Neil Industries Ltd Management Discussions.

ECONOMIC CONDITION

At the beginning of FY 2018-2019 there was an expectation of higher growth as the economy seemed to have overcome the teething troubles of the Goods and Service Tax (GST). However a rise in the current account deficit (CAD), concerns relating to the rising non-performing assets (NPAs), decline in liquidity, tighter bank credit to industry, and relatively lackluster sectoral performance contributed to uncertainties around whether India would actually post higher GDP Growth. The Central Statistic Office (CSO) estimates real GDP growth in FY 2018-2019 at 7% versus 7.2% in FY 2017-2018. Quarterly growth also reduced-from 8% in Q1 FY 2018-2019 to 7% in Q2 and then to 6.6% in Q3.

According to ICRA Research Report, The assets under management (AUM) of retail non-banking finance companies (Retail-NBFCs) witnessed a sharp slowdown in growth in Financial Year 2018-2019 as entities facing tightened liquidity moderated their incremental disbursements. Retail-NBFC AUM stood at Rs. 8.4 trillion as on December 31, 2018, registering a year-on-year (YoY) growth of 21.5%. All key segments of Retail-NBFC credit, which contributed to higher year-on-year growth of 24-25% in Financial Year 2019 namely, Loan against property, Micro Small and Medium Enterprises and business loan, commercial vehicle (CV), personal credit (unsecured including consumer durables) and microfinance, witnessed a deceleration in growth. While it was expected that the liquidity to NBFCs would improve and conditions would normalize by Financial Year 2018-2019, it is taking longer as market liquidity remains tight and cost is high. The share of unsecured personal credit (including microfinance) witnessed a steady increase in the recent past (currently 19% of total Retail-NBFC credit compared to 13% in December 2016). Moreover, entities are expected to focus on other riskier and high-yielding segments, including the used vehicle segment, personal credit and unsecured SME credit etc, to offset the impact of the increase in the cost of funds and competitive pressure from banks.

BUSINESS OVERVIEW

The NBFC Sector in India has undergone a significant transformation over the past few years. It has one to be recognized as one of the systematically important components of the financial system and has shown consistent year-on-year growth.

The Company continues to believe in the potential of Indian financial Market and rising income level. The Company wants to expand its presence, thereby strengthening its area of operations into the MSME markets across the Country. The Non Banking Financial Company sector saw a largely stable outlook for major NBFCs. From the perspective of the larger financial system, scheduled commercial banks continued to be the dominant players. NBFCs are considered as very important financial intermediary mainly for small-scale sectors. In Indian financial system, there is a great importance of NBFC segment. In India, for NBFC, there is stringent regulation as prescribed by Reserve Bank of India (RBI). Now they are giving tough competition to private sector banks.. In NBFCs, there is a simpler procedure of sanctioning the credit. There are more flexible terms of repayment. From past ten years, NBFCs have shown phenomenal growth.

PERFORMANCE

During the financial year 2018-2019 Company earned profit of 72.92 (Rs in ‘00000) as compared to last financial years profit of 112.55 (Rs in ‘00000). The profit of the Company has decreased due to unfavourable external business environment factors. The Company is determined to perform better during the current year by expanding its area of operations.

OUTLOOK

The markets will continue to grow and mature leading to differentiation of products and services. Each financial intermediary will have to find its niche in order to add value to consumers. Company offers a huge opportunity for credit intermediation and expansion owing to the economic policies in the country. We are focusing on maintaining stringent follow ups for recovery installments of principal and interest amounts. The Company is cautiously optimistic in its outlook for the year 2019-20.

RISK AND CONCERNS

Risk is an integral part of the business and cannot be avoided however it can be minimized. In the financial services sector, it becomes imperative to ensure that profitability does not come at the cost of asset quality. The Company has put in place adequate risk identification, risk management and mitigation processes to keep any such trade-off at bay. The Company has built sound systems and processes for both its verticals i.e. MSME and Wholesale Lending, to take care of the respective risks associated with them. It is also constantly gauging the external conditions and government policies to ensure that the business is one step ahead of the industry and monetary cycles, thereby insulating the Company from downtrends and enabling it to ride uptrends. For Credit Risk Assessment, a set of questions are used to evaluate the ability and willingness of borrower. There are some tests which are used to evaluate credibility. The biggest opportunity and risk to our business today is technology disruption but we must build an organization that is agile.

INTERNAL CONTROL SYSTEM

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. 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.

The Companys internal control system is commensurate with the size, nature and operations of the Company.

HUMAN RESOURCE CAPITAL

Acknowledging that human resources play a crucial role in enabling it to meet its objectives, the Company chooses its people very carefully, ensuring that they conform to the companys culture and follow its values and belief system. Setting the benchmark high, with its good governance the promoters are hands-on involved in the management of the Company with strategic inputs from a well-diversified and competent board.

During FY 2018-19, the Company continued to show signs of positivity and growth, providing the Management an appetite for enhancing potential and driving growth and development of its people.

DISCLAIMER

The statements and projections made in this report may vary depending on the economic conditions, government policies, and other factors beyond the control of the Company. Company is not under any obligation to amend, modify or revise any statement.