BOARD OF DIRECTORS
As on March 31, 2013, IDFC's Board consisted of 12 Directors, comprising (i) a Non-promoter Non-executive Chairman, (ii) seven Independent Directors, (iii) one Nominee Director of an institution which has invested in the Company, (iv) one Nominee Director of the Government of India, and (v) two Whole-time Directors.
At the Board Meeting held on May 1, 2013, Mr. Deepak Parekh stepped down as a Director and the Non executive Chairman of the Company. At the same Meeting, Dr. Rajiv B. Lall was appointed as the Executive Chairman of the Company and Mr. Vikram Limaye was appointed as the Managing Director & CEO.
The Directors bring to the Board a wide range of experience and skills which include banking, global finance, law, accounting and economics. None of the directors of the Company are related to each other.
As per the extant provisions of Clause 49, where the Chairman is an Executive Chairman, at least half of the Board should be Independent. The Chairman of the Company is an Executive Chairman and majority of the Board of Directors are Independent Directors. Thus, the composition of the Board of Directors of the Company is as stipulated in Clause 49. The details of the Committees of the Board of Directors are provided hereunder.
The Directors are in a fiduciary position and are empowered to oversee the management functions to ensure that these are effective and enhance Shareholder value. The Board’s mandate is to oversee the Company’s strategic direction, review corporate performance, assess the adequacy of risk management and mitigation measures, authorize and monitor strategic investments, ensure regulatory compliance as well as high standards of governance and safeguard interests of all stakeholders.
The Board meets at least once a quarter to review the quarterly results and other items on the agenda and also on the occasion of the Annual General Meeting (AGM) of the Shareholders. Additional meetings are held whenever necessary.
The Company Secretary in consultation with the Chairman, prepares the Agenda and the explanatory notes and circulates these in advance to the Directors. Members of the Board are also free to recommend inclusion of any matter in the agenda for discussion.
Since the Board of IDFC includes Directors from various parts of the world, the Company does make use of its video conferencing facility, when necessary, to enable larger participation of Directors in the meetings.
Senior Management members are invited to attend the Board Meetings, to make presentations and provide additional inputs to the items under discussion. The minutes of each Board / Committee meeting are recorded in the Minutes Book. The minutes of the Board meetings of unlisted subsidiary companies of IDFC are tabled at the Board Meetings. A statement of all significant transactions and arrangements entered into by the unlisted subsidiary companies are also placed before the Board.
During FY13, the Board met six times and the gap between any two meetings was less than four months. The dates of the meetings were May 8, 2012; July 9, 2012; August 14, 2012; October 26, 2012; February 1, 2013 and March 14, 2013.
Directors’ Attendance Record and Directorships Held
None of the Directors holds an office of Director in more than permissible number of Companies under the Companies Act, 1956. Also, the Committee Chairmanships and Memberships are within the limits laid down in Clause 49 of the Listing Agreement.. All Directors inform the Board every year about the Board memberships and Board Committee memberships that they occupy in other companies including Chairmanships in Board and Committees of such companies. Any change in the above as and when that take place is notified by the Directors and placed as a disclosure at the next Board Meeting.
Information Supplied to The Board
The Board has complete access to all information about the Company. Moreover, the following information, whenever it occurs, is regularly provided to the Board as a part of the agenda papers well in advance of the Board
Meetings or, when considered appropriate, tabled in the course of the meeting:
- Annual operating plans and budgets and updates thereof.
- Capital budgets and updates thereof.
- Quarterly results of the Company, it's operating divisions and business segments.
- Minutes of the meetings of the Audit and other Committees of the Board.
- Minutes of the Board meetings of subsidiary companies.
- Information on terms of appointment of the Executive Directors (EDs), the Chief Financial Officer (CFO) and Company Secretary. The terms of appointment of the CFO are also considered by the Audit Committee of the Company.
- Materially important show cause, demand, prosecution notices and penalty notices.
- Any material default in financial obligations to and by the Company, or substantial non-payment for services rendered by the Company, if any.
- Details of any joint venture or collaboration agreements.
- Transactions that involve substantial payment towards goodwill, brand equity or intellectual property.
- Significant developments in human resources and employee relations.
- Sale of a material nature of investments, subsidiaries, assets, which is not in the normal course of business.
- Quarterly details of foreign exchange exposures and the steps taken by Management to limit the risks of adverse exchange rate movement, if and where material.
- Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as non-payment of dividend, delay in share transfer, if any.
The Board periodically reviews compliance reports of all laws applicable to IDFC, as prepared by the Company, as well as steps taken to rectify instances of non-compliances, if these exist.
COMMITTEES OF THE BOARD
Currently, IDFC has six (6) Board-level Committees. These are (i) the Audit Committee, (ii) the Compensation Committee, (iii) the Risk Committee, (iv) the Nomination Committee, (v) the Investors Grievance Committee and (vi) the Executive Committee.
