ROLE OF NON BANKING FINANCIAL INTITUTIONS IN INDIAN FINANCIAL SYSTEM A Major Project Report
Submitted in partial fulfillment of the requirements for BBA (General) programme programme of Guru Gobind Singh Singh Indraprastha Indraprastha University, University, Delhi
Submitted by
BBA (General)Semester-VI (General)Semester-VI
Enroll. No.: 0891221708
Delhi College Of Advanced Studies B-7, Shankar Garden, Vikaspuri New Delhi-110088
CONTENTS
S.No.
Topic
Page No.
1
Declaration
-
2
Acknowledgement
-
3
List of Tables
-
4
List of Figures
-
5
List Of Symbols
-
6
List Of abbreviations
-
7
Chapter-1: Introduction
8
Chapter-2:Conceptual Framework
9
Chapter-3: Summary and Conclusion
10
References/Bibliography References/Bibliograph y
-
LIST OF TABLES
Table No.
Title
1
Business mix of Reliance Capital
2
Weakening Demand For Transportation Services
3
Top five banks and NBFCs with highest profitability profitabilit y
4
Banking versus NBFCregulatory arbitrageinIndia arbitrageinIn dia
Page No.
LIST OF FIGURES
Figure No. 1
2 3 4 5 6 7 8 9 10 11 12 13
Title Financial Performance of LIC Housing finance Debt-Equity Ratio and RONW
PBDTM and PAT ROG Sales Non-performing assets and provisions Financial performance PBDTM and RONW ROG Sales and PAT Financial Performance PBDTM and RONW Debt equity ratio and ROG Sales ROG and PAT Debt – equity ratio and PBDTM
14 15
RONW IDFC consolidated net profit at Rs.750 crore for FY 2009
16 17
ROG Sales PAT
Page No.
LIST OF SYMBOLS
Table No.
Title
Nomenclature & Meaning
1.
%
Percentage
2.
$
Dollar
LIST OF ABBREVIATIONS
S.No.
Title
Meaning
1.
IRDA
Insurance Regulatory Development Act
2.
CRR
Credit Return Rate
3.
w.e.f
With effect from
4.
CoR
Certificate of Registration
5.
SEBI
Securities Exchange Board of India
6.
COSMOS
Cosmopolitan
7.
SLR
Statutory Liquidity Ratio
8.
GDP
Gross Domestic Product
DECLARATION
I hereby declare the major project report, entitled ― Role of Non-Banking Financial Institutions in Indian Financial System‖ is based on my original study and has not been submitted earlier for
award of any degree or diploma to any institute or university.
The work of author(s), wherever used, has been acknowledged at appropriate place(s).
Place:New Delhi
Candidate‘s signature
Date: 2011
Name: ChhaviGoswami Enrol. No.: 0921221708
Countersigned
Name: Ms. PriyankaRaoName: Prof.(Dr). J.P. Vashney Supervisor Delhi College Of Advanced Studies
Director Delhi College Of Advanced Studies
ACKNOWLEDGEMENT
An independent project is a contradiction in terms. Every project involves contribution of many people. This project also bears the imprints of many people and it is a pleasure for me to acknowledge and thank all of them. I am deeply indebted to Ms. PriyankaRao who acted as a mentor and guide, providing knowledge and giving me their valuable time out of their busy schedule, at every step throughout the research. It is only because of her this project came into being. I also thank the Director of Delhi College Of Advanced Studies, for providing an opportunity of doing this project under his leadership. I also take the opportunity to express my sincere gratitude to each and every person, who directly or indirectly helped me throughout the project and without anyone of them the research would not have been possible.
The immense learning from this project would be indelible forever.
ChhaviGoswami Enrl.No.0921221708
CHAPTER 1 INTRODUCTION Introduction to NBFCs
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956
and
is
engaged
in
the
business
of
loans
and
advances,
acquisition
of
shares/stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non banking company). NBFCs are doing functions akin to that of banks; however there are a few differences: (i)an NBFC cannot accept demand deposits; (ii) an NBFC is not a part of the payment and settlement system and as such an NBFC cannot issue cheques drawn on itself; and (iii) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors unlike in case of bank. Types of NBFC’s
Originally, NBFCs registered with RBI were classified as: (i)equipment leasing company; (ii) hire purchase company; (iii) loan company; (iv) investment company. However, with effect from December 6, 2006 the above NBFCs registered with RBI have been reclassified as (i) Asset Finance Company (AFC) (ii) Investment Company (IC) (iii) Loan Company (LC) A Comparative Study Of NBFC in India 2010
Importance of NBFCs
According to RBI Non-Banking Finance Companies (NBFCs) is a constituent of the institutional structure of the organized financial system in India. NBFCs perform a significant and important role in our financial system. They facilitate the process of channelising of public savings and provide better return to the depositors. We are aware that due to liberalization and globalisation, banking industry and financial sector has gone through many reforms. In the present economic environment it is very difficult to cater need of society by Banks alone so role of Non Banking Finance Companies and Micro Finance Companies become indispensable. The activities of non-banking financial companies(NBFCs) in India have undergone qualitative changes over the years through functional specialisation. The role of NBFCs as effective financial intermediaries has been well recognised as they have inherent ability to take quicker decisions, assume greater risks, and customise their services and charges more according to the needs of the clients. While these features, as compared to the banks, have contributed to the proliferation of NBFCs, their flexible structures allow them to unbundle services provided by banks and market the components on a competitive basis. The distinction between banks and non-banks has been gradually getting blurred since both the segments of the financial system engage themselves in many similar types of activities. At present, NBFCs in India have become prominent in a wide range of activities like hire-purchase finance, equipment lease finance, loans, investments, etc. By employing innovative marketing strategies and devising tailor-made products, NBFCs have also been able to build up a clientele base among the depositors, mop up public savings and command large resources as reflected in the growth of their deposits from public, shareholders, directors and their companies, and borrowings by issue of non-convertible debentures, etc. According to KPMG survery The Indian Non Banking Finance Company (NBFC) sector has often been relegated to the shadows, in most discussions on the Indian Financial Services (FS) industry. Banks, insurance companies and capital market players take centre stage and invariably, NBFCs attract public attention only during times of crisis. Little attention has been paid to the silent but
effective manner in which NBFCs have spread their operations across the country. NBFCs have provided financial solutions to sections of society who hitherto were at the mercy of unorganized players for credit and savings products, which were delivered on economically and socially usurious terms. ronically, in recent times, NBFCs are once again in the spotlight for their perceived strengths and capabilities rather than their problems. While this re-rating ought to bring cheer to a much maligned sector, a degree of caution needs to be instilled within potential investors in NBFCs, who need to clearly understand the true drivers of value for finance companies. This understanding is imperative to enable a better judgment of the intrinsic worth of NBFCs. This article proceeds to illustrate the key factors responsible for the strong re-rating of the NBFC sector, as well as discuss the validity of each of these factors, as actual drivers of value. Today, the NBFC sector is as financially sound as it has ever been.To an extent, this can be attributed to the very problems affecting the sector which have resulted in the purging of several players, leaving the fittest few to dominate the landscape. Taking the Reserve Bank of Indias (RBI) definition of .reporting NBFCs as a proxy for non-dormant players, a mere 24 NBFCs held 92.7 percent of the total assets of all NBFCs in 2005-2006. The balance assets, amounting to less than 8 percent of the total, were fragmented across 439 NBFCs. In addition to this consolidation, at present, NBFCs in general are well-capitalized with strong parent support. A majority of active NBFCs reported capital adequacy ratios exceeding 12 percent Role of NBFCs
According to EPW Research Foundation (EPWRF) The Indian economy is going through a period of rapid `financial liberalisation'. Today, the `intermediation' is being conducted by a wide range of financial institution through a plethora of customer friendly financial products. The segment consisting of Non-Banking Financial Companies (NBFCs), such as equipment leasing/hire purchase finance, loan and investment companies, etc. have made great strides in recent years and are meeting the diverse financial needs of the economy. In this process, they have influenced the direction of savings and investment. The resultant capital formation is important for our economic
growth and development. Thus, from both the macroeconomic perspective and the structure of the Indian financial system, the role of NBFCs has become increasingly important. The crucial role of Non Banking Finance Institutions (NBFIs) in broadening access to financial services, and enhancing competition and diversification of the financial sector has been well recognized. The main advantages of these companies lie in their ability to lower transactions costs of their operations, their quick decision-making ability, customer orientation and prompt provision of services. While NBFIs are sometimes seen as akin to banks in terms of the products and services offered, this is strictly not accurate, as more often, NBFIs play a range of roles that complement banks. Further, Status Note on NBFCs NBFIs can add to economic strength to the extent they enhance the resilience of the financial system to economic shocks. A well developed and properly regulated NBFI sector is thus an important component of broad, balanced, efficient financial system that spreads risks and provides a sound base for economic growth and prosperity. On Global Crisis
According to CARE: NBFC sector faced significant stresses on asset quality, liquidity and funding costs due to the global economic slowdown & its impact on the domestic economy. While all the NBFCs were affected, the impact varied according to the structural features of each NBFC. AssetAsset liability maturity (ALM) profiles, type of assets financed and origination / collection models followed were the primary differentiators within NBFCs. The support provided by the Reserve Bank of India (RBI) highlighted the explicit acceptance of the systemic importance of the sector. FY10 was marked by re-aligning of the liability profiles, tightening of lending norms coupled with closing down of many of the unsecured loan segments. On a structural basis, the sector is now more robust due to the lessons learned by NBFCs from this crisis. Profitability is expected to be lower than historical levels due to conservative ALM management, higher provisioning and avoidance of high yielding unsecured loan segments. However profits are at the same time expected to be much more stable & less susceptible.
Guidelines for new deposit
Customeridentification:'KnowTheCustomer'(KYC)shouldbethekeyguiding
principle
for
identification of an individual / corporate customer (depositor or borrower).
Accordingly, the KYC framework should have two-fold objective, (i) to ensure customeridentificationandverifyinghisidentityandresidentialaddress;and(ii)to transactions
of
monitor asuspicious
nature.NBFCsshouldensurethattheidentityofthecustomer,includingbeneficialowneris donebased on disclosures bycustomers themselves.
TypicallyeasymeansofestablishingidentitywouldbedocumentssuchasPermanent AccountNumber(PAN),rationcard,drivinglicence,ElectionCommission'sidentity card,passport,etceteraincaseofindividualsandregistrationcertificate,partnership deed/agreement,etceteraandotherreliabledocumentsinrespectofcompanies,firms
and
otherbodies.
Verificationthroughsuchdocumentsshouldbeinadditiontotheintroductionbya person known to theNBFC.
Proceduresfor existingcustomers
In respect of existing customers, NBFCs should ensure that gaps and missing informationincomplianceofKYCguidelinesoncustomeridentificationprocedureis filled up and completed beforeJune30, 2004.
Ceilingand monitoringof cash transactions
NBFCs would normallynot havelargecash withdrawals and deposits. However, wherever transactions of Rs10 lakh (Rs1 million) and above are undertaken, they should keep record of these transactions in a separate register maintained at branch, aswellas at RegisteredOffice.
Such information shouldbemadeavailableto regulatoryand investigating authorities, when demanded.
Guidelines andmonitoringprocedures
Theboard
of
directors
of
NBFCs
should
formulate
policies
and
procedures
to
operationalisetheguidelines andput in place an effectivemonitoringsystem to ensure compliancebytheirbranches.
Earlycomputerisationofbranch/officereportingwillfacilitatepromptgenerationof
suchreports and monitoring.
Internal controlsystems
Duties andresponsibilitiesshouldbeexplicitlyallocatedamongthestaffforensuring that policies and procedures aremanaged effectivelyand that thereis full commitment andcompliancetoan effectiveKYCprogrammeinrespectofbothexisting and prospective customers/clients.
Internal audit/inspection
Internalauditorsmustspecificallyscrutiniseandcommentontheeffectivenessofthe measurestakenbybranches/officesofNBFCinadoptionofKYCnormsandsteps
towards
prevention ofmoneylaundering.
Specificcasesofviolationshouldbeimmediatelybroughttothenoticeofhead/
controlling/ registered office. Record keeping
NBFCs
should
prepare
a n d maintainproper
documentation
on
their
customer
relationships and cash transactions of Rs.10 lakh and above.
Therecordsofallsuchtransactionsshouldberetainedforatleasttenyearsafterthe transactionhastakenplaceandshouldbeavailableforperusalandscrutinybyaudit functionariesaswellas
regulatorsandlawenforcementauthorities;asandwhen
required,at
thebranch aswellas at registered office.
