I am pleased to report that along-with your company's revenue and profits its brandand customers' trust have also made a new high. Your company's market capitalization as onMarch 31 2017 stood at close to Rs 127 billion a steady relentless value creation sinceit went public in 2005 at post money valuation of Rs 3.3 billion. While this is animpressive growth track record outlook for the next decade is even brighter.
India is in a sweet spot. Amongst large economies India is likely to be the fastestgrowing economy. Indian economy has the potential to attain double digit real growth in afew years. The country with favourable policy framework democratic government and anunbiased judiciary is well placed to be the most attractive destination for foreigncapital. More importantly India is perhaps the only country that can absorb large capitaland generate healthy returns given its young population and underdevelopedinfrastructure. Over the next few years interest rate in India should head downward asinflation is likely to remain low. India is quite integrated with the world and globalcommodity prices continue to be under pressure due to subdued demand. Indian financialservices sector should be a prime beneficiary of the country's accelerated economicgrowth. Besides there are a few more tailwinds; there is a distinct increase in domesticsavings' investment into financial assets at the cost of real estate and gold thegovernment's strong incentive package for afiordable housing will drive housing financegrowth as well the under-penetrated credit market will witness robust growth and a majorpart of incremental growth will go to private players as PSU banks are constrained forcapital.
Your company has emerged as one of the leading players in financial services. It isreasonable for one to expect your company to register rapid growth in the next few years.When business is on the uptrend one tends to ignore efforts and investments required tostrengthen the foundation and backbone. We see the opportunity as long-term and cyclicalgyrations inevitable. It is in this context that we are focusing on making growth durableand de-risked.
In all our businesses there are ways to be opportunistic and target faster growth inshort-term. Growth in our core businesses has dependence on buoyancy in the economy andcapital markets. Notwithstanding the same your company has systematically chalked out astrategy to make growth sustainable over long-term. I shall briefiy describe ourbusiness-wise approach.
Financing business carried out by NBFC and its HFC subsidiary has a simple strategyRetail lending- Digital delivery.' In the lending business large ticket wholesaleloans are simpler to scale up and typically deliver better margins as well. Theconcentrated exposure carries higher risk. Therefore our preference for retail loans isto mitigate risk as one can not only disperse risk over large number of borrowers but itis easier to predict behaviour of population comprising a large number of constituents.Our edge in retail lending is underpinned by keeping costs under control by leveragingdigital technology.
Wealth business is focusing on building long-term sticky customer relationships. It hasalways refrained from maximising revenue in the short-term. Our team is working onincreasing share of active assets and advisory or discretionary mandate.
Capital market business has retail and institutional segment. In retail we have beenmoving customers on digital and mobile platform. For institutional business our corestrength is research capabilities and therefore the focus client segment comprise mutualfunds and foreign portfolio investments with long- term investment mandate. Similarly ourInvestment Banking focuses on our core strength in equities and distribution reach in allsegments.
De-risking the growth
Financial services business is particularly prone to multiple risks. Management andmitigation of risks has completely new dimensions for revolutionary changes in technologyon one hand and continuing tightening of regulatory framework. We always builtbest-in-class risk management framework with specific focus on credit assessmentcompliance technology and reputational aspects. We have continuously strengthened oursystems and processes not only to mitigate risks but to prevent them in the first place.Besides overall control of risks with Board supervision every business has built multiplelines of defences to protect the business. We are leveraging technology to provide earlywarning signals and intelligent detection of frauds risks and lapses in compliance.Besides we are actively broadening our service offerings diversifying asset mix andgeographical spread of customers.
I take this opportunity to place on record the hard work and commitment of all mycolleagues and gratitude to customers shareholders bankers and regulators for theirunstinted support. Your company is committed to work for long-term shareholders' value andfocus not only on growth but to have durable growth in a fairly de-risked business model.
|Nirmal Jain |
|IIFL Holdings Limited |