Viji Finance Ltd:Annual Report 2023-24 Analysis

Viji Finance Ltd. - A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: While “Viji Finance Ltd.” is a common-sounding name, there is no publicly traded or widely recognized financial institution by that exact name. It’s possible it’s a smaller, regional, or privately held company. If you are referring to a specific “Viji Finance Ltd.”, you will need to provide more information for a complete profile. This section will remain blank until that information is provided.

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Their Products #

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Primary Customers #

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Major Competitors #

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Future Outlook #

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Financial Analysis of Viji Finance Limited (FY 2023-24) #

Financial Performance Trend Analysis (FY23-FY24) #

• Profitability Decline: Significant downturn in profitability during FY 2023-24 compared to FY 2022-23.
  • Standalone: Total Income decreased by 7.76% (INR 192.75 Lakhs vs. INR 208.96 Lakhs). Profit After Tax (PAT) fell sharply by 72.70% (INR 12.02 Lakhs vs. INR 44.03 Lakhs). Basic & Diluted EPS dropped from INR 0.05 to INR 0.01.
  • Consolidated (up to Jan 10, 2024): Total Income was INR 137.56 Lakhs (vs. INR 208.96 Lakhs in prior full year). Consolidated PAT (up to Jan 10, 2024) was INR 13.80 Lakhs compared to INR 43.30 Lakhs in the prior full year, indicating a substantial decrease on an annualized basis. Consolidated Basic & Diluted EPS was INR 0.02 compared to INR 0.05 previously.
  • Stated Reasons: Decline primarily due to decreased interest income coupled with increased overall expenses.
• Key Financial Ratios (Standalone):
  • Interest Coverage Ratio: Decreased by 80.61% YoY, reflecting lower profits relative to finance costs.
  • Current Ratio: Increased by 124.14% YoY, primarily due to increased current assets and decreased current liabilities.
  • Debt-Equity Ratio: Increased by 43.42% YoY, indicating higher leverage due to increased debt relative to equity.
  • Operating Profit Margin (%): Decreased by 27.27% YoY, impacted by higher operating expenses.
  • Net Profit Margin (%): Decreased significantly by 71.43% YoY, owing to increased indirect expenses and reduced turnover.
  • Return on Net Worth (%): Decreased by 2.65% compared to the previous financial year, directly linked to reduced net profit.
• Overall Trend: Negative trend in core profitability and efficiency ratios, alongside increasing financial leverage. The disposal of the subsidiary impacts the comparability of consolidated figures.

Major Strategic Initiatives and Progress (FY24 & Subsequent) #

• Capital Restructuring:
  • Increased Authorized Share Capital from INR 11 Cr to INR 18 Cr (Approved EGM Nov 30, 2023).
  • Successfully completed a Rights Issue post-FY end (July 3, 2024), raising INR 9 Crores by issuing 6 Crore equity shares. This significantly increased the paid-up capital from INR 8.25 Cr to INR 14.25 Cr, strengthening the capital base.
• Portfolio Adjustment:
  • Disposed of the entire stake in its wholly-owned subsidiary, Viji Housing Finance Limited, effective January 10, 2024. This simplifies the corporate structure and potentially focuses resources on the core NBFC business.
• Leadership & Governance:
  • Strengthened the board with the appointment of Ms. Palak Malviya and Mr. Rajendra Sahay Shrivastava as Independent Directors.
  • Secured shareholder approval for the re-appointment and revised remuneration of the Chairman & Managing Director (Mr. Vijay Kothari) and the Whole-Time Director (Mr. Nitesh Gupta).
  • Appointed new Statutory Auditors (Dharmendra K Agarwal & Co.) upon completion of the previous auditor’s term.
• Funding:
  • Sought shareholder approval for material related party transactions involving unsecured loans up to INR 25 Crores from the Chairman & Managing Director (Mr. Vijay Kothari) for FY 2024-25, indicating a potential funding line.

Risk Landscape Changes #

• Regulatory Risk: The NBFC sector faces heightened regulatory scrutiny. Key aspects impacting Viji Finance include:
  • Compliance with RBI’s Scale Based Regulations (classified as NBFC-Base Layer).
  • Adherence to KYC, AML, and Fair Practice Code norms.
  • Increased focus on unsecured lending norms by RBI (though impact level on Viji Finance is not detailed).
  • Secretarial Audit highlighted delays in regulatory filings (RBI DNBS-02, Shareholding Pattern) and pending KYC data uploads to CICs, indicating areas for compliance improvement.
• Credit Risk: Core risk for an NBFC.
  • The Independent Auditor identified the estimation of Expected Credit Losses (ECL) on financial assets as a Key Audit Matter, highlighting the significant judgment involved.
  • Provision for Non-Performing Assets stood at INR 27.05 Lakhs as of March 31, 2024.
• Operational Risk:
  • Reliance on IT systems for financial reporting was noted as a Key Audit Matter by the auditors, emphasizing the need for robust IT controls.
• Market Risk: Performance decline was attributed partly to market conditions impacting interest income and expenses. General economic volatility remains a factor.
• Governance Risk: While policies are stated to be in place (Vigil Mechanism, Codes of Conduct), the Secretarial Audit qualifications point to execution gaps.

