As I sat down to write this message I took a few minutes to look backon my 5 years as Executive Chairman of our diversified and rapidly growing Group. It hastruly been an exciting satisfying and rewarding journey for me. Taking over anestablished business founded by my friend and partner Chandir Gidwani with KhushroohByramjee in 1997 and built painstakingly over two decades was not going to be easy.However with our highly capable and committed teams and guidance & support of ourChairman Emeritus and Board members partners and other stakeholders we have been able toachieve a lot expanded and acquired many learnings. We are today a valuable franchisewith a balanced mix of Fee and Lending businesses servicing Institutions and Individualsacross the country and overseas too. And there is so much more to do !!
In the past few years we successfully completed three significantacquisitions raised equity capital in many of our verticals established a PAN India andInternational presence offering a diversified basket of services seeded lendingbusinesses that have grown profitably and a robust AIF platform. Changing marketconditions with opportunities and challenges to growth led us to divest and relook atsome of our businesses. We exited our well established national Money Exchange businessin 2018 and implemented strategic changes in our other businesses.
Dear Shareholders FY2020-21 has been a very challenging year for allof us. The Pandemic has had a very significant impact on lives livelihoods andbusinesses. Lockdowns and extended work from home schedules have had an adverse impact ongrowth. As the second wave of Covid unfolded it brought untold misery on many. HoweverMoody's Investors Service and other Financial Industry experts predict that theeconomic impact of the second wave will be less severe than last year and is likely to belimited to the April June quarter. Moody's has revised it's estimate offiscal growth for FY 2021-22 to 9.6 %. With states now easing restrictions economicactivity should pick up in the second half of the year as the vaccination pace picks up.However the growth is likely to be patchy and uneven. With predictions of a possiblethird wave our focus continues to be on the health and safety of our teams and theirfamilies. The commitment and dedication of every Centrumite during the past months hashelped our businesses overcome challenges maintain close interaction with clients whilesimultaneously work on building new relationships.
I now share with you the highlights of your Company's performancein FY2020-21.
Fee based businesses Growth driven by Financial & BusinessAdvisory Comprehensive suite of Wealth Management Services Increased Trading Volumes andCapital Raising for Industry
Despite limited action in the capital markets our Investment Bankingteams fared well driven by greater client outreach. The Equity Capital Markets andInfrastructure Advisory teams together closed eleven deals which included the Buybackoffer of Motilal Oswal Financial Services Ltd Pricol Limited's Rights Issue andCapital Raise for DRN Infrastructure Blu Smart Mobility and Golden Hatcheries amongstothers. Taking advantage of the revival in Loan and Bond markets our revamped DebtSyndication team worked closely with our NBFC and closed several transactions of projectfinance refinance and OTS. Both teams have a strong pipeline of transactions in FY2021-22
With markets rising to all time highs and an increased need for privategrowth capital our Wealth business saw greater traction in PMS and Equity Advisoryservices along with rise in issuances of NCDs and MLDs. Presently It manages an AUM ofover Rs 25000 crore a significant increase over last year. The Family Office businessrecorded healthy growth acquiring marquee clients and expanding service offerings insuccession planning family business structuring and tax advisory. The Insurance Brokingbusiness which largely caters to Centrum's Wealth clients was merged with the Wealthbusiness for greater synergy. A sharp focus on growth and improving operationalefficiencies through increased use of technology in servicing clients led to prestigiousrecognitions from respected Industry platforms such as Private Banker International andThe Economic Times.
Our Institutional and Retail Broking teams faced headwinds during thefirst half of the year due to volatility in markets. Challenging market conditions droveus to scale down our services of underwriting credit and risk. We consolidated dealingoperations at fewer centres focused largely on servicing domestic and internationalInstitutions and cross leveraging relationships with Wealth clients. As the situationimproved and markets rebounded volumes grew significantly. We increased the stocks underour coverage and strengthened our sales and research teams. We also played a key role inbringing corporates and investors together by hosting several focused investorconferences which were well received.
The Alternative Investments vertical manages our Private Equity andStructured Credit portfolios. Owing to an increased demand for private capital our creditfund made two new investments. We are bullish on the AIF space and are in advanceddiscussions with a UK based asset management company to jointly launch a new alternativeinvestment fund. With deposit rates low we see good potential for higher investments fromHNIs and Family offices.
Lending Businesses Cautious on Fresh Disbursals Focused on RiskManagement & Governance
During the year our lending businesses of Affordable Housing SupplyChain MSME and Micro Finance faced liquidity pressures with some clients opting formoratoriums. However we took several steps to remain well capitalized and were able tomeet all our obligations on time. We remained cautious in making fresh disbursements andinstead focused on improving our risk management practices and interactions with clientsto ensure robust collections. Our overall Loan book growth remained flat and stands atapproximately Rs 2000 crore. Through our lending businesses we now offer loans startingfrom Rs 10000 to micro finance clients and going up to Rs 2 crore for corporates. Webelieve that our chosen client and geographic segments have ample growth potential.
Our Affordable Housing Finance business received a PE infusion of Rs190 crore from a fund managed by Morgan Stanley in March 2020. With sufficient liquidityavailable we continued to grow organically albeit cautiously and focused exclusively onsalaried and Government employees. We established a presence in Uttar Pradesh and nowoperate in seven states. In-organic growth opportunities were also explored. We see a bigopportunity in the low to middle income segment in tier 2 & 3 cities driven by lowerinterest and stamp duty rates and support extended by the Government through its variousinitiatives. Our efforts will be to service more and more home buyers in these markets.
