FSCL-Company analysis/Industry analysis Report

Name of the company:

Cholamandalam finance ltd
SUBMITTED TO
INDIRA INSTITUTE OF MANAGEMENT, PUNE
POST GRADUATION DIPLOMA IN MANAGEMENT
BY

Shubham Tammiwar
(PGDM BATCH 2018-2020)

UNDER THE GUIDANCE OF

Dr. Neetal Vyas

INDIRA INSTITUTE OF MANAGEMENT PUNE

(TAPASYA, PUNE-411033)
 INDEX

PAGE
Sr. No PARTICULARS NO.
1
Introduction of the company

2 Board of the directors

3 Products/Services offered by the company

4 Business model of the company

5
Marketing mix

6 Major achievements

7
Corporate governance activities

8 Management outlook of the company

9
SWOT Analysis of company

10 CAGR growth rate for net sales & net profit of the company
for last 3 years
11 Financial statement analysis of the company using ratio for
last 3 years
12
Market capitalization of the company for last 3 years

13
Analysis of capital structure of the company

14
Market price analysis of the company for last 3 years
 15
Introduction to the outlook of Industry

16 Contribution of Industry towards India’s GDP, Employment

etc
17
Major players in the Industry

18
PESTL Analysis of Industry

LIST OF TABLE

Sr No Table no Page No

LIST OF FIGURE

Sr No Figure no Page No
VISION & MISSION
Vision
Enable Customers to Enter a Better Life.
Mission
Customer first:
Switch from product focused to customer focused

Improving Efficiencies:
Long term Customer focus requires profitability and sustainability

People Power:
People are our Primary Asset. Happier people = Happier Customers

ABOUT COMPANY
About Cholamandalam Investment and Finance Company Limited (Chola)
Cholamandalam Investment and Finance Company Limited (Chola), incorporated in 1978 as
the financial services arm of the Murugappa Group. Chola commenced business as an
equipment financing company and has today emerged as a comprehensive financial services
provider offering vehicle finance, home loans, home equity loans, SME loans, investment
advisory services, stock broking and a variety of other financial services to customers.
Chola operates from 885 branches across India with assets under management above INR
47,700 Crores. The subsidiaries of Chola are Cholamandalam Securities Limited
(CSEC) and Cholamandalam Home Finance Limited (CHFL).
The vision of Chola is to enable customers enter a better life. Chola has a growing clientele of
over 8 lakh happy customers across the nation. Ever since its inception and all through its
growth, the company has kept a clear sight of its values. The basic tenet of these values is a
strict adherence to ethics and a responsibility to all those who come within its corporate ambit
- customers, shareholders, employees

Cholamandalam Investment and Finance Company, earlier known as Cholamandalam DBS

Finance Limited was incorporated in 1978 as Cholamandalam Investment & Finance Company
Limited (CIFCL). The company began operations as a Non Banking Finance Company
(NBFC) offering equipment finance to small and medium sized companies in South India.
Today, Cholamandalam DBS Finance Limited is a joint venture between Murugappa Group
and DBS Bank of Singapore and is one of India's largest domestically owned NBFCs. CDFL
offers Personal Loans, Vehicle Finance, Corporate Finance, Capital Market Finance and Home
Equity Loans. In 2010 the name of the Company has been changed from "M/s. Cholamandalam
DBS Finance Ltd" to "M/s. Cholamandalam Investment and Finance Company Ltd".

CDFL offers finance for a wide range of vehicles -- HCVs, LCVs, cars, MUVs and cargo three-
wheelers. CDFL also caters to the needs of Corporate and retail consumers through its Retail
and Corporate Finance wings. The company operates from over 160 locations. The company
has built up a portfolio of high quality. The company has an unbroken track record of dividend
payment for over 25 years. Following its partnership with DBS Bank, CDFL offers consumer
finance in the Indian market.
The Murugappa group has set up Cholamandalam DBS Finance Limited (CDFL). Incorporated
as Cholamandalam Investment and Finance Company Ltd (CIFCL) in 1978 with the primary
objective of offering asset finance through leasing and hire purchase to corporates and then to
retail customers. It has since evolved itself into a large, composite financial services
organization. Today, Cholamandalam DBS offers stock broking, mutual fund and investment
advisory services through its subsidiaries. The shares of CDFL are listed in the Mumbai (BSE)
and National (NSE) Stock Exchanges.

