Crest Ventures Ltd Management Discussions

Overview

Global Economy

As we reflect on the year spanning from April, 2022 to March, 2023, it becomes evident that the global economy experienced significant events that left a profound impact on its trajectory. The ongoing war in Ukraine, the rise in inflation, and the tightening of monetary policy by central banks created a complex landscape for businesses worldwide, with both positive and negative consequences.

The ongoing war in Ukraine had a substantial influence on global trade and energy prices, resulting in disruptions to supply chains and increased costs for goods and services. Energy prices, in particular, saw a sharp increase due to the conflict, leading to elevated inflation and hindering economic growth causing an increase in energy and food prices globally. It introduced a sense of uncertainty into the global economy, hampering investment and economic growth as businesses exercised caution in their decision-making processes.

The rise in inflation was another significant factor influencing the global economy, eroding consumer spending and investment. Inflation reached 40-year highs in the United States and 30-year highs in the United Kingdom, with upward trends observed in Europe and China. The rise in inflation affected the global economy through reduced consumer spending, reduced investment and increased financial stress.

Furthermore, central banks globally adopted a tightening stance on monetary policy to combat inflation. The tightening of monetary policy is projected to moderate economic growth in the current year resulting in reduced economic growth, increased unemployment and increased financial stress.

In conclusion, the global economy is expected to grow at a slower pace in the current year (April, 2023 to March, 2024) compared to the previous year. The interplay between the ongoing war in Ukraine, inflationary pressures, and the tightening of monetary policy poses challenges for businesses. To navigate these complexities, companies must closely monitor global economic trends, adapt strategies, mitigate risks, and seize opportunities in the ever-evolving global marketplace.

Indian Economy

The Indian economy, displaying notable resilience, experienced a significant growth in the FY 2022-23, with the GDP growth rate hitting a robust 7%. A key factor that underpinned this expansion was the impressive strength of private consumption and investment across a broad spectrum of sectors, indicative of an overall positive economic landscape.

Various determinants played pivotal roles in shaping this positive economic climate, including interest rates, currency valuation, inflation, government budgeting, and Foreign Direct Investment (FDI). A crucial move by the Reserve Bank of India (RBI) was to raise the repo rate by 2.50% over the year in a strategic bid to mitigate inflationary pressures. This policy aimed to modulate inflation by increasing borrowing costs for banks, which subsequently affected lending rates for businesses and individual consumers.

Currency valuation, another key area of focus, saw the Indian rupee depreciating by around 4% against the US dollar during this period. Such weakening of the rupee has the potential to create challenges, particularly by raising the cost of imports, and thereby contributing to inflationary pressures.

Inflation emerged as a prominent concern, surging to 6.9% in March, 2023, the highest point in eight years. Multiple factors, such as the escalating global commodity prices and the depreciating rupee, fed into this inflationary surge.

In the governments budget for the FY 2023-24, presented in February, 2023, a clear emphasis was placed on catalyzing economic growth and fostering job creation. Several provisions were included to stimulate investment, encompassing tax breaks for businesses and infrastructural projects. The budget also signaled the governments commitment to supporting the vulnerable segments of the population, with initiatives such as hikes in minimum wages and enhancement of social security benefits.

FDI saw substantial growth, hitting a five-year peak at $62 billion. This remarkable surge in FDI was driven by the impressive performance of the Indian economy and the governments continuous efforts to enhance the investment climate via focused reforms.

As part of this positive economic trajectory, the Indian economy witnessed a significant shift in employment, with the unemployment rate falling from 5.3% in the previous year to 4.2% in FY 2022-23. This decline can be attributed to the strong growth momentum, which fostered job creation across both formal and informal sectors. The subsequent rise in employment and income growth resulted in an overall enhancement in the populations living standards.

The Indian government employed a range of measures to support and strengthen the economy during the FY 2022-23. These strategies included a strategic surge in public spending, designed to invigorate economic activity and construct a conducive environment for businesses. Special attention was paid to the export sector with policies aimed at boosting competitiveness and exploring new markets. The government also addressed the potential ramifications of rising inflation, taking proactive steps to control inflationary pressures, thereby maintaining price stability and safeguarding the economys overall health.

