IARC Cover 1institutions including Bank of Baroda, IFCI Ltd., Allahabad Bank, LIC, United Bank of...
Transcript of IARC Cover 1institutions including Bank of Baroda, IFCI Ltd., Allahabad Bank, LIC, United Bank of...
Annual Report 2010-2011
Recreating Valuefrom Non Performing Assets
International Asset Reconstruction Company Private Limited (IARC), registered under
section 3 of the SARFAESI Act, 2002, as a Securitisation and Reconstruction Company
vide Certificate of Registration no. 006/2007 dated March 15, 2007, issued by the
Reserve Bank of India was promoted in 2002 by professionals from the banking and
financial services sector for reconstruction of financial assets. HDFC Bank Ltd., Tata
Capital Ltd., City Union Bank Limited, FMO, Netherlands, ICICI Bank Ltd. and Standard
Bank Plc. UK are the institutional shareholders. The Registered Office of IARC is
situated at 709, 7th Floor, Ansal Bhawan, 16, Kasturba Gandhi Marg, New Delhi – 110
001. IARC has Corporate Office in Mumbai and a SBU in Gurgaon. IARC commenced
operations in September 2007.
IARC aims to carve out a niche for itself in the area of its target group and optimise
resolution results in terms of amounts realized as well as time taken therefor. IARC has
already acquired assets of more than Rs. 2500 crores from various banks and financial
institutions including Bank of Baroda, IFCI Ltd., Allahabad Bank, LIC, United Bank of
India, State Bank of Bikaner & Jaipur, Punjab National Bank, UCO Bank, HDFC Bank Ltd,
Union Bank of India, State Bank of Patiala, Federal Bank and ICICI Bank Ltd. Besides, it
has been mandated by a foreign bank to resolve non performing assets as an Agent
and has shown considerable success in resolving these.
Contents
Company Information
Notice
Directors’ Report
Auditors’ Report
Balance Sheet
Profit & Loss Account
Cash Flow Statement
Schedules
2
3
4
8
15
18
19
20
21
42
43
Board of Directors’
Balance Sheet Abstract
Restructured
Annual Report 2010-112
Board of Directors’
Mr. M. S. VermaChairman
Mr. Birendra Kumar Managing Director & Chief Executive Officer
Mr. Arun DuggalVice Chairman
Mr. Sunil VarmaDirector
Mr. Vikas NandaDirector
Mr. Kishore MoorjaniDirector
Mrs. Ranjana KumarDirector
Mr. Praveen Kadle Director - Nominee,
Tata Capital Ltd.
Mr. Kaizad Bharucha Director - Nominee,
HDFC Bank Ltd.
Mr. Maninder JunejaDirector - Nominee,
ICICI Bank Ltd.
Mr. Anish Modi Director - Nominee, FMO, Netherlands
Mr. Ravindra Kumar Director - Nominee, Standard Bank Plc
Annual Report 2010-113
Bankers HDFC Bank
ICICI Bank
State Bank of Patiala
Kotak Mahindra Bank
Auditors’
M/s B S R & Company
Lodha Excelus,
Apollo Mills Compound, N.M. Joshi Marg,
Mahalaxmi,
Mumbai - 400 011. India
Share Registrars
Link Intime India Pvt. Ltd.
C-13 Pannalal Silk Mill Compound,
L B S Marg, Bhandup (west),
Mumbai - 400 078.
Registered Office
709, 7th Floor, Ansal Bhawan,
16, Kasturba Gandhi Marg,
New Delhi – 110 001.
Corporate Office
A-508, 215 Atrium, Kanakia Spaces,
Andheri-kurla Road, Andheri (E),
Mumbai – 400 069.
Gurgaon SBU
B-306, Millennium Plaza,
Sushant Lok- I, Sector 27,
Gurgaon, Haryana – 122001
Company Information
4 Annual Report 2010-11
Notice
Notice is hereby given that the 9th Annual GeneralMeeting (AGM) of the members of International AssetReconstruction Company Private Limited shall be held onThursday, 30th June, 2011 at 4.00 p.m. at HotelOberoi, Zakir Hussain Marg, New Delhi to transact thefollowing business:-
Ordinary Business:-
1. To receive, consider and adopt the Audited BalanceSheet of the Company as at 31st March, 2011 andthe Profit & Loss Account for the year ended on thatdate, together with the Report of the Directors andthe Auditors thereon.
2. To declare dividend @5% (Rs. 0.50 per share) on theequity shares of the Company, for the Financial year2010-11 to the shareholders whose name appear onthe Register of Members as at 30th March, 2011.
3. To confirm payment of dividend @5% (Rs. 0.50 pershare) on the Compulsory Convertible CumulativePreference Shares of the company, for the financialyear 2010-11.
4. To consider and if thought fit, pass the followingresolution, with or without modification, as aSpecial Resolution:
“RESOLVED THAT M/s B S R & Company, CharteredAccountants (Firm Registration number 128032W)the retiring Auditors of the Company, be and arehereby appointed as the Statutory and Tax Auditorsof the Company, to hold office from the conclusionof this Annual General Meeting until the conclusionof the next Annual General Meeting and further thatthe Board of Directors be and are hereby authorizedto fix their remuneration.”
Special Business:-
5. To consider and if thought fit, pass the followingresolution, with or without modification, as anOrdinary Resolution:
“RESOLVED THAT Mr. Ravindra Kumar, who wasappointed as an Additional Director and holds officeup to the date of this Annual General Meeting, beand is hereby appointed as a Director of theCompany.”
6. To consider and if thought fit, pass the followingresolution, with or without modification, as anOrdinary Resolution:
“RESOLVED THAT Mr. Maninder Juneja, who wasappointed as an Additional Director and holds officeup to the date of this Annual General Meeting, beand is hereby appointed as a Director of theCompany.”
7. To consider and if thought fit, pass the followingresolution, with or without modification, as aSpecial Resolution:
7.1 “RESOLVED THAT pursuant to the provisions ofSection 16, 94 of the Companies Act, 1956 and
other applicable provisions, if any, of the CompaniesAct, 1956 (including any statutory modification orre-enactment thereof for the time being in force)and in accordance with Clause 8.9 of the Articles ofAssociation of the company, the Authorised ShareCapital of the Company, presently comprising of8,50,00,000 (Eight Crore Fifty Lac) Equity Shares ofRs.10/- (Rupees Ten) each and 1,50,00,000 (OneCrore Fifty Lac) Compulsorily Convertible PreferenceShares of Rs. 10/- (Rupees Ten) each; aggregating toRs. 100,00,00,000/- (Rupees Hundred Crore) be andis hereby reclassified into 10,00,00,000 (Ten Crore)Equity Shares of Rs.10/- (Rupees Ten) each, bycancellation of 1,50,00,000 (One Crore Fifty Lac)Compulsorily Convertible Preference Shares of Rs. 10/-(Rupees Ten) each.
RESOLVED FURTHER THAT Clause V of theMemorandum of Association of the Company besubstituted with the following:
V. The Authorised Share Capital of the Company is Rs.100,00,00,000/- (Rupees Hundred Crore)divided into 10,00,00,000 (Ten Crore) EquityShares of Rs.10/- (Rupees Ten) each.
RESOLVED FURTHER THAT for the purpose ofgiving effect to this resolution, the Board ofDirectors or Committee thereof be and are herebyauthorized to take all such steps and actions andgive such directions as may be in its absolutediscretion deemed necessary and settle any questionthat may arise in this regard.”
By order of the BoardFor International Asset Reconstruction
Company Private Limited
Sd/-Place : Mumbai Rashmi SharmaDate : 25th April, 2011 Company
Secretary
NOTES:
1. A MEMBER ENTITLED TO ATTEND AND VOTE ATTHE MEETING IS ALSO ENTITLED TO APPOINT APROXY TO ATTEND AND VOTE INSTEAD OFHIMSELF AND THE PROXY NEED NOT BE AMEMBER OF THE COMPANY. In order to beeffective, the proxies must be received by theCompany at its Registered Office not less than 48hours before the commencement of the meeting. TheProxy Form is enclosed.
2. The Directors Report, Auditors’ Report, Audited profitand Loss Account and Audited Balance Sheet as at31st March, 2011 are enclosed.
3. The Explanatory Statement pursuant to Section173(2) of the Companies Act, 1956 to the Item Nos.4, 5, 6 and 7 of the Notice as set out herein aboveis annexed hereto.
5 Annual Report 2010-11
Notice
Explanatory Statement
Under Section 173(2) of the Companies Act, 1956
In accordance with the provisions of Section 173(2) of the
Companies Act, 1956, the Explanatory Statement, setting
out all material facts relating to the Special Business
mentioned in the notice is as below:
Item No. 4
Although not statutorily required, the Explanatory
Statement in respect of Item No. 4 is being given as the
resolution is proposed as a Special resolution. In terms of
Share Holders & Share Subscription Agreement dated 3rd
November, 2008 (reference Clause 9.9.7), appointment of
Auditors can be made only by way of Special resolution.
M/s B S R & Company, Chartered Accountants, the
Statutory Auditors of the Company, (Firm Registration
number 128032W) retire at the conclusion of ensuing
Annual General Meeting. The auditors have confirmed
that their re-appointment, if made, shall be within the
limits stipulated u/s 224(1B) of The Companies Act, 1956.
The Board of Directors recommends the reappointment of
M/s B S R & Company, Chartered Accountants as the
Statutory and tax Auditors of the Company to hold office
till the conclusion of the next Annual General Meeting, at
the remuneration as may be decided by the Board on
recommendation of the Audit Committee.
None of the directors are interested or concerned in this
resolution.
Your Directors recommend the resolution for approval.
Item No. 5
Pursuant to Section 260 of the Companies Act, 1956 and
consequent to the approval of Reserve Bank of India, Mr.
Ravindra Kumar, representative of Standard Bank Plc, was
appointed as an Additional Director on the Board of IARC
with effect from 19.11.2010 and holds office as such up
to the date of this Annual General Meeting. Being eligible
he has offered himself for re-appointment, as Nominee of
Standard Bank Plc.
Standard Bank Plc holds 53,79,088 Equity shares of Rs.
10/- each in IARC.
None of the directors except Mr. Ravindra Kumar is
interested or concerned in this resolution.
Your Directors recommend the resolution for approval.
Item No. 6
Pursuant to Section 260 of the Companies Act, 1956 and
consequent to the approval of Reserve Bank of India, Mr.
Maninder Juneja, representative of ICICI Bank Limited, was
appointed as an Additional Director on the Board of IARC
with effect from 25.02.2011, and holds office as such up
to the date of this Annual General Meeting. Being
eligible, he has offered himself for re-appointment, as
nominee of ICICI Bank Limited.
ICICI Bank Limited holds 53,79,088 Equity shares of Rs.
10/- each in IARC.
None of the directors except Mr. Maninder Juneja is
interested or concerned in this resolution.
Your Directors recommend the resolution for approval.
Item No. 7
The Present Authorized Share Capital of Company consists
of 8,50,00,000 (Eight Crore Fifty Lac) Equity Shares of Rs.
10/- each and 1,50,00,000 (One Crore Fifty Lac)
Compulsory Convertible Preference Shares of Rs. 10/-
each, aggregating to Rs.100,00,00,000/- (Rupees
Hundred Crore). The issued and paid up capital of the
company is Rs. 55,00,00,000/- (Rupees Fifty Five Crore),
consisting of 5,50,00,000 (Five Crore Fifty Lac) Equity
Shares of Rs. 10/- each, post conversion of 1,50,00,000
(One Crore Fifty Lac) Compulsory Convertible Preference
Shares of Rs. 10/- each into equivalent no. of equity
shares on 31st March, 2011, as per the terms of issue of
those preference shares.
As the above preference shares stand converted into
equity shares on 31st March, 2011, the Board of
Directors, at its meeting held on 25th April, 2011; have
unanimously decided to reclassify the Authorised share
capital of Rs. 100 Crore into 10,00,00,000 (Ten Crore)
equity shares of Rs. 10/- each, by canceling the Preference
share capital.
As per Clause 8.9 (Reserved Matters) of the Articles of
Association of the company, any change in the charter
documents (being the Memorandum and Articles of
Association) can be done only by passing a special
resolution by the shareholders. Your directors, therefore,
recommend the resolution for your approval as a special
resolution.
None of the Directors are interested or concerned in the
proposed resolution except to the extent of their
shareholding held in the Company.
The Directors recommend the resolution for approval.
By Order of the Boardfor International Asset Reconstruction
Company Pvt. Ltd.
Sd/-Place : Mumbai Rashmi SharmaDate : 25th April, 2011 Company Secretary
6 Annual Report 2010-11
International Asset Reconstruction Company Private LimitedRegistered Off: 709, 7th Floor, Ansal Bhawan, 16, Kasturba Gandhi Marg, New Delhi – 110 001.
9th Annual General MeetingAttendance Slip
Name of the Member / Proxy Regd. Folio No.DP ID*Client ID*No. of shares held
I hereby record my presence at the 9th Annual General Meeting of the Company on Thursday, 30th June, 2011.
Signature of the Member/Proxy............................................
Note:
1. Member/Proxy-holders are requested to bring their Attendance Slip duly filled and signed, to the meeting.
2. Member’s signatures should be in accordance with the specimen signatures registered with the Company.
3. Corporate members intending to send their authorized representatives to attend the meeting are requested tosend a certified copy of board resolution, authorizing their representative to attend and vote on their behalf atthe meeting.
