Fincare Business Finance Unlisted Shares

Annual Report Summary

Fincare Business Services Limited's annual report for 2020-21 (FY21) provides a review of the company’s business and operations, along with audited financial statements on both a standalone and consolidated basis.

Financial Highlights - FY21

• The company's financial performance is summarized, comparing FY21 to FY20 on both consolidated and standalone bases.
• Total Revenue: Consolidated total revenue grew from INR 12,00,51,96,284 in FY20 to INR 14,48,19,30,264 in FY21. Standalone total revenue also increased, from INR 7,50,04,665 to INR 8,99,14,871.
• Total Expenses: Consolidated expenses increased from INR 10,13,86,35,348 to INR 13,55,48,81,933, while standalone expenses rose from INR 12,98,06,466 to INR 14,55,09,679.
• Profit Before Tax: Consolidated profit before tax was INR 92,70,48,331 in FY21 compared to INR 1,86,65,60,936 in FY20. The company had a standalone loss before tax of INR (5,55,94,808) in FY21 and INR (5,48,01,801) in FY20.
• Profit/Loss After Tax: The company had consolidated profit after tax of INR 70,37,99,039 compared to INR 1,25,91,80,106. The standalone loss after tax was INR (5,79,71,705) compared to INR (6,08,00,970).
• Earnings Per Share: Basic and diluted earnings per share on a consolidated basis were INR 1.93 in FY21, down from INR 3.51 in FY20. The company had a standalone basic and diluted loss per share of INR (0.18) in FY21 and INR (0.19) in FY20.
• The company's investments are in the securities of its subsidiary, Fincare Small Finance Bank Limited (FSFB).

Operational and Strategic Overview:

• The company continues to operate as a Non-Banking Financial Company- Non Deposit taking Core Investment Company (NBFC-CIC-ND).
• FSFB formally started its initial public offering (IPO) process by filing the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The company is participating as a selling shareholder under offer for sale.
• No dividend was recommended for FY21 to conserve financial resources.
• There was no appropriation from the profit after tax to statutory reserves in the standalone financial statements.
• There was no change in the nature of the company's business during the year.
• The authorized share capital as of March 31, 2021, was INR 115,50,00,000 divided into equity shares of INR 1 each and preference shares of INR 10 each. The issued, subscribed and paid-up capital stood at INR 32,84,17,440.
• The company had one subsidiary, Fincare Small Finance Bank Limited (FSFB), holding 5,78,29,856 equity shares, representing 90.91% of FSFB.
• The company has implemented a risk management policy, considering its operations are limited to being a CIC. The operations and risks of the subsidiary are reviewed by Risk Management Committees and Audit Committees.

Governance and Compliance:

• The Board of Directors consists of professionals with industry knowledge and experience. Their responsibilities include policy formulation, new initiatives, performance review, and ensuring regulatory compliance.
• There were 7 Board meetings held during FY21.
• M/s Walker Chandiok & Co LLP were re-appointed as Statutory Auditors for a term of 4 years from September 30, 2020.
• Due to RBI notification requirements, Walker Chandiok & Co LLP expressed their inability to continue as statutory auditors beyond the next general meeting, and M/s Bhushan Khot & Company were recommended as statutory Auditors for 5 years.
• The directors affirmed there were no material changes that happened during the year.
• The company has complied with the Secretarial Standards issued by the Institute of Company Secretaries of India, along with other requirements of the Companies Act, 2013.
• The company formulated and adopted a policy on appointment and remuneration of Directors and Key Managerial Personnel, as included in the Corporate Governance Report.
• The company did not apply or obtain any registration/license/authorization from other financial sector regulators.
• There were no penalties imposed by the RBI or other regulators, and the auditor did not express any modified opinion or reservation in the audit report for FY21.

Employee Stock Option Scheme (ESOP):

• The company provided information about its Employee Stock Option Scheme as required under Section 62 of the Act and Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014.
• The total number of options granted was 86,55,600 with varying grant prices. The employee wise details of the options granted to are not specified.

Corporate Social Responsibility (CSR):

• The company has a Corporate Social Responsibility (CSR) Policy, guided by the Companies Act, 2013 and related rules.
• The CSR Committee consisted of five members as of March 31, 2021.
• Rs. 47,456 was the amount of the average net profit for the last three financial years (i.e. prescribed CSR expenditure for financial year ended 2020-21)

Indian Economy and Banking Sector Analysis (Annexure I):

• India is expected to record the highest GDP growth among major economies, despite the second wave of Covid-19.
• The Reserve Bank of India (RBI) and the central and state governments provided support to the economy during the crisis.
• The external sector showed resilience, and India's forex reserves reached an all-time high.
• The Indian banking sector has evolved in terms of asset quality, technology and regulations, shifting towards digital modes.
• Bank credit growth remained subdued, while deposits continued to grow.
• Small Finance Banks (SFBs) play a role in assisting low-income groups during the pandemic.
• Fincare Small Finance Bank adopted the digital route, expanding its geographical reach. The Bank's net NPAs stood at [2.55] % in FY21, showcasing the effectiveness of the Bank's robust 'rural' focussed model.

Corporate Governance Report (Annexure II):

• The company's Corporate Governance Philosophy is based on ethical practices and transparency.
• The Board has an optimal combination of Executive, Non-Executive and Independent Directors.
• The Board had 8 meetings during the FY 2020-21.
• The Board had 4 committees: Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, and Risk Management Committee.
• The Company has a Nomination and Remuneration Policy guided by Section 178 of the Act, disclosed on their website.
• Annual General Meetings (AGM) provide a forum for interaction with shareholders.
• The company has a Nomination and Remuneration Policy guided by Section 178 of the Act.

Subsidiaries (Annexure III):

• Fincare Small Finance Bank Limited is the company's subsidiary. Key financial details for FSFB are provided for the year ended March 31, 2021.

Independent Auditor’s Report:

• Walker Chandiok & Co LLP issued an independent auditor's report regarding the Standalone Financial Statements.
• The report states that the standalone financial statements give a true and fair view of the state of affairs of the Company as at March 31, 2021, and its loss (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
• Emphasis of matter noted was related to COVID-19 impact.

Note: The summary excludes information contained in financial statements and focuses primarily on the operational highlights and governance related information, as per the instructions provided.