A

PROJECT REPORT
ON
A STUDY ON FINANCIAL PERFORMANCE AND GROWTH
OF NON- BANKING FINANCIAL COMPANIES

ISHA MORE
M.B.A. (Sem 3) (FINANCE)
Student Id No. WESMBA25A021
Roll No. - 21

Guided by:

Prof. Dr. Renuka Garg

Submitted to:

Prof. S.J Gaikwad

ss
 ACKNOWLEDGEMENT

I acknowledge the invaluable assistance of all the faculty members of my college. I would
like to show my gratitude to Dr. Renuka Garg (Department of Business and Industrial
Management) for allowing me to take this opportunity in doing this project.

I also thank Dr. Vatsal Patel (Project guide) for being supportive at all the points of time. I
feel she is one such inspiration amidst the glory of this creation. My guide, whose meticulous
attention to detail drove me to finally learn the complexities of designing a research work.

I would also like to acknowledge and thank all my friends who participated in this research
by providing me with their valuable responses, which formed the basis of this work. I am
thankful to all those who, directly or indirectly, assisted me in bringing this project to
fruition.

I would like to express my gratitude to my parents for their active cooperation which was
great help during the course of my project.

Isha More
 TABLE OF CONTENTS

CHAPTER PARTICULARS PAGE NO.

NO.

Declaration
Acknowledgement
Executive summary 1
1 INTRODUCTION
1.1 Introduction to Non Banking Financial Companies 3
1.2 Requirement for registration of NBFC with RBI 5
1.3 Type of NBFC 6
1.4 The current status of NBFCs on India 9
1.5 Role of NBFC 12
1.6 Functions of NBFCS 14
1.7 Commercial bank v/s NBFC 15
1.8 Top NBFCS of India 16
1.9 Theoretical background 26

2 LITERATURE REVIEW 29

3 RESEARCH METHODOLOGY
3.1 Meaning of research and methodology 34
3.1.1 Meaning of research 34
3.2 Objectives of study 34
3.3 Research problem 34
3.3.1 Research design 35
3.3.2 Sampling design 35
3.3.3 Data collection 35
3.3.4 Limitations of study 36

4 DATA ANALYSIS 37
5 FINDINGS AND CONCLUSION
5.1 Findings 47
5.2 Conclusion 48

Bibliography 50
Executive summary

Non- Banking Financial Companies are an important segment of the Indian Financial
system in extending credit to the unbanked segments of the society particularly to micro,
small and medium enterprises. They are classified into different categories based on their
status and principal activities. In this paper, an attempt has been made to analyze the
performance of the five different categories of NBFCs in India across 2015 to 2019. The
performance is analyzed by examining key indicators like Liquidity ratio, Profitability
Ratio and Debt to Equity Ratio. The findings indicate that the selected categories of NBFCs
differ significantly in terms of Liquidity and Profitability ratios from one another.
India is a developing country where large sections of the population are unbanked which
give rise to several forms of financial intermediaries including non - banking financial
companies. A Non- Banking Financial Company (NBFC) is a company registered under the
Companies Act 1956 engaged in the business of loans and advances acquisition of stocks,
equities, debt etc issued by government or any local authority or other marketable securities
like leasing, hire purchase, insurance business , chit business. NBFC sector has evolved
considerably in terms of size, operations, technological sophistication, and entered into
newer areas of financial services and products. It is essential to analyze and measure the
growth of NBFCs for better understanding about the transformation of financial
intermediaries in the context of Indian banking system. Financial performance can be
measured using solvency and profitability ratios and applying statistical tools to analyze the
results. NBFCs are playing a crucial role in economic development of a country. They cater
to needs of people in both rural and urban areas through various schemes which helps in
bridging the credit gaps. NBFCs do enjoy flexibility in operations when compared to banks.
Some of the top NBFCs in India are Power Finance Corporation Limited, Mahindra &
Mahindra Financial Services Limited,
Muthoot Finance Ltd. Etc. This project ss is mainly focused on the studying the growth
of NBFCs and finding the reasons or factors behind their performance and non-
performance. The financial performance is analyzed through ratio analysis technique and
results are interpreted for 5-year period.