Looking forward to the FY 2023-24, the Indian economy is poised for sustained growth, with projections indicating a growth rate of 7%, exceeding the global growth rate of 3.6%. This prospect for continued growth is reinforced by two key factors: robust domestic demand and a favorable external environment. The robust domestic demand, fueled by escalating incomes, an optimistic rural outlook, and the governments steadfast focus on infrastructure development, is expected to persist. Additionally, the projected global economic growth of 3.6% in FY 2023-24 is expected to bolster Indias export sector, while favorable commodity prices are anticipated to provide additional momentum, given Indias status as a net importer of commodities.

However, the journey towards economic growth was not entirely without hurdles. Challenges such as persistent inflationary pressures and rupee depreciation could potentially pose obstacles. The adept management of these issues will be instrumental in maintaining economic momentum and ensuring stability. In this regard, the governments proactive measures, including interest rate adjustments and policy reforms, played a crucial role in navigating these challenges and further propelling growth.

In summary, the Indian economys admirable performance during the FY 2022-23, underscored by vigorous private consumption and diverse investment, attests to its resilience in the face of challenges. Looking forward, the combination of the governments strategic initiatives and the economys inherent strengths positions India on an encouraging path towards sustained growth and stability.

Industry Overview

Real Estate

In the past year (April, 2022 to March, 2023), the Indian real estate industry experienced a mixed bag of growth and challenges. The industry demonstrated healthy growth, with the value of new launches increasing by 10% year-on-year to 10.5 trillion. This growth was propelled by factors such as strong economic growth, with the GDP growth rate reaching around 7% in FY 2022-23. The robust economic expansion led to an increase in disposable income, driving demand for real estate.

Additionally, increasing urbanization played a significant role in the growth of industry. The urban population is projected to reach 500 million by 2030, fostering demand for housing and commercial real estate.

Government reforms, including the implementation of the Real Estate (Regulation and Development) Act, 2016, and the Goods and Services Tax (GST), aimed to boost the real estate sector by improving ease of doing business. These reforms facilitated increased investment in the industry.

Despite the positive growth prospects, the real estate industry faced challenges during the past year. One key challenge was the high prices of real estate in India. Factors such as the high cost of land, construction, and financing contributed to the elevated prices, making it difficult for many people to afford a home.

Furthermore, the regulatory environment for the real estate sector experienced uncertainty as rules and regulations governing the industry underwent frequent changes. This uncertainty created challenges for businesses in planning for the future.

Looking ahead, several key trends are expected to shape the Indian real estate industry. The rise of affordable housing initiatives, such as the Pradhan Mantri Awas Yojana (PMAY), will continue to drive demand for real estate. The rental market is also on the rise, driven by factors like high homeownership costs and the preferences of young individuals and professionals relocating for work. Additionally, technologys growing influence in the real estate sector will enhance efficiency, customer service, and the overall real estate experience.

In conclusion, the Indian real estate industry witnessed a mixed performance in the past year. While the industry demonstrated healthy growth, challenges related to high prices, lack of transparency, and regulatory uncertainty persisted. By keeping a pulse on these trends and challenges, industry players can adapt their strategies and navigate the dynamic real estate landscape effectively.

Financial Services

The FY 2022-23 served as a pivotal period for Indias financial services sector. This transformative phase was characterized by diverse influences, including proactive government initiatives, dynamic interest rates, burgeoning mutual funds industry, and fluctuating currency valuations.

In an attempt to curb inflation, the RBI adopted a contractionary monetary policy by hiking the repo rate by 2.50%. This adjustment made borrowing from the RBI more expensive, creating potential roadblocks to economic growth. As borrowing costs surge, businesses could be deterred from investing, while consumers might curtail their spending, leading to slower economic activity. The reverberations of this policy shift will require constant vigilance and evaluation over the upcoming period.

The mutual fund industry exhibited remarkable resilience and growth in FY 2022-23, with a 10% increase in Assets Under Management (AUM). This impressive growth can be attributed to rising disposable incomes, increasing awareness about the benefits of mutual funds, and streamlined access to mutual fund investments across numerous platforms. Predictions indicate that the industrys AUM could escalate to 50 lakh crore by 2025, reflecting a promising future for mutual funds in India.

