Study on Performance of NBFCs in India: A Case Study on Tata Capital Financial Services

02 Stochastic Analytical Frameworks for Indian Knowledge Systems and Innovation: Future Pathways 7 Study on Performance of NBFCs in India: A Case Study on Tata Capital Financial Services Harmandeep Kaur1, Isha Gupta2 1,2Assistant Professor, Department of Business Studies, Baba Farid College of Engineering & Technology, Bathinda. Abstract This paper studies the role and performance of Non-Banking Financial Companies (NBFCs) in India with a superior focus on Tata Capital Financial Services Limited (TCFSL). NBFCs help provide loans to people and businesses who may not get help from banks. Tata Capital is one such company offering many financial services. The study looks at its financial growth, profit, and challenges from 2019 to 2024. We used data from reports and websites to study its performance. It could further expand into profitability ratios, liquidity ratios, and capital adequacy ratios to assess TCFSL’s performance over some time. The paper also compares TCFSL’s position with others in the industry. It finds that the company is strong and growing but needs to manage risks better. With proper strategies, TCFSL can grow further. The study gives suggestions to help the company and other NBFCs improve. Keywords: NBFCs, Tata Capital, Financial Performance, Non-Banking Financial Institutions, Financial Inclusion. 1. Introduction Introduction to NBFCs Non-Banking Financial Companies (NBFCs) play a pivotal role in the Indian financial system by providing a wide array of financial services, including loans, asset financing, and investment products. TCFSL is a leading NBFCs that have significantly contributed to financial inclusion and economic growth. This study 8 Stochastic Analytical Frameworks for Indian Knowledge Systems and Innovation: Future Pathways utilizes financial ratios to evaluate and compare their financial performance over a five-year period. Introduction to Tata Capital Financial Services Limited TCFSL is a subsidiary of Tata Capital Limited company. It is a Non-Deposit Accepting NonBanking Financial Company (NBFC) which offers fund and feebased financial services to its customers, under the Tata Capital brand. The company provides financial services to retail, corporate and institutional customers in terms of Commercial Finance, Infrastructure Finance, Wealth Management, Consumer Loans and distribution. The company has its registered office located in Maharashtra. 2. Review of Literature Mishra et al., (2024) analyzed the financial performance of small industrial development bank of India (SIDBI) from the financial year 2016to 2022 to took the information about services provided the SIDBI and also ascertained the financial performance of bank in the terms of capital, reserves, income and funds. The studied analyzed that the capital adequacy and efficiency of the bank remained high during the period of study. Paul et al., (2022) focused on financial performance of Bajaj FinServ. The main objective of this study is to measure the financial performance and to know the profit ability of the company. The study is based on the financial position of the firm by using ratio analysis, financial statements help the management to analyses profit, solvency, liquidity, and efficiency. The study concluded that the company is in a good trend. P & Maheswari (2021) compared the financial performance of NBFCS related to the Nonperformance assets, and also compared the performance of NPAS in the three n NBFCS from 2011-2015. The study evaluated the association of revenue with the actions of NPAS, and found that The Muthoot finance shows the better performance in the terms of assets. Biswas (2019) Studiedon found out the relationship between profitability, liquidity and earnings of the 5 selected NBFCS from 2007 to 2016. He used the various parameter in the study and analyze the data through correlation and regression Stochastic Analytical Frameworks for Indian Knowledge Systems and Innovation: Future Pathways 9 methods. The study found out that the financial performance of Bajaj finance and Sundaram finance are better in the terms of growth of shareholders wealth. 3. Objective of the Study 1. To Study the Growth and performance of various NBFCs in India 2. To Study the financial performance of Tata capital financial services limited in the terms of liquidity, solvency, profitability and efficiency. 4. Research Methodology Research methodology means the way used to do a research study. It explains how information is collected, studied and used to find answers to questions. it includes the type of data used (primary or secondary), where the data come from and how it is analyzed. It helps make the research clear, organized, and reliable Research Design Research Design refers to the grand research approach or strategy used for a specific project. The design chosen for this study is descriptive research design. The reason behind using the descriptive research design is that the study was carried on financial performance analysis of banking sector for which the sources are annual reports and financial statements etc., the financial analysis is done on the basis of balance sheet, profit &loss account, cost report and analysis. Data source Secondary Data: Any data, which have been gathered earlier for some other purpose, are secondary data in the hand of researcher. The research will heavily rely on secondary data sources. These sources include Bajaj FinServ’s and tata capital financial services limited annual reports, financial statements, regulatory filings, and other publicly available documents. Additionally, financial databases, industry reports, and scholarly articles will be consulted for relevant data and insights Analysis of Data There are many financial ratios such as liquidity ratios, profitability ratios, profitability ratios, and efficiency ratios will be computed and analyzed to assess TCFSL’s financial performance. 