Akashdeep Metal Industries Ltd Management Discussions.

INDUSTRY OVERVIEW

During the year under review, NBFCs continued to grow their share in the financial services industry. Data published by the RBI in its Financial Stability Report dated 31 December 2018 show that NBFCs have outperformed scheduled commercial banks (SCBs) on growth in advances, asset quality and profitability. This growth momentum of NBFCs should result in their share in the financial service sector increasing in the near future.

NBFCs have carved the niche business areas for them within the financial sector space and bring the much needed diversity to the financial sector. NBFCs play an important role to promote financial inclusion agenda of the government by catering to financial needs of people belonging to weaker section of the society.

During the year 2018-19 your company on standalone basis earned a net profit of Rs. 29.62 lakhs as against a profit of Rs. 10.99 lakhs in the previous financial year. Revenue from opertions of your company (excluding other income) was Rs 42.23 Lakhs as against Rs. 42.82 Lakhs in the previous year.

OPPORTUNITIES

The macro economic developments in India as well as the rest of the world augur well for the growth of financial services in India and offer immense opportunities in FY 20 and beyond as under:

The financialisation of Indian household savings, low credit penetration and increasing consumption are already presenting newer opportunities for financial services.

As per IMF report, the projected growth in the Indian economy of around 7.2% in FY20 would continue to throw up vast opportunities for us to grow various diversified businesses. Even as we maintain a near term conservative outlook, our long term view for Indian markets remain steadfast.

Emerging trends in technology and move towards formal and cashless economy have also opened up new client segments which firms like ours can exploit for future growth.

THREATS

With the non-banking finance company (NBFCs) sector having come under serious financial pressure over the past few quarters, the government has come up with a proposal for laws and regulations that will give regulator more control. Consequently, the Finance Bill, 2019 proposes to amend the Reserve Bank of India Act, 1934 to give RBI a bigger role in the management of NBFCs in adverse situations.

The Reserve Bank of India has talked about strengthening the regulatory vigil on the sector in general and on the asset liability management (ALM) framework in particular in its latest report. The default by IL&FS on repayment of commercial papers shook the industry, making debt investors wary on investing in them.

OUTLOOK FOR THE INDUSTRY AND THE COMPANY

The markets will continue to grow and mature leading to differentiation of products and services. Each financial intermediary will have to find its niche in order to add value to consumers. The Company is cautiously optimistic in its outlook for the year 2019-20.

RISK MANAGEMENT

The Company has inbuilt risk of "default in unsecured loans provided to the customers" and "risk in dealing in securities market" due to its nature of business apart from other common risks which includes change in management/personnel and policies, lapses / inadequacy in existing infrastructure facilities, delinquencies on the part of employees, staff attrition, misfeasance, change in interest rates, government regulations, competition from others operating in similar business, etc.

The Company is taking proactive steps in implementing management principles well adapted to the demands of the changing environment. The Company has a policy of assessing the risk and managing its business. The Company is operating on a well-defined plan and strategy; hence we believe, we are prepared to face any change in regulatory environment.

FINANCIAL PERFORMANCE

Please refer point no. 1 of Boards report for financial performance of the Company. Segment/ product wise performance is not applicable to the company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has satisfactory internal control system. Please refer point no.25 of Boards report for internal control system and their adequacy.

HUMAN RESOURCE

Human resource is an essential element for any company. Infact a companys performance depends on how well its employees perform . In an increasing competitive market for talent, your company continues to focus on attracting and retaining right talent. It is committed to provide right opportunities to employees to realize their potential. As on 31st March, 2019 your company has three employees.

CAUTIONERY STATEMENT

Statements in the Management discussion and analysis, describing the Companys objectives, outlook, opportunities and expectations may constitute "Forward Looking Statements" within the meaning of applicable laws and regulations. The actual result may vary materially from those expressed or implied in the statement. Several factors make a significant difference to the Companys operations including the government regulations, taxation and economic scenario affecting demand and supply condition and such other factors over which the Company does not have any direct control.

DETAILS OF SIGNIFICANT CHANGES

The details of significant changes in financial ratios, along with detailed explanation thereof as per the SEBI (LODR) Amendment Regulations, 2018

Particulars FY 2019 FY 2018 Variation Reason
Key Financial Ratio
Debtors Turnover* 0.12 0.12 -3.33% -
Inventory - - - -
Turnover
Interest Coverage Ratio* 257.83 13.64 1790.39% Finance cost for FY 19 only includes bank charges, resultantly interest coverage ratio has improved significantly
Current ratio 32.38 115.60 -71.99% Deviation in the ratio has been due to income tax provisions. Since the Companys profitability has increased significantly in FY 2019, resultantly its tax provision has also increased. The Company has sufficient liquidity cushion.
Debt Equity Ratio - - - -
Operating Profit 44.66% 38.07% 17.31% -
Margin (%)*
Net Profit Margin(%) 70.14% 25.67% 173.22% Although margins from core operations have remained stable but PAT margin has grown due to higher net other income in FY 19
Return on Net 1.45% 0.55% 165.40% Sizeable increment in PAT margin have resulted in higher return on net worth and hence leading to such a variation.
Worth^