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This document provides an overview and objectives of a study comparing the financial performance of selected non-banking financial companies (NBFCs) in India. The study aims to analyze the profitability and growth of NBFCs and compare their performances. It will use financial ratios like return on equity, net profit margin, debt-to-equity ratio, and earnings per share to evaluate 10 major Indian NBFCs over the period of 2011-2018. Secondary data sources like publications, websites, and past organizational records will be used to calculate the financial ratios and analyze the financial performance of NBFCs.

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1K views7 pages

Synopsis

This document provides an overview and objectives of a study comparing the financial performance of selected non-banking financial companies (NBFCs) in India. The study aims to analyze the profitability and growth of NBFCs and compare their performances. It will use financial ratios like return on equity, net profit margin, debt-to-equity ratio, and earnings per share to evaluate 10 major Indian NBFCs over the period of 2011-2018. Secondary data sources like publications, websites, and past organizational records will be used to calculate the financial ratios and analyze the financial performance of NBFCs.

Uploaded by

Anchal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
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SYNOPSIS

Title of the project

“A comparative study of financial performance analysis of selected non-banking


financial companies(NBFCs) in India”

Introduction and Objectives of the study

A Non-Banking Financial Company (NBFC) is a company registered under the


Companies Act, 1956 and is engaged in the business of loans and advances,
acquisition of shares/stock/bonds/debentures/securities issued by Government or
local authority or other securities of like marketable nature, leasing, hire-purchase,
insurance business, chit business but does not include any institution whose principal
business is that of agriculture activity, industrial activity, sale/purchase/construction
of immovable property. A non-banking institution which is a company and which
has its principal business of receiving deposits under any scheme or arrangement or
any other manner, or lending in any manner is also a non-banking financial company.
With effect from December 6, 2006 the above NBFCs registered with RBI have been
classified as:

(i) Asset Finance Company (AFC)

(ii) Investment Company (IC)

(iii) Loan Company (LC)

This study and its outcome will be a tool for the NBFCs to have a clear view about
its current performance and risks (strengths and weaknesses). It will facilitate
decision-making through the identification of improvement areas and motivate the
entire institution towards performance improvement. It will also provide tool to
follow up its development, assess progress in achieving sustainability and compare
to its peers and present itself to potential funders. The main objective of this study
are:

 To study the financial performance of selected NBFCs in terms of profit


and growth.

 To compare the performances of selected NBFCs in India.

Problem statement and literature review


The NBFCs in different areas in general and in housing finance are playing
significant role in society and also profitable to investors. Due to competition
between these institutions, the customers are getting diverse housing schemes and
attractive rates of interest, thereby theses NBFCs are also growing in terms of
investment, deposits, loans, profit etc. Hence, the present study is made to evaluate
the performance of NBFCs in different sector under the title “A comparative study
of financial performance analysis of selected non-banking financial
companies(NBFCs) in India”.

Review of literature

1) According to RBI Non-Banking Finance Companies (NBFCs) is a constituent


of the institutional structure of the organized financial system in India. NBFCs
perform a significant and important role in our financial system. They
facilitate the process of channelising of public savings and provide better
return to the depositors. The activities of non-banking financial
companies(NBFCs) in India have undergone qualitative changes over the
years through functional specialisation.
2) According to KPMG survey. The Indian Non-Banking Finance Company
(NBFC) sector has often been relegated to the shadows, in most discussions
on the Indian Financial Services(FS) industry. Banks, insurance companies
and capital market players take center stage and invariably, NBFCs attract
public attention only during times of crisis.

3) Akanksha Goel in her article in ‘ELK Asia Pacific Journal’ studied the growth
prospects of NBFCs in India.

4) Jafor Ali Akhan (2010) writes on “Non-Banking Financial Companies


(NBFCs) in India”. The book discussed the financial system in India. It covers
the financial intermediaries including commercial banks, regional rural banks,
cooperative banks and Non-Banking Financial Companies in India.

