APSFC Annual Report 2014 Final 27-8-14 Low Res

158th Annual Report 2013 - 2014

K. Narasimha MurthyCost & Management Consultant

M. B. N. RaoFormer CMD,

Indian Bank & Canara Bank

K. Harish Chandra PrasadIndustrialist

V. SridharGeneral Manager, SIDBI, Mumbai

Satish Madhusudan KarambelkarGeneral Manager, SIDBI, Hyderabad

J.S.V. Prasad, IASManaging Director

T.S. Appa Rao, IAS (Retd.)Chairman

Corporate Governance

MD AzeezuddinSr. Divisional Manager, LIC of India

Koteswara Rao SSRChartered Accountant

Andhra Pradesh State Financial Corporation

2 58th Annual Report 2013 - 2014

Ass

ista

nt

Gen

era

l M

an

ag

ers

T. Swarnalatha SK. Ghouse Basha R. Prabhakar Goud Ts. Sudhakar

T.S.N. Raja K. S. Rao Ch. Anil Kumar

D. Suresam K. Hari Babu R. Satrughna Sarma P Ramakrishna Reddy

P. S. Satyanarayana A. Nagaiah G. Venkateswara Rao M. Chandra Prakash

P. Seshadri Shekhar V.P. Arun Mohzi M. Ramalingam P.S.S. Sekharudu

K.M.K. Prasad Y.N. Rajendra Kumar I. Ramachandra Rao Rathod Ramsingh

K. Rambabu G. Kishore Babu N. Prasada Rao

Dr. PS Rajeswara Prasad E. Chengalrayulu

Dep

uty

Gen

era

l M

an

ag

ers

Gen

era

l M

an

ag

ers

Executive Director Chief General Manager


Contents

Chairmans Statement ............................................................................. 5

From Managing Directors Desk .............................................................. 9

Notice to Shareholders ............................................................................ 11

Directors Report ..................................................................................... 13

Annual Accounts and Financial Statements

Auditors Report .............................................................................. 31

Balance Sheet ................................................................................. 33

Profit&LossAccount ....................................................................... 34

Schedules ....................................................................................... 36

Cash Flow Statement ....................................................................... 55

Business, Sources and Uses of Funds ................................................ 56

Details of Bonds Maturity ......................................................................... 59

Tables on Corporate Performance ............................................................ 63


Chairmans Statement

Dear Shareholders,

APSFCs performance during the Financial Year

2013-14 demonstrated its ability to respond to the

challenges posed by slowdown in the economy

and its impact on the industry. As Chairman of the

Corporation, I am privileged to report yet another

satisfactory performance of the Corporation in spite

of the Administrative uncertainties prevailing before

and after the decision to Re-organise the State. The

Corporation continued to maintain its lead position

in the Key Result Areas of Sanctions, Disbursements

and Recoveries among all SFCs in the Country for the

13th year in succession.

Economy

The economic slowdown bottomed out last year. A

spell of global financial turbulence caused capital

outflows and pressure on the exchange rate, but

strong policy measures stabilized the currency, rebuilt

reserves,andnarrowedtheexcessivecurrentaccount

deficit.

Weaknesses remain, however, and include persistent

inflation,fiscalimbalances,bottleneckstoinvestment

andinefficienciesthatrequirestructuralreforms.

The governments initial estimates peg the growth

in GDP at 4.9% in Fiscal Year 2013. The marginal

pickup in headline GDP growth masks underlying

weakness in the economy as it was due to stronger

agriculture. The economic downturn of recent years

appears to have calmed, and with new stable

Government at Centre and the policy initiatives

taken by the Government, GDP growth in FY2014 is

expectedtogoupwardby5.4%to5.9%onimproved



performance in industry and services. However, there

is the threatofescalationofconflict in Iraqwith its

likely impact on fuel prices and inflation. Another

major concern is the monsoon. As we all know that

Economies operate in cycles, let us hope that the

Economy would surge ahead overcoming these and

other hurdles.

The year just concluded saw the State bifurcated into

two. Industrial and Business activity was affected due

to prolonged political uncertainty and unrest. The

performance of the banking sector was adversely

affectedandyourCorporationisnoexceptiontoit.

The re-organisation process is continuing during the

currentfinancialyearalsoandmayhaveimpacton

the performance of the Corporation.

Performance

During the Financial Year 2013-14, the Corporation

sanctioned Rs.1315.34 crore and disbursed

Rs.882.76 crore as against Rs.1430.12 crore and

Rs.951.41 crore respectively during the previous

financial year 2012-13. The lower performance is

due to uncertainties prevailed in the state on account

of Re-organisation and APSFC concentrated on

consolidation and was selective in lending to projects.

The Corporation achieved all time high recoveries

of Rs.1076.44 crore in FY 2013-14 compared to

Rs.988.99 crore achieved during the previous year.

During the Current Financial year 2013-14, the

CorporationearnedanoperatingprofitofRs.93.58

crore against Rs.98.10 crore earned in the previous

year. The Corporation has earned a net profit of

Rs.40.14 crore during current year, after making

necessaryprovisions towards taxation,provision for

NPAs etc.

TheCapitalAdequacyRatio[CAR]stoodat13.26%,

average cost of borrowings stood at 9.77% as at

31.03.2014. The net NPAs have gone upto Rs.135.14

crore as on 31.03.2014 from Rs.88.99 crore as on

31.03.2013. The Corporation is determined to

bring down the NPAs during 2014-15 by improving

recoveries.

The Corporation has initiated the process of Re-

organising the Corporation consequent upon

bifurcation of the state.

Management

The Board of Directors with diverse and rich

experience have laid down clear cut policies and

guidelines and guided the Management for proper

and effective implementation.

The Managing Director, Sri T.Satyanarayana Rao,

IAS., has steered the Corporation successfully during

the period of uncertainty.

I takethisopportunity toextendmygratitudetomy

colleagues on the Board for their excellent support

and look forward for their valuable support in the

years to come.

Employees

I am proud to commend the extraordinary efforts

of the Senior Officers and employees of the

Corporation for delivering the Organisational goals.


Their commitment, professionalism and team work

in serving the customers has lent an identity to the

Corporation.

Outlook

In the backdrop of bifurcation of State into Two

States,theongoingandcomingyearsareexpectedto

open up lot of opportunities for both Telangana and

Andhra Pradesh States. The Central Governments

announcement of special package to the residuary

StateofAndhraPradeshisexpectedtospurindustrial

activity in that State. The Corporation has strong

presence in Telangana State and will continue to

retain the same.

We will continue to strive hard for achieving the

organisational goals by implementing customer

centric schemes, concentrating thrust areas in MSME

sector, identifying emerging sectors and meeting

customerrequirements.

Acknowledgement

I am grateful for the support of the Government of

Andhra Pradesh and Small Industries Development

Bank of India. I convey my gratitude to the Union

Government, Reserve Bank of India and Commercial

Banks for their continued support and guidance.

I express my gratitude to the Shareholders of the

Corporation for the trust reposed on the Corporation.

I am thankful to our esteemed customers for their

continued patronage and support.

I would like to propose a special thanks to the

previous Managing Director, Sri T.Satyanarayana

Rao, IAS., for his focused efforts for achieving the

organisational goals and the teamofOfficers and

staff of the Corporation.

T.S. APPA RAO CHAIRMAN


From Managing Directors Desk

During the FY 2014 despite the adverse market

conditions prevailing in the economy in general

and Andhra Pradesh in particular, the Corporation

recorded a decent performance in key result areas of

sanction, disbursement and recoveries.

The performance during the period under report are as under:

t The loan portfolio registered a year on year growth of 6.50%.

t The Corporation Sanctioned Rs.1315.34 crore against Rs.1430.12 crore in the previous year.

t The disbursements clocked at Rs.882.76 crore as against Rs.951.41 crore in in the previous

year.

t The principal collections stood at Rs.668.14 crore against the previous year collections of

Rs.619.31 crore.

t The interest income increased to Rs.408.30 crore from Rs.369.68 crore during the previous

year. The operating profit stood at Rs.93.58

crore against Rs.98.10 crore. The net profit

stood at Rs.40.14 crore against Rs.63.35

crore in the previous year.

The Corporation managed its funds position

successfully during the current financial year even

thoughSIDBIreduceditsrefinancesupportbylimiting

the refinance amount to Rs.184.30 crore during

the FY 2014, being 50% of the refinance amount

repaid by the Corporation. The Corporation raised



Non-SLR Bonds amounting to Rs.208.00 crore at a

competitive coupon rates. In order to meet the gap,

the Corporation raised funds from commercial banks

toanextentofRs.418.00crore.

