YVU Financial Services Private Limited Annual Report

Transcription

1 1 YVU Financial Services Private Limited Annual Report

2 TABLE OF CONTENTS LETTER TO STAKEHOLDERS 3 DIRECTORS REPORT 5 CORPORATE GOVERNANCE 8 OPERATIONAL HIGHLIGHTS 12 HUMAN RESOURCES 15 MIS & TECHNOLOGIES 18 INDEPENDENT AUDITORS REPORT 20 AUDITED FINANCIAL STATEMENTS

3 LETTER TO STAKEHOLDERS Dear stakeholders, It has been 10 years since the company was acquired. The company started with one branch office in Assam and now it has grown to 8 branch offices with operation in two states of India. It has been a learning of decade and learning to become significant from small in the ever-evolving landscape of financial inclusion. In the tenth year of our work on financial inclusion the company continues to grow despite going through one of the most challenging period. Since the inception of its microfinance activities, YVU Financial has always focussed on serving the marginalised and increasing the financial inclusion footprint of the company in the most financially excluded region of the country. Your company became the first company based in Manipur to ever received NBFC-MFI certificate from the Reserve Bank of India. It is also the first Manipur based MFI to sign MoU with MUDRA. The Board of Directors of YFS has always been a source of inspiration, guidance and support. During the year, two new Additional Directors were appointed namely; Dr. M. Rajendra Singh and Dr. Ch. Ibohal Meitei. Both of them have immense experiences and knowledge, which will be very valuable to the company. During the year the company could not add any new lender and investors. Though YVU Financial became a member of MUDRA, it could not avail loan during the year. Your company is also in the process of raising optionally convertible preference shares (OCPS) of 150 lakhs from SIDBI. Due to demonetisation of 500 and 1,000 notes, recovery of loans were affected to some extent during November 2016, December 2016 and January From 9th November, 2016 onwards, the company had stopped accepting the demonetised notes. Though, the borrowers has cash 3

4 to repay the loan, most of them had kept it for their consumption and other emergency purposes. The company was able to its loan recovery to normalcy and PAR > 30 days was 0.38% on 31st March, YVU Financial has installed several systems to make sure that loan portfolio, which is one fo the most important assets of the company is protected. Several steps are also taken up to prevent ghost clients. House verification of each and every loan applicant was made compulsory. In order to check this, photos of the house visit shall be produced before the sanctioning committee. Text messages are sent to the registered mobile number of the applicants when loans are sanctioned. This message contains a unique number. This shall be shown to a core team of the concerned branch at the time of disbursement of loan. Without this SMS and without the physical presence of the applicant, loan will not be released. This helps in keeping ghost clients away from the company to a great extent. Tracing of repayment of loans are done on each working day at branch level. This is monitored by Regional Managers. Report for such tracking is shared with Head Office on the first working day of every week. This way, the company is able to take up necessary steps at initial stage before things get out of hand. Internal Audit Department is also headed by an experienced person. Internal audit of each branch is done at least once in a quarter. The report along with action taken/ compliance report is shared to the Board through Audit & Risk Committee. We look forward to setting up a strong foundation for YVU Financial. In the coming years, we will focus on raising more funds in the form of debt and equity and expanding our outreach to more marginalised people. As we move forward on this exciting and challenging journey, I wish to sincerely thank all the stakeholders - our Employees, Customers, Shareholders, Regulators and others for their great cooperation and look forward to their continued support in future. With best wishes Bikendrajit Akoijam 4

5 DIRECTORS REPORT To The members of YVU Financial Services Private Limited, Your Directors are pleased to present the 24th Annual Report together with the Audited Statement of Accounts of your company for the financial year ended 31st March, FINANCIAL RESULTS The financial performance of the Company for the year ended 31st March, 2017 is summarised as under: Particular Total Income Profit before Tax Provision for Current Tax Provision for Deferred Tax Income Tax earlier years Profit after Tax DIVIDEND Current year ( ) Previous Year ( ) 2,38,45,178 1,98,54,499 39,40,743 33,70,962 12,21,191 12,17,759 10,886 (2,75,352) (17,225) 1,08,343 27,25,891 23,20,212 In order to conserve the resources of the company and to build up reserves, the Directors are not recommending any dividend against equity shares. CAPITAL ADEQUACY The Capital Adequacy Ratio of the company was 45.88% as of March 31, 2017 as against the minimum capital adequacy requirements of 15% by RBI. DIRECTORS RESPONSIBILITY STATEMENT The Board of Directors States that: I. That in the preparation of the annual II. accounts, the applicable accounting standards had been followed That 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 of the company for the year ended. III. That the Directors had taken proper a n d s u f fi c i e n t c a r e f o r t h e maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the 5

