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INTRODUCTION
1
SCOPE OF THE STUDY
The enhanced companies in the global economy has compelled corporations to perform better by
going in for cost-cutting, corporate restructuring, mergers & acquisitions, downsizing etc. All these
activities can be carried out successfully only if there is proper corporate governance. Thus,
market forces, active individual and institutional investor participation, and enhanced competition
have helped corporate governance to evolve beyond a set of static rules. In India, the concept of
SEBI has taken various steps to strengthen corporate governance in India. Some of these steps are
as follows:
Strengthening of disclosure norms for Initial Public Offers following the recommendations
Providing information in directors’ reports for utilization of funds and variation between
projected and actual use of funds according to the requirements of the Companies Act;
Mandatory appointment of compliance officer for monitoring the share transfer process and
2
NEED FOR THE STUDY
Corporate governance a practices are a set of structural arrangements that are emerging in free-
market economies to align the management of companies with the interests of their shareholders
Ethical Issues
Accountability Issues
Ethical Issues
Ethical issues are concerned with the problem of fraud, which is becoming wide spread in
capitalist economies. Corporations often employ fraudulent means to achieve their goals. They
form cartels to exert tremendous pressure on the government to formulate public policy, which
At times corporations may resort to unethical means like bribes, giving gifts to potential customers
and lobbying under the cover of public relations in order to achieve their goal of maximizing long-
3
Efficiency Issues
Efficiency issues are concerned with the performance of management. Management is responsible
individuals usually invest money through mutual, retirement and tax funds. In India, however,
small shareholders are still an important source of capital for corporations as the mutual funds
shareholders as there is no control mechanism through which they can control the activities of the
Accountability Issues
Issues” emerge out of the stakeholders' need for transparency of management in the conduct of
business. Since the activities of a corporation influence the workers, customers and society at
large, some of the accountability issues are concerned with the social responsibility that a
4
SIGNIFICANCE
It lays down the framework for creating long-term trust between companies and the
It improves strategic thinking at the top by inducting independent directors who bring a
It rationalizes the management and monitoring of risk that a firm faces globally
It limits the liability of top management and directors, by carefully articulating the decision
making process
It has long term reputational effects among key stakeholders, both internally (employees)
5
OBJECTIVES OF THE STUDY
Governance.
The objective explains the basic Features, Principles and Mechanisms and Controls of
Corporate Governance
6
METHODOLOGY OF THE STUDY
The methodology adopted for the study is discussions with the personnel in BHARTI AXA LIFE
The data has been first analysis purpose has been divided into Primary Data and Secondary Data.
The primary data that has been collected through personnel interview with various departmental
The secondary data has been collected from the BHARTI AXA LIFE INSURANCE COMPANY
LTD and the internet. Various books relating to Corporate Governance, Mechanisms and Controls
7
LIMITATIONS TO THE STUDY
During this limited period of study, the study may not be a detailed, full fledged and
The study does not provide any predictions or forecast of the selected scrip’s.
The study is done as per syllabus prescribed by the University Norms for the Award of the
The scope of the study is limited to “Corporate Governance” with special reference to
Indian context and the BHARTI AXA LIFE INSURANCE COMPANY LTD has been
8
CHAPTER – II
REVIEW OF LITERATURE
9
INTRODUCTION
Corporate Governance is looked upon as a distinctive brand and benchmark in the profile of
Corporate Excellence and the issue of Corporate Governance has assumed lot of importance in
India. Governance is a necessary discipline and a proper governance would lead to effectiveness
and transparency in the functioning of any corporate entity. Regulatory bodies for the capital
market also feel that corporate governance is a necessary requirement for the existence of entity in
the market as a whole and as a pre-condition to the listing requirement. The compliance of the
conditions of corporate governance has been given top priority by the Securities & Exchange
Board of India with the objective of providing better and effective protection to the investors and
As market forces increasingly replace government controls, corporate governance is fast gaining
prominence in business circles. The issue of corporate governance has become a matter of concern
for corporations as they see it as a prerequisite for attracting funds from foreign financial
institutions. Moreover, investors want to ensure that the companies they invest in are not only
managed properly, but also have proper corporate governance. Investors regard corporate
governance as a control mechanism that ensures the optimum use of human, physical and financial
resources for an enterprise. Further, GATT and WTO regulations call for adherence to good
governance practices.
10
We have come across companies which apparently were very efficiently managed but which
landed in troubles due to proper governance. There are cases in India where the companies that are
considered as blue chip companies, going in for allegedly illegal transactions like Hawala
transactions, which raise questions about the level of their function namely how to ensure that the
interests of the investors are taken care of. This is not only in terms of return on investment by
effective management, but also ensuring that the enterprises do not indulge in corrupt practices or
acts, which unethical. Such practices may have adverse consequences on the long-term interests of
the stakeholders.
Corporate governance is concerned with the way in which corporate entities are governed, as
distinct from the way in which business within those companies are managed. It addresses various
issues facing the boards of directors, which relate to the interaction with top management,
relationship with the owners, other stakeholders and society at large. Ensuring better corporate
conformance through top management supervision and accountability to the stakeholders come
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The growing scale of corporations and their style of functioning have raised many new issues that
Insider trading
The emergence of private companies and the growing complexity of corporate groups is one of the
main concerns of corporate governance. Initially, limited liability companies were incorporated to
raise outside capital. Later, these corporations used their powers as a legal person under law to
acquire shares in other companies. This resulted in the formation of new companies that took over
assets and liabilities of the original companies before winding them up. This led to a spate of
The magnitude of complexities associated with corporate groups increased in the twentieth
century. Large enterprises now trade through groups of subsidiary and associated companies. The
ownership structures of a few groups are simple to understand: a small hierarchy of wholly owned
companies functioning under a parent company. But many groups have more complex structures
that are characterized by shareholding by varied investors. The group wholly or partly owns the
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companies in the group. Cross-share holding between the group companies, cross-directorship are
common.
