npr finance ltd Management discussions

When the global economies are rife, the world has recognised India ("Country")as a "bright star", with estimated economic growth to be high amongst other major economies. The year 2022 was special for India – as it marked its 75^th year of Independence and further, our country became the worlds fifth largest economy measured in current dollars.

Indias aspiring goals for the coming years are also reflected in the Union Budget 2023-2024 which aims tofurther strengthen Indias aspirations through the following seven priorities to guide the country towards "Amrit Kaal", thus providing a blueprint for an empowered and inclusive economy,with its focus on strengthening Indias economic status:

The financial system will play a key role in realising the objectives of Amrit Kaal. The growing importance of the Non-Banking Financial Companies (NBFCs) sector in the Indian financial system is reflected in the consistent rise of NBFCs credit as a proportion to Indias Gross Domestic Product(GDP). Supported by various policy initiatives, NBFCs could absorb the shocks of the pandemic. While the global tightening cycle has contributed to a dampened global outlook, the domestic appetite for credit has been on an upswing. Credit disbursed by NBFCs has been on the rise.

Improvement in Asset Quality of NBFCs across sectors has been observed. NBFCs continued to deploy the largest quantum of credit from their balance sheets to various sectors. In this connection, loan to the services sector and personal loans registered robust growth.

The Reserve Bank of Indias (RBIs) support to growth is expected to ensure adequate liquidity in financial markets. The credit up cycle will also be aided by constant monitoring of the risks in the financial system by the regulators and their efforts to contain them.

RBI has issued Scale Based Regulation for NBFCs. - effective from 1^st October, 2022. These Regulations have classified NBFCs into different layers based on size and complexity – with theaim of calibrating the degree of regulatory prescriptions based on systemic importance of NBFCs.Thus, these regulations are a welcome move as they are expected to rebuild the confidence of investors and lenders in NBFCs over the longer term.

The Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. It contributes significantly in the economic and social development of the country by fostering entrepreneurship and generating large employment opportunities at comparatively lower capital cost, next only to agriculture. Despite having limited resources and lesser opportunities, women entrepreneurs from rural areas have shown immense potential to add value to the Indian economy by entering the MSME sector. MSMEs are complementary to large industries as ancillary units and this sector contributes significantly in the inclusive industrial development of the country. The MSMEs are widening their domain across sectors of the economy, producing diverse range of products and services to meet demands of domestic as well as global markets. In the coming years, MSMEs are expected to continue playing a vital role in shaping Indias growth.Your Company as an MSME, has been cautiously evaluating the benefits associated with the MSME sector with reference to our business structure.

The Union Budget 2023-24 has provided an increased outlay for the Renewable Energy Sector thereby providing clear indication of the importance of this Sector. Further, the Government has been taking various steps to promotethe Wind Energy Segmentin the country. These inter alia include: (i) Concessional custom duty exemption on certain components required for manufacturing of wind electric generators; (ii) Technical support including wind resource assessment and identification of potential sites through the National Institute of Wind Energy, Chennai, etc. However, Wind power must compete with other low-cost energy sources. Ideal wind sites are often in remote locations. Installation challenges must be overcome to bring electricity from wind farms to urban areas, where it is needed to meet demand.Nevertheless, with the Governments constant stress on clean energy and its active participation in achieving the same, it is being hoped that our country will be able to overcome these constraints in due course.

After facing a wave of challenges following the Covid-19 pandemic, Indias Real Estate Sector has been witnessing an upstick in demandand has been making encouraging recovery in comparison to several other real estate markets across the globe. Indias brave and resilient growth despite impending global slowdown, alongwith factors such as rising urbanization, middle class expansion and infrastructure development – are contributing for a promising future for the real estate players in India.

Financial institutions play a crucial role in ensuring economic stability for households and businesses at critical junctures. The pivotal role of NBFCs in driving sustainable fiscal growth is well recognized, given their last-mile connectivity and agile system. The sector has played a decisive role in accelerating last-mile funding and understanding the credit requirement of the Unbanked and Underserved. Aided bythe governments thrust towards a digital economy, the sector has also undertaken significant digital transformation and invested heavily to become tech-agile institutions offering personalized products and services, ensuring faster credit disbursement. As India strategizes post-pandemic economic recovery through fiscal measures and businesses aim to expand capacities, NBFCs have an enormous opportunity to assist in achieving the noble goal of Aatmanirbhar Bharat through the fast-tracked flow of credit to businesses and households.

Further, intense competition within the NBFCs and banking sectors, exposure to various credit risks, interest rate volatility, etc - may pose challengesfor the NBFC sector.

