1. MACROECONOMIC AND INDUSTRY STRUCTURE & DEVELOPMENTS:
A. Macroeconomic Outlook
In an ever-increasing globalized world, the prospects of Indias
future growth can be achieved only when we can overcome the challenges of the weak global
environment, thus raising the headwinds for domestic growth. The uncertainty in the global
scenario is weighing heavily on the outlook for economies across the globe. The Indian
economy, on the other hand, remains at a bright spot and has placed itself to grow at 7.2%
in FY23, making it the fastest growing major economy in the world for third time in a row.
The International Monetary Fund (IMF) expects emerging economies to account for four-fifth
of global growth this year, with India alone expected to play the role of a global growth
engine and contribute more than 15% to global economic growth. The stable growth of the
Indian economy is facilitated by sustained government capital expenditure, deleveraging of
the corporate sector, lower gross non-performing assets in the banking sector, and
moderation in commodity prices. Bank credit growth has been growing upwards of 15% since
August 2022.
Strong macro-economic fundamentals, therefore, combined with
reform-oriented approach of the Government are contributing to Indias economic
growth trajectory. Despite the resilience of the economy, certain risks continue to
challenge the growth. Inflation, which emerged as a big challenge post the geo-political
conflict between Russia and Ukraine, has averaged 6.8% between April-January FY23 as
compared to 5.3% in the same period last year. It has remained above the RBIs upper
tolerance band of 2%-6% for most parts of the year. The core inflation, too, has remained
close to 6.0%, which is likely to be the key monitorable from RBIs monetary policy
going forward. To offset the inflationary pressures, RBI on its part has so far raised the
key repo rate by a cumulative 250 basis points in the last one year to take it to 6.5%.
The central bank has indicated that it will remain vigilant, monitor every incoming
information and data, and act appropriately to maintain price stability in the interest of
strengthening medium-term growth.
The domestic monetary tightening has been synchronized with the
interest rates being increased by the key global central banks. Admittedly, while the pace
of rate hikes has slowed recently, major central banks have indicated continuation of
their hawkish stance on inflation. There is a high likelihood that entrenched inflation
may prolong the tightening cycle, resulting in borrowing costs to remain at escalated
levels a little longer.
The commencement of hostilities between Ukraine and
Russia around the close of the fiscal year 2022 has had a significant
impact on the landscape of the global economy. This continued through the fiscal year 2023
and has risen the prices of essential commodities across the globe. Its impact on the
global supply chain and inflation remains a key monitorable.
On the external trade front, exports demand has been affected by a
slowdown in global economy including Indias major export destinations such as US, EU
and China. The World Trade Organisation (WTO) expects merchandise trade growth in 2023 to
slow down to 1% from 3.5% in 2022. This prediction from WTO is expected to aggravate the
external headwinds, thus pressing the need for adequate support from domestic supply for
sustaining the aggregate demand. On the external trade front too,
India has been able to narrow its trade deficit in recent months by
diversifying its products and markets as well as through schemes like Production linked
Incentives. RBI is confident that the Current Account Deficit would be within manageable
levels.
According to the Provisional Estimates of National Income, 2022-23
released by the Ministry of Statistics and Programme Implementation, the real GDP growth
during 2022-23 grew at 7.2% y-o-y as compared to 9.1% in 2021-22, which was a Post-Covid
year. The year-on-year inflation stood at 5.7% for March 2023.
Source – Ministry of Statistics and Programme Implementation
The GDP growth performance surpassed the economic estimates of 6.8
– 7%, which was arrived after multiple revisions owing to global economic turmoil,
and ended at 7.2%. Adding to the buoyant tax collections, the growth in GVA at Basic
Prices by over 15% has contributed to GDP growth.
B. Real Estate & Housing Industry Outlook
The real estate industry, on the whole, started to see some improvement
after years of slow growth. The residential real estate market in prime locations has
shown robust expansion, both in terms of the number of homes sold and the number of new
developments launched. In addition, the unsold inventory has reduced, thus reducing the
holding and storage cost. Strong demand for house loans may be attributed to a number of
factors, including low interest rates, unrelenting property prices, greater affordability,
and tax incentives on home loans.
With Corporates calling their employees back to offices, there has been
a significant demand for office and residential spaces in all of the main metropolitan
locations. The demand for co-working spaces is also on the rise.
