Financial Results (Directors' Report)

Directors’ Report

 

Your Directors are pleased to present the 14th Annual Report of the OTC Exchange of India together with the audited Statements of Accounts for the year ended March 31, 2004.

 

Financial Results

The financials of your Exchange for the year 2003-2004 are as follows:

                                                                                                                        (Rs. in lakhs)

Particulars

As on 31st March

2004

2003

Income

305.95

3,40.10

Expenditure (Excluding Depreciation)

279.83

3,07.56

Surplus/(Deficit) Before Depreciation

26.12

32.54

Surplus/(Deficit) excluding prior period items

26.12

32.54

Depreciation

136.82

1,85.98

Net Surplus/(Deficit) for the year

(110.70)

(1,53.44)

Surplus/(Deficit) brought forward from previous years

(4391.95)

(42,38.51)

Accumulated Deficit carried forward to Balance Sheet

(4502.65)

(43,91.95)

 

Your exchange has been able to bring down substantially the total expenditure (excluding depreciation) for the fourth consecutive year. The savings in total expenditure is to the tune of Rs 27.73 lakhs i.e a 9.02% reduction over previous year. On the other hand, soft interest rate scenario has continued to affect the investment income of your exchange this year also.

 

A consistent financial discipline has helped the Exchange to break even its entire cash overheads. This has resulted into a surplus before depreciation of Rs 26.12 lakhs. The Company has not accepted any deposits from the public during the year. The Exchange has separate funds like the Investor Protection Fund (corpus Rs 234.09 lakhs), Investors Services Fund (corpus Rs 38.54 lakhs) and Settlement Guarantee Fund (corpus Rs. 725.69 Lacs out of which Rs.310.04 lakhs is in cash) in place as per the SEBI Guidelines. The exchange has also set up a Settlement Contingency Fund (Rs.50 lakhs) for short-term shortages. These funds have been invested in earmarked fixed deposits with Banks.     

 

Economy & Capital Market

 

The recent years witnessed significant reforms in the capital market. The trading cycle has been shortened to T+2. 99% of the scrips in the market are dematerialized.  Almost 100% of the trades are in D-mat form.

 

Robust risk management system has been put in place, Value-at-risk margining and exposure limits, on-line monitoring of margins and positions, Clearing Corporation and Settlement Guarantee Fund mechanism for trade settlement – all these have made Indian Capital Market attractive in terms of transparency, efficiency and safety.

 

New initiatives are in various stages of introduction. Margin Trading and Securities Lending have been introduced. Straight through Processing will be available.

 

The debt market which was thrown open to the non-institutional investors through the launch of Retail Debt Market on OTCEI, NSE and BSE could not attract much participation as familiarity with such debt products and trading techniques is low in this segment.

 

 

Operations at OTC Exchange of India

 

During the year, 112 brokers were active and their trading turnover amounted close to Rs. 15.76 crores.

 

During the year, the turnover on its wholly owned subsidiary - OTCEI Securities Ltd. (OSL) increased by 92% to Rs.2070.45 crores from Rs.1078.32 crores. 23 OTCEI members are now taking advantage of trading on capital market segment of NSE through OSL in comparison to 27 in the last year. 

 

FUTURE PLANS

 

The Exchanges’ proposal on Single Call Auction Market (SCM) has received SEBI’s approval. The Exchange is in the process of setting up the systems for this new segment which is expected to be launched shortly.   As the only Exchange so far in the country to be granted permission to introduce SCM, the launch of this new segment could provide the Exchange with a fillip, which is much needed to boost up its product line and bottom line.  The Exchange believes that SCM is the ideal platform for small and medium enterprises in line with the Union Budget presented by the Finance Minister. 

 

Subsidiary Company

A statement pursuant to Sec. 212 of the Companies Act, 1956, in respect of OTCEI Securities Limited (OSL), the wholly owned subsidiary of your company and its Accounts for the year 2003- 2004 together with the Report of the Directors and the Auditors thereon, are attached to the Accounts of the Company.

 

Listings

Due to low volumes, your Exchange could not find any new issuers in the equity segment this year. The number of listed companies on the Exchange stands at 113 as on March 31, 2004.

 

Technical Infrastructure

Technology is the lifeline of any Stock Exchange. Keeping this in mind, OTCEI follows a policy of up-grading technology from time to time to provide the best to our members and customers. The Exchange employs a fault tolerant Stratus Continuum C618 server for trading in listed and permitted segment and Stratus Polo C425 server supports its databases. The trading system of the Exchange i.e. OASIS (OTCEI Automated Securities Integrated System) is based on TCAM application licensed by OM, Sweden.  It is a hybrid software that supports both order and quote driven trading systems operating on a price-time priority.