ESG Initiatives and Metrics #

• Environmental: Operations are not energy-intensive. Focus is on reducing paper usage via electronic communication. No specific metrics on energy consumption, emissions, or waste management were provided.
• Social:
  • Policy against Sexual Harassment is in place with an Internal Committee constituted; zero cases were reported in FY24.
  • Employee relations reported as positive. No data on diversity, employee training, or community engagement was provided.
  • CSR provisions were not applicable due to the company not meeting the required thresholds.
• Governance:
  • Board composition stated as compliant (pre-Rights Issue). Post Rights Issue (July 2024), the increased capital necessitates compliance with stricter Corporate Governance norms (Regulation 15 of SEBI LODR) within six months.
  • Committees (Audit, NRC, Stakeholders Relationship) are constituted, with composition detailed.
  • Adoption of Code of Conduct and Insider Trading Code confirmed. Compliance with Secretarial Standards stated.
  • Director independence declarations received and noted by the Board.

Detailed Analysis #

Financial Analysis Report: VIJI FINANCE LIMITED (FY 2023-24) #

Note: This analysis is based solely on the provided excerpts from the Viji Finance Limited Annual Report for FY 2023-24. Data for FY 2021-22 was not provided, limiting comparisons to FY 2023-24 vs FY 2022-23. Industry benchmark data was not available in the provided text. Consolidated figures for FY 2023-24 reflect operations up to January 10, 2024, due to the disposal of the subsidiary Viji Housing Finance Limited.

Comparative Financial Analysis (Standalone & Consolidated) #

Standalone Financial Highlights (INR Lakhs) #

Consolidated Financial Highlights (INR Lakhs) #

VIJI FINANCE LIMITED (FY 2023-24) Financial Analysis #

Revenue Analysis #

• Segment: The Company operates solely within the Financial Services segment.
• Standalone Performance:
  • Total Income (FY24): INR 192.75 Lakhs
  • Total Income (FY23): INR 208.96 Lakhs
  • Growth Rate: -7.76% (Decrease)
• Consolidated Performance (Note: Consolidated up to Jan 10, 2024, due to subsidiary disposal):
  • Total Income (FY24 Period): INR 137.56 Lakhs
  • Total Income (FY23): INR 208.96 Lakhs
  • Growth Rate: -34.17% (Decrease, comparison impacted by differing consolidation period)

Cost Structure Analysis (Standalone FY24) #

• Total Expenditure: INR 180.73 Lakhs
  • Finance Costs: INR 16.80 Lakhs (9.30% of Total Expenditure)
  • Employee Benefits Expenses: INR 66.48 Lakhs (36.78% of Total Expenditure)
  • Depreciation, amortization and impairment: INR 35.17 Lakhs (19.46% of Total Expenditure)
  • Other Expenses: INR 62.28 Lakhs (34.46% of Total Expenditure)
  • Note: Major components within ‘Other Expenses’ exceeding 1% of Total Income include Advertisement Expenses, Consultancy Charges, Listing Fees, Interest on Income Tax, and Provision on Sub Standard Assets (Standalone Note 21).

Margin Analysis #

• Operating Profit Margin (PBT / Total Income):
  • Standalone FY24: (12.02 / 192.75) = 6.24%
  • Standalone FY23: (44.03 / 208.96) = 21.07%
  • Trend: Significant decrease in standalone operating margin.
  • Consolidated FY24 (Period): (13.80 / 137.56) = 10.03%
  • Consolidated FY23: (43.30 / 208.96) = 20.72%
  • Trend: Decrease in consolidated operating margin (comparison impacted by differing consolidation period).
• Net Profit Margin (PAT / Total Income):
  • Standalone FY24: (12.02 / 192.75) = 6.24% (PBT equals PAT as Tax Expense is Nil)
  • Standalone FY23: (44.03 / 208.96) = 21.07% (PBT equals PAT as Tax Expense is Nil)
  • Trend: Significant decrease in standalone net margin.
  • Consolidated FY24 (Period): (13.80 / 137.56) = 10.03% (PBT equals PAT as Tax Expense is Nil)
  • Consolidated FY23: (43.30 / 208.96) = 20.72% (PBT equals PAT as Tax Expense is Nil)
  • Trend: Decrease in consolidated net margin (comparison impacted by differing consolidation period).