Given Indias low mortgage to GDP penetration and the
countrys housing shortage, the potential for growth in Indias mortgage sector
remains enormous. The affordable housing sector holds prominent place in Indias real
estate sector growth prospects. The sector caters to the needs of the underserved such as
the non-salaried segment, MSMEs, blue-collared employees, and others. The affordable
housing finance companies maintain a good balance between employing technology and
maintaining good old direct customer contact. Direct customer connect generally results in
better customer relationships, satisfaction, and loan performance over time. The Budget
2023 mentioned the following highlights with regards to Infrastructure and Housing –
• An amount of Rs. 79,000 crores (revised from Rs. 48,000 crores
in Budget 2022) was allocated to Pradhan Mantri Awas Yojna (PMAY) for completion of 80
lakh housing units.
• The Emergency Credit Line Guarantee Scheme (ECLGS) validity
period was extended to March 31, 2023. (with a total cap of Rs. 5 lakh crores). The tax
holiday on profits earned by developers on affordable housing was extended until March 31,
2022.
• Rs. 10,000 crores per annum will be made available for setting
up of the Urban Infrastructure Development Fund (UIDF) through use of priority sector
lending shortfall. The Fund will be managed by the National Housing Bank, and will be used
by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities on the basis
of given guidelines.
The Fund would be operationalised broadly along the lines of the
existing Rural Infrastructure Development Fund.
C. Housing Finance Industry Outlook
According to a report published by ET-BFSI, Housing Finance Companies
(HFCs) have cumulatively recorded a Net Interest Margin of Rs. 9,326 crores in FY23,
marking an 18% rise year-on-year. Various macroeconomic factors coupled with Government
schemes and interventions like interest subsidies, tax benefits, and initiatives to
promote affordable housing have improved the demand for real estate, especially the
residential housing. Additionally, introduction of Real Estate Investment Trusts (REITs)
have also provided alternative funding options in the housing sector.
2. REGULATORY CHANGES
The Reserve Bank of India (RBI) has introduced a variety of regulations
that are applicable to housing finance Companies (HFCs) and other non-bank finance
companies
(NBFCs) in an effort to unify the laws that apply to HFCs/ NBFCs and
banks. The following are examples of these regulations:
a. Principal Business Criteria: To qualify as an NBFC-
HFC, at least sixty percent of total tangible assets must be dedicated
to housing finance. In addition, a minimum of fifty percent of the total tangible assets
must consist of housing finance for individuals. The
Companies have time until March 31, 2024 to achieve the aforementioned
criteria in a phased manner. [As on March 31, 2023, about 79.95% of RHFLs total
loan assets were allocated to housing finance to individuals. The Company does not have
any non-individual exposure.]
b. Liquidity Coverage Ratio (LCR): NBFC-HFCs are expected to
maintain liquidity buffers to overcome any
liquiditydisruptionsbyensuringthattheyhaveadequate High-Quality Liquid Assets (HQLA) to
withstand any temporary liquidity stress situation lasting for as long as 30 days. The
weighted values are computed in accordance with the guidelines after the relevant haircuts
for HQLA have been applied, and after stress factors on inflows at 75% and outflows at
115% have been taken into consideration. The Companies have time until December 1, 2025 to
achieve 100% LCR criterion in a phased manner. [As on March 31, 2023, RHFLs LCR
was 107.9%.]
c. Harmonization of Non-Performing Assets
(NPA) recognition: On November 12, 2021, the Reserve notification
Bank of India (RBI) issued on Prudential Norms on Income Recognition, Asset
Classification and
Provision (IRAC) in an effort to harmonise regulatory guidelines for
all lending institutions. RBI mandated that borrower accounts be labelled as delinquent as
part of their day-end due date procedure. In addition,
RBI mandated that NPA accounts cannot be converted to regular status
until all outstanding instalments have been paid in full. [Although the RBI granted
NBFCs time till September 30, 2022 to comply with the aforementioned changes, RHFL
implemented the changes in Q3FY22 and decided to continue with them in FY23.]
d. Risk Based Internal Audit (RBIA): RBI has stipulated that all
non-deposit taking HFCs with an asset value of Rs. 5,000 crores or more must have an RBIA
framework in place by June 30, 2022. The goal is to establish an audit methodology that
connects an institutions entire risk management framework and gives assurance to the
board and senior management on the quality and efficacy of the organizations
internal controls, risk management, and governance framework. A strong internal audit
function must meet a number of important characteristics in order to be considered
effective. These include sufficient power, right stature, independence, enough resources
and professional expertise. [RBIA policy was approved in the RHFLs Board meeting
held in May22 and implemented in June22.]