10 Stochastic Analytical Frameworks for Indian Knowledge Systems and Innovation: Future Pathways Time Horizon The study includes 5 years' financial data from 2019 to 2024. Reporting and Presentation The study findings will be presented in a report format. Charts and tables are tools of presentation and analysis. Ratios Year 20192020 Year 20202021 Year 20212022 Year 20222023 Year 20232024 Current Ratio 3.37 2.10 3.34 6.9 3.51 Quick Ratio 3.37 2.10 3.34 6.9 3.51 Debt to Equity 6.14 6.98 6.33 6.36 6.34 Interest Coverage Ratio 0.13 0.30 0.38 0.49 1.45 Equity Ratio 0.19 0.14 0.19 0.19 0.19 Net profit Margin 1.87 12.46 13.00 17.4 18.28 Return on assets 0.24 1.50 1.37 1.76 1.88 Return on Equity 1.82 12.48 10.53 13.47 14.2 Assets turnover Ratio 0.13 0.12 0.10 0.10 0.10 5. Interpretation Between 2019-2020 and 2023-2024, the liquidity position of the company was sound since the current and quick ratios remained well above 2, indicating that it could comfortably settle short-term obligations. Profitability enhanced significantly over the years-net profit margin, return on equity, and return on assets improved, indicating enhanced earnings and returns. Even the interest coverage ratio increased, indicating that the company can now settle its interest expenses more conveniently. But the debt-to-equity ratio remained very high, showing that the company remains highly reliant on debt. The equity ratio remained low, indicating majority of the assets are funded by debt rather than equity. One point of concern is that the asset turnover ratio remained low, which means the company is not efficiently utilizing its Stochastic Analytical Frameworks for Indian Knowledge Systems and Innovation: Future Pathways 11 assets to make sales. In general, profitability and liquidity have strengthened, but the company needs to work on decreasing debt and improving asset effectiveness. 6. Findings  TCFSL has consistently higher current and quick ratios that is 3.37% in 2020 to 3.51% in 2024, indicating a better ability to cover short-term liabilities with liquid assets.  TCFSL has debt-to-equity ratio is 6.14% in 2020 to 6.34% in march 2024, indicating a more balanced capital structure with less reliance on debt financing.  TCFSL’s interest coverage ratio has improving from 0.13% in march 2020 to march 2024 with 0.45% still has a relatively higher debt burden, which increases its financial risk for the company.  Tata capital showed more consistent growth that is 1.87% in march 2020 to 18.28% in march 2024 in net profit margin ratio.  Tata capital financial services Limited’s had improving in the form of ROE that was 1.82% in march 2020 to 14.2% in march 2024 indicating stringer profitability.  Tata capital financial services limited has shown a lower and stable equity ratio of around 0.13 throughout the five-year period, indicating that only 13% of its assets are funded by shareholders equity and the company is more reliant on debt financing.  Tata capital financial services limited showing declined trend in its asset’s turnover ratio, staring from 0.13% in 2019-2020 and falling to 0.10% in 20232024. This decline suggests that Tata capital financial services limited has been less efficient in using its assets to generate revenue over the years. 7. Suggestions  The company must have enough liquidity to cover term obligation, such as loan repayment and running costs. This assists in preventing financial strain during market volatility. 12 Stochastic Analytical Frameworks for Indian Knowledge Systems and Innovation: Future Pathways  A high debt to equity ratio adds to financial risk, but insufficient debt can restrict growth. The right balance between borrowed money and shareholder’s equity secure long term financial stability.  Firms can enhance profitability by eliminating unessential costs, better bargains with suppliers and purchasing high elastic assets while ensuring risk control.  Using digital lending platforms, auto credit approvals, and AI based fraud detection can boost efficiency, minimize human errors, and enhance customer experience.  Provides customized financial products, competitive rates of interest and prompt customer support can ensure customer retention and new borrowers. 8. Conclusion The study has aimed to examine the financial performance of TCFSL through analyzing the determinants of their profitability. Financial position plays an important role in measuring the overall health over a given period. The financial performance of Tata Capital Financial Services Ltd. from 2019 to 2024 shows strong growth for the company. Tata Capital has also expanded its loan book and income, with improving asset quality and controlled bad loans. TCFSL have managed risks well, with stable non-performing asset (NPA) levels. TCFSL has a stronger market presence and higher profitability and growing at a fast pace. Despite economic challenges, TCFSL have shown financial stability and efficiency. Their consistent growth indicates strong demand for financial services. Overall, Tata Capital is improving steadily. TCFSL have well-positioned for future growth in the NBFC sector. By implementing strategic measures to reduce dependency on debt, optimize working capital, and enhance profitability, the company can strengthen its financial position and sustain long-term growth. Regular monitoring and review of financial performance metrics will be crucial in navigating future challenges and seizing opportunities in the dynamic business environment. References 1. Mishra, Yadav and singh (2024),’’analyzed the financial performance of small industries development bank of India (SIDBI)’’, Adv. Tech. Volume 5(1) 42-54s Stochastic Analytical Frameworks for Indian Knowledge Systems and Innovation: Future Pathways 13 2. R.K Paul et al. (2022), Their study focused on financial performance of Bajaj FinServ. 3. Joseph Antony P and Dr. D. K. Maheswari (2021),’’ a study of performance of non-performing Aeetes in the NPAS”, Journal of General management research, vol. 9, Issue 1, July 2022, pp. 14-26 4. Dr. Bhaskar Biswas (2019),’’ worked on to find the relationship between various parameter of the NBFCS, Journal of General management research, Vol, 9, Issue 1, July 2022, pp. 14-26 5. Dr. Santanu Kmar Das (2016),’’ studied the growth of non-banking financial companies, Journal of management research, Vol, 9, Issue 1, July 2022, pp. 14-26 6. Salehi, M., & Bagheri, S. (2021). The Relationship between Financial Ratios and Stock Returns: Evidence from the Tehran Stock Exchange. Journal of Accounting and Finance, 21(3), 50-61. 7. Agarwal, R. K., & Goyal, S. (2020). Non-Banking Financial Companies (NBFCs) and Their Role in Indian Economy. Journal of Economics and Finance, 11(2), 63-72. 8. Shail Shakya (2017), published a working paper entitled “Regulation of Nonbanking Financial Companies in India: Some Visions & Revisions. 9. Thilakam (2018), writes on “CAMEL Analysis of NBFCs in Tamil Nadu” in ‘International Journal of Business and Administration Research Review.