in the Management Discussion and Analysis Report.

Inclusion in NIFTY 50 Index

With effect from 2 April 2018, the Company has been included in the NIFTY 50 Index of National Stock Exchange of India Limited.

Commencement of operations by Bajaj Finserv Direct Ltd.

During the year under review, Bajaj Financial Holdings Ltd., a wholly-owned subsidiary, has firmed up new business plans for undertaking activities on digital and online platform to augment the business of the Company's subsidiaries and has changed its name to Bajaj Finserv Direct Ltd. with effect from 27 February 2018.

Adoption of Confederation of Indian Industry (CII) Charters

Your Company, being a member of CII, has adopted the following Code/Charters:

1. Model Code of Conduct for Ethical Business Practices;

2. Charters on Fair & Responsible Workplace Guidelines for Collaborative Employee Relations; and

3. Charters on Fair & Responsible Workplace Guidelines for Contact Labour.

Extract of annual return

The extract of annual return as provided under sub-section (3) of section 92 of the Companies Act, 2013, in the prescribed form MGT-9 is annexed to this Report.

Number of meetings of the Board

Six meetings of the Board were held during the year. Detailed information is given in the Corporate Governance Report.

Directors' responsibility statement

As required under clause (c) of sub-section (3) of section 134 of the Companies Act, 2013, directors, to the best of their knowledge and belief, state that:

• in the preparation of the annual accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

• the 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;

• the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

• the directors had prepared the annual accounts on a going concern basis;

• the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

• 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.

Details in respect of frauds reported by auditors under section 143(12)

During the year under review, there were no frauds reported by the Statutory Auditors to the Audit Committee or the Board under section 143(12) of the Companies Act, 2013.

Declaration by independent directors

The independent directors have submitted the declaration of independence, as required pursuant to section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in section 149(6) of the said Act.

Directors' Remuneration Policy and criteria for matters under section 178

Information regarding Directors' Remuneration Policy and criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178 are provided in the Corporate Governance Report.

Particulars of loans, guarantees or investments

Information regarding loans, guarantees and investments covered under section 186 of the Companies Act, 2013 are detailed in the financial statements.

Related party transactions

No Related Party Transactions (RPTs) were entered into by the Company during the financial year, which attracted the provisions of section 188 of the Companies Act, 2013. There being no ‘material' related party transactions as defined under regulation 23 of the SEBI Listing Regulations, 2015, there are no details to be disclosed in form AOC-2 in that regard.

During the year 2017-18, pursuant to section 177 of the Companies Act, 2013, and regulation 23 of the SEBI Listing Regulations, 2015, all RPTs were placed before the Audit Committee for its approval.

The policy on RPTs as approved by the Board is uploaded on the Company's website www.bajajfinserv.in

Material changes and commitments

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year and the date of this Report.

Conservation of energy and technology absorption

The Company is engaged in wind-farm activities in addition to its financial services activities. A summary of the performance of the wind power division is available in the Management Discussion and Analysis which forms part of this Annual Report. Being essentially a financial services Company, no particulars regarding technology absorption are required to be given in this Report.

Particulars regarding conservation of energy are given below:

a) Steps taken to conserve energy and utilise alternate sources of energy:

The Company has installed a renewable energy (wind) project with a capacity of 65.2 MW. During the year under review, it generated 734 lakh units which it sold to third parties.

It, however, is unable to make captive use of wind energy, because new regulations do not permit the same where monthly demand is less than 700 KW. The Company has installed LED lamps in place of failed tube lights and CFL, thereby reducing energy consumption in lighting by around 16507 KWh units during the year.

b) Capital investment on energy conservation equipment:

Not applicable, since BFS is a non-manufacturing Company, not coming under the notified industries covered under Energy Conservation Act, 2001. Also, energy demand/ connected load of building utilised for the Company's corporate/commercial activities, etc. is less than 500 KW, which is the minimum threshold for applicability of the Energy Conservation Act, 2001.

Foreign exchange earnings and outgo

Total foreign exchange earned by the Company was H Nil during the year under review, as well as during the previous year.

Total foreign exchange outflow during the year under review was Rs.0.67 crore, as against Rs.0.62 crore during the previous year.

Risk Management Policy

Information on the development and implementation of a Risk Management Policy for the Company including identification therein of elements of risk, which in the opinion of the Board may threaten the existence of the Company, is given in the Corporate Governance Report.

Corporate Social Responsibility (CSR)

Detailed information on the CSR Policy developed and implemented by the Company on CSR initiatives taken during the year pursuant to section 135 of the Companies Act, 2013, is given in the annexed Annual Report on CSR activities.

Formal annual evaluation of the performance of the Board, its Committees, Chairperson and Individual Directors

Information on the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees, Chairperson and Individual Directors is given in the Corporate Governance Report.

