MANAGEMENT DISCUSSION AND ANALYSIS REPORT
(Within the limits set by Companys competitive position)
BUSINESS REVIEW GENERAL ECONOMY
A tentative recovery in 2021 has been followed by increasingly gloomy developments in
2022 as risks began to materialize. Global output contracted in the second quarter of this
year, owing to downturns in China and Russia, while US consumer spending undershot
expectations. Several shocks have hit a world economy already weakened by the pandemic:
higher-than-expected inflation worldwide—especially in the United States and major
European economies—triggering tighter financial conditions; a worse-than- anticipated
slowdown in China, reflecting COVID- 19 outbreaks and lockdowns; and further negative
spillovers from the war in Ukraine.
The baseline forecast is for growth to slow from 6.1 percent last year to 3.2 percent
in 2022, 0.4 percentage point lower than in the April 2022 World Economic Outlook. Lower
growth earlier this year, reduced household purchasing power, and tighter monetary policy
drove a downward revision of 1.4 percentage points in the United States. In China, further
lockdowns and the deepening real estate crisis have led growth to be revised down by 1.1
percentage points, with major global spillovers. And in Europe, significant downgrades
reflect spillovers from the war in Ukraine and tighter monetary policy. Global inflation
has been revised up due to food and energy prices as well as lingering supply-demand
imbalances, and is anticipated to reach 6.6 percent in advanced economies and 9.5 percent
in emerging market and developing economies this year—upward revisions of 0.9 and 0.8
percentage point, respectively. In 2023, disinflationary monetary policy is expected to
bite, with global output growing by just 2.9 percent.
The risks to the outlook are overwhelmingly tilted to the downside. The war in Ukraine
could lead to a sudden stop of European gas imports from Russia; inflation could be harder
to bring down than anticipated either if labor markets are tighter than expected or
inflation expectations unanchored; tighter global financial conditions could induce debt
distress in emerging market and developing economies; renewed COVID-19 outbreaks and
lockdowns as well as a further escalation of the property sector crisis might further
suppress Chinese growth; and geopolitical fragmentation could impede global trade and
cooperation. A plausible alternative scenario in which risks materialize, inflation rises
further, and global growth declines to about 2.6 percent and 2.0 percent in 2022 and 2023,
respectively, would put growth in the bottom 10 percent of outcomes since 1970.
With increasing prices continuing to squeeze living standards worldwide, taming
inflation should be the first priority for policymakers. Tighter monetary policy will
inevitably have real economic costs, but delay will only exacerbate them. Targeted fiscal
support can help cushion the impact on the most vulnerable, but with government budgets
stretched by the pandemic and the need for a disinflationary overall macroeconomic policy
stance, such policies will need to be offset by increased taxes or lower government
spending.
Tighter monetary conditions will also affect financial stability, requiring judicious
use of macroprudential tools and making reforms to debt resolution frameworks all the more
necessary. Policies to address specific impacts on energy and food prices should focus on
those most affected without distorting prices. And as the pandemic continues, vaccination
rates must rise to guard against future variants. Finally, mitigating climate change
continues to require urgent multilateral action to limit emissions and raise investments
to hasten the green transition.
Source:
https://www.imf.org/en/Publications/WEO/Issues/2022/07/26/world-economic-outlook-update-iulv-2022
INDIAN ECONOMY
• Recovering from pandemic-induced contraction, Russian-Ukraine conflict and
inflation, the Indian economy is staging a broad-based recovery across sectors,
positioning to ascend to the prepandemic growth path in FY23.
• Indias GDP growth is expected to remain robust in FY24. GDP forecast for FY24
to be in the range of 6-6.8%.
• Private consumption in H1 is the highest since FY15 and this has led to a boost
to production activity resulting in enhanced capacity utilisation across sectors.
• The Capital Expenditure of the Central Government and crowding in the private
Capex led by strengthening the balance sheets of the Corporates is one of the growth
drivers of the Indian economy in the current year.
• The credit growth to the MSME sector was over 30.6% on average during Jan-Nov
2022.
• Retail inflation is back within RBIs target range in November 2022.
• Indian Rupee performed well compared to other Emerging Market Economies in
Apr-Dec 2022.