Regarding the Wind Energy Sector–The Governments continuous encouragement to promote and develop the renewable energy sector continuous to be a positive sign.However, this sector continues to witness challenges of At the same time,this sector faces various challenges of high capital cost, low tariff caps, 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.

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.

Post pandemic, digital adoption by NBFCsis on a stead fast rise across the globe as this sector continuous to witness rising competition amongst market players. Addition of newer products to drive growth coupled with diversified product folio are important factors for sustainability in this segment so as to enable the NBFCs to reach out to more and more customers of the underserved markets and contribute to their success. Thus, despite the funding challenges, the NBFC sectors growth prospect continues to be positive.

Subject to the market conditions and various other factors, the Company is looking forward to expand group loan business segment in the near future. However, as the customers of the grouploan segment are primarily the most vulnerable section of the society due to lack of accessibility and limited financial resources– our Company is following a slow and cautious approach in identifying new customers in approving their loan disbursement size.

As regards the Wind Energy Sector– The renewable energy segment has the continuous support and encouragement of the Government which has been the driving force for this sector.However, 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 together with land to M/s Hindustan Unilever Ltd.and the same was implemented in October, 2022.

As India braves to remain resilient despite the global economic slowdown, the outlook for the Real Estate Sectorremains positive. The Union Budget 2023-24 has 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 measures, are expected to lead to value addition in properties in the transformed cities. Further, infrastructure enhancement coupled with healthy domestic demand – provide a positive outlook to this segment.

NBFCs are 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 Wind Energy Sector is exposed to Climatic Risk and Operation and Maintenance Riskand is also largely subject to varied wind velocity.

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.

The Companys internal controls framework ensures integrity in conducting its business, safeguarding its assets, timely preparation of reliable financial information, accuracy and completeness in maintaining accounting records and in detection of frauds and errors.

The Audit Committee in coordination with the Internal Audit team regularly reviews the adequacy and effectiveness of internal control systems, in view of the ever changing business environments.

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. 1274.33 lakhs during the financial year under review in comparison to Rs. 762.52 lakhs of the previous year. The rise in turnover is primarily due to rise in sale of shares and securities.

However, the Company has registered loss before Tax of Rs. 331.95lakhs as against profit of Rs. 20.81 lakhsin the previous financial year. The same isby and large attributable to higher write-offs towards loan given under group loan segment before lockdown, followed by the defaults and delays in repayment due to fallout of the COVID 19 pandemic.

Loss after deferred Taxation was recorded at Rs. 241.68 lakhs against loss of Rs. 5.23 lakhs in the previous year. As per the Requirement of IND AS, total Comprehensive Loss comprising of Loss after all taxationand other Comprehensive Loss during the year under review has been recorded at Rs. 373.06 lakhs (loss of Rs. 34.46 lakhs recorded in the previous year).

Owned Fund of the Company stands at Rs. 4982.98 lakhs as against Rs. 5356.04 lakhs, recorded in previous year.

b) Financing Segment

Income from Financing under Loans has significantly decreased by 72.83% (approx) after taking into account all write-offs, impairments and recoveries – primarily due to higher write-offs as detailed above in point no 7(a), though,on the positive side, there has been significant increase in recovery against bad debts by 126.94% in comparison to the previous year.

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. Accordingly, there has been a fall in income from wind power generation by 24.24%. 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 16.84% due to increase in no. of staff coupled with Annual increments. Other Expenses have gone up by 10.19% primarily due to rise in travelling including fuel, Communication Expense, printing & stationery expense.

Financial Expense during the year under review has gone up by about 65% due to increase in Inter-corporate Deposits taken for Group Loan Disbursements.

In a boundaryless world, those who partner with workers and experiment with whats possible, will create sustainable work models and elevated outcomes—making work better for humans and humans better at work.Human Capital is the cornerstone of any Companys success and Human resource development improves peoples knowledge, skills, and capabilities,which drives innovation, productivity gains, and economic growth.

Employees relations continued to be harmonious throughout the year with the management. Number of employees on roll was 73 as on 31^st March, 2023 (previous year: 58).

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:

10. Cautionary Statement

This Management Discussion and Analysis Report contain statements which are based on certain assumptions, risks, uncertainties and expectations of future events. The actual results or performance could differ materially from such expectations, projections, etc. whether express or implied as a result of various factors, including change in economic conditions affecting demand–supply, success of business, natural phenomenon, etc. Investors are advised to exercise due care and caution whileinterpreting these statements.