Dear Shareholder(s),
Your Directors take pleasure in presenting their Seventeenth (17th) Annual Report on the business and operations of your Company ("5paisa Capital", "Your Company", "We") along with the Audited Financial Statements for the Financial Year ended March 31, 2024 ("year under review" or "year" or "FY 2023-24"). The consolidated performance of your Company and its subsidiaries has been referred to wherever required.
In compliance with the applicable provisions of the Companies Act, 2013 ("the Act") (including any statutory modification(s) or re-enactment(s) thereof, for the time being in force and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulation, 2015 ("the Listing Regulations"), this report covers the financial performance and other developments during the Financial Year 2023-24 and upto the date of the Board Meeting held on July 12, 2024 to approve this report in respect of 5paisa Capital Limited on a standalone basis as well as on a consolidated basis comprising of 5paisa Capital Limited and its Subsidiaries.
FINANCIAL HIGHIGHTS:
Your Company's Standalone and Consolidated financial performance during Financial Year 2023-24, as compared with that of the previous Financial Year 2022-23 is summarized below:
Note(s):
1. Previous periods' figures have been regrouped/ rearranged wherever necessary.
2. Figures in brackets represent deduction(s).
The statement containing extract of subsidiaries financial statement are provided on the corporate website at https:// www.5paisa.com/investor-relations.
CONSOLIDATED FINANCIAL STATEMENTS:
The Consolidated Financial Statements of your Company for the FY 2023-24 are prepared in compliance with the applicable provisions of the Companies Act, 2013 ("the Act"), Indian Accounting Standards ("Ind AS") and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Listing Regulations"). The Consolidated Financial Statements have been prepared on the basis of Audited Financial Statements of the Company and its subsidiaries, approved by their respective Board of Directors.
Copies of the Balance Sheet, Statement of Profit & Loss,
Report of the Board of Directors and Report of the Auditors of the subsidiary companies are not attached to the accounts of your Company for the financial year 2023-24. Your Company will arrange for soft copies of these documents/details upon request by any member of the Company and dispatch the same on the registered email address of the member.
These documents/details will also be available for inspection by any member of your Company at its registered office and at the registered offices of the concerned subsidiary during the business hours on working days i.e. except on Saturdays, Sundays and Public Holidays. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a soft copy of the same would be sent to the registered email address of the member. The Annual Report of subsidiaries is uploaded on our corporate website at https://www.5paisa.com/investor-relations. As required by Companies Act, 2013 and Accounting Standard - 21 (AS 21) issued by the Institute of Chartered Accountants of India, your Company's Consolidated Financial Statements included in this Annual Report incorporate the accounts of its subsidiaries. A report on the performance and financial position of the subsidiaries is provided in the prescribed form AOC-1 as "Annexure-I" to this Directors' Report.
The policy on determining the material subsidiary is available on our corporate website: https://storage.googleapis. com/5paisa-prod-storage/files/investor_relations/2021-policy-on-determining-material-subsidiary.pdf
REVIEW OF BUSINESS AND OPERATIONS AND STATE OF YOUR COMPANY'S AFFAIRS:
Over the next ten years, there will be major megatrends in the
Indian capital markets that will fundamentally alter the financial landscape. The increasing digitisation of financial services is a participation in significant the markets. Younger generations, in particular, are becoming markets at more financially an early age. Their preference for digital platforms and self-directed investments will influence newer developments in the products and services offered by brokers. The increasing recognition of environmental, social, and governance (ESG) factors will lead to a growing demand for ESG-compliant investment options, driving the industry to offer products that align with sustainable and responsible investing principles.
Higher integration and adoption of technology in financial services, such as AI, blockchain, and robo-advisory services, will further drive efficiency and personalization in the broking industry. Algorithmic trading is expected to grow substantially, as more traders and institutions leverage advanced algorithms and AI to execute trades at high speeds and lower costs. Amidst the rapid pace of these changes, the Indian regulatory environment is also expected to evolve and place greater emphasis on transparency, compliance and investor protection while maintaining the stability and openness of the capital markets. Together, these major trends portend ten years of inclusion, sustainability and innovation in the Indian capital markets.
Your Company has improved its financial performance offering investors a digital platform with a range of features that enables them to learn more about the financial world, make informed decisions, invest through its mobile application and increase their participation and profits from the financial market. The revenue this year stood at Rs. 395 crore as against Rs.339 crore in FY23, an increase of 16% YoY. The Company earned a net profit after tax of Rs.54 crore, a growth of 25% on YoY basis. This is due to the Company's dedication to meeting the needs of its esteemed customers, its consistent efforts to build the right teams and culture and its integration of innovation, technology and sustainability at the heart of its operations.
Read more about your company's performance during the year on page 137 of the Annual Report of the company.
Throughout the year, your company concentrated on using technology to improve customer experience, expanded cohort-based personalized service offerings, developed the
Algo and API ecosystem and fortified strategic partnerships to drive innovation and market expansion. Consequently, your company has solidified its standing as a major participant in the discount broking market by providing exceptional services and delivering value to all its stakeholders.
MACRO-ECONOMIC OVERVIEW:
Read more about your company's performance during the year on page 137 of Annual Report of the company.
