indian infotech and software ltd share price Management discussions

The Management Discussion and Analysis Report for the year ended 31st March, 2023 as stipulated under Regulation 34(2) read with Schedule V of SEBI (LODR) Regulations 2015 have been included in consonance with the Code of Corporate Governance as approved by The Securities and Exchange Board of India (SEBI). Investors are cautioned that these discussions contain certain forward looking statements that involve risk and uncertainties including those risks which are inherent in the Company?s growth and strategy. The company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this report consequent to new information or developments, events or otherwise.

The operational performance and future outlook of the business has been reviewed by the management based on current resources and future development of the Company.



Last two years have been the struggling to overlap crises, the latest being the liquidity trouble in a series of global bank crises. Global economic activity is experiencing a broad based and sharper than expected slowdown. The cost of living crisis, tightening financial conditions in most regions , Russia?s invasion of Ukraine and the lingering Covid -19 pandemic all weight heavily on the world economic outlook.. Global growth slowed in 2022 to 3.2% more than 1 percentage point weaker than expected, mainly weighed down by Russia?s war of aggression in Ukraine. Global growth has stabilized towards the end of the year but the improvement is fragile. Policymakers are confronted with a challenging trade-off: maintaining near-term support for the global economy while preventing unintended consequences and medium-term financial stability risks. A prolonged period of extremely easy financial conditions, while needed to sustain the economic recovery, may result in overly stretched asset valuations and could fuel financial vulnerabilities. Some warning signs for example, increased financial risk- taking and rising fragilities in the nonbank financial institutions sector point to a deterioration in the underlying financial stability foundations. If left unchecked, these vulnerabilities may evolve into structural legacy problems, putting medium-term growth at risk and testing the resilience of the global financial system


In FY2023, the Indian economy faced multiple challenges. The country?s retail inflation indicator, consumer price inflation (CPI) went above the RBI?s tolerance range of 6% in January 2022. It remained above this range for almost ten months, right up to October 2022. Rising international crude prices coupled with inimical domestic weather conditions kept food prices high, fuelling retail inflation. The government cut excise and customs duties and restricted exports to cool off inflation. Like other central banks, the RBI raised the monetary policy rates and reduced excess systemic liquidity. Major areas of concern were elevated commodity prices, higher retail inflation, depreciation of the Indian rupee and a rising current account deficit (CAD).

The Government of India has introduced several reforms to liberalise, regulate and enhance this industry. The Government and Reserve Bank of India (RBI) have taken various measures to facilitate easy access to finance for Micro, Small and Medium Enterprises (MSMEs). These measures include launching Credit Guarantee Fund Scheme for MSMEs, issuing guideline to banks regarding collateral requirements and setting up a Micro Units Development and Refinance Agency (MUDRA). With a combined push by Government and private sector, India is undoubtedly one of the worlds most vibrant capital markets.



Consumer Price Inflation: (CPI)

The Survey states that the Consumer price inflation in India went through three phases in 2022. A rising phase up to April 2022 when it crested at 7.8 per cent, then a holding pattern at around 7.0 per cent up to August 2022 and then a decline to around 5.7 per cent by December 2022. The rising phase was largely due to the fallout of the Russia-Ukraine war and a shortfall in crop harvests due to excessive heat in some parts of the country. Excessive heat in summer and uneven rainfall thereafter in some parts of the country affected the farm sector, reducing supply and causing prices of some major products to rise.

Policy measures for price stability:

RBI?s Monetary Policy Committee increased the policy repo rate under the liquidity adjustment facility

(LAF) by 225 basis points from 4.0 per cent to 6.25 per cent between May and December 2022. Central Government has undertaken fiscal measures like reduction in excise duty on petrol and diesel, prohibition of the export of wheat products, imposition of export duty on rice, reduction in import duties and cess on pulses, rationalization of tariffs and imposition of stock limits on edible oils and oil seeds, maintenance of buffer stock for onion and pulses and rationalization of import duties on raw materials used in the manufactured products.


The NBFC sector saw a largely stable outlook for major NBFC?s. From the perspective of larger financial systems, scheduled commercial banks continued to be a dominant players accounting for nearly 47% of the bilateral expo- sure followed by Asset Management Companies managing mutual funds, NBFC?s, Insurance Companies, Housing Finance Companies and all India Financial Institutions.

