MANAGEMENT DISCUSSION AND ANALYSIS REPORT
1. Overview
The world was largely free of the impact of Covid in 2022-23. The war in Ukraine
dragged on with progressive reduction in the impact on commodities during the course of
the year. The war has also had a significant impact on the global economy, causing energy
prices to rise and disrupting supply chains. Inflation was a major concern in many
countries during the year. In the United States, inflation reached a 40-year high in 2022.
It made more difficult for people to afford basic necessities, and also lead to economic
instability around the globe. However, India was not significantly impacted with the
Inflation. It appears to have peaked and seem to be slowly receding. However, tight labour
markets in advanced economies ensured demand did not slacken even with multiple interest
rate hikes which leaves us with prospects of more rate increases to rein in inflation. US
Federal Reserve raised interest rates by a cumulative 3.5% in the past one year ending
March 2023. The terminal rate that was initially thought to be around 4.6% is now seen
crossing 5%, which shows that inflation is entrenched. The consistent rate increases have
led to stress in some parts of the Banking system. Collapse of the Three Major US banks
also significantly impacted the financial industry. Tighter financial conditions lead to
forecasts of recession for parts of the western world. World Bank warned in a paper in
September, 2022 that the world wide slow down and tightening financial conditions will
give rise to significant financial stress and trigger a global recession in 2023. However,
the growth rate of India for FY 2023-2024 is estimated to be 7.2%. This is slightly lower
than the growth rate of 9.1% in FY 2022-2023. The lower growth rate is attributed to a
number of factors, including the Russia-Ukraine war, rising inflation, and supply chain
disruptions.
Industry Structure and Developments
NBFCs have become important constituents of the financial sector and have been
recording higher credit growth than scheduled commercial banks (SCBs) over the past few
years. NBFCs have been at the forefront of financial inclusion in India, lending to
undeserved and unserved segments such as small businesses and rural households. They have
played an important role in deepening access to formal credit and promoting inclusive
growth.
NBFCs are leveraging their superior understanding of regional dynamics and customised
products and services to expedite financial inclusion in India. Lower transaction costs,
quick decision making, customer orientation and prompt service standards have typically
differentiated NBFCs from banks. Considering the reach and expanse of NBFCs, they are
well-suited to bridge the financing gap in a large country like India.
Given the systemic risks that the sector poses, the RBI issued ‘Scale Based
Regulation (SBR): A Revised Regulatory Framework for NBFCs and in line of this RBI issued
Compliance Function and Role of Chief Compliance Officer (CCO), Loans and Advances -
Regulatory Restrictions, Capital requirements for Non-Banking Finance Companies, Large
Exposures Framework for Non-Banking Financial Company, Guidelines on Compensation of Key
Managerial Personnel (KMP) and Senior Management in NBFCs, Provisioning for Standard
assets by NonBanking Financial Company, Multiple NBFCs in a Group during the year under
review.
Apart from Scale based regulations and multiple directions issued thereunder, the RBI,
inter alia, has also issued following to effectively regulate and govern the business of
NBFCs in India:
1. Master Direction - Credit Card and Debit Card - Issuance and Conduct Directions,
2022
2. Lending by Commercial Banks to NBFCs and Small Finance Banks (SFBs) to NBFC-MFIs,
for the purpose of on-lending to priority sectors
3. Outsourcing of Financial Services - Responsibilities of regulated entities employing
Recovery Agents
4. Guidelines on Digital Lending. Etc.
Opportunities
NBFCs have served the unbanked customers by pioneering into retail asset-backed
lending, lending against securities and microfinance. Following variables in the external
environment may be seen as opportunities for the Company:
• NBFCs aspire to emerge as a one-stop shop for all financial services
• The sector has witnessed moderate consolidation activities in recent years, a
trend expected to continue in the near future
• New banking license-related guidelines issued by RBI place NBFCs ahead in
competition for licenses owing largely to their rural network
• New RBI guidelines on NBFCs with regard to capital requirements, provisioning
norms & enhanced disclosure requirements are expected to benefit the sector in the
long run.
