NAGARJUNA FINANCE LIMITED
Ladies & Gentlemen,
It is my pleasure to welcome you all to this Twelfth Annual General Meeting
of your Company.
Past Year's Performance
The year in retrospect was one of considerable achievement, in the fast
changing environment characterised by continued deregulation, intense
competition, credit stringency and depressed stock markets. We initiated a
shift in our business culture to respond to changing customer needs. This
is reflected in accelerated growth in most business segments.
By far, the most remarkable performance has been in deposit mobilisation.
The continued thrust on mobilisation pushed the deposit base at the end of
the year to Rs. 161 crores, placing us amongst the top few Financial
Services Companies in India. The accretion of 284% in deposits in just one
year provides a sound base in the changed money market scenario, marked by
dearer and restricted credit availability from banks/institutions to Non-
Banking Finance Companies (NBFCs).
Disbursements under Lease and Hire Purchase portfolio recorded an increase
of 160% at Rs. 110 crores from Rs. 42 crores last year. The growth in this
segment was complemented by a renewed emphasis on building up a quality
portfolio and establishing effective risk assessment systems indicative of
the need to maintain receivables at a low level. Bills Discounting business
was further activised, paving the way for an increased presence in this
Investment Banking, was given the much needed push. Issue Management
assignments raising aggregate funds of Rs. 33 crores were handled during
the year besides extending underwriting support to 86 floatations for Rs.
17 crores, against which there was no devolvepment. The marked shift in the
division's current focus is on "Bought Outs". Several placements were made
on syndicated basis establishing in the process our capability in wholesale
marketing of issues as well. In the years ahead, our emphasis will be on
value added advisory services.
Funds handled during the year increased two fold at Rs. 304 crores, despite
reduced support from institutions. Gross Income, spurred by increased
business volumes, grew sharply by 77% at Rs. 64.24 crores. Net Profit after
tax and adjustments at Rs. 9.69 crores rose by 55% after making
substantially larger provision for depreciation of Rs. 11.11 crores as
against Rs. 6.41 cores.
Dividend payout has been retained at 30%. However, Members will be pleased
to know that earnings per share has risen to Rs. 7.40 from Rs. 5.50 a year
ago. Our Net Worth, which signifies leverage opportunities on borrowings,
stood enhanced at the close of the year to over Rs. 50 crores, on account
of additional inflows of Rs. 14.46 crores.
There has been a delay in launching the Mutual Fund, but for the right
reasons. Investor sentiment for the Industry has been relatively poor for a
major part of the year borne by the adverse stock market conditions and the
lacklustre performance of most existing private sector funds. We rightly
believe that proper investor education accompanied by improved market
conditions will bring about a shift in the investor perception, renewing
prospects for this scheme.
Consistent with our objective of tapping emerging business opportunities,
Nagarjuna Securities Limited, our stockbroking subsidiary, has been
enlisted as a member of the National Stock Exchange and the Hyderabad Stock
Exchange. Membership on the Bangalore Stock Exchange and the OTCEI will
follow during the current year. The broking subsidiary is committed to
provide value added services, in the form of institutional placements,
advisory services on portfolio selection and market making. With current
capital market regulations, permitting issuers of corporate paper below Rs.
5 crores to go the OTCEI route, business opportunities for the subsidiary
I am pleased to inform you that the aqua farm at Nellore has been
commissioned. The business is currently going through a period of
uncertainty consequent to the severe disease that affected large areas in
the eastern coast of India in November 1994. The large losses incurred by
aqua farms in the region and the seventy of disease necessitated a `crop
holiday' between November and May of this year as directed by the Marine
Product Exports Development Authority (MPEDA). Extensive studies have been
made on the cause of the disease and numerous guidelines issued by MPEDA
and other agencies on the proper management of the farms. Whilst the
disease cannot be fully eliminated, adherence to scientific systems would
certainly help minimise such extensive recurrence.
Our farm was still under construction and we were, hence, not affected by
the disease. Having collaborated with the largest producer of shrimps in
the world and with state-of-the-art technology, we have adopted the best
practices from the very start. However, the long term viability of the
business and the control of disease depends on the active cooperation of
all farmers in the region.
The lack of any major outbreak in the current year is an indication of the
changed outlook of farming.
In the current year, we expect to harvest our first crop and if the weather
permits, we may start the second crop as well towards the beginning of
Financial Services are here to stay. It may be pertinent to note that this
sector has been able to contribute to the country's GDP at a much faster
pace than the other constituents. The ability to being about innovative
solutions in meeting the resource needs of the corporate sector has been
the mainstay of NBFCs in an ever shifting environment which has phased out
entry barriers in erstwhile mutually exclusive areas of banking and
The renewed constraints placed on NBFCs through credit regulations by the
apex bank, have only helped in making resources dearer. The depressed
conditions in the stock market do not augur well for investment banking and
capital market operations. With ample opportunities come fierce competition
and it is only by improved and responsive customised financial services can
the need of the hour be met.
The inevitable realities of the emerging business climate has spurred us to
chalk out long term growth plans. It has become most imperative to augment
our capital base. Hence we propose to issue Preference Shares; Rs. 25
crores with conversion rights and Rs. 10 crores on a redeemable basis,
aimed at improving capital adequacy without diluting the earnings per share
on the common stock. This alone can help us mobilise additional resources
by way of loans and deposits.
In summary, the outlook for the rest of this year and the early part of the
next seems to be one of guarded optimism. Your sustained backing, immense
trust reposed by the depositors, patronage from the growing clientele,
combined with the cooperation from the committed team of professionals,
gives us ample confidence of improving this year's performance.
My colleagues on the Board join me in thanking all the investors, bankers,
institutions and fixed deposit holders for being so supportive. Our
Management team, led by our very energetic and dedicated Managing Director,
deserve our warm appreciation for their great contribution to our sustained
growth. I am also beholden to my colleagues on the Board for their
Minoo R. Shroff
Date : 29th September, 1995
This does not purport to be a record of the proceedings of the Twelfth
Annual General Meeting of the Company held on Friday, 29th September, 1995.