J J Finance Corporation Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

Being one of the major nations, India has posted highest GDP growth in FY 2024. IndiaRs.s diversified financial sector is undergoing rapid changes. The Indian Financial Sector currently comprises of segments, including commercial banks, new-age fintech start-ups, non-banking financial companies (NBFCs), co-operatives, insurance companies, pension funds, mutual funds, small and medium financial entities and recently established payment banks. Together, they provide solutions to a wide range of customers based on their requirements and accessibility.

The NBFC sector in India is expected to grow due to several factors like governmentRs.s commitment to financial inclusion, sectorRs.s digital transformation, regulatory changes that aim to ensure the sectorRs.s stability and prevent excessive risk-taking and also due to impressive growth projections. With strategic moves by industry leaders, the market is set to expand further. NBFCs are leveraging their superior understanding of regional dynamics and customized products and services to expedite financial inclusion in India. Lower transactions costs, quick decision making, customer orientation and prompt service standards have typically differentiated NBFCs from banks. Systemically Important NBFCs have demonstrated agility, innovation, and frugality to provide formal financial services to millions of Indians.

OPPORTUNITIES AND THREATS Opportunities

Reports from the World Bank indicate that Non Banking Financial Institutions act as critical pillars contributing to macroeconomic stability and sustained economic growth and prosperity, due to their ability to finance firms and individuals at a reasonable cost, reduce volatility by providing multiple sources to finance and park funds and enable creation of a competitive environment characterized by a diverse array of products. This has been proven time and again in developed markets. Non-Banking Finance Companies (NBFCs) continue to play a critical role in making financial Services accessible to a wider set of IndiaRs.s population and are emerging as strong intermediaries in the retail finance space. Going forward, one should expect NBFCs to further strengthen their presence in retail finance and grow at a reasonably healthy pace. Your Company is committed to addressing the changes boosted by its strengths in market position, agile execution capabilities, robust early warning systems and extensive use of analytics for risk mitigation and resource allocation. It will ensure to take advantage of the tailwinds that may emerge during the course of the year.

Threats

The biggest challenge before NBFCs is that they are facing stiff competition from banks and financial institutions, due to their ability to raise low cost funds which enables them to provide funds at much cheaper rate. More stringent capital adequacy norms have been stipulated by RBI for NBFCs which is making difficult for them to give cheaper finance. Ever-increasing competition from commercial counterparts whose capacity to absorb losses is higher, counter-party failures, recommendations being made to increase the purview of monitoring by regulatory authorities increase the threat of losing the essence of Non-banking Finance Companies which are specifically designed to reach out and finance certain target groups.

SEGMENT WISE / PRODUCT WISE PERFORMANCE

The Company is engaged in investment activities and other financial services during the year under review, hence the requirement of segment-wise reporting is considered irrelevant.

OUTLOOK

The Company being an investment Company seeks opportunities in the capital market. While interest rate were steady in 2023-24. The volatility in stock indices represents both an opportunity and challenge for the Company. We continue to see significant volatility in the market and will use periods of weakness as investment opportunities for long term.

The Company has a strong Risk Management System for identification, monitoring, mitigation and reporting of the risks associated with its operations. The Company has an established practice of compliance reporting covering all operations and support functions; compliance reporting is periodically reviewed to ensure comprehensive coverage.

RISKS AND AREAS OF CONCERN

The NBFC industry in general faces the risk of re-entry and new entry of players and existence of several unorganized regional players increasing the competition which mainly affects the asset quality. This is further characterized by captive NBFCs floated by other business houses. The ever existing systemic and delinquency risks and fluctuations in interest rates make the companies more vulnerable. Deployment of funds in sensitive and volatile sectors increases the risk exposure while concentration risk increases dependency.

INTERNAL CONTROL SYSTEMS AND THEIR

Internal Control measures and systems are established to ensure the correctness of the transactions and safeguarding of the assets of the Company. The Management ensures adherence to all internal control policies and procedures as well as compliance with regulatory guidelines. The audit committee of the Board of Directors reviews the adequacy of internal controls. This has improved the management of the affairs of the Company and strengthened transparency and accountability.

DISCUSSION ON FINANCIAL PERFORMANCE

During the year, the net revenue from operations of your Company increased from Rs. 40.02 Lakh to Rs. 76.18 Lakh Lakh. For FY 2023-24, your CompanyRs.s profit after tax stood at Rs. 36.57 Lakh vis-a-vis Rs. 8.12 Lakh in the previous year.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company always considers its human resources as a valuable asset and is committed towards their development for continuous growth. Focus on training to enhance the skill-sets of employees in line with the business and market requirements continued throughout the year and it confers recognition based on merit. The employee relations have continued to be harmonious throughout the year. The Company has two (2) permanent employees as on 31st March, 2024.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Ratios are used to make a holistic assessment of financial performance of the entity, and also help evaluating the entityRs.s performance vis-a-vis its peers within the industry. The NBFC sector is growing rapidly with borrowings comprising the largest source of funding. The key financial ratios of the company for F.Y. 2023-24 have shown an upward trend due to increase in the revenue of the company while the liability has increased during the year in concern. The Company is not a manufacturing unit and does not have any Non-Performing Assets (NPA), hence ratios related to those are not applicable. The significant changes in the other applicable key financial ratios are as follows:

Name of Ratios	FY 2023-24	FY 2022-23	Change (%)	Reasons for Change
Debtors Turnover	N.A.	N.A.	N.A.	No Credit sales during the year
Current Ratio	110.31	156.79	-29.64	Increase in current liabilities and Decrease in current asset
Debt Equity Ratio	0.005	0.004	25	Increase in liabilities
Net Profit Margin (%)	48.01	20.30	136.50	Increase in profit

CHANGE IN RETURN ON NET WORTH AS COMPARED TO PREVIOUS YEAR

Return on Net Worth (RONW) is a measure of profitability of a company expressed in percentage. Return on Net Worth for the financial year 2023-2024 is 3.81% while the Return on Net Worth for the financial year 2022-2023 was 0.91%. The Increase in Return on Net Worth is mainly due to the Increase in Total income of the company. The company is making continuous effort to make optimum utilization of the shareholdersRs. fund and perform better in the time to come.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report describing the CompanyRs.s objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of the applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could influence the CompanyRs.s operations include economic and political conditions in which the Company operates, interest rate fluctuations, changes in Government / RBI regulations, Tax laws, other statutes and incidental factors.