e. Scale based regulations: Applicable since October 2022, the
regulations further align the rules applicable to NBFCs with those of banks in matters
concerning internal capital adequacy assessment process, concentration of investments and
credit, large exposure framework, role of compliance officer, senior management
compensation and the like. RBI has defined four layers Base Layer, Middle Layer, Upper
Layer and the Top Layer. [RHFL falls in the middle layer. Compliance
Policy was framed and approved by the Board during the year.]
3. SWOT ANALYSIS OF THE COMPANY
STRENGTHS S
• Strong capital adequacy
Strong core profitability Loan spreads & NIMs
• Evolving underwriting processes
• Loyal customer base
• Ability to contain eventual loan losses
• Greater reliance on own sourcing
• Quarterly interest reset of existing loans
WEAKNESSES W
• Staggered loan book growth
Significant concentration in Southern States
Undiversified borrowing profile
• High non-performing assets compared to peers
OPPORTUNITY O
• Both rural and urban markets are vastly underserved.
• Massive housing shortage in the country
• Favourable demographic
• Rapid urbanization
• Digitization of processes
THREATS T
• Competition from banks
• Retaining quality manpower
• High inflation led stagflation
• Rise in borrowing cost
4. OUTLOOK
In comparison to FY22, FY23 was a notably better year for the economy.
The economy started opening up for real estate and there has been a slight improvement in
both retail and commercial real estate segment. Notwithstanding the rising interest rates,
inflation and the possibilities of a mild recession, the Company has been able to
kick-start growth trajectory in FY23 and expects the momentum built so far to accelerate
the business in FY24. The Company has set itself moderate performance targets across all
major parameters and will look to achieve them. In addition,
• The Company will continue to maintain an optimal blend of
non-salaried and salaried loans in the loan book.
• The Company will continue to maintain the non-housing book
around 25%.
• The Company will try to deepen its penetration in the
Non-Southern states to build on the brand value by opening new branches and SAT centres.
• The focus will be on both customer acquisition and ticket size
growth in line with the increase in input and labor costs.
• The Company will focus on cross-selling value additive insurance
products and earning fee-based income.
• The Company will strive to maintain the NIM and spread at
consistent levels.
• The Company will endure to focus on improving the asset quality.
• The Company expects that the digitization process will help
improve the TAT and bring in process efficiencies.
During the year, the Company initiated changes across departments. Some
of the major changes are:
• Delegated credit sanction powers up to Rs. 25 lakhs and OTS
powers for waiver of penalty up to Rs. 1 lakh to Regional Managers
• Initiated implementation of new IT software
• Undertook a review of HR practices being followed by the Company
vis-?-vis the industry
Started designating specific role functions in collections and sales
verticals The Company is optimistic that these measures would assist in improving the
performance of the Company in the medium to long term.
5. CORPORATE OVERVIEW
The Company is present in 2 segments – Individual Home Loans and
Home Equity. The Company provides a variety of tailor-made home loan products to
individual borrowers in both salaried and non-salaried (self-employed professional and
self-employed non-professional) segments to suit various requirements.
CONSTRUCTION OR PURCHASE
| Dream Home Loan |
| Composite Loan |
| Fifty Plus Loan |
| NRI Housing Loan |
| Plot loan |
| Repco Privilege* |
Repair and Renovation/ Extension/ Multipurpose loans
| Home Makeover Loan |
| Super Loan |
HOME EQUITY
| Prosperity loan |
| New Horizon Loan |
| Commercial Real Estate (CRE) Loan |
| Repco Nivaran Plus |
6. GEOGRAPHIC PRESENCE
As on March 31, 2023, the Company had 192 points of presence comprising
159 business branches and 33 satellite centers. Our presence spans across 12 states and a
Union Territory; our sourcing remains mostly direct.
During the year FY23, the Company opened 2 new branches in Rajasthan
and 14 new satellite centres across Andhra Pradesh,
Karnataka and Tamil Nadu. The Company also upgraded 3 satellite centres
to branches during the year. The Companys retail network is spread across Tamil
Nadu, Karnataka, Andhra Pradesh, Telangana, Kerala, Maharashtra, Odisha, West Bengal,
Gujarat, Madhya Pradesh, Jharkhand, Rajasthan, and the Union Territory of Puducherry.
