REPORT MACRO ECONOMY: REVIEW AND OUTLOOK
The global economy grew at a strong 5.9% in FY21, after a degrowth of 3.1% in the pandemic infested FY20. This remarkable rebound was helped by easing of pandemic-related restrictions and lockdowns and the accelerated vaccination drive across countries. Robust consumer spending and an uptick in investments also boosted this recovery.
The year 2021 was characterised by uncertainty and volatility as the pandemic continued to shift shape and form and impacted life with varied intensity. Right when the global economy seemed to be on the road to recovery after leaving the worst of the COVID-19 pandemic behind, the Russia-Ukraine crisis escalated. Consequently, prices of crude oil and gas, food grains such as wheat and corn, and several other commodities have shot up. The conflict has also brought in severe financial sanctions and political pressure on Russia from the rest of the world, primarily the Western powers. It is obvious that these will likely have unpredictable and undesired implications on the global financial system and economy. Global investors, for instance, are parking their money into safer-haven assets such as gold and US Treasuries, while emerging markets witnessed capital outflows.
It is, therefore, no surprise that the war in Ukraine and its potential economic impact have forced several economic forecasters to go back to their drawing boards and revise their growth projections for this year most now point to less- than-expected growth in 2022.
Despite the setbacks witnessed on account of the various concerns being faced at the global level, Indias economic fundamentals remain strong. It is expected that despite the short-term turbulence (hardening interest rates, geopolitical fallouts, supply-side shocks, logistic concerns, increasing commodity prices, covid pandemic, etc.), the long-term prospects still remain intact.
As the country recovers from the aftershocks of the pandemic-induced troubles and the Ukraine-Russia war, the results of the growth-enhancing policies and supportive schemes by the Central Government (Production-linked Incentive Schemes, Atmanirbhar Bharat Abhiyan, National Infrastructure pipeline). is expected to start kicking in only from the next fiscal onwards.
Higher infrastructural financing and development will be crucial to address the existing gaps in the physical infrastructure, especially, in the rural areas. Through implementation of a credible fiscal strategy to bring down the Debt-GDP ratio, while meeting the multi-faceted development needs, all these measures are likely to have a multiplier effect on jobs and incomes, higher productivity and higher efficiencies. These are expected to translate into better economic growth and prospects going ahead.
The Indian economy has demonstrated its resilience over the past two years of the pandemic and is on a firmer foundation maintain a growth path and, at the same time, deal with future external shocks. The near-term is likely to be volatile.
The Capital Markets are instrumental in mobilisation of savings through activation of the transfer of the ideal monetary resources to financial assets. The Indian capital market includes both, the share or stock market and bonds market, which deal in shares and debt securities, respectively. Further bifurcating the market, it is divided into gilt-edged market [government and semi-government securities, backed by the Reserve Bank of India (RBI)] and the industrial securities market (shares and debentures of new issues and secondary markets). The securities traded in gilt-edged market offer higher stability and hence, are much sort after by the banks and other institutions. Whereas the new issue market deals with corporations generating new capital in the form of shares and debentures, whereas the old capital market deals with securities that have previously been issued.
FY 2021-22 can be accorded as a sunrise year for the Indian stock market, when compared to the other major indices across the world. The National Stock Exchanges Nifty Index witnessed a 19% growth during the year, compared to the previous year. The small and mid-cap indices rose by 29% and 25%, respectively, over the same period.
On the other hand, the BSE Sensex clocked a growth of 18.3% over the previous year. It was the best year for BSE Sensex in history, as it moved up by more than 10,000 points for the first time in a single year. Considering CY 2021, it had gained 10,054 points across the year. In terms of percentage increase, this was the best performance in the previous 4 years.
The Demat account openings continued to swell gaining a rapid momentum over the entire of FY 2021-22. The no. of active Demat accounts witnessed a growth of 63% to 89.7 Million during the fiscal. This was on the back of an addition of over 2 Million new accounts every month since March 2020.
(Source: https://www.business-standard.com/article/markets/india-s-demat-account-tally-up-63-to-89-7-Million-in- fy22-shows-data-122041401088_1.html#:~:text=The%20number%20of%20active%20dematerialised,shows%20data%20.)