* Applicable for members holding shares in dematerialised form.
7 Annual Report 2010-11
International Asset Reconstruction Company Private Limited
Registered Off: 709, 7th Floor, Ansal Bhawan, 16, Kasturba Gandhi Marg, New Delhi – 110 001.
9th Annual General Meeting
Proxy Form
I/We...............................................................................................................................................................................................of
............................................................................................................being a Member/ Members of International Asset
Reconstruction Company Private Limited hereby appoint Mr./ Mrs./ Miss.......................................................................
of............................................................... or failing him / her........................................................... of................................as my/
our Proxy to attend and vote for me/us on my/our behalf at the 9th Annual General Meeting of the Company to be held
on Thursday, 30th June, 2011 at 4.00 p.m. and at any adjournment thereof.
Signed by the said ........................day of..........................2011.
(Signature of the member)
…………………………..
Name & Signature of the Proxy
Folio No. .................... DP ID No.*.................... Client ID No.*...................
No. of Shares.................
Note:
1. The Proxy Form duly signed across revenue stamp must be returned so as to reach the Registered Office of the
Company not less than 48 hours before the time of the meeting. Proxy need not be a member.
2. The Company reserves the right to ask for identification of the Proxy.
3. Proxy cannot speak at the meeting or vote on a show of hands.
* Applicable for members holding shares in dematerialized form
8 Annual Report 2010-11
To the Members,
Your Directors take pleasure in presenting the Ninth Annual
Report on the business and operations of the Company
together with Audited Accounts of the Company for the
financial year ended 31st March, 2011.
Financial Results
(Rs. in Lacs)
Financial Financial
Year Year
2010-11 2009-10
Gross Income 1,627.90 1,588.01
Operating Income 1,521.59 1,230.47
Other Income 106.31 357.54
Expenses 788.70 690.96
Finance Charges 0.07 -
Employee and Establishment
expenses 788.63 690.96
Profit/(loss) before tax 839.20 897.05
Provision for tax 279.07 275.24
Profit/(loss) after Tax 560.13 621.81
Balance brought forward 394.97 (139.09)
Dividend on Preference Shares 75.00 75.00
Dividend on Equity shares 200.00 -
Tax on dividend 45.67 12.75
Balance carried to Balance Sheet 634.43 394.97
Highlights
• Total acquisitions of financial assets during the year,
from various banks through participation in auctions
and bilateral deals - Rs. 2,074.82 Crores (Total Principal
Balance) at an acquisition cost of Rs. 151.11 Crores.
• Total cumulative recoveries of Rs. 251 Crores till March,
2011 from realization of financial assets acquired by
the company.
• Operating income increased to Rs. 1521.59 Lacs for
the year under review from Rs. 1,230.41 Lacs for the
previous year.
• Profit after tax of Rs. 560.13 Lacs as against Rs. 621.81
Lacs in the previous year.
Management Discussion & Analysis
Business Philosophy
The operations of your company are conducted as per the
policies and processes adopted in line with the best market
practices in India and abroad, within the ambit of the
regulatory framework. With transparency, integrity and
Corporate Governance in all the areas of its business and
with due care and prudence in decisions and their
implementation, your company has rightly positioned itself
as a credible institution in the ARC space and a leading
industry player, providing thought leadership in matters
impacting the business of ARCs.
Business Overview
The Gross NPAs of the Banking Sector continue to rise. The
comparative position is as under:
Year Ending Gross NPA Growth Growth
level Rs. in in %
(Rs. in crore) (crore) (term)
31st March, 2008 56,435 5,949 12%
31st March, 2009 68,973 12,538 22%
31st March, 2010 84,747 15,774 23%
31st March, 2011 * 1,02,544 17,797 21%
* Estimate based on study of 37 banks-26 public sector &11
private sector- by CARE Ratings-Banking Research
During the year, the absolute amount of Gross NPAs for the
banks selected by CARE, which is a reasonably correct
representation of the banking sector, as on 31st March,
2011 has risen by 21.5%, with Public Sector banks
accounting for approx. 82% thereof. NPA addition in PSU
banks is partly explained by migration to system driven NPA
recognition. The Gross NPA ratio marginally declined from
2.31% as at March, 2010 to 2.27% as at 31st March, 2011
primarily on account of credit growth. In respect of
restructured assets of the sample banks, slippages from the
restructured portfolio averaged between 8-12% during the
year. As per CARE estimates, Gross NPAs for the 37 banks
covered in the study would remain in the range of 2.4 -
2.6%, recognizing the normal slippages, slippages of 6-8%
in the category of restructured assets and full migration to
system recognition of NPAs by PSU banks. The Provisions
for NPAs increased from 51.5% as at the end of March,
2010 to about 75% as at the end of March, 2011. In view of
the increased provisioning, the Net NPA as at March, 2011
is estimated to be less than 1% from 1.08% as at March,
2010.
It would be seen that the Gross NPAs of the banking system
has been on a rise and the incremental growth shows
acceleration. However, growth in book value of Assets (NPAs)
transferred to ARCs - which were created as a systemic
response to tackle the menace of growing NPAs - has not
been able to keep pace. An area of concern that needs
critical introspection is that the incremental SRs issued since
2008 has, in fact, been on a steady decline as shown in
table below. The mismatch in price expectations between
banks/FIs and ARCs is on rise and deal closure rate in auctions
/ bilateral deals has been shrinking.
Directors’ Report
9 Annual Report 2010-11
Rs. in Crore
Mar-07 Mar-08 Mar-09 Mar-10
Gross NPAs 50,486 56,435 68,973 84,747
Incremental
Gross NPAs 5,949 12,538 15,774
Jun-07 Jun-08 Jun-09 Jun-10
Book Value
Transferred to ARCs 28,544 41,414 51,542 62,217
Incremental flow 12,870 10,128 10,675
SRs issued 7,436 10,658 12,801 14,051
Incremental SRs issued 3,222 2,143 1,250
Source-RBI
While the figures for the year 2010-2011 are yet to be
published, it can be safely inferred, on the basis of sales
concluded during the year that the increase in SRs issued
will be more or less the same as in the previous year or even
less than that. There is thus an imperative need for regulatory
intervention to address issues which have been impacting
adversely sale of NPAs to ARCs which were created with the
sole objective of relieving the banking system of the
increasing pressure of NPAs and enabling them to
concentrate on the growth of their main banking business.
Operating Performance
The operational performance of the Company in the year
under review is as follows:
Acquisitions
The Company has successfully acquired financial assets with
OPB of approx. Rs. 2,074.82 Crores (Total Dues approx. Rs.
2,300 Crores) from various selling banks and financial
institutions as compared to Rs. 542 Crores in the previous
year. Since commencement of business, the company’s total
acquisitions have crossed OPB of Rs. 3,274 Crores (Total
dues of approx Rs. 5,400 Crores), raising the position of
IARC significantly upwards in the ranking of ARCs. The
acquisitions, comprising financial assets of 246 corporate
borrower accounts, covering diverse industrial sectors, have
been from 19 banks both in the public and private sectors
and financial institutions.
A noteworthy feature of the company’s acquisitions in the
year has been acquiring financial assets with restructuring
and turn around potential. With such acquisitions
representing around 25% of corporate acquisitions, a good
beginning has been made and the company is now all set,
with the experience gained, to focus on such assets and garner
a significant share thereof in the ARC market. Post acquisition,
these financial assets have been restructured on sustainable
basis and Restructuring Support Finance has been provided
to the restructured units, as permissible in terms of the extant
regulatory guidelines, to put them on track and, in course of
time, help the company in optimizing recoveries from the
cash flow generated from the operations of these units.
It thus gives us immense satisfaction that IARC has taken
initiative in Asset Reconstruction, the prime philosophy
behind setting up ARCs. It is, however, recognized that the
company has a long way to go and having set on its journey,
it would not be far when your company emerges as a leader
in this business, of course, only with enabling regulatory
measures to support this line of activity.
Resolution
Total recoveries during the year amounted to Rs. 135 Crores
as against Rs. 84 Crores during the preceding year. The
recoveries in the corporate accounts at Rs. 70 Crores were
higher than Rs. 55 Crores in the previous year. There was
unanticipated pressure on recoveries, contributed by
prolonged litigation by number of borrowers who have been
going all out to block recovery actions on some pretext or
the other and the continuing delays in the legal system to
redress the situation so created. Despite all such road blocks,
your company has been taking adequate measures legally
and otherwise, as possible within the contours of legal and
judiciary framework to push recoveries and has been, to an
extent, successful in its efforts. It is heartening to note that
there were significant recoveries in number of accounts
where the security cover was negligible / minimum as also
in those accounts where concerted legal action led the
borrowers/guarantors to come to settlement of their debt
at such level as was found acceptable to the company.
Collections of retail loans acquired from two private sector
banks, who continue to handle collections post acquisition
as our Agents, have been beyond expectations.
Outlook& Strategy
The financial year under report reflected continuing rise in
NPAs in the banking system, on the one hand, and declining
sales of such NPAs to ARCs, on the other. The reasons for
such a situation are not difficult to seek. Some of the
important and critical factors hindering sales to ARCs are:-
i. Lack of conviction in the minds of sellers to sell their
NPAs to ARCs, on a continuing basis, as a policy
measure, on terms mutually acceptable to both.
ii. Absence of well laid down standard process for sale
on auction/bilateral basis.
iii. Different perceptions of price such assets should carry.
iv. Pending evolution of Deed of assignment finalized after
taking into account views of both seller banks and
acquiring ARCs.
With rising trends of NPAs and future forecasts in this regard
by various agencies and as per market reports, all these
issues need to be discussed and sorted out by all the
stakeholders without delay. Under the directions of Reserve
Bank of India, both the Indian Banks’ Association and
Association of ARCs should engage themselves in dialogue
with an open mind to arrive at solutions to be implemented
by both without exception. IARC has been, on its own, having
discussions with individual banks at different levels to take
them on board for acquisition of financial assets and our
efforts have, so far, met with some success. Persistent follow
up will, however, need to be continued with patience, to
10 Annual Report 2010-11
achieve the end results. At the same time, we have been
looking at our own internal processes of due diligence and
valuation of security underlying the assets for sale, to make
ourselves sure that we have assessed realizable value thereof
properly in arriving at the right value to the seller bank(s).
Secondly, the business of ARCs is capital intensive. With
seller banks increasingly preferring cash instead of SRs,
which was the instrument in vogue in the early days of ARCs
coming into existence, there is pressing need for mobilizing
cash, either through capital augmentation or raising Trust
fund. Foreign institutions engaged in distressed asset
business are keen to enter the Indian market and provide
funds by investing through FDI route in the equity of ARCs
and as FII in Trust Fund; they, however, need relaxation in
the present limits for such investments to be able to actively
participate in running the business of investee companies
instead of remaining as a passive investor. The proposal for
such relaxation is already under examination by RBI and the
Government and once the limits are revised upwards, we
anticipate money flowing in the system from such
international entities. Additionally, the definition of QIBs
needs to be broadened to widen the domestic market for
raising funds by ARCs. On their part, ARCs and banks should
work together to revive SR structure as mode for sale
transactions -- it should not be difficult as long as SRs are
issued on the basis of realistic recovery estimates and ARCs
redeem their SRs. In fact, SR structure would greatly meet
the pricing requirement of the banks as long as the price
expected adequately represents the value of the asset in
terms of the realisabilty value of the available security,
realistically discounted. Another point to be seriously
addressed is establishing the long term sustainability of
ARC business model which has unfortunately raised doubts
in view of declining/stagnant sales of NPAs to ARCs by banks,
particularly those in the public sector which dominate the
NPA market. Unless this is done, resource mobilsation will
continue to be a challenge.
Thirdly, it is time that ARCs start focusing on asset
reconstruction instead of working purely on recovery of dues
from the assets acquired by them through security
enforcement or settlement by the borrowers concerned. ARCs
will be able to meaningfully contribute to the economy by
restructuring the debt of units which show restructuring
potential. To be able to do so, the ARCs will need to be
permitted to convert debt of such units into equity, as in the
case of banks and framework developed for providing
Restructuring Support Finance to such units to rebuild their
business, in which regard ARCs can play only a limited role
as permissible by the extant regulatory provisions. Your
Company has already taken some concrete steps to look at
asset reconstruction business in a sustained manner and
explore how best the business can be grown, even with
these limitations which, of course, would need to be removed
at the earliest.
The basic essentials for success of ARCs discussed in the
foregoing call for urgent action in order that the institution
of ARCs is able to fulfill its objectives fully and a vibrant
distressed asset market is created before long. Amendments
in SARFAESI Act currently before the Parliament, appreciation
of the role of ARCs by the Judiciary, strengthening of the
legal system for expeditious decisions, rationalization of
stamp duty are some of the other equally important measures
to be put in place to support the ARCs. We are sanguine
that the initial difficulties and irritants being encountered
will, over time, get resolved and the business of ARCs will
grow with the pace it should. Besides equipping itself fully
to steer its way ahead in its pursuit for growth, your company
will continue to contribute, as heretofore, to finding solution
to the issues as a responsible member of the ARC community.