Usually, corporate groups operating globally go in for such complex structures so as to facilitate
management control and international tax planning. In some cases, corporates resort to such
complex structures to limit financial disclosure or for some regulatory reasons. Such complex
group structure creates difficulties in understanding the ownership, power and influence over the
group companies.
Corporate governance is also concerned with the growing influence of institutional investors on the
corporations, which create suspicion in the minds of minority investors. Minority investors believe
that larger and influential investors pressurize the corporations’ management to act in their own
interest.
Issues concerning hostile takeovers, particularly management buy-outs, are also addressed by
corporate governance. Insider trading, imbalanced boards and compliance with international
accounting standards are other issues that are addressed by corporate governance.
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EVOLUTION OF CORPORATE GOVERNANCE
Earlier the government was expected to ensure good corporate conduct. Most shareholders
believed that stringent government controls would prevent malpractices of the corporations for fear
of punishment.
However, there was soon a growing realization that government was not always the best guardian
of public interest. Shareholders began to feel the need for market driven corporate governance that
would be more democratic and flexible. This led to the birth of self imposed corporate governance
within the corporate system. The active participation of various stakeholders like shareholders,
financial institutions, etc. have strengthened the corporate governance mechanism and helped it to
Many factors have contributed to the evolution of corporate governance. Some of these are:
The responsibility for ensuring good corporate conduct shifted from government to a free-
market economy.
With the relaxation of direct and indirect administrative controls by the government, alternative
Shareholders believed that market forces could ensure good corporate conduct (self imposed) by
way of rewarding success and punishing failures of corporations. Many free-market economies
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laid down effective regulations to monitor the corporations. However, regulations alone do not
The second factor that boosted corporate governance is the growth of global fund management
business. Institutional investors such as insurance companies, pension and tax funds account for
more than half the capital in the corporations of USA. This trend is also growing in India. Earlier
institutional investors did not monitor the activities of the corporations in which they invested. But
the competition in the fund management business has forced them to take an active role in
governance in order to safeguard their investments in the corporations. Now, many institutional
investors express their views strongly with regard to various matters such as financial and
operational performance, business strategy, remuneration of top-level managers etc. Along with the
The active investor demands good performance in the form of return on investment and they also
expect timely and accurate information regarding the performance of the company. Institutional
investors can exert pressure on the management as they own a considerable share in the capital and
any criticism from these investors can have a major impact on the share prices. Investors believe
that only strong corporate governance mechanisms and practices can save them from the ever-
growing power of corporations, which can influence public policy to the detriment of investors.
The enhanced companies in the global economy has compelled corporations to perform better by
going in for cost-cutting, corporate restructuring, mergers & acquisitions, downsizing etc. All these
activities can be carried out successfully only if there is proper corporate governance. Thus,
15
market forces, active individual and institutional investor participation, and enhanced competition
have helped corporate governance to evolve beyond a set of static rules. In India, the concept of
The recommendations of Kumaramangalam Birla and CII committees’ reports are the first
steps in India towards ensuring better corporate governance. Prior to these recommendations SEBI
has take various steps to strengthen corporate governance in India. Some of these steps are as
follows:
Strengthening of disclosure norms for Initial Public Offers following the recommendations
Providing information in directors’ reports for utilization of funds and variation between
projected and actual use of funds according to the requirements of the Companies Act;
Mandatory appointment of compliance officer for monitoring the share transfer process and
16
DEFINITIONS:
Corporate Governance has succeeded in attracting a good deal of public interest since it is
important for the economic health of corporations and society. Corporate Governance is the system
by which business corporations are directed and controlled. The corporate governance structure
specifies the distribution of rights and responsibilities among different participants in the
corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the
Governance is concerned with the intrinsic nature, purpose, integrity and identity of the institution,
with a primary focus on the entity’s relevance, continuity, and fiduciary aspects. Governance
involves the monitoring and overseeing of strategic direction, socio-economic and cultural context,
“Corporate governance deals with the ways in which suppliers of finance to corporations
accountability.”
17
ISSUES INVOLVED IN CORPORATE GOVERNANCE
Reiview of the compensation arrangements for the chief executive officer and other senior
executives
The way in which individuals are nominated for positions on the board
Dividend policy
18
MECHANISMS AND CONTROLS
Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise
from moral hazard and adverse selection. For example, to monitor managers’ behaviour, an
independent third party (the auditor) attests the accuracy of information provided by management
to investors. An ideal control system should regulate both motivation and ability.
Internal corporate governance controls monitor activities and then take corrective action to
Monitoring by the Board of Directors: The board of directors, with its legal authority to
hire, fire and compensate top management, safeguards invested capital. Regular board
meetings allow potential problems to be identified, discussed and avoided. Whilst non-
executive directors are thought to be more independent, thy may not always result in more
structures are optional for different firms. Moreover, the ability of the board to monitor the
therefore evaluate top management on the basis of the quality of its decisions that lead to
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financial performance outcomes, ex ante. It could be argued, therefore, that executive
salary to individual performance. It may be in the form of cash or non-cash payments such
as shares and share options, superannuation or other benefits. Such incentive schemes,
however, are reactive in the sense that they provide no mechanism for preventing mistakes
External corporate governance controls encompass the controls external stakeholders exercise over
Debt covenants
Government regulations
Media pressure
Takeovers
Competition
Telephone tapping
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SYSTEMATIC PROBLEMS OF CORPORATE GOVERNANCE
will cause imperfections in the effectiveness of corporate governance. This should, ideally,
Demand for information: A barrier to shareholders using good information is the cost of
processing it, especially to a small shareholder. The traditional answer to this problem is
the efficient market hypothesis (in finance, the efficient market hypothesis (EMH) asserts
that financial markets are efficient), which suggests that the shareholder will free ride on
Monitoring costs: In order to influence the directors, the shareholders must combine with
others to form a significant voting group which can pose a real threat of carrying
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CORPORATE GOVERNANCE IN INDIA
The discussion on corporate governance in India may be divided into two parts. The first deal with
corporate governance in the private sector, and the second, in the public sector.
