voltaire leasing & finance ltd share price Management discussions


Indias growth continues to be resilient despite some signs of moderation in growth, says the World Bank in its latest India Development Update, the World Bank Indias biannual flagship publication. The Update notes that although significant challenges remain in the global environment, India was one of the fastest growing economies in the world. The overall growth remains robust and is estimated to be 6.9 percent for the full year with real GDP growing 7.7 percent year-on-year during the first three quarters of fiscal year 2022/23. There were some signs of moderation in the second half of FY 22/23. Growth was underpinned by strong investment activity bolstered by the governments capex push and buoyant private consumption, particularly among higher income earners. Inflation remained high, averaging around 6.7 percent in FY22/23 but the current-account deficit narrowed in Q3 on the back of strong growth in service exports and easing global commodity prices. The World Bank has revised its FY23/24 GDP forecast to 6.3 percent from 6.6 percent (December 2022). Growth is expected to be constrained by slower consumption growth and challenging external conditions. Rising borrowing costs and slower income growth will weigh on private consumption growth, and government consumption is projected to grow at a slower pace due to the withdrawal of pandemic-related fiscal support measures. Although headline inflation is elevated, it is projected to decline to an average of 5.2 percent in FY23/24, amid easing global commodity prices and some moderation in domestic demand. The Reserve Bank of Indias has withdrawn accommodative measures to rein in inflation by hiking the policy interest rate. Indias financial sector also remains strong, buoyed by improvements in asset quality and robust private-sector credit growth. The central government is likely to meet its fiscal deficit target of 5.9 percent of GDP in FY23/24 and combined with consolidation in state government deficits, the general government deficit is also projected to decline. As a result, the debt-to-GDP ratio is projected to stabilize. On the external front, the current account deficit is projected to narrow to 2.1 percent of GDP from an estimated 3 percent in FY22/23 on the back of robust service exports and a narrowing merchandise trade deficit.


The Indian stock market largely remained an outperformer, sustaining its strong performance from last year despite the various challenges. However, the year ended flat for both the indices. Nifty 50 ended with (0.6)% return for FY23 while the Sensex ended the year with minor growth of 0.7%. The resilient performance reflects the strong earning profile of Indian corporates and investors belief in Indias growth story. The strong performance of the Indian stock market was achieved despite a selloff from foreign institutional investors (FIIs) during FY23, when they liquidated stocks worth approximately C2.4 trillion in the cash segment. This was offset by Domestic Institutional investors (DIIs) who remained net buyers, purchasing equities worth approximately C2.4 trillion. The growth in SIP also remained robust during the year, with a surge in new account openings and significant fund inflow. The Indian equity market has seen a paradigm shift with retail investors substantially increasing their participation in equity markets. Their share in both cash and equity derivatives have grown over time. Share of retail investors expanded to 36.5% in equity cash turnover in FY23 from 33.0% in FY16. Also, their share in equity derivative turnover segment expanded to 27.7% in FY23 from 23.0% in FY16. This trend reflects that the retail investors are having a good portfolio mix. The retail investors are gradually building a portfolio for long term.


India is still a highly under penetrated market in terms of the geographical reach and wallet share across wealth, credit and protection products. Rising financial literacy among people is encouraging them to diversify their savings from conventional asset classes to include equity and related products into their portfolio. Younger people are on boarding to this journey and will continue to participate for a longer time of their working careers. The overall demand scenario seems to be improving which is implied by various high frequency economic indicators. The Nomura India Business Resumption Index is now higher by nearly 18 points since the pre-pandemic levels. Indias GDP plunged by a record 8.5% in FY22 (the biggest contraction since independence) but is expected to grow at a strong +9.5% in FY23. In several sectors of the economy, pre-pandemic levels of output have now been crossed, and nominal GDP is also now above pre-pandemic levels.