INDUSTRY OVERVIEW:
KEY DEVELOPMENTS:
Scheme of Arrangement between IIFL Securities Limited ("Demerged Company") and 5paisa Capital Limited ("Resulting Company") and their respective shareholders and creditors.
The Board of Directors at their meeting held on December 06, 2022 had approved the Scheme of Arrangement between the Company and IIFL Securities Limited and their respective shareholders and creditors which inter alia provided for the demerger of the Online Retail Trading Business of IIFL Securities Limited into the Company.
However, considering the substantial change in the business environment and overall impact of change in business environment, the Board of Directors, in the interest of the Company and its Stakeholders, withdrew the proposed scheme by passing a Circular Resolution of Board of Directors of the Company dated January 22, 2024.
RETURN TO INVESTORS (DIVIDEND):
In order to conserve the resources of your Company for future expansion, the Directors have decided not to recommend any dividend on equity shares of your Company for the financial year under review.
The Dividend Distribution Policy is available on the website at https://storage.googleapis.com/5paisa-prod-storage/files/ investor_relations/2022-04/Dividend%20Distribution%20 Policy_1.pdf
TRANSFER TO GENERAL RESERVE:
During the year under review, your Company has not transferred any amount to the reserves.
TRANSFER OF FUNDS TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF):
Pursuant to the provisions of Section 124 and 125 of the Companies Act, 2013 ("Act") read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ("IEPF Rules"), all unpaid or unclaimed dividends are required to be transferred by your Company to the Investor Education and Protection Fund ("IEPF" or "Fund") Account established by the Central Government, after completion of seven years from the date the dividend is transferred to unpaid/unclaimed account. Further, according to the Rules, the shares in respect of which dividend has not been paid or claimed by the members for seven consecutive years or more shall also be transferred to the demat account created by the IEPF Authority after complying with the procedure laid down under the Rules.
During FY 2023-24, your company had not transferred any shares to ‘IEPF' Account.
However, as on the March 31, 2024, Rs. 0.18 million is lying as the unclaimed fractional entitlements in the unpaid fractional shares account.
AWARDS AND RECOGNITION:
During the year under review, your Company received numerous awards and accolades which were conferred by reputable organizations and is designed to honor the efforts made by us and the details of the same are given herein below:
• India Content Leadership Awards 2023, Inkspell Best Content in a Financial Services App.
• India Content Leadership Awards 2023, Inkspell Best Financial Content on Social Platform(s).
• Masters of Modern Marketing Awards 2023, Inkspell Multi Channel campaign for a Financial Services Enterprise - Special Mention 5paisa.
• MCX Awards 2023
Leading Member - Client Participation
SHARE CAPITAL:
The paid up equity share capital of your Company as on March 31, 2024 was Rs. 31,19,09,730/- divided into 3,11,90,973 Equity Shares of Rs. 10/- each as compared to Rs. 30,63,55,680/- divided into 3,06,35,568 Equity Shares of Rs. 10/- each as on March 31, 2023.
The increase in the share capital was on account of exercise of 5,55,405 ESOPs granted under the 5paisa Capital Limited Employee Stock Option Scheme 2017, by eligible employees, which were converted into equity shares Rs. 10/- each.
EMPLOYEES STOCK OPTION SCHEMES ("ESOS"):
The Employees' Stock Option Schemes enable your Company to hire and retain the best talent for its senior management and key positions. The Nomination and Remuneration Committee of the Board of Directors of your Company, inter alia, administers and monitors the Employees' Stock Option Schemes in accordance with the applicable SEBI Regulations.
ESOS of your Company are in line with SEBI (Share Based
Employee Benefits and Sweat Equity) Regulations, 2021
("SBEBSE Regulations"). The Members at their 16th Annual General Meeting held on August 31, 2023 had approved 5paisa Capital Limited Employee Stock Option Scheme 2023 ("5PCL ESOS 2023") pursuant to which, your Company, presently, has three Schemes:
1) 5paisa Capital Limited Employee Stock Option Scheme 2017 ("5PCL ESOS 2017") was approved by shareholders vide special resolution dated January 25, 2018.
2) 5paisa Capital Limited Employee Stock Option Trust Scheme 2017 ("5PCL ESOTS 2017") was approved by shareholders vide special resolution dated January 25, 2018.
3) 5paisa Capital Limited Employee Stock Option Scheme 2023 ("5PCL ESOS 2023") was approved by shareholders vide special resolution dated August 31, 2023.
As per Regulation 14 of "SBEBSE Regulations", the details of the "ESOS" are disclosed on our corporate website which can be accessed at https://www.5paisa.com/investor-relations.
A certificate from the secretarial auditors of the Company stating that the aforesaid schemes have been implemented in accordance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and in accordance with the resolution passed by the members shall be placed at the ensuing Annual General Meeting for inspection by members.
INCREASE IN SIZE OF ESOP POOL:
Pursuant to the recommendation of the Nomination and Remuneration Committee, the Board of Directors at their meeting held on November 10, 2023, approved the increase in size of ESOP Pool for grant of options to eligible employees under the Employee Stock Option Scheme-2017 from 22,00,000 (Twenty-two Lakhs) to 40,00,000 (Forty Lakhs) options convertible into equity shares of Rs. 10/- each of the Company. Further, the members vide Special Resolution dated December 22, 2023 passed through Postal Ballot approved the same.
PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN AND SECURITIES PROVIDED UNDER SECTION 186 OF THE COMPANIES ACT, 2013:
Particulars of loans given, investments made, guarantees given and securities provided as covered under the provisions of Section 186 of the Act are set out in the notes to the accompanying financial statements of your Company.
DEPOSITS:
During the year under review, your Company has not accepted any deposits from the public falling under the ambit of Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014. Therefore, payment on the account of principal or interest amount on deposits from the public does not arise.
SUBSIDIARIES:
• 5paisa P2P Limited
5paisa P2P Limited is a wholly owned subsidiary of
5paisa Capital Limited. The company received Certificate of Registration from Reserve Bank of India ("RBI") bearing registration number N-13.02371 to act as NBFC P2P.
• 5paisa Corporate Services Limited (Formerly known as 5paisa Insurance Brokers Limited)
5paisa Corporate Services Limited (Formerly known as 5paisa Insurance Brokers Limited) is a wholly owned subsidiary of 5paisa Capital Limited incorporated on October 27, 2018. The name of the company was changed from ‘5paisa Insurance Brokers Limited' to ‘5paisa Corporate Services Limited' with effect from
November 16, 2022 pursuant to receipt of fresh Certificate of Incorporation dated November 16, 2022 issued by the Registrar of Companies, Mumbai. The Company shall commence its business shortly.
• 5paisa Trading Limited
5paisa Trading Limited was incorporated as a public limited company on February 27, 2020 as a wholly owned subsidiary of 5paisa Capital Limited.
• 5paisa International Securities (IFSC) Limited
5paisa International Securities (IFSC) Limited was incorporated as a public limited company on June 15, 2022 as a wholly owned subsidiary of 5paisa Capital Limited. 5paisa International Securities (IFSC) Limited is incorporated with the object of carrying out business of IFSC (International Financial Service Centre) Unit and act as intermediary in IFSC. The Company shall commence its operations after receipt of necessary clearances/ licenses.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
Management Discussion and Analysis Report for the year under review, as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), is presented in a separate section, forming part of the Annual Report.
CORPORATE GOVERNANCE:
Your Company is committed to transparency in all its dealings and places high emphasis on business ethics. It has put in place an effective Corporate Governance system which ensures that provisions of the Act and Listing Regulations are duly complied with, not only in form but also in substance.
A Report on Corporate Governance along with a Certificate from the Statutory Auditors of the Company confirming corporate governance requirements as stipulated under the Listing Regulations forms an integral part of this Annual Report.
BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT:
Regulation 34 of the Listing Regulations mandates for the top 1000 listed companies to submit Business Responsibility and Sustainability Report with effect from financial year 2022-
23. For Business Responsibility and Sustainability Report as stipulated under Regulation 34 of the Listing Regulations, kindly refer to Business Responsibility and Sustainability Report section which forms part of this Annual Report.
BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:
5paisa actively seeks to adopt best global practices for an effective functioning of the Board and believes in having a truly diverse Board whose wisdom and strength can be leveraged for creating greater stakeholder value, protection of their interests and better corporate governance. Your Company's Board comprises of eminent persons with proven competence and integrity, who bring in vast experience and expertise, strategic guidance and leadership qualities.
1. Composition of Board of Directors:
The composition of the Board of Directors of the Company is in accordance with the provisions of Section 149 of the Act and Regulation 17 of the Listing Regulations, with an appropriate combination of Executive, Non-Executive and Independent Directors.
As on the date of this Boards Report i.e. as on July 12, 2024, your Company's Board of Directors comprises of following Directors:
2. Changes in Board Composition:
As a measure of enhanced corporate governance and increased Board effectiveness, the Board, based on the recommendation of the Nomination and Remuneration Committee ("NRC"), appointed Mr. Narayan Gangadhar
(DIN: 09298665), incumbent Chief Executive Officer of the Company, as the Managing Director for a term of years (5) with effect from July 13, 2023.
Mr. Prakarsh Gagdani (DIN: 07376258) stepped down as the Whole Time Director & Chief Business Officer of the Company with effect from closure of business hours of December 31, 2023, to pursue career opportunities outside the organization. The Board places on record its appreciation for the guidance and support provided by Mr. Prakarsh Gagdani during his association with the Company.
There was no change in the composition of the Board of Directors during the year under review, except as stated above.
3. Key developments in the Board Composition pursuant to the conclusion of the financial year:
In order to pursue additional responsibilities as a Strategic Advisor to the IIFL group in their new initiatives towards Artificial Intelligence and Digital Transformation,
Mr. Narayan Gangadhar (DIN: 09298665), vide his letter dated May 30, 2024 resigned from the post of
Managing Director and Chief Executive Officer (CEO) of the Company and the said resignation was accepted by the Board vide Circular Resolution dated May 30, 2024. The said resignation shall be effective from the close of business hours of August 28, 2024.
