MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Background:
Bhagyashree Leasing and Finance Limited (the Company) is a non-deposit accepting
NonBanking Finance Company ("NBFC"), holding a Certificate of Registration from
the Reserve Bank of India ("RBI") engaged in a loan finance business. The
Company is headquartered in Pune.
Industry and Economic Scenario:
A brief summary of FY2022 and the impact of COVID-19 pandemic are discussed below:
Indias real GDP growth for FY 2021-22 was 8.7%, which is amongst the highest in
leading economies, as the Indian economy bounced back during the year exhibiting
resilience during the pandemic. As the year progressed, most of the economic indicators
such as GST collection, IIP, Exports and UPI transactions saw an uptick, indicating a
steady recovery from the lows of the first quarter of FY 2021-22. This was also reflected
in the credit growth for both Banks and NBFCs where the larger, well-funded ones witnessed
a swifter recovery on the back of ebbing third wave of COVID-19 and easing of
restrictions.
While Indias growth outlook for the year ahead remains bright, driven by private
consumption and elevated public spending, but risks remain, the biggest of which is
inflation. Higher inflation can curtail the discretionary consumption and unfavourably
affect the recovering domestic demand. The ongoing geopolitical crisis has caused supply
chain disruptions which has led to higher commodity prices; if this gets prolonged, it can
further fuel the inflation. The depreciating Rupee can become another issue as India is
one of the biggest importers of crude oil leading to likely rise in trade deficit in FY
2022-23. As Rupee depreciates and import prices go up, taming inflation can become an
uphill task for the central bank. A slower than expected global growth recovery may affect
the demand for exports.
Indias retail inflation soared to an 18-month high of 7.5% in April 2022 driven by
inflationary pressures, post which the RBI announced a 40 bps repo rate hike in May 2022
in an off-cycle monetary policy to combat the said rise in inflation. While RBIs stance
remains accommodative in order to support growth, ensuring that inflation remains within
the target going forward shall be key for a sustainable growth environment. However, a
downside to this is any further increase in the rates may force Banks and NBFCs to further
increase their lending rates, and thus affecting consumption and capital expenditure.
Nevertheless, the opportunities for growth remain intact driven by strong economic
fundamentals, favourable economic policies (such as PLI scheme, Aatmanirbhar Bharat
Abhiyan and Startup India initiative), digital push, demographic dividend and growing
global preference for India as an investment destination. Further, as the Company enters
into FY 2022-23, the thrust on capital expenditure in Union Budget 2022 is a welcome move
and expected to push demand through multiplie reffect on the economy.
Given the proactive efforts by the regulator and the push from the government to
support growth, the Company expects the inflationary environment to soften and a large
vaccinated population is likely to contain the impact of subsequent COVID-19 waves, which
will give way to robust growth going forward.
This in turn shall spur credit demand across retail, SME and corporate segments, and
reflect in the performance of the financial services sector as a whole.
Evolving Regulatory Landscape
Over the past few years, financial services as a sector has come under increased
scrutiny and therefore, greater regulatory supervision This is especially true for NBFCs,
as over the years, the sector has undergone considerable evolution in terms of size,
complexity and interconnectedness within the financial sector. With a view to bridge the
regulatory gaps between the Banks and NBFCs, NBFCs are now increasingly being subject to
regulations and guidelines at par with banks. Some of the key regulations and guidelines
aimed at bringing this regulatory convergence between the Banks and NBFCs are:
i. Scale Based Regulations where NBFCs would be classified into layers on the basis of
their size, activity and perceived risk. Effective October 2022, the said regulations
would put in place enhanced regulatory standards pertaining to Capital, Prudential and
Governance requirements. NBFCs which warrant enhanced regulatory requirements based on a
set of parameters and scoring methodology will feature in the upper layer, while the
middle layer will comprise of deposit-taking NBFCs irrespective of asset size,
non-deposit-taking NBFCs with assets worth Rs 1,000 crore or more, as well as Housing
Finance Companies.
ii. Prompt Corrective Action (PCA) framework prescribed for NBFCs as a tool for
effective market discipline, to enable Supervisory intervention at appropriate time which
require NBFCs to initiate and implement remedial measures in a timely manner, so as to
restore its financial health. With the NBFC sector witnessing a high growth trajectory
over the past decade and substantial inter-connectedness within the financial ecosystem,
this framework is expected to further strengthen the supervisory tools available to the
regulator to manage NBFCs.
iii. RBI circular dated November 12, 2021, pertaining to asset classification of NBFCs,
whereby certain aspects such as classification of an account as Special Mention Account
(SMA) and Non-Performing Asset (NPA) were clarified/harmonized. This has again been
brought to ensure uniformity in the implementation of Income Recognition, Asset
Classification and Provisioning norms across all lending institutions.
iv. RBI has tightened the norms around appointment of Auditors with issue of
‘Guidelines on appointment of Statutory Auditors with a view to strengthen
governance relating to appointment of auditors and to improve the overall quality and
standards of financial reporting of RBI regulated entities. It sets out the criteria for
audit firms regarding the number of audits they can take at a time and how they should
conduct it, while requiring joint audits for entities with asset size of more than Rs.
