Indergiri Finance Ltd Management Discussions.

The management of the Company is pleased to present the Management Discussion and Analysis Report (to the extent applicable to the Company) covering overall performance and outlook of its activities.


Global EconomyAs per the International Monetary Fund (IMFs) World Economic Outlook (WEO) update, Global growth is estimated at 3.6% in 2021 and 2022. The war in Ukraine has triggered a costly humanitarian crisis and will contribute to a significant slowdown in global growth in 2022 and add to inflation. Fuel and food prices have populations in low-income countries hardest. Beyond 2023, global growth is forecast to decline to about 3.3 percent over the medium term. War-induced commodity price increases and broadening price pressures have led to 2022 inflation projections of

5.7 percent in advanced economies and 8.7 percent in emerging markets and developing economies.

As per Reserve Bank of India (RBI), global growth outlook has been cut due to ongoing conflict in Eastern Europe. Even if the war ends, the imposed sanctions on Russia and the supply chain disruptions will last through this year i.e. 2022. This has resulted in organizations like the United Nations Conference on Trade and Development and the Organization for Economic Co-operation and Development to cut global GDP by 1 per cent.

Indian Economy

As per RBI, Gross Domestic Product (GDP) rose by 8.9 per cent in 2021-22, above its pre-pandemic (2019-20) level by just 1.8 per cent. Economic activity, which gained strength in Q2 with the ebbing of the second wave, has lost pace since Q3, exacerbated by the spread of the Omicron variant in January. Economic activity was recovering from the ebbing of the Omicron wave when the fallout of the Ukraine - Russia conflict has overcast the near-term outlook with heightened uncertainties. Growth and inflation outcomes are at high risk across the world as well as in India. In the face of this extraordinary risk, the positive effects expected from the release of pent-up demand, especially for contact-intensive services, the governments thrust on infrastructure and capital expenditure, congenial financial conditions and improving capacity utilization appear ephemeral.

The IMF projected a growth of 8.2 per cent for India in 2022, making it the fastest-growing major economy in the world, almost twice faster than Chinas 4.4 per cent. In 2021, India registered a growth rate of 8.9 per cent. As per IMF, by 2023, India is estimated to grow at 6.9 per cent. The downgrade in the 2023 growth projection for India is partly reflectiveof the war in Ukraine that has resulted in high energy and food prices, slowing down the growth momentum.


As per RBI reports, the pandemic tested the resilience of the NBFC sector. The balance sheet of the NBFC sector expanded in 2020-21 on the back of credit growth of Systematically Important - Non - Deposit Taking - Non Banking Financial Company (NBFCs-ND-SI) aided by proactive policy support and revival of the economy. Asset quality and capital buffers improved during the year, while profitability worsened marginally.

The NBFC sector is dominated by NBFCs-ND-SI that constitute 85.1 per cent of the total assets of the sector. Amongst NBFCs-ND-SI, Investment and Credit Companies (ICCs), Infrastructure Finance Companies (IFCs) and Micro Finance Institutions (MFI) together accounted for 98.1 per cent of the total asset size of the sub-sector.

RBI vide notification dated 22nd October 2021 announced its New Scale - Based Regulations (SBR) for the NBFCs. The SBR Framework will come into effect from 1st October, 2022. Under the SBR Framework, the RBI has introduced four scale-based layers (base layer, middle layer, upper layer, and top layer) which takes into consideration capital requirements, governance standards, prudential regulation and other aspects of the NBFCs. Going forward, all NBFCs will be regulated under one of these layers.

Asset Liability Management (ALM)

The Companys Asset-Liability Committee (ALCO), set up in line with the guidelines issued by the RBI, monitors asset-liability mismatches to ensure that there is no imbalance or excessive concentration on either side of the Balance Sheet. The Company continues to closely monitor liquidity in the market and as a part of its ALCO strategy, maintains a liquidity management desk to reduce its liquidity risk.


Your Company fulfils the standards laid down by the RBI relating to recognition and provisioning of non-performing assets, capital adequacy, statutory liquidity ratio, etc.


Your Company is exposed to specific risks that are particular to its business and the environment in which it operates, which includes market risk, interest rate volatility, execution risk and economic cycle.

which are exposed to fluctuations in stock prices. These investments TheCompanyhassignificant represent a substantial portion of the Companys core capital and are vulnerable to fluctuations in the stock markets. Any decline in these quoted investments may severely impact its financial position and results of operations.

Liquidity Risk: Asset / Liability Management: The Company is exposed to liquidity risk principally as a result of lending to its customers for periods which may differ from those of its funding sources. Financial firms are now increasingly focused on asset-liability risk. Asset-liability risk is a leveraged form of risk. The capital of most financial institutions is small relative to the firms assets or liabilities, hence small percentage changes in assets or liabilities can translate into large percentage changes in capital.

The risk is that the value of assets might fall or that the value of liabilities might rise. The Company is alive to the dynamics of this risk and has in place a control structure for closely monitoring incipient signs of risk in this area and to take necessary corrective measures, if needed. The Companys treasury actively manages asset liability positions in accordance with the overall guidelines laid down by the management in the Asset Liability Management (ALM) framework.

The Company can be adversely affected by volatility in interest rates in India, which could cause its margins to decline and profitability to shrink. It is therefore exposed to interest rate risk, principally as a result of lending to its customers at interest rates, in amounts, and for periods which may differ from those of its funding sources. Your Company is hedged to a large extent against this risk through the reset clause in its advances portfolio.

While the Indian economy has shown sustained growth over the last several years, a slowdown could cause the business of the  Company to suffer. The Company manages such risks by maintaining a conservative financial profile and following prudent business and risk management practices.

The risk appetite is enunciated by the Board from time to time. The Company has in place specially mandated Committees such as ALCO, Risk Management Committee, besides Nomination and Remuneration Committee and Audit Committee.


The Company has an independent internal control system which is commensurate with the size and scale of the Company. It evaluates the adequacy of all internal controls and processes and ensures strict adherence to clearly laid down processes and procedures as well as to prescribe regulatory and legal framework. Conforming to the requirements of regulatory authorities such as the RBI and SEBI and consistent with the requirements of the Listing Regulations of the Stock Exchanges, the Company has institutionalized an elaborate system of control processes designed to provide a high degree of assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, reliability of financial controls and compliance with applicable laws and regulations. The Internal Auditors are mandated to carry out periodical audit and report on areas of non-compliances / weaknesses. Corrective actions in case of reported deficiencies, if any, are taken actively to further strengthen the internal control systems. These reports are reviewed by the Audit Committee of the Board of Directors for follow-up action and instructions are issued for taking necessary measures.


Outlook for the coming financial year would see normalization of business activities, after facing challenges in the past few years assuming there will be no adverse events. The Companys present business operations are preponderantly that of an investment company, future of which largely depends upon financial and capital markets. The management is optimistic about the future outlook of the Company. The Company will expand its activities, consistent with its status as a NBFC.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward looking within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied. Important factors that could make a difference to the Companys operations include changes in Government regulations and tax regime, economic developments within India and abroad, financial markets, etc The Company assumes no responsibility in respect of forward-looking statements that may be revised or modified in future on the basis of subsequent developments, information or events. The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014. The management of the Company has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements reflect a true and fair manner, the state of affairs and profit/ loss for the year. The narrative on our financial condition and result of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the Annual Report.