Consequently, he also ceased to be the Member of the Risk Management Committee, Stakeholder Relationship Committee, Corporate Social Responsibility (CSR) Committee, Finance Committee, Environmental, Social and Governance (ESG) Committee, Information Technology (IT) Committee and Cyber Security Committee of the Company.
Further, the Board of Directors, based on the recommendation of Nomination & Remuneration (NRC)
Committee, at their meeting held on Friday, July 12, 2024 appointed Mr. Ameya Agnihotri (DIN: 07680132) as Additional Director designated as Whole Time Director of the Company w.e.f. July 13, 2024. The Board has recommended for approval of Members, appointment of Mr. Ameya Agnihotri as Whole-time Director of the
Company at the ensuing AGM. Brief profile and other information in this regard forms part of AGM Notice.
4. Retirement by Rotation:
Mr. Gourav Munjal (DIN: 06360031), Whole-time Director
& Chief Financial Officer of your Company, retires by rotation at the 17th Annual General Meeting of the Company and being eligible has offered himself for re-appointment. Based on the recommendation of the Nomination and Remuneration Committee, the Board has recommended for approval of Members, re-appointment of Mr. Gourav Munjal as Whole-time Director of the
5. Key Managerial Personnel:
Pursuant to the provisions of Section 2(51) and Section 203 of the Companies Act, 2013 and rules made thereunder, the Key Managerial Personnel of your Company as on March 31, 2024 are:
The Remuneration and other details of the Key Managerial Personnel for the year ended March 31, 2024 are mentioned in Form MGT-7 - Annual Return which can be accessed on our corporate website at https:// www.5paisa.com/investor-relations.
Further, pursuant to SEBI Circular No. SEBI/HO/MIRSD/ MIRSD-PoD-1/P/CIR/2023/24 dated February 06, 2023, your company has recognized and has designated following senior officers as a Key Managerial Personnel of your company for managing the key risks.
Mrs. Namita Godbole : Chief Compliance Officer
Mr. Yogesh Maroli Chief Information Security Officer :
6. Independent Directors:
The Independent Directors have been familiarized with the Company, their roles, rights and responsibilities in the Company. The details of Familiarization Programmes are available on the website of the Company at https:// storage.googleapis.com/5paisa-prod-storage/files/ investor_relations/2024-08/Familiarization%20 Programme_5paisa%20Capital%20Limited.pdf
The Company has received requisite declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence prescribed under Section 149(6) of the Act read with Rule 5 of the
Companies (Appointment and Qualification of Directors)
Rules, 2014 and Regulation 16(1)(b) of the SEBI Listing Regulations. The Independent Directors have also confirmed that they are not aware of any circumstance or situation that exists or may be reasonably anticipated that could impair or impact their ability to discharge their duties with an objective independent judgment and without any external influence. This has been noted by the Board of Directors.
In the opinion of the Board, all the Independent Directors satisfy the criteria of independence as defined under the Act, rules framed thereunder and the SEBI Listing Regulations, and that they are independent of the
Management of the Company. In the opinion of the Board, all Independent Directors (including those appointed during the year) possess requisite qualifications, experience, expertise, proficiency and hold high standards of integrity for the purpose of Rule 8(5)(iiia) of the Companies (Accounts) Rules, 2014. In terms of the requirements under the SEBI Listing Regulations, the
Board has identified list of key skills, expertise and core competencies of the Board, including the Independent Directors, details of which are provided as part of the Corporate Governance Report.
As required under Rule 6 of the Companies (Appointment all the and
Independent Directors (including those appointed during the year) have registered themselves with the Independent Directors Databank and completed the online proficiency test conducted by the Indian Institute of Corporate Affairs, wherever required.
BOARD MEETINGS:
During the year, Six (6) Board Meetings were convened and held on May 01, 2023, May 24, 2023, July 12, 2023, October 18,
2023, November 10, 2023 & January 11, 2024. The particulars of attendance of the Directors at the said meetings are detailed in the Corporate Governance Report of the Company, which forms part of this Report. The intervening gap between the Meetings was within the period prescribed under the Act and Listing Regulations.
MEETING OF INDEPENDENT DIRECTORS:
The Independent Directors of your Company meet atleast once during the year, without the presence of Executive Director or other Non-Independent Directors. These meetings are conducted in an informal and flexible manner to enable the Independent Directors to discuss matters pertaining to, inter alia, review of performance of Non-Independent Directors and the Board as a whole, assess the quality, quantity and timeliness of flow of information between the Company Management and the Board that is necessary for the Board to effectively and reasonably perform its duties. One such meeting was held during the year on March 28, 2024.
COMMITTEES OF THE BOARD:
Your Company has constituted various Board level committees in accordance with the requirements of the Act and the Listing Regulations. Further, the Company being categorized as Qualified Stock Broker (QSB) has also constituted other additional committees as required under the
SEBI Circular SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/24 dated February 06, 2023
Following are the Committees constituted by the Board:
• Audit Committee
• Nomination and Remuneration Committee
• Stakeholders Relationship Committee
• Finance Committee
• Risk Management Committee
• Corporate Social Responsibility (CSR) Committee
• Environmental, Social and Governance (ESG) Committee
• Independent Directors (ID) Committee
• Information Technology Committee
• Cyber Security Committee
Details of the above Committees along with composition and meetings held during the year under review are provided in the Corporate Governance Report forming part of this Report.