1. There are three broad categories of shareholders: Promoters (or foreign parent companies
investors. On average, the three categories of share holders are more or less equally
2. For electing the directors, the majority rule voting system is typically followed. The
proportionate rule voting system (also referred to as the cumulative voting system) is
3. Company boards generally comprise of three types of directors: promoter directors (or
promoter group. Professional directors are persons of eminence who are invited by the
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4. Individual shareholders have, by and large, been benign, tolerant, and ignorant. Though
there are some knowledgeable shareholders who raise sensible queries in the annual
general meetings, they are not able to accomplish much because the management enjoys an
informational advantage and knows how to retain the support of most of the shareholders
by offering sops here and there and portraying a glowing picture that enthuses them.
and challenges, put greater emphasis on systems, favour the interest of incumbent
management over that of shareholders, and set relatively easy performance targets.
The corporate governance system in the private sector may therefore be characterised as the
“entrenched system”, given the firm hold of the promoters over the companies managed by
them and the disinclination and / or inability of other to challenge them. Hence, the principal
conflict in India is not between the interests of the shareholders on the one hand and the
interests of managers on the other. This seems to be true of companies controlled by families or
23
Corporate Governance in the Public Sector
1. The equity shares are owned wholly or substantially (meaning 51 per cent or more) by the
government.
2. The boards of public sector undertakings, appointed for all practical purposes by the
directors, who are full time employees of the concerned public sector undertaking, (ii)
government directors who are bureaucrats from the controlling administrative ministry, and
3. There is, in general, a good deal of political and bureaucratic influence over the
guidelines. Further, they are subject to the CAG audit and are accountable to the
guidelines. Efficiency and performance are often sacrificed at the altar of property.
5. In general, performance standards are soft, compensation levels low, incentives for
The corporate governance system in the public sector may be characterised as the “transient
system” with the key players, viz., politicians, bureaucrats, and the managers taking a myopic
view of things.
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REFORMING CORPORATE GOVERNANCE
Given the deficiencies characterising corporate governance, there is a pressing need for reform.
Some ways and means of reforming corporate governance in practice are now discussed.
Strengthen the Hands of Institutional Investors: Individual investors are not likely to be active
because of the “free rider” problem. Institutional investors with a reasonable stake will have a
greater incentive to play a more active role and they can contribute immensely to improvement in
corporate governance. As Jensen says, active investors are important to a well functioning
governance system because they have the financial interest and independence to view firm
management and policies in an unbiased way. In this context, it must be mentioned that financial
institutions which currently have substantial equity and debt exposure in companies should play a
more active role in monitoring companies. There is a strong case for releasing financial institutions
from the yoke of government control, thereby improving their own corporate governance, so that
Ensure that the Board is Informationally Well-equipped: The board of directors should receive
information about the performance of the company in all important areas. The board should
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Link Managerial Compensation to Performance: Agency problems arise because of lack of
alignment of the interest of shareholders and management. To make these interests more
congruent, a significant portion of managerial compensation should be linked to the value created
by management. Further, the rewards to the managers may be based on relative performance,
should be real possibility of dislodging it through the market for corporate control. Theory and
evidence support the view that takeovers address governance problems. Indeed, in the United
States, takeovers are widely regarded as an important corporate governance mechanism, which
serves as a check on managerial discretion. This is also supported by scientific evidence that
Improve Corporate Accounting and Practices: Periodic accounting reports are the most
important means of communication between a company and its financiers (shareholders and
lenders).while a lot of improvement has occurred in this informational tool in recent years there is
definitely room for improving corporate accounting and reporting practice with respect to
classification of items in the balance sheet, investment in group companies, intangible assets, and
so on.
Reform of corporate governance practices, thus, calls for a multi-pronged approach on the lines
suggested. It is indeed a tall order. Access to external capital on economical terms is now a major
26
competitive weapon and there seems to be no better way to ensure this than to improve the quality
of corporate governance. Enlightened self-interest will prod companies to pay attention to ways
It is the responsibility of the board of directors to ensure good corporate governance. This involves
a set of relationships between the management of a corporation, its board, its shareholders and
other relevant stakeholders. The board must agree on the corporation’s purpose (what is for), its
values (what it stands for), and the strategy to be adopted to achieve its purpose.
Good corporate governance requires that the board must govern the corporation with honesty and
enterprise in a manner, which confirms and enhances the authority which it has to function. This
authority is not only regulatory but embraces the corporation’s interaction with its shareholders and
other stakeholders such as the communities in media, public opinion makers and pressure groups.
