1996
KARVY CONSULTANTS LIMITED
DIRECTORS REPORT
Your Directors have pleasure in presenting the 14th Annual Report, together
with the Balance Sheet and the Profit{ & Loss Account, for the period ended
30.04.1996.
01. DIVIDEND:
Your Directors recommend a dividend of 20% on the enhanced to quit share
capital and 15% (prorata) on the preference share capital of your Company
for the period under review. Your Company continues to pursue a
conservative dividend pay-out policy,in-view of the necessity to
retain,surplus funds for on-going expansion plans and increased working
capital needs.
02. ACCOUNTING YEAR:
In order to facilitate reflection of the increase in share capital, the
accounting year under review was for an extended period of thirteen months
comprising of 1-4-95 to 30-4-96.
03. SHARE CAPITAL :
Your Directors report that during the period under review, the equity share
capital of the Company was increased to Rs 300 lakhs by capitalising, an
amount of Rs.225 lakhs from the general reserves through an issue of bonus
shares in the proportion of 3 equity shares for every one equity share
held. Further, your Company issued 15% cumulative, convertible, redeemable
preference shares of Rs.100/- each for cash at a premium of Rs.1,070/- per
share aggregating to Rs.1107 lakhs to Jardine Fleming India Securities Pvt
Ltd. The increase in the share capital was required to fund the Company's
expansion plans and the natural growth of the existing businesses.
The total share capital of the Company stands at Rs.394.61 lakhs and the
reserves at Rs.1995.89 lakhs.
04. OPERATIONS:
Your Company continues to take effective steps in broad-basing its range of
activities and increasing its streams of income. In under to fulfill its
objective of becoming an integrated financial services provider, the
Company has, during the year under review established different divisions
for undertaking a wide range of activities. A review of each of the
divisions of the Company is given below:
A. Registrars:
Your company continues to maintain its leadership position in this sphere
of activity During the year under review, your Company has undertaken a
total of 84 assignments as Registrars to issues and serviced over 175
cooperates and mutual funds, as Registrars and transfer agents. Your
Company achieved a 28% market share in terms of the total capital
mobilised through domestic public offers during the year 95-96.
In view of the structural changes in the capital market, effective steps
were initiated by your Company in streamlining the operations of this
division by relocating the manpower and reducing the turn arounding time.
This activity continues to be an area of focus and future endeavours would
be to further improve the quality of investor service
B> Asset Financing:
Asset Financing has been identified as one of the key areas in broad basing
activities of your Company. A separate Asset Financing Division was
created during the year under review,,with the objective of undertaking
fund based activities and short term fund syndication. It is a matter of
pride that your Company has made an excellent start and the operations of
this division have helped substantially in maintaining the profitability of
the Company.
Short term fund syndication is being looked upon as an area of key focus in
future by virtue of leveraging on reiationships built by the Company with
varioUs-Corporate. The gross disbursements under various products exceeded
Rs 3,600 lakhs and the amount syndicated for clients was in excess of Rs
1400 lakhs, during the period under review.
C. Distribution of Retail Financial Products:
Your Company has, with the objective of leveraging its infrastructure and
existing distribution capablilties, taken effective steps in creating a
structure for distribution and marketing of fixed income products. Karvy
Deposit or Services, as a division of your Company, commenced its
activities during the year under review. This division focuses on
mobilization of fixed deposits for various corporate and in the very first
year of operations, the division has been in a position to mobilize over
Rs.2700 lakhs as fixed deposits and other debt instruments. The business in
this division is still in its infancy and substantial investments in terms
of human resources and infrastructure are being contemplated in future.
Your Company also commenced activities for researching and conducting pilot
projects for marketing of various insurance products. Your Directors are
confident that this will emerge as one of the important services of the
Company in the future.
D. Merchant Banking:
A separate division has been created during the year, subsequent to the
Company upgrading its registration with the Securities and Exchange Board
of India to Category Merchant Banker. In addition to underwriting of public
issues, issue management, marketing, distribution and advisory services are
contemplated to be undertaken by this division. Your Directors are pleased
to report that the Company has already received mandates to act as lead
managers/advisors to over ten issues. Your Company proposes to leverage on
its existing strengths, as well as he co-operation agreement entered into
with Jardine Fleming India Securities Pvt. Ltd., in making this an
important fee based activity in the years to come.
E. Corporate Advisory Services:
Your Company has been in the business of providing advisory services in
project finance to small and medium businesses. During the year under
review, a separate division has been created with the objective of
increasing the focus on this activity.
F. Others:
Necessary initiatives have been taken by the Company to assess the
feasibility of establishing a fledgling Custodial Services Division. This
division's preparatory work will commence during the current financial
year.
Your Company has also obtained trading membership the OTCEI during the
year.
Support functions in the form of separate divisions for human resources and
strategic planning, technology including networking, communications and in-
house software development were also created during the year under review.
Your Company places a great deal of emphasis on support functions in order
to enable the Company to upgrade its skill-base and continuously provide a
supportive and motivating work environment for all employees.
