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Asit C Mehta Financial Services ltd Management Discussions

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Jul 18, 2024|12:00:00 AM

Asit C Mehta Financial Services ltd Share Price Management Discussions

OF FINANCIAL POSITION AND RESULTS OF OPERATIONS OVERVIEW OF BUSINESSES

ANNEXURE1

We work under the guidance of our Non- Executive Non- Independent Directors, Mr. Asit Chimanlal Mehta and Mrs Deena Asit Mehta, who have experience of more than 40 years in the Financial Service Industry and have been associated with our Company since April 01, 2001 and March 25, 1991 respectively. They have been instrumental in evolving our business.

Our consolidated revenues from operations for Fiscals 2023, 2022 and 2021 were Rs 2,920.67 lacs, Rs 3,453.62 lacs and Rs 2,949.53 lacs, respectively. Our consolidated EBITDA for the Fiscals 2023, 2022 and 2021 were Rs -323.94 lacs, Rs 418.60 lacs and Rs 230.72 lacs, respectively. Our consolidated profit after tax for Fiscals 2023, 2022 and 2021 were Rs -931.25 lacs, Rs 146.33 lacs and Rs 225.69 lacs, respectively.

INDUSTRY STRUCTURE AND DEVELOPMENT:

Indian Economy

Indias economic activity has remained consistent despite extensive global uncertainty, and it is in a considerably stronger position than the majority of other economies. Strong investment activity, bolstered by the governments capital expenditure drive, and stable private consumption, especially among upper income earners, aided the growth of the Indian economy. However, persistently escalating inflationary pressures and longer-term forecasts of higher interest rates may impact the global economy, dragging Indias economic growth trajectory downward.

Indias GDP experienced double-digit growth of 13.1% in Q1FY2023 partially due to the base effect. However, growth slowed down in Q2FY2023 and Q3FY2023, reaching 6.2% and 4.5% respectively, due to high inflation and weakening demand. In Q4FY2023, growth bounced back to 6.1%, pushing the overall growth rate to 7.2% for FY2023. India continues to be one of the fastest growing major economies globally in FY2023.

The International Monetary Fund (IMF) revised Indias growth forecast for FY2024 to 5.9% from its previous estimate of 6.1%, citing a slowdown in domestic consumption and challenging external conditions. Additionally, the IMF reduced Indias growth forecast for FY2025 by 50 basis points to 6.3%. Despite these downward revisions, India will still maintain its position as one of the fastest- growing major economies globally. The Indian economy has demonstrated remarkable resilience in the face of the deteriorating global situation dueto strong macroeconomicfundamentals. Stepsto promote ease ofdoing business, skilled manpower, presence of natural resources, liberal FDI policies, huge domestic market and prospects of healthy GDP growth have made India an attractive destination for foreign investors. Thus, going forward, India is expected to see relatively stronger growth.

Retail Equity Massive inflows into secondary markets, an increase in new investor registrations and a rise in the share of retail investors in the overall cash market turnover indicate that direct retail participation and proprietary in Indian equities has increased significantly over the past few years. In fact, retail investors have been net buyers in the Indian equity markets for the last three years.

Equity Markets

Indian equities stayed volatile over the entire FY23, amid an aggressive monetary policy by central banks around the world, high inflation and outflows from overseas funds. Nifty ended FY23 down by almost 0.6%, while the Sensex rose by approximately 0.8% during the year. The Nifty 500 Index declined 1.2% in FY23. The Nifty Midcap 50 Index increased by 4.5% while the Nifty Small Cap 50 Index declined by 13.8% in FY23.

