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Corporate Governance Report

IDFC’s philosophy on Corporate Governance

Being a professionally run enterprise with no single promoter or promoter group, effective board oversight and sound Corporate Governance practices are fundamental to IDFC’s quest of delivering long-term value to all its stakeholders. Good Corporate Governance is intrinsic to the management of the affairs of IDFC.
IDFC Limited (“IDFC” or “the Company”) is fundamentally a financial intermediary. Its businesses focus on maximising return on assets, while managing inherent risks. The Company believes that sound Corporate Governance is critical for enhancing and retaining investor trust. Therefore, it always seeks to ensure that its performance goals are met with integrity. By adopting such a framework as it does, IDFC emphasises on appropriate and timely disclosures and transparency in its business dealings.

Corporate Governance is a continuous process at IDFC. It is about commitment to values and ethical business conduct. Systems, policies and frameworks are regularly upgraded to meet the challenges of rapid growth in a dynamic external business environment. Governance practices not only deal with the growing size of the business, but also increase in complexities of the organisational structure that supports such growth.

In India, Corporate Governance standards for listed companies are regulated by the Securities and Exchange Board of India (“SEBI”) through Clause 49 of the Listing Agreement with the Stock Exchanges. The New Companies Act, 2013 is brought in line with certain provisions of Clause 49 of the Listing Agreement. As a Company which believes in implementing Corporate Governance practices that go beyond just meeting the letter of law, IDFC not only meets with the mandated elements of Clause 49, but also incorporates the certain non-mandatory recommendations.

Recently, SEBI sought to amend the equity listing agreement to bring in additional corporate governance norms for listed entities which would be effective October 1, 2014. These norms provide for stricter disclosures and protection of investor rights, including equitable treatment for minority and foreign shareholders.

This chapter, read with the chapters on Management Discussion & Analysis and Additional Shareholder Information, reports IDFC’s compliance with Clause 49 of the Listing Agreement.


 

BOARD OF DIRECTORS

COMPOSITION
As on March 31, 2014, IDFC’s Board consisted of 11 Directors, comprising (i) two Whole-time Directors consisting of an Executive Chairman and Managing Director & CEO; (ii) seven Independent Directors (“IDs”); (iii) one Nominee Director of an institution which has invested in the Company and (iv) one Nominee Director of the Government of India (“GoI”). 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 is related to each other.

At the Board Meeting held on June 3, 2014, Mr. Shardul Shroff resigned as an Independent Director of the Company.

As per the provisions of Section 149(4) of the Companies Act, 2013, every listed company shall have at least one-third of the total number of Directors as Independent Directors. However, the provisions of Clause 49 state that where the Chairman is an Executive Director of the Company, at least half of the Board should comprise Independent Directors. The Chairman of IDFC is an Executive Director and accordingly, majority of the Board consists of Independent Directors. Thus, the composition of the Board of Directors of the Company is in compliance of Companies Act, 2013 and Clause 49 of the Listing Agreement.

The Directors oversee the management functions to ensure that these are effective and enhance shareholder value. The Board’s mandate inter alia is to have oversight of the Company’s strategic direction, to review corporate performance, assess the adequacy of risk management and mitigation measures, to authorise and monitor strategic investments, to ensure regulatory compliance as well as high standards of governance and safeguard interests of all stakeholders.

BOARD MEETINGS

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.

In consultation with the Chairman, the Company Secretary 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 video conferencing facility and other audio-visual means, when necessary, to enable larger participation of Directors in the meetings.

Members of the Senior Management are invited to attend the Board Meetings, 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 Board Meetings of unlisted subsidiary companies of IDFC are periodically tabled at the Company’s Board Meetings. A statement of all significant transactions and arrangements entered into by the unlisted subsidiary companies are also placed before the Board.

During FY14, the Board met six times and the gap between any two meetings was less than four months. The dates of the meetings were: May 1, 2013; June 18, 2013; July 29, 2013; October 31, 2013; January 31, 2014 and March 14, 2014.

