Emkay Global Financial Services Ltd Management Discussions

GLOBAL ECONOMY

The global economy exhibited remarkable resilience in 2023, bouncing back from the challenges posed by the Covid-19 pandemic, geopolitical tensions, and rising cost of living. Notwithstanding the headwinds, including supply chain disruptions, energy and food crises, and soaring inflation, major economies successfully averted recession, while banking systems maintained their robustness. Global GDP growth for 2023 is estimated at 3.2%, with expectations of maintaining this momentum into 2024 and 2025. This optimistic outlook is supported by stronger-than- expected performances in the US and key emerging market economies, along with continued fiscal stimulus in China and pent-up consumer demand.

Throughout 2023, global equity markets experienced a significant upswing, characterised by double-digit returns posted by major benchmarks. This surge was propelled by several factors, including cooling inflation, lower oil prices, and expectations of rate cuts. Inflation, which peaked in 2022, outpaced expectations in terms of its deceleration, resulting in a less pronounced impact on employment and economic activity than initially forecasted.

On the other hand, global headline inflation landscape showed signs of improvement, with expectations for a decline from 6.8% in 2023 to 5.8% in 2024, followed by a further drop to 4.4% in 2025. Despite the easing of headline figures towards the end of 2023, they remained above central bank targets in most countries. As a result, major central banks opted to maintain a hawkish stance.

In terms of GDP growth performance, advanced economies like the US witnessed a modest uptick at 2.5%, propelled by robust consumer spending and a strong job market. Conversely, the Eurozone encountered a more challenging path with a growth rate of 0.4%, attributed to high energy prices and a less confident consumer base. On the contrary, the emerging and developing economies fared better, collectively growing at a faster clip of 4.3%, driven by Chinas reopening and Indias strong domestic demand.

Moving forward, the global economy is confronted with the challenge of striking a delicate balance between sustaining growth and managing inflation. Therefore, the emphasis remains on vigilant and adaptive policy manoeuvres to ensure long-term stability and prosperity.

Source: [https://www.businesstoday.in/markets/story/globalmarket- performance-heres-how-global-equity-markets-major-currencies- performed-in-2023-411391-2023-12-31]

INDIAN ECONOMY

Indias Economic Growth Momentum: A Shining Star on the Global Stage

India shines bright on the global economic stage, surpassing major economies in terms of performance, while showcasing a robust growth trajectory. With an estimated GDP growth of 7.6% in 2023-24, India continues its forward march, fuelled by strategic national initiatives and resilient domestic demand. This formidable momentum garners recognition from the International Monetary Fund (IMF), which anticipates India to maintain its position as the fastest- growing major economy, with an expected real growth rate of 6.8% for 2024-25.

Favourable Economic Indicators

The Indian economy flourishes amid a plethora of encouraging indicators, including stable macroeconomic conditions, soaring optimism, and burgeoning domestic demand. Strong balance sheets of banks and corporates, along with normalised supply chains and heightened business confidence, paint a promising picture of Indias economic landscape. In the 2024-25 Interim Union Budget, the Government set an ambitious target of Rs. 11.11 lakh crore, equivalent to 3.4% of GDP, for capital expenditure. This represents a significant surge of 11.11% over the previous years allocation, thereby indicating a revival of the capital expenditure cycle. Moreover, these robust fundamentals have instilled optimism in the Indian economy, positioning the nation to achieve significant milestones in the years ahead. Despite the Reserve Bank of Indias (RBI) projections of 5.6% inflation for Q3 and 5.2% for Q4 of 2023-24, actual inflation figures stood at 5.4% and 5.1% respectively, undershooting projections by 20 bps and 10 bps respectively. This outcome is attributed to subdued food and core price increases, aided by proactive Government interventions in the supply chain, effectively mitigating inflationary pressures.

Source: [Monetary Policy Report April 2024 Reserve Bank of India]

Indias Solid Foreign Exchange Reserves

Indias economic resilience is highlighted by its soaring foreign exchange reserves, which hit a record high of USD 645.6 billion as of 29th March, 2024. The substantial forex reserves - indicative of the countrys economic strength, comprising assets like cash and gold held by the central bank - provide a buffer against external shocks and facilitate international trade. Indias robust forex position enhances its creditworthiness globally and fortifies its status as an emerging economic powerhouse, adept at navigating the ever-evolving landscape of global economic dynamics. Source: [https://www.cnbctv18.com/market/currency/rbi-monetary- policy-2024-india-forex-reserves-record-high-rupee-us-dollar- external-debt-shaktikanta-das-19392593.htm]

Robust Job Market

Indias job market witnessed a major surge, as indicated by a staggering 214% increase in listed vacancies on the National Career Service portal, with openings reaching 1.09 crore in 2023-24, compared to 34.81 lakhs in 202223. This unprecedented demand for talent outpaced the 53% growth in registered job seekers, pointing towards a potential skills gap or evolving job preferences. Key sectors driving this uptick in employment included finance and insurance, operations, and support, civil and construction, and manufacturing.

