I am pleased to present you the 31st Annual Report of the
company for the year 2016-17.
Indian economy has continued to consolidate the gains achieved in restoringmacroeconomic stability. India recorded a growth rate of 7.1 per cent during 2016-17despite with the fears that demonetisation of high-value currency notes would adverselyimpact the economic growth. As per Asian Development Bank Outlook Indias GDP isexpected to grow up to 7.4 per cent in fiscal year (2017-18) and 7.6 per cent in 2018-19.The growth of the Indian Economy will be due to the fact that India has taken someeconomic reforms initiative which includes the Goods and Services Tax (GST) andliberalisation of the FDI regime Made in India Campaign ease of doing business with aview to improve business climate and promote growth. The GST is expected to roll out fromJuly. The 'One Nation One tax' approach will make India an open market helping SMEsexplore new markets with no or low entry barriers and experience business expansion.
The year passed has been marked with two major economic decisions which include thepassage of the Constitutional amendment paving the way for implementing thetransformational Goods and Services Tax (GST) and the action to demonetise the twohighest denomination notes of Rs. 1000 and Rs. 500. GST once implemented will turn Indiainto one common market leading to greater ease of doing business and big savings inlogistics costs from companies across all sectors. GST will eliminate multiple levies. Itwill also allow deeper penetration of digital services.
The NBFC sector in India has undergone a significant transformation over the past fewyears. The sector has been recognized as one of the important component in Financialsector and has shown consistent year-on-year growth. NBFCs play a critical role in thecore development of infrastructure transport employment generation wealth creationopportunities and financial support for economically weaker sections of society.
The contribution by the NBFC Sector has been tremendous and has grown from 8.4% in 2006to about 15% in 2017. The growth potential of the NBFCs is good as public sector banks areunder stress due to mounting bad debt and their appetite to lend in rural areas. So thegrowth of NBFCs will ride on stress in Public Sector Banks Client Outreach Technology upgradation increased consumption and deep understanding of Micro and small enterpriseneeds. Based on all these efforts and market demand the NBFC sector is expected to growupto 20% by 2019-20.
The MSME sector has been acknowledged as the backbone of the India economy. The sectoris further expected to contribute significantly to India's growing GDP. The sector willinevitably support India to improve nation's financial inclusion and mitigate the urbanrural divide. This sector is also expected to generate maximum jobs in India as India willhave the largest job ready youth population in the world by year 2020. This sector willcreate favourable business ecosystem in the manufacturing sector and will not onlygenerate employment of significant level but also become hot bed of entrepreneurialactivities.
IMPACT OF DEMONITISATION
On 8th November 2016 the Government in a surprise move made a radicalgovernance-cum-social engineering measure by ceasing the legal effect of the two largestdenomination notes Rs 500 and Rs 1000together comprising 86 percent of all the cashin circulation. These notes were to be deposited in the banks by December 30 whilerestrictions were placed on cash withdrawals. In other words restrictions were placed onthe convertibility of domestic money and bank deposits. This step taken by the Governmentwas to curb corruption counterfeiting the use of high denomination notes for terroristactivities and especially the accumulation of black money. However this step impacted thebusiness as the company was not authorized to take the old currency notes and the newnotes were not available with the clients. The Company traditionally uses cash forrecovery operations. The installments on loans have fortnightly collections of smalldenominations. On account of non-availability of cash post demonetization the borrowerswere not in a position to service their loans which led to delay and drop in collectionrates.
Your company makes disbursements directly into the bank account of the borrowers as perthe system adopted more than two years before. The company has not been making any cashdisbursements. 100% of our clients are using bank accounts. Despite this the disbursementsafter the demonstration has fallen down in November December and January because clientswere unable to get the cash withdrawn from the bank. After various efforts by the companyand its employees the disbursement and collection rate has improved.
HIGHLIGHTS YEAR 2016-17
The year 2016-17 has been a great year for the company. The shares of the company havebeen listed at the National Stock Exchange Mumbai. Now the shares are listed at both theNational Stock Exchange and Bombay Stock Exchange. This has helped in the liquidity of theshares of the company.
The company has been awarded as one of the Top 100 SME companies in India by India SMEForum. The company has been selected one among 41832 companies competing on financial andnon financial parameters. It has been a great achievement for the company to be among top100 SME companies in India.
The company has acquired the Micro Finance Company in the name of Parikarma Investmentsand Financial Services Private Limited. The name of the company has been changed toCapital Trust Microfinance Private Limited. The company is wholly owned subsidiary of theCapital Trust Limited and is engaged in the business of Micro Finance.
The assets of the company has also crossed Rs. 500 Crores on consolidated basis thusthe company has become a Systematically Important Non Deposit Taking NBFC. Therefore theprovisioning norms has become stricter and therefore the NPA percentage has increased.
During the year the Company witnessed a strong performance as revenues on consolidatedbasis increased by 103% from Rs. 61.31 Crores in year 2016 to Rs. 124.77 Crores in year2017 while PAT grew 87% from Rs. 20.24 Crores in year 2016 to Rs. 37.86 Crores in year2017. The Board of directors has recommended a dividend of Rs. 1.50 per share for theyear.
The promoters have inducted additional Rs. 13.60 Crores by conversion of 1550000warrants into equal No. of equity shares. The company has also allotted 143915 equityshares to Capital Employee Welfare Trust under the ESOP scheme.
The capital adequacy ratio is at a comfortable level of 46.83% providing us enough roomfor comfortable expansion.
There is a funding shortfall of Rs. 26 Lakh Crores to the MSME Sector. The company isfocused on providing financial assistance to those who are excluded from main - streambanking. This segment represents the Missing Middle which is un-serviced bybanks and large NBFCs who typically prefer to lend to the top or bottom end of thepyramid. Companys vision is to fulfill the funding needs to theMissingMiddle.
Capital Trust has cutting edge technology to keep operations efficient and at low cost.Companys entire staff is empowered with smart phones who are able to have liveaccess to data. Loans are on - boarded through Mobile Technology and in-principle approvalis granted to clients at ground level within seconds of applying for the loan. Companyissues digital receipts for cash collections at the time of repayments ensuringtransparency. The company is far ahead on the Information Technology front and it keepsitself updating with the new technology.
The company is financially sound and its capital adequacy ratio is 46.83% which givesthe company a leverage to raise funds for its future growth. From here on we expectgrowth to be the only constant as our current infrastructure and capital structure iscapable of supporting business growth four to five times the current level. By acquiringthe NBFC-MFI the company has entered into Micro Finance sector. The company is nowplanning to enter the Housing Finance Sector in near future.
In the near future the company is planning to consolidate in the existing geographiesas well as enter new territories which has a great potential for the products which wedeal into. These regions shall provide steady business over the next couple of years as weleverage our existing strengths to grow with a more concerted effort.
MESSAGE TO THE SHAREHOLDERS
As we mark the end of another successful year I would like to thank the ManagementTeam for their unwavering commitment and guidance in leading the Company forward.
I would also like to extend our deepest gratitude to all
employees for their invaluable contributions to the Company.
Last but not least special Thanks to our Funders Shareholders and customers for theircontinued support and loyalty to our Company.
With Warm Regards
Chairman and Managing Director