Sunday, May 27, 2012

Auditor Appointment for Limited Companies in India

Auditor Appointment for Limited Companies in India

Auditor Appointment for Limited Companies in India


According to Section 226 of the Companies Act, the following persons qualify for appointment as auditors to companies.
1. A practicing chartered accountant.
2. A firm where all of the partners are qualified to be auditors for companies.
3. A holder of certificate under Certified Auditor's Rules 1961.

Audit of Limited Companies - India - Books of Account and Statements

Audit of Limited Companies - Books of Account and Statements

Audit of Limited Companies - Books of Account and Statements


Section 209 of the Companies Act, 1956, requires companies to maintain proper books of account.
Other statutory books to be maintained by companies
1. Register of investments, not held in the name of the company (Section 49(7)
2. Register of charges (Section 143)
3. Register of members  (Sec. 150)

CEO - Connecting with the Rank and File - Indian Examples Authors

CEO - Connecting with the Rank and File - Indian Examples

CEO - Connecting with the Rank and File - Indian Examples


Every six month, Habil Khorakiwala, the Chairman of Wockhardt shoots a film and over the next two weeks the staff of the company watch the film in groups.
The top boss of Cadbury India, Bharat Puri meets every one of his 200 front line salesmen in biannual sles conference face to face. He meets everyone else through a series of open-house meetings spread over 40 days at every company location at the end of the financial year.
Cadbury's global CEO John sutherland also believes in it and visits India once a year.
At Wipro Technologies, CEO Vivek Paul addresses 5000 people and uses webcasts.
Dibeyendu Ganguly and Pooja Kothari,  "Play the Field, Sir", Economic Times, 14 March 2004

Fixed Income Securities Analysis - NBFC Sector - India - 2003

Fixed Income Securities Analysis - NBFC Sector - India - 2003

Fixed Income Securities Analysis - NBFC Sector - India - 2003


This provides analysis of fixed income securities of NBFC sector carried out in year 2003 as an illustration.

Industry Synopsis


The companies within the universe of analysis were typically retail-financing companies, with particular emphasis on auto and consumer durables. While some were independent NBFCs, like Cholamandalam Investment and Finance, Lakshmi General Finance, others were captive financing companies with strong parentage such as Bajaj Auto Finance Ltd. and Ashok Leyland Finance Ltd.


Nature and Size

The retail financing industry is cyclical in nature.

After housing finance and auto loans are important areas in India. There are big players like Tata Finance, Ashok Leyland Finance, GE Countrywide, and Sundaram etc. Banks, both public and private sector, have jumped into the auto loan segment and are have snatched sizeable market share from NBFCs.



Market size (2003)

The market size of commercial vehicle segment is around Rs130bn and finance volume is around Rs95bn. The market leader Ashok Leyland Finance has just 5% market share, as there is tough competition in this segment. The market is highly fragmented and this segment is expected to increase in the near future.


Cars and MUV are the biggest segment in auto finance with the market size is of around Rs200bn and finance volumes of around Rs150bn. Most of the banks and finance companies are tying up with the auto manufacturers to give a boost to this segment. GE Countrywide has a tie-up with Maruti and SBI has tied up with Telco.


The two-wheeler segment is another area. The market size of this segment is around Rs160bn and finance volume is around Rs100bn. In this segment, motorcycle is the most promising area for the finance company.



Industry Size

Size of Consumer Financing

% of market through financing

Commercial Vehicles

Rs.130 billion

Rs. 95 billion


Cars and MUVs

Rs. 200 billion

Rs. 150 billion


Two wheelers

Rs. 160 billion

Rs. 100 billion





Consolidation in industry


ICICI Bank did 100 per cent takeover of the Mumbai-based, auto-dealer finance company, Transamerica Apple Distribution Finance Ltd (TADFL) in May 2003. 



Competition from banks & Position of NBFCs



 Sundaram Finance, Ashok Leyland Finance and Cholamandalam Finance recorded sizzling growth rates in the year ended March 2002. The period since has been no different with growth rates remaining strong. Indeed, the top-rated companies have managed to consolidate their position in the industry.


The focus on the growing retail financing market, their strengths in the management of a retail portfolio and the failure of a number of NBFCs have helped their performance. The turn of events in the economy, such as the liquidity in the banking system, too has helped these companies with better credit rating. With the advantage of low-cost funds, banks have eaten into the market share of NBFCs. But the top-rated ones have managed their costs better and, therefore, countered the competition from banks.



While the market itself is large enough for a number of players, it is also growing rapidly.

But, spreads have been under pressure, especially in the car-financing segment. In fact, private and foreign banks are said to virtually control this market in the metros. Some of the top-rated NBFCs describe the pricing in the car financing market in the metros (with lending rates now touching 8 per cent) as insane. Most NBFCs have been pushed out of the metros.

