kites rise highest against the wind, not with it. · financial declaration-religare housing...
TRANSCRIPT
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KITES RISE HIGHEST AGAINSTTHE WIND, NOT WITH IT.
KITES RISE HIGHEST AGAINSTTHE WIND, NOT WITH IT.
ndXXII Annual Report 2016-17
-
01Religare Finvest Limited
ndXXII Annual Report 2016-17
ContentIndex Page
Company Information
About Religare Finvest
Leadership Team
Industry Overview
Our Businesses
Constitution of Board of Directors
Supporting the SME Ecosystem
Financial Declaration-Religare Finvest Limited
Directors' Report
Annexure to Directors' Report
Independent Auditors' Report
Annexure to Independent Auditor's Report
Balance Sheet as at March 31, 2017
Statement of Prot and Loss for the year ended March 31, 2017
Cash ow statement for the year ended March 31, 2017
Notes forming part of the nancial statements for the year ended March 31, 2017
Financial Declaration-Religare Housing Development Finance Corporation Limited
Directors' Report
Annexure to Directors' Report
Independent Auditor's Report
Annexure to Independent Auditor's Report
Balance Sheet as at March 31, 2017
Statement of Prot and Loss for the year ended March 31, 2017
Cash ow statement for the year ended March 31, 2017
Notes forming part of the nancial statements for the year ended March 31, 2017
Consolidated Financials
Independent Auditor's Report on Consolidated Financial Statements
Annexure to Independent Auditor's Report on Consolidated Financial Statements
Consolidated Balance Sheet as at March 31, 2017
Consolidated Statement of Prot and Loss for the year ended March 31, 2017
Consolidated Cash ow statement for the year ended March 31, 2017
Notes forming part of the consolidated nancial statements for the year ended March 31, 2017
Notes
01
02
03
05-10
11-18
19-26
27
29-36
37
39-60
61-85
86-88
89-93
94
95
96-97
98-172
173
175-185
186-202
203-204
205-207
208
209
210-211
212-254
255
257-259
260-261
262-263
264
265-267
268-327
328-333
-
01Religare Finvest Limited
ndXXII Annual Report 2016-17
ContentIndex Page
Company Information
About Religare Finvest
Leadership Team
Industry Overview
Our Businesses
Constitution of Board of Directors
Supporting the SME Ecosystem
Financial Declaration-Religare Finvest Limited
Directors' Report
Annexure to Directors' Report
Independent Auditors' Report
Annexure to Independent Auditor's Report
Balance Sheet as at March 31, 2017
Statement of Prot and Loss for the year ended March 31, 2017
Cash ow statement for the year ended March 31, 2017
Notes forming part of the nancial statements for the year ended March 31, 2017
Financial Declaration-Religare Housing Development Finance Corporation Limited
Directors' Report
Annexure to Directors' Report
Independent Auditor's Report
Annexure to Independent Auditor's Report
Balance Sheet as at March 31, 2017
Statement of Prot and Loss for the year ended March 31, 2017
Cash ow statement for the year ended March 31, 2017
Notes forming part of the nancial statements for the year ended March 31, 2017
Consolidated Financials
Independent Auditor's Report on Consolidated Financial Statements
Annexure to Independent Auditor's Report on Consolidated Financial Statements
Consolidated Balance Sheet as at March 31, 2017
Consolidated Statement of Prot and Loss for the year ended March 31, 2017
Consolidated Cash ow statement for the year ended March 31, 2017
Notes forming part of the consolidated nancial statements for the year ended March 31, 2017
Notes
01
02
03
05-10
11-18
19-26
27
29-36
37
39-60
61-85
86-88
89-93
94
95
96-97
98-172
173
175-185
186-202
203-204
205-207
208
209
210-211
212-254
255
257-259
260-261
262-263
264
265-267
268-327
328-333
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02 Religare Finvest Limited
COMPANY INFORMATION BOARD OF DIRECTORSMr. Kavi Arora (Managing Director & CEO)Mr. Anil Saxena (Non-Executive Director)Mr. Daljit Singh (Non-Executive Director)Mr. Maninder Singh (Non-Executive Director)Mr. Nalin Nayyar (Non-Executive Director)Mr. Srinivas Chidambaram (Non-Executive Director)Mr. Avinash Chander Mahajan (Non-Executive Independent Director)Mr. Padam Bahl (Non-Executive Independent Director)Mr. R.K Shetty (Non-Executive Independent Director)Mrs. Sabina Vaisoha (Non-Executive Independent Director)
COMPANY SECRETARYMr. Punit Arora
REGISTERED OFFICE2nd Floor, Rajlok Building, 24, Nehru Place, New Delhi – 110019
CORPORATE OFFICE9th Floor, Tower B, Paras Twin Towers, Sector 54, Golf Course Road, Gurgaon – 122002 (Haryana), Phone No. +91 124 6180200E-Mail: [email protected], [email protected], Website: www.religarefinvest.com
CIN No.- U74999DL1995PLC064132
Abu Dhabi commercial Bank LimitedAditya Birla Finance Limited Andhra BankAxis Bank LimitedBank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Federal Bank Limited HDFC Bank Limited ICICI Bank IDBI Bank Limited Kotak Mahindra Bank LimitedJammu & Kashmir Bank Karnataka Bank
Karur Vysya Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank SIDBI South Indian BankState Bank of TravancoreState Bank of PatialaState Bank of Bikaner and JaipurState Bank of HyderabadState Bank of MysoreState Bank of India Syndicate BankUco BankUnion Bank of IndiaUnited Bank of IndiaVijaya Bank
LIST OF BANKERS/ FIs / NBFCs TO THE COMPANY
STATUTORY AUDITORSPrice Waterhouse, Chartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028
REGISTRAR & SHARE TRANSFER AGENTLink Intime India Pvt. Ltd. C-101, 247 Park, L.B.S. Marg, Vikhroli (West), Mumbai - 400 083Tel: 022-49186000; Email: [email protected], www.linkintime.co.in
TRUSTEE CONTACT DETAILSDebenture Trustee for NCD Public Issue Vistra ITCL (India) Limited(Formerly IL&FS Trust Company Limited)The IL & FS Financial Centre,Plot C- 22, G Block, Bandra Kurla Complex,Bandra (East),Mumbai – 400 051Tel: 022-26593927Email: [email protected]
Debenture Trustee for NCD Private PlacementAxis Trustee Services Limited2nd Floor, Axis House, Bombay Dyeing Mills Compound,Pandurang Budhkar Marg, Worli, Mumbai – 400 025Tel: 022-24255215 / 5216Email: [email protected]
03Religare Finvest Limited
‘To set the standards of excellence by which others are measured in the Commercial Financial Services Industry’. This is the
vision with which Religare Finvest Limited (RFL) was incorporated as a subsidiary of Religare Enterprises Limited (REL), to
power the growth of SMEs, the backbone of India’s economy. Ably guided by its highly experienced and professional
management team, RFL has been charting a steady course and ensuring health of the company remains in top form and
nurturing it with a long term vision.
RFL understands that each financial need is unique and offers customized solutions to empower the customer to prosper.
With a belief that the customer’s success is their success, its presence in 35 branches across all major cities plays a vital role in
nurturing the customer’s business while growing to a book size of over ̀ 3,716 Crores (as of March 31st, 2017).
Established as a non-deposit taking systemically important Non-Banking Finance company, Religare Finvest Limited is
committed to providing debt capital to the ever-growing promising sector of medium and small business owners, propellers
of India’s economy. Our experienced senior management and leadership team has created a unique SME focused business
model that is guided by the principle of ‘In our customers’ success, lies ours’.
Our customized solutions are offered via a wide network of branches. Our ISO 9001:2008 certification further cements our
commitment of providing debt capital to propel SME growth.
Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian
economy. Apart from playing a crucial role in providing large employment opportunities at comparatively lower capital cost,
they also help in industrialisation of rural & backward areas. The government has also acknowledged the SME sector as the
backbone of the India economy and several initiatives have been taken to enhance the growth of this sector. Some of the key
initiatives were Public Procurement Policy, Pradhan Mantri MUDRA Yojana, Make in India, Startup India and Skill India. With
increasing digital transformation, the Indian SMEs are quickly adapting to latest web and mobile technology and the sector is
expected to become a $25.8 billion market by the year 2020.
Religare Finvest Limited (RFL) is also an ‘employer of choice today’ having won several awards and accolades for its human
resource milestones. RFL was recently certified by the Great Place To Work Institute® for building and sustaining a High-
Trust, High-Performance Culture™. Great Place to Work Institute® is considered the gold standard for assessing and
certifying great workplace cultures and represents the definitive employer-of-choice and work place quality recognition any
organization can receive. Religare Finvest Limited has been ranked 50th under ‘Dream Companies to Work for’ by Times
Ascent, along with 3 other award categories, Dream Companies to Work for in Financial Services, Dream Employer of the
year and Talent Management. These external recognitions are a testimony to our commitment to the success of our people
and focus on creating a winning workplace!
