Economic Overview
The Indian economy continues to remain a bright spot in the world
economy despite geopolitical tensions and inflationary pressures. As per interview given
by MD of IMF in February, 2023, India 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 estimated to achieve real GDP growth
of *7.2% in FY 2022-23, which is quite high amongst all the major economies. Economic
Survey 2022-23 and Reserve Bank of India (RBI) projects a GDP growth of 6.5 Per Cent in
real terms in FY24 due to vigorous credit disbursal and capital investment cycle is
expected to unfold in India with the strengthening of the balance sheets of the corporate
and banking sectors. Further support to economic growth will come from the expansion of
public digital platforms and path-breaking measures such as PM GatiShakti, the National
Logistics Policy and the Production-Linked Incentive schemes etc.
*Ministry of Statistics & Programme Implementation in Provisional
Estimates of National Income 2022-23 dated 31st May, 2023 Indian economy and
financial sector stand strong and resilient amidst unprecedented global headwinds. Indian
economy have moved on after its encounter with the pandemic, staging a full recovery in
FY22 ahead of many nations and positioning itself to ascend to the pre-pandemic growth
path in FY23. Yet in the current year, India has also faced the challenge of reining in
inflation that the European strife/ Ukrain War accentuated. Inflation remained high,
averaging around 6.7 percent in FY22/23 but the current-account deficit narrowed in Q3 on
the back of reasonable growth in exports and easing global commodity prices. Measures
taken by the Government of India and RBI, coupled with the easing of global commodity
prices are bringing the retail inflation under control. Further, higher domestic demand
and a pick-up in capital investment are facilitating to accelerate the growth rate of
Indian economy.
Industry Structure and Developments
NBFCs are one of major contributors in driving Indias economy and
remains major focused areas of the Government. Non-Banking Financial Companies (NBFCs)
play a decisive role in accelerating economic growth with a superior reach and
understanding of the Unbanked and Underserved Small and Medium Enterprises, Small Road
Transport Operators etc. The size of the NBFC sector is rising driven by rising demand for
niche financial services provided by non-bank lenders, such as micro lending and small
business financing.
The Government of India has introduced various new rules and
regulations for the NBFC sector in FY 202223. Also the Securities and Exchange Board of
India (SEBI) introduced several policy changes to regulate capital markets including
mutual funds, Portfolio Management Services (PMS) and AIFs which inter alia includes
improved disclosure standards, restriction on fund management charges, introduction of
prudential norms and simplification of issue procedures. The new regulatory framework,
which was primarily introduced to create a level playing field for the MFI segment and
help the RBI derisk the sector, has been very beneficial. One of the major benefits of
this new framework is its assessment of household income and debt obligations as a means
to better underwriting and the flexibility of responsible risk pricing approved by the
board of the NBFCs, which helped build a stronger lending ecosystem and ensure the smooth
functioning of the sector. NBFCs are a crucial part of the banking ecosystem in India. By
providing lending services to low-income and high-risk individuals, the NBFC sector is
helping strengthen the MSME sector in India. Furthermore, RBI increased the common
household limit earlier this year to Rs 300,000 for loans to qualify as microfinance and
the cap on NBFCs was increased to 25% of assets as opposed to 10%. This helped the NBFC
sector grow strongly. With the role of NBFCs in supporting and augmenting the economic
growth of India, we are hopeful that the government will continue to introduce initiatives
that will ensure liquidity within the sector, helping its growth and expansion.
Pursuant to RBIs regulatory framework, your Company continue to be
categorized as "Systemically Important Non-deposit taking NBFCs (NBFCs-ND-SI) having
asset size above Rs. 500 Cores". Your Company is mainly doing investment activities
with long term perspective as well as doing trading and Lending activities. Further, the
Company is also doing real estate activities for higher yields.
Opportunities and Threats
Indian financial sector remained largely unaffected amidst the recent
turbulence in the US and European banking sectors which is attributable to adequate
capitalisation & liquidity, healthy asset quality and proactive monitoring &
timely interventions by the Regulator. The Government of India has taken numerous measures
to usher in financial and regulatory reforms in the primary and secondary markets. The RBI
undertook several rate hikes by a total of 190 basis points since May 2022 in order to
curb inflation and its effects and also to respond to other geopolitical events. The
Indian financial markets have been witnessing increasing growth and are becoming more
mature and modernized. At the same time, markets are also getting increasingly
multifaceted due to the emergence of new products, technology enabled processes and rising
global integration.
