PMC Fincorp Ltd Management Discussions.


The Company being a registered NBFC with the Reserve Bank of India has been engaged in the business offinancing activities, investment in Securities of Listed and Unlisted Companies and fee based advisory services in the field of Money market.

For FY 2017-18 on a standalone basis, the Companys profit after tax stood at 101.35 Lakhs as against 72.16 Lakhs in the PY

Your Company, as in the last few years, continues to evaluate investment opportunities in asset based transactions with good growth prospects.


The year 2017-18 saw large scale reform initiatives come into full force. Goods and Service Tax (GST) was rolled out on schedule on July 1,2017. This has created a single market for providers of goods and services. A single tax on transactions will aid GDP growth by reducing the cost of doing business. The other major reform was the constitution of National Company Law Tribunal (NCLT) and Insolvency and Bankruptcy Code (IBC). This is likely to reduce the time taken to resolve stressed assets through a time bound resolution Programme for referred accounts. While private activity remained somewhat subdued on account of the fall inconsumer sentiment, the governments how ditsintent by taking long pending tough decisions in the interest of the countrys future. Thus,India continued towitness steady economic growth despite avolatile internal and weak external environment. Improvement in commodity prices like Oil, low fiscal deficit, increase in inflation while still staying at a comfortable level,appreciation of the rupee vs. the dollar, passage of GST and the after effects of the demonetization exercise all resulted in a mixed bag for the Indian economy.

The official Wholesale Price Index (WPI) for all commodities (Base:2011-12=100) for the month of February, 2018 remainedlargely unchanged at its previous month level of 115.8 (provisional). The annual rate of inflation, based on monthly WPI, stood at 2.48% (provisional) for the month of February, 2018 (over February, 2017) as compared to 2.84% (provisional) for the previous month and 5.51% during the corresponding month of the previous year. The good news was that the headline inflation has been below 4% for 12 straight months, from November 2016 to October 2017 and CPI food inflation averaged around 1% during April -December in the current financial year, as per the Economic Survey 2018. The CPI inflation declined to 3.3% during FY 2017-18 (Apr-Dec), with abroad- based decline in inflation across major commodity groups except Housing and Fuel& Light. The government forecast economic (GDP) growth slowing to 6.5% in the year to 31-March from 7.1% in the previous year, mainly driven by the issues related to GST implementation and the poor performance of agriculture and manufacturing sector. GDP grow this expected to bounce back to 7-7.5% in FY19.

Incoming economic data remains largely encouraging, with GDP growth picking up more than expected in the October-to-December period, and leading indicators showing the recovery carrying over into the final quarter of the fiscal year. The robust GDP print reflected higher government consumption growth and increased public capital outlays, which more than offset a moderation in private spending growth. That said, consumption indicators have mostly bottomed out and are now gaining traction: In March 2018, passenger and two-wheel vehicle sales rose robustly, and consumer goods production expanded at its strongest pace in over a year.


The Non-Banking Financial Company (NBFC) sector saw a largely stable outlook for major NBFCs. From the perspective of larger financial system, Scheduled Commercial Banks continued to be the dominant players accounting for nearly 47% (Forty-Seven per cent) of the bilateral exposure followed by Asset Management Companies managing Mutual Funds (AMC-MFs), Non-Banking Financial Companies (NBFCs), Insurance Companies, Housing Finance Companies (HFCs) and All-India Financial Institutions (AIFIs).

The Union Budget 2017-18 referred to review of the refinancing policy and eligibility criteria set by MUDRA for better refinancing of NBFCs, setting a target of 3 lakh crore for lending under MUDRA for 2018-19, as the targets have been exceeded in all previous years.

(Data Source: RBI and Industry reports)


NBFCs niche in certain asset classes would continue to enable them to expand their market share. Their ability to customize products, price the risk and manage credit costs would continue to support their growth. Even in the large-ticket mid corporate segment, wholesale and diversified NBFCs would continue to gain share as they possess the ability to price the risk and loan structuring flexibility. The large NBFCs are expected to grow 18% YOY over FY18 - FY19.


Growth of the Companys asset book, quality of assets and ability to raise funds depend significantly on the economy. Unfavorable events in the Indian economy can affect consumer sentiment and in turn impact consumer decision to purchase financial products. Competition from a broad range of financial service providers, unstable political environment and changes in Government policies / regulatory framework could impact the Companys operations.