These Committees are formed to delegate particular matters that require greater and more focused attention. The Committees prepare the groundwork for decision making and recommend their views to the Board. Majority of the members of the Committee consist of Independent Directors. All decisions pertaining to the constitution of committees, appointment of members in different committees and fixing of terms of reference for the committees are taken by the Board of Directors.
As on March 31, 2013, the Audit Committee comprised five members, all of whom are Independent Directors. The Committee met six times during FY13: on May 8, 2012, August 14, 2012, October 10, 2012, October 26, 2012, January 31, 2013 and March 14, 2013.
The CFO and the representative of the Statutory Auditors and Internal Auditors are permanent invitees to the Audit Committee meetings. Mr. Mahendra N. Shah, Company Secretary of IDFC, is the secretary to the Committee. The quorum of the meeting is three members.
All members of the Audit Committee are financially literate and have accounting and financial management expertise. Mr. S. H. Khan, Chairman of the Audit Committee, was present at the Company’s previous AGM held on July 9, 2012.
The functions of the Audit Committee include the following:
- Oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.
- Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the Statutory Auditor and the fixation of audit fees.
- Approving appointment of the CFO after assessing the qualifications, experience and background, etc. of the candidate.
- Approving payment to statutory auditors for statutory audits and any other services rendered by them.
- Reviewing, with the Management, the annual financial statements before submission to the Board for approval, with particular reference to:
- matters required to be included in the Directors Responsibility Statement and in the Board’s report in terms of Clause (2AA) of Section 217 of the Companies Act, 1956.
- changes, if any, in accounting policies and practices and reasons for the same.
- major accounting entries involving estimates based on the exercise of judgment by Management.
- significant adjustments made in the financial statements arising out of audit findings, if any.
- compliance with listing and other legal requirements relating to financial statements.
- disclosure of related party transactions, where these exist.
- qualifications in the draft audit report, if any.
- Reviewing, with Management, the quarterly financial statements before submission to the Board for approval.
- Reviewing, with Management, performance of statutory and internal auditors, adequacy of the internal control systems.
- Reviewing the adequacy of internal audit function, including coverage and frequency of internal audits.
- Discussing with the internal auditor any significant findings and follow-up thereof.
- Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting such matters to the Board.
- Discussing with statutory auditors regarding the nature and scope of their audit, going forward, as well as post-audit discussions to ascertain any area of concern.
- Examining the reasons for any substantial defaults in the payment to the depositors, debenture-holders, shareholders (in case of non payment of declared dividends) and creditors, if any.
Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.
The Audit Committee is empowered to:
- investigate any activity within its terms of reference and seek any information it requires from any employee;
- obtain legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise, when considered necessary.
IDFC has systems and procedures in place to ensure that the Audit Committee mandatorily reviews:
- statement of significant related party transactions, (as defined by the Audit Committee), submitted by Management;
- Management letters / letters of internal control weaknesses issued by the statutory auditors;
- Internal audit reports relating to internal control weaknesses;
- the appointment, removal and terms of remuneration of the internal auditor;
- whenever applicable, the use / application of funds raised through public issues, rights issues, preferential issues by major category, as part of the quarterly and annual declaration of financial results;
- if applicable, on an annual basis, statement certified by the statutory auditors, detailing the use of funds raised through public issues, rights issues, preferential issues for purposes other than those stated in the offer document / prospectus / notice.
- the Management Discussion & Analysis of the financial condition and results of operations;
In addition, the Audit Committee also reviews the financial statements, in particular, the investments made by the unlisted subsidiary companies.
The Audit Committee is also appraised on information with regard to related party transactions by being presented:
- a statement in summary form of transactions with related parties in the ordinary course of business;
- details of materially significant individual transactions with related parties which are not in the normal course of business;
- details of material significant individual transactions with related parties or others, which are not on an arm’s length basis along with Management’s justification for the same.
The minutes of the Audit Committee are circulated to the Members of the Board and are taken note of.
At the meeting of the Board of Directors held on May 1, 2013, the Audit Committee was reconstituted by inducting Ms. Snehlata Shrivastava as a Member. The revised constitution of the Audit Committee is as under:
Mr. S. H. Khan (Chairman)
Dr. Omkar Goswami
Mr. Gautam Kaji
Ms. Marianne Økland
Ms. Snehlata Shrivastava
As of March 31, 2013, the Compensation Committee of IDFC comprised five Directors, none of whom is an executive of the Company. The Committee met on May 8, 2012.
The Compensation Committee recommends to the Board, the compensation terms of Executive Directors (EDs) and key Senior Managerial Personnel (SMP) one level below the Board. It has the overall responsibility of approving and evaluating compensation plans, policies and programmes for EDs and SMPs.