ANNUAL EVALUATION OF BOARD'S PERFORMANCE:
Pursuant to the provisions of the Act read with Rules made thereunder and the Corporate Governance requirements as prescribed under the Listing Regulations, the Board has carried out an annual evaluation of its own performance and that of its Committees and Individual Directors.
The performance of the Board and Individual Directors was evaluated by the Board seeking inputs from all the Directors. The performance of the Committees was evaluated by the Board seeking inputs from the Committee Members. The Nomination and Remuneration Committee reviewed the performance of the Individual Directors. A separate meeting of Independent Directors was held to review the performance of Non-Independent Directors, performance of the Board as a whole and performance of the Executive Directors of the Company. Performance of the Board, its Committees and Individual Directors was also discussed during the meeting of the Board of Directors.
The criteria for performance evaluation of the Board included aspects like Board composition and structure, effectiveness of Board processes, information and functioning etc. The criteria for performance evaluation of Committees of the Board included aspects like composition of Committees, effectiveness of Committee meetings etc. The criteria for performance evaluation of the Individual Directors included aspects on contribution to the Board and Committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings etc.
The evaluation process endorsed the Board Members confidence in the ethical standards of your Company, the cohesiveness that exists amongst the Board Members, the two-way open communication between the Board and the Management and the openness of the Management in sharing strategic information to enable Board Members to discharge their responsibilities.
RELATED PARTY TRANSACTIONS:
All related party transactions entered into by the Company during the financial year were conducted at an arm's length basis. No material contracts or arrangements with related parties were entered into during the year under review. Further, there were no transactions for which consent of the Board was required to be taken in terms of Section 188(1) of the Act and accordingly, no disclosure is required in respect of the related party transactions in Form AOC-2 under Section 134(3)(h) of the Act and rules framed thereunder.
During the year, the Audit Committee had granted an omnibus approval for transactions, which were repetitive in nature for one financial year. The Audit Committee on a quarterly basis reviewed all such omnibus approvals. All related party transactions were placed at the meetings of Audit Committee and of the Board of Directors for the necessary review and approval. The statement is supported by a certificate from the
Independent Chartered Accountant.
In case of transactions which are unforeseen, the Audit Committee grants an approval to enter into such unforeseen transactions provided that the transaction value does not exceed the limit of 1 crore per transaction in a Financial Year. Your Company has developed and adopted relevant SOPs for the purpose of monitoring and controlling such transactions. Your Company's policy for transactions with the related party which was reviewed by the Audit Committee and approved by the Board, can be accessed at https://storage.googleapis. com/5paisa-prod-storage/files/investor_relations/2022-RPT_Policy-Version-2.1-Final%20%282%29_0.pdf
Details of Related Party Transactions are set out in Notes to the Standalone Financial Statements.
None of the Directors and the Key Managerial Personnel has any pecuniary relationships or transactions vis-?-vis the Company.
Pursuant to Regulation 23(9) of the SEBI Listing Regulations, your Company filedthe reports has on related party transactions with the Stock Exchanges within statutory timelines.
NOMINATION AND REMUNERATION POLICY:
Your Company has in place Nomination and Remuneration Committee of the Board, which performs the functions as mandated under the Act, the SEBI Listing Regulations and such other functions as prescribed by the Board from time to time. The composition of Nomination and Remuneration Committee, attendance at its meetings and other details have been provided as part of the Corporate Governance Report.
The broad objectives of the Nomination and Remuneration Policy are:
a) to guide the Board in relation to appointment and removal of Directors, Key Managerial Personnel and Senior Management;
b) to evaluate the performance of the members of the Board; c) to recommend to the Board on remuneration payable to the Directors, Key Managerial Personnel and Senior Management.
The guiding principles of the Nomination and Remuneration Policy are to ensure that:
a) Level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run your Company successfully;
b) Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and
c) Remuneration to directors, key managerial personnel and senior management involves a balance between fixed performance objectives appropriate to the working of your Company and its goals and ensure that the policy is disclosed in the Board's report.
In accordance with the Nomination and Remuneration Policy, the Nomination and Remuneration Committee formulates the criteria for appointment as a Director, Key Managerial
Personnel and Senior Management, identifies persons who are qualifiedto be Directors and nominates candidates for
Directorships subject to the approval of Board, evaluates the performance of the Individual Directors, recommends to the Board, remuneration to Managing Director/Whole-time
Directors, ensures that the remuneration to Key Managerial Personnel, Senior Management and other employees is based on Company's overall philosophy and guidelines and is based on industry standards, linked to performance of the self and the Company and is a balance of fixed pay and variable pay and recommends to the Board, sitting fees/commission to the
Non-Executive Directors.