INFORMATION PROVIDED 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 which are sent 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, its operating divisions and business
    segments. These results are reviewed by the Audit Committee and recommended
    to the Board.
  • Minutes of the meetings of the Audit and other Committees of the Board and abstracts of circular resolutions passed.
  • Minutes of the Board Meetings of
    subsidiary companies.
  • Information on recruitment and 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, if any.
  • 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 compliances of all laws applicable to IDFC, as well as steps taken to rectify instances of non-compliances, if these exist.

CODE OF CONDUCT

The Board of Directors have laid down a Code of Conduct for all Directors and designated Senior Management Personnel (“SMPs”) of the Company. The code is available on the website of the Company www.idfc.com. All Board members and designated SMPs have affirmed their compliance with the Code. A duly signed declaration to this effect signed by the Chief Executive Officer is enclosed at the end of the chapter on Additional Shareholder Information.

All the IDs of the Company have given a declaration of Independence pursuant to Section 149(6) and 149(7) of the Companies Act, 2013 read with Rule 5 of Companies (Appointment and Qualification of Directors) Rules, 2014 along with their affirmance to the Code of Independent Directors as prescribed under Schedule IV of the Companies Act, 2013.

ADVISORY COUNCIL

During the year, IDFC constituted the Advisory Council, comprising four eminent personalities. These are given in Table 2.

The Advisory Council of IDFC is a high level consultative body that provides support and advice to Management and Board of Directors of IDFC on issues pertaining to business strategy including, but not limited to, foray into new business areas, acquisitions and diversification of the business, corporate citizenship and corporate governance. The vast experience of the members of the Council and their insights would add great value to the Board of Directors and Management to appropriately advance IDFC’s mission and business goals.

The Advisory Council members would provide unique industry insights and support the exploration of new business ideas. The Council would help the Board of Directors to understand external environment, potential risks and future drivers of growth. The Council would provide guidance for active leadership on operational, environment and sustainability related matters, relevant to the business through outreach to network of contacts. The Council will help increase stakeholder confidence in the Company, including among investors, government, regulators and other public organisations. The 1st Meeting of the Council was held on April 14, 2014.

Brief Profiles of the members of the Council is as follows:

Mr. Deepak Parekh
Mr. Deepak Parekh had been the Non-Executive Founding Chairman of IDFC from inception till May 1, 2013. He is currently the Chairman of Housing Development Finance Corporation Limited (“HDFC”), India’s premier Housing Finance Institution. A Chartered Accountant by profession, Mr. Parekh is at the financial helm of India Inc. Mr. Parekh began his career with Ernst & Ernst Management Consultancy Services in New York and later worked with Grindlays Bank and Chase Manhattan Bank. Subsequently, he joined HDFC in 1978 and has served as its chairman since 1993. He has been associated with various committees set up by the Government of India. He was conferred the Padma Bhushan by the President of India in 2006 for his contribution in the field of trade and industry. He has been associated with various committees set up by the Government of India, Advisory Group for “Securities Market Regulation”; High Level Group for the restructuring of 3 weak Public Sector Banks. He was awarded the “Businessman of the Year” in 1996 from Business India and the JRD Tata corporate leadership award from the All India Management Association. Mr. Parekh received a Bachelor of Commerce degree from Sydenham College of Commerce & Economics of Bombay University.


Mr. R. Chandrashekhar
Mr. R. Chandrashekhar, was the Chairman of Telecom Commission and Secretary to the Department of Telecommunication till March 2013 and is currently serving as the President of Nasscom. He has extensive experience of formulating and implementing policies, strategies and action plans to foster the growth of both Telecom and IT industries covering the entire enabling eco-system including Infrastructure, Human Resource Development, e-governance and establishing Public Private Partnerships. Mr. Chandrashekhar was instrumental in establishing the first department of Information Technology in the country in Andhra Pradesh and was Secretary of the department from June 1997 to December 1999. The policies and strategies he formulated catapulted the state to the forefront of the country in the sector and AP became a role model for other states and countries. He was conferred the Prime Minister’s Award for excellence in public administration for the year 2007-08. He has been conferred several awards including Data Quest Path Breaker of the Year Award in 2005 and Distinguished Alumnus award of IIT-Mumbai in 2010. He obtained a M.Sc. in Chemistry from IIT, Bombay and a MS degree in Computer Science from Pennsylvania State University.


