Abhinav Capital Services Ltd Management Discussions.

Non-Banking Finance Companies ("NBFC") are an integral part of the Indian financial system, enhancing competition and diversification in the financial sector and complementing the banking system. NBFCs play a vital role in furthering the objective of financial inclusion by serving the credit demand of the small and medium scale and retail sectors.

Finance is the most critical lubricant for accelerating economic growth. . Non-Banking Finance Companies (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.


It is over a year since the COVID-19 pandemic hit us hard through public health crisis and economic disruption. Though the accumulating human toll continues to raise concerns, the growing vaccine coverage is lifting sentiments.

The Covid-19 pandemic has impacted most countries, including India. This resulted in countries announcing lockdown and quarantine measures that sharply stalled economic activity. Several countries took unprecedented fiscal and monetary actions to help alleviate the impact of the crisis. Government of India had announced various measures to support the economy during this period. The Reserve Bank of India had also announced several measures to ease the financial system stress, including enhancing system liquidity, reducing interest rates, moratorium on loan repayments for borrowers, asset classification standstill benefit to overdue accounts where a moratorium had been granted amongst others to alleviate the economic stress induced by the pandemic which had an impact across sectors that were already showing signs of a slowdown even before the outbreak.


According to International Monetary Fund (IMF), the global economy is projected to grow at 6% in 2021 and 4.4% in 2022. Going forward, the extent of global recovery is expected to be uneven. The severity of the health crisis in each country, the degree of interruptions to economic activities, exposure to cross-border spill overs and the efficiency of policy support to limit the damage will decide the rate of recovery.


The Indian economy registered a GDP growth (YoY) of 0.4% in Q3 2020-21, after recording negative growth of 24.4% and 7.3% in the previous two quarters. The positive growth during the third quarter is indicative of slow resumption of economic activities, higher consumption and activity across sectors.

In even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible. Thanks to the ingenuity of the scientific community, we have multiple vaccines that can reduce the severity and frequency of infections. In parallel, adaptation to pandemic life has enabled the global economy to do well despite subdued overall mobility, leading to a stronger-than-anticipated rebound, on average, across regions.

The Indian economy grew by 1.6% in the fourth quarter recording a minor pickup in growth amidst the COVID-19 second wave hitting the economy hard. For the full fiscal year, the economy shrunk by -7.3% as the COVID-19 pandemic ruined the economy.


International Monetary Fund (IMF), in its World Economic Outlook April 2021 has projected a stronger global recovery, with global growth projected to be 6 percent in 2021 and 4.4 percent in 2022. IMF expects India to see a GDP growth of 12.5% in 2021. These projections are further backed by independent rating agencies like CRISIL, which expects Indias gross domestic product (GDP) growth to rebound to 11% in fiscal 2022, after an estimated 8% contraction this fiscal. Going by these projections, India Is expected to be one of the spearheads of global economic recovery through fiscal 2022.

With the economic activity gaining momentum post COVID-19 lockdown and rollout of coronavirus vaccines, the Indian economy is likely to do better. Monetary and fiscal support will remain crucial. Thanks to unprecedented policy response, the COVID-19 recession is likely to leave smaller scars than the 2008 global financial crisis.

Indian Financial Services Industry

Indias financial services sector plays a critical role in driving the countrys economic growth by providing a wide spectrum of financial and allied services to a large consumer cross-section. In India, the market for financial services sector is still largely untapped. Digital technology, which has transformed the way business is conducted across the world, is projected to be one of the major drivers for the growth of this sector in India as well. An extensive range of financial products are increasingly being sold and delivered using the electronic platform to millions of customers in India

NBFCs especially those catering to the urban and rural poor namely NBFC-MFIs and Asset Finance Companies have a complimentary role in the financial inclusion agenda of the country. Financial services sector is poised to grow on the back of rising incomes, significant government attention and the increasing pace of digital adoption A key measure taken by the Reserve Bank and Government of India to ameliorate the liquidity constraints faced by NBFCs, was to set up a Special Purpose Vehicle (SPV) to purchase short-term papers from eligible NBFCs/ HFCs, which could then utilize the proceeds to extinguish their existing liabilities. The special securities issued by the SPV were guaranteed by the Government of India and would be purchased by the Reserve Bank. Additionally, the scope of the Government scheme on partial credit guarantee (PCG) was expanded to cover the borrowings of lower-rated NBFCs, HFCs and MFIs.

