vibrant global capital ltd share price Management discussions


Your company is a NBFC which has been in existence for more than two and a half decades. Your Company is registered with the RBI as a NBFC without accepting public deposits under section 45 IA of the RBI Act, 1934 and has been in the business of providing short term and long-term loans and advances, investing in equity products for a substantial long time now.

Your Company is a professionally managed company with registered office at Mumbai with team of experts to ensure effective utilization of the assets and improve the overall profitability and financial efficiencies of the company.

MACROECONOMIC OVERVIEW:

The Indian economy staged a rebound from the pandemic-induced disruptions. However, the second wave, which was more intense and severe than the first, overwhelmed the country?s healthcare infrastructure and prompted the re-imposition of lockdowns, albeit localized. The government, overcoming initial jitters, focused rightly on accelerating the vaccination drive to leave behind the scars of the pandemic. The re-opening and subsequent normalization of economic activities brought the recovery trajectory on track in the second quarter, with several sectors showing a steady glide path to pre-pandemic levels. Rising inflation in the second half due to supply side challenges viz. elevated commodity, crude and food prices, logistics challenges however, kept the RBI on constant vigil mode. Although the apex bank refrained from raising policy rates through FY22, its statements turned increasingly hawkish, signaling that inflation and growth have exchanged places in its priority hierarchy in the last Monetary Policy committee meeting of FY22. That said, various indicators including GST collection, e-way bill generation, foreign trade indicated that the Indian economy was on track to exit the financial year with high-single-digit growth (Economic Survey 2022), after contracting by 6.9% n FY21. Meanwhile, in line with the economic activities, credit growth picked up in FY22 with retail loans showing the sharpest uptick.

SUMMARY OF THE ECONOMIC SURVEY 2021-22

Salient highlights for Indian economy as per the Economic outlook Survey for 2021-22 by Government of India were as under:

As per world bank, ADB and IMF projections, India to remain the fastest growing major economy in the world during 2021-24

Indian economy to grow by 9.2% in real terms in 2021-22

Agriculture to grow by 3.9% in 2021-22 in comparison to 3.6% in the previous year

Industrial sector to witness sharp rebound from a contraction of 7% in 2020-21 to expansion of 11.8% in 2021-22

Services to clock 8.2% growth in 2021-22 after a contraction of 8.4% last year

Foreign exchange reserves stood at us$ 634 billion as on 31st December 2021 equivalent to over 13 months of imports and higher than country?s external debt

Investment is expected to see a strong growth of 15% in 2021-22

Consumer price index (cpi) combined inflation of 5.6% in December 2021 is well within targeted tolerance band

Fiscal deficit for April - November 2021 contained at 46.2% of budget estimates

Capital market booms despite pandemic; over Rs 89 thousand crore raised via 75 IPO issues in April - November 2021, much higher than in any year in the last decade

MACRO-ECONOMIC STABILITY INDICATORS SUGGEST INDIAN ECONOMY BEING WELL PLACED

India will witness GDP growth of 8.0-8.5% in 2022-23, supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending. Economic Survey 2021-22 states that the year ahead is well poised for a pick-up in private sector investment with the financial system in a good position to provide support to the revival of economy. The growth projection for 2022-23 is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be broadly orderly, oil prices will be in the range of US$70-$75/bbl., and global supply chain disruptions will steadily ease over the course of the year.

GDP Growth

The Indian economy has grown, braving the covid pandemic and the ongoing Russia-Ukraine conflict that led to global inflation. However, the road ahead will not be a rosy one for the government as the cloud of price rises is looming large. The economic growth of India slowed to the lowest in the financial year 2021-22 during the January to March period or the fourth quarter. This pulled down the gross domestic product (GDP) growth in the full fiscal 2021-22 to 8.7%, according to the data released by the National Statistical Office (NSO).

The GDP growth for quarter 1 of FY2021-22 (April-June) was at 20.3%, for quarter 2 (July-September) at 8.5%, for quarter 3 (October-December) at 5.4%, and quarter 4 (January to March this year) at 4.1%.

