Gujarat State Financial Corporation

To the Members,

The Board of Directors is pleased to place before you the 64th Annual Report of the Corporation containing audited Balance Sheet as at March 31, 2024, Statement of Profit and Loss, Cash Flow Statement and other financial statements for the year ended March 31, 2024.

1. Economic Scenario:

Global Economy:

Global economy has displayed an extraordinary resilience, enduring wars, tight financial conditions and havoc-wreaking climate change. Global trade growth, which had flat-lined in 2023, is expected to recover in 2024, although it will likely to remain below its pre-pandemic trend. According to the World Trade Organization, trade measures introduced by G20 economies have become more restrictive in recent months than trade facilitating, although the value of traded merchandise covered by facilitating measures continued to exceed that covered restrictions. In its latest Global Economic Prospects (GEP), the World Bank has projected global growth to ebb from an estimated 3.0 per cent in 2023 to 2.9 per cent in 2024, making the third consecutive year of deceleration. The weaker outlook reflects the combined effects of the dampening of demand due to tight monetary policy, restrictive credit conditions, softening labour markets, reduced savings buffers, the waning of the revenge spending on services and lackluster global trade and investment.

Indian economy:

The domestic economy is experiencing strong momentum. As per the second advance estimates, real gross domestic product (GDP) expanded at 7.6 per cent in 2023-24 on the back of buoyant domestic demand. Headline inflation softened to 5.1 per cent during January-February 2024 from 5.7 per cent in December. In India, economic activity remained resilient on the back of robust demand, notwithstanding the external headwinds. Indian economy has undergone many structural reforms that have strengthened its macroeconomic fundamentals. These reforms have led to India emerging as the fastest growing economy among G20 economies. The government's economic policy focus was to restore India's growth potential by getting the financial sector back on track, facilitating economic activity by easing conditions for business, and massively augmenting physical and digital infrastructure to enhance India's connectivity and, thus, competitiveness of its manufacturing sector. With this vision to guide its policies, the Government has undertaken diverse economic reforms to prepare the economy to grow at its potential by creating a business-friendly environment, improving ease of living and strengthening the governance systems and processes. India has been showing both resilience as well as progress despite all risks and uncertainties in the global economic landscape. Through timely and effective policy actions aimed at achieving macro stability and repairing the balance sheets of financial and non-financial sectors as well as by investing significantly in building world-class physical and digital public infrastructure, India has been able to withstand the challenges, both domestic and global, and ensure that the economy continues to progress on a steady path.

2. Financial results:

Corporation's financial performance for the financial year ended March 31, 2024 is summarized below:

3. Performance:

During the year under reference, interest on Loans and Advances registered an increase of 744.69 per cent and stood at Rs465.68 lakh compared to Rs55.13 lakh reported in the previous year. Interest on deposits increased by 34.87 per cent to Rs1,294.01 lakh as against Rs959.43 lakh reported a year ago. Other income, including non-cash items, decreased by 7.56 per cent to Rs389.85 lakh during the year under reference compared to Rs421.72 lakh reported in the previous year. Total income for the year under reference stood at Rs2,149.54 lakh, an increase of 49.66 per cent over Rs1,436.28 lakh reported in the previous year. Interest on loans granted by the Government for the year under reference increased marginally and stood at Rs13,748.09 lakh as against Rs 13,562.34 lakh reported a year ago. Employees cost for the year under reference reduced by 34.21 per cent and stood at Rs149.25 lakh compared to Rs226.85 lakh reported in the previous year. Total expenditure for the year under report registered a marginal increase of 0.85 per cent and stood at Rs14,070.38 lakh as against Rs13,951.17 lakh reported a year back. Loss for the year under reference stood at Rs11,920.84 lakh, a reduction of 4.75 per cent over Rs12,514.89 lakh registered in the previous year. The accumulated loss for the year under reference increased by 3.75 per cent at Rs3,29,981.82 compared to Rs3,18,060.98 lakh reported in the previous year.

4. Borrowings:

Aggregate borrowings from Government of Gujarat during the year under reference remained statistic at Rs66,168.43 lakh.

5. Recovery:

During the year under reference, Corporation continued to extend liberal One Time Settlement Schemes to attract defaulting loanee units to come forward and settle the accounts. As a result of concerted efforts, Corporation registered a modest increase of 7.19 per cent in recovery of dues to Rs 558.77 lakh compared to Rs521.29 lakh reported a year ago.

6. Human Resource:

During the year under report, the staff strength of the Corporation reduced to 16 from 24 reported in the previous year. The break-up of staff strength is as under:-

Of the total staff strength of 16, one employee is on loan service and 5 are on deputation with other Government departments. The effective staff strength of the Corporation reduced to 10 spread over three Regional Offices and Head Office.

