ANNUAL REPORT 2017 - 2018 · 2018. 9. 3. · Muthoot Capital Services Limited Northern Arc Capital...

ANNUAL REPORT2017 - 2018

ContentsCorporate Informa�on...................................................................01

Leading the Way............................................................................ 02

Presence ..................................................................................03 (A)

Financial Highlights...................................................................03 (B)

AGM No�ce ...................................................................................04

Directors Report ............................................................................06

MGT-9 (Annexure-I) .......................................................................21

AOC-2 (Annexure-II) ......................................................................30

CSR Report (Annexure-III) ..............................................................32

Independent Auditors Report ........................................................36

Auditors Addi�onal Report.............................................................47

Standalone Financial Statemts........................................................51

Significant Accoun�ng Policies and Notes to Accounts...................63

KANAKA DURGA FINANCE LIMITEDAnnual Report 2017 - 2018


Corporate Informa�on

Finance Head

Mr. Rajesh Nallamalli

Senior Vice President:

Mr. Deepak Hanumanth

Company Secretary

Mr. Krishna Mohan Reddy

Board ofDirectors

S Lakshmi NarayanaManaging Director

S Ratna KumariWhole - Time Director

S Jayaprakash Narayana Chowdary Whole - Time Director

S SrimannarayanaWhole - Time Director

U Venkateswarlu Independent Director

N Hari KiranIndependent Director

Abhishek PoddarNominee Director

Audit Commi�ee

Mr. Sandireddy SrimannarayanaChairman

Mr. Venkateswarlu UnnamMember

Mr. Hari Kiran NekkalapudiMember

Bankers

Andhra Bank AU Small Finance Bank LimitedDCB Bank LimitedFincare Small Finance Bank LimitedSouth Indian Bank LimitedUtkarsh Small Finance Bank Limited

Other Financial Ins�tu�ons

A. K. Capital Finance Private LimitedHinduja Leyland Finance LimitedJM Financial Products LimitedMahindra and Mahindra Financial Services LimitedManappuram Finance LimitedMuthoot Capital Services LimitedNorthern Arc Capital LimitedSundaram Finance LimitedUNIFI AIF

Registered &Corporate office

CIN: U65921AP1994PLC018605

#40-7-31, Mogalrajapuram, Jammiche�u Centre, Vijayawada, Andhra Pradesh - 520010, India.

Ph No: 0866 2484034Web: www.kanakadurgafinance.com

M/s. XL So�ech Systems Limited3, Sagar Society, Road No.2, Banjara Hills, Hyderabad - 500 034.Phone: 040 23545913/14/15

Registrar & Share Transfer Agent

CorporateSocial Responsibility

Mr. Sandireddy SrimannarayanaMember


Mr. Sandireddy Jayaprakash Narayana ChowdaryChairman

Statutory Auditors

M/s. MSKA & AssociatesFloor 2, Enterprise Centre, Nehru Road, Near Domes�c Airport, Vile Parle (E). Mumbai - 400099.

Debenture Trustee

M/s. Catalyst Trusteeship LimitedAddress: Office No. 83 - 87, 8th floor, Mi�al Tower, ‘B’ Wing, Nariman Point, Mumbai - 400021.Ph. No: 022-49220546Website: www.catalys�rustee.com

Nomina�on andRemunera�on Commi�ee

Mr. Venkateswarlu UnnamChairman


Mr. Sandireddy Jayaprakash Narayana ChowdaryMember

01 | Annual Report 2017 - 2018


Leading the way

S Lakshmi NarayanaManaging Director

Whole Time DirectorWhole Time Director

Whole Time Director

First Row

S Ratna KumariSecond Row

S Jayaprakash NarayanaChowdary

S SrimannarayanaThird Row

02 (A) | Annual Report 2017 - 2018


Leading the way

02 (B) | Annual Report 2017 - 2018

Senior Vice President

Le�Deepak Hanumanth

Right

Finance HeadRajesh Nallamalli

Company Secretary

Le�Krishna Mohan Reddy

Right

General Manager AP Region 1B. Samba Siva Rao

General Manager AP Region 2

Le�B. Kishore

Right

General Manager, TamilnaduB. Harish

General Manager, Gujarat

Le�Ashish Shinde

Right

Zonal Manager A P Region 1P. Srinivas

Regional Manager, Gold

Le�Vara Prasad

Right

Regional Manager, ChennaiKrishna Kumar


CIN: U65921AP1994PLC018605

28+ YEARS

5 STATES

KANAKA DURGA FINANCE LIMITED

03 (A) | Annual Report 2017 - 2018


03 (B) | Annual Report 2017 - 2018

Financial Highlights

(In Lacs) (In Lacs)

1000

2016-17

3982.93

5607.61

284.18

188.76

2017-180

2000

3000

4000

5000

6000

PROFITAFTER TAX

GROSS REVENUE

200

2016-17

397.09

592.54

2017-180

400

600

800

1000

1200

Loan Book

2018

2017 Incr

ease

50.53%

NOTICE OF ANNUAL GENERAL MEETING

No�ce is hereby given that the 24th Annual General Mee�ng of the Company will be held at the Registered Office of the Company at 40-7-31, Jammiche�u Centre, Mogalrajapuram, Vijayawada - 520010 on Friday, 27th day of July, 2018 at 04:00 P.M. at shorter to transact the Following Business:

ORDINARY BUSINESS:

1. Adop�on of financial statements

To consider and adopt the audited financial statements of the Company for the year ended March 31, 2018 and the reports of the Board of Directors (‘the Board’) and Auditors thereon.

2. Appointment of Mr. Sandireddy Lakshmi Narayana, as a director liable to re�re by rota�on

To appoint a Director in place of Mr. Sandireddy Lakshmi Narayana, who re�res by rota�on and being eligible, seeks himself for re-appointment.

As per ar�cles of associa�on of the Company execu�ve directors are subject to re�rement by rota�on. To the extent that Mr. Sandireddy Lakshmi Narayana is required to re�re by rota�on and offer himself for re-appointment, he would need to be re-appointed as Managing Director.

Therefore, Shareholders are requested to consider and if thought fit, to pass the following resolu�on as ordinary resolu�on:

“RESOLVED THAT pursuant to the provisions of Sec�on 152 of the Companies Act, 2013, Mr. Sandireddy Lakshmi Narayana (DIN: 00538185), who re�res by rota�on at this mee�ng and being eligible has offered himself for re-appointment, be and is hereby re-appointed as a Managing Director of the Company, liable to re�re by rota�on.”

3. Ra�fica�on of re-appointment of Auditors

To consider and, if thought fit, to pass with or without modifica�on(s), the following Resolu�on as an Ordinary Resolu�on:

“RESOLVED THAT pursuant to the provisions of Sec�on 139,142 and all other applicable provisions, if any, of the Companies Act, 2013 (“Act”) and the Companies (Audit and Auditors) Rules, 2014 as amended from �me to �me, the Company hereby ra�fies the appointment of M/s. MSKA & Associates, Chartered Accountants, Firm Registra�on No.105047W, as Statutory Auditors of the Company to hold office from the conclusion of this Annual General Mee�ng (AGM) �ll the conclusion of the Twenty Fi�h (25th) AGM to be held in 2019 to examine and audit the accounts of the Company for the financial year 2018-19 at such remunera�on as to be decided by the Board of Directors in consulta�on with the Auditors plus applicable GST and reimbursement of travelling and out of pocket expenses incurred by them for the purpose of audit.



RESOLVED FURTHER THAT pursuant to the no�fied sec�on of Companies (Amendment) Act, 2017 the Company shall not be required to seek the approval of the shareholders for the ra�fica�on appointment of Statutory Auditors from the next Annual General Mee�ng �ll the conclusion of the 28th Annual General Mee�ng.

SPECIAL BUSINESS:

4. Approval of Related Party Transac�on

To consider and if thought fit, to pass, with or without modifica�on, the following resolu�on as an Ordinary Resolu�on:

“RESOLVED THAT pursuant to the provisions of sec�on 188 of the Companies Act, read with rules made thereunder, consent of the members of the Company be and is hereby accorded for the Related Party Transac�on(RPT) with Mr. Sandireddy Lakshmi Narayana and Mrs. Sandireddy Ratna Kumari on such terms as approved by the Board and such approval is further accorded to increase the consolidated value of transac�on subject to prescribed limits under the Companies Act, 2013. RESOLVED FURTHER THAT the Board of Directors of the Company of the Company be and are hereby severally authorised to take necessary ac�ons and complete all the legal formali�es related thereto.

