ONELIFE CAPITAL ADVISORS LIMITED
ANNUAL REPORT 2011-2012
MANAGEMENT DISCUSSION AND ANALYSIS
Global Economy Overview
The global economy is slowing down. In the World Economic Outlook (WEO),
the International Monetary Fund (IMF) has revised its projection for global
growth in 2012 marginally downwards to 3.5 per cent, but has emphasized
further downside risks to growth. In the US, output growth decelerated to
1.5 per cent (seasonally adjusted annualized rate) in Q2 from 2.0 per cent
in Q1 of 2012. In the euro area, growth was flat in Q1 after a contraction
by 1.2 per cent in the previous quarter. In the UK, growth contracted by
2.8 per cent in Q2 of 2012 and 1.3 per cent in Q1. The global manufacturing
purchasing managers' index (PMI) fell below the neutral level of 50.0 to
48.9 in June 2012 - the lowest in 3 years - suggesting contraction in
The decisions by the European Commission (EC) Summit on July 2, 2012
improved market confidence, but only temporarily. Without a sustained
recovery in growth or moderation in sovereign debt stress, which are highly
inter-linked, fiscal and financial stability pressures in the euro area
remain the most significant source of systemic global risk. The renewed
concerns about Greece and the need for greater collective support to Spain
and Italy have amplified these risks. Consequently, the potential for
negative spillovers to the euro area core countries and to the rest of the
world have also increased. India, as an emerging economy cannot be per se
be unaffected by such gigantic developments.
Importantly, risks to global growth, which stem from persistent weakness in
advanced economies, have increased with emerging and developing economies
(EDEs) also exhibiting moderation in growth. Among the Brazil, Russia,
India & China (BRICS) countries, growth in China fell from 8.1 per cent in
Q1 of 2012 to 7.6 per cent in Q2. Growth also moderated significantly in
Brazil and South Africa in Q1. According to the IMF, growth in a number of
major EDEs turned out to be lower than forecast by it earlier.
Inflationary pressures have softened across advanced and emerging
economies, reflecting both weaker growth prospects and moderation in
commodity prices. International (Brent) crude oil prices declined from an
average of about US$ 125 per barrel in March 2012 to an average of about
US$ 95 per barrel in June 2012. In July, however, the average price
increased to above US$ 100 per barrel. In advanced economies, spare
capacity in both product and labour markets limits risks to core inflation.
Among the BRICS countries, inflation fell significantly in China and
Indian Economy Overview
Gross Domestic Product (GDP at factor cost) growth decelerated over four
successive quarters from 9.2 per cent in Q4 of 2010-11 to 5.3 per cent in
Q4 of 2011-12. Significant slowdown in industrial growth as well as
deceleration in services sector activity pulled down the overall GDP growth
to 6.5 per cent for 2011-12.
On the expenditure side, significant weakness in investment activity was
the main cause of the slowdown. Gross Fixed Capital Formation, which grew
by 14.7 per cent in Q1 of 2011-12, moderated to 5.0 per cent in Q2 and then
contracted by 0.3 per cent in Q3 before recovering to a growth rate of 3.6
per cent in Q4. Growth in private consumption also decelerated in 2011-12,
even as it remained the key driver of growth. The positive impact of the
rupee depreciation on exports is yet to be seen.
Growth in the index of industrial production (IIP) decelerated from 8.2 per
cent in 2010-11 to 2.9 per cent in 2011-12. Further, IIP growth during
April-May 2012, at 0.8 per cent, was significantly lower than the expansion
of 5.7 per cent registered in the corresponding period of last year.
During the ongoing monsoon season, rainfall up to July 25, 2012 was 22 per
cent below its long period average (LPA). Further, the distribution of
rainfall was very uneven, with the North-West region registering the
highest deficit of about 39 per cent of LPA. If the rainfall deficiency
persists, agricultural production could be adversely impacted.
Headline Wholesale Price Index (WPI) inflation increased from 7.5 per cent
in April to 7.6 per cent in May before moderating to 7.3 per cent in June
2012. The stickiness in inflation, despite the significant growth slowdown,
was largely on account of high primary food inflation, which was in double-
digits during Q1 of 2012-13 due to an unusual spike in vegetable prices and
sustained high inflation in protein items.
Fuel group inflation moderated from 12.1 per cent in April 2012 to 11.5 per
cent in May and further to 10.3 per cent in June on account of decrease in
non administered fuel prices, which in turn was due to decline in global
crude oil prices. However, the reversal in crude oil prices in recent weeks
may add to domestic inflationary pressure.