6 company and for preventing and d e t e c t i n g f r a u d a n d o t h e r irregularities; IV. That the Directors had prepared the annual accounts on a going concern basis. DEPOSIT During the year, the Company had not accepted any deposit from the public within the meaning of Sec. 74 of the Companies Act, CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION Since the Company does not own any manufacturing facility, the particulars relating to conservation of energy and t e c h n o l o g y a b s o r p t i o n a r e n o t applicable. THE FOREIGN EXCHANGE EARNINGS AND OUTGO Since the company did not deal with any foreign currency, the particulars relating to foreign exchange are not applicable BOARD OF DIRECTORS Your Company has 6 directors which include 1 Nominee Director, 2 Additional Directors, 2 Directors and 1 Managing Director. According to the provision of Section 149 of the Companies Act, 2013 we have one woman director in the Board. During the year Mr. Ibohal Meitei Chingakham and Mr. Maibam Rajendra Singh were appointed as Additional Directors on 24th September, The details of the existing board of directors are given in the Corporate Governance report that forms part of the Directors report. NO. OF BOARD MEETINGS During the Financial year , six Meetings of the Board of Directors of the company were held on 18th June 2016, 25th July 2016, 24th September, 2016, 29th December 2016, 14th January 2017 and 9th March, RBI REGULATION The Company has been re-classified as NBFC-MFI by RBI w.e.f 22nd March, 2016 and has complied with the regulations stipulated by the apex bank. AUDITORS Auditors of the Company M/s D. Patwary & Co., Chartered Accountants, hold office until the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for reappointment until the conclusion of the 28th Annual General Meeting of the company to be held in the Year 2021 ( s u b j e c t t o r a t i fi c a t i o n o f t h e i r appointment by the Members at every 6

7 Annual General Meeting held after the ensuing Annual General Meeting). As required under the provisions of section 139(1) of the Companies Act, 2013, the company has received a written consent from M/s D. Patwary & Co., Chartered Accountant to their appointment and a certificate, to the effect that their re-appointment, if made, would be in accordance with the new Act and the Rules framed there under and that they satisfy the criteria provided in section- 141 of Companies Act, The Board recommends their appointment. AUDITORS REPORT With regard to the remarks in the Auditors Report, the relevant financial notes are self-explanatory For and on behalf of the Board YVU Financial Services Private Limited Sd/- Date: 10th June, 2017 Bikendrajit Akoijam Managing Director DIN:

8 CORPORATE GOVERNANCE COMPANY S PHILOSOPHY ON CORPORATE GOVERNANCE The Company recognises its role as a corporate citizen and endeavours to adopt the best practices and the highest standards of Corporate Governance through transparency in business ethics, accountability to its customers, government and others. The Company s activities are carried out in accordance with good corporate practices and the Company is constantly striving to better them and adopt the best practices. BOARD OF DIRECTORS The Board of Directors of the company is constituted in compliance with the Reserve Bank of India Act, 1934 and Companies Act, 2013 and in accordance with good corporate governance practices. The Board functions either as a full Board or through various committees constituted to oversee specific operational areas. The Board has constituted 5 committees viz. Audit & Risk Committee, Grievance Redressal Committee, Human Resource Committee, Board Credit Committee and Project Monitoring Committee. As on 31st March, 2017, the Board comprises of 6 Directors which include 1 Nominee Director, 2 Additional Directors, 2 Directors and 1 Managing Director. According to the provision of Section 149 of the Companies Act, 2013 it has one woman director in the Board. During the year Mr. Ibohal Meitei Chingakham and Mr. Maibam Rajendra Singh were appointed as Additional Directors on 24th September, During the Financial year , six Meetings of the Board of Directors of the company were held on 18th June 2016, 25th July 2016, 24th September,2016, 29th December 2016, 14th January 2017 and 9th March,

