The year under reviewimprovement in the performance of your Company after few toughyears when the environment in the infrastructure sector was adversely affected due tomany factors both internal for the companies and external from the perspective ofgovernment policies. The government has stepped up its outlay for infrastructure projects.Our country is poised for a good monsoon this year. And with the ongoing reforms the GDPgrowth momentum is likely to sustain. There is a general feel good' factorprevailing with an emerging belief that this year would be the year of the turnaround.There is an influx of foreign investments in the stock market in India and globalinvestors are excited about investing in the India Growth Story. Thus we are upbeat thatthis year and the years ahead will be interesting times for our country and your Company.
Your Company's shares have done much better in the last one year because of betterresults and an improved investment environment.
There has been both top-line and bottom-line growth. Leveraging our diversifiedpresence across the infrastructure spectrum and our deep understanding of the risks ineach sector we have done relatively well by focusing on improvement of the businessprocesses managing and mitigating the risks efficiently.
On the global front during the year under review two trends have become moreprominent. First developed economies are becoming increasingly protectionist especiallyevident from the actions in the US and the UK. Second the era of central bank-driven easyliquidity is gradually coming to an end. US Federal Reserve is already on a tighteningmode. Bank of England has indicated that it is through with its targeted purchase ofcorporate bonds. The European Central Bank (ECB) is also getting ready to initiate itstapering process.
On the domestic economy front India's GDP grew 7.1 per cent during the year underreview. India attracted record FDI and the country's forex reserves continued making newpeaks. However the sudden demonetisation action initiated by the government in India inNovember 2016 has resulted in a slowdown. In the January-March quarter (Q4FY17) the ratioof gross fixed capital formation to GDP fell to 28.5 per cent the lowest in the last 16quarters reflecting a further slowing down in the investment cycle. The 5.6 per centgrowth in Gross Value Added (GVA) in the same quarter shows a slowdown in consumption too.Nevertheless steps are being taken by the government to increase social andinfrastructure spending which will gradually result in growth investments and eventuallya pickup in consumption expenditure. The recently introduced Insolvency & BankruptcyCode (IBC) will surely enable the much awaited resolution for the over-leveragedcorporates and the bank burdened with bad loans.
The timeframe for addressing issues under IBC is practical and as and whenimplemented will effectively help in resuscitating the stressed companies.
Steps have also been initiated to improve India's
global competitiveness rank' and the concerted efforts made towards formalisingthe economy are reasons to be optimistic. The state governments are getting moreflexibility now in terms of spending the resources transferred by the central government.In addition the National Democratic Alliance (NDA) has significantly consolidated itspolitical position thus laying the ground for pushing through complex economic reforms.Meanwhile to keep inflation in control RBI has adopted a cautious but accommodativeapproach. The interest rates may further be reduced which will augur well for freshinvestments.
During the year under review except for the demonetisation drive which created sometemporary setback the overall business sentiment has been positive. The government hasincreased its outlay for the infrastructure sector. The other big positive has been theimmense groundwork done towards readying the nation for the Goods & Services Tax (GST)which now looks set to be rolled out on 1st July 2017. Although the GST initially mayresult in some practical issues it will usher in significant benefits especially byensuring a greater degree of transparency in transaction trails and by enhancinglogistical efficiencies.
Once GST comes into force leasing as a financial instrument can make a strong comebackwhich will be immensely beneficial to your Company.
Lack of clarity about the nature of leasing had resulted in multiple taxation onleasing thereby curbing its efficacy. GST should take care of that.
As IBC has become fully operational it will enable change in management of manystressed infrastructure assets. Infrastructure Finance Companies (IFCs) like Srei whichhave specialised skill sets in managing infrastructure assets will be well equipped totake charge of such assets and revive them.
In addition with the banks severely constrained in terms of undertaking fresh lendingIFCs and Asset Finance Companies (AFCs) will play a major role in financing infrastructureprojects and assets. Your Company thus now enjoys an added advantage. To sum up thebusiness outlook for your Company looks very positive.
During the year under review your Company posted a consolidated income of Rs. 4681crore (an increase of 44 per cent over last fiscal's Rs. 3262 crore) and registered a netprofit of Rs. 243 crore (more than threefold increase over last year's Rs. 73 crore). YourCompany's consolidated disbursements stood at Rs. 17604 crore a 21 per cent year-on-yeargrowth. The net worth of your Company at Rs. 4531 crore registered a healthy 40 percent growth. Your Company's consolidated assets under management stood at Rs. 37683 croreat the end of the year under review. In addition on a consolidated basis the grossnon-performing loans (NPL) came down from 4.02 per cent to 2.91 per cent while the netNPL reduced from 3.09 per cent to 1.98 per cent. Thus clearly the year under review hasbeen a very good one in terms of performance for your Company.
Your Company has been making strategic investments from time to time and has alwaysfollowed a strategy of diluting / divesting such stakes at the opportune moment. Themanagement is aware of such opportunities and will opt for strategic divestments wheneverthe right opportunity beckons. During the year under review your Company sold Treasurystocks which released more cash thus making more resources available for business growth.We are now looking forward to mobilising resources from the market for our road portfolio.
Technology is redefining our lives and also the way of doing business. Your Company iswell aware of this and the management is judiciously investing in technology in order tobe future-ready. At Srei we have launched a digital platform iQuippo which is an onlineforum to converge buyers and sellers of construction and infrastructure equipment. Rightfrom assisting original equipment manufacturers (OEMs) to market their products enablingand guiding potential buyers to identify the right assets iQuippo will have a role infinancing the asset deploying it providing insurance offering maintenance andoperational services making available spare parts re-deploying the asset in multipleproject sites identifying buyers for the used assets and providing all kinds of fee-basedservices till the asset is finally disposed off.
Your Company is keenly following the developments on the draft guidelines issued by RBIfor on-tap license for universal banks and wholesale banks. At an appropriate time andafter detailed evaluation of the pros and cons your Company will take an informeddecision on whether to go for a banking license.
Let me conclude by saying that there is enough reason to hope that the economicrecovery will only gather strength from here on. Your Company is well capitalised andequipped both in terms of technology and skilled manpower to tap the opportunities thatwill unfold. This new phase of your Company's journey will be far more exciting than whatwe have experienced before. We look forward to receiving your continued support in ourfuture endeavours.
Chairman & Managing Director