Purshottam Investofin Ltd Management Discussions

Overview

Non-banking financial companies (NBFCs) form an integral part of the Indian financial system. They play an important role in nation building and financial inclusion by complementing the banking sector in reaching out credit to the unbanked segments of society, especially to the micro, small and medium enterprises (MSMEs), which form the cradle of entrepreneurship and innovation. NBFCs ground level understanding of their customers profile and their credit needs give them an edge, as does their ability to innovate and customise products as per their clients needs. This makes them the perfect conduit for delivering credit to the unbanked and SMEs. However, NBFCs operate under certain regulatory constraints, which put them at a disadvantage position vis-a-vis banks. While there has been a regulatory convergence between banks and NBFCs on the asset side, on the liability side, NBFCs still do not enjoy a level playing field. This needs to be addressed to help NBFCs realise their full potential and thereby perform their duties with greater efficiency.

Industry Structure and Developments

India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises of commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities.

So far, Non-banking Finance Companies NBFC(s) have scripted a great success story. Their contribution to the economy has grown in leaps and bounds. In terms of financial assets, NBFC(s) have recorded a healthy growth. With the on-going stress in the public sector banks due to mounting of bad debts, their appetite to lend (especially in rural areas) is deteriorating.

Opportunities

NBFCs have served the unbanked customers by pioneering into retail asset-backed lending, lending against securities, unsecured finance and microfinance. Following variables in the external environment may be seen as opportunities for the Company:

• NBFCs aspire to emerge as a one-stop shop for all financial services

• The sector has witnessed moderate consolidation activities in recent years, a trend expected to continue in the near future

• New banking license-related guidelines issued by RBI place NBFCs ahead in competition for licenses owing largely to their rural network

• New RBI guidelines on NBFCs with regard to capital requirements, provisioning norms & enhanced disclosure requirements are expected to benefit the sector in the long run.

Challenges/Threats

Competitive rivalry between big players is intense in the industry

• Financial services companies often compete on the basis of offering lower financing rates, higher deposit rates and investment services;

• Stringent regulatory norms prevent new entrants;

• Customers prefer to invest their money with a reputed financial services company offering a wide range of services;

• Low bargaining power of suppliers as the industry is highly regulated by RBI;

• Medium bargaining power of customers. Although customers do not have much bargaining power, they can easily switch to another company based on the terms and quality of services provided;

• All risks associated with pandemic

STRENGTH:

The existing management has a strong technical, finance and administrative expertise in various industries and corporate sectors including the business of the Company.

Internal Control Systems and Their Adequacy

Given the magnitude and nature of its business, the Company has maintained sound and commercial practice with an effective internal control system. The system ensures that all transactions are authorized, recorded and reported correctly to safeguard the assets of the Company and protect them from any loss due to unauthorized use or disposition. The adequate internal information system is in place to ensure proper information flow for the decision- making process. The Company also has well-established processes and clearly defined roles and responsibilities for people at various levels. The control mechanism also involves well documented policies, authorization guidelines commensurate with the level of responsibility and standard operating procedures specific to the respective businesses, adherence to which is strictly ensured. Internal audit is carried out frequently to create awareness and to take corrective actions on the respective units or areas, which need rectification.

Outlook, risks and concerns

This section lists forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these statements as a result of certain factors. Our Outlook, risks and Concerns inter-alia as follows:

1. Our revenues and expenses are difficult to predict and can vary significantly from period to period.

2. Our success depends in large part upon our management team and key personnel, and our ability to attract and retain them.

Scheme of Arrangement for Amalgamation

The Board of Directors of the Company in its meeting held on December 24, 2021 had approved a Scheme of Arrangement for Amalgamation ("Scheme") of Middle Path Trading Private Limited ("Transferor Company 1") and Shiraj Marketing Private Limited ("Transferor Company2") with Purshottam Investofin Limited ("Transferee Company"). The said Scheme will be effective after receiving approval of shareholders, creditors, Honble National Company Law Tribunal, and other regulatory and statutory approvals as required, if any. The Appointed date of the Scheme is April 01, 2021. The Company has already initiated the process for seeking various approvals to the Scheme. Further, the Company has obtained NOC from BSE Limited and obtained approval from shareholders and creditors and filed its second motion petition before the Honble NCLT, New Delhi Bench. As on March 31, 2024 matter is pending before Honble NCLT, New Delhi Bench.

Segment-wise or product-wise performance/State of affairs

During the year 2023-24, interest income is 721.66 Lac (Previous year: 552.41 Lac), Dividend Income 0.42 Lac (Previous Year: 0.04 Lac) and 7198.27 Lac turnover comes from trading in securities/MTM (Previous year: 1021.22 Lac).

Balance 3.28 Lac is other Income (Previous Year: 11.75 Lac)

Human Resources

Human resource is the most precious asset of our Company and our Company seeks to attract and retain the best talent available. Our Company provides an environment, which encourages initiatives, innovative thinking and recognizes and rewards performance. Since our Company operates in the Loans and trading business, necessary training and development of its personnel are conducted on a continuous basis. Industrial relations with all employees are cordial. The Directors Report may be referred for any further details.

The total strength of employees as on March 31, 2024 was 6.

Discussion on Financial Performance With Respect To Operational Performance

The financial statements have been prepared in accordance with the requirements of the Companies Act, 2013 and applicable Indian Accounting Standards (Ind As) issued by the Institute of Chartered Accountants of India. The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Accounts and other financial statements forming part of this annual report.

Significant Change in Financial Ratios

Based on the reported financial statements, the following are the key financial ratios with respective variations:

*Previous year figures regrouped/reclassified wherever necessary to correspond with the current period disclosure.

Disclosure of Accounting Treatment

The Company has prepared its annual financial results for the year ended March 31, 2024 in accordance with the applicable Indian Accounting Standards (Ind AS).

Cautionary Statement

The management discussion and analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward-looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include changes in governmental regulations, tax regimes, economic developments within India and other incidental factors.