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TO THE SHAREHOLDERS OF SECURITIES TRADING CORPORATION OF INDIA LIMITED
Your Directors have pleasure in presenting the Fifteenth Annual Report
together with the audited accounts of the Company for the Year ended March
31, 2009.
1. FINANCIAL RESULTS
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March 31, 2009 |
March 31, 2008 |
| Total Income |
4,87,868.00 |
6,52,961.58 |
| Total Expenditure |
4,83,114.70 |
6,50,067.37 |
| Profit(+)/loss(-) before Tax & |
4,753.30 |
2894.21 |
| Prior period & Exceptional items |
(654.66) |
715.00 |
| Profit including exceptional items but before tax |
4098.64 |
3609.21 |
| Profit including exceptional items but after tax |
3287.52 |
2505.45 |
| Add: Balance in Profit & Loss Account brought forward |
1,374.58 |
(610.87) |
| Tax adjustment |
92.11 |
nil |
| Amount available for appropriation |
4,754.22 |
1894.58 |
| Proposed Appropriation/Withdrawals |
|
|
| Transfer to General Reserve |
NIL |
NIL |
| Transfer to Statutory Reserve |
658.00 |
520.00 |
| Balance Carried to the Balance Sheet |
4,096.22 |
1374.58 |
| TOTAL |
4,754.22 |
1894.58 |
* Created pursuant to Section 45 I /c of Reserve Bank of India Act, 1934 as amended in January
1997. This reserve forms part of Free Reserves, Net Owned Funds and Tier I Capital.
COMPANY’S PERFORMANCE
Financial Performance
Your Directors are pleased to report that the Company’s operations, following
recent restructuring, have stabilized and the profits have increased, though
marginally, as compared to the previous year. During the current year the
Company’s profit before tax and exceptional items touched Rs. 47.53 crore.
Sale of stake in a subsidiary accounted for a further gain of Rs. 12.83 crore
which has been treated as an exceptional item under the head ‘profit on sale of
investments’. This gain has been off set by an indemnity payment to Standard
Chartered-STCI Capital Markets Ltd (erstwhile UTI Securities Ltd) amounting
to Rs. 19.27 crore in terms of the Shareholders agreement between your
Company and Standard Chartered Bank (Mauritius) Ltd. The net difference
between the two figures has been shown as an exceptional item.
DIVIDEND
Keeping in view the amount available for appropriation and the planned buy
back of shares of your Company, your Board does not recommend any
dividend for the year 2008-09. The Board recommends transfer of 20% of the
profit after tax amounting to Rs. 6.58 crore to Statutory Reserve as required
under the Reserve Bank of India Act,1934 and that the balance available for
appropriation (Rs. 40.96 crore)be carried forward to Profit & Loss account in
the Balance Sheet.
BUY BACK OF SHARES
Your Board at its meeting held in April 2009 decided to offer 30 lakhs shares of
the Company for buy back at a book value of Rs. 194/- per share. The buy
back process has been completed and the shares bought back have been
extinguished after payment consideration to shareholders. This has resulted
in an outflow of Rs. 58.20 crore after the March 31, 2009 and the paid up
capital as on date stands reduced from the level of Rs. 410 crore at the end
of the year under report to Rs. 380 crore. It may be recalled that a share buy
back (1st buy back) was approved by your Board in November 2007, which was
well received by the shareholders and the paid up capital was brought down
from Rs 500 crore to Rs. 410 crore. These steps are expected to improve the
earning per share of the Company in future.
Company’s Operations.
After hiving off the Primary Dealership operations to a separate subsidiary, the
Company has retained its NBFC character and it has been classified as an
Investment Company by Reserve Bank of India (RBI). However in order to
diversify its activities, your Board appointed, a reputed consultancy firm on
future business strategies in the NBFC space. The business model suggested
by the consultants has been deliberated extensively and new activities have
been identified. These activities would be undertaken in full scale once the
preparations (including on-boarding of personnel with relevant skill and
experience) which are under way are completed. In the interim, your Company
has already booked some business under the new initiative in the first quarter
of 2009-10. As at the end of June 2009, the company has disbursed/renewed
loans over Rs. 100 crore.
