RONW Of 30 Non-banking Finance Companies Rises 15.91% In 2001-02

Updated: Jul 29 2002, 05:30am hrs
The return on net worth (RONW) of 30 non-banking finance companies (NBFC)increased during 2001-02 during the previous year, indicating an increase in the efficiency of generating higher shareholder value. It is measured as net profits as percentage of net worth. A NBFC which has higher RONW is generally considered to have generated higher shareholder value.

Of the 30 NBFCs,only 47 per cent companies were found to have improved their efficiency of generating higher shareholder value.This study traces the traces the trend of RONW for these NBFCs in 2001-02 and 2000-01. Aggregate net worth of 30 NBFCs has increased by 6.43 per cent to Rs 7,246 crore,against Rs 6,808 crore during 2000-01.Their combined net profits have increased by 14.4 per cent, resulting an increase in RONW-higher from 14.81 per cent in 2000-01 to 15.91 per cent in 2001-02.

Only profit making companies in both the years are considered for this study. The top five according to the PAT to net worth are Indl&Prud Invest(25.76 per cent), HDFC (21.46 per cent), Ashok Leyland Finance (20.89 per cent), LIC Housing Finance (19.99 per cent) and Bajaj Auto Finance (18.14 per cent).

In 2000-01,the top five were Ratnabali Capital Market (55.22 per cent), Dolat Investment (29.59 per cent), Industrial&Prud Investment (21.21 per cent), HDFC (19.97 per cent) and IL&FS Venture Corpn (19.39 per cent). Only two NBFCs namely Industrial&Prud Investment and HDFC are common on both these lists. The first rank of Industrial&Prud Invest in 2001-02 can be explained from its performance. The net profit of the company increased by 42.8 per cent to Rs 110 lakh against Rs 77 lakh during 2000-01. On the other hand, Ashok Leyland Finance improved its position from 22nd in 2000-01 to third in 2001-02. Its net profit increased to Rs 3,764 lakh, against Rs 1,618 lakh in 2000-01, indicating growth of 132.63 per cent. Sixteen of these 30 NBFCs have witnessed a fall in PAT to net worth ratio,while 14 companies have shown a higher ratio in 2001-02, against that in 2000-01.

A significant fall in RONW was witnessed in the case of IL&FS Venture Corpn(19.39 per cent in 2000-01 to 12.09 per cent in 2001-02),SMIFS Capital Market (11.10 per cent to 7.92 per cent), Ratnabali Capital Market (55.22 per cent to 5.90 per cent), Dolat Investments (29.59 per cent 4.43 per cent), SKP Securities (10.93 per cent to 3.68 per cent) GIC Housing Finance (5.23 per cent to 1.44 per cent) Sundaram Finance (14.07 per cent to 9.26 per cent) and Aakruti Holdings (11.18 per cent to 0.86 per cent). IL&FS Venture Corpn posted a net profit of Rs 227 lakh, against Rs 364 lakh in 2001-02, registering a decrease of 37.6 per cent.

Similarly, in the case of GIC Housing Finance, the net profit declined by 72.3 per cent to Rs 120 lakh,against Rs 433 lakh during 2000-01. Its net worth increased by 0.93 per cent during the same period.

A significant improvement in RONW was observed in the case of Ashok Leyland Finance (7.99 per cent in 2000-01 to 20.89 per cent in 2001-02), Bajaj Auto Finance (11.82 per cent to 18.14 per cent), Chola.Invest&Fin (7.07 per cent to 11.77 per cent), Allianz Securities (1.44 per cent to 9.89 per cent) and Goldcrest Fin (0.69 per cent to 1.74 per cent).