However, for top-rated NBFCs, the following have emerged as a source of strength:


· Reach into a number of non-metro locations;

· Focus on commercial vehicles and two-wheelers; and

· Strong relationships with their customers and manufacturers



Competition for NBFCs has mainly emerged from the new private sector banks, such as ICICI Bank and HDFC Bank, and foreign-owned banks. These banks operate from less than 200 locations, many of which are in the metros. On the other hand, a top-rated NBFC such as Ashok Leyland Finance operates from 251 locations, many of which are in the non-metros. A company such as M&M Financial Services, which had total assets of a little less than Rs 1,000 crore at the end of March 2002, operates from 151 locations.

Having been in the business for many years, companies such as Ashok Leyland Finance and Sundaram Finance also boast of strong relationships with their customers. Like the old private sector banks, some of the top-notch NBFCs have customer relationships that have grown over the years. Loyalties are strong and pricing, while being important, is less of an issue.


Companies such as Ashok Leyland Finance, Sundaram Finance, Bajaj Auto Finance, Mahindra & Mahindra Financial Services and Cholamandalam Finance also have strong relationships with manufacturers. These linkages have assumed importance given the intensity in competition.



NBFCs have also benefited from focussing on financing commercial vehicles and two-wheelers. These markets have been growing as rapidly as the car financing market. In fact, disbursements of a few top NBFCs in the car financing market have either plateaued or declined since March 2002. In contrast, competition from private and foreign banks is much less intense in the commercial vehicle and two-wheeler segments. The linkages with manufacturers and customers are also helping them boost disbursements.


Performance Indicators


Top-rated NBFCs have not only been successful in managing their market share but also in protecting their profitability. A combination of the factors cited earlier had helped these NBFCs earn better returns on their deployment. In fact, almost all the top-rated NBFCs enjoy a return on total assets that is higher than HDFC Bank's, one of the better-run banks. The higher return on assets was despite their operating cost ratio being similar to that of HDFC Bank. For example, operating expenses as a proportion of net margin worked out to 68 per cent for HDFC Bank. On an average, this was not significantly higher than the ratio for most top-rated NBFCs. If return on assets were still superior, then it was because of the higher return on their funds. For top NBFCs, the interest income worked out to 17-21 per cent of their total assets for the year ended March 2002.

The liquidity in the banking system also helped these finance companies. Spreads over government securities for AAA rated corporate sector debt instrument are now only 50 basis points. In other words, if the cost of funds for banking companies has declined sharply, then top-rated NBFCs have also benefited from such a decline in interest rates. Some of these companies are now raising funds at 7-8 per cent.


Also, these companies have displayed the ability to manage their portfolio without large incidence of non-performing assets. For instance, Ashok Leyland Finance, Cholamandalam Finance and Bajaj Auto Finance boast of net non-performing assets to net advances ratio of less than 1 per cent. It was higher at around 2.4 per cent only in the case of Sundaram Finance. This again has helped them lower the overall cost of operations and, thereby, protect their profitability.


Higher profitability and innovative financing options, such as securitisation, have also helped in boosting the capital adequacy ratio of these NBFCs. Sundaram Finance, Ashok Leyland Finance, Bajaj Auto Finance and M&M Financial Services, among others, boast of capital adequacy ratios upwards of 15 per cent. In other words, their balance sheets continue to be strong to accommodate further growth in disbursements.





CAMEL Analysis


A comparison for the companies analyzed is follows:



Bajaj Auto Finance

Lakshmi General Finance

Ashok Leyland Finance

Capital Adequacy




CAR (%)




Increase in Net Worth

Rs. 19.9 crore

Rs. 15.4 crore

Rs. 131 crore





Asset Quality




NPA (%)




Recognition of NPA (dpd)




Disbursements proportion

  • Auto – 48%
  • Consumer Durables-49%
  • Others-3%
  • Cars- 21.5%

·         Commercial Vehicles- 60.6%

  • Others- 17.9%
  • Cars and MUVs-17.6%
  • Construction Equipment-11.4%
  • 2 wheelers- 19.2%
  • Commercial Vehicles- 51.8%






Parent ownership/stake

46% stake held by Bajaj Auto Ltd.

91% stake of SFL and its directors

46% ownership by Hinduja group,

possible takeover by IndusInd Bank in future







Rs. 45.6 crore

Rs. 35 crore

Rs. 103.6 crore

OPBDT growth




Size of disbursements

Rs. 762 crore

Rs. 406 crore

Rs. 1870 crore

Growth in Disbursements













Cash flow from operations

Rs 8 crore

Rs. (20.5) crore

Rs. 286 crore

Interest Coverage






Report Generation for investment decision


On the basis of the above analysis and information, a structured  one page report that captures in a snap shot the results of the company study, can be generated for the fund manager’s initial perusal by the analyst or analysis department. 