Digitalization in financial services has emerged as a key trend in the Indian Financial Services sector. As more consumers embrace online transactions, the push towards digital platforms for banking, investment, lending, and other financial services is set to surge, resulting in a more streamlined, digitally-driven financial ecosystem. Fintech companies are poised to significantly contribute to the growth of the financial sector in India. By disrupting traditional financial services through innovative technology solutions, fintech companies offer a range of services from digital payments to online investment platforms. This revolution is likely to foster more efficient, customer-centric, and inclusive financial services.

Investments

The fundraising landscape for India-specific private equity and venture capital (PE/VC) has undergone a considerable transformation in recent years. After a period of steady growth culminating in a peak in 2019, the sector experienced a marked slowdown in 2020 and 2021, largely due to the disruptive impacts of the global pandemic. However, the sector witnessed a significant resurgence in FY 2022-23, as India- focused funds successfully raised a record sum of $17.4 billion. This resurgence was part of a broader global surge in PE/VC fundraising, reflecting renewed investor confidence and a positive market outlook.

In the breakdown of this record-breaking fundraising effort, venture capital emerged as the largest contributor, accounting for 44% or $7.8 billion of all PE/VC fundraising in India during FY 2022-23. This was closely followed by private equity funds, which contributed $3.7 billion, representing 21% of the total. Private credit funds also played a significant role, garnering $3 billion, or 17% of the total funds raised.

From a sectoral perspective, the largest proportion of the funds raised over 40 were designated for sector-neutral deployment, indicating a broad-based investment approach. Real estate and technology/internet sectors also stood out, receiving 22% and 17% of the raised funds respectively. Interestingly, clean energy has emerged as a promising theme, attracting approximately $938 million in fundraising, demonstrating investors increasing interest in sustainable and renewable energy sources.

The FY 2022-23 saw a notable decline in the number of buyouts, especially in terms of their overall value, which fell by a sharp 48%. This was primarily due to the absence of large buyouts, contrasting with the previous years record high figures. The drop in buyouts was concurrent with a global decrease in Mergers & Acquisitions (M&A) activity, indicating a broader trend in the investment world.

Despite an initial impression of slowed growth investments in FY 2022-23, the overall deal activity remained robust, with a steady 186 deals recorded, matching the previous years numbers. The decrease was primarily in the large deals segment, while early-stage deals (those below $50 million) actually saw an increase of 7%, showcasing a continued interest in nurturing promising early-stage businesses.

In the face of a global economic slowdown triggered by the pandemic, startup investments understandably receded by 35% in FY 2022-23, compared to the previous years all-time high. However, the startup ecosystem continues to thrive, though the trend has shifted towards smaller deals with more rationalized valuations. This downturn has been shaped by a complex web of factors, both global such as geopolitical tensions and rising inflation and domestic, including underperforming Initial Public Offerings (IPOs) and a slowdown in startup growth rates.

Given these evolving market conditions, startups have been compelled to recalibrate their strategies. There has been an increased emphasis on profitability over growth, leading to longer funding cycles with smaller amounts and lower valuation multiples. Many startups have also delayed their IPO plans due to market uncertainties. The funding winter has spurred a surge in M&A and consolidation activities, as mature startups look to expand their offerings by acquiring companies facing fundraising challenges. Startups are also implementing costcutting measures, focusing on enhancing efficiency and productivity by reducing workforce size, closing unproductive business verticals, and withdrawing from loss-generating markets. There has also been a noticeable shift in sector focus, with some previously favored sectors falling out of favor due to regulatory concerns. These trends reflect a cautious, but pragmatic approach towards ensuring financial sustainability and profitability in an unpredictable economic climate.

Company Overview

Real Estate

Crest Ventures Limited (CVL) is committed to constructing high-quality assets and delivering iconic projects that prioritize design and timely execution in prime locations under the Crest brand. Our focus lies in identifying the right opportunities that offer low investment requirements and the potential for high returns, with a strong emphasis on optimizing our Return on Capital Employed (RoCE). Drawing from our expertise in the real estate space and the credit markets, Crest has strategically taken on projects where we have lent to these projects and also taken up the execution and management of the same, thereby controlling the cash flows and maximizing our Internal Rate of Return (IRR).