The remuneration has been paid as per the Nomination and Remuneration Policy of the Company. The Nomination and Remuneration Policy is available on the website of the Company at https://storage.googleapis.com/5paisa-prod- storage/files/investor_relations/2021-04/nomination-and- remuneration-policy.pdf DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to Section 134(3)(c) and 134(5) of the Companies Act, 2013, the Directors of your Company, to the best of their knowledge and based on the information and explanations received from the Company confirm that:
a) In the preparation of the annual financial statements for the financial year ended March 31, 2024, the applicable accounting standards have been followed and there are no material departures from the same.
b) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at March 31, 2024 and of the profit of your Company for the said period; ed and to c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) The annual accounts have been prepared on a ‘going concern' basis.
e) Proper internal financial controls to be followed by the Company were laid down and such internal financial controls are adequate and were operating effectively; and
f) Proper systems to ensure compliance with the provisions of all applicable laws were devised and that such systems were adequate and operating effectively.
STATUTORY AUDITORS:
As per Section 139 of the Companies Act, 2013, read with Companies (Audit and Auditors) Rules, 2014, the members of your Company in its 15th AGM of the Company approved the re-appointment of M/s. V Sankar Aiyar & Co., Chartered
Accountants, Mumbai (Firm Registration Number: 109208W), as theStatutoryAuditorsofyourCompanyforatermoffive consecutive years i.e. from the conclusion of 15th AGM till the conclusion of 20th AGM of your Company.
MAINTENANCE OF COST RECORDS:
The maintenance of cost records, for the services rendered by your Company is not required pursuant to Section 148(1) of the Companies Act, 2013 read with Rule 3 of the Companies (Cost records and audit) Rules, 2014.
SECRETARIAL AUDITORS:
Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 read with Regulation 24A of the Listing Regulations, the Board of Directors of the
Company had appointed M/s. Nilesh Shah & Associates,
Company Secretaries in whole-time practice, Mumbai, to conduct Secretarial Audit of your Company for the Financial Year 2023-24.
The Secretarial Auditor, M/s. Nilesh Shah & Associates, conducted the Secretarial Audit of the Company for the Financial Year 2023-24. Observations made by the said auditor are mentioned in detail in the Secretarial Audit Report, issued in prescribed Form MR-3 which is annexed to this report ("Annexure-II") and is self-explanatory. During the year under review, the Secretarial Auditor has not reported any fraud under Section 143(12) of the Act and therefore disclosure of details under Section 134(3)(ca) of the Act is not applicable.
INTERNAL CONTROL SYSTEMS: a) Internal Audit and its adequacy
The scope and authority of the internal audit function is independence and objectivity well in its functions, the internal audit function reports directly to the Audit Committee of the Board.
At the beginning of each Financial Year, a risk-based annual audit plan is rolled out after it is approved by the Audit Committee of the Board. The audit plan aims to evaluate the efficiency and adequacy of the internal control system(s) and compliance(s) thereof, robustness of internal processes, policies and accounting procedures, compliance with laws and regulations. The Internal Audit function, consisting of professionally qualified chartered accountants and specialists, is adequately skilled and resourced to deliver audit assurances at highest levels.
Based on the reports of internal audit function, process owners undertake corrective action in their respective areas. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.
b) Internal Financial Control Systems and its adequacy
Your Company has in place adequate internal controls with reference to financial statements and operations and the same are operating effectively. The Internal Auditors tested the design and effectiveness of the key controls and no material weaknesses were observed in their examination. Further, Statutory Auditors verified the systems and processes and confirmed that the Internal Financial Controls system over financial reporting are adequate and such controls are operating effectively.
Based on the framework of internal financial controls and compliance systems established and maintained by your Company, the work performed by the internal, statutory and secretarial auditors and external consultants, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by management and the relevant board committees, including the Audit committee, the Board is of the opinion that your Company's internal financial controls were adequate and effective during FY 2023-24.
RISK MANAGEMENT:
For your Company, Risk Management is an integral and important aspect of Corporate Governance. Your Company believes that a robust Risk Management Framework ensures adequate controls and monitoring mechanisms for smooth and efficient running of the business. A risk-aware organization is better equipped to maximize shareholder value.
The key cornerstones of your Company's Risk Management Framework are:
A well-defined risk management policy;
• Periodic assessment and prioritization of risks that affect the business of your Company;
• Development and deployment of risk mitigation plans to reduce vulnerability to prioritized risks;
• Focus on both the results and efforts required to mitigate the risks;
Defined review and monitoring mechanism wherein the functional teams, the top management, the Risk Management Committee, Audit Committee and the Board review the progress of the mitigation plans;
• Integration of Risk Management with strategic business plan, annual operating plans, performance management systemandsignificant business
• Constant scanning of external environment for new and emerging risks;
Wherever applicable and feasible, defining the risk appetite and implementing adequate internal controls toor ensure that the limits are adhered to.
Your company has constituted a Risk Management Committee (RMC) chaired by an Independent Director and has also formulated a Risk Management Policy to identify risks and mitigate their adverse impact on business which is reviewed by the Risk Management Committee from time to time.
Risk Management Committee assists the Board in monitoring and overseeing the implementation of the Risk Management Policy, including evaluating the adequacy of Risk Management Systems and such other functions as mandated under the
SEBI Listing Regulations and as the Board may deem fit from time to time.
The business risks and its mitigation has been reported in detail in the Management Discussion and Analysis Section forming part of this Annual Report.
