Easun Capital Markets Ltd Management Discussions

OVERVIEW

As per RBI’s ‘Scale Based Regulations’ (SBR) as a NBFC Base Layer, as the Company has no public deposits and no customer interface it is classified as a Non-Systematically Important Non-Deposit Accepting NBFC. The Company is listed with the Bombay Stock Exchange and the Calcutta Stock Exchange. The Company is principally an investment company and does not have any other operations of its own. The Company invests in mutual funds, perpetual bonds, NCD’s, equity shares of quoted and unquoted companies & fixed deposits and providing of loan and advance to SME. The management has well-perceived and deliberated on various factors within the limits set by the Company’s competitive position as discussed in this report.

INDUSTRY STRUCTURE AND DEVELOPMENTS

India entered FY 2023 amidst uncertain macroeconomic environment. Global growth slowed in 2022 to 3.2% more than 1 percentage point weaker than expected, mainly weighed down by Russia’s war of aggression in Ukraine. Global growth has stabilized towards the end of the year but the improvement is fragile. Despite continuing the global uncertainties Indian economy has fared better than previous years. The Indian economy expanded 4.4% year on year in the three months to December of 2022.

The Economic Outlook projects steady global GDP growth of 3.1% in 2024, the same as the 3.1% in 2023, followed by a slight pick-up to 3.2% in 2025.

The International Monetary Fund (IMF) revised Indias growth forecast for FY2024 to 5.9% from its previous estimate of 6.1%, citing a slowdown in domestic consumption and challenging external conditions. Additionally, the IMF reduced Indias growth forecast for FY2025 by 50 basis points to 6.3%. Despite these downward revisions, India have potential to maintain its position as one of the fastest-growing major global economy. The Indian economy has demonstrated remarkable resilience in the face of the deteriorating global situation due to strong macroeconomic fundamentals. Steps to promote ease of doing business, skilled manpower, and presence of natural resources, liberal FDI policies, huge domestic market and prospects of healthy GDP growth have made India an attractive destination for foreign investors. Thus, going forward, India is expected to see relatively stronger growth.

INDIAN ECONOMIC SCENARIO

In India, retail inflation, as indicated by the Consumer Price Index, attained an eight-year peak in April 2022 and consistently exceeded the upper tolerance threshold of 6.0% set by the Reserve Bank of India (RBI) for a significant portion of the year. Retail inflation subsided to a 15-month low of 5.66% in March 2023. In April 2023, the MPC maintained the repo rate at 6.5% while affirming its commitment to a gradual withdrawal of accommodative measures. Indian economy exhibited robust growth in 2023-24, underpinned by strong investment activity, amidst subdued external demand. Manufacturing and services sectors were the key drivers on the supply side while agricultural activity slowed down due to uneven and deficient monsoon rainfall. The growth outlook remains buoyant, given the governments sustained focus on capital expenditure while maintaining fiscal consolidation.

The economic landscape of India is poised for unprecedented growth with GDP expanding at twice the global economic growth rate. The rural and semi-urban regions, accounting for 70% of the population yet receiving only 21% of financial credit, are crucial for steering the nation towards a sustainable growth path.

Against the backdrop of subdued global economic activity and multiple headwinds, the Indian economy expanded at a robust pace in 2023-24, with real GDP growth accelerating to 7.6 per cent from 7.0 per cent in the previous year the third successive year of 7 per cent or above growth. With gross fixed capital formation (GFCF) accelerating to 10.2 per cent in 2023-24 from 6.6 per cent in 2022-23, investment was the major driver of domestic demand, buoyed by government spending on infrastructure. Growth in private consumption demand, on the other hand, stood at 3.0 per cent as against 6.8 per cent a year ago. The services sector, with a share of over 63 per cent in GVA (Gross Value Added), remained the mainstay of aggregate supply, with growth of 7.9 per cent in 2023-24. Construction activity accelerated to register double digit growth, benefitting from rising demand in the housing sector and the government’s thrust on infrastructure.

