Last Financial Year 2016-17 was another challenging year for the Indian economy as theslowdown continued. From a macro perspective the year that went by was hardly encouragingfor the global as well as Indian economy. Across the spectrum growth was subdued riskswere on the ascent and recovery was too slow for comfort. Our growth plummeted andreported a decline in shares revenue and profitability. Overall the outlook did not lookpromising.
The key reasons for the economic fragility are the poor performance of the EmergingMarket Economies growing inflation and various other fiscal tightening measures. Theforecast for the year 2017-18 does not inspire much confidence in the light of certainstructural weaknesses continuing to haunt the global and national economy.
Ever since the onset of FY 2016-17 your Company has been facing an uncomfortablefinancial position business uncertainty in many of our markets and geographies andsevere challenges threatening our future economic and financial performance. Furthersince a major chunk of clientele of your company is operating in the Real Estate sector assuppliers of building material in particular Cement Iron & Steel TMT Bars and othersimilar products of use in civil construction activity etc. the liquidity position of allthe players was under immense pressure.
The business operations during the period after the pan-India strike by jewellersagainst the order of the Central Govt. pronouncing levy of 1% Excise Duty was called offwere severely impacted due to an overall disruption of cash flows and continued to strainthe liquidity position of all the players in the domestic market. Besides the persistingslowdown in the real estate sector further disrupted the cash flows of builders /developers and the traders dealing in the bulk supply of building material alike.
Both these segments largely representing financing activity of your company were themajor contributors to weak financial performance. Moreover the demonetization abruptlyannounced by the Central Govt. further put a dent on the liquidity available with thepublic at large and your company was no exception. Your company caters to self employedsegment SMEs and other small businesses which transact primarily in cash. Under theimpact of demonetisation this business segment had disruption in its collection cyclesdue to inordinate delays in payment due to difficulties experienced by their customers inconverting their holding within the stipulated timeframe. Over the medium term the demandfor the real estate sector where cash component as a proportion of transaction issignificant could not continue to reel under the influence of overall slowdown and thetrickle-down effect could adversely impact NBFCs and housing financiers.
It was under the impact of disrupted cash flows that your company failed to honour itsterm commitments including servicing of interest at monthly intervals to its lending Banksand the account with all the Banks was classified as NPA.
On behalf of the management my role is to describe those challenges and difficultiesto you and to the investment community with the utmost clarity and transparency. Howeverwe wish to convey with same clarity and conviction that we were confident and certainabout the path we had to follow for the company to overcome those many challenges andbring your Company out of distress.
Backed by the present conditions in the economy the Budget 2017-18 proposed a slew ofmeasures to boost infrastructure and investment which should be positive for the cementsector as increased spending on infrastructure would enhance the demand for cement.Incremental spend on smart city development the funds allocated by Government towardsUrban Rejuvenation Mission and Mission for Development of 100 Smart Cities should alsoincrease investment opportunities.
Also with the launch of "Housing for all by 2022" scheme by Hon'ble PrimeMinister which provides for affordable housing to 2 Crore urban poor will generate jobsand increase demand for raw materials used in construction providing a major fillip toeconomy and especially to cement and steel sectors. This in turn will help in increasingvolumes of our Company's business as there would be huge scope of financing.
With the passage of Goods and Services Tax (GST) Bill by the Central Govt. and itsimplementation nation-wide the prospects of investment infrastructure developmentcapital goods and Cement sector are considered bright through the process of rationalisingand simplification of the tax structure and defining clear norms that would streamline allrelated processes. When it comes to alleviating pain points GST will be a great ally asit will enhance liquidity and productivity of our customers as GST implementation willgive boost to real estate sector and other sectors and would stop the practice of doubletaxation. Alongside our NPA of banks will be decreased as customer's income and revenuewill increase and they will be in position of paying instalments timely.
As a caring corporate citizen your Company actively contributes to social and economicdevelopment in the communities in which it operates. The major areas of focus areeducation healthcare sustainable livelihood and infrastructure development.
The main challenge is to oppose and reverse the trend towards a worsening financialposition of the company. However we are sanguine that with the slew of measures proposedto be adopted by the management to negotiate with customers/borrowers by offering themoptions including but not limited to restructuring the accounts of company's clients Onetime Settlement (OTS) etc. the position would be revived in the current fiscal 2017-18.Simultaneously in case the stalemate continues the management of your company will notshy away from resorting to initiation of recovery proceedings through legal action for anexpeditious resolution.
Before I conclude I on behalf of the Board of Directors convey my deepest sense ofgratitude to all our stakeholders and business associates for their valuable contribution.I also thank our employees for nurturing the values we espouse and for their unflinchingefforts towards building this institution. The commitment of all of our employees to thegrowth of your Company is invaluable. Finally I thank each one of you and all of ourother shareholders across the country for backing us always and reposing faith in us.
I take this opportunity to thank my colleagues on the Board. I thank you for reposingtrust in us.
Managing Director & CEO