• Direct Tax collections for the period April-November 2022 remain buoyant.
• Enhanced Employment generation seen in the declining urban unemployment rate and
in the faster net registration in Employee Provident Fund.
• Economic growth to be boosted by the expansion of public digital platforms and
measures to boost manufacturing output.
• Overall Gross Value Added (GVA) by the Industrial Sector (for the first half of
FY23) rose 3.7% which is higher than the average growth of 2.8% achieved in the first half
of the last decade.
• Robust growth in Private Final Consumption Expenditure, export stimulus during
the first half of the year, increase in investment demand triggered by enhanced public
capex and strengthened bank and corporate balance sheets have provided a demand stimulus
to industrial growth.
• The supply response of the industry to the demand stimulus has been robust.
• PMI manufacturing has remained in the expansion zone for 18 months since July
2021, and the Index of Industrial Production (IIP) grows at a healthy pace.
• Credit to Micro, Small and Medium Enterprises (MSMEs) has grown by an average of
around 30% since January 2022 and credit to large industries has been showing double-digit
growth since October 2022.
• Electronics exports rise nearly threefold, from US$ 4.4 billion in FY19 to US$
11.6 Billion in FY22.
• India has become the second-largest mobile phone manufacturer globally, with the
production of handsets going up from 6 crore units in FY15 to 29 crore units in FY21.
• Foreign Direct Investment (FDI) flows into the Pharma Industry have risen four
times, from US$ 180 million in FY19 to US$ 699 million in FY22.
• The Production Linked Incentive (PLI) schemes were introduced across 14
categories, with an estimated capex of Rs. 4 lakh crore (US$ 48.8 billion) over the next
five years, to plug India into global supply chains. Investment of Rs. 47,500 crore (US$
5.8 billion) has been seen under the PLI schemes in FY22, which is 106% of the designated
target for the year. Production/sales worth Rs. 3.85 lakh crore (US$ 47 billion) and
employment generation of 3.0 lakh have been recorded due to PLI schemes.
• Over 39,000 compliances have been reduced and more than 3,500 provisions
decriminalized as of January 2023.
Source: https://www.ibef.org/economv/economic-survev-2022-23
BUSINESS AND INDUSTRY DEVELOPMENTS, OPPORTUNITIES & THREATS OUTLOOK, OPPORTUNITIES
AND THREATS
The principal focus areas of the company are money changing, remittance and pre-paid
payment systems.
1. Foreign Exchange Business:
Your Company is designated Authorized Dealer (Category II) from Reserve Bank of India,
for money changing which includes buying and selling of Foreign Exchange in retail as well
as wholesale to individuals and corporate clients and various permissible Outward
Remittance activities such as remittance for overseas education, medical treatment abroad,
emigration and emigration consultancy fees and for other permissible purpose.
The Foreign exchange & Outward remittance business has seen unhindered growth for
over decades due to increase in travel and business activities across the globe except
during the period affected by COVID- 19. Your Company has strong view that such
incremental growth in the business will continue to surge in coming years.
Keeping in view of the increasing demand in outward remittance sector, the company is
aggressively pursuing outward remittance business.
The company, during the year under consideration, the sales of Foreign Exchange
division (including outward remittance) was Rs 286040.50 Lakhs (for F.Y. 2021-22 Rs
229426.37 Lakhs).
2. Setting up and operating payment systems:
The companys Payments Division that includes the PPI license (Prepaid Instrument) has
emerged as an industry leader with more than 20,00,000 cardholders and more than 20
strategic partnerships which include co-branding arrangements. The team size of PPI
division has increased while customers and transactions have grown at a quarterly rate of
over 300%. PPI division of the company enjoys direct connectivity with various networks
including NPCI and VISA offering a range of propriety financial products.
