prospectus - Shriram City

TABLE OF CONTENTS
SECTION I : GENERAL ................................................................................................................................................................................i
Definitions / Abbreviations ................................................................................................................................................................................i
Forward Looking Statements......................................................................................................................................................................... viii
SECTION II : RISK FACTORS....................................................................................................................................................................1
SECTION III : INTRODUCTION ..............................................................................................................................................................20
General Information ........................................................................................................................................................................................20
Summary of Business, Strength & Strategy ....................................................................................................................................................30
The Issue .........................................................................................................................................................................................................35
Summary Financial Information......................................................................................................................................................................37
Capital Structure..............................................................................................................................................................................................49
Objects of the Issue .........................................................................................................................................................................................60
Statement of Tax Benefits ...............................................................................................................................................................................61
SECTION IV : ABOUT THE ISSUER COMPANY AND THE INDUSTRY .........................................................................................65
Industry............................................................................................................................................................................................................65
Our Business....................................................................................................................................................................................................84
History, Main Objects And Key Agreements................................................................................................................................................100
Our Management ...........................................................................................................................................................................................111
Our Promoter .................................................................................................................................................................................................123
Our Subsidiary...............................................................................................................................................................................................128
SECTION V : FINANCIAL INFORMATION.........................................................................................................................................130
Financial Statements ......................................................................................................................................................................................130
Disclosures on Existing Financial Indebtedness .............................................................................................................................................131
Material Developments .................................................................................................................................................................................137
SECTION VI : ISSUE RELATED INFORMATION ..............................................................................................................................141
Terms of the Issue .........................................................................................................................................................................................141
Issue Structure ...............................................................................................................................................................................................144
Issue Procedure..............................................................................................................................................................................................156
SECTION VII : LEGAL AND OTHER INFORMATION .....................................................................................................................169
Pending Proceedings and Statutory Defaults .................................................................................................................................................169
Regulations and Policies................................................................................................................................................................................181
Summary of Key Provisions of Articles Of Association ...............................................................................................................................189
Material Contracts and Documents For Inspection .......................................................................................................................................192
DECLARATION .........................................................................................................................................................................................194
SECTION I : GENERAL
DEFINITIONS / ABBREVIATIONS
Company related terms
Term
Description
"SCUFL", "Issuer", “the Company”
and “our Company”
Shriram City Union Finance Limited, a company incorporated under the
Companies Act, 1956, registered as a Non-Banking Financial Company with
the Reserve Bank of India under Section 45-IA of the Reserve Bank of India
Act, 1934, and having its Registered Office at 123, Angappa Naicken
Street, Chennai-600001, Tamil Nadu, India
AOA/Articles / Articles of Association
Articles of Association of our Company
Board / Board of Directors
The Board of Directors of our Company and includes any Committee thereof
from time to time
DIN
Director Identification Number
ESOP 2006
The Company Employee Stock Option Scheme of the year 2006, namely, “SCUF
Employee Stock Option Scheme 2006”
ESOP 2008
The Company Employee Stock Option Scheme of the year 2008, namely, “SCUF
Employee Stock Option Scheme 2008”
Equity Shares
Equity shares of face value of ` 10/- each of our Company
Fitch
Fitch Ratings India Private Limited
Loan Assets
Assets under financing activities
Memorandum / MOA
Memorandum of Association of our Company
Net Interest Margins/NIM
Interest income net off the amount of outgoing interest paid by the Company
on its liabilities
Net Loan Assets
Assets under financing activities net of provision for non-performing assets
NAV
Net Asset Value
NBFC
Non-Banking Financial Company as defined under Section 45-IA of the RBI
Act, 1934
NPA
Non Performing Asset
Promoter(s)
Shriram Enterprise Holdings Private Limited and Shriram Retail holdings
Private Limited
` / Rs./ INR/ Rupees
The lawful currency of the Republic of India
SCL
Shriram Capital Limited
i
Term
Description
SEHPL
Shriram Enterprise Holdings Private Limited
SHFL
Shriram Housing Finance Limited
SRHPL
Shriram Retail Holdings Private Limited
Shriram Chits
Entities operating under the brand name of “Shriram Chits” namely, Shriram
Chits Private Limited, Shriram Chits Tamilnadu Private Limited, Shriram Chits
Karnataka Private Limited, and Shriram Chits Maharashtra Private Limited
Shriram Group
Entities operating under the “Shriram” brand name
Statutory Auditor
Our statutory auditor being M/s Pijush Gupta & Co.
Subsidiary
Subsidiary of our Company namely Shriram Housing Finance Limited
“We”, “us” and “our”
Our Company and/or its Subsidiary, unless the context otherwise requires
Issue related terms
Term
Description
Allotment / Allotted
Unless the context otherwise requires, the allotment of the NCDs pursuant to the
Issue to the Allottees
Allottee
The successful applicant to whom the NCDs are being/have been allotted
Application Form
The form used by an applicant to apply for NCDs being issued through the
Prospectus
Bankers to the Issue/Escrow Collection
Banks
The bank(s) with whom Escrow Accounts will be opened as specified on page
24 of this Prospectus
Base Issue
Public Issue of NCDs by our Company aggregating upto ` 37,500 lakhs
Basis of Allotment
The basis on which NCDs will be allotted to applicants under the Issue and
which is described in “Issue Procedure – Basis of Allotment” on page 165 of this
Prospectus.
CARE
Credit Analysis and Research Limited
CRISIL
CRISIL Limited
Co-Lead Manager
Karvy Investor Services Limited
Debentures / NCDs
Secured, Redeemable, Non-Convertible Debentures offered through this
Prospectus aggregating upto ` 37,500 lakhs with an option to retain oversubscription upto ` 37,500 lakhs for issuance of additional NCDs aggregating to
a total of upto ` 75,000 lakhs.
ii
Term
Description
Debenture Holder (s)
The holders of the NCDs
Debt Listing Agreement
The listing agreement entered into/to be entered into between our Company and
the relevant stock exchange(s) in connection with the listing of debt securities of
our Company.
Debt Regulations
SEBI (Issue and Listing of Debt Securities) Regulations, 2008, issued by SEBI,
effective from June 6, 2008 as amended from time to time
Deemed Date of Allotment
The date of issue of the Allotment Advice / regret.
Depositories Act
The Depositories Act, 1996, as amended from time to time
Depository(ies)
National Securities Depository Limited (NSDL) and /or Central Depository
Services (India) Limited (CDSL)
DP / Depository Participant
A depository participant as defined under the Depositories Act
Designated Stock Exchange
National Stock Exchange of India Limited
Draft Prospectus / Draft Offer
Document
The draft prospectus dated July 21, 2011 filed with the NSE for receiving public
comments in accordance with the provisions of the Act and the Debt Regulations
Early Redemption (Call) Date
The date, 48 months after the expiry of the Deemed Date of Allotment , after
which our Company has the right to exercise its Call Option with respect to
Option I NCDs
Early Redemption (Call) Period
The period of 30 days from the Early Redemption (Call) Date within which our
Company has the right to exercise its Call Option with respect to Option I NCDs
Early Redemption (Put) Date
The date, 48 months after the expiry of the Deemed Date of Allotment Date,
after which a holder of Option I NCDs has the right to exercise his Put Option
with respect to the Option I NCDs held by him
Early Redemption (Put) Period
The period of 30 days from the Early Redemption (Put) Date within which a
holder of Option I NCDs has the right to exercise his Put Option with respect to
the Option I NCDs held by him
Escrow Agreement
Agreement dated July 28, 2011 entered into amongst our Company, the
Registrar, the Escrow Collection Bank(s) and the Lead Managers for collection
of the application amounts and for remitting refunds, if any, of the amounts
collected, to the applicants on the terms and conditions contained therein
Escrow Account
Accounts opened in connection with the Issue with the Escrow Collection Banks
and in whose favour the applicant will issue cheques or bank drafts in respect of
the application amount while submitting the application
Institutional Portion
Portion of applications received from Category I of persons eligible to
apply for the issue which includes Public Financial Institutions, Statutory
Corporations, Commercial Banks, Co-operative Banks and Regional Rural
Banks which are authorised to invest in the NCDs, Provident Funds, Pension
iii
Term
Description
Funds and Superannuation Funds and Gratuity Funds which are authorised to
invest in the NCDs, Venture Capital funds registered with SEBI, Insurance
Companies registered with the IRDA, National Investment Fund and Mutual
Funds
Issue
Public Issue by our Company of NCDs aggregating upto ` 37,500 lakhs with an
option to retain over-subscription upto 37,500 lakhs for issuance of additional
NCDs aggregating to a total of upto ` 75,000 lakhs.
Issue Opening Date
August 11, 2011
Issue Closing Date
August 27, 2011
Lead Brokers
A.K. Stockmart Private Limited, JM Financial Services Private Limited, Karvy
Stock Broking Limited, ICICI Securities Limited, R.R Equity Brokers Private
Limited, SPA Securities Limited, Integrated Securities Limited, HDFC Securities
Limited, Edelweiss Broking Limited, Bajaj Capital Investor Services Limited,
Kotak Securities Limited, Enam Securities Private Limited, SMC Global
Securities Limited, and Anand Rathi Shares & Stock Brokers Limited
Lead Managers
JM Financial Consultants Private Limited, A. K. Capital Services Limited and
ICICI Securities Limited
Market Lot
One NCD
Non-Institutional Portion
Category II of persons eligible to apply for the issue which includes
Companies, Bodies Corporate and Societies registered under the applicable laws
in India and authorised to invest in NCDs, Public/Private Charitable/Religious
Trusts which are authorised to invest in the NCDs, Scientific and/or Industrial
Research Organisations which are authorised to invest in the NCDs, Partnership
Firms in the name of the partners and Limited liability partnerships formed and
registered under the provisions of the Limited Liability Partnership Act, 2008
(No. 6 of 2009)
Options
Options being offered to the applicants as stated in the section titled ‘Issue
Related Information’ beginning on page 141 of this Prospectus
Prospectus / Offer Document
This Prospectus dated August 1, 2011 issued and filed/to be filed with the ROC
in accordance with the Debt Regulations containing inter alia the coupon rate for
the NCDs and certain other information
Put Option
The right of holders of Option I NCDs to seek redemption of such Option I
NCDs held by them at the expiry of 48 months, from the Deemed Date of
Allotment
Registrar to the Issue
Integrated Enterprises (India) Limited
Senior Citizen
Any person who has completed the age of 60 years as on the date of the
Prospectus
Trustees / Debenture Trustee
Trustees for the Debenture Holders in this case being IDBI Trusteeship Services
Limited.
iv
∗ The subscription list shall remain open for a period as indicated herein, with an option for early closure or
extension by such period, as may be decided by the duly authorised committee of Directors of our Company, subject
to necessary approvals. In the event of such early closure of subscription list of the Issue, our Company shall ensure
that notice of such early closure is given on such early date of closure through advertisement/s in a leading national
daily newspaper.
Technical & Industry Terms
Term
Description
ALM
Asset Liability Management
ALCO
Asset - Liability Committee
CAR
Capital Adequacy Ratio computed on the basis of applicable RBI
requirements
KYC Norms
Customer identification procedure for opening of accounts and monitoring
transactions of suspicious nature followed by NBFCs for the purpose of
reporting it to appropriate authority
MSME
Micro Small and Medium Enterprises
Non-Deposit Accepting NBFC
Directions
Non-Banking Financial (Non-Deposit Accepting or Holding) Companies
Prudential Norms (Reserve Bank) Directions, 2007
NBFC-D
NBFC registered as a deposit accepting NBFC
NBFC-ND
NBFC registered as a non-deposit accepting NBFC
Prudential Norms
Non-Banking Financial (Deposit Accepting or Holding) Companies
Prudential Norms (Reserve Bank) Directions, 2007
Public Deposit Directions
The Non-Banking Financial Companies Acceptance of Public Deposits
(Reserve Bank) Directions, 1998
SME
Small and Medium Enterprises
Conventional / General Terms
Term
Description
AGM
Annual General Meeting
AS
Accounting Standard
Act
The Companies Act, 1956, as amended from time to time
BSE
Bombay Stock Exchange Limited
CAGR
Compounded Annual Growth Rate
CDSL
Central Depository Services (India) Limited
v
Term
Description
DRR
Debenture Redemption Reserve
EGM
Extraordinary General Meeting
EPS
Earnings Per Share
FDI Policy
FDI in an Indian company is governed by the provisions of the FEMA read
with the FEMA Regulations and the Foreign Direct Investment Policy
FEMA
Foreign Exchange Management Act, 1999, as amended from time to time
FEMA Regulations
Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident Outside India) Regulations, 2000, as amended from time to time
FII/FIIs
Foreign Institutional Investor(s)
Financial Year / FY
Financial Year ending March 31
GDP
Gross Domestic Product
GoI
Government of India
HUF
Hindu Undivided Family
IFRS
International Financial Reporting Standards
IFSC
Indian Financial System Code
Indian GAAP
Generally Accepted Accounting Principles in India
IRDA
Insurance Regulatory and Development Authority
IT Act
The Income Tax Act, 1961, as amended from time to time
MCA
Ministry of Corporate Affairs, Government of India
MICR
Magnetic Ink Character Recognition
MSE
Madras Stock Exchange Limited
NECS
National Electronic Clearing Services
NEFT
National Electronic Funds Transfer
NRI
Non Resident Indian
NSDL
National Securities Depository Limited
NSE
National Stock Exchange of India Limited
PAN
Permanent Account Number
vi
Term
Description
RBI
The Reserve Bank of India
RBI Act
The Reserve Bank of India Act, 1934, as amended from time to time
ROC
Registrar of Companies
RTGS
Real Time Gross Settlement
SBI
State Bank of India
SCRA
Securities Contracts (Regulation) Act, 1956, as amended from time to time
SCRR
The Securities Contracts (Regulation) Rules, 1957, as amended from time to
time
SEBI
The Securities and Exchange Board of India constituted under the Securities
and Exchange Board of India Act, 1992
SEBI Act
The Securities and Exchange Board of India Act, 1992 as amended from time
to time
TDS
Tax Deducted at Source
WDM
Wholesale Debt Market
vii
FORWARD LOOKING STATEMENTS
Certain statements contained in this Prospectus that are not statements of historical fact constitute “forward-looking
statements.” Investors can generally identify forward-looking statements by terminology such as “aim”, “anticipate”,
“believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “objective”, “plan”, “potential”, “project”,
“pursue”, “shall”, “should”, “will”, “would”, or other words or phrases of similar import. All statements regarding
our Company’s expected financial condition and results of operations and business plans and prospects are forwardlooking statements. These forward-looking statements include statements as to our Company’ business strategy,
revenue and profitability, planned projects and other matters discussed in this Prospectus that are not historical facts.
These forward-looking statements and any other projections contained in this Prospectus (whether made by our
Company or any third party) are predictions and involve known and unknown risks, uncertainties, assumptions and
other factors that may cause our Company’s actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by such forward-looking statements or
other projections. All forward-looking statements are subject to risks, uncertainties and assumptions about our
Company that could cause actual results to differ materially from those contemplated by the relevant forwardlooking statement. Important factors that could cause actual results to differ materially from our Company’s
expectations include, among others:
•
General economic and business conditions in India and globally;
•
Our ability to successfully implement our strategy, our growth and expansion plans and technological
changes;
•
Our ability to compete effectively and access funds at competitive cost;
•
Changes in the value of Rupee and other currency changes;
•
Unanticipated turbulence in interest rates, equity prices or other rates or prices; the performance of the
financial and capital markets in India and globally;
•
Availability of funds and willingness of our lenders to lend;
•
Changes in political conditions in India;
•
The rate of growth of our Loan Assets;
•
The outcome of any legal or regulatory proceedings we are or may become a party to;
•
Changes in Indian and/or foreign laws and regulations, including tax, accounting, banking, securities,
insurance and other regulations; changes in competition and the pricing environment in India; and regional
or general changes in asset valuations;
•
Any changes in connection with policies, statutory provisions, regulations and/or RBI directions in
connection with NBFCs, including laws that impact our lending rates and our ability to enforce our
collateral;
•
Performance of the sectors and industries that our financial products cater to namely the automobile
industry, the small enterprises finance sector sector etc.
•
Changes in the value of gold prices in connection with our loans against gold.
viii
•
Emergence of new competitors;
•
Performance of the Indian debt and equity markets;
•
Occurrence of natural calamities or natural disasters affecting the areas in which our Company has
operations; and
•
Other factors discussed in this Prospectus, including under the section titled “Risk Factors” beginning on
page 1 of this Prospectus.
All forward-looking statements are subject to risks, uncertainties and assumptions about our Company that could
cause actual results and valuations to differ materially from those contemplated by the relevant statement.
Additional factors that could cause actual results, performance or achievements to differ materially include, but are
not limited to, those discussed under the sections titled “Industry” and “Our Business”. The forward-looking
statements contained in this Prospectus are based on the beliefs of management, as well as the assumptions made by
and information currently available to management. Although our Company believes that the expectations reflected
in such forward-looking statements are reasonable at this time, it cannot assure investors that such expectations will
prove to be correct or will hold good at all times. Given these uncertainties, investors are cautioned not to place
undue reliance on such forward-looking statements. If any of these risks and uncertainties materialise, or if any of
our Company’s underlying assumptions prove to be incorrect, our Company’s actual results of operations or
financial condition could differ materially from that described herein as anticipated, believed, estimated or expected.
All subsequent forward-looking statements attributable to our Company are expressly qualified in their entirety by
reference to these cautionary statements. Neither our Company, our Directors and Officers nor any of their
respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances
arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do
not come to fruition.
ix
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
General
In this Prospectus, unless the context otherwise indicates or implies, references to “you,” “offeree,” “purchaser,”
“subscriber,” “recipient,” “investors” and “potential investor” are to the prospective investors in this Offering,
references to our “Company”, the “Company” or the “Issuer” are to Shriram City Union Finance Limited.
In this Prospectus, references to “US$” is to the legal currency of the United States and references to “Rs.”, “`” and
“Rupees” are to the legal currency of India. All references herein to the “U.S.” or the “United States” are to the
United States of America and its territories and possessions and all references to “India” are to the Republic of India
and its territories and possessions, and the "Government", the "Central Government" or the "State Government" are
to the Government of India, central or state, as applicable.
Unless otherwise stated, references in this Prospectus to a particular year are to the calendar year ended on
December 31 and to a particular “fiscal” or “fiscal year” are to the fiscal year ended on March 31.
Unless otherwise stated all figures pertaining to the financial information in connection with our Company are on an
unconsolidated basis.
Presentation of Financial Information
Our Company publishes its financial statements in Rupees. Our Company’s financial statements are prepared in
accordance with Indian GAAP and the Companies Act.
The Reformatted Unconsolidated Summary Financial Statements and the Reformatted Consolidated Summary
Financial Statements are included in this Prospectus and collectively referred to hereinafter as the “Reformatted
Summary Financial Statements”. The examination reports on the Reformatted Summary Financial Statements, as
issued by our Company’s Statutory Auditor, M/s Pijush Gupta & Co, are included in this Prospectus in the section
titled “Financial Information” beginning at page 130.
Any discrepancies in the tables included herein between the amounts listed and the totals thereof are due to rounding
off.
Unless stated otherwise, macroeconomic and industry data used throughout this Prospectus has been obtained from
publications prepared by providers of industry information, government sources and multilateral institutions. Such
publications generally state that the information contained therein has been obtained from sources believed to be
reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although
the Issuer believes that industry data used in this Prospectus is reliable, it has not been independently verified.
x
SECTION II : RISK FACTORS
Prospective investors should carefully consider the risks and uncertainties described below, in addition to the other
information contained in this Prospectus before making any investment decision relating to the NCDs. If any of the
following risks or other risks that are not currently known or are now deemed immaterial, actually occur, our
business, financial condition and result of operation could suffer, the trading price of the NCDs could decline and
you may lose your all or part of your interest and / or redemption amounts. Unless otherwise stated in the relevant
risk factors set forth below, we are not in a position to specify or quantify the financial or other implications of any
of the risks mentioned herein. The ordering of the risk factors is intended to facilitate ease of reading and reference
and does not in any manner indicate the importance of one risk factor over another.
This Prospectus contains forward looking statements that involve risk and uncertainties. Our Company’s actual
results could differ materially from those anticipated in these forward looking statements as a result of several
factors, including the considerations described below and elsewhere in this Prospectus.
Investors are advised to read the following risk factors carefully before making an investment in the NCDs offered
in this Issue. You must rely on your own examination of our Company and this Issue, including the risks and
uncertainties involved.
INTERNAL RISK FACTORS
Risks relating to our Company and its Business
1.
Our financial performance is particularly vulnerable to interest rate volatility.
Our results of operations are substantially dependent upon the level of our Net Interest Margins. Income
from our financing activities is the largest component of our total income, and constituted 87.73% and
92.95% of our total income in fiscal 2010 and fiscal 2011, respectively. As of March 31, 2011, our assets
under management were ` 799,804.88 lakhs. We borrow funds on both fixed and floating rates. Volatility
in interest rates can materially and adversely affect our financial performance. In a rising interest rate
environment, if the yield on our interest-earning assets does not increase simultaneously with or to the same
extent as our cost of funds, or, in a declining interest rate environment, if our cost of funds does not decline
simultaneously or to the same extent as the yield on our interest-earning assets, our net interest income and
net interest margin would be adversely impacted. Additional risks arising from increasing interest rates,
among others, include:
•
increases in the rates of interest charged on various loans in our loan portfolio, which could result in
the extension of loan maturities and higher monthly installments due from borrowers which, in turn,
could result in higher rates of default;
•
reductions in the volume of product finance loans, auto loans, personal loans, loans against gold and/or
loans to small enterprise finance segment as a result of clients' inability to service high interest rate
payments; and
•
reduction in the value of fixed income securities held in our investment portfolio.
Accordingly, our operations are susceptible to fluctuations in interest rates. Interest rates are highly
sensitive and fluctuations thereof are dependent upon many factors which are beyond our control, including
the monetary policies of the RBI, de-regulation of the financial services sector in India, domestic and
international economic and political conditions, inflation and other factors. Rise in inflation, and
consequent changes in Bank rates, Repo rates and Reverse Repo rates by the RBI has led to an increase in
interest rates on loans provided by banks and financial institutions, and market interest rates in India have
been volatile in recent periods.
1
2.
Our business requires substantial capital, and any disruption in funding sources would have a material
adverse effect on our liquidity and financial condition.
As a finance company, our liquidity and ongoing profitability are, in large part, dependent upon our timely
access to, and the costs associated with, raising capital. Our funding requirements historically have been
met from a combination of term loans from banks and financial institutions, issuance of redeemable nonconvertible debentures, public deposits, the issue of subordinated bonds and commercial paper. Thus, our
business depends and will continue to depend on our ability to access diversified funding sources. Our
ability to raise funds on acceptable terms and at competitive rates continues to depend on various factors
including our credit ratings, the regulatory environment and policy initiatives in India, developments in the
international markets affecting the Indian economy, investors' and/or lenders' perception of demand for
debt and equity securities of NBFCs, and our current and future results of operations and financial
condition.
Changes in economic and financial conditions or continuing lack of liquidity in the market could make it
difficult for us to access funds at competitive rates. As an NBFC, we also face certain restrictions on our
ability to raise money from international markets which may further constrain our ability to raise funds at
attractive rates.
Such conditions may occur again in the future and may lead to a disruption in our primary funding sources
at competitive costs and would have a material adverse effect on our liquidity and financial condition.
3.
High levels of customer defaults could adversely affect our business, financial condition and results of
operations.
Our business involves lending money and accordingly we are subject to customer default risks including
default or delay in repayment of principal or interest on our loans. Customers may default on their
obligations to us as a result of various factors including bankruptcy, lack of liquidity, lack of business and
operational failure. If borrowers fail to repay loans in a timely manner or at all, our financial condition and
results of operations will be adversely impacted.
In addition, our customer portfolio principally consists of the under-banked community who does not
typically have easy access to financing from commercial banks or other organized lenders and often have
limited credit history. Such borrowers generally are less financially resilient than larger corporate
borrowers, and, as a result, they can be more adversely affected by declining economic conditions. In
addition, a significant majority of our client base belongs to the low or middle income group. In addition,
we may not receive updated information regarding any change in the financial condition of our customers
or may receive inaccurate or incomplete information as a result of any fraudulent misrepresentation on the
part of our customers. Furthermore, unlike several developed economies, a nationwide credit bureau has
only recently become operational in India, so there is less financial information available about the
creditworthiness of our customers. It is therefore difficult to carry out precise credit risk analyses on our
clients. Although we follow certain procedures to evaluate the credit profile of our customers at the time of
sanctioning a loan, we generally rely on the referrals from the current or past customers of our Company or
those of other entities in the Shriram Group. Although we believe that our risk management controls are
sufficient, we cannot be certain that they will continue to be sufficient or that additional risk management
policies for individual borrowers will not be required. Failure to continuously monitor the loan contracts,
particularly for individual borrowers, could adversely affect our credit portfolio which could have a
material and adverse effect on our results of operations and financial condition.
4.
We may not be able to recover, on a timely basis or at all, the full value of collateral or amounts which
are sufficient to cover the outstanding amounts due under defaulted loans.
For our two-wheeler and other vehicle loans, the two-wheeler/vehicle is typically hypothecated in favour of
our Company for the tenure of the loan. The value of the vehicle, however, is subject to depreciation,
deterioration, and/or reduction in value on account of other extraneous reasons, over the course of time.
Consequently, the realizable value of the collateral for the credit facility provided by us, when liquidated,
2
may be lower than the outstanding loan from such customers. The hypothecated vehicles, being movable
property, may be difficult to locate or seize in the event of any default by our customers. There can also be
no assurance that we will be able to sell such vehicles provided as collateral at prices sufficient to cover the
amounts under default. In addition, there may be delays associated with such process.
In connection with loans against gold provided by us, the gold jewellery and/or ornaments are provided as
security. An economic downturn or sharp downward movement in the price of gold could result in a fall in
collateral values. In the event of any decrease in the price of gold, customers may not repay their loans and
the collateral gold jewellery securing the loans may have decreased significantly in value, resulting in
losses which we may not be able to support. No assurance can be given that if the price of gold decreased
significantly, our financial condition and results of operations from this business product would not be
adversely affected. The impact on our financial position and results of operations of a hypothetical decrease
in gold values cannot be reasonably estimated because the market and competitive response to changes in
gold values is not pre-determinable. Additionally, we may not be able to realise the full value of our
collateral, due to, among other things, defects in the quality of gold or wastage on melting gold jewellery
into gold bars. In addition, failure by our employees to properly appraise the value of the collateral provides
us with no recourse against the borrower.
For the personal loans and loans to small enterprises business, in connection with a customer who is also an
existing customer of ‘Shriram Chits’ we typically create a lien over the chit deposits of such customer. If
the value of the chit deposits is insufficient to cover the entire loan amount, we typically also require
immovable or movable property to be provided for the remaining value of the loan amount. In cases where
the customer is unable to provide such immovable or movable property as security, the applicant is also
required to furnish a guarantee from typically an existing or a former customer. Any deterioration in the
value of such additional security or our failure to enforce such guarantees or to enforce such charges in a
timely manner or at all could adversely affect our operations and profitability.
Any default in repayment of the outstanding credit obligations by our customers may expose us to losses. A
failure or delay to recover the expected value from sale of collateral security could expose us to a potential
loss. Any such losses could adversely affect our financial condition and results of operations. Furthermore,
enforcing our legal rights by litigating against defaulting customers is generally a slow and potentially
expensive process in India. Accordingly, it may be difficult for us to recover amounts owed by defaulting
customers in a timely manner or at all.
5.
Our significant indebtedness and the conditions and restrictions imposed by our financing arrangements
could restrict our ability to conduct our business and operations in the manner we desire.
As of March 31, 2011, we had outstanding secured debt of ` 656,951.01 lakhs and unsecured debt of `
75,827.43 lakhs and we will continue to incur additional indebtedness in the future. Most of our borrowings
are secured by our immovable and other assets. Our significant indebtedness could have several important
consequences, including but not limited to the following:
•
a portion of our cash flow may be used towards repayment of our existing debt, which will reduce
the availability of our cash flow to fund working capital, capital expenditures, acquisitions and
other general corporate requirements;
•
our ability to obtain additional financing in the future at reasonable terms may be restricted or our
cost of borrowings may increase due to sudden adverse market conditions, including decreased
availability of credit or fluctuations in interest rates;
•
fluctuations in market interest rates may affect the cost of our borrowings as some of our
indebtedness are at variable interest rates;
•
there could be a material adverse effect on our business, financial condition and results of
operations if we are unable to service our indebtedness or otherwise comply with financial and
other covenants specified in the financing agreements; and
•
we may be more vulnerable to economic downturns, may be limited in our ability to withstand
3
competitive pressures and may have reduced flexibility in responding to changing business,
regulatory and economic conditions.
Some of our financing agreements also include various conditions and covenants that require us to obtain
lender consents prior to carrying out certain activities and entering into certain transactions. Failure to meet
these conditions or obtain these consents could have significant consequences on our business and
operations. Specifically, under some of our financing agreements, we require, and may be unable to obtain,
consents from the relevant lenders for, among others, the following matters: entering into any scheme of
merger; spinning-off of a business division; selling or transferring all or a substantial portion of our assets;
making any change in ownership or control or constitution of our Company; making amendments in our
Memorandum and Articles of Association; creating any further security interest on the assets upon which
the existing lenders have a prior charge; and raising funds by way of any fresh capital issue. Our financing
agreements also typically contain certain financial covenants including the requirement to maintain, among
others, specified debt-to-equity ratios, debt-to-net worth ratios, or Tier I to Tier II capital ratios that may be
higher than statutory or regulatory requirements. These covenants vary depending on the requirements of
the financial institution extending the loan and the conditions negotiated under each financing document.
Such covenants may restrict or delay certain actions or initiatives that we may propose to take from time to
time.
A failure to observe the covenants under our financing arrangements or to obtain necessary consents
required thereunder may lead to the termination of our credit facilities, acceleration of all amounts due
under such facilities and the enforcement of any security provided. Any acceleration of amounts due under
such facilities may also trigger cross default provisions under our other financing agreements. If the
obligations under any of our financing documents are accelerated, we may have to dedicate a substantial
portion of our cash flow from operations to make payments under such financing documents, thereby
reducing the availability of cash for our working capital requirements and other general corporate purposes.
Further, during any period in which we are in default, we may be unable to raise, or face difficulties raising,
further financing. Any of these circumstances could adversely affect our business, credit rating and
financial condition and results of operations. Moreover, any such action initiated by our lenders could result
in the price of our NCDs being adversely affected.
6.
Our entire customer base comprises individual and/or small enterprise segment borrowers, who
generally are more likely to be affected by declining economic conditions than larger corporate
borrowers.
Individual and small enterprise segment borrowers generally are less financially resilient than larger
corporate borrowers, and, as a result, they can be more adversely affected by declining economic
conditions. In addition, a significant majority of our customer base belongs to the low to medium income
group and/or the small enterprises finance sector. Furthermore, unlike several developed economies, a
nationwide credit bureau has only recently become operational in India, so there is less financial
information available about individuals, particularly our focus customer segment from the low to medium
income group who typically have limited access to other financing sources. It is therefore difficult to carry
out precise credit risk analyses on our customers. Although we believe that our risk management controls
are sufficient, we cannot be certain that they will continue to be sufficient or that additional risk
management policies for individual borrowers will not be required. Failure to maintain sufficient credit
assessment policies, particularly for individual borrowers, could adversely affect our credit portfolio which
could have a material and adverse effect on our results of operations and financial condition.
7.
We face increasing competition in our business which may result in declining margins if we are unable
to compete effectively.
We face competition in all our lines of businesses. Our primary competitors are other NBFCs, public sector
banks, private sector banks, co-operative banks and foreign banks and the unorganized financiers who
principally operate in the local markets. Over the past few years, the retail financing area has seen the entry
of banks, both nationalized as well as foreign. Banks have access to low cost funds which enables them to
enjoy higher margins and / or offer finance at lower rates. NBFCs do not have access to large quantities of
low cost deposits, a factor which can render them less competitive. In addition, interest rate deregulation
4
and other liberalization measures affecting the retail and small enterprises finance sector, together with
increased demand for capital by individuals as well as small enterprises, have resulted in an increase in
competition.
All of these factors have resulted in us facing increased competition from other lenders in each of our lines
of businesses, including commercial banks and other NBFCs. Our ability to compete effectively will
depend, to some extent, on our ability to raise low-cost funding in the future. Furthermore, as a result of
increased competition in the finance sector, finance products are becoming increasingly standardized and
variable interest rate and payment terms and lower processing fees are becoming increasingly common in
the finance sector in India. There can be no assurance that we will be able to react effectively to these or
other market developments or compete effectively with new and existing players in the increasingly
competitive finance industry. Increasing competition may have an adverse effect on our net interest margin
and other income, and, if we are unable to compete successfully, our market share may decline.
If we are unable to compete effectively with other participants in the finance sector, our business, future
financial performance and the trading price of the NCDs may be adversely affected.
8.
Since we handle high volume of cash and gold jewellery in a dispersed network of branches, we are
exposed to operational risks, including employee negligence, fraud, petty theft, burglary and
embezzlement, which could harm our results of operations and financial position.
Our transactions in connection with loans against gold, personal loans and loans to the small enterprises
finance segment involve cash and gold jewellery. Large cash and gold jewellery transactions expose us to
the risk of fraud by employees, agents, customers or third parties, theft, burglary and misappropriation or
unauthorized transactions by our employees. Our insurance policies, security systems and measures
undertaken to detect and prevent these risks may not be sufficient to prevent or deter such activities in all
cases, which may adversely affect our operations and profitability. Further, we may be subject to regulatory
or other proceedings in connection with any unauthorized transaction, fraud or misappropriation by our
representatives and employees, which could adversely affect our goodwill. The nature and size of the items
provided as collateral allow these items to be misplaced or mis-delivered, which may have a negative
impact on our operations and result in losses.
9.
We may not be able to successfully sustain our growth strategy.
We have demonstrated consistent growth in our business and in our profitability. Our Assets Under
Management have grown by a compounded annual growth rate, or CAGR, of 34% from ` 250,686.49 lakhs
as of March 31, 2007 to ` 799,804.88 lakhs as of March 31, 2011. Our capital adequacy ratio as of March
31, 2011 computed on the basis of applicable RBI requirements was 20.53%, compared to the RBI stipulated
minimum requirement of 12.00%. Our Tier I capital as of March 31, 2011 was ` 119,419 lakhs. Our Gross
NPAs as a percentage of Total Loan Assets were 1.86% as of March 31, 2011. Our Net NPAs as a
percentage of Net Loan Assets was 0.43% as of March 31, 2011. Our total income increased from `
34,805.91 lakhs in fiscal 2007 to ` 132,091.19 lakhs in fiscal 2011 at a CAGR of 40%. Our net profit after
tax increased from ` 5,162.16 lakhs in fiscal 2007 to ` 24,058.85 lakhs in fiscal 2011, at a CAGR of 47%.
Our growth strategy includes growing our loan book and expanding our customer base. There can be no
assurance that we will be able to sustain our growth strategy successfully or that we will be able to expand
further or diversify our product portfolio. If we grow our loan book too rapidly or fail to make proper
assessments of credit risks associated with new borrowers, a higher percentage of our loans may become
non-performing, which would have a negative impact on the quality of our assets and our financial
condition.
We also face a number of operational risks in executing our growth strategy. We have experienced growth
in each of our lines of business particularly in connection with loans to the small enterprises segment and
loans against gold businesses, our branch network has expanded significantly, we are entering into new,
smaller towns and cities within India as part of our growth strategy and gradually introducing all our
products in each of our branches.
5
Our rapid growth exposes us to a wide range of increased risks, including business risks, such as the
possibility that a number of our impaired loans may grow faster than anticipated, as well as operational
risks, fraud risks and regulatory and legal risks. Moreover, our ability to sustain our rate of growth depends
significantly upon our ability to manage key issues such as selecting and retaining key managerial
personnel, maintaining effective risk management policies, continuing to offer products which are relevant
to our target base of clients, developing managerial experience to address emerging challenges and
ensuring a high standard of client service. We will need to recruit new employees, who will have to be
trained and integrated into our operations. We will also have to train existing employees to adhere properly
to internal controls and risk management procedures. Failure to train our employees properly may result in
an increase in employee attrition rates, require additional hiring, erode the quality of customer service,
divert management resources, increase our exposure to high-risk credit and impose significant costs on us.
10.
We have no prior operating experience in the housing finance business and accordingly, we may not be
able to successfully implement our growth strategy to foray into the housing finance business.
Our Company incorporated a wholly owned subsidiary namely Shriram Housing Finance Limited in
November 2010, with a view of entering the housing finance sector. We have applied to National Housing
Bank (wholly owned by the Reserve Bank of India), for a certificate of registration under the National
Housing Bank Act, 1987, to carry on business of a housing finance institution. The aforesaid Subsidiary will
commence operations once it is registered with the National Housing Bank. Shriram Housing Finance Limited
will typically target middle-income customers in semi-urban locations.
We cannot assure that our foray into the housing finance business would yield favorable or expected results
as our overall profitability and success will be subject to various factors including, among others, our
ability to obtain necessary statutory and/or regulatory approvals and licenses in connection with the said
business, our ability to effectively recruit, retain and motivate appropriate managerial talent, our
inexperience in the housing finance sector and ability to compete with banks, housing finance companies
and other financial institutions that are already well established in this market segment as well as our ability
to effectively absorb additional infrastructure costs.
Our housing finance business will require significant capital investments and commitments of time from
our senior management, there also can be no assurance that our management will be able to develop the
skills necessary to successfully manage these new business areas. Our inability to effectively manage any
of these issues could materially and adversely affect our business and impact our future financial
performance.
11.
We may experience difficulties in expanding our business into new regions and markets in India and
introducing our complete range of products in each of our branches.
As part of our growth strategy, we continue to evaluate attractive growth opportunities to expand our
business into new regions and markets in India. Factors such as competition, culture, regulatory regimes,
business practices and customs and customer requirements in these new markets may differ from those in
our current markets and our experience in our current markets may not be applicable to these new markets.
In addition, as we enter new markets and geographical regions, we are likely to compete not only with
other banks and financial institutions but also the local unorganized or semi-organized private financiers,
who are more familiar with local regulations, business practices and customs and have stronger
relationships with customers.
As a part of our growth strategy, we propose to target establishing our operations through new branches in
cities and towns where we historically had relatively limited operations, such as in eastern and northern
parts of India, and to further consolidate our position and operations in western and southern parts of India.
We target to gradually introduce our entire range of product offerings, namely (i) product finance loans, (ii)
pre-owned and new vehicles loans, (iii) personal loans, (iv) loans against gold, and (v) loans to small
enterprises at each of our existing branches across India.
Our business may be exposed to various additional challenges including obtaining necessary governmental
approvals, identifying and collaborating with local business and partners with whom we may have no
6
previous working relationship; successfully gauging market conditions in local markets with which we
have no previous familiarity; attracting potential customers in a market in which we do not have significant
experience or visibility; being susceptible to local taxation in additional geographical areas of India and
adapting our marketing strategy and operations to different regions of India in which different languages
are spoken. Our inability to expand our current operations may adversely affect our business prospects,
financial conditions and results of operations.
12.
A large number of our branches are located in southern India, and any downturn in the economy in the
states in India where we operate, or any change in consumer preferences in that region could adversely
affect our results of operations and financial condition.
We have a strong concentration of our business in south India with 248 of our 559 branches as on March
31, 2011, located in the states of Tamil Nadu, Andhra Pradesh and Karnataka. Any adverse change in the
political and/or economic environment in the states of Tamil Nadu, Andhra Pradesh and Karnataka or any
unfavourable changes in the regulatory and policy regime in the said region could adversely affect our
manufacturing operations, financial condition and/or profitbility. Further, any changes in consumer
preferences in the said region could also affect our operations and profitability.
13.
Any downgrade of our credit ratings would increase borrowing costs and constrain our access to capital
and lending markets and, as a result, would negatively affect our net interest margin and our business.
In relation to our long-term debt instruments, we currently have ratings of CARE AA from Credit Analysis
and Research Limited (“CARE”), AA-(ind) from Fitch Ratings India Private Limited, (“Fitch”) and
CRISIL AA- /Stable from CRISIL. In relation to our short-term debt instruments, we have also received
ratings of CARE A1+ from CARE, F1+(ind) from Fitch, and CRISIL A1+ from CRISIL. Our fixed deposit
programme has been rated as CARE AA (FD) by CARE, and tAA- (ind) by Fitch. The NCDs proposed to
be issued under this Issue have been rated CARE AA by CARE for an amount of upto ` 75,000 Lakhs vide
its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs
vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high degree of safety
regarding timely servicing of financial obligations and carrying very low credit risk. The rating of NCDs by
CRISIL indicates high degree of safety regarding timely servicing of financial obligations.
Any downgrade of our credit ratings would increase borrowing costs and constrain our access to capital and
debt markets and, as a result, would negatively affect our net interest margin and our business. In addition,
downgrades of our credit ratings could increase the possibility of additional terms and conditions being
added to any additional financing or refinancing arrangements in the future. Any such adverse development
could adversely affect our business, financial condition and results of operations. A large number of our
branches are located in southern India and any downturn in the economy of southern India or adverse
change in consumer preferences in that region could adversely affect our results of operations
14.
If we are unable to manage the level of NPAs in our Loan Assets, our financial position and results of
operations may suffer.
Our Gross NPAs as a percentage of Total Loan Assets were 1.86 % and 2.27 % as of March 31, 2011 and
March 31, 2010 respectively, while our Net NPAs as a percentage of Net Loan Assets were 0.43 % and
0.71 % as of March 31, 2011 and March 31, 2010, respectively. We cannot be sure that we will be able to
improve our collections and recoveries in relation to our NPAs or otherwise adequately control our level of
NPAs in future. Moreover, as our loan portfolio matures, we may experience greater defaults in principal
and/or interest repayments. Thus, if we are not able to control or reduce our level of NPAs, the overall
quality of our loan portfolio may deteriorate and our results of operations may be adversely affected.
Furthermore, our current provisions may not be adequate when compared to the loan portfolios of other
financial institutions. Moreover, there also can be no assurance that there will be no further deterioration in
our provisioning coverage as a percentage of Gross NPAs or otherwise, or that the percentage of NPAs that
we will be able to recover will be similar to our past experience of recoveries of NPAs. In the event of any
further deterioration in our NPA portfolio, there could be an even greater, adverse impact on our results of
operations.
7
15.
A decline in our capital adequacy ratio could restrict our future business growth.
As per RBI notification dated February 17, 2011, all deposit taking NBFCs have to maintain a minimum
capital adequacy ratio, consisting of Tier I and Tier II capital, which shall not be less than 15.00% of its
aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items w.e.f.
March 31, 2012. Our capital adequacy ratio computed on the basis of applicable RBI requirements was
20.53 % as of March 31, 2011, with Tier I capital comprising 16.36 %. If we continue to grow our loan
portfolio and asset base, we will be required to raise additional Tier I and Tier II capital in order to continue
to meet applicable capital adequacy ratios with respect to our business. There can be no assurance that we
will be able to raise adequate additional capital in the future on terms favorable to us or at all and this may
adversely affect the growth of our business.
16.
System failures or inadequacy and security breaches in computer systems may adversely affect our
business.
Our business is increasingly dependent on our ability to process, on a daily basis, a large number of
transactions. Our financial, accounting or other data processing systems may fail to operate adequately or
become disabled as a result of events that are wholly or partially beyond our control including a disruption
of electrical or communications services.
Our ability to operate and remain competitive will depend in part on our ability to maintain and upgrade
our information technology systems on a timely and cost-effective basis. The information available to and
received by our management through our existing systems may not be timely and sufficient to manage risks
or to plan for and respond to changes in market conditions and other developments in our operations. We
may experience difficulties in upgrading, developing and expanding our systems quickly enough to
accommodate our growing customer base and range of products.
Our operations also rely on the secure processing, storage and transmission of confidential and other
information in our computer systems and networks. Our computer systems, software and networks may be
vulnerable to unauthorized access, computer viruses or other malicious code and other events that could
compromise data integrity and security.
Any failure to effectively maintain or improve or upgrade our management information systems in a timely
manner could materially and adversely affect our competitiveness, financial position and results of
operations. Moreover, if any of these systems do not operate properly or are disabled or if there are other
shortcomings or failures in our internal processes or systems, it could affect our operations or result in
financial loss, disruption of our businesses, regulatory intervention or damage to our reputation. In addition,
our ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports
our businesses and the localities in which we are located.
17.
We may not be able to maintain our current levels of profitability due to increased costs or reduced
spreads.
Our business strategy involves a relatively high level of ongoing interaction with our customers. We
believe that this involvement is an important part of developing our relationship with our customers,
identifying new cross-selling opportunities and monitoring our performance. However, this level of
involvement also entails higher levels of costs and also requires a relatively higher gross spread, or margin,
on the finance products we offer in order to maintain profitability. There can be no assurance that we will
be able to maintain our current levels of profitability if the gross spreads on our finance products were to
reduce substantially, which could adversely affect our results of operations.
18.
As part of our business strategy we assign or securitize a substantial portion of our Loan Assets to banks
and other institutions. Any deterioration in the performance of any pool of receivables assigned or
securitized to banks and other institutions may adversely impact our financial performance.
8
As part of our means of raising and/or managing our funds, we assign or securitize a substantial portion of
the receivables from our loan portfolio to banks and other institutions. Such assignment or securitization
transactions are conducted on the basis of our internal estimates of our funding requirements, which may
vary from time to time. In fiscal 2007, 2008, 2009, 2010 and 2011 we securitized/assigned assets of a book
value of ` 80,493.74 lakhs, ` 75,781.80 lakhs, ` 88,844.37 lakhs, ` 30,000 lakhs, and ` 117,915.72 lakhs
respectively. Any change in statutory and/regulatory requirements in relation to assignments or
securitizations by financial institutions, including the requirements prescribed by RBI and the Government
of India, could have an adverse impact on our assignment or securitization transactions. Any adverse
changes in the policy and/or regulations in connection with securitization of assets by NBFCs and/or new
circulars and/or directions issued by the RBI in this regard, affecting NBFCs or the purchasers of assets,
would affect the securitization market in general and our ability to securitise and/or assign our assets.
We are also required to provide a credit enhancement for the securitization/assignment transactions by way
of either fixed deposits or corporate guarantees and the aggregate credit enhancement amount outstanding
as on March 31, 2011 was ` 15,436.40 lakhs by way of cash collateral. In the event a relevant bank or
institution does not realize the receivables due under such Loan Assets, such bank or institution would have
recourse to such credit enhancement, which could have a material adverse effect on our results of
operations and financial condition.
19.
We face asset-liability mismatches which could affect our liquidity and consequently may adversely
affect our operations and profitability.
We face potential liquidity risks due to varying periods over which our assets and liabilities mature. As is
typical for NBFCs, a portion of our funding requirements is met through short-term funding sources such as
bank loans, working capital demand loans, cash credit, short term loans and commercial papers. However,
each of our products differs in terms of the average tenor, average yield, average interest rates and average
size of loan. The average tenor of our products may not match with the average tenor of our liabilities.
Consequently, our inability to obtain additional credit facilities or renew our existing credit facilities, in a
timely and cost-effective manner or at all, may lead to mismatches between our assets and liabilities, which
in turn may adversely affect our operations and financial performance. Further, mismatches between our
assets and liabilities are compounded in case of pre-payments of the financing facilities we grant to our
customers.
20.
Any change in control of our Promoters and/or any disassociation of our Company from the Shriram
Group could adversely affect our operations and profitability.
As of June 31, 2011, SCL holds 50.99 % of the paid up share capital of our Promoter Shriram Retail
Holdings Private Limited, (“SRHPL”), and the remaining shares in SRHPL were held by certain strategic
investors. SEHPL and SRHPL hold 36.04% and 17.20% of the paid up share capital of our Company as on
March 31, 2011, respectively. If SCL ceases to exercise control over SRHPL as a result of any transfer of
shares or otherwise, our ability to derive any benefit from the brand name “Shriram” and our goodwill as a
part of the Shriram Group of companies may be adversely affected, which in turn could adversely affect
our business and results of operations. Any such change of control could also significantly influence our
business policies and operations.
We benefit in several ways from other entities under the Shriram Group. We leverage on the Shriram
Group’s ecosystem to reach out to our prospective customers and our focus has been in maximizing our
association with the “Shriram” brand name and the synergies offered by the infrastructure, of other entities
in the Shriram Group. Our customer base over the years has comprised of customers of other entities in the
Shriram Group. The large customer bases and wide-spread network of branches of entities such as Shriram
Transport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), and
entities operating under the “Shriram Chits” brand name has continued to provide us with a large platform
of target customers. Further, typically loans provided to chit depositors of Shriram Chits are partly or
entirely secured by the deposits made with Shriram Chits. Accordingly, any disassociation of our Company
from the Shriram Group and/or our inability to have access to the infrastructure provided by other
9
companies in the Shriram Group could adversely affect our ability to attract customers and to expand our
business, which in turn could adversely affect our goodwill, operations and profitability.
21.
The trade mark/service mark and logo in connection with the “Shriram” brand which we use is licensed
to us and consequently, any termination or non-renewal of such license may adversely affect our
goodwill, operations and profitability.
Pursuant to a license agreement dated April 1, 2010 between our Company and Shriram Ownership Trust,
(“SOT”) we are entitled to use the brand name “Shriram” and the associated mark. In this regard, our
Company has to pay to SOT, 0.25% on the gross turnover of our Company for the first year of the license
agreement. Royalty rates for the subsequent years will be decided mutually on or before April 1st of the
respective financial years. Along with the royalty, our Company also is required to pay to SOT amounts by
way of reimbursement of actual expenses incurred by SOT in respect of protection and defence of the
Copyright. The agreement is valid for a period of three years from the date of execution thereof, subject to
any pre-mature termination thereof by SOT in accordance with the terms and conditions of the agreement.
In the event such license agreement is terminated or is not renewed or extended in the future, we may not
be entitled to use the brand name “Shriram” and the associated mark in connection with our business
operations. Consequently, we will not be able to derive the goodwill that we have been enjoying under the
“Shriram” brand. Further, if the commercial terms and conditions including the consideration payable
pursuant to the said agreement are revised unfavorably, our Company may be required to allocate larger
portions of its profits and/or revenues towards such consideration, which would adversely affect our
profitability.
We operate in a competitive environment and we believe that our brand recognition is a significant
competitive advantage to us. If the license and user agreement is not renewed or terminated, we may need
to change our name, trade mark/service mark or the logo. Any such change could require us to incur
additional costs and may adversely impact our goodwill, business prospects and results of operations.
22.
We have certain contingent liabilities which may adversely affect our financial condition.
As of March 31, 2011, we had certain contingent liabilities not provided for, including the following:
•
•
Guarantees issued by the company –`6.81 lakhs
Guarantees issued by others –` 1,942.77 lakhs
For further information on such contingent liabilities, see Annexure VI to our Reformatted Consolidated
Summary Financial Statements. In the event that any of these contingent liabilities materialize, our
financial condition may be adversely affected.
23.
We are involved in various legal and other proceedings that if determined against us could have a
material adverse effect on our financial condition and results of operations.
We are currently involved in a number of legal proceedings arising in the ordinary course of our business.
These proceedings are pending at different levels of adjudication before various courts and tribunals,
primarily relating to civil suits and tax disputes. For further information relating to certain significant legal
proceedings that we are involved in, please refer to the section titled “Pending Proceedings and Statutory
Defaults” beginning on page 169 of this Prospectus.
An adverse decision in these proceedings could materially and adversely affect our business, financial
condition and results of operations.
10
24.
We may have to comply with strict regulations and guidelines issued by regulatory authorities in India.
We are regulated principally by and have reporting obligations to the RBI. We are also subject to the
corporate, taxation and other laws in effect in India. The regulatory and legal framework governing us may
continue to change as India’s economy and commercial and financial markets evolve. In recent years,
existing rules and regulations have been modified, new rules and regulations have been enacted and
reforms have been implemented which are intended to provide tighter control and more transparency in
India’s asset finance sector. Further, RBI may increase the minimum capital adequacy requirement for
deposit taking NBFCs such as us.
Compliance with many of the regulations applicable to our operations may involve significant costs and
otherwise may impose restrictions on our operations. If the interpretation of the regulators and authorities
varies from our interpretation, we may be subject to penalties and the business of our Company could be
adversely affected. There can be no assurance that changes in these regulations and the enforcement of
existing and future rules by governmental and regulatory authorities will not adversely affect our business
and future financial performance.
25.
Our ability to assess, monitor and manage risks inherent in our business differs from the standards of
some of our counterparts in India and in some developed countries.
We are exposed to a variety of risks, including liquidity risk, interest rate risk, credit risk, operational risk
and legal risk. The effectiveness of our risk management is limited by the quality and timeliness of
available data.
Our hedging strategies and other risk management techniques may not be fully effective in mitigating our
risks in all market environments or against all types of risk, including risks that are unidentified or
unanticipated. Some methods of managing risks are based upon observed historical market behavior. As a
result, these methods may not predict future risk exposures, which could be greater than the historical
measures indicated. Other risk management methods depend upon an evaluation of information regarding
markets, customers or other matters. This information may not in all cases be accurate, complete, current,
or properly evaluated. Management of operational, legal or regulatory risk requires, among other things,
policies and procedures to properly record and verify a number of transactions and events. Although we
have established these policies and procedures, they may not be fully effective. Our future success will
depend, in part, on our ability to respond to new technological advances and evolving NBFC and retail
finance sector standards and practices on a cost-effective and timely basis. The development and
implementation of such technology entails significant technical and business risks. There can be no
assurance that we will successfully implement new technologies or adapt our transaction-processing
systems to customer requirements or evolving market standards.
26.
Our Promoters have significant control in our Company, which will enable them to influence the
outcome of matters submitted to shareholders for approval, and their interests may differ from those of
other holders of Equity Shares.
As of June 30, 2011, our Promoters SEHPL and SRHPL beneficially owned 36.04% and 17.20%,
respectively, of our paid-up equity share capital. See “Capital Structure”. Our Promoters have the ability to
control our business including matters relating to any sale of all or substantially all of our assets, the timing
and distribution of dividends and the election or termination of appointment of our officers and directors.
This control could delay, defer or prevent a change in control of our Company, impede a merger,
consolidation, takeover or other business combination involving our Company or discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of our Company even if it is
in our Company’s best interest. In addition, for so long as our Promoters continue to exercise significant
control over our Company, it may influence the material policies of our Company in a manner that could
conflict with the interests of our other shareholders. The Promoters may have interests that are adverse to
the interests of our other shareholders and may take positions with which we or our other shareholders do
not agree.
11
27.
We have entered into certain related party transactions and may continue to do so in the future.
We have entered into transactions with related parties, within the meaning of AS 18 as notified by the
Companies (Accounting Standards) Rules, 2006. These transactions include royalty paid to Shriram
Ownership Trust pursuant to the License Agreement dated April 1, 2010 between our Company and
Shriram Ownership Trust in connection with the use of the brand name "Shriram" and the associated mark.
For further information on our related party transactions please see the section titled “Financial
Information”. Such transactions may give rise to current or potential conflicts of interest with respect to
dealings between us and such related parties. Additionally, there can be no assurance that any dispute that
may arise between us and related parties will be resolved in our favor.
28.
Any failure by us to identify, manage, complete and integrate acquisitions, divestitures and other
significant transactions successfully could adversely affect our results of operations, business and
prospects.
As part of our business strategy, we may acquire complementary companies or businesses, divest non-core
businesses or assets, enter into strategic alliances and joint ventures and make investments to further our
business. In order to pursue this strategy successfully, we must identify suitable candidates for and
successfully complete such transactions, some of which may be large and complex, and manage the
integration of acquired companies or employees. We may not fully realize all of the anticipated benefits of
any such transaction within the anticipated timeframe or at all. Any increased or unexpected costs,
unanticipated delays or failure to achieve contractual obligations could make such transactions less
profitable or unprofitable. Managing business combination and investment transactions requires varying
levels of management resources, which may divert our attention from other business operations, may result
in significant costs and expenses and charges to earnings. The challenges involved in integration include:
29.
•
combining product offerings and entering into new markets in which we are not experienced;
•
consolidating and maintaining relationships with customers;
•
consolidating and rationalizing transaction processes and corporate and IT infrastructure;
•
integrating employees and managing employee issues;
•
coordinating and combining administrative and other operations and relationships with third
parties in accordance with applicable laws and other obligations while maintaining adequate
standards, controls and procedures;
•
achieving savings from infrastructure integration; and
•
managing other business, infrastructure and operational integration issues.
Our success depends in large part upon our management team and key personnel and our ability to
attract, train and retain such persons.
Our ability to sustain our rate of growth depends significantly upon our ability to manage key issues such
as selecting and retaining key managerial personnel, developing managerial experience to address emerging
challenges and ensuring a high standard of client service. In order to be successful, we must attract, train,
motivate and retain highly skilled employees, especially branch managers and product executives. If we
cannot hire additional qualified personnel or retain them, our ability to expand our business will be
impaired and our revenue could decline. We will need to recruit new employees, who will have to be
trained and integrated into our operations. We will also have to train existing employees to adhere properly
to internal controls and risk management procedures. Failure to train and motivate our employees properly
may result in an increase in employee attrition rates, divert management resources and subject us to
incurring additional human resource related expenditure. Hiring and retaining qualified and skilled
managers are critical to our future, as our business model depends on our credit-appraisal and asset
12
valuation mechanism, which are personnel-driven operations. Moreover, competition for experienced
employees in the finance sector can be intense. While we have an incentive structure and two employee
stock option schemes namely, ESOP 2006 and ESOP 2008, designed to encourage employee retention, our
inability to attract and retain talented professionals, or the resignation or loss of key management personnel,
may have an adverse impact on our business and future financial performance.
30.
We are exposed to fluctuations in the market values of our investment and other asset portfolio.
Recent turmoil in the financial markets has adversely affected economic activity globally, including in
India. Continued deterioration of the credit and capital markets could result in volatility of our investment
earnings and impairments to our investment and asset portfolio, which could negatively impact our
financial condition and reported income.
31.
Our results of operations could be adversely affected by any disputes with our employees.
As of March 31, 2011, we employed 2,318 employees. Currently, none of our employees are members of
any labor union. While we believe that we maintain good relationships with our employees, there can be no
assurance that we will not experience future disruptions to our operations due to disputes or other problems
with our work force, which may adversely affect our business and results of operations.
32.
Our inability to obtain, renew or maintain our statutory and regulatory permits and approvals required
to operate our business may have a material adverse effect on our business.
We require certain statutory and/or regulatory permits and approvals for our business. Our Company
incorporated a wholly owned subsidiary namely Shriram Housing Finance Limited in November 2010,
with a view of entering the housing finance sector. We have applied to National Housing Bank (wholly
owned by the Reserve Bank of India), for a certificate of registration under the National Housing Bank Act,
1987, to carry on business of a housing finance institution. Failure to obtain the same will adversely affect
our proposed business in the housing finance sector. In the future, we will be required to renew such
permits and approvals and obtain new permits and approvals for any proposed operations. There can be no
assurance that the relevant authorities will issue any of such permits or approvals in a timely manner or at
all, and/or on favorable terms and conditions. Failure by us to comply with the terms and conditions to
which such permits or approvals are subject, and/or to renew, maintain or obtain the required permits or
approvals may result in the interruption of our operations and may have a material adverse effect on our
business, financial condition and results of operations.
33.
We are subject to supervision and regulation by the RBI as a deposit-taking NBFC, and changes in
RBI’s regulations governing us could adversely affect our business.
We are subject to the RBI’s guidelines on financial regulation of NBFCs, including capital adequacy,
exposure and other prudential norms. The RBI also regulates the credit flow by banks to NBFCs and
provides guidelines to commercial banks with respect to their investment and credit exposure norms for
lending to NBFCs. The RBI’s regulations of NBFCs could change in the future which may require us to
restructure our activities, incur additional costs or could otherwise adversely affect our business and our
financial performance.
The RBI, from time to time, amends the regulatory framework governing NBFCs to address, inter-alia,
concerns arising from certain divergent regulatory requirements for banks and NBFCs. Pursuant to two
notifications dated December 6, 2006, (Notifications No. DNBS. 189 / CGM (PK)-2006 and DNBS.190 /
CGM (PK)-2006), the RBI amended the NBFC Acceptance of Public Deposits (Reserve Bank) Directions,
1998, reclassifying deposit taking NBFCs, such as us. We are also subject to the requirements of the Non
Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank)
Directions, 2007, issued by the RBI on February 22, 2007, as amended.
The laws and regulations governing the banking and financial services industry in India have become
increasingly complex and cover a wide variety of issues such as interest rates, liquidity, securitization,
investments, ethical issues, money laundering and privacy. In some cases, there are overlapping regulations
13
and enforcement authorities. Moreover, these laws and regulations can be amended, supplemented or
changed at any time such that we may be required to restructure our activities and incur additional expenses
to comply with such laws and regulations, which could materially and adversely affect our business and our
financial performance. For instance, RBI has vide recent circular dated May 3, 2011 clarified that bank
finance to NBFCs would not be classified as priority sector lending, which has affected profitability of
NBFCs engaged in money lending activities.
Compliance with many of the regulations applicable to our operations in India and/or outside India,
including any restrictions on investments, lending and other activities currently being carried out by our
Company, involves a number of risks, particularly in areas where applicable regulations may be subject to
varying interpretations. If the interpretation of the regulators and authorities varies from our interpretation,
we may be subject to penalties and our business could be adversely affected. We are also subject to changes
in Indian laws, regulations and accounting principles and practices. There can be no assurance that the laws
governing the Indian financial services sector will not change in the future or that such changes or the
interpretation or enforcement of existing and future laws and rules by governmental and regulatory
authorities will not adversely affect our business and future financial performance.
34.
Our insurance coverage may not adequately protect us against losses.
We maintain such insurance coverage that we believe is adequate for our operations. Our insurance
policies, however, may not provide adequate coverage in certain circumstances and are subject to certain
deductibles, exclusions and limits on coverage. We maintain general liability insurance coverage including
coverage for errors or omissions. We cannot, however, assure you that the terms of our insurance policies
will be adequate to cover any damage or loss suffered by us or that such coverage will continue to be
available on reasonable terms or will be available in sufficient amounts to cover one or more large claims
or that the insurer will not disclaim coverage as to any future claim.
A successful assertion of one or more large claims against us that exceeds our available insurance coverage
or changes in our insurance policies including premium increases or the imposition of a larger deductible or
co-insurance requirement could adversely affect our business, financial condition and results of operations.
35.
There is ambiguity on whether or not NBFCs are required to comply with the provisions of state money
lending laws, which if interpreted unfavorably by statutory/regulatory authorities or courts of law could
adversely affect our operations and profitability.
There is ambiguity on whether or not NBFCs are required to comply with the provisions of state money
lending laws that establish ceilings on interest rates. We also carry out operations in several states such as
Andhra Pradesh, Tamil Nadu, Madhya Pradesh, and Maharashtra, where there are money lending statutes
in operation. The relevant state money lending statutes provide penalties for non-compliance with such
statutes, including civil and criminal consequences. In the event that the government of any state in India
requires us to comply with the provisions of their respective state money lending laws or imposes any
penalty against us, our Directors or our officers, including for prior non-compliance, our business, results of
operations and financial condition may be adversely affected.
36.
We do not own most of our branch offices and our registered office. Any failure on our part to execute
and/or renew leave and license agreements and/or lease deeds in connection with such offices or failure
to locate alternative offices in case of termination of the leases and/or leave and license arrangements in
connection with any branch could adversely affect our operations and profitability.
Our Registered Office and most of our branches are located on leased and/or licensed premises. If any of
the owners of these premises does not renew an agreement under which we occupy the premises or if any
of the owners seeks to renew an agreement on terms and conditions unfavorable to us, we may suffer a
disruption in our operations or increased costs, or both, which may adversely affect our business and results
of operations.
14
Risks Relating to the Utilization of Issue Proceeds
37.
The fund requirement and deployment mentioned in the Objects of the Issue have not been appraised by
any bank or financial institution.
We intend to use the proceeds of the Issue, after meeting the expenditures of and related to the Issue, for
our various financing activities including lending and investments, subject to applicable statutory and/or
regulatory requirements, to repay our existing loans and our business operations including for our capital
expenditure and working capital requirements. For further details, please refer to the section titled “Objects
of the Issue” beginning on page 60 of this Prospectus. The fund requirement and deployment is based on
internal management estimates and has not been appraised by any bank or financial institution. The
management will have significant flexibility in applying the proceeds received by us from the Issue.
Further, as per the provisions of the Debt Regulations, we are not required to appoint a monitoring agency
and therefore no monitoring agency has been appointed for this Issue.
Risks Relating to the NCDs
38.
Changes in interest rates may affect the price of our NCDs.
All securities where a fixed rate of interest is offered, such as our NCDs, are subject to price risk. The price
of such securities will vary inversely with changes in prevailing interest rates, i.e. when interest rates rise,
prices of fixed income securities fall and when interest rates drop, the prices increase. The extent of fall or
rise in the prices is a function of the existing coupon, days to maturity and the increase or decrease in the
level of prevailing interest rates. Increased rates of interest, which frequently accompany inflation and/or a
growing economy, are likely to have a negative effect on the price of our NCDs.
39.
You may not be able to recover, on a timely basis or at all, the full value of the outstanding amounts
and/or the interest accrued thereon in connection with the NCDs.
Our ability to pay interest accrued on the NCDs and/or the principal amount outstanding from time to time
in connection therewith would be subject to various factors inter-alia including our financial condition,
profitability and the general economic conditions in India and in the global financial markets. We cannot
assure you that we would be able to repay the principal amount outstanding from time to time on the NCDs
and/or the interest accrued thereon in a timely manner or at all. Although our Company will create
appropriate security in favour of the Debenture Trustee for the NCD holders on the assets adequate to ensure
at least 100% asset cover for the NCDs, which shall be free from any encumbrances, the realizable value of
the assets charged as security, when liquidated, may be lower than the outstanding principal and/or interest
accrued thereon in connection with the NCDs. A failure or delay to recover the expected value from a sale
or disposition of the assets charged as security in connection with the NCDs could expose you to a potential
loss.
40.
If we do not generate adequate profits, we may not be able to maintain an adequate Debenture
Redemption Reserve, (“DRR”) for the NCDs issued pursuant to this Prospectus.
Section 117C of the Act states that any company that intends to issue debentures must create a DRR to
which adequate amounts shall be credited out of the profits of the company until the debentures are
redeemed. The Ministry of Corporate Affairs has, through its circular dated April 18, 2002, (“Circular”),
specified that the quantum of DRR to be created before the redemption liability actually arises in normal
circumstances should be ‘adequate’ to pay the value of the debentures plus accrued interest, (if not already
paid), till the debentures are redeemed and cancelled. The Circular however further specifies that, for
NBFCs like our Company, (NBFCs which are registered with the RBI under Section 45-IA of the RBI
Act), the adequacy of the DRR will be 50% of the value of debentures issued through the public issue.
Accordingly, our Company is required to create a DRR of 50% of the value of debentures issued through
the public issue. As further clarified by the Circular, the amount to be credited as DRR will be carved out
of the profits of the company only and there is no obligation on the part of the company to create DRR if
15
there is no profit for the particular year. Accordingly, if we are unable to generate adequate profits, the
DRR created by us may not be adequate to meet the 50% of the value of the NCDs. This may have a
bearing on the timely redemption of the NCDs by our Company.
41.
Any downgrading in credit rating of our NCDs may affect the value of NCDs and thus our ability to
raise further debts.
The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE for an amount of
upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount
of upto ` 75,000 Lakhs vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high
degree of safety regarding timely servicing of financial obligations and carrying very low credit risk. The
rating of NCDs by CRISIL indicates high degree of safety regarding timely servicing of financial
obligations. The ratings provided by CRISIL and/or CARE may be suspended, withdrawn or revised at any
time by the assigning rating agency and should be evaluated independently of any other rating. These
ratings are not a recommendation to buy, sell or hold securities and investors should take their own
decisions. Please refer to page 28 for the rationale for the above ratings.
42.
.
There is no active market for the NCDs on the stock exchanges. As a result the liquidity and market
prices of the NCDs may fail to develop and may accordingly be adversely affected.
There can be no assurance that an active market for the NCDs will develop. If an active market for the
NCDs fails to develop or be sustained, the liquidity and market prices of the NCDs may be adversely
affected. The market price of the NCDs would depend on various factors inter alia including (i) the interest
rate on similar securities available in the market and the general interest rate scenario in the country, (ii) the
market price of our Equity Shares, (iii) the market for listed debt securities, (iv) general economic
conditions, and, (v) our financial performance, growth prospects and results of operations. The
aforementioned factors may adversely affect the liquidity and market price of the NCDs, which may trade
at a discount to the price at which you purchase the NCDs and/or be relatively illiquid.
43.
There may be a delay in making refunds to applicants.
We cannot assure you that the monies refundable to you, on account of (a) withdrawal of your applications,
(b) our failure to receive minimum subscription in connection with the Base Issue, (c) withdrawal of the
Issue, or (d) failure to obtain the final approval from the NSE and/or BSE for listing of the NCDs, will be
refunded to you in a timely manner. We however, shall refund such monies, with the interest due and
payable thereon as prescribed under applicable statutory and/or regulatory provisions.
B.
EXTERNAL RISK FACTORS
44.
Our two-wheeler and other vehicle loans businesses are dependent on the automobile and transportation
industry in India.
Our two-wheeler and other vehicle loans businesses to a large extent depend on the continued growth in the
automobile and transportation industry in India, which are influenced by a number of extraneous factors
which are beyond our control, inter-alia including (a) the macroeconomic environment in India, (b) the
demand for transportation services, (c) natural disasters and calamities, and (d) changes in regulations and
policies in connection with motor vehicles. Such factors may result in a decline in the sales or value of new
and pre-owned vehicles. Correspondingly, the demand for availing finance for new and pre-owned vehicles
may decline, which in turn may adversely affect our financial condition and the results of our operations.
Further, the ability of vehicle owners and/or operators to perform their obligations under existing financing
agreements may be adversely affected if their businesses suffer as a result of the aforesaid factors.
45.
Our loans to the small enterprises is dependent on the performance of the small enterprises sector in
India, competition from public sector banks and financial institutions and other NBFCs, and
government policies and statutory and/or regulatory reforms in the small enterprises finance sector.
16
As on March 31, 2011, 24 % of our Assets Under Management were represented by loans to the small
enterprises segment. In recognition of the contribution and vast potential of the small enterprises finance
sector in the economy, provision of adequate credit to this sector continues to be an important element of
banking policy, particularly after the initiation of structural reforms in 1991. According to the Ministry of
Finance, Government of India, small and medium enterprises sector contribute about 40% of total
manufacturing and 34% of total exports and is crucial to India's economic growth, employment generation
and entrepreneurial development, (Source: Ministry Website). The Government of India has from time to
time taken economic policy initiatives to promote this sector and enhance credit to small and medium
enterprises. Some of the initiatives of the Government towards MSME financing include setting up of
credit guarantee fund trust for small industries, risk sharing facility, venture capital funding, micro credit,
etc. The small enterprises finance sector currently is catered to largely by public sector banks, public
financial institutions and local unorganized private financiers.
Any change in statutory and/or regulatory requirements in connection with the small enterprises finance
sector, change in government policies, slow down in liberalization and reforms affecting the sector could
affect the performance of small enterprises, which would affect the demand for finance in this sector, which
in turn would affect the results of our operations from loans to the small enterprises finance sector.
Further, progressive reforms, policy, statutory and/regulatory provisions in connection with the sector could
enable easier access to finance to small enterprises from banks, NBFCs and other financial institutions
which in turn could result in increased competition for our Company in relation to loans issued to small
enterprises. Our inability to manage such competition could adversely affect our results of operations from
loans to the small enterprises finance sector.
46.
Increase in competition from our peer group in the finance sector may result in reduction of our market
share, which in turn may adversely affect our profitability.
We have been increasingly facing competition from domestic and foreign banks and NBFCs in each of our
lines of businesses. Some of our competitors are very aggressive in underwriting credit risk and pricing
their products and may have access to funds at a lower cost, wider networks and greater resources than our
Company. Our financial condition and results of operations are dependent on our ability to obtain and
maintain low cost funds and to provide prompt and quality services to our customers. If our Company is
unable to access funds at a cost comparable to or lower than our competitors, we may not be able to offer
loans at competitive interest rates to our customers.
While our Company believes that it has historically been able to offer competitive interest rates on the
loans extended to our customers, there can be no assurance that our Company will be able to continue to do
so in the future. An increase in competition from our peer group may result in a decline in our market
share, which may in turn result in reduced incomes from our operations and may adversely affect our
profitability.
47.
Our growth depends on the sustained growth of the Indian economy. An economic slowdown in India
and abroad could have a direct impact on our operations and profitability.
Macroeconomic factors that affect the Indian economy and the global economic scenario have an impact on
our business. The quantum of our disbursements is driven by the growth in demand for vehicles, capital by
small enterprises and loans by individuals. Any slow down in the Indian economy may have a direct impact
on our disbursements and a slowdown in the economy as a whole can increase the level of defaults thereby
adversely impacting our Company’s profitability, the quality of its portfolio and growth plans.
48.
Political instability or changes in the government could delay further liberalization of the Indian
economy and adversely affect economic conditions in India generally, which could impact our business.
17
Since 1991, the Government has pursued a policy of economic liberalization, including significantly
relaxing restrictions on the private sector. There can be no assurance that these liberalization policies will
continue in the future as well. The rate of economic liberalization could change and specific laws and
policies affecting financial services companies, foreign investment, currency exchange rates and other
matters affecting investments in Indian companies could change as well. A significant slowdown in India’s
economic liberalization and deregulation policies could disrupt business and economic conditions in India,
thus affecting our business. Any political instability in the country, including any change in the
Government, could materially impact our business adversely.
49.
Civil unrest, terrorist attacks and war would affect our business.
Terrorist attacks and other acts of violence, war or conflicts, particularly those involving India, as well as
the United States of America, the United Kingdom, Singapore and the European Union, may adversely
affect Indian and global financial markets. Such acts may negatively impact business sentiment, which
could adversely affect our business and profitability. India has from time to time experienced and continues
to experience, social and civil unrest, terrorist attacks and hostilities with neighbouring countries. Also,
some of India’s neighbouring countries have experienced or are currently experiencing internal unrest.
This, in turn, could have a material adverse effect on the Indian economy and in turn may adversely affect
our operations and profitability and the market for the NCDs.
50.
Our business may be adversely impacted by natural calamities or unfavourable climatic changes.
India, Bangladesh, Pakistan, Indonesia, Japan and other Asian countries have experienced natural
calamities such as earthquakes, floods, droughts and a tsunami in recent years. Some of these countries
have also experienced pandemics, including the outbreak of avian flu. These economies could be affected
by the extent and severity of such natural disasters and pandemics which could, in turn affect the financial
services sector of which our Company is a part. Prolonged spells of abnormal rainfall, draught and other
natural calamities could have an adverse impact on the economy, which could in turn adversely affect our
business and the price of our NCDs.
51.
Any downgrading of India's sovereign rating by an international rating agency (ies) may affect our
business and our liquidity to a great extent.
Any adverse revision to India's credit rating for domestic and international debt by international rating
agencies may adversely impact our ability to raise additional finances at favourable interest rates and other
commercial terms. This could have an adverse effect on our growth, financial performance and our
operations.
PROMINENT NOTES
1.
This is a public issue of NCDs by our Company aggregating upto ` 37,500 lakhs with an option to retain
over-subscription upto ` 37,500 lakhs for issuance of additional NCDs, aggregating to a total of ` 75,000
lakhs.
2.
For details on the interest of our Company’s Directors, please refer to the sections titled “Our
Management” and “Capital Structure” beginning on pages 111 and 49 of this Prospectus, respectively.
3.
Our Company has entered into certain related party transactions, within the meaning of AS 18 as notified
by the Companies (Accounting Standards) Rules, 2006, as disclosed in the section titled “Financial
Information” beginning on page 130 of this Prospectus.
4.
Any clarification or information relating to the Issue shall be made available by the Lead Managers, the
Co-Lead Manager and our Company to the investors at large and no selective or additional information
would be available for a section of investors in any manner whatsoever.
18
5.
Investors may contact the Registrar to the Issue, Compliance Officer, the Lead Managers and the Co-Lead
Manager for any complaints pertaining to the Issue. In case of any specific queries on allotment/refund,
Investor may contact Registrar to the Issue.
6.
In the event of oversubscription to the Issue, allocation of NCDs will be as per the "Basis of Allotment" set
out on page 165of this Prospectus.
7.
Our Equity Shares are listed on the NSE and BSE.
8.
Some of our privately placed non convertible debentures are listed in BSE.
9.
As of March 31, 2011, we had certain contingent liabilities not provided for, including the following:
•
•
Guarantees issued by the company – `6.81 lakhs
Guarantees issued by others – `1,942.77 lakhs
For further information on such contingent liabilities, see Annexure VI to our Reformatted Unconsolidated
Summary Financial Statements.
10.
For further information relating to certain significant legal proceedings that we are involved in, see
“Pending Proceedings and Statutory Defaults” beginning on page 169 of this Prospectus.
19
SECTION III : INTRODUCTION
GENERAL INFORMATION
Shriram City Union Finance Limited
Date of Incorporation: March 27, 1986. Our Company was incorporated as a private limited company under the
provisions of the Act. Subsequently, our Company became a public limited company pursuant to a fresh certificate of
incorporation dated April 10, 1990.
Registered Office:
123, Angappa Naicken Street, Chennai, Tamil Nadu - 600 001.
Corporate Office:
221, Royapettah High Road, Mylapore, Chennai, Tamil Nadu – 600 004 Tel.: + 91 44 4391 5300; Fax: +91 44 4391
5351.
Registration:
Corporate Identification Number: L65191TN1986PLC012840 issued by the Registrar of Companies, Chennai, Tamil
Nadu.
Our Company holds a certificate of registration dated April 17, 2007, bearing registration no. 07-00458 issued by the
RBI to carry on the activities of a NBFC under section 45 IA of the RBI Act, 1934.
Compliance Officer (and Company Secretary):
The details of the person appointed to act as Compliance Officer for the purposes of this Issue is set out below:
Mr. C. R. Dash
Company Secretary
Shriram City Union Finance Limited
221, Royapettah High Road
Mylapore, Chennai
Tamil Nadu – 600 004
Tel.: + 91 44 4391 5300
Fax: +91 44 4391 5351
Email: [email protected]
Investors may contact the Registrar to the Issue or the Compliance Officer in case of any pre-Issue or post-Issue related
matters such as non-receipt of Allotment Advice, demat credit, refund orders or interest on application money.
20
Lead Managers:
JM Financial Consultants Private
Limited
141 Maker Chambers III
Nariman Point
Mumbai - 400 021
Tel: + 91 22 6630 3030
Fax: +91 22 2204 2137
Email: [email protected]
Investor Grievance Email:
[email protected]
Website: www.jmfinancial.in
Contact Person: Ms. Lakshmi
Lakshmanan
Compliance Officer: Mr. Chintal
Sakaria
SEBI Registration No.:
INM000010361
A. K. Capital Services Limited
30-39, Free press House
Free Press Journal Marg
215, Nariman Point
Mumbai-400021
Tel: +91 22 6754 6500/6634
Fax: +91 22 6610 0594
Email:
[email protected]
Investor
Grievance
Email:
[email protected]
Website: www.akcapindia.com
Contact Person: Mr. Hitesh Shah
Compliance Officer: Mr. Vikas
Agarwal
SEBI Registration No:
INM000010411
ICICI Securities Limited
ICICI Centre, H.T. Parekh Marg,
Churchgate
Mumbai- 400 020
Tel: +91 22 2288 2460
Fax: +91 22 2282 6580
Email:
[email protected]
Investor Grievance Email:
[email protected]
Website: www.icicisecurities.com
Contact Person: Mr. Manvendra
Tiwari
Compliance Officer: Mr. Subir Saha
SEBI Registration No:
INM000011179
Co-Lead Managers:
Karvy Investor Services Limited
Regent Chambers, 2nd floor
Nariman Point, Mumbai – 400021
Tel : +91 22 2289 5000
Fax: +91 22 3020 4040
Email: [email protected]
Investor Grievance Email:
[email protected]; [email protected]
Website: www.karvy.com
Contact Person: Mr. Omkar Barve
Compliance Officer: Mr. Rajnish Rangari
SEBI Registration No: INM000008365
Debenture Trustee:
IDBI Trusteeship Services Limited
Asian Building, Ground Floor
17, R Kamani Marg
Ballard Estate
Mumbai – 400 001
Tel: +91 22 4080 7000
Fax: + 91 22 6631 1776
Website: www.idbitrustee.co.in
Contact Person: Ms. Brindha V
Email: [email protected]
SEBI Registration No.: IND000000460
IDBI Trusteeship Services Limited has by its letter dated July 4, 2011 given its consent for its appointment as
Debenture Trustee to the Issue and for its name to be included in this Prospectus and in all the subsequent periodical
communications sent to the holders of the Debentures issued pursuant to this Issue.
21
Registrar to the Issue
Integrated Enterprises (India) Limited
2nd Floor, ‘Kences Towers’
No.1 Ramakrishna Street
North Usman Road, T Nagar
Chennai – 600 017
Tel: +91 44 2814 0801, +91 44 2814 0802, +91 44 2814 0803
Fax: +91 44 2814 2479
Email: [email protected]
Investor Grievance Email: [email protected]
Website: www.iepindia.com
Contact Person: Mr. K. Balasubramanian / Mr. Sriram S
SEBI Registration No.: INR000000544
Statutory Auditor:
Our statutory auditor being:
M/s Pijush Gupta & Co
Chartered Accountants
P-199, C.I.T. Road, Scheme IV-M
Kolkata - 700 010
Email: [email protected]
Tel: +91 33 2353 6859
Firm registration number: 309015E
Credit Rating Agencies:
Credit Analysis & Research Limited
4th Godrej Coliseum,
Somaiya Hospital Road,
Off Eastern Express Highway
Sion (East),
Mumbai – 400 022
Tel: +91 22 6754 3456
Fax: +91 22 6754 3457
CRISIL Limited
CRISIL House, Central Avenue,
Hiranandani Business Park,
Powai,
Mumbai – 400 076
Tel: +91 22 3342 3000
Fax: +91 22 3342 3050
Legal Advisor to the Issue:
J Sagar Associates
Vakils House,
18, Sprott Road
Ballard Estate
Mumbai- 400 001
Tel: +91 22 4341 8500
Fax: +91 22 6656 1515
Lead Brokers to the Issue
JM Financial Services Private Limited
141 Maker Chambers III, 13th Floor, Nariman Point,
Mumbai 400 021, India
Tel: +91 22 3021 3500/2266 5577- 80
Fax: +91 22 2266 5902
Email: [email protected]
Website: www.jmfinancialservices.in
AK Stockmart Private Limited
30-39, Free Press House, Free Press Journal Marg, 215,
Nariman Point, Mumbai 400 021, India.
Tel: +91 22 6754 6500
Fax: +91 22 6754 4666
Email: [email protected]
Website: www.akcapindia.com
22
Contact Person: Mr. Rohit Singh
SEBI Registration No: NSE: INB231054835
BSE: INB011054831
Contact Person: Mr. Alpesh Busa
SEBI Registration No: INB231269532
ICICI Securities Limited
ICICI Centre, HT Parekh Marg,
Churchgate,
Mumbai 400 020, India
Tel: +91 22 2288 2460
Fax: +91 22 2282 6580
Email: [email protected]
Website: www.icicisecurities.com
Contact Person: Mr. Mitesh Shah
SEBI Registration No: NSE: INB230773037
BSE: INB011286854
Karvy Stock Broking Limited
Karvy House 46, Avenue 4, Street No.1,Banjara Hills,
Hyderabad 500 034, India
Tel: +91 040 2331 2454
Fax: +91 040 6662 1474
Email: [email protected]
Website: www.karvy.com
Contact Person: Mr. Ramapriyan PB
SEBI Registration No: INB2300770138
Anand Rathi Shares & Stock Brokers Limited
4th Floor, Silver Metropolis Jai Coach Compound,
Opposite Bimbisar Nagar, Goregaon (East)
Mumbai 400 063, India.
Tel: +91 22 4001 3773
Fax: +91 22 4001 3770
Email: [email protected]
Website: www.rathi.com
Contact Person: Mr. Vinay Mahajan
SEBI Registration No: NSE: INB230676935
BSE: INB011371557
Bajaj Capital Investor Services Limited
5th Floor, Bajaj House, 97, Nehru Place,
New Delhi - 110019 India.
Tel: +91 11 6616 1111
Fax: +91 11 6660 8888
Email: [email protected]
Website: www.justtrade.in
Contact Person: Mr. Surajit Misra
SEBI Registration No: INB231269334
Edelweiss Broking Limited
Edelweisss House Off. C.S.T. Road, Kalina,
Mumbai 400 098, India.
Tel: +91 22 6747 1340, +91 9867009711
Fax: +91 22 6747 1347
Email: [email protected]
Website: www.edelcap.com
Contact Person: Mr. Nirmal Rewaria
SEBI Registration No: NSE: INB231311631
BSE: INB011311637
ENAM Securities Private Limited
Khatau Building, 2nd Floor, 44 Bank Street,
Fort, Mumbai 400 001, India.
Tel: +91 22 2267 7901
Fax: +91 22 2266 5613
Email: [email protected], [email protected]
Website: www.enam.com
Contact Person: Mr. Ajay Sheth / Mr. Vinay Ketkar
SEBI Registration No: NSE: INB011287852
BSE: INB230468336
HDFC Securities Limited
Office Floor 8, “I Think” Building, Jolly Board Campus,
Opp. Crompton Greaves Factory, Kanjurmarg (East)
Mumbai 400 042, India.
Tel: +91 22 3075 3442
Fax: +91 22 3075 3435
Email: [email protected]
Website: www.hdfcsec.com
Contact Person: Mr. Sunil Raula
SEBI Registration No: NSE: INB231109431
BSE: INB011109437
Integrated Securities Limited
15, 1st Floor, Modern House, Dr. V.B. Gandhi Marg,
Forbes Street, Fort, Mumbai 400 023, India
Tel: +91 22 4066 1800
Fax: +91 22 2287 4676
Email: [email protected]
Website: www.cubsharebroking.com
Contact Person: Mr. V. Krishnan
SEBI Registration No: INB231271835
Kotak Securities Limited
3rd Floor, Nirlon House, Dr. Annie Besant Road, Worli,
Mumbai 400 025, India
Tel: +91 22 6652 9191
Fax: +91 22 6661 7041
Email: [email protected]
23
RR Equity Brokers Private Limited
47, MM Road, Rani Jhansi Marg, Jhandewalan, New
Delhi 110 055, India
Tel: +91 11 2363 6362/63
Fax: +91 11 2363 6745
Email: [email protected]
Website: www.kotak.com
Contact Person: Mr. Sanjeeb Kumar Das
SEBI Registration No: NSE: INB230808130
BSE: INB010808153
Website: www.rrfinance.com
Contact Person: Mr. Manish Agrawal
SEBI Registration No: INB231219636
SMC Global Securities Limited
11/6B, Shanti Chambers Pusa Road,
New Delhi, India.
Tel: +91 11 3011 1000
Fax: +91 11 2575 4365
Email: [email protected]
Website: www.smctradeonline.com
Contact Person: Mr. Mahesh Gupta
SEBI Registration No: INB230771431
SPA Securities Limited
101-A, 10th Floor, Mittal Court, Nariman Point,
Mumbai 400 021, India
Tel: +91 22 2280 1240/ 4043 9000
Fax: +91 22 2657 3708/09
Website: www.spasecurities.in
Contact Person: Mr. Rajesh Gandhi
SEBI Registration No: NSE: INB231178238
BSE: INB011178234
Bankers to the Issue:
HDFC Bank Limited
FIG - OPS Department, - Lodha,
I Think Techno Campus, O-3, Level,
Next to Kanjurmarg Railway Station,
Kanjurmarg (East), Mumbai- 400 042
Tel: +91 22 3075 2928
Fax: +91 22 2579 9801
Email: [email protected]
Website: www.hdfcbank.com
Contact Person: Mr. Deepak Rane
SEBI Registration No.: INBI00000063
YES Bank Limited
3rd Floor, Ion House,
Dr. E. Moses Road,
Mahalaxmi, Mumbai – 400 011
Tel: +91 22 6622 9031
Fax: +91 22 2497 4875
Email: [email protected]
Website: www.yesbank.in
Contact Person: Mr. Mahesh Shirali
SEBI Registration No.: INBI00000935
Dhanlaxmi Bank
Ground Floor, Janmabhoomi Bhavan,
Janmabhoomi Marg,
Fort, Mumbai – 400 001
Tel: +91 22 2202 2535 / 6154 1857
Fax: +91 22 2287 1637 / 6154 1725
Email: [email protected]
Website: www.dhanbank.com
Contact Person: Venkataraghavan T. A.
SEBI Registration No.: INBI00000025
ICICI Bank Limited
Rajabahadur Mansion, 30,
Mumbai Samachar Marg,
Fort, Mumbai - 400 001
Tel: +91 22 6631 0322/12
Fax: +91 22 6631 0350
Email: [email protected]
Website: www.icicibank.com
Contact Person: Mr.Anil Gadoo
SEBI Registration No.: INBI00000004
INDUSIND Bank Limited
Cash Management Services
Solitare Corporate Park, No. 1001,
Building No. 10, Ground Floor,
Guru Hargovindji Marg, Andheri (East),
Mumbai – 400 093
Tel: +91 22 6772 3901-17
Fax: +91 22 6772 3998
Email: [email protected]
Website: www.indusind.com
Contact Person: Suresh Esaki
SEBI Registration No.: INBI00000002
The Hongkong and Shanghai Banking Corporation
Limited
Plot No. 139-140 B, Western Express Highway,
Sahar Road Junction, Ville Parle (East),
Mumbai – 400 057
Tel: +91 22 4035 7458
Fax: +91 22 4035 7657
Email: [email protected];
[email protected]
Website: www.hsbc.co.in
Contact Person: Swapnil Pavale
SEBI Registration No.: INBI00000027
Kotak Mahindra Bank Limited
5th Floor, Dani Corporate Park,
158 CST Road, Kalina, Santacruz (East),
Mumbai 400 098
24
Tel: +91 22 6759 5335
Fax: +91 22 6759 5374
Email: [email protected]
Website: www.kotak.com
Contact Person: Vidhi Gupta
SEBI Registration No.: INBI00000927
Bankers to our Company
ANDHRA BANK
Corporate Finance Branch,
16th, Earnest House,
NCPA Marg,
Nariman Point,
Mumbai – 400 021
Tel: +91 22 2288 4877
Fax: +91 22 2288 5841
AXIS BANK
Ground Floor, Karumuthu Nilayam,
No. 192, Anna Salai,
Chennai -600 002
Tel: +91 44 28577763
Fax: +91 44 28544193
BANK OF INDIA
Chennai Corporate Banking Branch,
IV Floor, Tarapore Towers, 826,
Anna Salai, Chennai - 600 002.
Tel: +91 44 2851 0661
Fax: +91 44 2852 1912
BANK OF MAHARASHTRA
16, East Mada Street,
Chennai - 600 004
Tel: +91 44 24338248
Fax: +91 44 2461 4357
CREDIT AGRICOLE CORPORATE AND
INVESTMENT BANK
Westminster Building 2nd Floor,
New No. 70, Dr. Radhakrishnann Salai,
Mylapore, Chennai 600 004
Tel: +91 44 6635 1001
Fax: +91 44 2847 4619
CANARA BANK
Prime Corporate Branch,
Ground Floor Spencer Tower-I,
No.770, Anna Salai,
Chennai - 600 002
Tel: +91 44 2849 7010
Fax: +91 44 2849 7016
CENTRAL BANK OF INDIA
Industrial Finance Branch, No.49,
Montieth Road, Egmore,
Chennai -600 008.