15,000 crore.
v. Extending Risk Based Internal Audit framework to NBFCs to enhance the quality and
effectiveness of their internal audit systems and processes. It requires internal audit
function to broadly assess and contribute to the overall improvement of the Organizations
governance, Risk Management and control processes using a systematic and disciplined
approach.
vi. Amendment in Listing Obligations and Disclosure Requirements by SEBI enhancing
Disclosure norms and Compliance requirements for debt listed entities. Multiple provisions
which were hitherto applicable only to equity listed entities were made applicable to High
Value Debt Listed Entities ("HVDL"). HVDLs are entities with listed NCDs having
outstanding value of Rs. 500 crore and above. Further, certain provisions which were
already applicable to debt listed entities have also been amended resulting in additional
compliances. The amendments encompassed areas such as board composition including
independent directors, related party transactions, corporate governance requirements,
disclosure of information, financial results and submissions to stock exchanges among
others.
vii. Introduction of guidelines on declaration of dividends by NBFCs with the intent to
infuse greater transparency and uniformity in practice. It requires NBFCs to comply with
the minimum prudential requirements including capital adequacy and net NPA levels to be
eligible to declare dividend within the prescribed Dividend Payout ratio.
Opportunities and Threats
Non-Banking Financial Companies ("NBFCs") remain one of the most important
pillars for ushering financial inclusion in India, reaching out to a hitherto
under/unserved populace and in the process leading to "formalization" of the
credit demand. NBFCs cater to the needs of both the retail as well as commercial sectors
and, at times, have been able to develop strong niches with their specialized credit
delivery models that even larger players including banks, have found hard to match. This
has further provided a fillip to employment generation and wealth creation and in the
process, bringing in the benefits of economic progress to the weaker sections of the
society.
While the economy is on the path to recovery, there are certain headwinds that may
impact the growth and credit offtake. The NBFC sector may get impacted if elevated levels
of retail inflation, crude oil prices and supply chain disruptions continue over a
prolonged period. Borrowing rate is expected to rise in the wake of rate hikes announced
by RBI in May 2022, which may lead to pressure on margins. Any loan re-pricing may lead to
reduced demand as well as deterioration in credit quality for small borrowers.
However, theres room for optimism - receding pandemic impact along with large
vaccinated population, rising private investments, higher consumption levels and thrust on
capital expenditure in Union Budget 2022 shall in tandem lead to a higher growth
trajectory for the economy. This shall also translate into a better performance vis-a-vis
the year gone by for most of the leading financial services institutions including NBFCs.
The Company
The Company is not in operation for last couple of years hence its comparative
figures/Analysis/Structure is available only with respect to non-revenue/business
transactions as per Schedule V (B) of Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015;
Financial Review:
Your Company is a private sector Non-Banking Financial Company (NBFC) primarily
involved in the business of leasing and hire purchase financing and financial services.
The Company has not earned income from operations during the financial year under
review whereas, Total Expenses incurred during the year is Rs.9,79,816/- as against the
expenses of previous year Rs.881,012/-.
Business Review:
The operations of the Company continue to be focused on Investment. The Directors are
very much optimistic about further improvement in performance during the current year.
Risk Management:
Risk Management is an integral part of the Companys business strategy. The Company is
exposed to specific risks that are peculiar to its business including interest rate
volatility, economic cycle, market risk and credit risk. The management continuously
assesses the risk and monitors the business and risk management policies to mitigate the
risk.
Internal Control Systems and their Adequacy:
The Companys internal control system is designed to ensure operational efficiency,
protection and conservation of resources, accuracy and promptness in financial reporting
and compliance with laws and regulations. The internal control system is supported by an
internal audit process for reviewing the adequacy and efficacy of the Companys internal
controls, including its systems and processes and compliance with regulations and
procedures. Internal Audit Reports are discussed with the Management which reviews the
adequacy and effectiveness of the internal controls in the Company.
Cautionary statements:
Statements in the Management Discussion and Analysis Report describing the Companys
objectives, projections, estimates, expectation may be forward looking statements within
the meaning of applicable securities laws and regulations. Actual results could differ
materially from those expressed or implied.
| On behalf of the Board of Directors |
| For BHAGYASHREE LEASING AND FINANCE LIMITED |
| RAJAS JAIN |
AMEYA JAIN |
| DIRECTOR & CEO:DIN: 00037599 |
DIRECTOR& CFO :DIN: 01947076 |
| Date: August 10, 2022 |
|
| Place: Pune |
|
+91-9892691696