The company offers a complete range of financial services. It is one of India’s largest
domestically owned NBFCs with a gross asset base (including securitised assets) of over Rs
4490 crore. CDFL is a leading player in automobile finance covering a wide range of vehicles
such as heavy and light trucks, cargo three-wheelers and multi-utility vehicles. The company
has presence in over 160 locations across India.

CDFL has evolved with time and built a portfolio of high quality. The company has maintained
an unbroken track record of dividend payment for over 26 years. Following its partnership with
DBS Bank, CDFL has introduced consumer finance into the Indian market. To sustain and
enhance the high quality CDFL service experience of customers, the company is also working
hard on its infrastructure and service capabilities — technology initiatives that will provide
seamless transaction delivery across India and establishing call centres to provide more
efficient customer service delivery besides supporting and boosting cross-sell and collection
mechanism are in the pipeline.

Products and services:

Since its incorporation in 1978 as Cholamandalam Investment & Finance Company Limited
(CIFCL), a NBFC, the company has successfully branched into valuable services in the
competitive scenario such as:

Commercial vehicle finance focusing on high yield segments with diversified customer base
and exploring new segments like three-wheelers and used vehicles
Corporate finance sector servicing business needs of corporates, currently intending to extend
its services to small and medium enterprises (SMEs) in key markets
Personal loans & home equity loans business currently poised to expand nationally through a
delivery support channel across the country
Its subsidiaries and associates include:

DBS Cholamandalam Distribution Limited- Formerly called Cholamandalam AMC Ltd,

DCAM is the asset management company and the investment manager of DBS Chola Mutual
Fund, which offers mutual funds to retail and institutional investors. Established in 1996, the
company manages funds in excess of Rs 2,761 crore across 17 schemes with more than 200,000
customers. DCAM is present in over 22 locations and has a strong distribution network in
place.

DBS Cholamandalam Asset Management Company Limited- Formerly called Cholamandalam

Distribution Services Ltd, the company is in the business of distribution of a wide array of
financial services products -both in-house and third party-to high-net worth and retail clients.
Products offered include mutual funds; fixed income, share trading and savings instruments;
capital bonds; IT / PAN processing services; equity IPOs and life and general insurance. The
company combines its reach in over 27 cities with the richness of its investment advisory
services.

DBS Cholamandalam Securities Limited- Cholamandalam Securities Limited (C-Sec) is a

securities brokerage firm offering stock broking and equity research services to institutional
investors, including many of the largest mutual funds in India, and to select individual clients.
DCSec is a member of the Stock Exchange, Mumbai (BSE) and the National Stock Exchange
(NSE). It is also a depository participant with NSDL.

BOARD OF DIRECTORS

1) Ms. Bharati Rao 4) Mr. M M Murugappan

Independent Director Chairman & Non-executive director

2) Mr. N .Ramesh Rajan 5) Mr. Arun Alagappan

Independent Director Executive Director

3) Mr. Ashok Kumar Barat 6) Mr. V Srinivasa Rangan

Independent Director Independent Director

Business Model & Positioning:
1) Vehicle Finance:

* Quicker Turn Around Time (TAT)

* Reputation as a long term and stable player in the market

* Strong dealer and manufacturer relationships

* Good penetration in Tier II and Tier III towns

* In-house highly experienced sales and collections team

* Low employee turnover

* Good internal control processes

* Customised products offered for target customers

* Strong collections management

2) Housing Finance:

* Process Differentiator

1) One of the best turnaround times in the industry

2) Personalised service to customers through direct interaction with each customer

*Pricing:

1)Fee Income adequate to cover origination & credit cost

2) Leverage cross sell opportunities for additional income

3) Effective cost management

*Underwriting Strategy:

1) Personal visit by credit manager

2) Assess both collateral and repayment capacity to ensure credit quality

*Structure:

