MANAGEMENT DISCUSSION AND ANALYSIS
GLOBAL ECONOMIC REVIEW
The big picture about the global economy is one of cautious optimism. The world has notfully emerged from the shadows of the financial crisis that started in late 2008, and oncethe government stimulus was slowly reduced, both developed and developing economies beganto show signs of stress. However, it must be admitted that global economic prospects haveimproved to some extent on key macroeconomic parameters.
The European Central Bank has reduced tail risks in the Euro zone by providingextensive monetary support to distressed economies, a commendable effort. On the otherhand, the US economy is strengthening fiscal consolidation and has grown for 15consecutive quarters (Source: US Commerce Department). China, India, Japan andIndonesia are driving Asian growth, although the rate of growth is not significant.Japans master plan for structural reforms is expected to boost economic growth inthe coming years. Overall, there is a need for consistent vigilance on the part of globalpolicy makers to build resilience against financial vulnerabilities.
INDIAS ECONOMIC REVIEW
The Indian economy is expected to grow by 5 per cent in Financial Year 2012-13 andwitness higher growth compared to world average GDP growth. Indias growth rate lookssubdued, when compared with those of yesteryears, but considering the fact that the worldhas now entered a low growth economic landscape, the nations performance is notaltogether discouraging. Going ahead, Indias key macroeconomic fundamentals lookrobust.
The Reserve Bank of Indias (RBI) initiatives to rein in inflation have succeededconsiderably as the countrys inflation rates eased to a 41-month low in April 2013.The government is also initiating measures to limit the fiscal deficit for 2013-14 to 4.8per cent of GDP. Such measures will restore confidence in Indias macroeconomicpolicy. Besides, the 12th Five Year Plan is already underway and fiscal allocation forinfrastructure creation is significant. The government has also allocated Rs. 60 Billionfor rural housing in the Union Budget 2013, around 50 per cent more than last year. It hasalso provided additional tax subvention for housing loans. These initiatives are expectedto boost the infrastructure and housing sector considerably. However, the result of thesesteps will take some time to reflect in the real economy.
Another positive trend is that India is steadily growing its economic statureinternationally. China has shown eagerness to enhance bilateral trade with India and thetwo countries have set a target USD 100 Billion in trade by 2015. Despite challenges,Indias long-term growth prospects look positive, but policies need to berecalibrated in view of evolving circumstances.
INDIAS NBFC INDUSTRY OVERVIEW
Over the years, the Non-Banking Financial Companies (NBFCs) of India have beeninstrumental in driving the countrys inclusive growth. In the rural and semi-urbanIndia, the sector plays a critical role in financing long-term infrastructure,construction equipment, leasing, real estate, vehicles and SMEs. At present, more than 80per cent of equipment leasing and hire purchase financing in India are financed by NBFCs. (Source:Indian Brand Equity Foundation)
The industrys retail credit projects 17 per cent growth in FY 2013. It is evidentthat prudent policy initiatives are required at all levels to drive growth to a highertrajectory. The key industry segments (construction equipment, commercial vehicle andgold) which constitute around 56 per cent of total retail credit, witnessed moderategrowth. The poor growth of the key segments will diminish the Gross Non Performing Assets(NPAs) of the industry. The cost of funds for retail-focused NBFCs will also remain high(Source: ICRA).
Nevertheless, the industrys long-term outlook remains stable. The major NBFCsmaintain a strong bufter against expected credit quality pressures.
PERFORMANCE OF KEY INDUSTRY SEGMENTS
Indian Automobile industry
The Indian automobile industry grew by only 1.20 per cent in FY 2013. The industryproduced 1,685,355 vehicles in March 2013 as against 1,845,868 in March 2012, a decline of8.70 per cent. The overall growth in domestic sales in FY 2013 was 2.61 per cent.