The way in which the board handles issues related to business ethics to environment protection
may affect the interest of certain groups (stakeholders) and this inturn may have an influence on
ROLE OF DIRECTORS
A director assumes two roles while governing the activities of an Organisaton. They are:
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Performance role
In this role, the director performs various activities that are aimed at improving the overall
performance of the corporation. Firstly, a director act as a source of know-how, expertise and
external information, secondly, he caters to needs of the corporation for networking, representing
The director brings into the corporation the knowledge and experience required to solve the
problems that the board faces. Outside directors sometimes play the role of “specialists,” drawing
upon their expertise, knowledge and skills in different areas such as finance, marketing, law and
engineering. The outside directors appointed by the corporations on their boards usually play the
role of specialists. The outside directors act as the eye of the board to the external world. They
etc, which is not readily accessible to the corporation. Generally outside directors are hand picked
from influential groups in the society. Corporations use them to gain access to these groups.
The directors represent the company on public forums or committees. They act with the media on
The presence of outside directors who are renowned in various fields enhances the status,
reputation and credibility of the board. This boosts customer/shareholder confidence in the
company.
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Conformance role
In this role the director is concerned with ensuring that the company follows the policies and
procedures laid down by the board. Directors usually accomplish this by questioning and
supervising the executive management. Conformance role is very tricky role as it involves,
monitoring and evaluating their own performance, (in case of majority/All-executive boards.)
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CODE OF CORPORATE GOVERNANCE
A code is a set of rules, which are accepted as general principles, or a set of written rules, which
state how people in a particular Organisation or country should behave. Thus, it is a set of
standards agreed on by a group of people who do a particular job. A regulation is an official rule
that lays down how things should be done. Both codes and regulations are “set of rules” or
“principles” or “standards” that are intended to control, guide, or manage behaviour or the conduct
of individuals working in Organisations, the basic difference being that codes are “self-imposed or
self-regulated” sets of rules, while regulations are “official”, i.e. imposed by the State
Government.
exchanges, investor groups and professional associations were responsible for promoting and
commissioning codes or principles for corporate governance. In addition to the codes developed by
30
CII REPORT ON CORPORATE GOVERNANCE
The liberalization of the Indian economy and the growth of international competition made Indian
industry recognize the importance of corporate governance for enhancing its ability to compete in
In this context the Confederation of Indian Industry (CII) took the initiative to draft some codes of
corporate governance. A national task force on corporate governance was set up in mid 1996 under
the leadership of MR. Rahul Bajaj, ex president, CII, and CMD, Bajaj Auto Ltd. Some of the
recommendations made by the CII committee on corporate governance are given below:
1. The full board should meet a minimum of six times a year, preferably at an interval of two
months and each meeting should have agenda items that require a least half a day’s
discussion.
2. Any listed company with a turnover of Rs. 100 crore and higher should have professionally
competent, independent, non-executive directors, who should constitute at least 30% of the
board if the chairman of the company is a non-executive director, or at least 50% of the
3. No single person should hold directorships in more than ten companies. This ceiling
excludes directorships in subsidiaries (where the group has over 50% stake) or associate
companies (where the group has over 25% but no more than 50% equity stake.)
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4. for non-executive directors to play a material role in corporate decision making an
maximizing long term shareholder value, they need to become active participants on the
board, not passive advisors; have clearly defined responsibilities within the board such as
the audit committee; and know-how to read a balance sheet, profit and loss account, cash
flow statements and financial ratios and have some knowledge of various company laws.
5. To secure better effort from non-executive directors, companies should pay a commission
over and above the sitting fees for the use of professional inputs. The present commission
of 1% of net profits (if the company has a managing director), or 3% (if there is no
performance.
6. While re-appointing members of the board, Companies should give the attendance record
of the concerned directors. If a director has not been present (absent with or without leave)
for 50% or more meetings, then this should be explicitly stated in the resolution that is put
to vote. A s a general practice, one should not re-appoint any director who has not had the
7. Listed Companies with either a turnover of over Rs. 100 crore or a paid-up-capital of Rs.
Audit committees should consists of at least three members, all drawn from a company’s
non-executive directors, who should have adequate knowledge of finance, accounts and
8. Under “Additional Shareholder Information”, listed companies should give data on high
and low monthly averages of share prices in a major stock exchange where the company is
listed for the reporting year; greater detail on business segments, up to 10% of turnover,
giving share in sales revenue, review of operations, analysis of markets and future
prospects.
32
9. Major Indian Stock Exchanges should gradually insist upon a compliance certificate,
signed by the CEO and CFO which clearly states that, the management is responsible for
the preparation, integrity and fair presentation of the financial statements and other
information in the annual report, and which also suggest that the company will continue in
10. For all Companies with a paid-up-capital of Rs. 20 crore or more the quality and quantity
of disclosure. A Companies GDR issue should be the norm for any domestic issue.
11. Government must allow far greater funding to the corporate sector against the security of
12. It would be desirable for financial institutions as pure creditors to re write their covenants
to eliminate having nominee directors except in the event of serious and systematic debt
default and in cases of the debtor company not providing six monthly or quarterly
13. Reduction in the number of companies where there are nominee directors. It has been
argued by Financial Institutions that there are too many companies where they are on the
board, and too few competent officers to do the task properly. So in the first instance,
financial institutions should take a policy decision to withdraw from boards of companies
under 10%.
