MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT
ANNUAL OVERVIEW AND OUTLOOK
In general, global economic shocks in the past were severe but spaced out in time. This
changed in the third decade of this millennium. At least three shocks have hit the global
economy since 2020. It all started with the pandemic-induced contraction of the global
output, followed by the Russian-Ukraine conflict leading to a worldwide surge in
inflation. Then, the central banks across economies led by the Federal Reserve responded
with synchronised policy rate hikes to curb inflation. The rate hike by the US Fed drove
capital into the US markets causing the US Dollar to appreciate against most currencies.
This led to the widening of the Current Account Deficits (CAD) and increased inflationary
pressures in net importing economies. The rate hike and persistent inflation also led to a
lowering of the global growth forecasts for 2022 and 2023 by the IMF in its October 2022
update of the World Economic Outlook. The frailties of the Chinese economy further
contributed to weakening the growth forecasts. Slowing global growth apart from monetary
tightening may also lead to a financial contagion emanating from the advanced economies
where the debt of the non-financial sector has risen the most since the global financial
crisis. With inflation persisting in the advanced economies and the central banks hinting
at further rate hikes, downside risks to the global economic outlook appear elevated.
The Indian economy, however, appears to have moved on after its encounter with the
pandemic, staging a full recovery in FY22 ahead of many nations and positioning itself to
ascend to the pre-pandemic growth path in FY23. Yet in the current year, India has also
faced the challenge of reining in inflation that the European strife accentuated. Measures
taken by the government and RBI, along with the easing of global commodity prices, have
finally managed to bring retail inflation below the RBI upper tolerance target in November
2022. However, the challenge of the depreciating rupee, although better performing than
most other currencies, persists with the likelihood of further increases in policy rates
by the US Fed. The widening of the CAD may also continue as global commodity prices remain
elevated and the growth momentum of the Indian economy remains strong. The loss of export
stimulus is further possible as the slowing world growth and trade shrinks the global
market size in the second half of the current year.
Indias economic growth in FY23 has been principally led by private consumption and
capital formation. It has helped generate employment as seen in the declining urban
unemployment rate and in the faster net registration in Employee Provident Fund. Still,
private capex soon needs to take up the leadership role to put job creation on a fast
track. Recovery of MSMEs is proceeding apace, as is evident in the amounts of Goods and
Services Tax (GST) they pay, while the Emergency Credit Linked Guarantee Scheme (ECGLS) is
easing their debt servicing concerns.
The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has been
directly providing jobs in rural areas and indirectly creating opportunities for rural
households to diversify their sources of income generation. Schemes like PM-Kisan and PM
Garib Kalyan Yojana have helped in ensuring food security in the country, and their impact
was also endorsed by the United Nations Development Programme (UNDP)1. The results of the
National Family Health Survey (NFHS) also show improvement in rural welfare indicators
from FY16 to FY20, covering aspects like gender, fertility rate, household amenities, and
women empowerment.
Global growth has been projected to decline in 2023 and is expected to remain generally
subdued in the following years as well. The slowing demand will likely push down global
commodity prices and improve Indias CAD in FY24. However, a downside risk to the Current
Account Balance stems from a swift recovery driven mainly by domestic demand 1
https://www.undp.org/publications/addressing-cost-living-crisis-developing-countries-poverty-and-vulnerability-
projections-and-policyresponses State of the Economy 2022-23: Recovery Complete 3 and, to
a lesser extent, by exports. The CAD needs to be closely monitored as the growth momentum
of the current year spills over into the next. Growth is expected to be brisk in FY24 as a
vigorous credit disbursal, and capital investment cycle is expected to unfold in India
with the strengthening of the balance sheets of the corporate and banking sectors. Further
support to economic growth will come from the expansion of public digital platforms and
path-breaking measures such as PM GatiShakti, the National Logistics Policy, and the
Production-Linked Incentive schemes to boost manufacturing output.
INDUSTRY OVERVIEW
In nominal terms, 2022-23 was a decent year for BSE Sensex as the index closed 422.9
points higher on March 31, 2023 from a year ago. In percentage terms, the Sensex moved
higher by only 0.7% in 2022-23, the worst performance in the past three years. To be sure,
the stock market saw a lot of volatility through the year. It had a poor performance in
the first half of the fiscal 2022-23, gained momentum in the second half and suffered
heavily after the release of Hindenburg report on Adani Group of Companies on February 1.
BSE Sensex lost 745.9 points in the month of February. However, the market recovered in
March to close higher than last years value.
To be sure, 2022-23 has done away with some of the exuberance which has been typical of
Indian equity markets in the past few years. The PE multiple - it measures the ratio of
stock price and profits per share - for BSE Sensex fell from 25.77 on March 31, 2022 to
22.4 on March 31, 2023. The fall is much sharper if one compares the average during the
entire fiscal (22.9 in 2022-23 from 29.5 in 2021-22). The 2022-23 PE multiple value is
also the lowest in the past four years.
