Kotak Mahindra Prime Limited. Bigger. Bolder. Better.

Transcription

1 Kotak Mahindra Prime Limited Bigger. Bolder. Better.

2 Directors Report To the Members of KOTAK MAHINDRA PRIME LIMITED The Directors present their Eighteenth Annual Report together with audited accounts of your Company for the year ended 31st March FINANCIAL RESULTS ` in Lakhs 31st March st March 2013 Gross Income 252, , Profit before Depreciation and Tax 75, , Depreciation Profit before Tax 75, , Provision for Tax 26, , Profit after Tax 49, , of Profit from previous years 133, , Amount available for appropriation 183, , Appropriations: Proposed Dividend on Preference Shares Interim Dividend on Equity Shares Corporate Dividend Tax Special Reserve u/s 45IC of the RBI Act, , Surplus carried forward to the Sheet 173, DIVIDEND During the year, the Company had declared an interim `0.60 per equity share. The Directors do not recommend any Final Dividend on the Equity Shares (Previous Year: Nil). Dividend recommended on Redeemable, Non- Cumulative Non-Convertible Preference Shares is `1 per share (Previous Year: `1 per share). CHANGE IN REGISTERED OFFICE OF THE COMPANY The Registered Office of the Company has been changed from 36-38A, Nariman Bhavan, 227, Nariman Point, Mumbai to 27BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai , with effect from 31st March DEBENTURES Pursuant to various circulars issued by the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) from time to time, the Company continues to issue debentures on private placement basis and list mostly all debentures issued, on the Bombay Stock Exchange Limited under Information Memorandums issued by the Company from time to time. The Company has appointed IDBI Trusteeship Services Limited, Asian Building, Ground Floor, 17R.Kamani Marg, Ballard Estate, Mumbai as Debenture Trustees to the issues. CAPITAL ADEQUACY The Capital to Risk Assets Ratio (CRAR) of your Company as on 31st March 2014 was at 17.70%. CREDIT RATING The Company s long-term borrowings are rated AA+ (with Stable Outlook) by CRISIL and ICRA respectively. The Company s short-term borrowing program from CRISIL continued to enjoy the highest rating of A1+. CRISIL s assessment of your Company s risk profile strengthens the confidence placed by a large pool of investors in your Company. Further the Tier II Subordinated Debts issued are dual rated by CRISIL and ICRA with a rating of AA+ (with Stable Outlook). AA+ indicates high degree of safety regarding timely servicing of financial obligations and carries a very low credit risk. Annual Report

