Directors Report of ICRA Ltd.
Mar 31, 2023
Your Directors have the pleasure in presenting the 32nd Annual Report of your Company along with the Audited Financial Statements for the year ended March 31, 2023.
Revenue from consolidated operations for the year was Rs 40,323 lakhs, compared to Rs 34,281 lakhs in the previous year, an increase of 18%. The overall Operational Expense for the year was Rs 27,157 lakhs, against Rs 23,159 lakhs in the previous year. Profit after tax was Rs 13,673 lakhs, against Rs 11,353 lakhs in the previous year.
|
Consolidated |
Standalone |
||||
|
Particulars |
2022-23 |
2021-22 |
Particulars |
2022-23 |
2021-22 |
|
(Rs lakhs) |
(Rs lakhs) |
(Rs lakhs) |
(Rs lakhs) |
||
|
Revenue from operations |
40,323 |
34,281 |
Revenue from operations |
22,254 |
19,473 |
|
Other income |
4,955 |
4,088 |
Other income |
6,557 |
4,542 |
|
Total income |
45,278 |
38,368 |
Total income |
28,811 |
24,015 |
|
Total expenses |
27,157 |
23,159 |
Total expenses |
17,097 |
14,680 |
|
Profit before tax |
18,121 |
15,209 |
Profit before tax |
11,713 |
9,335 |
|
Total tax expense |
4,449 |
3,855 |
Total tax expense |
2,120 |
2,004 |
|
Profit for the year |
13,673 |
11,353 |
Profit for the year |
9,593 |
7,331 |
|
Total other comprehensive income, net of tax |
(163) |
(38) |
Total other comprehensive income, net of tax |
(42) |
47 |
|
Total comprehensive income for the year |
13,510 |
11,316 |
Total comprehensive income for the year |
9,551 |
7,378 |
Review of Operations Rating ServicesMarket and Business Overview
The credit rating industry grew significantly in FY2023 despite the inflationary pressures and the fears of global recession due to the geo-political challenges arising out of the Russia-Ukraine war. The growth in rated volumes for the industry was backed by growth in bank credit outstanding by more than 15% and bond issuances by 28%. High global interest rates as global central banks tackled inflation and uncertainty on exchange rates pushed the domestic borrowers to the domestic funding market. Bank credit showed stronger growth in the first two quarters over bond issuances as bond yields rose faster than the bank Marginal Cost of Funds-based Lending Rate [MCLR], reflecting quicker transmission of the increase in policy rates by the Reserve Bank of India [RBI] to stem inflationary pressures.
Bank credit offtake to large industries witnessed a strong rebound after sluggish growth during the pandemic years. This growth was supported by higher working capital requirements due to inflationary pressures and an uptick in private capex. In addition, bank funding was available at cheaper rates compared with bonds and overseas borrowing. After a sluggish first half, bond issuances grew strongly in the second half of the year as bank MCLRs increased bond issuances from the NBFCs and corporates as interest rates on
bank loans started converging with bond yields. Strong bank credit growth resulted in banks tapping infrastructure bonds, tier II bonds and Certificates of Deposits(CDs). As mutual funds (MFs) preferred to invest in CDs, the Commercial Paper (CP) outstanding remained flat in FY2023.
Your Company grew its share in both the bank loan and the market debt segment as private sector borrowings increased sharply and your Company was able to improve its share of the same. Your Company was able to enhance its market position in terms of the volume of debt rated and also added some prominent and leading companies to its list of clients. Some novel transactions were rated involving-
⢠First cross collateralised loan structure for retail malls
⢠Two of the largest Electric two-wheeler Original Equipment Manufacturers
⢠Several SPVs of a group running Electric Vehicle (EV) bus operations
⢠PTC transaction involving pool originated under colending partnership
⢠AIF ratings addressing the capital protection available to the investors
In addition, your Company has been able to gain a sizeable share of ratings of Security Receipts [SRs] of Asset Reconstruction Companies [ARCs] in the last year.
Your Company, in the last financial year, continued to benefit from its focus on the growth segments of the economy such as the financial and infrastructure segments. Adoption of this approach helped improve the revenue compared to the previous year. The structured finance business saw an increase in the number of transactions and volumes over the previous year with growth in the books of NBFCs/HFCs. In terms of ratings quality, your Company has been appreciated for its accuracy and timely rating actions and continues to be a rating agency of choice for the issuers and investors.
The Indian Corporate sector witnessed steady business momentum supported by consumption and investment activity. The pace of private sector capital expenditure improved in the second half of FY2023 and, if sustained, would also be a positive for the credit demand from corporates. Private capex, over the near to medium term, would continue to be supported by the general uptick in macroeconomic activity, as well as several supportive policy measures in place such as the PLI, Aatmanirbhar Bharat etc. In addition to these policy-tailwinds, the China 1 strategy adopted by many global players augurs well for Indian companies, and investments in sectors where India can emerge as a major exporter.
Overall, ICRA expects the pick-up in private capex to be more visible in select sectors. For example, several steel players announced expansion plans with a pick-up in infrastructure and industrial activity, resulting in healthy demand. In the automotive sector, demand pick-up coupled with investments for localisation under several schemes such as Phased Manufacturing Programme (PMP) under the FAME II, the PLI for auto-components and Advanced Chemistry Cells (ACC) etc. are supporting investments in both the OEMs as well as the ancillary space. Investments in infrastructure such as data centres, to support the digitisation journey of the country, are also picking up momentum and are expected to remain healthy over the near to medium term. Regulatory and policy push for environment-related mandates also augurs well for investment in related infrastructure such as green hydrogen, scrappage centres, recycling facilities, renewable energy, charging infrastructure etc. to enable compliance to these policies. In addition, the oil & gas and petrochemicals sectors continue to invest in brownfield capex on modernisation, and expansion. Accordingly, there are several avenues for private capex to pick up pace going forward. Nonetheless, sectors or entities that face demand pressures, have limited pricing power, and are high on leverage are likely to face pressure on their credit profiles in FY2024, when the impact of the higher interest rates gets transmitted to the MCLR/base rate linked loans.
As the effects of pandemic on the asset quality of lenders waned, we witnessed all categories of lenders i.e., banks, non-banking financial companies (NBFCs), housing finance
companies (HFCs) pursue credit growth in FY2023. The strong credit growth across banks, the NBFCs and the HFCs amid tighter liquidity conditions fuelled refinancing demand, thereby leading to higher quantum of bond issuances from all-India financial institutions (AIFIs). To meet the increased funding requirements amid tighter liquidity conditions and slower deposit growth, banks'' bond issuances (including AIFIs) nearly doubled to Rs 2.0 trillion in FY2023 compared to the previous year.
While the impact of rising bond yields and uncertainty posed by the war impacted bond issuances by the NBFCs and the HFCs during Q1 FY2023, strong financial performance and attractive bond yields lured investors with bond issuances rising by an overall 27% on a YoY basis to Rs 4.0 trillion in FY2023. Apart from strong traction in the debt issuances by financial sector entities, the strong growth in assets under management for the NBFCs and the HFCs also led to increase in credit flow from banks to these institutions in FY2023.
The bank credit to the NBFCs and the HFCs including public financial institutions rose by 32% during FY2023 [year-on-year as of Feb 2023] to Rs 13 lakh crore. To meet the strong credit growth vis-a-vis deposit growth, the certificate of deposits (CDs) volume outstanding rose by 65% on YoY basis to over Rs 3.0 lakh crore. As the mutual funds preferred CDs over CPs, the latter saw a muted growth of just 0.4% in terms of the outstanding amount for FY2023. With higher bond yields and uncertainty on outlook on yield movements, many mutual funds (MFs) launched target maturity schemes leading to an increase in demand for ratings of various mutual fund schemes.
The rate transmission of recent policy rate hikes was more gradual in the deposit rates of banks vis-a-vis debt capital markets, creating an attractive opportunity for life insurance companies to push guaranteed return products. The recent changes in regulatory guidelines for raising sub-debt by insurance companies could see a rise in bond issuances by insurance companies to meet capital requirements. Despite an expected moderation in loan growth amid rising interest rates, the growth outlook for lenders continues to remain positive for the current year; however, changes in taxation laws could impact the near-term growth in life insurance and the MF segments.
The domestic securitisation volumes witnessed a sharp uptick to about Rs 1.8 lakh crore in FY2023 against about Rs 1.2 lakh crore in FY2022 supported by the healthy credit demand for the NBFCs and the HFCs as the macro-economic situation improved in the country. The securitisation volumes in Q4 of the fiscal were the highest quarterly volumes seen since the spread of the pandemic. The investor sentiments have revived supported by the stable performance of the retail loan pools seen over the past year. Growth in securitisation is expected to continue in line with the economic and credit growth in the country, further accelerated by new originators venturing into securitisation to support their funding needs.
The investor preference for retail loan pools of secured asset classes remained high with mortgage-backed loans being the dominant asset class in securitisation during the year followed by securitisation of commercial vehicle loans. Securitisation of unsecured asset classes, mainly microfinance loans, business loans and personal loans, had also seen a good pick-up during the year as the challenges arising from the pandemic have abated. The need for certain loan pools to meet priority sector lending (PSL) targets for banks has also driven growth in the securitisation market.
In FY2023, your Company continued to maintain its position as a leading credit rating agency (CRA) in the structured finance segment. Your Company saw a sharp increase in the number of fresh transactions rated / loss estimation reports prepared during the year for the second year in a row as the overall market size improved and also managed to deepen its presence by carrying out assignments for new originators, including the maiden transactions for some large-size NBFCs. In FY2023, your Company was involved in rating new and complex structures such as revolver structures as well as securitisation of trade receivables. Your Company also saw a healthy growth in recovery rating of Security Receipts issued by Asset Reconstruction Companies (ARCs) and increased its partnership with such ARCs. Your Company remains a thought leader in structured finance and continues to publish, on a periodic basis, reports on the securitisation market and new products and structures.
On the near-term outlook for the economy, ICRA expects the expansion in Indian GDP (at constant 2011-12 prices) in FY2024 to moderate to 6.0%, with global slowdown concerns likely to constrain exports. Domestic demand is expected to be resilient albeit uneven, with consumption of services likely to continue to be prioritised over goods. A potential El Nino-weakening monsoon rainfall and high crude oil prices pose upside risks to inflation and could affect the pace of demand in FY2024. The sharp expansion in capital spending budgeted by the Government of India (GoI) and several states should support investment activity, although execution remains key. ICRA expects a rise in capacity utilisation to ~75% in Q4 FY2023, which should boost private sector capacity expansion in FY2024. An upside to our projections could occur with a faster-than-expected pick-up in Government spending, with a downside of up to 50 bps stemming from a deficient monsoon.
Inflation is expected to moderate but print well above the mid-point of the Monetary Policy Committee''s (MPC''s) medium-term target band of 2-6%. After 250 bps of rate hikes in FY2023, the MPC unanimously voted to keep the policy repo rate unchanged at 6.5% in its First Bi-monthly Monetary Policy Review for FY2024. While it retained the stance of âwithdrawal of accommodation'', it revised the wordings to âensure inflation progressively aligns with the target, while supporting growth''. Given the heightened uncertainty around financial conditions in advanced economies, as well as evolving domestic inflation risks arising from adverse weather conditions and the El Nino, the MPC has highlighted that it will continue to stay vigilant and would not hesitate to take further action as may be required in its future meetings. If inflation does not fall in line with the MPC''s assessment for Q1 FY2024, a final hike could be in the offing, especially if financial stability concerns recede. Following the unexpected pause, short term rates eased, steepening the yield curve. The trajectory of the commodity prices and the borrowing costs would in turn have a bearing on the capital expenditure budgets and the viability of infrastructure investments - both ongoing and those in the pipeline.
Notwithstanding the expectations of some moderation in credit demand because of higher interest rates, credit growth is expected to remain strong in FY2024. This will also be aided by the high likelihood that domestic funding sources will continue to remain competitive vis-a-vis elevated global rates for most borrowers. As the incremental credit demand in FY2023 was partially met by lenders by drawing down the excess on-balance sheet liquidity, we expect that the resource mobilisation activity will remain strong in FY2024 despite expected moderation in credit growth. The incremental bank credit growth is expected to be strong at Rs 15-16 lakh crore during the current year and will be the highest for any year barring FY2023. A higher base would, however, moderate the YoY bank credit growth to 11.0-11.7% for FY2024. A moderation in bank credit growth could result in moderation in bond issuances by banks compared to FY2023, however, we expect that tighter liquidity conditions will result in a further improvement in credit spreads. This shall support investor appetite for corporate bonds whereas rising benchmark lending rates of banks could make bonds an attractive option for the issuers. Hence despite an expected moderation in bond issuances from banks, we expect the bond issuances to remain stable at near all-time high levels of Rs 8.7 lakh crore witnessed in FY2023.
The investment outlay envisaged under the National Infrastructure Pipeline (NIP) wherein an investment of Rs 111 trillion is expected during 2020-2025 in major infrastructure sub sectors - notably in Power, Roads, Railways and Urban Infrastructure - will give a fillip to the economy. To meet the NIP targets, significant catchup in budgetary allocations is required in the next couple of years. This is also reflected in the increase in capex allocations by the Government of India to Rs 10 lakh crore in FY2024 BE which augurs well for the sector.
While a large share of the funding will be coming from the Central and state allocations and public-sector infrastructure NBFCs, the corporate bond market is also expected to play a modest role, wherein Central PSUs in power and roads are expected to mobilise resources from the capital markets. Moreover, asset monetisation through InvITs is expected to gain traction and is estimated at Rs 2.5 trillion in the next three years, which will benefit both the bond market issuances as well as bank loans through refinancing. Besides the infrastructure companies, general corporates in capital intensive sectors such as oil & gas, metals, telecom and cement, are also expected to borrow from the capital
markets. However, there is a risk of significant supply of Government bonds crowding out corporate bonds.
The securitisation market is poised for a healthy growth in FY2024 supported by improving economic conditions and growing business activities of the NBFCs and the HFCs.
The healthy disbursements seen in H2 FY2023 would also increase the quantum of eligible loans available to securitise in the current year after taking care of the RBI''s requirements for a minimum holding period. The impending merger of a large HFC with a bank would reduce the loan sell-down market, though your Company''s business would remain unimpacted as rating agencies were not involved in these transactions. ICRA expects securitisation volumes to continue to be supported by the requirement of banks to meet their PSL requirements. The increase in the purchase of non-PSL pooled loans is also a healthy trend that will result in healthy growth in issuance volumes. Any significant traction in the priority sector loan certificates (PSLCs) market or widespread adoption of the loan co-origination framework by banks for sourcing PSL assets could, however, restrict issuance volumes in the medium to long term.
Overall, your Company will benefit from the anticipated pickup in the debt market and the infrastructure space.
Trends in Credit Quality of ICRA-rated Companies
India Inc.''s credit quality continued its strong rebound in FY2023, sustaining the positive momentum initiated in FY2022, post the pandemic''s adverse impact on businesses seen in the previous year. Although rating reaffirmations largely reverted to the 10-year average of 80% in FY2023 (compared to 77% in FY2022), the ratings that underwent a change remained skewed towards upgrades. As in the previous fiscal, FY2023 saw almost three upgrades for every downgrade.
As the credit quality improved, the occurrence of defaults were also lower in FY2023. There were only 22 defaults in ICRA''s portfolio in FY2023, compared with 42 in FY2022 and 44 in FY2021. This trend has been consistent with the general improvement witnessed in the asset quality indicators of banks and non-banking finance companies.
Real estate, financials, and textiles were the top three sectors in terms of rating upgrades. The warehousing and the office segments, where improved leasing activity and rising occupancy levels supported credit profiles, led upgrades in the real estate sector. In the financial sector, several small to mid-sized NBFCs and housing finance companies (HFCs) were upgraded. These entities had been showing a track record of consistent business growth while maintaining/ improving their asset quality and capitalisation metrics. In the textiles sector, ICRA upgraded the ratings of several branded apparel manufacturers and retailers with their business volumes benefiting from the tailwinds of formalisation, including the shift in customer preferences towards branded wear.
The hospitality sector, among the most severely affected by the pandemic, witnessed an equally strong rebound over the past one year. With both revenues as well as profitability expected to exceed the pre-Covid levels in FY2024, the credit quality is set to improve, which has been driving upgrades in the sector since the second half of FY2023. ICRA has a Positive outlook on the hospitality sector.
Inflationary pressure amid weak pricing power was one prominent credit themes that prompted downgrades in FY2023. The debilitating effect of cost inflation was seen across multiple sectors, including building materials, food products, pharmaceuticals, gas-based power plants, etc. Rs depreciation against the US Dollar provided another inflationary prop to commodity prices, and hence weighed on profits.
With economic growth in the advanced economies expected to falter in FY2024, the export-oriented sectors like textiles and gems & jewellery will likely face demand headwinds in the near term, a phenomenon already in play since H2 FY2023. The IT services sector too could face demand challenges depending on the extent to which discretionary IT spending slows, following the global macro-economic headwinds, setbacks seen in the financial services sector in the US (marked by recent regional bank failures), and the adverse impact on the technology sector caused by the retraction of easy money policies and its manifestation in employee lay-offs.
Another risk to watch out for is the interest rate risk. While the asset quality of banks and financial institutions has been improving steadily, the key downside risk stems from the possibility of an unexpected rise in bad loans when the full impact of the rise in interest rates in FY2023 starts reflecting in the P&L of borrowers in FY2024. A further rise in interest rates (beyond the 250-bps hike in repo rates in FY2023) will test the resilience of the asset quality improvement trends.
Furthermore, looking ahead, the geopolitical machinations and the attendant risks of supply chain disturbances, stubborn inflation, and volatile capital flows, could challenge the gains in credit quality.
The performance of any credit rating system is measured by metrics like default rates, stability rates and average default position. ICRA''s robust methodologies and their consistent application over the years is reflected in the low default rates in the investment grade suggesting that ICRA''s ratings have done well to distinguish between safer and riskier credits.
The default rates along the rating scale, from AAA to C, have shown ordinality which reflects the ability at differentiating among credits across the risk spectrum. This apart, ICRA''s ratings demonstrated a healthy one-year rating stability depicted across all investment grade rating categoriesâa high rating stability suggests that ICRA''s rating decisions do not get influenced by the stage of the business cycle but remain strongly focused on assessing the credit worthiness of entities through the cycle. Finally, the average default position (ADP) of ICRA-assigned ratingsâa measure of the tendency of a rating agency to commit type-1 and type-2 errorsâremains healthy and has systematically improved over the years.
The research reports of your Company continue to be well appreciated by various stakeholders for their analytical content. Your Company introduced multiple thematic reports across sectors covering relevant events and their impact on the industry which were particularly appreciated by the clients. These reports helped in positioning your Company as a thought leader. Some of these reports were - The ICRA Business Activity Monitor, Investment Tracker, Interest Rate Outlook, The Climate Series reports, NBFC-MFIs, export duties etc.
During the year FY2023, your Company has shown a strong growth in its research revenue with subscription from entities across sectors - MFs, banks, NBFCs, corporates, multilaterals, consulting firms as well as management institutes. A good renewal rate amongst the existing clients along with acquisition of many new clients underscores the quality of your Company''s research reports. Your Company continues to actively engage with the investor community by regularly holding interactive sessions on macro economy and industries and rating roundups through its webinar series, including a few with Moody''s Investors Services, thereby building a strong market franchise. Your company also published many high impact notes on emerging themes making research a high value proposition for its clients.
Your Company''s Credit Perspective Reports (CPRs) continue to attract eyeballs because of the enhanced analytical content, making it valuable for the investors.
ICRA Research has an ongoing coverage on more than 60 industries, including several sub-segments within the corporate, financial and structured finance sectors. ICRA remained a thought leader in the structured finance sector, publishing regular research notes on the securitisation market and credit quality trends across asset classes.
Your Company took several initiatives to strengthen its franchise through outreach efforts. We organised physical conferences on contemporary topics such as Infrastructure, Renewable Energy, InvITs/REITs, Data Centres and Financial sector revival, which attracted overwhelming participation by investors, intermediaries, and issuers. We also continued with our practice of organising webinars on various industry related developments, with a good mix of internal and external panelists, which saw robust participation from various stakeholders. Some of these were coupled with media interactions to promote your Company''s visibility and brand.
Automation Initiatives at ICRA
ICRA''s automation initiatives have yielded tangible benefits over the past year, and these efforts have allowed ICRA to streamline processes, reduce manual effort, improve the overall quality of work, and help strengthen compliance to the regulatory framework.
Significant investments have been made into improving ICRA''s technology stack over the past year, including the automation of standardised documents, system-generated alerts for regulatory timelines, and digitisation of internal rating frameworks. These initiatives helped improve turnaround times, reduced errors, and provided clients with higher quality deliverables. Furthermore, the initiatives helped strengthen ICRA''s controls framework and ensured compliance with regulatory requirements.
Your Company has also enhanced its customer relationship management (CRM) solution thereby helping to achieve efficiencies in business development, invoicing, revenue recognition and internal controls. This has also helped improve the lead to opportunity conversion and conduct data analytics.
As part of its efforts to improve its overall technology, ICRA developed a comprehensive three-year technology roadmap that includes upgrading existing infrastructure, investing in new technologies, and enhancing IT security measures. The company is committed to building a state-of-the-art infrastructure that will enable it to better serve clients and support growth ambitions. Efforts are also under way to integrate ICRA''s various systems and platforms, which will streamline processes, reduce manual effort, and improve the overall quality of work. The company has also got the right talent, which is critical for success in this area, and has invested in recruiting and retaining top talent.
ICRA''s renewed focus on creating a dynamic, agile and integrated information technology infrastructure is in line with the vision to improve operations and better serve clients. ICRA is confident that these efforts will enable it to maintain its leadership position in the industry and deliver even greater value to clients.
During 2022-23, there was no change in the nature of business of your Company. The CRAs are not allowed to carry out any non-rating activity except only those activities that are specifically permitted by SEBI or any of the specified financial sector regulators. In FY2021-22, SEBI mandated the credit rating agencies to monitor the end use of equity issue proceeds, which was till then being done by banks. During this year, SEBI further expanded this role to include monitoring of preferential issues and Qualified Institutional Placements (QIPs) as well.
During the year under review, ICRA Analytics Limited (ICRA Analytics), a material subsidiary of your Company registered a 23% growth in operating revenue to Rs 17,413 lakhs (previous year Rs 14,107 lakhs) and profit after tax (PAT) going up by 26 % to Rs 6,254 lakhs (previous year Rs 4,972 lakhs).
Drawing upon more than two decades of experience and a track record of executing over 10,000 assignments, ICRA
Analytics has developed extensive expertise across diverse domains. Clientele includes banks, NBFCs, fund managers, intermediaries, investors, and corporates. Leveraging domain expertise and functional competence, your Company has successfully designed and implemented products, services, and solutions in Risk Management, Data Management, Financial and Accounting Analysis, Bond Valuation, and Financial & Risk Advisory. In addition to expanding reach to previously untapped client segments, ICRA Analytics has introduced new offerings to the portfolio, such as Treasury Solution, workflow & decision facilitation tool/platform for fund managers and other bespoke offering for clients. Keeping pace with the evolving landscape, your Company has enhanced capability with cutting-edge technologies like analytics, automation, and cloud, utilizing them to launch contemporary cloud-hosted products with heightened analytical proficiency for all client segments.
Your Company had a very robust orderbook made possible by significant wins from new and existing clients across all lines of business. Several new assignments and initiatives were undertaken across all the businesses leading to growth in business and capabilities. Grading of Energy Services companies, developing a framework for stress testing of securities portfolio, automating generation of scheme summary documents, online polling tool to collate opinion on market movement from market participants, complex analytical support work for ESG, Corporate Finance, etc. are examples of new work executed by your Company. Apart from extending the out-reach activities, roll-out of new and enhanced solutions like cloud-hosted workflow and analytical solution for corporate treasuries, mutual fund ranking tool, capability assessment of fund management added to the product repository of your Company. Launch of an improved company SEO-friendly website with e-commerce capabilities was another notable achievement.
ICRA Analytics demonstrates a strong process and compliance orientation, as evident from the ISO27001:2013 and ISO9001:2015 certifications. These frameworks enable the Company to continually improve productivity, operations, and security measures. Based on the recent certification exercise, ICRA Analytics has been re-certified as a Great Place to Work for the CY 2023, for fourth consecutive years. The organization remains dedicated to upskilling and engaging with its talent pool of over 800 trained and qualified personnel, as a key initiative to add value to its customers through innovation and efficiency.
Subsidiary Companies (including step-down subsidiaries)
At the beginning of the year 2022-23, your Company had five subsidiaries, including one step-down subsidiary. There are no associates and/or joint ventures, as defined under the Companies Act, 2013.
There has been no material change in the nature of the business of the subsidiaries.
As of March 31, 2023, your Company had the following subsidiaries, including the step-down subsidiary:
|
S. Name of Subsidiary No. Companies |
Country of Category Incorporation |
||
|
1. |
ICRA Analytics Limited |
Subsidiary |
India |
|
2. |
Pragati Development Consulting Services Limited |
Step-down subsidiary |
India |
|
3. |
PT. ICRA Indonesia* |
Subsidiary |
Indonesia |
|
4. |
ICRA Lanka Limited** |
Subsidiary |
Sri Lanka |
|
5. |
ICRA Nepal Limited |
Subsidiary |
Nepal |
|
liquidation initiated by the Company |
|||
**credit rating licence surrendered to the Securities and Exchange Commission, Sri Lanka, effective from February 28, 2023. ICRA Lanka Limited will initiate the voluntary liquidation which will be subject to approval of the regulator(s) in Sri Lanka
Highlights of performance of subsidiary companies and their contribution to the overall performance of the Company during the year 2022-23 are provided in the Management Discussion and Analysis Report.
The consolidated financial statements of Group ICRA, consisting of ICRA Limited, its subsidiaries, including step-down subsidiary, for the year 2022-23, which form a part of the Annual Report, are attached. The Auditors'' Report on the consolidated financial statements is also attached. In compliance with the relevant provisions of the Companies Act, 2013, a statement containing the salient features of the financial statements in Form AOC-1 as per Rule 5 of the Companies (Accounts) Rules, 2014, of the said subsidiaries, is annexed to the consolidated financial statements, prepared in accordance with the prescribed Accounting Standards.
As required under the provisions of Section 136 (1) of the Companies Act, 2013, the financial statements, including consolidated financial statements and other documents required to be attached thereto, have been uploaded on the Company''s website, www.icra.in. Further, your Company has also uploaded on its website the audited financial statements of each subsidiary company.
Your Company operates its business from its offices in New Delhi, Gurugram, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune.
Board Meetings Held During the Year
During the year, six meetings of the Board of Directors of your Company were held, on May 12, 2022, August 4, 2022, August 29, 2022, October 20, 2022, February 13, 2023, and March 23, 2023. The details regarding the attendance of Directors at the Board meetings are furnished in the Corporate Governance Report attached as Annexure-II to
this Report. The Company has complied with secretarial standards issued by the Institute of Company Secretaries of India on board meetings and general meetings, as notified by the Ministry of Corporate Affairs.
Our human capital function has a strategic approach to nurturing and supporting employees and ensuring a positive workplace environment. During the year, the HR Department continued to uphold the Company''s talent management strategy aligned to its business strategy focused on building leaders of tomorrow to foster business growth. A fundamental belief of our management philosophy is to invest in our employees and enable them to develop mutually beneficial skills and capabilities. With this objective, an Organisation Training Matrix was created based on key themes of need and development that were identified, and subsequently implemented training across levels and functions. A total of 16,159 manhours were spent on training and development during the Financial Year.
In alignment with the Company''s long-term strategic plan, a robust Annual Talent Review process has been established via 9 Box assessment, which contributes to succession planning for critical positions. A 12-month journey - Leadership Accelerator Management Programme (LAMP) - was launched with the intent to provide a growth framework to individuals identified as High Potential.
Pursuant to the Company''s talent management strategy and to enhance talent attraction and retention, we have revisited our Performance and Total Rewards Proposition by undertaking Benchmarking studies. Our overall benefits proposition was restructured in keeping with the latest market trends and practices.
We also seek to add value to the workplace by being cognizant of the changing dynamic of the workforce, particularly in the areas of diversity and equity. At ICRA, 50% board members are women, 35% of the total workforce comprises women, and they constitute 20% of the proportion of senior leadership. Almost 36% of the high performers are women and 34% of all promotions have been of women. Women contribute less to attrition (34%), and 31% of our hiring has been of female candidates.
Employee engagement is of paramount importance for our organisation and plays a critical role in creating an enhanced employee value proposition. During the year, numerous fun events were organised for employees and their families to participate in. The festive events saw good traction and were aimed at enhancing employee recreation. Additionally, frequent Employee Assistance Programme (EAP) sessions have also been conducted on themes of employee health and well-being.
Employees Stock Option Scheme (ESOS)
The members of your Company in the Annual General Meeting held on August 9, 2018, by passing a special resolution, adopted a new scheme called the Employees Stock Option Scheme 2018
(âESOS 2018''), in compliance with SEBI (Share-based Employee Benefits) Regulations, 2014, under which an aggregate of 31,950 stock options were proposed to be granted. Permanent employees (excluding promoters and Independent Directors) of your Company and its subsidiaries are eligible to participate in the ESOS 2018. An estimated 31,950 stock options (shares of which are with the ICRA Employees Welfare Trust) may be granted under the ESOS 2018.
During the year, there were no changes in the ESOS 2018.
A certificate from the Secretarial Auditors of your Company certifying that the schemes are implemented in accordance with the Securities and Exchange Board of India (Share-Based Employee Benefits and Sweat Equity) Regulations, 2021, and the resolutions passed by the members of the Company will be made available in electronic mode to the members of the Company for inspection at the Annual General Meeting.
The disclosures in terms of Regulation 14 of the SEBI (Share-Based Employee Benefits and Sweat Equity) Regulations, 2021 read with Circular No CIR/CFD/POLICY CELL/2/2015, dated june 16, 2015, issued by SEBI, are available on the Company''s website; the web-link for the same is:
https://www.icra.in/InvestorRelation/
ShowCorpGovernanceReport/?Id=27&Title=Corporate%20
Governance&Report=Disclosure%20by%20Board%20
of%20Directors%20(ES0P)_2023.pdf
The disclosure under the provisions of Section 197(12) of the Companies Act, 2013, regarding the ratio of the remuneration of each Director to the median employee''s remuneration and such other details as specified in Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to the Directors'' Report (Annexure I).
A statement showing the names of the top ten employees in terms of remuneration drawn and other particulars of the employees drawing remuneration in excess of the limits set out in Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as well as the names and other particulars of every employee covered under the rule, are available at the registered office of the Company, and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished without any fee.
With regard to the provisions of Section 136(1) of the Companies Act, 2013, the Directors'' Report, excluding the information provided in compliance with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is being sent to the members of the Company.
In terms of Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, the Annual Return is available on the Company''s website at
https://www.icra.in/InvestorRelation/ShowInvestorCom-
municationReport/?Id=599&Title=Annual0/o20Return&Re-
port=Annual0/o20Return0/o202022-23.pdf
The report of the Board of Directors of your Company on Corporate Governance is presented as a separate section (Annexure II) titled Corporate Governance Report, which forms a part of the Annual Report.
The composition of the Board, the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders Relationship Committee, the Corporate Social Responsibility Committee, the Risk Management Committee and other committees of the Board, the number of meetings of the Board and committees of the Board, and other matters are presented in the Corporate Governance Report.
The certificate of the Statutory Auditors of your Company regarding compliance with the Corporate Governance requirements as stipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âListing Regulations'') is annexed to the Directors'' Report.
Your Company has obtained a certificate from a practising company secretary that none of the Directors on the Board of your Company have been debarred or disqualified from being appointed or continuing as directors of companies by the SEBI /Ministry of Corporate Affairs or any such statutory authority.
Management Discussion & Analysis
The Management Discussion and Analysis is annexed to the Annual Report (Annexure III).
Based on the requirements under the SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time, the Code of Conduct for prevention of insider trading is in force in your Company. The Board of Directors of the Company has adopted the Code of Practises and Procedures for Fair Disclosure of Unpublished Price Sensitive Information, the policy for determination of legitimate purposes, and policy for enquiry in case of the leak of unpublished price sensitive information in compliance with the said regulations and the same have been uploaded on the Company website.
Material Changes and Commitments
No material changes and commitments that would affect the financial position of the Company have occurred between the end of the financial year to which the attached financial statements relate and the date of this report. Further, as per the disclosure required under Section 134 of the Companies Act, 2013 read with Rule 8(5) of the Companies (Accounts) Rules, 2014, no significant and material orders have been passed by the regulators or courts or tribunals impacting the going concern status and the Company''s operations in future.
As on March 31, 2023, the Company''s issued, subscribed and paid-up equity share capital stood at Rs 9,65,12,310 (Nine Crore Sixty-Five Lakh Twelve Thousand Three Hundred and Ten Only) divided into 96,51,231 equity shares of Rs 10/- each.
Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings and Expenditure
As your Company is not involved in any manufacturing activity, the particulars relating to conservation of energy and technology absorption, as mentioned in the Companies (Accounts) Rules, 2014, are not applicable to it. However, emphasis is placed on the employing techniques that result in the conservation of energy. Details on the foreign exchange earnings and expenditure of your Company appear in the notes to the financial statements.
Directors and Key Managerial Personnel
During 2022-23, Dr. Min Ye, Non-Executive, NonIndependent Director of your Company, resigned from the Board of your Company, inclusive of membership in any and all committees of the Board. The resignation of Dr. Ye was effective from May 13, 2022. The Board places on record its appreciation for his valuable contribution and guidance throughout his tenure.
The Board of Directors of your Company had appointed Mr. Stephen Arthur Long as an Additional Director of your Company under the category of Non-Executive NonIndependent. Mr. Long''s appointment was effective from May 13, 2022. The approval from members was obtained in Annual General Meeting held on August 4, 2022 for appointment of Mr. Long under the category of Non-Executive Non-Independent Director, liable to retire by rotation.
Pursuant to the provisions of Section 152 of the Companies Act, 2013, and the Articles of Association of your Company, Ms. Wendy Huay Huay Cheong is due to retire by rotation, and being eligible, has offered herself for reappointment, subject to approval by the Members of the Company at the forthcoming Annual General Meeting.
Proposals for the above appointments form a part of the Agenda for the forthcoming Annual General Meeting and the resolutions are recommended for your approval. The profile of Ms. Cheong is presented in the Notice of the 32nd Annual General Meeting, as required under the Companies Act, 2013, secretarial standards issued by the Institute of Company Secretaries of India on general meetings and the Listing Regulations.
Except for Ms. Ranjana Agarwal, who is serving as a Non-Executive Chairperson and Independent Director on the Board of ICRA Analytics Limited, an unlisted material subsidiary of the Company, and who receives remuneration by way of commission, no other Directors are in receipt of any remuneration or commission from any of the subsidiaries of the Company.
During 2022-23, Mr. Amit Kumar Gupta, the Chief Financial Officer, appointed for an interim period, had stepped down as Chief Financial Officer, effective from August 30, 2022, and the Board of Directors at its meeting held on August 29, 2022, had approved the appointment of Mr. Venkatesh Viswanathan as a Group Chief Financial Officer effective from August 30, 2022, as recommended by the Audit Committee and the Nomination and Remuneration Committee of your Company.
Independent Directorsâ Declaration
Pursuant to the provisions of Section 149(7) of the Companies Act, 2013 read with Schedule IV of Companies Act, 2013, the Independent Directors have submitted declarations that each of them meets the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 along with rules made thereunder and Regulation 16(1)(b) of the Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company. The following Non-Executive Directors of the Company are independent in terms of Section 149(6) of the Companies Act, 2013 and the Listing Regulations:
1. Mr. Arun Duggal
2. Ms. Ranjana Agarwal
3. Ms. Radhika Vijay Haribhakti
Further, in terms of Section 150 of the Companies Act,
2013 read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, Independent Directors of the Company have confirmed that they have registered themselves with the databank maintained by the Indian Institute of Corporate Affairs (IICA) and have passed the proficiency test or avail the exemption from that, as applicable.
