Margdarshak Financial Services Ltd Annual report 2015-16 · 2018. 9. 24. · finance. He has served...

Margdarshak Financial Services Ltd Annual Report 2015-16

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MISSION“Providing a holistic bouquet of financial products and services to the economically weaker enterprising sections of the community for enabling mainstreaming and socio economic betterment.”

VISION“Adapting industry best practices in all aspects of organization for emerging as financial service provider of choice for families in Uttar Pradesh, Bihar and Neighbouring States.”

PAGE

KEY TRENDS �� 04

FROM THE MD’s DESK �� 05

THE MFSL BOARD OF DIRECTORS �� 06

DIRECTORS’ REPORT �� 07

ANNEXURES TO THE DIRECTORS’ REPORT �� 12

MANAGEMENT’S DISCUSSION AND ANALYSIS �� 21

CLIENT STORIES ��24

CORPORATE GOVERNANCE REPORT ��25

RISK MANAGEMENT REPORT �� 29

INDEPENDENT AUDITORS REPORT �� 31

FINANCIAL STATEMENTS ��35

CORPORATE INFORMATION �� 50

TABLE OF CONTENTS

Key TreNdS | 04


KEY TRENDS


FrOM THe Md’S deSK | 05

FROM THE MD’S DESK

dear Stakeholders,It gives me an immense pleasure to share the Annual report of Margdarshak Financial Services Ltd. for the year 2016 with you on behalf of the Board & Management of the organisation.The regulators and policy backing has enabled the microfinance sector in India in reviving itself and evolving to new framework of institutions for furthering the agenda of financial inclusion in the country. Margdarshak continues to be part of the sectors achievements in expanding its outreaching and improving product & service offering to the economically marginalsied communities.Following the overall agenda of enabling economic mainstreaming of the marginsalised communities and enabling them in improving their qualiity of lives, Margdarshak expanded its outreach to the hill state of Uttarakhand & continued to deepen its presence in the states of Uttar Pradesh, Bihar and Haryana. Margdarshak now has a network of 90 branches across 42 districts of 4 key North Indian states. Following a consistent and sustainable growth strategy, the aggregate gross loan portfolio of the company grew to ̀ 170.85 crore in March 2016 from `. 104.18 crore in March 2015. The overall growth rate achieved in the AUM by the organisation was 64%, which we intend to maintain and increase in the subsequent years.enabling access to a complete bouquet of financial services continues to be the core of Margdarshak’s financial inclusion strategy. In this direction, Margdarshak now partners with 3 institutions for extending financial services and has created portfolio of ` 50.93 crore as on March 31st 2016, for partner institutions like IdBI Bank, yes Bank and reliance Capital.We continue firm in our belief that capital is best used for productive purposes and therefore we continue our focus on artisanal clusters and

working closely with the artisans. About 60% of our customers are artisans and we intend to keep deepening our services to the artisanal communities of India. Margdarshak continues to keep exploring various uses of technology in various aspects of our organizational functioning. during the year we successfully achieved the objective of taking all our front end processes on to mobiles devices, seamless integration of data & information flow with our partner organisations and begin the process of going paper-less. In the coming years we intend putting technology at the disposal of our clients & employees and enabling them in using the various services of the organisation. Our integrated IVrS mechanism was made operational during the year & Margdarshak members now have ready access to check their credit status & loan application status without manual interventions.Human resources are one of the hallmarks of Margdarshak. Several of our key managers have grown with the organisation and key have a strong cadre of internally groomed and developed managers in the organisation. By intensively coaching and mentoring the 2nd and 3rd line managers to encourage their development and by increasing their commitment to their specific jobs has helped the organisation to reach its strategic objective. Our growth and success has been possible due to the diligence shown by our leadership team and all members of Margdarshak group. I thank them for their commitment. We focus on building an organisation that is future ready and is destined to thrive beyond generations. In the current year, the company is supported by 13 public sector banks and 9 private financial institutions. The company has also raised capital from 2 institutional investor’s viz. SIdBI and dia Vikas Capital Pvt. Ltd apart from the debt support. I would like to take this opportunity to express my gratitude to all stakeholders including our Board, Bankers, Investors for their unstinted support, co-operation and trust.With the firm belief in our abilities of establishing a sustainable model of livelihood financing, we look forward to continued faith and support of all stakeholders of Margdarshak.

Very sincerely,

rahul J MittraMd & CeO

THe MFSL BOArd OF dIreCTOrS | 06


THE MFSL BOARD OF DIRECTORS

Mr. D.P.S RathoreIndependent Director

Mr. Saneesh SinghNominee Director

Mr. Prasad KuchibhatlaIndependent Director

Ms. Maitrayee BanerjeeIndependent Director

Mr. Rahul J MittraFounder, CEO and Managing Director

Ms. Saroj MittraCFO and Whole Time Director

Mr. Arupjyoti Rai BaruahWhole Time Director

Mr. Bhanu Prakash VermaNominee Director


THe MFSL BOArd OF dIreCTOrS | 07

D.P.S. RATHOREIndependent Director (Non-Executive Chairman)Over 36 years of banking experience with the reserve Bank of India, from where he retired as regional director. His subject areas of work experience include Banking, finance, currency, public debt, administration, personnel, human resources (specially training field), foreign exchange (including control as well as management), rural credit, training, legal work and education/literacy (financial literacy/education) and disciplinary & domestic enquiry area/ behavioural sciences with specialized areas of industrial relations & communications.He guides the Md & CeO along with top management in the areas of Organizational strengthening, product development and environment management.

SANEESH SINGHNominee DirectorMr Saneesh Singh has over 25 years of experience in the fields of development, banking & finance, microfinance, financial inclusion, MSMe lending, capital structuring and social and impact investments. He is the Chief executive Officer of dia Vikas Capital Pvt. Ltd., (a subsidiary of Opportunity International Australia). He has worked for over 16 years in various senior managerial capacities in SIdBI, wherein he was part of the core team that initiated SIdBI Foundation for Micro Credit (SFMC). Mr. Singh holds a PGd in Information Management and Systems Administration; a Master’s degree in Social Work and is a British Chevening Scholar of Banking and Finance from The London School of economics and Political Science. He is an associate of the Indian Institute of Bankers and an alumnus of Indian School of Business.

K. PRASADIndependent DirectorMr. Prasad has over 35 years of banking experience with reserve Bank of India, from where he retired as Chief General Manager. He has extensive experience in the areas of Supervision and examination of Non- Banking Financial Institutions & Banks including the developmental Financial Institutions. He holds a M.Sc. degree and is a Certified Associate of Indian Institute of Bankers (C.A.I.I.B).He heads the internal audit committee of MFSL and is engaged in conducting the internal audit of the organisation on quarterly basis. He also conducts trainings for the microfinance staff on different aspects of credit & risk management.

MAITRAYEE BANERJEEIndependent DirectorOver 30 years of banking experience with public sector bank in India and abroad where she retired as General Manager. She has extensive experience in Credit, MSe, Self-Help Groups, Government Sponsored Schemes, Mid-Corporate and Corporate Credit - processing, sanction and monitoring thereof. She also holds experience in Foreign exchange and Treasury experience

RAHUL J. MITTRAManaging Director & CEOMr.rahul Mittra has over 20 years of experience working at the grass root level in North India. He specializes in rural finance, organizational development, and strategy development and operations management. Prior to establishing Margdarshak in 2004, he has worked with entrepreneurship development Institute of India, Asian Centre for Organisation research & development (“ACOrd”) as well.He has also worked on various projects in the microfinance sector including assignments with SIdBI Foundation for Micro Credit (SFMC), Sa-dhan, Oxfam (India) Trust, Indian Farm Forestry development Corporation (IFFdC), Shramik Bharti (MFI in Uttar Pradesh), UNICeF and ILO. He holds a Masters degree in psychology and has been part of various rural entrepreneurship development Programs.

SAROJ MITTRAWhole Time DirectorSaroj has over 19 years of experience in various streams ranging from internal audit, direct finance and accounts and finance and is a Certified Associate of Indian Institute of Banking. Prior to joining MFSL, she served at SIdBI in the capacity of AGM. She possesses extensive financial management skills and is responsible for prudential norms in financial management, business planning, development of financial management systems and overseeing information management systems within the organisation.

ARUPJYOTI RAI BARUAHWhole Time DirectorMr. Arup Baruah has 25 years of corporate and development sector experience. Prior to MFSL, he has worked as consultant for entrepreneurship with “UNIdO- Jordan” from 2002 to 2006. He was involved in establishing a business counselling system and provide advisory services to potential entrepreneurs for business identification, planning, implementation and management, facilitate in attracting Foreign direct Investment to Jordan and Promoting sector specific companies for Joint ventures and Sub-contracting. He was earlier associated with entrepreneurship development Institute of India, Nagarjuna Fertilizers and SAIL. He specializes in enterprise development, business facilitation and loan portfolio audit. He holds a Post Graduate diploma in rural Management (PGdrM) from IrMA.

BHANU PRAKASH VERMANominee DirectorHas 23 years of experience in the field of development Banking, Promotion & Financing of MSMes and Micro finance. He has served the Bank in different capacities including Branch Head of important Branches and has rich experience in project finance, treasury, forex operations, technology up-gradation financing, receivable financing, equity financing, Indirect Finance. He is presently posted as deputy General Manager in SIdBI Foundation for Micro Credit (SFMC) at SIdBI Head Quarter, Lucknow, India. He holds a Masters degree in Accountancy & Business Statistics from University of rajasthan, India..

dIreCTOrS’ rePOrT | 08


DIRECTORS’ REPORT

dear Stakeholders ,your directors have pleasure in presenting the directors report together with the Audited Balance Sheet and Profit & Loss Account for the year ended 31st March, 2016.

01� FINANCIAL SUMMARY OR HIGHLIGHTS/PERFORMANCE OF THE COMPANY

� I�FINANCIAL RESULTS (IN CRORE)

Particulars 2015-16 2014-15Total revenue 30.45 13.99

Total expenses 26.81 12.34

Profit before Taxation 3.64 1.65

Tax expense:

depreciation 0.36 0.28

(a) Current Tax 1.35 0.54

(b) deferred Tax -0.14 0.07

Total Tax expenses 1.21 0.61

Net Profit for the period 2.43 1.05

02� DIVIDENDThe company has made a provision of ` 22,05,000/- for payment of dividend @9% on outstanding Optionally Convertible Preference Shares of ` 2,45,00,000/-received from SIdBI

03� RESERVESThe reserves and Surplus of the company comprises of the following:i. Balance of profits earned in the past years.ii. Loan Loss reserveiii. Profit earned during the year.iv. Share Premiumv. Company has created the Statutory reserve as per Section 45 IC of the rBI Act 1934 which is 20% of the Net Profit after tax.

04� BRIEF DESCRIPTION OF THE COMPANY’S WORKING DURING THE YEAR/STATE OF COMPANY’S AFFAIRS

� PORTFOLIO AND OUTREACH:As on March 31, 2016 the operations of the company was spread across 42 districts in four states viz. Uttar Pradesh-31, Bihar-6 and Haryana-4 and Uttrakhand-1. Share of Uttar Pradesh remained highest at 75.65%, Bihar at 20.04% , Haryana at 4.17% and Uttarakhand at 0.14%.

The aggregate gross loan portfolio (GLP) of the company stood at ` 170.86 Crore, growth of 64% over previous Fy. Managed portfolio was ` 50.94 crore, 29.81% of the aggregate GLP. Portfolio at risk (PAr) was 0.35% and PAr>30 was 0.16% of the Gross Loan Portfolio.

� DISBURSEMENT during the financial year 2015-16, MFSL disbursed 88679 loans worth ` 162.69 Crores including ̀ 124.10 Crores (70790 loans) under Own portfolio and ` 38.60 Crores (17889 loans) under Managed Portfolio. Compared to previous year the number of loans disbursed grew by 29.97% and loan amount disbursed by 40.93%.

� GROWTH & EXPANSION during the year the company opened 37 new branches; 22 in Uttar Pradesh, 6 in Bihar, 8 in Haryana and 1 in Uttarakhand. The district wise details of branches are shown in the below table.

(No. of Branches)

Region 2015-16 2014-15Uttar Pradesh 67 45

Bihar 12 6

Haryana 9 1

Uttarakhand 1 0 � FINANCIAL PERFORMANCE HIGHLIGHTS

Debt Funding: during the year 2015-16, MFSL received a total of ` 130 Crore as debt funding (from banks and financial institutions) as compared to ` 56 crore in the previous year. This represents a growth of 132% as compared to previous year. 27.69% of funding came from banks and rest from other financial institutions.Financial Data:As on March 31, 2016, MFSL had total assets-own portfolio of ` 119.93 crore, an increase of 100.39% over the previous year. Outstanding borrowings stood at 137.93 crore as on March 31, 2016, up by 109.04% from previous year. Net Worth of the company increased to ` 21.93 crore from ` 19.40 crore in the previous year showing a growth of 13.02%. Capital to risk Adequacy ratio of the company is 15.55% as against the rBI requirement of 15% for systemically important NBFCs.

05� CHANGE IN THE NATURE OF BUSINESS, IF ANY



There has been no change in the nature of business of the Company. The company provides loans for income generation to rural and urban producers comprising of livelihood financial services, namely micro credit distribution to rural customers mostly unreached by the formal banking system with the main purpose of promoting sustainable livelihoods. The company does not provide any savings services as it does not take any deposits.

06� MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR OF THE COMPANY TO WHICH THE FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORTThere were no material changes affecting the financial position of the Company, between the end of the financial year and the date of the report.

07� DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY’S OPERATIONS IN FUTURE- No orders were passed by any regulators, courts or tribunals, impacting thee going concern status and Company’s operations in future.

08� DETAILS OF SUBSIDIARY/JOINT VENTURES/ASSOCIATE COMPANIESThe Company does not have any Subsidiary/ Joint ventures or Associate Companies.

09� DEPOSITSBeing a NBFC-Nd, the Company does not accept public deposits and has not accepted Public deposits till date.

10� STATUTORY AUDITORSIn the Annual General Meeting of the Company held in August, 2014 , the auditors Umesh K. Agrawal & Co., Chartered Accountants, were appointed for a Five year term under section 139 of the Companies Act, 2013, to hold office till the conclusion of the AGM in the year 2019. Their appointment is subject to ratification by members at every ensuing Annual General Meeting, till 2019.The Board recommends the ratification of the appointment of statutory auditors for the Fy 2015-16.

The company has complied with rBI circular on Corporate Governance directions, dated July 1, 2015 directions to rotate the partner/s of the Chartered Accountant Firm conducting the audit, every three years.

11� AUDITORS’ REPORTThe Auditors’ report for the Financial year ended 31st March 2016 is placed before the members as a part of the Annual report of the Company. No qualification, reservation or adverse remark has been made by the Auditors in their report.

12� SHARE CAPITAL � ISSUE OF EQUITY SHARES WITH

DIFFERENTIAL RIGHTS: No issue of equity shares with differential voting rights was made during the year.

� ISSUE OF SWEAT EQUITY SHARES:No sweat equity shares were issued by the Company during the year.

� ISSUE OF EMPLOYEE STOCK OPTIONS: during the year, the Company has issued 12,00,000 equity shares on 30th September, 2015 and 3,00,000 equity shares on 31st March, 2016 to Margdarshak employee Welfare Trust. The objective was to enhance the employee engagement, to reward the employees for their association and performance as well as to motivate them to contribute to the growth and profitability of the Company and to create a sense of ownership and participation amongst them. No options have been granted under the scheme till the date of this report.

13� EXTRACT OF THE ANNUAL RETURNThe extract of the Annual return in form MGT-9 is enclosed.

14� CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

� A� CONSERVATION OF ENERGYThe Company’s operation involves low energy consumption and there are no major areas where energy conservation measures could be taken. However, efforts to conserve and optimize the use of energy through improved operational methods and other means will continue.



� B� TECHNOLOGY ABSORPTIONThe organization has implemented android based mobile application for the CGT, GrT, Collection and disbursement module, which facilitates data entry by field staff on the real time basis. In this way, the most time consuming aspects of recording client repayments, disbursements and client on-boarding have been migrated to mobile modules The successful integration of mobile modules in the software, have enabled availability of real-time information related to collections, disbursements and outstanding / overdue with the central monitoring office. This has also reduced the Hr requirements and increased information management efficiencies in the organisation. The impact of OPeX is yet to be measured but it is expected that over a period of next 2 years the OPeX will reduce by ½% while increasing the operational efficiencies at the same time.

� C� FOREIGN EXCHANGE EARNINGS AND OUTGOThere were no foreign exchange earnings and outgo during the Financial year 2015-16

15� DIRECTORS � A� CHANGES IN DIRECTORS AND KEY

MANAGERIAL PERSONNELThere were change in the Board of directors during the year. SIdBI had appointed Mr. Bhanu Prakash Verma, as the Nominee director of the company with effect from 3rd of November, 2015, in place of Mr. Vivek Kumar Malhotra.There were no change in Key Managerial Personnel.

� B� DECLARATION BY AN INDEPENDENT DIRECTOR(S) AND RE- APPOINTMENT, IF ANYThe declaration of independence received from Independent directors is enclosed herewith.

� C� RETIREMENT BY ROTATIONUnder the provisions of subsection 6 of section 152 of the Companies Act, 2013, one-third of the directors being liable to retire by rotation, shall retire every year at the Annual General meeting. Presently there are 8 directors on Board of the Company, including 3 independent directors and 2 Nominee directors. Since Independent directors and Nominee directors are not liable for rotation, 3 directors of the Company Mr. rahul J. Mitta, Ms. Saroj Mittra and Mr. Arupjyoti rai Baruah were liable to retire. Mr. Arupjyoti rai Baruah, being longest in office, is retiring by rotation at the Annual General Meeting, and being eligible, has offered himself for reappointment.The Board recommends his re-appointment by the members at the Annual General meeting.

16� NUMBER OF MEETINGS OF THE BOARD OF DIRECTORSThe Board of directors of the Company met 4 times during the year on 11th June, 2015, 28th July 2015, 26th November, 2015 and 15th March, 2016.

17� AUDIT COMMITTEEThere was no change in the composition of the Audit Committee of the Company, during the year. The current composition of the Audit Committee is as below:

Name DesignationMr. K. Prasad Chairman

Ms.Maitrayee Banerjee Member

Ms. Saroj Mittra Member

18� DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES A whistle blower policy has been implemented which allows the directors and employees to report to the Management/Chairperson of the Audit Committee instances of unethical behaviour, actual or suspected, fraud or violation of the company’s Code of Conduct or ethics Policy. This policy would also help to create an environment where individuals feel free and secure to raise the alarm where they see a problem. It will also ensure that whistle blowers are protected from retribution, whether within or outside the organisation. The policy can be viewed on the website of the Company.



The Company also has a Staff Grievance redressal and a Client Grievance redressal System in place through which the employees and clients of the Company can submit their complaints and grievances through dedicated e-mail ids or by phone to the Management. Ms. Saroj Mittra, Whole Time director, was designated as the Grievance redressal Officer of the Company.The Board has also framed a Policy against Sexual Harassment of Women at Workplace which allows women employees to report concerns about or connected to any act or behavior of sexual harassment. The Company has also constituted a Internal Complaints Committee for redressal of complaints on Sexual Harassment.

19� NOMINATION AND REMUNERATION COMMITTEE The composition of the Nomination and remuneration Committee is as below: ,

Name DesignationMr. K. Prasad Chairman

Ms.Maitrayee Banerjee Member

Mr. d.P.S rathore Member

20� PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 There were no loans, guarantees or investments given under section 186 of the Companies Act, 2013.

21� PARTICULARS OF CONTRACTS OR ARRANGMENTS WITH RELATED PARTIES details of transactions with related parties is disclosed in Form AOC-2 annexed hereto.

22� MANAGERIAL REMUNERATIONThere were no change in remuneration of Key Managerial Personnel during the year 2015-16.

23� REMUNERATION TO OTHER DIRECTORS There were no change in sitting fees of other directors during the year 2015-16.

24� RISK MANAGEMENTThe Company has a three-tier risk Management function with a Board risk Management Committee, a Management risk Committee and a risk Officer. The risk department manages risks within the organization. It monitors Strategic and reputational risk, Credit risk, Liquidity risk, Operational risk, and Market risk against pre-defined risk tolerance limits and risk management framework set by the Board.

� CREDIT RISK: The company has documented guidelines for loan processes which are part of credit policy and operations manual. These include group formation, verification of authenticity of clients identity, client training, obtaining loan application and KyC documents from clients and perform credit bureau check on all loan applications received.

� MARKET RISK:The company has little exposure to market risk considering no exposure to foreign exchange transactions.

� LIQUIDITY RISK: The company assesses its liquidity position on a fortnightly basis through cash flow analysis.

� INTEREST RATE RISK: The company is exposed to Interest rate risk as lenders particularly banks link their interest rates to their base rate. We are in the process of evolving policies , guidelines and reports to monitor interest rates risks to periodically check whether these are in line with its projections as the funds raised at lower rate are likely to be replaced by higher cost of funds in the future.

� OPERATIONAL RISK: The company has reasonable system of internal control and the internal audit is outsourced. The company has well documented policies related to credit , operations, internal audit, Hr. Monitoring is carried out regularly by senior officers. The company tracks the economic progress of its clients using PPI tool in every cycle.

25� DIRECTORS’ RESPONSIBILITY STATEMENT The Board of directors states 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) the Board of directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and 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 this Act 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; and

(e) proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

26� ACKNOWLEDGEMENTSWe thank our clients, investors, lenders and regulators for their consistent support in helping us achieve our business and social goals. The Board of directors also places on record their appreciation for the contribution made by our employees in the sustainability and growth of the organization.

Place: LucknowDate: 26/07/2016

For and on behalf of the Board of Directors

Sd/- Sd/-Rahul J Mittra Saroj Mittra(Managing Director) (Whole Time Director)


ANNeXUreS | 13

ANNEXURES

FORM NO� MGT 9EXTRACT OF ANNUAL RETURN

As on financial year ended on 31�03�2016Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12(1) of the Company (Management &

Administration) Rules, 2014�

I� REGISTRATION & OTHER DETAILS:1 CIN U65921UP1996PLCO19924

2 registration date

3 Name of the Company MArGdArSHAK FINANCIAL SerVICeS LIMITed

4 Category/Sub-category of the Company

5 Address of the registered office & contact details

118 dAyAL FArMS GANeSHPUr, reHMANPUr, CHINNAT-deVA rOAd, LUCKNOW-226019

6 Whether listed company NO

7 Name, Address & contact details of the registrar & Transfer Agent, if any.

NOT APPLICABLe

II� PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY(All the business activities contributing 10 % or more of the total turnover of the company shall be stated)

S. No. Name and description of main products / services

NIC Code of the Product/service

% to total turnover of the company

1 NBFC dIVISION 65 100

2

3

III� PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIESSN Name and address of

the CompanyCIN/GLN Holding/ Subsidiary/

Associate% of shares held

Applicable Section

1 NOT APPLICABLe

2

3

IV� SHARE HOLDING PATTERN (equity share capital breakup as percentage of total equity)(i) Category-wise Share Holding

Category of Shareholders

No� of Shares held at the beginning of the year [As on 31-March-2015]

No� of Shares held at the end of the year [As on 31-March-2016]

% Change during

the year

Demat Physical Total % of Total Shares Demat Physical Total

% of Total

SharesA� Promoters (1) Indiana) Individual/ HUF 1,241,645 9.12% 1,635,219 10.78% 31.70%b) Central Govt - 0.00% - 0.00% 0.00%c) State Govt(s) - 0.00% - 0.00% 0.00%

ANNeXUreS | 14


Category of Shareholders

No� of Shares held at the beginning of the year [As on 31-March-2015]

No� of Shares held at the end of the year [As on 31-March-2016]

% Change during

the year

Demat Physical Total % of Total Shares Demat Physical Total

% of Total

Sharesd) Bodies Corp. 1,800,000 13.23% 2,502,811 16.50% 39.04%e) Banks / FI - 0.00% - 0.00% 0.00%f) Any other 0.00% 0.00% 0.00%Sub Total (A) (1) - - 3,041,645 22.35% - - 4,138,030 27.28% 70.74% (2) Foreigna) NrI Individuals - 0.00% - 0.00% 0.00%b) Other Individuals - 0.00% - 0.00% 0.00%c) Bodies Corp. 0.00% - 0.00% 0.00%d) Any other - 0.00% - 0.00% 0.00%Sub Total (A) (2) - - - 0.00% - - - 0.00% 0.00%TOTAL (A) - - 3,041,645 22�35% - - 4,138,030 27�28% 70�74% B� Public Shareholding1� Institutionsa) Mutual Funds - 0.00% - 0.00% 0.00%b) Banks / FI 2,550,000 18.74% 2,550,000 16.82% 0.00%c) Central Govt - 0.00% - 0.00% 0.00%d) State Govt(s) - 0.00% - 0.00% 0.00%e) Venture Capital Funds

- 0.00% - 0.00% 0.00%

f) Insurance Companies - 0.00% - 0.00% 0.00%g) FIIs - 0.00% - 0.00% 0.00% h) Foreign Venture Capital Funds

- 0.00% - 0.00% 0.00%

i) Others (downstream foreign investment)

6,269,176 46.07% 6,269,176 41.34% 0.00%

Sub-total (B)(1):- - - 8,819,176 64.81% - - 8,819,176 58.16% 0.00% 2� Non-Institutionsa) Bodies Corp.i) Indian - 0.00% - 0.00% 0.00%ii) Overseas - 0.00% - 0.00% 0.00%b) Individualsi) Individual shareholders holding nominal share capital upto ` 1 lakh

- 0.00% 140,562 0.93% 0.00%

ii) Individual shareholders holding nominal share capital in excess of ` 1 lakh

898,515 6.60% 1,067,190 7.97% 34.42%

c) Others (specify)Non resident Indians - 0.00% - 0.00% 0.00%Overseas Corporate Bodies

- 0.00% - 0.00% 0.00%

Foreign Nationals - 0.00% - 0.00% 0.00%Clearing Members - 0.00% - 0.00% 0.00%Trusts 850,000 6.25% 1000000 6.59% 0.00%Foreign Bodies - d r - 0.00% - 0.00% 0.00%Sub-total (B)(2):- - - 1,748,515 12�85% - - 2,207,752 14�56% 26�26%Total Public (B) - - 10,567,691 77�66% - - 11,026,928 72�72% 4�35%C� Shares held by Custodian for GDRs & ADRs

- 0�00% 0�00% 0�00%

Grand Total (A+B+C) - - 13,609,336 100�00% - - 15,164,958 100�00% 75�09%


ANNeXUreS | 15

(ii) Shareholding of Promoter

SN Shareholder’s Name

Shareholding at the beginning of the year

Shareholding at the end of the year

% change in shareholding

during the year

No. of Shares

% of total Shares of the company

% of Shares Pledged/ encumbered to total shares

No. of Shares

% of total Shares of the company

% of Shares Pledged / encumbered to total shares

1 rAHUL J. MITTrA

773,025 5.68% 1040093 6.86% 34.55%

2 ArUP BArUAH 468,620 3.44% 595126 3.92% 26.99%3 MdPC 1,800,000 13.23% 2502811 16.50% 39.04%

(iii) Change in Promoters’ Shareholding (please specify, if there is no change)