For the full year (April 2021 to March 2022), the countrys economic growth of 8.7% was lower than the 8.9% the government had projected three months back. First, the Covid-induced curbs and then the war in Ukraine added to higher commodity prices and a supply squeeze. The economy had contracted by 6.6% in the financial year 2020-21.

Inflation

India inflation rate for 2021 was 5.13%, a 1.49% decline from 2020 which was 6.62%

The RBI has revised Indias inflation projection to 6.7% from the earlier estimate of 5.7% as the protracted nature of the Russia-Ukraine war puts pressure on commodity prices globally. The RBI underlined that CPI inflation increased from 7.0 percent in March 2022 to 7.8 percent in April 2022, reflecting a wide increase in all of its major components.

Food inflationary pressures have increased, with cereals, milk, fruits, vegetables, spices, and prepared meals leading the way. The surge in LPG and kerosene costs drove up fuel inflation.

Through much of 2020-21 and 2021-22, the headline Consumer Price Index (CPI) inflation rate remained well above the 4% target of the Reserve Bank of India (RBI) and often even above the 6% upper limit of the tolerance band. Core inflation (excluding food and fuel) remained above or close to 6%. Non-food inflation was even higher, sometimes crossing 7%. The GDP deflator was in double digits for 2021-22. The Wholesale Price Index (WPI) inflation rate was also in double digits throughout 2021-22 and has exceeded 15% in April and May 2022. Despite these multiple indicators, and its single formal mandate of ensuring low inflation at 4% (+/- 2%), RBI maintained that high inflation was transitory and continued focusing on promoting growth, maintaining a low policy rate and high liquidity.

It is not clear how soon the Ukraine war situation will improve and ease global supply constraints. But monetary policy is being tightened quite sharply in the US and other advanced countries. Hence, on balance, the external pressures driving Indian inflation are likely to weaken in the months ahead. On the domestic front, assuming a normal monsoon, no new supply side disruptions or duty increases on fuel are expected to exacerbate inflationary pressures Hence, inflation may indeed decline to less than 6.2%, though the 4% target set by RBI seems beyond reach.

ECONOMIC OUTLOOK FOR INDIA

The year ahead is poised for a pickup in private sector investment with the financial system in a good position to provide support for the economy?s revival. Projection is comparable with World Bank and Asian Development Bank?s latest forecasts of real GDP growth of 8.7 % and 7.5% respectively for 2022-23. As per IMF?s latest World Economic Outlook projections, India?s real

GDP is projected to grow at 9% in 2021-22 and 2022-23 and at 7.1% in 2023-2024, which would make India the fastest-growing major economy in the world for all 3 years.

A combination of high foreign exchange reserves sustained foreign direct investment, and rising export earnings will provide an adequate buffer against possible global liquidity tapering in 2022-23. The economic impact of the "second wave" was much smaller than that during the full lockdown phase in 2020-21, though the health impact was more severe. Government of India?s unique response comprised of safety-nets to cushion the impact on vulnerable sections of society and the business sector, significant increase in capital expenditure to spur growth and supply-side reforms for a sustained long-term expansion. The government?s flexible and multi-layered response is partly based on an "Agile" framework that uses feedback-loops, and the use of eighty High-Frequency Indicators (HFIs) in an environment of extreme uncertainty.

However, the outlook for the current fiscal year (FY 2022-23) remains clouded as global crude oil prices have hardened back to $120 per barrel after increased sanctions on Russian oil. The economys near-term prospects have been affected by a spike in retail inflation, which hit an eight-year high of 7.8% in April. The surge in energy and commodity prices caused partly by the Ukraine crisis is also squeezing economic activity.

