Charter. Capital Management Discussions


A. Industry Structure, Developments and Outlook

The company is operating in the Merchant Banking industry; therefore its performance is largely dependent on the state of the capital markets and the macroeconomic conditions, within the country and globally.

Indian economy demonstrated resilience throughout FY23 even as global macroeconomic environment threw challenges in the form of tight monetary policy, reduced global demand, high commodity prices especially crude. Indias prudent fiscal planning aided in meeting the fiscal deficit target of 6.4% of GDP in FY23, moreover a lower Fiscal Deficit target for FY24 (5.9% of GDP) and record high capex allocation (? 10tn) reflected the governments strong intent to continue on its fiscal consolidation path, while carefully balancing the growth requirement of the economy. The uptick in benchmark yields (10yr Gsec) was marginal (50bps) even though the repo rates was hiked by 250 bps during this period, reflecting the confidence of the bond markets in the economy. GST collections have been consistently clocking above ? 1tn mark since last 21 months, collections reached record high of ? 1.6tn in Mar23. Indias trade deficit reached as high as USD 29.3bn in Sep22 vs USD 15.9bn avg. during FY22, which reduced significantly by the end of FY23 (USD 17.4bn in Feb). The positive improvement in trade balance was on account of sharp fall in imports vs exports, decline in oil prices and resilient services exports helped cushion the Current Account Deficit. The import cover ratio averaged 9.5 times during this period.

EQUITY MARKETS

Indian markets had a quiet FY2023 with major indices closing flat. The year started with ongoing Russia-Ukraine geopolitical tensions, accelerated monetary tightening by major central banks, volatility in commodity prices etc. Equity markets, which were down during the first quarter, bounced back with Sensex and Nifty achieving an all-time high of 63,284 and 18,812 respectively in the month of December 2022. The key factors that supported the bullish run were relative strong domestic growth, robust corporate earnings, optimistic growth outlook, large inflows into domestic institutional investors etc. Sensex and Nifty closed at 58,992 and 17,360 respectively in March 2023, down from all-time high due to US banking crisis where multiple banks were declared insolvent. Still, India was the second-best equity market performer among the emerging markets in FY2023 after South Africa.

India recorded FII outflows for the second consecutive year to the tune of Rs. 376 crore. June 2022 witnessed monthly FII outflows at Rs. 50,203 crore, 2nd highest ever after March 2020. On the contrary, DIIs recorded highest ever inflows of Rs. 2.6 lakh crore.

Primary Markets

IPO markets remain subdued in FY2023, after having an exceptional year in FY2022 on account of volatile market scenario and moderate listing performance. FY2023 witnessed 37 main board IPOs as compared to 53 in FY2022. The amount of funds raised through main board IPOs was Rs. 52,116 crore compared to all-time high of Rs. 1,11,547 crore in FY2022. The year recorded Indias largest IPO- LIC at Rs. 20,557 crore. Other major listing in the exchanges included Delhivery (Rs. 5,235 crore), Global Health (Rs. 2,206 crore) and Five Star Business Finance (Rs. 1,593 crore). Most of the IPOs (25 out of 37) came in just 3 months (May, November and December) which clearly depicted volatile market conditions prevailed through major part of the year. The average number of applications from retail dropped to 5.6 lakhs in comparison to 13.3 lakhs in FY2022.

B. Opportunities & Threats

Opportunities:

Low penetration of financial services and products in India;

Regulatory reforms would aid greater participation of all class of investors;

Favorable demographics like huge middle class, larger younger population with disposable income and investible surplus, change in attitude from wealth creation and risk taking abilities of the youth etc.;

Corporate are looking at expanding in overseas/domestic markets through merger & acquisitions and Corporate advisory Services.

Threats:

Execution Risk;

Increased competition from local and global players operating in India;

Regulatory Change impacting the landscape of business;

Unfavorable economic condition.

C. Segment-wise or Product-wise Performance

The Company is engaged primarily in Merchant Banking activities and there are no separate reportable segments as per the Accounting Standard 17.

D. Risk Management

It is our constant endeavour to ensure that every risk we take has been thoroughly assessed, and that all risks are concomitant with their potential return. We have worked to strengthen our enterprise wide risk management processes and practices through our risk philosophy, whose core lies in the identification, measurement, monitoring and action along with the development of risk mitigation plans.

Our risk management process is overseen by the Board of Directors. Our risk management approach and practices continued to focus on minimizing the adverse impact of risks on our business objectives and to enable the Company to leverage market opportunities based on risk-return parity. Our periodic assessment and monitoring of business risk and regulatory environment resulted in timely deployment of appropriate mitigation measures.

E. Internal Control Systems & Their Adequacy

The companys internal control systems are adequate and provide, among other things, reasonable assurance of recording transactions of operations in all material respects and of providing protection against significant misuse or loss of company assets. The internal control systems lay down the policies, authorization and approval procedures. The adequacy of the internal control systems has been reported by the auditors under the Companies (Auditors Report) Order, 2016.

F. Discussion on Financial Performance

During the year under review, the total income of the Company increased from Rs.168.15 lacs during the previous year to Rs. 205.98 lacs during the current year. The profit after tax also increased from a loss of Rs.2.16 lacs during the previous year to a profit of Rs.32.67 lacs during the current year mainly due to increase in the Other operating income (mainly Dividend income) and Other Income (mainly Interest income from financial assets carried at amortised cost). The Board of Directors expect this situation to improve further in the coming years.

G. Analysis of Significant change in Financial Ratios

Profit Before Tax Margin: The Profit Before Tax Margin for FY23 was 22.23% compared to 2.96% for FY22 mainly because of the increase in Total Income in comparison to the previous year while total expenses were almost same as the previous year.

Net Profit Margin (%): The Net Profit Margin for FY23 was 15.86% compared to (1.28%)% for FY22 mainly because of the increase in Total Income in comparison to the previous year while total expenses were almost same as the previous year.

Other parameters, namely Debt Equity Ratio, Debtors Turnover, Inventory Turnover, Interest Coverage Ratio and Current Ratio, are not applicable to the company.

H. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

Return on Networth for FY23 was 0.94 up from (0.07%) a year ago mainly due to increase in Total Income in comparison to the previous year while total expenses were almost same as the previous year.

I. Material Development in Human Resources / Industrial Relations Front, Including Number of People Employed

There has been no material development on the Human Resource / Industrial Relations front during the year. Employee relations at all levels continue to remain cordial. The Company had 7 employees (including Managing Director) as on March 31, 2023.

CAUTIONARY STATEMENT

Statements in this Management Discussion & Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic developments in the country and improvement in the state of capital markets, changes in the Government regulations, tax laws and other status and other incidental factors.