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Ceejay Finance Ltd.
 
March 2015

DIRECTORS' REPORT

To,

THE MEMBERS OF

CEEJAY FINANCE LIMITED

Your Directors hereby present their TWENTY SECOND Annual Report together with the audited accounts of the company for the year ended 31st March 2015.

DIVIDEND:

We are pleased to recommend dividend of 14% p.a (Rs. 1.40 per share) on the Equity Share Capital of the Company for the financial year ended March 31, 2015. The dividend, if approved by the members, will be paid to members within the period stipulated by the Companies Act, 2013.

OPERATIONS:

Your Company has continued to grow steady but substantially due to the concerted marketing efforts in new business centers, new product, and prudent recovery system. Company has maintained steady growth in operations and profit during fiscal 2014-15. Total revenue including income from operations and other income increased to Rs.  1160.30 lacs in the current year from X 1112.94 lacs in previous year. Considering inflation hike, total expenses increased from 562.84 lacs in previous year to Rs.  609.13 lacs in current year. In spite of increase

in bank interest rate, the finance cost icreased marginally to Rs.  225.37 lacs in the current year compared to Rs.  221.60 lacs in previous year. Accordingly, the profit before tax increased from Rs.  550.10 lacs in the previous year to Rs.  551.17 lacs in the current year. After providing tax of  Rs. 180.45 lacs in the current year (Rs.  175.00 lacs in previous year) profit after tax remained 372.64 lacs against Rs.  372.53 lacs in the previous year.

The disbursement in the current year remains increased to Rs.  4720.67 lacs compared to Rs.  4128.05 lacs in previous year. The Company's strategy to focus for the business in smaller places and specialization in two/ three wheeler segment has remained unchanged. Hypothecation / loan stock of the Company has increased from Rs.  3771.45 lacs in previous year to Rs.4181.77 lacs in the current year.

The assets of the company are properly and adequately insured and recoveries are at satisfactory level. 

FUTURE OUTLOOK/ MANAGEMENT DISCUSSION AND ANALYSIS:

INDIAN ECONOMY

Growth of India's GDP (at constant 2011-12 prices) rose to 7.3% in 2014-15 from 6.9% in 2013-14, and was mildly lower than the Advance Estimate of 7.4% released by the Central Statistics Office (CSO). Moreover, the pace of GDP growth was volatile over the various quarters of FY15 (6.7% in Q1FY15, 8.4% in Q2FY15, 6.6% in Q3FY15 and 7.5% in Q4FY15). Ratings agency CRISIL has cut its GDP (gross domestic product) growth forecast for 2015-16 by 50 basis points (bps) or 0.5% - to 7.4% from 7.9% - due to the increasing likelihood of a weak monsoon.

The RBI has cut its policy rate by 75 bps since January, 2015 and there could be a possibility of further rate cuts. If this happens, may leads better growth in the company.

The Indian automobile industry is finally seeing an uptick in sales. FY2014-15 numbers reveal all vehicle categories other than CVs are in positive territory and passenger car sales have returned to the black after three years. Riding on the back of a gradual uplift in market sentiments, excise duty cuts continuing through to December 2014 and the opening up of the mining and infrastructure sectors, the Indian automotive industry posted an overall growth of 7.22 percent in fiscal year April 2014-March 2015, marking an improved performance over the previous fiscal. FY2013-14 had seen growth of 3.53 percent, mainly due to a good performance by the two-wheeler sector.

In FY2014-15, passenger car and utility vehicle sales were up 4.99 percent and 5.30 percent respectively, pushing overall passenger vehicle sales up 3.90 percent. Van numbers however dipped 10.19 percent. In FY2013-14, PVs had declined 6.05 percent and all three segments - cars, UVs and vans - had seen a downturn. The overall CV sector's numbers are down in FY2014-15 mainly due to a below-par performance by LCVs, which de-grew 11.57 percent and pulled down CV sales by 2.83 percent year on year. In 2013-14, the CV segment fell sharply by 20.23 percent with M&HCVs sliding 25.33 percent and LCVs by 17.62 percent. In 2014-15, M&HCVs have grown 16.02 percent due to revival of construction and roadbuilding activities as well as mining activities. The two-wheeler industry continues to do well. The overall segment grew 8.09 percent, which notched 25.06 percent growth while motorcycles grew marginally at 2.50 percent; mopeds grew 4.51 percent in 2014-15. In comparison, in FY2013-14, two-wheelers saw 7.31 percent growth with scooter sales up 23.24 percent, bikes at 3.91 percent and mopeds down 8.35 percent.