Mr. Vinod Rai
Mr. Vinod Rai was Comptroller and Auditor General of India. He is the current chairman of UN Panel of External Auditors. Mr. Rai has wide experience of working in various capacities at both, the Central and State Governments. His previous position was as Secretary in the Ministry of Finance - GoI, where he was responsible for managing the Financial Services sector, including banks and insurance companies. He had been a Director on several Boards including the State Bank of India, ICICI Bank, IDBI Bank, Life Insurance Corporation of India and IDFC. Mr. Rai was instrumental in setting up the India Infrastructure Finance Company Limited and was also on the Board of this company. Mr. Rai has also been the Principal Secretary (Finance) in the State Government of Kerala, apart from holding senior positions in the Ministries of Commerce and Defence, GoI. Mr. Vinod Rai has a Masters Degree in Economics from Delhi School of Economics, University of Delhi. He has a Masters Degree in Public Administration from Harvard University, USA.


Dr. Jaimini Bhagwati
Dr. Jaimini Bhagwati, a noted economist and veteran diplomat, is a member of the 1976 batch of the Indian Foreign Service (“IFS”). He brings with him rich experience, having served inter alia as the Indian Ambassador to Belgium, Luxembourg and the EU, in the Ministry of External Affairs in various senior positions, in the Ministry of Finance and also the World Bank besides being India’s envoy to the UK during his 33 years of diplomatic career. Immediately prior to being appointed India’s Ambassador to Belgium, Luxembourg and the EU, Dr. Bhagwati served as Additional Secretary in the Ministry of External Affairs, GoI and earlier as Chief, Corporate Finance in the World Bank. He has also served as Joint Secretary (Capital Markets, External Commercial Borrowings and Pension Reforms) in the Department of Economic Affairs in the GoI. During his career he has developed wide experience in financial and economic matters with specialisation in capital markets. He also has considerable experience of working on foreign policy issues related to Central Asia, Europe, Russia, Bangladesh, Sri Lanka and Cuba.
He holds Doctorate in Finance and Masters in Physics.

 

 

COMMITTEES OF THE BOARD

As of March 31, 2014, IDFC had the following Board-level Committees: (i) the Audit Committee; (ii) the Compensation Committee; (iii) the Nomination Committee; (iv) the Risk Committee; (v) the Investors’ Grievance Committee (Stakeholders’ Relationship Committee) and (vi) the Executive Committee. 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.

These Committees help to delegate particular matters that require greater and more focused attention. They also prepare the groundwork for decision making and recommend their views to the Board. Majority of the members of all the above Committees consist of IDs. Mr. Mahendra N. Shah officiates as the Secretary to all the Committees.

Details on the role and composition of these committees, including the number of meetings held during FY14 and the attendance of each member, are given hereinafter.

A.

AUDIT COMMITTEE
As on March 31, 2014, the Audit Committee comprised six members, five of whom are IDs and one Nominee Director. The Committee met four times during FY14: on May 1, 2013; July 29, 2013; October 31, 2013 and January 31, 2014. The time gap between any two meetings was less than four months.

The CFO and the representatives 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 3 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 29, 2013.

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, reappointment and, if required, the replacement or removal of the Statutory Auditors 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 Management, the annual financial statements before submission to the Board for approval, with particular reference to:
    1. 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.
    2. changes, if any, in accounting policies and practices and reasons for the same.
    3. major accounting entries involving estimates based on the exercise of judgement by Management.
    4. significant adjustments made in the financial statements arising out of audit findings, if any.
    5. compliance with listing and other legal requirements relating to financial statements.
    6. disclosure of related party transactions, where these exist.
    7. 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.
  • Any other terms of reference as may be, included from time to time in Clause 49 of the Listing Agreement.

The Audit Committee is also empowered to: (i) investigate any activity within its terms of reference and seek any information it requires from any employee and (ii) obtain legal or other independent professional advice and to secure the services of outsiders with relevant experience and expertise, when necessary.

