Inter Globe Finance Ltd Management Discussions.

GLOBAL ECONOMIC OVERVIEW

The world economy witnessed a mixed Calendar Year (CY) 2019. The global real Gross Domestic Product (GDP) growth in CY 2019 was 2.9% compared with 3.6% in CY 2018, reflecting slow growth in both emerging markets and advanced economies. Higher reciprocal tariffs and an uncertain macro environment led to a broad-based slowdown in manufacturing and global trade. Concerns about future global growth and mixed macro environment led to accommodative monetary policies by global central banks.

The global economy started CY 2020 on a strong note with the US-China trade conflicts reaching phase one agreement and the uncertainty around Brexit fading. However, the outbreak of the COVID-19 pandemic, originating from China and spreading across the world, prompted most major countries to impose a lockdown to break the chain of transmission. The containment measures severely impacted economic activities worldwide.

While the magnitude of the COVID-19 impact is yet to be ascertained, the IMF forecasts the Great Lockdown to lead to the worst downturn in CY 2020 since the Great Depression, with global GDP likely to fall as much as -4.9%. However, assuming the contagion recedes by second half of 2020, the global economy could witness a sharp recovery of 5.4% in CY 2021. INDIAN ECONOMIC VIEW

In 2019, India became a $ 2.7 trillion economy, having added one trillion US dollars in the last five years. The Economic Survey of the government outlined the blueprint to achieve the vision of making Indian a USD 5 trillion economy by 2024-25. Following the path, Indias rank in the World Banks Ease of Doing Business 2020 survey has consistently improved over last three years and stands at 63, among 190 countries, making it the one of worlds top 10 most improved countries for the third consecutive time. Further, the Government has set a target to invest worth 111 trillion over 2020-2026 under National Infrastructure Pipeline (NIP). NIP is likely to help provide quality and adequate infrastructure across the nation and boost economic growth.

RBI has taken number of measures to ensure sufficient liquidity in the system since the beginning of 2019-20. We note that it has slashed policy rate (Repo rate) from 6.25% in the beginning of year to 4.4% at the closing of fiscal and at now at 4% in ongoing fiscal so far. We also note this time transmission of rate cuts has happened in a large way and helped across all industries and borrowers.

According to the World Bank, the global economy decelerated to an estimated 2.4 percent in 2019, the slowest pace since the global financial crisis.

The Indian Economy was not immune to the slowdown. The Indian economy was affected across all four key growth engines of our economy faltered to stimulate any growth. We note that three of the four growth engines—private consumption, private investment, and exports—have slowed down significantly led by variety of reasons. Consumption, the biggest contributor of growth was subdued, pointing to fragile consumer sentiment and purchasing ability. Similarly, private investments and exports have remained muted owing to soft demand, global uncertainties around trade and investments and geopolitical tensions. The fourth engine, government consumption and investment, has been moderated because of the limited elbow room the government has for counter-cyclical spending as the budget deficit remains under pressure. Further, an unexpected COVID-19 outbreak engulfed India too and resulted in nationwide lockdown starting 25th March 2020 has dashed hope of any early recovery on economy, which will have wider ramification in current fiscal.

The COVID-19 pandemic has spread across the world leading to well above 4.7 million confirmed infections, over 315,000 deaths, enormous human suffering and a full stop on virtually all commercial and economic activities. Even India, apparently relatively fortunate up to now, has had 101,139 confirmed cases and 3,163 deaths as per COVID-19 Situation Report-120 of World Health Organisation (WHO) dated 19 May 2020. With lockdowns spreading across countries accounting for over 50S of the worlds gross domestic product (GDP), COVID-19 has caused disruptions on an unimaginable scale. Nobody really knows how long the pandemic will last; whether it will increase in the winter of 2020-21 and if so how, and what will be its final toll on lives and livelihood. With the impact of this pandemic still to play out, the scenario of eerily empty high streets, shut factories and stores, and literally millions being rendered unemployed together point to a single outcome — extreme stress for the global economy of the kind not seen since the Great Depression.

The pandemic has created shocks ripping through society and the world of business. The picture of millions of unemployed daily wage workers and their families trying to trudge back to their villages hundreds of kilometres away; shut factories and stores; empty construction sites; and a nation being deprived of its natural economic vigour are vignettes of this scourge. After a nationwide lockdown involving 1.35 billion people over 55 continuous days, the debate is now on how to gradually open the economy without seriously risking a major spike in infections —something that Indias frail medical facility can ill cope with.

The Government of India announced a slew of wide-ranging reforms across varied sectors amidst a comprehensive package aggregating Rupees 20 lakh crore — or approximately 10% of nominal GDP — which covered among others (i) direct cash transfers and food security for vulnerable sections of society, (ii) collateral free loans and concessional credit to farmers and street vendors, (iii) enhancement of systemic liquidity by the Reserve Bank of India (RBI), (iv) special liquidity and partial credit guarantee scheme to provide liquidity to NBFCs, HFCs, MFIs and mutual funds, (v) 100% credit guarantee scheme for aggregate H 3 lakh crore of emergency credit lines by banks and NBFCs to their MSME borrowers and (vi) subordinated debt and equity support to MSMEs. The Government has also initiated compliance relief measures across various regulatory requirements. The RBI has also initiated several measures like reduction in policy rates, monetary transmission, credit flows to the economy and providing relief on debt servicing.

