BOARD S REPORT TO, THE MEMBERS OF Arman Financial Services Limited Your Directors have pleasure in presenting the 23rd Board's Report of your Company together with the Audited Statement of Accounts and the Auditors' Report of your company for the financial year ended, 31st March, 2015. STATE OF COMPANY'S AFFAIRS AND FUTURE OUTLOOK Your company is engaged in the business of Asset Financing and Microfinance. The Parent company, Arman Financial Services Ltd., is engaged in Asset Finance, viz. Two-Wheeler and Three-Wheeler financing; while the Microfinance business is managed through Arman's wholly owned subsidiary, Namra Finance Ltd. The financial statements of both Arman and Namra, as well as the consolidated financials of Arman are included within the Annual Report. The company has performed admirably in a highly competitive business segment and this performance was been consistent over a period of many years. Net interest revenue from operations totaled Rs.29.61 Crores, compared to Rs.24.47 Crores the previous year, a 21% increase. Earnings Before Interest & Taxes (EBIT) increased by 27%, from Rs.15.79 Crores in FY14 to Rs.19.99 Crores in the current Fiscal Year. Profit after taxes increased from Rs.4.53 Crores to Rs.6.16 Crores, a 36% increase. Earnings Per share (H10 each) was H8.89. The Company's Loan Assets-Under-Management has crossed H115 Crores, and Disbursements totaled H168 Crores. CHANGE IN NATURE OF BUSINESS, IF ANY Your Company continues to operate the same business segment as that of previous year and there is no change in the nature of the business. DIVIDEND Your Directors are pleased to recommend a dividend of Rs.1.2/-(net of tax) per equity share of Rs.10/- each (i.e. 12%) for the year ended March 31, 2015. The Register of Members and Share Transfer Books will remain closed from Tuesday, 22nd September, 2015 to Tuesday, 29th September, 2015 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31, 2015. Dividend will be paid to those Members whose names appear in the Register of Members as on 22nd September, 2015; in respect of shares held in dematerialised form, it will be paid to those Members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date. Above dividend would be paid subject to approval by the Members at the ensuing Annual General Meeting ("AGM"). AMOUNTS TRANSFERRED TO RESERVES The Board of the company has transferred the amounts to reserve as under: Transfer to special reserve as required by section 45-IC of the Reserve Bank Of India Act, 1934: Rs.57,00,000 Transfer to general reserve: Rs.12,00,000 CHANGES IN SHARE CAPITAL, IF ANY There is no change in the share capital of the company during the Year. INFORMATION ABOUT SUBSIDIARY/ JV/ ASSOCIATE COMPANY The Company has one wholly owned subsidiary company named Namra Finance Limited as on date. During the year no changes took place in the group corporate structure of your Company. The consolidated financial statements presented by the Company include financial information of its subsidiary prepared in compliance with applicable accounting standards. The salient features of Namra Finance Limited in Form AOC-1 is attached along with Financial statements as required under section 129 (3) of the Companies Act, 2013. UNCLAIMED DIVIDEND AS ON 31/03/2015 The unclaimed dividend as on 31/03/2015 was H12,28,650.60. No transfer of unclaimed / unpaid dividend was required to be made to the Investor Education And Protection Fund during the year. MATERIAL CHANGES AND COMMITMENTS No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which these financial statements relate as on the date of this report. LOANS, GUARANTEES AND INVESTMENTS Except the loans, guarantees and investments made in subsidiary company, there were no loans, guarantees or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review and hence the said provision is not applicable. PUBLIC DEPOSITS The Company has not accepted any deposits from the public within the meaning of the provisions of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1988. DIRECTORS AND KMP In accordance with the Articles of Association of the Company and pursuant to the provisions of Section 152 of the Companies Act, 2013, Shri AakashJ. Patel [DIN 02778878] and Shri Aditya Bhandari [DIN 03062463] would retire by rotation at the ensuing AGM and being eligible, offers themselves for reappointment. The term of Shri Aalok Patel, Executive director and CFO has expired on 30/06/2015. On recommendation of Nomination & Remuneration Committee in their meeting held on 14/05/2015, your directors recommend his reappointment as Executive director and CFO for further period of five years on a remuneration as specified in the notice calling 23rd Annual General Meeting. The Board has identified the following officials as Key Managerial Personnel pursuant to Section 203 of the Companies Act, 2013: 1. Mr. Jayendra B. Patel- Managing Director & CEO 2. Mr. Aalok Patel - Executive Director & Chief Financial Officer (CFO) 3. Mr. Shashikant N Thakar - Company Secretary Shri Amit Manakiwala, Whole-time Director is also Key Managerial Person in the Company. BOARD AND AUDIT COMMITTEE During the Financial Year 2014-15, the Company held four meetings of the Board of Directors as per Section 173 of Companies Act, 2013 and four meetings of the Audit Committee. All the recommendations made by the Audit Committee during the year were accepted by the Board. The details of the constitution and meetings of the Board and the Committees held during the year are provided in the Corporate Governance Report which