India's Leading BFSI Companies 2016

Indias Leading

BFSI Companies

2016

Indias Leading BFSI Companies 2016Published in India by Dun & Bradstreet Information Services India Pvt Ltd. Registered OfficeICC Chambers, Saki Vihar Road,Powai, Mumbai - 400072.CIN: U74140MH1997PTC107813Tel: +91 22 6676 5555, 2857 4190 / 92 / 94Fax: +91 22 2857 2060Email: [email protected]: www.dnb.co.in

New Delhi Office1st Floor, Administrative Building,Block E, NSIC - Technical Services Center,Okhla Industrial Estate Phase - III,New Delhi - 110020.Tel: +91 11 4149 7900 / 01Fax: +91 11 4149 7902

Kolkata Office166B, S. P. Mukherjee Road,Merlin Links, Unit 3E, 3rd Floor,Kolkata - 700026.Tel: +91 33 2465 0204Fax: +91 33 2465 0205

Chennai OfficeNew No: 28, Old No: 195,1st Floor, North Usman Road,T. Nagar, Chennai - 600017.Tel: +91 44 2814 2265 / 75Fax: +91 44 2814 2285

Ahmedabad Office801 - 8th Floor, Shapath V,Opp. Karnavati Club,S. G. HighwayAhmedabad 380054.Tel: +91 79 6616 8058 / 59Fax: +91 79 6616 8064

Bengaluru OfficeNo. 7/2 Gajanana Towers,1st Floor, Annaswamy Mudaliar Street,Opp. Ulsoor Lake,Bengaluru - 560042.Tel: +91 80 4250 3500Fax: +91 80 4350 3540

Hyderabad Office504, 5th Floor,Babukhans Millennium Centre,6-3-1099 / 1100, Somajiguda,Hyderabad - 500082.Tel: +91 40 6662 4102, 6651 4102Fax: +91 40 6661 9358

Editor Pawan Bindal

Sub-Editor Naina Acharya, Rohit Singh, Yogesh Jambhale, Mihir Shah

Editorial Team Swatti Mathur, Aakanksha Sawant, Christopher Dsouza, Rohit Pawar, Amol Lad

Sales Head Jayesh Bahadur

Sales Team Suhail Aboli, Asha Nair, Tanya Bedi, Apoorwa Tyagi, Nittin Maheshwari, Sunena Jain, Sapna Mishra, Nehal Khosla, Aloka Chatterjea, Sindhu Ravi, Ajith Alex George, Girish Menon, Sandeep Parakkal

Operations Team Nadeem Kazi, Prem Kumar, Ankur Singh, Sumit Sakhrani, Rajesh Gupta, Parth Desai, Parmeshwar More

Design Team Mohan Chilvery, Tushar Awate, Aditya Salvi, Sonal Gangnaik, Shilpa Chandolikar

All rights reservedExcept for any fair dealing for the purpose of private study, research, criticism or review as permitted under the Copyright Act, no part or portion of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher.

DISCLAIMERThis publication is circulated by Dun & Bradstreet to the select recipients and at Dun & Bradstreets sole discretion. The publication shall neither be reproduced, republished, publicly circulated, disclosed nor shall be copied, modified, redistributed, or otherwise made available to any person or entity, in any form whatsoever including by way of caching, framing or similar means, whether in part or whole, without the prior written consent of authorized representatives of Dun & Bradstreet. This publication is meant for the fair and internal use of the recipients. Dun & Bradstreet provides no advice or endorsement of any kind through this publication. This publication does not constitute any recommendation by Dun & Bradstreet to enter into any transaction or follow any course of action. All decisions taken by the recipients shall be based solely on the recipients evaluation of circumstances and objectives. Dun & Bradstreet recommends that the recipient independently verify the accuracy of the contents of the publication, upon which it intends to rely. This publication contains information compiled from various sources over which Dun & Bradstreet may not have control and / or which may not have been verified by Dun & Bradstreet, unless otherwise expressly indicated in the publication. Dun & Bradstreet, therefore, shall not be responsible for any accuracy, completeness or timeliness of the information or analysis in this publication. Dun & Bradstreet thus, expressly disclaims any and all responsibilities and liabilities arising out of the publication or its use by the recipient or any person or entity.

Indias Leading BFSI Companies 20168th EditionISBN 978-93-82060-88-8

ContentsPreface .................................................................................................................. I

Foreword ............................................................................................................ III

Executive Summary .............................................................................................V

Methodology .....................................................................................................VII

Definitions & Calculations .................................................................................. IX

Sector Overview

Banks ..........................................................................................................XV

NBFCs & FIs ............................................................................................. XXV

Securities Market .................................................................................. XXXV

Mutual Funds ........................................................................................... XLV

Insurance .................................................................................................. LIII

Interviews .............................................................................................. I - 1 - I - 5

Listing .................................................................................................... L-1 - L-10

Profiles

Banks .......................................................................................................1-30

NBFCs / FIs / Financial Services .............................................................33-72

Broking ..................................................................................................75-84

Asset Management Companies ............................................................87-99

Life Insurance ....................................................................................103-116

Non-Life Insurance ............................................................................119-134

Abbreviation .............................................................................................137-142

Index .........................................................................................................145-149

Preface

I

Dun & Bradstreet India is pleased to present the 2016 edition of its premier publication Indias Leading BFSI Companies 2016. This publication intends to provide useful and comprehensive information on the Indian BFSI (banking, financial services, and insurance) sector as well as highlights the recent developments and key trends shaping the sector. The key feature of the 2016 issue, gives a glimpse of the underlying opportunities in the financial sector as well as possible means for taking advantage of these opportunities.

The BFSI sector in India is diverse and contributes significantly to the growth of the economy. However, the sector still largely remains untapped with key segments of the sector such as banking which is largely underserved. The bank account penetration in India is still low as compared to other developing countries. The life insurance penetration in India stood at merely 3.3% of GDP as compared to around 7.3% of the US. Further, less than 5% of the Indian households savings are invested in share & debentures.

There lies immense opportunity to cover the huge untapped market of the BFSI sector. E-commerce which has changed the way business is conducted across the world and is expected to be one of the drivers for the growth of this sector. The ease and convenience to buying a financial product online has revolutionised the manner in which products are sold across the world. A plethora of financial products are being sold and delivered using the electronic platform to millions of customer in India. The increasing adoption of e-commerce in the near future will bring about a big change in the way the industry conducts its business and engages with its customers. The companies in the banking and financial services are also increasingly investing in e-commerce to lower the cost of transaction and bring higher efficiency and greater reach.

Various regulatory bodies are initiating a host of measures for the growth of e-commerce in the financial sector. The Reserve Bank of India is considering ways to link the e-commerce platform to the banking sector, similar to linking mobile phone operators to the banking system through the soon-to-be launched payment banks. The IRDA has formed two committees to explore and suggest ways to promote e-commerce in the insurance sector in order to increase penetration and bring about financial inclusion. With the positive impact of technology on the business models and emerging growth opportunities, the future of the BFSI sector looks buoyant and moving towards robust growth.

The publication provides an in-depth analysis of the BFSI sector in India and showcases profiles of leading players in the banking, NBFC, mutual fund, broking and insurance sectors. We, at Dun & Bradstreet are extremely optimistic about the progress of this sector and will continue to track it and aim to facilitate informed business decisions. I hope you will enjoy reading Indias Leading BFSI Companies 2016 and look forward to your suggestions.

Kaushal SampatPresident & Managing Director - IndiaDun & Bradstreet

Preface

Foreword

III

Dun and Bradstreet India is pleased to announce the launch of the eighth edition in the series of the publication on the Indian banking, financial services, and insurance (BFSI) sector Indias Leading BFSI Companies 2016. The publication features 310 leading companies in the BFSI industry across various segments namely banks, insurance, NBFCs, broking and mutual funds.

The 7.4% growth in GVA (gross value added), during Q2 FY16, supplemented by heightened industrial activity and pick up in investment demand helped India to overtake Chinas growth rate. Indias growth prospects were further elevated with foreign direct investment (FDI) related reforms touching upon 15 major sectors of the economy.

The BFSI sector is largely impacted by macro-economic conditions which as a consequence showed positive movement during the year. The first three quarters of FY16 witnessed assets under management (AUM) reaching almost ` 13 trillion, showcasing a strong growth of 21.3% in Dec 2015 as compared to Dec-14. This was the fastest growth registered by the industry, after a four year slowdown period that started in FY09 and dented the AUM growth momentum till FY12. The governments Pradhan Mantri Jan Dhan Yojana to ensure access to various financial services, need based credit, insurance and pension facility for every household resulted in opening of 208.7 million bank accounts (as on Feb 15, 2016).

The government and regulators are also taking positive steps to strengthen the sector. The Reserve Bank of India has granted in-principle approval to 11 applicants to set up payment banks in India and 10 applicants to set up small banks in India. Moreover, the Government of Indias launch of the Digital India program is also expected to offer enormous benefits to the Indian financial sector.

The progress of the financial sector is crucial to Indias economic growth. The publication Indias Leading BFSI Companies 2016 showcases the performance of Indias leading BFSI sector companies. Further, given Dun & Bradstreets extensive market reach and global footprint, companies featuring in this publication would benefit from the attention of global leaders in the financial markets.

We hope you enjoy reading the publication, Indias Leading BFSI Companies 2016 and aspire to continue to provide you with well-researched and reliable information on the BFSI industry in the future. We look forward to receiving your valuable feedback and suggestions.

Pawan Bindal Director Dun & Bradstreet India

Foreword

Executive Summary

V

Dun & Bradstreet, the worlds leading provider of business information, knowledge, and insight, has been tracking the BFSI sector for the past seven years through its publication titled Indias Leading BFSI Companies. The eighth edition of Dun & Bradstreets core intellectual property Indias Leading BFSI Companies 2016 highlights the contribution of key stakeholders of the BFSI sector across India and the growth of the sector. Further, it identifies the key challenges, faced by stakeholders, and key trends influencing the BFSI sector. The publication profiles the leading players of the BFSI sector with an annual total income of ` 250 million and above in FY15. Accordingly, the publication profiles 310 companies comprising 83 banks, 120 non-banking financial companies, 51 insurance companies, 29 asset management companies, and 27 broking companies.