SN Particulars Date ReasonShareholding at the

beginning of the year

Cumulative Shareholding

during the yearNo. of shares

% of total

shares

No. of shares

% of total

shares

At the beginning of the year 01/04/2015 3,041,645 22.35% 0.00%

Changes during the year 30/09/2015 Allot 1,096,385 4.93% 0.00%

0.00% 0.00%

0.00% 0.00%

At the end of the year 31/03/2016 4,138,030 27.28% 0.00%(iv) Shareholding Pattern of top ten Shareholders(Other than Directors, Promoters and Holders of GDRs and ADRs):

SN For each of the Top 10 shareholders Date Reason


Cumulative Shareholding during

the year

No� of shares % of total shares

No� of shares

% of total shares

1 dIA VIKAS

At the beginning of the year

6,269,176 46.07% 0.00%

Changes during the year

Allot - 0.00%

At the end of the year

6,269,176 41.34% 0.00%

2 SIdBI


2,550,000 18.74% 0.00%

Changes during the year

Allot - 0.00%


2,550,000 16.82%

3 SOMAK GHOSH


-

change during the year

30/09/2015 Transfer 205,592


205,592 1.36%

ANNeXUreS | 16


SN For each of the Top 10 shareholders Date Reason



the year

No� of shares % of total shares

No� of shares

% of total shares

4 SAMIr SHAH


-


30/09/2015 Allot 2,05,592


2,05,592 1.36%

5 GUrMeeT SINGH ANANd


77,645 0.57%


30/09/2015 Allot 70281 0.41%


147926 0.98%

6 SANdeeP SrIVASTVA


77,645 0.57%

Change during the year

Transfer (-)45894

30/09/2015 Allot 70,281


102032 0.67%

7 ANOOP MITTrA


155,000 1.14%


Allot -


155,000 1.02%

8 SANTOSH KULSHreSHTHA


-

Change during the year

30/09/2015 Allot 70281


70281 0.46% 0.00%

9 AMIT SINGH


95,000 0.70%


Transfer (-)95000

30/09/2015 Allot 70281


70281 0.46%


ANNeXUreS | 17

(v) Shareholding of Directors and Key Managerial Personnel:

SNShareholding of each

Directors and each Key Managerial Personnel

Date Reason



the yearNo� of shares

% of total shares

No� of shares

% of total shares

1 rAHUL J MITTrA


773,025 5.68% 0.00%

Changes during the year 267,068 1.18% 0.00%

At the end of the year 1,040,093 6.86% 0.00%

2 ArUP BArUAH


468,620 3.44% 0.00%

Changes during the year 126,506 0.48% 0.00%

At the end of the year 595,126 3.92% 0.00%

3 SArOJ MITTrA


222,935 1.64%

Changes during the year 28,113 0.02%

At the end of the year 251,048 1.66% 0.00%

V� INDEBTEDNESSIndebtedness of the Company including interest outstanding/accrued but not due for payment. (Amt. `/Lacs)

Particulars Secured Loans excluding deposits

Unsecured Loans Deposits Total

IndebtednessIndebtedness at the beginning of the financial yeari) Principal Amount 6,438.00 160.00 6,598.00

ii) Interest due but not paid - - -

iii) Interest accrued but not due 40.56 - 40.56

Total (i+ii+iii) 6,478�56 160�00 - 6,638�56Change in Indebtedness during the financial year* Addition 13,000.00 - 13,000.00

* reduction 5,645.26 160.00 5,805.26

Net Change 7,354.74 160.00 - 18,805.26

Indebtedness at the end of the financial yeari) Principal Amount 13,792.74 - 13,792.74

ii) Interest due but not paid -

iii) Interest accrued but not due 83.07 83.07

Total (i+ii+iii) 13,875�81 - - 13,875�81

ANNeXUreS | 18


VI� REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNELA� Remuneration to Managing Director, Whole-time Directors and/or Manager:

SN� Particulars of Remuneration Name of MD/WTD/ Manager Total Amount

Name RAHUL J MITTRA SAROJ MITTRA (`/Lac) Designation Managing Director WTD

1 Gross salary

(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961

1,020,000.00 600,000.00 1,620,000.00

(b) Value of perquisites u/s 17(2) Income-tax Act, 1961

515,360.00 236,360.00 192,000.00

(c) Profits in lieu of salary under section 17(3) Income- tax Act, 1961

-

2 Stock Option -

3 Sweat equity -

4 Commission -

- as % of profit -

- others, specify -

5 Others, please specify -

Total (A) 1,535,360.00 836,360.00 1,812,000.00

Ceiling as per the Act B� Remuneration to other Directors

SN� Particulars of Remuneration Name of Directors

Total Amount (`/Lac)

1 Independent directors K.PrASAd dPS rATHOre

SANNeeSH SINGH

MAITrAyee BANerJee

Fee for attending board/ committee meetings

33,345.00 47,520.00 13,500.00 26,955.00 121,320.00

Commission -

Others, please specify -

Total (1) 33,345.00 47,520.00 13,500.00 26,955.00 121,320.00

2 Other Non-executive directors

-

Fee for attending board committee meetings

-

Commission -

Others, please specify -

Total (2) - - - -

Total (B)=(1+2) 33,345.00 47,520.00 13,500.00 26,955.00 121,320.00

Total Managerial remuneration

1,933,320.00

Overall Ceiling as per the Act


ANNeXUreS | 19

C� Remuneration to Key Managerial Personnel other than MD/Manager/WTD

SN� Particulars of Remuneration Name of Key Managerial Personnel Total Amount

Name ANCHIT PANdey

(`/Lac)

designation CeO CFO CS

1 Gross salary 396000

(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961

-

(b) Value of perquisites u/s 17(2) Income-tax Act, 1961

-

(c) Profits in lieu of salary under section 17(3) Income- tax Act, 1961

-

2 Stock Option -

3 Sweat equity -

4 Commission

- as % of profit -

- others, specify -

5 Others, please specify -

Total - - 396,000.00 -

VII� PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES:

Type Section of the Companies

Act

Brief description

details of Penalty / Punishment/

Compounding fees imposed

Authority [rd / NCLT/

COUrT]

Appeal made, if any (give

details)

A. COMPANy

Penalty

Punishment

Compounding

B. dIreCTOrS

Penalty

Punishment

Compounding

C. OTHer OFFICerS IN deFAULT

Penalty

Punishment

Compounding

Date: 26/07/2016Place: Lucknow For Margdarshak Financial Services Limited

Sd/- Sd/-

rahul J Mittra Saroj Mittra

(Managing director) (Whole Time director)

ANNeXUreS | 20


FORM NO� AOC -2(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies

(Accounts) Rules, 2014�Form for disclosure of particulars of contracts/arrangements entered into by the company with related parties referred to in sub section (1) of section 188 of the Companies Act, 2013 including certain arms length transaction under third proviso thereto.1. Details of contracts or arrangements or transactions not at Arm’s length basis– Not Applicable

SL� No� Particulars Detailsa) Name (s) of the related party & nature of relationship

b) Nature of contracts/arrangements/transaction

c) duration of the contracts/arrangements/transaction

d) Salient terms of the contracts or arrangements or transaction including the value, if any

e) Justification for entering into such contracts or arrangements or transactions’

f) date of approval by the Board

g) Amount paid as advances, if any

h) date on which the special resolution was passed in General meeting as required under first proviso to section 188

2. Details of contracts or arrangements or transactions at Arm’s length basis. A)

SL� No� Particulars Details1 Name (s) of the related party & nature of relationship diaVikas Capital Pvt. Ltd./ Shareholder

2 Nature of contracts/arrangements/transaction equity Arrangement

3 duration of the contracts/arrangements/transaction ______

4 Salient terms of the contracts or arrangements or transaction including the value, if any

equity of `.62,691,760

5 date of approval by the Board 28/09/2012

6 Amount paid as advances, if any 0B)

SL� No� Particulars Details1 Name (s) of the related party & nature of relationship SIdBI/ Shareholder

2 Nature of contracts/arrangements/transaction equity and OCPS

3 duration of the contracts/arrangements/transaction _________

4 Salient terms of the contracts or arrangements or transaction including the value, if any

equity amounting to `.25,50,000 with percentage of holding 16.82% and Optionally Convertible Preference Shares of ` 10 each fully paid amounting to ` 24,50,000


6 Amount paid as advances, if any 0C)

SL� No� Particulars Details1 Name (s) of the related party & nature of relationship Margdarshak employee Welfar Trust/

Shareholder

2 Nature of contracts/arrangements/transaction Unsecured Loan

3 duration of the contracts/arrangements/transaction Not Specified


ANNeXUreS | 21

SL� No� Particulars Details4 Salient terms of the contracts or arrangements or

transaction including the value, if anyInterest free Loan of `.85,00,000 given to employee Welfare Trust for the purpose of subscribing to shares issued under employee Stock option scheme during previous year, and new transaction during the year of `.15,00,000


6 Amount paid as advances, if any 0

Date: 26/07/2016Place: Lucknow For Margdarshak Financial Services Limited

Sd/- Sd/-

rahul J Mittra Saroj Mittra

(Managing director) (Whole Time director)

MANAGeMeNT’S dISCUSSION ANd ANALySIS | 22


MANAGEMENT’S DISCUSSION AND ANALYSIS

OVERVIEWMicro finance is being recognized as a key strategy for addressing issues of poverty alleviation by providing access to credit and financial services needed to develop income earning businesses. Access to financial services enables the poor to build assets, increase incomes and reduce the vulnerability to economic stress. By reducing vulnerability and increasing earnings and savings, financial services allow poor households to make the transformation from ‘every-day-survival’ to planning for the future. As of March 31st, 2016, there are over 56 NBFC-MFI’s operating in India. The gross loan portfolio of all MFI’s stood at ̀ 53,223 crore which is growth of 84% over Fy 2014-15. Off balance sheet portfolio is ` 11,313 crore, 21% of the aggregate GLP. Share of off- balance sheet portfolio in the gross portfolio has increased from 11% last year to 21% this year. As of 31st March, 2016, MFIs provided microcredit to 3.25 crore (aggregate of clients of member MFIs) clients, an increase of 44% over Fy 14-15. The NBFC-MFI’s have a branch network of over 9,669 branches spread across states of India and employee around 85,888 persons. Currently, average loan outstanding per client is at ` 16,394 which is 28% more than last Fy 14-15. The MFI’s continue to maintain their portfolio quality with PAr 30 being less than 1%.Margdarshak has been making conscious strategies to develop various loan facilities for women. Presently about 70% of our client hail from rural areas and 100% of them are women. The Company has rolled out multiple products to cater to the diversified demands of its clients, over and above the non-financial services that are offered. Majority of the clientele is comprised of people at the bottom of the pyramid who have no access to formal banking system.Financial year 2015-16, was a year of growth at Margdarshak, highlighted by growth in terms of portfolio, branches, clients, and disbursement. Margdarshak now operates in UP, Bihar, Haryana and Uttarakhand, UP and Bihar being the largest states in the country in terms of population. The districts in which the organization is operating, span the length and breadth of the state. The mix of districts allows the company to provide financial services in rural, semi-urban and urban areas. The mix is a deliberate choice of the organization taking into consideration that the underlying objective of all our interventions is to

strengthen the livelihood of the poor and all these districts show tremendous need for strengthening the existing livelihood bases. The spread and composition of the branches allows Margdarshak to work with wide range of clients whose primary sources of livelihood range from agriculture, allied activities, artisanal work, petty trading and services etc.

FINANCIAL PRODUCTSAll loans mentioned below are given as per rBI guidelines at an interest rate as applicable from time to time.

INCOME GENERATION LOANA popular loan product offered to small scale entrepreneurs who look for building assets or infusing working capital. It is given for a period of 1-2 years and can be used for income generation activities such as livestock, vegetable vending, family enterprises, artisans etc. The loan amount is ` 15000-50000 and is in multiples of ` 5000.

SECONDARY LOAN The secondary loan is given for existing purpose as a top up to the existing loan. 25% of the loan is allowed to be used for consumption or health purpose. The loan amount ranges from ` 10,000 to ` 20,000 and is in multiples of ` 5000.educational Loan:educational loan of ` 5000/- is given to existing clients or purchase of books or for payment of tution fees.

CLEAN ENERGY /PRODUCT LOAN In their pursuit for a sustainable life the poor are unintentionally forced to contribute to the degradation of the environment. Margdarshak always strives to build awareness on environmental protection and climate change among the staff, customers and other stakeholders. We encourage them to adopt environment- friendly lifestyle and provide them access to clean energy and energy efficient products through appropriate financial services and training. The solar /clean energy loans as well as loan for purchase of mobile/cycle are given to existing clients and is co-terminus with the existing loan.

