• OVERVIEW
The Management Discussion and Analysis Report has been prepared in accordance with the
provisions of Regulation 34(2)(e) of Listing Regulations, read with Schedule V(B) thereto,
with a view to provide an analysis of the business and Financial Statements of the Company
for FY2022-23 and should be read in conjunction with the Companys financial statements,
the schedules and notes thereto and other information included in the Report.
• STARTECK FINANCE LIMITED
Starteck Finance Limited, formerly known as Nivedita Mercantile and Financing Limited,
was founded in 1985. It operates as a registered Non-Deposit Accepting Non-Banking
Financial Company (NBFC) under Section 451A of the Reserve Bank of India Act, 1934. It
serves the financing needs of the various corporates having presence in urban and
semi-urban areas of India. The company has a diversified portfolio across Retail, SMEs and
Commercial customers.
• INDUSTRY STRUCTURE AND DEVELOPMENTS GLOBAL ECONOMY
The global economy has shown strength but is slowing down amid uncertainty and with the
ongoing war between Russia-Ukraine. There has been persistent high inflation and financial
sector stresses. There have been tightening monetary policies to tame the inflation. Fuel
and food prices have increased rapidly, hitting vulnerable populations in low-income
countries hardest. According to IMF the projected global growth is 3.0% in FY 2024.
Chinas economic condition indeed plays a significant role in shaping the course of the
global economy. As the worlds second-largest economy and the most populous country,
Chinas economic performance has far-reaching implications for other nations and global
economic stability. The consumer spending in USA is proving to be resilient in the face of
surging inflation and the spending on goods have declined for the third consecutive
quarter. Multilateral efforts to respond to humanitarian crisis, prevent further economic
fragmentation, maintain global liquidity, manage debt distress and tackle climate change.
INDIAN ECONOMY
Indian economy has faced significant challenges in recent times, including the
pandemic-induced contraction, the Russian-Ukraine conflict, and inflationary pressures.
However, it is currently exhibiting signs of a broad-based recovery across sectors,
indicating its positioning to ascend to the pre-pandemic growth path in the fiscal year
2023. The Indian Rupee performed well compared to the other Emerging Market Economies.
While Indias retail inflation rate peaked at 7.8% in April 2022, above the RBIs upper
tolerance limit of 6%, the overshoot of inflation above the upper end of the target range
in India was however one of the lowest in the world.
BREAKDOWN OF OVERALL A%D SECTORAL GROWTH NUMBERS |
|
FY 2021 |
FY 2022 |
FY 2023 |
|
|
|
Q1 |
Q2 |
Q3 |
Q4 |
| Real GDP |
-6.6% |
8.7% |
13.1% |
6.2% |
4.5% |
6.1% |
| Nominal GDA |
-1.4% |
19.5% |
16.1% |
| Real GVA |
-4.8% |
8.1% |
11.9% |
5.4% |
4.7% |
6.5% |
| Agriculture, forestry, mining |
3.3% |
3.0% |
2.4% |
2.5% |
4.7% |
5.5% |
| Mining and quarrying |
-8.6% |
11.5% |
9.5% |
-0.1% |
4.1% |
4.3% |
| Manufacturing |
-0.6% |
9.9% |
6.t% |
-3.8% |
-1.4% |
4.5% |
| Electricity, gas, other utilities |
-3.6% |
7.5% |
14.9% |
6.0% |
8.2% |
6.9% |
| Construction |
-7.3% |
11.5% |
16.0% |
5.7% |
8.3% |
10.4% |
| Trade, hotels, transport |
-20.2% |
11.1% |
25.7% |
15.6% |
9.6% |
9.1% |
| Financial, real Estate, professional services |
2.2% |
4.2% |
8.5% |
7.1% |
5.7% |
7.1% |
| Public administration, defence, other services |
-5.5% |
12.6% |
2t.3% |
5.6% |
2.0% |
3.1% |
FY 2023 saw the trade sector make a robust return expanding to 15%. Agriculture sector
was steady having growth of 3.8% compared to 3.0% in FY 2022. The Financial, Real Estate
and professional services showed significant growth in FY 2023 compared to 4.2% in FY
2022.
• INDIAN FINANCIAL SERVICES INDUSTRY
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 2ttention and the increasing pace of digital adoption.
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 bn 100 per cent digitaily
enabled. The digital payment regime has grown since the introduction of fast payment
system, such as Immediate Payment Service and Unified Payment Interface, which provide
immediate credit to beneficiaries and are available round the clock. Moreover, the
financial inclusion drive in the country is now supported by a benchmark. The Reserve Bank
of India has launched a "Financial Inclusion or FI- Index to measure and improve the
extent of access, usage and quality of financial inclusion in the country.
The banking and non-banking financial company sector in India has witnessed significant
market-drive and regulatory events in the last decade. these have had a profound impact on
the industry. Some of the notewortny developments include the issuance of new bank
licenses for universal banks, introduction of new category of banks; insolvency processes
and the resolution of a few large non-performing assets situations and consolidation of
the public sector banks.