Our mission is to be sound NBFC among regional players in terms of product offerings, technology, service levels, risk management and audit and compliance etc. The objective is to continue building sound customer / franchises across distinct businesses so as to be a preferred provider of NBFC services for its target retail and customer segments, and to achieve a healthy growth in profitability, consistent with the company's risk appetite. The company's range of retail financial products and excellent services and branches net work is fairly exhaustive to meet up the coming challenges. The objective is continue to build sound customer/dealer friendly atmosphere to achieve healthy growth in profitability, consistent with company's risk appetite. The company also emphasizes to develop innovative products and services that attract its Customers, Increase its market share as NBFC and financial services industry by following a disciplined growth strategy focusing on balancing quality and volume growth while delivering high quality customer service, maintain reasonably good standards for asset quality

through disciplined credit risk management; and continue to develop products and services that reduce its cost of funds; and Focus on healthy earnings growth with low volatility. Our company growth is more important especially looking to the concentration in rural area for the business. The company grew its retail assets portfolio in a well balanced manner focusing on both returns as well as risk. Company intends to follow conservative view in the coming years. Company also expects continuous threats to small/medium Company like us, from global/giant players in the retail finance market especially with large size/volume, lower rate of interest and ability to sustain in the market is inevitable for the company to sustain in the market.

Overall, in spite of various pros and corns your company has demonstrated outstanding achievement in terms of earned valued and well built market presence. Your company is cash rich, has better liquidity, improved working capital and it has shown its readiness to accept market challenges. All of these are signs of strong fundamentals which the company has been able to establish with the help of batter and professional management support.

RISK MANAGEMENT /SWOT ANALYSIS

Your company has comprehensive Risk Management System towards identification and evaluation of all potential business risks. Management has developed Risk Management Plan and reviews its implementation regularly. The company is exposed to external and internal risk associated with its business. To counter these risks, the company continues to broaden its product portfolio, increase customer profile and geographic reach.

Taking on various types of risk is integral to the NBFC business. Sound risk management and balancing risk-reward trade-offs are critical to a company's success. Business and revenue growth have therefore to be weighed in the context of the risks implicit in the company's business strategy. Of the various types of risks your company is exposed to, the most important are credit risk, market risk including liquidity risk and price risk and operational risk. The identification, measurement, monitoring and management of risks accordingly remain a key focus area for the Company. For credit risk, appropriate distinct policies and processes are in place for the retail businesses. Overall portfolio diversification and reviews also facilitate mitigation and management. Especially a small capital based company faces multiple problems due to poor recovery systems. The specific NPA provisions that the company has made continue to be more conservative than the regulatory requirements. This will help the company to maintain high standards for assets quality through disciplined credit risk management.

However, while the balance of risks in the last financial year were largely external, rising domestic interest rates as well as firm inflationary pressures have meant that domestic factors have now emerged as points of concern for growth in the current fiscal year.

SWOT analysis

Strengths

• The pioneer in the two wheeler vehicles financing sector in Gujarat/Maharashtrs

• Oldest NBFC since last 20 years.

• Sound financial position since inception

• A well-defined and scalable organisation structure.

• Strong financial track record with low Non Performing Assets (NPAs)

• Experienced and stable management team

• Strong relationships with public, private as well as banks. Fast Procidure

Weaknesses

The Company's business and its growth are directly linked to the GDP growth

• Small organisation structure

• Availability of cheaper fund

• Competition with large NBFC's/Banks

Opportunities

• Growth in the Two/Three Wheeler market

• Strong demand for passenger second hand car/Trucks T

hreats

• Regulatory changes in the NBFC and ancillary sectors Rain fall and competition

FINANCIAL PERFORMANCE

As on 31st March, 2015, against hypothecation of loan stock of Rs. 4181.77 lacs (previous year Rs.3771.45), Rs. 3138.28 is falling due within 12 months. Company has made provision for Non Performing Hypothecation loan stocks for Rs. 5.33 lacs (previous year Rs. 6.25 lacs). The NPA of bad debts/hypo.loans written off is Rs. 21.47 lacs (previous year Rs. 43.28 lacs) while provision for doubtful/ nonperforming assets is Rs. 0.04 lacs.