ABOUT RELIGARE FINVEST LIMITED
ndXXII Annual Report 2016-17 ndXXII Annual Report 2016-17
-
02 Religare Finvest Limited
COMPANY INFORMATION BOARD OF DIRECTORSMr. Kavi Arora (Managing Director & CEO)Mr. Anil Saxena (Non-Executive Director)Mr. Daljit Singh (Non-Executive Director)Mr. Maninder Singh (Non-Executive Director)Mr. Nalin Nayyar (Non-Executive Director)Mr. Srinivas Chidambaram (Non-Executive Director)Mr. Avinash Chander Mahajan (Non-Executive Independent Director)Mr. Padam Bahl (Non-Executive Independent Director)Mr. R.K Shetty (Non-Executive Independent Director)Mrs. Sabina Vaisoha (Non-Executive Independent Director)
COMPANY SECRETARYMr. Punit Arora
REGISTERED OFFICE2nd Floor, Rajlok Building, 24, Nehru Place, New Delhi – 110019
CORPORATE OFFICE9th Floor, Tower B, Paras Twin Towers, Sector 54, Golf Course Road, Gurgaon – 122002 (Haryana), Phone No. +91 124 6180200E-Mail: [email protected], [email protected], Website: www.religarefinvest.com
CIN No.- U74999DL1995PLC064132
Abu Dhabi commercial Bank LimitedAditya Birla Finance Limited Andhra BankAxis Bank LimitedBank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Federal Bank Limited HDFC Bank Limited ICICI Bank IDBI Bank Limited Kotak Mahindra Bank LimitedJammu & Kashmir Bank Karnataka Bank
Karur Vysya Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank SIDBI South Indian BankState Bank of TravancoreState Bank of PatialaState Bank of Bikaner and JaipurState Bank of HyderabadState Bank of MysoreState Bank of India Syndicate BankUco BankUnion Bank of IndiaUnited Bank of IndiaVijaya Bank
LIST OF BANKERS/ FIs / NBFCs TO THE COMPANY
STATUTORY AUDITORSPrice Waterhouse, Chartered Accountants252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028
REGISTRAR & SHARE TRANSFER AGENTLink Intime India Pvt. Ltd. C-101, 247 Park, L.B.S. Marg, Vikhroli (West), Mumbai - 400 083Tel: 022-49186000; Email: [email protected], www.linkintime.co.in
TRUSTEE CONTACT DETAILSDebenture Trustee for NCD Public Issue Vistra ITCL (India) Limited(Formerly IL&FS Trust Company Limited)The IL & FS Financial Centre,Plot C- 22, G Block, Bandra Kurla Complex,Bandra (East),Mumbai – 400 051Tel: 022-26593927Email: [email protected]
Debenture Trustee for NCD Private PlacementAxis Trustee Services Limited2nd Floor, Axis House, Bombay Dyeing Mills Compound,Pandurang Budhkar Marg, Worli, Mumbai – 400 025Tel: 022-24255215 / 5216Email: [email protected]
03Religare Finvest Limited
‘To set the standards of excellence by which others are measured in the Commercial Financial Services Industry’. This is the
vision with which Religare Finvest Limited (RFL) was incorporated as a subsidiary of Religare Enterprises Limited (REL), to
power the growth of SMEs, the backbone of India’s economy. Ably guided by its highly experienced and professional
management team, RFL has been charting a steady course and ensuring health of the company remains in top form and
nurturing it with a long term vision.
RFL understands that each financial need is unique and offers customized solutions to empower the customer to prosper.
With a belief that the customer’s success is their success, its presence in 35 branches across all major cities plays a vital role in
nurturing the customer’s business while growing to a book size of over ̀ 3,716 Crores (as of March 31st, 2017).
Established as a non-deposit taking systemically important Non-Banking Finance company, Religare Finvest Limited is
committed to providing debt capital to the ever-growing promising sector of medium and small business owners, propellers
of India’s economy. Our experienced senior management and leadership team has created a unique SME focused business
model that is guided by the principle of ‘In our customers’ success, lies ours’.
Our customized solutions are offered via a wide network of branches. Our ISO 9001:2008 certification further cements our
commitment of providing debt capital to propel SME growth.
Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian
economy. Apart from playing a crucial role in providing large employment opportunities at comparatively lower capital cost,
they also help in industrialisation of rural & backward areas. The government has also acknowledged the SME sector as the
backbone of the India economy and several initiatives have been taken to enhance the growth of this sector. Some of the key
initiatives were Public Procurement Policy, Pradhan Mantri MUDRA Yojana, Make in India, Startup India and Skill India. With
increasing digital transformation, the Indian SMEs are quickly adapting to latest web and mobile technology and the sector is
expected to become a $25.8 billion market by the year 2020.
Religare Finvest Limited (RFL) is also an ‘employer of choice today’ having won several awards and accolades for its human
resource milestones. RFL was recently certified by the Great Place To Work Institute® for building and sustaining a High-
Trust, High-Performance Culture™. Great Place to Work Institute® is considered the gold standard for assessing and
certifying great workplace cultures and represents the definitive employer-of-choice and work place quality recognition any
organization can receive. Religare Finvest Limited has been ranked 50th under ‘Dream Companies to Work for’ by Times
Ascent, along with 3 other award categories, Dream Companies to Work for in Financial Services, Dream Employer of the
year and Talent Management. These external recognitions are a testimony to our commitment to the success of our people
and focus on creating a winning workplace!
ABOUT RELIGARE FINVEST LIMITED
ndXXII Annual Report 2016-17 ndXXII Annual Report 2016-17
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ndXXII Annual Report 2016-17
LEADERSHIP
Team
LEADERSHIP
Team
Religare Finvest Limited
ndXXII Annual Report 2016-17
Religare Finvest Limited04 05
-
ndXXII Annual Report 2016-17
LEADERSHIP
Team
LEADERSHIP
Team
Religare Finvest Limited
ndXXII Annual Report 2016-17
Religare Finvest Limited04 05
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Religare Finvest Limited
Kavi AroraManaging Director & CEO
Mr. Kavi Arora joined Religare Finvest Limited in the year 2008 to spearhead the group’s lending platform. It was his vision and farsightedness to focus on Small Business Lending as the core business segment.
The company under his able leadership has grown into being one of the key SME lending financial institutions in India, supporting entrepreneurs realize their dreams and thus evidencing true to the organization’s vision of ‘In your success, lies
stours’. It is this empathetic approach that has led to building up a book size of over ̀ 18,118 Crores as on 31 March, 2017.
Kavi’s vision has enabled Religare Housing Development Finance Corporation Limited to be recognized as a strong affordable Housing Business differentiated on ‘trust’ and ‘convenience’ supported by a distinct and robust underwriting framework. RHDFCL crossed a disbursement record of `100 Crores in March 2017, building the book size of over
st`829 Crores as on 31 March, 2017
With over 22 years of diverse experience within the financial services, Kavi has been associated with reputed companies thsuch as ABN AMRO Bank, ATS Services, Citi Financial, 20 Century Finance, Consortium Finance and GE Capital. During his
career, Kavi has managed assignments of high repute both at domestic as well as international locations. He has been recognized for his outstanding performance through many accolades and awards during the course of his career.
Kavi has also contributed in various SME focused forums and has written articles and whitepapers on subjects related to entrepreneurship such as Family Managed Businesses & Business Planning Tips for SMEs. Kavi is currently the Chairman of Regional Council on MSMEs for CII in Northern Region and also a member of CII’s National Council on MSMEs. He is also the Chairman for a very critical initiative of CII for providing financial advice and support to its members, called CII Finance Facilitation Centre.
An avid sportsman, Kavi brings his go-getter attitude to the field in sports such as hockey and cricket for which he has represented the teams at National and University levels and also pursues his love for Golf. A true philanthropist, Kavi supports an orphanage where he likes to spend time with the children whenever possible.
His academic qualifications include a Bachelor’s Degree in Commerce from Punjab University, a Diploma in Systems Management from NIIT and a Master’s Degree in Business Management from University Business School, Chandigarh.
ndXXII Annual Report 2016-17
Religare Finvest Limited
ndXXII Annual Report 2016-17
06 07
-
Religare Finvest Limited
Kavi AroraManaging Director & CEO
Mr. Kavi Arora joined Religare Finvest Limited in the year 2008 to spearhead the group’s lending platform. It was his vision and farsightedness to focus on Small Business Lending as the core business segment.
The company under his able leadership has grown into being one of the key SME lending financial institutions in India, supporting entrepreneurs realize their dreams and thus evidencing true to the organization’s vision of ‘In your success, lies
stours’. It is this empathetic approach that has led to building up a book size of over ̀ 18,118 Crores as on 31 March, 2017.
Kavi’s vision has enabled Religare Housing Development Finance Corporation Limited to be recognized as a strong affordable Housing Business differentiated on ‘trust’ and ‘convenience’ supported by a distinct and robust underwriting framework. RHDFCL crossed a disbursement record of `100 Crores in March 2017, building the book size of over
st`829 Crores as on 31 March, 2017
With over 22 years of diverse experience within the financial services, Kavi has been associated with reputed companies thsuch as ABN AMRO Bank, ATS Services, Citi Financial, 20 Century Finance, Consortium Finance and GE Capital. During his
career, Kavi has managed assignments of high repute both at domestic as well as international locations. He has been recognized for his outstanding performance through many accolades and awards during the course of his career.
Kavi has also contributed in various SME focused forums and has written articles and whitepapers on subjects related to entrepreneurship such as Family Managed Businesses & Business Planning Tips for SMEs. Kavi is currently the Chairman of Regional Council on MSMEs for CII in Northern Region and also a member of CII’s National Council on MSMEs. He is also the Chairman for a very critical initiative of CII for providing financial advice and support to its members, called CII Finance Facilitation Centre.
An avid sportsman, Kavi brings his go-getter attitude to the field in sports such as hockey and cricket for which he has represented the teams at National and University levels and also pursues his love for Golf. A true philanthropist, Kavi supports an orphanage where he likes to spend time with the children whenever possible.