9 The names and Designation of the Directors on the Board, their attendance at the Board Meetings held during the year are given herein below: Name of the Directors Designation No. of meetings Attended Mr. Bikendrajit Akoijam Managing Director 6 6 Mr. Akoijam Tikendrajit Director 6 6 Mr. Wahengbam Prabin Singh Nominee Director 6 4 Mrs. Akoijam Bino Devi Director 6 4 Mr. Maibam Rajendra Singh* Additional Director 3 3 Mr. Ibohal Meitei Chingakham* Additional Director 3 1 *Mr. Maibam Rajendra Singh and Mr. Ibohal Meitei Chingakham were appointed as additional Directors on 24th September, Akoijam Tikendrajit Director Dr. M. Rajendra Additional Director W. Prabin Singh Nominee Director Bikendrajit Akoijam Managing Director Ak. Bino Devi Director Dr. Ch. Ibohal Meitei Additional Director 9

10 COMMITTEES OF THE BOARD To focus effectively on pertinent issues and ensure expedient resolution of diverse matters, the Board has constituted a set of Committees with specific terms of reference. The Committees operate as per the guidelines approved by the Board. The minutes of the meetings of all Committees of the Board are placed before the Board for approval in subsequent meetings. The Board has constituted 5 committees. The names and the members of the committees are given below: Audit & Risk Committee W. Prabin Singh (Chairman) Bikendrajit Akoijam Grievance Redressal Committee Dr. M. Rajendro Singh (Chairman) Ak. Bino Devi W. Prabin Singh Board Credit Committee Akoijam Tikendrajit Singh (Chairman) Bikendrajit Akoijam Human Resource Committee Akoijam Tikendrajit Singh (Chairman) Dr. M. Rajendro Singh Dr. Ch. Ibohal Meitei Project Monitoring Committee Akoijam Tikendrajit Singh (Chairman) Bikendrajit Akoijam NEDFi representative 2 beneficiaries of the project 10

11 Babloo Barber I used to work under other people. Now, I own and run a barber shop. Thanks to YVU Financial. 11

12 OPERATIONAL HIGHLIGHTS OPERATIONAL OUTREACH From operational point of view, YFS successfully opened a new Branch at Mayang Imphal. But Porompat Branch faced one of the most difficult problems as far as loan disbursement and default loans are concerned. The major cause of this was due to sudden resignation of three FEs without giving prior notice. But the prevailing situation is improving slowly after inducting two new FEs and strict monitoring from Head Office. As far as numbers of state covered as well as number of branches are 8 2 No. of branches No. of States 7 FY 15 FY 16 FY 17 2 concerned, the number of state covered remain 2 while the number of Branches increases from 7 to 8 from previous FY Though the numbers of states being remain at 2, emphasis has given to open new Branches instead of increasing the number of states so that Group formation FY 15 FY 16 FY 17 untouched area within the two operational states before moving on another state. Number of groups formed increases from 498 to 723 during FY as compared to FY It is an increase of 45.18% when compared with Previous FY It was due to opening of Mayang Imphal Branches which consists of groups only. The new members enrolment increases from 3404 to It is an increase of 60.28% when compared to previous FY The main reason for increase in members enrolment is also due to focussing on formation of groups for lending purposes. As new groups are being promoted at Mayang Imphal Area and increasing number of members

13 Loan Disbursemetn ( in lakhs) 1,647 1,382 1,365 FY 15 Active FY borrowers 16 FY 17 9,806 8,099 7,927 FY 15 FY 16 FY 17 compared to 1,365 lakhs disbursed during the previous FY There was an increase of 20.66% from the previous FY During the FY , NEDFi sanctioned and disbursed a sum of 500 lakhs to YFS and with the fund, YFS started operating a new Branch at Mayang Imphal. LOAN RECOVERY There were two major problems during the reporting financial year, one was more than 3 months long economic b l o c k a d e a n d a n o t h e r w a s demonetisation. At the initial stage recovery process was affected but could within a group, number of mobilisation of group members has enhanced to greater extent. The number of active borrower increase from 7927 to It was an increase of 23.70% when compared to previous FY Thus as far as number of Branches, number of groups formed, number of new member enrolled and active borrowers are concerned, there was a positive trend and improvement was there when compared to previous FY. LOAN DISBURSEMENT When compared to previous two financial years, loan disbursement increases in the reporting financial year. A total of 1,647 lakhs was disbursed during the reporting financial year as 13 Loan Recovery ( in lakhs) ,454 1, , FY 15 FY 16 FY 17 manage to recover the due amounts Loan Outstanding ( in lakhs) , FY 15 FY 16 FY 17 during later stages. A total of 1,454 lakhs was recovered during the FY

