ROLE OF NON-BANKING FINANCIAL COMPANIES IN ECONOMIC DEVELOPMENT:
NBFCS AID IN ECONOMIC DEVELOPMENT IN FOLLOWING WAYS:
? Mobilization of resources- It converts savings into investments.
? Capital Formation- Aids to increase capital stock of Company.
? NBFCs provide long term credit and specialized credit.
? Aids in employment generation
? Help in development of financial markets.
? Help in attracting foreign grants.
? Helps in breaking the vicious circle of property by serving as Governments
Instrument.
OVERALL REVIEW
The word economic slowdown grabbed not only the headlines but business cycles of
lenders as well. Some hard OVERALL REVIEW: lessons have been to focus on being prudent and
building robust models. 2019 has kept everyone on their toes. Still, the biggest learning
has been that regardless of liquidity crisis or economic slowdown, investors will focus on
solid business models and proven teams that can drive profitability. NBFCs are learning to
calibrate the overall market dynamics and approaching new strategies to lend to different
segments. On the domestic front, the near-term economic prospects appear severely impacted
by lockdown induced disruptions to both supply and demand side factors, diminished
consumer confidence and risk aversion. While financial sector regulators and the
Government have taken policy measures to ensure financial intermediation functions
normally, and distress faced by disadvantaged sections of society is mitigated, the down
side risks to short term economic prospects are high. Policy measures have so far kept
financial markets from freezing up, and eased liquidity stress facing financial
institutions and households. Consequently, borrowing costs have ebbed and illiquidity
premia have shrunk. Nonetheless, risk aversion and lackluster demand have impeded the
fuller flow of finance from both banks and non-banks into the economy.
OPPORTUNITIES, THREATS, RISKS, CONCERNS, PERFORMANCE AND OUTLOOK
The Government has taken a series of measures to generate demand and ease the liquidity
by ensuring public OPPORTUNITIES, THREATS, RISKS, CONCERNS, PERFORMANCE AND OUTLOOK:
sector banks lend further to NBFCs, introducing partial credit guarantee scheme,
organizing loan mela etc. However, the experts believe that from an industry point of
view, the slowdown that has begun, cant be turned around that easily for which a booster
shot is required. Structurally, the government can make it easier for MSMEs to survive the
environment by providing more subsidies to some sectors and build more platforms for
small-scale industries to expand. Government should consider relaxing and easing some
compliances, for e.g. reforms on taxes or entry requirements for DFIs etc. Every
fundamental indicates towards a higher growth and better future next year, reflecting
strong optimism going into 2022. The overall economic outlook is currently challenging,
nobody can expect demand to pick up. These could include a change in personal tax rules in
order to put more money in the hands of the common man for a consumption-led revival of
the economy, measures to prop up the health and lending abilities of NBFCS, policies to
fast track digital adoption in tier 3, tier 4 towns. To compete in the fast-changing
global technological landscape, the Indian lending sector will need continued support from
the government and regulators to further evolve and scale up. Further a robust Aadhar and
digital payments infrastructure is needed to have a truly digital consumer lending
experience across consumer segments and loan products.
In the past Aadhar has been a great help for financial institutions for faster
on-boarding and managing KYC. The SC ruling had impacted many players who build their
business models on Aadhar. P2P lenders had a good year end to rejoice as RBI had hiked the
investment limit from Rs 10 lakh to Rs 50 lakh subject to declaration of net worth by a
Chartered Accountant. The recent boost from RBI which raised P2P lending cap from Rs 10
lakh to Rs 50 lakh is a game changer, an income tax rebate/deduction for P2P investment
can further help the P2P lending industry. Also operational efficiencies can be
significantly improved if the government facilitates Aadhaar based services for KYC &
agreements signing.
According to the Reserve Bank of Indias (RBI) Financial Stability Report-2020, recent
developments in the Non-banking financial companies (NBFC) sector have brought the sector
under greater market discipline as the better performing companies continued to raise
funds while those with Assets Liability Mismatch and/or asset quality concerns were
subjected to higher borrowing costs. In terms of network analysis, the total outstanding
bilateral exposures among constituents of the financial system narrowed during 2019-20.