The loan portfolio registered growth in absolute

terms to Rs.2926.77 crore as on 31.03.2014 from

Rs.2748.19 crore as on 31.03.2013. The net NPAs

increased to 4.83% as on 31.03.2014 against 3.34%

in the previous year due to increased assets in sub-

standard category. Action plan is being drawn to

contain NPAs.

The Corporations net worth improved to Rs.445.11

crore as on 31.03.2014 from Rs.433.39 crore as on

31.03.2013 registering a growth of 2.70%. While

the increased provisioning requirements, have led

tomarginaldipinCapitalAdequacyRatio(CAR),the

CARnowstandsat13.26%asagainst requirement

of 9% CAR.

The performance in key result areas of sanctions,

disbursements and recoveries during Financial Year

2014 has enabled the Corporation to retain the

Number One position among all SFCs in the country

for the thirteenth year in a row.

The Corporation is examining the challenges and

opportunities in the wake of bifurcation of the State.

To bring comprehensive reforms and make the

Corporation vibrant to face the emerging challenges

and perform well we have hired the services of Indian

Institute of Management (Bengaluru) to assess the

current situation and suggest the way forward. The

Corporation is in the process of reorganisation for

creating a separate State Corporation for the State

of Telangana with approval of Government of India

in terms of the Andhra Pradesh State Reorganisation

Act, 2014. I am sure that the Corporations will work

hard towards achieving the set goals in the coming

years.

J.S.V. PRASAD MANAGING DIRECTOR


NOTICE TO SHARE HOLDERS

Itisherebynotifiedthatthe58thAnnualGeneralMeetingoftheShareholdersofANDHRAPRADESHSTATE

FINANCIAL CORPORATION will be held at 11.00 a.m., on Saturday the 26th July, 2014, at the Head

OfficeoftheCorporation,5-9-194,ChiragAliLane,Hyderabad-500001,AndhraPradesh,totransactthe

following business:

1) To receive, consider and adopt the Balance Sheet as at 31st March, 2014 and the

Profit and Loss Account for the year ended 31st March, 2014, together with the

Report of the Board of Directors and the Report of the Auditors.

2) To declare dividend on equity shares.

For and on behalf of the Board

Sd/-

MANAGING DIRECTOR

Place: Hyderabad

Date: 02.07.2014.

N.B.:

1. The Share Transfer Book and Register of members of the Corporation will be closed from Thursday, July 10,

2014toSaturday,July26,2014(bothdaysinclusive).ShareholdersarerequestedtointimatetheCorporation

the change of address, if any, immediately.

2.TheBoardofDirectorshaverecommendedadividendof2%(Rs.2perequityshare)onpaidupequityshare

capitalforthefinancialyear2013-14.

3.AmemberentitledtoattendandvoteattheMeetingisentitledtoappointaproxytoattendandvoteinstead

ofhimself/herself,butaproxysoappointedshallnothaveanyrighttospeakatthemeeting.Theproxyform,

dulystampedandexecuted,mustreachtheChiefGeneralManager(F&A),HeadOfficeoftheCorporationnot

lessthantwocleardaysbeforethedatefixedfortheMeeting.

4.ThelistofshareholdersisavailableattheHeadOfficeoftheCorporationforpurchaseatRs.50/-percopy.


Dear Shareholders,

Your Directors have great pleasure in presenting

the 58th Annual Report of the Corporation

together with the Audited Accounts for the year

ended 31st March, 2014.

I. ECONOMIC SCENARIO

1. GLOBAL ECONOMY

Growth in advanced economies is projected

to strengthen moderately during 201415,

building up momentum from the gains in 2013.

World Bank in its latest report (April, 2014)

lowered its forecast for developing countries,

now eying growth at 4.8 percent this year, down

from its January estimate of 5.3 per cent. Signs

point to strengthening in 2015 and 2016 to 5.4

and 5.5 per cent, respectively.

Monetary conditions have remained broadly

supportive in advanced economies, but more

so in the United States than in the euro area

or Japan. Policy rates remain close to the zero

lower bound, but they are expected to raise

beginningin2015.Credittothenon-financial

private sector in the euro area has continued to

decline, reflecting tight lending standards and

weak demand.

2. INDIAN ECONOMY

The Indian Economy underwent a challenging

phase during the financial year 2013-14

entangled by subdued domestic growth and

inflationary pressures. Thus, the economic

landscape created certain uncertainties and risks

in the investment arena. While the Government

DIRECTORS REPORT

In emerging and developing

Asia,growthisexpectedtorise

to 5.7 percent in 2015, helped

by stronger external demand

and weaker currencies. Among

emerging market economies,

growth is projected to remain

robust in emerging and

developing Asia and to recover

somewhat in Latin America and

the Caribbean.TYCHE Die Castings, Ranga Reddy District



of India and Reserve Bank of India, in the wake

of difficult macro economic situation, initiated

several corrective steps to propel the economic

growth, the desired results could not be achieved.

The industrial sector was impacted due to supply

constraints, weak demand scenario besides high

cost of credit. Even though, the manufacturing

sector was under-performing since financial

year 2011-12, it recorded an average negative

growth rate so far. During this year, the service

sector also recorded a lowest growth rate of the

last decade.

Consequent to the subdued industrial activity

and weak performance of Corporate Sector

credit growth was impacted. Further, prolonged

slowdownstronglyaffectedtheassetqualityof

the Financial Institutions/Banks which lead to

significantincreaseinrestructuringofassets.

and have become highly vulnerable to the

business cycles. SMEs being the most important

segment of economy accounting for 45% of

manufacturingoutput,40%ofexportsandaround

15% of GDP, their underperformance affected

the Credit Portfolio of the Financial Institutions/

Banks and your Corporation is no exception.

Theloandelinquencieshavebeenconsiderably

higher as compared to the previous year.

There are positive signs in the direction of

improvement in domestic business climate

and confidence after General Elections. The

conducive macros may lift the capital productivity

which in turn will take GDP growth to 6-6.5%

levels as per the estimates by CRISIL but for

the ELNINOphenomenon. It is expected that

credit quality pressures have bottomed out

and improvement will now be gradual due to

recovery of economy.

As per the CRISIL Ratings

round up report, downgrades

continued to outnumber the

upgrades during 2013-14

reflecting unrelenting pressure

on credit quality of Corporate

India. The present sluggish

business environment coupled

with power problem has lowered

therevenuesandprofitabilityof

SMEs. They have been affected

more than large companies

Mateez Laboratories, Visakhapatnam District


is also working out a demerger plan in tune with

the A.P. Re-organisation Act.

II. REVIEW OF OPERATIONS

1. Sanctions and Disbursements

During the current Financial Year, the

Corporation sanctioned Rs.1315.34 crore

against Rs.1430.12 crore in the previous year.

3. STATE ECONOMY

Natural resources, policy incentives and

infrastructure in the state are favourably suited

for investments in major sectors such as drugs

and pharmaceuticals, biotechnology, IT and ITes,

minesandminerals,textiles,leatherandtourism.

Andhra Pradesh is one of the foremost states to

havedevelopedsector-specificpolicies.Forming

industrial clusters and developing infrastructure,

such as biotech parks, textile parks, leather

parks, auto parks, fab city and hardware parks,

has been the states key strategy to attract

investments in various industries.

Coming to the business environment in the

State of undivided Andhra Pradesh, the growth

was affected due to power cuts, Seemandhra

agitation etc. Uncertainty was prevailing and

investors largely followed wait and see policy.

Therefore desired business volumes could not be

achieved. Further, due to the adverse business

climate,assetqualityalsogotaffectedleadingto

higher provisions and prudential write offs.

Now that the uncertainty chapter is closed

consequent on bifurcation of the State into

Andhra Pradesh and Telangana, there are good

prospects for growth of the business in the two

States in view of the focused approach by the

newly elected Governments. Your Corporation

Disbursements clocked at Rs.882.76 crore in

thecurrentfinancialyearasagainstRs.951.41

crore during previous year.

2. Recovery Performance

During 2013-14, the Corporation continued its

efforts in the recovery front. The total recoveries

grew to Rs.1076.44 crore from Rs.988.99

crore during the previous year. The Principal

collections during the year stood at Rs.668.14

crore as against Rs.619.31 crore in the previous



year and interest income rose to Rs.408.30 crore

duringthecurrentfinancialyearfromRs.369.68

crore during the previous year.

Though the Corporations performance is

affected in the key operational areas of sanctions,

disbursements and recoveries during the FY

2013-14, considering the adverse conditions

prevailing in the economy, the results achieved

by the Corporation are satisfactory.