Passenger Vehicles (PV) segment grew at 2.15 per cent in FY 2013. The Passenger Carsegment declined by 6.69 per cent, while the Utility Vehicles segment grew by 52.20 percent and Vans grew only by 1.08 per cent during FY 2013, as compared to the same periodlast year. The overall Commercial Vehicles (CV) segment registered a degrowth of 2.02 percent in FY 2013, compared to the same period last year. While Medium and Heavy CommercialVehicles (MHCVs) segment growth declined by 23.18 per cent, Light Commercial Vehicles grewat 14.04 per cent.
Three Wheelers sales posted a modest growth of 4.87 per cent in April-March 2013.Passenger Carriers grew by 8.58 per cent during FY 2013 and Goods Carriers registeredde-growth at 9.20 per cent during this period.
During April-March 2013, overall automobile exports registered de-growth of 1.34 percent compared to the same period last year. PV export grew by 9.02 per cent, while theother segments like CV, Three Wheelers and Two Wheelers fell by 13.35 per cent, 16.22 percent and 0.72 per cent, respectively.
(Source: Society of Indian Automobile Manufacturers)
Indian Tractor industry
The Indian tractor market, the largest in the global tractor market by volume, declinedmarginally to touch 5,25,970 tractors, 1.7 per cent lower than the previous year asagainst a high growth of 32 per cent, 20 per cent and 11 per cent, respectively, in theprevious three fiscals. A delayed South West monsoon and deficient North East rainsimpacted the Indian agriculture, especially in the southern states, already reeling underthe impact of scarce rainfall in consecutive preceding years. This, together with theslowdown on infrastructure spending and restrictions on quarrying operations in certainparts of the country resulted in lower sales of new tractors as compared to the previousyear.
Owing to the slow pace of infrastructural investments and various regulatory hurdles,the construction equipment industry is expected to witness around 12-15 per cent declinein volumes in FY 2013.
The industrys short-term outlook is expected to remain subdued, given the slowpace of infrastructural investments, weak business confidence and slow growth inagriculture.
However, construction activity in the private sector may revive during the latter halfof FY14, supported by a proactive policy environment. Besides, the prevailing largedemand-supply gap in the domestic power sector and the need for basic infrastructure areexpected to drive the construction equipment segment.
(Source: ICRA Report on Indian Mining and Construction Equipment Industry, March 2013)
According to National Housing Bank, Indias housing finance market is expected toregister an estimated growth of 20 per cent, reaching a size of Rs. 1.25-1.3 Trillion bythe end of FY 2013. However, the current fiscal could be saddled with an increasing numberof bad loans as greater competition forces lenders into stepping up volume to maintainprofit.
Indian NBFCs operate under continuously evolving stringent guidelines. In fiscal 2013,RBI finalised its much awaited Guidelines on securitisation and assignment transaction ofstandard assets and issued final Guidelines on 7th May, 2012. As per the new Guidelines,securitisation route will be preferred over assignment route. RBI has also releasedrevised Guidelines on Priority Sector Lending-Targets and Classification, incorporatingrecommendations of MV Nair Committee on 20th July, 2012. The revised Guidelines recommend:
Interest spread cap of 8 per cent is higher than the original recommendation of6 per cent
No cap on the amount, which banks can buy through this route
No restriction on NBFCs on amount of securitisation/assignment
Usha Thorat Committee recommendations
RBI has proposed new draft Regulatory Guidelines for NBFCs, based on therecommendations of the Usha Thorat Committee on Issues and Concerns in the NBFC sector,published on 12th December, 2012. The key proposals are as follows:
The Tier I ratio of registered NBFCs to be increased to 10 per cent, and threeyears be given to achieve the required ratio (currently the minimum Tier I ratio forretail finance NBFCs is 7.5 per cent).
Asset classification and provisioning norms similar to those for banks are to beintroduced in a phased manner. This includes standard asset provision at 0.40 per centw.e.f. 31st March, 2014 (current 0.25 per cent), the 90 days overdue norm for classifyingNon-Performing Assets (NPA) from Q1 FY 2016, to be transited through a 120-day NPA from Q1FY15, and a one-time restructuring to be allowed for borrowers, which will notbe treated as default.