Fund Raising
IARC had launched International Asset Reconstruction Fund-
1 (IARF-1) of Rs. 400 crores in the previous year. With
sustained efforts, the first closure of the Fund at Rs. 180
crores with participation from Six Qualified Institutional
Buyers (QIBs) including IARC was announced on 14th June,
2010. As at the end of March, 2011, the Fund has total
commitments at Rs. 292.35 Crores with three well known
International investors, who have selected our Fund for their
investment foray in the distressed space in India through an
ARC, contributing significantly. With an additional
commitment of Rs. 12.50 Crores, from one of these
international investors, to be brought in with further
commitments from domestic investors, the Commitments
are approx Rs. 305 Crores. The drawdown from the Fund
commitments during the year amounted to Rs. 92.58 Crores
all of which was utilised in acquisitions made on bilateral
basis.
We have approached the investors for their consent for
extending the final closure by six months to 14th December,
2011 to be able to mobilise additional investment from the
domestic investors and are reasonably confident of receiving
their consent.
With this Fund, your company will have advantage in
acquiring assets on cash basis, more particularly those with
restructuring potential.
Net Asset Value
In accordance with the RBI guidelines dated 28th May, 2007
relating to Rating and NAV of SRs, initial rating has to be
assigned to SRs within one year from acquisition of assets
or finalization of resolution strategy whichever is earlier
and thereafter, rating is to be reviewed at half-yearly intervals
i.e. as on 30th June and 31st December every year.
The NAV position of the SRs issued by the various trusts set
by the Company up to 31st March, 2011 is as under:
Rs. in Lacs
Category No of Outstanding NAV
trusts Face Value of SR
A 23 21,401.57 24,251.42
B 2 559.72 417.29
Total 25 21961.29 24668.71
11 Annual Report 2010-11
A - NAV at or above face value
B - NAV below face value
Conversion of Preference Shares Into Equity
As per the terms of issue of 1,50,00,000 5% Compulsory
Convertible Cumulative Preference shares issued by IARC to
its preference shareholders, each preference share of Rs.
10/- each (fully paid up, at a premium of Rs. 30/- per share)
has been converted into One equity share of the face value
of Rs. 10/- each, fully paid up, at a premium of Rs. 30/- per
share, on the conversion date i.e. 31st March, 2011.
Dividend
Your directors are pleased to recommend dividend @ 5% (Rs.
0.50 per share) on the equity shares of the company for the
financial year ended 31st March, 2011, subject to the
approval of the shareholders at the ensuing Annual General
Meeting. The dividend shall be paid to the shareholders,
whose names appear on the register of members as on 30th
March, 2011. The Board of Directors have also declared
dividend @5% (Rs. 0.50 per share) on the Compulsorily
Convertible Preference Shares for the financial year 2010-11,
in terms of the offer for subscription to these Preference
Shares, subject to approval of the shareholders. The said
preference shares have since been converted into equity shares
of Rs. 10/- each, fully paid up, at a premium of Rs. 30/- per
share.
Reclassification of Authorized Share Capital
The Authorized Share Capital of your company was
reclassified during the year, to comprise of 8,50,00,000
(Eight Crore Fifty Lac) Equity shares having face value of Rs.
10/- each and 1,50,00,000 (One Crore Fifty Lac) Compulsorily
Convertible Preference Shares of Rs. 10/- each. Pursuant to
the conversion of Compulsory Convertible Cumulative
Preference shares into equity on 31st March, 2011 it is
proposed to reclassify the Authorized share capital to
comprise entirely of equity share capital of Rs. 100 Crores
(10 crore equity shares of Rs. 10/- each) and to cancel the
preference shares, subject to the approval of the
shareholders by way of special resolution at the ensuing
Annual General Meeting.
Corporate Governance
Composition of the Board
Your Board consists of an optimum combination of
professionals from the banking, finance and distressed asset
sector. The appointments to the Board are subjected to the
approval of the Reserve Bank of India, in accordance with
the provisions laid down in Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act,
2002 and the Companies Act, 1956.
Total strength of Board as on 31st March, 2011 is twelve
including, apart from Managing Director & CEO, two sponsor
nominee directors and nine non-executive independent
directors.
During the year, 5 meetings of the Board were held at
Mumbai and Delhi. All the meetings were well attended.
All the Directors have made requisite disclosures pertaining
to their position on Board and Committees of different
companies.
Change in Directors
During the year, consequent to the approval of RBI,
Mr. Ravindra Kumar was appointed as a nominee additional
director, representing Standard Bank Plc in place of Mr. Rob
Leith, who has since resigned and Mr. Maninder Juneja was
appointed as representative of ICICI Bank Limited, in place
of Mr. B. Madhivanan. Both directors hold office till the
ensuing Annual General Meeting of the company and being
eligible, offer themselves for appointment as directors.
Dr. N. Kamakodi, representative – City Union Bank and Justice
K.N. Singh (Retd.), resigned from the directorship of the
company during the year. The Board places on record, its
appreciation for the valuable contribution made by them
during their tenure.
Board Procedures
The Board meets at least once a quarter to review the
quarterly performance and the financial results of the
company. The agenda and Board notes are circulated well in
advance, for effective and fruitful participation by all
directors. The Board is kept apprised of the overall
performance of the company by the MD&CEO at the Board
meetings.
Committees of Directors
Whilst the Board of Directors deliberate on the matters of
corporate policy and performance, the operational matters
and other critical areas are delegated to various Committees
of the Board. The constitution of the various Committees
constituted by the Board is as follows:
Asset Acquisition & Reconstruction Committee
Sr. Members Designation
No.
1) Mr. M.S. Verma Chairman
2) Mr. Sunil Varma Member
3) Mr. Kaizad Bharucha Member
4) Mr. Anish Modi Member
5) Mr. Ravindra Kumar Member
6) Mr. Birendra Kumar MD&CEO - Member Secretary
7) Mr. M.R. Umarji Special Invitee, particularly
for restructuring cases /
resolution
During the year, 11 meetings of the Asset Acquisition &
Reconstruction Committee were held.
12 Annual Report 2010-11
Audit Committee
Sr. Members Designation
No.
1) Mr. Sunil Varma Chairman
2) Mr. Vikas Nanda Member
3) Mrs. Ranjana Kumar Member
Permanent invitee
Mr. Birendra Kumar MD & CEO
Ms. Sunanda Dandekar Chief Financial Officer
The Audit Committee met 4 times during the year.
HR & Remuneration Committee
Sr. Members Designation
No.
1) Mr. Arun Duggal Chairman
2) Mr. Sunil Varma Member
The Committee met once during the year.
Strategy, Policy & Process Committee
Sr. Members Designation
No.
1) Mr. M.S. Verma Chairman
2) Mr. Arun Duggal Member
3) Mr. Sunil Varma Member
4) Mr. Praveen Kadle Member
5) Mr. Kishore Moorjani Member
6) Mr. Kaizad Bharucha Member
7) Mr. Anish Modi Member
8) Mr. Birendra Kumar Member
The Committee met once during the year.
Fund Committee of IARF-1
In terms of the provisions of the Commitment Agreement
of the Trust Fund—IARF-1, the Fund Committee has been
constituted by the Board of Directors of IARC for considering
and approving acquisition of Financial Assets by the Fund
and plan for resolution thereof. All acquisition proposals
conforming to the parameters prescribed for Fund
investment, as set out in Fund Documents, are put up directly
to Fund Committee, whereas other acquisitions in terms of
carve out are put up to the existing Acquisition and
Reconstruction Committee of IARC. The Fund Committee
has the following members:
Sr. Members Designation
No.
1) Mr. M.S. Verma Chairman
2) Mr. Arun Duggal Member
3) Mr. Sunil Varma Member
4) Mr. Kishore Moorjani Member
5) Mr. Vikas Nanda Member
6) Mr. Birendra Kumar MD&CEO, Member Secretary
12 meetings of the Fund Committee were held during the
year.
Governance Board
The Governance Board has also been constituted in terms
of the Commitment Agreement of the Trust Fund, IARF - 1.
The Board comprises of (i) the Chairman of the IARC Board;
and (ii) the representatives as nominated by the Contributors
in the Fund, making a Capital Commitment of not less than
Rs. 250 million in the Fund. The Governance Board is set up
to deliberate and decide upon revision in the investment
limits for the Fund; provides suggestions to the Trustee on
the form, content and periodicity of reporting to the
Contributors; and address any Conflicted Transaction,
besides providing its non-binding advice and counsel on
other issues as may be presented to the Board. All
acquisitions made by the Fund and resolutions of assets
acquired, are to be reported to the Board. The constitution
of the Board as of now is as below:
Sr. Members Designation
No.
1) Mr. M.S. Verma Chairman - IARC
2) Mr. R.K. Dubey Representative -
Central Bank of India
3) Mr. Sudipto Basu Representative -
ICICI Bank Limited
4) Mr. Kaizad Bharucha Representative -
HDFC Bank Limited
5) Ms. Aarti Angara Representative - Morgan
Stanley Investments
(Mauritius) Ltd.
6) Ms. Clarisa De Franco Representative – CDC
Financial Services
(Mauritius) Ltd.
7) Ms Floor Van Oppen - Representative -
(Alternate Mr. Roel FMO, Netherlands
Messie)
8) Mr. Birendra Kumar, Permanent Invitee
MD & CEO
The Governance Board, excluding representatives of the
international investors who have been nominated this year,
had one meeting in December last year.
13 Annual Report 2010-11
Auditors
In accordance with the provisions of Section 224 of the
Companies Act, 1956, M/s B S R & Company, Chartered
Accountants, (Firm Registration No. 128032W) the Statutory
Auditors of the Company, hold office up to the conclusion
of the forthcoming Annual General Meeting. They have
confirmed their eligibility and willingness to accept the
office, if reappointed. The Company has also received a
certificate from them to the effect that their appointment, if
made, would be within the limits specified under Section
224(1B) of the Companies Act, 1956.
The Board recommends their reappointment as Statutory
Auditors of the Company to hold the office till conclusion
of next Annual General Meeting.
Risk Management
Your Company manages the various risks inherent in its line
of business by adopting best practices in its business
processes through checks and balances, monitoring and
control, and internal audit.
Your Company has adopted a comprehensive Risk Policy,
detailing types of risks in its business, factors contributing
thereto, and risk management of such risks. We are now in
the process of evolving a comprehensive framework for
implementation of the policy and review mechanism, to
address the basic objective of risk mitigation.
Internal Control
The Internal Audit system of the company is commensurate
with the size and nature of its operations. M/s BDO Haribhakti
Consulting Pvt. Ltd. carried out the Internal Audit of the
company for the year, with their reports being regularly
submitted to the Audit Committee. It is proposed to enhance
the scope of Internal Audit from the current financial year, by
including, periodic audit of different processes in the
acquisition and resolution of financial assets.
Workflow Automation
The SAP software in the Company continues to be effectively
used to record data for accounting and management
information purposes.
As part of its endeavor to streamline and standardize the
resolution work flow systems and processes, SAVION Process
Management System was commissioned for development
during the year. The software has been customized specific
to our needs and the System has been implemented in April
2011. The System has been developed to monitor the
processes / relating to post acquisition formalities and
resolution flow, to provide alerts, and to generate
management reports to help in timely correction of delays /
bottlenecks in the implementation of resolution strategy
approved for different assets. It is expected that it would
help bring about the desired efficiency in resolution
functions and lower turnaround time.
Going forward, the company plans to implement the Savion
System for acquisition business as well and has initiated
steps in this direction.
Enviornment, Social and Governance Initiatives
In line with its commitment to greater social causes beyond
business and in tune with the international best practices
and requirement of the international investors in the Fund,
the Company has put in place a comprehensive ESG system
with respect to the financial assets in trusts under
management and consciously makes efforts to the systematic
and structured improvement of governance, environmental
and social performance, targeted to identify and manage
environmental, social and governance risks in our investee
companies especially those under restructuring.
Human Resources Development
Human resources have always been the most valuable assets
of your Company. The Company seeks to attract and retain
the best available talent and its employee pool is derived
from professionals across the banking and financial sector
with expertise and experience in acquisition, reconstruction
and resolution of distressed assets. IARC has been
continuously reviewing and fine tuning its HR policies and
processes, in line with the best practices in the industry.
Stock Options
The ESOP Scheme was introduced by the Board in November,
2008 to provide incentive to attract, retain and reward the
employees and to enable them to participate in the future
growth of the Company. Each such option has conferred a
right upon the Employee to apply for one Equity Share of
the Company.
A total of 13,24,030 options were granted as on 1st April,
2010 under the 1st, 2nd and 3rd Grant of ESOP 2008 to the
eligible employees. No new options were granted during
the year and the outstanding as on 31st March, 2011
amount to 12,19,324 representing 2.22% of the current
paid up equity share capital of the Company.
The options were granted at an exercise price of Rs. 12/- per
share, being the Fair Market Value of the shares as at the
respective date of grant. These options are vested over a
period of 4 years, with 10% of the options vesting in the 1st
year, 20% in 2nd year, 30% in 3rd and remaining 40% in the
4th year, after the grant of the options, vesting being
contingent on continued employment with the company
and on performance parameters. The options are exercisable
from the date on which the shares of the Company get
listed on a recognized stock exchange.
As at the end of March, 2011, 3,33,397 options have been
vested while none of the options has been exercised nor
lapsed.
Particulars Regarding Conservation of Energy & Inflow
& Outflow of Foreign Exchange Under Section 217(1)
of the Companies Act, 1956 and Rules Made
Thereunder
Since the Company is not engaged in manufacturing
activities, disclosures in terms of Section 217(1)(e) of the
Companies Act, 1956 read with the Companies (Disclosures
of Particulars in the Report of the Board of Directors) Rules,
1988 are not applicable and hence, not given.
