MANAGEMENT'S DISCUSSION AND ANALYSIS NBFC- INDUSTRY STRUCTURE AND BUSINESS DEVELOPMENTS The year 2014 has been a landmark year in the history of Indian Politics as the new NDA government came into power and formed the government with sweeping majority. The new government brsented the Budget for the FY15-16 which focused on growth, weaker sections and social security and at the same time, fiscal responsibility was maintained. 2015 was a year of recovery for the global economy The measures and policies taken by the RBI have controlled the inflation in India. In April 2014, the CPI was at 8.48% which has been come down significantly after the new Government has been formed at the Centre. Looking ahead, it appears that the economy is headed for an upcycle of growth as interest rates are trending downward and inflation has been reigned in. These macro indicators, coupled with buoyant business and consumer sentiments bode well for the near-term future of the economy The NBFC sector in India is integral to the financial framework of the country. Non-banking finance companies (NBFCs) continued to play a critical role in making financial services accessible to a wider set of India's population. NBFCs continues to be stable with around 34% of total borrowing coming from capital market sources including NCDs, subordinated debt, brference shares, etc and 31% from bank funding. OPPORTUNITIES & THREATS, RISKS & CONCERNS, PERFORMANCE AND OUTLOOK Opportunities: The Monetary Policy Framework Agreement between the Government of India and Reserve Bank of India is a vital step to keep inflation below 6%. This is also supported by the steep decline in the international crude oil prices, which controlled food inflation and increased consumption of the basic commodities in rural areas. Government has announced a number of policy measures to achieve the projected GDP growth in 2015-16 like approval of large infrastructure projects, addressing challenges of mining and power sectors, increasing foreign investment limits in Insurance, Railways, Defence manufacturing and Aerospace. Growth in agricultural sector output will drive demand from rural areas. In view of the aforesaid initiatives of the Government, NBFCs can also look for growth in asset financing and collateral backed lending activities. Threats: Ability to raise funds depend significantly on growth of the Company's asset book, quality of assets and the economy. Unfavorable events in the Indian economy can affect consumer sentiment and in turn impact consumer decision to purchase financial products. 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. Risk and Risk Management: A NBFC contains both internal risk and external risk. The IFL is exposed to credit risk, liquidity risk and interest rate risk as an internal risk and External risk due to exposure to interest rate risks might result in increased cost of lending to customers. Slowdown in economic growth rate, political instability, market volatility, decline in foreign exchange reserves, etc. Concern: Your Company recognizes the importance of risk management. The Company on regular basis reviews its Risk Management Policy and takes proactive steps to safeguard and minimize any adversity. OUTLOOK The Company operates with its own limited resource; based on the brsent business model the growth potential in its business is limited. IFL expects to maintain its performance in FY2016. The approach would be to continue with the growth momentum while balancing risk. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY The Company has an Internal Control System which is commensurate with the size, scale and complexity of its operations. The Internal Auditors monitor the efficiency and efficacy of the internal control systems in the Company, compliance with operating systems/accounting procedures and policies of the Company. Significant audit observations and corrective actions thereon are brsented to the Audit Committee of the Board. The Company has adequate systems and procedures to provide assurance of recording transactions in all material respects. The Audit Committee of the Board of Directors, Statutory Auditors are periodically appraised of the internal audit findings and corrective actions taken .During the year M/s. Manoj Sharma & Associates, Chartered Accountants, reviewed the adequacy and operating effectiveness of the internal financial controls as per Section 134 (5) of the Companies Act, 2013. HUMAN RESOURCES The Company recognizes people as its most valuable asset and it has built an open, transparent and meritocratic culture to nurture this asset. In an increasingly competitive market for human resources, it seriously focuses on attracting and retaining the right talent. It provides equal opportunity to employees to deliver results. Company's current business activity does not require any technology up gradation or modernization. DISCLAIMER Statements in this Management Discussion and Analysis describing the Company's objectives, projections, estimates and expectations may be 'forward looking' within the meaning of applicable laws and regulations. Actual results may differ from those exbrssed or implied. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertainties. The Company does not undertake to update these statements. For and on behalf of the Board of Director Laxminarayan Sharma Managing Director DIN: 01731396 Kishan Sharma Director DIN: 01168525 Place : Mumbai Date: 27th May, 2015 |