3 FINANCE Your Company continues to be a Non Deposit Accepting Asset Financing company. It has well diversified and large pool of lenders comprising of Public Sector Banks, Private and MNC Banks, Mutual Funds, Insurance Companies, Financial Institutions, Foreign Institutional Investors (FII) and Corporates. Your Company introduced new investors during the year and continued to borrow through instruments like Debentures (NCDs), Commercial papers, etc. Further Asset Liability Management continues to be focus of your Company. During the financial year the growth and growth expectations in the economy moderated. Even with bottoming out of Indian economy, inflation remained a key concern. RBI adopted CPI as key measure of inflation for determining policy actions. The RBI adjusted policy rates by cumulative 50bps (repo - reverse repo rates) during the year to 8.0% - 7.0% respectively. During the year the RBI increased MSF (Marginal Standing Facility) rate during the period of Rupee vulnerability to External factors. RBI came up with the introduction of Term repos and has restricted the amount under Repo window (currently to 0.25% of NDTL), which has further resulted in increase of short term rates. Liquidity in the system was maintained in deficit mode, though largely in a comfort zone. Globally, Central banks in the biggest economies continued their accommodative monetary policies amid an uneven and weak economic recovery. Tapering of Quantitative Easing by US Federal Reserve in the month of December indicated to the sustained economic recovery in world s biggest economy. Economic growth rates in certain European economies point to the Eurozone may be on the verge of economic recovery. In terms of the Companies Act, 2013 and the Rules made thereunder, all NBFCs, which were earlier exempted, would now be required to create Debenture Redemption Reserve for redemption of debentures and comply with the provisions related to issuances of debentures. Your Company with its strong treasury philosophies and practices is well geared to meet the challenges of a dynamic interest rate and liquidity environment. MANAGEMENT DISCUSSION AND ANALYSIS Company Business Your Company is primarily into car finance, engaged in financing of retail customers of passenger cars and multi-utility vehicles and inventory and term funding to car dealers. Your Company finances new and used cars under retail loan, hire purchase and lease contracts. The main streams of income for your Company are retail income, dealer finance income and fee based income. Your Company also receives income from loans against securities, securitization / assignment transactions, purchase of non- performing assets, personal loans, corporate loans and developer funding. The major expenses for your Company are interest expense, business sourcing expense and cost of running operations. During the Financial Year , your Company s retail vehicle disbursements were at `633,489 lakhs as against `666,557 lakhs in the previous year. During the year under review, gross advances stood at `1,742,117 lakhs as against `1,705,647 lakhs in the previous year. Your Company continued to focus on cost control and credit losses, while improving its positioning in the car finance market by scaling up the business. As detailed in the Financial Results section above, Gross Income of your Company increased from `225, lakhs in to `252, lakhs in Profit before Tax was at `75, lakhs in as compared to `64, lakhs in , an increase of 17%. The credit loss ratio of your Company was at 0.31% in a very challenging year. There have been certain instances of frauds involving an aggregate amount of `63.44 lakhs, also reported in annexure to auditors report. The said instances are inherent in the nature of business of the Company and adequate provision in respect thereof has been made in the accounts for the year. Industry Scenario The passenger car market in India saw a degrowth of 5.9% for the Financial Year as compared to a growth of 2% for Total unit sales of cars and MUV s crossed lakh units in financial year Prospects Passenger car sales are likely to remain flat. Your Company has, carved out a niche for itself in the car-financing segment focusing on distribution and relationship management across manufacturers, dealers, channel partners and customers. Fee based income is an important initiative of your Company. Dedicated infrastructure is in place to give a further impetus to the growth of fee based income with a twin objective of offering value added services to customers and leveraging the large existing customer database to generate further fee based income. Customer knowledge, easy accessibility through its wide network of branches and a firm commitment to deliver superior customer service are key drivers for your Company s performance. Internal Controls The Internal Control department of Kotak Mahindra Bank Limited regularly conducts a review to assess the financial and operating controls at various locations of your Company including Head Office functions and at branches. Reports of the audits conducted by the Internal Control department are presented to the Audit Committee. Representatives of the statutory auditors are permanent invitees to the Audit Committee. Human Resources The Company is professionally managed with key management personnel having relatively long tenure with the Company. Your Company follows a policy of building strong teams of talented professionals. Your Company encourages and facilitates long term careers with your Company through carefully designated management development programs and performance management systems. 2 Kotak Mahindra Prime Limited

4 Information Technology Your Company uses the operating system CORE which is owned and managed by Kotak Mahindra Bank Limited and is used for its retail assets division since 2003 and uses ORACLE as its Financial system. The CORE system has the latest technology platform and also has capacity to scale based on business requirements. The modular nature of the system supports efficiency in operations coupled with strong systems and operational controls. The system is robust to cater to efficient customer service and support marketing initiatives at reasonable cost. Cautionary Note Certain statements in the Management Discussion and Analysis section may be forward-looking and are stated as may be required by applicable laws and regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of future performance and outlook. Your Company does not undertake to update these statements. DIRECTORS Mr. C. Jayaram resigned as a Director of the Company with effect from 24th April Your Directors place on record their appreciation for the valuable advice and guidance rendered by him during his tenure as a Director. Mr. Uday Kotak, Mr. Mohan Shenoi and Mr. Jaimin Bhatt, retire by rotation at the Eighteenth Annual General Meeting and being eligible, have offered themselves for re-appointment. EXECUTIVE MANAGEMENT Mr. Vyomesh Kapasi is the Chief Executive Officer of your Company. The Members at the Extraordinary General Meeting of the Company held on 30th May 2013 had approved the re-appointment of Mr. Kapasi as Manager of the Company with effect from 1st June 2013 for a period of two years. COMMITTEES (a) AUDIT COMMITTEE The Audit Committee was re-constituted by the Board on 24th April 2013, with effect from 1st May 2013 and presently consists of Mr. Dipak Gupta, Mr. Arvind Kathpalia, Mr. Jaimin Bhatt, Mr. Narayan S.A. and Mr. Sumit Bali. The quorum comprises of any two members. The details of the meetings held and the attendance by the members of the Committee is detailed below: Name of Members of Committee Meetings held during the tenure of the member Meetings Attended during the year Mr. Dipak Gupta 5 5 Mr. Jaimin Bhatt 5 4 Mr. Arvind Kathpalia 5 2 Mr. K.V.S. Manian 1 1 Mr. Narayan S.A. 4 3 Mr. Sumit Bali 5 5 The First Tier Audit Committee comprises of Mr. Sumit Bali, Mr. Vyomesh Kapasi, Mr. Harish Shah and Ms. Suman Sidana. The Committee screens the matters entrusted to the Audit Committee and also the routine matters such as overseeing the programme of inspections and compliance of inspection reports. (b) REMUNERATION COMMITTEE The Remuneration Committee was re-constituted by the Board on 24th April 2013 and presently consists of Mr. Dipak Gupta and Mr. Narayan S.A. The Committee has been formed to approve the remuneration payable to the Whole-time Director/Manager of the Company, as required under the amended Part II in Section II of Schedule XIII of the Companies Act, The details of the meetings held and the attendance by the members of the Committee is detailed below: Name of Members of Committee Meetings held during the tenure of the member Meetings Attended during the year Mr. Dipak Gupta 2 2 Mr. Narayan S.A. 1 1 Mr. C Jayaram 1 1 Annual Report

