Aryaman Capital Markets Ltd Management Discussions.

1) MACRO REVIEW:

The fiscal year of 2019 marked the completion of NDA governments 5 year term, with the nation-wide election results favouring majority for NDA government. The governments thrust was more on digital initiatives and financial inclusion on the forefront. However, Indias speedy journey in terms of political and economic reforms faced national as well as international road-blocks in FY2019. Global trade war concerns between US and China made the global markets volatile. Any agreement on the same will be a welcome move, going ahead. At the domestic level, rupee faced volatility due to tightening of US rates and hovering crude oil prices. This was followed by the default of IL&FS which had a ripple effect on NBFCs and mid-caps, contributing to liquidity issues. The central bank and the government were prompt enough to stabilize the panic selling in the credit markets with open market operation (OMO). RBI during the year, hiked the policy rates by 50 bps followed by a rate cut of 25 bps in February. RBI has announced its second rate cut of FY2020 to the tune of 25 bps with a view to strengthen domestic growth impulses by spurring investments that remained sluggish. From a global perspective, until last month of FY2019, there was a continuous shift in stance by major central banks across the globe. For instance, until the end of last year, the US Fed was likely to hike rates at least twice this year. Even the European Commercial Bank remained adamant on withdrawing its stimulus program. This hawkish stance was seen to completely shift to dovish. The US Fed has now kept its rates steady and signaled that there would be no hikes for the rest of the year. The ECB, citing the sustained economic slowdown in the bloc, has announced a fresh round of stimulus in order to boost the ailing economy. These measures have seen a shift of FII flows from major economies to emerging markets. Structurally, Indias future outlook remains optimistic with various fundamentals in favour. Firstly, in the coming years India is poised to gradually become the worlds youngest workforce after overtaking China. This combined with an increase in productivity will hugely benefit the economy. Although, IMF has softened the growth rate to 7.3% for FY20 from 7.5% citing weaker global outlook, it continues to maintain the fastest growing status for India

2) INDUSTRY STRUCTURE AND DEVELOPMENTS:

Indian economy witnessed many events in financial year 2018-19 affecting capital market and resource raising activities. The debacle of fall of large NBFCs such as ILFS & failure of largest domestic airlines were few of the major events effecting the capital market.This coupled with liquidity crunch and spate of loan defaults being treated under IBC had an impact on capital formation and resource raising activity. Though the ‘Sensex and ‘Nifty Fifty witnessed new heights, overall scenario in corporate activities was at a low level. Companies were struggling to raise further resources and there is a panic in the capital market as far as small & mid cap companies are concerned. As a result, there was a steep fall in resource raising activity through public equit markets. The year 2018-19 saw a drop by huge 81% in fund raising through IPOs as against last year. Similar situation was witnessed in respect of Rights Issues, SME IPOs and other areas. The events such as terrorists attack, forthcoming elections etc had its effect on overall economic activity and financial markets. As a result capital market witnessed high degree of volatility .Nevertheless, India being one of the growing economy is considered as a good investment destination by many foreign investors and capital formation activity is likely to improve in times to come. Over the past several years the securities market has witnessed a sea change. The market has become more modern in terms of infrastructure, adoption of best international practices and introduction of competition. With the maturity of the regulatory framework and increased market surveillance, the market has also become safer and investor is better protected. The extensive reforms introduced by SEBI over the last few years have enhanced the integrity, transparency and efficiency of the operations of the securities market. The introduction of electronic trading and "order matching" system in all the stock exchanges, have led to reduction in transaction costs, speedier execution of trades and gains in liquidity. Increase in trading volume on the exchanges, however, has not been reflected always in the liquidity of all the listed shares. There are a large number of shares that are not actively or frequently traded although many of them have some fundamental strength and intrinsic value. The introduction of market making facility for such shares could be a possible means to infuse liquidity in such shares. In the year 1993 guidelines for the Market Makers were issued vide SEBI circular no.SMD/SED/93/11362 dated August 05, 1993. However, the scheme did not elicit adequate response. Hence despite various such efforts the concept of official market makers in the equity stock exchanges in India has not been a popular one. However, with the amendment in the SEBI (ICDR) Regulations made during 2010 for the advent of SME Exchanges in India, the requirement of appointing a market maker for each listed SME Company for the first few years was made compulsory and hence the concept has once again gained recognition. Even though India has a long way to goes w.r.t market making being a serious part of capital markets as compared to the global scenario of the same, but a good beginning has been made with the advent of SME Exchanges and their regulations being launched in 2012.

3) REVIEW OF OPERATIONS:

During F.Y. 2018-19, Company has earned a total income of 7786.26 Lacs compared to previous years 2820.92 Lacs . The rise in top line was on account of increased in market making participation in SME listed companies on Bombay Stock Exchange Limited. Company has successfully added 13 SME listed companies in its clientele portfolio during the period under review. Net profit after tax has decreased from 49.05 lacs to 21.75 lacs on account of increase in finance cost during FY 2018-19. Consequently, EPS decreased to 0.18 from 0.41.

4) OPPORTUNITIES AND THREATS:

OPPORTUNITIES:

India is already the fastest growing economy globally and various projections for growth by World Bank or IMF etc., indicate that India will continue to outperform other economies. This would open up vast opportunities for SME businesses which constitutes more than 45% of Industrial Output and which employs large part of total workforce of India. Easy capital generation means and relaxation in Government regulations & policies will facilitate the ease of doing business in India for SMEs. As the Company operates as Market Maker for SME listed companies, robust performance by the SME sector and growth in SME Listed bourses will also open up new client segments which market makers like ours can tap for future growth. Various Opportunities:

• Long-term economic outlook positive, will lead to opportunity for financial services

• Growing Financial Services industrys share of wallet for disposable income.