Indian economy boasted an impressive growth rate of 7.8% in the 2023-24 fiscal year (FY) and exceeded the average G20 rate of 3.4%.

The Indian governments high capital spending has brought the fiscal deficit to 5.8% in FY 2023-24 and the combined debt-GDP to above pre-pandemic levels. The RBI paid a higher than expected dividend payout of Rs 2.1 trillion to the government, vs the expected Rs 0.9 trillion. This is likely to lead to lower market borrowings in the second half of the year and consequently lower bond yields.

The outlook for the Indian economy remains bright, underpinned by strengthening macroeconomic fundamentals, robust financial and corporate sectors, and a resilient external sector.

The government’s continued thrust on capex and fiscal consolidation, along with consumer and business optimism, bode well for investment and consumption demand.

The prospects for agriculture and rural activity appear favorable, with the expected above-normal southwest monsoon and government initiatives to support the agriculture sector. Emerging sectors like renewable energy and semi-conductors are expected to advance rapidly, supported by government initiatives and budget allocations.

A refined corporate governance framework forms the foundation for consistent business performance. By nurturing transparency, accountability, and ethical practices, such governance structures instill confidence helping attract affordable capital. This influx of capital fuels growth, enabling the organization to invest in innovation and expansion thereby enhancing its competitiveness in the market. As a result, a robust ecosystem emerges characterised by the symbiotic relationship between the organisation and its stakeholders. Thus, better governance not only drives consistent performance but cultivates growth and prosperity over the long term.

Non-Banking Finance Companies (NBFCs) are an integral part of the country’s financial system, catering to a large market of niche customers, and have emerged as one of the major purveyors of retail and SME credit in India. It is a heterogeneous group of institutions (other than commercial and co-operative banks) performing financial intermediation in a variety of ways, such as accepting deposits, making loans and advances, providing leasing/hire purchase services, among others. NBFCs serve an important role in developing countries, such as India, where access to bank finance continues to be a challenge for a large chunk of the population and businesses. Nonbanking financial institutions, including NBFCs in India, serve market segments to which commercial banks do not offer services because of higher risk and lower returns. Because of their inherent characteristics, nonbanking financial institutions are an indispensable part of an economy’s financial sector.

Your company’s position

The Company is mainly into investing in and acquiring and holding shares, stocks, debentures, bonds, mutual funds and/or other securities issued or guaranteed by any company constituted or carrying on business in India and/or by any Government, state, public body or authority. A trusted and customer-centric, one-stop financial services provider, the Company caters to the diverse needs of corporate customers, across various areas of business. Our Company is focused only on its main line of business of investment and financing.

OPPORTUNITIES AND THREATS

Opportunities

Positive long-term economic outlook will lead to opportunity for financial services Growing Financial Services industrys share of wallet for disposable income Regulatory reforms would aid greater participation by all class of investors Leveraging technology to enable best practices and processes

Corporates looking at consolidation / acquisitions / restructuring opens out opportunities for the corporate advisory business

Threats

Execution risk

Short term economic slowdown impacting investor sentiments and business activities Slowdown in global liquidity flows Increased intensity of competition from local and global players Market trends making other assets relatively attractive as investment avenues

Strengths

Strong Client Base

The Company enjoys a very strong and loyal customer base which has shown un-wavering loyalty time and again. The company has been able to leverage its base to grow its businesses, build relationships and attract and retain talented individuals.

Experienced top management

The promoters, are professionally qualified persons with gamut of experience each in the financial services industry. The top management team comprises qualified and experienced professionals, with a successful track record. The company believes that its managements entrepreneurial spirit, strong technical expertise, leadership skills, insight into the market and customer needs provide it with a competitive strength, which will help to implement its business strategies.

Strong risk management

Risk exposure is monitored and controlled through a robust financial, credit, operational, compliance and legal reporting systems. Risk management department analyses this data in conjunction with the company’s risk management policies and takes appropriate action where necessary to minimize risk.

Financial prudence

The Company’s operating margins continue to remain stable despite the fluctuations in market volumes and revenues due to our robust business model that can withstand the cyclical fluctuations in business volumes and simultaneously capture the opportunities provided by the structural growth of India.