3. Lead Position

During the year under review,

the Corporation continued

its lead position among its

peers in the Country. With

the good performance in all

the key operational areas of

Sanctions, Disbursements and

Recoveries, the Corporation

is likely to retain its NUMBER

ONE position among all SFCs

in the country for the thirteenth

year in a row.

AsianMultiplex,WarangalDistrict

4. Credit Flow Analysis

MSME sector being the backbone to the

Industrialization of the country, has been a thrust

area of both State and Central Governments.

In line with the policy of the Government, the

Corporation has been focusing credit delivery

to this segment. During the year, the bulk

of sanctions and disbursements were shared

together by micro and small enterprises,

which accounted for 72.80% and 51.31% of

the total sanctions and disbursements of the

Corporation respectively. In terms of absolute

amounts, Rs.74.98 crore were sanctioned to

Micro enterprises, Rs.882.58 crore to units in

Small Enterprises, Rs.230.76 crore to Medium

Enterprises and Rs.127.01 crore to others. In


respect of disbursements, Micro enterprises

account for Rs.65.46 crore, Small Enterprises

account for Rs.632.95 crore, Medium Enterprises

account for Rs.127.51 crore, and others account

for Rs.56.84 crore, during the year under

review.

Thenetprofithascomedownduetoincreased

provision for Non-performing assets, employee

benefitsandwriteoffofamountsoverandabove

thestatutoryrequirement.

2. Income & Expenditure

The total income of the Corporation during

2013-14 grew by 10.22% to Rs.453.40 crore

from Rs.411.36 crore in 2012-13, while interest

income stood at Rs.408.30 crore as against

Rs.369.67 crore in 2012-13 recording a growth

of 10.45%, other income was Rs.45.10 crore

during 2013-14 as against Rs.41.69 crore

during the previous year. The growth in interest

III. FINANCIAL PERFORMANCE

1. Profitability

The Corporation has earned a net profit of

Rs.40.14 crore during current year, after making

necessaryprovisionstowardstaxation,NPAsetc.



income was mainly due to increase in the loan

portfolio. Increase in other income is on account

of increased income from Treasury operation and

interestonFixedDeposits.During2013-14,the

total expenditure increased to Rs.359.82 crore

from Rs.313.27 crore in the previous year. The

increaseinthetotalexpenditurewasonaccount

of increased write off of bad debts during the

yearandinterestpayment.Theinterestexpenses

grew by 16.43% due to repayment of low cost

borrowings and increased cost of borrowings

on Term Loans form banks. The borrowing cost

increased from Rs.202.33 crore in 2012-13 to

Rs.235.59 crore in 2013-14. The operating

expenses were slightly increased to Rs.59.61

crore in the year 2013-14 from Rs.57.10 crore

during the year 2012-13.

3. Net worth

The net worth of the Corporation

improved to Rs.445.11 crore as

on 31.03.2014 from Rs.433.39

crore as on 31.03.2013,

registering a growth of 2.70%.

4. Capital Adequacy Ratio (CAR)

The Core Capital Adequacy

Ratio at the end of FY 2013-

14 stood at 13.26% as against

14.51% as on 31.03.2013

against 9% CAR stipulated by RBI for commercial

banks. The supplementary Capital Adequacy

Ratio stood at 17.43% as on 31.03.2014 as

against 15.10% as on 31.03.2013. The Slight

decrease in Capital Adequacy Ratio is due

to increase in the risk weighted assets, which

moved up by 12.42% to Rs.3356.89 crore as

on 31.03.2014 from Rs.2985.95 crore as on

31.03.2013 as a consequence of enhanced

loans and advances. The Reserves & Surpluses

rose from Rs.235.68 crore to Rs.508.71 crore in

thecurrentfinancialyearduetorevaluationof

fixedassetsandretainedearnings.

5. Expanded Loan Portfolio

The total loan portfolio has expended to

Rs.2926.77 crore as on 31.03.2014 from

Rs.2748.19croreason31.03.2013,reflecting

Shubham Function Hall, Nagole, Ranga Reddy District


market insurance products of LIC of India and

United India Insurance Company Ltd., during the

year. During 2013-14 the Corporation earned

commission from distribution of insurance

products at Rs.40.68 lakh against Rs.37.54

lakhs in the previous year.

IV. RESOURCE MANAGEMENT

1. Resource Mobilization

The aggregate resources raised by the

Corporation during the year stood at Rs.810.30

crore. The Corporation availed term loans from

Commercial Banks aggregating to Rs.418.00

crore. The Corporation issued Non-SLR Bonds

during the year aggregating to Rs.208.00 crore

andavailedRs.184.30crorebywayofRefinance

from SIDBI.

a year-on-year growth of 6.50%. The total loans

and advances, net of NPA provision, grew by

5.31% to Rs.2817.88 crore in the year 2013-14

as against Rs.2675.73 crore in the year 2012-13.

6. The per employee business performance

in the key parameters in 2013-14 vis--vis

2012-13 is as under

(` Lakhs)

Performance Indicator 2013-14 2012-13

Per employee sanctions 326.39 347.12

Per employee Disbursements

219.05 216.88

Per employee Recovery 267.11 225.44

Peremployeenetprofit 9.96 15.38

Per employee operating profit

23.22 23.81

7. Treasury Investments

During 2013-14, the Corporation continued to

invest short term surplus funds

inFixedDeposits withvarious

Banks and mutual funds

approved by the Board, duly

balancingtheliquidityposition.

During 2013-14, the income

from Treasury operations was

Rs.969.41 lakh as against

Rs.775.30 lakh in 2012-13.

8. Non-Fund Based Activities

The Corporation continued to EQIC Dies & Moulds, Ranga Reddy District



SIDBI with a view to limit its exposure to

SFCs, has been substantially reducing the

Refinance assistance to the Corporation from

2012 onwards. In order to meet the gap,

the Corporation availed term loans from

Commercial Banks. The term loans availed are

Rs.150.00 crore from Canara Bank, Rs.90.00

crore from Bank of India, Rs.55.00 crore from

South Indian Bank, Rs.43.00 crore from Union

Bank of India, Rs.40.00 crore from Corporation

Bank, Rs.30.00 crore form Bank of Maharashtra,

and Rs.10.00 crore from Andhra Bank.

2. Resource Deployment

During the year, the Corporation has maintained

its on dot repayment track record by meeting

all the principal and interest commitments to

all its lenders. The Corporation has repaid

Rs.368.61croretoSIDBItowardsLOC/Refinance

installments, Rs.225.86 crore

was repaid towards Term Loans

of Commercial Banks.

3. Increase in Borrowing Costs

During 2013-14, the

Corporation has repaid

borrowings of Rs.150.00 crore

carrying lower interest rates

ranging between 6.00% and

7.50% to SIDBI. Further the

fresh borrowings from Commercial Bank were

raised at higher rate which led to increase the

weighted average cost of borrowings to 9.77%

in 2013-14 from 9.36% in the previous year.

V. QUALITY INITIATIVES

1. Asset Quality

Standard assets had gone up by 3.71% to

Rs.2682.74 crore in 2013-14 from Rs.2586.73

crore as on 31.03.2013, which worked out to

91.66% of the gross loans and advances. The

Sub-Standard assets and assets in Doubtful

category-1 have gone up to Rs.198.73 crore

from Rs.130.87 crore and Rs.45.30 crore from

Rs.30.58 crore respectively. The gross NPAs have

gone up to Rs.244.03 crore as on 31.03.2014

from Rs.161.46 crore as on 31.03.2013.

The increase in NPAs is mainly on account of

adverse market conditions prevailing in the

Rajaram Garments, Hyderabad


State. The Corporation has

made additional provisions of

Rs.14.72 crore towards 100%

of the net outstanding of the

Doubtful-I assets. Additional

provision of Rs.21.71 crore

was also made towards 20%

of the net outstanding in Sub-

standard asset.

2. NPA Management

The Corporation has conducted

3. Asset Liability Management

The Asset Liability Management Committee

(ALCO) chaired by the Managing Director met

four times during the year and reviewed structural

liquidity,interestratesensitivityanalysis,monthly

cashbudgets,fundingoptions,taximplications

etc. during the year. The cash flows were

managed satisfactorily.

4. Human Resources Initiatives

As on 31.03.2014, the Corporation had staff

strengthof405.TheOfficersarefromvarious

disciplines such as management, engineering,

chartered accountancy, cost accountancy,

company secretary, legal etc.