Directorsâ Responsibility Statement
As required under the provisions contained in Section 134 of the Companies Act, 2013, your Directors hereby confirm that:
(i) in the preparation of the Annual Accounts for the year ended March 31, 2023, the applicable accounting standards have been followed and there are no material departures from the same;
(ii) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that year;
(iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, 2013, to safeguard the assets of the Company and to prevent and detect fraud and other irregularities;
(iv) the Directors had prepared the Annual Accounts on a going concern basis;
(v) the Directors had laid down the internal financial controls followed by the Company and that such internal financial controls are adequate and were operating effectively; and
(vi) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Policy on Directorsâ Appointment
The Nomination and Remuneration Committee works with the Board to determine the appropriate characteristics, skill and experience that are required of the members of the Board. The members of the Board should possess the expertise, skills and experience needed to manage and guide the Company in the right direction and to create value for all stakeholders. The Board needs to consist of eminent persons of proven competency and integrity with an established track record. Besides having financial literacy, experience, leadership qualities and the ability to think strategically, the members are required to have a significant degree of commitment to the Company and should devote adequate time in preparing for the Board meeting and attending the same. The members of the Board of Directors are required to possess the education, expertise, skills and experience in various sectors and industries needed to manage and guide the Company. The members are also required to look at strategic planning and policy formulations.
The members of the Board should not be related to any executive or independent director of the Company or any of its subsidiaries. They are not expected to hold any executive or independent positions in any entity that is in direct competition with the Company. Board members are expected to attend and participate in the meetings of the Board and its Committees, as relevant. They are also expected to ensure that their other commitments do not interfere with the responsibilities they have by virtue of being a member of the Board of the Company. While reappointing Directors on the Board and Committees of the Board, the contribution and attendance record of the concerned Director shall be considered in respect of such reappointment. Each Independent Director shall hold office as a member of the Board for a maximum term as per the provisions of the Companies Act, 2013 and the rules made thereunder, in this regard from time to time, and in accordance with the provisions of the Listing Regulations. The appointment of the Directors shall be formalised through a letter of appointment.
The Executive Directors, with the prior approval of the Board, may serve on the Board of any other entity if there is no conflict of interest with the Company''s business.
Board and Directorsâ Performance Evaluation
The Board of Directors of the Company, based on the recommendations of the Nomination and Remuneration Committee, has formulated a Board and Directors''
Performance Evaluation Policy, thereby setting out the performance evaluation criteria for the Board and its Committees and each Directors'' performance, including the Chairman of the Company.
Your Company''s Board had undertaken a formal performance evaluation in a comprehensive and structured manner as a part of the strengthening exercise. Based on the recommendations of the Nomination and Remuneration Committee, the Board has adopted a process of receiving anonymous feedback and discussing the same at the meeting to ensure the Directors'' collective participation and meaningful discussion over the performance of the Board, its Committees, individual Directors and Chairperson of the Board.
Your Company''s Board believes that trust in the evaluation process and its confidentiality is critical for the success of the evaluation exercise, therefore, the Board encourages fair and transparent evaluations and maintains anonymity of those providing the feedback.
During the evaluation process, various suggestions were made by individual Board members to further enhance the effectiveness of your Company''s Board. The results of the feedback were discussed with the Board and its respective committee members. Individual feedback was shared by the Chairman with each Board member separately.
The Board of Directors of the Company believes that the effectiveness of its governance framework can continue to be improved through periodic evaluation of the functioning of the Board as a whole, its committees and individual directors'' performance evaluation.
The Board of Directors acknowledges that Independent Directors on the Board have integrity and possess expertise and experience, including proficiency.
M/s. B S R & Co. LLP, Chartered Accountants, were appointed as Statutory Auditors of your Company, at the 28th Annual General Meeting to hold office until the conclusion of the 33rd Annual General Meeting. As mentioned in the notice of the Annual General Meeting, the Board of Directors and the Audit Committee shall be given the power to alter and vary the terms and conditions arising out of an increase in the scope of work, amendment in Auditing Standards or regulations and such other requirements resulting in change in scope of work. Any such change in the terms and conditions of appointment and remuneration of Statutory Auditors would be intimated in the Directors'' Report of the Company in the relevant year.
The disclosures relating to fees paid/payable to Statutory Auditors have been made in the Corporate Governance Report annexed to this Report.
Comments on Auditorsâ Report
The notes to the financial statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments.
The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.
The Board of Directors of the Company has appointed M/s. Chandrasekaran Associates, Company Secretaries, as the Secretarial Auditor of the Company for the financial year 2022-23 in terms of Section 204 of the Companies Act,
2013 and Regulation 24A of the Listing Regulations. The Secretarial Audit Report for financial year 2022-23 has been annexed to this Report (Annexure IV). The Secretarial Audit Report does not contain any qualifications.
The Secretarial Audit Report issued by the material subsidiary of the Company, ICRA Analytics Limited, is also annexed to this Report (Annexure IV-A).
Your Company proposes not to transfer any amount to the General Reserve.
The Board of Directors recommends for approval of the Members at the forthcoming Annual General Meeting, payment of dividend of Rs 40 per equity share of the face value of Rs 10 each, and a special dividend of Rs 90 per equity share. The Board of Directors recommends a total dividend of Rs 130 per equity share for the financial year ended March 31, 2023. If the members approve the dividend at the forthcoming Annual General Meeting, the dividend shall be paid to: (i) all those members whose names appear in the Register of Members as on Friday, July 28, 2023; and (ii) all those members whose names appear on that date as beneficial owners as furnished by the National Securities Depository Limited and Central Depository Services (India) Limited.
Your Company has formulated a Dividend Distribution Policy (âthe Policy'') pursuant to Regulation 43A of the Listing Regulations. The objective of the Policy is to maintain stability in the dividend pay-out of the Company, subject to the applicable laws, and to ensure a regular dividend income for the members and long-term capital appreciation for all stakeholders of the Company.
Your Company would ensure to strike the right balance between the quantum of dividend paid and the amount of profits retained in the business for various purposes. The Board of Directors refers to this Policy while declaring/ recommending dividends on behalf of the Company.
Through this Policy, the Company would try to maintain a consistent approach to dividend pay-out plans, subject to the applicable laws. The Policy has been uploaded on the website of your Company at:
https://www.icra.in/RegulatoryDisclosure/
Transfer to Investor Education and Protection Fund
The Company sends reminder letters to all members whose dividends are unclaimed to ensure that they receive their rightful dues. Your Company has also uploaded on its website, www.icra.in, information regarding unpaid/ unclaimed dividend amounts lying with your Company.
During 2022-23, the unclaimed dividend amount of Rs 99,144 towards the unpaid dividend account of the Company for the financial year 2014-15 was transferred to the Investor Education and Protection Fund. The said amount had remained unclaimed for seven years, despite reminder letters having been sent to each of the members concerned.
Pursuant to Section 124(6) of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and its amendments, all shares in respect of which dividend has not been paid or claimed for seven consecutive years or more, shall be transferred by the Company in the demat account of Investor Education and Protection Fund (IEPF) Authority (âthe Authority'') within a period of 30 days of such shares becoming due to be transferred to the IEPF, as per the procedure mentioned in the said Rules. Accordingly, your Company has transferred 85 equity shares to the demat account of the Authority in accordance with the provisions of the Companies Act, 2013 and rules made thereunder. All benefits accruing on such shares viz. bonus shares, split, consolidation, fraction shares etc., except any right issue, shall also be credited to such a demat account.
Members may note that unclaimed dividend and shares transferred to the demat account of the Authority can be claimed back by them from the Authority by following the procedure mentioned in the said Rules.
Your Company has formulated a risk management policy. The policy is a formal acknowledgement of the commitment of your Company to risk management. The aim of the policy is not to have the risk eliminated completely from the Company''s activities, but rather to ensure that every effort is made by the Company to manage risks appropriately to maximise potential opportunities and minimise the adverse effects of risk. The Board and the Risk Management Committee monitor and review the risk management plan.
Risks and concerns are discussed in Section E of the Management Discussion and Analysis Report.
Internal Control System and their Adequacy
Your Company has an internal control system, commensurate with its size, nature of its business and complexities of its operations. The Board of Directors of your Company has adopted policies and procedures for ensuring the orderly and efficient conduct of your
Company''s business. The Board of Directors of your Company has laid down Internal Financial Controls to provide reasonable assurance with regard to recording and providing reliable financial and operational information, adherence to the Company''s policies, safeguarding of assets and prevention and detection of frauds and errors, the accuracy and completeness of accounting records and timely preparation of reliable information. The Board and the Audit Committee regularly evaluate internal financial controls.
Corporate Social Responsibility
Your Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The CSR policy has been devised on the basis of the recommendations made by the CSR Committee. The composition of the CSR Committee, the CSR policy of the Company, details about the development and implementation of the policy and initiatives taken by the Company during the year as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, have been annexed to this report (Annexure V).
Business Responsibility and Sustainability Report
Your Company, in accordance with the provisions of Regulation 34(2)(f) of the Listing Regulations has prepared a Business Responsibility and Sustainability Report for the year 2022-23 (âBRSRâ). The BRSR is an effective compliance and communication tool for a company''s nonfinancial disclosures and is the next step in mandatory Environmental, Social and Governance (âESGâ) reporting in India. The BRSR describes the initiatives taken by your Company from the ESG perspective. The BRSR has been annexed to this report (Annexure VI) and forms a part of the Director''s Report.
Particulars of Contracts or Arrangements with Related Parties
Your Company has entered into contracts or arrangements with its related parties. The related-party transactions are disclosed in the financial statements for the year ended March 31, 2023. Considering the amendments to definition of the related parties effective from April 1, 2022, under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, (âListing Regulationsâ), transactions between the unlisted material subsidiary of the Company, ICRA Analytics Limited (âICRA Analyticsâ), and Moody''s Corporation (including its affiliates) (âMoody''s entitiesâ) for providing data outsourcing, research and IT support services, were approved by the Members of the Company as per the Listing Regulations, as the transaction(s) exceeds 10% of the annual consolidated turnover of previous financial year. The transactions are in the ordinary course of business of the concerned subsidiary and at an arm''s length basis. Except for this transaction, there have been no material-related party transactions as per Section 188(1) of the Companies Act, 2013 and as per Regulation 23 of the Listing Regulations. The required disclosures of information in Form AOC-2 in terms of Section 188 of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, are annexed to this report (Annexure VII).
Policy on Prohibition, Prevention and Redressal of Sexual Harassment
Your Company has formulated a Policy on Prohibition, Prevention and Redressal of Sexual Harassment of Women at Workplace in accordance with The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013. The Company has constituted an Internal Committee for prevention and redressal of sexual harassment at the workplace, separately for all the branches. The Company has not received any complaint during the financial year ended March 31, 2023. The disclosures in relation to The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013 have also been made in the Corporate Governance Report.
The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.
The Company is not required to maintain cost records as per sub-section (1) of Section 148 of the Companies Act, 2013.
Particulars of Loans, Guarantees and Investments
The particulars of loans, guarantees and investments are disclosed in the financial statements for the year ended March 31, 2023. During the year no security has been provided as per Section 186 of the Companies Act, 2013.
Vigil Mechanism/Whistle-Blower Policy
Your Company has established a vigil mechanism in compliance with the provisions of Section 177 (9) of the Companies Act, 2013, and Regulation 22 of the Listing Regulations. Your Company has adopted a Whistle-Blower Policy to report unethical/illegal/improper behaviour. Your Company has made employees aware of the WhistleBlower Policy to enable them to report instances of leak of unpublished price sensitive information.
The said Policy also provides for adequate safeguards against victimisation of persons who use such vigil mechanism and makes provision for direct access to the chairperson of the Audit Committee in exceptional cases. Further, no stakeholders have been denied access to the Audit Committee.
Composition of the Audit Committee
Your Company has constituted an Audit Committee, the composition of which has been provided in the Corporate Governance Report. During the financial year 2022-23, the Board accepted all the recommendations of the Audit Committee.
During the year under review, the Company complied with all the applicable provisions of Secretarial Standards issued by the Institute of Company Secretaries of India and notified by the Ministry of Corporate Affairs, Government of India.
There was no lockdown imposed in any part of the country in FY23 as Covid-19 was brought under control and many businesses recovered to pre-pandemic levels.
There are certain pending cases against your Company which are sub judice in court.
Besides this, the Company has filed an appeal before the Hon''ble Securities Appellate Tribunal (the âSATâ), challenging the adjudication order in respect of an adjudication proceeding initiated by SEBI in relation to the credit ratings assigned to one of the Company''s customers and the customer''s subsidiaries (the âImpugned Orderâ) and deposited the penalty amount of INR 25 lakh as imposed vide the Impugned Order without prejudice to such appeal.
Further, the Securities and Exchange Board of India (SEBI), vide its order dated September 22, 2020, has enhanced the penalty amount to INR 1 crore on ICRA under Section 15HB of SEBI Act, 1992. The Company has filed an appeal challenging the SEBI enhancement order before the SAT and has deposited the additional penalty amount of INR 75 lakh, without prejudice to the rights and contentions of the Company.
Your Directors acknowledge the cooperation and assistance received from various institutions, Government agencies, members and professionals from different disciplines.
Your Directors also wish to place on record their appreciation of the contribution made by the members of the staff of your Company.
Mar 31, 2022
Review of Operations Rating Services
Market and Business Overview
The credit rating business continued to face headwinds in terms of a Covid-19 pandemic-induced disruption to economic activity in Q1 FY2022 and Q4 FY2022, amidst the second and the third waves respectively, resulting in constrained credit demand. A heightened risk aversion had its impact across the corporate bond market, bank lending, structured finance and also in terms of flows into debt mutual funds, albeit there was some improvement over the low base of FY2021. But a broad resumption in economic activity, post the lifting of the less-restrictive lockdowns, supported by the Fiscal and Monetary Policy interventions, allowed businesses to recover, even as the recovery remains uneven and incomplete thus far.
The pandemic and the associated lockdowns affected activity in many sectors in FY2022, especially in the contact-intensive parts of the non-agricultural economy. While the YoY growth in Q1 FY2022 was high on a low base, the GDP remained below pre-pandemic levels. The two subsequent quarters did see a revival in economic activity. With the widening coverage of the Covid-19 vaccines, business and household sentiment improved. However, non-Government investment activity remained muted with a modest rise in capacity utilisation levels. While there was a fresh spike in Covid-19 infections in January 2022 led by the Omicron variant, which resulted in the re-imposition of localised restrictions, the rapid abatement of the third wave boosted economic activity in the later part of Q4 FY2022. Thereafter, the escalation of the geo-political conflict between Russia and Ukraine, and its impact on availability and prices of raw materials, has injected uncertainty into the macroeconomic outlook.
The bond issuances contracted in FY2022 by 19 % compared to the high base of FY2021, which was supported by regulatory measures such as targeted long-term repo operations (TLTROs) by the RBI and the Partial Credit Guarantee (PCG) scheme of the GoI for purchase of bonds issued by the NBFCs. The rising yields in the second half of FY2022 coupled with geo-political uncertainty shifted some borrowers to banks. Despite that the bond issuances recovered to pre-pandemic levels in absolute terms. Bank bond issuances constituted a higher proportion of FY2022 bond issuances compared with that in the previous year as Additional Tier I issuances got rolled over where call options were falling due. The outstanding stock of the commercial paper saw a small dip as low yields led to continued investor disinterest, except in highly rated borrowers.
Bank credit growth to large industries continued to be muted, reflecting a lack of demand. The 8% increase was supported by credit growth to Non-Banking Finance Companies / Housing Finance Companies and medium and small industries, the latter segments being supported by the Emergency Credit Line Guarantee Schemes of Government of India.
Unlike the previous year, FY2022 saw localised lockdowns in various parts of the country during which your Company was able to transact business in a seamless manner. Your Company was able to add some prominent and leading companies to its list of clients, and it also rated some novel transactions involving -
⢠First cross collateralised loan structure for retail malls
⢠Two of the largest Electric 2-wheeler Original Equipment Manufacturers
⢠Several SPVs of a group running Electric Vehicle (EV) bus operations
⢠First PTC transaction attempted by an NBFC-Peer-to-Peer lending platform
⢠First PTC transaction attempted by a co-working company
⢠Securitisation of trade receivables for a supplier to a large readymade garments company
Your Company''s growth in the last financial year was led by the focus on the growth segments of the economy and being selective in certain unremunerative situations such as the small bank loan segment and entities that adopt only tender-based criteria for selecting rating agencies. Adoption of this approach has helped in improving the overall yield. The structured finance business saw improved traction over the previous year but has not yet returned to pre-pandemic levels. In terms of ratings quality, your Company has been appreciated for its accuracy and timely rating actions and continues to be a rating agency of choice for the issuers and investors.
Corporate Sector
For the third year in succession, bank credit to the corporate sector remained muted in FY2022, driven by a lack of meaningful pick-up in investment activity. Borrowings through the bond route were restricted to PSUs and entities backed by strong promoters. Investor risk aversion and high systemic liquidity resulted in credit spreads on AAA and AA category corporate bonds witnessing a sharp compression with the spreads at lower than the average of the last five years. However, despite compression on credit spreads and finer rates in debt capital markets, the YoY issuances from the corporate sector declined by 28% in FY2022. The decline was driven by lower issuances from the PSUs in the corporate sector and against a high base of TLTRO led issuances from corporates in FY2021. Buoyant equity capital markets and private equity-led funding also supported the funding requirements of corporates. Leaner working capital cycle because of pent-up demand, supply chain dislocation and relatively softer commodity prices during FY2022 were other reasons for lower working capital demand, thereby moderating overall credit growth. However, rising commodity prices, which have further increased after the Russia-Ukraine conflict, are likely to pose higher working capital requirements and may result in improved credit demand. The private sector capital expenditure is also expected to revive in the latter half of FY2023, which could also be a positive for credit demand from corporates.
Financial Sector
Debt investors continued to remain cautious as asset quality concerns continued into FY2022 with the second phase of Covid in the first quarter and a minor scare caused by the third Covid wave in the last quarter of FY2022. The collection efficiencies dipped sharply in the first quarter of FY2022 before improving in the rest of the year. The restructuring window provided by the Reserve Bank of India helped lenders keep a lid on the reported asset quality indicators. With a significant slowdown in incremental business in the first quarter, the growth in assets under management were negligible in the first half. Despite a pick-up in the second half, the annual growth of the AUM for NBFCs/HFCs is estimated to be around 6-8% in FY2022. NBFCs/HFCs continue to focus on long-term resources, improve their Asset Liability Management (ALM) profile and maintain relatively limited usage of commercial papers (adjusted for the record levels of CP issuances for IPO financing). With a pick-up in disbursements by NBFC/HFCs, CP issuances could improve in FY2023, subject to investor appetite.
Heightened volatility around the second and third Covid-19 waves and expectations of a rise in interest rates slowed the growth in the AUM of debt MF schemes. While the overall AUM of debt MF schemes declined in FY2023, the AUM of shorter duration schemes improved marginally. Your Company continues to enhance its presence in the debt mutual fund scheme ratings with additions of more schemes from the existing fund houses.
Structured Finance
The domestic securitisation volumes witnessed an uptick to about Rs. 1.2 lacs crore in FY2022 as against about Rs. 0.9 lacs crore in FY2021 supported by the revival in sentiments as the impact of Covid-induced lockdowns reduced and disbursements of NBFCs and HFCs scaled up. Nonetheless, the volumes remained lower than pre-pandemic levels (Rs. 2 lacs crore volumes seen in FY2020) as the second wave of the pandemic had a bearing on securitisation undertaken in the first half of the fiscal. Adequate liquidity available in the system, especially for the higher rated entities, also led to lower need for securitisation of their assets. Growth in securitisation is expected to continue in line with the economic and credit growth in the country, further accelerated by new originators venturing into securitisation to support their funding needs.
The investor preference for retail loan pools of secured asset classes remained high with mortgage-backed loans being the dominant asset class in securitisation during the year followed by securitisation of commercial vehicle loans. Securitisation of unsecured asset classes, mainly microfinance loans and business loans, had witnessed a sharp decline in the post-Covid era. However, healthy demand for microfinance loan pools was seen in Q4 FY2022 as the concerns around asset quality abated for microfinance entities following a rebound in collections coupled with the need for such loan pools to meet priority sector lending (PSL) targets for banks.
In FY2022, your Company continued to maintain its position as a leading credit rating agency (CRA) in the Structured Finance segment. Your Company saw a sharp increase in the number of fresh transactions rated / loss estimation reports prepared during the year as the overall market size improved and also managed to deepen its presence by carrying out assignments
for new originators, a few of which only recently entered the securitisation market. In FY2022, your Company was involved in rating relatively new structures such as the Revolver Structure for merchant loan receivables as well as securitisation of trade receivables. Your Company remained a leading agency for rating covered bond issuances during the year, though the issuances scaled down significantly in the second half of the fiscal. Your Company remains a thought leader in Structured Finance and continues to publish, on a periodic basis, reports on the securitisation market and new products and structures.
Outlook
On the near-term outlook for the economy, ICRA pegs the expansion in Indian GDP (at constant 2011-12 prices) in FY2023 at 7.2%, following the elevated commodity prices and fresh supply chain issues arising from the Russia-Ukraine conflict, as well as the renewed lockdowns in parts of China. Higher prices of fuels and items such as edible oils are likely to compress disposable incomes in the mid to lower income segments, constraining the demand revival in FY2023. However, the prescient extension of free foodgrains under the Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY) until September 2022 may continue to offer some respite to the food budgets of vulnerable households. In the mid to upper income segments, normalisation of behaviours after the third wave is set to result in a pivot of consumption towards the contact-intensive services that were avoided during the pandemic, constraining the growth in demand for goods in FY2023. Even though exports of some items from India will rise to meet global demand amidst the supply crunch, ICRA expects a gradual rise in capacity utilisation to ~74-75% in Q3 FY2023, back-ending the broad-basing of private sector capacity expansion. The key upside to our projections is a faster-than-expected pick-up in Government spending, even as the execution risk has shifted to the state governments.
Inflation is expected to print well above the mid-point of the Monetary Policy Committee''s medium-term target band of 2-6%. With the focus shifting to inflation management over supporting growth, and the modification in the wording on the policy stance, the Monetary Policy Committee (MPC) has clearly telegraphed an imminent change in the stance. We foresee a shallow rate hike cycle, with the repo rate being increased by 25 bps each in August and September 2022, entailing a negative real policy rate throughout FY2023. However, G-sec yields have already climbed, mirroring global trends, and we expect other interest rates to follow suit. The trajectory of the commodity prices and the borrowing costs would in turn have a bearing on the capital expenditure budgets and the viability of infrastructure investments ongoing and in the pipeline.
In FY2023, bank credit is expected to continue its momentum and is likely to grow at 8.9-10.1% compared to 9.7% in FY2022; however, the developments around the global impact of the Ukraine - Russia war would be an event to keep a close eye on. The high Government borrowings for FY2023 coupled with expectations of rise in the yield may restrict issuance of bonds until yields stabilise at higher levels. Cut down in extra budgetary resources by the Government also means lower issuances by PSUs, which may be a positive for other issuers. The issuances are, however, likely to be dominated by better rated entities as the impact of withdrawal of various regulatory stimulus is likely to pose challenges for many issuers. Hence despite the continued regulatory thrust to deepen the bond markets both by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), larger issuers will continue to account for a majority of the issuances.
With no budgeted capital infusion by GoI into the public sector banks in FY2023, around Rs. 25000 crore of Additional Tier 1 (AT1) instruments with call options in FY2023 and banks'' increasing appetite for housing and infrastructure assets, we can witness higher issuances in FY2023. We continue to expect the financial institutions to drive the bond issuance volumes as they scale up. With improvement in investor risk appetite and most NBFCs having resumed lending from Q3 FY2021, we expect bond issuances by the NBFCs and the HFCs to scale up and refinance existing debt, subject to investor appetite.
The significant investment outlay envisaged under the National Infrastructure Pipeline (NIP) wherein an investment of Rs. 111 trillion is expected during 2020-2025 in major infrastructure sub sectors - notably in Power, Roads, Railways and Urban Infrastructure - will give a fillip to the economy. While a large share of the funding will be coming from the Central and state allocations and public-sector infrastructure NBFCs, the corporate bond market is also expected to play a modest role, wherein Central PSUs in Power and Roads are expected to mobilise resources from the capital markets. Moreover, asset monetisation through InvITs is expected to gain traction in the next five years, which will benefit both the bond market issuances as well as bank loans through refinancing. Besides the infrastructure companies, general corporates in capital intensive sectors such as Oil & Gas, Metals, Telecom and Cement, are also expected to borrow from the capital markets. However, there is a risk of significant supply of Government bonds crowding-out corporate bonds.
The securitisation market is poised for a healthy growth in FY2023 supported by improving economic conditions and growing business activities of NBFCs and HFCs. The higher disbursements seen in H2 FY2022 would also increase the quantum of eligible loans available to securitise in the current year after taking care of RBI''s requirements for minimum holding period. The securitisation volumes though would remain exposed to any sharp rise in Covid-19 infections that may lead to lockdowns or restrictions by the Government which would disrupt business activities. ICRA expects securitisation volumes to continue to be supported by the requirement of banks to meet their PSL requirements. The increase in the purchase of non-PSL pooled loans is also a healthy trend that will result in healthy growth in issuance volumes. Any significant traction in the priority sector loan certificates (PSLCs) market or widespread adoption of the loan co-origination framework by banks for sourcing PSL assets could, however, restrict issuance volumes in the medium to long term.
Overall, your Company will benefit from the anticipated pick-up in the debt market and the infrastructure space.
Trends in Credit Quality of ICRA-rated Companies
The credit quality of India Inc. experienced a rebound in FY2022, on the heels of two consecutive years of pressures caused first by the slowdown in economic growth in FY2020 and then by the pandemic scarring in FY2021. As businesses and policymakers adapted to the challenges, and as the economic repair-work progressed, the incremental downside credit risks ebbed in FY2022.
⢠As a result, the instances of downgrades1 of ICRA-assigned ratings in FY2022 (at 184 entities) reflected a downgrade rate2 of a mere 6%. This was substantially lower than the recent high of 13% seen in FY2020 and the past 10-year average of 9%.
⢠In contrast, the upgrade rate3 of 19%, corresponding to upgrades of 561 entities, stood at a multi-year high vis-a-vis the past 10-year average of 11%.
Many corporate sectors are on a path to recovery. Further, there exists additional opportunities in sectors like Steel, Agricultural Produce, Textiles, and Electronics Goods to scale up exports. The Production-Linked Incentive (PLI) Scheme too promises to enhance the supply chain resilience, support import substitution, and create other positive externalities. At the same time, banks as well as Non-Banking Finance Companies (NBFCs) are currently comfortably capitalised while facing manageable asset quality pressures. In effect, with both the real sector and the financial sector in a relatively good health, the year FY2023 could well have been a year of moving beyond the ''rebound'' growth.
However, following the Russia-Ukraine conflict, the risk of supply chain disturbances and the commodity price turmoil have raised the spectre of inflation across the globe. As policy rates, risk premia, and bond yields adjust on the upside, the capital flows search for safe havens, and currencies find their equilibrium, the policymakers and regulators would be induced to take centre stage as they attempt to strike a balance between growth and inflation. This means that India Inc. may have to continue to grapple with the challenge of rising input costs, energy costs, shipping and other logistics costs, besides potential supply disruptions. This could quickly translate into asset quality pressures for the financial sector. Further, the possibility of resurgence of a debilitating Covid wave cannot be ruled out. While the credit quality of India Inc. has improved substantially over the past one year, there are looming risks which stoke scepticism and would warrant a careful monitoring of the operating environment as the new fiscal beckons.
Rating accuracy trends
The performance of any credit rating system is measured by metrics like default rates, stability rates and average default position. ICRA''s robust methodologies and their consistent application over the years is reflected in the low default rates in the investment grade suggesting that ICRA''s ratings have done well to distinguish between safer and riskier credits. The default rates along the rating scale, from AAA to C, have shown ordinality which reflects the ability at differentiating among credits across the risk spectrum. This apart, ICRA''s ratings have demonstrated a healthy one-year rating stability depicted across all investment grade rating categoriesâa high rating stability suggests that ICRA''s rating decisions do not get influenced by the stage of the business cycle but remain strongly focused on assessing the credit worthiness of entities through the cycle. Finally, the average default position (ADP) of ICRA-assigned ratingsâa measure of the tendency of a rating agency to commit type-1 and type-2 errorsâremains healthy and has systematically improved over the years.
Latest short-run average default rates for long-term instruments (reflects an average of two years; computation approach as defined by SEBI)
|
Rating Category |
1-Year Default Rate |
2-year Cumulative Default Rate |
3-year Cumulative Default Rate |
||||||||
|
AAA |
0.1% |
1.0% |
1.6% |
||||||||
|
AA |
0.1% |
0.6% |
1.2% |
||||||||
|
A |
0.2% |
0.6% |
1.4% |
||||||||
|
BBB |
1.0% |
2.7% |
4.5% |
||||||||
|
BB |
2.7% |
5.9% |
8.7% |
||||||||
|
B |
3.8% |
7.9% |
11.7% |
||||||||
|
C |
10.1% |
16.6% |
22.8% |
||||||||
|
Latest short-run average default rates for short-term instruments (reflects an average of two-years; computation approach as defined by SEBI) |
|||||||||||
|
Rating Category |
1-Year Default Rate |
||||||||||
|
A1 |
0.1% |
||||||||||
|
A1 |
0.0% |
||||||||||
|
A2 |
0.4% |
||||||||||
|
A3 |
0.6% |
||||||||||
|
A4 |
3.1% |
||||||||||
|
Latest five-year average of one-year rating transition rates for long-term ratings (computation approach as defined by SEBI) |
|||||||||||
|
Rating Category |
AAA |
AA |
A |
BBB |
BB |
B |
C |
D |
|||
|
AAA |
97.9% |
0.8% |
0.0% |
0.7% |
0.2% |
0.0% |
0.0% |
0.5% |
|||
|
AA |
2.2% |
94.4% |
3.0% |
0.2% |
0.1% |
0.0% |
0.0% |
0.2% |
|||
|
A |
0.2% |
5.1% |
90.1% |
3.9% |
0.2% |
0.1% |
0.1% |
0.3% |
|||
|
BBB |
0.0% |
0.3% |
6.7% |
87.6% |
3.9% |
0.1% |
0.1% |
1.4% |
|||
|
BB |
0.0% |
0.1% |
0.1% |
5.1% |
87.1% |
2.4% |
0.1% |
5.1% |
|||
|
B |
0.0% |
0.0% |
0.0% |
0.0% |
6.8% |
83.6% |
0.4% |
9.2% |
|||
|
C |
0.0% |
0.0% |
0.0% |
0.0% |
0.0% |
14.9% |
58.7% |
26.4% |
|||
Industry Research
The research reports of your Company continue to be well appreciated by various stakeholders for their analytical content. Your Company introduced multiple thematic reports across sectors covering relevant events and their impact on the industry which were particularly appreciated by the clients. These reports helped in positioning your Company as a thought leader. Some of these reports were - The Climate Series reports - India''s goals for COP26, Impact of Productivity-Linked Incentive on India''s Manufacturing Sector, Commodity Risks Due to Russia Ukraine face-off, Impact of Coal Prices on India Inc., Impact of Semiconductor Chip Shortage on Auto sector, Electrifying India''s Bus Fleet, Impact of RBI''s Regulatory Changes on MFIs, thematic reports on Commercial Vehicle Financing Companies, Captive NBFCs, and Bank Brokerages.
During the year FY2022, your Company has grown its client base by nearly 27% adding entities across sectors - Banks, NBFCs as well as a consulting firm. A high renewal rate amongst the existing clients underscores the quality of your Company''s research reports. Your Company continues to actively engage with the investor community by regularly holding interactive sessions on macro economy, industries and rating round-ups through its webinar series, including a few high impact ones with Moody''s Investors Service, thereby building a strong market franchise.
Your Company also enhanced the quality of the Credit Perspective Reports (CPRs) by making them more exhaustive and adding Rating Framework Overview, Business and Financial Outlook for the next 12-24 months, and the Environment-Social-Governance (ESG) commentary for listed entities, making ICRA CPRs more valuable for the investors.
ICRA Research has an ongoing coverage on more than 55 industries, including several sub-segments within the corporate, financial and structured finance sectors. ICRA remained a thought leader in the structured finance sector, publishing regular research notes on the securitisation market and credit quality trends across asset classes.
Franchise Development
Your Company took several initiatives to strengthen its franchise through outreach efforts even as the year, like the previous year, saw only virtual seminars and conferences. Your Company was quick to reach out to the market participants through webinars, the frequency of which was increased to address the evolving credit themes either on account of Covid-induced lockdown or geo-political risks. The timely series of webinars was appreciated for the coverage on various sectors. Some of these were coupled with media interactions to promote your Company''s visibility and brand.
Automation Initiatives at ICRA
ICRA is pursuing several technology initiatives across various functions with the objective of improving operating efficiencies, enhancing the quality of deliverables and improving the internal controls through automation. Significant efforts and investments have been made in the recent past to improve the technology stack to improve operational effectiveness and productivity through system-generated reports for financial comparison, consolidation and benchmarking, besides aiding the regulatory reporting requirements. ICRA has also implemented a customer relationship management (CRM) solution to achieve efficiencies for the business development, invoicing and revenue recognition, improving the lead to opportunity conversion, and generating automated reports along with data analytics. ICRA has also sharpened the focus on technology to capture early warning signals to closely monitor the developments in the rated entities and further improve timeliness of rating actions.
Change in Nature of Business
During 2021-22, there was no change in the nature of business of your Company. Pursuant to the SEBI (Credit Rating Agencies) (Amendment) Regulations, 2018 along with its subsequent amendment(s) and clarifications issued by SEBI from time to time in this matter, a credit rating agency shall not carry out gradings and other related non-rating activities with effect from May 30, 2020. Accordingly, from this date, your Company does not accept any new business under these activities. During this year, SEBI mandated the credit rating agencies to monitor the end use of equity issue proceeds, which was hitherto being done by banks.
Subsidiary Companies (including step-down subsidiaries)
At the beginning of the year 2021-22, your Company had five subsidiaries, including one step-down subsidiary. There are no associates and/or joint ventures, as defined under the Companies Act, 2013.
There has been no material change in the nature of the business of the subsidiaries.
As of March 31,2022, your Company had the following subsidiaries, including the step-down subsidiary:
|
S. No. |
Name of Subsidiary Companies |
Category |
Country of Incorporation |
|
1. |
ICRA Analytics Limited$ |
Subsidiary |
India |
|
2. |
Pragati Development Consulting Services Limited |
Step-down subsidiary |
India |
|
3. |
PT. ICRA Indonesia* |
Subsidiary |
Indonesia |
|
4. |
ICRA Lanka Limited |
Subsidiary |
Sri Lanka |
|
5. |
ICRA Nepal Limited |
Subsidiary |
Nepal |
$Formerly known as ICRA Online Limited *liquidation initiated by the Company
Highlights of performance of subsidiary companies and their contribution to the overall performance of the Company during the year 2021-22 are provided in the Management Discussion and Analysis Report.
The consolidated financial statements of Group ICRA, consisting of ICRA Limited, its subsidiaries, including step-down subsidiary, for the year 2021 -22, which form a part of the Annual Report, are attached. The Auditors'' Report on the consolidated financial statements is also attached. In compliance with the relevant provisions of the Companies Act, 2013, a statement containing the brief financial details in Form AOC-1 as per Rule 5 of the Companies (Accounts) Rules, 2014, of the said subsidiaries, is annexed to the consolidated financial statements, prepared in accordance with the prescribed Accounting Standards.
