MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Sainik Finance & Industries Limited (SFIL), a listed Company is
engaged in the business of investment, finance and lending. It is Non- Systematically
Important Non-Deposit Taking Non-Banking Financial Company registered with the Reserve
Bank of India (RBI).
1. MACROECONOMIC OVERVIEW
Over the years, NBFCs have consolidated their position as a key
intermediary in the Indian financing sector with differentiated offerings such as niche
financing, last-mile connectivity and an alternative to bank financing. With respect to
liabilities, NBFCs have become increasingly interconnected with the financial system. The
RBI, like other central banks, raised the monetary policy rates and reduced excess
systemic liquidity. Major areas of concern for the economy were elevated commodity prices
leading to a depreciation of the Indian rupee, higher retail inflation (both core and food
inflation) leading to the RBI raising interest rates and rationalising systemic liquidity,
and a rising current account deficit (CAD). However, despite these critical challenges,
India emerged as the fastest growing major economy in the world. Table 1 gives the data on
real GDP and Gross value added (GVA) and growth for the last four financial years.
Table 1: Real GDP and GVA and growth, India
|
FY2020 |
FY2021 |
FY2022 |
FY2023 |
|
(2nd RE) |
(2nd RE) |
(1st RE) |
(2nd AE) |
| Real GDP( in trillion) |
145.2 |
135.6 |
147.7 |
159.7 |
| Real GVA( in trillion) |
132.2 |
125.9 |
136.2 |
147.1 |
| Real GDP growth |
3.7% |
(6.6%) |
8.9% |
7.0% |
| Real GVA growth |
3.7% |
(4.8%) |
8.3% |
6.6% |
Source: Government of India, Central Statistics Office (CSO). AE
denotes Advance estimate and RE denotes revised estimate.
In terms of growth, NBFCs witnessed a CAGR of 21% between fiscals 2017
and 2023, compared to 8% for other players. The current account deficit (CAD) widened in
FY2023 on account of (i) rising commodity prices, (ii) appreciation of the US dollar and
(iii) a slowdown in economic growth and world trade owing to aggressive and synchronized
monetary policy tightening across the world. For the first three quarters of FY2023, the
CAD stood at 2.7% of GDP. Simultaneously, the RBI maintained adequate liquidity to support
its accommodative stance throughout the year. It resorted to rebalancing liquidity on a
dynamic basis without compromising systemic liquidity. Moreover, the RBI change its key
policy rates including repo rate, reverse repo rate and bank rate at 6.5%, 3.35% and 5.15%
respectively duringFY2022-23. On balance, we believe that the Indian economy is well
positioned to counter the challenges posed by any new waves of the pandemic. The inflation
challenge needs to be tackled carefully without resorting to sharp interest rate hikes, as
it may dampen the pace of economic recovery. The current account deficit (CAD) widened in
FY2023 on account of (i) rising commodity prices, (ii) appreciation of the US dollar and
(iii) a slowdown in economic growth and world trade owing to aggressive and synchronized
monetary policy tightening across the world. For the first three quarters of FY2023, the
CAD stood at 2.7% of GDP. The calendar year 2023 began on a promising note with improved
supply conditions, resilient economic activity, and some degree of stability in financial
markets. In just a few weeks of March 2023 the sentiment changed as fresh headwinds
emerged from the banking sector turmoil in some advanced economies. Bank failures in the
USA and Switzerland with their contagion risks came to the forefront. However, the banking
and non-banking financial services sector in India remained healthy and evolved in an
orderly manner.
2. INDUSTRY OVERVIEW
NBFCs have become important constituents of the financial sector and
have been recording higher credit growth than scheduled commercial banks (SCBs) over the
past few years. NBFCs are leveraging their superior understanding of regional dynamics and
customised products and services to expedite financial inclusion in India. Lower
transaction costs, quick decision making, customer orientation and prompt service
standards have typically differentiated NBFCs from banks. Considering the reach and
expanse of NBFCs, they are well-suited to bridge the financing gap in a large country like
India. Systemically Important NBFCs have demonstrated agility, innovation, and frugality
to provide formal financial services to millions of Indians. This is an enviable track
record despite the business models of the NBFCs being severely tested by four large
external events in the last few years, namely, (i) demonetisation, (ii) GST
implementation, (iii) failure of few large NBFCs, and (iv) the pandemic. The fact that
many NBFCs have managed to overcome these stresses without significant impact on financial
position is a testimony to their resilience and agility. In terms of growth, NBFCs
witnessed a CAGR of 21% between fiscals 2017 and 2023, compared to 8% for other players.
3. OUTLOOK
The credit demand is expected to grow with reducing uncertainty and
investment traction going forward. Credit growth of NBFCs is expected to be driven by
rising retail consumerism, formalisation of MSMEs, increasing financial penetration and
investment focus on Indias manufacturing sector.
