Aryaman Financial Services Ltd Management Discussions.



Global economic growth accelerated in 201 7 and continued to do so until the first half of 2018, with almost all countries picking up the growth trend. The growth rates of most of the developed countries rose close to their potential with unemployment falling to historical lows. In 2018, the global economy registered 3.6 per cent growth as against 3.8 per cent in 201 7 . Going ahead, global growth is projected to decline to 3.3 per cent in 2019 due to the waning effect of the US fiscal stimulus, uncertainty around Brexit and the unpredictability of the US-China trade war. On the positive side, the second half of 2019 is expected to see a stabilisation in growth with the hope that the central banks across the world might opt out of their tightening stance. Even China is continuously ramping up its fiscal and monetary stimulus to counter the negative effect of trade tariffs. The overall impact will positively stimulate growth factors across the world, leading to a gradual recovery in growth to 3.6 per cent for the global GDP, in 2020.

Global growth projection


India is one of the ‘fastest-growing economy in the world. Now, along with that, the stable Government for a second time, is likely to be the perfect recipe for stronger reforms. The focus of the Government in FY20 will be to expedite reforms with a view to accelerate growth. As per the World Bank Report, Indias ranking in terms of ‘Ease of Doing Business has reached the 77th spot, improving by 23 positions, as compared to the previous year. The country grew at 6.8 per cent in FY19, a deceleration from 7.2 per cent in the previous year, due to challenges from the NBFC liquidity crisis, rupee depreciation, commodity price volatility, rural stress, and weak private investment activity. High-frequency indicators point towards a continued slowdown in private consumption activity in Q1FY20 along with low Government spending on account of election overhang. The Government is likely to smoothen already implemented reforms such as GST, and the Insolvency and Bankruptcy Code (IBC) to largely contribute towards easing the tightness in liquidity. In addition, controlled inflation has further provided room for monetary easing. Growth prospects look brighter from the H2FY20 owing to higher Government spending on infrastructure, tepid recovery expected in consumption activity once the NBFC crisis is resolved and on a favourable base.

Indian equity market performance in 2018-19:

FY2018 was a year of robust returns for equities especially for mid and small capitalisation stocks. The major stock indices touched an all-time high during the year but were trimmed owing to volatility towards the end of the year.

Strong FY2018 base year was followed by a challenging FY2019. It was a year of risk aversion in Indian equities wherein the mid and small cap stocks underperformed the NIFTY50 by 17.6% and 29.3% respectively. The rally in the large caps was one of the narrowest seen in the history of Indian equity markets. Mid and small capitalisation stocks underperformed, due to risk aversion emanating from high relative valuations and FPI outflows. Liquidity issues in the NBFC sector adversely impacted the flows into financial markets and the performance of the equity market in particular. While DIIs were net buyers of US$10.3bn of equities, FIIs bought US$1.5bn. FII buying saw a reversal in the last quarter of FY2019, as FIIs bought equities worth US$8.2bn. Funds raised through equity slowed down substantially during the year resulting in ~70% decline in equity fund raising.


Aryaman Financial Services Limited is a merchant banker. The Company is engaged in the business of lead management and syndication of small and medium sized initial public offerings (IPOs), follow on public offer (FPOs), rights issues, composite issues, qualified institutional placement (QIPs), private investment in public equity (PIPE) deals, venture capital (VC) funding and other forms of fund raising. The Companys principal products/services include income from merchant banking fees. It also acts as lead manager to mergers and acquisitions (M&A) transactions, open offers, delisting offers and buybacks, among others. The Company provides valuation and advisory services for foreign investments, employee stock options plan (ESOP) certifications, fairness opinions of amalgamation schemes, mergers and spin-off transactions, among others. The Company, through its subsidiary and group companies, provides stock and commodity broking services.


Your Company is SEBI registered Category I Merchant Banker. Company mainly participates into SME Segment of Primary market issues. SME Platform offers an entrepreneur and investor friendly environment, which enables the listing of SMEs from the unorganized sector scattered throughout India, into a regulated and organized sector. The platform provides opportunity to SME entrepreneurs to raise equity capital for growth and expansion. It also provides immense opportunity for investors to identify and invest in good SMEs at an early stage.