This knol is substantially based on the company internship report by Ms. Sakshi Budhiraja. The project was done under my guidance.

Knol Directory - Strategic Management Revision Articles

Knol Directory - Strategic Management Revision Articles

Knol Directory - Strategic Management Revision Articles




Short urls
Narayana Rao - 13 May 2011

Forms of Business Organization – Regulations in India

Forms of Business Organization – Regulations in India

Forms of Business Organization – Regulations in India

Financial Management Revision Article Series


Forms of Business Organization


Sole proprietorship


Private company

Public company





Partnerships are governed by the Indian Partnership Act, 1932.



Private Company


The Company Act 1956 regulates the functioning joint stock companies or companies.


A private company is a corporate body that can be formed by just two persons subscribing to its share capital.


 In private companies, the number of shareholders cannot exceed fifty. Public cannot be invited to subscribe to its capital. The members’ right to transfer shares is somewhat limited.


Public company


A public company is a corporate body that has a minimum of seven members (shareholder).
A separate knol on Companies Act will be developed to discuss the act in more detail.


Short urls

Narayana Rao - 14 May 2011

Why Study MBA abroad? - Indian Point of View

Why Study MBA abroad? - Indian Point of View

Why Study MBA abroad? - Indian Point of View


Job Prospects Abroad
To work in a particular country -- employers are keener on MBA graduates who have studied in the country where they operate.
  • To have a brand name that is recognised globally on their CV.
  • International MBA classes tend to have a more diverse population in terms of nationalities, backgrounds (educational and professional), genders, etc, which enhances the quality of the environment and the learning.
  • International B-schools tend to have a more global coverage of topics in their syllabi.
  • International B-schools are more likely to have access to a wider base of resources such as alumni network, faculty, guest speakers, libraries, employers, etc.
  • Some schools offer shorter duration formats such as a 10-month/ 16-month MBA, allowing candidates to return to work quicker
  • Job Prospects India
    Business connections
    Availability of seat(admission)
    Migrant work ethic


    Saturday, May 26, 2012

    Financial Management - India Focus - Revision Articles Directory

    Financial Management - India Focus - Revision Knols Directory

    Financial Management - India Focus - Revision Knols Directory

    Financial management revision article series


    Note: Some articles are unpublished at this time.
    Links are to be changed from Knols to Blog posts. Will take time as large number of knols are to be first posted in blogs.

    Central Excise - India - Chapter I Preliminary

    Definitions.— In this Act, unless there is anything repugnant in the subject or context, -

    Adjudicating authority” means any authority competent  to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), Commissioner  of  Central  Excise (Appeals)  or Appellate Tribunal;

     “Appellate Tribunal” means the Customs, Excise and  Service Tribunal Tax constituted under section 129  of  the  Customs  Act,  1962  (52 of 1962);

    "broker” or “commission  agent” means a person who in the ordinary course of business makes contract for the sale  or  purchase  of  excisable  goods for others;

     “Central Excise Officer” means the Chief Commissioner of Central Excise, Commissioner of Central Excise, Commissioner of Central Excise (Appeals), Additional Commissioner of Central Excise, Joint Commissioner of Central Excise, Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise or any other officer of the Central Excise Department, or any person (including an officer of the State Government) invested by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) with any of the powers of a Central Excise Officer under this Act.

     “curing” includes wilting, drying, fermenting and any  process for rendering an unmanufactured product fit for marketing or manufacture;

     “excisable goods” means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt;
    Explanation - For the purposes of this clause, “goods “ includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable.

    "factory”  means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on;

    “Fund” means the Consumer Welfare Fund established under section 12C;
    manufacture” includes any process, -

    incidental or ancillary to the completion of a manufactured product;
    which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or
    which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer;
    and the word “manufacturer” shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;

    National Tax Tribunal” means the National Tax Tribunal established under section 3 of the National Tax Tribunal Act, 2005;

    “prescribed” means prescribed by rules made under this  Act;

    sale” and “purchase”, with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration;

    wholesale dealer” means a person who buys or sells excisable goods wholesale for the purpose of trade or manufacture, and includes a broker or commission agent  who,  in  addition  to  making  contracts  for  the  sale  or  purchase  of  excisable goods for others, stocks such goods belonging to others as an agent for the purpose of sale.

    Central Excise - India - Chapter II Levy and Collection of Duty

    Central Excise - India - Chapter IIA - Indication of Excise Duty in Price