Ascom Leasing & Investments Ltd Management Discussions

Global Economic Overview:

India entered FY2023 amidst uncertain macroeconomic environment the threat posed by the Omicron coronavirus subtype quickly subsided but at the same time geopolitical conflicts arose between Russia and Ukraine. In addition to that, China decision to continue lockdown in its cities due to the increasing number of Covid cases had a detrimental impact on the global supply chain. This led to significant increase in oil and food prices which in turn lead to rise in inflation across the global economies.

Global real GDP is forecasted to grow by 2.7 percent in 2023, down from 3.3 percent in 2022. Global trade remains under pressure due to geopolitical tensions, weakening global demand and tighter monetary and fiscal policies. The volume of global trade in goods and services is forecast to grow by 2.3 per cent in 2023, well below the pre-pandemic trend.

Labour markets in the United States, Europe and other developed economies have continued to show remarkable resilience, contributing to sustained robust household spending. Amid widespread worker shortages and low unemployment rates, wage gains have picked up. Employment rates are at record high levels in many developed economies with gender gaps narrowing since the pandemic.

Fuel and non-fuel prices are expected to decline in 2023 and 2024. Crude oil prices are projected to fall by about 24% in 2023 and a further 5.8% in 2024. Primary commodity prices declined 28.2% between August 2022 and February 2023 led by energy commodities, down 46.4%. This will result in a fall of global inflation rate to 7% for 2023 and 4.3% for 2024.

In most economies, the priority remains achieving sustained disinflation while ensuring financial stability. It is expected that 76% of economies will experience lower headline inflation in 2023. By 2025, it is expected that the inflation to be close to targets in most of the economies. 90% of the advanced economies are expected to struggle, while developing countries like India and China are predicted to have a certain uptick contributing nearly half of the economic growth in 2023 while US and Europe contributing 10% only.

*Sources:1.https://www.un.org/development/desa/dpad/publication/world-economic-situation-and- prospects-as-of-mid-2023/

2. World economic Outlook by IMF

Indian Economic Overview:

The effects of the slowdown in global economic growth resulting from high inflation and the continuing war between Russia and Ukraine are also seen to be affecting Indias economic performance. The country recorded muted growth of 4.4% in Q4 2022 compared to 6.3% in Q3 2022, with sluggish private consumption and exports being the major reasons behind that. The countrys real GDP growth in the fiscal year 2022-23 is estimated at 7.0% in comparison to 9.1% in the prior year. However, some demand indicators such as record sales of 3.8 million in the passenger vehicles segment in 2022, strong growth in tractor sales, and a rise in domestic air travel, continue to support economic growth.

Despite the sluggish growth in the latest quarter, we still expect India to be one of the major beacons of growth in 2023, driven by strong domestic demand and government expenditure. The efforts of the Union Budget 2023-24 to improve the disposable income of taxpayers in the country is expected to boost consumption via an increase in discretionary spending. In addition, the strong capital expenditure push provided by the Union Budget, with an increased outlay of 37.4% in comparison to the fiscal year 2022-23, is expected to drive growth, investments, and job creation. The governments reduction of over 39,000 compliances and decriminalization of over 3,400 legal provisions will also foster the ease of doing business in the country. Strong credit growth and resilience in financial markets are further expected to create an environment that supports investments.

A high unemployment rate, however, remains a concern for India, standing at 7.5% in February 2023. Inflation, which was falling since October 2022, spiked again to 6.5% in January 2023 driven by high food prices, breaking the Reserve Bank of Indias (RBI) upper tolerance limit, though still below the elevated levels seen during the first half of 2022-23. The RBI is focused on the withdrawal of accommodation aimed at controlling inflation, with policy repo rates hiked six times since May 2022. The ongoing global geopolitical tensions and higher demand from various countries lifting Covid-19 related mobility restrictions are also expected to affect commodity prices. Core inflation is expected to be affected by the continued transfer of input costs to output prices, particularly in the services sector. However, input costs and output prices are expected to ease in the manufacturing sector. Taken together, the RBI projects inflation at 6.5% for 2022-23 and 5.3% for 2023-24.

A robust domestic demand and favorable government initiatives are expected to help India remain as one of the fastest growing major economies globally. However, external challenges, such as a slowdown in the global economy and monetary tightening in advanced economies, are factors that could affect the countrys growth.

Source:https://assets.kpma.com/content/dam/kpma/xx/pdf/2023/03/kpma-alobal-economic-outlook-h1-2023-report.pdf

NBFC Industry Overview:

The overall loan book of NBFCs is projected to grow by ~13% to reach 50 Trillion by March 2024. The RBI has been appreciative of the efforts of NBFCs including their efforts towards covering individuals beyond the financial fold. NBFCs are expected to focus upon new business such as unsecured loans and the SME segment which promises a higher growth prospect as compared to the traditional products. Additional funding of 2.9 to 3.3 Trillion in FY24 would be required to achieve the projected growth.

