THE MANAGEMENT DISCUSSION AND ANALYSIS REPORT ECONOMICSC EANERIO India's revised GDP growth rate stands revised upwards at 5.1 percent from 4.7 for FY13 and 6.9 percent from 5.0 percent for FY14. This year's Economy Survey suggests that GDP growth for FY15 is likely to be 7.4 percent. InFY16, the growth rate is likely to go up further to anything between 8.1 - 8.5 percent making India's growing large economies. The expected high growth rate in the coming year in the favorable economic environment has created a historic movement of opportunity to propel India into a double-digit growth trajectory. It gives an opportunity to the increasingly young, middle-class and aspirational India to realize its full potential. As the new Government has brsented its first full year budget, the Economic Survey states that it appears that India has reached a sweet spot and that there is a scope for Big Bang reforms now. According to World Bank, Global GDP growth in 2014 was lower than initially expected, continuing a pattern of disappointing out turns over the past several years. Growth picked up only marginally in 2014, to 2.6 percent, from 2.5 percent in 2013. Overall, global growth is expected to rise moderately,to 3.0 percent in 2015, and average about 3.3 percent in 2016. Going forward, the Indian economy in 2014-15 has emerged as one of the largest economies with a promising economic outlook on the back of controlled inflation, rise in domestic demand, increase in investments, decline in oil prices and reform among others. INDUSTRY STRUCTURE AND DEVELOPMENT Non-Banking Financial Companies (NBFCs) constitute a heterogeneous lot of privately-owned, small-sized financial intermediaries which provide a variety of services including equipment leasing, hire purchase, loans, investments and chit fund activities. These companies play an important role in providing credit to the unorganized sector and to the small borrowers at the local level. The Banking sector has always been highly regulated, however simplified sanction procedures, flexibility and timeliness in meeting the credit needs and low cost operations resulted in the NBFCs getting an edge over banks in providing funding. The Make in India campaign, government's initiative on bringing regulatory reforms to facilitate ease of doing business in India, thrust towards growth of infrastructure sector and financial inclusion will also demand NBFCs to shoulder the growth and development phase, India is seemingly walking into. FINANCIAL & BUSINESS REVIEW IGFL is an independent credit institution offering debt financing solutions and highly structured trades to customers in a diverse set of industries. IGFL's portfolio is well aligned with the rising growth opportunities in India's financial system. It provides solutions for credit needs ranging from project and capital expenditure funding, long-term working capital & special situations. Being a NBFC the Company's operations continue to be mainly focused in the areas of Financing, Inter- corporate Investments & Capital Market activities. Thus, given the bleak economic environment IGFL continued its cautious approach towards expanding its loan portfolio to avoid generation of any non performing assets. This helped us improve our interest income to Rs 835 lacs from Rs 463 Lacs. The company decreased its commodity transactions & increased share purchase during the volatile period. Overall profits were impacted by share business segment. The share business has been stabilized & should give good returns next year. The net profit of the company has increased to Rs. 25.53 Lacs in 2014-15 as compared to 14.16 lacs in 2013-14. IGFL has been able to bring in higher operating efficiencies within the company based on the understanding and strength of our superior knowledge of local markets and efficient, proactive and conservative approach. FUTURE OUTLOOK In 2014-15, NBFCs have proven their mettle in many other specialized financial services such as factoring, lease finance, venture capital finance, financing road transport and also in the business of securities-based lending such as Loan against Shares, Margin Funding, IPO Financing, Promoter Funding etc. They have also been providing a major boost to Micro, Small and Medium enterprises and other avenues where banks exercise cautious lending. All the above factors further emphasize the potential and opportunities in store for NBFCs and the regulations when designed to provide the right environment, provides impetus to the growth of the sector. The markets will continue to grow and mature leading to differentiation of products and services. Each financial intermediary will have to find its niche in order to add value to consumers. Your Company is cautiously optimistic in its outlook for the year 2015-16. IGFL hence wishes to diversify its lending activities in the coming period and shall embark on this path and move forward once the existing investments, which are at an incubating stage begin to bear fruits. Also, you are aware that your Company has established its brsence in Mumbai & Jaipur to expand nationally for the further growth of the company. In the upcoming years, IGFL will strive to be one of the top financial services businesses in India focused on delivering superior customer experience through class leading services and competitive products while providing consistent and superior returns to the company's shareholders and at the same time maintaining the high levels of integrity. KEY PERFORMANCE DRIVERS AND CAPABILITIES IGFL's team combines experience and expertise, adding to the credibility of the organization. The team's dynamicvision and approach helped the Company to navigate through challenging economic times and consistently deliver a robust performance. Core strengths IGFL's inherent strengths drive its endeavour to become a leading independent credit institution and ensure effective capital deployment. These are: • Management A highly-qualified senior management team, with a collective business experience of nearly 30 years, and expertise in equity and debt markets, guide IGFL's business. • High capital adequacy High capital adequacy provides the necessary level of cushion to IGFL's creditors from associated business risks. High capital absorbs volatility in cash flows and other business risks. • Client relations Due to strong relationships with corporate, IGFL is well positioned to build an asset management business with domestic investors. • Liquidity Safety, Liquidity and Return rebrsent the three principles that help IGFL run its treasury in a prudent manner. The Company adheres to the internal policy of maintaining adequate liquidity reserves to be invested in short-term treasury instruments. ADEQUACY OF INTERNAL CONTROL The Board has an Audit Committee with independent directors in majority to maintain the objectivity. IGFL has proper and adequate system of internal controls commensurate with its size and nature of operations to provide reasonable assurance that all assets are safeguarded, transactions are authorized, recorded and reported properly, applicable statutes and corporate policies are duly complied with. The Audit Committee also seeks the views of statutory auditors on the adequacy of the internal control systems in the Company. Moreover, IGFL continuously upgrades these systems in line with the best available practices. OPPORTUNITIES&THREATS • OPPORTUNITIES Non-Banking Financial Companies (NBFCs) are fast emerging as an important segment of Indian financial system. The Company provides long term financing to the Logistics, Share Brokers, Integrated Steel Plants, Real Estate Developer, Infrastructure Conglomerates, Airport Ground Handling Services, Retail Marts, Iron-ore Mine Industries and Power Sector. Thus, the Company has broadened and diversified the range of products and services offered by a financial sector. Gradually, the Company, being recognized as complementary to the banking sector due to its customer-oriented services; flexibility and timeliness in meeting the credit needs of specified sectors; etc. • THREATS Being an NBFC, the Company has to face various threats as under mentioned; * High cost of funds * Slow industrial growth * Stiff competition with NBFCs as well as with banking sector * Non performing assets RISKS&CONCERNS Our Company constantly invests in people, processes and technology as the Company acknowledges that these are vital elements for mitigating various risks posed by the environment. The Company has established detailed procedures and policies for underwriting across various product categories, based on the credit profile of the customers. While risk is an inherent aspect of any business, the Company, being a financial company is exposed to various numerous risks that are particular to its business and the environment within which it operates, including interest rate volatility, economic cycle, credit risk and market risk. The most important among them are credit risk, market risk and operational risk. The Company has the overall responsibility of ensuring that an effective risk management framework is aligned to its objectives. In retail loan businesses like ours, overall portfolio diversification and reviews also facilitate mitigation and management. By order of the Board of Directors Suresh Kumar Jain Managing Director Registered Office: Aloka House 6B, Bentinck Street, Kolkata-700001 Date: May14,2015 |