This optimism of growth projections has received a jolt early this year as a wave of omicron infections swept through the country (which, thankfully, did not last long), and then in February, Russia invaded Ukraine. These events aggravated the preexisting challenges such as surging inflation, supply shortages, and shifting geopolitical realities across the world with no definite end in sight. And the subsequent confluence of headwinds such as surging commodity prices and disruption in trade and financial transactions quickly deteriorated economic fundamentals that were trending up a few months back.

it is true that uncertainties in the global business ecosystem will send crippling headwinds toward India. Inflation and supply chain disruptions will remain entrenched for some time. However, domestic demand and the desire of global businesses to look for more resilient and cost-effective investment and export destinations, among other factors, will help India ride this tide of headwinds. However, we still believe and reiterate that the risks are not strong enough to deny India an economic rebound given the domestic demand potential. We expect India to grow by 7.1% 7.6% in FY22 23 and 6% 6.7% in FY23 24. This will ensure that India reigns as the world?s fastest-growing economy over the next few years, driving world growth even as several major economies brace themselves for a slowdown or possibly a recession. And the key drivers of growth of economy would be Higher capital expenditure, push to infrastructure through the new institutional framework, boost to the manufacturing sector and buoyant exports.

OVERALL PROSPECTS:

As the Ukraine conflict impacts the global GDP, India is projected to grow by 6.4 % in 2022, slower than the last years 8.8% but still the fastest-growing major economy, with higher inflationary pressures and uneven recovery of the labour market curbing private consumption and investment, according to a UN report.

The war in Ukraine has upended the fragile economic recovery from the pandemic, triggering a devastating humanitarian crisis in Europe, increasing food and commodity prices and globally exacerbating inflationary pressures.

The global economy is now projected to grow by only 3.1% in 2022, down from the 4.0% growth forecast released in January 2022. Global inflation is projected to increase to 6.7 % in 2022, twice the average of 2.9% during 2010-2020, with sharp rises in food and energy prices.

Outlook in South Asia has deteriorated in recent months, against the backdrop of the ongoing conflict in Ukraine, and higher commodity prices and potential negative spillover effects from monetary tightening in the United States. The regional economic output is projected to expand by 5.5% in 2022, which is 0.4 percentage points lower than the forecast released in January.

India, the largest economy in the region, is expected to grow by 6.4% in 2022, well below the 8.8% growth in 2021, as higher inflationary pressures and uneven recovery of the labour market will curb private consumption and investment, it said.

For the fiscal year 2023, Indias growth is forecast to be 6-6.5%

NBFC OUTLOOK WITH RESPECT TO INDUSTRY

Non-banking financial companies (NBFCs) and housing finance firms witnessed an improvement in their asset quality in the fourth quarter of FY22, helped by minimal impact of Omicron variant of COVID-19 and lower slippages from restructured book as per Reported by ICRA.

The gross stage 3 assets (loans overdue for more than 90 days) for NBFCs reduced to 4.4 % in March 2022 from 5.7% in December 2021. HFCs (Housing Finance Companies) gross stage 3 assets moderated and stood at 3.3% vis-?-vis 3.6% in December 2021. Entities augmented their collections in view of the tighter Income Recognition, Asset Classification and Provision (IRAC) norms, which are applicable from October 2022. NBFC write-offs remained elevated and marginally higher than the last fiscal, while HFC write-offs were modest. The slippage from the restructured book, especially for NBFCs, was lower than expected, which also favorably contributed to the asset quality performance.

The standard restructured book of NBFCs is estimated to have reduced to 2.7-3% in March 2022 from the peak of 4.5% in September 2021, while the same for HFCs moderated to 1.4-1.6% from 2.2% during the above-mentioned period. The performance of this book is expected to remain monitorable, considering the weakening macroeconomic/operating environment and the balloon repayment schedule of some of these loans. Although the gross stage 3 asset has moderated, these entities would provide them with some room to deal with pressure on margin in the current fiscal as their borrowing rates are going up.

Infrastructure credit growth has slackened regardless of a sharp economic recovery following the easing of restrictions after the COVID-19 second wave abated.

