incap financial services ltd Management discussions

INCAP FINANCIAL SERVICES LIMITED ANNUAL REPORT 2011-2012 MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS: The Company is primarily engaged in the business of financial services. Financial market in particular share market was boom throughout the year. ECONOMIC BACKDROP AND FINANCIAL ENVIRONMENT: After growing at 5.0% in 2006 and 4.9% in 2007, IMF estimates global GDP growth to decelerate to 3.7% in 2008 in the wake of the current financial crisis. The financial market turbulence in developed economies following the US sub-prime mortgage crisis has reduced financial leverage, lowered credit availability and negative wealth effects have emerged as risks to consumption and growth in advanced economies, especially in the US. Continuing inflationary pressures from food and commodity prices as well as high and volatile crude oil prices are other risks being faced by the global economy. India continued to be one of the fastest growing economies of the world. During 2007-08, the Indian economy grew at a robust pace for the fifth consecutive year. Real GDP growth, estimated at 8.7% in 2007-08, is in tune with the average annual GDP growth of 8.7% in the five year period 2003-04 to 2007-08. Agriculture and allied activities are estimated to grow by 2.6% in 2007-08, which is in line with the average growth of 2.6% per annum during 2000-01 to 2007-08. Industrial growth at 8.6% during 2007-08 has moderated somewhat against 10.6% in the previous year. The services sector maintained its double-digit growth at 10.6% during 2007-08, higher than the long term average of 8.9% (2000-01 to 2007-08). Within services, transport and communications and financial services recorded double-digit growth for the last two years and are expected to maintain the growth momentum. Another positive feature underpinning growth is the sharp rise in the rate of savings and investment in recent years, which rose to 34.8% and 35.9% respectively in 2006-07. The tight monetary policy followed by RBI to control inflation and money supply had a moderating impact on credit growth, which increased by 21.6% in 2007-08 against 28.1% in 2006-07. Deposit growth also moderated to 22.2% in 2007-08 from 23.8% in 2006-07. SEGMENT WISE/PRODUCT WISE PERFORMANCE: There are no separate reportable segments. OUTLOOK: For the current year, despite slowdown in the major economies of the world, the Indian economy will continue to grow at 8-8.5% driven by investment. Due to a number of fiscal and monetary measures taken by the Government and RBI to put a check on prices, inflation is expected to come down to 5-5.5% by March 2009. The company is trying to keep up with the pace of growth of the Indian economy. OPPORTUNITIES: The company is trying its level best to revoke the suspension of trading of its share to unlock the value of the share available to its share holders. The Directors are also trying to garner loans from various Corporate/Banks to lend them further at higher rate of interest to secure long term income to the Company. THREATS: The volatility in exchange rates, stock markets and constraint of net owned funds will always leave its impact on basic earning of the Company. The company is building various earning platform for the forthcoming financial years to come out from the red into the green and also reduce its accumulated losses. RISKS & CONCERNS: Your company is exposed to several market risks like credit risk, liquidity risk and interest rate risk. The volatility of the capital markets in which your Company operates is also a major cause of concern to the Company. INTERNAL CONTROL SYSTEM AND ADEQUACY: The Company has adequate internal control procedure commensurate with its size and nature of the business. The internal control system is supplemented by extensive internal audits, regular reviews by management and well-documented policies and guidelines to ensure reliability of financial and all other records to prepare financial statements. The Company continuously upgrades these systems in line with best accounting practices. The company is benefited from having a team of professionals as promoter and independent directors who are capable of exercising various checks and controls effectively. HUMAN RESOURCES: Human resource is one of the key assets that has been nurtured and encouraged for active participation in Companys growth. The Company has well defined appraisal system in pace for recognition of talented and deserving employees, which includes line and staff function personnel. The industrial relations remained cordial during the year. The company has never faced any staffs unrest or any discomfort in relations with its staffs due to the professional approach of the management towards this factor. FINANCIAL PERFORMANCE: The financial performance of the Company for the year under review is discussed in details in Directors report.