<dhheadMANAGEMENT DISCUSSION AND ANALYSIS REPORT</dhhead
BACKGROUND
The Company is registered as a Non Banking Financial Company (NBFC) with Reserve Bank
of India under the provisions of Section 45 IA of the Reserve Bank of India Act, 1934. In
term of Systemically Important Non-Deposit taking Company and Deposit taking Company
(Reserve Bank) Directions, 2016, Nalwa Sons Investments Limited (NSIL or the
Company) is a Systemically Important Non-Deposit taking-Non Banking Financial Company
(i.e a non-banking financial company not accepting / holding public deposits and having an
asset size of more than Rs.500 crores) having total assets of Rs. 9223.32 Crore.
OVERVIEW OF FINANCIAL AND OPERATIONAL PERFORMANCE
Your Company follows Indian Accounting Standards (IndAS) for preparing its
financial statements, in compliance with the requirement of the Companies Act, 2013, as
amended and regulations issued by the Securities and Exchange Board of India (SEBI) from
time to time.
Your Company has recorded a very good performance during the Financial Year 2022-23 on
Standalone as well as Consolidated basis. Below is a brief quantitative overview of the
financial and operational performance of your Company during the reporting period. This
Report should be read in conjunction with the Companys financial statements and other
information included elsewhere in this Annual Report.
a) Standalone Results:
Your Company has recorded a very good performance during the year under review. The
Company during the year has received an Income by way of dividend, interest and other
income stood at Rs. 11,207.12 lakh during the financial year ended 31st March,
2023 as compared to Rs. 7,241.69 lakh during the previous year. Profit before exceptional
items and tax stood at Rs. 10,911.62 lakh as compared to Rs. 7,016.34 lakh during previous
year. Profit after tax stood at Rs. 8,094.63 lakh as compared to Rs. 5,636.11 lakh during
the previous financial year, an increase of 43.62 %.
b) Consolidated Results:
Your Company has recorded a very good performance during the year under review. The
Company during the year has received an Income by way of Interest of Rs. 3,209.23 Lakh,
Dividend of Rs. 8,923.65 Lakh, sale of goods of Rs. 1,005.43 Lakh. Total Income stood at
Rs. 13,356.57 lakh during the financial year ended 31st March, 2023 as compared
to Rs. 9735.77 lakh during the previous year. Profit after tax stood at Rs. 9,258.26 lakh
as compared to Rs. 6586.37 lakh during the previous year.
OUTLOOK
a. Global Economy
Global GDP growth is estimated to fall from 3.4% in 2022 to 2.8% in 2023. The
continuing Russia-Ukraine war along with central banks hiking rates to tame inflation
continues to weigh on economic activity. Growth in 2022 was dampened due to rapid spread
of COVID-19 variants in China and the ongoing war in Ukraine. The concerted sanctions on
Russia, which supplies around 10% of the worlds energy, lead to dampening growth and
further straining of supply chain. The war worsens the persistent inflation across
developed economies. However, the recent re-opening may lead to faster than expected
recovery in 2023.
The current global economic slowdown cuts across both developed and developing
countries.In the US, economic growth is expected to be slower in 2023 given the tightening
monetary and fiscal policy. Contrary to late 2022 estimates, US will avoid a recession due
to declining energy prices, strong employment growth, and easing of supply chain stress.
Threat of recession continuous to loom over Europe as wages and consumer spending has
fallen significantly. Elevated natural gas prices are fuelling inflation and driving down
purchasing power. The tightening of monetary policy by ECB and Bank of England along with
energy shock resulting from the Russia-Ukraine war will play a key impact on the growth
potential.
b. Indian Economy
GDP growth rate in 2023 is expected to be 5.9%, lower than the 2022 growth of 6.8% due
to subdued external demand and tightening monetary policy. However, India will remain the
fastest growing major economy.The efforts of Government of India including health and
safety measures, financial incentives and a sustained increase in the capital expenditure
and incentivized boost to infrastructure development projects underpinned by private
players, have placed the country on the path of fast paced recovery, ahead of many
nations. The industry showed robust growth, particularly in the second-half of 2022-23,
with Index of Industrial Production (IIP) accelerated to 5.6 percent year-on-year in
February 2023.