Keeping in line with our investment philosophy of building and then unlocking value of high quality assets, we have successfully monetized a part of our mixed-used development in Chennai (Phoenix MarketCity). This liquidity event gave the Company an opportunity to expand its footprint and look at the various projects in the Real Estate market of Mumbai.

We continue to own a 50% stake in the Palladium mall and have started constructing a 500,000 square feet commercial office space atop the existing property. This development, in addition to the rental yields, will generate a captive footfall for Palladium, our flagship project.

To navigate this dynamic landscape, we have adopted an asset-light approach by engaging in Joint Development Agreements, Redevelopment Projects or Project Management partnerships in urban-centric areas. This prudent strategy allows us to participate in projects by providing capital at a cost and earning fees for our role as project managers. Leveraging our partnerships and expertise in architectural design, construction execution, financial support, and sales, we are well-positioned to optimize our operations. Additionally, through these arrangements, we earn a share of the project revenues and can strategically acquire stakes based on the financial viability and returns. This hybrid approach enables us to be selective in our project portfolio, safeguard against potential downsides, and maximize our returns.

At Crest, we are poised to capitalize on the various greenfield and redevelopment projects happening in the Mumbai real estate market. Our commitment to quality, our capital allocation, and our expertise as project managers position us to achieve exceptional results in our upcoming projects.

Ongoing Projects

Crest Oaks - Mumbai

In collaboration with the landowners, we are jointly developing over 100,000 square feet of residential space in Andheri East, Marol, Mumbai. This project is thoughtfully designed with three interconnected, 12-storey towers, boasting a range of shared amenities. The distinctive facade sets this development apart, nestled atop a serene hill. With more than 140 units available in 2 and 3 BHK configurations, we have already commenced excavation and piling activities on-site. Our goal is to complete this project within a three-year timeframe.

Crest Link - Mumbai

Crest Link represents our ambitious mixed-use redevelopment initiative, located in the vibrant heart of Mumbai on Linking Road. Construction is well underway, with substantial progress achieved in the past year. Currently, we have successfully completed over 25% of the project. This redevelopment spans approximately 80,000 square feet, encompassing over 6,000 square feet of saleable residential space and over 13,000 square feet of commercial area. With a successful launch and over 50% of our residential inventory liquidated, we anticipate completing the project within the coming year.

Crest Parkview - Mumbai

Situated in the serene neighborhood of Bandra West, Mumbai, Crest Parkview is a redevelopment project close to completion. Nestled amidst the tranquility of Guru Nanak Park, the project covers an overall area over 25,000 square feet, with around 8,000 square feet of sellable residential area. The project is already open for sales, with construction progress standing at an impressive 89%. Our objective is to complete the project within the current year.

Crest @ Palladium - Chennai

This is an under-construction office building, encompassing an impressive 500,000 square feet of space. This development is an integral part of the mixed-use project within the PMCC/Palladium complex, situated atop the Phoenix Palladium Chennai. Progress has been substantial with 20% overall project completion. We anticipate that this project will yield strong annual rental returns while further enhancing the performance of the Phoenix Palladium Chennai.

Crest Greens (Phase 2) - Raipur

Building upon the success of Phase 1, we are commencing the development of the remaining 14 acres within the 52-acre parcel in the heart of Raipur. Crest Greens has firmly established itself as the premier residential township in Raipur, Chhattisgarh, conveniently located adjacent to the Raipur Railway Station. Following the successful completion and delivery of Phase 1, we continue to change the landscape of Raipur with this marquee development.

Crest Park - Jaipur

We are in the process of commencing the development of a prime plot in Bani Park, Jaipur. Spanning an impressive 47,780 square yards, this centrally located plot serves as the canvas for a residential plotted development. The project encompasses the construction of essential infrastructure, roads, landscapes, and amenities, including a clubhouse, garden, gym, and recreational facilities. We expect to complete this project in 1.5 years and establish a strong brand in Jaipur.

Opportunities, Threats, Risks and Concerns:

In 2023, the Indian real estate market is expected to offer numerous opportunities, although certain challenges need to be addressed for sustained growth. The Indian economy is projected to experience robust growth in 2023, leading to increased disposable income and heightened demand for real estate. The rising urban population in India is driving the demand for housing and commercial real estate, creating opportunities for development and investment. The Indian governments proactive reforms in the real estate sector have simplified business processes, attracting more investment and fostering a favorable investment climate. Advancements in technology have made it easier for buyers and investors to explore and acquire real estate properties, resulting in increased demand and efficiency. Recent policy changes, including the Coastal Regulation Zone scheme and revised Floor Space Index (FSI) Premiums, have created a conducive environment for new projects, presenting fresh opportunities for development.