The Reserve Bank of Indias Financial Stability Report (FSR) in January estimated that gross bad loans of banks in India would rise to 13.5 per cent by September from 7.5 per cent in the year-ago month under the baseline scenario. Asset quality may still pose some challenges in the first half of fiscal 2022 with the uncertainty around the economic fallout of the second wave induced localized restrictions being placed in various parts of the Country. However, these challenges are expected to taper as we move towards the second half of fiscal 2022. The uneven recovery being currently observed is expected to be more broad-based later on in the fiscal as well.

Opportunities & Threats

NBFCs have also taken various steps to navigate through the pandemic induced headwinds, stricter and strengthened underwriting norms, use of alternate data sources for underwriting, quickening the pace of digitalization through use of UPI handles, Bots, IVRs, strengthening of collection teams and focus on safer asset classes amongst others.

The aforementioned measures, coupled with greater focus on asset quality, digitalization across customer lifecycle, co-lending partnerships, effective utilization of structured financing and strengthening of capital base amongst others will hold NBFCs in good stead as they navigate towards a more benign economic environment that is expected in the latter part of fiscal 2022 and beyond.

In FY 2021-22, NBFCs can expect growth in the vehicle-financing space after a lull in FY 20-21 due to pandemic and reluctance of buyers due to increase in vehicle prices due to introduction of BS-VI norms. Overall, loan defaults have also reduced and are expected to drop further as the economy shows positive recovery. Gold loans has shown higher traction due to increase in gold prices in the 1st half of fiscal 21. NBFCs have also mobilized their on-ground recovery staff to ramp up their collection efforts.

NBFC Sector

Non-Banking Financial Companies (NBFC) are an integral part of the Indian Financial system, augmenting competition and diversification in the financial sector and complementing the banking system. The Indian NBFC sector has been providing credit to customers in the underserved and unbanked areas. Their channeling the savings and investments of customers and the subsequent capital formation is necessary for Indias economic growth and development. Their ability to innovate products in conformity with the needs of their clients is well established.

Over the past few years, NBFCs have undergone a significant transformation and today they form an important component of Indias financial system. Playing a critical role in the development of infrastructure, transport and employment generation, NBFCs are changing the business loan landscape in the country. Most NBFCs, leverage alternative and tech-driven credit appraisal methodologies to assess the credit worthiness of prospective Borrowers. With the introduction of e-KYC, making borrowing an instant and hassle-free experience, NBFCs are already offering the right financial products to consumers and small businesses in a customized manner. The use of technology to optimize business processes also keeps cost overheads to a minimum, enabling credit to be availed at highly competitive interest rates.


NBFCs with robust business models, strong liquidity mechanisms and governance & risk Management standards are poised to reap the benefit of the market opportunity. NBFCs that are well prepared with their business continuity and contingency plans can quickly bounce back in the post COVID-19 era. With proper planning and strategic initiatives, NBFCs can limit and overcome the impact of this disruption India has a huge proportion of un-banked and under banked consumers and businesses. Hence, there is a lot of potential for NBFCs, which can still be tapped for future growth.

Company is operating business from Mumbai.


Your Company is having total net worth of approx. Rs. 30 Crores. Company is small NBFC registered with RBI. Company is in Business of Giving Corporate Loans & investment activities

1) Company is doing business only with reputed and long term associated clients only. Company is not in the business of retail funding or unsecured funding.

2) Company has repaid entire borrowing of Rs. 10.60 Crores during the current financial year. Your Company is debt free Company & doing business with its own fund only.

3) Further looking at current market scenario, Company has reduced its ICD & Loan portfolio from Rs. 37.74 crores to Rs. 13.13 Crores during FY 2020-21

4) Company has increased its investment in mutual Funds & equity from Rs. 1.54 Crores to RS. 18.35 Crores. Management expects good returns on the above investment.

Details of Investment is given as annexure in the balance sheet of the Company.

Financial performance

Particulars Current Year 2020-21 Previous Year 2019-20
(Rs.) (Rs.)
Revenue from Operations 3,25,12,056 4,34,43,789
Other Income - -
Income from operations 3,25,12,056 4,34,43,789
Less: Financial Expenses 10,33,947 1,11,53,720
Less: Depreciation & Amortisation Expenses 51,198 74,448
Less: Other Expenses 1,14,68,978 1,86, 53,429
Less: Employee Benefits Expenses 22,69,916 19,22,450
Profit/(Loss) Before Tax & Exceptional Items 1,76,88,017 1,16,39,741
Less: Current year Taxation 68,00,000 70,00,000
Less: Short Provisions for Prior Years - (5,84,297)
Less: Deferred Tax 28,77,531 (51,99,890)
Less: Exceptional item - 87,346
Profit After Tax 80,10,486 1,03,36,582
Less: Appropriation Transfer to General Reserve
Proposed Dividend - -
Tax on Dividend - -
Surplus carried to Balance Sheet 80,10,486 1,03,36,582
TOTAL 80,10,486 1,03,36,582

The year under review has been one of the most challenging years for your Company. Your company posted total income and net profit of Rs. 3,25,12,056/- and Rs. 80,10,486/- respectively, for the financial year ended March 31, 2021, as against Rs. 4,34,43,789, /- and Rs. 1,03,36,582/- respectively from the previous year. The year under review has been one of the most challenging years both for your Company and its customers. The COVID-19 pandemic outbreak which began in the middle of March 2020 continued to impact the economy throughout the financial year 2020-21. The year was full of uncertainties. There was slowdown in the activities.


