BANKERS BOARD OF DIRECTORS

Transcription

1 BOARD OF DIRECTORS R Seshasayee, Chairman S Nagarajan, Managing Director S Solomon Raj R Sundararaman Dheeraj G Hinduja Anil Harish Y M Kale T Anantha narayanan SECRETARY K R Sampath Kumar BANKERS Axis Bank Limited Bank of Baroda Canara Bank Central Bank of India Corporation Bank DBS Limited HDFC Bank Limited ICICI Bank Limited Kotak Mahindra Bank Limited State Bank of India Syndicate Bank The Federal Bank Limited The Hongkong & Shanghai Banking Corporation Limited Union Bank of India Vijaya Bank Yes Bank Limited REGISTERED OFFICE No.1, Sardar Patel Road Guindy Chennai Phone : Fax : AUDITORS M/s SNB Associates No 12, 3rd Floor, Gemini Parsn Complex, 121, Anna Salai, Chennai CORPORATE OFFICE Plot No 27, SP, Developed Plot SIPCOT Industrial Estate Guindy Chennai Phone : Contents Page Directors Report 3 Auditors Report 10 Balance Sheet 14 Profit and Loss Statement 15 Cash Flow Statement 16 Notes forming part of the Financial statements 17 1

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3 DIRECTORS REPORT Your directors have pleasure in presenting the 5th Annual Report with the Audited Accounts for the year ended 31st March The summarised financial results of your Company are given hereunder: Financial Results (` in Crores) Particulars Year ended March 31, 2013 Year ended March 31, 2012 Income from Operations Total Income Less: Total Expenditure Profit Before Tax Profit After Tax Surplus brought forward Amount available for appropriation Appropriations have been made as under: Transfers to: - Statutory Reserve Surplus carried to Balance Sheet 160, Dividend In view of the capital needs of the Company for further expansion, it was decided by the Board of Directors that no dividend would be declared. Macroeconomic Environment Indian Economy is expected to grow at 5% during the year as compared to 6.21% registered in India being an economy driven by indigenous consumption, this slowdown was largely on account of slowdown of investments, protracted weakness in industrial activity coupled with domestic supply constraints, weaker consumption due to high inflation as illustrated by average food inflation of 9.86% and fuel inflation of 10.53% during The Reserve Bank of India in a bid to kindle demand and revive growth had reduced the policy rates Repo Rate from 8% to 7.25% and Reverse Repo from 7% to 6.25% during the year. Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) were also reduced to improve liquidity in the market. Commercial Vehicles (CV) The year has been a challenging year for vehicle industry in general and commercial vehicle segment in particular due to cumulative effect of slowdown in economic growth, flagging buyer sentiment, high interest rates and rising fuel costs. The slackened pace of infrastructure development coupled with the ban on mining activities imposed by Supreme Court in some states also had an adverse impact on demand for Commercial Vehicles during Sales of Medium and Heavy Commercial Vehicles (M/HCV) were the worst hit registering a steep fall of 23% as against growth of 8% in due to below average monsoon and continuing inertia in manufacturing and infrastructure sectors. Sales of Light Commercial Vehicles (LCV), however showed growth during the year, though at a lower rate of 14% in as compared to 23% in the previous year mainly on account of higher demand for intra-city logistics. 3

