F mec International Financial Services Limited (or the Company) is a Non-deposit-taking
Non-Banking Financial Company (NBFC-ND) registered with the Reserve Bank of India (RBI).
and is engaged in the business of lending. The Company has a diversified lending portfolio
across retail, SMEs and commercial customers with significant presence in urban and rural
India.
Earlier the Company had a subsidiary under the name and style YDS Securities Private
Limited which is now ceases to be subsidiary by reason that Company disinvested Equity
Shares by way of selling in open market and hence investment in Equity Shares falls below
20% of the total paid up capital of the Company.
1. The COVID-19 pandemic
Financial year 2021-22 (FY2022) was once again dominated by Covid as new waves of
infection swept across countries.
In India, the second wave (‘Delta) proved far more deadly than the first. The
second wave of COVID-19 in India, which began in March 2021, had severe consequences in
the form of spiraling cases, reduced supplies of essential treatments, and increased
deaths particularly in the young population.
After a shaky start in some places, the roll-out of vaccines in India began in dead
earnest. The eventual success of nation-wide vaccination across this far flung
sub-continent played a large role in curbing hospitalization. The advent of the highly
transmissible variant ‘Omicron arrived in early January 2022. In this third wave,
Indias daily number of reported cases peaked to nearly 350,000 in January 2022 and the
active case load was over 22 million. Fortunately, while highly transmissible, Omicron was
nowhere as clinically deadly as Delta. So, while many got infected, almost all got well
again within a week or so, without hospitalizations and morbidity.
2. Global Economy
The first half of Financial Year 2021-2022 depicted a hesitant and asymmetrical global
economic recovery, which was impacted by the continuing and pervasive effect of COVID-19,
especially with the advent of new variants causing increased fatalities.
Before the impact of COVID-19 pandemic could ease, the global economy faces another set
of threats with Russia invading Ukraine in February 2022, oil and other commodity prices
have surged significantly, thereby worsening the already high inflation dynamics across
the globe. The escalation in the geo-political tension has also led to increased financial
volatility. Rising supply chain disruptions, shortages for semiconductors and containers,
rise in shipping costs and the continued energy crisis complicated by the ongoing
geopolitical conflict are creating short-term challenges for business.
International Monetary Fund (‘IMF) projected moderation in the worlds growth
at 3.6% in 2022 from 6.1% in 2021. It is further expected to slow down to 3.6% in 2023,
which is conditionally estimated on factors such as improved global health outcomes, and
higher vaccination rates. The uncertainty about the trajectory of the pandemic and
geopolitical tensions remain major challenges for near future.
3. Indian Economy
Indias economic growth bounced back after the COVID induced shock in 2020, reflecting
a strong recovery - led by favorable monetary and fiscal policy, mass vaccinations and
significant progress on structural reforms. The strong recovery is commendable considering
the fact that first the Delta-driven and then the Omicron induced waves of the pandemic
unsettled the recovery in domestic economic activity. Nevertheless, the fact is that we as
a nation have effectively lost two years of GDP growth.
The Government of India announced a growth oriented and expansionary budget for the
financial year 2022-23 (FY2023) with a big bet on investment push to lift economic growth.
The compound annual growth rate for capital expenditure of FY2023 over FY2020 is projected
at 28% while revenue expenditure is contained at 12%. The budgets expectation was that
such capex-led growth would take India on a growth path even at the cost of higher fiscal
deficit.
According to the provisional estimates released by the National Statistical Office
(NSO) on May 31, 2022, Indias real Gross Domestic Product (GDP) growth in FY 2021-22 was
8.7% which is 1.5% above the pre pandemic level (FY 2019-20). The recovery has been uneven
with the informal sector still reeling under pressure, with a large extent of the labour
migration yet to reverse fully.