EPS Analysis (Standalone) #

• Basic & Diluted EPS (FY24): INR 0.01
• Basic & Diluted EPS (FY23): INR 0.05
• Trend: Significant decrease in Basic and Diluted EPS, reflecting the lower profitability.
  • (Consolidated EPS figures are presented but comparison is impacted by differing consolidation period).

Viji Finance Limited (FY 2023-24) - Financial Analysis Report #

Cash Flow Analysis (Standalone) #

• Cash Flow from Operations (CFO): The company reported a net cash outflow from operating activities of INR 428.87 Lakhs for FY24, compared to an outflow of INR 350.20 Lakhs in FY23. The primary driver for the operating cash outflow is the significant increase in loans disbursed (increase in other financial assets used in operations), partially offset by profit before tax (INR 17.02 Lakhs) and adjustments for non-cash items like depreciation (INR 35.17 Lakhs) and provisions (INR 27.72 Lakhs). The increase in operating outflow compared to FY23 suggests expansion in lending activities outpacing operational profits and collections during the year.
• Cash Flow from Investing Activities (CFI): Net cash outflow from investing activities was INR 155.03 Lakhs in FY24, a substantial increase from INR 1.55 Lakhs outflow in FY23. This was primarily driven by the purchase of Property, Plant, and Equipment (PPE) amounting to INR 166.29 Lakhs (mainly vehicles), partially offset by proceeds from the sale of investments (INR 11.24 Lakhs, likely related to the subsidiary sale).
• Cash Flow from Financing Activities (CFF): Net cash inflow from financing activities stood at INR 600.56 Lakhs in FY24, compared to an inflow of INR 390.90 Lakhs in FY23. The inflow was mainly due to proceeds from borrowings (INR 1151.88 Lakhs, primarily from related parties and vehicle loans), which exceeded the repayment of borrowings (INR 541.42 Lakhs) and finance costs paid (INR 51.75 Lakhs).
• Free Cash Flow (FCF): Calculated as CFO minus Purchases of PPE, the FCF was negative INR 595.16 Lakhs (CFO of -428.87 Lakhs minus Capex of 166.29 Lakhs). This compares to a negative FCF of INR 351.75 Lakhs in FY23. The negative FCF reflects the nature of the NBFC business where loan disbursements (part of operating activities in the cash flow statement format used) are a primary use of funds, combined with capital expenditure.

Working Capital and Liquidity (Standalone) #

• Working Capital Structure: As an NBFC, the core operations involve managing financial assets (primarily loans) and financial liabilities (borrowings). Loans increased significantly to INR 2,396.12 Lakhs (net) from INR 1,981.98 Lakhs (net) in FY23. This was funded mainly by an increase in borrowings, which rose to INR 1,335.81 Lakhs from INR 919.52 Lakhs. A substantial portion of borrowings (INR 1,150.86 Lakhs) is from the Promoter/Director, Mr. Vijay Kothari, provided interest-free.
• Liquidity Position: The Current Ratio, based on the maturity analysis (assets/liabilities expected to be recovered/settled within 12 months), appears constrained. Assets maturing within 12 months (INR 303.48 Lakhs, primarily cash, other financial assets, and estimated loan recoveries) were significantly lower than liabilities maturing within 12 months (INR 1,318.31 Lakhs, primarily borrowings and payables). This indicates a potential reliance on refinancing or continued support from lenders, particularly related parties, to meet short-term obligations. Note: This calculated ratio (0.23) differs significantly from the 1.93 reported in the MD&A, suggesting potential differences in classification or calculation methodology. Cash and cash equivalents stood at INR 140.89 Lakhs at year-end, up from INR 124.23 Lakhs.
• Maturity Analysis: Note 39 indicates a significant portion of borrowings (INR 1,205.38 Lakhs out of INR 1,335.81 Lakhs) are due within one year, while loan recovery timelines are not explicitly split within the note but are the primary asset class. This mismatch underscores the liquidity risk managed through refinancing and promoter support.

Capital Expenditure (Standalone) #

• The company incurred INR 166.29 Lakhs towards the addition of Property, Plant, and Equipment (PPE) in FY24, compared to INR 1.55 Lakhs in FY23.
• The significant increase was primarily due to the purchase of vehicles (INR 155.06 Lakhs). Other additions included Computers (INR 6.89 Lakhs) and Office Equipment (INR 4.34 Lakhs).
• The Capex aligns with the company’s single operating segment (Financial Services) and likely supports business operations and expansion.

