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IFCI Ltd.

BSE: 500106 Sector: Financials
NSE: IFCI ISIN Code: INE039A01010
BSE 00:00 | 26 Nov 11.98 -0.50
(-4.01%)
OPEN

12.40

HIGH

12.41

LOW

11.92

NSE 00:00 | 26 Nov 11.95 -0.55
(-4.40%)
OPEN

12.25

HIGH

12.40

LOW

11.90

OPEN 12.40
PREVIOUS CLOSE 12.48
VOLUME 933198
52-Week high 16.40
52-Week low 6.16
P/E
Mkt Cap.(Rs cr) 2,446
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 12.40
CLOSE 12.48
VOLUME 933198
52-Week high 16.40
52-Week low 6.16
P/E
Mkt Cap.(Rs cr) 2,446
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

IFCI Ltd. (IFCI) - Chairman Speech

Company chairman speech

FOR FINANCIAL YEAR 2019-20

Dear Shareholders

I welcome you to the 27th Annual General Meeting of IFCI Ltd. I hope thatyou all are doing well and keeping safe and healthy. The Novel Coronavirus has impactedthe World every country business and individuals. But I am hopeful that we would emergeout of this crisis stronger more resilient and wiser. I thank you for your continuedtrust and unwavering support extended to IFCI all these years.

Before coming to IFCI's performance I would like to dwell on the developments in theworld and Indian economy and the NBFC sector during the financial year 2019-20.

MACRO-ECONOMIC SCENARIO & DEVELOPMENTS

The world economy growth decelerated to 3.3% in 2019 as compared to 3.6% in 2018. Theeconomic activity slowed down in 2019 on account of rising trade and geopolitical tensionsincreased uncertainty about the future of the global trading system and internationalcooperation more generally taking a toll on business confidence investment decisionsand global trade. A notable shift toward increased monetary policy accommodation-throughboth action and communication- has cushioned the impact of these tensions on financialmarket sentiment and activity while a generally resilient service sector has supportedemployment growth. All these factors contributed to a significantly weakened globalexpansion especially in the second half of 2019 after experiencing strong growth inearly 2018 thereby reflecting financial consolidation and slow-down in manufacturing andtrade and currency related issues in major economies.

The COVID-19 pandemic is inflicting high and rising human costs worldwide and thenecessary protection measures are severely impacting economic activity. As a result of thepandemic the global economy is projected to contract sharply by -3% in 2020 much worsethan during the 2018-19 financial crisis.

The Indian economy slowdown was primarily on account of relatively slower growth rateobserved in Q4 of FY 2018-19 at 5.8%. However the Indian economy consecutively for the 2ndyear was able to retain its place as the fastest growing major economy in the world in FY2019-20 as well as it continued its climb on an upward growth path though at a slowerpace at 4.2% in 2019-20 vis-a-vis 6.8% growth registered in 2018-19.

GLOBAL DEVELOPMENTS & OUTLOOK

Global growth is projected at -4.9% in 2020 1.9% points below the April 2020 WorldEconomic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact onactivity in the first half of 2020 than anticipated and the recovery is projected to bemore gradual than previously forecast. In 2021 global growth is projected at 5.4 percent.Overall this would leave 2021 GDP some 6.5% points lower than in the pre-COVID-19projections of January 2020. The adverse impact on low-income households is particularlyacute imperilling the significant progress made in reducing extreme poverty in the worldsince the 1990s.

As with the April 2020 WEO projections there is a higher-than-usual degree ofuncertainty around this forecast. The baseline projection rests on key assumptions aboutthe fallout from the pandemic. In economies with declining infection rates the slowerrecovery path in the updated forecast reflects persistent social distancing into thesecond half of 2020; greater scarring (damage to supply potential) from thelarger-than-anticipated hit to activity during the lockdown in the first and secondquarters of 2020; and a hit to productivity as surviving businesses ramp up necessaryworkplace safety and hygiene practices. For economies struggling to control infectionrates a lengthier lockdown will inflict an additional toll on activity. Moreover theforecast assumes that financial conditions-which have eased following the release of theApril 2020 WEO-will remain broadly at current levels. Alternative outcomes to those in thebaseline are clearly possible and not just because of how the pandemic is evolving. Theextent of the recent rebound in financial market sentiment appears disconnected fromshifts in underlying economic prospects-as the June 2020 Global Financial Stability Report(GFSR) Update discusses-raising the possibility that financial conditions may tighten morethan assumed in the baseline.