Tel: +91 44 2888 3186
Fax: +91 44 2346 4231
CORPORATION BANK
White Road Branch,
38 & 39, Whites Road,
Chennai - 600014
Tel: +91 44 2852 4258
Fax: +91 44 2852 2919
CITY UNION BANK LIMITED
"Keerthis", First Floor, No.67, Mandaveli Street,
Mandaveli,
Chennai – 600 028.
Tel: +91 44 2493 7874
Fax: +91 44 2461 0024
DBS BANK LIMITED
DBS Building, 806 Annasalai,
Chennai - 600002
Tel: +91 44 6656 8824
Fax: +91 44 6656 8899
FEDERAL BANK LIMITED
61, Anna Salai,
Chennai - 600002
Tel: +91 44 2851 2561
Fax: +91 44 2852 3058
DENA BANK
T Nagar Branch No.1,
Thanikachalam Road,
Chennai - 600017
Tel: +91 44 2433 2656
Fax: +91 44 2434 4870
25
HDFC BANK LIMITED
Corporate Banking Department, 2nd Floor, Process House,
Kamala Mills Compound,
Senapati Bapat Marg,
Lower Parel, Mumbai - 400 013
Tel: +91 22 2496 1616
Fax: +91 22 2496 8135
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED
Nagabrahma Towers, No.76.
Cathedral Road
Chennai - 600 086
Tel: +91 44 4391 2064
Fax: +91 44 2811 1845
ICICI BANK LIMITED
3rd Floor
No.1, Cenotaph Road
Teynampet
Chennai 600 018
Tel: +91 44 4231 6978
Fax: +91 44 4231 6960
INDIAN OVERSEAS BANK
Commercial & Institutional Credit Branch, "Auras
Corporate Centre", 98-A, Dr. Radhakrishnan Salai,
Mylapore, Chennai - 600 004
Tel: +91 44 2847 8634
Fax: +91 44 2847 8633
INDIAN BANK
No.66, Rajaji Salai, Chennai - 600 001
Tel: +91 44 2521 5368
Fax: +91 44 2521 0342
IDBI Bank Limited
No.115, Anna Salai,
P.B. No. 805, Saidapet,
Chennai - 600 015
Tel: +91 44 22355201
Fax: +91 44 22355226
INDUSIND BANK
1st Floor, IndusInd House,
425, Dadasaheb Bhadkamkar Marg,
Opera House, Mumbai - 400 004
Tel: +91 22 4345 7534
Fax: +91 22 4345 7530
JAMMU & KASHMIR BANK
Voltax International Centre,
No. 52, Armenian Street, Parrys
Chennai – 600 001
Tel: + 91 44 2533 0478
Fax: +91 44 2535 9131
ING VYSYA BANK
Regional Office: No. 185, Anna Salai,
02nd Floor, Chennai - 600 006
Tel: +91 44 2852 8377
Fax: +91 44 2859 3322
KARUR VYSYA BANK LIMITED
Kamanwala Chambers,
Sir P.M. Road,
Fort, Mumbai 400 001
Tel: +91 22 2266 5467
Fax: +91 22 2261 2761
ORIENTAL BANK OF COMMERCE
Spencer Plaza, Ground Floor, 769, Anna Salai,
Chennai - 600 002
Tel: +91 44 2849 2940
Fax: +91 44 2849 8031
KOTAK MAHINDRA BANK LIMITED
04th Floor, Kotak Infiniti, Building No.21,
Infinity Park, Gen A.K. Vaidya Marg, Malad (E),
Mumbai - 400 097
Tel: +91 22 6605 4139
Fax: +91 22 67259063
PUNJAB NATIONAL BANK
No.10,Raja Street, T. Nagar, Chennai - 600 017
Tel: +91 44 2432 3928
Fax: +91 44 2434 1050
STANDARD CHARTERED BANK
Origination & Client Coverage,
19, Rajaji Salai, 4th Floor,
Chennai - 600 001
Tel: +91 44 2534 9450
Fax: +91 44 2534 9186
26
THE SOUTH INDIAN BANK LIMITED
Industrial Finance Branch, No. 110,
Raheja Towers, 177,
Anna Salai, Chennai - 600 002
Tel: +91 44 2860 3964
Fax: +91 44 2860 3963
SMALL INDUSTRIES DEVELOPMENT BANK
OF INDIA
Overseas Towers, No. 756L,
Anna Salai (Opp. TVS), Chennai - 600 002
Tel: +91 44 2841 3716
Fax: +91 44 2852 0692
STATE BANK OF BIKANER AND JAIPUR
1st Floor, Giriraj Bldg.,
73, Sant Tukaram Road,
Danabunder, Masjid (E),
Mumbai 400 009
Tel: +91 22 2348 7020
Fax: +91 22 2348 1944
STATE BANK OF MAURITIUS LIMITED
Prince Arcade, 4th Floor, 22-A,
Cathedral Road, Chennai - 600 086
Tel: +91 44 2811 0943
Fax: +91 44 2811 6445
STATE BANK OF MYSORE
Branch 224-C, Mittal Court, 4th Floor,
Nariman Point, Mumbai - 400 021
Tel: +91 22 2288 5577
Fax: +91 22 2282 3895
STATE BANK OF PATIALA
Commercial Branch, Atlanta,
First Floor, Nariman Point,
Mumbai - 400 021
Tel: +91 22 2285 1762
Fax: +91 22 2285 6626
STATE BANK OF INDIA
Industrial Finance Branch,
Mumbai 'The Arcade" 2nd floor,
World Trade Centre,
Cuffe Parade, Coloba,
Mumbai - 400 005
Tel: +91 22 2216 1955
Fax: +91 22 2216 0918
SYNDICATE BANK
170 Eldams Road, Teynampet
Chennai - 600 018
Tel: +91 44 2432 3212
Fax: +91 44 2435 2182
STATE BANK OF TRAVANCORE
556 Anna Salai, Teynampet,
Chennai - 600 018
Tel: +91 44 2435 9432
Fax: +91 44 2435 1671
UNION BANK OF INDIA
12/13, Kodambakkam High Road,
Nunqambakkam,
Chennai - 600 034
Tel: +91 44 2346 0749
Fax: +91 44 2346 0751
TAMIL NADU MERCANTILE BANK
738, Anna Salai,
(Near District Central Library),
Chennai - 600 002
Tel: +91 44 2841 2205
Fax: +91 44 2841 2208
VIJAYA BANK
168 Mount Road,
Chennai - 600 002
Tel: +91 44 2852 1746
Fax: +91 44 2852 5231
UNITED BANK OF INDIA
United Bank of India, No. 25, Sir P.M. Road,
Fort, Mumbai - 400 001
Tel: +91 22 2202 0431
Fax: +91 22 2281 0440
YES BANK LIMITED
143/1, Nungambakkam High Road,
Chennai - 600 034
Tel: +91 44 2831 9000
Fax: +91 44 2831 9001
27
Impersonation
As a matter of abundant precaution, attention of the investors is specifically drawn to the provisions of sub-section
(1) of section 68A of the Act, relating to punishment for fictitious applications.
Minimum Subscription
If our Company does not receive the minimum subscription of 75 % of the Base Issue, i.e. ` 28,125 lakhs, on the
date of closure of the Issue, the entire subscription shall be refunded to the applicants within 30 days from the date
of closure of the Issue. If there is delay in the refund of subscription by more than 8 days after our Company
becomes liable to refund the subscription amount, our Company will pay interest for the delayed period at rates
prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.
Credit Rating and Rationale
The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE for an amount of upto `
75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount of upto ` 75,000
Lakhs vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high degree of safety
regarding timely servicing of financial obligations and carrying very low credit risk. The rating of NCDs by CRISIL
indicates high degree of safety regarding timely servicing of financial obligations.
Rationale
The rationale for the aforementioned credit rating issued by CARE is as follows:
The rating factors in the strong business growth of the Company with good profitability and asset quality
parameters. The rating also factors in the strengths that the Company derives from the Shriram Group franchise,
SCUF’s position as a niche player in the semi urban and rural areas, diversified product portfolio, adequate
capitalization and strong resource raising capability with diversified funding base and experienced management.
The rating is however constrained on account of regional concentration of the Company’s business and evolving
nature of the management information system. SCUF’s ability to maintain asset quality and raise capital to sustain
growth are the key rating sensitivities.
CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall
the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings on information
obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy,
adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results
obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have
paid a credit rating fee, based on the amount and type of bank facilities/instruments.
The rationale for the aforementioned credit rating issued by CRISIL is as follows:
The rating reflects the Company’s following strengths, (i) synergies derived from association with the Shriram
Group, (ii) healthy capitalization and (iii) adequate earnings. The aforementioned strengths are partially offset by the
Company’s following weaknesses, (i) exposure to potential asset quality risks from lending to low income group
segments and (ii) geographical concentration in lending portfolio.
CRISIL rating reflects CRISIL's current opinion on the likelihood of timely payment of the obligations under the
rated instrument and does not constitute an audit of the rated entity by CRISIL. CRISIL ratings are based on
information provided by the issuer or obtained by CRISIL from sources it considers reliable. CRISIL does not
guarantee the completeness or accuracy of the information on which the rating is based. A CRISIL rating is not a
recommendation to buy, sell, or hold the rated instrument; it does not comment on the market price or suitability for
a particular investor. All CRISIL ratings are under surveillance. Ratings are revised as and when circumstances so
28
warrant. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever
to the subscribers / users / transmitters / distributors of this product.
Utilisation of Issue proceeds
Our Board of Directors certifies that:
•
all monies received out of the Issue shall be credited/transferred to a separate bank account other than the
bank account referred to in sub-section (3) of Section 73 of the Act;
•
details of all monies utilised out of the Issue referred above shall be disclosed under an appropriate separate
head in our balance sheet indicating the purpose for which such monies have been utilised;
•
details of all unutilised monies out of the Issue, if any, shall be disclosed under an appropriate head in our
balance sheet indicating the form in which such unutilised monies have been invested; and
•
we shall utilize the Issue proceeds only upon creation of security as stated in this Prospectus in the section
titled “Issue Structure” beginning on page 144 of this Prospectus.
•
the Issue proceeds shall not be utilized towards full or part consideration for the purchase or any other
acquisition, inter alia by way of a lease, of any property.
Issue Programme
The subscription list for the Issue shall remain open for subscription at the commencement of banking hours and
shall close at the close of banking hours on the dates indicated below or earlier or on such date, as may be decided at
the discretion of the Board of Directors or any committee of the Board of Directors of our Company subject to
necessary approvals
August 11, 2011
ISSUE OPENS ON
August 27, 2011
ISSUE CLOSES ON
The subscription list for the Issue shall remain open for subscription at the commencement of banking hours and
close at the close of banking hours on the dates indicated above or earlier or on such date as may be decided at the
discretion of the Committee of Directors of our Company subject to necessary approvals. In the event of such early
closure of subscription list of the Issue, our Company shall ensure that notice of such early closure is given on such
early date of closure through advertisement/s in a leading national daily newspaper.
29
SUMMARY OF BUSINESS, STRENGTH & STRATEGY
Frost & Sullivan India Private Limited has used due care and caution in preparing the report titled “Analysis of
MSME Loan Markets for NBFCs – July 2011”. Information has been obtained from sources that Frost & Sullivan
India Private Limited considers reliable. However, Frost & Sullivan India Private Limited does not guarantee the
accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the
results obtained from the use of such information. No part of the said report may be published / reproduced in any
form without Frost & Sullivan India Private Limited’s prior written approval. Frost & Sullivan India Private
Limited is not liable for investment decisions which may be based on the views expressed in the said report.
Overview
Our Company is a deposit-accepting NBFC registered with RBI, offering (i) financing for two wheelers, appliances
and other commercial goods, (“Product Finance”), (ii) pre-owned and new vehicle loans, (iii) personal loans, (iv)
loans against gold, and (v) loans to the small enterprise finance segment.
Our current lines of business and organisational structure are as follows:
According to the Frost and Sullivan report titled “Analysis of MSME Loan Markets for NBFCs – July 2011”, our
Company is the largest small enterprise finance company in India. In the small loan segment (loans of `1 lakh -10
lakh) our Company has a dominant share of 95%. Our Company also leads the total Indian micro, small and medium
enterprises market with 53 % share.
Our Company was established in 1986 and we have a track record of twenty five years in the financial services
sector in India. Since 2005 we have focused on the retail financing segment. Our Company has been registered as a
deposit-taking NBFC with the RBI since September 4, 2000 under Section 45IA of the Reserve Bank of India Act,
1934.
We are a part of the Shriram Group of companies which has a strong presence in financial services in India,
including commercial vehicle financing, consumer finance, life and general insurance, stock broking, chit funds and
distribution of financial products such as life and general insurance products and mutual fund products, as well as a
growing presence in other businesses such as property development, engineering projects and information
technology.
30
We leverage on the Shriram Group’s ecosystem to reach out to our prospective customers and our focus has been in
maximizing our association with the “Shriram” brand name and the synergies offered by the infrastructure, of other
entities in the Shriram Group. Our customer base over the years has significantly comprised of customers of other
entities in the Shriram Group. The large customer bases and wide-spread network of business outlets of entities such
as, Shriram Transport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), and
entities operating under the “Shriram Chits” brand name, has continued to provide us with a large platform of target
customers.
Over the last 25 years our Company has established a pan-India presence, with 559 branches and 91 other business
outlets as of March 31, 2011, across 17 states in India, with a significant presence in south India. As on March 31,
2011, our total employee strength was 2,318. We operate in a ‘hub-and spoke’ business model, where
responsibilities from loan origination to recoveries of loans are vested in each of our business outlets, under the
general supervision and control of our head office in Chennai. Our business outlet networks are interconnected and
each business outlet is connected to our head office through an ERP platform developed by Take Solution Limited,
Chennai.
We have demonstrated consistent growth in our business and in our profitability. Our Assets Under Management
have grown by a compounded annual growth rate, or CAGR, of 34% from ` 250,686.49 lakhs as of March 31, 2007
to ` 799,804.88 lakhs as of March 31, 2011. Our capital adequacy ratio as of March 31, 2011 computed on the basis
of applicable RBI requirements was 20.53%, compared to the RBI stipulated minimum requirement of 12.00%. Our
Tier I capital as of March 31, 2011 was ` 119,419.00 lakhs. Our Gross NPAs as a percentage of Total Loan Assets
were 1.86% as of March 31, 2011. Our Net NPAs as a percentage of Net Loan Assets was 0.43% as of March 31,
2011.
Our total income increased from ` 34,805.91 lakhs in fiscal 2007 to ` 132,091.19 lakhs in fiscal 2011 at a CAGR of
40%. Our net profit after tax increased from ` 5,162.16 lakhs in fiscal 2007 to ` 24,058.85 lakhs in fiscal 2011, at a
CAGR of 47%. A summary of our assets under management, net non performing assets, total income and net profit
after tax for the corresponding periods specified below are as follows:
` In Lakhs
Particulars
Assets
Under
Management
Net Non performing
assets
Total Income
Net Profit after Tax
As at March
31, 2007
250,686.49
As at March
31, 2008
336,889.78
As at March
31, 2009
462,950.89
As at March
31, 2010
521,550.18
As at March
31, 2011
799,804.88
2,561.44
2,495.70
3,590.35
3,322.73
2,982.76
For the
Financial
Year Ended
March 31,
2007
34,805.91
5,162.16
For the
Financial
Year Ended
March 31,
2008
62,318.76
8,763.50
For the
Financial
Year Ended
March 31,
2009
93,393.75
11,700.77
For
the
Financial
Year ended
March
31,
2010
110,284.71
19,425.86
For
the
Financial
year ended
March
31,
2011
132,091.19
24,058.85
Our Strengths
We believe that the following are our key strengths:
Diversified Portfolio of Products
Our Company’s product portfolio comprises (i) Product Finance loans, (ii) pre-owned and new vehicles loans, (iii)
personal loans, (iv) loans against gold, and (v) loans to small enterprise finance segment. Each of our products
differs in terms of the average tenor, average yield, average interest rates and average size of loan. As on March 31,
2011 approximately 15 % of our Assets Under Management comprised product finance loans, 24 % of our Assets
Under Management comprised vehicle loans, 9 % of our Assets Under Management comprised personal loans, 28 %
31
of our Assets Under Management comprised loans against gold, and 24 % of our Assets Under Management
comprised loans to small enterprise finance segment. Our diverse revenue streams reduce our dependence on any
particular product, thus enabling us to spread and mitigate our risk exposure to any particular industry, business or
customer segment.
Pan-India Presence, Strong Foot-hold in Southern India and Synergies with Other Shriram Group Entities
As of March 31, 2011, we had 559 branches and 91 other business outlets across 17 states in India, with a significant
presence in south India. As on March 31, 2011, our total employee strength was 2,318. We have a strong foothold in
south India. We leverage on the Shriram Group’s ecosystem to solicit our customers and our focus has been in
maximizing our association with the “Shriram” brand name and the synergies offered by the infrastructure, of other
entities in the Shriram Group. Our customer base over the years has significantly comprised of customers of other
entities in the Shriram Group. The large customer bases and wide-spread network of business outlets of entities such
as, Shriram Transport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), and
entities operating under the “Shriram Chits” brand name, has continued to provide us with a large platform of target
customers. We believe the under-banked community, especially the small enterprise finance segment often do not
have sufficient movable and/or immovable property to provide as security or collateral for loans. Our relationship
and knowledge of customers’ requirements also enables us to minimize our risks while extending loans to such
under-banked communities. For instance, loans provided to chit depositors of Shriram Chits, are partly or entirely
secured by the deposits made with Shriram Chits. Shriram Chits has several years of experience of collecting chit
deposits from self-employed professionals, wholesale/retail dealers, merchants, builders, manufacturers and small
and medium scale business operators, which provides us a with an extensive database of potential borrowers,
specially for our loans to the small enterprise finance segment.
Hub and Spoke Business Model with Efficient Credit Policies and Procedures
We operate in a ‘hub-and spoke’ business model, where the responsibilities from loan origination to recoveries of
loans are vested in each of our business outlets, under the general supervision and control of our head office in
Chennai. Our business outlet networks are interconnected and each business outlet is connected to our head office
through an ERP platform developed by Take Solution Limited, Chennai. The ERP platform enables our
management to monitor each loan right from its origination to final closure of accounts.
Our head office and senior management is primarily responsible for the broad policy formulation for our businesses.
However, the decision making process in connection with loans is decentralized and majorly vested in our business
outlets, which ensures speedy credit approvals and more efficient turn around times in processing loans.
We focus on closely monitoring our assets and borrowers through our officials at each business outlet. Our branch
officials develop relationships with our target customer base, which enables us to capitalize on local knowledge. We
follow stringent credit policies, including limits on customer exposure, to ensure the asset quality of our loans and
the security provided for such loans. Further, we have nurtured a culture of accountability by making our product
executives responsible for loan administration and monitoring as well as recovery of the loans they originate. We
have a dedicated team of officials at each business outlet who are responsible for (i) loan origination, (ii) credit
evaluation, (iii) pre-lending field investigations where our officials personally visit our prospective customers at
their homes or offices, and (v) post lending credit appraisal. The team of officials responsible for origination of a
loan is also responsible for the timely servicing of loans, recoveries, and monitoring the performance of each loan
from origination to closure of the loan. We offer incentivized salary structures to such officials, where their
incentives are linked to recovery of installments of the principal amount and interest on the loans. We believe our
efficient credit policies, credit approval procedures, credit delivery process and relationship-based loan
administration and monitoring methodology have aided in increasing our customer loyalty and earn repeat business
and customer referrals.
Our stringent credit policies and relationship based model has helped us maintain relatively low NPA levels. Our
Gross NPAs as a percentage of Total Loan Assets were 1.86 % as of March 31, 2011. Our Net NPAs as a percentage
of Net Loan Assets was 0.43 % as of March 31, 2011.
32
Access to a range of cost effective funding sources
We fund our capital requirements through a variety of sources. Our fund requirements are currently predominantly
sourced through term loans from banks, issue of redeemable non-convertible debentures on a private placement
basis, and cash credit from banks including working capital loans. We access funds from a number of credit
providers, including nationalized banks, private Indian banks and foreign banks, and our track record of prompt debt
servicing has allowed us to establish and maintain strong relationships with these financial institutions. We have also
placed commercial paper, as and when required in the past. As a deposit-taking NBFC, we are also able to mobilize
retail fixed deposits at competitive rates. We have also raised subordinated loans eligible for Tier II capital. We also
undertake securitization/assignment transactions to increase the efficient use of our capital and as a cost effective
source of funds.
In relation to our long-term debt instruments, we currently have ratings of CARE AA from Credit Analysis and
Research Limited (“CARE”), AA-(ind) from Fitch Ratings India Private Limited, (“Fitch”) and CRISIL AA/Stable from CRISIL. In relation to our short-term debt instruments, we have also received ratings of CARE A1+
from CARE, F1+(ind) from Fitch, and CRISIL A1+ from CRISIL. Our fixed deposit programme has been rated as
CARE AA (FD) by CARE, and tAA- (ind) by Fitch. The NCDs proposed to be issued under this Issue have been
rated CARE AA by CARE for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL
AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011. The rating of the
NCDs by CARE indicates high degree of safety regarding timely servicing of financial obligations and carrying very
low credit risk. The rating of NCDs by CRISIL indicates high degree of safety regarding timely servicing of
financial obligations.
We believe that we have been able to achieve a relatively stable cost of funds despite the difficult conditions in the
global and Indian economy and the resultant reduced liquidity and an increase in interest rates, primarily due to our
improved credit ratings, (as evidenced by the recent upgrade in our ratings by Fitch and CARE). We believe we are
able to borrow from a range of sources at competitive rates.
Experienced senior management team
Our Board consists of 12 Directors, (including representatives of the TPG Group), with extensive experience in the
financial services sectors. Our senior and middle management personnel have significant experience and in-depth
industry knowledge and expertise. Our management promotes a result-oriented culture that rewards our employees
on the basis of merit. In order to strengthen our credit appraisal and risk management systems, and to develop and
implement our credit policies, we have hired a number of senior managers who have extensive experience in the
Indian banking and financial services sector and in specialized finance firms providing loans to retail customers. We
believe that the in-depth industry knowledge and loyalty of our management and professionals provide us with a
distinct competitive advantage.
Strategy
Our key strategic priorities are as follows:
Further expand operations by growing our business outlet network and introducing full range of products in all
business outlets
We intend to continue to strategically expand our operations in target markets establishing additional business
outlets. Our customer origination and servicing efforts strategically focus on building long term relationships with
our customers and address specific issues and local business requirements of potential customers in a particular
region. We have a strong concentration of our business in south India with 248 of our 559 branches as on March 31,
2011, located in the states of Tamil Nadu, Andhra Pradesh and Karnataka. 91 % of our Assets Under Management
as on March 31, 2011 were represented by loans originated in the states of Tamil Nadu, Karnataka and Andhra
Pradesh. However, we have continued to make efforts to expand and penetrate into other regions in India.
Currently, we have succeeded in opening business outlets in 17 different states in India. We propose to target
establishing our operations through new business outlets in cities and towns where we historically had relatively
limited operations, such as in eastern and northern parts of India, and to further consolidate our position and
33
operations in western and southern parts of India. Our focus would be to typically target Tier II and Tier III cities,
where we believe that demand for our products will grow steadily in the near future.
As an internal policy, we typically introduce our products in a particular location only after having evaluated the
regional market and the demand for each individual product. Currently, not all of our business outlets offer our full
range of products. As a part of our strategy we target to gradually introduce our entire range of product offerings,
namely (i) Product Finance loans, (ii) pre-owned and new vehicles loans, (iii) personal loans, (iv) loans against gold,
and (v) small enterprise finance segment at each of our existing business outlets across India.
Continue growth in the Loans to Small Enterprises Finance Segment
Our Company started offering customized loans to small enterprises finance segment in 2006 and has continually
focused on expanding our customer base for this product since then. We see a significant opportunity for our
Company to expand our customer base in small enterprise finance segment. According to the Frost and Sullivan
report titled “Analysis of MSME Loan Markets for NBFCs – July 2011”, our Company is the largest small
enterprise finance company in India. In the small loan segment (loans of `1 lakh -10 lakh) our Company has a
dominant share of 95 %. Our Company also leads the total Indian micro, small and medium enterprises market with
53 % share. As a strategy, we will continue to leverage on the infrastructure provided by entities operating under the
‘Shriram Chits’ brand name. Shriram Chits has several years of experience of collecting chit deposits from selfemployed professionals, wholesale/retail dealers, merchants, builders, manufacturers and small and medium scale
business operators, which provides us a with an extensive database of potential borrowers, specially for our loans to
the small enterprises segment. We also propose to extend such loans to our existing customer base for our other
products and propose to introduce small enterprises segment loans in all our current business outlets as well as in
new business outlets that we open in the future.
Increase focus on loans against gold business
Since 2007 we have been providing personal and business loans secured by gold jewellery and ornaments, primarily
to individuals who possess gold jewellery but do not have access to formal credit within a reasonable time, or to
whom credit may not be available at all, to meet their short-term requirements. We propose to utilize our existing
business outlet networks, our existing customer base as well as the infrastructure offered by other Shriram Group
entities, to expand our reach and customer base for loans against gold. We expect to establish this product in new
markets and to target potential customers using the Shriram Group’s eco-system, to include customers who
otherwise continue to rely on the unorganized sector for timely funding requirements. We propose to capitalize on
the “Shriram” brand name and our good-will with our existing customers to further develop our business for this
product.
Continue to implement advanced processes and systems
We have invested in our technology systems and processes to create a stronger organization and ensure good
management of customer credit quality. Our information technology strategy is designed to increase our operational
and managerial efficiency. We aim to increasingly use technology in streamlining our credit approval,
administration and monitoring processes to meet customer requirements on a real-time basis. We continue to
implement technology led processing systems to make our appraisal and collection processes more efficient,
facilitate rapid delivery of credit to our customers and augment the benefits of our relationship based approach. We
also believe that deploying strong technology systems will enable us to respond to market opportunities and
challenges swiftly, improve the quality of services to our customers, and improve our risk management capabilities.
Foray into Housing Finance Business
Our Company incorporated a wholly owned subsidiary namely Shriram Housing Finance Limited in November 2010,
with a view of entering the housing finance sector. We have applied to National Housing Bank (wholly owned by the
Reserve Bank of India), for a certificate of registration under the National Housing Bank Act, 1987, to carry on
business of a housing finance institution. We believe that offering housing finance will help us expand our product
portfolio and we are well positioned to enter into this business through our established infrastructure, our existing
customer base as well as through leveraging our association with other entities in the Shriram Group. The aforesaid
Subsidiary will commence operations once it is registered with the National Housing Bank. As a part of its strategy,
Shriram Housing Finance Limited will typically target middle-income customers in semi-urban locations.
34
THE ISSUE
The following is a summary of the Issue. This summary should be read in conjunction with, and is qualified in its
entirety by, more detailed information in the chapter titled “Terms of the Issue” beginning on page 141 of this
Prospectus.
Common Terms of NCDs
Issuer
Shriram City Union Finance Limited
Issue
Public Issue by our Company of NCDs aggregating upto ` 37,500 lakhs with an option to
retain over-subscription upto ` 37,500 lakhs for issuance of additional NCDs aggregating
to a total of upto ` 75,000 lakhs.
Stock
Exchanges
proposed for listing of
the NCDs
NSE and BSE
Issuance and Trading
Compulsorily in dematerialised form
Trading Lot
One NCD
Depositories
NSDL and CDSL
Security
Security for the purpose of this Issue will be created in accordance with the terms of
the Debenture Trust Deed. For further details please refer to the section titled “Issue
Structure” beginning on page 144 of this Prospectus.
Rating
The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE
for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL
AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs vide its letter dated July
14, 2011. The rating of the NCDs by CARE indicates high degree of safety regarding
timely servicing of financial obligations and carrying very low credit risk. The rating of
NCDs by CRISIL indicates high degree of safety regarding timely servicing of financial
obligations.
Issue Schedule ∗
The Issue shall be open from August 11, 2011 to August 27, 2011 with an option to
close earlier and/or extend upto a period as may be determined by our Board.
3 (three) Business Days from the date of reciept of application or the date of realisation
of the cheques/demand drafts, whichever is later.
Deemed date of allotment shall be the date of issue of the Allotment Advice / regret.
Pay-in date
Deemed
Allotment
Date
of
*The subscription list shall remain open for a period as indicated, with an option for early closure or extension by such period, upto a period of
30 days from date of opening of the Issue, as may be decided by the Board of Directors of our Company. In the event of such early closure of
subscription list of the Issue, our Company shall ensure that notice of such early closure is given on such early date of closure through
advertisement/s in a leading national daily newspaper.
35
The specific terms of each instrument are set out below:
Options
Frequency of Interest Payment
Minimum Application
In Multiples of
Face Value of NCDs
(` / NCD)
Issue Price (` / NCD)
Mode of Interest Payment
Coupon (%) for NCD Holders in
Category I and Category II
Coupon (%) for NCD holders in the
Reserved Individual Portion
Coupon (%) for NCD holders in the
Unreserved Individual Portion
Effective Yield (per annum)
Put and call option
Tenor
Redemption Date
Redemption Amount (`/NCD)
Nature of Indebtedness
CRISIL
I
II
Annual
Annual
` 10,000/- (10 NCDs) (for all options of NCDs, namely Options I and
Option II either taken individually or collectively)
` 1,000 (1 NCD)
` 1,000 (1 NCD)
` 1,000
` 1,000
` 1,000
Through Various options available
` 1,000
Through
available
Various
options
11.60% per annum
11.50% per annum
12.10% per annum
11.85% per annum
11.85% per annum
11.60% per annum
For NCD holders in the Reserved
Individual Portion – 12.10%
For NCD holders in the Unreserved
Individual Portion – 11.85%
For all other NCD holders – 11.60%
For NCD holders in the Reserved
Individual Portion – 11.85%
For NCD holders in the
Unreserved Individual Portion –
11.60%
For all other NCD holders –
11.50%
Nil
Exercisable at the end of 48 months
from the Deemed Date of Allotment
60 months*
60 months from the Deemed Date
of Allotment*
Repayment of the Face Value plus
any interest that may have accrued
at the Redemption Date, or at the
date of early redemption if any Put
Option or Call Option is exercised,
as the case may be*
Pari Passu with other secured
creditors
and
priority
over
unsecured creditors
Credit Rating
36 months
36 months from the Deemed Date
of Allotment.
Repayment of the Face Value
plus any interest that may have
accrued at the Redemption Date.
Pari Passu with other secured
creditors and priority over
unsecured creditors
'AA-/Stable' for an amount of upto
` 75,000 Lakhs
'AA-/Stable' for an amount of
upto ` 75,000 Lakhs
'CARE AA' for an amount of upto `
75,000 Lakhs
Deemed date of allotment shall be
Deemed Date of Allotment
the date of issue of the Allotment
Advice / regret.
* Subject to the exercise of the put and/or call option
'CARE AA' for an amount of upto
` 75,000 Lakhs
Deemed date of allotment shall be
the date of issue of the Allotment
Advice / regret.
CARE
36
SUMMARY FINANCIAL INFORMATION
The following tables present an extract of Reformatted Consolidated Summary Financial Statements and the
Reformatted Unconsolidated Summary Financial Statements. The Reformatted Consolidated Summary Financial
Statements and the Reformatted Unconsolidated Summary Financial Statements should be read in conjunction with
the examination report thereon issued by our Statutory Auditors and statement of significant accounting policies and
notes to accounts on the Reformatted Consolidated Summary Financial Statements and the Reformatted
Unconsolidated Summary Financial Statements contained in the section titled “Financial Information” beginning on
page 130 of this Prospectus.
A.
SUMMARY INFORMATION OF OUR UNCONSOLIDATED ASSETS AND LIABILITIES
(` in lakhs)
Particulars
As at March 31,
2009
2008
2011
2010
2007
2,944.43
2,044.52
3,721.98
5,108.06
5,570.48
551.45
101.45
606.45
604.98
664.03
1,581.66
1,122.70
313.05
-
-
Current Assets, Loans &
Advances
936,121.22
621,545.53
539,518.62
373,141.11
215,885.47
Total (A+B+C+D)
941,198.76
624,814.20
544,160.10
378,854.15
222,119.98
656,951.01
413,610.55
390,445.43
262,795.40
130,384.22
75,827.43
53,103.69
41,831.33
37,127.45
20,246.27
-
-
-
632.99
2,973.32
Current Liabilities
70,089.54
46,393.55
33,125.35
29,048.76
31,165.45
Provisions
17,123.50
11,706.08
7,783.75
4,269.76
2,457.10
819,991.48
524,813.87
473,185.86
333,874.36
187,226.36
Assets
A.
Fixed and Intangible
Assets(Net) (including CWIP)
B
Investments
C
Deferred Tax Asset (Net)
D
F
Liabilities
G
Secured Loans
H
Unsecured Loans
I
Deferred Tax Liability (Net)
J
K
L
Total (G+H+I+J+K)
37
(` in lakhs)
Particulars
As at March 31,
2009
2008
2011
2010
2007
121,207.28
100,000.33
70,974.24
44,979.79
34,893.62
Share Capital
Share application money
pending allotment
4,953.69
4,915.47
4,585.68
6,444.48
6,238.98
-
0.71
-
-
-
Stock Option Outstanding
1,887.27
2,281.04
1,637.97
542.08
-
-
-
2,700.00
232.20
560.00
Reserves and Surplus
Less : Miscellaneous
Expenditure
(to the
extent not written off or
adjusted)
114,366.32
92,803.11
62,050.59
37,761.03
28,096.77
-
-
-
-
2.13
Total (i+ii+iii+iv+v-vi)
121,207.28
100,000.33
70,974.24
44,979.79
34,893.62
M
Net Worth (F-L)
Represented By
(i)
(ii)
(iii)
(iv)
Optionally Convertible warrants
(v)
(vi)
38
B.
SUMMARY INFORMATION OF OUR UNCONSOLIDATED PROFIT AND LOSS ACCOUNT
(` in lakhs)
Particulars
A.
2011
For the year ended March 31,
2010
2009
2008
2007
131,800.12
107,205.35
92,357.73
61,072.29
33,592.29
Income
i
Income from Operations
ii
Other Income
291.07
3,079.36
1,036.02
1,246.47
1,213.62
Total Income
132,091.19
110,284.71
93,393.75
62,318.76
34,805.91
B.
Expenditure
i
Financial Expenses
58,848.26
51,759.01
49,048.65
30,848.93
17,124.52
ii
Personnel Expenses
4,367.02
3,611.63
3,582.75
2,274.74
935.51
iii
Operating & Other Expenses
20,470.16
14,163.60
12,882.73
10,273.02
6,034.77
iv
Depreciation and amortization
Impairment loss/(Reversal) on Fixed
assets & stock
Share & Debenture Issue expenses
written off
747.41
464.77
1,018.23
1,127.52
373.35
-
-
1,186.81
-
-
-
-
-
2.13
1.69
11,598.25
11,659.84
7,701.05
5,093.96
2,392.75
Total Expenditure
96,031.10
81,658.85
75,420.22
49,620.30
26,862.59
C.
Net Profit Before Taxation (A-B)
36,060.09
28,625.86
17,973.53
12,698.46
7,943.32
D.
Provision for taxation
Current tax
12,460.20
9,972.11
7,055.25
6,134.29
2,902.09
Deferred tax
(458.96)
(809.65)
(946.04)
(2,340.33)
(191.70)
161.79
141.00
70.77
v
vi
vii
Provisions & Write offs (net)
Wealth tax
1.76
Fringe Benefit Tax
Fringe Benefit Tax of earlier Year
E.
37.54
Total Tax
12,001.24
9,200.00
6,272.76
3,934.96
2,781.16
Net Profit after Taxation (C-D)
24,058.85
19,425.86
11,700.77
8,763.50
5,162.16
Balance in Profit & Loss Account
brought forward
22,730.09
12,003.01
8,412.03
4,471.38
2,264.35
39
(` in lakhs)
2011
For the year ended March 31,
2010
2009
2008
46,788.94
31,428.87
20,112.80
13,234.88
7,426.51
-
-
63.17
141.59
145.15
1,236.25
982.28
501.85
391.00
271.00
1,733.79
1,474.64
1,375.92
1,332.15
782.00
0.08
9.41
Tax on dividend
205.33
166.94
96.02
316.92
192.87
Tax on proposed dividend
281.26
244.92
233.84
-
-
Transfer to statutory reserve
4,810.00
3,890.00
2,340.00
1,761.11
1,032.43
Transfer to general reserve
Transfer to Capital Redemption
Reserve
2,410.00
1,940.00
1,170.00
880.00
522.27
-
-
2,328.98
-
-
10,676.63
8,698.78
8,109.79
4,822.85
2,955.13
36,112.31
22,730.09
12,003.01
8,412.03
4,471.38
Particulars
F.
G.
Balance Available for
Appropriations
2007
Appropriations
Dividend - Cumulative Redeemable
Preference Shares
Equity Shares - Interim dividend
Equity Shares - Proposed final
dividend
Preference Shares - Proposed final
dividend
Total Appropriations
H.
Balance carried to Balance Sheet
(F-G)
40
C.
SUMMARY INFORMATION OF OUR UNCONSOLIDATED CASH FLOW STATEMENT
(`
` in lakhs)
Particulars
For the year ended March 31,
2011
2010
2009
2008
2007
36,060.09
28,625.86
17,973.53
12,698.46
7,943.32
747.41
464.77
1,018.23
1,127.52
373.35
-
-
-
2.13
1.69
13.78
1.60
0.12
3.35
0.96
A. Cash flow from operating activities
Net profit before taxation
Depreciation and amortization
Share and debenture issue expenses written
off
(Profit) / loss on sale of fixed assets (net)
Lease equalization Adjustments
(Profit) / loss on sale of current and long
term investments (net)
Interest income on current and long term
investments and interest income on fixed
deposits
(11.49)
-
-
0.08
-
-
(270.70)
(1,203.65)
(258.14)
(228.64)
(302.65)
-
(444.91)
(56.47)
(46.06)
(65.27)
471.68
751.53
1,111.28
542.09
-
-
-
1,186.81
-
-
(546.62)
-
994.18
811.68
-
10,136.82
12,165.62
7,809.37
5,174.98
2,482.15
1,714.89
-
-
-
-
Provision for gratuity
40.82
15.88
6.46
104.70
28.48
Provision for leave encashment
Provision for diminution in value of
investments
Operating profit before working capital
changes
27.48
9.87
1.51
13.60
1.77
-
-
-
-
2.99
48,395.65
40,386.57
29,786.96
20,203.81
10,455.31
(233,365.56)
(111,057.72)
(101,492.75
)
(108,713.56
)
(88,184.8
9)
Dividend income
Employees Stock option compensation cost
Provision for impairment
Provision for hedging contracts
Provisions for non performing assets and
bad debts written off
Provisions for standard assets
Movements in working capital:
(Increase) / decrease in current assets:
(Increase) / decrease in assets under
financing activities
(Increase) / decrease in sundry debtors
(Increase) / decrease in lease assets - net of
sales
-
89.03
(13.21)
102.25
(60.52)
-
-
-
-
8.89
(Increase) / decrease in other current assets
(11,530.50)
(5,552.81)
(29.55)
(94.98)
306.06
41
(`
` in lakhs)
Particulars
For the year ended March 31,
2011
(931.92)
2010
4,708.39
2009
2,239.18
2008
(2,111.58)
2007
(1,734.19)
23,690.91
13,272.04
4,078.50
(2,119.00)
10913.48
Cash generated from operations
(173,741.42)
(58,154.50)
(65,430.87)
(92,733.06)
(68,295.8
6)
Direct taxes paid (net of refunds)
(11,127.69)
(9,197.57)
(6,450.11)
(6,522.66)
(3,154.36)
(184,869.11)
(67,352.07)
(71,880.98)
(99,255.72)
(71,450.2
2)
7,992.17
(12,665.70)
(5,855.70)
52.63
42.27
(1,663.61)
(1,058.11)
(879.02)
(670.26)
13.80
2.52
2,269.20
59.93
1.81
(368.18)
Purchase of Investment
(200.00)
-
-
-
-
Investment in subsidiary company
Proceeds from sale of investment in
subsidiary company
(250.00)
-
(4.55)
(4.99)
-
-
-
-
4.55
-
-
1,905.00
3.00
59.50
-
270.70
1,203.65
258.14
228.64
302.65
-
444.91
56.47
46.06
65.27
Net cash used in investing activities (B)
6,151.78
(7,901.05)
(6,361.73)
(282.06)
55.81
C. Cash Flows from financing activities
Proceeds from issue of equity share capital
including securities premium & Share
application
133.05
10,317.48
12,985.41
3,288.00
19,200.00
-
-
2,467.80
(327.80)
560.00
180,566.59
(3,271.15)
70,101.92
114,921.35
52,645.77
62,773.87
26,436.27
57,548.11
17,489.83
840.64
(45.64)
(12.06)
(52.87)
(214.31)
2.84
269.38
11,284.42
13,681.75
8,170.49
10,915.28
(Increase) / decrease in other loans and
advances
Increase / (decrease) in current liabilities
Net cash used in operating activities (A)
B. Cash flows from investing activities
Investment in Fixed deposits (net)
Purchase of fixed assets and intangibles
Proceeds from sale of fixed assets
Proceeds from sale of investments
Interest received on current and long term
investments and interest on fixed deposits
Dividend received
Proceeds from issue of share warrants
Increase / (decrease) in bank borrowings
(net)
Increase / (decrease) in long term
borrowings(net)
Increase / (decrease) in fixed deposits (net)
Increase / (decrease) in subordinate debts
(net)
42
(`
` in lakhs)
Particulars
For the year ended March 31,
2011
2010
2009
2008
2007
Increase / (decrease) in redeemable non
convertible debentures (net)
-
-
(3,500.00)
3,500.00
-
Increase / (decrease) in unsecured loans
22,500.00
-
(5,425.00)
5,425.00
(247.50)
Dividend paid
(2,710.89)
(2,358.20)
(1,897.26)
(1,324.00)
(959.32)
(450.25)
(400.77)
(322.44)
(225.01)
(134.55)
263,036.11
41,995.99
145,587.42
150,703.55
82,823.16
84,318.77
(33,257.14)
67,344.72
51,165.77
11,428.75
116,711.86
149,969.00
82,624.28
31,458.51
20,029.76
201,030.63
116,711.86
149,969.00
82,624.28
31,458.51
Tax on dividend
Net cash from financing activities (C)
Net increase / (decrease) in cash and
cash equivalents (A + B + C)
Cash and Cash Equivalents at the
beginning of the year
Cash and Cash Equivalents at the end of
the year
Components of Cash and Cash
Equivalents
As at March 31,
2010
2011
Cash and Cash Equivalents at the end of
the year as per Balance Sheet
216,540.14
2009
2008
2007
140,208.46
160,879.51
88,001.90
38,101.96
17.03
20.87
22.78
20.47
106.00
807.34
597.58
527.80
23373.57
10,082.30
4,757.26
6,095.18
116,711.86
149,969.00
82,624.28
31,458.51
Less: Balance in Current account held for
unpaid dividends
Less : Fixed deposits held for unpaid
dividends
22.11
Less : Fixed deposits held for more than
three months
51.00
Less : Fixed Deposit under Lien
15436.40
201,030.63
43
D.
SUMMARY INFORMATION OF OUR CONSOLIDATED ASSETS AND LIABILITIES
(` in lakhs)
As at March 31, 2011
Particulars
Assets
A.
Fixed and Intangible Assets(Net) (including CWIP)
B
Investments
C
Deferred Tax Asset (Net)
D
Current Assets, Loans & Advances
936,363.41
E
Total (A+B+C+D)
941,193.68
2,947.16
301.45
1,581.66
Liabilities
F
Secured Loans
G
Unsecured Loans
75,827.43
H
Current Liabilities
70,108.22
I
Provisions
17,123.50
J
Total (F+G+H+I)
820,010.16
K
Net Worth (F-K)
121,183.52
656,951.01
Represented By
(i)
Share Capital
4,953.69
(ii)
Stock Option Outstanding
1,887.27
(iii)
Reserves and Surplus
(iv)
Less : Miscellaneous Expenditure (to the extent not written off or
adjusted)
114,366.32
23.76
121,183.52
Total (i+ii+iii+iv+v-vi)
44
E.
SUMMARY INFORMATION OF OUR CONSOLIDATED PROFIT AND LOSS ACCOUNT
(` in lakhs)
For the year ended March
31,2011
Particulars
A.
Income
i
Income from Operations
ii
Other Income
291.07
Total Income
132,091.19
131,800.12
B.
Expenditure
i
Financial Expenses
58,848.26
ii
Personnel Expenses
4,367.02
iii
Operating & Other Expenses
20,470.16
iv
Depreciation and amortization
Provisions & Write offs (net)
747.41
11,598.25
Total Expenditure
96,031.10
C.
Net Profit Before Taxation (A-B)
36,060.09
D.
Provision for taxation
v
E.
Current tax
12,460.20
Deferred tax
(458.96)
Total Tax
12,001.24
Net Profit after Taxation (C-D)
24,058.85
Balance in Profit & Loss Account brought forward
22,730.09
46,788.94
F.
Balance Available for Appropriations
G.
Appropriations
Equity Shares - Interim dividend
1,236.25
Equity Shares - Proposed final dividend
1,733.79
Tax on dividend
205.33
Tax on proposed dividend
281.26
4,810.00
Transfer to statutory reserve
45
(` in lakhs)
For the year ended March
31,2011
Particulars
2,410.00
Transfer to general reserve
H.
Total Appropriations
10,676.63
Balance carried to Balance Sheet (F-G)
36,112.31
46
F.
SUMMARY INFORMATION OF OUR CONSOLIDATED CASH FLOW STATEMENT
(` in lakhs)
Particulars
Total As at March 31, 2011
A. Cash flow from operating activities
Net Profit before taxation
Depreciation and amortisation
(Profit)/loss on sale of assets(net)
income on fixed deposits
Employees Stock option compensation cost
Provision for hedging contracts
Provision for non performing assets and bad debts written off
36,060.09
747.42
13.78
(270.70)
471.68
(546.62)
10,136.80
Contingent Provision against Standard assets
Provision for gratuity
Provision for leave encashment
Operating profit before working capital changes
1,714.89
40.82
27.48
48,395.64
Movements in working capital:
(Increase) / decrease in assets under financing activities
(Increase) / decrease in other current assets
(Increase)/decrease in other loans and advances
Increase / (decrease) in current liabilities
Cash generated from operations
Direct taxes paid ( net of refunds)
Net cash used in operating activities (A)
B. Cash flows from investing activities
Investment in Fixed deposits (net)
Purchase of fixed and intangible assets
Proceeds from sale of fixed assets
Interest on fixed deposit
Pre-operative Expenditure
Preliminary Expenditure
Net cash used in investing activities (B)
(233,365.55)
(11,530.50)
(931.92)
23,709.59
(173,722.74)
(11,127.69)
(184,850.43)
7,992.17
(1,666.35)
2.52
270.70
(21.03)
(2.73)
6,575.28
C. Cash Flows from financing activities
Proceeds from issue of equity share capital including securities
premium and Share Application Money
Increase/ (decrease) in bank borrowings(net)
Increase/ (decrease) in long term borrowings (net)
Increase/ (decrease) in fixed deposits (net)
Increase/ (decrease) in subordinate debts (net)
Increase / (decrease) in unsecured loans
Dividend paid
Tax on dividend
Net cash from financing activities (C)
Net increase / (decrease) in cash and cash equivalents (A + B + C)
47
133.05
180,566.59
62,773.87
(45.64)
269.38
22,500.00
(2,710.89)
(450.25)
263,036.11
84,560.97
(` in lakhs)
Particulars
Total As at March 31, 2011
Cash and Cash Equivalents at the beginning of the period
Cash and Cash Equivalents at the end of the year
Components of Cash and Cash Equivalents
Cash and Cash Equivalents at the end of the year as per
Balance Sheet
Less: Balance in Current account held for unpaid dividends
Less: Fixed deposits held for more than three months
Less: Fixed deposit under lien
116,711.86
201,272.83
216,782.34
22.11
51.00
15,436.40
201,272.83
48
CAPITAL STRUCTURE
Details of share capital
The share capital of our Company as at date of this Prospectus is set forth below:
Share Capital
AUTHORISED SHARE CAPITAL
60,000,000 Equity Shares of ` 10/- each
4000,000 Cumulative Redeemable Preference Shares of ` 100/- each
` in Lakhs
6,000.00
4,000.00
10,000.00
TOTAL
ISSUED
49,733,379 Equity Shares of ` 10 /- each
4, 973.33
SUBSCRIBED
49,733,379 Equity Shares of ` 10 /- each
4, 973.33
PAID-UP SHARE CAPITAL
49,733,379 Equity Shares of ` 10/- each
4,973.33
TOTAL
4, 973.33
Changes in the authorised capital of our Company as on the date of this Prospectus:
Sr.
FY
Alteration
No.
1987
1.
The Authorised Share capital of our Company was increased from ` 2,500,000 divided into 25,000
Equity shares of `100/- each to ` 5,000,000 divided into 50,000 Equity shares of ` 100/- each.
1988
2.
The Authorised Share capital of our Company was increased from ` 5,000,000 divided into 50,000
Equity shares of `100/- each to ` 20,000,000 divided into 2,000,000 Equity shares of ` 10/- each.
1990
3.
The Authorised Share capital of our Company was reorganised and increased from ` 20,000,000
divided into 2,000,000 Equity shares of ` 10/- each to ` 60,000,000 divided into 6,000,000 Equity
shares of `10/- each
1990
4.
The Authorised Share capital of our Company was reorganised ` 60,000,000 divided into 6,000,000
Equity shares of `10/- each to ` 45,000,000 divided into 4,500,000 Equity shares of `10/- each and `
15,000,000 divided into 1,500,000 preference shares of `10/- each.
1994
5.
The Authorised Share capital of our Company was increased from ` 60,000,000 divided into
4,500,000 Equity shares of `10/- each and 1,500,000 preference shares of `10/- each to `
100,000,000 divided into 8,500,000 Equity shares of `10/- each and 1,500,000 preference shares of
`10/- each.
1997
6.
The Authorised Share capital of our Company was increased from ` 100,000,000 divided into
8,500,000 Equity shares of `10/- each and 1,500,000 preference shares of `10/- each to `
200,000,000 divided into 15,000,000 Equity Shares of `10/- each and 5,000,000 redeemable
preference shares of `10/- each
1998
7.
The Authorised Share capital of our Company was increased from ` 200,000,000 divided into
15,000,000 Equity Shares of `10/- each and 5,000,000 redeemable preference shares of `10/- each to
` 250,000,000 divided into 15,000,000 Equity shares of `10/- each and 1,000,000 Cumulative
Redeemable Preference shares of `100/- each with redemption period of 5 years carrying dividends
by the Board.
2000
8.
The Authorised Share capital of our Company was increased from ` 250,000,000 divided into
15,000,000 Equity shares of `10/- each and 1,000,000 Cumulative Redeemable Preference shares of
`100/- each to ` 350,000,000 divided into 15,000,000 Equity shares of `10/- each and 2,000,000
49
Sr.
No.
FY
9.
2001
10.
2002
11.
2003
12.
2008
Alteration
Cumulative Redeemable Preference shares of `100/- each with redemption period of 5 years carrying
dividends by the Board.
The Authorised Share capital of our Company was increased from ` 350,000,000 divided into
15,000,000 Equity shares of `10/- each and 2,000,000 Cumulative Redeemable Preference shares of
`100/- each to ` 450,000,000 divided into 15,000,000 Equity shares of `10/- each and 3,000,000
Cumulative Redeemable Preference shares of `100/- each with redemption period of 5 years carrying
dividends by the Board.
The Authorised Share capital of our Company was increased from ` 4,50,000,000 divided into
15,000,000 Equity shares of `10/- each and 3,000,000 Cumulative Redeemable Preference shares of
`100/- each to ` 550,000,000 divided into 25,000,000 Equity shares of `10/- each and 3,000,000
Cumulative Redeemable Preference shares of `100/- each with redemption period of 5 years carrying
dividends by the Board.
The Authorised Share capital of our Company was increased from ` 550,000,000 divided into
25,000,000 Equity shares of `10/- each and 3,000,000 Cumulative Redeemable Preference shares of
`100/- each to ` 850,000,000 divided into 45,000,000 Equity shares of `10/- each and 4,000,000
Cumulative Redeemable Preference shares of `100/- each with redemption period of 5 years carrying
dividends by the Board.
The Authorised Share capital of our Company was increased from ` 850,000,000 divided into
45,000,000 Equity shares of `10/- each and 4,000,000 Cumulative Redeemable Preference shares of
`100/- each to ` 1,000,000,000 divided into 60,000,000 Equity shares of `10/- each and 4,000,000
Cumulative Redeemable Preference shares of `100/-each.
Equity Share Capital History of our Company
Date of Allotment
March 27, 1986
April 7, 1986
May 14, 1986
May 30, 1986
August 2, 1986
September 6,1986
November 29,1986
March 7,1987
April 14,1987
November 21, 1987
June 11, 1988
October 29, 1988
December 30, 1988
March 27, 1989
January 22, 1991
June 10, 1993
June 14, 1994
December 22, 1994
February 19, 1996
September 12, 2003
December 22, 2006
December 27, 2006
Number of shares
Cumulative
issued and allotted Paid-up capital
in (`
`)
20
2,000
4,980
500,000
1,000
600,000
4,000
1,000,000
1,000
1,100,000
5,000
1,600,000
4,000
2,000,000
3,500
2,350,000
3,500
2,700,000
8,000
3,500,000
15,000
5,000,000
10,000
6,000,000
150,000
7,500,000
240,000
9,900,000
990,000
19,800,000
1,980,000
39,600,000
40,000
40,000,000
2,000,000
60,000,000
1,500,000
75,000,000
19,600,000
271,000,000
4,000,000
311,000,000
4,000,000
351,000,000
50
Nature of Issue
Subscribers to the Memorandum
Further Issue
Further Issue
Further Issue
Further Issue
Further Issue
Further Issue
Further Issue
Further Issue
Further Issue
Further Issue
Rights Issue
Rights Issue
Rights Issue
Rights Issue
Rights Issue
Preferential Issue
Public Issue
Bonus Issue
Preferential Issue
Preferential Issue
Preferential Issue
Issue Price Premiu
(`
`)
m (`
`)
100/100/100/100/100/100/100/100/100/100/100/100/10/10/10/10/10/10/Nil
10/10/10/-
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
10/Nil
5.35/150/150/-
Date of Allotment
December 29, 2006
March 20, 2008
May 14, 2008
May 16, 2008
June 27, 2008
January 30, 2009
May 29, 2009
November 6, 2009
November 9, 2009
November 11,2009
January 6, 2010
March 30, 2010
May 31, 2010
June 30, 2010
August 13, 2010
September 17, 2010
October 19,2010
November 8,2010
December 04, 2010
December 31,2010
January 31, 2011
March 2, 2011
March 31, 2011
April 30, 2011
June 7, 2011
June 29, 2011
Total
Number of shares
Cumulative
issued and allotted Paid-up capital
in (`
`)
4,000,000
391,000,000
2,055,000
411,550,000
1,837,500
1,412,500
1,445,000
429,925,000
444,050,000
458,500,000
6,800
7,050
587,500
458,568,000
458,638,500
464,513,500
662,500
471,138,500
2,000,000
491,138,500
10,100
30,750
27,184
20,572
83,126
39,957
34,050
33,150
20,350
49,150
48,200
14,810
11,628
1,48,400
43,550
4,552
49,733,379
491,239,500
491,547,000
491,818,840
492,024,560
492,855,820
493,255,390
493,595,890
493,927,390
494,130,890
494,622,390
495,104,390
495,252,490
495,368,770
496,852,770
497,288,270
497,333,790
497,333,790
Nature of Issue
Preferential Issue
Preferential Issue
(Conversion of Warrants)
Preferential Issue
Preferential Issue
Preferential Issue
(Conversion of Warrants)
ESOP$
ESOP$
Preferential Issue
(Conversion of Warrants)
Preferential Issue
(Conversion of Warrants)
Preferential Issue
(Conversion of Warrants)
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
ESOP$
Issue Price Premiu
(`
`)
m (`
`)
10/10/-
150/150/-
10/10/10/-
390/390/150/-
10/10/10/-
25/25/390/-
10/-
390/-
10/-
390/-
10/10/10/10/10/10/10/10/10/10/10/10/10/10/10/10/-
25/25/25/25/25/25/25/25/25/25/25/25/25/25/25/25/-
$
Equity shares allotted to the employees of our Company as fully paid up under the Company’s ESOP 2006 on
exercise of vested options.
Notes:
1. On March 20, 2008, the Company issued and allotted 2,055,000 Equity Shares of ` 10/- each at a premium of `
150/- per Equity share on conversion of warrants to Shriram Enterprise Holdings Private Limited
2.
On June 27, 2008, the Company issued and allotted 1,445,000 Equity Shares of ` 10/- each at a premium of `
150/- per Equity share on conversion of warrants to Shriram Enterprise Holdings Private Limited.
3.
On November 6, 2009, the Company issued and allotted 587,500 Equity Shares of ` 10/- each at a premium of `
390/- per Equity share on conversion of warrants to Asiabridge fund I LLC
4.
On November 9, 2009 the Company issued and allotted 662,500 Equity Shares of ` 10/- each at a premium of `
390/- per Equity share on conversion of warrants to Van Gogh Limited.
51
5.
On November 11, 2009, the Company issued and allotted 2,000,000 Equity Shares of ` 10/- each at a premium of
` 390/- per Equity share on conversion of warrants, to Bessemer Venture Partners Trust (1,250,000) and IDBI
Trusteeship Services Limited (India Advantage Fund VI)(750,000) .
Share holding pattern of our Company as on June 30, 2011:
Sr.
No
Category of
Shareholder
(A)
Shareholding of
Promoters and
Promoter Group
(A)
Indian (1)
Individuals/Hindu
Undivided Family
Central
Government/State
Government(s)
Bodies Corporate
Financial
Institutions/Banks
Any Other
Sub Total A (1)
Foreign
Individuals (NonResident
Individuals/Foreign
Individuals)
Bodies Corporate
Institutions/FII
Any Other
Sub Total A (2)
Total Shareholding
of Promoters and
Promoter Group
(A)= (A)(1)+(A)(2)
Public shareholding
Institutions
Mutual Funds/ UTI
Financial Institutions
/ Banks
Central
Government/State
Government(s)
Venture Capital
Fund
Insurance
Companies
Foreign Institutional
Investors
Foreign Venture
Capital Investor
Any other
Sub-Total (B)(1)
Non-institutions
(1)
(a)
(b)
(c)
(d)
(e)
(2)
(a)
(b)
(c)
(d)
(B)
(1)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(2)
Number
of
shareholders
Total
number
of Equity
Shares
Number of
Total shareholding as Shares pledged or
shares held in a % of total number
otherwise
dematerialized
of Equity Shares
encumbered
form
% of
% of
Number of As a %
shares
shares
shares
(A+B)
(A+B+C)
0
0
0
0
0
0.00
0.00
0
0
0
0
0
0.00
0.00
2
0
26,477,663
0
26,477,663
0
53.24
0
53.24
0
0.00
0.00
0.00
0.00
0
2
0
26,477,663
0
26,477,663
0
53.24
0
53.24
0.00
0.00
0.00
0.00
0
0
0
0
0
0.00
0.00
0
0
0
0
2
0
0
0
0
26,477,663
0
0
0
0
26,477,663
0
0
0
0.00
53.24
0
0
0
0.00
53.24
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
5
2
21,891
100,125
21,616
100,125
0.04
0.20
0.04
0.20
0.00
0.00
0.00
0.00
0
0
0
0
0
0.00
0.00
0
0
0
0
0
0.00
0.00
0
0
0
0
0
0.00
0.00
12
7,492,395
7,492,395
15.07
15.07
0.00
0.00
0
0
0
0
0
0.00
0.00
0
19
0
7,614,411
0
7,614,136
0
15.31
0
15.31
0.00
0.00
0.00
0.00
52
Sr.
No
Category of
Shareholder
(a)
(b)
(i)
Bodies Corporate
Individuals
Individual
shareholders holding
nominal share capital
up to ` 1 Lakh
Individual
shareholders holding
nominal share capital
in excess of ` 1 Lakh
Any other
Non Resident
Indians
Trust
Clearing Members
Overseas Corporate
Bodies
Sub-Total (B) (2)
Total Public
Shareholding (B) =
(B)(1)+(B)(2)
TOTAL (A) + (B)
Shares held by
custodians and
against which
Depository receipts
have been issued
Promoter and
Promoter Group
Public
Total C=C1+C2
GRAND TOTAL
(A)+(B)+(C)
(ii)
(c)
(C)
C1
C2
Number
of
shareholders
Total
number
of Equity
Shares
Number of
Total shareholding as Shares pledged or
shares held in a % of total number
otherwise
dematerialized
of Equity Shares
encumbered
form
% of
% of
Number of As a %
shares
shares
shares
(A+B)
(A+B+C)
108
0
4,926
141,679
0
1,284,898
135,429
0
906,748
0.28
0
2.58
0.28
0
2.58
0.00
0.00
0.00
0.00
0.00
0.00
12
173,859
173,859
0.35
0.35
0.00
0.00
21
21,353
21,353
0.04
0.04
N.A
N.A
2
24
3
3,700,124
19,392
10,300,000
3,700,124
19,392
10,300,000
7.44
0.04
20.71
7.44
0.04
20.71
N.A
N.A
N.A
N.A
N.A
N.A
5,096
5,115
15,641,305
23,255,716
15,256,905
22,871,041
31.45
46.76
31.45
46.76
N.A
N.A
N.A
N.A
5,117
49,733,379
49,348,704
100
100
0.00
0.00
0
0
0
0
0
0.00
0.00
0
0
5,117
0
0
49,733,379
0
0
49,348,704
0
0
100
0
0
100
0.00
0.00
0.00
0.00
0.00
0.00
List of top ten holders of Equity Shares of our Company as on June 30, 2011:
Sr. No
1.
2.
3.
Name of
shareholders
Shriram
Enterprise
Holdings
Private
Limited
Shriram
Retail
Holdings
Private
Limited
Van
Gogh
Limited
Mookambika Complex, No.4,
Lady Desika Road, Mylapore,
Chennai -600 004.
17,921,462
Percentage
Holding
(%)
36.04
Mookambika Complex, No.4,
Lady Desika Road, Mylapore,
Chennai -600 004.
8,556,201
17.20
HDFC Bank Limited, Custody
Services, Lodha- I Think
Techno Campus Office Floor53
6,625,000
13.32
Address
Total Number of Equity Shares held
Sr. No
Name of
shareholders
Address
Total Number of Equity Shares held
Percentage
Holding
(%)
8, Next to Kanjurmarg railway
station, Kanjurmarg (East)
Mumbai- 400 042
Norwest
Ventures
Partners
X
FII Mauritius
IDBI
Trusteeship
Services
Limited
C/o Standard Chartered Bank,
Securities Services, 23-25 M.G.
Road, Fort Mumbai- 400 001
4,342,179
8.73
ICICI Bank Limited, 1st Floor
SMS Department 414 Empire
House S B Marg Lower Parel,
Mumbai- 400 013
3,700,054
7.44
6.
Bessemer
Venture
Partners
Trust
Deutsche Bank AG, DB House,
Hazrimal Somani Marg, Post
Box No. 1142, Fort Mumbai 400 001
2,500,000
5.03
7.
Acacia
Partners LP
Citibank
N.A.
Custody
Services, 3rd Floor, Trent House,
G Block, Plot No. 60, Bandra
Kurla Complex, Bandra (East)
Mumbai-400 051
1,555,728
3.13
8.
Asiabridge
Fund I LLC
Citibank
N.A.
Custody
Services, 3rd Floor, Trent House,
G Block, Plot No. 60, BKC
Bandra (East) Mumbai-400 051
1,175,000
2.36
9.
Acacia
Institutional
Partners LP
Citibank
N.A.
Custody
Services, 3rd Floor, Trent House,
G Block, Plot No. 60, BKC
Bandra (East) Mumbai-400 051
543,000
1.09
10.
Morgan
Stanley
Mauritius
Company
Limited
HSBC
Securities
Services
Limited, 2nd Floor “SHIV” Plot
no 139-140 B Western Express
Highway, Sahar Road Junction
Vile Parle (East), Mumbai- 400
057
431,092
0.87
4.
5.
List of top ten holders of debt instruments, as on July 18, 2011:
1.
List of top ten holders of Secured Redeemable Non Convertibles Debentures (issued on private placement
basis) of face value ` 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07067):
Sr. No.
1.
2.
3.
4.
Name of holder
Number of
instruments
Corporation Bank
Allahabad Bank
Central Bank of India
Trustees Central Bank of India Employees
54
500
400
200
200
Aggregate Amount (`
`. in
lakhs)
500.00
400.00
200.00
200.00
Sr. No.
1.
2.
3.
4.
1.
2.
3.
4.
500
400
200
200
Aggregate Amount (`
`. in
lakhs)
500.00
400.00
200.00
200.00
100
100
Number of
instruments
Name of holder
750
600
300
300
Aggregate Amount (`
`. in
lakhs)
750.00
600.00
300.00
300.00
150
150.00
Number of
instruments
Corporation Bank
Allahabad Bank
Central Bank of India
Trustees Central Bank of India Employees
Pension Fund
Trustees Central Bank of India Employees
Pension Fund
5.
List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07091):
Sr. No.
1.
2.
3.
4.
Name of holder
750
600
300
300
Aggregate Amount (`
`. in
lakhs)
750.00
600.00
300.00
300
150
150
Number of
instruments
Corporation Bank
Allahabad Bank
Central Bank of India
Trustees Central Bank of India Employees
Pension Fund
Trustees Central Bank of India Employees
Pension Fund
5.
List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07109):
Sr. No.
1.
2.
100.00
List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07083):
Sr. No.
5.
Name of holder
Corporation Bank
Allahabad Bank
Central Bank of India
Trustees Central Bank of India Employees
Pension Fund
Trustees Central Bank of India Employees
Pension Fund
5.
4.
100
List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07075):
Sr. No.
3.
Aggregate Amount (`
`. in
lakhs)
Number of
instruments
Pension Fund
Trustees Central Bank of India Employees
Pension Fund
5.
2.
Name of holder
Name of holder
Number of
instruments
Central Bank of India
Bank of Baroda
400
200
55
Aggregate Amount (`
`. in
lakhs)
400.00
200.00
6.
List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07117):
Sr. No.
1.
2.
7.
400
200
Aggregate Amount (`
`. in
lakhs)
400.00
200.00
List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07125):
1.
2.
Name of holder
Number of
instruments
Central Bank of India
Bank of Baroda
600
300
Aggregate Amount (`
`. in
lakhs)
600.00
300.00
List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,00,000/- per debenture as on July 18, 2011 (ISIN :INE722A07133):
Sr. No.
1.
2.
9.
Number of
instruments
Central Bank of India
Bank of Baroda
Sr. No.
8.
Name of holder
Name of holder
Number of
instruments
Central Bank of India
Bank of Baroda
600
300
Aggregate Amount (`
`. in
lakhs)
600.00
300.00
List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07141):
Sr. No.
1.
Name of holder
Number of
instruments
Standard Chartered Bank (Mauritius)
Limited-Debt
1,750
Aggregate Amount (`
`. in
lakhs)
17,500.00
10. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07158):
Sr. No.
1.
2.
3.
4.
5.
Name of holder
Reliance Capital Trustee Company Limited
A/c Reliance Dual Advantage Fixed tenure
Fund Plan A
Reliance Capital Trustee Company Limited
A/c Reliance Fixed Horizon Fund XIX
Series 20
Reliance Capital Trustee Company Limited
A/c Reliance Fixed Horizon Fund XIX
Series 19
Reliance Capital Trustee Company Limited
A/c Reliance Fixed Horizon Fund XIX
Series 13
Reliance Capital Trustee Company Limited
A/c Reliance Monthly Income Plan
56
220
Aggregate Amount (`
`. in
lakhs)
2,200.00
210
2100.00
160
1,600.00
85
850.00
75
750.00
Number of
instruments
11. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07166):
Sr. No.
1.
2.
3.
Name of holder
100
Aggregate Amount (`
`. in
lakhs)
1,000.00
70
700.00
30
300.00
Number of
instruments
United India Insurance Company Limited
Employees Provident Fund
Board of Trustees for Bokaro Steel
Employees Provident Fund
ING Vysya Bank Limited
12. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07174)
Sr. No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Name of holder
190
20
Aggregate Amount (`
`. in
lakhs)
1,900.00
200.00
20
200.00
8
80.00
5
3
2
1
50.00
30.00
20
10.00
1
10.00
Number of
instruments
Bank of Maharashtra
Board of Trustees for Bokaro Steel
Employees Provident Fund
The Jalgaon People’s Co operative Bank
Limited
The Thane District Central Co operative
Bank Staff Provident Fund
Iris Mercantile Private Limited
Dhwani Mercantile Private Limited
Shrikrishna Baburao Malpekar
Jacobs H and G private Limited Employees
Provident Fund
Ushma Niren Nagri
13. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07182)
Sr. No.
1.
Name of holder
Number of
instruments
Jharkhand Gramin Bank
50
Aggregate Amount (`
`. in
lakhs)
500.00
14. List of top ten holders of Secured Redeemable Non-Convertible Debentures (issued on private placement
basis) of face value ` 1,000,000/- per debenture as on July 18, 2011 (ISIN :INE722A07190)
Sr. No.
1.
2.
Name of holder
2,500
Aggregate Amount (`
`. in
lakhs)
25,000.00
250
2,500.00
Number of
instruments
Nederlandse Financierings-Maatschappij
Voor Ontwikkelingslanden N.V. (FMO)
Deutsche Bank AG
57
15. List of top ten holders of Commercial Paper of
:INE722A14089)
Sr. No.
1.
2.
3.
4.
Name of holder
face value ` 500,000/- as on July 18, 2011 (ISIN
1,000
Aggregate Amount (`
`. in
lakhs)
5000.00
500
400
200
2,500.00
2,000.00
1,000.00
Number of
instruments
ICICI Prudential Life Insurance Company
Limited
UTI-Treasury Advantage Fund
UTI-FMP-Yearly Series August 10
UTI FIIF Annual Interval Plan II
16. List of top ten holders of Commercial Paper of face value ` 500,000/- as on July 18, 2011 (ISIN
:INE722A14097)
Sr. No.
1.
Name of holder
Aggregate Amount (`
`. in
lakhs)
Number of
instruments
TATA Trustee Company Limited A/c
TATA Mutual Fund A/c TATA Fixed
Maturity Plan- Scheme 27 Scheme A
1500
7,500
17. List of top ten holders of Commercial Paper of face value ` 500,000/- as on July 18, 2011 (ISIN
:INE722A14105)
Sr. No.
1.
2.
3.
Name of holder
Number of
instruments
UTI-FMP- Yearly Series September 2010
UTI-FIIF Annual Interval Plan S-III
Cholamandalam Ms General Insurance
Company Limited
300
200
100
Aggregate Amount (`
`. in
lakhs)
1,500.00
1,000.00
500.00
18. List of top ten holders of Commercial Paper of face value ` 500,000/- as on July 18, 2011 (ISIN
:INE722A14113)
Sr. No.
1.
Name of holder
Number of
instruments
TATA Trustee Company Limited A/c
TATA Mutual Fund A/c TATA Fixed
Maturity Plan Series 27 Scheme B
300
Aggregate Amount (`
`. in
lakhs)
1,500.00
19. List of top ten holders of Commercial Paper of face value ` 500,000/- as on July 18, 2011 (ISIN
:INE722A14154)
Sr. No.
1.
Name of holder
Number of
instruments
Kotak Mahindra Trustee Company Limited
A/c Kotak Floater Short Term Scheme
2,000
Aggregate Amount (`
`. in
lakhs)
10,000.00
20. List of top ten holders of Commercial Paper of face value ` 500,000/- as on July 18, 2011 (ISIN
:INE722A14147)
Sr. No.
1.
Name of holder
Number of
instruments
UTI Liquid Cash Plan
1,000
58
Aggregate Amount (`
`. in
lakhs)
5,000.00
Employee Stock Option Schemes
Pursuant to a special resolution dated October 30, 2006 passed by the shareholders of our Company, our Company
has formulated an employee stock option scheme in 2006, namely, “SCUF Employee Stock Option Scheme 2006”,
(“ESOP 2006”). As on the date of this Prospectus, our Company had issued 1,355,000 stock options under the
ESOP 2006, of which nil stock options have lapsed, 602,000 stock options are unvested, 119,621 stock options are
vested and unexercised and 633,379 stock options have been vested and exercised for Equity Shares. Under the
ESOP 2006 the exercise price for stock options is ` 35 per Equity Share to be issued upon the exercise of such stock
options.
Pursuant to a special resolution dated May 3, 2008 passed by the shareholders of our Company, our Company has
formulated an employee stock option scheme in 2008, namely, “SCUF Employee Stock Option Scheme 2008”,
(“ESOP 2008”). As on the date of this Prospectus, our Company has not granted any stock options under the ESOP
2008. Under the ESOP 2008 the exercise price for stock options is ` 112 per Equity Share to be issued upon the
exercise of such stock options.
Debt - Equity ratio:
The debt-equity ratio prior to this Issue is based on a total outstanding consolidated debt of ` 732,778.44 lakhs and
consolidated shareholder funds amounting to ` 121,207.28 lakhs as on March 31, 2011. The debt equity ratio post
the Issue, (assuming subscription of NCDs aggregating to ` 75,000 lakhs would be 6.66 times, is based on a total
outstanding debt of ` 807,778.44 lakhs and shareholders fund of ` 121,207.28 lakhs as on March 31, 2011.
Particulars#
Secured loans as on March 31, 2011
(` in lakhs)
Post Issue*
Prior to the Issue
Unsecured loans as on March 31,
2011
Total Debt
656,951.01
731,951.01
75,827.43
75,827.43
732,778.44
Share capital as on March 31, 2011
4,953.69
807,778.44
4,953.69
Stock Option outstanding as on
March 31, 2011
Reserves as on March 31, 2011
1,887.27
1,887.27
114,366.32
114,366.32
Total Shareholders Fund
121,207.28
121,207.28
6.05
6.66
Debt Equity Ratio (Number of
times)
# On a consolidated basis.
* The debt-equity ratio post the Issue is indicative and is on account of assumed inflow of ` 75,000 lakhs from the
Issue as on March 31, 2011 and does not include contingent and off-balance sheet liabilities. The actual debt-equity
ratio post the Issue would depend upon the actual position of debt and equity on the date of allotment.
For details on the total outstanding debt of our Company, please refer to the section titled “Disclosures on Existing
Financial Indebtedness” beginning on page 131 of this Prospectus.
59
OBJECTS OF THE ISSUE
The funds raised through this Issue, after meeting the expenditures of and related to the Issue, will be used for our
various financing activities including lending and investments, subject to applicable statutory and/or regulatory
requirements, to repay our existing loans and our business operations including for our capital expenditure and
working capital requirements.
The Main Objects clause of the Memorandum of Association of our Company permits our Company to undertake
the activities for which the funds are being raised through the present Issue and also the activities which our
Company has been carrying on till date.
Further, in accordance with the Debt Regulations, our Company will not utilize the proceeds of the Issue for
providing loans to or acquisitions of shares of any person who is a part of the same group as our Company or who is
under the same management as our Company.
The Issue proceeds shall not be utilized towards full or part consideration for the purchase or any other acquisition,
inter alia by way of a lease of any property.
Further, the Company undertakes that Issue proceeds from NCDs allotted to banks shall not be used for any
purpose which may be in contravention of the RBI guidelines on bank financing to NBFCs.
Interim Use of Proceeds
The management of our Company, in accordance with the policies formulated by it from time to time, will have
flexibility in deploying the proceeds received from the Issue. Pending utilization of the proceeds out of the Issue for
the purposes described above, our Company intends to temporarily invest funds in high quality interest bearing
liquid instruments including money market mutual funds, deposits with banks or temporarily deploy the funds in
investment grade interest bearing securities as may be approved by the Board. Such investment would be in
accordance with the investment policies approved by the Board or any committee thereof from time to time.
Monitoring of Utilization of Funds
There is no requirement for appointment of a monitoring agency in terms of the SEBI (Issue and Listing of Debt
Securities) Regulations, 2008. Our Board shall monitor the utilization of the proceeds of the Issue. For the relevant
Financial Years commencing from FY 2012, our Company will disclose in our financial statements, the utilization
of the net proceeds of the Issue under a separate head along with details, if any, in relation to all such proceeds of the
Issue that have not been utilized thereby also indicating investments, if any, of such unutilized proceeds of the Issue.
We shall utilize the proceeds of the Issue only upon the execution of the documents for creation of security as stated
in this Prospectus in the section entitled “Terms of the Issue - Security” on page 154 and upon the listing of the NCDs.
60
STATEMENT OF TAX BENEFITS
Under the current tax laws, the following tax benefits interalia, will be available to the Debenture Holders as
mentioned below. The tax benefits are given as per the prevailing tax laws and may vary from time to time in
accordance with amendments to the law or enactments thereto. The Debenture Holder is advised to consider in his
own case the tax implications in respect of subscription to the Debentures after consulting his tax advisor as
alternate views are possible. We are not liable to the Debenture Holder in any manner for placing reliance upon the
contents of this statement of tax benefits.
To our Debenture Holder
A. INCOME-TAX
I
To the Resident Debenture Holder
1. Interest on NCD received by Debenture Holders would be subject to tax at the normal rates of tax in accordance
with and subject to the provisions of the I.T. Act. No income tax is deductible at source as per the provisions of
section 193 of the Income Tax Act (IT Act) on interest on debentures in respect of the following:
(a) In case the payment of interest on debentures to resident individual Debenture Holder in the aggregate during the
financial year does not exceed ` 2,500 provided the debentures are listed on a recognized stock exchange in India
and the interest is paid by an account payee cheque.
(b) When the Assessing Officer issues a certificate on an application by a Debenture Holder on satisfaction that the
total income of the Debenture holder justifies no/lower deduction of tax at source as per the provisions of Section
197(1) of the I.T. Act; and that certificate is filed with our Company BEFORE THE PRESCRIBED DATE OF
CLOSURE OF BOOKS FOR PAYMENT OF DEBENTURE INTEREST.
(c) When the resident Debenture Holder with PAN (not being a company or a firm or a senior citizen) submits a
declaration in the prescribed Form 15G verified in the prescribed manner to the effect that the tax on his estimated
total income of the previous year in which such income is to be included in computing his total income will be nil as
per the provisions of section 197A (1A) of the I.T. Act. HOWEVER under section 197A (1B) of the I.T. Act, Form
15G cannot be submitted nor considered for exemption from deduction from tax at source if the aggregate of income
of the nature referred to in the said section, viz. dividend, interest, etc as prescribed therein, credited or paid or likely
to be credited or paid during the Previous year in which such income is to be included exceeds the maximum
amount which is not chargeable to tax, as may be prescribed in each year’s Finance Act. To illustrate, as on
April 1, 2011, the maximum amount of income not chargeable to tax in case of individuals (other than women
assesses, senior citizens and super senior citizens) and HUFs is ` 180,000; in the case of every individual being a
woman resident in India and below the age of 60 years at any time during the previous year is ` 190,000; in the case
of every individual being a resident in India, who is of the age of 60 years or more but less than 80 years at any time
during the previous year (Senior Citizen) is ` 250,000; and in the case of every individual being a resident in India,
who is of the age of 80 years or more at any time during the previous year (Super Senior Citizen) is ` 500,000 for
Previous Year 2011-12. Senior citizens, who are 60 or more years of age at any time during the financial year, enjoy
the special privilege to submit a self-declaration in the prescribed Form 15H for non deduction of tax at source in
accordance with the provisions of section 197A (1C) of the I.T. Act even if the aggregate income credited or paid or
likely to be credited or paid exceeds the maximum amount not chargeable to tax i.e. ` 250,000 for FY 2011-12
provided that the tax due on total income of the person is NIL. In all other situations, tax would be deducted at
source as per prevailing provisions of the I.T. Act; Form No.15G WITH PAN / 15H WITH PAN / Certificate
issued u/s 197(1) has to be filed with our Company before the prescribed date of closure of books for payment
of debenture interest.
61
(d) On any security issued by a company in a dematerialized form and is listed on recognized stock exchange in
India. (w.e.f. 01.06.2008).
2. Under section 2(29A) of the I.T. Act, read with section 2(42A) of the I.T. Act, a listed debenture is treated as a
long term capital asset if the same is held for more than 12 months immediately preceding the date of its transfer.
Under section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being listed
securities are subject to tax at the rate of 10% of capital gains calculated without indexation of the cost of
acquisition. The capital gains will be computed by deducting cost of acquisition of the debenture and expenditure
incurred in connection with such transfer from the full value of sale consideration.
In case of an individual or HUF, being a resident, where the total income as reduced by such long-term capital gains
is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be
reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not
chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate
mentioned above.
3. Short-term capital gains on the transfer of listed debentures, where debentures are held for a period of not more
than 12 months would be taxed at the normal rates of tax in accordance with and subject to the provisions of the I.T.
Act. The provisions relating to maximum amount not chargeable to tax, surcharge and education cess described at
para 2 above would also apply to such short term capital gains.
4. In case the debentures are held as stock in trade, the income on transfer of debentures would be taxed as business
income or loss in accordance with and subject to the provisions of the I.T. Act.
5. HOWEVER IN CASE WHERE TAX HAS TO BE DEDUCTED @ SOURCE WHILE PAYING
DEBENTURE INTEREST, THE COMPANY IS NOT REQUIRED TO DEDUCT SURCHARGE,
EDUCATION CESS : AND SECONDARY AND HIGHER EDUCATION CESS.
II To the Non Resident Indians
1. A non resident Indian has an option to be governed by Chapter XII-A of the I.T. Act, subject to the provisions
contained therein which are given in brief as under:
a) Under section 115E of the I.T. Act, interest income from debentures acquired or purchased with or subscribed to
in convertible foreign exchange will be taxable at 20%, whereas, long term capital gains on transfer of such
Debentures will be taxable at 10% of such capital gains without indexation of cost of acquisition. Short-term capital
gains will be taxable at the normal rates of tax in accordance with and subject to the provisions contained therein.
b) Under section 115F of the I.T. Act, subject to the conditions and to the extent specified therein, long term capital
gains arising to a non-resident Indian from transfer of debentures acquired or purchased with or subscribed to in
convertible foreign exchange will be exempt from capital gain tax if the net consideration is invested within six
months after the date of transfer of the debentures in any specified asset or in any saving certificates referred to in
clause (4B) of section 10 of the I.T. Act in accordance with and subject to the provisions contained therein.
c) Under section 115G of the I.T. Act, it shall not be necessary for a non-resident Indian to file a return of
income under section 139(1) of the I.T. Act, if his total income consists only of investment income as defined under
section 115C and/or long term capital gains earned on transfer of such investment acquired out of convertible
foreign exchange, and the tax has been deducted at source from such income under the provisions of Chapter XVIIB of the I.T. Act in accordance with and subject to the provisions contained therein.
d) Under section 115H of the I.T. Act, where a non-resident Indian becomes a resident in India in any subsequent
year, he may furnish to the Assessing Officer a declaration in writing along with return of income under section 139
for the assessment year for which he is assessable, to the effect that the provisions of Chapter XII-A shall continue
to apply to him in relation to the investment income (other than on shares in an Indian Company) derived from any
foreign exchange assets in accordance with and subject to the provisions contained therein. On doing so, the
62
provisions of Chapter XII-A shall continue to apply to him in relation to such income for that assessment year and
for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of
such assets.
2. In accordance with and subject to the provisions of section 115I of the I.T. Act, Non-Resident Indian may opt not
to be governed by the provisions of Chapter XII-A of the I.T. Act. In that case, please refer to para A (2, 3 and 4) for
the tax implications arising on transfer of debentures.
3. Under Section 195 of the I.T. Act, the company is required to deduct tax at source at the rate of 20% on
investment income and at the rate of 10% on any long-term capital gains as prescribed in section 115E; at the
normal rates for Short Term Capital Gains if the payee Debenture Holder is a Non Resident Indian. 2% education
cess and 1% secondary and higher education cess on the total income tax is also deductible.
4. As per section 90(2) of the I.T. Act read with the circular no. 728 dated October 30, 1995 issued by the CBDT, in
the case of a remittance to a country with which a Double Tax Avoidance Agreement (DTAA) is in force, the tax
should be deducted at the rate provided in the Finance Act of the relevant year or at the rate provided in the DTAA,
whichever is more beneficial to the assessee.
5. Alternatively, to ensure non deduction or lower deduction of tax at source, as the case may be, the Debenture
Holder should furnish a certificate under section 197(1) of the I.T. Act, from the Assessing Officer before the
prescribed date of closure of books for payment of debenture interest.
III To the Foreign Institutional Investors (FIIs):
In accordance with and subject to the provisions of section 115AD of the I.T. Act on transfer of debentures by FIIs,
long term capital gains are taxable at 10% (plus applicable surcharge and education and secondary and higher
education cess) and short-term capital gains are taxable at 30% (plus applicable surcharge and education and
secondary and higher education cess). The cost indexation benefit will not be available.
Further, benefit of provisions of the first proviso of section 48 of the I.T. Act will not apply. Income other than
capital gains arising out of debentures is taxable at 20% in accordance with and subject to the provisions contained
therein. In addition to the aforesaid tax, in case of foreign corporate FIIs where the income exceeds ` 1,00,00,000 a
surcharge of 2% of such tax liability is also payable. A 2% education cess and 1% secondary and higher education
cess on the total income tax (including surcharge) is payable by all categories of FIIs.
In accordance with and subject to the provisions of section 196D(2) of the I.T. Act, no deduction of tax at source is
applicable in respect of capital gains arising on the transfer of debentures by FIIs.
The provisions at para II (4 and 5) above would also apply to FIIs.
IV. To the Other Eligible Institutions:
All mutual funds registered under Securities and Exchange Board of India or set up by public sector banks or public
financial institutions or authorised by the Reserve Bank of India are exempt from tax on all their income, including
income from investment in Debentures under the provisions of Section 10(23D) of the I.T. Act subject to and in
accordance with the provisions contained therein.
B. WEALTH TAX
Wealth-tax is not levied on investment in debentures under section 2(ea) of the Wealth-tax Act, 1957.
C. GIFT TAX
Gift-tax is not levied on gift of debentures in the hands of the donor as well as the donee because the provisions of
the Gift-tax Act, 1958 have ceased to apply in respect of gifts made on or after October 1, 1998. HOWEVER, IF
ANY INDIVIDUAL OR HUF, RECEIVES THESE DEBENTURES OF THE AGGREGATE VALUE OVER
` 50,000 FROM ANY PERSON OR PERSONS WITHOUT CONSIDERATION OR RECEIVES THESE
63
DEBENTURES FOR A CONSIDERATION WHICH IS LESS THAN AGGREGATE FAIR MARKET
VALUE OF THE DEBENTURES BY AN AMOUNT EXCEEDING FIFTY THOUSAND RUPEES, THERE
WILL BE LIABILITY TO INCOME TAX TO THE EXTENT PROVIDED IN SEC.56(2)(VII) OF THE
INCOME TAX ACT 1961 TO SUCH RECEIVER. HOWEVER, THE DEBENTURES RECEIVED AS
GIFTS FROM ANY RELATIVE AS DEFINED IN SEC.56(2)(VII) OF THE INCOME TAX ACT WILL
NOT ATTRACT INCOME TAX LIABILITY IN THE HANDS OF THE RECEIVER.
D. REQUIREMENT TO FURNISH PERMANENT ACCOUNT NUMBER UNDER I.T. ACT
1. Sec.139A(5A):
Subsection (5A) of Sec.139A lays down that every person whose income tax has been deducted at source under
chapter XVII B of the Income Tax Act shall furnish his Permanent Account Number to the person responsible for
deduction of tax at source.
2. Sec.206AA:
(1) Notwithstanding anything contained in any other provisions of I.T. Act, any person entitled to receive any sum
or income or amount, on which tax is deductible under Chapter XVIIB (hereinafter referred to as deductee) shall
furnish his Permanent Account Number to the person responsible for deducting such tax (hereinafter referred to as
deductor), failing which tax shall be deducted at the higher of the following rates, namely:—
(i) at the rate specified in the relevant provision of this Act; or
(ii) at the rate or rates in force; or
(iii) at the rate of twenty per cent.
(2) No declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A shall be valid
unless the person furnishes his Permanent Account Number in such declaration.
(3) In case any declaration becomes invalid under sub-section (2), the deductor shall deduct the tax at source in
accordance with the provisions of sub-section (1).
(4) Where the Permanent Account Number provided to the deductor is invalid or does not belong to the deductee,
it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the
provisions of sub-section (1) shall apply accordingly.
64
SECTION IV : ABOUT THE ISSUER COMPANY AND THE INDUSTRY
INDUSTRY
The information in this section is derived from various government publications and other industry sources. Neither
we, nor any other person connected with the issue has verified this information. Industry sources and publications
generally state that the information contained therein has been obtained from sources generally believed to be
reliable, but their accuracy, completeness and underlying assumptions are not guaranteed and their reliability
cannot be assured and accordingly, investment decisions should not be based on such information.
In connection with the report by CRISIL Research titled "CRISIL - Retail Finance - Auto – May 2010", CRISIL
Limited has used due care and caution in preparing the aforementioned report. Information has been obtained by
CRISIL from sources it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or
completeness of any information and is not responsible for any errors or omissions or for the results obtained from
the use of such information. No part of the aforementioned report may be published / reproduced in any form
without CRISIL’s prior written approval. CRISIL is not liable for any investment decisions which may be based on
the views expressed in the aforementioned report. CRISIL Research operates independently of, and does not have
access to information obtained by CRISIL’s Rating Division, which may, in its regular operations, obtain
information of a confidential nature that is not available to CRISIL Research.
Frost & Sullivan India Private Limited has used due care and caution in preparing the report titled “Analysis of
MSME Loan Markets for NBFCs – July 2011”. Information has been obtained from sources that Frost & Sullivan
India Private Limited considers reliable. However, Frost & Sullivan India Private Limited does not guarantee the
accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the
results obtained from the use of such information. No part of the said report may be published / reproduced in any
form without Frost & Sullivan India Private Limited’s prior written approval. Frost & Sullivan India Private
Limited is not liable for investment decisions which may be based on the views expressed in the said report.
Indian Economy
India is the world’s largest democracy by the population size with an estimated population of approximately 11,900
Lakhs (July 2011 estimate). It is also one of the fastest growing economies in the world with the real growth rate of
GDP being 8.5% (Source: Press Information Bureau, Government of India, Press Note dated May 31, 2011). The
International Monetary Fund has projected India’s year on year growth at 8.2% for 2011(Source: World Economic
Outlook Projections – International Monetary Fund – June 2011).
Structure of India’s Financial Services Industry
The RBI is the central regulatory and supervisory authority for the Indian financial system. SEBI and the IRDA
regulate the capital markets and insurance sector, respectively. A variety of financial intermediaries in the public and
private sectors participate in India’s financial sector, including the following:
•
•
•
•
•
•
•
•
Commercial banks;
NBFCs ;
Specialized financial institutions like the National Bank for Agriculture and Rural Development
(NABARD), Export-Import Bank of India (EXIM Bank), the Small Industries Development Bank of India
(SIDBI) and the Tourism Finance Corporation of India (TFCI);
Securities brokers;
Investment banks;
Insurance companies;
Mutual funds; and
Venture capital funds.
65
Non-Banking Finance Companies (NBFCs)
Non-Banking Finance Companies (NBFCs) are an integral part of the country’s financial system, catering to a large
market of niche customers and have emerged as one of the major purveyors of retail and SME credit in India. It is a
heterogeneous group of institutions (other than commercial and co-operative banks) performing financial
intermediation in a variety of ways such as accepting deposits, making loans and advances, providing leasing/hire
purchase services, among others. There are over 12,000 NBFCs in India, (Source: Reserve Bank of India, Annual
Report, August 2009) mostly in the private sector.