OPERATIONAL PERFORMANCE:The operations of the company spread across 42 districts in 4 states- Uttar Pradesh, Bihar, Haryana and Uttarakhand. during the year 2015-16, the company extended its operations to Uttarakhand



and opened 37 new branches; 22 in Uttar Pradesh, 6 in Bihar, 8 in Haryana and 1 in Uttrakhand taking the total number of branches to 89. The state wise number of branches is shown in the table below: (No� of Branches)

State March 15 March 16Uttar Pradesh 45 67

Bihar 6 12

Haryana 1 9

Uttarakhand 0 1

Total 52 89The Gross Loan Portfolio stood at ` 170.86 crore as compared to ` 104.16 crore on March 31, 2015, a growth of 64%. Managed portfolio was 30% of the total portfolio amounting to ` 50.94 crore a growth of 15% over previous year. The Portfolio at risk (PAr) stood at 0.35%. About 76% of portfolio was in Uttar Pradesh, 20% in Bihar and 4% in Haryana.during 2015-2016, Margdarshak disbursed loans worth ` 162.69 crore including `.124 crores under own portfolio and `.38.69 crore under Managed Portfolio (overall growth of 41%). The company registered positive growth across all indicators. The clients grew by 62% to reach at 133847 on March 31, 2016 from 82670 on March 31, 2015, branches by 71% taking the count to 89 from 52 and employees by 93% taking total strength to 487 from 252 on March 31, 2015. (Snapshot as on March 31, 2016)

Particulars March 15

March 16

YOY Growth

districts 36 42 17%

Branches 52 89 71%

Groups 8417 13290 58%

Borrowers 82670 133847 62%

Loan Officers 155 288 86%

Staff 252 487 93%

disbursement during the year

115.44 162.69 41%

GLP 104.16 170.86 64%

FINANCIAL PERFORMANCE Particulars March 2015 March 2016

Total Assets 90.92 166.43

Borrowings 65.97 137.92

Total revenue 13.99 30.45

Profit After Tax 1.05 2.42

HUMAN RESOURCE MANAGEMENTA well-structured and comprehensive human resource management policy is a necessity for

effective management of MFIs, given the service orientation and distributed nature of microfinance institutions and the volume of staff-client interactions on the field. Margdarshak, therefore, encourages amongst it staff- professionalism- provide financial services through efficient systems and qualified staff and humility- to understand and respect our clients in our efforts to provide quality services. As on March 31, 2016, the total number of staff stood at 487 out of which 288 were field officers. Out of 487 employees, 51 employees were female and 436 were male.

RECRUITMENT:Institutions are successful because of their people – both past and present. Critical to our future success is the quality of the people our organisation can attract, recruit and retain. recruiting the right person has tremendous benefits. The right person is someone who is well matched to the job tasks and our institution’s values and goals. If a person is a “good fit”, they will demonstrate high levels of initiative; they will be productive and likely to stay longer with our organisation.The employees are hired on the basis of qualifications for the position, without regard to race, religion, age, state origin, gender, disability, marital status, or any other characteristic that may be protected by law. Selection for employment is solely contingent upon the individual’s ability to meet the qualifications as defined in the position description, and ability to perform in a satisfactory manner.The positions are normally advertised through leading newspapers/local newspaper/job sites etc. Opportunities are also given to our clients/group members by sending them vacancy details through SMS. during the year 304 employees were recruited for different positions.

TRAINING AND DEVELOPMENTMargdarshak is committed to creating a continuous learning culture within the institution, since it will have to depend on a highly trained, adaptable and effective work force to meet its challenges and overall goals and mandate of the organisation. The company has a team of trainers who conduct structured training programmes on mission and vision, code of conduct/ fair practice code, policies and processes, risk management and client engagement. A total of 56 training programmes were conducted during the year.

NEW BUSINESS INITIATIVES BC AGREEMENT WITH IDBI BANKduring the year Margdarshak entered into BC partnership with IdBI Bank for 6 districts in Uttar Pradesh and 4 districts in Haryana. The partnership will bring together the capacities of IdBI Bank and Margdarshak in providing financial



services to the JLG members.

SERVICE PROVIDER AGREEMENT WITH RELIANCE CAPITALreliance Capital appointed Margdarshak as their service provider in 8 districts of UP for providing mf loans to JLG members. As a service provider Margdarshak will be able to provide mf services to JLG members on behalf of reliance Capital.

NEED ASSESSMENT FOR AFFORDABLE HOUSING LOANSLooking at the lack of appropriate housing in the state, Margdarshak undertook a market assessment on demand for un-secured and secured housing loans amongst its members in the states of UP and Bihar. The market research conducted in collaboration with AFHTAC will enable Margdarshak in designing and delivering house improvement, sanitation and housing loans to its members.

MARKET ASSESSMENT FOR E-RICKSHAW LOANSIn continuation with its objectives of improving environmental conditions & reducing the manual drudgery of the rickshaw pullers, Margdarshak has conducted a market assessment for encouraging adaption of e-rickshaws. The market assessment will enable the organisation in moving towards strengthening its portfolio of providing credit for clean energy products.

TECHNOLOGY FOR SUSTAINABLE GROWTHMargdarshak uses web-based integrated software for information management. The software integrates operations management, accounting and Hr management. The software enables the organisation in monitoring the business quality, volume and performance at various hierchial levels. Mobile application is the front end replica of the software primarily for capturing data of the client by the field staff and for maintaining 100% real time data. The mobile application enables in speeding up of scalability of micro finance

operations and adds value to the existing system by providing an efficient and cost effective solution. Margdarshak has also migrated towards digitizing the entire life cycle of the loan process, aiming to become a paperless organization, starting from client onboarding to final disbursement and client maintenance.

SOCIAL IMPACTMargdarshak has created social metrics to track its achievements against social targets set out by the organisation. during the year, the organisation worked on developing a social dashboard for reporting to stakeholders. The organisation has also started using the social data for strategic decision making and for launch of new product viz. mobile loans, supports loans etc.The Social Performance Management framework of Margdarshak aims at designing the operational systems and delivery of services. Meeting the needs of target clients leads to the desired changes relating to the social mission.The organisation is providing opportunities for expanding sources of income and livelihood. 99% of the clients of the organisation are women and amongst them nearly 40% are from the minority communities. Large number of beneficiaries of the organisation, they are dependent upon solitary sources of livelihood like agriculture, animal husbandry, petty trading, home based micro enterprises or handicraft work. The organisation uses PPI tool to understand the social economic condition of the beneficiaries The average PPI score of the organisation is 37.05, which reflects that the organisation is presently reaching out to households which are just above poor. Since the organisation is maintaining 85% client retention rate, it is assumed in the next 2-3 years these borrowers will be moving towards being non-poor.


JOUrNey OF CLIeNTS WITH MArGdArSHAK | 25

JOURNEY OF CLIENTS WITH MARGDARSHAK

CASE STORY 1

I am Shivani devi, 25 years old, a resident of Madhubani, Bihar. Chandan, my husband, is disabled and I have two sons named Anmol and Pratik who are 6 and 4 years old respectively. Until 3 years ago my family was facing huge economic crisis as my father-in-law who was primarily supporting our family passed away and my children were too small to let me work for long hours. With the guidance of women who had availed loan through microfinance program of Margdarshak, I started dreaming of running my own business. By raising micro-finance from Margdarshak Financial Services and by availing some small loans from relatives, I was able to set up a general store from my home itself which my husband and I both manage together quite successfully with the grace of God. Assisted by another 9 responsible women in my group we are able to demonstrate our good repayment cycle in the last 3 years and therefore qualify each time for higher loan amounts from Margdarshak. I had availed `.10,000 as loan in the first year, ` 15,000 in the second year and this year I have taken yet another loan of `.25,000 from Margadarshak to expand our business. It has helped me tremendously both financially and socially as I am able to meet the expenses of my house and live a respectable life. I am paying a monthly installment of `.1695 and the rate of interest is much lower than the prevailing market rates. I had to give my Aadhar card copy, ration card copy and photo on the basis of which the loan got approved and in less than a month’s time with no hurdles. My husband is very much satisfied with my decision and my children go to private school getting good education which we could never imagine for ourselves previously. My family is quite thankful to Margdarshak for providing us much needed support at the right time.

CASE STORY 2

My name is Beena yadav and I live in Nishatganj, Lucknow with my family which includes my husband who is 58, my two sons (26 and 14 years) and two daughters (23 and 21 years old). I had started a tiffin business in 2005 with my husband as he had to leave his scooter repair business due to ill health and my children were studying then. My business was facing acute financial challenges due to high interest rates on loans from market until in 2008 when I took loan from Margdarshak. I have been taking loans regularly from them since and have currently availed `.15000 loan which is due to retire next month. There are 10 women in my group and we now follow a monthly repayment mode revised from weekly and then fortnightly but is the easiest mode now. We have expanded our Tiffin Service business currently to 40 tiffins a day supply; 20 each in the morning and evening. My daughters help in chopping the vegetables and I cook the food which my husband delivers in tiffins. Now we are able to earn ` 20000-25000 p.m. My eldest son is on his own feet working with Health India (NGO) and is able to provide support to the family when needed. My daughters have become graduates and one is undergoing training in computer course and the other in tailoring so that she can start her own boutique. The youngest son is studying in class six. The business helped me in shaping the career of my children and in leading a dignified life. I am thankful to Margdarshak for helping us to achieve this economic prosperity without falling in the trap of high interest rates. With minimum paper work of signing loan documents and with the mutual guarantee in the group we are able to get best service and hassle free loans.

COrPOrATe GOVerNANCe rePOrT | 26


CORPORATE GOVERNANCE REPORT

“Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.” -the company’s philosophy on

Corporate Governanceeffective corporate governance practices constitute the strong foundations on which successful commercial enterprises are built to last. The Company’s philosophy on corporate governance oversees strategies and ensures fiscal accountability, ethical corporate behavior and fairness to all stakeholders comprising regulators, employees, customers, vendors and investors and the society at large.

Strong leadership and effective corporate governance practices have been the Company’s hallmark. The Company believes in adopting the ‘best practices’ that are followed in the area of corporate governance across various geographies. The Company has a strong legacy of fair, transparent and ethical governance practices. The Company has adopted a Code of Conduct for its employees.As on March 31st, 2016 our Board consists of 8 members, three of whom are executive/ Whole-Time directors, three are Independent directors and two are Nominee directors. Independent directors constitute 38% of Board’s strength. Two out of eight board members or 25% of Board are women. Any changes in the composition of the Board is subject to the approval of institutional investors, as a part of the reserved matters of the Investors under the shareholder’s agreement.

RESPONSIBILITIES OF CHAIRMAN, CEO & MANAGING DIRECTORThe company has appointed a non-executive Chairman of the Board –d.P.S. rathore and the CeO & Managing director - rahul J. Mittra. The Chairman is responsible for ensuring that the board provides effective governance to the company and ensure that the board works harmoniously for long term benefits of its company and stakeholders. The CeO is responsible for reviewing and recommending credit policies and ensuring that the implementation/operations of Margdarshak are carried out within the directions and guidelines provided by the reserve Bank of India (rBI) as well as other relevant regulators including the Insurance regulatory and development Authority (IrdA), registrar of Companies (roC) and MFIN(SrO).

ROLE OF THE BOARD OF DIRECTORSThe Board of directors act as a trustee of the company and its primary role is to provide strategic direction to the company. The board has a fiduciary responsibility to the lenders and investors to protect and increase shareholders’ value and the company’s growth.

BOARD MEMBERSHIP CRITERIA The nomination and remuneration committee works with the entire Board to determine the appropriate skills and experience required for the Board as a whole. Members are expected to possess the required qualifications and expertise in micro finance sectors / areas and ability to contribute to the Company’s growth. The age limit for a managing director / executive director is 60 years while the age limit for an independent director is 70 years. A director’s term may be extended at the discretion of the committee beyond the age of 60 or 70 years with shareholder approval by passing a special resolution based on the explanatory statement annexed to the Notice for such motion indicating the justification for extension of appointment beyond 60 or 70 years as the case may be. The Board members are expected to rigorously prepare for, attend and participate in all Board and applicable committee meetings. None of the directors on the Board is member of more than ten committees or Chairman of more than five committees across all the public companies in which s/he is a director. Necessary disclosures regarding committee positions in other public companies as on March 31, 2016 have been made by the directors.



The composition of the Board, and directorships held, as on March 31, 2016 are as follows:

Name of the direc-tor

Designation Age Commit-tee mem-bership

Chairper-son of

Commit-tees

Rahul J Mittra

Md & CeO 43 years

3

Arup Baruah

Whole Time director

47 years

-

Saroj Mittra

CFO & Whole Time director

43 years

3

D�P�S� Rathore

Chairman of the Board

66 years

4 2

K� Prasad Independent director

71 years

3 3

Maitrayee Banerjee

Independent director

64 years

2 -

Saneesh Singh

Nominee director

48 years

1 -

Bhanu Prakash Verma

Nominee director

48 years

-

BOARD MEETINGS The dates of Board meetings are decided in advance. The Company Secretary in consultation with the Md & CeO prepare the agenda and distribute it in advance to the directors. The Board meets at least once a quarter to review the quarterly results and other items on the agenda also on the occasion of the AGM. Additional meetings are held when necessary. Committees of the Board usually meet the day before the formal Board meeting, or whenever the need arises for transacting business. 4 Board meetings were held during the year ended March 31, 2016. These were held on 11th June, 2015, 28th July, 2015, 26th November, 2015 and 15th March, 2016. The names and their attendance at Board Meetings held on during the year is appended below:

Name of the direc-tor

Designation

No� of meet-ings held

No� of meet-ings

attend-ed

Per-cent-age

rahul J Mittra

Md & CeO 4 4 100%

Arup Baruah

Whole Time director

4 2 50%

Saroj Mittra

CFO & Whole Time director

4 4 100%

d.P.S. rathore

Chairman of the Board

4 4 100%

K.Prasad Independent director

4 4 100%

Maitrayee Banerjee

Independent director

4 4 100%

Saneesh Singh

Nominee director-dia Vikas

4 4 100%

Bhanu Prakash Verma

Nominee director-SIdBI

4 1 100%*

*Prior to appointment of Bhanu Prakash Verma, Mr. Vivek Malhotra was Nominee director (nominated by SIdBI) who had attended 3 out of 3 meetings held during his tenure.

