MANAGEMENT DISCUSSION & ANALYSIS 

Macroeconomic outlook

GDP growth, by the new methodology adopted by the CSO, is 4.93% in FY15 compared with 6.64% in FY14. Growth in gross value added for some sectors was as follows: agriculture 0.23%, manufacturing 7.13%, trade, transport & communications 10.68% finance 11.54% and public administration 7.95%.

With agriculture being susceptible to a lower monsoon, there could be a negative impact of such an eventuality on farm production. But assuming that output will not be affected perceptibly on this score, the projections for FY16 are 8% growth in GDP with a downward bias depending on the monsoon impact finally. This will include 8-8.5% growth in industry with all three segments (mining, manufacturing & electricity) contributing to this growth and services (including construction) growing by 9-9.5%. Agricultural growth would be between 2.5-3% but a monsoon failure could push it down to 1-1.5%, thus bringing down GDP growth to 7.7-7.8%.

The long-term growth prospective of Indian Economy is moderately positive due to its young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy, Indian Economy has potential to become world's 3rd-largest Economy by next decade, and one of the largest economy by the mid-century. 

The country's current account deficit (CAD) narrowed sharply to US Dollar 1.3 billion, or 0.2 per cent of GDP, in the fourth quarter of the last financial year on a sequential basis mainly on account of a lower trade gap. On a year-on-year basis, however, CAD (which indicates imports of goods services and transfer are higher than their exports) in fourth quarter was a shade higher than USD 1.2 billion, or 0.2 per cent of GDP, in the same quarter of financial year 2013-14.

For the full fiscal (financial year 2014-15), the current account deficit shrank to USD 27.5 billion, or 1.3 per cent of GDP, from USD 32.4 billion, or 1.7 per cent of GDP, a year ago. 

Merchandise trade deficit at USD 31.7 billion in fourth quarter contracted sharply on a Q-o-Q basis on account of a larger decline in merchandise imports (13.4 per cent) than in merchandise exports (10.4 per cent). However, in terms of Y-o-Y changes, the trade deficit in fourth quarter widened marginally as exports registered a larger decline (15.4 per cent) than imports (10.4 per cent). 

CPI inflation was 5.2% in March 2015 and the monthly number would have to be tracked closely from the policy perspective. With food inflation (6.1% in March) still the dominant component and being the one susceptible to monsoon disturbances; this will continue to be the focus area assuming crude oil prices to be stable. The World Bank has indicated benign commodity prices for 2015 which indicates that global influences on both the farm and manufactured goods would be subdued this year.

Within domestic factors, food would continue to be the important part as prices are driven by domestic demand-supply factors. Supplies in the past have been affected by deficient and excess rainfall and even though confined to specific products, could lead to generalized inflation.

Capital market 

Source: NSE

Amid rise in investor sentiment, expectation of reforms and pick up in the industrial activity and economic growth following the clear mandate to one party in the General Elections, the benchmark Sensex at the BSE rose by 25 per cent in 2014-15, thereby capping its best show since 2009-10.

This came on the back of a strong participation by foreign institutional investors (FIIs), domestic institutions and retail investors. The mid-cap and small-cap indices rose even more as the BSE mid cap and the small cap indices rose by 50 and 51 per cent respectively during the year. In terms of milestones, the Sensex broke several of them in 2014-15. While it hit a new high of 29,681.8, it breached 7 milestones in 12 months rising from over 22,000 in April 2014 to hit 29,000 in January 2015.

Source: NSE, BSE, SEBI Commodity Market

Turnover of commodity exchanges fell 41 per cent to Rs. 58.68 lakh crore till March 15 of 2014-15 due to a sharp fall in the trading volumes of bullion and other commodities. According to the Forward Markets Commission (FMC), their business stood at Rs. 98.57 lakh crore in the same period brvious year. Much of the fall in turnover was seen in bullion, followed by energy, farm and metal items. 

Source: FMC 

Sectoral Break up and Growth of Different Commodities

According to the latest FMC data, the turnover from bullion fell over 50 per cent to Rs. 20.85 lakh crore during the April-March period of this fiscal from Rs. 41.99 lakh crore a year ago. Similarly, the business from energy items like crude oil declined by 36 per cent to Rs. 15.53 lakh crore from Rs. 24.12 lakh crore, while for agricultural commodities, it fell 34 per cent to Rs. 10.19 lakh crore from Rs. 15.39 lakh crore. Turnover from metals also showed a decline of 30 per cent to Rs. 12.06 lakh crore during April-March period of FY'15 from Rs. 17.05 lakh crore a year ago. 

