Kalyani Commercials Ltd Management Discussions.

INDUSTRY OVERVIEW

NBFCs have been playing a complementary role to the other financial institutions including banks in meeting the funding needs of the economy. They help fill the gaps in the availability of financial services that otherwise occur in the unbanked & the underserved areas.

The NBFC segment has witnessed considerable growth in the last few years and is now being recognized as complementary to the banking sector due to implementation of innovative marketing strategies, introduction of tailor- made products, customer-oriented services, attractive rates of return on deposits and simplified procedures, etc.

NBFCs have been at the forefront of catering to the financial needs and creating livelihood sources of the so-called non bankable masses in the rural and semi-urban areas. Through strong linkage at the grassroots level, they have created a medium of reach and communication and are very effectively serving this segment. Thus, NBFCs have all the key characteristics to enable the government and regulator to achieve the mission of financial inclusion in the given time.

OUR INDUSTRY SEGMENT

The Non-Banking Financial Companies (NBFC) Sector is still struggling for its growth in India. The NBFC Sector is doing much better all over the world as compared to Asian Countries as the general perception about NBFC in the mind of public is still hazy.

BUSINESS

The Company is engaged in the business of investment in securities and providing loans and advances. The Company is registered as Non-deposit taking Non-Banking Finance Company with the Reserve Bank of India. Since the asset size of the company is not more than Rs. 100 crores it is presently Non Systemically Important Non Deposit taking NBFC.

OPPORTUNITIES AND THREATS

Over the years, your Company has achieved an appropriate balance between risk and returns by setting up an efficient risk mitigation system to meet various forms of financial and other risks. The primary risks that the company is exposed to credit risk, market risk and operational risk. Deriving from the long years of experience in NBFC sector your companys credit policy framework is designed to provide the right balance between business growth and portfolio quality.

OUTLOOK AND FUTURE PROSPECTS

Competition continues to be intense, as the Indian and foreign banks have entered the retail lending business in a big way, thereby exerting pressure on margins. The erstwhile providers of funds have now become competitors. NBFCs can sustain in this competitive environment only through optimization of funding costs, identification of potential business areas, widening geographical reach, and use of technology, cost efficiencies, strict credit monitoring and raising the level of customer service.

RISKS & CONCERNS

In todays complex business environment, almost every business decision requires executives and managers to balance risk and reward. Effective risk management is therefore critical to an organizations success. Globalization, with increasing integration of markets, newer and more complex products & transactions and an increasingly stringent regulatory framework has exposed organizations to newer risks. As a result, todays operating environment demands a rigorous and integrated approach to risk management. Timely and effective risk management is of prime importance to our continued success. Increased competition and market volatility has enhanced the importance of risk management. The sustainability of the business is derived from the following:

• Identification of the diverse risks faced by the company.

• The evolution of appropriate systems and processes to measure and monitor them.

• Risk management through appropriate mitigation strategies within the policy framework.

• Monitoring the progress of the implementation of such strategies and subjecting them to periodical audit and review.

• Reporting these risk mitigation results to the appropriate managerial levels.

SUBSIDIARY COMPANY

S. No. Company Subsidiary/Joint Venture/Associates Company Shareholding
1 Ganganagar Vehicles Private Limited Subsidiary 51%
2 Nekub Consultancy Limited * Wholly owned Subsidiary 99%
3 YYKS Buildcon Limited* Wholly owned Subsidiary 99%

Nekub Consultancy Limited and YYKS Buildcon Limited** are under the process of strike off.

HUMAN RESOURCES

The Companys relations with the employees continued to be cordial.

FINANCIAL RESULTS

The Financial performance of the Company for the financial year ended 31 March, 2019 is summarized below:-

(Rs. In Crore, except EPS)

Particulars

Consolidated

Standalone

For the year Ended

For the year Ended

31.03.2019 31.03.2018 31.03.2019 31.03.2018
Total Revenue (I) 901.48 715.79 401.60 495.58
Total Expenses (II) 900.24 714.80 400.77 494.76
Profit Before Tax & Extraordinary Item 1.23 0.99 0.82 0.81
Extraordinary Item 0.09 - 0.09 -
Tax Expenses
- Current Tax 0.40 0.43 0.23 0.31
- Deferred Tax Liability (Net) (0.09) (0.08) (0.01) (0.02)
- Income Tax Earlier Year (0.03) 0.01 (0.03) (0.009)
Profit After Tax 0.70 0.57 0.54 0.51
Earnings Per Share (EPS) 7.07 5.76 5.49 5.19

SEGMENT-WISE OR PRODUCT WISE PERFORMANCE

The company operates in two segments. Hence segment wise performance is discussed as follows:

• Primary Segment: Business Segment

Based on the guiding principles given in Accounting Standard AS -17 "Segment Reporting" notified under Companies (Accounting standard) Rules 2006, the Companys operating business are organized and managed separately according to the nature of products.

The Two identified reportable segments. One is Automobile segment in which trading of vehicle and servicing (Including Heavy Commercial Vehicles, Two Wheeler and Three wheelers) and other includes NBFC Division and Retail out let of petroleum products (BPCL).