Our NBFC re-worked its strategy to focus on loans with smaller ticketsizes catering to MSMEs and Supply Chain Finance and reduced its exposure to large ticketloans. This resulted in the loan book contracting by size however it was a deliberateattempt to keep the book
Through our lending businesses we now offer loans starting from Rs10000 to micro finance clients and going up to Rs 2 crore for corporates. We believe thatour chosen client and geographic segments have ample growth potential.
granular. To maintain a healthy liquidity position and manage our ALMwe successfully securitized
Rs 50 crore of our Supply Chain Finance book by issuing Pass ThroughCertificates to HNIs Family Offices and Corporate Treasuries. This transaction structureis an Industry first with several innovations embedded in the issuance. Additionally weentered into new relationships with several PSU banks to extend credit facilities. Withbulk of our MSME business now digitized business sentiments improving and incentivesgiven by the Government to boost manufacturing in India we expect greater businesstraction.
The Micro Finance vertical completed its maiden international fundraise from Singapore's IIX's Women Livelihood Bond 3 and also its first fundraise through Non-Convertible Debentures (NCDs) which was subscribed by a large PSU Bankamongst other entities. It diversified its product offerings by launching three newproducts. Additionally the business partnered Fintech Major PayNearby to offerUnsecured Business Loans to their Retail Partners. This is the second Fintech tie-up doneby the business.
Our Standalone Revenue increased Y-o-Y by 76% to Rs 55.78 crore whereasconsolidated revenue stood at Rs 513.14 crore. Owing to the pandemic and subsequentslowdown in operations our profitability was impacted.
Centrum Foundation Helping To Improve the Lives of theUnder-Served
Dear Shareholders while we continue to grow our businesses with theutmost transparency and high standards of corporate governance we believe that it isequally important for us to participate in improving the lives of underserved fellowIndians. The Centrum Foundation undertakes several initiatives under the overall platformof "Health Nutrition and Well Being of the Underserved."
The pandemic and it's subsequent waves have had a significantimpact on the lives and livelihoods of many citizens. The weaker sections of Society weremost impacted suffering from reduced incomes lack of groceries & essentials andmedical support.
Through our Feed the Needy' program we provided over2 lakh nutritious meals to migrant workers and slum dwellers. Additionally with thesupport of the Micro Finance team we leveraged our branch network to supply over 25tonnes of food grains and other essential supplies in several areas affected by cyclonesand floods.
Under our Healthcare and Well-being initiative we sponsoredCochlear implants of 8 hearing impaired under-privileged children. These children below of5 years of age belong to poor and marginalized families. Surgery at an early age helpedrestore their hearing and enabled them to start attending school paving the way for themto lead a normal life. We also donated Wheel chair lifts to Queen Mary's TechnicalInstitute (QMTI) Pune to facilitate the easy movement of differently abled soldiers ofthe Indian Army Navy Air Force BSF and other Central Paramilitary Forces.
The Foundation has also procured Oxygen Concentrators for use byCentrum Group staff and their families as and when needed.
Our support to old age homes and meals to families of Cancer patientsbeing treated at the Tata Memorial Hospital continues.
Caring for our Extended Family Members
We undertook a number of initiatives for the well-being and safety ofour employees and their families. Well before the lockdowns were announced we put most ofour staff on Work from Home. Only those in essential service functions attended officethat too with strict guidelines. Regular checks were done on the mental and physicalhealth of teams. We arranged online counselling sessions set up testing centres in ouroffice premises and even tied up with a large hospital to sponsor vaccines for all ourmembers and their families. In addition a special Vaccination camp was arranged at ourcorporate office in Mumbai to provide vaccinations to staff and their families.
FY2022 The Path Ahead
As I come to the end of my message it gives me great pleasure to sharethat on 18th June 2021 The Reserve Bank of India issued an In-principleapproval to Centrum Financial Services Limited our established and profitable NBFC to setup a Small Finance
" The Reserve Bank of India issued an In-principle approval toCentrum Financial Services Limited our established and profitable NBFC to set up a SmallFinance Bank (SFB). BharatPe one of India's fastest-growing Fintech companies willpartner us in this new venture."
Bank (SFB). BharatPe one of India's fastest-growing Fintechcompanies will partner us in this new venture.
The RBI's in-principle approval is a validation of our provenexpertise in financial services and BharatPe's Digital Leadership both essential forsetting up a New Age Bank. The SFB will be guided by the directions and timelines of theRBI on the amalgamation of Punjab & Maharashtra Co-Operative Bank.
FY2022 will continue to remain challenging in spite of a moreoptimistic outlook for the second half. The pandemic has tested us in many ways - theresilience of our businesses the agility of our operations and teams our ability toadapt and our financial strength. At Centrum we have put in considerable time and effortto review our business strategies and streamline operations to be better prepared for thevagaries of a fast changing world. We move ahead with cautious optimism but inspired andexcited.
I would like to take this opportunity to thank every Centrumite ourclients investors regulators Board members and above all you dear shareholders for thecontinued trust and confidence in the Centrum Group. We look forward to your continuedsupport in our journey of creating long term value for all stakeholders.
|With Best Wishes |
|Jaspal Singh Bindra |