The RBI defines an NBFC as a company registered under the Companies Act, 1956 and engaged in the business of
loans and advances, acquisition of shares, stock, bonds, debentures, and securities issued by the GoI or local
government authorities, or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit
business. However, this excludes institutions whose principal business is in the agricultural or industrial sector, or
in the sale, purchase and construction of immovable property. A non-banking entity that has as its principal line of
business the receipt of deposits, under any scheme or arrangement, or the extension of loans, in any manner, is also
considered an NBFC.
Gradually, NBFCs have become recognized as complementary to the banking sector due to their customer-oriented
services, simplified procedures, attractive rates of return on deposits, flexibility and timeliness in meeting the credit
needs of specified sectors, among other reasons. NBFCs have traditionally extended credit across the country
through their widespread geographical presence, with NBFCs supplying credit in segments such as equipment
leasing, hire purchase, and consumer finance. These are areas which warrant infusion of financing due to the
existing demand-supply gap. NBFCs have provided a more flexible source of financing and have been able to
disburse funds to a gamut of clientele, from local individual customers to a variety of corporate clientele. NBFCs
can be divided into deposit taking NBFCs, i.e., those which accept deposits from the public and non-deposit taking
NBFCs, i.e., those which do not accept deposits from the public.
The activities carried out by NBFCs in India can be grouped as follows:
NBFC
Fund Based Activities
• Equipment Leasing
• Hire Purchase
• Bill Discounting
• Loans / Investments
• Venture Capital
• Factoring
• Equity Participation
• Short Term Loans
• Inter Corporate
Loans
Fee based Activities
• Investment Banking
• Portfolio
Management
• Wealth Management
• Corporate
Consulting
• Project Consulting
• Loan / Lease
Syndication
• Advisory Services
Even though NBFCs perform functions similar to those of banks, there are a few differences:
(i)
(ii)
(iii)
NBFCs cannot accept demand deposits;
NBFCs are not a part of the payment and settlement system and as such cannot allow their customers to
operate accounts through the issuance of cheques; and
Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available for
NBFC depositors.
66
Initially, the NBFCs registered with the RBI could only operate as equipment leasing companies, hire purchase
companies, loan companies and investment companies. However, effective December 6, 2006, NBFCs registered
with the RBI have been reclassified as (i) asset finance companies (“AFCs”); (ii) investment companies (“IC”); and
(iii) loan companies (“LC”). Further, RBI through a notification dated February 12, 2010, introduced a fourth
category of NBFCs namely, Infrastructure Finance Company (“IFC”), which are predominantly engaged in the
business of infrastructure financing. Efforts have been made to integrate NBFCs into the mainstream financial sector
by strengthening the prudential guidelines relating to income recognition, asset classification and provisioning. A
number of measures to enhance the regulatory and supervisory standards of NBFCs in order to put them on par with
commercial banks were undertaken by the RBI over a period of time including the alignment of interest rates,
allowing diversification of businesses e.g. issuance of co-branded cards and distribution of mutual fund and
insurance products, regulation of systemically important NBFCs and introduction of a fair practices code and
corporate governance.
Retail Finance – Automobiles
Automotive Industry Overview
In terms of global scale, the Indian automotive industry is the second largest two-wheeler market in the world, the
fourth largest heavy commercial vehicle market in the world and the eleventh largest passenger vehicle market in the
world. As one of the largest industrial sectors in India, it contributes nearly 17.0% to total indirect taxes. Although
the automotive industry provides direct and indirect employment to over 130 lakh people, the penetration levels for
vehicles in India are among the lowest in the world. [Source: Society of Indian Automobile Manufacturers (SIAM) ].
According to SIAM, the demand for automobiles in India is projected to grow by 12% -15% by 2011-2012 as
compared to 2010-2011. The forecasts made by SIAM in this regard are as follows:
Automobile segments
2011-12 growth over 2010-11 (per cent)
Passenger cars
16-18%
Utility vehicles
12-14%
Light Commercial Vehicles (goods)
18-21%
Medium and Heavy Commercial Vehicles (goods)
10-12%
Commercial vehicles (buses)
8-10%
Motorcycles
11-13%
Scooters
15-17%
Three wheelers (Cargo)
4-6%
Three wheelers (passengers)
10-12%
Automobile Industry
Source: SIAM – Demand Forecasts for Indian Automobile Industry2011-2012
12-15%
According to the Automotive Mission Plan 2006-2016, prepared by the Ministry of Industries & Public Enterprises,
Government of India, (“Automotive Mission Plan”), India is emerging as one of the world’s fastest growing
passenger car markets and the second largest two wheeler manufacturer. The growth of the Indian middle class with
increasing purchasing power along with robust growth in economy in recent years has attracted major global auto
manufacturers to Indian market. The Indian automotive industry after de-licensing has grown approximately at a rate
of 17%.
Passenger vehicles segment grew at 14.00 % during April 2011 over same month last year. Passenger cars grew by
13.18 %, utility vehicles grew by 6.25 % and Vans grew by 37.39 % in April 2011 as compared to same month last
year. The overall commercial vehicles segment registered growth of 8.22 % in April 2011 as compared to the same
month last year. While medium and heavy commercial vehicles registered only a marginal growth rate of 0.70 %,
light commercial vehicles grew at 14.43 %. Three wheelers sales recorded a growth rate of only 1.94 % in April
67
2011. Two Wheelers registered a healthy growth of 26.44 % in April 2011. Mopeds, motorcycles and scooters grew
by 15.68 %, 23.39 % and 48.06 % respectively in April 2011. [Source SIAM]
In the month of April 2011 overall automobile exports registered a growth rate of 29.62 %. Passenger Vehicles
registered growth at 12.66 % in the month. Commercial Vehicles, Three Wheelers and Two Wheelers segments
recorded growth of 36.01 %, 36.95 % and 32.77 % respectively in April 2011. [Source SIAM]
The domestic market share between passenger cars, commercial vehicles, two wheelers and three wheelers for 20102011 were as follows:
Segment wise Market Share in 2010–11
Commercial Vehicles
4.36%
Three Wheelers
3.39%
Passenger Vehicles
16.25%
Tw o Wheelers
76.00%
Source: SIAM
Two Wheeler Industry
The two-wheeler industry's domestic sales volumes are expected to grow by 20-22 % in 2010-11, driven by a strong
rural demand, an improvement in the financing scenario and new model launches.
Segment-wise change in demand for two-wheelers [Source: CRISIL – Retail Finance – Auto – May 2011]
1.
Motorcycles: The motorcycles segment is the largest in the two-wheelers industry, accounting for almost
79 % of total domestic sales. The segment primarily targets the urban and rural male population in the age
group of 16-45 years. Penetration of motorcycles has been higher in the urban markets compared to the
rural markets due to easy availability of finance in the former and an increased focus on the establishment
of dealers, service and distribution networks in these areas. On the flipside, the introduction of ultra lowcost cars and the declining cost of ownership would pose a threat to motorcycle demand over the long term.
The entry of new players and the launch of new models in the ungeared scooter segment is also likely to
affect the demand for motorcycles. Going forward, higher disposable incomes due to the restructuring of
personal income tax slabs, loan waivers for farmers and pay commission hikes are likely to drive
motorcycle demand.
2.
Ungeared scooters: The target market for ungeared scooters in urban areas has mainly been the female
population in the age group of 18-30 years and to some extent, the male population in the age group of 1645 years. In the long run, the growth potential for this segment would be higher due to the current lower
penetration levels and a low base over the previous year. Convenient riding, increasing urban incomes,
continuing urbanisation and an increase in the number of educated women and workforce population would
drive demand for ungeared scooters. In many households, ungeared scooters are preferred as a second
vehicle after cars, which is a major demand driver. Lower dependence on finance, which relatively
insulates the segment from such issues, also aids demand.
3.
Mopeds: The major target customers for this segment are low-income, self-employed professionals and
shopkeepers in urban areas. Although demand for mopeds has been rising, the prospects of any significant
increase are capped due to increase in substitution by ungeared scooters, limited regional presence and lack
of player interest.
68
Overall Demand Drivers in the Two Wheeler Industry [Source: CRISIL – Retail Finance – Auto – May 2011]
1.
Demographic trends: Going forward, growth in two-wheeler demand would come mainly from rising
population in the relevant age and income groups (which is defined as population in the age group of 16-45
years and income bracket of ` 0.1-0.5 million) and increasing use of personal transport. Growth in relevant
population in urban areas is expected to have slowed down to about 5 % during 2005 to 2010, while it is
expected to increase to 7.3 % in rural areas. Two-wheelers are estimated to have fairly penetrated the
relevant population in both the rural and urban markets. However, growth in demand is mainly expected to
come from rural markets.
2.
Need for mobility and shift in preferred mode of transport: A growing population and rising economic
activity is expected to increase consumers' need for mobility. Other contributors to mobility are an
increasing female workforce, especially in urban areas, and the rising trend of drifting away from
agricultural employment in rural areas. Thus, there is likely to be a modal shift in demand for transport.
Going ahead, the share of private modes of transport is expected to increase in comparison to public modes
of transport. In rural markets, demand for transport arises from rudimentary means like walking, bicycles,
animal-drawn vehicles and tractors. Going ahead, we expect dependence on walking and bicycles to shift in
favour of two-wheelers and buses. Thus, increasing need for mobility and the substitution effect will drive
rural demand for two-wheelers. Urban markets are likely to stagnate as here the shift is expected to be in
favour of four-wheelers from two-wheelers and public modes.
3.
Improving finance disbursement to support two-wheeler demand: Players have come out with schemes
such as Direct Cash Collection (DCC) systems where cash is collected every month on a door-to-door basis
and loans are given to people who do not have access to formal payment options like a bank account. Such
schemes along with the increasing risk appetite of two-wheeler players are expected to support sales in the
industry.
Cars and Utility Vehicles Industry
The domestic cars and utility vehicles (UV) industry grew by 33 % during the first half of 2010-11 primarily backed
by higher disposable incomes, easy availability of finance and price-competitive model launches by players. The
industry's domestic volumes are expected to grow by 23-25 % for 2010-11. In 2010-11, car and UV domestic sales
volume increased by 28.7 per cent and 27.4 per cent, respectively. Sales volume increased on account of increased
confidence among consumers with economic recovery and reduced uncertainty over income growth. In 2011- 12,
car sales volume is forecasted to further grow by 15-17 per cent and UV sales volumes to grow by 9-10 per cent.
The volume growth would mainly be driven by the small car segment, which has become the focal area for many
original equipment manufacturers. [Source: CRISIL – Retail Finance – Auto – May 2011]
Segment-wise assessment of demand drivers
The small car segment accounts for the largest proportion (about 78 %) of overall domestic car sales volumes. The
mid-size segment, which accounts for about 20 % of domestic car sales, depends on upgradation demand and
additional demand. An expected rise in corporate profitability, better financing environment and improved customer
sentiment would drive growth in the industry. Domestic sales in higher segments (the executive, premium and
luxury segments) are expected to grow at 19-21 % in 2010-11 owing to the availability of internationally-renowned
brands and the perceived prestige attached to bigger cars and due to improved business confidence and better
corporate profitability. International brands are likely to enhance their presence in India in these segments. [Source:
CRISIL – Retail Finance – Auto – May 2011]
Domestic utility vehicle (UV) sales are likely to be driven by strong growth in the personal UV segment, on the back
of new model launches and an increase in the addressable market, driven by the increase in per capita income.
Higher-end sports utility vehicle sales will also grow aggressively, due to the launch of new models and the status
ascribed to owning one. However, sales of commercial UVs are expected to grow at a moderate rate. [Source:
CRISIL – Retail Finance – Auto – May 2011]
69
Overall demand drivers for the passenger cars industry [Source: CRISIL – Retail Finance – Auto – May 2011]
1.
Increase in affordability: Growth in passenger car sales is mainly driven by greater affordability, which
enhances the aspiration levels of the consumers. The following factors determine affordability:
2.
Growth in addressable market, led by increase in disposable income: Addressable households in India
trebled during 2003-04 to 2008-09, led by an increase in per capita income. During 2003-04 to 2007-08,
there was a huge increase in the addressable market due to higher affordability, led by rise in per capita
income. However, in 2008-09, the size of the addressable market rose on account of a decline in car prices,
which was in turn the result of a reduction in excise duty on small cars from 16 % to 8 %.
Over the next 5 years, increase in per capita income and a reduction in entry-level prices of cars will be the
major drivers for the increase in affordability. A fall in car prices due to a rise in competition in the small
car segment, with the launch of ultra low-cost cars are likely to substantially increase the addressable
market in 2009-10.
3.
New launches: There is a significant increase in car sales after the launch of new models, as customers are
tempted to prepone their decision to purchase the vehicle. With competition intensifying, the number of
new launches has gone up, which will continue to drive demand. New launches at competitive prices across
segments, which are less penetrated, would also woo customers for new purchases.
4.
Increase in dealerships and easy access to finance: The widening of distribution networks by automakers
will push up car sales, as a large number of households will be added to the target population. Typically,
these households have the potential to buy a car, but defer the decision due to lack of sales and service
infrastructure. With most urban centres covered by dealership networks, car manufacturers are setting up
new dealerships in smaller towns to increase penetration and sales in semi-urban and rural areas. Enhanced
penetration of financing will also help the rise in passenger car sales across all segments. Most
manufacturers are targeting rural and semi-urban areas to increase sales volumes due to the rise in
disposable incomes in these areas. Along with increasing the number of dealerships, manufacturers are
providing easy accessibility to finance in these markets to enable customers to purchase cars.
5.
Reduction in excise duty: A cut in excise duty on cars, which if passed on by original equipment
manufacturers, increases affordability for buyers. In December 2008, excise duty on small cars (cars that
are less than 4,000 mm long and have an engine capacity below 1,200 cc and 1,500 cc for petrol cars and
diesel cars, respectively) was cut to 8 % from 12 %. For other cars and UVs, the duty was reduced to 20 %
from 24 %. The decline in small-car prices led to increase in demand on account of the lower cost of
ownership and growth in the addressable market.
6.
Reduction in holding period increases demand for a second car: A decline in the average holding period
will also increase passenger car sales, mainly in the mainstream/ small car/ mid-size segments. The average
holding period has shrunk to 3-4 years in 2008-09 from 5-6 years in 2000-01, implying frequent
upgradations to advanced models from the same or higher segment. Also, the concept of a second car is on
the rise in urban areas. With more than one working member in a family, the need for personal
transportation is an impetus for purchasing more than one car.
Commercial Vehicles Industry
The commercial vehicle industry is segmented into “light commercial vehicles” (for vehicles with gross vehicle
weight of less than 7.5 tons) and “medium and heavy commercial vehicles” (for vehicles weighing more than 7.5
tons). The performance of the medium and heavy commercial vehicle industry bears a high correlation with
industrial growth and is driven by economic development, improved road infrastructure (such as the Golden
Quadrilateral) for long haulage transportation and a favorable regulatory environment (in this regard, demand
created in the years 2006-2007 was attributable to the strict enforcement of overloading restrictions and age norms).
In turn, the performance of the light commercial vehicle industry tends to be less cyclical in nature and is driven by
GDP growth and demand for last mile distribution. The market share of light commercial vehicles increased rapidly
- the introduction of a sub-one ton carrier by certain players created a new segment typically occupied by three70
wheelers and similar forms of intra-city transport, resulting in significant growth in the commercial vehicle market
as a whole.
Total domestic sales in the commercial vehicle industry reached 6,76,048 units in 2010-11. From 2004-05 to 201011, domestic sales had grown at a healthy CAGR of 13.4%. The reduction in domestic sales was attributed to the
slowdown in economic development, credit availability and costs, an increase in fuel prices, in addition to the base
effect due to the one-time demand created in 2006-07 by the strict enforcement of overloading restrictions. [Source:
SIAM]
Domestic commercial Vehicle Sales Volumes
Units
CAGR : 13.4%
27.0%
800,000
33.3%
600,000
400,000
10.2%
318,430
467,765
38.7%
4.9%
490,494
-21.7%
676,408
532,721
384,194
351,041
200,000
0
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Source: CRISIL – Retail Finance – Auto – May 2011
Numbers in italics represent change over previous year
Source: Society of Indian Automobile Manufacturers ("SIAM")
After a stable second quarter in fiscal 2009, the automotive sector in India suffered severe contraction in demand in
the third quarter of fiscal 2009, arising from major financial and other market upheavals. This, along with
contraction in freight movement in many segments of the industry, led to a massive drop in the medium and heavy
commercial vehicle segment demand. High interest rates and peak commodity prices also affected the industry and
the supply chain. In the third quarter of fiscal 2009, industry commercial vehicle sales were down 44.0% and
passenger vehicle sales dropped by as much as 16.5% against the comparable quarter of the previous year. The
economy grew 5.3% in the December 2008 quarter from a year earlier, below forecasts of 6.2% and the previous
quarter's 7.6% as the global economic crisis cut demand and exports. As a result, 2008-2009 volumes declined
21.7%. With the Indian economy gaining momentum and rising GDP growth, the sales of the commercial vehicles
increased by 38.7% in 2009-10 and by 27.0% in 2010-11.
Over the long term, the commercial vehicle industry and consequently, commercial vehicle financing, is expected to
continue to show growth in light of the following factors:
Modernization of trucking industry. A replacement boom is likely to be triggered by stricter enforcement of
regulations banning trucks beyond 15 years and overloading, as well as the introduction by transport associations of
a voluntary retirement scheme for old trucks with better financing options. An anticipated replacement demand for
11 Lakh new as well as pre-owned trucks will require financing of ` 1,07,80,000 Lakhs. (Source: Society of Indian
Automobile Manufacturers)
Structural shift to hub-and-spoke model and improving road infrastructure. All commercial vehicle segments are
expected to experience a boost from the fast-evolving hub- and spoke-structure of the freight industry. Longdistance haulage between hubs is typically serviced by heavy commercial vehicles on highways which continue to
benefit from the Golden Quadrilateral and road development projects, with freight distribution from the hub to the
local warehouse at the end of the spoke requiring medium commercial vehicles and distribution over the last mile
requiring small commercial vehicles.
Growing freight capacity. GDP growth rate continues to drive incremental freight capacity, which is estimated to
increase at 1.25 times of GDP growth.
71
Growth of construction industry. The share of the construction industry in GDP has increased from 6.1% in 200203 to 6.9% in 2006-07. This increase has been largely propelled by government spending. Because a substantial
portion of construction investment is spent on equipment, this construction boom heralds a similar expansion in the
need for construction vehicles. The Indian construction industry is dominated by small contractors that perform
over 90.0% of projects. These local players often lack adequate access to institutional finance, creating enormous
opportunities in the area of construction equipment financing. (Source: Government of India Planning Commission
Eleventh Five Year Plan)
Vehicle Finance Industry – Overview
Strong growth in underlying asset sales, improvement in finance penetration and increase in the average ticket size
are the primary factors driving the growth of the Indian vehicle finance market. The vehicle finance disbursements
are expected to grow at around 23% in 2011-2012. Amongst individual segments, the cars and utility vehicle
segments are expected to grow the fastest. Disbursements in the new car and utility vehicle finance industry are
expected to grow by 26% in 2011-2012. Over the next five years, the vehicle finance disbursements are projected to
grow at 22% CAGR. [CRISIL – Retail Finance – Auto – May 2011]
Two Wheeler Finance Industry
Unlike passenger cars and commercial vehicles, market sentiment in the two-wheeler finance industry is expected to
remain subdued in the next 2 years. High operating expenses and a high probability of defaults, despite healthy
growth in sales volume, are expected to restrain many financiers from re-entering or becoming aggressive in the
market. Currently, only captive financiers and some NBFCs and few private banks are lending to the two-wheeler
buyers. Small ticket size, high operating expenses and high probability of defaults is expected to keep several
financiers wary of the market in the next 12-18 months. [CRISIL – Retail Finance – Auto – May 2011].
The two-wheeler finance disbursements in 2010-11 are expected to grow at 18%, reaching ` 99 billion. A 21.3 %
rise in underlying sales volume in 2010-11 over 2009-10 supports this positive growth. Deterioration in asset quality
and increased operating expenses has led many financiers to withdraw from some markets, particularly in the
northern and eastern regions of India, [CRISIL – Retail Finance – Auto – May 2011]. The growth in two-wheeler
finance disbursements over 2008-2009 to 2014-2015 can be summarized as follows:
` billion
New TW finance market
2008-09 E
72
2009-10 E
2010-11 P
2011-12 P
2014-15 P
CAGR (2010-11
to 2014-1 5)
84
99
114
150
11.1%
New TW market size
295
380
E: Estimated; P: Projected
Source: CRISIL – Retail Finance – Auto – May 2011
478
531
657
8.3%
Disbursements towards two-wheelers are expected to grow moderately by 11 % annually over the next 4 years
mainly supported by underlying assets volume growth. [CRISIL – Retail Finance – Auto – May 2011].
Domestic sales volume of two-wheelers recorded a growth of 21.3 % in 2010-2011 with strong performance across
all segments. The aforesaid growth rate was primarily on account of a low base effect of previous year and growing
demand from rural areas. The domestic demand for two wheelers is expected to grow at a CAGR of 8-10 % cent till
2014-2015. However, growing sales in rural markets will negatively affect the percentage of vehicles financed, as
consumers in these markets prefer to pay in cash for the vehicle purchased. Finance penetration which has fallen to
30 % in 2010-11 from 37 % in 2008-09, is expected to improve marginally to 31 % by 2011-12. However, with
players expected to increase their level of finance provided on account of better risk appetite, finance penetration
levels are expected to increase marginally and reach a level of around 33 % till 2014-15. [CRISIL – Retail Finance –
Auto – May 2011].
72
Players are now adopting stringent norms, including adequate check on past track record and proper documentation.
Average Loan to Value (LTV) ratio in the two-wheeler finance industry, which had dropped to 65 % in 2008-09, is
estimated to have increased marginally to 69 % in 2010-11. Stringent credit appraisal norms, better information
about customers due to Credit Information Bureau of India Limited (CIBIL) and increase in risk appetite of
financiers are expected to increase levels of finance provided in the industry. This is expected to translate into higher
LTV ratio for the industry with the LTV ratio expected to reach a level of 70 % by 2011-12 and remain constant
thereon. [CRISIL – Retail Finance – Auto – May 2011].
Drivers for two-wheeler finance market
%
80%
65%
67%
69%
70%
70%
37%
33%
30%
31%
33%
2008-09E
2009-10E
2010-11P
2011-12P
2014-15P
60%
40%
20%
0%
Finance penetration
LTV
E- Estimated; P- Projected;
Source: CRISIL – Retail Finance – Auto – May 2011
Car and Utility Vehicle Finance Industry
Strong recovery in underlying car and UV sales and decline in financiers risk aversion towards borrowers has led to
a strong growth in loan disbursements towards the sector. Disbursements in the new car and UV finance industry are
estimated to have grown by 44 % in 2010-11. The industry is expected to register a growth of 23-24 % in 2011-12.
The growth can mainly be attributed to swift recovery in the economy which has boosted consumer confidence,
thereby leading to higher car sales and increased willingness on the part of financiers to lend. Average ticket size for
car loans is also estimated to have increased on account of higher value car sales. [Source: CRISIL – Retail Finance
– Auto – May 2011]
Aggregate disbursements towards cars and UVs are forecasted to register a CAGR of 21 % till 2014-15. Continued
growth in underlying vehicle demand, increase in finance penetration and higher LTV would drive the
disbursements growth in the next four years. [Source: CRISIL – Retail Finance – Auto – May 2011]
Growth in car and UV finance disbursements
` billion
2008-09 E
2009-10 E
2010-11 P
2011-12 P
2014-15 P
CAGR (2010-11
to 2014-1 5)
New Car finance market
246
330
482
598
1,051
21.5%
New UV finance market
78
109
149
181
288
17.8%
632
779
1,339
20.7%
New car and UV finance
market
324
439
E: Estimated; P: Projected
Source: CRISIL – Retail Finance – Auto – May 2011
Finance penetration
The percentage of vehicles financed for cars and UVs increased from 68 % and 60 % in 2008-09 to 74 % and 61 %
in 2010-11. The aggressive interest rate schemes and decline in risk aversion amongst players is expected to lead to
an increase in the finance penetration in the cars and UV segment to improve to 80% and 69% by 2014-15. Increase
73
in competition and strong growth in underlying asset are expected to aid the growth of finance penetration going
forward. [Source: CRISIL – Retail Finance – Auto – May 2011]
Finance Penetration
%
90%
80%
80%
69%
71%
60%
62%
2008-09E
2009-10E
74%
75%
61%
63%
2010-11P
2011-12P
70%
69%
60%
50%
Cars
2014-15P
Utility Vehicles
Source
EEstimated; P-Projected
Source: CRISIL – Retail Finance – Auto – May 2011
Players have adopted stringent underwriting norms since the economic slowdown in 2008-09 which led to a number
of financiers facing high delinquency levels. However, improvement in business sentiments and reduction in
uncertainty over income growth have increased the comfort level of financiers in lending. Also, better information
about customers due to CIBIL has led to players increasing their LTV ratios for the segment. Hence, average LTV
ratio is estimated to have increased to 75 % and 70 % for cars and UVs, respectively. Over the next 4 years, we
expect LTV ratio for cars and UV segment to rise to 78 % and 72 % respectively. [Source: CRISIL – Retail Finance
– Auto – May 2011]
Average LTV Ratio
%
80%
75%
75%
72%
73%
67%
68%
2008-09E
2009-10E
76%
70%
65%
70%
71%
78%
72%
60%
2010-11P
Cars
2011-12P
2014-15P
Utility Vehicles
E: Estimated; P: Projected
Source: CRISIL – Retail Finance – Auto – May 2011
Commercial Vehicle Finance
Continued economic growth and strong credit appraisal mechanisms are expected to maintain the industry's growth
momentum in the next 4 years. Led by a robust growth of 28 % in underlying vehicle domestic sales volume, the
commercial vehicle finance industry is estimated to have recorded a strong growth of 44 % in disbursements in
2010-11. Disbursements are expected to remain buoyant over the medium term on account of revival of sales,
decline in risk aversion levels and increase in average ticket size for players. Commercial vehicles disbursements are
projected to grow by 22 per cent and 19 per cent in 2011-12 and 2012-13, respectively owing to healthy growth in
underlying sales volume and higher LTVs. The industry is expected to register a CAGR of 19 % in disbursements,
reaching a level of around ` 795 billion by 2014-15. [Source: CRISIL – Retail Finance – Auto – May 2011]
74
Growth in CV finance disbursements
` billion
New LCV finance market
2008-09 E
2009-10 E
2010-11 P
2011-12 P
2014-15 P
CAGR (2010-11
to 2014-1 5)
48
71
103
131
248
24.5%
New MHCV finance
market
146
201
289
347
547
17.3%
New CV finance market
194
272
392
479
795
19.3%
E- Estimated; P – Projected
LCV – Light Commercial Vehicle; MHCV – Medium and Heavy Commercial Vehicle
Source: CRISIL – Retail Finance – Auto – May 2011
Financiers are expected to marginally increase LTVs given their growing confidence in the transporter's earning
potential and repayment capabilities and consequently, increase their disbursements. CRISIL Research forecasts
average LTV ratio to increase from 74 % in 2009-10 to 75 % in 2010-11. However, credit appraisal mechanisms are
expected to remain stringent in the next 2 years due to the anxiety of deterioration in asset quality. Small fleet
operators and first-time users continue to remain at a higher risk from the financier’s perspective. On this backdrop,
we expect LTV levels to increase to a level of around 78 % by 2014-15. [Source: CRISIL – Retail Finance – Auto –
May 2011]
Commercial vehicle finance industry is already highly penetrated in terms of credit availed. Typically, more than 95
% of vehicles are purchased on finance. Finance penetration had decreased marginally in 2008-09. However, the
finance penetration levels have improved in 2009-10. This represents a huge dependence on finance industry.
Finance penetration levels are expected to remain high at a level of around 98 % by 2014-15. [Source: CRISIL –
Retail Finance – Auto – May 2011]
Micro Small and Medium Enterprises (MSME) Finance
MSME Sector
Micro, Small and Medium Enterprises (MSMEs), including khadi and village/rural enterprises credited with
generating the highest rates of employment growth, account for a major share of industrial production and exports.
They also play a key role in the development of economies with their effective, efficient, flexible and innovative
entrepreneurial spirit. The socio-economic policies adopted by India since the Industries (Development and
Regulation) Act, 1951 have laid stress on MSMEs as a means to improve the country’s economic conditions.
[Ministry of MSME Annual Report 2010-11]
The MSME sector contributes significantly to the manufacturing output, employment and exports of the country. It
is estimated that in terms of value, the sector accounts for about 45 % of the manufacturing output and 40 % of the
total exports of the country. The sector is estimated to employ about 59 million persons in over 26 million units
throughout the country. Further, this sector has consistently registered a higher growth rate than the rest of the
industrial sector. [Ministry of MSME Annual Report 2010-11]
In recognition of the contribution and vast potential of the MSME sector in the economy, provision of adequate
credit to this sector continues to be an important element of banking policy, particularly after the initiation of
structural reforms in 1991. The Government of India has from time to time taken economic policy initiatives to
promote this sector and enhance credit to small and medium enterprises. Some of the initiatives of the Government
towards MSME financing include setting up of credit guarantee fund trust for small industries, risk sharing facility,
venture capital funding, micro credit, etc.
75
Performance of MSMEs - Units, Investment, Production, Employment & Exports
Production
(`
` crore)
SI.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16**
17**
Year
Total
MSMEs
(lakh
numbers)
Fixed
Investment
(` Crore)
Current
Prices
Employment
(lakh person)
Exports (`
crore)
1992-93
73.51
109,623
84,413
174.84
17,784
(4.07)
(9.24)
(4.71)
(5.33)
(28.10)
76.49
115,795
98,796
182.64
25,307
(4.07)
(5.63)
(17.04)
(4.46)
(42.30)
79.60
123,790
122,154
191.40
29,068
(4.07)
(6.90)
(23.64)
(4.79)
(14.86)
82.84
125,750
147,712
197.93
36,470
(4.07)
(1.58)
(20.92)
(3.42)
(25.46)
86.21
130,560
167,805
205.86
39,248
(4.07)
(3.82)
(13.60)
(4.00)
(7.62)
89.71
133,242
187,217
213.16
11,112
(4.07)
(2.05)
(11.57)
(3.55)
(13.23)
93.36
135,482
210,454
220.55
48,979
(4.07)
(1.68)
(12.41)
(3.46)
(10.21)
97.15
139,982
233,760
229.10
54,200
(4.07)
(3.32)
(11.07)
(3.88)
(10.66)
101.10
146,845
261,297
238.73
69,797
(4.07)
(4.90)
(11.78)
(4.21)
(28.78)
105.21
154,349
282,270
249.33
71,244
(4.07)
(5.11)
(8.03)
(4.44)
(2.07)
109.49
162,317
314,850
260.21
86,013
(4.07)
(5.16)
(11.54)
(4.36)
(20.73)
113.95
170,219
364,547
271.42
97,644
(4.07)
(4.87)
(15.78)
(4.31)
(13.52)
118.59
178,699
429,796
282.57
124,417
(4.07)
(4.98)
(17.90)
(4.11)
(27.42)
123.42
188,113
497,842
294.91
150,242
(4.07)
(5.27)
(15.83)
(4.37)
(20.76)
261.01
500,758
709,398
594.61
182,538
(111.48)
(166.20)
(42.49)
(101.62)
(21.50)
272.79
558,190
790,759
626.34
202,017
(4.51)
(11.47)
(11.47)
(5.34)
(10.67)
285.16
621,753
880,805
659.35
NA
(4.53)
(11.39)
(11.39)
(5.35)
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
76
Production
(`
` crore)
SI.
No.
18**
Year
Total
MSMEs
(lakh
numbers)
Fixed
Investment
(` Crore)
Current
Prices
Employment
(lakh person)
Exports (`
crore)
2009-10
298.08
693,835
982,919
695.38
NA
(4.53)
(11.59)
(11.59)
(5.47)
The figures in brackets show the percentage growth over the previous year. The data for the period up to 2005-06 is of small scale industries
(SSl). Subsequent to 2005-06, data with reference to micro, small and medium enterprises (MSME5) are being compiled.
*Projected (Source: S&D Division — Office of the DC (MSME))
Comparison of the MSME Sector with the Overall Industrial Growth in India
The MSME sector has maintained a higher rate of growth vis-à-vis the overall industrial sector as would be
clear from the comparative growth rates of production for both the sectors during last five years as incorporated in
the following table:
Growth rates of 2001-02
base IIP (%age)
Over all Industrial
Growth rates of sector
(%age) #
2002-03
8.68
5.70
2003-04
9.64
7.00
2004-05
10.88
8.40
2005-06
12.32
8.20
2006-07
12.6
11.60
2007-08
13.00*
8.50
2008-09
Not Available
2.80
2009-10
Not Available
*: Projected, IIP — Index of industrial Production
#: Source- M/o Statistics and P1 website – http://www.mospi.gov.in
10.40
The total employment from the MSME sector in the country as per the Fourth Census of MSMEs with reference
year 2006-07 was 594.61 lakh numbers. As per the estimates compiled for the year 2009-10, the MSME sector
employed 695.38 lakh persons.
Employment
No. in lakh person
800
700
594.61
626.34
2006-07
2007-08
659.35
695.38
600
500
400
294.91
300
200
100
0
2005-06
Note
1.
Projected data for the year 2007-08 to 2009-10
2.
Data for 2005-06 pertain to small scale industries (SSI) only
77
2008-09
2009-10
The size of the registered MSME sector is estimated to be 1,563,974 of the total working enterprises. The total
proportion by micro, small and medium enterprises were 94.94%, 4.89% and 0.17% respectively. About 45.23%
(7.07 lakh) of the units were located in rural areas. 67.10 % of the enterprises in the registered MSME sector were
engaged in manufacturing/ assembling/processing, whereas 16.78 % of the units were engaged in services activities.
The remaining 16.13 % of the enterprises were engaged in the repair and maintenance.
Distribution by Nature of Activity
Manufacturing/ Assembling/ Processing
No. in lakh
10.50 (67.10%)
Services
2.62 (16.78%)
Repairing & Maintenance
2.52 (16.13%)
Total
15.64 (100%)
The MSME industry envisions that the sector will have a healthy growth with a large number of enterprises being
set up and their upward graduation into small and medium enterprises. This would be accompanied by enhancement
of their contribution to the GDP, manufacturing output, employment and exports.
The economic externalities which affect the MSME sector are the following:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Overall domestic and global growth trends;
Domestic tax regime, particularly advent of Goods and Service Tax and Direct Tax Code;
Policies governing the credit flow to the sector;
Trade policies, including free trade agreements with other countries;
Labour policies, particularly multiplicity of labour laws and procedures for compliance of various labour
regulations;
Availability of infrastructure facilities, including power, water, roads, etc.;
Availability of critical raw material at competitive prices;
Availability of skilled manpower for manufacturing, services, marketing, etc.
Credit to the MSME sector
Credit availability to MSMEs remains one of the major concerns. Although, the Government of India has taken
several steps to increase the lending of this Sector, this remains even now the most difficult problem faced by the
MSME.
There is a cyclical nature of availability of funds to the MSME sector. This is determined by larger issues of
international and domestic monetary policies, fiscal policies and other parameters beyond the pale of the sector. In
times of a liquidity crunch, lack of liquidity in the financial system, even though caused by external factors, can
quite dry up the flow of credit to the sector. The major dependence of the sector is working capital requirement
which directly impacts the production cycle. As stated elsewhere, the tolerance threshold levels of this sector are
very low. Hence, any liquidity crunch has an immediate and disastrous impact. During the last global economic
crisis, this was seen to be a problem area, affecting the MSMEs for their day-today requirement of working capital.
The MSME thus need to be insulated from such credit squeezes in times of adverse monetary conditions.
Credit Guarantee Fund Scheme
The Government of India launched the Credit Guarantee Fund Scheme for Micro and Small Enterprises in August,
2000, with the objective of making available credit to micro and small enterprises (MSEs), particularly micro
enterprises, for loans up to ` 100 lakh without collateral/third party guarantees. The Scheme is being operated
through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) set up jointly by the
Government of India and Small Industries Development Bank of India (SIDBI). The Scheme covers collateral free
credit facility (term loan and/ or working capital) extended by eligible member lending institutions (MLIs) to new
and existing micro and small enterprises up to ` 100 lakh per borrowing unit. The guarantee cover provided is up to
75% of the credit facility up to `50 lakh with an incremental guarantee of 50% of the credit facility above `50 lakh
and up to `100 lakh (85% for loans up to ` 5 lakh provided to micro enterprises, 80% for MSEs owned/ operated by
78
women and all loans to the North Eastern Region of India). As on 31st December 2010, there were 115 eligible
lending institutions registered as MLIs of the Trust comprising 27 Public Sector Banks, 17 Private Sector Banks, 61
Regional Rural Banks (RRBs), 2 foreign banks and 8 other Institutions. Cumulatively 476,452 proposals have been
approved for guarantee cover for a total sanctioned loan amount of ` 20,109.36 crore.
In spite of various initiatives taken by the Government of India, banks and financial institutions, MSMEs face
certain challenges. These problems relate to the issue of collaterals, cost of loans, delay in receivables, obsolete
technology, marketing, etc. The MSME sector is still under banked to a large extent and barring certain public
financial institutions and public sector banks, lending in this sector has traditionally been addressed by the
unorganized players in most regions in India.
Outstanding Bank Credit to Micro and Small Enterprises
As on last
reporting
Friday of
March
1
2005
2006
All
Scheduled
Commercial
Banks
5
83,498
1,01,285
(21.3)
1,27,323
(25.7)
2,13,538
(67.7)
2,56,127
(19.9)
3,64,012
(42.1)
Percentage of
MSE Credit
to Net Bank
Credit
6
8.8
7.5
Public Sector
Private
Foreign
Banks Sector Banks
Banks
2
3
4
67,800
8,592
6,907
82,434
10,421
8,430
(21.6)
(21.3)
(22.1)
2007
1,02,550
13,136
11,637
7.2
(24.4)
(26.1)
(38.0)
2008
1,51,137
46,912
15,489
11.6
(47.7)
(257.1)
(33.1)
2009
1,91,408
46,656
18,063
11.3
(26.6)
0.0
(16.6)
2010
2,78,398
64,534
21,080
13.4
(Provisional)
(45.4)
(38.3)
(16.7)
Source: Reserve Bank of India.
Note:
1. Figure in parentheses indicates year-on-year growth.
2. The high growth witnessed during 2008 is on account of re-classification of MSEs as per MSMED Act, 2006.
Firstly, the investment limit of small (manufacturing) was raised from `1 crore to `5 crore and small (services)
was added to include enterprises with investment limit between `1 0 lakh to `2 crore. Secondly, the coverage of
service enterprises was broadened to include small road and water transport operators, small business,
professional and self-employed and all other service enterprises as per definition provided under MSMED Act,
2006.
3. Vide circular RPC.CO.Plan.C.24/04.09.01/2009-10 dated September 18, 2009, retail trade (credit limit not
exceeding `20 lakh) has also been included under the ambit of MSE Sector.
Role of NBFCs in the MSME finance sector
Funding through banks requires extensive documentation; funding through unorganized sources is expensive. NBFC
loans provide ideal mid way between bank lending and unorganized sector. The growth drivers for NBFCs engaged
in MSME finance can be summarized as follows:
•
Swift Loan Processing due to minimal documentation and flexibility of disbursement process;
•
Customized repayment schedules, based on customer requirement at a lower interest rate than informal
sources
•
Huge untapped market and the lack of adequate penetration by banks
•
Extensive network of branches which leads to better customer service
79
[Source: Analysis of MSME Loan Markets for NBFCs – Frost & Sullivan – July 2011]
Most of the loans given to MSME sectors by NBFCs have a tenure of 2-3 years and it is only since 2008 the market
has witnessed significant size and growth. While loans to MSMEs are considered relatively risky (mostly unsecured
and to under-banked community), there is no concrete data to validate it due to the young life of this market.
MSME LOAN MARKET FOR NBFCS:
Source: Analysis of MSME Loan Markets for NBFCs – Frost & Sullivan – July 2011
NBFCs loan disbursals to MSMEs have grown at 75.8 % CAGR from Fiscal 2009 to Fiscal 2011. MSME loan
market is expected to increase at a CAGR of over 50.0% from 2011 to 2013 and further continue growing at 30-35
per cent from 2013 to 2015. Thereafter growth in this segment is expected to stabilise post 2015 around 20 % per
year for the next five years. [Source: Analysis of MSME Loan Markets for NBFCs – Frost & Sullivan – July 2011]
Loans Against Gold
India is one of the largest markets for gold and accounts for around 10% of total world gold stock with an annual
demand of around 700 tonnes. [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics].
Gold Loans have continued emerging as a key gold based financial product and as of Fiscal 2010, the organised gold
loans market in India is estimated at around ` 350-400 billion with a compounded annual growth of around 40%
during Fiscal 2002-2010. At this level, the gold loans portfolio translates into a marginal 1.2% of the value of total
gold stock in India. The market is significantly under-penetrated and is expected to continue growing at the rate of
35-45% going forward. Gold loans in India have largely been concentrated in South India, which holds the largest
proportion of gold portfolio and is typically more open to borrowing against gold as compared to consumers in
Northern and Western India, which are averse to pledging their gold holdings - considered as a symbol of family
pride and honour. As of Fiscal 2010, the gold loans market is largely concentrated between two categories of
lenders; south based NBFCs specialised in gold loans accounting for around 32 % of total market and scheduled
commercial banks holding another 58% of the market. The rest of the gold loans portfolio is constituted by several
small co-operative banks. [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics]
Role of NBFCs in the Gold Loan Market
Due to their ability to service the customer requirements, the specialised NBFCs command superior yields (20-24%)
as compared to their banking competitors (at 8-12%). [Source: Gold Loans Market in India 2010 - IMaCS Research
and Analytics]. Even with attractive yields in the gold loans segment, banks typically lack adequate focus on the
80
segment and the ability to provide flexible service offerings such as quick disbursal and low levels of documentation
to meet the requirements of gold loans customers. Given these limitations, banks find it difficult to service the
demand of non-agriculture client base which is largely un-organised and are hesitant of going through the processes
and formalities of banks, even if it means getting loans at significantly lower rates of interest. [Source: Gold Loans
Market in India 2010 - IMaCS Research and Analytics]
Several large pan-India NBFCs have marked their entry into the segment. These NBFCs are currently in a very
cautious and preparatory mode and are expected to take a few years to ramp up their capabilities in gold loans
segment. A few of these NBFCs have strong knowledge of local market conditions in South India, brand presence
and an ability to replicate the business model and service offerings of large specialised NBFCs and are to be closely
watched at in this space. [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics]
IMaCS Research and Analytics believe gold loans market holds immense potential in India and specialised NBFCs
will continue to be a leading force in the segment over the next 4-5 years. These NBFCs are expected to be able to
maintain their commanding position in the space, work aggressively to increase their branch presence and brand
image, establish operations beyond South India and develop alternate product and fee based offerings for the large
customer franchise.
The following chart illustrates gold demand trends in India since 1991:
Lending against gold is one of the popular instruments based on gold and it works well with Indian rural
household’s mindset, which typically view gold as an important saving instrument that is liquid and can be into
converted into cash instantly to meet any urgent expense needs. The market is very well established in the Southern
states of India, which account for the highest accumulated gold stock. Further, traditionally gold holders in Southern
India are more open to accept and exercise the option of pledging gold as compared to other regions in the country
which are reluctant to pledge jewellery or ornaments for borrowing money.
Size and Potential of Gold Loans Market in India
The organised gold loans market in India is estimated at around ` 350-400 billion in Fiscal 2010. At this size, the
organised gold loans market translates into 1.2% of the value of total gold stock in India and signifies a hugely under
penetrated market with a large potential. The organised segment has registered a growth of 35-45% and is expected
to continue growing at the same rate over the next few years and reach a portfolio size of ` 520-550 billion by Fiscal
2011. [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics]
81
There are no official estimates available on the size of this market which is marked with the presence of numerous
pawnbrokers, money lenders and cooperative societies operating on a local level. These players are quite active in
rural areas of India and provide loans against jewellery to families at interest rates in excess of 30 %. These
operators have a strong understanding of the local customer base and offer an advantage of immediate liquidity to
customers in need, without requirements of any elaborate formalities and documentation. However, these players are
largely un-regulated leaving the customers vulnerable to exploitation at the hands of these moneylenders and pawnbrokers. Going forward, we believe that as organised players, particularly NBFCs, become more aggressive in the
gold loans market, a significant part of the gold loans should shift from the un-organised lenders to the organised
lenders, thus fuelling a strong growth in the organised market. Further, the growth would be even higher if the
customer attitude towards gold pledging becomes more positive aided by government regulations and aggressive
promotion by banks and finance companies. [Source: Gold Loans Market in India 2010 - IMaCS Research and
Analytics]
A typical Gold Loan customer expects high loan-to-value ratios, easy access, low levels of documentation and
formalities, quick approval and disbursal of loans, lockers to ensure safety of their pledged gold and a team of expert
valuers. Specialized NBFCs have created a niche in the Gold Loans capabilities by meeting these requirements of
the typical gold loan customers, who require Gold Loans primarily to meet their urgent cash requirements[Source:
Gold Loans Market in India 2010 - IMaCS Research and Analytics]
NBFCs specializing in Gold Loans continue to perform strongly in the Gold Loans market and the overall statistics
demonstrate that the relative share of traditional gold finance NBFCs in the market has not changed significantly
over the last three years. In fiscal 2010, the Gold Loans market was largely concentrated between two categories of
lenders: south Indian based NBFCs specializing in Gold Loans which held approximately 32% and SCBs which
held 58% of the total market. The rest of the Gold Loans portfolio was held by several small co-operative banks.
[Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics]
Outlook of the Gold Loans Market in India
As the market is currently under-penetrated, it is expected that the Gold Loans market will offer enough
opportunities for portfolio expansion and retain attractive margins for all existing specialised NBFCs, banks and
new entrants [Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics]
The branch expansion and marketing initiatives of various specialized NBFCs are anticipated to give a strong boost
to the acceptability of gold loans and lead to further growth in the gold loans market. [Source: Gold Loans Market in
India 2010 - IMaCS Research and Analytics]
82
NBFCs in the Indian gold loans market
Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics
In addition, it is anticipated that the large public sector banks in southern India will continue to be amongst the
leading lenders, but considering the various regulatory and operational processes, it would be challenging for the
banks to match the flexible service regime of the specialised NBFCs (Source: Gold Loans Market in India 2010 IMaCS Research and Analytics).
New NBFC entrants in the market are currently in a cautious preparatory mode to enter the Gold Loans market but it
will take some time for these NBFCs to emerge as formidable competitors to specialized existing NBFCs. [Source:
Gold Loans Market in India 2010 - IMaCS Research and Analytics]
This is because it will take time for these new NBFCs to build the requisite focus, infrastructure (valuers, lockers,
etc,) and branch network (Source: IMaCS Industry Report 2009). Specialized NBFCs are expected to continue to
hold their share of the Gold Loans market with their ability to provide superior and niche servicing capabilities to
their existing and future customers. The following factors will be crucial in contributing to the continued growth of
specialized NBFCs:
•
•
•
•
ability to maintain their strong hold in the southern India markets in terms of reach and customer services;
strengthening brand image in the target customer segments with a special emphasis on markets beyond the
southern region in India;
developing related products such as education loans and offering fee based services such as money
transfers or financial products distribution; and
capturing a strong market position in other regions of India, including in the northern and western regions
Source: Gold Loans Market in India 2010 - IMaCS Research and Analytics
83
OUR BUSINESS
Frost & Sullivan India Private Limited has used due care and caution in preparing the report titled “Analysis of
MSME Loan Markets for NBFCs – July 2011”. Information has been obtained from sources that Frost & Sullivan
India Private Limited considers reliable. However, Frost & Sullivan India Private Limited does not guarantee the
accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the
results obtained from the use of such information. No part of the said report may be published / reproduced in any
form without Frost & Sullivan India Private Limited’s prior written approval. Frost & Sullivan India Private
Limited is not liable for investment decisions which may be based on the views expressed in the said report.
Overview
Our Company is a deposit-accepting NBFC registered with RBI, offering (i) financing for two wheelers, appliances
and other commercial goods, (“Product Finance”), (ii) pre-owned and new vehicle loans, (iii) personal loans, (iv)
loans against gold, and (v) loans to the small enterprise finance segment.
Our current lines of business and organisational structure are as follows:
According to the Frost and Sullivan report titled “Analysis of MSME Loan Markets for NBFCs – July 2011”, our
Company is the largest small enterprise finance company in India. In the small loan segment (loans of `1 lakh -10
lakh) our Company has a dominant share of 95%. Our Company also leads the total Indian micro, small and medium
enterprises market with 53 % share.
Our Company was established in 1986 and we have a track record of twenty five years in the financial services
sector in India. Since 2005 we have focused on the retail financing segment. Our Company has been registered as a
deposit-taking NBFC with the RBI since September 4, 2000 under Section 45IA of the Reserve Bank of India Act,
1934.
We are a part of the Shriram Group of companies which has a strong presence in financial services in India,
including commercial vehicle financing, consumer finance, life and general insurance, stock broking, chit funds and
distribution of financial products such as life and general insurance products and mutual fund products, as well as a
growing presence in other businesses such as property development, engineering projects and information
technology.
84
We leverage on the Shriram Group’s ecosystem to reach out to our prospective customers and our focus has been in
maximizing our association with the “Shriram” brand name and the synergies offered by the infrastructure, of other
entities in the Shriram Group. Our customer base over the years has significantly comprised of customers of other
entities in the Shriram Group. The large customer bases and wide-spread network of business outlets of entities such
as, Shriram Transport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), and
entities operating under the “Shriram Chits” brand name, has continued to provide us with a large platform of target
customers.
Over the last 25 years our Company has established a pan-India presence, with 559 branches and 91 other business
outlets as of March 31, 2011, across 17 states in India, with a significant presence in south India. As on March 31,
2011, our total employee strength was 2,318. We operate in a ‘hub-and spoke’ business model, where
responsibilities from loan origination to recoveries of loans are vested in each of our business outlets, under the
general supervision and control of our head office in Chennai. Our business outlet networks are interconnected and
each business outlet is connected to our head office through an ERP platform developed by Take Solution Limited,
Chennai.
We have demonstrated consistent growth in our business and in our profitability. Our Assets Under Management
have grown by a compounded annual growth rate, or CAGR, of 34% from ` 250,686.49 lakhs as of March 31, 2007
to ` 799,804.88 lakhs as of March 31, 2011. Our capital adequacy ratio as of March 31, 2011 computed on the basis
of applicable RBI requirements was 20.53%, compared to the RBI stipulated minimum requirement of 12.00%. Our
Tier I capital as of March 31, 2011 was ` 119,419.00 lakhs. Our Gross NPAs as a percentage of Total Loan Assets
were 1.86% as of March 31, 2011. Our Net NPAs as a percentage of Net Loan Assets was 0.43% as of March 31,
2011.
Our total income increased from ` 34,805.91 lakhs in fiscal 2007 to ` 132,091.19 lakhs in fiscal 2011 at a CAGR of
40%. Our net profit after tax increased from ` 5,162.16 lakhs in fiscal 2007 to ` 24,058.85 lakhs in fiscal 2011, at a
CAGR of 47%. A summary of our assets under management, net non performing assets, total income and net profit
after tax for the corresponding periods specified below are as follows:
` In Lakhs
Particulars
Assets
Under
Management
Net Non performing
assets
Total Income
Net Profit after Tax
As at March
31, 2007
250,686.49
As at March
31, 2008
336,889.78
As at March
31, 2009
462,950.89
As at March
31, 2010
521,550.18
As at March
31, 2011
799,804.88
2,561.44
2,495.70
3,590.35
3,322.73
2,982.76
For the
Financial
Year Ended
March 31,
2007
34,805.91
5,162.16
For the
Financial
Year Ended
March 31,
2008
62,318.76
8,763.50
For the
Financial
Year Ended
March 31,
2009
93,393.75
11,700.77
For
the
Financial
Year ended
March
31,
2010
110,284.71
19,425.86
For
the
Financial
year ended
March
31,
2011
132,091.19
24,058.85
Our Strengths
We believe that the following are our key strengths:
Diversified Portfolio of Products
Our Company’s product portfolio comprises (i) Product Finance loans, (ii) pre-owned and new vehicles loans, (iii)
personal loans, (iv) loans against gold, and (v) loans to small enterprise finance segment. Each of our products
differs in terms of the average tenor, average yield, average interest rates and average size of loan. As on March 31,
2011 approximately 15 % of our Assets Under Management comprised product finance loans, 24 % of our Assets
Under Management comprised vehicle loans, 9 % of our Assets Under Management comprised personal loans, 28 %
85
of our Assets Under Management comprised loans against gold, and 24 % of our Assets Under Management
comprised loans to small enterprise finance segment. Our diverse revenue streams reduce our dependence on any
particular product, thus enabling us to spread and mitigate our risk exposure to any particular industry, business or
customer segment.
Pan-India Presence, Strong Foot-hold in Southern India and Synergies with Other Shriram Group Entities
As of March 31, 2011, we had 559 branches and 91 other business outlets across 17 states in India, with a significant
presence in south India. As on March 31, 2011, our total employee strength was 2,318. We have a strong foothold in
south India. We leverage on the Shriram Group’s ecosystem to solicit our customers and our focus has been in
maximizing our association with the “Shriram” brand name and the synergies offered by the infrastructure, of other
entities in the Shriram Group. Our customer base over the years has significantly comprised of customers of other
entities in the Shriram Group. The large customer bases and wide-spread network of business outlets of entities such
as, Shriram Transport Finance Company Limited, (one of the largest organized asset financing NBFCs in India), and
entities operating under the “Shriram Chits” brand name, has continued to provide us with a large platform of target
customers. We believe the under-banked community, especially the small enterprise finance segment often do not
have sufficient movable and/or immovable property to provide as security or collateral for loans. Our relationship
and knowledge of customers’ requirements also enables us to minimize our risks while extending loans to such
under-banked communities. For instance, loans provided to chit depositors of Shriram Chits, are partly or entirely
secured by the deposits made with Shriram Chits. Shriram Chits has several years of experience of collecting chit
deposits from self-employed professionals, wholesale/retail dealers, merchants, builders, manufacturers and small
and medium scale business operators, which provides us a with an extensive database of potential borrowers,
specially for our loans to the small enterprise finance segment.
Hub and Spoke Business Model with Efficient Credit Policies and Procedures
We operate in a ‘hub-and spoke’ business model, where the responsibilities from loan origination to recoveries of
loans are vested in each of our business outlets, under the general supervision and control of our head office in
Chennai. Our business outlet networks are interconnected and each business outlet is connected to our head office
through an ERP platform developed by Take Solution Limited, Chennai. The ERP platform enables our
management to monitor each loan right from its origination to final closure of accounts.
Our head office and senior management is primarily responsible for the broad policy formulation for our businesses.
However, the decision making process in connection with loans is decentralized and majorly vested in our business
outlets, which ensures speedy credit approvals and more efficient turn around times in processing loans.
We focus on closely monitoring our assets and borrowers through our officials at each business outlet. Our branch
officials develop relationships with our target customer base, which enables us to capitalize on local knowledge. We
follow stringent credit policies, including limits on customer exposure, to ensure the asset quality of our loans and
the security provided for such loans. Further, we have nurtured a culture of accountability by making our product
executives responsible for loan administration and monitoring as well as recovery of the loans they originate. We
have a dedicated team of officials at each business outlet who are responsible for (i) loan origination, (ii) credit
evaluation, (iii) pre-lending field investigations where our officials personally visit our prospective customers at
their homes or offices, and (v) post lending credit appraisal. The team of officials responsible for origination of a
loan is also responsible for the timely servicing of loans, recoveries, and monitoring the performance of each loan
from origination to closure of the loan. We offer incentivized salary structures to such officials, where their
incentives are linked to recovery of installments of the principal amount and interest on the loans. We believe our
efficient credit policies, credit approval procedures, credit delivery process and relationship-based loan
administration and monitoring methodology have aided in increasing our customer loyalty and earn repeat business
and customer referrals.
Our stringent credit policies and relationship based model has helped us maintain relatively low NPA levels. Our
Gross NPAs as a percentage of Total Loan Assets were 1.86 % as of March 31, 2011. Our Net NPAs as a percentage
of Net Loan Assets was 0.43 % as of March 31, 2011.
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Access to a range of cost effective funding sources
We fund our capital requirements through a variety of sources. Our fund requirements are currently predominantly
sourced through term loans from banks, issue of redeemable non-convertible debentures on a private placement
basis, and cash credit from banks including working capital loans. We access funds from a number of credit
providers, including nationalized banks, private Indian banks and foreign banks, and our track record of prompt debt
servicing has allowed us to establish and maintain strong relationships with these financial institutions. We have also
placed commercial paper, as and when required in the past. As a deposit-taking NBFC, we are also able to mobilize
retail fixed deposits at competitive rates. We have also raised subordinated loans eligible for Tier II capital. We also
undertake securitization/assignment transactions to increase the efficient use of our capital and as a cost effective
source of funds.
In relation to our long-term debt instruments, we currently have ratings of CARE AA from Credit Analysis and
Research Limited (“CARE”), AA-(ind) from Fitch Ratings India Private Limited, (“Fitch”) and CRISIL AA/Stable from CRISIL. In relation to our short-term debt instruments, we have also received ratings of CARE A1+
from CARE, F1+(ind) from Fitch, and CRISIL A1+ from CRISIL. Our fixed deposit programme has been rated as
CARE AA (FD) by CARE, and tAA- (ind) by Fitch. The NCDs proposed to be issued under this Issue have been
rated CARE AA by CARE for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL
AA-/Stable by CRISIL for an amount of upto ` 75,000 Lakhs vide its letter dated July 14, 2011. The rating of the
NCDs by CARE indicates high degree of safety regarding timely servicing of financial obligations and carrying very
low credit risk. The rating of NCDs by CRISIL indicates high degree of safety regarding timely servicing of
financial obligations.
We believe that we have been able to achieve a relatively stable cost of funds despite the difficult conditions in the
global and Indian economy and the resultant reduced liquidity and an increase in interest rates, primarily due to our
improved credit ratings, (as evidenced by the recent upgrade in our ratings by Fitch and CARE). We believe we are
able to borrow from a range of sources at competitive rates.
Experienced senior management team
Our Board consists of 12 Directors, (including representatives of the TPG Group), with extensive experience in the
financial services sectors. Our senior and middle management personnel have significant experience and in-depth
industry knowledge and expertise. Our management promotes a result-oriented culture that rewards our employees
on the basis of merit. In order to strengthen our credit appraisal and risk management systems, and to develop and
implement our credit policies, we have hired a number of senior managers who have extensive experience in the
Indian banking and financial services sector and in specialized finance firms providing loans to retail customers. We
believe that the in-depth industry knowledge and loyalty of our management and professionals provide us with a
distinct competitive advantage.
Strategy
Our key strategic priorities are as follows:
Further expand operations by growing our business outlet network and introducing full range of products in all
business outlets
We intend to continue to strategically expand our operations in target markets establishing additional business
outlets. Our customer origination and servicing efforts strategically focus on building long term relationships with
our customers and address specific issues and local business requirements of potential customers in a particular
region. We have a strong concentration of our business in south India with 248 of our 559 branches as on March 31,
2011, located in the states of Tamil Nadu, Andhra Pradesh and Karnataka. 91 % of our Assets Under Management
as on March 31, 2011 were represented by loans originated in the states of Tamil Nadu, Karnataka and Andhra
Pradesh. However, we have continued to make efforts to expand and penetrate into other regions in India.
Currently, we have succeeded in opening business outlets in 17 different states in India. We propose to target
establishing our operations through new business outlets in cities and towns where we historically had relatively
limited operations, such as in eastern and northern parts of India, and to further consolidate our position and
87
operations in western and southern parts of India. Our focus would be to typically target Tier II and Tier III cities,
where we believe that demand for our products will grow steadily in the near future.
As an internal policy, we typically introduce our products in a particular location only after having evaluated the
regional market and the demand for each individual product. Currently, not all of our business outlets offer our full
range of products. As a part of our strategy we target to gradually introduce our entire range of product offerings,
namely (i) Product Finance loans, (ii) pre-owned and new vehicles loans, (iii) personal loans, (iv) loans against gold,
and (v) small enterprise finance segment at each of our existing business outlets across India.
Continue growth in the Loans to Small Enterprises Finance Segment
Our Company started offering customized loans to small enterprises finance segment in 2006 and has continually
focused on expanding our customer base for this product since then. We see a significant opportunity for our
Company to expand our customer base in small enterprise finance segment. According to the Frost and Sullivan
report titled “Analysis of MSME Loan Markets for NBFCs – July 2011”, our Company is the largest small
enterprise finance company in India. In the small loan segment (loans of `1 lakh -10 lakh) our Company has a
dominant share of 95 %. Our Company also leads the total Indian micro, small and medium enterprises market with
53 % share. As a strategy, we will continue to leverage on the infrastructure provided by entities operating under the
‘Shriram Chits’ brand name. Shriram Chits has several years of experience of collecting chit deposits from selfemployed professionals, wholesale/retail dealers, merchants, builders, manufacturers and small and medium scale
business operators, which provides us a with an extensive database of potential borrowers, specially for our loans to
the small enterprises segment. We also propose to extend such loans to our existing customer base for our other
products and propose to introduce small enterprises segment loans in all our current business outlets as well as in
new business outlets that we open in the future.
Increase focus on loans against gold business
Since 2007 we have been providing personal and business loans secured by gold jewellery and ornaments, primarily
to individuals who possess gold jewellery but do not have access to formal credit within a reasonable time, or to
whom credit may not be available at all, to meet their short-term requirements. We propose to utilize our existing
business outlet networks, our existing customer base as well as the infrastructure offered by other Shriram Group
entities, to expand our reach and customer base for loans against gold. We expect to establish this product in new
markets and to target potential customers using the Shriram Group’s eco-system, to include customers who
otherwise continue to rely on the unorganized sector for timely funding requirements. We propose to capitalize on
the “Shriram” brand name and our good-will with our existing customers to further develop our business for this
product.
Continue to implement advanced processes and systems
We have invested in our technology systems and processes to create a stronger organization and ensure good
management of customer credit quality. Our information technology strategy is designed to increase our operational
and managerial efficiency. We aim to increasingly use technology in streamlining our credit approval,
administration and monitoring processes to meet customer requirements on a real-time basis. We continue to
implement technology led processing systems to make our appraisal and collection processes more efficient,
facilitate rapid delivery of credit to our customers and augment the benefits of our relationship based approach. We
also believe that deploying strong technology systems will enable us to respond to market opportunities and
challenges swiftly, improve the quality of services to our customers, and improve our risk management capabilities.
Foray into Housing Finance Business
Our Company incorporated a wholly owned subsidiary namely Shriram Housing Finance Limited in November 2010,
with a view of entering the housing finance sector. We have applied to National Housing Bank (wholly owned by the
Reserve Bank of India), for a certificate of registration under the National Housing Bank Act, 1987, to carry on
business of a housing finance institution. We believe that offering housing finance will help us expand our product
portfolio and we are well positioned to enter into this business through our established infrastructure, our existing
customer base as well as through leveraging our association with other entities in the Shriram Group. The aforesaid
Subsidiary will commence operations once it is registered with the National Housing Bank. As a part of its strategy,
Shriram Housing Finance Limited will typically target middle-income customers in semi-urban locations.
88
Our Company’s Products
Product Finance Loan
Our product finance loans comprise of two wheeler loans, loans for purchase of electrical appliances and other white
and brown goods. The average tenor for our Product Finance loans is typically 24 months and the average yield
typically ranges between 24-26%. As on March 31, 2011, the Assets Under Management for Product Finance loans
was ` 116,584.39 lakhs, which represented 15 % of our total Assets under Management as at that date.
Pre-owned and New Vehicle Loans
Our Company offers a variety of loans to finance the purchase of new and pre-owned passenger and commercial
vehicles includes three wheelers, four wheelers, used and new cars. Our financing products are principally targeted
at the financing of new passenger and commercial vehicles, although we also provide financing for pre-owned
passenger and commercial vehicles. Our Company’s executives are stationed at the showrooms of various passenger
and commercial vehicle dealers and are responsible right from bringing in the customer, credit verification and loan
origination to recovery of the loan. The average tenor for our vehicle loans is typically 30 months and the average
yield typically ranges between 22-24%. As on March 31, 2011, the Assets Under Management for vehicle loans was
` 193,530.59 lakhs, which represented 24 % of our total Assets Under Management as at that date.
Personal Loans
We provide personal loans to our existing and old customers as well as to customers of other Shriram Group entities.
Our officials reach out directly to our personal loan customers and visit them at their doorstep to carry out loan
origination and credit evaluation, so as to ensure speedy processing of loans. We target customer segments who do
not have easy access to bank or other modes of financing for immediate short or medium term funding requirements,
within reasonable time or at all. The average tenor for such loans is typically 30 months with average yields
typically ranging between 24-27%. As on March 31, 2011, the Assets Under Management for personal loans was `
71,548.15 lakhs, which represented 9 % of our total Assets Under Management as at that date. .
Loans against Gold
Since 2007 we have been providing personal and business loans secured by gold jewellery and ornaments, primarily
to individuals who possess gold jewellery but do not have access to formal credit within a reasonable time, or to
whom credit may not be available at all, to meet their short-term requirements. Our gold loans are for an average
tenure of 4 months and provide a typical average yield of 18-20%. As on March 31, 2011, the Assets Under
Management for loans against gold was ` 220,472.81 lakhs, which represented 28 % of our total Assets Under
Management as at that date. .
Small Enterprise Finance Segment
Our Company started offering customized loans to small enterprises segment in 2006 and we have continually
focused on expanding our customer base for this product since then. According to the Frost and Sullivan report titled
“Analysis of MSME Loan Markets for NBFCs – July 2011”, our Company is the largest small enterprise finance
company in India. In the small loan segment (loans of `1 lakh -10 lakh) our Company has a dominant share of 95 %.
Our Company also leads the total Indian micro, small and medium enterprises market with 53 % share.
Currently, our Company offers business loans to the small enterprises segment for an average tenor of 36 months
and an average yield of 22-24%. Our target customers in the small enterprises segment typically comprises selfemployed professionals, wholesale and retail dealers, merchants, builders, small and medium scale manufacturing
concerns, catering services, tour operators, etc. Our small enterprises segment is typically customized to suit the
requirements of our customers after having assessed and understood their business model. As on March 31, 2011,
89
the Assets Under Management for loans to the small enterprises finance segment was ` 195,329.92 lakhs, which
represented 24 % of our total Assets Under Management as at that date.
We believe that the small enterprises finance segment is still under banked to a large extent and barring certain
public financial institutions and public sector banks, lending in this sector has traditionally been addressed by the
unorganized players in most regions in India. Accordingly, we see a significant opportunity for our Company to
expand our customer base in small enterprises segment.
The Shriram Group, particularly Shriram Chits has a large number of customers under the small enterprises
segment. Our Company does business with various vendors and dealers of Shriram Group. We plan to tap this
potential small enterprises segment and increase the size of our small enterprises segment portfolio by continuing to
offer customized products to our target customers.
Our Company’s Operations
Business Outlet Network
As of March 31, 2011, we had a wide network of 559 branches and 91 other business outlets across India and 2,318
employees, across 17 states in India. We have a strong concentration of our business in south India in the states of
Tamil Nadu, Andhra Pradesh and Karnataka. We propose to target establishing our operations through new business
outlets in cities and towns where we historically had relatively limited operations, such as in eastern and northern
parts of India, and to further consolidate our position and operations in western and southern parts of India. As an
internal policy, we typically introduce our products in a particular location only after having evaluated the regional
market and the demand for each individual product. Currently, not all of our business outlets offer our full range of
products. As a part of our strategy we target to gradually introduce our entire range of product offerings at each of
our existing business outlets across India.
A typical business outlet comprises 3 to 6 employees, including the branch manager. As of March 31, 2011, all of
our business outlets were connected to servers at our corporate office to enable real time information with respect to
our loan disbursement and recovery administration. Our customer origination efforts strategically focus on building
long term relationships with our customers, address specific issues and local business requirements of potential
customers in a specific region.
Strategic Partnerships
Since the retail financing and Small Enterprise Finance Segment continue to be influenced by the unorganized
lending sector in semi-urban regions, we from time to time, enter into agreements and memorandum of
understanding with local private financiers to cater to such markets. Currently, we have entered into a memorandum
of understanding dated January 2, 2010 with M/s. Hari & Company Investment Madras Private Limited, (“HAC”),
whereby HAC identifies the prospective customers desirous of availing finance, verifies the credit worthiness of
such customers, evaluates the loan proposals, disburses the loan amounts, obtains all necessary documentation in
connection with the loan proposal, collects installments and penalties for all customers, assists in creation of the
charge in connection with the loan and follows up on recovery of loan amounts, repossession of assets and/or
enforcement of the security interest on such loans. Our Company in turn provides the necessary funds for financing
the target customers and maintains the policy and procedures and banking transactions in connection with such
loans. The aforesaid memorandum of understanding is valid for a period of five years. HAC is entitled to an
incentivized revenue sharing based payment in connection with each loan originated and serviced by HAC.
Customer Evaluation, Credit Appraisal and Disbursement
Initial Evaluation
Due to our customer profile, in addition to a credit evaluation of the borrower, we rely on guarantor arrangements,
the availability of security, referrals from existing relationships and close client relationships in order to manage our
asset quality.
90
All customer origination and evaluation, loan disbursement, loan administration and monitoring as well as loan
recovery processes are carried out by our executives at each business outlet, who are responsible for (i) loan
origination, (ii) credit evaluation, (iii) pre-lending field investigations and (iv) post lending credit appraisal. The
team of officials responsible for origination of a loan is also responsible for the timely servicing of loans, recoveries,
and monitoring performance of each loan from origination to closure of the loan. We offer incentivized salary
structures to such officials where their incentives are directly linked to recovery of installments of the principal
amount and interest on the loans. We do not utilize or engage direct selling or other marketing and distribution
agents or appraisers to carry out these processes. We follow certain procedures for the evaluation of the
creditworthiness of potential borrowers. The credit appraisal process is as follows:
When a customer is identified and the requisite information for a financing proposal is received, a branch manager
or our branch executive personally visits such customer at their homes and/or place of business to assess the loan
requirements and creditworthiness of such customer. We also require an applicant to provide appropriate references
from existing or former customers. The proposal form requires the customer to provide information on the age,
address, employment details and annual income of the customer, as well as information on outstanding loans. The
applicant is required to provide proof of identification and residence for verification purposes. Generally, where the
customer is unable to provide sufficient immovable or movable property to secure the entire value of the loan, the
applicant is also required to furnish a guarantee from an existing or a former customer. Detailed information relating
to such guarantor is also required to be provided.
Credit policies
We follow stringent credit policies to ensure the asset quality of our loans and the security provided for such loans.
Any deviation from such credit policies in connection with a loan application requires prior approval from our head
office. In connection with a customer who is also an existing customer of ‘Shriram Chits’ we generally create a lien
over the chit deposits of such customer. If the value of the chit deposits is in-sufficient to cover the entire loan
amount, we generally also require immovable or movable property to be provided for the remaining value of the
loan amount. In cases where the customer is unable to provide such immovable or movable property as security, the
applicant is also required to furnish a guarantee from an existing or a former customer. For our two-wheeler and
vehicle loans, the two-wheeler/vehicle is hypothecated in favour of our Company for the tenure of the loan. From
time to time, our management lays down loan approval parameters which are linked to the value of the underlying
security and/or collateral. The borrower is charged prepayment charges in the event of termination of the loan by
prepayment. Security received from the borrower, including unutilized post-dated cheques, if any, is released on
repayment of all dues or on collection of the entire outstanding loan amount, provided no other existing right or lien
for any other claim exists against the borrower.
Approval Process
After having verified the credentials of an applicant, our branch executive is responsible for signaling any early
warning signals to the relevant branch manager and the disbursement team.
The branch manager evaluates the loan proposal based on supporting documentation and various other factors. The
primary criterion for approval of a loan proposal is based on the past reference of the prospective customer either
from an existing or a past customer of our Company or of another Shriram Group entity, report of our branch
executive and guarantee if required furnished by the customer. In addition, our branch managers may also consider
other factors in the approval process such as the location and the time period of residence, past repayment record
and income sources.
The branch manager is authorized to approve a loan if the proposal meets the criteria established for the approval of
a loan. The applicant is intimated of the outcome of the approval process, as well as the amount of loan approved,
the terms and conditions of such financing, including the rate of interest (annualized) and the application of such
interest during the tenure of the loan.
Disbursement
Margin money and other charges are collected prior to loan disbursements. The disbursing officer retains evidence
of the applicant’s acceptance of the terms and conditions of the loan as part of the loan documentation. For vehicle
91
loans and two-wheeler loans, a chassis print of the vehicle is also obtained and maintained in the loan file. The
relevant Regional Transport Office (RTO) endorsement forms are also required to be executed by the borrower prior
to the disbursement of the loan.
Prior to the loan disbursement, the loan officer ensures that a Know Your Customer checklist is completed by the
applicant. The loan officer verifies such information provided and includes the records in the relevant loan file. The
loan officer is also required to ensure that the contents of the loan documents are explained in detail to the borrower
either in English or in the local language of the borrower and a statement to such effect is included as part of the
loan documentation. The borrower is provided with a copy of the loan documents executed by him. Although our
customers have the option of making payments by cash or cheque, we may require the applicant to submit postdated cheques covering an initial period prior to any loan disbursement.
Loan administration and monitoring
The borrower (and guarantor, if required) execute(s) the security creation documents and the loan agreement setting
out the terms of the loan. A loan repayment schedule is attached as a schedule to the loan agreement, which
generally sets out periodical repayment terms. Repayments are made in periodical installments. Loans disbursed are
recovered from the customer in accordance with the loan terms and conditions agreed with the customer. We track
loan repayment schedules of our customers, on a monthly basis, based on the outstanding tenure of the loans, the
number of installments due and defaults committed, if any. This data is analyzed based on the loans disbursed and
location of the customer. The official originating the loan is responsible for monitoring the quality of the underlying
security and/or collateral and timely repayment of loans. Typically, the loan official’s remuneration is incentivized
and linked to the recovery of installments from the customer.
Our management information systems department operates out of our head office and monitors compliance with the
terms and conditions for credit facilities through our ERP system. We monitor the completeness of documentation,
creation of security etc. through regular visits to the business outlets by our regional as well as head office
executives and internal auditors. All borrower accounts are reviewed at least once a year, with a higher frequency of
reviews for the larger exposures and delinquent borrowers. The branch managers review collections regularly and
personally contact borrowers that have defaulted on their loan payments. Branch managers are assisted by the
officers responsible for loan origination, who are also responsible for the collection of installments from each
borrower serviced by them. We believe that close monitoring of debt servicing efficiency enables us to maintain
high recovery ratios.
Collection and Recovery
We believe that our loan recovery procedure is particularly well-suited to our target market for each of our products.
The entire collection operation is administered in-house through our branch officials and we do not outsource loan
recovery and collection operations. In case of default, the reasons for the default are identified by the officer
responsible for each loan and appropriate action is initiated, such as requiring partial repayment and/or seeking
additional guarantees or collateral.
In the event of a default on three loan installments, the relevant officer is required to make a personal visit to the
borrower to determine the gravity of the loan recovery problem.
We may initiate the process for repossession of the underlying asset and/or enforcement of the charge if required.
Our officers are trained to repossess assets and/or enforce the security interest and no external agency is involved in
such processes. Repossessed assets are held at designated secured facilities for eventual disposal. The notice to the
customer specifies the outstanding amount to be paid within a specified period, failing which the asset may be
disposed of and/or the charge enforced. In the event there is a short fall in the recovery of the outstanding amount
from enforcement of the charge, legal proceedings against the customer may be initiated.
Asset Quality
We maintain our asset quality through the establishment of prudent credit norms, the application of stringent credit
evaluation tools, limiting customer and security exposure and direct interaction with customers. In addition to our
credit evaluation and recovery mechanism, our asset-backed lending model and adequate asset cover has helped
92
maintain low gross and net NPA levels. Our historical Assets Under Management for each segment and Net NPAs
of our business have been as follows:
` In Lakhs
Particulars
Assets
Under
Management
for
Product
Finance
Loans
Assets
Under
Management
for
Vehicle Loans
Assets
Under
Management
for
Personal Loans
Assets
Under
Management
for
Loans Against Gold
Assets
Under
Management
for
Small
Enterprise
Finance
Segment
Loans
Other Assets Under
Management
Total Assets Under
Management
Net
Non
performing assets
As at March
31, 2007
73,904.25
As at March
31, 2008
1,38,519.97
As at March
31, 2009
98,219.95
As at March
31, 2010
79,422.24
As at March
31, 2011
1,16,584.39
1,25,459.69
1,01,631.66
2,14,126.71
2,07,372.26
1,93,530.59
23,337.61
37,814.52
39,755.51
49,785.79
71,548.15
1,519.19
13,436.18
34,751.82
85,478.36
2,20,472.81
24,157.05
4,35,85.85
70,294.50
99,197.48
1,95,329.92
2,308.70
1,901.60
5,802.41
294.05
2,339.01
2,50,686.49
3,36,889.78
4,62,950.89
5,21,550.18
7,99,804.88
2,561.44
2,495.70
3,590.35
3,322.73
2,982.76
Classification of Assets
The Prudential Norms Directions, 2007, read with the NBFC Acceptance of Public Deposits Directions, 1998, as
amended, prescribed by the RBI, among other matters, require us to observe the classification of our asset; treatment
of NPAs; and provisioning against NPAs.
An asset is termed as an NPA if interest or installments of the principal amount remain overdue for a period of 180
days or more. Each deposit-accepting NBFC is required to classify its lease/hire purchase assets, loans, advances
and other forms of credit into the following classes, namely:
Standard assets: An asset in respect of which no default in repayment of principal or payment of interest is
perceived and which does not disclose any problem nor carry more than normal risk attached to the business.
Sub-standard assets: An asset will be classified as an NPA for a period not exceeding 18 months or where the terms
of the agreement regarding interest and / or principal have been renegotiated or rescheduled after commencement of
operations, until the expiry of one year of satisfactory performance under the renegotiated or rescheduled terms.
Doubtful assets: An asset which remains a sub-standard asset for a period exceeding 18 months.
Loss assets (a) An asset which has been identified as loss asset by the NBFC or its internal or external auditor or by
the RBI during the inspection of the NBFC, to the extent that it is not written off by the NBFC; and (b) an asset
which is adversely affected by a potential threat of non-recoverability due to either erosion in the value of security or
non availability of security or due to any fraudulent act or omission on the part of the borrower.
93
For further information on the Prudential Norms Directions, 2007, refer to the section titled “Regulations and
Policies” beginning on page 181 this Prospectus.
Our Audit Committee has constituted a policy for making provisions in excess of the amounts prescribed by RBI
and we may make further provisions if we determine that it is prudent for a known and identified risk. Based on our
policy our provisions as of March 31, 2011 stood at ` 9,983.42 lakhs as compared to the RBI required minimum
provision of ` 9,249.10 lakhs.
The following table sets forth, as of the dates indicated, data regarding our NPAs:
Period
Gross NPA (`
in lakhs)
Net NPA (` in
lakhs)
4,040.66
March 31,
2007
March 31,
2008
March 31,
2009
March 31,
2010
March 31,
2011
2,561.44
Total Loan
Assets (` in
lakhs)
171,048.30
Net Loan
Assets(1) (` in
lakhs)
169,569.09
% of Gross
NPA to Total
Loan Assets
2.36
% of Net
NPA to Net
Loan Assets
1.51
4,228.66
2,495.70
274,857.78
273,124.82
1.54
0.91
7,784.03
3,590.35
375,395.10
371,201.42
2.07
0.97
10,753.30
3,322.73
473,135.02
465,704.45
2.27
0.71
12,966.18
2,982.76
698,919.09
688,935.67
1.86
0.43
Our Gross NPAs as a percentage of Total Loan Assets were 1.86% as of March 31, 2011. Our Net NPAs as a
percentage of Net Loan Assets was 0.43% as of March 31, 2011. We believe that our eventual write-offs are
relatively low because of our relationship based customer origination and customer support, prudent loan approval
processes, including adequate collateral being obtained and our ability to realize such collateral in a timely manner.
Funding Sources
We have expanded our sources of funds in order to reduce our funding costs, protect interest margins and maintain a
diverse funding portfolio. This will enable us to achieve funding stability and liquidity. Our sources of funding
comprise term loans including term loans from banks and financial institutions, cash credit from banks, redeemable
non-convertible debentures on a private placement basis, subordinated bonds, short term commercial paper, public
deposits, and inter-corporate deposits.
Borrowings
The following table sets forth the principal components of our secured loans as of the dates indicated:
As of March 31
` In Lakhs
SECURED LOANS
Redeemable non-convertible
debentures
Term loans:
- Term loans from banks
- Term loans from financial
institutions, and corporate
Cash credit from banks including
working capital demand loans
2007
2008
2009
2010
2011
60,968.50
69,106.39
127,741.10
154,073.77
41,453.74
1,161.00
115,755.02
10,513.00
143,562.74
9,426.40
104,634.17
9,530.00
295,677.28
6,500.00
26,800.92
67,420.99
109,715.19
145,372.61
134,896.09
94
219,877.64
The following table sets forth the principal components of our unsecured loans as of the dates indicated:
As of March 31,
UNSECURED LOANS
Fixed deposits
Inter-corporate deposits
Subordinated debt
Redeemable non-convertible debentures
Commercial paper
Term loans:
- Term loans from banks
- Term loans from corporate
2008
2009
2010
` In Lakhs
2011
379.98
Nil
19,866.29
Nil
Nil
165.67
925.00
28,036.78
3,500.00
4,500.00
112.80
Nil
41,718.53
Nil
Nil
100.74
Nil
53,002.95
Nil
Nil
55.10
Nil
53,272.33
Nil
22,500
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
2007
Increasingly, we have depended on the issue of redeemable non-convertible debentures on a private placement basis,
term loans from banks, term loans from financial institutions and corporates and cash credit from banks including
working capital demand loans as the primary sources of our funding. We believe that we have developed stable long
term relationships with our lenders, and established a track record of timely servicing of our debts, and have been
able to secure fixed rate long term loans of three to five years tenure to stabilize our cost of borrowings.
In fiscal 2011, total repayment of bank borrowings was ` 92,866.16 lakhs. As of March 31, 2011, loans from banks
aggregated ` 430,573.37 lakhs, as compared to ` 250,006.78 lakhs as of March 31, 2010.
In fiscal 2011, net redemption of redeemable non-convertible debentures was ` 76,112.67 lakhs. As of March 31,
2011, the aggregate outstanding amount of secured redeemable non-convertible debentures was ` 219,877.64 lakhs
as compared to ` 154,073.77 lakhs as of March 31, 2010.
Our short term fund requirements are primarily funded by cash credit from banks including working capital loans.
Cash credit from banks including working capital loans outstanding as of March 31, 2011 was ` 134,896.09 lakhs.
As of March 31, 2011 our outstanding subordinated debt amounted to ` 53,272.33 lakhs, compared to ` 53,002.95
lakhs as of March 31, 2010. The debt is subordinated to our present and future senior indebtedness. Based on the
balance term to maturity, as of March 31, 2011, ` 28,712 lakhs of the discounted book value of subordinated debt is
considered as Tier II under the guidelines issued by the RBI for the purpose of capital adequacy computation.
As of March 31, 2011, outstanding commercial paper amounted to ` 22,500 lakhs.
We are registered as a deposit-taking NBFC with the RBI under Section 45IA of the Reserve Bank of India Act,
1934, which authorizes us to accept deposits from the public. We do not, however, depend on deposits as our
primary source of funding. As of March 31, 2011, we had fixed deposits outstanding of ` 55.10 lakhs, compared to `
100.74 lakhs as of March 31, 2010, respectively.
Securitization/assignment of Portfolio against financing activities
We also undertake securitization/assignment transactions to increase and efficiently utilize our capital, and as a cost
effective source of funds. We sell part of our assets under financing activities from time to time through
securitization transactions as well as through direct assignment transactions. Our securitization/assignment
transactions involve provision of additional collateral and deposits or bank/ corporate guarantee.
In fiscal 2011, total book value of Loan Assets securitized/assigned was ` 117,915.72 lakhs.
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We continue to provide administration services for the securitized/assigned portfolio, the expenses for which are
provided for, at the outset of each transaction. The gains arising out of securitization/assignment, which vary
according to a number of factors such as the tenor of the securitized/assigned portfolio, the yield on the portfolio
securitized/assigned and the discounting rate applied are treated as income over the tenure of agreements as per RBI
guidelines on securitization of standard assets. Loss, if any, is recognized upfront.
The following tables set forth certain information with respect to our securitization/assignment transactions:
For the Financial Year Ended March 31,
2010
` In Lakhs
2011
314,685
146,402.00
178,502.00
75,781.80
88,844.37
30,000.00
117,915.72
91,302.42
83,539.14
91,874.15
30,000.00
126,737.01
10,808.68
7,757.34
13,182.64
2,554.73
27,163.76
2007
Total number of Loan Assets
securitized/assigned
Total book value of Loan Assets
securitized/assigned
Sale consideration received for
securitized/assigned assets
Gain on account of
securitization/assignment
2008
2009
438,457.00
398,691
80,493.74
As on March 31
` In Lakhs
-Fixed Deposit
-Guarantees given by third
parties
2007
2008
5,711.93
16.69
46,95.88
-
2009
2010
10,017.54
3,117.77
2011
7,373.57
1,942.77
15,436.40
1,942.77
We are required to provide credit enhancement for the securitization/assignment transactions by way of either fixed
deposits or corporate guarantees and the aggregate credit enhancement amount outstanding as on March 31, 2011
was ` 1,5436.40 lakhs. In the event a relevant bank or institution does not realize the receivables due under such
Loan Assets, such bank or institution would have recourse to such credit enhancement.
Capital Adequacy
We are subject to the capital adequacy ratio (“CAR”) requirements prescribed by the RBI. We are currently required
to maintain a minimum CAR of 12.00%, as prescribed under the Prudential Norms Directions, 2007, based on our
total capital to risk-weighted assets. As per RBI notification dated February 17, 2011, all deposit taking NBFCs have
to maintain a minimum capital ratio, consisting of Tier I and Tier II capital, which shall not be less than 15.00% of
its aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items w.e.f. March
31, 2012. As a part of our governance policy, we ordinarily maintain capital adequacy higher than the statutorily
prescribed CAR. As of March 31, 2011, our capital adequacy ratio computed on the basis of applicable RBI
requirements was 20.53%, compared to the minimum capital adequacy requirement of 12.00% stipulated by the RBI.
The following table sets out our capital adequacy ratios computed on the basis of applicable RBI requirements as of
the dates indicated:
As of March 31,
2007
Capital adequacy ratio
(%)……………………………………………………….
Tier 1 capital…………………………………………….
2010
2011
23.95
20.25
25.74
26.28
20.53
29,464.00
39,265.00
70,662.00
98,585.00
1,19,419.00
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2008
2009
Credit Rating
The following table sets forth certain information with respect to our credit ratings as on the date of this Prospectus:
Credit Rating
Agency
CARE
Limit in ` Lakhs
Instruments
Ratings
Non Convertible
Debentures
CARE AA
CARE
Fixed Deposit
CARE AA(FD)
1,000
CARE
Short Term Debt
CARE A1+
37500
CRISIL
Non Convertible
Debentures
27,500
2,000
CRISIL AA- / STABLE
CRISIL
Short Term Debt
CRISIL A1 +
32,000
Fitch
Long Term Rating
AA-(ind)
75,000
Fitch
Long Term Bank Loans
AA-(ind)
5,35,600
Fitch
Term Deposit Programme
tAA-(ind)
800
Fitch
Short Term
F1+(ind)
40,000
The NCDs proposed to be issued under this Issue have been rated CARE AA by CARE for an amount of upto `
75,000 Lakhs vide its letter dated July 14, 2011, and CRISIL AA-/Stable by CRISIL for an amount of upto ` 75,000
Lakhs vide its letter dated July 14, 2011. The rating of the NCDs by CARE indicates high degree of safety regarding
timely servicing of financial obligations and carrying very low credit risk. The rating of NCDs by CRISIL indicates
high degree of safety regarding timely servicing of financial obligations.
Risk Management
We have developed a strong risk-assessment model in order to maintain adequate asset quality. The key risks and
risk-mitigation principles we apply to address these risks are summarized below:
Interest Rate Risk
Our results of operations are dependent upon the level of our net interest margins. Net interest income is the
difference between our interest income and interest expense. Since our balance sheet consists of rupee assets and
predominantly rupee liabilities, movements in domestic interest rates constitute the primary source of interest rate
risk. We assess and manage the interest rate risk on our balance sheet through the process of asset liability
management. We borrow funds at fixed and floating rates of interest, while we extend credit at fixed rates. In the
absence of proper planning and in a market where liquidity is limited, our net interest margin may decline, which
may impact our revenues and ability to exploit business opportunities.
We have developed stable long term relationships with our lenders, and established a track record of timely
servicing our debts. This has enabled us to become a preferred customer with most of the major banks and financial
institutions with whom we do business. Moreover, our valuation capabilities enable us to invest in good quality
assets with stable, attractive yields. Some of our loans are classified as priority sector assets by the RBI, which when
securitized, find a ready market with various financial institutions, including our lenders.
97
Liquidity Risk
Liquidity risk arises due to non-availability of adequate funds or non-availability of adequate funds at an appropriate
cost, or of appropriate tenure, to meet our business requirements. This risk is minimized through a mix of strategies,
including asset securitization/assignment and temporary asset liability gap.
We monitor liquidity risk through our Asset Liability Management (“ALM”) function with the help of liquidity gap
reports. This involves the categorization of all assets and liabilities into different maturity profiles, and evaluating
these items for any mismatches in any particular maturities, especially in the short-term. The ALM policy has
capped the maximum mismatches in the various maturities in line with RBI guidelines and ALCO guidelines.
To address liquidity risk, we have developed expertise in mobilizing long-term and short-term funds at competitive
interest rates, according to the requirements of the situation. For instance, we structure our indebtedness to
adequately cover the average three-year tenure of loans we extend. As a matter of practice, we generally do not
deploy funds raised from short term borrowing for long term lending.
Credit risk
Credit risk is the risk of loss that may occur from the default by our customers under the loan agreements with us.
As discussed above, borrower defaults and inadequate collateral may lead to higher NPAs.
We lend on a relationship-based model, and we believe that our high loan recovery ratios indicate the effectiveness
of this approach for our target customer base. We also employ advanced credit assessment procedures, which
include verifying the identity and checking references of the proposed customer thoroughly at the lead generation
stage. Our extensive local presence also enables us to maintain regular direct contact with our customers. In this
regard, we assign personal responsibility to each member of the lead generation team for the timely recovery of the
loans they originate, closely monitoring their performance against our Company's standards, and maintain client
wise exposure limits.
Employees
As of March 31, 2011 our total employee strength was 2,318.
We have built a highly capable workforce primarily by recruiting and training fresh graduates. As our business
model does not require extensive background in banking or the financial services industry, we prefer to hire and
train fresh graduates in the particular operational aspects of our business. Moreover, we prefer to hire our workforce
from the locality in which they will operate, in order to benefit from their knowledge of the local culture, language,
preferences and territory. We emphasize both classroom training and on-the-job skills acquisition. Post recruitment,
an employee undergoes induction training to gain an understanding of our Company and our operations. Our product
executives are responsible for customer origination, loan administration and monitoring as well as loan recovery and
this enables them to develop strong relationships with our customers. We believe our transparent organizational
structure ensures efficient communication and feedback and drives our performance-driven work culture.
In a business where personal relationships are an important driver of growth, executive attrition may lead to loss of
business. We therefore endeavor to build common values and goals throughout our organization, and strive to ensure
a progressive career path for promising employees and retention of quality intellectual capital in our Company. We
provide a performance-based progressive career path for our employees. For instance, we introduced two employee
stock option plans for eligible employees at branch manager level and above. We believe our attrition rates are
among the lowest in the industry at managerial levels.
