kailash auto finance ltd Management discussions

Global Outlook

According to the World Bank, global GDP is projected to grow at 2.9 per cent in 2019, lower than the 3 per cent growth achieved in 2018. World Bank expects global growth to slow down further to 2.8 per cent in 2020. The International Monetary Fund (IMF) global growth forecasts, although slightly better than that of World Bank, indicate a slowdown nonetheless. IMF expects global economy to grow by 3.3 per cent in 2019, which is the weakest since 2009, after an estimated growth of 3.6 per cent in 2018. IMF however predicts global growth to recover to 3.6 per cent in 2020. Global economic growth has been slowing down since the second quarter of 2018 and there are no immediate signs of a pick-up. Growing trade tensions have contributed largely to this global slowdown.

The US economy registered strong growth in 2018, riding on the stimulus provided in terms of tax cuts. However, the positive effects of that stimulus seem to be fading and the US economy can slow down in the second half of 2019. The protectionist stance of the worlds biggest economy is causing trade friction. China, Europe, Japan, Mexico, India, and many others stand affected. Some of the affected nations have already started retaliating by imposing higher tariffs on goods exported by US. This, if continued, will have wider ramifications across the entire global supply chain.

One positive development is the change in stance of the main central banks which had earlier started winding down the quantitative easing undertaken in the aftermath of the global financial crisis of 2008. The US Federal Reserve had started raising interest rates since 2015 which continued until last year, but its recent announcements indicate a switch to a more accommodative strategy. Bank of Japan is continuing with its asset purchase agenda and a negative interest rate policy. European Central Bank, after tapering its stimulus, has expressed its intent to keep interest rates low and, if situation demands, is even open to restart its bond purchase programme.

Indian Scenario

The Indian economy continues to be a bright spot in the world map. For one more year India has held on to its position of the fastest growing major economy in the world. According to Central Statistics Office (CSO), for 2018-19, Indias GDP growth rate has been estimated to be 7.0 per cent, down from the 7.2 per cent achieved in 2017-18. According to IMF, Indias GDP growth rate is expected to pick up to 7.3 per cent in 2019 and to 7.5 per cent in 2020. According to estimates by Asian Development Bank (ADB) and the Reserve Bank of India (RBI), the Indian economy will grow at 7.2 per cent in 2019-20. However, it is worth noting that IMF, ADB, RBI and CSO have reduced their growth forecasts for India in the wake of recent developments. In the October-December quarter of 2018, Indian economy grew at 6.6 per cent, its slowest in last five quarters.

During the year under review, the Indian economy overtook France to become the worlds sixth largest economy. India also moved up to 77th position in the World Banks Ease of Doing Business survey, up by 53 places in the last two years. The India growth story has remained attractive to the global investor community. Another notable achievement for the economy during the year under review is the total exports (goods and services combined) surpassing the USD 500 billion mark for the first time. While India, like many other EMDEs, can get affected by global developments, the foreign exchange reserve of USD 415 billion provides adequate buffer.

Considerable progress has been made on the roll-out of the Goods & Services Tax (GST). Though the GST regime is still evolving, it has been successful in expanding the tax base and in drawing much of the erstwhile informal activity into the formal sector. With further rationalization of tax rates and expanding the coverage of GST to all sectors, entrepreneurship is likely to take off in a big way.

NBFCs in India

In India, the Non Banking Financial Companies (NBFCs) play an active role in meeting the funding needs of those segments of the society who mostly remain unserved by the formal modes of institutional funding. NBFCs are essentially fuelling entrepreneurship by catering to the funding needs of the micro, small and medium enterprises (MSMEs) many of which are involved in the infrastructure sector in services like construction, transportation, etc. Thus, NBFCs are performing a dual role of promoting financial inclusion and nation building.

As on September, 2018, the number of NBFCs registered with the RBI stood at 10,190. Of those, 10,082 are non-deposit taking, which is more than 95 per cent of the total number. The year under review has been a challenging one for the NBFC sector. Some isolated market events have significantly reduced the flow of funds to NBFCs from the institutional sources. RBI has tried to address the liquidity concerns of NBFCs, but more steps are needed.

Business Outlook and Future Plans

During the year under review, the government continued its efforts towards enhancing Indias attractiveness as an investment destination which resulted in:

• India climbing up 23 positions (from 100th in 2017 to 77th in 2018 among 190 countries) in the World Banks Ease of Doing Business Index

• India moving up 5 places (from 63rd in 2017 to 58th in 2018) in the Global Competitiveness Index of the World Economic Forum

• Indias rank improving from 60th in 2017 to 57th in 2018 on the Global Innovation Index of World Intellectual Property Organization

In order to sustain the growth momentum and to create jobs, the government has been proactively spending on infrastructure creation. According to the Interim Budget 2019-20, the total capital outlay for infrastructure in 2019- 20 has been kept at Rs. 4.7 trillion (approximately USD 70 billion). Among infrastructure segments, railways and roads are the biggest beneficiaries for 2019-20.

Overview of the Company

The Companys overall performance have been average during the Financial Year 2018-19. The financial results have been disclosed in the Financial Statements annexed herewith.

Human Resources

Human Resource is one of the most important key to success of any Company. Our Companys business critically depends on quality of manpower. The Company posses unique challenges to the Human Resource function. The HR function of the Company has been structured and aligned in line with the business needs and requirements. The Company business is managed by a team of competent and passionate leaders, capable of enhancing your Company standing in the competitive market. The Company consistently invests efforts in training and developing its employees, which in turn leads to sustained growth.

Opportunities and Threats

The major opportunities are:

1. Healthy and sustainable economic growth rate with sound macro-economic fundamentals.

2. Young and aspiring population

3. NBFCs are fast emerging as an important segment of Indian Financial System

4. Recognized as complementary to the banking sector due to its customer-oriented services, flexibility and timeliness in meeting the credit needs of specified sectors, etc.

The major threats are:

1. Stiff competition with NBFCs as well as with banking sector

2. Technology Advancement

3. Adverse Regulatory Changes

4. Increased competition from local and global players operating in India.

Cautionary Statement

Statement in the Management Discussion and Analysis Report, describing the Companys objectives, opportunities and expectations may constitute Forward Looking Statements within the meaning of applicable laws and regulations. The actual result may vary materially from those expressed or implied in the statement. Several factors make a significant difference to the Company operation including the government regulation, taxation and economic scenario affecting demand and supply condition and other such factors over which the Company does not have any control.