Liquidity ratio requirement for all registered NBFCs, such that cash, bankbalances and government securities fully cover the gaps, if any, between cumulativeoutflows and cumulative inflows for the first 30 days (currently, only deposit-takingNBFCs are required to hold 15 per cent of their public deposits in the RBI-defined liquidassets).
Strict corporate governance standards to be followed by large NBFCs; RBIspermission is necessary for any change in control, or sale of 25 per cent stake, and forappointment of CEOs for NBFCs with asset size of over Rs. 10 Billion.
Higher disclosures have been suggested by the RBI. These cover provisioncoverage ratios, liquidity ratios, asset-liability profiles and the movement of NPAs.
Capital market and real estate exposures: Risk weights will be increased to 150per cent for capital market exposures and 125 per cent for commercial real estateexposures (from the current 100 per cent for both these categories).
NBFCs with asset size below Rs. 250 Million will be exempted from registrationwith the RBI; existing non-deposit taking NBFCs (asset size below Rs. 250 Million) willhave to provide a roadmap to the RBI for increasing their asset size to this level orabove within two years.
Effects of recommendations on the industry
The policies, if implemented, will usher in positive and long-term growth of the NBFCsector, even though some of the clauses can impact profitability in the early stages ofimplementation.
The new proposals will have limited financial impact on major NBFCs. However, theincremental provision on 90-day NPAs and general provisions on standard assets at 0.40 percent (current 0.25 per cent) will reduce return on assets by 5-40 basis points. Theindustry is less likely to have any material impact from the requirements of higher Tier Iratio and liquid asset coverage (for cumulative mismatches in 1- 30 day buckets), as majorNBFCs maintain high capital ratios and well-matched asset-liability tenors
(Source: India Ratings).
If the proposed requirement of registration of NBFCs at an asset size of Rs. 250Million is implemented, the industrys small and mid-sized NBFCs will beconsolidated. As on 30th June, 2012, there were 12,385 registered NBFCs, marginally lowerthan 12,630 registered NBFCs in 2010 (Source: RBI).
Mahindra & Mahindra Financial Services Limited (MMFSL or theCompany), one of Indias prime NBFCs, caters to the financial needs of ruraland semi-urban population of the country. MMFSL commenced operations in 1993, as asubsidiary of the renowned Indian tractor and utility vehicle manufacturer, Mahindra &Mahindra Limited. Over the years, the Company has considerably diversified its productportfolio, offering the following services to its customers:
Vehicle loans (utility vehicles, commercial vehicles, tractors, cars,two-wheelers and used vehicles)
Housing finance (through Mahindra Rural Housing Finance Limited, a subsidiary ofthe Company)
Mutual fund distribution
Insurance broking (through Mahindra Insurance Brokers Limited, a subsidiary ofthe Company)
Loan against gold
Construction equipment loan
The Companys prudent risk management has helped maintain a better asset quality.This has resulted in steady growth despite market volatilities.
The Company focuses on building long-term relationships with all stakeholders,including customers, bankers, investors, dealers and employees. It understands theevolving requirements of discerning customers and delivers appropriately to address theirneeds. This has helped Mahindra Finance emerge as a customer-focused financialorganisation and maintain strong profitability, despite macroeconomic headwinds.