7. RISK MANAGEMENT
The Companys business activities expose it to various risks,
including Credit risk, Operational risk, Interest Rate risk, Liquidity risk, Reputational
risk, Compliance risk and Solvency risk. Risk management forms an integral part of the
Companys business. The objective of the Companys risk management system is to
identify, assess, measure, manage and suggest ways to quantify the risks and
control/mitigate various types of risks involved in each area of activity.
The Company recognizes that the identification of risk is the most
crucial function in managing and mitigating the risk. The
Company identifies the risks in each function/activity by taking inputs
from all the departments and by analyzing gaps in the existing processes and procedures.
The overall responsibility of identifying, monitoring, and evaluating risks lies with
departmental heads and executive management. The Company analyzes risks in terms of
consequence and likelihood of its impact. The analysis considers a range of potential
outcomes and the possibility of those consequences occurring.
The Companys risk management committee, comprising the Chief Risk
Officer and other senior management team members, meets regularly to assess the adequacy
of the existing risk management system and discuss emerging risks, operational or
otherwise. The Company has constituted a Board Level Committee for Risk Management. The
Board reviews the risk management practices of the Company and assists the Company in its
efforts.
A. Rigorous credit appraisal keeps credit risk in check
The Companys credit approval process is organized and defined and
comprises a well-established protocol for complete credit evaluation. The process, which
happens both at the branch,
Regional and Head Office level, ensures a high level of checks.
A preliminary appraisal is performed by the branch manager,
branch-level valuers, and lawyers. The same is again revalidated at the Regional Office
level up to a certain threshold and head office level before loan sanction. Each borrower
is rated based on a dynamic credit scoring model comprising over 15 parameters, including
credit bureau score, carrying different weights. The credit decision and interest
chargeable are linked to the credit score. Credit bureau scores are tracked and taken
seriously, and proposals with scores below a threshold value without justifications are
rejected. Apart from that, we are now moving towards capturing and analyzing granular
characteristics of loan accounts, identifying patterns and behaviors, and making the
credit underwriting process more effective. All efforts are made to ensure that our
pricing covers the risk we underwrite.
Such pricing discipline, we believe, will generate consistent and
superior return ratios. In order to limit the magnitude of credit risk, prudential limits
are laid down on various aspects of credit such as individual borrower-wise limits for
housing loans and loan against properties, etc. The Loan to Value (LTV) ratio is fixed for
different category of loans taking into account the regulatory prescriptions.
The Company maintains a conservative loan to value (LTV). The average
LTV was 45.9% on the realizable value as on March 31, 2023.
B. Operational risk is mitigated using various tools
Operational risk includes the risk of loss due to internal system,
process,orpeoplefailuresorexternaloccurrences.TheCompany has put in place various controls
to mitigate operational risks.
An ongoing monitoring of loan accounts is ensured by the credit
monitoring department at the head office that tracks, among other things, the repayment
capacity of the borrower, cash flow adequacy and proper valuation for the security etc.
and informs process owners immediately. Credit review team, checks at random, if the
approval by the sanctioning authority is in line with the Credit Policy of the Company.
Credit offsite team at HO checks all Know Your Customer (KYC) documents, loan
documentation and ensures compliance to loan sanction conditions before giving
disbursement clearance. Operational risk is also being monitored through introduction of
specific Key
Risk Indicators (KRIs) for each line of business activity. KRIs are
objective measures used to track the current risk and control environment and can act as
early warning signals to potential risk and control issues. They form part of annual
Operational Risk Management Reporting to the Board level committees. Post sanction of the
loan, our Customer Service Department takes a feedback from the customers on their
onboarding experience.
Inspection of each branch based on Risk Based Internal Audit system is
performed by the internal inspection team at regular intervals. Concurrent audit is done
at key branches identified in terms of outstanding loans and NPAs by retired senior
officials of banks entrusted with special duty. Senior Company officials also make
surprise visits to branches to check if all processes and best practices are followed.
Apart from that, we take the help of external KYC agents to perform KYC and risk checks on
all plot loans and other loans of ticket size higher than Rs. 50 lakhs. Our
Recovery team now starts following up with customers and takes action when an account
defaults on a payment.