Intellectual Property
Pursuant to a License Agreement dated April 1, 2010 between our Company and Shriram Ownership Trust,
(“SOT”), we are licensed to use the name "Shriram" and the associated mark for which our Company has to pay to
SOT, 0.25% on the gross turnover of our Company for the first year of the License Agreement. Royalty rates for the
subsequent years will be decided mutually on or before April 1st of the respective financial years. Along with the
98
royalty, our Company is also required to pay to SOT amounts by way of reimbursement of actual expenses incurred
by SOT in respect of protection and defence of the Copyright. The License Agreement is valid for a period of three
years from the date of execution thereof.
Technology
We use information technology as a strategic tool in our business operations to improve our overall productivity. We
believe that our information systems enable us to manage our nationwide operations network well and to effectively
monitor and control risks.
All our business outlets are online, connected through an ERP software developed by Take Solution Limited
Chennai and all our business outlets with our Central Server located at Chennai.
Property
Our registered office is at 123, Angappa Naicken Street, Chennai -600001, Tamil Nadu, India. Our corporate
office is at 221, Royapettah High Road, Mylapore, Chennai- 600004, Tamil Nadu, India. As of March 31, 2011, we
had 559 branches and 91 other business outlets across India. We enter into lease and/or leave and license agreements
in connection with the premises required for our business outlet.
Collaborations
Except as disclosed herein, our Company has not entered into any collaboration, any performance guarantee or
assistance in marketing by any collaborators.
99
HISTORY, MAIN OBJECTS AND KEY AGREEMENTS
Brief background of our Company
Our Company was incorporated as a private limited company, Shriram Hire-Purchase Finance Private Limited, on
March 27, 1986, under the provisions of the Companies Act, 1956. Further with effect from October 29, 1988, the
status of our Company was changed to a public limited company. The name of our Company was changed from
Shriram Hire-Purchase Finance Limited to Shriram City Union Finance Limited and a fresh certificate of incorporation
dated April 10, 1990 was issued by the ROC, Chennai, Tamil Nadu. Subsequently, our Company has obtained a
certificate of registration as a Deposit-Accepting Financing Company, dated April 17, 2007, bearing registration no.
07-00458 issued by the RBI to carry on activities of a NBFC under section 45 IA of the RBI Act, 1934.
Change in registered office of our Company
There has been no change in the registered office of our Company in the last five years preceding the date of this
Prospectus.
Main objects of our Company
The main objects of our Company as contained in our Memorandum of Association are:
•
To lend money on security on movable or immovable properties or any shares or securities of any nature or
without security and to negotiate loans.
•
To Undertake and carry on the business of financing, hire-purchase contracts relating to property or assets of
any description either fixed or movable and in particular relating to Houses, Lands, Government Bonds,
Goods, Chattels, Motorcars, Motor-Buses, Motor-lorries, Auto-Rickshaws, Omnibuses, Tricycles, Scooters,
Bicycles, Unicycles, Quadricycles, Velocipedes, Carriages and Vehicles of all kinds whether mechanically
propelled by steam, oil, gas, petrol or electricity or otherwise, Tractors, bullion, stocks, Shares, television sets,
machineries of all kinds, pump-sets, refrigerators, electric and electronic goods and on other household
articles.
•
To draw, accept, endorse, discount, buy, sell and deal in bills of exchange, promissory notes, bonds
Debentures and other negotiable instruments and securities.
•
To issue on commission, subscribe for, take acquire and hold, sell, exchange and deal in Shares, stock, bonds,
obligations or securities of any Government, local authority or Company.
•
To acquire, improve, manage, work, develop, exercise all rights in respect of leases and mortgages and to sell,
dispose of, turn to account and otherwise deal with property of all
kinds, and in particular, land,
buildings, concessions, patents, business concerns and undertakings.
•
Generally to carry on and undertake any business or operation, commonly carried on or undertaken by
capitalists, financiers.
•
To borrow or take deposits of money at interest or otherwise from any person or persons, local authority of
Government and advance, lend or deposit any such money or other moneys of the Company for the time being
on such security or otherwise as the Company may deem expedient. But the Company shall not do any
banking business, as defined in the Banking Regulations Act, 1949.
•
The Company shall either singly or in association with other Bodies Corporate-act as Asset Management
Company/ Manager/ Fund Manager in respect of any scheme of Mutual Fund whether Open-End Scheme or
Closed-End Scheme, floated/to be floated by any Trust/Mutual Fund (whether offshore or onshore)/Company
by providing management of Mutual Fund for both offshore and onshore Mutual Funds, Financial Services
consultancy, exchange of research and analysis on commercial basis. Constitute any trust and to subscribe and
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act as, and to undertake and carry on the office or offices and duties of trustees, custodian trustees, executors,
administrators, liquidators, receivers, treasures, attorneys, nominees and agents; and to manage the funds of all
kinds of trusts and to render periodic advice on investments, finance, taxation and to invest these funds from
time to time in various forms of investments including shares, term loans and debentures etc. Carry on and
undertake the business of portfolio investment and Management, for individuals as well as large Corporate
Bodies and/or such other bodies as approved by the Government, in Equity Shares, Preference Shares, Stock.
Debentures (both convertible and non-convertible), Company deposits, bonds unit. loans, obligations and
securities issued or guaranteed by Indian or Foreign Governments, States, Dominions, Sovereigns,
Municipalities or Public Authorities and/or any other financial instruments, and to provide a package of
Investment/Merchant Banking Services by acting as Managers to Public issue of securities, to act as
underwriters, issue house and to carry on the business of Registrar to Public issue/various investment schemes
and to act as Brokers to Public Issue. Without prejudice to the generality of the foregoing to acquire any
shares, stocks, debentures, debenture-stock, bonds, units of any Mutual Fund Scheme or any other statutory
body including Unit Trust of India, obligations or securities by original subscription, and/or through markets
both primary, secondary or otherwise participation in syndicates, tender, purchase, (through any stock
exchange, OTC exchange Of privately), exchange or otherwise and to subscribe for the same whether or not
fully paid-up, either conditionally or otherwise, to guarantee the subscription thereof and to exercise and to
enforce all rights and powers conferred by or incidental to the ownership thereof and to advance, deposit or
lend money against securities and properties to or with any company, body corporate, firms, person or
association or without security and on such terms as may be determined from time to time. To engage in
Merchant Banking activities, Venture Capital, acquisitions, amalgamations and all related merchant banking
activities including loan Syndication.
•
To carry on the business as manufacturers, exporters, importers, contractors, sub-contractors, sellers, buyers,
lesser or lessees and agents for wind electric generators and turbines, hydro turbines, thermal turbines, solar
modules and components and parts including rotor blades, braking systems, tower, nacelle, control unit,
generators, etc. and to set up wind farms for the company and/or other singly or jointly and also to generate,
acquire by purchase in bulk, accumulate, sell distribute and supply electricity and other power (subject to and
in accordance with the laws in force from time to time);
•
To carry on business of an investment company or an Investment Trust Company, to undertake and transact
trust and agency investment, financial business, financiers and for the purpose to lend or invest money or
negotiate loans in any form or manner, to draw, accept , endorse, discount, buy, sell and deal in bills of
exchange, hundies, promissory notes and other negotiable instruments and securities and also to issue on
commission , to subscribe for, underwrite, take, acquire and hold, sell and exchange and deal in shares stocks,
bonds or debentures or securities of any Government or Public Authority or Company, gold and silver and
bullion and to form, promote, subsidize and assist companies, syndicates and partnership to promote and
finance industrial enterprises and also to give any guarantees for payment of money or performance of any
obligation or undertaking, to advances, loans and subscribe to the capital of industrial undertakings and to
undertake any business transaction or operation commonly carried on or undertaken by capitalists, promoters,
financiers and underwriters.
•
To act as investors, guarantors, underwriters and financers with the object of financing industrial enterprises,
to lend or deal with the money either with or without interest or security including in current or deposit
account with any bank or banks, other person or persons upon such terms, conditions and manner as may
from time to time be determined and to receive money on deposit or loan upon such terms and conditions as
the Company may approve. Provided that the Company shall not do any banking business as defined under
the Banking Regulations Act, 1949;
•
To act as investors, guarantors, underwriters and financiers with the object of financing industrial
enterprises, to lend or deal with the money either with or without interest or security including in current or
deposit account with any bank or banks, other person or persons upon such terms, conditions and manner
as may from time to time be determined and to receive money on deposit or loan upon such terms,
conditions and manner as may from time to time be determined and to receive money on deposit or loan
upon such terms and conditions as the Company may approve. Provided that the Company shall not do any
banking business as defined under the Banking Regulations Act, 1949.
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•
To carry on in India or elsewhere the business of consultancy services in various fields, such as, general,
administrative, commercial, financial, legal, economic, labour and industrial relations, public relations,
statistical, accountancy, taxation and other allied services, promoting, enhancing, propagating the activity of
investment in securities, tendering necessary services related thereto, advising the potential investors or
investment activities, acting as brokers, sub-brokers, investment consultant and to act as marketing agents,
general agents, sub-agents for individuals/bodies corporate/institutions for marketing of shares, securities,
stocks, bonds, fully convertibles debentures partly convertible debentures, Non-convertible debentures,
debenture stocks, warrants, certificates, premium notes, mortgages, obligations, inter corporate deposits, call
money deposits, public deposits, commercial papers, general insurance products, life insurance products and
other similar instruments whether issued by government, semi government, local authorities, public sector
undertakings, companies, corporations, co-operative societies, and other similar organisations at national and
international levels;
Key terms of our Material Agreements
KEY TERMS OF THE MATERIAL CONTRACTS
1.
Investor agreement dated May 13, 2008 between Western India Trustee and Executor Company
Limited, in its capacity as the trustee of India Advantage Fund – VI, (“Investor”) and Shriram City
Union Finance Limited, (“Company”), (“Investor Agreement”).
Pursuant to the Investor Agreement, the Investor has subscribed to 750,000 equity shares constituting
1.69% of the equity share capital of our Company post the preferential allotment of equity shares to the
Investor, certain other investors, Shriram Capital Limited and Shriram Enterprise Holding Limited, (“Post
Preferential Issue Equity Share Capital”) and warrants. The shares and the warrants subscribed by the
Investor in one or more tranches would, on a fully diluted basis, aggregate to 2.85% of the Post Preferential
Issue Equity Share Capital of our Company. The salient features of the Investor Agreement are as follows:
(a)
Investor rights:
(i)
Right to appoint independent director: The Investor has a right to appoint an independent director on the
Board of our Company, with mutual consent of our Company, as long as the shareholding of the Investor,
together with its affiliates equals to or exceeds 7% of the paid up equity share capital of our Company.
(ii)
Right to appoint observer: The Investor has a right to appoint an observer who will be entitled to attend any
and all of the meetings of the Board and the committees, as long as the shareholding of the Investor and its
affiliates is equal to or exceeds 7% of the paid up equity share capital of our Company.
(iii)
Pre-emptive right on further issues of capital: If our Company should undertake a further issue of equity
shares or any other instrument convertible to equity shares, the Investor is entitled to be offered equity
shares in a manner so as to enable the Investor to maintain its shareholding percentage in our Company at
the same level as it had prior to such further issue. This right is available to the Investor as long as the
shareholding of the Investor and its affiliates is equal to or exceeds 5% of the paid up equity share capital
of our Company.
(iv)
Information Rights: Customary information rights are available to the Investor as long as the shareholding
of the Investor together with its affiliates in our Company is equal to or exceeds 7% of the paid up equity
share capital of our Company. If the shareholding of the Investor, together with its affiliates in our
Company falls below 7% of the paid up equity share capital of our Company and thereafter the Investor or
its affiliates acquire additional shares of our Company so as to take the shareholding of the Investor in our
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Company equal to or more than 7% of the paid up equity share capital of our Company, the information
rights will no longer be available to the Investor.
(b)
Investor not considered to be promoters: The Investor is merely a financial investor in our Company.
Our Company shall take all actions to ensure that the Investor shall not be considered or classified to be a
promoter or any ‘person acting in concert’ of the promoter of our Company. The Investor is not in control
of our Company.
(c)
Term and Termination: The Agreement may be terminated and the transactions contemplated by the
Agreement may be abandoned if closing does not take place on or before such time as mutually agreed to
between the parties. . Either party may terminate this Investment Agreement any time before the date on
which closing shall have taken place in the event that the other party commits a breach of its obligations
under this Investment Agreement and such breach is not remedied by the defaulting party within 60 days of
notice of such breach.
This Agreement shall terminate in the event that the shareholding of the Investor in our Company (which
includes warrants on a fully diluted basis and shares purchased by the Investor in an open market) and its
affiliates falls below 5% of the paid up share capital of our Company.
(d)
Governing Law: Indian Law.
(e)
Dispute Resolution: Arbitration will be carried out in accordance with the Arbitration and Conciliation
Act, 1996 and the place of arbitration is Mumbai. All proceedings will be conducted in English Language.
2.
Investor agreement dated May 12, 2008 between Bessemer Ventures Partners, (“Investor”) and
Shriram City Union Finance Limited, (“Company”), (“Investor Agreement”)
Pursuant to the Investor Agreement, the Investor has subscribed to 12,50,000 equity shares constituting
2.81% of the equity share capital of our Company post the preferential allotment of equity shares to the
Investor, certain other investors, Shriram Capital Limited and Shriram Enterprise Holding Limited, (“Post
Preferential Issue Equity Share Capital”) and 12,50,000 warrants each convertible to one equity share of
our Company. The shares and the warrants subscribed by the Investor in one or more tranches would, on a
fully diluted basis, aggregate to 4.75% of the Post Preferential Issue Equity Share Capital of our Company.
The salient features of the Investor Agreement are as follows:
(a)
Investor Rights:
(i)
Right to appoint observer: The Investor has a right to appoint an observer to the Board.
(ii)
Pre-emptive right on further issues of capital: If our Company should undertake any further issue of equity
shares and/or any other instrument convertible into equity shares, the Investor is entitled to be offered such
equity shares and/or other instruments on the same terms as the proposed issuance so as to enable to the
Investor to maintain its shareholding in our Company at the same level as it had prior to such further issue.
This right is available to the Investor as long as the shareholding of the Investor in our Company is more
than 5% of the paid up equity share capital of our Company.
(iii)
Information rights: As long as the shareholding of the Investor is more than 7% of the paid-up equity share
capital of our Company, the Investor is entitled to customary information rights as set out in the Investor
Agreement. In the event that the shareholding of the Investor falls below 7%, and thereafter the Investor
acquires additional shares of our Company so as to take the shareholding of the Investor in our Company to
more than 7%, the information rights will no longer be available to the Investor. However, notwithstanding
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the information rights of the Investor, our Company shall publish any unpublished price sensitive
information before providing it to the Investor and the Investor agrees that these information rights shall
remain suspended during the time the Board withholds the publication of such price sensitive information.
(b)
Investor not to be considered Promoters: The Investor is merely a financial investor in our Company.
Our Company shall take all actions to ensure that the Investor is not considered or classified to be a
‘promoter’ of our Company or as a person acting in concert with the promoter of our Company. The
Investor is not in control of our Company and the investment by the Investor is purely financial in nature.
(c)
Non termination of arrangements with connected persons: Our Company is required to seek prior
written consent of the Investor before terminating any of its material contracts or arrangements with such
persons described as ‘connected persons’ in the Investment Agreement, in relation to sharing of
infrastructure or facilities.
(d)
Term and termination: Either party has the right to terminate this Agreement any time before the date on
which closing shall have taken place due to a breach of the covenants of this Investment Agreement. In the
event the shareholding of the Investor (which shall include warrants on a fully diluted basis and any
purchase by the Investor of the shares of our Company in an open market) and its affiliates fall below 5%
of the paid up share capital of our Company this Investment Agreement shall terminate.
(e)
Governing law: Indian law
(f)
Dispute resolution: Arbitration will be carried out in accordance with the Arbitration and Conciliation Act,
1996 and the place of arbitration is Mumbai. All proceedings will be conducted in English Language.
3.
Investment agreement dated May 9, 2008 between Asiabridge Fund I LLC, (“Investor”) and Shriram
City Union Finance Limited, (“Company”), (“Investment Agreement”)
Pursuant to the Investor Agreement, the Investor has subscribed to 5,87,500 equity shares constituting
1.32% of the equity share capital of our Company post the preferential allotment of equity shares to the
Investor, certain other investors, Shriram Capital Limited and Shriram Enterprise Holding Limited, (“Post
Preferential Issue Equity Share Capital”) and 5,87,500 warrants each convertible to one equity share of
our Company. The shares and the warrants subscribed by the Investor in one or more tranches would, on a
fully diluted basis, aggregate to 2.23% of the Post Preferential Issue Equity Share Capital of our Company.
The salient features of the Investor Agreement are as follows:
(a)
Investor Rights:
(i)
More favourable rights: Our Company shall not grant to the shareholders who may invest in our Company
in the future (“New Investors”), any terms which are more favourable than that of the existing Investors, so
long as the New Investors are at par or less than 2.23% of the shareholding in our Company.
(ii)
Information Rights: The Investor is entitled to customary information rights as set out in the Investor
Agreement. In the event any information rights are provided to other investors participating in the
preferential allotment, the same rights shall be provided to the Investors.
(b)
Investor not to be considered as promoters: The Investor is merely a financial investor in our Company.
Our Company shall take actions to ensure that the Investor shall not be considered/classified to be a
‘promoter’ of our Company or any ‘person acting in concert’ with the promoter of our Company. The
Investor is not in control of our Company and the investment by the Investor is purely financial in nature.
104
(c)
Term and termination: Either party has the right to terminate this Agreement any time before the date on
which closing shall have taken place due to a breach of the covenants by the opposite party of this
Investment Agreement.
(d)
Governing Law: Indian Law
(g)
Dispute Resolution: Arbitration will be in accordance with the Arbitration and Conciliation Act, 1996, and
the place of arbitration is Mumbai. All proceedings will be conducted in English Language.
4.
Investment agreement dated December 26, 2006 between Van Gogh Limited, (“Investor”) and
Shriram City Union Finance Limited, (“Company”), (“Investment Agreement”) as amended by the
Subscription and Amendment Agreement dated May 12, 2008 between the Investor and our
Company, (“Amendment Agreement”)
Pursuant to the Investment Agreement, our Company has issued and allotted 40,00,000 equity shares, to the
Investor in one or more tranches aggregating to 10.23% of the equity share capital of our Company, post
the preferential allotment of equity shares to the Investor and other financial investors investing in the
equity shares of our Company (“Other New Investors-I”)pursuant to the resolution passed under the extraordinary general meeting dated December 18, 2006, of our Company (“Post Preferential Issue Equity
Share Capital-I”).
Pursuant to the Amendment Agreement our Company has further issued and allotted to the Investor,
6,62,500 equity shares constituting 1.5% of the equity share capital of our Company post the preferential
allotment of equity shares to the Investor, Other New Investors-I and other financial investors investing in
the equity shares of our Company (“Other New Investors – II”) pursuant to the preferential allotment
under the extra-ordinary general meeting resolution dated May 3, 2008. Further, pursuant to the
Amendment Agreement, our Company has issued and allotted 6,62,500 warrants to the Investor which
represent a right to apply for an aggregate of 6,62,500 equity shares of our Company(adjusted for any
bonus issues, share splits, share consolidation or reduction of capital of our Company).
The salient features of the Investment Agreement and the Amendment Agreement are as follows:
(a)
Indemnities: Our Company will indemnify (i) the Investor and its affiliates (entities which are either
controlled, in control of or in common control with the Investor) and employees and (ii) the Investor Group
(as described in the Investment Agreement), against any losses arising out of misrepresentations or breach
of any warranty, costs and expenses incurred by the Investors in respect of any claim.
(b)
Board of Directors: Our Company, the Investor and Other New Investors – I will jointly agree on a panel
of six independent directors out of which three will be appointed by our Company for a period of five years
and will not be eligible to retire by rotation. The Investor also has a right to appoint an observer who is
entitled to attend any and all Board meetings.
(c)
Reserved matters: Our Company is required to seek consent from the Investor before passing any
resolution or taking any decisions with respect to a reserved matter. Reserved matters include approval of
an annual business plan/operating budget; any material deviations from the approved business plan;
entering into or modifying transactions with connected persons/concerns; making investments or acquiring
shares exceeding ` 5 crore; transfer or disposal of any material part of our Company’s business; changes in
the memorandum or articles of association of our Company; issue of new shares or convertible instruments
(except in a case where the Investor has not exercised the pre-emptive rights offered to the Investor); any
change in the class rights, preferences and privileges of shareholders (including common equity, preference
shares and other convertible instruments); voluntary delisting of the shares; any material change in the
nature of business of our Company or commencement of a new line of business or entering into any joint
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venture, partnership or consortium arrangement; passing any resolution or taking any steps to have our
Company wound up, liquidated or to dissolve our Company, including taking steps to effect a
recapitalization, reclassification, split-off, spin-off or bankruptcy of our Company; undertaking a merger,
amalgamation, demerger, spin-off, consolidation of or by our Company or an acquisition of another
company; to mortgage, pledge, hypothecate, grant security interest in, subject to any lien, any business or
assets of our Company; appointment of the independent director and director appointed at the suggestion of
the Other New Investors and Other New Investors - II; approval of any employee stock option scheme or
employee stock purchase scheme; any change in the name of our Company; and any commitment or
agreement to do any of the foregoing;
(d)
Further Issue of Shares: In the event that our Company issues any further shares or other warrants,
convertible instruments, or any options or any appreciation rights and other securities convertible into
securities or otherwise to any person, (“Fresh Offering”) the following shall be applicable vis-à-vis the
Investor.
(i)
In case of a preferential issue: Our Company will offer such number of securities to the Investor, Other
New Investors-I and Other New Investors – II in the Fresh Offering, which is equal to their shareholding in
our Company prior to such Fresh Offering on the same terms as that of the Fresh Offering.
If any of the Other New Investors-I and the Other New Investors – II decline to subscribe to their portion of
the securities so offered, then such declined securities shall be offered proportionately to the Investor and
the non-declining Other New Investors-I and the non-declining Other New Investors – II in proportion to
their respective shareholding percentage prior to the Fresh Offering in our Company, on the same terms as
the proposed Fresh Offering.
(ii)
In case of a rights issue: If a whole or a part of the rights issue remains unsubscribed then the unsubscribed
portion of the securities shall be proportionately offered to the Investor, the Other New Investors-I and the
Other New Investors – II on the same terms as the proposed rights issue. Provided that, if any of the Other
New Investors-I, the Other New Investors – II decline to subscribe such securities, our Company shall offer
such securities proportionately to the Investor, Other New Investor-I and the Other New Investor- II on the
same terms as the proposed rights issue.
(e)
Investor not to be considered as Promoter: The Investor is merely a financial investor in our Company.
Our Company shall ensure that the Investor is not classified or considered to be a ‘promoter’ or a ‘person
acting in concert’ with the promoter of our Company. The Investor is not in control of our Company and
the investment by the Investor is purely financial in nature.
(f)
Term and Termination: The rights of the Investor in connection with reserved matters stand terminated
upon the dilution threshold of the Investor (calculated as per the Amendment Agreement) falls below 7% as
a result of the Investor selling any of the Investor’s shares or failing to exercise their pre-emptive rights at
the time of a further issue. The rights of the Investor in connection with further issue of shares stand
terminated upon the dilution threshold falling below 5% unless the same is caused due to securities not
being offered to the Investor in accordance with the Investor’s pre-emptive right.
5.
Share subscription agreement dated September 12, 2008 between (i) Mr. R. Thyagarajan, Mr. T
Jayaraman, Shriram Capital Limited and Shriram Ownership Trust acting through its trustees Mr.
R. Thyagarajan, Mr. Arun Duggal, Mr. D.A Prasanna, Mr. R. Kannan and Mr. D.V Ravi
(collectively known as the “Founders”) and (ii) TPG India Investments I, Inc. (the “Investor”) and
(iii) Shriram Retail Holdings Private Limited (“SRHPL”), and (iv) Shriram Enterprises Holdings
Private Limited (“SRHPL”) and Shriram City Union Finance Limited (“Company”), (“Agreement”).
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Pursuant to the Agreement, the Investor has subscribed to 1,306,700 shares and 1,538,278 warrants of
SRHPL. Upon allotment of shares by SRHPL, the Investor shall hold 39.0% equivalent to 1,306,700 shares
of SRHPL. The salient features of the agreement are as follows:
(a)
Non-Compete: As long as the Investor directly or indirectly holds no less than 5% beneficial interest in
the paid up share capital of our Company, whether through SRHPL, SEHPL or directly in our Company,
neither the Founders nor any of their affiliates may work for, associate with or conduct business as a
competitor of the Company or any future direct or indirect subsidiaries of the Company (directly or
indirectly).
Regardless of the beneficial interest of the Investor in our Company, (whether through SRHPL, SEHPL or
directly in our Company), the Founders shall not, directly or indirectly, work for or associate in any way
(including but not limited to as proprietor, shareholder, partner or director) with, or conduct business as, a
competitor of our Company or any of its future direct or indirect subsidiaries for a period of five years from
the later of (a) the date on which the Founders cease to have the right to appoint or nominate any Directors
to the Board of all the Companies or (b) the date on which the Founders (taken together) cease to directly
or indirectly hold at least 5% beneficial interest in the paid up share capital of the Company, whether
through SRHPL, SEHPL or directly in our Company.
(b)
Lock in and Restrictions on Transfer: For a period of three years from the date of closing, the Founders
shall not directly or indirectly effect or permit any transfer of shares of our Company, SEHPL or SRHPL or
warrants issued by our Company to any person including the lenders of our Company, except with the prior
written consent of the Investors. Such restrictions
The restrictions for transfer of shares shall not apply to any inter-se transfer between the Promoter and their
affiliates, provided that such affiliate signs a deed of adherence. The Founders may seek to create a pledge,
lien or charge over the shares held by SRHPL and SEHPL and SRHPL upon completion of the merger of
SEHPL with SRHPL (as contemplated in the Agreement) in our Company as security for short term
borrowings which pledge, lien or charge shall be subject to the prior written consent of the Investor. The
restrictions contemplated herein shall not in any manner apply to the transfer of shares of Shriram Capital
Limited subject to it satisfying certain conditions as laid down in the Agreement.
(c)
Investor’s Right of First Refusal: Before transferring any of its shares and/or warrants in SCUFL and/or
SRHPL, the Founder shall give a notice of such intention to transfer such shares and warrants (“Transfer
Notice”) which inter-alia includes details of the offer price and the name of the proposed purchaser to the
Investor. If the Investor either fails to respond to the notice within 30 days or refuses to buy the shares, the
Founder may transfer such shares and/or warrants to any person on terms and conditions no less favourable
than indicated in the Transfer Notice.
(d)
Tag along rights: Tag along rights are provided for in the Agreement. In the event of a proposed transfer
of shares and/or warrants by the Investor or Founders to a third party, the transferring percentage will be
calculated and the non-transferring party is entitled to cause the proposed transferee to purchase such
number of shares and/or warrants held by the non-transferring party as equal to the transferring percentage
of the total number of shares and/or warrants held by the non-transferring party as on the date of the
proposed transfer. Transferring percentage means the ratio of the number of shares and/or warrants
proposed to be transferred by the transferring party and the total number of share and/or warrants held by
the transferring party.
(e)
Composition of the Board of Directors: Under the terms of the Agreement, the Board of our Company
shall constitute 12 (twelve) directors out of which (i) three directors shall be the nominee of the Investor;
(ii) three directors shall be the nominee of the Founders; (iii) one director shall be the nominee of IREDA;
(iv) four independent directors to be nominated by the following existing investors investment agreements
namely (a) Indopark Holdings Limited (b) CPIM Structured Credit Fund A 1500 Limited; (c) CPIM
Structured Credit Fund A 1000 Limited (d) CPIM Structured Credit Fund A 20 Limited (e) Van Gogh
Limited (f) Western India Trustee and Executor Company Limited. The Investor and Founders shall
mutually agree upon and identify one individual who shall be independent Director and who shall be the
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chairman of the Board. In the event that IREDA or any of the Existing Investors waive their right to
nominate an independent Director on the Board of the Companies or cease to be entitled to such right, the
resulting vacancy in the office of independent directors of the Companies shall be filled in accordance to
the terms of this Agreement. The Managing Director of the Companies shall be appointed by the Founders.
(f)
Quorum: The Chairman of the Board shall not have a casting vote. The quorum of any meeting of the
Board where any matter which requires the specific consent of the nominee(s) of the Investor or the
Founders or both in accordance with the provisions of the Agreement is to be taken up shall be in
accordance with applicable law, of which at least one Director shall be the nominee(s) of the Investor or the
Founders or both, as the case may be. The quorum of any meeting of the Board of Directors other than
those aforementioned shall be in accordance with the applicable law and shall comprise at least one
Director who shall be a nominee of the Investor and one Director who shall be a nominee of the Founders.
In the absence of such quorum, the meeting of the Board of Directors shall be reconvened after one week.
At such reconvened meeting, the quorum shall be in accordance with applicable law and shall not require
the presence of a nominee of the Investor and / or the Founders. However, it is clarified that at such
meeting of the Board of Directors, there will be no discussion and no vote on matters which require either
the specific consent of the nominee of the Investor or the Founders in terms of the Agreement. All
decisions at any meeting of the Board shall be in accordance with the vote of a simple majority save such
decisions which require the specific consent of the Founders or the Investor, as the case may be.
(g)
Fundamental Issues: Any action with respect to customary fundamental issues shall require the specific
consent of the shareholders of SRHPL and SEHPL by way of an extraordinary resolution and/or the
consent of the Investor’s and the Founders’ nominee on the Board or Committee thereof, as the case may
be.
(h)
Indemnification: Our Company and the Founders jointly and severally agree to indemnify the Investor in
case of any material breach arising from the agreement.
(i)
Investor not to be considered Founder/Promoter: The Founders will ensure that the Investor will not be
classified as ‘promoter’ of any of our Company or its subsidiaries and the shares and warrants allotted to
the Investor at the time of closing are not subject to lock-in or any other restriction, which are applicable to
the promoters. SRHPL, SEHPL and the Founders will be considered as ‘persons acting in concert’ with the
Investor solely for the purpose of the Agreement and the acquisition of shares contemplated therein.
(j)
Investor’s Right to Exit:
(i)
Right to sell or transfer shares: The Investor has the right to freely transfer the beneficial interest held by it
in SCUFL whether directly or through shares/warrants of SRHPL to any person including third parties. In
the event that the proposed transfer of such beneficial (direct or indirect) interest by the Investor is by way
of placement with other investors of a block of shares/warrants owned by the Investor, the SRHPL and
SEHPL shall take necessary steps (including access to information and records) to facilitate such transfer
by the Investor.
In the event of the block of shares/warrants proposed to be transferred by the Investor is:
•
less than 25% of the fully diluted percentage beneficial ownership held by the Investor in SCUFL (whether
directly or through SRHPL and SEHPL), the transfer of such shares and warrants by the Investor shall be
without any rights attached to such shares/warrants under this Agreement, subject to the transferee
executing a deed of adherence;
•
more than 25%, but less than 50% of the fully diluted percentage beneficial ownership held by the Investor
in SCUFL (whether directly or through SRHPL and SEHPL), the Investor shall be entitled to transfer such
shares and warrants along with the Tag-along rights, Information Rights, Right of registration and right to
nominate one director on the Board of Directors of SRHPL and SCUFL only, subject to the transferee
executing a deed of adherence;
•
more than 50% of the fully diluted percentage of beneficial ownership held by the Investor in SCUFL
(whether directly or through SRHPL and SEHPL), the Investor shall be entitled to transfer such shares and
warrants with all rights attached to such shares or warrants under this Agreement subject to the transferee
executing a deed of adherence.
108
(ii)
Roll down of beneficial ownership of SCUFL: Any time after the expiry of two years from the date of
closing, the Investor may require SRHPL to distribute the shares/warrants held by SRHPL in our Company
amongst the Founders and the Investor in proportion to their respective holdings in SRHPL. In the
alternative, the Investor may require the merger of SRHPL with our Company to effect such distribution
and the Founders agree to use their best efforts to effect such distribution.
(h)
Drag along Rights: The Investor has the right but not the obligation to require the Founders to sell all or
part of the any Shares or Warrants that the Founders hold in our Company and/or SRHPL. (Shares or
Warrants mean any shares and warrants held by the Founders or the Investor in our Company and/or
SRHPL, or any direct or indirect beneficial interest held by the Founders or the Investor in the shares and
warrants of our Company and/or SRHPL). The Investor may notify the Founders of its decision to exercise
this right by delivering a written notice (“Exit Notice”) to the Founders. The Founders may notify the name
of a proposed purchaser, (“Proposed Purchaser”), terms and conditions of the purchase, including the
price, (“Exit Price”), for the purchase of all but not part of the Shares and Warrants held by the Investor
within 30 days from the receipt of the Exit Notice.
The Investor may exercise its acceptance to sell all of its Shares and Warrants to the proposed purchaser
within 30 days of the receipt of the exit notice (“Acceptance Period”), by delivery of a written notice.
In the event the Investor, at its sole discretion, does not accept the offer for purchase, or the Investor has
failed to communicate its agreement to sell its Shares and Warrants to the proposed purchaser at the end of
the expiry of the Acceptance Period, the Investor may, within 180 days of the Acceptance Period, furnish a
written notice (“Drag Notice”) giving the name of a proposed buyer, (“Exit Buyer”), along with terms and
conditions including price offered by the Exit Buyer, (“Drag Price”) to purchase all or part of the Shares
and Warrants held by the Founders. The Drag Price shall not be less than the Exit Price and the fair market
value calculated as on the date of the Exit Notice.
Upon delivery of the Drag Notice, the Founders are required to transfer the Shares and Warrants as
required by the Drag Notice to the Exit Buyer, upon the same terms and conditions (including, the Drag
Price) as agreed by the Investor and the Exit Buyer. The Founder shall make representations, warranties,
covenants and agreements to the Exit Buyer comparable to those made by the Investor and shall agree to
the same conditions to the transfer as the Investor agrees. All such representations, warranties, covenants
and agreements shall be made by each Founder and Investor severally and not jointly
(i)
Consequences of a material breach: In the event of a material breach of the provisions of this Agreement,
the non-defaulting parties are entitled to the following rights if such material breach is not cured within 60
days of receipt of notice of such breach, (“Cure Period”) and the non-defaulting party has not been
compensated according to the provisions of the Agreement.
(i)
Put and Call Option: The non-defaulting party shall have the right to either require the defaulting party,
jointly and severally, to acquire any or all of the Shares and Warrants held by the non-defaulting party in
SRHPL (collectively, “Securities”) at a price equivalent to 12.5% of the fair market value of the Securities,
or cause the defaulting party to sell to the non-Defaulting party any or all of the Securities then held by the
defaulting party at a price equivalent of 75% of the fair market value of the securities. The aforesaid
premium or discount to the fair market value represents a reasonable assessment made by the defaulting
party and the non-defaulting party representing the size of the liquidated damages payable to the nondefaulting party owing to the breach on the part of the defaulting party.
Within 30 days from the expiry of the Cure Period, the non-defaulting party shall issue a notice, (“Options
Notice”) to the defaulting party setting out the details of the option proposed to be exercised by the nondefaulting party, number of shares and/or warrants in respect of which such option is proposed to be
exercised and the price of each share and/or warrant for such purpose. The sale or purchase of the Shares
and/or Warrants, pursuant to such Option Notice shall be completed within 30 days from the date of the
Option Notice.
109
(ii)
Merger of SCUFL with SRHPL: The non-defaulting party has the right to requisition the convening of an
extra-ordinary general meeting of the shareholders of our Company and SRHPL to effect and sanction the
merger of SCUFL and SRHPL. For the purpose of protecting the non-defaulting party’s rights under this
Agreement, SRHPL and the defaulting party shall vote in favour of any resolution at such meeting of the
shareholders of our Company and SRHPL to authorize, sanction or effect such merger.
(j)
Dispute Resolution: Arbitration in accordance with the Arbitration and Conciliation Act, 1996 and the
place of arbitration is Mumbai. Arbitration will be conducted in English Language.
(k)
Governing law: Indian Law.
6.
License Agreement dated April 1, 2010 between Shriram Ownership Trust, (“SOT”) and our
Company, (“License Agreement”):
Pursuant to the License Agreement, SOT granted license to use the non exclusive copyright, relating to the
existing artistic work “SHRIRAM” logo, (“Copyright”) assigned in the favour of SOT by Shriram Capital
Limited, to our Company and to reproduce the said work, in connection with the business activities of our
Company in the territory of India during the term of the Copyright. The salient terms of the License
Agreement are as follows:
(i)
Consideration: A royalty of 0.25% on the gross turnover of our Company for the first year of the License
Agreement will be paid by our Company to SOT. Royalty rates for the subsequent years will be decided
mutually on or before April 1st of the respective financial years. Royalty will be paid by our Company to
SOT with quarterly rates ending on June 30th, September 30th, December 31st and March 31st with effect
from date of the License Agreement. Along with the royalty, our Company will also pay to SOT amounts
by way of reimbursement of actual expenses incurred by SOT in respect of protection and defence of the
Copyright.
(ii)
Duration: The License Agreement will remain in force for a period of three years and can be renewed
thereafter by mutual consent. SOT may terminate the agreement if our Company breaches the provisions of
the License Agreement and fails to remedy such breach within 60 days of notice of such breach.
(iii)
Arbitration: In case of dispute or difference arising between the SOT and our Company shall be referred to
an arbitrator decided on a mutual consent and the decision of the arbitrator is final and binding on both the
parties. The place of arbitration shall be in Chennai.
110
OUR MANAGEMENT
Board of Directors
The general superintendence, direction and management of our affairs and business are vested in our Board of
Directors. Currently, we have 12 Directors on our Board.
Details relating to Directors
Name, Designation,
Age and DIN
Mr. Arun Duggal
Non Executive NonIndependent
Chairman
Age: 64
Nationality
Date of
Appointment
Indian/Unite May 25, 2007
d States of
America
(Dual
citizenship
holder)
Address
A-4, 3rd Floor
West-End Colony
New Delhi- 110 021
DIN: 00024262
Mr. R. Kannan
Managing Director
Indian
Age:66
DIN: 00140363
Indian
Mr. Mukund
Govind Diwan
Non Executive
Independent Director
Age:79
DIN:00001097
Other Directorships
(i)
(ii)
(iii)
Zuari Industries Limited;
Patni Computers Systems Limited;
Ecron Acunova Limited ( Name
change from Manipal Acunova
Limited);
(iv) Info Edge (India) Limited ;
(v) Jubiliant Energy N.V, Canada;
(vi) Shriram Properties Limited;
(vii) Dish TV India Limited;
(viii) Shriram
Transport
Finance
Company Limited;
(ix) Mundra
Port
and
Special
Economic Zone Limited;
(x) Shriram EPC Limited;
(xi) Motrice Limited, Singapore;
(xii) FIL Fund Management Private
Limited;
(xiii) Carzonrent (India) Private Limited;
(xiv) The Bellwether Microfinance Fund
Private Limited;
(xv) International Asset Reconstruction
Company Private Limited;
(xvi) Blackstone Investment Company
Private Limited;
(xvii) Tanglewood Financial Advisors
Private Limited;
(xviii) Shriram Capital Limited; and
(xix) Jubiliant Energy N.V, Netherlands
September 15, No. 20/32, 2nd Floor (i)
2005
SA-1 Abirami Camelia,
4th
Main
Road (ii)
Kasturbai
Nagar
Adyar, Chennai- 600 (iii)
020
Shriram
Properties
and
Constructions (Chennai) Limited;
Shriram Permanent Fund Limited;
and
Shriram Entrepreneurial Ventures
Limited
June 15, 2007
Indian Institute of Public Opinions
Private Limited;
DS Acturial Education Services
Private Limited;
VLS Finance Limited;
G M Breweries Limited;
Marketing Research Corporation of
India Limited
Shriram
Chits
(Maharashtra)
Flat No. 3, Gulmohar
Building, 1st Floor, Vile
Parle Kalpataru Cooperative
Housing
Society, off. Swami
Vivekanand Road, Vile
Parle (West), Mumbai400 056
(i)
(ii)
(iii)
(iv)
(v)
(vi)
111
Name, Designation,
Age and DIN
Nationality
Date of
Appointment
Address
Other Directorships
Limited; and
(vii) GDA Trustee
Limited
Mr.
S. Indian
Krishnamurthy
Non
Executive
Independent Director
April 28, 2005
Age:72
Flat No. 2/B 2nd Floor, (i)
SPL Uma Apartments, (ii)
Old No. 169 New No. (iii)
34 Luz Church Road
Mylapore, Chennai 600 004
and
Consultancy
Kerela Ayurveda Limited;
Take Solutions Limited; and
Shriram EPC Limited
DIN: 00140414
Indian
Mr. Vipen Kapur
Non
Executive
Independent Director
June 15, 2007
(i)
Maxima Global Executive and
Search Singapore PTE Limited
(i)
(ii)
Galada Finance Limited;
Shriram
Transport
Finance
Company Limited;
Shriram Housing Finance &
Development Company Limited;
Novochem Laboratories Limited;
Madras Shoe Fabric Company
Limited;
Shriram Credit Company Limited;
Shriram Trade Finance Company
Limited;
Shriram
Industrial
Holdings
Private Limited;
Shriram Exports Private Limited;
Ranjani
Enterprises
Private
Limited;
Charukesi
Investments
PrivateLimited;
Road Safety Club Private Limited;
Rambal Properties Private Limited;
Shriram Investments Holdings
Limited
Shriram
Overseas
Investment
Private
Limited
(Formerly
Dhanashri Investments Private
Limited) and
Celindia Finance And Investment
Company Private Limited
No. A1-1201
World SPA,
Sector - 41,
Gurgaon - 122002
Age:65
DIN: 01623192
Mr.
S. Indian
Venkatkrishanan
Non Executive NonIndependent Director
July 28, 2000
34, Oliver Road,
Mylapore,
Chennai ,
600 004
Age:81
(iii)
(iv)
(v)
DIN: 00136608
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
Mr. Ranvir Dewan
Non-Executive Non Citizen of
Independent Director Singapore
December 1,
2010
(i)
41, Ewe Boon Road
#11/41, Crystal Tower (ii)
Singapore - 259335
112
PT Bank Tabunean Pensiunan
Nasional (Indonesia); and
Shriram
Transport
Finance
Company Limited
Name, Designation,
Age and DIN
Age; 57
Nationality
Date of
Appointment
Address
Other Directorships
DIN: 01254350
Indian
Mr.K.R.
Ramamoorthy
Non-Executive
Independent Director
December
2010
1, D-302M
Mantri (i)
Garden,
Madhavan
Park, Jayanagar
(ii)
I-Block,
Bangalore
(iii)
Karnataka-560 011
(iv)
Age:70
DIN:00058467
Ms.
Lakshmi Indian
Pranesh
Non-Executive
Independent Director
December 1,
2010
FIL Trustee Company Private
Limited;
Ujjivan Financial Services Private
Limited;
GMR Power Corporation Private
Limited;
GMR
AmbalaChandigarh
Expressways Private Limited;
(v) The Clearing Corporation of India
Limited;
(vi) Subros Limited;
(vii) Nilkamal Plastics Limited;
(viii) Amrit Corp. Limited;
(ix) GMR Infrastructure Limited and;
(x) Clear Corp Dealing Systems (India)
Limited;
Old 48, New 30, Nil
Rukmani
Road
Kalakshetra
Colony
Besant Nagar, Chennai
Tamil Nadu -600 090
Age: 66
DIN: 03333412
Indian
Mr. Puneet Bhatia
Non-executive NonIndependent Director
December 1,
2010
Age:44
DIN: 00143973
Mr.
G.
Sundararajan
S. Indian
Non Executive NonIndependent Director
December 31, A2, Ashok Tejashvi,
2009
New No. 7, Fourth
Cross Street, R. A.
Puram, Chennai – 600
028
Age: 51
DIN: 00361030
Mr. Sunil Varma
Non
Executive
Independent Director
Age: 67
Indian
(i)
214B
Aralias (ii)
Apartments, DLF
PH-V, Old Golf Club (iii)
Gurgaon - 122009
(iv)
(v)
August
2007
TPG Capital India Private Limited;
Shriram Transport Finance
Company;
Shriram Holdings (Madras) Private
Limited
Shriram Capital Limited
Shriram Properties Limited
(i) Shriram Capital Limited;;
(ii) Shriram Credit Company Limited;
(iii) Shriram
General
Insurance
Company Limited;
(iv) Vistaar Livelihood
Financial
Services Private Limited and
(v) Shriram Life Insurance Company
Limited;
(vi)
17, 104
Aradhana (i) International Asset Reconstruction
Apartments
Company Private Limited
R.K.Puram
Sec-13, (ii) Vistaar
Livelihood
Financial
New Delhi- 110 066
Services Private Limited and
(iii) Shriram EPC Limited
DIN: 01020611
113
Profile of Directors
Profile of Directors
Mr. Arun Duggal - Chairman
Mr. Arun Duggal is the non-executive Chairman of our Board. Mr. Duggal holds a Bachelor’s degree in Mechanical
Engineering from the Indian Institute of Technology, Delhi and a Master’s degree in Business Administration from
the Indian Institute of Management, Ahmedabad. Mr. Duggal is an experienced international banker and has an
experience of approximately 33 years in the banking and finance industry. He has advised companies on financial
strategy, mergers and acquisitions and on various means of raising capital.
He serves on the Board of Directors of Jubiliant Energy. Netherlands (Chairman of Audit Committee), Patni
Computers (Chairman of Audit Committee), Fidelity Fund Management, Ecron Acunova, Zuari Industries, Info
Edge (Chairman of Audit Committee), Dish TV, Mundra Port, Motrice Limited (Singapore) (Chairman of Audit
Committee), Shriram City Union Finance Limited, Shriram Capital Limited and others. He is also a member of the
Investment Committee of Axis Private Equity. He had a distinguished career with Bank of America for 26 years in
the US, Hong Kong, Japan, Philippines, etc. He was the Chief Executive of Bank of America in India from 1998 to
2001.
Currently, he is a visiting faculty at the Indian Institute of Management, Ahmedabad and teaching Venture Capital.
Mr. R. Kannan- Managing Director
Mr. R. Kannan holds a degree in Bachelors in Arts from University of Madras. Mr. Kannan has approximately 50 years
of experience in the banking and finance industry.
He serves on the board of directors of Shriram Properties & Constructions (Chennai) Limited, Shriram Permanent Fund
Limited and Shriram Entreprenuerial Ventures Limited.
Mr. Mukund G. Diwan
Mr. Mukund G. Diwan holds a masters degree in Statistics from University of Mumbai, and is a fellow member of the
Institution of Actuaries, London (FIA) and the Institute of Actuaries of India. Mr. Diwan has a wide experience in the
insurance industry and expertise in carrying out Management and Actuarial consultant assignments. He has served as a
Chairman of the Life Insurance Corporation of India (LIC) and is working as a consulting actuary in the areas of life
insurance, general insurance and retirement benefits.
He serves on the Boards of VLS Finance Limited, G.M. Breweries Limited, Marketing Research Corporation of India
Limited, Sriram Chits (Maharashtra) Limited, GDA Trustee & Consultancy Limited, Indian Institute of Public Opinion
Private Limited, DS Actual Education Services Private Limited and a partner in K.A. Pandit (Consulting Actuaries).
Currently he is appointed as an Actuary for LIC, Nepal; LIC, Sri Lanka and a few companies in the Gulf.
Mr. S. Krishnamurthy
Mr. S. Krishnamurthy holds a Master’s Degree in labor management and post graduate diploma in Industrial Relations
and Personnel Management from Madurai Kamaraj University and Personnel Management (IR&PM).. He is also a
certified Associate of the Indian Institute of Bankers with a Bachelors Degree in General Laws from University of
Mysore.
Mr. Krishnamurthy is a senior banker with experience of approximately 40 years with the Reserve Bank of India and
commercial banks. He was the chairman and chief executive officer of Tamil Nadu Mercantile Bank, Tuticorin for a
114
period of 5 years and also served as General Manager (Vigilance & Inspection/Audit) with Indian Overseas Bank,
Chennai for a period of 5 years. He was Banking Ombudsman, Chennai for a period of approximately 2 years.
He serves on the Board of Kerala Ayurveda Limited, Take Solutions Limited and Sriram EPC Limited.
Mr. Vipen Kapur
Mr. Vipen Kapur holds bachelors degree in Commerce from University of Madras and is an Associate of the Institute
of Bankers, London. He has wide experience in the international banking sector and has served in various departments
of the Standard Chartered (erstwhile Grindlays Bank). Mr. Kapur was the chief operations officer at the Al Rushiad
Group in Saudi Arabia, Managing Director of Sinar Mas Group of Indonesia and President and chief executive officer
of New Quest Corporation Private Limited.
Mr. Kapur is the author of “Power through people and principles”, published by Tata Mcgraw Hill, which won the
Best Book Award by Indian Society for Training and Development in the year 2001.
He serves on the Board of Maxima Global Executive Search Singapore Pte. Limited.
Mr. S. Venkatakrishnan
Mr. S. Venkatakrishnan is a Non-executive Director on our Board. He is a post graduate in Mathematics from Madras
University and is also a member of the Indian Audit and Accounts Service, Government of India, where he has held
senior positions in the Finance, Audit & Accounts department of the Government and other Public Undertakings. He
also functioned as BIFR Director in several companies for a period of five years.
He serves on the Board of Shriram Transport Finance Company Limited, Shriram Industrial Holdings Private Limited,
Shriram Exports Private limited, Dhanasri Investments Private Limited, Shriram Housing Finance and Development
Company Limited, Sriram Credit Company, Shriram Trade Finance Company Limited, Sriram Investments Holdings
Limited and others.
Mr. Ranvir Dewan
Mr. Ranvir Dewan is a Non-Executive Director on our Board. Mr. Dewan holds bachelors degree in Commerce (Hons)
from Shriram College of Commerce, Delhi University, India. He is a fellow member of the Institute of Chartered
Accountants in England & Wales (FCA) and a member of the Canadian Institute of Chartered Accountants (CA). He
has over 30 years of experience in the finance and investment sector. Mr. Dewan joined TPG-Newbridge Capital in
July 2006 and is currently the Head of Financial Institutions Group Operations. Previously, he was Executive Vice
President and Chief Financial Officer of Standard Chartered First Bank in Seoul, Korea. He has also spent over thirteen
years at Citibank in various senior positions in its international businesses. In his previous assignment, he was Vice
President and Regional Financial Controller of Citibank’s Global Consumer Bank with responsibilities covering 11
countries in the Asia Pacific region. He has also held senior positions with KPMG in Canada and England where he
specialized in the audits of financial institutions.
Mr. Dewan serves on the Boards of Shriram Transport Finance Company Limited in Chennai, India and PT Bank
Tabunean Pensiunan Nasional Tbp (“BTPN”) in Jakarta, Indonesia and is a member of the Audit and Risk Committees
of Bank BTPN. Mr. Dewan is an advisor of Taishin Financial Holdings.
Mr. K. R. Ramamoorthy
Mr. K.R. Ramamoorthy holds a Bachelors degree in Economics and Law from University of Delhi and is a senior
Fellow member of the Institute of Company Secretaries of India. Mr. Ramamoorthy is a senior banker with
approximately 40 years of commercial and banking experience in India. He has served as the Chairman and Managing
Director of Corporation Bank and the Chairman and CEO of ING Vysya Bank.
Mr. Ramamoorthy has served on various committees including those constituted by the Reserve Bank of India, SEBI
and the Indian Banks Association. He has also served as Convener, Economic Affairs Panel, Confederation of Indian
Industry (CII), Karnataka.
115
He serves on the Board of the Clearing Corporation of India Limited, Subros Limited, Amrit Corp. Limited, GMR
Infrastructure Limited, , ClearCorp Dealings Systems (India) Limited, FIL Trustee Company Private Limited, Ujjivan
Financial Services Private Limited, GMR Power Corporation Private Limited and GMR Ambala-Chandigarh
Expressways Private Limited.
Mrs. Lakshmi Pranesh
Mrs. Lakshmi Pranesh holds a bachelors and a master’s degree in Mathematics from the University of Madras. She is
an ex-officer of the Indian Administrative Services (I.A.S.). She retired as Chief Secretary to the Government of Tamil
Nadu in the year 2005. She has served as a government nominated director in many corporations in the public sector
viz. the Tamil Nadu Industrial Development Corporation, Small Industries Development Corporation, Police Housing
Corporation and Agro-Industries Corporation.
Presently she does not hold directorships in any other company.
Mr. Puneet Bhatia
Mr. Puneet Bhatia is Managing Director and Country Head - India for TPG Asia. Prior to joining TPG Asia in April
2002, Mr. Bhatia was Chief Executive, Private Equity Group for GE Capital India (“GE Capital”), where he was
responsible for conceptualizing and creating its direct and strategic private equity investment group. As Chief
Executive, he handled a portfolio of almost a dozen companies including TCS, Patni Computers, BirlaSoft, Sierra
Atlantic, iGate, Indus Software and Rediff. He was also responsible for consummating some of GE Capital’s joint
ventures in India. Prior to this, Mr. Bhatia was with ICICI Bank Limited from 1990 to 1995 in the Project and
Corporate Finance group and thereafter worked as Senior Analyst with Crosby Securities from 1995 to 1996
covering the automobiles and consumer sectors. Mr. Bhatia is a native of and is based in India and currently serves
as Director on the Board of Shriram Transport Finance Company Limited, TPG Capital India Private Limited,
Shriram Holdings (Madras) Private Limited, Shriram Capital Limited and Shriram Properties Limited . Mr. Bhatia
has a B.Com Honors degree from the Sriram College of Commerce, Delhi and an M.B.A. from the Indian Institute
of Management, Calcutta.
Mr. G.S. Sundararajan
Mr. G.S. Sundararajan holds a bachelors degree in engineering from College of Agricultural Engineering, Tamil Nadu
Agricultural University, Coimbatore and a post graduate diploma in management from the Indian Institute of
Management, Ahmedabad. Mr. Sundararajan has served as the Managing Director and head of Citibank SME & Asset
Based Finance business in India and as the Managing Director of Fullerton India Credit Company Limited.
He is also the Managing Director of Shriram Capital Limited, and serves on the boards of Shriram Credit Company
Limited, Shriram General Insurance Company Limited, Shriram Life Insurance Company Limited and Vistaar
Livelihood Financial Services Private Limited.
Mr. Sunil Varma
Mr. Sunil Varma is a fellow member of the Institute of Chartered Accountants of India and the Institute of Cost &
Management Accountants India. He also holds a Bachelor’s degree in Arts (Maths and Economics) from Punjab
University. Mr. Varma has consulting experience of approximately 30 years with Price Waterhouse Management
Consultants and the IBM Consulting group in India and overseas. He has also worked as a CFO in HCL Perot Systems
and MD Asia online Limited Hong Kong.
He has advised companies on corporate governance, financial management, organizational strengthening, efficiency
improvements, process re-engineering and business systems.
He serves on the Board of Sriram EPC Limited, International Asset Reconstruction Company Private Limited and
Vistaar Livelihood Financial Services Private Limited.
116
Remuneration of the Directors
The independent directors are paid sitting fees for attending the various meetings of the Board and of the
Committees of the Board as under:
Meeting
Overall limit per Director (`)
Meetings of the Board
Meetings of any committee of the Board
15,000
10,000
Appointment and Remuneration of the Managing Director
Mr. R. Kannan has been appointed as the managing director of our Company for period of three (3) years with effect
from September 15, 2010, pursuant to a resolution of the shareholders of our Company passed at their AGM held on
July 30, 2010. Currently no remuneration is payable to our managing director as consented by him and authorised by
an ordinary resolution passed by the shareholders of our Company at their general meeting held on July 30, 2010.
Other terms of appointment of our Managing Director are as follows:
1.
The Managing Director shall not be paid any sitting fees for attending General Meetings and Meetings of
the Board or Committee thereof.
2.
The Board may revise the existing or allow any other facilities/perquisites from time to time, within overall
ceiling limits.
3.
The Managing Director is not liable to retire by rotation.
For further details refer to the section titled “Material Contracts and Documents for Inspection” beginning on page
192 this Prospectus.
Borrowing Powers of the Board
Pursuant to resolution passed by the shareholders of our Company at their AGM held on July 28, 2011, and in
accordance with provisions of Section 293 (1)(d) of the Act, the Board has been authorised to borrow sums of
money as they may deem necessary for the purpose of the business of our Company upon such terms and conditions
and with or without security as the Board of Directors may think fit, provided that money or monies to be borrowed
together with the monies already borrowed by our Company (apart from temporary loans obtained and/or to be
obtained from the Company’s bankers in the ordinary course of business) shall not exceed ` 15,00,000 lakhs.
Interest of the Directors
All the directors of our Company, including our independent directors, may be deemed to be interested to the
extent of fees, if any, payable to them for attending meetings of the board or a committee thereof as well as to the
extent of other remuneration and reimbursement of expenses payable to them. All the non-executive independent
directors of our Company are entitled to sitting fees for every meeting of the board or a committee thereof. The
managing director of our Company is interested to the extent of remuneration paid for services rendered as an
officer or employee of our Company.
All the directors of our Company, including independent directors, may also be deemed to be interested to the
extent of Equity Shares, if any, held by them or by companies, firms and trusts in which they are interested as
117
directors, partners, members or trustees and also to the extent of any dividend payable to them and other
distributions in respect of the said Equity Shares.
All our directors may be deemed to be interested in the contracts, agreements/arrangements entered into or to be
entered into by our Company with any company in which they hold directorships or any partnership firm in which
they are partners as declared in their respective declarations. Except as otherwise stated in this Prospectus and
statutory registers maintained by our Company in this regard, our Company has not entered into any contract,
agreements or arrangements during the preceding two years from the date of this Prospectus in which the directors
are interested directly or indirectly and no payments have been made to them in respect of these contracts,
agreements or arrangements which are proposed to be made with them.
Our Company’s directors have not taken any loan from our Company.
Debenture holding of Directors:
None of our Directors are holding debentures of our Company.
Changes in the Directors of our Company during the last three years:
The Changes in the Board of Directors of our Company in the three years preceding the date of this Prospectus are
as follows:
Name of the Director
Date of Change
Reason
Mr. V. Parthasarathi
Dr. T.S. Sethurathnam
November 2, 2009
January 30, 2010
Resignation
Resignation
Shareholding of Directors, including details of qualification shares held by Directors
As per the provisions of our MOA and AOA, Directors are not required to hold any qualification shares.
None of our Directors are holding shares in our Company.
Corporate Governance
Our Company has been complying with the requirements of the applicable regulations, including the listing
agreement with the Stock Exchanges where our securities are listed and the SEBI Regulations, in respect of
corporate governance including constitution of the Board and Committees thereof. The corporate governance
framework is based on an effective independent Board, separation of the Board’s supervisory role from the
executive management team and constitution of the Board Committees, as required under law.
The Board is constituted in compliance with the Companies Act , the listing agreement with Stock Exchanges
where our securities are listed and in accordance with best practices in corporate governance. The Board functions
either as a full Board or through various committees constituted to oversee specific operational areas. The executive
management of our Company provides the Board detailed reports on its performance periodically.
Details of various committees of the Board
Our Company has constituted the following committees:
118
A.
Audit Committee
The members of the Audit Committee as on March 31, 2011 are:
1.
2.
3.
4.
5.
6.
Mr. Sunil Varma- Chairman
Mr.S. Krishnamurthy
Mr. S Venkatakrishnan
Mr. Mukund Govind Diwan
Mr. Ranvir Dewan
Mrs. Lakshmi Pranesh
Terms of Reference:
To oversee the financial reporting process
To recommend appointment and re-appointment of Auditors and their remuneration
Approval of payment to Statutory Auditors for any other services rendered by the Statutory Auditors
Reviewing, with the management, the Financial Statements before submission to the Board
To ensure proper disclosure in the quarterly , half yearly and Audited Financial Statements
Reviewing the adequacy of internal audit function including the structure of the internal audit department,
staffing and seniority of the official heading the department, reporting structure , coverage and frequency of
internal audit
Discussing with Internal Auditors on any significant findings and follow up there on
Reviewing the findings of any internal examinations by the Internal Auditors into matters where there is
suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the
matter to the Board
Discussion with Statutory Auditors before the audit commences, about the nature and scope of audit as well
as post-audit discussion to ascertain any area of concern.
To discuss with management, the senior internal audit executives and the Statutory Auditor/s, the
Company’s major risk exposures and guidelines and policies to govern the processes by which risk
assessment and risk management is undertaken by the Company, including discussing the Company’s
major financial risk exposures and steps taken by management to monitor and mitigate such exposures and
from time to time conferring with another Committee/s of the Board about risk exposures and policies
within the scope of such other Committee’s oversight.
To look into the reasons for substantial defaults in the payment to the depositors, debenture holders,
shareholders (in case of non payment of declared dividends) and creditors, if any.
To review the functioning of the Whistle Blower Mechanism
To approve appointment of Chief Financial Officer (CFO) of the Company( person heading the finance
function or discharging that function) .
To have management discussion and analysis of financial condition and results of operations;
To review significant related party transactions
Management letters/letters of internal control weaknesses issued by the Statutory Auditors
119
Internal Audit Reports relating to internal control weaknesses
To review the appointment , removal and terms of remuneration of the Internal Auditor
Reviewing , with the management, performance of Statutory and Internal Auditors, adequacies of the
internal control systems
To Carry out any other function as decided by the Board from time to time
B.
Remuneration and Compensation Committee
The members of the Remuneration and Compensation Committee as on March 31, 2011 are:
1.
2.
3.
Mr. Vipen Kapur- Chairman
Mr. S. Krishnamurthy
Mr. Mukund Govind Diwan
The terms of reference of the Remuneration and Compensation Committee, inter alia, include:
To determine salaries, benefits and stock options grants to Directors of the Company.
To develop guidelines, review and approve the Remuneration Policy of the Company.
To guide the management regarding the Company’s compensation, bonus, pension and other benefit plans,
policies and practices and the talent management .
To review and approve employment agreements , severance arrangements, change in control agreements and
any other benefits, compensation or arrangements for the Directors of the Company
To establish guidelines and to grant the stock options to employees and officers of the Company .
To administer the Company’s stock incentive plans and other similar incentive plans and interpret and
adopt rules for the operation thereof.
C.
Shareholders’ and Investors’ Grievance Committee
The members of the Shareholders’ and Investors’ Grievance Committee as on March 31, 2011 are:
1.
2.
3.
Mr. S. Venkatakrishnan- Chairman
Mr. R. Kannan
Mr. S. Krishnamurthy
The terms of reference of the Shareholders and Investors Grievance Committee, inter alia, include:
Redressal of shareholders' and investors' complaints;
Review the Shareholding pattern and Ownership .
Facilitate better investor services and relations.
Transfer of unclaimed Dividend/Deposits/Debentures/Subordinated Debt , to Investor Education and
Protection Fund
Listing of Securities on Stock Exchanges including Global depository receipts
Review of Secretarial audits, appointment of Secretarial Auditors and their remuneration
Any other subject as may be assigned by the Board from time to time.
120
To form Sub Committees
D.
Asset liability Management Committee
The members of the Asset liability Management Committee, (“ALCO”) as on March 31, 2011 are:
1.
2.
3.
Mr. R. Kannan- Chairman
Mr. R. Chandra Sekhar
Mrs. Subasri Sriram
The terms of reference of the ALCO, inter alia, include:
The ALCO is responsible for ensuring adherence to the limits set by the Board as well as for deciding the
business strategy of the Company in line with the Company’s budget and decided risk management objectives.
The ALCO is the decision-making unit responsible for Balance Sheet planning from risk-return perspective
including strategic management of interest rate and liquidity risks.
Its functions include the following:
Liquidity risk management
Funding and Capital Planning
Forecasting and analyzing future business environment and preparation of contingency plans
Management of Market Risk
Profit Planning and growth projection
E. Banking and Finance Committee
The members of the Banking and Finance Committee as on March 31, 2011 are:
1.
2.
Mr. S. Venkatakrishnan - Chairman
Mr. R. Kannan
The terms of reference of the Banking and Finance Committee, inter alia, include:
Banking operations including Open, Close, Operation of all types of Bank Accounts with any Bank and
authorize such person to do all or any of these activities.
Authorise any person/s to accept and confirm the bank balances
Borrow money from bank or any other institution within the limit specified by the Board from time to time
either by short term loan or long term loan by whatever name called.i.e, working capital loan, cash credit,
working capital demand loan, short term loan, overdraft, term loan, commercial paper, debentures,
securitization etc.
121
Invest keep deposited or otherwise the funds of the Company in short term deposits and long term deposits
with banks or any other institutions, in mutual funds or any other funds within the limit sanctioned by the
Board and authorize such person/s to do any such activities.
Apply for listing of any instruments/ securities as may be required with any of the Stock exchanges.
To authorize any person to sign the documents required for banking and borrowing of any nature and such
other activities.
To do all such acts required for all types of banking and borrowing and authorize such other person/s to do
any or all such activities.
To sell down the assets of the Company.
To appoint issuing and paying agents, merchant bankers, brokers and related agents for banking and
borrowings.
Any other activity related to banking and borrowing or any activity of business importance as may be
ratified by the Board.
Payment of benefits and profit-share to Employees
Except entitlement to stock options under the ESOP 2006 and ESOP 2008, and payments in accordance with the
terms of appointment of our employees, we have not paid or granted any amounts or benefits to our employees, in
the two years preceding the date of this Prospectus. Our employees are not entitled to any share in the profits of our
Company.
122
OUR PROMOTER
Profile of our Promoters
Our Promoters are Shriram Enterprise Holdings Private Limited and Shriram Retail Holdings Private Limited.
A.
Shriram Enterprise Holdings Private Limited
Shriram Enterprise Holdings Private Limited was incorporated as a private limited company under the Act on June
29, 1995, vide a certificate of incorporation issued by the ROC, Chennai, Tamil Nadu. The registered office of our
Promoter is located at Mookambika Complex, No.4, Lady Desika Road, Mylapore, Chennai 600 004. Our Promoter is
primarily engaged in the business of investment promotion including facilitating strategic investor or private equity
investor or third parties to invest in our Company.
Our Promoter has not been named or set out as a promoter of any other company in any offer document, filing with
stock exchange(s) or with any regulatory and/or statutory authorities. Further, besides holding shares of our
Company, our Promoter does not directly or indirectly hold shares in the share capital of any company. There are no
common pursuits between our Company and our Promoter.
Interest of Promoter in our Company
Except as stated under the section titled “Financial Information” beginning on page 130 of this Prospectus and to
the extent of their shareholding in our Company, the Promoter does not have any other interest in our Company’s
business. Further, our Promoter has no interest in any property acquired by our Company in the last two years from
the date of this Prospectus, or proposed to be acquired by our Company.
Our Promoter does not propose to subscribe to this Issue.
Other than the payment of dividend on the shares held by our Promoter in the share capital of our Company, and
issue of the following Equity Shares and warrants convertible into Equity Shares, interest paid on Inter-corporate
Deposit, we have not paid or granted any amounts or benefits, in the two years preceding the date of this Prospectus.
Details of Shares allotted to our Promoter during the last three Financial Years
Sr.
No.
1.
2.
Nature of Transaction
Conversion of warrants issued on December 29, 2006
Conversion of warrants issued on December 29, 2006
Date of
allotment
March 20, 2008
June 27, 2008
No. of
Securities
20,55,000
14,45,000
Issue Price (`
`)
160/160/-
Shareholding Pattern of our Promoter as on March 31, 2011:
Sr.
No.
1.
2.
Name of Shareholder
Shriram Retail Holdings Private Limited
Sri R. Thyagarajan and Shriram Retail
Holdings Private Limited
Total
123
No. of Shares
Percentage Shareholding(%)
999,990
10
99.99
0.01
1,000,000
100.00
Board of directors of our Promoter as on March 31, 2011
1.
Mr. Chandrashekhar Ramasubramanian
2.
Mr. Ravi Devaki Venkatraman
3.
Mr. Murali Srinivasan
Changes in the board of directors
There have been no changes in the board of directors of our Promoter in the last three years preceding the date of
this Prospectus.
Name of the Director
Date of Change
Reason
Mr. Murali Srinivasan
Mr. Rengaswamy Sundararajan
Mr. Venkataraman Mahalingam
September 6, 2008
October 1, 2009
May 27, 2010
Appointment
Resignation
Deceased
Financial Performance of our Promoter for the last three financial years
(` in Lakhs)
Particulars
Balance Sheet
FY 2008
FY 2009
FY 2010
SOURCES OF FUNDS
Shareholder Funds:
Share Capital
Unsecured Loan from Shareholder
Reserves and Surplus
1,000.00
2,682.50
22,556.34
1000.00
4228.30
23265.25
1000.00
4228.30
23991.49
Total
26,238.84
28493.55
29219.79
2,6230.93
Nil
28,311.73
Nil
28,311.73
7.80
0.18
0.07
7.91
26,238.84
181.74
0.18
0.10
181.82
28,493.55
907.99
432.64
0.00
432.64
716.86
0.00
716.86
APPLICATION OF FUNDS
Investments
Deferred Tax Asset (Net)
Current Assets
Cash and Bank Balances
Loans & Advances
Less: Current Liabilities
Net Current Assets
Total
Nil
0.18
0.12
908.05
29,219.79
Profit and Loss Account
INCOME
Dividend Income
Interest Received
Total
EXPENDITURE
124
896.07
0.00
896.07
Particulars
Interest Paid
FY 2008
FY 2009
0.00
0.10
0.00
6.50
0.29
0.00
0.00
142.50
0.00
0.00
0.13
0.36
1.06
0.00
6.25
0.06
0.00
0.04
Bank Charges
Total
0.03
149.42
0.04
Net Profit Before Tax
283.22
Audit Fees
Demat A/c Charges
Filing Fees
Postage & Courier Expenses
Professional Charges Paid
Miscellaneous Expenses
Loss on sale of Shares
Printing and Stationary Charges
Add: Provision for Deferred Tax
-
Less : Provision for –Taxation
-
Net Profit After Tax
283.22
Balance brought down from Previous Year
429.77
Less: Prior Period Tax
-
Less: Dividend Paid
-
Less: Transferred to General Reserve
-
Surplus carried over to Balance Sheet
712.99
7.94
708.92
708.92
712.99
1,421.91
FY 2010
0.00
0.15
0.13
0.02
0.00
169.53
0.00
0.00
0.00
0.01
169.84
726.23
726.23
1421.91
2148.14
B. Shriram Retail Holdings Private Limited
Shriram Retail Holdings Private Limited was incorporated as private limited companies under the Act on January
24, 2006 vide a certificate of incorporation issued by the ROC, Chennai, Tamil Nadu. The registered office of our
Promoter is located at Mookambika Complex, No.4, Lady Desika Road, Mylapore, Chennai 600 004. Our Promoter is
primarily engaged in the business of investment promotion including facilitating strategic investor or private equity
investors or third parties to invest in our Company.
Our Promoter has not been named or set out as a promoter of any other company in any offer document, filing with
stock exchange(s) or with any regulatory and/or statutory authorities. Further, besides holding shares of our
Company, our Promoter does not directly or indirectly hold shares in the share capital of any company. There are no
common pursuits between our Company and our Promoter.
Interest of Promoter in our Company
Except as stated under the section titled “Financial Information” beginning on page 130 of this Prospectus and to
the extent of their shareholding in our Company, the Promoter does not have any other interest in our Company’s
business. Further, our Promoter has no interest in any property acquired by our Company in the last two years from
the date of this Prospectus, or proposed to be acquired by our Company.
Our Promoter does not propose to subscribe to this Issue.
Other than the payment of dividend on the shares held by our Promoter in the share capital of our Company, and
issue of the following Equity Shares and warrants convertible into Equity Shares, interest paid on Inter-corporate
Deposit, we have not paid or granted any amounts or benefits, in the two years preceding the date of this Prospectus.
Details of Shares allotted to our Promoter during the last three Financial Years
125
There have been no allotments to Shriram Retail Holdings private Limited during the last three Financial years.
Shareholding Pattern of our Promoter as on March 31, 2011:
Sr.
No.
Name of Shareholder
No. of Shares
Percentage Shareholding (%)
2,305,997
10
50.99
0.00
2,215,575
4,521,582
49.00
100.00
1. Shriram Capital Limited
2. R. Thyagarajan and Shriram Capital
Limited
3. TPG India Investments INC.
Total
Board of directors of our Promoter as on March 31, 2011:
1.
2.
Mr. Ravi Devaki Venkataraman
Ms. Akhila Srinivasan
Changes in the board of directors
There have been no changes in the board of directors of our Promoter in the last three years preceding the date of
this Prospectus.
Financial Performance of our Promoter for the last three financial years
(` in Lakhs)
Particulars
Balance Sheet
FY 2008
FY 2009
FY 2010
SOURCES OF FUNDS
Shareholder Funds:
Share Capital
Unsecured Loan
Reserves and Surplus
5.00
0.00
0.00
334.67
43,092.93
33,730.94
452.15
0.00
61,678.24
Total
5.00
77,158.54
62,130.39
0.00
0.00
44,904.27
0.00
55,962.27
0.00
4.55
0.00
0.01
4.54
32,021.61
138.78
0.70
32,159.70
939.82
4,374.48
86.24
5,228.06
0.10
0.35
5.00
0.06
94.51
77,158.54
0.03
940.03
62130.39
0.00
217.66
334.38
APPLICATION OF FUNDS
Investments
Deferred Tax Asset (Net)
Current Assets
Cash and Bank Balances
Other Current Assets
Less: Current Liabilities
Net Current Assets
Miscellaneous Expenditure
Preliminary Expenses- To the extent not written off
Profit and Loss account
Total
Profit and Loss Account
INCOME
Dividend Income
126
Particulars
Interest Received
Other Income
Total
FY 2008
EXPENDITURE
Audit Fees
Filling Fees
General Charges
Demat A/c Charges
Management Charges
Bank Charges
Advertisement Expenses
Printing and Stationery
Travelling Expenses
Postage and Courier Expenses
Professional Charges
Preliminary Expenses written off
Total
Net Profit Before Tax
Less : Provision for –Taxation
Less: Provision for Fringe Benefit Tax
Balance brought down from Previous Year
Surplus carried over to Balance Sheet
127
FY 2009
FY 2010
0.00
0.00
0.00
296.05
0.02
513.74
449.00
0.01
783.39
0.01
0.04
0.002
0.00
0.00
0.004
0.00
0.00
0.00
0.00
0.00
0.03
0.09
(0.09)
0.00
0.00
(0.26)
(0.35)
0.15
58.65
0.11
0.40
548.31
0.02
0.00
0.03
0.14
0.00
0.01
0.03
607.90
(94.15)
0.00
0.002
(0.35)
(94.51)
0.15
0.07
1,400.34
0.13
120.00
0.01
0.36
0.97
0.00
0.61
20.14
0.03
1,542.83
(759.44)
86.07
0.00
(94.51)
(940.03)
OUR SUBSIDIARY
As on the date of this Prospectus our Company has the following one subsidiary:
1.
Shriram Housing Finance Limited (“SHFL”):
SHFL was incorporated pursuant to a certificate of incorporation dated November 9, 2010, issued by the
Registrar of Companies, Chennai, Tamil Nadu , and commenced its operations, pursuant to a certificate of
commencement of business dated January 21, 2011. The registered office is situated at123, Angappa
Naicken Street, Chennai, Tamil Nadu 600001.
Shareholding Pattern:
As on the date of this Prospectus the shareholding pattern of SHFL is as follows:
Sr.
No.
Name of Shareholder
Address
1.
Shriram
City
Finance Limited
2.
Subhasri Sriram
3.
C.R. Dash
4.
Y.S. Chakravarthi
5.
M. R. Vijaya
6.
Krithika Doraiswamy
7.
P Udhaya Geetha
Union
No. Of Equity
Shares
Face value of
Equity
Shares in (`
`)
Percentage
of
Equity
Share capital
(%)
123,
Angappa
Naicken
Street,
Chennai, Tamil Nadu
- 600 001.
No.5 (Old No. 23)
29th Cross Street, Indra
Nagar, Chennai, Tamil
Nadu - 600 020.
2,999,994
10
99.99
1
10
0.00003
Flat
no.
B/13,
Raghamallika
Apartment, No. 2,
Jeevaratnam Nagar,
Adyar, Chennai - 600
020.
Flat No. 302, Banjara
Heritage Apts Road
No. 3, Panchavati
Society, Banjara Hills,
Hyderabad- 500 034.
Golden Emerald Flats
No. 12, G4, Muthu
Kumaran
Street,
Venkatewara Nagar,
Ambattur Chennai 600 053.
Flat No. 8, Anandham
Flats, new No. 343,
Thachi
Aruchalam
Street,
Mylapore,
Chennai - 600 004.
No.
5/10,
Govindasamy Street
MGR Nagar, (Jothi
Nagar),
1
10
0.00003
1
10
0.00003
1
10
0.00003
1
10
0.00003
1
10
0.00003
128
Sr.
No.
Name of Shareholder
Address
No. Of Equity
Shares
Face value of
Equity
Shares in (`
`)
Percentage
of
Equity
Share capital
(%)
Chitlapakkam,
Chennai -600 064.
Total
3,000,000
Board of Directors:
The board of directors of SHFL comprises of the following persons:
1.
2.
3.
Mr. Sujan Sinha-Managing Director;
Mrs. Subhasri Sriram; and
Mr. Y. S. Chakravarti;
129
100
SECTION V : FINANCIAL INFORMATION
FINANCIAL STATEMENTS
Sr.
No.
1.
Particulars
Page No.
Examination report on Reformatted Unconsolidated Summary Financial
Statements as at and for the financial years ended March 31, 2007, 2008, 2009,
2010 and 2011 as issued by the Statutory Auditor
F-1
2.
Reformatted Unconsolidated Summary Financial Statements as at and for the
years ended for the financial years ended March 31, 2007, 2008, 2009, 2010
and 2011
F-4
3.
Examination report on Reformatted Consolidated Summary Financial
Statements as at and for the financial year ended March 31, 2011 as issued by
Statutory Auditor
F-123
4.
Reformatted Consolidated Summary Financial Statements as at and for the
financial year ended March 31, 2011.
F-126
130
PIJUSH GUPTA & CO
CHARTERED ACCOUNTANTS
P-199, C.I.T.ROAD, SCHEME IV-M, KOLKATA – 700 010
TEL (033) 2353-6859, (0) 98311 91779 MAIL: [email protected]
Auditors' Report
To
The Board of Directors
Shriram City Union Finance Limited
221, Royapettah High Road,
Mylapore, Chennai
Dear Sirs,
1.
We, Pijush Gupta & Co., have examined the attached Reformatted unconsolidated financial information
comprising of Balance Sheet, Profit and Loss Accounts, Cash Flows and notes thereon of Shriram City Union
Finance Limited, ("Company" or “Issuer”) as at and for the years ended March 31, 2011, 2010, 2009, 2008 and
2007, approved by the board of directors of the Company and as prepared by the Company in accordance with
the requirements of:
a.
paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 ('the Act') and
b.
the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008,
("Regulations"), issued by the Securities and Exchange Board of India, ("SEBI"), as amended from time
to time in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992 ("SEBI
Act").
Pijush Gupta & Co. is referred to as the "Auditors" and the references to the Auditors as "we", "us" or "our", in
this letter, shall be construed accordingly.
2.
We have examined such reformatted unconsolidated financial information taking into consideration:
a.
The terms of reference dated June 26, 2011 received from the Company and engagement letter of
auditors dated June 26, 2011 requesting us to carry out the assignment, in connection with the Draft
Prospectus/Prospectus (collectively referred to as “Offer Document”) being issued by the Company for
its proposed public issue of secured non-convertible debentures ("NCDs"), having a face value of
Rs.1000 each (referred to as the "Issue") and
b.
The ‘(Revised) Guidance Note on Reports in Company Prospectuses’ issued by the Institute of Chartered
Accountants of India.
Reformatted Unconsolidated Financial information as per audited unconsolidated financial statements:
3.
The reformatted unconsolidated financial information of the Company has been extracted by the management
from:
a.
the Unconsolidated balance sheet as at March 31, 2011, 2010, 2009, 2008 and 2007 and the related
Unconsolidated profit and loss account and Unconsolidated cash flow statement for the year ended
March 31, 2011, 2010, 2009, 2008 and 2007 (collectively referred to as the " Unconsolidated Financial
Statements") audited by us;
b.
In the course of our aforesaid audit we relied upon audit reports received from Branch Auditors who had
conducted audit of business regions of the company.
These Audited Unconsolidated Financial Statements have been approved by the Board of Directors.
F-1
4.
In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, the SEBI Regulations,
terms of our engagement agreed with you and statement of responsibilities of auditors, we further report that:
a)
The Reformatted Unconsolidated Summary Statement of Assets and Liabilities and the schedules
forming part thereof, Reformatted Unconsolidated Summary Statement of Profit and Loss and the
schedules forming part thereof and the Reformatted Unconsolidated Summary Statement of Cash Flow
(‘Reformatted Unconsolidated Summary Statements’) of the Company, including and as at and for the
years ended March 31, 2011, 2010, 2009, 2008 and 2007 , examined by us have been set out in Annexure
I to V to this report. These Reformatted Unconsolidated Summary Statements are after regrouping as in
our opinion are appropriate and more fully described in Significant Accounting Policies and Notes (Refer
Annexure XIII)
b)
Based on the above, we state that:
5.
the Reformatted Unconsolidated Summary Statements have to be read in conjunction with the
notes given in Annexure XIII;
the figures of earlier periods have been regrouped (but not restated retrospectively for change in
accounting policy), wherever necessary, to confirm to the classification adopted for the
Reformatted Unconsolidated Summary Statement as at/for the year ended March 31, 2011;
there are no extraordinary items which need to be disclosed separately in the reformatted
unconsolidated summary statements; and
there are no qualifications in the auditors’ reports, which require any adjustments to the
reformatted consolidated summary statements.
We have not audited any unconsolidated financial statements of the Company as of any date or for any
period subsequent to March 31, 2011. Accordingly, we express no opinion on the financial position,
results of operations or cash flows of the Company as of any date or for any period subsequent to March
31, 2011.
Other unconsolidated Financial Information:
6.
At the Company’s request, we have also examined the following unconsolidated financial information proposed
to be included in the Offer Document prepared by the Company and approved by the board of directors of the
Company and annexed to this report, relating to the Company for the years ended March 31, 2011, 2010, 2009,
2008 and 2007 :
i. Statement of contingent liabilities, enclosed as Annexure VI
ii. Statement of dividend paid/proposed, enclosed as Annexure VII
iii. Statement of accounting ratios relating to earnings per share, net asset value, return on net worth,
enclosed as Annexure VIII
iv. Statement of Secured and Unsecured Loans including terms and conditions, enclosed as Annexure IX &
X
v. Capitalization Statement as at March 31, 2011, enclosed as Annexure XI
vi. Statement of tax shelters, enclosed as Annexure XII
7.
In our opinion, the reformatted unconsolidated financial information as disclosed in the annexure to this report,
read with the respective significant accounting policies and notes disclosed in Annexure XIII, and after making
re-groupings as considered appropriate and disclosed, has been prepared in accordance with Paragraph B(1) of
Part II of Schedule II of the Act and the Regulations.
F-2
8.
This report should not be in any way construed as a reissuance or redating of any of the previous audit reports
issued by us or by any other firm of Chartered Accountants, nor should this report be construed as a new
opinion on any of the Reformatted Unconsolidated Financial Statements referred to herein.
9.
We have no responsibility to update our report for events and circumstances occurring after the date of the
report for the financial position, results of operations or cash flows of the Company as of any date or for any
period subsequent to March 31, 2011.
10.
This report is intended solely for your information and for inclusion in the Offer Document in connection with
the Offering of the Company, and is not to be used, referred to or distributed for any other purpose without our
prior written consent.
For Pijush Gupta & Co.
Firm registration number: 309015E
Chartered Accountants
Ramendra Nath Das
Partner
Membership No.: 014125
Chennai, July 21, 2011
F-3
Annexure I
Shriram City Union Finance Limited
Reformatted summary of Assets and Liabilities
(Rs. in lakhs)
Particulars
Schedule
2011
As at March 31,
2009
2010
2008
2007
Assets
A.
Fixed and Intangible Assets(Net)
(including CWIP)
B
Investments
C
Deferred Tax Asset (Net)
D
Current Assets, Loans &
Advances
F
Total (A+B+C+D)
1
2
3
2,944.43
2,044.52
3,721.98
5,108.06
5,570.48
551.45
101.45
606.45
604.98
664.03
1,581.66
1,122.70
313.05
-
-
936,121.22
621,545.53
539,518.62
373,141.11
215,885.47
941,198.76
624,814.20
544,160.10
378,854.15
222,119.98
656,951.01
413,610.55
390,445.43
262,795.40
130,384.22
75,827.43
53,103.69
41,831.33
37,127.45
20,246.27
-
-
-
632.99
2,973.32
70,089.54
46,393.55
33,125.35
29,048.76
31,165.45
17,123.50
11,706.08
7,783.75
4,269.76
2,457.10
Liabilities
4
G
Secured Loans
H
Unsecured Loans
I
Deferred Tax Liability (Net)
J
Current Liabilities
K
Provisions
L
Total (G+H+I+J+K)
819,991.48
524,813.87
473,185.86
333,874.36
187,226.36
M
Net Worth (F-L)
121,207.28
100,000.33
70,974.24
44,979.79
34,893.62
4,953.69
4,915.47
4,585.68
6,444.48
6,238.98
5
6
7
Represented By
(i)
Share Capital
8
F-4
Annexure I
Shriram City Union Finance Limited
Reformatted summary of Assets and Liabilities
(Rs. in lakhs)
Particulars
Schedule
2011
As at March 31,
2009
2010
2008
2007
(ii)
Share application money pending
allotment
(iii)
Stock Option Outstanding
(iv)
Optionally Convertible warrants
(v)
Reserves and Surplus
Less : Miscellaneous Expenditure
(to the extent not written off or
adjusted)
(vi)
Total (i+ii+iii+iv+v-vi)
10
9
-
0.71
-
-
-
1,887.27
2,281.04
1,637.97
542.08
-
-
-
2,700.00
232.20
560.00
114,366.32
92,803.11
62,050.59
37,761.03
28,096.77
-
-
-
-
2.13
121,207.28
100,000.33
70,974.24
44,979.79
34,893.62
11
The accompanying statement of Significant Accounting Policies and Notes to Accounts on Summary Financial Statements are
integral part of this statement.
As per our report of even date
For Pijush Gupta & Co.
For and on behalf of the Board of Directors of
Firm Registration No. 309015E
Shriram City Union finance Limited
Chartered Accountants
Ramendra Nath Das
R. Kannan
S. Venkatakrishnan
Partner
Managing Director
Director
Membership No. 014125
F-5
Annexure II
Shriram City Union Finance Limited
Reformatted summary of Profit and Loss Account
(Rs. in Lacs)
Particulars
A.
Schedule
2011
For the year ended March 31,
2010
2009
2008
2007
Income
i
Income from Operations
12
131,800.12
107,205.35
92,357.73
61,072.29
33,592.29
ii
Other Income
13
291.07
3,079.36
1,036.02
1,246.47
1,213.62
132,091.19
110,284.71
93,393.75
62,318.76
34,805.91
Total Income
B.
Expenditure
i
Financial Expenses
14
58,848.26
51,759.01
49,048.65
30,848.93
17,124.52
ii
Personnel Expenses
15
4,367.02
3,611.63
3,582.75
2,274.74
935.51
iii
Operating & Other Expenses
16
20,470.16
14,163.60
12,882.73
10,273.02
6,034.77
iv
Depreciation and amortization
Impairment loss/(Reversal) on
Fixed assets & stock
Share & Debenture Issue expenses
written off
747.41
464.77
1,018.23
1,127.52
373.35
-
-
1,186.81
-
-
17
-
-
-
2.13
1.69
18
11,598.25
11,659.84
7,701.05
5,093.96
2,392.75
Total Expenditure
96,031.10
81,658.85
75,420.22
49,620.30
26,862.59
C.
Net Profit Before Taxation (A-B)
36,060.09
28,625.86
17,973.53
12,698.46
7,943.32
D.
Provision for taxation
Current tax
12,460.20
9,972.11
7,055.25
6,134.29
2,902.09
Deferred tax
(458.96)
(809.65)
(946.04)
(2,340.33)
(191.70)
161.79
141.00
70.77
v
vi
vii
Provisions & Write offs (net)
Wealth tax
1.76
Fringe Benefit Tax
Fringe Benefit Tax of earlier Year
E.
37.54
Total Tax
12,001.24
9,200.00
6,272.76
3,934.96
2,781.16
Net Profit after Taxation (C-D)
24,058.85
19,425.86
11,700.77
8,763.50
5,162.16
F-6
Annexure II
Shriram City Union Finance Limited
Reformatted summary of Profit and Loss Account
(Rs. in Lacs)
2011
For the year ended March 31,
2010
2009
2008
Balance in Profit & Loss Account
brought forward
22,730.09
12,003.01
8,412.03
4,471.38
2,264.35
Balance Available for
Appropriations
46,788.94
31,428.87
20,112.80
13,234.88
7,426.51
-
-
63.17
141.59
145.15
1,236.25
982.28
501.85
391.00
271.00
1,733.79
1,474.64
1,375.92
1,332.15
782.00
0.08
9.41
Particulars
F.
G.
2007
Appropriations
Dividend - Cumulative
Redeemable Preference Shares
Equity Shares - Interim dividend
Equity Shares - Proposed final
dividend
Preference Shares - Proposed final
dividend
H.
Schedule
Tax on dividend
205.33
166.94
96.02
316.92
192.87
Tax on proposed dividend
281.26
244.92
233.84
-
-
Transfer to statutory reserve
4,810.00
3,890.00
2,340.00
1,761.11
1,032.43
Transfer to general reserve
Transfer to Capital Redemption
Reserve
2,410.00
1,940.00
1,170.00
880.00
522.27
-
-
2,328.98
-
-
Total Appropriations
10,676.63
8,698.78
8,109.79
4,822.85
2,955.13
Balance carried to Balance Sheet
(F-G)
36,112.31
22,730.09
12,003.01
8,412.03
4,471.38
As per our report of even date
For and on behalf of the Board of Directors of
For Pijush Gupta & Co.