As required under the provisions of Section 136 (1) of the Companies Act, 2013, the financial statements, including consolidated financial statements and other documents required to be attached thereto, have been uploaded on the Company''s website, www.icra.in. Further, your Company has also uploaded on its website the audited financial statements of each subsidiary company.
Branches of the Company
Your Company operates its business from its offices in New Delhi, Gurugram, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune.
Board Meetings Held During the Year
During the year, eight meetings of the Board of Directors were held. The details of the meetings are furnished in the Corporate Governance Report attached as Annexure-II to this Report. The Company has complied with secretarial standards issued by the Institute of Company Secretaries of India on board meetings and general meetings.
Human Resource Development & Training
Human Resources (HR) continued to provide a variety of training & development opportunities in the year under review with an aim to build employee capacity to meet strategic needs and align with the Company''s strategic plan and overall mission.
A fundamental belief of our management philosophy is to invest in our employees and enable them to develop new skills and capabilities which will benefit them as well as the Company. A variety of training and development programmes were provided in areas of domain, functional and behavioural skills, with emphasis placed on improving knowledge, skills and attitude.
Organisation Training Matrix: A Division and organisation-wide Training Matrix has been created based on the KSA mapping exercise, Training Need Identification (TNI) and Individual Development Plan (IDP). Key themes and priority for the year 2021-22 were identified basis the Organisation Training Matrix.
Business Outcome:
> Creation of a learning-oriented customised roadmap across levels for respective groups /divisions. Each Division head provided a sign-off on respective Divisions Training Matrix
> Creation of the Organisation Training Matrix which provides the organisation with employee training plans per division, per designation/role created
> Execution of the domain, functional and behavioural training need as per the Matrix
> Incorporation of new training needs on an ongoing basis as per business requirement
The training identified in the Organisation Training Matrix is being delivered to the employees as per the employee mapping in the Training Matrix. Details mentioned below under Domain, Functional and Behavioural organisation level training needs.
1. Domain Skills (Internal):
a. Analytical Bootcamp Programme is a certified structured development programme for new hires across levels through well-defined learning paths, equipping them with fundamental business and professional skills to help them grow in their roles.
⢠Bootcamp Programme Coverage:
> Domain-specific skills as per the requirement of the functions and teams
> Functional skills: Defined modules for communication skills, MS office, etc
> Behavioural skills: Fundamentals on People Development Programme covered topics like Being Proactive, Giving and Receiving Feedback, Time Management
Business Outcome: Improved employee retention through learning & development and capability building for future business growth
b. Analytical Domain Skills Yearly Calendar is released on a quarterly basis and employees are invited for the workshops as per mapping in the Training Matrix
2. Functional Skills Identified in the Organisation Training matrix
Being executed at an organisation level across departments - BD, Analytical and Corporate
3. Behavioural Skills Identified in the Organisation Training matrix
Designed and executed internally at an organisation level across departments: BD, Analytical and Corporate
a. Transform Programme for Senior Level Leadership
Business Outcome: Understanding how to create a culture of high performance and effectiveness; to be able to provide constructive development feedback, manage perceptions
Objective: Team Effectiveness
> Line Managers to feel responsible for feedback for team members and themselves
> Develop individuals to reach the highest level of performance on specific goals or tasks
> Increase the frequency and quality of conversation about performance and development
> Impart knowledge and skills to give feedback to other people about their job performance, behaviour and competencies
New hires go through a systematic on-boarding programme, designed to equip them adequately with the right skills and competencies to achieve their best potential. Apart from this, all employees, including the new hires, are trained online on the Code of Business Conduct, Conflict of Interest, Anti-Bribery & Corruption, Prevention of Sexual Harassment at Workplace & Information Security.
ICRA continues to focus on building a strong talent pipeline across levels through regular in-house Domain, Functional and Behavioural training, online learning platforms, team building and external programmes. Since employees attend external workshops also, we have started the practice of knowledge-sharing sessions. The approach is to build a culture whereby participants share knowledge and learnings from the external training attended. Post completion of the programme they must share the knowledge learnt across levels on the topics relevant to business need. Developing and strengthening capabilities of all employees has remained an ongoing priority. Deserving employees, who demonstrate high performance and potential, are awarded challenging assignments and higher responsibilities. They are provided adequate training and coaching to prepare them towards the same.
The Company''s talent management strategy is focused on building leaders of tomorrow. We invest through world class leadership development programmes to build the talent bank in the organisation. The Company has a robust talent review programme and ensures a succession plan towards critical positions, annually.
ICRA Lighthouse is a resource capability enhancement initiative created with the objective of helping mentees benefit from the experience of mentors in various aspects of professional development. It is a platform wherein mentees will get a chance to interact with their mentors to discuss on a wide range of topics related to an individual''s work profile, receive advise on overcoming workplace challenges, and tips to improve professional skills and competencies in addition to guidance on career progression. The current batch started its mentoring journey in October 2021 and completed in April 2022. Participation in this Programme is voluntary for both mentors and mentees.
Objective: It is a resource capability enhancement initiative
All Mentors & Mentees are trained on the benefits of mentoring; core attributes and skills; stages of mentoring; evaluating progress
Programme Duration: Six months Stages of Mentoring
⢠Stage I: Initiating the relationship - Knowing each other & contracting
⢠Stage II: Building on the relationship - Setting Goals
⢠Stage III: Deepening the relationship - working towards the goals
⢠Stage IV: Ending the formal mentoring and planning for the future
There is a harmonious relationship between the employees and the management of your Company. The consultative and participative management style of your Company has facilitated the achievement of its corporate goals. Employee morale has been high, resulting in a positive contribution to your Company''s progress.
Employees Stock Option Scheme (ESOS)
The members of your Company in the Annual General Meeting held on August 9, 2018, by passing a special resolution, adopted a new scheme called the Employees Stock Option Scheme 2018 (''ESOS 2018''), in compliance with SEBI (Share-based Employee Benefits) Regulations, 2014, under which an aggregate of 31,950 stock options were proposed to be granted. Permanent employees (excluding promoters and Independent Directors) of your Company and its subsidiaries are eligible to participate in the ESOS 2018. An estimated 31,950 stock options (shares of which are with the ICRA Employees Welfare Trust) may be granted under the ESOS 2018.
During the year, there were no changes in the ESOS 2018. A certificate from the Secretarial Auditors of your Company certifying that the schemes are implemented in accordance with the Securities and Exchange Board of India (Share-Based Employee Benefits and Sweat Equity) Regulations, 2021 to the extent applicable and Securities and Exchange Board of India (Share-Based Employee Benefits) Regulations, 2014 to the extent applicable, prior to its repealment and the resolutions passed by the members of the Company will be made available in electronic mode to the members of the Company for inspection at the Annual General Meeting.
The disclosures in terms of Regulation 14 of the SEBI (Share-Based Employee Benefits and Sweat Equity) Regulations, 2021 read with Circular No CIR/CFD/POLICY CELL/2/2015, dated June 16, 2015, issued by SEBI, are available on the Company''s website; the web-link for the same is:
https://www.icra.in/InvestorRelation/ShowCorpGovernanceReport/?Id = 27&Title = Corporate%20 Govemance&Report=Disclosure%20bv%20Board%20of%20Directors%20(ESQP)_2022_March.pdf
Particulars of Employees
The disclosure under the provisions of Section 197(12) of the Companies Act, 2013, regarding the ratio of the remuneration of each Director to the median employee''s remuneration and such other details as specified in Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to the Directors'' Report (Annexure I). A statement showing the names of the top ten employees in terms of remuneration drawn and other particulars of the employees drawing remuneration in excess of the limits set out in Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as well as the names and other particulars of every employee covered under the rule, are available at the registered office of the Company, and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished without any fee.
With regard to the provisions of Section 136(1) of the Companies Act, 2013, the Directors'' Report, excluding the information provided in compliance with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is being sent to the members of the Company.
Annual Return
In terms of Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, the Annual Return is available on the Company''s website at
https://www.icra.in/InvestorRelation/ShowInvestorCommunicationReport/?Id = 525&Title=Annual%20 Return&Report=Annual%20Return%20FY%202021-22.pdf
Corporate Governance
The report of the Board of Directors of your Company on Corporate Governance is presented as a separate section (Annexure II) titled Corporate Governance Report, which forms a part of the Annual Report.
The composition of the Board, the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders Relationship Committee, the Corporate Social Responsibility Committee, the Risk Management Committee and other
committees of the Board, the number of meetings of the Board and committees of the Board, and other matters are presented in the Corporate Governance Report.
The certificate of the Statutory Auditors of your Company regarding compliance with the Corporate Governance requirements as stipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''Listing Regulations'') is annexed to the Directors'' Report.
Your Company has obtained a certificate from a practising company secretary that none of the Directors on the Board of your Company have been debarred or disqualified from being appointed or continuing as directors of companies by the SEBI / Ministry of Corporate Affairs or any such statutory authority.
Management Discussion & Analysis
The Management Discussion and Analysis is annexed to the Annual Report (Annexure III).
Based on the requirements under the SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time, the Code of Conduct for prevention of insider trading is in force in your Company. The Board of Directors of the Company has adopted the Code of Practises and Procedures for Fair Disclosure of Unpublished Price Sensitive Information, the policy for determination of legitimate purposes, and policy for enquiry in case of the leak of unpublished price sensitive information in compliance with the said regulations and the same have been uploaded on the Company website.
Material Changes and Commitments
No material changes and commitments that would affect the financial position of the Company have occurred between the end of the financial year to which the attached financial statements relate and the date of this report. Further, as per the disclosure required under Section 134 of the Companies Act, 2013 read with Rule 8(5) of the Companies (Accounts) Rules, 2014, no significant and material orders have been passed by the regulators or courts or tribunals impacting the going concern status and the Company''s operations in future.
As on March 31,2022, the Company''s issued, subscribed and paid-up equity share capital stood at Rs. 9,65,12,310 (Nine Crores Sixty-Five Lakh Twelve Thousand Three Hundred and Ten Only) divided into 96,51,231 equity shares of Rs. 10/- each.
Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings and Expenditure
As your Company is not involved in any manufacturing activity, the particulars relating to conservation of energy and technology absorption, as mentioned in the Companies (Accounts) Rules, 2014, are not applicable to it. However, emphasis is placed on the employing techniques that result in the conservation of energy. Details on the foreign exchange earnings and expenditure of your Company appear in the notes to the financial statements.
Update Regarding Certain Matters
During the year ended March 31, 2022, the Company was dealing with following matters which arose in current and/or previous periods:
(a) The Securities and Exchange Board of India ("SEBI") had enhanced the penalty amount from Rs. 25 lacs to Rs. 1 Crores during the quarter ended September 30, 2020 in respect of an adjudication proceeding initiated by it in relation to the credit ratings assigned to one of the Company''s customer and the customer''s subsidiaries. The Company had deposited the enhanced penalty amount under protest and had filed an appeal with the Securities Appellate Tribunal contesting the said order. The said appeal is under review. On this matter, the Company also co-operated with other government agencies in relation to queries received from them. Basis the foregoing and the legal counsel opinion obtained, the Company does not foresee any significant adverse implications on the Company.
(b) The Company had received an anonymous complaint during the quarter ended September 30, 2021, making certain allegations around conflict of interest against two senior officials of the Company, who are no longer in employment.
The Company had appointed an external firm to examine the allegations. During the year ended March 31,2022, the Company has concluded the examination thereof and finalised the necessary action plan. The findings did not indicate any adverse financial impact.
Directors and Key Managerial Personnel
During 2021-22, Mr. N. Sivaraman, Managing Director & Group CEO of your Company resigned from the Board of your Company, inclusive of membership in any and all committees of the Board effective from October 22, 2021. Further, Mr. David Brent Platt, Non-Executive, Non-Independent Director of your Company, resigned from the Board of your Company, inclusive of membership in any and all committees of the Board. The resignation of Mr. Platt was effective from February 18, 2022. The Board places on record its appreciation for their valuable contribution and guidance throughout their tenure.
The Board of Directors of your Company had appointed Mr. Ramnath Krishnan as an Additional Director and as Managing Director & Group CEO of your Company effective from October 23, 2021, subject to approval of the members. The approval from the members was obtained through Postal Ballot on March 26, 2022 for appointment of Mr. Krishnan as Managing Director & Group CEO, and a Director not liable to retire by rotation.
The Board of Directors of your Company had appointed Ms. Shivani Priya Mohini Kak as an Additional Director of your Company under the category of Non-Executive Non-Independent. Ms. Kak''s appointment was effective from February 18, 2022. The approval from members was obtained through Postal Ballot on March 26, 2022 for appointment of Ms. Kak under the category of Non-Executive Non-Independent Director, liable to retire by rotation.
Pursuant to the provisions of Section 152 of the Companies Act, 2013, and the Articles of Association of your Company, Mr. Michael Foley is due to retire by rotation, and being eligible, has offered himself for reappointment, subject to approval by the Members of the Company at the forthcoming Annual General Meeting.
On May 9, 2022, Dr. Min Ye had resigned as Non-Executive and Non-Independent Director (inclusive of membership in any and all committees of the Board of Directors) of your Company, effective from May 13, 2022. The Board of Directors of your Company in its meeting held on May 12, 2022, had appointed Mr. Stephen Arthur Long as an Additional Director under the category of "Non-Executive and Non-Independent Director". Mr. Long''s appointment is effective from May 13, 2022. Mr. Long is not related to any Director on the Board of the Company, and he is not debarred from holding the office of director pursuant to the Securities and Exchange Board of India order or any other authority. The Nomination and Remuneration Committee and the Board of Directors of your Company recommend the appointment of Mr. Long under the category of Non-Executive Non-Independent Director, liable to retire by rotation.
The resolutions seeking Mr. Long''s appointment as Director have been included in the Agenda of the Annual General Meeting.
Proposals for the above appointments form a part of the Agenda for the forthcoming Annual General Meeting and the resolutions are recommended for your approval. The profiles of Mr. Foley and Mr. Long are presented in the Notice of the 31st Annual General Meeting, as required under the Companies Act, 2013, secretarial standards issued by the Institute of Company Secretaries of India on general meetings and the Listing Regulations.
Except for Ms. Ranjana Agarwal, who is serving as a Non-Executive Chairperson and Independent Director on the Board of ICRA Analytics Limited, an unlisted material subsidiary of the Company, and who receives remuneration by way of commission, no other Directors are in receipt of any remuneration or commission from any of the subsidiaries of the Company.
During 2021-22, Mr. Vipul Agarwal, Group Chief Financial Officer of your Company had resigned and was relieved from the services of the Company and from position of Group Chief Financial Officer and a designated Chief Investor Relations Officer, with effective date of March 10, 2022.
The Board of Directors at its meeting held on January 25, 2022, had approved the appointment of Mr. Amit Kumar Gupta as a Chief Financial Officer for an interim period, effective from March 10, 2022. Mr. Gupta continues to hold his current key managerial position of General Counsel of the Company.
The Nomination and Remuneration Committee of your Company is in the process of identifying the full-time Group Chief Financial Officer.
Independent Directors'' Declaration
Pursuant to the provisions of Section 149(7) of the Companies Act, 2013 read with Schedule IV of Companies Act, 2013, the Independent Directors have submitted declarations that each of them meets the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 along with rules made thereunder and Regulation 16(1)(b) of the Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company. The following Non-Executive Directors of the Company are independent in terms of Section 149(6) of the Companies Act, 2013 and the Listing Regulations:
1. Mr. Arun Duggal
2. Ms. Ranjana Agarwal
3. Ms. Radhika Vijay Haribhakti
Further, in terms of Section 150 of the Companies Act, 2013 read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, Independent Directors of the Company have confirmed that they have registered themselves with the databank maintained by the Indian Institute of Corporate Affairs (IICA) and have passed the proficiency test or avail the exemption from that, as applicable.
Directors'' Responsibility Statement
As required under the provisions contained in Section 134 of the Companies Act, 2013, your Directors hereby confirm that:
(i) in the preparation of the Annual Accounts for the year ended March 31,2022, the applicable accounting standards have been followed and there are no material departures from the same;
(ii) t he Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that year;
(iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, 2013, to safeguard the assets of the Company and to prevent and detect fraud and other irregularities;
(iv) the Directors had prepared the Annual Accounts on a going concern basis;
(v) the Directors had laid down the internal financial controls followed by the Company and that such internal financial controls are adequate and were operating effectively; and
(vi) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Policy on Directors'' Appointment
The Nomination and Remuneration Committee works with the Board to determine the appropriate characteristics, skill and experience that are required of the members of the Board. The members of the Board should possess the expertise, skills and experience needed to manage and guide the Company in the right direction and to create value for all stakeholders. The members of the Board need to consist of eminent persons of proven competency and integrity with an established track record. Besides having financial literacy, experience, leadership qualities and the ability to think strategically, the members are required to have a significant degree of commitment to the Company and should devote adequate time in preparing for the Board meeting and attending the same. The members of the Board of Directors are required to possess the education, expertise, skills and experience in various sectors and industries needed to manage and guide the Company. The members are also required to look at strategic planning and policy formulations.
The members of the Board should not be related to any executive or independent director of the Company or any of its subsidiaries. They are not expected to hold any executive or independent positions in any entity that is in direct competition with the Company. Board members are expected to attend and participate in the meetings of the Board and its Committees, as relevant. They are also expected to ensure that their other commitments do not interfere with the responsibilities they have by virtue of being a member of the Board of the Company. While reappointing Directors on the Board and Committees of the
Board, the contribution and attendance record of the concerned Director shall be considered in respect of such reappointment. Each Independent Director shall hold office as a member of the Board for a maximum term as per the provisions of the Companies Act, 2013 and the rules made thereunder, in this regard from time to time, and in accordance with the provisions of the Listing Regulations. The appointment of the Directors shall be formalised through a letter of appointment.
The Executive Directors, with the prior approval of the Board, may serve on the Board of any other entity if there is no conflict of interest with the Company''s business.
Board and Directors'' Performance Evaluation
The Board of Directors of the Company, based on the recommendations of the Nomination and Remuneration Committee, has formulated a Board and Directors'' Performance Evaluation Policy, thereby setting out the performance evaluation criteria for the Board and its Committees and each Directors'' performance, including the Chairman of the Company.
Your Company''s Board had undertaken a formal performance evaluation in a comprehensive and structured manner as a part of the strengthening exercise. Based on the recommendations of the Nomination and Remuneration Committee, the Board has adopted a process of receiving anonymous feedback and discussing the same at the meeting to ensure the Directors'' collective participation and meaningful discussion over the performance of the Board, its Committees, individual Directors and Chairperson of the Board.
Your Company''s Board believes that trust in the evaluation process and its confidentiality is critical for the success of the evaluation exercise, therefore, the Board encourages fair and transparent evaluations and maintains anonymity of those providing the feedback.
During the evaluation process, various suggestions were made by individual Board members to further enhance the effectiveness of your Company''s Board. The results of the feedback were discussed with the Board and its respective committee members. Individual feedback was shared by the Chairman with each Board member separately.
The Board of Directors of the Company believes that the effectiveness of its governance framework can continue to be improved through periodic evaluation of the functioning of the Board as a whole, its committees and individual directors'' performance evaluation.
The Board of Directors acknowledges that Independent Directors on the Board have integrity and possess expertise and experience, including proficiency.
M/s. B S R & Co. LLP Chartered Accountants, were appointed as Statutory Auditors of your Company, at the 28th Annual General Meeting to hold office until the conclusion of the 33rd Annual General Meeting. As per the explanatory statement circulated to the members along with the notice of the Annual General Meeting, the annual fee for the financial year ending March 31, 2020 was proposed at 47,00,000 (Rupees Forty-Seven Lakh only), plus out-of-pocket expenses and taxes at the applicable rates, for the purpose of the statutory audit of the Company.
It was mentioned in the notice of the Annual General Meeting, that the Board of Directors and the Audit Committee shall be given the power to alter and vary the terms and conditions arising out of an increase in the scope of work, amendment in Auditing Standards or regulations and such other requirements resulting in change in scope of work. Any such change in the terms and conditions of appointment and remuneration of Statutory Auditors would be intimated in the Directors'' Report of the Company in the relevant year.
The disclosures relating to fees paid/payable to Statutory Auditors have been made in the Corporate Governance Report annexed to this Report.
The Statutory Auditors have, in their report to the Members of the Company on the standalone financial statements of the Company, mentioned that the Company has not carried out physical verification of its property, plant and equipment during the year ended March 31,2022.
In this regard we wish to submit that the physical verification of the Company''s property, plant and equipment during the year ended March 31,2022 could not be carried out due to COVID-19 pandemic.
The notes to the financial statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments.
The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.
The Board of Directors of the Company has appointed M/s. Chandrasekaran Associates, Company Secretaries, as the Secretarial Auditor of the Company for the financial year 2021-22 in terms of Section 204 of the Companies Act, 2013 and Regulation 24A of the Listing Regulations. The Secretarial Audit Report for financial year 2021-22 has been annexed to this Report (Annexure IV). The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks.
The Secretarial Audit Report issued by the material subsidiary of the Company, ICRA Analytics Limited, is also annexed to this Report (Annexure IV-A).
Your Company proposes not to transfer any amount to the General Reserve.
The Board of Directors recommends for approval of the Members at the forthcoming Annual General Meeting, payment of dividend of Rs. 28 per equity share for the financial year ended March 31,2022. If the members approve the dividend at the forthcoming Annual General Meeting, the dividend shall be paid to: (i) all those members whose names appear in the Register of Members as on Friday, July 29, 2022; and (ii) all those members whose names appear on that date as beneficial owners as furnished by the National Securities Depository Limited and Central Depository Services (India) Limited.
Your Company has formulated a Dividend Distribution Policy (''the Policy'') pursuant to Regulation 43A of the Listing Regulations. The objective of the Policy is to maintain stability in the dividend pay-out of the Company, subject to the applicable laws, and to ensure a regular dividend income for the members and long-term capital appreciation for all stakeholders of the Company.
Your Company would ensure to strike the right balance between the quantum of dividend paid and the amount of profits retained in the business for various purposes. The Board of Directors refers to this Policy while declaring/recommending dividends on behalf of the Company. Through this Policy, the Company would try to maintain a consistent approach to dividend pay-out plans, subject to the applicable laws. The Policy has been uploaded on the website of your Company at:
https://www.icra.in/RegulatorvDisclosure/ShowCodePolicvReport/7
Transfer to Investor Education and Protection Fund
The Company sends reminder letters to all members whose dividends are unclaimed to ensure that they receive their rightful dues. Your Company has also uploaded on its website, www.icra.in, information regarding unpaid/unclaimed dividend amounts lying with your Company.
During 2021-22, the unclaimed dividend amount of Rs. 1,32,066 towards the unpaid dividend account of the Company for the FY 2013-14 was transferred to the Investor Education and Protection Fund. The said amount had remained unclaimed for seven years, despite reminder letters having been sent to each of the members concerned.
Pursuant to Section 124(6) of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and its amendments, all shares in respect of which dividend has not been paid or claimed for seven consecutive years or more, shall be transferred by the Company in the demat account of Investor Education and Protection Fund (IEPF) Authority (''the Authority'') within a period of 30 days of such shares becoming due to be transferred to the IEPF, as per the procedure mentioned in the said Rules. Accordingly, your Company has transferred
218 equity shares to the demat account of the Authority in accordance with the provisions of the Companies Act, 2013 and rules made thereunder. All benefits accruing on such shares viz. bonus shares, split, consolidation, fraction shares etc., except any right issue, shall also be credited to such a demat account.
Members may note that unclaimed dividend and shares transferred to the demat account of the Authority can be claimed back by them from the Authority by following the procedure mentioned in the said Rules.
Your Company has formulated a risk management policy. This policy is a formal acknowledgement of the commitment of your Company to risk management. The aim of the policy is not to have the risk eliminated completely from the Company''s activities, but rather to ensure that every effort is made by the Company to manage risks appropriately to maximise potential opportunities and minimise the adverse effects of risk. The Board and the Risk Management Committee monitor and review the risk management plan.
Risks and concerns are discussed in Section E of the Management Discussion and Analysis Report.
Internal Control System and their Adequacy
Your Company has an internal control system, commensurate with its size, nature of its business and complexities of its operations. The Board of Directors of your Company has adopted policies and procedures for ensuring the orderly and efficient conduct of your Company''s business. The Board of Directors of your Company has laid down Internal Financial Controls to provide reasonable assurance with regard to recording and providing reliable financial and operational information, adherence to the Company''s policies, safeguarding of assets and prevention and detection of frauds and errors, the accuracy and completeness of accounting records and timely preparation of reliable information. The Board and the Audit Committee regularly evaluate internal financial controls.
Corporate Social Responsibility
Your Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The CSR policy has been devised on the basis of the recommendations made by the CSR Committee. The composition of the CSR Committee, the CSR policy of the Company, details about the development and implementation of the policy and initiatives taken by the Company during the year as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, have been annexed to this report (Annexure V).
Business Responsibility Report
Your Company, in accordance with the provisions of Regulation 34(2)(f) of the Listing Regulations has prepared a Business Responsibility Report for the year 2021-22. The Business Responsibility Report describes the initiatives taken by the Company from the environmental, social and governance perspective. The Business Responsibility Report has been annexed to this report (Annexure VI) and forms a part of the Director''s Report.
Particulars of Contracts or Arrangements with Related Parties
Your Company has entered into contracts or arrangements with its related parties. The related-party transactions are disclosed in the financial statements for the year ended March 31, 2022. Considering the amendments to definition of the related parties effective from April 1, 2022, under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, ("Listing Regulations"), transactions between the unlisted material subsidiary of the Company, ICRA Analytics Limited ("ICRA Analytics"), and Moody''s Corporation (including its affiliates) ("Moody''s entities") for providing data outsourcing, research and IT support services, were approved by the Members of the Company as per the Listing Regulations, as the transaction(s) exceeds 10% of the annual consolidated turnover of previous financial year. The transactions are in the ordinary course of business of the concerned subsidiary and at an arm''s length basis. Except this transaction, there have been no material-related party transactions as per Section 188(1) of the Companies Act, 2013 and as per Regulation 23 of the Listing Regulations. The required disclosures of information in Form AOC-2 in terms of Section 188 of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, are annexed to this report (Annexure VII).
Policy on Prohibition, Prevention and Redressal of Sexual Harassment
Your Company has formulated a Policy on Prohibition, Prevention and Redressal of Sexual Harassment of Women at Workplace in accordance with The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 201 3. The Company has constituted an Internal Committee for prevention and redressal of sexual harassment at the workplace, separately for all the branches. The Company has not received any complaint during the financial year ended March 31, 2022. The disclosures in relation The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013 have also been made in the Corporate Governance Report.
The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.
The Company is not required to maintain cost records as per sub-section (1) of Section 148 of the Companies Act, 2013.
Particulars of Loans, Guarantees and Investments
The particulars of loans, guarantees and investments are disclosed in the financial statements for the year ended March 31, 2022. During the year no security has been provided as per Section 186 of the Companies Act, 2013.
Vigil Mechanism/Whistle-Blower Policy
Your Company has established a vigil mechanism in compliance with the provisions of Section 177 (9) of the Companies Act, 2013, and Regulation 22 of the Listing Regulations. Your Company has adopted a Whistle-Blower Policy to report unethical/ illegal/improper behaviour. Your Company has made employees aware of the Whistle-Blower Policy to enable them to report instances of leak of unpublished price sensitive information.
The said Policy also provides for adequate safeguards against victimisation of persons who use such vigil mechanism and makes provision for direct access to the chairperson of the Audit Committee in exceptional cases. Further, no stakeholders have been denied access to the Audit Committee.
Composition of the Audit Committee
Your Company has constituted an Audit Committee, the composition of which has been provided in the Corporate Governance Report. During the FY 2021-22, the Board accepted all the recommendations of the Audit Committee.
During the year under review, the Company has complied with all the applicable provisions of Secretarial Standards issued by the Institute of Company Secretaries of India and notified by the Ministry of Corporate Affairs, Government of India.
There are certain pending cases against your Company which are sub judice in court.
Besides this, the Company has filed an appeal before the Hon''ble Securities Appellate Tribunal (the ''SAT''), challenging the adjudication order in respect of an adjudication proceeding initiated by SEBI in relation to the credit ratings assigned to one of the Company''s customer and the customer''s subsidiaries (the ''Impugned Order'') and deposited the penalty amount of INR 25 lacs as imposed vide the Impugned Order without prejudice to such appeal.
Further, the Securities and Exchange Board of India (SEBI), vide its order dated September 22, 2020, has enhanced the penalty amount to INR 1 crore on ICRA under Section 15HB of SEBI Act, 1992. The Company has filed an appeal challenging the SEBI enhancement order before the SAT and has deposited the additional penalty amount of INR 75 lacs, without prejudice to the rights and contentions of the Company.
The first quarter of FY21-22 saw a sharp fall in economic activity across sectors - manufacturing as well as services - due to the lockdown imposed by the Central and the state Governments. The subsequent quarters saw a rebound in the economic activity as the lockdown was lifted. While the impact of this on the economy is still evolving, there is keenness on the part of the Government to ensure minimum disruption to economic activity while significantly ramping up vaccination efforts.
Rating opportunities in the near term are going to depend, among other things, on the revival in economic activity, trajectory of interest rates and Government spending to revive manpower intensive sectors that in turn would spur consumption.
Your Company has considered internal and external information and has performed an analysis based on the current estimates on your Company''s capital and financial resources, profitability, liquidity position, assets, internal financial reporting and control, and demand for the Company''s services. Your Company is of the view that based on its present assessment this situation does not materially impact your Company''s capital and financial resources. However, the actual impact of Covid-19 may differ from that estimated due to unforeseen circumstances and your Company will continue to closely monitor any material changes to future economic conditions.
As on date of this Report, there has been no impact on the business due to non-fulfilment of any obligations by any party to existing contracts/agreements, except a few cases which are sub judice.
Your Company extended remote work for all employees across all locations for a major part of the year. In March 2022, the employees returned to working in offices across all locations. Your Company has demonstrated its ability to provide seamless delivery of high-quality and timely services to its clients even during the lockdown and with the employees working remotely.
Your Directors acknowledge the cooperation and assistance received from various institutions, Government agencies, members and professionals from different disciplines.
Your Directors also wish to place on record their appreciation of the contribution made by the members of the staff of your Company.
For and on behalf of the Board of Directors
(Arun Duggal)
Place: Gurugram Chairman
Date: May 12, 2022 DIN: 00024262
The count of downgrades excludes the entities whose ratings were downgraded because of their non-cooperation with ICRA unless it was a case of a downgrade to the [ICRA]D category.
Downgrade Rate is defined as the number of entities downgraded in the period of analysis as a percentage of the total number of rated entities as of the beginning of the period. The calculation of the downgrade rate excludes the [ICRA]D rated entities.
Upgrade Rate is defined as the number of entities upgraded in the period of analysis as a percentage of the total number of rated entities as of the beginning of the period. The calculation of the upgrade rate excludes the [ICRA]AAA and the [ICRA]A1 rated entities.
NOTE: The data in this section does not include the ratings assigned to securitisation transactions, nor does it capture ratings that were in the ''Issuer Not Cooperating'' (INC) category at the beginning of the year
Mar 31, 2018
Directors'' Report
Review of Operations Rating Services Market Overview
The market for credit rating business in FY2018 was positively influenced by favourable interest rates in the first five months of the year and new rating opportunities in the commercial paper and debt restructuring segments, while economic growth remained moderate as it adjusted to the Goods and Services Tax (GST) transition and the broad-based recovery in investment activity continued to be delayed.
Capital market issuances of debt in the first five months of the year grew well, supported by low interest rates. However, bond yields hardened in H2 FY2018 on account of factors such as the rise in the market borrowing programme of the Government of India (GoI), fiscal slippage relative to the previously announced targets, the uptick in the CPI inflation, as well as the hardening of global yields. This, in conjunction with the tepid recovery in private sector capex, weighed upon bond market issuance volumes in H2 FY2018, even as bank credit growth saw a modest revival, led by the base effect and higher working capital requirements.
Economic growth in FY2018 remained moderate as various sectors adjusted to the GST transition in H1 FY2018. While volume growth was low in many sectors in Q1 FY2018 to minimise inventories ahead of the GST rollout, the subsequent pace of restocking in Q2 FY2018 was modest. Subsequently, a number of sectors displayed healthy performance in Q3 FY2018, benefitting from the favourable base effect as well as a catch-up related to the low growth in H1 FY2018. Nevertheless, moderate capacity utilisation, high leverage levels of some large corporate groups and weak asset quality of the banking system continued to delay a broad-based recovery in investment activity.
Going ahead, expansion in Government spending at the Central and state level are expected to support economic activity and infrastructure creation. Furthermore, a likely normally distributed monsoon, increase in the minimum support prices (MSPs) of various crops, the improving sentiment and staggered pay revision by state governments are expected to support consumption growth. This, in turn, would support capacity utilisation in various sectors, although a broad-based capacity addition by the private sector is unlikely to emerge until H2 FY2019. Completion of the resolution process of cases admitted to the National Company Law Tribunal (NCLT) would improve utilisation of the existing capacity and promote consolidation in some sectors.
While bank credit growth in FY2019 would be supported by increasing capacity utilisation, it would be contingent upon the recapitalisation of the public sector banks (PSBs) and investment revival in the economy. An increased regulatory thrust to part-finance incremental borrowings, particularly in case of borrowers with whom banks have large exposures in capital market financing, is likely to support the bond market.
Corporate Sector
As in the previous years, the market for bank loan ratings remained sluggish in FY2018 too, although the corporate credit growth showed a marginal revival in the second half of the year because of enhanced demand for working capital loans and slowing bond market issuances. While sectoral performance in the first half of the year was impacted because of the twin effects of demonetisation and transition to the GST, volume growth has started to show an upward trend from Q3 of 2017-18, and this is expected to result in improved corporate performance going forward. Also the capacity utilisation levels in several industries are showing signs of a pick-up along with the capital goods segment, even though it would still be some time before private capital expenditure revives meaningfully.
In contrast to the trend seen in the previous years, borrowings through the bond route also showed a slowdown, especially in the second half of the year due to rising yields. However, we believe that this was a temporary phenomenon, and as yields stabilise we should see increased traction in the bond market, given the ability to borrow at lower rates and the strong regulatory support for the growth of the bond markets. During the year, the trend of special purpose vehicles (SPVs) in the infrastructure sector accessing the bond market to refinance bank loans continued, primarily driven by entities in the road sector and to some extent the power sector. Contrary to expectations, though, fund raising through new instruments like Infrastructure Investment Trusts (InvITs), formed under the Securities and Exchange Board of India (Sebi) InvIT Regulations 2014, did not show traction, possibly because of the muted investor response to the first two offerings.
Your Company has also been involved in the Independent Credit Evaluation (ICE) of stressed assets as required under the Reserve Bank of India''s revised framework for resolution of stressed assets. Given the large quantum of stressed assets in the banking sector, we expect that this service has the potential to grow in the coming year.
Till the third quarter of last year, the commercial paper (CP) market continued to be active with better rated entities using the CP route to meet their funding requirements, though activity levels were subdued in the last quarter because of higher interest rates. Your Company gained significantly from the Reserve Bank of India (RBI) mandating dual rating of CPs for issuances above a certain threshold, adding prominent corporates to its client list, and providing opportunities in the future as well.
Financial Sector
Total domestic issuances by the financial sector entities witnessed a slowdown during 2017-18 after three consecutive years of strong growth. Banks as well as non-bank finance companies (NBFCs) witnessed lower issuance volumes in 2017-18.