1
CHAPTER 1

INTRODUCTION

2
1.1 INTRODUCTION OF NON-BANKING FINANCIAL COMPANIES
(NBFCS)
Non-Banking Financial Companies are financial companies which performs like banks but
they are not actual bank. These types of financial companies have to be registered under
Companies act,1956. These financial companies engage in the business of financial loans
and advances, acquisition of securities/bonds/debentures which are issued by Government
or local authority or the marketable securities of a like nature, leasing, hire- purchase,
insurance business, chit business but does not it does not include whose prime principal
business is that of agricultural activity, industrial activity, purchase or sale of any goods. A
Non-Banking Financial Companies have head business of accepting stores under any plan
or course of action in one singular amount or in portions by method for commitments or in
some other way, is additionally a non-banking budgetary organization.
NBFCs garnered the attention of the Reserve Bank of India (‘RBI’) when several
depositors lost their money, during the failure of several banks in the late 1950s and early
1960s. In order to prevent the large number of depositors, RBI initiated regulating them by
introducing Chapter IIIB in the Reserve Bank of India Act, 1934.In March 1996, there were
around 41,000 NBFCs in India and they were not recognized as a separate class. However,
due to the failure of some of the institutions the regulatory structure along with the
reporting and supervision was constricted by RBI. In the late 90s, sweeping changes were
brought to protect the interest of depositors and ensuring the desired functioning of NBFCs.
The capital requirement was changed in the year 1999, NBFCs getting registered on or after
the issuance of notification dated April 21, 19991 were required to have the minimum net
owned funds of ` 200 lakhs in order to commence the business of an NBFC. Due to
snowballing trend in the sector and to ensure the growth of the sector in a healthy and
efficient manner various regulatory measures were taken for identifying the systemically
important companies and bringing them under the austere norms. The NBFC-ND with asset
size of ` 100 crores or more were considered to be systemically important companies.
During the FY 2011-12, two new categories of NBFCs were introduced viz., IDF and MFI.
DEFINITION ( Reserve Bank of India)
Definition for Non-Banking Financial Company, it carries functions like bank but it is not
actual bank. Reserve bank of India has defined NBFC as below. RBI has defined it in
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systematic way, it has explained each term in detailed i.e. what is financial institution? What
is non-banking?
An NBFC is a company registered under the Companies act, 1956 or Companies act, 2013
and is engaged in the Business of financial Institution.
Section 45I(f) of the Reserve Bank of India act, 1934 defines “Non-Banking Financial
Companies” as
(i) A financial Institution which is a company;
(ii) A non-banking financial institution which is company and which has its
principal business the receiving of deposits, under any scheme or arrangement
or in any order manner, or in lending in any manner;
(iii) Such other non-banking financial institution or class of such institution, as the
bank may, with the previous approval of the central government and by
notification in the Official gazette, specify; Section 45I(c) of the Reserve Bank
of India act, 1934 defines the term “Financial Institution” as
Financial institution means any non-banking institution which carries on as it’s business or
part of its business any of the following activities, namely:
(i) The financing, whether by way of making loans or advances or otherwise, of
any activities other than its own;
(ii) The acquisition of shares, stocks, bonds, debentures or securities issued by
government or local authority or other marketable securities of a like nature;
(iii) Letting or delivering of any goods to a hirer under hire-purchase agreement as
defined in clause (c) of section 2 of the hire purchase act, 1972;
(iv) The carrying on of any class of business;
(v) Managing, conducting or supervising, as foreman, agent or in any other
capacity, of chits or kooris as defined as any law which is for the time being in
force in any state, or in any business, which is similar thereto;
(vi) Collecting, for any purpose or under any scheme or arrangement by whatever
name called, monies in lump sum or otherwise, by way of subscription or by
sale of units, or other instruments or other any manner and awarding prizes or
gifts, whether in cash or kind, or disbursing monies in any other way, to persons
from
4
 whom monies are collected or to any other person, but does not include any other
institution, which carries on as its personal business:
 Agricultural operations; or
 Industrial activity; or
 The purchase or sale of any goods (other than securities) or the providing of any
services; or
 The purchase, construction or sale of any immovable property, so however, that no
other portion of income of the institution is derived from the financing of the
purchases, constructions or sale of immovable property by other persons.