14 Annual Report 2010-11
Foreign Exchange Earnings and Outgo
The details of foreign exchange earnings and outgo are
outlined in Clause 17.7 of the notes to accounts.
Statement Pursuant to Section 217 (2a) of the Companies
Act, 1956 Read with the Companies (Particulars of
Employees) Rules, 1975
None of the employees of the company was in receipt of
remuneration during the year that exceeded the sum
prescribed under Section 217(2A) of the Companies Act,
1956 read with Companies (Particulars of Employees) Rules,
1975, as amended.
Directors’ Responsibility Statement
The Directors confirm that:
a) In the preparation of the annual accounts, the
applicable accounting standards have been followed,
along with proper explanation relating to material
departures.
b) Such accounting policies have been selected and
applied consistently and the judgments and estimates
made are reasonable and prudent, so as to give a true
and fair view of the state of affairs of the Company at
the end of the financial year and of the profit or loss of
the Company for that period.
c) Proper and sufficient care has been taken 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 fraud and other
irregularities.
d) The annual accounts have been prepared on a going-
concern basis.
Acknowledgements
The Directors express their gratitude for the support and
guidance provided by the Reserve Bank of India, sponsors
and other shareholders, banks and financial institutions,
rating agencies, depositories and other service providers.
The Board also sincerely acknowledges the significant
contributions made by all employees for their dedicated
services to the Company.
For and on behalf of the Board
Place : Mumbai M. S. Verma
Date : 26th April, 2011 Chairman
15 Annual Report 2010-11
To the Members of
International Asset Reconstruction Company PrivateLimited
We have audited the attached balance sheet of InternationalAsset Reconstruction Company Private Limited (‘theCompany’) as at 31st March, 2011 and the profit and lossaccount and cash flow statement of the Company for theyear ended on that date, annexed thereto. These financialstatements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion onthese financial statements based on our audit.
We conducted our audit in accordance with auditingstandards generally accepted in India. Those standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements.An audit also includes assessing the accounting principlesused and significant estimates made by management, aswell as evaluating the overall financial statementpresentation. We believe that our audit provides areasonable basis for our opinion.
1. As required by the Companies (Auditor’s Report) Order,2003 and amendments thereto (together referred toas ‘the Order’) issued by the Central Government ofIndia in terms of sub-section (4A) of section 227 ofthe Companies Act, 1956 (the ‘Act’), we enclose in theAnnexure, a statement on the matters specified inparagraph 4 and 5 of the said Order.
2. Further to our comments in the Annexure referred toabove, we report that:
(i) we have obtained all the information andexplanations, which to the best of our knowledgeand belief were necessary for the purposes of ouraudit;
(ii) in our opinion, proper books of account asrequired by law have been kept by the Companyso far as appears from our examination of thosebooks;
Auditors’ Report
(iii) the balance sheet and profit and loss account dealtwith by this report are in agreement with thebooks of account;
(iv) in our opinion, the balance sheet and the profitand loss account dealt with by this report complywith the accounting standards referred to in sub-section (3C) of section 211 of the Act, to the extentapplicable;
(v) on the basis of written representations receivedfrom the Directors of the Company, as on31st March, 2011, and taken on record by theBoard of Directors, we report that none of theDirectors are disqualified as on 31st March, 2011from being appointed as a Director in terms ofclause (g) of sub-section (1) of section 274 of theAct; and
(vi) in our opinion and to the best of our informationand according to the explanations given to us,the said financial statements, give the informationrequired by the Act, in the manner so requiredand give a true and fair view in conformity withthe accounting principles generally accepted inIndia:
(a) in the case of the balance sheet, of the stateof affairs of the Company as at 31st March,2011;
(b) in the case of the profit and loss account, ofthe profit of the Company for the year ended31st March, 2011; and
(c) in the case of the cash flow statement, ofthe cash flows for the year ended on thatdate.
For B S R & CompanyChartered Accountants
Firm’s Registration No: 128032W
Akeel MasterPlace : Mumbai PartnerDate : 26th April, 2011 Membership No: 046768
16 Annual Report 2010-11
Annexure to Auditors’ Report(referred to in our report of even date)
We report as follows:
1. (a) The Company has maintained proper recordsshowing full particulars, including quantitativedetails and situation of fixed assets.
(b) The Company has a regular programme of physicalverification of its fixed assets by which all fixedassets are verified at the end of the financial year.In our opinion, this periodicity of physicalverification is reasonable having regard to the sizeof the Company and the nature of its assets. Nomaterial discrepancies were noticed on suchverification.
(c) Fixed assets disposed of during the year were notsubstantial, and therefore, do not affect the goingconcern assumption.
2. The principal activity of the Company is to carry on thebusiness of securitization and assets reconstruction.Accordingly it is not required to hold any physicalinventories. Thus, paragraph 4(ii) of the Order is notapplicable.
3. The Company has neither granted nor taken any loans,secured or unsecured, to or from companies, firms orother parties covered in the register maintained undersection 301 of the Companies Act, 1956.
4. In our opinion, and according to the information andexplanations given to us, there is an adequate internalcontrol system commensurate with the size of theCompany and the nature of its business, with regardto purchase of fixed assets and with regards to sale ofservices. The activities of the Company do not involvepurchase of inventory and sale of goods. We have notobserved any major weakness in the internal controlsystem during the course of the audit.
5. In our opinion and according to the information andexplanations given to us, there are no contracts andarrangements, the particulars of which need to beentered into the register maintained under section 301of the Act.
6. The Company has not accepted any deposits frompublic.
7. In our opinion, the Company has an internal auditsystem commensurate with the size and nature of itsbusiness.
8. The Central Government has not prescribed themaintenance of cost records under section 209(1) (d)of the Act for any services rendered by the Company.
9. (a) According to the information and explanationsgiven to us and on the basis of our examinationof the records of the Company, amounts deducted/accrued in the books of account in respect ofundisputed statutory dues including ProvidentFund, Income-Tax, Service Tax, and other materialstatutory dues have generally been regularlydeposited during the year by the Company withthe appropriate authorities.
As explained to us, the provisions of Sales Tax,Wealth Tax, Custom Duty, Excise Duty, Cess,Employees’ State Insurance and InvestorEducation and Protection Fund are not applicableto the Company.
(b) According to the information and explanationsgiven to us, no undisputed amounts payable withrespect of Provident Fund, Income-Tax, Service Taxor other material statutory dues were in arrears asat 31st March, 2011 for a period of more than sixmonths from the date they become payable.
(c) According to the information and explanationsgiven to us, there are no dues of Provident Fund,Income-Tax, Service Tax and other materialstatutory dues which have not been depositedwith appropriate authorities on account of anydispute.
(d) There were no dues on account of Cess undersection 441A of the Companies Act, 1956, sincethe date from which the aforesaid section comesinto force has not yet been notified by the CentralGovernment.
10. The Company does not have any accumulated lossesat the end of the financial year and has not incurredcash losses in the financial year and in the immediatelypreceding financial year.
11. In our opinion and according to the information andexplanations given to us, the Company has notdefaulted in repayment of dues to its bankers or to anyfinancial institutions. The Company did not have anyoutstanding debentures during the year.
12. In our opinion, the Company has maintained adequaterecords in cases where it has granted loans andadvances on the basis of security by way of pledge ofshares, debentures and other securities.
13. In our opinion and according to the explanationsprovided to us, the Company is not a chit fund, nidhi,mutual benefit fund or a society.
14. In our opinion and according to the information andexplanations given to us, the Company has maintainedproper records of the transactions and contracts relatingto investment in security receipts and timely entrieshave been made therein. The security receipts are heldby the Company in its own name.
15. According to information and explanations given tous, the Company has not given any guarantee for loanstaken by others from banks or financial institutions.
16. Based on our examination of the records of theCompany and based on the information andexplanation given to us, the Company has not takenany term loans during the year accordingly paragraph4 (xvi) of the order is not applicable to the Company.
17. According to the information and explanations givento us and on the overall examination of the balancesheet of the Company, there are no funds raised on ashort-term basis which have been used for long-terminvestment.
17 Annual Report 2010-11
18. The Company has not made any preferential allotmentof shares to companies/firms/parties covered in theregister maintained under section 301 of theCompanies Act, 1956.
19. The Company did not have any outstanding debenturesduring the year.
20. The Company has not raised any money by public issuesduring the year.
21. According to information and explanations given tous, no fraud on or by the Company has been noticedor reported during the course of our audit.
For B S R & CompanyChartered Accountants
Firm’s Registration No: 128032W
Akeel MasterPlace : Mumbai PartnerDate : 26th April, 2011 Membership No: 046768
18 Annual Report 2010-11
Balance Sheetas at 31st March, 2011
(Amount in Rs.)
Schedule As at As atNo. 31st March, 2011 31st March, 2010
Source of Funds
Shareholders’ funds
Share capital 3 550,000,000 550,000,000
Reserves and surplus 4 548,391,601 524,446,330
1,098,391,601 1,074,446,330
Loan funds
Secured loan 5 50,468,932 -
Deferred tax liabilities (net) 17.8 103,536 431,824
Total 1,148,964,069 1,074,878,154
Application of Funds
Fixed assets 6
Gross block 11,322,560 10,630,087
Less: Accumulated depreciation 5,852,603 3,458,942
Net block 5,469,957 7,171,145
Capital work-in-progress 4,274,876 -
Investments 7 905,705,743 869,335,549
Current assets, loans and advances
Sundry debtors 8 15,793,648 7,565,915
Cash and bank balances 9 150,707,093 182,046,579
Loans and advances 10 137,101,746 32,305,471
303,602,487 221,917,965
Current liabilities and provisions
Current liabilities 11 43,529,990 13,762,474
Provisions 12 26,559,004 9,784,031
70,088,994 23,546,505
Net current assets 233,513,493 198,371,460
Total 1,148,964,069 1,074,878,154
Significant accounting policies 2
Notes to the accounts 17
The schedules referred to above form integral part of this Balance Sheet
As per our attached report of even date For and on behalf of the Board of Directors’International Asset Reconstruction Company Private Limited
For B. S. R. & CompanyChartered Accountants M. S. VermaFirm’s Registration No.: 128032W Chairman
Akeel MasterPartnerMembership No : 046768
Mumbai Rashmi Sharma26th April, 2011 Company Secretary & Compliance Officer
Sunanda DandekarChief Financial Officer
Birendra KumarManaging Director &Chief Executive Officer
19 Annual Report 2010-11
(Amount in Rs.)
Profit & Loss Accountfor the year ended 31st March, 2011
Schedule For the year ended For the year endedNo. 31st March, 2011 31st March, 2010
Income
Operating income 13.1 29,916,589 22,151,462
Investment income 13.2 122,243,395 100,896,137
Other income 13.3 10,630,557 35,753,749
162,790,541 158,801,348
Expenditure
Employee cost 14 39,383,210 34,171,253
Administrative and other operating costs 15 36,199,589 32,563,544
Finance charges 16 747,556 -
Depreciation 6 2,539,799 2,361,378
78,870,154 69,096,175
Profit before tax 83,920,387 89,705,173
Provision for tax
- Current tax 28,236,000 27,092,394
- Deferred tax (credit) / charge (328,288) 431,824
Profit after tax 56,012,675 62,180,955
Balance brought forward from previous year 39,497,719 (13,908,611)
Amount available for appropriations 95,510,394 48,272,344
Proposed dividend on equity shares 20,000,000 -
Dividend on preference shares 7,500,000 7,500,000
Tax on dividend 4,567,405 1,274,625
Balance in the profit and loss account carried forward 63,442,989 39,497,719
Earnings per share of face value Rs.10
Basic 17.5 1.18 1.34
Diluted 17.5 1.18 1.13
Significant accounting policies 2
Notes to the accounts 17
The schedules referred to above form integral part of this Profit & Loss Account
As per our attached report of even date For and on behalf of the Board of Directors’International Asset Reconstruction Company Private Limited
For B. S. R. & CompanyChartered Accountants M. S. VermaFirm’s Registration No.: 128032W Chairman
Akeel MasterPartnerMembership No : 046768
Mumbai Rashmi Sharma26th April, 2011 Company Secretary & Compliance Officer
Sunanda DandekarChief Financial Officer
Birendra KumarManaging Director &Chief Executive Officer
20 Annual Report 2010-11
Cash Flow Statementfor the year ended 31st March, 2011
Schedule 2011 2010No.