To improve operational efficiency, quarterly board level discussions
are held on reports shared by recovery officers, external audit firm, internal Inspection
team and the Operations team, who oversee monitoring of the Companys offsite
transactions and KYC-related compliance. New learning is put to use immediately.
Performance review of all branch personnel is undertaken twice a year
by the senior management team.
C. Interest rate risk is mitigated by matching maturity and repricing
of assets and liabilities
The Company has formulated Asset-Liability Management (ALM) policy,
which lays down mechanisms for assessing various types of risks and dynamically altering
the asset-liability portfolio to manage such risks. The maturity profile of assets and
liabilities are monitored on an ongoing basis by Asset Liability Management Committee
(ALCO) - a strategic decision-making body constituted by the Board, to mitigate the risks
arising from cash flow mismatches, comprising of the Managing
Director, Chief Operating Chief Development Officer, Chief
Financial Officer, Chief Risk Officer and a few other senior members of the Company. In
addition, the Company has put in place an efficient and transparent interest rate
transmission policy in the form of Minimum Lending Rate (MLR), which is reviewed every
month and applicable immediately on all new loans.
The frequency of pricing reset for the existing loans has been revised
to three months from 6 months with effect from April 1, 2023.
At any point in time, an optimal balance between short-term and
long-term borrowings is maintained in sync with the extant asset and liability profile.
Most long-term borrowings and on-lending happen at floating rates, which act as a hedge
when interest rate volatility is high.
D. Liquidity Risk is mitigated by ensuring availability of regular
funding sources to enable uninterrupted lending activity by the Company
Management of liquidity risk is the ability of a Company to meet debt
obligations as they become due, without adversely affecting the Companys financial
condition. This assumes significance on account of the fact that liquidity crisis, even at
a single institution, can have systemic implications. The cost incurred in maintaining
sufficient liquidity is adequately incorporated in the internal product pricing,
performance measurement and new product approval process for all material business lines,
products and activities. Therefore, management of liquidity involves optimization of cost
of liquidity and profitability of the
Company. Maturity based cash flow mismatches (traditional maturity gap)
in the balance sheet positioning are identified as a potential source of liquidity risk
and they are being measured by following a flow approach on a regular basis. For measuring
the net funding requirements under various time buckets, maturity profile as suggested by
RBI/NHB is used and the cumulative deficits in each time bucket is monitored vis- a- vis.
the pre-determined tolerance levels. The funding requirement and deployment of surplus
funds are monitored regularly. In addition to the above, we adhere to the guidelines on
Liquidity Coverage Ratio (LCR), which stood at 107.9% as on
March 31, 2023 as against the regulatory prescription of 60%.
E. Solvency risk is mitigated by keeping liquid investments
To mitigate solvency risk, the Company has an investment policy in
place. The idea is to create and maintain an emergency buffer to be used in the unlikely
event that things go out of hand. During the year ending March 2023, the Company made
multiple investments in short-term bank fixed deposits. The value of short-term
investments at the end of the year was Rs. 103.55 crores. In addition, the Company
had a bank balance to the tune of Rs. 347.10 crores. The total liquidity was about
3.6% of the balance sheet size as of March 31, 2023.
8. BORROWING PROFILE
The Company has diversified funding sources spread across three
verticals viz. refinance from NHB, term loans and working capital loan facilities from
Repco Bank and other banks. The Company did not issue any Non-Convertible Debentures
(NCDs), and Commercial Papers (CPs) during the year.
As of March 31, 2023, 74.0% of the Companys borrowings were by
way of borrowings from Commercial Banks, 15.0% by way of refinancing from the National
Housing Bank (NHB), 11.0% from
Repco Bank.
As of March 31, 2023, 13.7% of overall borrowings were on a fixed rate
basis and 86.3% on floating rate basis. The average tenor on borrowings was 8.7 years.
| Borrowing source |
Rs. crores |
| Repco Bank |
1,090.52 |
| National Housing Bank |
1,486.99 |
| Commercial Banks |
7,337.13 |
| Total |
9,914.64 |
9. CREDIT RATING
The Companys short-term and long-term debt facilities are rated
by two rating agencies – CARE Ratings & ICRA.
The long-term facilities include both Companys term loan
facilities with banks and other financial institutions. The
Companys commercial paper facility (short term rating) continues
to enjoy A1+ rating by CARE Ratings.