All countries including those that have seemingly passed peaks in infections shouldensure that their health care systems are adequately resourced. The internationalcommunity must vastly step up its support of national initiatives including throughfinancial assistance to countries with limited health care capacity and channelling offunding for vaccine production as trials advance so that adequate affordable doses arequickly available to all countries. Where lockdowns are required economic policy shouldcontinue to cushion household income losses with sizable well- targeted measures as wellas provide support to firms suffering the consequences of mandated restrictions onactivity. Where economies are reopening targeted support should be gradually unwound asthe recovery gets underway and policies should provide stimulus to lift demand and easeand incentivize the reallocation of resources away from sectors likely to emergepersistently smaller after the pandemic.

DOMESTIC DEVELOPMENTS & OUTLOOK

The International Monetary Fund (IMF) in its latest World Economic Outlook of April2019 issue had pegged growth for Indian Economy at 7.3% and 7.5% for FY 2018-19 and FY2019-20 respectively. The estimates are on the back of continued recovery of investmentand robust consumption amid a more accommodative stance of monetary policy and someexpected impetus from fiscal policy.

The monsoon is expected to be near normal in FY 2019-20 however there exists someuncertainty around it not being evenly distributed among all regions of the country. Theoutlook for oil prices continues to be hazy both on the upside and the downside risk. Thefinancial markets remained volatile throughout FY 2018-19 and the fiscal situation at thegeneral Government level requires careful monitoring. Overall the output gap remainsnegative and therefore strengthening domestic growth impulses by spurring privateinvestment assumes priority. Further the consumer price inflation is expected to be 3.8%by end of 2019-20.

The IMF on June 24 2020 projected a sharp contraction of 4.5% for the Indian economyin 2020 a "historic low" citing the unprecedented coronavirus pandemic thathas nearly stalled all economic activities but said the country is expected to bounceback in 2021 with a robust 6% growth rate.

The International Monetary Fund (IMF) projected the global growth at -4.9% in 20201.9% points below the April 2020 World Economic Outlook (WEO) forecast. It has projected asharp contraction in 2020 of -4.5%. Given the unprecedented nature of this crisis as isthe case for almost all countries this projected contraction is a historic low.

The COVID-19 pandemic has had a more negative impact on activity in the first half of2020 than anticipated and the recovery is projected to be more gradual than previouslyforecast. In 2021 global growth is projected at 5.4% the report said.

"India's economy is projected to contract by 4.5% following a longer period oflockdown and slower recovery than anticipated in April". The IMF's record revealsthat this is the lowest ever for India since 1961. However India's economy is expected tobounce back in 2021 with a robust 6% growth.

NBFC SECTOR

Non-Banking Finance Companies (NBFCs) have consistently been increasing their share oflending to the Indian financial sector. However in line with the general trend in banking&financial services industry deterioration in asset quality of NBFC sector waswitnessed in the past one year. As on September 2019 there were 9642 NBFCs registeredwith the Reserve Bank of India of which 82 were deposit taking (NBFCs-D) and 274 weresystemically important non-deposit taking NBFCs (NBFCs ND-SI). All NBFCs-D and NBFCs-ND-SIare subjected to prudential regulations such as capital adequacy requirements andprovisioning norms along with periodic reporting requirements. The consolidated balancesheet size of the NBFC sector (including NBFC-D and NBFC-ND-SI including GovernmentNBFCs).

Although the NBFC sector grew in size from Rs.26.2 lakh crore in 2017-18 to Rs.30.9lakh crore in 2018-19 the pace of expansion was lower than in 2017-18 mainly due torating downgrades and liquidity stress in a few large NBFCs in the aftermath of theIL&FS event. This slowdown was witnessed mainly in the NBFCs- ND-SI category whereasNBFCs-D broadly maintained their pace of growth. However in 2019-20 (up to September)growth in balance-sheet size of NBFCs- ND-SI as well as NBFCs-D moderated due to a sharpdeceleration in credit growth.