IDFC has in place mechanisms to inform the Board Members about the risk assessment and minimisation procedures and periodical review to ensure that Executive Management controls risk by means of a properly defined framework. It is a Board-level Risk Committee and it monitors risk management of the Company on a regular basis. The Chairman of the Committee, Mr. Gautam Kaji, reports it's findings/observations to the Board. It reviews and monitors mainly four types of risks across the organisation: credit risk, market risk, liquidity risk and operational risk. This is done under the overall framework of the Enterprise Risk Management System. The quorum for any meeting of this Committee is three. The Committee met four times during the year under review: on May 8, 2012, August 14, 2012, October 26, 2012 and January 31, 2013. Attendance details of Risk Committee Meetings are given in Table 5.
At the meeting of the Board of Directors held on May 1, 2013, the Risk Committee was reconstituted by inducting Mr. Vikram Limaye as a Member. The revised constitution of the Risk Committee is:
Mr. Gautam Kaji (Chairman)
Mr. S. H. Khan
Dr. Rajiv B. Lall
Ms. Marianne Økland
Mr. Vikram Limaye
THE NOMINATION COMMITTEE
The Nomination Committee assists the Board in identifying, screening and reviewing individuals qualified to serve as EDs, NEDs and Independent Directors consistent with the criteria approved by the Board. It also works with the Board for orderly succession of leadership within the Board and the Company. The Committee met on May 8, 2012. Attendance details of Nomination Committee Meetings are given in Table 6.
Consequent upon Mr. Deepak Parekh ceasing to be the Director of the Company, the Nomination Committee was reconstituted on May 1, 2013 and now comprises the following members:
Dr. Rajiv B. Lall (Chairman)
Mr. Gautam Kaji
Mr. Donald Peck
Dr. Omkar Goswami
STAKEHOLDERS' RELATIONSHIP COMMITTEE
As of March 31, 2013, the Stakeholders' Relationship Committee consists of four Directors, two of whom are Independent. Mr. S. H. Khan, the Chairman of the Committee is an Independent Director and was present at the AGM held on July 9, 2012. The Committee met four times during the year: on May 8, 2012, August 14, 2012, October 26, 2012 and January 31, 2013.
The Committee is empowered to perform the functions of the Board in relation to handling of Shareholders’ complaints and grievances. It primarily focuses on:
a. Review of investor complaints and their redressal.
b. Review of queries received from investors.
c. Review of work done by the share transfer agent.
d. Review of corporate actions related to investor issues.
Mr. Mahendra N. Shah, the Company Secretary officiates as the Secretary of the Committee and is also designated as Compliance Officer in terms of the Listing Agreement with the Stock Exchanges .
Consequent upon Mr. Deepak Parekh ceasing to be the Director of the Company, the Investors Grievance Committee was reconstituted on May 1, 2013 and the Committee now comprises the following members:
Mr. S. H. Khan (Chairman)
Dr. Omkar Goswami
Dr. Rajiv B. Lall
Mr. Vikram Limaye
SHARES AND CONVERTIBLE INSTRUMENTS HELD BY NEDs
As on March 31, 2013, none of the NEDs held any shares or convertible instruments of the Company.
APPOINTMENT AND RE-APPOINTMENT OF DIRECTORS
The Board, at its meeting held on October 26, 2012, appointed Mr. Joseph Dominic Silva, nominee of Sipadan Investments (Mauritius) Limited, as an Additional Director in place of Mr. Abdul Rahim Abu Bakar. Upon the resignation of Mr. Abdul Rahim Abu Bakar on October 26, 2012, his Alternate Director Mr. Michael Fernandes also ceased to hold the position of Alternate Director with effect from October 26, 2012.
Ministry of Finance (MoF), Government of India nominated Ms. Snehlata Shrivastava, Additional Secretary, Department of Financial Services, MoF, as Director on the Board of IDFC in place of Mr. Sunil Soni (former Additional Secretary, Department of Financial Services, MoF). Accordingly, at the Board Meeting dated February 1, 2013, Ms. Snehlata Shrivastava was appointed as an Additional Director in place of Mr. Sunil Soni.
At the Board Meeting held on May 1, 2013, Mr. Deepak Parekh resigned as the Non - executive Chairman of the Company. Mr. Parekh would, however, remain associated with your Company in his new role as Chairman of IDFC’s Advisory Council, a consultative body, comprising of 3-4 eminent persons, to be constituted by the Company in few months.
The Nomination Committee of the Company, at its meeting held on May 1, 2013, recommended the appointment of:
- Dr. Rajiv B. Lall as Executive Chairman of the Company, and
- Mr. Vikram Limaye as Managing Director & CEO of the Company,
w.e.f. May 2, 2013 for a period of 3 years on the same terms and conditions as approved by Shareholders at the last AGM held on July 9, 2012.