The divercifications contemplated during the year are expected to yield
results over the next few years, thereby helping to achieve your Company's
vision of establishing itself as an intrgrated financial services
05. FIXED DEPOSITS :
Your Company has launched a fixed deposits programme during the year under
review. This fixed deposits programme has met with substantial investor
interest and support. ICRA Ltd (The Investment Information and Credit
Rating Agency) awarded your Company the 'MAA' rating for its Fixed Deposit
programme, which indicates a high degree of safety of payment of interest
and repayment of the principal amount. As on 30-4-96, your Company had
Rs.0.70 lakhs in unclaimed deposits, relating to seven deposit holders.
Subsequently six deposits aggregating to Rs.0.65 lakhs have been repaid/
renewed.
06. PERSONNEL:
Your Company believes that its future prosperity and growth will depend to
a great extent, on the quality of its human resources. Your Directors wish
to place on record the contribution rendered by employees across the
Company during the year under review under the trying circumstances of the
depressed market conditions. It is a matter of pride that your Company has
been able to attract good quality professionals who are being provided with
the necessary environment to discharge their managerial and more
particularly, entrepreneurial functions effectively.
Your Directors continue to hold the view that the Company's human resources
are and will constitute the most important and significant intangible asset
of the Company. A great deal of emphasis has also been placed on training,
and the Company is striving hard to attain a high de-gree of proficiency in
this area by initiating training programmes for al the employees on an
ongoing basis . A corporate library has been established and is freely
accessible to all employees, as your Directors believe that your Company
has to be a learning organisation.
A statement giving details of the employees who fall under the provisions
of Section 217 (2A) of the Companies Act, 1956, together with the gross
remuneration paid to them is annexed.
07. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, EXPORTS AND FOREIGN
Exchange EARNINGS AND OUTFLOW:
The details, as required under Section 217 (1 )(e) of the Compnies Act
1956 are as under:
a) Conservation of energy:
The consumption of energy by the Company is not substantial. However, the
Company has taken adequate steps to conserve energy and reduce electricity
costs.
b) Technology absorption:
The Company has updated its technology by acquiring advanced software and
networking infrastructure within India, from leading companies having
licensing arrangements from overseas companies. The Company's endeavor has
been to utilize leading edge technology for enhancing the quality of
investor services.
c) Foreign exchange earnings and outflow:
There was no foreign exchange earning during the year. However the foreign
exchange outflow on account of travelling during the year under review was
Rs. 5.48 lakhs.
08. DIRECTORS:
In terms of the investment in the share capital and the mutual co-operation
agreement entered into by the Company with Jardine Fleming India Securities
Pvt. Ltd., Mr. Roger W.J. Davis and Mr.Andries D. Doves were co-opted on
the Board of Directors of the Company. They retire at the conclusion of
this years Annual General Meeting and being eligible offer themselves for
reappointment. Mr. Rogcr W.J. Davis the Managing Director and Mr. Andries
D. Doves is the Chief Operating Officer of Jardinc Fleming India
Securities Pvt. Ltd. Mumbai.
Mr. M.S. Ramakrishna and Mr. Pradeep N. Mane both directors retire by
rotation and being eligible, offer themselves for reappointment.
Your directors recommend reappointment of the above Directors.
09. AUDITORS
Your Company's auditors Thatta's Chartered Accountants, retire at the
conclusion of this Annual General Meeting and being eligible offer
themselves for reappointment. The Company has received notice from a
shareholder of the Company proposing the appointment of Price Waterhouse,
Chartered Accountants, Mumbai as auditors of the Company. Your directors
recommend appointment of both Thattais and Price Waterhouse as joint
auditors to the Company.
10. FUTURE PROSPECTS
In view of the likely structural changes in the capital market and its
continued lack of activity in the short term, the major expansion-cum-
diversification plan as reported in the last Directors' Report had be
reviewed. The Company now proposes a more conservative approach to acquire
premises and debt in relation to creation of infrastructural facilities.
However, term funding limits will be pursued actively for the Asset
Financing Division. The Company is now in the process of drawing up a
revised five year business plan.
The strategic intent of the Company is to reduce its dependence on income
source linked to the cyclical equities market. With this objectives, your
Company is diversifying into other related financial services, which
utiiise the core strengths of the Company. Your Company will concentrate on
strengthening and substantially increasing the activities in all its
present businesses, and simultaneously upgrading its, technology and human
resources.
The financial health of your company is considered good, and this will be
an asset in achieving the Company's objectives of an integrated financial
services organization Your Directors share the view that the 1long-term
potential of the new business divisions of the Company is considerable, and
hence the long- term prospects of your company are excellent.
12. ACKNOWLEDGEMENTS:
Your Directors acknowledge the support received from all the capital market
intermediaries during the year under review. Their co-operation has
continued to be a major contributor to the good results in a relatively
lean market. Your Company has also availed of credit lines with various
bankers during the year under review. Your Directors firmly believe that
relationship building has been one of the major factors contributing to the
success of your company, and the Company continues its endeavour to build
strong relationships with all its clients and customers. Your Companys
relationship with the bankers has been one of its major strengths, and has
also been an important ponar, factor in its financial performance.
Your Directors also record their deep sense of gratitude to Jardine Fleming
India Securities Pvt. Ltd., for their investment, and also for their belief
and conviction in the potential of your Company to develop into a leading
financial services provider.
For and on behalf of the Foard
C. Parthasarathy
Chairman & Managing Director
Place : Hyderabad
Date : 29th May, 1996.
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