4 Operating and Financial Performance In line with the trends in Commercial Vehicle sector, loan disbursement of your Company during the year ended 31st Mar 2013 was at `2100 crores, which is flat, compared to the previous year. The gross receivables managed by your Company grew by 30% and stood at ` 3280 Crores as at March 31, 2013 as compared to ` 2518 Crores as at March 31, Your Company has made a net profit of ` crores during the year as compared to ` crores during the previous year The Company s net worth stood at ` Crores as on March 31, Capital Adequacy Ratio was at 15.95% as against the statutory requirement of 15%. Standard assets constituted 96.84% of the total assets and the net non-performing assets after provisioning stood at 2.76%. Your Company has made adequate provision for Non-Performing Assets as per regulatory requirements, including a provision of `6.21 Crores towards provision for standard assets as mandated by RBI. Outlook for the year Inflation continues to be a major concern. The global environment is still uncertain and though core inflation is easing, retail inflation remains high, offering little scope for further monetary easing. CV and passenger vehicle sales volumes are likely to remain flat in The structural shift in the CV industry is leading to increasing demand for large tonnage and low tonnage CVs and shrinking demand for medium tonnage vehicles. The trend is likely to continue in the medium term. The use of LCVs for the intra-city movement of consumer goods, rural/urban taxis and captive use has also supported high sales and financing growth in LCV segment. Used M/HCV financing may be negatively impacted since the limited bargaining power of owner drivers/small road transporters (main buyers of used M/HCVs) to increase their freight rates in line with the diesel price increases would constrain their ability to buy more vehicles. Consequent to various measures of fiscal consolidation initiated by the Government, there is a general expectation of falling inflation and gradual decline in interest rates. While this could gradually improve business and consumer sentiments, the deregulation of diesel prices in the absence of perfect correlation between diesel prices and freight rates and continued slowdown in infrastructure projects is likely to impact the borrowers earnings viability and hence may pose portfolio pressures for your Company. Asset quality may, therefore, come under pressure, at the same time as credit growth in this business line remains weak. Your Company has taken necessary steps to mitigate these effects. Given the various uncertainties in the macroeconomic environment and the none too optimistic outlook for the automobile industry, your Company will strive for growth that is sustainable and profitable, while remaining strongly focussed on the highest asset quality. Your Company continues to be engaged in financing the Light Commercial Vehicles, Small Commercial Vehicles, Tractors, Construction Equipment, Three Wheelers and Two Wheelers apart from M & HCVs. With its presence in more than 601 locations across the country including semi-urban and rural locations, the Company would be able to capitalise on the growth in this segment. Regulatory Environment In December 2012, Reserve Bank of India had issued draft Guidelines on regulatory framework of Non Banking Finance Companies for public comments. The broad thrust of the draft guidelines is towards aligning the regulatory framework of NBFCs with that of banks in respect of Asset Classification, Capital Adequacy, Corporate 4

5 Governance and Liquidity Management. Your Company has already started to gear its systems and processes to ensure adherence to the draft Guidelines. Resource Mobilisation Term Loans and Bank Credit During the year, your Company availed term loans of `1223 Crores and `90 Crores as cash credit from its Bankers. This has been the primary source of funds for the business concluded during the year. Assignment of receivables In August 2012, RBI had announced the revised Guidelines on Securitisation transactions, with a view to develop an orderly and healthy securitisation market and encourage greater alignment of the interests of the originators and investors. In the year , your Company raised resources amounting to ` 258 crores by direct assignment of receivables in accordance with revised Guidelines. Credit Rating The term borrowings of your Company have been rated and CARE has assigned a rating of A+ which indicates adequate safety. Capital Infusion Your Company is in the final stages of negotiations with a Private Equity (PE) Investor with respect to further capital infusion into the Company and the transaction is expected to be closed by Q1 of This capital infusion would further strengthen the capital adequacy of your Company besides sending positive feedback in the market about your Company. This transaction would also involve conferring some special rights to the PE investor necessitating changes to the Memorandum and Articles of Association. The revised draft of Memorandum and Articles of Association incorporating the necessary changes is enclosed with the Notice for Annual General Meeting for the approval of members by Special Resolution. Internal Audit As part of the effort to evaluate the effectiveness of the internal control systems your Company s internal audit function reviews all the control measures on a periodic basis and recommends improvements, wherever appropriate. The Audit Committee regularly reviews the audit findings as well as the adequacy and effectiveness of the internal control measures. Risk Management Your Company, being in the business of financing of commercial vehicles, three wheelers, two wheelers and equipment in the retail segment, has to manage various risks including credit risk, liquidity risk, interest rate risk and operational risk. The Credit Committee, the Risk Management Committee and the Asset Liability Management Committee review and monitor these risks at periodic intervals. Board of Directors As per Articles 42 of the Articles of Association of the Company Mr. Dheeraj G Hinduja, Mr. Anil Harish and Mr. Y M Kale retire by rotation and being eligible, offer themselves for re-appointment. Corporate Governance The Report on Corporate Governance forms part of the Annual Report, and is annexed herewith. Auditors M/s SNB Associates, Chartered Accountants, Chennai retire at the ensuing Annual General Meeting and are eligible for re-appointment. However, they have expressed their desire not to continue. In view of the same, it is proposed to appoint M/s B S R and Associates, Chartered Accountants as Statutory Auditors of the Company subject to the approval of the shareholders. 5