The soaring real estate prices in Mumbai pose challenges for affordability, making it difficult for some individuals to purchase homes. The real estate sector in Mumbai suffers from a lack of transparency due to the regulatory landscape, hindering informed decision-making for buyers and investors. Frequent changes in regulations and policies governing the real estate sector create uncertainty for businesses, hampering long-term planning. A potential slowdown in the Indian economy could lead to decreased demand for real estate in Mumbai, impacting the markets stability and growth.

An increase in interest rates can raise borrowing costs, potentially reducing the affordability of homes and dampening demand for real estate. In the event of an economic recession, the real estate sector may experience a decline in demand as consumers tighten their spending. Given we are entering into an election year, political instability can undermine investor confidence and deter investments in the real estate sector.

Outlook

Last year, Crest Ventures Limited made the strategic decision to unlock the value of our mall asset in Chennai to fuel our next decade of growth. This decision aligns with our commitment to unlocking value in the high quality assets that weve built and moving towards an asset-light model for our Real Estate practice, which we started to successfully execute.

To further drive growth, we have entered into Redevelopments, Joint Development Agreements and Project Management engagements for prestigious and iconic projects. Our participation in these projects involves providing capital at a cost and earning fees for our role as project managers. Through these partnerships, we leverage our expertise in architectural design, construction execution, financial support, and sales.

We are confident that by successfully converting our project pipeline we will establish ourselves as one of the prominent quality developers in Mumbai and India while deploying significantly less capital, optimizing our returns, and effectively managing our overheads and costs.

Financial Services & Credit

In our Government Securities desk, market volumes were a little low compared to the last year as the RBI increased the repo rate throughout the year putting a continuous pressure on the yield curve. There were also concerns due to rising inflation, global tension and interest rate going upwards, leading to a decrease in volumes. The volumes are expected to be better in the coming year as there is an expectation that the RBI will start cutting rates from the third quarter of the year and also with the expectation that the US Fed is done with its rate hike cycle.

Indian Rupee started strong at 75.43 in April, 2022 before depreciating to 82.91 in March, 2023 on the Forex segment. Dollar has strengthened amid Russia-Ukraine conflict, global slowdown and global inflation concerns which led to surge in the US bond yields, thus leading to appreciating US Dollar. Forward yields were volatile, ranging more than 200 basis points between 1.95% - 4.10%. Forward volumes were higher than the previous year due to the volatility in the domestic market and due to continuous intervention by the central bank. The outlook for the Indian currency looks weak in the near-term but do not see downside extending for a prolonged period as India is expected to remain as the best performing major economy which may be supportive for Rupee at lower levels.

On the Derivatives desk the rate hike cycle started from the beginning of the year. RBI raised the benchmark rate from 4% to 6.5% between May, 2022 and February, 2023, in order to tame high inflation. The growth in industrial activity saw credit expansion which induced higher volumes in the derivatives market. Inflation cooled off in Q4 due to lower commodity prices, pointing towards the end of the rate hike cycle.

The performance of the Corporate Bond desk has improved though the overall volumes in the market were on the lower side and average team strength of 10 dealers vis-a-vis an industry standard of 18-20 dealers. Market share has improved in the last quarter and we are expecting revenues to grow. The volumes in the secondary market corporate bond segment have decreased from 11.97 trillion in FY 2021-22 to 11.44 trillion in FY 2022-23, marking a de-growth of 4.4% YoY. Private Placement remains the most preferred route to raise money due to ease of issuance, cost efficiency and institutional demand.

