Annual Report Project On Muthoot Finance Ltd 5y6n3v

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

ABSTRACT The project – REVIEWING PUBLISHED CORPORATE ANNUAL REPORT OF MUTHOOT FINANCE. An Annual Report is a comprehensive report on a company's activities throughout the preceding year. Annual reports are intended to give information about the company's activities and financial performance. Most jurisdictions require companies to prepare and disclose annual reports, and many require the annual report to be filed at the company's registry.

The responsibility of Muthoot Finance is to conduct the audit in accordance with the Standards on Auditing issued by the Institute of Chartered ants of India.

The first step of this project is to understand how company prepare all the essential report whole year and then submit annual report. To take an in depth knowledge of Financial Report, ing Policies, Annual Reports and different forms of reporting.

The second step of this project is to understand and review the Annual Report made by company which notify the Financial Report, ing Policies and reports of all the transaction took place in the whole year. The details provided in the report are of use to investors and other interested person to understand the company's financial position and future direction.

The final step of this project is to suggest measures to make this whole process more effective, less time consuming and error proof.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

EXECUTIVE SUMMARY Muthoot Finance was founded by M George Muthoot in 1939.Muthoot Finance to enter capital market through IPO route - Economic Times. The company has been licensed by Reserve Bank of India under Section 45 I (a) of the RBI Act, 1934 to function as a Nonbanking financial company (NBFC) without accepting public deposits and is specifically exempted from the provisions of the Money Lenders Act in Karnataka and other states. The company's gold loan business constitutes more than 99 percent of its total income. Muthoot Finance was originally incorporated as a private limited company on March 14, 1997 with the name “The Muthoot Finance Private Limited” under the Companies Act. Subsequently, by fresh certificate of incorporation dated May 16, 2007, its name was changed to “Muthoot Finance Private Limited”. The company was converted into a public limited company on November 18, 2008 with the name “Muthoot Finance Limited” and received a fresh certificate of incorporation consequent upon change in status on December 02, 2008 from the RoC. Muthoot Finance Ltd. is an Indian financial corporation. It is known as the largest gold financing company in the world. In addition to financing gold transactions, the company offers foreign exchange services, money transfers, wealth management services, travel and tourism services, and sells gold coins at Muthoot Finance Branches. The company's headquarters are located in Kerala, India, and operates over 4,400 branches throughout the country. Outside India, Muthoot Finance is established in the UK, US, and United Arab Emirates. While the company falls under the brand umbrella of the Muthoot Group, its stocks are listed on BSE and NSE. The target market of Muthoot Finance includes small businesses, vendors, farmers, traders, SME business owners, and salaried individuals.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

OBJECTIVE OF STUDY An annual

report is

a

comprehensive report on

a company's activities

and

financial

performance throughout the preceding year. Thus the detailed study on Annual Report is being carried out with the following objectives: 1. To understand how to read, analyze, and create financial statements to get a full and accurate understanding how much money there is, how much debt is owed, the income coming in each month, and the expenses going out the door. 2. To know how well the company is doing. Is company earnings higher, lower or the same as the year before? How are sales doing? These numbers should be presented clearly in the financial section of the annual report. 3. To find out whether the company is making more money than it is spending. How does the balance sheet look? Are assets higher or lower than the year before? Is debt growing, shrinking, or about the same as the year before? 4. To get an idea of management’s strategic plan for the coming year. How will management build on the company’s success? This plan is usually covered in the beginning of the annual report — frequently in the letter from the chairman of the board. 5. To find out where the company has been, where it is now, and where it’s going.

LIMITATIONS OF THE STUDY Despite of all the efforts to make the analysis more comprehensive and scientific, a study of present kind is bound to have certain limitations. Attempts have been made to provide more comprehensive conceptual analysis. 1. The study is only limited to the information published and available by the company. 2. The study is limited to the financial area of Annual Report.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

SCOPE OF THE STUDY The study is limited based on data published by the company’s financial statements. The data has been collected for the financial year 2013-14 and has been analysed using pictorial diagrams like graph, bar and columns charts etc. The data has been collected from secondary sources.

RESEARCH METHODOLOGY In order to fulfil the objectives of the study the data can be collected from two sources of data –  

Primary Data Secondary Data

SOURCES OF DATA: Primary Data The primary data of the topic is collected by personal interaction with the officials of the finance and ing department .For this project secondary data was used for collecting data. Secondary data For gathering secondary data various other sources were used, which are – 1. 2. 3. 4. 5. 6.

Different ing records of the company. Magazines and journals Annual Reports Company website Internet and web searching Company databases

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

CONTENTS SR.NO

PARTICULARS

PAGE NO.

CHAPTER - I

INTRODUCTION OF PUBLISHED CORPORATE ANNUAL REPORT

1 - 12

CHAPTER – II

MUTHOOT FINANCE LTD

13 - 14

Introduction of Muthoot Finance Ltd

CHAPTER - III

CHAPTER - IV

CHAPTER - V

Financial Statements of Muthoot Finance Ltd for the year ended March, 2014

13

15 - 18

Balance Sheet

15

Profit and Loss Statement

16

Cash Flow Statement

17

DATA ANALYSIS AND INTERPRETATION

19 - 32

Management Discussion and Analysis

19

Notes to s

27

Interpretation to Financial Statements

30

CONCLUSION

33

Project on Published Corporate Annual Report of Muthoot Finance Ltd BIBLIOGROPHY

2013-14 34

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

CHAPTER - I

INTRODUCTION Today reporting by companies has to assume a high level of importance. Formerly annual reports used to be less revealing and reporting was not timely and we not catering to requirement of various shareholder. More was concealed than what was revealed. But today thanks to investor awareness global standards used the effective functioning of regulatory bodies corporate reporting has become more revealing.

ESSENTIALS OF FINANCIAL REPORTS 1) Relevance Means selecting the information most likely to aid s in their economic decisions. 2) Understandibility which implies not only that the selected information must be intelligible but also that the s can understand it. 3) Verifiability which implies that the ing results may be corn borated by independent measurers using the same measurement methods. 4) Neutrality which implies that the ing information is directed towards the common needs of s rather than the particulars needs of specific s. 5) Timeliness which implies an early communication of information to avoid delays in economic decision-making. 6) Comparability which implies that differences should not be the result of different financial ing treatments. 7) Completeness Which implies that all the information that ‘reasonably’ fulfils the requirements of other qualitative objectives should be reported.

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Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

DEVELOPMENTS OF FINANCIAL REPORTING OBJECTIVE . These objectives may be summarized as follows: 1. The particular objectives of financial statements are to present fairly, and in conformity with generally accepted ing principles, financial position, results of operations, and other changes in financial position. 2. To provide reliable information about economic resources and obligations a business enterprise in order(i) Evaluate its strengths and weakness. (ii) Show its financing and investment. (iii) Evaluate its ability to meet its commitments and (iv) Show its resources base for growth. 3. To provide reliable information about changes in net resources resulting from a business enterprise’s profit- directed activities in order (i) Show investors expected dividend return (ii) Show operation’s ability to pay creditors and suppliers, provide jobs for employees pay taxes, and generate funds for expansion. (iii) Provide management with information for planning and control and (iv) Show its long-term profitability. 4. To provide financial information useful for estimating the earning potential of the firm. 5. To serve s who have limited authority. 6. To provide other needed information about changes in economic resources and obligations. 7. To disclose other information relevant to statement ’s needs. 8. To provide a statement of earnings for predicting future performance. 9. To provide information required for decision making 10. To educate public about the company`s mission and goals.