Cash Flow from Operating Activities:
Net profit before tax 83,920,388 89,705,172
Adjustments for:
Depreciation 2,539,799 2,361,378
Loss on sale of fixed assets 48,457 27,754
Interest income (9,387,638) (31,575,382)
Finance charges 747,555 -
Operating profit before working capital changes 77,868,561 60,518,922
Movement in working capital:
Increase in sundry debtors (8,227,734) (5,207,958)
(Increase) / decrease in loans and advances (82,228,686) 7,274,270
Increase in current liabilities and provisions 30,782,129 4,797,538
Cash generated from operations 18,194,270 67,382,772
Income taxes paid (including fringe benefits tax) (50,803,589) (23,102,518)
Net cash (used in) / generated from operating activities (A) (32,609,320) 44,280,254
Cash flow from investing activities:
Investment in initial contribution towards trust fund (4,000) (8,000)
Investments in security receipts (278,535,000) (578,923,000)
Redemption / partial reduction in face value of security receipts 242,168,806 109,099,451
Interest received 9,387,638 31,575,382
Purchase of fixed assets (5,166,943) (2,177,230)
Sale proceeds of fixed assets 5,000 5,500
Net cash used in investing activities (B) (32,144,499) (440,427,897)
Cash flow from financing activities:
Finance charges (747,555) -
Bank overdraft 50,468,933 -
Payments of dividend (including tax on proposed dividend) (16,307,044) (3,381,270)
Net cash generated from / (used in) financing activities (C) 33,414,334 (3,381,270)
Net decrease in cash and cash equivalents (A+B+C) (31,339,485) (399,528,913)
Cash and cash equivalents at the beginning of the year
Cash in hand 2,678 4,099
Balance with scheduled banks 182,043,901 581,571,393
182,046,579 581,575,492
Cash and cash equivalents at the end of the year
Cash in hand 15,406 2,678
Balance with scheduled banks 150,691,687 182,043,901
150,707,093 182,046,579
Significant accounting policies 2
Notes to the accounts 17
For and on behalf of the Board of Directors’International Asset Reconstruction Company Private Limited
For B. S. R. & CompanyChartered Accountants M. S. VermaFirm’s Registration No.: 128032W Chairman
Akeel MasterPartnerMembership No : 046768
Mumbai Rashmi Sharma26th April, 2011 Company Secretary & Compliance Officer
Sunanda DandekarChief Financial Officer
Birendra KumarManaging Director &Chief Executive Officer
(Amount in Rs.)
21 Annual Report 2010-11
Schedules to the financial Statementsfor the year ended 31st March, 2011
1. Background
International Asset Reconstruction Company Private
Limited (‘the Company’) was incorporated on 16
October 2002 as a private limited company under the
Companies Act, 1956.
The principal activity of the Company is to carry on the
business of securitization and asset reconstruction as
defined in section 2 of the Securitisation and
Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (‘the SARFAESI Act’). The
Company acts as an Investment Manager / Trustee for
various trusts set up for securitization pursuant to the
SARFAESI Act. The financial assets are acquired under
separate trusts set up for securitization or directly for
asset reconstruction.
The Reserve Bank of India (‘RBI’) granted a Certificate
of Registration to the Company on 15 March, 2007 to
commence / carry on business of securitization or asset
reconstruction under section 3 of the SARFAESI Act.
2 Significant accounting policies
2.1 Basis of preparation of financial statements
The financial statements are prepared and presented
under the historical cost convention on the accrual
basis of accounting and in accordance with the
provisions of the Companies Act, 1956 (‘the Act’), the
guidelines issued by the Reserve Bank of India (the
‘RBI’) on Securitisation Companies and Reconstruction
Companies and amendments thereto (the Guidelines),
and the accounting principles generally accepted in
India and comply with the accounting standards
prescribed in the Companies (Accounting Standards)
Rules, 2006, to the extent applicable.
The Company is a Small and Medium Sized Company
(‘SMC’) as defined in the General instructions in respect
of Accounting Standards notified under the Act.
However, the Company was not a SMC in the previous
year. Accordingly, the Company is not qualified for
exemption or relaxation in respect of accounting
standards available to SMC in the current year.
2.2 Use of estimates
The preparation of the financial statements in
conformity with generally accepted accounting
principles (‘GAAP’) in India requires management to
make estimates and assumptions that affect the
reported amount of assets, liabilities, revenues and
expenses and disclosure of contingent liabilities on
the date of the financial statements. The estimates
and assumptions used in the accompanying financial
statements are based upon management’s evaluation
of the relevant facts and circumstances as of the date
of the financial statements. Actual results may differ
from the estimates used in preparing the
accompanying financial statements. Any revision to
accounting estimates is recognized prospectively in
current and future periods.
2.3 Revenue recognition
Trusteeship fee is recognized quarterly in advance on
an accrual basis in accordance with the terms of the
respective trust deed / offer document / commitment
agreement, wherever applicable.
Management fee is recognized on amount recovered
from the financial assets acquired by the Company on
behalf of the trust / other financial institutions managed
by the Company on agency basis in terms of the
respective service agreements.
Management incentive fee is recognized in accordance
with the provisions of trust deed / offer document /
commitment agreement.
Upside income represents gain on redemption of
investments in security receipts (SRs) of trusts set up
for acquisition of financial assets. Upside income from
investment in SRs of trusts set up for acquisition of
financial assets is recognized as per the distribution
advice received from the respective trusts and in
accordance with the terms of the respective trust deed
/ offer document / commitment agreement.
Interest income is recognised on a period proportion
basis.
2.4 Fixed assets and depreciation
a) Fixed assets are carried at cost of acquisition less
accumulated depreciation, amortization and
impairment loss, if any. Cost includes freight, duties,
taxes and incidental expenses related to the
acquisition and installation of the assets.
b) Depreciation on fixed assets is provided on the
straight-line method.
c) The rates of depreciation prescribed in Schedule
XIV to the Companies Act, 1956 are considered as
the minimum rates. If the management’s estimate
of the useful life of a fixed asset at the time of
acquisition of the asset or of the remaining useful
life on a subsequent review is shorter than that
envisaged in the aforesaid schedule, depreciation
is provided at a higher rate based on the
managements estimate of the useful life/remaining
useful life. Pursuant to this policy, depreciation on
fixed assets has been provided for at the following
rates:
Asset Depreciation rate
Computer and printers 25.00%
Office equipments 15.00%
Furniture and fixtures 15.00%
Motor vehicles 20.00%
Software 25.00%
22 Annual Report 2010-11
d) Asset individually costing Rs. 5,000 or less, are fully
depreciated in the year of purchase.
e) Depreciation on assets sold during the year is
recognised on a pro-rata basis in the profit and
loss account up to the month prior to the month in
which the assets have been disposed off.
f) Impairment of assets:
The Company assesses at each balance sheet date
whether there is any indication that an asset may
be impaired. If any such indication exists, the
Company estimates the recoverable amount of the
asset. If such recoverable amount of the asset or
the recoverable amount of the cash generating unit
which the asset belongs to, is less than its carrying
amount, the carrying amount is reduced to its
recoverable amount. The reduction is treated as an
impairment loss and is recognised in the profit and
loss account. If at the balance sheet date, there is
an indication that a previously assessed impairment
loss no longer exists, the recoverable amount is
reassessed and the asset is reflected at the
recoverable amount subject to a maximum of
depreciable historical cost.
2.5 Investments
Investments in security receipts of the various trusts
set up by the Company are valued at lower of cost or
realizable value in accordance with the Guidelines, as
applicable. Net realizable value is based on net asset
value (NAV) declared by the respective trusts.
Diminution, if any, on aggregate basis is charged to
the profit and loss account.
Amount received as per the distribution advice from
the respective trusts to the extent of the cost of SRs of
the respective trust is treated as reduction in the face
value of the SRs on a pro-rata basis.
Initial contribution towards trust fund is valued at cost
less any other than temporary diminution in value.
2.6 Secured loan
Loan provided by the Company for reconstruction of
non-performing assets which are acquired in the Trusts,
set up by the Company are recorded on outstanding
principal balance.
2.7 Employee benefits
Gratuity
The Company’s gratuity scheme is a defined benefit
plan. The Company’s net obligation in respect of the
gratuity benefit is calculated by estimating the amount
of future benefit that the employees have earned in
return for their service in the current and prior periods,
that benefit is discounted to determine its present value
and the fair value of any plan assets, if any, is deducted.
The present value of the obligation under such benefit
plan is determined based on actuarial valuation using
the Projected Unit Credit Method which recognizes
each period of service that give rise to additional unit
of employee benefit entitlement and measures each
unit separately to build up the final obligation.
The obligation is measured at present values of
estimated future cash flows. The discounted rates used
for determining the present value are based on the
market yields on Government Securities as at the
balance sheet date.
Actuarial gains and losses are recognized immediately
in the profit and loss account.
Provident fund
Contribution payable to the recognised provident fund,
a defined contribution scheme, made at 12% of the
basic salary, is charged to the profit and loss account.
Leave entitlement
The Company provides for leave entitlement, which is
a defined benefit scheme, based on actuarial valuation
as at the balance sheet date conducted by an
independent actuary.
2.8 Accounting for leases
Operating leases
Leases where the lessor effectively retains substantially
all the risks and benefits of ownership over the lease
term are classified as operating leases. Operating lease
rentals are recognized as an expense on a straight-line
basis over the lease period.
2.9 Earning per share
The basic earnings per share is computed by dividing
the net profit attributable to the equity shareholders
by weighted average number of equity shares
outstanding during the reporting year.
Number of equity shares used in computing diluted
earnings per share comprises the weighted average
number of shares considered for deriving basic
earnings per share and also weighted average number
of equity shares which would have been issued on the
conversion of all dilutive potential shares. In computing
diluted earnings per share only potential equity shares
that are dilutive are included.
2.10Taxation
Income tax expense comprises current tax (i.e. amount
of tax for the period determined in accordance with
the income-tax law) and deferred tax charge or credit
(reflecting the tax effects of timing differences between
accounting income and taxable income for the period).
Current taxes
Provision for current income-tax is recognized in
accordance with the provisions of Indian Income-tax
Act, 1961 and is made annually based on the tax
liability after taking credit for tax allowances and
exemptions.
Schedules to the financial Statementsfor the year ended 31st March, 2011
23 Annual Report 2010-11
Deferred taxes
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to timing
differences that result between the profits offered for
income taxes and the profits as per the financial
statements. Deferred tax assets and liabilities are
measured using the tax rates and the tax laws that have
been enacted or substantively enacted by the balance
sheet date. The effect of a change in tax rates on deferred
tax assets and liabilities is recognized in the period that
includes the enactment date. Deferred tax assets are
recognised only to the extent there is reasonable
certainty that the assets can be realized in the future.
However, where there is unabsorbed depreciation or
carried forward loss under taxation laws, deferred tax
assets are recognised only if there is virtual certainty of
realisation of such assets. Deferred tax assets are
reassessed for the appropriateness of their respective
carrying values at each balance sheet date.
The Company recognizes deferred taxes in respect of
those originating timing differences, which reverse after
the tax holiday period, resulting in tax consequences.
Timing differences which originate and reverse within
the tax holiday period do not result in tax consequence
and, therefore, no deferred taxes are recognized in
respect of the same.
2.11Provisions and contingencies
The Company creates a provision when there is a
present obligation as a result of a past event that
probably requires an outflow of resources and a reliable
estimate can be made of the amount of the obligation.
A disclosure for a contingent liability is made when
there is a possible obligation or a present obligation
that may, but probably will not, require an outflow of
resources. When there is a possible obligation or a
present obligation in respect of which the likelihood
of outflow of resources is remote, no provision or
disclosure is made.
Provisions are reviewed at each balance sheet date and
adjusted to reflect the current best estimate. If it is no
longer probable that the outflow of resources would be
required to settle the obligation, the provision is reversed.
Contingent assets are not recognised in the financial
statements. However, contingent assets are assessed
continually and if it is virtually certain that an economic
benefit will arise, the asset and related income are
recognised in the period in which the change occurs.
Schedules to the financial Statementsfor the year ended 31st March, 2011
24 Annual Report 2010-11
3 Share capital
Authorised
85,000,000 (Previous year: 40,000,000) equity shares of Rs. 10 each 850,000,000 400,000,000
“15,000,000 (Previous year: 60,000,000) compulsorily convertible 150,000,000 600,000,000
preference shares of Rs. 10 each “
1,000,000,000 1,000,000,000
Issued, subscribed and paid-up
55,000,000 (Previous year: 40,000,000) equity shares of Rs. 10 each
fully paid-up 550,000,000 400,000,000
“Nil (Previous year: 15,000,000) 5% Compulsorily convertible
preference shares of Rs. 10 each “ - 150,000,000
550,000,000 550,000,000
4 Reserves and surplus
Securities premium account 484,948,612 484,948,612
Profit and loss account 63,442,989 39,497,718
548,391,601 524,446,330
5 Secured loan
Bank overdraft 50,468,932 -
(Secured against fixed deposit with a bank)
50,468,932 -
As at As at31st March, 2011 31st March, 2010
(Amount in Rs.)
Schedules to the financial Statementsfor the year ended 31st March, 2011
25 Annual Report 2010-11
Sch
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s.)
