Neil Industries Ltd Management Discussions

Neil Industries Limited -An Overview

Neil Industries Limited is a Non- Banking Finance Company and with reforms being expected in the NBFC sector, the company is now poised to grow, building a reputation of quality, craftsmanship and expertise. Our Company has grown rapidly over the past three decades on the foundations of committed customer service, transparent business practices, well - organized, secure financial policies and trusted customer base. Its our people, locations and work culture that make us unique.

We are committed to achieve higher standards in everything we do in servicing our customers, shareholders and business Associates. We, at Neil Industries Limited, understand that there are times during the normal course of business when companies with good track records and bright future prospects require short to medium term financing, loan for purchasing machinery or other assets for business expansion.

We have seamless flexible finance / loan options to fulfil your requirements and give quick access to capital for business expansion. We also consider Investor Relations to be the key to building transparent, open and long-term relationships with our stakeholders. Industry Overview The world seems to be recovering from the aftermath of the challenges posed in the last few years. Overall, albeit 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 AUM grow 14-17% by the end of this fiscal. 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. When it comes to serving the underbanked, Indian NBFCs are leveraging technology and innovation to drive the financial inclusion agenda. NBFCs have played a significant role in the Indian economys growth story, especially in the rural and semi-urban areas. NBFCs have emerged as a crucial source of credit for micro, small and medium-sized enterprises (MSMEs) and rural, small-scale, unbanked and informal sectors in India. They have filled the gap left by traditional banks, which have been reluctant to lend to these segments due to their perceived risk. NBFCs have also been instrumental in supporting the growth of the Indian economy.

They have provided credit to key sectors such as real estate, infrastructure and MSMEs, which have been critical drivers of economic growth in the last few years. It has also been critical in providing credit to the SME sector, which accounts for a significant share of employment and output in the Indian economy.

Financial Performance of the Compan

There has been remarkable increase in the Net profit of our Company for the financial year ended March 31, 2024 as compared to the previous financial year. Although, in this reporting year, the Company booked Net profit of Rs. 251.19 Lakhs.

Risk and Concerns

The Company is exposed to numerous risks viz. credit risk, interest rate risk, liquidity risk, market risk, operational risk etc. As the Company has booked losses in the previous financial years, reason being that some of loans of the Company which were categorized under the sub-standard asset, due to non-repayment of loan, they were covered in the category of non-performing asset (NPA), which affected the Company s performance badly but in the present Financial Year the Company ensured its bounce back and booked profit.

The Company has in place a robust risk management framework that identifies and evaluates business risks and opportunities. Company recognizes that these risks need to be handled effectively and mitigated to protect the interests of the shareholders and stakeholders, to achieve business objectives and create sustainable value and growth.

The Companys risk management processes focus on ensuring that these risks are promptly identified and a mitigation action plan is developed and monitored periodically to ensure that the risks are being addressed accordingly. A strong governance framework ensures that the Board of Directors and its committees approve risk strategies and delegates credit authorities. Robust underwriting practices and continuous risk monitoring ensure that portfolios stay within acceptable risk levels.

The identification, evaluation, and reaction to risk elements that occur in the Company are inherent in the operation of a business, and they are all included in risk management. Effective risk management is acting proactively rather than reactively in an effort to influence the businesss future events as much as feasible.

As a result, sound management in risk can potentially reduce the likelihood of a risk happening and its possible consequences. The execution of risk-management techniques in the sector to guarantee that the business models remain viable, sufficiently ring-fenced in the scope of operations and growing regulatory rigour. Our current era of banking, which began with nationalised banks, is marked by NBFCs growth and success. NBFC is part of the banking revolution that happened. And NBFCs are currently responsible for the last mile of financial service distribution. The RBI and the Ministry of Fmance periodically announced different initiatives to help borrowers and institutions get through this unprecedented and difficult period. But, it is the responsibility of every institution to take prior steps to mitigate the risk they are anticipated to face in the business.

