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- Industry structure and developments
KIFS Financial Services Limited (‘KIFS or ‘the
company) is registered with the Reserve Bank of India as a Non- Banking Financial
Company – Investment and Credit Company (NBFC-ICC). As per RBIs ‘Scale
Based Regulations (SBR), the company is classified as NBFC - Base Layer (NBFC-BL).
During FY 2022-23, India emerged as one of the fastest growing major
economy in the world. The second advance estimate of national income released by the
Central Statistics Office (CSO) on 28 February 2023 expects real GDP growth in FY2023 to
be 7.0%. According to the International Monetary Fund (IMF), global growth is predicted to
bottom out at 2.8% in 2023, and then grow to 3.0% in 2024. Along with improvement in
growth rate, inflation is expected to moderate from 8.7% in 2022 to 7.0% in 2023, before
reaching 4.9% in 2024. IMF identifies that inflation, though moderating, has mostly been
sticky. The reduction reflects severe reversal in energy and food prices, but core
inflation (excluding food and energy prices) may not have peaked yet.
- Opportunities and threats
To carry success story forward, the organization needs to evaluate
the opportunities & threats and synchronize its plans with them.
Opportunities
- Companys excellent customer service and strong experience and brand recognition
- Bank-NBFC co-lending model
- Continuing demand of working capital
- Government initiatives for startups
- Growing digitalization and analytics
- Underserved retail sector
- Low retail penetration of financial services / products
- Strong managerial capabilities
- Integration of various financial services in the group
Threats
The company believes to be exposed to the following type of risks:
- Tightening regulation of NBFCs
- Global economic slowdown
- Market fluctuations
- Uncertain global political environment
- Competitions from banks and other NBFCs
- Volatility of business cycle
- Increasing cost of funding
- Segment–wise / product–wise performance
The company is engaged into a single segment of finance and thus
separate segment wise performance details arent given. Income from interest on loans
stands at 30,72,01,196/- in compare to 32,71,30,003/- for the previous financial year.
Profit before tax has been increased by 4.49% i.e. from 822.20 lakhs to 859.11 lakhs
during the financial year under review.
- Outlook
The RBI has projected Indias GDP growth at 6.5% for FY24 and
has predicted inflation to subside at 5.2% with governments focus on capital expenditure,
better capacity utilisation and moderate commodity prices. As per the latest Monetary
Policy, quarterly inflation for FY24 is projected for Q1 at 5.1%, Q2 at 5.4%, Q3 at 5.4%
and Q4 at 5.2%.
The overall loan book of NBFCs is projected to grow by ~13% to reach
50 Trillion by March 2024. The RBI has been appreciative of the efforts of NBFCs including
their efforts towards covering individuals beyond the financial fold. NBFCs are expected
to focus upon new business such as unsecured loans and the SME segment which promises a
higher growth prospect as compared to the traditional products.
The regulatory framework for NBFCs was revised in October 2021 to
introduce scale-based regulation, which has been become effective in October 2022. Under
the new framework, NBFCs are placed in four layers based on their size, activity, and
perceived risks, viz., Base Layer (BL), Middle Layer (ML), Upper Layer (UL) and a possible
Top Layer (TL). The new framework will tighten regulatory oversight of the sector with
progressively tighter norms for the higher layers.
NBFCs in the Base Layer will be non-deposit-taking NBFCs, with assets
worth up to 1,000 crore. These will be broadly subjected to extant regulations for
non-deposit-taking NBFCs, except for changes in governance and prudential guidelines.
NBFCs in the Middle Layer will include deposit-taking NBFCs
irrespective of asset size, non-deposit-taking firms with assets worth 1,000 crore or
more, as well as HFCs. These will be regulated on the lines of systemically important
non-deposit-taking NBFCs, deposit-taking NBFCs, and HFCs, as the case may be, except for
changes in capital, prudential and governance guidelines.
NBFCs lying in the Upper Layer will include top-10 NBFCs as per size
and NBFCs that warrant enhanced regulatory requirements based on certain parameters. These
will be subject to regulations applicable to NBFCs in the Middle Layer, with additions
such as introduction of common equity tier 1 and leverage requirements, mandatory listing,
qualification of Board members and the like.
- Risks and concerns
The company is exposed to specific risks that are particular to its
business and the environment within which it operates, including interest rate volatility,
economic cycle, credit and market risks. Risk is an integral part of the business and
almost every business decision requires the management to balance risk and reward. For the
company, risk management forms an integral part of the business operations and monitoring
activities. The risk is managed through risk management framework approved by the risk
management committee established by the board, considering independent identification,
measurement and management of risk for the business operations and activities of the
company.
The risk management oversight structure includes committees of the
board and senior management. KIFS recognizes that the risks need to be managed to protect
its customers, employees, shareholders and other stakeholders, to achieve its business
objectives and to enable the sustainable growth. Although the board recognizes presence of
these risks, but there are no risks which in the opinion of the board threaten the
existence of the company. On-going monitoring by the management helps in identifying the
risks at an early stage. Experience team members identify and monitor these risks on an
on-going basis and control the same to keep the risks to minimum levels.