Trainingof staffand management
Itisimportantthatalltheoperatingandmanagementstaffismadefullyawareofthe implications and understand the needforstrict adherenceto KYC norms.
NBFCsmaytakesuitablestepstoimparttrainingtotheiroperationalstaffonanti-
moneylaunderingmeasures.
Responsibilities
TheNBFCs acceptingpublicdeposits should furnish to RBI i.
Auditedbalancesheetofeachfinancialyearandanauditedprofitandlossaccountin respectofthatyearaspassedintheannualgeneralmeetingtogetherwithacopyof thereportoftheBoardofDirectorsandacopyofthereportandthenotesonaccounts
furnished
byits Auditors; ii.
StatutoryAnnual Returnon deposits-NBS1;
iii.
CertificatefromtheAuditorsthatthe companyisinapositionto repaythedeposits as andwhen the claims arise;
iv.
QuarterlyReturn on liquid assets;
v.
Half-yearlyReturn onprudential norms;
vi.
Half-yearlyALMReturnsbycompanieshavingpublicdepositsofRs.20croreand aboveor with assets of Rs. 100 croreand aboveirrespectiveof thesizeof deposits ;
vii.
Monthlyreturnonexposuretocapitalmarketbycompanies havingpublicdeposits ofRs. 50 croreand above; and
viii.
AcopyoftheCreditRatingobtainedonceayearalongwithoneoftheHalf-yearly Returns on prudential norms as at (v)above.
Current Scenario
Nearly11years after thelast of thetwo bankinglicences wereissued byRBIto private sector entities,the
governmenthasagainstartedtheprocessofallowingthebetter-managednon-
banking
finance companies (NBFCs) to graduate to full-fledged banks. FM Pranab Mukherjee‗ Budget proposal on Friday was thefirst steptowardsthesame.
ThesecondstepwillbeenactedonTuesdaymorning.Aselectgroupofofficialsfromtop theaegisoftheFinanceIndustryDevelopment
Council
NBFCs,
(FIDC),
under
thetradebody
forNBFCsinIndia,aremeetingRGopalan,thebankingsecretaryinthefinanceministry,to presentacaseforselectNBFCstobeconvertedintofull-fledgedbanks,sourcessaid.About 12-15NBFCsandcorporatehouseshavingpresenceinthefinancialsectorareexpectedto join the raceto floatabank.
Thefinanceministerisconvincedthatthereisahugeneedforlow-costfinancingatthe
semi-
urbanandruralareasinIndia,‗‗saidaindustrysource.Thefinancialservicesindustry believestheBudgetproposalwasareflectionofthesame.Inthefinanceministrythingsare movingintherightdirectionandthebankingsecretary ‗smeetingprovesthesame, ‗‗saidthe source.FIDC officebearers could notbe contacted duringtheextended weekend.
InthelastUnionBudget,theFMhadannouncedthatRBIisconsideringgivingadditional bankinglicencestoprivatesectorplayers,includingNBFCs.Thiswasostensiblytofurther financialinclusionandalsoto
improvethesizeandsophisticationoftheIndianbanking
system.Theannouncementsetthefinancialmarketsonfirewithalotofconjecturingasto whowouldbetheluckyfew.Theaccesstolow-costcurrentaccountandsavingsaccounts andtheabilitytoofferallfinancialproductsunderoneroofwerecitedasmajorattractions
forNBFCstorushtoseekbankinglicences.ItwasalsoexpectedthatRBIwouldgivenew licencestoprivateplayersverysoon.But,ananalysisrevealsadifferentpicture.Neitheris
RBIinahurry
toissuefreshlicencesnoraremanyNBFCskeentogetintocommercial banking.
Thereasonsforthisaremanifold.RBIrulesarestringentforcommercialbanksastheyare ofthe
Indian
financial
system
and
custodiansofpublicmoney.RBI
commercial
banks
thevisibleface areprimarilythe
placesrestrictionsoncommercialbanksintheirlending
operations.OutofRs100takeninasdeposits,approximatelyRs30hastobesetapartas statutoryrequirementstowardsCRRandSLR.ThisleavesthebankswithRs70tolend.Out ofthis,40%hastobestatutorilylenttowardstheprioritysectorasdefinedbyRBI.This leavesbankswithapproximatelyRs42tolendattheirowndiscretion.ManyNBFCswould
definitelyfind
this as restrictiveto saythe least.
Aspertheguidelinesof2001,NBFCsseekingabankinglicenceshouldhaveaminimum
paid-
upcapitalofRs200crore,whichmustbeincreasedtoRs300crorewithin3yearsof conversion intoa bank. Further, banks have to invest large funds in fixed assets and information technology primarily to facilitate
financial
inclusion,
risk
management,
moneylaundering,etc.Thesehugecapitalexpendituresincreasethepaybackperiodforthe made.
Also,
banking-as-a-business model
is
far more people-,
investments
process- and product-
driventhanasimpleNBFCmodel.Forexample,inordertoadoptuniversalbanking, thestaffneedstobemulti-skilledinbankingfunctions.So,theoperatingexpenseswillbe substantiallyhigher,which,inturn,wouldreducetheprofitabilityofoperations.Also,there arerestrictionsonownershipandvotingrights.
anti
Objectives of the study
Theconfined objectivesofthe present studyare:
To analyzethemarket ofNBFC‗s inIndia. To study the financial structure of NBFCs in Indian financial system.
NBFCspossessoneoftheindustry'smostextensivemarketingnetworkinIndia.BackOfficessprea dacrossthecountryconductthe creditappraisal and administrative functions. One of the main objectives is to analyse these functions.
TheCompanyhassetupaRepresentativeOfficeinDubai
and
KuwaittocatertotheNon-
ResidentIndians intheGLCCcountriescoveringBahrain,Dubai, Kuwait,Qatar and Saudi Arabia.TodaytheCompany hasaproudgroupofover10,00,000prudenthouseownerswho have enjoyed theCompany's financial assistance.
Scope of the study
ThestudywaslimitedtotheFinancialServicemarketofIndiawhichincludedNBF C‗s.
Thestudywascompletedwithinthetimeframeof60days(2months) startingfrom1stApril,2010and endingon1stJune,2010.
To conduct the analysis on the NBFCs , secondary data from the published sources has been collected.
Research Methodology Research design
SincetheresearchisforindustryanalysisanditisstructuredforNBFC‗S.Ther esearchuses secondarydata for analysIsandinterpretation.
Data collection
Therearetwomethodsofdatacollectionthatcanbeconsideredwhencollectingdatafor research purpose. Thesedata collection types includethe following: 1.Secondarydata Thesecondarydatacollection methods wereused in thestudy.
Secondary data
Thesecondary
datafortheresearchwascollectedfromjournals,researcharticles,booksand
internet
websites, annualreportsetcwhosedetails andreferences has beengiven in Chapter2andin―References‖.ThesourceofthesecondarydatawasBritishLibrary, NBFC‗sand Internet. Secondarydatawasthemainsourceinformulatingtheconstructsof ―
Acomparativestudy
inIndia‖
Field Work Plan
ThestudywasconductedinNewDelhi(NCRandBangalorevisitingdifferentinstitutions and analyzingthe different NBFC‗swork.
ofNBFC‗s
CHAPTER 2 CONCEPTUAL FRAMEWORK
Regulations of NBFCs
In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be registered with RBI to commence or carry on any business of non-banking financial institution as defined in clause (a) of Section 45 I of the RBI Act, 1934. However, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 or Housing Finance Companies regulated by National Housing Bank. A company incorporated under the Companies Act, 1956 and desirous of commencing business of non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should have a minimum net owned fund of Rs 25 lakh (raised to Rs 200 lakh w.e.f April 21, 1999). The company is required to submit its application online by accessing RBIs secured website https://secweb.rbi.org.in/COSMOS/rbilogin.do (the applicant companies do not need to log on to the COSMOS application and hence user ids for these companies are not required). The company has to click on CLICK for Company Registration on the login page. A window showing the Excel application forms available for download would be displayed. The company can then download suitable application form (i.e. NBFC or SC/RC) from the above website, key in the data and upload the application form. The company may note to indicate the name of the correct Regional Office in the field ¢wC-8¡ü of the ¢wAnnx-Identification Particulars¡ü worksheet of the Excel application form. The company would then get a Company Application Reference Number for the CoR application filed on-line. Thereafter, the company has to submit the hard copy of the application
form (indicating the Company Application Reference Number of its on-line application), along with the supporting documents, to the concerned Regional Office. The company can then check the status of the application based on the acknowledgement number. The Bank would issue Certificate of Registration after satisfying itself that the conditions as enumerated in Section 45-IA of the RBI Act, 1934 are satisfied.
IntermsofSection45-IAoftheRBIAct,1934,itismandatorythateveryNBFC shouldberegisteredwithRBItocommenceorcarryonanybusinessofnon-banking financialinstitutionas
definedinclause(a)ofSection45IoftheRBIAct,1934.
However,toobviatedualregulation,certaincategoriesofNBFCswhichareregulated byotherregulatorsareexemptedfromtherequirementofregistrationwithRBIviz. Capital
Fund/Merchant
Banking
companies/Stock
broking
Venture companies
registeredwithSEBI,InsuranceCompanyholdingavalidCertificateofRegistration issuedbyIRDA,NidhicompaniesasnotifiedunderSection620AoftheCompanies Act,1956,Chitcompaniesasdefinedinclause(b)of
Section2oftheChitFundsAct,
1982orHousing FinanceCompanies regulated byNational Housing Bank.
A
company
incorporated
under
the
Companies
Act,
1956
and
desirous
of
commencingbusiness ofnon-bankingfinancial institution as defined under Section 45 I(a)oftheRBIAct,1934shouldhaveaminimumnetownedfundofRs25lakh (raised to Rs 200 lakh w.e.f April 21, 1999). Thecompany isrequiredtosubmititsapplication onlineby accessingRBI‗ssecured
websitehttps://secweb.rbi.org.in/COSMOS/rbilogin.do(the
applicantcompaniesdo not need to log on to the COSMOS application and hence user ids for
these
companiesarenotrequired).Thecompanyhastoclickon
― CLICK ‖forCompany
Registration onthelogin page. A window showing the Excel application forms available for download
would
be
displayed.
The
company
can
then
suitableapplicationform(i.e.NBFCorSC/RC)fromtheabovewebsite,keyinthe dataanduploadtheapplicationform.Thecompanymaynotetoindicatethenameof
download
thecorrectRegionalOfficeinthefieldC-8oftheAnnexIdentificationParticularsworksheetoftheExcelapplicationform.Thecompanywould thengetaCompany line.Thereafter,the
ApplicationReferenceNumberfortheCoRapplicationfiledoncompanyhas
to
submit
form(indicatingtheCompany
thehardcopyof
theapplication
ApplicationReferenceNumberofitson-
lineapplication),alongwiththesupporting
documents,totheconcernedRegional
Thecompanycanthencheckthestatus
Office.
oftheapplicationbasedon
theacknowledgementnumber.TheBankwouldissue CertificateofRegistrationaftersatisfyingitselfthattheconditionsasenumeratedin Section 45-IA ofthe RBI Act, 1934 aresatisfied.
AllNBFCsarenotentitledtoacceptpublicdeposits.OnlythoseNBFCsholdinga
validCertificate
ofRegistrationwithauthorisationtoacceptPublicDepositscan accept/holdpublicdeposits.NBFCsauthorisedtoaccept/holdpublicdepositsbesides havingminimumstipulatedNetOwned
Fund(NOF)shouldalsocomplywiththe
Directionssuchasinvestingpartofthefundsinliquid assets,maintainreserves, rating etc. issued bytheBank.
Presently,themaximumrateofinterestanNBFCcanofferis12.5%.Theinterest may be paid or compounded at rests not
shorter than
monthly
rests.
TheNBFCsareallowedtoaccept/renewpublicdepositsforaminimumperiodof12 monthsandmaximumperiodof60months.They cannotacceptdepositsrepayable on demand.
TheNBFCsareallowedtoaccept/renewpublicdepositsforaminimumperiodof12 monthsandmaximumperiodof60months.They cannotacceptdepositsrepayable on demand.
NBFCscannotofferinterestrateshigherthantheceilingrateprescribedb yRBIfrom timetotime.Thepresentceilingis12.5percentperannum.Theinterestmaybepaid or compounded at restsnot shorter than monthlyrests.
NBFCs cannot offergifts/incentives or anyother additional benefit to the depositors.
NBFCs (except certain AFCs) should haveminimum investment grade creditrating.
Thedeposits with NBFCs arenot insured.
The repayment of deposits byNBFCs isnot guaranteed byRBI.
