DIRECTORS' REPORT Dear Members Your Directors present the 30th Annual Report of your Company together with the Audited Annual Accounts for the financial year ended 31st March, 2015. ? Operating Highlights During the year under review total Income of the Company is Rs. 23,274,126.20 as against Rs. 44,511,712.78 in the previous year. The Company incurred a profit of Rs. 175,078.07 after taxes. Your Directors are putting in their best efforts to improve the performance of the Company. Company's Affairs Sonal Mercantile Limited (registered with the Reserve Bank of India (RBI) as a Non-Banking Financial Company), engaged mainly, in the business of providing Secured and Unsecured Loans & Advances and investing in securities, both quoted and unquoted. The Company offers specialized solutions for meeting specific liquidity requirements with technical insights into capital markets. Material changes and commitments affecting the financial position of the Company after the close of financial year Save as mentioned else where in this Report, no material changes and commitments affecting the financial position of the Company has occurred between the end of the financial year of the Company- 31st March, 2015 till the date of this report. Change In The Nature Of Business There were no changes in the nature of the Business during the Financial Year ended 31st March, 2015. Dividend In view of marginal profits made by the Company, your Directors regret their inability to recommend any dividend for the financial year 2014-15. Share Capital There is no change in the Equity Share Capital of the Company during the financial year under review. Fixed Deposits The Company has not accepted any fixed deposit during the year under review falling within the purview of Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014. Successful Listing on BSE Limited As you know the shares of the Company are listed on Delhi Stock Exchange and in the meantime the Company's shares have also been listed on BSE Limited Board of in February, 2015 under Direct Listing Route. The Company has already paid listing fees for the financial year 2015-16 to the BSE Limited and no annual fees is required to pay Delhi Stock Exchange as the DSE is being a operational stock exchanges and no demand has been made by DSE for annual fees for the financial year 2015-16. Particulars of Loans, Guarantees or Investments Under Section 186 Particulars of Loans and Guarantees are provided in the financial statements (please refer the Note 12 to the financial Statements). Internal Control Systems and Their Adequacy The Company has adequate system of internal control to safeguard and protect from loss, unauthorized use for disposition of its assets. All the transactions are probably authorised, recorded and reported to the Management. The Company is following all applicable accounting standards for properly maintaining the books of accounts and reporting financial statements. The internal Auditor of the company checks and verifies internal control and monitors them in accordance with policy adopted by the company. The Company continues to ensure proper and adequate systems and procedures commensurate with its size and nature of business. Transfer to Reserves As the company has not declared any dividend, therefore, the Company has not proposes to carry any sum to the General Reserves of the Company for the period under consideration. The Company has transferred an amount of Rs. 35,016 to the General Reserve put of current year's profits and the same is in compliance with the applicable provisions prescribed under the Special reserves u/s 45-IC of the RBI Act,1934. Industrial relations: During the year under review, your Company enjoyed cordial relationship with employees at all levels. DIRECTORS • Number of Meetings of the Board During the year Twenty Two Board Meetings were convened and held, details of which are provided in the Corporate Governance Report. The intervening gap between the Meetings was in compliance with the Companies Act, 2013. • Policy on Directors' Appointment and Remuneration The current policy is to have a appropriate mix of Executive and Independent directors to maintain the independence of the board, separate its function of Governance and Management. As on March 31, 2015, the Board consists of 6 members, two of whom are executive or whole time directors, and other three are independent Directors. The Board periodically evaluates the need for change in its composition and its size. The policy of the company on directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Sub-section (3) of Section 178 of the companies Act, 2013, adopted by the Board, is appended as "Annexure A" to the Board's Report. We affirm that remuneration paid to the directors is as per the terms laid out in the remuneration policy of the company. • Declaration by Independent Directors All independent directors have given declarations under section 149(7) of the Companies Act, 2013 that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and clause 49 of the Listing Agreement. • Board Evaluation Clause 49 of the listing agreement mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the board on its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the directors and the board as a whole was conducted based on the criteria and frame work adopted by the Board. The evaluation process has been explained in this Annual report. The Board approved the evaluation results as collated by the nomination and remuneration committee. None of the independent directors are due for re-appointment. • Familiarization Programme For Independent Directors Every new independent directors of the board attends an orientation program. To familiarize the new inductees with the strategy, operations and functions of our Company, the executive directors/ senior managerial personnel make presentations to the inductees about the Company's strategy, operations, product and service offerings, markets, software delivery, organization structure, finance, human resources, technology, quality, facilities