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Consolidated Finvest & Holdings Ltd Management Discussions

197.14
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Jul 19, 2024|09:44:56 AM

Consolidated Finvest & Holdings Ltd Share Price Management Discussions

ABOUT CONSOLIDATED FINVEST & HOLDINGS LIMITED

Consolidated Finvest & Holdings Limited ("CFHL" or "Company"), registered with the Reserve Bank of India ("RBI") as a Systemically Important Non-Deposit taking Non-Banking Financial Company ("NBFC") is mainly engaged in lending and Investment in group Companies.

GLOBAL ECONOMY

The global economy demonstrated growth driven by the resilience of labour markets, robust household consumption, business investment, and a better-than-expected response to the energy crisis in Europe. However, central banks globally were forced to raise interest rates abruptly to curb the persistently high infl ation. The higher interest rate, and other global headwinds like the Russia-Ukraine confl ict, and the resurgence of the COVID-19 situation in China had an impact on economic growth during the year. Although many of these factors are still relevant, the recent re-opening of China brings some respite and could trigger a rapid rebound in activity.

OUTLOOK

According to the International Monetary Fund (IMF), global growth is predicted to bottom out at 2.8% in 2023, and then grow to 3.0% in 2024. Along with improvement in growth rate, infl ation is expected to moderate from 8.7% in 2022 to 7.0% in 2023, before reaching 4.9% in 2024. IMF identifi es that infl ation, though moderating, has mostly been sticky. The reduction refl ects severe reversal in energy and food prices, but core infl ation (excluding food and energy prices) may not have peaked yet. In summary, global growth continues to be uncertain due to a multitude of economic and geopolitical factors. The sharp policy tightening over the last year has had some impact on the global fi nancial sector and the ability of authorities to take swift action may be tested again

INDIAN ECONOMY AND OUTLOOK

After the COVID-19 pandemic, India was quick to get back on the pre-pandemic growth trajectory, surpassing the UK to become the fi fth-largest economy in the world. As per the National Statistical Offi ce, the Indian economy grew at 7.2% in FY2023, compared to 9.1% in FY2022. Although this is still a slowdown from the previous year due to the current global scenario, the economy remained resilient due to solid domestic demand and an uptick in private consumption. The economy underwent a gamut of wide-ranging structural and governance reforms, including ECLGS extension, PMEGP extension, changes in the union budget, among others that strengthened its fundamentals and fi nancial markets. Capex by the central government increased by 63.4% in the fi rst eight months of FY2023 since the fi rst quarter of FY2022, providing an impetus to the economys growth.

The enduring factors that fuel the long-term growth of the economy are still intact, with a sizeable and rapidly expanding middle-class leading the way in consumer spending. Indias domestic consumer market is experiencing rapid growth, alongside its signifi cant industrial sector, establishing itself as an attractive investment hub for MNCs operating in manufacturing, infrastructure, and services. Moreover, India is also emerging to be a global hub for startups, attracting substantial foreign investments due to its youthful population which includes a large GenX demographic, and its technological advancements.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Indias fi nancial services sector plays a critical role in driving the countrys economic growth by providing a wide spectrum of fi nancial and allied services to a large consumer cross-section. The Sector comprises commercial banks, insurance companies, NBFCs, housing fi nance companies, co-operatives, pension funds, mutual funds and other smaller fi nancial entities. In India, the market for fi nancial services sector is still largely untapped. After the COVID-19 impact gradually tapers off, the fi nancial services sector is poised to grow eventually on the back of strong fundamentals, adequate liquidity in the economy, signifi cant government and regulatory support, and the increasing pace of digital adoption. 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. Greater use of digital technology is helping the sector to lower transaction cost, generate higher productivity and reach unexplored markets in the fi nancial ecosystem.

STRENGTH

Non-Banking Financial Companies ("NBFCs") remain one of the most important pillars for ushering fi nancial 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 fi llip to employment generation and wealth creation and in the process, bringing in the benefi ts of economic progress to the weaker sections of the society. NBFC play a key role in providing fi rms with funds through equity participation. As against traditional banks, NBFCs supply long-run credit to trade and commerce industry. They facilitate to fund large infrastructure projects and boost economic development. NBFCs cater to a wide variety of customers – both in urban and rural areas. They fi nance projects of small-scale companies, which is important for the growth in rural areas. They also provide small-ticket loans for affordable housing projects. All these helps promote inclusive growth in the country.

WEEKNESS, RISKS, THREATS & OPPORTUNITIES

Company is a NBFC, having investment in group companies, which are strategic investments and exposed to risk associated with the performance of the group companies and also have investments in mutual funds. The Company will continue to focus on making long term strategic investments in various new ventures promoted by Group, besides consolidating the existing investments through further investments in the existing companies. The company is confi dent to improve its performance on the strength of its long experience and its strong emphasis on the fundamentals.