CertainmandatorydisclosuresaretobemadeaboutthecompanyintheApplication Form issued bythe companysolicitingdeposits.
EffectivefromApril24,2004,NBFCscannotacceptdepositsfromNRIsexcept depositsbydebittoNROaccountofNRIprovidedsuchamountdoesnotrepresent inwardremittanceortransferfromNRE/FCNR(B)account. However,theexisting NRIdeposits can berenewed.
LICHousing Finance Housing Finance Industry
India‗shousingfinanceindustrycomprisesofbanksandhousingfinancecompanies.They havecontributedtonewresidentialhomeloansatacompoundedannualgrowthrate(CAGR) ofmorethan 30 percentduringthe period 2002-2007. This has been duetothe combined effect of aboomingeconomyand low interest rates. Further,steadypricesandcontinuationoftaxconcessionstoself-occupiedresidentialhome borrowersarecontributorstothegrowthoftheindustry.Theaverageageofborrowershas declined over the years, while the number of double income households has grown significantlyenablingthem to borrow higher loanamountdueto higher repaying capacity. Thescenario
ofunprecedented growth
in
housingfinance,
drivenbylow
interest
rates,
increasingpurchasingpowerandattractionoftheyieldinthissectorhasbeguntoshowsigns ofchangelastyear.Therehasbeenadecreaseindemandduringthelastoneyear.Earlierto thati.e.,during2006to2007homepricesincreasedataCAGRof30to40percentagainsta 20percentincrementinsalarieswitnessedinmetrosandlargecities.Thishadaffectedthe buyer ‗s affordability.
Astheborrowingcostforbanksandhousingfinancecompaniessteadilyincreasedinline
withrising
interestratesintheeconomyinthepasttwoyearsuptoQ3of2008-09,banksand housingfinancecompaniesresortedtohikeininterestratessoastomaintaintheirinterest spreads.Interestratesonnewhomeloanoriginations basispointsduringApril ‗ 2008toSeptember
haveincreasedsignificantlyby200 October‗2008.Asaresultahigherproportion
ofmonthlyincomewasbeingpaidoutashomeloanequatedmonthlyinstallments Thecombinedeffectofanincreaseinpropertypricesandinterestrateshasmeantthathome loanbuyers,whowouldhavehadtoborrowlessataninterestrateof8.75percentayearago, nowhavetoborrowmoretobuythesamepropertyduetohigherpropertypricesathigher
(EMI).
interestratesof10.5to11percent.Thistrendhasresultedinbothloweraffordabilityi.e.,an averagehomeatahigher multipleofannualincome,andhigherdebtburden(meaningthata largerproportionofincomegetsspentashomeloanEMI).Further,theincreaseininterest rates on fresh loans to 10.5 to 11 percentfrom 8.75 percent meant increasein debt burden i.e., higherinstallmenttoincomeratio.Alongwith,theeconomicdownturnandconsequentialapprehensionso fjobinsecurityandincomereductionledtoslumpinthemarket. However,thescenariohastakenthereverseturninthelastquarterofthefinancialyear2008-09,which wasevidentfromthehigherbookingofflats,andsharpincreaseinthedisbursements.Real estatedevelopershavetakensensibledecisioninreducingorslashingratesinmajorcentres speciallyMumbai,Thane,NaviMumbai,DelhiNCRandBangaloretoencashontheexisting demandintherealestatemarket.Thegooddealsmightbeofferedforafewweeksorforthe firsttenpropertiesorforakillerdealforatime-boundtwodaysorsimilarschemesbutyes, thewritingisclearonthewallthatthewillingnesstoconnectwiththe―real pricinghas dawnedonthedeveloperstosellatreducedpricestoencouragemoreandmoresales.The thebuilder/developerofficesareattheirall-timecreativebestwithsales clearlythat
withbuyersunwillingto withbuyersun willingto
salesteamsin
tactics.Theynowunderstand
relentonunrealistic relentonunreal istic pricing,thereisanevengreaterneedtop pricing,thereisan evengreaterneedtoprice rice
competitively,maybewithalowerprofit margin,thanholdingontothepriceandprojectastheinterestmeterruns.Theseproactive
steps
should
ensure renewed demandsand increased volumes duringthecurrentyear TheIndianeconomy,whichwasonarobustgrowthpathupto TheIndianeconomy,whichwasona robustgrowthpathupto2007-08,av 2007-08,averagingat8.9per eragingat8.9per cent duringthe period 2003-04 to 2007-08, witnessed moderation in 2008-09, 200 8-09, with the deceleration decele ration turning turnin g out
to
be
somewhat
sharper
growthexperiencedasignificantdownturnandtheloss
in
the of
third
quarter.
Industrial
growthmomentumwasevidentinall
categories, viz., the basic, capital, intermediateand consumergoods. However,thefiscalstimuluspackagesoftheGovernmentandthemonetaryeasingofthe
ReserveBank
will,however,arrestthemoderationingrowthandreviveconsumptionand investmentdemand,thoughwithsomelag,inthemonthsahead.Furthermore,prospectsof theagriculturalsectoralsoremainbright,andthiswillcontinuetosupporttheruraldemand. Finally,inthewakeofexpectedimprovementinagricultural
productionaswellaslow
internationalcommodityprices,inflationarypressuresarealsoanticipatedtoremainatalow
level
through thegreaterpart ofthe 2009-10.
IndianHousing Financescenario Financescenario
India‗shousingfinanceindustrycomprisesofbanksandhousingfinancecompanies.They havecontributedtonewresidentialhomeloansatacompoundedannualgrowthrate(CAGR) ofmorethan30percentduringtheperiod2002-2007.Thescenarioofunprecedentedgrowth inhousingfinance,drivenbylowinterestratesandboomingeconomy,hasbeguntoshow signsofchangelastyear.Therehasbeenadecreaseinhomepricesduringthelastoneyear.
Earliertothati.e.,2006to2008homepricesincreasedataCAGRof30to40percentagainst a20percentincrementinsalarieewitnessedinmetrosandlargercities.Thishadaffectedthe buyer ‗saffordability.Theaveragehomebuyerspentaround4timeshisnetannualincome forpurchasinganewresidentialhomein
the3-4yearstillMarch2005.(sourceCRISIL
report
19thFebruary,2009)Astheborrowingcostforbanksandhousingfinancecompanies steadilyincreasedinlinewithrisinginterestratesintheeconomyinthepasttwoyearsuptoSeptember‗2008 ,banksand
housing
financecompanies
resorted
to
hikein
interest
rates
so
as
tomaintaintheirinterestspreads.Interestratesonnewhomeloanoriginationshadincreased significantly by200basispointsduringApri by200basisp ointsduringAprill 2008toAugust 2008toAugust ‗
September‗2008.Asar esult esult
ahigherproportionofmonthlyincomeswaspaidashomeloanequatedmonthlyinstalments (EMI).But,thescenariohastakenthereverseturninthelastquarterofthefinancialyear
2008-
09whichwasevidentfromthehigherbookingofflatsand disbursements.Asinterestratesare
heading
Housingfinancecompanies
sharpincreaseinthe southward,publicsectorbankshavesetthepace.
wouldfollowthesuit.Itmaybementionedherethatwiththe
declineininterestrates,LICHousingFinancehaspassedon150basispointsratecuttothe customersi.e.75 basispointseachon1stJanuary,2009and1stApril,2 basispointseachon1 stJanuary,2009and1stApril,2009.Ourinterest 009.Ourinterest rates areamong the lowest in the industry.
This
hashelped
our
company
in
retaining
customersandmaintaininghighgrowthratesevenintoughconditions.Andinterestrateis just oneof the factors.
Transparency,
hassle-free
repaymentcapacityareequally
services,
property
prices
and
buyer ‗s
important.Thecustomerwouldnotarriveatadecisionsolely
basedonthereductionininterestratesforone basedonthereductionini nterestratesforoneyear.LICHousingFinanceisoneoftheb year.LICHousingFinanceisoneofthebest est players in the industryin terms ofEMIas ourcompanyhas no hiddencosts.
LIC Housing Finance
LIC
HousingFinance
Ltd.
is
oneof
thelargest
Housing
Finance
Company
inIndia.
Incorporatedon19thJune1989undertheCompaniesAct,1956,thecompanywaspromoted byLICofIndiaandwentpublicintheyear1994.TheCompan byLICofIndiaandwentpublici ntheyear1994.TheCompanylauncheditsmaide ylauncheditsmaidenGDR nGDR issuein2004.TheAuthorizedCapitaloftheCompanyisRs.1500Million(Rs.150Crores) anditspaidupCapital
isRs.850Millions(Rs.85Crores).The
Companyisrecognizedby
NationalHousingBankandlistedontheNational NationalHousingBankandl istedontheNationalStockExchange(NSE)&BombayStock StockExchange(NSE)&BombayStock ExchangeLimited(BSE)anditssharesaretradedonlyinDematformat.TheGDR'sare theLuxembourgStock Exchange.
listed
on
Profile&Progress
Provides loans forhomes, construction activities,and corporate housingschemes.
Around91%oftheloanportfolioderivedfromtheretailsegmentandtherestfrom
large
corporateclients
Formed threenew whollyowned subsidiaries in 2007-08 to promotemarketingof
Financial products and venture capital fund.
RatedAAA‗ byCRISILforthe8thconsecutivetimein2008-09;maidenFixedDeposit. program receivedan FAAA/stable ratingbyCRISIL.
An offshoot ofLifeInsuranceCorporation ofIndia(LIC), incorporate in 1989.
Registered &CorporateOfficeat Mumbai with 6 regional offices, 13 BackOffices
and 130 marketingunits across the country.
1352 Direct Sales Agents (DSAs), 7085 Home Loan Agents (HLAs) and 777Customer
Relationship Associates (CRAs) comprise its pan-Indian marketingnetwork.
Representative overseaspresencein Dubai and Kuwait.
Listed on theBombayStock ExchangeLimited, National Stock ExchangeofIndiaLimited and theLuxembourgStock Exchange.
Morethan 10,00,000 satisfied customers across the countrysinceinception.
Reported a23.90 percentincreasein disbursals in 2008-09.
Improved return onnetworthby267 basispoints to 23.80 percent in 2008-09.
Reduced net NPA to arecord low of0.21 percent in 2008-09.
Enhanced PAT 37.30 percent to Rs. 531.62 crorein 2008-09.
Un-interrupted dividendpayment record since1990.
Recommended 30 percent increasein dividend over previousyear i.efrom100 percent to 130 percent.
Figure 1: FinancialPerformance
Interestincomefromhousingloansincreased34.90percentfromRs.2036.79crorein200708toRs.2747.65crorein200809.Thenetinterestincomegrewby31.97percentfromRs.553.94crorein200708toRs.731.04crorein2008-09.Profitaftertaxsurged37.30percent crorein2007-08 to Rs. 531.62 crorein 2008-09.
from
Rs.
387.19
Figure 2: Debt-equity Ratio
Figure-3: PBDTM & PAT
Figure-4: ROG Sales
Operations :
Funds mobilizedgrew 49.38 percent from Rs. 7489.70 crorein 2007-08 to Rs.
11,188.33crorein 2008-09.
Sanctions(Ind.+Proj.)increased26.46percentfromRs.8617.88crorein2007-08to
Rs.10898.47 crorein 2008-09.
Disbursements(Ind.+Proj.)grew23.90percentfromRs.7071.48crorein2007-08to
Rs.8762.01 crorein 2008-09.
Loan portfoliogrew 26.18 percent from Rs. 21936.41 crorein 2007-08 to Rs.
27679.28crorein 2008-09.
Margins:
Netinterestmarginimproved by 10basispointsfrom2.85percentin2007-08to2.95 percent in 2008-09.
Returnonequitygrewby267basispointsfrom21.13percentin2007-08to23.80
percent
in
2008-09.
Net profitmargin improved b y49basispoints from 17.82 percent in2007-08 to 18.31
percentin 2008-09.
AssetQuality:GrossNPAdeclinedby63basispointsfrom1.70percentin2007-08 to1.07percentin2008-09.NetNPAlevelsdeclined43basispointsfrom0.64percent in 2007-08 to 0.21 percent in 2008-09.
Onfunds
OntheperformanceoftheCompany :IntheturbulenttimeswhenHousingsectorwas
passingthrough
roughpatch,LICHousingFinancelargelycouldmanagetheenvironment
well,inspiteofvariousglobalas
wellasdomesticeconomicchallengesandwassuccessfulin
producinggood business growth byits inherent strength in meetingdifficult challenges throughunceasinganduntiringefforts.TheCompanyhasnotonlyensuredconsolidationof the gains achieved
in
the
past
years,
but
also
ensured
further
growth
and
increased
profitability.Theyear2008-09hasbeenayearoffurthercontainmentofdefaultsandNPA
levels
when compared topreviousyears.
