arnav corporation ltd share price Management discussions

Forward- Looking Statement:

The report contains forward-looking statements, identified by words. All statements that address expectations or projections about the future are forward looking statements. Since these are based on certain assumptions and expectations for future events, the company cannot guarantee that these are accurate or will be realized. The Companys actual results, performance or achievements could thus differ from those projected in any forward- looking statements. The Company assumes no responsibility to publicly amend, modify or revise any such statements on the basis of subsequent developments, information or events. The Company disclaims any obligation to update these forward-looking statements, except as may be required by law.

I. Overview:

Global:

The world economy grew at a stable pace of 3.1% in CY 2016, aided by recovery in emerging economies particularly commodity exporters, while growth in developed markets remained modest. Increase in oil prices along with other major commodities like iron ore and copper aided recovery in global trade towards the end of CY 2016. The uptick in global trade was led by pickup in import demand in Asia and US which augurs well for underlying demand trends. While global growth was stable, markets were focused on geopolitical developments with change in leadership in the USA, and the UK working on modalities around its exit from the European Union.

Activity rebounded in the USA after a weak first half of CY 2016, as the economy approaches full employment. The US Federal Reserve continued with the interest rate normalization cycle in FY 2016-17 by increasing rates twice, in Dec 2016 and Mar 2017. The global low interest rate and abundant liquidity cycle is likely to slowly normalize.

India:

On the domestic front, India remained the fastest growing major economy in the world, after surpassing China last year. Gross Domestic Product growth rate was 7.1% for FY 2016-17, supported by strong consumption growth and government spending. Inflation eased sharply led by a decline in food inflation amidst governments astute food management, facilitating a 50 basis points rate cut by the RBI in FY 2016-17 before it adopted a neutral stance. Diminishing vulnerabilities on the external and fiscal front with Apr-Dec FY 2016-17 current account deficit at 0.7% of GDP and governments commitment to fiscal consolidation reinstated investor confidence in the economy, resulting in record Net Foreign Direct Investment of US$35.9 billion in FY 2016-17.

FY 2016-17 was also marked by two significant economic measures by the government. Governments demonetization move to counter the shadow economy and promote cashless economy has boosted digital payments in the country. The Goods and Services Tax (GST) implementation will have a significant impact on the taxation structure of the country.

II. Business Performance:

The Company is currently engaged in business of general trading of goods. However, the company is expanding operations in other promising business segments. During the year under review, your company registered a very healthy growth in top line and bottom line. The top line grew by 36.85 percent whereas the bottom line expanded by 153.77 percent as compared to the previous year. The Income tax outgo more than doubled to Rs. 61,743/- as compared to Rs. 24,330/- in the previous year. The net worth of the Company stood at Rs. 89.59 lakhs as compared to Rs. 89.56 lakhs in the previous year.

III. Opportunities:

Your company is making an attempt to diversify into the media and entertainment segment. While we have been in discussions with various industry players, the progress is slow due to the overall business environment and economic conditions. Your company has had discussions with various media businesses for acquiring media assets, business and also exploring other business opportunities. Your company shall also consider other business opportunities in future.

IV. Threats and Risks:

Macroeconomic environment: Economic uncertainties in our key markets like the United States and Europe can impact demand. The overall business environment continues to be prone to volatility. Recently Chinas economic turbulence had a ripple effect on overall global economy. The economic outlook for Europe continues to look grim with countries like Greece, Spain and Italy have stretched finances. In addition uncertainties around Brexit discussions can have further consequences. Such volatility in macroeconomic environment can affect the business sentiments

Input cost trend; Going ahead, FY 17-18 is expected to see a gradual upward trend in input costs. This rise may impact industry profitability in the longer run, affecting both top line as well as bottom line growth.

Employee Related Risks: The market continues to be highly competitive for attracting and retaining professionals & this is compounded by the ever changing constraints around talent mobility primarily on account of regulatory requirements.

Competition risk: The Company operates in highly competitive environment that is subject to innovations, changes and varying levels of resources available to each player in each segment of business. Pricing pressure continues in our traditional area of business where we may face margin pressures. As Companies recognize the critical role of technology as an enabler to their business, the number of in-house technology centres of large enterprises as well as the number of new entrants in the market increases. Since providers with new technologies and cloud-enabled delivery models are further adding to the competition.

Technology Related Risks: The Company operates in an ever evolving and dynamic technology environment and it is of utmost importance that the Company continuously reviews and upgrades its technology resources and processes, so as to avoid technological obsolescence.

Information & Cyber security risk: Both the number of incidents and the severity of cyber security threats are increasing globally and are becoming more widespread. Cyber risk is now firmly at the top of the international agenda as high profile breaches raise fears that hacking attacks and other security failures could be endangering.

V. RISK MANAGEMENT:

In a business environment that is constantly under churn, Risk Management becomes a top priority in order to guard against any eventuality, while at the same time, being able to extract maximum benefit out of favorable conditions. The following section discusses the various aspects of enterprise-wide risk management.

The risk is an integral part of the business and needs to be effectively managed. The Company has formulated a Risk Management Framework covering Credit, Operational, and Market risks, faced by the organization on an ongoing basis. The identification, measurement, monitoring and management of these risks remain a key focus area. Thus, Risk Management Committee has been constituted by the Board in its meeting to ensure the quality, integrity and effectiveness of risk management systems and see risks policies and strategies are effectively managed.

The Company follows a Risk Management framework, where the risk committee meets regularly to identify imminent and potential risks, as well as documenting risk mitigation measures to eliminate or reduce the event impact. The Company ensures that there are no lapses on the regulatory front, and the Company functions within the legal and statutory framework. The Company takes many steps proactively to ensure that potential risks are minimized.

VI. INTERNAL CONTROL SYSTEMS AND THEIR EFFICACY:

Given the nature of business and the size of operations, your Companys Internal Control System has been designed to provide for:

Accurate recording of transactions with internal checks and prompt reporting;

Adherence to applicable Accounting Standards and Policies;

Compliance with applicable statutes, policies, and procedures, guidelines and authorisations;

Effective use of resources and safeguarding of assets.

The observations arising out of the audits are periodically reviewed and compliance ensured. The summary of the Internal Audit observations and status of implementation are submitted to the Audit Committee for its review and concerns, if any, are reported to the Board.

VII. HUMAN RESOURCES:

During the year under review, the total number of permanent people on the rolls of the Company is 4. The Companys Human Resources agenda for the year was focused on strengthening four key areas:

Building a robust and diverse talent pipeline,

Enhancing individual and organizational capabilities for future readiness,

Driving greater employee engagement; and Capability building at the grass root level.

The ability of the company to properly develop, train and retain its employees with the appropriate skill set could affect the Companys future performance.