For and on behalf of the Board Sd/- Sandireddy Jayaprakash Narayana Chowdary Date: 20.07.2018 Whole-�me Director Place: Vijayawada DIN: 00538246



Notes: 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING TO WHICH THIS NOTICE

RELATES IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE (ON POLL) ON HIS/HER BEHALF. A PROXY NEED NOT BE A MEMBER OF THE COMPANY. A PROXY, IN ORDER TO BE VALID/ EFFECTIVE, MUST BE RECEIVED AT THE REGISTERED OFFICE OF THE COMPANY BEFORE THE COMMENCEMENT OF THE MEETING TO WHICH THIS NOTICE RELATES. A BLANK PROXY FORM IS ENCLOSED. A person can act as a proxy on behalf of members not exceeding fi�y and holding in aggregate shares not more than 10 percent of the total share capital of the Company carrying vo�ng rights. A member holding more than ten percent of the total share capital of the Company carrying vo�ng rights may appoint a single person as proxy and such person shall not act as a proxy for any other person or shareholder.

2. The Explanatory Statement pursuant to Sec�on 102 of the Companies Act, 2013 forms part of this No�ce and is a�ached hereto.

3. All the documents relevant to the resolu�ons specified in the No�ce are available for

inspec�on by the shareholders of the Company at the corporate office of the Company and also at the place of the mee�ng on the mee�ng day.

4. The mee�ng to which this No�ce relates, is proposed to be held at a shorter no�ce. If you

consent to the holding of the mee�ng with shorter no�ce, you are requested to inform the Company of your consent by returning the a�ached consent le�er duly signed by you, to the Company.

EXPLANATORY STATEMENT PURSUANT TO SECTION 102(1) OF THE COMPANIES ACT, 2013 (“THE ACT”)

Item No.4: Members are requested to note that the Board of Directors at their Mee�ng held on 20th July, 2018 had approved Related Party Transac�on (RPT) to be entered with Mr. Sandireddy Lakshmi Narayana and Mrs. Sandireddy Ratna Kumari.

The nature and details of the transac�on is as follows:

Rent


Name of the Interested Party(ies) 1. Mr. Sandireddy Lakshmi Narayana 2. Mrs. Sandireddy Ratna Kumari

Nature of Transac�on

Valued at Rs.6,32,348/- per month as per valua�on report

Transac�on value


Though the transac�on is within limits as prescribed under the provisions of Sec�on 188 of the Companies Act, 2013, the Board hereby presents to the Members to enable the transac�on more transparent and to avoid any unjust advantage.

This transac�on would con�nue to be in ordinary course of business and at arm's length basis. The Audit Commi�ee and Board of Directors have reviewed terms & condi�ons of this transac�on and recommend to the members for their approval by way of an Ordinary Resolu�on.

Except Mr. Sandireddy Lakshmi Narayana and Mrs. Sandireddy Ratna Kumari, none of the Directors/ Key Managerial Personnel of the Company is concerned or interested, financially or otherwise, in the resolu�on set out at Item No. 4 of the No�ce.

For and on behalf of the Board

Sd/- Sandireddy Jayaprakash Narayana Chowdary Date: 20.07.2018 Whole-�me Director Place: Vijayawada DIN: 00538246


The Price arrived at Independent Assessment by Registered Valuer Varia�on in the price Decided by the Board of Directors

Whether the transac�on is at arm’s length price under sec�on 188 of the Companies Act, 2013

Yes

Descrip�on of proposed property

Commercial Building (S�lt, GF+2) with 2000 square feet of office space and 1000 square yards of open space located at RS No. 484, Plot No. 38&39, 100 Feet Road, Auto Nagar, Vijayawada - 520007.

Whether the transac�on is within the limits as specified under sec�on 188 of the Companies Act, 2013

Yes


DIRECTOR’SREPORT

To the Members of Kanakadurga Finance Limited, Your Directors hereby present 24th Annual Report on the business, opera�ons and state of affairs of the Company together with the audited financial statement for the year ended 31st March, 2018:

1. Financial Highlights:

2. Review of Opera�ons:

Your Company has focused on high growth, dispersed risk, retail financing. The Company has further increased its presence in promising segments including commercial vehicles loan and two and three wheeler loans by u�lising its extensive branch network to reach out to retail customers.

Overview of FY 2018

• Loan book grew by 50.53% to Rs. 284.18 crore as of March 31, 2018 as against Rs. 188.76 crore in the previous year;

• Commercial Vehicle contributed to 27.22 % of loan book, followed by Gold Loan accoun�ng for 4.77%, Two Wheeler about 19.66%, Three Wheeler at 48.04% and 0.27% of Term Loan

• Gross and Net NPAs (Non performing assets) were 0.72% and 0.52% respec�vely;

• Provision coverage for standard assets was 0.25% as at FY18 end.

• Capital Adequacy Ra�o was 24.50% well above the regulatory requirement of 15.0%, comprising Tier I capital ra�o of 24.39% and Tier II capital ra�o of 0.11%;

• Company’s income significantly increased by 40.80 % to Rs.56.07 crore and profit a�er tax increased by 49.12% to Rs. 5.92 crore during the year.

Further there is no change in the nature of business of the Company.


Par�culars 2017-2018

(Rs. in Lakhs) 2016-2017

(Rs. in Lakhs) Gross Revenue 5607.61 3982.93 Profit Before Deprecia�on and Tax 907.38 676.36 Less: deprecia�on and amor�sa�on 79.55 73.17 Profit Before Tax 827.83 603.19 Less: Provision for Taxa�on 235.28 206.09 Profit A�er Tax 592.54 397.09 Add: Surplus brought forward from previous year 2175.02 1857.35 Profit Available for appropria�on 2767.56 2254.44 Less: Appropria�ons Dividend and Tax thereon Transfer to Statutory reserve

-

(118.50)

-

(79.42) Surplus carried to the Balance Sheet 2649.06 2175.02


3. Fund Raising:

During the financial year ended March 31, 2018, Company raised funds from following sources:


(a). By issuance of Debentures on Private Placement During the year under review, the Company had raised Rs. 20 Crore by way of Compulsorily Conver�ble Debentures and Rs. 15 Crore by way of Unsecured Debentures total aggrega�ng to Rs. 35 crore and the same has been disclosed in Notes to Accounts for the financial year ended March 31, 2018. (b). Borrowings from Banks Borrowings from the banks were Rs. 55 crore. And; Company’s Working-Capital limits with Andhra Bank were at Rs.50.00 Crores.

(c). Borrowings from Financial Ins�tu�ons

During the period under review the Company

had

availed

Rs.104

crore

from various

financial ins�tu�ons.

The Company has been regular in making payments of principal and interest amounts to its

lenders. In considera�on to its finance cost the Company is constantly looking to avail financial facili�es at reduced interest rates.

4. Securi�za�on of Loan por�olio:

During the year, your Company as an originator, has undertaken securi�za�on transac�on of total book value of loan assets amoun�ng to Rs. 12,36,70, 657.00/-.

5. Share Capital:

During the year under review there is no change in Authorised Share Capital of the Company and exis�ng Authorised capital as on 31.03.2018 is Rs. 16,00,00,000/-, further the Issued, Subscribed and Paid-up Share Capital of your Company stood at Rs.11,16,18,810/- comprising 1,11, 61,881 equity shares of Rs.10/- each on 31.03.2018. M/s. Banyantree Growth Capital II, LLC has invested in the Company for an amount of INR 200 million in the form CCDs and INR 130 million for acquisi�on of 17,28,475 shares of Company from its promoters. We see this as a key step in our journey to Scaling Up.

6. Management Discussion and Analysis:

India has emerged as the fastest growing major economy in the world as per the Central Sta�s�cs Organisa�on (CSO) and Interna�onal Monetary Fund (IMF) and it is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships. India’s GDP is es�mated to have increased 6.6 per cent in 2017-18 and is expected to grow 7.3 per cent in 2018-19.

Indian Economy:


NBFC Overview:

Present in the compe�ng fields of vehicle financing, housing loans, hire purchase, lease and personal loans, NBFCs, have emerged as key financial intermediaries for small-scale and retail sectors thereby forming an essen�al part of finance sector in India. NBFCs are the third largest segment in the Indian financial system a�er commercial banks and insurance companies. As per ICRA a ra�ng agency the outlook on NBFCs' retail credit growth upwards to about 17-19 per cent for FY18 and said the growth trend will hold in the current financial year also. The total managed NBFC-retail credit of NBFCs stood at around Rs 7 trillion as on December 31, 2017 (Rs 6.1 trillion in March 2017), pos�ng a year-on-year growth of 18.3 per cent, compared with nearly 15.5 per cent in FY17 and 19 per cent in FY16. The growth was supported by a healthy up�ck witnessed in some key asset classes namely, commercial vehicles (CV), unsecured credit (including microfinance) and SME credit; these segments together accounted for about 60 per cent of the total NBFC-retail credit as of December, 2017. In the third quarter, the asset quality of NBFCs, excluding NBFC-MFIs, witnessed a decline in 90+day delinquencies to 4.9 per cent, compared with about 5 per cent in September 2017. The decline was supported by the sharp por�olio growth during the quarter and steady improvements in collec�ons by en��es in view of the transi�on to 90+ day NPA recogni�on norm by March 2018. KFL AT FY19: During the financial year FY18, your company had healthy performance across financial and opera�ng metrics. It was another good year for KFL as the scale up and maturity in our business. In KFL, we have created clear path for FY-2019, and es�mated to grow by more than half of its loan book. In approach the same, we will focus on two new capabili�es - customer orienta�on and technology. We con�nue to see healthy trac�on in the credit book, however our end goal is to meet customer sa�sfactory of our products. We do believe that the Indian market will provide an equal opportunity among its peers to grow.