The year witnessed reduced bond issuances by PSBs as investors became risk averse to their bond issuances amid their mounting losses. Announcement by PSBs of recapitalisation improved the capital position for the PSBs and later the GoI instructions restricting PSBs to issue Tier-I capital bonds impacted bond issuances from PSBs. The slowdown in bond issuances by PSBs was largely offset by the growth in bond issuances from private sector banks (PVBs), as they locked in the borrowings at lower rates. With abundant liquidity in the banking system, the issuance of certificate of deposits also remained muted during most part of the year. Going forward, the debt capital issuances from banks is expected to be largely driven by banks pursuing credit growth, which is expected to be largely driven by PVBs, which have demonstrated relatively better financial performance in comparison to PSBs. Your Company has a strong presence in the banking segment.
The NBFCs borrowings from debt capital markets also witnessed a moderation during 2017-18 with the rise in interest rates in the latter half of the financial year and a higher base on the back of strong growth in the last few years. An increased appetite for credit by banks, especially in the H2 2017-18, also contributed to lower issuance volumes as some of the NBFCs shifted back to borrowings from banks. The inflows in the debt mutual funds have also been stagnating after the increase witnessed post demonetisation. This may also constrain the growth of debt issuances. The challenges with the banking sector helped the NBFCs expand their activity while maintaining adequate profitability and asset quality metrics, though the aftereffects of demonetisation and the GST implementation did have an adverse impact on the collection efficiencies, especially in the micro finance sector, small and medium enterprise loans and loans against property segments. Your Company continued to expand its presence in this space by adding new clients and rating the incremental debt requirements of existing clients.
The year under review continued to witness Tier II bond issuances from insurance companies to strengthen their regulatory solvency profile, which is in addition to the ratings done on the claims-paying ability of these companies. Your Company continued to maintain a major share of this segment.
Ratings on mutual fund schemes continued to gain traction for your Company as it further expanded during the year under review.
Structured Finance
During FY2018, the securitisation market witnessed a marginal de-growth after showing a positive momentum in FY2016 and FY 2017.
The predominant motive for banks to invest in securitisation transactions and acquire loan pools through bilateral assignment continued to be the need to meet shortfalls in priority sector lending (PSL) targets and achieve balance sheet growth, respectively. This was, however, offset by the availability of the priority sector lending certificates (PSLCs) as an alternate tool available to banks for meeting their PSL requirements. PSLCs were the primary cause for the reduced securitisation volumes in FY2018.
Continuing the trend that started in the previous fiscal (pursuant to more clarity on legacy tax issues and removal of the distribution tax on securitisation trusts), mutual funds and foreign portfolio investors (FPIs) continued to push the non-PSL volumes.
In FY2018, your Company rated the first collateralised loan obligation (CLO) transaction, post the 2006 RBI guidelines on securitisation. Your Company continued to maintain its position as a thought leader and a dominant credit rating agency (CRA) in the structured finance segment.
Going forward, the extent of the shortfall in PSL targets in the banking system and the availability of eligible assets with sellers are expected to be the key factors influencing securitisation /assignment volumes. However, continued traction in the PSLC market and any adverse impact of adoption of the Indian Accounting Standards on the originators, could hamper issuance volumes going forward. Nonetheless, the market has seen a number of new asset classes getting securitised in the non-PSL segment and this trend is expected to strengthen further.
Industry Research
Your Company has added several new clients as it continues to strengthen its research offerings, covering a large number of sub-segments within the corporate sector and multiple sub-segments under the financial services and structured finance sectors. Being focussed and thematic, these reports have been well appreciated, particularly by the senior management.
Besides the periodic off-the-shelf research publications, your Company''s customised research offerings to meet the specific requirements of various clients have also been well appreciated. Your Company expects to be able to enhance the offerings under this service, leveraging its extensive knowledge base and research capabilities.
Franchise Development
Your Company has made significant strides to enhance its franchise through seminars, conferences and media activities aimed at promoting its visibility and brand strength.
During the year, your Company organised several seminars and conferences, including a few with industry associations like Assocham, CII etc to disseminate its views on credit trends in specific sectors in the domestic markets. Like each year, the Annual ICRA Bond Market and the Moody''s-ICRA credit conferences, involving speakers and panellists representing the market participants, were very well received by the participants.
Further, your Company''s sector-specific webinars and thematic research reports, were all well appreciated. Apart from these, your Company has been able to attain significant visibility in both electronic and print media - it has maintained its leading position in the latter in terms of share of voice through regular releases voicing our opinion on contemporary issues.
Your Company continues to be a preferred partner in powering the Financial Advisor Awards along with CNBC-TV18, and the India Pride Awards, an initiative to recognise the superior performing public sector entities, with the Dainik Bhaskar Group. These awards have a strong franchise and are a subject of considerable pride for the winners.
Change in nature of business
During 2017-18, there was no change in the nature of business of your Company.
Subsidiary Companies (including step-down subsidiaries)
At the beginning of the year 2017-18, your Company had six subsidiaries, including one step-down subsidiary.
There has been no material change in the nature of the business of the subsidiaries.
As of March 31, 2018, your Company had namely the following subsidiaries, including the step-down subsidiary:
|
S. No. |
Name of Subsidiary Companies |
Category |
Country of Incorporation |
|
1. |
ICRA Management Consulting Services Limited |
Subsidiary |
India |
|
2. |
Pragati Development Consulting Services Limited |
Step-down subsidiary |
India |
|
3. |
ICRA Online Limited |
Subsidiary |
India |
|
4. |
PT. ICRA Indonesia* |
Subsidiary |
Indonesia |
|
5. |
ICRA Lanka Limited |
Subsidiary |
Sri Lanka |
|
6. |
ICRA Nepal Limited |
Subsidiary |
Nepal |
Highlights of performance of subsidiary companies and their contribution to the overall performance of the Company during the year 2017-18 are provided in the Management Discussion and Analysis Report.
The consolidated financial statements of Group ICRA, consisting of ICRA Limited, its subsidiaries, and step-down subsidiary, for the year 2017-18, which form a part of the Annual Report, are attached. The Auditors'' Report on the consolidated financial statements is also attached. In compliance with the relevant provisions of the Companies Act, 2013, a statement containing the brief financial details in Form AOC-1 as per Rule 5 of the Companies (Accounts) Rules, 2014, of the said subsidiaries is annexed to the consolidated financial statements, prepared in accordance with the prescribed Accounting Standards.
As required under the provisions of Section 136 (1) of the Companies Act, 2013, the financial statements, including consolidated financial statements and other documents required to be attached thereto, have been uploaded on the Company''s website, www.icra.in. Further, your Company has also uploaded on its website the audited financial statements of each subsidiary company.
Your Company operates its business from its offices in New Delhi, Gurugram, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune.
Board meetings held during the year
During the year, four meetings of the Board of Directors were held. The details of the meetings are furnished in the Corporate Governance Report attached as Annexure-III to this Report.
Human Resource Development & Training
Human resource development continued to be accorded high priority during the year under review, with emphasis being placed on improving skill, competency and knowledge through regular training and in-house/external professional development programmes. Learning opportunities are extended to employees across levels which also results in the overall improved performance of the Company. New joiners go through a systematic on-boarding programme to equip them adequately with information and skills required to be purposeful at work.
ICRA believes in empowering and nurturing talent. Deserving employees, those who demonstrate high performance and potential, are awarded challenging assignments and higher responsibilities. They are provided adequate training and coaching to prepare them towards the same.
The Company inspires its employees to be focused and result-oriented. As part of the overall talent strategy, the Company reviews a succession plan towards critical positions, annually.
There is a harmonious relationship between the employees and the management of your Company. The consultative and participative management style of your Company has facilitated the achievement of its corporate goals. The employee morale has been high, resulting in a positive contribution to your Company''s progress.
Employees Stock Option Scheme (ESOS)
Your Company has implemented the Employee Stock Option Scheme 2006 ("the Scheme") in accordance with the erstwhile Guidelines i.e. the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, and in conformity with the resolutions passed by the Members at the Annual General Meetings of the Company held on June 12, 2006, July 29, 2008, and August 12, 2011. The Scheme came into force on June 27, 2006 and expired on June 27, 2016, after completion of 10 years, but the expiry shall not affect the granted options and the eligible employees will have the right to exercise till the expiry date of such options, with the expiry date of the last instalment of granted options being November 8, 2018.
The disclosures in terms of Regulation 14 of the Securities and Exchange Board of India (Share-Based Employee Benefits) Regulations, 2014 read with Circular No CIR/CFD/POLICY CELL/2/2015, dated June 16, 2015, issued by the Securities and Exchange Board of India, are available on the Company''s website and the web-link for the same is:
https://www.icra.in/InvestorRelation/ShowCorpGovernanceReport/?Id = 27&Title = Corporate%20 Governance&Report=Disclosures%20on%20ESOPs_03-07-2017.pdf.
Particulars of Employees
The disclosure under the provisions of Section 197(12) of the Companies Act, 2013, regarding the ratio of the remuneration of each Director to the median employee''s remuneration and such other details as specified in Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to the Directors'' Report (Annexure I). A statement showing the names of the top ten employees in terms of remuneration drawn and other particulars of the employees drawing remuneration in excess of the limits set out in Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as well as the names and other particulars of every employee covered under the rule are available at the registered office of the Company, and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished without any fee.
Having regard to the provisions of Section 136(1) of the Companies Act, 2013, the Directors'' Report, excluding the information provided in compliance with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is being sent to the members of the Company.
Extract of the Annual Return
An extract of the Annual Return in Form No. MGT 9, as per Section 92(3) and Rule 12 of the Companies (Management and Administration) Rules, 2014, is annexed with this report (Annexure II).
Corporate Governance
The report of the Board of Directors of your Company on Corporate Governance is presented as a separate section (Annexure III) titled Corporate Governance Report, which forms a part of the Annual Report.
The composition of the Board, the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders Relationship Committee, the Corporate Social Responsibility Committee and other Committees of the Board, the number of meetings of the Board and Committees of the Board, and other matters are presented in the Corporate Governance Report.
The certificate of the Statutory Auditors of your Company regarding compliance with the Corporate Governance requirements as stipulated in the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations") is annexed to the Directors'' Report.
Management Discussion & Analysis
The Management Discussion and Analysis is annexed to the Annual Report (Annexure IV).
Insider Trading Regulations
Based on the requirements under the SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time, the Code of Conduct for prevention of insider trading is in force in your Company. The Board of Directors of the Company has adopted the Code of Practises and Procedures for Fair Disclosure of Unpublished Price Sensitive Information in compliance with Chapter IV of the said Regulations and the same has been uploaded on the Company website.
Material Changes and Commitments
No material changes and commitments that would affect the financial position of the Company have occurred between the end of the financial year to which the attached financial statements relate and the date of this report. Further, as per the disclosure required under Section 134 of the Companies Act, 2013 read with Rule 8(5) of Companies (Accounts) Rules, 2014, no significant and material orders have been passed by the regulators or courts or tribunals impacting the going concern status and the Company''s operations in future.
Buyback of Shares
During the year 2016-17, the Board of Directors of your Company at their meeting held on February 9, 2017, had approved the buyback of the Company''s fully paid-up equity shares of the face value of Rs.10 each from its members/beneficial owners, other than those who are promoters or the persons in control of the Company and the promoter group, from the open market through the stock exchange mechanism i.e. using the electronic trading facilities of the BSE Limited and the National Stock Exchange of India Limited, where the equity shares are listed in accordance and consonance with the provisions contained in the Companies Act, 2013 (Act) and the provisions contained in the Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 (Buyback Regulations).
The buyback commenced from March 2, 2017 and closed on April 3, 2017. The Company bought back 96,720 equity shares at an average price of Rs. 4,135.54 per equity share for a total consideration of Rs. 39,99,89,225/- (Rupees Thirty Nine Crore Ninety Nine Lakh Eighty Nine Thousand and Two Hundred Twenty Five Only) (excluding transaction costs), representing 99.997% of the total approved amount of Rs. 40.00 crore (Rupees Forty Crore Only) towards the buyback.
Share Capital
As on March 31, 2018, the Company''s issued, subscribed and paid-up equity share capital, stood at Rs. 9,90,32,800 (Nine Crore Ninety Lakh Thirty Two Thousand Eight Hundred Only) divided into 99,03,280 equity shares of Rs. 10/- each.
Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings and Expenditure
As your Company is not engaged in any manufacturing activity, the particulars relating to conservation of energy and technology absorption, as mentioned in the Companies (Accounts) Rules, 2014, are not applicable to it. However, emphasis is placed on employing techniques that result in the conservation of energy. Details on the foreign exchange earnings and expenditure of your Company appear in the notes to the financial statements.
Directors and Key Managerial Personnel
During 2017-18, Mr. Simon Richard Hastilow, Non-Executive, Non-Independent Director of your Company, resigned from the Board of your Company inclusive of membership in any and all committees of the Board. The resignation of Mr. Hastilow was effective from November 1, 2017. The Board placed on record its deep appreciation of the valuable advice and guidance provided by Mr. Hastilow throughout his tenure with your Company.
During the year under review, the Board of your Company appointed Mr. Navneet Agarwal as Additional Director, effective from November 2, 2017.
The Nomination and Remuneration Committee and the Board of your Company recommend the appointment of Mr. Agarwal, under the category of Non-Executive, Non-Independent Director, liable to retire by rotation, for approval of the shareholders of the Company at the forthcoming Annual General Meeting. The resolution seeking Mr. Agarwal''s appointment as Director has been included in the Agenda of the Annual General Meeting.
Pursuant to the provisions of Section 152 of the Companies Act, 2013, and the Articles of Association of your Company, Mr. Thomas John Keller Jr. is due to retire by rotation, and being eligible, has offered himself for re-appointment.
Proposals for the above appointments form a part of the Agenda for the forthcoming Annual General Meeting and the resolution is recommended for your approval. The profile of Messrs. Keller and Agarwal are presented in the Notice of the 27th Annual General Meeting, as required under the Companies Act, 2013, and the Listing Regulations.
Independent Directors'' Declaration
As required under Section 149(7) of the Companies Act, 2013 read with Schedule IV of Companies Act 2013, the Company has received a confirmation/declaration from each of the Independent Directors stating that they meet the criteria of independence. The following Non-Executive Directors of the Company are independent in terms of Section 149(6) of the Companies Act, 2013, and the Listing Regulations:
1. Mr. Arun Duggal
2. Ms. Ranjana Agarwal
3. Ms. Radhika Vijay Haribhakti
Directors'' Responsibility Statement
As required under the provisions contained in Section 134 of the Companies Act, 2013, your Directors hereby confirm that:
(i) in the preparation of the Annual Accounts for the year ended March 31, 2018, the applicable accounting standards have been followed and there are no material departures from the same;
(ii) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that year;
(iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
(iv) the Directors had prepared the Annual Accounts on a going concern basis;
(v) the Directors had laid down the internal financial controls, followed by the Company and that such internal financial controls are adequate and were operating effectively; and
(vi) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Policy on Directors'' Appointment
The Nomination and Remuneration Committee works with the Board to determine the appropriate characteristics, skill and experience that are required of the members of the Board. The members of the Board should possess the expertise, skills and experience needed to manage and guide the Company in the right direction and to create value for all stakeholders. The members of the Board will need to consist of eminent persons of proven competency and integrity with an established track record. Besides having financial literacy, experience, leadership qualities and the ability to think strategically, the members are required to have a significant degree of commitment to the Company and should devote adequate time in preparing for the Board meeting and attending the same. The members of the Board of Directors are required to possess the education, expertise, skills and experience in various sectors and industries needed to manage and guide the Company. The members are also required to look at strategic planning and policy formulations.
The members of the Board should not be related to any executive or independent director of the Company or any of its subsidiaries. They are not expected to hold any executive or independent positions in any entity that is in direct competition with the Company. Board members are expected to attend and participate in the meetings of the Board and its Committees, as relevant. They are also expected to ensure that their other commitments do not interfere with the responsibilities they have by virtue of being a member of the Board of the Company. While reappointing Directors on the Board and Committees of the Board, the contribution and attendance record of the Director concerned shall be considered in respect of such reappointment. The Independent Directors shall hold office as a member of the Board for a maximum term as per the provisions of the Companies Act, 2013 and the rules made thereunder, in this regard from time to time, and in accordance with the provisions of the Listing Regulations. The appointment of Directors shall be formalised through a letter of appointment.
The Executive Directors, with the prior approval of the Board, may serve on the Board of any other entity if there is no conflict of interest with the business of the Company.
Board and Directors'' Performance Evaluation
The Board of Directors of the Company, based on the recommendations of the Nomination and Remuneration Committee, has formulated a Board and Directors'' Performance Evaluation Policy, thereby setting out the performance evaluation criteria for the Board and its Committees and each Directors'' performance, including the Chairman of the Company.
Your Company''s Board had undertaken a formal performance evaluation in a comprehensive and structured manner as a part of the strengthening exercise. Based on the recommendations of the Nomination and Remuneration Committee, the Board has adopted a process of receiving anonymous feedback and discussing the same at the meeting to ensure the Directors'' collective participation and meaningful discussion over the performance of the Board, its Committees, individual Directors and Chairperson of the Board.
Your Company''s Board believes that trust in the evaluation process and its confidentiality is critical for the success of the evaluation exercise, therefore, the Board encourages fair and transparent evaluations and maintains anonymity of those providing the feedback.
During the evaluation process, various suggestions were made by individual Board members to further enhance the effectiveness of your Company''s Board. The results of the feedback were discussed with the Board and its respective committee members. Individual feedback was shared by the Chairman with each Board member separately.
The Board of Directors of the Company believes that the effectiveness of its governance framework can continue to be improved through periodic evaluation of the functioning of the Board as a whole, its committees and individual directors'' performance evaluation.
Auditors
M/s. B S R & Co. LLP, Chartered Accountants, were appointed as Statutory Auditors of your Company, at the 24th Annual General Meeting to hold office until the conclusion of the 28th Annual General Meeting, subject to ratification in each Annual General Meeting. In accordance with the Companies (Amendment) Act, 2017, the appointment of Statutory Auditors is not required to be ratified at every Annual General Meeting.
Comments on Auditors'' Report
The notes to the financial statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments.
The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.
Secretarial Audit
The Board of Directors of the Company has appointed M/s. Y.J. Basrar & Co., Company Secretaries (Membership No. FCS 2754), as the Secretarial Auditor of the Company for the financial year 2017-18 in terms of Section 204 of the Companies Act, 2013. The Secretarial Audit Report for financial year 2017-18 has been annexed to this Report (Annexure V). The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks.
Transfer to Reserves
Your Company proposes not to transfer any amount to the General Reserve.
Dividend
The Board of Directors recommends for approval of the Members at the forthcoming Annual General Meeting, payment of dividend of Rs. 30 per Equity Share for the financial year ended March 31, 2018. If the members approve the dividend at the forthcoming Annual General Meeting, the dividend shall be paid to: (i) all those members whose names appear in the Register of Members as on Friday, August 17, 2018; and (ii) all those members whose names appear on that date as beneficial owners as furnished by National Securities Depository Limited and Central Depository Services (India) Limited.
Dividend Distribution Policy
Your Company has formulated a Dividend Distribution Policy (''the Policy'') pursuant to Regulation 43A of the Listing Regulations. The objective of the Policy is to maintain stability in the dividend payout of the Company, subject to the applicable laws and to ensure a regular dividend income for the members and long term capital appreciation for all stakeholders of the Company.
Your Company would ensure to strike the right balance between the quantum of dividend paid and the amount of profits retained in the business for various purposes. The Board of Directors refers to this Policy while declaring/recommending dividends on behalf of the Company. Through this Policy, the Company would try to maintain a consistent approach to dividend pay-out plans, subject to the applicable laws. The Policy has been annexed to this report (Annexure VI) and also uploaded on the website of the Company, www.icra.in.
Transfer to Investor Education and Protection Fund
The Company sends reminder letters to all members whose dividends are unclaimed so as to ensure that they receive their rightful dues. Your Company has also uploaded on its website, www.icra.in, information regarding unpaid/unclaimed dividend amounts lying with your Company.
During 2017-18, the unclaimed dividend amount of Rs. 1,26,769 towards the unpaid dividend account of the Company for the financial year 2009-10 was transferred to Investor Education and Protection Fund. The said amount had remained unclaimed for seven years, despite reminder letters having been sent to each of the members concerned.
Pursuant to Section 124(6) of the Companies Act, 2013 and the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and its amendments, all shares in respect of which dividend has not been paid or claimed for seven consecutive years or more shall be transferred by the Company in the demat account of Investor Education and Protection Fund ("IEPF") Authority (the "Authority") within a period of thirty days of such shares becoming due to be transferred to the IEPF, as per the procedure mentioned in the said Rules. Accordingly, your Company has transferred 207 equity shares to the demat account of the Authority and in terms of the said Rules. All benefits accruing on such shares viz. bonus shares, split, consolidation, fraction shares etc. except the right issue shall also be credited to such demat account.
Members may note that unclaimed dividend and shares transferred to the demat account of the Authority can be claimed back by them from IEPF Authority by following the procedure mentioned in the said Rules.
Risk Management Policy
Your Company has formulated a risk management policy. This policy is a formal acknowledgement of the commitment of your Company to risk management. The aim of the policy is not to have risk eliminated completely from the Company''s activities, but rather to ensure that every effort is made by the Company to manage risks appropriately to maximise potential opportunities and minimise the adverse effects of risk. The Board and the Audit Committee monitor and review the risk management plan.
Internal Control System and their Adequacy
Your Company has an internal control system, commensurate with its size, nature of its business and complexities of its operations. The Board of Directors of your Company has adopted policies and procedures for ensuring the orderly and efficient conduct of your Company''s business. The Board of Directors of your Company has laid down Internal Financial Controls to provide reasonable assurance with regard to recording and providing reliable financial and operational information, adherence to the Company''s policies, safeguarding of assets and prevention and detection of frauds and errors, the accuracy and completeness of accounting records and timely preparation of reliable information. The Board and the Audit Committee regularly evaluate internal financial controls.
Corporate Social Responsibility
Your Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The CSR policy has been devised on the basis of the recommendations made by the CSR Committee. The composition of the CSR Committee, the CSR policy of the Company, details about the development and implementation of the policy and initiatives taken by the Company during the year as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014, have been annexed to this report (Annexure VII).
Business Responsibility Report
Your Company, in accordance with the provisions of Regulation 34(2)(f) of the Listing Regulations has prepared a Business Responsibility Report for the year 2017-18. The Business Responsibility Report describes the initiatives taken by the Company from environmental, social and governance perspective. The Business Responsibility Report has been annexed to this report (Annexure VIII) and forms a part of the Director''s Report.
Particulars of Contracts or Arrangements with Related Parties
Your Company has entered into contracts or arrangements with its related parties. The related-party transactions are disclosed in the financial statements for the year ended March 31, 2018. There have been no material-related party transactions as per Section 188(1) of the Companies Act, 2013 and as per Regulation 23 of the Listing Regulations, and the required disclosures of information in Form AOC-2 in terms of Section 188 of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, are annexed to this report (Annexure IX).
Policy on Prohibition, Prevention and Redressal of Sexual Harassment
Your Company has formulated a Policy on Prohibition, Prevention and Redressal of Sexual Harassment of Women at Workplace in accordance with The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act,
2013. The Company has constituted separately for all the branches an "Internal Committee" for prevention and redressal of sexual harassment at workplace. The Company has not received any complaints.
Deposits
The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.
Particulars of Loans, Guarantees and Investments
The particulars of loans, guarantees and investments are disclosed in the financial statements for the year ended March 31, 2018.
Vigil Mechanism/Whistle-Blower Policy
Your Company has established a vigil mechanism in compliance with the provisions of Section 177 (9) of the Companies Act, 2013, and Regulation 22 of the Listing Regulations. Your Company has adopted a Whistle Blower Policy for reporting of unethical/illegal/improper behaviour. The said whistle-blower policy also provides for adequate safeguards against victimisation of persons who use such vigil mechanism and makes provision for direct access to the chairperson of the Audit Committee in exceptional cases. Further, no stakeholders have been denied access to the Audit Committee.
Composition of the Audit Committee
Your Company has constituted an Audit Committee, the composition of which has been provided in the Corporate Governance Report. During the financial year 2017-18, the Board accepted all the recommendations of the Audit Committee.
Litigations
During the year 2017-18 there were no litigations against the Company.
Acknowledgements
Your Directors acknowledge the cooperation and assistance received from various institutions, Government agencies, members and professionals from different disciplines.
Your Directors also wish to place on record their appreciation of the contribution made by the members of staff of your Company.
For and on behalf of the Board of Directors
(Arun Duggal)
Place : Gurugram Chairman
Date : May 17, 2018 DIN: 00024262
Mar 31, 2017
Review of Operations Rating Sen/ices Market Overview
Growth in the economy in FY201 7 continued to remain moderate as the recovery remained limited to sectors such as roads, metro rail and urban infrastructure, partly benefiting from higher capital spending by the Government of India (Gol). Moderate capacity utilization, high leverage levels of some large corporate groups and weak asset quality of the banking system continued to delay a broad-based recovery in investment activity. The consumption boost that was expected in H2 FY201 7 on account of the near-normal monsoon and the implementation of the Seventh Central Pay Commission''s (SCPC''s) recommendations, was temporarily affected by the note ban. The withdrawal of the legal tender status for the existing currency notes in the denominations of Rs. 500 and Rs. 1,000 from November 9, 2016, temporarily affected economic activity in some sectors.
The moderation in retail inflation, led the Reserve Bank of India (RBI) to reduce the benchmark repo rate by 50 basis points during FY201 7. With faster transmission of monetary easing to the debt market, the trend of disintermediation continued, with a number of corporate accessing the domestic bond and commercial paper (CP) market.
Going ahead, the economic activity in FY2018 is expected to be favourably influenced by enhanced Government spending on rural infrastructure, affordable housing and transport, as well as tax concessions to support the MSME sector and the income tax payers in the lowest bracket. The expectation of a normal monsoon, moderate hikes in minimum support prices for various crops, and automatic stabilizers such as the rural employment guarantee scheme, would support rural consumption demand. Urban consumption would benefit from pay revision for state government employees and pensioners. A rise in capacity utilization to healthier levels would set the stage for a revival of private sector investments. While the transition to the Goods and Services Tax (GST) may lead to momentary disruption, the positive impact of this reform is likely to manifest by the end of the year.
While bank credit growth may revive modestly from the lows seen in FY201 7, particularly for working capital financing, finer pricing may result in continued high growth of bond issuances. This, along with the implementation of various regulatory steps such as guidelines encouraging large borrowers to access a certain portion of their financing needs through the market mechanism, augur well for the domestic corporate bond market. The bank loan rating segment is expected to benefit, to some extent, from the higher risk weights for larger unrated bank exposures.
Corporate Sector
As in the previous years, the market for bank loan ratings remained sluggish in FY201 7 too, with corporate credit growth continuing to be muted. With capacity utilization levels in several industries remaining low and little pick up in investment demand, private capital expenditure did not show any meaningful recovery. The "twin balance sheet problem" also continued to weigh on the economy in general and credit growth in particular.
While the bond markets have been showing consistent growth over the last few years, a majority of the fund-raising has been carried out by financial sector entities. However, bond and CP issuances by corporate sector entities also witnessed robust growth. Additionally, the trend of SPVs in the infrastructure sector accessing the bond market to refinance bank loans continued during the year, albeit at a modest pace, by primarily road and power sector entities. Additionally, your Company was also involved in the issuer rating of two Infrastructure Investment Trusts (InvlTs), formed under the Securities and Exchange Board of India (Sebi) InvIT Regulations 201 4. InvIT is a mechanism that enables developers of infrastructure assets to monetize their assets by pooling multiple assets under a single entity (trust structure). Given the huge capital requirement by infrastructure players, this could be an attractive option for infrastructure developers to raise funds once the various market participants are comfortable with the new product.
With the availability of finer rates to raise funds, the commercial paper (CP) market continued to be active with better rated entities using the CP route to meet their funding requirements.
Financial Sector
Total domestic bond issuance by financial sector entities increased well in 2016-1 7, driven by higher volumes by banks as well as non-bank finance companies. With weak profitability and low valuation curbing their ability to raise sizeable equity, banks used the bond route instead to shore up their capital adequacy. Investor appetite for such bonds was supported by the higher spread over banks'' deposits and other debt instruments. The issuance volumes were also partly aided by the relaxation provided by the regulator on servicing of these instruments. Given the sizeable capital requirements for banks as they fully adopt the Basel III regulations, your Company expects the issuance volumes to remain elevated over the medium term. The year also saw the commencement of operations of specialized banks, particularly, the small finance banks. Your Company has a strong presence in this segment.
The non-banking finance companies (NBFCs) borrowed significantly from the debt market, which offered finer rates, amidst steady inflows into the mutual funds and insurance sectors during 2016-17, even as the alternative funding sources, like bank borrowings, continued to remain costlier. The challenges with the banking sector helped the NBFCs expand their activity while maintaining adequate profitability and asset quality metrics. Though the demonetization of specified currency rotes did have an adverse impact on the collection efficiencies, barring a few segments, most segments have shown adequate resilience. Your Company continued to expand its presence in this space by adding new clients and also rating the incremental debt requirements of existing clients.
The year under review also witnessed insurance companies issuing Tier II bonds to strengthen their regulatory solvency profile. Your Company has a major share of this segment.
Your Company also continued to expand its presence in the mutual funds space during the year under review by adding more clients to its portfolio of rated mutual fund houses and schemes.
Your Company continued to build on the social performance assessment (SPA) service, which seeks to measure the social performance of a microfinance institution (MFI) - analysing the manner in which the MFI oversees, manages and monitors its performance to achieve its social mission.
Structured Finance
During FY201 7, the securitization market continued the positive momentum witnessed in FY2016 with the issuance volume rising significantly over the previous fiscal year.
The predominant motive for banksâprimarily domestic private sector banks and foreign banksâto invest in securitization transactions and to acquire loan pools through bilateral assignment - continued to be the need to meet shortfalls in priority sector lending (PSL) targets. In FY201 7, with more clarity and transparency on legacy tax issues and removal of the distribution tax on securitization trusts, the investor base for securitization transactions expanded further with mutual funds entering the market as investors.
Quarterly assessment of PSL targets for banks resulted in issuance volumes being spread throughout the year in FY2017. Prior to that, there was a rush for PSL assets in the second half of the fiscal year to meet the annual PSL targets. Return of mutual funds as an investor segment also resulted in some pickup in non-PSL securitization volumes. However, the share of non-PSL transactions in the overall market continued to remain low. In FY201 7, your Company rated the first securitization transaction backed by trade receivables - a landmark transaction as it marked the return of banks as originators in securitization transactions. Your Company continued to maintain its position as a thought leader and dominant Credit Rating Agency (CRA) in the structured finance segment.
Going forward, the extent of shortfall in PSL targets in the banking system and the availability of eligible assets with sellers are expected to be the key factors influencing securitization issuance/assignment volumes. Opening up of the securitization market for foreign portfolio investors also bodes well for the development of the securitization market.
However, the emergence of priority sector lending certificates (PSLCs) as an alternate mode for banks to meet PSL targets, and any adverse impact of adoption of Indian Accounting Standards on the originators, could also hamper issuance volumes going forward.
Industry Research
Your Company has continued to strengthen its research offerings, covering a large number of sub-segments within the corporate sector and multiple sub-segments under the financial services and structured finance sectors. The research reports are well-appreciated for their in-depth analyses of industry-specific issues such as trends in demand-supply, the competitive landscape and credit trends, apart from their projection of the medium-to-long-term outlook. Being focused and thematic, these reports have been well appreciated particularly by the senior management.
Besides the periodic off-the-shelf research publications, your Company''s customized research offerings to meet the specific requirements of various clients have also been well appreciated. Your Company expects to be able to enhance the offerings under this service, leveraging its extensive knowledge base and research capabilities.
Franchise Development
Your Company continues to make significant efforts to enhance its visibility and reinforce its brand strength through seminars, conferences and media activities aimed at promoting market awareness, bridging the information gap, and recognizing excellence.
During the year, in addition to several joint seminars with Moody''s Investors Service (Moody''s) to disseminate its views on developments in the domestic and global credit markets, your Company organized a bond market conference, involving panelists representing regulators, issuers and investors, which was very well received by the participants.
Further, your Company''s periodic teleconferences, increasing use of research and sectoral reports, were all well appreciated. Apart from these, your Company has been able to attain a substantial share of voice in the media through regular releases voicing our opinion on contemporary issues.
On recognizing excellence, your Company continues to power the Financial Advisor Awards along with CNBC-TV18, and the India Pride Awards, an initiative to recognize the superior performing public sector entities, with the Dainik Bhaskar Group. These awards are a subject of considerable pride for the winners.
Change in nature of business
During 2016-1 7, there was no change in the nature of business of your Company. However, your Company has sold its Kollcata-based wholly-owned subsidiary, which is engaged in information technology and business analytics services, to a global client base.
Subsidiary Companies (including step down subsidiaries)
At the beginning of the year 2016-1 7, your Company had 11 subsidiaries including five step-down subsidiaries.
During 2016-17, members of your Company had approved the sale of its entire shareholding in ICRA Techno Analytics Limited (now known as Nihilent Analytics Limited), then a wholly-owned subsidiary of the Company, inclusive of its four direct and indirect subsidiaries, to Nihilent Technologies Limited, which sale was consummated on October 7, 2016.
Additionally, in 2016-1 7, PT. ICRA Indonesia surrendered its rating license and your Company initiated its liquidation proceedings.
There has been no material change in the nature of the business of the subsidiaries.
As of March 31, 201 7, your Company had namely the following subsidiaries, including the step-down subsidiary:
|
SI. No |
Name of Subsidiary Companies |
Category |
Country of Incorporation |
|
1. |
ICRA Management Consulting Services Limited |
Subsidiary |
India |
|
2. |
Pragati Development Consulting Services Limited |
Step-down subsidiary |
India |
|
3. |
ICRA Online Limited |
Subsidiary |
India |
|
4. |
PT. ICRA Indonesia* |
Subsidiary |
Indonesia |
|
5. |
ICRA Lanka Limited |
Subsidiary |
Sri Lanka |
|
6. |
ICRA Nepal Limited |
Subsidiary |
Nepal |
^liquidation initiated by the Company
Highlights of performance of subsidiary companies and their contribution to the overall performance of the Company during the year 2016-17 are provided in the Management Discussion and Analysis Report.
The consolidated financial statements of Group ICRA, consisting of ICRA Limited, its subsidiaries, and step-down subsidiary, for the year 2016-17, which form a part of the Annual Report, are attached. The Auditors'' Report on the consolidated financial statements is also attached. In compliance with the relevant provisions of the Companies Act, 201 3, a statement containing the brief financial details in Form AOC-1 as per Rule 5 of the Companies (Accounts) Rules, 2014, of the said subsidiaries is annexed to the consolidated financial statements, prepared in accordance with the prescribed Accounting Standards.
As required under the provisions of Section 1 36 (1) of the Companies Act, 2013, the financial statements, including consolidated financial statements and other documents required to be attached thereto, have been uploaded on the Company''s website, www.icra.in. Further, your Company has also uploaded on its website the audited financial statements of each subsidiary company.
Branches of the Company
Your Company operates its business from its offices in Delhi, Gurgaon, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune.
Board meetings held during the year
During the year, six meetings of the Board of Directors were held. The details of the meetings are furnished in the Corporate Governance Report attached as Annexure-lll to this Report.
Human Resource Development & Training
Human resource development continued to be accorded high priority during the year under review, with emphasis being placed on improving skill, competence and knowledge through regular training and in-house/external professional development programmes. Learning opportunities are extended to employees across levels which also results in the overall improved performance of the Company. New joiners go through a systematic On-boarding program to equip them adequately with information and skills required to be purposeful at work.
ICRA believes in empowering and nurturing talent. Deserving employees, those who demonstrate high performance and potential are awarded challenging assignments and higher responsibilities. They are provided adequate training and coaching to prepare them towards the same.
The Company inspires its employees to be focused and result oriented. As part of the overall Talent strategy, company reviews succession plan towards critical positions, annually.
