Financial Results (Directors' Report)

Directors’ Report

 

Your Directors are pleased to present the 17^th Annual Report of the OTC   Exchange of   India together   with the audited Statements of Accounts for the year ended March 31, 2007.

 

Financial Results

 

The financials of your Exchange for the year 2006- 2007 are as follows:

                          

                                                                                   (Rs. in lakhs)

Particulars	As on 31st March
	2007	2006
Income	214.35	227.02
Expenditure (Excluding Depreciation)	256.91	194.99
Surplus/(Deficit) Before Depreciation	(  42.56)	32.03
Depreciation	37.29	63.14
Net Surplus/(Deficit) for the year	(  79.85)	(31.11)
Surplus/(Deficit) brought forward from previous years	(4669.75)	(4638.64)
Accumulated Deficit carried forward to Balance Sheet	(4749.60)	(4669.75)

 

There is an increase in the total expenditure by Rs.61.92 lacs than that of the previous year mainly on account of society’s lift replacement expenditure at Maker Towers Office premises and due to full provisioning of advance to NSE.IT and full provisioning for impairment of assets. This has resulted in a deficit of Rs.42.56 lacs before depreciation

 

A consistent financial discipline has helped the Exchange to reduce its expenses and the exchange will be able to report positive earnings in the next year due to increase in interest earnings on our Fixed Deposits with banks and elimination of unrealizable/bad assets by providing them in full. 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 291.14 lakhs), Investors Services Fund (corpus 40.39 lakhs) and Settlement Guarantee Fund (corpus 574.02 Lacs out of which Rs.374.58 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 Indian Economy is emerging as one of the fastest growing economies of the world. During the year, the Indian stock market indices rose to their highest ever.  The stock market performance is being driven in part by the recognition that corporate governance and transparency standards in India are superior compared to most emerging markets. India also stands ahead in the protection of minority shareholders rights.  Moreover the initiatives taken in recent years to enhance capital market integrity by tightening regulations and oversight as well as promoting disclosures and reducing operational risk are also beginning to pay rich dividends.  The period, under review, also saw large number of mega primary issues and an overwhelming response of the retail and institutional investors to such issues.   

 

Operations at OTC Exchange of India

 

Pursuant to the Securities Contract Regulation (Amendment) Act, 2004, SEBI has notified OTCEI as a Corporatised & Demutualised Exchange u/s 4(B)(1) of the Securities Contract (Regulation) Act, as amended. We have received renewal of recognition of our Exchange valid up to August 22, 2008.

 

The Exchange witnessed negligible volumes this year too.  The Exchange is looking for opening a separate platform for SME sector exclusively for our Exchange.

 

The Subsidiary Company, OTCEI Securities Ltd. has for the second consecutive year reported Net Profit before tax of Rs.17.56 lacs and after tax of Rs.17.41 lacs. The turnover on the Subsidiary Company was         Rs.1283.55 crores. OTCEI members are now taking advantage of trading on Capital Market segment of NSE through OSL. It is trying to enroll new sub-brokers in the current year.

 

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 2006- 2007 together with the Report of the Directors and the Auditors thereon, are attached to the Accounts of the Company.

 

 

Listings

 

Due to continued 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 102 as on March 31, 2007.

 

Technical Infrastructure

 

Technology is the key requirement 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.  

 

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 23 employees as on March 31,2007.

 

 

Auditors

The statutory auditors, M/s.Mittal & Associates, Chartered Accountants, Mumbai, will retire at the ensuing Annual General Meeting and are eligible for re-appointment.

 

Directors

In accordance with the provisions of the Companies Act, 1956 and pursuant to the Articles of Association of the Company, our Directors Shri M.Raghavendra(GIC), Shri.A.V.Rammurty[IDBI],Shri.D.G.Chaudhury (IFCI) and Prof.Pushpa Trivedi(PRD) retire at the seventeenth Annual General Meeting of the Company and are eligible for re-appointment.

 

During the year, Shri.D.K.Gupta, ROC, Mumbai has been nominated by SEBI under Article 110(ii) of the Articles of Association in place of Shri.V.A.Vijayan Menon. 

 

Dr.M.Thiripalraju, Public Representative Maj.Gen.Krishen Kaul, Public Representative and Shri.A.P.Verma, representative of SBI Capital Markets

 

Limited have been appointed as Additional Directors on the Board of the Company. Since they were appointed as Additional Directors, the term of their appointment as Additional Directors would come to an end at the ensuing Annual General Meeting. In pursuance of section 257 of the Companies Act 1956, they are required to be appointed as Directors.

 

The Board records its appreciation of guidance and support provided by                       Smt. Renu Challu, Nominee Director of SBI Capital Markets Limited and Shri.V.A.Vijayan Menon, SEBI Nominee Director, during their tenure on the Board.

 

 

 

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 high 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. The Board consists of nominee directors of Promoter Institutions, SEBI nominees and Public Representatives. During the financial year 2006-2007, the Board met six times to review and evaluate the operations of the Exchange and decides on strategic issues.  

 

The name of the members on the Board, their attendance at the Board meeting and the number of their other directorships are set out below:

 

Sr.No.	Name of Member	Board Meetings attended during the year	Attendance at the last AGM (Sept.9, 2006)	Number of other Directorships (Public/Other Companies)
1	Shri. S. C. Bhargava	6	Yes
2	Shri M Raghavendra	6	Yes
3	Shri A V Rammurty	6	No
4	Shri S.B.Mainak	3	No
5	Shri D G Chaudhury	4	No
6	Smt. Renu Challu (Till December 02,2006)	3	No
7	Shri V A Vijayan Menon (Till December 02,2006)	3	No	1
8	Prof. Pushpa Trivedi	5	No	Nil
9	Shri.D.K.Gupta (From December 02,2006)	Nil	N.A	Nil
10	Dr.M.Thiripalraju (From December 02,2006)	2	N.A
11	Maj.Gen.Krishen Kaul (From December 02,2006)	2	N.A
12	Shri A.Manickavelu	6	Yes	1

 

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

 

Delisting Committee: Meetings held during the year: 4

 

Sr.No.	Name of Member	Number of meetings attended during the year
1.	Shri S C Bhargava, Chairman	4
2.	Shri V A Vijayan Menon, SND	Nil
3.	Shri Y Venkata Rao	4
4.	Shri.D.K.Gupta	1
5.	Dr.M.Thiripalraju	1
6.	Shri A Manickavelu	4

 

 

Audit & Ethics Committee: Meetings held during the year: 2

 

Sr.No.	Name of Member	Number of meetings attended during the year
1.	Shri M Raghavendra, GIC	2
2.	Shri A V Rammurty, IDBI	2
3.	Shri S B Mainak, LIC	2

 

Investment Committee: Meetings held during the year : Nil

Sr.No.	Name of Member	Number of meetings attended during the year
1.	Shri S B Mainak, LIC	-
2.	Shri D G Chaudhury, IFCI Ltd.	-
3.	Shri A Manickavelu	-

 

 

Acknowledgements

 

OTCEI expresses its wholehearted appreciation and sincere thanks to Ministry of Finance, all its Promoter Institutions, Securities and Exchange Board of India, Department of Company Affairs and Reserve Bank of India for their continued support and co-operation. OTCEI also likes to thank its Members and Dealers as well as the Companies which 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. The Directors also appreciate the teamwork and valuable contribution of all the employees of your Exchange. 

 

For and on behalf of the Board

 

                                                                                     S C Bhargava

                                                                        Chairman

Mumbai

Date: August 27, 2007