Transwarranty Finance Ltd Management Discussions

Background:

Transwarranty Finance Limited is a non-deposit accepting NonBanking Finance Company (“NBFC”), holding a license from the Reserve Bank of India (“RBI”) engaged in a wide spectrum of financial services, with focus on fund based lending. The Company has a capital market subsidiary engaged in equity / commodities / currency broking and Merchant Banking activities and a wholly owned subsidiary operating a technology platform.

Global Economic Overview:

Despite conflict in Ukraine and the war between Israel and Gaza, a persistent threat of a global recession and elevated interest rates, the global economy showcased remarkable resilience, maintaining a low but steady growth in economic activity. Factors such as expansionary government spending, robust household consumption, and strong labour markets and normalisation of supply chain issues have contributed to this steady growth. The inflation is falling across all major countries and the IMF has projected the world real GDP growth at 3.2% in 2024 and 3.2% in 2025.

Indian Economic Overview:

India emerged as the fastest growing major economy of the world amidst the slowdown in the global economy and geopolitical adversities. It is the worlds fifth-largest economy, with GDP growth estimates at 8.2% in FY2024. This growth was propelled by robust domestic consumption, increased government capital investment, a strengthened financial sector, and stable monetary policies. The RBI has raised Indias real GDP forecast to 7.2% for FY2025. The CPI averaged at the rate of 5.4% in FY2024, and it is expected to further reduce to 4.5% in FY2025 subject to, of course, the usual upside risks. Overall retail inflation is now stable and within the tolerance band of the RBI.

Industry Overview:

The Financial Services sector in India is a diversified sector consisting of commercial banks, insurance companies, nonbanking financial companies, housing finance companies, co-operatives, pension funds, mutual funds and various other smaller financial entities.

NBFCs have emerged as the crucial source of finance for a large segment of the population, including SMEs and economically unserved and underserved people. They continue to leverage their superior understanding of regional dynamics and customised products and services to cover financial inclusion in India. Lower transaction costs, innovative products, quick decision making and prompt customer service and efficient last-mile credit delivery with the help of technology have differentiated NBFCs from banks.

Digital payment transactions have increased significantly as a result of the coordinated efforts of the government. During the past five years, various easy and convenient modes of digital payments, have experienced significant growth and transformed the Fin Tech ecosystem making it the most preferred mode of payment.

As per RBIs Financial Stability Report, aggregate lending by NBFCs rose by 20.8% from 10.8% a year ago, primarily led by personal loans and loans to industry. The gross nonperforming assets (GNPA) and net non-performing assets (NNPA) ratios of NBFCs continued on their downward trend indicating better asset quality.

Over the past two years, banks and NBFCs have seen rapid and persistent growth in retail loans, especially unsecured retail lending. Concerned with the risk of a spillover effect, the RBI has taken various regulatory measures to address governance issues, strengthen risk management practices, and ensure higher levels of supervision. These include scale based regulation, higher risk base to unsecured lending, capping first loss default guarantee ( FLDG), tightening of NPA provisioning norms, extension of prompt corrective action (PCA) to select NBFCs etc.

Overall, the BFSI sector in India will continue to demonstrate resilience, innovation, and adaptability, thereby positioning itself for sustained growth and financial inclusion in the years ahead.

Review of Operations of the Company:

The performance of the company has been remarkable during the year. Total revenue increased to Rs. 851.20 lakhs compared to Rs. 386.82 lakhs in previous year. This was mainly due to better performance of Lending business. The company made a profit of Rs. 35.10 lakhs as compared to loss of Rs. 870.09 lakhs in previous year. On a consolidated basis, total revenue increased from Rs. 1203.09 lakhs to Rs. 1738.03 during the year.

The Company has been in the personal and consumer lending business on digital platform. It has developed its own digital lending OROBORO app as well. The Company has collaborated with many channel partners and have accelerated lending activities. The number of disbursements during the year have increased substantially to Rs. 2698.70 lakhs from 2150.35 Lakhs in the previous year. The Company has taken necessary steps to further upgrade the technology platform and has put in place systems to cater to higher scale of operations. The business activity is very encouraging and there is huge potential to scale up the business.