Non-Banking Financial Corporations (NBFCs) have emerged as the primary source of financing for a vast section of the population including small and medium-scale enterprises as well as the economically unserved and underserved individuals.

They are financial institutions that provide a wide range of banking services like loans, credit facilities, investments, and other financial products. NBFCs have played a significant role in the Indian economys growth story, especially in the rural and semi-urban areas.

NBFCs are increasingly focusing on digitization including the usage of chatbots to improve customer service, providing digital solutions, and increasing partnerships with fintechs. With the help of tools such as eKYC (Electronic Know Your Customer), e-signature, and Aadhaar-based verification, NBFCs have furthered the process of financial inclusion among the diverse Indian population. However, certain pitfalls stand in the way of the NBFC sector.

Credit extended by NBFCs is picking up momentum, with the aggregate outstanding amount at ^31.5 lakh crore as of September 2022. NBFCs continued to deploy the largest quantum of credit from their balance sheets to the industrial sector, followed by retail, services, and agriculture. Loans to the services sector (share in outstanding credit being 14.7 per cent) and personal loans (share of 29.5 per cent) registered a robust double-digit growth.

After the pandemic decline, 2023 has brought growth for the NBFCs. It has demonstrated an innovative and resilient streak over the years which includes adapting efficiently even during the COVID-19 pandemic to avoid the revolving credit landscape. The market share of NBFCs has increased in the last few years with Asset Under Management (AUM) accounting for as much as 18% of the overall credit on March 2019, up from 12% in March 2008. A few challenges over the past three years lowered their share to 16% in fiscal 2022, with banks making bigger growth strides. The increase in NBFCs AUM from US$ 44.02 billion (Rs. 3.6 lakh crore) in March 2008 to almost US$ 330.21 billion (Rs. 27 lakh crore) in March 2022, and is expected to increase further, indicates the importance of the sector to overall credit delivery in the economy.

Overview of Underlying Segments:

Loan against properties (LAP) & Small & medium enterprises (SME) loans:

Loan against properties (LAP) & Small & medium enterprises (SME) loans witnessed a strong growth in FY23 on the back of lower growth during the pandemic period, amidst a revival in demand from smaller businesses. The credit flow remained subdued during the last two years as cash flows were impacted due to the pandemic. The NBFC AUM in this segment, after remaining range bound for eight quarters, started growing from Q3 FY22. LAP & SME market in India is expected to grow at 12- 14% in FY24 to ~3.1 Trillion from ~2.6 Trillion as of March 2023. These loans are driving the industry since they cater to the unmet credit needs at low interest rates and EMIs. Loan against property pools and the continuation of rate hikes will not have a significant bearing on the collection efficiencies, given the association of the borrower with the underlying collateral (residential properties) and the priority given by borrowers to repay such loans. The types of property, loans available, interest rates, sources, tenures, geographic regions, and companies are used to segment the loan against property market in India. There is a gradual shift from traditional loans from bank to loans from NBFCs due to quicker and hassle-free disbursements.

Source: As per ICRA April23 Quarterly Update

Gold Loan:

In India, gold is considered to be a sign of social status, financial security and cultural legacy. As of 2019, households in India assembled about 25,000 tons of gold, making the country the largest holder of the yellow metal in the world. Rural communities account for ~65% of the total gold demand in the country. Owing to the sentimental value that Indians associate with this indispensable item, people seldom sell it to meet financial emergencies. They prefer to pledge gold as collateral to secure short-term loans. Gold loans enjoy a relatively low interest rate that varies between 9.5% and 24%, and have a flexible tenure (ranging from a few days to 5 years).

NBFCs constitute the largest share of the organized market. Customers residing in rural parts of the country are gradually switching to these NBFCs, owing to quick loan processing, systematic gold valuation, auctioning and safe-keeping. Banks also offer gold loans, but they primarily consider these as their priority sector lending (PSL) requirements. Further, small finance and Nidhi companies represent the co-operative segment in the Indian gold loan industry, and account for ~12.98% of the organized gold loan market. Private sector banks are gradually entering the Indian gold loan market with tech-driven offerings like online gold loan services.

Banks loan against gold jewellery portfolio saw a robust 16.2 per cent year-on-year increase as at January 27, 2023, against a decline of 0.4 per cent as at January 28, 2022, on the back of loan offerings at competitive interest rates vis-a-vis non-banking finance companies.

In absolute term, banks loan portfolio increased by ^11,968 crore in the March-end 2022 to January 27, 2023 period against a decline of ^270 crore in the year ago period, as per RBI data.