5 (c) NOMINATION COMMITTEE The Nomination Committee was re-constituted by the Board on 24th April 2013 and presently consists of Mr. Uday Kotak, Mr. Dipak Gupta and Mr. Narayan S.A. During the year, one meeting of the Committee was held on 23rd April 2013 and was attended by all the three members. (d) COMMITTEE OF THE BOARD OF DIRECTORS The Committee of the Board of Directors was re-constituted by the Board on 24th April 2013 with effect from 1st May 2013 and presently consists of Mr. Dipak Gupta, Mr. Arvind Kathpalia, Mr. Narayan S.A. and Mr. Sumit Bali. The quorum comprises of any two members. The Committee looks into the routine transactions of Company which inter alia include authorizing opening, operation & closure of bank accounts of the Company, authorizing officials of the Company to execute various documents/agreements, issuing power of attorney for representing the Company in various Courts of Law and before various Statutory Authorities and borrowing of money within the delegated limit. The details of the meetings held and the attendance by the members of the Committee is detailed below: Name of Members of Committee Meetings held during the tenure of the member Meetings Attended during the year Mr. Dipak Gupta Mr. Arvind Kathpalia Mr. K.V.S. Manian 2 2 Mr. Narayan S.A Mr. Sumit Bali 26 9 (e) RISK MANAGEMENT COMMITTEE The Company has a two level structure for the Risk Management Committee. The Tier I level Committee consists of three members, namely Mr. Vyomesh Kapasi, Ms. Suman Sidana and Mr. Harish Shah. The quorum comprises of any two members. During the year, 4 meetings of the Tier I level Committee were held. Mr. Vyomesh Kapasi and Ms. Suman Sidana attended 4 meetings each and Mr. Harish Shah attended 1 meeting. The Tier II level (supervisory level) Committee was re-constituted by the Board on 24th April 2013 with effect from 1st May 2013 and presently consists of Mr. Arvind Kathpalia, Mr. Narayan S.A. and Mr. Sumit Bali. The quorum comprises of any two members. During the year, 4 meetings of the Tier II level Committee were held. Mr. Sumit Bali and Mr. Narayan S.A. attended 3 meetings each and Mr. Arvind Kathpalia attended 2 meetings. (f) ASSET LIABILITY COMMITTEE (ALCO) The ALCO was re-constituted by the Board on 24th April 2013 with effect from 1st May 2013 and presently consists of Mr. Mohan Shenoi, Mr. Narayan S.A., Mr. Vyomesh Kapasi and Ms. Suman Sidana. The quorum comprises of any three members. Members of ALCO meet every month to discuss various issues for the effective management of the assets and liabilities of the Company. The details of the meetings held and the attendance by the members of the Committee is detailed below: Name of Members of Committee Meetings held during the tenure of the member Meetings Attended during the year Mr. Narayan S.A Mr. Mohan Shenoi 14 9 Mr. K.V.S. Manian 1 1 Mr. Vyomesh Kapasi Ms. Suman Sidana (g) CREDIT COMMITTEE The Credit Committee was re-constituted by the Board on 24th April 2013 with effect from 1st May 2013 and presently consists Mr. Narayan S.A., Mr. Sumit Bali, Mr. Vyomesh Kapasi and Ms. Suman Sidana. The quorum comprises of any three members. The Committee scrutinizes and approves credit proposals up to such limit as specified in the Approval Authorities from time to time. 4 Kotak Mahindra Prime Limited