Schedules to the financial Statementsfor the year ended 31st March, 2011
26 Annual Report 2010-11
7 Investments
Non trade, unquoted
Initial contribution towards trust fund 30,000 26,000
Investment in security receipts of
“IARC-BOB-01-07 Trust” 59,311,894 92,275,226
[1,675 (Previous year: 1,675) security receipts of Rs.35,410.08
(Previous year: Rs.55,089.69) each]
“IARC-CBOP-CORP-RD-02/07-08 Trust” 2,748,610 2,748,610
[3,105 (Previous year: 3,105) security receipts of Rs. 885.22
(Previous year: Rs. 885.22) each]
“IARC-CBOP-RET-03/07 -08 Trust” - 192,514
[3,191 (Previous year: 3,191) security receipts of Rs. Nil
(Previous year: Rs. 60.33) each]
“IARC-IFCI-EIL-04-07/08 Trust” 1,239,566 2,125,000
[2,125 (Previous year: 2,125) security receipts of Rs. 583.32
(Previous year: Rs.1,000) each]
“IARC-SBOP-CORP-06/07-08 Trust” 1,000,000 1,000,000
[10 (Previous year: 10) security receipts of Rs. 100,000
(Previous year: Rs.100,000) each]
“IARC-LIC-CORP-07/07-08 Trust” 825,000 825,000
[825 (Previous year: 825) security receipts of Rs. 1,000
(Previous year: Rs.1,000) each]
“IARC-UCO-CORP-08/07-08 Trust” 225,000 225,000
[225 (Previous year: 225) security receipts of Rs. 1,000
(Previous year: Rs.1,000) each]
“IARC-PNB-CORP-09/08-09 Trust” 10 1,138,941
[1,505 (Previous year: 1,505) security receipts of Rs. 0.002
(Previous year: Rs.756.77) each]
“IARC-BOB-CORP-10/08-09 Trust” 33,082,000 30,907,000
[33,082 (Previous year: 30,907) security receipts of Rs. 1,000
(Previous year: Rs.1,000) each]
“IARC-SBOP-CORP-11/08-09 Trust” 67,000,000 71,600,000
[71,800 (Previous year: 71,800) security receipts of Rs. 933.15
(Previous year: Rs.997.20) each]
“IARC-BOB-CORP-12/08-09 Trust” 60,709,920 147,100,000
[147,100 (Previous year: 147,100) security receipts of Rs. 412.71
(Previous year: Rs.1,000) each]
“IARC-SBBJ-CORP-13/08-09 Trust” 500 42,600,000
[42,600 (Previous year: 42,600 @ Rs.1,000) each security receipts
of Rs. 0.012 (Previous year: Rs.1,000) each]
“IARC-ALLB-CORP-14/08-09 Trust” 57,730,950 72,347,000
[73,000 (Previous year: 73,000) security receipts of Rs. 790.83
(Previous year: Rs.991.05) each]
“IARC-UNTD-CORP-15/08-09 Trust” - 22,700,000
22,700 (Previous year: 22,700) security receipts of Rs. 0.009
(Previous year: Rs.1,000) each]
As at As at31st March, 2011 31st March, 2010
(Amount in Rs.)
Schedules to the financial Statementsfor the year ended 31st March, 2011
27 Annual Report 2010-11
“IARC-UBI-CORP-16/09-10 Trust” 150,800,000 150,800,000
[150,800 (Previous year: 150,800) security receipts of Rs. 1,000
(Previous year: Rs.1,000) each]
“IARC-ICICI-CORP-17/09-10 Trust” 30,492,939 30,492,938
[73,000 (Previous year: 73,000) security receipts of Rs. 417.71
(Previous year: Rs.417.71) each]
“IARC-18/09-10 Trust” 1,890,359 2,100,000
[2,100 (Previous year: 2,100) security receipts of Rs. 900.17
(Previous year: Rs.1,000) each]
“IARC-19/09-10 Trust” 1,085,836 14,092,320
[26,476 (Previous year: 26,476) security receipts of Rs. 41.01
(Previous year: Rs.532.27) each]
“IARC-20/09-10 Trust” 140,285,026 145,190,000
[145,190 (Previous year: 145,190) security receipts of Rs. 966.22
(Previous year: Rs.1,000) each each]
“IARC-21/09-10 Trust” 31,200,000 31,200,000
[31,200 (Previous year: 31,200) security receipts of Rs. 1,000
(Previous year: Rs.1,000) each]
“IARC-22/09-10 Trust” 11,067,828 7,650,000
[12,990 (Previous year: 7,650) security receipts of Rs. 852.03
(Previous year: Rs.1,000) each]
“IARC-23/10-11 Trust” 9,960,306 -
[2,6000 (Previous year: Nil) security receipts of Rs. 383.09
(Previous year: Nil) each]
“IARF I TRUST- SCHEME 1 “ 217,520,000 -
[217,520 (Previous year: Nil) security receipts of Rs.1,000
(Previous year: Nil) each]
“IARC -25/10-11 Trust “ 27,500,000 -
[275,000 (Previous year: Nil) security receipts of Rs.1,000
(Previous year: Nil) each]
905,705,743 869,335,549
* Less than Re.1
The aggregate book value and market value of quoted investments
and book value of unquoted investments is as follows:
Quoted investments
- Aggregate book value - -
- Aggregate market value - -
Aggregate book value of unquoted investments 905,705,743 869,335,549
As at As at31st March, 2011 31st March, 2010
(Amount in Rs.)
Schedules to the financial Statementsfor the year ended 31st March, 2011
28 Annual Report 2010-11
8 Sundry debtors*
Unsecured and considered good
Outstanding for more than six months 5,568,310 3,961,325
Other debts 10,225,338 3,604,590
15,793,648 7,565,915
* Includes Rs.14,986,791 (Previous year Rs.7,565,915) of trusteeship
fee receivable from various IARC trusts
9 Cash and bank balances
Cash in hand 15,406 2,678
Balance with scheduled banks
- in current account 10,691,687 18,335,598
- in fixed deposit account 140,000,000 163,708,303
150,707,093 182,046,579
10 Loans and advances
Secured and considered good
Corporate loan 37,199,535 -
Unsecured and considered good
Advances recoverable in cash or in kind or for value to be received * 62,223,736 17,947,814
Interest accrued but not due 3,528,624 4,027,539
Prepaid expenses 737,990 406,663
Deposits 5,772,027 4,851,210
Advance Income tax, net of provision for income tax of Rs.57,413,725
(Previous year: Rs.29,177,725) 27,639,834 5,072,245
137,101,746 32,305,471
* Includes advances receivable from various IARC trusts Rs.54,761,481
(Previous year: Rs.13,839,308)
11 Current liabilities
Sundry creditors 3,297,609 177,277
Statutory dues 2,673,389 2,258,396
Advance towards Security Receipts redemption 25,000,000 -
Payable to IARC trusts 6,122,945 500,000
Provision for bonus 5,400,000 6,500,000
Unpaid dividend - 32,420
Other liabilities 1,036,047 4,294,381
43,529,990 13,762,474
As at As at31st March, 2011 31st March, 2010
(Amount in Rs.)
Schedules to the financial Statementsfor the year ended 31st March, 2011
29 Annual Report 2010-11
As at As at31st March, 2011 31st March, 2010
12 Provisions
Provision for gratuity 1,826,894 1,009,406
Provision for leave entitlement 164,705 -
Proposed dividend on equity shares 20,000,000 -
Proposed dividend on cumulative preference shares - 7,500,000
Provision for tax on dividend 4,567,405 1,274,625
26,559,004 9,784,031
For the year ended For the year ended
2011 2010
13.1 Operating income
Trusteeship fees {(tax deducted at sources Rs.3,122,967
(previous year : Rs.2,382,624)} 28,332,872 21,396,056
Management fees {(tax deducted at sources Rs.155,172
(previous year: Rs.74,938)} 1,402,656 679,446
Management incentive fees{(tax deducted at sources Rs.19,971
(previous year: Rs.8,378)} 181,061 75,960
29,916,589 22,151,462
13.2 Investment income
Upside income 115,741,390 100,896,137
Interest on corporate loan 6,502,005 -
122,243,395 100,896,137
13.3 Other income
Interest on fixed deposits with bank {tax deducted at source
Rs.1,042,919 (previous year: Rs.4,178,367)} 10,430,557 35,753,749
Other income 200,000 -
10,630,557 35,753,749
14 Employee cost
Salaries, bonus and allowances 35,583,214 31,178,153
Staff welfare expenses 1,345,515 891,361
Contribution to provident and other funds 2,454,481 2,101,739
39,383,210 34,171,253
(Amount in Rs.)
Schedules to the financial Statementsfor the year ended 31st March, 2011
30 Annual Report 2010-11
15 Administrative and other operating costs
Professional and advisory fees 9,604,784 7,356,001
Rent 8,997,055 6,974,105
Legal and financial due diligence expenses 2,415,708 5,021,134
Traveling and conveyance expenses 2,473,976 2,457,658
Motor car expenses 2,274,348 1,729,890
Software maintenance expenses 2,141,183 1,514,433
Directors’ sitting fees 1,000,000 1,156,737
Communication expenses 1,304,099 1,160,323
Repair and maintenance - others 1,008,329 1,081,645
Auditors’ remuneration
- Statutory audit fees 400,000 324,250
- Tax audit fees 80,000 69,850
- Out of pocket expenses 8,800 4,510
Electricity charges 651,611 633,717
Membership and subscription fees 648,033 477,474
Brokerage on rental premises - 450,760
Entertainment expenses 59,748 35,496
Printing and stationery expenses 613,109 401,828
Bank charges 101,162 111,782
Board meeting expenses 1,198,876 854,842
Miscellaneous expenses 1,218,768 747,109
36,199,589 32,563,544
16 Finance charges
Interest on bank overdraft 747,556 -
747,556 -
For the year ended For the year ended2011 2010
(Amount in Rs.)
Schedules to the financial Statementsfor the year ended 31st March, 2011
31 Annual Report 2010-11
Schedules to the financial Statementsfor the year ended 31st March, 2011
Scheme Opening balance as Purchased during Redeemed during Closing balance as on
on 1st April, 2010 the year the year 31st March, 2011
Investment in security receipts of Units Amount Units Amount Units Amount Units Amount
“IARC-BOB-01/07 Trust” 1,675 92,275,226 - - - 32,963,332 1,675 59,311,894
“IARC-CBOP-CORP-RD-02/07-08 Trust” 3,105 2,748,610 - - - - 3,105 2,748,610
“IARC-CBOP-RET-03/07 -08 Trust” 3,191 192,514 - - - 192,514 3,191 -*
“IARC-IFCI-EIL-04-07/08 Trust” 2,125 2,125,000 - - - 885,434 2,125 1,239,566
“IARC-SBOP-CORP-06/07-08 Trust” 10 1,000,000 - - - - 10 1,000,000
“IARC-LIC-CORP-07/07-08 Trust” 825 825,000 - - - - 825 825,000
“IARC-UCO-CORP-08/07-08 Trust” 225 225,000 - - - - 225 225,000
“IARC-PNB-CORP-09/08-09 Trust” 1,505 1,138,941 - - - 1,138,931 1,505 10
“IARC-BOB-CORP-10/08-09 Trust” 30,907 30,907,000 2,175 2,175,000 - - 33,082 33,082,000
“IARC-SBOP-CORP-11/08-09 Trust” 71,800 71,600,000 - - 4,600,000 71,800 67,000,000
“IARC-BOB-CORP-12/08-09 Trust” 147,100 147,100,000 - - - 86,390,080 147,100 60,709,920
“IARC-SBBJ-CORP-13/08-09 Trust” 42,600 42,600,000 - - - 42,599,500 42,600 500
“IARC-ALLB-CORP-14/08-09 Trust” 73,000 72,347,000 - - - 14,616,050 73,000 57,730,950
“IARC-UNTD-CORP-15/08-09 Trust” 22,700 22,700,000 - - - 22,700,000 22,700 -*
“IARC-UBI-CORP-16/09-10 Trust” 150,800 150,800,000 - - - - 150,800 150,800,000
“IARC-ICICI-CORP-17/09-10 Trust” 73,000 30,492,939 - - - - 73,000 30,492,939
“IARC-18/09-10 Trust” 2,100 2,100,000 - - - 209,641 2,100 1,890,359
“IARC-19/09-10 Trust” 26,476 14,092,320 - - - 13,006,484 26,476 1,085,836
“IARC-20/09-10 Trust” 145,190 145,190,000 - - - 4,904,974 145,190 140,285,026
“IARC-21/09-10 Trust” 31,200 31,200,000 - - - - 31,200 31,200,000
“IARC-22/09-10 Trust” 7,650 7,650,000 5,340 5,340,000 - 1,922,172 12,990 11,067,828
“IARC-23/10-11 Trust” - - 26,000 26,000,000 - 16,039,694 26,000 9,960,306
“IARF 1 Trust - Scheme 1” - - 217,520 217,520,000 - - 217,520 217,520,000
“IARC-25/10-11 Trust” - - 27,500 27,500,000 - - 27,500 27,500,000
* Less than Re.1
(Amount in Rs.)
Statement Showing purchase and redemption of investments (in units and amount)
32 Annual Report 2010-11
17. Notes to the accounts
17.1 Related party
The related parties of the Company are set out below:
1. HDFC Bank Limited
2. Tata Capital Limited
3. Birendra Kumar - Managing Director and Chief Executive Officer of the Company (Key Management Person)
4. IARC-BOB-01/07 Trust
5. IARC-CBOP-CORP-RD-02/07-08 Trust
6. IARC-CBOP-RET-03/07-08 Trust
7. IARC-IFCI-EIL-04/07-08 Trust
8. IARC-UCO-CORP-05/07-08 Trust
9. IARC-SBOP-CORP-06/07-08 Trust
10. IARC-LIC-CORP-07/07-08 Trust
11. IARC-UCO-CORP-08/07-08 Trust
12. IARC-PNB-CORP-09/08-09 Trust
13. IARC-BOB-CORP-10/08-09 Trust
14. IARC-SBOP-CORP-11/08-09 Trust
15. IARC-BOB-CORP-12/08-09 Trust
16. IARC-SBBJ-CORP-13/08-09 Trust
17. IARC-ALLB-CORP-14/08-09 Trust
18. IARC-UNTD-CORP-15/08-09 Trust
19. IARC-UBI-CORP-16/09-10 Trust
20. IARC-ICICI-CORP-17/09-10 Trust
21. IARC-18/09-10 Trust
22. IARC-19/09-10 Trust
23. IARC-20/09-10 Trust
24. IARC-21/09-10 Trust
25. IARC-22/09-10 Trust
26. IARC-23/10-11 Trust
27. International Asset Reconstruction Fund 1 Trust and International Asset Reconstruction Fund 1 Trust - Scheme 1
(IARF 1 Trust and Scheme)
28. IARF 25/10-11 Trust
Entities no. 4 to 28 listed above are various trusts set up by the Company for the purpose of carrying out asset
securitization and reconstruction business. By virtue of provisions of SARFAESI Act and RBI guidelines, the Company acts
as Trustee and Asset Management Company (AMC) of the aforesaid trusts and decides the acquisition and resolution
strategy and takes necessary steps for recovery in line with the strategy decided. As prescribed by RBI, the Asset
Acquisition and Resolution has to be approved by a “Committee of directors” of the Company to ensure that there is no
NotesForming part of the Accounts
(Amount in Rs.)