ANNUAL REPORT 2

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

There are different ways of corporate reporting of which the most important is the published Annual Report sent to the shareholders. An annual report is a comprehensive report on company's activities throughout the preceding year. Annual reports are intended to give shareholders and other interested people information about the company's activities and financial performance. Annual Report is a mandatory part of reporting. Most jurisdictions require companies to prepare and disclose annual reports, and many require the annual report to be filed at the company's registry. IMPORTANCE OF ANNUAL REPORT i.

It gives an opportunity to take a step back and look at the overall practical and financial health of your business.

ii.

You can know how well the company is doing.

iii.

You can find out whether the company is making more money than it is spending

iv.

You can get an idea of management`s strategic plan for the coming year. Annual Report is statutory financial statements include profit & loss and balance

sheet in vertical form. It is accompanied by various schedules and notes to the s. Other information deemed relevant to stakeholders may be included, such as a report on operations for manufacturing firms or corporate social responsibility reports for companies with environmentally or socially sensitive operations. The details provided in the report are of use to investors to understand the company's financial position and future direction. The financial

statements

are

usually

compiled

in

compliance

with IFRS and/or

the

domestic GAAP, as well as domestic legislation. The information largely reflects the financial effects of transactions and events that have already happened. Financial reporting is expected to provide information about an enterprise’s financial performance during a period and about how management of an enterprise has discharged its stewardship responsibility to owners. Management is also interested in the information contained in the financial information that helps it carry out its planning, decision-making and control responsibilities. Management has the ability to determine the form and content of such additional information order to meet its own needs. Published financial statements are based on the information used by management about the financial position, performance and changes in financial position of the enterprise.

CONTENTS OF ANNUAL REPORT 3

Project on Published Corporate Annual Report of Muthoot Finance Ltd 1. STATUTORY : a. Profit & Loss A/c b. Balance Sheet c. Director`s Report d. Auditor`s Report e. Notes to s 2. ING STANDARDS : f. Disclosure of ing policies (AS 1) g. Cash flow statement (AS 3) h. Consolidated financial statements (AS 21) i. Segment reporting (AS 17) j. Related party Disclosures (AS 18) 3. LISTING REQUIREMENTS : k. Cash flow statement l. Management Discussion and Analysis m. Report on corporate Governance 4. EXTENDED REPORTING : n. Chairman`s speech o. Financial highlights p. Ten year`s summary q. Value Added statement r. Shareholder`s Information s. Segment Reporting t. Human Resource ing u. Inflation Adjusted s v. Social Reporting w. Important Ratios x. Economic Value Added y. Shareholder`s reference z. Risk Management

Annual Report and s - Contents Contents: non-audited information Narrative items – Chairmen’s statement – Directors’ report – Operating and financial review – Review of operations – Statement of corporate governance – Auditors report – Statement of directors’ responsibilities for the financial statements

4

2013-14

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

– Shareholder information • Non-narrative – Highlights – Historical summary – Shareholder analysis Balance sheet • A balance sheet is a statement of the resources owned and controlled by a business at a single point in time. • It gives a snapshot of assets, liabilities and capital at a point in time. • It provides information about the company’s funds and how they are used in the business. Profit and loss • The Profit and Loss is a statement which shows total business revenue less expenses. • The P&L quantifies and explains the gains or losses of the company over the period of time bounded by two balance sheets • It provides a summary of the year’s trading activities: – Revenue from sales (turnover) – Business costs – Profit or (loss) – How the profit was used. Cash flow statement • This is a statement which shows the flow of cash into and out of the business. • It is not the same as a profit and loss . • The cash flow statement only records movements of cash and, for example, does not include credit sales or purchases until such time as cash actually flows. • This statement became mandatory because of some high profile business failures of the 1980s/90s - these were companies that, in of the P&L, were profitable but were short of cash to pay their debts. • The cash flow statement should not be confused with a cash flow forecast. The former is historical whereas the latter is a forecast about the future.

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Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

Statement of total recognised gains and losses • The STRGL is a financial statement which attempts to highlight all shareholder gains and losses and not just those from trading. • It is a summary of all the profits and losses made during the year. • It is necessary because not all gains and losses are shown on the P and L . • Example: upward revaluation of a fixed asset is not classed as revenue from trading operations and so it will not shown up on the P and L . It does show up as an addition to revaluation reserves on the balance sheet.

Certification of the annual report A company’s annual report must be provided with a certification that it is a true copy of the original document. Read more on the page Certification of annual reports, see the menu.

Notes to the s • Provides a more detailed analysis of some of the entries in the s • Disclosure of ing policies used (e.g. depreciation) and any changes to these policies. • An explanation for any deviation from ing standards. • Sources of turnover from different geographical areas. • Details of fixed assets, investments, share capital, debentures and reserves. •Directors emoluments (how much the Directors earned) • Earnings per share.

ing policies • Companies must describe the ing policies they use in preparing financial statements. • Companies have a choice of ing policies in many areas such as foreign currencies, goodwill, pensions, sales and stocks. • As different ing policies will result in different figures it is necessary to state the policy that was used so that readers of the s can make an informed judgement about performance. • It is also important to state the effect of any changes in ing policies – restating prior year numbers where this is materially significant.

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Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

Chairpersons statement • An overview of the trading year. • A personalise overview of the company’s performance over the past year. • Usually covers strategy, financial performance and future prospects. Directors’ Report • Its principal objective is to supplement the financial information with other information consider necessary for a full appreciation of the companies activities. It includes: • A description of the principal activities of the company. • A fair review of the current and future prospects of the business. • Information on the sale, purchase or valuation of assets. • Recommended dividends. • Employee statistics. • Names of directors and their interests. • Details of political or charitable donations. Operating and financial review • This is a statement in the annual report which provides a formalised, structured explanation of financial performance. • The operating review covers items such as operating results, profit and dividend. • The financial review discusses items such as capital structure and treasury policy. Operating and financial review Operating review • New product development • Details of shareholders returns • Risks and uncertainties • Future investment • Sensitivity of financial results to specific ing policies. Financial review • Current cash position. • Sources of finding.

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Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

• Treasury policy. • Capital structure. • Confirmation of the business as a going concern. • Factors outside the balance sheet impacting on the value of the business. • Taxation. Other features • Highlights – An “at a glance” summary of selected figures and ratios. • Historical summary – Five years of selected data from the balance sheet and profit and loss – Tables and graphs to illustrate trend and comparison of turnover, profit, dividend and earnings per share. • Shareholder analysis – Detailed analysis of the shareholders, for example by size of shareholding. Auditors report • Auditors are independent ants who are ed to carry out this work. • They also have to certify that the s are drawn up in accordance with the requirements of the Companies Act. • Auditors must make a brief report to confirm that the s give a true and fair view of the firm’s financial position.