6 The details of the meetings held and the attendance by the members of the Committee is detailed below: Name of Members of Committee Meetings held during the tenure of the member Meetings Attended during the year Mr. Narayan S.A Mr. K.V.S. Manian 5 3 Mr. Sumit Bali Mr. Vyomesh Kapasi Ms. Suman Sidana AUDITORS The Company s auditors Messrs. Deloitte Haskins & Sells, Chartered Accountants, Baroda, retire at the Eighteenth Annual General Meeting and do not offer themselves for re-appointment. Messrs. Deloitte Haskins & Sells LLP, Chartered Accountants have consented to act as the Statutory Auditors of the Company. It is proposed to appoint Messrs. Deloitte Haskins & Sells LLP, Chartered Accountants as the Statutory Auditors of the Company in place of Messrs. Deloitte Haskins & Sells, Chartered Accountants, Baroda. STATUTORY INFORMATION The particulars of employees as required under Section 217 (2A) of the Companies Act, 1956, read with the Companies ( of Employees) Rules, 1975, is annexed. During the year under review, your Company did not accept any deposits from the public. There are no deposits due and outstanding as on 31st March Your Company s foreign exchange outgo was ` lakhs. It had no foreign exchange earnings. The other particulars prescribed under the Companies (Disclosure of in the Report of Board of Directors) Rules, 1988, are not applicable since your Company is not a manufacturing company. DIRECTORS RESPONSIBILITY STATEMENT Based on representations from the Operational Management, the Directors state, in pursuance of Section 217 (2AA) of the Companies Act, 1956, that: i) the Company has, in the preparation of the annual accounts for the year ended 31st March 2014, followed the applicable accounting standards along with proper explanations relating to material departures, if any; ii) iii) iv) 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 31st March 2014 and of the profit of the Company for the financial year ended 31st March 2014; the Directors have taken proper and sufficient care to the best of their knowledge and ability, for the 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 fraud and other irregularities; and the Directors have prepared the annual accounts on a going concern basis. ACKNOWLEDGEMENTS The Directors thank the shareholders, dealers and their staff for the strong support that they have continued to extend to your Company. The Board also takes this opportunity to place on record its appreciation of the outstanding performance and dedication of your Company s employees at all levels, without whose commitment, the achievement of results as indicated above could not have been possible. The Board also acknowledges the faith reposed in the Company by the Company s lending institutions. Mumbai, 23rd April 2014 For and on behalf of the Board of Directors Uday Kotak Chairman Annual Report

7 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF KOTAK MAHINDRA PRIME LIMITED Report on the Financial Statements We have audited the accompanying financial statements of KOTAK MAHINDRA PRIME LIMITED ( the Company ), which comprise the Sheet as at 31st March, 2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements The Company s 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 notified under the Companies Act, 1956 ( the Act ) (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs) and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal controls 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. Auditors 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 the 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 the internal controls 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, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the 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 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: (a) in the case of the Sheet, of the state of affairs of the Company as at 31st March, 2014; (b) (c) in the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date and in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. 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 in terms of Section 227(4A) 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) (b) (c) (d) (e) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. In 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. The 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. In our opinion, the Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards notified under the Act (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs). On the basis of the written representations received from the directors as on 31st March, 2014 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2014 from being appointed as a director in terms of Section 274(1)(g) of the Act. For DELOITTE HASKINS & SELLS Chartered Accountants (Firm Registration No W) Abhijit A Damle Partner Membership No MUMBAI, 23rd April, Kotak Mahindra Prime Limited

