Gujarat State Financial Corporation Management Discussions

1. (a) Industry structure and developments:

Gujarat State Financial Corporation is established under State Financial Corporations Act, 1951 as a State level development financial institution to provide medium and long term credit to small and medium scale industrial undertakings in the State of Gujarat and Union Territories of Dadra and Nagar Haveli. Since establishment, Corporation has played pivotal role in industrial development of the State. However, as a result of liberalized financial and economic policies, Banks and other NBFCs, who have access to cheap funds, started catering to the requirements of MSMEs vigorously. Due to heavy loss, Corporation could not generate adequate funds to keep afloat from FY 2001-02 which impacted its operations adversely forcing it to discontinue main activities of sanction and disbursement and concentrating on recovery of dues since then.

(b) Opportunities and Threats

Gujarat is one of the most industrially developed state and MSMEs being backbone of industrial prosperity, there is no dearth for the business of the Corporation. However, keeping in view the state of affairs of the Corporation, it is not in a position to avail of the opportunities. Having net-worth eroded long back and being unable to source cheap funds coupled with manpower shortage pose threat to the Corporation in re-entering the business in a matured manner.

(c) Segment-wise performance:

Corporation is primarily engaged in the business of recovery of dues. All activities of the Corporation revolve around the said main business. During the year under report, Corporation recovered an amount of Rs5.59 crore as against Rs5.21 crore recovered in the previous year.

(d) Outlook:

Loan Assets portfolio is 100 per cent non-performing and recovery from loan accounts not backed with securities is a herculean task. Most of the residual accounts available with the Corporation are entangled with legal and other issues. In such circumstances, recovery of dues from the loanees is expected to be contracted in the years to come.

(e) Risks and concerns:

Risk is an inherent part of business and the Corporation not free from various risks associated with the business. Risk increases when recovery attempted from 100% Non-Performing Asset Portfolio. Inspite of introducing various clients oriented attractive One Time Settlement Schemes, recovery of dues is not on expected level which is a matter of concern to the Corporation.

(f) Internal control system and their adequacy:

Corporations internal control system provides for budgetary control and cost monitoring system. Corporation engaged services of an external firm of Chartered Accountants for internal audit so as to provide timely information to management. Regular management reviews are undertaken to ensure conformity with targets. The internal control system of the Corporation is adequate commensurate with the size of the Corporation.

(g) Financial Performance:

(h) Material developments in Human Resources:

There is no reportable material development in human resources during the year under reference. Corporations staff strength, including employees on deputation/ loan services, reduced to 16 as on 31st March, 2024 compared to 24 reported in the previous year.

(i) Details of significant changes in key financial ratios:

No significant change in key financial the financial ratios during the year under report as compared to immediately preceding financial year.

2. Cautionary statement:

Statements in the Management Discussion and Analysis describing the Corporations objective, projections, estimates and expectations may be "forward looking" within the meaning of applicable laws or regulations. Actual results may differ from those expressed or implied.