Aryaman Capital Markets Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS:

Indias capital markets have undergone significant transformations in recent years, driven by technological advancements, regulatory reforms, and growing investor participation. The countrys equity market has seen remarkable growth, with the benchmark indices reaching new highs, driven by strong corporate earnings, economic reforms, and foreign investor inflows.

The fixed income market in India has also evolved, with the introduction of new instruments and platforms, such as the Bharat Bond Exchange and the India International Bullion Exchange. Additionally, the currency market has seen increased activity, with the Indian rupee becoming more widely traded.

Furthermore, Indias commodity markets have expanded, with the launch of new exchanges and products, such as the India International Crude Oil Exchange. The countrys market infrastructure has also been upgraded, with the introduction of new trading platforms, clearing and settlement systems, and depositories.

Key trends in Indias capital markets include the growing adoption of digital technologies, increasing investor focus on environmental, social, and governance (ESG) factors, and the expanding role of institutional investors. Additionally, the governments initiatives to promote financial inclusion and literacy are expected to drive further growth in the market.

Overall, Indias capital markets are poised for continued growth and evolution, driven by regulatory reforms, technological advancements, and increasing investor participation. As the market continues to develop, it is essential to stay informed about the latest trends and developments to navigate the landscape effectively.

INDIAN CAPITAL MARKET:

Industry Overview ICRA suggests an 18-22 percent increase in the Broking industry revenues and a 22-25 percent rise in net profits YoY for FY24, driven by a resurgence in investor sentiment, improved profitability and positive returns.12 In the current fiscal year, the Margin Trade Funding (MTF) segment has seen increased activity, reaching new highs. After maintaining a relatively flat trajectory in FY2023, the overall industry-wide MTF exposure surged by 98% from March 2023 to approximately H 51,000 crore as of December 28, 2023.13 The financial market is witnessing significant growth due to rebounding investor sentiment. It has led to increased equity mobilization, expansion of the active NSE client base through the addition of new demat accounts and record equity AUMs fuelled by retail participation in mutual funds.

The industry is experiencing a phenomenal growth trajectory due to rising retail participation, improved market sentiment and increased mutual fund exposure. Discount brokerages have also established a strong foothold, with F&O segments reporting relentless growth in comparison to the past few years.

GLOBAL CAPITAL MARKETS

In 2023, the global economy demonstrated strength despite unpredictable challenges, driven by fluctuating commodity prices that led to high inflation. These issues were compounded by ongoing geopolitical tensions between Ukraine and Russia, and more recently, between Israel and Palestine, resulting in disruptions to supply chains. To mitigate inflation, Central Banks in major economies resorted to interest rate hikes which impacted economic activity. As a result, the International Monetary Fund (IMF) estimates global growth to decrease from 3.5% in 2022 to 3.1% in 2023.1 Despite these hurdles, emerging economies like India, Vietnam and Mexico experienced positive growth and attracted investments from foreign institutional investors. However, China s economy exhibited signs of strain, which could have adverse effects on the global economy.

Global capital markets experienced a year of resilience and recovery in 2023, despite ongoing challenges and uncertainties. Equity markets posted modest gains, driven by earnings growth and economic fundamentals. Fixed income markets stabilized, with bond yields pausing their upward trajectory. Currencies saw a weakening of the US dollar, while emerging market currencies benefited from a more favorable environment. Commodities experienced mixed trends, with oil prices range-bound and gold serving as a safe-haven asset.

Looking ahead to 2024, we expect global capital markets to continue their recovery, driven by improving economic growth, earnings, and market sentiment. However, we also anticipate ongoing challenges from geopolitical tensions, trade uncertainties, and central bank policy shifts.

Overall, our annual report highlights the progress made in global capital markets and our outlook for the year ahead. We remain committed to providing expert insights and guidance to help investors navigate the evolving market landscape.

MACRO-ECONOMIC OVERVIEW

Strong economic growth in the first quarter of FY23 helped India overcome the UK to become the fifth-largest economy after it recovered from the COVID-19 pandemic shock. Nominal GDP or GDP at Current Prices in the year 2023-24 is estimated at Rs. 293.90 lakh crores (US$ 3.52 trillion), against the First Revised Estimates (FRE) of GDP for the year 2022-23 of Rs. 269.50 lakh crores (US$ 3.23 trillion). The growth in nominal GDP during 2023-24 is estimated at 9.1% as compared to 14.2% in 2022-23. Strong domestic demand for consumption and investment, along with Government s continued emphasis on capital expenditure are seen as among the key driver of the GDP in the first half of FY24. During the period January-March 2024, India s exports stood at US$ 119.10 billion, with Engineering Goods (25.01%), Petroleum Products (17.88%) and Organic and Inorganic Chemicals (7.65%) being the top three exported commodity. Rising employment and increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months.