During F.Y. 2018-19, Company has earned a total income of 865.58 Lacs compared to previous years 1,090.88 Lacs. Company came out with 13 IPOs on SME Platform in F.Y. 2018-19 as compared to 16 IPOs in F.Y. 2017-18 Net profit after tax has decreased from 241.04 Lacs to 165.11 Lacs. Consequently, EPS decreased to 1.41 from 2.01. Subdued market conditions have lead to lack of growth top-line and bottom line.

Further there has been a similar lack of growth in financial performance of the subsidiary; Aryaman Capital Markets Limited and Escorp Asset Management Limited. However, considering extremely difficult market conditions it is commendable that these subsidiaries have not incurred any substantial losses.


Our businesses are expected to benefit from the structural shift in the financial savings environment as well as improving technology infrastructure of India. Some of the broad macro trends which underline the opportunities facing our businesses are:

India is expected to be a high growth economy in the medium to longer term which coupled with an expectation of recovery in economic growth at global level augurs well for the capital markets in India

India has been and is expected to continue to be a high savings economy. The young working population is expected to increasingly channelise a higher share of a growing pie of their savings into financial assets. Increasingly the preference of retail investors to participate in equity as an asset class coupled with the relative under penetration in terms of both market capitalisation to GDP ratio or ratio of investments in shares and debentures to GDP signify a positive outlook for equity-based businesses in India.

Increase in overall economic activity, scaling up of domestic corporate institutions and professionalisation of promoter driven set-up would continue to fuel demand for capital raising and advisory services

Advances in technology, increasing smartphone penetration and increasing digitisation at systemic level are expected to propel more retail consumers to adopt and consumer financial services through electronic media Our businesses being primarily driven by need for financial products and services of our retail and institutional clients expect to benefit from the emerging macro trends. The role of technology coupled with customer centricity through timely and effective advisory remains the key for growth ahead.

Digital transformation: Fintech is the new buzzword in the financial services industry. It is an amalgamation and application of technology in the financial services industry. Global investments in fintech companies have been picking up in the recent past. With big developments, ranging from the rise of open banking, increasing regulatory clarity and maturation of Artificial Intelligence (AI) and blockchain, 2019 promises to be another big year for Fintech. India has witnessed a dramatic surge in its technological growth and the adoption in recent years. The traditional financial services industry is inherently online, time consuming, manual, inaccessible and cost-heavy. This is primarily because of the dependency on human capital for every process in the funnel. However, the integration of technology at each step of the process has brought in the change from manual to machine-driven decision making. Seeing this as an opportunity, we are making serious efforts to improve technological infrastructure and offer our product and services through cutting-edge digital solutions.


Liquidity deficit and rise in interest rates can cause uncertainty in the market, leading to outflow of funds from FIIs and DIIs. Besides, factors such as global uncertainties, geo-political tensions, and uneven economic growth may tend to weaken market sentiment, leading to a slowdown in the investment appetite.

Customers today have a wide range of choices to select their investment advisory partner. They evaluate them on their expertise, fund utilisation strategies, digital support and fee structure. With the emergence of discount brokerage, customers are experiencing the next level of artificial automation with ‘do it yourself functionalities which are easy to use and low on cost. While the opportunities landscape is promising, following threats could could dampen the growth of financial services sector in india.

a) Slower than expected recovery of macro-economy, domestically as well as globally or a prolonged trade and tariff war between the US and China can impact growth

b) Increase in oil prices on the back of US sanctions against Iran or delay inrevival of capex cycle can also impede growth

c) If the current tight liquidity situation does not normalize soon, it could affect the natural growth of the sector

d) Any adverse changes in the regulatory and policy environment in which Aryaman and its subsidiaries operates could adversely affect the business and financial condition.

e) Short term economic slowdown impacting investor sentiments and business activities


The Companys internal control systems are adequate, operating effectively and commensurate with the size of business. These internal control systems are provided through competent management, implementation of standard policies and processes, maintenance of an appropriate audit programme with an internal control environment, effective risk monitoring and management information systems. Moreover, the Company continuously upgrades these systems in line with the best available practices.