Each year, the Indias Leading BFSI Companies publication is associated with a theme. In this context, the theme for this years edition is Exploring the Underlying Opportunities in the Financial Services Sector. There is a huge untapped market which offers enormous opportunities. With continual technological changes the sector is already witnessing disruptive innovations and BFSI players will have to rethink their business models and adopt innovative delivery channels to respond to the needs of increasingly demanding digital customer.

Following are some of the key highlights in this publication:

As on 2014, India ranked 11th among 88 countries in the life insurance business and 20th in global non-life insurance markets. In terms of premium volume, the country is the fifteenth largest insurance market in the world. During Mar-Sep 2015, foreign direct investment in the insurance sector stood at US$ 341 million displaying a stupendous growth of 152% compared to the same period last year

The asset base of mutual fund industry surged nearly ` 3 trillion in FY15, crossing the ` 10 trillion benchmark. The countrys fund houses together saw a growth of 33.2% in AUM to end the year FY15 at ` 10.8 trillion. The first three quarters of FY16 witnessed AUM reaching almost ` 13 trillion, showcasing a strong growth of 21.3% in Dec 2015 as compared to Dec-14

The aggregate trading turnover of the cash segment on both exchanges taken together remained largely unchanged during FY11-15, having increased marginally from ` 46.8 trillion in FY11 to ` 51.8 trillion in FY15. On the other hand, trading in the derivatives segment has seen a manifold growth over the last five years. The aggregate trading turnover (derivatives) on both exchanges taken together grew from ` 292.5 trillion in FY11 to ` 759.7 trillion in FY15

Deteriorating asset quality has emerged to be a major concern for the domestic banking industry. The gross non-performing advances (GNPAs) of all SCBs as a percentage of gross advances grew to 4.6% in March 2015 from 4.1% in March 2014. The net non-performing advances (NNPAs) as a percentage of the total net advances for all SCBs grew from 2.2% as on Mar 2014 to 2.5% as on Mar 2015

As at the end of FY15, balance sheet size of NBFC-D stood at ` 1,925 billion registering a marginal increase of around 2% y-o-y. The balance sheet size of NBFCs-ND-SI grew considerably by 15.9% y-o-y and stood at ` 14,166 billion as at end-Mar 2015

Digital transformation is expected to catalyze the expansion and growth of the BFSI sector. The BFSI sector in India will continue to undergo rapid change and the vision of complete digitization will soon become a reality in the years to come. Dun & Bradstreet will endeavor to keep track of various developments in this sector to make this publication a ready reference tool.

Naina R AcharyaDeputy Leader - OperationsEconomic Analysis GroupDun & Bradstreet India

Executive Summary

Methodology

VII

For the purpose of the publication, Indias Leading BFSI Companies 2016, the BFSI sector has been divided into four key segments, viz; banking - only scheduled commercial banks (SCBs) based on the RBI enumeration of SCBs as on Mar 2014; companies providing financial services falling under NIC Codes 64, 65 & 66; asset management companies as registered with Association of Mutual Funds in India (AMFI); and insurance companies that are registered with Insurance Regulatory and Development Authority (IRDA), in accordance with the Insurance Act, 1938.

Adequate measures are undertaken, such as an advertisement in the All India edition of a prominent business daily, to ensure that the publication covers most companies from the BFSI sector from across the country. In addition, emails and social networking was also entailed for reaching out to Dun & Bradstreet Indias in-house database and companies registered with the respective regulatory bodies and industry associations. To ensure that all the information contained in this publication is verified and authenticated, companies that have not responded with financials statements, and/or their information is not available in public domain are excluded. In addition, if the annual reports of companies are not available to Dun & Bradstreet at the time of compiling this publication, then those companies have also been excluded.

As a basic selection criterion, companies with a standalone total income of ` 250 mn and above in FY15 are featured in this publication. Further, subsidiaries and associate companies satisfying the eligibility criteria have also been featured. We have also considered additional exclusion criteria of the corporate governance record (with a focus on NBFCs, FIs, Financial Services & Broking Companies) while compiling this publication to arrive at the final list of Indias Leading BFSI Companies 2016. Audited Financial statements considered were for the period July 31, 2014 and June 30, 2015 have been used as the source of information for this publication. The various financial computations are based on Dun & Bradstreets methodology and have been explicitly explained in the Definitions and Calculations section. For companies where the published financial statement is for a period other than 12 months, the financials are annualized for the sole purpose of shortlisting and profiling. In general, all information used in the publication is from publically available sources. Financials of the companies have been sourced from Annual Reports or Financial Statements or regulatory authority (IRDA, RBI, and AMFI). In case of certain subsidiaries, financials have been procured from annual reports of their respective parent companies.

Information pertaining to SCBs has been primarily sourced and compiled from RBI, annual reports (ARs) and Websites of banks. Information related to financials and infrastructure of the banks has been taken purely from various publications provided by the RBI and pertains to March 2015.

The information pertaining to financial services companies, insurers and AMCs have been sourced and compiled from Questionnaires circulated and administered by Dun & Bradstreet India; Data provided by the respective regulatory authority (IRDA and AMFI) through its Websites and various

publications; Data available from respective companies Website and ARs/Financial statements, draft red herring prospectuses; Government of India websites such as Reserve Bank of India, Securities and Exchange Board of India, Economic

Survey, Central Statistical Organisation, Planning Commission, etc.

The total income pertaining to insurance companies has been calculated by taking financials from the annual reports and public disclosures of respective insurers. Other financial information pertaining to insurers has been taken from IRDAs FY15 AR. The Quarter Ended AAUM pertaining to AMCs has been consideredfrom AMFI newsletters while other financial information is taken from their respective ARs/financial statements. The financial information for financial services companies, NBFCs, FIs, broking companies have been taken from ARs/Financial Statements.

A standardized format has been used for reporting the information aboutthe companies. The editorial team would appreciate if readers would keep Dun & Bradstreet India regularly updated regarding any changes in their companies, as and when it occurs. Each company featured in the publication has been allotted a unique identification number (D-U-N-S - Data Universal Numbering System). This will help readers locate and obtain full-fledged informative reports on these companies from the Dun & Bradstreet India database.

The editorial team is confident that Indias Leading BFSI Companies 2016 will prove a useful reference tool for information on the BFSI sector. We would be pleased to receive your invaluable feedback and suggestions, which we can incorporate in the next edition. Your satisfaction remains our goal in Dun & Bradstreet Indias journey towards excellence.

Methodology

VIII

Definitions & Calculations

IX

Calculations

Total Advances = Bills purchased & discounted (Short term) + Cash credits, overdrafts & loans (Short term) + Term loans

Total Deposits = Demand Deposits + Savings Bank Deposit + Term Deposits

Total Business = Total Deposits + Total Advances

Net Profit Margin (NPM) = Net Profit/Total Income*100

Total First Year Premiums (FYP) = FYP + Single Premiums

Total Income for Insurance companies = Premiums earned - net (policy holders account) + Income from Investments (policy holders account) + other income (policy holders account) + income from investments (shareholders account) + other income and miscellaneous receipts (shareholders account)

Data Sources

Total Income for banks taken as per RBI and for other companies as per the ARs/Financial Statements/Public Disclosures

Net Profit/Loss for banks taken as per RBI and for other companies as per the ARs (except for Insurance companies)

Total Deposits, Total Advances, CRAR - Basel III and Net NPA/Net Advances Ratio for banks taken as per RBI

AAUM (Quarter Ended) of asset management companies taken from AMFI as per data disclosed by the AMCs

Total Premium Earned, Share of Linked Premiums / Total Premiums, AUM and Solvency Ratio of Life Insurance companies taken as per the data from IRDA AR 2014-15

AUM, Solvency Ratio and Incurred Claims Ratio of Non-life insurance companies taken as per the data from IRDA AR 2014-15

Net Premiums Earned of Non-life insurance companies taken as per ARs/Financial Statements/Public Disclosures

LP Loss to Profit

LL Loss to Loss

PL Profit to Loss

N.A Not Available

Definitions & Calculations

XVI

Global Banking Scenario

The global financial crisis of 2008 exposed the weakness in the global financial system. Since the crisis, tighter regulations on banks, both general and specific to their international operations, combined with a need to clean up balance sheets have induced banks to cut back their international lending. International banks, especially European banks have reduced their cross-border lending (direct lending to non-affiliated entities in other countries) and shifted their focus more on multinational banking with more local and locally funded operations.

During the global financial crisis, a number of banks in many countries either failed or received taxpayer-funded bailouts. Thus to prevent this type of global situation further in the future, a series of significant regulatory changes to the international banking sector were introduced. These regulatory changes are made to help manage systemic risk by strengthening capital, liquidity and leverage requirements for all banks.

As a part of regulatory change, Basel III, a framework which sets out global regulatory rules for bank capital and liquidity was developed and agreed by The Basel Committee on Banking Supervision. Subsequently, the phase-in of Basel III capital rules began in 2013. While these rules are being set internationally, the pace of domestic implementation of these is not consistent around the world but most likely these will come in place globally by 2019.

Basel III Capital rules Under this rule, the banks are required to hold capital

equal to at least 10.5% of their total risk-weighted assets by 2019. The global systemically important banks (G-SIBs) and domestic systemically important banks (D-SIBs) are required to hold additional capital as failure of any from these set of banks can have a significant impact on global and domestic economies.

Basel III Liquidity rules These rules are set to ensure that banks have sufficient,

high-quality liquid assets to withstand a period of economic stress. The Basel Committee has developed two minimum rules for liquidity which includes the Liquidity Coverage Ratio (LCR) having a 30-day horizon

Banks

and the Net Stable Funding Ratio (NSFR) having a time horizon of one year. LCR requirements will be phased in between 2015 and 2019 while NSFR will be phased out by 2018.

