INDUSTRY STRUCTURE AND DEVELOPMENTS
Just as the world was on the mend post multiple waves of COVID, the Russia-Ukraine
conflict induced a trail of irreversible economic, social and political effects. Global
inflation touched an all-time high of >8% with many developed economies witnessing
double digit inflation figures for the first time in many decades. This led the central
banks across the globe to simultaneously hike interest rates in a bid to tame inflation.
Repercussions of the conflict were also visible in disrupted trade relations and
spiralling energy prices resulting in severe global energy crunch leading to significant
diversion from the otherwise chartered growth paths. While the ramifications were evident
all over the world, Europe was hit the hardest. As Europe braved an unprecedented energy
crisis, people worldwide realized the importance of self-reliance for energy and
consequentially, countries advanced their climate goals. This turbocharged the growth
momentum of renewables and green sources. As supply chain disruptions and rise in
commodity prices posed a temporary retardant to this growth story, bulk of low-carbon
investments were directed towards building resilient supply ecosystems along with
renewable capacities. Having weathered the storm in 2022, this year the economies will be
seen establishing their redefined pathways.
INDIAN ECONOMIC OVERVIEW
Indias economy grew by 8.4% year-on-year in Q2 of CY 2022. On a sequential basis
(quarter-on-quarter basis), domestic economic output expanded by 10.4%. With the easing of
lockdown restrictions across states along with the steady decline in COVID-19 cases and an
increased pace of vaccination, a higher economic activity and output was recorded in the
latest quarter.
With increasing signs of higher level of activity across sectors, theres an optimism
regarding the strengthening of recovery in the domestic economy. Growth in industrial
output remained unchanged, at 3.2% in October 2021, compared with 3.1% in the previous
month. Negative growth in the capital and consumer goods segment limited growth in overall
industrial output. Weakening of the base has contributed to a decreased momentum in
industrial activity and brought it down from the double-digit growth witnessed during the
first five months of CY 2021. Output in all sectors witnessed an improvement in November,
except electricity, capital goods and consumer goods segment.
Demand and investments are yet to see a meaningful and durable pick-up. Improvements in
these segments are expected to be limited, given that even before the pandemic, the
domestic economy was grappling with low demand and a subdued investment climate. To add to
this, domestic and external challenges still abound. The rise in price levels and the
underlying threats as a result of COVID-19 virus and its strains could be a
set-back/challenge for domestic as well as global recovery
OVERVIEW OF THE FINANCIAL SERVICES INDUSTRY
Non-banking financial companies (NBFCs) showed resilience in 2021 despite the
coronavirus pandemic woes and are expected to witness continued momentum in growth this
year. This year, the growth will be driven by the uptick in the economy, stronger balance
sheet, higher provisions and improved capital positions of NBFCs.
Overall, there is some loss of the momentum of near-term growth while global factors
are turning adverse. Looking ahead, domestic growth drivers are gradually improving.
Considering all these factors, real GDP growth is projected at 7.8 per cent for 2022-23.
(RBI governor in press release: Governors Statement: February 10, 2022)
On the other hand, gross non-performing assets (NPAs) of NBFCs are likely to rise,
following the Reserve Bank of Indias (RBI) move to tighten the NPA norms in November
2021.
Our baseline assumption is that the worst is behind them (NBFCs) and things will
start improving here on. We expect NBFCs to show higher growth and they will benefit from
the economy moving up. The asset under management (AUM) of shadow banking players is
expected to grow at 6-8 per cent in the current financial year and 8-10 per cent in the
next financial year. (As per CRISIL report)
To strengthen supervision over NBFCs, the Reserve Bank of India (RBI) introduced
scale-based regulation and revised NPA recognition and upgradation norms during 2021.
In a report released in November 2021, CARE Ratings said there would be an increase of
up to 300 basis points (bps) in gross NPAs with a limited impact for shorter-tenure loans
due to the revised NPA norms.
BUSINESS & OPERATIONAL OVERVIEW
Your Company follows a customer centric business philosophy, with its growth strategy
centered on transparency in term of offerings, suitability of products and variety of
choices to meet a range of needs of its customers.
A key strength of your company is the variety of its funding sources, which helps it
optimize funding costs, protect interest margins, and retain its diversified funding
portfolio. At the same time, this also enables the Company to achieve funding stability
and liquidity, facilitating reduction in average borrowing costs.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:
Due to the financial crises and other certain unavoidable circumstances, The Income
during the financial year ended 31st March 2022 is 26,70,29,943 compared to Rs.