Some experts, however, believe that the measures announced by the Government are predominantly liquidity support mechanisms through banks and NBFCs, and constitute only a limited fiscal stimulus. Given the extended tenor of lockdown and severity of its impact on the economy, it is likely that the fiscal stimulus announced so far may not have the desirable effect on the economy. It remains to be seen whether there are other fiscal measures in the offing.

INDUSTRY STRUCTURE AND DEVELOPMENT

NBFCs (Non Banking Financial Companies) play an important role in promoting inclusive growth in the country, by catering to the diverse financial needs of bank excluded customers. Further, NBFCs often take lead role in providing innovative financial services to Micro, Small, and Medium Enterprises (MSMEs) most suitable to their business requirements.

NBFCs are financial intermediaries engaged in the business of accepting deposits delivering credit and play an important role in channelizing the scarce financial resources to capital formation. They supplement the role of the banking sector in meeting the increasing financial needs of the corporate sector, delivering credit to the unorganized sector and to small local borrowers. The RBI and the government have taken several measures to enhance system liquidity and strengthen the governance and risk management framework of NBFCs, including HFCs:

• Removal of 25% Debenture Redemption Reserve (DRR) requirement,

• Relaxation of end-use restrictions on external commercial borrowings from recognised lenders,

• Allowance of Partial Credit Enhancements (PCE) to banks for bonds tenured three years and above,

• Relaxation of the minimum holding period of loans with original maturities > 5 years to encourage securitizing assets,

• Allowing co-origination of loans with scheduled commercial banks,

• Liquidity coverage ratio maintenance of 50% and 30%, as per the size of AUM,

• Interest subvention scheme for NBFC-ND-SI for loans provided to MSMEs to the extent of 2% for all GST registered MSMEs,

• One-time restructuring of existing loans to MSMEs.

In addition, the RBI undertook a series of initiatives to strengthen the financial services industry, like accommodative monetary policies, reducing the benchmark rates by 115 basis points, CRR exemption for retail loans, externally benchmarking rates, long- term repo operations and operation twist.

Special measures by the Government and RBI for COVID-19 impact mitigation.

1. Additional policy rate cut by 115 bps to 4%,

2. Reverse repo rate cut at 3.35%, to purposefully create an imbalance, encouraging banks to productively disburse for lending purposes,

3. Targeted Long-Term Repo Operations (TLTRO) upto Rs. 1,00,000 Crore,

4. Reduction of CRR by 1% for 1-year period to 3%,

5. Reduce daily CRR requirement from 90% to 80% till June 26, 2020,

6. Increase accommodation under the Marginal Standing Facility (MSF) from 2% to 3% till June 30, 2020,

7. Additional measures like permitting all lending institutions to provide a 6-month moratorium for all term loans, deferring interest on working capital facilities and easing working capital financing, were announced to infuse liquidity in the markets,

8. On April 17, 2020, the RBI announced another round of TLTRO amounting to 50,000 Crore and the banks are required to invest the funds in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs, with at least 50% of the total amount availed going to small and mid-sized NBFCs and Micro Finance Institutions (MFIs),

9. Further, RBI provided a Special Liquidity Facility (SLF) of Rs. 15,000 Crore to enable it to provide liquidity support to the MSMEs and meet sectoral credit needs.

10. Rs. 45,000 Crore partial credit guarantee (PCG 2.0) scheme for non-banking financial companies (NBFCs)

11. Rs. 30,000 Crore special liquidity scheme for NBFCs, housing finance companies (HFCs) and microfinance institutions (MFIs) with full guarantee by the government.

INTER GLOBE FINANCE- AN OVERVIEW

Today, IGFL is one of West Bengals leading & valuable financial management & advisory services company in the eastern region. Through its lending and financing solutions IGFL has enabled its customers to pursue ambitious growth strategies and execute value creating transactions. Our Vision is to become the most respected company in the financial services space in India. Our Business Strategy is to have a steady growth by adapting to the changing environment, without losing the focus on our core domain of financial services.

IGFL is a knowledge driven organization and has over the years developed and institutionalized knowledge about its businesses at all the levels.

Unlike conventional corporate lenders, we provide easy finance with hassle-free documentation through a speedy and transparent process. IGFL is at the right place, at the right time and with the right skill sets. The Government of India is strongly focusing on steps to stimulate the rural economies and we believe that we have a significant part to play. As we diversify our product portfolio to other forms of secured financing, we will soon have an entire spectrum of financial products under the IGFL umbrella.

FINANCIAL REVIEW

The Business strategy of reducing Equity investments and focusing on core loan activity helped company reduce its volatility. The summary of our financial performance is as follows:

• Our Interest Income stood at Rs. 7.95 Crores during the year.

• The Company earned a profit of Rs. 73.37 lakhs during the year before provisions for doubtful debts.