6 Directors responsibility statement a) In the preparation of the annual accounts for the year ended March 31, 2013 the applicable accounting standards have been followed by the Company. b) The Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2013 and of the profit of the Company for the year ended that date. c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. foreign exchange earnings and outgo. The annexure setting out the names and other particulars of employees covered under Section 217 (2A) of Companies Act, 1956, 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. Acknowledgement Your Directors wish to place on record their deep appreciation for the whole-hearted and sincere cooperation your Company has received from all its Bankers, Financial Institutions, Ashok Leyland Limited and all dealers. Your Directors also wish to extend their sincere thanks to all the customers and shareholders for their continued support. Your Directors also wish to place on record their appreciation for the unstinted co-operation and support extended by all the employees in achieving the performance of your Company. d) The accounts of the Company have been prepared on a going concern basis. Disclosure under Section 217 (2A) and 217 (1) (e) of Companies Act, 1956 Your Company has no activity relating to conservation of energy, technology absorption or Chennai May 10, 2013 On behalf of the Board of Directors R. Seshasayee Chairman 6

7 REPORT ON CORPORATE GOVERNANCE I COMPANY S PHILOSOPHY ON CORPORATE GOVERNANCE: II The Company recognizes its role as a corporate citizen and endeavors 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. As part of the Hinduja Group and as an associate of Ashok Leyland Limited, the Company's philosophy on Corporate Governance is founded upon a rich legacy of fair, ethical and transparent governance practices. BOARD OF DIRECTORS All members of the Board are eminent persons with considerable experience and expertise in diverse fields of banking, finance, law, automobile, engineering, audit and accounting sectors. The Company is immensely benefited by the array of skills and expertise brought by the Directors to the Board. The composition of the Board is under: Promoter Directors: Mr. R Seshasayee Non-Executive Chairman Mr. Dheeraj G Hinduja Non-Executive Director Mr. S Nagarajan Managing Director Independent Non-executive Directors: Mr. R Sundararaman Mr. Anil Harish Mr. T Anantha narayanan III IV Non-Executive Directors: Mr. S Solomon Raj Mr. Y M Kale All Directors and Senior Management Personnel have re-affirmed compliance with the Code of Conduct approved and adopted by the Board of Directors. BOARD MEETINGS The Board meets regularly to discuss, review and decide upon the matters such as policy formulation, setting up of goals, appraisal of performances with the goals and control functions, etc. During the year, six meetings of the Board were held on May 14, 2012, July 24, 2012, October 8, 2012, November 9, 2012, December 31, 2012 and January 24, AUDIT COMMITTEE The Audit Committee of the Company is constituted in line with the provisions of Section 292A of the Companies Act, Terms of Reference: The Terms of reference of the Audit Committee, inter alia includes: 1. Overseeing of Company s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. 2. Statutory Auditor: a. Recommending to the Board, the appointment, re-appointment and if required, the replacement or removal of the statutory auditor and the fixation of audit fees. b. Approval of payment to statutory auditors for any other services rendered by them. 7

8 3. Internal Audit: a. Reviewing the performance of internal auditors and adequacy of internal control systems. b. Discussing significant findings with the internal auditors and follow up thereon including reviewing the findings of any internal investigations by the internal auditors into matters where there is irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. 4. Reviewing with the management annual financial statements before submission to the Board, focusing primarily on matters required to be included in the Director s Responsibility Statement to be included in the Board s report in terms of clause (2AA) of section 217 of the Companies Act, 1956, changes in accounting policies and practices along with reasons, qualifications in draft audit report and significant adjustments in financial statements arising out of audit findings, compliance with accounting standards, going concern assumption, compliance with legal requirements concerning financial statements and related party transactions. During the year under review, four meetings were held on May 13, 2012, July 23, 2012, November 8, 2012 and January 23, The Company Secretary acts as the Secretary for the Audit Committee. The Statutory Auditors, Internal Auditor, the Managing Director, Chief Operating Officer and the EVP Finance attend and participate in the meetings of the Audit Committee. The necessary quorum was present for all the meetings. IV NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee was constituted in line with the RBI s guidelines on Corporate Governance. Terms of Reference: The Terms of Reference of the Nomination and Remuneration Committee includes inter alia: a. The Committee shall: Regularly review the balance of skills, knowledge and experience on the Board, and the structure, size and composition of the Board and make recommendations to the Board with regard to any adjustments that are deemed necessary; Be responsible for preparing a description of the role and capabilities required of the Board members, and for identifying and nominating for the approval of the Board, candidates who fulfill the Fit and Proper person criteria to fill board vacancies as and when they arise; Keep under review the leadership needs of the organisation with a view to ensuring the continued ability to compete effectively in the organisation's marketplace; Keep up to date and be fully conversant with strategic issues and commercial changes affecting the company and the market in which it operates. b. The Committee shall also make recommendations to the Board: As regards plans for succession, in particular, of the Chairman and the Managing Director; As regards managerial remuneration payable to the Managing Director and other Executive Directors; 8