Subsidiaries of the Company
Your Company has the following subsidiaries:
STCI Primary Dealer Ltd (wholly owned subsidiary)
STCI Commodities Ltd (wholly owned subsidiary)
In terms of the provisions of Section 212 of the Companies Act, 1956, the
audited statements of account for the year ended 31st March 2009 of the
Company’s subsidiaries, STCI Primary Dealer Ltd, and STCI Commodities Ltd
(wholly owned subsidiaries), the Auditors’ Report and the Directors’ Report
thereon and the statement pursuant to Section 212(e) of the Companies Act
are annexed to this report. These reports provide information regarding
business undertaken and financial results achieved by the subsidiaries.
Your Directors would, however, like to provide the following further information
with respect to these subsidiaries.
Performance of
(i) STCI Primary Dealer Ltd
This Company delivered a strong performance as a Primary Dealer during the
year under report. The performance during the first two quarters did get
adversely affected due to volatility in the fixed income market, but the
Company was able to retrieve the position as the market improved in the
next two quarters. The subsidiary posted a net profit (after tax) of Rs. 69.41
crore and declared a dividend of 10%.
(ii) STCI Commodities Ltd
In the year under report, the Company has posted a net loss of Rs.60 lakhs.
The networth of the Company as on March, 2009 came down to Rs. 135.55
lakhs. Hence, your Company has made a provision of Rs. 254.38 lakhs
towards decline in the value of its investment. Your Company is exploring the
possibility of inducting a strategic partner in the Commodities Business.
Meanwhile all efforts are being made to contain costs and arrest losses.
Standard Chartered-STCI Capital Markets Ltd (erstwhile UTI Securities Ltd)
Till 12th December 2008 Standard Chartered-STCI Capital Markets Ltd (SCSCML)
used to be our subsidiary. Following exercise of the Call option by Standard
Chartered Bank- Mauritius (SCB) your Company transferred further 25.9% stake
in SCSCML on 12th December 2008 for a consideration of Rs. 77.70 crs pursuant
to the Share Purchase Agreement (SPA). With this stake sale, SCSCML is no
longer a subsidiary of the Company. SCB has a Call option and the Company has
a Put Option in 2010-11 for the remaining 25.1 percent stake in SCSCML.
Your Company has also made a provision of Rs. 3.62 crs for claims relating to
Income tax appeals and some irregularities at one of the branches of SCSCML
(erstwhile UTI Securities Ltd)pursuant to the terms of SPA & SHA (Share Holder
Agreement) for sale of stake in SCSCML.
BOARD AND COMMITTEES
(i) Composition of Board of Directors
The Company’s Board comprises professionals from Banking and Financial sectors
and Academics. As on March 31, 2009, the Board comprised eight Directors, out
of whom three are nominated by Bank of India. The Board met 5 times during the
year under review.
The brief resume/details relating to Shri D Basu, Dr. N Balasubramanian and
Prof S K Barua who retire by rotation and offer themselves for reappointment
are furnished as attachment to the notice calling for the ensuing Annual
General Meeting.
Bank of India has nominated Shri V Sridar, Ex- Chairman & Managing Director of
UCO Bank and National Housing Bank as their nominee Director on our Board.
The Board also inducted Shri Vikram Limaye, Executive Director of IDFC as a
Director. Shri Limaye is a Chartered Accountant and an MBA from Wharton
School Pennsylvania with wide experience in Global Investment Banks,
International Banks and Global Accounting Firms.
Shri Sridar and Shri Limaye were inducted as additional Directors and hold office
up to the date of the ensuing Annual General Meeting. The Company has received
notice under section 257 of the Companies Act 1956 proposing their appointment
as Directors liable to retire by rotation.
ii) Committees of the Board
The following Committees of the Board functioned during the year:
(a) Audit Committee
The Audit Committee of the Board comprises Shri D. Basu (Chairman), Dr. N.