Over 90% of the banks worldwide achieve capital ratio target of 7%Banks worldwide went on an overdrive boosting their capital ratios, eventually outpacing the targets implied in the Basel III phase-in arrangements. As per the study conducted by Basel Committee on Banking Supervision, all the 97 banks in the large internationally active banks group (banks having Tier 1 capital of more than Euro 3 bn) displayed a Common Equity Tier 1 (CET1) ratio under Basel III above both the 4.5% minimum capital requirement and the 7% target ratio (the minimum capital requirement plus the capital conservation buffer). By June 30 2014, large internationally active banks, as a group, increased the average ratio of their CET1 capital to risk weighed assets (RWAs) to 10.8% from 9.5% as on June 30 2013. Of the 114 banks in the other banks group, 99% reported a CET1 ratio equal to or higher than 4.5%; while 93% also achieved the target of 7%. Other banks, as a group also reached the same average capital ratio levels of 11.2% as on Jun 31 2014 as compared to 9.1% as on June 31 2013.

The major growth driver for the steady improvements in the regulatory capital positions of both advanced economy and emerging market economies is the higher profits. Retained earnings were one of the major contributing factors for 45% increase in large internationally active banks CET1 capital between mid-2011 and mid-2014. Increased capital coupled with declining risk-weighted assets has helped the CET1 regulatory ratios increase from 7.1% to 10.8% over the same period.

Continued policy improvements and economic reforms coupled with greater efforts by the banks to strengthen their capital position have led to the improvement in capital adequacy levels in various economies. Banks in few of the advanced economies like UK, Canada and Germany exhibited decline in their capital adequacy levels. Most of the Emerging market and developing economies including India, China and Brazil with the exception of Russia exhibited increase in their capital adequacy levels.

XVII

Among the BRICS nation, the aggregate capital adequacy ratio of Russia decreased from 13.5% in 2013 to 12.5% in 2014 on account of increasing NPAs from 6% in 2013 to 6.7% in 2014. Other BRICS nations including India, China, Brazil and South Africa demonstrated increase in their capital adequacy ratio from 12.3%, 12.2%, 16.1% and 12.3% in 2013 to 12.5%, 12.4%, 16.7% and 12.5% in 2014 respectively.

Ratio of bank regulatory capital to risk weighted assets (%)

Country 2010 2011 2012 2013 2014

Advanced Economies

Australia 11.6 11.8 12.1 11.8 12.4

Canada 15.6 15.9 16.2 14.3 14.2

Japan 13.3 13.8 14.2 15.2 15.6

United Kingdom 15.9 15.7 17.1 19.6 16.6

United States 14.8 14.7 14.5 14.4 14.4

Euro Area

Spain 11.9 12.1 11.6 13.3 13.7

Greece 12.3 - 9.6 13.5 15.4

Italy 12.1 12.7 13.4 13.7 15

Portugal 10.3 9.8 12.6 13.3 12

Ireland 14.5 18.9 19.2 20.5 22.9

BRICS

India 15.2 13.1 13.1 12.3 12.5

China 12.2 12.7 13.3 12.2 12.4

Russia 18.1 14.7 13.7 13.5 12.5

Brazil 16.9 16.3 16.4 16.1 16.7

South Africa 15.2 13.1 13.1 12.3 12.5Source: FSI Tables, April 2014 Database, IMF

Note: Data available for India, China, Russia, Spain, Brazil, Australia and Canada pertain to the year ended December; For United States, Greece, Ireland and Japan it pertains to year ended September; For United Kingdom, Italy and Portugal, it pertains to the year ended June and For South Africa, it pertains to the year ended January for the respective years

Return on Assets remain stable in most of the economiesThe Return on Assets (RoA), an indicator of banking systems profitability showed a mixed trend across the economies. Among advanced economies, few economies like the US and UK displayed deterioration in RoA while other economies like Australia, Canada and Japan demonstrated a stable to modest growth in their RoA. Among the Euro Zone, economies like Greece, Portugal and Slovenia has reported negative return on assets due to impact on profitability driven by weak economic activities.

Amongst the BRICS countries, all economies except Russia have shown stable RoA in 2014. Russia has reported sharp decline in RoA in 2014 as compared to 2013 due to increase in NPA (increased from 6% in 2013 to 6.7% in 2014) and reduction in profitability.

NPAs on the rise in Euro zoneWith the economy bouncing back after the crisis in few advanced countries, the asset quality of advanced economies like the US, UK has improved over the period of last four years. However, banks in the Euro Zone remain burdened by the large and growing stock of non-performing assets (NPAs), which are largely the outcome of corporate debt overhang and the economic slowdown. Asset quality continued to deteriorate in the euro area as a whole in 2014 with total non-performing loans standing at more than 900 billion.

Furthermore, the stock of non-performing loans in the euro area is unevenly distributed, with about two-thirds located in six euro area countries viz Cyprus, Greece, Ireland, Italy, Portugal and Slovenia. By the end of 2014, these six euro area countries witnessed the soaring of their NPAs-to-total loans ratio to very high levels, even to the extent of 10% or more. The situation was the worst in Cyprus with over 45% of its loans marked as NPAs followed by Greece, with almost one-thirds (34.3%) of its total loans marked as NPAs. Ireland (18.7%), Slovenia (11.7%), Cyprus (16.6%), Italy (17.3%) and Portugal (11.2%) also witnessed NPAs levels of more than 10%.

On the other hand, banks in the US and UK made steady progress in managing their NPAs. The US banking sector posted steady declines in the aggregate NPA ratio, which fell to 2% by 2014 from 4.4% in 2010. The UKs banking sector also posted declines in the aggregate NPA ratio from 4% in 2010 to 2.7% in 2014.

Among the BRICS nation, the aggregate NPA ratio of South Africa banking decreased from 3.6% in 2013 to 3.3% in 2014 and Brazils NPA ratio remained at the same level at 2.9%. Other BRICS nations including India, China and Russia demonstrated increase in their NPAs with their NPA ratio increasing from 4%, 1% and 6% in 2013 to 4.3%, 1.1% and 6.7% in 2014 respectively.

XVIII

Ratio of Non-Performing Loans to Total Loans (%)

Country 2010 2011 2012 2013 2014

Advanced Economies

Australia 2.1 2 1.8 1.5 1.1

Canada 1.2 0.8 0.7 0.6 0.5

Japan 2.5 2.4 2.4 2.3 1.9

United Kingdom 4 4 3.6 3.1 2.7

United States 4.4 3.8 3.3 2.5 2

Euro Area

Spain 4.7 6 7.5 9.4 8.5

Greece 9.1 14.4 23.3 31.9 34.3

Italy 10 11.7 13.7 16.5 17.3

Portugal 5.2 7.5 9.8 10.6 11.2

Ireland 13 16.1 25 25.7 18.7

BRICS

India 2.4 2.7 3.4 4 4.3

China 1.1 1 1 1 1.1

Russia 8.2 6.6 6 6 6.7

Brazil 3.1 3.5 3.4 2.9 2.9

South Africa 5.8 4.7 4 3.6 3.3Source: FSI Tables, April 2014 Database, IMF

Note: Data available for India, China, Russia, Spain, Brazil, Australia and Canada pertain to the year ended December; For United States, Greece, Ireland and Japan it pertains to year ended September; For United Kingdom, Italy and Portugal, it pertains to the year ended June and For South Africa, it pertains to the year ended January for the respective years

The Way ForwardIn advanced economies, to support the economic growth and to bring inflation to the target level, accommodative monetary policy needs to be continued. The countries where fiscal position is in control should increase the investment in infrastructure and the countries with high public debt should balance between fiscal management and improving the economic activity.

The Euro zone is recovering but the recovery is turning out to be weaker than expected. The investments are still well below pre-crisis levels and high unemployment, large debt burdens; higher real interest rates in stressed economies, weak banks and contracting credit are continuously posing obstacles to the resurgence of domestic demand. The Euro Zone also requires the repairing of bank balance sheets with implementation of a mechanism which can facilitate credit flowing across the borders and reducing financial fragmentation.

In emerging market and developing, budget deficits and public debt levels are generally lower than in developed economies. As commodity prices are expected to remain

weak, government revenues of the countries whose GDP is dependent on commodities is likely to remain subdued. Despite comparatively low public debt levels, a more cautious attitude towards sovereign borrowing should be adopted by many developing countries. Higher benchmark interest rates, volatile exchange rate and any change in appetite of investor to invest in emerging markets may hamper the ability of developing countries to refinance ww

Indian Banking industry

Overview on Indian Banking IndustryThe Indian banking industry plays a key role in the economic development and growth of the country and is the most dominant segment of the financial sector. The Indian banking sector comprises of different types of institutions catering to the diverse banking needs of different sectors of the economy. Banks operational in India can be broadly classified as commercial and co-operative banks. Commercial banks constitute the largest segment of the banking system.

Trends in the Banking Industry for the past 3 years

Total credit off-take of all scheduled commercial banks (SCBs) increased at a compound annual growth rate (CAGR) of 12% during FY12-FY15 to reach ` 65,364.20 bn as on Mar 2015

Total deposits of all SCBs increased at a CAGR of 13% during FY12-FY15 to reach ` 85,332.9 bn as on Mar 2015

The share of deposits-GDP (at current 2011-12 prices) rose from 66.9% in FY12 to 68% in FY15

Bank Credit to GDP (at current 2011-12 prices) stood at approximately 52% during FY12-FY15

Key Factors that impacted the performance of the banking industry

FY15 was characterised by slight improvement in economic growth with Gross Domestic Product (GDP) at constant prices (2011-12) recording 7.3% growth as per CSO, MOSPI against 6.9% recorded in FY14

High inflation over the past few years has been one of the major concerns for the economy. The Reserve Bank of India (RBI) had targeted to keep CPI below 8% by Jan 2015 and below 6% by Jan 2016. The Reserve Bank of India (RBI) adopted the new CPI (combined) as the key measure of inflation, maintained its disinflationary policy stance and was able to bring Consumer Price Index (CPI) down to 5.25% for Mar 2015 as compared to 8.31% in Mar 2014

XIX

The RBI revised its liquidity management framework from Sep 5, 2014, with more frequent 14-day term repos and daily overnight variable rate repo operations, to ensure flexibility, transparency and predictability in liquidity management operations

With the pick-up in economic growth, Index of Industrial Production (IIP) grew from a decline of 0.1% during FY14 to 2.8% in FY15 due to decline in inflation and improvement in business sentiments

During FY15, banks reduced deposit rates on various maturities driven by decline in inflation. Deposit rate for more than one year maturity dropped from 8.00%-9.25% in FY14 to 8.00%-8.75% in FY15

Base rate remained steady at 10.00%-10.25% during FY15

The RBI reduced repo rate by 50 bps (25 bps each) since Jan 2015 from 8% to 7.5% as on Mar 2015 to improve credit off-take in the system

SLR was reduced by 50 bps in Q4 FY15 from 22.0% to 21.5%

Credit and deposit growth continued to remain sluggishThe growth in aggregate deposits moderated to 11.4% in FY15 from 14.1% in FY14 due to lower deposit mobilization as well as base effect i.e. high accretion to NRI deposits owing to fresh foreign currency non-resident account (banks) (FCNR (B)) deposits mobilized under the swap scheme during Sep to Nov 2013 to tide over the external financing requirements. Further, during FY15, banks reduced deposit rates on various maturities which impacted the growth of aggregate deposits.

