Industry Structure and Developments
The Company is a Systemically Important Non-Banking Financial Company
(NBFC) (Non-Deposit Taking) and is registered with the Reserve Bank of India. The Company
does not accept Public Deposits. Its activities are limited within India and is mainly
engaged in the business of providing Loans and making Investments in Shares and
Securities. The performance of the Company is closely linked with the overall performance
of the Global and Indian Economy, Financial and Capital Markets and the business strategy
of the Company is therefore dependant upon the economic environment, sectoral outlook and
policies of Government and Reserve Bank of India. The Company continues to remain invested
in leaders across sectors, which we believe have potential to remain differentially
value-accretive over the long term.
The Indian economy demonstrated an exceptional performance during FY
2022-23, While the post pandemic global economy continues to be affected by geopolitical
tensions and inflationary pressures, India continues to remain a bright spot in the world
economy. As per IMF, it will alone contribute 15% of the global growth in 2023 driven by
its demographic dividend, pent-up demand growth, digital infrastructure and commitment to
fiscal consolidation. Overall, India is expected to close FY 2022-23 with a GDP growth of
about 7%, which is the fastest amongst all the major economies. 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%.
In line with its global peers, RBI also undertook several rate hikes
during the year to keep the inflationary pressures in check. Despite this, the industry
demonstrated strong credit growth of 15% YoY in March 2023, driven by the overall
improvement of the economy and pent-up post-covid demand. This growth was also evidenced
by several high frequency indicators including the economic growth in the Country,
Purchasing Manager Index readings, buoyant tax collections (both direct and indirect) etc.
The growth outlook for NBFCs has improved to 13-15 per cent from 11-13
per cent earlier led by an upward revision in the projection of business loans, retail
loan growth (comprising personal and consumption loans, vehicle loans, unsecured small
enterprise loans and microfinance loans etc.). Total sector Assets under Management (AUM)
stood, consisting of retail, infrastructure and wholesale loans, stood at about 40-lakh
crore at the end of March 2023.
Opportunities and Threats
Non-Banking Financial Companies (“NBFCs”) remain one of the
most important pillars for ushering financial inclusion in India, reaching out to a
hitherto under/unserved populace and in the process leading to “formalization”
of the credit demand. NBFCs cater to the needs of both the retail as well as commercial
sectors and, at times, have been able to develop strong niches with their specialized
credit delivery models that even larger players including banks, have found hard to match.
This has further provided a fillip to employment generation and wealth creation and in the
process, bringing in the benefits of economic progress to the unserved / underserved
sections of the business and society.
The Company constantly monitors the external environments and internal
situation so that it is aware of the opportunities and threats that emerge. This enables
the Company to tap into the positive prospects that come its way while overcoming or
managing the challenges.
Indian economy is underpenetrated in terms of domestic credit to
private sector in comparison to developed and emerging economies. Thus, the possibilities
for increasing the size of the credit pie through tailored and superior credit and product
offerings are numerous. Further, with emergence of several new age fintech companies,
there is unexplored potential for existing players to partner with these new age companies
and build stronger technical capabilities, expand business reach and multiply customer
base.
Major threats is to access to capital for the NBFCs in India. NBFCs are
forced to rely on bank loans or the issue of bonds/NCD to raise money, as opposed to
banks, which have access to low-cost deposits. It may be challenging for NBFCs to compete
with banks on interest rates. There are some other challenges like unpredictable policy
changes by the Government, increasing competition from local and global players in terms
of product development and technology innovations, higher exposure to semi-formal and
informal sector customers, inadequate availability of bank finance and upsurge in
borrowing costs, regulatory and compliance related changes in the sector affecting NBFCs.
With its strong parentage, brand recognition, liquidity and strong
client network, your Company is poised to capitalize on this opportunity and foresees
several profitable opportunities and tapping deeper markets. Further, the Companys
robust risk management framework with a deep understanding of underwriting and credit
controls shall help to mitigate the risk of deterioration in asset quality.
Segment wise performance
The Company being a non-banking financial company operates under a
single segment viz providing loans and investments in shares and securities.
Outlook
The Governments continued focus on infrastructure development,
coupled with rising private investment, is providing the necessary momentum for the
countrys economy to flourish, backed by robust GST and income tax collections and
forex reserves. The fundamentals of the countrys economy remain resilient despite
the challenges felt by the global economy. India is further expected to witness a growth
of 6.1% in FY 2023-24. RBI projects CPI inflation for Q1 - FY 2023-24 at 5.0% and for Q2
-FY 2023-24 at 5.4% on the assumption of a normal monsoon. Whereas on the inflationary
front, it is anticipated that the rates would remain moderate somewhere between 5-6%, due
to the Governments adherence to calibrated monetary policies.