Balasubramanian, Professor S. K. Barua, Shri V. Rajaraman, Shri V. Sridar and
Shri P Sanyal. Three members of the Committee are independent and all except
the Managing Director are Non-Executive Directors of the Company. All the
members of the Committee have knowledge of finance and accounts. The
Committee met four times during the year under review. The scope and functions
of the Audit Committee are as per the provisions of the Companies Act, 1956 and
in particular include the following:
a) To determine the scope and functions of the Internal and the
Concurrent Auditors.
b) To review the Statutory, Internal and Concurrent Auditors’ reports.
c) To hold discussions as necessary with the Internal, Concurrent and
Statutory Auditors.
d) To review the Audit / Inspection reports of the Comptroller & Auditor
General of India, RBI, etc.
e) To discuss the annual financial statements with the Management and
the Statutory Auditors.
Further, the Board desired to entrust the review of risk issues to the Audit
Committee. The scope and functions for this purpose are as follows:
- Approval and review of risk policies, procedures and reporting mechanism;
- Approval and review of various limits and parameters of trading viz. setting
up of trading limits for Company’s officials, counterparty exposure limits,
instrument wise exposure limits etc;
- Approval and review of ALM and Reports that may be submitted to the
Committee from time to time under RBI’s NBFC Directions;
- Approval and review of cut-loss policies;
- Review of risk management reports;
- Monitoring of compliance with the approved and statutory risk policies,
procedures, parameters, etc. and
- Any other risk/ALCO related matter that the Committee may consider
relevant and appropriate.
(b) HRD Committee
The HRD Committee of the Board reviews the Human Resources policy and
procedure to be followed by the Company besides the remuneration to be paid
to the Managing Director. The Members of the HRD Committee are Professor
S. K. Barua (Chairman), Shri T.C. Venkat Subramanian, Shri V Sridar, Shri V
Rajaraman and Shri P Sanyal. The Committee met once during the year under
review.
(c ) NBFC Steering Committee
The Board formed a Steering Committee of the Board of Directors - the ‘NBFC
Steering Committee’. The Committee provides ongoing guidance to the
Management in implementing the project of taking up lending activity as an
NBFC (NBFC project) and to provide on behalf of the Board all approvals as
may be necessary to implement the project whether in the area of business
policy and parameters, creation of IT infrastructure, selection/ recruitment of
senior management for implementation of the project and all other matters in
connection with the NBFC project. The Committee comprises Shri V Sridar,
(Chairman) and Shri Vikram Limaye, Shri V Rajaraman, and the Managing
Director of STCI as members of the Committee. The Committee met once
during the year.
(d) Business Development & Credit Committee
The Board also felt the need for constituting a committee for considering and
approving Loan and other business proposals, which would eventually be part
of the new NBFC activity, pending rolling out of the NBFC Project, to capture
new business opportunities that may emerge in the interim. Accordingly the
Business Development & Credit Committee has been constituted comprising
Shri D Basu, (Chairman), Shri V Sridar, Shri Vikram Limaye, Shri Rajaraman
and the Managing Director as members.
Directors’ Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
confirm that:
- In preparation of the Annual Accounts, the applicable accounting
standards have been followed and that there are no material departures.
- Appropriate accounting policies have been selected and applied
consistently, judgments and estimates made are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company as at the end of the financial year and the profit for that
period.
- Proper and sufficient care has been taken to the best of their knowledge
and ability for maintenance of adequate accounting records in
accordance with the provisions of the Companies Act, 1956, for
safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities.
- The annual accounts have been prepared on a going concern basis.
Management/Executive Committee
Your Company has constituted the following committees of senior executives
to manage its business and the related risks. All these Committees meet at
regular intervals.
Management Committee
The Management Committee comprises of Senior Executives and is headed by
the Managing Director. It deliberates on matters which have a bearing on the
Company’s operations and functions as a forum to elicit inputs from
departmental heads and also keeps departmental heads aware of these issues.
ALCO and Risk Management Committee
The ALCO and Risk Management Committee comprise Senior Executives and
is headed by the Managing Director. It is responsible for (i) ensuring adherence
to the prudential limits and guidelines set by the Board and the Audit
Committee of Board (ii) formulating Risk Management Policies and (iii)
attending all issues related to Asset-Liability Management.