Table 1 Our credit ratings
| ||CRISIL ||Outlook |
|Fixed Deposit Programme ||FAAA ||Stable |
|Short term debt ||A1+ ||Stable |
|Long term and subordinated debt ||AA+ ||Stable |
| ||Brickwork ||Outlook |
|Long term and subordinated debt ||AA+ ||Positive |
| ||India Rating (FITCH) ||Outlook |
|Long term and subordinated debt ||AA+(ind) ||Stable |
The key highlights of the Companys operations have been enumerated below:
Enhanced customer base considerably to reach 2.5 Million in fiscal 2013
Expanded branch network to 657 in 2012-13 (compared to 607 in 2011-12) across 24states and four union territories
Registered 22 per cent growth in the value of assets financed, helping it risefrom Rs. 195,043 Million in 2011-12 to Rs. 238,386 Million in 2012-13
Witnessed 35 per cent growth in assets under management, helping it increasefrom Rs. 206,429 Million in 2011-12 to Rs. 279,131 Million in 2012-13
Total assets and income from operations increased by 37 per cent and 39 percent, respectively
Total employee base has grown to 11,270 in 2012-13
Maintained gross NPA to total assets at 3 per cent
The financial statements have been prepared in compliance with the requirements of theCompanies Act, 1956, and generally accepted accounting principles (GAAP) in India. Thefollowing table presents MMFSLs abridged financials for 2012-13, including revenues,expenses and profits:
Table 2 Abridged Statement of Profit and Loss
(Rs. in Lacs unless indicated otherwise)
| ||2012-13 ||2011-12 ||Growth |
|Revenue || || || |
|Revenue from operations ||3,85,672.15 ||2,76,811.05 ||39.3% |
|Other income ||3,797.75 ||2,648.33 ||43.4% |
|Total Revenues ||3,89,469.90 ||2,79,459.38 ||39.4% |
|Expenses || || || |
|Employee benefits expenses ||22,340.20 ||19,977.07 ||11.8% |
|Finance costs ||1,61,876.50 ||1,12,032.35 ||44.5% |
|Depreciation and amortisation expenses ||2,224.33 ||1,956.32 ||13.7% |
|Loan provisions and write-offs ||28,334.34 ||15,702.00 ||80.5% |
|Other expenses ||49,632.86 ||37,266.04 ||33.2% |
|Total Expenses ||2,64,408.23 ||1,86,933.78 ||41.4% |
|Profit before exceptional items and taxes ||1,25,061.67 ||92,525.60 ||35.2% |
|Exceptional items (net) - income/ (expense) ||2,858.21 ||- ||- |
|PBT ||1,27,919.88 ||92,525.60 ||38.3% |
|Tax expense ||39,650.70 ||30,513.93 ||29.9% |
|PAT ||88,269.18 ||62,011.67 ||42.3% |
|Basic EPS (Rs.) ||16.59 ||12.09 ||37.2% |
In fiscal 2013, the growth in new contracts stood at 14.3 per cent, which, in turn,enhanced the Companys total assets and total revenues by 37.3 per cent and 39.4 percent, respectively, as compared to the previous fiscal. The Companys profit beforetax (PBT) witnessed 38.3 per cent growth, increasing from Rs. 92,525.60 Lacs in 2011-12 toRs. 1,27,919.88 Lacs in 2012-13. Profit after tax (PAT) also increased from Rs. 62,011.67Lacs in 2011-12 to Rs. 88,269.18 Lacs in the current fiscal, up 42.3 per cent.
Subsequently, basic earnings per share grew by 37.2 per cent, from Rs. 12.09 in 2011-12to Rs. 16.59 in 2012-13.
Table 3 Key Ratios
|Particulars ||2012-13 ||2011-12 |
|PBT/Total income ||32.8% ||33.1% |
|PBT/Total assets ||5.1% ||5.1% |
|RONW (avg. net worth) ||23.9% ||22.8% |
|Debt/Equity ||4.2 ||4.7 |
|Capital adequacy ||19.7% ||18.0% |
|Tier I capital ||17.0% ||15.1% |
|Tier II capital ||2.7% ||2.9% |
|Book value (Rs.) (excluding ESOPs) ||79.0 ||57.3 |
The Companys debt to equity ratio stood at 4.2 on 31st March, 2013. Compared toother finance companies, the Company has better scope to enhance borrowings for futurebusiness ventures.
The Company has capital adequacy ratio of 19.7 per cent as compared to 15 per cent,mandated by the Reserve Bank of India. The book value stood at Rs. 79.0 as on 31st March,2013.
The Company prudently makes additional provisions for NPAs at a faster rate than thatprescribed by RBI. In FY 2012-13, the gross NPA to total asset ratio stood at 3 per cent,while the net NPA to total asset ratio was at 1 per cent.
