Today's Top Gainer
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Information provided in this Management Discussion and Analysis (MD&A) pertains to Vibrant Global Capital
Limited ("the Company"), its Subsidiaries and Associate Companies as on March 31, 2017 vis--vis March 31, 2016, wherever mentioned.
The company has travelled another year, in pursuit of excellence for all its stakeholders. Despite a turbulent year with low growth rates and stiff competition from banks, the performance of the company continued to be encouraging on all fronts. It has geared itself to face new challenges, and capitalise on new opportunities.
Global economic growth slowed down from 3.19% in 2016 to 2.3% in 2017, as global trade got stagnated, weak investment and policy uncertainty increased. A moderate recovery is expected in FY 2017-18, with global growth forecast to increase to 2.7%. This is driven primarily by improvement in emerging market and developing economies (EMDE). With the expected increased commodity prices, commodity exporters growth is expected to pick up in EMDE. Fiscal stimulus in major economies may boost global growth above expectations. Despite global uncertainties, Indias growth in first half of FY 2016-17, was driven by robust public and private consumption. Consumption was supported by lower energy costs, public sector salary and favourable monsoon rains. Economic activity also benefited from a pick-up in FDI and increase in public infrastructure spending.
INDIAN ECONOMY OVERVIEW
On the domestic front, India remained the fastest growing major economy in the world, after surpassing China last year. Gross Domestic Product growth rate was 7.1% for FY 2016-17, supported by strong consumption growth and government spending. Inflation eased sharply led by a decline in food inflation amidst governments astute food management, facilitating a 50 basis points rate cut by the RBI in FY 2016-17 before it adopted a neutral stance. Diminishing vulnerabilities on the external and fiscal front with Apr-Dec FY 2016-17 current account deficit at 0.7% of GDP and governments commitment to fiscal consolidation reinstated investor confidence in the economy, resulting in record Net Foreign Direct Investment of US$35.9 billion in FY 2016-17. The economic survey re-affirms that India stands out as a heaven of stability and on outpost of opportunities.
FY 2016-17 was also marked by two significant economic measures by the government. Governments demonetisation move to counter the shadow economy and promote cashless economy has boosted digital payments in the country. The Goods and Services Tax (GST) - constitution amendment bill, passed by the government, to be implemented from July 1st, 2017 will have a significant impact on the taxation structure in the country. The reform process would further help boost Indias position in the global arena.
Financial Services Industry
Coming to non-banking finance company (NBFC) industry, India Ratings and Research (Ind-Ra) has maintained a stable outlook on the NBFC sector and on the major NBFCs rated by it for FY 2017-18. The sector is expected to continue expanding the assets classes and take higher market share at the cost of mid-sized banks. The agency predicted large NBFCs to grow 16% year-on-year (Y-o-Y) in FY 2016-17 and 21% YoY in FY 2017-18, which on the system-wide basis would be close to one third of the total systems incremental credit. Both the regulator and government have been maintaining a favourable stance towards the NBFC sector; starting with the latest announcement where SME loans up to INR 2 crores by NBFCs will be covered under the credit guarantee fund trust for micro and small enterprises and the government notification, covering systemically important NBFCs under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
These measures would strengthen the NBFCs ability to lend and mitigate loss given default while speeding up recovery timelines.
*Source: World Bank Report - June 2017
Changing consumer behavior - The young generation is rapidly adopting technology to interact and transact with the world. The number of internet users in India has tripled to 485 million in the past three years (Source: Euro monitor). New technologies such as cloud and analytics are gaining importance. This would provide a huge opportunity to nimble and innovative players in the financial sector to use technology to strengthen their business. Technology can be used to reach customers in a cost-effective manner and enhance customer experience through faster turnaround time, wider product offerings and better risk control and pricing.
Uncertainty in global markets, owing to a recessionary environment in advanced economies and increased strain in China and other emerging markets can result in volatile capital inflows and currency fluctuations. In India, the slow pace in implementation of economic reforms and important legislations can further delay growth.