The forex reserve stood at USD 595.976 Billion in the first week of May
2023 marking second consecutive weekly rise in reserves. However, a high degree of
synchronisation between Indias growth cycle with advanced countries urges to remain
cautious about plausible hindrances. This could have a significant impact on Indias
deepening trade and financial connections with advanced economies.
The NBFC sector is expected to deliver double-digit loan growth in FY
2024, on top of 6-8% growth projected for FY 2023.
Risks and Concerns
The Company being a Non-Banking Financial Company is mainly engaged in
the business of providing Loans and making Investment in Shares and Securities and
therefore it is exposed to various financial risks such as credit, market, interest rate
and liquidity risks associated with financials products.
However, the Company has a robust financial risk management system in
place to identify, evaluate, manage and mitigate various risks associated with financial
products and ensure that the Company accomplishes its desired financial objectives. The
Company has a Risk Management Policy in accordance with the provisions of the Master
Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking
Company and Deposit taking Company (Reserve Bank) Directions, 2016 issued by Reserve Bank
of India. It establishes various levels and types of risks with its varying levels of
probability, the likely impact on the business and its mitigation measures. The Management
evaluates the execution of Risk Management Practices in the Company, in the areas of risk
identification, assessment, monitoring, mitigation and reporting from time to time.
The risk management framework is based on assessment of risks through
proper analysis and understanding of the underlying risks before undertaking any
transactions and changing or implementing processes and systems. This risk management and
mitigation mechanism is supported by regular review, control, self-assessment and
monitoring of key risk indicators.
Hence, the Management regularly monitors and reviews the continuous
changing economic and market conditions in order to take timely and prudent investment
decisions.
Internal Control system and their adequacy:
The Company has a proper and adequate internal control system to ensure
that all assets are safeguarded and protected against loss from unauthorized use or
disposition and those transactions are authorised, recorded and reported correctly. The
internal control is exercised through documented policies, guidelines and procedures. It
is supplemented by an extensive program of internal audits conducted by the Internal
Auditors and tested by the Statutory Auditors of the Company. The audit observations and
corrective action taken thereon are periodically reviewed by the audit committee to ensure
effectiveness of the internal control system. The internal control is designed to ensure
that the financial and other records are reliable for preparing financial statements and
other data, and for maintaining accountability of persons.
Financial and operational performance:
The financial statements have been prepared in accordance with Indian
Accounting Standards notified under section 133 of the Companies Act 2013, read together
with the Companies (Indian Accounting Standards) Rules, 2015 (as amended) together read
with the MCA notification dated 11 October 2018 which states the mandate for adoption of
these standards by the NBFC Companies, as defined under the Companies (Indian Accounting
Standards) (Amendment) Rules, 2016. Please refer to the Directors Report in this
respect.
Material developments in Human Resources:
Your Company continues with the philosophy of thrust and focus on human
resources for its continued success. In order to strengthen our human resources for
meeting the future challenges and expansion plans, we have focused on hiring the best
resources available and retaining and developing our existing talent pool.
The total employee strength as on 31st March, 2023 was 12.
Details of Significant Changes in the Key Financial Ratios
Pursuant to amendment made in Regulation 34(3) read with Part B of
Schedule V, SEBI has notified SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015, details of Significant Changes (i.e. Changes of 25% or more as compared
to the immediately previous Financial year) in the Key Financial Ratios and Return on Net
Worth of the Company (on standalone basis) including explanation thereof are given below:
| Particulars |
FY ended 31st March 2023 |
FY ended 31st March 2022 |
Changes between FY23 and FY22 |
Explanation |
| Interest Coverage Ratio |
5.41 |
29.10 |
-81.42% |
Increase in Interest Expenses & Decrease in PBT |
| Current Ratio |
2.98 |
4.91 |
-39.42% |
Increase in borrowing |
| Debt-Equity Ratio |
0.142 |
0.041 |
247.06% |
Increase in borrowing |
| Return on Capital Employed (RoCE) |
3.14% |
12.74% |
-75.33% |
Increase in Interest Expenses & Decrease in PBT |
| Return on Net Worth |
2.61% |
10.19% |
-74.39% |
Decrease in PAT |
Note : Profits of the Company in any given year are linked to
performance of Capital Markets in respect of its Investment portfolio.
Cautionary statement
Statements in this management discussion and analysis describing the
Companys objectives, projections and expectations may be forward looking statements
within the meaning of applicable laws and regulations. Actual results may differ
substantially or materially from those expressed or implied. Important developments that
could affect the Companys operations include a downtrend in the industry- global or
domestic or both, significant changes in political and economic environment in India,
applicable statutes, litigations etc.
+91-9892691696