1) Separate verticals for sales, credit & collections to drive focus

2) Convergence of verticals at senior levels

Major Achievements:
 Achieved whopping 40% net profit growth in Q4 in 2016
 Gross NPA ratio has come down from 4.3 per cent in the December 2015 quarter to 3.5
per cent in March 2016.
 Chola recognised as one of top 26 innovative organizations of India
 National award for excellence in CSR
 Listed in the ASSOCHAM 9th Global and CSR Sustainability Compendium-16-17
 Assets under management grew 32 per cent at ₹52,868 crore
 company ended the December 2018 quarter with GNPA (gross NPA) of 2.7 per cent,
down from 2.8 per cent in Q2 and 3.7 per cent in Q3 of this fiscal. Net NPA stood at
1.5 per cent (1.6 per cent in Q2 of this fiscal and 2.3 per cent in the year-ago quarter).
 In vehicle finance business, disbursements grew 11 per cent at ₹6,240 crores (₹5,607
crore).
 CIFCL has posted a 39 per cent growth in its net profit at ₹304 crores for the quarter
ended December 31, 2018 when compared with ₹219 crore in a year-ago period, helped
by growth in revenues.
Corporate governance activities:
Corporate governance is about commitment to values and ethical business conduct. It is also
about how an organisation is managed viz., its corporate and business structure, its culture,
policies and the manner in which it deals with various stakeholders. Timely and accurate
disclosure of information regarding the financial position of the company, its performance and
ownership forms part of the corporate governance.

CORPORATE GOVERNANCE PHILOSOPHY

The company is committed to the highest standards of corporate governance in all its activities
and processes. The company has always believed in and practices the highest standards of
corporate governance. The board recognises that governance expectations are constantly
evolving and is committed to keeping standards of transparency and dissemination of
information under continuous review to meet both letter and spirit of the law and its own
demanding levels of business ethics. The company believes that sound corporate governance
practices are crucial to the smooth and efficient operation of a company and its ability to attract
investment, protect the rights of its stakeholders and provide shareholder value. Everything the
company does is defined and conditioned by the high standards of governance, which serve its
values. The company firmly believes in and follows the below principle:

“The fundamental principle of economic activity is that no man you transact with will lose;
then you shall not.”

The corporate governance philosophy of the company is driven by the following fundamental
principles:

*Adhere to corporate governance standards beyond the letter of law

* Maintain transparency and high degree of disclosure levels

* Maintain a clear distinction between the personal interest and the corporate interest

* Have a transparent corporate structure driven by business needs; and

* Ensure compliance with applicable laws.

BOARD OF DIRECTORS:

The corporate governance practices of the company ensure that the board of directors (the
board) remains informed, independent and involved in the company and that there are ongoing
efforts towards better governance to mitigate “non-business” risks. The board is fully aware of
its fiduciary responsibilities and recognises its responsibilities to shareholders and other
stakeholders to uphold the highest standards in all matters concerning the company and has
empowered responsible persons to implement its broad policies and guidelines and has set up
adequate review processes. The board is committed to representing the long-term interests of
the stakeholders and in providing effective governance over the company’s affairs and exercise
reasonable business judgment on the affairs of the company. The company’s day to day affairs
are managed by the managing director and CEO, assisted by a competent management team,
under the overall supervision of the board. The company has in place an appropriate risk
management system covering various risks that the company is exposed to, including fraud
risks, which are discussed and reviewed by the audit committee and the board every quarter.
The company’s commitment to ethical and lawful business conduct is a fundamental shared
value of the board, the senior management and all employees of the company. Consistent with
its values and beliefs, the company has formulated a Code of Conduct applicable to the board
and senior management. Further, the company has also adopted a Code of Conduct to regulate,
monitor and report trading by insiders in the securities of the company and a whistle blower
policy for reporting any concerns or grievances by directors / employees / customers and
vendors in their dealings with the company. In order to ensure that the whistle blower
mechanism is effective and as prescribed, direct access to the chairman of the audit committee
is provided to the complainant.

Management Outlook:

While the momentum in the growth of commercial / passenger vehicles and tractors have
continued in Q1 of FY 18-19, there are external risks, clouding the overall economic scenario.
Higher oil prices, higher trade/ current account deficit, weakening Rupee, all have an impact
on the macro economy. RBI has already effected a rate hike of 0.25 bps in the recent policy
and the market interest rates are hardening. Despite this, FY 2018-19 promises to be a better
year for the rural economy. Prediction of a normal monsoon, good agricultural output,
implementation of minimum support price (MSP) of the Government, are expected to boost
the farmers’ income. Implementation of various infra projects and the continued growth of the
road sector will further augment rural income and create a demand for motor vehicles.

