DCM Financial Services Ltd Management Discussions.

We submit herewith the "Management Discussion and Analysis Report" on the business of the Company as applicable to the extent relevant.

THE COVID-19 PANDEMIC AND LOCKDOWN

We are amidst unprecedented times. The COVID-19 pandemic has spread across the world — leading to well above 4.7 million confirmed infections, over 315,000 deaths, enormous human suffering and a full stop on virtually all commercial and economic activities. Even India, apparently relatively fortunate up to now, has had 101,139 confirmed cases and 3,163 deaths as per COVID-19

Situation Report–120 of World Health Organisation (WHO) dated 19 May 2020. With lockdowns spreading across countries accounting for over 50% of the worlds gross domestic product (GDP), COVID-19 has caused disruptions on an unimaginable scale. Nobody really knows how long the pandemic will last; whether it will increase in the winter of 2020-21 and if so how, and what will be its final toll on lives and livelihood. With the impact of this pandemic still to play out, the scenario of eerily empty high streets, shut factories and stores, and literally millions being rendered unemployed together point to a single outcome — extreme stress for the global economy of the kind not seen since the Great Depression.

In response, Governments across the world have unleashed massive fiscal measures to protecteconomic activity and dramatically strengthen health services and testing. Central banks, too,have initiated multiple monetary and regulatory measures.

India, too, has initiated relief measures. The Government of India announced a slew ofwide-ranging reforms across varied sectors amidst a comprehensive package aggregating Rs. 20 lakh crore — or approximately 10% of nominal GDP — which covered among others

(i) directcash transfers and food security for vulnerable sections of society,

(ii) collateral free loans andconcessional credit to farmers and street vendors,

(iii) enhancement of systemic liquidity by theReserve Bank of India (RBI),

(iv) special liquidity and partial credit guarantee scheme to provideliquidity to NBFCs, HFCs, MFIs and mutual funds,

(v) 100% credit guarantee scheme for aggregate Rs. 3 lakh crore of emergency credit lines by banks and NBFCs to their MSME borrowers and(vi) subordinated debt and equity support to MSMEs. The Government has also initiatedcompliance relief measures across various regulatory requirements. The RBI has also initiatedseveral measures like reduction in policy rates, monetary transmission, credit flows to theeconomy and providing relief on debt servicing.

INDUSTRY STRUCTURE AND DEVELOPMENT

India, too, has initiated relief measures. The Government of India announced a slew ofwide-ranging reforms across varied sectors amidst a comprehensive package aggregating Rs. 20 lakh crore — or approximately 10% of nominal GDP — which covered among others

(i) directcash transfers and food security for vulnerable sections of society,

(ii) collateral free loans andconcessional credit to farmers and street vendors,

(iii) enhancement of systemic liquidity by theReserve Bank of India (RBI), (iv) special liquidity and partial credit guarantee scheme to provideliquidity to NBFCs, HFCs, MFIs and mutual funds,

(v) 100% credit guarantee scheme for aggregate Rs. 3 lakh crore of emergency credit lines by banks and NBFCs to their MSME borrowers and(vi) subordinated debt and equity support to MSMEs. The Government has also initiatedcompliance relief measures across various regulatory requirements. The RBI has also initiatedseveral measures like reduction in policy rates, monetary transmission, credit flows to theeconomy and providing relief on debt servicing.

GDP growth for FY2020 was 4.2% — worst in the last 11 years.

Industry Overview

Non-banking financial companies (NBFCs) form an integral part of the Indian financial system. They play an important role in nation building and financial inclusion by complementing the banking sector in reaching out credit to the unbanked segments of society, especially to the micro, small and medium enterprises (MSMEs), which form the cradle of entrepreneurship and innovation. NBFCs ground-level understanding of their customers profile and their credit needs give them an edge, as does their ability to innovate and customize products as per their clients needs. This makes them the perfect conduit for delivering credit to the unbanked and SMEs. However, NBFCs operate under certain regulatory constraints, which put them at a disadvantage position vis--vis banks. While there has been a regulatory convergence between banks and NBFCs on the asset side, on the liability side,

NBFCs still do not enjoy a level playing field. This needs to be addressed to help NBFCs realize their full potential and thereby perform their duties with greater efficiency.

The NBFC sector continued to grow its share in the financial services industry. Credit growth ofscheduled commercial banks (SCBs) continued to moderate throughout FY2020. On 31 March 2019,growth in advances of SCBs was 13.2%. By 30 September 2019, this had reduced to 8.7% and on 27 March 2020, it was further down to 6.1%. SCBs also continued to face asset quality challengesin FY2020. Data published by the RBI in its Financial Stability Report dated 27 December

2019show that NBFCs have outperformed SCBs on asset quality.