Source:[https://www.businesstoday.in/india/story/more-jobs-less-takers-only-87-lakh-applied-against-109-crore-openings-in-fy24-427220-2024-04-27]

Nurturing Manufacturing Prowess

Another pivotal contributor to Indias economic growth is the concerted effort to nurture niche and complex manufacturing sectors, while simultaneously enhancing the supporting physical infrastructure, as the manufacturing sector currently accounts for only a modest 17% of GDP in 202324, indicating room for further growth and development in this area. The Government has identified sectors with the potential to leverage Indias competitive advantages in resources and skills. Introductions of initiatives such as Production Linked Incentive (PLI) schemes, tax incentives, ease of business reforms, national infrastructure projects, and the national logistics plan are aimed at revitalising manufacturing, streamlining logistics, and capitalising on positive externalities.

Source:[https://economictimes.indiatimes.com/news/economy/policy/indias-experience-in-terms-of-manufacturing-gdp-growth-different-from-rest-of-world-niti-aayog-member-arvind-virmani/ articleshow/104166950.cms]

Robust Financial Sector and Regulatory Oversight

A robust financial sector is imperative for achieving ambitious national goals. The RBI maintained a vigilant stance on inflation, leading to credit growth outpacing deposit growth. Encouragingly, there are positive indications in asset quality, with the gross NPA ratio declining to 3.0% in December 2023 from 4.5% a year ago. Retail credit, especially personal loans, recorded a significant uptick, presently comprising one-third of all loans, up from less than one-fifth a decade ago. However, in a bid to maintain stability, the RBI implemented stricter regulations for consumer lending. Source: [Monetary Policy Report April 2024 Reserve Bank of India] Indian Equity Market Outperforming Global Counterparts Indias equity market consistently outshone other major global equity markets across all investment horizons, firmly establishing India as a standout performer in the global equity landscape. Since the year 2000, Indian equities continued to deliver stellar performance and offered the highest dollar returns for nearly all investment periods among emerging markets, rivalling even those from more advanced economies.

Source:[https://economictimes.indiatimes.com/markets/stocks/news/indias-best-equity-story-on-a-10-year-view-chris-wood/ articleshow/107956272.cms]

Catalysing the Digital Transformation

The digital revolution in India gained significant momentum, catalysing transformation across various sectors and driving innovation. Government initiatives and policies continued to play a crucial role in accelerating this digital shift. A notable aspect of these revolutionary changes is the exponential growth of digital transactions in India, which reached an astounding level. The total volume of UPI transactions surged to a record Rs. 131 billion in 202324, marking a remarkable 57% increase over the previous year. Additionally, the Indian capital market also witnessed a surge in participation, with over 3.70 crore new demat accounts opened in 2023-24 alone. On the whole, the total number of demat accounts is estimated to reach a record high of 15 crore by March 2024, reflecting the growing interest of investors in the stock market. Source:[https://www.businesstoday.in/latest/economy/story/upi- transactions-dip-marginally-to-rs-1964-lakh-cr-inapril-from-rs 1978-lakh-cr-in-march-427817-2024-05-01 https://www.zeebiz. com/market-news/news-demat-account-in-fy24-rose-nearly-370- crore-recording-new-high-283058]

Addressing Growth Challenges

Despite the remarkable resilience displayed by the Indian economy, challenges persist on multiple fronts. Private consumption growth remains subdued, having increased by only 3.5% in Q3 of 2023-24. Additionally, the moderation observed in core GDP growth and Gross Value Added (GVA) growth suggests an uneven growth spurt across sectors. Moreover, the escalation of global geopolitical tensions and slowing down of external demand have the potential to hamper the prospects of the external sector. The ongoing general election process in April-June 2024 further contributes to volatility, with concerns regarding policy direction and market sentiments. However, with policy continuity, a sustained focus on infrastructure development, and ongoing benefits from supply chain diversification, India is well-equipped to address these hurdles and maintain its robust economic performance.

INDIAN EQUITY MARKET OVERVIEW

The Indian equity market witnessed a remarkable surge in 2023-24, further cementing Indias position as one of the worlds leading investment destinations. The total market capitalisation soared past the historic USD 4 trillion mark, positioning India as the fifth-largest market worldwide. Symbolising the impressive run of Indian equity market, the benchmark indices, Sensex and Nifty50, concluded the fiscal year with gains of 24.85% and 28.61%, respectively. Noteworthy is the standout performance of the realty sector, boasting a staggering 135% gain, trailed closely by state-owned banks at 120%, the auto sector at 90%, and the energy sector at 70%. This broad-based rally across sectors showcased the strength and resilience of the Indian equity market. Moreover, the small-cap and mid-cap segments also outperformed the benchmarks, with small-cap stocks surging by 70% and mid-cap stocks experiencing a 60% increase, demonstrating their growth potential and investor appeal, despite valuation concerns observed in March.

