Dhenu Buildcon Infra Ltd Management Discussions.
Dhenu Buildcon Infra Limited is Non-Banking Financial Company (NBFC), primarily engaged in the business of Investment in securities. The Management discussions and analysis is given hereunder:-
The Indian economy retained its tag of the fastest growing major economy in the world in 2018-19. However, overall growth for 2018-19 slumped to a five-year low of 6.8% compared with 7% projected in the second advance estimates released in February. Full-year growth in value added terms was lower at 6.6%, compared with 6.9% in financial year 2017-18.
So far, non-banking finance companies (NBFCs) have scripted a great success story. Their contribution to the economy has grown in leaps and bounds from 8.4% in 2006 to above 14% in March 2015. In terms of financial assets, NBFCs have recorded a healthy growtha compound annual growth rate (CAGR) of 19% over the past few yearscomprising 13% of the total credit and expected to reach nearly 18% by 2018-19. Going forward, the latent credit demand of an emerging India will allow NBFCs to fill the gap, especially where traditional banks have been wary to serve. Additionally, improving macroeconomic conditions, higher credit penetration, increased consumption and disruptive digital trends will allow NBFCs credit to grow at a healthy rate of 7-10% (real growth rate) over the next five years. Clearly, NBFCs are here to stay.
PERFORMANCE IN FINANCE SECTOR:
India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, NBFCs, Housing Finance Companies, Co-operatives, Pension Funds, Mutual Funds and other smaller financial entities The Reserve Bank of India (RBI) recently allowed new entities such as payment banks and small finance banks to commence operations, focusing on specific segments of transactional banking and small-ticket lending, respectively.
Some recent developments that have happened in this sector are:
Launch of India Post Payments Bank (IPPB) for better rural penetration of banks.
Under the Union Budget 2018-19, there has been an allocation of Rs. 3 trillion (USD 46.3 billion) towards the Mudra (Micro-Units Development & Refinance Agency Ltd.) Scheme.
The Securities and Exchange Board of India (SEBI) has limited the Total Expense Ratio (TER) charged by mutual fund houses having equity assets up to Rs. 500 billion (USD 7.1 billion) to 1.05%.
NBFCs are gaining eminence in retail finance by financing more than 80% of the equipment leasing and hire purchase activities in India.
The governments focus on the infrastructure sector is providing an impetus to NBFCs engaged in the infrastructure financing space.
OUR BUSINESS OPERATIONS:
Dhenu Buildcon is a medium size NBFC engaged in the sole business segment of financial services. During the year, the Company has marked income of Rs. 57.55 lakhs, which has increased from the preceding years income of 3.02 lakhs. In the road of profit making, Company is still struggling and incurred a loss of Rs. 33.46. A rapid fluctuation in market activities due to ongoing amendments in business sector are the challenges which Company is facing and striving to find news ways to come back in the profit track.
OPPORTUNITIES AND THREATS:
Report from the World Bank indicate that Non Banking Financial Institutions act as critical pillars contributing to macroeconomic stability and sustained economic growth and prosperity.
The Biggest Challenge before NBFC is that they are facing stiff competition from Bank & Financial Institutions, due to their ability to raise low cost funds which enables them to provide funds at much cheaper rate. More stringent Capital adequacy norms have been stipulated by RBI for NBFC which is making difficult for them to give cheaper finance.
The Company believes that worked upon continuously through a very sharp learning and unlearning in order to achieve operational excellence.
The Company is operating on only one broad segment i.e. financial services. Hence separate segmental reporting is not applicable. The Company has no activity outside India.
India has a lot of un-banked and under-banked consumers and businesses. Hence there is a lot of potential for NBFCs, which can still be tapped. The NBFCs and Housing Finance Companies (HFCs) are being recognised as being vital for growth. Regardless of the recent panic, NBFCs are here to stay and play an important role in economic growth and financial inclusion. Given the crisis and despite concerns surrounding the sector, NBFCs with robust business models, strong liquidity mechanisms, governance and risk management standards are well positioned to take benefit of the market opportunity.
The Company wishes to diversify its lending activities in the coming period and shall embark on this path and move forward once the existing investments, which are at an incubating stage begin to bear fruits.
RISK AND CONCERNS:
In todays challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risk for the Company are financial risks, credit risk, liquidity risk, market risk etc. The ever existing systematic and delinquency risk and fluctuations in interest rates and risk weight make the companies more vulnerable.
Risk mitigation is also an exercise aiming to reduce the loss or injury arising out of various risk exposures. The Company adopts a systematic approach to mitigate risks associated with accomplishment of objectives, operations, revenues and regulations.
INTERNAL CONTROL SYSTEM:
Internal Control measures and systems are established to ensure the correctness of the transactions and safeguarding of the assets. The Management ensures adherence to all internal control policies and procedure as well as compliance with regulatory guidelines.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATING PERFORMANCE:
The operating performance of the Company has been discussed in Directors Report under the head Financial Highlights and Operations and Overall Performance in the current year.
HUMAN RESOURCES AND INDUSTRIAL RELATIONS:
Company believes that human resources play a crucial role in enabling it to meet its objectives, the Company chooses its people very carefully, ensuring that they conform to the companys culture and follow its values and belief system.focus on training to enhance the skill-sets of employees in line with the business and market requirements continued throughout the year.
RATIOS WHERE THERE HAS BEEN A SIGNIFICANT CHANGE FROM FINANCIAL YEAR 2018 TO FINANCIAL YEAR 2019
During the year under review, the detail of changes made in the following key financial ratios at Standalone and Consolidated level as compare to the immediately previous financial year. The details of the same in a form of comparison is provided as:-
|S. No.||Particulars of Ratio||Financial Year 2018-19||Financial Year 2017-18|
|1||Debtors Turnover Ratio||262.61||5624.90|
|2||Inventory Turnover Ratio||0.00||916.83|
|3||Interest Coverage Ratio||(146.55)||NA|
|5||Debt Equity Ratio||0.14||0.18|
|6||Operating Profit Margin||(0.84)||(2.65)|
|7||Net Profit Margin||(8.35)||(2.65)|
|8||Return on Net worth||(11.56)||(0.02)|
The Management Discussions and Analysis describe Companys projections, expectations or predictions and are forward looking statements within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand and supply and price conditions in domestic and international market, changes in Government regulations, tax regimes, economic developments and other related and incidental factors.