8 Annexure to the Independent Auditors Report (Referred to in paragraph 1 under Report on Other Legal and Regulatory Requirements section of our report of even date) (i) (ii) Having regard to the nature of the Company s business/activities/results during the year, clauses 4(ii), 4(viii), 4(x), 4(xiii), 4(xviii) and 4(xx) of paragraph 4 of the Order are not applicable to the Company. In respect of its fixed assets: (a) (b) (c) The Company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets. The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification. The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company. (iii) (a) The company has not granted any loan, secured or unsecured, to Companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, (b) (c) (d) In respect of loans, secured or unsecured, taken by the Company from companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956, according to the information and explanations given to us; the Company has borrowed secured loan of Rs.55,000 lakh (by way of issue of Non-Convertible Debentures) during the year from one party covered in the said register; the Company also has a Cash Credit facility with the said party. At the year-end, the outstanding balance of such loans taken was Rs.52,500 lakhs and the maximum amount involved during the year was Rs.81,166 lakhs. The rate of interest and other terms and conditions of such loans are, in our opinion, prima facie not prejudicial to the interests of the Company. The payments of principal amounts and interest in case of the aforesaid loan are as per stipulations. (iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of fixed assets and for the sale of services. The company does not purchase inventory nor does it sell goods in the ordinary course of business. During the course of our audit, we have not observed any major weakness in such internal control system. (v) In respect of contracts or arrangements entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us: (a) (b) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered in the Register maintained under the said Section have been so entered. Where each of such transaction is in excess of Rs.5 lakhs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time. (vi) According to the information and explanations given to us, the Company has not accepted any deposit from the public during the year. (vii) In our opinion, the Company has an adequate internal audit system commensurate with the size and the nature of its business. (viii) According to the information and explanations given to us, in respect of statutory dues: (a) (b) (c) The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-Tax, Sales Tax, Wealth Tax, Service Tax, Cess and other material statutory dues applicable to it with the appropriate authorities. There have been no dues payable in respect of Excise Duty and Customs Duty during the year. There were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-Tax, Sales Tax, Wealth Tax, Service Tax, Cess and other material statutory dues in arrears as at 31st March, 2014 for a period of more than six months from the date they became payable. According to the information and explanation given to us, there are no dues of Income-Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty and Cess which have not been deposited on account of any dispute. Details of dues of Sales Tax which have not been deposited on account of disputes are as below: (ix) Statute Nature of Dues Forum where dispute is pending Rajasthan Value Added Tax Act, 2003 Sales Tax, Interest and Penalty Deputy Commissioner (Appeals) Period to which the amount relates Amount involved (` In lakhs) AY to In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to banks, financial institutions and debenture holders. Annual Report

9 (x) In our opinion, the Company has maintained adequate documents and records where it has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xi) Based on our examination of the records and evaluations of the related internal controls, the Company has maintained proper records of the transactions and contracts in respect of its dealing in shares, securities, debentures and other investments and timely entries have been made therein. The aforesaid securities have been held by the Company in its own name. (xii) According to the information and explanations given to us, the Company has not given any guarantee for the loans taken by Others from banks or financial institutions during the year. (xiii) In our opinion and according to the information and explanations given to us, the term loans have been applied by the Company during the year for the purposes for which they were obtained, other than temporary deployment pending application. (xiv) In our opinion and according to the information and explanations given to us, and on an overall examination of the Sheet of the Company, we report that funds raised on short-term basis have, prima facie, not been used during the year for long-term investment. (xv) According to the information and explanations given to us, during the year covered by our audit report, the Company had issued Rs 515,543 lakh debentures of Rs.10,00,000/- each. The Company has created security in respect of the debentures issued. (xvi) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year, except that there have been instances of providing forged documents by few customers and misappropriation of funds by employees of collection agencies appointed by the Company. The aggregate amount on account of the above frauds is Rs lakhs. However, as informed to us, such instances are inherent in the nature of business of the Company. Adequate provision in respect thereof has been made in the accounts for the year. For DELOITTE HASKINS & SELLS Chartered Accountants (Registration No W) Abhijit A Damle Partner (Membership No ) MUMBAI, 23rd April, Kotak Mahindra Prime Limited

10 Sheet as at 31st March, 2014 Note No. As at A EQUITY AND LIABILITIES 1 Shareholders funds As at 31 March, 2013 (a) Share capital (b) Reserves and surplus 4 283, , Non-current liabilities 284, , (a) Long-term borrowings 5 540, , (b) Other long-term liabilities 6 8, , (c) Long-term provisions 7 2, , Current liabilities 550, , (a) Short-term borrowings 8 394, , (b) Trade payables 9 29, , (c) Other current liabilities , , (d) Short-term provisions 11 7, , ,095, ,034, TOTAL 1,930, ,875, B ASSETS 1 Non-current assets (a) Fixed assets (i) Tangible assets 12A 2, , (ii) Intangible assets 12B (b) Non-current investments 13 27, , (c) Deferred tax assets (net) , , (d) Long-term loans and advances , , (e) Other non-current assets 15 6, , , , Current assets (a) Current investments 16 54, , (b) Trade receivables (c) Cash and bank balances 18 77, , (d) Short-term loans and advances , , (e) Other current assets 20 18, , ,033, ,058, TOTAL 1,930, ,875, See accompanying notes forming part of the financial statements In terms of our report attached For DELOITTE HASKINS & SELLS Chartered Accountants For and on behalf of the Board of Directors Abhijit A Damle Partner Dipak Gupta Director Jaimin Bhatt Director Place : Mumbai Date : April 23, 2014 Harish Shah Company Secretary Annual Report

