KEN Financial Services Ltd Management Discussions.

Overall Review

The Covid-19 pandemic has exacerbated the woes of non-banking financial companies (NBFCs). The decline in non-bank credit growth, which started in the second half of fiscal 2019, continued through fiscal 2020, accentuated first by economic slowdown and then - more vigorously - by the pandemic. The ramifications are being felt across the sector, though some segments have been impacted more severely than others.

The Reserve Bank of India (RBI) has allowed lenders to extend moratorium on loans up to August 31, temporarily mitigating the hardship of borrowers. However, in the absence of any such moratorium on non-banks capital market borrowings, ensuring adequate liquidity to meet repayments coming up in the near term has become the primary challenge for most nonbanks. Another challenge is to ensure asset quality remains under control, through steps such as maintaining close contact with borrowers and supporting them through this unprecedented crisis. It is clear that NBFCs will need to recalibrate their strategies in order to deal with changing business scenario post pandemic

Industry Structure and Development

NBFCs are emerging as an alternative to mainstream banking. Besides, they are also emerging as an integral part of Indian Financial System and have commendable contributions towards Governments agenda of financial Inclusion. NBFCs form an integral part of the Indian Financial System. They have been providing credit to retail customers in the underserved and unbanked areas. Their ability to innovate products in consonance to the needs of their clients is well established. They have played a key role in the development of important sectors like Road Transport and Infrastructure which are the life lines of our economy. NBFCs have been supplementing the role of the organized banking sector by bridging the credit gaps, i.e., in meeting the increasing financial needs of the corporate sector, delivering credit to the unorganized sector and to small local borrowers. NBFCs have enjoyed a more flexible structure than banks in the organized sector. From time to time, the Central Government as well as Reserve Bank of India has been working towards regulation of these NBFCs. The Department of Non-Banking Supervision of RBI has been indulged in these activities of regulating as well as supervising the NBFCs.

The Government has taken a series of measures to generate demand and ease the liquidity by ensuring public sector banks lend further to NBFCs, introducing partial credit guarantee scheme, organizing loan mela etc.

Opportunities and Threats

At present, the Indian Government is promoting Make in India projects and other similar initiative, like Vocal for Local, involving new business ideas. This is expected to increase the demand for NBFC. As regards threat it could be economic slowdown due to various government measures taken to control the Covid-19 outbreak. Also forex volatility could be a major threat.

Segment-wise/Product-wise Performance

Your Company has only one reporting segment. The revenue for the year was Rs. 1768.00 lakhs.

Outlook

The markets presently are subdued and how sooner it will revive is not easy to predict. However, with the industrys increasing preparedness, the evolving opportunities can be better harvested.

Risk and Concern

Economic downturn due to covid-19 pandemic is the risk which every industry is facing and the government is trying, through its all measures like economic package and other policy assistance, to revive the economy as earliest as it can. The Government should continue its initiative of Ease of Doing Business. During the year your Company under its well planned and defined risk management policy gave attention to all the risk areas. The Board of Directors is apprised of the development in risk management in periodical meetings where the quarterly results are approved.

Internal Control System

Your Company has a planned internal control system through internal checks and reviews it periodically to strengthen it and safeguard Companys assets. Management Information System is given up most importance.

Financial Performance w.r.t. Operational Performance

During the year under review, the Company has earned Total Revenue of Rs. 1768.00 lakhs in comparison to Rs. 210.83 lakhs during the previous year. The Company has incurred net profit of Rs. 135.06 lakhs in comparison to Rs. 21.01 lakhs during the previous year.

Safety, Health and Environment

Your Company as a matter of policy gives greater importance to safety, health and environment and also ensures compliance with applicable legislative requirements.

Human Resources

Your Company recognizes the importance of Human Resource in achieving its objectives and strategies as human resource plays an important role in the success and growth of Company. Your company gives priority in honing and utilizing their skills through in house training programs.

Key Financial Ratios:

In accordance with the SEBI (Listing Obligations and disclosures Requirements) Regulations 2018 (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in Key sector-specific financial ratios.

PARTICULARS F.Y. 2019-20 F.Y.2018-19
Debt equity Ratio 1 2.17 Times 0.84 Times
Net Profit Margin (%)2 7.73% 10.29%
Return on Netwoth (%)3 26.13% 5.60%

1. Debt Equity ratio has increased as a result of increase in business of the Company.

2. Net Profit Margin has reduced as a result of increase in business of the Company.

3. Return on net worth increased as a result of increase in business without increase in capital investment.

Cautionary Statement

The report contains forward looking statements describing expectations, estimates, plans or words with similar meaning. Your Companys actual result may differ from those projected depending on various factor. Your Company cannot guarantee that the assumptions and estimates in the forward looking statements are accurate or will be realized.