Challenges
• Competitive rivalry between big players is intense in the industry
• Financial services companies often compete on the basis of offering lower
financing rates, higher deposit rates and investment services;
• Stringent regulatory norms prevent new entrants;
• Customers prefer to invest their money with a reputed financial services company
offering a wide range of services;
• Low bargaining power of suppliers as the industry is highly regulated by RBI;
• Medium bargaining power of customers. Although customers do not have much
bargaining power, they can easily switch to another company based on the terms and quality
of services provided.
STRENGTH:
The existing management has a strong technical, finance and administrative expertise in
various industries and corporate sectors including the business of the Company.
Internal Control Systems and their adequacy
Given the magnitude and nature of its business, the Company has maintained sound and
commercial practice with an effective internal control system. The system ensures that all
transactions are authorized, recorded and reported correctly to safeguard the assets of
the Company and protect them from any loss due to unauthorized use or disposition. The
adequate internal information system is in place to ensure proper information flow for the
decision- making process. The Company also has well-established processes and clearly
defined roles and responsibilities for people at various levels. The control mechanism
also involves well documented policies, authorization guidelines commensurate with the
level of responsibility and standard operating procedures specific to the respective
businesses, adherence to which is strictly ensured. Internal audit is carried out
frequently to create awareness and to take corrective actions on the respective units or
areas, which need rectification.
Outlook, risks and concerns
This section lists forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these statements as a
result of certain factors our Outlook, risks and concerns inter-alias follows:
1. Our revenues and expenses are difficult to predict and can vary significantly from
period to period.
2. Our success depends in large part upon our management team and key personnel, and
our ability to attract and retain them.
Segment-wise or product-wise performance.
This has been already dealt in the financial statement attached with the annual report.
Exchange Rate Fluctuation
The functional currency of your Company is the Indian rupee.
Human Resources
The Company regards its human resources as amongst its most valuable assets and
proactively reviews policies and processes by creating a work environment that encourages
initiative, provides challenges and opportunities and recognizes the performance and
potential of its employees attracting and retaining the best manpower available by
providing high degree of motivation.
Your Company believes in trust, transparency & team work to improve employees
productivity at all levels.
Discussion on Financial Performance with Respect to Operational Performance
The financial statements have been prepared in accordance with the requirements of the
Companies Act, 2013 and applicable accounting standards issued by the Institute of
Chartered Accountants of India. The details of the financial performance of the Company is
appearing in the Balance Sheet, Profit & Loss Accounts and other financial statements
forming part of this annual report.
Significant Change in Financial Ratios
Based on the reported financial statements, following are the key financial ratios with
respective variations:
| Particulars |
31.03.2023 |
31.03.2022 |
Variations (%) |
| Current Ratio |
3.65 |
14.62 |
-74.98 |
| Debt Equity Ratio |
0.082 |
0.081 |
1.37 |
| Operating Profit Margin |
0.507 |
0.171 |
195.46 |
| Net Profit Margin |
0.498 |
0.171 |
190.16 |
| Return on Net Worth |
0.073 |
0.011 |
519.66 |
| Net Interest Margin |
0.052 |
0.048 |
8.99 |
The several ratios presented under ‘Key Ratios, over the previous year Operating
Profit Margin Ratio, Net Profit Margin Ratio, Return on Net Worth Ratio has appreciated by
more than 25% and Current Ratio have declined by more than 25% due to lessor turnover and
increase in other expenses in comparison to previous year.
Disclosures
During the year the Company has not entered in to any transaction of material nature
with its promoters, the directors or the management, their subsidiaries or relatives etc
that may have potential conflict with the interest of the Company at large.
All details of transaction covered under related party transaction are given in the
notes to account.
Cautionary Statement
The management discussion and analysis report containing your Companys objectives,
projections, estimates and expectation may constitute certain statements, which are
forward looking within the meaning of applicable laws and regulations. The statements in
this management discussion and analysis report could differ materially from those
expressed or implied. Important factors that could make a difference to the Companys
operation include changes in the governmental regulations, tax regimes, forex markets,
economic developments within India and the countries with which the Company conducts
business and other incidental factors.
2. Disclosure of Accounting Treatment
The Company has prepared their annual financial results for the year ended March 31,
2023 in accordance with the applicable Indian Accounting Standards (Ind AS).
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