Industry Structure and Developments Business Environment
TCI Finance Limited (TCIFL or the Company), is a non-deposit taking
Non-Banking Financial Company (NBFC) registered with RBI and classified as an NBFC-non
deposit taking Company. TCIFL engaged in the business of financial services. NBFC Sector
is passing through a critical phase at this juncture. Recent failures of certain large
Non-Banking Financial Companies (NBFCs), severe liquidity strain confronting the sector
and the consequent financial stability concerns have brought NBFC regulations back into
focus.
INDUSTRY AND ECONOMIC SCENARIO
While the post pandemic global economy continues to be affected by
geopolitical tensions and inflationary pressures, India continues to remain a bright spot
in the world economy. As per IMF, it will alone contribute 15% of the global growth in
2023 driven by its demographic dividend, pent-up demand growth, digital infrastructure and
commitment to fiscal consolidation. Overall, India is expected to close FY 2022-23 with a
GDP growth of 7%, which is the fastest amongst all the major economies. It is projected to
further grow by 6.1% in FY 2023-24 - in contrast, the projected global growth rate for
same period is only 2.9%.
In line with its global peers, RBI also undertook several rate hikes
during the year to keep the inflationary pressures in check. Despite this, the industry
demonstrated strong credit growth of 15% YoY in March 2023, driven by the overall
improvement of the economy and pent-up post-Covid demand. This growth was also evidenced
by several high frequency indicators including the Purchasing Manager Index readings,
buoyant tax collections, healthy vehicle and tractor sales among others.
The overall NBFC sector benefited from resurgent domestic economic
activity leading to strong momentum in disbursements and bolstering higher business
growth. Asset quality indicators have also been improving steadily for NBFCs on the back
of higher collections and lower than anticipated slippages on overall book including
restructured book. Notably, most major players are focusing on growing their Retail AUM.
As per ICRA, the NBFC-Retail AUM is projected to have grown at 16-18% in FY 2022-23 and
expected to further grow at a healthy 12-14% in FY 2023-24. However, margins will be an
area of focus as they are expected to remain under pressure in FY 2023-24 which may
moderate slightly.
The overall outlook for industry remains positive as India treads on
its growth trajectory leading to higher credit demand. The growth in credit is expected to
be broad based across products and segments with key risks being elevated interest rates
and inflation.
Opportunities
Reports from the World Bank indicate that Non Banking Financial
Institutions act as critical pillars contributing to macroeconomic stability and sustained
economic growth and prosperity, due to their ability to finance firms and individuals at a
reasonable cost, reduce volatility by providing multiple sources to finance and park funds
and enable creation of a competitive environment characterized by a diverse array of
products. This has been proven time and again in developed markets.
NBFCs continue to play a critical role in making financial Services
accessible to a wider set of Indias population and are emerging as strong intermediaries
in the retail finance space. Going forward, one should expect NBFCs to further strengthen
their presence in retail finance and grow at a reasonably healthy pace.
Your company is committed to addressing the changes boosted by its
strength in market position, agile execution capabilities, robust early warning systems
and extensive use of analytics for risk mitigation and resource allocation. It will ensure
to take advantage of the tailwinds that may emerge during the course of the year.
Threats
Even though there are many opportunities provided to NBFCs for its
growth and improvement, yet there are some challenges that are faced by NBFCs in India.
The biggest challenge before NBFCs is that they are facing stiff
competition from banks and financial institutions, due to their ability to raise low cost
funds which enables them to provide funds at much cheaper rate. More stringent capital
adequacy norms have been stipulated by RBI for NBFCs which is making difficult for them to
give cheaper finance. On the flip side, weak credit profiling of borrowers amid a gradual
economic recovery remains one of the biggest threat. Beyond the immediate liquidity
challenges, the key challenge for the NBFCs would be to prevent a sharp deterioration in
the delinquency levels subsequent to the expiry of the moratorium period.
Segment-wise or product-wise performance of the Company
The Company is a NBFC. It is engaged in the business of financing which
is the only segment in the Company. Hence, the results for the year under review pertain
to only financing activity.
