SHAKTI FINANCE LIMITED
Ladies and Gentlemen,
It gives me great pleasure to welcome you all to the 38th Annual General
Meeting of the members of the Company. The Directors' Report and the audited
accounts of the Company for the financial year ended 31st March, 1994 have
been with you for some time and with your permission, I shall take them as
FAVOURABLE DEVELOPMENTS IN INDIAN ECONOMY
The achievements of Sri P.V. Narasimha Rao's Govemment after it had assumed
office in June 1991 has been outstanding in many respects. Due to the impact
of the liberalisation measures adopted by the Central Govemment consistently,
the economy is entering a new phase of growth.
In 1993-94 the balance of payments position was completely under control with
a reduction in the trade deficit to a meagre amount of $1.03 billion from
$3.31 billion in 1992-93. Exports were higher by 20.3 per cent while imports
have increased by only 3.3 per cent in spite of the liberalisation of import
controls and adequate availability of foreign exchange with full
convertibility of the nupee on current account. It is expected that the
uptrend in foreign exchange reserves will remain evident and the $20 billion
mark may be touched before long.
With agricultural output recording a net rise in the aggregate and an
improvement in industrial production in the later half of 1993-94, the Gross
Domestic Product is estimated to have grown around 4 per cent.
The efforts of the Government in curtailing inflation rate may prove
successful in the coming months as the monsoon is behaving satisfactorily for
the seventh season in succession. In fact there has been a heavy and even
abnormal rainfall in some regions. It is hoped that agricultural production
will again be at high levels.
The uptrend in industrial production will be more pronounced in 1994-95 and
the Gross Domestic Product may rise to over S per cent with industrial
production also increasing by over 6 percent.
THE AUTOMOBILE INDUSTRY
The Indian automobile industry, which was affected by demand recession, began
to experience a strong revival in-1993 94. The demand for Commercial Vehicles
increased from the middle of 1993-94 and the major manufacturers were able to
respond effectively to meet the renewed market demand by increasing their
production in the second half of the year.
With the liberalisation of the economy leading to increase in industrial
activity coupled with increase in production of agricultural commodities and
the growing prosperity of large consumer segment, the demand for commercial vehicles and passenger cars is expected to increase. Almost all the passenger
car manufacturers in the country are planning to introduce new models
However the road network is the only factor setting the limits for the growth
of commercial vehicle industry. A study by Asian Development Bank has
recommended constnuction of about 10000 k.m. of express ways before the year
2015 at an estimated cost of Rs.30900 crores. For development of existing
high ways, an additional investment of Rs.27000 crores is estimated making a
total of Rs.57900 crores. Therefore the Govemment should consider enhancing
the investments in roads which will promote wider economic development.
EXCELLENT PERFORMANCE IN 1993-94
The performance of your company in 1993-94 was excellent as greater emphasis
was laid on the transaction of hire purchase business with the conclusion of
lease contracts only to the extent necessary. As explamea earller, tnere was
also a revivals activity in the automoDne moustry m an lts segments m tne
later nau of the accounting period and as adequate resources were available
to the Company with the equity base getting enlarged on account of Issue of
equlty shares on a rignt basis, the dlsbursements m mre purcnase Dusme$ coula
De steppea up snarply to Rs.68 crores from Rs.34 crores in 1992-93, recording
a growthof 100%. The stock on hire has thus risen by 48% to Rs.121.62 crores
from Rs.81.66 crores in 1992-93
With an increase in advances in all directions, the gross income has improved
to Rs.37.23 crores from Rs.30.14 crores and the net profit after depreciation
to Rs.4.00 crores from Rs.3.01 crores previously, there being no liability
for taxation The dividend has been maintained at 25 percent, taxable even on
the enlarged On capital after rights issue. A larger outlay of Rs 1 40 crores
(Rs 0 77 crores) is therefore required. The new shares are eligible for a
proportionate dividend. The balance has been appropriated for strengthening
It is proposed to keep up the growth rate during the current year, closer to
that of the last hnancial year by disbursing around Rs. 125 crores. I am
pleased to inform you that against the said objective, around Rs.30 crores
have already been deployed in the first four months registering a growth rate
of 103 per cent as compared to corresponding period last year These higher
disbursements will lead to larger unmatured finance charges and thus the
future prospects of the company is bright.
The scope for increasing advances is substantial as there has been an
increase in output of commercial vehicles and passenger cars. The branch
expansion programme envisaged in neighbouring states like Andhra Pradesh and
Kamataka will also enable the Company to increase the deployment. The
emphasis will be mainly on hire purchase finance for commercial vehicles and
passenger cars. The outlook for 1994-95 and the coming years will therefore
be promising especially as it is also being explored how activities can be
diversified in new directions.
PRUDENTIAL NORMS FOR NON-BANKING FINANCE COMPANIES
Based on the recommendations of the Dr A C Shah Committee Reserve Bank of India has announced the guidelines for prudential norms for income
recognition, accounting standards, provisioning for bad debts, etc. Your
Board of Directors have already taken steps to comply with these guidelines.
The method of providing depreciation on leased assets have already been
changed to conform to the norms of The Institute of Chartered Accountants of
This segment of the financial services sector has indeed a bright future. The
pace of development in the coming years will thus be much faster than in
recent years I am sure your Company will also participate fully in the new
phase of growth of the industry as always and reach new heights in the
On behalf of the Board of Directors, I wish to convey my sincere thanks to
the shareholders, customers, hankers, depositors and employees of the
I pray the Goddess "SAKTHI" to shower her blessings and continue to guide us
in all our endeavours.
NOTE This does nor purport to be the proeeedings of the Annual General
Meeting of the Company.
DR N CMHAIHMAALNINGAM
COIMBATORE - 641018.
1st September, 199444