A recent study by the Reserve Bank of India (RBI) on the financial results of 472 non-banking finance companies (NBFCs) has revealed a 59 per cent increase in the total assets of these companies, with receivables constituting more than half of the total block of assets.
Receivables at Rs 10790 crore continued to remain the most important item followed by net fixed assets (19.9 per cent of the total assets) and investments (18.5 per cent) for the financial year 1994-95. Loans and advances recorded a 67.4 per cent growth, with loans and advances for hire purchase making up for 61.4 per cent of loans and advances disbursed. Liabilities, too, registered a 59 per cent rise (naturally, since in a balance sheet, total assets is equal to total liabilities). Borrowings was the major component constituting 53.6 per cent of the total liabilities and recorded a growth of 71.7 per cent over 1993-94.Reserves and surplus more than doubled and formed 19.3 per cent of the total liabilities.
The NBFCs continued to rely heavily on external sources in financing their asset formation. Borrowings remained the major external source of funds, though fresh paid-up capital raised also formed a significant proportion on account of high share premium collected on new issues. Funds garnered by the 472 companies were mainly from loans and advances and creation of fixed assets.During the year under review, 391 of the 472 companies made profits. Profit margin of these companies indicated good financial performance. The margin rose to 31.4 per cent in 94- 95 from 28.5 per cent the previous year. Return on total net assets remained almost unmoved at 4.1 per cent. Return on net worth declined by 2.6 per cent to 17 per cent due to huge accumulation of reserves and additions to paid-up capital.
The main income of the 472 companies moved up by 45.1 per cent to Rs 2609 crore.
Leasing and hire purchase financing were the most yielding activities with lease rentals and earnings from hire purchase financing accounting for 38.8 per cent and 33.8 per cent of the total income.
The rise in total income led to a 59.5 per cent growth in the operating income of the 472 non-bankign finance companies.
The operating profits of the companies was placed at Rs 818 crore. Total expenditure recorded a growth of 53.7 per cent on account of a substantial increase of 58.5 per cent in interest payments.