His academic qualifications include a Bachelor’s Degree in Commerce from Punjab University, a Diploma in Systems Management from NIIT and a Master’s Degree in Business Management from University Business School, Chandigarh.
ndXXII Annual Report 2016-17
Religare Finvest Limited
ndXXII Annual Report 2016-17
06 07
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Religare Finvest Limited
Bipin KabraPresident & Chief Financial Officer
Bipin has over 21 years of total experience in various BFSI spaces such as Capital Markets, Insurance & Banking. Bipin worked from ’92 to ’01 with SBI Capital Markets as Asst. Vice President in treasury, leasing & public issue management. Subsequently, he worked with ICICI Bank from ’01 to ’05 as AGM in International Banking Group and then worked with Reliance General Insurance as Dy. CEO & CFO up to ’08.
His last assignment was with Dhanlaxmi Bank as President & CFO for approx. 4 years.
He brings in substantial experience in resource raising from Banks, NBFCs, FIs, MFs, Insurance Cos., FIIs & PEs and has interacted substantially with regulators such as RBI, IRDA, Taxation authorities & SEBI.
Bipin is a rank holder Chartered Accountant ’91 batch.
Mohit KapoorDirector – Legal & Compliance
Mohit Kapoor joined Religare Finvest Limited as Director-Legal & Compliance in May 2013 from Aon Hewitt where he was the Chief Counsel for the Asia Pacific Region.
With over 24 years of total experience, he brings a rich blend of working with legal firms for over 8 years & corporate experience for 16 years with several reputed corporates.
Mohit has, in the past worked in firms like JB Dadachanji & Co., Kochhar & Co. at New Delhi and Nagashima, Ohno & Tsunematsu based in Tokyo, Japan. Subsequently, he worked in senior management roles at IMG & TWI as Legal Counsel-India, Citibank as General Counsel-Global Consumer Group and Max Life Insurance Co. He holds rich experience in handling legal issues related to financial services in general and issues related to dispute resolution and corporate litigation across various forums, as also corporate documentation and consulting.
Mohit is a law graduate from Delhi University after acquiring a B.Com. degree from Kirori Mal College (Delhi University). He is also a qualified Solicitor of the Supreme Court of England & Wales.
ndXXII Annual Report 2016-17
Religare Finvest Limited
Abhijit GhoshPresident & Chief Business Officer
A science graduate from the University of Calcutta, Abhijit Ghosh is responsible for the entire distribution as President & Chief Business Officer. He joined Religare in 2010 and spearheaded special projects in Healthcare and Insurance Broking functions in the group at leadership levels, before taking up the responsibility of building the SME Lending business in the most ‘entrepreneur focused’ regions of the country.
Having a rich product distribution experience from Future Capital, ICICI Securities, ABN AMRO Bank & ICICI Bank, he has thoroughly evolved and integrated the Sales, Operations & Credit underwriting functions to make the region a profit center.
Abhijit is actively involved with the SMEs in his region by proactively organizing & participating in various SME focused Expos, conclaves, seminars & Personal discussion meetings that have enabled him to be constantly connected to the dynamics of the business.
Pankaj SharmaPresident & CRO
Pankaj has over 27 years of rich experience in Credit and Risk of which he has been with Citi bank N.A./ Citicorp Finance (India) Ltd for about 15 years. He started his career from L&T Ltd. in 1989 as Branch Engineer finalizing merchandising plans for their entire range of construction and earthmoving equipment. In 1997, he moved to RPG Itochu Finance Ltd. in the role of Business Development for construction equipment. It was in 1999 that he joined Citicorp Finance (CFIL) and managed transportation and equipment finance businesses thereby underwriting credits, managing portfolio within program parameters of net credit losses & delinquencies and applied rehabilitation and remedial measures for stressed accounts. He has also handled various roles in Citicorp Finance including Portfolio and Operational Risk Manager, Risk Head of Asset Backed Finance and Head of Equipment Management Group. He was last designated as Managing Director in CFIL.
Prior to joining Religare Finvest Limited, Pankaj was working as Director and Risk Head- Citi bank N.A. for Asset Backed Finance under Commercial Banking Group. He is a B.Tech from REC Kurukshetra- batch of 1989.
ndXXII Annual Report 2016-17
08 09
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Religare Finvest Limited
Bipin KabraPresident & Chief Financial Officer
Bipin has over 21 years of total experience in various BFSI spaces such as Capital Markets, Insurance & Banking. Bipin worked from ’92 to ’01 with SBI Capital Markets as Asst. Vice President in treasury, leasing & public issue management. Subsequently, he worked with ICICI Bank from ’01 to ’05 as AGM in International Banking Group and then worked with Reliance General Insurance as Dy. CEO & CFO up to ’08.
His last assignment was with Dhanlaxmi Bank as President & CFO for approx. 4 years.
He brings in substantial experience in resource raising from Banks, NBFCs, FIs, MFs, Insurance Cos., FIIs & PEs and has interacted substantially with regulators such as RBI, IRDA, Taxation authorities & SEBI.
Bipin is a rank holder Chartered Accountant ’91 batch.
Mohit KapoorDirector – Legal & Compliance
Mohit Kapoor joined Religare Finvest Limited as Director-Legal & Compliance in May 2013 from Aon Hewitt where he was the Chief Counsel for the Asia Pacific Region.
With over 24 years of total experience, he brings a rich blend of working with legal firms for over 8 years & corporate experience for 16 years with several reputed corporates.
Mohit has, in the past worked in firms like JB Dadachanji & Co., Kochhar & Co. at New Delhi and Nagashima, Ohno & Tsunematsu based in Tokyo, Japan. Subsequently, he worked in senior management roles at IMG & TWI as Legal Counsel-India, Citibank as General Counsel-Global Consumer Group and Max Life Insurance Co. He holds rich experience in handling legal issues related to financial services in general and issues related to dispute resolution and corporate litigation across various forums, as also corporate documentation and consulting.
Mohit is a law graduate from Delhi University after acquiring a B.Com. degree from Kirori Mal College (Delhi University). He is also a qualified Solicitor of the Supreme Court of England & Wales.
ndXXII Annual Report 2016-17
Religare Finvest Limited
Abhijit GhoshPresident & Chief Business Officer
A science graduate from the University of Calcutta, Abhijit Ghosh is responsible for the entire distribution as President & Chief Business Officer. He joined Religare in 2010 and spearheaded special projects in Healthcare and Insurance Broking functions in the group at leadership levels, before taking up the responsibility of building the SME Lending business in the most ‘entrepreneur focused’ regions of the country.
Having a rich product distribution experience from Future Capital, ICICI Securities, ABN AMRO Bank & ICICI Bank, he has thoroughly evolved and integrated the Sales, Operations & Credit underwriting functions to make the region a profit center.
Abhijit is actively involved with the SMEs in his region by proactively organizing & participating in various SME focused Expos, conclaves, seminars & Personal discussion meetings that have enabled him to be constantly connected to the dynamics of the business.
Pankaj SharmaPresident & CRO
Pankaj has over 27 years of rich experience in Credit and Risk of which he has been with Citi bank N.A./ Citicorp Finance (India) Ltd for about 15 years. He started his career from L&T Ltd. in 1989 as Branch Engineer finalizing merchandising plans for their entire range of construction and earthmoving equipment. In 1997, he moved to RPG Itochu Finance Ltd. in the role of Business Development for construction equipment. It was in 1999 that he joined Citicorp Finance (CFIL) and managed transportation and equipment finance businesses thereby underwriting credits, managing portfolio within program parameters of net credit losses & delinquencies and applied rehabilitation and remedial measures for stressed accounts. He has also handled various roles in Citicorp Finance including Portfolio and Operational Risk Manager, Risk Head of Asset Backed Finance and Head of Equipment Management Group. He was last designated as Managing Director in CFIL.
Prior to joining Religare Finvest Limited, Pankaj was working as Director and Risk Head- Citi bank N.A. for Asset Backed Finance under Commercial Banking Group. He is a B.Tech from REC Kurukshetra- batch of 1989.
ndXXII Annual Report 2016-17
08 09
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Religare Finvest Limited
ndXXII Annual Report 2016-17
Religare Finvest Limited
Sachin SharmaDirector IT-OPs & Strategic initiatives
Sachin Sharma is responsible for conceptualizing, developing and executing strategies for making the organization future ready at all times. Creating new business lines in the SME segment is an area that Sachin works upon to ensure that there is a regular stream of opportunities and Religare is leveraging those.
He joined Religare in July 2008 as the SME business head and Regional Business Director for two different regions.
He has prior experience of setting up the cards & loans business for RBS in Gujarat & has served as the Head of cards & loans for North region, before managing the role of Centre Manager for Gujarat for ICICI Prudential. Prior to this, Sachin worked with Citi Financial and was a part of startup teams leading consumer durables, two wheelers and personal loans businesses.
A London Business School graduate, Sachin has a keen interest in technologies & loves to sing and listen to music.
Ashish AnandDirector and Head – Human Resources
Ashish Anand is responsible for driving all strategic HR plans such as Culture building, PMS, Compensation & Benefits, R&R, Employee Engagement, Hiring & On-Boarding, OD & Training. All his efforts are guided towards making Religare Finvest Limited & it’s subsidiary, an Employer of Choice. Besides HR function, he is also responsible for Admin & Infrastructure functions.
Having joined the Religare Group in 2008 to set up its training and development function, he thereafter managed the Business HR function for retail financial services businesses (NBFC, Health Insurance & Capital Market). He has diverse & multi industry experience of over 16 years in areas such as Org design & scale up, system thinking, employee engagement, organisational development, performance management, ESOP & Compensation management etc.
Ashish started his career at Piaggio and later worked at Dabur India, where in his last role, he was simultaneously managing various portfolios such as -international business as HR head, HR Business Partner-Sales (West & South) and Corporate HR.