- Internal control systems and their adequacy
The company has a proper and adequate system of internal control in
all spheres of its activities to ensure that all its assets are safeguarded and protected
against loss from unauthorized use or disposition and that the transactions are
authorized, recorded and reported diligently. The internal control is supplemented by an
effective internal audit being carried out by an external firm of chartered accountants.
The company ensures adherence to all internal control policies and procedures as well as
compliances with all regulatory guidelines. The audit committee of the board of directors
reviews the adequacy of internal controls.
The main purposes of the internal control systems are:
- assurance about the fact that the transactions are recorded in proper manner and under
proper heads;
- conducting business efficiently;
- automatic and independent checking of transactions so as to ensure their validity;
- to check and assure the compliance of various enactments like corporate laws, tax laws
etc;
- to prevent and early detection of frauds and malpractices, if any; and
- to ensure timely preparation of reliable financial information.
The internal control system is supplemented by an extensive program of
internal audit and reviews by the senior management. Adherence to these processes is
ensured through frequent internal audits to assess and improve the effectiveness of risk
management, control, operations and processes. To ensure independence, the internal audit
function has a reporting line to the audit committee of the board. The management
regularly reviews the findings and recommendations of the internal auditors so as to
continuously monitor and improve internal controls to match the organizations pace
of growth and increasing complexity of operations as well as to meet the changes in
statutory and accounting requirements.
38 251658240
KIFS Financial Services Limited
The audit committee of the board of respective companies reviews the
performance of the audit and the adequacy of internal control systems and compliance with
regulatory guidelines. Significant deviations are brought to the notice of the audit
committee of the respective companies and corrective measures are recommended for
implementation. The audit committee provides necessary oversight and directions to the
internal audit function and periodically reviews the findings and ensures corrective
measures are taken. This system enables us to achieve efficiency and effectiveness of
operations, reliability and completeness of financial and management information and
compliance with applicable laws and regulations.
- Financial performance with respect to operational performance
The overall financial performance of the company during the
financial year ended on March 31, 2023 is simplified in tabular form as under:
| Sr. no. |
Particulars
|
March 31, 2023 ( in lakhs)
|
March 31, 2022 ( in lakhs)
|
|
1
|
Total revenue |
3,072.01 |
3,271.30 |
|
2
|
Profit before interest, depreciation and tax |
2,984.98 |
3,174.19 |
|
3
|
Depreciation |
50.31 |
37.99 |
|
4
|
Finance cost |
2,075.57 |
2,314.01 |
|
5
|
Tax |
219.49 |
209.57 |
|
6
|
Profit after tax |
639.62 |
612.62 |
|
7
|
Net profit margin (%) |
20.80 |
18.73% |
|
8
|
EPS (basic and diluted) (amount in ) |
5.91 |
5.66 |
- Human resources / industrial relations
The Company has established a robust Human Resources
(‘HR) system that nurtures a high performing, conducive and inclusive work
culture. In an environment that is rapidly becoming technology and digital oriented, your
Company continues to invest in long term people development. We promote an atmosphere of
inclusion, by encouraging the next level of employees to take higher responsibilities.
The company strongly believes that its human resources are critical to
its success and carrying forward its mission. With their sustained, determined and able
work efforts the company has been able to cruise smoothly through the hard time of the
economic volatility and rapidly changing market conditions. By creating conducive
environment for career growth, company always tries to achieve the maximum utilization of
employees skills in the most possible way. Board of directors thanks all of the
employees for their valuable contribution towards the growth of the company.
There were no cases of sexual harassment of woman at work place. Also,
there are no instances of child labour / forced labour / involuntary labour and
discriminatory employment during the year.
There are 7 employees employed by the company on payroll as on March
31, 2023. Industrial relations throughout the year continued to remain very cordial and
satisfactory.
- Key financial ratios
|
Key indicators
|
2022-23
|
2021-22
|
Change (%) |
| PBT / total income (%) |
27.94 |
25.13 |
11.18 |
| PBT / total assets (%) |
2.72 |
2.74 |
(0.73) |
| Interest coverage ratio (x) (EBIDTA / Interest) |
1.44 |
1.37 |
5.11 |
| Debt / equity (x) |
6.04 |
6.35 |
(4.88) |
| Net profit margin (%) |
20.80 |
18.73 |
11.05 |
| Return on net worth (%) |
14.28 |
15.37 |
(7.09) |
Profit before tax (%) in the proportion of total income has shown
upward trend of 11.18% as compared to that of last year. Total expenses including finance
cost have been reduced by 9.52% as the financial cost has also been reduced by 10.30% and
impairment on financial instruments has been reduced by 83.92% and profit before tax
stands at 859.11 lakhs compared to 822.20 lakhs for previous financial year which also
shows rise of 4.49%. Net profit margin stands at 20.80% as compared to 18.73% for the
previous financial year ended on March 31, 2022.
Cautionary statement
Certain statements in this annual report including the management
discussion and analysis report describing the companys objectives, predictions may
be "forward-looking statements" 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. These risks and
uncertainties include the effect of economic and political conditions in India, volatility
in interest rates, new regulations and government policies that may impact the
companys business as well as its ability to implement the strategies. The company
does not undertake to update these statements.
+91-9892691696
