KIFS Financial Services Ltd

Dear members,

Your directors have pleasure in presenting the 29th annual report on the business and operations of the company together with the audited financial statement for the financial year ended on March 31, 2024.

1. Financial summary

(Rs in lakhs except EPS)

2. State of company's affairs / performance of the company

During the financial year under report, total income of the company includes Rs 4,663.87 lakhs as revenue from operations and Rs 1.23 lakhs as other income as compared to Rs 3,072.01 lakhs as revenue from operations and Rs 2.94 lakhs as other income during the previous financial year. The revenue from operations has shown a drastic growth of 51.82% in compare to previous financial year. Profit before interest, depreciation and tax also stands at Rs 4,543.12 lakhs as compared to Rs 2,984.98 lakhs in the financial year ended on March 31, 2023 which shows positive growth of 52.20%.

Net profit after tax has also represented growth of 11.26% when compared to that of previous financial year. Earnings per share stands at Rs 6.58 compared to Rs 5.91 for the previous financial year ended on March 31, 2023.

The detailed analysis as to review of company's operational and financial performance is given in the management discussion and analysis report.

3. Dividend

Your directors propose to recommend final dividend for the financial year 2023-24 at a rate of Rs 1.40 (one rupee and forty paise only) (14.00%) per equity share of Rs 10/- (rupees ten only) each in compare to Rs 1.35 (13.50%) per equity share of Rs 10/- (rupees ten only) each declared for the previous financial year.

Further, the payment of dividend is subject to the approval of shareholders in the ensuing annual general meeting of the company. The dividend, if declared at the ensuing annual general meeting, will be paid to those shareholders whose names appear in the register of members as on the record date. The amount of final dividend will be Rs 151.45 lakhs.

4. T ransfer to reserves

The company proposes to transfer Rs 142.32 lakhs to the special reserve out of amount available for appropriations and an amount of Rs 2,388.49 lakhs is proposed to be retained in the statement of profit and loss.

5. Deposits

During the financial year ended on March 31, 2024, the company has not accepted any deposits from the public within the meaning of the provisions of applicable directions and notifications issued by the Reserve Bank of India in this respect.

Further, being a non-deposit taking non-banking financial company, the disclosures with respect to deposits, required as per rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014 read with the Companies (Acceptance of Deposits) Rules, 2014 and section 73 of the Companies Act, 2013 are not applicable to it.

6. Share capital

During the financial year under report, the company has neither made any issue of equity shares with differential voting rights, sweat equity shares or under employee stock options scheme nor it has made any provision of money for purchase of its own shares by employees or by trustees for the benefit of employees.

As on March 31, 2024, the authorized share capital of the company stands at Rs 11,00,00,000/- consisting of 1,10,00,000 no. of equity shares of Rs 10/- each and issued, subscribed and paid up share capital of the company stands at Rs 10,81,80,000/- consisting of 1,08,18,000 no. of equity shares of Rs 10/- each fully paid-up.

7. Details of subsidiary / joint venture / associate companies

The company doesn't have any subsidiary, joint venture or associate company.

Director retiring by rotation

Pursuant to the provisions of section 152 of the Companies Act, 2013 and in accordance with the articles of association of the company, Mr. Vimal P. Khandwala, director of the company, retired by rotation at the previous annual general meeting of the company held on Friday, September 29, 2023 i.e. during the financial year 2023-24 and Mrs. Sonal R. Khandwala, non executive non independent director of the company is proposed for appointment as retired by rotation at the ensuing annual general meeting of the company and being eligible offers herself for re-appointment. The board of directors of the company recommends her re-appointment.

Appointment and regularization of directors during the financial year

The board of directors of the company at its meeting held on August 14, 2023 appointed Mr. Rajesh Gopaldas Parekh and Mr. Dixit Dipakkumar Shah as additional non-executive independent directors of the company for a period of 5 years and their appointments were further approved by the shareholders of the company at their previous annual general meeting held on Friday, September 29, 2023. The board of directors of the company recommends passing of special resolutions for ratification of their appointments in the ensuing annual general meeting.