There is a harmonious relationship between the employees and the management of your Company. The consultative and participative management slyle of your Company has facilitated the achievement of its corporate goals. The employee morale has been high, resulting in a positive contribution to your Company''s progress.
Employees Stock Option Scheme (ESOS)
Your Company has implemented the Employee Stock Option Scheme 2006 ("the Scheme") in accordance with the erstwhile Guidelines i.e. Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, and in conformity with the resolutions passed by the Members at the Annual General Meetings of the Company held on June 12, 2006, July 29, 2008, and August 12, 2011. Pursuant to the resolution passed by the Members at the Annual General Meeting held on June 12, 2006 for the grant of options, 9,06,000 equity shares amounting to 9.06% of the equity share capital of your Company have been issued to the ICRA Employees Welfare Trust ("Trust") for grant of options to the eligible option grantees. Upon completion of ten years, the Scheme has expired during 2016-1 7, but the expiry is unlikely to affect the granted options and the eligible employees will have the right to exercise till the expiry date of such options, with the expiry date of the last installment of granted options being November 8, 201 8. The options equivalent to 1,20,250 equity shares of your Company, remained unexercised in terms of the Scheme and are not subject to any grant or vesting to employees. These equity shares of the Company will continue to be held by the Trust and will be dealt with in accordance with the Scheme and the Securities and Exchange Board of India (Share-Based Employee Benefits) Regulations, 2014.
The disclosures in terms of Regulation 14 of the Securities and Exchange Board of India (Share-Based Employee Benefits) Regulations, 2014 read with Circular No CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 issued by the Securities and Exchange Board of India are available on the Company''s website and the web-link for the same is https://www.icra.in/lnvestorRelation/ShowCorpGovernanceReport/?Id=27&Title=Corporate%20 Governance Report=Disclosures%20on%20ESOPs%20(l ).pdf. There were no material changes in the Scheme and the Scheme are in compliance with the Securities and Exchange Board of India (Share-Based Employee Benefits) Regulations, 2014. The Scheme is administered by the ESOS Compensation Committee of the Board of your Company and the ICRA Employees Welfare Trust.
Particulars of Employees
The disclosure under the provisions of Section 197(12) of the Companies Act, 2013, regarding the ratio of the remuneration of each Director to the median employee''s remuneration and such other details as specified in Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to the Directors'' Report (Annexure I). A statement showing the names of the top ten employees in terms of remuneration drawn and other particulars of the employees drawing remuneration in excess of limits set out in Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as well as the names and other particulars of every employee covered under the rule are available at the registered office of the Company, and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished without any fee.
Having regard to the provisions of Section 136(1) of the Companies Act, 2013, the Directors'' Report excluding the information provided in compliance with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is being sent to the members of the Company.
Extract of the Annual Return
An extract of the Annual Return in Form No.MGT 9 as per Section 92(3) and Rule 12 of the Companies (Management and Administration) Rules, 2014, is annexed with this report (Annexure II).
Corporate Governance
The report of the Board of Directors of your Company on Corporate Governance is presented as a separate section (Annexure III) titled "Corporate Governance Report," which forms a part of the Annual Report. The composition of the Board, the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders Relationship Committee, the Corporate Social Responsibility Committee and other Committees of the Board, the number of meetings of the Board and Committees of the Board, and other matters are presented in the Corporate Governance Report.
The certificate of the Statutory Auditors of your Company regarding compliance with the Corporate Governance requirements as stipulated in the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations") is annexed to the Directors'' Report.
Management Discussion & Analysis
The Management Discussion and Analysis is annexed to the Annual Report (Annexure IV).
Insider Trading Regulations
Based on the requirements under the SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time, the Code of Conduct for prevention of insider trading is in force in your Company. The Board of Directors of the Company has adopted the Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information in compliance with Chapter IV of the said Regulations and the same has been uploaded on the Company website.
Material Changes and Commitments
No material changes and commitments that would affect the financial position of the Company have occurred between the end of the financial year to which the attached financial statements relate and the date of this report. Further, as per the disclosure required under Section 134 of the Companies Act, 2013 read with Rule 8(5) of Companies (Accounts) Rules, 2014, no significant and material orders have been passed by the regulators or courts or tribunals impacting the going concern status and the Company''s operations in future.
Buyback of Shares
During the year 2016-1 7, the Board of Directors of your Company at their meeting held on February 9, 201 7, had approved the buyback of the Company''s fully paid-up equity shares of the face value of Rs. 10 each from its members/beneficial owners, other than those who are promoters or the persons in control of the Company and the promoter group, from the open market through stock exchange mechanism i.e. using the electronic trading facilities of the BSE Limited and the National Stock Exchange of India Limited, where the equity shares are listed in accordance and consonance with the provisions contained in the Companies Act, 2013 ("Act") and the provisions contained in the Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 ("Buyback Regulations").
As prescribed under the Buyback Regulations and the Act, the buyback of your Company was for a total amount not exceeding Rs. 40.00 crores (Rupees Forty Crores Only) (the "Maximum Buy back Size"), and at a price not exceeding Rs. 4,500 (Rupees Four Thousand Five Hundred Only) per equity share (the "Maximum Buyback Price"), payable in cash.
The maximum buyback size represented 9.91 % of the aggregate of the Company''s paid-up equity share capital and free reserves based on the standalone audited financial statements of the Company as at March 31, 201 6 (being the latest available audited financial statements of the Company). Further, since the maximum buyback size was less than 10% of the total paid-up equity share capital and free reserves of the Company, in accordance with the proviso to the Section 68(2)(b) of the Act, approval from the members of the Company was not necessary to be taken.
The buyback commenced from March 2, 201 7 and closed on April 3,201 7. Till the date of closure of the buyback, the Company bought back 96,720 equity shares at an average price of Rs. 4,1 35.54 per equity share for a total consideration of Rs. 39,99,89,225/- (Rupees Thirty Nine Crore Ninety Nine Lakh Eighty Nine Thousand and Two Hundred Twenty Five Only) (excluding transaction costs), representing 99.997% of the total approved amount of Rs. 40.00 crores (Rupees Forty Crores Only) towards the buyback.
The equity share capital of the Company before the buyback was 1,00,00,000 equity shares of Rs. 10 each and after extinguishment of 80,677 equity shares; the equity share capital of the Company was 99,19,323 equity shares of Rs. 10 each as on March 31, 201 7.
Share Capital
As on March 31, 2017, in accordance with the buyback of equity shares, the Company''s issued, subscribed and paid-up equity share capital, stood at Rs. 9,91,93,230 (Nine Crore Ninety One Lakh Ninety Three Thousand Two Hundred and Thirty Only) divided into 99,19,323 equity shares of Rs. 10/- each. Till the year ended March 31, 2017, the Company had extinguished 80,677 equity shares. Equity shares amounting to 16,043 were extinguished on April 5,201 7. Post extinguishment of all the equity shares bought back under the buyback, the issued, subscribed and paid-up equity share capital, stood at Rs. 9,90,32,800 (Nine Crore Ninety Lakh Thirty Two Thousand Eight Hundred Only) divided into 99,03,280 equity shares of Rs. 10/- each.
Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings and Expenditure
As your Company is not engaged in any manufacturing activity, the particulars relating to conservation of energy and technology absorption, as mentioned in the Companies (Accounts) Rules, 2014, are not applicable to it. However, emphasis is placed on employing techniques that result in the conservation of energy. Details on the foreign exchange earnings and expenditure of your Company appear in the notes to the financial statements.
Directors and Key Managerial Personnel
During 201 6-1 7, Mr. Robert Scott Fauber, Non-Executive, Non-Independent Director of your Company resigned from the Board of your Company. The resignation of Mr. Fauber was effective from June 14, 2016. The Board placed on record its deep appreciation of the valuable advice and guidance provided by Mr. Fauber throughout his tenure with your Company.
During the year under review, the Board of your Company appointed Ms. Farisa Zarin as Additional Director with effect from June 15, 2016 under the category of Non-Executive, Non-Independent Director. Further, the members of your Company at the Annual General Meeting held on August 11, 201 6 approved the appointment of Ms. Zarin as Non-Executive, Non-Independent Director of your Company.
Pursuant to the provisions of Section 152 of the Companies Act, 2013, and the Articles of Association of your Company, Mr. Simon Richard Hastilow is due to retire by rotation, and being eligible, has offered himself for reappointment.
Proposals for the above appointment forms a part of the Agenda for the forthcoming Annual General Meeting and the resolution is recommended for your approval. The profile of Mr. Simon Richard Hastilow is presented in the Notice of the 26* Annual General Meeting, as required under the Companies Act, 2013, and the Listing Regulations.
Independent Directors'' Declaration
As required under Section 149(7) of the Companies Act, 2013 read with Schedule IV of Companies Act 2013, the Company has received a confirmation/declaration from each of the Independent Directors stating that they meet the criteria of independence. The following Non-Executive Directors of the Company are independent in terms of Section 149(6) of the Companies Act, 2013, and the Listing Regulations:
1. Mr. Arun Duggal
2. Ms. Ranjana Agarwal
3. Ms. Radhika Vijay Haribhakti
Directors'' Responsibility Statement
As required under the provisions contained in Section 134 of the Companies Act, 2013, your Directors hereby confirm that:
(i) in the preparation of the Annual Accounts for the year ended March 31, 201 7, the applicable accounting standards have been followed and there are no material departures from the same;
(ii) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that year;
(iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;
(iv) the Directors had prepared the Annual Accounts on a going concern basis;
(v) the Directors had laid down the internal financial controls followed by the Company and that such internal financial controls are adequate and were operating effectively; and
(vi) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Policy on Directors'' Appointment
The Nomination and Remuneration Committee works with the Board to determine the appropriate characteristics, skill and experience that are required of the members of the Board. The members of the Board should possess the expertise, skills and experience needed to manage and guide the Company in the right direction and to create value for all stakeholders. The members of the Board will need to consist of eminent persons of proven competency and integrity with an established track record. Besides having financial literacy, experience, leadership qualities and the ability to think strategically, the members of the Board of Directors are required to have a significant degree of commitment to the Company and should devote adequate time in preparing for the Board meeting and attending the same. Members of the Board of Directors are required to possess the education, expertise., skills and experience in various sectors and industries needed to manage and guide the Company. The members of the Board are required to look at strategic planning and policy formulations.
The members of the Board should not be related to any executive or independent director of the Company or any of its subsidiaries. They are not expected to hold any executive or independent positions in any entity that is in direct competition with the Company. Board members are expected to attend and participate in the meetings of the Board and its Committees, as relevant. They are also expected to ensure that their other commitments do not interfere with the responsibilities they have by virtue of being a member of the Board of the Company. While reappointing Directors on the Board and Committees of the Board, the contribution and attendance record of the Director concerned shall be considered in respect of such reappointment. The Independent Directors shall hold office as a member of the Board for a maximum term as per the provisions of the Companies Act, 2013, and the Listing Regulations. The appointment of Directors shall be formalized through a letter of appointment.
The Executive Directors with the prior approval of the Board may serve on the Board of any other entity if there is no conflict of interest with the business of the Company.
Board and Directors Performance Evaluation
The Board of Directors of the Company, based on the recommendations of the Nomination and Remuneration Committee, has formulated a Board and Director Performance Evaluation Policy, thereby setting out the performance evaluation criteria for the Board and its Committees and each Directors'' performance, including the Chairman of the Company.
Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board of Directors has carried out an internal evaluation of its own performance, its committees, independent directors, individual directors, including the Chairman. The exercise of performance evaluation was led by the Chairman of the Company along with the chairperson of the Nomination and Remuneration Committee of the Board.
During 2016-17, the Board devised a process to get anonymous feedback on the functioning and performance of the Board as a whole, the chairperson of the Board, the individual directors, and every committee of the Board.
The results of the feedback were discussed with the Board and its respective committees. Individual feedback was shared by the Chairman with each Board member separately.
The Board of Directors of the Company believes that the effectiveness of its governance framework can continue to be improved through periodic evaluation of the functioning of the Board as a whole, its committees and individual directors'' performance evaluation.
Auditors
M/s. B S R & Co. LLB Chartered Accountants, were appointed as Statutory Auditors of your Company, at the 24* Annual General Meeting to hold office until the conclusion of the 28th Annual General Meeting, subject to ratification in each Annual General Meeting. The Company has received their written consent and a certificate that they satisfy the criteria provided under Section 141 of the Companies Act, 2013, and that the appointment, if ratified, shall be in accordance with the applicable provisions of the Companies Act, 2013, and the Rules framed there under. The Board of Directors, in terms of Section 139 of the Companies Act, 201 3, on the recommendation of the Audit Committee, has recommended ratification of appointment of M/s B S R & Co. LL(^ Chartered Accountants as the Statutory Auditors of the Company from the conclusion of the ensuing Annual General Meeting till the conclusion of 27* Annual General Meeting of the Company.
Comments on Auditors'' Report
The notes to the financial statements referred to in the Auditors'' Report are self explanatory and do not call for any further comments.
The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.
Secretarial Audit
The Board of Directors of the Company has appointed M/s. Y.J. Basrar & Co., Company Secretaries (Membership No. FCS 2754), as the Secretarial Auditor of the Company for the financial year 2016-17 in terms of Section 204 of the Companies Act, 2013. The Secretarial Audit Report for financial year 201 6-1 7 has been annexed to this Report (Annexure V). The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks.
Transfer to Reserves
Your Company proposes not to transfer amount to the General Reserve.
Dividend
The Board of Directors recommends for approval of the Members at the forthcoming Annual General Meeting, payment of dividend of Rs. 27 per Equity Share for the financial year ended March 31,2017. If the members approve the dividend at the forthcoming Annual General Meeting, the dividend shall be paid to: (i) all those members whose names appear in the Register of Members as on July 31, 2017; and (ii) all those members whose names appear on that date as beneficial owners as furnished by National Securities Depository Limited and Central Depository Services (India) Limited.
Dividend Distribution Policy
Your Company has formulated a Dividend Distribution Policy (''the Policy'') pursuant to Regulation 43A of the Listing Regulations. The objective of the Policy is to maintain stability in the dividend payout of the Company, subject to the applicable laws and to ensure a regular dividend income for the members and long term capital appreciation for all stakeholders of the Company.
Your Company would ensure to strike the right balance between the quantum of dividend paid and the amount of profits retained in the business for various purposes. The Board of Directors refers to this Policy while declaring/ recommending dividends on behalf of the Company. Through this Policy, the Company would try to maintain a consistent approach to dividend pay-out plans, subject to the applicable laws. The Policy has been annexed to this report (Annexure VI) and also uploaded on the website of the Company, www.icra.in.
Transfer to Investor Education and Protection Fund
The Company sends reminder letters to all members whose dividends are unclaimed so as to ensure that they receive their rightful dues. Your Company has also uploaded on its website, www.icra.in, information regarding unpaid/ unclaimed dividend amounts lying with yourCompany.
During 2016-1 7, the unclaimed dividend amount of Rs. 85,812 towards the unpaid dividend account of the Company for the financial year 2008-09 was transferred to Investor Education and Protection Fund. The said amounts had remained unclaimed for seven years, despite reminder letters having been sent to each of the members concerned.
Pursuant to Section 124(6) of the Companies Act, 2013 and the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and its amendment Rules, 201 7 all shares in respect of which dividend has not been paid or claimed for seven consecutive years or more shall be transferred by the Company in the demat account of Investor Education and Protection Fund ("IEPF") Authority (the "Authority") within a period of thirty days of such shares becoming due to be transferred to the IEPF as per the procedure mentioned in the said Rules. The Company shall transfer/credit such shares to the demat account of the Authority and in terms of the said Rules all benefits accruing on such shares viz. bonus shares, split, consolidation, fraction shares etc. except the right issue shall also be credited to such demat account.
The list containing the names of members and their folio no. or DP ID and Client ID whose shares are due to transfer to the demat account of the authority has been uploaded on the Company''s website viz. www.icra.in.
Pursuant to the said Rules, advertisements have been published in newspapers and individual notices were sent to the members whose equity shares are liable to be transferred to the IEPF Suspense Account. The Company had requested them to encash their unclaimed dividends since financial year 2008-09 as the same remained unclaimed for seven consecutive years.
Members may note that unclaimed dividend and shares transferred to IEPF Suspense Account can be claimed back by them from IEPF Authority by following the procedure mentioned in the said Rules.
Risk Management Policy
Your Company has formulated a risk management policy to ensure that every effort is made to manage risk appropriately so as to maximize potential opportunities and minimize the adverse effects of risk. The Board and the Audit Committee monitor and review the risk management plan.
Internal Control System and their Adequacy
Your Company has an internal control system, commensurate with its size, nature of its business and complexities of its operations. The Board of Directors of your Company has adopted policies and procedures for ensuring the orderly and efficient conduct of your Company''s business. The Board of Directors of your Company has laid down Internal Financial Controls to provide reasonable assurance with regard to recording and providing reliable financial and operational information, adherence to the Company''s policies, safeguarding of assets and prevention and detection of frauds and errors, the accuracy and completeness of accounting records and timely preparation of reliable information. The Board and the Audit Committee regularly evaluate internal financial controls.
Corporate Social Responsibility
Your Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The CSR policy has been devised on the basis of the recommendations made by the CSR Committee. The composition of the CSR Committee, the CSR policy of the Company, details about the development and implementation of the CSR policy and initiatives taken by the Company during the year as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014, have been annexed to this report (Annexure VII).
Business Responsibility Report
Your Company, in accordance with the provisions of Regulation 34(2)(f) of the Listing Regulations has prepared a Business Responsibility Report for the year 201 6-1 7. The Business Responsibility Report describes the initiatives taken by the Company from environmental, social and governance perspective. The Business Responsibility Report has been annexed to this report (Annexure VIII) and forms a part of the Directors'' Report.
Particulars of Contracts or Arrangements with Related Parties
Your Company has entered into contracts or arrangements with its related parties. The related-party transactions are disclosed in the financial statements for the year ended March 31, 201 7. There have been no material-related party transactions as per Section 188(1) of the Companies Act, 2013 and as per Regulation 23 of the Listing Regulations, and the required disclosures of information in Form AOC-2 in terms of Section 188 of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, are annexed to this report {Annexure IX).
Policy on Prohibition, Prevention and Redressal of Sexual Harassment
Your Company has formulated a Policy on Prohibition, Prevention and Redressal of Sexual Harassment of Women at Workplace in accordance with The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013. The Company has constituted separately for all the branches "Internal Committee" for prevention and redressal of sexual harassment at workplace. The Company has not received any complaint.
Deposits
The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.
Particulars of Loans, Guarantees and Investments
The particulars of loans, guarantees and investments are disclosed in the financial statements for the year ended March 31, 2017.
Vigil Mechanism/Whistle-Blower Policy
Your Company has established a vigil mechanism in compliance with the provisions of Section 177 (9) of the Companies Act, 2013, and Regulation of the Listing Regulations. Your Company has adopted a Whistle Blower Policy for reporting of unethical/illegal/improper behaviour. The said whistle-blower policy also provides for adequate safeguards against victimization of persons who use such vigil mechanism and makes provision for direct access to the chairperson of the Audit Committee in exceptional cases. Further, no stakeholders have denied access to the Audit Committee.
Composition of the Audit of Committee
Your Company has constituted an Audit Committee, the composition of which has been provided in the Corporate Governance Report. During the financial year 201 6-1 7, the Board accepted all the recommendations of the Audit Committee.
Litigations
During the year 2016-1 7 there were no litigations against the Company.
Acknowledgements
Your Directors acknowledge the cooperation and assistance received from various institutions, Government agencies, members and professionals from different disciplines.
Your Directors also wish to place on record their appreciation of the contribution made by the members of staff of your Company.
For and on behalf of the Board of Directors
(Arun Duggal)
Place: Gurgaon Chairman
Date: May 1 1, 201 7 DIN: 00024262
Mar 31, 2015
To The Members,
ICRA Limited
The Directors have pleasure in presenting the 24th Annual Report of
your Company along with the Audited Financial Statements for the year
ended March 31,2015.
Financial Performance
During its 24th year of operations, your Company has earned a Net
Profit of Rs. 50.42 crore as against Rs. 58.73 crore during the
previous year. Your Company's Basic Earning per Share for the year
ended March 31,2015 was Rs. 51.44 as against Rs. 58.73 in the previous
year. The financial results of your Company (standalone and
consolidated) for the year ended March 31,2015 are presented in the
following table.
Standalone
Particulars 2013-14 2014-15
(Rs. crore) (Rs. crore)
Revenue from Operations 162.11 180.18
Other operating income 0.79 1.07
Other Income 17.29 24.92
Total Revenue 180.19 206.17
Total Expenditure (98.27) (110.87)
Profit before prior period adjustments, 81.92 95.30
exceptional items and tax
Prior period adjustments - 7.65
Profit before exceptional items and tax 81.92 87.65
Exceptional items - (11.52)
Profit before Tax 81.92 76.13
Tax Expense (23.19) (25.71)
Profit before Minority Interest 58.73 50.42
Minority Interest - -
Profit for the year 58.73 50.42
Balance brought Forward 127.49 153.43
Adjustment of on account of depreciation - (0.20)
Profit Available for Appropriation 186.22 203.65
appropriations
Proposed Dividend 23.00 24.00
Corporate Tax on Proposed Dividend 3.91 4.89
Transfer to General Reserve 5.88 5.05
Balance Carried to Balance Sheet 153.43 169.71
186.22 203.65
Consolidated
2013-14 2014-15
(Rs. crore) (Rs. crore)
Revenue from Operations 282.16 320.88
Other operating income 0.80 1.04
Other Income 19.35 26.23
Total Revenue 302.31 348.15
Total Expenditure (204.40)* (234.61)
Profit before prior period adjustments,
exceptional items and tax 97.91 113.53
Prior period adjustments - 8.97
Profit before exceptional items and tax 97.91 104.56
Exceptional items - (4.13)
Profit before Tax 97.91 100.43
Tax Expense (28.98) (34.85)
Profit before Minority Interest 68.92 65.59
Minority Interest 0.01 0.13
Profit for the year . 68.93 65.45
Balance brought Forward 139.71 175.85
Adjustment of on account of depreciation - (63.25)
Profit Available for Appropriation 208.64 240.76
appropriations
Proposed Dividend 23.00 24.00
Corporate Tax on Proposed Dividend 3.91 4.89
Transfer to General Reserve 5.88 5.05
Balance Carried to Balance Sheet 175.85 206.82
208.64 240.76
*lncludes Rs. 1.46 crore towards Amortisation of Deferred Employees
Compensation for Options granted under the Employees Stock Option
Scheme of your Company.
Conditional Open Offer by Moody's
Moody's Singapore Pte Ltd along with Moody's Investment Company India
Private Limited and Moody's Corporation made a Conditional Open Offer
under Regulation 3(2) and Regulation 4 of the Securities and Exchange
Board of India (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011 ("Takeover Regulations") vide a Public Announcement
dated February 21,2014 for the acquisition, from public shareholders,
of up to 26,50,000 equity
shares, representing 26.50% of the total equity shares, of your
Company, at a price of Rs. 2,000 per equity share and subsequently
revised the price upwards to Rs. 2,400 per equity share.
The tendering period commenced on June 3, 2014 and closed on June 16,
2014. Pursuant to the closing of the tendering period, Moody's
Singapore Pte Ltd acquired 2,154,722 equity shares tendered in the Open
Offer, amounting to a total of 21.55% of the equity share capital of
the Company. This resulted in an increase in the Moody's Group's total
equity shareholding in the Company to 50.06% of the equity share
capital of your Company.
Review of Operations Rating Services Market Overview
Compared to the previous fiscal, the macroeconomic situation improved
in 2014-15 following substantial moderation in wholesale and retail
inflation as well as narrowing of the current account and fiscal
deficits; all of which benefited to an extent from the global trend of
softening commodity prices. Economic growth recorded a mild uptick in
spite of the drag created by weak rural demand and exports. Exchange
rate volatility reduced substantially in 2014-15 versus the situation
in 2013-14.
The investment-friendly policies and reform measures adopted by the new
Union Government, such as faster clearances for stalled projects,
easing of norms for foreign investments in key sectors and allocation
of coal blocks through the auction route, led to an improvement in
business confidence, creating the prospect of economic activity picking
up pace, going forward. However, persisting problems related to land
acquisition, high corporate leverage and banks' asset quality continued
to constrain investment.
In line with subdued economic activity, credit growth of the banking
system remained sluggish at less than 10% in 2014-15. Apart from muted
demand growth across sectors and absence of pick up in investments, the
increasing trend of disintermediation with a number of corporates
accessing the bond markets (both domestic as well as international)
also contributed to the same. Primary domestic equity issuances too
remained sluggish in 2014-15 although, as mentioned earlier, domestic
bond issuances revived.
With moderation in retail inflation, the Reserve Bank of India (RBI)
reduced the benchmark repo rate by 50 basis points (bps) in
January-March 2015. With decline in crude oil and other commodity
prices contributing towards a narrowing of India's current account
deficit (CAD), it is expected that further monetary easing in the
remainder of calendar 2015 would take place. In addition, the focus on
infrastructure in the Union Budget and the expectation of continued
reform momentum would support investment activity with a lag.
The pick-up in economic activity, along with the expected monetary
easing, should result in an increase in bank credit growth as well as
increased activity in the bond market . Bond issuances should also get
a fillip from the increased refinancing of high cost bank loans,
including those by Special Purpose Vehicles (SPVs) set up for
implementation of infrastructure projects, as well as financial sector
players seeking to capitalise on lower cost of incremental borrowings.
Rating Services Review
Ratings: Segment-wise Revenue Composition
Segment 2013-14 2014-15 Growth (%)
(Rs.crore) (Rs.crore)
Corporate Sector 99.10 110.49 11%
Financial Sector 42.63 51.49 21%
Structured Finance 7.41 7.96 7%
Public Finance 0.87 0.84 -3%
Other Ratings 12.89 15.12 17%
Total 162.90 185.90 14%
Composition of Rating
Revenues
Segment 2013-14 2014-15 Growth (%)
(Rs. crore) (Rs.crore)
Basel II 69.92 43% 77.78 42% 11%
Non-Basel II 92.98 57% 108.13 58% 16%
Total 162.90 100% 185.91 100% 14%
Corporate Sector
The market for bank loan ratings continued to remain sluggish in
2014-15, affected by the muted growth in corporate credit and the
subdued investment climate. Your Company is hopeful that the measures
being taken by the Union Government would start yielding positive
results during the latter half of the current fiscal, supported by a
benign macroeconomic environment, softening interest rates and gradual
demand revival.
Also, on the positive side, despite the sluggish investment climate,
total domestic bond issuance increased by approximately 60% in 2014-15
as against the 27% decline reported in 2013-14. The increase in
issuance volumes was aided by softening interest rates (given the
reluctance of banks to lower their base rates proportionately) and the
trend towards increasing disintermediation. The increase in net foreign
portfolio investment (FPI) inflows into the Indian bond markets during
2014-15 also helped corporates partly refinance their bank borrowings
with bonds at finer pricing.
During the first nine months of the year under review, your Company
continued to make significant progress in scaling up its business of
rating small and medium enterprises (SMEs). However, during the last
quarter of the fiscal year, the business received a setback as the
National Small Scale Industries Corporation (NSIC) cut back the subsidy
on the performance and credit rating scheme for SMEs. Thus your Company
expects its SME rating business to remain sluggish during the current
fiscal. However, given the large number of SMEs in the country and the
valuable experience gained so far, your Company is exploring other
options to scale up this business.
Financial Sector
Total domestic bond issuance by financial sector entities increased
over 40% during 2014-15 as against the decline of 24% reported during
the previous fiscal. The sharp increase was aided by the issuance of
long tenure infrastructure bonds by banks, which the RBI allowed in
August 2014. A number of banks also raised Basel III compliant capital
instruments to meet the regulatory requirements. Your Company benefited
from this development, given its strong presence in the rating of bank
issuances. As for non-banking financial companies (NBFCs), they took
advantage of the sticky base rates of banks amidst strong inflows into
mutual funds on expectations of softening interest rates and came out
with more bond issuances during 2014-15. With the banking system facing
challenges on capital adequacy, an increase in capital issuance by
banks is expected over the medium term, which should help your Company,
going forward. Issuances of certificates of deposit (CDs) by banks
continued to decline during the year under review, with most banks
paring their bulk deposits as bank credit off-take remained subdued.
Among NBFCs, most of the retail focussed ones continued to scale up at
a good pace in 2014-15. Some NBFCs continued to take the public debt
issuance route in 2014-15 to raise funds from a wider investor base for
onward lending. The better rated entities used commercial papers (CPs)
to lower their borrowing costs as the cost of bank funds remained
relatively high. The banks' base rate, especially, remained sticky
while the CP and bond rates eased in 2014- 15. Accordingly, CP
issuances were significantly higher throughout the year under review as
compared with the previous year. The overall trends in the NBFC sector
benefited your Company during the year under review, and it was able to
use its strong presence in the sector to continue adding new clients
while also increasing the volume of rated debt.
During 2014-15, your Company reinforced its position further in the
rating of debt mutual funds with a number of fresh ratings of schemes
across fund houses.
Looking forward, rating activity for your Company in the financial
sector is expected to grow, but at a pace determined by several
factors, including pickup in economic activity, especially in
investment and consumption demand, and behaviour of interest rates.
Structured Finance
During 2014-15, issuance volumes in the securitisation market dropped
for the second year in a row and issuance was around 45% lower than in
the previous fiscal at around Rs. 16,000 crore. The predominant motive
for banksÂprimarily private sector banksÂto invest in
securitisation instruments, despite the high tax incidence and the
resultant low yield, is the need to meet shortfalls in meeting priority
sector lending (PSL) targets. During May 2014, the RBI decided to
recognise as priority sector loans banks' remaining deposits placed
under the Rural Infrastructure Development Fund (RIDF) and certain
other funds established with the National Bank of Agriculture and Rural
Development (NABARD). This change resulted in a significant reduction
in the PSL shortfall of banks for 2014-15, which in turn directly
reduced such requirement from banks, the key investor segment for such
securitised debt in India. However, even as the securitisation market
lost pace in 2014-15, your Company was able to increase its share of
this segment over the previous year.
The dip in securitisation activity in 2014-15 was partly compensated by
growth in the bilateral assignment of loan pools, the alternative mode
for acquisition of retail loan assets by banks.
Investing in securitisation transactions and acquiring loan pools
through bilateral assignmentÂwith the underlying assets being
eligible loan receivablesÂcontinue to be the key routes for banks to
meet shortfalls in PSL targets.
Thus, going forward, the extent of shortfall in PSL targets in the
banking system and the availability of eligible assets with sellers are
expected to be the key factors influencing securitisation
issuance/assignment volumes.
Economic and Industry Research
Economic Research
Economic research is an activity that your Company has been engaged in
right since its inception. The purpose of this continuing programme is
to analyse contemporary developments that characterise the money and
finance world, and to offer a framework for the explanation of policy
choices, initiatives and outcomes. Your Company invests considerable
time and resources in this activity, a product of which is the ICRA
Bulletin: Money & Finance (Money & Finance). Every issue of Money &
Finance features in-depth articles covering the key developments in the
global and Indian economy since the previous edition, besides research
articles on issues of contemporary interest. A host of
financial statistics is also presented at the end of every issue. The
periodical is disseminated among a wide variety of readers, including,
among others, students, academicians, policymakers, investors and
economists across the country.
Apart from the abovementioned Bulletin, your Company regularly comes
out with impact-assessment studies, research notes and trend analyses,
covering several topics including, but not limited to, inflation,
industrial growth, economic performance, the Union Budget and policy
assessment and impact.
Industry Research
Your Company has continued to strengthen its research offerings,
covering over 30 sub-segments within the corporate sector and multiple
sub-segments under both the financial services and structured finance
sectors. Given your Company's strong analytical capabilities across
industries, access to primary data and reach across various tiers of
industry players, the research reports provide in-depth analyses of
industry-specific issues, trends in demand-supply factors, the
competitive landscape, credit trends and medium-to-long-term outlook.
The research reports are tailored to meet the analytical requirements
of a wide range of participants, including banks, mutual funds,
insurance companies, venture funds and corporate entities. Your Company
has also introduced a quarterly Industry Risk Score service covering a
wide range of industry sub-segments. The service captures
industry-level factors that impact the credit profiles of companies
operating in an industry and can be a comprehensive guide to assess
credit risks for the lending community.
Besides periodic off-the-shelf research publications, your Company also
offers customised research to meet the niche requirements of various
clients. Your Company would continue to strengthen its offerings under
this service, harnessing its extensive knowledge base and research
capabilities.
During the year under review, your Company brought out regular research
notes, analysing the impact of various events on a wide variety of
industry players from the credit perspective. Besides, your Company
continued to hold seminars, webinars and teleconferences on credit
trends across industries for market participants at regular intervals.
Franchise Development
Your Company continues to make significant efforts to enhance its
visibility and reinforce its brand strength through activities aimed at
promoting investor and market awareness, bridging the information gap,
and recognising excellence.
During the year, your Company held several joint seminars with Moody's
Investors Service to disseminate its views on developments in the
domestic and global credit markets. Further, to achieve faster
dissemination of our views among a wider set of market participants
your Company held a large number of teleconferences, which were all
well appreciated. These initiatives, along with the increasing use of
your Company's research and rating reports, have led to increasing
requests from corporate groups and investors to hold sector specific
briefings for them. Your Company continues to hold sessions along with
banks, on Bank Loan Ratings under Basel II Guidelines, Rating of Small
and Medium Enterprises, and other ICRA products as part of its outreach
and education initiative. Apart from these, regular media releases
voicing our opinion on contemporary issues continue to be made in the
interest of the investing public.
On recognising excellence, your Company continues to power the
Financial Advisor Awards along with CNBC-TV18, and the India Pride
Awards, an initiative to recognise the superior performing public
sector entities, with the Dainik Bhaskar group. All these awards have
gained considerable popularity, as is evident from the level of
participation witnessed over the years. These media houses make
considerable efforts to popularise these awards, which helps your
Company's position as an objective and independent firm, apart from
providing visibility.
Subsidiary Companies
During 2014-15, your Company has dissolved one of its step-down
subsidiaries, BPA Technologies Pte Ltd., incorporated in Singapore. As
of March 31,2015, your Company has the following subsidiaries:
1. ICRA Management Consulting Services Limited
1.1. IMaCS Virtus Global Partners Inc.
1.2. Pragati Development Consulting Services Limited
2. ICRA Techno Analytics Limited
2.1. ICRA Sapphire Inc.
2.2. ICRA Global Capital Inc.
2.2.1. BPA Technologies Inc.
2.2.1.2. BPA Technologies Pvt. Ltd.
3. ICRA Online Limited
4. PT. ICRA Indonesia
5. ICRA Lanka Limited
6. ICRA Nepal Limited
1 A
The Consolidated Financial Statements of Group ICRA, consisting of ICRA
Limited, its subsidiaries, and their subsidiaries, for the year
2014-15, which form a part of the Annual Report, are attached. The
Auditors' Report on the Consolidated Financial Statements is also
attached. In compliance with the relevant provisions of the Companies
Act, 2013, a statement containing the brief financial details of the
said subsidiary companies is annexed to the Consolidated Financial
Statements. The Consolidated Financial Statements have been prepared in
accordance with the prescribed Accounting Standards.
As required under the provisions of Section 136 (1) of the Companies
Act, 2013, the financial statements, including consolidated financial
statements and other documents required to be attached thereto, have
been uploaded on the Company's website, www.icra.in. Further, your
Company has also uploaded on its website the audited annual accounts of
each of its subsidiary companies.
Branches of the Company
Your Company operates its business from its offices in Delhi, Gurgaon,
Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune.
Human Resource Development & Training
Human resource development continued to be accorded high priority
during the year under review, with emphasis being placed on improving
skill, competence and knowledge through regular training and
in-house/external professional development programmes. The relation
between the employees and the management of your Company remained
harmonious during the year. Your Company has a consultative and
participative management style, which has facilitated the achievement
of its corporate goals. The morale of the employees remained high
during the year, resulting in a positive contribution to the progress
of your Company.