To strengthen theasset-liability profile of the sector, RBI introduced a liquidity coverage ratio (LCR) requirement forall NBFCs with AUM of H 5,000 crore and above. The LCR regulation mandates NBFCs to maintaina minimum level of high-quality liquid assets to cover expected net cash outflows in a stressedscenario. The regulation also stipulates that NBFCs should attain LCR of 100% in a phased mannerover a period of four years starting December 2020. It is a welcome regulatory change andwill significantly strengthen ALM profile of the NBFC sector.The RBIs moratorium measuresfor customers are likely to put additional stress on many NBFCs. There is an asymmetry. On onehand, NBFCs have to offer such moratoriums to their customers; while on the other, their marketborrowings must be repaid on due dates.

OPPORTUNITIES, CHALLENGES AND OUTLOOK

 

Opportunities

NBFCs have served the unbanked customers by pioneering into retail asset-backed lending, lending against securities and microfinance. Following variables in the external environment may be seen as opportunities for the Company:

The Government of India announced a slew of wide-ranging reforms across varied sectors amidst a comprehensive package aggregating Rs. 20 lakh crore — or approximately 10% of nominal (vi) subordinated debt and equity support to MSMEs.

NBFCs aspire to emerge as a one-stop shop for all financial services.

The sector has witnessed moderate consolidation activities in recent years, a trend expected to continue in the near future.

New banking license-related guidelines issued by RBI place NBFCs ahead in competition for licenses owing largely to their rural network.

New RBI guidelines on NBFCs with regard to capital requirements, provisioning norms & enhanced disclosure requirements are expected to benefit the sector in the long run.

Challenges

Competitive rivalry between big players is intense in the industry

Global recession due to COVID-19 pandemic.

Working Capital and Liquidity Stress in the market.

Low demand in the market.

Financial services companies often compete on the basis of offering lower financing rates, higher deposit rates and investment services;

Stringent regulatory norms prevent new entrants;

Customers prefer to invest their money with a reputed financial services company offering a wide range of services;

Medium bargaining power of customers. Although customers do not have much bargaining power, they can easily switch to another company based on the terms and quality of services provided.

Outlook

Although slowdown in all business sector including NBFC and trade tensions between the US and China were among the many factors that softened the economic outlook for 2019, the year did begin on a firm footing. The projected global economic growth, albeit downgraded, was 2.9%. Despite the economic and financial headwinds, growth in developing Asia was projected to remain a robust

5.5% during 2019 (Asian Development Outlook, Update, September 2019). However, in 2019-20, the Indian economy grew by 4.2% against 6.1% expansion in 2018-19. Due to the COVID-19 pandemic, the International Monetary Fund has projected a sharp contraction of the global economy to a status much worse than what resulted from the 2008-09 financial crisis.

DISSCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial statements have been prepared in accordance with the requirements of the Companies

Act, 2013 and applicable accounting standards issued by the Institute of Chartered Accountants of

India. The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Accounts and other financial statements forming part of this annual report. INTERNAL CONTROL SYSTEM

Given the magnitude and nature of its business, the Company has maintained sound and commercial practice with an effective internal control system. The system ensures that all transactions are authorized, recorded and reported correctly to safeguard the assets of the Company and protect them from any loss due to unauthorized use or disposition. The adequate internal information system is in place to ensure proper information flow for the decision- making process. The Company also has well-established processes and clearly defined roles and responsibilities for people at various levels. The control mechanism also involves well documented policies, authorization guidelines commensurate with the level of responsibility and standard operating procedures specific to the respective businesses, adherence to which is strictly ensured. Internal audit is carried out frequently to create awareness and to take corrective actions on the respective units or areas, which need rectification. These reports are then reviewed by the "Management Team" and the "Audit Committee" for follow-up action.

HUMAN RESOURCE DEVELOPMENT

The Company regards its human resources as amongst its most valuable assets and proactively reviews policies and processes by creating a work environment that encourages initiative, provides challenges and opportunities and recognizes the performance and potential of its employees attracting and retaining the best manpower available by providing high degree of motivation.

Your Company believes in trust, transparency & teamwork to improve employees productivity at all levels.

CAUTIONARY STATEMENT

The management discussion and analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.

On behalf of the Board of Directors For DCM Financial Services Limited

Shantanu Deveshwar Whole-time Director

DIN: 08268523

Date: 11.11.2020 Place: New Delhi

Form AOC-I

(Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 of Companies (Accounts)

Rules, 2014)

Statement containing salient features of the financial statement of Subsidiaries/Associate

Companies/Joint Ventures Part "A": Subsidiaries

 

(Information in respect of each subsidiary to be presented with amounts in Rupees)