and risk management. Further, at the time of appointment of an independent director, the Company issues a formal letter of appointment outlining his/her role, function, duties and responsibilities as a director. The format of the letter of appointment is available on our website. • Inductions During the year under review, Pursuant to the provisions of the Companies Act, 2013 and rules made there under and in compliance of Listing Agreement, Ms. Rukhsana was appointed as the Independent Director of the Company. • Retirement/Re-appointment To appoint Director in place of Mr. Deep Chand Singhal (DIN: 00815681) who retires by rotation & being eligible offers himself for reappointment. None of Independent Directors will retire at the ensuing Annual General Meeting. • Resignation During the year under review, Mr. Anil Kumar Goyal resigned from the Directorship of the Company. The Board hereby places on record his valuable contribution towards the growth and development of the company during his tenure as director of the Company. • Disclosure Of Relationships Between Directors Inter-Se Mr. Deep Chand Singhal and Mr. Sunil Kumar are directly related to each other. As they both are Brothers. • Details of Key Managerial Personnel The following 3 persons were formally appointed/ designated as Key Managerial Personnel of the Company in compliance with the provisions of Section 203 of the Companies Act, 2013. 1. Mr. Sunil Kumar - Whole-Time Director 2. Ms. Deepika Rathore- Company Secretary 3. Ms. Anjali Aggarwal- Chief Financial Officer • Committees Of The Board Currently, the Board has Four Committees; the Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Risk Management Committee. A detailed note on the Board and its committees is provided under the Corporate Governance report section in this annual report. • Director's Responsibility Statement In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state that: i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departure. ii) The directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for the year under review. iii) The directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. iv) The directors have prepared the annual accounts on a going concern basis. v) The directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. vi) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively. ? Subsidiary Companies The Company does not have any subsidiary. ? Code Of Conduct The Board of Directors has approved a Code of Conduct which is applicable to members of the Board and all employees in the course of day to day business operations of the company. The Code has been placed on the Company's website www.sonalmercantile.com. The Code lays down the standard procedure of business conduct which is expected to be followed by the directors and the designated employees in their business dealings and in particular on matters relating to integrity in the work place, in business practices and in dealing with stakeholders. All the Board Members and the Senior Management personnel have confirmed compliance with the Code. ? Details of Establishment of Vigil Mechanism/ Whistle Blower Policy For Directors And Employees In order to ensure that the activities of the company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism, honesty, integrity and ethical behavior of the company has adopted a vigil mechanism policy. The aim of the policy is to provide adequate safeguards against victimization of whistle blower who avails of the mechanism and also provide direct access to the Chairman of audit Committee, in appropriate and exceptional cases. Accordingly, 'whistle Blower policy' has been formulated with a view to provide a mechanism for the Directors and employees of the Company to approach the Ethics Counselor or the Chairman of the audit Committee of the Company. The purpose of this policy is to provide a framework to promote responsible and secure whistle blowing. It protects employees willing to raise a concern about irregularities within the Company. This policy is also posted on the website of the company. The whistleblower policy is appended as "Annexure B" to the Board's report. Business Risk Management And Policy Pursuant to section 134 (3) (n) of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the company has constituted a risk management committee. The details of the committee and its terms of reference are set out in the corporate governance report forming part of the Annual report. The Company has implemented Risk Management Policy ("Annexed as Annexure C") and the Board of Directors has prepared a comprehensive framework of risk management for assessment of risks and to determine the responses to these risks so as to minimize their adverse impact on the organization. The policy as approved by the Board of Directors is uploaded on Company's website. ? Prevention of Insider Trading The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and certain designated employees of the Company. The Code requires pre-clearance for dealing in the Company's shares and prohibits the purchase or sale of Company shares by the Directors and designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the trading window is closed. The Board is responsible for implementation of the Code. All Board Directors and the designated employees have confirmed compliance with the Code. ? AUDITORS • Statutory Auditors As per the provisions of Section 139 of the Act, no listed company can appoint or re-appoint an audit firm as auditor for more than two terms of five consecutive years. Section 139 of the Act has also provided a period of three years from the date of commencement of the Act to comply with this requirement. M/s V.N. Purohit, Chartered Accountants have been the Auditors of the Company since Annual General Meeting held for the Financial Year 2012-13 and will complete their consecutive term of 5 years in the Thirty Third AGM to be held in year 2018. M/s V.N. Purohit, Chartered Accountants, being eligible for re-appointment and based on the recommendation