CHAIRMANS SPEECH FOR FINANCIAL YEAR 2015-16
It is my pleasure to welcome you to the 23rd Annual General Meeting of IFCILtd. You would be glad to know that your Company takes immense pride in playing a pivotalrole in contributing to the industrial and infrastructural development needs of the nationby providing financial assistance to several enterprises. Over the years your Companyfaced tremendous challenges but your Company faced them strongly and maintained itsposition stable. Your Company has demonstrated considerable excellence in the areas of itsoperations sustainable development and in being a good corporate citizen. This has beenpossible largely due to persistent efforts of our human resources and support andco-operation of all our stakeholders who continued to extend their much needed support andtrust.
ECONOMIC OUTLOOK AND YOUR COMPANYS RESPONSES
During 2015 the Global recovery has weakened further amid increasing financialturbulence thereby impairing the world economic growth since a growth of 3.1% wasregistered against the projected growth of 3.5%. The manufacturing activity softenedtowards the end of 2015 in advanced economies and stress in several large emergingeconomies showed no signs of abating. Central banks of Europe UK and Japan continued toremain in an accommodative mode a clear indication that growth and inflation have notrecovered to a sustainable level. Emerging market economies have been an engine of globalgrowth during the 2000s especially after the 2007-08 global financial crisis. Howevertimes are changing as growth rates in several emerging market economies have beendeclining since 2010.
The risks to global financial stability have increased manifold in FY 2015-16. Theoutlook in many of the advanced economies was not very bright on account of uncertaintyand disruptions to global asset markets thereby impairing the growth prospects. Decline inoil and commodity prices have kept risks elevated in emerging market economies whilegreater uncertainty about Chinas growth transition has increased spill overs toglobal markets. These developments tightened financial conditions reduced risk appetiteraised credit risks and obstructed balance sheet repair undermining financial stability.
It is expected that the world economy will grow at modest 3.2% as per base-lineprojections for global growth in 2016 in comparison with earlier projections of 3.4%. Inadvanced economies a modest and uneven recovery is expected to continue with a gradualfurther narrowing of output gaps. The slowdown and rebalancing of the Chinese economylower commodity prices will continue to weigh on growth prospects in 201617. Whilethe growth of emerging and developing economies still account for a larger share inprojected world growth in 2016 prospects across many of these countries remain uneven andgenerally weaker than over the past two decades particularly Brazil and Russia are stillmired in deep recessions.
During the FY 2015-16 Indias growth story remained positive on the strength ofdomestic consumption and registered the steady growth during the 3rd quarter of FY2015-16. The Indian Economy emerged as the fastest growing economy in the world with over7% growth till Q3 of FY 2015-16 which was higher than growth registered by Chineseeconomy.
The macroeconomic parameters like inflation fiscal deficit and current account balanceexhibited distinct signs of improvement and stayed within the target. The monetaryconditions remained consistent with achieving the target of retail inflation under 5%however an unfavourable monsoon played the spoil sport in agricultural production. Thesaving and investment rates showed hardly any signs of revival.
Indian economy is generally projected to continue growing at a robust pace althoughsome strong headwinds are expected to be faced in 2016-17 from Chinas economicrebalancing and slowdown in global demand. As per the Economic Survey of 2015-16 it isexpected that keeping in view the prevalent overall macroeconomic scenario and assuming anormal level of rains in 2016-17 Indian Economy will register a growth of more than 7%for the third consecutive year.
OPERATIONAL AND FINANCIAL PERFORMANCE
During the year under consideration your Company made sanctions and disbursements forvarious proposals aggregating to Rs 10895 crore and Rs 7488 crore lower than sanctionand disbursements of FY 2014-15 at Rs 12230 crore and Rs 8687 crore respectively onaccount of subdued economic environment.