Shareholder`s fund and policy holder`s fund •Shareholder`s fund are usually the shares in the company, any share issue , retained profits and possibly other reserved that have been accumulated. •Policy holder`s fund represents customer deposit plus interest credited at current rates. CAG Report CAG Report shows all receipts and expenditure of the government of India and the state government.

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Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

Report of board of directors to member Board of directors issue a report quarterly, half yearly and annually giving details about the companies, policies, programs and formulating strategies about the company to Annual general meeting Gathering of the directors and stockholders of every incorporated firm required. Management report Management report is the statement made by management and it is used to compare the actual results achieved with the budgeted forecast levels. This report helps the management to see where they went wrong and they apply measures to improve it. Segment reporting schedule In an annual report the purpose of business segment reporting is to provide an accurate picture of a public company`s performance to its shareholder`s. For upper management, business segment reporting is used to evaluate each segment`s income, expenses, assets, liabilities and so on in order to assess profitability and riskiness.

NOTES TO S Financial Statements are prepared as per historical cost convention on accrual basis of ing. These statements comply with the companies Act 1956 and the ing Standards issued by the ICAI. The significant ing Policies are about the following: 1. 2. 3. 4.

Fixed assets depreciation and amortisation Investments Inventories Provision for doubtful debts/advances

9

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

5. Foreign currency transactions 6. Revenue Recognition 7. Retirement benefits 8. R & D 9. Excise / Custom duty 10. Income tax 11. Borrowing cost 12. Provision for current and Deferred Tax 13. on Redemption of Debentures. NOTES TO S Annual Report of every company must contain notes to s due to the following 1. 2. 3. 4.

Financial statements are prepared in vertical format in abridged form. Notes to s give the contents of every item in the financial statements. Notes to s explain the policies of the company. Notes to s bring out the effect of change in method of ing on profits of

the company. 5. Details of the changes in policies are disclosed through notes. 6. The reader can interpret the financial statements with the help of Notes to s. 7. Notes to s explain about the compliance of SEBI Guidelines, RBI Guidelines, ing Standards etc. 8. Notes to s throw light on the methods/procedure of ing followed by the organisation.

Significant ing Policies in Financial Statements Significant ing Policies are specific ing principles and methods a company employs and considers to be the most appropriate to use in current circumstances in order to fairly present its financial statements. The disclosure of ing Policies helps s of financial statements (e.g., investors, creditors, vendors) to understand how particular ing principles were used in preparing the company’s financial statements. Description of significant ing policies also helps in comparing financial statements of different companies. Disclosure of significant ing policies should be done in the following situations: 

A selection of existing acceptable alternatives.



Principles and methods that are specific in a particular industry in which the company operates.



Unusual or innovative application of GAAP.

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Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

Some areas for which significant ing policies can be disclosed in financial statements are presented below:                            

Basis of consolidation s receivables and determination of allowance for bad debts Advertising costs Cash and cash equivalents Changes in ing policies Deferred income taxes Derivatives and hedging activities Fair value elections, methods, assumptions, inputs used Fiscal year (52-53 week year) Foreign currency translation Goodwill Impairment of long-lived assets, goodwill, other intangibles, investments, etc. Intangible assets Interest capitalization Internal-use software Inventories and their pricing (FIFO, LIFO, Weighted-average, etc.) Nature of operations Operating cycle Pension and other postretirement or postemployment plans Property and equipment and related depreciation and amortization Reclassifications Research and development costs and their basis of amortization Revenue recognition Stock-based compensation Shipping and handling costs Start-up costs Use of estimates Warranties

Companies normally present significant ing policies in a separate note to financial statements or in a separate summary of significant ing policies preceding the notes to financial statements. RATIO TO ANALYSE FINANCIAL STATEMENT

Annual reports contain information about financial highlights and the key indicators. The key ratios are given for the last 10 years. These ratios help to interpret financial position of the company. The analyst should draw conclusion about the following from the reported ratios: 1. Liquidity Position

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Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

With the help of ratio conclusions can be drawn about liquidity position of a company. Liquidity is the ability of a company to meet its current obligations when they become due. A firm is said to have food liquidity position when it has sufficient liquid assets to meet the current obligations. 2. Long term Solvency Ratio analysis is useful for assessing the long term financial position of a company. The position can judged from capital structure ratio, debt equity ratio and proprietary ratio. 3. Operating efficiency Operating efficiency of the management is judged from operating ratio, net operating profit ratio, inventory turnover, debt collection etc. 4. Overall Profitability It is the ability of the company to generate adequate income so that the shareholders can be rewarded adequately. This is judged from return on investment, return on equity capital, E.P.S etc. 5. Utilisation of resources The management efficiency in utilization of resources can be judged from assets turnover ratios, return on investment etc.

12

CHAPTER - II

MUTHOOT FINANCE LIMITED Muthoot Finance was founded by M George Muthoot in 1939.Muthoot Finance to enter capital market through IPO route - Economic Times. The company has been licensed by Reserve Bank of India under Section 45 I (a) of the RBI Act, 1934 to function as a Nonbanking financial company (NBFC) without accepting public deposits and is specifically exempted from the provisions of the Money Lenders Act in Karnataka and other states. The company's gold loan business constitutes more than 99 percent of its total income. Its retail loan assets stand at Rs. 23,763 Crs. the total number of shares of Muthoot Finance held by Individuals/Hindu Undivided Family stood at 80.12 percent and the public shareholdings from Mutual Funds/UTI totalled 3.52 percent. Muthoot finance is a flagship company of the Muthoot Group based in

Southern

India.

Company was formed with a vision of “creating an organization capable of serving the versatile need of the growing Indian financial market”

the focus of the company is on

creating liquidity with an asset class, namely gold that has the largest consumer market. Muthoot Finance Ltd (MFL), incorporated in 1997, is the Kerala based largest gold financing company in India in of loan portfolio. The company offers gold loan to individuals like small businessmen, vendors, traders, and salaried individuals who cannot access formal credit for reasons like lack of credit history, documentation, accessibility. They have deployed 25000 people in over 4400 branches spread over 21 states and 4 union Territories. Muthoot finance is a major market player dedicated to make a positive impact on countless people ranging from farmers to salaried employees seeking financial aid. The target market of Muthoot Finance includes small businesses, vendors, farmers, traders, SME business owners, and salaried individuals. Muthoot finance India Ltd has 4,270 branches across 26 states and Union Territories, 75% Promoter shareholding in the company 5 lakhs + Debenture holders in the company 5 Millions + Customers 75 years unblemished track records

PRODUCT AND SERVICES OF THE MUTHOOT FINANCE 13

1. GOLD LOAN India`s largest gold loan service provider, safeguard the deposit of gold is primary concern. Gold loan range starts from Rs.1500 to Rs. 1 Crore. 2. GOLD COIN Muthoot finance help to invest in the most powerful asset, which is gold it is also a leading Silver and Gold Coins provider in India. 3. M POWER CARD Ticket to heavy discounts, rebates and interesting services that add value to . M Power Card is a CRM Service provided by Muthoot Finance. 4. MONEY TRANSFER Mothoot Money Transfer makes it possible to Receive and Send money within a blink of an eye. 5. FOREIGN TRANSFER Muthoot Exchange brings you hassle-free currency exchange services that are provided at competitive rates. 6. TRAVELSMART Muthoot finance provides flexible and customized travel insurance and foreign exchange alongside travel packages and tour arrangements. 7. WEALTH MANAGEMENT SERVICE Wealth Management is classified into 4 step process comprising risk evaluation, client evaluation, value analysis and consultancy. 8. ATM Muthoot finance aims to expand the number of ATMs reach to Tier III to Tier VI cities as well, as part of financial inclusion. In 2013 it obtains RBI License to start operating 9,000 White Label ATMs.