The internal control systems are supplemented by extensive internal audits, regular reviews by the Management and standard policies and guidelines to ensure the reliability of financial and all other records to prepare financial statements and other data. The Management Information System (MIS) forms an integral part of the Companys control mechanism. The Company has regular checks and procedures through internal audits conducted by an independent audit firm, periodically. The reports are deliberated and an executive summary of the same along with Action Taken Reports (ATR) and steps taken by the Management to address the issues, are placed before the Audit Committee meeting/ Board meeting for their review. Reports of internal auditors are reviewed by the Audit Committee, and corrective measures, if any, are carried out towards further improvement in systems and procedures in compliance with Internal Control Systems. The Board also recognises the work of the auditors as an independent check on the information received from the Management on the operations and performance of the Company.


NDA winning the ‘historic mandate for another five years is a reaffirmation of the inclusive growth policies followed by the Government in the previous five years. This victory will embolden the Government to continue in the same vein to complete the unfinished agenda and also to fine-tune the earlier policies for better results. Resilient landmark reforms are expected in Modi 2.0, specifically aimed at infrastructure development, financial inclusion, doubling farmers income, job creation, smoothening out the glitches in earlier reforms, and evading & benefitting from the US-China trade war. We believe that FY20 will largely be driven by Government spending with more concentration towards infrastructure and moderate focus on consumption, leading to overall growth of sub-7 per cent. Based on the earlier track record, we believe that the spending mix will tilt towards creating basic infrastructure for poor/rural areas, rather than just increasing cash transfers. Inflation should remain benign, making the RBI comfortable to reduce the rates further. Jitters from the US President Donald Trumps tweets might send the global markets into a frenzy. But isolating this, we might see Governments, the world over, taking significant efforts to revive domestic growth. Aryaman financial services limited is well-positioned with its team, experience and products, to grow exponentially across various verticals of institutional and non-institutional broking, investment banking, asset management and wealth management. All these verticals are led by seasoned professionals and manned by motivated personnel, who will, by offering differentiated solutions to their clients, help the clients achieve their objectives and also simultaneously grow the revenues and bottom line of Emkay manifold


As the Companys performance is dependent on capital markets, it faces the risk of downturn in the economic growth and/or worsening macro-economic environment. Rising crude oil prices, depreciating currency, worsening current account deficit and a slowdown in foreign investment inflows pose risks to the Company. Rising inflation, a bad monsoon, slowdown in corporate earnings, rising NPAs also pose significant risks. Other challenges which may drive away the DIIs include rising real estate and gold prices, which may provide other attractive investment options

Global events may also pose challenges to the growth of the Company as it directly impacts foreign inflows and indirectly will have a bearing on the Indian economy. Risks from geo-political tensions, global financial market volatility led by rise in interest rates and the threat of trade protectionism all post significant risks to the operations of the Company. The Company faces significant competition from companies seeking to attract its customers/clients financial assets. In particular, it competes with other Indian and foreign brokerage houses, discount brokerage companies, investment banks, public and private sector commercial banks and asset managers, among others, operating in the markets in which it is present. The Company competes on the basis of a number of factors, including execution, depth of product and service offerings, innovation, reputation, price and convenience. The Company also faces threats from the tightening and the ever-evolving regulatory framework and any unfavourable policy changes like introduction of long term capital gains tax. Internal threat to the Company arises from failure of compliance or overlooking of any misrepresentations/fraud in the operations of the Company. Our implementation of risk management at the operational level embraces the identification, analysis and assessment of all possible risks as provided below:

Risk Concern Response
Economic and political risk Arising from changes in the macro- economic conditions like political instability, foreign exchange fluctuations and crude oil prices. The Company has a dynamic business set up that allows itself to restrategise and respond to the uncertainties.
Financial and market risk Uncertainty in capital markets and negative investor sentiments may slow down the investments. Diversified business offerings, strong research and experienced team ensure promptness and stable operations.
Competition risk Loss of market share to existing players or new entrants. Competition gets the best out of the Company. It makes all the efforts to offer undivided attention to its customers. Besides, strong digital infrastructure and risk management team further ensure steady flow of operations.
Regulatory and compliance risk changes Regulatory in risk regulations arises due to that dynamic may significantly affect the business. Compliance risk arises due to the negligence in complying statutes, internal policies and best practices related to the business. The Company has ensured transparent disclosures in meeting the regulatory norms.
The experienced team is further capable of handling and fulfilling all regulatory norms.
Human resources risk This risk arises due to low motivation, dissatisfaction or attrition of employees. Using the human capital risk approach, the Company efficiently manages the working culture, declaring performance-based incentives, conducting induction and training programmes at regular intervals.