33 Annual Report 2010-11
potential conflict with the interest of the Company and they are being carried out on arm’s length basis at fair market
value. Further the powers and duties of the Company, acting as Trustee and AMC of the aforesaid trusts are governed by
relevant trust deeds / offer document and commitment agreement. In case of IARF 1 Trust and Scheme, in accordance
with the commitment agreement, there is independent “Governance Board” advising the Company on certain matters
relating to IARF 1 Trust and Scheme.
Transactions with related parties:
Particulars 2011 2010
1. Payments to Key Management Personnel*
Salary and bonus 3,811,291 4,004,839
Other allowances 1,642,339 1,572,138
2. Conversions of preference share into equity capital
HDFC Bank Limited 44,117,310 -
Tata Capital Limited 40,343,160 -
3. Payment of dividend towards preference share capital
HDFC Bank Limited 4,411,731 8,58,172
Tata Capital Limited 4,034,316 19,61,894
* The Company has granted 237,132 stock options under the Employee Stock Option Scheme 2008.
Note: Transactions carried out with providers of finance in the normal course of business have not been disclosed in the
above table in accordance with Accounting Standard 18 – Related Party.
Transaction and balances with the trusts to be disclosed below
Note: Transactions and balances with the trusts constituting more than 10% of the each of the category are disclosed
separately, transactions and balances with other trusts are grouped under “others.
Particulars 2011 2010
1. Investment in security receipts
International Asset Reconstruction Fund 1 Trust Scheme 1 217,520,000 -
Others 61,015,000 578,923,000
2. Initial contribution paid
IARC-UNTD-CORP-15/08-09 Trust - 1,000
IARC-UBI-CORP-16/09-10 Trust - 1,000
IARC-ICICI-CORP-17/09-10 Trust - 1,000
IARC-18/09-10 Trust - 1,000
IARC-19/09-10 Trust - 1,000
IARC-20/09-10 Trust - 1,000
IARC-21/09-10 Trust - 1,000
IARC-22/09-10 Trust - 1,000
IARC-23/10-11 Trust 1,000 -
International Asset Reconstruction Fund 1 Trust 1,000 -
International Asset Reconstruction Fund 1Trust Scheme 1 1,000 -
IARC-25/10-11 Trust 1,000 -
NotesForming part of the Accounts
(Amount in Rs.)
(Amount in Rs.)
34 Annual Report 2010-11
Particulars 2011 2010
3. Redemption/ Partial reduction in face values of
Security Receipts
IARC-BOB-01/07 Trust 32,963,332 49,299,775
IARC-BOB-CORP-12/08-09 Trust 86,390,080 -
IARC-SBBJ-CORP-13/08-09 Trust 42,599,500 -
Others 80,215,893 59,799,676
4. Upside income
IARC-BOB-01/07 Trust 55,634,289 45,638,946
IARC-BOB-CORP-12/08-09 Trust 35,832,303 -
Others 24,274,798 44,341,366
5. Trusteeship fees received
IARC-BOB-01/07 Trust 2,998,477 5,323,268
IARC-UBI-CORP-16/09-10 Trust 3,015,999 -
IARC-20/0 9-10Trust 2,897,480 -
IARC-23/10-11 Trust 7,086,319 -
Others 12,334,599 16,072,788
6. Management fees received
IARC-CBOP-RET-03/07-08 Trust 362,658 432,708
7. Management incentive fees received
IARC-PNB-CORP-09/08-09 Trust 181,161 -
Others - 75,960
8. Recovery made on behalf of trust
IARC-BOB-01/07 Trust 65,880,000 8,323,000
IARC-PNB-CORP-09/08-09 Trust 32,974,341 9,373,749
IARC-SBOP-CORP-11/08-09 Trust 38,000,000 12,600,000
IARC-UNTD-CORP-15/08-09 Trust 30,060,000 -
IARC-SBBJ-CORP-13/08-09 Trust 51,952,918 -
Others 47,493,010 43,275,000
9. Expenses incurred on behalf of Trust
IARC-BOB-01/07 Trust 7,109,339 3,387,277
International Asset Reconstruction Fund I Trust Scheme I 19,638,342 -
Others 16,345,907 12,891,730
10. Investments
IARC-UBI-CORP-16/09-10 Trust 150,800,000 92,280,225
IARC-20/0 9-10Trust 140,285,026 145,191,000
International Asset Reconstruction Fund I Trust Scheme I 217,520,000 150,801,000
Others 397,070,718 481,063,324
NotesForming part of the Accounts
(Amount in Rs.)
35 Annual Report 2010-11
Particulars 2011 2010
11. Payables to IARC Trust
IARC-PNB-CORP-09/08-09 Trust 846,405 -
International Asset Reconstruction Fund I Trust Scheme I 4,776,540 -
Others 500,000 500,000
12. Receivables
IARC-BOB-CORP-12/08-09 Trust 16,115,412 3,139,544
IARC-UBI-CORP-16/09-10 Trust 9,171,637 2,408,567
International Asset Reconstruction Fund I Trust Scheme I 27,099,564 -
Others 17,359,549 11,813,677
17.2 Employee benefits
Disclosures as required by AS 15 are given below:
A) Amount recognised in the balance sheet
2011 2010 2009
Present value of obligation as at the end of the year (1,826,894) (1,009,406) (274,569)
Fair value of plan assets as at the end of the year 2,206,025 1,451,920 437,600
Net assets 379,131 442,514 163,031
B) Expense recognized in the statement of
profit and loss account
2011 2010 2009
Current service cost 391,112 380,219 232,273
Interest on defined benefit obligation 80,752 19,220 -
Expected return on plan assets (141,100) (83,000) -
Net actuarial losses / (gains) recognized in the year 355,898 372,030 (48,922)
Total included in “Employee cost” 686,662 688,469 183,351
Actual return on plan assets 130,826 46,368 -
C) Reconciliation of benefit obligations and
plan assets for the year
2011 2010 2009
Change in defined benefit obligation
Opening defined benefit obligation 1,009,406 274,569 91,218
Current service cost 391,112 380,219 232,273
Interest cost 80,752 19,220 -
Actuarial losses / (gain) 345,624 335,398 (48,922)
Benefits paid - - -
Closing defined benefit obligation 1,826,894 1,009,406 274,569
Change in the fair value of assets
Opening fair value of plan assets 1,451,920 438,355 -
Actual return on plan assets 130,826 46,368 755
Contributions by employer 623,279 967,197 437,600
Benefits paid - - -
Closing fair value of plan assets 2,206,025 1,451,920 438,355
NotesForming part of the Accounts
(Amount in Rs.)
(Amount in Rs.)
(Amount in Rs.)
(Amount in Rs.)
36 Annual Report 2010-11
D) Asset information
Category of assets 2011 2010 2009
Insurer managed funds 100% 100% 100%
The break-up of the approximate market value of the assets
as at 31st March, 2011 as advised by the insurer is as follows:
Category of assets
Insurer managed funds 2,206,025 1,451,920 437,600
E) Summary of actuarial assumptions
Assumptions: 2011 2010 2009
Valuation method Projected Projected Projected
unit credit unit credit unit credit
method method method
Discount rate 8% 8% 7%
Salary growth rate 10% 10% 3%
Normal retirement age 60 years 60 years 60 years
Withdrawal rate 1 % to 3 % 1 % to 3 % 1 % to 3%
Mortality rate LIC (94-96) LIC (94-96) LIC (94-96)
Ultimate Ultimate Ultimate
Amortization of actuarial loss (gain) Immediate Immediate Immediate
a) Discount rate:
The discount rate is based on the prevailing market yields of Indian Government securities as at the balance
sheet date for the estimated term of the obligations.
b) Expected rate of return on plan assets:
This is based on the Company’s expectation of the average long-term rate of return expected on investments
of the fund during the estimated term of the obligations.
c) Salary escalation rate:
The estimates of future salary increases considered takes into account the inflation, seniority, promotion and
other relevant factors.
17.3 Employee Stock Option Scheme
In terms of the Employee Stock Option Scheme 2008 (ESOS), the maximum number of options granted to any eligible
employee shall not exceed 1% of the issued equity shares of the company at the time of grant of the options and
aggregate of all such options granted to the eligible employees shall not exceed 5% of the aggregate number of the
issued equity shares of the Company on the date (s) of the grant of options. Under the stock option scheme, options
vest in a graded manner over a four year period, with 10%, 20%, 30%, 40% of grants vesting each year, commencing
from the end of 12 months from the date of grant. The options can be exercised within 3 years from the date of grant
or date of listing, whichever is later.
In terms of the ESOS, 1,324,030 options granted to eligible employees were outstanding at 31st March, 2011. Options
were granted during the year ended 31st March, 2010 with effective dates as mentioned below:
Effective date of grant Number of options Intrinsic value of Exercise price
options on the
date of grant
19th November, 2008 893,441 10.65 12.00
1st January, 2009 215,294 10.65 12.00
1st October, 2009 215,295 10.00 12.00
NotesForming part of the Accounts
(Amount in Rs.)
(Amount in Rs.)
37 Annual Report 2010-11
As per the ESOS, the exercise price of options is higher than the fair market value as on the date of grant of options.
Hence, there is no compensation cost in the year ended 31st March, 2011, based on intrinsic value of options.
However, if Company had used the fair value of options based on the Black-Scholes model, compensation cost for the year
ended 31st March, 2011 would have been higher by Rs. 890,060 (Previous year: Rs 919,987) and profit after tax would
have been Rs. 55,418,617 (Previous year: Rs 61,572, 967) and the Company’s basic and diluted earnings per share would
have been Rs.1.17 (Previous year: basic and diluted Rs. 1.32 and Rs.1.12 respectively). Key assumptions used to estimates
the fair value of options granted during the year ended 31st March, 2010 are given below:
2011 2010
Risk-free interest rate - 6.87%
Expected life - 4.85 years
Expected volatility - 0.00%
Expected dividends yield - 0.00%
There have been no options granted during the year. The weighted average fair value of options granted during the year
ended 31stMarch, 2010 is Rs 1.99.
A summary of the status of the company’s stock option for the year ended 31st March, 2011 is given below:
2011 2010
No. of Weighted No. of Weighted
option average exercise options average exercise
price price
Outstanding, beginning of the year 1,324,030 12.00 1,108,735 12.00
Add: Granted during the year Nil Nil 215,295 12.00
Less: Lapsed during the year 104,706 12.00 Nil Nil
Less: Exercised during the year Nil Nil Nil Nil
Outstanding, end of the year 1,219,324 12.00 1,324,030 12.00
Options exercisable, at the end of the year 333,397 12.00 110,874 12.00
Weighted average remaining contractual life 5.04 years 6.04 years
17.4 Leases
The Company has taken office premises on operating leases. Gross rental expenses for the year ended 31st March, 2011
aggregated to Rs. 8,997,055 (Previous year: Rs. 6,974,105)
These leases have lock-in periods upto 27 months and the minimum lease payment commitments for the lock-in period
are as follows.
2011 2010
Minimum lease payments for non cancellable lease
- not later than one year 6,626,940 4,948,735
- later than one year and not later than five years 4,211,142 6,620,255
- later than five years - -
Total 10,838,082 11,568,990
NotesForming part of the Accounts
(Amount in Rs.)
(Amount in Rs.)
(Amount in Rs.)
38 Annual Report 2010-11
17.5 Earnings per share (EPS)
EPS is computed in accordance with Accounting Standard 20 ‘Earnings Per Share’ prescribed by Companies (Accounting
Standard) Rules, 2006:
Particulars 2011 2010
a) Profit attributable to equity shareholders (used as numerator
for calculating Basic EPS) 47,267,021 53,406,333
b) Profit attributable to equity shareholders (used as numerator
for calculating Diluted EPS) 47,267,021 62,180,958
c) Weighted average number of equity shares (used as denominator
for calculating Basic EPS)
- Number of shares at the beginning of the year 40,000,000 40,000,000
- Number of shares issued during the year 15,000,000 -
Total number of equity shares outstanding at the end of the year 55,000,000 40,000,000
Weighted average number of equity shares outstanding during the
year (used as denominator for calculating Basic EPS) 40,041,096 40,000,000
d) Add: Effect of potential equity shares to be issued under
compulsory convertible preference shares - 15,000,000
e) Weighted average number of equity shares (used as denominator
for calculating Diluted EPS) 40,041,096 55,000,000
f) Basic earnings per share (in rupees) (a/c) 1.18 1.34
g) Diluted earnings per share (in rupees) (b/e) 1.18 1.13
* There is no dilutive impact due to options granted to employees by the Company under ESOS as the exercise price of
options is higher than the fair value of equity share on the date of grant of options.