Similarly, growth of overall bank credit also decelerated in FY15. The increase in nonperforming assets (NPAs) and corporate debt restructuring emerged to be major concerns for the economy during 2015. The corporate sectors preference for raising finances through issuance of commercial papers (CP) and external commercial borrowings (ECBs) also seemed to have impacted the credit off-take growth. Consequently, growth in credit off-take of all SCBs decelerated to nearly 9.5% in FY15 from 13.9% in FY14. Increase in risk aversion due to deterioration in asset quality and availability of alternative sources of funds resulted in moderation in credit off-take.

Trends in Credit-off take and Deposits Growth (y-o-y)

Source: RBI and Dun & Bradstreet Research

CRAR (Basel III) for all SCBs stood at a comfortable level of 13% during FY15The RBI implemented the Basel-III capital regulation to enhance SCBs ability to absorb shocks from financial and economic stress. The RBI extended the end date for full implementation to Mar 31, 2019. The regulatory requirement for capital to risk-weighted assets ratio (CRAR) Basel III stood at 9% for FY15.

The CRAR of SCBs though met the regulatory requirement, declined marginally to 12.9% in Mar 2015 from 13.02% in Mar 2014. Public sector banks (PSBs) recorded the lowest CRAR among all bank-groups. Moving ahead the banking industry, especially PSBs will require substantial capital to meet regulatory requirements with respect to additional capital buffers.

Asset quality of all SCBs continued to deteriorateDeteriorating asset quality has emerged to be a major concern for the domestic banking industry. The gross non-performing advances (GNPAs) of all SCBs as a percentage of gross advances grew to 4.6% in Mar 2015 from 4.1% in Mar 2014. The net non-performing advances (NNPAs) as a percentage of the total net advances for all SCBs grew from 2.2% as on Mar 2014 to 2.5% as on Mar 2015.

XX

GNPA ratio (%)


Continued pressure on profitability of SCBs eased during FY15Net Interest Income (NII) recorded decelerated growth of 9.3% in FY15 as compared to 11.7% in FY14. The share of NII to total operating income (TOI) of all SCBs dropped to 69.5% in FY15 from 71.1% in FY14.

Trends in net profit growth y-o-y


Net profit growth which was showing a downward trend since FY11 improved significantly in FY15. Net profit recorded significant growth of 11.4% during FY15 compared to a decline of 14.1% during FY14. Some significant factors attributing to this growth included the impact of base effect, increase in treasury gains and write back of excess provisions held in investment portfolio.

Focus on Financial Inclusion to continue to improve banking accessibility in rural areasThe RBI has advised domestic banks to adopt a structured approach to financial inclusion (FI) through preparation of board approved FIPs. The first phase of FIPs was implemented over 2010-13. Banks were advised to prepare fresh three-year FIPs for 2013-16 with the focus on enhancing the volume of transactions in the large number of accounts opened. The launch of the FIP has aided in growth of banking outlets in villages, grant of credit and deployment of ATMs in rural areas.

Several policies have been implemented to promote financial inclusion such as the launch of the Pradhan Mantri Jan Dhan Yojana (PMJDY) in Aug 2014 and the RuPay Card - a payment solution. The Yojana envisions universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit and insurance. PMJDYs benefits include a RuPay debit card, 1 lakh accident insurance cover and an additional 30,000 life insurance cover. It is a platform for Direct Benefits Transfer (DBT) which will help plug leakages in subsidies.

As on Jan 2015, 123.1 mn bank accounts have been opened under PMJDY, of which 73.6 mn are in rural areas and 49.5 mn in urban areas. Under the PMJDY, 67.5% of the accounts as on Jan 2015 are with zero balance. The total number of banking outlets, opening of BSBDAs and small credits have grown significantly during FY15 due to PMJDY.

XXI

Progress on financial inclusion by banks

Particular Year Ended March 10Year Ended March 14

Year Ended March 15

Progess April 14 - March 15

Banking Outlets In Villages - Branches 33,378.0 46,126.0 49,965.0 3,839.0

Banking Outlets In Villages - BCs 34,174.0 333,845.0 499,587.0 165,742.0

Banking Outlets In Villages - Other Modes 142.0 3,833.0 4,552.0 719.0

Banking Outlets In Villages - Total 67,694.0 383,804.0 554,104.0 170,300.0

Urban Locations covered through BCs 447.0 60,730.0 96,847.0 36,117.0

BSBDA-Through Branches (Number) 60.2 126.0 210.2 84.2

BSBDA-Through Branches (Amount) 44.3 273.3 363.7 90.4

BSBDA-Through BCs (Number) 13.3 116.9 187.8 70.9

BSBDA-Through BCs (Amount) 10.7 39.0 74.6 35.6

BSBDA-Total (Numbers) 73.5 243.0 398.0 155.0

BSBDA-Total (Amount) 55.0 312.2 438.3 126.0

OD facility availed in BSBDAs (Number) 0.2 5.9 7.6 1.7

OD facility availed in BSBDAs (Amount) 0.1 16.0 19.9 3.9

KCCs - Total (Number) 24.3 39.9 42.6 2.6

KCCs - Total (Amount) 1,240.0 3,684.5 4,430.3 745.8

GCCs - Total (Number) 1.4 7.4 9.2 1.8

GCCs - Total (Amout) 35.1 1,096.9 1,301.6 204.7

ICT A/Cs-BC-Total Transaction (Number) 26.5 328.6 477.0 477.0

ICT A/Cs-BC-Total Transaction (Amount) 6.9 524.4 859.8 859.8Source: RBI

Banks recorded maximum addition of ATMs and offices in rural areas for inclusive growth in FY15Banks are increasingly adding branches and ATMs in rural areas to tap these markets and for inclusive growth. Total number of ATMs in India has grown to 181,252 as on Mar 2015 from 74,505 as on Mar 2011. As on Mar 2015, ATMs of all SCBs in rural and semi urban areas accounted for 44% share of the total ATMs in the country compared to 41.6% as on Mar 2014. In addition of all the ATMs that were opened in FY15, around 39% were in rural areas and 24% in semi-urban areas.

Total number of bank offices in India has grown to 125,863 as on Mar 2015 from 89,110 as on Mar 2011. Offices in rural areas formed the largest share of 38% in FY15 along with the highest addition in the branch network during FY15, both in absolute and percentage terms in rural areas.

Penetration of electronic payment modes is on the riseThe RBI enacted Payment and Settlement Systems Act 2007 (PSS Act) to provide sound legal basis for the regulation and supervision of payment systems in India. To make the PSS Act more effective, amendments to provide finality to the determination of the payment obligations and settlement instructions between a central counter party (the system provider) and system participants in the event of insolvency,

dissolution, or winding up of a central counter party have been added. The Payment and Settlement Systems (Amendment) Bill 2014 has been passed by the Lok Sabha in the winter Session of 2014 and was passed by the Rajya Sabha in Apr 2015.

The RBI to promote electronic payments in the country has continued its efforts in making the payment systems safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards. Various initiatives for infrastructure enhancements have been undertaken including implementation of Trade Receivables and Discounting System and the Bharat Bill Payment System.

The continued trend of greater acceptance in electronic payments over paper cheques was also seen during FY15. Nearly 90% of the total settlement volumes have been carried out through retail electronic modes as on Aug 2014. Transactions through RTGS have grown 14.4% and 2.7%, in volume and value terms respectively in FY15. Retail electronic segment saw growth of 52.25% in volume and 36.59% in value during FY15. NEFT volumes and values rose 40.3% and 36.58% respectively, during FY15. Debit card usage has registered a growth of 16.36% in volume whereas credit card witnessed growth of 20.97% in FY15.

XXII

Distribution of settlement systems (Percentage share in total by value) Distribution of settlement systems (Percentage share in total by volume)


In volume terms, the no. of transactions handled through RTGS has increased to 92.78 mn during FY15 from 81.1 mn in FY14. In value terms, RTGS transactions have increased from ` 905 tn in FY14 to ` 929 tn in FY15. Under the retail electronic payments the volume handled grew from 1,108.32 mn during FY14 to 1,687 mn during FY15. Similarly, in value terms also, it has increased to ` 65 tn from ` 48 tn.

Further, the use of internet, social media and smart phones for banking has been on the rise on account of growing internet and mobile penetration. During FY15, mobile banking services executed 172 mn transactions valued at ` 1,035 bn, registering y-o-y growth of 82% in volume and 362% in value. Despite the high mobile density in the country, there exists immense potential for leveraging the mobile technology to offer banking services.

The Road Ahead Economic growth, infrastructure investments, financial inclusion, favourable demography & rising income levels (which will lead to increased demand for banking services), rapid urbanisation, policy support, technological innovation and digitisation are expected to drive growth in the banking sector.