Company has become the first non-Bank in India for various activities including:
1. First non-Bank to go live with network cards (Rupay)
2. First non-Bank to get RBI approvals for co-branding
3. First (and currently only) non-Bank live on the VISA network
4. CKYC and Video KYC
5. First issuer to go live with contactless wearables (rings) and biometric cards
6. Preferred partners for Rupay and VISA for co-branding programs and any new product
innovation
7. Only non-Bank offering cash withdrawals
Company works selectively with marquee clients to deliver full stack co-branded card
programs which bundles licensing & technology- the only non-Bank offering this in
India. Company powers co-branded prepaid cards and wallets for leading fintech companies,
lenders, aggregators, industry giants and startups using its unique licensing and platform
bundle.
Companys PPI platform is being used for many kinds of payouts including merchant
settlements, commission/incentives, gifts, loans, salaries, expenses/meals. In addition to
tax benefits, payouts on these cards give visibility on customer spend patterns and data
analytics to optimize marketing. In April 2021,
Reserve Bank of India has strategically broadened the scope of services for PPIs -
allowing cash withdrawals and other financial products to enabling Transcorp to provide
offerings akin to a traditional Bank. These changes include offering and settling
NEFT/RTGS transactions and cash withdrawals from ATM.
Other than above the company is a national Business correspondent of State Bank of
India and having Customer Service Centers (CSPs) which provides various banking services
of State Bank of India.
The company added more CSPs during the financial year 2022-2023 and focused on
activation of dormant CSPs. The company is taking Banking Correspondence as focus area for
financial inclusion and are working on enhancing its CSP network. The company is having
more than 1000 CSPs of SBI under National BC arrangements and is making its efforts to
enhance the number of CSPs. The SBI-BC segment is in profits.
SEGMENT WISE REPORTING
Segment wise revenue, results and capital employed are provided in the notes on account
forming part of the Annual Report.
RISK AND CONCERNS
Your company has exposure in foreign exchange and any wide fluctuations in foreign
exchange prices have adverse effect on the performance of the company. Further the
increase in competition, reduction in profit margins and change in government policies may
affect the operation of the company.
Your Company has satisfactory internal control systems, the adequacy of which has been
reported by the Auditors in their report as required under Companies (Auditors Report)
Order, 2020. The discussion on the financial performance of the company is covered in the
Directors Report.
FORWARD- LOOKING STATEMENTS
This report contains forward- looking statements, which may be identified by use of
words like ‘plans, ‘expects, ‘will, ‘anticipates, ‘believes,
‘intends, ‘projects, ‘estimates or other words of similar meaning. All
statements that address expectations or projections about the future, including but not
limited to statements about the Companys strategy for growth, market position,
expenditures and financial results, are forward looking statements.
These statements are based on certain assumptions and expectations of future events.
The Company cannot guarantee that these assumptions and expectations are accurate or will
be realized. The Companys actual results, performance or achievements could thus differ
materially from those projected in any such forward-looking statements. The Company
assumes no responsibility to publicly amend, modify or revise any forward-looking
statements, on the basis of any subsequent developments, information or events.
CHANGES IN THE KEY FINANCIAL RATIOS
S.no |
Particulars |
As on 31.03.2023 |
As on 31.03.2022 |
Change in % |
Explanation for reduction (if significant i.e., more than 25%) |
1 |
Return on net worth (%) |
0.76% |
0.34%. |
123.53% |
Due to Increase in Revenue |
2 |
Return on Capital Employed (%) |
4.17% |
3.83%. |
8.88% |
N/A |
3 |
Debt Equity Ratio |
0.13 |
0.20 |
35% |
Due to decrease in Borrowings as compared to last financial year |
4 |
Current Ratio |
0.88 |
0.70 |
25.71% |
Due to increase in Current Asset (Cash & bank balances, Trade
receivables) |
|
|
|
|
|
|
5 |
Debtors Turnover Ratio |
215.41 |
356.19 |
39.52% |
Due to Increase in debtors amount as compared to credit sales |
6 |
Inventory Turnover |
951.71 |
875.71 |
8.68% |
N/A |
|
|
|
|
|
|
7 |
Interest Coverage Ratio |
2.80 |
1.31 |
113.74% |
Due to Increase amount of EBIT because of Revenue increase N/A |
8 |
Operating Profit Margin (%) |
1.79% |
1.90% |
11% |
|
9 |
Net Profit Margin (%) |
0.013% |
0.01% |
30% |
Due to increase in revenue but fixed cost will be same |
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