Lending operations
Themainthrustcontinuesonindividualloanswithagrowthof25percentasagainst20 percent in the previousyear. However,project loans were also given dueweightage resultinginamodestgrowthof20percentoverpreviousyear.Duringtheyear,theCompany sanctioned67,886individualloansforRs.8,186.02croreanddisbursed67,237loansforRs. 7,351.09croreduring2008-09.Individual
retailloansconstitute75.11percentofthetotal
sanctionsand83.94percentofthetotaldisbursementsfortheyear2008-09comparedtothe lastyear ‗sfigureof75.84percentand83.47percentrespectively.Theretail(individual)loan portfoliogrewbyover22percentfromRs.20,618.78croreason31stMarch,2008toRs. 25,252.87croreason31stMarch,2009.Thecumulativesanctionsanddisbursementssince theincorporation,inrespectofindividualoansare:Amountsanctioned:Rs.45,624.24crore Amountdisbursed :Rs. 42,993.98 crore
Figure-5:
Non-Performing
Assetsand
provisions:
TheamountofgrossNon-PerformingAssets(NPA)ason31stMarch,2009wasRs.297 crores,whichisequivalentto1.07percentofthehousingloanportfoliooftheCompany,as againstRs.372.92crorei.e.,1.70 percentofthehousingloanportfolioason31stMarch, 2008.ThenetNPAason31stMarch,2009isreducedtoRs.57crorei.e.0.21percentofthehousingloan portfolio
vis-à-vis
Rs.
140.90 crorei.e., 0.64
percent
ofthehousing
loan
portfolioason31stMarch,2008.Thetotalcumulativeprovisiontowardshousingloanason31stMarch ,2009isRs.240.25crore.Duringtheyear,theCompany haswrittenoffRs.5.40 croreof housingloan portfolio as againstRs. 38.99 croreduring the previousyear. FundraisingTheCompanyraisedfundsaggregatingtoRs.11,188.33crorethroughterm loansfrombanks,Non-ConvertibleDebenture(NCD),sub-ordinatedebts,commercialpaper, Public Deposit and others which were used for fresh disbursements as well as repayments/prepaymentsofpastborrowings.TheCompany‗sNCDissuewasrated AAA‗andPubli cDeposit was rated as FAAA/STABLE byCRISIL.
Macro-Economic AnalysisCompetition
TheHousing Finance Industry is one of the most keenly competitive segments of the Economy,withtheBankingsectorhavingasignificantpresence.However,HousingFinance Companieswithadedicatedfocusontheindustryandbetterunderstandingoftheunderlying realestatemarketsstandonabetterfootingwhenitcomestounderstandingtheneedsand requirementofthecustomersasalsoassessingtherisksintheindustry.Itmaybementioned herethatwiththedeclineininterestrates,LICHousingFinancehaspassed
on150basis
pointsratecuttothecustomersduringthecalendaryear2009sofar75basispointseachon 1stJanuary,2009and1stApril,2009.Ourinterestratesare
among
thelowestintheindustry.
Thishashelpedourcompanyinretainingcustomersandmaintaininghighgrowthrateseven intoughconditions.Andinterest
rateisjustoneofthefactors.Transparency,hassle-free
services,propertypricesandcustomeraffordabilityareequallyimportant.NHBhaslowered itsinterestratesonrefinancetohousingfinancecompanies.Refinanceforruralhousingat concessionalrate of 8 percent perannum for sevenyears has also been provided.Its‗ PLRhas beenreducedto10.75percentperannum.Therefinancefacilit yofRs.4,000croreextended byRBItoNHBwillbeon-lentbyNHBtohousingfinancecompanieswithacapofRs.400 housingfinancecompanywith
the
condition
that
the
refinancewould
be
croreper availableat
aninterestof8percent,onlyforloansbelowRs.20lakh.HousingFinance,theCompany, throughitscompetitivepricing,transparencyin
operations,widedistributionnetworkand
goodcustomerservice,hasnotonlybeenabletoshowagoodgrowthinnewbusiness,but has shown an improved retention rate, which is reflectedin highgrowth ofloan book.
Opportunities
Therearemanyuniquecharacteristicsofhousingdistinguishingitfromothergoods.Itisa
universal
necessity.Homeownershipisasocialgoal,bringingsocialstatustothebuyer. Housingisalsoarelativelyexpensiveasset,oftensoakingupalifetime ‗ssavings.Housing propertieshaveadownwardslopingdemand effectivelybuywhenpricesarehighandviceversa.Athigh
curve,whichmeansthatlesspeoplewould prices,buyerspostponetheir
buyingdecisionsandoptforrentedaccommodation.Atlowprices,people
oftenpurchase
morethanonehouse.Disposableincomesdeterminepurchasingpower.Governmentpolicies relatingtointerestrates,mortgagesubsidies,taxrebateandothertaxeslikestampdutyetc. alsoimpactthehousingpropertymarket.Thehousingsectorismarkedbyavarietyoftaxes andregulations.Thesearemeanttoensurethesafetyofhousesforoccupationandtoconfer rightsofownershiptoenablefurthertransactions.Giventhatbuildingoracquisitionofa houseusually involves several intermediary agents (either statutory like registration of varioustitledocumentsorfacilitatingagentssuchasbrokers,buildersorfinanciers),thefinal costofacquisitionincludesnotjustthepriceofthepropertythatispaidtotheseller(incase thepropertyispurchased)butalsoalltheinterveningtransactioncosts.Asforthehousing propertymarket in India, the residential housing
property segment constitutes about 75
percentoftherealestatemarketintermsofvalue.Realestatedevelopment
activityhas
shiftedfrommetrostotheirsuburbsandtier-twocities.Agradualshifttotier-threecitiesand ruralareasistakingplace.Easyavailabilityoffinancefromthehousingfinancecompanies andcommercialbanksatlowerinterestrates,increasedsalariesandavailabilityoffiscaland taxbenefitsarepropellingthedemandforhousingproperties.ThegrowthoftheInformation TechnologyEnabledServices(ITES),industryhasbeenasignificantcontributorofhousing property demandin recent years. ITES firmsare moving from traditional centreslike Mumbai,Delhi,Bangalore,HyderabadandChennaitotheNationalCapitalRegion,
Pune,
Chandigarh,Jaipur,etc.inordertobecosteffective.Thisisresultinginnotonlytheboomin residential
propertymarketsbutalsointheinstitutionalpropertymarketsinthesecities.
Thereisgreat
demandfor modern officebuildingsand commercial spaces inIndia.
Threats (bottlenecks)
Impact of legal charges and documentation fees Therearetaxes/duties/feespayabletothestateattheconstructionstage.Therearetwo
aspects
of
thecost namely: i)
monetarycost and;
ii)
cost in terms of time devoted in obtaining various permissions and clearances.
The number of permissions and documentation required can be quite large. Further, permissions
havetobetakenfromdifferentdepartmentsandthattoosequentially.This
delaystheprocessofhousingconstructionandoccupation.Theactualfeesimposedbythe governmentarenotnecessarily
highbutthetimetakentoobtainrequisitepermissionsisvery
long,
procedures cumbersome and sometimes involves extra payments to facilitate the movementoffilesandgettingthetransactionthrough,issignificantvis-à-visthe fees.Thedelayshighlightthesluggishnessofthemarketbyincreasingthegapbetween changein demand and themarketresponse to it.
statutory
FutureOutlook:
Itisestimatedthatthehousingfinanceindustrywillbeabletomaintainahighergrowthin origination
ofresidential
homeloans
overnext
threeto
fresh
five yearsmainlydueto
increasedaffordabilityoftheborroweri.e.ratioofaveragepropertypricetoaverageannual income,onaccountofthefallingloaninterest
ratesanddecreaseinpropertyprices.The
averageageofborrowershasdeclinedovertheyears,whilethe
numberofdouble-income
householdshasgrownsignificantlytherebyenablingthemtoborrowhigherloan
quantum
duetoincreasedaffordabilityandrepaymentcapacity.Thegrowthdriverswillcontinueto
increase
demandforself-occupiedresidentialhousing;Revivalofeconomywillcertainly leadtoasteadyincreaseinmonthlyincomesacrosskeysectors.Risingproportionofdouble incomehouseholds,renewedconfidencein
higherincomegeneration,reassuranceofjob
securityand availability
options should stimulate growth of the
of varietyof financing
housingsector.Allthesefactorswillfurtherboosttheimpactofincreased affordability, leading to the sector ‗s steady and comfortable growth. Looking forward, LIC Housing Finance would like
to
remain
focused
in
end-user
segment
for
growth
and
profitabilityandwishtomakethecomingyear,ayearoffurtherconsolidationandprogress bycrossing greater milestones.
increased
Reliance Capital:
IndianEconomy:
Afterseveralquartersofaround9percentGDPgrowth,theratemoderatedto7.6percent and5.3percentinthelasttwoquartersof2008,
andisexpectedtoaverage7percentfor
FinancialYear(FY)2009.The slowdownhas
beenlargelycausedbyadecelerationin industrial
growthfrom about 8.5 percent in FY 2008 to 2.4 percent in thethird quarter ofFY 2009.Surprisingly,theagriculturesectorsloweddownfrom4.5percentinFY2008to-2.2 percentinthethirdquarterofFY2009.Incontrast,theremarkableservicesectorsuccess storyremainedintactasoutputgrew9.9percentinthirdquarter,downonlyslightlyfrom 10.8percentin2008.Themoderationfrompreviousyearswasduetoseveralfactors.The financialcrisis
andglobalslowdownaffectedbothexportgrowthingoods,servicesand
henceindustrialproductionas
well
ascorporates‗accesstodiverseandlowcostfunding.
Moreover,highinflationduringthefirsthalfof
FY2009forcedRBItopursueatight
monetarypolicy,whichfurtherdampenedinvestmentand
consumption.However,thefact
thatIndia‗sgrowthinthelastfewyearshasbeenfairlybroadbased
(across
sectorsand
regions)andbalanced(withconsumption,investment,savingsandexportsallrising)bodes wellforthestructuraltransformationoftheeconomyasthebusinesscycleentersarecovery phase, in thesecond halfof FY 2010. RBIcutsratesaggressively:India‗sWholesalePriceIndex,whichwasashighas12.9per centinAugust2008fellto0.3percentbyMarch2009resultinginanaverageinflationof around8 cent
for FY09. Thesharpfall
in
inflation
significantfallincommoditypricesandvarious
was
caused
byahigh
base,
per a
dutycutsannouncedbytheGovernment.
Inflationisexpectedtoremainlowandmayevenenterthenegativeterritoryforashorttime beforemovingup again towards the end of 2009. FallinginflationandslowinggrowthgavetheCentralbankenoughroomandreasontocut
ratesaggressively.FromSeptember‗08toMarch‗09,theRBIhascutRepo,ReverseRepo andCRRby400,250and400bpsrespectively.Thiseasinginmonetarypolicyislikelyto translate,withalag,intoasignificantboostfortheeconomy.India‗sTradeDeficitwidens, largelyduetoincreasingimportgrowth:Globaldemanddestructionduetotherecentcrisis ledtoamere3.4percentgrowthinexportsinFY2009whilehigher commodityprices (includingoil)peggedtheimportsgrowthat14.3percent.Thisresultedinatradedeficitof US$119billi oninFY09comparedtoUS$88.5billioninFY2008.Forthefirstthreequarters
inFY2009,the
highertradedeficit,coupledwithnegativecapitalflows,reducedIndia‗s BalanceofPayments(BoP) surplus
toadeficitofUS$20.4billion.After10consecutive
quartersofsurpluses,thisisthesecondtimeinthreequartersthatBoPhasendedinadeficit.
The
capitala/c balancetoo turned negative (-US$3.7 billion) in third quarter FY 2009 mainly duetonetoutflowsunderportfolioinvestment,bankingcapitalandshort-termtradecredit. under
portfolioinvestment
wereled
bylargesales
of
equities
byFIIsand
Outflows slowdown
innetinflowsunderADRs/GDRs.India‗sforeignexchangereservesdeclinedbyaboutUS$59billion inFY2009,butstillremainedatanimpressiveUS$250billionin March2009.The country‗scurrent foreignexchangereservesfarexceeditstotalofficialandprivatesector external debt makingIndia‗s balanceof
payments
position
quite
comfortable.Importdeclinesmorethanexportinrecentmonths,therebyimprovingtradedeficit:Sinc e
January
2009,Importshavedeclinedmorethanexportsduetobothloweroilimportbillsand
slowingdomesticinvestment and consumption. This has helped in narrowingour tradedeficit further.ThetradedeficitforthemonthofMarchnarrowedtoUS$4billion(4.1percentof annualized) compared to US$14 billion in August 2008.