IDFC has systems and procedures in place to ensure that the Audit Committee mandatorily reviews:

  • Statement of significant related party transactions, submitted by Management;
  • Management letters / letters of internal control weaknesses issued by the Statutory Auditors;
  • Internal audit reports relating to internal control weaknesses, if any;
  • The appointment, removal and terms of remuneration of the Internal Auditor;
  • Whenever applicable, monitoring the end 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 and having its views taken on:

  • 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; and
  • Details of materially 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.

   

B.

COMPENSATION COMMITTEE
As of March 31, 2014, the Compensation Committee of IDFC comprised five Directors, none of whom is an Executive of the Company. The Committee met five times during FY14: on April 25, 2013; May 1, 2013; October 31, 2013; February 25, 2014 and March 14, 2014. Dr. Omkar Goswami, the Chairman of the Compensation Committee, was present at the AGM held on July 29, 2013.

The Compensation Committee recommends to the Board the compensation terms of EDs and key SMP one level below the Board. It has the overall responsibility of approving and evaluating compensation plans, policies and programmes for EDs and SMP.
IDFC pays remuneration to EDs by way of salary, perquisites and retirement benefits (fixed component) and a variable component based on the recommendation of the Compensation Committee and approval of the Board and the Shareholders of the Company, which is separately disclosed in the financial statements. The remuneration paid to EDs is determined keeping in view the industry benchmark and the relative performance of the Company vis-à-vis industry performance. The minutes of the Compensation Committee are reviewed by the Board.

The Non-Executive Directors (“NEDs”) are paid remuneration by way of commission and sitting fees. In FY14, IDFC paid sitting fees of ` 20,000 per meeting for attending the Board and the Committee Meetings. Commission is paid as per the limit approved by the shareholders of the Company at the 16th AGM  held on July 29, 2013 of a sum not exceeding 1% of the net profits of IDFC Limited, computed in accordance with Section 309(5) of the Companies Act, 1956. The Commission is distributed on the basis of attendance and contribution at the Board and Committee Meetings as well as Chairmanship of Committees. The Company has not granted any stock options to NEDs / IDs. For FY14, IDFC will pay a sum of ` 15,000,000 as commission to its NEDs.

During FY14, the Company did not advance loans to any of its Directors. None of the Directors is entitled to severance fee and none of the NEDs hold any stock options as at March 31, 2014. The notice period for Dr. Rajiv B. Lall, the Executive Chairman and Mr. Vikram Limaye, Managing Director & CEO is three months. None of the employees of the Company is related to any of the Directors. There are no inter-se relationships between Board members.

   

C.

THE NOMINATION COMMITTEE
The Nomination Committee assists the Board in identifying, screening and reviewing individuals qualified to serve as EDs, NEDs and IDs 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 1, 2013. Attendance details of Nomination Committee Meetings are given in Table 7.
Pursuant to the provisions of Section 178(1) of the Companies Act, 2013, the Board of Directors of the Company, at its meeting held on June 3, 2014, combined the Nomination Committee and Compensation Committee of the Company and the new Committee named as “Nomination and Remuneration Committee” (“NRC”) was formed to handle / manage all the matters issues previously handled / managed by Nomination Committee and Compensation Committee.

   

D.

RISK COMMITTEE
IDFC has in place mechanisms to inform the Board about its risk assessment and minimisation procedures with periodical reviews to ensure that the Executive Management controls risk through a Board-approved properly defined framework. This is done through its Board-level Risk Committee and it monitors risk management of the Company on a regular basis.

The Risk Committee 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. Mr. Gautam Kaji, Chairman of the Committee, reports the findings / observations of the Committee to the Board.

The Committee met four times during the year under review on May 1, 2013; July 29, 2013; October 31, 2013 and January 31, 2014.

   

E.

