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MANAGEMENT DISCUSSION AND ANALYSIS
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 continues to be one of the fastest growing economies around the world, despite the two major reforms, namely GST and Demonetisation that deterred the growth rate in the short run. With a policy change such as GST, which is of a huge scale, scope, and complexity, the transition unsurprisingly encountered challenges of policy, law, and information technology systems, which especially affected the informal sector in the country. In the second half of the year, the economy witnessed signs of revival. Economic growth improved as the shocks began to fade, corrective actions were taken, and the synchronous global economic recovery boosted exports. The GST implementation also brought about a 50% increase in unique indirect taxpayers.
Going ahead we believe growth trajectory will remain strong and improve further based on stabilisation of GST regime and other reforms. Rural Economy should also get a _llip with IMD forecasting FY19 to be the third consecutive year of normal monsoon. Most importantly, we expect Banking sector NPA problems, which have been haunting the economy for the last 7 years, to _nally near and end owing to a quicker resolution of stressed assets and PSU bank recapitalisation.
Capital markets have been buoyant and both primary and secondary markets have seen healthy growth in activities over the last one year. Corporates raised a record Rs. 2 trillion from primary markets via IPOs, QIP, rights issue etc. in FY17. The domestic investors are now a dominant player in equity markets even as foreign portfolio flows have decelerated. Investments in mutual funds via Systematic Investment Plan or SIPs have gained significant traction and collections via SIPs have more than doubled in the last two years. AMFI also contributed to the popularisation of mutual fund investments, majorly through its nationwide campaign over the years of "Mutual Fund sahi hai". However, mutual fund AUM as a percentage of GDP is low in India as compared to its peers. Driven by rise in domestic investments and an optimistic outlook for earnings growth, Indian equity indices hit all-time highs in early 2018.
The number of Public Issues in India increased from 106 in FY2017 to 202 in FY2018. The amount of funds raised through Public Issues in FY2018 was Rs. 83696 crores, up from Rs. 29088 crores in the previous year. The largest issue raised during 2017-18 was IPO (OFS) issue by General Insurance Corporation of India (Rs. 11,176 crore), which was followed by another IPO (OFS) issue by The New India Assurance Company Limited (Rs. 9,467 crore). While the amount raised through rights issues rose significantly from Rs. 3,720 crore in 2016-17 to Rs. 21,400 crore in 2017-18, further the resource mobilised through public issue of debt declined from Rs. 29,328 crore in 2016-17 to Rs. 5,173 crore in 2017-18. During 2017-18, 53 issues garnered a total of Rs. 67,257 crore through the QIP route as compared to Rs. 8,464 crore raised in 2016-17.
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.
Increased competition from local and global players operating in India;
Regulatory Changer 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 decreased to Rs.235.26 lacs from Rs. 388.22 lacs during the previous year. The profit after tax also decreased from Rs.235.27 lacs during the previous year to Rs.105.97 lacs during the current year mainly due to reduction in other operating income (i.e. income on non-current investment) from Rs. 168.22 lacs during the previous year to Rs.63.16 lacs during the current year and reduction in other income (i.e. interest on Term Deposits with Bank, Bonds, ICDs etc) from Rs.166.48 lacs during the previous year to Rs.103.98 lacs during the current year. In fact, the Merchant Banking fee has increased from Rs.53.15 lacs during the previous year to Rs. 67.31 lacs during the current year. Although there was an overall improvement in the capital market there was a decrease in the total income and profit after tax of the company which directors expect to improve in the coming years.
G. 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 8 employees as on March 31, 2018.
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.