33
CHAPTER – III
COMPANY PROFILE
34
INTRODUCTION
BHARTI AXA LIFE INSURANCE COMPANY LTD is a profit making dividend paying Private
BHARTI AXA LIFE INSURANCE COMPANY LTD , is a distillery Manufacturing Company, engaged
primarily in the manufacture of Extra Natural Alcohol (ENA), Rectified Spirit (RS), Denatured
Spirit (DS), Absolute Alcohol (Ethanol) and Carbon-di-oxide (CO2), at its factory located at
LOCATION
The Head office is at 6th floor Raheja Titanium II , off Western Express Highway, Goregaon (East),
35
Bharti Enterprises
Bharti Enterprises is a pioneer in telecom sector and the group is widening its horizons by entering
new business areas such as insurance and retail. Bharti Enterprises has created a vantage position
for itself in the global telecommunications sector. Bharti Airtel Limited occupies numero uno
status in mobile telephony in India while its brand 'Beetel' is the largest manufacturer and exporter
of world class telecom terminals. Founder of Bharti Group is Sunil Mittal. In 1983, Sunil Mittal
entered into an agreement with Germany's Siemens to manufacture the company's push-button
telephone models for the Indian market. In 1986, Sunil Bharti Mittal incorporated Bharti Telecom
Limited (BTL) and his company became the first in India to offer push-button telephones,
establishing the basis of Bharti Enterprises. This first-mover advantage allowed Sunil Mittal to
expand his manufacturing capacity elsewhere in the telecommunications market. By the early
1990s, Sunil Mittal had also launched the country's first fax machines and its first cordless
telephones. In 1992, Sunil Mittal won a bid to build a cellular phone network in Delhi. In 1995,
Sunil Mittal incorporated the cellular operations as Bharti Tele-Ventures and launched service in
Delhi. In 1996, cellular service was extended to Himachal Pradesh. In 1999, Bharti Enterprises
acquired control of JT Holdings, and extended cellular operations to Karnataka and Andhra
Pradesh. In 2000, Bharti acquired control of Skycell Communications, in Chennai. In 2001, the
company acquired control of Spice Cell in Calcutta. Bharti Enterprises went public in 2002, and
36
the company was listed on Mumbai Stock Exchange and National Stock Exchange of India. In
2003, the cellular phone operations were rebranded under the single AirTel brand. In 2004, Bharti
acquired control of Hexacom and entered Rajasthan. In 2005, Bharti extended its network to
Andaman and Nicobar. Today, Airtel is the laegest cellular service provider in India.
BHARTI’S COMPANIES
Bharti Airtel Ltd is India's leading provider of telecommunications services. The company has 3
distinct Business divisions - Mobile, broadband & telephone services and enterprise services.
Bharti Teletech is India’s leading telecom & allied products company and is one of the largest
manufacturers of landline telephones in the globe. Bharti TeleTech Ltd manufactures and exports
world-class telecom equipment under the brand 'Beetel'. The company’s manufacturing operations
are spread across two ISO-9000 certified plants in Goa and Ludhiana with an installed capacity of
Telecom Seychelles Ltd provides telecom services in Seychelles, under the brand 'Airtel'
Bharti Telesoft Ltd delivers best-in-class, revenue-critical VAS products and services to telecom
carriers.
Pvt. Ltd, to offer fresh and processed fruits and vegetables in the domestic as well as international
Bharti Retail is a wholly owned subsidiary of Bharti Enterprises. Bharti Retail is setting up a chain
of multiple consumer friendly format stores in India which will be 100 percent owned and operated
by Bharti. Bharti Retail will provide consumers with products of affordable prices, great quality
and wider choice. The company has launched neighbourhood format stores called "Easy Day". The
stores are a one stop shop to cater to every family’s day-to-day needs.
Bharti AXA General Insurance is a joint venture between Bharti Enterprises and AXA, world
leader in financial protection and wealth management. The company was incorporated in July
2007 and will bring to the Indian market a full suite of general insurance solutions to meet the
Bharti AXA Life Insurance Company Ltd is a joint venture between Bharti Enterprises and AXA,
world leader in financial protection and wealth management. The joint venture company has a 74%
stake from Bharti and 26% stake of AXA Asia Pacific Holdings Ltd (APH).
Bharti AXA Investment Managers Pvt. Ltd., an asset management company in India, is a joint
venture between Bharti Enterprises, AXA Investment Managers (AXA IM) and AXA Asia Pacific
38
Bharti Learning Systems Limited, a wholly owned subsidiary of Bharti Enterprises, is a premier
end-to-end learning and development solutions organisation that specialises in the customer
experience arena. It provides learning solutions that impact business performance through
Jersey Airtel, a subsidiary of Bharti, offers world-class mobile services in Jersey (Channel Islands)
over its full 2G, 3G and HSDPA enhanced network. The Company brings market-leading products
Bharti Foundation
Bharti Foundation was set up in 2000, with the vision, “To help underprivileged children and
young people of our country realize their potential”. It aims to create and support programs that
bring about sustainable changes through education and the use of technology and information.
Bharti Realty
Bharti Realty Private Limited is the in-house Real Estate Arm for Bharti Group and facilitates by
extending support to the Group Companies for Identifying, Developing and Maintaining Quality
Real Estate in line with their Business Models. Being a seasoned player in the Real Estate
Fraternity, Bharti Realty is playing a significant role in Bharti Retail’s Roll out plan.
39
The AXA Group
In 1980, AXA did not exist. Today, the AXA Group is an important global player
whose ambition is to attain leadership in its core Financial Protection business. Its
AXA Vision
Help our clients be life confident: this is how we see our business and how it should be done.
AXA Strategy
AXA Brand
40
Your local AXA
Legal structure
Corporate Governance
Implementing sound corporate governance principles has been a priority at AXA for many years.
Both the Group's stepped-up international expansion since the 1990s and its listing on the New
governance standards.
AXA reviewed its corporate governance practices to take into account the recommendations
resulting from the consolidation of the reports from the AFEP and the MEDEF dated 1995
("Vienot"), 1999 ("Vienot II") and 2002 ("Bouton"), which describe certain standards and practices
of corporate governance for French listed companies, and the Sarbanes-Oxley Act (2002).