During Q1 of 2012-13, yields on government securities softened reflecting
an improvement in liquidity, moderation in inflation and concerns about
weakening of domestic and global growth. The 10-year benchmark yield was
significantly lower at 8.11 per cent on July 26, 2012 as compared with 8.63
per cent at end-March 2012.
In 2011-12, the current account deficit (CAD) rose to US$ 78 billion (4.2
per cent of GDP) from US$ 46 billion (2.7 per cent of GDP) in the previous
year, largely reflecting a higher trade deficit on account of subdued
external demand and relatively inelastic imports of petroleum, oil and
lubricants (POL) as well as gold and silver. As capital inflows fell short
of the CAD, there was a net drawdown of reserves (on a Balance of Payments
(BoP) basis) to the extent of US$ 13 billion in contrast to a net accretion
to reserves of more or less of the same order in the previous year.
The weakness in the external sector observed in 2011-12 continued during
the first quarter of 2012-13, mainly reflecting uncertainty in global
economic and financial conditions coupled with weak domestic macroeconomic
conditions. The Indian Rupee witnessed renewed pressures and depreciated
against the US dollar in Q1 of 2012-13, in line with the trend registered
by major EDEs currencies. Capital flows have remained subdued and volatile.
Notwithstanding various policy measures initiated by the Reserve Bank,
significant depreciation of the rupee, softening commodity prices and
moderation in gold imports, improvement in the trade deficit will continue
to hinge upon global macroeconomic conditions and therefore, upside
prospects remain limited in the short term.
With the services exports likely to decelerate further during 2012-13, the
risks of Current Accounts Deficit going above its sustainable rate, and
difficulties in financing it, persist. There are concerns of a drought in
the economy, with a stressed manufacturing sector and a pessimistic
business environment. Industrial growth may be inclined to remain a
challenge in the near term.
Equity markets turned cautious on concerns about the investment climate
The slow recovery in Q4 of 2011-12 reversed for most part of Q1 of 2012-13,
on the backdrop of deceleration in IIP growth, weak revenue outlook for
Indian IT companies and concerns over the implementation of retrospective
tax and general anti avoidance rules (GAAR). Euro area crisis, the
downgrade of India's long term rating outlook to negative from stable and
the rupee slide also affected the equity market sentiment. However, the
later part of June 2012, saw the market turnaround from low levels on
account of a pick-up in foreign institutional investor (FII) investment in
the equity market, reportedly likely clarifications by the government on
retrospective tax, GAAR and the government decision to boost investments in
infrastructure, and, on the global front, the European Council's decision
to support stressed euro area sovereigns and banks. SEBI data indicate that
FIIs sold shares worth Rs.9.8 billion in Q1 of 2012-13, while MFs sold
shares worth Rs.6.4 billion during the same period.
In Q2 of 2012-13 so far (up to July 23, 2012), the equity market recovered
aided by FII investments (Rs.78.7 billion), moderation in the depreciation
of the rupee and the easy monetary policy pursued globally.
The Primary Market Remained Subdued
The low risk appetite of investors coupled with a weak secondary market and
negative returns on IPOs led to low resource mobilisation in the primary
segment in 2011-12. During 2012-13 so far (up to end-June 2012), the
primary market continued to remain muted, with only Rs. 5 billion mobilised
through six public issues (four IPO and two rights issues).
Resource Mobilisation from Capital Market
Category 2011-12 2011-12 2012-13
A. Prospectus and
Rights Issues* 129 70 5
1. Private Sector (a+b) 83 24 5
a) Financial 9 17 0
b) Non-financial 74 7 5
2. Public Sector 46 46 0
B. Euro Issues 27 12 2
C. Mutual Fund
Mobilisation (net)@ -220 730 -4995
1. Private Sector -154 644 -3985
2. Public Sector # -66 86 -1010
* Excluding offer for sale.
@: Net of redemptions.
#: Including UTI MF, Source:RBI
In the April 2012 Policy, the Reserve Bank of India (RBI) had projected GDP
growth for 2012-13 at 7.3 per cent on the assumption of a normal monsoon
and improvement in industrial activity. Both these assumptions may not
hold. The monsoon has been deficient and uneven so far. Also, data on
industrial production for April-May suggest that industrial activity,
despite some recovery, remains weak. In addition, several risks to domestic
growth have intensified. First, global growth and trade volume are now
expected to be lower than projected earlier. Given the integration of the
Indian economy with the global economy, this will have an adverse impact on
growth, particularly in industry and the services sector. However, the
lagged impact of depreciation of the exchange rate could partly offset this
and impact of weak industrial activity and global slowdown. The services
sector growth is also expected to slow down. On the basis of the above
considerations, the growth projection for 2012-13 has been further revised
downwards by RBI from 7.3 per cent to 6.5 per cent.
