MANAGEMENT DISCUSSION AND ANALYSIS REPORT This Management Discussion and Analysis ("MD&A) is management's assessment of the operations and the financial results together with future prospects of Paragon Finance Ltd. ECONOMIC OVERVIEW India topped World Bank's growth outlook for the year 2015-16 for the first time with economy grown 7.3% in 2014-15 due to improvement in the performance of both services as well as manufacturing sectors. India is expected to grow at 7.5% - 8.3% in 2015-16 and likely to cross China's projected growth rate, as per IMF. Over the last year, new stable government, RBI initiatives to contain inflation & manage interest rate, subdued commodities prices including oil has helped Indian economy to revive post 2010 global meltdown era. Overall India's macroeconomic parameters are improving and we are much better placed today compared to many other emerging market economies. The GDP data for the third quarter ended December 31, 2015 has however, seen a sharp downward revision to 6.6 per cent in the provisional estimate from 7.5 per cent in the advance estimate. INDUSTRY OVERVIEW Non Banking Financial Companies (NBFCs) have made great progress in last few years and are assisting in meeting the diverse financial needs of the economy. In doing so NBFCs have influenced the direction of investments and the resultant capital formation has become essential for India's economic growth and development. NBFCs contributed almost 76% of the Rs.120 billion microfinance industry in the country. The estimated demand for microfinance is much higher than the brsent level of microcredit supply. The medium and heavy commercial vehicle (CV) segment will see volume growth of 13-17 per cent next fiscal and drive the CV sector, while LCVs will see marginal growth of up to 3 per cent, says a report by India Ratings. The br-owned Commercial Vehicles market is largely organized providing private financiers enormous business opportunity for a sustainable long term growth. Your company has brpared well for challenging economic scenario expected next year in the financing of Medium & Heavy Commercial vehicles Space. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY In any industry, the processes and internal control play a critical role in the health of the Company. The company has adequate check on its internal control system to ensure sufficient accuracy in functioning of the organization. The Company's well defined organizational structure, documented policy guidelines, defined authority and internal controls ensure efficiency of operations, compliance with internal policies and applicable laws and regulations. Management Information System (MIS) forms an integral part of the company's control mechanism. The Audit Committee of the Board, Statutory Auditors and the Top Management are apprised regularly with the matters of the Company. The Audit Committee of the Company consisting of Non-Executive Independent Directors, periodically reviews and recommends the financial statements o the Company. The Audit Committee also monitors the implemented suggestions. All the major decisions of the Company are taken by the Independent Director. RISK MANAGEMENT In today's business world risk management has become the most important tool for the survival of the business. So to avoid such dilemmas, the board has adopted Risk Management policy. Under the Policy, the Board delegates day-to-day management of risk to the Chief Executive Officer (or equivalent). There is continuous follow up for identification of risks and treatment for the same. Paragon has been successful in maintaining robust growth in disbursements and at the same time maintaining an impeccable portfolio quality through constant process re-engineering coupled with sound risk management practices. In this inflated economy, your company manages Interest Rate Risk very well because of low cost of borrowings. Company is also not using short term borrowings to fund long term assets. To manage default risk, most of the customers are old customers or referred by existing customers with a good track record who stands as a guarantor mitigating the default risk. HUMAN RESOURCES Over the years, the Company has built up an excellent human resource with a variety of skill sets as appropriate for the business and as per its requirements. Industrial Relations have been cordial and the morale of the employees is very high. The Company follows people friendly policies coupled with performance rewarding culture. The company is always up graded with the new technologies and there is continuous emphasis on training for the development of the company as well as personal grooming of the employees. Paragon Finance Limited is also focused on building the talent pipeline. The HR mandate is to attract the good people, retain the better and advance the best. There is a structured plan to nurture fresh talent & groom them over next few years to take up leadership roles. Towards this end, various initiatives have been undertaken. CAUTIONARY STATEMENT Statements in the MD&A, describing the Company's objective, projections and estimates, are forward looking statements and progressive within the meaning of applicable security laws and regulations. Actual results may vary from those exbrssed or implied, depending upon economic conditions, Government Policies and other incidental factors. This report should be read in conjunction with the financial statements included herein and the notes thereto. For and on behalf of the Board of Directors Sanjay Kumar Gupta Executive Director DIN - 00213467 Place : Kolkata Date : 29.05.2015 |