CHAPTER – III FINANCIAL STATEMENTS OF MUTHOOT FINANCE LTD FOR THE YEAR ENDED MARCH 2014 BALANCE SHEET OF FOR THE YIEAR ENDED MARCH 2014

14

PARTICULARS

31st March, 2014

31st March, 2013

EQUITY AND LIABILITIES Shareholders’ funds Share capital

3,717,127,680.00

3,717,127,680.00

38,928,634,085.04

33,638,524,414.26

69,046,032,561.10

79,529,418,712.87

8,975,080,634.76

5,633,839,140.60

18,733,086.00

2,410,000.00

Short-term borrowings

60,642,866,946.00

94,802,406,416.23

Trade Payables & Other current liabilities

72,431,871,016.08

73,155,919,995.26

2,178,393,743.91

3,683,008,186.58

255,938,739,752.89

294,162,654,545.80

3,119,747,528.67

2,888,081,210.06

6,065,822.34

5,696,085.11

83,785,469.00

95,963,836.25

60,267,280.00

40,431,863.00

46,749,940.00

75,049,940.00

210,470,735.90

195,441,491.90

1,019,451,594.24

1,045,225,440.06

307,000,000.00

750,000,000.00

11,639,680,421.27

11,481,770,359.45

20,489,267,554.30

13,419,987,682.79

218,944,896,078.16

264,131,088,154.70

11,357,329.01

33,918,482.48

255,938,739,752.89

294,162,654,545.80

Reserves and surplus

Non-current liabilities Long-term borrowings Other Long-term liabilities Long-term provisions

Current liabilities

Short-term provisions TOTAL

ASSETS Non-current assets Fixed assets

Tangible Assets Intangible Assets Capital Work-in-progress Intangible Assets under development Non-current investments Deferred tax assets (net) Long-term loans and advances

Current Assets Current investments Trade receivables Cash and Bank Balances TOTAL

STATEMENT OF PROFIT AND LOSS OF MUTHOOT FINANCE FOR THE YIEAR ENDED MARCH 2014 PARTICULARS Revenue from

49,278,820,053.01 53,588,984,621.56 31st March, 2014 31st March, 2013 195,544,949.75 282,381,919.53

Operations Total Revenue

15

49,474,365,002.7

53,871,366,5

6

41.09

Expenses:

5,917,121,758.87

Employee benefits expense

5,452,749,569.

26,259,879,576.76

71 28,194,442,89

4,257,105,053.85

1.99 3,567,826,839.

Directors Remuneration

192,000,000.00

56 192,000,000.0

Depreciation and amortization expense

474,615,435.73

0 454,430,452.4

Provisions and Write Offs

438,086,684.35

6 895,462,587.0

37,538,808,509.5

0 38,756,912,3

6 11,935,556,493.20

40.72 15,114,454,20

Finance costs Other expenses

Total Expenses Profit Before Tax

0.37

Tax Expense:

4,123,961,486.00

5,171,097,057.

(15,029,244.00)

00 (191,545,228.0

25,933,715.42

0) 92,507,141.84

7,800,690,535.78

10,042,395,2

Current tax Deferred tax Taxes relating to Previous Years Profit for the year

29.53 Earningsperequityshareof`10/-each

20.99

Basic & Diluted

27.02

CASH FLOW STATEMENT FOR THE YIEAR ENDED MARCH 2014 PARTICULARS A

31st March, 2014

Cash FlowBefore From Operating Net Profit Taxation

31st March, 2013

11,935,556,493.20

15,114,454,200.3 7

Adjustments for: Add: Provision for Non- Performing Assets and Standard assets Add: Finance Cost Add: Loss on Sale of Fixed Assets

16

213,948,607.00

765,190,034.00

26,259,879,576.7

28,194,442,891.9

6 80,760.00

9 213,367.00

Add: Depreciation and amortization

474,615,435.73

454,430,452.46

Add: Provision for Gratuity

18,733,086.00

2,410,000.00

Add :Expenses on ESOP

98,731,243.00

-

Less: Interest received on Bank Deposits

(70,993,542.80)

(195,639,653.95

Less: Income from Investments

(85,776,381.95)

(85,698,393.58))

Less: Profit on sale of Investments

(37,950,000.00)

Operating profit before working capital changes

-

38,806,825,276.94

44,249,802,898.29

45,211,965,922.36

(50,477,390,792.7

(157,910,061.82)

2) (4,141,538,546.0

Adjustments for: (Increase) / Decrease in Loans and Advances (Increase) / Decrease in Trade receivables (Increase) / Decrease in other receivables Increase / (Decrease) in Current liabilities

153,937,363.67

-23,712,913.76

Increase / (Decrease) in Other Liabilities

(1,852,892.26)

5,486,267.30

84,012,965,608.89

(10,386,831,281.3

(22,391,757,790.41

8) (23,828,995,205.2

Direct tax paid

(4,359,281,173.09)

6)

Net cash from operating activities

57,261,926,645.39)

(5,308,549,132.10) (39,524,375,618.74

Cash generated from operations Finance cost paid

B

9) 521,805.60

-

)

Cash Flow From Investing Activities Purchase of Fixed Assets Sale of Fixed Assets (Increase) / Decrease in Capital Work in

(711,014,501.57)

(724,067,399.14)

4,282,250.00

2,541,458.00

(7,657,049.75)

(81,030,468.00)

443,000,000.00

150,000,000.00

Progress Sale of Bonds

66,250,000.00

Sale of Investment in Shares

81,966,908.60

252,089,352.15

Interest

97,364,169.62

66,080,242.90

(25,808,223.10)

(334,386,814.09)

(6,154,952,000.00

33,940,758,000.0

) 2,315,016,877.30

0 1,480,611,281.0

Income Net Cash from Investing Activities C

---

Cash Flow From Financing Activities Net Proceeds from Issue of Debentures Increase / (Decrease) in Loan from Directors / Relatives of Directors

0

Increase / (Decrease) in Borrowings from Bank /Financial Institutions Increase / (Decrease) in Inter Corporate Loan

(43,330,189,698.23

9,043,583,304.1

)

1

(52,220,000.00)

(78,230,000.00 )