• The company on a conservative basis provided 100 % provision for all doubtful debts identified.

• The Companys total turnover amounted to Rs. 8.88 Crores in comparison to Rs. 13.82 Crores in the previous financial year 2018-19.

• Earnings per share (EPS) stood at (Rs.4.78) in current year.

ROAD AHEAD & FUTURE OUTLOOK

A temporary shock has appeared in the NBFC circuit as banks have tightened credit flows and liquidity squeeze. It has reduced the pace of acceleration of credit as right now the entities are choosing to focus on asset-liability management rather than just growing their books.

With the economic and consumption activities a bust in sectors such as real estate and micro-finance, NBFCS such as ours have been hit with the worst in the wave of this global pandemic. The increasing loan losses and inaccessibility to new capital is likely to exacerbate the liquidity stress.

Due to uncertainties in various industries & customers having difficult time in repaying existing loans as per schedule, our business too had suffered a major setback. Currently, we are not pursuing any expansion or fresh disbursement and are concentrating on all existing borrowers only.

We are in touch with all existing borrowers and trying to ease the situation to the best possible extent.

We are hoping for the situations to get normalize by December Quarter 2020.

INTERNAL CONTROL SYSTEMS AND ADEQUACY OF INTERNAL CONTROL

In any industry, the processes and internal control systems play a critical role in the health of the Company. The Companys well-defined organizational structure, documented policy guidelines, defined authority matrix and internal controls ensure efficiency of operations, compliance with internal policies and applicable laws and regulations as well as protection of resources. Moreover, the Company continuously upgrades these systems in line with the best available practices.

The Board has an Audit Committee with independent directors in majority to maintain the objectivity.

IGFL has proper and adequate system of internal controls commensurate with its size and nature of operations to provide reasonable assurance that all assets are safeguarded, transactions are authorized, recorded and reported properly, applicable statutes and corporate policies are duly complied with.

The Audit Committee also seeks the views of statutory auditors on the adequacy of the internal control systems in the Company. Moreover, IGFL continuously upgrades these systems in line with the best available practices.

OPPORTUNITIES & THREATS

Opportunities

The macro economic developments in India and rest of the world detailed earlier in augur well for the development of financial sector in India as well for CGCL and offer immense opportunities in FY 2020-21 and beyond as under:

• In MSME, there is huge potential to grow as the credit requirement GAP of 25.9 Trillion exists in the segment.

• Growth in the affordable housing sector, Government push for affordable housing and "Housing for All by 2022" augurs well for the Company where Company already having a strong foothold in lending to affordable housing sector and a wide network of branches in North and West India that gives an edge over the other NBFCs.

• Strong liquidity position and availability of un-availed banking limits and proposed credit lines available under TLTRO/additional funds from banks under bonds and other securities for NBFCs having credit ratings of AA and below gives an edge in growth in retail sectors where Company already have presence.

• Credit Guarantee from GoI for additional credit to existing MSME customers to an extent of 20% of existing loan as on February 29, 2020 will improve asset quality and growth for FY 2020-21.

Threats

Being an NBFC, the Company has to face various threats as under mentioned -

• Inflationary pressures, slowdown in policy making and reduction in household savings in financial products,

• Competition from local players,

• Execution risk,

• Regulatory changes, and

• Attraction and retention of human capital.

RISK MANAGEMENT

Being in the lending business, risk management forms a vital element of our business. Company has a well-defined risk management framework, approved by the Board of Directors. It provides the mechanism for identifying, assessing and mitigating risks.

The Company has a Risk Management Committee (RMC) approved by the Board.

During the year, the RMC reviewed the risk associated with the business, its root cause and the efficacy of the measures taken to mitigate the same. Board reviewed the risks arising from the liquidity gap and interest rate sensitivity and took decisions to mitigate the risk by ensuring adequate liquidity through the maturity profile of the Companys assets and liabilities.

HUMAN RESOURCES & INFRASTRUCTURE DEVELOPMENT

Our people are our key assets. In an increasingly competitive market for talent, we focus on attracting and retaining the right talent, and fostering a work culture that is always committed to providing the best opportunities to employees to realize their potential.

We responded swiftly to the COVID-19 outbreak by adopting various measures to ensure health and safety of our employees. We cancelled all physical trainings and conferences, curtailed domestic travels, and took extensive precautions like sanitization of offices, availability of hand sanitizers and masks and operations in multiple shifts to ensure lesser number of staff — thus enabling social distancing. We have readied our offices to further ensure health protocols, continuous communication on protection and social distancing, and self-declaration surveys for employees on their health status.

CAUTIONARY STATEMENT

The Board of Directors have reviewed the Management Discussion and Analysis prepared by the Management, and the Independent Auditors have noted its contents. Statement in this report of the Companys objective, projections, estimates, exceptions, and predictions are forward looking statements subject to the applicable laws and regulations. The statements may be subjected to certain risks and uncertainties. Companys operations are affected by many external and internal factors which are beyond the control of the management. Thus the actual situation may differ from those expressed or implied. The Company assumes no responsibility in respect of forward looking statements that may be amended or modified in future on the basis of subsequent developments, information or events.