BACKGROUND
Pariksha Fin-Invest-Lease Limited (PFIL) is a Non-Banking Finance Company
("NBFC"), holding a Certificate of Registration from the Reserve Bank of India
("RBI"). The PFIL is non deposit accepting NBFC engaged in financial services.
The PFIL is an entity of Uttam Group. The Company has its registered office in Delhi and
Corporate office at Ghaziabad.
GLOBAL ECONOMY
The COVID-19 pandemic is a once in a lifetime occurrence that has brought with it
unimaginable suffering to people and to almost all sections of the economy. When the
pandemic struck and led to nationwide lockdowns to curtail the transmission of disease, it
was natural to fear that the global economy would stay in extreme stress of the kind not
seen since the Great Depression and would have a long-lasting economic impact. To counter
the crippling impact of the lockdowns on economies, the worlds policymakers have resorted
to fiscal and monetary measures never seen before in global economic history. It still
remains to be seen if these relief measures sufficed, and whether actions taken by
Governments across the globe adequately compensated for the disruptions created in the
lives of people. Fortunately, science prevailed. Multiple vaccines were found with
impressive efficacy levels in less than a year — which will probably rank as among
one of the most incredible achievements in science. The announcement of successful
development of vaccines seemed to lift spirits around the world. Unfortunately, the advent
of winter saw several countries battle second waves of COVID-19 infections, including more
virulent strains leading to partial lockdowns. The race between vaccines and variants is
heating up as massive vaccination drives are underway. Much depends on blocking
transmission and not just the disease. The only three preventives are masks, social
distancing and vaccinations. However, to vaccinate even half of the worlds population of
7.8 billion is going to take years. The production, storage and distribution challenges
require that Governments prioritise the vaccinations in a judicious manner so as to limit
the human toll. Fortunately for India, which is home to some of the largest vaccine makers
in the world, the supply constraints should be limited and temporary. Moreover, our
experience in implementing large scale vaccination programmes should help in vaccinating
our vulnerable population. Even so, with many states in India witnessing a seriously
full-blown second surge of COVID-19, the vaccination challenge is enormous. After an
estimated historic correction of (3.3%) in 2020, the International Monetary Fund (IMF) has
projected the global economy to grow 6% in calendar year 2021 and 4.4% in 2022 on the back
of the fiscal and monetary support provided by Governments of the world over coupled with
widespread vaccination. We know that India can ill afford another country-wide lockdown
such as was imposed from March to June 2020. The impact on the economy and employment was
severe in the first instance; and cannot be repeated yet again. The lockdown that
continued throughout the first quarter of the FY2021 saw Indias GDP for April-June 2020
contracting by a massive 24.4%. Even the second quarter was terrible, with GDP shrinking
by 7.3% in July-September 2020. Thereafter, we have seen a rebound — thanks to the
resilience of our citizens, our entrepreneurs and of our economy. The third quarter
(October-December 2020) saw a small positive growth of 0.4% compared to the same period in
the previous year. The second advance estimates of national income for FY2021 released by
the Central Statistics Office (CSO) on 26 February 2021 anticipates the total contraction
for FY2021 to be 8% — implying a significant ‘V shaped bounce-back in the
second half of the year. The most recent IMF forecast has also raised Indias GDP growth
estimate for FY2022 from 11.5% to 12.5%. If that were to occur, it will be the most
significant growth turnaround among all the major nations of the world, including China.
The only grey cloud at present is the huge surge in infections that started with the
second wave beginning in early March 2021. Hopefully, a serious increase in the pace of
vaccinations across the country will bring this surge down; and if we keep all enterprises
and workers open for business, it should not affect the economy in any significant manner.
INDIAN ECONOMY
The degrowth in GDP was much larger than expected. For April-June 2020, real GDP
contracted by a massive 24.4%. India had never recorded a quarter of negative growth since
it began issuing such data publicly in 1996. No other large economy shrank so much during
the pandemic. In the second quarter, July-September 2020, GDP again contracted by 7.3%.
The consensus was that growth in the second half of the fiscal year would be far less than
what was needed to erase the effect of the deep recession in the first half. Thankfully,
we began to witness early signs on resumption of economic activity in the second half of
the year with several high frequency indicators suggesting that the economy was back on to
positive growth. The third quarter (October-December 2020) recorded a GDP growth of 0.4%.
And, as mentioned earlier, the second advance estimates of national income for FY2021
released by the CSO indicates a negative GDP growth of 8% for FY2021.
INDUSTRIAL STRUCTURE AND DEVELOPMENTS
NBFCs have become important constituents of the financial sector and have been
recording higher credit growth than scheduled commercial banks (SCBs) over the past few
years. NBFCs are continuously leveraging their superior understanding of regional
dynamics, well-developed collection system and personalised services to expedite financial
inclusion in India. Lower transaction costs, quick decision making, customer orientation
and prompt provision of services have typically differentiated NBFCs from banks.
Considering the reach and expanse of NBFCs, these are well-suited for bridging the
financing gap. Systemically important NBFCs have demonstrated agility, innovation and
frugality to provide formal financial services to millions of Indians.