BOARD COMMITTEESBoard committees are formed to help the board of directors conduct its business efficiently Committees also serve as training grounds for board members to take on position of increasing responsibility. Board committees are used to improve the quality and efficiency of the board by defining ways to address an issue that the board then considers in making a decision. Boards can assign considerable responsibility to committees; however, committees should never make a policy decision for the full board. For committees to be effective, their work, role, responsibilities, and mandates are clearly outlined.Currently the Board has 5 committees viz. Audit Committee, risk Management Committee, Hr & Compensation Management Committee, Asset Liability Management Committee and Nomination and remuneration Committee.

Name Audit Committee

Risk Management Committee

Asset Liability Management Committee

HR & Compensation Management Committee

Nomination and Remuneration

Committee

d.P.S rathore Member Chairperson Chairperson Member

K. Prasad Chairperson Chairperson Chairperson

Maitreyee Banerjee Member Member

rahul J Mittra Member Member Member

Arup Baruah

Saroj Topno Member Member Member

Saneesh Singh Member

Bhanu Prakash Verma



AUDIT COMMITTEE:Composition of the Audit Committee is in accordance with the section 177 of the Companies Act, 2013. during Fy 2015-16, the Audit Committee had following directors: � Mr. K Prasad, Chairman of the Committee � Ms. Maitrayee Banerjee, Independent director � Ms. Saroj Mittra, Whole-time director & CFO

The Company Secretary of the Company acts as a Secretary to the Committee.Four meetings of Audit Committee were held during the year on 11th June 2015, 27th July 2015, 25th November 2015 and 14th March 2016. The attendance of this committee is given below:

S�No DirectorsNo� of meetings held

No� of meetings attended

%

1. Mr. K Prasad 04 04 100%

2. Mr. dPS rathore 04 04 100%

3. Ms. Saroj Mittra 04 04 100%

The purpose of the Audit Committee is to oversee the company’s financial reporting process and disclosure of its financial information to ensure that financial statement is correct, sufficient and credible and reviewing with the management the annual financial statements before submission to the Board, focusing primarily on any changes in accounting policies and practices, major accounting entries based on exercise of judgment by management, qualifications in draft audit report, significant adjustments arising out of audit.

BOARD RISK MANAGEMENT COMMITTEEThe Board risk Management Committee has following members: � Mr. K. Prasad- Independent director & Chairman of the Committee

� dPS rathore –Independent director � Mr. Saneesh Singh- Nominee director � Mr. rahul J. Mittra- Managing director

Company Secretary of the Company acts as Secretary of the Committee.3 meetings of the Board risk Management Committee were held during the year on 27th July 2015, 25th November 2015 and 14th March 2016. The attendance of this committee is given below:

S�N Directors No� of meetings held


1. Mr. dPS rathore 03 03

2. Mr. rahul J. Mittra 03 03

3. Mr. Saneesh Singh 03 03

4. Mr. K.Prasad 03 03

The purpose of risk Management committee is

to review the risk identification and management process developed by management, to confirm it is consistent with the Company’s strategy and business plan in addition to ensuring that there are effective procedures and adequate resources to identify and mitigate credit risk; monitoring and evaluating all issues that may materially impact on the present and future quality of the loan portfolio and credit risk management along with setting the limits on lending exposure and specific actions for the PAr in line with the institution’s risk management programs and market

ASSET LIABILITY MANAGEMENT COMMITTEE:As on March 31, 2016, the Committee has following members: � Mr. dPS rathore–Independent director � Mr. rahul J. Mittra- Managing director � Ms. Saroj Mittra- Whole-time director � Mr. Gurmeet Singh Anand-AGM- Business Planning and development

Company Secretary of the Company acts as Secretary of the CommitteeALCO met 14 times during the year on 11.06.2015, 26.06.2015, 21.07.2015, 4.08.2015, 31.08.2015, 27.10.2015, 06.11.2015, 22.12.2015, 28.12.2015, 29.12.2015, 15.01.2015, 09.02.2016, 29.02.2016 and 10.03.2016.

S�N DirectorsNo� of meetings held


Percent-age

1. Mr. dPS rathore

14 9 64%

2. Ms. Saroj Mittra

14 14 100%

3. Mr. rahul J. Mittra

14 9 64%

4. Mr. Gurmeet Singh Anand

14 13 93%

The purpose of Asset Liability Management Committee is to provide an independent and objective oversight and review of the information raised by management at different levels along with monitoring limits on loans to deposit and loans to capital ratios as well as the percentage on a particular deposit category as set by the board and maximum percentage imbalance between rates and sensitive assets and liabilities as set by the board.

NOMINATION AND REMUNERATION COMMITTEEAs on March 31, 2016, the Committee has following members: � Mr. Kuchibhatla Prasad- Chairman, Independent director



� Mr. dPS rathore–Member, Independent director

� Ms. Maitrayee Banerjee- Member, Independent director

Company Secretary of the Company acts as Secretary of the Committee.NrC met 2 times during the year on 27.07.2015 and 14.03.2016.

S�N DirectorsNo� of meetings held


Percent-age

1. Mr. dPS rathore 02 02 100%

2. Mr. Kuchibhatla Prasad

02 02 100%

3. Ms. Maitrayee Banerjee

02 02 100%

The purpose of Nomination and remuneration Committee is to identify persons who are

qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board, their appointment and removal and shall carry out evaluation of every director’s performance and to formulate the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy, relating to the remuneration for the directors, key managerial personnel and other employees.

rISK MANAGeMeNT rePOrT | 30


RISK MANAGEMENT REPORT

risk Management has become a key area of focus for the MFIs, particularly in India, subsequent to the global financial crisis (2008-09) and the Andhra Pradesh microfinance crisis (2010). MFIs have realized that risk management can, in fact, create value. In addition, the pressure to have proper risk Management procedures in place has increased, given the attention that regulatory bodies have placed on such issues, as well as the introduction of stricter capital requirements. responding to the needs of the MFIs, IFC developed risk Assessment Framework to improve the overall approach of the MFIs towards risk management. IFC performed a Microfinance risk diagnostic to assess the risk management capabilities of Margdarshak Financial Services Ltd. and thereafter provided technical assistance through support of consultants from M2i for implementing the risk management framework. Margdarshak implemented the recommendations with the support of consultants from M2i during the period from July 2014 to June 2015. As part of implementation support, the consultants helped Margdarshak in establishing risk management structures, drafting policies related to risk management, finalizing risk reporting formats, orienting senior and middle management staff in risk Management issues. Structured workshops were conducted by M2i for senior and middle management professionals. during the course of implementation, Margdarshak made improvements in all areas covered under the diagnostic. risk management is a dynamic function and structures and reporting frameworks need to evolve given increase in scale of operations, changes in operating structures and changes in the external environment.

RISK GOVERNANCEMargdarshak has evolved a general risk management policy, which was adopted by its board in November 2014. It has formed two committees – Board risk Management Committee (BrMC) and the Management risk Committee (MrC). The Board risk Committee is chaired by an Independent director and consists of three Board Members. The Management risk Committee is chaired by the executive director and consists of all department heads. A risk Management department has been established with a dedicated person heading it. The head of the risk Management department reports to the Board risk Management Committee. The organisation has increased the strength of the risk Management department and plans to further strengthen the department as the scale of

operation increases. The risk Management department is currently involved in: � Advising the Management and the Board on risk Management policies and limits

� developing tools for effective management of risks

� Advising the organisation on improvement of management systems

� Preparing risk reports in coordination with various departments

� Conducting orientation workshops for field staff on issues pertaining to risk Management

� The risks of the organization has been categorized into the following major heads:

ICAAPThe organisation has set Board approved limits for risk-Weighted Capital Adequacy ratio (CrAr). As the scale of operations increase, the organization will need to further evolve its ICAAP framework and in the medium term shall link its level of capital with assessment of risks.

CREDIT RISKMargdarshak has evolved its credit risk policy to include limits for concentration in various categories, credit risk reports, monthly review by the Management risk Committee of the management and quarterly review by the Board risk Management Committee. Credit risk policy is widely disseminated across all the organization. Limits have also been documented in the operations manual of the organization. The process of loan administration including loan application, loan disbursement and collection are now being administered using a mobile based application. The MIS software has in-built validations to ensure adherence to limits on individual and cycle wise loan sizes. Margdarshak has developed mechanisms to actively track its exposure to different districts and industry segments and takes action to bring this exposure to approved limits. Margdarshak has also started estimating hidden delinquency on the basis of a sample survey of groups. The organisation is in the process of developing a mobile based software application, which will enable it to track hidden delinquency for all clients.

OPERATIONAL RISKThe organisation has adopted operational risk


rISK MANAGeMeNT rePOrT | 31

policy that contains quantitative limits on key operational parameters. These limits are also communicated to relevant persons in the organization. The organization has developed business continuity plans for different aspects of its operations. (eg fire in the premises, riots/floods in the operational area, loss of critical staff etc). Margdarshak is in the process of including aspects of risk in its induction and refresher trainings. This is expected to build appropriate risk culture in the organization. Margdarshak has also developed mechanism to track its operational risks using a system of Key risk Indicators (KrIs) for its various activities. Information on Key risk Indicators is obtained by the risk Management department on monthly basis and is shared with the Management risk Committee (MrC). Margdarshak has developed a system of grading its groups on the basis of a set of objective criteria, where groups are rated by the internal auditors and supervisors during their regular visits. Margdarshak has also started analysing internal audit scores of its branches to identify aspects requiring immediate attention. Margdarshak is also in the process of evolving a system of capturing operational loss data. All functional departments have been made accountable for the operational risks relevant to them. The risk Management department advises them to adopt required tools for effective management of operational risks. Heads of departments are required to submit assurance reports to the BrMC to inform them about the status of operational risks within their departments. Operational risk reports are discussed in the MrC and BrMC.

LIQUIDITY RISKAlthough dependence on NBFCs is still very high, contribution from a single source of fund has come down. Margdarshak has developed Board approved Liquidity and Funding risk policy. The policy covers the following aspects: � Organizational responsibility for managing

liquidity � Cash management system � Liquidity risk monitoring � Limits on concentration of funding sources � Liquidity Contingency Plan

Margdarshak has also developed funding and liquidity risk limits and actively tracks its liquidity position on the basis of short-term forecasts. Limits have been defined for minimum number of days of liquidity on the basis of short-term forecasts. The organization has also started actively tracking the concentration of its funding sources and cost of funds. A system to track funding covenants has been developed to ensure that all the funding covenants are met. Margdarshak has also started undertaking liquidity stress testing on quarterly basis Key liquidity reports are discussed in the meeting of Management risk Committee (MrC) on monthly basis.

INTEREST RATE RISKMargdarshak has adopted an Interest rate risk Policy. The policy requires monthly management review of interest rate risk and quarterly board risk committee review of these risks as well as their limits. Margdarshak has developed limits on interest rate risks to comply with regulatory margins on interest rate risks. It also has developed limits for losses on account of increase in interest rates by the lenders. Margdarshak has also prepared formats for tracking maturity mismatches in interest incomes and interest expenses as well as for tracking the impact of changes in borrowing interest rates on profits.

MARKET RISK Margdarshak still has no exposure to Foreign exchange risk. As per the organization’s policy, in case it accesses foreign currency borrowings, it will need to completely hedge this exposure. This is also required by the directions issued by rBI on external Commercial Borrowings by NBFC-MFIs. Margdarshak’s level of maturity remains Formative for Forex risk implementation and practice.

INdePeNdeNT AUdITOrS rePOrT | 32


INDEPENDENT AUDITORS REPORT

To the members of Margdarshak Financial Services Limited

REPORT ON THE FINANCIAL STATEMENTSWe have audited the accompanying financial statements of Margdarshak Financial Services Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information (collectively referred to as the “financial statements”).

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe Company’s Board of directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with rule 7 of the Companies (Accounts) rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITYOur responsibility is to express an opinion on these financial statements based on our audit.We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the rules made thereunder, to the extent applicable.We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act and other applicable

authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s directors, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

OPINIONIn our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, its Profit and its cash flows for the year ended on that date.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS1. As required by the Clause 2 (iii) of the

Companies (Auditor’s report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, we give in the “Annexure-A” a statement on the matters specified in paragraphs 3 and 4 of the order.

2. As required by Section 143 (3) of the Act, we report that:



(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this report are in agreement with the books of account.

(d) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with rule 7 of the Companies (Accounts) rules, 2014.

(e) On the basis of the written representations received from the directors as on March 31, 2016 taken on record by the Board of directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure-B”; and

(g) With respect to the other matters to be included in the Auditor’s report in accordance with rule 11 of the Companies (Audit and Auditors) rules, 2014, in our opinion and to the best of our information and according to the explanations given to us: i. The Company does not have any

pending litigations which would impact its financial position.

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the Investor education and Protection Fund by the Company.

For Umesh K. Agrawal & Co.Chartered AccountantsFirm’s registration No. : 004883CSd/-Alok SrivastavaPartnerMembership No.: 076025Place: Lucknowdate: June 30, 2016

ANNEXURE-A REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING ‘REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS’ OF OUR REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF MARGDARSHAK FINANCIAL SERVICES LIMITED (‘THE COMPANY’) AS AT AND FOR THE YEAR ENDED MARCH 31, 2016 (i) (a) The Company has maintained proper records

showing full particulars, including quantitative details and situation of fixed assets.

(b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verification.

(ii) The Company’s business does not involve inventories and, accordingly, the requirements under paragraph 3 (ii) of the Order are not applicable to the Company and hence not commented upon.