Onelife Capital Advisors Limited (OCAL) is a financial services company
offering Investment Banking services and venturing into Portfolio
Management and Equity Broking services. OCAL was incorporated in 2007, by
Mr. T.K.P Naig and Mr. Pandoo Naig as a Private Limited Company.
Subsequently, in December 2010, the company was converted into a Public
Our present focus is primarily on investment banking operations, including
merchant banking. OCAL offers services like Initial Public Offerings (IPO),
Rights Issue, Buyback of Shares, Follow on Public Offering, Qualified
Institutional Placements, Open Offers and other Equity Linked Financing.
Currently, OCAL is assisting small and medium sized companies in their
business planning and fund raising program. These companies are in diverse
sectors like Oral Care, Oil & Gas, Water Purification, Ferro Alloy, Digital
Marketing, Metal Recycling, Glass Manufacturing, Sugar, Health & Spa and
Education etc. As on August 5, 2012, OCAL has signed sixteen mandates for
fund raising through IPO, and two advisory mandates.
Opportunities & Threats
The Challenging global business environment is affecting massive structural
and operational changes in the global financial market. Liquidity situation
in global financial market remains tight as there is depressed growth
momentum in the developed economies as well as a decelerated growth outlook
for Asia, a key performing region in the world. Credit ratings of many
major and reputed economies are under challenge. Ownership of the debt
generated by these economies is under scrutiny.
Regulatory agencies have become proactive and diligent on the activities
and actions by global financial conglomerates. Their punitive action and
demands show the cynical views about actions of these entities which is
further increasing the complexity of conducting business. Business
challenges are already many.
Tiny businesses are suddenly now left in a depressing end of the value
chain with all concerns being magnified and their ability to raise
liquidity for themselves becoming completely shallow. Even in India, Banks
are facing challenges in terms of loan recoveries. Enough liquidity is
limiting the extent of this damage in terms of economic cycle. The flavor
of the season for businesses looks to be corporate financial and business
restructuring, business consolidation and revival of the focus on core
Economic slowdown is forcing companies to put on hold planning for further
capacity expansion and also to reduced utilization of capacities. Hence,
businesses are now suddenly challenged from several fronts: Sales, Asset
Utilizations, Financials, Innovation, Operations and Strategy. There are
many organizations which are now seeking new markets to grow for their
businesses based on their present strengths.
All these developments position our business at the epicenter of change and
have become a change driver. Our company is working positively to act on
these developments to provide a positive growth momentum for the business.
The equity markets remain a major challenge as investors liquidity and
willingness are few and their investment outlooks remain conservative. The
overall risk appetite of these investors has also reduced to a great
extent. The process of corporate decision making is also decelerating in
the wake of delayed and unclear policy making environment of the
The industry and the economy are at crossroads. Our company is trying its
best to benefit from the present environment by seeking opportunities,
which it can address and wherein its strengths exist.
Escalation of global depression for businesses and several economies
themselves being under stress, lead to a large degree of uncertainty for
business and trade. Relative cooling of the commodities has left a ray of
optimism of a potential global recovery in the next few quarters. In this
context, the accelerated act of regulatory pressures/ compliances by
regulators is also tending to impact the speed, quality and quantity of
decision making. Seemingly cynical and retrospective changes of decisions
and several key business/economy drivers appear to make a case for a clear
dis-incentive for entrepreneurship and growth. This is affecting industrial
and business sentiment.
This is a major a cause of our concern as proactive economy builders are
challenged a with no alternative measures for encouraging growth or
investment activity in the economy.
Further, the political climate and social obligations that are beyond the
scope of commercial enterprises are increasing the cost of compliance for
businesses. Situations need to be delicately understood and pragmatic way
of addressing the same is required. Sustainable ideas/guidelines should be
introduced to ensure proper focus and build a globally competitive India.
The need of the hour appears to be reforms in key sectors of economy and
industry along with greater freedom given to enterprises in the public
sector. Unlike, these sectors are provided a fair and equitable platform
for growth, industrial activity may not be fully revived nor these services
sector can thrive. It is utmost urgent and imperative that this issue is
Risks and Concerns
Our company is equally exposed as the rest of the industry to various risk
and uncertainties, thereby impacting business prospects and performance.
