We submit herewith the "Management Discussion and Analysis Report" on the
business of the Company as applicable to the extent relevant.
COMPANY OVERVIEW
Ikab Securities and Investment Limited (IKAB) (‘ Company ‘) is a Listed
company and was incorporated on 17th January, 1991 in India with its registered
office 11th Floor, Express Towers Nariman Point Mumbai - 400 021
"Maharashtra". The Company had received Certificate of Registration on 20th
April 1998 from Reserve Bank of India (‘RBI’). IKAB is an NBFC bearing
registration No. CoR No.13.00690, registered under Reserve Bank of India (RBI).The Company
is a Non-Banking Financial Company (NBFC), registered with Reserve Bank of India as a NBFC
-Non Deposit taking-Non-Systemically Important (‘NBFC-ND-SI’).
The Company has been in the business of providing financial services. Simple processes
and procedures in sanction and disbursement of credit as well as timely, friendly, and
flexible terms of repayment have been the USP of the company.
INDUSTRY STRUCTURE AND DEVELOPMENT
Non-banking Financial Companies (NBFC) sector in India has undergone a significant
transformation over the past few years and plays a significant role in the growth of the
Indian financial system. India has a diversified financial sector undergoing rapid
expansion. The sector comprises of commercial banks, insurance companies, non-banking
financial companies, co-operatives, pension funds, mutual funds and other smaller
financial entities.
NBFC sector in India is playing a critical role in the development of Core
infrastructure, transport, employment generation, wealth creation, economic development of
the weaker sections in India.
In the recent decade, NBFCs have emerged as one of the principal institutions in
providing credit financing to the unorganized underserved segment of the society. NBFCs
have not only revolutionized the way the lending system operates in India but have also
been able to integrate technology and credit appraisal process to provide customers with a
quick and convenient financing experience
Specialized Non-Banking Financial Companies (focussed on select segments) have
outperformed banks in segments like Mortgage Industry, Gold financing by leveraging
technology in credit deployment. Technology has made NBFC’s expand into underserved
segments, where the banks don’t serve. NBFC’s have carved niche business areas
for themselves by understanding customers & building customized products, which the
commercial banks fail to.
OUTLOOK AND INDUSTRY OVERVIEW
Non-banking finance companies (NBFCs) form an integral part of the Indian financial
system by complementing the banking sector in extending credit to the unbanked segments of
society, especially to the micro, small and medium enterprises (MSMEs) which form the
cradle of entrepreneurship and innovation
However, NBFCs operate under certain regulatory constraints, which put them at a
disadvantageous position vis-a-vis banks. While there has been a regulatory convergence
between banks and NBFCs on the asset side, on the liability side, NBFCs have a long way to
go to be at par with banks. This needs to be addressed to help NBFCs realize their full
potential and thereby perform their duties with greater efficiency.
OPPORTUNITIES AND CHALLENGES
NBFC segments provides huge growth opportunities particularly after the development of
last few years. We have witnessed reasonable degree of consolidation in the NBFC sector.
Liability side stress in the sector has largely reduced in last couple of years led by
focussed efforts from the regulators side. The NBFC sector faced headwinds again when the
second wave hit the country by May 2021. With the passing of the second wave, the outlook
is brightening again.
During the year under review, the balance sheet of NBFCs expanded at a faster rate than
a year ago, driven essentially by growth in credit and investments of NBFCs-ND-SI.
New management has recently taken over the reins of your company and are excited to
capitalize on this immense growth opportunity in the NBFC sector.
Challenges in NBFC sector:
• Business is highly regulated, and it may be adversely affected by future
regulatory changes.
• Financial performance is vulnerable to interest rate risk, as most of the
funding is from banking channels.
• Greater competition from NBFCs/banks/fintech could impact growth in AUM and
profits.