17

Increase / (Decrease) in Subordinated debt

3,245,842,000.00

8,199,876,000.0

Increase / (Decrease) in Commercial Papers

(2,073,562,100.00

0 (5,530,622,300.0

Dividend paid (including Dividend distribution

(4,116,773,629.85))

0) (1,727,611,944.00

(899,041,471.40)

2,620,588,164.5)

tax) (Increase) / Decrease in bank deposits held for greater than 3 months

5

Net Cash from financing Activities D

Net Increase In Cash And Cash Equivalents

(51,065,880,022.18

47,948,952,505.6

) 6,170,238,400.11

6 8,090,190,072.8 3

(A+B+C) Cash And Cash Equivalent at the Beginning of

13,401,835,731.7

5,311,645,658.9

the Year Cash And Cash Equivalent at the End of the

9 19,572,074,131.9

6 13,401,835,731.7

0

9

16,872,853,791.7

10,845,228,865.2

9 350,000,000.00

4 720,000,009.00

Cash on Hand

2,347,061,235.96

1,836,163,309.5

Unpaid Dividend

2,159,104.15 19,572,074,131.9

5 443,548.00 13,401,835,731.7

0

9

Year Components of Cash and Cash Equivalents at the end of the Year Deposit with Banks

Total

CHAPTER – IV

DATA ANALYSIS AND INTERPRETATIONS MANAGEMENT DISCUSSION AND ANALYSIS

GDP at factor cost 8 7 6 5 4 3 2 1 0

6.7

2011-12

4.5

4.7

2012-13

2013-14

 GDP GROWTH

18

The Indian Economy witnessed yet another year of sub 5 % GDP growth. FY 13 saw the worst GDP growth rate in the decade. The last time the economic growth rate had pierced the 5% mark. It is widely believed that economic growth will accelerate in 2014-15 as the reform process continues and starts yielding results. The pick-up will depend on resolution of several existing issues mainly implementation of stalled projects, ease of land acquisition, approvals from state governments, mine sector reforms, capital infusion to banks etc. There could be a minor improvement in growth rate in the second half of the current fiscal due to improvement in manufacturing and investments to around 5% and depending on the level of reforms, the growth may rise to 6% over medium term.  Role of NBFCs NBFCs being financial intermediaries are engaged in the activity of bringing the saving and the investing community together. In this role they are perceived to be playing a complimentary role to banks rather than competitors. NBFCs have carved niche business areas for them within the financial sector space and are also popular for providing customised products. In short, NBFCs bring the much needed diversity to the financial sector thus diversifying the risks, increasing liquidity in the markets thereby promoting financial stability and bringing efficiency to the financial sector.  Regulations Reserve Bank Of India has over the last 50 years streamlined the NBFC regulations, addressed the risks posed by them to financial stability, depositors’ and customers’ interests, regulatory arbitrage and helped the sector grow in a healthy and efficient manner. Some of the regulatory measures include identifying systemically important non-deposit taking NBFCs as those with asset size of Rs.100 Crores and above and bringing them under stricter prudential norms (CRAR and exposure norms), issuing guidelines on Fair Practices Code, aligning the guidelines on restructuring and securitisation with that of banks, permitting NBFCs-ND-SI to issue perpetual debt instruments etc. It is an acknowledged fact that NBFC’s in India are playing a crucial role in meeting the ‘Financial Inclusion’ objectives and needs of our country.  Gold Loan Sector The country’s Organised Gold Loan market has witnessed a significant expansion in the last one decade. The large domestic household gold holding of the country enabled the creation of this market. The magnitude of this holding could be more than 18000 tonnes. Most of the

19

gold is held by people in rural areas and in many cases this is the only asset they have in their possession. While richer sections diversify their portfolio according to risk-return equation, the poor rely more on gold as well as silver commodities. The jewellery bought in times of prosperity has been sold for cash in periods of distress or need.

Due to the

increased holding of gold as an asset among large section of people as also the nontransparent practices of lending against gold in the

Unorganised sector, entities like

‘Muthoot Finance’ started providing loans against the collateral of used gold jewellery many years back and over a period transformed itself as NBFCs with core focus on gold loans.  Factors influencing expansion of gold loan sector The gold loan industry is driven by multiple factors. Since the loan is granted against gold jewellery, the quantum of gold jewellery available with the customers is of utmost importance. The needs of the borrower coinciding with various purposes like cropping season, business season, academic year, festivals, Medical purposes etc, are critical in determining the demand for gold loans. Further, easy availability of loans on flexible and changing attitude of customers to avail loans and relative constriction by banks for giving personal loans enabled the popularisation of the product. To tap the opportunity, aggressive network expansion by NBFCs on a pan India basis, enabled the product to reach the masses and thereby widening the customer base. Further, aggressive marketing campaigns by the NBFCs increased awareness among the people and renunciation of stigma attached to pledging of gold jewellery. NBFCs, since having core focus, invested in infrastructure thereby building service quality. Customers found comfort and confidence in their transparent practices and started shifting their loyalties from the unorganised sector to the organised sector.  LEVEL PLAYING FIELD The regulatory Loan to Value cap of 60% on gold price for NBFCs denied the sector a level playing field with banks. The increased focus of banks on retail lending consequent to lack of adequate opportunities for safe corporate lending created disequilibrium in gold loan business. In January 2014, RBI relaxed the LTV norms for NBFCs by increasing the cap to 75% from 60%. Subsequently, RBI made the LTV cap applicable for banks also. This measure will pave way for a stability in the business of gold loans by NBFCs going forward and healthy development of the sector.

20

 OUTLOOK Credit extended by the gold loan NBFCs witnessed a CAGR of 86.7% during the period March 2009 to March 2013. In absolute , NBFC gold loans increased from just Rs.39 billion as on 31st March, 2009 to Rs.475 billion as on 31 st March, 2013. Monetising idle gold is crucial for creation of productive resources for India. NBFCs can continue to play a major role in this process.

 NBFCs-MONETISING IDLE GOLD Core focus - The primary focus of the gold loan NBFCs is to provide gold loans. Branch network - Branches play a significant role in building an institutions brand image. A wide network of branches enables NBFCs to be closer to the customer Faster turnaround time - Superior service creates loyalty and deeper customer relationships. achieved without any compromise on documentation discipline and KYC compliance requirements. Transparent and Standard Operating Practices - NBFCs offer a transparent transaction capturing all the clearly in the loan document and operate with standard operating procedures Flexible Repayment Option - Customers get a trouble free loan period where he is not troubled for any payment of equated monthly instalment rather would be allowed to make payment of interest and principal on closure of the loan. Resources availability - NBFCs have access to organised credit and hence do not face any constraint. Value to the Customer - Customers stay with a service provider if they pay a price they deem fair for quality of the products they receive. Low-cost structure - The Company has built network with a minimum investment corresponding to the potential of business in which it is going to operate.  RISK MANAGEMENT The objective of risk management systems is to measure and monitor the various risks the Company is subject to and to implement policies and procedures to address these. The Company continues to improve its operating processes and risk management systems that will further enhance its ability to manage these risks.  INTERNAL SYSTEMS AND THEIR ADEQUACY Muthoot Finance has an adequate internal control system in place to safeguard assets and protect against losses from any unauthorised use or disposition. The Company’s internal

21

controls are supplemented by an extensive programme of internal audits, review by the management, and documented policies, guidelines and procedures.  CAUTIONARY STATEMENTS Statements in this Management Discussion and Analysis describing the Company’s objectives, projections, estimates and expectations may be ‘forward looking statements’ within the meaning of applicable laws and regulations. This report should be read in conjunction with the financial statements included herein and the notes thereto.