AXA and its principal subsidiaries have boards of directors or supervisory boards, audit
The sections entitled "Supervisory Board" and "Supervisory Board Committees" from the AXA
Group's 2007 Annual Report, which correspond to the first part of the Chairman of the Supervisory
Board's Report on the conditions of preparation and organisation of the Supervisory Board's work,
were prepared in accordance with the French Financial Security Act of August 1st, 2003.
41
Governance structure
Since 1997, AXA has had a dual corporate governance structure consisting of a Management
Board and a Supervisory Board. This governance structure is designed to clearly separate the
The aim of internal control is to prevent and manage the risks relating to AXA's financial
protection and wealth management activities, and to ensure that accounting and financial
Corporate Responsibility
"For AXA, being responsible is first and foremost about taking on risks transferred from our
clients on a lasting basis. It also means innovating by analyzing the expectations of individuals or
businesses, factoring in the impacts of their behavior on Society over the long term. Lastly, it
represents the meaning that we give to our business: enabling our clients, through a lasting
relationship with them, to be life confident. For us, the stakes involved with being a responsible
AXA's divestment of companies that produce or sell cluster bombs has been
completed
AXA's divestment of its holdings in companies that produce or sell cluster bombs, decided and
announced in July 2007, has been completed in full. This initiative follows the 2006 divestmen
t from companies that produce or sell anti-personnel landmines. Both of these divestment
initiatives cover holdings among the AXA Group's general account insurance assets. In doing so,
AXA substantiates its commitment to undertake tangible actions in line with new international
guidelines.
The Group Sustainable Development strategy, its context and its history. The Group's
42
commitments in relation to its stakeholders and international organizations. Internal governance:
the code of professional ethics, compliance with market regulations and the fight against fraud and
corruption.
Financial Protection
property, casualty & health insurance and risk prevention, life insurance and retirement savings,
Social responsibility
AXA operates as a responsible corporate entity, building a trust-based relationship with its
stakeholders: clients, shareholders, employees, suppliers, the community and the environment.
Performance
Organization
The structure and organization of the Sustainable Development department, which defines and
43
Bharti Axa Profiler:
Bharti AXA Investment Managers Pvt. Ltd. is a joint venture between Bharti Ventures Limited –
one of the foremost business groups in India, AXA Investment Managers (AXA IM) and AXA
Asia Pacific Holdings (AXA APH) (through NMIPL). We focus on excellence and performance,
with our professional fund management taking care of your imperative financial needs, keeping
Corporate Profile
Bharti AXA Life Insurance is a joint venture between Bharti, one of India’s leading business
groups with interests in telecom, agri business and retail, and AXA, world leader in financial
protection and wealth management. The joint venture company has a 74% stake from Bharti and
26% stake of AXA. The company launched national operations in December 2006. Today, we
have over 5200 employees across over 12 states in the country. Our business philosophy is built
As we expand our presence across the country to cater to your insurance and wealth management
needs with our product and service offerings, we continue to bring 'life confidence' to customers
44
spread across India. Whatever your plans in life, you can be confident that Bharti AXA Life will
You would like to live your life and prepare for the future with complete confidence. We at Bharti
AXA Life Insurance, design solutions which will protect you and your family and help you realise
your dreams. Our endeavour is to bring to you products and services that help you lead a confident
life.
Individual Plans :
Bharti AXA Life Bright Stars provides a launch pad for your child’s bright future. What else, You
also have Jumpstart benefit which is paid out at maturity along with Policy Fund Value, which
Dream Life Pension, Bharti AXA Life Insurance’s unique pension product ensures that your
You have always strived hard to achieve the best for you and your loved ones, so when it comes to
making an investment decision, we know that you would expect the best from it too.
Your wealth, your status ensures that you get preferential status wherever you go. So why
term.
term.
Your changing lifestages decide your financial milestone planning. When you foresee intermittent
financial requirements in the years to come, like regular expenses related to your child’s education,
liquidity becomes a key aspect of your planning along with long term savings, and protection for
your family.
46
Bharti AXA Life SecureConfident
A Long Term Life Insurance.
All of us desire to maximise the happiness for our family at all times, irrespective of the
circumstances. The thought of unfortunate events befalling us may cause us anxiety about
Group Plans :
47
GOVERNING BODY
BOARD OF DIRECTORS:
Shri. K. Hari Narayana Rao Asst. General Manager – Finance & Accounts
H.NO.2-77,2-76,2-75&3-4/1,
A K REDDY Complex
Chaitanyapuri x Road ,
48
E-mail: service@bharti-axalife.com
Goregaon (East),
REGISTRARS AND
SHARE TRANSFER AGENTS: BHARTI AXA LIFE INSURANCE COMPANY LTD,
H.NO.2-77,2-76,2-75&3-4/1,
A K REDDY Complex
Chaitanyapuri x Road ,
49
CHAPTER – IV
50
I. CORPORATE GOVERNANCE
BHARTI AXA LIFE INSURANCE COMPANY LTD aims at implementing, adhering and
achieving qualitative excellence and transparent Corporate Governance by taking into its fold the
responsibility towards all the stakeholders and Statutory Authorities. The Company has formulated
its policy on Corporate Governance as a Code for the Directors and Senior Management Personnel,
adherence to which will be confirmed annually. Formulation of such code is only an initial step
towards the ever increasing commitment for corporate transparency. The management will strive
towards improving and enhancing its vision towards its goal. The pursuit towards achieving good
all our dealings with our employees, shareholders, customers and the community at large.