RelianceCapital
(RCL)isapartoftheRelianceAnilDhirubhaiAmbaniGroupandisoneofIndia‗sleading andfastestgrowingprivatesectorfinancialservicescompanies,andranksamongthetop3 privatesectorfinancialservicesandbankinggroups,intermsofnetworth.Itisaconstituent
GDP,
ofS&PCNXNiftyandMSCIIndia. RelianceAnilDhirubhaiAmbaniGroupisamongst India‗s top 3 business
houses
with
a
market
cap
of
US$
22
billion,
customers.Ithasastrongpresenceacrossawidearrayofhighgrowth businessessuchasTelecom,
and
150
million
consumer-facing
FinancialServices,Energy,Power,InfrastructureandMediaan
EntertainmentRelianceCapitalhasinterestsinassetmanagementandmutualfunds,lifeand generalinsurance,privateequityandproprietaryinvestments,stockbrokinganddepository services,consumerfinance,asset reconstruction,institutionalbrokinganddistributionof financial products. RelianceCapital,aconstituentofS&PCNXNiftyandMSCIIndia,isapartoftheReliance AnilDhirubhaiAmbaniGroup(www.relianceada.com).ItisoneofIndia'sleading,most
valuable
and fastestgrowingfinancial services companies in theprivate sector. Reliance Capital has interests in asset management and mutual fund; life and general insurance; consumer finance and industrial finance; stock broking; depository services; privateequityand
proprietary
investments;exchanges,assetreconstruction;distributionof
financial products and other activities in financialservices. RelianceMutualFundisIndia'slargestMutualFundwithoversevenmillioninvestors. RelianceLifeInsuranceisoneofIndia'sfastestgrowinglifeinsurancecompaniesandamong thetopfourprivatesector
insurers.RelianceGeneralInsuranceisoneofIndia'sfastest
growing
general insurance companies and among the top three private sector insurers. RelianceMoney isoneofIndia‗sleadingretailbrokeragehousesanddistributorsoffinancial products and services. RelianceCapitalhasanetworthofRs.7,712crore(US$2billion)andtotalassetsofRs. 26,003crore(US$ 6 billion) as on March 31, 2010. RelianceConsumerFinanceoffersawiderangeofproducts,whichincludepersonalloans, vehicleloans(carandcommercial),homeloans,loanagainstproperty,andSMEloans.The focusinthisbusinessisprimarilytheassetqualityandtheprofitabilityofeachloangiven; notmerelygrowthormarketsharegains.IntheSeptembertoDecemberquarteroftheyear, therewasasteepdropinliquidityduetotheglobalfinancialmeltdownthathaditsfallouton
India.Consequentlyweslowedourdisbursals.Thisnaturallyresultedinasmallerloanbook, whichfellfromRs.9,513crorelastyeartoRs.8,576crorethisyearRelianceConsumer FinanceoffersawiderangeofproductswhichincludeHomeloans,Loansagainstproperty,
Vehicle
loans(carsandcommercialvehicles),SMEloansandPersonalloans.Thefocusin thisbusiness isnot justonthegrowthofcreditpersebutalsoon
thequality
ofcredit.Backed
bythelong-
standingconservativeapproach,wehavedevelopedstringentin-housecreditrisk managementsystemstoensurethehighestqualityofcredit.Therewasreductionthesizeof ourloanbooktoRs.8,576crore(US$2billion)asonMarch31,2009,asagainstRs.8,902 croreattheendofDecember31,2008.Ourloanbookisspreadacross1,19,759customers
and
23
locations. The loan book as on March 31, 2008 was Rs.7,120 crore. Reliance ConsumerFinancegeneratedrevenuesofRs.1,200crore(US$261million)fortheyear endedMarch31,
2009,asagainstRs.395croreforthecorrespondingpreviousperiod
increaseof204percent.FortheyearendedMarch2009,itachievedaprofitbeforetaxof Rs.91crore(US$20million)asagainstRs.36croreanincreaseof152percent._Reliance Capital‗ssubsidiariesi.e.RelianceConsumerFinancePvt.Ltd.andRelianceHomeFinance
an
Table-1: Business mix of Reliance Capital
Asset Management
Mutual Fund, Portfolio Management, OffshoreFund
Insurance
LifeInsurance, GeneralInsurance
ConsumerFinance&Home
Mortgages,LoansagainstProperty,BusinessLoans,Loansfor Commercial Vehicles, Loans for Construction Equipment,
Finance
AutoLoans,Loans againstshares, BusinessLoans
Brokingand Distribution
Stocks Commodities and Derivatives, Wealth Management Services,PortfolioManagementServices,InvestmentBanking, Foreign Exchange
Other Businesses
and Offshore Investment, Third Party
Products Asset Reconstruction, Institutional Broking, Private Equity, Exchanges, VentureCapital
Figure-6: FinancialPerformance
Figure 7: PBDTM & RONW
Figure 8: ROG Sales & PAT
TheCompany‗sgrossincomeforthefinancialyearendedMarch31,2009increasedto Rs.3,017.29crore,fromRs.2,079.79croreinthepreviousyear,registeringagrowthofover 45.08percent.Theoperatingprofit(PBDIT)oftheCompanyincreased46.24percentto Rs.2,334.99croreduringtheyear,upfromRs.1596.69croreinthepreviousyear.Interest expensesfortheyearincreasedby
203.02percenttoRs.1,236.75crore,fromRs.408.15
crore,inthepreviousyear.DepreciationwasatRs.21.22croreasagainstRs.17.09crorein thepreviousyear.TheprovisionfortaxationduringtheyearwasRs.109crore.Thenetprofit fortheyeardecreased
byover5.60percenttoRs.968.02crorefromRs.1,025.45croreinthe
previousyear.AnamountofRs.193.61crorewastransferredtotheStatutoryReserveFund pursuanttosection45ICoftheReserveBankofIndiaAct,1934,andanamountofRs.96.81crorewastransferredtotheGenera lReserveduringtheyearunderreview.TheCompany‗s NetworthasonMarch31,2009,stoodatRs.6,697.42crore,asagainstRs.5,927.50Fixed DepositsTheCompanyhasneitheracceptednorrenewedanyfixeddepositsduringtheyear. Fivedepositaccounts,aggregatingtoRs.26,000,remainedunclaimedontheduedatesason 31, 2009. The Company
March
has intimated the deposit holders individually of their
unclaimedamountwitharequesttoreturntheFixedDepositReceiptsduly theCompanyto repaythe amount.
dischargedto
enable
Macro-EconomicAnalysis Opportunities
Lowretail penetration offinancial services / products inIndia
Tremendous brand strength andextensivedistribution reach
Opportunityto cross sellservices
Increasingper-capitaGDP
Changingdemographic profileof the countryin favourof theyoung
Threats
Competition from local and multinational players.
Execution risk.
Regulatorychanges.
Attraction and retention of human capital.
FutureOutlook
Indiahassurvivedoneoftheworstglobalcrisesinhistorybetterthanmostothereconomies. Therecent recoveryinmanyoftheleadingmacroindicatorsofeconomicactivityhasled manytobelievethattheworstisoverfortheIndianeconomyandweareonourwaytoa highergrowthtrajectory.Therehasbeen
aresurgenceinsalesacrossavarietyofsectors
fromautomobilestocement,steelandelectricity production. Railandporttraffictoohas seenanuptick.ThePurchasingManagers ‗Index(PMI)hasshownanimprovementfroma lowof49.5forMarchto53.3forApril2009,signifyingarenewedtrendofgrowthin manufacturing.Indiaisthesecondmajoreconomy
afterChinawhere
thePMIhascrossedthe
baseline50mark,indicatingthestartofanexpansionaryphase.Thegrowthinfirsthalfof FY2010isexpectedtoremainsoft,withtheeconomy
turningaroundinthesecondhalf.The
driversofthisturnaroundincludegovernment‗sfiscal stimulusmeasures,thecollapsein commodity prices,thecomingonstreamofsignificantdomesticoilandgasoutput,therecent infusionofrecordlevelsofFDI,theimprovementintradedeficitandtheenvironmentfor externalcommercialborrowing(ECB)thefallintherealexchangerate,theRBI‗saggressive monetarypolicy
actionsandtheexpectedstabilizationoftheglobaleconomy.Indiaremained
thesecondfastestgrowing
economyinFY2009afterChina.Inthelightoftheongoing
globalrecession,Indiawill,evenatamodestgrowthof6percentin FY2010,beoneofthe fastest growingin theworld.
Shriram Transport Finance
Economic overview
Theglobaleconomicconditionsdeterioratedsharplyduringtheyear2008-09withseveral
advanced
economiesexperiencingtheirsharpestdeclines.Theassociatedadverseeffects spreadacrossemerging
marketeconomies(EMEs)particularlybythethirdquarterofthe
yearandaccentuatedthesynchronized
globalslowdown.Inflationconditionswitnessed
sharpvolatilityduringtheyearasheadlineinflationinmajoradvancedeconomiesfirmedup considerably
u ptoJuly
2008,
but
declined
sharply
thereafter.
The
global
financialenvironmententeredacrisisphaseinmidSeptember2008,followingthegrowingdistress amonglargeinternationalfinancialinstitutions.India – thethirdlargesteconomyinAsiais estimatedtohavegrownlessthan7percentin2008-09,aftergrowingatanaveragerateof around9percentormore
inthreefiscalyearstoMarch2008.Thiswasonaccountofa
global
economicdownturn and a contraction in domesticdemand.
Commercialvehicleindustryoverview
Thefinancialyear2008-09endedwithanetdeclineof22.3percentinnewcommercial vehicle(CV)sales(domesticandexports)ascomparedtothepreviousyear.Theindustry witnessedahealthygrowthduringthefirst-halfof2008-09,postwhichtheCVsalesstarted
declining
ata high rate. This can be primarily attributed to the weakening of macro- economic indicators,
resulting in drop in freight
availability,
and
restricted
availability.However,inthefourthquarter,theindustrywitnessedaslightrevivalinsales,
credit on
a
month-on-month basis, partly driven by the stimulus packages provided by the government. The key steps taken include reduction in excise duty and provision of accelerated
depreciationtobenefitCVbuyers.Inadditiontothis,thegovernmentalso undertook measures to improveliquidityforNBFCs
and
provide
financial
assistanceto
State
TransportUndertakingsforpurchasing busesundertheJawaharlalNehruNationalUrban Mission.
Major demand drivers
1.Roadways haveremained adominant transportmode: Overthelastfewdecades,roadwayshavedominantlyimprovedtheirshareduetogreater higherflexibilityofdoor-to-doordeliveryand
lowerrisk
of
coverage,
handlinglosses.
Further,thegovernment‗sinvestmentinthedevelopmentofnationalhighwaysoverthelast fewyearshasledtohigherdemandforroadtransport.Withfurtherimprovementinroad infrastructureandhighergrowthexpectedinroadtransport(whichareprimarilytransported throughroadways),roadfreightisexpectedtoaccountfor63.5percentofthetotalfreight movement.
2.Higherreplacementdemand:HigherCVsalesoverthelastfewyearswerealsosupported
by
replacement demand which stemmed from stricter regulations on overloading and emissions. TheSupremeCourt, in November 2005, bannedoverloading ofgoods‗ trucks and trailers in excess of prescribed gross vehicleweight. Toreducepollution, the AutomotiveResearch
OwnershiptrendinCVS
ShriramTransportcaterstosmalltruckoperators(STO –
owninglessthanfivetrucks)andfirst-timeusers(FTU),andiscurrentlytheonlyorganised playerfinancingthissegment(othersareprivatefinanciers).STOsandFTUscontrolaround 75percentofthetotaltruckfleet;however,theyhavepoorfreightoriginationskillsandare thereforedependent on brokers for amajorityof theircontracts.