Independent directors

In terms of the definition of the independent director as prescribed under regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and section 149(6) of the Companies Act, 2013, Mr. Devang M. Shah, Mr. Dharmendra N. Soni, Mr. Sharvil B. Suthar, Mr. Rajesh G. Parekh and Mr. Dixit D. Shah remained independent directors of the company as on closure of the financial year under report. Tenure of Mr. Devang M. Shah and Mr. Dharmendra N. Soni as independent directors of the company expired on May 26, 2024 and thus their office was vacated accordingly w.e.f. May 26, 2024. The board appreciates their contribution made towards the continued growth of the company.

The independent directors have submitted the declaration, confirming that they meet the criteria of independence as prescribed under both the provisions of the relevant laws. Further, the independent directors have complied with the code for independent directors prescribed in schedule IV of the Companies Act, 2013 and code of conduct prescribed for the directors, management and senior managerial personnel.

Further, a separate meeting of independent directors of the company was held on Friday, February 9, 2024 in accordance with the provisions of clause VII of the schedule IV of the Companies Act, 2013 and provisions of the SEBI LODR regulations.

All the independent directors of the company have completed their registration on the independent directors' data bank within the timeline stipulated by the law. Also the requisite independent director(s) have cleared the proficiency self-assessment test or are not required to do so based on the relaxation provided therein.

Also the board of directors of the company opines that during the year the integrity, expertise and experience (including proficiency) of the independent directors are satisfactory to the company's requirements. The independent directors are proficient in the field as specified in point II(h) of the corporate governance report attached herewith.

Woman director

Pursuant to the provisions of section 149 of the Companies Act, 2013 and regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Mrs. Sonal R. Khandwala holds position of a non executive woman director of the company.

All of the directors of the company have confirmed that they are not disqualified under provisions of section 164 of the Companies Act, 2013 from being appointed / continue to hold position of directors of the company.

Key managerial personnel

Pursuant to the provisions of section 203 of the Companies Act, 2013, Mr. Rajesh P. Khandwala holds position of managing director and Mr. Bhavik J. Shah holds the position of chief financial officer of the company. Mr. Durgesh D. Soni has resigned from the post of company secretary and compliance officer of the company w.e.f. July 12, 2024 in order to pursue other opportunities and the board appreciates his association with the company and his invaluable contribution towards satisfactory regulatory compliances of the organization.

Remuneration policy

The company follows a policy on remuneration of directors and senior management employees. The policy has been approved both by the nomination & remuneration committee and the board of directors. More details on the same have been given in the corporate governance report.

The policy on remuneration of directors, key managerial personnel and senior employees can be accessed on website of the company at following web link:

https://www.kifsfinance.com/wp-content/uploads/all/Nomination-Remuneration-policy-KIFS.pdf

9. Number of meetings of the board of directors

The board of directors met four times during the financial year under report, the details of which have been given in the corporate governance report. The intervening gap between any two board meetings did not exceed 120 days, as prescribed under the provisions of the law(s), except where relaxation provided by the appropriate authorities.

10. Committees of the board

The company has formed various committees namely audit committee, nomination and remuneration committee, stakeholders' relationship committee, corporate social responsibility committee and risk management committee in compliance with the requirements of the relevant provisions of the applicable laws and statutes. The risk management committee has been established voluntarily as a part of the better corporate governance practices.

Apart from the above statutory committees, the company also has a managing committee of the board of directors to look after the routine day to day affairs of the company.

The details with respect to the compositions, terms of reference, scope and powers, roles, meetings etc. of the relevant committees are given in detail in the corporate governance report forming part of this annual report.