Our performance will be conditioned by the evolving regulatory and legal
framework in the industry. We operate in very competitive market. Financial
Market conditions are likely to remain uncertain in the near-term with the
stress likely to continue for some time, given both global and domestic
Our Risk Management Framework (RMF) is designed to deliver requisite
shareholder returns by achieving an appropriate tradeoff between risk and
return. Our RMF is overseen by the Board of Directors. Our organization
structure is based on appropriate checks and balances configured so as to
facilitate integrated risk management and structured periodic reporting to
the Board, following best corporate governance practices. Your company has
also an adequate internal audit system to ensure feedback on adherence to
the defined policies and procedures. Risks are assessed and ranked
according to the likelihood and impact of them occurring. Existing controls
are assessed and mitigation measures discussed. Risk are assessed and
reviewed regularly at top level and risk mitigation measures taken promptly
to address any adverse situation.
Internal Control Systems and Adequacy
The Company has an in-house accounts department which examines and ensures
adequate internal checks and control procedures. It also ensures proper
accounting, records authorization, control of operations and compliance
with law. Further the Company is continuously working to improve and
strengthen internal check and control system to align with the expected
growth in operations.
Review of Financial Performance
During the financial year 2011-12 our company's revenue was Rs. 910.54
lakhs as compared to Rs. 39.15 lakhs in corresponding period of last year.
Net Profit of the Company remains at Rs. 1.31 lakhs as compared to loss of
Rs. 69.95 lakhs in Financial Year 2010-11.
During the financial year 2011-12, we have raised Rs. 45.83 crores for
Paramount Printpackaging Limited through an Initial Public Offering which
closed on April 25, 2011. This offering was subscribed by more than 3.5
times of the issue size.
SEBI carried out investigation into the IPO process and tend-use of funds
thereof of certain companies for a certain period. OCAL was one of the
company. Following the same, they passed an Ex-Parte Ad Interim order dated
28th December 2011. At our instance, it has also passed an order dated 15th
February 2012 clarifying its order dated 28th December 2011. The cumulative
effect of these orders with respect to the company and its directors is as
a. The company shall not issue any equity shares or any other instrument
convertible into equity shares, in any manner, or shall not alter its
capital structure in any manner till further directions from SEBI;
b. The company shall not undertake any fresh business in its capacity as
merchant banker, portfolio manager, stock broker and trading member till
further directions from SEBI, except the business already mandated as on
28th December 2011;
c. The company shall not buy, sell or deal in securities directly or
indirectly till further directions from SEBI;
d. All the directors of the company shall not buy, sell or deal in
securities directly or indirectly till further directions from SEBI;
e. The company shall call back funds transferred to Fincare Financial and
Consultancy Services Private Limited and Precise Consulting & Engineering
(For detailed information please see the SEBI order copy dated December 28,
2011, which is available on below mentioned link:
Based on our convictions about this issue, apart from responding to SEBI,
we have consistently appealed to the Hon'ble SAT placing the same facts
from our perspective for their kind examination. In respect of our first
appeal before the Hon'ble SAT, SEBI has been kind enough to pass an
explanatory/clarrificatory order in respect of the operational aspects of
our existing business. Yet, our Company genuinely believes that certain
other substantive issues of their order required a reconsideration by them
and hence we have filed a second appeal before the Hon'ble SAT, who have
since passed their orders, asking SEBI to complete full investigations on
this matter and pass the final orders before end-October 2012. Meanwhile by
keeping in abeyance the directions of SEBI in respect of the recall of
funds paid out to certain Companies for business purposes, consistent with
our objects of the issue, the Hon'ble SAT has given your company the much
needed breathing space in this circumstance. (For detailed information
please see the SAT order copy dated January 01, 2012 and dated June 25,
2012, which are available on below mentioned link: http://www.sebi.
gov.in/cms/sebi_data/ attachdocs/ 1327056363349.pdf and http://www.sebi.
Developments in Human Resources
Our employees continue to be our biggest source of strength. Determination
and commitment of all the employees through the thick and thin has been a
major support to your Company with regard to chalking out and executing
strategies and plan. Going forward, your Company's ability to enhance its
human resource competencies will be even more critical. It is challenge
that is being addressed on continuous basis by your management.
This Report contains forward-looking statements that involve risks and
uncertainties. When used in this Report, the words, 'believe', 'estimate',
'expect', 'will' and other similar expressions as they relate to the
Company and/or its businesses are intended to identify such forward-looking
statements. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events, or otherwise. Actual results, performances or
achievements could differ from those expressed or implied in such forward-
looking statements. Members are cautioned not to place undue reliance on
these forward-looking statements that speak only as of their dates. This
Report should be read in conjunction with the financial statements included
herein and the notes thereto.