14 as compared to 1,307 lakhs during the previous FY marking an increase of 11.25%. 8 6 PAR > 1 day ( in lakhs) 7.26 LOAN OUTSTANDING When compared to previous two financial years, loan outstanding increases in the reporting financial year. Total outstanding at the end of the reporting financial year was 1,028 lakhs as compared to 835 lakhs at the end of FY PORTFOLIO AT RISK The PAR was a little bit higher when compared to previous FY. The most problematic branch is Porompat Branch which PAR contribution is at the tune of 4.04 lakhs out of a total of FY 15 FY 16 FY 17 lakhs. The major factor leading to such erratic behaviour was due to the following main factors. i. 2 months long counter economic blockade which affected the operational area of the Branch. ii. Demonetisation iii. Sudden resignation of 3 FEs without giving prior information 14

15 HUMAN RESOURCES The company has a Training & Development calendar which is prepared before the beginning of financial year. Various topics are covered under these training programs. During the FY , 8 in house trainings were conducted. The topics of the training included operational policies & p r o c e d u r e s, d e l i n q u e n c y management, Fair Practice Code, risk controlling mechanisms, documentation, Apart from regular training, official circulars were issued to update the staffs of the changes in the rules and regulations of the company and also to inform them about the changes and developments in the microfinance sector. The Management as well as staffs also took part in training and workshop session held outside the state as well as outside the Country. Managing Director Strategic Response to Risk in Microfinance Markets training at IFC, Washington DC management information system etc. Mr. Kishore Periyar, General Manager, DNBS, Reserve Bank of India, Guwahati also conducted a session on Investors Awareness Program. The representatives of other MFIs based in Manipur also took part in the program. took part in a workshop on Strategic response to Risk in Micro Finance Markets which was held by Boulder Institute of Microfinance at International Finance Corporation, Washington DC from 28th November to 2nd December, The Managing Director also took 15

16 sponsored by NEDFi and held at NEDFi House Guwahati from 10th to 11th January, Over and above these induction trainings were also provided to newly appointed staffs. part in the workshop on Good Governance conducted by Institute of Directors in association with Sa-Dhan at SIDBI, Lucknow. The Finance team took part in a training session on Accounting and Financial Reporting which was conducted by M2i Consulting and sponsored by NEDFi and held at NEDFi House Guwahati from 7th to 8th February, Internal Audit team also took part in a training session on Internal Control and Audit which was conducted by M2i Consulting and The in-house trainings held during the financial year are given in the table below: Date Topics of the Training/Workshop Resource Person/s Participants 25th April 2nd May, th June 14th June, 2016 Induction Training session for newly appointed staff Accounting Policies and procedures Financial Management HR Policies & Procedure Credit Policies & Procedures MIS Induction Training session for newly appointed staff Accounting Policies and procedures Financial Management HR Policies & Procedure Credit Policies & Procedures MIS Managing Director, General Manager Operation, MIS, HR Manager Managing Director, General Manager Operation, MIS, HR Manager 23rd July, 2016 Delinquency Management W. Prabinkumar Singh, NEDFi New Staffs New Staffs Core Staffs 16

17 Date Topics of the Training/Workshop Resource Person/s Participants 17th Aug 23rd Aug, th Sep, 2016 Induction Training session for newly appointed staff Accounting Policies and procedures Financial Management HR Policies & Procedure Credit Policies & Procedures MIS Refresher Training on Membership Process Loan Process Appraisal & Sanctioning Process Tracking & Monitoring Debt Recovery Process Grievance Redressal Mechanisms RBI Managing Director, General Manager - Operation, MIS, HR Manager Managing Director, General Manager Operation 11th Dec, 2016 Fair Practice Code Managing Director, General Manager Operation New Staffs All Staffs All Staffs 18th Dec, 2016 HR Policies and Procedure Communication Skill Team Work Managing Director, General Manager Operation, HR Manager All Staffs 17