Although rural India has made significant strides in recent decades, it has a long wayto go. According to Census 2011, rural India:
Is home to 833 Million people
Covers 38 per cent of total pan-India bank branches (32,000 branches)
Offers bank access to 39 per cent population
Constitutes 9 per cent in total deposits, 7 per cent in total credit, 10 percent in life insurance and 0.6 per cent in non-life insurance business
Indias Government has focused on financial inclusion to provide credit facilitiesand other government-sponsored benefits to the rural population. Powered by its extensivereach, the Company has emerged as one of the important drivers of rural credit. Goingahead, various government initiatives to elevate the quality of life in rural India willcatalyse MMFSLs growth opportunities.
In the last five years, Commercial Vehicles (CV) loan disbursements grew by around 10per cent per annum owing to the growing CV sales. Light Commercial Vehicles (LCV)disbursements grew by 23 per cent per annum, faster compared to Medium and HeavyCommercial Vehicles (MHCV) disbursements. The focus of market players to drive sales andenhanced vehicle financing will augur well for the segment. On the other hand, MHCVdisbursements grew by around 6 per cent. However, finance penetration in this segment wasimpacted during the year due to the economic volatility and higher risk aversion byfinanciers. Nevertheless, steady growth in underlying vehicle demand and increase infinance penetration is expected to drive the CV finance industry over the next five years.By 2016-17, vehicle financing penetration levels will reach 74 per cent for cars and 66per cent for UVs, following moderation in interest rates and alleviation of credit risks.The Loan to Value (LTV) ratio for cars and Utility Vehicles (UV) is also expected to riseto 75 per cent and 71 per cent, respectively. These factors are expected to accelerate thevehicle finance industry growth by 18-20 per cent, reaching Rs. 1,150 Billion in 2016-17.
Table 4 Projected growth of new car finance and new car market
| ||New car market ||New car finance market |
|2009-10 ||637 ||349 |
|2010-11 ||858 ||476 |
|2011-12 ||905 ||456 |
|2012-13 ||991 ||506 |
|2016-17 (Projected) ||2,100 ||1,165 |
Table 5 Projected growth of Utility Vehicles (UV) finance and new Utility Vehiclesmarket
| ||New UV market ||New UV finance market |
|2009-10 ||253 ||108 |
|2010-11 ||340 ||155 |
|2011-12 ||396 ||172 |
|2012-13 ||485 ||217 |
|2016-17 (Projected) ||872 ||409 |
(Source: CRISIL Report on Auto-Finance, October 2012)
The small and medium enterprises (SMEs) contribute significantly to Indiaseconomic development, including:
40 per cent in domestic production
About 50 per cent in total exports
45 per cent in industrial employment
95 per cent in all industry establishments
(Source: FICCI Report on Financial Foresights, Volume 2, Q2 FY 12-13)
Despite growing considerably over the past few years, Indias SMEs often lackaccess to timely and adequate credit to meet working capital requirements. A majority(92.77 per cent) of Indias SMEs lack access to finance, while only 5.18 per centavail finance from institutional sources (Source: Role of Government in SME Financing,YES Bank report, April 2012). Hence, the sector has immense potential to fuel industrygrowth.
The 12th Five Year Plan (2013-17) estimates a housing shortage of over 40 Million, withover 200 Million people, especially in rural India, living in chronically poor housingconditions (Source: Planning Commissions Report on Rural Housing, September 2011).Several schemes introduced by the National Housing Bank and the Government of India tobridge the housing demand-supply gap will, in turn, help the Company grow.
The housing demand is further magnified by:
A favourable demographic profile (65 per cent of the population is below 35years)
Growing family nuclearisation, leading to higher housing demand
On the other hand, Indias mortgage profile as a percentage of GDP remains one ofthe worlds lowest (9 per cent), a considerable headroom for growth. By 2015, thehome loan portfolio of finance companies is expected to reach Rs. 3,116 Billion. Goingforward, Mahindra Rural Housing Finance Limited, the Companys subsidiary, inassociation with the National Housing Bank, will contribute significantly to theCompanys consolidated revenues.
