KJMC FINANCIAL SERVICES
On behalf of the Board of Directors and on my own behalf, I extend to you
all a warm welcome to this 8th Annual General Meeting of Your Company. The
performance of Your Company during the year under review 1995-96, has been
very close to the projections inspite of depression in Capital Market
throughout the year. Heartened by the spectacular performance, the Board of
Directors are pleased to recommend a dividend of 45% on Equity Shares which
again is an all time high dividend as against the projected dividend of 30%
indicated in the Prospectus of the Company.
[A] ECONOMIC SCENARIO
Coming to today's scenario, it may be mentioned that the economic scenario
under the policy of liberalisation which was started 3 yeas ago continued
unabated last year. The latest estimates indicate that the Growth of G.D.P.
is maintained 6.2% keeping inflation under check. More particularly the
growth of industry was as high as 10% despite serious liquidity crunch. The
present Government at Centre has committed itself to follow the path of
reform and liberalisation and privatisation of more sectors is on the card
which will generate more competition leading to greater efficiencies and
improvement in the quality of services. It is believed that entry of more
private Banks, Insurance Companies, thrust on development of
infrastructure, more liberalisation in respect of F.D.I. - E.C.B., Euro
Issues and G.D.R. will stimulate the inflow of funds and revitalise the
Capital Market operations. The economic growth seems to have acquired a
momentum of its own undeterred by uncertain political climate. In my view,
these are encouraging signs and splak of the inbuilt strength of our
country and give a glimpse of what our country can achieve and what our
countrymen can aspire for in a conducive climate.
[B] YOUR COMPANY'S THRUST ON DIVERSIFICATION
The company's thrust is on expanding Fund-based and Non-Fund-based services
on a large scale by providing value added services based on research and
specialisation to meet the challenges of the 21st Century. The Management
feels that it is time to act now or never. With this view in mind, the
Management has decided to foray into Infrastructural Development
activities, Banking and Insurance activities, Housing Finance activities,
Mutual Fund and Venture Fund activities. This has become absolutely
necessary to face the stiffcompetition, locally and internationally.
As a part of the steps taken towards diversification programme and to
expand its activities in financial sector, your Company has sponsored
during the year Eight new Companies under the banner of KJMC to take up the
following activities such as :-
1) Forex Services
2) Housing Finance Services
3) Infrastructure Development Services
4) Asset Management Company by Sponsoring Mutual Funds.
Your Company intends to enter into Banking business. Necessary application
in this regard for acquiring the Banking licence has been filed with
Reserve Bank of India.
Your Company is also planning to enter into Insurance Services Sector as
soon as necessary laws are enacted in this respect.
In order to mobilise funds, increase the resources base, we have started
accepting Fixed Deposits from Public and Shareholders. Rating "CARE A -
(FIXED DEPOSIT)" which indicates adequate safety of payment of Principal
and Interest has been issued by CARE and has also received a certificate
from RBI to increase rate of interest as may be desired by Board of
Your Company has also started Foreign Exchange Division after receiving
RBI's approval for the same. In the ensuing year your Company has got
sufficient non-fund based assignments in hand and barring unforeseen
circumstances the Company expects to achieve the projected targets.
[C] THE FUTURE PROSPECTS :
i. EXPECTED BUOYANCY IN CAPITAL MARKET
Recently, in the Budget proposals, Government has announced certain
relaxations in direct investments, Euro Bond and GDR Issues, External
Commercial borrowings and raised the minimum holdings by FIIs from 5% to
10% in one single Company. All these relaxations have contributed to
resurgence of investors' confidence and will hopefully add to the buoyancy
in Capital Market.
ii. FOREIGN EXCHANGE FLOW
Demand for investment is expected to remain buoyant during 1996-97, based
on a series of steps taken by the monetary authorities - particularly, the
serial reduction in CRR and SLR and recent relaxation in GDR and ECB
guidelines - are expected to enhance liquidity, deposit growth and lendable
capacity of financial intermediaries. FDI flows show clear signs of
gathering momentum and appear likely to show a significant rise in the next
fiscal year. Both GDR markets and FII inflows have displayed upward swings
recently. These developments, alongwith reforms undertaken in both segments
of the capital market, should lead to revitalisation of the domestic
capital market. Thus, investment climate in the coming fiscal year looks
promising on current reckoning.
iii. IMPROVEMENT IN LIQUIDITY
The liquidity tightness that continued during 1995-96 is displaying some
signs of easing and short term money market rates are already evidencing
signs of decline. This is largely as a result of significant monetary
policy changes effected by the RBI in April and July 1996, specifically,
the serial reduction in CRR from 14% to 12% between April and July 1996 and
the freeing of interest rates on deposits of maturity period over one year.