Mutual Funds

Equity mutual funds have been the most preferred investment vehicles for investors in the current uncertain market. The mutual fund industry has been bolstered by healthy net inflows into equity mutual funds. As investors alter their allocation between short-term and long-term funds amid elevated interest rates, debt funds continue to experience outflows. From 1st April 2023, the indexation benefit will no longer be available when calculating long-term capital gains on Specified Mutual Funds, i.e. mutual funds that invest less than 35% of their proceeds in domestic company equity shares. As the tax burden on returns may increase, this change may reduce the appeal of debt funds as an investment option. Without indexation benefits, debt mutual fund investments would now be comparable to bank deposits and other fixed-income products. During FY23, the average assets under management (AAUM) for mutual funds increased by approximately 7% to Rs. 40.05 trillion from Rs. 37.70 trillion in FY22. The retail assets under management (AUM) for equity, hybrid and solution-oriented schemes increased from Rs. 18.75 trillion in FY22 to Rs. 20.34 trillion in FY23, thereby growing at 8.5%.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The following table sets forth, for the periods indicated, certain items from our financial statements, in each case also stated as a percentage of our total income:

(Rs in Lakhs except percentage data)

Particular

2023 Percentage of total income 2022 Percentage of total income 2021 Percentage of total income
(%) (%) (%)

INCOME

Revenue from Operations

2,920.67 86.33% 3,453.62 83.14% 2,949.53 75.17%

Other Income

462.57 13.67% 700.46 16.86% 974.12 24.83%

Total Income (A)

3,383.24 100.00% 4,154.08 100.00% 3,923.65 100.00%

EXPENDITURE

Employee benefit expenses

1,144.45 33.83% 792.97 19.09% 783.47 19.97%

Finance costs

1,017.15 30.06% 792.72 19.08% 690.67 17.60%

Net Loss on Fair Value Change

57.60 1.70% 0.00 0.00% 0.00 0.00%

Depreciation and amortisation expense

155.71 4.60% 167.49 4.03% 205.68 5.24%

Other Expenses

2,042.02 60.36% 2,242.05 53.97% 1,935.34 49.32%

Total Expenses (B)

4,416.93 130.55% 3,995.23 96.18% 3,615.16 92.14%

Profit Before exceptional items

(1,033.69) (30.55%) 158.85 3.82% 308.49 7.86%

Exceptional Item

0.00 0.00% 0.00 0.00% 0.00 0.00%

Profit before tax

(1,033.69) (30.55%) 158.85 3.82% 308.49 7.86%

Tax expense:

(i) Current tax

0.00 0.00% 0.00 0.00% 48.00 1.22%

(ii) Deferred tax

(114.66) (3.39%) 71.86 1.73% 5.44 0.14%

(iii) MAT Credit Entitlement Written off / Utilised

0.65 0.02% 10.39 0.25% 28.31 0.72%

Prior Tax Adjustment

11.57 0.34% (0.20) 0.00 1.05 0.03%

Total Tax Expense

(102.44) (3.03%) 82.05 1.98% 82.80 2.11%

Profit from Discontinued operations

0.00 0.00 69.53 1.67% 0.00 0.00

Profit for the year

(931.25) (27.53%) 146.33 3.52% 225.69 5.75%

Other Comprehensive Income

a) Re-measurement gains/ (losses) on defined benefit plans

(17.62) (0.52%) 3.75 0.09% (54.03) (1.38%)

b) Effect of measuring Equity Instruments on Fair Value

(252.52) (7.46%) 41.51 1.00% 54.88 1.40%

c) Income Tax on (a) and (b)

68.02 2.01% (11.40) (0.27%) (0.70) (0.02%)

Other comprehensive income for the year, net of tax

(202.12) (5.97%) 33.86 0.82% 0.15 0.00

Total comprehensive income for the year

(1,133.37) (33.50%) 180.19 4.34% 225.84 5.76%

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

Consolidated Financial Results for the year ended 31st March 2023 as shown in Table below is of the Company, and its subsidiary.

Summarised Consolidated financials:

(Rs in Lakhs)

Segment Revenue

Particulars

2022-23 2021-22

Stock Broking and allied services

2,750.99 3,330.19

Advisory and Consultancy

28.25 36.54

Investments Activities

141.43 78.02

Information Technology

0.00 8.18

 

Segment Results Profit/(Loss) after depreciation and interest

Particulars

2022-23 2021-22

Stock Broking and allied services

(146.32) 406.02

Advisory and Consultancy

11.33 15.77

Investments Activities

(210.21) (150.93)

Information Technology

(133.91) (19.75)

Total

(479.11) 251.11

Less: Interest

(1,017.15) (792.72)

