Sakthi Finance Ltd

ECONOMY/INDUSTRY STRUCTURE AND OVERVIEW

The performance of Indian Economy in 2010-11 was commendable as the agriculture sectorincreased its output by 5.8 per cent as against 0.4 per cent in 2009-10. The bountifulrainfall in the Kharif season and the harvesting of rich crops in the Rabbi seasonfacilitated an output of 235.88 million tons against the estimate of 232.07 million tons.The exports were buoyant and there was a record output of food and cash crops in 2010-11.The industrial output dipped to lower levels after August and the rise for the whole yearwill be 8.60 per cent against 9.50 per cent. With the improvement in Industrial Productionand export, the growth in GDP is estimated at 8.70 per cent.

The Commercial Vehicle industry consists of Light, Medium and Heavy CommercialVehicles. This can be further classified into new and pre-owned Commercial Vehicles. Ourcompany's main thrust is on the pre-owned Commercial Vehicle segment. This segment ismostly dominated by unorganized players like Small Truck Operators (STO) and First TimeUser (FTU) etc.

OPPORTUNITIES

Backed by strong economic growth and new model launches, the Indian Commercial VehicleIndustry in 2010-11 grew to 26.97 per cent over the previous year. The Light CommercialVehicle (LCV) and Medium and Heavy Commercial Vehicle (M&HCV) registered a growth of22.88 per cent and 31.78 per cent respectively in 2010-11. Society of Indian AutomobileManufacturers (SIAM) expects the overall industry volume growth to settle at 12-15 percent in 2011-12. The market size of the pre-owned Commercial Vehicle is estimated atRs.520 billions. With the huge market size and the untapped potential, our company canincrease its market share in Pre-owned Commercial Vehicles which will facilitate thebusiness growth of the company.

THREATS

With the world prices of Crude and Petro products rising steadily, the IndianGovernment has also increased the Diesel and petrol prices. The rising interest is also acause of concern. The effect of increase in petro products and rising interest rates willhave an effect on the profitability of NBFCs which finance for New/ Pre-owned CommercialVehicles.

BUSINESS OUTLOOK

The outlook for the economy in 2011-12 is heartening as it is hoped that growth inoutput of agriculture sector will be 4 per cent on a larger base. If the total output offood crops exceed Rs.250 million tons in 2011-12 agriculture season, the performance ofthe industrial sector will be commendable.

The GDP has also been estimated at 8.70 per cent during 2011-12. The growth inagriculture and Industrial sector are likely to be better in 2011-12. The outlook forNon-Banking Financial Companies which fund the Road Transport sector stand to gain interms of profitability as the growth in agriculture and road transport sector areinterlinked.

PERFORMANCE AND FINANCIAL REVIEW

During the year 2010-11, the company's disbursements touched a new peak. The totaldisbursements for the year is Rs.35127 lakhs in hire purchase finance business as againstRs.29,609 lakhs in the previous financial year. As on 31st March 2011, the total depositswith the company stood at Rs.4829 lakhs.

The gross income for the year 2010-11 was Rs.9166.58 lakhs and the net profit after taxfor the year was at Rs.793.59 lakhs. The company has charged a depreciation of Rs.220.01lakhs in the profit and loss account.

RISKS AND CONCERNS

Our Company is exposed to normal industry risks such as credit, market, interest andoperational risks. These risks are mitigated by adopting prudent business and riskmanagement policies. The risk management policies are periodically reviewed by the AuditCommittee so as to modify them to suit our Company's business needs.

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

Our Company has a sound and adequate system of internal controls to monitor andregulate all the activities. The Company complies with internal control policies andprocedures and other regulatory requirements.

HUMAN RESOURCES DEVELOPMENT

During the year, our Company maintained very harmonious and cordial relationship withits employees. As on 31st March 2011, there were 324 employees. Our Company's humanresources philosophy is to establish and build a strong performance and competency-drivenculture with higher sense of accountability and responsibility among its employees. OurCompany has taken necessary steps to strengthen the organizational competency throughtraining programmes at various levels and installing effective system.

Cautionary Statement

Certain statements made in the Management Discussion and Analysis Report describing theCompany's objectives, predictions may be forward-looking statements within the meaning ofapplicable laws and regulations. Actual results may vary significantly fromforward-looking statements contained in this report due to various risks anduncertainties. These risks and uncertainties include the effect of economic and politicalconditions in India, change in interest rates, new regulations and Government policiesthat may impact the Company's business as well as its ability to implement the strategy.The Company does not undertake to update these documents.