INDIAN ECONOMY
Indias gross domestic product (GDP) has touched the $3.75 trillion-mark in 2023 so far
from around $2 trillion in 2014. Indian economy has become the fifth largest economy in
the world. At current prices, Indias GDP ranks above the UK ($3,159 billion), France
($2,924 billion), Canada ($2,089 billion), Russia ($1,840 billion), and Australia ($1,550
billion) at current prices.
For the entire fiscal 2022-23, the growth rate came in at 7.2 per cent underscoring the
countrys economic resilience amid geopolitical conflicts and global headwinds.
Indias GDP has reached $3.75 trillion in 2023, from around $2 trillion in 2014; moving
from 10th largest to 5th largest economy in the world. India is now being called a Bright
Spot in the global economy,
INDUSTRY STRUCTURE AND DEVELOPMENTS
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 closed 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%.
It is also praiseworthy to note that the Indian financial sector remained largely
unaffected amidst the recent turbulence in the US and European banking sectors. This
resilience in Indias financial system is attributable to adequate capitalization &
liquidity, healthy asset quality and proactive monitoring & timely interventions by
the regulator.
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 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.
SWOT ANALYSIS
Strengths
• Expertise and experience in Finance sector
• Specialization in the task of recovery
• Consistent financial track record
• Experienced senior management team
• Strong relationships with public, private as well as institutions and investors
• Vast knowledge of the needs of the customer segment
• Simplified and prompt loan request appraisal and disbursements Weakness
• Non-performing asset and consequent pressure on the bottom line
• Rising competition from banks
• Increasing cost of funding
• Retention of talent
• High resource cost structure Opportunities
• Buoyant business environment
• Tax motivations by government
• Optimistic capital markets and access to varied resources
• Expanded role of being in diversified financial intermediation activities in the
areas of credit and in channelizing the saving
Threats
• Slow industrial growth
• Exposure to the abnormal industry risk factors
• Entry of many players in the banking and non-banking operations creating stiff
competition
• Major shakeout in the NBFC sector
• Increase in finance cost due to uncertainties of pandemic
• Geopolitical crisis
SEGMENT WISE PERFORMANCE
The company operates only in one segment i.e. Financial Services.
INDIAN ECONOMY OUTLOOK
The total CPI (Consumer Price Index) inflation rate was 6.5% in February 2023, up from
6.1% in February 2022. The Monetary Policy Committee (MPC) of the RBI has recently kept
the repo rate unchanged at 6.5% and maintained its stance on “withdrawal of
accommodation”. However, the RBI forecasts consumer inflation to decline to 5.2% in
FY 2023-24. The combination of digitalization and efficiency-enhancing measures, along
with robust capex investments, will eventually boost business productivity in India.
Moreover, Indias financial sector remains robust, bolstered by improvements in asset
quality and robust private-sector credit growth.
RISKS AND CONCERNS
In the backdrop of obvious rise in the scope of business and increased regulatory
rigor, what remains challenging is the implementation of risk-management strategies in the
NBFC sector to ensure that the business models remain viable, adequately ringfenced and
sustainable. In the realm of risk management, the asset quality norms will bring to focus
any gaps in credit risk management can reveal the shortcomings in market risk.
Failing to tame the operational risks can have serious consequences threatening the
sustainability of the organizations. A tough task awaits NBFCs to rein in operational risk
much beyond going successful in scaling up business. A right risk prioritization can be a
recipe to thrive in the vibrant economy poised to unfold in post-pandemic regime.
An NBFC is prone to inherent risks while operating in the financial sector.
Types of risks faced by an NBFC:
Credit Risk:
• Risk that a borrower will fail to meet his obligation i.e. fail to repay the
loan etc. / Risk of default on account of non-payment of any contractual obligation on
part of the borrower.
• NBFCs are at a higher risk of default than Banks -higher exposure to
non-traditional segments and riskier segments.
• Gives rise to NPAs
Regulatory risks:
• Risks due to change in applicable laws which can impact the NBFC.
Market Risk:
• The companys operations are directly affected by the stock markets.
Volatilities in the markets may have an effect on our volumes and profits.
Compliance risk:
• Non-compliance with laws - fine, penalties, imprisonment, suspension of license.
• Changes in the policies of the Government of India or political instability may
adversely affect economic conditions in India generally, which could impact our business
and prospects.
Reputation risk:
• Risk from adverse/ negative perception of the companys image - on part of
customers, shareholders, investors, regulators.
Liquidity Risk:
• Liquidity risk is the non-availability of cash to pay a liability that falls due
• Financially healthy Company can pay off both long term and short-term
obligations without any strain.
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. Considering the size and nature of
activities, the company has adequate internal control system covering both accounting and
administrative control. In addition the internal audit is carried out periodically. The
management ensuring an effective internal control system so that the financial statements
and reports give a true and fair view and during the year under review no material or
serious observation has been received from the Internal Auditors of the Company for
inadequacy or ineffectiveness of such control.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
Financial and operational performance forms part of the Annual Report and is presented
elsewhere in the report.
HUMAN RESOURCES
We, at UIFL, give paramount importance to our employees, who we believe to be our
greatest assets. Attracting and retaining the best talents have been the cornerstone of
the Human Resource function. We strive to create a diverse and inclusive environment that
is value driven, collaborating and growth inducing.
All the actions of the Companys leadership aim at reinforcing a fair, transparent and
inclusive culture. Leading with empathy is part of the Companys policy, which is what
helped the organization navigate the pandemic effectively. Through the combined efforts of
its employees, we continued to promote its business priorities while protecting the best
interests of its people and communities.
INDUSTRIAL RELATIONS
Companys Industrial relations continued to be healthy, cordial and harmonious during
the period under review.
DETAILS OF SIGNIFICANT CHANGES IN THE KEY RATIOS AND RETURN ON NETWORTH
As per the amendment made under schedule V to the Listing Regulations read with
regulation 34(3) of the Listing Regulations, details of key financial ratios and any
change in return on networth of the company are given below
Particulars |
2022-23 |
2021-22 |
Change |
Debtors Turnover Ratio |
|
|
- |
Inventory Turnover Ratio |
- |
- |
- |
Current Ratio |
- |
- |
- |
Debt Equity Ratio |
- |
- |
- |
Operating Profit Margin Ratio |
|
|
- |
Net Profit Margin Ratio |
0.02 |
0.38 |
37% |
Return on Equity Ratio |
0.01 |
0.38 |
37% |
Return on Capital employed |
0.03 |
0.29 |
26% |
CAUTIONARY STATEMENT
This report contains forward-looking statements extracted from reports of Government
Authorities / Bodies, Industry Associations etc. available on the public domain which may
involve risks and uncertainties including, but not limited to, economic conditions,
government policies, dependence on certain businesses and other factors. Actual results,
performance or achievements could differ materially from those expressed or implied in
such forward-looking statements. This report should be read in conjunction with the
financial statements included herein and the notes thereto. The Company does not undertake
to update these statements.
+91-9892691696