ShriramTransport Finance
Weareapartofthe"SHRIRAM"conglomeratewhichhassignificantpresenceinfinancial servicesviz.,
commercialvehiclefinancingbusiness,consumerfinance,lifeandgeneral
insurance,stockbroking,chit
fundsanddistributionoffinancialproductssuchaslifeand
generalinsuranceproductsandunitsofmutualfunds.Apartfromthesefinancialservices, thegroupisalsopresentinnon-financialservicesbusinesssuchaspropertydevelopment, engineeringprojects andinformation technology. OurCompanywasincorporatedintheyear1979andisregisteredasaDeposittaking NBFCwithReserveBankofIndia underSection45 IAoftheReserveBankofIndiaAct, 1934. STFCdecidedtofinancethemuchneglectedSmallTruckOwner.Shriramunderstoodthe of
'Aspiration'
much
before
marketing
based
on
'Aspiration'
power became
Fashionable.ShriramstartedlendingtotheSmallTruckOwnertobuynewtrucks.Butwe foundamismatchbetweentheAspirationandAbility.TheTruckOperatorwashonestbut theEquityathiscommandwasnotsufficienttosupportthecreditlevelsrequiredtobuya new truck. FromDrivertoOwner,evenifonlyofaPre-ownedTruckandfromPre-ownedTrucktothe
New
Truck, wehavebeen with himin his journeyof Prosperityas hehas been ourpartner in ourroad to success and leadership.
Figure-9: Financial Performance
Figure 10-PBDTM & RONW
Figure 11: Debt- Equity Ratio & ROG- Sales
Figure 12: ROG - PAT
Public issue of NCDS
Toexplore and develop additional source of financing and with a view to meet The Company‗s
businessoperations,TheCompany,pursuanttotheSecuritiesandExchange
BoardofIndia(Issueand
ListingofDebtSecurities)Regulations,2008andsubjecttothe
necessaryapprovals,consentsandpermissions,issuedandallottedSecuredNon-Convertible Debentures, through apublicissue and raisedasum of Rs. 99,999.96 lacs. Consideringthepotentialinraisingfundsbyissueofnon-convertibledebentures(NCDs), TheBoard,atitsmeetingheldonJanuary18,2010,hasdecidedtoofferandallot,subjectto aforementioned Regulations
the
and such approvals as may be necessary, secured /
unsecured,NCDsnotexceedingRs.50,000lacsin
oneormoretranchesthroughanother
publicissuewhich is expected to open for publicsubscriptions in May2010.
SWOT AnalysisStrengths
Thepioneer in thepre-owned CVs financingsector
Knowledge-driven (products as well as local customers) and relationship-based businessmodel.
Significantexpertiseandexperienceinvaluationofpre-ownedCVsaswellasin recovery/collection ofmonthlypayments fromcustomers
Pan-India presencewith 484 branch officesallover the country.
Awell-definedandscalableorganisationstructure,capableofsupportingsurging delinquencyasassetsarebackedwithadequatecoverandareeasyto
growthLow
repossess
with
immediateliquidity
Strong financialtrackrecorddrivenbyfastgrowthinAUMwithlowNonPerforming Assets (NPAs).
ExperiencedandstablemanagementteamStrongrelationshipswithpublic,privateas foreign banks, institutions and investors
wellas
Weaknesses
TheCompany‗sbusinessanditsgrowtharedirectlylinkedtotheGDPgrowthofthe
country.
Anyslowdown in GDP growthmayhaveanegativeimpact on thebusiness.
Opportunities
GrowthintheCVmarketdrivenbytheeconomicgrowthandtheinfrastructure development in the country
Strongdemandforconstruction equipment Strong demandforpassenger CVs
Strong
demand forpre-owned tractorsLoans forworking capital requirements ofCV users
PartnershipswithprivatefinancierswillenabletheCompanytoenhanceitsreach withoutsignificant investments in buildinginfrastructure
Threats
Maintaining relationships with customers who are mobile and have no proper documentation
Maintainingasset quality.
Regulatory changes in the Non-Banking Financial Company (NBFC) and transportation sectors.
Outlookand opportunities
Theglobalfinancialslumpdrastically inthecountry‗s
squeezedexportdemandforourproductsandservices
mainUSandEuropeanmarkets.TheGDPgrowthfor2008-09isnow
projectedtobeintherangeof6.5to6.7percent.TheGovernmentofIndiaaswellasthe Reserve Bank of
India
did
a
splendid
task
in
somewhat
insulating
the
country
and
financialmarketsfromtheeffectsoftheworldwidecrisis.Theyrespondedtothechallenge and
magnificently,
thus
minimisingthe
impact
of
the
crisis
on
its
quickly
India
while
maintainingcomfortabledomesticandforeignexchangeliquidity.TheGovernmentofIndia providedthreestimuluspackageswhich,amongstothermeasures,cutexcisedutyby centacrossthe
fourper
boardandincreasedplannedexpenditurebyRs.20,000crores.Easingof
monetarycurbs andregulatoryactions of theReserveBank ensured that ourfinancial markets functionednormallyinspiteofthedisturbances
acrosstheworld.Thesemeasures,onone
hand
stimulated consumption and on the other hand provided enoughliquidityin thefinancial markets.Theseinitiatives,coupledwithlowercommodityprices,areexpectedtosoftenthe downswingbystabilisingdomesticeconomicactivity.Severalfactors,suchasincreased of
freightat
theleadingports,
pick-upin
project
investments,
increased
movement hiring,
and
encouragingdatafromanumberofkeymanufacturingsegmentscouldbeanindicatorthat thedowntrendhasbottomedout andthatoureconomyispoisedtoregainitslostvigour shortly. It is reported
that
auto,
cement,
steel
and
capital
goods
performingstronglywhichindicatesapossiblestrongturnaroundin
sectors
have
started
theeconomy.Despite
severalchallengeslyingahead,theIndianeconomyremainsresilientandiswidelyexpected togrowataround6percentinFY2009-10.ThecumulativeproductiondatafortheAuto industryfor2008 – 09recordedagrowthof2.96percentover2007 – 08.During2008-09the salesofCommercialVehiclesdeclinedby21.69percentwhencomparedtothatoflastyear. SalesofMedium&HeavyCommercialVehicles(M&HCV)fellby33.16percentandLight
CommercialVehicles(LCV)recordeda economicslowdowninthecountry,YourCompanywas
negativegrowthof7.10percent.Inspiteofthe abletoonceagainpoststerling
growthintheFY2008-09aswell.YourCompanywas,toalargeextent,insulatedfromthe downswingasitoperatesmainlyinthepreownedcommercialvehiclesegment,andisthe onlyorganised player in this segment.
IDFC Global FinancialandEconomic Crisis
The year2008-09sawtheworstglobalfinancialandeconomiccrisisin60years. The crisis had asevereknock-on effect on thedevelopingandemergingeconomies, andcausedIndiatolosemuchsheenfromthestellareconomicperformanceofthe Itexacerbatedthe
pastyears.
beginningofacyclicaldownturninIndia‗seconomyandIndia‗sGDP
growth,whichwas9%during 2007-08,slowedto5.3%inthethirdquarterof2008-09. Although FinancialInstitutions(FIs)inIndiahaveverylimitedexposuretothetoxic‗ordistressed‗assets,dir ectlyorthroughderivatives,andtothefailedandstressedglobalFIs,
Indiahasfelta
strongimpactthroughtrade,financialmarketsandmoderationincapital flows.Theimpacthasalsobeen
feltbytheinfrastructuresectorinthecountry,largely
throughweakeningofdemand,whichwaspronouncedinthetransportationsector(seeTable 1),andreducedavailability
offinances,asexternalcapitaldriedupandtheequity
marketOn
theotherhand,theglobaleconomicslowdownledtosofteningofcommoditypricessuchas crudeoil,aluminum,ironore,copperandsteelafterJuly2008,therebyreducingthecostof projectsalbeitwithsometimelag.
Interest
ratesalsostarteddecliningin
linewith
the
monetarypolicymeasuresadoptedbytheReserveBankofIndia.Nevertheless,thesepositive effectswereoffsetbytheweakening
rupee,
slackeningdemandandproblems
facedby
developersin respectof fund raising.Poorinfrastructurecontinues to hamper theprospects of Economic growth and business in the country.
Table 2 : Weakening Demand For Transportation Services
To
meetthegrowingdemandforinfrastructureservices-regulatoryframeworkandprivate
sectorparticipation.Notwithstandingsuchefforts,theprogressincapacityexpansioninthe differentsectorswasverylimited(seeTable2).Theglobalcrisisisonlypartlytoblameas therearecontinuing
deficienciesinpolicyandregulatory
making.Thedelaysinallocationof3Gspectrum
frameworks,anddelaysindecision
andallegationsoffavouredtreatmentto
someoperatorsfor2Gspectrumhavedonelittletostrengthentheinvestmentclimateinnot onlythetelecomsector,butininfrastructureperse.Similarly,litigationrelating
tonormslaid
downinthemodelbiddocumentsfortheroadssectordelayedthemuchneededimpetusfor
new
projects
The
underthe
concessionagreements
National
Highways
Development
Programme(NHDP).
finalizedfortheawardofnewterminalsatmajorportsin2007-08
alsounderwentseveralrevisionsduring2008-09.Theawardandexecutionofprojectsalso facedseveralproblems.Theseincludethelargenumberofclearancesrequiredfromvarious governmentagencies,delaysinlandacquisition.changesinscopeof
projectsduringthe
biddingprocess,inadequatesupplyofequipment,delaysinawardofcivilworks,andweak project
execution capacity. WhilefinancialmarketsintheUSandEuropewerefeelingthepressureinthesecondhalfof 08,othercapitalmarkets,especiallyinemergingeconomies,didnotseemtothinkthat
2007thesub-
primeproblemwouldplayoutintoafullblowncrisisoffinancialconfidence.That changedbythefirsthalfof
2008-09,wheneveryonebegantoseeaclearerpictureofthe
extentofwrite-downsundertakenbythemajorinternationalfinancialhousesonaccountof theirnon-performing assets.
InfrastructureDevelopment Finance
CompanyLimited(IDFCortheCompany‗)wassetupin1997toactasafinancierand catalystforthedevelopmentofprivatesectorsponsoredinfrastructureprojectsinIndia.Over thelast12years,andmoresosincetheInitialPublicOffering(IPO)inJuly2005,IDFChas pursuedafocusedgrowthstrategytoevolverapidlyintoaone-stop-shop‗forinf rastructure financeinIndia,capableofmeetingtheincreasingly complexandambitiousrequirementsof an expanding client base. Infrastructure typically involves projects with long gestation periods, with each project going through different phases of implementation. Broadly speaking,itbeginswithconceptualizingaproject.Thenthefullprojectplanisdeveloped, followed byfinancial closure. Next comesthe execution phase, where the underlying physicalinfrastructureisactuallycreated.Finall y,theprojectmovestorevenuegeneration, whentheunderlyingassetstartsgettingutilisedandgeneratesactualincomestreams.Eachof thephaseshasdifferentriskreturnprofiles.IDFC‗sexpertiseliesinadeepunderstandingof therisksandopportunitiesassociatedwiththedifferentphasesofaproject‗slifecycle,and appropriatelypackagingdifferentiatedfinancialsolutionsthatbestmeettherequirementsof investorsandclientsatthedifferentstagesbyprogressivelyexpandingtherangeofitsskills, productsandservicesbeyondthetraditionalprojectlendingtoinvestmentbankingaswellas
differenttypesofassetmanagement.Thisdiversifiedrangeofproductandservicecapability hasstrengthened
IDFC‗scorebusinessmodelandhaspropelledtheCompanyintooneof
India‗spremierfinancialservicesplatformleveragingknowledgeandtalenttospantheareas ofinfrastructureprojectfinance,assetmanagementandinvestmentbanking.MuchofIDFC‗s businessisaboutmobilizinginternationalaswellasdomesticcapital.Naturally,likeother businesses,ithastodealwithdemandandsupplysideissues.Whilethedemandsideissues aredomesticinnatureandrelatelargelytotheappetiteforprivateinvestmentespeciallyin
the
Infrastructuresector,thesupplysideissuesaremoreglobal.Theseincludefactorslike costofcapital, liquidityandinvestorconfidencethatareintrinsictointernationalcapital flows. Onbothfrontsthereweresignificantdevelopmentsinthemacro-economicenvironmentand overallmarketconditions,whichplayedakeyroleindefiningtheCompany‗sstrategyand progressduring2008-09.Inthiscontext,itisimportanttofirstanalysethestructuralchanges thattookplaceinthemacroeconomic environmenttoappreciatethechallengesthatIDFC had to face and overcomeduring 2008-09.