A cross comparison of BSE Sensex with 10 major world-indices (across 10 countries)
shows that Indias stock market performance was not the worst amongst all. Asian economies
such as Korea, Hong Kong, Singapore saw a sharper fall in their stock metrics in the last
fiscal, while BSE Sensexs performance was at par with Shanghais SSE and Japans Nikkei
225. Overall, it had the fifth best performance in the world.
OPPORTUNITIES & CHALLANGES
The Indian stock market presents several opportunities and challenges for investors.
Here is a more detailed analysis of the opportunities and challenges:
A. Opportunities
• Growing Middle Class: Indias growing middle class gives the Indian stock market
a big chance to make money. As more people move into the middle class, they will likely
put more money into the stock market. This will lead to more money in circulation and
growth.
• Infrastructure Development: The Indian governments focus on building
infrastructure gives the Indian stock market a big chance. Infrastructure projects like
roads, trains, and airports will likely help the economy grow and give businesses chances
to make money.
• Digitalization of the Economy: The Indian stock market has much to gain from the
digitalization of the economy. Buyers may have more chances to make money as e-commerce,
finance, and other digital companies grow.
B. Challenges
• Political Uncertainty: Political uncertainty in India is a big problem for the
stock market. Uncertainty about politics can make the market move up and down, making
foreign buyers less likely to invest.
• Banking Sector Crisis: The Indian stock market faces a big problem with the
banking sector crisis. The problem has made investors less confident and has made the
market more volatile.
• High Levels of Debt: The Indian stock market faces a big problem with the
countrys high debt levels. High debt can cause inflation, a drop in the currencys value,
and more market instability.
• Legal Hurdles: The legal situation in India is complicated, which can be hard
for companies. Regulatory hurdles can make foreign buyers nervous and less likely to
invest in the market.
RISKS AND CONCERNS
Khoobsurat Ltd. (KL) has exposures in various line of business. KL are exposed to
specific risks that are particular to their respective businesses and the environments
within which they operate, including market risk, competition risk, credit risk, liquidity
and interest rate risk, human resource risk, operational risk, information security risks,
regulatory risk and macroeconomic risks. The level and degree of each risk varies
depending upon the nature of activity undertaken by them.
MARKET RISK
The Company has quoted investments which are exposed to fluctuations in stock prices.
KL continuously monitors market exposure in equity and, in appropriate cases, also uses
various derivative instruments as a hedging mechanism to limit volatility.
LIQUIDITY AND INTEREST RATE RISK
The Company is exposed to liquidity risk principally, because of lending and investment
for periods which may differ from those of its funding sources. Management team actively
manages asset liability positions in accordance with the overall guidelines laid down by
various regulators. The Company may be impacted by volatility in interest rates in India
which could cause its margins to decline and profitability to shrink. The success of the
Companys business depends significantly on interest income from its operations. It is
exposed to interest rate risk, both as a result of lending at fixed interest rates and for
reset periods which may differ from those of its funding sources. Interest rates are
highly sensitive to many factors beyond the Companys control, including the monetary
policies of the RBI, deregulation of the financial sector in India, domestic and
international economic and political conditions and, inflation. As a result, interest
rates in India have historically experienced a relatively high degree of volatility.
The Company seeks to match its interest rate positions of assets and liabilities to
minimize interest rate risk. However, there can be no assurance that significant interest
rate movements will not have an adverse effect on its financial position.
HUMAN RESOURCE DEVELOPMENT
The Company recognizes that its success is deeply embedded in the success of its human
capital. During 2022-2023, the Company continued to strengthen its HR processes in line
with its objective of creating an inspired workforce. The employee engagement initiatives
included placing greater emphasis on learning and development, launching leadership
development programme, introducing internal communication, providing opportunities to
staff to seek inspirational roles through internal job postings, streamlining the
Performance Management System, making the compensation structure more competitive and
streamlining the performance-link rewards and incentives.
CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable
to the Company.
COMPLIANCE
The Compliance function of the Company is responsible for independently ensuring that
operating and business units comply with regulatory and internal guidelines. The
Compliance Department of the Company continues to play a pivotal role in ensuring
implementation of compliance functions in accordance with the directives issued by
regulators, the Companys Board of Directors and the Companys Compliance Policy. The
Audit Committee of the Board reviews the performance of the Compliance Department and the
status of compliance with regulatory/internal guidelines on a periodic basis.
No penalty has been imposed by any of SEBI, BSE and MSEIL during the year under review.
| Kolkata, August 21, 2023 |
By order of the Board |
|
For KHOOBSURAT LIMITED |
|
S/d- |
| Registered Office: |
Sanjay Mishra |
| 7A, Bentinck Street, 3rd Floor, Room No. 310 |
DIN:09048557 |
| Kolkata-700 001 |
Managing Director |
+91-9892691696
