It gives me great pleasure to present to you your Company''''s Annual Report for FY17,sharewith you your Company’s progress thus far, and thoughts for the future.
Clearly the most significant event of the year was the government''''s decision to demonetize 86% of the high-value currency in circulation in one stroke. This government has implemented many significant reforms since it has assumed office three years ago, but demonetization has to be counted as the boldest decision this government has taken.
No matter what the contrasting opinions were, for all high-value currency to hit the system and wash itself for cleanliness, and to give a one-time jolt to promote digital India, this was amazing means. Data shows that economic activity is back to pre-November levels. Enquiries for loans are a lightning rod for economic activity. CIBIL reports show that retail loan enquiries fell 12% in November ''''16 over September ''''16, but by February ''''17, it was higher over September ''''16 by 9%.
That things stabilized quickly within 3 months, and business is back to normal is a big vindication. Nine million new taxpayers crawled out of the woodwork and paid their taxes for the first time.
Demonetization may be remembered for a few years, but GST will be remembered for ever. Millions of un-organized business people will register themselves for GST and start paying their taxes for the first time, as not doing so will make them uncompetitive as they won''''t get input credit. For the first time, we will become one nation economically-it was sometimes easier to import instead of buying from another state of India! When the bill was passed in the Rajya Sabha in August 2016, I tweeted “Iron man Sardar Vallabhbhai Patel unified India politically, GST will unify India economically. It’s that big a moment”. That sums up GST''''s significance for generations.
The smartest decision by this government has to be accepting Aadhaar as the platform for a new India, even if it was initiated by the previous government. The Aadhaar platform has not only made a digital India possible through e-KYC, e-signature, and e-payments, but has also helped reduce ghost beneficiaries who were sucking and siphoning what was meant for the poor. I hope the judiciary sees the merit of making Aadhaar mandatory for availing all government benefits to avoid such siphoning, of course with a lead notice period for the citizens to sign up. If we “also” provide subsidy benefits to people outside of such authentication system, the ghosts will always hide under the “also” category, we can''''t effectively weed them out and middlemen will consume the poors'''' entitlements.
An important part of India Inc. is the voiceless small entrepreneur. I have always been publicly advocating for progressive and lower tax rates for small enterprises in various forums including ASSOCHAM, National Business events, budget debates, and even in representation to the Finance Minister and to the Minister of State for Finance, over the last three years. It''''s more equitable - after all why should small enterprises pay the same tax slab as the large ones? Don''''t salaried people with large pay-checks pay higher taxes? Besides, small enterprises largely deal in cash so you might as well encourage them with low taxes and bring them to the tax net.
I am delighted that in its latest budget FY 17-18, the government reduced the tax rate for small companies with turnover of less than Rs, 50 crores to 25%. No one can say that any move by the government was because of their representation, neither can I. But I am happy nevertheless that this was implemented. In the next stage, I wish the same for other small entities, including proprietorships and partnerships, who are not covered under this structure today.
Finally, in financial services, the big breakthrough was awarding new bank licenses. India waited 25 years after nationalization for 5 licenses to be issued in FY94. After ten years, in FY04, 2 more bank licenses were issued. After yet another ten years, in FY14, 2 more were issued. In FY15, 19 bank licenses, including payment and small banks, were issued. In FY16, it was announced that bank licenses would be issued on tap.
The theme with which your Company was founded is that financing India''''s 50 million MSMEs and its fast-emerging middle class, with a differentiated model, based on new technologies, provides a large and unique opportunity. Keeping with this theme, the Company has continuously grown its retail businesses over the years, and has built a strong business model focused on these areas. I am happy to share that the Company has so far successfully financed more than four million customers in 222 locations across the country thereby establishing a connect with millions of customers.
I am pleased to share with you that once again, we have augmented our presence in the retail business segment. Retail lending now stands at 93% of the Assets Under Management as of March 31, 2017.
The Company''''s loan book grew by 24% from Rs, 160.41 billion (Rs, 16,041 crores) in FY16, to Rs, 198.24 billion (Rs, 19,824 crores) by the end of FY17. We are happy to share that along with this growth, we have maintained our asset quality at high standards with Gross NPA at only 0.95% and Net NPA at 0.30%, on 120 DPD basis.
The NII has grown by 59% from Rs, 8,181 million in FY16 to Rs, 13,008 million in FY17. The total income too grew by 65% to Rs, 16,403 million in FY17 from Rs, 9,918 million in FY16.
The PAT grew by 44% from Rs, 1,661 million in FY16 to Rs, 2,389 million in FY17. I am confident that the Company will continue to grow its business at a compounded rate and such growth will translate into an abundant increase in profits as well.
I am happy to inform you that your Company has been rated AAA on its long-term debt instruments.
One of the remarkable successes for your Company in recent years is that it has successfully diversified its lines of credit from a large number of institutions. The Company now avails credit from over 221 reputed institutions including banks, mutual funds, provident funds, pension funds, superannuation funds, gratuity funds insurance companies, domestic and international Financial Institutions as at end March 2017, compared to a total count of 171 institutions in FY16. This ensures a steady stream of funding for continued growth in the future.
I am delighted to share that during this financial year, GIC, the Sovereign Wealth Fund of Government of Singapore, with over uSD 100 billion of funds under management invested Rs, 3.40 billion into the Company in December 2016, taking the Capital Adequacy to 20.34% as of March 2017. Subsequently in May 2017, Warburg Pincus reduced its stake from 61% to 36%, and we are proud to inform that the stake was bought by GIC and a number of marquee foreign and domestic investors. In the process, GIC demonstrated its confidence in the Company by increasing its shareholding to 14%. We are overwhelmed by such show of confidence in your Company from globally top rated firms and hereby reaffirm our commitment for the highest standard of business and corporate governance anywhere in the world.
I am happy to share that your Company is carrying on CSR activities with great vigour. I assure you that I personally encourage employees to actively participate and widely support the CSR activities through their personal efforts. We have further expanded the scope and magnitude of these initiatives. Our flagship CSR programme, Capital First Scholarship Program (CFSP) entails providing financial assistance to meritorious students from the economically weaker sections of the society, and this is progressing extremely well. We have also tied up with various NGOs and change agents to sponsor programmes in the field of education and skill training for the economically weaker sections of society. We are pleased to report that these programmes have moved beyond the drawing board stage and showing tangible results.
I am happy to assure you that all the employees are working extremely hard with great dedication, high energy and strong commitment throughout the year for your Company. I sincerely thank them all vide this letter. I would also like to thank all our stakeholders including our lenders and customers for reposing their faith in us and thank our regulators, for their constant support and guidance.
I also express my thanks to all our Directors for their invaluable contribution through their guidance and encouragement, which have been critical for the success of the Company. Finally, I thank each and every shareholder, large and small, for your confidence in us.
With your continued support and trust, we look forward to growing your Company and contributing to the economic progress that our country is set to achieve.
With Best Wishes V. Vaidyanathan