The amount of bonds placed privately for the entire FY 2022-23 sums to 5.81 trillion showing an increase from 3.84 trillion in the previous FY 2021-22. The primary issuance of CDs and CPS in FY 2021-22 stood at 20.19 trillion and decreased to 13.70 trillion in FY 2022-23, marking a de-growth of 32.14% YoY

As per AMFI data, Average Assets Under Management (AAUM) of all Mutual Funds touched 40.05 trillion as of the close of March, 2023. MF industry AUM grown by approx. 6.2% compared to March, 2022. FY 2022-23, the share of equity-oriented funds has gone up further from 48.9% to 51.6% and the share of active longer period debt funds fell from 23.1% to just 19.6% and share of liquid funds fell from 16.4% to 15.8%. However, there was rise in share of passive funds like ETFs and FOFs from 11.6% to 13.1%. During FY 2022-23, the share of individual investors (including UHNI and HNI) in the overall AUM has gone up from 55.2% to 58.1% and the share of institutions and corporates has fallen from 44.8% to 41.9%.

Two major amendments with respect to taxation have affected the markets. MLDs came under the ambit of STCG as per Union budget 2023. Additional amendment in Union Budget 2023 wherein LTCG benefit will be removed from debt-oriented funds for those investments made after April 1, 2023. Hence, investors especially HNI and UHNI will not enjoy the benefit of tax arbitrage between Debt MFs and FDs and Debt MFs may not be so attractive going forward.

Opportunities, Threats, Risk & Concerns

For the Indian Government bond market, the main threats include rising inflation leading to higher interest rates and potentially a less attractive bond market, and a potential widening of the governments fiscal deficit raising concerns about the governments ability to repay its debt. A slowdown in economic growth could also decrease the demand for government bonds. However, opportunities exist in the governments focus on infrastructure development, which could increase bond demand, and efforts to reduce its fiscal deficit and improve its credit rating, potentially making government bonds more attractive. Risks include the governments ability to repay its debt being affected by economic growth, inflation, and interest rates, and a potential downgrade of the governments credit rating. Concerns center around increased government debt due to infrastructure development and potential cuts in social welfare programs.

In the corporate bond market, the threats are similar to those of the government bond market, with added concerns about the safety of corporate bonds due to an increase in corporate defaults. Opportunities exist in the governments efforts to improve the credit rating of Indian companies, which could attract foreign investors. Risks include corporates ability to repay their debt and the increase in corporate defaults. Concerns here also include increased corporate debt and potential cuts in social welfare programs and infrastructure development.

The forex derivatives market faces threats from a slowdown in economic growth, an increase in volatility in the foreign exchange market, and tighter regulation. Opportunities lie in the governments focus on promoting exports and efforts to improve the infrastructure of the forex derivatives market. Risks are similar to the threats, with added concerns around increased speculation in the forex derivatives market due to the governments export promotion efforts.

Finally, for the mutual funds market, threats include a potential slowdown in economic growth and increased stock market volatility. Opportunities lie in increased financial literacy, digitalization, and the governments push towards financial inclusion. Risks include changes to the risk-return balance of mutual funds due to factors like interest rates, economic growth, and stock market performance, regulatory changes, and performance risks related to fund managers and underlying assets. Concerns include the complex nature of certain mutual funds, potential changes in tax laws affecting mutual fund returns, and excessive concentration of mutual fund holdings in certain sectors or companies.

Outlook

The outlook for the Indian Government bond market, corporate bond market, forex derivatives market, and mutual funds market for the year 2023 is mixed. The governments focus on infrastructure development and its efforts to reduce its fiscal deficit are expected to support demand for financial assets. However, the slowdown in economic growth and the increase in volatility in the global markets are expected to weigh on demand for financial assets.

We will continue to grow our inter-bank market share and maintain pole position on the forex and debt derivatives markets. We tread with caution in our capital business as the yields and returns on the same have been very low.

Our credit book has been expanding and aligns with our Real Estate practice. We continue to grow this business by deploying capital in an efficient manner while managing our risks effectively.

Investments

We create value in companies that we invest in and grow by strategic business planning, leveraging our connectivity across the group and ensuring effective resource allocation while empowering and enabling the leadership teams.

Vascon Engineers Limited ("Vascon")

We made a strategic investment in Vascon in October, 2021. It has been engaged in the business of engineering, procurement and construction (EPC), real estate construction and development for over 3 decades. The company has demonstrated its business expertise through the construction and development of residential and office complexes along with IT parks, industrial units, shopping malls, multiplexes, educational institutions and hotels. To date, Vascon has completed more than 200+ projects across 30+ cities and delivered 50+ million square feet.