forms part of this Annual Report. As per the section 178 (1) of the Companies Act, 2013 the Company has constituted Nomination And Remuneration Committee, details of which are provided in the Corporate Governance Report which forms part of this Annual Report. REMUNERATION POLICY Remuneration to Executive Directors: The remuneration paid to Executive Directors is recommended by the Nomination and Remuneration Committee and approved by Board in the Board meeting, subject to the subsequent approval of the shareholders at the General Meeting and such other authorities, as may be required. The remuneration is decided after considering various factors such as qualification, experience, performance, responsibilities shouldered, industry standards as well as financial position of the Company. Remuneration to Non Executive Directors: The Non-Executive Directors are paid sitting fees for each meeting of the Board and Committee of Directors attended by them. RATIO OF REMUNERATION TO EACH DIRECTOR The information required pursuant to Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Companies (Particulars of Employees) Rules, 1975, in respect of employees of the Company and Directors is furnished hereunder as annexure-1. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134(5) of the Companies Act, 2013 the Board of Directors of the Company confirms that- a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b) 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 at the end of the financial year and of the profit and loss of the company for that period; c) The directors had 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 had prepared the annual accounts on a going concern basis; and e) The directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. INDEPENDENT DIRECTORS AND DECLARATION Mr. Chinubhai R. Shah, Mr. Kaushikbhai D shah and Mr. Lokesh Kumar Singh have been appointed as the Independent Director of the Company as per Section 149(10) of the Companies Act, 2013 on 24/09/2014 for a term of 5 (Five) consecutive years on the Board of the Company. However Mr. Lokesh Kumar Singh ceases to be director with effect from 14th May, 2015 and it is also proposed to appoint Mr. R. K. Nagpal as Independent Director of the Company with effect from 24th August, 2015 for a term of 5 (Five) consecutive years on the Board of the Company 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. FAMILIARIZATION PROGRAMME Since all Independent Directors are associated with the company for more than 5 (Five) years, the company has not conducted familiarization programme for Independent Director. AUDITORS AND REPORT THEREON The Auditors, M/s J. T. Shah & Co, Chartered Accountants, Ahmedabad (Membership No 45669) retire at the ensuing Annual General Meeting and, being eligible; offer themselves for reappointment for a period of two years from the conclusion of this Annual General Meeting [AGM] till the conclusion of 25 th AGM. There are no qualifications or adverse remarks in the Auditors' Report which require any clarification/ explanation. The notes on financial statements are self-explanatory, and needs no further explanation. SECRETARIAL AUDIT REPORT The Company has appointed M/s Pinakin Shah & Co., Practicing Company Secretary as secretarial auditor to conduct the audit under section 204 of the Companies Act, 2013. There are no qualifications or adverse remarks in the Secretarial Audit Report which require any clarification/ explanation. Further the Secretarial Audit Report for the financial year ended, 31st March, 2015 is annexed herewith for your kind perusal. RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are 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 and Approval of the Board of Directors & shareholders was obtained wherever required. Further all the necessary details of transaction entered with the related parties are attached herewith in Form No. AOC-2 as Annexure-2 for your kind perusal and information. RISK MANAGEMENT Periodic assessments to identify the risk areas are carried out and management is briefed on the risks in advance to enable the company to control risk through a properly defined plan. The risks are classified as financial risks, operational risks and market risks. The risks are taken into account while preparing the annual business plan for the year. The Board is also periodically informed of the business risks and the actions taken to manage them. The Company has formulated a policy for Risk management with the following objectives: Provide an overview of the principles of risk management Explain approach adopted by the Company for risk management Define the organizational structure for effective risk management Develop a "risk" culture that encourages all employees to identify risks and associated opportunities and to respond to them with effective actions. Identify access and manage existing and new risks in a planned and coordinated manner with minimum disruption and cost, to protect and preserve Company's human, physical and financial asset. INTERNAL CONTROL SYSTEM The Company has in place, adequate systems of Internal Control to ensure compliance with policies and procedures. It is being constantly assessed and strengthened with new / revised standard operating procedures and tighter Information Technology controls. Internal audits of the Company are regularly carried out to review the Internal Control Systems. The Audit Reports of Internal Auditor along with their recommendations and implementation contained therein are regularly reviewed by the Audit