2015-16 Keep ANNUAL Report 2015-16Aspiring CAPITAL FIRST LIMITED Built on a strong foundation 2015-16 Keep Aspiring Built on a strong foundation Contents 02 Corporate Information 04 CHAIRMAN’S ADDRESS 08 Board OF Directors 10 SENIOR MANAGEMENT TEAM 13 Corporate SOCIAL RESPONSIBILITY 20 awards AND accolades 22 MANAGEMENT DISCUSSION AND ANALYSIS 41 Directors’ Report 75 REPORT ON CORPORATE GOVERNANCE 88 STANDALONE FINANCIAL STATEMENTS 138 CONSOLIDATED FINANCIAL STATEMENTS 2015-16 Keep Aspiring Built on a strong foundation OUR VISION TO BE A LEADING FINANCIAL SERVICES PROVIDER, ADMIRED AND RESPECTED FOR ETHICS, VALUES AND CORPORATE GOVERNANCE CAPITAL FIRST LIMITED } ANNUAL REPORT 2015-16 Corporate Information BOARD OF DIRECTORS LIST OF BANKING RELATIONSHIPS & Pension Funds Capital First Limited SUBSCRIBERS TO DEBT ISSUES Pramerica Mutual Fund Mr. V. Vaidyanathan 15th Floor, Tower - 2, Chairman & Managing Director Allahabad Bank Principal Mutual Fund Indiabulls Finance Centre, DIN - 00082596 Andhra Bank Provident Funds Senapati Bapat Marg, Mr. N. C. Singhal Bank of Baroda Punjab and Sind Bank Elphinstone, Independent Director Bank of India Punjab National Bank Mumbai - 400 013, Maharashtra. DIN - 00004916 Bank of Maharashtra Reliance General Insurance Tel. No.: +91 22 4042 3400 Baroda Pioneer Mutual Fund Reliance Mutual Fund Mr. Vishal Mahadevia Fax No.: +91 22 4042 3401 Canara Bank Religare Mutual Fund Non-Executive Director E-mail: [email protected] SBI General Insurance DIN - 01035771 Canara Robeco Mutual Fund Website: www.capitalfirst.com SBI Mutual Fund Mr. M. S. Sundara Rajan Central Bank of India SIDBI Independent Director Cholamandalam MS General CIN : L29120MH2005PLC156795 State Bank of Bikaner & Jaipur DIN - 00169775 Insurance State Bank of Hyderabad Corporation Bank HEAD - LEGAL, COMPLIANCE AND Mr. Hemang Raja State Bank of India Independent Director Dena Bank COMPANY SECRETARY Sundaram Mutual Fund DIN - 00040769 Deutsche Bank Superannuation Funds Mr. Satish Gaikwad Dhanlaxmi Bank Limited Dr. (Mrs.) Brinda Jagirdar Syndicate Bank DSP Blackrock Mutual Fund Independent Director The Lakshmi Vilas Bank INVESTOR RELATIONS DIN - 06979864 Franklin Templeton Mutual Fund Union Bank of India Mr. Saptarshi Bapari General Insurance Corporation Mr. Dinesh Kanabar Union KBC Mutual Fund of India Independent Director United Bank of India Gratuity Funds STATUTORY AUDITORS DIN - 00003252 UTI Mutual Fund HDFC Bank Mr. Narendra Ostawal Vijaya Bank M/s. S.R. Batliboi & Co. LLP, HDFC Standard Life Insurance Non-Executive Director Yes Bank Chartered Accountants (ICAI Company Limited DIN - 06530414 Firm Registration No. 301003E/ HSBC Mutual Fund E300005) Mr. Apul Nayyar IDBI Bank REGISTRAR & SHARE TRANSFER AGENT Executive Director IDBI Mutual Fund Link Intime India Private Limited DIN - 01738973 (w.e.f 04.04.2016) Indiabulls Mutual Fund C-13, Pannalal Silk Mills Compound, Mr. Nihal Desai Indian Overseas Bank LBS Marg, Executive Director International Finance Corporation Bhandup (West), DIN - 03288923 (w.e.f 04.04.2016) Kotak Mahindra Bank Mumbai - 400 078. L & T Mutual Fund Tel. No.: +91 22 2594 6970 CHIEF FINANCIAL OFFICER & HEAD - Life Insurance Corporation Fax No.: +91 22 2594 6969 CORPORATE CENTRE of India E-mail: [email protected] Mr. Pankaj Sanklecha Oriental Bank of Commerce Website: www.linkintime.co.in 2 2015-16 Keep Aspiring Built on a strong foundation KEY INDICATORS 27.38 Billion Total Capital (as of March 31, 2016) (Tier 1 + Tier 2) 160.41 Billion AUM (as of March 31, 2016) 19.81% AA+ 222 Capital Adequacy Ratio Credit Rating Locations (as of March 31, 2016) (as of March 31, 2016) (as of March 31, 2016) ISO 27001 1412 1.07% 0.55% Certification for Information Employees Net NPA Gross NPA Security Management (as of March 31, (as of March 31, 2016) System 2016) 3 CAPITAL FIRST LIMITED } ANNUAL REPORT 2015-16 Chairman’s Address Dear Stakeholders, It is with great pleasure that I present to you your Company’s Annual Report for FY16 against the backdrop of increasing optimism within India. During the year gone by, all key macro metrics that influence the growth of the economy improved. The fiscal deficit, current account deficit and inflation have stabilised. More relevant, these improvements are sustainable in nature as the policy framework, like aligning domestic oil prices to global movements for instance, have been implemented. Further, large ticket government investments in roads, railways, defence and other such sectors will play a catalyst role in reviving the economy. Interest rates too are trending downwards apart from a possibility of a good monsoon. These factors will create a more enabling environment for large and small businesses going forward. The theme with which your Company was founded is that financing 4 2015-16 Keep Aspiring Built on a strong foundation over 2.25 million customers