Firm Registration No. 309015E
Shriram City Union finance Limited
Chartered Accountants
Ramendra Nath Das
Partner
R. Kannan
Managing Director
Membership No. 014125
Place: Chennai
C R DASH
Company Secretary
Date: July 21, 2011
F-7
S. Venkatakrishnan
Director
Annexure III
Shriram City Union Finance Limited
Reformatted Summary of Cash Flow Statement
(Rs in Lacs)
Particulars
A. Cash flow from operating activities
Net profit before taxation
Depreciation and amortization
Share and debenture issue expenses written
off
(Profit) / loss on sale of fixed assets (net)
Lease equalization Adjustments
(Profit) / loss on sale of current and long
term investments (net)
Interest income on current and long term
investments and interest income on fixed
deposits
For the year ended March 31,
2011
2010
2009
2008
2007
36,060.09
28,625.86
17,973.53
12,698.46
7,943.32
747.41
464.77
1,018.23
1,127.52
373.35
-
-
-
2.13
1.69
13.78
1.60
0.12
3.35
0.96
(11.49)
-
-
0.08
-
-
(270.70)
(1,203.65)
(258.14)
(228.64)
(302.65)
-
(444.91)
(56.47)
(46.06)
(65.27)
471.68
751.53
1,111.28
542.09
-
-
-
1,186.81
-
-
(546.62)
-
994.18
811.68
-
10,136.82
12,165.62
7,809.37
5,174.98
2,482.15
1,714.89
-
-
-
-
Provision for gratuity
40.82
15.88
6.46
104.70
28.48
Provision for leave encashment
Provision for diminution in value of
investments
27.48
9.87
1.51
13.60
1.77
-
-
-
-
2.99
Dividend income
Employees Stock option compensation cost
Provision for impairment
Provision for hedging contracts
Provisions for non performing assets and bad
debts written off
Provisions for standard assets
F-8
Shriram City Union Finance Limited
Annexure III
Reformatted Summary of Cash Flow Statement
(Rs in Lacs)
2011
For the year ended March 31,
2010
2009
2008
48,395.65
40,386.57
29,786.96
20,203.81
10,455.31
(233,365.56)
(111,057.72)
(101,492.75)
(108,713.56)
(88,184.89)
-
89.03
(13.21)
102.25
(60.52)
-
-
-
-
8.89
(11,530.50)
(5,552.81)
(29.55)
(94.98)
306.06
(931.92)
4,708.39
2,239.18
(2,111.58)
(1,734.19)
23,690.91
13,272.04
4,078.50
(2,119.00)
10913.48
Cash generated from operations
(173,741.42)
(58,154.50)
(65,430.87)
(92,733.06)
(68,295.86)
Direct taxes paid (net of refunds)
(11,127.69)
(9,197.57)
(6,450.11)
(6,522.66)
(3,154.36)
(184,869.11)
(67,352.07)
(71,880.98)
(99,255.72)
(71,450.22)
7,992.17
(12,665.70)
(5,855.70)
52.63
42.27
(1,663.61)
(1,058.11)
(879.02)
(670.26)
13.80
2.52
2,269.20
59.93
1.81
(368.18)
Purchase of Investment
(200.00)
-
-
-
-
Investment in subsidiary company
Proceeds from sale of investment in
subsidiary company
(250.00)
-
(4.55)
(4.99)
-
-
-
-
4.55
-
-
1,905.00
3.00
59.50
-
270.70
1,203.65
258.14
228.64
302.65
-
444.91
56.47
46.06
65.27
6,151.78
(7,901.05)
(6,361.73)
(282.06)
55.81
Particulars
Operating profit before working capital
changes
2007
Movements in working capital:
(Increase) / decrease in current assets:
(Increase) / decrease in assets under
financing activities
(Increase) / decrease in sundry debtors
(Increase) / decrease in lease assets - net of
sales
(Increase) / decrease in other current assets
(Increase) / decrease in other loans and
advances
Increase / (decrease) in current liabilities
Net cash used in operating activities (A)
B. Cash flows from investing activities
Investment in Fixed deposits (net)
Purchase of fixed assets and intangibles
Proceeds from sale of fixed assets
Proceeds from sale of investments
Interest received on current and long term
investments and interest on fixed deposits
Dividend received
Net cash used in investing activities (B)
F-9
Annexure III
Shriram City Union Finance Limited
Reformatted Summary of Cash Flow Statement
(Rs in Lacs)
Particulars
C. Cash Flows from financing activities
Proceeds from issue of equity share capital
including securities premium & Share
application
For the year ended March 31,
2010
2009
2008
2011
2007
133.05
10,317.48
12,985.41
3,288.00
19,200.00
-
-
2,467.80
(327.80)
560.00
180,566.59
(3,271.15)
70,101.92
114,921.35
52,645.77
62,773.87
26,436.27
57,548.11
17,489.83
840.64
(45.64)
(12.06)
(52.87)
(214.31)
2.84
269.38
11,284.42
13,681.75
8,170.49
10,915.28
Increase / (decrease) in redeemable non
convertible debentures (net)
-
-
(3,500.00)
3,500.00
-
Increase / (decrease) in unsecured loans
22,500.00
-
(5,425.00)
5,425.00
(247.50)
Dividend paid
(2,710.89)
(2,358.20)
(1,897.26)
(1,324.00)
(959.32)
(450.25)
(400.77)
(322.44)
(225.01)
(134.55)
263,036.11
41,995.99
145,587.42
150,703.55
82,823.16
84,318.77
(33,257.14)
67,344.72
51,165.77
11,428.75
116,711.86
149,969.00
82,624.28
31,458.51
20,029.76
201,030.63
116,711.86
149,969.00
82,624.28
31,458.51
Proceeds from issue of share warrants
Increase / (decrease) in bank borrowings
(net)
Increase / (decrease) in long term
borrowings(net)
Increase / (decrease) in fixed deposits (net)
Increase / (decrease) in subordinate debts
(net)
Tax on dividend
Net cash from financing activities (C)
Net increase / (decrease) in cash and cash
equivalents (A + B + C)
Cash and Cash Equivalents at the
beginning of the year
Cash and Cash Equivalents at the end of
the year
F-10
Annexure III
Shriram City Union Finance Limited
Reformatted Summary of Cash Flow Statement
(Rs in Lacs)
Components of Cash and Cash
Equivalents
As at March 31,
2011
Cash and Cash Equivalents at the end of
the year as per Balance Sheet
2010
2009
2008
2007
216,540.14
140,208.46
160,879.51
88,001.90
38,101.96
Less : Fixed deposits held for unpaid
dividends
22.11
17.03
20.87
22.78
20.47
Less : Fixed deposits held for more than
three months
51.00
106.00
807.34
597.58
527.80
15436.40
23373.57
10,082.30
4,757.26
6,095.18
201,030.63
116,711.86
149,969.00
82,624.28
31,458.51
Less: Balance in Current account held for
unpaid dividends
Less : Fixed Deposit under Lien
As per our report of even date
For and on behalf of the Board of Directors of
For Pijush Gupta & Co.
Firm Registration No. 309015E
Shriram City Union finance Limited
Chartered Accountants
Ramendra Nath Das
Partner
R. Kannan
Managing Director
Membership No. 014125
Place: Chennai
C R DASH
Company Secretary
Date: July 21, 2011
F-11
S. Venkatakrishnan
Director
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 1 - Fixed and Intangible
Assets(Net)
As at March 31,
2011
2010
2009
2008
2007
ASSETS FOR OWN USE
Tangible Fixed Assets
Building
10.59
10.80
11.01
11.22
11.41
Leasehold Improvements
681.68
374.89
287.54
229.02
-
Furniture & Fixtures
790.93
417.94
317.97
94.63
283.86
22.73
19.14
18.54
10.23
6.47
1.76
1.76
72.89
131.70
131.70
-
-
-
1230.25
927.61
3,009.38
4,631.26
5,137.04
206.49
292.38
4.65
-
-
2,944.43
2,044.52
3,721.98
5,108.06
5,570.48
ASSETS GIVEN ON LEASE
Plant and Machinery
-
-
-
-
-
Vehicles
-
-
-
-
-
Land
-
-
-
-
-
Buildings
TOTAL (B)
-
-
-
-
-
-
-
-
-
-
2,944.43
2,044.52
3,721.98
5,108.06
5,570.48
Vehicles
Land - Freehold
Land - Leasehold
Plant and Machinery
Intangible Fixed Assets
Software
TOTAL (A)
TOTAL (A+B)
F-12
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 2 – Investments
2011
LONG TERM INVESTMENT (At cost)
Trade
Shares : Fully paid up
Unquoted - Preference Share
As at March 31,
2009
2010
2008
2007
-
-
101.45
101.45
101.45
3.08
101.45
59.50
3.08
101.45
-
-
500.00
500.00
500.00
-
-
5.00
0.45
551.45
101.45
606.45
604.98
664.03
101.45
101.45
101.45
104.53
164.03
Market value of Quoted investments
83.52
83.52
83.52
86.69
143.43
Book value of Unquoted investments
450.00
-
505.00
500.45
500.00
Other Than Trade
Quoted :
A. Government Securities:
13.05% GI Loan 2007 (Face Value-Rs. 55.70
Lacs)
12.25% GI Loan 2008 (Face Value Rs. 3 Lacs)
6.13% GI Loan 2028(Face value -Rs.100 lacs)
B.Equity Shares (Fully paid up)
Unquoted :
Shriram Life Insurance Company Ltd.
(Face Value of Rs. 10/- each)
Shriram Non Convention Energy Ltd.
(Face Value of Rs. 10/- each)
In wholly Owned Subsidiary
Shriram Housing Finance Ltd.
(Face Value of Rs. 10/- each)
250.00
Others
Highmark Credit Information Services Pvt. Ltd
(Face Value of Rs. 10/- each)
200.00
Book value of Quoted investments
Details of investments may be referred from the annual report of the respective years
F-13
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 3 - Current Assets, Loans &
Advances
As at March 31,
2011
2010
2009
2008
2007
Assets under financing activities
(a) Secured Loan
- Considered good
- Considered doubtful
(b)Unsecured Loans
- Considered good
- Considered doubtful
617,967.11
418,113.82
327,961.52
235,141.98
146,105.68
7,066.95
4,950.58
3090.72
1,511.01
1,479.21
70,970.68
47,595.24
38,855.44
37,991.59
23,489.31
2,916.48
2,479.99
1,102.96
221.95
-
698,921.22
473,139.63
371,010.64
274,866.53
171,074.20
-
-
89.03
75.82
178.07
-
-
89.03
75.82
178.07
6,025.87
3,590.69
1,515.96
1,686.20
1,676.56
-
-
86.81
221.04
453.34
Sundry Debtors
(Unsecured, considered Good)
Debts outstanding for a period exceeding
six months
Other debts
Cash & Bank Balances
(i) Cash on hand
(ii) Remittances in transit
(iii) Balances with scheduled banks in:
Current accounts
Deposit Accounts #
95,526.87
93,150.93
37,527.09
36,694.58
15,619.07
114,987.40
43,466.84
121,749.65
49,400.08
20,352.99
216,540.14
140,208.46
160,879.51
88,001.90
38,101.96
F-14
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 3 - Current Assets, Loans &
Advances
As at March 31,
2011
2010
2009
2008
2007
Other current assets
(i) Interest accrued on fixed deposits and
other loans and advances
324.96
1,262.84
413.71
325.18
177.57
24.99
161.60
-
-
-
17,147.07
4,542.08
-
58.98
75.86
-
-
-
-
35.75
17,497.02
5,966.52
413.71
384.16
289.18
-
-
4392.66
-
-
1,547.91
2,065.94
2,274.95
4,319.43
3,156.69
Advance- Capital Assets
Advance tax (Net of provisions for Income
Tax)
108.93
12.60
50.00
4,128.96
2,209.76
-
-
262.19
1,030.88
783.51
Prepaid expenses
952.29
24.00
38.21
202.35
29.79
Security deposits
553.71
128.38
107.72
131.08
62.31
3,162.84
2,230.92
7,125.73
9,812.70
6,242.06
936,121.22
621,545.53
539,518.62
373,141.11
215,885.47
# Includes Fixed deposits pledged with
Banks as margin for securitization
15,436.40
7,373.57
9,941.77
4,299.21
4,149.75
# Includes Fixed deposits pledged with
Banks as as lien against loans taken
-
16,000.00
140.53
458.05
1,945.43
(ii) Other Assets
(iii) Securitsation - Receivable
(iv)Repossessed Assets
Other Loans and Advances
Secured - Considered Good
loans to subsidiaries
Unsecured- Considered Good
Advances recoverable in cash or in kind or
for value to be received
Total
F-15
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 4 - Secured Loans
Redeemable non convertible
debentures
As at March 31,
2011
2010
2009
2008
2007
219,877.64
154,073.77
127,741.10
69,106.39
60,968.56
2(1)(a)(b)
2(1)(a)(b)(c)
2(1)(a)
2(1)(a)
B(1)(i)
Term loans
i) From Financial institutions /
Corporate
6,500.00
9,530.00
9,426.40
10,513.00
1,161.00
refer note
2(1)(c)(i)
2(1) (d)(i)
2(1)(b)(i)
2(1)(b)(i)
B(1)(ii)(iii)
295,677.28
104,634.17
143,562.74
115,755.02
41,453.74
2(1)(c)(ii)
2(1)(d)(ii)
2(1)(b )(ii)
2(1)(b)(ii)
B(1)(ii)(iii)(iv)
134,896.09
145,372.61
109,715.19
67,420.99
26,800.92
2(1)(d)
2(1)(e)
2(1)(c)
2(1)(c)
B(1)(v)
656,951.01
413,610.55
390,445.43
262,795.40
130,384.22
refer note
ii) From banks
refer note
Cash credit from banks
refer note
F-16
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 5 - Unsecured Loans
Fixed deposits
Inter corporate deposits
Subordinated debts
Redeemable non-convertible debentures
Commercial papers
As at March 31,
2011
2010
2009
2008
2007
55.10
100.74
112.80
165.67
379.98
-
-
-
925.00
-
53,272.33
53,002.95
41,718.53
28,036.78
19,866.29
-
-
-
3,500.00
-
22,500.00
-
-
4,500.00
-
75,827.43
53,103.69
41,831.33
37,127.45
20,246.27
F-17
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 6 - Current Liabilities
Sundry Creditors
Caution and lease deposits
Interest accrued but not due on loans
Unclaimed Redeemable Preference
Shares
Application money on Redeemable
non convertible debentures
Application money on Subordinated
debts
As at March 31,
2011
2010
2009
2008
2007
2,653.61
1,133.96
1,776.37
2,857.83
1,845.87
-
-
-
-
44.44
32,818.43
28,902.17
21,543.25
13,595.42
15,045.02
-
-
-
967.07
117.27
172.09
392.23
303.87
107.47
4.00
43.11
216.33
151.05
Investor Education and Protection
Fund shall be credited by the
following amounts (as and when due)
Unclaimed Matured Deposits
20.83
21.01
19.79
13.71
19.98
Unclaimed Matured Debentures
Unclaimed Matured Subordinated
Debts
3,777.27
2,744.13
2,219.30
1,932.21
1,136.73
210.19
13.85
-
-
-
Interest accrued and due on above
858.63
568.99
614.44
669.57
246.20
22.11
17.03
20.87
22.78
20.47
3,122.28
7,126.55
2,796.97
2,473.35
3,950.78
23,686.37
4,025.63
2,228.49
5,176.46
6,799.25
1,845.28
1,718.96
1,690.67
1,698.87
1,601.79
46,393.55
33,125.35
29,048.76
31,165.45
Unclaimed dividend
Temporary credit balance in bank
accounts
Securitization deferred income
Other liabilities
70,089.54
F-18
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 7 - Provisions
As at March 31,
2011
2010
2009
2008
2007
For non-performing assets
9,983.42
7,430.57
4,193.68
1,732.96
1,479.21
For standard assets
1,714.89
-
-
-
-
For income tax (net of advance tax)
1,882.40
549.89
-
-
-
17.93
17.93
17.93
17.93
21.73
1,259.24
1,805.86
1,805.86
811.68
-
54.23
26.75
16.88
15.37
1.77
196.34
155.52
139.64
133.18
28.48
1,733.79
1,474.64
1,375.92
1,332.15
782.00
-
-
-
0.08
9.41
281.26
244.92
233.84
226.41
134.50
17,123.50
11,706.08
7,783.75
4,269.76
2,457.10
For diminution in value of investments
For hedging contracts
For leave encashment and availment
For gratuity
Proposed dividend
Dividend on preference shares
Corporate dividend tax
F-19
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 8 - Share Capital
As at March 31,
2011
2010
2009
2008
2007
Authorized
Equity Share Capital
6,000.00
6,000.00
6,000.00
4,500.00
4,500.00
Preference Share Capital
4,000.00
4,000.00
4,000.00
4,000.00
4,000.00
10,000.00
10,000.00
10,000.00
8,500.00
8,500.00
60,000,000
60,000,000
60,000,000
45,000,000
45,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,953.69
4,915.47
4,585.68
4,115.50
3,910.00
49,536,877
49,154,700
45,856,800
41,155,000
39,100,000
-
-
-
2,328.98
2,328.98
4,953.69
4,915.47
4,585.68
6,444.48
6,238.98
No. of equity Shares of Rs.10/- each
No. of preference Shares of Rs.100/each
Issued, Subscribed & Fully Paid up
Equity Shares
No. of equity shares of Rs. 10/- each
Preference Share Capital
F-20
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 9 - Reserves and Surplus
Capital Reserve
Balance as per last account
Add: Forfeiture of optionally convertible warrants
Capital Redemption Reserve
Balance as per last account
Add : Transfer from Profit & Loss A/c
Securities Premium Account
Balance as per last account
Add: Amount received during the year
Investment Allowance Reserve
Balance as per last Account
Less: Transfer to General Reserve
Statutory Reserve
Balance as per last account
Add: Transfer from Profit & Loss Account
Debenture Redemption Reserve
Balance as per last account
Less: Transfer to General Reserve
General Reserve
Balance as per last account
Add: Transfer from Investment Allowance
Reserve
Add: Transfer from Debenture Redemption
Reserve
Add: Transfer from Profit & Loss Account
Balance in Profit & Loss Account
As at March 31,
2011
2010
2009
2008
2007
1,400.00
-
1,400.00
-
-
-
1,400.00
1,400.00
-
-
-
2,328.98
-
2,328.98
-
2,328.98
-
-
2,328.98
2,328.98
2,328.98
-
49,836.14
960.99
37,040.70
12,795.44
22,181.10
14,859.60
19,098.60
3,082.50
1,098.60
18,000.00
50,797.13
49,836.14
37,040.70
22,181.10
19,098.60
-
-
-
7.90
7.90
7.90
-
-
-
-
-
7.90
11,150.00
4,810.00
7,260.00
3,890.00
4,920.00
2,340.00
3,158.89
1,761.11
2,126.46
1,032.43
15,960.00
11,150.00
7,260.00
4,920.00
3,158.89
-
-
-
-
25.00
25.00
-
-
-
-
-
5,357.90
3,417.90
2,247.90
1,360.00
812.73
7.90
25.00
522.27
2,410.00
1,940.00
1,170.00
880.00
7,767.90
5,357.90
3,417.90
2,247.90
1,360.00
36,112.31
22,730.09
12,003.01
8,412.03
4,471.38
114,366.32
92,803.11
62,050.59
37,761.03
28,096.77
F-21
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
( Rs. in Lacs)
As at March 31,
Schedule 10 - Stock Option Outstanding
Employee stock option outstanding
Less : Deferred employee compensation outstanding
2011
2010
2009
2,079.09
2,882.26
2,990.73
3,006.12
-
191.82
601.22
1,352.76
2,464.04
-
1,887.27
2,281.04
1,637.97
542.08
-
F-22
2008
2007
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 11- Miscellaneous Expenditure (to the
extent not written off or adjusted)
Issue expenses for equity shares
As at March 31,
2011
2010
2009
2008
2007
-
-
-
-
2.13
-
-
-
-
2.13
F-23
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 12 - Income from Operations
Income from financing activities
Interest on margin money on securitization
Gain on securitization / assignment
Lease Rentals
For the year ended March 31,
2011
2010
2009
2008
2007
122,778.70
96,759.92
86,138.88
51,351.57
27,107.08
799.12
749.99
405.96
457.44
260.15
8,222.30
9,695.44
5,812.89
9,255.64
6,203.52
-
-
-
7.64
21.54
131,800.12
107,205.35
92,357.73
61,072.29
33,592.29
F-24
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
Schedule 13 - Other Income
Interest on deposits with banks *
For the year ended March 31,
2011
2010
264.57
2009
2008
2007
1,197.52
251.85
221.73
288.89
-
500.59
476.13
583.08
0.16
0.15
-
0.01
8.85
-
1,400.00
-
-
6.13
6.13
6.29
6.91
13.76
-
444.91
56.47
46.06
65.27
10.23
10.37
116.32
121.22
164.04
Compensation Charges
-
-
24.74
242.54
-
Miscellaneous Income
9.98
20.28
79.76
131.87
89.73
291.07
3,079.36
1,036.02
1,246.47
1,213.62
Sale of electricity
Profit on sale of assets
Income from Long Term Investments (non
trade)
- Profit on sale of investments
- Interest on government securities
Income from Current Investments (non trade)
- Profit on sale of investments
- Dividend
Commission/Referral fees Received
F-25
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 14 -Financial Expenses
For the year ended March 31,
2011
2010
2009
2008
2007
Interest on :
- Debentures
- Subordinated debts
- Fixed deposits
18,256.28
17,817.36
12,863.43
8,777.67
8,917.22
7,456.74
6,764.46
4,460.21
2,971.95
1,463.89
6.03
10.42
11.56
36.35
43.96
18,914.70
15,549.18
19,430.72
9,944.02
1,688.79
- Loans from institutions and others
1,243.82
962.59
1,670.87
453.36
110.34
- Commercial paper
1,434.16
30.40
250.72
291.17
-
Bank charges
1,535.79
3,289.78
2,700.70
1,591.33
720.08
Processing and other charges
2413.69
907.39
1,684.45
971.18
278.30
Brokerage & Commission
7587.05
6,427.43
5,975.99
5,811.90
3,901.94
58,848.26
51,759.01
49,048.65
30,848.93
17,124.52
- Loans from banks #
F-26
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. In Lacs)
Schedule 15 - Personnel Expenses
Salaries, allowances and Bonus
Gratuity
Contribution to provident and other funds
Staff welfare
For the year ended March 31,
2011
2010
2009
4,150.24
3,472.85
3,452.64
2,163.40
837.14
40.51
14.60
9.24
31.77
24.49
138.21
94.27
90.09
60.07
36.69
38.06
29.91
30.78
19.50
37.19
4,367.02
3,611.63
3,582.75
2,274.74
935.51
F-27
2008
2007
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 16 - Operating and other Expenses
Rent
Electricity expenses
For the year ended March 31,
2011
2010
2009
2008
2007
1,007.21
689.58
476.63
526.83
268.32
360.57
452.72
393.97
232.87
151.07
-
-
127.29
80.58
120.79
437.90
1,176.79
759.43
723.26
790.72
Repairs & Maintenance
- Plant & machinery
- Others
Rates, duties & Taxes
636.02
643.41
577.56
0.68
2.02
Printing & stationery
1,649.92
835.83
748.39
838.55
626.03
Travelling & conveyance
3,704.17
2,166.87
2,038.11
1,755.57
780.03
520.06
49.84
61.04
63.53
70.05
Business Promotion Expenses
3,495.02
2,533.95
2,257.86
1,880.57
673.62
Sourcing Fees and other charges
1,444.79
1,123.68
949.88
443.61
515.14
364.24
304.08
269.55
147.50
79.24
5.45
5.55
5.20
3.03
0.15
167.01
44.07
21.59
21.47
11.32
1,908.24
1,603.23
1,533.99
1,493.66
585.07
- Audit fees
7.65
7.58
6.05
4.50
6.44
- Tax audit fees
3.10
2.59
2.08
1.50
1.52
- Certification fee
4.60
7.41
5.10
2.25
4.59
Advertisement
Royalty
Directors' sitting fees
Insurance
Communication expenses
Auditor's remuneration
- Limited Review
Professional charges
Legal Expenses
Recovery Expenses
Donations
Loss on sale of assets
Loss on sale of Long Term Investments (non
trade)
Miscellaneous expenses
5.88
4.65
4.55
2.25
2.49
2,092.43
1,069.77
1,130.74
648.15
567.19
-
62.24
7.69
5.30
156.53
2,053.29
1,232.91
1,077.91
843.91
556.26
1.00
-
65.00
41.50
1.60
13.94
1.75
0.12
3.36
9.81
-
-
0.08
-
-
587.67
145.10
362.92
508.59
54.77
20,470.16
14,163.60
12,882.73
10,273.02
6,034.77
F-28
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 17 - Share & Debenture issue expenses
written off
Issue expenses for equity shares
For the year ended March 31,
2011
2010
2009
2008
2007
-
-
-
2.13
1.69
-
-
-
2.13
1.69
F-29
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Statement of Assets and Liabilities
(Rs. in Lacs)
Schedule 18 - Provisions & Write offs
Provision for non performing assets
Provision for standard assets
Provision for diminution in value of investments
Bad debts written off
Bad debt recovery
For the year ended March 31,
2011
2010
2009
2,552.85
1,714.89
3,236.89
-
2,460.72
-
253.75
212.67
7,583.97
(253.46)
11,598.25
8,928.73
(505.78)
11,659.84
5,348.64
(108.31)
7,701.05
4,921.23
(81.02)
5,093.96
2.99
2,269.48
(92.39)
2,392.75
F-30
2008
2007
Annexure VI
Shriram City Union Finance Ltd.,
Statement of Contingent Liabilities
(Rs. In Lacs)
As on 31, March
Particulars
2011
2010
2009
2008
2007
Guarantees issued by the Company and out standing
6.81
6.81
6.81
6.81
6.81
1942.77
1942.77
3117.77
-
Guarantees issued by Others
-
In respect of assets securitized
-
-
-
-
16.69
In respect of derivative transaction
-
-
-
-
9.97
F-31
Annexure VII
Shriram City Union Finance Ltd.,
Statement of Dividend in respect of Equity Shares
Particulars
2011
2010
2009
2008
2007
Interim
Rate of Dividend
25%
20%
10%
10%
10%
49449939
49113850
45850000
39100000
27100000
1236.25
982.28
501.85
391.00
271.00
205.33
166.94
85.28
66.45
38.01
16.609%
16.995%
16.995%
16.995%
14.025%
35%
30%
30%
30%
20%
49536877
49154700
45856800
41155000
39100000
1733.79
1474.64
1375.92
1332.15
782.00
16.2225%
16.609%
16.995%
16.995%
16.995%
281.26
244.92
233.84
226.40
132.90
Number of Equity Shares on which
interim dividend paid
Amount of Interim Dividend
Dividend Distribution tax
Dividend Distribution tax Rate
Proposed Final Dividend for the Current Year
Rate of Dividend
Number of Equity Shares on which
final dividend paid
Amount of Final Dividend
Dividend Distribution tax Rate
Dividend Distribution tax
Note: For the year 2009 interim dividend includes 30% final dividend of 433500 (No. of shares 1445000)
F-32
Annexure VII
Shriram City Union Finance Ltd.,
Statement of Dividend
Statement of Dividend in respect of Preference Shares
Particulars
2011
2010
2009
2008
2007
5%
-
-
-
4210
176170
6%
-
-
2328980*
2018590
1343230
8%
-
-
-
83260
277730
9%
-
-
-
-
302350
10%
-
-
-
16270
21050
12%
-
-
-
2950
3850
13.50%
-
-
-
200000
200000
14%
-
-
-
1900
2750
15%
-
-
-
1800
1850
2328980
2328980
2328980
Amount of dividend
63.17
141.67
154.56
Dividend distribution Tax
10.74
24.07
21.96
Total shares
* During the financial year 2008-09 all Preference Shares are redeemed
F-33
Annexure VIII
Shriram City Union Finance Limited
Statement of Accounting Ratios
[Calculation of Earnings Per Share (EPS)]
Earnings per share calculation are done in accordance with Accounting Standard -20 "Earning Per
Share" notified under Accounting Standards (AS) under Companies Accounting Standard Rules, 2006,
as amended
(Rs. in Lacs)
As at March 31,
Particulars
2011
A.
Net Profit After Tax (Rs in Lacs)
B.
Less: Preference dividend including tax on dividend
(Rs in Lacs)
C.
Net Profit Attributable to Equity Shareholders
Lacs)
D.
Weighted average number of Equity Share Outstanding
during the year/ period (for Basic EPS) (Lacs)
(i) Equity Share arising on conversion of optionally
convertible warrants (Lacs)
c
E.
(ii) Equity Share for no consideration arising on grant of
Stock option under ESOP (Lacs)
d
F.
G.
Weighted average number of Equity Shares outstanding
during the year/ period (for Diluted EPS) (b+c+d) (Lacs)
H.
I.
2010
2009
2008
2007
24058.85
19425.86
11700.77
8763.5
5162.16
-
-
73.91
165.74
176.52
24058.85
19425.86
11626.86
8597.76
4985.64
493.23
471.32
451.16
391.67
302.45
-
-
59.28
1.45
0.89
8.32
10.45
7.71
2.29
-
501.55
481.77
518.15
395.41
303.34
Earnings per share (Basics) (Rs.) (a/b)
48.78
41.22
25.77
21.95
16.48
Earnings per share (Diluted) (Rs.) (a/e)
47.97
40.32
22.44
21.74
16.44
(Rs in
a
b
e
F-34
Annexure VIII
Shriram City Union Finance Limited
Statement of Accounting Ratios
Calculation of Return on Net Worth (RONW)
(Rs. in Lacs)
Particulars
As at March 31,
Schedule
2011
2010
2009
2008
2007
4953.69
4915.47
4585.68
6444.48
6238.98
-
0.71
-
-
-
1887.27
2281.04
1637.97
542.08
-
-
-
2700
232.2
560
114366.32
92803.11
62050.59
37761.03
28096.77
-
-
-
-
2.13
121207.28
100000.33
70974.24
44979.79
34893.62
24058.85
19425.86
11700.77
8763.5
5162.16
19.85%
19.43%
16.49%
19.48%
14.79%
SHAREHOLDERS FUNDS
A.
Share Capital
B.
Share Application Money Pending Allotment
C.
Stock Option Outstanding
D.
Optionally Convertible Warrants
E.
Reserve and Surplus
F.
Less: Miscellaneous Expenditure (Not
written off)
G.
Net Worth as at the end of the year/
period
H.
Net Profit after tax
I.
Return on Net Worth (Annualized) (%)
8
10
9
F-35
Annexure VIII
Shriram City Union Finance Limited
Statement of Accounting Ratios
[Calculation of Net Asset Value (NAV) Per Equity Share]
(Rs. in Lacs)
Particulars
As at March 31,
Schedule
2011
2010
2009
2008
2007
4953.69
4915.47
4585.68
6444.48
6238.98
-
0.71
-
-
-
1887.27
2281.04
1637.97
542.08
-
-
-
2700
232.2
560
114366.32
92803.11
62050.59
37761.03
28096.77
-
-
-
-
2.13
SHAREHOLDERS FUNDS
A.
Share Capital
8
B.
Share Application Money Pending
Allotment
C.
Stock Option Outstanding
D.
Optionally Convertible Warrants
E.
Reserve and Surplus
F.
Less: Miscellaneous Expenditure (Not
written off)
G.
Net Asset Value
121207.28
100000.33
70974.24
44979.79
34893.62
H.
Number of Equity shares outstanding at
the end of the year/ period
49536877
49154700
45856800
41155000
39100000
I.
Net asset Value per Equity Share (Rs.)
244.68
203.44
154.77
109.29
89.24
10
9
F-36
Annexure IX
Shriram City Union Finance Ltd.,
SECURED LOANS
A. Term loan from banks
Particulars
ANDHRA BANK
BANK OF MAHARASHTRA
CALYON BANK
Date of
Disbursement
31-Dec-08
31-Mar-11
2-Dec-10
Disbursed
amount (Rs. in
lacs)
Balance as on
March 31st
2011 (Rs. in
lacs)
Interest
Rate %
10000.00
4371.95
12.25
5000.00
3500.00
5000.00
3500.00
10.00
9.49
7500.00
20000.00
20000.00
10000.00
10000.00
20000.00
6000.00
5000.00
8000.00
1250.00
20000.00
20000.00
10000.00
10000.00
20000.00
6000.00
5000.00
8000.00
11.50
10.50
10.00
10.00
9.75
9.50
9.20
8.65
8.90
5000.00
5000.00
8.25
25000.00
20000.00
4000.00
1000.00
25000.00
20000.00
4000.00
333.28
8.75
9.50
9.50
10.50
4300.00
2866.67
8.20
2500.00
625.00
9.50
2000.00
2000.00
9.50
17-Dec-07
CANARA BANK
CANARA BANK
CANARA BANK
CANARA BANK
CORPORATION BANK
CORPORATION BANK
DBS BANK LTD
DBS BANK LTD
DBS BANK LTD
29-Jan-10
17 & 24-Sep-10
24-Sep-10
28-Dec-10
29-Mar-11
4-Mar-11
24-Sep-10
26-Oct-10
22-Mar-10
HDFC BANK
ICICI BANK
IDBI BANK
IDBI BANK
ING VYSYA BANK
22-Mar-11
22-Mar-11
22-Mar-11
26-Mar-09
25-Mar-10
ING VYSYA BANK
31-Jul-09
KARUR VYSYA BANK
ORIENTAL BANK OF
COMMERCE
ORIENTAL BANK OF
COMMERCE
31-Mar-10
28-Mar-11
10000.00
10000.00
10.00
5000.00
1397.73
12.50
1500.00
1500.00
10.50
31-Mar-09
STATE BANK OF INDORE
STATE BANK OF
MAURITIUS
7-Feb-11
F-37
Repayment terms
Repayable In 16 Quarterly
Installments
25 Crs Each at the end Of 30Jun-14 & 30-Sep-14
Bullet Payment on 02-Dec-12
35 Months 5 Half Yearly
Installments - 1.250Crs /
Installment
Bullet Payment on 18-Feb-12
Bullet Payment on 24-Aug-13
Bullet Payment on 24-Aug-13
Bullet Payment on 28-Dec-13
Bullet Payment on 29-Jun-11
Bullet Payment on 07-Oct-11
Bullet Payment on 24-Sep-13
Bullet Payment on 26-Oct-11
Tenor-18 Months(3 Equal
Installment At The End Of
12Th,15Th & 18Th)
25 Months-(Oct11, Apr12,
Oct12, Apr13 - 62.5 Crs
Bullet Payment on 22-Jun-11
Bullet Payment on 22-Jun-11
Monthly Emi 27.70 Lacs
Half Yearly
Installment(Rs.71666666) - 35
Months
Tenro-24 Months(Repaid In 4
Equal Half Yearly Installments
Of Rs.6.25 Cr)
Repayable In 24 Monthly
Installments (208.33 Lac)
In 4 Quarterly Installment Of
25 Cr-36 Months(25 Crs-Jun
13, Sep 13, Dec 13 & Mar 14)
11 Quarterly Installment(Rs.4.50Cr) And Last One
(5Cr)
8 Quarterly Installments 31.25 Million
Annexure IX
Shriram City Union Finance Ltd.
SECURED LOANS
A. Term loan from banks
Particulars
STATE BANK OF MYSORE
STATE BANK OF PATIALA
STATE BANK OF PATIALA
Date of
Disbursement
27-Nov-10
28-Feb-09
21-Dec-10
Disbursed
amount (Rs. in
lacs)
10000.00
5000.00
10000.00
Balance as on
March 31st
2011 (Rs. in
lacs)
9999.38
2000.00
10000.00
Interest
Rate %
9.50
10.25
10.75
Bullet Payment on 27-Nov-13
10 Qtrly installment (5.00 Crs)
Bullet Payment on 21-Dec-13
15000.00
15000.00
9.75
Repayment At The End Of
Every 12 Months In 3 Annual
Equal Instalments-3Years
10000.00
15000.00
15000.00
15000.00
9999.97
15000.00
15000.00
15000.00
10.50
10.00
9.75
10.50
Bullet Payment on 23-Dec-12
Bullet Payment on 03-Jan-13
Bullet Payment on 22-Nov-12
Bullet Payment on 04-Jan-13
2500.00
833.30
11.00
9000.00
8000.00
9000.00
8000.00
295677.28
10.50
9.25
22-Mar-11
STATE BANK OF PATIALA
STATE BANK OF
TRAVANCORE
SYNDICATE BANK
UNION BANK OF INDIA
UNION BANK OF INDIA
UNITED BANK OF INDIA
23-Dec-10
3-Jan-11
22-Nov-10
4-Jan-11
27-Dec-08
30-Mar-11
VIJAYA BANK
YES BANK
Total
28-Feb-11
Repayment terms
12 Quarterly Installments For
36 Months
Repayable In 36 Months With
An Initial Moratorium Period
Of 12 Months & Thereafter It
Should Be Repaid In 24 Emi
Bullet Payment on 28-Feb-14
B. Term loan from institutions
Particulars
SIDBI
Date of
disbursement
10-Aug-10
Disbursed
amount (Rs. in
lacs)
10000.00
F-38
Balance as on
March 31st
2011 (Rs. in
lacs)
6500.00
Repayment terms
10.00
Repayable on 10-Aug-13
Annexure IX
C. Cash Credit from Banks(Including WCDL)
Particulars
Date of
disbursement
Disbursed amount
(Rs. in lacs)
Balance as on March 31st
2011 (Rs. in lacs)
Interest Rate %
AXIS BANK
23-Aug-06
10000.00
9.08
11.75%
BANK OF INDIA
11-Jun-09
20000.00
10185.07
9.60%
BANK OF MAHARASHTRA
19-Mar-06
5000.00
4997.40
10.50%
CANARA BANK
24-Nov-09
5000.00
4088.27
11.00%
CENTRAL BANK OF INDIA
24-Mar-09
10000.00
3532.29
10.50%
CITY UNION BANK
10-Nov-10
1400.00
78.13
11.50%
CORPORATION BANK
28-Dec-10
5000.00
3522.68
9.75%
DBS BANK
29-Apr-10
100.00
5.91
10.00%
DENA BANK
5-Mar-07
15000.00
10713.18
10.45%
IDBI BANK
10-Oct-08
1000.00
90.30
11.25%
INDUSIND BANK
31-May-10
7500.00
120.56
10.60%
ING VYSYA BANK
23-Mar-10
500.00
5.70
10.00%
JAMMU & KASHMIR BANK LTD.,
15-Mar-11
10000.00
8013.44
11.00%
KOTAK MAHINDRA BANK
ORIENTAL BANK OF
COMMERCE
21-Aug-09
5000.00
1014.64
10.60%
5000.00
3662.67
10.00%
PUNJAB NATIONAL BANK
4-Aug-07
5000.00
9.16
13.00%
SOUTH INDIAN BANK
25-Jun-10
1000.00
40.33
12.00%
STATE BANK OF INDIA
13-Mar-09
15000.00
7539.90
12.00%
STATE BANK OF PATIALA
24-Feb-09
5000.00
48.11
12.75%
STATE OF BIKANUR AND JAIPUR
TAMILNADU MERCANTILE
BANK
8-Sep-10
100.00
40.59
11.50%
18-Sep-06
20-Aug-07
5000.00
19.89
11.50%
UNION BANK OF INDIA
25-Mar-08
5000.00
2766.09
12.00%
UNITED BANK OF INDIA
25-Mar-09
7500.00
3292.02
9.00%
YES BANK - ac 200
25-Mar-10
2000.00
10.74
11.00%
HSBC BANK
23-Dec-09
10000.00
10000.00
8.15%
HSBC BANK
23-Dec-09
5000.00
5000.00
8.05%
SOUTH INDIAN BANK
STATE BANK OF BIKANER &
JAIPUR
25-Jun-10
5000.00
4989.92
7.75%
2400.00
2400.00
9.50%
WCDL
22-Dec-10
STANDARD CHARTERED BANK
25-Oct-10
5000.00
5000.00
8.90%
CENTURION CC BANK
31-Dec-10
2400.00
2400.00
9.50%
CANARA BANK
9-Dec-10
15000.00
15000.00
9.80%
DBS
4-Mar-11
1400.00
1400.00
9.20%
FEDERAL
1-Mar-11
5000.00
5000.00
9.90%
STATE BANK OF MYSORE
18-Mar-11
4900.00
4900.00
9.30%
IDBI
22-Mar-11
15000.00
15000.00
9.50%
Total
134896.09
F-39
Annexure IX
D. Privately placed Redeemable NCD
Particulars
Date of
disbursement
Disbursed
amount (Rs. in
lacs)
Balance as on
March 31st
2011 (Rs. in
lacs)
Interest
Rate %
CORPORATION BANK
24-Sep-09
2500.00
2500.00
10.75
CENTRAL BANK OF INDIA
17-Sep-09
1000.00
1000.00
10.75
CENTRAL BANK PENSION
FUND
17-Sep-09
1000.00
1000.00
10.75
CENTRAL BANK
PROVIDENT FUND
17-Sep-09
500.00
500.00
10.75
ALLAHABAD BANK
23-Sep-09
2000.00
2000.00
10.75
A.K.CAPITAL SERVICES
BANK OF BARODA
STANDARD CHARTERED
BANK
RELIANCE MUTUAL FUND
6-Oct-09
6-Oct-09
2000.00
1000.00
2000.00
1000.00
10.75
10.75
22-Apr-10
17500.00
14583.33
7.82
5-Jul-10
7500.00
7500.00
9.00
ING VYSYA BANK
23-Nov-10
2000.00
2000.00
10.50
ING VYSYA BANK
ING VYSYA BANK
JHARKAND GRAHIM BANK
DEUTSCHE BANK
Total
13-Dec-10
13-Dec-10
4-Feb-11
30-Mar-11
1000.00
1500.00
500.00
27500.00
1000.00
1500.00
500.00
27500.00
64583.33
10.60
10.60
10.75
9.00
Repayment terms
3.5 years 1st 20% 4th year
2nd 20% 4.5 years 30% and
5th year30%
3.5 years 1st 20% 4th year
2nd 20% 4.5 years 30% and
5th year30%
3.5 years 1st 20% 4th year
2nd 20% 4.5 years 30% and
5th year30%
3.5 years 1st 20% 4th year
2nd 20% 4.5 years 30% and
5th year30%
3.5 years 1st 20% 4th year
2nd 20% 4.5 years 30% and
5th year30%
Repayable on 07-Oct-14
Repayable on 07-Oct-14
Half yearly instalment-3 years
Repayable on 05-Jan-13
In 3 Equal installments in
5th/6th/ 7th Year from
deemed date of allotment
Repayable on 13-Dec-17
Repayable on 13-Dec-17
Repayable on 04-Feb-21
Repayable on 30-Mar-17
E. Privately placed Redeemable Non Convertible Debenture of Rs. 1,000 each
Particulars
Retail Debentures
Balance as on March
31st 2011 (Rs. in lacs)
155294.31
Repayment terms
Redeemable at par over a period 12 to 160 months
F-40
Annexure X
Shriram City Union Finance Limited
UNSECURED LOANS
Particulars
Balance as on
March 31st
2011 (Rs. in
lacs)
A. Fixed Deposits
55.10
B. Subordinated Debts
53,272.33
Total
Repayment terms
Redeemable at par
over a period 12 to 60
months
Redeemable at par
over a period 60 to
216 months
53,327.43
C. Commercial Paper
Particulars
UTI MUTUAL FUND
ICICI PRUDENTIAL LIFE
INSURANCE
TATA MUTUAL FUND
CHOLAMANDALAM MS
GENERAL INSURANCE
COMPANY LTD.
TATA TRUSTEE COMPANY
LTD.
UTI - FIIF ANNUAL INTERVAL
PLAN S-III
UTI-FMP-YEARLY SERIES
Total
Date of
disbursement
Disbursed amount
(Rs. in lacs)
13-Sep-10
13-Sep-10
13-Sep-10
Balance as
on March
31st 2011
(Rs. in lacs)
Interest
Rate %
5500.00
5500.00
8.66
5000.00
5000.00
8.66
7500.00
7500.00
8.66
500.00
500.00
8.67
1500.00
1500.00
8.24
1000.00
1000.00
8.67
1500.00
1500.00
22500.00
8.67
8-Oct-10
8-Oct-10
8-Oct-10
8-Oct-10
F-41
Repayment terms
Repayable on 12Sep-11
Repayable on 12Sep-11
Repayable on 07Sep-11
Repayable on 07Oct-11
Repayable on 19Sep-11
Repayable on 07Oct-11
Repayable on 07Oct-11
Annexure XI
Shriram City Union Finance Limited
Capitalization statement
(Rs. In Lacs)
Pre Issue as at March 31,
2011 (Audited)
Particulars
As adjusted for Issue
Debt
Short Term Debt
160552.61
160552.61
Long Term Debt
572225.83
647225.83
Total
732778.44
807778.44
4953.69
4953.69
-
-
1887.27
1887.27
114366.32
114366.32
-
-
121207.28
121207.28
6.05
6.66
Shareholders Fund
Share Capital
Share Application Money pending allotment
Stock Option Outstanding
Reserve & Surplus (Refer Annexure IV - Schedule 10)
Less: Miscellaneous Expenditure
Total of Shareholders Fund
Long Term Debt / equity Ratio
F-42
Annexure - XII
Shriram City Union Finance Limited
Statement of Tax Shelter
(Rs. in Lacs)
Particulars
For the year ended
March 31
2011
Profit as per accounting books
(business)
Profit as per accounting books
(investments)
Total profit as per accounting
books
Tax rate on business income
Tax rate on investment income
Tax on accounting profit
Permanent Differences
Donation
Exempt Dividend Income
Disallowance u/s 14A
Capital gains on sale of fixed assets
Others
Sub Total (A)
Temporary Differences
Depreciation and Lease adjustments
Service tax write off
Provision for standard assets
Leave Encashment, Gratuity &
Bonus
Derivative provision
Others
Sub Total (B)
Net Adjustments (A+B)
Tax Impact on Net Adjustments
Total Taxation
Current Tax Provision for the year
For the year ended 31st March
2010
36,060.09
2009
27,225.86
2008
2007
17,973.53
12,698.46
7,943.32
17,973.53
33.99%
12,698.46
33.99%
7,943.32
33.66%
6,109.20
4,316.21
2,673.72
32.50
(56.47)
13.25
(46.06)
0.80
(65.27)
0.20
(23.77)
2,797.00
24.34
2,788.53
15.52
(48.95)
1,400.00
36,060.09
33.22%
11,978.26
28,625.86
33.99%
11.33%
9,412.69
0.50
13.94
14.44
(444.91)
500.00
2,193.38
200.00
2,448.47
0.03
(97.37)
1,804.92
859.39
783.14
516.21
173.41
25.75
7.97
994.18
140.16
811.68
(34.03)
2,560.34
5,348.87
1,818.08
6,134.29
6,134.29
23.38
1,714.89
68.30
(546.62)
199.84
1,436.44
1,450.88
481.95
12,460.21
12,460.20
(0.42)
(72.04)
2,376.43
559.42
9,972.11
9,972.11
2,807.07
2,783.30
946.04
7,055.25
7,055.25
Notes:1. Profits after tax are often affected by the tax shelters which are available.
2. Some of these are of a relatively permanent nature while others may be limited in point of time.
3. Tax provisions are also affected by timing differences which can be reversed in future.
F-43
14.42
727.42
678.47
228.37
2,902.09
2,902.09
Annexure XIII
Significant Accounting Policies
Back Ground
Shriram City Union Finance Limited (SCUFL) was incorporated on 27th March 1986, as a Private Limited
Company and became a Public Limited Company on 29th October 1988. The Company is a Non-Banking Finance
Company registered with Reserve Bank of India (RBI)
a.
Basis of preparation
The financial statements have been prepared under historical cost convention on an accrual basis and in
accordance with generally accepted accounting principles in India and specifically to comply in all material
respects with the notified Accounting Standards (AS) issued under the Companies Accounting Standard Rules
2006 and the relevant provisions of the Companies Act 1956. (‘The Act’) and the guidelines issued by the
Reserve Bank of India (‘RBI’) as applicable to a Non Banking Finance Company (‘NBFC’). The Accounting
policies are consistent with those used in the previous year.
b.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and the results of operations during the
reporting year end. Although these estimates are based upon management’s best knowledge of current events and
actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized
prospectively in the current and future years.
F-44
c.
Fixed Assets, Depreciation / Amortization and Impairment of assets
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation/amortization and impairment losses, if any. Cost
comprises the purchase price and any attributable cost of bringing the asset to its working condition for its
intended use. Borrowing costs relating to acquisition of fixed assets are included to the extent they relate to the
period till such assets are ready to be put to use.
Depreciation / Amortization
Depreciation is provided pro rata on Straight Line Method (‘SLM’), which reflect the management’s estimate of
the useful lives of the respective fixed assets and are greater than or equal to the corresponding rates prescribed in
Schedule XIV of the Act. The assets for which higher rates are applied are as follows:
Particulars
Rates (SLM)
Schedule XIV rates (SLM)
Windmills
10%
5.28%
33.33%
16.21%
Computer Software
Leasehold improvement is amortized over the primary period of lease subject to a maximum of 60 months. All
fixed assets individually costing Rs.5000 or less are fully depreciated in the year of installation.
Impairment of assets
The carrying amount of assets is reviewed at each balance sheet date if there is any indication of impairment
based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset
exceeds its recoverable amount. The recoverable amount is the greater of the assets’ net selling price and value in
use.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful
life.
A previously recognized impairment loss is increased or reversed depending on changes in circumstances.
However the carrying value after reversal is not increased beyond the carrying value that would have prevailed by
charging usual depreciation if there was no impairment.
Up to year ended March 31, 2007
Fixed Assets and Depreciation:Fixed assets have been stated at historical cost less depreciation. Depreciation has been provided under straight
line method at rates prescribed under the Companies Act, 1956. Assets costing Rs.5000/- or less are fully
depreciated in the year of purchase.
F-45
d.
Investments
Investments intended to be held for not more than a year are classified as current investments. All other
investments are classified as long-term investments. Current investments are carried at lower of cost and fair
value determined on an individual investment basis. Long Term Investments are carried at cost. Provision for
diminution in the value of long term investments is made to recognize decline in value other than temporary in
nature.
e.
Assets under financing activities
Assets under Financing Activities are stated at the amount advanced including finance charges accrued and expenses
recoverable, as reduced by the amounts received up to Balance sheet date and assets securitized. Non Performing
Assets are written off / provided for, as per management estimates, subject to the minimum provision required as per
Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions
2007.
Provision @0.25% on standard Asset is made as required under Reserve bank of India (RBI) notification No.
DNBS.222/CGM (US-2011) Dated January 17, 2011 for the year 2010-11.
Up to year ended March, 31, 2008
Provisioning / Write – off of assets
Loans, hire purchase and lease receivables are written off / provided for , as per management estimates, subject to the
minimum provision required as per Non – Banking Financial Companies Prudential Norms (Reserve Bank) Directions,
1998.
Up to the year ended March, 31, 2007
Receivables under Hire Purchase and Financial Lease Agreements
Receivables under Hire Purchase and Financial Lease Agreements are stated at agreement value including expenses
recoverable reduced by installment received and unearned finance income as required under Accounting Standard AS 19 issued by the Institute of Charted Accountants of India and shown net of assets securitized.
f.
Foreign currency translation
Foreign currency transactions are accounted at the exchange rate prevailing on the date of transactions. Foreign
currency monetary items on the Balance Sheet date are restated at the closing exchange rates. All Exchange
differences are dealt within the profit & loss account.
F-46
g.
Revenue recognition
i.
Income from Financing Activities is recognised on the basis of internal rate of return. This includes
Additional Finance Charges which is accounted when received because of uncertainty of realization.
ii.
Gain arising on securitization/direct assignment of assets is recognized over the tenure of agreements as
per guideline on securitization of standard assets issued by RBI. Loss (if any) is recognized upfront.
iii.
The Prudential norms for income recognition prescribed under Non-Banking Financial (Deposit Accepting
or Holding) Companies Prudential Norms (Reserve Bank) Directions 2007 are followed.
iv.
Income from services is recognized as per the terms of the contract on accrual basis.
v.
Interest Income on deposit accounts with banks is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
vi.
Dividend is recognized as Income when right to receive is established by the date of balance sheet.
vii.
Profit / Loss on sale of investments is recognized at the time of actual sale / redemption.
Up to the year ended March 31, 2010
Income from power generation is recognized on supply of power to the grid as per the terms of the Power
Purchase Agreements with State Electricity Boards.
Up to the year ended March 31, 2007
Income from financial lease is recognized on the basis of Internal Rate of Return and the
corresponding assets are booked as receivable in accordance with Accounting Standard AS-19
issued by the institute of Chartered Accountants of India. Lease rentals is respect of assets leased
up to 31.03.2011are recognized as per “Guidance Note on Accounting for Leases (Revised)”
issued by the Institute of Chartered Accountants of India and in respect of these assets lease
equalization/adjustment accounts are created for the shortfall in capital recovery and adjusted in
lease rental income/fixed assets. Interest on Hypothecation loans, Personal loans, Microfinance
and Hire Purchase finance charges are recognized on the basis of Internal Rate of Return.
Additional finance charges are treated to accrue only on realization, due to uncertainty of
realization and are accounted for accordingly.
F-47
h.
Employee benefits
Provident Fund
All the employees of the Company are entitled to receive benefits under the Provident Fund, a defined contribution
plan in which both the employee and the Company contribute monthly at a stipulated rate. The Company has no
liability for future Provident Fund benefits other than its annual contribution and recognizes such contributions as
an expense in the year it is incurred.
Gratuity
The Company provides for the gratuity, a defined benefit retirement plan covering all employees. The plan
provides for lump sum payments to employees at retirement, death while in employment or on separation from
employment as per Provisions of payment of Gratuity Act 1972 . The Company accounts for liability of future
gratuity benefits based on an external actuarial valuation on projected unit credit method carried out annually for
assessing liability as at the balance sheet date.
Leave Encashment
Short term compensated absences are provided for based on estimates. Long term compensated absences are
provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.
Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.
i.
Income Tax
Tax expense comprises of current tax, deferred tax and fringe benefit tax. Current income tax and fringe benefit
tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax
Act, 1961. Deferred income taxes reflects the impact of current year timing differences between taxable income
and accounting income for the year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance
sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient
future taxable income will be available against which such deferred tax assets can be realized. In situations where
the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if
there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
The un-recognized deferred tax assets are re-assessed by the Company at each balance sheet date and are
recognized to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient
future taxable income will be available against which such deferred tax assets can be realized.
The carrying cost of the deferred tax assets are reviewed at each balance sheet date. The Company writes down
the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain,
as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be
realized. Any such write down is reversed to the extent that it becomes reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be available.
F-48
j. Segment reporting
The company operates in one reportable segment.
k. Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity
shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding
during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity
shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects
of all dilutive potential equity shares.
l.
Cash and cash equivalents
Cash and cash equivalents in the cash flow statement which is prepared in accordance with Accounting Standard (AS)
3 issued by the Institute of Chartered Accountants of India(ICAI) comprise cash at bank, cash in hand and short term
investments with an original maturity of three months or less.
m. Expenses on deposits / debentures
Expenses on mobilization of deposits / debentures are charged to Profit & Loss account in the year in which they are
incurred.
Upto year ended March, 31 2007
Expenses on mobilization of deposits / debenture have been charges to Profit & Loss account in the year in which
they are incurred. However, expenses incurred up to 31st March 2003 are charged to Profit and Loss Account on the
basis of duration of deposits / debenture.
n.
Provisions
A provision is recognized when the Company has a present obligation as a result of past event; it is probable that
outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.
Provisions are not discounted to its present value and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current
best estimates.
o.
Derivative instruments
Accounting for derivative contracts, other than those covered under AS-11, are marked to market and the net loss
after considering the offsetting effect on the underlying hedge item is charged to profit and loss account. Net gains
are ignored.
F-49
p.
Employee stock compensation costs
Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note
on Accounting for Employee Share-based Payments, issued by the ICAI. The Company measures compensation
cost relating to employee stock options using the intrinsic value method. Compensation expense is amortized over
the vesting period of the option on a straight line basis.
Up to year ended March. 31, 2007
l.
Equity Shares and Preference Shares Issue Expenses
Equity Shares and Preference Shares and Debenture issue Expenses are written off over a period of 10 years.
Up to the year ended March 31, 2010
m. Leases
Assets taken on operating lease are not capitalized in the books of the Company and the lease rental payments are
charged to Profit and Loss accounts.
F-50
2010 - 2011
2. Notes to Accounts
1.
Particulars of Secured Loans
a) Privately placed Redeemable Non-convertible Debentures of Rs.1, 000/- each (Retail)
As at March 31,2011
Number
As at March 31,2010
Amount
Number
Amount (Rs. in lacs)
1,34,07,377
1,34,073.77
(Rs. in lacs)
1,55,29,431
1,55,294.31
Secured by equitable mortgage of title deeds of immovable property. Further secured by charge on plant and
machinery, furniture and other fixed assets of the Company, charge on Company’s hypothecation loans, other loans,
advances and investments of the Company subject to prior charges created or to be created in favor of the Company’s
bankers, financial institutions and others.
These Debentures are redeemable at par over a period of 12 months to 160 months from the date of allotment depending
on the terms of the agreement. The earliest date of redemption is April 1, 2011 (March 31, 2010; April 1, 2010). The
last date of redemption is October 25, 2017 (March 31, 2010; October 25, 2017).
Debentures may be bought back subject to applicable statutory and /or regulatory requirements, upon the terms and
conditions as may be decided by the Company. The Company may grant loan against the security of Non Convertible
Debentures upon the terms and conditions as may be decided by the Company and subject to applicable statutory and/or
regulatory requirements.
F-51
b) Privately Placed Redeemable Non-Convertible Debenture (Institutional)
Amount (Rs. In lacs)
Date of
Allotment/renewal
23.04.2009
24.09.2009
17.09.2009
17.09.2009
17.09.2009
23.09.2009
06.10.2009
06.10.2009
22.04.2010
05.07.2010
23.11.2010
13.12.2010
13.12.2010
04.02.2011
30.03.2011
Total
Face
Value
100000
100000
100000
100000
100000
100000
100000
100000
1000000
1000000
1000000
1000000
1000000
1000000
1000000
Number
As at
March
31, 2011
1000
2500
1000
1000
500
2000
2000
2000
1458
750
200
100
150
50
2750
As at
March
31, 2010
-
2500.00
1000.00
1000.00
500.00
2000.00
2000.00
1000.00
14583.33
7500.00
2000.00
1000.00
1500.00
500.00
27500.00
64583.33
10000.00
2500.00
1000.00
1000.00
500.00
2000.00
2000.00
1000.00
20000.00
Redeemable at par on
23.04.2010
30.09.2014
30.09.2014
30.09.2014
30.09.2014
30.09.2014
07.10.2014
07.10.2014
22.04.2013
05.01.2013
23.11.2017
13.12.2017
13.12.2017
04.02.2021
30.03.2017
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and equitable
mortgage of title deeds of immovable property.
F-52
c) Term Loans:
i.
From Financial Institutions/Corporate :
Secured by an exclusive charge by way of hypothecation of assets under
financing.
Total
ii.
As at March 31
2011
(Rs. In lacs)
As at March 31
2010
6500.00
9530.00
6500.00
9530.00
295677.28
104634.17
295677.28
104634.17
From Banks :
Secured by an exclusive charge by way of hypothecation of assets
under financing.
Total
d) Cash Credit from Banks
(Rs. In lacs)
As at March 31
2011
Cash Credit from Banks
As at March 31 2010
134896.09
145372.61
Secured by an exclusive charge by way of hypothecation of receivables relating to assets under financing.
2.
Subordinated Debt
The Company has as on 31.03.2011 subordinated debt bonds amounting to Rs. 53272.33 Lacs (March 31,2010:
Rs. 53002.95 Lacs) with coupon rate of 7.00% to 13.00% Per annum which are redeemable over a period of 60
month to 216 month.
3.
Gratuity and other post-employment benefit plans:
The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five years or
more of service gets a gratuity on separation at 15 days basic salary (last drawn salary) for each completed year of
service
Consequent to the adoption of revised AS 15 ‘Employee Benefits’ issued by the ICAI the following
disclosures have been made as required by the standard:
F-53
Profit and Loss account
Net employee benefit expense (recognized in Employee Cost)
(Rs. in Lacs)
Gratuity
Particulars
March 31 2011
Current service cost
Interest cost on benefit obligation
Expected return on plan assets
Net actuarial (gain) / loss recognized in the year
Past service cost
Net benefit expense
Actual return on plan assets
March 31 2010
4.84
21.49
12.44
12.38
N.A
N.A
23.23
(19.27)
NIL
NIL
40.51
14.60
N.A
N.A
Balance sheet
Details of Provision for gratuity
(Rs in Lacs)
Gratuity
Particulars
March 31 2011
Defined benefit obligation
Fair value of plan assets
Total
Less: Unrecognized past service cost
Plan asset / (liability)
F-54
March 31 2010
196.34
155.52
N.A
N.A
196.34
155.52
NIL
NIL
(196.34)
(155.52)
Changes in the present value of the defined benefit obligation are as follows:
(Rs. In Lacs)
Gratuity
Particulars
March 31 2011
Opening defined benefit obligation
Interest cost
Current service cost
155.52
139.64
12.44
12.38
4.84
21.49
--
1.28
23.54
(19.27)
196.34
155.52
Benefits paid
Actuarial (gains) / losses on obligation
Closing defined benefit obligation
March 31 2010
The Company would not contribute any amount to gratuity in 2011-12 as the scheme is unfunded.
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
(Rs. In Lacs)
Gratuity
Particulars
Investments with insurer
March 31 2011
March 31 2010
%
%
NA
NA
The principal assumptions used in determining gratuity obligations for the company’s plan are shown
below:
(Rs.
In
Lacs)
Gratuity
Particulars
March 31 2011
8.25%
March 31 2010
7.75%
Increase in compensation cost
5.00%
5.00%
Employee Turnover
2.00%
3.25%
Discount Rate
F-55
The estimates of future salary increases considered in actuarial valuation, are on account of inflation,
seniority, promotion and other relevant factors such as supply and demand in the employment market.
Amounts for the current and previous years are as follows:
Particulars
March 31 2011
March 31 2010
March 31 2009
196.34
155.52
139.64
133.18
N.A
N.A
N.A
N.A
(196.34)
(155.52)
(139.64)
(133.18)
Experience adjustment on Plan
Liabilities
(29.63)
(19.27)
(39.51)
53.10
Experience adjustment on Plan
Assets
N.A
N.A
N.A
N.A
Defined Benefit obligation
Plan Assets
Surplus/Deficit
March 31 2008
4. Related Party Disclosures
Related Parities have been identified by the Management and relied upon by the auditors.
Subsidiary
:
Shriram Housing Finance Limited (from 9th November 2010)
Shriram Non-Conventional Energy Limited (till 26th June 2009)
Enterprises having significant
influence over the Company
:
Shriram Enterprise Holdings Private Limited
Shriram Retail Holdings Private Limited
Shriram Capital Limited
Shriram Ownership Trust
TPG India Investments I Inc.
Key Managerial Personnel
:
R Kannan Managing Director
F-56
(Rs. in Lacs)
Enterprises having
significant influence
over the Company
2011
Subsidiary
2010
2011
Total
2010
2011
2010
-
Payments
Royalty
338.15#
304.08*
-
-
338.15#
304.08*
Data Sourcing fees
206.40#
160.53*
-
-
206.40#
160.53*
1238.39#
963.15*
-
-
1238.39#
963.15*
Reimbursement of Business Promotion
Expenses
33.09 *
44.12*
-
-
33.09*
44.12*
Equity dividend
985.68$
896.07$
-
-
985.68$
896.07$
Equity dividend
470.59@
334.38@
-
-
470.59@
334.38@
-
-
250.00^
-
250.00^
--
-
1900.00*
-
-
-
1900.00*
Share Capital
1792.15*
1792.15#
-
-
1792.15*
1792.15#
Share Capital
855.62@
855.62@
-
-
855.62@
855.62@
Investment in Shares
-
-
250.00^
-
250.00^
-
Outstanding Expenses
-
41.84*
Service Charges
Investments in Equity shares
Receipts
Sale of investments
Balance outstanding at the year end
*
Denotes transactions with Shriram Capital Limited
$
Denotes transactions with Shriram Enterprise Holdings Private Limited
@
Denotes transactions with Shriram Retail Holdings Private Limited
#
^
Denotes transactions with Shriram Ownership Trust Limited
Denotes transactions with Shriram Housing Finance Limited
5.
-
41.84*
In accordance with the Reserve Bank of India circular no. RBI/2006-07/225 DNBS (PD) C.C
No.87/03.02.2004/2006-07 dated January 4,2007, the Company has created a floating charge on the statutory
liquid assets comprising of investment in Government Securities to the extent of Rs. 101.45 Lacs ( March
31,2010: Rs: 101.45Lacs) in favour of trustees representing the public deposit holders of the Company.
F-57
6.
(Rs. in lacs)
Earnings per share
Particulars
Year ended March 31
2010
Year ended
March 31 2011
Net Profit after tax and Share of loss of Associates as per profit
and loss account (Rs. in lacs)(A)
24058.85
19425.86
Weighted average number of equity shares for calculating Basic
EPS (in lacs) (B)
493.23
471.32
Weighted average number of equity shares for calculating Diluted
EPS (in lacs) (C)
501.55
481.77
Basic earnings per equity share (in Rupees) (Face value of Rs. 10/per share) (A) / (B)
48.78
41.22
Diluted earnings per equity share (in Rupees) (Face value of Rs.
10/- per share) (A) / (C)
47.97
40.32
(Rs. in lacs)
Year ended March
31 2010
Year ended March
31 2011
Particulars
Weighted average number of equity shares for calculating EPS (in
lacs)
493.23
471.32
Add : Equity shares arising on conversion of optionally convertible
warrants (in lacs)
-
--
Add : Equity shares for no consideration arising on grant of stock
options under ESOP (in lacs)
8.32
10.45
Weighted average number of equity shares in calculation diluted
EPS (in lacs)
501.55
481.77
Deferred Tax Liabilities /Asset (Net)
The breakup of deferred tax asset / liabilities is as under:-
(Rs. in lacs)
Particulars
As at March 31 2011
As at March 31 2010
Differences in depreciation in block of fixed assets as per tax
books and financial books
85.63
92.32
Gross Deferred Tax Liabilities (A)
85.63
92.32
Deferred Tax Liabilities
Timing difference on account of :
F-58
Deferred Tax Asset
Timing difference on account of :
Service Tax Provision
515.90
527.89
Additional Provision against standard assets
569.65
0.00
Leave Encashment Provision
18.01
9.09
Gratuity Provision
65.22
52.86
418.29
613.81
Bonus Provision
13.78
11.42
Estimated Disallowances
66.44
Derivative Provision
Gross Deferred Tax Assets (B)
Deferred Tax Liabilities/(Asset) (Net) (A-B)
1667.29
1215.02
(1581.66)
(1122.70)
(Rs. in lacs)
8.
As at March 31
2011
Capital commitments
Estimated amount of contracts remaining to be executed on
capital account and not provided for (net of advances)
As at March 31 2010
61.78
2.80
(Rs. in lacs)
9.
Contingent Liabilities not provided for
a.
Guarantees issued by the Company
b.
Guarantees issued by others
10.
As at March 31
2011
As at March 31 2010
6.81
6.81
1942.77
1942.77
Income Tax/Wealth Tax/Service Tax/Fringe Benefit Tax
Disputed Wealth Tax/Service Tax demands contested in appeal as on March 31st , 2011. Wealth tax – Rs.
176.00 lacs (March 31st 2010: Rs.176 lacs)
Service Tax - Rs.1553.08 Lacs (March 31st 2010: Rs.1553.08 lacs)
However provision is made in the books for any liability that may arise.
11. Employee Stock Option Plan:
Date of grant
October 19 2007
Date of Board Approval
October 19 2007
Date of Shareholder’s approval
October 30 2006
Number of options granted
1355000
F-59
Method of Settlement (Cash/Equity)
Equity
Graded vesting period:
After 1 year of grant date
10% of options granted
After 2 years of grant date
20% of options granted
After 3 years of grant date
30% of options granted
After 4 years of grant date
40% of options granted
Exercisable period
10 years from vesting date
Vesting Conditions
on achievement of pre –determined targets
The details of Stock Option Plan are summarized below:
As at March 31 2011
Number of
Shares
Outstanding at the beginning of the year
As at March 31 2010
Weighted
Average
Exercise
Price(Rs.)
1272800
Number of
Shares
1320700
35.00
27500
-
-
Less: Forfeited during the year
-
-
-
Less: Exercised during the year
382177
47900
35.00
-
-
1272800
35.00
-
-
Add: Granted during the year
Less: Expired during the year
35.00
Weighted Average
Exercise Price(Rs.)
35.00
-
Outstanding at the end of the year
918123
35.00
Exercisable at the end of the year
-
Weighted average remaining contractual life
(in years)
-
9.55
-
10.55
Weighted average fair value of options
granted
-
227.42
-
227.42
The details of exercise price for stock options outstanding at the end of the year are:
Range of
exercise
prices(Rs.)
No. of options
outstanding
Weighted average
remaining
contractual life of
options (in years)
Weighted average
Exercise Price(Rs.)
March 31 2011
35
9,18,123
9.55
35
March 31 2010
35
12,72,800
10.55
35
As at
F-60
Stock Options granted
The weighted average fair value of stock options granted was Rs.227.42. The Black Scholes model has been used for
computing the weighted average fair value of options considering the following inputs:
Yr 1
Yr 2
Yr 3
Yr 4
Exercise Price (Rs.)
35.00
35.00
35.00
35.00
Expected Volatility (%)
55.36
55.36
55.36
55.36
NA
NA
NA
NA
Life of the options granted (Vesting and exercise period) in
years
1.50
2.50
3.50
4.50
Expected dividends per annum (Rs.)
3.00
3.00
3.00
3.00
Average risk-free interest rate (%)
7.70
7.67
7.66
7.67
Expected dividend rate (%)
0.84
0.84
0.84
0.84
Historical Volatility
The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank Nifty
which is considered as a comparable peer group of the Company. To allow for the effects of early exercise it was
assumed that the employees would exercise the options within six months from the date of vesting in view of the
exercise price being significantly lower than the market price.
Effect of the employee share-based payment plans on the profit and loss account and on its financial position:
(Rs. in lacs)
Compensation cost pertaining to equity-settled employee share-based
payment plan included above
Liability for employee stock options outstanding as at year end
Deferred compensation cost
F-61
As at March 31
2011
As at March 31 2010
471.68
751.53
2079.09
2882.26
191.82
601.22
Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings per
share by applying the fair value based method is as follows:
In March 2005,the ICAI issued a guidance note on “Accounting for Employees Share Based Payments” applicable to
employee based share plan the grant date in respect of which falls on or after April 1 2005. The said guidance note
requires that the proforma disclosures of the impact of the fair value method of accounting of employee stock
compensation accounting in the financial statements. Applying the fair value based method defined in the said
guidance note the impact on the reported net profit and earnings per share would be as follows:
Year ended March
31 2011
Profit as reported (Rs. in lacs)
(Rs. in lacs)
Year ended March 31
2010
24058.85
19425.86
Add: Employee stock compensation under intrinsic value
method (Rs. in lacs)
471.68
751.53
Less: Employee stock compensation under fair value method
(Rs. in lacs)
473.70
754.75
24056.83
19422.64
-
-
24056.83
19422.64
- As reported
48.78
41.22
- Proforma
48.77
41.21
- As reported
47.97
40.32
- Proforma
47.96
40.31
Proforma profit (Rs. in lacs)
Less Preference Dividend
Proforma Net Profit for Equity Shareholders
Earnings per share
Basic (Rs.)
Diluted (Rs.)
F-62
12. Securitization
The information on securitization & direct assignment activity of the Company as an originator for the year March
31 2011 and March 31 2010 is given below:
Year ended March
31 2011
Total number of assets securitized
Year ended March 31
2010
178502
146402
Total book value of assets securitized (Rs. in lacs)
117915.72
30000.00
Sale consideration received for the securitised assets (Rs. in
lacs)
126737.01
30000.00
27163.76
2554.73
15436.40
7373.57
1900.63
2735.13
Net gain on account of securitization (Rs. in lacs)
Outstanding
credit
banks/corporate
enhancement-
Deposit
with
Outstanding Credit enhancement – Assets under financing
13.
Derivative Instruments:
The Notional principal amount of derivative transactions outstanding as on March 31 2011 for interest rate
swaps Rs.12500 lacs (March 31 2010 – 12500 lacs).
14.
Supplementary Statutory Information
14.1
Managing Director’s Remuneration
The computation of profits under section 349 of the Act has not been given as no remuneration / commission
is payable to the Managing Director.
(Rs.in lacs)
14.2
Expenditure in foreign currency (On cash basis)
Year ended March
31 2011
0.09
Subscription Fees
15.
Year ended March 31
2010
0.08
Additional information pursuant to the provisions of paragraphs 3 4C and 4D of Part II of schedule VI
to the Act
The Company does not have licensed capacity as it is a Non Banking Finance Company.
16.
Previous Year Comparatives
The figures for the previous year have been regrouped and reclassified, wherever necessary to conform to current
year’s classification.
F-63
2009 – 2010
2. Notes to Accounts
1.
Particulars of Secured Loans
a) Privately placed Redeemable Non-convertible Debentures
(Retail)
As at March 31,2010
Face Value
Number
(Rs.)
As at March 31,2009
Amount
Number
Amount (Rs.in
lacs)
1,00,74,110
1,00,741.10
(Rs.in lacs)
1,000
1,34,07,377
1,34,073.77
These Debentures are redeemable at par over a period of 12 months to 160 months from the date of allotment depending
on the terms of the agreement. The earliest date of redemption is 01.04.2010 (March 31,2009; 01.04.2009). The last
date of redemption is 25.10.2017 (March 31, 2009; 25.10.2017).
b) Privately Placed Redeemable Non-Convertible Debenture (Institutional)
Amount (Rs. in lacs)
Date of
Allotment/renewal
Face
Value
Number
As at
March
31, 2010
As at
March
31, 2009
Redemption date
28.03.2008
1,000
5,00,000
-
5,000.00
15.04.2009
28.05.2008
1,000
12,50,000
-
12,500.00
28.10.2009
17.12.2008
10,00,000
950
-
9,500.00
17.12.2009
23.04.2009
10,00,000
1,000
10,000.00
-
23.04.2010
24.09.2009
10,00,000
250
2,500.00
-
30.09.2014
17.09.2009
10,00,000
100
1,000.00
-
30.09.2014
17.09.2009
10,00,000
100
1,000.00
-
30.09.2014
17.09.2009
10,00,000
50
500.00
-
30.09.2014
23.09.2009
10,00,000
200
2,000.00
-
30.09.2014
06.10.2009
10,00,000
200
2,000.00
-
07.10.2014
06.10.2009
10,00,000
200
1,000.00
-
07.10.2014
20,000.00
27,000.00
Total
These Debentures are redeemable at par at respective dates given above.
F-64
c) All Debentures under (a) and (b) above are secured by exclusive mortgage of office premise and further secured by
charge on Plant and Machinery, Furniture and other fixed assets of the Company, charge on Company’s book debts,
loans, advances and other investments of the Company subject to prior charges created or to be created in favour of
the Company’s bankers, financial institutions and others.
d) Term Loans:
As at March 31,
2010
i.
(Rs. in lacs)
As at March 31,
2009
From Financial Institutions/Corporate:
(a)
(b)
Secured by an exclusive charge by way of
hypothecation of assets under financing.
9,530.00
9,103.00
--
323.40
9,530.00
9,426.40
Secured by an exclusive charge by way of
hypothecation of specific charge on Land, Plant &
Machinery and Receivables relating to the
Windmills
Total
(Rs. in lacs)
As at March 31,
2010
ii.
As at March 31,
2009
From Banks :
(a)
Secured by an exclusive charge by way of
hypothecation of assets under financing.
1,04,634.17
1,40,150.93
Secured by an exclusive charge by way of
hypothecation of specific charge on Land, Plant &
Machinery and Receivables relating to the Windmills
--
1,448.70
Secured by an exclusive charge by way of
hypothecation of specific charge on Land, Plant &
Machinery relating to the Bio Mass Plant
--
1,963.11
104634.17
1,43,562.74
(b)
(c)
Total
F-65
e) Cash Credit from Banks
(Rs. in lacs)
As at March 31,
2010
Cash Credit from Banks
As at March 31,
2009
1,45,372.61
1,09,715.19
Secured by an exclusive charge by way of hypothecation of receivables relating to assets under financing.
2.
Gratuity and other post-employment benefit plans:
The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five years or
more of service gets a gratuity on separation at 15 days salary (last drawn salary) for each completed year of
service.
Consequent to the adoption of revised AS 15 ‘Employee Benefits’ issued by the ICAI, the following disclosures
have been made as required by the standard :
Profit and Loss account
Net employee benefit expense (recognized in Employee Cost)
(Rs. in lacs)
Gratuity
Particulars
March 31, 2010
March 31, 2009
Current service cost
21.49
35.29
Interest cost on benefit obligation
12.38
13.37
N.A
N.A
(19.27)
(39.51)
NIL
NIL
14.60
9.15
N.A
N.A
Expected return on plan assets
Net actuarial (gain) / loss recognized in the year
Past service cost
Net benefit expense
Actual return on plan assets
F-66
Balance sheet
Details of Provision for gratuity
(Rs in Lacs)
Gratuity
Particulars
March 31, 2010
Defined benefit obligation
155.52
139.64
N.A
N.A
155.52
139.64
NIL
NIL
(155.52)
(139.64)
Fair value of plan assets
Total
Less: Unrecognized past service cost
Plan asset / (liability)
March 31, 2009
Changes in the present value of the defined benefit obligation are as follows:
(Rs. in Lacs)
Gratuity
Particulars
March 31, 2010
Opening defined benefit obligation
March 31, 2009
139.64
133.18
Interest cost
12.38
13.37
Current service cost
21.49
35.29
1.28
(2.69)
Actuarial (gains) / losses on obligation
(19.27)
(39.51)
Closing defined benefit obligation
155.52
139.64
Benefits paid
The Company would not contribute any amount to gratuity in 2010-11 as the scheme is unfunded.
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
(Rs. In Lacs)
Gratuity
Particulars
Investments with insurer
March 31, 2010
March 31, 2009
%
%
NA
NA
The principal assumptions used in determining gratuity obligations for the company’s plan are shown
below:
F-67
(Rs. In Lacs)
Gratuity
Particulars
March 31, 2010
7.75%
March 31, 2009
7.75%
Increase in compensation cost
5.00%
5.00%
Employee Turnover
3.25%
3.25%
Discount Rate
The estimates of future salary increases, considered in actuarial valuation, take account of inflation,
seniority, promotion and other relevant factors, such as supply and demand in the employment market
Amounts for the current period are as follows:
Particulars
(Rs. in lacs)
March 31, 2010
Defined benefit obligation
Experience adjustments on plan liabilities
March 31, 2008
155.52
139.64
133.18
N.A
N.A
N.A
(155.52)
(139.64)
(133.18)
(19.27)
(39.51)
53.10
N.A
N.A.
N.A
Plan assets
Surplus / (deficit)
March 31, 2009
Experience adjustments on plan assets
3. Related Party Disclosures
Related Parities have been identified by the Management and relied upon by the auditors.
Subsidiary
:
Shriram Non-Conventional Energy Limited (till 26th June 2009)
Enterprises having significant
influence over the Company
:
Shriram Enterprise Holdings Private Limited
Shriram Retail Holdings Private Limited
Shriram Capital Limited
Shriram Ownership Trust
TPG India Investments I Inc.
Key Managerial Personnel
:
R Kannan, Managing Director
F-68
(Rs. In Lacs)
Enterprises having
significant influence over
the Company
2010
2009
Subsidiary
2010
Total
2009
2010
2009
Payments
Royalty
304.08*
269.55*
-
-
304.08*
269.55*
Data Sourcing fees
160.53*
135.70*
-
-
160.53*
135.70*
Service Charges
963.15*
814.18*
-
-
963.15*
814.18*
-
-
-
44.12*
-
-
-
44.12*
-
Equity dividend
896.07#
716.86#
-
-
896.07#
716.86#
Equity dividend
334.38@
217.67@
-
-
334.38@
217.67@
Investments in shares
-
-
-
-
Loan to Subsidiary
-
- 4,392.66^
4,392.66^
Equity dividend
Reimbursement
of
Promotion Expenses
Business
-
-
-
-
-
-
-
-
-
-
1,400.00@
-
-
1,400.00@
2,080.80#
-
-
2,080.80#
Interest Received
-
78.00^
78.00^
Balance outstanding at the year
end
-
Receipts
Sale of investments
1,900.00*
Subscription of equity shares
Subscription
to
convertible warrants
optionally
Conversation of Warrants
Equity / Securities Premium
into
1,900.00*
-
Share Capital
1,792.15#
1,792.15#
-
1,792.15#
1,792.15#
Share Capital
855.62@
544.17@
-
855.62@
544.17@
Share Warrants
-
1,400.00@
-
-
1,400.00@
Investment in Shares
-
-
5.00^
41.84*
60.90*
Outstanding Expenses
Interest receivable
Subsidiary
41.84*
on
Loan
60.90*
to
-
F-69
5.00^
60.32^
60.32^
*
Denotes transactions with Shriram Capital Limited
#
Denotes transactions with Shriram Enterprise Holdings Private Limited
@
Denotes transactions with Shriram Retail Holdings Private Limited
^
Denotes transactions with Shriram Non Conventional Energy Limited
(Rs. In Lacs)
4. Earnings Per Share
Year ended
March 31, 2010
19,425.86
Year (ended
March 31, 2009
11,700.77
0.00
73.91
19,425.86
11,626.86
Weighted average number of equity shares for calculating Basic EPS (in lacs) (B)
471.32
451.16
Weighted average number of equity shares for calculating Diluted EPS (in lacs)
(C)
481.77
518.15
Basic earnings per equity share (in Rupees) (Face value of Rs. 10/- per share) (A)
/ (B)
41.22
25.77
Diluted earnings per equity share (in Rupees) (Face value of Rs. 10/- per share)
(A) / (C)
40.32
22.44
Year ended
March 31, 2010
(Rs. in lacs)
Year ended
March 31, 2009
471.32
451.16
Add : Equity shares arising on conversion of optionally convertible warrants (in
lacs)
--
59.28
Add : Equity shares for no consideration arising on grant of stock options under
ESOP (in lacs)
10.45
7.71
481.77
518.15
Particulars
Net Profit after tax as per profit and loss account (Rs. in lacs)
Less : Preference Dividend
Net Profit for Equity Shareholders (A)
Particulars
Weighted average number of equity shares for calculating EPS (in lacs)
Weighted average number of equity shares in calculation diluted EPS (in lacs)
F-70
5.
Deferred Tax Liabilities/(Asset) (Net)
(Rs. in lacs)
The breakup of deferred tax asset / liabilities is as under:-
As at March 31,
2010
As at March 31,
2009
Differences in depreciation in block of fixed assets as per tax books
and financial books
92.32
881.85
Gross Deferred Tax Liabilities (A)
92.32
881.85
Expenses disallowed under Income Tax Act, 1961
601.20
581.09
Provision for hedging contracts
613.81
613.81
Gross Deferred Tax Assets (B)
1,215.02
1,194.90
(1,122.70)
(313.05)
Deferred Tax Liabilities
Timing difference on account of :
Deferred Tax Asset
Timing difference on account of :
Deferred Tax Liabilities/(Asset) (Net) (A-B)
(Rs. in lacs)
6.
As at March 31,
2010
Capital commitments
Estimated amount of contracts remaining to be executed on capital account
and not provided for (net of advances)
2.80
As at March 31,
2009
NIL
(Rs. in lacs)
7.
Contingent Liabilities not provided for
Guarantees issued by the Company
Guarantees issued by others
As at March 31,
2010
As at March 31,
2009
6.81
6.81
1,942.77
3,117.77
Income Tax/Wealth Tax/Service Tax/Fringe Benefit Tax
Disputed Income tax/Wealth Tax/Service Tax/Fringe Benefit Tax demands contested in appeal as on March 31st,
2010 amount to Rs.1,553.08 lacs (March 31st 2009: Rs.1,554.83 lacs. However provision is made in the books for
any liability that may arise.
F-71
8.
The Company during the year converted 32,50,000 warrants issued on preferential basis into equity shares
of Rs.10/- each at a premium of Rs.390/-. The company forfeited 35,00,000 warrants for non exercise of
option and the amount of Rs.1,400 lacs was transferred to Capital Reserve.
9.
Employee Stock Option Plan
Series I
Date of grant
October 19, 2007
Date of Board Approval
October 19, 2007
Date of Shareholder’s approval
October 30, 2006
Number of options granted
13,27,500
Method of Settlement (Cash/Equity)
Equity
After 1 year of grant date
10% of options granted
After 2 years of grant date
20% of options granted
After 3 years of grant date
30% of options granted
After 4 years of grant date
40% of options granted
Exercisable period
10 years from vesting date
Vesting Conditions
on achievement of pre –determined targets
F-72
The details of Series I have been summarized below:
As at March 31, 2010
Number of
Shares
Outstanding at the beginning of the year
As at March 31, 2009
Weighted
Average
Exercise
Price(Rs.)
Number of
Shares
Weighted Average
Exercise Price(Rs.)
13,20,700
35.00
Nil
-
Add: Granted during the year
-
-
13,27,500
35.00
Less: Forfeited during the year
-
-
Nil
-
Less: Exercised during the year
47,900
35.00
6,800
35.00
Nil
-
Nil
-
Outstanding at the end of the year
12,72,800
35.00
13,20,700
35.00
Exercisable at the end of the year
-
-
-
-
Weighted average remaining contractual life
(in years)
-
10.55
-
11.55
Weighted average fair value of options granted
-
227.42
-
227.42
Less: Expired during the year
The details of exercise price for stock options outstanding for Series I at the end of the year are:
As at
Range of
exercise
prices
Number of options
outstanding
Weighted average
remaining contractual life
of options (in years)
Weighted average
exercise price
March 31, 2010
Rs.35/-
12,72,800
10.55
Rs.35/-
March 31, 2009
Rs.35/-
13,20,700
11.55
Rs.35/-
F-73
Stock Options granted
Series I:
The weighted average fair value of stock options granted was Rs.227.42. The Black Scholes model has been used for
computing the weighted average fair value of options considering the following inputs:
Yr 1
Yr 2
Yr 3
Yr 4
Exercise Price (Rs.)
35.00
35.00
35.00
35.00
Expected Volatility (%)
55.36
55.36
55.36
55.36
NA
NA
NA
NA
Life of the options granted (Vesting and exercise
period) in years
1.50
2.50
3.50
4.50
Expected dividends per annum (Rs.)
3.00
3.00
3.00
3.00
Average risk-free interest rate (%)
7.70
7.67
7.66
7.67
Expected dividend rate (%)
0.84
0.84
0.84
0.84
Historical Volatility
The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank Nifty
which is considered as a comparable peer group of the Company. To allow for the effects of early exercise, it was
assumed that the employees will exercise the options within six months from the date of vesting in view of the exercise
price being significantly lower than the market price.
Effect of the employee share-based payment plans on the profit and loss account and on its financial position:
(Rs. in lacs)
As at March
31, 2010
Compensation cost pertaining to equity-settled employee share-based
payment plan included above
Liability for employee stock options outstanding as at year end
Deferred compensation cost
F-74
As at March 31,
2009
751.53
1,111.28
2,882.26
2,990.73
601.22
1,352.76
Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings per
share by applying the fair value based method is as follows:
In March 2005, ICAI has issued a guidance note on “Accounting for Employees Share Based Payments” applicable to
employee based share plan the grant date in respect of which falls on or after April 1, 2005. The said guidance note
requires that the proforma disclosures of the impact of the fair value method of accounting of employee stock
compensation accounting in the financial statements. Applying the fair value based method defined in the said
guidance note, the impact on the reported net profit and earnings per share would be as follows:
(Rs. in lacs)
Year ended March
31, 2009
Year ended March
31, 2010
Profit as reported (Rs. in lacs)
19,425.86
11,700.77
Add: Employee stock compensation under intrinsic value
method (Rs. in lacs)
751.53
1,111.28
Less: Employee stock compensation under fair value method
(Rs. in lacs)
754.75
1,116.04
19,422.64
11,696.01
-
73.91
19,422.64
11,622.10
- As reported
41.22
25.77
- Proforma
41.21
25.76
- As reported
40.32
22.44
- Proforma
40.31
22.43
Proforma profit (Rs. in lacs)
Less Preference Dividend
Proforma Net Profit for Equity Shareholders
Earnings per share
Basic (Rs.)
Diluted (Rs.)
F-75
10.
Securitization
The information on securitization & direct assignment activity of the Company as an originator for the year March
31, 2010 and March 31, 2009 is given below:
Year ended March
31, 2010
Total number of assets securitized
(Rs. In Lacs)
Year ended March
31, 2009
1,46,402
3,14,685
Total book value of assets securitized (Rs. in lacs)
30,000.00
88,844.37
Sale consideration received for the securitized assets (Rs. in
lacs)
30,000.00
91,874.15
2,554.73
13,182.64
7,373.57
10,017.54
2,735.13
1,762.03
Net gain on account of securitization (Rs. in lacs)
Outstanding
credit
banks/corporate
enhancement-
Deposit
with
Outstanding Credit enhancement – Assets under financing
11.
Derivative Instruments:
The Notional principal amount of derivative transactions outstanding as on March 31, 2010 for interest
rate swaps Rs.12,500 lacs (March 31, 2009 – 12,500 lacs).
12.
Supplementary Statutory Information
12.1
Managing Director’s Remuneration
The computation of profits under section 349 of the Act has not been given as no remuneration /
commission is payable to the Managing Director.
(Rs .in lacs)
12.2
Expenditure in foreign currency (On cash basis)
Year ended March
31, 2010
0.08
Subscription Fees
13.
Year ended March 31,
2009
0.08
Additional information pursuant to the provisions of paragraphs 3, 4C and 4D of Part II of schedule
VI to the Act
F-76
13.1
Licensed Capacity, Installed capacity, Actual production and Sales
Class of
Goods
Electricity Windmill
Units
34
Licensed
Capacity as
at March 31,
Installed
Capacity as at
March 31, (in
KW)
2010
2009
2010
2009
-
NA
-
12,550
F-77
Actual Production and
Sales for the year ended
March 31, (in units)
2010
2009
1,71,19,786
Sales Value
(Rs. in lacs)
2010
2009
500.5
9
2008 – 2009
2. Notes to Accounts
1.
Particulars of Secured Loans
a) Privately placed Redeemable Non-convertible Debentures of Rs.1,000/- each
(Rs. in lacs)
As at March 31, 2009
As at March 31, 2008
Number
1,00,74,110
64,10,639
Amount
1,00,741.10
64,106.39
Debentures are redeemable over a period of 12 months to 160 months from the date of allotment depending on the
terms of the agreement.
Privately Placed Redeemable Non-Convertible Debenture of Rs.1000/- each
(Rs. in lacs)
Amount (Rs. in lacs)
Date of
Allotment/renewal
As at March 31,
2009
Redemption date
As at March 31,
2008
28.03.2008
5,000.00
5,000.00
15.04.2009
28.05.2008
12,500.00
-
28.10.2009
17.12.2008
9,500.00
-
17.12.2009
27,000.00
5,000.00
Total
The above mentioned privately placed Non-Convertible Debentures are secured by exclusive mortgage of office
premise. Further secured by charge on Plant and Machinery, Furniture and other fixed assets of the Company, charge on
Company’s book debts, loans, advances and other investments of the Company subject to prior charges created or to be
created in favour of the Company’s bankers, financial institutions and others.
F-78
b) Term Loans:
(Rs. in lacs)
As at March 31,
2009
i.
As at March 31, 2008
From Financial Institutions/Corporate:
(a)
Secured by an exclusive charge by way of
hypothecation of
receivables relating to
Loans
(b)
9,103.00
10,100.00
323.40
413.00
9,426.40
10,513.00
Secured by an exclusive charge by way of
hypothecation of specific charge on Land, Plant
& Machinery and Receivables relating to the
Windmills
Total
(Rs. in lacs)
As at March 31,
2009
ii.
As at March 31, 2008
From Banks :
(a)
Secured by an exclusive charge by way of
hypothecation of receivables relating to Loans
(b)
1,40,150.93
1,11,568.53
1,448.70
1,910.78
1,963.11
2,275.71
1,43,562.74
1,15,755.02
Secured by an exclusive charge by way of
hypothecation of specific charge on Land, Plant
& Machinery and Receivables relating to the
Windmills
(c)
Secured by an exclusive charge by way of
hypothecation of specific charge on Land, Plant
& Machinery relating to the Bio Mass Plant
Total
c) Cash Credit from Banks
(Rs. in lacs)
As at March 31,
2009
Cash Credit from Banks
1,09,715.19
Secured by an exclusive charge by way of hypothecation of receivables relating to Loans
F
F-79
As at March 31, 2008
67,420.99
2. FiFixed Deposits
In accordance with the Reserve Bank of India circular no.RBI/2006-07/ 225 DNBS (PD) C.C No.
87/03.02.004/2006-07 dated January 4, 2007, the Company has created a floating charge on the statutory liquid
assets comprising of investment in Government Securities to the extent of Rs101.45 lacs in favour of trustees
representing the public deposit holders of the Company.
3.
Subordinated Debt
The Company has raised during the year subordinated
debt
bonds amounting
to
Rs.13,813.75 lacs (March 31, 2008: Rs. 8,170.49 lacs) with coupon rate of 11.5% to 13% per annum which
are redeemable over a period of 62 months to 73 months.