7. RBI Registra�on:

As you are aware your Company is registered with Reserve Bank of India and the Registra�on Number is B-09.00204. Your Company retains the classifica�on given by the Reserve Bank of India as Asset Finance Company.



8. Directors and Key Managerial Person:

9. Statement of declara�on by Independent Directors:

10. Details of Board mee�ngs:

Sr. No.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Date of Mee�ng

01.04.2017 15.04.2017 04.07.2017 16.08.2017 13.09.2017 15.09.2017 17.10.2017 03.11.2017 16.11.2017 22.12.2017 04.01.2018 23.01.2018 03.03.2018 16.03.2018 23.03.2018

Number of Directors A�ended the Board Mee�ng

6 6 7 7 7 7 7 7 7 7 7 7 7 7 7



During the year under review Mr. Mi�n Jain, was appointed as an Addi�onal Director as nominat-ed by M/s. Banyantree Growth Capital II, LLC and he resigned from the office of Director with effec�ve from 16th August, 2017. The Board sincerely appreciate the valuable services rendered by Mr. Mi�n Jain.

Mr. Ravinder Vashist was appointed as Nominee Director in place of Mr. Mi�n Jain with effec�ve from 16th August, 2017.

In terms of Sec�on 152 of the Companies Act, 2013 and the Ar�cles of Associa�on of the Compa-ny, Mr. Sandireddy Lakshmi Narayana, Managing Director of the Company is liable to re�re by rota-�on at the 24th Annual General Mee�ng and being eligible offer himself for re-appointment.

Mr. Vijay Kumar Jonnada, Company Secretary resigned from the Company with effec�ve from 30th December, 2017 and Mr. Krishna Mohan Reddy, was designated as Company Secretary of the Com-pany w.e.f. 27th March, 2018.

In terms of provisions of sub-sec�on (7) of sec�on 149 of the Companies Act, 2013, the Indepen-dent Directors have made their disclosures sta�ng and confirming that they are not disqualified to act as Independent Director on the Board of the Company and further the Board is also opinion that the Independent Directors fulfil the condi�ons specified in the Companies Act, 2013 making them act as such.

During the Financial Year, 15 (fi�een) number of Board Mee�ngs were held, details of which are given below:

11. Commi�ees of Board:

The details of composi�on of the Commi�ees of the Board of Directors are as under:-

a) Audit Commi�ee

In terms of sec�on 177 of the Companies Act, 2013, the Board had cons�tuted the Audit Commi�ee and the Commi�ee comprises following Directors as its members:

Sl. No. 1

2 3

Name Mr. Sandireddy Srimannarayana Mr. Unnam Venkateswarlu Mr. Nekkalapudi Hari Kiran

Chairman/ Members

Chairman

Member Member

Status on Board

Whole-Time Director

Independent Director Independent Director



During the financial year 2017-2018, the Audit Commi�ee met 3 (three) �mes i.e. on 01st April, 2017, 04th July, 2017 and 16th August 2017 and all the members a�ended the mee�ng.

During the year, there were no such instances where the Board did not accept the recommenda-�on of the Audit Commi�ee.

The terms of reference of the Audit Commi�ee inter alia includes:1. To oversee the Company’s Financial Repor�ng Process and the disclosure of its financial infor-ma�on to ensure that the Financial Statement is correct, sufficient and credible;

2. Recommenda�on for appointment, remunera�on and terms of appointment of Auditors of the Company;

3. Reviewing, with the management, the annual financial statements and auditor’s report thereon before submission to the Board for approval, with par�cular reference to;

a) Ma�ers required being included in the Director’s Responsibility Statement to be included in the Board’s Report.b) Changes, if any, in accoun�ng policies and prac�ces and reasons for the same.c) Major accoun�ng entries involving es�mates based on the exercise of judgment by the manage-ment.d) Significant adjustments made in the Financial Statements arising out of audit findings.e) Disclosure of any Related Party Transac�ons.f) Qualifica�ons in the dra� Audit Report.

4. Reviewing with the Management, the quarterly/half yearly Financial Statements, if any, before submission to the Board for approval;

5. Reviewing with the Management, the Statement of Uses/Applica�on of Funds raised through an issue (public issue, rights issue, preferen�al issue, etc.), the statement of funds u�lized for purpos-es other than those stated in the offer document / prospectus / no�ce and the report submi�ed by the monitoring agency monitoring the u�lisa�on of proceeds of a public or rights issue, and making appropriate recommenda�ons to the Board to take up steps in this ma�er;

b) Nomina�on and Remunera�on Commi�ee

The Nomina�on and Remunera�on Commi�ee presently comprises the following Directors as its member:

Sl. No.

1 2 3

Name

Mr. Unnam Venkateswarlu Mr. Nekkalapudi Hari Kiran Mr. S Jayaprakash Narayana Chowdary

Chairman/ Members Chairman Member Member

Status on Board

Independent Director Independent Director Whole-Time Director

Sl. No.

2

3

Name

Mr. Sandireddy Simannarayana

Mr. Nekkalapudi Hari Kiran

Chairman/ Members

Member

Member

Status on Board

Independent Director

Independent Director

1 Mr. S Jayaprakash Narayana Chowdary

Chairman Whole-Time Director

During the financial year 2017-2018, the Nomina�on and Remunera�on Commi�ee met 2 (two) �mes i.e. on 01st April, 2017 and 16th March, 2018.

c) Corporate Social Responsibility Commi�ee



6. Review and Monitor the Auditor’s independence and performance, and effec�veness of Audit Process;

7. Approval or any subsequent modifica�on of transac�ons of the Company with Related Par�es;

8. Scru�ny of Inter-Corporate Loans and Investments;

9. Evalua�on of Internal Financial Controls and Risk Management Systems;

10. Reviewing with the Management, the performance of Internal Auditors, adequacy of the Inter-nal Control Systems and reviewing the adequacy of internal audit func�on, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, repor�ng structure coverage and frequency of internal audit;

11. Reviewing the findings of any internal inves�ga�ons by the internal auditors into ma�ers where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and repor�ng the ma�er to the Board;

12. To review the func�oning of the Whistle Blower Mechanism;

13. Approval of appointment of CFO or any other person heading the finance func�on or discharg-ing that func�on a�er assessing the qualifica�ons, experience and background, etc. of the candi-date;

14. Reviewing Financial Statements, in par�cular the investments made by the Company’s subsid-iaries.

12. Directors' Responsibility Statement:

The Board acknowledges its responsibility for ensuring compliance with the provisions of Sec�on 134(3) (c) read with Sec�on 134(5) of the Companies Act, 2013 in the prepara�on of the annual accounts for the year ended on 31st March, 2018 and state that:

i. In the prepara�on of the annual accounts, the applicable Accoun�ng Standards had been followed along with proper explana�on rela�ng to material departures;

ii. The Directors had selected such accoun�ng policies and applied them consistently and made judgments and es�mates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the profit of the Company for that period;

iii. The Directors had taken proper and sufficient care for the maintenance of adequate accoun�ng records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preven�ng and detec�ng fraud and other irregulari�es;

iv. The Directors had prepared the Annual Accounts on a going concern basis;

v. The Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were opera�ng effec�vely; and

vi. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and opera�ng effec�vely.

13. Extract of Annual Return:

As required pursuant to Sec�on 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administra�on) Rules, 2014, an extract of Annual Return in MGT-9 is annexed as a part of this report vides Annexure I.

14. Remunera�on to Directors and key Managerial Personnel:

In pursuant to Rule 5(1) of Companies (Appointment and Remunera�on of Managerial Personnel) Rules, 2014 the remunera�on details of Directors and Key Managerial Personnel (KMP) of the Company is provided in MGT-9 annexed to this report as Annexure I.

