INDUSTRY STRUCTURE AND DEVELOPMENTS
Mudit Finlease Limited is a NBFC and is engaged mainly in the business of providing
Loans & Advances and investing in shares, both quoted and unquoted and renting &
leasing of movable and immovable propreties. The industry structure relevant to the
Companys operations is mainly concerned with the capital market.
The NBFCs sector is undergoing a significant transformation at present and has come to
be recognized as an important element of the financial system. The recent issue in
financial sector has highlighted the necessity, importance and significant role, the NBFCs
play in development of nations infrastructure.
While commercial banks continued to remain dominant source of credit in India, NBFCs
are gaining significant ground. While the banking sector was beset with worsening asset
quality in FY17, NBFCs could restrict the impact in their portfolios due to their ability
to respond quickly as well as availability of a higher collateral cover. The growing
relevance and interconnectedness of the NBFC sector also highlights the importance of risk
management in the sector. Going ahead, comfortable capitalisation levels and conservative
liquidity management will continue to support the credit profile of NBFCs.
India has a diversified financial sector undergoing rapid expansion, both in terms of
strong growth of existing financial services firms and new entities entering the market.
The sector comprises commercial banks, insurance companies, non-banking financial
companies, co-operatives, pension funds, mutual funds and other smaller financial
entities.
NBFCs would continue to expand in small ticket loans, where banks are clearly less
efficient because of their high operating cost structures and somewhat rigid processes
would find it difficult to significantly penetrate these segments. Additionally, NBFCs
flexibility of loan structuring provides an advantage to them in this segment.
The Government of India has introduced several reforms to liberalise, regulate and
enhance this industry. The Government and Reserve Bank of India (RBI) have taken various
measures to facilitate easy access to finance for Micro, Small and Medium Enterprises
(MSMEs). The governments drive to integrate informal economy into the formal segment and
reduce unaccounted income, and digital push, if followed through, can significantly change
operating dynamics for NBFCs. Recently, both the regulator and Government have been
maintaining a favorable stance towards the sector; starting with the latest announcement
where SME loans up to INR20 million by NBFCs will be covered under the CGTMSE guarantee
and the government notification, covering systemically important NBFCs under the SARFAESI
Act. These measures would strengthen the NBFCs ability to lend and mitigate loss given
default while speeding up recovery timelines.
The NBFCs have attracted substantial investments during the recent years both from the
retail and from the wholesale side. The growth also has been significant during this year.
The NBFCs have been catalysts in accelerating the growth in the semi urban and rural
areas. The projections made by RBI and other financial forecasts give substantial growth
opportunities for the industry in the coming years.
ECONOMY OVERVIEW
Indian economy is adversely affected by persistent inflation over the last few years.
The rising incomes dropped the purchasing power of the population, driving consumption
demand in sectors, where supply lagged particularly, in food grain and non-food-grain
commodities, Sharp increase in international prices of fuels also contributed to
inflationary pressure. The Government has been going very slow on various reforms,
expected by large investors and market. Market participants were particularly concerned
about subsidies—fertilizer, food and fuel; falling rupee against dollar; unreported
corruptions; widening current account and fiscal deficits. Net Buys by the Foreign
Institutional investors have been declining during the year as compared to these of the
earlier years. Economic situations in Euro Zone countries and other priced the Capital
Market towards losses.
The NBFCs sector has undergone a significant transformation in the past few years and
has come to be recognized as a systemically important element of the financial system. The
recent global financial crisis has also highlighted the regulatory imperatives concerning
the non-banking financial sector and the risks arising from regulatory gaps, arbitrage and
systemic inter-connectedness.
In the multi-tier financial system of India, importance of NBFCs in the Indian
financial system is much discussed by various committees appointed by RBI in the past and
RBI has been modifying its regulatory and supervising policies from time to time to keep
pace with the changes in the system. NBFCs have turned out to be engines of growth and are
integral part of the Indian financial system, enhancing competition and diversification in
the financial sector, spreading risks specifically at times of financial distress and have
been increasingly recognized as complementary of banking system at competitive prices.
OPPORTUNITIES AND THREATS
Capital markets at present are going through turbulent times due to slow-down in
domestic economy, slow-down in reforms, uncertain global economic environment, economic
crisis faced by a few countries in Europe, fluctuations in currency rates, etc. Although
the inflation has remained steady during the year but it is still under pressure due to
hike in petrol prices, burden of diesel subsidies, high fiscal deficit, etc. However, we
feel that the opportunities will soon arise in the markets upon the corrective policies by
the government and better fiscal management which will strengthen the economy.
The NBFC industry holds immense potential and the Government of Indias increased focus
towards Financial Inclusion has created various opportunities for existing NBFCs to
leverage on their established customer base in rural areas. The recent steps by the
Government of India to create Infrastructure for NBFC and to provide banking license for
NBFCs is a positive signal. The above opportunities have made the Industry highly
competitive with the emergence of new category of systematically important NBFCs. Along
with existing local and Multinational players leading to tough competition within the
industry.
SEGMENT-WISE PERFORMANCE
The Company is into single reportable segment only.