11. Corporate social responsibility

The company was required to comply with the provisions related to corporate social responsibility considering its applicability for the financial year 2023-24. Accordingly it has adhered the provisions of section 135(1) of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 and has also implemented a policy and has formed a committee named corporate social responsibility committee, more details on which along with details of spending w.r.t. CSR are provided in the report on corporate social responsibility enclosed along with this directors' report as Annexure - 1.

12. Performance evaluation of the board

In accordance with the provisions of regulation 17(10) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and schedule IV of the Companies Act, 2013, evaluation of performance of independent directors by the non independent directors and review of performance of non independent directors and the board as a whole by the independent directors was made during the financial year under report. The board also evaluated performance of all the committee and their members. The directors were satisfied with the evaluation results, which reflected an overall engagement of the board and its committees with the company. This may be considered as a statement under provisions of section I34(3)(p) of the Companies Act, 2013 and rule 8(4) of the Companies (Accounts) Rules, 2014.

More details on the evaluation mechanism are given in the corporate governance report.

13. Vigil mechanism / whistle blower policy

The company promotes ethical behavior in all its business activities and has put in place a mechanism wherein the employees are free to report illegal or unethical behavior, actual or suspected fraud or violation of the company's codes of conduct or corporate governance policies, raise concerns against management and business practices, incorrect or misrepresentation of any financial statements and reports or any improper activity being negative in nature to the chairman of the audit committee of the company or chairman of the board. The whistle blower policy has been appropriately communicated within the company.

Under the whistle blower policy, the confidentiality of those reporting violation(s) is protected and they are not subject to any discriminatory practices. No personnel have been denied access to the audit committee. The functioning of the vigil mechanism is reviewed by the audit committee from time to time. The vigil mechanism / whistle blower policy has been uploaded on website of the company and can be accessed at following web link:

https://www.kifsfinance.com/kifs_whistle_blower_policy.pdf

14. Statement of development & implementation of risk management policy

The company has developed and implemented a risk management policy to meet the risks associated with the business of the company. Business risk evaluation and management is an ongoing process within the company. The assessment is periodically examined by the risk management committee of the board. The company, while giving loan to its customers, follows the criteria and procedure laid down in policy and the credibility of the clients.

15. Loans / guarantees or investment in securities

Being a non banking financial company pursuing loan business in its ordinary course of business, the disclosures relating to the details of loans made, guarantees given, securities provided or subscription / acquisition of securities, pursuant to the provisions of section 186(11) of the Companies Act, 2013 and rule 11 of the Companies (Meetings of Board and its Powers) Rules, 2014 are not required to be given. Details of loans as financial assets are given in note no. 6 of the notes to the financial statements of the company.

16. Contracts or arrangements with related parties

All related party transactions that were entered during the financial year under report were in the ordinary course of business of the company and were on arm's length basis. There were no materially significant related party transactions entered by the company with its promoters, directors, key managerial personnel or other persons, which may have a potential conflict with the interest of the company. All such related party transactions are being quarterly placed before the audit committee for its review. Omnibus approval has been obtained from the audit committee, board of directors and shareholders of the company for all the related party transactions (including transactions which are foreseen and repetitive in nature).

Since no material related party transactions were entered by the company and all the transactions entered into by the company with its related parties were in the ordinary course of business and on arm's length basis, disclosure in the form AOC-2 is not being given.

In terms of amendment made vide the SEBI (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021 replacing threshold determining material related party transactions and related clarifications issued in this respect, the board had proposed and the shareholders accorded their consent in the previous annual general meeting held on Friday, September 29, 2023 for the related party transactions / material related party transactions made and proposed to be made with the related parties identified in terms of definition provided in the Companies Act, 2013.

The policy on related party transactions as approved by the board has been uploaded on the company's website at the web link:

https://www.kifsfinance.com/wp-content/uploads/all/RPT-Policy-KIFS.pdf

17. Internal financial control systems and their adequacy

The company has internal control systems, commensurate with the size, scale and complexity of its operations. Your company has laid down set of standards, processes and structure which enable it to implement internal financial control systems across the organization and ensure that the same are adequate and operating effectively. Internal financial control systems of the company provide a reasonable assurance with regard to maintaining of proper accounting controls, monitoring of operations, protecting assets from unauthorized use or losses, compliance with regulations and for ensuring reliability of financial reporting.