Vehicle

The Indian commercial vehicle (CV) industry has recovered post the COVID-19 pandemic. According to the RBI, vehicle loans from banks have witnessed an impressive 137%. In F.Y. 2022-23, commercial vehicles witnessed the second-highest domestic sales growth in India. As per SIAM, the sales of overall Commercial Vehicles increased from 7,16,566 units in FY 2021-22 to 9,62,468 units in FY 2022-23, representing 34% substantial growth rate. Furthermore, the sales of Medium and Heavy Commercial Vehicles (MHCVs) increased from 2,40,577 units in FY 2021-22 to 3,59,003 units in FY 2022-23 indicating a growth of ~50%. Additionally, Light Commercial Vehicles increased from 4, 75,989 units in FY 2021-22 to 6, 03,465 units in FY-2022-23 indicating a growth of 27%. MHCVs market share poised to grow further, driven by increased activity in the construction and infrastructure sectors, while truck utilization reached an all-time high of 90%. LCVs growth levels have been increased due to rural consumption and e-commerce. In F.Y. 2022-23, the CV industry in India is expected to witness positive volume growth of 22-24%, driven by positive demand drivers from multiple industries and growing freight movements.

In FY 2022-23, domestic sales of Personal Vehicles exhibited significant growth, primarily due to the improvement in sentiments and the ease in the supply of semi-conductors. This growth reflects a strong recovery after the pandemic-induced disruption, which adversely affected sales in FY 2021- 22.Car sales for fleet operations, including those to app-based cab aggregators such as Ola and Uber, nearly doubled last fiscal and are expected to significantly outpace overall industry growth to get closer to the pre-pandemic peak this year.

The industry estimates that 137,000 vehicles were sold to fleet operators in the last financial year, a growth of 95%

Source:https://economictimes.indiatimes.com//industrv/auto/auto-news/car-sales-on-fleet-street-acceIerate-95infV23/articIeshow/100085686.cms?utmsource=contentofinterest&utmmedium=text&utm campaign=cpp.st

Source:https://bfsi.economictimes.indiatimes.com/news/bankina/vehicIe-Ioan-arowth-outpaces-home-Ioans-as-consumers-prioritise-cars-suvs-over-houses/101348063

Key Financial Ratios

For detailed ratio analysis refer Note Number 22 (Xii) of the Financial Statements which is annexed as an integral part of the Annual Report.

Company Overview

SWOT Analysis Strengths:

1. Understanding customers approach;

2. Better services to individual as well as corporate customers;

3. Easy and simplified sanction procedure and disbursement;

4. Flexible operation & ability to innovate;

5. Experienced senior management team;

6. Strong relationships with other NBFCs, institutions and investors;

7. Smoothly and easily catering the need of Customer via our loan products inclusive of Car Loan, Personal Loan, Gold Loans etc.,

Weakness:

1. Weakness in urban markets due to disparities in public perception

2. Strong and dynamic competitors

3. Business and growth are directly linked with the GDP growth of the country.

Opportunities:

Opportunities in home equity, personal finance, personal investment, etc.

Collaboration with Banks.

Securitizing to collect funds to generate asset growth No entry barriers or low entry barriers

Threats:

1. Competition from captive finance companies, small banks, FinTechs and new entrants.

2. Inadequate availability of bank finance and an upsurge in borrowing costs.

3. External risks associated with liquidity stress, political uncertainties, fiscal slippage concerns, etc.

4. Increasing competition from global and local competitors in terms of product development and technology innovations, leaving very thin margins of error.

5. Regulatory and compliance-related changes in the sector affecting NBFCs.

6. Growing commoditization of financial products remains the toughest challenge for the Company.

Discussion on financial performance with respect to operational performance

The total revenue from operations of your Company for the year ended March 31, 2023 stood at Rs. 1215.11 Lakh as against Rs. 1244.63 Lakh for the year ended March 31, 2022. The Company has earned a profit (after tax) of Rs. 496.11 Lakh for the Year ended March 31, 2023 as compared to Rs. 487.30 Lakh for the year ended March 31, 2022.

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and Generally Accepted Accounting Principles in India.

Material developments in human resources/industrial relations front, including number of people employed.

The Company had sufficient numbers of employees at its administrative office. The Company recognizes the importance of human value and ensures that proper encouragement both moral and financial is extended to employees to motivate them. The Company enjoyed excellent relationship with workers and staff during the last year.

Cautionary Statement

The statements in the "Management Discussion and Analysis Report" section describes the Companys objectives, projections, estimates, expectations and predictions, which may be "forward looking statements" within the meaning of the applicable laws and regulations. The annual results can differ materially from those expressed or implied, depending upon the economic and climatic conditions, Government policies and other incidental factors.

For and on the behalf of Ascom Leasing & Investments Limited
Sd/-	Sd/-
RupalbenTushar Pandya	TusharRohitbhai Pandya
Wholetime Director	Managing Director
DIN: 06396751	DIN: 03264783