The Corporation has conducted 5 in-house

training programmes for new recruitees

at APCOB Training College, Hyderabad.

NPA Review meetings at periodical intervals during

2013-14 under the Chairmanship of the

Managing Director besides recovery reviews

at Weekly Departmental Review meetings.

The Corporation also conducted Special OTS

Campaigns for settlement of NPA accounts.

During the year, the Corporation has restructured

102 deserving loan accounts involving an

outstanding amount of Rs.283.40 crore.

XXX Soaps, Guntur District



Conducted training programme on Upgraded IT

ApplicationstotheOfficersoftheCorporationat

Hyderabad, wherein 212 staff members of the

Corporation have attended. The Corporation

also gave induction training programme for

newly recruited employees. The Corporation

has also sponsored 30Officers for 9 external

training programmes conducted by reputed

institutes like ICAI, ICWAI, RBI College of

Agriculture Banking, IDRBT, Dr.MCR HRD

Institute etc., covering topics like Cost & Risk

Management, Accounting Standards, Service

Tax, etc. The Corporation also sponsored an

Officer for an Overseas Training Programme.

TheCorporationcontinuedtoextendcounselling

services to the students of Professional colleges

and36studentswerebenefitedduring2013-14.

Vijayawada, Rajahmundry, Visakhapatnam and

Tirupati. The campaigns drew good response

fromtheexistingaswellasnewentrepreneurs.

The Corporation also conducted Mini-

Development campaigns at potential Mandals

of each district to widen the customer base.

2. Tie-up with APCOB

The Corporation has entered into a Memorandum

of Understanding with Andhra Pradesh State Co-

operative Bank [APCOB] Limited for extending

Cash Credit Limits to the assisted units of the

Corporation.

VII. DIVIDEND

The Board of the Directors of the Corporation

recommended a dividend of 2% on paid up

equity share capital (PY 7.50%) to the share

holders for the FY 2014.

VI. BUSINESS INITIATIVES

1. Business Development

Campaigns

During 2013-14, the

Corporation with a view to

provide faster services, build

relationship and encourage

new entrepreneurs in the very

beginning of the financial

year conducted Development

Campaigns at Hyderabad, Rank Silicon, Ranga Reddy District


The out go on account of dividend including

dividendDistribution Tax works out to Rs.3.85

crores (PY Rs.14.45 crores).

VIII. OUTLOOK

The Corporation continued to hold on its

business volumes during 2013-14 despite the

adverse market conditions and disturbance in

the State prevailed during the most part of the

year under review.

The Corporation will focus on enhancing the

business substantially and thereby improve the

profitabilityinthecurrentyear.Inthisdirection,

the Corporation has set a business target of

Rs.1600 crore sanction for the financial year

2014-15. The business strategy will be on

identifying niche areas of business, enhance

client base with accretion of new customers

by encouraging entrepreneurship, and

for the past 13 successive years and aim for a

significantplaceinMSMElendingintheStateof

Andhra Pradesh.

IX. STATUTORY AND AGS AUDIT

The AGs audit team completed the audit of

Annual Accounts of the Corporation for the year

2012-13. As recommended by the Reserve

Bank of India under Sec. 37(1) of SFCs Act,

the Corportion appointed M/s.G.S. Madhava

Rao & Co., Hyderabad, as Statutory Auditors,

to conduct the audit of the books of account

of the Corporation for the F.Y.2013-14. The

auditors have completed the statutory audit for

thefinancialyear2013-14.

X. CORPORATE GOVERNANCE

PRACTICE

The Corporation has put in good Corporate

Governance Practices in place. The Corporation

Hotel Daspalla, Hyderabad

reach the existing customers

through business development

campaigns.

During 2014-15, the

Corporation will strive to improve

the operational and financial

parameters, reducing Net NPAs

to below 4% and retaining its

bench mark status of NUMBER

ONE position among all the

SFCs in the country, a position

the Corporation is enjoying



has adopted cardinal principles such as

credibility, accountability, transparency and

independency in decision making.

The Board of the Corporation meets regularly

and monitors the performance, issues guidelines

and reviews various aspects such as loan policy,

recoverypolicy,exposurelimits,businessplans,

performance in key result areas of operations,

overallassessmentoffinancialpositionactuals

vis--vis approved budgets, and other policy

matters besides according loan sanctions

beyond delegated powers of other sanctioning

authorities.

Audit Committee

The Corporation, in order to ensure good

corporate governance practices in its functioning,

has put in place an Audit Committee. The

members of the Committee are experienced

professionals in the fields of finance and

industry. Sri K.Narsimha Murthy, Director

of the Corporation is the Chairman, Sri. K.

Harishchandra Prasad and Sri S.S.R. Koteswara

Rao were members of the Audit Committee. The

Committee, which met four times during the year

2013-14, reviewed various aspects of internal

and external audit reports, performance of

branches, accounting policies, SIDBI Inspection

Report, annual financial statements including

profit&lossaccountandbalancesheetetc.

XI. BOARD OF DIRECTORS

1. Chairman

Sri T. S. Appa Rao, IAS (Retd.), was re-nominated

asaDirectorandnon-executiveChairmanofthe

Corporation by Small Industries Development

Bank of India (SIDBI) for a further period of 2

years ie. till 18.04.2016.

2. Managing Director

Sri T. Satyanarayana Rao, IAS, was appointed

as the Managing Director of the Corporation by

the Government of Andhra Pradesh with effect

from 07.01.2012 and continued as Managing

GS Alloy Castings Limited, Krishna District


Director during the year 2013-14. The

Government of Andhra Pradesh appointed Sri

J.S.V. Prasad, IAS,asManagingDirector [FAC]

witheffectfrom01.04.2014,consequenttothe

retirement of Sri T. Satyanarayana Rao, IAS, on

attaining the superannuation.

The Board places on record its appreciation for

the services rendered by Sri T. Satyanarayana

Rao, IAS.

3. Changes in the constitution of the Board

(i) Sri Koteswara Rao, SSR, Chartered

Accountant, was unanimously elected

as Director by the Shareholders of the

Corporation with effect from 27.04.2013;

(ii) Sri K. Harish Chandra Prasad, Industrialist,

Director was unanimously elected as

Director by the Shareholders of the

Corporation with effect from 27.04.2013;

(iii) Sri MD Azeezuddin, Senior Divisional

Manager, LIC of India, Secunderabad

Division, was nominated by Life Insurance

Corporation of India Limited in place of

Sri Uday Kumar Navani, Senior Divisional

Manager, LIC of India, Secunderabad

Division, with effect from 12.06.2013.

(iv) Sri Satish Madhusudan Karambelkar,

General Manager, SIDBI, Hyderabad,

was nominated by Small Industries

Development Bank of India [SIDBI],

in place of Sri S. Mallikarjun, General

Manager, SIDBI, Hyderabad, with effect

from 28.06.2013;

(v) Sri V. Sridhar, General Manager, SIDBI,

Mumbai, was nominated by Small

MultiplexRestaurant,WarangalDistrict



Industries Development Bank of India,

in place of Sri R.P. Malik, Chief General

Manager, SIDBI, Mumbai, with effect from

05.08.2013;

(vi) Sri K. Jagadish Prasad, Industrialist,

Director elected by the Shareholders,

retired on 27.04.2013 on completion of

tenure;

(vii) Sri C. Rajendra Prasad, Industrialist,

Director elected by the Shareholders,


tenure;

(viii) Dr. Rajat Kumar, IAS, Commissioner of

Industries, nominated by the Government

of Andhra Pradesh, retired on 13.09.2013

on completion of tenure;

(ix) SriK.PattabhiSeetharamaRao,Chartered

Accountant and Industrialist, nominated

by the Government of Andhra Pradesh,


tenure;

The Board places on record its appreciation

for the services rendered by the outgoing

Directors.

XII. ACKNOWLEDGEMENTS

The Board is grateful to the Government of

Andhra Pradesh for the support and excellent

guidance extended at the need of the hour.

The Board is also grateful to the SIDBI for the

continuoussupportandguidanceextended.

TheBoardexpressesitsgratitudetoGovernment

of India and the Reserve Bank of India for their

S.V. Industry, Hyderabad


valuable support and guidance. The Board

expressesthanksforAPIICLtd.,APCOB,Andhra

Bank, Bank of India, Bank of Maharashtra,

Canara Bank, Corporation Bank, State Bank

of Hyderabad, Syndicate Bank, Ing Vysya Bank

Ltd., IDBI Bank Ltd., ICICI Bank Ltd., HDFC Bank

Ltd., The Karur Vysya Bank, Axis Bank, South

India Bank, Union Bank of India, LIC of India

and United India Insurance Company Ltd., for

their continued cooperation and support.