• Regulatory reforms would aid greater participation by all class of investors

• Leveraging technology to enable best practices and processes

• Corporates looking at consolidation / acquisitions / restructuring opens out opportunities for the corporate advisory business

THREATS:

Despite great opportunities, there are significant factors presenting threats to our businesses viz. a) Increased competition from local and global players operating in India; b) Continuous downward pressure on the fees, commissions and brokerages caused by heightened competition and willingness of most players to deliver services at very low fees; c) Execution risk d) Short term economic slowdown impacting investor sentiments and business activities e) Slowdown in global liquidity flows f) Increased intensity of competition from local and global players g) Market trends making other assets relatively attractive as investment avenues

5) INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The company has an Internal Control System commensurate with its requirement and size of business to ensure that the assets and interest of the company assets are safeguarded. The adequacy and effectiveness of the internal control across various activities, as well as compliance with laid down system and policies are comprehensively and frequently monitored by your companys management at all the levels of the organization. The company has established well defined policies and processes across the organization covering all major activities including authority for approvals. In all cases where monetary decisions are involved, various limits and authorities are in place. The Companys internal controls are structured in a manner that ensure reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses, executing transactions with proper authorization and ensuring compliance of corporate policies, laws and accounting standards. With a strong monitoring system in place, the Company has an Audit Committee, the details of which have been provided in the Corporate Governance Report .The Audit Committee of the Board of Directors review the existing audit procedures and internal systems of control on an ongoing basis keeping in mind the organizations requirements, growth prospects and ever evolving business environment. They also review the internal audit findings and recommendations and ensure that corrective measures are implemented. Suggestions for improvement are considered and the Audit Committee follows up on the implementation of corrective actions.

6) OUTLOOK:

Fund raising activity in coming year i.e. 2019-20 is likely to be impacted substantially. The volatility and the bearish sentiment in the market continued to prevail which will affect the capital markets. The proposed budget by the newly formed government is likely to set a tone for further activities in the market. Though many Companies hold SEBI approval to raise money from the capital market, on account of subdued conditions, they are not able to launch their IPOs. Repeat of political mandate to the present party in power and the stable government at centre may make sentiments positive for the capital market. It remains to be seen whether capital market sees positive developments on account of various factors.

7) RISKS AND CONCERN:

Risk is an integral part of the business and we aim at delivering superior shareholder value by achieving an appropriate balance between risks and returns. The financial services industry is subject to continuously evolving legislative and regulatory environment due to increasing globalization, integration of world markets, newer and more complex products & transactions and an increasingly stringent regulatory framework. Our senior management identifies and monitors the risks on an ongoing basis and evolves processes/systems to monitor and control the same to contain the risks to minimum levels. Periodic monitoring by our officials helps in identifying risks in early stage. If required, a risk event update report is periodically placed before the Board of Directors of the Company Regulatory framework, focused on maintaining controls on domestic businesses but even inadvertently creating more favorable regulatory environment for global entities operating in India is a matter of concern. We actively participate in dialogue in industry bodies and with regulators to point these out and to recommend appropriate changes.

8) RISK MANGEMENT:

For Aryaman Capital Market Limited, an effective risk management policy lies at the core of our business philosophy, which is centred on delivering higher and better returns to all our stakeholders. With ups and downs, volatility and fluctuations in the financial business in which the Company operates, Aryaman Capital Market Limited is exposed to various risks and uncertainties in the normal course of our business. Since such variations can cause deviations in the results from operations and affect our financial state, the focus on risk management continues to be high. Aryaman Capital Market Limited, risk management strategy has product neutrality, speed of trade execution, reliability of access and delivery of service at its core. Multiple products and diverse revenue streams enable the Company to ensure continued offering of customized solutions to suit client needs at all times – good and bad. State-of-the-art technology, experienced professionals, a highly qualified IT team for in-house software development, coupled with adequate back-up systems and compliance with regulatory norms insulate Aryaman Capital Market Limited from the vagaries of the financial business.

9) HUMAN RESOURCES:

Aryaman Capital Markets Ltd. is part of a dynamic and progressive group that actively fosters a challenging work environment and encourages Entrepreneurship. With trust being the critical part of our business belief, we lay a strong emphasis on integrity, teamwork, innovation, performance and partnership. Our professional staff with diverse backgrounds brings varied talent, knowledge and experience to the Group, helping our businesses to remain competitive, achieve greater success and newer milestones. Our management team and board of directors are resolved to do what, we believe, is best for our shareholders, clients and associates. At Aryaman Capital Market limited, we recruit for skill, experience, right attitude, commitment and diversity. However, the one common trait that runs through the DNA of every employee is entrepreneurship. We encourage our employees to act as owners, partners and managers of their individual functions while providing a conducive environment for them to be creative and productive.

10) SAFE HARBOUR:

This document contains statements about expected future events, financial and operating results of the businesses, which are forward-looking. By their nature, forward-looking statements require the businesses to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirely by the assumptions, qualifications and risk factors referred to in the managements discussion and analysis of Aryaman Capital Market Limiteds Annual Report, FY2019.