5) Taxmann’s (2013) published “Statutory Guide for Non-Banking Financial


Companies” is published by Taxman’s Publications, New Delhi. The book
listed the laws relating to Non-Banking Financial Companies.

6) Sunita yadav in her article in ‘International journal of recent scientific


research’ studied the financial performance of selected NBFCs on parameters
like Net profit ratio, Return on Investment, Annual growth rate etc.

7) Sornaganesh and Maria Navis Soris17 (2013) B “A Fundamental Analysis of


NBFCs in India” in ‘Outreach’. The study was made to analyze the
performance of five NBFCs in India.

8) According to a research article by S. Venkitaramanan' on "Needed, a fair deal


for NBFCs", it mentions that the time has come for the RBI to make peace
with NBFCs as a class. According to him, NBFCs are proven instruments of
efficient and customer-friendly outreach in the credit space, not only for
consumer durables, but also housing and transport, besides infrastructure.

Methodology and References

To examine the financial performance of selected Indian NBFCs, the financial ratios
of will used, viz. the liquidity ratio, represented by the quick ratio, current ratio and
loans to deposit ratio, the profitability ratio, measured by the return on equity (ROE),
earning per share (EPS) and net profit margin, debt equity ratio, return on capital
employed, dividend payout ratio. The list of Indian NBFCs selected for the study is
shown in Table 1.

S.NO Selected NBFCs in India


1 Power Finance Corporation Ltd.
2 Shriram Transport Finance Company Ltd.
3 Bajaj Finance Ltd.
4 Mahindra & Mahindra Financial Services Ltd.
5 Muthoot Finance Ltd.
6 HDB Finance Services
7 Cholamandalam Finance
8 Tata Capital Financial Services Ltd.
9 L &T Finance Ltd
10 Aditya Birla Finance Ltd.

The study covers the annual data for the period from 2011/12 to 2017/18 . The
research design of study is based on the descriptive research by using the secondary
data.

Methods of Data Collection

The data related to the study are collected from secondary data. Secondary data is
collected from various published books, journals, magazines, newspapers, websites
and past records from various Governments, Private organizations involved in
operations of NBFCs as well as regulations.

Tools and Techniques of Analysis

To analysis the financial performance of NBFCs, the financial ratios will be used:

1) Current Ratio: The current ratio evaluates a capacity to pay short-term and
long-term obligations.

Current Ratio = Current Assets/Current Liabilities

2) Quick Ratio: The quick ratio is also a liquidity ratio that represents the short-
term liquidity.

Quick Ratio = (Cash + accounts receivables + marketable securities)/Total


Current Liabilities

3) Loan to Deposit Ratio: The loan-to-deposit ratio (LTD) is also a commonly


used statistic or assessing a bank’s liquidity by dividing the bank’s total loans
by its total deposits.

Loans to Deposit Ratio = Loans/Deposits

4) Return on Equity: Return on equity is commonly used profitability ratio that


measures profitability by revealing how much profit generates with the money
shareholders have invested.

Return on Equity = Net Income/Shareholder’s Equity

5) Net Profit Margin: Another measure of profitability ratio is the net profit
margin measured by the ratio of net profits to revenues for a bank.
Net Profit Margin = Net Profit/Revenue

6) Debt Equity Ratio: It indicates what proportion of equity and debt the
company is using to finance its assets.

Debt equity ratio=Total liabilities/Shareholders Equity

7) Return on Capital employed: A financial ratio that measures a company's


profitability and the efficiency with which its capital is employed.

ROCE = Earnings Before Interest and Tax (EBIT) / Capital Employed

8) Dividend Payout Ratio: The percentage of earnings paid to shareholders in


dividends.

Dividend Payout Ratio=Dividend/Net Income

9) Earnings Per Share: Earnings Per Share (EPS) measures the fraction of a
profit allocated to each outstanding share of common stock.

Earnings Per Share = (Net Income − Dividends on Preferred Stock)/Average


Outstanding Shares

References

www.rbi.org

www.google.com

www.scholar.google.co.in

www.reserchgate.net

www.elkjournals.com
www.recentscietific.com

www.scribd.com

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