Shareholder Returns (Standalone) #

• Dividends: The Board of Directors did not recommend any dividend for the financial year ended March 31, 2024, aiming to conserve resources for growth. Unclaimed dividend for FY16 (INR 0.65 Lakhs) was transferred to the IEPF

Segment Performance Analysis #

Revenue and Profitability Metrics (FY2023-24 vs FY2022-23) #

Standalone Performance #

• Total Income: ₹192.75 Lakhs (down 7.76% from ₹208.96 Lakhs)
• Profit Before Tax (PBT): ₹14.33 Lakhs (down 73.41% from ₹53.89 Lakhs)
• Profit After Tax (PAT): ₹12.02 Lakhs (down 72.70% from ₹44.03 Lakhs)

Consolidated Performance #

• Total Income: ₹137.56 Lakhs (down 34.17% from ₹208.96 Lakhs)
• Profit Before Tax (PBT): ₹16.07 Lakhs (down 69.77% from ₹53.16 Lakhs)
• Profit After Tax (PAT): ₹13.80 Lakhs (down 68.13% from ₹43.30 Lakhs) Note: FY24 data up to Jan 10, 2024 due to subsidiary disposal

Key Profitability Ratios Changes (Standalone) #

• Operating Profit Margin (%): Decreased by 27.27% due to increased operating expenses.
• Net Profit Margin (%): Decreased by 71.43% due to increased indirect expenses and reduced turnover.
• Return on Net Worth (%): Decreased by 2.65% due to reduced net profit.
• Interest Coverage Ratio: Decreased by 80.61% due to lower profit.

Market Share and Competitive Position #

• The company operates within the competitive Non-Banking Financial Companies (NBFC) sector in India.
• The Management Discussion and Analysis (MDA) notes increasing brand recognition across its businesses.
• The Board’s Report cites tough competition as a reason contributing to inadequate profits or performance challenges.
• No specific market share data or explicit ranking relative to competitors is provided in the report.

Key Products/Services Performance #

• The company’s primary business is providing financial services as a Non-Systemically Important Non-Deposit Accepting NBFC.
• The main revenue source is Interest Income from loans. Standalone interest income decreased to ₹192.41 Lakhs in FY24 from ₹206.51 Lakhs in FY23.
• The standalone gross loan portfolio increased from ₹1,981.98 Lakhs (Mar 31, 2023) to ₹2,396.12 Lakhs (Mar 31, 2024).
• Loans are primarily unsecured term loans classified under ‘Corporates’ and ‘Retail’ categories.
• Fee and commission income remains minimal compared to interest income.
• The company disposed of its entire investment in its wholly-owned subsidiary, Viji Housing Finance Limited, effective January 10, 2024.

Geographic Distribution and Market Penetration #

• The company’s registered office is located in Indore, Madhya Pradesh.
• The report does not provide specific details regarding the geographic distribution of its loan portfolio or customer base.
• While the MDA acknowledges the role of NBFCs in reaching under-served rural areas, no specific company strategy or performance related to geographic expansion or market penetration is detailed.

Segment-wise Capex and ROIC #

• The company reports operating in only one business segment: Financial Services.
• Therefore, segment-wise capital expenditure (Capex) and Return on Invested Capital (ROIC) are not applicable/provided.
• Overall additions to Property, Plant, and Equipment (PPE) during FY24 amounted to ₹40.27 Lakhs (Standalone), primarily for vehicles.

Operational Efficiency Metrics #

• Key financial ratios indicate changes in operational efficiency:
  • Operating Profit Margin (%): Declined significantly (27.27% decrease).
  • Net Profit Margin (%): Declined significantly (71.43% decrease).
  • Debt-Equity Ratio: Increased by 43.42%, indicating higher leverage.
  • Current Ratio: Improved significantly (124.14% increase), suggesting improved short-term liquidity.
• The company maintains compliance with RBI norms for NBFCs, including prudential norms related to asset classification and provisioning. Provision for Non-Performing Assets stood at ₹27.05 Lakhs as of March 31, 2024 (Standalone).

Growth Initiatives and Challenges #

Growth Initiatives #

• Strategy to diversify income sources reported as showing results.
• Fundraising via Rights Issue (approx. ₹9 Crores) approved post-FY end (allotted July 3, 2024) to support growth.
• Focus on improving operational performance and liquidity through cost control measures.
• Increased Authorized Share Capital from ₹11 Cr to ₹18 Cr to facilitate fundraising.

Challenges & Threats #

• Economic slowdown, market uncertainty, and volatility impact performance.
• Intense competition within the NBFC sector.
• Stringent regulatory environment: Compliance with RBI’s Scale Based Regulation (SBR) framework (classified as NBFC-Base Layer), KYC/AML regulations, tightened norms on unsecured lending, and data privacy/security requirements.
• Operational Challenges: Delays noted in certain regulatory filings (Audited Financial Statement DNBS-02 to RBI, Shareholding Pattern submission) as per Secretarial Audit. KYC data upload to CICs is reported as ‘in process’.
• Credit Risk: Managing credit quality and impairment (ECL) in the loan portfolio is a key challenge.
• Compliance Observation: Gross acquisition of shares by promoter exceeding 5% noted in Secretarial Audit, although net promoter holding did not increase beyond the threshold during the financial year.