Financial Performance of Muthoot Finance for the year ended 2014

Average Gold Loan Outstanding per Branch GOLD LOAN ASSETS 30000

7 6.63

6 5 5.75 4

25000

6.36

24417

20000 5.06

15000 10000

3

5000

2

0

1 0 FY 10-11 FY 11-12 FY 12-13 FY 13-14

22

15728 15728

26000

PROFIT AFTER TAX 1200

6000

1000 800

892

5000

1004 780

600 400

REVENUE 4549

4947

3000 2000

494

5387

4000

200

1000

0

0

2316

Capital Adequacy Ratio 30 25

24.69

20 15

15.82

18.29

19.62

10 5 0 FY 10-11 FY 11-12 FY 12-13 FY 13-14

From the Charts we can understand that –

23

Gold Loan Assets is increasing every year. But as compared to previous year it was slightly increased. Average Gold Loan outstanding per branch decreased in the year 2013-14 as compared to previous year which is good for company Revenue and Profit After Tax slightly decreased in the FY 2013-14 as compared to PY 201213 Capital Adequacy Ratio Increased in the FY 2013-14 as compared to PY 2012-13

STRIKING A BALANCE OF MUTHOOT FINANCE During FY 2013-14, the gold loan industry was severely impacted by a set of three distinct factors. First, it was regulatory action, designed to infuse greater credibility and governance in the sector in the long run. Second, it was the fall in the price of gold, unleashing a fresh wave of speculations on the business model, leading to an uncertain environment. Third, it was the overall downturn in the core economic sectors, which led to Regulatory action first reduced the maximum loan-to-value allowed on gold loans by NBFCs to 60% of gold price, Subsequently, however, this cap was revised upwards to 75% for NBFCs and simultaneously made this cap applicable for banks, which paved the way for a level playing field. The fall in gold prices triggered a wave of speculation on business model leading to suspicion in the minds of various stakeholders inspite of clarifications on the risk management practices of the company. Therefore, striking a balance between adhering to evolving regulation and changing as well as growing customer expectations remains a key focus area. Striking a balance between Regulatory landscape and commitments 

The regulatory clarity came following a period of uncertainty, which engulfed the gold loan industry, with intermediate rules making banks capable of lending at a higher LTV than NBFCs. In addition, the disbursement of loans of Rs.1 lakh and above compulsorily by cheque also affected the interest of customers as a normal cheque collection usually takes about three days even now. Though it’s easier to obtain PAN card now-a-days, insistence of PAN card for loans of Rs.5 lakhs and above was



another regulatory norm, which a gold loan customer was required to comply with. As the largest industry player in the gold loan business, They focused on gold loan financing with widening reach, customised products and services, and above all

24

deepening relationships and trust of a growing fraternity of customers, investors and other stakeholders. They stand by their customers when it matters most, bringing millions of people within the ambit of organised financing. Striking a balance between raising capital and cost of capital 

Muthoot finance have relied on the proceeds of non-convertible debentures placed through their branches under private placement mode subscribed primarily by retail investors with an average ticket size of around Rs.1.5 lakhs. This constituted about 49% of total funding source at the beginning of FY 2013-14. They believe that mobilisation through this mode was possible on of for industry leadership, goodwill, trust, reputation, track record, performance, stability in our business and



strong quality asset portfolio. To tame spiralling inflation, RBI consistently increased the benchmark policy repo rate from 7.25% to 8% by the end of FY 2013-14 and correspondingly the bank rate from 8.25% to 9.0%. This resulted in the banking sector increasing the base rate of lending to a certain extent. In addition, the regulatory stress and baseless speculation about the business model kept the expectations of lenders on lending rates high. The situation has eased a little following the RBI’s relaxation of LTV cap from 60% to 75%

Striking a balance between Mitigating Risk and Maximising Return. 

They provide one of the fastest loan approval and collateral appraisal processes backed by strong systems and policies that give us a two-fold advantage. One, it strengthens the trust of the customers. Second, their strong systems and processes help them to keep the bad debts write-off levels at the minimum. In addition, the gold jewellery, which acts as a collateral for loans, can be easily liquidated at auctions,



ensuring maximum realisation of loan amounts in case of any defaults While their assets under management declined considerably during FY 2013-14, they remained profitable, despite hardships. Their profitability during tough times demonstrates the strength of business model consequent to which the capital leverage declined to 4.53 times from 6.52 times in previous year. As reserves strengthened to Rs.3, 893 Crores, They decided to give back a higher amount to stakeholders, resulting in a higher dividend payout of 29% as against 17% last year. Such a measure will reinforce stakeholder trust in their operations and the long term commitment to create value.

Striking a balance between Diverse Offerings and Fostering Relationships

25



During FY 2013-14, they disbursed Rs.4596 Crores comprising 21 lakhs transactions. They have also forayed into the ATM network with the launch of White Label ATM, empowering rural customers with ATM services. The ATM launch reiterates to commitment towards making finance easily available in the rural hinterland. We developed an in-house Core Banking Solution, It enabled to provide ‘anytime &



anywhere’ services to customers and enhanced convenience. At Muthoot, they have been committed to continuously strengthen brand and enrich products and services. Being consumer focused, they strive to reach and connect with consumers through several brand initiatives. Apart from the conventional outdoor branding routes (buses, bus depots, local trains, boats in high-traffic areas), we have also aggressively scaled up contemporary branding measures (principal sponsors of Delhi. Daredevils in 2011, 2012 and 2013 and online media, among others). These measures have not only widened their reach, but also strengthened relationships with customers.

Striking a balance between Employee Engagement and Employee Motivation 

Muthoot empower and engage 25,012-people strong team to achieve the organisational goals and, in turn, drive their career progression. They routinely conduct several sales orientation and marketing programmes for their people, so that they can go to the market and educate potential customers about the benefits of gold



financing. During the year under review, they announced our maiden Employee Stock Option Plan (ESOP) for all our permanent employees. The options were granted to employees through three stock option schemes. The management decided to reward employees for their loyalty and performance and the initiative helped enhance their sense of ownership. They continue to train their national team at higher levels with their established Regional Learning Centres across India with 7 days of average training per employee. They focus on developing the qualities, such as soft-skills, leadership, personality development, marketing and customer service, among others. These factors enhance the service quotient of our team, motivating and inspiring people to lead from the front.