WHISTLE BLOWER POLICY/VIGIL MECHANISM:
Over the years, your Company has established a reputation for doing business with integrity and displays zero tolerance for any form of unethical behaviour. To create enduring value for all stakeholders and ensure the highest level of honesty, integrity and ethical behaviour in all its operations, your Company has implemented Vigil Mechanism in the form of Whistle Blower
Policy for Directors and Employees to report their genuine concerns about misconduct and actual/potential violations, if any, to the Whistle Officer of the Company.
Pursuant to Section 177 of the Act read with the Rules prescribed thereunder and Regulation 22 of the Listing Regulations, the Whistle Blower Policy provides for adequate safeguards against victimisation of persons who use the
Vigil Mechanism. In terms of the Policy of the Company, no employee of the Company has been denied direct access to the Chairman of the Audit Committee of the Board.
The Whistle Blower Policy can be accessed on the website of the Company at https://storage.googleapis.com/5paisa-prod-storage/files/investor_relations/2021-05/whistle-blower-policy.pdf.
The Audit Committee is also committed to ensure fraud-free work environment. We investigate complaints speedily, confidentially and in an impartial manner and takes appropriate action to ensure that the requisite standards of professional and ethical conduct are always maintained.
Protected disclosures can be made by a whistle-blower through several channels to report actual or suspected frauds and violation of the Company's Code of Conduct. However, during the year under review, no protected disclosure concerning any reportable matter in accordance with the Policy of the Company was received by the Company.
GOING CONCERN STATUS:
During the year under review, no significant orders were passed by the Regulators or Courts or Tribunals which may impact the going concern status and Company's operations in future.
However, MCX vide its email dated March 14, 2024 ("Order") imposed a restriction on your Company with regard to onboarding of new clients across all segments with immediate effect. It was further intimated that the said restrain shall continue till the Company submits a complete Root Cause Analysis ("RCA") along with documentary evidence or for a period of 15 days, whichever is higher. Basis the action taken by MCX, NSE and BSE also imposed a similar restriction on your Company vide its email dated March 14, 2024.
Being aggrieved by the Order, the same was immediately challenged by your Company before the Hon'ble Bombay
High Court by filing a writ petition. Thereafter, your Company was given an opportunity of being heard on March 27, 2024 wherein your Company had offered a detailed representation along with the Root Cause Analysis ("RCA") and Action taken to ensure non-recurrence of the said issues in future. Despite the same, the Member and Core Settlement Guarantee Fund Committee (MCSGFC) of the MCX passed an order vide its letter dated July 01, 2024 levied a monetary penalty of Rs. 2,59,75,000/- (plus applicable GST) on your company and further, a non-monetary penalty of restricting on-boarding of new clients for a period of Fourteen (14) days from the date of receipt of the order.
Aggrieved by the said order, your company had filedan appeal against the said order before Hon'ble Securities Appellate Tribunal ("SAT"). SAT passed an order on July 05, 2024, granting a stay on the operation of the Impugned order of MCX subject to deposit of 50% of the penalty amount i.e.
Rs. 1,30,00,000/- (Rupees One Crore Thirty Lakhs Only) within one week with MCX. Your Company promptly deposited the said amount with MCX and the restriction, so imposed was revoked across Exchanges.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:
The additional information on energy conservation, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is appended as "Annexure –III" to this Directors' Report.
PARTICULARS OF EMPLOYEES:
Disclosures with respect to the remuneration of Directors, Key Managerial Personnel and employees as required under Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in "Annexure-IV" to this Report. Details of employee remuneration as required under provisions of
Section 197 of the Act read with Rule 5(2) & 5(3) of Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 also form part of this Report. However, as per the provisions of Section 136 of the Act the report and the Audited Standalone and Consolidated Financial Statements along with the Auditors' Report thereon are being sent to the Members and others entitled thereto, excluding the said information. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard.
DISCLOSURE ON SEXUAL HARASSMENT OF WOMAN AT WORKPLACE:
Your Company recognizes its responsibility to provide equal opportunities and further it is committed to create a healthy working environment that enables all the employees to work with equality and without fear of discrimination, prejudice, gender bias or any form of harassment at workplace.
To ensure this, your Company has in place, a gender-neutral policy on prevention of sexual harassment at the workplace and a framework for employees to report sexual harassment cases at the workplace where its process ensures complete anonymity and confidentiality mechanism of the Company provides for adequate safeguards against victimization of Directors, employees and third parties who avail of the mechanism and provides for direct access to the Chairman of the Audit Committee in exceptional cases.
All new employees go through a detailed personal orientation on anti-sexual harassment policy. Additionally, separate trainings (classroom/online) on Anti-Sexual Harassment Policy are conducted to educate the employees on said policy/ rules.
In compliance with the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal)
Act, 2013 and rules made thereunder, your Company has constituted Internal Complaints Committee to deal with complaints relating to sexual harassment at workplace. Details of complaint on sexual harassment are as under:
• Number of Complaints received during the year: NIL
• Number of Complaints disposed off during the year: NIL
• Number of cases pending more than 90 days: NIL
Nature of action taken by employer or district officer: Not
Applicable
The Whistle Blower Policy can be accessed on the website of the Company at https://storage.googleapis.com/5paisa-prod-storage/files/investor_relations/2021-05/whistle-blower-policy.pdf. During the year under review, no protected disclosure from any Whistle Blower was received by the
Whistle Officer.