The Companys total Revenue from Operations during the year were Rs.
0.07 Lakhs and the net loss is Rs. (251.03) Lakhs as against Rs. (3296.58) lakhs
respectively in the previous year.
Outlook
The Company being an investment company seeks opportunity in the
capital market. The Volatility in stock indices represents both an opportunity and
challenge for the company. We continue to see significant opportunities in the market for
long term.
The company carries shares and securities in its books. The effect of
mark to market thereon have been taken into account for the year. The Company believes
that it has taken into account the impact of known events arising out of COVID-19 pandemic
in the preparation of financial results resulting out of fair valuation of these
investments. However, the impact assessment of COVID-19 is a continuing process given its
nature and duration. The Company will continue to monitor for any material changes to
future economic conditions.
Risks and concerns
The Company recognizes that risk is an integral and unavoidable
component of business and is committed to managing the risk in a proactive and effective
manner. The Company is an NBFC Company registered under RBI and categorized as a Loan
Company. In todays challenging and competitive environment, strategies for mitigating
inherent risks in accomplishing the growth plans of the Company are imperative. The common
risks for the Company are financial risks, credit risk, liquidity risk, market risk, etc.
Risk mitigation is also an exercise aiming to reduce the loss or injury
arising out of various risk exposures. The Company adopts a systematic approach to
mitigate risks associated with accomplishment of objectives, operations, revenues and
regulations. The Company believes that this would ensure mitigating risks proactively and
help to achieve stated objectives. The NBFC industry in general faces the risk of re-entry
and new entry of players and existence of several unorganized regional players increasing
the competition which mainly affects the asset quality. This is further characterized by
captive NBFCs floated by other business houses. The ever existing systemic and delinquency
risks and fluctuations in interest rates and risk weight make the companies more
vulnerable. Deployment of funds in sensitive and volatile sectors increases the risk
exposure while concentration risk increases dependency.
Internal Control Systems and their adequacy
Internal Control measures and systems are established to ensure the
correctness of the transactions and safe guarding of the assets. The Management ensures
adherence to all internal control policies and procedures as well as compliance with
regulatory guidelines. The audit committee of the Board of Directors reviews the adequacy
of internal controls. This has improved the management of the affairs of the Company and
strengthened transparency and accountability. The Companys Internal Financial Control
System is commensurate with the size, scale and complexity of its operations. The Company
has in place policies and procedures required to properly and efficiently conduct its
business, safeguard its assets, detect frauds and errors, maintain accuracy and
completeness of accounting records and prepare financial records in a timely and reliable
manner. Further, your Companys Internal Financial Controls (IFC) has been reviewed and
actions have been taken to strengthen financial reporting and overall risk management
procedures. Detailed procedural manuals are in place to ensure that all the assets are
safeguarded, protected against loss, proper prevention & detection of frauds &
error, the accuracy and completeness of the accounting records, and all transactions are
authorized, recorded and reported correctly.
The Internal Auditors monitor and evaluate the efficiency and adequacy
of Internal Financial control system in the Company, its compliance with operating
systems, accounting procedures and policies. To maintain its objectivity and independence,
the Internal Auditors report directly to the Chairman of the Audit Committee of the Board,
all the significant audit observations and follow up actions thereon. Both Statutory
Auditor on quarterly basis and Internal auditor on annually basis have sessions with the
Audit committee. The Internal audit reports are placed before the Audit committee on
annual basis and all findings and observation, if any are recorded thereon. The said
observation and comments, if any of the Audit Committee are placed before the board. The
Internal Auditor is a permanent invitee to the Audit Committee Meetings. The Audit
Committee advises on various risk mitigation exercises on a regular basis.
The audit committee also reviews reports submitted by the management
and audit reports submitted by internal auditors and statutory auditors on periodic basis.
Suggestions for improvement are considered and the audit committee follows up on
corrective action. The audit committee also meets companys statutory Auditor to
ascertain, inter alia their views on the adequacy of internal control systems and keeps
the board of directors informed of its major observations, if any, periodically.
