The Management Discussion and Analysis Report has to be read in conjunction with the
Companys financial statements, covering overall performance and outlook of its activities
which read as follows:
MACRO-ECONOMICVIEW
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.
In FY2023, the Indian economy faced multiple challenges. The country’s retail
inflation indicator, consumer price inflation {CPI} inched above the RBIs tolerance range
in January 2022. It remained above the target range for almost twelve months before
retracting within the upper tolerance of 6% in November 2022. Rising international crude
prices coupled with domestic weather conditions like excessive heat and unseasonal rains
kept food prices high, fuelling retail inflation. The Government cut excise and customs
duties and restricted exports to cool off inflation. 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 rationalizing 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. The second advance estimate of national income
released by the central statistics office (CSO) on 28 February 2023 expects real GDP
growth in FY2023 to be 7.0%.
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. Consumer
price inflation (CPI) remained at elevated levels during the year. Though it dropped from
7.79% in April 2022 to 5.72% in December 2022, it again rose to 6.52% in January 2023
before dropping to 5.66% in March 2023. In May 2022, the RBI increased the policy repo
rate by 40 basis points (bps); and thereafter continued to increase policy repo rates by
50 bps in June 2022, August 2022 and September 2022. This was followed by smaller
increases of 35 bps in December 2022 and 25 bps in February 2023. The cumulative increase
in FY2023 was 250 bps. This was preceded by the introduction of the Standing Deposit
Facility (SDF) at a rate 40 bps higher than the fixed rate reverse repo. Thus, the
effective rate hike during the year has been 290 bps.
At its Monetary Policy Committee (MPC) meeting held in April 2023, the RBI unanimously
decided to keep the policy rates unchanged with an emphatic statement that the pause was
only for this meeting and the MPC would not hesitate to take further action as may be
required in future. The MPC also decided to remain focused on withdrawal of accommodation
which was favored by five out of six members.
The Government of India announced a growth oriented and expansionary budget for the
FY2024. It has tried to strike balance between fiscal consolidation and growth by
continuing its focus on capital expenditure and creating fiscal space for that by
curtailing revenue expenditure. It has set a target of reducing the central governments
fiscal deficit to 5.9% of the GDP in FY2024 from 6.4% (revised estimate or RE) in FY2023,
while using the infrastructure capex tool to support the economy. The Government has
budgeted for H 10 trillion towards capital expenditure for FY2024, an increase of 33%
year-on-year. On balance, we believe that the Indian economy has weathered the external
shocks reasonably well. The proof of it is that the country has emerged as the fastest
growing major economy in the world. The general expectation is that India’s GDP for
FY2024 would record a growth in excess of 6%. Of course, much depends on a normal rainfall
in the coming year. The risk of monsoon falling below normal levels {after four
consecutive years of normal rainfall) remains a wildcard and could hit agricultural
production and impact food prices.
INDUSTRY VIEW
NBFCs have become important constituents of the financial sector and have been
recording higher credit growth thanscheduled commercial banks (SCBs) over the past few
years. NBFCs are leveraging their superior understanding of regional dynamics and
customized 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 frombanks. Considering the reach and expanse
of NBFCs, they are well-suited to bridge the financing gap in a large countrylike India.
Systemically Important NBFCs have demonstrated agility, innovation, and frugality to
provide formal financialservicestomillionsofindians. In recent years as the impact of the
second COVID-19 wave waned and the third wave turned out to be shortlived, the NBFC sector
regained momentum, cushioned by proactive policy measures announced by the RBI and the
Government. The economic survey has observed that credit extended by NBFCs is picking up
momentum, with the aggregate outstanding amount at H 31.5 trillion as on September 2022.
NBFCs continued to deploy the largest quantum of credit to the industrial sector, followed
by retail, services, and agriculture. Loans to the services sector {share in outstanding
credit being 14.7%) and personal loans (share of 29.5%) registered a double-digit growth.
Given the increasing importance of NBFCs, the RBI, in the last few years, has increased
its regulatory oversight over the sector. Multiple guidelines such as {i} vigil over
asset-liability management practices, (ii) maintaining liquidity ratios, (iii) increased
reporting requirements, and (iv) scale-based regulation, have led to NBFCs adopting
practices in line with banks. The regulatory vigil is based on four key cornerstones of:
(i) responsible financial innovation, {ii} accountable conduct, {iii} responsible
governance, and (iv) centrality of the customer. The recently adopted changes to the
finance bill withdrawing exemptions on long term capital gains to investors in debt mutual
funds is estimated to have minimal impact on the NBFC sector given limited exposure of
mutual funds in long term papers of NBFCs.
FINANCIAL PERFORMANCE-OVERVIEW
Sarvottam Finvest Limited ("The Company") is a registered Non-Banking
Financial Company {NBFC). The performance ofthe Company is discussed in the
Directors’ Report. The Company is listed on Calcutta Stock Exchange Limited andBombay
Stock Exchange. The financial statements of the Company are prepared in compliance with
applicable provision of the Companies Act, 2013 and applicable Indian Accounting
Standards. The Company has earned income from financing, providing loans and advances
trading ofsecurities, interest and dividend. The Company will extend the business further
through hide notification of promising investment opportunities, through leveraging its
resources. Company is also looking forward to expand its operations in the other fields
permitted by the regulator, in conformitywith its present status. The Company is engaged
in the businesses permitted for Non-Banking Financial Company andoffered a wide range of
fund based financial services to its customers. Nearly 100 percent of the operating
profits were contributed by core businesses viz., lending, trading in securities and
investments.