OPPORTUNITIES & THREATS
Financial sector is the backbone of any economy. NBFC sector in India have already
started witnessing a slowdown with businesses almost coming to a standstill. The impact of
the virus on the NBFCs sector has only begun, NBFC Sector might face threats such as
Liquidity Crunch, it includes Lockdown, delay order, Increase in Insolvency threshold,
Three month Moratorium, credit rating affect, cost cutting, difficulty in generate
business, fierce Competition etc The NBFC Sector has adopted new opportunities during this
COVID-19 Pandemic. The NBFCs have also been fast in adopting newer technology led
processes e.g. API based validation of KYC documents, eSignature, eKYC, GPS based address
filling, video based customer engagement, IOT (Internet of Things) based data collection,
expand into allied products from own bouquet, Expand into value chain of banks, insurance
companies, credit card companies, Focus on different models of fee
FINANCIAL PERFORMANCE
PFIL gross income from operations for the financial year ended March 31, 2021 is
Rs.53,30,618/- as against Rs. 55,06,873/- in the previous year. The working of Pariksha
Fin-Invest-Lease Ltd. (PFIL) for the year under review resulted in loss of Rs.
6,52,94,903/- as against loss of Rs. 5,66,846/- (before tax) in the previous year.
RESOURCES AND LIQUIDITY
During the year under review, PFIL has not raised any funds from the market by way of
allotment of shares/bonds/ warrants/debentures, or by raising public deposits etc.
PORTFOLIO
PFILs investment portfolio stood at Rs. 53,134,035 as on March 31, 2021, at cost.
PFILs strategy for its portfolio is to focus on asset quality and asset mix to achieve
good returns.
OUTLOOK
NBFC is facing its own set of financial challenges with the future outlook looking
bleak at the moment.COVID-19 pandemic is likely to disrupt non-banking finance companies
(or NBFCs) more than banks. Non-banks are better prepared to manage as they have ramped-up
defences in the form of stronger capitalisation buffers and better on-balance sheet
liquidity buffers. Indias non-bank financial institutions (NBFC) face renewed asset
quality and liquidity risks as a second wave of coronavirus infections sweeps the country
and could delay recovery in the sector.
The Management of PFIL is concentrating and focusing on the core area of investment and
finance.Capital market is improving and PFIL will explore the opportunities available in
the Capital Market and other financial areas. The persistent challenges in the operating
environment resulted in higher delinquency levels for the NBFCs.
RISK MANAGEMENT
NBFCs should focus more on "liquidity" than on "growth" in these
times as lack of liquidity could pose challenges around "going concern" for
them. "Liquidity should be most important now for companies We can talk about growth
when we survive this crisis. We should prepare response plan for each shape of recovery
(whether V or U or W). This will not only help companies mitigate risk in future, but also
identify new revenue streams, NBFCs should upfront share with banks their long term
business model and try to avail the money in the two government announced schemes of
liquidity window and partial credit guarantee,
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company is maintaining an efficient and effective system of Internal Financial
Control for the facilitation of speedy and accurate compilation of financial statements.
The Companys internal control system is designed to ensure operational efficiency,
protection and conservation of resources, accuracy and promptness in financial reporting
and compliance with laws and regulations as well as procedures. Further, the auditors of
the Company have verified the systems and processes and confirmed that the internal
financial controls system over financial reporting is operating effectively.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS
The Company recognizes people as its most valuable asset and it has built an open,
transparent and meritocratic culture to nurture this asset. The Company is of firm belief
that the Human Resources are the driving force that propels a Company towards progress and
success. The Company has a team of able and experienced professionals to look after the
affairs of the Company. The Company takes pride in the commitment, competence and
dedication of its employees in all areas of the business. The Company is in equipping
organizations to meet the challenges of an expanding and increasingly competitive sector.
The functions are responsive to current staffing needs, but can be proactive in reshaping
organizational objectives. The Company also has zero tolerance for harassment of women at
workplace. The overall industrial relations atmosphere continued to be cordial.
DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS
Ratios are used to make a holistic assessment of financial performance of the entity,
and also help evaluating the entitys performance vis--vis its peers within the
industry. The NBFC sector is growing rapidly with borrowings comprising the largest source
of funding. The financial performance of NBFC-D and NBFC-ND-SI sector has shown a
consistent year-to-year growth in the financial ratios over the last few years.
The key financial ratios of the company for F.Y. 2020-21 have not shown improvement due
to decrease in the revenue of the company during the year in concern. The Company has no
Non-Performing Assets (NPA), hence ratios related to NPAs are not applicable. The
significant changes in the other applicable key financial ratios are as follows:
| Name of Ratios |
F.Y. 2020-21 |
F.Y. 2019-20 |
Change (%) |
Reasons for change |
| Current Ratio |
51.67 |
33.27 |
18.4% |
Reduction in current liabilities |
| Debt Equity Ratio |
0.02 |
0.02 |
0.0% |
No change during the Year |
| Net Profit Margin |
(12.25) |
(10.29) |
(1.96)% |
Decrease in profit |
CHANGE IN RETURN ON NET WORTH AS COMPARED TO PREVIOUS YEAR
Return on Net Worth (RONW) is a measure of profitability of a company expressed in
percentage. Return on Net Worth for the financial year 2020-21 is 14.21% while Return on
Net Worth for the Financial year 2019-20 is 14.38% . The downward in Return on Net Worth
is mainly due to the decrease in revenue of the company while the shareholders equity has
remained the same. The company is making continuous effort to make optimum utilization of
the shareholders fund and perform better in the time to come.
CAUTIONARY STATEMENT
Statements made in this Management Discussion and Analysis (MDA) Report may contain
certain forward-looking statements based on our projections and assumptions on the
Companys present and future business strategies.
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