FII-led improvement in foreign inflows since December 1995 have also served
to add buoyancy to overall liquidity. The long term rates. however,
continue to rule firm and the trends in the regard need to be watched in
the context of anticipated growth of industrial investment in general and
infrastructural demand for credit in particular complemented by the market
borrowing programme of the government.
iv. FOCUS ON INFRASTRUCTURE DEVELOPMENT
To understand the future of Capital Market we have also to dwell upon the
major macroeconomic issue, i.e. financing of infrastructure, which has a
bearing on th operations of FIs, including NBFCs. Infrastructure
development is a key commitment on the country's macro agenda and
reflecting national priorities, your company has adopted infrastructure
financial services as a key focus area.
v. DEMAND FOR MONEY UNPRECEDENTED
The fund requirements for financing projects in this sector are, however,
of gigantic proportions. Estimates of fund requirements are variously put
at Rs. 94,500 crore to Rs. 1,40,000 crore per year during the next five
years. In power and telecom alone, an annual investment requirement of
somewhere between Rs. 50,000 - Rs. 85,000 crore is envisaged over the next
quinquennium. With the opening up of the sector to foreign investment, the
focus seems to have shifted to attracting sizeable external funds for
financing such projects. While it is no doubt important to attract as much
foreign investment as possible, for which there is a good scope, there is a
need to pay attention to resources required to be raised domestically, as
bulk of the required funds flow into infrastructure has to be sourced
domestically and for this Government is obliged to give necessary filip to
the Capital Markets.
It is heartening to note that the infrastructure sector has received due
attention in the recent Budget and a series of measures have been announced
by the Honourable Finance Minister for its development. The definitional
ambit of infrastructure for the purpose of five year tax holiday under Sec
80IA has been widened to include irrigation, water supply, sanitation and
sewerage systems. With a view to improving the retail-level attractiveness
of investing in infrastructure projects, all income from such investments
has been exempted from tax. Infrastructure projects have themselves
benefited by way of exclusion from payment of Minimum Alternative Tax. An
adequately capitalised specialised financial institution for providing
financial and other assistance to long-gestative projects in select
infrastructure sector constituents is proposed to be set up. It is hoped
that the new organisation will bring additional resources to the sector and
will not duplicate the efforts of existing DFIs in this regard. Finally,
the option given to FIIs to invest in unlisted companies will go a long way
towards providing the much-needed start-up funds for greenfield
infrastructure projects which take time to get listed. Overall, the
pronounced policy thrust in favour of infrastructure in the Budget augurs
well for this crucial sector.
vi. DEVELOPMENT OF LONG TERM DEBT MARKET
In this context, I strongly urge that there is considerable urgency to
activate long term debt market in the country to enable the corporate
sector as well as FIs to raise long term funds. Creating an active market
for debt instruments is a must for sustaining the interest of investors in
such instruments in the long run. Some efforts in this direction have
recently been made, like introduction of primary dealers in Government
securities and setting up of Securities Trading Corporation by RBI.
However, for a vibrant debt market the participation base has to be
considerably widend and adequate funding arrangements for dealers need to
be ensured. In all mature markets, bulk of long term funds is provided by
Insurance Funds, Provident Funds, Superannuation Funds and Gratuity Funds.
In our country, because of statutory restrictions, participation of these
funds in the long term bond markets is not very significant. There is a
need to relax these restrictions which could give the bond market the
[D] CONCLUDING OBSERVATIONS
To conclude, I have no hesitation in saying that the prospects for future
growth of your Company's operations are quite bright. We are fully alive to
the fundamental changes that are taking place in our operating environment.
We have kept ourselves fine-tuned to environmental changes alongwith
emergence of increasingly sophisticated client needs, even as our services
are getting diversled. Simultaneously, the Company would actively address
its secular agenda of expanding its client base and developing new and
With the buoyancy in the economy which is poised for a rapid growth in the
years to come, according to me, the prospects for Non-Banking Financial
Companies in the light of measures taken by R.B.I for liberalisation and
deregulation are extremely bright and the prospects of your Company are
brighter still. Our faith in the shape of things to come is reflected in
the diversification programme undertaken by the Company as stated earlier.
In these exciting times, staying focused on our business and building on
our credentials and capabilities is, I believe, the surest route towards
enhancing the shareholders value.
I gratefully acknowledge the advice and guidance given by the honourable
members of the Board. Your Company primarily derives its competitive edge
from the professional approach of its staff and their unfailing dedication
to the objectives of our Company. Their hard work and commitment merit
sincere appreciation. Finally, I must place on record our deep sense of
gratitude for the faith and trust reposed by our shareholders in the
management of your Company. With your sustained support and encouragement,
we are confident that your Company would continue to achieve new milestones
of progress in the years ahead.
I. C. Jain
Place : Mumbai,
Dated : 26th September, 1996.