Indergiri Finance Ltd Management Discussions.

This Management Discussion and Analysis Report contains forward-looking statements which are based on certain assumptions, risks, uncertainties and expectations of future events. The actual results, performance or achievements can differ materially from those projected in any such statements depending on various factors including: the demand supply conditions, change in government regulations, tax regimes, economic development within the country and abroad and such other incidental factors over which, the Company does not have any direct control. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on basis of any subsequent developments, information or events.

This Report is framed in compliance with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations").

INDUSTRY STRUCTURE AND DEVELOPMENT

Non-Banking Financial Companies play a vital role in the financial sector of our economy along with other financial institutions. They largely extend support to the micro, small and medium enterprises (MSMEs) which get benefitted due to their strategic operational techniques coupled with lower costs of delivery, lower restrictions on customers etc. Over the years, NBFCs have emerged as an alternate choice and at times the first choice for several customers, who need short term/ medium term financing.

The NBFCs work under strict regulations of the RBI and reach out to even those sectors which the Banks cannot reach.

OPPORTUNITIES

Non-banking finance companies (NBFCs) are an integral part of the Indian financial ecosystem. NBFCs reach out to millions of individuals and Micro, Small and Medium Enterprises across the country having no or limited access to secured and unsecured credit lines by commercial banks and other development financial institutions. NBFCs integrate such people and firms with the financial mainstream of our economy. NBFCs are able to develop a ground-level understanding of their customers their credit needs and provide innovative and customized products to satisfy their clients needs and so they are a preferred source of credit line compared to traditional banks. They have a niche particularly in the low income/asset segment of individuals and corporates and also among the first-time seekers of credit who have not borrowed from any financial institution in the past. NBFCs thrive well in those areas too where banking and institutional credit financial services have limited ground presence. The adverse effects of the covid 19 have posed a lot of challenges to the NBFC sector but has also presented some opportunities in the form of relaxations as well as support extended to them by the government and the Reserve Bank of India.

The Indian economy is also showing signs of recovery, reeling out of the nation-wide lockdown gradually and cautiously. The government of India has announced several measures during the various unlock phases in order to sustain the economy from the perils of a sudden knock down by the covid19 pandemic.

Recognizing the role played by NBFCs in providing credit at the bottom of the pyramid to the sectors which contribute significantly to the economic growth in terms of export and employment, and with a view to augment the liquidity position of the NBFCs, RBI had allowed (August, 2019) banks to classify lending to registered NBFCs (other than MFIs) as Priority Sector Lending (PSL) up to 5 per cent of a banks total PSL, for on-lending to Agriculture/MSME/Housing until March 31, 2021 which has further been extended up to September 30, 2021. (Source: RBI Press Release)

With a view to increasing the focus of liquidity measures on revival of activity in specificsectors that have both backward and forward linkages and having multiplier effects on growth, the RBI had announced the ‘on Tap TLTRO Scheme on October 9, 2020 which was available up to March 31, 2021. In addition to the five sectors announced under the scheme on October 21, 2020, 26 stressed sectors identified by the Kamath Committee were also brought within the ambit of sectors eligible under on tap TLTRO on December 4, 2020 and bank lending to NBFCs on February 5, 2021. Liquidity availed by banks under the scheme is to be deployed in corporate bonds, commercial paper, and non-convertible debentures issued by entities in these sectors; it can also be used to extend bank loans and advances to these sectors. Investments made by banks under this facility can be classified as held to maturity (HTM) even above the 25 per cent of total investment permitted to be included in the HTM portfolio. All exposures under this facility are exempted from reckoning under the large exposure framework (LEF). On a review, it has now been decided to extend the TLTRO on Tap Scheme by a period of six months, i.e., till September 30, 2021. (Source: RBI Press Release) The RBI has announced a second set of relief measures aimed at alleviating economic pain caused by the COVID-19 pandemic. (Source: Press Conference April 17). A new Targeted Long-Term Repo Operation (TLTRO) of Rs 500 billion has been announced for mid and small-sized Non-Banking Finance Companies (NBFCs) and microfinance institutions (MFIs). Besides, there is a 25bp reduction in the reverse repo rate and the corridor relative to the MSF rate has been reduced to 90bp. This measure offers an incentive to banks to channel credit into the economy, rather than parking excess funds at the central bank. Some other measures include providing a special refinancing facility of Rs 500 billion to institutions, such as NABARD, SIDBI and NHB, a halt to asset classification till May 31, 2021 along with giving a further 90-day extension for asset recognition, i.e., a moratorium on NPA classification. Further there is a sharp reduction in banks liquidity coverage requirement (LCR) to 80% from 100%. All these measures are going to present increased resilience to the NBFC sector.