Starting as an EPC services company, Vascon diversified into real estate development including owning and operating projects with a focus on mid-range housing. Real estate development operations include identification and acquisition of land, ownership and operation of projects, and the development of residential and office complexes, shopping malls, multiplexes, hospitality properties, IT parks, and other buildings. It also owns an 85% stake in its subsidiary GMP Technical Solutions, providing engineering solutions to pharmaceutical, chemical and healthcare industries.

We have a 5.12% shareholding as on March 31, 2023 in the company.

TBOF Foods Private Limited ("TBOF")

As explained in the last report, TBOF, founded by two brothers, Satyajit and Ajinkya Hange, is a direct-to-consumer (D2C) organic agri-food company selling over 50 SKUs across India and exporting to 52 different countries. TBOF has trained over 15,000 farmers in sustainable organic farming and is a leading voice in the organic revolution. The company is best known for its cultured Desi Gir cow ghee, produced from A2 milk. Other top-selling products include Khapli atta and wellness products like Amlaprash, Moringa powder and an Immunity boosting powder that was developed in partnership with celebrity nutritionist Luke Coutinho.

Most of the companys sales are generated through two e-commerce channels, the companys website and Amazon. Products are shipped across India and to 52 countries worldwide. The company has been growing at 68% CAGR Y-o-Y and has established itself as a category leader in the D2C space. The company has successfully raised 14 crores pre Series A round in April, 2023.

We continue to own 20.74% of the company.

Tamarind Global Services Private Limited ("Tamarind")

Tamarind is a focused destination and event management company. Having a large global presence, the company operates under four verticals: Tours, MICE (Meetings, Incentives, Conferencing and Exhibitions), Events and Online. The business is on a path of recovery after the setback faced due to Covid-19 in the previous years.

We have a 23.14% shareholding in the company.

We have exited our 10% stake in our previous investment, CMS IT Services Private Limited.

Opportunities, Threats, Risk & Concerns

Strengths in the industry are underscored by the persistence of startup investment activity, despite the perceived slowdown in the market. The focus of many startups has shifted towards maturation and sustainability, aligning more with profitability and enhancing their business models. Another positive trend is the rise in mergers and acquisitions, with mature startups expanding their product offerings through strategic acquisitions. Moreover, fundraising activities dedicated to India have reached an all-time high, indicating a significant availability of global "dry powder" or unallocated cash.

However, this industry is not without its weaknesses. The uncertainty that pervades the current market has led to funding rounds being conducted at lower valuations, signaling caution among investors. The instability in the market has also resulted in a delay of IPO plans by several startups. Furthermore, in order to survive in the changing market conditions, many startups have had to resort to cost-cutting measures such as reducing their workforce, closing certain verticals, and exiting markets that generate losses.

Amidst these strengths and weaknesses, there are various opportunities and threats. With the rise of regulatory concerns surrounding sectors like cryptocurrency and gaming, investors might find opportunities to diversify and explore other burgeoning sectors. The investment screening process is also becoming more rigorous, which can foster the growth of more sustainable and profitable ventures. The increase in deals valued less than $100 million suggests opportunities for early-stage startups.

However, the threats to the industry must not be underestimated. Startups are facing the need to pivot or adjust their business models to the shifting market conditions. There is a noticeable decline in the number of larger investment rounds (valued over $100 million), signaling a reduction in mega deals. Another threat is the potential workforce layoffs in well-funded companies, which can result in a loss of talent and have a negative impact on the startup ecosystem. Its crucial to recognize that these conditions are subject to change and evolve along with the market dynamics.

Outlook

In FY 2022-23, private equity and venture capital (PE/VC) fundraising in India hit a record high of $17.4 billion, and with global LPs planning to increase their capital allocations for India, a significant rebound in PE/VC activity is expected in 2023. As valuation multiples have contracted, theres a shift towards value plays and operational excellence rather than growth, leading to an uptick in consolidation and M&A within the startup space.

We are actively exploring special situation opportunities across industries. For the last few years in early-stage investments, we are keenly exploring technology and agricultural companies. After our experience with these industries in our previous investments, we have a positive outlook on the potential in realizing healthy returns. Structured trades are likely to increase to bridge valuation gaps, and while startups will continue to receive large investments, valuations are expected to be lower than in 2021.