15. Regulatory Compliance:

The Company has complied with all the applicable guidelines prescribed by the Reserve Bank of India for NBFCs regarding Accoun�ng Standards, Pruden�al Norms including Income Recogni�on, Capital Adequacy, Fair Prac�ce Code, KYC, AML requirements, etc.


During the year Corporate Social Responsibility Commi�ee was met on 31st March 2018. The Report on CSR Ac�vi�es/ Ini�a�ves is enclosed as Annexure III. The company could not find suitable long term project for implemen�ng CSR ac�vity.


16. Related Party Transac�ons:

The transac�ons entered into by the Company with the Related Par�es were in the ordinary course of business and on an arm’s length basis. Form AOC-2, as required under Sec�on 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules 2014, is a�ached as part of this report vide Annexure II.

17. Material changes and commitment if any affec�ng the financial posi�on of the company:

No material changes and commitments have been occurred between the end of the Financial Year to which this Financial Statements relate and on the date of this report.

18. Risk Management:

The Management of the Company monitors and reports principal risks and uncertain�es that can impact its ability to achieve its strategic objec�ves. Organisa�onal structures, Processes, Standards of the Company altogether form the Risk Management System of the Company. Your Company’s Management confirms that no significant and material orders have been passed by the Regulators or Courts or Tribunals impac�ng the going concern status and Company’s opera�on in future in accordance with the Rule 8(5) (vii) of the Companies (Accounts) Rules, 2014. Whereas your Company is engaged in vehicle finance and loans against security of Gold and Jewellery Ornaments, would lead to expose various risks viz. credit risk, liquidity risk, interest rate risk and opera�onal risk. Whereas your Board of Directors are con�nuously review and monitor these risks at periodic intervals. The Company manages credit risk through stringent credit norms established through several years of experience in this line of business and con�nues to follow the �me tested prac�ce of personally assessing every borrower, before commi�ng to a credit exposure. This process ensures that the exper�se in lending opera�ons acquired by the Company over decades is put to best use and acts to mi�gate credit risks. Liquidity risk and interest rate risk arising out of maturity mismatch of assets and liabili�es are managed through regular monitoring of the maturity profiles. The Company monitors ALM periodically to mi�gate the liquidity risk. Opera�onal risks arising from inadequate or failed internal processes, people and systems or from external events are adequately addressed by the internal control systems and are con�nuously reviewed and monitored by a dedicated team of people. Process improvements and quality control are on-going ac�vi�es and are built into the employee's training modules, as well.

19. Dividend:

In view to conserve resources of the Company, your directors do not recommend any dividend during the Financial Year.



20. Cost Audit:

21. Secretarial Audit

22. Human Resources Management:

23. Disclosure under Sexual Harassment of Women at Workplace (Preven�on, Prohibi�on Redressal)Act, 2013:

24. Statutory Auditors:



Your Company is being engaged in the business of financial services and the provisions of Sec�on 148 of the Companies Act, 2013 is not applicable to the Company.

Your Company is not falling under the limits as prescribed in terms of Sec�on 204 of the Companies Act, 2013 hence audi�ng of its secretarial records is not applicable to the Company.

The Human Resource (HR) department at Kanakadurga Finance Limited is driven by an endeavour:

• To origin right culture and capabili�es • To make passionate and innova�ve culture for its employees • To work beyond le�er and towards sprit

HR Management at KFL has under taken several ini�a�ves to ensure that the knowledge and wisdom gained over decades is handed down to the next genera�on of employees. These ini�a-�ves had resulted in the form of a strong group of in-house facilitators of domain knowledge and a highly mo�vated team of employees geared to fulfilling the needs of your Company’s valued customers.

At present KFL strengthen with 900 employees working in various geographical of India.

The Company is strictly abide by its principles to protect its integrity and commi�ed to provide a safe and healthy environment for all its employees. The Company has zero tolerance towards sexual harassment at work place. The Company had put in place a mechanism for redressal of com-plaints regarding sexual harassment which would be monitored under Internal Complaints Com-mi�ee (ICC) cons�tuted under the Sexual Harassment of Women at Workplace (Preven�on, Prohi-bi�on and Redressal) Act, 2013.

The policy framed under above act would cover all employees (permanent, contractual, temporary, trainees) of the Company.

During the period under review no complaints were received regarding sexual harassment.

Pursuant to the provisions of Sec�on 139(2) of the Companies Act, 2013 and rules made thereun-der, the Members at their 23rd Annual General Mee�ng (“AGM”) held on 29th August, 2017 had appointed M/s. MSKA & Associates, Chartered Accountants, (Registra�on No. 105047W) as Statu-tory Auditors of the Company for a term of five years, i.e. from the conclusion of the 23rd AGM �ll the conclusion of the 28th AGM subject to ra�fica�on of their appointment at every AGM. Accord-ingly the appointment M/s. MSKA & Associates, Chartered Accountants, as the Statutory Auditors of the Company, is being placed for ra�fica�on by the Members in the forthcoming AGM.

25. Internal Financial Controls:

26. Vigil Mechanism:

27. Financial statements of subsidiaries, Asspcoates and Joint Ventures:

29. Deposits:

28. Transfer of Amounts to Investor Educa�on and Protec�on Fund



In this regard, the Company has received a cer�ficate from the Statutory Auditors to the effect that ra�fica�on of their appointment, if made, would be in accordance with the provisions of sec�on 141 of the Act.

Further, the report of the Statutory Auditors along with notes to Schedules is enclosed to this report. The Notes to the financial statements referred in the Auditors Report are self-explanatory and therefore do not call for any further comments under sec�on 134 of the Companies Act, 2013.

The Company has in place adequate internal controls with reference financial statements and opera�onal and same opera�ng effec�vely. The Statutory Auditors verified the systems and processes and confirmed that the Internal Financial Controls systems over financial repor�ng are adequate and such controls are opera�ng effec�vely.

In terms of sec�on 138 of the Companies Act, 2013, the Company is required to appoint internal auditor of the Company and the Board is on careful considera�on to comply the same.

Your Company has established a Vigil Mechanism for its Director, employees and stakeholders to report their genuine concerns and grievances. The said mechanism provides for adequate safe-guard against vic�misa�on of persons who uses such mechanism. The Vigil Mechanism of the Com-pany is overseen by the Audit Commi�ee.

During the period under review no such complaint were reported under Vigil Mechanism.

Your Company does not have any Associate, Subsidiaries and Joint Ventures companies.

Your Company did not have any funds lying unpaid or unclaimed for past period of seven years. Therefore no funds were transferred to the Investor Educa�on and Protec�on Fund (IEPF) during the period under review.

During the period under review, your Company did not accept or renew any deposit within the meaning of Sec�on 73 of the Companies Act, 2013 and read with the rules framed under the Act. Further the Company does not intent to raise any public deposits in terms of its declara�on to the Reserve Bank of India.

31. Conserva�on of energy, technology absorp�on and foreign exhange earings and outgo:

32. General:



(i) Conserva�on of energy

The Company is involved in business of providing loans to its retails customers and as such its oper-a�ons do not count for substan�al energy consump�on. However, the Company adopted effec�ve measures to conserve energy.

(ii) Technology absorp�on

In modern world your Company recognised the importance of technology and adop�ng the best prac�ces which would help the Company to stay ahead in the market.

Your Company had introduced mobile app for its vehicle finance business which would help in providing its services at customer’s door steps.

(iii) Foreign exchange earnings and Outgo

During the period under review the details of foreign exchange earnings and outgo of the Company is as follows:Foreign Earnings : NilForeign Outgo : Nil

Your Directors state that during the financial year: 201-2018

(a). The Company has not issued any equity shares with differen�al rights as to dividend, vo�ng or otherwise.

(b). The Company has not issued any sweat equity shares during the year.

(c). There are no significant and material orders passed against the Company by the Regulators or Courts or tribunals, which would impact the going concern status of the Company and its future opera�ons.

30. Par�culars of Employees Remunera�on:

None of the employees of the Company in the financial year 2017-2018 are drawing remunera�on exceeding Rs. 8.50 Lakhs per month or Rs. 102.00 Lakhs per annum or a propor�onate amount for a part period thereof.

33. Apprecia�on:

Kanakadurga Finance Limited

On Behalf of the Board of Directors For Kanakadurga Finance Limited

Sd/- Sd/- Sd/- S. Lakshmi Narayana S.J.P.N.Chowdary S. Srimannarayana Managing Director Whole-Time Director Whole-Time Director (DIN: 00538185) (DIN: 00538246) (DIN 00538273)

Date: 20th July, 2018 Place: Vijayawada



The Board of Directors wish to place on record its apprecia�on for the con�nued support and co-opera�on from the Reserve Bank of India and other Government Authori�es of India, Banks, Financial Ins�tu�ons, Shareholders and various Stakeholders viz. Debenture holders, Trustees, Intermediaries, Business Associates for their con�nued support.