Our view on markets is coloured by three factors. The primary factor is that despite the threat of a global slowdown owing to sharply tighter monetary conditions, the Indian economy continues to show strength in several areas. Secondly, however, valuations seem rich everywhere despite 10-year yield being higher than pre-Covid by 70bps, Nifty forward multiple is higher by 20%. In the US, this is almost unchanged despite a doubling of 10-year yields from 1.8%. Also, the lag effects of sharp policy rate hikes around the world can disturb this rudely. The third factor is led by higher borrowing costs. There is a distinct bias towards earnings downgrades rather than upgrades, and it will pay to select sectors and stocks where earnings growth downgrade risk is minimal and better visibility might start attracting higher premiums. For instance, our calculations suggest up to 5% EPS downgrade for India due to higher borrowing costs. However on the geopolitics side, things couldnt possibly worsen. The strength of the Indian economy is evident through a number of indicators. Surveys show improving consumer sentiment, closing in on pre-Covid levels (quite the opposite in advanced economies), PMI both manufacturing and services at 55+ on a sustained basis, strong volume compounded annual growth rate in production of steel and coal etc. Government tax collections are likely to beat budget estimates, but while they will be neutralized for some time by cost overruns in food, fertilizer and fuel subsidies, given recent trends in commodity prices. However, these cost overruns may not last for long, and rapid fiscal position improvement might happen in 2HFY24. Corporate leverage are at a 9-year low, and with banks having raised capital, the twin balance sheet problem is all but gone. Reform momentum has been strong in the last 3 years and should sustain. Forex reserves are substantial, and external debt to GDP is low compared to other countries.


Voltaire Leasing & Finance Limited (VLFL) has exposures in various line of business. VLFL are exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, liquidity and interest rate risk, operational risk, information security risks, regulatory risk and macro-economic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.


The Company has quoted investments which are exposed to fluctuations in stock prices. GCM continuously monitors market exposure in equity and, in appropriate cases, also uses various derivative instruments as a hedging mechanism to limit volatility.


The Company is exposed to liquidity risk principally, because of lending and investment for periods which may differ from those of its funding sources. Management team actively manages asset liability positions in accordance with the overall guidelines laid down by various regulators. The Company may be impacted by volatility in interest rates in India which could cause its margins to decline and profitability to shrink. The success of the Companys business depends significantly on interest income from its operations. It is exposed to interest rate risk, both as a result of lending at fixed interest rates and for reset periods which may differ from those of its funding sources. Interest rates are highly sensitive to many factors beyond the Companys control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions and, inflation. As a result, interest rates in India have historically experienced a relatively high degree of volatility. The Company seeks to match its interest rate positions of assets and liabilities to minimize interest rate risk. However, there can be no assurance that significant interest rate movements will not have an adverse effect on its financial position.


The Company recognizes that its success is deeply embedded in the success of its human capital. During 2022-2023, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings, streamlining the Performance Management System, making the compensation structure more competitive and streamlining the performance-link rewards and incentives.


The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable to the Company.


The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company continues to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Companys Board of Directors and the Companys Compliance Policy. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/internal guidelines on a periodic basis. During the year, the penalty of Rs. 38.52 Lakh has been levied by BSE on the Company for delay in uploading Annual Report 2017-18 on BSE Portal as well as a fine of Rs. 0.28 Lakh has been levied for late filing of Annual Report 2019-20 with BSE. The Company has made payment of the same in current financial year. Furthermore, the Company has been found guilty of violation of FUTP Regulations and thus penalties of Rs. 10.00 Lakh has been levied by SEBI on the Company. Apart from above, no penalties/strictures were imposed on the Company SEBI or any other statutory authority on any matter related to capital market during the last three years.

Mumbai, August 7, 2023 By order of the Board
For Voltaire Leasing & Finance Limited
Registered Office : S/d-
79, Bhagyodaya Building, 3rd Floor Alok Kr. Behera
Mezzanine Floor, Nagindas Master Road DIN: 00272675
Fort, Mumbai -400 023 Chairman & Managing Director