18 MIS & TECHNOLOGIES MIS plays an important role in identifying a Company s strengths and weaknesses due to the presence of revenue reports, employees' performance record etc. Identifying these aspects can help a company improve its business processes and operations. It gives an overall picture of t h e c o m p a n y. I t a c t s a s a communication and planning tool. The availability of customer data and feedback can help the company to align its business processes according to the needs of its customers. The effective management of customer data can help the company to perform direct marketing and promotion activities. MIS can help a company gain a competitive advantage. Competitive advantage is a firm's ability to do something better, faster, cheaper, or uniquely, when compared with rival firms in the market. MIS report help to take decision and action on certain object with quick time. Ease in accessibility, Authority wise access right, Tracking on individual wise basis, Ease in generation of branch wise as well as consolidated report etc. As YFS used cloud based server for storing its database, downloading of the backup is done from the server on monthly basis. SMS INTEGRATION During the FY, SMS facility for providing information regarding sanctioned amount, disbursed amount and recovered amount were integrated into the system. By doing so, the concerned client got access to real time information of the loan process and recovery process. SMS regarding recovered loan amount is sent to the borrower on monthly basis. SMS integration into the system serves the following purposes: MAIN FEATURES OF MIS SOFTWARE YFS use a web based software developed by Force Ten Technology, Kolkata and huge improvement has been there since then. Some of the advantages are: Generation of real time report, Transparency borrower will receive the text message regarding sanctioned amount and date, disbursed amount and date of repayment, amount repaid, interest amount collected, the principal outstanding. Ghost client checking - An SMS will be sent to the loan applicant at the time of sanctioning of loan. The SMS will 18

19 contain application number. At the time of loan disbursement, the applicant must show this SMS to the staff disbursing of loan in BIJLI (software). Without this SMS no loan will be disbursed. This helps us in checking ghost loans. Fraud control: As the borrowers are intimated about the amount recovered from them, the chances of field staffs committing fraud will be reduced to almost nil. 19

20 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF YVU FINANCIAL SERVICES PVT. LTD. REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of WU Financial Services Pvt. Ltd. ('the Company'), which comprise the Balance Sheet as at 31 March 2017, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to' the preparation and preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. AUDITOR'S RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit. 20

21 We have taken into account the provisions of the Act, the accounting and auditing standards And matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. m he procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or 'error. In making those risk assessments, the auditor considers internal financial control relevant to the company s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes 21 evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements. OPINION In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2017 and its profit and its cash flows for the year ended on that date. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS 1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of subsection (11) of section 143 of the Act, we give in the Annexure-A a statement on the matters specified in the paragraph 3 and 4 of the Order, to the extent applicable.

22 2. As required by Section 143 (3) of the Act, we report that: (a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. (b) n our opinion proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us; (c) The balance sheet, the statement of profit and loss and the cash flow statement dealt with by this Report are in agreement with the books of account and with the returns received from the branches not visited by us; (d) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, (e) o n t h e b a s i s o f t h e w r i t t e n representations received from the directors as on 31 March taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2016 from being appointed as a director in terms of Section 164 (2) of the Act; (f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure-B"; and (g) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us: i. the Company did not have any pending litigations to impact its financial position ii. the Company did not have any long-term contracts including derivative contracts for which t h e r e w e r e a n y m a t e r i a l foreseeable losses and iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company. iv. the company has provided requisite disclosures in its standalone financial statements as to holdings as well as dealing sin Specified Bank Notes during the period from 8 November, 2016 to 30 December, 2016 and there are in accordance with the books of accounts maintained by 22

23 the Company. Refer Note 28 to the standalone financial statements 23

24 ANNEXURE-A TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF YVU FINANCIAL SERVICES PVT. LTD. The Annexure referred to in our Independent Auditors' Report to the members of the Company on the financial statements for the year ended 31 March 2017, we report that: (i) (a) The Company has maintained records showing full particulars, including quantitative details and situation of fixed assets. (b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of one year. In accordance with this programme, fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. (c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, there are no immovable properties held in the name of the Company. (ii) The Company is a Non- Banking Financial company (NBFC), primarily giving finance loans. Accordingly, it 24 does not hold any physical paragraph applicable. (iii) Thus, of the Order is not Company has not granted any loans to the person covered in the register maintained under section 189 of the Companies Act, 2013 ('the Act'). Consequently, the provisions of iii (b) and iii (c) of the order are not applicable to the company. (iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act, with respect to loans, investments, guarantees and security made. (v) The Company has not accepted any deposits from the public. (vi) The Central Government has not prescribed the maintenance of cost records under section of the Act, for any of the services rendered by the Company. (vii) (a) According to the information and explanations given to and on the basis of our examination of the records of the Company, amounts deducted1 accrued in the books of account in respect of undisputed statutory dues

