An analysis of published financial results of NBFC listed companies
Non-Banking Financial Companies (NBFCs) have adopted Ind AS from 1 April 2018. These companies have recently published their financial results for the period ended 30 September 2018. 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 58 NBFCs (28 NBFCs that have their debt securities listed on the BSE and 30 equity listed NBFCs on BSE 500).
The equity listed NBFCs have implemented Ind AS when preparing their financial results for the quarter ended 30 June 2018 while debt listed NBFCs have published their Ind AS results for the first time as at 30 September 2018. With the 30 September 2018 financial results, equity listed NBFCs presented their balance sheet prepared under Ind AS for the first time.
Basis of our analysis is a comparison of the reported financial results for the half year ended 30 September 2017 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 period ended 30 September 2018.
As noted in the first quarter, the implementation and disclosures relating to the application of Ind AS in the second quarter too have 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. This has brought in diversity in results presented by companies. Most of the companies presented only bare minimum information mandated by SEBI. As a result, the impact of the transition on net worth, the transition related choices made and exemptions availed are not evident in the published results thus far. Further, close to 83 per cent of these NBFCs have reported only separate financial results instead of consolidated financial results. 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 half year ended 30 September 2017 is in line with the trend observed in the first quarter 30 June 2017 i.e., 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 22 per cent by the equity listed NBFCs while debt listed NBFCs showcased a reduction in the loan loss provision by 28 per cent.
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