Thebusinessenvironment and IDFC
Aswasreportedinlastyear ‗sAnnualReport,thefallinhousing
pricesintheUShadsparked
offthesubprimelendingcrisisinthemiddleof2007.Creditdowngradingbyratingagencies andincreaseddefaultriskof
various
housingbackedpaper,particularlycollateraliseddebt
obligations(CDOs)thatweresliced,dicedandfarremovedfromtheoriginalassets,rapidly spreadthroughouttheUS,andthentotheEuropeanandAsianfinancialsystems.Inamatter ofmonths,whathadstartedasaUShousingproblembecameamajorcrisisthataffectedthe entireglobalfinancialsystem.Severallargeinternationalfinancialinstitutionswereleftto grapplewiththeconsequencesoflargeassetwrite-downs.Soonthisledtoanunprecedented contractionofcreditinthesystem — especiallyinthelastthreeandahalfmonthsof2008, afterthecollapseofLehmanBrotherson14thSeptember.Thankstomassivefinancial,
monetaryand
fiscalinterventionsbytheUSaswellasmajorEuropeannations,theacute
financialcrisispassedbyJanuary2009.Butitscarredtherealeconomyeverywhereinthe world.StartingwiththeUSinthethirdquarterof2008,every
majordevelopedcountrywent
intoarecession — whichcontinuestilltoday.Atthe timeofwritingthisManagement Discussion and
Analysis,
the
global
situation
remains
grim.
Indeed,
thisis
the
worst
economicdownturn thatthe world has seen sincethe Great Depression ofthe 1930s.
TheUShasalreadysufferedfromthreesuccessivequartersofnegativeGDPgrowth, withpossiblymoretofollow.AlthoughitisbelievedbysomethattheUSeconomy willbottomoutby theendofthethirdquarterof2009,theestimatedGDPgrowthfor2009willbe2.9%.InApril2009,unemploymentwasat8.9%,andrising — theworst
sincethe
early1980s.
TheEuroareaisalsoinadeeprecession,andstructurallymuchworseoffthanthe
US.GDP
growthfor2009 is estimated at-3.7%.
Japanisheadingforyetanotherperiodoflongtermde-growth.Industrialoutputhas beenfallingby
morethan30%ever ymonthcomparedtoayearearlier;andGDP
growth
for2009 is being estimated at 6.4%.
Withanestimated11%to12%fallintherealvalueofworldtradein2009,China‗s
growth
is
expected to reduceto high single digits.
India‗sgrowthisdownfromthe9%plusrangeofthelastthreeyearsto6.7%in the chances of it beingsimilar in 2009-10.
Figure 13: Debt- Equity Ratio & PBDTM
2008-09, with
Figures-14:RONW
Figure 15:IDFC consolidated net profit at Rs. 750 crore for FY 2009 Funding:
IDFCconsolidated net profit atRs. 750 crorefor FY2009
HighlightsofFY2009
ProfitAfterTaxof Rs.750 croreforFY 2009 compared to Rs.742 croreinFY 2008
Balancesheet size as on March 31, 2009: Rs. 29,809 crore:an increaseof7%
Net NPAs at 0.21% ofoutstandingloans Capital AdequacyRatioat 23.75% (TierI – 20.04%; TierII – 3.71%)
NetInterest income (NII)of Rs.922 crore:an increaseof 33%
NonInterestIncome ofRs. 613 croreinFY 2009
Assets under management – USD 4.7 bn
Closureof USD 1.0 bnIndiaInfrastructureFundand USD 0.70 bnIDFC Private
EquityFundIII
At its 72nd Board Meeting held on April 28, 2009, the Board of Directors ofInfrastructure
DevelopmentFinanceCompanyLimited(IDFC)approvedfinancial
resultsfortheperiodApril1,2008toMarch31,2009andrecommendedDividendat therate of Rs. 1.20 per equityshare forFY 2009.
Figure16: ROG sales
Income
NetInterestIncome (NII) increased by33%fromRs. 694 crorein FY 2008to Rs. 922 crorein FY 2009. NetInterestIncome (NII) from infrastructurelo ans increased by34%from Rs. 565 crorein FY 2008toRs. 758 crorein FY 2009. NetInterestIncome fromtreasuryoperations increased b y27%from Rs. 129 croreinFY 2008 to Rs. 164 croreinFY 2009 Non-InterestIncomeforFY2009decreasedb y 1%fromRs.618croreinFY2008to Rs.613crorein FY 2009.
FeesfromIDFC‗s assetmanagement business wereRs. 203 crorein FY 2009.
IncomefromInvestmentbankingandbrokingactivityofIDFCwasRs.115crorein
FY 2009.
Income from principal investments was Rs. 184 crorein FY 2009.
Other fees wasRs.111 crore in FY 2009.
Figure 17: PAT
Profits:
Profitbeforetax(PBT)increased by4% from Rs. 1,000 croreinFY 2008 to Rs. 1,036 croreinFY 2009.
EPS(diluted) at Rs. 5.78 per share
AfteraccountingforRs.278 crorefortax, profitin associate companyandminority interest, theprofitafter tax(PAT) for FY 2009 increased by1%to Rs. 750 crorefrom Rs. 742 crorein FY 2008.
Macro EconomicAnalysis
TheinfrastructureNBFCstatus,,willallowIDFCtoimprovefundmobilizationandease
overall
funding
single-
pressure
on
the
firm.
the
statuswill
give
it
higher
party/groupexposures,andborrowingfrombankscouldincreaseto20%ofnetworth.Noninfrastructure NBFCs can currentlyraise up to 15% ofnet worth.
Additionally,thefir m‗splantor aiseRs3,500croreoverthenext12monthsisa― pre- emptive bid to raise
capital
and
stay
relevant
with
the
―SBIs
of
the
wor ld,
Limaye
told
Mintinaninterviewlastweek. Thestate-ownedStateBankofIndiaisIndia‗slargest lender. Inthenextthreeyears,theopportunityintheinfrastructurelandscapelooksquiteattractive sowethinkitis
agoodtimetocapitalizeontheopportunity hesaid,estimatingthat ,
infrastructurelenderscouldstandtolendclosetoRs3trillionoverthenextthree-fouryears, especiallyin power, roads andgas distribution.
Indian Banks VS NBFC
2008-09wasadifficultyear,especiallyforthefinancialsegmentacrosstheglobe.However, India‗sstrongmacro-economicfundamentalsandfinancialpolicieshaveshieldeditfromthe turmoil..Thestudyconsideredthosebanksthathaveannouncedtheirresultsbetween15th 20thMay2008-09postedonthe
April-
websiteofBombayStockExchange.Thehave
analyzedintotal29banks(bothpublic&privatesector)
and7NBFCsThe)studyhas
examinedandcomparedtheprofitabilityofbankswithNBFCsduringthe financialyear 2008-09.Simpleaverageandprofitabilityratio
ofthetwosegmentshavebeenstudied.
Methodology-TheAFPanalysisoftheIndiancommercialbanks&NBFCsprofitabilityis calculatedusingtwobroad
parametersincludingnetprofitandtotalincome.Profitability
Ratioisaclassoffinancialmetricsthatis earningsascomparedtoitsexpensesandotherrelevant
usedtoassessabusiness'sabilitytogenerate costs
incurredduringaspecific
period
oftime.
Profitabilityis
calculatedas:
(Net Profit/Total income)*100
NBFCsmoreprofitablethancommercialbanksdespiteslowdownEvenastheworldwide financialcrisis
and
slowdowninkeysectorsoftheIndianeconomyledtheNonBankingFinancialCompaniestoface severecashshortageduringthefinancialyear2008-09,the overallprofitabilityofNBFCshasremained
higherthanthescheduledcommercialbanks.
Duringthefinancialyear2008-09,Non-BankingFinancial profitability
Companies(NBFCs)average
stoodhigherat18.90percentascomparedtothebankswith10.08percent.The
NBFCsgenerallyoperatesonthemodeloflendingtoriskierprojectswithinterestrates
higherthanofferedbythebankinginstitutions.Asthefinancialmarketsfacedtheheatof globalcrisisduringthefinancialyear2008-09,mostoftheNBFCsfacedproblemsinfund Amongtheseven
NBFCs,
in
2008-09 thehighest
profitabilitywas
raising.
reported
by
InfrastructureDevelopmentFinanceCompanyLimitedat20.89percent,withtotalincome stoodatRs.3626.38croreandnetprofitat
Rs.757.73crore.ItwasfollowedbyHousing
DevelopmentFinanceCompaniesLimited(HDFC)andPowerFinanceCompaniesLimited (PFCL)at20.76percentand20.67percentrespectively.―TheReserveBankofIndia(RBI) monetarymeasuresbycuttinginterestratesduring2008-09hasbenefitedtheNBFCssince
many
ofthemfinancetheiroperationsthroughmarketborrowings saidMr.SajjanJindal President. Aggregatenetprofittototalincomeratioof17publicsectorbanksand12privatesector banks reported to be 10.08 per cent during2008-09.
Table 3: Top5 Banks andNBFCs with highest profitability:
Amongthe17publicsectorbanks,thehighestprofitability BankofIndiaat
wasreportedbyIndianBankand
15.83percentand15.50percentrespectively.Outoftheprivatesector
banksthetoppositionswere occupiedbyAxisBankandYesBankat13.22percentand 12.46percentrespectively,amongothers.The7NBFCs,aggregatetotalincomegrewbya whooping57.3
percenttoRs.28,208.72croreinFY‗09fromRs.17,906.84croreinthe
previousfiscal.However,theaggregatetotalincomeof29bankshaveincreasedby25.3per centfromRs2,69,055crorein2007-08toRs3,37,206.9crorein2008-09.Year-on-year performanceofthe29banksregardingnetprofittototalincomeratioattheaggregatelevel showedamarginaldeclineduringFY‗09with10.08percentasagainstFY‗08recordedat 10.52percent,whileinthecaseof7majorNBFCs,theratiodeclinedduring2008-09at 18.90per centas against21.80 percent inFY‗08.
Table 4: Banking versus NBFCregulatory arbitrageinIndia
Porter’s fiveforces
Porter‘s five forces modelofcompetition
Thenatureofcompetitionintheindustryinlargepartdeterminesthecontentof strategy,especiallybusinesslevelstrategy.baseditisonthefundamentaleconomicsofthe industry,theveryprofit
potentialofanindustryisdeterminebycompetitioninteraction.
Wheretheseinteractionsareintense, profittendstobewhittledawaybytheactivitiesof competing. Porter ‗s model is based on the insight that a corporate strategyshouldmeetthe opportunities andthreatsintheorganizationsexternalenvironment.Especially,competitive strategyshouldbaseonand
understandingofindustrystructuresandthewaytheychange.
Porterhasidentifiedfivecompetitiveforces forces determine the intensity
thatshapeeveryindustryandeverymarket.
of competition
and
These
hence the profitability and
attractivenessofanindustry.Theobjectiveofcorporatestrategyshouldbetomodifythese competitiveforcesinawaythatimprovethepositionoftheorganization.Porter ‗smodel supportsanalysisofthedrivingforcesinanindustry.Basedontheinformationderivedfrom theFiveForcesAnalysis,managementcandecidehowtoinfluenceortoexploitparticular characteristics oftheirindustry.
Barriers toentry
Productdifferentiationisverydifficult:AsmostoftheNBFC‗soffersimilartypesof loanswhich
caterstosamemarket.Innovationofaproductplaysaveryimportant
themarket.
Licensingrequirement:Therearealready13000registeredNBFC.So,thelicensing requirement is also low.The regulations arenot that stringentas that of aBank.
rolein
Threatofsubstitute:
Banks:Banksareimportantsubstitutes.Asthey
areleadersinthemarkets.They
have
aquitestrongbrand presenceand agood creditappraisal method also.
MoneyLenders:SmallNBFC‗scaterto
theruralareaswherethereisalreadyavery
strongpresence. Theydominatethemarketintheruralareasanditsmostlythe unorganised market theytap in.
Bargaining Power ofsuppliers
Manyalternatives:ThesuppliersinthiscasearethedepositorsortheNBFC‗sfunds.
Suppliershavelotsofalternativestoputtheirmoney.Withtherisktheycaninvest theirmoney.E.g.Low Risks:Banks, Bondsetc. High Risk: Stocks,Investment.
RBIrulesandregulations:RBIrulesandregulationsarenotasstringentasofBanks. NBFC‗s aregoverned bymanybodies. E.g. RBI,FIDC, NHBetc
Bargaining powerofconsumervery high
Largeno. ofalternatives
Low switching costs
Undifferentiated services
Fullinformation aboutthe market
Threat ofcompetitors
Largeno ofNBFC‗s
High marketgrowthrate
Low switching costs
Undifferentiated services
High fixed cost
High exitbarriers
Rivalryamong competitors isvery fierceinIndianNon BankingFinancialIndustry.