Striking a balance between Commerce and Conscience 

Muthoot have created sustainable value by driving financial inclusion for a significant consumer base. They have the relevant infrastructure and the technological expertise to process large number of transactions on a daily basis across pan-India branch

26

network. In addition, they are expanding and deepening their reach to India’s remote 

corners with the help of a motivated workforce. They are committed to empower the ambitions of a large cross-section of people, who in turn help shape the nation’s future course as citizens. As a conscientious corporate, they partner with several organisations to contribute in areas like education, health, environment and safety. They are stepping up investments in the social sector to help improve the quality of life

NOTES TO S FOR THE YEAR ENDED 31st March 2014 (Amounts in the financial statements are stated in Rupees, except for share data and as otherwise stated.)

1. ing Concepts The financial statements are prepared on historical cost convention complying with the relevant provisions of the Companies Act, 1956 and the ing Standards issued by the Institute of Chartered ants of India, as applicable. The Company follows prudential norms for income recognition; asset classification and provisioning as prescribed by Reserve Bank of India vide Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007. The estimates and assumptions used in these financial statements are based upon the management evaluation of the relevant facts and circumstances as of the date of the financial statements. Management believes that these estimates and assumptions used are prudent and reasonable. 2. Revenue Recognition Revenues are recognised and expenses are ed on accrual basis with necessary provisions for all known liabilities and losses. Revenue is recognised to the extent it is realisable wherever there is uncertainty in the ultimate collection. Income from NonPerforming Assets is recognised only when it is realised. Income and expense under bilateral assignment of receivables accrue over the life of the related receivables assigned. Interest income and expenses on bilateral assignment of receivables are ed on gross basis. Interest income on deposits is recognised on time proportionate basis. 3. Fixed Assets Fixed assets are stated at historical cost less accumulated depreciation. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Depreciation is charged at the rates specified in Schedule XIV of the Companies Act, 1956. 4. Intangible Assets

27

Intangible Assets are amortised over their expected useful life. It is stated at cost, net of amortisation. Computer Software is amortised over a period of five years on straight line method. 5. Cash And Cash Equivalents Cash and cash equivalents comprise of cash at bank, cash in hand, bank deposits having a maturity of less than 3 months and unpaid dividend. 6. Provisions, Contingent Liabilities & Contingent Assets Provisions are recognised only when the Company has present, legal, or constructive obligations as a result of past events, for which it is probable that an outflow of economic benefit will be required to settle the transaction and a reliable estimate can be made for the amount of the obligation.Contingent liability is disclosed for (i) possible obligations which will be confirmed only by future events not wholly within the control of the Company or (ii) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised. 7. General Reserve Appropriate transfer to General Reserves in accordance with Companies (Transfer of Profits to Reserves) Rules, 1975, has been made in the financial statements. 8. Debenture Redemption Reserve During the year, the company has transferred an amount of Rs.6,637,035,559.00 (Previous Year Rs. 967,249,498.00) to the Debenture Redemption Reserve. No appropriation was made from this Reserve during the year. 9. Statutory Reserve Statutory Reserve represents the Reserve Fund created under Section 45 IC of the Reserve Bank of India Act, 1934. An amount of Rs.1,560,138,107.00 representing 20% of Net Profit is transferred to the Fund for the year ( Previous Year: Rs.2,008,479,046.00). 10. Secured Redeemable Non-Convertible Debentures The Company had privately placed Secured Redeemable Non-Convertible Debentures for a maturity period of 60-120 months with an outstanding amount of Rs.81,579,609,000.00 (Previous Year: Rs.94,596,214,000.00) 11. Secured Non Convertible Debentures – Public Issue The outstanding amount of Secured Rated Non-Convertible Listed Debentures raised through Public Issue stood at Rs.23,734,590,000.00 (Previous Year: Rs.16,872,937,000.00)

28

12. Subordinated Debt Subordinated Debt is subordinated to the claims of other creditors and qualifies as Tier II capital under the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007. The outstanding amount of privately placed

subordinated

debt

stood

at

Rs.25,366,628,000.00

(Previous

year:

Rs.23,000,972,000.00) 13. Long Term Loans and Advances Security Deposit includes Rs.1,822,500.00 (Previous Year: Rs.1,822,500.00) being rent deposit due from promoter Directors and Rs.1,470,000.00 (Previous Year: Rs.1,470,000.00) being rent deposits due from firms in which promoter Directors are partners 14. Current Investments (Valued at lower of cost and fair value) – Quoted Current investments refers to investment in 307 bonds of 10.05% Unsecured, Redeemable, Non-Convertible, Upper Tier II Subordinated Bonds issued by Yes Bank Limited Rs.307,000,000.00 listed in BSE (Previous Year: Rs.750,000,000.00) 15. Employee Benefits Defined Contribution Plan - During the year, the Company has recognised the contribution to Provident Fund, in the Statement of Profit and Loss. Defined Benefit Plan - Gratuity Plan - The deficit in funding of gratuity Rs.18,733,086.00 has been ed as Long term provisions.Estimated employer contribution for 2014-15 Rs.90,000,000.00 16. Dividends proposed to be distributed to equity shareholders The Board has recommended a final dividend for the year 2013-14 of Re.1/- (10%) per equity share of Rs.10/- each , subject to the approval of shareholders in the ensuing Annual General Meeting. The Company has during the year paid interim dividends aggregating to Rs.5/- (50%) per equity share of Rs.10/- each (Previous Year: Nil). The total dividend for the year 2013-14 is Rs.6/- (60%) per equity Share of Rs.10/- each (Previous Year Rs.4.5/- (45%) per equity share of Rs.10/- each). 17. Earnings Per Share As per ing Standard 20, Earning Per Share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the Weighted average number of equity shares outstanding during the year. 18. Dividend remitted in foreign currency The company has also remitted Rs.264,441,172.50 in Indian currency to 908 non resident shareholders holding 58,764,705 shares of Rs.10/- each as final dividend for the F Y 201213 and the company has remitted Rs.174,697,074.00 in Indian currency to 980 non resident

29

shareholders holding 58,232,358 shares of Rs.10/- each as First Interim Dividend for the F Y 2013-14 and Rs.101,637,018.00 in Indian currency to 915 shareholders holding 50,818,509 shares of Rs.10/- each as Second Interim Dividend for the F Y 2013-14 (Previous year : The Company has remitted Rs.150,220,372.00 in Indian currency to 1060 non-resident shareholders holding 37,555,093 Shares of Rs.10/- each).