Credit Committee
The Credit Committee decide upon fixing of exposure limits for each IPO
financing and for loan against shares. The exposure limit for each borrower is
also decided by the Credit Committee subject to the ceilings laid down by the
Board.
Grievances Redressal Committee
Grievances Redressal Committee reviews the complaints and grievances of staff
and that of Customers/clients.
Regulatory Compliance
The Company has complied with all the applicable guidelines prescribed by
RBI for NBFCs, regarding accounting standards, income recognition, valuation
of securities, capital adequacy, etc.
The Company has also complied with the Directions and Guidelines issued by
the Securities & Exchange Board of India (SEBI) under the SEBI (Portfolio
Managers) Regulation, 1993.
Credit Rating
The Company continued to enjoy the highest ratings of P1+ and A1+ from
rating agencies CRISIL and ICRA for its short-term borrowing programme.
2. OTHER MATTERS
(i) Auditors
M/s BansiLal Shah & Co., Chartered Accountants, Mumbai were appointed as
the Auditors of the Company by the Comptroller & Auditor General of India
(C&AG) for the year ended March 31, 2009. Auditors for the financial year
ending March 31, 2010 will be appointed by C&AG, under the provisions of
Section 619(2) of the Companies Act, 1956.
M/s B K Khare & Co., Chartered Accountants, continued as the Company’s
Internal Auditors during the year under report.
(ii) Recruitment and Training of Staff
With a view to strengthening its human resources, the Company has been
recruiting professionals with appropriate skills and experience at the middle
and senior management levels. Recognising the importance of exposing officers
to the developments in the financial sector, the Company deputes its officers
for appropriate training programmes and seminars.
(iii) Disclosure of Particulars
- No statement containing particulars of employees as required under
section 217(2A) of the Companies Act, 1956 read with the Rules framed
there under is being annexed to the Report as no employee drew
remuneration in excess of the prescribed amount.
- The Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988 pertaining to Conservation of Energy in Form A
and Technology Absorption in Form B are not applicable to your
company, as your company is not a manufacturing company
- The details of the foreign exchange outgo appear at Item No.12 of
Schedule 20 in the Notes forming part of accounts.
- Your company uses information technology extensively in its day to day
operations.
(iv) Public Deposits
During the year ended March 31, 2009, your Company has not accepted any
deposits from the public within the meaning of the provisions of the Non-
Banking Financial Companies (Reserve Bank) Directions, 1998.
(v) Portfolio Management Services (PMS)
Your company is registered with Securities and Exchange Board of India as
Portfolio Manager and the registration is valid till 2010. However, after the
hiving off of Primary Dealers operation into a separate subsidiary, the
Management has decided to allow the subsidiary to pursue this activity and
not to compete with them. Your company is open to new business as Portfolio
Manager where there is no competition with the subsidiary.
(vi) Future Outlook
The Global economic scenario seems challenging. Indian Economy is, however,
in a consolidation mode and the year ahead looks promising with a stable
government in place. The country seems to be poised for another phase of
reforms and liberalization of its economy. However, the uncertain interest rate
scenario has led to market volatility and has had its impact on market
sentiments.
Your company, which has retained its NBFC character after hiving off the
Primary Dealer activity, expect to be able to scale up its operations in the
lending segment. The Company is in touch with its shareholding Banks and
financial institutions for tying up viable business proposals. As the Company’s
loan book expands, as we hope would be the case in the current financial year,
the Company’s income stream should get strengthened. Your company is also
on the lookout for newer activities in the NBFC space
(vii) Acknowledgement
The Board of Directors thank the Government of India, Reserve Bank of India,
Securities and Exchange Board of India, all the Shareholders and Company’s
Bankers for their support.
The Board of Directors also place on record their appreciation of the
dedicated performance by the employees during the period under review
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On behalf of the Board of Directors |
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Mumbai
16th July, 2009 |
(D. Basu)
Chairman |
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