9 As regard the re-appointment of any nonexecutive director at the conclusion of his or her specified term of office; Concerning the re-election by shareholders of any director under the "retirement by rotation" provisions in the company's Articles of Association; Concerning any matters relating to the continuation in office as a director of any director at any time; Concerning the appointment of any director to executive or other office other than to the positions of Chairman and Managing Director, the recommendation for which would be considered at a meeting of: o o All the non-executive directors of the Company regarding the position of Managing Director; and All the directors of the Company regarding the position of Chairman. c. The Committee shall also assist the Board of Directors in the Board s responsibilities relating to Employee Stock Option Plan including establishment of guidelines for and approval of the grant of Stock Options to key employees, officers and directors of the Company, including determination of number of shares to be covered by each Option and vesting schedule for such Options. During the year under review, two meetings of the Committee were held on May 14, 2012 and July 24, The necessary quorum was present for all the meetings. V REMUNERATION POLICY OF THE COMPANY Managing Director The Managing Director is paid a fixed quantum of salary and perquisites. He is also eligible for such percentage of variable performance pay as may be recommended by the Nomination and Remuneration Committee based on overall performance of the Company, which shall be within the overall limits permissible under the Companies Act, 1956 and as approved by the shareholders. Remuneration paid to the Managing Director for the Financial Year is given elsewhere in this report. Non-Executive Director Non-Executive Directors of the Company are paid a Sitting Fee of ` 20000/- each for every meeting of the Board, Audit Committee, Risk Management Committee, Asset Liability Management Committee, Credit Committee, Nomination and Remuneration Committee and Fund Raising Committee. 9

10 AUDITORS REPORT TO THE MEMBERS OF HINDUJA LEYLAND FINANCE LIMITED Report on the Financial Statements We have audited the accompanying financial statements of M/s. Hinduja Leyland Finance Limited ( the Company ), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and 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 Management is responsible for the 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 Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956 ( the Act ). This responsibility includes the design, implementation and maintenance of internal control 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. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. 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 disclosures in the financial statements. The 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 control relevant to the Company s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, 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. Opinion In our opinion and to the best of our information and according to the explanations given to us, the 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: (a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013; (b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Emphasis of Matter Without qualifying, attention is drawn to note no 1.1 and 20 regarding change in accounting policy relating to recognition of Excess Interest Spread in respect of bilateral assignment of receivable at par resulting in recognition of additional income of ` lakhs and resultant increase in profit before tax for the year amounting to ` lakhs 10

11 Report on Other Legal and Regulatory Requirements 1. As required by the Companies (Auditor s Report) Order, 2003 ( the Order ) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order. 2. As required by section 227(3) of the Act, we report that: a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; b. in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account d. in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956; e. on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company For SNB Associates Chartered Accountants Firm Reg. No: N S. Lakshmanan Date : Partner Place: Chennai. Membership No:

12 ANNEXURE TO THE AUDITORS REPORT (Referred to in our report of even date) 1. a. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. b. During the year the Company had physically verified the assets once and the material discrepancies had been suitably dealt with in the accounts. In our opinion the frequency of such verification is reasonable having regard to the size of the company and the nature of its assets. c. In our opinion and according to the information and explanations given to us, the Company has not disposed off a substantial part of the fixed assets during the year thereby affecting going concern. 2. Since the Company is engaged in the business of financing, clause 4(ii) of Companies (Auditor s Report) Order, 2003 relating to inventories is not applicable to the Company. 3. a. According to the information and explanations given to us, the Company has not given any loans secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act. Accordingly, sub-clauses (b), (c) and (d) of the clause (iii) of paragraph 4 of the said order are not applicable. b. During the year, the Company has not taken any unsecured loans from the parties covered in the register maintained under section 301 of the Companies Act In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets and for rendering of services. During the course of our audit, we have not observed any continuing failure to correct major weakness in the internal control system. 5. a. According to the information and explanations given to us, we are of the opinion that contracts or arrangements that need to be entered in the register maintained under section 301 of the Companies Act, 1956 have been so entered. b. In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. 6. In our opinion and according to information and explanations given to us, the Company has not accepted any deposits from the public to which the directives issued by the Reserve Bank of India and the provision of section 58A and 58 AA or any other relevant provision of the Act and the rules framed there under are applicable. 7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. 8. In respect of the activities of the company, maintenance of cost records has not been prescribed by the Central Government under section 209(1)(d) of the Companies Act, The Company is regular in depositing with appropriate authorities applicable undisputed statutory dues including provident fund, income-tax, service tax and any other statutory dues applicable to it. 12