INVESTORS’ / SHAREHOLDERS’ GRIEVANCE COMMITTEE (“IGC”)
As of March 31, 2014, the IGC consists of four Directors, two being Independent. Mr. S. H. Khan, the Chairman of the Committee is an Independent Director and was present at the AGM held on July 29, 2013. The Committee met four times during the year: on May 1, 2013; July 29, 2013; October 31, 2013 and January 31, 2014.
Section 178 of the Companies Act, 2013 inter alia requires the listed company to constitute a Stakeholders Relationship Committee for resolving the grievances of it’s security holders. The aforesaid IGC takes care of the issues for which Stakeholders Relationship Committee is required to be constituted. Accordingly, in terms of the said Section 178 of the Companies Act, 2013, the Board of Directors of the Company, at its meeting held on April 25, 2014, renamed the existing IGC as “Stakeholders Relationship Committee” having same terms of reference and composition.

The Committee is empowered to perform the functions of the Board in relation to handling of shareholders’ and other investors’ complaints and grievances. It primarily focuses on:

  • Review of investor complaints and their redressal.
  • Review of queries received from investors.
  • Review of work done by the share transfer agent.
  • Review of corporate actions related to investor issues.

Mr. Mahendra N. Shah, the Company Secretary is designated as Compliance Officer in terms of the Listing Agreement with the Stock Exchanges. In terms of Clause 47(f) of the Listing Agreement, the designated e-mail address for investor complaints is mahendra.shah@idfc.com.

   

F.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

As per the Companies Act, 2013, all companies having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year will be required to constitute a Corporate Social Responsibility (“CSR”) Committee of the Board consisting of three or more directors, out of which atleast one director shall be an Independent Director. Accordingly, the Board of Directors of the Company, at its meeting held on April 25, 2014 constituted the “CSR Committee” pursuant to Section 135 of the Companies Act, 2013 and corresponding Rules pertaining to CSR.

The purpose of the Committee is to formulate and monitor the CSR policy of the Company.

Shares and Convertible Instruments held by NEDs
As on March 31, 2014, none of the NEDs held any shares or convertible instruments of the Company.

Appointment / Reappointment of Directors
Pursuant to provisions of Section 152(6) of Companies Act, 2013, Mr. Joseph Dominic Silva would be retiring by rotation and being eligible, offers himself for reappointment in the ensuing AGM.

Mr. S. H. Khan, Mr. Donald Peck and Mr. Gautam Kaji, IDs of the Company, were liable to retire by rotation at the ensuing AGM under the erstwhile Companies Act, 1956. Accordingly, the Board of Directors at its Meeting held on June 3, 2014 recommended to the Shareholders, the appointment of the above three Directors as IDs. MCA vide its circular dated June 9, 2014 clarified that if the existing IDs are to be appointed under the Companies Act, 2013, the Company would be required to appoint those IDs within period of one year from April 1, 2014. Accordingly, the Company would appoint the remaining IDs within the prescribed period. The Members are requested to consider the appointment of Mr. S. H. Khan, Mr. Donald Peck and Mr. Gautam Kaji as IDs for a period of two consecutive years from the date of the ensuing Seventeenth AGM to the conclusion of the Nineteenth AGM of the Company.

Brief profiles of all the Directors getting appointed / reappointed is given in the Exhibit to Notice of the AGM.

 

 

MANAGEMENT

MANAGEMENT DISCUSSION & ANALYSIS

The Annual Report has a separate chapter titled Management Discussion & Analysis.


DISCLOSURES

During the year, there were no materially significant related party transactions that could have any potential for conflict with the interest of the Company at large. Transactions with related parties entered into by the Company in the normal course of business were placed before the Audit Committee. Details of related party transactions are included in the Notes to the Accounts.

Disclosure of Accounting Treatment in Preparation of Financial Statements
The Financial Statements of the Company have been prepared in accordance with Generally Accepted Accounting Principles in India (“Indian GAAP”) to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 (‘the 1956 Act’) [which continues to be applicable in respect of Section 133 of the Companies Act, 2013 (‘the 2013 Act’) in terms of General Circular 15 / 2013 dated September 13, 2013 of the Ministry of Corporate Affairs] and the relevant provisions of the 1956 Act / 2013 Act, as applicable.

Confirmation of Compliance
IDFC has complied with all the requirements of regulatory authorities. No penalties or strictures were imposed on the Company by Stock Exchanges or the SEBI or any statutory authority on any matter related to capital market during the last three years.