Employees Stock Option Scheme (ESOS)
Your Company has implemented the Employee Stock Option Scheme 2006
("the Scheme") in accordance with the Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999, and in conformity with the resolutions passed by the
Shareholders at the Annual General Meetings of the Company held on June
12, 2006, July 29, 2008, and August 12, 2011. Pursuant to the
resolution passed by the Shareholders at the Annual General Meeting
held on June 12, 2006 for the grant of Options, 9,06,000 Equity Shares
amounting to 9.06% of the Equity Share Capital of your Company have
been issued to the ICRA Employees Welfare Trust for grant of Options to
the eligible Optionees. Accordingly, the Stock Options have been
granted to the eligible Optionees from the said pool of 9,06,000 Equity
Shares in two tranches so far.
The first tranche was granted during 2006-07 and the second during
2010-11. The details of the Stock Options granted under the Scheme is
annexed to the Directors' Report (Annexure I). The Scheme is
administered by the ESOS Compensation Committee of the Board of your
Company and the ICRA Employees Welfare Trust.
Particulars of Employees
The disclosure under the provisions of Section 197(12) of the Companies
Act, 2013, regarding the ratio of the remuneration of each Director to
the median employee's remuneration and such other details as specified
in Rule 5(1) of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014 is annexed to the Directors' Report
(Annexure II). The information on employees receiving remuneration of
Rs. 60 lakh per financial year or Rs. 5 lakh per month, or more, is
availble at the Registered Office of the Company during working hour
and shall be made available to any shareholder on request.
Corporate Governance
The report of the Board of Directors of your Company on Corporate
Governance is presented as a separate section (Annexure III) titled
"Corporate Governance Report", which forms a part of the Annual Report.
The composition of the Board, the Audit Committee, the Nomination and
Remuneration Committee, the Stakeholders Relationship Committee, the
Corporate Social Responsibility Committee and other Committees of the
Board, number of meetings of the Board, Committees of the Board and
other matters are presented in the Corporate Governance Report.
The certificate of the Statutory Auditors of your Company regarding
compliance with the Corporate Governance requirements as stipulated in
Clause 49 of the Listing Agreement with the stock exchanges concerned
is annexed to the Directors' Report.
Management Discussion & Analysis
The Management Discussion and Analysis is annexed to the Directors'
Report (Annexure IV).
Insider Trading Regulations
Based on the requirements under the Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 2015, as amended
from time to time, the Code of Conduct for prevention of insider
trading is in force in your Company. The Board of Directors of the
Company has adopted the Code of Practices and Procedures for Fair
Disclosure of Unpublished Price Sensitive Information in compliance
with Chapter IV of the said Regulations.
Material Changes and Commitments
No material changes and commitments that would affect the financial
position of the Company have occurred between the end of the financial
year to which the attached financial statements relate and the date of
this report.
Conservation of Energy, Technology Absorption, and Foreign Exchange
Earnings and Expenditure
As your Company is not engaged in any manufacturing activity, the
particulars relating to conservation of energy and technology
absorption, as mentioned in the Companies (Accounts) Rules, 2014, are
not applicable to it. However, emphasis is placed on employing
techniques that result in the conservation of energy. Details on the
foreign exchange earnings and expenditure of your Company appear in the
Notes to Accounts.
Directors and Key Managerial Personnel
During 2014-15, Mr. Pranab Kumar Choudhury retired as Chairman & Group
CEO of your Company and as Director from all the Group companies and
their subsidiaries with effect from January 29, 2015. The Board placed
on record its gratitude towards Mr. Choudhury for having nurtured and
led the Company through evolution and growth to its present status.
During 2014-15, Mr. Amal Ganguli, Dr. Uddesh Kohli, Prof. Deepak Nayyar
and Mr. Piyush Gunwantrai Mankad ceased to be Directors of your Company
following their resignation from the Board. The resignations of Mr.
Ganguli and Dr. Kohli were effective as of July 25, 2014 and July 26,
2014, respectively, while the resignations of Prof. Nayyar and Mr.
Mankad were effective as of September 30, 2014. The Board placed on
record its deep appreciation of the valuable advice and guidance
provided by the said Directors throughout their tenure with your
Company.
Pursuant to the provisions of Section 152 of the Companies Act, 2013,
and the Articles of Association of your Company, Mr. Simon Richard
Hastilow is due to retire by rotation, and being eligible, has offered
himself for reappointment.
Pursuant to the provisions of sub-sections (4), (10), (11) of Section
149 of the Companies Act, 2013, read with the Companies (Appointment
and Qualification of Directors) Rules, 2014, the Board of Directors
appointed Mr. Arun Duggal and Ms. Ranjana Agarwal as Independent
Directors for a period of five consecutive years with effect from
November 11,2014 subject to approval of the shareholders of the Company
at the forthcoming Annual General Meeting; the Board at its meeting on
December 4, 2014, named Mr. Duggal as non-executive Chairman of your
Company, effective January 29, 2015; the Board of Directors also
appointed Ms. Radhika Vijay Haribhakti as Independent Director for a
period of five consecutive years with effect from December 4, 2014
subject to approval of the shareholders of the Company at the
forthcoming Annual General Meeting. The resolutions seeking their
appointment as Independent Directors have been included in the Agenda
of the Annual General Meeting.
Further, the Board of Directors appointed Mr. Robert Scott Fauber and
Mr. Thomas John Keller Jr. as Additional Directors with effect from
January 30, 2015 under the category of Non-Executive and Independent
Directors. Both of them will hold office till the date of the next
Annual General Meeting. The resolutions seeking their appointment as
Director have been included in the Agenda of the Annual General
Meeting.
The Board of Directors elevated and appointed Mr. Naresh Takkar as CEO
of ICRA Group effective from January 30, 2015 (the elevation and
appointment being in addition to his existing position as Managing
Director and CEO of the Company), subject to approval of the
shareholders of the Company at the forthcoming Annual General Meeting
and other authorities, if any, under the provisions of Sections 196,
197, 198 and 203 read with Schedule V of the Companies Act, 2013, and
the Rules made thereunder (including any statutory modification(s) or
re- enactment thereof for the time being in force).
Proposals for the above appointments are part of the Agenda for the
forthcoming Annual General Meeting and the respective resolutions are
recommended for your approval.
The profiles of these Directors are presented in the Notice of the 24th
Annual General Meeting, as required under the Companies Act, 2013, and
Clause 49 of the Listing Agreement.
During 2014-15, Mr. Vijay Wadhwa resigned as the Company Secretary &
Chief Financial Officer of the Company and was relieved from the
services of the Company on September 29, 2014. The Board of Directors
at its meeting held on March 2, 2015 appointed Mr. Vivek Mathur as the
Chief Financial Officer of the Company and Mr. S. Shakeb Rahman as the
Company Secretary & Compliance Officer.
Independent Directors' Declaration
As required under Section 149 (7) of the Companies Act, 2013, and
Clause 49 of the Listing Agreement with the Stock Exchanges, the
Company has received a confirmation/declaration from each of the
Independent Directors stating that they meet the criteria of
independence. The following Non-Executive Directors of the Company are
independent in terms of Section 149(6) of the Companies Act, 2013, and
Clause 49 of the Listing Agreement:
1. Mr. Arun Duggal
2. Ms. Ranjana Agarwal
3. Ms. Radhika Vijay Haribhakti
Extract of the Annual Return
An extract of the Annual Return in Form No. MGT 9 as per Section 92(3)
and Rule 12 of the Companies (Management and Administration) Rules,
2014, is annexed with this report (Annexure V).
Directors' Responsibility Statement
As required under the provisions contained in Section 134 of the
Companies Act, 2013, your Directors hereby confirm that:
(i) in the preparation of the Annual Accounts for the year ended March
31,2015, the applicable accounting standards have been followed and
there are no material departures from the same;
(ii) the Directors had selected such accounting policies and applied
them consistently and made judgements and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the Company at the end of the financial year and of the profit and
loss of the Company for that year;
(iii) the Directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 2013, for safeguarding the assets of
the Company and for preventing and detecting frauds and other
irregularities;
(iv) the Directors had prepared the Annual Accounts on a going concern
basis;
(v) the Directors had laid down the internal financial controls
followed by the Company and that such internal financial controls are
adequate and were operating effectively; and
(vi) the Directors had devised proper systems to ensure compliance with
the provisions of all applicable laws and that such systems were
adequate and operating effectively.
Policy on Directors' Appointment
The Nomination and Remuneration Committee works with the Board to
determine the appropriate characteristics, skill and experience that
are required of the members of the Board. The members of the Board
should possess the expertise, skills and experience needed to manage
and guide the Company in the right direction and to create value for
all stakeholders. The members of the Board will need to consist of
eminent persons of proven competence and integrity and with an
established track record. Besides having financial literacy,
experience, leadership qualities and the ability to think
strategically, the members of the Board of Directors are required to
have a significant degree of commitment to the Company and should
devote adequate time in preparing for the Board meeting and attending
the same. Members of the Board of Directors are required to possess the
education, expertise, skills and experience in various sectors and
industries needed to manage and guide the Company. The members of the
Board are required to look at strategic planning and policy
formulation.
The members of the Board should not be related to any Executive or
Independent Director of the Company or any of its subsidiaries. They
are not expected to hold any executive or independent position in any
entity that is in direct competition with the Company. Board members
are expected to attend and participate in the meetings of the Board and
its Committees, as relevant. They are also expected to ensure that
their other commitments do not interfere with the responsibilities they
have by virtue of being a member of the Board of the Company. While
reappointing Directors on the Board and Committees of the Board, the
contribution and attendance record of the Director concerned shall be
considered in respect of such reappointment. The Independent Directors
shall hold office as a member of the Board for a maximum term as per
the provisions of the Companies Act, 2013, and the Listing
Agreement. The appointment of Directors shall be formalised through a
letter of appointment.
The Executive Directors with the prior approval of the Board may serve
on the Board of any other entity if there is no conflict of interest
with the business of the Company.
Board and Directors Performance Evaluation
The Board of Directors of the Company based on the recommendations of
the Nomination and Remuneration Committee has formulated a Board and
Director Performance Evaluation Policy, thereby setting out the
performance evaluation criteria for the Directors and the Board of the
Company. The Board of Directors of the Company believe that the
effectiveness of its governance framework can continue to be improved
through periodic evaluation of the functioning of the Board as a whole,
its Committees and individual Director's performance evaluation.
The Nomination and Remuneration Committee of the Board has established
the performance evaluation criteria for (i) the Board as a whole (ii)
Chairperson of the Board, (iii) individual Directors, and (iv) every
Committee of the Board.
Auditors
M/s. B S R & Co. LLfl Chartered Accountants, Statutory Auditors of your
Company, hold office until the conclusion of the forthcoming Annual
General Meeting and are eligible for reappointment. The Company has
received their written consent and a certificate that they satisfy the
criteria provided under Section 141 of the Companies Act, 2013, and
that the appointment, if made, shall be in accordance with the
applicable provisions of the Companies Act, 2013, and the Rules framed
thereunder. The Audit Committee and the Board of Directors has
recommended the appointment of M/s. B S R & Co. LLFJ Chartered
Accountants, as the Auditors of the Company for a period of four years,
subject to ratification of the same at the Annual General Meeting.
Comments on Auditors' Report
The notes to accounts referred to in the Auditors' Report are self
explanatory and do not call for any further comments. The Secretarial
Audit Report does not contain any qualifications, reservations or
adverse remarks.
The Statutory Auditors have not reported any incident of fraud to the
Audit Committee of the Company in the year under review.
Transfer to Reserves
Your Company proposes to transfer Rs. 5.05 crore (10% of the Net Profit
for the year) to the General Reserve. An amount of Rs. 169.71 crore is
proposed to be retained in the Statement of Profit & Loss.
Dividend
The Board of Directors recommends for approval of the Shareholders at
the forthcoming Annual General Meeting, payment of dividend of Rs. 24
per Equity Share for the financial year ended March 31,2015. If the
Shareholders approve the dividend at the forthcoming Annual General
Meeting, the dividend shall be paid to: (i) all those Members whose
names appear in the Register of Members as on August 7, 2015; and (ii)
all those Members whose names appear on that date as beneficial owners
as furnished by National Securities Depository Limited and Central
Depository Services (India) Limited.
Transfer to Investor Education and Protection Fund
The Company sends reminder letters to all Shareholders whose dividends
are unclaimed so as to ensure that they receive their rightful dues.
Your Company has also uploaded on its website, www.icra.in, information
regarding unpaid/unclaimed dividend amounts lying with your Company.
During 2014-15, the unclaimed dividend and Initial Public Offer
application amounts which were due for transfer to the Investor
Education and Protection Fund in accordance with the provisions of
Section 205A(5) and 205C of the Companies Act, 1956, were transferred
to the Investor Education and Protection Fund established by the
Central Government: Rs. 18,800 on April 19, 2014 towards the
application money received for the allotment of securities and due for
refund; and Rs. 87,170 on September 12, 2014 towards amount in the
unpaid dividend account of the Company for the financial year 2006-07.
The said amounts had remained unclaimed for seven years, despite
reminder letters having been sent to each of the Investors/Shareholders
concerned.
Risk Management Policy
Your Company has formulated a risk management policy to ensure that
every effort is made to manage risk appropriately so as to maximize
potential opportunities and minimize the adverse effects of risk. The
Board and the
Audit Committee monitor and review the risk management plan.
Corporate Social Responsibility
Your Company has constituted a Corporate Social Responsibility (CSR)
Committee in accordance with Section 135 of the Companies Act, 2013.
The CSR Policy has been devised on the basis of the recommendations
made by the CSR Committee. The CSR Policy of the Company and details
about the development of CSR Policy as required under the Companies
(Corporate Social Responsibility Policy) Rules, 2014, have been annexed
to this report (Annexure VI). The reasons for not spending any amount
under CSR in the financial year 2014-15 is provided in the Annual
Report on Corporate Social Responsibility Activities.
Particulars of Contracts or Arrangements with Related Parties
Your Company has entered into contracts or arrangements with its
related parties. The related-party transactions are disclosed in the
financial statements for the year ended March 31,2015. There have been
no material related-party transactions as per Section 188(1) of the
Companies Act, 2013, and the required disclosure of information in Form
AOCÂ2 as per Rule 8(2) of the Companies (Accounts) Rules, 2014, is
annexed to this report (Annexure VII).
Policy on Prohibition, Prevention and Redressal of Sexual Harassment
Your Company has formulated a Policy on Prohibition, Prevention and
Redressal of Sexual Harassment of Women at Workplace in accordance with
The Sexual Harassment of Women at Workplace (Prohibition, Prevention
and Redressal) Act, 2013. The Company received one complaint dated
March 10, 2015 relating to sexual harassment of a women employee. The
Internal Complaint Committee (ICC) examined the same and the necessary
action has been taken as recommended by the ICC.
Vigil Mechanism
Your Company has established a vigil mechanism in compliance with the
provisions of Section 177 (9) of the Companies Act, 2013, and Clause 49
of the Listing Agreement. The vigil mechanism established provides
adequate safeguards against victimization of persons who use such
mechanism and make provision for direct access to the Chairperson of
the Audit Committee in appropriate or exceptional cases. The Whistle
Blower Policy of the Company has been uploaded on the website of the
Company, www.icra.in.
Composition of the Audit of Committee
Your Company has constituted an Audit Committee, the composition of
which has been provided in the Corporate Governance Report. During
2014-15, the Board accepted all the recommendations of the Audit
Committee.
Secretarial Audit
The Board of Directors of the Company has appointed M/s. YJ. Basrar &
Co., Company Secretaries (PCS Registration No. 3528), as the
Secretarial Auditor of the Company for the financial year 2014-15 in
terms of Section 204 of the Companies Act, 2013. The Secretarial Audit
Report for financial year 2014-15 has been annexed to this Report
(Annexure VIII).
Acknowledgements
Your Directors acknowledge the cooperation and assistance received from
various institutions, Government agencies, Shareholders and
professionals from different disciplines.
Your Directors also wish to place on record their appreciation of the
contribution made by the members of staff of your Company.
For and on behalf of the Board of Directors
Place : Gurgaon (Arun Duggal)
Date : May 21,2015 Chairman
DIN:00024262
Mar 31, 2014
To The Members, ICRA Limited
The Directors have pleasure in presenting the 23rd Annual Report of
your Company along with the Audited Financial Statements for the year
ended March 31, 2014.
Financial Performance
During its 23rd year of operations, your Company earned a Net Profit of
Rs. 58.73 crore as against Rs. 60.38 crore during the previous year.
Your Company''s Earning per Share and Cash Earning per Share for the
year ended March 31, 2014 were Rs. 58.73 and Rs. 62.65, respectively,
as against Rs. 60.38 and Rs. 67.30, respectively, in the previous year.
The financial results of your Company (standalone and consolidated) for
the year ended March 31, 2014 are presented in the following table.
Particulars Standalone Consolidated
2012-2013 2013-14 2012-13 2013-14
Revenue from Operations 148.59 162.90 251.41 282.96
Other Income 16.24 17.29 17.91 19.10
Total Revenue 164.83 180.19 269.32 302.06
Total Expenditure (91.95)# (98.27)* (197.28)# (204.15)*
Profit before Tax 72.88 81.92 72.04 97.91
Tax Expense (12.50) (23.19) (13.23) (28.99)
Profit before Minority
Interest 60.38 58.73 58.81 68.92
Minority Interest - - 0.35 0.01
Profit after Tax 60.38 58.73 59.16 68.93
Balance brought Forward 98.89 127.49 112.33 139.71
Profit Available for
Appropriation 159.27 186.22 171.49 208.64
APPROPRIATIONS
Proposed Dividend 22.00 23.00 22.00 23.00
Corporate Tax on Proposed
Dividend 3.74 3.91 3.74 3.91
Transfer to General Reserve 6.04 5.88 6.04 5.88
Balance Carried to Balance
Sheet 127.49 153.43 139.71 175.85
159.27 186.22 171.49 208.64
#Includes Rs. 4.81 crore towards Amortisation of Deferred Employees
Compensation for Options granted under the Employees Stock Option
Scheme of your Company.
*Includes Rs. 1.46 crore towards Amortisation of Deferred Employees
Compensation for Options granted under the Employees Stock Option
Scheme of your Company.
Conditional Open Offer by Moody''s
Moody''s Singapore Pte Ltd along with Moody''s Investment Company India
Private Limited and Moody''s Corporation has made a Conditional Open
Offer under Regulation 3(2) and Regulation 4 of the Securities and
Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011 ("Takeover Regulations") vide a Public
Announcement dated February 21, 2014 for the acquisition of up to
26,50,000 equity shares, representing 26.50% of the total equity
shares, of your Company, at a price of Rs. 2,000 per equity share, from
public shareholders. At present, Moody''s Investment Company India
Private Limited holds 28,50,900 equity shares, representing 28.509% of
the total equity share capital, of your Company. The Offer is
conditional on the acquisition of a minimum of 21,49,101 equity shares,
representing 21.49101% of the total equity share capital, of your
Company. Acquisition of the minimum 21,49,101 equity shares will take
up Moody''s shareholding to 50.00001%, thereby making Moody''s the
majority shareholder of your Company. In case of full acceptance of the
Offer, on the other hand, Moody''s will hold 55,00,900 equity shares,
representing 55.009% of the total equity share capital, of your
Company.
As required under the Takeover Regulations, your Company has
constituted a Committee of Independent Directors to provide its
Reasoned Recommendations on the Open Offer to the shareholders of your
Company. The Takeover Regulations require the Committee of Independent
Directors to provide its recommendations at least two working days
prior to the commencement of the Tendering Period.
Under Regulation 9(c) of the Securities and Exchange Board of India
(Credit Rating Agencies), Regulations, 1999, prior approval of
Securities and Exchange Board of India (SEBI) is required in cases
involving change in control of a Credit Rating Agency. Accordingly, an
application has been submitted with SEBI, seeking approval for change
in control of your Company.
Under the Takeover Regulations, the Tendering Period will commence
within 12 working days of the receipt of comments on the draft Letter
of Offer from SEBI.
Review of Operations
Rating Services
Market Overview
Anaemic growth, high retail price inflation and periods of substantial
volatility of the rupee''s exchange rate complicated macroeconomic
management in fiscal year 2013-14, although risks related to the
current account and fiscal deficits eased during the course of the
year.
Despite a favourable monsoon and healthy growth of agricultural output,
the pickup in domestic demand in 2013-14 was feeble and restricted to a
few sectors. Additionally, issues related to weak investment
confidence, high leverage levels of corporates, especially those in the
infrastructure sector, and impaired asset quality of banks continued to
constrain capacity expansion even as the Cabinet Committee on
Investments (CCI) facilitated clearances for stalled projects during
the year.
While a moderation in wholesale price inflation led to some monetary
easing at the beginning of the fiscal year, the benchmark repo rate was
raised by 75 basis points (bps) in September 2013-January 2014 in
response to the elevated consumer price inflation rate. Also, given the
sharp weakening of the Indian rupee (INR) relative to the US dollar in
May-August 2013, the Reserve Bank of India (RBI) undertook temporary
measures to combat exchange rate volatility, which however also put a
strain on systemic liquidity. On the positive side, after a sharp
deterioration in April-June 2013, India''s current account deficit (CAD)
improved considerably in the subsequent three quarters, led partly by a
successful clampdown on gold imports and contraction in non-oil,
non-gold merchandise imports following feeble domestic growth.
Moreover, merchandise exports looked up, benefiting from the weaker
currency. Similarly, the Government of India''s fiscal deficit was also
contained at a level below the budget estimates.
Primary equity and domestic bond issuances were sluggish in 2013-14.
Growth in bank credit also remained at 14-15% during the year as it had
in 2012-13.
The RBI has signalled an end to further monetary tightening if consumer
price inflation follows the hoped-for path of moderation. However, the
risks arising out of factors such as the possibility of a below-average
monsoon in 2014 and resetting of administered prices (electricity,
fuels, fertilisers) point to the high likelihood of an extended pause
on policy rates. This, in turn, would keep consumption sentiments in
check in 2014-15. Notwithstanding clearances received by various
stalled projects, a long gestation period would limit the upside in the
near term. Factoring in a mild improvement in manufacturing growth and
a pickup in investment activity in the second half, economic growth is
likely to display a small up-tick in 2014-15.
Rating Services Review
Ratings: Segment-wise Revenue Composition
Segment 2012-13 2013-14 Growth(%)
(Rs. crore) (Rs. crore)
Corporate Sector 92.12 99.10 8%
Financial Sector 40.85 42.63 4%
Structured Finance 6.21 7.41 19%
Public Finance 1.18 0.87 -26%
Other Ratings 8.23 12.89 57%
Total 148.59 162.90 10%
Composition of Rating Revenues
Segment 2012-13 2013-14 Growtg(%)
(Rs. crore) (Rs. crore)
Basel II 64.94 44% 69.92 43% 8%
Non-Basel II 83.65 56% 92.98 57% 11%
Total 148.59 100% 162.90 100% 10%
Corporate Sector
The market for bank loan ratings expanded at a sluggish pace in
2013-14. It continued to be affected by muted growth in corporate
credit, the subdued investment climate leading to slow or deferred
project execution and greater risk aversion among lenders in
sanctioning new loans. While the high-powered CCI took the lead in
according fast-track clearances to several core sector projects during
the latter half of the year, it would possibly take some more time for
project execution and investments to gather momentum.
As a result of the weak investment climate and high interest rates,
total domestic bond issuance declined 27% during 2013-14 over the
previous fiscal. Apart from a few tax-free bond issuances by public
sector undertakings (PSUs), bond issuances by corporate entities
remained low. On the positive side, there were some instances of
refinancing of existing loans through bond issuances, and this could be
expected to pick up once the interest rate environment turns more
benign.
During the year under review, your Company continued to make
significant progress in scaling up the business activity of rating
small and medium enterprises (SMEs). This has been achieved through a
combination of factors like greater reach and higher awareness about
the benefits that SME ratings provide to borrowers. Given the large
number of SMEs in the country and the valuable experience gained so
far, your Company hopes to be able to continue increasing its scale and
reach in this segment.
Financial Sector
The total domestic bond issuance by entities in the financial sector
declined by 24% during 2013-14 over the previous fiscal as the
investment climate remained subdued and the interest rate outlook
uncertain. The decline would have been sharper but for the good
investor response to the public issuance of debt (including tax-free
bonds) by non-banking financial companies (NBFCs) and institutions in
the second half of 2013-14, given the relatively high post-tax yields.
The volumes were also supported by the increase in issuances of debt
capital by banks, with many raising Basel III complaint Tier II bonds
to meet regulatory capital requirements. Your Company benefited from
this development, given its strong presence in the rating of Bank
issuances. During 2013-14, your Company also rated the first Basel III
compliant Tier I bonds to be issued by any bank in India. With the
banking system facing challenges on capital adequacy, an increase in
capital issuance by banks is expected over the medium term, which
should help your Company, going forward. Issuances of certificates of
deposit (CDs) by banks continued to decline during the year under
review, with most banks paring their bulk deposits as bank credit
off-take remained subdued.
As for NBFCs, most of them continued to scale up in 2013-14, albeit at
a lower rate level than in 2012-13 when the operating environment was
more benign. Some NBFCs continued to take the public debt issuance
route in 2013-14 to raise funds from a wider investor base for onward
lending. The tax-free bond issuances by strong public sector entities
picked up in 2013-14 as they offered higher yields than the issuances
made the previous year and given the expectations of softening interest
rates over the medium term. Better rated entities used commercial
papers (CPs) to lower their borrowing costs as the cost of bank funds
remained relatively high, especially after the increase in base rates
in the second quarter of 2013-14. Accordingly, CP issuances picked up
in the second half of 2013-14 after having witnessed a decline in the
first. The overall trends in the NBFC sector benefited your Company
during the year under review, and it was able to use its strong
presence in the sector to continue adding new clients while also
increasing the volume of rated debt.
During 2013-14, your Company reinforced its position further in the
rating of debt mutual funds by rating a number of capital protection
oriented schemes (across fund houses) launched during the year.
Looking forward, rating activity in the financial sector is expected to
grow, but at a pace determined by several factors, including pickup in
economic activity, especially in investment and consumption demand, and
behaviour of interest rates.
Structured Finance
During 2013-14, issuance volumes in the securitisation market declined
8% over the previous fiscal to around Rs. 28,000 crore. The dip in
securitisation activity is attributable primarily to the distribution
tax regime for securitisation transactions introduced by the Union
Budget, 2013-14. The new tax treatment marks a significant adverse
change for banks, the key investor segment in securitisation
transactions in India. The pre-dominant motive for banksÂprimarily
private sector banksÂto invest in these securities, despite the high
tax incidence and the resultant low yield, is the need to meet
shortfalls in meeting priority sector lending (PSL) targets. However,
even as the securitisation market lost some pace in 2013-14, your
Company achieved significant growth compared to the previous year.
The dip in securitisation activity during the year under review was
more than compensated by a strong revival in bilateral assignment of
loan pools, the alternative mode for acquisition of retail loan assets
by banks. The total estimated volume of bilateral assignments was
around Rs. 18,000 crore, a rise of over 100% over the figure (albeit
low) for the previous year. Notably, a sizable portion of this volume
was accounted for by public sector banks, which acquired retail loan
pools not to meet PSL shortfalls but as a tool for inorganic growth in
assets at a time when corporate credit off-take was low. Estimation of
credit loss in such loan pools, which is required by the investors,
helped your Company serve this segment effectively.
Investing in securitisation transactions or acquiring loan pools
through bilateral assignmentÂwith the underlying assets being eligible
loan receivablesÂcontinue to be the key routes for banks to meet
shortfalls in PSL targets. Thus, going forward, the extent of shortfall
in PSL targets in the banking system and the availability of eligible
assets with sellers are expected to be the key factors influencing
securitisation issuance/assignment volumes.
Economic and Industry Research
Economic Research
Economic research is an activity that your Company has been engaged in
right since its inception. The purpose of this continuing programme is
to analyse contemporary developments that characterise the money and
finance world, and to offer a framework for the explanation of policy
choices, initiatives and outcomes. Your Company invests considerable
time and resources in this activity, a product of which is the ICRA
Bulletin: Money & Finance (Money & Finance). Every issue of Money &
Finance features in-depth articles covering the key developments in the
global and Indian economy since the previous edition, besides research
articles on issues of contemporary interest. A host of financial
statistics is also presented at the end of every issue. The periodical
is disseminated among a wide variety of readers, including, among
others, students, academicians, policymakers, investors and economists
across the country.
Money & Finance apart, your Company regularly comes out with
impact-assessment studies, research notes and trend analyses, covering
several topics including, but not limited to, inflation, economic
performance, the Union Budget, the index of industrial production, and
policy assessment and impact.
Industry Research
Your Company has continued to strengthen its research offerings,
covering over 30 segments in the corporate and financial services
sectors. Given your Company''s strong analytical capabilities across
industries, access to primary data and reach across various tiers of
industry players, the research reports provide in-depth analysis of
industry-specific issues, trends in demand-supply factors, the
competitive landscape, credit trends and medium-to-long-term outlook.
The research reports are tailored to meet the analytical requirements
of a wide range of participants, including banks, mutual funds,
insurance companies, venture funds and corporate entities. Besides
periodic off-the-shelf publications, your Company also offers
customised research to meet the niche requirements of various clients.
Your Company would continue to strengthen its offerings under this
service, harnessing its extensive knowledge base and research
capabilities.
During the year under review, your Company continued to bring out
research notes, analysing the impact of various events on a wide
variety of industry players from the credit perspective. Besides, your
Company continued to hold seminars, webinars and teleconferences for
market participants at regular intervals.
Franchise Development
Your Company continues to make significant efforts to enhance its
visibility and reinforce its brand strength through activities aimed at
promoting investor and market awareness, bridging the information gap,
and recognising excellence.
During the year, your Company held several seminars, some along with
banks, on Bank Loan Ratings under Basel II Guidelines, Rating of Small
and Medium Enterprises, and other ICRA products in several Tier II
cities as part of its outreach and education initiative. Besides, joint
seminars with Moody''s Investors Service were conducted, all of which
were well attended and widely appreciated. Further, several
teleconferences, covering most of the key sectors, were organised, with
these enabling more efficient and faster dissemination of ICRA''s credit
outlook among a wider set of market participants. These apart, regular
media releases were made on issues of interest to the investing public.
On recognising excellence, your Company continues to power the
Financial Advisor Awards along with CNBC-TV18, and the India Pride
Awards, an initiative to recognise the superior performing public
sector entities, with the Dainik Bhaskar group. All these awards have
gained considerable popularity, as is evident from the level of
participation witnessed over the years. In addition, your Company
during the year under review powered the MACCIA Awards that recognise
Corporate Excellence in the State of Maharashtra. This award is
promoted by Maharashtra Chamber of Commerce, Industry & Agriculture and
IBN Lokmat.
Subsidiary Companies
During the year under review, ICRA Techno Analytics Limited (ICTEAS), a
wholly owned subsidiary of your Company, through its subsidiary ICRA
Global Capital Inc., increased its equity stake to 100% in BPA
Technologies Inc. (BPA), thereby making BPA a wholly-owned subsidiary
of ICTEAS. BPA is a California-based global business consulting and
software technology services firm. Other than in California, BPA has
development centres in Chennai and Visakhapatnam. Focused on enterprise
content management, enterprise portal and collaboration, BPA offers
strategy consulting, implementation and application management services
in its areas of specialisation.
Your Company is in compliance with all the conditions stipulated by the
Ministry of Corporate Affairs, Government of India, for availing itself
of the general exemption under Section 212 (8) of the Companies Act,
1956, from annexing to the Balance Sheet of your Company, the Audited
Statements of Account together with the Directors'' Reports and the
Auditors'' Reports for the year 2013-14 of the following subsidiary
companies:
1. ICRA Management Consulting Services Limited
1.1. IMaCS Virtus Global Partners Inc.
1.2. Pragati Development Consulting Services Limited
2. ICRA Techno Analytics Limited
2.1. ICRA Sapphire Inc.
2.2. ICRA Global Capital Inc.
2.2.1. BPA Technologies Inc.
2.2.1.1. BPA Technologies Pte Ltd.
2.2.1.2. BPA Technologies Pvt. Ltd.
3. ICRA Online Limited
4. PT. ICRA Indonesia
5. ICRA Lanka Limited
6. ICRA Nepal Limited
However, if any Shareholder of your Company or its subsidiary companies
so desires, your Company will make available copies of the Financial
Statements of the above subsidiary companies and related information,
free of charge.
The Consolidated Financial Statements of Group ICRA, consisting of ICRA
Limited, its subsidiaries, and their subsidiaries, for the year
2013-14, which form a part of the Annual Report, are attached. The
Auditors'' Report on the Consolidated Financial Statements is also
attached. A statement containing the brief financial details of the
said subsidiary companies is annexed, as prescribed by the Ministry of
Corporate Affairs, Government of India, to the Consolidated Financial
Statements. The Consolidated Financial Statements have been prepared in
accordance with the prescribed Accounting Standards.
Recovery of Security Deposit from Associated Journals Limited
During 1998-99, your Company had filed a suit with the Hon''ble High
Court of Delhi for the recovery of a refundable security deposit of Rs.
46.73 lakh, along with interest due thereon, from Associated Journals
Limited for premises located at Herald House, Bahadurshah Zafar Marg,
New Delhi. During 2007-08, a ruling was passed in favour of your
Company in the said matter by the Hon''ble High Court of Delhi.
Subsequently however, appeals were filed by Associated Journals Limited
against the said ruling. In 2011-12, the Hon''ble High Court of Delhi
dismissed the appeals, but refrained from imposing any cost on
Associated Journals Limited. Thereafter, your Company reinitiated
proceedings against Associated Journals Limited for recovery of the
sums due in terms of the decree passed in favour of your Company. Your
Company has received the amount deposited by Associated Journals
Limited with the Hon''ble High Court of Delhi, and subsequently full and
final settlement amount was received on March 31, 2014.
Branches of the Company
Your Company operates its business from its offices in Delhi, Gurgaon,
Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune.
During the year under review, your Company took additional space on
lease in Mumbai, Kolkata, Chennai and Pune to accommodate employees who
have joined your Company recently.
Human Resource Development & Training
Human resource development continued to be accorded high priority
during the year under review, with emphasis being placed on improving
skill, competence and knowledge through regular training and
in-house/external professional development programmes. The relation
between the employees and the management of your Company remained
harmonious during the year. Your Company has a consultative and
participative management style, which has facilitated achievement of
its corporate goals. The morale of employees remained high during the
year, contributing positively to the progress of your Company.
Employees Stock Option Scheme (ESOS)
Your Company has implemented the Employee Stock Option Scheme 2006
("the Scheme") in accordance with the Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999, and in conformity with the resolutions passed by the
Shareholders at the Annual General Meetings of the Company held on June
12, 2006, July 29, 2008, and August 12, 2011. Pursuant to the
resolution passed by the Shareholders at the Annual General Meeting
held on June 12, 2006 for the grant of Options, 9,06,000 Equity Shares
amounting to 9.06% of the Equity Share Capital of your Company have
been issued to the ICRA Employees Welfare Trust for grant of Options to
the eligible Optionees. Accordingly, the Stock Options have been
granted to the eligible Optionees from the said pool of 9,06,000 Equity
Shares in two tranches so far. The first tranche was granted during
2006-07 and the second during 2010-11. The details of the Stock Options
granted under the Scheme are annexed to the Directors'' Report (Annexure
I), and so is the Certificate from the Statutory Auditors of your
Company certifying that the scheme has been implemented in accordance
with the Securities and Exchange Board of India (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, and in
accordance with the resolutions passed in the said Annual General
Meetings of the Company (Annexure II). The Scheme is administered by
the ESOS Compensation Committee of the Board of your Company and the
ICRA Employees Welfare Trust.