4.
Cash & Cash Equivalents
Particulars
Cash & Bank balance (as per schedule 8 )
Less
:
Fixed
deposits
having
original
maturity
greater than 3 months or pledged with banks or lien marked
deposits
Balance considered as cash & cash equivalents for
flow statement
5.
cash
Year ended March 31,
2009
1,60,803.74
(Rs. in lacs)
Year ended March 31,
2008
87,605.23
10,813.87
4,958.17
1,49,989.87
82,647.06
Gratuity and other post-employment benefit plans:
The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five
years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each
completed year of service.
Consequent to the adoption of revised AS 15 ‘Employee Benefits’ issued by the ICAI, the following
disclosures have been made as required by the standard:
F-80
Profit and Loss account
Net employee benefit expense (recognized in Employee Cost)
(Rs. in lacs)
Gratuity
Gratuity
Particulars
March 31, 2009
March 31, 2008
Current service cost
35.29
45.67
Interest cost on benefit obligation
13.37
5.93
N.A
N.A
(39.51)
53.10
Past service cost
NIL
NIL
Net benefit expense
9.15
104.70
Actual return on plan assets
N.A
N.A
Expected return on plan assets
Net actuarial (gain) / loss recognized in the year
Balance sheet
Details of Provision for gratuity
(Rs in Lacs)
Gratuity
Gratuity
Particulars
March 31, 2009
Defined benefit obligation
Fair value of plan assets
Total
Less: Unrecognized past service cost
Plan asset / (liability)
F-81
March 31, 2008
139.64
133.18
N.A
N.A
139.64
133.18
NIL
NIL
(139.64)
(133.18)
Changes in the present value of the defined benefit obligation are as follows:
(Rs. in Lacs)
Particulars
Gratuity
Gratuity
March 31, 2009
March 31, 2008
Opening defined benefit obligation
133.18
28.48
Interest cost
13.37
5.93
Current service cost
35.29
45.67
Benefits paid
(2.69)
NIL
Actuarial (gains) / losses on obligation
(39.51)
53.10
Closing defined benefit obligation
139.64
133.18
The Company would not contribute any amount to gratuity in 2009-10 as the scheme is unfunded.
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
Particulars
Investments with insurer
Gratuity
Gratuity
March 31, 2009
March 31, 2008
%
%
NA
NA
The principal assumptions used in determining gratuity obligations for the company’s plan are shown
below:
Gratuity
Gratuity
March 31, 2009
7.75%
March 31, 2008
8%
Increase in compensation cost
5.00%
5%
Employee Turnover
3.25%
10%
Particulars
Discount Rate
F-82
The estimates of future salary increases, considered in actuarial valuation, take account of inflation,
seniority, promotion and other relevant factors, such as supply and demand in the employment market.
Amounts for the current period are as follows:
( Rs. In Lacs)
Particulars
March 31, 2009
Defined benefit obligation
Plan assets
Surplus / (deficit)
Experience adjustments on plan liabilities
Experience adjustments on plan assets
March 31, 2008
139.64
133.18
N.A
N.A
(139.64)
(133.18)
(39.51)
53.10
N.A.
NA
The current year being the first year of adoption of AS 15 (revised) by the Company, the previous year comparative
information has not been furnished.
F-83
6.
Segment Reporting
(Rs. in lacs)
Year ended March 31, 2008
Year ended March 31, 2009
Unallocated
reconciling
items
Particulars
Financing
Activities
Total
Unallocated
reconciling
items
Financing
Activities
Total
Segment Revenue
92,893.16
500.59
93,393.75
61,842.63
476.13
62,318.76
Segment
Results
(Profit before tax and
after
interest
on
Financing Segment)
19,785.18
(1,552.74)
18,232.43
13,366.42
(347.14)
13,019.28
-
258.90
258.90
-
320.82
320.82
Less: Interest
unallocated
reconciling items
on
Net profit before tax
17,973.53
12,698.46
Less: Income taxes
6,272.76
3,934.96
11,700.77
8,763.50
Net profit
Other Information:
5,33,858.67
9,726.13
5,43,584.80
8,372.14
3,77,823.27
-
575.82
575.82
1,030.88
1,030.88
Total Assets
5,33,858.67
10,301.95
5,44,160.62
3,69,451.13
9,403.02
3,78,854.15
Segment liabilities
4,69,776.83
1,799.79
4,71,576.62
3,28,489.90
4,752.31
3,33,241.21
-
-
-
-
632.99
632.99
4,69,776.83
1,799.79
4,71,576.62
3,28,489.90
5,384.30
3,33,874.20
Capital expenditure
879.02
-
879.02
670.25
-
670.25
Depreciation
285.12
1,919.93
2,205.05
394.40
733.12
1,127.52
9,922.91
-
9,922.91
6,652.54
Segment assets
Unallocated corporate
assets
Unallocated corporate
liabilities
Total Liabilities
Other non
expenses
-
cash
F-84
3,69,451.13
6,652.54
7. Related Party Disclosures
Related Parities have been identified by the Management and relied upon by the auditors.
Subsidiary
:
Enterprises having significant influence over
the Company
:
Shriram Non-Conventional Energy Limited (From 10th January
2009)
Shriram Enterprise Holdings Private Limited
Shriram Retail Holdings Private Limited
Shriram Capital Limited
Key Managerial Personnel
:
R Kannan, Managing Director
F-85
(Rs in Lacs)
Enterprises having
significant influence
over the Company
2009
Subsidiary
2008
2009
Total
2008
2009
2008
Payments
Royalty
269.55*
147.50*
-
-
269.55*
147.50*
Data Sourcing fees
135.70*
63.38*
-
-
135.70*
63.38*
Service Charges
814.18*
380.24*
-
-
814.18*
380.24*
Equity dividend
-
162.60*
-
-
-
162.60*
Equity dividend
716.86#
432.64#
-
-
716.86#
432.64#
Equity dividend
217.67@
-
-
-
217.67@
-
Investments in shares
-
-
-
4.99^
-
4.99^
Loan to Subsidiary
-
-
4392.66^
-
4392.66^
-
Sale of investments
-
-
-
4.54^
-
4.54^
Subscription of equity shares
-
-
-
-
-
-
Subscription to optionally convertible
warrants
1400.00@
-
-
-
1400.00@
-
Conversation of Warrants into Equity /
Securities Premium
2080.80#
2959.20#
-
-
2080.80#
2,959.20#
78.00^
-
78.00^
-
Receipts
Interest Received
Balance outstanding at the year end
Share Capital
542.00*
542.00*
Share Capital
1,792.15#
1,647.65#
1,792.15#
1,647.65#
Share Capital
544.17@
-
544.17@
-
1,400.00@
232.20#
1,400.00@
232.20#
5.00^
0.45^
60.90*
174.28*
60.32^
-
Share Warrants
Investment in Shares
Outstanding Expenses
5.00^
60.90*
0.45^
174.28*
Interest receivable on Loan to
Subsidiary
60.32^
F-86
-
*
Denotes transactions with Shriram Capital Limited
#
Denotes transactions with Shriram Enterprise Holdings Private Limited
@
Denotes transactions with Shriram Retail Holdings Private Limited
^
Denotes transactions with Shriram Non Conventional Energy Limited
8.
Earnings per share
(Rs. in lacs)
Year ended March 31,
2009
11,700.77
Year ended March 31, 2008
73.91
165.74
11,626.86
8,597.76
Weighted average number of equity shares for calculating
Basic EPS (in lacs) (B)
451.16
391.67
Weighted average number of equity shares for calculating
Diluted EPS (in lacs) (C)
518.15
395.41
Basic earnings per equity share (in Rupees) (Face value of Rs.
10/- per share) (A) / (B)
25.77
21.95
Diluted earnings per equity share (in Rupees) (Face value of
Rs. 10/- per share) (A) / (C)
22.44
21.74
Particulars
Net Profit after tax as per profit and loss account (Rs. in lacs)
Less : Preference Dividend
Net Profit for Equity Shareholders (A)
8,763.50
(Rs. in lacs)
Year ended March 31,
2009
Year ended March 31,
2008
Particulars
Weighted average number of equity shares for calculating EPS
(in lacs)
451.16
391.67
Add : Equity shares arising on conversion of optionally
convertible warrants (in lacs)
59.28
1.45
Add : Equity shares for no consideration arising on grant of stock
options under ESOP (in lacs)
7.71
2.29
Weighted average number of equity shares in calculation diluted
EPS (in lacs)
518.15
395.41
F-87
9.
Consolidated Financial Statements
The Company has further acquired 45,500 equity shares of M/s. Shriram Non Conventional Energy Limited
(SNEL) during the year and consequently SNEL has become wholly owned subsidiary with effect from 10th
January 2009. This investment is intended to be temporary since the subsidiary is acquired and held exclusively
with a view to dispose it in the near future. Complying with Accounting Standard 21 issued by the Institute of
Chartered Accountants of India consolidated accounts are therefore not presented. The Company has at its
Extra Ordinary General Meeting of the shareholders held on May 11, 2009 obtained the approval of the
shareholders to sell the shares held as Investments in its wholly owned subsidiary.
10.
Deferred Tax Liabilities/(Asset) (Net)
(Rs. in lacs)
The breakup of deferred tax asset / liabilities is as under:-
As at March 31,
2009
As at March 31, 2008
Deferred Tax Liabilities
Timing difference on account of :
Differences in depreciation in block of fixed assets as per
tax books and financial books
881.85
1,495.39
Gross Deferred Tax Liabilities (A)
881.85
1,495.39
Expenses disallowed under Income Tax Act, 1961
581.09
586.51
Provision for hedging contracts
613.81
275.89
Gross Deferred Tax Assets (B)
1194.90
862.40
Deferred Tax Liabilities/(Asset) (Net) (A-B)
(313.05)
632.99
Deferred Tax Asset
Timing difference on account of :
(Rs. in lacs)
11.
As at March 31,
2009
Capital Commitments
Estimated amount of contracts remaining to be executed on
capital account and not provided for (net of advances)
F-88
NIL
As at March 31, 2008
276.84
(Rs. in lacs)
12.
As at March 31,
2009
Contingent Liabilities not provided for
Guarantees issued by the Company
As at March 31, 2008
6.81
Income Tax/Wealth Tax/Service Tax/Fringe Benefit Tax
Disputed Income tax/Wealth Tax/Service Tax/Fringe Benefit Tax demands contested in appeal as on March 31st,
2009 amount to Rs.1554.83 lacs (March 31st 2008: Rs.1,603.12 Lacs. However provision is made in the books
for any liability that may arise.
13.
14.
The Company during the year converted 14,40,000 warrants issued to Shriram Enterprise Holdings Private
Limited into equity shares of Rs.10/- each at a premium of Rs.150/-. The total amount of Rs. 2167.50 lacs
received from the said preferential allotment was utilized for the purpose of increasing the net worth and
working capital of the Company. The company has further issued 35,00,000 warrants to Shriram Retail
Holdings Private Limited on a preferential basis with an option to convert into equity shares of Rs.400/each (including securities premium of Rs.390/-) within 18 months from the date of issue i.e. May 16,2008.
Employee Stock Option Plan
Series I
Date of grant
October 19, 2007
Date of Board Approval
October 19, 2007
Date of Shareholder’s approval
October 30, 2006
Number of options granted
13,27,500
Method of Settlement (Cash/Equity)
Equity
After 1 year of grant date
10% of options granted
After 2 years of grant date
20% of options granted
After 3 years of grant date
30% of options granted
After 4 years of grant date
40% of options granted
Exercisable period
10 years from vesting date
Vesting Conditions
on achievement of pre –determined targets
F-89
6.81
The details of Series I have been summarized below:
As at March 31, 2009
Number of
Shares
Outstanding at the beginning of the year
As at March 31, 2008
Weighted
Average
Exercise
Price(Rs.)
Number of
Shares
Nil
Add: Granted during the year
Weighted Average
Exercise Price(Rs.)
Nil
13,27,500
Rs. 35.00
13,27,500
Rs. 35.00
Less: Forfeited during the year
Nil
-
Nil
-
Less: Exercised during the year
6,800
Rs.35.00
-
-
-
-
-
-
13,20,700
Rs. 35.00
13,27,500
Rs. 35.00
Less: Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted average remaining contractual life
(in years)
Weighted average fair value of options granted
-
-
11.55
12.55
Rs. 227.42
Rs. 227.42
The details of exercise price for stock options outstanding for Series I at the end of the year are:
As at
Number of options
outstanding
March 31, 2009
Rs.35/-
13,27,500
11.55
Rs.35/-
March 31, 2008
Rs.35/-
13,27,500
12.55
Rs.35/-
F-90
Weighted average
remaining
contractual life of
options (in years)
Weighted average exercise price
Range of
exercise
prices
Stock Options granted
Series I:
The weighted average fair value of stock options granted was Rs.227.42/-. The Black Scholes model has been used for
computing the weighted average fair value of options considering the following inputs:
Yr 1
Yr 2
Yr 3
Yr 4
Exercise Price (Rs.)
35.00
35.00
35.00
35.00
Expected Volatility (%)
55.36
55.36
55.36
55.36
NA
NA
NA
NA
Life of the options granted (Vesting and exercise period) in
years
1.50
2.50
3.50
4.50
Expected dividends per annum (Rs.)
3.00
3.00
3.00
3.00
Average risk-free interest rate (%)
7.70
7.67
7.66
7.67
Expected dividend rate (%)
0.84
0.84
0.84
0.84
Historical Volatility
The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank Nifty
which is considered as a comparable peer group of the Company. To allow for the effects of early exercise, it was
assumed that the employees will exercise the options within six months from the date of vesting in view of the exercise
price being significantly lower than the market price.
Effect of the employee share-based payment plans on the profit and loss account and on its financial position:
(Rs. in lacs)
As at March
31, 2009
As at March
31, 2008
Compensation cost pertaining to equity-settled employee share-based payment
plan included above
1,111.28
542.08
Liability for employee stock options outstanding as at year end
2,990.73
3,006.12
Deferred compensation cost
1,352.76
2,464.04
F-91
Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings per
share by applying the fair value based method is as follows:
In March 2005, ICAI has issued a guidance note on “Accounting for Employees Share Based Payments” applicable to
employee based share plan the grant date in respect of which falls on or after April 1, 2005. The said guidance note
requires that the proforma disclosures of the impact of the fair value method of accounting of employee stock
compensation accounting in the financial statements. Applying the fair value based method defined in the said
guidance note, the impact on the reported net profit and earnings per share would be as follows:
(Rs. in lacs)
Year ended March
31, 2009
Profit as reported (Rs. in lacs)
Year ended March
31, 2008
11,700.77
8,763.50
Add: Employee stock compensation under intrinsic value method
(Rs. in lacs)
1,111.28
542.08
Less: Employee stock compensation under fair value method (Rs. in
lacs)
1,116.04
544.40
11,696.01
8,761.18
73.91
165.74
11,622.10
8,595.44
- As reported
25.77
21.95
- Proforma
25.76
21.95
Diluted (Rs.)
-
-
- As reported
22.44
21.74
- Proforma
22.43
21.74
Proforma profit (Rs. in lacs)
Less Preference Dividend
Proforma Net Profit for Equity Shareholders
Earnings per share
Basic (Rs.)
F-92
15.
Securitisation
The Company sells loans through securitisation and direct assignment. The information on securitisation & direct
assignment activity of the Company as an originator for the year March 31, 2009 and March 31, 2008 is given
below:
Year ended
March 31, 2009
Total number of loan assets securitized
Year ended March 31,
2008
3,14,685
3,98,691
Total book value of loan assets securitised (Rs. in lacs)
88,844.37
75,781.80
Sale consideration received for the securitised assets (Rs. in
lacs)
91,874.15
83,539.14
3,029.78
7,757.34
Net gain on account of securitization (Rs. in lacs)
The information on securitisation & direct assignment activity of the Company as an originator as on March 31, 2009
and March 31, 2008 is given in the table below :
(Rs. in Lacs)
As at March 31,
2009
Outstanding credit enhancement- Deposit with banks/corporate
Outstanding Credit enhancement - Receivables
16.
As at March 31, 2008
10,017.54
4,695.88
1,762.03
3,200.86
Derivative Instruments:
The Notional principal amount of derivative transactions outstanding as on March 31, 2009 for interest rate swaps
Rs.12,500 lacs (March 31, 2008 – 50,000 lacs).
17.
Supplementary Statutory Information
17.1
Managing Director’s Remuneration
The computation of profits under section 349 of the Act has not been given as no remuneration / commission is
payable to the Managing Director.
(Rs.in lacs)
17.2
Expenditure in foreign currency (On cash basis)
Year ended March
31, 2009
0.08
0.08
Travelling
Others
F-93
Year ended March 31,
2008
1.67
Nil
1.67
18.
Additional information pursuant to the provisions of paragraphs 3, 4C and 4D of Part II of schedule VI to
the Act
18.1
Licensed Capacity, Installed capacity, Actual production and Sales
Class of
Goods
Electricity
- Windmill
19.
Units
34
Licensed
Capacity as at
March 31,
Installed
Capacity as at
March 31, (in
KW)
Actual Production and
Sales for the year ended
March 31, (in units)
Sales Value
2009
2008
2009
2008
2009
2008
2009
2008
NA
NA
12,550
12,550
1,71,19,786
1,65,56,603
500.59
476.13
(Rs. in lacs)
Based on the intimation received by the Company, none of the suppliers have confirmed to be registered
under The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. Accordingly, no
disclosures relating to amounts unpaid as at the year end together with interest paid /payable are
required to be furnished.
F-94
2007 – 2008
2. Notes to Accounts
1.
Particulars of Secured Loans
a) Privately placed Redeemable Non-convertible Debentures of Rs.1,000/- each
(Rs. in lacs)
As at March 31,
2008
As at March 31, 2007
Number
64,10,639
60,96,856
Amount
64,106.39
60,968.56
Debentures are redeemable over a period of 12 months to 160 months from the date of allotment depending on the
terms of the agreement.
Privately Placed Redeemable Non-Convertible Debenture of Rs.1000/- each
(Rs. in lacs)
Amount (Rs. in lacs)
Date of
Allotment/renewal
28.03.2008
As at March 31,
2008
Redemption date
As at March 31,
2007
5,000.00
Nil
15.04.2009
The above mentioned privately placed Non-Convertible Debentures are secured by exclusive mortgage of office
premise. Further secured by charge on Plant and Machinery, Furniture and other fixed assets of the Company,
charge on Company’s book debts, leased assets, loans, advances and other investments of the Company subject to
prior charges created or to be created in favour of the Company’s bankers, financial institutions and others.
F-95
b) Term Loans:
(Rs. in lacs)
As at March 31,
2008
i.
As at March 31, 2007
From Financial Institutions/Corporate:
(a)
Secured by an exclusive charge by way of
hypothecation of
receivables relating to
Loans
(b)
10,100.00
700.00
413.00
461.00
10,513.00
1,161.00
Secured by an exclusive charge by way of
hypothecation of specific charge on Land,
Plant & Machinery and Receivables relating to
the Windmills
Total
(Rs. in lacs)
As at March 31,
2008
ii.
As at March 31, 2007
From Banks :
(a)
Secured by an exclusive charge by way of
hypothecation of receivables relating to
Loans
(c)
1,11,568.53
37,716.00
1,910.78
2,370.19
2,275.71
1,367.55
1,15,755.02
41,453.74
Secured by an exclusive charge by way of
hypothecation of specific charge on Land,
Plant & Machinery and Receivables relating
to the Windmills
(d)
Secured by an exclusive charge by way of
hypothecation of specific charge on Land,
Plant & Machinery relating to the Bio Mass
Plant
Total
c) Cash Credit from Banks
(Rs. in lacs)
As at March 31,
2008
67,420.99
Cash Credit from Banks
Secured by an exclusive charge by way of hypothecation of receivables relating to Loans
F-96
As at March 31, 2007
26,800.92
2.
Subordinated Debt
The Company has raised during the year subordinated debt bonds amounting to Rs. 8,170.49 lacs (March
31, 2007: Rs. 10,920.89 lacs) with coupon rate of 11.5% per annum which are redeemable over a period
of 62 months to 73 months.
3.
Cash & Cash Equivalents
(Rs. in lacs)
Year ended March 31,
2008
87,605.23
Year ended March 31, 2007
Less : Fixed deposits having original maturity
greater than 3 months or pledged with banks or lien marked
deposits
4,958.17
5,010.80
Balance considered as cash & cash equivalents for
cash flow statement
82,647.06
31,478.98
Particulars
Cash & Bank balance (as per schedule 8 )
36,489.78
Gratuity and other post-employment benefit plans:
The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five
years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each
completed year of service.
Consequent to the adoption of revised AS 15 ‘Employee Benefits’ issued by the ICAI, the following
disclosures have been made as required by the standard:
Profit and Loss account
Net employee benefit expense (recognized in Employee Cost)
(Rs. in lacs)
Gratuity
Particulars
March 31, 2008
Current service cost
45.67
Interest cost on benefit obligation
5.93
Expected return on plan assets
N.A
Net actuarial (gain) / loss recognized in the year
53.10
Past service cost
NIL
Net benefit expense
104.70
Actual return on plan assets
N.A
F-97
Balance sheet
Details of Provision for gratuity
(Rs in Lacs)
Gratuity
Particulars
March 31, 2008
Defined benefit obligation
133.18
Fair value of plan assets
N.A
Total
133.18
Less: Unrecognized past service cost
NIL
Plan asset / (liability)
(133.18)
Changes in the present value of the defined benefit obligation are as follows:
(Rs..in Lacs)
Gratuity
March 31, 2008
Particulars
Opening defined benefit obligation
28.48
Interest cost
5.93
Current service cost
45.67
Benefits paid
NIL
Actuarial (gains) / losses on obligation
53.10
Closing defined benefit obligation
133.18
The Company would not contribute any amount to gratuity in 2008-09 as the scheme is unfunded.
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
Gratuity
Particulars
March 31, 2008
%
Investments with insurer
NA
F-98
The principal assumptions used in determining gratuity obligations for the company’s plan are shown
below:
Gratuity
Particulars
March 31, 2008
Discount Rate
8%
Increase in compensation cost
5%
Employee Turnover
10%
The estimates of future salary increases, considered in actuarial valuation, take account of inflation,
seniority, promotion and other relevant factors, such as supply and demand in the employment market.
Amounts for the current period are as follows:
(Rs. In Lacs)
Particulars
March 31, 2008
Defined benefit obligation
133.18
Plan assets
NA
Surplus / (deficit)
(133.18)
Experience adjustments on plan liabilities
53.10
Experience adjustments on plan assets
NA
The current year being the first year of adoption of AS 15 (revised) by the Company, the previous year comparative
information has not been furnished.
F-99
5.
Segment Reporting
(Rs. In Lacs)
Year ended March 31, 2008
Particulars
Financing
Activities
Segment Revenue
Segment Results (Profit
before tax and after interest
on Financing Segment)
Less:
Interest
on
unallocated
reconciling
items
Unallocated
reconciling
items
Year ended March 31, 2007
Total
Unallocated
reconciling
items
Financing
Activities
Total
61,843
476
62,319
34,223
583
34,806
13,366
(347)
13,019
8,078
195
8,273
-
321
321
-
330
330
Net profit before tax
12,698
7,943
Less: Income taxes
3,935
2,781
Net profit
8,763
5,162
Other Information:
Segment assets
Unallocated
assets
3,69,451
corporate
8,372
3,77,823
1,031
1,031
2,13,998
7,340
2,21,338
784
784
Total Assets
3,69,451
9,403
3,78,854
2,13,998
8,124
2,22,122
Segment liabilities
3,73,469
4,752
3,78,221
2,14,798
4,351
2,19,149
633
633
2,973
2,973
5,385
3,78,854
7,324
2,22,122
Unallocated
liabilities
corporate
Total Liabilities
3,73,469
Capital expenditure
Depreciation
Other non - cash expenses
2,14,798
395
733
6,004
F-100
-
1,128
117
6,004
1,860
256
373
1,860
6. Related Party Disclosures
Related Parities have been identified by the Management and relied upon by the auditors.
Subsidiary
:
Enterprises having significant influence over
the Company
:
Shriram Non-Conventional Energy Limited (upto March 20, 2008)
Shriram Enterprise Holdings Private Limited
Shriram Capital Limited (formerly known as Shriram Financial
Services Holding Private Limited)
Key Managerial Personnel
R Kannan, Managing Director
:
(Rs in Lacs)
Enterprises having
significant influence over
the Company
2008
2007
Subsidiary
2008
Total
2007
2008
2007
Payments
Royalty
147.50
79.24
-
-
147.50
79.24
63.38
73.59
-
-
63.38
73.59
Service Charges
380.24
441.55
-
-
380.24
441.55
Equity dividend
595.24
595.24
-
-
595.24
595.24
-
-
4.99
4.99
-
-
-
4.54
-
4.54
-
-
-
-
-
Data Sourcing fees
Investments in shares
Receipts
Sale of investments
Subscription
shares
of
equity
Subscription to optionally
convertible warrants
560.00
560.00
Conversation of Warrants
into Equity / Securities
Premium
2,959.20
-
F-101
-
-
-
2,959.20
-
7.
Leases
In case of assets given on lease
Financial lease including hire purchase
The Company has given vehicles on finance lease. The lease term is for 3 to 5 years. There is no escalation clause in the
lease agreement. There are no restrictions imposed by lease arrangements.
(Rs. in lacs)
Total gross investment in the lease
Less : Unearned finance income
Less: Unguaranteed residual value
Present value of minimum lease payments
Gross investment in the lease for the period :
Not later than one year [Present value of minimum lease
payments receivable Rs. NIL as on March 31, 2008 (March 31,
2007: Rs.4560.18 lacs)]
Later than one year but not later than five years [Present value of
minimum lease payments Rs. NIL as on March 31, 2008 (March
31, 2007 : Rs. 1017.19 lacs)]
Later than five years [Present value of minimum lease payments
Nil as on March 31, 2008 (March 31, 2007: Nil)]
As at March 31,
2008
NIL
NIL
NIL
NIL
As at March 31, 2007
6166.73
589.35
NIL
5577.38
NIL
5024.56
NIL
1142.17
NIL
Nil
In case of assets taken on lease
Rent Rs.164 lacs (March 31,2007 : Rs. 129 lacs) represents lease payments in respect of cancellable leases as per
respective agreements. There are no separate amounts for minimum lease payments and contingent rents. There is no
sub-lease.
8.
Investments
In accordance with the Reserve Bank of India circular no.RBI/2006-07/ 225 DNBS (PD) C.C No.
87/03.02.004/2006-07 dated January 4, 2007, the Company has created a floating charge on the statutory liquid
assets comprising of investment in Government Securities to the extent of Rs.104.53 lacs in favour of trustees
representing the public deposit holders of the Company.
F-102
9.
Earnings per share
Year ended March
31, 2008
8,763.50
Year ended March
31, 2007
5,162.16
165.74
176.52
8,597.76
4,985.64
Weighted average number of equity shares for calculating Basic EPS (in
lacs) (B)
391.67
302.45
Weighted average number of equity shares for calculating Diluted EPS
(in lacs) (C)
395.41
303.34
Basic earnings per equity share (in Rupees) (Face value of Rs. 10/- per
share) (A) / (B)
21.95
16.48
Diluted earnings per equity share (in Rupees) (Face value of Rs. 10/- per
share) (A) / (C)
21.74
16.44
Particulars
Net Profit after tax as per profit and loss account (Rs. in lacs)
Less : Preference Dividend
Net Profit for Equity Shareholders (A)
Year ended March
31, 2008
Year ended March
31, 2007
Particulars
Weighted average number of equity shares for calculating EPS (in lacs)
391.67
302.45
Add : Equity shares arising on conversion of optionally convertible
warrants (in lacs)
1.45
0.89
Add : Equity shares for no consideration arising on grant of stock options
under ESOP (in lacs)
2.29
-
Weighted average number of equity shares in calculation diluted EPS (in
lacs)
395.41
303.34
F-103
10.
Deferred Tax Liabilities (Net)
(Rs. in Lacs)
The break up of deferred tax asset / liabilities is as under:-
As at March 31,
2008
As at March 31,
2007
Deferred Tax Liabilities
Timing difference on account of :
Differences due to accelerated amortisation of intangibles
under Income Tax Act
-
7.07
Differences in depreciation in block of fixed assets as per tax
books and financial books
1,495.39
1,657.12
Effect of lease accounting
-
788.47
Others
-
530.84
1,495.39
2,983.50
586.51
10.18
Provision for hedging contracts
275.89
0.00
Gross Deferred Tax Assets (B)
862.40
10.18
Deferred Tax Liabilities (Net) (A-B)
632.99
2,973.32
Gross Deferred Tax Liabilities (A)
Deferred Tax Asset
Timing difference on account of :
Expenses disallowed under Income Tax Act, 1961
Provision for securitization
(Rs. in lacs)
11.
As at March 31,
2008
Capital Commitments
Estimated amount of contracts remaining to be executed on
capital account and not provided for (net of advances)
276.84
As at March 31,
2007
1,126.88
(Rs. in lacs)
12.
As at March 31,
2008
Contingent Liabilities not provided for
As at March 31, 2007
Guarantees issued by the Company
6.81
6.81
In respect of assets securitized
NIL
16.69
In respect of derivative transaction
NIL
9.97
F-104
Income Tax/Wealth Tax
Disputed Income tax/Wealth Tax demands contested in appeal as on March 31st, 2008 amount to
Rs.1,603.12 lacs(March 31st 2007: Rs.1,397.89 Lacs. In view of favourable appellate decisions in respect
of earlier years on similar issues, the company is confident of getting full relief. Hence the amount is not
considered as contingent liability.
Service Tax
The applicability of Service tax has been challenged in respect of its hire purchase/lease activities and
has obtained a stay in its favour granted by Madras High Court. However provision is made in the books
for any liability that may arise.
13.
14.
The Company during the year converted 20,55,000 warrants issued to Shriram Enterprise Holdings
Private Limited into equity shares of Rs.10/- each at a premium of Rs.150/-. The total amount of Rs.
3,082.50 lacs received from the said preferential allotment was utilized for the purpose of increasing the
net worth and working capital of the Company.
Employee Stock Option Plan
Series I
Date of grant
October 19, 2007
Date of Board Approval
October 19, 2007
Date of Shareholder’s approval
October 30, 2006
Number of options granted
13,27,500
Method of Settlement (Cash/Equity)
Equity
After 1 year of grant date
10% of options granted
After 2 years of grant date
20% of options granted
After 3 years of grant date
30% of options granted
After 4 years of grant date
40% of options granted
Exercisable period
10 years from vesting date
Vesting Conditions
on achievement of pre –determined targets
F-105
The details of Series I have been summarized below:
As at March 31, 2008
Number of
Shares
Outstanding at the beginning of the year
As at March 31, 2007
Weighted
Average
Exercise
Price(Rs.)
Number of
Shares
Nil
Add: Granted during the year
Weighted
Average
Exercise
Price(Rs.)
Nil
-
13,27,500
Rs. 35.00
Nil
-
Nil
-
Nil
-
Less: Forfeited during the year
Less: Exercised during the year
Less: Expired during the year
Outstanding at the end of the year
13,27,500
-
-
Rs. 35.00
-
-
-
12.55
-
Rs. 227.42
-
Exercisable at the end of the year
Weighted average remaining contractual life (in
years)
Weighted average fair value of options granted
The details of exercise price for stock options outstanding for Series I at the end of the year are:
As at
Range of exercise
prices
Number of
options
outstanding
Weighted average
remaining contractual life
of options (in years)
Weighted average
exercise price
March 31, 2008
Rs.35/-
13,27,500
12.55
Rs.35/-
March 31, 2007
NIL
NIL
NIL
NIL
F-106
Stock Options granted
Series I:
The weighted average fair value of stock options granted was Rs.227.42/-. The Black Scholes model has been used
for computing the weighted average fair value of options considering the following inputs:
Yr 1
Yr 2
Yr 3
Yr 4
Exercise Price (Rs.)
35.00
35.00
35.00
35.00
Expected Volatility (%)
55.36
55.36
55.36
55.36
NA
NA
NA
NA
Life of the options granted (Vesting and exercise period) in
years
1.50
2.50
3.50
4.50
Expected dividends per annum (Rs.)
3.00
3.00
3.00
3.00
Average risk-free interest rate (%)
7.70
7.67
7.66
7.67
Expected dividend rate (%)
0.84
0.84
0.84
0.84
Historical Volatility
The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank Nifty
which is considered as a comparable peer group of the Company. To allow for the effects of early exercise, it was
assumed that the employees will exercise the options within six months from the date of vesting in view of the exercise
price being significantly lower than the market pric
Effect of the employee share-based payment plans on the profit and loss account and on its financial position:
(Rs. in Lacs)
As at March
31, 2008
Compensation cost pertaining to equity-settled employee share-based
payment plan included above
As at March
31, 2007
542.08
-
Liability for employee stock options outstanding as at year end
3,006.12
-
Deferred compensation cost
2,464.04
-
F-107
Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings per
share by applying the fair value based method is as follows:
In March 2005, ICAI has issued a guidance note on “Accounting for Employees Share Based Payments” applicable to
employee based share plan the grant date in respect of which falls on or after April 1, 2005. The said guidance note
requires that the proforma disclosures of the impact of the fair value method of accounting of employee stock
compensation accounting in the financial statements. Applying the fair value based method defined in the said
guidance note, the impact on the reported net profit and earnings per share would be as follows:
Year ended March
31, 2008
Profit as reported (Rs. in lacs)
8,763.50
Year ended March
31, 2007
5,162.16
Add: Employee stock compensation under intrinsic value method (Rs. in
lacs)
542.08
-
Less: Employee stock compensation under fair value method (Rs. in lacs)
544.40
-
Proforma profit (Rs. in lacs)
8,761.18
Less Preference Dividend
165.74
Proforma Net Profit for Equity Shareholders
8,595.44
5,162.16
176.52
4,985.64
Earnings per share
-
Basic (Rs.)
-
- As reported
21.95
16.48
- Proforma
21.95
16.48
Diluted (Rs.)
-
- As reported
21.74
16.44
- Proforma
21.74
16.44
F-108
-
15.
Securitisation
The Company sells loans through securitisation and direct assignment. The information on securitisation & direct
assignment activity of the Company as an originator for the year March 31, 2008 and March 31, 2007 is given below:
Year ended March
31, 2008
Total number of loan assets securitized
Total book value of loan assets securitised (Rs. in lacs)
Sale consideration received for the securitised assets (Rs. in lacs)
Net gain on account of securitization (Rs. in lacs)
Year ended March
31, 2007
3,98,691
4,38,457
75,781.80
80,493.74
83,539.14
91,302.42
7,757.34
10,808.68
The information on securitisation & direct assignment activity of the Company as an originator as on March 31, 2008
and March 31, 2007 is given in the table below :
(Rs. in Lacs)
As at March 31,
2008
As at March 31, 2007
Outstanding credit enhancement- Deposit with banks/corporate
4,695.88
5,711.93
Outstanding Credit enhancement - Receivables
3,200.86
1,906.69
16.
Derivative Instruments:
The Notional principal amount of derivative transactions outstanding as on March 31, 2008 for interest
rate swaps Rs.50,000 lacs (March 31, 2007 – 5,000). The interest rate swaps is to hedge against exposure
to variable interest outflow on loans.
17.
During the year ended March 31, 2008, the Company has reassessed the balance useful life of its
Windmills and Leasehold improvement (Furniture & fixtures ). Based on such reassessment, the estimated
balance useful life has reduced from 6 years to 3 years and 16 years to 5 years respectively. Accordingly,
the Company has provided additional depreciation amounting to Rs.505.34 lacs in respect of these assets
during the year.
F-109
18.
Supplementary Statutory Information
18.1
Managing Director’s Remuneration
The computation of profits under section 349 of the Act has not been given as no remuneration / commission is
payable to the Managing Director.
(Rs. in lacs)
18.2
Expenditure in foreign currency (On cash basis)
Year ended March 31,
2008
1.67
Nil
1.67
Travelling
Others
Year ended March
31, 2007
Nil
Nil
Nil
19.
Additional information pursuant to the provisions of paragraphs 3, 4C and 4D of Part II of schedule VI to
the Act
19.1
Licensed Capacity, Installed capacity, Actual production and Sales
Class of
Goods
Windmill
20.
Units
34
Licensed
Capacity as at
March 31,
Installed
Capacity as at
March 31, (in
KW)
Actual Production and
Sales for the year ended
March 31, (in units)
Sales Value
2008
2007
2008
2007
2008
2007
2008
2007
NA
NA
12,550
12,550
1,65,56,603
2,06,05,220
476.13
583.08
(Rs. in lacs)
The Company has initiated the process of identification of ‘suppliers’ registered under the “The Micro,
Small and Medium Enterprises Development (‘MSMED’) Act, 2006” by obtaining confirmations from
suppliers. Based on the intimation received by the Company, none of the suppliers have confirmed to be
registered under MSMED Act, 2006. Accordingly, no disclosures relating to amounts unpaid as at the
year end together with interest paid /payable are required to be furnished.
F-110
2006 – 2007
B) Notes to Accounts
Particulars of Secured Loans are as follows:i) Redeemable Non Convertible Debentures are redeemable at par between six months and one hundred
sixty months from the date of allotment depending on the terms of issue and are secured by charge on
company’s buildings, plant & machinery, receivables, leased assets, lease rentals including future
receivables other than assets specifically charged to banks / institutions / other lenders, referred to (ii),
(iii), (iv) and (v) below.
ii) Term Loan from Banks / Institution to the extent of Rs. 38416.00 lacs are secured by hypothecation of
all the present and future receivables covered by specific Hire Purchase /lease/Loan Agreements.
iii) Term Loan from Banks and Institution to the extent of Rs. 2831.19 lacs are secured by specific charge
on Land, Plant & Machinery and Sundry Debtors relating to Windmills.
iv) Term Loan from Banks to the extent of Rs.1367.55 lacs is secured by specific charge on Land,
Machinery & Receivable relating to Biomass Plant.
v) Cash Credit from Banks are secured by hypothecation of all present and future receivables covered
by specific Hire Purchase/Lease/Loan Agreements.
2. The company has created floating charge on its Statutory Liquid Assets to the extent of Rs.158.70 lacs in
favor of trustees representing public deposit holders of the Company.
3. The Company has issued 35,00,000 warrants on Preferential basis with an option to convert into Equity
Shares of Rs.160/- each including Premium of Rs.150/- within 18 months from the date of issue i.e 29th
December, 2006.
4. In view of the circular number 9/2002 dated 18th April 2002 issued by the Department of Company Affairs,
no Debenture Redemption Reserve is required to be created in case of privately placed debentures. Since
the debentures issued by the company are privately placed, the Debenture Redemption Reserve of Rs. 25
Las created during the year 2000-2001 is transferred to the General Reserve.
5. In the opinion of the Board of Directors, Receivable and Debtors, have a value on realisation in the
ordinary course of business, at least equal to the amount at which they are stated.
6. The Company does not have any dues payable to small scale industries.
F-111
7. Contingent Liabilities:
(Rs. In Lacs)
As on 31.03.2007
As on 31.03.2006
i.
Income Tax
NIL
160.63
ii.
Guarantees
6.81
116.11
iii.
In respect of assets securitised
16.69
958.40
iv.
In respect of derivative transaction
9.97
NIL
Disputed Income Tax / Wealth Tax demand contested in appeals not provided for Rs.1397.89 lacs. In the
opinion of the Management there is no contingent liability, for the said disputed tax demand, in view of
favourable appellate decision in the company’s own cases in respect of earlier years.
Estimated amount of contracts on capital account not provided for is Rs.1126.88 lacs.
8. Securitization:
The company sells loans through securitization and direct assignment. The information on securitization
activity of the company as on organizer for the year March 31, 2007 and March 31,2006 is given below
As on 31st
March 2007
As on 31st
March 2006
438457
188082
Total book value of loan assets securitised (Rs, in lacs)
80493.74
34907.38
Sale consideration for the securitised assets (Rs. In lacs)
91302.42
38734.72
Net gain on account of securitisation (Rs. In lacs)
10808.68
3827.34
Total number of agreements securitised (Nos)
The information on securitization activity of the company as an originator as on March 31,2007 and
March 31, 2006 is given in the table below.
As on 31st March 2007
As on 31st March
2006
Outstanding credit enhancement – Deposits with
Banks/Corporates
5711.93
2321.72
Outstanding credit enhancement – Receivables
1906.69
--
F-112
9. Expenses in respect of common branches and infrastructure are shared by the Company with other
Companies. The expenses/ recoveries are booked under respective Account heads.
10. The Company is engaged primarily in the business of financing and accordingly there are no separate
reportable segments as per Accounting Standard AS - 17 “ Segment Reporting “ issued by The
Institute of Chartered Accountants of India.
11. The Particulars of power generation by wind mills are as follows :
For the Year Ended
31.03.2007
For the Year ended
31.03.2006
Licensed Capacity
Not Applicable
Not Applicable
Installed Capacity
12550kw
12800 kw
Units Generated
2,06,05,220 Units
1,73,32,680 Units
Units Sold
2,06,05,220 Units
1,73,32,680 Units
(As Certified by the management)
12. Earnings per share:
For the Year Ended
Particulars
Unit
31.03.2007
31.03.2006
Nos. (Lacs)
271
271
Total No of shares outstanding
Nos. (Lacs)
391
271
Weighted Average No of shares outstanding for Basic EPS
Nos. (Lacs)
302.45
271
Weighted Average No of shares outstanding for Diluted EPS
Nos. (Lacs)
303.34
271
Profit After Tax
Rs. (Lacs)
5162.16
3167.29
Less. Preference Dividend
Rs. (Lacs)
105.60
211.88
Net Profit for Equity Shareholders
Rs. (Lacs)
5056.56
2955.41
Basic Earning Per Share
Rs.
16.48
10.91
Diluted Earning per share
Rs.
16.44
10.91
Opening No.of shares
F-113
13. Related Party transactions
Names of related parties where control exists irrespective of whether any
transactions have occurred or not
a. Significant influence over the Company
Shriram Enterprises Holding Private
Limited
Shriram Financial Services Holdings
Private Limited
R.Kannan
( Previous Year Singh)
b .Key Management Personnel
Akhilesh Kumar
Related Party Disclosure
(Rs. In lacs)
Holding company or group of individuals having control or
significant influence over the Company and relatives of such
individuals
Payments
2007
2006
Royalty
79.24
47.85
Data Sourcing Fees
73.59
48.03
Service Charges
441.55
288.20
Equity Dividend
595.24
496.04
560
--
--
5.38
Subscription to optionally Convertible Warrants
Remuneration to Managing Director
14 . Particulars of Receivables are as follows on Hire Purchase and Financial Lease (for advances on or
after 01/04/2001)
(Rs. in lacs)
RECEIVABLES
As on 31st March 2007
Not Later than 1
Year
Later than 1 year but not
later than 5 years
GROSS INVESTMENTS
6166.73
5024.56
1142.17
Less : UNEARNED INCOME
589.35
464.37
124.98
NET PRESENT VALUE
5577.37
4560.18
1017.19
F-114
15. Details of Deferred Tax Liability:
Deferred Tax Liabilities
(Rs in Lacs)
Mar 31,2006
Mar 31,2007
Differences due to accelerated amortization of intangibles under
Income Tax Act
Difference in depreciation and other difference in block of fixed assets
as per tax books and financial books
7.07
12.53
1657.12
1660.69
Effects of lease accounting
788.47
975.18
Others
530.84
521.41
Gross Deferred Tax Liabilities
2983.5
3169.82
10.18
4.8
10.18
4.8
2973.32
3165.02
Deferred Tax Assets
Effect of expenditure debited to profit and loss account in the current
year
But allowed for tax purpose in following years
Gross Deferred Tax Assets
Net Deferred Tax Liability
F-115
18. Schedule to the Balance Sheet of a Non-Banking Financial (Deposit Accepting of Holding) Company
[As required in terms of paragraph 13 of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007]
1
Particulars
Liabilities side :
Loans and advances availed by
the NBFCs inclusive of interest
accrued thereon but not paid :
(a) Debentures : Secured
Unsecured
(other than falling within the
meaning of public deposits*)
(b) Deferred Credits
(c) Term Loans
(d) Inter-corporate loans and
borrowings
(e) Commercial Paper
(f) Public Deposits*
(g) Other Loans - HP Refinance
- Cash Credit from banks
- Others - Subordinated Debts
- ICD
* Please see Note 1 below
2
Break-up of (1)(f) above
(Outstanding public deposits
inclusive
of interest accrued thereon but
not paid):
(a) In the form of Unsecured
debenture
(b) In the form of partly secured
debenture i.e. debentures where
there is a shortfall in the value
of security
(c) Other Public deposit
* Please see Note 1 below
As on 31.03.,2011
As on 31.03. 2010
As on 31.03.2009
As on 31.03.2008
(Rs. In lacs)
As on 31.03. 2007
Amount
outstandin
g
242299.99
nil
Amount
overdue
4487.39
nil
Amount
outstandin
g
173984.77
nil
Amount
overdue
3300.41
nil
Amount
outstandin
g
144720.26
nil
Amount
overdue
2826.03
nil
Amount
outstandi
ng
81076.87
3669.88
Amount
overdue
2597.38
nil
Amount
outstandin
g
75594.27
nil
Amount
overdue
1377.10
nil
nil
302979.72
nil
nil
nil
114676.66
nil
nil
nil
153594.21
nil
nil
nil
126803.37
nil
nil
nil
42799.21
nil
nil
nil
22500.00
90.85
nil
134965.79
68701.99
nil
nil
nil
27.05
nil
nil
352.48
nil
nil
nil
139.50
nil
145453.74
64830.99
nil
nil
nil
28.92
nil
nil
18.65
nil
nil
nil
155.19
nil
109771.11
48647.97
nil
nil
nil
27.50
nil
nil
nil
nil
959.41
4500.00
210.43
nil
67420.99
32101.36
nil
nil
nil
18.11
nil
nil
nil
nil
nil
nil
441.35
nil
26800.92
21651.38
nil
nil
nil
25.81
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
90.85
27.05
139.50
28.92
155.19
27.50
210.43
18.11
441.35
25.81
F-116
(Rs. In lacs)
As on March 31,
Particulars
2011
2010
2009
2008
2007
Amount outstanding
Asset side :
3
Break-up of Loans and advances including bills receivables [other than those
included in (4) below]
(a) secured
625034.06
423064.40
1215.04
8.75
25.90
71548.15
50075.23
39958.40
nil
nil
(a) Financial lease
nil
nil
nil
nil
2485.26
(b) Operating lease
nil
nil
nil
nil
nil
(a) Assets on hire
nil
nil
nil
nil
3117.30
(b) Repossessed Assets
nil
nil
nil
nil
nil
(a) Loans where assets have been repossessed
nil
nil
nil
nil
35.75
(b) Loans other than (a) above
nil
nil
335118.24
237502.50
131177.55
(b) Unsecured
4
Break-up of Lease Assets and stock on hire counting towards AFC activities
(l) Lease assets including lease rentals under sundry debtors:
(ii) Stock on hire including hire charges under sundry debtors:
(iii) Other loans counting towards AFC activities
F-117
(Rs. In lacs)
Amount outstanding as on March 31,
Particulars
2011
5
2010
2009
2008
2007
Break-up of Investments:
Current Investments:
1 Quoted:
(l) Shares: (a) Equity
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
(ii) Debentures and Bonds
nil
nil
nil
nil
nil
(iii) Units of mutual funds
nil
nil
nil
nil
nil
(iv) Governments Securities
nil
nil
nil
nil
nil
(v) Others (please specify)
nil
nil
nil
nil
nil
450.00
nil
nil
nil
nil
nil
nil
nil
nil
nil
(ii) Debentures and Bonds
nil
nil
nil
nil
nil
(iii) Units of mutual funds
nil
nil
nil
nil
nil
(iv) Governments Securities
nil
nil
nil
nil
nil
(v) Others (please specify)
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
(ii) Debentures and Bonds
nil
nil
nil
nil
nil
(iii) Units of mutual funds
nil
nil
nil
nil
nil
101.45
101.45
101.45
104.53
164.03
nil
nil
nil
nil
nil
(b) Preference
2 Unquoted:
(l) Shares: (a) Equity
(b) Preference
Long term Investments:
1 Quoted:
(l) Shares: (a) Equity
(b) Preference
(iv) Governments Securities
(v) Others (please specify)
F-118
(Rs. In lacs)
Amount outstanding as on March 31,
Particulars
2011
2010
2009
2008
2007
2 Unquoted:
(l) Shares: (a) Equity
nil
nil
505.00
500.45
500.00
nil
nil
nil
nil
nil
(ii) Debentures and Bonds
nil
nil
nil
nil
nil
(iii) Units of mutual funds
nil
nil
nil
nil
nil
(iv) Governments Securities
nil
nil
nil
nil
nil
(v) Others (please specify)
nil
nil
nil
nil
nil
(b) Preference
F-119
6
Borrower group-wise classification of all assets financed as in (3) and (4) above Please see Note 2 below
As on March 31, 2011
As on March 31, 2010
Category
As on March 31, 2009
As on March 31, 2008
As on March 31, 2007
Secured
Secured
Amount net of provisions
Secured
Unsecured
Secured
Unsecured
Secured
Unsecured
Unsecured
Unsecured
1 Related Parties**
(a) Subsidiaries
nil
nil
nil
nil
4369.66
nil
nil
nil
nil
nil
(b) Companies in the same group
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
(c) Other related parties
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
617967.11
68631.67
418113.82
47595.24
328872.90
38855.44
237578.64
37991.59
169773.06
nil
617967
68631.67
418113.82
47595.24
333242.56
38855.44
237578.64
37991.59
169773.06
nil
2 Other than related parties
Total
F-120
7
Investor group-wise classification of all investments(current and long term) in shares and Securities(both quoted and unquoted):
Please see Note 3 below
Year ended March 31, Year ended March 31, Year ended March 31, Year ended March 31, Year ended March 31,
2011
2010
2009
2008
2007
Market
Market
Market
Market
Market
Book
Book
Book
Book
Book
Value/
Value/
Value/
Value/
Value/
Break-up
value
Break-up
value
Break-up
value
Break-up
value
Break-up
value
Category
or
or
or
or
or
(net of
(net of
(net of
(net of
(net of
fair value
fair value
fair value
fair value
fair value
provisions
provisions
provisions
provisions
provisions
or NAV**
or NAV**
or NAV**
or NAV**
or NAV**
)
)
)
)
)
1 Related Parties**
(a) Subsidiaries
nil
nil
nil
nil
5.00
5.00
nil
nil
nil
nil
(b) Companies in the same
group
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
(c) Other related parties
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
2 Other than related parties
533.52
533.52
83.52
83.52
583.52
583.52
587.14
587.05
643.43
642.30
Total
533.52
533.52
83.52
83.52
588.52
588.52
587.14
587.05
643.43
642.30
** As per Accounting Standard of ICAI(please see
Note3)
F-121
8
Other information :
Year ended March 31,
2010
2009
2011
(l)
(ii)
(iii)
Particulars
Gross Non-Performing Assets
(a) Related Parties
(b) Other than related parties
Net Non-Performing Assets
(a) Related Parties
(b) Other than related parties
Assets acquired in satisfaction of debt
Amount
Amount
Amount
2008
2007
Amount
Amount
nil
12966.18
nil
10753.30
nil
7784.03
nil
4228.66
Nil
4040.66
nil
2982.76
nil
nil
3322.73
nil
nil
3590.35
nil
nil
2495.70
nil
Nil
2561.44
Nil
Notes:
1. As defined in Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptances of Public Deposits (Reserve Bank) Directions, 1998.
2. Provisioning norms shall be applicable as prescribed in the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms
(Reserve Bank) Directions, 2007.
3. All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuation of investments and other assets as also assets
acquired in satisfaction of debt. However, market value in respect of quoted investments and break-up/fair value/NAV in respect of unquoted investments
should be disclosed irrespective of whether they are classified as long term or current in column (5) above.
For Pijush Gupta & Co.
Firm Registration No. 309015E
Chartered Accountants
For and on behalf of the Board of Directors of
Shriram City Union Finance Limited
R. Kannan
Managing
Director
Ramendra Nath Das
Partner
Membership No. 014125
Place: Chennai
Date:
July 21, 2011
S.Venkatakrichnan
Director
C R Dash
Company Secretary
F-122
PIJUSH GUPTA & CO
C H A R T E R E D A CC O U N T A N T S
P-199, C.I.T.ROAD, SCHEME IV-M, KOLKATA – 700 010
TEL (033) 2353-6859, (0) 98311 91779 MAIL: [email protected]
Auditors' Report
To
The Board of Directors
Shriram City Finance Limited
221, Royapettah High Road,
Mylapore, Chennai
Dear Sirs,
1.
We, Pijush Gupta & Co., have examined the attached Reformatted Consolidated financial information
comprising of Consolidated Balance Sheet, Consolidated Profit and Loss Accounts, Consolidated Cash Flows
and Consolidated notes therein of Shriram City Union Finance Limited (‘Company’ or ‘Issuer’), and its
subsidiary Shriram Housing Finance Limited (Collectively referred to as "Group") as at and for the year
ended March 31, 2011, approved by the board of directors of the Company and as prepared by the Company
in accordance with the requirements of:
a.
paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 ('the Act') and
b.
the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008
("Regulations") issued by the Securities and Exchange Board of India ("SEBI"), as amended from
time to time in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992
("SEBI Act").
Pijush Gupta & Co. is referred to as the "Auditors" and the references to the Auditors as "we", "us" or "our",
in this letter, shall be construed accordingly.
2.
We have examined such reformatted consolidated financial information taking into consideration:
a.
the terms of reference dated June 26, 2011 received from the Company and statement of
responsibilities of auditors dated June 26 ,2011 requesting us to carry out the assignment, in
connection with the Draft Prospectus/Prospectus (collectively referred to as “Offer Document”)
being issued by the Company for its proposed public issue of secured non-convertible debentures
("NCDs"), having a face value of Rs. 1000 each (referred to as the "Issue") and
b.
The Revised Guidance Note on Reports in Company Prospectuses issued by the Institute of Chartered
Accountants of India.
F-123
Reformatted Consolidated financial information as per audited Consolidated financial statements:
3.
The Reformatted Consolidated financial information of the Group has been extracted by the management
from the Consolidated balance sheet of the Group as at March 31, 2011, and the related Consolidated profit
and loss account and Consolidated cash flow statement for the year ended March 31, 2011, (Collectively
referred to as the "Audited Consolidated Financial Statements") audited by us..
For our examination, we placed reliance on a.
The financial statements of Shriram Housing Finance Limited for the year ended March 31,
2011, audited and reported upon by R. Shankar, Chartered Accountants, Auditors of the said
subsidiary for the financial year ended March 31, 2011, and
b.
Audit reports received from Branch Auditors who had conducted audit of business regions of
the company.
These Audited Consolidated Financial Statements have been approved by the board of directors.
4.
5.
In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, the SEBI
Regulations, terms of our engagement agreed with you and statement of responsibilities of auditors, we
further report that:
a.
The Reformatted Consolidated Summary Statement of Assets and Liabilities and the schedules
forming part thereof, Reformatted Consolidated Summary Statement of Profit and Loss and the
schedules forming part thereof and the Reformatted Consolidated Summary Statement of Cash Flow
("Reformatted Consolidated Summary Statements") of the Group, as at March 31, 2011 examined
by us, have been set out in Annexure I to V to this report. These Reformatted Consolidated Summary
Statements are after regrouping as in our opinion is appropriate and more fully described in Significant
Accounting Policies and Notes (Refer Annexure XIII)
b.
Based on the above we state that:
the Reformatted Consolidated Summary Statements have to be read in conjunction with the notes
given in Annexure XIII;
there are no extraordinary items which need to be disclosed separately in the reformatted
consolidated summary statements; and
there are no qualifications in the auditors’ reports, which require any adjustments to the
reformatted consolidated summary statements.
We have not audited any consolidated financial statements of the Group as of any date or for any
period subsequent to March 31, 2011. Accordingly, we express no opinion on the financial position,
results of operations or cash flows of the Group as of any date or for any period subsequent to March
31, 2011.
F-124
Other consolidated Financial Information:
6.
At the Company’s request, we have also examined the following consolidated financial information proposed
to be included in the Offer Document prepared by the management and approved by the board of directors of
the Company and annexed to this report relating to the Group for the year ended March 31, 2011 :
i. Statement of contingent liabilities, enclosed as Annexure VI
ii. Statement of dividend paid/proposed, enclosed as Annexure VII
iii. Statement of accounting ratios relating to earnings per share, net asset value, return on net worth,
enclosed as Annexure VIII
iv. Statement of Secured and Unsecured Loans including terms and conditions, enclosed as Annexure IX
&X
v. Capitalization Statement as at March 31, 2011, enclosed as Annexure XI
vi. Statement of tax shelters, enclosed as Annexure XII
7.
In our opinion, the Reformatted consolidated financial information as disclosed in the annexure to this report,
read with the respective significant accounting policies and notes disclosed in Annexure XIII, as considered
appropriate and disclosed, has been prepared in accordance with Paragraph B(1) of Part II of Schedule II of
the Act and the Regulations.
8.
This report should not be in any way construed as a reissuance or redating of any of the previous audit reports
issued by us or by any other firm of Chartered Accountants, nor should this report be construed as a new
opinion on any of the Reformatted Consolidated Financial Statements referred to herein.
9.
We have no responsibility to update our report for events and circumstances occurring after the date of the
report for the financial position, results of operations or cash flows of the Group as of any date or for any
period subsequent to March 31, 2011.
10.
This report is intended solely for your information and for inclusion in the Offer Document in connection
with the Offering of the Company, and is not to be used, referred to or distributed for any other purpose
without our prior written consent.
For Pijush Gupta & Co.
Firm registration number: 309015E
Chartered Accountants
Ramendra Nath Das
Partner
Membership No.: 014125
Chennai, July 21, 2011
F-125
Annexure I
Shriram City Union Finance Limited
Reformatted Consolidated summary of Assets and Liabilities
(Rs. in lacs)
Particulars
Schedule
As at March 31, 2011
Assets
A.
Fixed and Intangible Assets(Net) (including CWIP)
1
2,947.16
B
Investments
2
301.45
C
Deferred Tax Asset (Net)
D
Current Assets, Loans & Advances
E
Total (A+B+C+D)
1,581.66
3
936,363.41
941,193.68
Liabilities
F
Secured Loans
4
656,951.01
G
Unsecured Loans
5
75,827.43
H
Current Liabilities
6
70,108.22
I
Provisions
7
17,123.50
J
Total (F+G+H+I)
820,010.16
K
Net Worth (F-K)
121,183.52
(i)
Share Capital
8
4,953.69
(ii)
Stock Option Outstanding
10
1,887.27
(iii)
Reserves and Surplus
9
114,366.32
(iv)
Less : Miscellaneous Expenditure (to the extent not written
off or adjusted)
11
23.76
Represented By
Total (i+ii+iii+iv+v-vi)
121,183.52
The accompanying statement of Significant Accounting Policies and Notes to Accounts on Summary Financial
Statements are integral part of this statement.
As per our report of even date
For Pijush Gupta & Co.
For and on behalf of the Board of Directors of
Firm Registration No. 309015E
Shriram City Union finance Limited
Chartered Accountants
Ramendra Nath Das
R. Kannan
S. Venkatakrishnan
Partner
Managing Director
Director
Membership No. 014125
Place: Chennai
C R DASH
Date: July 21, 2011
Company Secretary
F-126
Annexure II
Shriram City Union Finance Limited
Reformatted Consolidated summary of Profit and Loss Account
(Rs. in lacs)
Particulars
Schedule
For the year ended
March 31,2011
A.
Income
i
Income from Operations
12
131,800.12
ii
Other Income
13
291.07
Total Income
132,091.19
B.
Expenditure
i
Financial Expenses
14
58,848.26
ii
Personnel Expenses
15
4,367.02
iii
Operating & Other Expenses
16
20,470.16
iv
Depreciation and amortization
Provisions & Write offs (net)
17
747.41
11,598.25
v
Total Expenditure
96,031.10
C.
Net Profit Before Taxation (A-B)
36,060.09
D.
Provision for taxation
E.
Current tax
12,460.20
Deferred tax
(458.96)
Total Tax
12,001.24
Net Profit after Taxation (C-D)
24,058.85
Balance in Profit & Loss Account brought forward
22,730.09
46,788.94
F.
Balance Available for Appropriations
G.
Appropriations
H.
Equity Shares - Interim dividend
1,236.25
Equity Shares - Proposed final dividend
1,733.79
Tax on dividend
205.33
Tax on proposed dividend
281.26
Transfer to statutory reserve
4,810.00
Transfer to general reserve
Total Appropriations
2,410.00
10,676.63
Balance carried to Balance Sheet (F-G)
36,112.31
F-127
The accompanying statement of Significant Accounting Policies and Notes to Accounts on Summary Financial
Statements are integral part of this statement.
As per our report of even date
For Pijush Gupta & Co.
For and on behalf of the Board of Directors of
Firm Registration No. 309015E
Shriram City Union finance Limited
Chartered Accountants
Ramendra Nath Das
R. Kannan
Partner
Managing Director Director
Membership No. 014125
Place: Chennai
C R DASH
Date:
Company Secretary
July 21, 2011
F-128
S. Venkatakrishnan
Annexure III
Shriram City Union Finance Limited
Consolidated Cash Flow Statement for the Year ended March 31, 2011
(Rs. in lacs)
Particulars
Total As at March 31, 2011
A. Cash flow from operating activities
Net Profit before taxation
Depreciation and amortization
(Profit)/loss on sale of assets(net)
income on fixed deposits
Employees Stock option compensation cost
Provision for hedging contracts
Provision for non performing assets and bad debts written off
36,060.09
747.42
13.78
(270.70)
471.68
(546.62)
10,136.80
Contingent Provision against Standad assets
Provision for gratuity
Provision for leave encashment
Operating profit before working capital changes
1,714.89
40.82
27.48
48,395.64
Movements in working capital:
(Increase) / decrease in assets under financing activities
(Increase) / decrease in other current assets
(Increase)/decreae in other loans and advances
Increase / (decrease) in current liabilities
Cash generated from operations
Direct taxes paid ( net of refunds)
Net cash used in operating activities (A)
B. Cash flows from investing activities
Investment in Fixed depostis (net)
Purchase of fixed and intangible assets
Proceeds from sale of fixed assets
Interest on fixed deposit
Pre-operative Expenditure
Preliminary Expenditure
Net cash used in investing activities (B)
(233,365.55)
(11,530.50)
(931.92)
23,709.59
(173,722.74)
(11,127.69)
(184,850.43)
7,992.17
(1,666.35)
2.52
270.70
(21.03)
(2.73)
6,575.28
C. Cash Flows from financing activities
Proceeds from issue of equity share capital including securities
premium and Share Application Money
Increase/ (decrease) in bank borrowings(net)
Increase/ (decrease) in long term borrowings (net)
Increase/ (decrease) in fixed deposits (net)
Increase/ (decrease) in subordinate debts (net)
Increase / (decrease) in unsecured loans
Dividend paid
Tax on dividend
Net cash from financing activities (C)
F-129
133.05
180,566.59
62,773.87
(45.64)
269.38
22,500.00
(2,710.89)
(450.25)
263,036.11
Annexure III
Shriram City Union Finance Limited
Consolidated Cash Flow Statement for the Year ended March 31, 2011
Particulars
Net increase / (decrease) in cash and cash equivalents (A + B + C)
Cash and Cash Equivalents at the beginning of the period
Cash and Cash Equivalents at the end of the year
(Rs. in lacs)
Total As at March 31,
2011
84,560.97
116,711.86
201,272.83
Components of Cash and Cash Equivalents
Cash and Cash Equivalents at the end of the year as per
Balance Sheet
Less: Balance in Current account held for unpaid dividends
Less: Fixed deposits held for more than three months
Less: Fixed deposit under lien
216,782.34
22.11
51.00
15,436.40
201,272.83
As per our report of even date
For Pijush Gupta & Co.
Firm Registration No: 309015E
Chartered Accountants
For and on behalf of the Board of Directors of
Shriram City Union Finance Limited
Ramendra Nath Das
Partner
R Kannan
Managing Director
Membership No : 014125
Place : Chennai
C R Dash
Company Secretary
Date: July 21, 2011
F-130
S Venkatakrishnan
Director
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Assets and Liabilities
(Rs. in lacs)
Schedule 1 - Fixed and Intangible Assets(Net)
As at March 31,2011
ASSETS FOR OWN USE
Tangible Fixed Assets
Building
10.59
Leasehold Improvements
681.68
Furniture & Fixtures
791.09
Vehicles
22.73
Land - Freehold
1.76
Plant and Machinery
1232.82
Intangible Fixed Assets
Software
206.49
TOTAL (A)
2,947.16
F-131
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Assets and Liabilities
(Rs. in lacs)
Schedule 2 - Investments
As at March 31, 2011
LONG TERM (at cost)
Trade
Shares : Fully paid up
Other Than Trade
Quoted :
A. Government Securities:
6.13% GI Loan 2028(Face value -Rs.100 lacs)
101.45
B.Equity Shares (Fully paid up)
Others
Highmark Credit Information Services Pvt. Ltd
(Face Value of Rs. 10/- each)
200.00
301.45
Book value of Quoted investments
101.45
Market value of Quoted investments
83.52
Book value of Unquoted investments
200.00
Details of investments may be referred from the annual report of the respective years
F-132
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Assets and Liabilities
(Rs. in lacs)
Schedule 3 - Current Assets, Loans & Advances
As at March 31, 2011
Assets under financing activities
Secured Loans
-Consider good
617,967.11
-Consider doubtful
7,066.95
Unsecured Loans
-Consider good
70,970.68
-Consider doubtful
2,916.48
698,921.22
Cash & Bank Balances
i) Cash on hand
6,025.90
ii) Balances with scheduled banks in:
- Current accounts
95,769.03
- Deposit Accounts #
114,987.40
216,782.33
Other current assets
i) Interest accrued on fixed deposits and other loans and advances
iii) Other Assets
324.96
24.99
iv) Securitsation- Receivable
17147.07
17,497.02
Other loans and advances
Unsecured- Considered Good
Advances recoverable in cash or in kind or for value to be received
1,547.91
Advance- Capital Assets
108.93
Prepaid expenses
952.29
Security deposits
553.71
3162.84
Total
936,363.41
# Includes Fixed deposits pledged with Banks as margin for securitisation
F-133
15,436.40
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Assets and Liabilities
(Rs. in lacs)
Schedule 4 - Secured Loans
As at March 31, 2011
Redeemable non convertible debentures
219,877.64
refer notes to account
2(2)(a)(b)
Term loans
i) From Financial institutions / Corporate
6,500.00
refer notes to account
2(2)( c)(i)
ii) From banks
295,677.28
refer notes to account
2(2)(c )(ii)
Cash credit from banks
134,896.09
refer notes to account
2(2)(d)
656,951.01
Schedule 5 - Unsecured Loans
As at March 31, 2011
55.10
Fixed deposits
Subordinated debts
53,272.33
Commercial papers
22,500.00
Total
75,827.43
F-134
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Assets and Liabilities
(Rs. in lacs)
As at March
31,2011
Schedule 6 - Current Liabilities
Sundry creditors
2,653.61
Interest accrued but not due on loans
32,818.43
Application money on Redeemable non convertible debentures
967.07
Application money on Subordinated debts
107.47
- Unclaimed Matured Deposits
20.83
- Unclaimed Matured Debentures
3,777.27
- Unclaimed Matured Subordinated Debts
210.19
- Interest accrued and due on above
858.63
- Unclaimed dividend
22.11
Temporary credit balance in bank accounts
3,122.28
Securitization deferred income
23,686.37
Other liabilities
1,863.96
70,108.22
(Rs. in lacs)
As at March 31,
2011
Schedule 7 - Provisions
For non-performing assets
9,983.42
For standard assets
1,714.89
For income tax (net of advance tax)
1,882.40
For diminution in value of investments
17.93
For hedging contracts
1,259.24
For leave encashment and availment
54.23
For gratuity
196.34
Proposed dividend
Corporate dividend tax
1,733.79
281.26
17,123.50
F-135
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Assets and Liabilities
(Rs. in lacs)
Schedule 8 - Share Capital
As at March 31, 2011
Authorised
Equity Share Capital
6,000.00
Preference Share Capital
4,000.00
10,000.00
No. of equity Shares of Rs.10/- each
60,000,000
No. of preference Shares of Rs.100/- each
4,000,000
Issued, Subscribed & Fully Paid up
4,953.69
Equity Shares
No. of equity shares of Rs. 10/- each
49,536,877
4,953.69
F-136
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Assets and Liabilities
(Rs. in lacs)
Schedule 9 - Reserves and Surplus
As at March 31, 2011
Capital Reserve
Balance as per last account
1,400.00
Forfeiture of optionally convertible warrants
1,400.00
Capital Redemption Reserve
Balance as per last account
2,328.98
Add : Transfer from Profit & Loss A/c
2,328.98
Securities Premium Account
Balance as per last account
49,836.14
Add: Amount received during the year
960.99
50,797.13
Statutory Reserve
Balance as per last account
11,150.00
Add: Transfer from Profit & Loss Account
4,810.00
15,960.00
General Reserve
Balance as per last account
5,357.90
Add: Transfer from Profit & Loss Account
2,410.00
7,767.90
36,112.31
Balance in Profit & Loss Account
114,366.32
(Rs. in lacs)
Schedule 10 - Stock Option Outstanding
As at March 31,2011
Employee stock option outstanding
2,079.09
Less : Deferred employee compensation outstanding
191.82
1887.27
F-137
Annexure IV
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Assets and Liabilities
(Rs. in lacs)
Schedule 11- Miscellaneous Expenditure (to the extent not
written off or adjusted)
Issue expenses for equity shares
Preliminary and Incorporation expenditure
As at March 31, 2011
2.73
Pre Operative expenditure:
Rent
16.79
Deprecation and amortization
0.01
Printing & stationery
0.43
Travelling & conveyance
0.35
Communication expenses
0.19
Audit fees
0.10
Professional charges.
0.60
Legal & professional charges
0.09
Miscellaneous expenses
2.47
23.76
F-138
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Profit and Loss Account
(Rs. in lacs)
For the year ended March 31,
2011
Schedule 12 - Income from Operations
Income from financing activities
Interest on margin money on securitization/
assignments
122,778.70
799.12
8,222.30
Gain on securitization/ assignments
131,800.12
(Rs. in lacs)
For the year ended March 31,
2011
Schedule 13 - Other Income
Interest on deposits with banks
264.57
Profit on sale of assets
0.16
Income from Long Term Investments (non trade)
- Interest on government securities
6.13
Income from Current Investments (non trade)
Commission /Referral fees received
10.23
Miscellaneous Income
9.98
291.07
F-139
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Profit and Loss Account
(Rs. in lacs)
For the year ended March 31,
2011
Schedule 14 - Financial Expenses
Interest on :
- Debentures
18,256.28
- Subordinated debts
7,456.74
- Fixed deposits
6.03
- Loans from banks
18,914.70
- Loans from institutions and others
1,243.82
- Commercial paper
1,434.16
Bank charges
1,535.79
Brokerage and Commission
7,587.05
Processing and other charges
2,413.69
58,848.26
(Rs. in lacs)
For the year ended March 31,
2011
Schedule 15 - Personnel Expenses
Salaries, other allowances and bonus
4,150.24
Gratuity
40.51
Contribution to provident and other funds
138.21
Staff welfare
38.06
4,367.02
F-140
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Profit and Loss Account
(Rs. in lacs)
Schedule 16 - Operating and other Expenses
Rent
For the year ended March 31,
2011
1,007.21
Electricity expenses
360.57
Repairs & Maintenance
437.90
Rates, Duties and Taxes
636.02
Printing & stationery
1,649.92
Travelling & conveyance
3,704.17
Advertisement
520.06
Business Promotion
3,495.02
Sourcing fees and other charges
1,444.79
Royalty
364.24
Directors' sitting fees
5.45
Insurance
167.01
Communication expenses
1,908.24
Payment to auditor
As Auditor:
- Audit fees
7.65
- Tax audit fees
3.10
- Certification fee & Other services
4.60
- Limited Review
5.88
Professional charges
2,092.43
Legal & Recovery Expenses
2,053.29
Donations
1.00
Loss on sale of assets
13.94
Miscellaneous expenses
587.67
20,470.16
F-141
Annexure V
Shriram City Union Finance Limited
Schedules to the Reformatted Consolidated Statement of Profit and Loss Account
(Rs. in lacs)
For the year ended March 31,
2011
Schedule 17 - Provisions & Write offs
Provision for non performing assets
2,552.85
Provision for standard assets
1,714.89
Bad debts written off
7,583.97
Bad debt recovery
(253.46)
11,598.25
F-142
Annexure VI
Shriram City Union Finance Ltd.,
Statement of Contingent Liabilities
(Rs. in lacs)
Particulars
As on March 31, 2011
Guarantees issued by the Company and out standing
6.81
Guarantees issued by Others
1942.77
F-143
Annexure VII
Shriram City Union Finance Ltd.,
Statement of Dividend in respect of Equity Shares
(Rs. in lacs)
2011
Particulars
Interim
Rate of Dividend
25%
Number of Equity Shares on which interim dividend paid
Amount of Interim Dividend
49449939
1236.25
Dividend Distribution tax
205.33
Dividend Distribution tax Rate
16.609%
Final Dividend for the current year
Rate of Dividend
35%
Number of Equity Shares on which Final dividend paid
Amount of Final Dividend
49536877
1733.79
Dividend Distribution tax Rate
16.222%
Dividend Distribution tax
281.26
F-144
Annexure VIII
Page 1 of 3
Shriram City Union Finance Limited
Statement of Accounting Ratios
Calculation of Earning Per Share (EPS)
(Rs. in lacs)
As at March
31,2011
Particulars
A.
Net Profit After Tax (Rs in Lakhs)
B.
Less: Preference dividend including tax on dividend
Lakhs)
C.
Net Profit Attributable to Equity Shareholders
D.
24058.85
(Rs in
(Rs in Lakhs)
a
24058.85
Weighted average number of Equity Share Outstanding during the
year/ period (for Basic EPS) (Lakhs)
b
493.23
E.
(i) Equity Share arising on conversion of optionally convertible
warrants (Lakhs)
c
-
F.
(ii) Equity Share for no consideration arising on grant of Stock
option under ESOP (Lakhs)
d
8.32
Weighted average number of Equity Shares outstanding during the
year/ period (for Diluted EPS) (b+c+d) (Lakhs)
e
501.55
G.
H.
Earnings per share (Basics) (Rs.) (a/b)
48.78
I.
Earnings per share (Diluted) (Rs.) (a/e)
47.97
F-145
Annexure VIII
Page 2 of 3
Shriram City Union Finance Limited
Statement of Accounting Ratios
Calculation of Return on Net Worth (RONW)
(Rs. in lacs)
Particulars
As at March 31,
2011
Schedule
SHAREHOLDERS FUNDS
A.
Share Capital
9
B.
Share Application Money Pending Allotment
C.
Stock Option Outstanding
D.
Optionally Convertible Warrants
E.
Reserve and Surplus
F.
Less: Miscellaneous Expenditure (Not written off)
G.
Net Worth as at the end of the year/ period
H.
Net Profit after tax
I.
Return on Net Worth (Annualized) (%)
4953.69
-
11
1887.27
-
10
114366.32
23.76
121183.52
24058.85
19.85%
F-146
Annexure VIII
Page 3 of 3
Shriram City Union Finance Limited
Statement of Accounting Ratios
Calculation of Net Asset Value (NAV) Per Equity Share
(Rs. in lacs)
Particulars
Schedule
As at March 31,
2011
SHAREHOLDERS FUNDS
A.
Share Capital
9
4953.69
B.
Share Application Money Pending Allotment
C.
Stock Option Outstanding
D.
Optionally Convertible Warrants
E.
Reserve and Surplus
F.
Less: Miscellaneous Expenditure (Not written off)
G.
Net Asset Value
121183.52
H.
Number of Equity shares outstanding at the end of the
year/ period
49536877
I.
Net asset Value per Equity Share (Rs.)
11
1887.27
-
10
114366.32
23.76
244.63
F-147
Annexure IX
Shriram City Union Finance Ltd.,
Secured Loans
Term loan from banks
Particulars
ANDHRA BANK
BANK OF MAHARASHTRA
CALYON BANK
Date of
Disbursement
31-Dec-08
31-Mar-11
2-Dec-10
Disbursed
amount (Rs. in
lacs)
Balance as on
March 31st
2011 (Rs. in
lacs)
Interest
Rate %
10000.00
4371.95
12.25
5000.00
3500.00
5000.00
3500.00
10.00
9.49
7500.00
20000.00
20000.00
10000.00
10000.00
20000.00
6000.00
5000.00
8000.00
1250.00
20000.00
20000.00
10000.00
10000.00
20000.00
6000.00
5000.00
8000.00
11.50
10.50
10.00
10.00
9.75
9.50
9.20
8.65
8.90
5000.00
5000.00
8.25
25000.00
20000.00
4000.00
1000.00
25000.00
20000.00
4000.00
333.28
8.75
9.50
9.50
10.50
4300.00
2866.67
8.20
2500.00
625.00
9.50
2000.00
2000.00
9.50
Repayable In 16 Quarterly
Installments
25 Crs Each at the end Of 30Jun-14 & 30-Sep-14
Bullet Payment on 02-Dec-12
35 Months 5 Half Yearly
Installments - 1.250Crs /
Installment
Bullet Payment on 18-Feb-12
Bullet Payment on 24-Aug-13
Bullet Payment on 24-Aug-13
Bullet Payment on 28-Dec-13
Bullet Payment on 29-Jun-11
Bullet Payment on 07-Oct-11
Bullet Payment on 24-Sep-13
Bullet Payment on 26-Oct-11
Tenor-18 Months(3 Equal
Installment At The End Of
12Th,15Th & 18Th)
25 Months-(Oct11, Apr12,
Oct12, Apr13 - 62.5 Crs
Bullet Payment on 22-Jun-11
Bullet Payment on 22-Jun-11
Monthly Emi 27.70 Lacs
Half Yearly
Installment(Rs.71666666) - 35
Months
Tenro-24 Months(Repaid In 4
Equal Half Yearly
Installments Of Rs.6.25 Cr)
Repayable In 24 Monthly
Installments (208.33 Lac)
10.00
In 4 Quarterly Installment Of
25 Cr-36 Months(25 Crs-Jun
13, Sep 13, Dec 13 & Mar 14)
17-Dec-07
CANARA BANK
CANARA BANK
CANARA BANK
CANARA BANK
CORPORATION BANK
CORPORATION BANK
DBS BANK LTD
DBS BANK LTD
DBS BANK LTD
29-Jan-10
17 & 24-Sep-10
24-Sep-10
28-Dec-10
29-Mar-11
4-Mar-11
24-Sep-10
26-Oct-10
22-Mar-10
HDFC BANK
ICICI BANK
IDBI BANK
IDBI BANK
ING VYSYA BANK
22-Mar-11
22-Mar-11
22-Mar-11
26-Mar-09
25-Mar-10
ING VYSYA BANK
31-Jul-09
KARUR VYSYA BANK
ORIENTAL BANK OF
COMMERCE
ORIENTAL BANK OF
COMMERCE
31-Mar-10
Repayment terms
28-Mar-11
10000.00
F-148
10000.00
Annexure IX
Shriram City Union Finance Ltd.,
Secured Loans
Term loan from banks
Particulars
STATE BANK OF INDORE
STATE BANK OF
MAURITIUS
STATE BANK OF MYSORE
STATE BANK OF PATIALA
STATE BANK OF PATIALA
Date of
Disbursement
31-Mar-09
7-Feb-11
27-Nov-10
28-Feb-09
21-Dec-10
Disbursed
amount (Rs. in
lacs)
Balance as on
March 31st
2011 (Rs. in
lacs)
Interest
Rate %
Repayment terms
5000.00
1397.73
12.50
1500.00
10000.00
5000.00
10000.00
1500.00
9999.38
2000.00
10000.00
10.50
9.50
10.25
10.75
11 Quarterly Installment(Rs.4.50Cr) And Last One
(5Cr)
8 Quarterly Installments 31.25 Million
Bullet Payment on 27-Nov-13
10 Qtrly installment (5.00 Crs)
Bullet Payment on 21-Dec-13
Repayment At The End Of
Every 12 Months In 3 Annual
Equal Instalments-3Years
STATE BANK OF PATIALA
STATE BANK OF
TRAVANCORE
SYNDICATE BANK
UNION BANK OF INDIA
UNION BANK OF INDIA
22-Mar-11
15000.00
15000.00
9.75
23-Dec-10
3-Jan-11
22-Nov-10
4-Jan-11
10000.00
15000.00
15000.00
15000.00
9999.97
15000.00
15000.00
15000.00
10.50
10.00
9.75
10.50
UNITED BANK OF INDIA
27-Dec-08
2500.00
833.30
11.00
VIJAYA BANK
YES BANK
Total
30-Mar-11
28-Feb-11
9000.00
8000.00
9000.00
8000.00
295677.28
10.50
9.25
Bullet Payment on 23-Dec-12
Bullet Payment on 03-Jan-13
Bullet Payment on 22-Nov-12
Bullet Payment on 04-Jan-13
12 Quarterly Installments For
36 Months
Repayable In 36 Months With
An Initial Moratorium Period
Of 12 Months & Thereafter It
Should Be Repaid In 24 Emi
Bullet Payment on 28-Feb-14
Term loan from institutions
Particulars
SIDBI
Date of
Disbursement
10-Aug-10
Disbursed
amount (Rs. in
lacs)
10000.00
F-149
Balance as on
March 31st
2011 (Rs. in
lacs)
6500.00
Repayment terms
10.00
Repayable on 10-Aug-13
Annexure IX
Shriram City Union Finance Ltd.,
Cash Credit from Banks(including WCDL)
Particulars
Date of
Disbursement
Disbursed amount (Rs. in lacs)
Balance as on March
31st 2011 (Rs. in lacs)
Int. Rate %
AXIS BANK
23-Aug-06
10000.00
9.08
11.75%
BANK OF INDIA
11-Jun-09
20000.00
10185.07
9.60%
BANK OF MAHARASHTRA
19-Mar-06
5000.00
4997.40
10.50%
CANARA BANK
24-Nov-09
5000.00
4088.27
11.00%
CENTRAL BANK OF INDIA
24-Mar-09
10000.00
3532.29
10.50%
CITY UNION BANK
10-Nov-10
1400.00
78.13
11.50%
CORPORATION BANK
28-Dec-10
5000.00
3522.68
9.75%
DBS BANK
29-Apr-10
100.00
5.91
10.00%
DENA BANK
5-Mar-07
15000.00
10713.18
10.45%
IDBI BANK
10-Oct-08
1000.00
90.30
11.25%
INDUSIND BANK
31-May-10
7500.00
120.56
10.60%
ING VYSYA BANK
23-Mar-10
500.00
5.70
10.00%
JAMMU & KASHMIR BANK LTD.,
15-Mar-11
10000.00
8013.44
11.00%
KOTAK MAHINDRA BANK
21-Aug-09
5000.00
1014.64
10.60%
ORIENTAL BANK OF COMMERCE
18-Sep-06
5000.00
3662.67
10.00%
PUNJAB NATIONAL BANK
4-Aug-07
5000.00
9.16
13.00%
SOUTH INDIAN BANK
25-Jun-10
1000.00
40.33
12.00%
STATE BANK OF INDIA
13-Mar-09
15000.00
7539.90
12.00%
STATE BANK OF PATIALA
24-Feb-09
5000.00
48.11
12.75%
STATE OF BIKANUR AND JAIPUR
8-Sep-10
100.00
40.59
11.50%
TAMILNADU MERCANTILE BANK
20-Aug-07
5000.00
19.89
11.50%
UNION BANK OF INDIA
25-Mar-08
5000.00
2766.09
12.00%
UNITED BANK OF INDIA
25-Mar-09
7500.00
3292.02
9.00%
YES BANK - ac 200
25-Mar-10
2000.00
10.74
11.00%
HSBC BANK
23-Dec-09
10000.00
10000.00
8.15%
HSBC BANK
23-Dec-09
5000.00
5000.00
8.05%
SOUTH INDIAN BANK
25-Jun-10
5000.00
4989.92
7.75%
STATE BANK OF BIKANER & JAIPUR
22-Dec-10
2400.00
2400.00
9.50%
STANDARD CHARTERED BANK
25-Oct-10
5000.00
5000.00
8.90%
CENTURION CC BANK
31-Dec-10
2400.00
2400.00
9.50%
CANARA BANK
9-Dec-10
15000.00
15000.00
9.80%
DBS
4-Mar-11
1400.00
1400.00
9.20%
FEDERAL
1-Mar-11
5000.00
5000.00
9.90%
STATE BANK OF MYSORE
18-Mar-11
4900.00
4900.00
9.30%
IDBI
22-Mar-11
15000.00
15000.00
9.50%
WCDL
Total
134896.09
F-150
Annexure IX
Shriram City Union Finance Ltd.,
Privately placed Redeemable NCD
Particulars
Date of
Disbursement
Disbursed
amount (Rs. in
lacs)
Balance as on
March 31st
2011 (Rs. in
lacs)
Interest
Rate %
CORPORATION BANK
24-Sep-09
2500.00
2500.00
10.75%
CENTRAL BANK OF INDIA
17-Sep-09
1000.00
1000.00
10.75%
CENTRAL BANK PENSION
FUND
17-Sep-09
1000.00
1000.00
10.75%
CENTRAL BANK
PROVIDENT FUND
17-Sep-09
500.00
500.00
10.75%
ALLAHABAD BANK
23-Sep-09
2000.00
2000.00
10.75%
A.K.CAPITAL SERVICES
BANK OF BARODA
STANDARD CHARTERED
BANK
RELIANCE MUTUAL FUND
6-Oct-09
6-Oct-09
2000.00
1000.00
2000.00
1000.00
10.75%
10.75%
20-Apr-10
17500.00
14583.33
7.82%
2-Jul-10
7500.00
7500.00
9.00%
ING VYSYA BANK
22-Nov-10
2000.00
2000.00
10.50%
ING VYSYA BANK
ING VYSYA BANK
JHARKAND GRAHIM BANK
DEUTSCHE BANK
Total
13-Dec-10
13-Dec-10
4-Feb-11
30-Mar-11
1000.00
1500.00
500.00
27500.00
1000.00
1500.00
500.00
27500.00
64583.33
10.60%
10.60%
10.75%
9.00%
Repayment terms
3.5 years 1st 20% 4th year
2nd 20% 4.5 years 30% and
5th year30%
3.5 years 1st 20% 4th year
2nd 20% 4.5 years 30% and
5th year30%
3.5 years 1st 20% 4th year
2nd 20% 4.5 years 30% and
5th year30%
3.5 years 1st 20% 4th year
2nd 20% 4.5 years 30% and
5th year30%
3.5 years 1st 20% 4th year
2nd 20% 4.5 years 30% and
5th year30%
Repayable on 07-Oct-14
Repayable on 07-Oct-14
Half yearly instalment-3
years
Repayable on 05-Jan-13
In 3 Equal installments in
5th/6th/ 7th Year from
deemed date of allotment
Repayable on 13-Dec-17
Repayable on 13-Dec-17
Repayable on 04-Feb-21
Repayable on 30-Mar-17
Privately placed Redeemable Non Convertible Debenture of Rs. 1,000 each
Particulars
Retail Debentures
Balance as on March
31st 2011 (Rs. in lacs)
155294.31
Repayment terms
Redeemable at par over a period 12 to 160 months
F-151
Annexure X
Shriram City Union Finance Limited
Unsecured loans
Particulars
Balance as on March 31st
2011 (Rs. in lacs)
55.10
Fixed Deposits
Subordinated Debts
53,272.33
Total
53,327.43
Repayment terms
Redeemable at par
over a period 12 to 60
months
Redeemable at par
over a period 60 to
216 months
Commercial Paper
Particulars
UTI MUTUAL FUND
ICICI PRUDENTIAL LIFE INSURANCE
TATA MUTUAL FUND
CHOLAMANDALAM MS GENERAL
INSURANCE COMPANY LTD.
TATA TRUSTEE COMPANY LTD.
UTI - FIIF ANNUAL INTERVAL PLAN
S-III
UTI-FMP-YEARLY SERIES
Total
13-Sep-10
13-Sep-10
13-Sep-10
Disbursed
amount
(Rs. in
lacs)
5500.00
5000.00
7500.00
Balance as on
March 31st
2011 (Rs. In
lacs)
5500.00
5000.00
7500.00
8-Oct-10
8-Oct-10
500.00
1500.00
8-Oct-10
8-Oct-10
1000.00
1500.00
Date of
Disbursement
F-152
Interest
Rate %
Repayment terms
8.66
8.66
8.66
Repayable on 12-Sep-11
Repayable on 12-Sep-11
Repayable on 07-Sep-11
500.00
1500.00
8.67
8.24
Repayable on 07-Oct-11
Repayable on 19-Sep-11
1000.00
1500.00
22500.00
8.67
8.67
Repayable on 07-Oct-11
Repayable on 07-Oct-11
Annexure XI
Shriram City Union Finance Limited
Capitalization statement
(Rs. in lacs)
Pre Issue as at
March 31, 2011
(Audited)
Particulars
As adjusted for
Issue
Debt
Short Term Debt
160552.61
160552.61
Long Term Debt
572225.83
647225.83
Total
732778.44
807778.44
4953.69
4953.69
Shareholders Fund
Share Capital
Share Application Money pending allotment
-
Stock Option Outstanding
Reserve 7 Surplus (Refer Annexure IV - Schedule 10)
Less: Miscellaneous Expenditure
Total of Shareholders Fund
Long Term Debt / equity Ratio
F-153
1887.27
1887.27
114366.32
114366.32
23.76
23.76
121183.52
121183.52
6.05
6.67
Annexure XII
Shriram City Union Finance Limited
Statement of Tax Shelter
(Rs. in lacs)
For the year ended March
31, 2011
Particulars
Profit as per accounting books (business)
Profit as per accounting books (investments)
36,060.09
Total profit as per accounting books
Tax rate on business income
Tax rate on investment income
36,060.09
33.22%
Tax on accounting profit
Permanent Differences
11,978.26
Donation
Exempt Dividend Income
Disallowance u/s 14A
Capital gains on sale of fixed assets
0.50
Others
13.94
Sub Total (A)
Temporary Differences
14.44
Depreciation and Lease adjustments
0.03
Provision for standard assets
1,714.89
Leave Encashment, Gratuity & Bonus
68.30
Derivative provision
(546.62)
Others
199.84
Sub Total (B)
1,436.44
Net Adjustments (A+B)
1,450.88
Tax Impact on Net Adjustments
481.95
Total Taxation
12,460.21
Current Tax Provision for the year
12,460.20
Notes:1. Profits after tax are often affected by the tax shelters which are available.
2. Some of these are of a relatively permanent nature while others may be limited in point of time.
3. Tax provisions are also affected by timing differences which can be reversed in future.
F-154
Annexure XIII
Shriram City Union Finance Limited
Significant Accounting Policies & Notes to Accounts
1.
(A)
Significant Accounting Policies
Basis of preparation
The Consolidated financial statements relates to M/s. Shriram City Union Finance Company Limited (the
Company) and its subsidiary company. The Company and its subsidiary company constitute the Group.
The financial statements have been prepared in conformity with generally accepted accounting principles
to comply in all material respects with the notified Accounting Standards (‘AS’) under Companies
Accounting Standard Rules, 2006, as amended, the relevant provisions of the Companies Act, 1956 (‘the
Act’) and the guidelines issued by the Reserve Bank of India (‘RBI’) as applicable to a Non Banking
Finance Company (‘NBFC’). The financial statements have been prepared under the historical cost
convention on an accrual basis.
(B)
Basis of consolidation
(i)
The financial statements of the subsidiary company Shriram Housing Finance Limited used in the
consolidation are drawn up to the same reporting date as of the Company i.e. period ended March 31, 2011
and are prepared based on the accounting policies consistent with those used by the Company.