The company is confident of maintaining its growth in the vehicle financing business. The
home equity business is expected to return to normal growth in FY 18-19 by spreading its
wings in 60 more locations. We will also resolve and bring down the non-performing assets of
this business through a set of specific action plans. The Government’s emphasis on housing for
all, benefits announced for smaller units and credit linked subsidy scheme to end users is giving
a big impetus to the growth of affordable housing segment. We are targeting to grow
significantly in this segment. The Board has approved setting up of an independent housing
finance company (HFC) considering the opportunity in the home loans segment and the home
loans business will be scaled up in the new HFC, which will be a wholly owned subsidiary of
this company. company is a large player in the Vehicle Financing space; with 870 branches
located pan India and a strong relationship with all OEMs in the country. company continue to
make significant investments in people, technology and analytics capabilities, to redefine the
business model, aiming superior processes and decision making. These are expected to position
the company to grow non-linear, handling higher volume with efficiency and better
profitability.

SWOT Analysis:

Strength:

Easy & fast appraisal & disbursements

Product innovation & superior delivery

Strong market penetration & increased operating efficiency

Collection efficiency

Weakness:

Too much of diversification from core business

Increased regulatory coverage

Volatile business environment

Opportunities:

Large untapped market, both rural & urban & also geographically

Tie-up with global financial sector giants

New opportunities in Personal finance, home equity, etc

Threats:

High cost of funds

Growing retail thrust within banks & competition from unorganized money lenders

Detrioration of asset quality & rising levels of NPA’s

Quantitative Factors:

CAGR growth for net sales & net profit for last 3 years:

Year Net Sales Net Profit

2016 4193.71 568.45

2017 4660.35 718.74

2018 5425.77 974.12

CAGR 13.74% 30.9%

 6000

5000

4000

3000

2000

1000

0
2016 2017 2018

net sales net profit

*Over the course of 2 years/months net profit grew from 568.54 to 974.12. Its compound
annual growth rate (CAGR) is 30.9 %.

*Over the course of 2 years/months net sales grew from 4193.71 to 5425.77. Its compound
annual growth rate (CAGR) is 13.74 %.
Liquidity Ratios:

Current Ratio:

Years Current Assets Current liabilities Current Ratio

(in crores) (in crores)
8,727.48 12,721.38 0.69
2016
9,364.47 4,687.34 2.00
2017
12,070.15 5,349.15 2.26
2018

Current Ratio = Current Assets / Current Liabilities

current ratio
2.5

1.5

0.5

0
2016 2017 2018

current ratio
Profitability Position:

Net Profit Margin:

Years Net Profit Revenue Net Profit Margin

(in crores) (in crores) %

568.45 4,193.71 13.55

2016
718.74 4,660.35 15.42
2017
974.12 5,425.77 17.95
2018

Net Profit Margin % = (Net Profit/Revenue)×100

 net profit margin
20
18
16
14
12
10
8
6
4
2
0
2016 2017 2018

net profit margin

Return on Assets:

Years Net Profit Margin Total Asset Return on Assets %

% Turnover
13.55 15.03 2.03
2016
15.42 15.22 2.34
2017
17.95 13.73 2.46
2018

Return On Assets % = (Net Profit Margin × Total Assets Turnover)/100

 return on assets%
3

2.5

1.5

0.5

0
2016 2017 2018

return on assets%
Solvency Position:

Total Debt/Equity Ratio:

Year Long term Short term Total Debt/Equity

borrowings borrowings shareholders
(in crores) (in crores) funds
(in crores)
10,934.73 11,641.49 3,657.38 6.17
2016
20,840.14 3,268.96 4,284.74 5.63
2017
28,219.90 3,682.37 5,150.22 6.19
2018

Total Debt/Equity Ratio = (Long term borrowings + Short term borrowings)/Total

Shareholders funds

debt/equity
6.3
6.2
6.1
6
5.9
5.8
5.7
5.6
5.5
5.4
5.3
2016 2017 2018

debt/equity
Turnover Position:
Total Assets Turnover Ratio:

Year Total Revenue Total Assets Assets Turnover

(in crores) (in crores) Ratio %

4,193.71 27,888.31 15.03

2016
4,660.35 30,594.80 15.22
2017
5,425.77 39,504.57 13.73
2018

Total Assets Turnover Ratio % = (Total Revenue/Total Assets) × 100

Assets Turnover Ratio %

15.5

15

14.5

14

13.5

13

12.5
2016 2017 2018

Assets Turnover Ratio %

Miscellaneous:
P/E Ratio:

Year Market price of EPS P/E Ratio

equity share(cr)
633.03 37.46 16.89
2015-2016
992.67 45.99 21.58
2016-2017
1199.83 62.26 19.27
2017-2018

P/E Ratio = Market price of equity share(cr)/EPS

Dividend Payout Ratio:

Year EPS (diluted) Dividend per Share Dividend Payout

Ratio %

37.46 4.50 12.35

2016
45.99 5.50 7.60
2017
62.26 6.50 10.42
2018

Dividend Per Share % = (Dividend Per Share/EPS (diluted)) × 100

 Dividend Payout Ratio %
14

12

10

0
2016 2017 2018

Dividend Payout Ratio %

Capital Structure (Cholamandalam Investment and Finance Company)

Period Instrument Authorized Issued Capital -PAIDUP-

Capital
From To (Rs. cr) (Rs. cr) Shares (nos) Face Value Capital
2017 2018 Equity Share 240 156.47 156331371 10 156.33

2016 2017 Equity Share 240 156.41 156277533 10 156.28

2015 2016 Equity Share 240 156.28 156145644 10 156.15
Industry Analysis:

1) Outlook Of Industry:

For a country like India which is diverse and vast, the financial sector is the fuel of the
economy, and NBFC’s are crucial links of the economy delivering a different set of
services such as lending, Investment banking, and capital market operations. Non-
banking financial Company is a company registered under the companies act 2013 1st
1956. These type of company mostly engaged in the business of lending, chit business,
insurance business, and acquisition of stocks, debentures, and securities.

Non-Banking companies have expansive reach as compared to the banking system of

our economy; this why NBFC’s in Indian financial sector provide credit facility for
small needs of the unbanked and rural sector of the economy. Many government-backed
schemes have made it possible for most of the Indian population to have their own bank
account, but the still certain population of India do not use banking facility. To increase
this number, the government has asked 21 other companies to establish a special system
to further and strengthen the financial sector of the economy.

Future Expansion Of NBFC in India:

Indian banking sector has been facing a lot of trouble over the past few years due to the
burden of Non-Paying accounts. This scenario has opened up a new perspective for the
Non-Banking Financial Companies (NBFCs). NBFC have a greater important role now
as the banking system has constricted themselves and are not expanding their lending
activities.

The government has a strong focus on promoting entrepreneurship, and therefore they
can help the NBFC sector in the Indian economy to realize their full potential and attain
greater efficiency while performing the duties.

NBFC have emerged a cut above other financial institution as the largest receiver of
funds; this is supported by the financial stability report, and 2015. The increasing
growth in the NBFC’s has forced RBI to introduce additional safeguards to contain the
systemic risks. Unlike the other players in the banking and financial segment, NBFCs
grew by 15.5 percent in Financial Year (FY) 2016-17 as against 9.1 percent growth in
Financial Year 2015-16.

The growth of NBFC faced many problems seeing that they were considered a systemic
risk to the financial sector of the Indian economy. NBFC now have a large presence in
the retail lending sector the estimated account for automobile loan is 44%and 52%for a
loan provided against the private sector

NBFC in India have a ground-level understanding of their customers and their credit
scores this provides them with an edge over their counterparts in the banking system.
A new measure for liquidity aggregate has been appropriated for NBFC, i.e. now net
credit account of NBFC should be 20 crores or more for it to be registered by RBI as
an NBFC company.

The growth of NBFC in the current economy amounts up to 16%, and this is twice the
bank credit growth in the same period.

The distribution reach of many Non-Banking Financial companies is wide-ranging and

unmatched by the banks which are there in that area.

NBFC are using digital surrogate data in the absence of income proof documents to
improve credit penetration in India. The share growth of NBFC in the Indian economy
has gone up from 10%to 15% between 2005 and 2015.

The growth of credit share is seen in all types of NBFC companies and not only
traditional NBFC like commercial vehicle finance companies The new regulations
which are laid down by RBI and companies act 2013 have paved the way for NBFC
growth in Indian economy.

Regulatory Framework: The reserve bank of India was amended on December 1st in
1934 by RBI amendment Act, 1963. Chapter III-B was introduced to regulate deposit
accepting NBFC’s. Different committees were introduced to review the regulatory
guidelines which were introduced in the RBI, Act. These banking committees were
introduced to examine the Non-Banking Financial Institutions.