The Board places on record the valuable support

and guidance, received from the Industries &

Commerce Department, the Public Enterprises

Department, Commissionerate of Industries and

other Development Corporations/Organisations

of Andhra Pradesh Government.

The Board expresses its profuse gratitude to

the shareholders of the Corporation for their

confirmed trustandunflinchingsupportall the

times.

The Board expresses its sincere thanks to the

valued customers, for their continued patronage

& support.

The Board acknowledges the high level

commitment and dedication of the Managing

Director,OfficersandStaffof theCorporation.

Their hard work, professionalism has enabled

the Corporation to achieve good results and

retain its Number One Position among all SFCs

in the Country for 13th year in a row.

For and on behalf of the Board

J.S.V. Prasad

MANAGING DIRECTOR

Place : Hyderabad

Date : 02.07.2014


58th Annual Report2013 - 14

Annual Accountsand

Financial Statements


Auditors Report

To,

The Members of


Report on the Financial Statements

We have audited the accompanied financial statements of Andhra Pradesh State Financial Corporation (the

Corporation), which comprise the Balance Sheet as at 31st March 2014, Profit and Loss Account and the

Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other

explanatory information.

Managements Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of

the financial position, financial performance of the Corporation in accordance with the form of Annexure C and

D of the regulation 87 of the Andhra Pradesh State Financial Corporation General Regulations 2004 framed

as per Section 48 of State Financial Corporations Act 1951 (the Act). This responsibility includes the design,

implementation and maintenance of internal control relevant to the preparation and presentation of the financial

statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors Responsibility

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

audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India.

Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain

reasonable assurance about whether the financial statements 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 the internal control relevant to the Corporations preparation

and fair presentation of the financial statements in order to design audit procedures that are appropriate

in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and

the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall

presentation 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.



Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial

statements give the information required by the Act in the manner so required and give a true and fair view in

conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Corporation as at 31st March, 2014;

(b) in the case of the Profit and Loss Account, of the profit of the Corporation for the year ended on that date,

and

(c) in the case of the Cash Flow Statement, of the cash flows of the Corporation for the year ended on that

date.

Report on Other Legal and Regulatory Requirements

1. As required by the section 37 of the Act, 1951, we report that:

(a) we have obtained all the information and explanations which to the best of our knowledge and belief

were necessary for the purpose of our audit;

(b) in our opinion proper books of accounts as required by the Act have been kept by the Corporation so far

as appears from our examination of those books

(c) the Balance Sheet, Profit and Loss account dealt with by this report are in agreement with the books of

accounts

(d) in our opinion, the Balance Sheet, Profit and Loss account comply with the form of Annexure C and D of

the regulation 87 of the Andhra Pradesh State Financial Corporation General Regulations, 2004 framed

as per Section 48 of the Act;

(e) In our opinion Corporation has complied with provisions of section 7 and 8 of the State Financial

Corporation Act, 1951 as amended by SFC (Amendment) Act, 2000, regarding borrowings and deposits.

for G S Madhava Rao & Co

Chartered Accountants

FRN: 001907S

SVS Bhaskara Krishna

Place : Hyderabad Partner

Date : 2nd July, 2014 M.No: 209539


Balance Sheet as at 31st March, 2014(` in lakhs)

Schedule 2014 2013

Capital and Liabilities :

Share Capital A 20600.99 20600.99

Loans Pending Conversion to Share Capital B 1334.00 1334.00

Reserve Fund and Other Reserves C 50870.81 23567.62

Borrowings D 275432.61 257466.70

Current Liabilities & Provisions E 19404.48 24722.91

T O T A L : 367642.89 327692.22

Property and Assets :

Cash & Bank Balances F 27623.75 24708.38

Investments G 4705.69 7759.63

Loans & Advances (Net of NPAs provision) H 281788.09 267572.52

Fixed Assets I 40935.81 15086.93

Other Assets J 12589.55 12564.76

T O T A L : 367642.89 327692.22

Accounting Policies O

Notes on Accounts P

Note : The Schedules referred to above form an integral part of the Balance Sheet

As per our Report of Even Date

for G.S. Madhava Rao & Co. T.S. Appa Rao J.S.V. PrasadChartered Accountants Chairman Managing Director

(Registration No. 001907S)

S.V.S. Bhaskara Krishna K. Narasimha MurthyPartner Director

M.No.209539

Place : Hyderabad

Date : 2nd July, 2014



Profit and Loss Account for the year ended 31st March, 2014

(` in lakhs)

ScheduleCurrent

Year

Previous

Year

Income :

Interest on Loans & Advances 40829.86 36967.63

Other Income K 4509.73 4168.59

T O T A L : 45339.59 41136.22

Expenditure :

Interest and other Financial Expenses L 23558.89 20232.73

Personnel Expenses M 5239.81 5060.61

Administrative Expenses N 721.35 649.00

Depreciation I 361.45 185.60

Bad Debts written off 6100.27 5198.76

T O T A L : 35981.77 31326.70

Operating Profit c/f 9357.82 9809.52

Contd. in next page






M.No.209539

Place : Hyderabad



Contd. from previous page : (` in lakhs)

ScheduleCurrent

Year

Previous

Year

Operating Profit b/f 9357.82 9809.52

Add :

Income tax provision for earlier years written back 22.88 0.00

Deferred Tax Asset (DTA) (198.59) (134.59)

Excess Provision for MGD written back 0.00 107.79

Profit before provisions 9182.11 9782.72

Less :

Provision for Non-Performing Assets 1385.80 0.00

Provision for erosion in the value of investments 44.66 0.00

Provision for Income tax 1987.78 2530.61

Provision for incentive to employees 176.33 181.52

Provision for retirement benefits of employees 1184.97 506.06

Provision against Standard Assets 388.46 229.34

5168.00 3447.53

Net Profit carried to P&L appropriation a/c C1 4014.11 6335.19






M.No.209539

Place : Hyderabad




Schedule A

(` in lakhs)

31.03.2014 31.03.2013

Share Capital :

Authorised :

50000000 Ordinary Shares of Rs. 100/- each 50000.00 50000.00

Issued,subscribed and Paid up:

a. 16505074 Ordinary Shares (Previous year 16505.07 16505.07

16505074 shares) of Rs. 100/- each fully paid

Less: Surrendered Share Capital pending re-issue 32.83 32.83

16472.24 16472.24

b. 3016000 Ordinary Shares (Previous year 3016000)

of Rs. 100/- each fully paid up - Pending allotment 3016.00 3016.00

19488.24 19488.24

c. 1112750 Shares of Rs. 100/- each fully

paid (issued under Sec. 4A(1) of the

SFCs Act as Special Class of Shares) 1112.75 1112.75

T O T A L : 20600.99 20600.99

Schedule B

(` in lakhs)

Loans Pending conversion to Share Capital :

31.03.2014 31.03.2013

Loan Pending Conversion to Share Capital 946.00 946.00

Loan Pending Conversion to Special Share Capital 388.00 388.00

T O T A L : 1334.00 1334.00


Schedule C

Reserve Fund and Other Reserves :

(` in lakhs)

31.03.2014 31.03.2013

a. Reserve Fund (under Sec.35 of SFCs Act,1951) 53.40 53.40

b. Special Reserve Fund (u/s.35A of SFCs Act,1951) 250.00 250.00

c. Reserve (U/s.36(1)(viii) of I.T.Act,1961) 7900.41 6597.21

d. Revaluation Reserve (on Land & Buildings) 27643.31 1711.35

e. Profit and Loss Account balance 15023.69 14955.66

T O T A L : 50870.81 23567.62

Schedule C1

(` in lakhs)

Current YearPrevious

YearProfit and Loss Appropriation Account :

Net Profit carried from Profit & Loss Account 4014.11 6335.19

Less: Transfer to Reserve U/s.36(1)(viii) of I.T.Act,1961 1303.20 1521.27

Balance 2710.91 4813.92

Less:

Proposed Dividend and dividend tax 385.43 1445.38

Minimum guaranteed dividend to SIDBI and other

shareholders0.00 987.02

Add: Profit brought forward from Previous Balance Sheet 14955.66 14049.77

17281.14 16431.29

Less:

Additional Provision on Sub-std and Doubtful-1 assets 2257.45 1475.63

Balance carried to Schedule C 15023.69 14955.66



Schedule D

(` in lakhs)

31.03.2014 31.03.2013

Borrowings :

