MANAGEMENT DISCUSSION & ANALYSIS REPORT
OVERVIEW
Your Company is a non-deposit non-systemically important NBFC with a record of
consistent growth and profitability. This Management Discussion and Analysis Report have
to be read in conjunction with the Companys financial statements, which follows this
section. The financial statements have been prepared in compliance with the requirements
of the Companies Act, 2013 and as per Indian Accounting Standards (Ind AS) and as per the
directions issued by Reserve Bank of India for NonBanking Financial Companies from time to
time, wherever applicable. The estimates and judgments relating to the financial
statements have been made on a prudent and reasonable basis, in order that the financial
statements reflect in a true and fair manner the form and substance of transactions, and
reasonably present the Companys state of affairs and profits for the year. The following
discussion may include forward looking statements which may involve risks and
uncertainties, including but not limited to the risks inherent to Companys growth
strategy, change in regulatory norms, economic conditions and other incidental factors.
Actual results could differ materially.
INDIAN ECONOMIC OVERVIEW
The financial year 2022-23 was a landmark year for the Indian economy. While the global
economy faced a growth slowdown in a high-interest rate environment, Indias economy was
resilient. It became the worlds fifth largest economy. Unlike other emerging and
developing economies, Indias resilience was not entirely dependent on fiscal stimulus but
led by structural interventions by the Government of India such as Aatmanirbhar Bharat
and the National Infrastructure Pipeline and stronger than anticipated private
consumption.
According to ADB (Asian Development Bank), despite the global slowdown, Indias
economic growth rate is stronger than in many peer economies and reflects relatively
robust domestic consumption and lesser dependence on global demand.
Inflation has emerged as a global challenge owing to the surge in energy prices,
non-food commodities, input prices disruptions of global supply chains and rising freight
costs. In India, retail inflation measured by the Consumer Price Index (CPI) hit the
highest of 7.79% in April 2022. India is presently known as one of the most important
players in the global economic landscape. Our country is growing rapidly and is expected
to become a US$ 5 trillion economy by 2025.
The Union Budget presented on February 01, 2023 highlighted the policies and investment
incentives to look forward to in the next year. The investments in India have been riding
high for the last few years. Investments here should always be a longterm story. The next
10 years will surely give good returns. Over the years, India has emerged as one of the
fastest-growing economies in the world and an attractive investment destination driven by
economic reforms and a large consumption base. We believe that NBFCs with superior capital
adequacy, better margins,
According to RBIs surveys, both businesses and consumers hold optimistic outlooks for
the future. However, the slowdown in global trade and output, coupled with geopolitical
tensions, global financial conditions, and market volatility, pose risks to the overall
economic outlook.
Amidst this volatility, the banking and non-banking financial service sectors in India
remain healthy and financial markets have evolved in an orderly manner. The prolonged
geopolitical tension between Russia and Ukraine adversely affected global trade and crude
oil prices, leading to a tighter inflationary grip. RBIs Monetary Policy Committee
increased the policy repo rate under the liquidity adjustment facility (LAF) by 225 basis
points from 4.0% to 6.25% between May and December 2022.
FINANCIAL SERVICES INDUSTRY
"Indian NBFCs Set to Keep Rising In 2023"
The world seems to be recovering from the aftermath of the challenges posed in the last
few years. Overall despite the challenges, India has emerged as a bright spot in terms of
economic growth amidst an outlook of global slowdown. The World Bank has reported that
India is better positioned to navigate global headwinds and handle global spill overs, as
compared to other major emerging economies.
Also, it is heartening to see that the RBI and policymakers recognize the contribution
of NBFCs in supporting real economic activity and meeting the credit demand, especially
reaching the unbanked. RBI Scale based norms implemented last year have strengthened the
sector while offering operational flexibility to meet the increasing credit demand and aid
Indias economic growth.
During the last financial year, despite geopolitical events, extremely high global
volatility in commodities, currencies, financial markets and increase in interest rates
globally to tame the high inflation, NBFCs in India have weathered the storm well and
exhibited resilience.
In 2023, NBFCs are expected to play a larger role in supporting the socioeconomic
construct of the Indian economy. The opportunity for credit penetration remains very high
in India. The NBFCs can set a new benchmark by introducing new business models with
personalized offerings through digital platforms. CRISIL recently reported that riding on
macroeconomic tailwinds, NBFCs are expected to see growth.
NBFCs with stronger business models, strong capital adequacy, strong underwriting
capabilities and focus on digital strategy will continue to perform better and grow
stronger in years to come. To benefit from the growth opportunities, many industrial
groups have ventured into this segment with new business models. According to ICRAs
recent report, in 2023 non-bank lenders will focus on reviving growth by improving asset
quality supported by increasing retail demand and liquidity.
The financial services sector in India is a diversified sector consisting of commercial
banks, insurance companies, non-banking financial companies, housing finance companies,
co-operatives, pension funds, mutual funds and other smaller financial entities. Financial
inclusion drive by RBI has expanded the target market to semi-urban and rural areas. NBFCs
especially those catering to the urban and rural poor namely NBFC-MFIs and Asset Finance
Companies have a complimentary role in the financial inclusion agenda of the country.
Financial Services sector is poised to grow on the back of rising incomes, significant
government attention and the increasing pace of digital adoption.
The Banking and Non-Banking Financial Company (NBFC) sector in India has witnessed
significant market driven and regulatory events in the last decade. Cumulatively, these
have had a profound impact on the industry. Some of the noteworthy developments include
the issuance of new bank licences for universal banks, introduction of a new category of
banks (small finance banks and payments banks); insolvency processes and the resolution of
a few large non-performing assets (NPA) situations; and consolidation of public sector
banks (PSBs), etc.