SEGMENT WISE AND PRODUCT WISE PERFORMANCE
The company considers business segment as the primary segment and geographical segment
as a secondary segment. The company was engaged in the business of trading/investment in
shares and securities and operates in one geographical segment in ‘India’. The
Company’s performance during the year is given below:
FINANCIAL PERFORMANCE VIS-A-VIS OPERATIONAL PERFORMANCE
Total Income of the Company during the year was Rs. 13,71,91,719/- as against Rs.
8,30,68,827/- in the previous year. During the year under review, the Company has earned a
profit of Rs. 4,56,53,315/- as against Rs. 2 ,69,63,282/- in the previous year.
RISK AND CONCERN
Risk management forms an integral part of our business. In the financial services
sector, it becomes imperative to ensure that profitability does not come at the cost of
asset quality. The key risks are Credit Risk, Interest Rate Risk, Market Risk (collateral
price), Liquidity Risk and Operational Risk. These risks, if not effectively managed may
have a bearing on our financial strength and operations. The Company has put in place
adequate risk identification, risk management and mitigation processes to keep any such
trade-off at bay. It is also constantly gauging the external macroeconomic environment,
market conditions, and government policies to ensure that the business is one-step ahead
of the industry and monetary cycles, thereby insulating the Company from downtrends and
enabling it to ride uptrend. Bearing this in mind, we continuously improve our risk
management policies and procedures and implement them rigorously for the efficient
functioning of our businesses. The key objective in the risk management processes is to
measure and monitor the risks and effectively contain these within acceptable limits.
Credit Risk : Credit risk is defined as the possibility of losses associated with
diminution in the credit quality of borrowers or other counterparties.
Interest Rate Risk : The Company is subject to interest rate risk, principally because
it lends to customers at fixed interest rates and for periods that may differ from its
funding sources, which bear fixed and floating rates. Interest rates are highly sensitive
to many factors beyond our control, including the monetary policies of the RBI,
deregulation of the financial sector in India, domestic and international economic and
political conditions, inflation and other factors.
Operational Risk: Operational risks are risks arising from inadequate or failed
internal processes, people and systems or external events. The internal control includes
effective separation of functions, segregation of roles and responsibilities, reliance on
the maker- checker concept, monitoring of exceptions, etc. We also attempt to mitigate
operational risk by maintaining a comprehensive system of internal controls, establishing
policies and procedures to monitor transactions, maintaining necessary back-up procedures
and undertaking contingency planning.
Liquidity Risk : Liquidity risk arises due to the unavailability of an adequate amount
of funds to meet the Company’s financial obligations at an appropriate price and
tenure.
The Company attempts to minimise this risk through a mix of strategies, including
diversification of sources of funds, securitisation and assignment of receivables, fixing
caps on short term funds and maintaining liquidity buffer.
Business Risk : The Company, being an NBFC, is exposed to various external risks which
have a direct bearing on the sustainability and profitability of the Company. Foremost
amongst them are Industry Risk and Competition Risk. The volatile macroeconomic conditions
and change in sector dynamic in various commercial segments cause ups and downs in the
business and may result in impairment of loan assets.
Regulatory Risk : It is the risk of change in-laws and regulations materially impacting
the business. All the periodic guidelines issued by regulators including the RBI, SEBI,
NHB, IRDA are fully adhered to and complied with by the Company. The Company strictly
adheres to the Capital Adequacy, Fair Practices Code, Asset Classification and
Provisioning Norms, submission of all required returns to the regulators with zero
tolerance for non-compliance.
Reputation Risk : Reputational risk is the risk of possible damage to the
company’s brand and reputation, and the associated risk to earnings, capital or
liquidity, arising from any association, action or inaction which could be perceived by
stakeholders to be inappropriate, unethical or inconsistent.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has put in place an adequate internal control system to safeguard all its
assets and ensure operational excellence. The system also meticulously records all
transaction details and ensures regulatory compliance. Your Company has an adequate system
of internal financial control procedures, which is commensurate with the size and nature
of business. During the year under review, such controls were tested and no reportable
material weakness in the design and operation were observed.
