MANAGEMENT'S DISCUSSION AND ANALYSIS 1. Economic Outlook The year 2014 -15 began with several challenges on the macroeconomic front, including rising inflation, dwindling industrial output and a falling rupee. The Reserve Bank of India (RBI) intervened in July and August to stem the rupee's slide by increasing the marginal standing facility rate and the bonk rate by 200 bps each to 10.25%. Overall GDP growth in the fiscal settled at around 7.4%, mostly driven by the industry ond services sector. Wholesale Price Index has registered moderation of(2.33%), while Consumer Price Index has moderated to 5.17% up to March 2015. Structural shifts in inflation are due to lower oil prices, deceleration in agriculture prices & wages and improved household inflation expectations. The trading environment is becoming more challenging as the buoyancy of Indian exports has declined with respect to world growth. Current account deficit (CAD) is expected to decline below 1% of GDP for the FY 2014-15. Foreign exchange reserves increased to $ 341.14 billion at week ended March 27,2015. Fiscal deficit is expected to be contained at 4.1% as per the budget estimates. The vision of the new government is pragmatic ond of inclusive growth which is apparent from more devolution of tax collections to the states, postponing the achievement of 3% fiscal target to FY 2018 thereby making more space for public investment in the country. Thrust to infrastructure, measures to revive the investment cycle, boost to savings, 'Make in India' initiative, ease of doing business and boosting entrebrneurship are major focus areas of the government. 2. Revised Regulatory Framework By RBi The revised regulatory framework released in November, 2014 by the RBI focuses on strengthening the structural profile of the NBFC sector. These changes hove to be implemented in a phased manner by March 31, 2018. Some of the key changes are: I. Classification of loan NPAs for NBFCs has also been brought in line with banks. NPA recognition will change in a phased manner to 90 days overdue from the current 180 days overdue for loans and 360 days for hire purchase assets. II. Increase in Tier I CAR (core CAR) will increase in a phased manner to 10%for NBFC -Dand NBFC -ND- SI, thereby increasing loan absorbing capacity and long term capital requirement. III. Stringent Corporate governance and disclosure norms for accountability, transparency and trust in NBFC sector IV. Standard asset provisioning will stand increased from 0.25% to 0.40% The highlights of the reforms introduced by Government of India in their budget for the coming fiscal for the financial sector ore as following: i. Inclusion of NBFCs, having on asset size of Rs. 500 crore and above, under the SARFAESI Act and new bankruptcy code will provide a boost to recovery efforts and help rein in asset quality problems over the long run. ii. Setting up of autonomous bank board bureau marks the initial move towards formalizing a holding company structure for public sector banks. This will improve governance, optimize capital contribution by government, and provide greater functional autonomy. iii. The new Micro Units Development Refinance Agency (MUDRA) Bank for refinancing of microfinance institutions will support micro credit. Automobile sales growth in India continues to remain in single digits but the growth has doubled from 3.5% in FY14 to 7.2% in FY15. CRISIL Research expects sales in the medium and heavy commercial vehicles (MHCVs) segment to grow at 12-15% Year on Year (YoY) in FY16 with improvement in freight availability due to further pick-up in industrial activity, higher infrastructure project execution / awarding and expectations of better agricultural output assuming normal monsoons. The outlook for the Company's growth continues to be robust for the financial year 2014-2015. Gilada Finance and Investments Limited (GFIL) continues to focus on the core area of vehicle and consumer financing. Your Company has carved an enviable niche in the fiercely competitive financial sector in India. GFIL's strategy, as in the past, will be to focus on profitable growth, leveraging its intimate knowledge of the market and customer relationships that have been built on a strong foundation of personalised and dedicated service. Your Company has initiated various pro-active steps and strategies to face future challenges by taking maximum odvantage of new opportunities and aggressively pursuing them. 4. Threats Though the Indian financial system has made imbrssive strides in resource mobilization, geographical and functional reach, financial viability, profitability and competitiveness, vast segments of the population, especially the underprivileged sections of the society, have still no access to formal banking services. Competition from a broad range of financial services providers, unstable political environment and changes in Government policy/regulatory framework could impact the Company's operations. With the growing brsence of players providing advisory services coupled with provision af funds for the clients' needs we would face competition of unequal proportions as the company is operating only in one segment viz. vehicle ond consumer financing. All these risks are continuously analysed and reviewed at various levels of the Management through a well designed effective information system and by the provision of increasingly superior customized services. 5. Segment-wise Performance The Company concentrates its operations only in one segment namely vehicle and consumer financing. 6. Operating & Financial Performance During the financial year under review, your Company has made substantial disbursements and was able to improve its margins, notwithstanding intense competition. Your Company continues to focus on new opportunities to improve profitability. 7. Management of Risks & Concerns In today's highly complex business environment coupled with cut throat competition, every business decision made by the Executives requires to balance the risks and rewards. Effective risk management is of paramount importance for the survival and success of the organisation. The Company identifies these risks and the root-causes are properly defined to facilitate brparation of robust mitigation plans. The risk identification process and mitigation plans are subject to review by the Board of Directors and suitable corrective actions are initiated. The Company further maintains a conservative financial profile and follows prudent business and risk management practices. 8. Internal Control Systems and their adequacy The Company's internal control systems and procedures are commensurate with its si2e and nature of operations. The Company has adequate internal control systems and document procedures covering all financial and operating functions. The Company has well defined roles, responsibilities and authorities for employees at all levels. The Company continuously improves various quality processes in line with customer expectations. The Company has framed a compliance policy to effectively monitor and supervise the compliance function in accordance with the statutory requirements. As part of the effort to evaluate the effectiveness of the internal control systems, your Company's internal audit division reviews the control measures on a periodic basis and recommends improvements, wherever appropriate. The Company has appointed Ms. Anand Boob & Associates, Chartered Accountants, to conduct internal audit covering all areas of operations. The reports are placed before the Audit Committee of the Board. The Audit Committee reviews the performance of the audit and compliance functions, the effectiveness of controls and compliance with regulatory guidelines and gives such directions to the Management as necessary / considered appropriate. 9. Human Resource Development & Industrial Relations Vour Company continues to regard and recognize its human power as its best and most valuable asset. The Company's Human Resource policy is to build a strong performance driven culture with a highest sense of accountability and responsibility with commensurate reward mechanisms linked to the individual and organisation performance. Continuous development of knowledge, skills and competencies is imperative in the rapidly changing business environment. Consequently, the Company has designed and implemented a number of initiatives to build and improve knowledge base and competencies of employees at all levels. The Company continues to place high importance on its human resources and enjoys cordial relationships at all levels. 10. Cautionary Statements Statements in this Management's Discussion and Analysis detailing the Company's objectives, projections, estimates, expectations or brdictions may be "forward - looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate and will be realised. The Company's actual results, performance or achievements could thus differ materially from those projected in any such forward-looking statements. The company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information and events. FOR AND ON BEHALF OF THE BOARD OF DIRECTORS RAJGOPAL GILADA MANAGING DIRECTOR DIN: 00307629 SHANKARIAL TULSIRAM GILADA CHAIRMAN & DIRECTOR DIN: 02016074 Date: 2nd September 201S Place: Bangalore |