THREATS

In April, 2021 the IMF has presented an optimistic outlook for the world economy. They have projected that the global growth may be 6 percent in the year 2021 which is far better than a projection of minus 4.6 percent for the year 2020 World Economic Outlook (WEO) forecast. Further, it opines that the projections for the year 2021 and 2022 are stronger than in the October 2020 WEO. The upward revision reflects additional fiscal support in a few large economies, the anticipated vaccine powered recovery in the second half of 2021, and the continued adaptation of economic activity to subdued mobility. However, the IMF has expressed apprehensions about the path of the pandemic, the effectiveness of the policy support to provide a bridge to vaccine-powered normalization and the evolution of the financial conditions. As regards the Indian that Indian economy may grow around 12.5 percent (WEO, April 2021). However, the ferocity of the COVID-19 second wave has overwhelmed India and the world. Real economy indicators have moderated through April-May 2021.The biggest toll of the second wave is in terms of a demand shock - loss of mobility, discretionary spending and employment, besides inventory accumulation.

The biggest challenge before NBFCs is that they are facing stiff competition from banks and financial institutions, increased intra-industry competition, and deceleration of economic growth rate due to covid 19 pandemic. Further they are likely to be affected adversely due to an upsurge of covid 19 cases in rural pockets which form one of their niche areas.

The COVID19 has presented a war-like syndrome where it is difficult information about the exact duration of the second wave of the pandemic and the extent of damage that it will inflict upon the COVID19 affected Indian economy, projections about the outcome may often be not much better than hunches.

FINANCIAL

The financial performance of the Company is given as under: -

PERFORMANCE Year Ended 31/03/2021 Year Ended 31/03/2020
Amount in Rs. Amount in Rs.
Gross Profit before Depreciation and Provisioning 361,163 157,192
Less: Depreciation 21,332 21,331
Less: Provision for Income Tax (net of MAT Entitlement) including deferred tax and earlier year tax liability 86,789 35,518
Net Profit/(Loss) 253,042 100,343

OUTLOOK

The Company operates with its own limited resource; based on the present business model the growth potential in its business is limited. IFL expects to maintain its performance in FY 2021-22. The approach would be to continue with the growth momentum while balancing risk.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an Internal Control System which is commensurate with the size, scale and complexity of its operations. Internal controls and systems are part of the principles of good governance, and should be exercised within a framework of proper checks and balances. Your Company remains committed to ensuring a reasonably effective internal control environment that provides assurance on the operations and safeguarding of its assets. The internal controls have been designed to provide assurance with regard to recording and providing reliable financial and operational information, complying with the applicable statutes, safeguarding assets, executing transactions with proper authorisation and ensuring compliance within the policies of the Company.

The Audit Committee of the Board of Directors, Statutory Auditors are periodically appraised of the internal audit findings corrective actions taken. During the year M/s. Manoj Sharma & Associates, Chartered Accountants, reviewed the adequacy and operating effectiveness of the internal financial controls as per Section 134 (5) of the CompaniesAct, 2013.

HUMAN RESOURCES

The Companys vision is to become an employer of choice by providing a compelling employee value proposition. It strives to attract the best talent and ensures employees development, retention and contribution to the Companys success. The HR policies and practices are focused on creating a happy, engaged and productive workforce. Companys current business activity does not require any technology up gradation or modernization.

DISCLAIMER

Statements made in this Management Discussion and Analysis Report may contain certain forward-looking statements based on various assumptions on the Companys present and future business strategies and the environment in which it operates. Actual results may differ substantially or materially from those expressed or implied due to risk and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India and abroad, volatility in interest rates and in the securities market, new regulations and Government policies that may impact the Companys businesses as well as the ability to implement its strategies.

For and on behalf of the Board of Director
Laxminarayan Sharma Kishan Sharma
Place: Mumbai Managing Director Director
Date: 29th June, 2021 DIN: 01731396 DIN: 01168525