Your Company has earned Rs. 3,25,12,056 by way of interest on loan, Dividend Income & Profit by sale of Investments. Company is managed by professionals. Company is always following strict norms as prescribed by the management for disbursement of Loan. Management is of the opinion that Companys NPA will be within the limit as prescribed by the Management. Company has invested Rs.18.35 crores in Mutual Funds and Equity Market . Board is of opinion that this Investment will fetch good returns.

Your Company is having very limited Client Base. Company is managed by professionals. Company is always following strict norms as prescribed by the management for disbursement of Loan. Management is of the opinion that Companys NPA will be within the limit as prescribed by the Management. Company is hopeful of recovery in the financial year 2020-2021. Management has also decided to find out new avenue in the Financial Market

SWOT analysis


Distinguished financial services provider, with local talent catering to local customers.

Simplified and prompt loan request appraisals and disbursements.

Product innovation and superior delivery.

Innovative resource mobilization techniques and prudent fund management practices.


Regulatory restrictions - continuously evolving government regulations may Impact operations.

Uncertain economic and political environment.


Demographic changes and under penetration.

Large untapped markets.

Use of digital solutions for business/collections.


High cost of funds.

Rising Non-Performing Assets (NPAs).

Competition from other NBFCs and banks

Human Resources

Company conducts various programs aimed towards strengthening skills, enhancing productivity and building sense of ownership among its employees. The Company undertake regular training program for development of Employees skills. To promote & develop upcoming managerial talent, advance training programs were extended to select skilled talents who have displayed high potential to take additional responsibilities in the challenging business environment.

Risk Management

Your Company, being in the business of finance, has to manage various risks. These risks include credit risk, liquidity risk, interest rate risk and operational risk. The stock market the barometer of Economy is not done well. Further it seems that retail investors are not investing in capital market. In todays complex business environment, almost every business decision requires executives and managers to balance risk and reward. Effective risk management is therefore critical to an organizations success. Todays operating environment demands a rigorous and integrated approach to risk management. Timely and effective risk management is of prime importance to our continued success.

Increased competition and market volatility has enhanced the importance of risk management in Share Trading business. The sustainability of the business is derived from the following:

* Identification of the diverse risks faced by the company.

* The evolution of appropriate systems and processes to measure and monitor them.

* Risk management through appropriate mitigation strategies within the policy framework.

* Monitoring the progress of the implementation of such strategies and subjecting them to periodical audit and review.

* Reporting these risk mitigation results to the appropriate managerial levels.

There is the risk of loss from inadequate or failed systems, processes or procedures. These may be attributed to human failure or technical problems given the increased use of technology and staff turnover.

Internal Control Systems and their adequacy

Companys Internal Audit Department has been reviewing all control measures on periodical intervals also recommending improvements wherever necessary. Thus, an effort is made for evaluating the effectiveness of Internal Control System.

Such internal control is being managed by highly qualified and experienced personnel and reports directly to the Audit Committee of the Board. The Audit Committee regularly reviews the audit findings as well as the, an Information Security Assurance Service is also provided by independent external professionals. Based on their recommendations, the Company has implemented a number of control measures both in operational and accounting related areas, apart from security related measures.

Fulfilment of RBI Norms and Standards

The Company has fulfilled all RBI Norms and complied with it.

Cautionary Statement

This report describing the companys activities, projections about future estimates, assumptions with regard to global economic conditions, government policies, etc may contain "forward looking statements" based on the information available with the company. Forward-looking statements are based on certain assumptions and expectations of future events. These statements are subject to certain risks and uncertainties. The company cannot guarantee that these assumptions and expectations are accurate or will be realized. The actual results may be different from those expressed or implied since the companys operations are affected by the many external and internal factors, which are beyond the control of the management. Hence the company assumes no responsibility in respect of forward-looking statements that may be amended or modified in future on the basis of subsequent developments, information or events.

Company follows all Mandatory Accounting Standards.

For and on behalf of the Board of Directors,
Abhinav Capital Services Limited
Place: Mumbai Chetan Karia
Date: 10 th August 2021