He holds a bachelor’s degree in commerce from Pune University and is an alumnus of Symbiosis Institute of Business Management. Besides work, Ashish loves the game of golf and gymming.
ndXXII Annual Report 2016-17
INDUSTRY
Overview
10 11
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Religare Finvest Limited
ndXXII Annual Report 2016-17
Religare Finvest Limited
Sachin SharmaDirector IT-OPs & Strategic initiatives
Sachin Sharma is responsible for conceptualizing, developing and executing strategies for making the organization future ready at all times. Creating new business lines in the SME segment is an area that Sachin works upon to ensure that there is a regular stream of opportunities and Religare is leveraging those.
He joined Religare in July 2008 as the SME business head and Regional Business Director for two different regions.
He has prior experience of setting up the cards & loans business for RBS in Gujarat & has served as the Head of cards & loans for North region, before managing the role of Centre Manager for Gujarat for ICICI Prudential. Prior to this, Sachin worked with Citi Financial and was a part of startup teams leading consumer durables, two wheelers and personal loans businesses.
A London Business School graduate, Sachin has a keen interest in technologies & loves to sing and listen to music.
Ashish AnandDirector and Head – Human Resources
Ashish Anand is responsible for driving all strategic HR plans such as Culture building, PMS, Compensation & Benefits, R&R, Employee Engagement, Hiring & On-Boarding, OD & Training. All his efforts are guided towards making Religare Finvest Limited & it’s subsidiary, an Employer of Choice. Besides HR function, he is also responsible for Admin & Infrastructure functions.
Having joined the Religare Group in 2008 to set up its training and development function, he thereafter managed the Business HR function for retail financial services businesses (NBFC, Health Insurance & Capital Market). He has diverse & multi industry experience of over 16 years in areas such as Org design & scale up, system thinking, employee engagement, organisational development, performance management, ESOP & Compensation management etc.
Ashish started his career at Piaggio and later worked at Dabur India, where in his last role, he was simultaneously managing various portfolios such as -international business as HR head, HR Business Partner-Sales (West & South) and Corporate HR.
He holds a bachelor’s degree in commerce from Pune University and is an alumnus of Symbiosis Institute of Business Management. Besides work, Ashish loves the game of golf and gymming.
ndXXII Annual Report 2016-17
INDUSTRY
Overview
10 11
-
Religare Finvest Limited
For some time now, NBFCs have enjoyed the status of being financial intermediaries in retail finance and are an important instrument of financial inclusion. They complement banks by allocating resources to growth oriented micro, small and medium (MSMEs) business owners and by extending credit to the unbanked segments of the society. NBFCs’ growing contribution to the economy standing at 13% as on FY15 is a testimony of their promising future. The growth is driven not only by traditional NBFC products like commercial vehicle financing but also in the areas of personal and affordable housing finance. Further, the success of the sector is attributed to cost efficiency, ‘bad debt’ control, customised products and better customer services. NBFCs’ ground level understanding of their customers’ profile and credit needs, gives them an edge over traditional lenders. Additionally, their continuous efforts towards innovation and customisation of products suiting their customers’ needs make them a desirable option for the fund seeking MSMEs. The ongoing stress in the public sector banks due to mounting debts and banking system’s constraints with respect to expanding their lending activities, has clearly enhanced the role of NBFCs in the recent past and has provided them the opportunity to increase their reach. As the government has turned its focus towards making India a country of job creators and not job seekers, its policies are focused towards entrepreneurship, start-ups and manufacturing. This has given a favourable boost to the NBFC sector. With the advent of digital transformation in the lending space and NBFCs’ agility in embracing these technological changes and upgrades have made them more appealing to the new-era MSMEs. Thus, the NBFC sector has made itself an integral part of the Indian financial system and that plays a vital role in India’s economic growth and development.
One area where the NBFCs have recently gained popularity is the affordable housing space. With the government coming up with various schemes like Pradhan Mantri Awaas Yojna (PMAY), the affordable housing sector is witnessing a boom and so are the NBFCs and Housing Finance Corporations (HFCs). Another government initiative called the PM Jan Dhan Yojna has also accelerated financial inclusion of the unbanked segment making them a part of the formal economy. The Jan Dhan Yojna has opened up opportunities created by the underserved customer base especially for NBFCs and HFCs. Hence, some of the key initiatives of the government like ‘Make in India’, ‘Housing for All’ and ‘Jan Dhan’ have positively contributed to the growth of NBFC sector.
Despite the promising future of NBFCs, their journey is punctuated by unforeseen challenges. For instance, the retail NBFC credit growth moderated to 16-18% in FY2017 vis-à-vis 19.5% in FY2016. This slowdown can be attributed to the impact on retail credit off-take post demonetisation. The key target segment of NBFCs – the self-employed – are likely to be affected more, as a sizeable share of their business is based on cash transactions, which were impacted by the shortage in currency following demonetisation. They were also unprepared for digital transactions post demonetisation and further undecided due to the impending GST bill. This is especially true for the rural market and there is expected to be a muted growth in this sector. The positive outlook on disbursement growth projected for FY16 and FY17 was stifled and thus did not meet expected results due to limited cash availability. The employees’ focus also shifted from incremental business to collections in the months post demonetisation. For NBFCs the slowdown might hamper the growth currently but the success in recovery of the amount lent, income levels, and their ability to contribute margins for asset purchase and business funding would be the key growth drivers in the near to medium term.
The slow growth overall in the industry and slower growth for some key asset classes like LAP and microfinance in the medium term as compared to in the past can be attributed to increasing competitive pressure. Competitive pressure for retail-focused NBFCs may intensify as banks are increasingly focusing on retail segment to offset the weak corporate credit growth. Also, increase in the banks’ deposit base post demonetisation and steep reduction in lending rates is expected to result in migration of some large-ticket and relatively better quality NBFC borrowers, namely large fleet operators, MSMEs borrowers and some salaried customer segments to banks. Thus, going forward the banks are going to be more competitive in this space.
NBFCs collection efficiency was adversely affected due to inability to accept repayments in old currency and diminished circulation of valid currency. Hence, NBFCs’ 90+ day delinquencies (excluding MFIs) increased to 5.5% in December 2016 after remaining range bound at 5.1-5.3% between Q4FY2016 and Q2FY2017 (4.6-4.7% including MFIs). The delinquencies in the soft bucket are expected to remain high in the near term. Overall too, the delinquencies will remain higher in Q4FY2017 and H1FY2018 as compared with H1FY2017 as demonetisation impacted collections across asset classes.
With respect to NPAs, the gross NPAs of retail-focused NBFCs (excluding captive financiers and MFIs) have increased to 5.0% in December 2016 as compared with 4.4% in March 2016 (3.5% in March 2015). This is the result of the dip in the collections across asset classes post demonetisation, weak asset quality performance of some large NBFCs and on account of the migration of NBFCs to tighter NPA recognition norms.
The average cost of operations for NBFCs was higher at around 3.2% in 9MFY2017 than as compared to 3.2% in FY2015 and 2.9% in FY2014. According to an ICRA report, the operating efficiency is expected to weaken further in the near to medium term on account of demonetisation, given the additional collection efforts and, some slowdown in incremental business volumes.
The cost of funds has moderated steadily with reduction in systemic rates. Both the incremental cost of borrowing through capital market instruments and from the banking sector moderated steadily in the current financial year. Favourable market liquidity position and incremental borrowing rates (from banks and marketing instruments) would drive down the overall cost of funding of NBFCs in the current financial year.
The banking sector is the primary source of retail funding for retail-focussed NBFCs, attributing around 37% of the total borrowing as on December 2016. This share is however expected to reduce in the near term as funding profile shifts towards market instruments (NCDs/CPs) of the NBFCs. Net income from operations of NBFCs improved with moderation in borrowing costs. However, the expectation of higher credit cost and increasing competitive pressures going forward would offset the benefits of the lower cost of funds for NBFCs.
Executive Summary
ndXXII Annual Report 2016-17
Religare Finvest Limited
ndXXII Annual Report 2016-17
12 13
-
Religare Finvest Limited
For some time now, NBFCs have enjoyed the status of being financial intermediaries in retail finance and are an important instrument of financial inclusion. They complement banks by allocating resources to growth oriented micro, small and medium (MSMEs) business owners and by extending credit to the unbanked segments of the society. NBFCs’ growing contribution to the economy standing at 13% as on FY15 is a testimony of their promising future. The growth is driven not only by traditional NBFC products like commercial vehicle financing but also in the areas of personal and affordable housing finance. Further, the success of the sector is attributed to cost efficiency, ‘bad debt’ control, customised products and better customer services. NBFCs’ ground level understanding of their customers’ profile and credit needs, gives them an edge over traditional lenders. Additionally, their continuous efforts towards innovation and customisation of products suiting their customers’ needs make them a desirable option for the fund seeking MSMEs. The ongoing stress in the public sector banks due to mounting debts and banking system’s constraints with respect to expanding their lending activities, has clearly enhanced the role of NBFCs in the recent past and has provided them the opportunity to increase their reach. As the government has turned its focus towards making India a country of job creators and not job seekers, its policies are focused towards entrepreneurship, start-ups and manufacturing. This has given a favourable boost to the NBFC sector. With the advent of digital transformation in the lending space and NBFCs’ agility in embracing these technological changes and upgrades have made them more appealing to the new-era MSMEs. Thus, the NBFC sector has made itself an integral part of the Indian financial system and that plays a vital role in India’s economic growth and development.
