MANAGEMENT DISCUSSION AND ANALYSIS Industry Structure & Development - Non-Banking Financial Companies continue to face competition from the local and multinational players in the market. The Non- Banking Financing Industry grew despite several constraints. These problems relate to the inadequacy of funding, insufficient tax benefits, multiplicity of taxes and the absence of specific legislation governing lease transactions. Frequent changes in law affect Non- Banking Finance operations substantially. Interest rate volatility affects operating costs, expenses and profitability of the Non- Banking Financing Industry. The indiscriminate entry of new companies into the industry evidenced a need for regulation and the Reserve Bank of India imposed certain restrictions. To grow the Non- Banking Financing Industry, it is necessary for the Government to initiate tax incentives. But, due to regular changes in the RBI policies it is difficult to identify the market situation, which results in volatile market and companies' financial position gets affected adversely. Large professionally managed independent Non- Banking Finance companies demonstrated an ability to succeed and grow. The Finance market has not developed commensurately with the growth of Non-Banking Finance companies. This has led to competition and as a result several Non-Banking Finance companies, lacking in profession expertise, were forced to exit. Mangal Credit and Fincorp Limited with its 53 years of record has been able to run its business operations in a profitable manner and generate adequate funds to meet its financial obligations to banks and other credit grantors. Opportunities & Threats - According to the management, the MCFL has been financing reliable & loyal clients who have good potential to generate returns. And with respect to its businesses, the company is having excellent market in Mumbai and it has achieved the necessary target during the financial year 2014-15. In the Financial year 2014-15 it is observed that the MCFLs performance is better than the last year. Accordingly, the net profit of the Company is increased marginally. However, the Companies CRAR was not maintained during the Financial Year 2013-14 as per the RBI guidelines for NBFC-ND-SI. Hence, the Company has taken necessary action in order to maintain CRAR. Accordingly, MCFL has reduced its investment in its subsidiaries and maintained CRAR during the Financial year 2014-15. Further, there is a general concern regarding the interest rate fluctuations, fiscal & monetary policies, which might affect the profitability of the company. However MCFL remains upbeat about the India economic growth, especially the finance sector. The company will anticipate & counter the economic fluctuations to the best of its capacity. The company in such a business always faces the risk of default or non-payment. MCFL will continue to adopt strategies to register significant increase in business volumes. The market in which MCFL mainly operates is growing slowly. There are new players entering the semi urban and rural markets. This is likely to increase the competition. Performance - During the year ended 31st March, 2015, the Income of the Company by way of interest and other income has stood at Rs. 13.81 crore as compared to Rs. 12.05 crore during the brvious year. Net Profit after tax stood at Rs. 92.77 Lacs as compared to Rs.87.13 Lacs during the brvious year. Outlook - MCFL expects to maintain its performance in FY 2015-2016 and hopes to grow at a rate faster than the growth of bank credit. The approach would be to continue the growth momentum while balancing risk. As before, it will continue to invest in strengthening risk management practices; and in maintaining its investment in technology and human resources to consolidate its position as a leading NBFC in India. NBFC INDUSTRY- Non- Banking Finance Companies (NBFCs) have emerged as important financial intermediaries particularly for the small scale and retail sectors. With simplified sanction procedures, flexibility, low operating cost and focused product brsence, NBFCs have an edge over banks in meeting the credit needs of customers. Risk & Concerns - As an NBFC, Mangal Credit and Fincorp Limited is exposed to credit risk, liquidity risk and interest rate risk. The Company has invested in people, processes and technology to mitigate risks posed by external environment and by its borrowers. It has in place a strong risk management team and an effective credit operations structure. Its risk management policies continue to segregate the functions of a Chief Risk Officer and a Chief Credit Officer to focus on portfolio management and underwriting. Sustained efforts to strengthen the risk framework and portfolio quality have yielded significant results over the last few years. MCFL's conservative approach to portfolio management and its rigorous portfolio review mechanism has enabled it to get early stress signals of investment in various sector like Jewellery Industry, Solar Power Industry, Entertainment Industry, Capital Market Business, Real Estate sector etc. Unfortunately the NTA of the Company for the Financial Year 20142015 is 2.39% as compared to zero NPA for last year. Internal Control Systems & Adequacy - MCFL has an independent internal management assurance function which is commensurate with the size and scale of the Company. It evaluates the adequacy of all internal controls and processes and ensures strict adherence to clearly lie down processes and procedures as well as to the brscribed regulatory and legal framework. The Company has further strengthened its internal audit function by investing in domain specialists to increase effectiveness of controls. The audit committee of the Board of Directors reviews the internal audit reports and the adequacy and effectiveness of internal controls. Fulfilment Of Rbi's Norms And Standards - The Company has taken necessary steps to comply with the RBI norms accordingly the company has reduced the holding of subsidiary Companies, which results in reduction in total assets size of the Company below 100 cr. and the Company is exempted from the various regular compliance as per RBI norms. Asset Liability Management (ALM) - MCFL has a total borrowing of Rs. 46,48,27,060 as on 31 March 2015. The Company's asset /liability committee (ALCO), set-up in line with the guidelines issued by the RBI, monitors asset/ liability mismatches to ensure that there are no imbalances or excessive concentrations on either side of the balance sheet. MCFL continued to raise shorter tenor borrowings in FY 2016 as well. Financial & Operational Performance - Please refer to the Board's Report for performance review. Human Resources/Industrial Relations - The Company continues to lay emphasis on people, its most valuable resource. 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. Caution - Statements in this management discussion and analysis describing the Company's objectives, projections, estimates and expectations may be 'forward looking statements' within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those exbrssed or implied. Important developments that could affect the Company's operations include a downtrend in the industry - global or domestic or both, significant changes in political and economic environment in India, applicable statues, litigations, labour relations and interest costs. For Mangal Credit and Fincorp Limited Sd/- (Mr. Meghraj S Jain) Chairman & Managing Director DIN: 01311041 Place: Mumbai Date: 30th May, 2015 |