In this era of globalization, the financial service sector has been integrated with the global markets and is becoming more complex and competitive with introduction of newer and complex products & transactions, stringent legislative and regulatory environment. The ability to manage risks across geographies, products, asset classes, customer segments and functional departments is of paramount importance for the hindrance-free growth of the organisation which helps in delivering superior shareholder value by achieving an appropriate tradeoff between risks and returns.

Risk is inevitable in business and there are various risks associated with your Company as well like portfolio risk, industry risk, credit risk, internal control risk, technology risk, regulatory risk, human resources risk and competition risk. The Companys focus of risk management is all about risk reduction and avoidance. It has comprehensive integrated risk management framework that comprise of clear understanding of the Companys strategies, policies, initiatives, norms, reporting and control at various levels. Timely and effective risk management is of prime importance to our continued success. The risk for the Company arises mainly out of the risks associated with the operations we carry. Experienced professionals review and monitor risks in our Company. We have comprehensive risk management policies and processes to mitigate the risks that are encountered in conducting business activities. The management also periodically reviews the policies and procedures and formulates plans for control of identified risks and improvements in the systems.

A risk/compliance update report is regularly placed before the Audit Committee/Board of Directors of the Company. The Directors/Audit Committee review the risk/ compliance update reports and the course of action taken or to betaken, to mitigate and manage the risks is taken.


The Company depends on the services of its management team and employees. Its inability to recruit and retain them may adversely affect its business.

The Companys future success depends substantially on the continued service and performance of members of its management team and employees. There is intense competition for experienced senior management and other qualified personnel, particularly office managers, field executives and employees with local knowledge inclient procurement, loan disbursement and installment collections. Inability to hire additional or retain existing management personnel and employees, may impair the Companys ability to expand its business and adversely affect its revenue. Failure to train and motivate its employees properly may result in an increase in employee attrition rates, require additional hiring, divert management resources, adversely affect its origination and collection rates, increase the Companys exposure to high-risk credit and impose significant costs.

The Company has taken several actions to ensure that the talent pipeline for the Company is strong especially when it comes to key management positions. The Company also has a strong focus on ensuring that its employees are adequately trained in their job functions and on all compliance related trainings.


To remain competitive, NBFCs are undertaking product and geographical expansion, which introduce new risks and challenge imposed by rapid growth. As Non-Banking Finance Companies (NBFCs) grow and operate as regulated financial intermediaries, internal control becomes essential to long-term institutional viability.

The number and types of stakeholders concerned with the NBFCs financial well-being increases; board members want to protect their reputations and fulfils their obligations; investors are interested in preserving capital; borrowers are concerned with continuous access to loans; depositors want to ensure the safety of their savings; and regulators want to protect the financial environment and depositors interests. An effective system of internal control allows the NBFCs to assume additional risks in a calculated manner while minimizing financial surprises and protecting itself from significant financial loss. Thus, internal control is an integral component of risk management. The Internal control checks and internal audit programmes adopted by our Company plays an important role in the risk management feedback loop, in which the information generated in the internal control process is reported back to the Board and Management. The internal control systems are modified continuously to meet the dynamic changes in the business condition and to comply with applicable laws, regulations, statutory and accounting requirements.

The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and the corrective actions taken. The Company has engaged a competent firm of Chartered Accountants to conduct internal audit, examine and evaluate the adequacy and effectiveness of the Internal Control System. The internal audit ensures that the systems designed and implemented, provides adequate internal control commensurate with the size and operations of the Company. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of internal controls systems and suggests improvements for strengthening them. The Company has a strong Management Information System which is an integral part of the control mechanism.


NBFCs have emerged as substantial contributors to the countrys economic growth by having access to certain deposit segments and catering to the specialized credit requirements of certain classes of borrowers. Going forward, the governments initiatives like Make in India, Start up India and Digital India are expected to bolster development in India.

For a large and diverse country like India, ensuring financial access to fuel development and entrepreneurship is critical. With the launch of government-backed schemes (such as the Pradhan Mantri Jan-Dhan Yojana [PMJDY]), there has been a substantial increase in the number of bank accounts. As traditional banks are already under stress; NBFCs would be of vital importance and can fill the necessary credit demand gap.

Therefore, the NBFCs need to be well integrated into the financial system to cater to the growing requirements of the economy. Additionally, the Indian consumer is aggressively adopting digital technology in his/her daily life. Thus, NBFCs need to re think on their strategies to enhance their product portfolio, processes and customer experience. Besides, they also need to leverage on digital data for better credit decisions (based on analytics) and social media to serve customers better


The Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those expressed or implied. The Company is not under any obligation to publicly amend, modify or revise any forward looking statements on the basis of any sub sequent developments, information or events.