The Compensation Committee of the Company, at its meeting held on May 1, 2013, also recommended the terms of appointment of Dr. Rajiv B. Lall and Mr. Vikram Limaye, to be the same as were approved by Shareholders at the AGM held on July 9, 2012.
Based on the recommendation of Nomination and Compensation Committees, and subject to the approval of the Members at the ensuing AGM, the Board of Directors at its meeting held on May 1, 2013, granted its approval for the appointment of Dr. Rajiv B. Lall as Executive Chairman and Mr. Vikram Limaye as Managing Director & CEO with effect from May 2, 2013 for a period of 3 years; on the same terms and conditions as approved by Shareholders at the last AGM held on July 9, 2012.
Dr. Omkar Goswami and Mr. Shardul Shroff are retiring by rotation and being eligible, offer themselves for re-appointment in the ensuing AGM.
Brief resume of the Directors getting appointed or re-appointed are given in the Exhibit to Notice of the AGM.
MEANS OF COMMUNICATION WITH SHAREHOLDERS
As per Clause 54 of the Listing Agreement, IDFC maintains a website (www.idfc.com) containing basic information about the Company, such as details of its business, financial information, shareholding pattern, compliance with corporate governance, contact information of the designated officials who are responsible for assisting and handling investor grievances. It also displays all official press releases and presentation to analysts made by the Company. Information on this website is regularly updated.
As per Clause 52 of the Listing Agreement, information about the financial results, shareholding pattern and other specified details are now electronically filed through the Corporate Filing & Dissemination System (CFDS). Investors can visit the websitewww.corpfilling.co.in to view such data. NSE and BSE have introduced their respective electronic platforms namely NSE Electronic Application Processing System (NEAPS) and BSE Corporate Listing Centre - Online Portal for submission of various filings by Listed Companies. The Company ensures that the said compliances are also done/ filed through these systems in addition to dissemination of information by email or fax.
The quarterly, half-yearly and annual results of the Company’s performance are published in leading newspapers like the Business Standard for all-India, Hindu Business Line, and Makkal Kural in Chennai and also displayed on the website of the Company.
ALTERATION OF ARTICLES OF ASSOCIATION AND CHANGE OF NAME
The Shareholders of the Company at the AGM held on July 9, 2012 had approved the change of name of the Company to IDFC Limited. Pursuant to this, the Registrar of Companies in its letter dated July 20, 2012 had approved the new name i.e. IDFC Limited.
SPECIAL RESOLUTIONS PASSED AT THE AGM HELD ON JULY 29, 2013
The Company had sought the approval of the Members of the Company by way of Special Resolution in respect of the following proposals:
(i) decreasing the limit of FII holding and SEBI approved sub-accounts in the Equity Share Capital from 74% to 54% at an appropriate time as may be decided by the Board,
(ii) additional 2% Equity Shares under ESOS,
(iii) approval for payment of Commission to NEDs not exceeding 1% of the Net Profit of the Company calculated in accordance with the provisions of Sections 198, 349 and 350 of the Companies Act, 1956 for a period of 5 years from April 1, 2013 to March 31, 2018. The shareholders accorded their approval in respect of all the above special resolutions with requisite majority at the AGM held on July 29, 2013.
ANNUAL AND EXTRA-ORDINARY GENERAL MEETING OF SHAREHOLDERS
The following Special Resolutions were taken up in the last three AGMs and were passed with requisite majority.
AGM held on June 28, 2010:
(i) Appointment of Statutory Auditors; and
(ii) Raising of capital.
AGM held on July 27, 2011:
(i) Appointment of Statutory Auditors.
AGM held on July 9, 2012:
(i) Appointment of Statutory Auditors;
(ii) Change of name of the Company; and
(iii) Alteration of Articles of Association of the Company.
During the year FY13, there were no ordinary or Special Resolutions that were required to be passed by our Shareholders through Postal Ballot. During FY14, the Company may pass Special Resolution through Postal Ballot, as and when required, pursuant to the applicable rules pertaining to the same.
ADOPTION OF NON-MANDATORY REQUIREMENTS
||The Board has put in place a duly constituted Compensation Committee.
||During the period under review, there is no audit qualification in the Company’s financial statements. Your Company continues to adopt best practices to ensure regime of unqualified financial statements.
||Whistle Blower Policy
||The Company promotes ethical behaviour in all its business activities and has also put in place a mechanism wherein the employees are free to report concerns about unethical behaviour, actual or suspected fraud or violation on the Company’s Code of Conduct. It also provides adequate safeguards against
the victimization of employees, who avail of the mechanism, and allows direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle Blower policy has been appropriately communicated within the Company.