17.6 Capital commitments and contingent liabilities
Estimated amounts of contracts remaining to be executed on capital account are Rs. 2,331,600 {Previous year: Nil}.
There is a contingent liability of Rs. 1,629,844 (previous year: Rs. Nil) on account of disallowances from income-tax
authorities for assessment year 2008-2009. The Company has filed a response challenging the disallowance made by
the income tax authorities.
The Company has availed a bank guarantee of Rs 2,100,000 from a bank for participation in auction for sale of non
performing loans. Based on the results of the said auction, there is no payment obligation for the Company. As at 31st
March, 2011, the Company is in the process of releasing the bank guarantee.
17.7 Earnings and expenditure in foreign currency
a) Earnings in foreign currency (on accrual basis): Nil
b) Expenditure in foreign currency (on accrual basis): Travelling expenses Rs. 370,750 (previous year: Nil)
c) Dividend remittances: A sum of Rs. 4,034,316 (previous year Rs. 784,758) was remitted during the year in foreign
currency in respect of preference dividend on 4,034,316 (previous year 4,034,316) shares held by two non-resident
shareholders.
17.8 Deferred taxation
The Company estimates the deferred tax (credit) / charge using the applicable rate of taxation based on the impact of
timing differences between financial statements and estimated taxable income for the current year. The components
of deferred taxes are as follows:
2011 2010
Deferred tax assets
Leave entitlements 54,711 -
Rent 253,159 97,601
Total (a) 307,870 97,601
NotesForming part of the Accounts
(Amount in Rs.)
(Amount in Rs.)
39 Annual Report 2010-11
2011 2010
Deferred tax liabilities
Depreciation on fixed assets (411,406) (529,425)
Total (b) (411,406) (529,425)
Deferred tax liability (net) (a-b) (103,536) (431,824)
17.9 Managerial remuneration
2011 2010
Salary and bonus * 3,811,291 4,004,839
Perquisites and allowances 1,642,339 1,572,137
Total 5,453,630 5,576,976
* Information relating to managerial remuneration does not include provision for leave entitlements and premium
towards group term life, which are provided on an overall basis.
17.10 Micro, Small and Medium Enterprises
On the basis of the information and records available, there are no dues to Micro, Small and Medium enterprises,
which have registered with the competent authorities.
17.11 Quantitative details
The activities of the Company are not capable of being expressed in any generic unit and hence it is not possible to
give the quantitative details required under paragraph 3, 4C and 4D of part II of Schedule VI of the Companies Act,
1956.
17.12 Segment Reporting
The Company is engaged only in the business of asset reconstruction. Accordingly, there is no reportable segment and
hence, no disclosure is required under Accounting Standard 17 – Segment Reporting. Further, segmentation based on
geography has not been presented as the Company operates only in India.
17.13 Additional disclosures as required by RBI guidelines
(A) Names and addresses of the bank / financial institution from whom the financial assets were
acquired and the value at which the assets were acquired from each bank / financial institution:
Seller wise acquisition details as at 31st, March
2011 2010
Name of selling bank Address of selling bank / Acquisition price Acquisition price
/ financial institution financial institution (Rs. in Lacs) (Rs. in Lacs)
Sponsors
HDFC Bank Limited HDFC Bank House, Senapati Bapat Marg,
Lower Parel Mumbai 400 013 2,829 1,754
Sub Total (A) 2,829 1,754
Non sponsors
Bank of Baroda 9th Floor, Baroda Corporate Centre
Bandra Kurla Complex, Bandra (East),
Mumbai 400 051 8,433 8,411
IFCI Limited Earnest House (7th floor) Backbay
Reclamation, Nariman Point,
Mumbai - 400 021 534 534
UCO Bank 10, B T M Sarani, Cuffe Brabourne Road,
Kolkata - 700 001 1,092 1,092
Life Insurance Jeevan Seva Annexe, 4th Floor (Adjacent
Corporation of India to LIC Council), Above Branch 893,
S.V. Road, Santacruz (W) Mumbai 400 054 165 165
NotesForming part of the Accounts
(Amount in Rs.)
(Amount in Rs.)
40 Annual Report 2010-11
2011 2010
Name of selling bank Address of selling bank / Acquisition price Acquisition price
/ financial institution financial institution (Rs. in Lacs) (Rs. in Lacs)
State Bank of Patiala The Mall, Patiala 147 001 988 988
Punjab National Bank 7, Bhikaiji Cama Place
New Delhi 110 001 1,113 1,113
State Bank of Bikaner Tilak Marg, C - Scheme, Jaipur 426 426
& Jaipur
Allahabad Bank 2, N. S. Road, Kolkata 700 001 730 730
Central Bank of India Chander Mukhi, Nariman Point
Mumbai 400 021 866 510
Corporation Bank Mangaladevi Temple Road
Pandeshwar, Manglore 575 001 300 300
Federal Bank Limited P O Box No 103, Federal Towers
Alwaye, Kerala, 683101 215 215
Kotak Mahindra Bank Limited 5A, 5th Floor, Bakhtawar229,
Nariman Point 531 531
Union Bank of India 239 Vidhan Bhavan Marg
Central Office, Nariman Point,
Mumbai 400 021 325 325
United Bank 11, Hemanta Basu Sarani
Kolkata 700001. 227 227
ICICI Bank Limited Landmark, Race Course Circle
Vadodara 390 007 11,225 6,025
IDBI Bank Limited IDBI Tower, WTC Complex
Cuffe Parade, Mumbai 400 005 69 69
Laxmi Vilas Bank Salem Main Road, Karur - 639006 1779 -
Axis Bank Limited Bombay Dyeing Mills compound,
Pandurang Bodhkar Marg,
Worli, Mumbai-400025 6679 -
Sub Total (B) 35,697 21,661
Total (A + B) 38,526 23,415
(B) Dispersion of financial assets acquired industry wise:
Industry wise acquisition of financial assets as at 31st, March
Industry* 2011 2010
No. of Acquisition % of Total No. of Acquisition % of Total
borrowers price assets borrowers price assets
(Rs. in lacs) (Rs. in lacs)
Agriculture and Allied Industries 27 4,441 11.53% 22 3,193 13.64%
Cement 3 39 0.10% 3 39 0.17%
Construction & Engineering 25 3,539 9.19% 23 1,989 8.49%
Computers and Software 5 182 0.47% 5 182 0.78%
Financial Services 5 190 0.49% 5 190 0.81%
Hospital 2 127 0.33% 2 127 0.54%
Hospitality 1 1504 3.90% - - -
Infrastructure 4 671 1.74% 3 171 0.73%
Iron and Steel 18 1842 4.78% 17 792 3.38%
NotesForming part of the Accounts
41 Annual Report 2010-11
Industry* 2011 2010
No. of Acquisition % of Total No. of Acquisition % of Total
borrowers price assets borrowers price assets
(Rs. in lacs) (Rs. in lacs)
Jewellery 7 1048 2.72% 6 458 1.96%
Pharmaceuticals & Chemical 39 3,225 8.37% 37 2,964 12.66%
Plastic and Rubber 8 222 0.58% 8 222 0.95%
Power Generation 1 1,508 3.91% 1 1,508 6.44%
Retail ** NA 11,133 28.90% NA 5,933 25.33%
Stationary 7 522 1.35% 7 522 2.23%
Textiles 35 3,315 8.60% 32 1,944 8.30%
Trading 23 2,203 5.72% 20 1,528 6.53%
Others 36 2,815 7.31% 28 1,653 7.06%
Total 246 38,526 100.00% 219 23,415 100.00%
* The industry wise details of financial assets are as provided by management.
**Include three retail portfolio
(C) The related party disclosure has been provided above as per the accounting standard prescribed in the Companies
(Accounting Standards) Rules, 2006, to the extent applicable.
(D) There has been no migration of financial assets from standard to non-performing during the current year.
(E) Other additional disclosures:
Particulars 2011 2010
Value of financial assets acquired during the financial year 1,511,075,000 1,165,220,000
Value of financial asset realized during the financial year 980,874,588 563,454,912
Value of financial assets outstanding for realization at the end of
the financial year 2,098,761,459 1,560,627,603
Value of Security Receipts redeemed partially and the Security
Receipts redeemed fully during the financial year 949,932,138 569,347,686
Value of Security Receipts pending for redemption as at the end
of the financial year 2,196,131,177 1,634,988,314
Value of Security Receipts which could not be redeemed as a
result of non-realization of financial assets as per the policy
formulated by the Company Nil Nil
Value of land and/or building acquired in ordinary course of
business of reconstruction of assets Nil Nil
17.14 Prior year comparatives
Previous year figures have been regrouped / reclassified wherever necessary to conform to the current year
presentation.
NotesForming part of the Accounts
(Amount in Rs.)
For and on behalf of the Board of Directors’International Asset Reconstruction Company Private Limited
For B. S. R. & CompanyChartered Accountants M. S. VermaFirm’s Registration No.: 128032W Chairman
Akeel MasterPartnerMembership No : 046768
Mumbai Rashmi Sharma26th April, 2011 Company Secretary & Compliance Officer
Sunanda DandekarChief Financial Officer
Birendra KumarManaging Director &Chief Executive Officer
42 Annual Report 2010-11
Balance Sheet Abstract And Company’s General Business Profile As Per
Part IV, Schedule VI of the Companies Act, 1956
1. Registration Details
Registration No. State Code
Balance Sheet Date
Date Month Year
2. Capital Raised During the Year
(Amount Rupees in Lakhs)
Public Issue Bonus Issue
Rights Issue Private Placement
3. Position Of Mobilization And Deployment Of Funds
(Amount Rupees in Lakhs)
Total Liabilities Total Assets
Sources Of Funds
Paid-up Capital Reserves and Surplus
Secured Loans Unsecured Loans
Application Of Funds
Net Fixed Assets Loans and Investments
Net Current Assets and Advances Miscellaneous Expenditure
4. Performance Of Company
(Amount Rupees in Lakhs)
Turnover (Gross Income) Total Expenditure
* after adjustment of accounting policy changes
Profit before Tax Profit after tax
* after adjustment of accounting policy changes
Basic Earning per Share in Rupees Dividend Rate %
Diluted Earning per Share in Rupees
5. Generic Names Of Principal Products/Services Of The Company
Product Description: Item Code
Asset Securitisation /
Asset Reconstruction
For and on behalf of the Board of Directors’International Asset Reconstruction Company Private Limited
M. S. VermaChairman
Mumbai Rashmi Sharma26th April, 2011 Company Secretary & Compliance Officer
Sunanda DandekarChief Financial Officer
Birendra KumarManaging Director &Chief Executive Officer
1 . 1 8
5 5
N I L
N I L
1 1 7 3 5 7
1 1 4 8 9 1 1 4 8 9
N I L
N I L
N I L
5 5 0 0 5 4 8 4
5 0 5 N I L
9 7
2 3 3 5
9 0 5 7
N I L
1 6 2 8 7 8 9
1 . 1 8
5
5 6 0
3 1 0 3 1 1
8 3 9
Balance Sheet Abstract
RestructuredNijjer Agro Foods Limited
Nijjer Agro Foods Limited is the leading agro-processing
company in North India and the largest tomato
processor in India. Affected by climatic conditions and
delayed customer approvals for some of its diversified
product portfolio, the Company had defaulted on its
loan commitments. Looking at the business prospects
and the underlying real estate with good development
potential, IARC acquired all the outstanding debt of the
Company in February – March 2010 and provided
Restructuring Support Finance. Since then, IARC has
worked with the management in streamlining
operations, expediting approval process for various
products and institutionalizing a strong, robust and
resilient financial management system. Nijjer Agro
Foods supplies its products to large international and
domestic FMCG companies, like Hindustan Unilever,
Nestle, Jubilant Foods, etc. The operations are expected
to be stabilized by next year.
Annual Report 2010-1143
RestructuredSabare International Ltd.
Sabare is India's leading manufacturer of home
furnishings in the non-terry towel category offering a
wide range of products across categories including
kitchen and dining, bed, bath and rugs. Sabare’s
customers include various Fortune-500 companies,
such as Wal-Mart, Target, Kmart/ Sears, Home Depot,
IKEA, etc. Affected by the sub-prime crisis and
consequently reduced volume off-take, the company’s
operations suffered severely, resulting in decline in
revenue and operating profit and ultimately default in
its debt servicing obligations. As part of the financial
restructuring exercise undertaken by the Company,
IARC acquired and undertook a workout exercise in
respect of debt exposure of rugs & flooring division at
Panipat envisaging cash-flow linked repayments and
demerging the rugs & flooring division into a separate
entity. Sabare is on course to meet its target well ahead
of time.
Annual Report 2010-1144
Registered Office
709, 7th Floor, Ansal Bhawan,
16, Kasturba Gandhi Marg,
New Delhi – 110 001.
Corporate Office
A-508, 215 Atrium, Kanakia spaces,
Andheri–kurla Road, Andheri (East)
Mumbai – 400 069.
Tel : +91 22 6736 3000
Fax : +91 22 6736 3022
Gurgaon Office
B-306, Millennium Plaza,
Sushant Lok- I, Sector 27, Gurgaon
Haryana – 122001.
Tel : +91 124 4980 700
Fax : +91 124 4980 721
Email : [email protected]
Website : www.iarc.co.in
International Asset Reconstruction
Company Pvt. Ltd.
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