Particulars of Employees
The information on employees receiving remuneration of Rs. 60 lakh per
financial year or Rs. 5 lakh per month, or more, is required to be
given as annexure to the Directors'' Report under Section 217 (2A) of
the Companies Act, 1956, and the Companies (Particulars of Employees)
Amendment Rules, 2011. However, in terms of Section 219 (1) (b) (iv) of
the Companies Act, 1956, the Directors'' Report is being sent to all
Shareholders of your Company without this annexure. Any Shareholder
interested in obtaining a copy of the said annexure may write to the
Company Secretary at the Registered Office of your Company.
Corporate Governance
The report of the Board of Directors of your Company on Corporate
Governance is presented as a separate section (Annexure III) titled
"Corporate Governance Report", which forms a part of the Annual Report.
The Composition of the Board, the Audit Committee, the Nomination and
Remuneration Committee, the Stakeholders Relationship Committee, the
Corporate Social Responsibility Committee and other Committees of the
Board, number of meetings of the Board, Committees of the Board and
other matters are presented in the Corporate Governance Report.
The Certificate of the Statutory Auditors of your Company regarding
compliance with the Corporate Governance requirements as stipulated in
Clause 49 of the Listing Agreement with the stock exchanges concerned
is annexed to the Directors'' Report.
Management Discussion & Analysis
The Management Discussion and Analysis is annexed to the Directors''
Report (Annexure IV).
Insider Trading Regulations
Based on the requirements under the Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 1992, as amended
from time to time, the Code of Conduct for prevention of insider
trading is in force in your Company.
Conservation of Energy, Technology Absorption, and Foreign Exchange
Earnings and Expenditure
As your Company is not engaged in any manufacturing activity, the
particulars relating to conservation of energy and technology
absorption, as mentioned in the Companies (Disclosure of Particulars in
the Report of the Board of Directors) Rules, 1988, are not applicable
to it. However, emphasis is placed on employing techniques that result
in the conservation of energy. Details on the foreign exchange earnings
and expenditure of your Company appear in the Notes to Accounts.
Directors
During 2013-14, Mr. Pranab Kumar Choudhury was reappointed Whole-time
Director (Chairman & Group CEO) of your Company by the Shareholders at
the 22nd Annual General Meeting held on August 2, 2013.
Further, Dr. Min Ye and Mr. Simon Richard Hastilow have been appointed
Directors of your Company by the Shareholders at the 22nd Annual
General Meeting held on August 2, 2013.
During 2013-14, Ms. Jennifer Ann Elliott and Mr. Frederic Walter
Jacques Drevon ceased to be Directors of your Company following their
resignation from the Board on May 24, 2013. The Board places on record
its deep appreciation of the valuable advice and guidance provided by
them throughout their tenure with your Company.
Pursuant to the provisions of Section 152 of the Companies Act, 2013,
and the Articles of Association of your Company, Dr. Min Ye retires by
rotation, and being eligible, offers himself for reappointment.
The Board of Directors of your Company has considered the provision of
Section 149(10) of the Companies Act, 2013, which states that an
Independent Director shall hold office for a term of up to five
consecutive years on the Board of a Company, but shall be eligible for
re-appointment on the passing of a special resolution by the Company
and the disclosure of such appointment in the Board''s report. The Board
has also considered the provision of Section 149(11) which states that
no Independent Director shall hold office for more than two consecutive
terms, but such Independent Director shall be eligible for
re-appointment after the expiration of three years from the date s/he
ceased to be an Independent Director.
Further, the Board of Directors of your Company has considered the
provision of Section 149(13) of the Companies Act, 2013, which states
that the provision of sub-sections (6) and (7) of Section 152 in
respect of retirement of Directors by rotation shall not apply to the
appointment of Independent Directors.
The Board of Directors of your Company felt that it would be important
to re-appoint the existing Independent Directors of your Company in
accordance with the provisions of sub-sections (4), (10), (11) of
Section 149 of the Companies Act, 2013, read with the Companies
(Appointment and Qualification of Directors) Rules, 2014.
Pursuant to the provisions of sub-sections (4), (10), (11) of Section
149 of the Companies Act, 2013, read with the Companies (Appointment
and Qualification of Directors) Rules, 2014, the Board of Directors
recommends the re-appointment of Dr. Uddesh Kohli, Prof. Deepak Nayyar,
Mr. Piyush Gunwantrai Mankad and Mr. Amal Ganguli, for a period of five
consecutive years with effect from August 13, 2014 to the Shareholders
of your Company at the ensuing Annual General Meeting.
Proposals for the above re-appointments are part of the Agenda for the
forthcoming Annual General Meeting and the respective resolutions are
recommended for your approval.
The profiles of these Directors are presented in the Notice of the 23rd
Annual General Meeting, as required under the Companies Act, 2013, and
Clause 49 of the Listing Agreement.
Directors'' Responsibility Statement
As required under the provisions contained in Section 217(2AA) of the
Companies Act, 1956, your Directors hereby confirm that:
(i) in the preparation of the Annual Accounts for the year ended March
31, 2014, the applicable accounting standards have been followed and
there are no material departures from the same;
(ii) the Directors have selected such accounting policies and applied
them consistently and made judgements and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the Company at the end of the financial year and of the profit of
the Company for that year;
(iii) the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956, for safeguarding the assets of
the Company and for preventing and detecting frauds and other
irregularities; and
(iv) the Directors have prepared the Annual Accounts on a going concern
basis.
Auditors
Messers Vipin Aggarwal & Associates, Chartered Accountants, Statutory
Auditors of your Company, hold office until the conclusion of the
forthcoming Annual General Meeting and are eligible for re-
appointment. They have confirmed their eligibility for reappointment
under the provisions of Section 139 of the Companies Act, 2013.
The Notes to Accounts referred to in the Auditors'' Report are self
explanatory and do not call for any further comments.
Transfer to Reserves
Your Company proposes to transfer Rs. 5.88 crore (10% of the Net Profit
for the year) to the General Reserve. An amount of Rs. 153.43 crore is
proposed to be retained in the Statement of Profit & Loss.
Dividend
The Board of Directors recommends for approval of the Shareholders at
the forthcoming Annual General Meeting, payment of dividend of Rs. 23
per Equity Share for the financial year ended March 31, 2014. If the
Shareholders approve the dividend at the forthcoming Annual General
Meeting, the dividend shall be paid to: (i) all those Members whose
names appear in the Register of Members as on August 7, 2014; and (ii)
all those Members whose names appear on that date as beneficial owners
as furnished by National Securities Depository Limited and Central
Depository Services (India) Limited.
Transfer to Investor Education and Protection Fund
The Company sends reminder letters to all Shareholders whose dividends
are unclaimed so as to ensure that they receive their rightful dues.
Your Company has also uploaded on its website, www. icra. in,
information regarding unpaid/unclaimed dividend amounts lying with your
Company.
During 2013-14, none of the unclaimed dividend/Initial Public Offer
application amounts were due for transfer to the Investor Education and
Protection Fund. However, pursuant to the provisions of Section 205A(5)
and 205C of the Companies Act, 1956, your Company has transferred to
the Investor Education and Protection Fund established by the Central
Government, Rs. 18,800 on April 19, 2014 towards the application money
received for the allotment of securities and due for refund. The said
amount remained unclaimed for a period of seven years, despite reminder
letters having been sent to each of the Investors concerned.
Acknowledgements
Your Directors acknowledge the cooperation and assistance received from
various institutions, Government agencies, Shareholders and
professionals from different disciplines.
Your Directors also wish to place on record their appreciation of the
contribution made by the members of staff of your Company.
For and on behalf of the Board of Directors
(Pranab Kumar Choudhury)
Place : New Delhi Chairman & Group CEO
Date : May 14, 2014 DIN: 00015470
Mar 31, 2013
To The Members, ICRA Limited
The Directors have pleasure in presenting the 22nd Annual Report of
your Company along with the Audited Financial Statements for the year
ended March 31, 2013.
Financial Performance
During its 22nd year of operations, your Company earned a Net Profit of
Rs. 60.38 crore as against Rs. 50.90 crore during the previous year.
Your Company''s Earning per Share and Cash Earning per Share for the
year ended March 31, 2013 were Rs. 60.38 and Rs. 67.30, respectively,
as against Rs. 50.90 and Rs. 65.72, respectively, in the previous year.
The financial results of your Company (standalone and consolidated) for
the year ended March 31, 2013 are presented in the following table.
Particulars Standalone Consolidated
2011-12 2012-13 2011-12 2012-13
(Rs. crore)(Rs. crore)(Rs. crore) (Rs. crore)
Revenue from
Operations 139.36 148.59 207.46 251.41
Other Income 19.74 16.24 21.29 17.91
Total Revenue 159.10 164.83 228.75 269.32
Total Expenditure (83.37)# (91.95)* (149.58)# (197.28)*
Profit before Tax 75.73 72.88 79.17 72.04
Tax Expense (24.83) (12.50) (25.31) (13.23)
Profit before
Minority Interest 50.90 60.38 53.86 58.81
Minority Interest 0.15 0.35
Profit after Tax 50.90 60.38 54.01 59.16
Balance brought Forward 76.32 98.89 86.94 112.33
Profit Available
for Appropriation 127.22 159.27 140.95 171.49
APPROPRIATIONS
Proposed Dividend 20.00 22.00 20.00 22.00
Corporate Tax on
Proposed Dividend 3.24 3.74 3.24 3.74
Transfer to Capital
Redemption Reserve 0.30
Transfer to General
Reserve 5.09 6.04 5.09 6.04
Adjustments relating to
erstwhile
Axiom Technologies Ltd. (0.01)
Balance Carried to
Balance Sheet 98.89 127.49 112.33 139.71
127.22 159.27 140.95 171.49
#Includes Rs. 12.92 crore towards Amortisation of Deferred Employees
Compensation for Options granted under the Employees Stock Option
Scheme of your Company.
*Includes Rs. 4.81 crore towards Amortisation of Deferred Employees
Compensation for Options granted under the Employees Stock Option
Scheme of your Company.
Review of Operations Rating Services
Market Overview
The fiscal year 2012-13 remained challenging from a macroeconomic
perspective. Although core inflation moderated appreciably, retail
inflation remained stubbornly high, limiting the space available for
the Reserve Bank of India (RBI) to ease the policy repo rate in
response to the slowing of economic growth. While the announcement of
various reforms from September 2012 onwards led to an improvement in
sentiments, new project announcements and capacity addition remained
elusive.
An unfavourable monsoon weakened agricultural growth and incomes in the
rural sector during the year, while relatively high retail inflation
dampened growth of disposable income for other households. As a
result, consumption demand moderated for various categories of
products. Moreover, the investment cycle showed no signs of revival,
given the persistence of issues related to regulatory approvals, land
acquisition, availability of critical inputs, and over-leveraged
balance sheets.
The domestic systemic liquidity deficit breached the RBI''s comfort zone
for much of the second half (H2) of 2012-13 despite the reduction of 75
basis points (bps) in the cash reserve ratio (CRR) since September 2012
as deposit accretion lagged credit growth at the absolute level in H2,
2012- 13. Tight liquidity restrained the pace of transmission of
monetary easing to lower interest rates, particularly in the fourth
quarter (Q4) of the year.
Merchandise exports contracted during the year, reflecting weak demand
from advanced economies and persisting infrastructural deficits in
India, which offset the competitiveness gains arising out of a weaker
exchange rate of the rupee relative to major currencies. At the same
time, relatively inelastic demand for crude oil and gold kept
merchandise imports high. A weaker rupee in conjunction with the
substantial volume of short-term debt due for redemption created
problems for corporate entities, especially those with large foreign
currency borrowings.
While the primary equity market revived somewhat in H2, 2012-13,
domestic bond issuances displayed over 30% growth during the year
driven by higher issuances by non-banking finance companies (NBFCs) and
corporates. Growth in bank credit dipped from 17% in 2011-12 to around
15% in 2012-13. Continuing the trend set in 2011-12, a significant
proportion of the incremental bank credit extended to industry in
2012-13 was absorbed by the power sector (largely to offset the
substantial accumulated losses) and basic metals & metal products
(partly on account of the higher working capital requirement against
the backdrop of elevated commodity prices).
On the regulatory side, recently, Government of India (GoI) has made
concerted efforts to arrest fiscal slippages and also announced some
bold policy measures with a view to stimulating economic growth. Even
as the RBI''s policy stance continues to tilt towards measures
addressing growth concerns, the forward-looking guidance it has
provided cites high retail inflation and the wide current account
deficit to emphasise that headroom for further monetary easing remains
limited. Nevertheless, transmission of the recent and anticipated repo
rate cuts would ease interest rates to an extent, providing a limited
boost to interest-rate sensitive sectors and consumption sentiments.
Additionally, a normal monsoon would help ease food inflation and
revive consumer demand, particularly from the rural sector. Moreover,
the steps initiated by GoI to expedite clearances through the Cabinet
Committee on Investment and address sector-specific issues (for
instance, in power) are likely to help revive investment activity over
the course of the current fiscal year.
Rating Services Review
Ratings: Segment-wise Revenue Composition
Segment 2011-12 2012-13 Growth (%)
Rs. Rs.
Corporate Sector 93.05 92.12 -1%
Financial Sector 35.72 40.85 14%
Structured Finance 6.30 6.21 -1%
Public Finance 0.88 1.18 34%
Other Ratings 3.41 8.23 141%
Total 139.36 148.59 7%
Corporate Sector
The market for bank loan ratings continued to expand in 2012-13,
although the ticket size of individual mandates remained small. Also,
the market for bank loans was affected by sluggish growth in corporate
credit as well as by the subdued investment climate in the country
which saw very few large projects achieving financial closure. The
challenging macroeconomic environment along with the highly leveraged
balance sheet of a large number of corporates, especially in the
infrastructure sector, also constrained pick-up in fresh investment
activity.
The volume of corporate debt issuance through the capital market
continued to rise in 2012-13 as better-rated entities (including NBFCs
and corporate entities) raised funds via bonds at finer rates, given
the high base rate of banks. Also, there was some progress in rating
credit enhanced bonds with partial guarantee provided by India
Infrastructure Finance Company Limited (IIFCL). The takeout financing
scheme of IIFCL also saw a few special purpose vehicles (SPVs)
refinance loans taken from the banking system.
The market for grading of initial public offerings (IPOs) remained
sluggish during 2012-13. Growth in this segment hinges on revival in
market sentiments and the consequent increase in fund-raising via IPOs.
Your Company has been making progress in scaling up the business
activity of rating small and medium enterprises (SMEs). These ratings
are widely used by banks as an input for the pricing of credit to the
SMEs concerned. The total number of SMEs rated by ICRA picked up well
during the year under review. Given the large number of SMEs in the
country and the valuable experience gained so far, your Company hopes
to step up the volumes in this segment during the current year.
Financial Sector
During the year, your Company benefited from the increase in issuances
of commercial paper and corporate bonds, which in turn drew support
from the greater investor appetite for such products and the higher
limits set for investments by foreign institutional investors (FIIs) in
corporate bonds. However capital debt issuances by banks stagnated in
2012-13, with overall credit off-take being weaker and some equity
infusion taking place ahead of Basel III. Certificate of deposit (CD)
issuances by banks also declined during the year with most public
sector banks paring their bulk deposits on regulatory prompt.
As for NBFCs, most of them continued to scale up operations in 2012-13
even as the operating environment remained challenging. The year also
saw some NBFCs take the public debt issuance route to raise funds for
onward lending. Tax-free bond issuances by strong public sector
entities however remained weak during 2012-13 with investor interest
for these long-tenure issues remaining tepid as banks continued to
offer attractive rates on deposits. The overall trends in the NBFC
sector continued to benefit your Company during the year under review,
given its strong presence in this sector.
Your Company continued to further strengthen its position in the rating
of debt mutual funds during 2012-13, adding new asset management
companies (AMCs) as clients, besides rating more debt schemes of its
existing AMC-clients.
Looking ahead, rating activity in the financial sector is expected to
grow, given GoI''s attempts to put growth back of track and the
likelihood of a decline in interest rates in the economy, both of which
should encourage investment and consumption demand.
Structured Finance
During 2012-13, issuance volumes in the rated bilateral loan
assignment/securitisation market reduced by around 20% over the
previous fiscal to around Rs. 29,000 crore. The dip in activity
followed mainly from the H1, 2012-13-issued RBI guidelines disallowing
originators from providing credit enhancement in the bilateral
assignment of loan poolsÂthe popular mode of doing transactions till
2011-12. Further, some of the requirements introduced by the RBI
guidelines left originators with a smaller portfolio eligible for
securitisation. On the positive side, the year under review saw the
first instance of pass-through certificates, the instruments issued in
securitisation transactions, being listed on the stock exchangeÂa
positive step towards improving secondary market trading.
Even as the opportunity for rating of bilateral assignment transactions
ceased, your Company developed an alternative productÂestimate of
credit loss in the loan poolÂto serve the segment. This was received
well by market participants. Also, your Company rated a number of
customised structured obligationsÂguarantee-backed non-convertible
debentures (NCDs)/commercial paper, put option-backed NCDs, and
annuity-backed structured NCDsÂduring the year under review. It is also
expected that the new tax treatment introduced by the Union Budget for
2013-14 would open the path for mutual funds to invest in
securitisation transactions (which would have to be rated), although
the same could be a negative for banks.
With bank finance to NBFCs no longer qualifying as priority sector
lending (PSL), investing in securitisation transactionsÂwith the
underlying assets being eligible loan receivablesÂremains the key route
left for banks to meet their shortfall in PSL targets. Thus, going
forward, the extent of shortfall in PSL targets in the banking system
and the availability of eligible assets with sellers are expected to be
the key factors influencing securitisation issuance volumes.
Nevertheless, in this regard, the tax treatment could lower banks''
motivation to invest in securitised paper.
Economic and Industry Research
Economic Research
Your Company has been engaged in economic research since its inception,
investing considerable time and resources into the activity. The
purpose has been to analyse contemporary developments that characterise
the money and finance world, and to offer a framework for the
explanation of policy choices, initiatives and outcomes. The ICRA
Bulletin: Money & Finance (Money & Finance) is a product of this
research. This periodical is disseminated among a wide variety of
readers, including, among others, students, academicians, policymakers,
investors and economists across the country.
Apart from Money & Finance, your Company regularly comes out with
impact-assessment studies, research notes and trend analyses, covering
several topics including, but not limited to, inflation, economic
performance, the Union Budget, the index of industrial production, and
policy assessment and impact.
Industry Research
Your Company has re-launched industry research service, covering over
30 segments in the corporate and financial services sectors. Given your
Company''s strong analytical capabilities across industries, the
research reports provide in-depth analysis of industry-specific issues,
trends in demand-supply factors, the competitive landscape, and
medium-to-long-term outlook. The research reports are tailored to meet
the research requirements of a wide range of participants, including
banks, mutual funds, insurance companies, venture funds and corporates.
Your Company would continue to strengthen its offerings under this
service, harnessing its extensive knowledge base and research
capabilities.
During the year under review, your Company continued to bring out
research notes, analysing the impact of various events on the sectors
concerned from the credit perspective. Besides, your Company continued
to hold seminars and teleconferences for market participants at regular
intervals.
Franchise Development
Your Company continues to make every effort to enhance its visibility
and reinforce its brand strength through such activities that are aimed
at promoting investor and market awareness, bridging the information
gap, and recognising excellence.
During the year, your Company held several seminars, some along with
banks, on Bank Loan Ratings under Basel II Guidelines, Rating of Small
and Medium Enterprises, and other ICRA products in several Tier II
cities as part of its outreach and education initiative. Besides, joint
seminars with Moody''s Investors Service were conducted, all of which
were well attended and appreciated. Further, several teleconferences,
covering most of the key sectors, were organised, with these enabling
more efficient and faster dissemination of ICRA''s credit outlook among
a wider set of market participants. These apart, regular media
releases were made on issues of interest to the investing public.
On recognising excellence, your Company continues to power the
Financial Advisor Awards along with CNBC-TV18, the Financial Leadership
Awards with Bloomberg UTV, and the India Pride Awards, an initiative to
recognise the superior performing public sector entities, with the
Dainik Bhaskar group. All these Awards have gained considerable
popularity, as is evident from the level of participation witnessed
over the years. This year, your Company has also powered Dainik
Bhaskar''s inaugural Jaipur Real Estate Awards.
Subsidiary Companies
During the year, ICRA Nepal Limited (ICRA Nepal), a subsidiary of your
Company, commenced credit rating services in Nepal following the grant
of rating licence by the Securities Board of Nepal. Your Company holds
51% of the share capital in ICRA Nepal, the balance 49% being held by
certain reputable Nepal-based institutions and professionals.
During 2012-13, ICRA Techno Analytics Limited (ICTEAS), a wholly owned
subsidiary of your Company, through its subsidiary ICRA Global Capital
Inc., acquired a majority stake of 75.1% in BPA Technologies Inc.
(BPA), a California-based global business consulting and software
technology services firm. Other than in California, BPA has development
centres in Chennai and Visakhapatnam, besides a sales and customer
service centre in Singapore. Focused on enterprise content management,
enterprise portal and collaboration, BPA offers strategy consulting,
implementation and application management services in its areas of
specialisation.
The acquisition of BPA is structured in three tranches over a period of
three years. The valuation of BPA would be performance-linked and is
estimated at US$16 million.
Your Company is in compliance with all the conditions stipulated by the
Ministry of Corporate Affairs, Government of India, for availing itself
of the general exemption under Section 212 (8) of the Companies Act,
1956, from annexing to the Balance Sheet of your Company, the Audited
Statements of Account together with the Directors'' Reports and the
Auditors'' Reports for the year 2012-13 of the following subsidiary
companies:
1. ICRA Management Consulting Services Limited
1.1. IMaCS Virtus Global Partners Inc.
1.2. Pragati Development Consulting Services Limited
2. ICRA Techno Analytics Limited
2.1. ICRA Sapphire Inc.
2.2. ICRA Global Capital Inc.
2.2.1. BPA Technologies Inc.
2.2.1.1. BPA Technologies Pte Ltd.
2.2.1.2. BPA Technologies Pvt. Ltd.
3. ICRA Online Limited
4. PT. ICRA Indonesia
5. ICRA Lanka Limited
6. ICRA Nepal Limited
However, if any Shareholder of your Company or subsidiary companies so
desires, your Company will make available copies of the Financial
Statements of the above subsidiary companies and related information,
free of charge.
The Consolidated Financial Statements of Group ICRA, consisting of ICRA
Limited, its subsidiaries, and their subsidiaries, for the year
2012-13, which form a part of the Annual Report, are attached. The
Auditors'' Report on the Consolidated Financial Statements is also
attached. A statement containing the brief financial details of the
said subsidiary companies is annexed, as prescribed by the Ministry of
Corporate Affairs, Government of India, to the Consolidated Financial
Statements. The Consolidated Financial Statements have been prepared in
accordance with the prescribed Accounting Standards.
Recovery of Security Deposit from Associated Journals Limited
During 1998-99, your Company had filed a suit with the Hon''ble High
Court of Delhi for the recovery of a refundable security deposit of Rs.
46.73 lakh, along with interest due thereon, from Associated Journals
Limited for premises located at Herald House, Bahadurshah Zafar Marg,
New Delhi. During 2007-08, a ruling was passed in favour of your
Company in the said matter by the Hon''ble High Court of Delhi.
Subsequently however, appeals were filed by Associated Journals Limited
against the said ruling. In 2011-12, the Hon''ble High Court of Delhi
dismissed the appeals, but refrained from imposing any cost on
Associated Journals Limited. Your Company has reinitiated proceedings
against Associated Journals Limited for recovery of the sums due in
terms of the decree passed in favour of your Company and has received
the amount deposited by Associated Journals Limited with the Hon''ble
High Court of Delhi.
Branches of the Company
Your Company operates its business from its offices in Delhi, Gurgaon,
Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune.
During the year, your Company took additional space on lease in Mumbai,
Chennai, Ahmedabad and Bengaluru to accommodate new employees who have
joined your Company recently.
Human Resource Development & Training
Human resource development continued to be accorded high priority
during the year, with emphasis being placed on improving skill,
competence and knowledge through regular training and in-
house/external professional development programmes. The relation
between the employees and the management of your Company remained
harmonious during the year. Your Company has a consultative and
participative management style, which has facilitated achievement of
its corporate goals. The morale of employees remained high during the
year, contributing positively to the progress of your Company.
Employees Stock Option Scheme (ESOS)
Your Company has implemented the Employee Stock Option Scheme 2006
("the Scheme") in accordance with the Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999, and in conformity with the resolutions passed by the
Shareholders at the Annual General Meetings of the Company held on June
12, 2006, July 29, 2008, and August 12, 2011. Pursuant to the
resolution passed by the Shareholders at the Annual General Meeting
held on June 12, 2006 for the grant of Options, 9,06,000 Equity Shares
amounting to 9.06% of the Equity Share Capital of your Company have
been issued to the ICRA Employees Welfare Trust for grant of Options to
the eligible Optionees. Accordingly, the Stock Options have been
granted to the eligible Optionees from the said pool of 9,06,000 Equity
Shares in two tranches so far. The first tranche was granted during
2006-07 and the second during 2010-11. The details of the Stock Options
granted under the Scheme are annexed to the Directors'' Report (Annexure
I), and so is the Certificate from the Statutory Auditors of your
Company certifying that the scheme has been implemented in accordance
with the Securities and Exchange Board of India (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, and in
accordance with the resolutions passed in the said Annual General
Meetings of the Company (Annexure II). The Scheme is administered by
the ESOS Compensation Committee of the Board of your Company and the
ICRA Employees Welfare Trust.
Particulars of Employees
The information on employees receiving remuneration of Rs. 60 lakh per
financial year or Rs. 5 lakh per month, or more, is required to be
given as annexure to the Directors'' Report under Section 217 (2A) of
the Companies Act, 1956, and the Companies (Particulars of Employees)
Amendment Rules, 2011. However, in terms of Section 219 (1) (b) (iv) of
the Companies Act, 1956, the Directors'' Report is being sent to all
Shareholders of your Company without this annexure. Any Shareholder
interested in obtaining a copy of the said annexure may write to the
Company Secretary at the Registered Office of your Company.
Corporate Governance
The report of the Board of Directors of your Company on Corporate
Governance is presented as a separate section (Annexure III) titled
"Corporate Governance Report", which forms a part of the Annual Report.
The Certificate of the Statutory Auditors of your Company regarding
compliance with the Corporate Governance requirements as stipulated in
Clause 49 of the Listing Agreement with the stock exchanges concerned
is annexed to the Directors'' Report.
Management Discussion & Analysis
The Management Discussion and Analysis is annexed to the Directors''
Report (Annexure IV).
Insider Trading Regulations
Based on the requirements under the Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 1992, as amended
from time to time, the Code of Conduct for prevention of insider
trading is in force in your Company.
Conservation of Energy, Technology Absorption, and Foreign Exchange
Earnings and Expenditure
As your Company is not engaged in any manufacturing activity, the
particulars relating to conservation of energy and technology
absorption, as mentioned in the Companies (Disclosure of Particulars in
the Report of the Board of Directors) Rules, 1988, are not applicable
to it. However, emphasis is placed on employing techniques that result
in the conservation of energy. Details on the foreign exchange earnings
and expenditure of your Company appear in the Notes to Accounts.
Directors
During 2012-13, Mr. Dhruba Narayan Ghosh resigned as Chairman and
Independent Director of the Company with effect from February 1, 2013.
The Board accepted his resignation and resolved to place on record its
debt of gratitude to Mr. Ghosh for having nurtured and led ICRA through
its evolution from a startup to a leader in the credit rating business
in India. Mr. Ghosh, from the said date, holds the position of Chairman
Emeritus, ICRA Limited.
The Board of Directors of your Company has, at its meeting on January
25, 2013, approved the elevation of Mr. Pranab Kumar Choudhury to the
position of Executive Chairman of ICRA Limited with effect from
February 1, 2013. The Board reappointed Mr. Choudhury as Whole-time
Director (Chairman & Group CEO) for a period of three years with effect
from February 1, 2013, subject to the approval of the Shareholders at
the forthcoming Annual General Meeting.
Ms. Jennifer Ann Elliott and Mr. Frederic Walter Jacques Drevon have
ceased to be Directors following their resignation from the Board on
May 24, 2013. The Board places on record its deep appreciation of the
valuable advice and guidance provided by them throughout their tenure
with your Company.
Dr. Min Ye and Mr. Simon Richard Hastilow have been appointed
Additional Directors of your Company at the Board Meeting held on May
24, 2013. Both of them will hold office till the date of the next
Annual General Meeting. The resolutions seeking their appointment as
Director have been included in the Agenda of the Annual General
Meeting.
Pursuant to the provisions of Sections 255 and 256 of the Companies
Act, 1956, and the Articles of Association of your Company, Dr. Uddesh
Kohli and Prof. Deepak Nayyar retire by rotation, and being eligible,
offer themselves for reappointment.
Proposals for the above reappointments/appointments are part of the
Agenda for the forthcoming Annual General Meeting and the respective
resolutions are recommended for your approval.
The profiles of these Directors are presented in the Notice of the 22nd
Annual General Meeting, as required under Clause 49 of the Listing
Agreement.
Directors'' Responsibility Statement
As required under the provisions contained in Section 217(2AA) of the
Companies Act, 1956, your Directors hereby confirm that:
(i) in the preparation of the Annual Accounts for the year ended March
31, 2013, the applicable accounting standards have been followed and
there are no material departures from the same;
(ii) the Directors have selected such accounting policies and applied
them consistently and made judgements and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the Company at the end of the financial year and of the profit of
the Company for that year;
(iii) the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956, for safeguarding the assets of
the Company and for preventing and detecting frauds and other
irregularities; and
(iv) the Directors have prepared the Annual Accounts on a going concern
basis.
Auditors
Messers Vipin Aggarwal & Associates, Chartered Accountants, Statutory
Auditors of your Company, hold office until the conclusion of the
forthcoming Annual General Meeting and are eligible for reappointment.
They have confirmed their eligibility for reappointment under the
provisions of Section 224 (1B) of the Companies Act, 1956.
The Notes to Accounts referred to in the Auditors'' Report are self
explanatory and do not call for any further comments.
Transfer to Reserves
Your Company proposes to transfer Rs. 6.04 crore (10% of the Net Profit
for the year) to the General Reserve. An amount of Rs. 127.49 crore is
proposed to be retained in the Statement of Profit & Loss.
Dividend
The Board of Directors recommends for approval of the Shareholders at
the forthcoming Annual General Meeting, payment of dividend of Rs. 22
per Equity Share for the financial year ended March 31, 2013. If the
Shareholders approve the dividend at the forthcoming Annual General
Meeting, the dividend shall be paid to: (i) all those Members whose
names appear in the Register of Members as on July 29, 2013; and (ii)
all those Members whose names appear on that date as beneficial owners
as furnished by National Securities Depository Limited and Central
Depository Services (India) Limited.
Acknowledgements
Your Directors acknowledge the cooperation and assistance received from
various institutions, Government agencies, Shareholders and
professionals from different disciplines.
Your Directors also wish to place on record their appreciation of the
contribution made by the members of staff of your Company.
For and on behalf of the Board of Directors
Place : New Delhi (Pranab Kumar Choudhury)
Date : May 24, 2013 Chairman & Group CEO
Mar 31, 2012
The Directors have pleasure in presenting the 21st Annual Report of
your Company along with the Audited Financial Statements for the year
ended March 31, 2012.
Financial Performance
During its 21st year of operations, your Company earned a Net Profit of
Rs. 50.90 crore as against Rs. 44.91 crore during the previous year.
Your Company's Earnings per Share and Cash Earnings per Share for the
year ended March 31, 2012 were Rs. 50.90 and Rs. 65.72, respectively,
as against Rs. 44.91 and Rs. 54.46, respectively, in the previous year.
The financial results of your Company for the year ended March 31, 2012
are presented in the following table.
Particulars 2010-11(Rs.crore) 2011-12 (Rs. crore)
Revenue from Operations 129.31 139.36
Other Income 12.54 19.74
Total Revenue 141.85 159.10
Total Expenditure (73.05)# (83.37)*
Profit before Tax 68.80 75.73
Tax Expense (23.89) (24.83)
Profit after Tax 44.91 50.90
Balance brought Forward 55.59 76.32
Profit Available for
Appropriation 100.50 127.22
Appropriations
Proposed Dividend 17.00 20.00
Corporate Tax on Proposed
Dividend 2.68 3.24
Transfer to General Reserve 4.50 5.09
Balance Carried to Balance Sheet 76.32 98.89
100.50 127.22
#Includes Rs. 7.51 crore towards Amortization of Deferred Employees
Compensation for Options granted under the Employees Stock Option
Scheme of your Company.
*Includes Rs. 12.92 crore towards Amortization of Deferred Employees
Compensation for Options granted under the Employees Stock Option
Scheme of your Company.
Review of Operations Rating Services Market Overview
The fiscal year 2011-12 was a challenging year, with India facing
strong headwinds on the macroeconomic front. Stubbornly high inflation
rates prompted the Reserve Bank of India (RBI) to embark upon
successive rounds of monetary tightening, which caused a sharp rise in
interest rates. The country was also besieged by a series of
governance issues, which affected policymaking in several sectors of
the economy. Additionally, weak business sentiments led to a dearth of
new project announcements and capacity addition. All these factors
contributed to a slowdown in the expansion of GDP and sobering effect
on the investment plans. The negative sentiments prevailing in the
domestic market were accompanied by uncertainty in the global markets,
with concerns being raised over the possible contagion effect of
potential sovereign defaults by one or more European countries.
Elevated levels of global risk aversion caused the inflow of funds from
foreign institutional investors (FIIs) to remain sluggish during
2011-12. This, in combination with inelastic oil imports, led to
considerable depreciation of the Indian rupee and a larger current
account deficit.
While consumption demand still held up reasonably well during 2011-12
on the strength of higher disposable income, the private capital
expenditure (capex) cycle, which was already showing signs of slowing
down, virtually ground to a halt. The problem was particularly acute in
important infrastructure sectors like power, in which a variety of
issues served to significantly slow down both fresh project awards and
project execution.
The domestic liquidity situation came under considerable strain in the
second half of 2011-12 as Central Government borrowings exceeded the
budgeted amount and the RBI intervened in the foreign exchange market
to stabilize the exchange rate. Further, the sharp depreciation of the
rupee exchange rate relative to major currencies since August 2011
created problems for corporate entities, especially those with large
foreign currency borrowings.
All these factors contributed to sluggishness in the volumes of capital
raised during 2011-12, both through bond issuances and bank credit;
growth in bank credit dipped from over 21% in 2010-11 to around 17% in
2011-12. Moreover, a substantial portion of the incremental bank credit
extended to industry in 2011-12 was absorbed by the power sector
(largely to offset the substantial accumulated losses in the sector)
and basic metals & metal products (partly on account of a higher
working capital requirement, reflecting elevated commodity prices).
On the positive side, the year under review saw several bond issuances
by financial and infrastructure sector entities targeted at the retail
investor. The encouraging response to such issuances augurs well for
fund mobilization via the bond route. Further, with inflation appearing
to have peaked, the RBI stance has shifted towards monetary easing, and
this would have a beneficial impact in terms of reviving investment
demand and shoring up consumer demand (which seems to have reached a
plateau of late). However, spiraling crude oil prices could upset
calculations in this regard. Significantly, the Government appears to
be taking steps to resolve some of the contentious issues in areas like
power, which could also help revive investor sentiments and facilitate
project implementation. However, clearly, a lot more needs to be done
in terms of initiating bold policy reforms that would catalyze
investment-led growth, going forward.