Conclusion:
The growth of NBFC in the Indian economy is lower than many other developing
countries like Thailand and Malaysia where NBFC’S credit penetration is 25%whereas
in Indian economy NBFC’s company’s credit penetration is only 15% only. NBFC have
gained momentum in the Indian economy recently where there has been a significant
increase in incorporation of companies since the 1990’s. Government Initiatives like
Pradhan Mantri Jan Dhan Yojna has introduced banking system to that part of India
which was not aware of it but still 15% of the adults don’t use the banking facilities
which are available to them and therefore government has introduced 21 NBFC to curb
this difference as NBFC's have far-reaching effect than what commercial banks have.

NBFC are specialized players, and they are the companies which will entirely change
the banking value chain, this will ensure the sustainable growth of the economy for the
long run.

With the introduction of small finance banks and proposed bill payment service
providers would anatomize traditional banking in the country and this will open up
opportunities for NBFCs to provide financial offerings for its clients
.

2) Contribution of Industry towards Indian Economy:

The contribution of NBFC to Indian Economy:

*Substantial employment generation
*Major thrust on semi-urban rural areas &first time buyers or users
*To finance economically weaker sections
*Help and increase wealth creation
*Supplement bank credit to the rural segment of the Indian economy
*Economic development

NBFCs (Non Banking Financial Companies) play an important role in promoting

inclusive growth in the country, by catering to the diverse financial needs of bank
excluded customers. Further, NBFCs often take lead role in providing innovative
financial services to Micro, Small, and Medium Enterprises (MSMEs) most suitable
to their business requirements. NBFCs do play a critical role in participating in the
development of an economy by providing a fillip to transportation, employment
generation, wealth creation, bank credit in rural segments and to support financially
weaker sections of the society. Emergency services like financial assistance and
guidance is also provided to the customers in the matters pertaining to insurance.
NBFCs are financial intermediaries engaged in the business of accepting deposits
delivering credit and play an important role in channelizing the scarce financial
resources to capital formation. They supplement the role of the banking sector in
meeting the increasing financial needs of the corporate sector, delivering credit to
the unorganized sector and to small local borrowers. However, they do not include
services related to agriculture activity, industrial activity, sale, purchase or
construction of immovable property. In India, despite being different from banks,
NBFC are bound by the Indian banking industry rules and regulations. NBFC
focuses on business related to loans and advances, acquisition of shares, stock,
bonds, debentures, securities issued by government or local authority or other
securities of like marketable nature, leasing, hire-purchase, insurance business, chit
business. The banking sector would always be the most important sector in the field
of business because of its credibility in supporting manufacturing, infrastructural
development and even being the backbone for the common man's money. But
despite this, the role of NBFCs is critical and their presence in a country would only
boost the economy in the right direction.

Size of sector : The NBFC sector has grown considerably in the last few years
despite the slowdown in the economy.

Growth : In terms of year-over-year growth rate, the NBFC sector beat the banking
sector in most years between 2006 and 2013. On an average, it grew 22% every
year. This shows, it is contributing more to the economy every year.

Profitability : NBFCs are more profitable than the banking sector because of lower
costs. This helps them offer cheaper loans to customers. As a result, NBFCs' credit
growth - the increase in the amount of money being lent to customers – is higher
than that of the banking sector with more customers opting for NBFCs.
 Infrastructure Lending : NBFCs contribute largely to the economy by lending to
infrastructure projects, which are very important to a developing country like India.
Since they require large amount of funds, and earn profits only over a longer time-
frame, these are riskier projects and deters banks from lending. In the last few years,
NBFCs have contributed more to infrastructure lending than banks.

Promoting inclusive growth : NBFCs cater to a wide variety of customers - both in

urban and rural areas. They finance projects of small-scale companies, which is
important for the growth in rural areas. They also provide small-ticket loans for
affordable housing projects. All these help promote inclusive growth in the country.