The Reserve Bank of India recently issued discussion documents on the extent of
ownership of banks as well as scale-based governance frameworks for NBFCs. While the
industry provided feedback on both these documents, it is now eagerly awaiting the
regulators final decision and circular on the matters. It appears almost certain that
larger NBFCs that have the potential to systematically influence the overall banking and
financial services system may now enjoy less of ta regulatory arbitrage and be subject t a
governance framework akin to banks. With expected regulations around corporate houses
being allowed to own a bank, we can also expect significant consolidation in this segment
resulting in a few large NBFCs either converting into a bank or merging with existing
banks. The decision to convert into a bank though cold also depend on the transition
guidelines, especially those related to liquidity ratio. At the same time, it would be
interesting to see if large NBFCs will leverage the governments privatization of PSB
programme to convert into banks.
Ongoing stress in public sector banks because of increasing bad debts, lending in rural
areas deterioration has provided NBFCs with the opportunity to increase presence. The
success of these NBFCs vs PSUs can be attributed to product lines, lower cost, wider and
effective reach, strong risk management capabilities to check and control bad debts, and a
better understanding of customer segments versus banks. NBFCs have witnessed success in
the passenger and commercial vehicle finance segments as well as growing AUM in the
personal loan and housing finance sector. Additionally, improving macroeconomic
conditions, higher credit penetrations, consumption themes and disruptive digital trends
have influenced NBFC credit growth. Stress in public sector, underlying credit demand,
digital disruption for MSMEs and SMEs as well as increased consumption and distribution
access and sectors where traditional banks do not lend are major reasons for the switch
from traditional banks to NBFCs.
Banking and NBFC sector is once again at an inflexion point, given the potential
transformational, operational and stakeholder changes influenced by the above-mentioned
drivers. Theres a need for financial institutions to assess and evaluate their current
business model and take a strategic call on their commercial and operational framework in
anticipation of newer ways of doing business coupled with changes in market and
competition landscape.
• FINANCIAL PERFORMANCE
Standalone Financial Performance: The Companys loan portfolio is at INR 218.10 Crs in
FY 2023 from INR 174.93 Crs in FY 2022. During the year under consideration, your
Companys total income including other income is INR 26.16 Crs as compared to INR 16.45
Crs in the previous years. The Net Profit after tax is INR 9.84 Crs against the profit of
INR 9.36 Crs in the previous years.
• SEGMENT WISE / PRODUCT WISE PERFORMANCE
The Company is engaged in financing activities, hence the requirement of segment-wise
reporting is considered irrelevant.
• OUTLOOK
The Companys growth prospects remain positive as it is well equipped to handle any
exigency. The Company is consistently adding its revenue sources while containing costs
and work upon disruptions to its advantage. The Company has adequate capital and financial
resources to run its business operations and has adequate internal financial reporting and
control.
• OPPORTUNITIES, THREATS, RISK & CONCERNS
Risk is synonym with NBFCs which is inherent part of their business. The Company is
also subjected to various types of risks. The Company has identified risks and guarded
itself by adopting a range of strategies and measures to reduce the impact of risks.
Business Opportunities for NBFCs are enormous. As the new areas and segments are being
explored, there is a large scope of medium size NBFCs like ours, for certain segment of
customers, which remain unserved by Banks and large size NBFCs. The major threat being
faced by NBFCs are from aggressive marketing of Banks and low rates of financing offered
by them.
• INTERNAL CONTROL SYSTEMS AND ADEQUACY
The Company has adequate internal control systems to ensure operational efficiency and
accuracy in financial reporting and compliance of applicable laws and regulations. The
internal control is supplemented by review of internal auditors. Observations of the
internal auditors are subject to periodic review and compliance monitoring. The Audit
Committee of Directors reviews the Internal Audit process and the adequacy and
effectiveness of internal audit and controls periodically.
• HUMAN RESOURCES
During the year under review there has been no material development on the Human
Resource/Industrial Relations front.
• CAUTIONARY STATEMENT
Statements in this Management Discussion and Analysis describing the companys
objectives, estimates and expectations may be "forward-looking statements"
within the meaning of applicable security laws and regulations. Actual results could
differ materially from those expressed or implied due to several factors which are beyond
the control of the management. In accordance with the Code of Corporate Governance
approved by the Securities and Exchange Board of India, shareholders and readers are
cautioned that in the case of data and information external to the company, no
representation is made on its accuracy and comprehensiveness though the same are based on
sources believed to be reliable. Utmost care has been taken to ensure that the opinions
expressed by the management herein contains its perceptions on the material impacts on the
companys operation but its not exhaustive. The Company assumes no obligation to amend or
update forward looking statements in future on the basis of new information, subsequent
developments or otherwise.
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