25 including provident fund, income tax, sales tax, service tax, duty of customs, value added tax, cess and other material statutory dues have been regularly deposited during the year by the Company with the appropriate authorities, where applicable. According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, income tax, sales tax, service tax, duty of customs, value added tax, cess and other material statutory dues were in arrears as at 31 March 2016 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, no dues of income-tax, sales tax, service tax or value added tax were in dispute except Income tax demand of Rs. 8,56,902 for the assessment year the appeal of which is pending before Commissioner Appeals. (viii) Company have not defaulted in repayment of dues to financial institution, bank and debenture holder. (ix) Term loans during the year were applied for the purpose for which those were taken (x) According to the information and explanations given to us, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit. (xi) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has, for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act. (xii) In our opinion and according to the information and explanations given to us, the not a Nidhi company. Accordingly, paragraph of the Order is not applicable. (xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial s t a t e m e n t s a s r e q u i r e d b y t h e applicable accounting standards. (xiv) According to the information and explanations give to us and based on our examination of the records of the Company, the, Company has not made any preferential allotment or private placement of shares or fully convertible debentures during the year. (xv) According to the information and explanations given to us and based on our examination of the records of the 25

26 Company, the Company has not entered into non- cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable. (xvi) Company is registered under section 45-IA of the Reserve Bank of India Act 1934 as Non-Banking Financial Company. The status was changed to Non - Banking Financial Company-Micro Finance Institutions ( N B F C - M F I ) w i t h e f f e c t f r o m

27 ANNEXURE-B TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF YVU FINANCIAL SERVICES PVT. LTD. REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER CLAUSE (I) OF SUB-SECTION 3 OF SECTION 143 OF THE COMPANIES ACT, 2013 ("THE ACT") We have audited the internal financial controls over financial reporting of Financial Services Pvt. Ltd. ("the its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, Company") as of March 31, 2017 in conjunction with our audit of the financial statements of the Company for the year ended on that date. AUDITORS' RESPONSIBILITY Our responsibility is to express an opinion on the Company s Internal financial controls over financial reporting MANAGEMENT'S RESPONSIBILITY based on our audit. We conducted our FOR INTERNAL FINANCIAL CONTROLS audit in accordance with the Guidance The Company's management is Note on Audit of Internal Financial Controls Over Financial Reporting (the responsible for establishing and "Guidance Note") and the Standards on maintaining internal financial controls based on the internal control over Auditing, issued by and deemed to be prescribed under section of the financial reporting criteria established by Companies Act, 2013, to the extent the Company considering the essential applicable to an audit of internal components of internal control stated in financial controls, both applicable to an the Guidance Note on Audit of Internal Financial Controls Over Financial audit of Internal Financial Controls and, both issued by the Institute of Chartered Reporting issued by the Institute of Accountants of India. Those Standards Chartered Accountants of India. These and the Guidance Note require that we responsibilities include the design, comply with ethical requirements and implementation and maintenance of adequate internal financial controls that plan and perform the audit to obtain reasonable assurance about whether were operating effectively for ensuring adequate internal financial controls over the orderly and efficient conduct of its financial reporting was established and business, including adherence to maintained and if such controls company's policies, the safeguarding of operated effectively in all material 27

28 respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial r e p o r t i n g a n d t h e i r o p e r a t i n g effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls system over financial reporting. MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those 28 policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also,, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting become inadequate because of changes in

29 conditions, or that the degree of compliance with the policies or procedures may deteriorate. OPINION In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2017 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. 29

30 AUDITED FINANCIAL STATEMENTS

31 Balance sheet as at 31 March 2017 Particulars Note no. As at 31st March 2017 As at 31st March 2016 EQUITY AND LIABILITIES Shareholders' funds Share Capital 3 3,43,94,500 3,43,94,500 Reserve and surplus 4 1,30,40,541 1,03,14,651 Total 4,74,35,041 4,47,09,151 Non-Current Liabilities Long term Borrowings 5 2,96,99,450 2,08,44,593 Long term Provisions 6 1,38,312 41,019 Deferred Tax Liability (Net) 0 0 Total 2,98,37,762 2,08,85,612 Current Liabilities Short term Borrowings 5A 46,76,060 41,41,981 Trade Payables 7 12,92,081 10,88,808 Other current liabilities 8 3,64,36,197 2,56,28,712 Short term provisions 6 21,82,506 22,75,617 Total 4,45,86,843 3,31,35,119 TOTAL 12,18,59,647 9,87,29,882 ASSETS Non-Current Assets Fixed Assets 9 -Tangible Assets 10,87,250 9,05,809 -Intangible Assets 1,98,382 3,90,416 31