Unfortunately, the conflict in Ukraine and the sanctions unleashed by the western
countries on Russia have led to chaos in global commodity markets. While the crude prices
have settled at below US$ 100 after reaching a high of US$ 139, India will have to deal
with a larger oil import bill. This has already impacted the exchange rate, with the
Indian crossing 77 to the US dollar on 7 March 2022 before settling at below 76 at the end
of March 2022.
The Consumer Price Index (CPI) inflation in India stood at 6.95% in March 2022 and have
since then moved upwards to touch an 8-year high of 7.79% recorded for April 2022. The
rising inflation and uncertainty around its outlook is a reflection of persisting
geopolitical tensions and sanctions resulting in elevated prices of crude oil and other
commodities along with continuing Covid related supply chain bottlenecks and disruptions
in the labour market.
Outlook
A gradual subsidence of the impact of the pandemic will aid the growth of
contact-intensive industries and support robust urban demand. A good rabi harvest bodes
well for the farm sector and rural demand. Resilient exports, improving capacity
utilisation, higher capital expenditure to boost public infrastructure and increase in
private investments will drive overall GDP growth.
Monetary actions taken by the Reserve Bank of India would help contain inflation, the
effect of which is expected to be seen in the second half. The Reserve Bank of India
expects CPI inflation to be at 6.7% in FY2023. Risks to the outlook include global
financial market volatility, elevated commodity prices and continuing global demand-supply
disruptions.
4. Industry Overview
Bank credit growth increased steadily in FY 2021-22 as a result of increased retail
demand, economic recovery, and co-ordinated efforts by the RBI and the Government. The
resolution frameworks announced by the RBI in the wake of COVID-19 enabled a flexible
system to help COVID stressed borrowers and provided for rescheduling of payments,
conversion of any interest accrued into another credit facility and granting of moratorium
for up to two years. The Resolution Framework 2.0 announced by the RBI post second wave
primarily targeted individuals, small businesses and MSMEs as the impact was much limited.
The regulatory interventions, ample banking system liquidity, and the governments
fiscal spending and higher level of social and consumer activities following the
relaxation of the lockdown boosted credit demand conditions in the economy, leading to
higher credit off take in various sectors. The credit off take momentum has been mostly
positive in the second half of the year, and it increased by 9.6% in FY 2021-22 as
compared to 5.6% in the previous year.
The diverse Indian financial services sector represents the progress and opportunity of
its economy. The sector continues to be impacted by rising incomes, increased government
support through policies, and rapid digital adoptions throughout the value chain.
Growth drivers
Financial inclusion
Indias current financial inclusion index stands at 53.9. Government efforts through
the Pradhan Mantri Jan Dhan Yojana (PMJDY) and the RBIs continuous efforts to bring
banking to a large mass of people continues to intensify financial inclusion in India. As
many as 1.5 lakh post offices are set to connect with the core banking system in 2022 to
increase the interoperability of the accounts via various accessible means.
Technology/digitalisation
The Government has been driving as well as supporting the digital revolution in
banking, fintech and payment systems to increase efficiency and streamline processes,
creating an indirect credit demand from banks and NBFCs. Scheduled commercial banks are
planning to set up digital banking units in 75 districts across India.
Financialisation of savings
The number of folios under equity, hybrid and solution-oriented schemes, wherein the
maximum investment is from retail segment, stood at about 10.34 crore as of March 2022.
Increasing awareness about mutual funds, ease of transactions through digitisation and
sharp surge in equity markets have aided asset management companies to add a staggering
3.17 crore investor accounts in FY 2022.
Growing penetration of financial products
The increasing penetration of insurance and mutual funds among the Indian population is
good for the financial sector. Advancement in technology that has made these products more
accessible and enhanced customer convenience is a driving factor in enlarging the market
size.
Policy support
The approval of Factoring Regulation (Amendment) Bill has enabled approximately 9,000
NBFCs to participate in factoring market and with an oversight of central bank on the US$6
billion factoring sector.
