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We meet at a critical moment in the history of global economy, and in our own country's economic environment. The Indian economy has, in the last year, witnessed certain difficulties involving expensive money, limited finance options, and a general slowdown. The global scenario, by all accounts, is bleak.
The NBFC industry is at the crossroads, and faces immense challenges.
Alongside, there have been other critical factors that have favoured your Company's growth even in this recessionary economy. The relative insulation of our focused rural and semi–urban market from the recession has ensured that your Company's loan portfolio remains largely shielded from the recessionary trends. Further, the focus on relatively small ticket sizes of the loans preempts the chances of delinquencies. On the positive side, several upticks signs are now visible indicating that the economy may slowly but surely be moving towards a revival – aided by ample liquidity in the institutional system, more liberalised credit, government stimulus packages and rural demand.
Notwithstanding its inherent strengths, your Company nevertheless adopted an ultra–conservative approach to lending in the recent months, when the confidence of institutional lenders and other NBFCs seemed to be shaken on account of the current trends in the economy. Moving forward cautiously, your Company limited its loan sanctions during the year to somewhat below peak levels even during the festive period.
This partly impacted the revenue and margin, but the overall growth story of your Company remained intact during 2008–09. Piggybacking on these gains, your Company continued to move together with its customers in their aspirations and goals, moving in the right direction even in difficult times to reach new levels of success, both financially and operationally, and moving forward to chart a bigger success story for the future.
MOVING FORWARD, FINANCIALLY
One of the important highlights for the year gone by was the excellent reception your Company received from banks; Your Company has successfully mobilised Rs.151050 Lacs from banks and financial institutions. Your Company had a gross mobilisation of Rs. 66898 Lacs in the debunture portfolio.
MOVING FORWARD, OPERATIONALLY
The solid financial performance of the last year helped your Company impress major investors to repose their faith in the organisation. The leading among them was TPG India Investments I, Inc (.'TPG'). During the year under review, your Company approved the execution of an agreement with TPG, whereby TPG will acquire an equity stake in Shriram Retail Holdings Pvt Ltd, the holding company of Shriram City Union Finance Limited.
MOVING RIGHT, PORTFOLIO & CUSTOMER WISE
In terms of its product portfolio, too, your Company's progress did not stop, despite the overall economic slowdown, which did impact demand for financing and increased the risk of delinquencies in some key financing segments, particularly Auto and Commercial Vehicles loans. With our vast and diverse product portfolio, and focus on newer and other target segments such as loan against gold, we have been able to counter these risks to a large extent.
Thus, your Company continued to expand its business operations across key product portfolios, reaching out to more and more customers, through a larger distributor network, during the fiscal under review.
Our solid performance notwithstanding, we are fully aware of the serious structural challenges that the NBFC sector in India is currently facing in the form of increased risk of refinancing or rollover of their short–term borrowings (particularly Mutual Funds) and higher short–term asset–liability mismatch, as well as decelerating disbursement growth. While your Company cannot be totally immune to these adverse circumstances, and its implications in the short and mid–term, the fact remains that we are fully equipped, on the back of our sound financial and operational strengths, to overcome these pressures and emerge eventual winners.
Coupled with these is the inherent trust that our customers repose in our systems and processes, which are totally geared towards providing them hassle–free, simplified, at–the–doorstep services. Keeping all this in view, I am confident that your Company will not only survive the current times but will emerge even more successful in the months and years to come.
It is widely believed that the performance between better positioned and average players in the sector will widen in the current turbulence. As a better positioned player, let me assure you, your Company is comfortably placed – in view of its specialisation in low–risk segments, flexibility in product and liability mix, sound risk management standards, established origination and recovery capabilities – to successfully sail through this adverse period.
ON A CONCLUDING NOTE
Analysts are optimistic about the long–term gains of the business model of NBFCs. And our own business model is particularly blueprinted for success due to its inherent flexibility and diversity in terms of the product portfolio and a strong and well–established dealer and recovery network.
Your Company also has strong operating flexibility in terms of business segments and geographies. Our strong understanding of regional dynamics and customer needs, coupled with flexibility in capital infusion, further enhances our growth potential. I am confident, in the circumstances, which your Company will continue to move fast, move right and move on in the Indian financial services space.
One factor that really encourages me to be optimistic is the highly motivated, huge workforce that is the biggest asset of your Company. This workforce has been highly instrumental in enabling your Company to move on the right track even in not–so–positive circumstances. As a token of its appreciation to the employees, your Company had come out with an Employees' Stock Option Scheme in 2006.
I am sure that with their continued support, combined with the inherent strengths and resilience of your Company, we shall continue to move on the path to higher revenues and returns for a long time to come.