7. Corporate Governance:

The detailed Corporate Governance Report containing all relevant information and the certificate regarding compliance of corporate governance are forming part of the Annual Report. The qualifications contained in para 2 of the Certificate of compliance with the conditions of Corporate Governance Regulations are dealt with in "Other Disclosures" in para 10 of the Report on Corporate Governance for FY 2023-24 forming part of the Annual Report.

Management Discussion and Analysis Report and declaration by Managing Director that the Board of Directors and Senior Management Personnel have complied with the Code of Conduct also form part of Annual Report.

8. Auditors:

M/s. Pankaj R Shah & Associates, Chartered Accountants (FRN No. 107361W), were re-appointed for the second term as the statutory auditors of the Corporation to hold office from the conclusion of 63rd Annual General Meeting till the conclusion of ensuing Annual General Meeting by the members at the AGM held on 27th July, 2023 pursuant to 37 (1) of SFCs Act, 1951. Since an auditor can be continued for four years as per Reserve Bank of India norms, Corporation requested Reserve Bank of India to confirm their eligibility and suitability for re-appointment for the third term. RBI, vide letter dated April 05, 2024, confirmed their eligibility for re-appointment. Proposal to re-appoint the said auditors for the third term as recommended by the Board is being placed before the shareholders at the ensuing Annual General Meeting for consideration. M/s. Pankaj R Shah & Associates, Chartered Accountants, statutory auditors have submitted

Independent Auditor's Report on the financial statements of the Corporation for the year ended March 31, 2024 which contains two qualifications, both reiteration of previous yeaRs Said qualifications along with comments thereon of the management is given in Addendum to this Report and also form part of the Annual Report.

9. Board of Directors:

The following are the changes in chronological order in the Directorate during the financial year ended March 31, 2024:

a. Shri Sandip J Sagale, IAS, Industries Commissioner, took over as ex-officio Managing Director of the Corporation with effect from April 05, 2023 succeeding Dr. Rahul Gupta, IAS pursuant to Order dated April 29, 2017 read with Notification dated March 31, 2023 of the General Administration Department.

b. Pursuant to Section 10 (d) of the SFCs Act, 1951, Life Insurance Corporation of India nominated Shri Madhukar M Asthana, Senior Divisional Manager, LIC of India, Gandhinagar Divisional Office as Director on the Board of Directors of the Corporation in place of Shri Sanjeev Mehta vide letter dated May 16, 2023. Accordingly, Shri Madhukar M Asthana assumed office of Director of the Corporation on May 23, 2023.

c. Small Industries Development Bank of India, vide letter dated September 04, 2023 nominated Shri S.J. Haider, IAS, Additional Chief Secretary, Industries & Mines Department, Government of Gujarat as Chairman of the Corporation to succeed Shri Raj Kumar, IAS, the then Additional Chief Secretary, Industries & Mines Department. Shri S.J. Haider, IAS assumed the position of Chairman with effect from September 26, 2023. Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, brief resume of Directors joined on the Board of Directors during the year under report is furnished in the Corporate Governance Report, forming part of the Annual Report.

10. Directors' Responsibility Statement

The Directors, based on the representations received from the Operations Departments and to the best of their knowledge and ability, hereby confirm that:

1. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

2. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Corporation at the end of the financial year ended March 31, 2024 and of the profit and loss of the Corporation for that period;

3. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the regulatory provisions for safeguarding the assets of the Corporation and for preventing and detecting fraud and other irregularities;

4. the annual accounts for the year ended March 31, 2024 has been prepared on a going concern basis,

5. they have laid down internal financial controls to be followed by the Corporation and that such internal financial controls are adequate and were operating effectively during the year ended March 31, 2024; and 6. proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively during the year ended March 31, 2024.

11. Acknowledgement:

The Board of Directors is pleased to place of record its gratitude to Government of India, Ministry of Finance, Department of Financial Services, Government of Gujarat and its various departments, Small Industries Development Bank of India, Lucknow and Ahmedabad offices, Reserve Bank of India, SEBI and BSE Ltd for their continuous support and guidance. The Board gratefully acknowledges its appreciation to the commendable services rendered and guidance provided by Shri Raj Kumar, IAS as Chairman and Shri Sanjeev Mehta as Director of the Corporation. The Board is also pleased to place on record its gratitude to the stakeholders, valued customers and well-wishers for their goodwill, patronage and support. Finally, the Board also appreciates the dedicated services rendered by the staff at all levels.