Code for Prevention of Insider Trading
In compliance with the SEBI Regulations on Prevention of Insider Trading, the Company has instituted a comprehensive Code of Conduct for its Management and staff. It lays down guidelines which advises employees on procedures to be followed and disclosures to be made while dealing with the shares of the Company and cautions them of the consequences of violations.

Anti-Money Laundering and Know Your Customer Policy
In keeping with specific requirements for a Non-Banking Financial Company, the Company has formulated an Anti-Money Laundering and Know Your Customer Policy.

Subsidiary Companies
Clause 49 defines a material non-listed Indian subsidiary as an unlisted subsidiary, incorporated in India, whose turnover or net worth (i.e. paid-up capital and free reserves) exceeds 20% of the consolidated turnover or net worth of the listed holding company and its subsidiaries in the immediately preceding accounting year. By this definition, IDFC does not have any material non-listed Indian subsidiary. The Audit Committee reviews the financial statements of the subsidiary companies and the investments made by its unlisted subsidiaries.

CEO and CFO Certification
The CEO and CFO certification of the financial statements for FY14 is enclosed at the end of the chapter on Additional Shareholder Information.

 
 

 

SHAREHOLDERS

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.

Pursuant to 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 website www.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. IDFC ensures that the requisite compliances are also done / filed through these systems in addition to dissemination of information by e-mail and fax.
The quarterly, half-yearly and annual results of IDFC’s performance are published in leading newspapers like the Hindu Business Line & Makkal Kural in Chennai and are also displayed on the website of the Company.

SPECIAL RESOLUTIONS SOUGHT TO BE PASSED AT THE ENSUING AGM
IDFC seeks the approval of Members of the Company by way of Special Resolution in respect of the following proposals:

  1. Approval of the Borrowing Limits of the Company
  2. Offer & Issue Non-Convertible Securities under Private Placement
  3. Further issue of Securities
  4. Alteration of the Object Clause of the Memorandum of Association of the Company

Detailed explanatory statement pursuant to Section 102 of the Companies Act, 2013 in respect of the above items forms part of the Notice of the Seventeenth AGM.

ANNUAL AND EXTRA-ORDINARY GENERAL MEETINGS OF SHAREHOLDERS
No Extra-Ordinary General Meeting of the Company was held during the last three financial years.

POSTAL BALLOT

During FY14, pursuant to Section 192(A) of the Companies Act, 1956 read with Companies (passing of the resolution by postal ballot) Rules, 2011, approval of the shareholders of the Company was sought by way of special resolution vide Notice dated December 23, 2013 circulated through postal ballot for reduction in the ceiling limit on the aggregate holdings of Foreign Institutional Investors (“FIIs”) / SEBI approved sub-accounts of FIIs, Foreign Direct Investment (“FDI”), Foreign Nationals, Non-resident Indians (“NRIs”) and Overseas Corporate Bodies (“OCBs”) (collectively referred to as the “Foreign Shareholding”) from 54% to 49.90% of the total paid-up equity share capital of the Company.

The Company also offered e-voting facility to its Shareholders through Karvy Computershare Private Limited (“Karvy”) to enable the Members to cast their votes electronically.

The Company appointed Ms. Savita Jyoti, a practicing Company Secretary, as the Scrutinizer for the postal ballot process both for e-voting and physical ballot papers received. The special resolution was passed by the requisite majority and the Scrutinizer submitted her report to the Chairman. The result was announced on Thursday, January 30, 2014 and the same was displayed at the Corporate Office and the Registered Office of the Company. The said result was posted on the website www.idfc.com, besides being communicated to the stock exchanges where the securities of IDFC are listed.
The Company may seek to pass Special Resolution(s) in FY15 through Postal Ballot, as and when required, subject to applicable Act and Rules

 

 

COMPLIANCE

Status of Compliance with the Listing Agreement
As is evident, IDFC is fully compliant.

Adoption of Non-Mandatory Requirements

Remuneration Committee
The Board has in place a duly constituted Compensation Committee. Details of this Committee have been provided earlier in
the chapter.

