DJS Stock & Shares Ltd Management Discussions

Overall Outlook

"Volatility in headlines, stability in index." If we had to sum up 2025 for investors, that might be it. The year felt at times like a rollercoaster - global worries, sharp sector rotations, and a barrage of news - yet Indias stock market quietly notched solid gains.

The Indian share market in financial year 2025-2026 experienced a resilient yet volatile trajectory, characterized by record primary market activity and robust domestic retail inflows countering massive foreign portfolio investor (FPI) outflows. Broad indices delivered moderate, range-bound returns amid shifting global trade dynamics, tighter liquidity/tax adjustments, and a transition toward earnings-led growth.

This overall market environment directly shapes the operating environment of DJS Stock and Shares Limited ("the Company", "DJS") as a registered trading member, given that the Companys brokerage income and gains on its investment book are both closely linked to the market volumes and price movements described above.

Flows & Liquidity

One of the biggest stories of 2025 was who was buying and who was selling. In simple terms, foreign investors ran for the exits, while domestic investors poured money in. This push-pull of FII vs DII had a huge impact on market leadership and stability.

Foreign Institutional Investors (FIIs) pulled out in record amounts. By year-end, FIIs had sold about ?1.6 trillion worth of Indian equities (roughly $18 billion), the largest annual outflow on record. Concerns about stretched valuations and weaker earnings in early 2025 made global investors cautious, and factors like steep US tariff threats on Indian exports only added to their list of reasons to trim India.

Industry Structure and Development

DJS Stock and Shares Limited operates as a registered trading member of BSE (and NSE, for the relevant segments), and its industry — stock-broking and capital-market intermediation — continues to be reshaped by the following structural trends:

• Digital and discount broking: the continuing shift of retail investors towards mobile- first, digital trading platforms is compressing brokerage yields industry-wide as discount-broking models gain further market share.

• Derivatives-segment recalibration: SEBI and the stock exchanges continue to recalibrate the futures & options segment (including measures to moderate speculative retail participation), which has a direct bearing on industry-wide trading volumes and, in turn, on transaction-linked revenue for trading members such as the Company.

• Cyber-security and business continuity: SEBIs cyber-security and cyber-resilience framework for market infrastructure institutions and intermediaries has raised the compliance and technology bar for all trading members.

• Consolidation: rising compliance, technology and cyber-security costs are making scale increasingly important, driving consolidation among smaller and mid-sized broking entities.

Within this environment, the Companys own scale of operations remains modest, and its income has, in recent years, been more closely linked to gains on its investment book than to steady, high-volume brokerage flow — see ‘Financial Performance below.

Leading Industry Developments

• Growth of Discount and Digital-First Broking: fee compression and platform-led client acquisition continue to reshape competitive dynamics among trading members.

• Regulatory Recalibration of the Derivatives Segment: periodic tightening of eligibility, margin and lot-size norms by SEBI/exchanges to temper speculative retail activity.

• Cyber-security and Systemic Risk Management: heightened exchange/SEBI oversight of trading members IT systems, business continuity planning and client-data protection.

• Consolidation Among Smaller Trading Members: smaller broking entities face rising fixed compliance and technology costs, prompting consolidation and, in some cases, exit from the business.

SWOT Analysis

Strengths

1. Debt-free balance sheet: the Company carries no borrowings and incurred nil finance cost during the year, insulating it from interest-rate and refinancing risk.

2. Experienced Board: the Company is led by an experienced Managing Director and Board, supported by a qualified Company Secretary, providing continuity in governance and compliance oversight.

3. Established exchange membership: the Companys trading membership/registration with BSE (and NSE) is a regulatory recognition not easily replicated by new entrants.

4. Lean cost structure: a compact employee base and low fixed overheads allow the Company to remain profitable even at a modest scale of operations

Weaknesses

1. Small scale of operations: Total Income for FY 2025-26 was only ?27.87 lakh, materially lower than larger peers, which limits operating leverage.

2. High dependence on non-recurring gains: a significant part of the Companys income in recent years has come from capital gains on its investment portfolio (?42.71 lakh in FY 2024-25, nil in FY 2025-26) rather than steady brokerage income, making results volatile from year to year.

3. Accumulated losses: Other Equity remained negative at ?(1.02) crore as at March 31, 2026, reflecting accumulated losses not yet fully absorbed by current profitability.

Opportunities

1. Rising retail participation: continuing growth in demat accounts and retail participation in Indian capital markets provides a long-term addressable base for brokerage services.

2. Diversification potential: scope to diversify into adjacent, SEBI-permitted financial services (research, distribution of financial products, depository-related services) to reduce dependence on volatile trading/other income.

3. Technology-led efficiency: continued digitisation of trading, KYC and back-office processes can further reduce the Companys already-lean cost base.

Threats

1. Regulatory tightening: continuing SEBI/exchange measures to moderate speculative trading in the derivatives segment could further reduce industry-wide trading volumes.

2. Fee competition: aggressive pricing by discount brokers continues to compress brokerage yields industry-wide.

3. Market-linked volatility: the Companys other income is materially exposed to capital- market movements and is not assured to recur — the absence of the prior years capital gains directly and disproportionately affected profitability in FY 2025-26, as discussed under Financial Performance below.

4. Cyber-security and technology risk: as a trading member handling client trades, the Company remains exposed to cyber-security and system-availability risk consistent with the broader industry.

Segment-wise/Product-wise Performance

The Company is engaged mainly in the financial services and as such there are no other reportable segment as defined by Indian Accounting Standard 108 on "Operating Segments" issued by the Institute of Chartered Accountants of India.