CAPABILITIES AND STRATEGY
India’s financial services sector comprises of commercial banks/co-operative
banks, non-banking financial companies, insurance companies, pension / mutual funds and
other various entities. India is expected to be fourth largest privatewealth market
globally by 2028. The NBFC sector plays important role in financial inclusion by meeting
credit needs ofretail and MSME sector. The NBFC sector provides efficient credit
distribution reach to untapped and under- penetratedregions and customer class. It brings
the much-needed diversity to the financial sector by providing consumer credit, including
automobile finance, home finance and consumer durable products finance, wholesale finance
products such as bills discounting forms all and medium companies and fee based services
such as investment banking and underwriting. NBFCs have carved niche business areas for
them within the financial sector space and are also popular for providing customized
products. Few NBFCs have upheld their position in this market. However, intense
competition, dynamic environment, compliance framework and stricter regulations are
forcing companies to change its framework.
TheCompanyishelpingenterprisestorationalizeandmakingbusinessoperationallyefficientandremaincostcompetitive
in market. The Company is in process of creating a separate nichein market. The Companys
strategy for long term profitable growth is based on continuous scaling and updated to its
core businesses, while investing in new customers, services, markets and industries.
TheCompanysstrategyofstrengtheningthecurrentbusinessandinvestinginf uturerevolvesaround:
1. Customer centricity.
2. Proximity to client’ location.
3. Transparent communication.
4, Flexible control systems
OPPORTUNITY AND THREATS
Non-Banking Financial Companies (“NBFCs”) remain one of the most important
pillars for ushering financial inclusion inlndia, reaching out to a hitherto
under/unserved populace and in the process leading to “formalization” of the
creditdemand. The NBFCs cater to the needs of both the retail as well as commercial
sectors and, at times, have been able todevelop strong niches with their specialized
credit delivery models that even larger players including banks, have foundhard to match.
This has further provided a fillip to employment generation and wealth creation and in the
process, bringing in the benefits of economic progress to the weaker sections of the
society.
RISKS AND CONCERNS
The Company aims to operate within an effective risk management framework to actively
manage all the material risks faced by the organization and make it resilient to shocks in
a rapidly changing environment. It aims to establish consistent approach in management of
risks and strives to reach the efficient frontier of risk and return for the organization
and its shareholders. Broad categories of risk faced by the Company are CreditRisk,
MarketRisk, Operational Risk, Fraud Risk, Compliance Risk, Cyber Security and Reputation
Risk. The risk management policies are well defined for various risk categories
supplemented by periodic monitoring through the sub committees of the Board (i) The
Company reviews its risk factors annually in order to keep it aligned with the changing
global risks. (ii) The Company manages such risks by maintaining a conservative financial
profile and following prudent business and risk management practices. (iy The company is
operating on a well-defined planand strategy; hence we are equipped to face any change in
regulatory risk. (iv) The risk appetite is enunciated by the Board from time to time.
COMPLIANCE
We have a robust risk management framework covering all elements of risk management
which is aligned to RBIrequirements and also other international best practices. The
company regularly monitors the changes in legislation pertaining to employment, labour and
immigration laws across the globe to ensure total compliance assisted by regularaudits.
The key areas where the Company needs to introduce new policies or modify the existing
policies to remaincompliant are identified and acted upon. The Company has complied with
all the regulations and guidelines of RBI applicable to a Non-Banking Finance Company.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has adequate internal control system commensurate with its size and nature
of business. Conforming to the requirements of the regulatory authorities such as the RBI
and the SEBI and consistent with the requirements of the Listing agreements with the Stock
Exchanges, the company has institutionalized an elaborate system of control processes
designed to provide a high degree of assurance regarding the effectiveness and efficiency
of operations, the adequacy of safeguards for assets, reliability of financial controls
and compliance with applicable laws and regulations. These systems are designed in a
manner to provide reasonable assurance about the integrity and reliability of the
financial statements. The Internal Auditors are mandated to carry out periodical audit and
report on areas of non- compliances/weaknesses. Corrective actions in case of reported
deficiencies, if any, are taken actively to further strengthen the internal control
systems. These reports are reviewed by the Audit Committee of the Board of Directors for
follow-up action and instructions are issued for taking necessary measures. The Companys
present business operations are preponderantly that of a Loan Company, future of which
largely depends upon financial and capital markets. The Company has exposure in
financially sound entities. The management is optimistic about the future outlook of the
Company. Further, more promising areas of activity are being explored on a sustained
basis. The Company will expand its activities, consistent with its status as a Non-Banking
Finance Company.
HUMAN RESOURCES
The Company firmly believes that intellectual capital and human resources is the
backbone of the Companys success. The Company always treats human resources as its most
valuable assets and continuously evolves policies and process to attract and retain its
substantial pool of managerial resources through friendly work environment. The Company
has always aimed to create a work place where every person can achieve his optimum
potential. In view of this, the Company encourages its people to balance their
professional and personal responsibilities leading to a more productive tenure of its
employees. The Company lays great emphasis on building a motivated work force, which can
participate constructively in the growth of the Company.
CAUTIONARYSTATEMENT
The statement in the Managements Discussion and Analysis Report detailing the
Companys objectives, projections, estimates, expectations or predictions may be
"forward looking statements" within the meaning of applicable securities laws
and regulations. These statements being based on certain assumptions and expectation of
future events, actual results could differ materially from those expressed or implied.
Important factors that could make a difference to the Companys operations include changes
in Government regulations and tax regime, economic developments within India and abroad,
financial markets etc. The Company assumes no responsibility in respect of forward-looking
statements that may be revised or modified in future on the basis of subsequent
developments, information or events. The management of the Company has used estimates and
judgments relating to the financial statements on a prudent and reasonable basis, in order
that the financial statements reflect true and fair picture, the state of affairs and
profit/loss for the year. The following discussions on our financial condition and result
of operations should be read together with our audited financial statements and the notes
to these statements included in the Annual Report.
+91-9892691696