11 Statement of Profit and Loss for the year ended Note No. For the year ended For the year ended 31 March, Revenue from operations , , Other income 22 5, , Total revenue (1+2) 252, , Expenses (a) Employee benefits expense 23 5, , (b) Finance costs , , (c) Depreciation and amortisation expense 12C (d) Other expenses 25 25, , Total expenses 177, , Profit before tax (3-4) 75, , Tax expense: (a) Current tax expense 26, , (b) (Excess) / Short provision for tax relating to prior years (91.59) (c) Net current tax expense 26, , (d) Deferred tax credit (549.77) (684.98) 26, , Profit for the year (5-6) 49, , Earnings per share (of ` 10/- each): (a) Basic 27.6a 1, , (b) Diluted 27.6b 1, , See accompanying notes forming part of the financial statements In terms of our report attached For DELOITTE HASKINS & SELLS Chartered Accountants For and on behalf of the Board of Directors Abhijit A Damle Partner Dipak Gupta Director Jaimin Bhatt Director Place : Mumbai Date : April 23, 2014 Harish Shah Company Secretary 10 Kotak Mahindra Prime Limited

12 Cash Flow Statement for the year ended 31st March, Cash flows from operating activities Profit before tax 75, , Add/(Less) : Adjustment for Depreciation and amortization expense Loss / (Profit) on sale of current investments (498.96) (663.07) Loss on sale of long term investments Loss on buy back of debentures Dividend on long term investments (3.38) (3.73) Discount income on Certificate of Deposits (17.30) (91.22) Profit on sale of fixed assets (3.73) (3.39) Provision for long term employee benefits (64.45) Provision for short term employee benefits Provision for doubtful debts, receivables and advances 1, Provision for diminution in investments (419.00) 1, Provision for standard assets Operating profit before working capital changes 76, , Increase in Receivables under Financing Activity 3, (383,045.54) (Increase) / Decrease in Loans and Advances (11,632.19) Increase in Current Liabilities 11, , Cash used in operations 79, (312,295.50) Income Tax paid (net of refunds) (26,072.00) (20,119.08) Net cash used in operating activities A 53, (332,414.58) Cash flows from investing activities Purchase of Fixed assets (177.54) (383.73) Sale of Fixed assets Dividend on long term investments Discount income on Certificate of Deposits Application money pending allotment (90.66) - Purchase of Investments (4,144,035.65) (3,156,885.80) Sale of Investments 4,155, ,134, Net cash used in investing activities B 10, (22,884.18) Annual Report

13 Cash Flow Statement for the year ended 31st March, Cash flows from financing activities Increase in Non convertible debentures 134, , Increase in Short term borrowings (25,918.72) 90, Decrease in Bank borrowings (115,119.95) (770.60) Dividend paid and Corporate Dividend Tax on equity and preference shares (36.23) (11.62) Net cash from financing activities C (6,094.44) 295, Net (decrease) / increase in cash and cash equivalents A+B+C 57, (59,527.24) Cash and cash equivalents at the beginning of the year 19, , Cash and cash equivalents at the end of the year 77, , Notes: 1. Cash and cash equivalents as per Note 18 - Cash and Bank balances 2. The Cash Flow Statement has been prepared under the Indirect Method as set out in the Accounting Standard - 3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. 3. The previous year s figures have been regrouped wherever necessary in order to conform to this year s presentation. In terms of our report attached For DELOITTE HASKINS & SELLS Chartered Accountants For and on behalf of the Board of Directors Abhijit A Damle Partner Dipak Gupta Director Jaimin Bhatt Director Place : Mumbai Date : April 23, 2014 Harish Shah Company Secretary 12 Kotak Mahindra Prime Limited