13 10. The Company does not have accumulated losses. The Company has not incurred cash loss during the year covered by our audit nor in the immediately preceding financial year. 11. On the basis of our examination of books of accounts and documents and according to the information and explanations given to us the company has not defaulted in repayment of dues to any financial institution or bank or debenture holders. 12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities and therefore paragraph 4 (xii) of the said Order relating to maintenance of documents and records are not applicable. 13. In our opinion, the Company is not a chit fund or a nidhi/mutual benefit/society. Therefore the provisions of paragraph 4(xiii) of the said Order relating to compliance with the provisions of special statute relevant to chit fund and nidhi/mutual benefit/society are not applicable to the Company. 14. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, provisions of paragraph 4 (xiv) of the said Order relating to maintenance of proper records, timely entries and holding investments in own name are not applicable to the Company. 15. According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank or financial institutions. 16. Based on the records examined by us and according to the information and explanations given to us, during the year, term loans were applied for the purpose for which the loans were taken. 17. On the basis of overall examination of the financial statements and other financial information furnished, we report that the company has not used short term funds for long term investment. 18. According to the information and explanations given to us, the company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, According to the information and explanations given to us, during the period covered by our audit report, the Company has not issued any debentures. 20. According to the information and explanations given to us, the Company has not made any public issue during the year and accordingly paragraph 4(xx) of the said Order relating to end use of money raised is not applicable. 21. Based on the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanation given by the management, we report that cases of fraud of ` lakhs on the Company has been reported during the year. The Company has initiated legal action. The amount involved as aforesaid has been fully provided for after netting of the claims. For SNB Associates Chartered Accountants Firm Reg. No: N S. Lakshmanan Date : Partner Place: Chennai. Membership No:

14 BALANCE SHEET As at March 31, 2013 ` In Lakhs As at March 31, Note EQUITY AND LIABILITIES Shareholders Funds Share Capital 2 32, , Reserves and Surplus 3 20, , , , Non-Current Liabilities Long Term Borrowings 4 118, , Long Term Provisions , , Current Liabilities Short Term Borrowings 6 44, , Trade Payables Other Current Liabilities 8 81, , Short Term Provisions 9 1, , , TOTAL EQUITY AND LIABILITIES 299, , ASSETS Non-Current Assets Fixed Assets 10 (i) Tangible Assets 1, (ii) Intangible Assets , Non-Current Investments Deferred Tax Assets (net) Receivables under Financing Activities , , Long-Term Loans and Advances 14 2, Other Non-Current Assets 15 19, , , , Current Assets Cash and Bank Balances 16 7, , Receivables under Financing Activities , , Short Term Loans and Advances Other Current Assets 19 8, , , , TOTAL ASSETS 299, , Significant Accounting Policies and Notes to the Accounts 1 to 30 The notes referred to above form part of the financial statements as per our report of even date attached For SNB Associates For and on behalf of the board Chartered Accountants Firm No.: N R Seshasayee S Nagarajan Chairman Managing Director S Lakshmanan Partner Membership No:20045 G Vijayakumar K R Sampath Kumar EVP Finance & Resources Company Secretary Place : Chennai Date : May 10,

15 PROFIT & LOSS STATEMENT For the year ended March 31, 2013 ` In Lakhs Note Year ended March 31, Income from Operations 20 49, , Total Revenue 49, , Expenses Finance Cost 21 23, , Employee Cost 22 2, , Other Operating Expenses 23 5, , Depreciation and Amortisation expenses Provisions and Write offs 24 5, , Total Expenses 36, , Profit Before Tax 13, , Tax Expense: Current Tax 4, , Excess Provision of previous years written back (194.81) - Deferred Tax 12 (156.22) (285.39) Profit for the year 9, , Earnings per equity share of ` 10 each 25 -Basic Diluted Significant Accounting Policies and Notes to the Accounts 1 to 30 The notes referred to above form part of the financial statements as per our report of even date attached For SNB Associates For and on behalf of the board Chartered Accountants Firm No.: N R Seshasayee S Nagarajan Chairman Managing Director S Lakshmanan Partner Membership No:20045 G Vijayakumar K R Sampath Kumar EVP Finance & Resources Company Secretary Place : Chennai Date : May 10,