The financial statements of the Group have been prepared in accordance with the Accounting Standard 21‘Consolidated Financial Statements’ and Accounting Standard 23 – ‘Accounting for investments in
Associates in Consolidated Financial Statements, notified under the Companies (Accounting Standards)
Rules, 2006, as amended and other generally accepted accounting principles in India.
(ii)
(iii)
a.
b.
c.
(C)
The consolidated financial statements have been prepared on the following basis :
The financial statements of the company and its subsidiary company have been combined on a line-by-line
basis by adding together like items of assets, liabilities, income and expenses. The intra-group balances
and intra-group transactions and unrealised profits or losses have been fully eliminated.
The excess of cost to the Company of its investments in the subsidiary company over its share of equity
of the subsidiary company, at the dates on which the investments in the subsidiary company is made, is
recognised as ‘Goodwill’ being an asset in the consolidated financial statements. Alternatively, where the
share of equity in the subsidiary company as on the date of investment is in excess of cost of investment of
the Company, it is recognised as ‘Capital Reserve’ and shown under the head ‘Reserves and Surplus’, in
the consolidated financial statement.
Minority interest, if any, in the net assets of consolidated subsidiary consists of the amount of equity
attributable to the minority shareholders at the dates on which investments are made by the Company in
the subsidiary company and further movements in their share in the equity, subsequent to the dates of
investments as stated above.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of
operations during the reporting year end. Although these estimates are based upon management’s best
knowledge of current events and actions, actual results could differ from these estimates. Any revisions to
the accounting estimates are recognized prospectively in the current and future years.
F-155
(D)
Fixed Assets, Depreciation / Amortisation and Impairment of assets
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation/amortisation and impairment losses, if any.
Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition
for its intended use. Borrowing costs relating to acquisition of fixed assets are included to the extent they
relate to the period till such assets are ready to be put to use.
Depreciation / Amortisation
Depreciation is provided pro rata on Straight Line Method (‘SLM’), which reflect the management’s
estimate of the useful lives of the respective fixed assets and are greater than or equal to the corresponding
rates prescribed in Schedule XIV of the Act. The assets for which higher rates are applied are as follows:
Particulars
Computer Software
Rates (SLM)
33.33%
Schedule XIV rates (SLM)
16.21%
Leasehold improvement is amortized over the primary period of lease subject to a maximum of 60 months.
All fixed assets individually costing Rs.5000 or less are fully depreciated in the year of installation.
Impairment of assets
The carrying amount of assets is reviewed at each balance sheet date if there is any indication of
impairment based on internal/external factors. An impairment loss is recognized wherever the carrying
amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets’
net selling price and value in use.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining
useful life.
A previously recognized impairment loss is increased or reversed depending on changes in circumstances.
However the carrying value after reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
F-156
(E)
Investments
Investments intended to be held for not more than a year are classified as current investments. All other
investments are classified as long-term investments. Current investments are carried at lower of cost and
fair value determined on an individual investment basis. Long Term Investments are carried at cost.
Provision for diminution in the value of long term investments is made to recognize decline in value other
than temporary in nature.
(F)
Assets under financing activities
Assets under Financing Activities are stated at the amount advanced including finance charges accrued and
expenses recoverable, as reduced by the amounts received up to Balance sheet date and assets securitized.
Non performing Asset are written off / provided for, as per management estimates, subject to the minimum
provision required as per Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential
Norms (Reserve Bank) Directions 2007.
Provision @0.25% on standard asset is made as per the notification DNBS.PD.CC.No.207/ 03.02.002
/2010-11 issue by Reserve Bank of India.
(G)
Foreign currency translation
Foreign currency transactions are accounted at the exchange rate prevailing on the date of transactions.
Foreign currency monetary items on the Balance Sheet date are restated at the closing exchange rates. All
Exchange differences are dealt with in the profit and loss account.
(H)
Revenue recognition
i.
ii.
Income from Financing Activities is recognised on the basis of internal rate of return. This includes
Additional Finance Charges which is accounted when received because of uncertainty of
realization.
Gain arising on securitization/direct assignment of assets is recognized over the tenure of
agreements as per guideline on securitization of standard assets issued by RBI. Loss (if any) is
recognized upfront.
iii.
The Prudential norms for income recognition prescribed under Non-Banking Financial (Deposit
Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions 2007 are followed.
iv.
Income from services is recognized as per the terms of the contract on accrual basis.
v.
Interest Income on deposit accounts with banks is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
vi.
Dividend is recognized as Income when right to receive is established by the date of balance sheet.
vii.
Profit / Loss on sale of investments is recognized at the time of actual sale / redemption.
F-157
(I)
Employee benefits
Provident Fund
All the employees of the Company are entitled to receive benefits under the Provident Fund, a defined
contribution plan in which both the employee and the Company contribute monthly at a stipulated rate. The
Company has no liability for future Provident Fund benefits other than its annual contribution and
recognizes such contributions as an expense in the year it is incurred.
Gratuity
The Company provides for the gratuity, a defined benefit retirement plan covering all employees. The plan
provides for lump sum payments to employees at retirement, death while in employment or on separation
from employment as per provisions of payment of Gratuity Act, 1972. The Group accounts for liability of
future gratuity benefits based on an external actuarial valuation on projected unit credit method carried out
annually for assessing liability as at the balance sheet date.
Leave Encashment
Short term compensated absences are provided for based on estimates. Long term compensated absences
are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit
method.
Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.
(J)
Income tax
Tax expense comprises of current tax, deferred tax and fringe benefit tax. Current income tax and fringe
benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act, 1961. Deferred income taxes reflects the impact of current year timing differences
between taxable income and accounting income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the
balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty
that sufficient future taxable income will be available against which such deferred tax assets can be
realized. In situations where the Group has unabsorbed depreciation or carry forward tax losses, all
deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that
they can be realized against future taxable profits.
The un-recognized deferred tax assets are re-assessed by the Group at each balance sheet date and are
recognized to the extent that it has become reasonably certain or virtually certain, as the case may be that
sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying cost of the deferred tax assets are reviewed at each balance sheet date. The
Group writes down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably
certain or virtually certain, as the case may be, that sufficient future taxable income will be available
against which deferred tax asset can be realized. Any such write down is reversed to the extent that it
becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income
will be available.
F-158
(K)
Segment reporting
The company operates in one reportable segment.
(L)
Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity
shareholders (after deducting attributable taxes) by the weighted average number of equity shares
outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to
equity shareholders and the weighted average number of shares outstanding during the period are adjusted
for the effects of all dilutive potential equity shares.
(M)
Cash and cash equivalents
Cash and cash equivalents in the cash flow statement which is prepared in accordance with Accounting
Standard (AS) 3 issued by the Institute of Chartered Accountants of India comprise cash at bank and in
hand and short term investments with an original maturity of three months or less.
(N)
Expenses on deposits / debentures
Expenses on mobilization of deposits / debentures are charged to Profit & Loss account in the year in
which they are incurred.
(O)
Provisions
A provision is recognized when the Group has a present obligation as a result of past event; it is probable
that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate
required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date
and adjusted to reflect the current best estimates.
(P)
Derivative instruments
Accounting for derivative contracts, other than those covered under AS-11, are marked to market and the
net loss after considering the off setting effect on the underlying hedge item is charged to profit and loss
account. Net gains are ignored
(Q)
Employee stock compensation costs
Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999and the
Guidance Note on Accounting for Employee Share-based Payments, issued by the ICAI. The Company
measures compensation cost relating to employee stock options using the intrinsic value method.
Compensation expense is amortized over the vesting period of the option on a straight line basis.
F-159
2.
Notes to Accounts
(1)
The following subsidiary company is considered in the consolidated financial statements:
Sr.
No.
Name of the Subsidiary Company
a)
Shriram Housing Finance Limited
(Incorporated on 9th November 2010)
Particulars of Secured Loans
(2)
Country of
incorporation
% of holding either
directly as at March
31, 2011
% of holding either
directly
as
at
March 31, 2010
100%
-
India
a) Privately placed Redeemable Non-convertible Debentures of Rs 1000/- each (Retail)
As at March 31,2011
Number
Amount (Rs. in lacs)
1,55,29,431
1,55,294.31
Secured by equitable mortgage of title deeds of immovable property. Further secured by charge on plant and
machinery, furniture and other fixed assets of the Company, charge on Company’s hypothecation loans, other loans,
advances and investments of the Company subject to prior charges created or to be created in favor of the
Company’s bankers, financial institutions and others.
These Debentures are redeemable at par over a period of 12 months to 160 months from the date of allotment
depending on the terms of the agreement. The earliest date of redemption is April 1, 2011. The last date of
redemption is October 25, 2017.
Debentures may be bought back subject to applicable statutory and /or regulatory requirements, upon the terms and
conditions as may be decided by the Company. The Company may grant loan against the security of NCDs upon the
terms and conditions as may be decided by the Company and subject to applicable statutory and/or regulatory
requirements.
F-160
b) Privately Placed Redeemable Non-Convertible Debenture (Institutional)
Date of
Allotment/renewal
24.09.2009
17.09.2009
17.09.2009
17.09.2009
23.09.2009
06.10.2009
06.10.2009
22.04.2010
05.07.2010
23.11.2010
13.12.2010
13.12.2010
04.02.2011
30.03.2011
Total
Face
Value
Number
100000
100000
100000
100000
100000
100000
100000
1000000
1000000
1000000
1000000
1000000
1000000
1000000
2500
1000
1000
500
2000
2000
1000
1458
750
200
100
150
50
2750
As at March
31, 2011
Redeemable
at par on
2500.00
1000.00
1000.00
500.00
2000.00
2000.00
1000.00
14583.33
7500.00
2000.00
1000.00
1500.00
500.00
27500.00
64583.33
30.09.2014
30.09.2014
30.09.2014
30.09.2014
30.09.2014
07.10.2014
07.10.2014
22.04.2013
05.01.2013
23.11.2017
13.12.2017
13.12.2017
04.02.2021
30.03.2017
Secured by specific assets covered under hypothecation loan agreements and by way of exclusive charge and
equitable mortgage of title deeds of immovable property.
c) Term Loans:
i.
(Rs. in lacs)
As at March 31,
2011
From Financial Institutions/Corporate
Secured by an exclusive charge by
hypothecation of assets under financing.
way
of
6500.00
Total
ii.
6500.00
As at March 31,
2011
From Banks
Secured by an exclusive charge by
hypothecation of assets under financing.
Total
way
of
295677.28
295677.28
F-161
d) Cash Credit from Banks
(Rs. in lacs)
As at March 31, 2011
Cash Credit from Banks
3.
134896.09
Subordinated Debt
The Company has issued subordinated debt bonds amounting to Rs. 53272.33 Lacs with coupon rate of
7.00% to 13.00% Per annum which are redeemable over a period of 60 month to 216 month.
4.
Gratuity and other post-employment benefit plans:
The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five years or
more of service gets a gratuity on separation at 15 days basic salary (last drawn salary) for each completed
year of service.
Consequent to the adoption of revised AS 15 ‘Employee Benefits’ issued by the ICAI the following
disclosures have been made as required by the standard:
Profit and Loss account
Net employee benefit expense (recognized in Employee Cost)
(Rs. in lacs)
Gratuity
Particulars
March 31, 2011
4.84
Current service cost
Interest cost on benefit obligation
12.44
Expected return on plan assets
N.A
Net actuarial (gain) / loss recognized in the year
Past service cost
23.23
NIL
Net benefit expense
40.51
Actual return on plan assets
N.A
F-162
Balance sheet
Details of Provision for gratuity
(Rs in lacs)
Gratuity
Particulars
March 31, 2011
196.34
Defined benefit obligation
Fair value of plan assets
N.A
Total
196.34
Less: Unrecognized past service cost
NIL
Plan asset / (liability)
(196.34)
Changes in the present value of the defined benefit obligation are as follows:
(Rs. in lacs)
Gratuity
Particulars
March 31, 2011
155.52
Opening defined benefit obligation
Interest cost
12.44
Current service cost
4.84
Benefits paid
--
Actuarial (gains) / losses on obligation
23.54
Closing defined benefit obligation
196.34
The Group would not contribute any amount to gratuity in 2011-12 as the scheme is unfunded.
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
Gratuity
Particulars
March 31, 2011
%
Investments with insurer
NA
F-163
The principal assumptions used in determining gratuity obligations for the Group’s plan are shown below:
Gratuity
Particulars
March 31, 2011
8.25%
Discount Rate
Increase in compensation cost
5.00%
Employee Turnover
2.00%
The estimates of future salary increases considered in actuarial valuation, are on account of inflation, seniority,
promotion and other relevant factors such as supply and demand in the employment market.
Amounts for the current and previous year are as follows:
Particulars
March 31, 2011
196.34
Defined Benefit obligation
Plan Assets
N.A
Surplus/Deficit
(196.34)
Experience adjustment on Plan Liabilities
(29.63)
Experience adjustment on Plan Assets
N.A
(5) Related Party Disclosures
Related Parities have been identified by the Management and relied upon by the auditors.
Subsidiary
:
Shriram Non-Conventional Energy Limited (till 26th June 2009)
Enterprises having significant
influence over the Company
:
Shriram Enterprise Holdings Private Limited
Shriram Retail Holdings Private Limited
Shriram Capital Limited
Shriram Ownership Trust
TPG India Investments I Inc.
Key Managerial Personnel
:
R Kannan Managing Director
F-164
(Rs. in lacs)
Enterprises having significant influence over the Company
2011
Payments
Royalty
338.15#
Data Sourcing fees
206.40#
Service Charges
1238.39#
Equity dividend
Reimbursement of Business Promotion Expenses
33.09*
Equity dividend
985.68$
Equity dividend
470.59@
Receipts
Balance outstanding at the year end
Share Capital
1792.15*
Share Capital
855.62@
*
Denotes transactions with Shriram Capital Limited
$
Denotes transactions with Shriram Enterprise Holdings Private Limited
@
Denotes transactions with Shriram Retail Holdings Private Limited
#
Denotes transactions with Shriram Ownership Trust Limited
(6)
In accordance with the Reserve Bank of India circular no. RBI/2006-07/225 DNBS (PD) C.C
No.87/03.02.2004/2006-07 dated January 4,2007, the Company has created a floating charge on the
statutory liquid assets comprising of investment in Government Securities to the extent of Rs.101.45 Lacs
in favour of trustees representing the public deposit holders of the Company.
F-165
(7)
Earnings per share
(Rs. in lacs)
Particulars
Year ended March
31, 2011
Net Profit after tax and Share of loss of Associates as per profit and loss account (Rs. in
lacs)(A)
24058.85
Weighted average number of equity shares for calculating Basic EPS (in lacs) (B)
493.23
Weighted average number of equity shares for calculating Diluted EPS (in lacs) (C)
501.25
Basic earnings per equity share (in Rupees) (Face value of Rs. 10/- per share) (A) / (B)
48.78
Diluted earnings per equity share (in Rupees) (Face value of Rs. 10/- per share) (A) / (C)
47.97
(Rs. in lacs)
Particulars
Year ended March
31, 2011
Weighted average number of equity shares for calculating EPS (in lacs)
Add : Equity shares arising on conversion of optionally convertible warrants (in lacs)
Add : Equity shares for no consideration arising on grant of stock options under ESOP (in
lacs)
Weighted average number of equity shares in calculation diluted EPS (in lacs)
F-166
493.23
8.32
501.55
(8)
Deferred Tax Liabilities/(Asset) (Net)
The breakup of deferred tax asset/ liabilities is as under :
(Rs. in lacs)
As at March 31,
2011
Deferred Tax Liabilities
Timing difference on account of :
Differences in depreciation in block of fixed assets as per tax books and
financial books
85.63
Gross Deferred Tax Liabilities (A)
85.63
Deferred Tax Asset
Timing difference on account of :
Service Tax Provision
515.90
Additional Provision against Standard Asset
569.65
Leave Encashment Provision
18.01
Gratuity Provision
65.22
Derivative Provision
418.29
Bonus Provision
13.78
Estimated Disallowances
66.44
Gross Deferred Tax Assets (B)
1667.29
Deferred Tax Liabilities/(Asset) (Net) (A-B)
(1581.66)
(Rs. in lacs)
(9)
Capital commitments
As at March 31, 2011
Estimated amount of contracts remaining to be executed on capital
account and not provided for (net of advances)
F-167
61.78
(Rs. in lacs)
(10)
Contingent Liabilities not provided for
a.
Guarantees issued by the Company
b.
Guarantees issued by others
(11)
As at March 31, 2011
6.81
1942.77
Income Tax/Wealth Tax/Service Tax/Fringe Benefit Tax
Disputed Wealth Tax/Service Tax demands contested in appeal as on 31st 2011.
Wealth Tax – Rs. 1.76 lacs , Service Tax – Rs.1553.08 Lacs
However provision is made in the books for any liability that may arise.
(12)
Employee Stock Option Plan
Date of grant
October 19 2007
Date of Board Approval
October 19 2007
Date of Shareholder’s approval
October 30 2006
Number of options granted
1355000
Method of Settlement (Cash/Equity)
Equity
Graded vesting period:
After 1 year of grant date
10% of options granted
After 2 years of grant date
20% of options granted
After 3 years of grant date
30% of options granted
After 4 years of grant date
40% of options granted
Exercisable period
10 years from vesting date
Vesting Conditions
on achievement of pre –determined targets
F-168
The details of Stock Option plan are summarized below:
As at March 31, 2011
Number of
Shares
Outstanding at the beginning of the year
Weighted Average
Exercise Price(Rs.)
1272800
Add: Granted during the year
35
27500
Less: Forfeited during the year
-
Less: Exercised during the year
382177
Less: Expired during the year
35
-
Outstanding at the end of the year
918123
35
Exercisable at the end of the year
-
Weighted average remaining contractual life (in years)
-
9.55
Weighted average fair value of options granted
-
227.42
The details of exercise price for stock options outstanding at the end of the year are:
As at
March 31, 2011
Range of
exercise
prices
Number of options
outstanding
Weighted average
remaining
contractual life of
options (in years)
Weighted average
exercise price
Rs.35/-
918123
9.55
Rs.35/-
F-169
Stock Options granted
The weighted average fair value of stock options granted was Rs.227.42. The Black Scholes model has been used for
computing the weighted average fair value of options considering the following inputs:
Yr 1
Yr 2
Yr 3
Yr 4
Exercise Price (Rs.)
35.00
35.00
35.00
35.00
Expected Volatility (%)
55.36
55.36
55.36
55.36
NA
NA
NA
NA
Life of the options granted (Vesting and
exercise period) in years
1.50
2.50
3.50
4.50
Expected dividends per annum (Rs.)
3.00
3.00
3.00
3.00
Average risk-free interest rate (%)
7.70
7.67
7.66
7.67
Expected dividend rate (%)
0.84
0.84
0.84
0.84
Historical Volatility
The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank
Nifty which is considered as a comparable peer group of the Company. To allow for the effects of early exercise it
was assumed that the employees will exercise the options within six months from the date of vesting in view of the
exercise price being significantly lower than the market price.
Effect of the employee share-based payment plans on the profit and loss account and on its financial position:
(Rs. in lacs)
As at March 31, 2011
Compensation cost pertaining to equity-settled employee share-based payment plan
included above
Liability for employee stock options outstanding as at year end
Deferred compensation cost
471.68
2079.09
191.82
Since the enterprise used the intrinsic value method the impact on the reported net profit and earnings
per share by applying the fair value based method is as follows:
F-170
In March 2005 the ICAI has issued a guidance note on “Accounting for Employees Share Based Payments”
applicable to employee based share plan the grant date in respect of which falls on or after April 1, 2005. The said
guidance note requires that the pro-forma disclosures of the impact of the fair value method of accounting of
employee stock compensation accounting in the financial statements. Applying the fair value based method defined
in the said guidance note the impact on the reported net profit and earnings per share would be as follows:
(Rs. in lacs)
Year ended March 31, 2011
Profit as reported (Rs. in lacs)
24058.85
Add: Employee stock compensation under intrinsic value method (Rs.
in lacs)
471.68
Less: Employee stock compensation under fair value method (Rs. in
lacs)
473.70
Proforma profit (Rs. in lacs)
24056.83
Less Preference Dividend
-
Proforma Net Profit for Equity Shareholders
24056.83
Earnings per share
Basic (Rs.)
- As reported
48.78
- Proforma
48.77
Diluted (Rs.)
13.
- As reported
47.97
- Proforma
47.96
Securitisation
The information on securitisation & direct assignment activity of the Company as an originator for the year
F-171
March 31 2011 is given below:
Year ended March 31, 2011
Total number of assets securitised
178502
Total book value of assets securitised (Rs. in lacs)
117915.72
Sale consideration received for the securitised assets (Rs. in lacs)
126737.01
Net gain on account of securitization (Rs. in lacs)
27163.76
Outstanding credit enhancement- Deposit with banks/corporate
15436.40
Outstanding Credit enhancement – Assets under financing
14.
1900.63
Derivative Instruments:
The Notional principal amount of derivative transactions outstanding as on March 31, 2010 for interest
rate swaps Rs.12500 lacs.
15.
Supplementary Statutory Information
15.1
Managing Director’s Remuneration
The computation of profits under section 349 of the Act has not been given as no remuneration /
commission is payable to the Managing Director.
(Rs. in lacs)
15.2
Expenditure in foreign currency (On cash basis)
Year ended March 31, 2011
0.09
Subscription Fees
16.
Additional information pursuant to the provisions of paragraphs 3 4C and 4D of Part II of
schedule VI to the Act
The Company does not have licensed capacity as it is Non Banking Finance Company.
17.
Previous year Comparatives
The figures for the previous year have been regrouped and reclassified, wherever necessary to conform to
current year’s classification.
F-172
As per our report of even date
For and on behalf of the Board of Directors of
For Pijush Gupta & Co.
Firm Registration No: 309015E
Shriram City Union Finance Limited
Chartered Accountants
Ramendra Nath Das
R Kannan
S Venkatakrishnan
Partner
Managing Director
Director
Membership No : 014125
Place : Chennai
C R Dash
Date: July 21, 2011
Company Secretary
F-173
DISCLOSURES ON EXISTING FINANCIAL INDEBTEDNESS
A.
Details of Secured Borrowings:
Our company’s secured borrowings as on March 31, 2011 amount to ` 656,951.01 lakhs. The details of the
individual borrowings are set out below:
1.
Term Loans from Banks:
Sr.
No.
Particulars
Date of
disbursement
Amount outstanding
as on March 31,2011
(`
` in Lakhs)
4,371.95
Maturity date
1. Andhra Bank
December 31,2008
2. Bank of Maharashtra
March 31, 2011
5,000.00
September 30, 2014
3. Calyon bank
December 2, 2010
3,500.00
December 2, 2012
4. Canara Bank
December 17, 2007
1,250.00
August 9, 2011
5. Canara Bank
January 29, 2010
20,000.00
February 18, 2012
6. Canara Bank
September 24, 2010
20,000.00
August 24, 2013
7. Canara Bank
September 24, 2010
10,000.00
August 24, 2013
8. Corporation Bank
December 28, 2010
10,000.00
December 28, 2013
9. Corporation Bank
March 29, 2011
20,000.00
June 29, 2011
10. DBS Bank Limited
March 4, 2011
6,000.00
October 7, 2011
11. DBS Bank Limited
September 24, 2010
5,000.00
September 24, 2013
12. DBS Bank Limited
October 26, 2010
8,000.00
October 26, 2011
13. HDFC Bank Limited
March 22, 2010
5,000.00
September 21, 2011
14. ICICI Bank Limited
March 22, 2011
25,000.00
April 22, 2013
15. Industrial Development Bank of
India Limited
March 22, 2011
20,000.00
June 22, 2011
131
December 31,2012
Sr.
No.
Particulars
Date of
disbursement
16. Industrial Development Bank of
India Limited
March 22, 2011
Amount outstanding
as on March 31,2011
(`
` in Lakhs)
4,000.00
17. ING Vysya Bank Limited
March 26, 2009
333.28
18. ING Vysya Bank Limited
March 25, 2010
2,866.67
19. Karur Vysya Bank
July 31, 2009
20. Oriental Bank of Commerce
March 31, 2010
2,000.00
March 31, 2012
21. Oriental Bank of Commerce
March 28, 2011
10,000.00
March 28, 2014
22. State Bank of Indore
March 31, 2009
1,397.73
December 19, 2011
23. State Bank of Mauritius
February 7, 2011
1,500.00
February 7, 2013
24. State Bank of Mysore
November 27, 2010
9,999.38
November 27, 2013
25. State Bank of Patiala
February 28, 2009
2,000.00
February 27, 2012
26. State Bank of Patiala
December 21, 2010
10,000.00
December 21, 2013
27. State Bank of Patiala
March 22, 2011
15,000.00
March 22, 2014
28. State Bank of Travancore
December 23, 2010
29. Syndicate Bank
January 3, 2011
15,000.00
January 3, 2013
30. Union Bank of India
November 22, 2010
15,000.00
November 22, 2012
31. Union Bank of India
January 4, 2011
15,000.00
January 4, 2013
32. United Bank of India
December 27, 2008
33. Vijaya Bank
March 30, 2011
9,000.00
March 31, 2014
34. YES Bank Limited
February 28, 2011
8,000.00
February 28, 2014
132
625.00
9,999.97
833.30
Maturity date
June 22, 2011
March 23, 2012
February 25, 2013
July 31, 2011
December 23, 2012
December 31, 2011
Sr.
No.
Particulars
Date of
disbursement
Amount outstanding
as on March 31,2011
(`
` in Lakhs)
2,95,677.28
Total
2.
Sr.
No.
1.
3.
Term Loans from Others:
Particulars
Small Industries Development
Bank of India
Total
Date of disbursement
August 10, 2010
Amount
outstanding
on
March 31, 2011 (`
`
in Lakhs)
6,500.00
Maturity date
August 10, 2013
6,500
Cash Credit from Banks
Sr.
No.
Particulars
Date of sanction
1.
2.
3.
4.
5.
6.
7.
Axis Bank Limited
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
City Union Bank
Corporation Bank
8.
9.
10.
DBS Bank Limited
Dena Bank
Industrial Development Bank of
India Limited
INDUSIND Bank
ING Vysya Bank
Jammu & Kashmir Bank
LimitedKotak
Mahindra
bank
Kotak Mahindra
Bank Limited
Oriental Bank of Commerce
Punjab National Bank
South Indian Bank
State Bank of India
State Bank of Patiala
State Bank of Bikaner and Jaipur
Tamil Nadu Mercantile Bank
Union Bank of India
United Bank of India
YES Bank Limited
HSBC Bank Limited
HSBC Bank Limited
South Indian Bank
State Bank of Bikaner and Jaipur
August 23, 2006
June 11, 2009
March 19, 2006
November 24, 2009
March 24, 2009
November 10, 2010
December 28, 2010
April 29, 2010
March 5, 2007
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
Maturity date
October 10, 2008
May 31, 2010
March 23, 2010
March 15, 2011
August 21, 2009
September 18, 2006
August 4, 2007
June 25, 2010
March 13, 2009
February 24, 2009
September 8, 2010
August 20, 2007
March 25, 2008
March 25, 2009
March 25, 2010
December 23, 2009
December 23, 2009
June 25, 2010
December 22, 2010
133
Amount outstanding as on
March 31, 2011(`
` in Lakhs)
9.08
10,185.07
4,997.40
4,088.27
3,532.29
78.13
3,522.68
5.91
10,713.18
90.30
120.56
5.70
8,013.44
1,014.64
3,662.67
9.16
40.33
7,539.90
48.11
40.59
19.89
2,766.09
3,292.02
10.74
10,000.00
5,000.00
4,989.92
2,400.00
Sr.
No.
Particulars
Date of sanction
29.
30.
31.
32.
33.
34.
35.
Standard Chartered Bank
Centurion Bank
Canara Bank
DBS Bank Limited
Federal Bank Limited
State Bank of Mysore
Industrial Development Bank of India Limited
TOTAL
October 25, 2010
December 31, 2010
December 9, 2010
March 4, 2011
March 1, 2011
March 18, 2011
March 22, 2011
4.
Our Company has issued secured redeemable non convertible debentures on a private placement basis of
which ` 64,583.33 lakhs is outstanding as on March 31, 2011, the details of which are set forth below:
Sl. No. Particulars
1.
Corporation Bank
2.
Central Bank of India
3.
Central Bank Pension Fund
4.
Central Bank Provident Fund
5.
Allahabad Bank
6.
7.
8.
9.
10.
A.K. Capital Services Limited
Bank of Baroda
Standard Chartered Bank
Reliance Mutual Fund
ING Vysya Bank
11.
ING Vysya Bank
12.
ING Vysya Bank
13.
Jharkhand Gramin Bank
Deutsche Bank
Total
* Face Value: ` 1,00,000 each
**Face Value: `10,00,000 each
14.
5.
Date of Allotment
September 24, 2009
September 17, 2009
September 17, 2009
September 17, 2009
September 23, 2009
October 6, 2009
October 6, 2009
April 22, 2010
July 5, 2010
November 23, 2010
December 13, 2010
December 13, 2010
February 4, 2011
March 30, 2011
Amount outstanding as on
March 31, 2011(`
` in Lakhs)
5,000.00
2,400.00
15,000.00
1,400.00
5,000.00
4,900.00
15,000.00
1,34,896.09
Amount outstanding as on March
Maturity Date
31, 2011(`
` in Lakhs)
September 30,
*2,500.00 2014
September 30,
*1,000.00 2014
September 30,
*1,000.00 2014
September 30,
*500.00 2014
September 30,
*2,000.00 2014
*2,000.00 October 7, 2014
*1,000.00 October 7, 2014
**14,583.33 April 22, 2013
**7,500.00 January 5, 2013
November 23,
**2,000.00 2017
December 13,
**1,000.00 2017
December 13,
**1,500.00 2017
February 4,
**500.00 2021
**27,500.00 March 30, 2017
64,583.33
Our Company has issued secured redeemable non convertible debentures of face value of ` 1000 each on a
private placement basis of which ` 1,55,294.31 lakhs is outstanding as on March 31,2011, the details of which
are set forth below:
Sl. No.
Particulars
1.
Retail
Amount outstanding as on March
Maturity
31,
Date
2011(`
` in Lakhs)
1,55,294.31 Redeemable at par
over a period of 12
months to 160
months
134
B.
Details of Unsecured Borrowings:
Our Company’s Unsecured Borrowings as on March 31, 2011 amount to ` 75,827.43 lakhs. The details of
the individual Borrowings are set forth below:
1.
Subordinated Debts:
Sr.
Particulars
Amount Outstanding as on
No.
1.
2.
(`
`.In Lakhs)
Maturity Date
March 31, 2011
Subordinated Debt
53,272.33
Total
53,272.33
Redeemable at par over a
period of 60 months to
216 months
Fixed Deposits:
(`
` in lakhs)
Amount Outstanding as on March 31, 2011
Maturity Date
55.10
3.
Redeemable over a period of 12
to 60 months
Commercial Paper
The Company has issued commercial paper of which `. 22,500.00 lakhs are outstanding as on March 31,
2011, the details of which are set forth below:
(`
` in lakhs)
Name of Holder
Date of
Amount Outstanding
Maturity
Disbursement
as on March 31, 2011
UTI Mutual Fund
September 13, 2010
5,500.00 September 12,
2011
ICICI Prudential Life Insurance Company
September 13, 2010
5,000.00 September 12,
Limited
2011
Tata Mutual Fund
September 13, 2010
7,500.00 September 7, 2011
Cholamandalam MS General Insurance
October 8, 2010
500.00 September 7, 2011
Company Limited
Tata Trustee Company Limited
October 8, 2010
1,500.00 September 19,
2011
UTI – FIIF Annual Interval Plan S-III
October 8, 2010
1,000.00 October 7, 2011
UTI FMP Yearly Series
October 8, 2010
1,500.00 October 7, 2011
Total
22,500.00
Restrictive Covenants under our Financing Arrangements:
Some of the corporate actions for which our Company requires the prior written consent of lenders include the
following:
1.
to declare and/ or pay dividend to any of its shareholders whether equity or preference, during any financial
year unless our Company has paid to the lender the dues payable by our Company in that year;
135
2.
to undertake or permit any merger, amalgamation or compromise with its shareholders, creditors or effect
any scheme of amalgamation or reconstruction;
3.
to create or permit any charges or lien on any mortgaged properties;
4.
to amend its MOA and AOA or alter its capital structure; and
5.
to make any major investments by way of deposits, loans, share capital, etc. in any manner.
Servicing behaviour on existing debt securities, payment of due interest on due dates on term loans and debt
securities.
As on the date of this Prospectus, there has been no default in payment of principal or interest on any existing term
loan and debt security issued by the Issuer in the past.
136
MATERIAL DEVELOPMENTS
Save as disclosed hereinafter, there have been no developments since March 31, 2011 which effect the operations,
or financial condition of our Company:
•
On June 29, 2011, our Company issued and allotted 4,552 Equity Shares at a price of ` 35 per Equity Share to
our employees pursuant to the exercise of stock options pursuant to the ESOP 2006.
•
On June 7, 2011, our Company issued and allotted 43,550 Equity Shares at a price of ` 35 per Equity Share to
29 employees pursuant to the exercise of stock options pursuant to the ESOP 2006.
•
On May 26, 2011, the Board of Directors of our Company have recommended a final dividend of ` 3.5 per
Equity Share (35%), subject to the approval of our shareholders at their ensuing AGM.
•
On April 30, 2011, our Company issued and allotted 1,48,400 Equity Shares at a price of ` 35 per Equity
Share to 71 employees pursuant to the exercise of stock options pursuant to the ESOP 2006.
•
On March 31, 2011, our Company issued and allotted 11,628 Equity Shares at a price of ` 35 per Equity
Share to 10 employees pursuant to the exercise of stock options pursuant to the ESOP 2006.
•
Pursuant to resolution passed by the shareholders of our Company at their AGM held on July 28, 2011, and in
accordance with provisions of Section 293 (1)(d) of the Act, the borrowing limits of the Board of Directors
was increased from ` 10,00,000 lakhs to ` 15,00,000 lakhs.
•
Pursuant to resolution passed by the shareholders of our Company at their AGM held on July 28, 2011, and in
accordance with provisions of Section 293 (1)(a) of the Act, the Board of Directors were authorised to
mortgage and/or charge the current and future movable and immovable properties of the Company to secure
borrowings and/or other financing arrangements availed by our Company upto a sum not exceeding `
20,00,000 lakhs.
•
Interim Financial Information for the Quarter ended June 30, 2011
Pursuant to a meeting of its Board of Directors on July 28, 2011, our Company has adopted and filed with
the Stock Exchanges on July 28, 2011 the unaudited financial information as of and for the three months
ended June 30, 2011, (“Unaudited June Interim Financial Information”), as presented below, in
accordance with the provisions of Clause 41 of the Listing Agreement with the Stock Exchanges.
Please note that the Unaudited June Interim Financial Information have been subjected to a limited review
by the Statutory Auditors of the Company, M/s Pijush Gupta & Co. The presentation of the Unaudited June
Interim Financial Information may not be comparable to the presentation of the Reformatted Financial
Information Reformatted Unconsolidated Summary Financial Statements and the Reformatted
Consolidated Summary Financial Statements included in this Prospectus.
137
PIJUSH GUPTA & CO
CHARTERED ACCOUNTANTS
P-199, C.I.T.ROAD, SCHEME IV-M, KOLKATA –700 010 TEL (033) 2353-6859 Cell (0) 98311 91779
E-MAIL: [email protected]
RE: SHRIRAM CITY UNION FINANCE LIMITED
LIMITED REVIEW REPORT
We have reviewed the accompanying statement of unaudited financial results of Shriram City Union Finance
Limited for the quarter ended June 30, 2011. This statement is the responsibility of the Company’s management
and has been approved by the Board of Directors. Our responsibility is to issue a report on these financial
statements based on our review.
We conducted our review in accordance with the Standard on Review Engagement (SRE) 2400, Engagements to
Review Financial Statements issued by the Institute of Chartered Accountants of India. This Standard requires that
we plan and perform the review to obtain moderate assurance as to whether the financial statements are free from
material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures
applied to financial data and thus provides less assurance than an audit. We have not performed an audit and
accordingly, we do not express an audit opinion.
Based on our review conducted as above, nothing has come to our attention that caused us to believe that the
accompanying statement of unaudited financial results for the quarter ended June 30, 2011 prepared in accordance
with recognition and measurement principles laid down in Accounting Standard 25 ‘Interim Financial Reporting’,
notified pursuant to the Companies (Accounting Standards) Rules, 2006 and other recognized accounting practices
and policies has not disclosed the information required to be disclosed in terms of Clause 41 of the Listing
Agreement including the manner in which it is to be disclosed, or that it contains any material misstatement.
For Pijush Gupta & Co.
Firm Registration No : 309015E
Chartered Accountants
Ramendra Nath Das
Partner
Membership No. 014125
Place : Chennai
Date : July 28, 2011.
138
SHRIRAM CITY UNION FINANCE LIMITED
Regd.Office: No.123, Angappa Naickan Street, Chennai 600 001.
Website: www.shriramcity.in Email: [email protected]
UNAUDITED FINANCIAL RESULTS FOR THE QUARTER ENDED JUNE 30,2011
(Rs. In Lacs)
Sr. No
Quarter
ended
30.06.2011
(Unaudited)
Particulars
1 (a) Income from operations
(b) Other Operating Income
Total
2
Expenditure
(a) Employment cost
(b) Depreciation
(c) Provisions & write off's
(d) Provision for Standard Assets
(e) Other Expenditure
Total
3
Profit from operations before Other income,
Interest & exceptional items (1-2)
4
Other Income
5
Profit before Interest & Exceptional items (3+4)
6
Interest
7
Profit after Interest but before exceptional item (56)
8
Exceptional Items (Income)
9
Profit before tax
Tax Expense
10
11
Net Profit after tax
12
Paid up equity share capital ( Face value of Rs. 10
each)
13
Reserve (excluding revaluation reserves)
14
Earnings Per Share(EPS) in Rs. (Not Annualised)
(a) Basic
(b) Diluted
15
Public shareholdings
(a) Number of shares
(b) Percentage of shareholdings
139
Quarter
ended
30.06.2010
(Unaudited)
Year Ended
31.03.2011
(Audited)
41513
28088
131800
41513
28088
131800
1632
263
3370
250
4468
9983
945
151
2684
4304
8084
4367
747
9875
1715
20471
37174
31530
1314
32844
21063
20004
128
20132
12741
94626
291
94917
58848
11781
0
11781
3743
8038
7391
0
7391
2478
4913
36069
0
36069
12002
24067
4973
4920
4954
116382
16.33
16.31
9.99
9.79
48.78
47.97
23255716
46.76%
22677037
46.13%
23059214
46.55%
SHRIRAM CITY UNION FINANCE LIMITED
UNAUDITED FINANCIAL RESULTS FOR THE QUARTER ENDED JUNE 30,2011
(Rs. In Lacs)
Sr. No
16
Particulars
Promoters and promoter group Shareholdings
Pledge/ encumbered
Number of shares
Percentage of shares (as a percentage of total
ii.
shareholding of promoter and promoter group)
Percentage of shares (as a percentage of total share
iii.
capital of the company)
(b) Non- Encumbered
i.
Number of shares
Quarter
ended
30.06.2011
(Unaudited)
Quarter
ended
30.06.2010
(Unaudited)
Year Ended
31.03.2011
(Audited)
26,477,663
26,477,663
26,477,663
(a)
i.
ii.
Percentage of shares (as a percentage of total
shareholding of promoter and promoter group)
iii.
Percentage of shares( as a percentage of total share
capital of the company)
Notes:
1.
2.
3.
4.
5.
6.
7.
8.
100%
100%
100%
53.24%
53.87%
53.45%
The above results have been reviewed by the Audit Committee and approved by the Board of Directors at
their respective meetings held on July 27, 2011 and July 28, 2011.
The above results have been subjected to Limited Review by the statutory auditors of the company.
The figures for the previous year / period have been regrouped /rearranged wherever necessary.
There has been no change in the accounting policies and practices followed during the period ended June
30, 2011 compared to those in preceding financial year ended March 31, 2011.
During the quarter ended June 30, 2011 the Company allotted 196502 Equity Shares of Rs.10/- each to its
Employees under the Company's Employees Stock Option Scheme.
The Company operates in single reportable segment.
Status of complaints for the quarter ended June 30, 2011:- Pending as on April 1, 2011:- Nil, Received
during the quarter: - Nil, Resolved during the quarter: - Nil, Pending as on June 30, 2011:- Nil.
The results of the company are available at www.bseindia.com; www.nseindia.com; www.shriramcity.in;
As per our Limited Review report of even date
For Pijush Gupta & Co.
Firm Registration No: 309015E
Chartered Accountants
By Order of the Board
For Shriram City Union Finance Ltd
Ramendra Nath Das
Partner
Membership No : 014125
R.KANNAN
Managing Director
Place: Chennai
Date: July 28, 2011
140
SECTION VI : ISSUE RELATED INFORMATION
TERMS OF THE ISSUE
The NCDs being offered as part of the Issue are subject to the provisions of the Debt Regulations, the
Act, the Memorandum and Articles of Association of our Company, the terms of the Draft Prospectus,
this Prospectus, the Application Forms, the terms and conditions of the Debenture Trust Agreement and
the Debenture Trust Deed, other applicable statutory and/or regulatory requirements including those
issued from time to time by SEBI/the Government of India/the Stock Exchange/s, RBI, and/or other
statutory/regulatory authorities relating to the offer, issue and listing of securities and any other
documents that may be executed in connection with the NCDs.
Ranking of NCDs
The NCDs would constitute direct and secured obligations of ours and shall rank pari passu inter se, and subject
to any obligations under applicable statutory and/or regulatory requirements, shall also, with regard to the
amount invested, be secured by way of first and exclusive charge on the identified immovable property and the
specified future loan receivables of the company. The claims of the NCD holders shall be superior to the claims
of any unsecured creditors, subject to applicable statutory and/or regulatory requirements.
Debenture Redemption Reserve
Section 117C of the Act states that any company that intends to issue debentures must create a DRR to which
adequate amounts shall be credited out of the profits of the company until the redemption of the debentures. The
Ministry of Corporate Affairs has, through its circular dated April 18, 2002, (“Circular”), specified that the
quantum of DRR to be created before the redemption liability actually arises in normal circumstances should be
‘adequate’ to pay the value of the debentures plus accrued interest, (if not already paid), till the debentures are
redeemed and cancelled. The Circular however further specifies that, for NBFCs like our Company, (NBFCs which
are registered with the RBI under Section 45-IA of the RBI Act), the adequacy of the DRR will be 50% of the value
of debentures issued through the public issue. Accordingly our Company is required to create a DRR of 50% of the
value of debentures issued through the public issue. As further clarified by the Circular, the amount to be credited as
DRR will be carved out of the profits of the company only if there is profit for the particular year and there is no
obligation on the part of the company to create DRR if there is no profit for the particular year. Our Company shall
credit adequate amounts to DRR, from its profits every year until such NCDs are redeemed. The amounts credited to
DRR shall not be utilized by the company except for the redemption of the NCDs.
Face Value
The face value of each NCD shall be ` 1,000.
NCD holder not a Shareholder
The NCD holders will not be entitled to any of the rights and privileges available to the equity and/or
preference shareholders of our Company.
Rights of NCD holders
Some of the significant rights available to the NCD holders are as follows:
1.
The NCDs shall not, except as provided in the Act, confer upon the holders thereof any rights or
privileges available to our members including the right to receive notices or annual reports of, or to
attend and/or vote, at our general meeting. However, if any resolution affecting the rights attached
to the NCDs is to be placed before the members, the said resolution will first be placed before the
concerned registered NCD holders for their consideration. In terms of Section 219(2) of the Act, holders of
NCDs shall be entitled to a copy of the balance sheet and copy of trust deed on a specific request made to
us.
141
2.
Subject to applicable statutory/regulatory requirements, including requirements of the RBI, the rights, privileges and
conditions attached to the NCDs may be varied, modified and/or abrogated with the consent in writing of
the holders of at least three-fourths of the outstanding amount of the NCDs or with the sanction of a
special resolution passed at a meeting of the concerned NCD holders, provided that nothing in such
consent or resolution shall be operative against us, where such consent or resolution modifies or varies
the terms and conditions governing the NCDs, if the same are not acceptable to us.
3.
The registered NCD holder or in case of joint-holders, the one whose name stands first in the register of
debenture holders shall be entitled to vote in respect of such NCDs, either in person or by proxy, at
any meeting of the concerned NCD holders and every such holder shall be entitled to one vote on a
show of hands and on a poll, his/her voting rights on every resolution placed before such meeting of the
NCD holders shall be in proportion to the outstanding nominal value of NCDs held by him/her.
4.
The NCDs are subject to the provisions of the Debt Regulations, the Act, the Memorandum and Articles of
Association of our Company, the terms of the Draft Prospectus, this Prospectus, the Application Forms, the terms
and conditions of the Debenture Trust Deed, requirements of the RBI, other applicable statutory and/or regulatory
requirements relating to the issue and listing, of securities and any other documents that may be executed in
connection with the NCDs.
5.
A register of NCD holders will be maintained in accordance with Section 152 of the Act and all interest
and principal sums becoming due and payable in respect of the NCDs will be paid to the registered
holder thereof for the time being or in the case of joint-holders, to the person whose name stands first in
the Register of NCD holders as on the record date.
6.
Subject to compliance with RBI requirements, NCDs can be rolled over only with the consent of the
holders of at least 75% of the outstanding amount of the NCDs after providing at least 21 days prior
notice for such roll over and in accordance with the Debt Regulations. The Company shall redeem the
debt securities of all the debt securities holders, who have not given their positive consent to the roll-over.
The aforementioned rights of the NCD holders are merely indicative. The final rights of the NCD holders will
be as per the terms of the Prospectus and the Debenture Trust Deed to be executed between our Company and
the Debenture Trustee.
Minimum Subscription
If our Company does not receive the minimum subscription of 75 % of the Base Issue, i.e. ` 28,125 lakhs, on the
date of closure of the Issue, the entire subscription shall be refunded to the applicants within 30 days from the date
of closure of the Issue. If there is delay in the refund of subscription by more than 8 days after our Company
becomes liable to refund the subscription amount, our Company will pay interest for the delayed period, at rates
prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.
Market Lot & Trading Lot
Under Section 68B of the Act, the NCDs shall be allotted only in dematerialized form. As per the Debt
Regulations, the trading of the NCDs shall be in dematerialised form only. Since trading of the NCDs is in
dematerialised form, the tradable lot is one NCD.
Allotment in the Issue will be in electronic form in multiples of one NCD. For details of allotment refer to
chapter titled “Issue Procedure” under section titled “Issue Related Information” beginning on page 156 of this
Prospectus.
Nomination facility to NCD holder
In accordance with Section 109A of the Act, the sole NCD holder or first NCD holder, along with other joint
NCD holders (being individual(s)) may nominate any one person (being an individual) who, in the event of
death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the NCD. A
142
person, being a nominee, becoming entitled to the NCD by reason of the death of the NCD holder(s), shall
be entitled to the same rights to which he would be entitled if he were the registered holder of the NCD.
Where the nominee is a minor, the NCD holder(s) may make a nomination to appoint, in the prescribed
manner, any person to become entitled to the NCD(s), in the event of his death, during the minority. A
nomination shall stand rescinded upon sale of a NCD by the person nominating. A buyer will be entitled to
make a fresh nomination in the manner prescribed. When the NCD is held by two or more persons, the
nominee shall become entitled to receive the amount only on the demise of all the holders. Fresh nominations
can be made only in the prescribed form available on request at our Registered/ Corporate Office or at such
other addresses as may be notified by us.
NCD holder(s) are advised to provide the specimen signature of the nominee to us to expedite the transmission of
the NCD(s) to the nominee in the event of demise of the NCD holder(s). The signature can be provided in
the Application Form or subsequently at the time of making fresh nominations. This facility of providing the
specimen signature of the nominee is purely optional.
In accordance with Section 109B of the Act, any person who becomes a nominee by virtue of the provisions
of Section 109A of the Act, shall upon the production of such evidence as may be required by our Board,
elect either:
(a)
to register himself or herself as the holder of the NCDs; or
(b)
to make such transfer of the NCDs, as the deceased holder could have made.
Further, our Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or
to transfer the NCDs, and if the notice is not complied with, within a period of 90 days, our Board may thereafter withhold
payment of all interests or other monies payable in respect of the NCDs, until the requirements of the notice have been
complied with.
Notwithstanding anything stated above, since the allotment of NCDs in this Issue will be made only in dematerialised mode,
there is no need to make a separate nomination with our Company. Nominations registered with the respective Depository
Participant of the applicant would prevail. If the investors require changing their nomination, they are requested to inform
their respective Depository Participant.
Jurisdiction
Exclusive jurisdiction for the purpose of the Issue is with the competent courts of jurisdiction in Chennai, India.
Application in the Issue
NCDs being issued through this Prospectus can be applied for in the dematerialised form only through a valid
Application Form filled in by the applicant along with attachment, as applicable.
Period of Subscription
The subscription list shall remain open for a period as indicated below, with an option for early closure or extension
by such period, as may be decided by the duly authorised committee of Directors of our Company, subject to
necessary approvals. In the event of such early closure of subscription list of the Issue, our Company shall ensure
that notice of such early closure is given on the day of such early date of closure through advertisement/s in a
leading national daily newspaper.
Issue Opens on
August 11, 2011
Closing Date
August 27, 2011
Restriction on transfer of NCDs
There are no restrictions on transfers and transmission of NCDs and on their consolidation/ splitting except as may
be required under RBI requirements and as provided in our Articles of Association. Please refer to the section titled
“Summary of the Key Provisions of the Articles of Association” beginning on page 189 of this Prospectus.
143
ISSUE STRUCTURE
Public Issue of NCDs aggregating upto ` 37,500 lakhs with an option to retain over-subscription upto ` 37,500
lakhs for issuance of additional NCDs, aggregating to a total of up to ` 75,000 lakhs.
The key common terms and conditions of the NCDs are as follows:
Particulars
Terms and Conditions
Minimum Application Size
The minimum number of NCDs per application form will be
calculated on the basis of the total number of NCDs applied for under
each such Application Form and not on the basis of any specific
option
Mode of allotment
Compulsorily in dematerialised form
Terms of Payment
Full amount on application
Trading Lot
1 (one) NCD
Who can Apply
Category I
•
Public Financial Institutions, Statutory Corporations, Commercial
Banks, Co-operative Banks and Regional Rural Banks, which are
authorised to invest in the NCDs;
•
Provident Funds, Pension Funds, Superannuation Funds and
Gratuity Fund, which are authorised to invest in the NCDs;
•
Venture Capital funds registered with SEBI;
•
Insurance Companies registered with the IRDA;
•
National Investment Fund;
•
Mutual Funds;
Category II
•
Companies; bodies corporate and societies registered under the
applicable laws in India and authorised to invest in the NCDs;
•
Public/private charitable/religious trusts which are authorised to
invest in the NCDs;
•
Scientific and/or industrial research organisations, which are
authorised to invest in the NCDs;
•
Partnership firms in the name of the partners; and
•
Limited liability partnerships formed and registered under the
provisions of the Limited Liability Partnership Act, 2008 (No. 6 of
2009)
Category III*
The following persons/entities
•
Resident Indian individuals; and
•
Hindu Undivided Families through the Karta.
144
*With respect to applications received from Category III applicants, applications by applicants who apply for
NCDs aggregating to a value not more than ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be
grouped together, (“Reserved Individual Portion”) while applications by applicants who apply for NCDs
aggregating to a value exceeding ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be separately
grouped together, (“Unreserved Individual Portion”).
Participation by any of the above-mentioned investor classes in this Issue will be subject to applicable statutory
and/or regulatory requirements. Applicants are advised to ensure that applications made by them do not exceed
the investment limits or maximum number of NCDs that can be held by them under applicable statutory and/or
regulatory provisions.
In case of Application Form being submitted in joint names, the applicants should ensure that the de-mat account is also
held in the same joint names, and the names are in the same sequence in which they appear in the Application Form.
Applicants are advised to ensure that they have obtained the necessary statutory and/or regulatory
permissions/consents/approvals in connection with applying for, subscribing to, or seeking allotment of NCDs
pursuant to the Issue.
For further details, please see “Issue Procedure” on page 156.
Principal Terms and Conditions of the Issue
TERMS AND CONDITIONS IN CONNECTION WITH THE NCDs
Nature of the NCDs
We are offering NCDs which shall have a fixed rate of interest. The NCDs will be issued at a face value of `
1,000/- per NCD. Interest on the NCDs shall be payable on an annual basis, as set out hereinafter. The terms of
the NCDs offered pursuant to the Issue are as follows:
Options
Frequency of Interest Payment
Minimum Application
In Multiples of
Face Value of NCDs
(` / NCD)
Issue Price (` / NCD)
Mode of Interest Payment
Coupon (%) for NCD Holders in
Category I and Category II
Coupon (%) for NCD holders in the
Reserved Individual Portion
Coupon (%) for NCD holders in the
Unreserved Individual Portion
Effective Yield (per annum)
Put and call option
I
II
Annual
Annual
` 10,000/- (10 NCDs) (for all options of NCDs, namely Options I and
Option II either taken individually or collectively)
` 1,000 (1 NCD)
` 1,000 (1 NCD)
` 1,000
` 1,000
` 1,000
Through Various options available
` 1,000
Through
available
Various
options
11.60% per annum
11.50% per annum
12.10% per annum
11.85% per annum
11.85% per annum
11.60% per annum
For NCD holders in the Reserved
Individual Portion – 12.10%
For NCD holders in the Unreserved
Individual Portion – 11.85%
For all other NCD holders – 11.60%
For NCD holders in the Reserved
Individual Portion – 11.85%
For NCD holders in the
Unreserved Individual Portion –
11.60%
For all other NCD holders –
11.50%
Nil
Exercisable at the end of 48 months
from the Deemed Date of Allotment
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Options
Tenor
Redemption Date
I
60 months*
60 months from the Deemed Date
of Allotment*
II
36 months
36 months from the Deemed Date
of Allotment.
Redemption Amount (`/NCD)
Repayment of the Face Value plus
any interest that may have accrued
at the Redemption Date, or at the
date of early redemption if any Put
Option or Call Option is exercised,
as the case may be*
Pari Passu with other secured
creditors
and
priority
over
unsecured creditors
Credit Rating
Repayment of the Face Value
plus any interest that may have
accrued at the Redemption Date.
'CRISIL AA-/Stable' for an amount
of upto ` 75,000 Lakhs
'CRISIL AA-/Stable' for an
amount of upto ` 75,000 Lakhs
'CARE AA' for an amount of upto `
75,000 Lakhs
Deemed date of allotment shall be
Deemed Date of Allotment
the date of issue of the Allotment
Advice / regret.
* Subject to the exercise of the put and/or call option
'CARE AA' for an amount of upto
` 75,000 Lakhs
Deemed date of allotment shall be
the date of issue of the Allotment
Advice / regret.
Nature of Indebtedness
CRISIL
CARE
Pari Passu with other secured
creditors and priority over
unsecured creditors
Interest and Payment of Interest
A.
Interest
In case of Option I NCDs, interest would be paid annually at the following rates of interest in
connection with the relevant categories of NCD holders, on the amount outstanding from time to
time, commencing from the Deemed Date of Allotment of each Option I NCD:
Category of NCD Holder
Category I and Category II
Reserved Individual Portion
Unreserved Individual Portion
Rate of Interest per annum (%)
11.60
12.10
11.85
Option I NCDs shall be redeemed at the Face Value thereof along with the interest accrued thereon, if
any, at the end of 60 months from the Deemed Date of Allotment, or on the date of early redemption in
case of the exercise of any put/call option.
In case of Option II NCDs, interest would be paid annually at the following rates of interest in
connection with the relevant categories of NCD holders, on the amount outstanding from time to
time, commencing from the Deemed Date of Allotment of each Option II NCD:
Category of NCD Holder
Category I and Category II
Reserved Individual Portion
Unreserved Individual Portion
Rate of Interest per annum (%)
11.50
11.85
11.60
Option II NCDs shall be redeemed at the Face Value thereof along with the interest accrued thereon, if
any, at the end of 36 months from the Deemed Date of Allotment.
If the date of interest payment falls on a Saturday, Sunday or a public holiday in Mumbai or any
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other payment centre notified in terms of the Negotiable Instruments Act, 1881, then interest would
be paid on the next working day. Payment of interest would be subject to the deduction as prescribed
in the I.T. Act or any statutory modification or re-enactment thereof for the time being in force.
Please note that in case the NCDs are transferred and/or transmitted in accordance with the
provisions of this Prospectus read with the provisions of the Articles of Association of our Company,
the transferee of such NCDs or the deceased holder of NCDs, as the case may be, shall be entitled to
any interest which may have accrued on the NCDs.
As per clause (ix) of Section 193 of the I.T. Act, no tax is required to be withheld on any interest payable
on any security issued by a company, where such security is in dematerialized form and is listed on a
recognized stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42
of 1956) and the rules made thereunder. Accordingly, no tax will be deducted at source from the interest on
listed NCDs held in the dematerialised form.
However in case of NCDs held in physical form, as per the current provisions of the IT Act, tax will
not be deducted at source from interest payable on such NCDs held by the investor (in case of
resident individual NCD holders), if such interest does not exceed ` 2,500 in any financial year. If
interest exceeds the prescribed limit of ` 2,500 on account of interest on the NCDs, then the tax will
be deducted at applicable rate. However in case of NCD holders claiming non-deduction or lower
deduction of tax at source, as the case may be, the NCD holder should furnish either (a) a declaration
(in duplicate) in the prescribed form i.e. (i) Form 15H which can be given by individuals who are of
the age of 60 years or more (ii) Form 15G which can be given by all applicants (other than
companies, and firms ), or (b) a certificate, from the Assessing Officer which can be obtained by all
applicants (including companies and firms) by making an application in the prescribed form i.e.
Form No.13. The aforesaid documents, as may be applicable, should be submitted to our Company
quoting the name of the sole/ first NCD holder, NCD folio number and the distinctive number(s) of
the NCD held, prior to the record date to ensure non-deduction/lower deduction of tax at source from
interest on the NCD. The investors need to submit Form 15H/ 15G/certificate in original from
Assessing Officer for each financial year during the currency of the NCD to ensure non-deduction or
lower deduction of tax at source from interest on the NCD.
B.
Payment of Interest
Annual Payment of Interest
For NCDs subscribed under Option I and Option II, the relevant interest will be paid on the first day
of April every year for the amount outstanding. The first interest payment will be made on April 1,
2012 for the period commencing from the Deemed Date of Allotment till March 31, 2012. The last
interest payment will be made at the time of redemption of the NCD on a pro rata basis.
C.
Payment of Interest to NCD Holders
Payment of Interest will be made to those NCD holders whose names appear in the register of NCD
holders (or to first holder in case of joint-holders) as on record date.
We may enter into an arrangement with one or more banks in one or more cities for direct credit of
interest to the account of the investors. In such cases, interest, on the interest payment date, would be
directly credited to the account of those investors who have given their bank mandate.
We may offer the facility of NECS, NEFT, RTGS, Direct Credit and any other method permitted by
RBI and SEBI from time to time to help NCD holders. The terms of this facility (including towns
where this facility would be available) would be as prescribed by RBI. Refer to the paragraph on
“Manner of Payment of Interest/Refund/Redemption” at page 148 in this Prospectus.
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Tax exemption certificate/document, if any, must be lodged at the office of the Registrar at least
7(seven) days prior to the record date or as specifically required, failing which tax applicable on
interest will be deducted at source on accrual thereof in our Company’s books and/or on payment
thereof, in accordance with the provisions of the IT Act and/or any other statutory modification,
enactment or notification as the case may be. A tax deduction certificate will be issued for the amount
of tax so deducted.
Maturity and Redemption
The NCDs issued pursuant to this Prospectus have a fixed maturity date. The date of maturity for NCDs
subscribed under Option I and Option II is 60 months and 36 months, respectively, from the Deemed Date of
Allotment. The redemption of NCDs is subject to the exercise of any put / call option with respect to Option I
NCDs which can be exercised by any NCD holder/ Company.
Options
I
II
If put / call option is exercised
48 months from the Deemed date of
Allotment
Not Applicable
At the end of maturity period
60 months from the Deemed Date of Allotment
36 months from the Deemed Date of Allotment
Deemed Date of Allotment
Deemed date of allotment shall be the date of issue of the Allotment Advice / regret.
Application Size
Each application should be for a minimum of 10 NCDs and multiples of 1 NCD thereof. The minimum application
size for each application for NCDs would be ` 10,000/- (for all options of NCDs namely, Option I and Option II
NCDs either taken individually or collectively) and in multiples of ` 1,000/- thereafter.
Applicants can apply for any or all options of NCDs offered hereunder (any/all options) using the same
Application Form.
Applicants are advised to ensure that applications made by them do not exceed the investment limits or
maximum number of NCDs that can be held by them under applicable statutory and or regulatory
provisions.
Terms of Payment
The entire issue price of ` 1,000 per NCD is payable on application itself. In case of allotment of lesser number
of NCDs than the number of NCDs applied for, our Company shall refund the excess amount paid on
application to the applicant in accordance with the terms of this Prospectus. For further details please refer to
the paragraph on “Interest on Application Money” beginning on page 155 of this Prospectus.
Record Date
The record date for payment of interest in connection with the NCDs or repayment of principal in connection
therewith shall be 15 (fifteen) days prior to the date on which interest is due and payable, or the date of
redemption or early redemption or as prescribed by the relevant stock exchange(s).
Manner of Payment of Interest / Refund / Redemption
The manner of payment of interest / refund / redemption in connection with the NCDs is set out below:
For NCDs applied / held in electronic form:
The bank details will be obtained from the Depositories for payment of Interest / refund / redemption as the
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case may be. Applicants who have applied for or are holding the NCDs in electronic form, are advised to
immediately update their bank account details as appearing on the records of the depository participant.
Please note that failure to do so could result in delays in credit of refunds to the applicant at the applicant’s
sole risk, and the Lead Managers, the Co-Lead Manager, our Company nor the Registrar to the Issue shall
have any responsibility and undertake any liability for the same.
For NCDs held in physical form:
The bank details will be obtained from the Registrar to the Issue for payment of
redemption as the case may be.
interest / refund /
The mode of interest / refund / redemption payments shall be undertaken in the following order of preference:
1.
Direct Credit
Investors having their bank account with the Refund Banks, shall be eligible to receive refunds, if any, through
direct credit. The refund amount, if any, would be credited directly to their bank account with the Refund Banker.
2.
NECS
Payment of interest / refund / redemption shall be undertaken through NECS for applicants having an account
at the centers mentioned in NECS MICR list.
This mode of payment of refunds would be subject to availability of complete bank account details including
the MICR code, IFSC code, bank account number, bank name and branch name as appearing on a cheque leaf,
from the Depositories. One of the methods for payment of interest / refund / redemption is through NECS for
applicants having a bank account at any of the abovementioned centers.
3.
RTGS
Applicants having a bank account with a participating bank and whose interest payment / refund /
redemption amount exceeds ` 2 lakhs, or such amount as may be fixed by RBI from time to time, have the
option to receive refund through RTGS. Such eligible applicants who indicate their preference to receive
interest payment / refund / redemption through RTGS are required to provide the IFSC code in the
Application Form or intimate our Company and the Registrars to the Issue at least 7 (seven) days before the
record date. Charges, if any, levied by the applicant’s bank receiving the credit would be borne by the
applicant. In the event the same is not provided, interest payment / refund / redemption shall be made
through NECS subject to availability of complete bank account details for the same as stated above.
3.
NEFT
Payment of interest / refund / redemption shall be undertaken through NEFT wherever the applicants’ bank has
been assigned the Indian Financial System Code (“IFSC”), which can be linked to a Magnetic Ink Character
Recognition (“MICR”), if any, available to that particular bank branch. IFSC Code will be obtained from the
website of RBI as on a date immediately prior to the date of payment of refund, duly mapped with MICR
numbers. Wherever the applicants have registered their nine digit MICR number and their bank account
number while opening and operating the de-mat account, the same will be duly mapped with the IFSC Code of
that particular bank branch and the payment of interest/refund/redemption will be made to the applicants
through this method.
4.
Registered Post/Speed Post
For all other applicants, including those who have not updated their bank particulars with the MICR code, the
interest payment / refund / redemption orders shall be dispatched by post for value up to ` 1,500/- and through
Speed Post/ Registered Post for refund orders /interest payment/redemption orders of ` 1,500/- and above.
Please note that applicants are eligible to receive payments through the modes detailed in (1), (2) (3), and (4)
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herein above provided they provide necessary information for the above modes and where such payment facilities
are allowed / available.
Please note that our Company shall not be responsible to the holder of NCD, for any delay in receiving credit of
interest / refund / redemption so long as our Company has initiated the process of such request in time.
Printing of Bank Particulars on Interest Warrants
As a matter of precaution against possible fraudulent encashment of refund orders and interest/redemption
warrants due to loss or misplacement, the particulars of the applicant’s bank account are mandatorily required
to be given for printing on the orders/ warrants. In relation to NCDs applied and held in dematerialized form,
these particulars would be taken directly from the depositories. In case of NCDs held in physical form either
on account of rematerialisation or transfer, the investors are advised to submit their bank account details with
our Company / Registrar at least 7 (seven) days prior to the record date failing which the orders / warrants will
be dispatched to the postal address of the holder of the NCD as available in the records of our Company.
Bank account particulars will be printed on the orders/ warrants which can then be deposited only in the
account specified.
Loan against NCDs
Our Company, at its sole discretion, subject to applicable statutory and/or regulatory requirements, may
consider granting of a loan facility to the holders of NCDs against the security of such NCDs. Such loans
shall be subject to the terms and conditions as may be decided by our Company from time to time.
Buy Back of NCDs
Our Company may, at its sole discretion, from time to time, consider, subject to applicable statutory and/or regulatory
requirements, buyback of NCDs, upon such terms and conditions as may be decided by our Company.
Form and Denomination
In case of NCDs held in physical form, a single certificate will be issued to the NCD holder for the aggregate
amount (“Consolidated Certificate”) for each type of NCDs. The applicant can also request for the issue of
NCD certificates in denomination of one NCD (“Market Lot”).
In respect of Consolidated Certificates, we will, only upon receipt of a request from the NCD holder,
split such Consolidated Certificates into smaller denominations subject to the minimum of Market Lot. No
fees would be charged for splitting of NCD certificates in Market Lots, but stamp duty payable, if any,
would be borne by the NCD holder. The request for splitting should be accompanied by the original NCD
certificate which would then be treated as cancelled by us.
Procedure for Redemption by NCD holders
Subject to the exercise of the put option by the NCD holder / call option by our Company, the procedure for
redemption is set out below:
NCDs held in physical form:
No action would ordinarily be required on the part of the NCD holder at the time of redemption and the
redemption proceeds would be paid to those NCD holders whose names stand in the register of NCD holders
maintained by us on the record date fixed for the purpose of Redemption. However, our Company may require
that the NCD certificate(s), duly discharged by the sole holder/all the joint-holders (signed on the reverse of
the NCD certificate(s)) be surrendered for redemption on maturity and should be sent by the NCD holder(s) by
Registered Post with acknowledgment due or by hand delivery to our office or to such persons at such
addresses as may be notified by us from time to time. NCD holder(s) may be requested to surrender the NCD
certificate(s) in the manner as stated above, not more than three months and not less than one month prior to the
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redemption date so as to facilitate timely payment.
We may at our discretion redeem the NCDs without the requirement of surrendering of the NCD certificates by
the holder(s) thereof. In case we decide to do so, the holders of NCDs need not submit the NCD certificates to us
and the redemption proceeds would be paid to those NCD holders whose names stand in the register of NCD
holders maintained by us on the record date fixed for the purpose of redemption of NCDs. In such case, the NCD
certificates would be deemed to have been cancelled. Also see the para “Payment on Redemption” given below.
NCDs held in electronic form:
No action is required on the part of NCD holder(s) at the time of redemption of NCDs.
Payment on Redemption
The manner of payment of redemption is set out below:
NCDs held in physical form:
The payment on redemption of the NCDs will be made by way of cheque/pay order/ electronic modes.
However, if our Company so requires, the aforementioned payment would only be made on the surrender of
NCD certificate(s), duly discharged by the sole holder / all the joint-holders (signed on the reverse of the
NCD certificate(s)). Despatch of cheques/pay order, etc. in respect of such payment will be made on the
Redemption Date or (if so requested by our Company in this regard) within a period of 30 days from the date
of receipt of the duly discharged NCD certificate.
In case we decide to do so, the redemption proceeds in the manner stated above would be paid on the
Redemption Date to those NCD holders whose names stand in the register of NCD holders maintained by us on
the record date fixed for the purpose of Redemption. Hence the transferees, if any, should ensure lodgement of
the transfer documents with us at least 7 (seven) days prior to the record date. In case the transfer documents
are not lodged with us at least 7 (seven) days prior to the record date and we dispatch the redemption proceeds
to the transferor, claims in respect of the redemption proceeds should be settled amongst the parties inter se
and no claim or action shall lie against us or the Registrars.
Our liability to holder(s) towards his/their rights including for payment or otherwise shall stand extinguished
from the date of early redemption (in case of an exercise of the put/call option)/ redemption in all events and
when we dispatch the redemption amounts to the NCD holder(s).
Further, we will not be liable to pay any interest, income or compensation of any kind from the date of
redemption of the NCD(s).
NCDs held in electronic form:
On the redemption date, or the date of early redemption (in case of an exercise of the put/call option),
redemption proceeds would be paid by cheque /pay order / electronic mode to those NCD holders whose
names appear on the list of beneficial owners given by the Depositories to us. These names would be as per
the Depositories’ records on the record date fixed for the purpose of redemption. These NCDs will be
simultaneously extinguished to the extent of the amount redeemed through appropriate debit corporate action
upon redemption of the corresponding value of the NCDs. It may be noted that in the entire process mentioned
above, no action is required on the part of NCD holders.
Our liability to NCD holder(s) towards his/their rights including for payment or otherwise shall stand
extinguished from the date of early redemption (in case of an exercise of the put/call option)/ redemption in
all events and when we dispatch the redemption amounts to the NCD holder(s).
Further, we will not be liable to pay any interest, income or compensation of any kind from the date of
redemption of the NCD(s).
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Redemption Date
Option I NCDs will be redeemed at the expiry of 60 months from the Deemed Date of Allotment, subject to the
exercise of any put option by the Option I NCD holders / call option by our Company, as the case may be.
Option II NCDs will be redeemed at the expiry of 36 months from the Deemed Date of Allotment.
Put / Call Option
With respect to Option I NCDs, the holders thereof shall at the expiry of 48 months, from the Deemed Date of
Allotment, have the right to seek redemption of such Option I NCDs held by them, (“Put Option”). A NCD holder of
Option I NCDs, may at his discretion, redeem any number of Option I NCDs held by him, while exercising such Put
Option.
With respect to Option I NCDs, our Company shall at the expiry of 48 months have the right to redeem such
outstanding Option I NCDs, (“Call Option”).
The holders of Option II NCDs shall not be entitled to exercise any Put Option in connection with such Option II NCDs
held by them. Our Company shall not be entitled to exercise any Call Option in connection with any Option II NCDs.
Procedure for Exercise of Put Option
At the expiry of 48 months with respect to Option I NCDs from the Deemed Date of Allotment, (“Early Redemption
(Put) Date”), a holder of Option I NCDs has the right to exercise his Put Option with respect to the Option I NCDs
held by him within 30 days from the Early Redemption (Put) Date (“Early Redemption (Put) Period”).
During the Early Redemption (Put) Period, an Option I NCD holder seeking to exercise his Put Option can approach
our Company in writing of his intention to redeem any or all of the Option I NCDs held by him.
The Option I NCDs with respect to which an NCD holder exercises his Put Option will be redeemed within 30 (thirty)
days from the expiry of the Early Redemption (Put) period.
Procedure for Exercise of Call Option
At the expiry of 48 months with respect to Option I NCDs from the Deemed Date of Allotment, (“Early Redemption
(Call) Date”), our Company has the right to exercise its Call Option with respect to Option I NCDs within 30 days
from the Early Redemption (Call) Date (“Early Redemption (Call) Period”).
During the Early Redemption (Call) Period, our Company can send a notice in writing to the holder of any Option I
NCDs, (as on record on the Early Redemption (Call) Date), calling for redemption of all Option I NCDs that are
outstanding. The Call can be exercised for all outstanding Option I NCDs.
The Option I NCDs with respect to which our Company exercises its Call Option will be redeemed within 30 (thirty)
days from the expiry of the Early Redemption (Call) Period.
Method for calculation for Early Redemption
On exercise of the Put Option by the holders of Option I NCDs and/or the Call Option by our Company, in connection
with Option I NCDs, as the case may be, the NCDs will be redeemed at their respective face value along with interest
accrued thereon, if any.
Right to Reissue NCD(s)
Subject to the provisions of the Act, where we have fully redeemed or repurchased any NCD(s), we shall have
and shall be deemed always to have had the right to keep such NCDs in effect without extinguishment thereof,
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for the purpose of resale or reissue and in exercising such right, we shall have and be deemed always to have
had the power to resell or reissue such NCDs either by reselling or reissuing the same NCDs or by issuing
other NCDs in their place. The aforementioned right includes the right to reissue original NCDs.
Transfer/Transmission of NCD (s)
The NCDs shall be transferred or transmitted freely in accordance with the applicable provisions of the Act.
The provisions relating to transfer and transmission and other related matters in respect of our shares
contained in the Articles and the Act shall apply, mutatis mutandis (to the extent applicable to debentures)
to the NCD(s) as well. In respect of the NCDs held in physical form, a suitable instrument of transfer as may
be prescribed by the Issuer may be used for the same. The NCDs held in dematerialised form shall be
transferred subject to and in accordance with the rules/procedures as prescribed by NSDL/CDSL and the
relevant DPs of the transfer or transferee and any other applicable laws and rules notified in respect thereof.
The transferee(s) should ensure that the transfer formalities are completed prior to the record date. In the
absence of the same, interest will be paid/redemption will be made to the person, whose name appears in
the register of debenture holders maintained by the Depositories. In such cases, claims, if any, by the
transferees would need to be settled with the transferor(s) and not with the Issuer or Registrar.
For NCDs held in electronic form:
The normal procedure followed for transfer of securities held in dematerialised form shall be followed for
transfer of the NCDs held in electronic form. The seller should give delivery instructions containing details of
the buyer’s DP account to his depository participant.
In case the transferee does not have a DP account, the seller can re-materialise the NCDs and thereby convert his
dematerialised holding into physical holding. Thereafter the NCDs can be transferred in the manner as stated
above.
In case the buyer of the NCDs in physical form wants to hold the NCDs in dematerialised form, he can choose
to dematerialise the securities through his DP.
Joint-holders
Where two or more persons are holders of any NCD(s), they shall be deemed to hold the same as joint holders
with benefits of survivorship subject to other provisions contained in the Articles.
Sharing of Information
We may, at our option, use on our own, as well as exchange, share or part with any financial or other
information about the NCD holders available with us, with our subsidiaries, if any and affiliates and other
banks, financial institutions, credit bureaus, agencies, statutory bodies, as may be required and neither we or
our affiliates nor their agents shall be liable for use of the aforesaid information.
Notices
All notices to the NCD holder(s) required to be given by us or the Debenture Trustee will be sent by post/
courier or through email or other electronic media to the Registered Holders of the NCD(s) from time to
time.
Issue of Duplicate NCD Certificate(s)
If any NCD certificate(s) is/are mutilated or defaced or the cages for recording transfers of NCDs are fully
utilised, the same may be replaced by us against the surrender of such certificate(s). Provided, where the
NCD certificate(s) are mutilated or defaced, the same will be replaced as aforesaid only if the certificate
numbers and the distinctive numbers are legible.
If any NCD certificate is destroyed, stolen or lost then upon production of proof thereof to our satisfaction and
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upon furnishing such indemnity/security and/or documents as we may deem adequate, duplicate NCD
certificate(s) shall be issued. Upon issuance of a duplicate NCD certificate, the original NCD certificate shall
stand cancelled.
Security
The principal amount of the NCDs to be issued in terms of this Prospectus together with all interest due on the
NCDs, as well as all costs, charges, all fees, remuneration of Debenture Trustee and expenses payable in respect
thereof shall be secured by way of first and exclusive charge in favour of the Debenture Trustee on an identified
immovable property and specified future receivables of our Company as may be decided mutually by our Company
and the Debenture Trustee.
Our Company will create appropriate security in favour of the Debenture Trustee for the NCD holders on the assets
adequate to ensure 100% asset cover for the NCDs, which shall be free from any encumbrances.
Our Company intends to enter into an agreement with the Debenture Trustee, (‘Debenture Trust Deed’),
the terms of which will govern the appointment of the Debenture Trustee. Our Company proposes to
complete the execution of the Debenture Trust Deed during the subscription period after the minimum
subscription for the Issue has been achieved and utilize the funds after the stipulated security has been
created.
Under the terms of the Debenture Trust Deed, our Company will covenant with the Debenture Trustee that
it will pay the NCD holders the principal amount on the NCDs on the relevant redemption date and also
that it will pay the interest due on NCDs on the rate specified in this Prospectus and in the Debenture Trust
Deed
The Debenture Trust Deed will also provide that our Company may withdraw any portion of the security and replace
with another asset of the same or a higher value.
Trustees for the NCD holders
We have appointed IDBI Trusteeship Services Limited to act as the Debenture Trustees for the NCD
holders. We and the Debenture Trustee will execute a Debenture Trust Deed, inter alia, specifying the powers,
authorities and obligations of the Debenture Trustee and us. The NCD holder(s) shall, without further act or
deed, be deemed to have irrevocably given their consent to the Debenture Trustee or any of its agents or
authorised officials to do all such acts, deeds, matters and things in respect of or relating to the NCDs as the
Debenture Trustee may in its absolute discretion deem necessary or require to be done in the interest of the
NCD holder(s). Any payment made by us to the Debenture Trustee on behalf of the NCD holder(s) shall
discharge us pro tanto to the NCD holder(s).
The Debenture Trustee will protect the interest of the NCD holders in the event of default by us in regard to
timely payment of interest and repayment of principal and they will take necessary action at our cost.
Future Borrowings
We will be entitled to borrow/raise loans or avail of financial assistance in whatever form as also to issue
debentures/ NCDs/other securities in any manner having such ranking in priority, pari passu or otherwise,
subject to applicable consents, approvals or permissions that may be required under any
statutory/regulatory/contractual requirement, and change the capital structure including the issue of shares of
any class, on such terms and conditions as we may think appropriate, without the consent of, or intimation to,
the NCD holders or the Debenture Trustee in this connection.
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Interest on Application Money
Interest on application monies received which are used towards allotment of NCDs
Our Company shall pay interest on application money on the amount allotted, subject to deduction of income tax
under the provisions of the Income Tax Act, 1961, as amended, as applicable, to any applicants to whom NCDs
are allotted pursuant to the Issue from the date of realization of the cheque(s)/demand draft(s) or 3 (three) days
from the date of receipt of the application (being the date of presentation of each application as acknowledged
by the Bankers to the Issue) whichever is later upto one day prior to the Deemed Date of Allotment, at the rate
of 7.00% per annum.
Our Company has a right to withdraw the Issue at anytime 2 (two) days prior to Issue closing date for receiving
subscription in the Issue. Our Company shall in the event of such withdrawal, subject to receipt of a minimum
subscription of 75 % of the Base Issue, i.e. ` 28,125 lakhs, allot NCDs to all applicants who have applied for NCDs
upto one day prior to the date by which Company gives notice for withdrawal of Issue. Further our Company
shall pay interest on application money on the amount allotted, subject to deduction of income tax under the
provisions of the Income Tax Act, 1961, as amended, as applicable, to any applicants to whom NCDs are allotted
pursuant to the Issue from the date of realization of the cheque(s)/demand draft(s) or 3 (three) days from the
date of receipt of the application (being the date of presentation of each application as acknowledged by the
Bankers to the Issue) whichever is later upto one day prior to the Deemed Date of Allotment, at the rate of
7.00% per annum. However, it is clarified that in the event that our Company does not receive a minimum
subscription of 75 % of the Base Issue, i.e. ` 28,125 lakhs our Company will not allot any NCDs to applicants.
Our Company may enter into an arrangement with one or more banks in one or more cities for direct credit of
interest to the account of the applicants. Alternatively, the interest warrant will be dispatched along with the
Letter(s) of Allotment at the sole risk of the applicant, to the sole/first applicant.
Interest on application monies received which are liable to be refunded
Our Company shall pay interest on application money which is liable to be refunded to the applicants in
accordance with the provisions of the Debt Regulations and/or the Companies Act, or other applicable
statutory and/or regulatory requirements, subject to deduction of income tax under the provisions of the Income
Tax Act, 1961, as amended, as applicable, from the date of realization of the cheque(s)/demand draft(s) or 3
(three) days from the date of receipt of the application (being the date of presentation of each application as
acknowledged by the Bankers to the Issue) whichever is later upto one day prior to the Deemed Date of
Allotment, at the rate of 2.50% per annum. Such interest shall be paid along with the monies liable to be refunded.
Interest warrant will be dispatched / credited (in case of electronic payment) along with the Letter(s) of Refund
at the sole risk of the applicant, to the sole/first applicant.
In the event our Company does not receive a minimum subscription of 75 % of the Base Issue, i.e. ` 28,125 lakhs
on the date of closure of the Issue, our Company shall pay interest on application money which is liable to be
refunded to the applicants in accordance with the provisions of the Debt Regulations and/or the Companies
Act, or other applicable statutory and/or regulatory requirements, subject to deduction of income tax under the
provisions of the Income Tax Act, 1961, as amended, as applicable, from the date of realization of the
cheque(s)/demand draft(s) or 3 (three) days from the date of receipt of the application (being the date of
presentation of each application to the Bankers to the Issue as acknowledged) whichever is later upto one day
prior to the date of closure of the Issue or one day prior to the date on which Company gives notice for
withdrawal of Issue, as the case may be at the rate of 2.50% per annum. Such interest shall be paid along with
the monies liable to be refunded.
Provided that, notwithstanding anything contained hereinabove, our Company shall not be liable to pay any interest
on monies liable to be refunded in case of (a) invalid applications or applications liable to be rejected, and/or (b)
applications which are withdrawn by the applicant. Please refer to “Rejection of Application” at page 164 of this
Prospectus.
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ISSUE PROCEDURE
1.
i.
How to Apply?
Availability of Prospectus and Application Forms
The abridged Prospectus containing the salient features of the Prospectus together with Application Forms and copies
of the Prospectus may be obtained from our Registered Office, Lead Manager(s) to the Issue, the Co-Lead Manager
to the Issue, the Registrar to the Issue and at branches/collection centres of the Bankers to the Issue, as mentioned on
the Application Form.
In addition, Application Forms would also be made available to the stock exchanges where listing of the NCDs are
sought and to brokers, on their request.
We may provide Application Forms for being filled and downloaded at such websites as we may deem fit.
ii.
Who can Apply
The following categories of persons are eligible to apply in the Issue:
Category I
•
•
•
•
•
•
Public Financial Institutions, Statutory Corporations, Commercial Banks, Co-operative Banks and Regional
Rural Banks, which are authorised to invest in the NCDs;
Provident Funds, Pension Funds, Superannuation Funds and Gratuity Funds, which are authorised to invest
in the NCDs
Venture Capital funds registered with SEBI;
Insurance Companies registered with the IRDA
National Investment Fund; and
Mutual Funds.
Category II
•
•
•
•
•
Companies, Bodies Corporate and Societies registered under the applicable laws in India and authorised to
invest in NCDs;
Public/Private Charitable/Religious Trusts which are authorised to invest in the NCDs;
Scientific and/or Industrial Research Organisations, which are authorised to invest in the NCDs;
Partnership Firms in the name of the partner; and
Limited liability partnerships formed and registered under the provisions of the Limited Liability Partnership
Act, 2008 (No. 6 of 2009)
Category III*
•
•
Resident Indian individuals; and
Hindu Undivided Families through the Karta.
* With respect to applications received from Category III applicants, applications by applicants who apply for
NCDs aggregating to a value not more than ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be
grouped together, (“Reserved Individual Portion”) while applications by applicants who apply for NCDs
aggregating to a value exceeding ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be separately
grouped together, (“Unreserved Individual Portion”).
Note: Participation of any of the aforementioned categories of persons or entities is subject to the applicable statutory
and/or regulatory requirements in connection with the subscription to Indian securities by such categories of persons
156
or entities.
Applicants are advised to ensure that applications made by them do not exceed the investment limits or
maximum number of NCDs that can be held by them under applicable statutory and or regulatory provisions.
Applicants are advised to ensure that they have obtained the necessary statutory and/or regulatory
permissions/consents/approvals in connection with applying for, subscribing to, or seeking allotment of NCDs
pursuant to the Issue.
The Lead Managers, the Co-Lead Manager and their respective associates and affiliates are permitted to subscribe in
the Issue.
The information below is given for the benefit of the investors. Our Company, the Lead Managers and/or the CoLead Manager are not liable for any amendment or modification or changes in applicable laws or regulations, which
may occur after the date of this Prospectus. Investors are advised to ensure that the aggregate number of NCDs
applied for does not exceed the investment limits or maximum number of NCDs that can be held by them under
applicable law.
Grouping of Applications and Allocation Ratio
For the purposes of the basis of allotment:
i)
Applications received from Category I applicants: Applications received from Category I, shall be
grouped together, (“Institutional Portion”);
ii)
Applications received from Category II applicants: Applications received from Category II, shall be
grouped together, (“Non-Institutional Portion”);
iii)
Applications received from Category III applicants: Further with respect to applications received
from Category III applicants, applications by applicants who apply for NCDs aggregating to a value not
more than ` 5 Lakhs, across all series of NCDs (Option I and/or Option II), shall be grouped together,
(“Reserved Individual Portion”) while applications by applicants who apply for NCDs aggregating to a
value exceeding ` 5 Lakhs (Option I and/or Option II,), shall be separately grouped together, (“Unreserved
Individual Portion”). For further details please refer to “Additional Applications” beginning on page 163 of
this Prospectus.
For removal of doubt, “Institutional Portion”, Non-Institutional Portion” “Reserved Individual Portion” and
“Unreserved Individual Portion” are individually referred to as “Portion” and collectively referred to as
“Portions”
Applications by Mutual Funds
No mutual fund scheme shall invest more than 15% of its NAV in debt instruments issued by a single Company
which are rated not below investment grade by a credit rating agency authorised to carry out such activity. Such
investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of
Trustees and the Board of Asset Management Company
A separate application can be made in respect of each scheme of an Indian mutual fund registered with SEBI and
such applications shall not be treated as multiple applications. Applications made by the AMCs or custodians of a
Mutual Fund shall clearly indicate the name of the concerned scheme for which application is being made. In case of
Applications made by Mutual Fund registered with SEBI, a certified copy of their SEBI registration certificate must
be submitted with the Application Form. The applications must be also accompanied by certified true copies of (i)
SEBI Registration Certificate and trust deed (ii) resolution authorising investment and containing operating
instructions and (iii) specimen signatures of authorized signatories. Failing this, our Company reserves the right to
accept or reject any Application in whole or in part, in either case, without assigning any reason therefor.
157
Application by Scheduled Banks, Co-operative Banks and Regional Rural Banks
Scheduled Banks, Co-operative banks and Regional Rural Banks can apply in this public issue based upon their own
investment limits and approvals. The application must be accompanied by certified true copies of (i) Board
Resolution authorising investments; (ii) Letter of Authorisation. Failing this, our Company reserves the right to
accept or reject any Application in whole or in part, in either case, without assigning any reason therefor.
Application by Insurance Companies
In case of Applications made by insurance companies registered with the Insurance Regulatory and
Development Authority, a certified copy of certificate of registration issued by Insurance Regulatory and
Development Authority must be lodged along with Application Form. The applications must be accompanied
by certified copies of (i) Memorandum and Articles of Association (ii) Power of Attorney (iii) Resolution
authorising investment and containing operating instructions (iv) Specimen signatures of authorized
signatories. Failing this, our Company reserves the right to accept or reject any Application in whole or in part,
in either case, without assigning any reason therefor.
Applications by Trusts
In case of Applications made by trusts, settled under the Indian Trusts Act, 1882, as amended, or any other
statutory and/or regulatory provision governing the settlement of trusts in India, must submit a (i) certified
copy of the registered instrument for creation of such trust, (ii) Power of Attorney, if any, in favour of one or
more trustees thereof, (iii) such other documents evidencing registration thereof under applicable
statutory/regulatory requirements. Further, any trusts applying for NCDs pursuant to the Issue must ensure that
(a) they are authorised under applicable statutory/regulatory requirements and their constitution instrument to
hold and invest in debentures, (b) they have obtained all necessary approvals, consents or other authorisations,
which may be required under applicable statutory and/or regulatory requirements to invest in debentures, and
(c) applications made by them do not exceed the investment limits or maximum number of NCDs that can be
held by them under applicable statutory and or regulatory provisions. Failing this, our Company reserves the
right to accept or reject any Applications in whole or in part, in either case, without assigning any reason
therefor.
iii. Applications cannot be made by:
a)
b)
c)
d)
e)
f)
2.
Minors without a guardian name;
Foreign nationals;
Persons resident outside India;
Foreign Institutional Investors;
Non Resident Indians; and
Overseas Corporate Bodies
Escrow Mechanism
We shall open Escrow Accounts with one or more Escrow Collection Bank(s) in whose favour the applicants shall
make out the cheque or demand draft in respect of their application. Cheques or demand drafts for the application
amount received from applicants would be deposited in the respective Escrow Account.
Upon creation of security as disclosed in this Prospectus, the Escrow Collection Bank(s) shall transfer the monies
from the Escrow Accounts to a separate bank account as per the terms of the Escrow Agreement, (“Public Issue
Account”). Payments of refund to the applicants shall also be made from the Escrow Accounts/refund account(s) as
per the terms of the Escrow Agreement and this Prospectus.
The Escrow Collection Bank(s) will act in terms of the Draft Prospectus, this Prospectus and the Escrow Agreement.
The Escrow Collection Bank(s) shall not exercise any lien whatsoever over the monies deposited therein. In terms of
Debt Regulations, it is mandatory for our Company to keep the proceeds of the Issue in an escrow account until the
documents for creation of security as stated in this Prospectus are executed.
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3.
Filing of the Prospectus with ROC
A copy of the Prospectus shall be filed with the Registrar of Companies, Chennai, Tamil Nadu, in terms of section 56
and section 60 of the Act.
4.
Pre-Issue Advertisement
Our Company will issue a statutory advertisement on or before the Issue Opening Date. This advertisement will
contain the information as prescribed under Debt Regulations. Material updates, if any, between the date of filing of
the Prospectus with ROC and the date of release of this statutory advertisement will be included in the statutory
advertisement.
5.
General Instructions
Do’s
Check if you are eligible to apply;
Read all the instructions carefully and complete the Application Form;
Ensure that the details about Depository Participant and Beneficiary Account are correct as allotment of
NCDs will be in the dematerialized form only;
Ensure that you mention your PAN allotted under the IT Act
Ensure that the Demographic Details (as defined herein below) are updated, true and correct in all
respects.
Ensure that you have obtained all necessary approvals from the relevant statutory and/or regulatory
authorities to apply for, subscribe to and/or seek allotment of NCDs pursuant to the Issue.
Don’ts:
Do not apply for lower than the minimum application size;
Do not pay the application amount in cash;
Do not fill up the Application Form such that the NCDs applied for exceeds the issue size and/or
investment limit or maximum number of NCDs that can be held under the applicable laws or regulations
or maximum amount permissible under the applicable regulations;
Do not submit application accompanied with Stockinvest.
6.
Instructions for completing the Application Form
A. Submission of Application Form
Applications to be made in prescribed form only
The forms to be completed in block letters in English
Applications should be in single or joint names and should be applied by Karta in case of HUF
Thumb impressions and signatures other than in English/Hindi/Gujarati/Marathi or any other languages
specified in the 8th Schedule of the Constitution needs to be attested by a Magistrate or Notary Public or
a Special Executive Magistrate under his/her seal.