of the Audit Committee, the Board of Directors has, at its meeting held on 30th May, 2015, proposed the appointment of M/s V.N. Purohit, Chartered Accountants as the statutory auditors of the Company for a period of three years to hold office from the conclusion of this AGM till the conclusion of the Thirty Third AGM of the Company to be held in the year 2018 (subject to ratification of their appointment at every AGM). In this regard, the company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013. • Auditors' Report Comments made by the Statutory Auditors in the Auditors' Report are self-explanatory and do not require any further clarification. • Secretarial Auditor Pursuant to provisions of section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the company has appointed Ms. Rachna Bhasin, Practicing Company Secretary in practice to undertake the Secretarial Audit of the Company for FY 2014-15. The Secretarial Audit Report is annexed herewith as "Annexure D". • Internal Auditor The Board of Directors of your company have appointed Mr. Mukesh Kumar Gupta, Practicing Chartered Accountant as an internal auditors of the company and his report is reviewed by the Audit Committee from time to time. ? Extract of Annual Return In accordance with Section 134(3)(a) of the Companies Act, 2013, the details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as "Annexure E". ? Corporate Social Responsibility The provision of Companies Act, 2013 regarding Corporate Social Responsibility shall not be applicable to companies having net worth not exceeding Rs. 500 Cr or turnover not exceeding Rs. 1,000 Cr or net profit not exceeding Rs. 5 Cr or more during any financial year, as on the last date of previous financial year. In this connection, we wish to inform you that in respect of our company as on the last audited balance sheet as at March 31, 2015 neither the net worth exceeds Rs. 500 Cr nor turnover exceeds Rs. 1,000 Cr nor net profit exceeding Rs. 5 Cr. Hence, the provisions of Companies Act, 2013 regarding Corporate Social Responsibility would not be applicable. ? Prudential Norms & Directions of RBI for NBFCs Your company has complied with all the requirements prescribed by the Reserve Bank of India and has filed the required returns. ? Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo a. Conservation of Energy & Technology Absorption: Since the Company is not engaged in any manufacturing activity, issues relating to conservation of energy and technology absorption are not quite relevant to its functioning. b. Export Activities: There was no export activity in the Company during the year under review. The Company has no immediate plans for export in the near future as well. c. Foreign Exchange Earnings and Outgo: There was no Foreign Exchange earnings and outgo during the year under review. Particulars of Employees The information required pursuant to Section 197 read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, forms part of this report and annexed herewith as "Annexure F". In terms of Section 136 of the Act, the reports and accounts are being sent to the members and others entitled thereto, including the information on employees' particulars which is available for inspection by the members at the Registered office of the company at all working days except Saturdays between 11 A.M. and 01:00 P.M. up to the date of Annual General Meeting. If any member is interested in inspecting the same, such member may write to the company secretary in advance. Related Party Transactions All related party transactions that were entered into during the financial year were on arm's length basis and also in the ordinary course of the business. There are no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large. The details of Related Party Transactions are disclosed in Note No. 27 attached to and forming part of the Annual Financial Statements and also stated in Form AOC-2 annexed as "Annexure-G". Sexual Harassment The Company has in place a Prevention of Sexual harassment policy in line with the requirements of the sexual harassment of Women at workplace ( Prevention, Prohibition and Redressal) Act, 2013.. All employees (permanent, contractual, temporary, trainees) are covered under this policy. During the Year 2014-2015, no complaints were received by the Company related to sexual harassment. Business Responsibility Report Clause 55 of the listing Agreement is not applicable to our Company. Since no initiative with respect to environmental, social etc has been taken. Corporate Governance The Company is committed to maintain the steady standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. The Report on corporate governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. The requisite certificate from the Practicing Company Secretary confirming compliance with the conditions of corporate governance as stipulated under the aforesaid Clause 49, as also certificate from CFO are attached to the Report on corporate governance. Management's Discussion and Analysis Report Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is presented in a separate section forming part of the Annual Report. Significant and Material Orders There are no significant and material orders passed by the regulators or courts or tribunals impacting going concern status and company's operations in future. Cautionary Note The statements forming part of the Board's Report may contain certain forward looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements. Acknowledgments and Appreciation The Directors take this opportunity to thank the Company's customers, shareholders, investors, suppliers, bankers, financial institutions and Central & State Governments for their consistent support to the Company. The Directors also wish to place on record their appreciation to employees at all levels for their hard work, dedication and commitment. For and on Behalf of the Board For Sonal Mercantile Limited Gopal Bansal Director(DIN: 01246420) Deep Chand Singhal Director (DIN: 00815681) Date: 30th May, 2015 Place: Delhi |