In rupee operation the objective has been to manage the surplus fund effectively withminimum risk and deploying it to get optimum return with availability of funds forbusiness requirement. With priority on safety your Company invested in Treasury BillsGovernment Securities Certificate of Deposit Commercial Papers Inter-Corporate Deposit/Short Term Deposit (STD) and Mutual Fund Schemes. Average Deployment during the year wasRs 940.86 crore and annualized return on fund deployed was 8.56%. Your Company hasconsistently generated return higher than the average 91 day T-bill yield during FY2015-16 from Treasury operations. During the year under report your Company registered anincome of Rs 135 crore from Fixed Income Money Market operations as against Rs 170 croreduring the previous year. The lower income is on account of planned reduction of averagesurplus funds available with Treasury vis--vis last year to minimize negative carryingcost.
The foreign currency operations were restricted to containing the exchange risk arisingdue to mismatch in the outstanding amount of FC assets and liabilities. The mismatcheswere covered through forward contracts currency future and principal only swap. The netmismatch position was restricted to much below the limit of USD 3 million approved by RBIby maintaining almost square position.
During the year your Company continued with the strategy of selective disinvestment ofslow moving/ illiquid stocks and strengthening the portfolio through investment in bluechip stocks. During FY 2015-16 your Company earned a profit of Rs 280 crore from sale ofEquity.
Net investment portfolio of your Company as on March 31 2016 stood at Rs 8188 croreas against Rs 7590 crore at the end of previous financial year.
RECENT DEVELOPMENTS NEW BUSINESS INITIATIVE AND PROSPECTS
During 2015-16 your Company finalised and implemented its Vigilance Policy & Manualwith the approval of the Board ofDirectors.Themanualscontentsincludethepolicyandprocedures for the vigilance actionsWork Flow Chart Disciplinary Action procedures and Penalties and Appeals procedures. IFCIhas also adopted the policy of entering into Integrity Pact with suppliers and contractorswith the approval of the Board of Directors. e-Procurement and e-Auction routes have beenmade mandatory above certain cut off limits.
Keeping in view the current market scenario and credit demand on short-term basis bythe borrowers your Company launched a new product of providing short term loans withtenure up-to 1 year on competitive rates for high rated borrowers or existing borrowershaving good credit record with your Company.
During the year your Company continued its efforts to promote the use of Hindi in itsofficial work. With a view to motivating and encouraging the officers to use Hindi inofficial work Hindi workshops and competitions were organized at Head Office as well asother offices of the company. IFCI officers bagged prizes in various Hindi Competitionsorganized by Town Official Language Implementation Committee.
The House Journral "E Vitta Shikha" of your Company received the first prizefrom Town Official Language Implementation Committee in Financial Institution category.The Official Language Committee at Corporate Office monitored the use of Hindi in alloffices and provided necessary guidelines. All the computers available have been upgradedwith Unicode facility and the website of your Company has also been made bilingual for thebenefit of the shareholders and to further promote use of Hindi.
ADHERANCE TO THE CORPORATE GOVERNANCE
The Report on Corporate Governance for the Financial Year 2015-16 forms separate partof the Annual Report. During the year under report your Company has made all out effortsfor compliance of the conditions of Corporate Governance as stipulated in the Guidelineson Corporate Governance for Central Public Sector Enterprises 2010 SEBI (ListingObligations and Disclosure Requirements) Regulation 2015 and Non-Banking FinancialCompanies - Corporate Governance (Reserve Bank) Directions 2015.
In order to reward the shareholders your Company paid interim dividend of Re. 1 pershare of Rs 10 each during Financial Year 2015-16. Your Directors recommended it as finaldividend for the Financial Year 2015-16.
With all the efforts being made by your Company to further strengthen its operationalfinancial and human resources performance I hope that it will continue to grow in futureconsistently and meet the emerging challenges posed by the economic environment and theindustry.
I take this opportunity to thank the Government of India especially the Ministry ofFinance Ministry of Corporate Affairs the Reserve Bank of India The Securities &Exchange Board of India and all stakeholders including Banks and Financial Institutionsfor the continued support and guidance provided to your Company. Your Company expressesits gratitude for the professional advice and vision of all Members of the Board ofDirectors. I place on record my sincere thanks to all our esteemed shareholders clientsand investors for their unstinted support to the Company. I also wish to place on recordmy deep appreciation of the dedicated service of all the employees of your Company.
(S V Ranganath)
Non-Executive Chairman of the Board