OUTLOOK
Outlook for the Company is linked to Capital Market. The Board of Directors of the
Company believes that Companys Investments in the equity shares of various companies
would reasonably perform in the ensuing years.
The role of NBFCs has become increasingly important from both the macroeconomic
perspective and the structure of the Indian financial system. Over a period of time, one
has to accept; that it is only those which are big enough and serious about being in the
finance business will and must grow. To survive and constantly grow, NBFCs have to focus
on their core strengths while improving on weaknesses. They have to constantly search for
new products and services in order to remain competitive. The coming years will be testing
ground for the NBFCs and only those who will face the challenge and prove themselves will
survive in the long run.
For several years, NBFCs have rapidly emerged as an important segment of the Indian
Financial System. The sector is now being recognized as complementary to the banking
sector due to the implementation of innovative marketing strategies, introduction of
tailor made products, customer-oriented services, attractive rates of return on deposits
and simplified procedures.
RISKS AND CONCERNS
As an NBFC, the Company is subjected to both external risk and internal risk. External
risk due to interest rate fluctuation, slowdown in economic growth rate, political
instability, market volatility, decline in foreign exchange reserves, etc. Internal risk
is associated with your Companys business which includes deployment of funds in specific
projects, diversification into other business operations, retention of talented personnel,
managing effective growth rate, volatility in interest rate, NPAs in portfolio, changes in
compliance norms and regulations, contingent liabilities and other legal proceedings. Your
Company recognizes the importance of risk management and has invested in people, process
and technologies to effectively mitigate the above risks.
Companys performance is closely linked to the Indian Capital Market as the company has
investments in both quoted as well as unquoted shares. These investments represent a
substantial portion of the companys business and are vulnerable to fluctuations in the
stock market. Any decline in the price of quoted investments may affect its financial
position and results of operations. The value of the companys investments may be affected
by factors affecting capital markets such as price and volume volatility, interest rates,
currency exchange rates, foreign investment, government policy changes, political and
economic developments, crude oil prices and economic performance abroad, etc.
The Companys success largely depends upon the quality and competence of its management
team and key personnel. Attracting and retaining talented professionals is therefore a key
element of the companys strategy. The resignation or loss of key management personnel may
have an adverse impact on the Companys business, its future financial performance and the
result of its operations.
As a non-deposit taking NBFC, the Company is subjected to regulations by Indian
governmental Authorities, including the Reserve Bank of India. Their Laws and regulations
impose numerous requirements on the Company including prescribed levels of capital
adequacy, solvency requirements and liquid assets. There may be future changes in the
regulatory system or in the enforcement of the Laws and regulations that may adversely
affect the Companys performance.
Moreover, any slowdown in the economic growth in India could cause the business of the
Company to suffer. Recently, the growth of industrial production has been variable. Any
slowdown in Indian economy could adversely affect the Companys business.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an adequate internal controls system commensurate with its size and the
nature of its business. All the transactions entered into by the Company are duly
authorized and recorded correctly. All operating parameters are monitored and controlled.
The top management and the Audit Committee of the Board of Directors review the adequacy
and effectiveness of internal control systems from time to time
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
The brief on Financial Performance of the Company is already provided in the Boards
Report of the Company. HUMAN RESOURCE DEVELOPMENT
The Company believes that its people are a key differentiator, especially in knowledge
driven, competitive and global business environment. Adapting work culture to suit the
dynamic balancing of people requirements and employee needs is an ongoing process. Our
people are the companys greatest assets. Your company focuses on increasing the overall
productivity per employee in the challenging market conditions. Men are the only active
agent and acts as a catalyst in effective utilization of all other Ms (Material, Machine
and Money). The Board of Directors of your company would like to place on record their
sincere appreciation for the efforts and contribution made by all the employees of the
Company in the challenging environment. Your Directors take this opportunity to thank all
employees for rendering impeccable services to every constituent of Company, customers and
shareholders. The Company has a well-defined appraisal system to assess and reward the
employees appropriately and also to gauge the potentials of the individuals.
CAUTIONARY STATEMENT
Investors are cautioned that this discussion contains statements that involve risks and
uncertainties. Words like anticipate, believe, estimate intend, will, expect and other
similar expressions are intended to identify "Forward Looking Statements". The
company assumes no responsibility to amend, modify or revise any forward looking
statements, on the basis of any subsequent developments, information or events. Actual
results could differ materially from those expressed or implied. Important factors that
could make the difference to the Companys operations include cyclical demand and pricing
in the Companys principal markets, changes in Government Regulations, tax regimes,
economic developments within India and other incidental factors.
APPRECIATION
Your Directors would like to express their sincere appreciation of the co-operation and
assistance received from the shareholders, bankers and other government agencies during
the year under review.
For and on behalf of the Board For Mudit Finlease Limited
| Date: 30th May, 2018 |
Poonam Garg |
Pavel Garg |
| Place: New Delhi |
(Director) |
(Director) |
|
(DIN: 00085201) |
(DIN: 00085167) |
+91-9892691696