The infrastructure-focused loan books saw moderate annualized growth for both non-banking finance companies NBFCs and banks in FY22. However, a late recovery was witnessed after the first wave of the COVID pandemic, with infrastructure credit growing 10 % in FY21 despite having decelerated in the first half of the fiscal. Although the tepidness in recent years was mainly due to the sluggishness in banking sector credit to infrastructure segment, the trend in FY 22 was attributable to moderation in the portfolio growth of infrastructure finance companies (IFCs) as per ICRA

The growth prospects for NBFC-IFCs are strong as demand for infrastructure credit is expected to gather pace amid the Governments resolve to focus on the infrastructure sector to revive economic growth. Consequently, NBFC-IFCs loan books are expected to grow by 10-12% in FY2023.

In terms of sectoral breakup, concentration in the power sector remains higher for IFCs with a share of around 60% of the portfolio compared to the 50% share of the power sector in banks exposure to the infrastructure segment. This is because of certain NBFC-IFCs, which are specialized institutions solely focused on the power sector. The asset quality trajectory over the past few years indicates receding asset quality pressures for NBFC-IFCs.

"With the improving asset quality and increased provision cover against NPAs, the aggregate solvency indicator (Net Stage 3/Net Worth) for the sector has improved considerably over the past three years to the strongest level since March 2016. Thus, with the balance sheets recuperating, the sector is relatively better placed for growth. ICRA expects the reported stage 3% to decline by further 25-30 bps supported by pending resolutions and book growth.

NBFC-IFCs, especially Public-IFCs, have reverted to a healthy profitability trajectory with the decline in the share of non-performing loans and in the cost of borrowings. This is driving healthy internal capital generation and supporting the capitalization level. As a result, the capitalisation level remains adequate with a downward bias in the gearing level in recent years, which places the industry well for medium-term growth.

Nonetheless, the capitalisation and solvency levels of IFCs have witnessed a respite only in the recent past. Hence, the ability of these entities to grow in a calibrated manner without significantly reducing the cushion in the capital over the levels prescribed by the regulator will remain imperative. Prudent capitalisation is a key mitigant against the risks in NBFC-IFCs portfolios arising out of sectoral and credit concentration and growth above 10-12% may warrant external capital raise to maintain prudent leverage.

The asset-liability maturity profiles have improved as reliance on short-term borrowings has reduced and longer-tenor borrowings have been raised in the recent past amid favourable systemic rates. "Given the intense competition from Public-IFCs, IDFs and banks, it is expected that the profitability of Private-IFCs (excluding IDFs) may remain lower than its public sector peers and IDFs, until these entities can ramp up and sustain the non-interest income levels NBFC/HFC net profitability-RoMA (Return on Average Managed Assets) for FY23 is expected to remain at the same levels as the last fiscal.

"NBFC and HFC Profitability indicator RoMA for FY23 are expected to be around 2.3-2.5% and 1.6-1.8%, respectively, similar to FY22 levels, supported by stable Net Interest Margins and moderation in credit cost.

BUSINESS RISK MANAGEMENT:

In the backdrop of obvious rise in the scope of business and increased regulatory rigour, what remains challenging is the implementation of risk-management strategies in the sector to ensure that the business models remain viable, adequately ring-fenced and sustainable. In the realm of risk management, the asset quality norms will bring to focus any gaps in credit risk management while the trends of risk adjusted yields on investment, treasury earnings and

‘mark to market? obligations can reveal the shortcomings in market risk.

NBFCs are exposed to several major risks in the course of their business - credit risk, interest rate risk, equity / commodity price risk, liquidity risk and operational risk. In a dynamic environment which is in a state of flux due to natural calamities like COVID PANDEMIC that surfaced 2 years back or breakout of Russia-Ukraine war, it is absolutely necessary to have a proper frame work to identify business risks and also put proper systems to take corrective actions immediately after the signals from business environment are scanned and their impact is perceived. In this context, risk identification and its mitigation has become most imperative. Therefore, in accordance with the provisions of the listing agreement the Board members are informed about risk assessment and minimization procedures after which the Board formally adopts steps for framing, implementing, and monitoring the risk management plan for the company. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating, and resolving risks associated with the business and identifying suitable measures for risk mitigation.