With most of the countrys population still uninsured, Indias insurancesector offers immense growth potential. Insurance sector growth is expected to be drivenby a combination of factors viz., expanding economy, rise in young earners, growing publicawareness and escalating concern about the incidence of natural calamities. Thecountrys general insurance and life insurance markets are likely to reach Rs. 90,000Crores and Rs. 5,17,000 Crores, respectively by 2015 (Source: ASSOCHAM and DeloitteReport on Funding the Infrastructure Investment Gap). With enhanced operations of oursubsidiary Mahindra Insurance Brokers Limited, we are well positioned to leverage thelong-term growth.
MUTUAL FUND DISTRIBUTION
The Assets Under Management of Indian Asset Management Companies reached Rs. 8.16trillion in March, 2013. The Indian Mutual Fund Industry witnessed sluggish short-termgrowth in last 2 years due to changes in regulatory guidelines, including abolishment ofentry load, stringent KYC norms, guidelines on transaction charges and tighteningvaluation and advertisement norms. However, Securities and Exchange Board of India (SEBI)has undertaken several initiatives to re-energise the industry. Enhanced presence,relaxing KYC norms for small investors, widening distributor network to include postalagents and retired officials, and recommending the inclusion of equity scheme mutual fundproducts under Rajiv Gandhi Equity Savings Scheme will help the industry in the long-run.
On the other hand, Indias gross national savings is expected to reach USD 1,455Billion by 2016. With only 10 per cent of Indias savings being channelised tofinancial services, and abysmally low penetration of mutual funds in India, thecountrys mutual fund distribution has considerable growth prospects.
(Source: KPMG India, Sector Insights (Issue 21), September 2012)
An overall sluggish economy is affecting industry growth. Combined with adeclined automobile demand, the sector projects moderate growth in the coming years.
Products standardisation is gradually gaining prominence, owing to variableinterest rates, different payment terms and low processing fees, in the wake of enhancedcompetition.
The economic slowdown can raise the delinquency rate and enhance credit costs.
The adverse operating environment around the Heavy and Medium CommercialVehicles and Construction Equipment (CE) segments will keep asset quality under pressure.It may increase the aggregate gross NPA (NPA 180 days overdue) ratio of the keyNBFCs to 2.7 per cent-3.0 per cent in 2013 from 2.1 per cent in FY 2012.
Unlike banks, NBFCs depend on non-retail borrowing. The regulatory requirements mayrestrict the banks to fund the NBFC sector. A tight liquidity condition will furtherincrease costs of funds. With multiple players invading the market, the ability to competeeffectively will depend, to some extent, on the Companys ability to raise low-costfunds in future.
Risk management is integral to MMFSLs business philosophy. The CompanysBoard has put in place a systemic Risk Management Committee to effectively manage andreview the risk management systems, policies and strategies.
The operating risk management team, headed by the Chief Financial Officer, identifies,assesses and monitors all principal relevant risks, in accordance with defined policiesand procedures. The Companys key risks and mitigation strategies include thefollowing:
Risk: Mahindra Finance is dependent on Mahindra & Mahindra Limited (M&M),the parent company for sourcing of business. Hence, sluggish growth by M&M can impactthe Companys future growth prospects.
Mitigation: The Company is gradually expanding its vehicle financing business. Inthe current fiscal, it has considerably lowered its dependence on M&M vehicles andincreased its presence in commercial vehicle, construction equipment and pre-owned vehiclefinancing (M&M and Non-M&M asset ratio is around 45: 55).
Risk: Continuously evolving government regulations may impact operations.
Mitigation: The Company continuously monitors regulatory compliances. TheCompanys Tier I and Tier II capital adequacy ratios conform to regulatory norms. Theexpertise of the Senior Management facilitates these compliances.
