Financial and investment companies' financial income growth moderated to 23.2% in 2012-13 from 30.4% in 2011-12 mainly due to lower growth in interest income, according to RBI report. Growth in total income also decelerated during the year 2012-13 to 24.7% vis-a-vis the previous year (28.9%).
Total expenditure increased at a lower rate of 28.5% in 2012-13 (37.7% in 2011-12) aided by a fall in growth of interest expenses to 37.4% (57.6% in 2011-12). Growth in operating profits (EBDT) of the select companies was lower during the year 2012-13 whereas growth in net profits of the company's improved. Operating profit margin (measured as a ratio of operating profits to financial income) declined together with marginal fall in return on assets (ratio of net profits to total net assets) and return on shareholders’ equity (ratio of net profits to net worth) in comparison with the previous year.
Growth in investment of select financial and investment companies increased to 14.2% in 2012-13 from 7.3% in the previous year. Although the growth rate in borrowings from the bank declined significantly, the share of bank borrowing to total borrowing increased. The debt to equity ratio also increased in 2012-13 as compared to that in 2011-12, the report said.
Within liabilities, share of the major component viz. long-term borrowings increased marginally; while on the assets side, share of loans and advances rose.
During the year, the financial and investment companies continued to rely mainly on external sources for funds and used them predominantly for expanding their long-term loans and investment portfolios. In sources of funds, the shares of both long-term and short-term borrowings in total sources of funds declined in 2012-13 as compared with the previous year. While in case of uses of funds, the share of long-term loan and advances in total uses of funds increased in 2012-13 (58.1%) vis-a-vis the previous year (44.9%).