"Your company has displayed commendable tenacity in the face of adversity. Thecompany was one among the first in the industry to activate a robust Business ContinuityPlan"
It is during the times of uncertainty and challenges that robust businesses withstrong underlying fundamentals stand out from the rest. The financial year 2019-20 hasbeen one such challenging year for the NBFC industry in India and its allied sectorsincluding automotive real estate and MSMEs. The year saw a significant decline in theautomotive sales across product categories especially in commercial vehicles. The realestate sector and MSMEs were significantly affected towards the latter half of the yeardue to a liquidity crunch and muted demand. The COVID-19 outbreak has further extended thealready underlying challenges.
Owing to multiple headwinds commercial vehicle industry closed the year FY 20 with a29% de-growth. Despite the expectation of an improvement in rural demand due to a goodRabi crop the outbreak of COVID-19 has led to restricted movement of goods and lesserdemand in the Light Commercial Vehicles (LCV) segment. Used commercial vehicle saleshowever is less likely to be impacted in FY 21 considering lower market prices BS VItransitioning an extended time gap in regularization of the new vehicle supply chain.Domestic Car and Utility vehicle industry witnessed two consecutive years of decline forthe first time in a decade with a de-growth of 18% in FY 20. Tractor industry had ade-growth of 10% in FY 20 due to weak farm sentiments in the first half of the yeartogether with erratic rainfall and the onslaught of COVID-19 during March 2020. A fasterrecovery of the rural sector with a good Rabi harvest normal monsoon government supportthrough farm subsidies and direct income support to farmers is expected to aid tractordemand in FY 21. Government's thrust towards doubling farm income is also expected todrive long term growth
in this segment. The two-wheelerindustry had a de-growth of 18% in FY 20 due to weakconsumer sentiment subdued rural demand and an increase in cost of ownership.
Across the Home Equity business NBFCs have progressively lost market share in the LoanAgainst Property (LAP) product post FY 17 owing to efforts to contain asset qualitydeterioration and yield pressure. Growth rate of NBFCs in the Home Equity business untilFY 21 is expected to be 5 - 7% almost half the overall industry growth rate of 13 - 14%during this period.
The Indian Housing Finance market is estimated to be Rs.21 lakh crore and grew ataround 10-14% in FY 20. The growth in the affordable housing finance segment estimated atRs.3 lakh crore continued to out-pace the overall housing finance market and is estimatedto grow between 15-20% in the coming years. The national mission of 'Housing for All by2022' continues to be at the forefront of the Government's initiatives. The subsidyoffered to customers through the PMAY (Pradhan Mantri Awas Yojana) - CLSS (Credit LinkedSubsidy Scheme) has helped in affordable housing growth. Further RERA (Real Estate(Regulations and Development) Act 2016) brought in transparency in housing transactionsas well as allayed customer fears of investing in under-construction projects thus furtherboosting demand. Given this environment the demand for affordable housing continues toremain intact and may emerge as a favored asset class for investors.
Despite the prevailing challenges your company has displayed commendable tenacity inthe face of adversity. The company was one among the first in the industry to activate arobust Business Continuity Plan. Your company had initiated targeted actions towardsfinancial planning business strategy realignment employee productivity re-focus ITenablement and renewed customer engagement post the onset of COVID-19. The companycontinues to exercise significant advantage owing to a strong cash balance and highliquidity.
In the year gone by your company managed to increase its closing assets by 11% yearover year.
For the year FY 20 the total income increased by 24% and the net margin increased by19% in comparison with the previous year. As a matter of abundant caution your companyhas set aside an additional provision of Rs.534 crores (including Rs.30 crores of Macroprovision created in FY 19) to meet any contingencies that may arise. Accordingly netprofit before tax dropped 14.6% over the previous year.
Looking ahead the NBFC industry will see a definite stress in the short term. HoweverI remain confident of the return to normalcy in disbursement growth and gradual reductionof stress on the assets by the second half of the financial year 2021. As a financialengine that services the liquidity requirements of the vast majority of rural India theeconomic recovery requires the NBFC industry to stay healthy.
Your company shall continue to be prudent and ensure it is adequately prepared to ridethe wave when the economic activities return to normalcy. Your company has over a periodof time invested in upgrading itself digitally with a strong emphasis on ramping upin-house analytics and technology capabilities. These investments will hold the company ingood stead in a post COVID-19 world.
On behalf of the company and board of directors I welcome on board Ms. BhamaKrishnamurthy. I also take this opportunity to congratulate Mr. Arun Alagappan on hiselevation as managing director and Mr. Ravindra Kumar Kundu on his appointment as anexecutive director of the company. I wish them well and great success in their new roles.
I would like to take this opportunity to thank all our employees for their sustainedcontribution. Further I would like to thank the Board and RBI for their guidance andsupport. I would also like to thank our shareholders bankers and business partners fortheir continued support for our company over the years. We will continue to stay focusedand work together with all our stakeholders to ensure we all succeed together.