20,23,71,250. The Profit for the year for the financial year ended 31st March 2022 is Rs
3,76,65,389 compared to loss of Rs. (7,06,57,968) in the previous year.
ACCOUNTING RATIO
Particulars |
31.03.2022 |
31.03.2021 |
Capital to risk-weighted assets ratio (CRAR) |
3.79% |
2.21% |
| Tier I CRAR |
3.79% |
2.21% |
| Tier II CRAR |
- |
- |
| Liquidity Coverage Ratio |
1.23 |
1.75 |
OPPORTUNITIES AND THREATS
Non-banking finance companies (NBFCs) form an integral part of the Indian financial
ecosystem. By extending the line of secured and unsecured credit to millions of
underbanked and unbanked individuals and businesses across the country, these companies
provide them an opportunity to be a part of the financial mainstream.
Furthermore, the NBFC lending model is also under pressure as a result of increased
internal and external forces such as:
1. Operational Risk It arises when the flow of and controls over the operations of the
company are lacking, which has adverse impact on the continuity of business, reputation
and profitability of the company.
2. Credit Risk It is a risk of default or non-repayment of loan by a borrower which
involves monetary loss to the company, both in terms of principal and interest.
3. Business Risk Morarka Finance being a NBFC is exposed to various external risks
which have direct bearing on the sustainability and profitability of the Company. Foremost
amongst them are Industry Risk and Competition Risk. The volatile macro-economic
conditions and changes in sector attitude in various economic segments cause ups and downs
in the business, and result in loan asset impairment.
4. Regulatory Risk It is the risk of change in laws and regulations materially
impacting the business.
5. Human Capital Risk Human capital risk is the gap between the goals of the
organisation and the skills of its workforce.
SEGMENT WISE PERFORMANCE
The Company is engaged in financial services during the year under review, hence the
requirement of segment-wise reporting is considered irrelevant.
OUTLOOK
With the long term India growth story intact, we continue to remain enthused about the
growth prospects of financial services sector in India. However given the inherent linkage
of most of our business with the economy and capital markets, our financial performance is
subject to fluctuations depending on the pace of economic growth and activity in the
capital market. The last financial year has been year of new initiatives for company. The
new financial year will see a lot of our initiatives taking shape and being deployed
HUMAN RESOURCES
For enhanced performance of any organization, it is important that its human resources
are abreast of new developments and possess relevant skill sets. To realize this, the
emphasis on training and development activities has been increased.
During this uncertain times facility of work from home has been adopted by the Company
for the welfare and wellbeing of its employees.
INTERNAL CONTROL SYSTEMS
Your Company has an adequate system of internal controls for business processes,
operations, financial reporting, fraud control, and compliance with applicable laws and
regulations, among others. Your companys Management Assurance and Audit function is
headed by a senior management personnel with reporting lines to the Audit Committee of the
Board and a dotted line reporting to the Managing Director.
COMPLIANCE
The Compliance function of the Company is responsible for independently ensuring that
operating and business units comply with regulatory and internal guidelines. The
Compliance department of the Company is continued to play a pivotal role in ensuring
implementation of Compliance functions in accordance with the directives issued by
regulators, the Companys Board of Directors and the Companys Compliance Policy. The
Audit Committee of the Board reviews the performance of the Compliance Department and the
status of compliance with regulatory/internal guidelines on a periodic basis.
New instructions / guidelines issued by the regulatory authorities were disseminated
across the Company to ensure that the business and the functional units operate within the
boundaries set by regulators and that compliance risks are suitably monitored and
mitigated in their course of their activities and processes. New products and process
launched during the year were subjected to scrutiny from compliance standpoint and
proposals of financial services were screened from risk control prospective.
The company has complied with all requirement of regulatory authorities. No penalties /
strictures were imposed on the Company by the stock exchanges or SEBI or any statutory
authority on any matter related to capital market during the year.
CAUTIONARY STATEMENT
Certain statements under "Management Discussion & Analysis " describing
the Companys objectives, projects, estimates, expectations and predictions may forward
looking statement within the meaning of applicable securities laws and regulations.
Although the expectations are based on reasonable assumptions, the actual results could
materially differ from those expressed or implied, since the companys operations are
influenced by many external and internal factors beyond the control of the
Company. The Company assumes no responsibility to publicly amend, modify or revise any
forward looking statements, on the basis of any subsequent developments, information or
events.
|
For and on behalf of the Board of Directors |
|
Sd\- |
Mumbai |
(Anupam N Gupta) |
Date: 29.08.2023 |
Managing Director |
+91-9892691696