18. Annual return

Pursuant to the provisions of section 92(3) read with section 134(3)(a) of the Companies Act, 2013, the annual return as on March 31, 2024 is available under the investors tab on the company's website www.kifsfinance.com.

19. Disclosure as per the rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

The details as per rule 5(1) and 5(2) of the aforesaid rules are enclosed herewith as Annexure - 2.

20. Auditors Statutory auditors

The shareholders of the company at their 27th annual general meeting held on Tuesday, September 27, 2022, re- appointed M/s. Bimal Shah Associates, chartered accountants, Ahmedabad as statutory auditors of the company for a period of 5 years i.e. upto conclusion of 32nd annual general meeting of the company.

The said appointment of statutory auditors has been made in accordance with the provisions of rule 6 of the Companies (Audit and Auditors) Rules, 2014 i.e. manner of rotation of auditors by the companies on expiry of their term.

Further, the company, being engaged in the financial service activities, is not required to maintain cost records under the provisions of section 148 of the Companies Act, 2013.

Secretarial auditors

Pursuant to the provisions of section 204 of the Companies Act, 2013 and rules framed thereunder, the board has re-appointed the existing secretarial auditors of the company, M/s. Anamika Jajoo & Co., practicing company secretary, Ahmedabad for conducting the secretarial audit for the financial year ending on March 31, 2025.

Secretarial audit report issued by the secretarial auditor of the company for the financial year ended on March 31, 2024 is attached to the directors' report as Annexure - 3. Further, the company has complied with the secretarial standards to the extent applicable to the company. Annual secretarial compliance report issued in terms of provisions of regulation 24A of the SEBI LODR is attached as Annexure - 4.

Explanations or comments by the board on qualification / reservation / adverse remark or disclaimer made by the statutory auditors in their audit report and by the secretarial auditor in her secretarial audit report

The audit report issued by the statutory auditors of the company is self-explanatory and no comment from the board of directors of the company is required as no qualification, reservation or adverse remark or disclaimer is given by any of the auditors of the company.

The secretarial auditor has not reported any observation in the secretarial audit report and annual secretarial compliance report issued for the financial year ended on March 31, 2024.

Internal auditors

In accordance with the provisions of section 138 of the Companies Act, 2013 and rules framed thereunder, your company has appointed M/s. Mihir D. Shah & Associates, Ahmedabad, as the internal auditors of the company in the board meeting held on May 25, 2024 to conduct the internal audit of the functions and activities of the company for the financial year ending on March 31, 2025.

21. Investor education and protection fund (IEPF)

During the financial year under report i.e. 2023-24, the company has transferred Rs 1,52,141/- from the unclaimed and unpaid dividend amount for the financial year 2015-16 to the investor education and protection fund. Moreover, 460 number of equity shares were also transferred to the IEPF corresponding to the unpaid dividend

remained unclaimed and unpaid for seven consecutive years. The shares outstanding with the IEPF authority stands at 1,73,100 equity shares of Rs 10/- each as on March 31, 2024.

Further the details as on March 31, 2024 for unclaimed / unpaid dividend lying in the unpaid account, which are liable to be transferred to the IEPF are as follows:

22. Material changes and commitments affecting financial position of the company

There are no material changes and commitments, affecting the financial position of the company which have been occurred between the end of the financial year i.e. March 31, 2024 and the date of signing of the directors' report. Further, no significant or material orders have been passed by the regulators or courts or tribunals impacting the going concern status of the company and / or the company's operations in future.

23. Remuneration given to the managing director

The managing director of the company, Mr. Rajesh P. Khandwala also occupies the office of the managing director in KIFS Housing Finance Limited, a group company to the Khandwala group. Mr. Khandwala was paid remuneration to the tune of Rs 9,00,000/- (rupees nine lakhs only) from your company during and for the financial year ended on March 31, 2024. The company does not have any subsidiary company.

24. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

A policy under the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 has been laid down and circulated to every employee of the company so as to inform them about the redressal mechanism available to them against any kind of harassment. Your directors state that during the financial year under report, there were no cases filed or compliant received from any employee pertaining to the sexual harassment.

A policy framed and adopted by the board of directors of the company on prevention of sexual harassment is uploaded on the company website at below web link:

https://www.kifsfinance.com/wp-content/uploads/all/SEXUAL-HARASSMENT-POLICY.pdf

25. Listing

Presently, the equity shares of your company are listed at the Bombay Stock Exchange Limited (BSE) (scrip code: 535566). The company's equity shares are available for trading in demat form by all the investors on BSE which is having nation-wide trading terminals in various cities affording to the investors convenient access to trade and deal in the company's equity shares across the country.

The company is regular in complying with the requirements of the listing agreement / regulations and has duly paid the requisite listing fees to the BSE.

26. Code of conduct

The board has laid down a code of conduct ("code") for board members, managerial personnel and for senior management employees of the company. This code has been posted on the company's website at http://kifsfinance.com/code-of-conduct-policy/. All the board members and senior management personnel have affirmed compliance with this code. A declaration by the managing director to this effect forms part of the corporate governance report.

The board has also laid down a code of conduct for independent directors pursuant to section 149(8) and schedule IV to the Companies Act, 2013 via terms and conditions for appointment of independent directors, which is a guide to professional conduct for independent directors and has been uploaded on the website of the company at following web link:

https://www.kifsfinance.com/wp-content/uploads/all/Terms-of-appointment-of-Independent-Directors.pdf

27. Corporate governance

Your company practices a culture that is built on core values and ethical governance practices and is committed to transparency in all its dealings. A report on corporate governance along with a certificate from statutory auditors of the company regarding compliance of conditions of corporate governance, as stipulated under provisions of regulation 34(3) and schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to this report.

28. Management discussion and analysis report

A detailed analysis of the company's performance is made in the management discussion and analysis report, which forms part of this annual report.

29. Compliance with the Reserve Bank of India guidelines

The company being a non banking financial company categorized as a loan company continues to comply with all the applicable regulations, directions and guidelines issued by the Reserve Bank of India from time to time.

30. Particulars regarding conservation of energy, technology absorption and foreign exchange earnings and outgo

The disclosures required to be made under section 134(3)(m) of the Companies Act, 2013 read with rule (8)(3) of the Companies (Accounts) Rules, 2014 pertaining to the conservation of energy, technology absorption and foreign exchange earnings and outgo are not applicable to the company as the company being a non banking financial company, is neither involved in any manufacturing, processing activities nor any of its transactions involves foreign exchange earnings and outgo.

31. Directors' responsibility statement

Pursuant to the provisions of section 134(3)(c) of the Companies Act, 2013, your directors confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) the directors had 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 for the financial year ended on March 31, 2024 and of the profit and loss of the company for that period;

c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d) the directors had prepared the annual accounts on a going concern basis;

e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

32. Details of application made or proceedings pending under the Insolvency and Bankruptcy Code, 2016

During the financial year under report, no application was made or proceeding was pending for the company under the Insolvency and Bankruptcy Code, 2016.

33. Details of difference between valuation amount on one time settlement and valuation while availing loan from bank and financial institutions

During the financial year under report, there has been no instance of one time settlement of loans taken from banks and financial institutions.

34- Acknowledgement

Your directors take this opportunity to express their deep and sincere gratitude to the clients, customers, employees, shareholders and other stakeholders of the company for their trust and patronage, as well as to the various bankers, Reserve Bank of India, Securities and Exchange Board of India, Bombay Stock Exchange, Government of India and other regulatory authorities for their continued co-operation, support and guidance.