16 CASH FLOW STATEMENT For the year end 31st March, 2013 ` In lakhs Particulars A. CASH FLOW FROM OPERATING ACTIVITIES Profit Before Tax 13, , Interest for the year 22, , Opening Interest accrued but not due on borrowings Closing Interest accrued but not due on borrowings Interest paid for the year (22,617.03) (14,062.11) Depreciation and Amortisation Movement in provisions for Standard Assets Movement in provisions for NPAs Other Short Term Provision (29.88) Interest on Fixed Deposits (651.96) OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 15, , Adjustments for: (Increase) / Decrease in net Receivables under Financing Activities (84,697.07) (96,461.72) (Increase) / Decrease in Loans and Advances (627.22) (117.56) Increase / (Decrease) in Current Liabilities (1,056.33) 5, Cash (Used in) / From Operations (71,189.39) (79,270.47) Direct Taxes Paid (5,052.38) (4,447.77) NET CASH FROM / (Used in) OPERATING ACTIVITIES (A) (76,241.77) (83,718.24) B. CASH FLOW FROM INVESTING ACTIVITIES Bank Deposits (5,403.00) Purchase of Fixed Assets (2,558.31) (228.69) NET CASH FROM / (Used in) INVESTING ACTIVITIES (B) (2,543.31) (5,631.69) C. CASH FLOW FROM FINANCING ACTIVITIES Long Term & Medium Term Increase in Equity Share Capital - 10, Increase / (Decrease) in Long Term Borrowings Long Term Loans Borrowed during the year 130, , Long Term Loans Repaid during the year (57,410.16) (7,264.29) Short Term Increase / (Decrease) in Bank Borrowings 8, , Cash received on sell down of bilateral assignment 25, , Cash Credit repaid during the year (25,823.00) (84,169.00) NET CASH FROM / (Used in) FINANCING ACTIVITIES (C) 82, , Net Increase / (Decrease) in Cash and Cash Equivalents (A+B+C) 3, (9,551.34) Cash and Cash Equivalents at the beginning of the Year 3, , Cash and Cash Equivalents at the end of the Year 7, , See accompanying notes forming part of the financial statements For SNB Associates For and on behalf of the board Chartered Accountants Firm No.: N R Seshasayee S Nagarajan Chairman Managing Director S Lakshmanan Partner Membership No:20045 G Vijayakumar K R Sampath Kumar EVP Finance & Resources Company Secretary Place : Chennai Date : May 10,

17 Notes forming part of the Financial Statements for the year ended March 31, 2013 Accounts are prepared in accordance with the Revised Schedule VI applicable from April 1, Accordingly, previous year s figures have been realigned to make them comparable with the current year s figures. 1. Significant Accounting Policies: The financial statements are prepared and presented under the historical cost convention on the accrual basis of accounting and in compliance with the provisions of Companies Act Besides, the Company follows the directions prescribed by Reserve Bank of India (RBI) for systemically important non-deposit taking Non-Banking Finance Companies (NBFC-ND-SI). The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities as at the Balance Sheet date and reported amounts of revenues and expenses during the year ended as at that date. The estimates and assumptions used in these financial statements are based upon management s evaluation of relevant facts and circumstances as of the date of financial statements. 1.1 Income Recognition Income from hypothecation loans is accounted on the basis of internal rate of return method. Income from services is recognized on accrual basis. Additional / Penal Interest is accounted on accrual basis. Upto Financial year , in respect of bilateral assignment of receivables at par, Excess Interest Spread (EIS) is subordinated and therefore forms a part of credit cum liquidity enhancement. The EIS of a month shall be available for meeting the shortfalls in corresponding monthly payout and also replenishment of Credit Collateral, to the extent utilized. The remaining EIS, if any, in that month will flow back to the originator and is recognized as income in the month of availability of excess. From the financial year , EIS is recognized on accrual basis over the tenor of the underlying asset. In respect of bilateral assignment on premium basis, the profit has been recognized upfront till March 31, From the Financial Year , in respect of bilateral assignment on premium basis, the gain on such assignment is amortised over the tenor of the underlying asset. Interest on fixed deposits is recognized on accrual basis. 1.2 Fixed Assets and Depreciation Fixed assets are stated at cost less accumulated depreciation. Cost includes taxes, duties, freight and incidental expenses related to the acquisition and installation of the assets. Depreciation on fixed assets is provided pro-rata on the basis of the Straight Line Method at rates arrived at considering the estimated useful life or at the rates specified in Schedule XIV of the Companies Act, 1956, whichever is higher. Assets Description Depreciation Rate (%) Building 5.00 Furniture & Fittings / Air Conditioners Computers Vehicles Improvement on leased premises Primary lease period or three years whichever is earlier. 17

