DIRECTORS' REPORT Dear Shareowners, Your Directors have pleasure in presenting the 29th Annual Report and the audited financial statement for the financial year ended March 31, 2015. Financial Performance The Company's gross income for the financial year ended March 31, 2015 increased to Rs. 3,988 crore, from Rs. 3,254 crore in the previous year, increase of 23 per cent. The operating profit (PBDIT) of the Company increased by 16 per cent to Rs. 3,232 crore during the year, from Rs. 2,777 crore, in the previous year. Interest expenses for the year increased by 3 per cent to Rs. 2,357 crore from Rs. 2,279 crore, in the previous year. Depreciation was at Rs. 31 crore as against Rs. 34 crore in the previous year. The net profit for the year increased by 85 per cent to Rs. 757 crore from Rs. 409 crore, in the previous year. An amount of Rs. 151 crore was transferred to the Statutory Reserve Fund pursuant to Section 45-IC of the Reserve Bank of India Act, 1 934, and a net amount of Rs. 76 crore was transferred to the General Reserve during the year under review. Dividend Your Directors have recommended a dividend of Rs. 9.00 (90 per cent) per equity share each of Rs. 10 aggregating to Rs. 257 crore (inclusive of dividend tax) for the financial year ended March 31, 2015, which, if approved at the ensuing 29th Annual General Meeting (AGM), will be paid to (i) all those equity shareholders whose names appear in the Register of Members as on September 18, 2015, and (ii) to those whose names appear as beneficial owners, as on September 18, 2015 as furnished by the National Securities Depository Limited and Central Depository Services (India) Limited forthe purpose. The Dividend payout as proposed is in accordance with the Company's policy of paying sustainable dividend linked to long term performance, keeping in view of the capital needs of the Company's growth plans and desire to achieve optimal financing of such plans through internal accruals. Management Discussion and Analysis Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India is presented in a separate section forming part of this Annual Report. Strategic Alliance and Preferential Allotment of Shares Your Company and Sumitomo Mitsui Trust Bank (the "SMTB") have been evaluating a strategic alliance for the establishment of a Universal Bank. SMTB is a company incorporated and registered in Tokyo, Japan, with business operations in Japan, Singapore and the United States. SMTB offers a broad range of banking and financial services and consulting services. The central focus of SMTB's business is on various banking services outside India. Sumitomo Mitsui Trust Bank is core part of Sumitomo Mitsui Trust Group of Japan which is the fourth largest bank in Japan. The Company and SMTB have agreed to explore and engage on collaborating in a variety of areas of potential synergies and mutual benefits in respect of the current lines of business operations and specifically for the establishment of the Universal Bank. The Company has as a part of strategic alliance with SMTB and in accordance with the provisions of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, allotted on a Preferential basis 70,00,000 equity shares of face value of Rs. 10 each at a premium of Rs. 520 per share aggregating to Rs. 371 crore to SMTB. Resources and Liquidity The Company's Net Worth as on March 31, 2015, stood at Rs. 12,387 crore. The Company has raised Rs. 24,490 crore during the financial year 2014-15 by issuance of Commercial Paper, Non-Convertible Debentures (NCDs) and other money market instruments. The Company has also raised Rs. 250 crore by way of Unsecured Subordinated Non Convertible Debentures (Tier II Bonds) to augment the Capital Adequacy Ratio. The funds were deployed in providing commercial finance and other business requirement. RCL's debt equity ratio as on March 31, 2015 stood at 1.76:1. Capital Adequacy Ratio Your Company's Capital to Risk Assets Ratio (CRAR) calculated in line with the Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 ("RBI Directions") stood at 23.87 per cent, well above the regulatory minimum of 15 per cent. Your Company's asset size is Rs. 35,702 crore. The Company has received a certificate from the Auditors of the Company, M/s. Chaturvedi & Shah, Chartered Accountants and M/s. B S R & Co. LLP, Chartered Accountants, pursuant to Non-Banking Financial Companies Auditors' Report (Reserve Bank) Directions, 2008, confirming compliance of the conditions with respect to Systemically Important Non-Deposit taking Non-Banking Financial Companies. Deposits The Company has neither accepted nor renewed any fixed deposits during the year. There are no unclaimed deposits, unclaimed / unpaid interest, refunds due to the deposit holders or to be deposited to the Investor Education and Protection Fund as on March 31, 2015. Particulars of Loans, Guarantees or Investments Pursuant to Section 186(11) of the Companies Act, 2013 loans made, and acquisition of securities by a Non-Banking Financial Company in the ordinary course of its business are exempted from disclosure in the Annual Report. Subsidiary and Associate companies During the year under review, Reliance Alternative Investments Services Private