Your Directors take this opportunity to express their sincere apprecia�on for the dedicated efforts of each employee of the Company, resul�ng in significant milestones achieved during the year and also confident that the Company would expand to new horizons in coming years.

Form No.MGT-9Annexure - I

Form No.MGT-9 EXTRACT OF ANNUAL RETURN FOR THE FINANCIAL YEAR ENDED ON 31.03.2018

[Pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014]

I. REGISTRATION AND OTHER DETAILS:

1 CIN U65921AP1994PLC018605 2 Registration Date 24.10.1994 3 Name of the Company Kanakadurga Finance Limited 4 Category/Sub-Category of the Company Company Limited by Shares / Indian Non-

Government Company 5 Address of the Registered office and

contact details 40-7-31, Jammiche�u Centre, Mogalrajapuram, Vijayawada - 520010 Tel. No: 0866 – 2484034

6 Whether listed company No 7 Name, Address and Contact details of

Registrar and Transfer Agent ,If any XL So�ech Systems Limited 3, Sagar Society, Road No.2, Banjara Hills, Hyderabad - 500 034.

II.PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY

All the business activi�es contributing 10% or more of the total turnover of the Company shall be stated:-

Sr. No.

Name and Descrip�on of main products/ services

NIC Code of the Product/ service

% to total turnover of the Company

1 NBFC - Asset Finance – Hypotheca�on

64920 100%

III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES

Sr. No.

Name And Address Of The Company CIN/GLN

Holding/ Subsidiary /Associate

%of shares held

Applicable Sec�on

NIL

IV. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity)

i. Category - wise Share Holding



Category ofShareholders

No. of Shares held at the beginning of the year 2017

No. of Shares held at the end of the year 2018

% Change during the year

Demat

Physical

Total

% of Total

Shares Demat

Physical Total

% of Total

Shares

A. PROMOTERS 1) Indian a) Individual/ HUF - 8931014 8931014 80.01 7202539 7202539 64.52 (15.49) b) Central Govt - - - - - - - - - c) State Govt(s) - - - - - - - - - d) Bodies Corp - 2230867 2230867 19.99 2230867 - 2230867 19.99 NIL e) Banks / FI - - - - - - - - - f) Any Other - - - - - - - - - Sub-total(A)(1):- - 11161881 11161881 100 9433406 - 9433406 84.51 (15.49) 2) Foreign g) NRIs-Individuals - - - - - - - - - h) Other-Individuals - - - - - - - - -

i) Body Corporate - - - - - - - - - j) Banks / FI’s - - - - - - - - - k) Any Other…. - - - - - - - - - Sub-total(A)(2):- - - - - - - - - - Total Promoter shareholding A - 11161881 11161881 100 9433406 - 9433406 84.51 (15.49)

B. PUBLIC SHAREHOLDING

1. Institutions a) Mutual Funds - - - - - - - - - b) Banks / FI - - - - - - - - - c) Central Govt - - - - - - - - - d) State Govt(s) - - - - - - - - - e) Venture Capital

Funds - - - - - - - -

f) Insurance Companies - - - - - - - -

g) FIIs - - - - - - - - - h) Foreign Venture

Capital Funds - - - - - - - - -

i) Others (specify) - - - - - - - - Sub-total(B)(1) - - - - - - - - -

2. Non Ins�tu�ons a) Bodies Corp.

(i) Indian - - - - - - - - -

(ii) Overseas - - - - 1728475 - 1728475 15.49 15.49

a) Individuals (i) Individual shareholders holding nominal share capital - up to Rs. 1 lakh ------------------- (ii) - excess of Rs 1 lakh

- - - - - - - - -

C) OTHERS - - - - - - - - - Sub-total(B)(2) - - - - - - - - -



Total Public Shareholding (B)= (B)(1)+ (B)(2)

- - - - 1728475 - 1728475 15.49 15.49

C. Shares held by Custodian for GDRs &ADRs

- - - - - - - - -

GRAND TOTAL (A+B+C) - 11161881 11161881 100 11161881 - 11161881 100

ii. Shareholding of Promoters

Sr. No Shareholder’s Name

Shareholding at the beginning of the year Shareholding at the end of the year

No. of Shares

% of total Shares of

the company

%of Shares Pledged /

encumber- red to total

shares

No. of Shares

% of total Shares of

the company

%of Shares Pledged /

encumber- red to total

shares

% change in share holding

during the year

1 S. Lakshmi Narayana 2145135 19.22%

Nil 992818 8.89 Nil (10.33)

2 S. Ratna Kumari 1264653 11.33 Nil 688495 6.17 Nil (5.16) 3 S. J.P.N. Chowdary 2758113 24.71 Nil 2758113 24.71 Nil 0.00 4 S. Srimannarayana 2758113 24.71 Nil 2758113 24.71 Nil 0.00 5 S. Gayatri 2500 0.02 Nil 2500 0.02 Nil 0.00 6 S. Asha Jyothi 2500 0.02 Nil 2500 0.02 Nil 0.00 7 Kanakadurga Financial

Services Ltd 2230867 19.99 Nil 2230867 19.99 Nil 0.00

Total 11161881

100 - 9433406 84.51 -

iii. Change in Promoters Share holding (Please specify, if there is no change)

Sr. no Name

Shareholding at the beginning of the year

Cumula�ve Shareholding during the year

1

S. Lakshmi Narayana No. of shares % of total shares of the company

No. of shares % of total shares of the company

At the beginning of the year 21,45,135 19.22 Date wise Increase / Decrease in Promoters Share holding during the year specifying the reasons for increase/ decrease (e.g. allotment / transfer / bonus/ sweat equity etc):

15.04.2017

11,52,317 Transfer

(Decrease)

(10.33)

9,92,818

8.89

At the End of the year 9,92,818 8.89 9,92,818 8.89



2

S. Ratna Kumari No. of shares % of total shares of the

company

No. of shares % of total shares of the

company At the beginning of the year 12,64,653 11.33 Date wise Increase / Decrease in Promoters Share holding during the year specifying the reasons for increase / decrease (e.g. allotment / transfer / bonus/ sweat equity etc):

15.04.2017

5,76,158 Transfer

(Decrease)

(5.16)

6,88,495

6.17


iv. Shareholding Pa�ern of Top Ten Shareholders (Other than Directors, Promoters and Holders of GDRs and ADRs):

Sr. no Name Shareholding at the beginning of

the year Cumula�ve Shareholding

during the year

1

M/s. BanyanTree Growth Capital II, LLC No. of shares

% of total shares of the company

No. of shares % of total

shares of the company

At the beginning of the year 0 0 Date wise Increase / Decrease in Promoters Share holding during the year specifying the reasons for increase/ decrease (e.g. allotment / transfer / bonus/ sweat equity etc):

15.04.2017

17,28,475 Transfer

15.49

17,28,475

15.49

At the End of the year 17,28,475

15.49 17,28,475 15.49

v. Shareholding of Directors and Key Managerial Personnel:

Sr. No

Name

Shareholding at the beginning of the year

Cumula�ve Shareholding during the year

1

Mr. S. Lakshmi Narayana No. of shares % of total shares of the company

No. of shares % of total shares of the company

At the beginning of the year 21,45,135 19.22 Date wise Increase / Decrease in Promoters Share holding during the year specifying the reasons for increase/ decrease (e.g. allotment / transfer / bonus/ sweat equity etc):

15.04.2017

11,52,317 Transfer

(Decrease)

(10.33)

9,92,818

8.89




2

Mrs. S. Ratna Kumari No. of shares % of total shares of the

company


company At the beginning of the year 12,64,653 11.33 Date wise Increase / Decrease in Promoters Share holding during the year specifying the reasons for increase / decrease (e.g. allotment / transfer / bonus/ sweat equity etc):

15.04.2017

5,76,158 Transfer

(Decrease)

(5.16)

6,88,495

6.17


3

Mr. S. Jayaprakash Narayana Chowdary


company


company At the beginning of the year 27,58,113 24.71 Date wise Increase / Decrease in Promoters Share holding during the year specifying the reasons for increase/ decrease (e.g. allotment / transfer / bonus/ sweat equity etc):

NIL


4

Mr. S. Srimannarayana No. of shares % of total shares of the

company


company At the beginning of the year 27,58,113 24.71 Date wise Increase / Decrease in Promoters Share holding during the year specifying the reasons for increase/ decrease (e.g. allotment / transfer / bonus/ sweat equity etc):

NIL


V. INDEBTEDNESSIndebtedness of the Company including interest outstanding/accrued but not due for payment

Secured Loans excluding deposits (Rs. in Crores)

Unsecured Loans (Rs. in Crores)

Deposits (Rs. in Crores)

Total Indebtedness (Rs. in Crores)

Indebtedness at the beginning of the financial year i) Principal Amount ii) Interest due but not paid iii) Interest accrued but not

154.08 - -

- - -

-

154.08 - -

Total(i+ii+iii) 154.08 - - 154.08



Change in Indebtedness during the financial year - Addi�on - Reduc�on

184.00 96.56

15.00 -

- -

199.00 96.56

Net Change 87.44 15.00 - 102.44 Indebtedness at the end of the financial year i) Principal Amount ii) Interest due but not paid iii) Interest accrued but not due

241.52 -

1.61

15.00 -

.48

-

256.52 -

2.09

Total (i+ii+iii) 243.13 15.48 Nil 258.615 .