S. No. Particulars Details
1 Name of the subsidiary Global IT Options Limited
2 Reporting period for the subsidiary concerned, if different from the holding companys reporting period NA
3 Reporting currency and Exchange rate as on the last date of the relevant Financial year in the case of foreignsubsidiaries NA
4 Share capital 1,00,00,200
5 Reserves & surplus (7,715,160)
6 Total assets 2,561,505
7 Total Liabilities 2,561,505
8 Investments 20,857
9 Turnover NIL
10 Profit before taxation 1,25,409
11 Provision for taxation 37,654
12 Profit after taxation 87,755
13 Proposed Dividend NIL
14 % of shareholding 90% approx.
1 Names of subsidiaries which are yet to commence operations NIL
2 Names of subsidiaries which have been liquidated or sold during the year NIL

Part "B": Associates and Joint Ventures

Statement pursuant to Section 129(3) of the Companies Act, 2013 related to Associate Companies and Joint Ventures

Name of Associate/Joint Venture
1. Latest audited Balance Sheet Date NA
2. Shares of Associate/Joint Venture held by the company on the year end NA
No. NA
Amount of Investment in Associate/Joint Venture NA
Extend of Holding% NA
3. Description of how there is significant influence NA
4. Reason why the associate/joint venture is not consolidated NA
5. Net worth attributable to shareholding as per latest audited Balance Sheet NA
6. Profit/Loss for the year NA
Considered in Consolidation NA
Not Considered in Consolidation NA
1 Names of Associate Companies/Joint Ventures which are yet to commence operations NIL
2 Names of Associate Companies/Joint Ventures which have been liquidated or sold during the year NIL

For and on behalf of the Board For DCM Financial Services Limited

Richa Kalra Director DIN:07632571

Somali Tiwari

Company Secretary &CFO

Shantanu Deveshwar

Whole Time Director

DIN:08268523

Date: 11.11.2020 Place: Delhi

Form AOC-2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014)

Form for disclosure of particulars of contracts/arrangements entered into by the company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto

Details of contracts or arrangements or transactions not at Arms
Length basis
1 a) Name(s) of the related party and nature of relationship Nil
b) Nature of contracts/arrangements/ transactions Nil
c) Duration of the contracts/ arrangements/ transactions Nil
d) Salient terms of the contracts or arrangements or transactions including the value, if any Nil
e) Justification for entering into such contracts or arrangements or transactions. Nil
f) Date(s) of approval by the Board Nil
g) Amount paid as advances, if any Nil
h) Date on which the special resolution was passed in General Nil
Meeting as required under first proviso to section 188.
Detail of material contracts or arrangement or transactions at -
Arms Length basis
2 a) Name(s) of the related party and nature of relationship
b) Nature of contracts/arrangements /transactions
c) Duration of the contracts/arrangements/ transactions
d) Salient terms of the contracts or arrangements or transactions including the value, if any: As Per Annexure-1
e) Date(s) of approval by the Board, if any
f) Amount paid as advances, if any
For and on behalf of the Board
For DCM Financial Services Limited
Shantanu Deveshwar Richa Kalra
Whole Time Director Director
DIN:08268523 DIN:07632571
Somali Tiwari
Company Secretary &CFO

Date: 11.11.2020

Place: Delhi

List of Related Parties:
Sr. No. Description of Relationship Name of Party
1. Subsidiary Company Global IT Option Ltd.
2. Significant Influence 1. DCM Services Ltd
2. DCM International Ltd
3. DCM Anubhavi Marketing Pvt Ltd
3. Key Management Personnel 1. Shantanu Deveshwar
(Whole-time Director)
2. Ms. Somali Tiwari
(CS & CFO)(appointed w.e.f.18.7.19)
3. Ms. Priya Sharma(CS & CFO)
(resigned w.e.f 10.6.19)

Transactions with related parties during the year (Rs.)

Sr. Particulars For the year ending 31.03.2020 For the year ending 31.03.2019
1 Remuneration 4,81,131 2,79,230
2 Repayment of Loan
i. DCM Services Ltd 66,99,000 -
ii. DCM Anubhavi Marketing Pvt. Ltd. 1,73,09,902 -
iii. Global IT Option Ltd. 22,84,425 -
3 Interest Expenses
i. DCM Services Ltd 67,37,930 67,16,845
ii. DCM International Ltd 25,66,399 23,26,407
iii. DCM Anubhavi Marketing Pvt. Ltd. 2,90,242 18,36,728
iv. Global IT Option Ltd. 2,08,217 1,88,746
4 Interest Income
i. DCM Services Ltd 49,15,886 52,79,977
ii. DCM International Ltd 21,40,068 21,34,221
iii. Global IT Option Ltd. 1,73,708 1,72,615
Balance Outstanding (Rs.)
1. DCM Services Ltd. 7,39,24,220 7,38,85,290
2. DCM International Ltd. 2,81,56,876 2,55,90,476
3. DCM Anubhavi Marketing Pvt. Ltd. 31,84,349 2,02,04,010
4. Global IT Option Ltd. Nil 20,76,208
5. Remuneration 28,829 Nil