Limited, Reliance Asset Management (Malaysia) Sdn. Bhd., Reliance Composite Insurance Broking Limited, Reliance Consultants (Mauritius) Limited, Reliance Equity Advisors (India) Limited, Quant Capital Advisors Private Limited, Quant Commodities Private Limited and Indian Agri Services Private Limited ceased to be subsidiaries of the Company. The performance and financial position of the major subsidiary companies are presented in Management Discussion and Analysis Report forming part of this Annual Report. Also, a report on the performance and financial position of each of the subsidiary companies and associate companies as per the Act is provided in the consolidated financial statement. The Policy for determining material subsidiary companies may be accessed on the Company's website at <http://www.reliancecapital.co.in/pdf/Policy_for_> Determining_Material_Subsidiary.pdf. Consolidated Financial Statement The Audited Consolidated Financial Statement for the financial year ended March 31, 2015, based on the financial statement received from subsidiary companies and associate companies, as approved by their respective Board of Directors have been prepared in accordance with Accounting Standard (AS) - 21on 'Consolidated Financial Statements' read with AS-23 on 'Accounting for Investments in Associates', notified under the Act, read with the Accounting Standards Rules as applicable. Directors During the year under review, in terms of the provisions of Act, the Company appointed Shri Rajendra P. Chitale, Shri V. N. Kaul and Dr. Bidhubhusan Samal as Independent Directors of the Company for a period of 5 years w.e.f. September 30, 2014. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges. The details of programme for familiarization of Independent Directors with the Company, nature of the industry in which the Company operates and related matters are put up on the website of the Company at the link <http://www.reliancecapital.co.in/cg_> policies.html. Smt. Chhaya Virani was appointed as a Women Director, liable to retire by rotation w.e.f. September 30, 2014 and designated as an Independent Director of the Company for a period of 5 years w.e.f. May 29, 2015. In terms of the provisions of the Companies Act, 2013, Shri Amitabh Jhunjhunwala, Director of the Company, retires by rotation and being eligible, offers himself for re-appointment at the ensuing AGM. Shri Soumen Ghosh, CEO was appointed as an Executive Director & Group CEO for a period of 5 years commencing from May 29, 2015. A brief resume of Shri Amitabh Jhunjhunwala, Smt. Chhaya Virani and Shri Soumen Ghosh, Directors, nature of expertise in specific functional areas and names of the companies in which they holds directorship and / or membership / chairmanships of Committees of the respective Boards, shareholding and relationship between directors inter se as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is given in the section on Corporate Governance Report forming part of this Annual Report. Key Managerial Personnel During the year, Shri Soumen Ghosh, Chief Executive Officer, Shri Amit Bapna, Chief Financial Officer and Shri V. R. Mohan, President & Company Secretary were designated as the Key Managerial Personnel of the Company as per requirements of the Act. Shri Soumen Ghosh, CEO to the Board of the Company has been appointed as an Executive Director & Group CEO, with effect from May 29, 2015 and upon his appointment Shri V. R. Mohan ceased to hold the office of Manager. Evaluation of Directors, Board and Committees The Company has devised a policy for performance evaluation of the individual directors, Board and its Committees, which includes criteria for performance evaluation. Pursuant to the provisions of the Act and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of the Committees of the Board. The Board performance was evaluated based on inputs received from all the Directors after considering criteria such as Board composition and structure, effectiveness of Board / Committee processes, and information provided to the Board, etc. A separate meeting of the Independent Directors was also held during the year for the evaluation of the performance of non-independent Directors, performance of the Board as a whole and that of the Chairman. The Nomination and Remuneration Committee has also reviewed the performance of the individual directors based on their knowledge, level of preparation and effective participation in Meetings, understanding of their roles as directors, etc. Policy on appointment and remuneration for directors, key managerial personnel and senior management employees The Nomination and Remuneration Committee of the Board has devised a policy for selection and appointment of Directors, Key Managerial Personnel and Senior Management Employees and their Remuneration. The Committee has formulated the criteria for determining qualifications, positive attributes and independence of a Director, which has been put up on the Company's website. The policy on the above is attached as Annexure - A. Directors' Responsibility Statement Pursuant to the requirements under Section 134(5) of the Act with respect to Directors' Responsibility Statement, it is hereby confirmed that: i. In the preparation of the annual financial statements for the financial year ended March 31, 2015, the applicable Accounting Standards had been followed along with proper explanation relating to material departures, if any; ii. The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profit of the Company for the year ended on that date; iii. The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. The Directors had prepared the annual financial statements for the financial year ended March 31, 2015 on a 'going concern' basis; v. The Directors had laid down proper internal financial controls to be followed by the Company and such financial controls are adequate and are operating effectively; and vi. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. Contracts and Arrangements with Related Parties All contracts/ arrangements/ transactions entered into/ by the Company during the financial year under review with related parties were on an arm's length basis and in the ordinary course of business. There were no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons, which may have a potential conflict with the interest of the Company at large. All Related Party Transactions were placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee was obtained for the transactions which were of a repetitive nature. The transactions entered into pursuant to the omnibus approval so granted were reviewed and statements giving details of all related party transactions were placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis. The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website at the link <http://www.reliancecapital.co.in/pdf/Policy_for_Related_> Party_Transaction.pdf. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company. Material Changes and Commitments if any, affecting the financial position of the Company There was no material change and commitment which materially affect the financial position of the Company occurred between the financial year ended on March 31, 2015 and the date of this report. Meetings of the Board A calendar of Meetings is prepared and circulated in advance to the Directors. During the year, eight Board Meetings were held, details of which are given in the Corporate Governance Report. Audit Committee The Audit Committee of the Board consists of Independent Directors namely Shri Rajendra P. Chitale, Chairman, Dr. Bidhubhusan Samal, Shri V. N. Kaul and Non Independent Director Shri Amitabh Jhunjhunwala as members. During the year, all the recommendations made by the Audit Committee were accepted by the Board. Auditors and Auditors' Report M/s. Chaturvedi & Shah, Chartered Accountants and M/s. B S R & Co. LLP, Chartered Accountants, the Auditors of the Company hold office until the conclusion of the ensuing AGM and are eligible for re-appointment. The Company has received letters from M/s. Chaturvedi & Shah, Chartered Accountants and M/s. B S R & Co. LLP, Chartered Accountants; to the effect that their appointment, if made, would be within the prescribed limits under Section 141(3) of the Act and that they are not disqualified from appointment as statutory auditors of the Company. The observations and comments given by the Auditors in their report read together with notes on financial statements are self explanatory and hence do not call for any further comments under Section 134 of the Act. Secretarial Audit Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors had appointed M/s Aashish K. Bhatt & Associates, Practicing Company Secretaries, to undertake the Secretarial Audit of the Company. There is no qualification, reservation or adverse remark made in their Secretarial Audit Report. The Audit Report of the Secretarial Auditor is attached as Annexure - B. Extract of Annual Return Extract of the Annual Return of the Company in form MGT-9 is attached as Annexure - C. Employees Stock Option Scheme During the year under review, the Company has not granted any Options to the employees of the Company. Employees Stock Option Scheme (ESOS) was approved and implemented by the Company and Options were granted to the employees under ESOS Plan A and Plan B in accordance with earlier guidelines applicable to ESOS. The ESOS Compensation Committee of the Board monitors the Scheme. The existing ESOS Scheme and Plans are in compliance with the Securities and Exchange Board of India (Share based employee benefits) Regulations, 2014 (SEBI Regulations). Particulars of Employees and related disclosures In terms of the provisions of Section 197 of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annexure to the Directors' Report. However, having regard to the provisions of Section 136 of the Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. The said information is available for inspection at the registered office of the Company on all working days, except Saturdays between 11:00 A.M. and 1:00 P.M. up to the date of the meeting and any member interested in obtaining the same may write to the Company Secretary. Upon such request the information shall be furnished. Disclosures relating to the remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in Annexure - D. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo As the Company is a non-banking financial company and does not involve in any manufacturing activity, most of the information as required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 are not applicable. However, the information as applicable has been given in Annexure - E forming part of this Report. Corporate Governance The Company has adopted "Reliance Group-Corporate Governance Policies and Code of Conduct" which sets out the systems, process and policies conforming to the international standards. The report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, forms part of this Annual Report. A Certificate from the auditors of the Company M/s. Chaturvedi & Shah, Chartered Accountants and M/s. B S R & Co. LLP, Chartered Accountants conforming compliance to the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement, is enclosed to this Report. Vigil Mechanism In accordance with Section 177 of the Act and the Listing Agreement, the Company has formulated a Vigil Mechanism to address the genuine concerns, if any of the directors and employees. The details of the same have been stated in the Report on Corporate Governance and the policy can also be accessed on the Company's website. Risk Management The Company has laid down a robust Risk Management Policy, defining Risk profiles involving Strategic, Technological, Operational, Financial, Organisational, Legal and Regulatory risks within a well defined framework. The Risk management Policy acts as an enabler of growth for the Company by helping its businesses to identify the inherent risks, assess, evaluate and monitor these risks continuously and undertake effective steps to manage these risks. A Risk Management Committee (RMC) consisting of Shri V. N. Kaul, Chairman and Smt. Chhaya Virani and Shri Soumen Ghosh as members, periodically reviews the robustness of the Risk Management Policy. The periodical update on the risk management practices and mitigation plan of the Company and subsidiaries are presented to the Audit Committee and Board of Directors. The Audit Committee and Board periodically review such updates and findings and suggest areas where internal controls and risk management practices can be improved. Asset Liability Committee (ALCO) consisting of senior management executives, monitors liquidity and interest rate risks of the Company. The functioning of ALCO is reviewed by the RMC which meets on quarterly basis and reports to the Board of Directors. Compliance with provisions of Sexual Harassment of Women at workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company is committed to uphold and maintain the dignity of woman employees and it has in place a policy which provides for protection against sexual harassment of women at work place and for prevention and redressal of such complaints. During the year no such complaints were received. Corporate Social Responsibility The Company has constituted Corporate Social Responsibility Committee in compliance with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules 2014. The Corporate Social Responsibility Committee has formulated a Corporate Social Responsibility Policy (CSR policy) indicating the activities to be undertaken by the Company. The CSR policy may be accessed on the Company's website at the link; <http://www.reliancecapital.co.in/pdf/Group_CSR_Policy_> Document.pdf. The CSR Committee consists of Dr. Bidhubhusan Samal as Chairman, Shri Amitabh Jhunjhunwala and Shri V. N. Kaul, Directors as members. The disclosures with respect to CSR activities is given in Annexure - F. Order, if any, passed by regulator or courts or tribunals No orders have been passed by the regulators or courts or tribunals impacting the going concern status and the Company's operations. Internal Financial Controls and their adequacy The Company has in place adequate internal financial controls across the organization. The same is subject to review periodically by the internal audit cell for its effectiveness. During the year, such controls were tested and no reportable material weakness in the design or operation were observed. Business Responsibility Statement SEBI vide its Circular CIR/CFD/DIL/8/2012 dated August 13, 2012, has mandated the top 100 listed entities, based on market capitalisation on BSE Limited and National Stock Exchange of India Limited at March 31, 2012, to include Business Responsibility Report ("BRR") as part of the Annual Report. In view of FAQ's issued by SEBI, the BRR has been uploaded on the website of the Company at www.reliancecapital.co.in Any shareholder interested in obtaining physical copy of BRR may write to the Company Secretary at the Registered Office of the Company. Acknowledgement Your Directors would like to express their sincere appreciation for the co-operation and assistance received from shareholders, debenture holders, debenture trustee, bankers, financial institutions, regulatory bodies and other business constituents during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the commitment displayed by all executives, officers and staff, resulting in the successful performance of the Company during the year. For and on behalf of the Board of Directors Anil Dhirubhai Ambani Chairman Date : May 29, 2015 |