14 Note 1 - CORPORATE INFORMATION Kotak Mahindra Prime Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, The Company is registered as a Non-Banking Financial Company with Reserve Bank of India. The Company is primarily engaged in financing of passenger cars and multi-utility vehicles for retail customers and inventory and term funding to car dealers. The Company also provides finance for loans against securities, personal loans, corporate loans and developer funding. Note 2 - SIGNIFICANT ACCOUNTING POLICIES a) BASIS OF ACCOUNTING AND PREPARATION OF FINANCIAL STATEMENTS The Financial Statements have been prepared on historical cost basis of accounting. The company adopts the accrual system of accounting. The Financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 ( the 1956 Act ) (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 ( the 2013 Act ) in terms of General Circular 15/2013 dated 13 September, 2013 of the Ministry of Corporate Affairs) and the relevant provisions of the 1956 Act/ 2013 Act, as applicable and the guidelines issued by the Reserve Bank of India (RBI) for Non-Banking Financial Companies. b) USE OF ESTIMATES The preparation of financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. c) CASH FLOW STATEMENT Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. d) REVENUE RECOGNITION i. Auto Finance Income (including service charges, incentives) is accounted for by using the internal rate of return method to provide a constant periodic rate of return after adjustment of brokerage expenses on the net investment outstanding on the contract. The volume-based incentives and brokerage are accounted as and when the said volumes are achieved. Income also includes gains made on termination of contracts. ii. iii. iv. The profit on account of securitisation of assets at the time of sale computed based on the difference between the sale consideration and the book value of the securitised asset is amortised over the tenure of the securities issued. Loss on account of securitisation of assets is charged off immediately to Statement of Profit and Loss. Gain on account of assignment of assets on bilateral basis is recognised, based on the difference between the book value of the assigned assets and sale consideration received. In respect of non performing assets acquired from other banks / NBFCs / Financial Institutions / Companies, collections in excess of the consideration paid for acquisition at each asset level is treated as income. v. Interest income is recognised on accrual basis except in case of non-performing assets where it is recognised, upon realisation, as per RBI guidelines. Overdue/ penal interest is recognised as income on realisation. vi. vii. Fees and commission income are recognised when due. Dividend income is accounted on an accrual basis when the Company s right to receive the dividend is established. e) FIXED ASSETS AND INTANGIBLE ASSETS i. All the fixed assets have been stated at cost inclusive of incidental expenses less accumulated depreciation / amortization. ii. The Company adopts the Straight Line Method of depreciation / amortization so as to write off 100% of the cost of the assets at rates higher than those prescribed under Schedule XIV to the Companies Act, 1956 based on the Management s estimate of the useful lives of all the assets. Estimated useful lives over which assets are depreciated / amortized are as follows: Computers Office Equipment Furniture and Fixtures Vehicles Premises Leasehold Improvements Software (including development) expenditure 3 years 5 years 6 years 4 years 58 years Over the period of lease subject to a maximum of 6 years 3 years Annual Report

15 iii. Depreciation on assets whose cost does not exceed Rs.5,000/- is fully provided in the year of purchase. f) INVESTMENTS Investments are classified into long term investments and current investments. Investments which are intended to be held for more than one year, are classified as long term investments and investments, which are intended to be held for less than one year, are classified as current investments. Long term investments are accounted at cost and any decline in value, other than temporary is provided for. Current investments are valued at cost (calculated by applying weighted average cost method) or fair value whichever is lower. Brokerage, stamping and additional charges paid are included in the cost of investments. In case of investments in units of mutual fund, the net asset value is considered as the fair value. g) EMPLOYEE BENEFITS i. Provident Fund Defined Contribution Plan Contribution as required by the Statute made to the Government Provident Fund is debited to the Statement of Profit and Loss. ii. Gratuity Defined Benefit Plan The Company accounts for the liability for future gratuity benefits based on an actuarial valuation. During the year, the Company made contribution to a Gratuity Fund administered by trustees and managed by Kotak Mahindra Old Mutual Limited, fellow subsidiary. The net present value of the Company s obligation towards the same is actuarially determined based on the projected unit credit method as at the Sheet date. iii. iv. Actuarial gains/losses are immediately recognised in the Statement of Profit and Loss. Compensated Absences - Other Long-Term Employee Benefits The Company accrues the liability for compensated absences based on the actuarial valuation as at the balance sheet date conducted by an independent actuary. The net present value of the Company s obligation is determined based on the projected unit credit method as at the Sheet date. v. Other Employee Benefits The undiscounted amount of employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include performance incentives. h) EMPLOYEE STOCK OPTION SCHEME Cash-settled scheme The cost of cash-settled scheme (stock appreciation rights) is measured initially using intrinsic value method at the grant date taking into account the terms and conditions upon which the instruments were granted. This intrinsic value is amortised on a straight-line basis over the vesting period with a recognition of corresponding liability. This liability is remeasured at each balance sheet date up to and including the settlement date with changes in intrinsic value recognised in Statement of Profit and Loss in Payments to and provisions for employees. i) FOREIGN CURRENCY TRANSACTIONS Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction. Monetary items denominated in foreign currencies are restated at the exchange rate prevailing on the balance sheet date. Exchange differences arising on settlement of the transaction and on account of restatement of monetary items are dealt with in the Statement of Profit and Loss. In case of items which are covered by forward exchange contracts entered to hedge the foreign currency risk, the difference between the year end rate and the rate on the date of the contract is recognized as exchange difference and the premium paid on forward contracts is recognized over the life of the contract. j) DISCOUNTED INSTRUMENTS The liability is recognised at face value at the time of issuance of discounted instruments. The discount on the issue is amortised over the tenure of the instrument. k) TAXES ON INCOME The Income Tax expense comprises Current tax and Deferred tax. Current tax is measured at the amount expected to be paid in respect of taxable income for the year in accordance with the Income tax Act, Deferred tax adjustments comprises of changes in the deferred tax assets and liabilities. Deferred tax assets and liabilities are recognised for the future tax consequences of 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 and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted before the balance sheet date. Changes in deferred tax assets / liabilities on account of changes in enacted tax rates are given effect to in the Statement of Profit and Loss in the period of change. The carrying amount of deferred tax assets are reviewed at each balance sheet date. Deferred tax assets on account of timing 14 Kotak Mahindra Prime Limited