One area where the NBFCs have recently gained popularity is the affordable housing space. With the government coming up with various schemes like Pradhan Mantri Awaas Yojna (PMAY), the affordable housing sector is witnessing a boom and so are the NBFCs and Housing Finance Corporations (HFCs). Another government initiative called the PM Jan Dhan Yojna has also accelerated financial inclusion of the unbanked segment making them a part of the formal economy. The Jan Dhan Yojna has opened up opportunities created by the underserved customer base especially for NBFCs and HFCs. Hence, some of the key initiatives of the government like ‘Make in India’, ‘Housing for All’ and ‘Jan Dhan’ have positively contributed to the growth of NBFC sector.
Despite the promising future of NBFCs, their journey is punctuated by unforeseen challenges. For instance, the retail NBFC credit growth moderated to 16-18% in FY2017 vis-à-vis 19.5% in FY2016. This slowdown can be attributed to the impact on retail credit off-take post demonetisation. The key target segment of NBFCs – the self-employed – are likely to be affected more, as a sizeable share of their business is based on cash transactions, which were impacted by the shortage in currency following demonetisation. They were also unprepared for digital transactions post demonetisation and further undecided due to the impending GST bill. This is especially true for the rural market and there is expected to be a muted growth in this sector. The positive outlook on disbursement growth projected for FY16 and FY17 was stifled and thus did not meet expected results due to limited cash availability. The employees’ focus also shifted from incremental business to collections in the months post demonetisation. For NBFCs the slowdown might hamper the growth currently but the success in recovery of the amount lent, income levels, and their ability to contribute margins for asset purchase and business funding would be the key growth drivers in the near to medium term.
The slow growth overall in the industry and slower growth for some key asset classes like LAP and microfinance in the medium term as compared to in the past can be attributed to increasing competitive pressure. Competitive pressure for retail-focused NBFCs may intensify as banks are increasingly focusing on retail segment to offset the weak corporate credit growth. Also, increase in the banks’ deposit base post demonetisation and steep reduction in lending rates is expected to result in migration of some large-ticket and relatively better quality NBFC borrowers, namely large fleet operators, MSMEs borrowers and some salaried customer segments to banks. Thus, going forward the banks are going to be more competitive in this space.
NBFCs collection efficiency was adversely affected due to inability to accept repayments in old currency and diminished circulation of valid currency. Hence, NBFCs’ 90+ day delinquencies (excluding MFIs) increased to 5.5% in December 2016 after remaining range bound at 5.1-5.3% between Q4FY2016 and Q2FY2017 (4.6-4.7% including MFIs). The delinquencies in the soft bucket are expected to remain high in the near term. Overall too, the delinquencies will remain higher in Q4FY2017 and H1FY2018 as compared with H1FY2017 as demonetisation impacted collections across asset classes.
With respect to NPAs, the gross NPAs of retail-focused NBFCs (excluding captive financiers and MFIs) have increased to 5.0% in December 2016 as compared with 4.4% in March 2016 (3.5% in March 2015). This is the result of the dip in the collections across asset classes post demonetisation, weak asset quality performance of some large NBFCs and on account of the migration of NBFCs to tighter NPA recognition norms.
The average cost of operations for NBFCs was higher at around 3.2% in 9MFY2017 than as compared to 3.2% in FY2015 and 2.9% in FY2014. According to an ICRA report, the operating efficiency is expected to weaken further in the near to medium term on account of demonetisation, given the additional collection efforts and, some slowdown in incremental business volumes.
The cost of funds has moderated steadily with reduction in systemic rates. Both the incremental cost of borrowing through capital market instruments and from the banking sector moderated steadily in the current financial year. Favourable market liquidity position and incremental borrowing rates (from banks and marketing instruments) would drive down the overall cost of funding of NBFCs in the current financial year.
The banking sector is the primary source of retail funding for retail-focussed NBFCs, attributing around 37% of the total borrowing as on December 2016. This share is however expected to reduce in the near term as funding profile shifts towards market instruments (NCDs/CPs) of the NBFCs. Net income from operations of NBFCs improved with moderation in borrowing costs. However, the expectation of higher credit cost and increasing competitive pressures going forward would offset the benefits of the lower cost of funds for NBFCs.
Executive Summary
ndXXII Annual Report 2016-17
Religare Finvest Limited
ndXXII Annual Report 2016-17
12 13
-
Religare Finvest Limited
NBFCs’ cost of funds has reduced steadily with the reduction in systemic rates and a shift in the funding profile towards capital market instruments (NCD/CPs) over the last few quarters. Though banks still remain the preferred primary source of funding, the trend is moving towards various debt market instruments. This incremental shift can be attributed to favourable rates and for diversifying their borrowing profile.
5%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mar-13 Mar-14 Mar-15 Jun-15 Sept-15 Mar-16 Jun-16 Sept-16 Dec-16
Bank Debentures Assignment Securitization Commercial Paper Others
15% 15% 12% 10% 10% 12% 11% 10% 07%
13% 12% 14% 10% 15% 14% 14% 14% 15%
14% 13%9% 5% 8% 5% 9% 9% 10%
8% 7%10% 11% 11% 11% 12% 13% 12%
2% 4% 6% 5% 5% 8% 6% 8% 8%
Fig 5: Funding Profile (Excluding MFIs)
Source: ICRA Research; Company/Company Investor Presentation
Fig 6: Movement in Cost of Funds(12 months trailing; excluding MFIs)
11.0%
10.0%
10.0%
9.0%
9.0%
Mar-13 Mar-14 Mar-15 Mar-16 Jun-16 Sep-16 Dec-16
Source: ICRA Research; Company/Company Investor Presentation
Growth and outlook across asset classes
Loan Against 19% 30% 18% 18-20% 16-19% NBFCs offering LAPs are becomingProperty + cautious because of the highHousing Loan delinquencies and declining business margins in the segment
Construction 6% -1% 6% 4-5% 6-7% FY2018 seem promising due toEquipment increase in infrastructure demand. Banks are especially competitive in this segment and NBFCs remain cautious in this segment
Micro finance 18% ¬60% 49% 35-38% 30-33% Growth is impacted in this segmentand other due to demonetisation. NBFCs have unsecured shifted their focus on collectionsloans and incremental lending is at lower levels than in the past
Asset Dec-31,2016 Growth in Y-o-Y Expected Expected Comments and future (% of retail FY2016 Growth growth growth in growth triggers
book) 9MFY2017 in FY2017 FY2018
ndXXII Annual Report 2016-17
Religare Finvest Limited
Overview of the Industry and NBFC Retail Credit Market
Overall domestic credit: Size, composition and growth trends
Annual retail credit growth slowed down as the cash crunch post-demonetisation affected credit demand and off-take during Q3FY2017 and Q4FY2017. Some of the key growth drivers in the retail segment – vehicle finance, mortgage loans, micro finance and other asset backed loans – witnessed lower off-take in H2FY2017 as compared with the run rate until Q2FY2017. Further, with non-bank lenders remaining focused on collections, while banks focused on demonetisation related activities in Q3FY2017 and early Q4FY2017; disbursements were impacted. Business volumes are expected to remain subdued in the near to medium term until the demand from the key retail segments improves in a stable manner. In the medium to long term however, credit growth would be supported by the movement of borrowers from the informal sector to the organized sector for meeting their incremental credit demand.
The Indian retail credit market stood at INR 28.0 trillion as on December 31, 2016. The y-o-y credit growth in 9MFY2017 moderated to 16.2% as compared with 20.4% in H1FY2017. Overall, housing credit continued to account for about 47% of the total domestic retail credit, and registered a moderate growth of about 14.5% in 9MFY2017 (19.0% during FY2016). The banking sector retail credit grew y-o-y by about 13.5% (19.5% in FY2016) while HFCs and NBFCs registered a growth of about 20.1% (20.0% during FY2016) and 17.5% (19.5%) respectively in 9MFY2017.
Retail credit includes that of Scheduled Commercial Banks (SCBs), Non-Banking Financial Corporation’s (NBFCs) and Housing Finance Companies (HFC’s)
Mar-11 Mar-11 Mar-11 Mar-11 Mar-11 Mar-11
5
10
15
20
25
30
-
5%
10%
15%
20%
25%
35%
0%
30%
Figure 1: Size of the Retail Credit Market
In
tri
llio
n`
Retail CreditRetail Credit as % of GDP (RHS)
Growth (RHS)Retail Credit as % of Credit (RHS)
Source: RBI, financials of NBFCs & Mortgage lenders; ICRA Research
Figure 2: Total Industry Credit as on December 31, 2016
SCB
Infra
11%
SCB Retail
17%
SCB- excl, Retail
and Infra 47%
HFCs 9%
NBFC - Infra &
Corporate
10%
Source: RBI, annual accounts of NBFCs & mortgage lenders and ICRA research
NBFC - Retail
6%
As on December 31, 2016, retail credit accounted for approximately 31% of total industry credit, as bank credit to the corporate segment (including SME, industry, services) remained stagnant on a y-o-y basis (4.9% growth observed during FY2016).
NBFCs continued to account for about 20% of total domestic retail credit supported by good growth over the last 18 months. Banking sector share has reduced in December 2016 as credit growth in the retail segment was moderate in the months post demonetisation. So, the share of NBFCs and HFCs increased over September 2016 levels.
Retail lending assets classified as priority sector attract a 75% risk weight.