Your Board is of the opinion that the Internal Financial Controls,
affecting the Financial Statements of your Company are adequate and are operating
effectively.
Discussion on Financial Performance with respect to operational
performance
TCI Finance Limited follows accrual basis of accounting under the
historical cost convention. It has adopted Indian Accounting Standards ("Ind
AS") notified under section 133 of the Companies Act 2013 ("the Act") read
with the Companies (Indian Accounting Standards) Rules, 2015 from April 1, 2019 and the
effective date of such transition is April 1, 2018. Your company is a small sized, BSE and
NSE listed, Non Banking Financial Company (NBFC).
The Companys total Revenue from Operations during the year were Rs.
0.07 Lakhs and the net loss is Rs. (251.03) Lakhs as against Rs. (3296.58) lakhs
respectively in the previous year.
The loss in the current year is mainly on account of provision for
impairment of its investment in and loans granted to Mahendra Investment and Advisors
Private Limited.
The Company is in the process of identifying various alternatives/ new
areas to venture into for reviving the Company.
Material Developments in Human Resources/Industrial Relations
The Company always considers its human resources as a valuable asset
and is committed towards their development for continuous growth. Focus on training to
enhance the skill-sets of employees in line with the business and market requirements
continued throughout the year and it confers rewards and recognition based on merit.
The employee relations have continued to be harmonious throughout the
year. The Company has 4 permanent employees as on 31st March 2023.
Financial Ratios (%)
| Ratios |
2022 |
2023 |
Change (%) |
| Debtor Turnover |
1.29 |
0.02 |
–98.22% |
| Inventory Turnover |
Not Applicable as there is no Inventory |
Not Applicable as there is no Inventory |
- |
| Interest coverage Ratio |
-20.05 |
-0.63% |
-96.85% |
| Current Ratio |
- |
- |
0.00% |
| Debt equity Ratio |
-2.26 |
-1.69% |
-25.01% |
| Operating Profit Margin(%) |
-5417.74% |
-235243.95% |
4242.11% |
| Net Profit Margin (%) |
-118528.73% |
-386198.02% |
225.83% |
Explanation
1. Debtor turnover: The reduction in the current year has been
mainly on account of non recognition of interest on loans and investments granted to Amrit
Jal Ventures Pvt Ltd for which provision for Impairment Loss has been created
2. Interest Coverage Ratio: The reduction in Profit has been
mainly on account of provision for impairment of loans and advance and investments in
Amrit Jal ventures Private Limited.
3. Debt Equity ratio: There has been a reduction in debt equity
ratio in the current year on account of provision for impairment of loans and advance and
investments in Amrit Jal ventures Private Limited
4. Operating Profit Margin: There has been a reduction in the
operating margin on account of non recognition of income on loans and advance and
investments in and granted to Amrit Jal Ventures Pvt Ltd
5. Net Profit Margin: There has been a negative Net profit
margin on account of non recognition of income and provision of impairment loss on loans
and advances and investments in and granted to Amrit Jal Ventures Pvt Ltd .
Return on Net Worth
The Company recorded a loss of Rs. 251.03 Lakhs for FY 2022-23 as
compared to the loss of Rs. 3296.58 lakhs for FY 2022-23. The Net Worth of the Company Rs.
(6285.31Lakh) as of 31st March 2023 as compared to Rs. (4674.59 Lakh) as of 31st March
2022. Due to adverse developments in the entities to whom the company has advanced loans /
given guarantees / investments made, the Company had incurred these losses and adversely
affect the future income from operations. These factors substantially affected the
operations of the Company.
Cautionary Statement
Statements in the Management Discussion and Analysis Report describing
the Companys objectives, projections, estimates, expectations or predictions may be
"forward looking statements" within the meaning of the applicable laws and
regulations. Actual results could differ materially from those expressed or implied.
Important factors that could influence the Companys operations include economic and
political conditions in which the Company operates, interest rate fluctuations, changes in
Government/ RBI regulations, Tax laws, other statutes and incidental factors.
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