16 differences 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. l) SERVICE TAX The Cenvat (Central Value Added Tax) in respect of service tax is accounted on accrual basis on eligible services. The balance of cenvat credit is reviewed at the end of each year and amount estimated to be unutilised is charged to the Statement of Profit and Loss for the year. m) BORROWING COST Borrowing costs are recognised as an expense in the period in which they are incurred. n) DERIVATIVE TRANSACTIONS The derivative transactions comprising of Interest rate swaps, equity index / stock futures and Options are considered off balance sheet items. Interest rate / Currency swaps The outstanding swap trades at the reporting date are disclosed at the contract amount. The swaps which are in the nature of hedges are accounted on an accrual basis. Accrued interest is adjusted against the interest cost/income of the underlying liability/asset. The foreign currency balances on account of principal of currency swaps outstanding as at the Sheet date are revalued using the closing rate. Currency options The outstanding Option trades, in the nature of hedge, at the Sheet date are disclosed at revalued amount using the closing exchange rate. The premium paid is amortised over the life of the contract. Embedded Derivatives and Equity Index Derivatives Initial Margin - Index Derivative Instrument representing the initial margin paid and /or additional margin paid over and above the initial margin, for entering into contracts for equity index futures, which are released on final settlement / squaring up of the underlying contracts, are included under Other Current Assets. Deposit for Mark to Market Margin - Index Derivative Instrument representing the deposit paid in respect of mark to market margin is included under Other Current Assets. On final settlement or squaring up of contracts for equity index derivatives, the realised profit or loss after adjusting the unrealized loss already accounted, if any, is recognised in the Statement of Profit and Loss and shown as realised profit / (loss) on index derivatives. When more than one contract in respect of the relevant series of equity index futures to which the squared-up contract pertains is outstanding at the time of the squaring-up of the contract, the contract price of the contract so squared-up is determined using the weighted average cost method for calculating the profit/loss on squaring-up. derivative contracts are measured at fair value as at each balance sheet date. Fair value of derivatives is determined using quoted market prices for that instrument wherever available, as the best evidence of fair value is a quoted price in an actively traded market. In the absence of quoted market prices in an actively traded market, a valuation technique is used to determine fair value. In most cases valuation techniques use as input parameters observable market data in order to ensure reliability of the fair value measure. The mark to market on derivative contracts is determined on a portfolio basis with net unrealized losses being recognised in Statement of Profit and Loss. Net unrealized gains are not recognised in Statement of Profit and Loss on grounds of prudence as enunciated in Accounting Standard 1 Disclosure of Accounting Policies. o) STRUCTURED LIABILITIES The Company has issued structured liabilities wherein the return on these liabilities is linked to non-interest benchmarks; these liabilities are stated at net present value. Such structured liabilities have an embedded derivative which is the non-interest related return component. The embedded derivative is separated and accounted separately. (Refer accounting policy on Derivative Transactions No. n) The resultant debt component of such structured liabilities is recognised in the Sheet under borrowings and is measured at amortised cost using yield to maturity basis. p) STOCK IN TRADE Securities held as Stock-in-trade are valued at cost or market value, whichever is lower. On sale of stock in trade, profit or loss is determined using weighted average cost method. q) ADVANCES Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the RBI guidelines and are stated net of provisions made towards non-performing assets. Provision for non-performing assets comprising sub-standard, doubtful and loss assets is made in accordance with the RBI guidelines. In addition, the Company adopts an approach to provisioning that is based on the past experience, realisation of security, erosion over time in value of security and other related factors. Annual Report