Add: Unallocable income

462.57 700.46

Total Profit / (Loss) before tax

(1,033.69) 158.85

BUSINESS OUTLOOK

India continues to remain a bright spot in the global economic landscape. It leverages its demographic dividend, digital transformation and innovation potential to drive sustained growth. According to the economic survey, real GDP growth is forecasted to reach 6.5% in FY24, though lower than FY23, India will still be one of the fastest growing economies in the world. This will be primarily driven by a progressive regulatory environment, a strong industrial policy (through PLI), a deleveraged private sector and sustained capital expenditure, especially on largescale infrastructure projects.

The current financial landscape, with rising incomes, increasing financial-sawiness of customers and greater retail participation has benefited our Subsidiary ACMIlLs business. Recognising this opportunity, the Company has launched several focused products in this category to make the investing digital driven, cost effective and in the reach of smallest investors. Our recently launched products like l-basket, Chotta Nivesh Gold, INVESTMENTZ Mobile App, etc. are estimated to further strengthen our position in the industry. This coupled with our technology integration and digital drive is expected to boost our margins and returns in long term through cost optimisation and enhanced efficiency.

OPPORTUNITIES, THREATS, RISK AND CONCERN OF MANAGEMENT

The Companys income mainly comprises of rents, and debenture interest accruing from investments made in the group Companies. The Company will be affected as per the impact on the investee Companies that are held by it as investments. Demand for rental properties and supply of the same in and around its properties will impact its revenues accordingly. Also, slowdown in the growth of Indian economy and /or volatility in the financial market could adversely affectthe performance.

The Company is actively pursuing its efforts to generate more income from Advisory and Consultancy Services. Demand for the Companys services emanates from entities seeking growth money or structuring of new projects etc. Risks associated with the Advisory and Consultancy Services includes competition from unorganised advisors, employees attrition, incorrect project assessments etc.

Our financial condition and results of operations are affected by numerous factors and uncertainties, the following is a discussion of certain factors that have had, and we expect will continue to have, a significant effect on our financial condition and results of operations:

• Any adverse changes in central or state government policies;

• Any adverse development that may affect our operations in Maharashtra;

• Any qualifications or other observations made by our statutory auditors which may affect our results of operations;

• Loss of one or more of our key customers and/or suppliers;

• An increase in the productivity and overall efficiency of our competitors;

• Our ability to maintain and enhance our brand image;

• Our reliance on third party suppliers for our products;

• General economic and business conditions in the markets in which we operate and in the local, regional and national economies;

• Changes in technology and our ability to manage any disruption or failure of our technology systems;

• Our ability to attract and retain qualified personnel;

• Changes in political and social conditions in India or in countries that we may enter, the monetary and interest rate policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

• The performance of the financial markets in India and globally;

• Any adverse outcome in the legal proceedings in which we are involved;

• Occurrences of natural disasters or calamities affecting the areas in which we have operations;

• Market fluctuations and industry dynamics beyond our control;

• Our ability to compete effectively, particularly in new markets and businesses;

• Changes in foreign exchange rates or other rates or prices;

• Inability to collect our dues and receivables from, or invoice our unbilled services to, our customers, our results of operations;

• Other factors beyond our control;

• Our ability to manage risks that arise from these factors;

• Conflict of interest with our Subsidiary, Individual Promoter and other related parties;

• Changes in domestic and foreign laws, regulations and taxes and changes in competition in our industry;

• Termination of customer contracts without cause and with little or no notice or penalty; and

• Inability to obtain, maintain or renew requisite statutory and regulatory permits and approvals or noncompliance with and changes in, safety, health and environmental laws and other applicable regulations, may adversely affect our business, financial condition, results of operations and prospects.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has a sound internal control system, which ensures that

(a) its financial reports are reliable,

(b) its operations are effective and efficient, and

(c) its activities comply with applicable laws and regulations. The internal control systems are further supplemented by internal audit carried out by an independent Chartered Accountant and periodical review by the Management. The Internal Audit process is designed to review the adequacy of internal control checks in the system and covers all the significant areas of the Companys operations.