The Company has established a comprehensive system for risk management and internal controls for all its businesses to manage the risks that it is exposed to. The objective of its risk management framework is to ensure that various risks are identified, measured and mitigated and also that policies, procedures and standards are established to address these risks and ensure a systematic response in the case of crystallisation of such risks. The Company has classified the key risks associated with its business into implied market risk, operational risk, information technology/cyber security risk, liquidity risk, credit risk and reputation risk. It has established various policies with respect to such risks which set forth limits, mitigation strategies and internal controls to be implemented by the three lines of defence approach provided below. These policies include a corporate risk and investment policy, a liquidity risk management policy, an operational risk management policy, an outsourcing policy, a fraud risk management policy, an information technology risk management policy, an information security management policy and a surveillance policy.

The Company is particularly sensitive to risks emanating from the introduction of new products and services. Before the launch of any new product or service, it is reviewed and approved by the corporate risk management group, compliance and operations groups and product and process approval committee that has been set up earlier. These groups and committee review the product/service through the lenses of regulatory compliance, risk management and integration with the existing risk management systems The Board oversees the Companys risk management and has constituted a Risk Management Committee, which frames and reviews risk management processes and controls. The risk management system features a ‘three lines of defence approach

The first line of defence comprises its operational departments, which assume primary responsibility for their own risks and operate within the limits stipulated in various policies approved by the Board or by committees constituted by the Board.

The second line of defence comprises specialised departments such as risk management and compliance. They employ specialised methods to identify and assess risks faced by the operational departments and provide them with specialised risk management tools and methods, facilitate and monitor the implementation of effective risk management practices, develop monitoring tools for risk management, internal control and compliance, report risk related information and promote the adoption of appropriate risk prevention measures.

The third line of defence comprises the internal audit department and external audit functions. They monitor and conduct periodic evaluations of the Refer to the notes to the financial statements for the reconciliation of net-worth and profit under Indian GAAp and Ind AS for the year ended March 31, 2018.


At Aryaman Financial Services Ltd, people are the key driving force behind the Companys success. They make us outperform. Respecting them, keeping them motivated and developing their skills and careers are essential if we are to be successful. We recognize and embrace the value that an engaged and motivated workforce can bring to an organisation. The Company stays committed to its principle of ‘Your Success is our Success. The work environment is not just supportive of high levels of performance, but also the one in which people can share and celebrate their success Intellectual capital is one of the key resources of the Company to ensure business sustainability and growth. The Company has an experienced and talented pool of employees who play a key role in enhancing business efficiency, devising strategies, setting-up systems and evolving business as per industry requirements. The Company provides regular skill and personnel development training to enhance employee productivity. As part of group processes, the Company follows a robust leadership potential assessment and leadership development process. These processes identify and groom leaders for the future and also enable succession planning for critical positions in the Company. Being a growth-oriented and progressive organisation, it recognises the importance of professionalism. The Company has embarked on several human resource initiatives to enhance the productivity of the organisation and each individual. The Company endeavours to provide a safe, conducive and productive work environment.


In this Annual Report, we have disclosed forward-looking information to enable investors to comprehend our prospects and take investment decisions. This report and other statements - written and oral - that we periodically make contain forward-looking statements that set out anticipated results based on the managements plans and assumptions. We have tried, wherever possible, to identify such statements by using words such as ‘anticipate, ‘estimate, ‘expects, ‘projects, ‘intends, ‘plans, ‘believes and words of similar substance in connection with any discussion of future performance. We cannot guarantee that these forward-looking statements will be realised, although we believe we have been prudent in our assumptions .The achievements of results are subject to risks, uncertainties and even inaccurate assumptions. Should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Readers should keep this in mind. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.