However, the challenge of the depreciating rupee, although better
performing than most other currencies, persists with the increased policy rates by the US
Fed. The Economic Survey states that the widening of the Current Account Deficit (CAD) may
continue as global commodity prices remain elevated and the growth momentum of the Indian
economy remains strong. The loss of export stimulus is further possible as the slowing
world growth and trade shrinks the global market size in the second half of the current
year. With inflation persisting in the advanced economies and the central banks hinting at
further rate hikes, downside risks to the global economic outlook appear elevated.
Although significant challenges remain in the global environment, the
Indian economy continues to show strong resilience to external shocks due to continued
buying by foreign institutional investors (FIIs), monsoon progress and expectations of
healthy corporate earnings.
Your Company identifies profitable investment opportunities in the
entire financial market segments and also in real estate segment, diversify its revenue
stream and scale up its operations in a prudent manner, while maintaining adequate risk
management systems and profitability. Due to the recent amendment in Income Tax Act
regarding taxation of debt mutual fund relinquishing the indexation benefit, your Company
is exploring other investment options including investing directly in debt securities,
GSEC, SDL etc. for better profitablity. Your Company foresees and is cautious of all the
economic and financial threats globally as well as domestically, while making new
investments and also aware of the fact that change in Government policies and rate of
interest revisions will affect the valuation of investments made by Company. Your company
is more cautious in investing i.e. by increasing fund allocations to safer and high rated
securities, REITS, INVITS, AIFs, Next Generation PE and VC funds, Digital Disruptive
Technology Funds etc and also focus on new business/Startup Investment opportunities. In
current volatile global scenario and fast changing consumer behaviours, your Company is
investing in longer duration investment opportunities compatible with new technologies
like Electric Vehicles (EVs), Artificial Intelligence (AI), 56G Networking, Cloud
Computing etc. Your Company has built a strong diversified investment base and continues
to mitigate any adverse impact of any uncertainty in the short term but is well-
positioned to benefit from the economic rebound expected over the next few years.
Future Outlook
Spillovers from recent developments in financial markets in the US and
Europe pose a risk to shortterm investment flows to emerging markets, including India. The
frailties of the Chinese economy further contributed to weakening the growth forecasts.
These developments may pose significant challenge to the growth of the Indian economy for
the short to medium run. The rate hike and persistent inflation also led to a lowering of
the global growth forecasts by IMF for 2023-24 to 5.9 per cent from 6.1 per cent. Despite
a significant drop India continues to be a high growth economy in the world, as stated by
IMF in the World Economic Outlook. To sustain growth of Indian economy, policies measures
are being undertaken for boosting the Indias share of global manufacturing, expanding
credit availability, creating new businesses, improving quality of life and spurring a
boom in consumer spending.
The Company will strive to do the financial business, focused on
delivering consistent and superior returns to the companys shareholders and at the same
time maintaining the high levels of safety. On real estate front, the Company is looking
for opportunities and will further explore and invest in new projects to upsurge its
lease/rental income in the coming periods. We have created an organization, keeping our
aspirations and business model to keep pace with fast changing global scenarios, consumer
behaviour and new technologies. Your Company has recognized its role as a corporate
citizen and continuously endeavors to adopt the best practices and the highest standards
of corporate governance. We look forward to the future with renewed optimism as your
Company will continuously focus on its resources, strengths and strategies to achieve its
vision keeping the above strategic intent in mind.
Risks and Concerns
The Company recognizes that risk is an integral and unavoidable
component of business and it is committed to manage the risk in a proactive and effective
manner. Being an investment company, the business of the Company is exposed to several
risks viz; market risk, global risk, regulatory risk, credit risk, liquidity risk,
competition risk, interest rate risk, cyber security risk etc. which can affect the
returns on Companys investments and financial business in unexpected way. Presently,
different and next generation investment opportunities are prevalent, which are highly
remunerative if we utilize expertise and experience of professional and specialized fund
managers.
Considering the Companys nature of its business, it is essentially
exposed to the volatility associated with financial markets. However, with the investments
being well-diversified among various financial market instruments like mutual funds (both
debt and equity), bonds/debentures, REITS, AIFs, Invits, VC/PE funds and equity shares
(both listed and unlisted), the risk is rather mitigated and managed. The Companys
balanced approach to portfolio management and its continuous review has enabled it to get
early warning signals because of corrective measures taken by company from time to time.
