Operation profit of non-government non-banking financial and investment companies slows to 2.6% in 2017-18: RBI

Share of their short-term borrowings jumped to 37.9% in 2017-18 from 25.2% in 2016-17

The Reserve Bank of India has released data relating to the performance of non-government non-banking financial and investment (NGNBF&I) companies (excluding insurance and banking companies) for 2017-18.

As per the date, the operating profit growth of these companies slumped to 2.6% in 2017-18 from 14.8% a year ago on account of moderation in interest income and higher remunerations to employees. Retained earnings contracted due to overall reduction in profit margin and higher dividend payments.

Within total borrowing by these companies, loan from banks accelerated in 2017-18. Investments by these companies decelerated in a broad based manner barring the loan finance group.

The combined balance sheet of these companies expanded by over 20% for the second successive year mainly on account of long-term loans and advances by asset finance and loan finance companies; these activities were financed by both short-term and long-term borrowings.

There was greater reliance on short-term borrowings for funding activities, with their share in total borrowings increasing to 37.9% during 2017-18 from 25.2% in the previous year.

Mobilisation of long-term funds through bonds and debentures declined, whereas funding by way of term loans, especially from banks, picked up.

The analysis is based on audited annual accounts of select 16,278 NGNBF&I companies accounting for 86.6% of the total paid-up capital (PUC) of all NGNBF&I companies as on 31 March 2018.

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