MUMBAI, Sept 28: The net profits of 158 non-banking finance companies (NBFCs) dropped steeply by 30 per cent during the year 1997-98, marking the second year of sharp drops in their net profits.According to a study by the Centre for Monitoring Indian Economy (CMIE), the main income of 158 large NBFCs increased by only 15 per cent during 1997-98, reflecting a sharp drop from the 15 per cent raise of the previous year. It also implies a substantial slowdown in the activities of the NBFCs during the year.The interest expenditure, which accounted for 45 per cent of the main income, rose by 17 per cent, thus cutting into the profitability of these companies. ``Pertinently, the total net profit of 216 NBFCs had declined by 61 per cent in 1996-97,'' CMIE said.On the other hand, the total net sales of 1,321 manufacturing companies rose by 6 per cent, while the aggregate net profit increased by 4 per cent during 1997-98.CMIE said 40 big NBFCs could expand their main incomes, while the remaining 118companies reported declining incomes. Again, it was this top quartile of 40 companies which earned net profits during the year, though their aggregate net profits declined by 20 per cent.The next quartile, comprising another 40 companies, incurred an aggregate net loss by more than 50 per cent. The performance of the bottom 78 companies only worsened during the year as they reported a combined net loss against the net profit in 1996-97.``The poor performance of the NBFC scrips clearly reflects the decline in their financial results. For instance, finance and leasing companies together yield a negative return of 31 per cent during the 12-month period ended August 1998,'' CMIE said.This was worse than the 24 per cent average negative return of all the relatively actively traded scrips during the period. The number of such traded finance scrips declined sharply from 89 in September 1997 to just 16 by the end of August 1998.Meanwhile, last year's slowdown in the activities of the NBFCs seems to haveinfluenced their performance in the initial months of the current year. The main income of 36 NBFCs declined by 23 per cent during the first quarter of 1998-99, but the companies earned a total net profit of Rs 4 crore.In all, 81 companies with a main income of Rs 374 crore have announced their working results for April-June. Of these, only 36 companies with main income of Rs 166 crore have provided the requisite data for the corresponding first quarter of the last fiscal. Though quarterly results are now mandatory, SEBI has exempted companies from disclosing this comparable data if their accounting systems do not have it.Meanwhile, the Union Government has appointed a high-level committee, headed by C M Vasudev, banking secretary, Union Minister of Finance, to explore the need for a separate regulatory body for NBFCs.