Fig 3: Lender-wise breakup of retail credit as on December 31, 2016
Source: RBI, financials of NBFCs & Mortgage lenders; ICRA Research
Banks - Housing
29%
Banks - Retail (Non Housing)
25%
HFCs26%
NBFC -Retail20%
25%
20%
15%
10%
5%
0%
Source: Non-Banking Finance Companies: The ChangingLandscapes; ASSOCHAM-PwC report
7% CAGR
10% CAGR
2015 2016E 2017E 2018E 2019E 2020E
Fig 4: Credit Growth at NBFCs as a % of total credit
ndXXII Annual Report 2016-17
14 15
-
Religare Finvest Limited
NBFCs’ cost of funds has reduced steadily with the reduction in systemic rates and a shift in the funding profile towards capital market instruments (NCD/CPs) over the last few quarters. Though banks still remain the preferred primary source of funding, the trend is moving towards various debt market instruments. This incremental shift can be attributed to favourable rates and for diversifying their borrowing profile.
5%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mar-13 Mar-14 Mar-15 Jun-15 Sept-15 Mar-16 Jun-16 Sept-16 Dec-16
Bank Debentures Assignment Securitization Commercial Paper Others
15% 15% 12% 10% 10% 12% 11% 10% 07%
13% 12% 14% 10% 15% 14% 14% 14% 15%
14% 13%9% 5% 8% 5% 9% 9% 10%
8% 7%10% 11% 11% 11% 12% 13% 12%
2% 4% 6% 5% 5% 8% 6% 8% 8%
Fig 5: Funding Profile (Excluding MFIs)
Source: ICRA Research; Company/Company Investor Presentation
Fig 6: Movement in Cost of Funds(12 months trailing; excluding MFIs)
11.0%
10.0%
10.0%
9.0%
9.0%
Mar-13 Mar-14 Mar-15 Mar-16 Jun-16 Sep-16 Dec-16
Source: ICRA Research; Company/Company Investor Presentation
Growth and outlook across asset classes
Loan Against 19% 30% 18% 18-20% 16-19% NBFCs offering LAPs are becomingProperty + cautious because of the highHousing Loan delinquencies and declining business margins in the segment
Construction 6% -1% 6% 4-5% 6-7% FY2018 seem promising due toEquipment increase in infrastructure demand. Banks are especially competitive in this segment and NBFCs remain cautious in this segment
Micro finance 18% ¬60% 49% 35-38% 30-33% Growth is impacted in this segmentand other due to demonetisation. NBFCs have unsecured shifted their focus on collectionsloans and incremental lending is at lower levels than in the past
Asset Dec-31,2016 Growth in Y-o-Y Expected Expected Comments and future (% of retail FY2016 Growth growth growth in growth triggers
book) 9MFY2017 in FY2017 FY2018
ndXXII Annual Report 2016-17
Religare Finvest Limited
Overview of the Industry and NBFC Retail Credit Market
Overall domestic credit: Size, composition and growth trends
Annual retail credit growth slowed down as the cash crunch post-demonetisation affected credit demand and off-take during Q3FY2017 and Q4FY2017. Some of the key growth drivers in the retail segment – vehicle finance, mortgage loans, micro finance and other asset backed loans – witnessed lower off-take in H2FY2017 as compared with the run rate until Q2FY2017. Further, with non-bank lenders remaining focused on collections, while banks focused on demonetisation related activities in Q3FY2017 and early Q4FY2017; disbursements were impacted. Business volumes are expected to remain subdued in the near to medium term until the demand from the key retail segments improves in a stable manner. In the medium to long term however, credit growth would be supported by the movement of borrowers from the informal sector to the organized sector for meeting their incremental credit demand.
The Indian retail credit market stood at INR 28.0 trillion as on December 31, 2016. The y-o-y credit growth in 9MFY2017 moderated to 16.2% as compared with 20.4% in H1FY2017. Overall, housing credit continued to account for about 47% of the total domestic retail credit, and registered a moderate growth of about 14.5% in 9MFY2017 (19.0% during FY2016). The banking sector retail credit grew y-o-y by about 13.5% (19.5% in FY2016) while HFCs and NBFCs registered a growth of about 20.1% (20.0% during FY2016) and 17.5% (19.5%) respectively in 9MFY2017.
Retail credit includes that of Scheduled Commercial Banks (SCBs), Non-Banking Financial Corporation’s (NBFCs) and Housing Finance Companies (HFC’s)
Mar-11 Mar-11 Mar-11 Mar-11 Mar-11 Mar-11
5
10
15
20
25
30
-
5%
10%
15%
20%
25%
35%
0%
30%
Figure 1: Size of the Retail Credit Market
In
tri
llio
n`
Retail CreditRetail Credit as % of GDP (RHS)
Growth (RHS)Retail Credit as % of Credit (RHS)
Source: RBI, financials of NBFCs & Mortgage lenders; ICRA Research
Figure 2: Total Industry Credit as on December 31, 2016
SCB
Infra
11%
SCB Retail
17%
SCB- excl, Retail
and Infra 47%
HFCs 9%
NBFC - Infra &
Corporate
10%
Source: RBI, annual accounts of NBFCs & mortgage lenders and ICRA research
NBFC - Retail
6%
As on December 31, 2016, retail credit accounted for approximately 31% of total industry credit, as bank credit to the corporate segment (including SME, industry, services) remained stagnant on a y-o-y basis (4.9% growth observed during FY2016).
NBFCs continued to account for about 20% of total domestic retail credit supported by good growth over the last 18 months. Banking sector share has reduced in December 2016 as credit growth in the retail segment was moderate in the months post demonetisation. So, the share of NBFCs and HFCs increased over September 2016 levels.
Retail lending assets classified as priority sector attract a 75% risk weight.
Fig 3: Lender-wise breakup of retail credit as on December 31, 2016
Source: RBI, financials of NBFCs & Mortgage lenders; ICRA Research
Banks - Housing
29%
Banks - Retail (Non Housing)
25%
HFCs26%
NBFC -Retail20%
25%
20%
15%
10%
5%
0%
Source: Non-Banking Finance Companies: The ChangingLandscapes; ASSOCHAM-PwC report
7% CAGR
10% CAGR
2015 2016E 2017E 2018E 2019E 2020E
Fig 4: Credit Growth at NBFCs as a % of total credit
ndXXII Annual Report 2016-17
14 15
-
Religare Finvest Limited
With an increase in delinquencies and higher competitive pressures with entry of new players, there has been a slow-down
in the LAP lending which has led to moderation in margins over the last five years. Since the demonetisation, the NBFCs have
become much more cautious in extending LAP and SME credit. The demonetisation has affected the cash flows as well as the
income levels of the borrowers. Demonetisation has adversely affected the credit profile of target and large borrowers as
their own businesses had a lot of dependability on cash transactions.
High competitive pressures, mediocre lending yields and profitability of products in this segment have led to moderation of
the lending rate to about 12.0-13.0% as compared to 14.5-15.0% in FY2013 and FY2014.
According to an ICRA’s report, lender portfolio largely consists of loans against residential properties (around 55%), loans
against commercial (33%), mixed usage (8%) and industrial properties (3%). Cases of balance transfer are also quite usual
and this can be attributed to the absence of prepayment penalty and that a large part of such business is sourced through
DSA.
When it comes to geography wise lending, the portfolios of key lenders exhibited a concentrated top lending profile in these
three states - Delhi, Maharashtra and Tamil Nadu. These three states have together accounted for around 50-55% of the
overall disbursements in the last two years. In cities, Delhi and Mumbai together accounted for around 30-35%.
In the current scenario, delinquencies have been a cause of concern for the NBFCs. Delinquencies in the LAP segment have
continued to increase, with 90+ dpd as on December 31 2016 being at 3.9-4.0% as compared to 2.8% as on March 31, 2016.
Since a majority of the LAP and mortgage loans are taken by self-employed borrowers for business needs, the muted
operating environment over the past few quarters has also impacted asset quality. According to an ICRA report, the
borrowers are resorting to refinancing of existing loans with new lenders to manage liquidity pressures.
Fig 9: 90+ dpd movement in the LAP segment
4.5%
4.0%
2.5%
2.0%
2.5%
2.0%
1.5%
1.0%
1.0%
0.0%Mar -11 Mar -12 Mar -13 Mar -14 Mar -15 Jun -15 Mar-16 Jun-16 Sep-16 Oct-16
Source: ICRA Research; Company/Company Investor Presentation
Lenders are becoming cautious in extending incremental credit to this segment given the asset quality pressures and high
competition leading to weakening underwriting standards and moderation in business yields. As compared to other
segments, the collections in this segment were not adversely impacted by demonetisation. But, its impact on borrower
businesses is expected to result in cash flow constraints, resulting in delinquencies increasing to levels higher than in the
past.
ndXXII Annual Report 2016-17
Religare Finvest Limited
Performance of key retail asset class
Mortgage and SME Finance
SME loans include loans secured by mortgages, plant & machinery, inventory, and unsecured loans and LAP stands foroans against property. LAP portfolio of NBFCs stood at INR 895 billion as on December 31, 2016 with a 12% y-o-y growth in 9MFY2017 as compared to 27% growth in FY2016. NBFC LAP and SME credit together stood at INR 1.50 trillion (INR 1.68 trillion including Housing Loan) as on December 31, 2016 registering a growth of 20% (24% y-o-y growth including Housing Loan) on a y-o-y basis in 9MFY2017.