Future Prospects for commodities segment -

FMC will soon be merged with the Securities and Exchange Board of India as Finance Minister Arun Jaitley had made an announcement to this effect while brsenting the Budget for 2015-16 fiscal last month. At brsent, there are four national and six regional level commodity exchanges operating in the country.

Institution Participation - Currently many institutional mostly financials are not permitted to trade commodity futures.

Introduction of Commodity Options - The matter is said to be under the active consideration of the Government and the options trading may be introduced in the near future.

Tax and Legal bottlenecks - Regulatory changes are needed to bring uniformity in octroi and sales taxes etc. Currently the taxes for speculative gain and loss are different which means speculator cannot offset futures losses against profits in the underlying commodity.

The net resource mobilization increased to Rs 103288 cr in FY15 which is higher by Rs. 49205 cr as compared to FY14 (by 90% up ). At gross level, mutual funds mobilized over Rs 110.86 lakh crore in FY15, while there was redemption worth Rs 109.82 lakh crore. 

Financing Activities (NBFC)

NBFCs have been playing a very important role both from the macro economic perspective and the structure of the Indian financial system. NBFCs are the brferred alternatives to the conventional banks as a financial intermediary for meeting various financial requirements of a business enterprise as they provide a hassle free credit. A sales driven approach and quick & efficient service offered by NBFC without complex formalities make them a better alternative to traditional banks. To withstand the competition, NBFCs need to constantly innovate in terms of their product as well as improve their operational efficiencies. The coming years will be very crucial for NBFCs and only those who will be able to face the challenge and prove themselves by standing the test of time will survive in the long run. The changing and tougher banking regulation can be a major impediment to the growth of NBFC in India.

NBFCs are incorporated under the Companies Act, 1956. NBFCs can be classified into two broad categories, viz.

(i) NBFCs accepting public deposit (NBFCs-D)

(ii) NBFCs not accepting/holding public deposit (NBFCs-ND)

NBFCs include a loan company, an investment company, asset finance company (i.e. a company conducting the business of equipment leasing or hire purchase finance) and Residuary Non-Banking Companies 

The non-banking financial sector is witnessing a consolidation process, with smaller NBFCs (deposit taking) opting for either merger or closure and some larger ones getting converted into non-deposit taking NBFCs. NBFCs are comfortably placed with higher capital. The financial performance of deposit-taking Non-Banking Financial Companies (NBFCs-D) showed an improvement as reflected in the increase in their operating profits mainly emanating from growth in fund-based income.

Vehicle Finance

Commercial vehicle loans are usually taken by individual, partnership firms, proprietorship firms, HUF (Hindu Undivided Family), trusts, societies, self-employed, businessmen and private and public limited companies for their financing needs for owning and running commercial vehicles. Commercial vehicle loan options are available for buses, tippers, transit mixers or any other heavy, light or small commercial vehicle. A commercial vehicle loan can be taken for a variety of commercial vehicles, which may be used at different locations. While loans are sanctioned for the purchase of a new commercial vehicle, banks also offer loans for br-owned vehicles. Borrowers can also avail of a top up on existing loans subject to conditions.

In total, India has more than 35 financial institutions that provide financing.4 Banks have an advantage over other financiers in the auto finance market because of the high degree of confidence by customers. They offer lower rates, have better access to credit histories and possess the ability to process loan approvals more quickly.

While banks have to cater to multiple products and services, some NBFCs are more sector focused. Banks were taking the easier route of lending to NBFCs and also fulfilling their priority target—lending to agriculture and allied activities. However, with the change in regulations and the recommendations of the Nair committee on priority sector lending, private banks have realized that they would have to boost their priority sector lending.

Vehicle finance industry generally faced challenges with the slowdown in demand coupled with high fuel prices and little respite in interest rates but the operating environment over the past 6-9 months has also stabilized owing to sharp drop in diesel rates and relatively firm freight rates, implying improvement in their cash flows. As per estimates from Society of Indian Automobile Manufacturers, growth in overall passenger vehicle segment is likely to improve slightly to 5-7% on the back of the continued demand for the diesel vehicles which is expected to push the growth of utility vehicle sales. In the commercial vehicle segment, sale of medium and heavy commercial ranges are expected to improve. The long term perspective of the commercial vehicle industry looks positive and is expected to grow at a compounded annual growth rate of 12-14% in FY 2016

Industry performance in 2014-15 Production

The industry produced a total of 23,366,246 vehicles including passenger vehicles, commercial vehicles, three wheelers and two wheelers in April-March 2015 as against 21,500,165 in April-March 2014, registering a growth of 8.68 percent over the same period last year.