Internal Control System & its Adequac

The Company believes that strong internal control system and processes play a crucial role in the health of the Company. The Company believes that Internal Control is one of the key pillars of governance, which provides freedom to the management within a framework of appropriate checks and balances. Neil Industries Limited has a robust internal control framework, which has been instituted considering the nature, size and risks in the business. The Companys well-defined organizational structure, documented policy guidelines, defined authority matrix and internal controls ensure efficiency of operations, compliance with internal policies and applicable laws and regulations as well as protection of resources.

The Company has, in material respect, an adequate internal financial control over financial reporting and such controls are operating effectively. The Companys internal control environment ensures efficient conduct of operations, security of assets, prevention and detection of frauds/ errors, accuracy and completeness of accounting records and the timely preparation of reliable financial information. Internal Auditor reports functionally to the Audit Committee and administratively to the Managing Director of the Company.

Key internal audit findings/observations and observations along with plan of corrective actions are presented to the Audit Committee at its quarterly meetings. The Company has framed risk based internal audit policy as a part of its oversight function. The objective of risk based internal audit review is to identify the key activities and controls in the business processes, review effectiveness of business processes and controls, assess the operating effectiveness of internal controls and provide recommendations for business process and internal control improvement. SWOT Analvsis Strength:

“* Pioneer in financing sector.

“? Unique relationship-based business model with extensive experience and expertise in credit appraisal and collection process.

“+ Consistent financial track record.

“+ Experienced senior management team.

** Strong relationships with public, private as well as institutions.

Weakness:

“+ Business and growth directly linked with the GDP growth of the country.

“+ % Companys borrowers are more vulnerable to negative effects of economic downturn.

Opportunities:

“+ % Meeting working capital needs of business, persons as well as micro, small and medium enterprises (“MSMEs”).

“+ Humongous opportunities to finance since more and more customers are likely to go for upgradation in various sectors.

Threats:

“> Inflation

“* Geo-political crisis

“+ Competition from captive finance companies, small banks.

“* Material Developments in Human Resources/ Industrial relations front including number of people employed.

Outlook

In recent years, the future of NBFCs is witnessing good growth in consumer lending. The liquidity position has improved and 1s gradually coming back to normal. In the future also, NBFCs will play a crucial role in economic development and in financial inclusion.

Segment Wise Performance:

Our Company is dealing with only one Segment 1.e., providing Financial and Insurance Services. There is no any other segment in the Company.

Details of Significant Changes in Key Financial Ratios:

Current Ratio	38.34	23.86
Debt-Credit Ratio	NA	NA
Debt Service Coverage Ratio	NA	NA
Return on Equity Ratio	0.04	0.03
Inventory Turnover Ratio	NA	NA
Trade Receivable Turnover	NA	NA
Ratio

Details of change in return on Networth as compared to the Immediately previous Financial Year:

The Company has Networth of Rs. 5739.76 Lakhs in the Financial year 2023-24 and Rs. 5488.57 Lakhs in previous financial year 1.e., 2022-23. The reason for increase in Networth is improved market conditions during the year under review.

Disclosure of Accounting Treatment:

In the preparation of the financial statements, the Company has followed the applicable Accounting Standards referred to in Section 133 of the Companies Act, 2013. The significant accounting policies which are consistently applied have been set out in the notes to the fmancial statements.

Future Plans

The Board has determined the following medium-term and long-term plans to achieve its corporate goals in next couple of years:

Effective use and implementation of data analytics in the process of loan disbursement and loan recovery.

* Further strengthening the leadership position.

Maintaining borrowers loyalty through winning relationship.

Our commitment is to continue to remain in the forefront by constantly upgrading our products and bettering our services to meet the demands of our clients.”

Cautionary Statement

This Report is based on the current situation, past experience and information available to the Company about its business and assumptions regarding economic and industrial scenario, Governmental and other regulatory policies. The Performance of the Company is, to a great extent, dependent on these factors. The report should be read in conjunction with the financial statements included herein and the notes thereto. The future performance may be materially influenced by the changes in any of these factors which are beyond the control of the Company and may affect the views expressed in or perceived from this Report. Therefore, the investors are requested to make their own independent judgments by taking into account all relevant factors before taking any investment decision.