1.2 REQUIREMENT FOR REGISTRATION WITH RBI

Section 45-IA of the RBI Act, 1934 states that-
No Non-Banking Financial company shall commence or carry on the business of a Non-
Banking Financial Institution without-
 Obtaining Certificate of Registration; and
 Having Net Owned Fund of Rs. 2 crores (Prior to the issuance of notification dated
21st April, 1999 the requirement of having minimum Net owned fund was revised
from 25 lac to 2 crores)
However, as per revised regulatory framework if a NBFC having NOF less than Rs. 2 crores
then such companies need to increase the NOF in the following manner
 Rs. 1 crore before 1st April, 2016;
 and Rs. 2 crores before 1st April, 2017.
An application for the registration needs to be submitted by the company in the prescribed
format along with the necessary documents for the RBIs consideration. RBI has specified
different indicative list of documentation/information to be submitted along with for the
application for NBFC-CIC (Core Investment Companies), NBFC-Factors, NBFC-MFI
(Micro Finance Company), and other NBFCs. However, in order to avert dual registration,
RBI has exempted certain class of companies from the requirement of registration with the
RBI.

5
1.3 TYPES OF NBFCS

TYPES OF
NBFCS

LIABILITY SIZE ACTIVITY

Liability
There are two types in classification of NBFCs by Liability.
 Deposit accepting NBFCs
 Non-Deposit accepting NBFCs
All Non-Banking Financial Companies don’t accept deposits. Only those NBFCs which
are holding a valid Certificate of Registration (COR) with authorization to accept Public
Deposits can accept/hold public deposit.
Section 45-I(bb) of the Reserve Bank of India Act, 1934 defines the term deposits as-
Stores (Deposits) incorporates and will be deemed always to have included any receipt
of cash by way of deposit or credit or in any other structure, however does exclude –
(i) Amounts raised by the way share capital;
(ii) Amounts contributed as capital by partners of the firm;
(iii) Amounts received from scheduled bank or co-operative bank or any other
banking company as defined in clause (c) of section 5 of the banking regulation
act, 1949;
(iv) Any amount received from, - a State financial corporation, any financial
institution specified in or under section 6 a of IDBI act, 1964, or any other
institution that may be specified by bank in this behalf;

6
 (v) Money got in normal course of business, by method for – Security Deposits,
Dealership Deposits, sincere cash, and advance against request of merchandise,
properties or administrations.
(vi) Any sum got from an individual or a firm or a relationship of a people not being
a body corporate, enlisted under any institution identifying with cash loaning
which is for now in power in any state;
Size
NBFCs are categorized into two different categories viz. Deposit accepting and non-Deposit
accepting. The non-depositing NBFCs further bifurcated into:
1. Systematically Important-
The term “Systematically important non-deposit taking non-banking financial
company” has been defined to means a Non-Banking Financial Company not
accepting/holding public deposits and having total assets of Rs. 500 crores and
above.
2. . Non-systematically Important-
The term “non-systematically important non-deposit taking non- banking financial
company” has been defined to means a Non-Banking Financial Company not
accepting/holding public deposits and having total assets less than Rs. 500 crores.
Activity

 Underlying one or more assets as security for availing credit

ASSET FINANCING
 Principal business, Financing for physical assets like
COMPANY
automobiles, tractors , and generator sets etc
 E.g. Magma Fincorp ltd, Edelweiss Assets management

 Engaged in business of pooled capital of investors in

financial securities.
INVESTMENT  It can be corporation, partnership, business trust, or L.L.P
COMPANY  E.G. TATA Investment corporation ltd.

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LOAN  Provide finance by making loans and advances.
COMPANY  Offer different types of loans as per individual’s preference.
 Accept deposits at higher interest rate and further give loans
give loans on higher interest to retailers, wholesalers, and
self-employed persons

 Non-Deposit taking NBFC

INFRASTRUCTURE  Deploys 75% of its total assets in infrastructural

FINANCE loans.

COMPANY  Minimum Net Owned fund Rs.300 crores, minimum credit

rating of ‘A’ or equivalent, and CAR should be 15 %. E.g.
L&T, IDFC Ltd

 Asset size 100 crores and accept public deposit.

