Elcid Investments Ltd Management Discussions

The Company has been in the widespread Investment Business across the country. The Securities market has been a challenge to deal with for the previous year. The Share Market and Money Market have comparatively seen a downtrend over the past few years, and the huge impact was created on the portfolio already invested. The financial landscape over the past year was shaped by a delicate balance between moderating inflation, recovering markets, and ongoing global risks. Investors, businesses, and policymakers alike navigated a dynamic environment where cautious optimism coexisted with persistent uncertainty. The Investments decisions are purely based on the risk factors, inflations and share market performance as described below:

1. Inflation Trends

Inflation, a major concern globally since 2021, showed signs of easing in most economies over the past year. In the United States, inflation cooled significantly from the highs of 2022, with the Consumer Price Index (CPI) hovering around 3% to 3.5%. The Federal Reserve maintained a cautious stance, holding interest rates steady for much of the year while signalling potential cuts if disinflation continued. The core drivers of U.S. inflation included housing costs and wage pressures, though energy and food prices stabilized.

In Europe, inflation also declined but remained somewhat sticky in countries dependent on imported energy. Governments continued to subsidize key sectors to reduce the cost burden on consumers, especially during winter months.

In India, inflation stayed within the Reserve Bank of Indias (RBI) target range of 4-6%, fluctuating between 4.5% and 5.5%. Food inflation remained a concern, especially with irregular monsoon patterns affecting crop output. Global crude oil prices also had a moderate impact, though the government managed to cushion the blow through subsidies and supply management. Overall, RBI maintained a neutral monetary policy stance, aiming to support economic growth without letting inflation overshoot.

2. Performance of the Securities Market

Global share markets performed well, with optimism driven by improved inflation data, strong corporate earnings, and developments in artificial intelligence and clean energy.

In the United States, indices like the S&P 500 and NASDAQ recorded double-digit gains over the year. Much of the rally was led by big tech firms, particularly those involved in AI, cloud computing, and semiconductors. However, market concentration became a concern as a handful of mega-cap stocks disproportionately drove index performance.

In Europe, markets were more mixed, with modest gains in some sectors like luxury goods, pharmaceuticals, and green energy. Economic slowdown concerns and geopolitical instability capped growth in others. Indias share market emerged as one of the strongest performers globally. Benchmark indices Nifty 50 and Sensex touched record highs in early 2025. The rally was broad-based, with strong participation from the banking, infrastructure, IT, and FMCG sectors. Retail investor participation surged, supported by increased financial literacy, digital access to investing, and the popularity of SIPs (Systematic Investment Plans). Indian companies posted strong quarterly results, driven by domestic demand and export growth in sectors like pharma, auto, and specialty chemicals.

Foreign Institutional Investors (FIIs), after a phase of outflows in 2023, returned to the market amid policy stability and Indias growing economic stature.

3. Risk factors in focus

The Investment companies face a broad array of risk factors that can impact their operations, financial performance, and investor trust. One of the most significant risks is market risk, which arises from fluctuations in the value of assets due to changes in equity prices, interest rates, commodity prices, or overall economic conditions. A market downturn can drastically reduce the value of portfolios, leading to lower returns and potential investor withdrawals, which in turn decrease the companys assets under management and revenue.

Another major concern is liquidity risk, particularly for firms that invest in illiquid assets such as private equity, real estate, or venture capital. These firms may face difficulties in selling assets quickly without incurring substantial losses, which becomes especially problematic when investors seek redemptions during volatile periods. Credit risk also poses a threat, especially to firms engaged in fixed-income or lending strategies. This refers to the potential that counterparties may default on their obligations, resulting in financial losses and damage to the firms reputation.

Operational risk stems from failures in internal processes, human error, system breakdowns, or even fraudulent activities. These issues can disrupt business continuity, lead to regulatory fines, and erode investor confidence. Closely related is regulatory and legal risk, which involves the possibility of changing laws or non-compliance with existing regulations. Regulatory bodies around the world often impose strict oversight on investment firms, and failure to comply can result in legal actions, financial penalties, or even revocation of licenses.