Audit Qualifications
During the period under review, there were no audit qualifications in the Company’s financial statements. IDFC continues to adopt best practices to ensure a regime of unqualified financial statements.

Whistle Blower Policy
Pursuant to provisions of Section 177(9) of the Companies Act, 2013 and Clause 49 of Equity Listing Agreement (as amended by the Securities and Exchange Board of India (“SEBI”) vide its Circular No. CIR / CFD / POLICY CELL / 2 / 2014 dated April 17, 2014, the Company has established the Vigil Mechanism, as part of the Whistle Blower Policy, for the Directors and Employees to report concerns about unethical behaviour, actual or suspected fraud or violation of the Company’s code of conduct or ethics policy. It also provides adequate safeguards against the victimisation 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 and establishment of Vigil Mechanism have been appropriately communicated within the Company and also disclosed on the Company’s website www.idfc.com .

 

TABLE 12

Annual General Meetings held during the last three years

FINANCIAL YEAR

LOCATION OF THE MEETING

DATE

TIME

SPECIAL RESOLUTIONs PASSED WITH REQUISITE MAJORITY

FY11

Tapovan Hall,
Chinmaya Heritage Centre,
No. 2, 13th Avenue,
Harrington Road, Chetpet,
Chennai 600 031

July 27, 2011

2.00 p.m.

(i)  Appointment of Statutory Auditors.

FY12

The Music Academy,
New No. 168 (Old No. 306),
T.T.K. Road, Royapettah,
Chennai 600 014

July 09, 2012 

11.00 a.m.

(i)  Appointment of Statutory Auditors;
(ii)  Change of Name of the Company; and
(iii) Alteration of Articles of Association of the Company.

FY13

The Music Academy,
New No. 168 (Old No. 306),
T.T.K. Road, Royapettah,
Chennai 600 014

July 29, 2013

2.30 p.m.

(i)  Appointment of Statutory Auditors;
(ii)  Decreasing the limit of FII holding and SEBI approved sub-accounts in equity share capital from 74% to 54% at an appropriate time as may be decided by the Board;
(iii) Additional 2% equity shares under the Employment Stock Option Scheme;
(iv) Approval for payment of commission to NEDs in accordance with the provisions of the Companies Act, 1956.

 

TABLE 13

COMPLIANCE WITH THE LISTING AGREEMENT

PARTICULARS

CLAUSE OF
LISTING GREEMENT
COMPLIANCE STATUS

I    BOARD OF DIRECTORS 

49 (I) 

Compliant

     A. Composition of Board 

49(IA) 

Compliant

     B. Non-executive Directors Compensation & Disclosures

49 (IB) 

Compliant

     C. Other provisions as to Board and Committees

49 (IC) 

Compliant

     D. Code of Conduct

49 (ID) 

Compliant

II  AUDIT COMMITTEE

49 (II) 

Compliant

     A. Qualified & Independent Audit Committee

49 (IIA)

Compliant

     B. Meeting of Audit Committee

49 (IIB) 

Compliant

     C. Powers of Audit Committee

49 (IIC) 

Compliant

     D. Role of Audit Committee 

49 II(D) 

Compliant

     E. Review of Information by Audit Committee 

49 (IIE) 

Compliant

III  SUBSIDIARY COMPANIES

49 (III) 

Compliant

IV  DISCLOSURES 

49 (IV)

Compliant

     A. Basis of related party transactions 

49 (IV A) 

Compliant

     B. Disclosure of Accounting Treatment

49 (IV B) 

Compliant

     C. Board Disclosures

49 (IV C) 

Compliant

     D. Proceeds from public, rights, preference issues etc.

49 (IV D) 

Compliant

     E. Remuneration of Directors

49 (IV E) 

Compliant

     F. Management

49 (IV F) 

Compliant

     G. Shareholders

49 (IV G) 

Compliant

V   CEO / CFO CERTIFICATION 

49 (V) 

Compliant

VI  REPORT ON CORPORATE GOVERNANCE

49 (VI) 

Compliant

VII COMPLIANCE

49 (VII) 

Compliant

 
 
 

Annual Report and Accounts 2013-14

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including the IDFC
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