1. Non-SLR Bonds (Guaranteed by Govt. of A.P.)

8.50% Series - II 2008 10320.00 12900.00

9.00% Series - III 2008 10000.00 10000.00

8.35% Series - IV 2010 12100.00 12100.00

9.48% Series - V 2012 20000.00 20000.00

9.15% Series - VI 2013 32000.00 32000.00

9.75% Series - VII 2014 5800.00 0.00

9.85% Series - VIII 2014 15000.00 0.00

Sub-total 105220.00 87000.00

2. Small Industries Development Bank of India (SIDBI)

Refinance U/s 7(5) of the SFCs Act,1951 94031.59 112462.69

Sub-total 94031.59 112462.69

3. Term Loans from Banks 74554.89 55336.18

4. Fixed Deposits 1626.13 2667.83

T O T A L : 275432.61 257466.70


Schedule E

(` in lakhs)

31.03.2014 31.03.2013

Current Liabilities & Provisions :

A. Current Liabilities :

1. Earnest Money Deposit (Sec.29) 67.77 64.18

2. Down payment (Inter-se Transfer/Sec.29) 370.00 290.97

3. Partys share of initial investment 40.00 3.17

4. Borrowings from bank (SOD) 5.41 2005.12

5. Seed capital assistance 53.61 53.84

6. Sundry Deposits 1684.37 1612.76

7. Dividend Subvention Fund 114.09 114.09

8. Deposit for service charges 206.30 185.84

9. Accrued interest on Borrowings 1663.40 1867.31

10. Outstanding expenses 226.98 651.83

11. Proposed dividend 329.44 1235.42

12. Other Liabilities 3983.28 4610.41

8744.65 12694.94

B. Provisions :

1. Provision for Income-tax 7379.18 8151.53

2. Contingent Provision against Standard Assets 1491.00 1102.54

3. Provision for retirement benefits of employees 1589.65 2573.90

4. Provision for incentive to employees 200.00 200.00

10659.83 12027.97

T O T A L : 19404.48 24722.91



Schedule F

Cash and Bank Balances : (` in lakhs)

31.03.2014 31.03.2013

a. Cash and Cheques on hand 4400.81 4280.42

b. Balances with Banks :

i) Reserve Bank of India 1.19 1.19

ii) SBI & Other Scheduled Banks 5548.30 6901.41

iii) Short Term Deposits with Banks 20873.61 16571.65

30823.91 27754.67

Less : Book overdraft 3200.16 3046.29

T O T A L : 27623.75 24708.38

Schedule G

Investments : (` in lakhs)

31.03.2014 31.03.2013

Investments held for Maturity :

i) Shares acquired pursuant to underwriting

agreements under sec.25(1)(c) of the

SFCs Act, 1951

a. Non-redeemable Preference Shares fully paid 2.25 2.25

b. Equity Shares fully paid 13.37 13.38

ii) Other equity shares fully paid 81.55 81.55

iii) Investment of Special Share Capital

under Sec.4A(1) of the SFCs Act, 1951

in Redeemable Preference Shares fully paidup. 4.53 4.53

Treasury Investments :

- Short term investments in liquid funds 4664.23 7673.50

4765.93 7775.21

Less :

Provision for diminution in value of shares 60.24 15.58

T O T A L : 4705.69 7759.63


Schedule H

Loans and Advances : (` in lakhs)

31.03.2014 31.03.2013

Classification of Loans and Advances

on purpose-wise basis :

a. General Loans 173496.87 158130.31

b. Transport Loans 479.90 407.33

c. Loans under Good Entrepreneurs Scheme 21313.38 25735.43

d. Working Capital Term Loans 65736.39 62865.52

e. Loans under Marketing Assistance Scheme 27761.01 24349.51

288787.55 271488.10

Add i) Interest Accrued on Standard Assets 3785.98 3276.20

ii) Other Expenses - Loanee Accounts 103.92 54.32

292677.45 274818.62

Less: Provision against Non Performing Assets 10889.36 7246.10

T O T A L : 281788.09 267572.52



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Schedule JOther Assets : (` in lakhs)

31.03.2014 31.03.2013

Loans & Advances to Staff 953.33 1077.63

Accrued interest 588.12 531.20

Other receivables 70.29 21.66

Deferred Tax Asset 608.30 806.89

Stock of Stationery 9.19 8.75

Disbursements under self employment

scheme receivable from Government 21.36 21.36

Margin Money to SC/ST reimbursable from Govt of A.P 87.76 107.44

Deferred Guarantee Commission 979.20 896.00

Income tax and Advance tax 8764.37 8685.93

Deposits 57.47 55.37

Other Current Assets 450.16 352.53

T O T A L : 12589.55 12564.76

Schedule KOther Income : (` in lakhs)

2013-14 2012-13

Bad Debts written-off recovered/written back 1835.75 1817.84

Service charges 625.81 654.84

Upfront Fee/ Commitment Charges 327.18 411.16

Sale of Application Forms 5.95 7.37

Dividend on Shares 2.43 1.82

Dividend on investments in liquid funds 317.33 443.37

Interest on Bank Deposits 652.08 331.93

Interest on Staff advances 188.77 52.45

Premium on pre-mature closure of Accounts 181.42 142.26

Profit on sale of investments 9.25 21.44

Profit on sale of assets 3.71 4.69

Commission on Insurance 40.68 37.54

Rent received & Other income 319.37 241.88

T O T A L : 4509.73 4168.59



Schedule LInterest and other Financial Expenses : (` in lakhs)

2013-14 2012-13

Interest on Borrowings from SIDBI 8856.19 9905.51

Interest on SLR Bonds 0.00 206.27

Interest on Non-SLR Bonds 7886.98 5187.94

Interest on borrowings from Banks & others 6028.57 4363.86

Interest on Loan Pending Conversion to Share Capital 70.95 70.95

Interest on Fixed Deposits 177.47 291.71

Service charges to SIDBI on Seed Capital 1.08 1.05

Brokerage on Fixed Deposits 0.08 0.03

Guarantee Commission to Govt. of A.P. 124.80 104.00

Service tax paid 9.16 0.00

Other financial / Service charges 403.61 101.41

T O T A L : 23558.89 20232.73

Schedule MPersonnel Expenses : (` in lakhs)

Head of Account 2013-14 2012-13

Salaries and Allowances :

a. Managing Director 20.58 17.29

b. Others 4618.14 4393.11

Medical Expenses :

a. Managing Director 0.28 0.29

b. Others 89.23 135.95

Contribution to Provident Fund 357.75 364.12

Contribution to Leave Encashment - MD 4.86 0.00

Contribution to pension -MD 7.23 0.00

Gratuity (including contribution to Group Gratuity Scheme) 34.12 37.44

Leave Travel Concession 26.94 22.51

Staff Training Expenses 7.45 4.53

Staff recruitment expenses 0.00 13.62

Staff Welfare Expenses 73.23 71.75

T O T A L : 5239.81 5060.61


Schedule N

Administrative Expenses : (` in lakhs)

Head of Account 2013-14 2012-13

Travelling Expenses :

i) Managing Director 1.37 0.91

ii) Directors 2.60 4.93

iii) Others 79.98 66.97

Sitting Fees to Directors 2.33 2.27

Rent,Taxes & Insurance 68.12 66.35

Postage,Telegrams & Telephones 54.03 58.33

Motor Car Expenses 115.82 100.94

Printing & Stationery 37.84 32.52

Publicity & Advertisement 1.32 3.49

Books, Periodicals & Newspapers 2.13 2.25

Repairs & Maintenance of office equipment & assets 67.91 50.70

Office Maintenance Expenses 161.32 129.65

Building Maintenance Expenses 7.67 10.68

Bank Charges & Commission 6.41 7.02

Remuneration to Auditors :

i) Audit fees 2.76 2.13

ii) Tax Audit Fee 0.59 0.43

iii) Expenses 1.56 2.35

Legal Charges 1.18 2.38

Professional & Consultancy charges 4.84 14.45

Power charges 61.75 50.21

Board Meetings/AGM Expenses 2.91 3.11

Membership fees/Subscriptions to institutions 1.02 0.97

Loss on sale of assets 0.18 0.00

Other Expenses 35.71 35.96

T O T A L : 721.35 649.00



Schedule O

Significant Accounting Policies

General

1. The Financial Statements have been prepared under the historical cost convention, (other than

revalued land & buildings), by following the going concern concept. These Financial Statements are in

accordance with the accounting principles Generally Accepted in India and conform to the prevailing

statutory provisions of the State Financial Corporations Act, 1951, and other provisions, unless otherwise

stated.