SEGMENT OVERVIEW NBFCs growing in prominence
Indian NBFCs have been effective in serving the unbanked customers by spearheading into retail asset-backed lending, lending against securities and microfinance. Primarily, they offer small business loans, small-ticket personal loans, financing of two wheelers and cars, farm equipment financing and loans for purchasing used commercial vehicles/ machinery.
Investments and trading in listed / unlisted securities and financial products
Management of our Company focuses on identification, analysis of suitable Equity investment opportunities in different sectors. We undertake suitable due diligence exercises, document preparation, negotiations with customers and counterparties and researching and advising on the optimal structure for the investment. An important factor considered at the time of investment is the possibility to make a profitable exit from the investment, over a period of three-to-five years. As on March 31, 2017, the aggregate value of the Unquoted Investment# of our Company stood at INR 1964.93 Lakhs and the aggregate Market value of the Quoted Investment@ of the Company stood at INR 2,814.50 Lakhs.
#Including investments in subsidiaries and associates and Investment in Preference Share.
@After making provision of diminution in the value of Investment under Accounting Standard 13.
Providing long term loans and advances
Small part of the business is providing long term loans and advances to parties, including our related parties. The loans and advances as provided by us are either in form of:
Term Loans backed by Assets whereby a charge on the relevant asset is created in our favour for ensuring security for repayment of the loan. We follow a client centric approach with customized tenor and repayment schedules to match with the cash flows of the customer.
Long Term Unsecured Loans and advances whereby we provide unsecured loans and advances to our customers. We provide these loans to selected customers and conduct credit checks for these loans from time to time on regular intervals. As on March 31, 2017, there were no unsecured long-term loans and advances.
Advancing short term loans
We also advance loans on short term basis to various customers. As on March 31, 2017, the aggregate value of the short-term loans of our Company stood at INR 494.55 Lakhs+.
+Excluding Short Terms Loans and Advances in nature of Sub Standard, Doubtful and Debit Balances in Creditors Account
Brief Segment-wise revenue is stated as below:
|(INR in Lakhs)|
|Particulars||FY 2016-17||FY 2015-16||FY 2016-17||FY 2015-16|
The standalone capital market revenue increased to INR 1855.64 Lakhs in FY 2016-17 from INR 1,545.73 Lakhs in FY 2015-16, an increase of 20.05% over the previous financial year. The standalone revenue from Lending decreased from INR 217.92 Lakhs to INR 62.56 Lakhs from previous fiscal year. On account of these performances the standalone total Segment Revenues increased to INR 1,926.04 Lakhs in FY 2016-17 from INR 1,773.97 Lakhs in FY 2015-16, an increase of 8.58% over the previous financial year.
The consolidate capital market revenue increased to INR 1855.64 Lakhs in FY 2016-17 from INR 1,545.73 Lakhs in FY 2015-16, an increase of 20.05% over the previous financial year. The Consolidated Trading revenue increased to INR 29,450.49 Lakhs from INR 28,296.55 Lakhs, showing an increase of 4.08% over the previous financial year. On account of these performances the consolidated Revenue increased to INR 36,707.13 Lakhs in FY 2016-17 from INR 30,088.66 Lakhs, which resulted in an increase of 22.00% over the previous financial year.
Long Standing Track-record and Established relationships
Our company received its Non-Deposit accepting NBFC Registration from RBI in the year 1998 and has in the business of providing short term & long-term loans and advances, investing in equity products for a substantial long time now. Our management makes efforts to ensure effective utilization of our assets and improve the overall profitability and financial efficiencies of the company. Our client relationships are established over a period of time as a result of proper client servicing. Our company intends to expand its loan portfolio to cover high net worth individuals with healthy credit record to whom the company may advance funds under both secured/unsecured modes.