Outlook and Indian Economic Review

Indias economy in 2026 demonstrates strong macro resilience with a projected real GDP growth of 6.7% to 7.4% for F.Y. 2026-2027, supported by robust public/private capital expenditure and rising consumption. However, the sharemarket faces a tug-of-war between strong domestic retail inflows and intermittent foreign portfolio investor (FPI) volatility tied to shifting global trade policies and geopolitical tensions

Indian Economic Review (2026)

• GDP & Growth Momentum: Real GDP growth remains anchored around 6.7%- 7.4%, maintaining Indias status as the fastest-growing major global economy.

• Inflation & Pricing: Retail and food inflation have generally moderated compared to previous cycles, giving the Reserve Bank of India room to maneuver monetary policy.

• Consumption & Wages: Salaried and rural consumption are recovering due to improved corporate wage growth, stabilizing agricultural output, and government infrastructure investments.

• External Sector: Forex reserves stand robust (surpassing $700 billion), providing a comfortable cushion against currency fluctuations and external shocks.

Sharemarket Outlook (2026)

• Valuation & Earnings: After a mixed earnings phase in 2025, markets are closely watching quarterly corporate earnings trajectories to justify elevated index multiples.

• Sector Preferences: Cyclical recovery plays, manufacturing, infrastructure proxies (like capital goods), and select consumption baskets are favored by institutional brokerages.

• Key Risks: Geopolitical flare-ups (such as Middle East tensions impacting energy costs) and volatile FPI flows present near-term headwinds.

• Regulatory/Structural Support: Continuous local retail participation via SIPs and dynamic primary markets (IPOs) continue to provide strong structural floor support to domestic equities.

Company Outlook

Having regard to the above industry and economic backdrop, the Companys near-term focus will be on stabilising its core brokerage income, maintaining the cost discipline reflected in the reduction in operating expenses during the year under review, and exploring measured diversification into other permitted financial services so as to reduce its dependence on nonrecurring investment gains for profitability. The Company will also continue to prioritise compliance with the capital adequacy, cyber-security and risk-management requirements prescribed by SEBI and the stock exchanges of which it is a member.

Internal Control System

We have an adequate system of internal controls in place. We have documented policies and procedures covering all financial and operating functions. These controls have been designed to provide a reasonable assurance regarding maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations, and protecting assets from unauthorized use or losses, compliances with regulations. We have continued our efforts to align all our processes and controls with global best practices. Some significant features of the internal control of systems are: The Audit Committee of the Board of Directors, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with accounting standards as well as reasons for changes in accounting policies and practices.

In addition, being a stock-exchange trading member, the Company maintains risk-management and trade-monitoring controls appropriate to that status, including margin and exposure monitoring and safeguards around segregation of client funds and securities, where applicable.

The Board takes responsibility for the overall process of risk management throughout the organization. Through an Enterprise Risk Management program, our business units and corporate functions address risks through an institutionalized approach aligned to our objectives. This is facilitated by internal audit. The Business risk is managed through cross functional involvement and communication across businesses. The results of the risk assessment are presented to the senior management. During the year, we assessed the effectiveness of the Internal Control over Financial Reporting and has determined that our Internal Control over Financial Reporting as at March 31, 2026, is effective.

Financial Performance w.r.t Operational Performance

During the year, the Company has earned Total Income of Rs. 27,872.51 hundreds in comparison to Rs. 96,456.41 hundreds during the previous financial year. On the other hand, the Total Expenses were Rs. 24,594.50 hundreds as compared to Rs. 81,518.58 hundreds during the previous year. The Company has earned Net Profit of Rs. 2,337.34 hundreds during the year as compared to the Net Profit of Rs. 11,805.07 hundreds incurred during the previous year.

The Company is trying hard to grab the market opportunities and make it into a profit-making Company.

Safety, Health and Environment

Your Company as a matter of policy gives greater importance to safety, health and environment and also ensures compliance with applicable legislative requirements.

Human Resources

Our people are our best assets. Their caliber and commitment are our inherent strength. With the singular objective of always being the employer of choice in the Indian industry, we are encouraging our employees to discover and realize their true potential. Acquiring diverse experiences, accomplishing challenging tasks and continually learning and upskilling is enabling them to deliver their best.

By identifying, developing and nurturing quality talent at every stage of the employee lifecycle, we are empowering them to become future ready and build rewarding careers. Keeping employee well-being foremost, we have embraced the post-pandemic way of life and work. By institutionalizing hybrid mode of working, digitizing processes, refreshing our culture, we are collectively fostering new ways of working. Future ready trails of agility, digital mindset and customer centricity are being consciously imbibed, both in thought and action, at every level across the organization. Richer collaborations and stronger teamwork have accelerated our pursuit of excellence.

Key Financial Ratios:

In accordance with the SEBI (Listing Obligations and disclosures Requirements) Regulations 2018 (Amendment) Regulations, 2018, the Company is required to give details of significant changes in Key sector-specific financial ratios.

*The current ratio has increased due to a decrease in current liabilities.

2 The net profit margin has declined as a result of decrease in operating income.

3 Return on net worth (%) declined due to a decrease in the companys operating income.

Cautionary Statement

Statements in the Report describing our objective, projections, estimates and expectations 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 our operations include, among others, economic conditions affecting demand/ supply and price conditions in the domestic and overseas markets, in which we operate, in addition to changes in government regulations, tax laws and other statutes and incidental factors.