Risk Analysis Report: VIJI FINANCE LIMITED (FY 2023-24) #

Strategic Risks #

• Description: Risks associated with the company’s business strategy, market positioning, competitive landscape, and major initiatives.
• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Increasing.
• Mitigation Strategies:
  • Diversify business model towards more sources of annual income.
  • Focus on brand recognition across businesses.
  • Disposal of investment in wholly-owned subsidiary (Viji Housing Finance Limited).
  • Fundraising via Rights Issue to likely support growth or capital needs.
  • Re-appointment of experienced KMPs (Chairman & MD, WTD).
• Potential Financial Impact: Continued pressure on revenue and profitability. Dilution from Rights Issue impacts EPS.
• Quantitative Risk Metrics:
  • Standalone Total Income decreased 7.76% YoY.
  • Standalone Net Profit decreased 72.70% YoY.
  • Consolidated Total Income decreased 34.17% YoY.
  • Consolidated Net Profit decreased 68.13% YoY.
• Year-over-Year Changes: Significant decline in financial performance. Major strategic changes including subsidiary divestment and planning a large Rights Issue.

Operational Risks #

• Description: Risks arising from inadequate or failed internal processes, people, systems, or external events.
• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Stable to Increasing.
• Mitigation Strategies:
  • Documented policies and procedures.
  • Internal Audit function in place, reviewed by Audit Committee.
  • IT General Controls (access, change management, operations) tested by Statutory Auditors.
  • Use of accounting software with audit trail feature.
  • Familiarization programmes for Directors.
  • Code of Conduct for Board and Senior Management.
  • Whistle Blower Policy providing direct access to Compliance Officer/Audit Committee Chair.
  • Adequate insurance coverage for assets.
• Control Effectiveness:
  • Statutory Auditors deemed Internal Financial Controls adequate and effective.
  • Statutory Auditors tested IT General Controls and Automated Controls.
  • Secretarial Auditor noted adequate systems and processes commensurate with size/operations but highlighted specific compliance delays.
  • Internal Audit reports reviewed by Audit Committee.
• Potential Financial Impact: Operational failures could lead to financial losses, regulatory penalties, reputational damage, or service disruption.
• Quantitative Risk Metrics:
  • Number of complaints received/pending: Nil reported for FY24.
  • Secretarial Audit observations on filing delays (1 day for Shareholding Pattern, delay in DNBS-02).
• Year-over-Year Changes: IT Controls specifically highlighted as a Key Audit Matter in FY24 audit. Specific filing delays noted in FY24 Secretarial Audit.

Financial Risks #

• Description: Risks related to financial structure, funding, liquidity, credit quality of assets, and market fluctuations (interest rates, etc.).
• Severity: Moderate to High.
• Likelihood: High (Credit Risk), Moderate (Liquidity/Funding Risk).
• Trend: Increasing.
• Mitigation Strategies:
  • Risk Management Policy and framework in place, reviewed by Board.
  • RBI Prudential Norms compliance (Income Recognition, Asset Classification, Provisioning).
  • Impairment provisioning using Expected Credit Loss (ECL) model under Ind AS 109.
  • Credit risk managed by setting limits and monitoring exposures.
  • Liquidity risk managed by maintaining reserves, facilities, monitoring cash flows, and matching asset/liability maturities.
  • Interest Rate Risk deemed low due to primarily fixed-rate loans/borrowings.
  • Currency Risk deemed low due to INR-denominated transactions.
  • Capital management objectives include safeguarding going concern and maintaining optimal structure.
• Control Effectiveness: Statutory Auditors reviewed ECL estimation process and IT controls supporting financial reporting. Internal audit reviews controls. Audit Committee oversees financial reporting and risk.
• Potential Financial Impact: Credit losses impacting profitability and capital. Liquidity constraints hindering operations or growth. Increased funding costs. Adverse ratio movements affecting lender/investor confidence.
• Quantitative Risk Metrics:
  • NPA Provision: INR 27.05 Lakhs (Standalone), INR 25.84 Lakhs (Consolidated) as of Mar 31, 2024.
  • Standard Asset Provision: INR 4.51 Lakhs (Standalone), INR 0.09 Lakhs (Consolidated) as of Mar 31, 2024.
  • Debt-Equity Ratio: 1.08 (FY24) vs 0.75 (FY23) (Standalone). Change: +43.42%.
  • Interest Coverage Ratio: 1.81 (FY24) vs 9.38 (FY23) (Standalone). Change: -80.61%.
  • Net Profit Margin: 6.24% (FY24) vs 21.07% (FY23) (Standalone). Change: -71.43%.
  • Return on Net Worth decreased by 2.65% YoY.
  • Leverage Ratio (Total Debt / Total Equity): 1.08 (Standalone FY24) vs 0.75 (Standalone FY23).
  • Unsecured Loan from Director (Mr. Vijay Kothari): INR 11.51 Cr outstanding (Standalone FY24) vs INR 7.66 Cr (Standalone FY23).
• Year-over-Year Changes: Deterioration in key financial ratios (Debt-Equity, Interest Coverage, Net Profit Margin, Return on Net Worth). Increase in borrowings, including from related party.