The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of the internal control systems and tracks the implementation of corrective actions. Significant audit observations and corrective actions taken by the Management are presented to the Audit Committee. To maintain its objectivity and independence, the Internal Audit reports are submitted to the Chairman of the Audit Committee. Audit Committee plays a key role in providing assurance to the Board of Directors.

HUMAN RESOURCES

Effective Human Resource Management enables employees to contribute effectively and productively to the overall Company growth and the accomplishment of the organizations goals and objectives. The Human Resource Management of our organization deals with and provides leadership and advice for dealing with all issues related to the people in the organization. They also help in attaining maximum individual development and desirable working relationship.

The Company considers its Human Resource as the most valuable resource which has to be nurtured well and equipped to meet the challenges posed by the dynamics of business developments and marketing. The employees are motivated and promoted with good work culture, training, remuneration packages and ethical values, which the Company maintains. The Board of Directors would like to record their appreciation of the efficient and loyal service rendered by the Companys employees.

Company has 1 (one) employee as on March 31, 2023.

DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS, ALONGWITH DETAILED EXPLANATIONS THEREFOR, INCLUDING:

Ratio

Formula 2022-23 (working) 2021-22 (working) 2022-23 Ratio 2021-22 Ratio Explanation where the ratio exceeds 25% as compared to the previous year.

Debtors Turnover

Net Credit Sales / Average Trade Receivables 33,522 / 4,156 24,485 / 6,265 8.07 3.91 There is a increase in net revenue (Credit Sale) but average trade receivables is lower than last year, which resulted in net increases in ratio.

Return on Equity Ratio

Profit after tax / Average Shareholders Equity (55,999)/ 2,42,444 (43,870) / 2,91,921 (0.23) (0.15) There is a decrease in profitability due to a decrease in revenue and net margin which resulted in net loss in the FY 2022-23

Interest Coverage Ratio

Earnings available for debt Service / Debt Service 37,195 / 3,12,177 27,456 / 1,54,847 0.12 0.18 There is a decrease in profitability due to a decrease in revenue and net margin, along with reduction in the debt and its repayments.

Current Ratio

Current Assets / Current Liabilities 89,085 / 2,89,712 56,414 / 2,47,835 0.31 0.23 There is an increase in current loans and due to Increase in current borrowings resulted in Net increase in Current Ratios.

Debt Equity Ratio

Total Debt / Shareholders Equity 8,56,761 / 2,14,318 7,68,005 / 2,70,570 4.00 2.84 There is a decrease in profitability due to a decrease in revenue and net margin, along with increase in the debt.

Return on Capital Employed (%)

EBIT / Capital Employed 16,144 / 10,71,079 15,222 / 10,38,575 0.02 0.01

Net Profit Ratio (%)

Net Profit / Net Sales (55,999) / 33,522 (43,870) / 24,485 (167) (179) -

Inventory Turnover Ratio (%)

Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable

Operating profit margin (%)

Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable

DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF.

FY 2021-22 & FY 2022-23 Return on Net Worth was (23.10)% and (15.03)% respectively. There was a detrimental change in the Return by (53.69) %.

DISCLOSURE OF ACCOUNTING TREATMENT

During the period under the review there was no deviation in accounting treatment applicable.

CAUTIONARY STATEMENT

Statements in this management discussion and analysis describing the Companys objectives, projections, estimates, and expectations may be ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied. Important developments that could influence Companys operations include global and domestic financial market conditions affecting the interest rates, availability of resources for the financial sector, market for lending, changes in regulatory directions issued by the Government, tax laws, economic situation, significant changes in the political and economic environment in India, applicable statues, litigations, labor relations and interest costs and other unforeseen events, if any.

Date: 25/07/2023

For and on behalfof the Board of Directors

Place: Mumbai

Asit C Mehta Financial Services Limited

Registered Office:

Asit C. Mehta

Pantomath Nucleus House,

Chairman

Saki- Vihar Road, Andheri (East),

(DIN: - 00169048)

Mumbai - 400 072

CIN: L65900MH1984PLC091326

Email: investorgrievance@acmfsl.co.in

Website: www.acmfsl.com

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