financed India’s 50 million MSMEs and its Company’s 2.25 million customers fast-emerging middle class, with a financed have between ` 20,000 and The theme with differentiated model, based on new ` 2,00,000 with an average tenor of 8 technologies, provides a large and months to 2 years. These are difficult which your company unique opportunity. The Company has to originate, to manage, and to collect was founded is that so far financed more than 2.25 million because of the relatively small book customers including more than 1.5 size from this business. Further, the financing India’s 50 million self-employed individuals and small size of EMI and quick run off million MSMEs and MSMEs. makes it challenging. Your Company is working on the means to improving its fast-emerging Keeping in line with this theme, your capabilities to manage these accounts middle class, with Company has been consistent in in a sustainable way. its strategy to transform itself into a differentiated a unique retail financial services I am pleased to share with you that this model, based on new institution over the past 6 years. Within year, the retail business as a proportion this short span of time, we have built of the overall AUM stands at 86% as technologies, provides an extensive reach of 222 locations of March 31, 2016, primarily driven a large and unique across the length and breadth of by the growth in the retail business the country and have developed segments like consumer durable opportunity proprietary underwriting methods financing, two-wheeler financing, loan including usage of automated credit to MSME and self employed people, scoring models. for which there is a vast untapped opportunity in India. The Company has established for itself a unique franchise where it has While we are pleased that the developed the capability to provide Loan book has grown by 34% from small ticket loans. Over 97% of the ` 119.75 billion (` 11,975 crores) in 5 CAPITAL FIRST LIMITED } ANNUAL REPORT 2015-16 FY15 to ` 160.41 billion (` 16,041 long-term credit rating of AA+ on its crores) by end of FY16. We are even long-term debt instruments 4 years The PBT grew by 52% more pleased that we have been able in a row, which is achieved by very from ` 1,662 million in to maintain our asset quality at high select players in the financial services standards compared to the industry. industry. We also enjoy a short-term FY15 to credit rating of A1+, which again is The NII has grown by 53% to ` 8,181 the highest rating available for this ` 2,522 million million in FY16 from ` 5,363 million category. in FY16 in FY15. The total income too grew by 51% to ` 9,918 million in FY16 from One of the remarkable successes ` 6,588 million in FY15. Against the for your Company in recent years is backdrop of such growth in assets and that it has successfully diversified its income, the operating expenses grew lines of credit from a large number by 30% in FY16 over FY15. The company now of institutions. The Company now I am also pleased to inform you that avails credit from over 171 reputed avails credit from the PBT grew by 52% from ` 1,662 institutions including banks, mutual over 171 reputed million in FY15 to ` 2,522 million in funds, provident funds, pension funds, FY16. I am confident that the Company superannuation funds, gratuity funds institutions including will continue to grow its business at a and insurance companies. Some compounded rate and such growth will notable names include International banks, mutual funds, translate into an abundant increase Finance Corporation, LIC, GIC of provident funds, in profits as well. India, SBI Mutual Fund, HSBC Mutual Fund, Sundaram Mutual Fund, UTI Our Gross NPAs and Net NPAs have pension funds, Mutual Fund, Deutsche Bank, SBI, continued to remain low at 1.07% and HDFC Bank, Kotak Mahindra Bank, superannuation funds, 0.55%, respectively, at 150 DPD NPA DSP Blackrock Mutual Fund, HDFC provision norms. We are confident Standard Life Insurance, Bank of gratuity funds and that your Company will continue to insurance companies maintain its high asset quality in the Baroda and Yes Bank. I am sincerely years to come as compared to industry thankful to each and every one of these benchmarks. great institutions for extending their shoulders in building an institution I am happy to inform you that your that has great value addition to the Company continues to enjoy a high social sector of this country. 6 2015-16 Keep Aspiring Built on a strong foundation I’m happy to state that Capital First I would like to assure you that all our Home Finance Limited (CFHFL), employees are working extremely hard wholly-owned housing finance with great dedication, high energy and I assure you that each subsidiary of your Company, has strong commitment through the year one of us is committed grown its loan book by more for your Company.