The Board of Directors present the Corporate Governance Report in accordance with Clause 49 of
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II. AUDIT COMMITTEE
The Audit Committee of the company consists of 4 Directors of whom 3 are Independent
Directors. All the members of he Committee are Non-Executive Directors with the Chairman of
the Committee Shri. V. Subramanian being and Independent Director. Following Directors are
The Audit Committee of the Company has the powers to investigate any activity, seek information
from any employee and can secure attendance of outsiders with relevant expertise, if it considers
(a.) Oversight of the Company’s financial reporting process and disclosure of its financial
information
(b.) Recommendation to the Board, the appointment, reappointment and, if required, the
52
(c.) Reviewing the management, the annual financial statements and quarterly financial
(d.) Reviewing with the management performance of statutory and internal auditors, adequacy
of the internal control systems, reviewing the adequacy of internal audit function an
During the year, the Audit Committee Meetings were held on the following dates:
Sl. No. 1 2 3
Date of the
Meeting 22.05.2007 24.07.2007 27.10.2008
1. V.Subramanian 4
2. C.V. Kamalaker 3
3. H. Anantha Krishnana 2
4. L. Venkateswara Rao 4
53
III. REMUNERATION COMMITTEE
Directors are paid any remuneration apart from sitting fees paid for attendance at the Board
c) Remuneration Policy
time Directors. The remuneration policy is in consonance with the existing Industry
Venkateshwar Rao, Non-Executive Director, Shri. K. Sudhir Rao, Vice Chairman, and Shri.
K. Suhan Rao, Managing Director inter-alia, oversees the transfer of shares and redressal of
Annual Reports
LISTING AGREEMENT
I. Board of Directors
(i) The Board of directors of the company shall have an optimum combination of executive and
non-executive directors with not less than fifty percent of the board of directors comprising
of non-executive directors.
(ii) Where the Chairman of the Board is a non-executive director, at least one-third of the Board
should comprise of independent directors and in case he is an executive director, at least half
(iii) For the purpose of the sub-clause (ii), the expression ‘independent director’ shall mean a non-
a. apart from receiving director’s remuneration, does not have any material pecuniary
relationships or transactions with the company, its promoters, its directors, its senior
management or its holding company, its subsidiaries and associates which may affect
c. has not been an executive of the company in the immediately preceding three
financial years;
i) the statutory audit firm or the internal audit firm that is associated with the
company, and ii) the legal firm(s) and consulting firm(s) that have a material
association with
the company.
f. is not a substantial shareholder of the company i.e. owning two percent or more of
shall be fixed by the Board of Directors and shall require previous approval of shareholders in
general meeting. The shareholders’ resolution shall specify the limits for the maximum number of
stock options that can be granted to non-executive directors, including independent directors, in
between any two meetings. The minimum information to be made available to the board is
given in Annexure– I A.
II Audit Committee
A qualified and independent audit committee shall be set up, giving the terms of reference
(i) The audit committee shall have minimum three directors as members. Two-thirds of the
(ii) All members of audit committee shall be financially literate and at least one member shall
The audit committee should meet at least four times in a year and not more than four months
shall elapse between two meetings. The quorum shall be either two members or one third of the
members of the audit committee whichever is greater, but there should be a minimum of two
The audit committee shall have powers, which should include the following:
57
1. To investigate any activity within its terms of reference.
1. Oversight of the company’s financial reporting process and the disclosure of its financial
information to ensure that the financial statement is correct, sufficient and credible.
replacement or removal of the statutory auditor and the fixation of audit fees.
3. Approval of payment to statutory auditors for any other services rendered by the statutory
auditors.
4. Reviewing, with the management, the quarterly financial statements before submission to
5. Reviewing, with the management, performance of statutory and internal auditors, adequacy
6. Reviewing the adequacy of internal audit function, if any, including the structure of the
internal audit department, staffing and seniority of the official heading the department,
7. Reviewing the findings of any internal investigations by the internal auditors into matters
9. To look into the reasons for substantial defaults in the payment to the depositors, debenture
holders, shareholders (in case of non payment of declared dividends) and creditors.
III. Disclosures
(i) A statement in summary form of transactions with related parties in the ordinary course of
(ii) Details of material individual transactions with related parties which are not in the normal
(iii) Details of material individual transactions with related parties or others, which are not on an
arm’s length basis should be placed before the audit committee, together with Management’s
Where in the preparation of financial statements, a treatment different from that prescribed in
an Accounting Standard has been followed, the fact shall be disclosed in the financial
statements, together with the management’s explanation as to why it believes such alternative
treatment is more representative of the true and fair view of the underlying business
59
The company shall lay down procedures to inform Board members about the risk assessment
and minimization procedures. These procedures shall be periodically reviewed to ensure that
(D) Proceeds from public issues, rights issues, preferential issues etc.
When money is raised through an issue (public issues, rights issues, preferential issues etc.), it
shall disclose to the Audit Committee, the uses / applications of funds by major category
(capital expenditure, sales and marketing, working capital, etc), on a quarterly basis as a part of
their quarterly declaration of financial results. Further, on an annual basis, the company shall
prepare a statement of funds utilized for purposes other than those stated in the offer
document/prospectus/notice and place it before the audit committee. Such disclosure shall be
made only till such time that the full money raised through the issue has been fully spent. This
statement shall be certified by the statutory auditors of the company. The audit committee shall
60
INFORMATION TO BE PLACED BEFORE BOARD OF DIRECTORS
3. Quarterly results for the company and its operating divisions or business segments.
5. The information on recruitment and remuneration of senior officers just below the board level,
including appointment or removal of Chief Financial Officer and the Company Secretary.
6. Show cause, demand, prosecution notices and penalty notices which are materially important
7. Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems.
8. Any material default in financial obligations to and by the company, or substantial non-
9. Any issue, which involves possible public or product liability claims of substantial nature,
including any judgement or order which, may have passed strictures on the conduct of the
company or taken an adverse view regarding another enterprise that can have negative
61
11. Transactions that involve substantial payment towards goodwill, brand equity, or intellectual
property.