The risk aversion among NBFCs-ND-SI coupled with their inability to mobilise adequateresources was reflected in the decrease in credit growth in spite of a fall in stressedassets ratio. However for the services sector stressed assets rose reflecting thebuilt-up stress in the real estate segment where NBFC exposures are significant.

OPERATIONAL AND FINANCIAL PERFORMANCE OF IFCI

During the year there was reduction in operational income on account of decline inloan assets caused by prepayment of certain loans and increase in stage-3 assets andabsence of net gains on fair value changes in current Financial Year.

As the overall economic environment and especially the credit offtake was subduedduring FY 2019-20 IFCI's performance was also affected in line with the overall financialsector. Despite decline in operational income and fair value loss Your Company could earnprofit of Rs.281.05 crore before impairment on financial instruments though suffered atotal comprehensive loss of Rs.317.53 crore during the year under report mainly onaccount of large amount of impairment made in respect of Stage-3 assets especially thecases admitted in National Company Law Tribunal (NCLT). The substantial amount ofprovisions enhanced the provision coverage ratio to over 49.05% however the capitaladequacy ratio improve in current FY to 13.54% with Tier-I capital at 8.20%. Variousstrategic initiatives including measures for recovery were initiated during the year inorder to maximize recovery under Insolvency and Bankruptcy Code (IBC) route and othermodes expedite divestment of non-core assets and strengthen the appraisal and riskmanagement processes and controls which are expected to improve the asset portfolioquality as well as cash flow of Your Company and make the balance sheet of Your Companyhealthier.

SANCTIONS AND DISBURSEMENT AND RECOVERY

While keeping the macroeconomic scenario during FY 2019-20 in view Your Companyadopted a cautious approach in its business also to conserve enough liquidity fewerfresh sanctions were granted worth Rs.158 crore. Further disbursements were also curbedwhere total disbursements in FY 2019-20 stood at Rs.742 crore. During the year YourCompany focused on recoveries from Non-Performing Accounts (NPA) by initiating variousproactive measures. Aggregate amount of Rs.1207 crore was recovered from NPAs includingNational Company Law Tribunal (NCLT)resolution cases amounting to Rs.1007.30 crore.Besides this Your Company was also successful in exiting from few of the long standingunquoted project equity investments and recovered Rs.780 crore including Rs.745 crore fromEquity Shares in a thermal power case. Your Company had received security receipts inearlier years towards part value of assignments of certain NPAs to Asset ReconstructionCompanies (ARCs). During the year under report redemption of some of the securityreceipts resulted in recovery of Rs.555 crore. Your Company is committed to continue itsaggressive approach for recovery from NPAs and other stressed assets through various modesand strategies.

ADHERENCE TO THE CORPORATE GOVERNANCE

The Report on Corporate Governance for the FY 2019-20 forms separate part of the AnnualReport. During the Year under report Your Company has made all out efforts for complianceof the conditions of Corporate Governance as stipulated in the Guidelines on CorporateGovernance for Central Public Sector Enterprises 2010 SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 and Non-Banking Financial Companies-CorporateGovernance (Reserve Bank) Directions 2015. However the requirements w.r.t. constitutionof Board and certain Board Level Committees could not be met in absence of IndependentDirectors on the Board of the Company. Application for appointment of IndependentDirectors has already been made with the Department of Financial Services being theAdministrative Ministry in Charge. The appointments are awaited.

CONCLUDING REMARKS & ACKNOWLEDGEMENT

With all the efforts being made by Your Company to further strengthen its operationalfinancial and human resources performance I hope that it will overcome the challenges& emerge triumphant once again in the very near future.

I take this opportunity to thank the Government of India especially the Ministry ofFinance the Ministry of Corporate Affairs The Reserve Bank of India The Securities& Exchange Board of India and all stakeholders including Banks and FinancialInstitutions for the continued support and guidance provided to Your Company. YourCompany expresses its gratitude for the professional advice and vision of the Board ofDirectors. I place on record my sincere thanks to all our esteemed shareholders clientsand investors for their unstinted support to the Company. I also wish to place on recordmy deep appreciation of the dedicated service of all the employees at all levels of YourCompany.

Stay Safe
Thank you. Dr. Emandi Sankara Rao
(MD & CEO)
DIN: 05184747
Dated: 31.7.2020

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