The risk management procedures are reviewed periodically, to ensure the focus of the Company is aligned to the changing needs of its customers. The Companys risk management strategy focuses on risk identification and its mitigation, thereby enhancing stakeholder value.
A. Risk: Non-repayment by borrowers might disrupt the cash flows.
Mitigation: The Company actively manages its credit exposures with regular assessment across its customer profile. All the diverse product portfolios are strictly monitored to ensure minimal delinquency levels. In addition, the security also serves as the underlying collateral for the loan taken by the borrowers, securing its credit portfolio.
B. Risk: Exposure to interest rate risks might result in increased cost of lending to customers.
Mitigation: The Company prudently assesses the fund mix to reduce dependency on any one source of funding. In addition, the superior credit ratings on financial instruments enable it to raise funds at competitive rates.
C. Risk: Regulatory implications might dent the smooth operational functioning of the Company.
Mitigation: The Company has in place a robust Corporate Governance framework and ensures that all the regulatory checks are successfully complied with at all times. It maintains its Tier I and Tier II capital adequacy ratios according to the prescribed limits, to continue efficient functioning of its operations.
D. Risk: Disruption in sources of funding could adversely affect the liquidity and financial position of the Company. Mitigation: The Company meets its funding requirements from diverse sources, including shareholder funding, securitized receivables, secured and unsecured loans and several other credit facilities.
E. Risk: Difficulty in expanding operations across new markets or regions in the country.
Mitigation: The Company leverages its deep industry experience during the course of its expansion strategies. It identifies and collaborates with local business partners and adopts strategies to successfully market its products, ensuring it reaches the customers.
F. Risk: Any loss resulting from ineffective processes or responsiveness could affect viability.
Mitigation The Company invested in comprehensive controls to monitor transactions, maintaining key informational backup and undertaking adequate contingency planning.
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 Trading of steel products, Manufacturing of polyester films, Biaxially Oriented Polyethylene Terephthalate films and manufacturing of Salt.
A brief highlight of the revenues of our subsidiary & group companies for FY 2016-17 is as follows:
|(INR in Lakhs)|
|Name of the Company||Revenue||PAT|
|Vibrant Global Infraproject Pvt. Ltd. Wholly Owned Subsidiary Company#||-||1.63|
|Vibrant Global Trading Pvt. Ltd. Subsidiary Company||
|Vibrant Global Salt Pvt. Ltd. Subsidiary Company #||
|Vibrant Global Vidyut Pvt. Ltd. Associate Company||-||(51.12)|
#effective from March 27, 2017
The growing operations and contributions of our subsidiary entities and Associate Company to our consolidated performance provide us financial strength and synergy.
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.
Our Companys Business
We intend to pursue the following principal strategy to leverage our competitive strengths and grow our business:
To continue expanding our business by including new financial products and services
We intend to explore opportunities to expand our operations by developing new products and services within our existing lines of business as well as selectively identifying opportunities to expand into new lines of business. Further expanding our business lines and service offerings will help us to build on existing diversification of our business.
We believe that our employees are key contributors to our business success. To achieve this, we focus on attracting and retaining the best possible talent. Our Company looks for specific skill-sets, interests and background that would be an asset for its kind of business. We believe that our Company has a balanced mix of experience and young force.
The company expects that human resources and employee recruitment activities will increase as the Companys business grows.
We recognize that our human capital drives the Companys customer-driven business model. Therefore, we continuously strive to attract and retain the best talent from the local markets, clearly define their roles and responsibilities, include them into robust performance management systems, create an inspiring and rewarding work environment, engage them into an inclusive work place, impart training and create development opportunities for increasing employee knowledge and efficiency to make them future ready, and create career opportunities within.
As on March 31, 2017, Vibrant Global Capital Limited had 4 (Three) whole time Employees, excluding One Managing Director and One Whole Time Director.