Last two years the mutual fund industry faced hardship due to the pandemic as the income of the people suffered during the period. But slowly after the second wave the industry started gaining momentum as lot of investors who held their SIPs during the period started investing back and there was liquidity in the market. There are some key trends which are increasing the demand of mutual fund industry. In India the mutual fund industrys assets grew as a result of strong stock market performance and net inflows into equity schemes.
INDUSTRY STRUCTURE AND DEVELOPMENTS
According to the Economic Survey released by the Indian Government in January 2022, the GDP growth is estimated at 9.2% in FY 2021-22, which is higher than the latest estimates by the IMF. In line with these estimates released by the Economic Survey, the Agriculture and allied sectors were the least impacted by the pandemic having grown by 3.9% in FY 2021-22, compared to 3.6% in the previous year, as a result of the record levels of areas sown under the Kharif and Rabi crops, good monsoon, higher procurement of food grains under the central pool and adequate policy support.
The industrial sector witnessed a sharp rebound with an estimated growth of 11.8% in FY 2021-22 compared to a contraction of 7% in FY 2020-21, with the manufacturing and construction picking up momentum, post the easing of the lockdowns imposed in the previous year. This, while the service sector witnessed an estimated growth of 8.2% in FY 2021-22, compared to a de-growth of 8.4% in the previous fiscal. The private consumption is subsequently estimated to have significantly improved to recover 97% of the corresponding pre-pandemic output levels. This recovery is expected to be led by higher vaccination coverage, coupled with normalisation of the Indian economic activity and policy thrust to quicken the virtuous growth cycle through Capex and infrastructure spending and higher budgetary allocations. This shall be supported by gains from the supply-side reforms and easing of regulations, robust export growth and availability of fiscal space to ramp up capital spending.
The Indian financial markets have also performed admirably, allowing for the unprecedented risk capital mobilisation by Indian enterprises. With the broader capital market indices, BSE Sensex and NSE Nifty having reached all-time high levels of 62,245 and 18,477 respectively, in October 2021, the year witnessed a plethora of IPOs. An amount to the tune of Rs. 1.11+ Lakh Crore was raised in FY 2021-22 - a record high compared to the other years.
Furthermore, in line with the straining geopolitical conditions arising because of the Russia-Ukraine fallout in March 2022, there have been far fetching effects on the various economic aspects, leading to inflationary conditions. However, with the good prospects, higher vaccination coverage, gains from the supply-side reforms, regulatory easing out, healthy export growth, and availability of fiscal headroom is likely to lead to a GDP growth of 8.2% in FY 2022-23 and further moderate to 6.9% in FY 2023-24.
OPPORTUNITIES AND THREATS Opportunities
• Favourable demographics
• Growing demand for financial products in semi-urban and rural areas
• Increase in financial savings to drive capital market investment
• Technology advancement
• Long-term economic outlook positive, will lead to opportunity for financial services
• Corporates looking at consolidation / acquisitions / restructuring opens out opportunities for the corporate advisory business
• Spread of Pandemic
• Indias lower sovereign rating
• Increase in interest rates making debt more attractive, impacting flows into equity market
• Technological disruptions
• Execution risk
• Regulatory changes
• Threats to cyber security, regulatory overhauls and data privacy are potential threats to the financial services sector.
SEGMENT WISE PERFORMANCE - FINANCIAL PERFORMANCE
Your Company operates in only one segment i.e., trading and investment in Shares and Securities.
The Board of Directors primarily uses a measure of adjusted earnings before interest, tax, depreciation and amortization (adjusted EBITDA) to assess the performance of the operating segments. However, the Board of Directors also receives information about the segments revenue and assets on a periodical basis.
FY 2021-22 has been a remarkable year in terms of growth for the Company. Our sustained efforts on focusing on growth backed by revenues and cost efficiency has helped increase in profitability in current FY 2021-22 with Profit before tax increased to Rs. 1130.85 lakhs as against Rs. 403.96 lakhs in previous FY 2020-21. Profit after Tax (PAT) increased to Rs. 941.61 lakhs as against Rs. 113.03 lakhs registered in FY 2020-21.