32 Deferred Tax Assets 2,78,811 2,89,697 Other Non Current Assets 10 5,49,54,291 4,92,12,158 5,65,18,734 5,07,98,080 Current Assets Cash and Cash Equivalents 11 34,63,658 28,49,364 Short term loans and advances 12 6,16,31,167 4,48,19,342 Other current assets 13 2,46,088 2,63,095 Total 6,53,40,913 4,79,31,801 TOTAL 12,18,59,647 9,87,29,882 Significant Accounting Policies, please see notes 1 & 2. The accompanying notes are forming an integral part of these Financial Statements. For D. Patwary & Co. Chartered Accountants FRN: E For and on behalf of the Board of Directors Sd/- Amit Patwari (Partner) M. No Sd/- Managing Director Sd/- Director Date : 10/06/2017 Place: Guwahati 32

33 Statement of profit and loss for the year ended 31st March, 2017 Particulars Note no. For the year ended 31st March 2017 For the year ended 31st March 2016 Revenue from Operations 14 2,29,16,678 1,90,75,482 Other Income 15 9,28,500 7,79,017 Total Revenue 2,38,45,178 1,98,54,499 Expenses Employee Benefits Expenses 16 86,52,204 78,21,979 Depreciation 4,43,393 3,76,208 Finance Cost 17 79,49,286 51,97,185 Other Expenses 18 26,10,061 29,83,654 Provisions and Write-offs 19 1,93,084 (43,589) Total expenses 1,98,48,028 1,63,35,437 Profit before Proir Period & exceptional Items 39,97,150 35,19,062 Prior Period Gratuity Provision 56,407 1,48,100 39,40,743 33,70,962 Tax Expenses: (1) Current Tax 12,21,191 12,17,759 (2) Deferred Tax (Assets)/Liabilities 10,886 (2,75,352) (3) Tax of Earlier Years (17,225) 1,08,343 Total Tax Expenses 12,14,852 10,50,750 33

34 Profit for the Year 27,25,891 23,20,212 Earning Per Equity Share (1) Basic (2) Diluted The accompanying notes are forming an integral part of these Financial Statements For D. Patwary & Co. Chartered Accountants FRN: E For and on behalf of the Board of Directors Sd/- Amit Patwari (Partner) M. No Sd/- Managing Director Sd/- Director Date : 10/06/2017 Place: Guwahati 34

35 Cash flow statement for the year ended 31st March, 2017 Particulars 31st March st March 2016 Cash Flow From Operating Activities : Profit Before Tax and extraordinary items 39,97,150 35,19,062 Adjustments for : Loan Loss Provisions 1,93,084 (43,589) Depreciation 4,43,393 3,76,208 Provision For Gratuity 34,747 1,15,600 Operating Profit Before Working Capital Changes 46,68,374 39,67,281 (Increase)/Decrease in Micro Finance Loans (1,63,67,325) (7,15,332) (Increase)/Decrease in Other Current Assets 1,36,605 (1,33,144) (Increase)/Decrease in Non Current Assets (57,42,133) - Increase/(Decrease) in Current Liabilities 58,191 (41,01,598) Increase/(Decrease) in Trade Paybles 2,03,273 - Payment of Advance Tax (17,64,631) (9,57,272) Gratuity paid (2,27,081) Adjustment Baddebts and Provisions -1-13,143 Net Cash Provided By/(Used In) Operating Activities (A) (1,90,34,728) (19,53,208) Cash Flow From Investing Activities Purchases of Fixed Assets 4,32,800 6,22,453 Net Cash Provided By/(Used In) Investing Activities (B) 4,32,800 6,22,453 Cash Flow From Financing Activities : Increase in Borrowings 2,00,81,821 28,12,743 Proceeds From Issuance of Share Capital - 44,28,100 Share Premium - 9,27,225 Net Cash Provided By/(Used In) Financing Activities (C) 2,00,81,821 81,68,068 35

36 Particulars Net Increase In Cash And Cash Equivalents (A+B+C) Cash And Cash Equivalents At The Begining of The Year Cash And Cash Equivalents At The End of The Year 31st March st March ,14,294 55,92,407 28,49,364 31,95,244 34,63,658 87,87,651 Cash And Cash Equivalents Comprises of : 1. Cash In Hand 11,82,017 15,47, Balances With Scheduled Banks 22,81,641 13,02,112 34,63,658 28,49,364 For D. Patwary & Co. Chartered Accountants FRN: E For and on behalf of the Board of Directors Sd/- Amit Patwari (Partner) M. No Sd/- Managing Director Sd/- Director Date : 10/06/2017 Place: Guwahati 36