 

Personnel and HRD  

There are no employees within the purview of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975. The Exchange has 42 employees as on March 31,2004. During the year 3 employees were sent for various training programmes and seminars. During the year 4 employees passed 6 number of NCFM courses conducted by NSE.

 

Auditors

The statutory auditors, M/s. K. S. Aiyar & Co. Chartered Accountants, Mumbai, will retire at the ensuing Annual General Meeting and are eligible for re-appointment. The Board on the recommendations of the Audit Committee has recommended the reappointment of M/s K S Aiyar & Co. as Auditors to audit the accounts of the Company for the financial year ending March 31, 2005. You are requested to consider their appointment for the financial year 2004-2005.

 

Directors

In accordance with the provisions of the Companies Act, 1956 and pursuant to the Articles of Association of the Company, our Directors Shri N Chandrasekaran [SBI Caps] and Shri S B Mainak [LIC] retire at the Fourteenth Annual General Meeting of the Company and are eligible for re-appointment.

 

The Board records its appreciation of guidance and support provided by                      Dr. K Kameswar Rao, Shri N K Ramachandran, Smt Chitkala Zutshi, Shri S P Goel and Shri S K Mukhopadhyay, Directors, who have resigned during the year.

 

 

 

 

DIRECTORS RESPONSIBILITY STATEMENT

The Directors confirm that:

a.      in the preparation of the annual accounts, the applicable accounting standards have been followed, along with proper explanation relating to material departures, if any ;

b.      they have selected such accounting policies and applied them consistently and made judgements and estimates 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 surplus and deficit of the Company for that period; 

c.       they have taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d.      they have prepared the annual accounts on a going concern basis.

 

 

Corporate governance

The Exchange has persistently observed highest standards of corporate governance. The Managing Director is in charge of day-to-day management of the affairs of the Exchange subject to the superintendence, control and directions of the Board of Directors. At present there are 11 Directors on the Board. The Board consists of nominee directors of Promoter Institutions, SEBI nominees and Public representatives. During the financial year 2003-2004, the Board met 7 times to review and evaluate the operations of the Exchange and decide on strategic issues.  

 

The names of members of the Exchanges’ Board of Directors, their attendance at the Board meeting and the number of their directorships are set out below:

 

Sr.No.

Name of Member

Board Meetings attended during the year

Attendance at the last AGM (16.09.2003)

Number of other Directorships (Public/Other Companies

 1

Shri I D Agarwal 

7

Yes

 5

2

 

Dr K Kameswara Rao

(Till August 7,2003)

 Nil

Nil

 Nil

3

Shri N Chandrasekaran

7

Yes

3

4

Shri A V Rammurty

(Since August 7,2003)

5

Nil

2

5

Shri N K Ramachandran

4

Nil

4

6

Shri M Raghavendra

6

Nil

5

7

Shri V A Vijayan Menon

6

Nil

Nil


 

8

Smt.Chitkala Zutshi IAS

(Till October 31, 2003)

Nil

Nil

Nil

9

Shri D C Anjaria

4

Nil

6

10

Shri Prithvi Haldea

7

Nil

6

11

Shri S P Goel

(Till 25th May, 2004)

6

Nil

5

12

Shri S B Mainak

7

Nil

Nil

13

Shri S K Mukhopadhyay (Till  October 9, 2003)

4

Yes

1

14

Shri Girish Dave

(Since September 18, 2003)

3

Nil

7

15

Shri K Kumar

(Since October 9, 2003)

3

Nil

1

 

The names of members of various Committees, number of meetings held during the year and attendance of members are set out herein below:

 

Default Committee: Meetings held during the year : 2

Sr.No.

Name of Member

Number of meetings attended during the year

1.

Shri I  Agarwal, Chairman  

2

2.

Shri G.V. Nageswara Rao, IDBI Caps

(Till February 24, 2004)

Nil

3.

Prof. M D Limaye, Ex-Vice Chancellor, Bombay University 

Nil

4.

Shri S C Dikshit, UTI

2

5.

Shri S K Mukhopadhyay, MD

(Till October  9, 2003)

2

 

Disciplinary Committee: Meetings held during the year : 8

Sr.No.

Name of Member

Number of meetings attended during the year

1.

Shri I D Agarwal, Chairman

8

2.

Shri G.V. Nageswara Rao, IDBI Caps

(Till February 24, 2004)

1

3.