Future capital spending of the government in the economy is expected to be supported by factors such as tax buoyancy, the streamlined tax system with low rates, a thorough assessment and rationalisation of the tariff structure, and the digitization of tax filing. In the medium run, increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers. The contact-based services sector has demonstrated promise to boost growth by unleashing the pent-up demand. The sectors success is being captured by a number of HFIs (High-Frequency Indicators) that are performing well, indicating the beginnings of a comeback.

India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. Indias appeal as a destination for investments has grown stronger and more sustainable because of the current period of global unpredictability and volatility, and the record amounts of money raised by India-focused funds in 2022 are evidence of investor faith in the "Invest in India" narrative.

OPPORTUNITIES

? The need for superior quality and process execution.

? Increasing disposable income and investment in financial products. ?

? Acceptance of a new and innovative range of financial products creates an opportunity to innovate in the financial services space. ?

? Rise in urban youth awareness about the benefits of investment. ?

? Need for leadership in sophisticated solutions to enable our clients to optimize the efficiency of their businesses. ?

? Constant upgradation of the technology enables us to emerge as a leader in this fast-paced financial services environment.

? Consolidation/acquisitions/restructuring opens out opportunities for the corporate advisory business.

THREATS:

? Enhanced competition from both local and global players and the rise of disruptive business models in financial services and the emergence of new technology, the company runs the risk of obsolescence.

\? A dependence on technology and third-party platforms exposes us to threats posed on the internet such as virus attacks leading to execution failures and disclosure of client information.

? Our business operations have a heavy reliance on technology and servers to execute trades on the exchanges. This May lead to a threat due to execution risk.

? Our business is exposed to macroeconomic changes and operates in a highly regulated industry. Its performance not only depends on a slowdown in global liquidity flows but also on change in regulatory frameworks

BUSINESS PERFORMANCE:

1) REVIEW OF OPERATIONS:

The Total Income of the Company stood at 3,432.04 lacs for the year ended March 31, 2024 as against 4,670.88 lacs in the previous year. The Company made a net profit of 645.53 lacs for the year ended March 31, 2024 as compared to the net profit of 148.78 lacs in the previous year.

2) 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 company s 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 Company s 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 organization s 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.

3) 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.

4) RISK MANGEMENT:

For Aryaman Capital Market Limited, an effective risk management policy lies at the core of our business philosophy, which is centered 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 develop5ment, coupled with adequate back-up systems and compliance with regulatory norms insulate Aryaman Capital Market Limited from the vagaries of the financial business. The Number of Employees are Five (5).

5) KEY RATIOS

PARTICULARS	2023-24	2022-23	Change in ratios in %
Current ratio	1.27	1.19	6.70
Debt- Equity Ratio	1.12	1.43	(21.42)
Debt Service Coverage Ratio	1.76	0.84	110.27
Inventory turnover Ratio	1.49	2.35	(36.50)
Debtors Turnover Ratio	232.37	460.50	(49.54)
Interest Service Coverage Ratio	8.15	1.57	418.42
Long term debt to working capital	N.A.	N.A	NA
Bad debts to accounts receivable ratio	N.A.	N.A	NA
Current liability ratio	1.00	1.00	0.00
Total debts to total assets	0.51	0.57	(10.89)
Return on Equity Ratio	0.19	0.06	191.32
Trade Payable Turnover Ratio	3696.57	887.88	316.34
Net Capital Turnover Ratio	2.38	5.55	(57.14)
Net Profit Ratio	0.20	0.03	516.51
Return on Capital Employed	0.13	0.07	81.48
Return on Investment	0.14	0.06	159.90

REASONS FOR MORE THAN 25% VARIANCE

RATIOS WITH VARIANCE MORE THAN 25%	REASONS FOR VARIANCE
Debt Service Coverage Ratio	Due to increase in earnings available for debt service.
Inventory Turnover Ratio	Due to decrease in revenue from sales of product.
Debtor Turnover Ratio	Due to decrease in revenue from operations of current year and increase in average debtors.
Interest Service Coverage Ratio	Due to increase in Earnings before interest and taxes.
Return on Equity Ratio	Due to proportionate increase in net profit after tax is more than the increase in total equity.
Trade Payable Turnover Ratio	Due to decrease in Average trade payables.
Net Capital Turnover Ration	Due to decrease in Revenue form operation and increase in working capital.
Net Profit Ratio	Due to increase in net profit after tax in current year and decrease in revenue from operation.
Return on capital employed	Due to increase in profit before tax and exceptional items.
Return on Investment	Due to proportionate increase in Interest and investment Income is more than the Investment and deposits.

6) 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, knowedge 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.

7) OUTLOOK:

The new initiatives undertaken are in early stages and FY 2025 marks the beginning of a transition of the business from a pure traditional brokerage into a new generation digital brokerage. It will leverage its relations with multiple fintech and bank partners to capitalize on the growing financial services opportunity in India.

8) 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 management s discussion and analysis of Aryaman Capital Market Limited s Annual Report, FY2023-24