Digitisation is a focus area for the Government and leveraging various digital technologies such as SMAC (Social, Mobile, Analytics and Cloud) capabilities will facilitate banks in reaching out to new customers, enhancing customer experience, gaining insights into customer behaviour and improving revenue generation & operational efficiency. Growing internet, mobile banking and technology led distribution models is expected to widen reach, reduce costs, protect margins and promote growth for banks.

Further, some of the key reform measures such as licensing of payment and small bank, change in the norms of recapitalization of PSBs etc. taken towards improvement in corporate governance and financial inclusion are expected to positively impact the banking industry.

With government initiatives like PMJDY and the MUDRA Bank, as well as increased adoption of technology, new processes such as direct benefits transfers, enhanced inclusive growth is expected. A vast un-banked population offers potential for growth and scope for innovation in delivery models. To bring rural population under the banking ambit, the Government of India and RBI have prioritized financial inclusion. SCBs are expanding their branch network to tap rural areas for further business opportunities. Rural banking is expected to grow further moving ahead.

XXVI

Key Highlights The total number of NBFCs registered with the RBI

stood at to 11,781 which includes 212 NBFCs-D companies and 11,569 NBFCs-ND companies as on end-Sep 2015.

Share of NBFC assets as a percentage of scheduled commercial banks assets has increased from 7% in 1998 to 14.8% in March 2015.

Borrowings from banks and FIs accounted for 46.4% and debentures accounted for 33.4% of the total borrowings of NBFCs-D in FY15. In case of NBFCs-ND-SI, debentures accounted for 48.7% and borrowings from banks and FIs accounted for 24.9% of the total borrowings.

In FY15, the aggregated balance sheet of the NBFC sector expanded by 16.8% y-o-y to ` 14,565 bn and 14.2% y-o-y in Sep 2015 as compared to Mar 2015.

As at the end of FY14 balance sheet size of NBFC-D stood at ` 1,925 bn registering a marginal increase of around 2% y-o-y. The balance sheet size of NBFCs-ND-SI grew considerably by 15.9% y-o-y and stood at 14,166 bn as at end-Mar 2015.

The aggregate total income of the NBFC sector expanded by 15.7% y-o-y to 1,676 bn in FY15 and net profit to total income increased from 18.3% in FY14 to 18.8% in FY15.

During FY15, total income of NBFCs-D grew by 13.4% to 246 bn while their net profit declined substantially by 35% to ` 28 bn. NBFCs-ND-SI, on the other hand showed an improved performance and their total income and net profit increased 15.6% and 15.8% respectively to stand at ` 1,601 bn and ` 297 bn respectively in FY15.

CRAR of the NBFCs-ND-SI slipped from 27.8% as of Sep 2014 to 27.3% as of Mar 2015 and to 23.8% as of Sep 2015.

Gross NPAs as percent of credit deployed of NBFC sector rose to 4.1% as on end-Mar 2015 from 3.9% as on end-Mar 2014. The asset quality of the NBFCs-D and NBFCs-ND-SI deteriorated from the past years level. During FY15, gross NPA to gross advances of NBFC-D increased to 3.5% as against 3.1% in FY14. At the same time, net NPAs to net advances also increased to 1.1% compared to 1% in FY14. In case of NBFC-ND-SI, net NPA ratio increased from 2.5% in FY14 to 2.6% in FY15.

Non-Banking Financial Companies

The number of NBFCs registered with the RBI continues to decline led by consolidation in the sector The total number of NBFCs registered with the RBI declined marginally to 11,781 as on end-Sep 2015 from 11,842 as on end-Mar 2015 and 12,029 as on end-Mar 2014. This reduction in numbers is largely due to consolidation in industry and cancellation of Certificates of Registration (CoR). Of the total 11,781 NBFCs, 212 were deposit-accepting (NBFCs-D) and 11,569 were non-deposit accepting (NBFCs-ND).

Since Nov 2014, NBFCs-ND with assets of ` 5 bn and above have been classified as systemically important non-deposit accepting NBFCs (NBFCs-ND-SI).

During the period Mar - Sep 2015, 10 more companies came under the category of NBFCs-ND-SI taking the total count to 210 as on Sep 2015.

Distribution of NBFCs registered with RBI

Category AS on Sep 2015 As on Mar 2015As on Mar

2014

All NBFCs 11,781 11,842 12,029

NBFCs-D 212 220 241

NBFCs-ND 11,569 11,622 11,788

NBFCs-ND-SI 210 200 NASource: RBI and Dun & Bradstreet ResearchNote: NA denotes not available

Share of NBFC assets as a percentage of scheduled commercial banks assets has increased from 7% in 1998 to 14.8% in March 2015. However, share of NBFC deposits as a percentage of scheduled commercial banks deposits has come down from 3.34% in March 1997 to 0.30% in March 2015.

The non-banking financial sector is witnessing consolidation as the number of NBFCs operating in the economy is declining. A Committee on Comprehensive Financial Services for Small Business and Low Income Households which was set up by RBI also came up with the recommendation of consolidation of multiple NBFC definitions into two categories viz. (i) core investment companies and (ii) all other NBFCs along with activity based regulations.

XXVII

Debentures and Borrowings from banks & FIs continues to be the two most important sources of funds for NBFCs-D and NBFCs- ND-SIFunding source of NBFCs comprises of debentures, borrowings from banks and FIs, public deposits, commercial papers and inter-corporate loans. In FY15, borrowings from banks and FIs, followed by debentures, constituted an important source of funds for NBFCs-D. Borrowings from banks and FIs accounted for 46.4% and debentures accounted for 33.4% of the total borrowings of NBFCs-D in FY15. In case of NBFCs-ND-SI, debentures form an important source of funds followed by borrowings from banks and FIs. In FY15, debentures accounted for 48.7% and borrowings from banks and FIs accounted for 24.9% of the total borrowings of NBFCs-ND-SI.

Consolidated balance sheet of the NBFC sector

Item

As on Mar 2015 (` bn)

As on Mar 2014 (` bn)

% variation

Mar 2015

% variation

Sep 2015

Share Capital 668 621 7.5 6.7

Reserves & Surplus 2,578 2,241 15.1 12.8

Total Borrowings 10,545 8,885 18.7 14.5

Current Liabilities & Provisions 774 725 6.8 19.7

Total Liabilities / Assets 14,565 12,472 16.8 14.2

Loan & Advances 10,063 8,653 16.3 14.2

Hire Purchase & Lease Assets 1,003 914 9.7 5.3

Investments 2,085 1,689 23.5 18.0

Other Assets 1,414 1,217 16.2 9.7Source: RBI and Dun & Bradstreet Research

Sources of Funds of NBFCs-D Application of Funds of NBFCs-D

Source: RBI and Dun & Bradstreet ResearchNote: P denotes Provisional

In FY15, the aggregated balance sheet of the NBFC sector expanded by 16.8% y-o-y to ` 14,565 bn and 14.2% y-o-y in Sep 2015 as compared to Mar 2015. Total borrowing which accounted for more than two-third of the total liabilities increased 18.7% y-o-y in FY15 and 14.5% y-o-y in Sep 2015.

As at the end of FY15 balance sheet size of NBFC-D expanded by 2% to stand at ` 1,925 bn. Component wise, the advances accounted for a predominant share of the total assets, followed by cash and bank balances. On the liability side, the expansion was mainly in terms of public deposits which are subjected to credit rating, and bank borrowings which continue to constitute the largest source of funding for NBFCs-D. In FY15, Both public deposits and bank borrowings grew 5.8% y-o-y. Borrowings through commercial papers which picked up significantly by 55.6% in FY14, declined considerably by 16.6% during the year while inter-corporate borrowings grew considerably by 32.7% during FY15. Mobilisation of funds through debentures, which constituted the second biggest source of funding, declined 2% during the year.

In FY15, loans and advances grew marginally by 1% but hire purchase & lease assets decreased considerably by 15.2% y-o-y. Investment activities of NBFCs-D witnessed a sharp rise during the year. Total Investments grew significantly at 32.8% to ` 77 bn mainly on the back of substantial growth in investments in commercial paper, mutual funds and debentures & bonds. The ratio of public deposit to net owned funds improved marginally and stood at 89.3% as at end-March 2015, as against 84.7% as at end-March 2014.

XXVIII

Sources of Funds of NBFCs-ND -SI Application of Funds of NBFCs-ND-SI

Source: RBI and Dun & Bradstreet ResearchNote: P denotes Provisional

During FY15, the balance sheet of NBFCs-ND-SI expanded significantly at 15.9% to ` 14,166 bn on the back of marked growth in disbursement of loans and advances on the asset side and sharp rise in borrowings on the liability side. Total borrowings of NBFCs-ND-SI which represents more than 70% of their total liabilities grew 17.4% y-o-y in FY15. Secured borrowing which constitutes a major source of borrowings for NBFCs-ND-SI grew by 16.8% during FY15 on account of 15.2% growth in borrowing through debentures and 9.5% growth in bank borrowings. Unsecured borrowings which constitute 45% of total borrowings also grew 18% y-o-y during the year. Secured and unsecured borrowings from FIs both declined significantly by 11% and 45% respectively during FY15.

On the deployment side, loans and advances continue to constitute the largest share, followed by investments and hire purchase assets. Loans and advances extended by NBFCs-ND-SI posted significant growth at 15.5% in FY15 owing to the strong growth in credit extended by NBFC - Infrastructure finance companies, microfinance companies and loan companies. Among the sectors, infrastructure, medium and large-scale industries, and the transport sectors contributed to strong growth in credit off-take of the NBFCs-ND-SI in FY15. During FY15, hire purchase assets and investments grew 10% and 20% y-o-y respectively.

Financial Performance of NBFCsIn FY15, the aggregate total income of the NBFC sector expanded by 15.7% y-o-y to 1,676 bn. The NPM increased from 18.3% in FY14 to 18.8% in FY15. However, it deteriorated to 15% during the quarter ended Sept 2015 as compared to Mar 2015. RoA of the NBFC sector declined to 2.2% as of

Mar 2015 and further to 1% as of Sep 2015.