CORE INVESTMENT  Does not hold less than 90% of its total assets in the form
COMPANY of investment in shares
 Principal business, acquisition of shares and securities
 E.G. TATA capital limited

 Non-deposit taking NBFC with minimum net owned funds

of 5 crores.
MICRO FINANCE
 Loans to be extended without collateral.
INSTITUTIONS
 Indebtedness should not be exceeded Rs. 1,00,000
 E.G. Unnati Micro Finance private limited

 Principal business of financing of acquisition or

construction of houses.
HOUSING FINANCE
 Regulated by national housing financing
COMPANY
 Net owned fund of Rs. 10 crores
 E.G. HDFC ltd, India Bulls Housing Finance ltd.
8
1.4 THE CURRENT STATUS OF NON- BANKING FINANCIAL
COMPANIES.

Prudential norms:
The Reserve Bank put in place in January 1998 a new regulatory framework involving
prescription of prudential norms for NBFCs which deposits are taking to ensure that these
NBFCs function on sound and healthy lines. Regulatory and supervisory attention was
focused on the ‘deposit taking NBFCs’ (NBFCs – D) so as to enable the Reserve Bank to
discharge its responsibilities to protect the interests of the depositors. NBFCs - D are
subjected to certain bank –like prudential regulations on various aspects such as income
recognition, asset classification and provisioning; capital adequacy; prudential exposure
limits and accounting / disclosure requirements. However, the ‘non-deposit taking NBFCs’
(NBFCs – ND) are subject to minimal regulation.
The application of the prudential guidelines / limits is thus not uniform across the banking
and NBFC sectors and within the NBFC sector. There are distinct differences in the
application of the prudential guidelines / norms as discussed below:
i) Banks are subject to income recognition, asset classification and provisioning norms;
capital adequacy norms; single and group borrower limits; prudential limits on capital
market exposures; classification and valuation norms for the investment portfolio; CRR /
SLR requirements; accounting and disclosure norms and supervisory reporting
requirements.
ii) NBFCs – D are subject to similar norms as banks except CRR requirements and
prudential limits on capital market exposures. However, even where applicable, the norms
apply at a rigor lesser than those applicable to bank. Certain restrictions apply to the
investments by NBFCs – D in land and buildings and unquoted shares.
iii) Capital adequacy norms; CRR / SLR requirements; single and group borrower
limits; prudential limits on capital market exposures; and the restrictions on investments
in land and building and unquoted shares are not applicable to NBFCs – ND.
iv) Unsecured borrowing by companies is regulated by the Rules made under the
Companies Act. Though NBFCs come under the purview of the Companies Act, they are
exempted from the above Rules since they come under RBI regulation under the Reserve
9
Bank of India Act. While in the case of NBFCs – D, their borrowing capacity is limited to a
certain extent by the CRAR norm, there are no restrictions on the extent to which NBFCs –
ND may leverage, even though they are in the financial services sector.

Financial Linkages between Banks and NBFC:

Banks and NBFCs compete for some similar kinds of business on the asset side. NBFCs offer
products/services which include leasing and hire-purchase, corporate loans, investment in
non-convertible debentures, IPO funding, margin funding, small ticket loans, venture
capital, etc. However, NBFCs do not provide operating account facilities like savings and
current deposits, cash credits, overdrafts etc.
NBFCs avail of bank finance for their operations as advances or by way of banks’ subscription
to debentures and commercial paper issued by them.
Since both the banks and NBFCs are seen to be competing for increasingly similar types of
some business, especially on the assets side, and since their regulatory and cost-incentive
structures are not identical it is necessary to establish certain checks and balances to ensure
that the banks’ depositors are not indirectly exposed to the risks of a different cost-
incentive structure. Hence, following restrictions have been placed on the activities of
NBFCs which banks may finance:
i) Bills discounted / rediscounted by NBFCs, except for rediscounting of bills discounted
by NBFCs arising from the sale of –
a) Commercial vehicles (including light commercial vehicles); and
b) Two-wheeler and three-wheeler vehicles, subject to certain conditions;
c) Investments of NBFCs both of current and long term nature, in any
company/entity by way of shares, debentures, etc. with certain exemptions;
ii) Unsecured loans/inter-corporate deposits by NBFCs to/in any company.

iii) All types of loans/advances by NBFCs to their subsidiaries, group companies/entities.

iv) Finance to NBFCs for further lending to individuals for subscribing to Initial Public
Offerings (IPOs).