Compliance/Regulatory Risks #

• Description: Risks associated with non-compliance with laws, regulations (especially RBI norms for NBFCs), listing requirements, accounting standards, and ethical codes.
• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Increasing.
• Mitigation Strategies:
  • Adherence to RBI norms (KYC, PMLA, FPC, SBR) stated.
  • Systems devised to ensure compliance with applicable laws.
  • Compliance with Ind AS and Schedule III (Division III) for NBFCs.
  • Secretarial Audit conducted annually.
  • Internal Audit includes compliance review.
  • Audit Committee oversight.
  • Code of Conduct and Insider Trading Code in place.
  • Compliance with Secretarial Standards stated.
  • Related Party Transaction Policy and approval process.
  • Policy against Sexual Harassment & Internal Complaints Committee constituted.
• Control Effectiveness:
  • Statutory Auditors report compliance with Ind AS, Section 133, etc.
  • Secretarial Auditor confirmed compliance framework exists but noted specific delays/observations.
  • Director’s Responsibility Statement affirms systems for legal compliance are adequate and effective.
  • No material fraud reported by auditors.
  • No pending litigations reported.
• Potential Financial Impact: Penalties from regulators (RBI, SEBI, Stock Exchanges), reputational damage, potential restrictions on operations, litigation costs.
• Quantitative Risk Metrics:
  • Secretarial Audit Observations: Delay in DNBS-02 filing, 1-day delay in Shareholding Pattern filing, potential SAST Regulation 3 gross acquisition breach, KYC upload to CICs pending.
  • Related Party Transactions with Mr. Vijay Kothari potentially exceeding 10% of turnover, requiring shareholder approval. Aggregate value up to INR 25 Cr proposed for FY25.
• Year-over-Year Changes: Specific compliance shortcomings highlighted in the FY24 Secretarial Audit report. Increased regulatory focus on NBFC sector. Upcoming applicability of full Corporate Governance norms post-Rights Issue.

Strategic and Management Analysis #

Long-term Strategic Goals and Progress #

The company aims to diversify its business model towards multiple income sources. The future outlook emphasizes leveraging market opportunities. However, specific quantifiable long-term goals or detailed progress metrics are not articulated. The focus is on positioning the company to capitalize on potential growth. Steps taken for improvement in response to inadequate profits include cost control measures.

Competitive Advantages and Market Positioning #

Viji Finance operates as an NBFC, targeting underserved households and businesses. Its competitive positioning relies on advantages such as deeper rural reach, stronger loan origination skills, faster processing times, and streamlined documentation. The company is registered as a Non-Systemically Important Non-Deposit Accepting NBFC (NBFC-BL under Scale Based Regulations).

M&A Strategy and Execution #

The company disposed of its entire equity stake in Viji Housing Finance Limited, effective January 10, 2024. This indicates a strategic decision to exit the housing finance segment or streamline the group structure.

Management’s Track Record in Execution #

Financial performance indicates challenges during FY2023-24. Standalone net profit decreased by 72.70%. Consolidated net profit decreased by 68.13%. Management cites external factors like economic slowdown, market uncertainty, competition, and regulatory pressures. Compliance faced issues, noting delays in submitting regulatory returns and technical non-compliance with SEBI (SAST) Regulations. Steps like cost control were initiated. The successful increase in authorized capital and initiation of a rights issue demonstrate execution capability in capital raising activities.

Capital Allocation Strategy #

The company prioritized resource retention over shareholder distribution, recommending no dividend for FY2023-24. Key capital allocation decisions included:

• Increasing Authorized Share Capital significantly.
• Approving and initiating a Rights Issue to raise equity capital.
• Disposing of the investment in the wholly-owned subsidiary.
• Utilizing debt, including vehicle loans and unsecured, interest-free loans from the Chairman & Managing Director.
• Transferring 20% of net profit to the Statutory Reserve.

Organizational Changes and Their Impact #

Significant changes occurred at the Board level:

• One Independent Director resigned.
• Two new Independent Directors were appointed.
• These changes necessitated the reconstitution of the Audit, Nomination & Remuneration, and Stakeholders Relationship Committees.
• Re-appointment proposals for the Chairman & Managing Director and the Whole Time Director signal leadership continuity.
• No changes occurred in the positions of Chief Financial Officer or Company Secretary during FY24.