In FY15, total income of NBFCs-D grew by 13.4% to ` 246 bn and expenditure grew by 14% to 189 bn. The net profit decline during FY15 may be attributed to increased interest payment burden and higher operating expenses. Owing to the decline in net profit, RoA of NBFCs-D also deteriorated from previous years level at 2.3% to 1.5% in the current year. In view of increased costs, cost-to- income ratio of the NBFCs-D also rose from 76.4 to 77 during the year.

Financial Performance (` bn)

Particulars NBFCs-D NBFCs-ND-SI NBFC

2014 2015 P 2014 2015 P 2014 2015

Total income 217 246 1386 1,601 1,449 1,676

Operating Profit (PBT) 59 45 N.A. N.A. N.A. N.A.

Net profit (PAT) 43 28 256 297 265 316

Total Assets 1,885 1,925 12,226 14,166 12,472 14,565

Ratios in %

Return on Assets 2.3 1.5 2.1 2.1 2.3 2.2

Income as % of total assets

11.5 12.8 11.33 11.3 11.6 11.5

Net Profit as % of total income

19.8 11.4 18.48 18.52 18.3 18.8

Cost to Income Ratio 76.4 77 N.A. N.A. N.A. N.A.

Source: RBI and Dun & Bradstreet ResearchNote: P denotes Provisional; NA denotes Not Available

XXIX

Total income of NBFCs-ND-SI grew 15.6% to ` 1,601 bn and expenditure increased by 15.54% to ` 1,187 bn. As a result net profit of NBFCs-ND-SI grew by 15.8% to 297 bn in FY15. NPM remained in double digits and increased marginally from last years level. RoA remained at the same level of 2.1% during the year.

NBFCs-ND-SI and NBFCs-D companies shall maintain Tier I capital of 10% by end of Mar 2017 and shall follow 90 day norm for classification of assetsNBFCs-D and NBFCs-ND-SI are required to maintain minimum Capital Adequacy Ratio (CRAR) of 15% as against 9% in case of banks. As per the revised guidelines issued by RBI in Nov 2014, all NBFCs-ND-SI and NBFCs-D companies shall maintain minimum Tier l capital of 10%. These entities have to meet the compliance in a phased manner which is 8.5% by end-Mar 2016 and 10% by end-Mar 2017.

As of Mar 2015, the capital adequacy position of the NBFCs-ND-SI remained comfortable and was well above prudential norms. Nevertheless, CRAR of the NBFCs-ND-SI slipped marginally from 27.8% as of Sep 2014 to 27.3% as of Mar 2015 and further to 23.8% as of Sep 2015. At the disaggregated level, eights NBFCs were unable to meet the regulatory required minimum CRAR of 15% as of Sep 2015.

To align the asset classification norms applicable to NBFCs with the 90 day norms currently applicable to banks, RBI has issued revised regulatory guidelines for classifying the assets as NPAs. As per the revised regulations, NBFCs-ND-SI and NBFCs-D shall meet the compliance of classifying an account as NPA in a phased manner which is lease rental and hire-purchase assets shall become NPA if they become overdue for 9 months for end-Mar 2016, overdue for 6 months for end-Mar 2017 and overdue for 3 months for end-Mar 2018. Similarly, assets other than lease rentals and hire-purchase assets shall become NPA if they become overdue for 5 months for end-Mar 2016, overdue for 4 months for end-Mar 2017 and overdue for 3 months for end-Mar 2018. RBI has also increased the provisioning for standard assets in a phased manner from 0.25% to 0.40% of the outstanding amount for NBFCs-D and NBFCs-ND-SI.

In recent years, asset quality of NBFC sector has been impacted due to slowdown in the economy. Gross NPAs as a percent of credit deployed rose to 4.1% as on end-Mar 2015 from 3.9% as on end-Mar 2014.

Trend in gross NPA ratio of the NBFC sector


Asset quality of NBFCs-D deteriorated as both gross and net NPAs increased during FY15. Gross NPA to gross advances of NBFC-D increased to 3.5% as against 3.1% in FY14. At the same time, net NPAs to net advances also increased to 1.1% compared to 1% in FY14. Category-wise, deterioration in asset quality was more in respect of the Asset finance companies (AFCs) as compared to the Loan companies (LCs).

NPA Ratios of NBFCs-D

As at end

2014 2015P

AFC LC All NBFCs-D

AFC LC All NBFCs-D

Gross NPA ratio 3.6% 1.5% 3.1% 4.1% 1.7% 3.5%

Net NPA ratio 1.1% 0.7% 1.0% 1.3% 0.7% 1.1%Source: RBI and Dun & Bradstreet ResearchNote: P denotes Provisional

Asset quality of NBFCs-ND-SI also continued to deteriorate and the NPA ratio rose marginally as compared to the previous year. Net NPA ratio increased from 2.5% as at end-Mar 2014 to 2.6% as at end-Mar 2015. Amongst the NBFCs-ND-SI, LCs accounted for the major chunk of NPAs followed by NBFC-Infrastructure Finance Companies and AFCs as at end-Mar 2015. The asset quality of the NBFC-Micro Finance Institutions witnessed some improvement albeit it still remained at an elevated level. NPAs of the NBFCs-ND-SI sector were primarily concentrated in infrastructure sector and transport operator segment.

XXX

NPA ratios of NBFCs-ND-SI

Particular As at end

2014 2015P

Gross NPAs to Gross Advances 4.3% 4.3%

Net NPAs to Net Advances 2.5% 2.6%

Gross NPAs to Total Assets 3.0% 3.1%

Net NPAs to Total Assets 1.7% 1.8%Source: RBI and Dun & Bradstreet researchNote: P denotes Provisional

Regulatory Developments for NBFCsThe role of NBFC sector in the Indian financial system has become critical in terms of its size, spread and niche areas of operations. Majority of large players in the NBFC sector have grown bigger and become more connected with other financial entities, necessitating periodical review of the regulatory framework for this sector. With a view to address the regulatory gaps, arbitrage and risks associated with NBFCs, during the year, the RBI initiated a host of measures to strengthen regulation and supervision of NBFCs and harmonize their regulations with those of the banks in a phased manner as also to foster financial stability. Some of these include:

The RBI introduced revised regulatory framework in Nov 2014 with a view to transforming over time to an activity-based regulation of NBFCs while ensuring that NBFCs having low risk profiles would be lightly regulated. The revised framework has been aimed at addressing gaps in regulations of NBFCs and harmonising regulation with that of the commercial banks. Some of the important changes inter alia include raising of net owned funds (NOF) for the NBFCs to ` 10 mn by Mar 2016 and ` 20 mn by Mar 2017; rating requirement for all unrated deposit-taking AFCs by Mar 31, 2016 for being eligible for acceptance of public deposits; fixing of threshold of ` 5 bn for all the NBFCs-ND for being considered systemically important, and harmonisation of the asset classification norms for NBFCs-ND-SI and NBFCs-D in line with that of banks, in a phased manner.

In Jul 2015, RBI proposed to put in place a regulatory framework to allow a new kind of NBFC which could act as account aggregator (NBFC-AA) to enable the common man to see all his accounts across financial institutions in a common format. The NBFC-AA will provide a technology enabled solution to a person to view at one place the position of his financial assets across institutions under different sectoral regulators.

In order to address the issue of recovery of bad loans, bigger NBFCs, with an asset size of ` 5 bn and above, have been proposed to be brought under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

OutlookNBFCs that form a significant segment of the shadow banking system play an important role in broadening access to financial services and enhancing competition and diversification of the financial sector. In medium-term different segments of the NBFC sector are poised to have different prospects and challenges. For example, investment companies are expected to have bright prospects, due to expansion in the equity and corporate bond markets, along with economic growth and careful recalibration of bank finance in the wake of Basle III. The infrastructure NBFCs will have greater scope in the coming years, both because the economic growth will bring forth new projects and banks, will adopt a restrained approach towards such projects. As the large exposure regime for the banks will apply by 2018, NBFCs will have space for market funding or loan funding of big corporate financing in the medium term.

XXXI

Key Highlights Sanctions and disbursements made by all FIs as at the

end of FY15 stood at ` 1,147.4 bn and ` 1,029.1 bn respectively, registering a y-o-y growth of 16.7% and 11.8% respectively.

The consolidated balance sheet of the AIFIs expanded by 9% during FY15. On the assets side, loans and advances accounted for 87.9 % of the total assets and registered a y-o-y growth of 14.3% in the current year. On the liability side, deposits along with bonds and debentures constituted around 65% of total liabilities in FY15.

In FY15, total income of AIFIs grew by 7.5% to ` 350.1 bn owing to low growth in interest income and decline in non-interest income.

Net profit and operating profit of AIFIs grew 26.8% and 27.7% to ` 52.9 bn and ` 78.3 bn respectively.

As on Mar 31 2015, CRAR of AIFIs improved to 18.7% from 17.8% as on Mar 31 2014.

In FY15, average return on assets of AIFIs increased marginally to 1.1% from 1% in FY14.

The asset quality of AIFIs deteriorated marginally and net NPAs as percentage of net loans increased from 0.19% in FY14 to 0.26% in FY15.

Financial assistance by all FIs increased decently in FY15

Sanctions Disbursement

Source: RBI and Dun & Bradstreet ResearchNote: Data are provisional; * stands for IFCI and SIDBI; # stands for IVCF and TFCI; @ stands for LIC

Financial Institutions (FIs)

Sanctions and disbursements made by all FIs as at the end of FY15 stood at 1,147.4 bn and 1,029.1 bn respectively, registering a y-o-y growth of 16.7% and 11.8% respectively. This growth was led by 33.4% and 34.9% growth in sanction and 32.5% and 32.3% growth in disbursements of specialised financial institutions and investment institutions respectively. Contribution of both specialized FIs and investment institutions in overall FIs sanctions increased to 1.1% and 40.2% respectively and contribution in disbursement to 0.9% and 39.1% respectively in FY15. During the year, sanctions and disbursement of all India financial institutions consisting of IFCI and SIDBI increased marginally by 6.6% and 1.3% respectively. Their contribution in overall FIs sanctions and disbursement however went down to 58.6% and 60.1% in FY15 from 64.2% and 66.3% in FY14 respectively.