1800
1600
1400
1200
1000
800
600
400
200
0
30%
20%
15%
10%
5%
0%
25%
35%
40%
Mar-13 Mar-14 Mar-15 Mar-16 Dec-15 Dec-16
LAP SME Housing % Growth-LAP+HL+SME
` B
illio
n
Fig 7: Movement of NBFC LAP+SME+HL segment
Source: ICRA Research; Company/Company Investor Presentation
Fig 8: Movement of NBFC LAP+SME
1800
1600
1400
1200
1000
800
600
400
200
0
30%
20%
15%
10%
5%
0%
25%
35%
40%
Mar-13 Mar-14 Mar-15 Mar-16 Dec-15 Dec-16
LAP+SME+HL % Growth-LAP+SME
` B
illio
n
% Growth-LAP-HL-SME % Growth-LAP
Source: ICRA Research; Company/Company Investor Presentation
ndXXII Annual Report 2016-17
16 17
-
Religare Finvest Limited
With an increase in delinquencies and higher competitive pressures with entry of new players, there has been a slow-down
in the LAP lending which has led to moderation in margins over the last five years. Since the demonetisation, the NBFCs have
become much more cautious in extending LAP and SME credit. The demonetisation has affected the cash flows as well as the
income levels of the borrowers. Demonetisation has adversely affected the credit profile of target and large borrowers as
their own businesses had a lot of dependability on cash transactions.
High competitive pressures, mediocre lending yields and profitability of products in this segment have led to moderation of
the lending rate to about 12.0-13.0% as compared to 14.5-15.0% in FY2013 and FY2014.
According to an ICRA’s report, lender portfolio largely consists of loans against residential properties (around 55%), loans
against commercial (33%), mixed usage (8%) and industrial properties (3%). Cases of balance transfer are also quite usual
and this can be attributed to the absence of prepayment penalty and that a large part of such business is sourced through
DSA.
When it comes to geography wise lending, the portfolios of key lenders exhibited a concentrated top lending profile in these
three states - Delhi, Maharashtra and Tamil Nadu. These three states have together accounted for around 50-55% of the
overall disbursements in the last two years. In cities, Delhi and Mumbai together accounted for around 30-35%.
In the current scenario, delinquencies have been a cause of concern for the NBFCs. Delinquencies in the LAP segment have
continued to increase, with 90+ dpd as on December 31 2016 being at 3.9-4.0% as compared to 2.8% as on March 31, 2016.
Since a majority of the LAP and mortgage loans are taken by self-employed borrowers for business needs, the muted
operating environment over the past few quarters has also impacted asset quality. According to an ICRA report, the
borrowers are resorting to refinancing of existing loans with new lenders to manage liquidity pressures.
Fig 9: 90+ dpd movement in the LAP segment
4.5%
4.0%
2.5%
2.0%
2.5%
2.0%
1.5%
1.0%
1.0%
0.0%Mar -11 Mar -12 Mar -13 Mar -14 Mar -15 Jun -15 Mar-16 Jun-16 Sep-16 Oct-16
Source: ICRA Research; Company/Company Investor Presentation
Lenders are becoming cautious in extending incremental credit to this segment given the asset quality pressures and high
competition leading to weakening underwriting standards and moderation in business yields. As compared to other
segments, the collections in this segment were not adversely impacted by demonetisation. But, its impact on borrower
businesses is expected to result in cash flow constraints, resulting in delinquencies increasing to levels higher than in the
past.
ndXXII Annual Report 2016-17
Religare Finvest Limited
Performance of key retail asset class
Mortgage and SME Finance
SME loans include loans secured by mortgages, plant & machinery, inventory, and unsecured loans and LAP stands foroans against property. LAP portfolio of NBFCs stood at INR 895 billion as on December 31, 2016 with a 12% y-o-y growth in 9MFY2017 as compared to 27% growth in FY2016. NBFC LAP and SME credit together stood at INR 1.50 trillion (INR 1.68 trillion including Housing Loan) as on December 31, 2016 registering a growth of 20% (24% y-o-y growth including Housing Loan) on a y-o-y basis in 9MFY2017.
1800
1600
1400
1200
1000
800
600
400
200
0
30%
20%
15%
10%
5%
0%
25%
35%
40%
Mar-13 Mar-14 Mar-15 Mar-16 Dec-15 Dec-16
LAP SME Housing % Growth-LAP+HL+SME
` B
illio
n
Fig 7: Movement of NBFC LAP+SME+HL segment
Source: ICRA Research; Company/Company Investor Presentation
Fig 8: Movement of NBFC LAP+SME
1800
1600
1400
1200
1000
800
600
400
200
0
30%
20%
15%
10%
5%
0%
25%
35%
40%
Mar-13 Mar-14 Mar-15 Mar-16 Dec-15 Dec-16
LAP+SME+HL % Growth-LAP+SME
` B
illio
n
% Growth-LAP-HL-SME % Growth-LAP
Source: ICRA Research; Company/Company Investor Presentation
ndXXII Annual Report 2016-17
16 17
-
ndXXII Annual Report 2016-17
Religare Finvest Limited
A year of reforms with a positive outlook for the next financial year
This financial year has been a mixed bag for the NBFC sector. On one hand, demonetisation disrupted the industry by
impacting business activity and availability of cash currency while on the other, the SARFAESI act helped in building a
stronger regulatory environment resulting in higher capital cover and better risk management for NBFCs. Similarly, the cost
of funds has moderated steadily during the last two to three quarters with the reduction in systemic rates. There has also
been a shift towards capital market instrument for funds in the past two quarters. But an increasing penetration of the banks
in the key retail asset classes can intensify the competition for NBFCs further. Additionally, the RBI is seeking to remove some
of the regulatory arbitrage through alignment of NPA and provisioning norms that the NBFCs have enjoyed vis-à-vis banks.
Though, ICRA notes that there may be a case for providing NBFCs with some ‘enabling’ provisions similar to those enjoyed by
banks, given that NBFCs are an important source of funds for the self-employed segment. Over the years, the NBFCs have
also shifted towards maintaining conservative Asset Liability Maturity (ALM) profile by maintaining the liquidity buffers in
terms of liquid investments and committed lines from banks. They are also steadily increasing the proportion of long term
funding.
ndXXII Annual Report 2016-17
OURBusinesses
Religare Finvest Limited18 19
-
ndXXII Annual Report 2016-17
Religare Finvest Limited
A year of reforms with a positive outlook for the next financial year
This financial year has been a mixed bag for the NBFC sector. On one hand, demonetisation disrupted the industry by
impacting business activity and availability of cash currency while on the other, the SARFAESI act helped in building a
stronger regulatory environment resulting in higher capital cover and better risk management for NBFCs. Similarly, the cost
of funds has moderated steadily during the last two to three quarters with the reduction in systemic rates. There has also
been a shift towards capital market instrument for funds in the past two quarters. But an increasing penetration of the banks
in the key retail asset classes can intensify the competition for NBFCs further. Additionally, the RBI is seeking to remove some
of the regulatory arbitrage through alignment of NPA and provisioning norms that the NBFCs have enjoyed vis-à-vis banks.
Though, ICRA notes that there may be a case for providing NBFCs with some ‘enabling’ provisions similar to those enjoyed by
banks, given that NBFCs are an important source of funds for the self-employed segment. Over the years, the NBFCs have
also shifted towards maintaining conservative Asset Liability Maturity (ALM) profile by maintaining the liquidity buffers in
terms of liquid investments and committed lines from banks. They are also steadily increasing the proportion of long term
funding.
ndXXII Annual Report 2016-17
OURBusinesses
Religare Finvest Limited18 19
-
Religare Finvest Limited
Segment Wise – Product Wise Performance
The Company has the stated objective to be SME lending company. The SME financing constitutes over 83% of RFL’s lending business. The Company offers SME Loans for working capital and capacity expansion requirements and therefore acts as a “growth capital provider” to the SME segment. RFL’s SME loan book has decreased to ̀ 11,385 Crore as of March 31, 2017 from `15,067 Crore in FY 2016. The actions during the year were undertaken as part of portfolio consolidation and building granular portfolio. Under the same, 1029 Short Term Trade Finance & 3386 SME customers were acquired during the financial year by the Company.
SME - Secured: SME –Secured product enables our customers to acquire funds against their residential or commercial property. Loans offered under this product may be utilized towards different business purposes including business expansion and purchase of plant and machinery. This product caters to individuals and corporates across various sectors & industries.
As on March 31, 2017, RFL’s SME Mortgage loan book was at ̀ 10,321 Crore with 5,184 no. of active accounts.
SME FINANCING
SME - Secured (`Crore) (ENR):
909
2,892
5,913 5,8187,218
10,163
13,119
2010 2011 2012 2013 2014 2015 2016
10,321
2017
SME - Unsecured: This caters to the working capital and other financial requirements of medium and small enterprises. Loans are granted post an in-depth and detailed financial analysis and credit underwriting of the SMEs. This is a high yielding product and is non- revolving in nature with maximum tenor up to 3 years.
As on March 31, 2017, RFL’s SME Working Capital Loan book stood at ̀ 1,059 Crore with 13,725 live accounts.
SME – Unsecured (`Crore) (ENR):
303
672
1,066931 881
1,096
1,921
2010 2011 2012 2013 2014 2015 2016
1,059
2017
During Fiscal 2017, our Company disbursed SME loans amounting to `1,044 Crore in the first quarter of the year. The year was dedicated building diversified granular book with higher focus on small ticket retail acquisition through alternate channels. Under this the Company acquired 1029 customer from Short Term Trade Finance (STTF) offering and 3386 customers under SME financing.
ndXXII Annual Report 2016-17
Religare Finvest Limited
ndXXII Annual Report 2016-17
20 21
-
Religare Finvest Limited
Segment Wise – Product Wise Performance
The Company has the stated objective to be SME lending company. The SME financing constitutes over 83% of RFL’s lending business. The Company offers SME Loans for working capital and capacity expansion requirements and therefore acts as a “growth capital provider” to the SME segment. RFL’s SME loan book has decreased to ̀ 11,385 Crore as of March 31, 2017 from `15,067 Crore in FY 2016. The actions during the year were undertaken as part of portfolio consolidation and building granular portfolio. Under the same, 1029 Short Term Trade Finance & 3386 SME customers were acquired during the financial year by the Company.