18 Notes forming part of the Financial Statements for the year ended March 31, 2013 Assets individually costing less than or equal to ` 5000/- are fully depreciated in the year of acquisition. In accordance with Accounting Standard AS 26-Intangible assets, software purchased/developed amounting to `17.13 lakhs during the year ( `9.24 Lakhs) is amortized over a period of 5 years. The carrying amount of assets is reviewed at each balance sheet date to ascertain impairment based on internal and external factors. An impairment loss, if any, is recognized when the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of the net selling price of the assets and their value in use. 1.3 Valuation of Investment Investments which are long term in nature are stated at cost and provision for diminution in value other than temporary, is considered wherever necessary. 1.4 Receivables under Financing Activity All loan exposures to borrowers with installment structure are stated at the full agreement value after netting off a) Unearned income b) Collections appropriated up to the year end and c) Loans assigned Provision for Standard Assets is made as per internal estimates, based on past experience, realization of security, and other relevant factors, on the outstanding amount of Standard Assets subject to minimum provisioning requirements specified by RBI. Provision for Non-Performing Assets is made subject to minimum provisioning requirements as specified by RBI. 1.5 Repossessed Assets Repossessed Assets are valued at lower of amount outstanding at the time of repossession and estimated net realizable value. 1.6 Service Tax Input Credit Service Tax input credit is accounted for in the books in the period when the underlying service received is accounted and when there is no uncertainty in availing/utilizing the same. 1.7 Taxation Income Tax : Current tax is the amount of tax payable on the taxable income for the year and is determined in accordance with the provisions of the Income Tax Act,1961. Deferred Tax: Deferred tax is recognized on timing differences; being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are recognized if there is reasonable certainty that there will be sufficient future taxable income available to realize such assets. 18

19 Notes forming part of the Financial Statements for the year ended March 31, Provisions, Contingent Liabilities and Contingent Assets Provisions are recognized only when the Company has present or legal or constructive obligations as a result of past events, for which it is probable that an outflow of economic benefit will be required to settle the transaction and a reliable estimate can be made for the amount of the obligation. Contingent liability is disclosed for (i) possible obligations which will be confirmed only by future events not wholly within the control of the Company or (ii) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognized in the financial statements. 1.9 Employee Benefits a) Post - employment benefits: i) Defined Contribution Plan: Provident Fund: All employees of the Company are entitled to receive benefits under provident fund, a defined contribution plan in which both the employee and the Company contribute monthly at a stipulated rate. The Company has no liability for future provident fund benefits other than its annual contribution and recognizes such contribution as an expense in the year it is incurred. ii) Defined Benefit Plan: Gratuity: Retirement benefits in respect of gratuity at retirement/cessation are provided for based on valuations, as at the Balance Sheet date, made by independent actuaries. The Company provides for the Gratuity, a defined benefit retirement plan covering all employees. The plan provides for lump sum payments to employees at retirement, death while in employment or on termination of employment. The Company accounts for liability of future gratuity benefits based on an external actuarial valuation on projected unit credit method for assessing liability as at reporting date. b) Short term employee benefits: Short term employee benefits for services rendered by employees are recognized during the period services are rendered. 19

20 Notes forming part of the Financial Statements for the year ended March 31, 2013 ` In Lakhs As At March SHARE CAPITAL Authorized Equity Shares: 37,50,00,000 (32,50,00,000) equity shares of ` 10 each 37, , Issued, Subscribed and Paid up Equity Shares: 32,50,00,000 (32,50,00,000) equity shares of ` 10 each 32, , , , a) Reconciliation of number shares and amount outstanding at the beginning and at the end of the year: As at March 31, 2013 As at March 31, 2012 Equity Shares No Amount No Amount At the beginning of the year 325,000,000 32, ,000,000 22,500 Issued during the year ,000,000 10,000 Outstanding at the end of the year 325,000,000 32, ,000,000 32,500 b) Terms / rights attached to Equity shares The company has only one class of equity shares having par value of ` 10 per share. Each holder of equity share is entitled to one vote per share. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion of the number of equity shares held by the shareholders. c) Details of shareholders holding more than 5% shares in the company As at March 31, 2013 As at March 31, 2012 No % holding No % holding Ashley Investments Limited 93,450, % 69,000, % Ashley Holdings Limited 93,549, % 68,999, % IndusInd International Holdings 69,500, % 62,500, % Ashok Leyland Limited 30,500, % 57,000, % Hinduja Ventures Limited 21,888, % 28,888, % 20