This increase was on account of overall improvement in operational efficiencies
OUTLOOK, RISKS AND CONCERNS
The nature of Companys business is susceptible to various kinds of risks. The Company encounters risks like Market Risk, Credit Risk, Technology Risk, Reputation Risk, Regulatory & Compliance Risk, Operational Risks on daily business operations. For overcoming such risks Company has framed comprehensive risk management techniques and safeguards, to ensure that major risks are properly assessed, analyzed and appropriate mitigation tools are applied. These techniques remain dynamic and align with the continuing requirements and demands of the market.
Our Outlook, risks and concerns are as follows:
• Spending on technology products and Services including both the economic and regulatory requirement in the market.
• We have reduced debt on the balance sheet to nearly zero and as we have articulated in the past, we do not expect to leverage the balance sheet. Our focus will be on generating income from trading and investment in securities market.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
BLB Limited has an adequate internal audit and control system. Risk based internal audit, through external audit firms, are being conducted periodically to independently evaluate adequacy of internal controls, adherence of processes and procedures and compliance of regulatory and legal requirements. The internal audit programme is periodically reviewed by Audit Committee of Board, which is chaired by Independent Director, for its effectiveness and timely reporting. The internal control procedures include segregation of roles and responsibilities, independent confirmations, physical verifications and preventive checks on compliance risk.
Statutory and standard auditing practices employed include, interalia, compliance to accounting and auditing standards, compliance of all relevant rules & regulations, tax laws and review of related party transactions.
BLB believes in conduct of its affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior.
MATERIAL DEVELOPMENTS IN HUMAN RESOUCE/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED
At BLB, it is our endeavour to create an employee centric culture. The knowledge, skill, competencies of the employees are being continuously developed by way of proper training programs. Company emphasizes in improving the efficiency and skills of employees by adopting Total Quality Management (TQM) Technique, this helps employees to resolve problems through a pro - active approach. We believe in growing with the growth of employees.
The company has also organized motivational activities for its employees. We have always strive to act as a catalyst in achieving the goals of the organization by developing the capabilities of the employees.
DETAILS OF SIGNIFICANT CHANGES
As per the amendment made under Schedule V to the Listing Regulations read with Regulation 34(3) of the Listing Regulations, details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios and any changes in Return on Net Worth of the Company including explanations therefor are given below:
|S. Particulars No.||Previous F.Y. March 31, 2021||Current F.Y. March 31, 2022||Changes, if any, and reason thereof|
|1. Current Ratio||12.11||7.29||Change due to movement in current assets to Nin-current assets and increase in current liabilities|
|2. Debt Equity Ratio||0.03||0.05||Due to increase in short term borrowings as compared to previous year|
|3. Return on Equity||0.01||0.17||Due to increase in profitability during the year|
|4. Debt Service Coverage Ratio||2.09||3.04||Due to increase in profitability during the year|
|5. Inventory Turnover Ratio||0.51||0.02||Decline due to an increase in inventories compared to decrease in turnover during the year|
|6. Net Capital Turnover Ratio||7.22||4.43||Due to decrease in turnover as compared to capital employed during the year.|
|7. Net Profit Ratio||0.01||0.03||Improvement due to increase in operational results of the Company during the year.|
|8. Return on Capital Employed||0.06||0.14||Improvement due to increase in operational results of the Company during the year.|
|9. Return on Investment||0.01||0.06||Improvement due to increase in operational results of the Company during the year.|
DISCLOSURE OF ACCOUNTING TREATMENT
The financial statements of the Company have been prepared in accordance with the Section 133 of the Companies Act, 2013 and Indian Accounting Standard Rules, 2015, which became applicable on the Company w.e.f. 01.04.2017. The significant accounting policies which are consistently applied are set out in the Notes to the Financial Statements.
All statements that address expectations or projections about future, but not limited to the companys/ groups strategy for growth, product development, market position, expenditures and financial results may be forward - looking statements within the meaning of applicable rules and regulations. Since these are based on certain assumptions and expectations of future events, the company cannot guarantee that these are accurate or will be realized. The company assumes no responsibility to publicly amend, modify or revise any such statements on the basis of subsequent developments, information or events.
|For and on behalf of the Board of Directors of|
|Brij Rattan Bagri|
|Place : New Delhi||Chairman|
|Date : August 11, 2022||DIN: 00007441|