VI. REMUNERATION OF DIRECTORS AND KEYMANAGERIAL PERSONNEL

A. Remunera�on to Managing Director, Whole-�me Directors and/or Manager

Sl. No.

Par�culars of Remuneration

Name of MD/WTD/ Manager Total Amount 1.

Name Mr. S. Lakshmi Narayana (MD)

Mrs. S. Ratna Kumari (WTD)

Mr. S.J.P.N. Chowdary (WTD)

Mr. S. Sriman Narayana (WTD & CFO)

2. Gross Salary (a) Salary as per provisions contained in section17(1) of the Income-tax Act, 1961 (b) Value of perquisites u/s 17(2)Income-tax Act, 1961 (c) Profits in lieu of salary under sec�on17(3) Income- tax Act,1961

36,50,000

36,50,000

36,50,000

36,50,000

1,46,00,000

3. Stock Option Nil

Nil

Nil

Nil

Nil

4. Sweat Equity Nil

Nil

Nil

Nil

Nil

5. Commission - as % of profit - others, specify…

Nil

Nil

Nil

Nil

Nil

6. Others, please specify Nil

Nil

Nil

Nil

Nil

7.

Total(A)

36,50,000

36,50,000

36,50,000

36,50,000

1,46,00,000*

* Shareholders in their Extra Ordinary General mee�ng held on 08.04.2017 have approved to pay said remunera�on to Managing & Whole �me Directors of the Company.



B. Remunera�on to other directors:

Sl. No. Par�culars of Remuneration Name of Director Total Amount

1. Independent Directors ·Fee for a�ending board committee mee�ngs ·Commission ·Others, please specify

Nil

Nil

Nil

Nil

Nil

2. Total(1) Nil

Nil

Nil

Nil

Nil

3. Other Non-Execu�ve Directors ·Fee for a�ending board committee mee�ngs ·Commission ·Others, please specify

Nil

Nil

Nil

Nil

Nil

4. Total(2) Nil

Nil

Nil

Nil

Nil

5. Total(B)=(1+2) Nil

Nil

Nil

Nil

Nil

6. Total Managerial Remuneration A+B

1,46,00,000

7. Overall Ceiling as per the Act

C. Remunera�on to Key Managerial Personnel Other Than MD/Manager/WTD

Sl. no. Particulars of Remuneration

Key Managerial Personnel

1.

CEO

Company Secretary CFO

Total Mr. G Krishna Mohan Reddy*

Mr. Vijay Kumar Jonnada**

Mr. S. Sriman Narayana^

2.

Gross salary (a)Salary as per provisions contained in section17(1)of the Income-tax Act,1961 (b)Value of perquisites u/s 17(2)Income-tax Act,1961 (c)Profits in lieu of salary under sec�on 17(3) Income-tax Act,1961

Nil 9,600 4,05,000 36,50,000

3. Stock Option Nil Nil Nil Nil 4. Sweat Equity

Nil

Nil Nil Nil

5. Commission - as % of profit -others, specify…

Nil Nil

Nil Nil

6. Others, please specify Nil Nil Nil Nil 7.

Total

Nil

9,600

4,05,000

36,50,000



* Mr. Krishna Mohan Reddy was appointed as Company Secretary w.e.f 27th March, 2018 and accordingly his remunera�ons details are provided.** Mr. Vijay Kmar Jonnada was resigned as COmpany Secretary w.e.f 32st December, 2017.*** Mr. Srimannarayana being WTD and CFO of the Company, the remuneraion details provided in Director’s remunera�on is same as above.

VII. PENALTIES/PUNISHMENT/COMPOUNDING OF OFFENCES:

Type Sec�on of the Companies Act

Brief Descrip�on

Details of Penalty/ Punishment/Compounding fees imposed

Authority [RD /NCLT/Court]

Appeal made. If any (give details)

A. Company Penalty - - - - - Punishment - - - - - Compounding - - - - - B. Directors Penalty - - - - - Punishment - - - - - Compounding - - - - - C. Other Officers In Default Penalty - - - - - Punishment - - - - - Compounding - - - - -

On Behalf of the Board of Directors For Kanakadurga Finance Limited

Sd/- Sd/- Sd/- S. Lakshmi Narayana S.J.P.N.Chowdary S. Srimannarayana Managing Director Whole-Time Director Whole-Time Director (DIN: 00538185) (DIN: 00538246) (DIN 00538273)

Date: 20th July, 2018 Place: Vijayawada



Form No. AOC-2Annexure - II

Form No. AOC - II(Pursuant to clause (h) of sub section (3) of Section 134 of the Act and Rule 8 (2)

of the Companies (Accounts) Rules, 2014)

Form for disclosure of par�culars of contracts/arrangements entered into by the company withrelated par�es referred to in sub-sec�on (1) of sec�on 188 of the Companies Act, 2013 including

certain arms length transac�ons under third provisio thereto

On Behalf of the Board of DirectorsFor Kanakadurga Finance Limited

Date: 20th July, 2018Place: Vijayawada

Sd/-S. Lakshmi NarayanaManaging Director

(DIN: 00538185)

Sd/-S.J.P.N. Chowdary

Whole-Time Director(DIN: 00538246)

Sd/-S. Srimannarayana

Whole-Time Director(DIN: 00538273)

(a) Details of contracts or arrangements or transac�ons

not at arm’s length basis: NIL

(b) Details of material contracts or arrangement or transac�ons at arm’s length basis NIL



REPORT ON CSR Annexure - III

[Pursuant to Section 135 of the Act & Rules made thereunder]

REPORT ON CSR ACTIVITIES/ INITIATIVES

1. A brief outline of the company’s CSR policy, including overview of the projects or programs proposed to be undertaken has been laid down.

2. Composi�on of the CSR Commi�ee

3. CSR Amount

4. Reasons for shor�all

5. A responsibility statement by the CSR Commi�ee that the implementa�on and monitoring of CSR Policy, is in compliance with CSR objec�ves and Policy of the Company

KFL aims to undertake CSR ac�vi�es that creates sustainable growth and empowers under privileged sec�ons of society. KFL focuses on following CSR ac�vi�es:

a. Educa�onb. Healthc. Sustainable livelihood

Sl. No. Name of the Member Chairman/ Members Status on Board

1 Mr. Sandireddy Jayaprakash Narayana Chowdary

Chairman Whole-�me Director

2 Mr. Sandireddy Srimannarayana Member Whole-�me Director 3 Mr. Hari Kiran Nekkalapudi Member Independent Director

(i) Average Net Profit of the Company for last 3 financial years: Rs.546.00 Lakhs(ii) Prescribed CSR expenditure (2% of amount): Rs.10.92 Lakhs(iii) Amount un-spent: 5.12 Lakhs

The details of CSR ac�vi�es are provided below.

During the financial year 2017-2018, the Company successfully deployed half of its CSR amounts on prescribed CSR ac�vi�es. The amount deployed has been based on the finalisa�on of programs/projects which are duly iden�fied through evalua�on.

KFL has focused its efforts on iden�fying and undertaking CSR projects that have maximum poten�al to improve sustainability. In alignment with this vision, in FY 2017-2018, the Company undertook various projects in the core areas of health care and educa�on. KFL envisages to enhance the scope of its CSR ac�vi�es and increase the quantum of CSR expenditure, whereas under some circumstances the Company is not able to spent on CSR projects and keeping in view of social and environmental sustainability the Company looks for long terms Projects for period of 3-5 years and in coming years the allocated CSR will be spent on the same.



We hereby state that implementa�on and monitoring of CSR Policy, is in compliance with CSR objec�ves and Policy of the company.

For Kanakadurga Finance Limited

Sd/-S Jayaprakash Narayana Chowdary Chairman of CSR Commi�ee

Date: 20th July, 2018Place: Vijayawada



Sl. No.