Shri M P Tejwani, MD, Goodearth Credit and Investment Ltd.

8

4.

Shri S C Dikshit, UTI

7

5.

Shri S K Mukhopadhyay, MD

(June 2003 till October 9, 2003)

2


 

6

Shri K Kumar, MD

(Since October, 2003)

6

 

Delisting Committee: Meetings held during the year : 1

Sr.No.

Name of Member

Number of meetings attended during the year

1.

Shri I D Agarwal, Chairman

1

2.

Shri V A Vijayan Menon, SND

1

3.

Shri S C Dikshit, UTI

1

4.

Shri Anand R Prabhu, Appointed Actuary, New India Assurance Co. Ltd

1

5.

Shri S K Mukhopadhyay, MD

(Till October 9, 2003)

1

6.

Shri K Kumar, MD

(Since October, 2003)

Nil

 

 

Audit & Ethics Committee: Meetings held during the year : 4

Sr.No.

Name of Member

Number of meetings attended during the year

1.

Shri N Chandrasekaran, SBI Caps

(June,2003 to July, 2003)

3

2.

Dr K Kameswara Rao, IDBI

(June,2003 to July, 2003)

1

3.

Shri A V Rammurty, IDBI

(Since October,2003)

2

4.

S B Mainak, LIC

(Since June,2003)

 

3

5.

Shri M Raghavendra, GIC

(Since October,2003)

1

 

Investment Committee: Meetings held during the year : 2

Sr.No.

Name of Member

Number of meetings attended during the year

1.

Shri N K Ramachandran, IFCI

1

2.

Shri S B Mainak, LIC

2

3

Shri S K Mukhopadhyay, MD

(Till October 9, 2003)

1

4.

Shri K Kumar, MD

(Since October 9,2003)

1

 

Sub-Committee of the Governing Board (monitoring the compliance of observation in the SEBI Inspection Report): Meetings held during the year : 5

Sr.No.

Name of Member

Number of meetings attended during the year

1.

Shri V A Vijayan Menon, SND

4

2.

Shri D C Anjaria, PRD

4

3.

Shri Prithvi Haldea, PRD

4

4.

Shri S P Goel, Member/Dealer Representative

2

5.

Shri S K Mukhopadhyay,MD

(August,2003 to October,2003)

2

4.

Shri K Kumar, MD

(Since  October 9, 2003)

3

 

 

Sub-Committee of the Governing Board (to suggest the revival strategy for the Exchange): Meetings held during the year :2

Sr.No.

Name of Member

Number of meetings attended during the year

1.

Shri D C Anjaria, PRD

2

2.

Shri Prithvi Haldea, PRD

2

3.

Shri M Raghavendra, GIC

2

4.

Shri K Kumar, MD

(Since October, 2003)

2

 

 

Staff Selection Committee: Meetings held during the year :4

Sr.No.

Name of Member

Number of meetings attended during the year

1.

Shri I D Agarwal, Chairman

4

2.

Shri M Raghavendra, GIC

4

3.

Shri S K Mukhopadhyay, MD

(August,2003 to October,2003)

3

4.

Shri K Kumar, MD

(Since October, 2003)

1

 

 

The Exchange had constituted its Audit & Ethics Committee of the Board on 23rd October, 2000. The Audit Committee, inter-alia, provides direction and oversees the working of Internal Audit and interacts with Statutory Auditors.  The Audit Committee comprises three members viz. Shri M Raghavendra as Chairman and Shri A V Rammurty and Shri S B Mainak as members.

 

Acknowledgements

 

OTCEI would like to wholeheartedly thank all its Promoter Institutions, Securities and Exchange Board of India, Ministry of Finance, Department of Company Affairs and Reserve Bank of India for their continued support and co-operation. OTCEI would also like to thank its Members and Dealers as well as the Companies whose securities are listed on the Exchange for their support. OTCEI acknowledges their patronage and regards them as partners in progress.

 

The Exchange would also like to place on record its appreciation of the services of its technology service providers Tata Consultancy Services Ltd, CMC Ltd., CMS Computers Ltd. and HCL Comnet Systems & Services Ltd. It also acknowledges the services of its Clearing Bankers, Clearing House – NSCCL (National Securities Clearing Corporation Ltd.), its custodian SHCIL (Stock Holding Corporation of India Ltd.) and main corporate banker UTI Bank Ltd. Finally the Directors also appreciate the teamwork and valuable contribution of all the employees of your Exchange. 

 

For and on behalf of the Board

 

I D Agarwal

      Chairman

  Mumbai

Date: July 19,2004

 

 

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