SEGMENT WISE OR PRODUCT WISE PERFORMANCE

The company is primarily engaged in the single business of Financing and Investment.

RISKS AND CONCERNS

The Company is exposed to market risk and credit risk. The Company’s senior management oversees the management of these risks and is supported by professionals who advises on financial risks and assist in preparing the appropriate financial risk governance framework for the Company. The Board Level Committees viz. Audit Committee and Risk Management Committee oversee risk management policies and procedures. It reviews credit and operational risks and investment strategy and other risks like interest rate risk and liquidity risk. It provides assurance to the Company’s senior management that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. It is the Company’s policy that no trading in derivatives for speculative purposes can be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks which are summarized under Note No. 41(C) of the attached Financial Statements.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Management continuously reviews the Internal Control Systems and procedures for the efficient conduct of the Companys business. The Company adheres to the prescribed guidelines with respect to the transactions, financial reporting and ensures that all its assets are safeguarded and protected against losses. Internal Control System are implemented in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting and the Standards on Auditing issued by ICAI to safeguard the Companys assets from loss or damage, to keep a constant check on the cost structure, to prevent revenue leakages, to provide adequate financial and accounting controls and implement accounting standards.

M/s Chaudhuri, Ray & Associates, Chartered Accountants, have conducted the Internal Audit of the Company. The report thereof is placed before the Audit Committee for evaluation of internal financial controls and risk management systems.

The Compliance Officer of the Company is designated as the Chief Investor Relations Officer (“CIRO”) to ensure that fairness and transparency is maintained while dealing with unpublished price sensitive information. Your Board is of the opinion that the Internal Financial Controls, affecting the Financial Statements of your Company are adequate and are operating effectively.

OUTLOOK OF THE COMPANY

India’s goal of attaining high-income status by 2047 requires inclusive growth that benefits the entire population. Reforms focused on growth need to be accompanied by the creation of quality jobs that keep up with the influx of new entrants into the labour market. Additionally, efforts will be made to address gaps in economic participation, including promoting greater female workforce participation. The NBFC sector will definitely enjoy the percolated effect of the prospect. Your Directors are optimistic that it shall also translate into a better performance vis-a-vis the year gone by for most of the leading financial services institutions including NBFCs.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

Business landscape across the world is marked by fast evolving dynamics. These demand agile responses while keeping the long term focus intact. Your Company is led by highly experienced and successful business leaders with proven track record of delivering sustainable growth in demanding business environment. As of March 31, 2023, your Company has complied with requirement of KMP and Directors during the year and other statutes to the extent applicable with a robust team competing on the strength of our people, all of us are bonded together by core values of Pride, Integrity, Discipline and Ambition. We thrive in this climate of ‘Right People for Right Culture’. Your Company has consciously built an entrepreneurial and empowering culture of ‘Results, Not Reasons’. Our culture emphasises on having a workforce that is diverse, agile, eager to learn and driven to succeed. We have modelled ourselves as a learning organization -by focusing on ‘Stretch - Learn and Grow’ with Theme Respect for all with parameters like Capacity Building performance management.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS AND FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

An analysis of key analytical ratios have been made in Note 43 of the attached Financial Statements including the % of variance of such ratios with respect to ratios of the previous financial year as at March 31, 2024. As outlined, there is no material variance in the Capital to Risk Weighted Assets Ratio (CRAR) and Tier I CRAR. However, there is a significant increase of 41.85% in the Current Tier II CRAR (FY 2023-24) with reference to the previous year Tier II CRAR (FY 2022-23) due to fresh Loans given by the Company. We strive to achieve market leadership in scale and profitability, wherever we compete.

	for and on behalf of the Board of Directors of
	EASUN CAPITAL MARKETS LIMITED
	Sd/-	Sd/-
Date: 06-09-2024	Aditya Sadani	Apurva Salarpuria
Place: Kolkata	Whole-Time Director	Director
	DIN: 09023418	DIN: 00058357