Garbi Finvest Ltd Management Discussions

Economic Overview

India adopted a four-pillar strategy of containment, fiscal, financial, and long-term structural reforms. Indias gross domestic product (GDP) grew at 8.2 per cent in the fiscal year 2023-24. Financial, real estate and professional services grew by 7.6 per cent. Unemployment rate in urban India in the January-March quarter of 2023-24 rises to 6.7% from 6.5% in October-December quarter, it was 6.6% in the July-September quarter and 6.7% in the April-June quarter after the ebbing of the second wave of the pandemic. It stood at 6.1% in the corresponding quarter of 2022-23.

Indian Financial Services Industry

The countrys financial services sector consists of capital markets, insurance sector and non-banking financial companies (NBFCs). Indias gross national savings (GDS) as a percentage of Gross Domestic Product (GDP) stood at 30.50% in 2019. In 2019, US$ 2.5 billion was raised across 17 initial public offerings (IPOs). The number of ultra-high net-worth individuals (UHNWIs), with wealth of US$ 30 million or more, is expected to rise 63% between 2020 and 2025 to 11,198; India has the second-fastest growth in the world. India has scored a perfect 10 in protecting shareholders rights on the back of reforms implemented by Securities and Exchange Board of India (SEBI) in the World Banks Ease of Doing Business 2020 report. In May 2021, the mutual fund (MF) industrys assets under management (AUM) amounted to 3,305,660 crore (US$ 454.12 billion). The total number of accounts stood at 100.4 million. In May 2021, the mutual fund industry crossed over 10 crore folios. The Government of India has taken various steps to deepen reforms in the capital market, including simplification of the IPO process, which allows qualified foreign investors (QFIs) to access the Indian bond market.

Industry Structure and Development

Lenders are finding ways to manage their books, demand and stay in the business in long-run. The Government has taken a series of measures to generate demand and ease the liquidity by ensuring public sector banks lend further to NBFCs, introducing partial credit guarantee scheme, organizing loan mela etc. The slowdown that has begun cant be turned around that easily for which a booster shot is required. Structurally, the government can make it easier for MSMEs to survive the environment by providing more subsidies to some sectors and build more platforms for small-scale industries to expand. Government should consider relaxing and easing some compliances, for e.g. reforms on taxes or entry requirements for DFIs. Every fundamental indicates towards a higher growth and better future next year, reflecting strong optimism going into 2024.

Opportunities and Threats and Risks and Concerns

The RBI constantly issues new regulations and/ or modifies existing regulations endeavoring to balance the multiple objectives of financial stability, consumer and depositor protection and regulatory arbitrage concerns. The major opportunities are Demographic Changes, large untapped rural and urban Markets and Use of digital solutions for business/collections.

The threat for the NBFCs come from increased competition from Banking industry, which is in a position to lend at competitive rate due to availability of huge funds at a cheaper cost.

High cost of funds, Rising Non-performing Assets (NPAs), restrictions on deposit taking NBFCs, Competition from other NBFCs and banks. and Growing number of Fintech companies are major threats for the Industry.

A company in its normal course of working takes on many risks. For a Non-Banking Finance Company the risks that are most important are operational risk, credit risk and competition risk. The identification, monitoring and mitigation of these risks are integral to the success of the company. The Company has framed a Risk Management Policy for the Company in order to detect, mitigate and prevent risk both internal and peripheral arising to the Company.

Internal Control and their Adequacy

The company has an adequate system of internal controls commensurate with the size and nature of business. The company is complying with all the mandatory requirements of Corporate Governance as laid down in the Listing Agreement. This has improved the management of the affairs of the company and strengthened transparency and accountability. The Audit Committee reviews the internal control system and look into the observations of the statutory auditor very closely.

Discussions on Financial performance

The financial performance of the Company for the year has been discussed in the Directors Report and Cash Flow Statement annexed with the Annual Accounts.

Developments in Human Resources

The Company has potential appraisal systems for identifying and developing talent of Employees. The Company is confident of attracting, developing and nurturing the best talent in the industry in view of the companys inherent strengths gained over the years. As in the past, the Company has enjoyed cordial relations with the employees at all levels.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the companys present position, objectives, expectations or predictions may be "forward looking" statements within the meaning of applicable laws and regulations.