NPR Finance Ltd Management Discussions

1. Industry Structure and Developments

The past few years have witnessed various turbulences -such as global pandemic, conflicts in Ukraine, Europe and Gaza &also rising tension across certain parts of the globe. Yet, the Indian Economy has weathered the external shocks reasonably well and has emerged amongst the fastest growing economies of the world.

The Governments measures of : (a) Substantive development of all forms of infrastructure-Physical, Digital and Social ; (b) Digital Public Infrastructure (DPI)- Promoted formalisation and financial inclusion ; (c) Strengthened financial sector ; (d) GIFT IFSC- A robust gateway for global capital and financial services for the economy - have contributed towards the goal of People-centric inclusive development. Focus on Youth empowerment by fostering entrepreneurial aspirations of Youth, "Nari Shakti", Welfare of farmers, speedy infrastructure development - have paved way for resilient performance of the Indian Economy and has also encouraged various parts of the country to become active participants in economic growth.

The Indian Economy has thus been witnessing positive transformation since the past few years and the people of India are looking ahead to the future with hope and optimism.

The Non-Banking Financial Companies (NBFCs) sector has established itself as a signifying player within the countrys landscape. The same is primarily attributable to a substantial demand for specialized financial services particularly from the Micro, Small and Medium Enterprises (MSME) sector which face challenges in obtaining loans from traditional banks. Furthermore, the NBFC sectors momentum has been augmented by the entry of digital lenders offering alternative financing options. This trend has provided a significant boost to the sector, allowing it to cater to the evolving financial needs of businesses and individuals. The collaborative efforts of NBFCs and digital lenders are contributing to the sectors overall dynamism and its ability to serve as a vital source of financial support for diverse economic entities, especially the MSMEs facing obstacles in accessing traditional bank loans. Further, one of the key drivers for the expansion of the NBFC sector is the escalating demand for credit from the MSMEs. Traditional Banks have often presented challenges for MSMEs in securing loan due to stringent eligibility criteria.

Moreover, the Governments commitment to promote financial inclusion through various initiatives has further elevated the importance of NBFCs. These initiatives position NBFCs as vital implementers, providing credit access to the unbanked and under-banked segments.

The Reserve Bank of Indias (RBIs) support to growth is expected to ensure adequate liquidity in financial markets. While RBI has been bringing about changes in the regulatory norms from time to time - these changes primarily aim at bring about transparency in the functioning of NBFCs and in protecting the interest of public and consumer at large.

As regards the Real Estate sector, it is poise to thrive further in the coming years, factors such as rising urbanization, middle class expansion and infrastructure development - are contributing for a promising future for the real estate players in India. Indias infrastructure development and real estate sector share a mutually beneficial relationship. Typically, the growth of infrastructure has a significant correlation with real estate through the creation of new locations, while driving up capital values and demand. The ongoing mega infrastructure projects in the country - encompassing transportation networks, highways, airports and metro network, are expected to support growth of real estate.

2. Opportunities and threats

Non-Banking Financial Companies (NBFCs) have emerged as a core pillar of the rapidly expanding financial services ecosystem in India, playing a crucial role in credit inclusion and catering to diverse financial needs. NBFCs are increasingly targeting underserved markets like micro, small and medium enterprises (MSMEs), rural populations, and women entrepreneurs. India boasts a robust MSME sector which signifies the prevalence of small-scale businesses in the Indian economic ecosystem. This involves offering customized financial products that cater to the specific needs of these segments. By reaching out to the unbanked and under-banked population, NBFCs are playing a vital role in promoting financial inclusion. This includes providing microloans, small business loans, and financial literacy initiatives.

Strategic partnerships with traditional banks can unlock new growth opportunities for NBFCs. This collaboration can leverage the strengths of both, with banks offering their extensive infrastructure and NBFCs specializing in niche areas.

At the same time, NBFCs are also subjected to various challenges - (a) Banks primarily lend to larger NBFCs, creating a network of inter-dependencies; (b) Risks associated with Digital Lending Apps - Difficulty in verifying the legality of these apps poses risks to consumer safety and privacy; (c) intense competition within the NBFCs and banking sectors, (d)exposure to various credit risks, interest rate volatility, etc.

The Real Estate Sectors prospects are positively related to the rise in economic well being of the people. Moreover, now that India has the worlds population, it has become more important to develop the Real Estate sector, which also bears responsibility for the environment and sustainability. However, this sector may be adversely affected by various factors such as: funding issues, land availability, etc.

3. Segment-wise or product-wise performance

Segment-wise or product wise performance data is enumerated in accordance with IND AS-108 in Note No. 35 (b) of the "Notes to the Financial Statement" section of the Annual Report.

4. Outlook

The NBFC sector in India is poised for growth in the upcoming years, driven by several factors - Governments commitment to financial inclusion, coupled with digitization is expected to contribute to the growth of this sector. The emerging technologies are anticipated to redefine credit appraisal processes and help in faster and accurate decision making. As businesses aim to expand capacities post-pandemic, NBFCs have the opportunity to facilitate the flow of credit to both businesses and households.The customers of the micro finance segment play key role in enabling the country to achieve inclusive growth - hence the role of NBFCs in achieving the Atmanirbhar Bharat vision is crucial.

Our Company is following a slow and cautious approach in identifying new customers in approving loan disbursement considering the unsecured nature of the segment.