The Company uses information technology extensively in its operations and hires
professional advisors for ensuring effective controls besides economy. Sustained efforts
to strengthen the risk framework and portfolio quality have yielded consistently better
outcomes for the Company.
As part of the Risk Management framework, the Company has also
constituted the Risk Management Committee comprising of three Non-Executive Directors to
monitor risk tolerance limits, review and analyze risk exposure related to specific issues
and provides oversight of risk across the organization. The Risk Management Committee met
four times during the financial year under review. The Company is having Risk Management
Policy and Fair Practice Code to strengthens the investment decisions and also for better
risk management.
Internal Control Systems and Their Adequacy
The Company is maintaining an efficient and effective system of
Internal Financial Control for the facilitation of speedy and accurate compilation of
financial statements. The Companys 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 as well as procedures.
Further, the statutory auditors of the Company have verified the systems and processes and
confirmed that the internal financial controls system over financial reporting is
operating effectively.
Pursuant to the provisions of Section 138 of the Companies Act, 2013
read with Companies (Accounts) Rules, 2014, the Company has also appointed M/s. Piyush
Singla & Associates, Chartered Accountant as Internal Auditor of the Company to test
the adequacy and effectiveness of Internal Control Systems and Information Security
Framework laid down by the management and to suggest improvement in the systems. They also
identify and address technology and IT-related security issues commensurate with the
nature and complexities of its operations. The 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. During the year,
Companys Internal Controls and Information Security Network were tested and no reportable
weakness in the system was observed.
The companys Internal Financial Control System commensurate with the
nature of its business and the size of its operations. In order to further strengthen the
Internal control system and to automate the various processes of the business, company is
making use of SAP S4 HANA application, which is based on SAP HANA database. It keeps all
the data in memory which results in data processing that is magnitude faster than that of
disk based system, allowing for advanced, real time analytics. The Asset Liability
Management (ALM) Policy concerned with the effective risk management in various Portfolios
is also framed by the Company.
Apart from this, an Audit Committee consisting of three Non-Executive
Directors has been constituted. All the significant audit observations and follow up
actions thereon are taken care of by the Audit Committee. The Committee oversees the
adequacy of Internal Control. The Audit Committee met four times during the financial year
under review. The Company has also established a Vigil Mechanism as per Section 177(9) of
Companies Act, 2013 read with Rule 7 of the Companies (Meeting of Board and its Powers)
Rules, 2014.
Segment wise Financial/Operational Performance
We would like to inform you that as per Ind-AS 108 Operating
Segments, Companys activities can be classified under two segments namely;
Investment/Financial Activities and Real Estate Segment. During the year, the Company
achieved a total income of Rs. 4011.30 Lakhs with a net profit before tax of Rs. 3093.66
Lakhs. The segment wise detailed performance has already been discussed in the Directors
Report under the column Financial Review.
Your Company continued to reward shareholders with regular dividends.
The Board of Directors, considering the growth and profitability of the Company, has
proposed a dividend of Rs. 1.50/- per equity share (i.e. 30%) for the year ending March
31, 2023.
Human Resources/Industrial Relations
The Company recognizes people as its most valuable asset and it has
built an open, transparent and meritocratic culture to nurture this asset. The Company is
of firm belief that the Human Resources are the driving force that propels a Company
towards progress and success. The Company has a team of able and experienced professionals
to look after the affairs of the Company. The total employees strength of the Company was
19 as on 31st March 2023.
Key Financial Ratios
The Company has identified the following ratios as applicable key
financial ratios:-
| Ratio |
31.03.2023 |
31.03.2022 |
| • Capital to Risk-Weighted Assets Ratio (C RAR) % |
97.56 |
97.63 |
| CRAR - Tier I Capital (%) |
97.56 |
97.63 |
| CRAR - Tier II Capital (%) |
0.00 |
0.00 |
Cautionary Statement
Though the statement and views expressed in the above said report are
on the basis of best judgment but the actual future results might differ from whatever is
stated in the report.
| For and on behalf of the Board of Directors |
|
| Place: Ludhiana |
Jawahar Lal Oswal |
| Date: 9th August, 2023 |
(Chairman) DIN: 00463866 |
+91-9892691696