ESG Framework Analysis #

Environmental Analysis #

• The Company’s operations are stated as not being energy-intensive. While measures to reduce energy consumption are mentioned, specific metrics, targets, or investments in energy conservation equipment are not disclosed.
• No utilization of alternate energy sources was reported for the financial year.
• Environmental impact is primarily addressed through the assertion of being a non-pollutant service company and encouraging electronic communication.

Social Responsibility Analysis #

• Corporate Social Responsibility (CSR) provisions under Section 135 of the Companies Act, 2013 were not applicable for the financial year due to the company not meeting the specified criteria.
• Compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 is confirmed, with an Internal Complaints Committee constituted and no cases reported during the year.
• Employee relations are reported as positive, with performance evaluations conducted. No specific employee welfare or community engagement programs beyond standard operational requirements are detailed.

Governance Structure and Effectiveness Analysis #

Board Composition #

• As of the report date, the Board comprised six directors, including the Chairman & Managing Director (Promoter), one Whole-Time Director, one Non-Executive Director (Promoter), and three Independent Directors (including two women), meeting basic regulatory requirements for its size. Recent appointments aim to maintain compliance.

Committees #

• Audit, Nomination & Remuneration, Stakeholders Relationship, and a Rights Issue Committee were functional, with compositions primarily aligned with regulatory requirements. Meeting frequencies and attendance are documented.

Independent Directors #

• Declarations of independence were received, and the Board expressed satisfaction with their integrity, expertise, and experience. A familiarization program is in place. Independent Directors held a separate meeting during the year.

Performance Evaluation #

• A formal annual evaluation process for the Board, its committees, and individual directors, including the Chairman, was conducted based on defined criteria.

Related Party Transactions (RPTs) #

• A policy is in place, and transactions are reviewed and approved by the Audit Committee. All reported RPTs were stated to be in the ordinary course of business and at arm’s length. Shareholder approval is sought for material RPTs, specifically an unsecured loan arrangement with the Chairman & Managing Director up to INR 25 Crores for FY 2024-25.

Audits and Compliance #

• Statutory Audit: Unqualified opinion issued on both standalone and consolidated financial statements. The retiring auditor completes their term, and a new auditor is proposed for appointment.
• Secretarial Audit: Generally compliant, but noted delays in filing financial statements (DNBS-02) with RBI and shareholding patterns with exchanges. An observation regarding gross promoter acquisition exceeding 5% under SEBI SAST (though net holding increase was within limits) and pending KYC data upload to CICs was made.
• Internal Audit: An internal auditor is appointed, and the Audit Committee reviews reports. Internal financial controls were deemed adequate by the Board and Statutory Auditors.

Policies #

• Code of Conduct for Board/Senior Management and Code for Prevention of Insider Trading are adopted and available. A Vigil Mechanism (Whistle Blower Policy) is established.

Future #

• Corporate Governance provisions under SEBI LODR Regulation 15, previously not applicable, will become applicable post the Rights Issue concluded in July 2024, requiring enhanced compliance within six months.

Regulatory Compliance and Future Preparations Analysis #

NBFC Compliance #

• The Company operates as a Non-Systemically Important Non-Deposit Accepting NBFC (NBFC-ND-NSI) under RBI regulations and is categorized under the Base Layer (NBFC-BL) as per Scale Based Regulations. Compliance with key RBI norms (KYC, AML, Fair Practice Code) is affirmed. A statutory reserve transfer (20% of net profit) was made as required.

SEBI & Companies Act #

• General compliance is reported, subject to observations in the Secretarial Audit regarding filing timeliness and SAST regulations. Compliance with applicable Secretarial Standards is confirmed.

Financial Reporting #

• Financial statements are prepared under Ind AS as per Division III of Schedule III applicable to NBFCs.

Risk Management #

• A risk management policy and framework are in place, reviewed by the Board. Credit risk, liquidity risk (maturity analysis provided), and market risk (primarily interest rate risk, deemed low due to fixed-rate portfolio) are identified as key areas.

Future Outlook #

• The MD&A acknowledges the evolving regulatory landscape for NBFCs, particularly regarding unsecured lending and AIF exposure, but does not detail specific future preparatory actions beyond ongoing compliance. The primary future outlook focuses on business diversification.

Future Outlook: Viji Finance Limited #

Management Guidance and Assumptions #

Management anticipates increased profitability, driven by strategic initiatives. Key assumptions center on resilient domestic demand, access to funding (Rights Issue), and successful diversification and cost control.

Market Growth Forecasts #

IMF forecasts global economic growth at 3.2% (2024-2025) and Indian growth at 6.8% (2024) and 6.5% (2025). The NBFC sector is crucial for financial inclusion, serving underserved households and businesses.