Risk: The inherent nature of lending exposes the Company to considerable creditrisk, which may lead to higher NPAs.
Mitigation: Insight about the nature of borrowers and a strong business modelreduce the risk of defaults significantly.
Risk: Government policies may impact interest rates and liquidity.
Mitigation: The Company has prudently evolved a strategic fund mix to reducedependence on banks. Moreover, superior credit rating helps MMFSL raise funds at acompetitive rate.
Risk: Simplified sanction procedures and low-entry barriers have encouraged theinflux of new players in the NBFC market, enhancing competition.
Mitigation: Mahindra Finances extensive presence across rural India providesit with a decisive edge over its competitors.
Since the beginning of its journey, MMFSL has developed a strong and sustainablebusiness model to maintain profitability, even amidst the global economic turmoil. TheCompanys customer-centric business model has been yielding significant results overthe years. It is optimistic about the growing business potential across Indias vastrural and semi-urban markets. MMFSLs growth is expected to be driven by itsextensive branch network, growing customer fraternity, operational excellence, innovativeproducts with local relevance, strong processes and prudent risk management.
INFORMATION TECHNOLOGY (IT)
MMFSLs systematic and sound IT support system facilitates smooth transactionprocesses. At the pre-disbursement stage, the system maintains relevant customer detailsfor future reference. After disbursement, the system generates the Equated MonthlyInstalments (EMI) due on each loan at any given point. It also tracks each phase of thepayment schedule (until maturity) and enables the senior management to access operationaldata, as and when required.
MMFSL has successfully implemented innovative solutions over a period of time, to focusand address the problems specific to the Rural environment in India. The hand-held devicesused by the field executives act as a virtual local branch at the customers doorstep and provides information about the dues and transactions to the customers in theirpreferred languages. Other innovations include Mobility solutions for tracking andmonitoring Turn-
Around-Time, self-service portals for all Customers and Dealers, Solar and wind basedpower solutions to provide uninterrupted customer servicing at remote rural locations,etc.
As on 31st March, 2013, about 96 per cent of the offices were connected to thecentralised data centre in Mumbai. Besides, the Companys field executives useapproximately 9,000 hand-held GPRS devices to collect loan payments from thecustomers home or business locations.
The Companys entire data and systems are centrally controlled from the HeadOffice and all production servers maintain a daily automated back-up. It leveragesadvanced technologies and facilities for in-system data back-up and disaster recovery.
HUMAN RESOURCE MANAGEMENT
MMFSLs growth and sustained leadership is the result of hard work and commitmentof its people. The human enterprise drives the Companys customer-driven businessmodel.
The Company recruits and retains industry relevant talent by virtue of a strongrecruitment policy, clearly defined roles and responsibilities, individual performancemanagement systems and performance-based compensation policies. The inspiring workenvironment also ensures career progression of the employees. Rewarding employee stockoptions to key performers creates a sense of ownership among employees. Besides, theCompany regularly identifies areas of improvement to accelerate business processes.Moreover, the Mahindra Finance Academy imparts training to employees to significantlyenhance the organisations collective knowledge and efficiency.
INTERNAL CONTROL SYSTEM
The Company has put in place an adequate internal control system to safeguard allassets and ensure operational excellence. The system also meticulously records alltransaction details and ensures regulatory compliance.
It also has a team of internal auditors to conduct internal audit. Reputed audit firmsalso ensure that all transactions are correctly authorised and reported. The reports arereviewed by the Audit Committee of the Board. Wherever deemed necessary, internal controlsystems are strengthened and corrective actions initiated.
Certain statements in the Management Discussion and Analysis describing theCompanys objectives, predictions may be "forward-looking statements"within the meaning of applicable laws and regulations. Actual results may varysignificantly from the forward looking statements contained in this document due tovarious risks and uncertainties. These risks and uncertainties include the effect ofeconomic and political conditions in India, volatility in interest rates, new regulationsand Government policies that may impact the Companys business as well as its abilityto implement the strategy. The Company does not undertake to update these statements.