2. Method of Accounting

The financial statements are prepared on Accrual basis.

3. Revenue Recognition.

Income and expenditure are accounted on accrual basis. In the case of Non-Performing Assets and

investments, the income is recognized to the extent of realization in accordance with norms prescribed by

SIDBI.

4. Fixed assets, except land and buildings which are revalued, are stated at their original cost, less

depreciation, comprising of the purchase price and attributable cost of bringing the asset to working

condition for its intended use.

5. Depreciation is provided on the written down value method at the rates prescribed under the Income

Tax Rules, 1962.

6. Investments are stated at Purchase Price less provision, for erosion in the value of investment made, in

accordance with the guidelines prescribed by SIDBI.

7. Loans & Advances - Provision / Write off

(i) Provision against loans classified as Standard Assets and Non-Performing Assets, is made

in accordance with the guidelines on asset classification and provisioning prescribed for State

Financial Corporations by SIDBI.

(ii) Assets classified as Loss, Doubtful-3 and Doubtful-2 are fully written off.

iii) 50% of Assets in Doubtful-1 category are written off, unit-wise/ age-wise which remained in

Doubtful-1 Category for longer period.


8. Provision for Income Tax

Provision for Income Tax is made in accordance with the provisions of the Income Tax Act, 1961 applicable

for the year.

9. Appropriation of recoveries

Amounts received from borrowers is first appropriated to recover Other Expenses incurred on their behalf,

thereafter to Interest and lastly to Principal, except in regard to units sold U/s.29 of the SFCs Act, 1951,

where, sale proceeds received are first appropriated to Other Expenses, thereafter to Principal and lastly

to Interest.

Receipts under One Time Settlement Scheme (OTS) are appropriated against the crystallized liability as

per the OTS approval, in the order of, Other Expenses, Interest and Principal.

10. Retirement Benefits

Liability for gratuity and leave encashment (defined benefits) is determined and provided for on the basis

of actuarial valuations at the year end.





M.No.209539

Place : Hyderabad




Schedule - P

Notes on Accounts

1. Share Capital

The Corporation has received an Equity Contribution of Rs.10879.00 lakhs from Government of Andhra

Pradesh by way of land of Ac 271-39 guntas at Gajularamaram, Qutubullapur Mandal, Rangareddy

district. (Ac.33-11 guntas of land by way of alienation and Ac.238-28 guntas of land by way of 99 years

lease, both at Rs.40.00 lakhs per acre during the year 2007-08). Out of the total Equity Contribution of

Rs.10879.00 lakhs, the Corporation has allotted and issued Shares to the extent of Rs.7863.00 lakhs in

respect of Ac.196-23 guntas of land demarcated and the balance amount of Rs.3016.00 lakhs was kept

as Share Capital Pending Allotment for want of completion of demarcation of balance of the land.

2. Asset Classification and Provisioning

The contingent provision for Standard Assets is 0.25% on Assets covered under Micro and Small Enterprises

(MSEs), 1.00% on Assets covered under Commercial Real Estate and 0.40% on others. The general

provisioning for Sub-Standard is 15%, for Doubtful-1 at 25%, Doubtful-2 at 40%, for Doubtful-3 and Loss

at 100%.

The asset classification and provisioning is made in accordance with the guidelines issued by SIDBI.

The provisioning requirement as per guidelines against Standard Assets and non-performing assets is

provided in the Profit & Loss Account. An additional provision to the tune of Rs.2257.45 lakhs has been

made from the appropriation account to cover 20% of the net Sub Standard Assets and at 100% on the

Net Doubtful-1 Assets over and above the mandatory requirement as buffer recycling provision. The

assets classified under Doubtful-2, Doubtful-3 and Loss categories are fully written off and the assets

classified under DBT-1 category are written off to the extent of 50% unit wise in the order of age wise

arrears.


The asset category wise details of the outstanding loans as on 31.03.2014 and provision made are as follows:

(` in lakhs)

Asset

CategoryCurrent Year 2013-14 Previous Year 2012-13

Gross Provision Net Gross Provision Net

Standard 264488.50 1466.55 263021.95 255396.92 1086.52 254310.40

Int.in Std. 3785.98 24.45 3761.53 3276.20 16.02 3260.18

STD-Assets 268274.48 1491.00 266783.48 258673.12 1102.54 257570.58

Sub-Standard 19872.96 2980.94 16892.02 13087.35 1963.10 11124.25

Doubtful-1 4530.01 1132.50 3397.51 3058.15 764.54 2293.61

Doubtful-2 0.00 0.00 0.00 0.00 0.00 0.00

Doubtful-3 0.00 0.00 0.00 0.00 0.00 0.00

Loss 0.00 0.00 0.00 0.00 0.00 0.00

NPA-Assets 24402.97 4113.44 20289.53 16145.50 2727.64 13417.86

Total-Assets 292677.45 5604.44 287073.01 274818.62 3830.18 270988.44

Addl.Prov.

Sub-Standard 0.00 3378.40 3378.40 0.00 2224.85 2224.85

Doubtful-1 0.00 3397.51 3397.51 0.00 2293.61 2293.61

Grand Total 292677.45 12380.35 280297.10 274818.62 8348.64 266469.98

3. Loans and Advances

Letters seeking confirmation of outstanding balances in loan accounts were sent by the Corporation to

borrowers. Confirmations are yet to be received from the borrowers.

4. Contingent liabilities not provided for in respect of

a) Suits filed against the Corporation by the borrowers and others is estimated at Rs.435.89 lakhs

(Previous year - Rs.430.44 lakhs).

b) Contracts remaining to be executed on capital account, net of advances are estimated at Rs.12.00

lakhs (Previous year - Rs.22.00 lakhs).

c) Service Tax matters Rs.203.38 lakhs (Previous year Nil).

5. The total liability towards Gratuity on account of upward revision in ceiling during 2010-11 is estimated

at Rs.1479.46 lakhs, which is being provided in 5 years as per RBI guidelines, at Rs.295.89 lakhs each

year commencing from FY 2010-11. The balance liability yet to be provided in the books of accounts as

at 31st March, 2014 stood at Rs.295.89 lakhs (Previous year - Rs.591.79 lakhs).



6. A onetime guarantee commission is payable to the Government of Andhra Pradesh @ 1% of the Non-SLR

Bonds raised during the FY 2013-14. The same is proposed to be absorbed over the tenure of the Bonds.

7. The Corporation contributed to the Employees Social Security Trust an amount of Rs. 1764.00 lakhs till

the end of March, 2014, including Rs.761.84 lakhs for the current year, being one third of the balance

amount. An amount of Rs.200.00 lakhs is provided towards incentive as against previous year expenditure

of Rs.176.78 lakhs.

8. Status Of Income Tax Assessments

The Income tax assessments are completed up to the Assessment Year 2011-12.

9. Deferred Tax Asset (DTA)

During the year, the Deferred Tax Asset to the tune of Rs. 198.59 lakhs has been reversed due to funding

of employee benefits with LIC. The Deferred Tax Asset stood at Rs. 608.30 lakhs as at 31st March, 2014

(Previous Year - Rs. 806.89 lakhs).

10. Investment of surplus funds

The Corporation invested its surplus funds in liquid funds and fixed deposits as part of cash flow

management to maximize the returns and earned Rs.969.41 lakhs. (Previous Year - Rs.775.30 lakhs)

11. One Time Settlement

During the year, under One Time Settlement, the Corporation waived interest/penal interest of Rs.312.04

lakhs (Previous year - Rs.121.01 lakhs) for settling the bad and doubtful loans and for regularization of

the defaulted loan accounts including the accounts written off.

12. Segment reporting

The Corporation operates in a single business segment of term lending and in one geographical segment.

Hence, disclosure of Segment reporting as per AS-17 is not required.

13. Related Party Disclosures

Sri T. Satyanarayana Rao, IAS., Managing Director of the Corporation is the key managerial personnel

during the year.

Salary and other payments are shown under Personnel and Administrative expenses in Schedule M and

N respectively.


14. Disclosures in compliance with SIDBIs guidelines:

A) Capital:

a. i) Core Capital Risk Weighted Adequacy Ratio (CRAR) 13.26% (PY 14.51%)

ii) Supplementary Capital Risk weighted Adequacy Ratio 17.43% (PY 15.10%)

b. Amount of subordinated debt raised and outstanding as Tier II capital NIL (PY Nil)

c. i. Net worth Rs.44511.22 lakhs (PY Rs.43338.82 lakhs)

ii. Risk weighted Assets Rs.335689.03 lakhs (PY Rs.298594.94 lakhs)

d. Shareholding Pattern:

(` in lakhs)

Sl. No. Shares held by

Equity Share Capital

Share Capital pending allotment

Special Share

CapitalTotal % of holding

1. State Govt. 14114.087 3016.00 556.375 17686.462 85.85

2. SIDBI 2330.987 0.00 556.375 2887.362 14.02

3. LIC of India 21.655 0.00 0.00 21.655 0.11

4.Individuals, Co-op. Banks, PF Trusts etc.