CORPORATE SOCIAL RESPONSIBILITY:
Your Company has been at the forefront in helping the Community through impactful CSR projects that have addressed critical issues of our time. CSR for a business includes being responsible for its business processes and products, and engaging in accountable relationships with its employees, customers, and the community. Your Company has built its reputation as a good corporate citizen by not only doing good business, but also by driving positive change in society. For your Company, CSR is not only about adhering to statutory and legal compliances but also creating social and environmental value for its stakeholders thus contributing to build an equal and future-ready nation.
During the year, your Company has spent Rs. 67,20,000/- on CSR activities. The Annual Report on CSR activities is annexed as "Annexure-V" to this report.
ENVIRONMENT, HEALTH AND SAFETY:
Your Company prioritises protecting, promoting, and enhancing employees wellbeing. Your Company recognises healthy and safe working conditions as a human right and adheres to all local and national health and safety regulations.
Given the nature of business, your Company does not undertake any manufacturing activity. However, the Companyof information. The vigil has designed and adopted manuals and procedures to cover environmental aspects and health and safety risks that the facility/property can control and directly manage and those that it does not directly control or manage but over which it can be expected to have an influence through its Environment, Health and Safety Manual.
Your Company is sensitive about the health and safety of its employees and has been achieving continuous improvement in safety performance through a combination of systems and processes as well as co-operation and support of all employees.
INDUSTRIAL RELATIONS:
The Company maintained healthy, cordial and harmonious industrial relations at all levels during the year. The Board acknowledges the contribution of the employees and all other stakeholders towards meeting the objectives of the Company.
ANNUAL RETURN:
As per the requirements of Section 92(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return of your Company is available on your company's corporate website at https://www.5paisa.com/ investor-relations.
CONFIRMATIONS:
1. There has been no change in the nature of business of your Company during the Financial Year 2023-24.
2. The notes on the financial statement referred in the
Auditor's Report are self-explanatory and do not call for any further comments. The Auditor's Report does not contain any qualification, reservation, adverse remark or disclaimer for the Financial Year 2023-24.
3. There have been no instances of frauds reported by the Auditors under Section 143(12) of the Act and the Rules framed thereunder, either to the Company or to the Central Government.
4. Your Company is fully compliant with the applicable Secretarial Standards (SS) issued by Institute of Company
Secretaries of India viz. SS-1 & SS-2 on Meetings of the
Board of Directors and General Meetings respectively.
5. There was no instance of one-time settlement of loan obtained from the Banks or Financial Institutions.
6. No Significant or material orders passed against your
Company by the Regulators or Courts or Tribunals during the year ended March 31, 2024 which would impact the going concern status of your Company and its future operations except that MCX vide its letter dated March 14, 2024, restricted the Company from onboarding new clients until the Company submitted a Root Cause Analysis (RCA) or for a period of 15 days. NSE and BSE imposed similar restrictions.
Being aggrieved by the Order, the same was immediately challenged by your Company before the Hon'ble Bombay High Court and submitted the RCA on March 27, 2024. Despite the same, MCX imposed a penalty amounting to Rs. 2,59,75,000/- and extended the restriction of on-boarding of new clients for 14 days from the date of receipt of the order.
Aggrieved by the said order, your Company appealed to the Hon'ble Securities Appellate Tribunal (SAT), which stayed the MCX order on July 5, 2024, subject to deposit of 50% of the penalty amount i.e. Rs. 1,30,00,000/-. The Company complied, and the restrictions were lifted across Exchanges.
GENERAL:
The Directors states that there being no transactions with respect to the following items during the financial year 2023-
24, no disclosure or reporting is required with respect to the same:
1. Issue of equity shares with differential rights as to dividend, voting or otherwise.
2. Buyback of shares.
3. Receipt of any remuneration or commission by the Director(s) of your Company from any of its subsidiaries.
4. Material changes and commitments affecting the financial position of your Company that have occurred between the end of the financial year to which the financial statements relate and the date of this report, or unless otherwise stated in the report.
5. Application or proceedings made under the Insolvency and Bankruptcy Code, 2016.
CAUTIONARY STATEMENT:
Statements in the Annual Report, including those which relate to Management Discussion and Analysis, describing your Company's objectives, projections, estimates and expectations, may constitute ‘forward looking statements' withinthemeaningofapplicablelawsandregulations.Although the expectations are based on reasonable assumptions, the actual results might differ.
APPRECIATION:
Your directors place on record their sincere appreciation for the assistance and guidance provided by the Government, Regulators, Stock Exchanges, Depositories, other statutory bodies and your Company's Bankers for the assistance, co-operation and encouragement extended to your Company.
Your directors also gratefully acknowledge all stakeholders of the Company viz. customers, members, dealers, vendors, banks and other business partners for the excellent support received from them during the year. The employees of your Company are instrumental for the Company scaling new heights, year after year. Their commitment and contribution is deeply acknowledged. Your involvement as members is also greatly valued. Your Directors look forward to your continuing support.