Subsidiary and Joint Venture

Following are the subsidiary and joint venture companies of the Company as at 31 March 2018

Name of the company % Shareholding Status
Bajaj Allianz Life Insurance Company Ltd. 74% Subsidiary
Bajaj Allianz General Insurance Company Ltd. 74% Subsidiary
Bajaj Finance Ltd. 54.99% Subsidiary
Bajaj Housing Finance Ltd. (100% subsidiary of Bajaj Finance Ltd.) Subsidiary
Bajaj Financial Securities Ltd. (100% subsidiary of Bajaj Housing Finance Ltd.) Subsidiary
Bajaj Finserv Direct Ltd.* (formerly known as Bajaj Financial Holdings Ltd.) 100% Subsidiary
Bajaj Allianz Financial Distributors Ltd. 50% Joint Venture
Bajaj Allianz Staffing Solutions Ltd. (100% subsidiary of Bajaj Allianz Financial Distributors Ltd.) Joint Venture

*Name has changed with effect from 27 February 2018

Detailed information on the performance and financial position of each subsidiary/joint venture of the Company is covered in the Management Discussion and Analysis Report.

Directors and Key Managerial Personnel-Changes

The directors regret to inform the sad demise of Naresh Chandra, an independent director of the Company, on 9 July 2017. The directors record their very sincere appreciation of the valuable services rendered by him during his long tenure in the Company. In his place, pursuant to section 149 of the Companies Act, 2013 and regulation 17(1)(b) read with regulation 25(6) of the SEBI Listing Regulations, 2015, Dr. Naushad Forbes was appointed as an additional director in the category of non-executive, independent director of the Company, in the meeting of the Board held on 13 September 2017, to hold office up to the date of the ensuing Annual General Meeting (AGM) of the Company. Resolution for appointment of Dr. Naushad Forbes is put up for the approval of shareholders in the Notice of ensuing AGM.

Pursuant to the provisions of the Companies Act, 2013, Dr. Naushad Forbes, if appointed at the ensuing AGM, shall be an independent director under the said Act for a period of 5 years with effect from 13 September 2017.

As per the provisions of the Companies Act, 2013, Rajiv Bajaj retires from the Board by rotation this year and being eligible, offers himself for re-appointment. The information as required to be disclosed under regulation 36(3) of the SEBI Listing Regulations, 2015 in case of re-appointment of the director is provided in the Notice of the ensuing Annual General Meeting.

There was no other change in the Directors and Key Managerial Personnel during the year under review except as above.

Detailed information on the directors is provided in the Corporate Governance Report.

Significant and material orders passed by the regulators or courts

During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals, which may impact the going concern status of the Company and its operations in future.

Details of internal financial controls with reference to the financial statements

The Company has documented its internal financial controls considering the essential components of various critical processes, physical and operational. This includes its design, implementation and maintenance along with periodical internal review of operational effectiveness and sustenance, which are commensurate with the nature of its business and the size and complexity of its operations.

This ensures orderly and efficient conduct of its business, including adherence to the Company's policies, safeguarding of its assets, prevention of errors, accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

The internal financial controls with reference to the financial statements were adequate and operating effectively.

Presentation of financial statements

The audited financial statements of the Company for the year ended 31 March 2018 have been disclosed as per Schedule III (Division I) to the Companies Act, 2013.

Consolidated financial statements

The directors also present the audited consolidated financial statements incorporating the duly audited financial statements of the subsidiaries and joint ventures, and as prepared in compliance with the Companies Act, 2013, applicable Accounting Standards and the SEBI Listing Regulations, 2015.

A separate statement containing the salient features of our subsidiaries and joint ventures in the prescribed form AOC-1 is annexed.

Statutory disclosures

The summary of the key financials of the Company's subsidiaries and joint venture in form AOC-1 is included in this Annual Report. A copy of the audited financial statements for each of the subsidiary companies will be made available to members of the Company seeking such information at any point of time. The audited financial statements for each of the subsidiaries will be kept for inspection by any member of the Company at its registered office during business hours. The same are placed on the Company's website www.bajajfinserv.in

Details as required under section 197(12) of the Companies Act, 2013, read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed to this Report.

Details as required under section 197(12) of the Companies Act, 2013, read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, which forms part of the Directors' Report, will be made available to any shareholder on request, as per the provisions of section 136(1) of the said Act.

A Cash Flow Statement for the year 2017-18 is attached to the Balance Sheet.

Pursuant to the legislation 'The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013', the Company has a Policy on Prevention of Sexual Harassment at Workplace. There was no case reported during the year under review under the said Policy.

Corporate governance

Pursuant to the SEBI Listing Regulations, 2015, a separate chapter titled Corporate Governance has been included in this Annual Report, along with the reports on Management Discussion and Analysis and General Shareholder Information.

All Board members and Senior Management Personnel have affirmed compliance with the Code of Conduct for the year 2017-18. A declaration to this effect signed by the Managing Director & CEO of the Company is contained in this Annual Report.

The Managing Director & CEO and CFO have certified to the Board with regard to the financial statements and other matters as required under regulation 17(8) of the SEBI Listing Regulations, 2015.

The Certificate from the Statutory Auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

Business Responsibility Report

Regulation 34(2) of the SEBI Listing Regulations, 2015, inter alia, provides that the annual report of the top 500 listed entities based on market capitalisation (calculated as on 31 March of every financial year) shall include a Business Responsibility Report (BRR).