These have been designed to provide reasonable assurance with regard to recording and
providing reliable financial and operational information, complying with applicable
statutes, safeguarding assets from unauthorized use, executing transactions with proper
authorization and ensuring compliance with corporate policies.
The Audit Committee of the Board reviews the reports. Wherever necessary, strengthening
of internal control systems and corrective actions initiated.
HUMAN RESOURCE DEVELOPMENT
The Company believes that people perform to the best of their capability in
organisations to which they feel genuinely associated. The Company focuses on widening
organisational skills and improving organisational effectiveness by having a competent and
engaged workforce.
The Company regards its human resources as amongst its most valuable assets and
proactively reviews policies and processes by creating a work environment that encourages
initiative, provides challenges and opportunities and recognizes the performance and
potential of its employees attracting and retaining the best manpower available by
providing high degree of motivation.
Our people and employee empowerment has been critical in driving our
organisation’s growth to the next level.
The Company always strives to promote a safe, healthy and happy workplace.
The Company believes in trust, transparency & teamwork to improve employees
productivity at all levels.
Disclosure of Accounting Treatment:
The financial statements of the Company have been prepared in accordance with Indian
Accounting Standards (Ind AS) as notified by Ministry of Corporate Affairs pursuant to
Section 133 of the Companies Act, 2013 to be read with Rule 3 of the Companies (Indian
Accounting Standards) Rules, 2015 and the Companies (Indian Accounting Standards)
Amendment Rules, 2016. The Master Direction - Non-Banking Financial Company - Non-Deposit
taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 (‘the NBFC
Master Directions’) and notification for Implementation of Indian Accounting Standard
vide circular RBI/2019-20/170 D0R(NBFC).CC.PD.No.109/22.10.106/2019-20 dated 13 March 2020
(‘RBI Notification for Implementation of Ind AS’) issued by RBI. The Company
uses accrual basis of accounting except in case of significant uncertainties. The
Company’s Financial Statements for the year ended 31st March 2022 comprises of the
Balance Sheet, Statement of Profit and Loss, Statement of Cash Flows, Statement of Changes
in Equity and Notes to Financial Statements.
The financial statements are prepared on a going concern basis, as the Management is
satisfied that the Company shall be able to continue its business for the foreseeable
future and no material uncertainty exists that may cast significant doubt on the going
concern assumption. In making this assessment, the Management has considered a wide range
of information relating to present and future conditions, including future projections of
profitability, cash flows and capital resources. The outbreak of COVID - 19 has not
affected the going concern assumption of the Company.
Effective Nov 2021 there has been a change in the management of the company. The new
management has undertaken few structural changes in the working of the company including
selling of the fixed assets, which were obsolete or of no use to the company’s future
plans. The management has taken effective steps to roll out the modified business plan for
the company, which shall be evident during the next financial year. Pending such roll out,
the fund of the company has been temporarily parked in liquid investments. The company
continues to be a going concern in accordance with the definition contained in the
applicable Accounting Standards and the financial statements under review have been
prepared on a going concern basis.
Company’s financial statements are presented in Indian Rupees, which is also its
functional currency.
CAUTIONARY STATEMENT
Certain statements in the Management Discussion and Analysis describing the
Company’s objectives, predictions may be ‘forwardlooking statements’ within
the meaning of applicable laws and regulations. Actual results may vary significantly from
the forwardlooking statements contained in this document due to various risks and
uncertainties. These risks and uncertainties include the effect of economic and political
conditions in India, volatility in interest rates, new regulations and Government policies
that may impact the Company’s business as well as its ability to implement the
strategy. The Company does not undertake to update these statements.
Accordingly, this document is subject to the disclaimer and qualified in its entirety
by the assumptions, qualifications and risk factors referred to in the management’s
discussion and analysis report.
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