(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of clause 3(iii) (a) and (b) of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of fixed assets and for rendering of services. The activities of the Company do not involve purchase of inventory and the sale of goods. during the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the Company in respect of these areas.

(v) According to the information and explanations given to us, the Company has not accepted any deposit from the public. Therefore, the provisions of Clause (v) of paragraph 3 of the Order are not applicable

(vi) To the best of our knowledge and as explained, the Central Government has not specified the maintenance of cost records under clause 148(1) of the Companies Act, 2013, for the services provided by the Company.

(vii) (a) Undisputed statutory dues including Provident Fund, employee State Insurance, Income-tax, Service tax and other material statutory dues have been generally regularly deposited with the appropriate authorities.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident



Fund, employee State Insurance, Income-tax, Service tax and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of income tax and service tax which have not been deposited on account of any dispute.

In respect of sub clause (vii) (a) to (vii) (c) above, the Company did not have any dues towards wealth-tax, sales-tax, customs duty, excise duty, value added tax and cess during the year.

(d) There were no amounts which were required to be transferred to the Investor education and Protection Fund by the Company in accordance with the relevant provisions of the Companies Act, 2013 and rules made thereunder.

(viii) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(ix) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders in respect of term loans or debentures.

(x) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained, though idle /surplus funds have been gainfully invested in fixed deposits / mutual funds till disbursement.

(xii) In our opinion and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

For Umesh K. Agrawal & Co.Chartered AccountantsFirm’s registration No. : 004883CSd/-Alok SrivastavaPartnerMembership No.: 076025Place: Lucknowdate: June 30, 2016

ANNEXURE - B TO THE AUDITORS’ REPORTReport on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)We have audited the internal financial controls over financial reporting of Margdarshak Financial Services Limited (“the Company”) as of 31 March 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

MANAGEMENT’S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLSThe Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial reporting issued by the Institute of Chartered Accountants of India (‘ICAI’). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

AUDITORS’ RESPONSIBILITYOur responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial



reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTINGA company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the

financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTINGBecause of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

OPINIONIn our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial reporting issued by the Institute of Chartered Accountants of India.For Umesh K. Agrawal & Co.Chartered AccountantsFirm’s registration No. : 004883CSd/-Alok SrivastavaPartnerMembership No.: 076025Place: Lucknowdate: June 30, 2016

FINANCIAL STATeMeNTS | 36


FINANCIAL STATEMENTS

BALANCE SHEET AS ON MARCH 31, 2016

NotesNo�

As atMarch 31, 2016

(`)

As atMarch 31, 2015

(`)I. EQUITY AND LIABILITIESShareholders’ funds

Share Capital 3 176,149,580 160,593,360 reserves & Surplus 4 68,290,330 37,725,168

244,439,910 198,318,528 Non-current liabilities

Long-term borrowings 5 620,842,518 269,423,048 deferred tax liability 7 - 819,730 Long Term Provisions 8 1,578,729 -

622,421,247 270,242,778 Current Liabilities

Short Term borrowings 5.1 758,431,323 390,377,188 Other Current liabilities 6 21,529,956 42,009,883 Short-term provisions 9 17,508,826 8,316,104

797,470,105 440,703,175 TOTAL 1,664,331,262 909,264,481

II. ASSETSNon-current assets

Fixed Assets-Tangible Assets 10 18,560,141 12,883,279

Non-current investments 11 119,954,285 109,288,000 Long term loans and advances 12 379,386,316 191,573,875 Other non-current assets 13 34,055,287 12,830,074 deferred tax asset 7 577,107 -

552,533,136 326,575,228 Current Assets

Current Investments 11 58,496,915 18,875,000 Cash and Bank Balances 14 176,981,200 135,238,611 Short term loans and advances 12 819,890,161 406,884,347 Other current assets 15 56,429,850 21,691,295

1,111,798,126 582,689,253 TOTAL 1,664,331,262 909,264,481

Summary of significant accounting policies 2

The accompanying notes are an integral part of the financial statementsAs per our report of even dateFor Umesh K� Agrawal & Co� For and on behalf of the Board of Directors ofFirm Registration No�04883C Margdarshak Financial Services LimitedChartered Accountants

Sd/- Sd/- Sd/-(Alok Srivastava) (Rahul J� Mittra) (Saroj Mittra)Partner Managing Director Executive DirectorMembership No�076025

Place: Lucknow Sd/-Date: 29th June 2016 (Anchit Pandey) Company Secretary



PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2016

NotesNo.

Year endedMarch 31,

2016(`)

Year endedMarch 31, 2015

(`)

I. Incomerevenue from operations 16 285,281,642 134,310,883

Other income 17 19,176,526 5,563,216

Total Income 304,458,168 139,874,099

II. Expensesemployee benefit expenses 18 62,133,371 31,138,292

Finance Costs 19 152,803,896 59,887,192

depreciation and amortization 20 9,846,482 5,679,349

Other expenses 21 43,294,703 26,654,836

Total Expenses 268,078,452 123,359,669

Profit before Tax 36,379,716 16,514,430

Tax Expense-Current Tax 13,521,614 5,358,107

-deferred tax charge/ (credit) (1,396,837) 705,262

Total Tax Expenses 12,124,777 6,063,369

Profit for the year 24,254,939 10,451,061

Earning per equity share(EPS) 22

Basic 1.51 0.80

diluted 1.45 0.88

Nominal value of share 10.00 10.00

Summary of significant accounting policies 2 The accompanying notes are an integral part of the financial statements

As per our report of even dateFor Umesh K� Agrawal & Co� For and on behalf of the Board of Directors ofFirm Registration No�04883C Margdarshak Financial Services LimitedChartered Accountants

Sd/- Sd/- Sd/- (Alok Srivastava) (Rahul J� Mittra) (Saroj Mittra)Partner Managing Director Executive DirectorMembership No�076025




CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2016

Particulars NotesNo.


(`)


(`)A. Cash Flow from Operating Activities

Net Profit Before Taxation 36,379,716 16,514,430 Adjustments for:

depreciation 9,846,482 2,773,491 Provision for standard and non-performing assets 6,008,183 5,984,582 Provision for portfolio loan securitized/assigned - -Portfolio loans written-off 298,980 210,137 Loans & advances written-off - -Provision for doubtful advances - -

Operating Profit Before working Capital Changes 52,533,361 25,482,640 Movements in working capital:

(Increase)/decrease in Other Current Assets (33,013,556) (19,685,416)(Increase)/decrease in Other Non-Current Assets (21,802,320) (3,744,142)(Increase)/decrease in Short Term Loans & Advances (413,005,814) 60,460,935 (Increase)/decrease in Long Term Loans & Advances (187,812,441) (284,964,137)(Increase)/decrease in Long Term Provisions (17,897,555) (4,641,409)(Increase)/decrease in Short Term Provisions 9,053,236 2,072,426 (Increase)/decrease in Other Long Term Liabilities (819,730) 705,262 (Increase)/decrease in Other current liabilities (20,479,927) 38,914,552 (Increase)/decrease in Other non- current liabilities 1,578,729 -

Cash generated from/(used in) operations (631,666,017) (185,399,289)direct Taxes Paid (980,000) (790,000)

Net Cash flow generated from/(used in) Operating Activities(A) (632,646,017) (186,189,289)B. Cash flow from Investing Activities:

Purchase of Fixed Assets (9,302,950) (8,245,161)encashment of desposit with BanksInvestment of deposit with Banks/NBFCs (50,288,200) (105,788,000)Purchase of InvestmentsProceeds from sale of Investments

Net Cash flow generated from/(used in) Investing Activities (B) (59,591,150) (114,033,161)C. Cash flow from Financing Activities:

Proceeds from Issuance of equity Shares 15,556,220 52,314,470 Share/debenture Issue expensesProceeds from Issuance of debenturesrepayment of debenturesProceeds from Long term Borrowings 1,300,000,000 561,400,000 repayment of Long term Borrowings (580,526,395) (204,416,604)Payment of dividend incuding dividend tax (1,050,069) (2,790,155)

Net Cash generated from/(usedin) Financing Activities(C) 733,979,756 406,507,711 Net Increase In Cash And Cash equivalents (A+B+C) 41,742,589 106,285,261 Cash And Cash equivalents at the beginning of the year 135,238,611 28,953,351 Cash And Cash equivalents at the end of the year 176,981,200 135,238,612 Summary of significant accounting policies 2

The accompanying notes are an integral part of the financial statements As per our report of even dateFor Umesh K� Agrawal & Co� For and on behalf of the Board of Directors ofFirm Registration No�04883C Margdarshak Financial Services LimitedChartered Accountants

Sd/- Sd/- Sd/- (Alok Srivastava) (Rahul J� Mittra) (Saroj Mittra)Partner Managing Director Executive DirectorMembership No�076025




Notes to the Financial Statements for the year ended 31st March 2016

1. CORPORATE INFORMATIONMargdarshak Financial Services Limited is a public limited company incorporated in India. The company is engaged in the business of financial inclusion. It provides small value collateral free loans to the economically weaker section of the society especially women who are organized into joint liability groups. The company is registered with rBI as a Non- Banking Financial Company and rBI had approved its conversion into NBFC-MFI w.e.f 19th december 2013.The registered office of the company is at Plot No.118, dayal Farms, Ganeshpur, rehmanpur, Chinhat, deva road, Lucknow 226019, Uttar Pradesh It has also tied with yes Bank, IdBI Ltd. for working as a Business Correspondent and support the banks in client origination and client servicing.Financial Inclusion forms the backbone and core of Margdarshak’s economic empowerment and development paradigm. Following the principles of social and financial sustainability, financial inclusion services of Margdarshak include credit, pension and insurance services. Working in underserved areas and with artisan’s remains the core of Margdarshak’s financial inclusion intervention. Margdarshak through its network of 89 branches serves over 1.3 lakh families in the most populous & backward states of North India including Uttar Pradesh, Bihar, Uttrakhand and Haryana.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2�1 BASIS OF PREPARATION :The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) rules 2014 and the provisions of rBI as applicable to NBFC-MFI.The Financial Statements have been prepared on an accrual basis and under the historical cost convention, except for interest on non-performing loans which is accounted on realization basis. The accounting policies applied by the company are consistent with those applied in the previous year.

2�2 USE OF ESTIMATES:The preparation of financial statements is in conformity with Indian GAAP requires management to make estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income

and expenses and the disclosure of contingent liabilities on the date of the financial statements. Future results could differ due to these estimates and differences between the actual results and estimates are recognized in the period in which the results are known/ materialize.

2�3 TANGIBLE FIXED ASSETS:All fixed assets are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Cost comprises the purchase price and any directly attributable cost of bringing the asset to its working condition for its intended use.Gains and Losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit & loss when the asset is derecognized.

2�4 DEPRECIATION ON TANGIBLE FIXED ASSETS: depreciation on fixed assets is calculated on the straight line method basis as per useful life prescribed under Schedule II of the Companies Act, 2013, which is the useful lives of the underlying assets as estimated by the management.

2�5 IMPAIRMENT OF ASSETS:The carrying amount of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on internal/external factors. An impairment loss is recognized whether the carrying amount of an asset exceeds its recoverable amount which is the greater of the asset’s net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessment of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

2�6 INVESTMENTS:Investments that are readily realizable and intended to be held for less than one year from the date of purchase are classified as current Investments. All other investments are classified as long term investments.

2�7 FINANCIAL COST:Financial Costs includes interest and amortization of ancillary costs incurred in connection with the arrangement of borrowings/ securitization/ assignment transactions. Interest on borrowings are recognized on the time proportion basis taking into account the amount outstanding and the rate applicable on borrowings.

2�8 REVENUE RECOGNITION:revenue is recognized to the extent that it is probable that the economic benefits will flow



to the company and the revenue can be reliably measured.

2.8.1 All Interest income on loans is recognized on accrual basis taking into account the amount outstanding and the rate applicable, except in the case of non-performing assets (NPA) , where it is recognized, upon realization, as per prudential norms of rBI..

2.8.2 Interest income on deposits with banks is recognized on time proportion basis taking into account the amount outstanding and the rate applicable.

2.8.3 Processing Fees are recognized as income at the time of collection from members.

2.8.4 Income from services rendered in connection with loans given on behalf of banks/ financial institutions to JLG groups organized / monitored by the company are recognized on accrual basis as and when such services are rendered.

2.8.5 All other income is recognized on accrual basis.

2�9 GOVERNMENT GRANTS:Grants are recognized when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant will be received.When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate.

2�10 LEASE:Leases, where the lessor effectively retains substantially all risks and the benefits of ownership of the leased item, are classified as operating lease. . Operating lease payments are recognized as expense in the statement of profit and loss on a straight line basis over the lease term.

2�11 RETIREMENT AND OTHER EMPLOYEE BENEFITSretirement benefit in the form of provident fund is a defined contribution scheme. The company has no obligation, other than the contribution payable to the regional Provident Fund Commissioner. The company recognizes contribution payable to the provident fund scheme as expenditure, when an employee renders the related service. If the contribution payable to the scheme for the service rendered before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then the excess is recognized as an asset to the extent that the pre-payment will

lead to, for example a reduction in future payment or a cash refund.Gratuity liability is a defined obligation and is provided for on the basis of an actuarial valuation on projected unit credit method at the end of each financial year.The company provides employees stock option (eSOP) benefits to its employees under its employees Stock Option Scheme 2014. The objective of the scheme is to enhance the employee engagement, to reward the employees for their association and performance as well as to motivate them to contribute to the growth and profitability of the company and to create a sense of ownership and participation amongst them. A trust names Margdarshak employee Welfare Trust was set up for implementing the scheme. The pool of shares is used for granting stock options to the eligible employees of the company.