As you are aware, The Company has quoted investments which are exposed to fluctuations in stock prices. The Company continuously monitors market exposure for equity and takes attendant control measures. Thus, Managing the portfolio Risk is a key element of Managing risk of our business.

Managing overall portfolio risk

There is an overall framework for management of the overall portfolio profile to achieve expected risk adjusted returns by continually monitoring the portfolio for risk and return tradeoffs. Under this framework, there is a periodic review of the portfolio and deciding and implementing actions to achieve portfolio objectives. This in turn means

Proactively reviewing portfolio health and performance metrics and potential deviations from plan due to deal specific factors or external factors.

Reviewing the levels of portfolio concentration risk on various dimensions in light of external environment and internal funding considerations to ensure risk adjusted returns are in line with expectations. These dimensions would include

Client, group level concentration: long term and short term pending sell-down or divestments (beyond RBI stipulations)

Sectoral concentration Collateral based: land, other forms of real estate listed shares, unlisted shares, other

End-use: capital markets, real estate development, M&A etc.

Suitability for various forms of finance: bank finance, rated paper etc.

Deciding on divestments and their terms to manage the portfolio within desired risk- return parameters

Deciding on need for actions on parts of the portfolio such as additional collateral, exercise of puts or calls or other options to get the best risk adjusted return profile

Deciding on guideline/ framework changes for incremental loans to manage the portfolio within desired risk parameters given the existing portfolio

HUMAN RESOURCES RISK MITIGATION:

Human Resource Paradigms in an Organisation are the mind-sets of people reflecting the knowledge, beliefs, perceptions, and assumptions about the world in which the human resources are deployed. Human resource paradigms are the eyeglasses through which managers see people and their ability to contribute to the business. How the management team views and feels about human resources directly affects human resource management. We, as a management believe in the Paradigm that People are one of the keys to success in risk management, that Employees are creative and that they are an important source of new ideas and that Appreciated people will respond with dedication and loyalty.

The management team, not employees or the rest of the family, determines the paradigms that shape the human resource environment. We believe that human capital is the most important capital that needs to be harnessed to be able to carve out a vibrant performance from the Organisation and hence lot of emphasis is placed upon respecting all 4 C?s as a part of Human

Resource risk mitigation strategy

Critical thinking and problem solving the ability to make decisions, solve problems and take action as appropriate.

Effective communication the ability to synthesize and transmit ideas in both written and oral formats.

Collaboration and team building the ability to work effectively with others, including those from diverse groups and those with opposing points of view.

Creativity and innovation the ability to see what?s not there and make something happen.

And in light of the above, we adopt 4 core strategies to manage Human Capital

Assess current HR capacity.

Forecast HR requirements.

Develop talent strategies.

Review and evaluate.

Thus, Company has adopted a policy of encouraging performance, innovation, multitasking and human capital alignment with business strategies driving business performance.

OPERATIONAL RISK MANAGEMENT:

Company deploys an effective operational risk management (ORM) program despite the fact that we face a number of headwinds. Rapid shifts have transformed the way we operate in a global environment with larger and more complex supply chains. We need to manage an expanding list of regulations, and the explosion in social media means their activities are scrutinized more closely than ever before.

Our ORM is based on following 7 Fundamentals:

1. Backing of the organization?s leadership. It is championed at the very top of the organisation.

2. Introduce risk accountability across the organisation. Employees across every level of the enterprise are trained to incorporate risk-based thinking into their day-to-day activities and held accountable for risks within their immediate area of control.

3. Agree to timely risk assessments. Risk assessments helps us to ensure comply with new requirements and keep risk management a top priority. The frequency of these audits are annual basis, to keep the risk profile up-to-date and to incorporate any relevant changes (economic, geopolitical, technology, workforce).

4. Quantify and prioritize risk. ORM program are quantified in terms of probability and severity, and calculated in terms of the costs and benefits of mitigating a risk versus allowing the risk to remain as is. This enables mitigation efforts to be targeted most effectively.