21 Notes forming part of the Financial Statements for the year ended March 31, 2013 ` In Lakhs As at March 31 3 RESERVES AND SURPLUS (As per Section 45-IC of Reserve Bank of India) Balance at the beginning of the year 2, Add: Amount transferred from surplus in Profit and Loss statement 1, , Closing balance 4, , Surplus in Profit and Loss statement Balance at the beginning of the year 8, , Profit for the year 9, , Less: Transfer to Statutory Reserve (1,827.68) (1,673.94) Net surplus in the Profit and Loss statement 16, , Total Reserves and Surplus 20, , LONG TERM BORROWINGS Term Loans from Banks 195, , Less: Current maturities of Long Term Loans transferred to other Current Liabilities (Refer Note 8) 77, , , , a) Term Loans from banks are secured by way of specific charge on receivables created out of the proceeds of the loan b) Details of Term Loans Rate of Interest Maturity Installment Amount outstanding Long Term Current Maturity Base Rate + Spread <1year 30-77, (0.5% to 2.25%) 1-2 years 25 57, years 17 44, years 4 13, years 1 2, LONG TERM PROVISIONS Contingency provision against Standard Assets

22 Notes forming part of the Financial Statements for the year ended March 31, 2013 As at March 31 ` In Lakhs SHORT TERM BORROWINGS Cash Credit and Working Capital Demand Loans from banks 44, , , , Cash Credit and Working Capital Demand Loans from banks are secured by pari passu charge on receivables excluding receivables that are specifically charged to other lenders. Balances in Cash Credit Account include amounts collected in respect of contracts assigned pending remittance to assignees. (Refer Note 8) 7 TRADE PAYABLES Provision for expenses Based on and to the extent of information received by the Company from the suppliers during the year regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006, there are no dues to the suppliers registered under the said Act. 8 OTHER CURRENT LIABILITIES Current maturities of Term Loans from Banks ( Refer Note 4) 77, , Interest accrued but not due on Borrowings Security Deposits Dues to Assignees towards collections in Assigned Assets (Refer Note 6) 3, , Employees Statutory Authorities Others , , SHORT TERM PROVISIONS Provision for Non Performing Assets 1, Provision for Employee Benefits - Gratuity ,

23 Notes forming part of the Financial Statements for the year ended March 31, Fixed Assets ` In Lakhs Gross Block Depreciation Net Block Description As at Additions Deletions As at Upto For the year Adjustments Upto As at As at Tangible Assets Free Hold Land Building Improvement on Leased Building Furniture & Fittings Vehicles Office Equipment , , Previous Year Intangible Assets Computer Software Previous Year Total , , Previous year

24 Notes forming part of the Financial Statements for the year ended March 31, NON CURRENT INVESTMENTS Long Term - Trade Unquoted As at March ` In Lakhs Investments in equity shares HLF Services Limited (22950 equity shares of ` 10/- each, fully paid up) DEFERRED TAX ASSET (net) Deferred Tax Asset Contingency provision against Standard Assets Provision for Non Performing Assets Provision for Derecognised Assets Provision for Diminution in value of Repossessed Assets Others ( A ) Deferred Tax Liability On Account of Fixed Assets ( B ) Net Deferred Tax Asset ( A - B ) Movement in Deferred Tax Asset during the year RECEIVABLES UNDER FINANCING ACTIVITIES Unsecured unless otherwise stated Secured - Vehicle Financing 152, , Transferred from Current Assets (Refer Note 17) Out of the above considered good 149, , Non Performing Assets 3, , , , Secured by exclusive first charge on assets financed including all accessories 14 LONG TERM LOANS AND ADVANCES Unsecured, Considered good unless otherwise stated Other Loans and Advances Capital Advances 1, Rental Deposits Insurance Deposits Advance Tax -Income Tax (net) ,