As regards the Real Estate Sector- Indias robust economy and a healthy fiscal position, creates a fertile ground for growth of the Real Estate sector. Further, targeted government initiatives, are further expected to boost this sector. The Union Budget 202324 had laid emphasis on encouragement to states and cities to undertake urban planning reforms and actions to transform our cities into sustainable cities of tomorrow - which reinforces the governments seriousness about the implementation of urban planning reforms and thereby, elevating the condition of Indian cities. All these factors, provide an overall positive outlook to this segment.

5. Risks and concerns

As reliance on technology grows, cybersecurity and data privacy become paramount- which has subjected NBFCsto data loss risk. NBFCs must invest in robust security measures to safeguard from this loss. NBFCs are also subjected to credit risks, which, your Company manages through stringent credit norms to verify the identity of an individual and also determining their intent and ability to repay a loan. Further, NBFCs are also exposed to Interest Rate Risk and liquidity risk which are managed through regular monitoring of maturity profile. Besides, operational risks in the form of risks of incurring losses due to manual errors, fraud or system failure, can be monitored through an effective internal control system management and its periodic assessment.

The Real Estate Sector is adversely affected by market price fluctuations, high construction costs, etc.

The risk management plan of the Company is monitored by the Risk Management Committee in accordance with the Risk Management Policy of the Company.

6. Internal Control Systems and their Adequacy.

The Company duly acknowledges that the maintenance of an effective control system is very important for NBFCsin detection of frauds and errors, ensuring integrity in conducting its business and also for the accuracy and completeness in maintaining accounting records. The Company thus strives to continuously upgrade its Internal Control System to commensurate with its size and the nature of its operations.

7. Discussion on financial performance with respect to operational performance

a) Turnover and Profit

Company has recorded turnover at Rs. 946.61 lakhs during the financial year under review in comparison to Rs. 1274.33 lakhs of the previous year. The fall in turnover is primarily due to fall in income from sale of shares and securities and also due to closure of the Wind Power segment with effect from 1^st June, 2023.

Yet inspite of the reduced turnover, the Company has registered profit before Tax of Rs. 147.75lakhs as against loss of Rs. 331.95 lakhs in the previous financial year. The same is by and large attributable to low write-offs and higher interest generation income along- with booking of profit resulting from sale of office premise at Mumbai which was lying vacate after the closure of Branch at Mumbai some years ago. Further, one-time income booked for profit on redemption of preference shares.

Profit after Taxation was recorded at Rs. 108.63 lakhs against loss of Rs. 241.68 lakhs in the previous year. As per the requirement of IND AS, total Comprehensive Loss during the year under review has been recorded at Rs. 258.23 lakhs (loss of Rs. 373.06 lakhs recorded in the previous year).

Owned Fund of the Company stands at Rs. 4724.75 lakhs as against Rs. 4982.98 lakhs, recorded in previous year.

b) Financing Segment

Income from Financing under Loans has significantly increased by Rs. 401.11 lakhs approx. due to higher interest income coupled with low write-offs particularly in Group Loan Financing.

c) Wind Power Segment

In view of rising maintenance cost of turbines vis-a-vis low tariff rates available in the market, it was decided to dispose-off the turbines & accordingly Turbines with Lands were sold at Rs. 2.80 Crores in total in the month of October 2022. Pursuant to the sale of our Winds Turbines located at Dhule (Loc. No. K230, Village Chhadvel, Taluka Sakari, District: Dhule) &Sangli (Loc. No. G210, Village Kundlapur, Taluka Kawthe Mahakal District: Sangli) in Maharashtra, the Company is no more operating in the said segment as the Board of Directors did not find any other suitable operating avenue in this segment. Accordingly, it was considered to close the Wind Power segment with effect from 01/06/2023.

d) Employee Benefit Expenses, Finance Cost and other Operating expenses

Employee Benefit Expenses have gone up by 18.12% due to annual increment and recruitments.

Financial Expense during the year under review has gone up by Rs.30.11 lakhs (134.49% increase) in comparison to the previous Year due to increase in Inter-corporate Deposits taken for Loan Disbursements.

Various other expenses have gone down by 32% approx. primarily due to closure of wind power segment resulting in Repair & maintenance cost being substantially reduced .Professional fee & consultancy fee has also gone down substantially.

8. Material developments in Human Resources / Industrial Relations front, including number of people employed

The success of an organization largely depends on the productivity of its employees. A positive work environment boosts employee productivity.

Employees relations continued to be harmonious throughout the year with the management. Number of employees on roll was 79 as on 31^st March, 2024 (previous year: 73).

9. Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year)

The details of the key financial ratios in which there has been a significant change (i.e. change of 25% or more)along with detailed explanations thereof:

Return on Networth (in %) :

The comparative increase in Return on Networth is primarily is on account of higher Earnings before Interest and Taxes resulting from:

(a) lower write off towards bad debts;

(b) increase in interest income on loans.

11. Cautionary Statement

This Management Discussion and Analysis Report contain statements which are based on certain assumptions, risks, uncertainties and expectations of future events. Investors are advised to exercise due care and caution while interpreting these statements. The actual results, performance or achievements can thus differ materially from those projected in any such statements depending on various factors including: the demand supply conditions, change in government regulations, tax regimes, economic development within the country and abroad and such other incidental factors over which, the Company does not have any direct control.