Rating Services Review
Ratings: Segment-wise Revenue Composition
Segment 2010-11 2011-12 Growth
(Rs.crore) (Rs.crore) (%)
Corporate Sector 79.45 93.05 17%
Financial Sector 39.81 35.72 -10%
Structured Finance 6.25 6.30 1%
Public Finance 1.89 0.88 -53%
Other Ratings 1.91 3.41 79%
Total 129.31 139.36 8%
Composition of Rating Revenues
Segment 2010-11 2011-12 Growth
(Rs.crore) (Rs.crore) (%)
Basel II 58.02 66.38 14%
Non-Basel II 71.29 72.98 2%
Corporate Sector
The market for Bank Loan Ratings continued to expand in 2011-12,
providing for an increase in the number of ratings assigned, although
the ticket size of individual mandates shrunk further.
During the year under review, your Company acquired the distinction of
being the first Credit Rating Agency in the country to rate a bond
issuance proposed by an infrastructure-related Special Purpose Vehicle
(SPV) with credit enhancement from India Infrastructure Finance Company
Limited (IIFCL)1. The credit guarantee scheme, finalized in
consultation with various stakeholders, including the Asian Development
Bank, is designed to improve the credit rating of bonds proposed to be
issued by infrastructure sector entities. This is expected to provide a
fillip to the corporate bond market, given that the inability of
infrastructure entities to attain the desired ratings has traditionally
been a major hindrance in bond floatation by them.
In the context of the corporate bond market in India, the lack of
vibrancy in it remains a challenge, and given its importance in funding
the large investment requirements of both the infrastructure and
industrial sectors, the GoI, along with the regulating agencies, is
keen on delivering a growth push to it. The increasing coverage of Bank
Loan Ratings has brought in a large number of hitherto unrated
borrowers into the rating domain, and this is expected to contribute
significantly to the development of the corporate bond market over
time.
The market for Grading of Initial Public Offerings (IPOs) remained
sluggish during 2011-12. Growth in this segment is squarely dependent
on revival in market sentiments and the consequent increase in
fund-raising via IPOs.
Financial Sector
Against the backdrop of a slowing economy amidst fears of deterioration
in asset quality, credit off take from banks declined sharply for most
part of the year under review, but picked up during the last quarter.
Bulk of the incremental credit in 2011-12 went to infrastructure
companies and non-bank finance companies, or NBFCs (which continued to
scale up operations). The total volume of debt issuance increased in
2011-12 as the better-rated entities (largely NBFCs and some corporate
entities) raised funds through bonds at finer rates as compared with
bank loans. However, the total volume of capital debt issuances by
banks stagnated in 2011-12, given the decline in credit growth during
the year and the anticipated infusion of equity into public sector
banks (which took place in the last quarter of 2011-12). On the other
hand, banks continued to place Certificates of Deposit (CDs) in 2011-12
so as to replace earlier high-cost deposits and also meet demand for
credit.
Most NBFCs continued to scale up operations in 2011-12 leveraging their
franchise and branch networks, even as the operating environment
remained difficult. The year under review saw entities take the public
debt issuance route to raise funds for onward lending. The tax-free
bonds issued by strong public sector entities during 2011-12 elicited
significant investor interest. With the limit for funds to be raised
through tax-free bonds doubled in 2012-13, more tax free bond issuances
may be expected, going forward. The overall trends in the NBFC sector
benefited your Company during the year under review, given its strong
presence in this sector.
Your Company continued to strengthen the position of its Debt Mutual
Funds Rating product during 2011-12, adding new Asset Management
Companies (AMCs) as clients, besides rating more debt schemes of its
existing AMC-clients.
Looking ahead, rating activity in the financial sector is expected to
grow, driven by expectations of reduction in interest rates in the
economy, which would provide a fillip to investment and consumption
demand in the economy.
Structured Finance
The number of entities active in securitization/bilateral assignment of
retail loans expanded during 2011-12Ãwith a number of Micro Finance
Institutions (MFIs) being amongst the new entrants. Nevertheless,
issuance volumes in this segment continued to be dominated by a few
large issuers during the year under review, as in the previous years.
During 2011-12, the RBI issued guidelines under which bank finance to
NBFCs would no longer qualify as "priority sector lending". This change
in regulation left only one major route for banks to meet their
shortfall in meeting priority sector lending targets, that is,
acquisition of compliant portfolios from NBFCs. This led to a rise in
bilateral assignment transactions, especially during the last quarter
of the year.
Securitization of individual corporate loans, on the other hand, almost
dried out during the year under review largely because of the RBI
guidelines, which prescribed a minimum holding period pre-
securitization of any loan, besides minimum retention requirements
post-securitization.
During 2011-12, your Company also rated several customized structured
obligations, including the first proposed Indian infrastructure debt
issuance to be credit enhanced by a partial guarantee from IIFCL as
mentioned earlier.
Going forward, regulatory factors such as eligibility for qualification
as priority sector loan and guidelines relating to the lock-in and
retention requirements on loan securitization are expected to continue
influencing securitization volumes significantly. Besides, as always,
growth of originators' loan books and investor appetite would continue
to have a major say in securitization volumes.
Economic and Industry Research Economic Research
Over the years, your Company has assiduously built up a research
capability to analyze contemporary developments that characterize the
Indian money and finance world. The objective has been to develop and
continually fine-tune the analytical bases for the interpretation of
the inter- related movements of the principal macro-variables that
impact the monetary and the various other sectors of the Indian
economy. The ICRA Bulletin: Money & Finance is a publication directed
towards individuals with an interest in understanding the reasons
underlying policy initiatives and outcomes. This publication apart,
your Company regularly comes out with impact-assessment studies,
research notes and trend analyses, covering several topics including,
but not limited to, inflation, economic performance, the Union Budget,
the index of industrial production, and policy assessment and impact.
Industry Research
During the year under review, your Company continued to bring out
sector-research reports, analyzing the impact of various events on the
sectors concerned from the credit perspective.
Besides, your Company continued to hold seminars and teleconferences
for market participants at regular intervals. Given its extensive
knowledge base and continuing research, your Company has in-depth
understanding of, and insights into, the trends emerging across a wide
spectrum of industries. It is now exploring opportunities to bring
about a sharper focus on research and commercialize the same.
Franchise Development
Your Company remains focused on enhancing its visibility and
reinforcing its brand strength through activities that also serve to
promote investor and market awareness and recognize excellence. In
promoting investor and market awareness, your Company periodically
holds seminars and conferences at various locations within the country
with a view to ensuring both wider participation and greater
dissemination. During the year under review, your Company intensified
dissemination of rating releases and sector notes to the media, thereby
achieving greater visibility. In recognizing excellence, your Company
remains involved with various awards, all of which seek to accord
greater recognition to professional excellence in such sectors as
banking, insurance, broking, mutual funds, international trade, and
public sector enterprise. Through these activities your Company has,
over the years, sought to associate brand ICRA with intellectual
leadership.
During the year, your Company held several seminars on Bank Loan
Ratings under Basel II Guidelines, Rating of Small and Medium
Enterprises, and other ICRA products in several Tier II cities to
address issues concerning the community of rated entities (existing and
prospective) and intermediaries. Besides, joint seminars with Moody's
Investors Service were conducted, all of which were well attended and
appreciated. Further, several teleconferences were organized, with
these enabling more efficient and faster dissemination of ICRA's credit
outlook on certain key sectors among a wider set of market
participants.
Your Company, along with its subsidiary ICRA Online Limited, organized
the Ninth Annual ICRA Mutual Fund Awards during 2011-12. The annual
awards have gained considerable popularity over the years. Besides,
your Company continues to power the Financial Advisor and International
Trade Awards along with CNBC-TV18, the Financial Leadership Awards with
Bloomberg UTV, and the India Pride Awards, an initiative to recognize
the superior performing public sector entities, with the Dainik Bhaskar
group.
Subsidiary Companies
During the year, ICRA Lanka Limited (ICRALanka), a wholly-owned
subsidiary of your Company, commenced credit rating services in Sri
Lanka following the grant of rating license by the Securities and
Exchange Commission of Sri Lanka.
During 2011-12, PT. ICRA Indonesia (ICRAIndo), the Indonesian venture
of your Company, received recognition as a credit rating agency from
Bank Indonesia (BI), Indonesia's central bank.
During 2011-12, your Company has been granted a letter of intent (LoI)
by the Securities Board of Nepal to establish a Credit Rating Agency in
Nepal. Your Company proposes to set up a Credit Rating Agency in Nepal
in a joint venture with certain reputable Nepal-based institutions and
professionals.
During 2011-12, Axiom Technologies Limited, wholly owned by ICRA Techno
Analytics Limited (ICTEAS), merged into ICTEAS following the Order
passed by the Hon'ble Calcutta High Court. ICTEAS is a wholly-owned
subsidiary of your Company offering software solutions and services.
Your Company is in compliance with all the conditions stipulated by the
Ministry of Corporate Affairs, Government of India, for availing itself
of the general exemption under Section 212 (8) of the Companies Act,
1956, from annexing to the Balance Sheet of your Company, the Audited
Statements of Account together with the Directors' Reports and the
Auditors' Reports for the year 2011-12 of the subsidiary companies,
namely, ICRA Management Consulting Services Limited; ICRA Techno
Analytics Limited; ICRA Online Limited; PT. ICRA Indonesia; ICRA Lanka
Limited; ICRA Nepal Limited; ICRA Sapphire Inc.; IMACS Virtus Global
Partners Inc.; and Pragati Development Consulting Services Limited.
However, if any Shareholder of your Company or subsidiary companies so
desires, your Company will make available copies of the Financial
Statements of the above subsidiary companies and related information,
free of charge.
The Consolidated Financial Statements of Group ICRA, consisting of ICRA
Limited, its subsidiaries, and their subsidiaries, for the year
2011-12, which form a part of the Annual Report, are attached. The
Auditors' Report on the Consolidated Financial Statements is also
attached. A statement containing the brief financial details of the
said subsidiary companies is annexed, as prescribed by the Ministry of
Corporate Affairs, Government of India, to the Consolidated Financial
Statements.
The Consolidated Financial Statements have been prepared in accordance
with the prescribed Accounting Standards.
Recovery of Security Deposit from Associated Journals Limited
During 1998-99, your Company had filed a suit with the Hon'ble High
Court of Delhi for the recovery of a refundable security deposit of Rs.
46.70 lakh, along with interest due thereon, from Associated Journals
Limited for premises located at Herald House, Bahadurshah Zafar Marg,
New Delhi. During 2007-08, a ruling was passed in favour of your
Company in the said matter by the Hon'ble High Court of Delhi.
Subsequently however, appeals were filed by Associated Journals Limited
against the said ruling. In 2011-12, the Hon'ble High Court of Delhi
dismissed the appeals, but refrained from imposing any cost on
Associated Journals Limited. Your Company will shortly re- initiate
proceedings against Associated Journals Limited for recovery of the
sums due in terms of the decree passed in favour of your Company and
against Associated Journals Limited.
Branches of the Company
Your Company operates its business from its offices located in Delhi,
Gurgaon, Mumbai, Kolkata, Chennai, Ahmadabad, Bengaluru, Hyderabad, and
Pune.
Human Resource Development & Training
Human resource development continued to be accorded high priority
during the year, with emphasis being placed on improving skill,
competence and knowledge through regular training and in-house/
external professional development programmes. The relation between the
employees and the management of your Company remained harmonious during
the year. The management had periodical discussions with employees
aimed at providing the best possible work environment and facilities to
them. Your Company has a consultative and participative management
style, which has facilitated achievement of its corporate goals. The
morale of employees remained high during the year, contributing
positively to the progress of your Company.
Employees Stock Option Scheme (ESOS)
Your Company has implemented the Employee Stock Option Scheme 2006
("the Scheme") in accordance with the Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999, and in conformity with the resolutions passed by the
Shareholders at the Annual General Meetings of the Company held on June
12, 2006, July 29, 2008, and August 12, 2011. Pursuant to the
resolution passed by the Shareholders at the Annual General Meeting
held on June 12, 2006 for the grant of Options, 9,06,000 Equity Shares
amounting to 9.06% of the Equity Share Capital of your Company have
been issued to the ICRA Employees Welfare Trust for grant of Options to
the eligible Optioned. Accordingly, the Stock Options have been
granted to the eligible Optioned from the said pool of 9,06,000 Equity
Shares in two tranches so far. The first tranche was granted during
2006-07 and the second during 2010- 11. The details of the Stock
Options granted under the Scheme are annexed to the Directors' Report.
The Scheme is administered by the ESOS Compensation Committee of the
Board of your Company and the ICRA Employees Welfare Trust.
Particulars of Employees
The information on employees who received remuneration of Rs. 60 lakh
per financial year or Rs. 5 lakh per month, or more, is required to be
given under Section 217 (2A) of the Companies Act, 1956, and the
Companies (Particulars of Employees) Amendment Rules, 2011, as annexure
to the Directors' Report. However, in terms of Section 219 (1) (b) (iv)
of the Companies Act, 1956, the Directors' Report is being sent to all
Shareholders of your Company without this annexure. Any Shareholder
interested in obtaining a copy of the said annexure may write to the
Company Secretary at the Registered Office of your Company.
Corporate Governance
The report of the Board of Directors of your Company on Corporate
Governance is presented as a separate section titled "Corporate
Governance Report", which forms a part of the Annual Report. The
Certificate of the Statutory Auditors of your Company regarding
compliance with the Corporate Governance requirements as stipulated in
Clause 49 of the Listing Agreement with the stock exchanges concerned
is annexed to the Directors' Report.
Management Discussion & Analysis
The Management Discussion and Analysis is annexed to the Directors'
Report.
Insider Trading Regulations
Based on the requirements under the SEBI (Prohibition of Insider
Trading) Regulations, 1992, as amended from time to time, the Code of
Conduct for prevention of insider trading is in force in your Company.
Conservation of Energy, Technology Absorption, and Foreign Exchange
Earnings and Expenditure
As your Company is not engaged in any manufacturing activity, the
particulars relating to conservation of energy and technology
absorption, as mentioned in the Companies (Disclosure of Particulars in
the Report of the Board of Directors) Rules, 1988, are not applicable
to it. However, emphasis is placed on employing techniques that result
in the conservation of energy. Details on the foreign exchange earnings
and expenditure of your Company appear in the Notes to Accounts.
Directors
During 2011-12, Mr. Pranab Kumar Choudhury was reappointed Whole-time
Director (Vice-Chairman & Group CEO) of your Company by the
Shareholders at the 20th Annual General Meeting held on August 12,
2011.
Further, Mr. Naresh Takkar was reappointed Whole-time Director
(Managing Director & CEO) of your Company by the Shareholders at the
20th Annual General Meeting held on August 12, 2011.
Pursuant to the provisions of Sections 255 and 256 of the Companies
Act, 1956, and the Articles of Association of your Company, Mr.
Frederic Walter Jacques Drevon and Mr. Amal Ganguli retire by rotation,
and being eligible, offer themselves for reappointment.
Proposals for the above reappointments are part of the Agenda for the
forthcoming Annual General Meeting and the respective resolutions are
recommended for your approval.
The profiles of these Directors are presented in the Notice of the 21st
Annual General Meeting, as required under Clause 49 of the Listing
Agreement.
Directors' Responsibility Statement
As required under the provisions contained in Section 217(2AA) of the
Companies Act, 1956, your Directors hereby confirm that:
(i) in the preparation of the Annual Accounts for the year ended March
31, 2012, the applicable accounting standards have been followed and
there are no material departures from the same;
(ii) the Directors have selected such accounting policies and applied
them consistently and made judgments and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the Company at the end of the financial year and of the profit of
the Company for that year;
(iii) the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956, for safeguarding the assets of
the Company and for preventing and detecting frauds and other
irregularities; and
(iv) the Directors have prepared the Annual Accounts on a going concern
basis.
Auditors
Messers Vipin Aggarwal & Associates, Chartered Accountants, Statutory
Auditors of your Company, hold office until the conclusion of the
forthcoming Annual General Meeting and are eligible for reappointment.
They have confirmed their eligibility for reappointment under the
provisions of Section 224 (1B) of the Companies Act, 1956.
The Notes to Accounts referred to in Auditors' Report are self
explanatory and do not call for any further comments.
Transfer to Reserves
Your Company proposes to transfer Rs. 5.09 crore (10% of the Net Profit
for the year) to the General Reserve. An amount of Rs. 98.89 crore is
proposed to be retained in the Statement of Profit & Loss.
Dividend
The Board of Directors recommends for approval of the Shareholders at
the forthcoming Annual General Meeting, payment of dividend of Rs. 20
per Equity Share for the financial year ended March 31, 2012. If the
Shareholders approve the dividend at the forthcoming Annual General
Meeting, the dividend shall be paid to: (i) all those Members whose
names appear in the Register of Members as on July 30, 2012; and (ii)
all those Members whose names appear on that date as beneficial owners
as furnished by National Securities Depository Limited and Central
Depository Services (India) Limited.
Acknowledgements
Your Directors acknowledge the cooperation and assistance received from
various institutions, Government agencies, Shareholders and
professionals from different disciplines.
Your Directors also wish to place on record their appreciation of the
contribution made by the members of staff of your Company.
For and on behalf of the Board of Directors
Place : New Delhi (D. N. Ghosh)
Date : May 11, 2012 Chairman
Mar 31, 2011
The Directors have pleasure in presenting the 20th Annual Report of
your Company along with the Audited Accounts for the year ended March
31, 2011.
Financial Performance
During its 20th year of operations, your Company earned a Net Profit of
Rs. 44.91 crore as against Rs. 50 crore during the previous year. Your
Companys Earning per Share and Cash Earning per Share1 for the year
ended March 31, 2011 were Rs. 44.91 and Rs. 54.46, respectively, as
against Rs. 50 and Rs. 51.96, respectively, in the previous year. The
financial results of your Company for the year ended March 31, 2011 are
presented in the following table.
Particulars 2009-10 (Rs. crore) 2010-11 (Rs. crore)
Income from Operations 106.16 129.31
Other Income 21.78 12.54
Total Income 127.94 141.85
Total Expenditure (51.87) (71.01)Ã
Profit before Depreciation and Tax 76.07 70.84
Depreciation (1.96) (2.04)
Profit before Tax 74.11 68.80
Provision for Taxes (24.11) (23.89)
Profit after Tax 50.00 44.91
Balance Brought Forward 30.41 55.59
Profit Available for Appropriation 80.41 100.50
Appropriations
Proposed Dividend 17.00 17.00
Corporate Tax on Proposed Dividend 2.82 2.68
Transfer to General Reserve 5.00 4.50
Balance carried to Balance Sheet 55.59 76.32
80.41 100.50
Review of Operations Rating Services
Market Overview
The economic revival that had gained a foothold during the previous
fiscal year consolidated itself in 2010-11, drawing mainly on robust
consumption demand. A normal monsoon in 2010 turned farm
output around and helped the rural economy that was already benefiting
from higher government spending on social sector schemes. The revival
in the rural economy in turn fed the growth in domestic consumption
during 2010-11. Merchandise exports also reported high growth in
2010-11 following greater diversification of destinations against the
backdrop of broadly improving global economic conditions.
However, while India remained one of the fastest growing economies in
the world in 2010-11, the private capital expenditure (capex) cycle
failed to pick up pace during the year. In the face of a persistently
high headline inflation rate, the Reserve Bank of India (RBI) resorted
to a series of monetary tightening measures, which eventually got
transmitted into higher bank lending rates. Besides, systemic liquidity
remained in deficit for large parts of 2010-11, pushing up short-term
interest rates. Further, commodity prices displayed an uptrend in the
latter part of 2010-11, with high crude oil prices in particular posing
a challenge to the current account deficit, besides the fuel subsidy
bill and the inflation rate.
All these factors, exacerbated by market volatility, weak market
sentiments, and the absence of fresh awards in the infrastructure
sector (notably roads), contributed to exerting a downward pressure on
long-term bond issuances in 2010-11. While bank credit did report
robust overall growth in 2010-11 over the previous fiscal, this was
partly on account of the institutional credit that telecom players
accessed ahead of the spectrum and bandwidth auctions.
Looking ahead, on the policy front, the RBI is likely to continue with
monetary tightening measures to contain inflationary expectations and
prevent generalisation of inflation, even as it seeks to ensure that
such measures do not derail growth in the short term. Over the longer
term, investments in industrial capacity and in infrastructure, which
appear likely at this juncture, would keep the demand for funds high,
thereby encouraging growth in bank credit and in issuance volumes in
the debt market.
Rating Services Review
Ratings: Segment-wise Revenue Composition
Segment 2009-10 2010-11 Growth
(Rs. crore) (Rs. crore) (%)
Corporate Sector 65.64 79.45 21%
Financial Sector 32.25 39.81 23%
Structured Finance 5.34 6.25 17%
Public Finance 0.89 1.89 112%
Other Ratings 2.04 1.91 -6%
Total 106.16 129.31 22%
Composition of Rating Revenues
Segment 2009-10 2010-11 Growth
(Rs. crore) (Rs. crore) (%)
Basel II 46.21 58.02 26%
Non-Basel II 59.95 71.29 19%
Corporate Sector
The market for Bank Loan Ratings, which had taken off in the second
half of 2007-08, continued to provide opportunities for the expansion
of rating coverage in 2010-11 as well, providing for an increase in the
number of Ratings assigned, although the smaller ticket size of
individual mandates led to further moderation of growth from fresh
business in this segment. A revival in the capex cycle, in addition to
an increase in the economic growth momentum, would stimulate expansion
in bank ending to the corporate sector, and correspondingly, in the
Bank Loan Rating segment.
The market for Grading of Initial Public Offerings (IPOs), which
improved during the first half of 2010-11, slackened thereafter. Given
the magnitude of fund raising envisaged during the current year through
IPOs, and the gradual improvement in market sentiments seen during the
last few months, the market for IPO Gradings should be buoyant during
2011-12.
The lack of a vibrant Corporate Bond market continues to be a
challenge, and given its importance in the funding of the vast
investment requirements of both the infrastructure and industrial
sectors, the Government including the regulating agencies are keen on
giving it the necessary fillip. The increasing coverage of Bank Loan
Ratings has brought in a large number of hitherto unrated borrowers
into the Rating domain, and this is expected to enable the development
of the Corporate Bond market over time.
Financial Sector
Credit offtake from banks remained robust for most of 2010-11 on the
back of sustained economic growth, besides access of credit by telecom
entities (ahead of the spectrum/bandwidth auctions) and some others in
the infrastructure space and by Non-Bank Finance Companies (which
continued to increase their scale of operations). However, the total
volume of capital debt issuances by banks was lower in 2010-11 as they
used the capital that had been mobilised earlier. The anticipated
equity infusion by the Government of India into most public sector
banks was another factor that contributed to lower debt capital
issuance by banks. On the other hand, banks continued to place
Certificates of Deposit (CDs) in 2010-11, especially in the second half
of 2010-11, to fund demand for credit and also in anticipation of
further rate increases over the short term.
Most NBFCs were able to grow their business in 2010-11, drawing on a
growing economy and supported by greater access to funds.
Infrastructure finance companies were allowed to mobilise retail funds
by issuing tax-free bonds in 2010-11; while the scheme has elicited a
mixed response, it is expected to enable these companies diversify
their funding avenues. The overall trends in the NBFC sector benefited
your Company during the year under review, given its strong presence in
this sector.
Your Company continued to strengthen the position of its Debt Mutual
Funds Rating product during the year under review, adding new Asset
Management Companies (AMCs) as clients, besides rating more debt
schemes of its existing AMC-clients.
Going forward, rating activity in the financial sector is expected to
grow, driven by investment and consumption demand in the economy.
Structured Finance
Securitisation of retail loans as well as securitisation of individual
corporate loans continued to be dominated by a few large issuers during
the year under review, as had been the case earlier as well. However,
the latter segment was impacted negatively by the draft guidelines
issued by RBI in the first quarter of 2010-11, which prescribed a
minimum holding period before any loan can get securitised and also a
minimum retention requirement post-securitisation. The issuers
motivation to securitise was also partly hampered by hardening interest
rates, and therefore higher cost, especially during the second half of
2010-11. Thus, overall securitisation volumes during the year under
review dipped by an estimated 40% or so. Nevertheless, during 2010-11,
your Company was able to improve its share of the retail loan
securitisation market relative to the previous year on the strength of
its improved market presence.
Going forward, regulatory factors such as Priority Sector Loan (PSL)
requirements and the finalisation of the proposals on the lock-in
period and the retention requirement for securitisation are expected to
continue influencing securitisation volumes significantly. Besides,
growth of originators loan books and investor appetite (in turn
influenced by the liquidity in the system) would also have a major role
in determining the securitisation volumes.
Economic and Industry Research Economic Research
Over the years, your Company has assiduously built up a research
capability to analyse contemporary developments that characterise the
Indian money and finance world. The objective has been to develop and
continually fine-tune the analytical bases for the interpretation of
the inter-related movements of the principal macro-variables that
impact the monetary and the various other sectors of the Indian
economy. The ICRA Bulletin: Money & Finance is a publication directed
towards individuals with an interest in understanding the reasons
underlying policy initiatives and outcomes. This publication apart,
your Company regularly comes out with impact-assessment studies,
research notes and trend analyses, covering several topics including,
but not limited to, inflation, economic performance, the Union Budget,
the index of industrial production, and policy assessment and impact.
Industry Research
Given its extensive knowledge base and continuing research, your
Company has an in-depth understanding of, and insights into, the trends
emerging across a wide spectrum of industries. The sectoral research
reports published by your Company present a thorough analysis (from the
credit perspective) of the developments and trends that have emerged
and are likely to emerge in the various industrial sectors in which it
has business interest. Apart from these sectoral research reports, your
Company has also been publishing rating methodology notes to better
promote the cause of transparency and investor education.
Franchise Development
Your Company remains focused on enhancing its visibility and
reinforcing its brand strength through activities that also serve to
promote investor and market awareness and recognise excellence. In
promoting investor and market awareness, your Company periodically
holds seminars and conferences at various locations within the country
with a view to ensuring both wider participation and greater
dissemination. In recognising excellence, your Company remains involved
with various awards, all of which seek to accord greater recognition to
professional excellence in such sectors as banking, insurance, broking,
mutual funds, international trade, and public sector enterprise.
Through these activities your Company has, over the years, sought to
associate brand ICRA with intellectual leadership.
During the year, your Company held several seminars on Basel II
guidelines and on ICRAs rating approach in this context in several
tier II cities to address the issues concerning many first-time ratees
and intermediaries. Joint seminars with Moodys Investors Service were
conducted, which were all well attended and appreciated. Several
teleconferences were also organised, with these enabling more efficient
and faster dissemination of ICRAs credit outlook on certain key
sectors among a wider set of market participants.
Your Company along with its subsidiary, ICRA Online Limited, organised
the Eighth Annual ICRA Mutual Fund Awards during 2010-11. These awards
have gained considerable popularity over the years. Further, in
2010-11, your Company partnered with Bloomberg UTV in the first edition
of their Financial Leadership Awards, a unique attempt at recognising
superior performance across the financial sector space that features,
among others, banks, insurance companies, mutual funds and broking
firms. Your Company also continues to power the Financial Advisor and
International Trade Awards along with CNBC-TV18, and the India Pride
Awards, an initiative to recognise the superior performing Public
Sector entities, with the Dainik Bhaskar group.
Subsidiary Companies
During the year, PT. ICRA Indonesia (ICRAIndo), the Indonesian venture
of your Company, commenced credit rating services in Indonesia
following the grant of rating licence by the Capital Market and
Financial Supervisory Board, Ministry of Finance, Republic of
Indonesia. Your Company holds 99% of the share capital in ICRAIndo, the
balance 1% being held by one of ICRAIndos employees.
During 2010-11, M-Serve Business Solutions Private LimitedÃa
wholly-owned subsidiary of ICRA Online Limited, which is a wholly-owned
subsidiary of your CompanyÃbeing non-functional, wound up its
operations after completing the necessary formalities.
Your Company is in compliance with all the conditions stipulated by the
Ministry of Corporate Affairs, Government of India, for availing itself
of the general exemption under Section 212 (8) of the Companies Act,
1956, from annexing to the Balance Sheet of your Company, the Audited
Statements of Account together with the Directors Reports and the
Auditors Reports for the year 2010-11 of the subsidiary companies,
namely, ICRA Management Consulting Services Limited; ICRA Techno
Analytics Limited; ICRA Online Limited; P T. ICRA Indonesia; ICRA Lanka
Limited; ICRA Sapphire Inc.; IMaCS Virtus Global Partners Inc.; Axiom
Technologies Limited; and Pragati Development Consulting Services
Limited. However, if any shareholder of your Company or subsidiary
companies so desires, your Company will make available copies of the
Annual Accounts of the above subsidiary companies and related
information, free of charge.
The Consolidated Financial Statements of Group ICRA, consisting of ICRA
Limited, its subsidiaries, and their subsidiaries, for the year
2010-11, which form a part of the Annual Report, are attached. The
Auditors Report on the Consolidated Financial Statements is also
attached. A statement containing brief financial details of the said
subsidiary companies is annexed, as prescribed by the Ministry of
Corporate Affairs, Government of India, with the Consolidated Financial
Statements. The Consolidated Financial Statements have been prepared in
accordance with the prescribed Accounting Standards.
Recovery of Security Deposit from Associated Journals Limited
During the year 1998-99, your Company had filed a suit with the Honble
High Court of Delhi for recovery of a deposit of Rs. 46.70 lakh along
with interest due thereon, receivable from Associated Journals Limited
representing refund of the security deposit for premises located at
Herald House, Bahadurshah Zafar Marg, New Delhi. During 2007-08, a
ruling was passed in favour of your Company by the Honble High Court
of Delhi. Subsequently, your Company made an application for release of
the monies deposited with the Honble High Court of Delhi by Associated
Journals Limited following the 2007-08 ruling. The matter is pending
before the Honble High Court of Delhi.
Branches of the Company
Your Company operates its business from its offices located in Delhi,
Gurgaon, Mumbai, Kolkata, Chennai, Ahmedabad, Bangalore, Hyderabad, and
Pune. The additional office premises taken on lease at Hyderabad and
Kolkata were renovated during the year under review.
Human Resource Development & Training
Human resource development continued to be accorded high priority
during the year, with emphasis being placed on improving skill,
competence and knowledge through regular training and in-house/
external professional development programmes. The relation between
employees and management of your Company continued to remain harmonious
during the year. The management had periodical discussions with
employees aimed at providing the best possible work environment and
facilities to them. Your Company has a consultative and participative
management style, which has facilitated achievement of its corporate
goals. The morale of employees continued to remain high during the
year, contributing positively to the progress of your Company.
Employees Stock Option Scheme (ESOS)
Pursuant to the resolution passed by the Shareholders at the Annual
General Meeting held on June 12, 2006 for the grant of Options,
9,06,000 Equity Shares amounting to 9.06% of the Equity Share Capital
of your Company have been issued to the ICRA Employees Welfare Trust
for grant of Options to the eligible Optionees. Accordingly, the Stock
Options have been granted to the eligible Optionees from the said pool
of 9,06,000 Equity Shares in two tranches so far. The first tranche was
granted during 2006-07 and the second during 2010-11. The details of
the Stock Options granted under the Employees Stock Option Scheme 2006
(ESOS) are annexed to the Directors Report. The ESOS is administered
by the ESOS Compensation Committee of the Board of your Company and the
ICRA Employees Welfare Trust.
Particulars of Employees
The information on employees who received remuneration of Rs. 60 lakh
per financial year or Rs. 5 lakh per month, or more, is required to be
given under Section 217 (2A) of the Companies Act, 1956, and the
Companies (Particulars of Employees) Amendment Rules, 2011, as annexure
to the Directors Report. However, in terms of Section 219 (1) (b)
(iv) of the Companies Act, 1956, the Directors Report is being sent to
all shareholders of your Company without this annexure. Any shareholder
interested in obtaining a copy of the said annexure may write to the
Company Secretary at the Registered Office of your Company.
Corporate Governance
The report of the Board of Directors of your Company on Corporate
Governance is presented as a separate section titled "Corporate
Governance Report", which forms a part of the Annual Report. The
Certificate of the Statutory Auditors of your Company regarding
compliance with the Corporate Governance requirements as stipulated in
Clause 49 of the Listing Agreement with the stock exchanges concerned
is annexed to the Directors Report.
Management Discussion & Analysis
The Management Discussion and Analysis is annexed to the Directors
Report.
Insider Trading Regulations
Based on the requirements under the SEBI (Prohibition of Insider
Trading) Regulations, 1992, as amended from time to time, the Code of
Conduct for prevention of insider trading is in force in your Company.
Conservation of Energy, Technology Absorption, and Foreign Exchange
Earnings and Expenditure
As your Company is not engaged in any manufacturing activity, the
particulars relating to conservation of energy and technology
absorption, as mentioned in the Companies (Disclosure of Particulars in
the Report of the Board of Directors) Rules, 1988, are not applicable
to it. However, emphasis is placed on employing techniques that result
in the conservation of energy. Details on the foreign exchange earnings
and expenditure of your Company appear in the Notes to Accounts.
Directors
The Board of Directors of your Company has, at its meeting on May 11,
2011, approved the reappointment of Mr. Pranab Kumar Choudhury as
Whole-time Director (Vice-Chairman & Group CEO) for a period of two
years with effect from February 1, 2012, subject to the approval of the
shareholders at the forthcoming Annual General Meeting.
Further, the Board of Directors of your Company has, at its meeting on
May 11, 2011, approved the reappointment of Mr. Naresh Takkar as
Whole-time Director (Managing Director & CEO) for a period of five
years with effect from July 1, 2011, subject to the approval of the
shareholders at the forthcoming Annual General Meeting.
Pursuant to the provisions of Sections 255 and 256 of the Companies
Act, 1956, and the Articles of Association of your Company, Prof.
Deepak Nayyar and Mr. Piyush Gunwantrai Mankad retire by rotation, and
being eligible, offer themselves for reappointment.
Proposals for the above reappointments are part of the Agenda for the
forthcoming Annual General Meeting and the respective resolutions are
recommended for your approval.
The profiles of these Directors are presented in the Notice of the 20th
Annual General Meeting, as required under Clause 49 of the Listing
Agreement.
Directors Responsibility Statement
As required under the provisions contained in Section 217(2AA) of the
Companies Act, 1956, your Directors hereby confirm that:
(i) in the preparation of the Annual Accounts, the applicable
accounting standards had been followed;
(ii) the Directors had selected such accounting policies and applied
them consistently and made judgements and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the Company at the end of the financial year and of the profit of
the Company for that year;
(iii) the Directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956, for safeguarding the assets of
the Company and for preventing and detecting frauds and other
irregularities; and
(iv) the Directors had prepared the Annual Accounts on a going concern
basis.
Auditors
Messers Vipin Aggarwal & Associates, Chartered Accountants, Statutory
Auditors of your Company, retire at the forthcoming Annual General
Meeting and are eligible for reappointment. They have confirmed their
eligibility for reappointment under the provisions of Section 224 (1B)
of the Companies Act, 1956.
Transfer to Reserves
Your Company proposes to transfer Rs. 4.50 crore (10% of the Net Profit
for the year) to the General Reserve. An amount of Rs. 76.32 crore is
proposed to be retained in the Profit & Loss Account.
Dividend
The Board of Directors recommends for approval of the shareholders at
the forthcoming Annual General Meeting, payment of dividend of Rs. 17
per Equity Share for the financial year ended March 31, 2011. If the
shareholders approve the dividend at the forthcoming Annual General
Meeting, the dividend shall be paid to: (i) all those Members whose
names appear in the Register of Members as on August 8, 2011; and (ii)
all those Members whose names appear on that date as beneficial owners
as furnished by National Securities Depository Limited and Central
Depository Services (India) Limited.
Acknowledgements
Your Directors acknowledge the cooperation and assistance received from
various institutions, Government agencies, shareholders and
professionals from different disciplines.
Your Directors also wish to place on record their appreciation of the
contribution made by the members of staff of your Company.
On behalf of the Board of Directors
Place : Gurgaon (D. N. Ghosh)
Date : May 11, 2011 Chairman
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