INTERPRETATIONS ON FINANCIAL STATEMENTS INTERPRETATION ON BALANCE SHEET OF MUTHOOT FINANCE LTD FOR THE YEAR ENDING 31st MARCH 2014 

 

Shares and On 29th April, 2014, your Company allotted 2, 53, 51,062 shares of Rs.10 each for cash at a of Rs.155 per equity share aggregating to Rs.41, 829.25 Lakhs. Economic Scenario India’s economic growth rate in the current financial year remained weak at 4.7 % Dividend Based on Company’s performance, directors had recommend for approval of the shareholders a dividend of 10% for Equity Shares of face value of Rs.10 each (Rs.1/per share) of the Company for the financial year 2013-14 which is payable on obtaining the approval of the shareholders of the Company on the 17th Annual



General Meeting. Gross retail loan assets under management The Company’s Gross Retail Loan Assets under Management decreased from Rs.26, 386 Crores in FY 2012-13 to Rs.21, 861 Crores in FY 2013-14. Regulatory headwinds in the form of lower LTV of 60% throughout the year impacted disbursements and resulted in decline in loan portfolio. LTV has, since January 2014, increased to 75% for NBFCs and later made the same applicable for banks. This



relaxation can positively impact the business going forward. Average gold loan outstanding per branch The Company’s average gold loan outstanding per Branch witnessed a decline from Rs.6.36 Crores in FY 2012-13 to Rs.5.06 Crores in FY 2013-14 on of decline



in gold loan portfolio. Subordinated Debts Subordinated Debts represents long term source of funds for the Company and the amount outstanding as on 31st March, 2014 was Rs.2635 Crores. Commercial Banks continued their to the Company during Financial Year. As of 31st March 2014, borrowings from banks were Rs.5803 Crores as against Rs.10136 Crores in the previous year. The reduction in borrowings were on of the decline in gold loan portfolio of Rs.4383 Crores during the year.

30





Capital Adequacy Your Company’s Capital Adequacy Ratio as of 31st March, 2014 stood at 24.69% of the aggregate risk weighted assets on balance sheet Public Deposits The Company has not accepted any public deposits and as such, no amount on of principal or interest on public deposits was outstanding as on the date of



Balance Sheet. Unsecured loans The company has taken unsecured loans during the year was Rs.48,661.03 Lakhs and the year-end balance of such loan is Rs.44,617.78 Lakhs. In our opinion, in



respect of loan taken, the repayment of principal amount and interest was regular. Current Assets Current Assets have increased as compare to previous year that means the firms liquidity position is very good and he is able to meet its current obligations.

INTERPRETATION ON PROFIT AND LOSS OF MUTHOOT FINANCE LTD

FOR THE YEAR ENDING 31st MARCH 2014 

Revenues The Company’s revenues declined by 8% from Rs.5,387 Crores in FY 2012-13 to Rs.4947 Crores in FY 2013-14. This was on of reduction in gold loan



portfolio during the year. Profit before Tax The Company’s Profit before Tax declined by 21%, from Rs.1,511 Crores in FY 2012-



13 to Rs.1193 Crores in FY 2013-14. Profit after Tax Muthoot Finance’s Profit after Tax declined by 22% at Rs.780 Crores in FY 2013-14



from Rs.1,004 Crores in FY 2012-13. Capital Adequacy Ratio The Company’s Capital Adequacy Ratio increased from 19.62% in FY 2012-13 to 24.69% in FY 2013-14 with Tier I capital of 18.01%, on of ploughing back of



profit for the year net of dividend payment. Earnings per share (EPS) Earnings per share declined to Rs.20.99 in 2013-14 from Rs. 27.02 in 2012-13 on of lower profits generated during the year.

Comparision of Profit and Loss as compare to previous year – 

Total income declined by 8% to Rs.4947 Crores as compared to previous year 2012-



13 Profit Before Tax declined by 21% to Rs.1194 Crores as compare to previous year



2012-13 Profit After Tax declined by 22% to Rs.780 Crores as compare to previous year 12-13

31



The Return on Average Retail Loans declined to 3.22% in the year 2013-14 as



compared to 4.05% in fiscal 2012-13. On of the above, the Net Interest Margin declined to 9.42% in the year 2013-

 

14 as against 10.28% in fiscal 2012-13. The Company remitted to exchequer Rs.458 Crores in the year 2013-14 Observed from the above Profit & Loss A/C Statement of Muthoot Finance Ltd it can say that the firm has limited earnings in the year 2014.

INTERPRETATION ON CASH FLOW STATEMENT OF MUTHOOT FINANCE LTD FOR

THE YEAR ENDING 31st MARCH 2014  Observed from the above table that cash flow statement of Muthoot Finance Limited. In the year 2013-14 variable net profit after tax, depreciation and others have decreased.  Operating profit before and after working capital changes has decreased for the financial year 2014.  Cash generated from operations have increased due to huge decrease in trade receivables  Net Cash from operating activities have increased due to a huge decrease in trade receivables and other receivables and even due to decrease in loans and advances and liabilities. Thus this increased Net cash from operating activities.  Due to increase in sale of Bonds and sale of investment in shares and decrease in capital work in progress there was a huge decrease in Net Cash from investing Activities.  Due to fund borrowings form financial institute/banks there was a huge increase in Net cash from financing activities.  Cash and Cash Equivalent increased during the year 2013-14 as compared to previous year 2012-13 this shows that the liquidity fund is very much good in the year 2014 and company can utilise it in a way that it gain a huge profit in years.

CHAPTER - V CONCLUSION An Annual Report is a document published on a yearly basis to provide stockholders, the public and the government with financial data, a summary of ownership, and the ing practices used to prepare the report. Annual reports measure a corporation`s financial health. They focus on past and present financial performance, and make predictions about future prospects. The annual report is a report issued to a company's shareholders, creditors, and regulatory organizations following the end of its fiscal year. An annual report

32

includes a balance sheet reflecting changes in the corporation`s financial worth, an income cash flow statement, and other relevant documentation. In addition they make public details about products and services, domestic and foreign markets and the backgrounds of directors and executive officer. It also contain management comments, an audit report, and various ing schedules that may be required by regulatory organizations. An annual report is an audited corporate document that details the business activity and financial status of a publicly-held company over the previous year. The annual report provides a variety of important financial data. The SEC requires all publicly traded companies to file reports on an annual and quarterly basis, and the reports provide in-depth information

on

a

company's

products, market segments,

competitors,

customers,

management and legal proceedings. In this annual report project I have analysed annual report of Muthoot Finance Ltd. I have studied balance sheet, income statement and cash flow statement of Muthoot Finance for the year ending 31 st March 2014 and understood company`s financial positions in current year comparing to previous years and gave interpretations of it. Muthoot Finance is the fastest growing company largest loan, which offers a variety of gold trade, personal loans, housing, education, investments, etc., low interest rates on the site, only 1% of the Muthoot Finance Web site to keep people from all over India in place of promise and improvement but still the main lending. Muthoot Finance delivered a stable performance and recorded revenues to the tune of Rs.4947 Crores. Significant shareholder value was created with our basic earnings per share at Rs.20.99 for FY 2013-14. Our book value per share increased to Rs.114.73. Annual report project helps us in analysing the financial position of the company practically and to judge accordingly company`s position in the market.

BIBLOGRAPHY

 17 th Annual Reports of Muthoot Finance Ltd of 2014  www.muthootfinance.com  Advance ing Finance Book of M.com Part 1 Semester 1 written by L.N Chopde, D.H Choudhari, Dhiren Kanabar and Sandeep Chopde. and published by Sheth Publications  http://en.wikipedia.org/wiki/Annual_report 33

 http://en.wikipedia.org/wiki/Muthoot_Finance_Ltd  http://www.muthootfinance.com/about-us/  http://www.muthootfinance.com/fair-practices-code/

34