Committee of the Board. Internal Auditor has verified the key Internal Financial Control by reviewing key controls impacting financial reporting and overall risk management procedures of the Company and found the same satisfactory. It was placed before the Audit Committee of the Company. DETAILS OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS Internal financial control is in place commensurate with the size of the Company CORPORATE SOCIAL RESPONSIBILITY The company does not meet the criteria of Section 135 of Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 so there is no requirement to constitute Corporate Social Responsibility Committee. ANNUAL EVALUATION Pursuant to the provisions of the Companies Act, 2013, 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 its Audit, Nomination & Remuneration Committees. A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as level of engagement and contribution, independence of judgment, safeguarding the interest of the Company and its minority shareholders etc. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors. CORPORATE GOVERNANCE Report on Corporate Governance along with the Certificate of the Auditors, M/s. Pinakin Shah & Co. Practicing Company Secretary, Ahmedabad confirming compliance of conditions of Corporate Governance as stipulated in the Listing Agreement with the Stock Exchanges forms part of the Board Report. VIGIL MECHANISM As per Section 177(9) and (10) of the Companies Act, 2013, and as per the Clause 49 of the Listing Agreement, the company has established Vigil Mechanism for directors and employees to report genuine concerns and made provisions for direct access to the chairperson of the Audit Committee. Company has formulated the present policy for establishing the vigil mechanism to safeguard the interest of its stakeholders, Directors and employees, to freely communicate and address to the Company their genuine concerns in relation to any illegal or unethical practice being carried out in the Company. GREEN INITIATIVE In accordance with the 'Green Initiative', the Company has been sending the Annual Report / Notice of AGM in electronic mode to those Shareholders whose e-mail Ids are registered with the Company and / or the Depository Participants. Your Directors are thankful to the Shareholders for actively participating in the Green Initiative EXTRACT OF ANNUAL RETURN The Extract of Annual Return as required under section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, in Form MGT-9 is annexed herewith as annexure-3 for your kind perusal and information. CONSERVATION OF ENERGY, ABSORPTION AND FOREIGN EXCHANGE OUTGO: (A) Conservation of energy and Technology absorption Since the Company does not carry out any manufacturing activity, the particulars regarding conservation of energy, technology absorption and other particulars as required by the Companies (Accounts) Rules, 2014 are not applicable. (B) Foreign exchange earnings and outgo There were no foreign exchange earnings and outgo during the year under review. SHARES BUY BACK OF SECURITIES The Company has not bought back any of its securities during the year under review. SWEAT EQUITY The Company has not issued any Sweat Equity Shares during the year under review. BONUS SHARES No Bonus Shares were issued during the year under review. EMPLOYEES STOCK OPTION PLAN The Company has not provided any Stock Option Scheme to the employees. SHARES IN SUSPENSE ACCOUNT i. Aggregate number of shareholders and the outstanding shares in the suspense account lying at the beginning of the year: Nil ii. Number of shareholders who approached issuer for transfer of shares from suspense account during the year: Not Applicable iii. Number of shareholders to whom shares were transferred from suspense account during the year: Not Applicable iv. Aggregate number of shareholders and the outstanding shares in the suspense account lying at the end of the year: Nil . That the voting rights on these shares shall remain frozen till the rightful owner of such shares claims the shares: Not Applicable SHARES IN UNCLAIMED SUSPENSE ACCOUNT i. Aggregate number of shareholders and the outstanding shares lying in the Unclaimed Suspense Account at the beginning of the year: Nil ii. Number of shareholders who approached the issuer for transfer of shares from the Unclaimed Suspense Account during the year: Not Applicable iii. Number of shareholders to whom shares were transferred from the Unclaimed Suspense Account during the year: Not Applicable iv. Aggregate number of shareholders and the outstanding shares lying in the Unclaimed Suspense Account at the end of the year: Nil CODE OF CONDUCT The Code of Conduct for all Board members and Senior Management of the Company have been laid down and are being complied with in words and spirit. The compliance on declaration of code of Conduct signed by Managing Director and CEO of the Company is included as a part of this Annual Report. MANAGEMENT DISCUSSION AND ANALYSIS REPORT As required under Clause 49 of the Listing Agreements with Stock Exchanges, the Management Discussion and Analysis Report should forms part of this Annual Report. ANY SIGNIFICANT AND MATERIAL ORDER PASSED BY REGULATORS OR COURTS OR TRIBUNALS No orders were passed by the regulators or courts or Tribunals impacting the going concern status and company's operation in future. ACKNOWLEDGEMENT The Board places on record their appreciation of the support of all stakeholders. For & on behalf of the Board Chinubhai Shah Chairman DIN: 00558310 Date: 24/08/2015 Place: Ahmedabad |