1

2

3

4

CSR Project or ac�vity iden�fied

Suppor�ng and promo�on of culture Provide health care including preven�ve health care

Promo�on of Educa�on

Suppor�ng Environmental Social Sustainability

Sector in which the project is covered

Promo�on & Preserva�on of Culture

Promo�on of Health & Hygiene

Promo�ng educa�on by providing financial assistance to deserving and meritorious students

Promo�on of Social Welfare & Awareness

Projects or Programs

1. Local area or other 2. Specified Loca�on

Andhra Pradesh

Vijayawada - Andhra Pradesh. Bangalore - Karnataka

Krishna Distrct, Andhra Pradesh

Andhra Pradesh & Karnataka

Amount Outlay (budget) on Project or Programs (INR)

500,000.00/-

200,000.00/-

200,000.00/-

200,000.00/-

Amount spent on the projects or programs (Rs)

1. Direct Expenditure

2. Overhead

320,180.00/-

127,000.00/-

73,100.00/-

59,336.00/-

Cumula�ve expenditure up to the repor�ng period (Rs)

320,180.00/-

127,000.00/-

26,38,000.00/-

59,336.00/-

Amount Spent: Direct or through implemen�ng agency

Part of amount spent through - Sandireddy Lakshmi Narayana Ratna Kumari Founda�on




For Kanakadurga Finance Limited

Sd/-Sandireddy Jayaprakash narayana ChowdaryChairman of CSR Commi�ee



INDEPENDENT AUDITORS’ REPORT

To the Members of Kanakadurga Finance Limited

Report on the Financial Statements

We have audited the accompanying financial statements of Kanakadurga Finance Limited (the “Company”), which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accoun�ng policies and other explanatory informa�on.

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the ma�ers stated in Sec�on 134(5) of the Companies Act, 2013 (the “Act”) with respect to the prepara�on of these financial statements that give a true and fair view of the financial posi�on, financial performance and cash flows of the Com-pany in accordance with the accoun�ng principles generally accepted in India, including the Accoun�ng Standards specified under Sec�on 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Accoun�ng Standards) Amendment Rules, 2016. This responsibility also includes maintenance of adequate accoun�ng records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preven�ng and detec�ng frauds and other irregulari�es; selec�on and applica�on of appropriate accoun�ng policies; making judgments and es�mates that are reasonable and prudent; and design, implementa�on and main-tenance of adequate internal financial controls, that were opera�ng effec�vely for ensuring the accuracy and completeness of the accoun�ng records, relevant to the prepara�on and presenta-�on of the financial statements that give a true and fair view and are free from material misstate-ment, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.

We have taken into account the provisions of the Act, the accoun�ng and audi�ng standards and ma�ers which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Audi�ng specified under Sec�on 143(10) of the Act and other applicable authorita�ve pronouncements issued by the Ins�tute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial state-ments are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s prepara�on of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evalua�ng the appropriateness of the accoun�ng policies used and the reasonableness of the accoun�ng es�mates made by the Company’s Directors, as well as evalua�ng the overall presenta�on of the financial statements.



We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Opinion

In our opinion and to the best of our informa�on and according to the explana�ons given to us, the aforesaid financial statements give the informa�on required by the Act in the manner so required and give a true and fair view in conformity with the accoun�ng principles generally accepted in India, of the state of affairs of the Company as at March 31, 2018, and its profit and its cash flows for the year ended on that date.

Other Ma�er

The financial statements of the Company for the year ended March 31, 2017, were audited by another firm of chartered accountants under the Companies Act, 2013 who, vide their report dated August 16, 2017, expressed an unmodified opinion on those financial statements.

Our opinion is not modified in respect of this ma�er.

Report on Other Legal and Regulatory Requirements

1. As required by Sec�on 143(3) of the Act, we report that:

(a) We have sought and obtained all the informa�on and explana�ons which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examina�on of those books.

(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid financial statements comply with the Accoun�ng Standards spec-ified under Sec�on 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Accoun�ng Standards) Amendment Rules, 2016.

(e) On the basis of the wri�en representa�ons received from the directors as on March 31, 2018 taken on record by the Board of Directors, none of the director is disqualified as on March 31, 2018 from being appointed as a director in terms of Sec�on 164(2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial repor�ng of the Company and the opera�ng effec�veness of such controls, refer to our separate report in ‘Annex-ure A’

(g) With respect to the other ma�ers to be included in the Auditors’ Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014 as amended, in our opinion and to the best of our informa�on and according to the explana�ons given to us:



2. As required by the Companies (Auditor’s Report) Order, 2016 (the “Order”) issued by the Central Government of India in terms of Sub-sec�on (11) of Sec�on 143 of the Act, we give in the ‘Annexure B’, a statement on the ma�ers specified in paragraphs 3 and 4 of the Order.

i. The Company does not have any pending li�ga�ons as at March 31, 2018 which would impact its financial posi�on.

ii. The Company did not have any long-term contracts including deriva�ve contracts for which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the Investor Educa-�on and Protec�on Fund by the Company during the year ended March 31, 2018.

For MSKA & Associates (Formerly known as MZSK & Associates) Chartered Accountants ICAI Firm Registra�on No. 105047W Swapnil Kale Partner Membership No.117812 Vijayawada July 20, 2018


Sd/-


ANNEXURE A

TO THE INDEPENDENT AUDITOR’S REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF KANAKADURGA FINANCE LIMITED

[Referred to in paragraph 1(f) under ‘Report on Other Legal and Regulatory Requirements’ in the Independent Auditors’ Report of even date to the Members of Kanakadurga Finance Limited on the

Financial Statements for the year ended 31st March 2018.]

Report on the Internal Financial Controls under Clause (i) of Sub-sec�on 3 of Sec�on 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial repor�ng of Kanakadurga Finance Limited as of March 31, 2018 in conjunc�on with our audit of the financial statements of the Com-pany for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s Management is responsible for establishing and maintaining internal financial controls based on the internal control over financial repor�ng criteria established by the Company considering the essen�al components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Repor�ng issued by the Ins�tute of Chartered Accoun-tants of India (ICAI) (the “Guidance Note”. These responsibili�es include the design, implementa-�on and maintenance of adequate internal financial controls that were opera�ng effec�vely for ensuring the orderly and efficient conduct of its business, including adherence to Company’s policies, the safeguarding of its assets, the preven�on and detec�on of frauds and errors, the accu-racy and completeness of the accoun�ng records, and the �mely prepara�on of reliable financial informa�on, as required under the Act.


Our responsibility is to express an opinion on the Company's internal financial controls over finan-cial repor�ng based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Audi�ng, issued by ICAI and deemed to be prescribed under sec�on 143(10) of the Act, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial repor�ng was established and maintained and if such controls operated effec�vely in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial repor�ng and their opera�ng effec�veness. Our audit of internal financial controls over financial repor�ng included obtaining an understanding of internal financial controls over financial repor�ng, assessing the risk that a material weakness exists, and tes�ng and evalua�ng the design and opera�ng effec�veness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial repor�ng.



Meaning of Internal Financial Controls over Financial Repor�ng

A Company's internal financial control over financial repor�ng is a process designed to provide reasonable assurance regarding the reliability of financial repor�ng and the prepara�on of financial statements for external purposes in accordance with generally accepted accoun�ng principles. A Company's internal financial control over financial repor�ng includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transac�ons and disposi�ons of the assets of the company; (2) provide reasonable assurance that transac�ons are recorded as necessary to permit prepara�on of financial state-ments in accordance with generally accepted accoun�ng principles, and that receipts and expendi-tures of the company are being made only in accordance with authoriza�ons of management and directors of the company; and (3) provide reasonable assurance regarding preven�on or �mely detec�on of unauthorized acquisi�on, use, or disposi�on of the company's assets that could have a material effect on the financial statements.

Inherent Limita�ons of Internal Financial Controls over Financial Repor�ng

Because of the inherent limita�ons of internal financial controls over financial repor�ng, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projec�ons of any evalua�on of the internal financial controls over financial repor�ng to future periods are subject to the risk that the internal financial control over financial repor�ng may become inadequate because of changes in condi�ons, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial repor�ng and such internal financial controls over financial repor�ng were opera�ng effec�vely as at March 31, 2018, based on the internal control over financial repor�ng criteria established by the Company considering the essen�al components of internal control stated in the Guidance Note.

For MSKA & Associates

(Formerly known as MZSK & Associates)

Chartered Accountants

ICAI Firm Registra�on No. 105047W

Swapnil Kale

Partner

Membership No.117812

Place: Vijayawada

Date: July 20, 2018


Sd/-


ANNEXURE B

TO INDEPENDENT AUDITORS’ REPORT OF EVEN DATE ON THE FINAN-CIAL STATEMENTS OF KANAKADURGA FINANCE LIMITED FOR THE

YEAR ENDED MARCH 31, 2018

[Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements’ in the Independent Auditors’ Report]

i. (a) The company has not maintained proper records showing full par�culars including quan�ta�ve details and situa�on of fixed assets.

