An analysis of published results of NBFCs listed companies for the year ended 31 March 2019.
Non-Banking Financial Companies (NBFCs) have adopted Ind AS from 1 April 2018. These companies have recently published their financial results for the year ended 31 March 2019. As NBFCs embrace Ind AS, KPMG in India, through its publication, ‘Ind AS: Practical perspectives (NBFCs)’ aims to capture emerging trends and practices by analysing these financial results.
In this publication, we analyse the results of 60 NBFCs (28 NBFCs that have their debt securities listed on the BSE and 32 equity listed NBFCs on BSE 500). Basis of our analysis is a comparison of the reported financial results for the year ended 31 March 2018 under the erstwhile Indian GAAP with the restated financial results for the same period under Ind AS, that have been published as comparatives for the year ended 31 March 2019.
In the earlier quarters of the financial year 2018-19, the implementation and disclosures relating to the application of Ind AS had been substantially impacted by the financial reporting relaxations provided by the Securities and Exchange Board of India (SEBI) for the first-time adoption of Ind AS. Now for the year end results, both, the equity listed and debt listed NBFCs have disclosed their balance sheets in the revised format along with comparatives as at 31 March 2018, and equity reconciliations as on that date. However, while the equity listed NBFCs have provided consolidated financial results, many of the debt listed companies have reported only separate financial results. This has brought in diversity in results presented by companies.
We found that most of the companies have presented only bare minimum information mandated by SEBI, without sufficient explanations. As a result, the transition related choices made and exemptions availed are not evident in the published results thus far. Due to these reasons, the financial results do not fully showcase the extent of qualitative differences between erstwhile Indian GAAP and Ind AS.
The trend of impact of Ind AS on key financial metrics for the year ended 31 March 2018 is in line with the trend observed in our publications Ind AS: Practical Perspectives (NBFCs) for the half year ended 30 September 2018 and quarter ended 30 June 2018. There is an increase in revenue from operations, finance cost and employee cost under Ind AS in comparison to the erstwhile Indian GAAP while there is a fall in profit after tax. Additionally, we observed that there is an increase in loan loss provision reported by 12.6 per cent by the equity listed NBFCs while debt listed NBFCs showcased a reduction in the loan loss provision by 12.1 per cent.
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