Domestic Sales

The sale of Passenger Vehicles grew by 3.90 percent in April-March 2015 over the same period last year. Within the Passenger Vehicles segment, Passenger Cars and Utility Vehicles grew by 4.99 percent and 5.30 percent respectively, while Vans declined by (-) 10.19 percent in April-March 2015 over the same period last year.

The overall Commercial Vehicles segment registered a de-growth of (-) 2.83 percent in April-March 2015 as compared to same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) grew by 16.02 percent and Light Commercial Vehicles declined by (-) 11.57 percent.

Three Wheelers sales grew by 10.80 percent in April-March 2015 over the same period last year. Passenger Carriers and Goods Carriers grew by 12.16 percent and 5.27 percent respectively in April-March 2015 over April-March 2014.

Two Wheelers sales registered growth of 8.09 percent in April-March 2015 over April-March 2014. Within the Two Wheelers segment, Scooters, Motorcycles and Mopeds grew by 25.06 percent, 2.50 percent and 4.51 percent respectively in April-March 2015 over April-March 2014.

Exports

In April-March 2015, overall automobile exports grew by 14.89 percent over the same period last year. Passenger Vehicles, Commercial Vehicles, Three Wheelers and Two Wheelers grew by 4.42 percent, 11.33 percent, 15.44 percent and 17.93 percent respectively during April-March 2015 over the same period last year.

After two years of down cycle, some segments of the domestic Commercial Vehicle (CV) industry have shown signs of recovery in FY 2015.

Financial Performance on Consolidated Basis

The Company has achieved a turnover of Rs. 15,918.24 lakhs on consolidated as compared to Rs. 6,101.48 in the brvious year.

The consolidated revenue increased by 160% from Rs.6,101,.48 lakhs to Rs.15,918.24 lakhs. During the year under review, the Company reported consolidated net profit of Rs.200.35 lakhs as against consolidated net loss of Rs.124.19 lakhs during the corresponding brvious year.

Human Resources

The quality of servicing, the passion of the employees to reach out to new customers, achieve aggressive targets, while following the processes and at the same time retaining and winning diverse customers' confidence plays a vital role in Company's business. The recent turbulent times pushed organizations across industry to face unique and complex talent management challenges. Effective manpower planning, effective remuneration and incentive scheme helped us in retaining good talent. Since the company is engaged in knowledge and relationship based business, attraction and retention of talent is very crucial. The company has introduced various attractive employee schemes including ESOP for sharing wealth with employees.

Risk and Concern

Fortune operates on a combrhensive risk management framework that has put in place over the period of time. Fortune reviews credit applications, collections and branch processes to ensure that the business process is in line with the organizational policies and procedures. Concerned divisions identify operational and tactical risk and suggest measures for mitigation and control. The findings and observations are used for periodic process improvements.

Internal control and their adequacy

The Company has in place adequate systems of internal control that are commensurate with its size and nature of the business and documented procedures covering all financial and operating functions. The Company being a service industry, has in its place a clear processes and well-defined roles and responsibilities for its employees at various levels. The Management has a defined reporting system, which facilitates monitoring and adherence to the process and systems in place. Also the Management evaluates these reports, internal controls and ensures that its employees adhere not only to internal processes and procedures set by the Company from time to time but also to the various statutory compliances. These have been designed to provide reasonable assurance with regard to maintaining proper accounting controls, monitoring economy and efficiency of operations, protecting assets from unauthorized use or losses, and ensuring reliability of financial and operational information published from time to time.

Our aim is to establish and enhance Company's operating policies, systems and processes in order to align them to best practices and changing organizational and regulatory requirements. With the current market scenario becoming more challenging, the focus on asset quality has taken a center stage.

Internal audit of its entire subsidiary are regularly carried out. The Internal Audit Reports along with implementation and recommendations contained therein are constantly reviewed by the Audit Committee of the Board. Audit Committee of the Board of Directors, comprising of independent directors, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with Accounting Standards as well as reasons for changes in accounting policies and practices, if any.

Cautionary Statement

Statements in this Management Discussion and Analysis report describing the Company's objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those exbrssed or implied.

The Company is not under any obligation to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events.