During the year FY23, rating agencies ICRA & CARE Ratings
reaffirmed AA- rating assigned to Companys term loan facilities and A1+ rating
assigned to Companys Commercial Paper facility.
10. CAPITAL ADEQUACY
RHFLs Capital Adequacy Ratio (CAR) as of March 31, 2023, was
35.8% consisting of Tier-1 capital of 35.0% & Tier-2 capital of 0.8%.
11. ASSET QUALITY
Over the years, the Company has developed robust risk management
systems & processes in all areas of operations like loan origination, credit
appraisal, loan disbursement, and collection & recovery. The new LLMS software
introduced during the year also facilitates in improving our monitoring mechanism.
Despite the enablers, delinquency of a few accounts is inevitable
especially when the Company is dealing with a fair proportion of unorganized sector. The
after-effects of Covid-19 on this segment was severe. During FY21 and FY22, the Company
had to restructure loans of approximately Rs. 719.32 crores. These loans began falling due
for repayments in FY23 post moratorium. Also, the change in methodology of identification
of NPA accounts as per the RBI Master Circular dated October 1, 2021 on Prudential
norms on Income Recognition,
Asset Classification and Provisioning pertaining to Advances led to a
spurt in NPA in FY22. During FY22, the Company also made additional Provisions to comply
with the said Master Circular.
Despite the above issues, the Company was successful in bringing down
its Non-performing assets (NPAs) during the year. NPAs (Stage-3) constituted 5.8% (Rs.
718.68 crores) of the overall loan book as of March 31, 2023, as compared to 7.0% (Rs.
819.79 crores) in the previous year.
The Provision Coverage Ratio on Stage-3 assets stood at about 49.6% as
of March 31, 2023. About 79.0% of the loans in Stage-3 were under various stages of
SARFAESI as of March 31, 2023.
Although the market segment we operate in, results in volatile asset
quality and relatively higher credit costs, the actual losses are comparatively low.
Cumulative mark-down of only about Rs. 113.17 crores since inception (including
technical write-offs) as bad till date bears testimony to the statement mentioned above.
To summarize, the credit cost may be higher for the Company but eventual losses have been
significantly low historically.
12. INVESTMENTS
The Company held investments in the equity of unlisted associate
Company, Repco Micro Finance Limited, to the extent of Rs. 31.6 crores (3,16,00,000 equity
shares of Rs.10/- each).
13. OPERATIONAL HIGHLIGHTS & PERFORMANCE SUMMARY
The Company ended the year with a resilient balance sheet, higher
provision cover, and strong capital levels. The Companys primary business is housing
finance. All other activities of the
Company revolve around the main business.
During the year, the Company remained focused on preserving the quality
of the balance sheet. Business performance in the last quarter was meaningfully better as
the consumer confidence of our target group started showing an improvement.
A Business Summary
| FY23 |
Loan sanctions |
Loan disbursements |
|
(Rs. crores) |
(Rs. crores) |
| Q1 |
690.86 |
642.18 |
| Q2 |
829.49 |
745.51 |
| Q3 |
744.95 |
696.20 |
| Q4 |
966.24 |
835.16 |
| Total |
3,231.54 |
2,919.04 |
B. Return on Assets Tree
The ratio of income and expenses to average loan assets
| Metric |
FY21 |
FY22 |
FY23 |
| Net interest margin |
4.8% |
5.0% |
4.8% |
| Other income |
0.2% |
0.1% |
0.1% |
| Non-interest expenses |
1.0% |
1.0% |
1.2% |
| Credit cost |
0.7% |
1.9% |
0.4% |
| Income Tax |
0.9% |
0.6% |
0.8% |
| Return on assets |
2.4% |
1.6% |
2.5% |
D. Other ratios
ECL provisions made during the year were significantly lower than the
provisions made during FY22. The present provisions available are in compliance with the
RBI Master Circular dated October 1, 2021 on Prudential norms on Income Recognition,
Asset Classification and Provisioning pertaining to Advances. The lower
provisioning facilitated in increasing the profitability ratios like Net Profit Margin,
Return on Equity and Return on Assets of the Company during the year.