SME - Secured: SME –Secured product enables our customers to acquire funds against their residential or commercial property. Loans offered under this product may be utilized towards different business purposes including business expansion and purchase of plant and machinery. This product caters to individuals and corporates across various sectors & industries.
As on March 31, 2017, RFL’s SME Mortgage loan book was at ̀ 10,321 Crore with 5,184 no. of active accounts.
SME FINANCING
SME - Secured (`Crore) (ENR):
909
2,892
5,913 5,8187,218
10,163
13,119
2010 2011 2012 2013 2014 2015 2016
10,321
2017
SME - Unsecured: This caters to the working capital and other financial requirements of medium and small enterprises. Loans are granted post an in-depth and detailed financial analysis and credit underwriting of the SMEs. This is a high yielding product and is non- revolving in nature with maximum tenor up to 3 years.
As on March 31, 2017, RFL’s SME Working Capital Loan book stood at ̀ 1,059 Crore with 13,725 live accounts.
SME – Unsecured (`Crore) (ENR):
303
672
1,066931 881
1,096
1,921
2010 2011 2012 2013 2014 2015 2016
1,059
2017
During Fiscal 2017, our Company disbursed SME loans amounting to `1,044 Crore in the first quarter of the year. The year was dedicated building diversified granular book with higher focus on small ticket retail acquisition through alternate channels. Under this the Company acquired 1029 customer from Short Term Trade Finance (STTF) offering and 3386 customers under SME financing.
ndXXII Annual Report 2016-17
Religare Finvest Limited
ndXXII Annual Report 2016-17
20 21
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Religare Finvest Limited
CAPITAL MARKET FINANCING
Maintaining the Company’s SME focus strategy, incremental lending under capital market products was discontinued during
the year and the portfolios under Loans Against Securities (LAS) and Promoter Finance stood at `159.7 cr. and `424.5 cr.
respectively. The portfolios will run-off with loan maturity and attrition.
CMF – Loans Against Securities (`Crore) (ENR):
811
1,227
1,519
1,317
1,111 1,048
2010 2011 2012 2013 2014 2015 2016
287
2017
160
CMF – Promoter Funding (`Crore) (ENR):
204
908
798
612665
735793
425
2010 2011 2012 2013 2014 2015 2016 2017
Financial Performance & Operational Performance
During the year 2016-17, the Company’s total income declined by 4% to `2417.13 Crore, as compared to `2528.29 Crore in 2015-16. The Company’s PAT decreased to (`340.93 Crore), from `295.14 crore. The Gross NPAs and net NPAs for the year under review stood at 4.66% and 3.36% respectively. The Company’s net spread for the year under review stood at 2.63%.
Ø Capital Adequacy Ratio (CRAR): The Company maintained a CRAR of 21.20% during 2016-17 against a minimum 15% as required by RBI norms.
Ø Borrowing Profile: The Company’s total external borrowings decreased from `17,218.53 Crore as of March 31, 2016 to `13,333.40 Crore as of March 31, 2017.
Ø Assets under Management (AUM): The total Assets under Management (AUM) as on March 31, 2017 stood at`14,725.81 Crore against ̀ 18,813.40 Crore as on March 31, 2016.
Ø Securitization/Assignment: During financial year 2016-17 the Company assigned it’s assets worth `375.49 as against`890.17 Crore securitization during 2015-16.
ndXXII Annual Report 2016-17
Religare Finvest Limited
Our portfolio continues to be well diversified and spread across industry sector and geographies.
SME portfolio by Industry
59%
25%
9%
5% 3%
Services Manufacturer Real Estate
Others Primary & Allied
SME portfolio by zone
MUMBAI CHENNAI BANGALORE GUJRAT_NORTH PUNENEW DELHI
HYDERABAD ROTN CHANDIGARH RAJASTHAN GUJRAT_SOUTH KOLKATA
INDORE PUNJAB NAGPUR NASHIK RAIPUR HO
10%
9%6%
6%
6%
6%
5%
5%
4%
3%3%
2%2%
2% 1%
1%
16%
14%
ndXXII Annual Report 2016-17
22 23
-
Religare Finvest Limited
CAPITAL MARKET FINANCING
Maintaining the Company’s SME focus strategy, incremental lending under capital market products was discontinued during
the year and the portfolios under Loans Against Securities (LAS) and Promoter Finance stood at `159.7 cr. and `424.5 cr.
respectively. The portfolios will run-off with loan maturity and attrition.
CMF – Loans Against Securities (`Crore) (ENR):
811
1,227
1,519
1,317
1,111 1,048
2010 2011 2012 2013 2014 2015 2016
287
2017
160
CMF – Promoter Funding (`Crore) (ENR):
204
908
798
612665
735793
425
2010 2011 2012 2013 2014 2015 2016 2017
Financial Performance & Operational Performance
During the year 2016-17, the Company’s total income declined by 4% to `2417.13 Crore, as compared to `2528.29 Crore in 2015-16. The Company’s PAT decreased to (`340.93 Crore), from `295.14 crore. The Gross NPAs and net NPAs for the year under review stood at 4.66% and 3.36% respectively. The Company’s net spread for the year under review stood at 2.63%.
Ø Capital Adequacy Ratio (CRAR): The Company maintained a CRAR of 21.20% during 2016-17 against a minimum 15% as required by RBI norms.
Ø Borrowing Profile: The Company’s total external borrowings decreased from `17,218.53 Crore as of March 31, 2016 to `13,333.40 Crore as of March 31, 2017.
Ø Assets under Management (AUM): The total Assets under Management (AUM) as on March 31, 2017 stood at`14,725.81 Crore against ̀ 18,813.40 Crore as on March 31, 2016.
Ø Securitization/Assignment: During financial year 2016-17 the Company assigned it’s assets worth `375.49 as against`890.17 Crore securitization during 2015-16.
ndXXII Annual Report 2016-17
Religare Finvest Limited
Our portfolio continues to be well diversified and spread across industry sector and geographies.
SME portfolio by Industry
59%
25%
9%
5% 3%
Services Manufacturer Real Estate
Others Primary & Allied
SME portfolio by zone
MUMBAI CHENNAI BANGALORE GUJRAT_NORTH PUNENEW DELHI
HYDERABAD ROTN CHANDIGARH RAJASTHAN GUJRAT_SOUTH KOLKATA
INDORE PUNJAB NAGPUR NASHIK RAIPUR HO
10%
9%6%
6%
6%
6%
5%
5%
4%
3%3%
2%2%
2% 1%
1%
16%
14%
ndXXII Annual Report 2016-17
22 23
-
Religare Finvest Limited
13% 6%
81%
1%
Debentures
Bank Term Loans
Commercial Paper
Short Term Bank Lines
In order to augment capital adequacy, your company has been raising Tier II Capital in the form of sub-ordinated loans from the Banking sector. During this year, your Company has raised ̀ 100 Crores of sub-ordinated loans from banks.
Your Company had launched its maiden Public Issue of Secured Redeemable Non-Convertible Debentures (NCDs) in September 2011 (Public issue-1) for `753.8 Crores followed by a second public issue in October 2012 (Public issue-2) for`332.05 Crores. These NCDs are listed on the BSE and are secured by way of a charge on business receivables and immovable property. While Public issue 1 was fully matured during the financial year, the amount outstanding as on March 31, 2017 is `108.92 Crores for Public issue 2. During FY 2017, the Company did not issue any new NCDs.
RFL Treasury Operations
The Treasury operations of your Company are focused on meeting funding requirements, reducing cost of Borrowings and managing short term surpluses. The treasury department undertakes liquidity management by seeking to maintain an optimum level of liquidity and complying with the RBI requirements of asset liability management. The treasury department of your Company maintains a healthy balance between interest-earning liquid assets and cash to optimize earnings. As a part of treasury activities, your company also invests surplus fund in fixed deposits with banks, liquid debt-based mutual funds, CBLO, corporate bonds, government securities.
Asset Liability Management and Interest Rate Risk Management
Treasury also monitors the Liquidity risk and Interest Rate risk. Liquidity risk arises due to non-availability of adequate funds at an appropriate cost, or of appropriate tenure, to meet the business requirements. This risk is minimized through a mix of strategies, including maintaining back up credit facilities, liquid investments etc. The short term fund requirements are primarily funded by working capital loans/ cash credit/ over draft facilities and through commercial paper (CP).The Company also issues Commercial Paper as a strategy to take advantage of lower interest in the capital market. However, in order to manage the liquidity risk, your company keeps atleast hundred percent back up of liquid assets/ undrawn bank finance against the CP outstanding to ensure that liquidity risk is minimal.
Your Company also monitors liquidity risk by segregating all assets and liabilities into different maturity profiles, and evaluating these buckets for any mismatches in any particular segment. The Company’s ALM policy is in line with RBI guidelines and your company regularly prepares ‘Dynamic Liquidity Statement’, called ALM-I, on a monthly basis and which is reviewed by ALCO to assess the liquidity position of the Company. Your Company also prepares ‘Structural Liquidity Statement’, ALM-II and ‘Interest Rate Sensitivity Report’, ALM-III on a half yearly basis. All these ALM reports are submitted to RBI at the specified periods.
In order to avoid mismatches between long terms assets and long term liabilities, your Company over the years has increased the tenor of Term Loans borrowed from Banks. Your Company currently borrows terms loans having tenor of 7 years to avoid significant gaps in ALM profile. The Company has been able