J J Finance Corporation Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY STRUCTURE AND DEVELOPMENTS

Recent developments and changes in the NBFC ecosystem inerest rate may rise in 2023. The stock indices has been volatile posing a challenge and opportunity for the Company. The Company believes that it has taken into account the impact of known events arising out of COVID-19 pandemic in the preparation of financial results resulting out of fair valuation of these investments. However the impact assessment of COVID-19 is a continuing process given its nature and duration. The Company will continue to monitor for any material changes to future economic conditions. This pandemic has inflicted enormous pain and su?ering to individuals and corporates alike across the world. It was not just the corporate sector that has been forced to rapidly adapt. Public services organisations, regulators, governments, and local administrations have demonstrated their potential to adapt and overcome.

Opportunities

Reports from the World Bank indicate that Non-Banking Financial Institutions act as critical pillars contributing to macroeconomic stability and sustained economic growth and prosperity, due to their ability to finance firms and individuals at a reasonable cost, reduce volatility by providing multiple sources to finance and park funds and enable creation of a competitive environment characterized by a diverse array of products. This has been proven time and again in developed markets. Non-Banking Finance Companies (NBFCs) continue to play a critical role in making financial Services accessible to a wider set of Indias population and are emerging as strong intermediaries in the retail finance space. Going forward, one should expect NBFCs to further strengthen their presence in retail finance and grow at a reasonably healthy pace. Your Company is committed to addressing the changes boosted by its strengths in market position, agile execution capabilities, robust early warning systems and extensive use of analytics for risk mitigation and resource allocation. It will ensure to take advantage of the tailwinds that may emerge during the course of the year.

Threats

The biggest challenge before NBFCs is that they are facing sti? competition from banks and financial institutions, due to their ability to raise low cost funds which enables them to provide funds at much cheaper rate. More stringent capital adequacy norms have been stipulated by RBI for NBFCs which is making difficult for them to give cheaper finance. Ever-increasing competition from commercial counterparts whose capacity to absorb losses is higher, counter-party failures, recommendations being made to increase the purview of monitoring by regulatory authorities increase the threat of losing the essence of Non-banking Finance Companies which are specifically designed to reach out and finance certain target groups.

SEGMENT WISE / PRODUCT WISE PERFORMANCE

The Company is engaged in investment activities and other financial services during the year under review, hence the requirement of segment-wise reporting is considered irrelevant.

OUTLOOK

The Company being an investment Company seeks opportunities in the capital market. The volatility in stock indices represents both an opportunity and challenge for the Company. We continue to see significant change in the market and will use periods of weakness as investment opportunities for long term.

RISKS AND AREAS OF CONCERN

The NBFC industry in general faces the risk of re-entry and new entry of players and existence of several unorganized regional players increasing the competition which mainly a?ects the asset quality. This is further characterized by captive NBFCs floated by other business houses. The ever existing systemic and delinquency risks and fluctuations in interest rates make the companies more vulnerable. Deployment of funds in sensitive and volatile sectors increases the risk exposure while concentration risk increases dependency.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Internal Control measures and systems are established to ensure the correctness of the transactions and safeguarding of the assets of the Company. The Management ensures adherence to all internal control policies and procedures as well as compliance with regulatory guidelines. The audit committee of the Board of Directors reviews the adequacy of internal controls. This has improved the management of the a?airs of the Company and strengthened transparency and accountability.

DISCUSSION ON FINANCIAL PERFORMANCE

During the year, the net revenue from operations of your Company decreased from Rs. 40.43 Lakh to Rs.40.02 Lakh. For FY 2022-23, your Companys profit after tax stood at Rs. 8.12 Lakh vis-?-vis Rs. 19.71 Lakh in the previous year.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company always considers its human resources as a valuable asset and is committed towards their development for continuous growth. Focus on training to enhance the skill-sets of employees in line with the business and market requirements continued throughout the year and it confers recognition based on merit. The employee relations have continued to be harmonious throughout the year. The Company has three (3) permanent employees as on 31st March, 2023.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Ratios are used to make a holistic assessment of financial performance of the entity, and also help evaluating the entitys performance vis-?-vis its peers within the industry. The NBFC sector is growing rapidly with borrowings comprising the largest source of funding. The key financial ratios of the company for F.Y. 2022-23 have shown a decline due to decrease in the revenue of the company while the liability has decreased during the year in concern. The Company is not a manufacturing unit and does not have any Non-Performing Assets (NPA), hence ratios related to those are not applicable. The significant changes in the other applicable key financial ratios are as follows:

CHANGE IN RETURN ON NET WORTH AS COMPARED TO PREVIOUS YEAR

Return on Net Worth (RONW) is a measure of profitability of a company expressed in percentage. Return on Net Worth for the financial year 2022-2023 is 0.91% while the Return on Net Worth for the financial year 2021-22 was 2.03%. The Decrease in Return on Net Worth is mainly due to the Decrease in Total income of the company. The company is making continuous e?ort to make optimum utilization of the shareholders fund and perform better in the time to come.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of the applicable laws and regulations. Actual results could di?er materially from those expressed or implied. Important factors that could influence the Companys operations include economic and political conditions in which the Company operates, interest rate fluctuations, changes in Government / RBI regulations, Tax laws, other statutes and incidental factors.