3) Major Players in Industry:

1) Bajaj Finance
2) M&M Financial
3) Shriram Trans
4) Sundaram Fin
5) Shriram City
6) Manappuram Fin
7) Magma Fincorp
8) SREI Infra
9) Optiemus Infra
10) Capital Trust
11) Arman Financial
12) VLS Finance
13) Maha Rasht Apex
14) Motor and Gen F
15) Sakthi Finance
16) Times Guaranty
17) Hb Stockhol
18) Guj Lease Fin
19) Lloyds Finance

4) PEST Analysis:

*Political Legal Factors:

RBI Regulations:
Till 1997 there was an unorganized NBFC sector. As the NBFC emerged as
one of the major competitor of banks, the RBI made rules and regulation to
organize the sector. RBI made regulations that NBFCs have to register
themselves and made it mandatory for NBFC wanting to raise funds through
public deposits. RBI is constantly monitoring NBFCs and framing regulations
from time to time to regulate the sector.
Taxation Regulations:

NBFC sector is liable to pay income tax per the section 269T under income
tax regulation. As NBFCs fall under service tax norms, mostly hire purchase
and lease financing companies are liable to pay service taxes.

Companies Act Regulations:

The Companies Regulation Bill aims to consolidate the law relating to NBFCs
with a view to ensure depositor protection. This indicates that NBFCs will now
be classified as financial companies under RBI guidance and regulations.
Investigative powers have been vested with District magistrates and
Superintendents of Police.

Consumer Protection:
Company Law Boards will be authorized to adjudicate claims of depositors. In
case of defaults in repayments by NBfCs of either the principal amount or
interest or both on deposits, the depositor can approach concerned regional
bench of Company Law Boards. Alternatively, consumer can approach
disputes redressal forum at district, state or national level
.
For Ceiling:
The ceiling of FDI in NBFC industry is 50%. This is also affects growth of the
sector because foreign direct investment adds viable leverage in the cost of
net owned funds and hence plays an important role in growth of NBFC.

*Economic Factors:
Following are the economical factors which affect the NBFC industry:
Gross Domestic Product (GDP):
Economic condition of any country and economy can be measured by GDP.
From the consumption side, GDP is equal to the sum of private consumption,
government consumption, investment and net exports. In 2006-2007 the
GDP was about 8% which was close to double than previous years.
Inflation
Recent inflation rate has been 3.6% but over the recent past months it has
ranged from 12% to 5% and has been highly volatile in the entire history.
This affects NBFCs in the long run as rise in inflation rate will affect the
disposable income and thus it will affect the savings and cost to raise funds.

Agriculture and NBFC:

If we consider various types of component of NBFC such as Hire purchase,
Lease finance and Loan than we can say that they are directly related with
NBFC, as in hire purchase most of tractors are mainly sold in instalment basis.
More than 50% farmers use loans and to purchase agricultural devices
they also use lease finance for agricultural development.

Industrv and NBFC:

Mainly manufacturing industries and mining sector are acquiring the
equipment and machineries on lease basis or hire purchase. So the growth in
industry will impact the NBFC sector significantly. Industry has contributed
around 6.5% of GOP in the previous years.

Interest Rate:
As per the RBI regulation, the NBFC cannot offer more than 11% on public
deposit if than there is any change in for banking industry's interest rates it
will directly affect the NBFCs the collection of deposit from public.

*Social Factors:
Following are the social factors which affect non banking financial services
industry.
1. Due of industrialization more rural people are attracted towards the urban
areas, which has resulted into the emergence of a large middle class.
2. India is coming out of its typical mentality that the debt is bad. More and
more people of people of middle class and upper middle class are buying
computer, television, vehicles and also home on installment this is
positive sign of NBFCs .
3. NBFCs are providing loan to those whose application is denied by bank or
any other financial institution so it is providing venture capital for new
businesses. This is again helpful in generating further opportunities for
gainful employment and in turn creating an additional customer segment.
4. Development of rural areas is also on the wheel as rural class population
has gone up from 25% to 32% which indicate that there is vast
opportunity in rural area.

* Technical Factors:
Following are the technical factors, which affect the non-banking financial
services industry.
Internet:
Through internet an NBFC can provide its information of customers. Further,
it can also shorten the process as customers planning to avail loans can get
detail about the interest rate, EMI, tax benefits, etc.

Telecommunication Services:
Customer can use help lines for information about existing loans and many
NBFCs have replaced physical discussion by telephonic discussions. This
again benefits the way the business is conducted and facilitating customers.

Interconnected Branches:
NBFCs which are well managed and which are widely spread all over the
country are connected with one another through information technology.

MIS Application:
Information technology can be a great advantage to automate all the
functions of NBFCs it is useful in maintaining, gathering data and refine
organizational systems which enhance decisions and ensure data availability
easily whenever required by them.