Brent oil prices are expected to remain range bound in 2023, given the continuing war
in Ukraine and sanctions imposed in response by the USA and European Union. India meets
nearly 80% of its oil needs through imports. High oil prices will also have a trickledown
effect on the prices paid by consumers for goods and services. Persistent inflation
resulted in RBI to increase the repo rate by 250 basis points throughout FY2022-23.
Further rate hikes are expected in the coming year, despite no rate hike in the April
Monetary Policy Committee meeting.
c. Company Prospects
With a size of around 15% of Scheduled Commercial Banks combined balance sheet, the
NBFC sector has been growing robustly in recent years, providing an alternative source of
funds to the commercial sector in the face of slowing bank credit. NBFC-ND-SI
(Systematically Important Non-Deposit accepting NBFCs) comprise 85.4% of the total balance
sheet size of the NBFC sector. Whereas the balance 14.6% accounted by NBFC-D (Deposit
accepting NBFCs). Although in the FY 2022-23, the concerns surrounding the sector due to
debt defaults amidst temporary asset liability mismatches arose, the inherent strength of
the sector, coupled with the Reserve Banks continuing vigil on the regulatory and
supervisory front, ensure that the growth of the sector is sustained and liquidity fears
are allayed and the introduction of Scaled Based Regulations have elevated the private
NBFC sector at par with public NBFCs.
Your Company continues to hold significant investments in equity shares of steel
manufacturing companies of O.P. Jindal group. The performances of the Investee Companies
are expected to improve in the current financial year, which would result in higher
dividend payouts in the coming year. The Company will focus on making long term strategic
investments in various new ventures promoted by O.P. Jindal group, besides consolidating
the existing investments through further investments in the existing companies.
FUTURE PROSPECTS
Your Company holds significant investments in Equity Shares of O.P. Jindal Group of
Companies, therefore the business prospects of the Company largely depends on the business
prospects of O.P. Jindal Group of Companies and the steel industry.
Worldsteel has forecasted that demand for steel is expected to see a 2.3% rebound to
reach 1,822.3 MT in F.Y. 2023 and is forecasted to grow by 1.7% in F.Y. 2024 to reach
1,854.0 MT. Manufacturing is expected to lead the recovery, but persistent inflation and
high interest rates in most economies will limit the recovery of steel demand, despite
positive factors like Chinas reopening, Europes resilience and the easing of supply
chain bottlenecks. Demand in India is expected to show healthy growth of 7.3% in F.Y. 2023
and 6.2% in F.Y. 2024. The growth in steel consumption is expected to accelerate in most
regions, but expected deceleration in China may overshadow the improved environment.
Your Company is looking forward for a sustainable growth in its investee Companies in
the coming years which would enhance the shareholders value. Considering the forecasted
growth in the economy as a whole and the steel industry in particular, the Company expects
to enhance its entrenched value for the benefit of the shareholders at large.
OPPORTUNITIES AND THREATS
NBFCs have become important constituents of Indias financial sector and have been
recording higher credit growth than scheduled commercial banks (SCBs) over the past few
years. NBFCs continue to leverage their superior understanding of regional dynamics and
customised products and services to expedite financial inclusion in India. Lower
transaction costs, innovative products, quick decision making, customer orientation and
prompt service standards have typically differentiated NBFCs from banks. Considering the
reach and expanse of NBFCs, these are well-suited to bridge the financing gap in a large
country like India. Systemically important NBFCs have demonstrated agility, innovation and
frugality to provide formal financial services to millions of Indians.
Every business carried out by any Company are full of challenges and risk and the
success of any business always depend upon the ability of the Company how it faces the
challenges and survive in the highly competitive market.Your Company holds significant
investments in Equity Shares of O.P. Jindal Group of Companies, therefore the business
prospects of the Company largely depends on the business prospects of O.P. Jindal Group of
Companies and the steel industry.