Balance sheet performance of All India financial institutions (AIFIs)Presently, there are four all India financial institutions regulated and supervised by the Reserve Bank of India. These are Export-Import Bank of India (EXIM Bank), National Bank for Agriculture and Rural Development (NABARD), National Housing Bank (NHB) and Small Industries Development Bank of India (SIDBI). These AIFIs play a salutary role in the financial markets through credit extension and refinancing operation activities, thus catering to the long-term financing

XXXII

needs of the industrial sector.

The consolidated balance sheet of the AIFIs expanded by 9% during FY15 reflecting moderation from double-digit expansion registered in the previous couple of years. On the assets side, loans and advances continued to be the single largest component, accounting for 87.9% of the total assets and registering a y-o-y growth of 11.3% in the current year. On the liability side, deposits along with bonds and debentures constituted around 65% of total liabilities in FY15. During the year, deposits and borrowings increased by 17% and 9.7% respectively but bonds & debentures registered a decline of 7.2% y-o-y. In FY15, AIFIs raised short-term funds mainly by floating commercial papers, which are capped under the umbrella limit.

Liabilities and Assets of AIFIs

Liabilities and Assets of AIFIs

As at end-Mar

Item 2014 2015% variation

Item 2014 2015% variation

Liabilities (In ` bn) (In ` bn) Assets (In ` bn) (In ` bn)

Capital 93.6 109.6 17.1% Cash & Bank Balance 73.4 78.2 6.6%

Reserves & Surplus 520.3 566.5 8.9% Investments 243.3 256.0 5.2%

Bond & Debentures 1,141.8 1,059.9 -7.2% Loans & Advances 3,911.1 4,352.6 11.3%

Deposits 1,865.4 2,183.1 17.0% Bill Discounted / Rediscounted 58.4 21.1 -63.9%

Borrowings 659.5 723.3 9.7% Fixed Assets 6.3 6.6 5.3%

Other Liabilities 263.5 308.4 17.1% Other Assets 251.6 236.3 -6.1%

Total Liabilities 4,544.1 4,950.8 9.0% Total Assets 4,544.1 4,950.8 9.0%

Source: RBI and Dun & Bradstreet ResearchNote: Data pertain to four FIs EXIM Bank, NABARD, SIDBI and NHB; Data for EXIM Bank, NABARD and SIDBI for end March, while end June for NHB.

Financial Performance of all India financial institutionsIn FY15, total income of AIFIs grew by 7.5% to ` 350.1 bn and expenditure grew by 10.9% to ` 262.6 bn. AIFIs posted modest growth in income owing to low growth in interest income and decline in non-interest income even while income from bill discounting/ rediscounting shrunk substantially. However, AIFIs fared better on the profitability front as both their operating profit and net profit increased significantly during the year. Net profit and operating profit of AIFIs grew 26.8% and 27.7% to ` 52.9 bn and ` 78.3 bn respectively.

Net profit as a ratio to total income remained in double digits and increased marginally from last years level of 12.8% to 15.1% in FY15.

Financial Performance (` bn)

Particulars 2014 2015 % variation

Total income 325.8 350.1 7.5%

Interest income 308.9 333.7 8.0%

Non-interest income 16.9 16.4 -2.7%

Expenditure 236.8 262.6 10.9%

Interest expenditure 219.3 243.3 10.9%

Operating expenses 17.5 19.3 10.5%

Profit before tax (PBT) 61.3 78.3 27.7%

Profit after tax (PAT) 41.8 52.9 26.8%Source: RBI and Dun & Bradstreet ResearchNote: Audited OSMOS Returns of EXIM Bank, NABARD and SIDBI for end March 2014 and 2015, respectively; Audited OSMOS Returns of NHB for end June 2014 and 2015, respectively

AIFIs maintained capital in excess of minimum stipulated norm of 9%Presently, FIs are required to have minimum Capital Adequacy Ratio (CRAR) of 9% as against 15% in case of NBFCs. AIFIs maintained capital in excess of the stipulated norm and their capital adequacy position comparatively improved during the year. As on Mar 31 2015, CRAR of AIFIs improved to 18.7% from 17.8% as on Mar 31 2014.

XXXIII

Capital to Risk (Weighted) Asset Ratio, Net NPA and Average return on assets of Select four FIs (In %)

Institutions

CRAR Net NPA ratio Average Return on Assets

As at end-March As at end-March As at end-March

2014 2015 2014 2015 2014 2015

EXIM Bank 14.3 15.3 0.43 0.60 0.9 0.8

NABARD 16.6 16.9 0.01 0.01 0.8 0.9

NHB 15.2 16.2 0.28 0.32 1.2 1.6

SIDBI 30.5 36 0.47 0.86 1.7 2.2

AlFIs 17.8 18.7 0.19 0.26 1.0 1.1

Source: Dun & Bradstreet Research and RBI

Overall, the FIs enjoyed higher returns on their assets during the year barring EXIM Bank whose return on assets was marginally lower. In FY15, average return on assets of AIFIs grew to 1.1% from 1% in FY14.

The asset quality of AIFIs deteriorated marginally and net NPA as percentage of net loans increased from 0.19% in FY14 to 0.26% in FY15. Nevertheless, the stressed asset position of these four FIs remained comparatively better than that of the commercial banks and other NBFCs. Net NPA as a percentage of net loans and advances is highest for SIDBI followed by EXIM Bank, NHB and NABARD.

XXXVI

Global Scenario

Global Equity MarketsIn 2014, the world economies grew at a modest rate of 3.4% with the 1.8% growth in advanced economies and 4.6% growth in emerging and developing economies. Factors which affected the activities and growth globally in 2014 include global shocks, such as lower oil prices and country- or region-specific factors, such as exchange rate swings triggered by actual and expected changes in monetary policies. Companies across the world are looking for getting listed in more than one market. As the regulatory scenario in emerging economies changes and capital markets become more sophisticated, companies from the developed market will increasingly access capital markets in emerging economies. Asia Pacific region has been increasingly attracting more capital giving competition to developed markets.

Market cap of NSE and BSE grew 9% and 10.1% respectively, almost double the average growth of 5% depicted by the world stock exchanges.Market capitalization is the market value of all listed corporations on a stock exchange and thus represents the size of an exchange. The total market capitalization of stock

Securities Marketmarkets across the globe reached USD 63.5 tn as on Dec-14. During the 7 months period of Jan-Jul 2015, market capitalisation of the world stock exchanges has seen further growth to reach level of USD 66.6 tn.

Region-wise, stock exchanges in the Americas dominate over Asia-Pacific and Europe-Africa-Middle East (EAME) regions accounting for 47.6% of total market capitalization of the world stock exchanges. In CY14, market capitalization of stock exchanges in Americas and Asia-Pacific regions grew 7% and 13.8% to US$ 30.26 tn and US$ 21.08 tn respectively. Due to fragile economic conditions in Europe, stock exchanges in EAME region displayed a lackluster in their performance with market capitalization declining 8% to US$ 12.17 tn.

Market Capitalization of World Stock Exchanges

Source: Dun & Bradstreet Research, World Federation of ExchangesNote: * EAME: Europe Africa Middle East

XXXVII

The market capitalization of the countrys leading stock exchanges, Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), which declined 10% in CY13 on account of economic slowdown and huge volatility in Indian currency, displayed a tremendous recovery in CY14 buoyed by the stable government at the centre.

During 7 months period Jan-Jul 2015, market capitalization of BSE and NSE further grew to US$ 1.64 tn and US$ 1.59 tn respectively. The Indian stock exchanges were amongst the best performing exchanges in the world during Jan-Jul 15. During the period, the market cap of NSE and BSE grew 9% and 10.1% respectively, almost double the average growth of 5% depicted by the world stock exchanges. As market capitalisation of Indian stock exchanges have increased considerably during Jan-Jul 2015 this has resulted in the increase in their share in global market to around 5%.

Top 15 exchanges in terms of market capitalization in CY15 (till Jul15)

Exchange Country Market Cap (Jul 2015) (USD bn)Market Cap

(CY14) (USD bn)Market Cap

(CY10) (USD bn) CAGRMarket Cap /

GDP ratio 2014Market Cap /

GDP ratio 2010

NYSE USA 19,351.6 19,351.4 13,394.1 9.6% 111.1% 89.5%

NASDAQ OMX USA 7,473.5 6,979.2 3,889.4 15.7% 40.1% 26.0%

Japan Exchange Group - Tokyo Japan 4,985.1 4,378.0 3,827.8 3.4% 95.1% 69.7%

Shanghai SE China 4,839.2 3,932.5 2,716.5 9.7% 38.0% 45.0%

Euronext 3,549.1 3,319.1 2,930.1 3.2% - -

Hong Kong Exchanges Hong Kong 3,445.8 3,233.0 2,711.3 4.5% 1111.4% 1185.9%

Shenzhen SE China 3,303.9 2,072.4 1,311.4 12.1% 20.0% 21.7%

TMX Group Canada 1,855.8 2,093.7 2,170.4 -0.9% 117.2% 134.5%

Deutsche Brse Germany 1,780.8 1,738.5 1,429.7 5.0% 45.1% 41.9%

BSE India India 1,639.7 1,558.3 1,631.8 -1.1% 75.4% 95.5%

SIX Swiss Exchange Switzerland 1,624.7 1,495.3 1,229.4 5.0% NA 211.5%

National Stock Exchange India India 1,591.1 1,520.9 1,596.6 -1.2% 73.6% 93.5%

NASDAQ OMX Nordic Exchange 1,266.4 1,196.7 1,042.2 3.5% - -

Korea Exchange Korea 1,256.4 1,212.8 1,091.9 2.7% 86.0% 99.8%

Australian SE Australia 1,229.5 1,288.7 1,454.5 -3.0% 88.6% 127.4%Source: Dun & Bradstreet Research, World Federation of Exchanges, World Bank

Market capitalization to GDP ratio which provides significant insights into the liquidity of equity market declined for both BSE and NSE from 95.5% and 93.5% in CY10 to 75.4% and 73.6% in CY14 respectively. The decrease in market capitalization ratio over five years period indicates declining participation as well as size and liquidity of the Indian capital market. This is clearly indicated by the decline in FIIs inflows in the equity market which decreased from ` 1332.7 bn in CY10 to ` 970.5 bn in CY14 registering a four-year CAGR decline of 7.6%.