12. Significant labour problems and their proposed solutions. Any significant development in
Human Resources/ Industrial Relations front like signing of wage agreement, implementation
13. Sale of material nature, of investments, subsidiaries, assets, which is not in normal course of
business.
14. Quarterly details of foreign exchange exposures and the steps taken by management to limit
(i) There shall be a separate section on Corporate Governance in the Annual Reports of company,
requirement of this clause with reasons thereof and the extent to which the non-mandatory
requirements have been adopted should be specifically highlighted. The suggested list of items to
62
Suggested List of Items to Be Included In the Report on Corporate Governance in the
Annual Report of Companies
2. Board of Directors:
equity investor.
ii. Attendance of each director at the Board meetings and the last AGM.
iii. Number of other Boards or Board Committees in which he/she is a member or Chairperson
3. Audit Committee:
4. Remuneration Committee:
63
ii. Composition, name of members and Chairperson
5. Shareholders Committee:
iii. Whether any special resolution passed last year through postal ballot – details of
voting pattern
64
7. Disclosures:
iii. Whistle Blower policy and affirmation that no personnel has been denied access to
iv. Details of compliance with mandatory requirements and adoption of the non-
8. Means of communication.
i. Quarterly results
65
9. General Shareholder information:
vii. Market Price Data : High., Low during each month in last financial year
index etc.
66
PARTICULARS 31.03.2008 31.03.2007
SOURCES OF FUNDS:
Shareholder Funds:
Share Capital 123688000 124764000
Reserves and Surplus 9925200 8850000
Loan Funds:
Secured Loans 202826932 199378971
Unsecured Loans 187060386 140172300
APPLICATION OF FUNDS:
Fixed Assets:
Gross Block 468402246 451406837
Less: Depreciation 120653854 100015933
Net Block 347748392 351390904
Capital Work in Progress 83397893 3276749
67
INTERPRETATIONS
As per the financial statements have been prepared these are the following details which
are as follows:
1.) The accompanying financial statements have been prepared in accordance with
2.) The company has disclosed the end use of money raised by way of issue of equity
4.) The Company has not given any guarantee for loans taken by others, from banks
or financial institutions.
5.) The Company has not granted loans and advances on the basis of security by way
6.) According to the records of the Company, there are no dues of sales tax, income-
tax, and excise duty which have not been deposited with appropriate authorities
on the useful life of the assets. Depreciation for assets purchased/sold during the
8.) The Company has physical verification of its fixed assets which, is reasonable
having regard to the size of the Company and the nature of its assets.
68
9.) In accordance with this, certain fixed assets were physically verified by
material and have been properly dealt with in the books of account.
11.) The Company does not have any accumulated losses at the end of the financial
year and has not incurred cash losses in the financial year and in the immediately
69
COMPARATIVE BALANCESHEET FOR THE YEAR 2007-2008
70
PARTICULARS 31.03.2008 31.03.2007 % CHANGE
SOURCES OF FUNDS
Shareholder Funds:
Share Capital 129944000 123688000 95.19
Reserves and Surplus 43288876 9925200 22.93
Loan Funds:
Secured Loans 277347360 202826932 73.13
Unsecured Loans 223728880 187060386 83.61
APPLICATION OF FUNDS:
Fixed Assets:
Gross Block 695471862 468402246 67.35
Less: Depreciation 144859597 120653854 83.29
Net Block 550612265 347748392 63.16
Capital Work in Progress 22673972 83397893 367.81
71
1.) There is a raise in Share Capital of 95% for the year ending 31st March, 2008
2.) The Company is maintaining a 23% of Reserves and Surplus for the year ending
31st March,2008.
3.) There is change of 73% in Secured and Unsecured loans during the financial year.
4.) The Fixed Assets of the Company are stood at 63 % for the year ending 31 st
March, 2008
6.) The Company is having a Cash & Bank Balances of 74 % for the year ending 31 st
March, 2008.
7.) The Work-in-progress of the company has raised to 362% compared to the last
financial year. As there was a huge increase in the sales in the organization.
8.) The Loans and Advances of the Company increased to 63% compared to last
9.) The Current Assets of the Company raised to 80% when compared to 31 st March,
2007.
10.)Over all the company performance is well and attaining a competitive position in
the market.
72
CHAPTER – V
73
The fundamental objective of Corporate Governance is the “enhancement of long-term
share holder value while, at the same time, protecting the interest of other stakeholders.
directors.
Dispatch of one copy of complete balance sheet to every household and abridged
Company.
A certificate from the auditors on compliance should form part of the Annual
Report and Annual Return and a copy has to be sent to the Stock Exchanges.
74
SUGGESTIONS
SUGGESTIONS
75
The board should clearly define the role of the management
Disclosure must be made by the management to the board relating to all material,
The Company should have active participation in global market to face the
competitors.
The global activities of the corporations are growing for better efficiency in the
market.
A certificate from the auditors on compliance should form part of the Annual
Report and Annual Return and a copy has to be sent to the Stock Exchanges.
Today, investors want to ensure that the Company’s they invest in are not only
managed properly but also have proper Corporate Governance. They regard
now began to integrate ethics into their Corporate Cultures and concentrate on
76
BIBILIOGRAPHY
77
BOOKS:
DONALD
MOHANTY.
WEB SITES:
www.corpgov.net
www.icfai.org.com
www.google.com
www.thecorporatelibrary.com
www.bharti-axalife.com
www.sebi.gov.in
NEWS PAPERS:
DECCAN CHRONICLE
THE HINDU
TIMES OF INDIA.
78