Your company is developing various systems and strategies to face the challenges in the
competitive market. The Challenges are not from the competitors but from the domestic and
global economic scenario. Your company is talking all precautions to offset the associated
risks. As a result of which, the Company is looking forward for a sustainable growth in
its investee Companies in the coming years which would enhance the shareholders value.
The Company expects to enhance its entrenched value for the benefit of the shareholders
at large.
RISKS AND CONCERNS
The Companys business is exposed to many internal and external risks and it has
consequently put in place robust systems and processes, along with appropriate review
mechanisms to actively monitor, manage and mitigate these risks.
The geo-political war in Ukraine, a slowing global economy, tightening fiscal policy
mired with badly managed/failure of few major players in banking and finance sectors
around the world suggest a possible moderation in business confidence and investment.
Uncertainty over the global trade environment and volatility in the financial markets have
softened the global trade and protracted war in Ukraine poses further downside risks to
this forecast. The short-term economic outlook for many European countries has
deteriorated sharply giving headwinds for mild recession.
The Company continuously evaluates its investments in such company to ensure that the
same meets the objective of ensuring maximisation of value to all its stakeholders in a
prudent manner. The Company expects to make full use of the growth opportunities available
to it, however, the challenge remains on being able to leverage these initiatives to carve
out a space in the competitive industry, within the regulatory and compliance framework.
SIGNIFICANT CHANGE IN KEY FINANCIAL RATIOS
As compared to the figures of previous year, your Companys Current Ratio increase
significantly by 176.86 %, owing to decrease in tax liability, Debtor Turnover Ration of
the Company has decreased Significantly by 34.25%, owing to increase in dividend and
interest income as compared to corresponding previous financial year.
Except for this, there is no significant change (i.e. change of more than 25%) in any
other key financial ratios during the current financial year as compared to immediately
preceding financial year.
ADEQUACY OF INTERNAL CONTROL SYSTEM
The Company has an Internal Control System, commensurate with the size and nature of
its business. The audit plan is approved by the Audit Committee, which regularly reviews
compliances to the plan. All Audit observations and follow-up actions thereon were
reported to the Audit Committee. The Audit Committee also met the Companys Statutory
Auditors to ascertain their views on the financial statements, including the financial
reporting system, compliance to accounting policies and procedures, the adequacy and
effectiveness of the internal control and systems followed by the Company. The Management
acted upon the observations and suggestions of the Audit Committee.
The Company has adequate internal control systems for the business processes in respect
of all operations, financial reporting, compliance with laws and regulations etc. The
Audit Committee reviews the adequacy of internal controls on regular basis.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCE/INDUSTRIAL RELATIONS FRONT
There have been no material developments in Human Resource and Industrial Relations
front during the F.Y. 2022-23, given the nature of business your Company is engaged in.
The Company recognizes that its human resource is its strength in realizing its goals
and objectives. As on March 31, 2023, there are three Whole-time Key Managerial Personnel
and one general staff in the Company. The Company will strengthen its operative staff as
and when the need arises.
CAUTIONARY STATEMENT
The Statement in this Management Discussion and Analysis report, describing the
Companys outlook, projections, estimates, expectations or predictions may be
“Forward looking" within the meaning of applicable laws or regulations. Actual
results could differ materially from those expressed or implied owing to successful
implementation of our strategies, our growth and expansion, global & Indian economy,
political stability, stock performance on stock markets, changes in government
regulations, tax regimes, economic developments and other incidental factors. Except as
required by law, the Company does not undertake to update any forward-looking statements
to reflect future events or circumstances. This MDA should not be considered as a
recommendation that any investor should subscribe for or purchase any of the Companys
shares. The Company makes no representation or warranty, express or implied, as to and
does not accept any responsibility or liability with respect to the fairness, accuracy,
completeness or correctness of any information or opinions contained herein. Investors are
advised to exercise due care and caution while interpreting these statements.
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