The language of money is at its elegant best with straight talk and trust is built whenyou walk the talk. Your company is in the business of borrowing and lending money'.Institutions and individuals who trust us lend to us; and even our customers who borrowfrom us being small retail customers trust us. The trust built over a whole life throughhonest and straight talk can be lost by a single instance of loose talk. Your company'svalues of fairness integrity and transparency are captured in the phrase Seedhi Baat orStraight Talk. To achieve it effectively we begin with active listening and empatheticunderstanding. Our values also form the theme for your company's promotional campaign thisyear led by our favourite cricketer Rohit Sharma known for playing with a straightbat'.
How individuals and organisations talk during a crisis reveals their character. ForNBFCs like your company the last twenty months since the IL&FS collapse have beenunprecedented crisis. The liquidity squeeze and perception issues have pushed NBFCs to thebrink.
The recent Covid-19 crisis has just added fuel to fire. These are the times when manycompanies falter in their communication and commitment to their investors lenderscustomers employees and vendors/ partners. When the storm blows over and dust settlesmen are separated from the boys.
Your company's Board and Management have stuck to the company's core values with evengreater vigour in the last two years of turbulent times for Indian financial sector. Wehave disclosed all relevant information more lucidly and transparently to lendinginstitutions. During the last six quarters of liquidity-uncertainty rumours andperception perplexity we increased our disclosures to take care of all queries investorsor lenders could have. We organised conference calls and lenders' conclaves along-withrating agency executives among other initiatives to encourage open dialogue withcustomers creditors shareholders media and employees.
In normal course as part of our culture we keep our communication and businesspractices simple and honest. As a result all our loan products and processes are simpleand straightforward. So is the process to repay or close an account. We have refrainedfrom opportunistic or complicated pricing which is more often than not to the detrimentof customers. We avoid diplomatic or convoluted communication to customers and employees.Our employees keep abreast of all developments on real time basis through our corporateintranet on Facebook Workplace.
The straight talk from the heart has helped us connect with the hearts of thecustomers. Even in the difficult year of 2019-20 our loan AUM grew 9% and for coreproducts that are focus for future growth the book expansion was 12%. We keptnon-performing assets (NPA) under control with net NPA after provision at less than 1% ofloan assets. This performance at a level far superior to industry averages has beenpossible due to your company's committed people time tested processes and cutting edgetechnology.
Your company's pre-tax profit prior to exceptional Covid related provision made a newhigh of Rs 10072 million.
Share price performance of NBFC sector manifests equity shareholders' concern aboutfuture of NBFCs in India. Entrepreneurial NBFCs without the backing of large industrialhouses have borne the brunt of negative perception and outlook. While it started with theIL&FS collapse it just kept getting aggravated with a few more large-scale defaultsin NBFC/ HFC sectors. To add to the woes Covid crisis has further heightened the riskaversion to the sector. In fact many industry observers and commentators describe this asthe worst crisis ever for the sector.
But as Benjamin Franklin once said Out of adversity comes opportunity!'
Your company's Board and management have pondered in-depth on the risks andopportunities arising from this unprecedented crisis. Many worthy and novel ideas came upfor discussion and the prominent five big drivers of the opportunities are:
a) Acceleration of digital technology and adoption
b) Cost saving opportunities from new behaviour such as work from home'
c) Risk aversion leading to higher savings and cross-sell opportunities
d) Banks with surplus liquidity showing eagerness to buy retail assets
e) Consolidation in the industry resulting in improved margins.
It is interesting that decades ago John F. Kennedy noticed When written inChinese the word crisis is composed of two characters - one represents danger and theother represents opportunity.'
In my view the best strategy to seize the opportunity and fortify your company'scompetitive position is to stick to your knitting- in terms of business as well asculture. Simple products honest policies and straight talk or Seedhi Baat. Your company'sentire team is excited by the potential for growth cost saving and innovation in thepost-Covid era. Just as Jeannette Walls put it Sometimes you need a little crisis toget your adrenaline flowing and help you realise your potential.'