bnk capital markets ltd Management discussions

Overview

Non- banking finance companies (NBFCs) play an important role in an economy like India, with the growing financial needs of the urban middle class and a pre- dominantly rural population. They offer a variety of services such as loans and advances, saving and investment plans, credit facilities, insurance, acquisition of shares and more. NBFCs are leveraging their superior understanding of regional dynamics and customized products and services to expedite financial inclusion in India. Systemically Important NBFCs have demonstrated agility, innovation and frugality to provide formal financial services to millions of Indians.

NBFCS showed an immense growth in lending through digital mode with around 60% of laons being disbursed through digital channels. The Country is still at a nascent stage in terms of digital lending, however the space is very exciting given the availability of data/ internet services available at cheaper rate.

Through various policy announcements, the government has reinforced the stature of the infrastructure sector as a critical driver of economic growth and overall development. While the National Infrastructure Pipeline (NIP) introduced in 2019 will continue to push the infrastructure juggernaut forward, the PM Gati Shakti National Master Plan and National Logistics Policy announced in February 2022 and September 2022, respectively, will also further this cause.

Over the years, India has emerged as one of the fastest-growing economies in the world and an attractive investment destination driven by economic reforms and a large consumption base. We believe that NBFCs with superior capital adequacy, better margins, frugal cost management, prudent risk management and those incorporating above four key cornerstones in their business models will continue to deliver sustainable growth in the foreseeable future.

Opportunities and Threats

Over the past three fiscals, NBFCs largely focussed on liquidity, capital and provisioning buffer. These, combined with the consistent improvement in economic activity, have put the sector in a better position today to capitalize on growth opportunities. That said, two key monitorables remain. First, intensifying competition from banks, especially in the traditional retail segments of home loans and vehicle finance. Second, rising interest rates have increased the cost of borrowing for NBFCs, which is limiting their competitiveness in some asset classes. To be sure, NBFCs are realigning their portfolio strategies to combat these challenges. Their focus is shifting towards non-traditional asset classes unsecured loans; micro, small and medium enterprise (MSME) finance; and used vehicle finance which are expected to post higher growth. Consequently, these segments are garnering higher share in incremental disbursements. While the traditional segments will also grow, the rate is unlikely to surpass the pre-pandemic levels. As large NBFCs tap new segments, co-lending and partnerships with the emerging and mid-sized NBFCs will gain traction. With this shift and NBFCs being able to pass on the increase in cost of borrowing to consumers, at least in incremental disbursements, gross spreads are likely to compress 40-60 basis points (bps) this fiscal.

Outlook:

Non- Banking Financial Companies (NBFCs) are set to announce robust results on the back of strong credit, Upcycle, higher disbursements and higher collections.

NBFCs would maintain loan growth of around 14% year on year basis in the next fiscal year on back of Higher demand for loan against property, housing loan, vehicle finance loan and personal loan. The existing on balance sheet liquidity would help in maintaining funding cost for certain quarters. However, a rising interest Rate, regime would impact funding costs for incremental borrowing across capital market instruments The Union government has set a target of infrastructure investment of over Rs. 111 lakh crore under the National Infrastructure Pipeline (NIP) and the pace of infrastructure investment is planned to be twice the past level. In line with same, Rating agency ICRA Ltd has revised its outlook to positive from stable for non-banking financial companies - infrastructure finance companies (NBFC-IFCs) on expectations of a continuation of enhanced performance in FY23-24.

Business Segment Analysis

During the period under review, the Companys activities was majorly restricted to Capital Market, NBFC and related fields which specifically involve in trading and dealing in Securities and Mutual Funds.

Financial Results

The financial performance of the Company, for the year ended 31st March, 2023 is summarized below :

Particulars	Year Ended 31st March 2023	Year Ended 31st March 2022
	(Rs. In Lakhs)	(Rs. In Lakhs)
Profit Before Tax	2,376.72	2,894.77
Net Profit After Tax	1,886.28	2,199.73

Comment on current years performance:

Revenue	Total Revenue of the Company has decreased in comparison to previous year because of sale of shares & lower dividend and interest income
Operating Expenses	Operating & Administrative expense have decreased considerably in comparison to previous year.
Operating Profit	Though operating expenses register a decline during the year but due to reduction in interest and dividend income, operating Profit decreased during the year.
Finance cost	Finance cost has reduced considerably during the year
Net Profit	Net profits of the Company during the year have decreased in comparison to previous year due to lower dividend and interest income.

Calculation and Explanation of Major Ratios

Particulars	Standalone
	31- March- 2023	31-March-2023
Current Ratio
Total Current Assets/Current Liabilities)	141.63	192.62
Reason for variance: Due to fixed deposit invested in Non- Current Investment
Operating Profit Margin (%)	73.93%	73.69%
Operating profit/ Revenue from operations
Net Profit Margin (%)	58.69	56.21%
Reason for variance= Increase in dividend income

Note: Debt Equity Ratio and Interest Coverage ratio is not relevant as Company has negligible debt as on 31st March, 2023.

Human Resources

We have believed that our people are our most important asset and our HR function always places a great emphasis on employee engagement, capability building, nurture talent, and focus on training and individual development. We have always been committed to create environment where all individuals are treated with respect and dignity and cultivating an atmosphere where individuals enjoy the right to work in professional environment to deliver their best results.

Internal Controls

The Company has a proper and adequate system of internal controls befitting its size to ensure that all its assets are safeguarded and protected against loss from unauthorized use and disposal and that all transactions are authorized and reported correctly.

The internal controls are supplemented by internal audits, reviewed by Audit Committee of Board of Directors. The internal control ensures that appropriate financial records are available for preparing financial statements and other data for showing a true and fair picture of the state of affairs of the Company.

	For and on behalf of the Board of Directors
		QUEST CAPITAL MARKETS LIMITED
Place: Kolkata
Date: 18.07.2023
	Mr. Sunil Bhandari	Mr. Harish Toshniwal
	DIN No.: 00052161	DIN: 00060722