10
 v) Bridge loans of any nature, or interim finance against capital/debenture issues
and/or in the form of loans of a bridging nature pending raising of long-term funds from
the market by way of capital, deposits, etc. to all categories of Non-Banking Financial
Companies, i.e. equipment leasing and hire-purchase finance companies, loan and
investment companies, Residuary Non-Banking Companies (RNBCs).
Should not enter into lease agreements departmentally with equipment leasing companies
Structural Linkages between Banks and NBFCs:
Banks and NBFCs operating in the country are owned and established by entities in the private
sector (both domestic and foreign), and the public sector.
Some of the NBFCs are subsidiaries/ associates/ joint ventures of banks – including foreign
banks, which may or may not have a physical operational presence in the country. There
has been increasing interest in the recent past in setting up NBFCs in general and by banks,
in particular.
Investment by a bank in a financial services company should not exceed 10 per cent of the
bank’s paid-up share capital and reserves and the investments in all such companies,
financial institutions, stock and other exchanges put together should not exceed 20 per cent
of the bank’s paid-up share capital and reserves.
Banks in India are required to obtain the prior approval of the concerned regulatory department
of the Reserve Bank before being granted Certificate of Registration for establishing an
NBFC and for making a strategic investment in an NBFC in India. However, foreign
entities, including the head offices of foreign banks having branches in India may, under
the automatic route for FDI, commence the business of NBFI after obtaining a Certificate
of Registration from the Reserve Bank.
NBFCs can undertake activities that are not permitted to be undertaken by banks or which the
banks are permitted to undertake in a restricted manner, for example, financing of
acquisitions and mergers, capital market activities, etc. The differences in the level of
regulation of the banks and NBFCs, which are undertaking some similar activities, gives
rise to considerable scope for regulatory arbitrage. Hence, routing of transactions through
NBFCs would tantamount to undermining banking regulation.
This is partially addressed in the case of NBFCs that are a part of banking group on account of
prudential norms applicable for banking groups
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1.5 ROLE OF NON- BANKING FINANCIAL COMPANIES.
1. Promoters Utilization of Savings:

Non- Banking Financial Companies play an important role in promoting the utilization of
savings among public. NBFC’s are able to reach certain deposit segments such as
unorganized sector and small borrowers were commercial bank cannot reach. These
companies encourage savings and promote careful spending of money without much
wastage. They offer attractive schemes to suit needs of various sections of the society. They
also attract idle money by offering attractive rates of interest. Idle money means the money
which public keep aside, but which is not used. It is surplus money.
2. Provides easy, timely and unusual credit:

NBFC’s provide easy and timely credit to those who need it. The formalities and
procedures in case of NBFC’s are also very less. NBFC’s also provides unusual credit
means the credit which is not usually provided by banks such as credit for marriage
expenses, religious functions, etc. The NBFC’s are open to all. Every one whether rich or
poor can use them according to their needs.
3. Financial Supermarket:

NBFC’s play an important role of a financial supermarket. NBFC’s create a financial

supermarket for customers by offering a variety of services. Now, NBFC’s are providing a
variety of services such as mutual funds, counseling, merchant banking, etc. apart from
their traditional services. Most of the NBFC’s reduce their risks by expanding their range of
products and activities.

4. Investing funds in productive purposes:

NBFC’s invest the small savings in productive purposes. Productive purposes mean they
invest the savings of people in businesses which have the ability to earn good amount of
returns. For example – In case of leasing companies lease equipment to industrialists, the
industrialists can carry on their production with less capital and the leasing company can

12
also

13
earn good amount of profit.
5. Provide Housing Finance:

NBFC’s, mainly the Housing Finance companies provide housing finance on easy term
and conditions. They play an important role in fulfilling the basic human need of housing
finance. Housing Finance is generally needed by middle class and lower middle-class
people. Hence, NBFC’s are blessing for them.
6. Provide Investment Advice:

NBFC’s, mainly investment companies provide advice relating to wise investment of

funds as well as how to spread the risk by investing in different securities. They protect the
small investors by investing their funds in different securities. They provide valuable
services to investors by choosing the right kind of securities which will help them in
gaining maximum rate of returns. Hence, NBFC’s plays an important role by providing
sound and wise investment advice.
7. Increase the Standard of living:

NBFC’s play an important role in increasing the standard of living in India. People with
lesser means are not able to take the benefit of various goods which were once considered
as luxury but now necessity, such as consumer durables like Television, Refrigerators, Air
Conditioners, Kitchen equipment, etc. NBFC’s increase the Standard of living by providing
consumer goods on easy installment basis. NBFC’s also facilitate the improvement in
transport facilities through hire- purchase finance, etc. Improved and increased transport
facilities help in movement of goods from one place to another and availability of goods
increase the standard of living of the society.
8. Accept Deposits in Various Forms:

NBFC’s accept deposits forms convenient to public. Generally, they receive deposits from
public by way of depositor a loaner in any form. In turn the NBFC’s issue debentures,
units’ certificates, savings certificates, units, etc. to the public.

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 9. Promote Economic Growth:

NBFC’s play a very important role in the economic growth of the country. They increase
the rate of growth of the financial market and provide a wide variety of investors. They
work on the principle of providing a good rate of return on saving, while reducing the risk
to the maximum possible extent. Hence, they help in the survival of business in the
economy by keeping the capital market active and busy. They also encourage the growth of
well- organized business enterprises by investing their funds in efficient and financially
sound business enterprises only. One major benefit of NBFC’s speculative business means
investing in risky activities. The investing companies are interested in price stability and
hence NBFC’s, have a good influence on the stock- market. NBFC’s play a very positive
and active role in the development of our country.

1.6 FUNCTIONS OF NON- BANKING FINANCIAL COMPANIES:

1. Receiving benefits:

The primary function of NBFC is receive deposits from the public in various ways such as
issue of debentures, savings certificates, subscription, unit certification, etc. thus, the
deposits of NBFC are made up of money received from public by way of deposit or loan or
investment or any other form.
2. Lending money:

Another important function of NBFC is lending money to public. Non- banking financial
companies provide financial assistance through.
3. Hire purchase finance:

Hire purchase finance is given by NBFC to help small important operators, professionals,
and middle-income group people to buy the equipment on the basis on Hire purchase. After
the last installment of Hire purchase paid by the buyer, the ownership of the equipment
passes to the buyer.
4. Leasing Finance:

In leasing finance, the borrower of the capital equipment is allowed to use it, as a hire, against

15
the payment of a monthly rent. The borrower need not purchase the capital equipment but
he buys the right to use it.
5. Housing Finance:

NBFC’s provide housing finance to the public, they finance for construction of houses,
development of plots, land, etc.
6. Other types of finance provided by NBFCs include:

Consumption finance, finance for religious ceremonies, marriages, social activities, paying
off old debts, etc. NBFCs provide easy and timely finance and generally those customers
which are not able to get finance by banks approach these companies.
7. Investment of surplus money:

NBFCs invest their surplus money in various profitable areas.

1.7 COMMERCIAL BANK VERSUS (V/S) NON-BANKING FINANCIAL

COMPANIES

While commercial banks and non-banking financial companies are both financial
intermediaries (middleman) receiving deposits from public and lending them.
Commercial bank is called as “Big brother” while the “NBFC” is called as the “Small
brother. But there are some important differences between both of them, they are as
follows:

Sr no. COMMERCIAL BANKS NBFC

1 Issue of cheques: In case of NBFC’s there is no
In case of commercial banks, a facility to issue cheques against bank
cheque can be issued against deposits
bank deposits
2 Rate of interest: NBFC’s offer higher rate Of
Commercial bank offer lesser interest on deposits and charge
rate of interest on deposits and
charge less rate of interest on higher rate of interest on loans as
compared to

16
 loans as compared to NBFC’s. Commercial banks.
3 NBFC’s offer higher rate of NBFC’s are not given such
interest on deposits and charge facilities.
higher rate of interest on loans
as compared to Commercial
banks.
4. Law which governs them: NBFC’s are regulated by different
Commercial banks are regulated regulation such as SEBI, Companies
by Banking Regulation Act 1949 Act, National Housing Bank, Unit
and RBI. Fund Act and RBI.
5 Types of assets: NBFC’s specialize in one types of
commercial banks hold a variety asset. For e.g.: Hire purchase
of assets in the form of loans, cash
companies specialize in consumer
credit, bill of exchange, overdraft
etc. loans while Housing Finance
Companies specialize in housing
finance only.