(b) All the fixed assets of the Company have not been physically verified by the management during the year. Accordingly, material discrepancies, if any, could not be ascertained and therefore, we are unable to comment on whether such material discrepancies have been properly dealt with in the books of account. (c) According to the informa�on and explana�ons given to us and on the basis of our examina�on of the records of the Company, the �tle deeds of immovable proper�es are held in the name of the Company. ii. The Company is involved in the business of rendering services. Accordingly, the provisions stated in paragraph 3(ii) of the Order are not applicable to the Company.

iii. The Company has granted loans to other party covered in the register maintained under sec�on 189 of the Act.

(a) According to the informa�on and explana�ons given to us and based on the audit procedures conducted by us, we are of the opinion that the terms and condi�ons of loans granted by the Com-pany to party covered in the register maintained under sec�on 189 of the Act, (total loan amount granted Rs.25,00,000 and balance outstanding as at balance sheet date Rs.nil) are not prejudicial to the Company’s interest.

(b) In case of the loans granted to the Other Party listed in the register maintained under sec�on 189 of the Act, schedule of repayment of principal and payment of interest have been s�pulated and the borrowers have been regular in the payment of the principal and interest.

(c) There are no amounts overdue for more than ninety days in respect of the loan granted to Other Par�es listed in the register maintained under sec�on 189 of the Act.

iv. In our opinion and according to the informa�on and explana�ons given to us, the Company has not either directly or indirectly, granted any loan to any of its directors or to any other person in whom the director is interested, in accordance with the provisions of sec�on 185 of the Act and the Company has not made investments through more than two layers of investment companies in accordance with the provisions of sec�on 186 of the Act. Accordingly, provisions stated in para-graph 3(iv) of the Order are not applicable to the Company.

v. In our opinion and according to the informa�on and explana�ons given to us, the Company has not accepted any deposits from the public within the meaning of Sec�ons 73, 74, 75 and 76 of the Act and the rules framed there under.



vi. The provisions of sub-sec�on (1) of sec�on 148 of the Act are not applicable to the Company as the Central Government of India has not specified the maintenance of cost records for any of the products of the Company. Accordingly, the provisions stated in paragraph 3 (vi) of the Order are not applicable to the Company.

vii. (a) According to the informa�on and explana�ons given to us and the records of the Company examined by us, in our opinion, the Company is regular in deposi�ng with appropriate authori�es undisputed statutory dues including provident fund, employees' state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues applicable to it.

(b) According to the informa�on and explana�on given to us and the records of the Company exam-ined by us, there are no dues of income tax, sales-tax, service tax, customs duty, excise duty, value added tax, cess and any other statutory dues which have not been deposited on account of any dispute.

viii. In our opinion and according to the informa�on and explana�ons given to us, the Company has not defaulted in repayment of dues to the financial ins�tu�on, bank or debenture holders.

ix. In our opinion, according to the informa�on explana�on provided to us, money raised by way of term loans and Debt instruments during the year have been applied for the purpose for which they were raised. The Company has not raised any money by way of ini�al public offer or further public offer during the year. x. During the course of our audit, examina�on of the books and records of the Company, carried out in accordance with the generally accepted audi�ng prac�ces in India, and according to the informa-�on and explana�ons given to us, we have neither come across any instance of material fraud by the Company or on the Company by its officers or employees.

xi. According to the informa�on and explana�ons given to us and based on our examina�on of the records of the Company, the Company has paid/ provided for managerial remunera�on in accor-dance with the requisite approvals mandated by the provisions of sec�on 197 read with Schedule V to the Act.

xii. In our opinion and according to the informa�on and explana�ons given to us, the Company is not a Nidhi Company. Accordingly, the provisions stated in paragraph 3(xii) of the Order are not applicable to the Company.

xiii. According to the informa�on and explana�ons given to us and based on our examina�on of the records of the Company, transac�ons with the related par�es are in compliance with sec�ons 177 and 188 of the Act where applicable and details of such transac�ons have been disclosed in the financial statements as required by the applicable accoun�ng standards.

xiv. According to the informa�on and explana�ons given to us and based on our examina�on of the records of the Company, the Company has made fully conver�ble debentures during the year and the requirements of Sec�on 42 of the Act have been complied with. The amount raised has been used for the purposes for which they were raised.

xv. According to the informa�on and explana�ons given to us and based on our examina�on of the records of the Company, the Company has not entered into non-cash transac�ons with direc-tors or persons connected with him. Accordingly, provisions stated in paragraph 3(xv) of the Order are not applicable to the Company.

xvi. The Company is required to and has been registered under Sec�on 45-IA of the Reserve Bank of India Act, 1934 as Non Banking Financial Company.



xv. According to the informa�on and explana�ons given to us and based on our examina�on of the records of the Company, the Company has not entered into non-cash transac�ons with direc-tors or persons connected with him. Accordingly, provisions stated in paragraph 3(xv) of the Order are not applicable to the Company.

xvi. The Company is required to and has been registered under Sec�on 45-IA of the Reserve Bank of India Act, 1934 as Non Banking Financial Company. For MSKA & Associates (Formerly known as MZSK & Associates) Chartered Accountants ICAI Firm Registra�on No. 105047W _______________ Swapnil Kale Partner Membership No.117812 Place : Vijayawada Date : July 20, 2018


Sd/-


AUDITORSADDITIONAL

REPORT

The Board of DirectorsKanakadurga Finance Limited#40-7-31, Jammiche�u Centre, Mogalrajpuram, Vijayawada- 520010

Management’s Responsibility for the Financial Statements


1. This report is issued in accordance with the requirements of Master Direc�on - Non-Bank-ing Financial Companies Auditor’s Report (Reserve Bank) Direc�ons, 2016 dated September 29, 2016 (the “Direc�ons”). 2. We have audited the accompanying financial statements of Kanakadurga Finance Limited (hereina�er referred to as the “Company”) comprising Balance Sheet as at March 31, 2018 and the related Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date, on which we have issued our report dated June 27, 2018.

3. The Company’s Board of Directors is responsible for the ma�ers stated in Sec�on 134(5) of the Companies Act, 2013 (the “Act”) with respect to the prepara�on of these financial statements to give a true and fair view of the financial posi�on, financial performance and cash flows of the Company in accordance with the accoun�ng principles generally accepted in India, including the Accoun�ng Standards specified under Sec�on 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Accoun�ng Stan-dards) Amendment Rules, 2016. This responsibility also includes maintenance of adequate accoun�ng records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preven�ng and detec�ng frauds and other irregulari�es; selec�on and applica�on of appropriate accoun�ng policies; making judgments and es�mates that are reasonable and prudent; and design, implementa�on and maintenance of adequate internal financial controls, that were opera�ng effec�vely for ensuring the accuracy and completeness of the accoun�ng records, relevant to the prepara�on and presenta�on of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. 4. The Management is also responsible for compliance with the Reserve Bank of India (the “RBI”) Act, 1934 and other relevant RBI circulars and guidelines applicable to Non-Banking Financial Companies, as amended from �me to �me, and for providing all the required infor-ma�on to the RBI.

5. Pursuant to the requirements of the Direc�ons referred to in paragraph 1 above, it is our responsibility to examine the audited books and records of the Company for the year ended March 31, 2018 and report on the ma�ers specified in the Direc�ons to the extent applica-ble to the Company.



Opinion

Restric�on on Use

6. We conducted our examina�on in accordance with the ‘Guidance Note on Reports or Cer�ficates for Special Purposes’ issued by the Ins�tute of Chartered Accountants of India (the “Guidance Note”). The Guidance Note requires that we comply with the ethical require-ments of the Code of Ethics issued by the Ins�tute of Chartered Accountants of India.

7. We have complied with the relevant applicable requirements of the Standard on Quality Control (SQC) 1, “Quality Control for Firms that Perform Audit and Reviews of Historical Financial Informa�on, and Other Assurance and Related Services Engagements".

8. Based on our examina�on of the audited books and records of the Company for the year ended March 31, 2018 as produced for our examina�on and the informa�on and explana-�ons given to us we report that :

8.1 The Company is engaged in the business of non-banking financial ins�tu�on and has obtained a cer�ficate of registra�on No.B-090.00204 dated February 11, 2010 from the RBI.

8.2 The Company is en�tled to con�nue to hold such cer�ficate of registra�on in terms of its asset/income pa�ern as on March 31, 2018.

8.3 The non-banking financial company is mee�ng the required net owned fund require-ment as laid down in RBI/DNBR/2016-17/44 Master D

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