| Particulars |
FY 22 |
FY 23 |
Y-o-Y |
|
|
|
Change |
| Interest Coverage Ratio |
1.7 |
1.7 |
- |
| Debt Equity Ratio |
4.7 |
4.3 |
-0.4 |
| Operational Profit |
37.5% |
34.8% |
-7.2% |
| Margin |
|
|
|
| Net Profit Margin |
14.7% |
22.8% |
55.5% |
| Return on Equity |
9.6% |
13.5% |
40.6% |
| Return on Assets |
1.6% |
2.5% |
56.3% |
14. INTERNAL AUDIT & CONTROL
The Company has put in place organized and effective internal control
systems in sync with the nature of the business and scale of operations. The Company has
also implemented "Risk
Based Internal Audit" system as per the guidelines specified by
RBI.
The Risk Based Internal Audit team (RBIA) was further strengthened to
intensify the thrust on evaluation of branches and ensure that the functioning is
in consonance with the carefully formulated and well documented policies of the Company,
plug loopholes and improve customer service, which is the mainstay in an organization like
ours. Details of audit reports provided by the Risk Based Internal Audit (RBIA)
inspection, NHB/RBI as well as the internal and external Auditors of branches are placed
before the Audit Committee of the Board for review. The reports of standalone
"Application audit of IT systems" by the external IT auditors and special audits
for evaluating the ‘efficiency of existing internal control systems are
reviewed by the Audit Committee as well as the IT Strategy Committee, periodically. The
operations and performance of the audit department are reviewed by the Audit Committee.
Evaluation of the effectiveness and appropriateness of internal control
systems and their compliance, the robustness of internal processes, policies, accounting
procedures, and compliance with laws and regulations are the goals of these efforts.
Stringent systems are in place to ensure that the assets and properties of the Company are
utilized in its best interest.
15. INFORMATION TECHNOLOGY
The Company is in the midst of providing its IT infrastructure and
systems a 360-degree overhaul. The Digitization project is divided into two phases.
Enterprise General Ledger (EGL) and Loan Life Cycle Management (LLMS) - comprising of Loan
Origination System, Loan Management System, Collection Management System and Mobile
Applications for channel partners, field investigation and collection - are the primary
priorities of Phase 1. The Phase 2 of the Digitization project contains
department-specific applications, such as Human
Resource Management System, Asset Liability Management System,
Integrated Treasury Management System, Bank Reconciliation System, GST System, Incentive
Management System, Fixed Asset Management System, Accounts Receivables & Accounts
Payable System, Purchase To Pay, Audit Management System, Document Management System,
Deduplication System, Enterprise Data Warehouse System and Customer Mobile App and Portal.
To achieve complete Digitization, the Company has committed to substantial investments and
appointed reputed solution providers to carry out the project.
LLMS comprising of Loan Origination, Loan Management, Loan Collection
and Enterprise General Ledger have gone live from February 2023 onwards after complete
integration and successful data migration in all our branches. Besides, mobile
applications under Phase 1 of the project and remaining applications will be rolled out
shortly after thorough testing and implementation of relevant security related operations.
Likewise, implementation of all Phase 2 applications will be completed by December 2023.
All branches of the Company are connected wirelessly with the head
office at Chennai. One of the USPs of the Company is the quick processing of loan
applications, which is facilitated by the Companys adequate IT infrastructure that
ensures all borrower-specific documents are transferred online. Automated SMS alerts are
also sent to borrowers to remind them of upcoming payments to ensure the availability of
sufficient funds in their bank accounts. The Companys ability to operate and remain
competitive depends in part on its ability to maintain and upgrade information technology
systems and infrastructure on a timely and cost-effective basis, including the ability to
process a large number of transactions daily. An Information Technology audit is conducted
every year via an external agency to ensure the safety of protocols and data.
16. HUMAN RESOURCES
The Company believes in attracting, nurturing, and retaining a
qualitative workforce to accomplish its long-term objectives. To achieve this, the Company
provides the necessary internal and external training to keep employees updated in tune
with prevailing benchmark practices in the housing finance industry.
During the year, an average of 670 employees participated in at least
one training program. The Company offers a professional work environment and maintains
healthy relations with its employees. The Company on boarded 240 employees during the
year. As of March 31, 2023, the Company had 951 employees on its rolls.
|
For and on behalf of the Board of Directors |
|
K Swaminathan |
|
Managing Director |
| Place : Chennai |
|
| Date : 4th August 2023 |
|
+91-9892691696