4. SFIL PERFORMANCE REVIEW, FY 22-23 i) Share Capital
The Authorised share capital of the Company is Rs.1100.00 Lakhs divided
into 11000000 Equity shares of Rs.10/-each. Issued, Subscribed and Paid up share capital
of the Company is Rs.1088.00 Lakhs divided into 10880000 Equity Shares of Rs.10/-each
fully paid up. ii) Net Worth
The Net worth of the Company has been decreased to Rs.3,540.56 Lakhs
during the current year as compared to Rs. 3555.62 Lakhs during the previous year. iii)
Total Income
During the year under review the total income of the Company is
Rs.1824.19 Lakhs as compared to Rs.1580.32 Lakhs during the previous year. iv) Other
Income
During the year under review other income of the Company is Rs.21.74
Lakhs as compared to Rs.18.30 Lakhs during the previous year. v) Interest and Finance
Charges
During the year under review total interest and finance charges are
Rs.1493.89 Lakhs as compared to Rs.1767.30 Lakhs during the previous year. vi) Tax
Expense
During the year under review, total current tax expenses is NIL and
deferred tax expenses were Rs.242.58 Lakhs as compared to deferred tax expenses Rs.109.47
Lakhs during the previous year. vii) RBI Guidelines
The Company has complied with all the applicable rules and regulations
of the Reserve Bank of India. viii) Human Resources/ Industrial Relations
The Company has a dedicated team who has been contributing to the
progress and growth of the Company. The manpower requirement at the offices of the Company
is assessed continuously and recruitment is conducted accordingly. Concerted efforts have
been put in talent management and succession planning practices, strong performance
management and learning and training initiatives to ensure that Company consistently
develops inspiring, strong and credible leadership. Number of people employed is six. ix)
Details of any change in Return on Net Worth as compared to the immediately previous
financial year along with a detailed explanation thereof
During the year under review, the return on networth as compared to the
immediately previous financial year is Incremental due to increase in turnover x)
Operational and Financial Performance
During the year financial year 2022-23, the Companys total income
has increased to Rs.1,824.19 Lakhs as compared to Rs. 1580.32Lakhs in the previous year
During the Financial year the Company earned profit before tax of Rs. 233.83 Lakhs as
compared to the losses of Rs.921.98 Lakhs in the previous year.
5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The internal financial control of SFIL over financial reporting is a
process that is designed to provide reasonable assurance regarding the reliability of
financial reporting and preparation of financial statements for external purposes in
accordance with the generally accepted accounting principles. The Companys internal
financial control over financial reporting consists of the policies and procedures: (1)
Pertaining to maintenance of the records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company (2) Providing
reasonable assurance that transactions are being recorded as mandatory to permit the
preparation of financial statements according to the generally accepted accounting
principles and that the receipts and expenditures of the Company are prepared only in
accordance with authorisations of management and Directors of the Company, and
(3) Providing reasonable assurance to prevent or timely detect
unauthorised acquisition, use or disposition of the Companys assets which may have a
material effect on the financial statements. The Company has a robust internal audit
programme, where the internal auditors, an independent firm of Chartered Accountants,
conduct a risk based audit to not only test the adherence to policies and procedures but
to also suggest improvements in the processes and systems. The audit program is agreed
upon by the Audit Committee. Internal audit observations and recommendations are reported
to the Audit Committee, which monitors the implementation of such recommendations.
6. POSSIBLE THREATS
As we get into an environment which is likely to be largely positive
over medium to long term, there may be significant roadblocks in the shorter term due to
funding difficulties which are facing by NBFC. Despite recent push by the RBI, the
resolution of stressed assets in the system is likely to take more time. Also the effect
of various loan waivers on credit culture in the rural areas is still to be seen. Your
Company acknowledges these possible negative factors and has a plan to mitigate them
through its deep domain knowledge, strong risk framework and an efficient collection
mechanism.
7. FIXED DEPOSITS
The Company is a non-deposit accepting -NBFC. The Company has not
accepted any fixed deposit during the period under review.
8. RISK AND CONCERNS
As an NBFC, SFIL is exposed to credit, liquidity and interest rate
risk. It has continued to invest in talent, processes and emerging technologies for
building advanced risk and underwriting capabilities. The Company recognizes the
importance of risk management and has accordingly invested in appropriate processes,
people and a management structure. The Board of Directors of the Company reviews the asset
quality at frequent intervals. The nature of business the Company is engaged in exposes it
to a slew of complex and variable risks. The rapid and continuous changes in the business
environment have ensured that the organization becomes increasingly risk focused to
achieve its strategic objectives. SFILs policies ensure timely identification,
management and mitigation of relevant risks, such as credit risk, liquidity risk, interest
rate risk, operational risk, reputational and regulatory risks, which help the Company
move forward with vigour.
9. DETAIL OF SIGNIFICANT CHANGE IN KEY FINANCIAL RATIOS
There is no significant change in key financial ratios as if compared
to the ratios of previous financial year.
10. CAUTIONARY STATEMENT
This statement describes the objectives, projections, expectation and
estimations of the Company, which may be ‘forward looking statements within the
meaning of applicable securities laws and regulations. Forward looking statements are
based on certain assumptions and expectations of future events. The Company cannot
guarantee that these assumptions and expectations are accurate or will be realised by the
Company. The actual result may differ materially from those expressed in the statement or
implied due to the influence of the external factors, which are beyond the Companys
control. The Company assumes no responsibility to publicly amend, modify or revise any
forward looking statements on the basis of any subsequent developments.
By Order of the Board of Directors
For SAINIK FINANCE & INDUSTRIES LIMITED
|
Kuldeep Singh Solanki |
Rudra Sen Sindhu |
| Place: New Delhi |
Director |
Director |
| Dated: 11th August,2023 |
DIN: 00009212 |
DIN:00006999 |
+91-9892691696