In todays environment, reputational risk is also critical. Negative publicity from poor performance, scandals, or unethical behaviour can severely damage a firms ability to attract and retain investors. Additionally, interest rate risk is particularly relevant to firms with significant exposure to bonds or those using leverage. Fluctuations in interest rates can affect both the value of existing investments and the cost of borrowing capital.

Investment companies may also face concentration risk if they have excessive exposure to a particular asset class, sector, or geographic region. A downturn in one concentrated area can have a disproportionate impact on the firms overall performance. For firms with global investments or international clients, currency risk is a key factor, as changes in exchange rates can affect returns once foreign investments are converted back into the base currency.

Strategic risk arises when firms make poor business decisions or fail to adapt to evolving market trends and technologies, potentially leading to a loss of competitive advantage. Lastly, with increasing reliance on technology and data, cybersecurity risk has become a pressing concern. Cyberattacks or data breaches can compromise sensitive client information, disrupt operations, and result in significant reputational and legal consequences.

In sum, investment-based companies operate in a complex and dynamic environment where multiple interconnected risks must be actively managed to ensure long-term sustainability and client trust. From Mid-2024 to Mid-2025, the global economic scenario improved steadily, with inflation easing and stock markets rebounding strongly. India stood out as a high-performing economy, with stable inflation, strong equity gains, and policy continuity. However, global risks related to geopolitics, interest rates, and capital flows remained active. Investors continued to seek a balance between growth opportunities and risk management in a world still adjusting to post-pandemic economic realities.

During the reporting period, the company witnessed key developments in human resources and industrial relations. Focused efforts were made to enhance employee engagement through upskilling programs, leadership development, and wellness initiatives. The company continued to emphasize a culture of inclusion and performance, with improvements in recruitment, retention, and diversity. Industrial relations remained stable, with no significant disruptions or disputes. Constructive engagement with employee unions and representatives ensured smooth negotiation processes and compliance with labor laws. Regular communication and collaboration helped maintain a positive work environment. Initiatives such as flexible work policies, mental health support, and digitization of HR processes contributed to improved workforce satisfaction and productivity. Overall, the company remains committed to building a resilient, future-ready workforce aligned with long-term business goals and evolving industry standards.

The Company is primarily an investment Company, and its business income is the income arriving out of investments held by the Company. The company is functioning under a single segment of investment activities. The growing trend in the Indias economy is a motivating factor for the Company to look forward to increasing the profitability. The predominant risk pertains to investments including volatile capital market risks such as stock market crashes, economic downturn, interest rate changes etc. Inflation is another factor for the managing the risks because Inflation erodes the real value of investment returns, reducing purchasing power and potentially diminishing the overall performance of market-based assets, especially fixed-income investments.

The company regularly appoints and seeks advice from reputed portfolio managers to mitigate the risks and accordingly carry out its investments within the risk management framework.

The Company continues to be debt free and maintains sufficient cash to meet its strategic and operational requirements. The companys working capital management is robust and involves a well-organized process which facilitates continuous monitoring and control over all the financial parameters. The internal control system is commensurate with the size of the Company.

Ratios for the year 2024-25 are as follows:

Ratios	Standalone	Consolidated
Debtors Turnover Ratio	NA	NA
Inventory Turnover Ratio*	NA	NA
Interest Coverage Ratio*	0	0
Current Ratio	1.93	4.13
Debt Equity Ratio**	NA	NA
Operating Margin Ratio	72.94%	72.46%
Net Profit Margin	71.80%	71.71%
# Return on Net Worth (RONW)	1.59%	1.67%

*The company is an investment company, hence, the ratios relating to sales and inventory are not applicable to the company.

** The company does not have any debt, therefore the ratio relating to debt and interest comes to 0.

#The Improvement on Return on Net Worth is on account of significant fair value changes of Equity Instruments through FVTPL.