Financial inclusion has been a key agenda of the Central Government. To promote
financial inclusion, the Central Bank has set up a pilot project in association with banks
under which at least one district in each State/UT would be 100 per cent digitally
enabled. The digital payment regime has grown since the introduction of fast payment
systems, such as Immediate Payment Service (IMPS) and Unified Payment Interface (UPI), 35
which provide immediate credit to beneficiaries and are available round the clock.
RISK MANGEMENT
The very nature of the Companys business makes it susceptible to various kinds of
risks. The Company encounters market risk, credit risk and operational risks in its daily
business operations. The Company has framed a comprehensive Risk Management Policy which
inter-alia lays down detailed processes and policies in various facets of the risk
management function. Such comprehensive framework helps the company to minimize adverse
impact of risks and also enable to leverage market opportunities.
Risk management practices seek to sustain and enhance short & long-term competitive
advantage to the Company. It is integral to our business model, described as the
"Practicable, Sustainable, Profitable and De-risked" (PSPD) model. Our core
values and ethics provide the platform for our risk management practices.
NON-BANKING FINANCE COMPANY (NBFC) OUTLOOK:
The Non-Banking Financial Companies (NBFCs) sector plays a significant role in the
Indian economy, providing credit to individuals, small and medium-sized enterprises, and
rural areas, among others. NBFCs have emerged as a key segment in the financial sector,
bridging the gap between banks and borrowers who are underserved or excluded from
traditional banking services. In recent years, the sector has witnessed significant
growth, fuelled by a rise in demand for credit and the emergence of new players. The
sectors resilience and ability to innovate have been tested during times of economic
turmoil, such as the COVID-19 pandemic.
As the economy has moved past the impact of the pandemic, the NBFCs sector is
anticipated to experience a substantial growth in both FY2023 and FY2024, following the
rebound of the economy. ICRA Ratings predicts that during these fiscal years, the sector
will witness a loan growth of 10-12% and a rise in profitability by 50 basis points. The
PCA framework implemented by RBI has created a level playing field for NBFCs with banks,
thus enhancing corporate governance and leading to sustainable growth in the sector
NBFCs have solidified their position as an integral part of the financial services
system. They also complement the banking system in achieving the agenda of financial
inclusion. There has been a consistent rise in the credit extended by NBFCs as a
proportion of GDP, with the aggregate outstanding amount at ? 31.5 lakhs crores as of
September 2022.
For several years, NBFCs have rapidly emerged as an important segment of the Indian
Financial System. The sector is now being recognized as complementary to the banking
sector due to the implementation of innovative marketing strategies, introduction of
tailor-made products, customer-oriented services and attractive rates of return and
simplified procedures. NBFCs have emerged as a powerful force for financial inclusion in
India, serving the bottom of the pyramid rural clients. NBFCs are characterized by their
ability to provide niche financial services in the Indian economy. Because of their
relative organizational flexibility leading to a better response mechanism, they are often
able to provide tailor-made services relatively faster than banks. NBFCs are governed and
are required to be registered with RBI, follow stringent prudential norms prescribed by
RBI in the matters of capital adequacy, credit investment norms, asset-liability
management, income recognition, accounting standards, asset classification, provisioning
for NPA and several disclosure requirements. Besides this, RBI also supervises the
functioning of NBFCs by conducting annual on-site audits through its officials. Such a
rigorous regulatory framework ensures that NBFCs function properly and follow all the
guidelines of RBI. Thus, in all respect the monitoring of NBFCs is similar to banks.
Indias financial sector is a highly diversified one comprising commercial banks,
insurance companies, non-banking financial companies, co-operatives, pension funds, mutual
funds and other smaller financial entities. The sector dominated by banking and
non-banking financial companies (NBFCs) has witnessed exponential growth in the last
decade driven largely by regulatory reforms and their ability to cater to unbanked areas
through innovative products and service delivery mechanisms. However, in the past few
years the sector was dealing with the contagion effects associated with the collapse of a
few NBFCs and co-operative banks followed by the pandemic and global political conflicts.
After challenging years, the NBFC industry has rebounded well in FY 23. The overall NBFC
sector including Housing Finance Companies (HFCs) benefited from resurgent domestic
economic activity leading to strong momentum in disbursements and bolstering higher
business growth backed by various policy initiatives of the Government and the regulators.
The momentum is expected to continue in the current year also. The outlook for the
industry remains positive as the country strides on its growth trajectory leading to
higher credit demand. The growth in credit is expected to be broad based across products
and segments with key risks being elevated interest rates and inflation
RISK MANAGEMENT & GOVERNANCE
• Responsible for managing overall ERM, Internal Control, Compliance and Assurance
activities.
• Co-ordinating with Internal Auditors & Functional Head for timely execution
of Audit & compliance of Audit observation.
• Work with Business Management Group (BMG) of respective locations for process
efficiency & productivity improvements.
• Ensure effective implementation of Standard Operating Procedure & Policies.
• Conducting management Audit & Special Audit as assigned by the
Management/Audit Committee.
• Conducting Self-Assessment Survey for all Business Verticals.
INTERNAL CONTROL SYSTEM
The Company has in place adequate internal control systems covering all its operations.
Proper accounting records highlight the economy and efficiency of operations, safeguarding
of assets against unauthorized use or losses, and the reliability of financial and
operational information.
Some of the significant features of internal control system are:
• Financial and Commercial functions have been structured to provide adequate
support and control of the business.
• Risk Management policy has been adopted by the Company.
• The Company has an Internal Audit System conducted by the internal auditor of
the Company. Standard operating procedures and guidelines are reviewed periodically to
ensure adequate control.
SEGMENT WISE/ PRODUCT WISE PERFORMANCE
As the Company is in only one line of business, product wise and/or segment wise
disclosure of performance is not required to be made.
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