5. Establish appropriate metrics and key performance indicators to monitor and assess performance. It enables us to ensure that the appropriate effort and resources are expended based on the specific risk profile of the business.

6. Implement consistent, well-documented and cost-effective controls. Such control measures are in place to actively mitigate identified priority risks.

7. Reinforce the importance of risk management through regular communications. We adopt a regular timetable of communication on ORM performance as an effective way of maintaining engagement on the subject. Communications are tailored to specific levels and functions of the organisation to address different priorities and focus areas.

CONSOLIDATED SEGMENT-WISE PERFORMANCE

A table showing Brief on the Segment-wise revenue is stated as below:

Consolidated
Particulars FY 2021-22 FY 2020-21
Trading 9,991.71 8,170.50
Manufacturing 5,740.97 5,949.66
Capital Market 12,213.97 4,185.46
Unallocated 419.27 1,304.47
Total 28,365.93 19,610.10

Trading revenue stood at INR 9,991.71 Lakhs during current fiscal year as compared to INR 8,170.50 Lakhs during previous year. There was slight dip in the Manufacturing revenue which stood at INR 5,740.97 Lakhs during current year as compared to INR 5,949.66 Lakhs for previous year. The capital revenue stood at INR 12,213.97 Lakhs during current fiscal year as compared to INR 4,185.46 Lakhs during previous year. This resulted due to improvement of investment in listed equities in Vibrant Global Capital Limited. Detailed Segment revenue-wise revenue forms part of notes to consolidated financial statements.

SYNERGY & STRENGTH DERIVED FROM OUR GROUP AND SUBSIDIARY COMPANIES:

Our company is a part of "Vibrant Global Group" with the operation of our group and

Subsidiaries and Associate companies spanning from Manufacturing of Iodized Edible Salt, Trading of steel products and polyester films.

A brief highlight of the revenues of our subsidiaries for FY 2021-22 is as follows:

Name of the Company Revenue PAT/ LAT
Vibrant Global Trading Pvt. Ltd. Subsidiary Company 15,289.76 (289.11)
Vibrant Global Salt Pvt. Ltd. Subsidiary Company 7,035.05 256.11

Vibrant Global salt Pvt ltd continued its good performance with the sales focus more enhanced on the private labelling sales opportunities for brands of other companies that led to a good growth. In the quest for enhancing the quality of the products, company will commission in the FY 22-23, specialty machines that would further make quality of our iodized refined salt offering for domestic market, better than competition.

Experienced Management Team

Our core management team has substantially contributed to the growth of our business operations. Our Company is managed by Mr. Vinod Garg, Managing Director and Mr. Vaibhav Garg, Whole Time Director and Chief Financial Officer. Our professionally qualified Directors have added to our operational and business strengths.

PERFORMANCE DURING THE YEAR

On Standalone Business:

The standalone total income increased to INR 6,151.20 Lakhs during current fiscal as compared to INR 2,313.79 Lakhs during previous FY 2020-21. The Company recorded profit (after Tax) of INR 4,608.74 Lakhs during fiscal year as compared to profit (after Tax) of INR 1,937.09 Lakhs during previous FY 2020-21.

On Consolidated Business:

The consolidated total income increased from INR 19,007.30 Lakhs to INR 28,354.98 Lakhs during current fiscal year, which is increase by 49.18%. The Company recorded profit (after Tax) of INR 4,670.55 Lakhs during fiscal year as compared to profit (after Tax) of INR 3,497.86 lakhs during FY 2020-21.

The company?s focus remains on manufacturing businesses for their investments and simultaneously company is also reducing its debt aggressively as doing this financial year.

As on 31st March, 2022, total market value of quoted investment stood at INR 9,061.41 Lakhs whereas unquoted investments were recorded at INR 2,151.17 Lakhs.

CAUTIONARY STATEMENT

Statements made herein describing the Companys expectations or predictions are "forward-looking statements". The actual results may differ from those expected or predicted. Prime factors that may make a difference to the Companys performance include market conditions, Government policies & regulations, economic development within/outside country etc.