Overall Review
Ken Finance Service Limited (‘KFSL or ‘the Company) is a non-systemically
important nondeposit taking non-banking financial company (NBFC) registered with the
Reserve Bank of India (RBI) since March 24, 1998, with registration number 13.00423 and
classified as NBFC- Investment and Credit Company (NBFC-ICC) pursuant to circular DNBR
(PD) CC.No.097/03.10.001/2018-19 dated 22 February 2019. The Company is mainly engaged in
the business of financing. The Company has a diversified lending portfolio across retail,
SMEs and commercial customers with significant presence in urban and rural India. It
accepts public and corporate deposits and offers variety of financial services products to
its customers.
In Financial Year 2023, the Indian economy faced multiple challenges. The countrys
retail inflation indicator, consumer price inflation (CPI) inched above the RBIs
tolerance range in January 2022. It remained above the target range for almost twelve
months before retracting within the upper tolerance of 6% in November 2022. Rising
international crude prices coupled with domestic weather conditions like excessive heat
and unseasonal rains kept food prices high, fueling retail inflation. The Government cut
excise and customs duties and restricted exports to cool off inflation. The RBI, like
other central banks, raised the monetary policy rates and reduced excess systemic
liquidity. Major areas of concern for the economy were elevated commodity prices leading
to a depreciation of the Indian rupee, higher retail inflation (both core and food
inflation) leading to the RBI raising interest rates and rationalising systemic liquidity,
and a rising current account deficit (CAD). However, despite these critical challenges,
India emerged as the fastest growing major economy in the world.with a robust estimated
overall GDP growth rate of 7% for FY2023. It is projected to further grow by 6.1% in FY
2023-24 - in contrast, the projected global growth rate for same period is only 2.9%.
Industry Structure and Development
The world seems to be recovering from the aftermath of the challenges posed in the last
few years. Overall despite the challenges, India has emerged as a bright spot in terms of
economic growth amidst an outlook of global slowdown. Recently, The World Bank has
reported that India is better positioned to navigate global headwinds and handle global
spillovers, as compared to other major emerging economies. The uptick in demand during the
festive season is another reason which makes us optimistic.
CRISIL recently reported that riding on macroeconomic tailwinds, NBFCs are expected to
see their Asset under Management (AUM) grow 11-12%. Also, it is heartening to see that the
RBI and policymakers recognise the contribution of NBFCs in supporting real economic
activity and meeting the credit demand, especially reaching the unbanked. The recent RBI
Scale based norms is another welcome step for the industry that will elevate the status of
NBFCs in line with several other public sector NBFCs. Under these revised norms, we expect
to attain more operational flexibility to meet the increasing credit demand and aid
Indias economic growth.
A large number of our population remains largely unfamiliar with technology and face
unique challenges in financial literacy. When it comes to serving the underbanked, Indian
NBFCs are leveraging technology and innovation to drive the financial inclusion agenda.
To keep this momentum of growth going in 2023 as well, it is important to address the
key challenges faced by the NBFC sector. One such challenge is the recent revision of
securitisation norms by RBI which state that loans with residual maturity of less than 365
days cannot be securitised. We do believe that this can have an impact on the level of
securitisation, as gold loans, MFI loans are of shorter duration.
In a scenario of rising interest rates and intense competition from banks, NBFCs will
further need to focus on their pricing power to maintain profitability and also focus on
higher-yield segments for growth. Needless to say, NBFCs with stronger business models,
strong capital adequacy, strong underwriting capabilities and focus on digital strategy
will continue to perform better and grow stronger in years to come.
In 2023, NBFCs will play a larger role in supporting the socioeconomic construct of the
Indian economy. The opportunity for credit penetration still remains very high in India.
The NBFCs can set a new benchmark by introducing new business models with personalised
offerings.
Opportunities and Threats
India remains largely underpenetrated in terms of credit. The domestic
credit-to-private sector (% of GDP) ratio for India is at about 55%, which is
significantly lower than other developed and emerging economies which are well beyond 100%
in terms of penetration. Furthermore, with emergence of several new age companies, we
believe there is unexplored potential for existing large players like us to partner with
these new age firms and build stronger technical capabilities, expand business reach and
multiply customer base. The Company would also focus on increasing cross-sell and
increasing wallet share by offering customized solutions to their existing and new
customers.
In terms of threats, we believe that the impact of elevated interest rates on funding
costs could be visible and lead to slowdown of credit offtake as well as increase in
credit costs. Growing competitive intensity from banking sector can also affect the growth
of NBFCs like ours.
Segment-wise/Product-wise Performance
The Company is engaged mainly in business of financing and as such there are no other
reportable segment. The revenue for the year was Rs. 7,90,297 Hundreds in comparison to
Rs. 7,23,473 Hundreds during the previous year.
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
KFSLs internal control system is designed to ensure operational efficiency, protection
and conservation of resources, accuracy and promptness in financial reporting and
compliance with laws and regulations. The internal control system is supported by an
internal audit process for reviewing the design, adequacy and efficacy of the Companys
internal controls, including its systems and processes and compliance with regulations and
procedures. Internal Audit Reports are discussed with the Management and are reviewed by
the Audit Committee of the Board, which also reviews the adequacy and effectiveness of the
internal controls in the Company. KFSLs internal control system is commensurate with its
size and the nature of its operations.
Financial Performance w.r.t. Operational Performance
During the year under review, the Company has earned Total Revenue of Rs.7,90,297
Hundreds in comparison to Rs. 7,23,473 Hundreds during the previous year. The total
expenses have been increased from Rs. 6,23,310 Hundreds to Rs. 6,91,331 Hundreds due to
which Net Profit after tax is Rs. 61,758 Hundreds in comparison with Rs.74,617 Hundreds
during the previous year. Your directors are of the opinion of performing better in
forthcoming FY 20232024.
Safety, Health and Environment
Y our Company as a matter of policy gives greater importance to safety, health and
environment and also ensures compliance with applicable legislative requirements.
Human Resources
The Company firmly believes that Human Capital is its most important asset. A series of
engagement interventions across identified key themes were undertaken to increase employee
morale and the initiatives focused on key aspects such as physical and mental wellness,
celebrations, continuing with its journey of "Happiness at the workplace".
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. 2022-23 |
F.Y. 2021-22 |
Debt equity Ratio 1 |
0.31 Times |
3.05 Times |
Net Profit Margin (%)2 |
7.81% |
10.31% |
Return on Networth (%)3 |
8.75% |
11.49% |
1Debt Equity ratio has decreased as a result of decrease in business of the
Company.
2Net Net Profit Margin has decreased as a result of decrease in business of the
Company.
3Return on Net worth decreased as a result of decrease 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.
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