?Secondary Segment: Geographical segment

Since the companys activities/operations are primarily with in the country and considering the nature of products/services it deals in, the risk and returns are same and as such there is only one geographical segment.

The following is the distributions of the companys consolidated revenue by geographical markets, regardless of where the goods/services were produced.

(Rs In Lacs)
Particulars 2018-19 2017-18
Revenue from Domestic Market 40130.87 49534.30
Revenue from Overseas Market 0.00 0.00
Total 40130.87 49534.30

The company has assets for producing goods for domestic market and no assets for overseas markets

• Segment accounting polices:

In addition to the significant accounting policies applicable to the business segment, the accounting policies in relation to segment accounting are as under:

i) Segment revenue & expenses:

Joint revenue and expenses of segments are allocated amongst them on a reasonable basis. All other segment revenue and expenses are directly attributable to the segments.

ii) Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of operating cash, debtors, inventories and fixed assets, net of allowance and provisions, which are reported as direct off sets in the balance sheet. Segment Liabilities include all operating Liabilities and consist principally of creditors & accrued liabilities. Segment assets and liabilities do not include deferred income taxes except in in the Automobile Division. While most of the assets/liabilities directly attributed to individual segments.

iii) Inter segment sales:

Inter segment revenues between operating segments are accounted for at market price. These transactions are eliminated in consolidation. The main division is Automobile division and funds provided by the Automobile division to other division and interests on such balances are not charged.

iv) Information about business segments :

For the year ending as on 31st March, 2019

Particulars

Automobile

Others

Total

Curr. Year Prev. Year Curr. Year Prev. Year Curr. Year Prev. Year
Segment Revenue :
External sales/income (Net) 44702.82 52423.92 733.81 1171.85 45436.63 53595.77
Other reciept 25.71 26.93 0.00 0.00 25.71 26.93
Total Revenue 44728.52 52450.85 733.81 1171.85 45462.34 53622.70
Segment Results :
Segments results 73.80 90.03 4.35 1.01 78.15 91.04
Unallocated expenses (Net) 0.00 0.00 0.00 0.00 0.00 0.00
Operation profit before Interest 653.81 566.80 4.45 1.04 658.26 567.84
Financial exp. 580.01 476.77 0.10 0.03 580.11 476.80
Income tax current/Earlier Year 26.53 31.32 0.00 0.00 26.53 31.32
Less: Deferred tax Liability -3.04 -2.34 0.00 0.00 -3.04 -2.34
Net Profit 50.31 61.05 4.35 1.01 54.66 62.06
Other Information :
Segment Assets 6672.98 6839.79 101.82 97.06 6774.80 6936.85
Inter Branch 0.00 0.00 0.00 0.00 0.00 0.00
Unallocated assets
Total Assets 6672.98 6839.79 101.82 97.06 6774.80 6936.85
Segmets Liabilities :
Share Capital 100.00 100.00 0.00 0.00 100.00 100.00
Reserve & Surplus 458.59 408.29 101.41 97.06 560.00 505.35
Secured & Unsecured Loan 3796.75 4488.64 0.00 0.00 3796.75 4488.64
Segment liabilities 2317.64 1842.86 0.41 0.00 2318.05 1842.86
Unallocated liabilities 0.00 0.00 0.00 0.00 0.00 0.00
Deferred tax liabilities 0.00 0.00 0.00 0.00 0.00 0.00
Total Liabilities 6672.98 6839.79 101.82 97.06 6774.80 6936.85
Capital Expenditure 41.60 82.43 0.00 0.00 41.60 82.43
Depreciation 74.43 75.86 0.00 0.00 74.43 75.86

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUENCY

Your Company has an effective system of accounting and administrative controls supported by an internal audit system with proper and adequate system of internal check and controls to ensure safety and proper recording of all assets of the Company and their proper and authorised utilization.

As part of the effort to evaluate the effectiveness of the internal control systems, your Companys internal audit department reviews all the control measures on a periodic basis and recommends improvements, wherever appropriate. The internal audit department is manned by highly qualified and experienced personnel and reports directly to the Audit Committee of the Board. The Audit Committee regularly reviews the audit findings as well as the, an Information Security Assurance Service is also provided by independent external professionals. Based on their recommendations, the Company has implemented a number of control measures both in operational and accounting related areas, apart from security related measures.

CAUTIONARY STATEMENT

This report describing the Companies activities, projections about future estimates, assumptions with regard to global economic conditions, government policies, etc. may contain "forward looking statements" based on the information available with the company. Forward-looking statements are based on certain assumptions and expectations of future events. These statements are subject to certain risks and uncertainties. The company cannot guarantee that these assumptions and expectations are accurate or will be realized. The actual results may be different from those expressed or implied since the companys operations are affected by the many external and internal factors, which are beyond the control of the management. Hence 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.

By the order of the Board
For Kalyani Commercials Limited
Sd/- Sd/-
Sourabh Agarwal Shankar Lal Agarwal
(Whole Time Director) (Managing Director)
DIN:02168346 DIN: 01341113
Address: AE- 166, Shalimar Bagh, Address: AE-166, Shalimar Bagh,
New Delhi- 110088 New Delhi- 110088
Date: 07/08/2019
Place: New Delhi