Non-banking financial companies
NBFCs have gained systemic importance in the Indian financial services industry with a
growing share in credit. NBFCs credit intensity measured by the credit/GDP ratio reached
a high of 13.7% in 2021.
NBFCs operate in a wide variety of asset classes ranging from granular retail loans
(e.g., personal loans, vehicle loans, small business loans, gold loans, microfinance
loans, etc.) to large-ticket wholesale loans (e.g., lending to corporates, infrastructure,
real estate and structured credit).
NBFCs have carved a niche for themselves in the Indian financial sector through their
differentiated business models and credit appraisal methods, targeting the relatively
un-banked borrower segments with niche domain expertise. They provide last mile credit
delivery and have been significantly using technology to achieve better operational
efficiency and risk management.
Performance in FY 2022
Heavily impacted by the first wave of the pandemic in 2020, the NBFC sector faced
headwinds again when the second wave struck the country in March 2021. Disbursements were
severely impacted with the first two months being impacted by lockdowns. Monthly
collection efficiency significantly deteriorated significantly. This led to a sharp
increase in asset restructuring in the first half of the year. With the passing of the
second wave, collection efficiency improved progressively during the year and reached
pre-COVID levels, reflecting a return to normalcy. Collections saw a modest decline by
about 3% following the third wave of infections in January 2022, but recovery was prompt
given the lower severity of the COVID variant and limited restrictions on movement during
this period.
Key regulatory developments in FY 2022
NBFCs are regulated by the RBI and the level of regulation and supervision for NBFCs is
relatively moderate when compared to banks. However, over the last few years following the
2018 crisis, the regulatory requirements for NBFCs have been strengthened to bring parity
with banks. During FY 2022, the following important regulations were introduced by the RBI
to govern NBFCs:
Prudential norms for Income Recognition, Asset Classification and Provisioning (IRACP)
pertaining to advances: During the year, the RBI tightened NPA upgradation norms,
which may lead to a rise in NPAs of NBFCs as the provision is to be implemented effective
October 2022. As per the new norms, an NBFC may upgrade an NPA to a ‘standard asset
only if entire arrears of interest and principal are paid by the borrower. Additionally,
there is change in the recognition of NPAs to a daily due-date basis versus month-end
basis, followed earlier by many NBFCs. These revised norms will bring parity in income
recognition and asset classification practices at banks and NBFCs.
Outlook
The NBFC sector is expected to deliver double-digit loan growth in FY 2023, on top of
6-8% growth projected for FY 2022. This will be driven by improvement in economic activity
and strengthened balance sheets of NBFCs.
5. Business review
F MEC INTERNATIONAL FINANCIAL SERVICES LIMITED, a Non-Deposit taking Non
Systemically Important NBFC. is a professionally managed Company. It focuses on four broad
categories: (i) consumer lending, (ii) SME lending, (iii) commercial lending, (iv) rural
lending,
The Company significantly recovered from the loss caused due to the pandemic in the
earlier year. The financial performance of your Company during the financial year ended
March 31, 2022, remained healthy with the Total Net Revenue (Net Interest Income Plus
Other Income) rising by 3.99% to 53.98 lakhs from 51.91 lakhs in the previous financial
year. Other Income grew by 296% to 1.31 lakhs from 0.33 lakhs in the previous financial
year. Major increase is due to interest received on Flexi Fixed Deposits
The profit after tax (‘PAT) for FY 2021-22 stood at 10.21 lakhs, an increase of
105.43% over the previous financial year.
However, reflecting on steady growth in the balance sheet, Total Liabilities (including
capital and reserves) increased by 7.10% from 4.12 crore as on March 31, 2021 to 4.42
crore as on March 31, 2022 whereas Total Advances (Net) stood at 3.63 crore, a growth of
28.65% over FY 2020-21
The Earning Per Share (EPS) of the Company for the FY 2021-2022 also witnessed a
increase of 105.49% to 0.3292 per share as compared to 0.1602 per share in FY 2021-2021.