Discussion on Financial Position relating to Operational Performance:
The Company has only one class of equity shares of par value of INR 10 each. The Paid-up Equity Share Capital stood at INR 2,290.74 Lakhs as of March 31, 2017.
Reserves and Surplus:
The Reserves and surplus of the Company increased from INR 509.84 Lakhs to INR 713.94 Lakhs during FY 2016-17. The increase is consequent to Profit earned during the year.
The long-term borrowings outstanding as on March 31, 2017 were INR 1,395.67 Lakhs as compared to INR 1,475.00 Lakhs as of March 31, 2016. The decrease is on accounts of part repayment of Loan.
Investments of the company include quoted and unquoted investment in Equity and Preference Shares, the total investment as on March 31, 2017 were INR 3,897.29 Lakhs as compared to INR 2,870.50 Lakhs as on March, 2016. The increase in investment is due to new of Investments.
The Company further invested in Subsidiaries and Associate Company during FY 2016-17:
1. Investment in Vibrant Global Infraproject Private Limited@
@On March 27, 2017, The Company acquired 3,10,000 Equity Shares of INR 10.00 each of Vibrant Global Infraproject Private Limited and by virtue of this investment, it has become Wholly Owned Subsidiary of the Company w.e.f. March 27, 2017.
2. Investment in Vibrant Global Trading Private Limited#
#On March 27, 2017, the Company acquired 1,75,360 Equity Shares of INR 10.00 each of Vibrant Global Trading Private Limited and by virtue of this investment, the Company consolidated its stake and now holding 85.00% of Share capital of Vibrant Global Trading Private Limited.
3. Investment in Vibrant Global Salt Private Limited^
^On March 27, 2017, the Company acquired 4,50,000 Equity Shares of INR 10.00 each of Vibrant Global Salt Private Limited and by virtue of this investment, the Company consolidated its stake and now holding 57.58% of Share capital of Vibrant Global Salt Private Limited.
Revenue from Operations
The Standalone total income increased from INR 1,773.97 Lakhs to INR 1,926.04 Lakhs, an increase of 8.54% over the previous financial year.
Total expenditure decreased by 7.04% from INR 1,712.52 Lakhs during FY 2015-16 to INR 1,591.95 Lakhs during FY 2016-17.
The standalone Profit after Tax increased to INR 204.10 Lakhs from INR 66.50 Lakhs with increase of 206.91%
Cash Flows Statement
|(INR in Lakhs)|
|Particulars||FY 2016-17||FY 2015-16|
|Net Cash inflow/ (outflow) from Operating activities||1,039.92||1,233.65|
|Net Cash inflow/ (outflow) from Investing activities||(985.13)||(462.46)|
|Net Cash inflow/ (outflow) from Financing activities||356.00||(1,052.05)|
|Cash and Cash equivalents at the beginning of the year||118.31||399.18|
|Cash and Cash equivalents at the end of the year||529.10||118.31|
Information provided in the consolidated results are results of Vibrant Global Capital Limited, its Subsidiaries (Vibrant Global Trading Private Limited, Vibrant Global Infraproject Private Limited and Vibrant Global Salt Private Limited) and Associate Company (Vibrant Global Vidyut Private Limited).
Total Revenue from Operations
The Consolidated Total revenue from Operations increased from INR 30,088.66 Lakhs to INR 36,707.13 Lakhs, an increase of 18.03% over the previous financial year
Expenses for the year March 31, 2017 is INR 36,489.36 Lakhs as compared to INR 29,917.38 Lakhs for the year March 31, 2016. Expenses increase by 21.97% due to increase in Purchase of stock-in-trade, Employee costs, Finance cost and Depreciation and amortization expenses.
There was a Profit after Tax of INR 132.44 Lakhs for the year March 31, 2017 as compared to Profit after Tax of INR 9.59 Lakhs for the year March 31, 2016.
&PAT is shown after taking into consideration of Minority Interest and Profit/ Loss of associate Companies.