2�12 FOREIGN CURRENCY TRANSACTIONSForeign currency transactions are recorded using the exchange rates prevailing on the dates of the respective transactions. exchange differences arising on foreign currency transactions settled during the year are recognized in the statement of profit and loss account.Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date, not covered by forward exchange contracts, are translated at year-end rates. The resultant exchange differences are recognized in the Statement of Profit and Loss. Non-monetary assets and liabilities denominated in foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.

2�13 DIRECT AND INDIRECT TAXESIncome tax expense comprises current tax and deferred tax charge or credit.Current TaxThe current charge for income taxes is calculated in accordance with the relevant tax regulations applicable to the Company. Deferred Taxdeferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the year. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantially enacted by the balance sheet date. deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognized only if there is a virtual certainty of realization of such assets. deferred tax assets are reviewed at each balance sheet



date and written-down or written-up to reflect the amount that is reasonably/virtually certain to be realized.Service Tax Input CreditService tax input credit is accounted for in the books in the period in which the underlying service received in accounted and when there is reasonable certainty in availing/ utilizing the credit.

2�14 EARNING PER SHAREThe basic and diluted earnings per share (“ePS”) is computed by dividing the profit after tax for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

2�15 CONTINGENT LIABILITYA contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resource is remote.

2�16 CASH AND CASH EQUIVALENT:Cash and cash equivalents for the purpose of cash flow statement comprise cash at bank and in hand and deposits with an original maturity of three months or less.

2�17 ASSET CLASSIFICATION AND PROVISIONING NORMS:Loans to customers are classified as Standard and Non-performing assets on the criteria laid down below :-

Particulars CriteriaStandard Asset The asset in respect of which,

no default in repayment of principal or payment is perceived and which does not disclose any problem nor carry more than normal risk attached to the business.

Non-Performing Asset

An asset for which interest/ principal payment has remained overdue for a period of 90 days or more.

2�18 LOAN PROVISION FOR LOAN PORTFOLIO:The company follows the prudential norms for income recognition, asset classification and provisioning as prescribed by the reserve Bank of India for systemically important Non-deposit taking Non-Banking Financial Company- MFI (NBFC-MFI) on micro finance loans.The aggregate loan provision to be maintained by the company at any point of time shall not be less than the higher of:-

a) 1% of the outstanding loan portfolio Orb) 50% of the aggregate loan installments which

are overdue for more than 90 days and less than 180 days and

c) 100% of the aggregate loan instalments which are overdue for 180 days or more.

2�19 UNAMORTIZED EXPENSES:Valued at the cost, preliminary expenses including expenses on acquisition and transformation to NBFC are being amortized over the period of five years.The debt syndication fees has been amortized during the year over the period of loan.

3� SHARE CAPITAL:As On

Mar-16 Mar-15

Authorised Share Capital

250,00,000(Py: 31 March 2015: 150,00,000) equity Shares of `.10/- each

25,00,00,000 15,00,00,000

25,00,000(Py:31 March 2015: 25,00,000) 9% Optionally Convertible Preference Shares (OCPS) of `.10/- each

2,50,00,000 2,50,00,000

20,00,000 (Py:31 March 2015:20,00,000) redeemable Preference Shares of `.10/-each

- 2,00,00,000

25,00,000(Py:31 March 2015:0) 9% Compulsorily Convertible Preference Shares (CCPS) of `.100/- each

25,00,00,000 -

Total 52,50,00,000 19,50,00,000

Issued, Subscribed and Paid up

15164958 (Py: 31 March 2015: 13609336) equity shares of ` 10/- each

15,16,49,580 13,60,93,360

2450000(Py: 31 March 2015: 2450000) 9% OCPS of `.10 each

2,45,00,000 2,45,00,000

Total 17,61,49,580 16,05,93,360

3�1 RECONCILIATION OF THE NUMBER OF SHARES AND AMOUNT OUTSTANDING AT THE BEGINNING AND AT THE END OF THE REPORTING YEAR:equity Shares Mar-16 Mar-15

Number ` Number `

Opening Balance

13609336 13,60,93,360 8827889 8,82,78,890

Fresh Issue during the year**

1555622 1,55,56,220 4781447 4,78,14,470

Closing Balance

15164958 15,16,49,580 13609336 13,60,93,360

** Includes shares issued to Margdarshak employee Welfare Trust under the various eSOP scheme.



3�2 9% OPTIONALLY CONVERTIBLE PREFERENCE SHARES (OCPS):

Mar-16 Mar-15

Number ` Number `

Opening Balance

2450000 2,45,00,000 2000000 2,00,00,000

Fresh Issue during the year

- - 450000 45,00,000

Closing Balance

2450000 2,45,00,000 2450000 2,45,00,000

3�3 TERMS/ RIGHTS ATTACHED TO EQUITY SHARES:The company has only one class of equity shares having par value of ̀ .10/ per share. each holder of equity shares is entitled to one vote per share for matters other than “Investors reserved Matters”.In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

3�4 TERMS OF CONVERSION/ REDEMPTION OF OCPS:On August 22, 2012, the company had issued 32,50,000 OCPS of ` 10/- each fully paid-up to Small Industries development Bank of India (SIdBI), carrying a coupon rate of 9%, convertible into equity shares of ` 10/- each. Out of which 12,50,000 shares has been converted into equity shares @ 10 each on September 21, 2012 and 13,00,000 shares has been converted into equity on September 23, 2014.On december 15, 2014, the company has issued 17,50,000 OCPS of `.10/- each fully paid up to Small Industries development Bank of India (SIdBI), carrying a coupon rate of 9%, convertible into equity shares of `.10/- each.

3�5 DETAILS OF SHAREHOLDERS HOLDING MORE THAN 5% SHARES IN THE COMPANY:

Equity Shares of `�10/- each fully paid

Mar-16 Mar-15

No� of Shares held

% of holding in the class

No� of Shares held


rahul J Mittra 1040093 6.86% 773025 5.68%

dia Vikas Capital Limited

6269176 41.34% 6269176 46.07%

Margdarshak development Projects and Consulting Pvt Ltd.

25,02,811 16.50% 1800000 13.23%

SIdBI 25,50,000 16.82% 25,50,000 18.74%

Margdarshak employee Welfare Trust

10,00,000 6.59% 850000 6.25%

Total 1,33,62,080 1,22,42,201

Optionally Convertible Preference Shares of `�10 each fully paid

Mar-16 Mar-15

No� of Shares

held


No� of Shares

held


SIdBI 2450000 100.00% 2450000 100.00%

Total 2450000 100�00% 2450000 100�00%

**As per records of the company, including its register of shareholders / members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

4�RESERVES AND SURPLUS:Mar-16

(`)

Mar-15

(`)

a) Statutory Reserves

Opening Balance 32,59,382 11,69,170

Add: amount transferred from current year surplus

48,50,988 20,90,212

Closing Balance 81,10,370 32,59,382

** Statutory reserves created u/s 45-IC of the reserve Bank of India Act, 1934

b) Share Premium


Add:- Premium on equity shares issued during the year.

34,43,780 40,85,528

Closing Balance 1,04,18,818 69,75,038

c) Provision for Loan Loss


Add:- additional provision created during the year

60,08,183 -9,37,453

Closing Balance 1,19,92,765 59,84,582

d) Grant Support from PSIG Programme- SIDBI


Less: Grant adjusted and transferred to deferred revenue against the depreciable asset.

5,62,000 -

Closing Balance 8,48,000 14,10,000

e) Surplus in the statement of Profit and Loss

Opening Balance 2,00,96,166 83,90,113

Add:-current year profit available after appropriation

Profit after taxes ` 2,42,54,939

Less :- Statutory reserves ` 48,50,988

Less :- dividend payable to SIdBI ` 22,05,000

Less :- dividend distribution Tax ` 3,74,740

1,68,24,211 1,17,06,053

Closing Balance 3,69,20,377 2,00,96,166

Total Reserves and Surplus 6,82,90,330 3,77,25,168



4�1 BREAKUP OF DIVIDEND PROPOSED TO PREFERENCE SHAREHOLDERS:

Particulars Number of Shares

Per Share dividend

dividend (`)

9% OCPS 2450000 0.90 22,05,000

4�2 STATUTORY RESERVES:As per Section 45-IC of the reserve Bank of India Act, 1934, the company is required to create a reserve fund at the rate of 20% of the Net Profit after Tax. Accordingly, the company has transferred an amount of ` 48,50,988/-(Previous year ` 20,90,212/-) out of the profit after tax for the year to the statutory reserve.

5 LONG TERM BORROWING:

Mar-16 (`) Mar-15 (`)

Term Loans

Secured

From Banks & Financial Institutions

62,08,42,518 26,94,23,048

Mar-16 (`) Mar-15 (`)

Unsecured


- -

Total 62,08,42,518 26,94,23,048

5�1 SHORT TERM BORROWINGS

Mar-16(`)

Mar-15(`)

Term Loans

Secured


75,84,31,323 37,43,77,188

Unsecured


- 1,60,00,000

Total 75,84,31,323 39,03,77,188

5�2 DETAILS OF TERM LOANS FROM BANKS AND FINANCIAL INSTITUTIONS- SECURED:

Sr. No

Name of Bank / Financial Institution

Terms of repaymentLoan Amount Outstanding

(`)Current(`) Non-Current

(`)

1 Andhra Bank Loan 1 rate of Interest-15%, repayable in 8

Quarterly Installments37,50,000 37,50,000 -

2 Ananya Finance For Inclusive Growth Pvt Ltd. Loan 1 rate of Interest-16%, repayable in 18

monthly Installments66,66,668 66,66,668 -

Loan 2 rate of Interest-15.75%, repayable in 18 monthly Installments

1,55,55,556 1,33,33,332 22,22,224

3 AU Financiers Pvt. Ltd. Loan 1 rate of Interest-15.75%, repayable in 24

monthly Installments4,27,14,376 2,42,82,091 1,84,32,285

4 Bank of Maharashtra Loan 1 rate of Interest-12.75%, repayable in 36

monthly Installments3,47,16,186 1,66,68,000 1,80,48,186

Loan 2 rate of Interest-12.20%, repayable in 36 monthly Installments

2,00,00,000 66,72,000 1,33,28,000

5 Capital First Limited Loan 1 rate of Interest-16%, repayable in 18

monthly Instalments10,00,00,000 3,33,33,336 6,66,66,664

6 Central Bank of India Loan 1 rate of Interest-14%, repayable in 12

quarterly Instalments1,25,00,000 75,00,000 50,00,000

7 dena Bank Loan 1 rate of Interest-13.80%, repayable in 21

monthly Instalments1,66,66,670 1,66,66,670 -

Loan 2 rate of Interest-13.50%, repayable in 21 monthly Instalments

4,58,33,334 2,49,99,996 2,08,33,338

8 dCB Bank Ltd.



Sr. No




(`)

Loan 1 rate of Interest-14%, repayable in 18 monthly Instalments

3,00,00,000 2,25,00,000 75,00,000

10 Indian Overseas Bank Loan 1 rate of Interest-14.50%, repayable in 36

monthly Instalments87,51,537 66,00,000 21,51,537


5,00,00,000 1,68,00,000 3,32,00,000

11 Maanaveeya development and Finance Pvt. Ltd. Loan 1 rate of Interest-15%, repayable in 12

quarterly Instalments2,49,97,955 2,49,97,955 -

Loan 2 rate of Interest-15%, repayable in 12 quarterly Instalments

6,66,68,000 2,66,40,000 4,00,28,000

12 MAS Financial Services Ltd. Loan 1 rate of Interest-16.25%, repayable in 21



2,50,00,004 2,50,00,004 -


6,45,83,339 2,49,99,996 3,95,83,343


7,50,00,004 2,49,99,996 5,00,00,008

13 MUdrA Limited Loan 1 rate of Interest-11.50%, repayable in 27


14 Muthoot Fincorp Ltd. Loan 1 rate of Interest-16.50%, repayable in 24


15 reliance Capital Limited Loan 1 rate of Interest-15.5%, repayable in 12

monthly instalments1,32,30,900 1,32,30,900 -


12,65,51,549 12,65,51,549 -

16 reliance Home Finance Ltd Loan 1 rate of Interest-15.50%, repayable in 12

monthly Instalments53,60,426 53,60,426 -

17 religare Finvest Ltd. Loan 1 rate of Interest-15.25%, repayable in 33


18 Small Industries development Bank of India (SIdBI) Loan 1 rate of Interest-13.50%, repayable in 24



4,76,00,000 2,88,00,000 1,88,00,000


6,00,00,000 3,00,00,000 3,00,00,000

19 State Bank of Bikaner & Jaipur Loan 1 rate of Interest-13.50%, repayable in 33


20 State Bank of India Loan 1 rate of Interest-12.30%, repayable in 34


21 UCO Bank



Sr. No




(`)


38,74,114 27,00,000 11,74,114


1,37,33,508 54,00,000 83,33,508

22 Union Bank of India Loan 1 rate of Interest-12.75%, repayable in 30

monthly Instalments1,28,33,336 69,99,996 58,33,340

23 United Bank of India Loan 1 rate of Interest-14%, repayable in 12

quarterly Instalments2,72,72,728 1,09,09,088 1,63,63,640

24 Vijaya Bank Loan 1 rate of Interest-12.65%, repayable in 10

quarterly Instalments3,00,00,000 1,20,00,000 1,80,00,000

TOTAL 1,37,92,73,841 75,84,31,323 62,08,42,518

6� OTHER CURRENT LIABILITIES:

Mar-16(`)

Mar-15(`)

expenses Payable 1,03,83,099 30,49,354

Payable to employer Provident Fund 1,75,159 66,245

Payable to eSI 34,943 17,762

TdS Payable 12,91,747 7,82,712

Swachh Bharat Cess Payable 1,22,932 -

Interest Payable to Financial Institutions 83,06,597 40,56,035

Payable to PFrdA 12,15,479 45,79,260

Managed Loan (yes Leap) - 2,94,58,515

Total 2,15,29,956 4,20,09,883

7 DEFERRED TAX LIABILITY/(ASSET):

Mar-16(`)

Mar-15(`)


Impact of difference between tax depreciation and depreciation charged for the financial reporting period.