The Company has only one segment of activity namely, Financial services.

Strengths, Weakness, Opportunities and Threats (SWOT) analysis:

Strengths:

• Professional and ethical management

• Infusion of equity funds

• Various Channel partners

• Stringent cost control

• Prudent risk management systems

• Strong collection field force

• Strong Technological base Weakness:

Limitations in capturing adequate scale of business Opportunities:

• Scalability of digital lending business

• Leveraging technology for ease of operations

• Distribution of various financial products

• Wealth management Threats:

• Exposed to systemic, regulatory and economic risks Business Outlook:

The Company has collaborated with multiple channel partners for lending. This will accelerate the scale up in fund based digital lending business. The Company strives to be an important player in pocket loans segment. The Company has completed its Rights issue and a Preferential issue. The company is poised to accelerate the growth in coming years.

The Company has developed OROBORO app for seamless digital lending. It is in the process of integrating it with other technology platforms for complete automation. Application Program Interface (API) based integrations and full set of digital payment options and the integration with partner networks is likely to improve operational efficiency.

The Company, conducts all capital market activities through its subsidiary company, Vertex Securities Limited. This includes broking of equity & equity derivatives, commodities and currency broking and distribution of third-party products.

FINANCIAL REVIEW:

During the year under review, Total revenue of the company increased to Rs. 851.20 lakhs as compared to Rs. 386.82 Lakhs in the previous year. This was mainly attributable to substantial rise in lending activity during the year. The company has turned the corner and made a profit of Rs. 33.10 lakhs during the year against loss of Rs. 870.09 lakhs in previous year.

On consolidated basis, the Company achieved total revenue of Rs. 1738.03 lakhs as compared to Rs. 1203.09 Lakhs in the previous year.

The subsidiary company, Vertex Securities limited achieved consolidated revenue of Rs. 908.85 lakhs against RS.838.19 lakhs in the previous year.

Key Ratios

Particulars	2023-24	2022-23
Debtors Turnover ratio	0.26:1	0.58:1
Interest Coverage Ratio	1.17	(0.86)
Current Ratio	1.34	1.15
Net Profit Margin (%)	4.12	(226.70)
PBT/Total Income	0.04	(224.93)
PBT/Total Assets	0.005	(13.26)
RONW (Avg. Net Worth)	0.010	(0.26)
Debt/ Equity	0.75	0.64
Capital Adequacy	72.98%	92.10%
Tier I Capital	36.49%	46.05%
Tier II Capital	36.49%	46.05%

There is an Improvement in Profitably Ratio due to improved performance of the company

RISK MANAGEMENT:

Risk Management is an integral part of the Companys business strategy. The Company is exposed to specific risks that are peculiar to its business including interest rate volatility, economic cycle, market risk and credit risk. The management continuously assesses the risk and monitors its business and risk management policies to mitigate risk.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Companys internal control system is designed to ensure operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliance with laws and regulations. The internal control system is supported by an internal audit process for reviewing the adequacy and efficacy of the Companys internal controls, including its systems and processes and compliance with regulations and procedures. Internal Audit Reports are discussed with the Management and are reviewed by the Audit Committee of the Board which also reviews the adequacy and effectiveness of the internal controls in the Company.

HUMAN RESOURCE DEVELOPMENT:

The Company believes that the human resources play a vital role in giving the company a competitive edge. The Companys philosophy is to provide congenial work environment, performance oriented work culture, knowledge acquisition/ dissemination, creativity and responsibility. As in the past, the Company has enjoyed cordial relations with the employees at all levels. Our employee strength is 34 as on March, 2024.

CAUTIONARY STATEMENTS:

Statements in the Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectation may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied.

For and on behalf of the Board of Directors
	Kumar Nair
	Chairman
	(DIN 00320541)
Place: Mumbai
Date: 09th August, 2024