1.8 TOP NBFCS IN INDIA

1. Power finance corporation ltd.

Power Finance Corporation Ltd is a leading power sector public financial institution and a
non-banking financial company providing fund and non-fund based support for the
development of the Indian power sector. The company is engaged in power sector
financing and the integrated development of the power and associated sectors. They
provide large range of Financial Products and Services like Project Term Loan Lease
Financing Direct Discounting of Bills Short Term Loan and Consultancy Services etc for
various Power projects in Generation Transmission and Distribution sector as well as for
Renovation & Modernization of existing power projects.

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 Revenue Rs. 33,362.90 crores

Operating Income Rs. 30045.7 crores

Total assets 361787.26 crores

Total equity 45,164.13

2. Rural Electrification Corporation

Rural Electrification Corporation Ltd is a Navratna Central Public Sector Enterprise under
the Ministry of Power. The company is engaged in the financing and promotion of
transmission distribution and generation projects throughout India. Their main objective is
to finance and promote rural electrification projects all over the country. They provide
financial assistance to State Electricity Boards State Government Departments and Rural
Electric Cooperatives for rural electrification projects sponsored by them. The company
provides loan assistance to SEBs/State Power Utilities for investments in rural
electrification schemes through its extensive network of 23 offices across the country
Revenue ₹ 30007.50 crore
Operating income ₹ 26021.28 crore
Total assets ₹ 347030.08 crore
total equity ₹35396.43 crore
Net income ₹4972.27 crore

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3. Mahindra & Mahindra Limited
Mahindra & Mahindra Limited is the flagship company of the Mahindra Group which
consists of diverse business interests across the globe and aggregate revenues of around
USD
19.4 billion. The company operates in nine segments: automotive segment comprises of
sales of automobiles spare parts and related services; farm equipment segment comprises of
sales of tractors spare parts and related services; information technology (IT) services
comprises of services rendered for IT and telecom; financial services comprise of services
relating to financing leasing and hire purchase of automobiles and tractors; steel trading and
processing comprises of trading and processing of steel; infrastructure comprise of
operating of commercial complexes project management and development; hospitality
segment comprises of sale of timeshare; Sys tech segment comprises of automotive
components and other related products and services and its others segment comprise of
logistics after-market two wheelers and investment.

19
 Revenue ₹11,996.46 crore
Operating income ₹ 1556.13 crore
Total assets ₹ 81792.58 crore
total equity ₹ 11969 crore

4. Muthoot Finance Limited

Muthoot Finance Limited is the largest gold financing company in India in terms of loan
portfolio. The company provides personal and business loans secured by gold jewellery or
Gold Loans primarily to individuals who possess gold jewellery but could not access
formal credit within a reasonable time or to whom credit may not be available at all to meet
unanticipated or other short-term liquidity requirements

Revenue ₹ 9,707 crore

Operating income ₹ 7,433 crore
Total assets ₹54,881 crore
total equity ₹ 11,414 crore
Net income ₹ 3168 crore

5. Larsen & Toubro

Larsen & Toubro is a major technology engineering construction manufacturing and
financial services conglomerate with global operations. The company is one of the largest

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and most respected companies in India’s private sector. The company operates in three
segments Engineering & Construction Segment Electrical & Electronics segment
Machinery & Industrial Products and others
Revenue ₹147,813.26 crore
Operating income ₹13,430.95 crore
Total assets ₹308,140.13 crore
total equity ₹66,723.22 crore
Net income ₹9549.03 crore

6. Siemens financial services

Siemens Financial Services (SFS) is a Division of Siemens. The company’s global
headquarters is in Munich, Germany. SFS offers international financing solution in the
business-to-business area. Financial Services serves Siemens as well as other companies –
primarily in the energy, industry, healthcare and infrastructure & cities markets. The
division finances infrastructure, equipment as well as working capital investments, and acts
as a manager of financial risks within Siemens AG. The network of financing companies
coordinated by Siemens Financial Services GmbH in Munich comprises about 3,150
employees worldwide.