SCOT Analysis
Strengths
| Diversified asset mix and well-diversified funding profile |
| Vast knowledge of the needs of the customer segment we work with |
| Diversified product range and robust collection systems |
| Simplified and prompt loan request appraisal and disbursements |
| Strong financial position; comfortable capitalisation and liquidity profile |
| Strong management team |
Challenges
| Rising competition from banks |
| Increasing cost of funding |
| Retention of talent |
Opportunities
| Recovery in economic activity |
| New pivots of growth: Digital Finco, Leasing, SME |
| Digitalisation and data driven decision making |
Threats
| Future waves of the pandemic may negatively impact asset quality |
| Uncertain global political environment |
| Tightening regulation of NBFCs |
| Impact on demand in the backdrop of sustained inflation |
6. RESPONSIBILITY FOR THE MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The Board of Directors have reviewed the Management Discussion and Analysis prepared by
the Management, and the Independent Auditors have noted its contents. Statement in this
report of the Companys objective, projections, estimates, exceptions, and predictions are
forward looking statements subject to the applicable laws and regulations. The statements
may be subjected to certain risks and uncertainties. Companys operations are affected by
many external and internal factors which are beyond the control of the management. Thus
the actual situation may differ from those expressed or implied. 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.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS AS REQUIRED UNDER SECTION 186 OF THE
COMPANIES ACT, 2013
| Sl.No. Particulars |
31/03/2022 |
31/03/2021 |
| 1. Loans And Advances |
|
|
| Advance for Shares |
1,126,000 |
1,500,000, |
| ACE Integrated Solutions Limited |
190,000 |
204,000 |
| Alok Kumar Goel |
2,712,000 |
1,647,000 |
| Arun Bhatt |
- |
302,000 |
| Bharat Singh |
275,000 |
1,300,000 |
| Degourdi Engineering and Infra |
|
|
| Solutions Private Limited |
347,000 |
2,176,000 |
| Espan Infrastructure (I) Ltd |
863,000 |
806,000 |
| Ganesh Kirana & Co |
- |
660,000 |
| Impex (India) Limited |
- |
770,000 |
| Invision Entertainment Pvt Ltd |
648,000 |
648,000 |
| Jellybean Studios |
1,085,000 |
1,000,000 |
| Kanishk Intetrade |
1,390,000 |
2,210,000 |
| Lovleen |
- |
50,000 |
| Mukesh Sharma |
1,671,000 |
1,951,000 |
| Oracle Sales |
7,074,000 |
- |
| Paras Green |
- |
312,000 |
| Priyanka Singhaniya |
- |
200,000 |
| Rakesh Pandey |
- |
502,000 |
| R.S. Traders |
- |
89,000 |
| Shivam Online Education and Calibre Testing Lab Pvt Ltd |
587,000 |
547,000 |
| Shivani Realbuild Pvt Ltd |
4,990,000 |
4,646,000 |
| Shriram Stores |
1,165,000 |
- |
| Sunrise Structures and Developers Private Limited |
2,524,000 |
- |
| Suresh Pal Singh |
3,500,000 |
3,500,000 |
| Suvi Global Engineering LLP |
1,277,000 |
1,187,000 |
| Tata Capital Financial Services Limited |
163,000 |
163,000 |
| Vardhaman Solvents And Chemicals Private Limited |
1,960,000 |
1,813,000 |
| Focus Multi-speciality Centre LLP |
81,000 |
- |
| Digital Lending |
1,050,000 |
- |
| TOTAL |
36,255,000 |
28,182,000 |
| 2. Non-Current Investments |
|
|
| Unquoted |
|
|
| YDS Securities Pvt. Ltd. |
|
|
| 210000 Equity Shares @ Rs. 10 each |
2,100,000 |
2,100,000 |
| Advance against property |
|
|
| Triveni Buildzone Private Limited |
- |
1,000,000 |
| TOTAL |
2,100,000 |
3,100,000 |
+91-9892691696