37 Notes to Financial Statements for the year ended March 31, 2017 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS NOTE NO. 1: NATURE OF OPERATION YVU Financial Services Private Limited (here in after referred as "the company" or "YVU"), is engaged in Micro Finance lending activities for providing financial services to the poor women in the rural and urban areas of India. YVU provides small value collateral free loans for income generating activities to poor women according to the guidelines of Reserve Bank of India vide Notification No. DNBS.CC.PD.No. 250/ / dated 2nd December, The Company havs converted from NBFC to Non-Banking Financial Company-Micro Finance Institutions ( N B F C - M F I ) w i t h e f f e c t f r o m All financial transactions are conducted in group meetings organised near the inhabitants or work place. The operations, in the initial stages of group formations, i n volves e fforts o n development training on financial discipline, and later constant monitoring 37 through meetings and providing financial and support services at the doorstep of the borrowers to ensure high rate of recovery. NOTE NO. 2: SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Preparation of Financial Statements The financial statements of the Company have been prepared in accordance with the generally accepted accounting principle in India (Indian GAAP). The company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read with paragraph 7 of the Companies ( A c c o u n t s ) R u l e a n d t h e provisions of the Reserve Bank of India (RBI) as applicable to a Non Banking Financial Company. The Financial Statements are prepared under historical cost convention, on accrual basis except interest/discount on a loan which have been classified as Non Performing Assets and is accounted for on cash basis. The accounting policies

38 applied by the company are consistent with those applied in the previous year. 2. Use of Estimates The preparation of Financial Statements in conformity with the Generally Accepted Accounting Principles (GAAP) r e q u i r e s M a n a g e m e n t t o m a k e estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the Financial Statement and the result of the operations during the reporting year end. Although these assumptions are made as per the Management's best knowledge of current events and actions, actual result may differ from these estimates. assets are amortised over their estimated useful lives on a straight-line basis. The management estimates the useful lives of the Fixed assets as follows. Classes of Assets 4. I n t a n g i b l e A s s e t s a c q u i r e d separately are measured on initial recognition at cost. Following recognition, intangible assets are carried at cost less accumulated amortisation. Useful Lives Office Equipment 5 Years Furniture and Fixtures Computer and Accessories 10 Years 3 Years Motor Vehicles 8 Years 3. Tangible Assets 5. Borrowing Cost All Tangible Fixed Assets have been Interest on borrowing is recognised on s t a t e d a t h i s t o r i c a l c o s t l e s s time proportion basis taking into account accumulated depreciation and the amount outstanding and the rate impairment loss, if any. Cost comprises applicable on the borrowing. the purchase price and any attributable cost of bringing the asset to its working 6. Revenue Recognition condition for its intended use. Revenue is recognised to the extent that it is probable that the economic benefits Depreciation will flow to the company and the Depreciation on Tangible Fixed Assets revenue can be reliably measured. has been provided on the straight-line I. Interest income on loans is method over the useful lives of assets recognised on accrual basis. Interest estimated by the Management, which is on Non-Performing Assets (NPA) is consistent with the useful lives recognised only when realised. prescribed under Part 'C' of Schedule II II. All other income is recognised on of Companies Act, Intangible accrual basis. 38

39 7. Retirement and other Employee Benefits I. The monthly contribution towards II. Provident Fund is charged to Profit and Loss Account for the year when the contribution to the respective fund is due. There are no other o b l i g a t i o n s o t h e r t h a n t h e contribution payable to the respective funds. The company has for the first time provided towards Employees Gratuity based on 15 days salary for every completed year of service for the current and past years. The measurement of liability has been done in-house by the company without using the services of an Actuary. 8. Credit Rating The credit policy of the company requires all credit exposures to be measured, monitored and managed proactively. Exposure to credit risk is monitored on yearly basis by a leading external credit rating agency. 9. Taxation I. Tax Expenses comprise of Current and Deferred Tax. Current Income Tax is measured at the amount expected to be paid to the Tax Authorities in accordance with the Income Tax Act, Deferred Income Tax reflects the impact of current year timing differences 39 II. between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet Date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realised. III. The carrying amount of the Deferred Tax Assets is reviewed at each Balance Sheet Date. The company writes down the carrying amount of the deferred tax assets to the extent that it is no longer reasonably certain or virtually certain as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such written-down amount is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. 10.Classification of Portfolio Loans Loans are classified as follows Asset Classification Standard Assets Sub Standard Assets Period Current Loan and arrears upto 90 days Arrears from 91 days upto 179 days