Since BFS is one of the top 500 listed entities, the Company, as in the previous years, has presented its BRR for the financial year 2017-18, which is part of this Annual Report. As a green initiative, the BRR has been hosted on the Company's website www.bajajfinserv.in

A physical copy of the BRR will be made available to any shareholder on request.

Secretarial standards of ICSI

Pursuant to the approval given on 10 April 2015, by the Central Government to the Secretarial Standards specified by the Institute of Company Secretaries of India (ICSI), the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) came into effect from 1 July 2015. The said standards were amended with effect from 1 October 2017. The Company is in compliance with the same.

Auditors

Statutory Auditor

Pursuant to the provisions of section 139 of the Companies Act, 2013, the members at the Annual General Meeting of the Company held on 19 July 2017 appointed S R B C & CO LLP, Chartered Accountants (firm registration No. 324982E/E300003) as Statutory Auditors of the Company from the conclusion of 10th Annual General Meeting till the conclusion of 15th Annual General Meeting, covering one term of five consecutive years, subject to ratification by the members at each intervening annual general meeting.

In view of the amendment to the said section 139 through the Companies (Amendment) Act, 2017 notified on 7 May 2018, ratification of auditors' appointment is no longer required. However, under section 142 of the Companies Act, 2013, a proposal is put up for approval of members for authorising the Board of Directors of the Company to fix Auditors' remuneration for the year 2018-19 and thereafter. The members are requested to approve the same.

The Statutory Audit Report for the year 2017-18 does not contain any qualification, reservation or adverse remark or disclaimer made by the Statutory Auditors.

Secretarial Auditor

Pursuant to the provisions of section 204 of the Companies Act, 2013, and the Rules made thereunder, the Company has re-appointed Shyamprasad D Limaye, Practising Company Secretary (membership no. 1587), to undertake the secretarial audit of the Company. The Secretarial Audit Report for the year 2017-18 as issued by him in the prescribed form MR-3 is annexed to this Report.

The said Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer made by the Secretarial Auditor except that the Company had issued to its shareholders Rights Equity Shares in the year 2012. Out of this issue, 3,317 rights equity shares earlier kept in abeyance were allotted on 16 October 2017. Application for listing of these shares was filed with BSE and NSE in 30 days and 29 days respectively from the date of allotment, which was beyond the prescribed 20 days' period. The delay was due to certain interpretational issues and for technical reasons. NSE and BSE levied a fine of Rs.180,000 and Rs.200,000 respectively, which the Company paid under protest.

Cost Auditor

Pursuant to section 148 of the Companies Act, 2013, and the Rules made thereunder, the Board of Directors had, on the recommendation of the Audit Committee, re-appointed Dhananjay V Joshi & Associates (firm registration no. 000030), Cost Accountants, to audit the cost accounts of the Company for the financial year 2018-19 on a remuneration of Rs.55,000 plus service tax, out-of-pocket, travelling and living expenses, subject to ratification by the shareholders at the ensuing Annual General Meeting. Accordingly, a resolution seeking members' ratification for the remuneration payable to the Cost Auditor is included in the Notice convening the Annual General Meeting.

On behalf of the Board of Directors

Rahul Bajaj

Chairman

Pune: 17 May 2018

Annexure to Directors' Report

Remuneration Details under Rule 5(1) of Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 (as amended) for the year ended 31 March 2018

Name of Director/KMP Ratio of Remuneration of director to Median Remuneration of employees % increase in the financial year
(A) Whole-time director/Managerial Personnel
Sanjiv Bajaj-Managing Director & CEO 19.39 4.99
(B) Non-Executive directors1
Rahul Bajaj 0.17 50.00
Madhur Bajaj 0.12 0.00
Rajiv Bajaj 0.08 (33.33)
Nanoo Pamnani 0.27 (6.67)
Naresh Chandra3 0.06 (75.00)
D J Balaji Rao 0.21 22.22
Dr. Gita Piramal 0.21 83.33
Dr. Naushad Forbes4 0.10 0.00
(C) Key Managerial Personnel
Sanjiv Bajaj, Managing Director & CEO 4.99
S Sreenivasan, CFO 63.52
Sonal R Tiwari, Company Secretary 18.27
(D) Remuneration of Median Employee (other than whole-time director) 3.26
(E) Permanent employees as on 31 March 2018: 24

1 (a) Remuneration payable to Non-executive directors is based on the number of meetings of the Board and its Committees attended by them as members during the year. (b) Remuneration to directors does not include sitting fee paid to them for attending Board/Committee meetings.

2 'Permanent employees' does not include trainees, probationers and contract employees.

3 Naresh Chandra expired on 9 July 2017 and hence figures in his case are not comparable.

4 Dr. Naushad Forbes was appointed with effect from 13 September 2017. Figures in his case are therefore not comparable.

Notes on Disclosures under Rule 5

A In 2017-18, the remuneration of median employee other than Whole-time Director increased by 3.26% over the previous year.

B Increase in the remuneration of Managerial Person, which was 4.99% during the year under review, was given keeping in view the trends of remuneration in industry.

C The remuneration paid as above was as per the Remuneration Policy of the Company.

   

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