For several years, NBFCs have rapidly emerged as an important segment of the Indian Financial System. The sectors now being recognized as complementary to the banking sector due to the implementation of innovative marketing strategies, introduction of tailor made products, customer oriented services, attractive rates of return on deposits and simplified procedures. NBFCs in India have recorded marked growth in recent years. After their existence, they are useful and successful for the evolution of a vibrant, competitive and dynamic financial system in Indian money market. The success factors of their business has been by making the most of their ability to contain risk, adapt to changes and tap demand in markets that are likely to be avoided by the bigger players. Thus the need foruniformpracticesandlevelplayingfieldforNBFCsinIndiaisindispensable.


Over the past few years, NBFCs have undergone a significant transformation and today they form an important component of India?s financial system. Playing a critical role in the development of infrastructure, transport and employment generation, NBFCs are changing the business loan landscape in the country. Most NBFCs, leverage alternative and tech-driven credit appraisal methodologies to assess the credit worthiness of prospective borrowers.

This difference in approach allows them to meet loan requirements of individuals and businesses left traditionally underserved by banks. With the introduction of e-KYC, making borrowing an instant and hassle-free experience, NBFCs are already offering the right financial products to consumers and small businesses in a customized manner. The use of technology to optimize business processes also keeps cost overheads to a minimum, enabling credit to be availed at highly competitive interest rates.

Key Opportunities

Increasing the penetration in the Micro, Small and Medium Enterprise (MSME) segment with new and dynamic operating models

Synergistic alliances with fintech companies to tap niche markets.

Accessingnewcustomersandcheaperfundingsourcesbydevelopingaviableco- lending business model. Tapping into the fast-growing e-commerce segment.

Diversifying assets by targeting new profitable segments and developing the capabilities required to serve those segments.

Increasing fee income through advisory services.

Using digital competencies and tools to improve sales productivity the use of advanced analytics and machine learning to build propensity models for lead generation, making real-time offers available to sales representatives by using customer data from multiple internal and external sources.

Initiatives launched by the RBI to support NBFCs

Measures RBI guidelines Impact
Increasing exposurelimit The RBI increased the counterparty exposure limit of banks to a single NBFC to20% of Tier-I capital from 15%. While the measure was intended toencourage banks to lend more to NBFCs,banks have been largely cautious andhave refrained from making the best useof higher limits. Many banks are still below the former limit.
Priority sector classification Loans given by banks to NBFCs for lending to agriculture, micro and small enterprises, and housing to be classified asPriority SectorLending (PSL) The measure has benefit some of thelarger NBFCs and specialized NBFCs. However, it has not directly addressed the refinancing challenges of the NBFC sector.
Partial credit guarantee GOI has created a mechanism whereby it will provide partial credit guarantee to banks for the purchase of NBFC assets, amounting to Rs. 1 trillion during 2019- 20. The guarantee will be provided on a one- time basis for six months for public sector bank?s first loss of up to 10%. The measure is in the initial stages of implementation. Market participants are confident that the guarantee isadequate to cover typical losses. This could helpsome of the large and mid- sized NBFCs with their liquidity needs for about six months.
Co-origination model The RBI released guidelines on co-origination of loans by banks and non-deposit taking NBFCs in the priority sector.NBFCs must take a minimum exposure of20% with the remaining contribution bythe participating bank There are obvious benefits from this arrangement in terms of the liquidity support, especially for struggling NBFCs. The NBFCs are also likely to benefit from the risk sharing model and will be able to target a new customer base.
Securitization The RBI guidelines on securitization allow NBFCs to securities their loans with original maturity of more than 5 years. NBFCs would benefit from the liquidity generated by securitization of assets to address problems arising from asset liability mismatch.

The government has approved 100% FDI for insurance intermediaries and increased FDI limit in the insurance sector to 74% from 49% under the Union Budget 2021-22.

Government Initiatives:

? In January 2021, the Central Board of Direct Taxes launched an automated e-portal on the e-filing website of the departmentto process and receive complaints of tax evasion, foreign undisclosed assets and register complaints against ‘Benami? properties.