INTERNAL AUDIT AND COMPLIANCE:

The Company has Internal Audit and Compliance functions which are responsible for independently evaluating the adequacy of all internal controls and ensuring operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements. The audit function also recommends improvements in operational processes and service quality. To mitigate operational risks, the Company has put in place extensive internal controls including restricted access to the company's computer systems, appropriate segregation of front and back office operations and strong audit trails. The Audit Committee of the Board also reviews the performance of the audit and compliance functions and reviews the effectiveness of controls and compliance with regulatory guidelines. The Board has formed a new audit committee considering the requirement under the Companies Act, 2013 and rules made thereunder. Along with keeping in view the requirement under listing agreement.

RESOURCE MOBILATION/ICRA RATING

Cost of funds for retail-focused NBFCs, which remained high at 12%-14%, is likely to remain stable during the year. As mentioned earlier, company is in constant search to avail cheaper fund to reduce our cost of funds. The cash credit limit of the company has been elevated from Rs. 1008.17 lacs to Rs. 1218.79 lacs with the Banks.

The Company has discontinued accepting or renewing fresh deposits, therefore there no outstanding fixed deposit as on date. Inter Corporate Deposit almost remain constant from 881.61 lacs in the previous year to Rs. 884.54 lacs in current year.

The company has obtained ICRA rating for Rs. 1500 lacs Cash Credit Limits from Bank. ICRA has assigned +BB (Stable) ratings for the same.

CAPITAL ADEQUACY:

Your company's Capital Adequacy Ratio (CAR) stood at 55.93%, well above the regulatory minimum of 15%. The revised Guidelines issued by R.B.I for recognition of Income, asset classification, Investment accounting, provision for non-performing assets and capital adequacy have been followed by your company. The company has also made the provision for non performing assets in case of Sub-standard, doubtful and loss assets as per R.B.I. guidelines.

FIXED DEPOSITS:

As reported earlier, the Company has discontinued to accept or renewed fresh/existing fixed deposits. At the close of the year, no amount remained unclaimed or unpaid. The company does not have any claimed but unpaid deposits.

DIRECTORATE:

Mr.Deepak Patel and Mr.Shailesh Patel are liable to retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for reappointment. During the year under review, Mr.Bhikhubhai Patel has resigned

as a director and Mrs. Mrudulaben Patel is appointed as an additional director. None of the directors of the companyis disqualified from being appointed or re-appointed as a Director as specified under Section 164 of the Companies Act, 2013. As required under Clause 49 of the Listing Agreement, the information on the particulars of the Directors proposed for appointment has been given in the Notice of the Annual General Meeting.

The Board of Directors of the Company hereby confirms that all the Independent directors duly appointed by the Company have given the declaration and they meet the criteria of independence as provided under section 149(6) of the Companies Act, 2013.

CORPORATE GOVERNANCE:

As per clause 49 of the listing agreement with stock exchanges, your company was required to implement the code of corporate Governance. Accordingly, your company has complied in all material respects with the features of the said code. A report on the same is given separately.

DIRECTORS' RESPONSIBILITY STATEMENT:

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, which states that—

(a) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(b) 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 of the company for that period;

(c) 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;

(d) the Directors have prepared the Annual Accounts on a going concern basis;

(e) the Directors, in the case of a listed company, have laid down Internal Financial Controls to be followed by the Company and that such Internal Financial Controls are adequate and were operating effectively; and

(f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

LISTING AGREEMENT WITH STOCK EXCHANGES:

Pursuant to the provisions of listing agreement with stock exchanges, the equity shares of the company are listed at Ahmedabad (regional) and Mumbai stock exchanges.

DEPOSITORY SYSTEM:

Your company has established electronic connectivity with National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. In view of the compulsory dematerialization of company's equity shares on stock exchanges, members are requested to dematerialize the shares on either of the depositories as aforesaid.

AUDITORS:

Kantilal Patel & Co. Chartered Accountants, auditors of the company, hold office until the conclusion of the ensuing Annual General Meeting of the company and being eligible, offer themselves for reappointment.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act,2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the company has appointed M/S Tushar Vora & Associates, proprietor, company secretaries in practice to undertake the secretarial audit of the company. The secretarial aidit report is annexed herewith as Annexure 'A'.

CORPORATE SOCIAL RESPONSIBILITY

Since the net profit for the year ended 31st March, 2015 is less than 5 crores, the relevant provision of the Act is not applicable.

NOMINATION AND REMUNERATION COMMITTEE

The Board of Directors at its meeting held on 24th May 2014 constituted a Nomination and remuneration Committee comprising of Mr.Bharat Amin as Chairman, Mr.Kiritkumar Dalal, Mr. Bhikhubhai Patel, Mr. Sunil G. Patel and Mr. Deepak Patel as other members. The role and responsibilities, Company's policy on directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other related matters are in conformity with the requirements of the Companies Act, 2013 and the listing agreement. As on 31st March, 2015, Mrs. Mrudulaben Patel was replaced as a member in place of Mr.Bhikhubhai Patel.