4,59,692 7,05,262

Impact of provision for standard and non-performing assets (18,56,529) -

Closing Balance (5,77,107) 8,19,730

8 LONG TERM PROVISIONS :

Mar-16(`)

Mar-15(`)

Provision for employee benefits -

Provision for Gratuity 15,78,729

Total 15,78,729 -

9 SHORT TERM PROVISIONS:

Mar-16(`)

Mar-15(`)

Others Provision for taxation 1,49,29,086 72,66,035



Mar-16(`)

Mar-15(`)

Provision for Preference dividend 22,05,000 8,97,534

Provision for dividend distribution tax 3,74,740 1,52,535

Total 1,75,08,826 83,16,104

10 FIXED ASSETS:

Cost or ValuationFurnitures

(`)Computers

(`)

Electricals Equipments

(`)

Total(`)

1st April 2015 47,37,053 75,01,249 59,92,295 1,82,30,597

Additions 33,43,459 32,32,861 27,26,630 93,02,950

As at 31st March 2016 80,80,512 1,07,34,110 87,18,925 2,75,33,547

1st April 2015 7,20,788 40,09,717 6,16,813 53,47,318

Charge for the year 6,96,021 22,07,751 7,22,316 36,26,088

As at 31st March 2016 14,16,809 62,17,468 13,39,129 89,73,406

Net BlockAs at 31st March 2015 40,16,265 34,91,532 53,75,482 1,28,83,279

As at 31st March 2016 66,63,703 45,16,642 73,79,796 1,85,60,141

11 INVESTMENTS:

Mar-16(`)

Mar-15(`)

Non-current InvestmentsIncludes Fdrs with the following:-a) Banks - 100050000 (Mar-15-- 78788000)b) Financial Institutions - 19904285 (Mar-15-- 30500000)

11,99,54,285 10,92,88,000

11,99,54,285 10,92,88,000 Current InvestmentsIncludes Fdrs with the following:-a) Banks - 21563000 (Mar-15-- 5375000)b) Financial Institutions - 36933915 (Mar-15-- 13500000)

5,84,96,915 1,88,75,000

5,84,96,915 1,88,75,000 Total 17,84,51,200 12,81,63,000

12 LOANS AND ADVANCES:

Long Term Advances Short Term AdvancesMar-16 (`) Mar-15 (`) Mar-16 (`) Mar-15 (`)

Loan to Micro Finance Clients

Considered Good 37,77,08,185 19,00,45,097 81,73,72,965 40,45,91,180

remained overdue for more than 30 days and upto 90 days

16,78,131 15,28,778 25,17,196 22,93,166

37,93,86,316 19,15,73,875 81,98,90,161 40,68,84,346

12�1 LOAN WRITTEN OFF DURING THE YEAR: An amount of ` 2,98,980/- which remained overdue for more than 90 days and treated as loss asset has been written off during the year.

13 OTHER NON-CURRENT ASSETS:

Mar-16 (`) Mar-15 (`)

Other Non-Current assets:

Unamortised expenditure 2,40,55,287 43,30,074

Loan to Margdarshak employee Welfare Trust 1,00,00,000 85,00,000

Total 3,40,55,287 1,28,30,074



14 CASH AND CASH EQUIVALENTS:

Cash & Cash equivalentsMar-16

(`)Mar-15

(`)

Cash in hand 6,52,655 13,85,887

Balances with Scheduled Bank 17,63,28,545 13,38,52,724

Total 17,69,81,200 13,52,38,611

15 OTHER CURRENT ASSETS:

Mar-16(`)

Mar-15(`)

Interest accrued on Loan 59,79,954 48,04,780

Interest receivable on fixed deposit 1,37,51,693 52,25,276

Prepaid expenses 2,21,855 8,26,093

Security deposit and Advances 53,93,332 45,12,563

TdS receivable 67,24,420 23,78,563

Service Tax Credit 92,244 12,93,174

Advance Tax 65,00,000 25,00,000

receivable from IdBI 1,61,30,000 -

Corpus to Margdarshak employee Welfare Trust 14,86,353 -

Advance to Insurance Company 1,50,000 1,50,846

5,64,29,850 2,16,91,295

16 REVENUE FROM OPERATIONS:

Mar-16(`)

Mar-15(`)

Interest Income on portfolio loans 22,14,58,445 10,91,23,585

Processing fee on portfolio loans 1,24,09,540 67,30,515

Income from BC operations 5,14,13,657 1,84,56,783

Total 28,52,81,642 13,43,10,883

17 OTHER INCOME:

Mar-16(`)

Mar-15(`)

Interest Income on Fixed deposits/ Investment 1,77,08,789 48,86,123

Grant income received from SIdBI under PSIG - 3,31,900

deferred income for grant received under PSIG 5,62,000 -

Income from PFrdA 8,14,896 3,17,706

Misc Income 90,841 27,487

Total 1,91,76,526 55,63,216

18 EMPLOYEE BENEFIT EXPENSES:

Mar-16(`)

Mar-15(`)

directors Salary 16,20,000 16,20,000

Staff Salaries & Allowances 5,74,56,474 2,54,01,025

employer Contribution-PF 6,89,671 3,31,717

employer Contribution-eSI 2,60,164 1,47,071

Gratuity expense 15,78,729 31,85,948

Staff Welfare 5,28,333 4,52,531

Total 6,21,33,371 3,11,38,292



19 FINANCIAL COST

Mar-16 (`) Mar-15 (`)Interest on Borrowings 13,91,26,236 5,25,07,422

Management Fee/ Upfront Fees 1,10,89,308 58,56,271

Bank Charges 25,88,352 15,23,499

Total 15,28,03,896 5,98,87,192

20 DEPRECIATION AND AMORTIZATION :

Mar-16 (`) Mar-15 (`)depreciation on Tangible Assets 36,26,088 27,73,491

Amortization expenses 62,20,394 29,05,858

Total 98,46,482 56,79,349

21 OTHER EXPENSES:

Mar-16 (`) Mar-15 (`)Telephone & Postage expenses 25,52,166 15,16,716

Printing & Stationery 29,37,041 16,92,627

Legal and Professional Fees 31,44,392 13,29,181

Payment to Auditor (refer details below) 3,10,000 1,65,000

Internal Audit Fees 21,06,951 7,21,215

IT consumables and maintenance 49,57,713 14,09,834

Portfolio loans written off 2,98,980 2,10,137

Business Promotion & CSr Initiative expenses 5,38,775 3,47,743

electricity & Water charges 14,51,843 9,25,343

Filing Fees 26,18,400 7,85,334

Credit Bureau expenses 4,60,673 1,09,969

Training & Capacity Building 10,23,220 7,44,022

Board Meeting expenses 4,04,148 2,82,369

Books, Journals and Meeting expenses 4,15,485 1,72,792

Miscelleneous expenses 2,39,863 1,96,464

Insurance expenses 4,62,578 3,55,233

Loan Loss Provision 60,08,183 59,84,582

Total 4,32,94,703 2,66,54,836

22 EARNING PER SHARE:

Mar-16 (`) Mar-15 (`)Profit for the year 2,42,54,939 1,04,51,061

Less : dividend on 9% OCPS 22,05,000 14,80,931

Net Profit/(Loss) for calculation of basic ePS 2,16,75,199 87,18,446

Net Profit as above 2,16,75,199 87,18,446

Add: dividend on convertible preference shares and tax thereon 25,79,740 17,32,615

Net Profit/(Loss) for calculation of diluted ePS 2,42,54,939 1,04,51,061

Weighted average number of equity shares in calculating basic ePS 1,43,35,013 1,08,76,724

effect of dilution :

Convertible Preference shares 24,50,000 9,97,260

Weighted average number of equity shares in calculating diluted ePS

1,67,85,013 1,18,73,985

ePS 1.51 0.80

diluted ePS 1.45 0.88



23 RELATED PARTY DISCLOSURES:As per Accounting Standard (AS 18), on related party disclosures specified under section 133 of the Companies Act, 2013 read with rule 7 of the Companies (Accounts) rule, 2014, related parties of the company are as follows:

Name of Related Party Nature of Relationship

Opening Balance (in `)

Transaction during the year

Closing Balance (in `�)

dIA Vikas Capital Pvt Ltd. Shareholder 6,26,91,760 - 6,26,91,760

SIdBI Shareholder 5,00,00,000 - 5,00,00,000

Margdarshak employee Welfare Trust

Shareholder 85,00,000 15,00,000 1,00,00,000

24 EMPLOYEE BENEFITS:GRATUITYThe company has a defined employee benefit plan in the form of gratuity on retirement/ cessation. The company has entrusted the administration of the gratuity plan to the Life Insurance Corporation of India (LIC) and contributions are made based on the demand raised by the LIC.The following table summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amount recognized in the balance sheet for the respective plan :-

Mar-16(`)

Mar-15(`)

i) Assumptions discount rate 8% 8%

Salary escalation 5% 5%

Withdrawal rate Varying between 10% to 5% per annum depending upon duration and age of employees

expected average remaining working life of employees 27.18 years 27.22 years

ii) Table Showing changes in present value of Defined Benefit Obligation :

Past Service Liability 22,89,374 38,07,954

Current Service Cost 15,78,729 8,96,574

25 ADDITIONAL DISCLOSURES REQUIRED BY RESERVE BANK OF INDIA:25.1 Capital to risk Adequacy ratio:

Mar-16 Mar-15Capital to risk Adequacy ratio (in %) 15.55% 27.14%25.2 exposures:

The company has no exposures to real estate Sector and capital market directly or indirectly in the current and previous year.

25.3 disclosure relating to assignment of receivables of loan:

Sr� no� Particulars 16-Mar 15-Mar1 Total Nos of assignment of receivables of loan 15315 -

2 Total Book Value of Loan assignment 6,13,98,550 -

3 Total book value of loan assignment including loan placed as collateral

6,46,30,053 -

4 Sales Consideration received for Loans assignment 6,13,30,053

5 Interest spread on assignment of loans 23,68,685 25.4 disclosure relating to Managed Loan Portfolio:

Sr� no� Particulars 16-Mar 15-Mar1 yes Bank Ltd. 32,43,55,607 44,31,91,1232 IdBI Bank Ltd. 11,82,79,048 -

TOTAL 44,26,34,655 44,31,91,123



25.5 Asset Liability Management:

Particulars upto 1 month

Over 1 month upto 2 month

Over 2 months upto 3 months

Over 3 months upto 6 months

Over 6 months

upto 1 year1-3 years

Over 3 years upto

5 yearsTotal

deposits - - - - - - -Advances 949.2 832.51 765.1 2206.02 3446.07 3793.86 - 11992.76Investment 26 10.05 41.47 181 326.45 1199.54 - 1784.51Borrowings 787.02 715.25 735.12 2055.57 3649.22 5693.56 157 13792.74

The above asset liability management has been prepared on the basis of assumptions and estimates by the management and relied upon by the auditors.

25.6 ratings Assigned by the Credit rating Agencies:

Mar-16 Mar-15Long Term Bank facilities CAre BBB- CAre BBB-

MFI Grading CAre MFI 2 CrISIL MFr425.7 Customer Complaints:

Numbera) No. of complaints pending at the beginning of the year 8

b) No. of complaints received during the year 408

c) No. of complaints redressed during the year 363

d) No. of complaints pending at the end of the year 5325.8 details of registration with Financial regulators:

Registration No�regulator

Ministry of Corporate Affairs U65921UP1996PLC019924

reserve Bank of India B-12.00364


COrPOrATe INFOrMATION | 51

CORPORATE INFORMATION

Registered Office 118 dayal Farms, Ganeshpur- rehmanpur, Chinhat-deva road, Lucknow-226019

Corporate Office 118 dayal Farms, Ganeshpur- rehmanpur, Chinhat- deva road, Lucknow-226019

CIN U65921UP1996PLC019924

RBI Reg No� B-12-00364

Board of Director

Mr. rahul J Mittra(Founder, CEO and Managing Director)

Mr. Arupjyoti rai Baruah(Whole Time Director)

Ms. Saroj Mittra(CFO and Whole Time Director)

Mr. d.P.S rathore(Independent Director)

Mr. Prasad Kuchibhatla(Independent Director)

Ms. Maitrayee Banerjee(Independent Director)

Mr. Saneesh Singh(Nominee Director)

Mr. Vivek Kumar Malhotra(Nominee Director-till 25.09.2015)

Mr. Bhanu Prakash Verma(Nominee Director)

Company Secretary Ms. Anchit Pandey

Auditors M/S Umesh Kumar Agarwal & Co.

“We Thank all our Lenders for their Support.”

Margdarshak Financial Services Ltd.118, dayal Farms, Ganeshpur-rehmanpur, Chinhat, deva road, Lucknow-226019

Phone:+0522-4025811 Website: www.margdarshak.org.in Email: [email protected] No.-U65921UP1996PLC019924

Margdarshak Financial Services Ltd Annual report 2015-16 · 2018. 9. 24. · finance. He has served...

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