Indian stock exchanges which are globally ranked higher in trade volume, accounted for 14% of the total trade volumes of the total trade volumes of the world stock exchanges The Indian stock exchanges are the leading exchanges in the world in terms of number of trades in equity shares and number of contracts traded in derivative segment, especially in stock index option. In fact, NSE tops the list with highest number of stock index options traded during Jan Jul 2015. Indian stock exchanges together accounted for around 14% of the total trade volumes of the world stock exchanges. In CY14, number of shares traded at BSE and NSE stood at 387 mn and 1.7 bn respectively registering a y-o-y growth of 12.3% and 17.7% respectively.

During the 7 month period of Jan-Jul 2015, the total trades of world stock exchanges recorded a splendid growth rising 77.4% to 14.2 bn compared with 7 month period of Jan-Jul 2014. The Indian stock exchange continued to rank higher

in trade volumes compared with its peer exchanges. The number of trades at NSE stood at 1.1 bn while EOB trades in BSE stood at 227 mn during the 7 month period of Jan-Jul 2015.

Despite global slowdown, Asia Pacific Region continues to see higher number of listings; BSE and NSE ranked amongst the top 10 exchanges with the highest number of listed companies Asia-Pacific continues to have highest number of listed companies amongst all the regions. In past few years, share

XXXVIII

of Asia-Pacific has increased while share of other regions (Americas and EAME) declined marginally.

As on Jul 2015, the companies listed on world stock exchanges decline 3.3% to 43,026 companies mainly on account of decrease in the companies listed on stock exchanges in Americas. The companies listed on stock exchanges in Americas decreased drastically by 19% to 8,375 companies as on Jul 2015. Asia-Pacific and EAME regions showed marginal growth of 0.3% and 4.2% respectively in the number of listed companies as on Jul 2015.

Region-wise share in number of listed companies

Source: Dun & Bradstreet Research, World Federation of ExchangesNote: * EAME: Europe Africa Middle East

The Indian stock exchanges are lower in world ranking in terms of trading value despite having the highest number of listed companies and amongst the largest investor base in

India. Over the past few years, Indian stock market showed positive movement in the number of listed companies. Indias stock exchanges are amongst the top 10 exchanges across the globe with BSE topping the list. As on Jul 2015, BSE recorded the highest number of listed companies (5,726) followed by the TMX Group (3,669). National Stock Exchange of India ranked 9th across the globe in terms of number of listed companies as on Jul 2015 with 1756 listed companies.

Top 10 exchanges with the highest number of listed companies in CY15 (till Jul15)

Stock Exchanges Country Dec 10 Dec 14 CAGR Jul 15

BSE India India 5,034 5,242 1.02% 5,726

TMX Group Canada 3,741 3,761 0.13% 3,669

BME Spanish Exchanges Spain 3,345 3,452 0.79% 3,629

Japan Exchange Group - Tokyo Japan 2,293 3,470 10.91% 3,488

NASDAQ OMX USA 2,778 2,782 0.04% 2,858

Australian SE Australia 1,999 2,073 0.91% 2,089

Korea Exchange Korea 1,798 1,864 0.91% 1,885

Hong Kong Exchanges Hong Kong 1,413 1,752 5.52% 1,808

National Stock Exchange India India 1,552 1,708 2.42% 1,756

Shenzhen SE China 1,169 1,618 8.47% 1,729Source: Dun & Bradstreet Research, World Federation of Exchanges

XXXIX

Indian Scenario

Key Economic Indicators- GDP at constant prices (2011-12) grew at 7.3% in FY15

to ` 106.4 trillion (PE)- GVA at basic price at constant 2011-12 prices)grew by

7.2% in FY15- Between Mar-14 to Aug -15, RBI reduced repo rates

twice by 0.75 bps to 7.25%- IIP vastly improved to 2.8% in FY15 as compared to

-0.1% in FY14- BSE Sensex closed at 27,957 points on 31st March 2015,

nearly 25% higher than a year ago- The aggregate P/E ratio of the BSE improved from 18.3

times in Mar 2014 to 19.5 times in Mar 2015

Current Scenario of Indian Securities MarketThe formation of the new government at the Centre in May 2014 brought about a renewed hope for a revival in the domestic economic scenario through reforms and policies. The new government ushered in changes to attract foreign investment, like curbing the use of retrospective taxation and raising the FDI cap on sectors like insurance and defence. Measures to ease governance norms and setting up of FPI regulation aimed at improving the operations of both primary and secondary market also augured well for the domestic markets. The equity market was also supported by global liquidity conditions, lower international crude oil prices and softening of the policy rate. Accordingly, the BSE Sensex crossed the 27,000 mark; while the CNX Nifty breached the 8,400 levels.

I. Primary Market Trends

Private placement spurs 22.7% rise in overall resource mobilisationThe cumulative value of overall resource mobilisation by the corporate sector in FY15 stood at ` 4,807.1 bn, about 22.7% higher than a year ago. This rise was driven by a steep 46.4% rise in resources mobilised via private placement of corporate debt. As per data furnished by SEBI and the RBI, about 4,041.4 bn was raised by Indian companies through this route, which was the highest ever fund raised thus in a financial year. These funds have been raised mainly for expansion of business plans and to support working capital requirements. Financial institutions or banks contributed to most of the fund-raising.

QIPs remained robust and rocketed to a five-year high in FY15. Companies raised ` 291 bn via 51 QIP issues in FY15, more than twice the funds raised in FY14 (` 136.6 bn).

Resource mobilisation through public issues plunges 65.5% in FY15 In contrast, other segments of the primary markets were relatively subdued in FY15. Cumulative resource mobilisation in equities during the year stood at 97.9 bn from 64 issues, about 26.2% lower than the ` 132.8 bn raised via 55 issues in FY14. Resource mobilisation via the public issues route (equity + debt), reflected a sharp decline of 65.5% in FY15, with only ` 192.1 bn being raised as against ` 556.5 bn in FY14.

Resource Mobilisation (all amounts in ` bn)

Particulars FY11 FY12 FY13 FY14 FY15

Nos Amt Nos Amt Nos Amt Nos Amt Nos Amt

1. Public Issues (Equity +Debt) 68 581.1 55 460.9 53 219.2 75 510.8 70 124.6

a. Equity

IPOs 53 355.6 34 59.0 33 49.4 38 12.4 46 30.4

FPOs 5 130.9 1 45.8 0 - 2 74.6 0 0.0

b. Debt (Bonds) 10 94.5 20 356.1 20 169.8 35 423.8 24 94.2

2. Rights Issue 23 95.0 16 23.8 16 89.4 15 45.8 18 67.5

Total Equity Issues (1a + 2) 81 581.5 51 128.6 49 138.8 55 132.7 64 97.9

A. Total (Equity + Debt) 91 676.0 71 484.7 69 308.6 90 556.5 88 192.1

B. QIP 59 258.5 16 21.6 45 160.0 17 136.6 51 291.0

C. Preferential Allotments 373 305.1 311 257.1 420 469.4 411 464.6 419 282.6

D. Private Placement of Corporate Debt 1,404 2,187.9 1,953 2,612.8 2,489 3,614.6 1,924 2,760.5 2,611 4,041.4

Total (A + B + C + D) 3,427.5 3,376.2 4,552.6 3,918.2 4,807.1Source: SEBI, Dun & Bradstreet Research

XL

Out of the 64 companies that accessed the primary market for equity in FY15, about 46 took the public issue route, while the other 18 opted for rights issues. The number of IPOs in FY15 was 46, as against 38 in FY14. Although large-ticket IPOs were missing through the year, a total of ` 30.4 bn were raised through this route. On the other hand, while companies raised ` 74.6 bn via FPOs in FY14, nothing was raised in FY15. Funds raised via debt issues declined from ` 423.8 bn in FY14 to a much lower ` 94.2 bn in FY15.

Funds raised via preferential allotments also declined steeply in FY15. They stood at ` 282.6 bn in FY15 as against ` 464.6 bn raised in the preceding year, which translates into a sharp 39.2% decline.

Industry-wise classification for FY15 recorded that the finance sector had a lions share in overall resource mobilisation for equities. Around 30 issues of financing companies from the industry contributed to nearly 51% to the total resource mobilisation. The cement & construction sector accounted for about 11% of the total fund raised, signifying efforts made by the sector to overcome its cash crunch. On the other hand, the share of banks/FIs in capital raised declined from as much as 25.5% in FY11 to merely 4.7% in FY15.

Industry-Wise Share in Capital Raised

FY11 FY15

Source: SEBI, Dun & Bradstreet Research

With respect to sector-wise (public sector & private sector) distribution of capital raised through public and right issues, private sector companies were found to have raised more capital in FY15 as compared to public sector companies. Of the ` 192.1 bn raised via public and rights issues in FY15, about 57.8% (` 11.1 bn) were raised by private sector companies. This was in sharp contrast to FY14, when public

sector companies accounted for a whopping 79% of the total capital raised. Sector-wise (public/private) distribution of capital mobilised through public and rights issues


XLI

II. Secondary Market Trends

The Indian securities markets saw new highs in FY15, with benchmark indices peaking to new levels. The Indian capital markets witnessed a rebound in FY15, with the BSE Sensex closing at 27,957 points on 31st March 2015, nearly 25% higher than a year ago. Likewise, the market capitalisation on the BSE as on 31st March 2015 stood at ` 101.5 trillion, about 36.9% higher than on 31st March 2014.

Five-Year Performance of Key Indices


Market Capitalisation (FY11-FY15)


The aggregate market capitalisation of the two major stock exchanges in the country, the BSE and the NSE, grew at a CAGR of more than 10% between FY11 and FY15. On a y-o-y basis, both exchanges registered more than 35% growth. The market capitalisation-to-GDP ratio monitors the growth and development of the stock market in tandem with the economy. By De

India's Leading BFSI Companies 2016

Documents

Transcript of India's Leading BFSI Companies 2016