AUDIT COMMITTEE

The Board of Directors at its meeting held on 24th May 2014 re-constituted a Audit Committee comprising of Mr.Bharat Amin as Chairman, Mr.Kiritkumar Dalal, Mr.Bhikhubhai Patel, Mr. Sunil G. Patel and Mr. Deepak Patel as other members. The scope of Audit committee is enhanced in accordance with the Companies Act, 2013 and the listing agreement. As on 31st March, 2015, Mrs. Mrudulaben Patel was replaced as a member in place of Mr.Bhikhubhai Patel.

STAKEHOLDERS RELATIONSHIP/SHARE TRANSFER COMMITTEE

The Board of Directors at its meeting held on 24th May 2014 re-constituted a Stakeholders Relationship/Share Transfer committee of Mr.Bharat Amin as Chairman, Mr.Kiritkumar Dalal, Mr.Bhikhubhai Patel, Mr. Sunil G. Patel and Mr. Deepak Patel as other members, in accordance with the Companies Act,2013 and the listing agreement. As on 31st March, 2015, Mrs. Mrudulaben Patel was replaced as a member in place of Mr.Bhikhubhai Patel.

EVALUATION OF BOARD, COMMITTEE AND DIRECTORS

A detailed exercise for evaluation of the performance of the Board, its various committees and also the performance of individual Directors was carried out by the Board. The performance of the Board and that of its committees was evaluated on the basis of various parameters like adequacy of Composition, Board Culture, Execution and performance of specific duties, obligations and governance etc. Whereas the evaluation of individual directors and that of the Chairman of the Board was on the basis of various factors like their attendance, level of their engagement, their contribution, and independency of judgment, their contribution in safeguarding the interest of the company and other relevant factors. The Board and committees put sufficient efforts to safeguard the interest of the company. The information relating to its terms of reference, no. of meetings held and attendance etc during the year under report are provided in Corporate Governance Report.

During the year under report, the Board of Directors has adopted the familiarization program for independent directors of the company.

During the year under report, the company has appointed Key Managerial Personnel to inter alia shoulder the responsibilities in their respective fields as envisaged under the provisions of the Companies Act, 2013.

DISCLOSURE OF REMUNERATION RATIO

The particulars of ratio of remuneration of Director,KMP and employees, more particularly described under section 197(12) of the Companies Act,2013 and Rules 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are given in Annexure B to this report.

PARTICULARS OF LOANS AND INVESTMENTS

The company being NBFC registered with Reserve Bank of India with principal business as loan company, the provisions of Section 186 except sub section (1) of the Companies Act,2013 are not applicable to it. Hence no particulars thereof as envisaged under Section 134(3)(g) of the Act are covered in this report.

RELATED PARTY TRANSECTIONS

The company has no transection with related parties referred to sub section (1) of Section 188 of the Companies Act, 2013. However other related party transections not covered above are disclosed in note 22.8 of this report

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO :

As the main business of the company is of finance, the company has no activities relating to conservation of energy or technology absorption. The company has had no foreign exchange earnings or out goes during the year under review.

SEXUAL HARRASSMENT

Entire staff in the company is working in a most congenial manner and there are no occurrence of any incidents of sexual harassment during the year.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Board during the year under report approved and adopted "Vigil Mechanism/Whistle Blower Policy" in the company. The Brief details of establishment of this policy are provided in the Corporate Governance Report.

RISK MANAGEMENT POLICY

The company was already having risk management system to identify, evaluate and minimize the business risks. The company during the year had formmalised the same by adopting Risk Management Policy. This policy intends to identify, evaluate monitor and minimize the identifiable risks in the organization.

ANNUAL RETURN

The extract of the Annual Return in Form MTG 9 is provided in Annexure D to this report.

PARTICULARS OF EMPLOYEES:

There are no Employees covered by Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

ACKNOWLEDGEMENT:

The Directors would like to place on record their sincere appreciation to all the employees of their continued effort towards the growth of the company and would also like to express their thanks to the Bankers, Shareholders and Customers for their support and contribution which enabled the company to achieve its goals for the year.

FOR AND ON BEHALF OF THE BOARD

Harshad Dalal

CHAIRMAN

 Place : NADIAD 

Dated : 9th May 2015

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