Investors will become more selective, and leaders with positive unit economics and a shorter path to profitability may have the opportunity to play the role of consolidators. India sits at the center of a confluence of positive themes that bode well for the long-term investor. By striking a portfolio balance between Indias tech start-ups and its sector strongholds like IT, manufacturing and financials, we believe India can provide investors with a high-growth allocation in their portfolios.

Internal Control Systems

The Companys internal control systems commensurate with the nature of its business and the size and complexity of its operations. The Company has a standard operating procedure for governance of orderly and efficient conduct of its business including adherence to the Companys policies, safeguarding its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures. To fulfill the requirements of the Companies Act, 2013, the internal control systems are supplemented by Internal Audit carried out by independent firms of Chartered Accountants. Internal audit team carries out a risk-based audit of these processes to provide assurance on the adequacy and effectiveness of internal controls for prevention, detection, reporting and remediation of frauds.

Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews the adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Companys risk management policies and systems.

On review of the internal audit observations and action taken on audit observations, we can state that, there are no adverse observations having material impact on financials or commercial implications.

Business Review

A brief review of the financial performance of your Company for the FY 2022-23 is given below:

Particulars	FY 2022-23	FY 2021-22
Consolidated Total Revenue	65,085.15 Lakh	5,692.96 Lakh
Standalone Total Revenue	81,591.07 Lakh	2,958.61 Lakh

A summary of the major financial ratios of your Companys performance on consolidated basis is as under:

RATIOS	FY 2022-23	FY 2021-22
Price to Book Value	0.46	0.88
Price to Earnings	1.14	42.90
Return on Assets	33.45%	1.42%
Return on Equity	40.46%	2.05%
Debt to Equity	0.18	0.42
Total Debt to Total Assets Ratio	0.15	0.29
Interest Coverage Ratio	51.16	2.04
Net Profit Margin	60.82%	21.25%
Capital Adequacy Ratio *	85.50%	13.96%

* This ratio is on standalone basis.

There are significant changes in the key financial ratios of the Group for FY 2022-23 as compared to FY 2021-22 on account of liquidation of the Groups entire stake held in Classic Mall Development Company Limited, as associate company for an aggregate consideration of 93,600 Lakh, resulting into realised profit of 74,761.16 Lakh on standalone basis and 54,725.77 Lakh on a consolidated basis respectively.

Human Resources

The Company continues to consider its employees its most valuable asset and aims to attract, develop, motivate and retain diverse talent, that is critical for its vision, competitive differentiation and continued success. Post Covid as business gained momentum the focus of human resource function was to aid business by ensuring availability of good quality diverse talent in a timely manner. Conscious efforts were made to ensure selection process stayed unbiased and equal opportunity was presented to all based on merit.

Another area that continued to stay in focus for the Human Resource function was sustaining a workplace that fosters creativity, agility, innovation, meritocracy and an environment that encourages a culture of lifelong learning and thriving together. Aligned to this vision specific competency-based learning opportunities were made available to employees at all levels with a focus on methods that were experiential, and application based.

The Companys talent management strategy aims to maximize the potential of every employee by creating a purpose-driven, inclusive, stimulating, rewarding work environment, and quality employee experience that fuels business growth. Committed to this vision the company continues to fairly use its robust succession plan and lateral growth models ensuring every role is played by the right talent. The company also launched its first ever "Games Day" for all its employees across its group companies, to encourage people to collaborate, synergize and learn to work across boundaries under one single brand "Crest".

The Company extends its appreciation for the trust, commitment and support shown by its employees at every step and looks forward to a more productive, fulfilling, and active association in the years to come.

As on March 31, 2023, Crest Group (including subsidiary companies) had 118 employees including the Managing Director. During the year considering the future business growth plans the Company has consciously added a considerable amount of talent across levels and functions.

Cautionary Statement

Statements in this Annual Report, particularly those that relate to Management Discussion and Analysis, describing the Companys objectives, projections, outlook, expectations, estimates, among others may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections, etc., whether express or implied. Although these expectations, projections, etc. are based on reasonable assumptions, the actual results might differ. Several factors could make a significant difference to the Companys operations. These include economic conditions, government regulations, taxation, natural calamity and currency rate changes, among others over which the Company does not have any direct control.