aditya birla money mart ltd Management discussions

ADITYA BIRLA MONEY MART LIMITED (FORMERLY BIRLA SUN LIFE DISTRIBUTION COMPANY LIMITED) ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS COMPANY PERFORMANCE Your Company achieved gross revenue of Rs. 6,445.50 lakhs during the year under review as against the gross revenue of Rs. 5,332.10 lakhs during the previous year, an increase of 20.88%. The total loss before depreciation and tax was Rs. 500.91 lakhs as against a loss of Rs. 892.00 Lakhs in previous year. During the year, the company incurred one time exceptional loss of Rs. 9,732.18 Lakhs on account of certain trades of its clients. As a result, the loss after tax (after exception item) was at Rs. 10,362.46 lakhs against a loss of Rs. 1,020.10 Lakhs in the previous year. The Company diversified into distribution of various other asset classes of financial products and expanded its range of product offering for its client, from traditionally mutual fund to broking, fixed deposits, real estate, alternate assets. During the year, your Company mobilized aggregate funds under different asset classes to the tune of Rs. 2,762 billion. The Assets Under Advice (AUA) as at March 31, 2011 was Rs. 138.61 billion as against Rs. 163.87 billion last year. The market share of the Companys average AUA stood at 2.34%, which makes it second largest Corporate Distributors in terms of Closing AUA as on 31st March 2011 (as per CAMS report). REGULATORY DEVELOPMENT, CHALLENGES AND OPPORTUNITIES During the year, the market regulator SEBI implemented various regulatory changes affecting Distributors and the Mutual Fund scheme. The certification examination for distributors, agents or any other persons employed or engaged in the sale and/or distribution of mutual fund products, came under the purview of National Institute of Securities Markets (NISM). AMFI introduced compulsory Know Your Distributor (KYD) process for all Mutual Fund distributors which inter-alia involved bio- metric process. The process of change of distributors by investors was also simplified and the Asset Management Companies were directed to act on the basis of request received from investors. SEBI also directed all mutual fund schemes held in demat form shall be freely transferable (other than ELSS during lock in period). SEBI also made significant policy changes in the debt mutual fund schemes, by making Ultra Short Term funds value their portfolio on a mark to market basis instead of on accrual basis. The Ultra Short Term schemes were earlier known as Liquid Plus schemes and were valuing their portfolio on an accrual basis. SEBI also made KYC (know your customers) compulsory for all investors irrespective of amount invested. The FY 2010-11 initially saw good volumes on Indian capital market, however inflation continued to be a cause of concern, thereby raising interest rates and also impact volumes. The market volatility increased in the last quarter of the year under review as FIIs turned net sellers for the quarter due to high crude prices, political instability in the MENA region and European sovereign debt crisis. The FY 2010-11 ending with low IIP numbers, high inflation, scams, which are likely could effect the future growth prospects. In these dynamic scenarios, your Company also faces challenges on margins due to abolition of entry load, pressure on sub-brokers and IFA network, increase in customer acquisition cost, talent acquisition and retention of employees. The Company has plans to mitigate these challenges to provide Financial Planning based advisory model, appropriate product mix to counter environmental challenges, riding on multi product and increase in product volumes, thus enhancing customer engagement and formalized process of training and career development for employee retention.