The Company is also exposed to interest risk and credit risk. However prudent business and risk management practices followed by a company over the years helps it to manage the normal industry risk factors, which inter-alia includes economic / business cycle, besides the interest rate volatility and credit risk.

The Company is confi dent of managing these risks by observing a conservative approach in lending and investments.

FUTURE PROSPECTS AND OUTLOOK

OUTLOOK OF THE SECTOR

India has a huge proportion of un-banked and underbanked consumers and businesses. Hence, there is a lot of potential for NBFCs, which can still be tapped for future growth. The NBFCs are being recognised as being vital for the growth of Indian economy. NBFCs are here to stay and play an important role in economic growth and fi nancial inclusion. As Indias economy grows, the requirement for credit will rise more than proportionately. We need both banks and NBFCs to rise to the occasion and power the economy with free fl owing credit lines. NBFCs with robust business models, strong liquidity mechanisms and governance & risk management standards are poised to reap the benefi t of the market opportunity.

The NBFC-Retail asset under management (AUM), estimated at around 14 lakh crore as of March 2023. The growth outlook for F.Y. 2023-24 has been revised upward, and the ratings agencys estimates suggest that the NBFCs retail assets under management is likely to expand by about 18–20% in fi scal 2024 in comparison to the previous estimate of 12–14% as growth in the unsecured loans segment, consisting of personal & consumption loans, unsecured small enterprise.

OUTLOOK OF THE COMPANY

Outlook of the Company is coming years will better as the Company is having investments in group companies. Future outlook/ performance of the group companies is relatively better.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an adequate and effective system of internal controls for its various business processes, with regard to operations, fi nancial reporting, compliance with applicable laws and regulations, etc. Clearly defi ned roles and responsibility for all managerial positions gives strength to the internal control system of the organisation. Internal audits are done at regular intervals to ensure that responsibilities are executed effectively. Audit Committee of the Board of Directors on quarterly basis reviews the adequacy and effectiveness of internal control systems and suggests measures for improvement of the existing control system and strengthen the control in view of changing business needs and safe guarding the assets of the Company against signifi cant misuse or Loss from time to time.

The company regularly conducts internal audits and checks to ensure that the responsibilities are executed effectively and that adequate systems are in place. The audit fi ndings are reported on a quarterly basis to the Audit committee of the Board headed by a non-executive independent Director.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED.

The company is having suffi cient industry professionals to carry out its operations and follows good management practices. These are basically its human resources assets and integral to the Companys ongoing success. They have played a signifi cant role and enabled the Company to deliver superior performance year after year. Board of Directors of the Company is also actively involved in the day-to-day functions of the Company.

OPERATIONAL AND FINANCIAL PERFORMANCE

Details of Financial Results and Operations of the Company are given as under:

Year ended

31-03-2023 31-03-2022
Total Income 41,732.44 345.94
Profi t before Tax, 41,077.45 266.21
Exceptional Items and
share of Profi t from
Associates
Profi t before Tax and 41,077.45 266.21
Exceptional Items
Less:
i) Exceptional items - -
ii) Provision for Taxation 9,783.05 203.88
Profi t/(Loss) for the Year 31,294.40 62.33
after tax
Less: (Loss) from (0.82) (1.27)
Discounting operations
Add: Other Comprehensive (7171.38) 13558.42
Income/(Loss)
Total Comprehensive 24,122.21 13619.48
Income
EPS (Basic and Diluted) 96.81 0.19

DETAILS OF SIGNIFICANT CHANGE IN KEY FINANCIAL RATIOS (Standalone):

There is a signifi cant change (more than 25%) as compared to immediately previous fi nancial year in some of the fi nancial ratios. Details of the same is as under:

Interest Coverage Ratio 0 2070.47% 100% EBIT/ INREREST
Operating Profi t Margin 98.43% 76.95% 27.91 % Gross Profi t / Total Income
Net Profi t Margin 74.99% 17.65% 324.87% Net Profi t/ Total Income
Return on Net worth 42.10% 0.12% 34,983.33% Net Profi t/ Net worth

Explanation:

Change of more than 25% in the above key fi nancial ratios has occurred as the Company earned exceptionally high income mainly due to net gain on fair value changes as compared to F.Y. ended 31.03.2022.

CAUTIONARY STATEMENT

Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be a forward looking statement within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

For and on behalf of the Board
(Sanjiv Kumar Agarwal) (Radhey Shyam)
Managing Director Director
(DIN: - 01623575) (DIN: - 00649458)
Dated : 31.08. 2023
Place : New Delhi

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