5.511 0.00 0.00 5.511 0.02

Total 16472.24 3016.00 1112.750 20600.990 100.00

e. Loan Pending Conversion to Share Capital as on 31.03.2014.

(` in lakhs)

Loan Pending Conversion to Share Capital

IDBIState

GovernmentTotal

31.03.2014Total

31.03.2013

Ordinary Share Capital 946.00 0.00 946.00 946.00

Special Share Capital 194.00 194.00 388.00 388.00

Total 1140.00 194.00 1334.00 1334.00



B) Asset Quality and Credit Concentration:

a. Percentage of net NPAs to net Loans & Advances: 4.83% (PY3.34%)

b. Value and percentage of net NPAs to Net Loans and Advances:

(` in lakhs)

Asset category

2013-14 2012-13

Net Loans Net NPAs% to total net

loans

% to total net

loans

Standard 266544.12 0.00 0.00 0.00

Sub-standard 13513.62 13513.62 4.83 3.34

Doubtful 0.00 0.00 0.00 0.00

Total 280057.74 13513.62 4.83 3.34

c. Provisions for the year:.

(` in lakhs)

Sl. No. Assets & Others Current Year Previous Year

1. Loans & Advances: Standard Assets 388.46 229.34

2. Income Tax 1987.78 2530.61

3. Employees Retirement Benefits 1184.97 506.06

4. Provision for incentives to employees 176.33 181.52

5. Provision for Non-Performing Assets 1385.80 0

6. Provision in the erosion of investments 44.66 0

Total 5168.00 3447.53

d. Movement in net NPAs:

i. Sub-standard Rs. 4614.22 lakhs Increase (51.84%)

ii. Doubtful - Nil -

e. Credit exposure as a percentage to capital funds and to total assets in respect of:

Sl. No. Borrower% to % to

Capital funds total assets

1 the largest single borrower other than group 3.69 0.63

2 the largest borrower group 9.43 1.60

3 10 largest single borrowers other than group 28.48 4.84

4 10 largest borrower groups 42.69 7.26


C. Particulars of Accounts Restructured

(` in lakhs)

CDR

Mechanism

SME Debt

RestructuringOthers

C.Y. P.Y. C.Y. P.Y. C.Y. P.Y.

Standard

advances

restructured

No.of Borrowers -- -- -- -- 95 92

Amount outstanding -- -- -- -- 27970.54 16492.41

Sacrifice (diminution

in the fair value)-- -- -- -- - Nil - - Nil -

Sub-standard

advances

restructured

No. of Borrowers -- -- -- -- 7 17




Doubtful

advances

restructured

No. of Borrowers -- -- -- -- - Nil - - Nil -

Amount outstanding -- -- -- -- - Nil - - Nil -



TOTAL

No. of Borrowers -- -- -- -- 102 109




D. Liquidity:

Maturity pattern of rupee current assets & liabilities:

(` in lakhs)

Items < = 1 yr>1 yr &

upto 3 yr

> 3 yr &

upto 5 yr

> 5 yr &

upto 7 yr

> 7 yr &

upto 10 yr> 10 yr Total

Rupee

assets93427.46 175913.05 43756.31 6026.95 218.66 40977.25 360319.68

Rupee

liabilities47333.57 96659.71 55589.64 33516.56 52923.40 59273.11 345295.99

Surplus/

(Deficit)46093.89 79253.34 (11833.33) (27489.61) (52704.74) (18295.86) 15023.69

Cum.

Surplus46093.89 125347.23 113513.90 86024.29 33319.55 15023.69

Surplus/

(Deficit) %97.38 81.99 (21.29) (82.02) (99.59) (30.87)



E. Operating Results

Item 2013-14 2012-13

1. Interest income as percentage to average working funds 12.06% 12.36%

2.Non-interest income as a percentage to average working

funds1.33% 1.39%

3 Non-interest income as a percentage of operating expenses 58.69% 63.33%

4. Operating profit as a percentage to average working funds 2.76% 3.28%

5. Return on average assets 1.19% 2.12%

6. Operating profit per employee (Rs. lakhs) 23.22 23.81

7. Net profit per employee (Rs. lakhs) 9.96 15.38

8. Weighted Average cost of borrowing as on 31st March. 9.77% 9.36%

15. The Board proposed and decided in its meeting held on 02-07-2014 to declare a dividend of Rs.2/- per

share amounting to Rs.385.44 lakhs including Dividend Distribution Tax of Rs.55.99 lakhs.





M.No.209539

Place : Hyderabad



(` in lakhs)A. CASH FLOW FROM OPERATING ACTIVITIES 2013-14 2012-13

Profit before tax & provisions 9357.82 9809.52 Add: Depreciation 361.45 185.60 Bad Debts Written off 6100.27 5198.76 Less: Profit on sale of Fixed Assets (Net of loss on sale) 3.71 4.69 Profit on sale of investments 9.25 21.44 Dividend on shares 2.43 1.82 Cash from Operations 15804.15 15165.93 Adjustment for :Increase in advances (22893.36) (37979.57)Increase in borrowings 19007.61 36790.10 Decrease in deposits (1041.70) (979.36)Decrease in other assets (223.38) 327.79 Increase in other Liabilities (4279.73) 909.76 Direct Taxes paid (Net) (2878.68) (3421.15)Net cash from Operating Activities 3494.91 10813.50

B. CASH FLOW FROM INVESTMENT ACTIVITIES :Purchase of investments 0.00 (5534.07)Purchase of Fixed Assets (1252.14) (218.04)Sale of Fixed Assets 6.89 4.76 Sale of investments 3009.28 21.44 Dividend on shares 2.43 1.82 Net cash from investment activities 1766.46 (5724.09)

C. OTHER CASH FLOWS :Increase in Share Capital 0.00 0.00 Loan pending conversion to Share Capital 0.00 0.00 Other net cash flows (2346.00) (1931.73)Net cash flows (A+B+C) 2915.37 3157.68Net increase / (decrease) in cash and cash equivalents 2915.37 3157.68 Cash and Cash equivalents at the beginning of the year 24708.38 21550.70

Cash and Cash equivalents at the end of the year 27623.75 24708.38


for G.S. Madhava Rao & Co. T.S. Appa Rao J.S.V. PrasadChartered Accountants Chairman Managing Director (Registration No. 001907S)

S.V.S. Bhaskara Krishna K. Narasimha MurthyPartner DirectorM.No.209539

Place : HyderabadDate : 2nd July, 2014

Cash Flow Statement



Business, Sources and Uses of Funds(` in lakhs)

2013-14 2012-13

I BUSINESS

NET EFFECTIVE SANCTION

a Term Loan

i Micro & Small Enterprises 45189.52 61279.96

ii Medium Enterprises 13033.75 3947.98

Sub-total 58223.27 65227.94

b Others

i Short Term Loan / WCTL 26514.09 27673.24

ii Soft Loan - NEF (Revival) 0.00 0.00

iii Soft Loan - Others (MUN) 0.00 0.00

iv Others - Commercial & Residential Complexes 10048.59 9355.00

Sub-total 36562.68 37028.24

Total I (a+b) 94785.95 102256.18

II USES OF FUNDS

1 DISBURSEMENTS

a Term Loan

i Micro & Small Enterprises 49146.12 54542.44

ii Medium Enterprises 6368.51 10464.33

Sub-total 55514.63 65006.77

b Others

i Short Term Loan (WCTL) 27077.12 26547.83

ii Soft Loan - NEF 0.00 0.00

iii Soft Loan - Others 0.00 0.00

iv Others - Commercial & Residential Complexes 5684.26 3586.79

Sub-total 32761.38 30134.62

Total 1 (a+b) 88276.01 95141.39


Business, Sources and Uses of Funds

(` in lakhs)

2013-14 2012-13

2 REPAYMENTS

i Refinance / LOC / TL / Principal - SIDBI 36861.10 26879.54

ii SLR Bonds 0.00 4525.00

iii Non SLR Bonds 2

APSFC Annual Report 2014 Final 27-8-14 Low Res

Documents

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financial year

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sridhargeneral manager

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