TheservicesNBFC‗sofferismoreofhomogeneouswhichmakestheCompanytoofferthe sameserviceatalowerrateandeattheircompetitormarket‗sshare.MarketPlayersuseall sortsofaggressivesellingstrategiesandactivitiesfromintensiveadvertisementcampaignsto promotionalstuff.Evenconsumerswitchfromonebanktoanother,ifthereisawidespread intheinterest.Hencetheintensityofrivalryisvery high.Thenooffactorshascontributedto increaserivalrythoseare.
AlargenoofNBFCserving
similarloanproducts:ThereissomanyNBFC‗sandnon
financial
institution fightingfor samepie,which hasintensified competition.
Highmarketgrowthrate:Indiaisseenasoneofthebiggestmarketplaceandgrowth rate inIndian financial industryis also veryhigh.This has ignited the competition.
Homogeneous product and services: The services banks offer is more of homogeneouswhichmakesthecompanytoofferthesameserviceatalowerrateand eat their competitor market‗s share.
Undifferentiatedservices:AlmosteveryNBFCprovidessimilarservices.Everybank copyeach otherservicesand technologywhich increaselevel ofcompetition.
High exit barriers: High exit barriers humiliate banks to earn profit and retain
tries
to
customersbyprovidingworld class services.
CHAPTER 3
SUMMARY AND CONCLUSION Results of the Study
Top-ratedNBFCshavenotonlybeensuccessfulinmanagingtheirmarketsharebutalsoin protectingtheir
profitability.Acombinationofthefactorscitedearlierhadhelpedthese
NBFCsearnbetterreturnsontheirdeployment.Infact,almostallthetop-ratedNBFCsenjoy areturnontotalassetsthatishigherthanHDFC
Bank's,oneofthebetter-runbanks.The
higherreturnonassetswasdespitetheiroperatingcostratiobeingsimilartothatofHDFC Bank.Forexample,operatingexpensesasaproportionofnetmarginworkedoutto68per centforHDFCBank.Onanaverage,thiswasnotsignificantlyhigherthantheratioformost
top-rated
NBFCs.Ifreturnonassetswerestillsuperior,thenitwasbecauseofthehigher returnontheirfunds.FortopNBFCs,theinterestincomeworkedoutto17-21percentof theirtotalassetsfortheyearendedFY.Theliquidity
inthebankingsystemalsohelpedthese
financecompanies.SpreadsovergovernmentsecuritiesforAAAratedcorporatesectordebt instrumentarenowonly50basispoints.Inotherwords,ifthecostof
fundsforbanking
companieshasdeclinedsharply,thentop-ratedNBFCshavealsobenefitedfromsucha declineininterestrates.Someofthesecompaniesarenowraisingfundsat7-8percent. Also,thesecompanieshavedisplayedtheabilitytomanagetheirportfoliowithoutlarge incidenceofnon-performingassets.Forinstance,LICHousingFinance,IDFCandShriram TransportFinanceboastofnetnon-performingassetstonetadvancesratiooflessthan1per cent.Thisagainhashelpedthemlowertheoverallcostofoperationsand,thereby,protect profitability. securitization,
Higher profitability and innovative
havealso
helpedin
boosting the capital
their
financing options, such as adequacyratio
ofthese NBFCs.
amongothers,LICHousingFinance,IDFCandShriramTransportFinance,RelianceCapital, boastofcapitaladequacyratiosupwardsof15percent.Inotherwords,theirbalancesheets continueto
be strongto accommodate furthergrowth in disbursements.
Disbursements-Sharp fallduring the crisis
DisbursementswereclearlyhitduringthecrisisasisvisiblefromPrimaryreasonforthis initialfallwaslackofsupplyoffundsafterthemarketliquiditydriedup.Impacthowever differeddependingonthecapitalstructureofthecompany,withNBFCshavinglargerALM mismatches and those which had more dependence on mutual funds for funding were affectedmoreseverelyasmutualfundsthemselvesfacedredemptionpressureontheirshort termschemes.Tosupportthesector,RBIundertookseveralmeasurestoimproveliquidity flowtotheNBFCsector.Thiswasasignificantdevelopmentastheregulatorhighlightedthe systemicimportanceof thesector.
RBImeasures to improveliquidity ofNBFCs
The systemically important non-deposit taking non-banking financial companies (NBFCs-ND-SI) werepermitted to raise short-term foreign currencyborrowings.
Allowed banks to availliquiditysupport under theLAF for thepurpose ofmeetingthe fundingrequirementsofNBFCsthroughrelaxationinthemaintenanceofSLRupto 1.5per cent of their NDTL.
Risk weights on banks‗ exposures to claims on NBFCs-NDSIwere reduced to 100 per cent from 150 per cent.
Settingupofaspecialpurposevehicle(SPV)foraddressingthetemporaryliquidity constraints ofsystemically important non-deposit taking non-banking financial companies (NBFCs ND-SI).
Deferringthehigher CAR norms forNBFCs-ND-SIby1year.
WhileliquidityconditionsstartedimprovingfromQ4FY09,disbursementsgrowthremained subdued for the sector till the first half of FY10. On ay-o-y basis the cumulative disbursementsshowedafallduringQ1FY10andH1FY10.Thisperiodsawdeteriorationin assetqualityofmostNBFCs,whichwasespeciallyhighintheirunsecuredloanportfolios. Lowerdisbursementsweremainlybecauseofthepullbackof
NBFCsoutofunsecured
lendingsegments.Onacumulativebasis9MEFY10disbursementsincreasedbymorethan 19%.EvenifweconsiderthelowbaseeffectofQ3FY09disbursements,thereisclear
indication
pick
sector.
up
in
disbursements
and
a
positive
outlook
for
the
With
improvementinoveralleconomic activity andhigherthrustoninfrastructure financing by the government, thescenariois expected to improve furtherin FY11.
of
CostofFunding-Shotupduringthecrisisduetoshorttenureborrowings,
stabilizednow
&expectedtobelessvolatileduetolargerproportionoflongterm funding
ManyNBFCstookadvantageofthelowerinterestrateregimeattheshorterendoftheyield
curveby
borrowingshorttermfunds(3months – 1year)atlowerratesandlendingfor maturitiesrangingfrom3-4yearsathigherrates.Howeverthelevelofmismatchesdiffered betweenNBFCsandthosewithhighermismatchfacednotonlyliquiditypressure,buttheir costoffundingalsoincreasedduringthisperiodduetoinversingoftheyieldcurveanda generalriseininterestrates.Averageborrowingscosts1(onanaggregate
basisforCARE
ratedNBFCs)increasedfromaround9.5-10.0%inFY08to11.5-12.0%inFY09.Thisshows theseverity
oftheimpactasfinancialcrisisaffectedfundingcostsinthe
secondhalf
ofFY09
andledtoa200bpsincreasefortheentireyear.TheresponsebyNBFCswastogradually replaceshorttermfundingwithlongtermsources.Thisisasignificantstructuralchangein theborrowingprofilesthatwillbringmorestabilityinprofitabilityofthesector.However spreadswillalsobelowercomparedtohistoricallevelsduetothischange.Duringthe9ME FY10costofborrowingreducedfromtheaverageof11.5-12.0%ofFY09to10.210.5%for the9monthperiodandisexpectedtoremainaroundtheselevelsforFY10.Thishoweveris stillhigher than theFY08 levels due to thestructural movetowards longer term borrowings.
AssetQuality – Deterioratedmoreduetounsecuredloanswhichisnowvirtually
stoppedby
mostplayers,provisioninghasimproved&assetqualityexpectednotto worsenfurther.
Assetqualityforthesectordeterioratedsignificantlyduringthecrisis.AggregateGrossNPAratio trended from around 1.1% for FY08 to around 2.1% in FY09. While therewas deteriorationin allassetclasses,unsecuredassetclasses(PersonalLoans,UnsecuredSME loans)showedthemaximum
deteriorationandwerethekeydriversforoverallincreasein
NPAs.Apartfromtheasset-typefinanced,anotherdifferentiatorbetweenassetqualitieswas theorigination&collectionmodelfollowed.NBFC‗s
whichoriginatedmajorityoftheir
portfoliothroughbranches&ownemployeesshowedbetterassetqualityperformancethan thosewhichusedtheDSAmodel.AggregateGrossNPAratiohasfurtherworsenedto3.0% attheendof9MFY10,howeveritisclosetopeakingout.De-growthinunsecuredportfolio segmenthasalsoloweredtheportfoliooutstandinggrowththerebyleadingtoabaseeffect‗ontheGr ossNPAratioandaddingtotheriseinreportednumbers.Provisioncoveragehasincreasedfromaroun d50%forFY09toaround60%attheendof9MFY10asplayershave
becomemore
conservative.UnsecuredlendinghasvirtuallystoppedformanyNBFCsand underwriting norms have also been tightened in general for other asset classes. Thesedevelopments indicate positive structural changes.
Conclusion
ItisencouragingthattheNBFCsector ‗simportanceisfinallybeingacknowledgedacrossFS marketconstituents as wellas theregulator.However,the importanceattached tothe sector is oftentranscendingintomisplacedexuberance.OversimplifiedandvaguedriversforNBFC valuationssuchasstrategicfitandcustomerbase,canneversubstitutedispassionatebusiness analytics.ArationalassessmentoftheintrinsicvaluesofNBFCsfactoringissuessuchaspast performance,structuralweaknessesofthesector(forinstancefundingdisadvantages),along withanidentificationofrealcapabilitiesareessentialtoensurethattheequilibriumbetween pricepaidandvaluerealizedisreachedtotheextentpossible.Intheabsenceofthis,Indiais suretowitnessthere-openingoftheNBFChorrorstoryalbeitwithanewchapteronthe
erosion
ofNBFC investment values affectinginvestors acrosscategories. Ratings of the NBFCs whoseprofitabilityandasset qualitywas affected dueto the crisis weresupportedbytheirstrongparentage.Basedontheparentalstrengthsomeplayershave raisedfurtherequityandalsomanagedtore-aligntheirbusinessmodelswhilemaintaining theirsolvency. onrelatively
overallpositiveoutlookonthesectorduetothebetterALMposition,focus saferassetclassesandthedemonstratedacceptanceofthesectorassystemically
importantbytheregulator.Thecrisishasimposedanoverallsenseofcautionevenforthenewerentran tsinthemarket.Alsogoingforwardhighercapitaladequacynormswillputafairlyconservativecapon theleverageofthesectortherebyimprovingthecreditprofileof manyentities (NBFC-NDSI).
Recommendations
DomesticFinancialmarketscanbeintegratedbymakingNBFC‗sChannelpartnersto Banks.Itwillhelpinbetterallocationandfundsavailability.Itwillalsohelpinbetter management ofFinancial services sector inIndia.
Enhancingthecreditdeliverymechanisms:Thecreditdeliverymechanismneedsto
bemore
transparentandhasslefree.Thereshouldbemorestringentnormsforthe defaulters.
StrengtheningtheprofessionalismofNBFCsectorthrougheducationandtraining: areorganized players. Regulatory bodyneeds to educate people about NBFC.
To reducein interest costand hencebenefit theultimate consumer.
NBFC‗s
Limitations Of the Study
There were several time constraints.
Due to continuous change in environment, what is relevant today may be irrelevant tomorrow.
The data available through secondary sources was brief.
BIBLIOGRAPHY
Books:
NBFCs and mutual funds.
Non-Banking Financial Companies in India, AkhanJafor, New Century Publications
Investigation into NBFCs, by P Sarath Kumar.
Websites:
http://www.rediff.com/money/2011/march/07rbi.htm (March,2011)
http://www.financialexpress.com/news/Column---Why-NBFCs-may-not-want-to-be banks/614492/ (March,2011)
http://www.stockwatch.in/nbfcs-offering-high-dividends-yet-again-25964 (March,2011)
http://www.livemint.com/2011/04/30204917/IDFC-seeks-infrastructure-NBFC.html (April,2011)
http://www.encyclopedia.com/doc/1G1-143176307.html (April,2011)
http://mba-bba-dissertations.blogspot.com/2011/04/capital-structure-of-indiabullsnbfc.html (April,2011)
http://www.nbfc.rbi.org.in (April,2011)
http://www.rediff.com/money/2007/jul/20nbfc.htm (April,2011)
http://www.thehindubusinessline.com/2011/04/14/stories/2009111451870100.htm (April,2011)
http://indiabudget.nic.in/es98-99/chap35.pdf (April,2011)
http://www.banknetindia.com/finance/fbanking.htm (April,2011)
http://www.coolavenues.com/know/fin/svs_nbfc_1.php3 (April,2011)
http://www.thehindubusinessline.com/.../2005022800330800.htm (April,2011)