All Application Forms duly completed together with cheque/bank draft for the amount payable on
application must be delivered before the closing of the subscription list to any of the Bankers to the
Public Issue or collection centre(s)/ agent(s) as may be specified before the closure of the Issue.
Applicants at centres not covered by the branches of collecting banks can send their forms together with
a cheque/draft drawn on/payable at a local bank in Chennai to the Registrar to the Issue by registered
post.
No receipt will be issued for the application money. However, Bankers to the Issue and/or their branches
receiving the applications will acknowledge the same.
Every applicant should hold valid Permanent Account Number (PAN) and mention the same in the
Application Form.
159
All applicants are required to tick the relevant column of “Category of Investor” in the Application
Form.
ALL APPLICATIONS BY CATEGORY I APPLICANTS SHALL BE RECEIVED ONLY BY
THE LEAD MANAGERS, THE CO-LEAD MANAGER AND THEIR RESPECTIVE
AFFILIATES.
All applicants should apply for one or more type of NCDs and/or one or more option of NCDs in a single
Application Form only.
Our Company would allot Option I NCDs to all valid applications, wherein the applicants have not indicated
their choice of NCDs.
B. Applicant’s Bank Account Details
It is mandatory for all the applicants to have their NCDs allotted in dematerialised form. The Registrars to
the Issue will obtain the applicant’s bank account details from the Depository. The applicant should note
that on the basis of the name of the applicant, Depository Participant’s (DP) name, Depository Participants
identification number and beneficiary account number provided by them in the Application Form, the
Registrar to the Issue will obtain from the applicant’s DP account, the applicant’s bank account details. The
investors are advised to ensure that bank account details are updated in their respective DP A/cs as these
bank account details would be printed on the refund order(s), if any. Please note that failure to do so could
result in delays in credit of refunds to applicants at the applicant’s sole risk and neither the Lead Managers,
the Co-Lead Manager, our Company, the Refund Banker, nor the Registrar to the Issue shall have any
responsibility and undertake any liability for the same.
C. Applicant’s Depository Account Details
IT IS MANDATORY FOR ALL THE APPLICANTS TO HAVE THEIR NCDs IN
DEMATERIALISED FORM. ALL APPLICANTS SHOULD MENTION THEIR DEPOSITORY
PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND
BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. INVESTORS MUST
ENSURE THAT THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME
AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE
APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT
THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN
THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE APPLICATION FORM.
Applicant should note that on the basis of name of the applicant, Depository Participant’s name, Depository
Participant-Identification number and Beneficiary Account Number provided by them in the Application
Form, the Registrar to the Issue will obtain from the Depository, demographic details of the investor such as
address, bank account details for printing on refund orders and occupation (“Demographic Details”).
Hence, applicants should carefully fill in their Depository Account details in the Application Form.
These Demographic Details would be used for all correspondence with the applicants including mailing of
the refund orders/ Allotment Advice and printing of bank particulars on the refund/interest order and the
Demographic Details given by applicant in the Application Form would not be used for these purposes by
the Registrar.
Hence, applicants are advised to update their Demographic Details as provided to their Depository
Participants and ensure that they are true and correct.
By signing the Application Form, the applicant would have deemed to have authorised the depositories to
provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its
records. Refund Orders/Allotment Advice would be mailed at the address of the applicant as per the
Demographic Details received from the Depositories. Applicant may note that delivery of Refund
Orders/Allotment Advice may get delayed if the same once sent to the address obtained from the
Depositories are returned undelivered. In such an event, the address and other details given by the applicant
160
in the Application Form would be used only to ensure dispatch of refund orders. Please note that any such
delay shall be at the applicant’s sole risk and neither we nor the Lead Managers, the Co-Lead Manager nor
the Registrars shall be liable to compensate the applicant for any losses caused to the applicant due to any
such delay or liable to pay any interest for such delay.
However in case of applications made under power of attorney, our Company in its absolute discretion,
reserves the right to permit the holder of Power of Attorney to request the Registrar that for the purpose of
printing particulars on the refund order and mailing of Refund Orders /Allotment Advice, the demographic
details obtained from the Depository of the applicant shall be used.
In case no corresponding record is available with the Depositories that matches all three parameters,
namely, names of the applicants (including the order of names of joint holders), the Depository
Participant’s identity (DP ID) and the beneficiary’s identity, then such applications are liable to be rejected.
D. Applications under Power of Attorney by limited companies, corporate bodies, registered societies etc.
In case of Applications made pursuant to a power of attorney or by limited companies, corporate bodies,
registered societies etc, a certified copy of the power of attorney or the relevant resolution or authority, as
the case may be, along with a certified copy of the Memorandum of Association and Articles of
Association and/or bye laws must be lodged along with the Application Form, failing this, our Company
reserves the right to accept or reject any Application in whole or in part, in either case, without assigning
any reason therefor.
E. Permanent Account Number
The applicant or in the case of applications made in joint names, each of the applicant, should
mention his or her Permanent Account Number (PAN) allotted under the IT Act. In accordance with
Circular No. MRD/DOP/Cir-05/2007 dated April 27, 2007 issued by SEBI, the PAN would be the
sole identification number for the participants transacting in the securities market, irrespective of the
amount of transaction. Any Application Form, without the PAN is liable to be rejected, irrespective
of the amount of transaction. It is to be specifically noted that the applicants should not submit the GIR
number instead of the PAN as the Application is liable to be rejected on this ground.
F. Terms of Payment
The entire issue price for the NCDs is payable on application only. In case of allotment of lesser number
of NCDs than the number applied, our Company shall refund the excess amount paid on application to the
applicant.
G. Payment Instructions for Applicants
In pursuance of Debt Regulations, we shall open Escrow Account with the Escrow Collection
Banks(s) for the collection of the application amount payable upon submission of the Application
Form.
Payment may be made by way of cheque/bank draft drawn on any bank, including a co-operative bank
which is situated at and is member or sub-member of the Bankers’ clearing-house located at the
place where the Application Form is submitted, i.e. at designated collection centres. Outstation
cheques /bank drafts drawn on banks not participating in the clearing process will not be accepted
and applications accompanied by such cheques or bank drafts are liable to be rejected. Payment
though stockinvest would also not be allowed as the same has been discontinued by the RBI vide
notification No. DBOD.NO.FSC.BC. 42/24.47.001/2003-04 dated November 5, 2003.
Cash/Stockinvest/Money Orders/Postal Orders will not be accepted. In case payment is effected in
contravention of conditions mentioned herein, the application is liable to be rejected and
application money will be refunded and no interest will be paid thereon. A separate cheque / bank
draft must accompany each Application Form.
161
8.
9.
All Application Forms received with outstation cheques, post dated cheques, cheques / bank drafts
drawn on banks not participating in the clearing process, Money orders/postal orders, cash,
stockinvest shall be rejected and the collecting bank shall not be responsible for such rejections.
All cheques / bank drafts accompanying the application should be crossed “A/c Payee only” and (a)
all cheques / bank drafts accompanying the applications made by eligible applicants must be made
payable to “Escrow Account SCUF NCD Public Issue”.
The Escrow Collection Bank(s) shall transfer the funds from the Escrow Account, as per the terms of
the Escrow Agreement, into a public issue account after the creation of security as disclosed in this
Prospectus.
Only Category I applicants have an option to make payments on applications through RTGS.
Submission of Completed Application Forms
All applications duly completed and accompanied by account payee cheques / drafts shall be submitted
at the branches of the Bankers to the Issue (listed in the Application Form) or our Collection Centre(s)/
agent(s) as may be specified by us before the closure of the Issue. Our collection centre/ agent however,
will not accept payments made in cash. However, Application Forms duly completed together with
cheque/bank draft drawn on/payable at a local bank in Chennai for the amount payable on application
may also be sent by Registered Post to the Registrar to the Issue, so as to reach the Registrar prior to
closure of the Issue. Applicants at centres not covered by the branches of collecting banks can send their
Application Forms together with cheque / draft drawn on / payable at a local bank in Chennai to the
Registrar to the Issue by registered post.
No separate receipts shall be issued for the application money. However, Bankers to the Issue at their
designated branches/our Collection Centre(s)/ agent(s) receiving the duly completed Application Forms
will acknowledge the receipt of the applications by stamping and returning the acknowledgment slip to
the applicant.
Applications shall be deemed to have been received by us only when submitted to Bankers to the Issue
at their designated branches or at our Collection Centre/ agent or on receipt by the Registrar as detailed
above and not otherwise.
All applications by persons or entities belonging to Category I should be made in the form
prescribed for Category I applicants and shall be received only by the Lead Managers, the CoLead Manager and their respective affiliates.
On-line Applications
We may decide to offer online application facility for NCDs, as and when it is permitted by law subject to
terms and conditions as may be prescribed.
10. Other Instructions
A. Joint Applications
Applications may be made in single or joint names (not exceeding three). In the case of joint applications,
all payments will be made out in favour of the first applicant. All communications will be addressed
to the first named applicant whose name appears in the Application Form and at the address
mentioned therein.
162
B. Additional Applications
An applicant is allowed to make one or more applications for the NCDs for the same or other series of
NCDs, subject to a minimum application size of ` 10,000/- and in multiples of ` 1,000/- thereafter, for
each application. Any application for an amount below the aforesaid minimum application size will be deemed
as an invalid application and shall be rejected. However, multiple applications by the same applicant
belonging to Category III aggregating to a value exceeding ` 5 Lakhs shall be grouped in the Unreserved
Individual Portion, for the purpose of determining the basis of allotment to such applicant. However, any
application made by any person in his individual capacity and an application made by such person in his capacity
as a karta of a Hindu Undivided family and/or as joint applicant (second or third applicant), shall not be deemed
to be a multiple application.
For the purposes of allotment of NCDs under the Issue, applications shall be grouped based on the PAN, i.e.
applications under the same PAN shall be grouped together and treated as one application. Two or more
applications will be deemed to be multiple applications if the sole or first applicant is one and the same. For the
sake of clarity, two or more applications shall be deemed to be a multiple application for the aforesaid purpose if
the PAN number of the sole or the first applicant is one and the same.
C. Depository Arrangements
As per the provisions of Section 68B of the Act, the allotment of NCDs of our Company can be made in a
dematerialised form, (i.e. not in the form of physical certificates but be fungible and be represented by the
Statement issued through electronic mode).
We have made depository arrangements with NSDL and CDSL for issue and holding of the NCDs in
dematerialised form. Please note that tripartite agreements have been executed between our Company, the
Registrar and both the depositories.
As per the provisions of the Depositories Act, 1996, the NCDs issued by us can be held in a dematerialized
form. In this context:
i
Tripartite Agreement dated March 30, 2000 and April 30, 1999 between us, the Registrar to the Issue and
CDSL and NSDL, respectively for offering depository option to the investors.
ii. An applicant who wishes to apply for NCDs in the electronic form must have at least one beneficiary
account with any of the Depository Participants (DPs) of NSDL or CDSL prior to making the application.
iii. The applicant seeking allotment of NCDs in the Electronic Form must necessarily fill in the details
(including the beneficiary account number and DP’s ID) appearing in the Application Form under the
heading ‘Request for NCDs in Electronic Form’.
iv. NCDs allotted to an applicant in the Electronic Account Form will be credited directly to the applicant’s
respective beneficiary account(s) with the DP.
v. For subscription in electronic form, names in the Application Form should be identical to those
appearing in the account details in the depository. In case of joint holders, the names should necessarily
be in the same sequence as they appear in the account details in the depository.
vi. Non-transferable Allotment Advice/refund orders will be directly sent to the applicant by the Registrars
to this Issue.
vii. If incomplete/incorrect details are given under the heading ‘Request for NCDs in electronic form’ in the
Application Form, it will be deemed to be an application for NCDs in physical form and thus will be
rejected.
viii. For allotment of NCDs in electronic form, the address, nomination details and other details of the
applicant as registered with his/her DP shall be used for all correspondence with the applicant. The
applicant is therefore responsible for the correctness of his/her demographic details given in the
Application Form vis-à-vis those with his/her DP. In case the information is incorrect or insufficient, our
Company would not be liable for losses, if any.
ix. It may be noted that NCDs in electronic form can be traded only on the Stock Exchanges having
electronic connectivity with NSDL or CDSL. The Stock Exchange/s have connectivity with NSDL and
CDSL.
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x.
Interest or other benefits with respect to the NCDs held in dematerialised form would be paid to those
NCD holders whose names appear on the list of beneficial owners given by the Depositories to us as on
record date. In case of those NCDs for which the beneficial owner is not identified by the Depository as
on the record date/ book closure date, we would keep in abeyance the payment of interest or other benefits,
till such time that the beneficial owner is identified by the Depository and conveyed to us,
whereupon the interest or benefits will be paid to the beneficiaries, as identified, within a period of
30 days.
xi. The trading of the NCDs shall be in dematerialized form only.
D. Communications
•
All future Communications in connection with Applications made in the Issue should be addressed to the
Registrar to the Issue quoting all relevant details as regards the applicant and its application.
•
Applicants can contact the Compliance Officer of our Company/Lead Managers/Co-Lead Manager or the
Registrar to the Issue in case of any Pre-Issue related problems. In case of Post-Issue related problems such
as non-receipt of Allotment Advice / credit of NCDs in depository’s beneficiary account / refund orders, etc.,
applicants may contact the Compliance Officer of our Company/Lead Manager/Co-Lead Manager or
Registrar to the Issue.
11. Rejection of Application
The Board of Directors and/or any committee of our Company reserves its full, unqualified and absolute right to
accept or reject any application in whole or in part and in either case without assigning any reason thereof.
Application may be rejected on one or more technical grounds, including but not restricted to:
Applications not duly signed by the sole/joint applicants (in the same sequence as they appear in the records
of the depository);
Amount paid doesn’t tally with the amount payable for the NCDs applied for;
Age of First applicant not given;
Application by persons not competent to contract under the Indian Contract Act, 1872 including minors
(without the name of guardian) and insane persons;
PAN not mentioned in the Application Form;
GIR number furnished instead of PAN;
Applications for amounts greater than the maximum permissible amounts prescribed by applicable
regulations;
Applications by persons/entities who have been debarred from accessing the capital markets by SEBI;
Applications by any persons outside India;
Any application for an amount below the minimum application size;
Application for number of NCDs, which are not in multiples of one;
Category not ticked;
Application under power of attorney or by limited companies, corporate, trust etc., where relevant
documents are not submitted;
Application Form does not have applicant’s depository account details;
Applications accompanied by Stockinvest/money order/postal order;
Signature of sole and/ or joint applicant(s) missing;
Application Forms not delivered by the applicant within the time prescribed as per the Application Form and
the Prospectus and as per the instructions in the Prospectus and the Application Form; or
In case the subscription amount is paid in cash.
In case no corresponding record is available with the Depositories that matches three parameters namely,
names of the applicant, the Depository Participant’s Identity and the beneficiary’s account number.
Application Form accompanied with more than one cheque.
Institutional Investor Applications not procured by the Lead Managers, the Co-Lead Manager or their
respective affiliates.
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For further instructions regarding application for the NCDs, investors are requested to read the Application Form
12. Allotment Advice / Refund Orders
The unutilised portion of the application money will be refunded to the applicant by an A/c Payee
cheque/demand draft. In case the at par facility is not available, our Company reserves the right to adopt any
other suitable mode of payment.
The Company shall credit the allotted NCDs to the respective beneficiary accounts/despatch the Letter(s) of
Allotment or Letter(s) of Regret/Refund Orders in excess of ` 1,500/-, as the case may be, by Registered
Post/Speed Post at the applicant’s sole risk, within 30 days from the date of closure of the Issue. Refund Orders
up to ` 1,500/- will be sent by post. We may enter into an arrangement with one or more banks in one or more
cities for refund to the account of the applicants through Direct Credit/RTGS/NEFT.
Further,
a) Allotment of NCDs offered to the public shall be made within a time period of 30 days from the date
of closure of the Issue;
b) Credit to de-mat account will be given within 2 working days from the date of allotment
c) Interest at a rate of 15 per cent per annum will be paid if the allotment has not been made and/or the
Refund Orders have not been dispatched to the applicants within 30 days from the date of the closure
of the Issue, for the delay beyond 30 days.
The Company will provide adequate funds to the Registrars to the Issue, for this purpose.
13. Retention of oversubscription
The Company is making a public Issue of NCDs aggregating upto ` 37,500 lakhs with an option to retain
oversubscription of NCDs up to ` 37,500 lakhs.
14. Basis of Allotment
Grouping of Applications and Allocation Ratio: Applications received from various applicants shall be
grouped together on the following basis:
i)
Applications received from Category I applicants: Applications received from Category I, shall be
grouped together, (“Institutional Portion”);
ii)
Applications received from Category II applicants: Applications received from Category II, shall be
grouped together, (“Non-Institutional Portion”);
iii)
Applications received from Category III applicants: Further with respect to applications received
from Category III applicants, applications by applicants who apply for NCDs aggregating to a value not
more than ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be grouped together,
(“Reserved Individual Portion”) while applications by applicants who apply for NCDs aggregating to a
value exceeding ` 5 Lakhs, across all series of NCDs, (Option I and/or Option II), shall be separately
grouped together, (“Unreserved Individual Portion”). For further details please refer to “Additional
Applications” beginning on page 163 of this Prospectus.
For removal of doubt, “Institutional Portion”, Non-Institutional Portion” “Reserved Individual
Portion” and “Unreserved Individual Portion” are individually referred to as “Portion” and
collectively referred to as “Portions”
For the purposes of determining the number of NCDs available for allocation to each of the abovementioned
Portions, our Company shall have the discretion of determining the number of NCDs to be allotted over and
above the Base Issue Size, in case our Company opts to retain any oversubscription in the Issue upto ` 75,000
Lakhs. The aggregate value of NCDs decided to be allotted over and above the Base Issue Size, (in case our
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Company opts to retain any oversubscription in the Issue), and/or the aggregate value of NCDs upto the Base
Issue Size shall be collectively termed as the “Overall Issue Size”.
Basis of Allotment for NCDs
(a)
Allotments in the first instance:
(i)
Applicants belonging to the Institutional Portion, in the first instance, will be allocated NCDs
upto 10% of Overall Issue Size on first come first serve basis (determined on the basis of
date of receipt of each application duly acknowledged by the Bankers to the Issue);
(ii)
Applicants belonging to the Non-Institutional Portion, in the first instance, will be allocated
NCDs upto 10% of Overall Issue Size on first come first serve basis (determined on the basis
of date of receipt of each application duly acknowledged by the Bankers to the Issue);
(iii)
Applicants belonging to the Reserved Individual Portion, in the first instance, will be
allocated NCDs upto 60% of Overall Issue Size on first come first serve basis (determined
on the basis of date of receipt of each application duly acknowledged by the Bankers to the
Issue);
(iv)
Applicants belonging to the Unreserved Individual Portion, in the first instance, will be
allocated NCDs upto 20% of Overall Issue Size on first come first serve basis (determined
on the basis of date of receipt of each application duly acknowledged by the Bankers to the
Issue);
Allotments, in consultation with the Designated Stock Exchange, shall be made on a first-come firstserve basis, based on the date of presentation of each application to the Bankers to the Issue, in each
Portion subject to the Allocation Ratio.
(b)
Under Subscription: Under subscription, if any, in Reserved Individual Portion or Unreserved
Individual Portion shall first be met by inter-se adjustment between these two sub-categories.
Thereafter, if there is any under subscription in any Portion, priority in allotments will be given to the
Category III, with preference in allotments to Reserved Individual Portion applicants, and balance, if
any, shall be first made to applicants of the Non-Institutional Portion (Category II), and thereafter to
Institutional Portion (Category I) on a first come first serve basis, on proportionate basis.
(c)
For each Portion, all applications received on the same day by the Bankers to the Issue would be
treated at par with each other. Allotment within a day would be on proportionate basis, where NCDs
applied for exceeds NCDs to be allotted for each Portion respectively.
(d)
Minimum allotments of 1NCD and in multiples of 1 NCD thereafter would be made in case of each
valid application.
(e)
Allotments in case of oversubscription: In case of an oversubscription, allotments to the maximum
extent, as possible, will be made on a first-come first-serve basis and thereafter on proportionate
basis, i.e. full allotment of NCDs to the applicants on a first come first basis up to the date falling 1
(one) day prior to the date of oversubscription and proportionate allotment of NCDs to the applicants
on the date of oversubscription (based on the date of presentation of each application to the Bankers
to the Issue, in each Portion).
(f)
Proportionate Allotments: For each Portion, on the date of oversubscription:
i) Allotments to the applicants shall be made in proportion to their respective application size,
rounded off to the nearest integer.
ii) If the process of rounding off to the nearest integer results in the actual allocation of NCDs being
higher than the Issue size, not all applicants will be allotted the number of NCDs arrived at after
such rounding off. Rather, each applicant whose allotment size, prior to rounding off, had the
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highest decimal point would be given preference.
iii) In the event, there are more than one applicant whose entitlement remain equal after the manner
of distribution referred to above, our Company will ensure that the basis of allotment is finalised
by draw of lots in a fair and equitable manner.
(g)
Applicant applying for more than one series of NCDs: If an applicant has applied for more than one
series of NCDs, (Option I and Option II, individually referred to as “Series”), and in case such
applicant is entitled to allocation of only a part of the aggregate number of NCDs applied for, the
Series-wise allocation of NCDs to such applicants shall be in proportion to the number of NCDs with
respect to each Series, applied for by such applicant, subject to rounding off to the nearest integer, as
appropriate in consultation with Lead Managers, the Co-Lead Manager and Designated Stock
Exchange.
All decisions pertaining to the basis of allotment of NCDs pursuant to the Issue shall be taken by our
Company in consultation with the Lead Managers, the Co-Lead Manager and the Designated Stock
Exchange and in compliance with the aforementioned provisions of this Prospectus.
Our Company would allot Option I NCDs to all valid applications, wherein the applicants have not
indicated their choice of the relevant Series of NCDs (Option I, or Option II).
15. Investor Withdrawals and Pre-closure
Investor Withdrawal: Applicants are allowed to withdraw their applications at any time prior to the closure of
the Issue.
Pre-closure: Our Company, in consultation with the Lead Managers and the Co-Lead Manager reserve the
right to close the Issue at any time prior to the Closing Date, subject to receipt of minimum subscription for
NCDs aggregating to 75% of the Base Issue. Our Company shall allot NCDs with respect to the applications
received at the time of such pre-closure in accordance with the Basis of Allotment as described hereinabove and
subject to applicable statutory and/or regulatory requirements.
16. Utilisation of Application Money
The sum received in respect of the Issue will be kept in separate bank accounts and we will have access to such
funds as per applicable provisions of law(s), regulations and approvals.
17. Utilisation of Issue Proceeds
a)
All monies received pursuant to the Issue of NCDs to public shall be transferred to a separate bank
account other than the bank account referred to in sub-section (3) of section 73 of the Act.
b)
Details of all monies utilised out of Issue referred to in sub-item (a) shall be disclosed under an
appropriate separate head in our Balance Sheet indicating the purpose for which such monies had been
utilised; and
c)
Details of all unutilised monies out of issue of NCDs, if any, referred to in sub-item (a) shall be
disclosed under an appropriate separate head in our Balance Sheet indicating the form in which such
unutilised monies have been invested.
d)
We shall utilize the Issue proceeds only upon creation of security as stated in this Prospectus and on
receipt of the minimum subscription of 75% of the Base Issue.
e)
The Issue proceeds shall not be utilized towards full or part consideration for the purchase or any other
acquisition, inter alia by way of a lease, of any property.
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Listing
The NCDs offered through this Prospectus are proposed to be listed on the NSE and BSE. Our Company has
obtained an ‘in-principle’ approvals for the Issue from the NSE vide their letter dated August 1, 2011 and from BSE
vide their letter dated July 29, 2011. For the purposes of the Issue, NSE shall be the Designated Stock Exchange.
If permissions to deal in and for an official quotation of our NCDs are not granted by NSE and/or BSE, our
Company will forthwith repay, without interest, all moneys received from the applicants in pursuance of this
Prospectus.
Our Company shall ensure that all steps for the completion of the necessary formalities for listing and
commencement of trading at NSE and BSE are taken within 7 working days from the date of allotment.
For the avoidance of doubt, it is hereby clarified that in the event of non subscription to any one or more of the
Options, such NCDs with Option(s) shall not be listed.
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SECTION VII : LEGAL AND OTHER INFORMATION
PENDING PROCEEDINGS AND STATUTORY DEFAULTS
As on the date of this Prospectus, there are no defaults in meeting statutory dues, institutional dues, and towards
holders of instrument like debentures, fixed deposits and arrears on cumulative preference shares, etc, by our
Company or by public companies promoted by the same promoter and listed on stock exchange.
Our Company is involved in legal proceedings which have arisen in the ordinary course of business. Save as stated
hereinbelow, such proceedings however, are not material enough to adversely affect our operations, financial
position and profitability.
Save as stated herein, there are no material defaults, non payments or over dues of statutory dues, institutional or
bank dues or dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares.
Save as disclosed herein below, there are no pending proceedings pertaining to:
a.
matters likely to affect operation and finances of our Company including disputed tax liabilities of any
nature; and
b.
criminal prosecution launched against our Company and the Directors for alleged offences under the
enactments specified in Paragraph 1 of Part I of Schedule XIII to the Act.
Proceedings Initiated Against our Company
Civil Proceedings
259 civil proceedings have been initiated in the regular course of business against our Company involving an
aggregate amount of ` 1,555.03 lakhs.
Tax Proceedings
1.
The Commissioner of Income Tax (“CIT”), has filed an appeal against our Company before the Hon’ble
High Court of Madras (bearing no 835 of 2007 and T.C.A No.836 of 2007) against the order of the Income
Tax Appellate Tribunal (“ITAT”) dated November 16, 2009, wherein inter alia it has confirmed the
disallowance of bad debts and treating them as NPA as per the RBI norms for the assessment year 1996-97.
The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter
is pending hearing and final disposal.
2.
The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble
High Court of Madras (bearing no T.C.A No. 1236 of 2007 and T.C.A No.1237/2007) against the order of
the Income Tax Appellate Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed the
deduction of i) deposit mobilisation expenses amounting to ` 28,500,000, ii) taxing of Additional Finance
Charges on accrual basis : ` 31,015,733, and iii) method of accounting for the assessment year 1997-98.
The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter
is pending hearing and final disposal.
3.
The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble
High Court of Madras (bearing no 1238 & 1239 of 2007) against the order of the Income Tax Appellate
Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed the deduction of deposit
mobilisation expenses amounting to ` 28,500,000 for the assessment year 1998-99. The appeal has been
raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing
and final disposal.
169
4.
The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble
High Court of Madras (bearing no T.C.A No.1241/2007 and T.C.A No.1242/2007) against the order of the
Income Tax Appellate Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed the i)
taxing of additional finance charges on accrual basis ` 9,75,65,295 ii) method of accounting and iii)
deduction of deposit mobilisation expenses amounting to ` 28,500,000 for the assessment year 1999-2000.
The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter
is pending hearing and final disposal.
5.
The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble
High Court of Madras (bearing T.C.A No.1240/2007) against the order of the Income Tax Appellate
Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed i) taxing of additional finance
charges on accrual basis: ` 2,11,69,152 ii) method of accounting and iii)the deduction of deposit
mobilisation expenses amounting to ` 28,500,000 for the assessment year 2000-2001. The appeal has been
raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing
and final disposal.
6.
The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble
High Court of Madras (bearing T.C.A No.1243/2007) against the order of the Income Tax Appellate
Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed i) taxing of additional finance
charges on accrual basis: ` 8,90,62,060 ii) method of accounting and iii) the deduction of deposit
mobilisation expenses amounting to ` 28,500,000 for the assessment year 2001-2002. The appeal has been
raised on the grounds that the allowances made by the ITAT are erroneous. The matter is pending hearing
and final disposal.
7.
The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble
High Court of Madras (bearing T.C.A No. 2161/2008) against the order of the Income Tax Appellate
Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed i) taxing of Additional
Finance Charges on accrual basis : `.8,72,388 ii) Method of Accounting iii) Enhancement of Additional
Finance Charges & iv) Provision for Bad Debts u/s 115JB ` 2,16,00,000 for the assessment year 20022003. The appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The
matter is pending hearing and final disposal.
8.
The Commissioner of Income Tax (“CIT”) has filed an appeal against our Company before the Hon’ble
High Court of Madras (bearing T.C.A No.638/2009) against the order of the Income Tax Appellate
Tribunal (“ITAT”) dated April 21, 2006, wherein inter alia it has confirmed i) method of accounting and
ii) enhancement of additional finance charges `. 168,498,442 for the assessment year 2003-2004. The
appeal has been raised on the grounds that the allowances made by the ITAT are erroneous. The matter is
pending hearing and final disposal.
9.
The Commissioner of Income tax (“CIT”) has filled an appeal against our Company before the Hon’ble
High Court of Madras (bearing No T.C.A. No.1422/2010) against the order of the Income Tax Appellate
Tribunal (“ITAT”) dated July 16, 2009 wherein inter alia it has confirmed i.) taxing of Additional
Finance Charges on accrual basis : ` 1,03,77,135 & ii) method of accounting & iii) provision for bad debts
u/s 115JB : `. 41,451,000 for the assessment year 2005-2006. The matter is pending hearing and final
disposal.
Proceedings Initiated by our Company
Tax Proceedings
1.
The Assistant Commissioner of Income Tax (Company Circle-VI-2), Chennai, (“Assessing Officer”)
raised a demand amounting to ` 181,447,869 by order dated December 31, 2010 for the assessment year
2008-09 (“Assessment Order”) on the alleged grounds that our Company may have concealed income
within the meaning of section 271 (1) (c) of the Income Tax Act, 1961. Our Company filed an appeal dated
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January 20, 2011 before the Commissioner of Income Tax (Appeals), (“CIT Appeals”) against the
Assessment Order on the grounds that additions and disallowances made by the Assessing Officer are
erroneous. The matter is pending hearing and final disposal.
2.
The Assistant Commissioner of Income Tax (Company Circle-VI-2), Chennai, (“Assessing Officer”)
raised a demand amounting to ` 26,557,859 by order dated March 3, 2011 for the assessment year 2006-07
(“Assessment Order”) on the alleged grounds that our Company may have concealed income within the
meaning of section 271 (1) (c) of the Income Tax Act, 1961 in respect of amount transferred to the
statutory reserve fund.. Our Company filed an appeal dated April 26, 2011 before the Commissioner of
Income Tax (Appeals), (“CIT Appeals”) against the Assessment Order on the grounds that additions and
disallowances made by the Assessing Officer are erroneous. The matter is pending hearing and final
disposal.
3.
The Assistant Commissioner of Income Tax (Company Circle-VI-2), Chennai, (“Assessing Officer”)
issued a notice granting a refund amounting to ` 25,343,340 by order dated December 3, 2010 for the
assessment year 2005-06 (“Assessment Order”). Our Company filed an appeal dated January 20, 2011
before the Commissioner of Income Tax (Appeals), (“CIT Appeals”) against the Assessment Order on the
grounds that additions on interest accrued on NPA made to the taxable income by the Assessing Officer is
erroneous. The matter is pending hearing and final disposal.
4.
The Assistant Commissioner of Income Tax (Company Circle-VI-2), Chennai, (“Assessing Officer”)
raised a demand amounting to ` 16,653,626 by order dated March 03, 2011 for the assessment year 200506 (“Assessment Order”) on the alleged grounds that our Company may have concealed income within
the meaning of section 271 (1) (c) of the Income Tax Act, 1961 in respect of amount transferred to the
statutory reserve fund. Our Company filed an appeal dated April 26, 2011 before the Commissioner of
Income Tax (Appeals), (“CIT Appeals”) against the Assessment Order u/s 271(1)(c) on the grounds that
additions and disallowances made by the Assessing Officer are erroneous. The matter is pending hearing
and final disposal.
5.
The Assistant Commissioner of Income Tax (Company Circle-VI-2), Chennai, (“Assessing Officer”)
raised a demand amounting to ` 1,041,069 by order dated December 3, 2010 for the assessment year 200304 (“Assessment Order”) on the alleged grounds that our Company did has not charged to tax the interest
accrued on NPA, on a year to year basis and may have concealed income within the meaning of section 271
(1) (c) of the Income Tax Act, 1961. Our Company filed an appeal dated January 20, 2011 before the
Commissioner of Income Tax (Appeals), (“CIT Appeals”) against the Assessment Order on the grounds
that additions and disallowances made by the Assessing Officer are erroneous. The matter is pending
hearing and final disposal.
6.
Our Company has preferred an appeal before the Income Tax Appellate Tribunal (bearing No 362/09-10)
dated November 11, 2010, against the order of the Commissioner of Income Tax Appeals (“CIT Appeals”)
dated December 22, 2009, for Assessment Year 2007-2008 demanding ` 77,088,130 the (“Assessment
Order”). The appeal has been raised on the grounds that the additions and disallowances made by the CIT
Appeal under section 250 of the Income tax Act, 1961, are erroneous. The Department has also filed
appeals before the Income Tax Appellate Tribunal against the above mentioned order of CIT(A) in respect
of following additions. i) royalty ` 5,045,977 ii) ex-gratia ` 338,948 & iii) Rule 8D : ` 608,458. The
matter is pending hearing and final disposal.
7.
Our Company has preferred an appeal before the Hon’ble High Court of Madras against the order of the
Income Tax Appellate Tribunal (“ITAT”), dated May 6, 2009, wherein inter alia it had confirmed the
disallowance of the amount transferred to the statutory reserve fund of ` 2,99,57,110 in compliance with
the provisions of section 45-I of the Reserve Bank of India Act (“Act”) for the assessment year 2004-05.
The appeal has been raised on the grounds that the order of ITAT, in computing income under section 115
JB of the Income Tax Act, 1961, is erroneous. The matter is pending hearing and final disposal.
8.
Our Company has preferred an appeal before the Hon’ble High Court of Madras against the order of the
Income Tax Appellate Tribunal (“ITAT”) dated July 16, 2009, wherein inter alia it had confirmed the
171
disallowance of the amount transferred to the statutory reserve fund of ` 455,11,034 in compliance with the
provisions of the section 45-I of the Reserve Bank of India, Act (“Act”) for the assessment year 2005-06.
The appeal has been raised on the grounds that additions and disallowances made by the order of ITAT, in
computing income under section 115-JB of the Income Tax act, 1961, is erroneous. The matter is pending
hearing and final disposal
9.
Our Company has preferred an appeal before the Hon’ble High Court of Madras against the order of the
Income Tax Appellate Tribunal (“ITAT”) dated December 8, 2010, wherein inter alia it had confirmed the
disallowance of the amount transferred to the statutory reserve fund of ` 789,00,354 in compliance with the
provisions of the section 45-I of the Reserve Bank of India, Act (“Act”) for the assessment year 2006-07.
The appeal has been raised on the grounds that additions and disallowances made by the order of ITAT in
computing income under section 115-JB of the Income Tax Act, 1961, is erroneous. The matter is pending
hearing and final disposal.
Civil Proceedings
Our Company has initiated various civil proceedings in the regular course of business, the outcome of which our
Company believes will not materially adversely affect the financial condition and operations of our Company.
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OTHER REGULATORY AND STATUTORY DISCLOSURES
Authority for the Issue
At the meeting of the Board of Directors of our Company, held on March 24, 2011, the Directors approved the issue
of NCDs to the public upto an amount not exceeding `75,000 lakhs.
Prohibition by SEBI
Our Company, persons in control of our Company and/or our Promoter have not been restrained, prohibited or
debarred by SEBI from accessing the securities market or dealing in securities and no such order or direction is in
force. Further, no member of our promoter group has been prohibited or debarred by SEBI from accessing the
securities market or dealing in securities due to fraud.
Disclaimer Clause of the Stock Exchanges
Disclaimer Clause of BSE
“BOMBAY STOCK EXCHANGE LIMITED (“THE EXCHANGE”) HAS GIVEN VIDE ITS LETTER DATED
JULY 29, 2011, PERMISSION TO THIS COMPANY TO USE THE EXCHANGE’S NAME IN THIS OFFER
DOCUMENT AS ONE OF THE STOCK EXCHANGES ON WHICH THE COMPANY’S SECURITIES ARE
PROPOSED TO BE LISTED. THE EXCHANGE HAS SCRUTINIZED THIS OFFER DOCUMENT FOR ITS
LIMITED INTERNAL PURPOSE OF DECIDING ON THE MATTER OF GRANTING THE AFORESAID
PERMISSION TO THIS COMPANY. THE EXCHANGE DOES NOT IN ANY MANNERa)
WARRANT, CERTIFY OR ENDORSE THE CORRECTNESS OR COMPLETENESS OF ANY OF THE
CONTENTS OF THIS OFFER DOCUMENT;
b) WARRANT THAT THIS COMPANY’S SECURITIES WILL BE LISTED OR WILL CONTINUE TO BE
LISTED ON THE EXCHANGE; OR
c) TAKE ANY RESPONSIBILITY FOR THE FINANCIAL OR OTHER SOUNDNESS OF THIS COMPANY,
ITS PROMOTERS, ITS MANAGEMENT OR ANY SCHEME OR PROJECT OF THIS COMPANY.
AND IT SHOULD NOT FOR ANY REASON BE DEEMED OR CONSTRUED THAT THIS OFFER
DOCUMENT HAS BEEN CLEARED OR APPROVED BY THE EXCHANGE. EVERY PERSON WHO
DESIRES TO APPLY FOR OR OTHERWISE ACQUIRES ANY SECURITIES OF THE COMPANY MAY DO
SO PURSUANT TO INDEPENDENT INQUIRY, INVESTIGATION AND ANALYSIS AND SHALL NOT
HAVE ANY CLAIM AGAINST THE EXCHANGE WHATSOEVER BY REASON OF ANY LOSS WHICH
MAY BE SUFFERED BY SUCH PERSON CONSEQUENT TO OR IN CONNECTION WITH SUCH
SUBSCRIPTION/ACQUISITION WHETHER BY REASON OF ANYTHING STATED OR OMITTED TO BE
STATED HEREIN OR FOR ANY OTHER REASON WHATSOEVER”.
Disclaimer Clause of NSE
AS REQUIRED, A COPY OF THIS OFFER DOCUMENT HAS BEEN SUBMITTED TO NATIONAL
STOCK EXCHANGE OF INDIA LIMITED (HEREINAFTER REFERRED TO AS NSE). NSE HAS GIVEN
VIDE ITS LETTER REF.:NSE/LIST/141452-E DATED AUGUST 1, 2011 PERMISSION TO THE ISSUER
TO USE THE EXCHANGE’S NAME IN THIS OFFER DOCUMENT AS ONE OF THE STOCK
EXCHANGES ON WHICH THIS ISSUER’S SECURITIES ARE PROPOSED TO BE LISTED. THE
EXCHANGE HAS SCRUTINIZED THIS DRAFT OFFER DOCUMENT FOR ITS LIMITED INTERNAL
PURPOSE OF DECIDING ON THE MATTER OF GRANTING THE AFORESAID PERMISSION TO
THIS ISSUER. IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE AFORESAID PERMISSION
GIVEN BY NSE SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE OFFER
DOCUMENT HAS BEEN CLEARED OR APPROVED BY NSE; NOR DOES IT IN ANY MANNER
WARRANT, CERTIFY OR ENDORSE THE CORRECTNESS OR COMPLETENESS OF ANY OF THE
CONTENTS OF THIS OFFER DOCUMENT; NOR DOES IT WARRANT THAT THIS ISSUER’S
SECURITIES WILL BE LISTED OR WILL CONTINUE TO BE LISTED ON THE EXCHANGE; NOR
173
DOES IT TAKE ANY RESPONSIBILITY FOR THE FINANCIAL OR OTHER SOUNDNESS OF THIS
ISSUER, ITS PROMOTERS, ITS MANAGEMENT OR ANY SCHEME OF PROJECT OF THIS ISSUER.
EVERY PERSON WHO DESIRES TO APPLY FOR OR OTHERWISE ACQUIRE ANY SECURITIES OF
THIS ISSUER MAY DO SO PURSUANT TO INDEPENDENT INQUIRY, INVESTIGATION AND
ANALYSIS AND SHALL NOT HAVE ANY CLAIM AGAINST THE EXCHANGE WHATSOEVER BY
REASON OF ANY LOSS WHICH MAY BE SUFFERED BY SUCH PERSON CONSEQUENT TO OR IN
CONNECTION WITH SUCH SUBSCRIPTION/ ACQUISITION WHETHER BY REASON OF
ANYTHING STATED OR OMITTED TO BE STATED HEREIN OR ANY OTHER REASON
WHATSOEVER.”
Disclaimer Clause of the RBI
THE COMPANY IS HAVING A VALID CERTIFICATE OF REGISTRATION DATED APRIL 17, 2007
ISSUED BY THE RESERVE BANK OF INDIA UNDER SECTION 45 IA OF THE RESERVE BANK OF
INDIA ACT, 1934. HOWEVER, THE RBI DOES NOT ACCEPT ANY RESPONSIBILITY OR
GUARANTEE ABOUT THE PRESENT POSITION AS TO THE FINANCIAL SOUNDNESS OF THE
COMPANY OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS OR REPRESENTATIONS
MADE OR OPINIONS EXPRESSED BY THE COMPANY AND FOR REPAYMENT OF DEPOSITS/
DISCHARGE OF LIABILITY BY THE COMPANY.
Listing
The NCDs offered through this Prospectus are proposed to be listed on the NSE and BSE. Our Company has
obtained an ‘in-principle’ approvals for the Issue from the NSE vide their letter dated August 1, 2011 and from BSE
vide their letter dated July 29, 2011. For the purposes of the Issue, NSE shall be the Designated Stock Exchange.
If permissions to deal in and for an official quotation of our NCDs are not granted by NSE and/or BSE, our
Company will forthwith repay, without interest, all moneys received from the applicants in pursuance of this
Prospectus.
Our Company shall ensure that all steps for the completion of the necessary formalities for listing and
commencement of trading at all the Stock Exchanges mentioned above are taken within 7 working days from the
date of allotment.
For the avoidance of doubt, it is hereby clarified that in the event of non subscription to any one or more of the
Options, such NCDs with Option(s) shall not be listed.
Consents
Consents in writing of: (a) the Directors, (b) our Company Secretary and Compliance Officer (c) Bankers to our
Company and Bankers to the Issue; (d) Lead Managers, (e) Co-Lead Manager, (f) the Registrar to the Issue, (g)
Lead Brokers to the Issue, (h) Legal Advisors to the Issue, (i) Credit Rating Agencies, (j) the Debenture Trustee, and
(k) the Lead Brokers to act in their respective capacities, have been obtained and the same will be filed along with a
copy of the Prospectus with the ROC.
The consent of the Statutory Auditor of our Company, namely M/s. Pijush Gupta & Co for (a) inclusion of their
names as the Statutory Auditor, (b) examination reports on Reformatted Consolidated Summary Financial
Statements and the Reformatted Unconsolidated Summary Financial Statements in the form and context in which
they appear in this Prospectus, have been obtained and the same will be filed along with a copy of this Prospectus
with the Designated Stock Exchange.
Expert Opinion
Except the reports issued by CRISIL dated July 14, 2011 and CARE dated July 14, 2011, respectively in respect of
the credit ratings issued thereby for this Issue and the rationale for its rating, our Company has not obtained any
174
expert opinions.
Common form of Transfer
The Issuer undertakes that there shall be a common form of transfer for the NCDs and the provisions of the
Companies Act, 1956 and all applicable laws shall be duly complied with in respect of all transfer of debentures and
registration thereof.
Minimum Subscription
If our Company does not receive the minimum subscription of 75% of the Base Issue, i.e. ` 28,125 lakhs, on the date
of closure of the Issue, the entire subscription shall be refunded to the applicants within 30 days from the date of
closure of the Issue. If there is delay in the refund of subscription by more than 8 days after our Company becomes
liable to refund the subscription amount, our Company will pay interest for the delayed period, at rates prescribed
under sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.
Filing of the Draft Prospectus
The Draft Prospectus has been filed with NSE on July 21, 2011 and with BSE on July 22, 2011 in terms of
Regulation 7 of the Debt Regulations for dissemination on their website(s).
Debenture Redemption Reserve
Section 117C of the Act states that any company that intends to issue debentures must create a DRR to which
adequate amounts shall be credited out of the profits of the company until the redemption of the debentures. The
Ministry of Corporate Affairs has, through its circular dated April 18, 2002, (“Circular”), specified that the
quantum of DRR to be created before the redemption liability actually arises in normal circumstances should be
‘adequate’ to pay the value of the debentures plus accrued interest, (if not already paid), till the debentures are
redeemed and cancelled. The Circular however further specifies that, for NBFCs like our Company, (NBFCs which
are registered with the RBI under Section 45-IA of the RBI Act), the adequacy of the DRR will be 50% of the value
of debentures issued through the public issue. Accordingly our Company is required to create a DRR of 50% of the
value of debentures issued through the public issue. As further clarified by the Circular, the amount to be credited as
DRR will be carved out of the profits of the company only if there is profit for the particular year and there is no
obligation on the part of the company to create DRR if there is no profit for the particular year. Our Company shall
credit adequate amounts to DRR, from its profits every year until such NCDs are redeemed. The amounts credited to
DRR shall not be utilized by the company except for the redemption of the NCDs.
Issue Related Expenses
The expenses of this Issue include, among others, Fees for the Lead Managers and the Co-Lead Manager, printing
and distribution expenses, legal fees, advertisement expenses and listing fees. The estimated Issue expenses to be
incurred for the Issue size of up to ` 2,739.05 lakhs (assuming the full subscription including the retention of over
subscription of up to ` 75,000 lakhs) are as follows:
(` in lakhs)
Revised Expenses (final to be
published in Prospectus
Activity
352.96
Lead Management Fee/ Underwriting Commission
1,000.00
Advertising and Marketing Expenses
120.00
Printing and Stationery
27.57
Fees payable legal advisors to the Issue
25.00
Fess payable to the Registrars to the Issue
7.16
Fees payable to the Debenture Trustee
140.00
Credit Rating Fee
1,000.00
Brokerage
175
Revised Expenses (final to be
published in Prospectus
41.36
25.00
2,739.05
Activity
Listing Fees
Others
Total
The above expenses are indicative and are subject to change depending on the actual level of subscription to the
Issue and the number of Allottees, market conditions and other relevant factors.
Underwriting
The Issue has not been underwritten.
Details regarding the public issue during the last three years by our Company and other listed companies
under the same management within the meaning of section 370(1B):
Our Company has not made any public or rights or composite issue of capital during the last three years. There are
no listed companies under the same management within the meaning of Section 370(1) (B) of the Companies Act,
1956.
Public / Rights Issues
Our Company has not made any public or rights issuances in the last five years.
Previous Issue
Other than as specifically disclosed in this Prospectus, our Company has not issued any securities for consideration
other than cash.
Stock Market Data
A.
Our Equity Shares
Our Equity Shares are listed on the BSE and NSE.
The high, low and average market prices of the Equity Shares of our Company during the preceding three years:
BSE
Year
Date of High High (`
`)
2008
May 16, 2008
385.00
2009
December 10,
2009
October 11,
2010
401.10
2010
713.50
Volume on Date of low
date of High
(No
of shares)
22,05,675 October
2008
397 May
2009
397 January
2010
176
Low (`
`)
Volume on Average (`
`)
Date of low
(No
of
shares)
24,
318.00
3,922
351.50
15,
320.05
4256
360.58
6,
401.00
411
557.25
BSE
Year
Date of High High (`
`)
2011
January
2011
5,
Volume on Date of low
date of High
(No
of shares)
616.60
Low (`
`)
6 February 25,
2011
Volume on Average (`
`)
Date of low
(No
of
shares)
490.10
51
553.35
(Source:www.bseindia.com)
Notes
•
•
High, low and average prices are of the daily closing prices.
In case of two days with the same closing price, the date with higher volume has been considered.
NSE
Year
Date of
High
High (`
`)
2008
January 7,
2008
2009
December
14, 2009
2010
October 11,
2010
2011
April 29,
2011
(Source:www.nseindia.com)
Volume on
date of
High (No
of Equity
Shares)
389.80
1,845
405.00
209
712.45
2,706
617.20
5,850
Date of
Low
Low(`
`)
January 21,
2008
July 14,
2009
January 4,
2010
February 9,
2011
Volume on
date of
High (No
of Equity
Shares)
Average
(`
`)
305.60
3,990
347.70
315.65
40,12,132
360.30
388.95
953
550.70
499.85
3,599
558.53
Notes
•
•
High, low and average prices are of the daily closing prices.
In case of two days with the same closing price, the date with higher volume has been considered.
Monthly high and low prices and trading volumes on the Stock Exchanges for the six months preceding the date of
filing of this Prospectus:
Month
Date
January 2011
January 5,
2011
February16,
2011
March 1,2011
February2011
March 2011
April 2011
May 2011
June 2011
April 29,
2011
May 2, 2011
June 14, 2011
BSE
High
Volume (No.
(`
`)
of Shares)
615.50
6
Date
616.05
January 28,
2011
95 February 25,
2011
101 March 21,
2011
982 April 1, 2011
611.00
560.00
162 May 24, 2011
633 June 30, 2011
538.00
523.00
177
Low
Volume (No. Average
(`
`)
of Shares)
(`)
512.22
38 563.86
490.10
51
514.05
500.10
317
511.55
534.69
708
575.37
541.00
540.50
194
1658
576
550.26
(Source: www.bseindia.com)
Month
Date
January 2011
January 3,
2011
February2011
February 14,
2011
March 2011
March
3,2011
April 2011
April 29,
2011
May 2011
May 4, 2011
June 2011
June 10, 2011
(Source: www.nseindia.com)
NSE
High
Volume (No.
(`
`)
of Shares)
603.85
2,198
617.20
January 25,
2011
1644 February 9,
2011
111 March 10,
2011
5850 April 5, 2011
610.06
564.90
9,245 May 30,2011
2,342 June 29, 2011
525.40
521.00
Low
Volume (No. Average
(`
`)
of Shares)
(`)
530.00
3144 566.92
Date
499.85
3599
512.62
500.05
913
510.52
526.80
795
572
555.00
540.45
1864
1387
582.53
552.67
Notes
•
•
High, low and average prices are of the daily closing prices.
In case of two days with the same closing price, the date with higher volume has been considered.
Details of the volume of business transacted during the last six months on the Stock Exchanges where our securities
are listed:
(` lakhs)
Period
BSE
NSE
January 2011
4,606,484.00
201.60
February 2011
3,565,050.00
230.25
March 2011
3,722,643.00
151.69
April 2011
2,829,569.00
374.65
May 2011
1,788,743.00
377.85
June 2011
4,632,183.00
396.75
(Source: www.bseindia.com, www.nseindia.com)
B.
Trading of Debentures
The following privately placed debentures issued by our Company have been traded on the BSE in the last 3 years
preceding the date of this Prospectus:
ISIN No.
Date of Trade
INE722A07141
April 30, 2010
INE722A07I90
May 5, 2011
Last
Trade
Price (`
` in
lakhs)
Last
Trade
Value(`
` in
lakhs)
Total Trade
Value(`
` in
lakhs)
Last Trade
Yield (%)
per annum
Weighted
Average
Price (`
` in
lakhs)
100.0686
17,500
17,500
7.79
100.07
100.16
25,000
25,000
8.96
100.16
(Source: www.bseindia.com )
Except as stated above none of our other listed privately placed non convertible debentures have been traded in the
last 3 years.
178
Debentures or bonds and redeemable preference shares and other instruments issued by our Company and
outstanding
Our Company has issued secured redeemable non convertible debentures on a private placement basis of which non
convertible debentures aggregating to ` 219,877.64 lakhs are outstanding as on March 31, 2011.
Dividend
Our Company has no stated dividend policy. The declaration and payment of dividends on our shares will be
recommended by our Board of Directors and approved by our shareholders, at their discretion, and will depend on a
number of factors, including but not limited to our profits, capital requirements and overall financial condition.
Dividend details with respect of Equity Shares
Particulars
Interim Dividend
Rate of Dividend
Number of Equity Shares on which Interim
Dividend paid
Amount of Interim Dividend
Dividend Distribution Tax Rate
Proposed Final Dividend for the current year
Rate of Dividend
Number of Equity Shares on which Final Dividend
paid
Amount of Final Dividend
Dividend Distribution Tax
` In Lakhs
2007
Year ended As at 31st March
2010
2009
2008
2011
25%
49,449,939
20%
49,113,850
10%
45,850,000
10%
39,100,000
10%
27,100,000
1,236.25
16.609%
982.28
16.995%
501.85
16.995%
391.00
16.995%
271.00
14.025%
35%
49,536,877
30%
49,154,700
30%
45,856,800
30%
41,155,000
20%
39,100,000
1,733.79
281.26
14,74.64
244.92
1,375.92
233.84
1,332.15
226.40
782.00
132.90
Dividend details respect of Preference Shares
Year ended As at 31st March
Particulars
` In Lakhs
2011
2010
2009
2008
2007
5%
-
-
-
4,210
176,170
6%
-
-
2,328,980*
2,018,590
1,343,230
8%
-
-
-
83,260
277,730
9%
-
-
-
-
302,350
10%
-
-
-
16,270
21,050
12%
-
-
-
2,950
3,850
13.50%
-
-
-
200,000
200,000
14%
-
-
-
1,900
2,750
15%
-
-
-
1,800
1,850
2,328,980
2,328,980
2,328,980
Total shares
179
Year ended As at 31st March
Particulars
2011
2010
` In Lakhs
2009
2008
2007
Amount of dividend
63.17
141.67
154.56
Dividend distribution Tax
10.74
24.07
21.96
* During the financial year 2008-09 all Preference Shares are redeemed
Revaluation of assets
Our Company has not revalued its assets in the last five years.
Mechanism for redressal of investor grievances
The MoU between the Registrar to the Issue and our Company will provide for retention of records with the
Registrar to the Issue for a period of at least three years from the last date of despatch of the Allotment Advice,
demat credit and refund orders to enable the investors to approach the Registrar to the Issue for redressal of their
grievances.
All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full details such as name,
address of the applicant, number of NCDs applied for, amount paid on application and the bank branch or collection
centre where the application was submitted. The contact details of Registrar to the Issue are as follows:
Integrated Enterprises (India) Limited
2nd Floor, ‘Kences Towers’
No.1 Ramakrishna Street
North Usman Road, T Nagar
Chennai – 600 017
Tel: +91 44 2814 0801, +91 44 2814 0802, +91 44 2814 0803
Fax: +91 44 2814 2479
Email: [email protected]
Investor Grievance Email: [email protected]
Website: www.iepindia.com
Contact Person: Mr. K. Balasubramanian / Mr. Sriram S
SEBI Registration No.: INR000000544
We estimate that the average time required by us or the Registrar to the Issue for the redressal of routine investor
grievances will be 7 (seven) business days from the date of receipt of the complaint. In case of non-routine
complaints and complaints where external agencies are involved, we will seek to redress these complaints as
expeditiously as possible.
Mr. C.R. Dash has been appointed as the Compliance Officer of our Company for this issue.
The contact details of Compliance officer of our Company are as follows:
Mr. C.R. Dash,
221, Royapettah High Road, Mylapore,
Chennai – 600004, Tamil Nadu
Tel.: + 91 44 4391 5300
Fax: +91 44 4391 5351
Email: [email protected]
Change in Auditors of our Company during the last three years
There has been no change(s) in the statutory auditor of our company in the last 3 (three) financial years preceding the
date of this Prospectus.
180
REGULATIONS AND POLICIES
The regulations summarised below are not exhaustive and are only intended to provide general information to
Investors and is neither designed nor intended to be a substitute for any professional legal advice. Taxation statutes
such as the IT Act, Central Sales Tax Act, 1956 and applicable local sales tax statutes, labour regulations such as
the Employees State Insurance Act, 1948 and the Employees Provident Fund and Miscellaneous Act, 1952, and
other miscellaneous regulations such as the Trade and Merchandise Marks Act, 1958 and applicable Shops and
Establishments statutes apply to us as they do to any other Indian company and therefore have not been detailed
below. The following information is based on the current provisions of applicable Indian law, which are subject to
change or modification by subsequent legislative, regulatory, administrative or judicial decisions.
As per the RBI Act, a financial institution has been defined as a company which includes a non-banking institution
carrying on as its business or part of its business the financing activities, whether by way of making loans or
advances or otherwise, of any activity, other than its own and it is engaged in the activities of loans and advances,
acquisition of shares/stock/bonds/debentures/securities issued by the Government of India or other local authorities
or other marketable securities of like nature, leasing, hire-purchase, insurance business, chit business but does not
include any institution whose principal business is that of carrying out any agricultural or industrial activities or the
sale/purchase/construction of immovable property.
Any company which carries on the business of a non-banking financial institution as its principal business is to be
treated as an NBFC. Since the term 'principal business' has not been defined in law, the RBI has clarified through a
press release (Ref. No. 1998-99/ 1269) in 1999, that in order to identify a particular company as an NBFC, it will
consider both the assets and the income pattern as evidenced from the last audited balance sheet of the company to
decide its principal business. The company will be treated as an NBFC if its financial assets are more than 50 per
cent of its total assets (netted off by intangible assets) and income from financial assets should be more than 50 per
cent of the gross income. Both these tests are required to be satisfied as the determinant factor for principal business
of a company.
With effect from 1997, NBFCs were not permitted to commence or carry on the business of a non banking financial
institution without obtaining a Certificate of Registration (CoR). Further, with a view to imparting greater financial
soundness and achieving the economies of scale in terms of efficiency of operations and higher managerial skills,
the RBI has raised the requirement of minimum net owned fund from ` 25 Lakhs to ` 200 Lakhs for the NBFC
which commences business on or after April 21, 1999. Further, every NBFC is required to submit to the RBI a
certificate, from its statutory auditor within one month from the date of finalization of the balance sheet and in any
case not later than December 30th of that year, stating that it is engaged in the business of non-banking financial
institution requiring it to hold a CoR.
1.
Regulation of NBFCs registered with the RBI
NBFCs are primarily governed by the RBI Act, 1934 (“RBI Act”), the Non-Banking Financial (Deposit
Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, (“Prudential
Norms”), the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)
Directions, 1998, (“Public Deposit Directions”), the Non-Banking Financial (Non-Deposit Accepting or
Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 (“Non- Deposit Accepting
NBFC Directions”), and the provisions of the Non- Banking Financial Companies Prudential Norms
(Reserve Bank) Directions, 1998. In addition to these regulations, NBFCs are also governed by various
circulars, notifications, guidelines and directions issued by the RBI from time to time.
2.
Types of Activities that NBFCs are permitted to carry out
Although by definition, NBFCs are permitted to operate in similar sphere of activities as banks, there are a
few important, key differences. The most important distinctions are:
(i)
an NBFC cannot accept deposits repayable on demand – in other words, NBFCs can only accept
fixed term deposits. Thus, NBFCs are not permitted to issue negotiable instruments, such as
cheques which are payable on demand; and
181
(ii)
3.
NBFCs are not allowed to deal in foreign exchange, even if they specifically apply to the RBI for
approval in this regard.
Types of NBFCs:
Section 45-IA of the RBI Act makes it mandatory for every NBFC to get itself registered with the Reserve
Bank in order to be able to commence any of the aforementioned activities.
Further, an NBFC may be registered as a deposit accepting NBFC (“NBFC-D”) or as a non-deposit
accepting NBFC (“NBFC-ND”).
NBFCs registered with RBI are further classified as:
(i)
asset finance companies;
(ii)
investment companies; and/or
(iii)
loan companies and/or
(iv)
infrastructure finance companies
Our Company has been classified as an NBFC-D and is further classified as an “asset finance company”.
An asset finance company is an NBFC whose principal business is to finance physical assets supporting
productive / economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving
and material handling equipments, moving on own power and general purpose industrial machines.
4.
Regulatory Requirements of an NBFC under the RBI Act
Net Owned Fund
Section 45-IA of the RBI Act provides that to carry on the business of a NBFC, an entity would have to
register as an NBFC with the RBI and would be required to have a minimum net owned fund of `
2,00,00,000 (Rupees two crore only). For this purpose, the RBI Act has defined “net owned fund” to mean:
(a)
the aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the
company, after deducting (i) accumulated balance of losses, (ii) deferred revenue expenditure, and (iii)
other intangible assets; and
(b)
further reduced by the amounts representing,
(1)
investment by such companies in shares of (i) its subsidiaries, (ii) companies in the same group,
(iii) other NBFCs, and
(2)
the book value of debentures, bonds, outstanding loans and advances (including hire purchase and
lease finance) made to, and deposits with (i) subsidiaries of such companies; and (ii) companies in
the same group,
to the extent such amount exceeds 10% of (a) above.
Reserve Fund
In addition to the above, Section 45-IC of the RBI Act requires NBFCs to create a reserve fund and transfer
therein a sum of not less than 20% of its net profits earned annually before declaration of dividend. Such
sum cannot be appropriated by the NBFC except for the purpose as may be specified by the RBI from time
to time and every such appropriation is required to be reported to the RBI within 21 days from the date of
182
such withdrawal.
Maintenance of liquid assets
The RBI through notification dated January 31, 1998, as amended has prescribed that every NBFC shall
invest and continue to invest in unencumbered approved securities valued at a price not exceeding the
current market price of such securities an amount which shall, at the close of business on any day be not
less than 10% in approved securities and the remaining in unencumbered term deposits in any scheduled
commercial bank; the aggregate of which shall not be less than 15% of the public deposit outstanding at
the last working day of the second preceding quarter.
5.
Obligations of NBFC-D under the Public Deposit Directions
The RBI’s Public Deposit Directions governs the manner in which NBFCs may accept and/or hold public
deposits. The Public Deposit Directions places the following restrictions on NBFCs in connection with
accepting public deposits:
1.
Prohibition from accepting any demand deposits: NBFCs are prohibited from accepting any public deposit
which is repayable on demand.
2.
Ceiling on quantum of deposits: A NBFC which is classified as an asset finance company, (a) having net
owned funds of ` 25,00,000/- (Rupees twenty five lakh only) or more, and, (b) having complied with all
prudential norms relating to the capital adequacy ratio of not less than fifteen percent as per last audited
balance-sheet, may, accept or renew public deposits not exceeding one and one-half times of its net owned
funds or public deposit up to ` 10,00,00,000/- (Rupees ten crore), whichever is less. Further, an asset
finance company, (a) having net owned funds ` 25,00,000/- (Rupees twenty five lakh only) or more, (b)
having complied with all the prudential norms, and (c) having obtained minimum investment grade credit
rating from a notified credit rating agency, may, accept or renew public deposits not exceeding four times
of its net owned funds.
3.
Downgrading of credit-rating: In the event that the credit rating issued by a credit rating agency recognised
by RBI, for an asset finance company is downgraded below the minimum specified investment grade, with
respect to the relevant credit rating agency, the NBFC must (a) forthwith stop accepting public deposit, (b)
report the position of the credit rating within fifteen working days to the RBI, and, (c) reduce, within three
years from the date of such downgrading of credit rating, the amount of excess public deposit to nil or the
appropriate extent as permitted under the Public Deposit Directions, by repayment as and when such
deposit falls due or otherwise.
4.
Ceiling on rate of interest: An NBFC cannot invite or accept or renew public deposit at a rate of interest
exceeding twelve and half per cent per annum. Such interest may be paid or compounded at rests which
shall not be shorter than monthly rests.
5.
Minimum lock-in period: An NBFC is prohibited from granting any loan against a public deposit or make
premature repayment of a public deposit within a period of three months from the date of acceptance of
such public deposit.
6.
Obligations of NBFC-D under the Prudential Norms
NBFC-Ds are required to comply with prescribed capital adequacy ratios, single and group exposure
norms, and other specified prudential requirements prescribed under the Prudential Norms. Some of the
important obligations are as follows:
i)
Income Recognition: NBFC-Ds are required to follow recognised accounting principles in
connection with recognition of income. Income including interest/discount or any other charges on
NPA is recognised only when it is actually realised. Any such income recognised before the asset
became non-performing and remaining unrealised must be reversed. With respect to hire purchase
assets, where instalments are overdue for more than 12 months, income shall be recognised only
183
when hire charges are actually received. Any such income taken to the credit of profit and loss
account before the asset became non-performing and remaining unrealised, must be reversed.
ii) Asset Classification and provisioning of assets: Every NBFC-D is required to, after taking into
account the degree of well defined credit weaknesses and extent of dependence on collateral
security for realisation, classify its lease/hire purchase assets, loans and advances and any other
forms of credit into the following classes, namely:
•
•
•
•
Standard assets;
Sub-standard assets;
Doubtful assets; and
Loss assets.
Further, an NBFC-D must, after taking into account the time lag between an account becoming
non-performing, its recognition as such, the realisation of the security and the erosion over time in
the value of security charged, make provision against sub-standard assets, doubtful assets and loss
assets in the manner prescribed by RBI.
iii) Provisioning of Standard Assets: In terms of the requirement of the circular dated January 17,
2011 issued by the RBI, NBFCs are required to make a general provision at 0.25 per cent of the
outstanding standard assets. The provisions on standard assets are not reckoned for arriving at net
NPAs. The provisions towards standard assets are not needed to be netted from gross advances but
shown separately as 'Contingent Provisions against Standard Assets' in the balance sheet. NBFCs
are allowed to include the ‘General Provisions on Standard Assets’ in Tier II capital which
together with other ‘general provisions/ loss reserves’ will be admitted as Tier II capital only up to
a maximum of 1.25 per cent of the total risk-weighted assets.
iv) Loans against NBFC’s own shares prohibited: No NBFC-D can lend against its own shares, as of
July 1, 2008. Any outstanding loan granted by a NBFC-D against its own shares on the date of
commencement of these Directions shall be recovered by the NBFC as per the repayment
schedule.
v) NBFC failing to repay public deposit prohibited from making loans and investments: A NBFC-D
which has failed to repay any public deposit or part thereof in accordance with the terms and
conditions of such deposit, cannot grant any loan or other credit facility by whatever name called
or make any investment or create any other asset as long as such default exists.
vi) Exposure to capital-markets: Every NBFC-D with total assets of ` 100 crore and above according
to the previous audited balance sheet, must submit a monthly return within a period of 7 days of
the expiry of the month to which it pertains in the prescribed form to the Regional Office of the
Department of Non-Banking Supervision of the RBI.
vii) Capital Adequacy: Every NBFC-D shall maintain a minimum CAR consisting of Tier I and Tier II
capital which must not be less than twelve per cent of its aggregate risk weighted assets on balance
sheet and of risk adjusted value of off-balance sheet items. The total of Tier II capital of any
NBFC-D, at any point of time, must not exceed one hundred per cent of Tier I capital. As per RBI
notification dated February 17, 2011, all deposit taking NBFCs have to maintain a minimum
capital ratio, consisting of Tier I and Tier II capital, which shall not be less than 15% of its
aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items
w.e.f. March 31, 2012.
viii) Disclosure Requirements: Every NBFC-D is required to separately disclose in its balance sheet the
provisions made in accordance with the applicable prudential norms prescribed by the RBI
without netting them from the income or against the value of assets. Further, the provisions must
be distinctly indicated under separate heads of account as under:
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•
provisions for bad and doubtful debts; and
•
provisions for depreciation in investments.
Such provisions shall not be appropriated from the general provisions and loss reserves held, if
any, by the NBFC-D and for each year shall be debited to the profit and loss account. The excess
of provisions, if any, held under the heads general provisions and loss reserves may be written
back without making adjustment against them.
ix) Monthly Return: Every NBFC with total assets of ` 100 crore and above according to the previous
21 days audited balance sheet, is required to submit a monthly return within a period of 7 days of
the expiry of the month to which it pertains in the prescribed format to the Regional Office of the
Department of Non-Banking Supervision of the RBI.
x) Fair Practices Code: The RBI has framed the fair practice guidelines, to promote good and fair
practices by setting minimum standards to be adhered to by NBFCs in dealing with customers.
These guidelines require NBFCs to ensure that they meet the commitments and standards
specified therein for the products and services they offer and in the procedures and practices their
staff follows, their products and services meet relevant laws and regulations in letter and spirit,
and their dealings with customers rest on ethical principles of integrity and transparency. Further,
the said guidelines prescribe the requirements in connection with information to be provided and
disclosures to be made by NBFCs to their customers. Accordingly, the guidelines require NBFCs
to provide information on interest rates, common fees and charges, provide clear information
explaining the key features of their services and products that customers are interested in, provide
information on any type of product and service offered, that may suit the customer’s needs, tell the
customers about the various means through which products and services are offered, and provide
more information on the key features of the products, including applicable interest rates / fees and
charges.
xi) KYC Guidelines: NBFCs have been advised to follow certain customer identification procedure
for opening of accounts and monitoring transactions of suspicious nature for the purpose of
reporting it to appropriate authority, (“KYC Norms”). Accordingly, NBFCs have been advised to
ensure that a proper policy framework on ‘know your customer’ and anti-money laundering
measures is formulated and put in place with the approval of the RBI. The KYC Norms also
require that while preparing operational guidelines NBFCs may keep in mind to treat the
information collected from the customer for the purpose of opening of account as confidential and
not divulge any details thereof for cross selling or any other purposes. NBFCs may, therefore,
ensure that information sought from the customer is relevant to the perceived risk, is not intrusive,
and is in conformity with the guidelines issued in this regard. Any other information from the
customer should be sought separately with his /her consent and after opening the account.
Rating of Financial Product
As per RBI Circular dated February 4, 2009 all NBFCs with assets size of ` 10,000 lakhs and above is
required to furnish at the regional office of the RBI under whose jurisdiction the registered office of the
NBFC is functioning, information relating to the downgrading and upgrading of assigned rating of any
financial products issued by them within 15 days of such change.
Norms for excessive interest rates
RBI through its circular dated May 24, 2007 directed all NBFCs to put in place appropriate internal
principles and procedures in determining interest rates and processing and other charges. In addition to the
aforesaid instruction RBI has issued a circular dated January 2, 2009 and a master circular on Fair Practices
Code dated July 1, 2009 for regulating the excessive rates of interest charged by the NBFCs. The
aforementioned circular and the master circular stipulate that the board of each NBFC shall adopt an
interest rate model taking into account the various relevant factors such as cost of funds, margin and risk
premium etc. The rate of interest and the approach for gradation of risk and the rationale for charging
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different rates of interest for different categories of borrowers shall be required to be disclosed to the
borrowers in the application form and communicated explicitly in the sanction letter. Further, the same is
also required to be made available on the company’s website or be published in the relevant newspapers
and is required to be updated in the event of any change therein. Further, the rate of interest would have to
be annualized rates so that that the borrower is aware of the exact rates that would be charged to the
account.
7.
Corporate Governance
Pursuant to RBI circular (DNBS.PD/CC 94/03.10.042/2006-07) dated May 8, 2007, the RBI has proposed
certain corporate governance guidelines for the consideration of all NBFC–D with an asset size of ` 20
crore or more. The guidelines recommend that such NBFCs constitute an Audit Committee, a Nomination
Committee (to ensure that fit and proper persons are nominated as directors on their respective boards) and
a Risk Management Committee to institute risk management systems. The guidelines have also issued
instructions relating to credit facilities to directors, loans and advances to relatives of the directors of the
said NBFCs or to the directors of other companies and their relatives and other entities, timeframe for
recovery of such loans, etc. Such NBFCs are also required to frame internal corporate governance
guidelines based on the guidelines issued by the RBI on May 8, 2007.
8.
Accounting Standards & Accounting policies
Subject to the changes in Indian Accounting Standards and regulatory environment applicable to a NBFC
we may change our accounting policies in the future and it might not always be possible to determine the
effect on the Profit and Loss account of these changes in each of the accounting years preceding the
change.
In such cases our profit/ loss for the preceding years might not be strictly comparable with the profit/ loss
for the period for which such accounting policy changes are being made.
9.
Reporting by Statutory Auditor
The statutory auditor of the NBFC-D is required to submit to the Board of Directors of the company a
report inter-alia certifying that such company has complied with the prudential norms relating to income
recognition, accounting standards, asset classification and provisioning for bad and doubtful debts and
standard assets as applicable to it. In the event of non-compliance, the statutory auditors are required to
directly report the same to the RBI.
10.
Other Regulations
Applicable Foreign Investment Regime
FEMA Regulations
Foreign investment in India is governed primarily by the provisions of the FEMA which relates to regulation
primarily by the RBI and the rules, regulations and notifications thereunder, and the policy prescribed by the
Department of Industrial Policy and Promotion (DIPP), GoI which is regulated by the FIPB.
The RBI, in exercise of its power under the FEMA, has notified the Foreign Exchange Management (Transfer or
Issue of Security by a Person Resident Outside India) Regulations, 2000 (“FEMA Regulations”) to prohibit, restrict
or regulate, transfer by or issue of security to a person resident outside India. As laid down by the FEMA
Regulations, no prior consent and approval is required from the RBI, for FDI under the “automatic route” within the
specified sectoral caps. In respect of all industries not specified as FDI under the automatic route, and in respect of
investment in excess of the specified sectoral limits under the automatic route, approval may be required from the
FIPB and/or the RBI.
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Foreign Direct Investment
FDI in an Indian company is governed by the provisions of the FEMA read with the FEMA Regulations and the
Foreign Direct Investment Policy (“FDI Policy”) by the DIPP. FDI is permitted (except in the prohibited sectors) in
Indian companies either through the automatic route or the approval route, depending upon the sector in which FDI
is sought to be made. Under the automatic route, no prior Government approval is required for the issue of securities
by Indian companies/ acquisition of securities of Indian companies, subject to the sectoral caps and other prescribed
conditions. Investors are required to file the required documentation with the RBI within 30 days of such issue/
acquisition of securities.
Under the approval route, prior approval from the FIPB or RBI is required. FDI for the items/ activities that cannot
be brought in under the automatic route (other than in prohibited sectors) may be brought in through the approval
route. Further:
(a)
As per the sector specific guidelines of the Government of India, 100% FDI/ NRI investments are allowed
under the automatic route in certain NBFC activities subject to compliance with guidelines of the RBI in
this regard.
(b)
Minimum Capitalisation Norms for fund based NBFCs:
(i)
(ii)
(iii)
For FDI up to 51% - US$ 5 Lakhs to be brought upfront
For FDI above 51% and up to 75% - US $ 50 Lakhs to be brought upfront
For FDI above 75% and up to 100% - US $ 500 Lakhs out of which US $ 75 Lakhs to be brought
upfront and the balance in 24 months
(c)
Minimum capitalization norm of US $5 Lakhs is applicable in respect of all permitted non fund based
NBFCs with foreign investment
(d)
Foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum of
25% of its equity to Indian entities, subject to bringing in US$ 500 Lakhs as at (b) (iii) above(without any
restriction on number of operating subsidiaries without bringing in additional capital)
(e)
Joint ventures operating NBFC’s that have 75% or less than 75% foreign investment will also be allowed to
set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with
the applicable minimum capital inflow i.e. (b) (i) and (b) (ii) above.
Where FDI is allowed on an automatic basis without FIPB approval, the RBI would continue to be the primary
agency for the purposes of monitoring and regulating foreign investment. In cases where FIPB approval is obtained,
no approval of the RBI is required except with respect to fixing the issuance price, although a declaration in the
prescribed form, detailing the foreign investment, must be filed with the RBI once the foreign investment is made in
the Indian company. The foregoing description applies only to an issuance of shares by, and not to a transfer of
shares of, Indian companies. Every Indian company issuing shares or convertible debentures in accordance with the
RBI regulations is required to submit a report to the RBI within 30 days of receipt of the consideration and another
report within 30 days from the date of issue of the shares to the non resident purchaser.
Laws relating to Employment
Shops and Establishments legislations in various states
The provisions of various Shops and Establishments legislations, as applicable, regulate the conditions of work and
employment in shops and commercial establishments and generally prescribe obligations in respect of inter alia
registration, opening and closing hours, daily and weekly working hours, holidays, leave, health and safety measures
and wages for overtime work.
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Labour Laws
The Company is required to comply with various labour laws, including the Minimum Wages Act, 1948, the
Payment of Bonus Act, 1965, the Payment of Wages Act, 1936, the Payment of Gratuity Act, 1972 and the
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Laws relating to Intellectual Property
The Trade Marks Act, 1999 and the Indian Copyright Act, 1957 inter alia govern the law in relation to intellectual
property, including brand names, trade names and service marks and research works.
In addition to the above, our Company is required to comply with the provisions of the Companies Act, 1956, the
Foreign Exchange Management Act, 1999, various tax related legislations and other applicable statutes.
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SUMMARY OF KEY PROVISIONS OF ARTICLES OF ASSOCIATION
Pursuant to Schedule II of the Act the main provisions of the AOA relating to the issue and allotment of debentures
and matters incidental thereto. Please note that the each provision herein below is numbered as per the
corresponding article number in the AOA. All defined terms used in this section have the meaning given to them in
the AOA. Any reference to the term “Article” hereunder means the corresponding article contained in the AOA.
Article 11 provides that Debenture/Debenture Stock, Loan/Loan Stock, Bonds or other securities conferring the
right to allotment or conversion into shares or the option or right to call for allotment of shares shall not be issued
except with the sanction of the Company in the General meeting.
Article 14 provides that in case Share/Debenture certificates are issued for either more or less than marketable lots,
sub-division or consolidation into marketable lots will be done by the Company at no charge.
Clause (ii) of Article 15 A provides that the Company shall within three months after the allotment or within one
month after the application for registration of the transfer of any Share or Debenture is completed and have ready for
delivery the certificates of all the Shares and Debentures so allotted or transferred unless the conditions of issue of
the said Shares otherwise provide.
Article 16 provides that if a certificate be worn out, defaced or if there is no further space on the back thereof for
endorsement of transfer, it shall, if required, be replaced by a new certificate free of charge provided/however that
such new certificate shall not be issued except upon delivery of the said worn out or defaced or used up certificate
for the purpose of cancellation.
Article 17 provides that if a certificate is lost or destroyed the Company may, upon such evidence and proof of such
loss or destruction and such Indemnity as the Board may require and on payment of such a fee not exceeding Rupee
one issue a renewed certificate. Any renewed certificate shall be marked as such.
Clause A of Article 17 provides that notwithstanding what is stated in Article 16 and 17 above the Directors shall
comply with such Rules or Regulations or requirements of any Stock Exchange or the Rules made under the
Securities Contract (Regulation) Act, 1956 or any other Act, or rules applicable in this behalf.
The provisions of this Article shall mutatis mutandis apply to the Debentures of the Company.
Clause A of Article 20 provides that the Board of Directors may, if they think fit, receive from any member willing
to advance the same, all or any part of the money uncalled and unpaid upon any Share/Debenture held by him and
upon all or any part of the money so advanced may (until the same would but for such advance become presently
payable) pay interest at such rate not exceeding 14%, p.a. or such other percentage as may be fixed in this regard as
the maximum percentage without the sanction of the Company in the General meeting as may be agreed upon
between the member paying the sum in advance and the Board of Directors, provided that the amount of advance
calls so received shall not be entitled to rank for dividend or participate in the profits of the Company.
Clause (f) of Article 21 provides that the Company should effect transfer, transmission, sub-division or
consolidation of Shares/ Debentures within one month from the date of lodgement thereof.
Clause (g) of Article 21 provides that notwithstanding anything contained in these Articles, the Board of Directors
of the Company may in their absolute discretion refuse splitting of any Share certificate or Debenture certificate into
denominations less than Marketable lots i.e. the minimum number of Shares or Debentures as required for the
purpose of trading on the stock exchange in which the Company’s Shares and/or Debentures are/will be listed,
except where subdivision is required to be made to comply with a statutory provision or order of a competent
Authority of law.
Article 24 provides that no fee shall be charged for registration of transfer of Shares/Debentures or for effecting
transmission or for registering any letter of probate, letters of administration and similar other documents.
Article 42 provides that in furtherance of and without prejudice to the general powers conferred on the Board of
Directors by or implied in Articles 41 and the other powers conferred by these articles and subject to the provision
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of Sec.292 of the Act, it is hereby expressly declared that it shall be lawful, for the Directors to carry out all or any
of the objects set forth in the Memorandum of Association and to do the following things:
…
Clause (3) of Article 42 at their discretion to pay for any property rights, or privileges acquired by, or services
rendered to the Company, either wholly or partially in cash or in Shares, bonds, Debentures or other securities of the
company and any such Shares may be issued either as fully paid-up or with such amount credited as paid up thereon
as may be agreed upon and any such bonds, Debentures, or other securities may be either specifically charged upon
all or any of the property of the company and its uncalled Shares, or not so charged.
Clause (4) of Article 42 to secure the fulfilment of any contracts or agreement entered into by the Company by
mortgage or charge of all or any of the properties of the Company and its uncalled capital for the time being or in
such other manner as they think fit.
Clause (16) of Article 42 To borrow on mortgage of the whole or any part of the property of the Company or on the
Bonds, Debentures either unsecured or secured by a charge or mortgage or other securities of the Company, or otherwise
as they may deem expedient, such sums as they may think necessary for the purpose of the Company, subject to
provisions contained in Sec.292 and Sec.293 of the Act.
Article 44 provides that he Board of Directors may from time to time but with such consent of the Company in
general meetings as may be required under Sec.293 of the Act, raise any money or any moneys or sum of money for
the purpose of the Company, provided that the moneys to be borrowed together with moneys already borrowed by
the company apart from temporary loans obtained from the Company’s bankers in the ordinary course of business
shall not without the sanction of the Company at a General Meeting exceed the aggregate of the paid-up capital of
the company and its free reserves that is to say reserves not set apart for any specific purpose and in particular but
subject to the provision of Section 292 of the Act, the Board may from time to time at their discretion may raise or
borrow or secure the payment of any such sum or sums of money for the purpose of the Company, by the issue of
Debentures to members, raised or received, to mortgage, pledge or change, the whole or any part of the property,
assets, or revenue of the Company, present or future, including its uncalled capital by special assignment or
otherwise or to transfer or convey the same absolutely or in trust and to give the lenders powers of sale and others as
may be expedient and to purchase, redeem or pay off any such securities.
Provided that the Directors may, by a resolution at a meeting of the Board delegate the power to borrow money
otherwise than on Debentures to a committee of Directors subject to limits specified in the said resolution in respect
of the total which can be so borrowed.
“Debentures, Debenture Stocks, Bonds or other securities with a right to allotment of or conversion into Shares shall
not be issued except with the sanction of the Company in General Meeting”.
Article 54 provides that
Clause (1) of Article 54 Every shareholder or debenture holder or depositor of the Company, may at any time,
nominate a person to whom his shares or debentures or deposits shall vest in the event of his death in such manner
as may be prescribed under the Act.
Clause (2) of Article 54 Where the shares or debentures or deposits of the Company are held by more than one
person jointly, joint holders may together nominate a person to whom all the rights in the shares or debentures or
deposits, as the case may be shall vest in the event of death of all the joint holders in such manner as may be
prescribed under the Act.
Clause (3) of Article 54 Notwithstanding anything contained in any other law for the time being in force or in any
disposition, whether testamentary or otherwise, where a nomination made in the manner aforesaid purports to confer
on any person the right to vest the shares of debentures or deposits, the nominee shall, on the death of the
shareholder or debenture holder or depositor or, as the case may be on the death of the joint holders become entitled
190
to all the rights in such shares or debentures or deposits or, as the case may be, all the joint holders, in relation to
such shares or debentures or deposits, to the exclusion of all other person, unless the nomination is varied or
cancelled in the manner as may be prescribed under the Act.
Clause (4) of Article 54 Where the nominee is a minor, it shall be lawful for the holder of the shares or Debenture or
deposits, to make the nomination to appoint any person to become entitled to shares in or debentures of or deposits
of the Company in any manner prescribed under the Act, in the event of his death, during minority.
Article 55 provides that
Clause (1) of Article 55 provides that a nominee, upon production of such evidence as may be required by the Board
and subject as hereinafter provided elect, eitherClause (1) (a) register himself as holder of the share or debenture or deposit, as the case may be; or
Clause (1) (b) to make such transfer of the share or debenture or deposit, as the deceased shareholder or debenture
holder or deposit holder, as the case may be, could have made.
Clause (2) of Articles 55 provides that if the nominee elects to be registered as nominee of the Share or Debenture or
deposit himself as the case may be, he shall deliver or send to the Company, a notice in writing signed by him
stating that he so elects and such notice shall be accompanied with the death certificate of the deceased shareholder
or debenture holder or deposit holder, as the case may be.
Clause (4) of Article 55 provides that the Board may, at any time, give notice requiring any such person to elect
either to be registered himself or to transfer the shares or debenture or deposit, and if the notice is not complied with
within ninety (90) days, the Board may hereafter withhold payment of all dividends, interest, bonuses or other
moneys payable in respect of the share or debenture or deposit, until the requirements of the notice have been
complied with.
Article 56 provides that the Company shall be entitled to dematerialise its existing shares, debentures and other
securities, rematerialise its shares, debentures and other securities held in the Depositories and/or offer its fresh
shares and debentures and other securities in a dematerialised form pursuant to the Depositories Act, and the Rules
framed thereunder, if any. Every person subscribing to or holding securities offered by the Company shall have the
option to receive security certificates or to hold the securities with a Depository. Such a person who is the beneficial
owner of the securities can at any time opt out of a depository, if permitted by law, in respect of any security in the
manner provided by the Depositories Act, and the Company shall, in the manner and within the time prescribed,
issue to the beneficial owner the required Certificates of Securities. If a person opts to hold his security with a
Depository, the Company shall intimate such Depository the details of allotment of the security, and on receipt of
the information, the Depository shall enter in its record the name of the allottee as the beneficial owner of the
security. The Company shall cause to be kept a Register and Index of Members and a Register and Index of
Debenture holders in accordance with all applicable provisions of the Companies Act, 1956 and the Depositories
Act, with details of shares and Debentures held in material and dematerialised forms in any media as may be
permitted by law, including in any form of electronic media. The Register and Index of Beneficial Owners
maintained by Depository under the Depositories Act shall be deemed to be Register and Index of Members and
Security holders for the purposes of these Articles. The Company shall be entitled to keep in any State or Country
outside India a Branch Register of Members Resident in that State or Country.
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MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
The following contracts which are or may be deemed material have been entered or are to be entered into by the
Company. These contracts and also the documents for inspection referred to hereunder, may be inspected at the
Registered Office of the Company situated at 123, Angappa Naicken Street, Chennai, Tamil Nadu, India 600001
from 10.00 AM to 5 P.M on any business days from the date of this Prospectus until the date of closure of the Issue.
A.
Material Contracts
1.
2.
3.
4.
5.
6.
B.
Engagement Letter dated July 20, 2011 received from the Company appointing the Lead Managers
and the Co-Lead Manager.
Memorandum of Understanding dated July 20, 2011 between the Company, the Lead Managers
and the Co-Lead Manager.
Memorandum of Understanding dated July 14, 2011 with the Registrar to the Issue
Debenture Trust Agreement dated July 18, 2011 executed between the Company and the
Debenture Trustee.
The agreed form of the Debenture Trust Deed to be executed between the Company and the
Debenture Trustee.
Escrow agreement dated July 28, 2011 executed by the Company, the Registrar, the Escrow
Collection Bank(s), the Lead Managers and the Co-Lead Manager.
Material Documents
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Certificate of Incorporation of the Company dated March 27, 1986, issued by Registrar of
Companies, Tamil Nadu, Chennai
Memorandum and Articles of Association of the Company.
The certificate of registration No. 07-00458 dated April 17, 2007 issued by Reserve Bank of India
u/s 45 IA of the Reserve Bank of India, 1934.
Credit rating letter dated July 14, 2011 from CARE and credit rating letter dated July 14, 2011
from CRISIL, granting credit ratings to the NCDs.
Copy of the Board Resolution dated March 24, 2011, approving the Issue.
Resolution passed by the shareholders of the Company at the Annual General Meeting held on
July 28, 2011 approving the overall borrowing limit of Company.
Consents of the Directors, Lead Managers to the Issue, the Co-Lead Manager to the Issue,
Compliance Officer of our Company, Debenture Trustee, Lead Brokers, credit rating agencies for
the Issue, Legal Advisor to the Issue, Bankers to the Issue, Bankers to the Company and the
Registrar to the Issue, to include their names in this Prospectus.
The consent of the Statutory Auditors of our Company, namely M/s. Pijush Gupta & Co. for (a)
inclusion of their names as the Statutory Auditors, (b) inclusion of examination reports on
Reformatted Consolidated Summary Financial Statements and the Reformatted Unconsolidated
Summary Financial Statements in the form and context in which they appear in this Prospectus.
The examination report of the Statutory Auditors dated July 21, 2011 in relation to the
Reformatted Consolidated Summary Financial Statements included herein.
The examination report of the Statutory Auditors dated July 21, 2011 in relation to the
Reformatted Unconsolidated Summary Financial Statements included herein.
Annual Reports of the Company for the last five Financial Years 2006-07 to 2010-11.
Due Diligence certificates dated August 1, 2011 filed by the Lead Managers and the Co-Lead
Manager, respectively.
Due Diligence Certificate of the Debenture Trustee to be filed with SEBI (prior to the Issue
Opening Date).
Tripartite agreement between the Company, Registrar to the Issue and CDSL and the Company,
Registrar to the issue and NSDL dated March 30, 2000 and April 20, 1999, respectively.
Copy of the shareholders’ resolution re-appointing the Managing Director of the Company dated
July 30, 2010.
License Agreement dated April 1, 2010 with Shriram Ownership Trust.
192
23.
Investor agreement dated May 13, 2008 between Western India Trustee and Executor Company
Limited, in its capacity as the trustee of India Advantage Fund – VI and our Company.
Investor agreement dated May 12, 2008 between Bessemer Ventures Partners and our Company.
Investment agreement dated May 9, 2008 between Asiabridge Fund I LLC and our Company.
Investment agreement dated December 26, 2006 between Van Gogh Limited and our Company
and the Subscription and Amendment Agreement dated May 12, 2008 between Van Gogh Limited
and our Company.
Share subscription agreement dated September 12, 2008 between (i) Mr. R. Thyagarajan, Mr. T
Jayaraman, Shriram Capital Limited and Shriram Ownership Trust acting through its trustees Mr.
R. Thyagarajan, Mr. Arun Duggal, Mr. D.A Prasanna, Mr. R. Kannan and Mr. D.V Ravi, TPG
India Investments I, Inc., Shriram Retail Holdings Private Limited, Shriram Enterprises Holdings
Private Limited and our Company.
SCUF Employee Stock Option Scheme of 2006 and SCUF Employee Stock Option Scheme of
2008.
In-principle approval, dated August 1, 2011 for the Issue issued by NSE.
24.
In-principle approval, dated July 29, 2011 for the Issue issued by BSE.
17.
18.
19.
20.
21.
22.
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DECLARATION
We, the Directors of the Shriram City Union Finance Limited, certify that all the relevant provisions of the Companies Act, 1956
and the guidelines issued by the Government of India or the guidelines issued by the Securities and Exchange Board of India
established under Section 3 of the Securities and Exchange Board of India Act, 1992, as the case may be, have been complied
with and no statement made in this Prospectus is contrary to the provisions of the Companies Act, 1956, the Securities and
Exchange Board of India Act, 1992 or the rules made or guidelines issued thereunder, as the case may be.
Yours faithfully
On behalf of the Board of Directors of Shriram City Union Finance Limited:
_________________________
MR. ARUN DUGGAL
____________________________
MR. R. KANNAN
_______________________
MR. MUKUND GOVIND DIWAN
_________________________
MR. S. KRISHNAMURTHY
_______________________
MR. VIPEN KAPUR
____________________
MR. S. VENKATKRISHANAN
________________________
MR. RANVIR DEWAN
______________________
MR. K. R. RAMAMOORTHY
_________________________________
MRS. LAKSHMI PRANESH
_________________________________
MR. PUNEET BHATIA
_________________________________
MR.G.S. SUNDARAJAN
_________________________________
MR. SUNIL VARMA
Place: Chennai
Date: August 1, 2011
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