In terms of inter-sectorial exposures, asset management companies/mutual funds
(AMCMFs), followed by insurance companies, and were the biggest fund providers in the
system, while non-banking financial companies (NBFCs) were the biggest receiver of funds,
followed by housing finance companies (HFCs). AMC-MFs recorded a sharp decline in their
receivables from the financial system, while public sector banks (PSBs) and insurance
companies experienced an increase. Payables of NBFCs and HFCs increased marginally.
BasedonthedisclosuresmadebyNBFCs/HFCs,theassetsundermoratoriumaredominatedbywholesalecustomers
and real-estate developers, although retail portfolios in the micro-loans and auto loan
segments have also been affected. Access of NBFCs/HFCs to capital markets, both debt and
equity, is of significant importance to the sector.
Simultaneously, there is a visible consolidation in a few industries namely, airlines,
telecom and real estate developers leading to disruption and breakdown of many weaker
players. This has unfortunately led to rising unemployment, higher NPAs for Banks and
NBFCs, and large write offs in the income statements of creditors as seen in the Jet
Airways scenario. The emergence of strong leaders in industries which are consolidating
brings forth investment opportunities. In financial markets it is commonly referred to as
"Value Migration".
NBFCs can bring the much needed diversity to the financial sector thereby diversify the
risks, increase liquidity in the markets thereby financial stability and efficiency can be
promoted to the financial sector. In the backdrop of a growing economy, NBFCs will
continue to grow in the financial ecosystem and create meaningful financial inclusion and
further the government agenda of "Self- reliant India", "Make in
India" and ‘Start-Up India.
The Directors confirm that all the investments have been made with the intent to hold
for long term appreciation, to enhance the income from dividends and are not held for
trade. The Company continues to remain invested in sectors, which we believe have
potential to remain value accretive over the long term. The Company continues to invest
for the long term while availing opportunities to realize gains. The Company endeavours to
evaluate opportunities considering the macro economic conditions both globally and
domestically
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
The financial performance of the Company for the year 2021-22 is described in the
Directors Report under the head of ‘Operation.
SEGMENT WISE PERFORMANCE
The Company has only one segment i.e. NBFC – Investment Company.
INTERNAL CONTROL SYSTEMS AND ADEQUACY
The Internal Control Systems and their Adequacy of the company for the year 2021-22 is
described in the Directors Report under the head of ‘Internal Control Systems and
Their Adequacy.
HUMAN RESOURCE DEVELOPMENT/INDUSTRIAL RELATIONS
Driven by the Groups visionary leadership during the year, training programs are
conducted to facilitate competency development both functional and behavioural for
harmonious and cordial Industrial relations. The knowledge and skill enhancement programme
were conducted for the employees. No operating days were lost due to strike, lock out etc.
Human Resources Development, in all its aspects like training safety and social values are
under constant focus of the management.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER
OF PEOPLE EMPLOYED
There is no material development in human resources. Industrial relation with number of
employed during the year are cordial.
DETAILS OF SIGNIFICANT CHANGES _I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE
IMMEDIATELY PREVIOUS FINANCIAL YEAR_ IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED
EXPLANATIONS THEREFOR, INCLUDING:
| Particulars |
FY 2021-22 |
FY 2020-21 |
| (i) Debtors Turnover |
N.A. |
N.A. |
| (ii) Inventory Turnover |
N.A |
N.A |
| (iii) Interest Coverage Ratio |
N.A |
N.A |
| (iv) Current Ratio |
12.40 |
2.69 |
| (v) Debt Equity Ratio |
N.A |
N.A |
| (vi) Operating Profit Margin (%) |
N.A |
N.A |
| (vii) Net Profit Margin (%) |
N.A |
N.A |
or sector-specific equivalent ratios, as applicable.
Details of any change in Return on Net Worth as compared to the immediately previous
financial year along with a detailed explanation thereof – Not Applicable
CAUTIONARY STATEMENT
Statement in this Management Discussion and analysis describing the Companys
objective, projects, estimates and expectations may be forward looking statement within
the meaning of applicable laws and regulations. Actual results may vary significantly from
the forward-looking statements contained in this document due to various risks and
uncertainties. Several factors could make a significant difference to the Companys
operations. These include economic conditions, Government regulations and Tax Laws,
political situation, natural calamities etc. over which the Company does not have any
direct control.
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