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7. Reliance capital
Reliance Capital, a constituent of MSCI Global Small Cap Index, is a part of the
Reliance Group. It is amongst India’s leading and most valuable financial services
companies in the private sector. Reliance Capital has interests in life, general and
health insurance; commercial & home finance; equities and commodities broking;
wealth management services; distribution of financial products; asset reconstruction;
proprietary investments and other activities in financial services. Reliance Nippon
Life Insurance and Reliance General Insurance are amongst the leading private sector
insurers in India. Reliance Securities is one of the India’s leading retail broking
houses and distributors of financial products and services. Reliance Money and
Reliance Home Finance are one of the most rapidly expanding businesses in the
lending space.
Revenue ₹1,075 crore

Total assets ₹64,782 crore

Total equity ₹-2,294crore

Operating income ₹2,741 crore

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8. Ceejay Finance
Ceejay Finance Ltd was incorporated in 1993 under the name of Heritage Packaging
Limited in the state of Gujarat as a public limited company {vides Co.No.04-1990,
since then Ceejay Finance hasn’t looked backed and is a leading non-banking Financial
Company (NBFC), formed by Ceejay Group with its headquarters situated in Nadiad,
Gujarat (India). Ceejay Finance Ltd is listed on Bombay Stock Exchange (BSE) under
the security code: 530789. The company is currently managing assets (AUM) of over
₹500 Crore and has served over 1.2 million clients nationally.
Ceejay Finance Ltd is registered as an Asset Finance Company – D NBFC with the
Reserve bank of India. Ceejay Finance is an integrated fiance company providing
financial services such as diverse vehicle loans, SME Business loans, Loan against
property, Personal Loan, Micro Finance Loan and Insurance services.

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9. Industrial Finance Corporation of India (IFCI)
Industrial Finance Corporation of India (IFCI) is actually the first financial institute
the government established after independence. The main aim of the incorporation of IFCI
was to provide long-term finance to the manufacturing and industrial sector of the country.
Initially established in 1948, the Industrial Finance Corporation of India was converted into
a public company on 1 July 1993 and is now known as Industrial Finance Corporation of
India Ltd. The main aim of setting up this development bank was to provide assistance to the
industrial sector to meet their medium and long-term financial needs.
The IDBI, scheduled banks, insurance sector, co-op banks are some of the major
stakeholders of the IFCI. The authorized capital of the IFCI is 250 crores and the Central
Government can increase this as and when they wish to do so.

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10. Arman financial services ltd.

Arman Financial Services Limited (Arman) is an India-based non-banking finance

company. The Company provides two-wheeler three-wheeler financing inter-corporate
deposit (ICD) micro financing and personal financing. The Company operates through two
segments: JLG Microfinance and Asset-backed Microfinance (two-wheeler/three-wheeler
financing). Arman's Micro Finance operations have 14 branches operational all over
Gujarat in urban semi-urban and rural areas. Arman Financial Services Limited was
originally incorporated on November 26 1992 as an erstwhile Arman Lease & Finance Ltd.
The company is a public limited listed company.

1.9 THEORITICAL FRAMEWORK

Introduction to ratio analysis
Ratio analysis is used to evaluate relationships among financial statement items. The ratios
are used to identify trends over time for one organization or to compare two or more
organizations
at one point in time. Ratio analysis focuses on three key aspects of business: liquidity,
profitability, and solvency. Ratio Analysis is an important tool for any business
organization.

Classification of ratio
1. Liquidity ratios: Liquidity ratios are the ratios that measure the ability of a company to
meet its short- term debt obligations. These ratios measure the ability of a company to pay
off its short-term liabilities when they fall due.
2. Solvency ratios: The solvency ratio is a key metric used to measure an enterprise’s
ability to meet its debt obligations and is used often by prospective business lenders. The
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solvency ratio indicates whether a company’s cash flow is sufficient to meet its short-and
long-ter

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