? In December 2020, the Reserve Bank of India issued a draft circular on declaration of dividends by NBFCs, wherein it proposed that NBFCs should have at least 15% Capital to Risk Weighted Assets Ratio (CRAR) for the last 3 years, includingthe accounting year for which it proposes to declare a dividend

? In November 2020, the Union Cabinet approved the governments equity infusion plan for Rs. 6,000 crores (US$ 814.54 million) in the NIIF Debt Platform funded by the National Investment and Infrastructure Fund (NIIF) consisting of AseemInfrastructure Finance Limited (AIFL) and NIIF Infrastructure Finance Limited (NIIF) (NIIF- IFL).

? In November 2020, two MoUs were signed one between India International Exchange (India INX) and Luxembourg Stock Exchange and another between State Bank of India and Luxembourg Stock Exchange for cooperation in financial services,ESG (environmental, social and governance) and green finance in the local market.

? On November 11, 2020, The Cabinet Committee on Economic Affairs approved continuation and revamping of the scheme for financial support to public-private partnerships (PPPs) in ‘Infrastructure Viability Gap Funding (VGF) Scheme? until 2024-25with a total outlay of Rs. 8,100 crore (US$ 1.08 billion)


As there are no subsidiaries of the Company, Investment made in Subsidiaries is NIL.


The Company operates in single reported segment with main business of Finance and Share Trading activity.


Growth of the company?s asset book, quality of assets and ability to raise funds depends significantly on economy. Unfavorable events in the Indian economy can affect consumer sentiments and in turn impact consumer decision to purchase financial products. Competition from a broad range of financial service providers, unstable political environment changes in government policies/regulatory frame work could impact the company?s operations. There are several large and profitable opportunities for NBFCs and the sector plays an important role in the Indian financial system. The key is for the NBFC sector to grow in a prudential manner while focusing on financial innovation and in having in place, the adequate risk management systems and procedures before entering into risky areas. The regulator constantly endeavors to balance the multiple objectives of financial stability, consumer and depositor protection and regulatory arbitrage concerns.


As an NBFC, Indian Inoftech and Software Limited is exposed to Credit, Liquidity and Interest Rate Risk. The Company takes risk management seriously and its procedures and policies in the area are well defined and considered appropriate for the assessment and management of individual risk categories. Sustained efforts to strengthen the Risk Framework have yielded consistently better outcomes for the company.

Company is well placed on the liquidity front and appropriate policies exist for underwriting credit risk. The Company endeavors to continuously learn and modifies its policies to manage the aforementioned risks.

The Audit Committee has been periodically reviewing the risk profile of the Company and evaluating the adherence by the branches/ functions of the systems and processes in place for monitoring, evaluation, assessment and mitigation of risk through a systematic and effective audit programme. The observations of Audit Committee, if any, on the risk management are reported to the board.

The key risks are:

Liquidity Risk Interest Rate Risk Credit Risk Regulatory Risk


The company has adequate internal control system commensurate with its size and business. The company Com- plied with all applicable statutes, policies, procedures, listing requirements and management guidelines. It Adheres to applicable accounting standards and polices.

Indian Infotech and Software Limited has robust internal audit programme, where the internal auditors, an independent firm of chartered accountants, conduct a risk-based audit with a view to not only test adherence to laid down policies and procedures but also to suggest improvements in processes and systems. Their audit program is agreed upon by the Audit Commit- tee. Internal audit observations and recommendations are reported to the Audit Committee, which monitors the implementation of such recommendations.


The Company has excellent combination of experienced and talented employees. The Company also undertakes on regular basis various training programmes to keep its employees updated on new technical developments and information which directly results in optimum capacity utilization and cost effectiveness. The Company?s relation withits employees continues to be cordial. The Company always reciprocates commitment to its employees in order to motivate them to perform the best.


The Company continues to fulfill all applicable norms and standards laid down by the Reserve Bank of India pertaining to prudential norms, income recognition, accounting standards, asset classification as applicable to NBFC?s (ND) except few, explanation pertaining to which has been provided in Boards? report.


The company is cautiously optimistic in its outlook for the year 2018-19. The outlook of the company for the year ahead is to diversify risk and stabilize its asset quality. The Corporate Finance Division will adopt a cautious approach and focus on customer relationships. This division will look to grow its supply chain, structured finance and leasing business.


Statements in foregoing paragraphs of this report describing the current industry structure, outlook, opportunities, etc., may be construed as "forward looking statements", based on certain assumptions of future events over which the Company exercises no control. Therefore, there can be no guarantee as to their accuracy. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those that may be implied by these forward looking statements.