Planned Strategic Initiatives #

Viji Finance Limited is diversifying its business model. A Rights Issue raised INR 9 Crores (allotted July 3, 2024) to augment capital. The disposal of Viji Housing Finance Limited refocuses on core NBFC activities. Continued adherence to RBI norms (KYC, Fair Practice Code) is integral.

Capital Expenditure Plans #

Capital expenditure focuses on growing the loan portfolio. Additions to Property, Plant, and Equipment (vehicles, computers, office equipment) align with operational needs.

Efficiency Improvement Targets #

Cost control measures are in place to improve operational performance and liquidity. Focus on internal controls, risk management, and regulatory compliance (Scale Based Regulations for NBFC-Base Layer) indicates ongoing efficiency efforts.

Potential Challenges and Opportunities #

Opportunities #

• Significant potential in catering to new-to-credit customers in underserved rural segments.
• NBFCs benefit from operational flexibility, eligibility for 100% FDI, and SARFAESI Act powers.
• Digitization and specialization in niche markets offer future growth.

Challenges #

• Threats from economic slowdowns, market uncertainty, and intense competition.
• Increasingly stringent regulatory landscape (RBI norms on unsecured lending, increased risk weights, restrictions on AIF lending, enhanced consumer protection, data privacy/security).
• Secretarial Audit noted delays in regulatory submissions and a technical breach regarding promoter share acquisition thresholds, indicating compliance challenges.
• Ensuring robust KYC processes and timely data uploads to CICs is critical.

Financial Analysis Report: Viji Finance Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

Financial Statements (Standalone & Consolidated) #

The Independent Auditors (Shyam Nagori & Company) issued an unqualified opinion on both the Standalone and Consolidated Ind AS financial statements for the year ended March 31, 2024. They concluded that the financial statements present a true and fair view in conformity with Indian Accounting Standards (Ind AS) and the Companies Act, 2013.

Key Audit Matters (KAMs) #

The auditors highlighted two KAMs, indicating areas of significant judgment and audit focus:

• Impairment of Financial Assets (Expected Credit Losses - ECL): Significant management judgment is involved in loan staging, grouping, estimating life, incorporating macro-economic factors, and estimating losses, particularly for assets with limited default history.
• IT Systems and Controls: Reliance on IT systems for processing significant transaction volumes makes IT general controls and automated controls crucial for reliable financial reporting.

Internal Financial Controls (IFC) #

The auditors issued an unqualified opinion on the adequacy and operating effectiveness of the company’s internal financial controls over financial reporting as of March 31, 2024.

Secretarial Audit Qualifications/Observations #

The Secretarial Auditor (Ramesh Chandra Bagdi & Associates) noted the following observations for FY 2023-24:

• Delay in submission of the Audited Financial Statement (DNBS-02) for FY 2022-23 to the Reserve Bank of India (RBI).
• One-day delay in submitting the quarterly shareholding pattern (Regulation 31, SEBI LODR).
• Observation regarding gross acquisition of shares by a promoter exceeding 5% during the year under SEBI (SAST) Regulations, 2011, although the total promoter holding did not increase by more than 5% compared to the previous year-end.
• The process of uploading Know Your Customer (KYC) data to Central KYC Registry (CKYCR) or Credit Information Companies (CICs) as per RBI Master Direction is ongoing.

Key Accounting Policies and Changes #

Basis #

Financial statements are prepared under Ind AS, complying with the Companies Act, 2013, and RBI guidelines for NBFCs (Schedule III, Division III format). The historical cost convention is generally used, except for certain financial instruments measured at fair value. The functional and presentation currency is INR.

Key Policies #

• Revenue Recognition: Interest income is recognized on an amortized cost basis using the Effective Interest Rate (EIR) method. Fee income is recognized when measurable and collection is probable.
• Financial Instruments: Classified and measured at Amortized Cost, Fair Value Through Other Comprehensive Income (FVOCI), or Fair Value Through Profit or Loss (FVTPL) based on business model and cash flow characteristics.
• Impairment: Expected Credit Loss (ECL) model applied to financial assets not measured at FVTPL, using a 3-stage approach based on credit risk assessment.
• Property, Plant & Equipment (PPE): Stated at cost less accumulated depreciation (WDV method over useful lives prescribed in Schedule II of the Companies Act).
• Taxes: Current tax based on taxable income; Deferred tax recognized on temporary differences using the liability method.

Changes #

No significant changes in accounting policies were reported for the financial year 2023-24. Policies were consistently applied. The use of accounting software with an audit trail feature, as noted by the auditors, enhances record integrity.

Internal Control Effectiveness #

Both the Board of Directors (in the Directors’ Responsibility Statement and Board’s Report) and the Independent Auditors affirm the existence of an adequate internal financial control system commensurate with the company’s size and operations. The Independent Auditors’ report confirms that these controls were operating effectively as of March 31, 2024.