Foreign Portfolio Investors (FPIs) emerged as pivotal players, transitioning into net buyers of Indian equities with substantial investments amounting to Rs. 2.04 trillion (USD 24.46 billion) from 1st April, 2023 until 27th March, 2024. This marks the second largest FPI investment since the post-Covid-19 market recovery in 2020-21. Concurrently, domestic mutual fund investors maintained their confidence in equity-oriented schemes, with assets under management (AUM) surging past the Rs. 40 trillion mark for the first time in March 2024, indicative of the burgeoning retail participation in the market.

India emerged as the worlds second most active space for equity capital market (ECM) transactions, second only to the US. With 75 new issues, the market saw a convergence of eager investors and ambitious companies, setting a new benchmark for the primary market. Standout IPOs this year often exceeded expectations, drawing in substantial subscriptions and achieving notable success on their listing days. This upswing in IPO engagement facilitated a significant 20% increase in equity fundraising, with companies raising Rs. 61,915 crore. This represents a considerable leap from the Rs. 52,116 crore amassed by 37 IPOs in 2022-23, signifying the burgeoning confidence in Indias equity markets. Moreover, prominent global investors like Blackstone Inc., Blackrock Inc., The Carlyle Group, KKR & Co., and The Brookfield Asset Management are aggressively expanding their private equity holdings and investments in India across sectors. These encompass investments in technology, real estate, infrastructure, healthcare, and financial services. This trend underlines Indias growing appeal as an attractive investment destination for international investors.

The strong performance of the Indian equity market is attributed to robust domestic demand, favourable economic conditions, a stable regulatory environment, and increased global investor interest. The Governments persistent emphasis on reforms and infrastructure development, combined with the countrys resilient economic growth, sets the stage for further growth and attractiveness of the Indian equity market in the coming years.

Global Equity Market Performance

Index	% Change
Nikkei	45.97
Nasdaq Composite	39.97
S&P500	32.16
Nifty 50	31.00
Ibovespa	26.00
Dow Jones	22.74
DAX	22.03
Euro Stoxx 50	21.92
CAC 40	15.75
KOSPI	12.77
FTSE 100	5.98
CSI 300	[11.97]
Hang Seng	[16.37]

Source: [https://www.wrightresearch.in/blog/fy24-stock-market-recap-and-outlook-for-india-in-fy25/]

The Nifty 50s remarkable 31% gain reflects the inherent strength and robust growth prospects of the Indian equity market, supported by solid economic fundamentals and persistent investor confidence. While Japans Nikkei and US indices like Nasdaq and S&P 500 outperformed with even higher gains, this trend reflects the broad-based rally witnessed in the global equity market.

Source:[https://timesofindia.indiatimes.com/business/lndia-business/lndia-coming-of-age-sensex-nifty-soar-to-record-highs-in-fy23-24-whats-next/ articleshow/108854885.cms]

The Sensex surged to record highs during 2023-24, with significant upward movements and volatility. It started around 62,000 levels in April 2023 and surged to nearly 74,000 by the end of the fiscal year, reflecting a gain of around 12,000 points or nearly 20%.

Net Investment in Indian Equities by Institutional Investors

For the 2023-24 period, Foreign Institutional Investors (FIIs) were net sellers in the Indian equity market, resulting in a total net outflow of Rs. 4,890.33 crore. In contrast, Domestic Institutional Investors (DIIs) emerged as net buyers with a total net inflow of Rs. 10,741.48 crore. These divergent investment patterns between the two investor groups highlight distinct approaches and sentiments in the market.

Outlook

As India transitions into the financial year 2024-25, the domestic equity markets are poised for a bullish run, fuelled by a confluence of positive factors. Historically, Indian stock markets demonstrated resilience leading up to general elections, and this time was no exception. The significant net buying by Foreign Institutional Investors (FIIs) in March 2024, amounting to Rs. 24,000 crore, coupled with significant positions carried into April 2024, reflect this empirical trend, with overseas investors harbouring positive sentiment. Notably, the surge of Rs. 38,098 crore in FPI inflows into Indian equities in March 2024 reverses earlier selling trends and underscores a renewed appetite for Indian assets among foreign investors, aligning with historical patterns of FPI behaviour around general elections. Moreover, indications from the United States Federal Reserve regarding potential rate cuts may prompt the RBI to follow suit, thereby increasing liquidity in the stock markets and creating a more conducive environment for equity investments.

The finance ministrys optimistic perspective on inflation, coupled with the downward trend in core inflation, indicates a broad-based moderation in price pressures. This is in sync with initiatives aimed at stabilising inflation levels, such as promoting summer sowing to reduce food prices. Such measures bode well for corporate profitability and consumer confidence. Additionally, the anticipated inclusion of Indian bonds in Bloombergs emerging market index holds the potential to attract additional foreign investment, estimated between USD 3-4 billion in 2024-25. This move is anticipated to deepen the Indian bond market and indirectly bolster equities through improved overall market sentiment. The upward revisions in Indias GDP growth projections for 2024-25 signal a promising trajectory. With Morgan Stanley now estimating a growth of 6.8% up from 6.5% and the National Statistical Office forecasting a strong surge of 7.6% up from 7.3%, the focus is on the countrys robust economic prospect. These revisions reinforce Indias position as a standout performer on the global stage. Fuelled by a vibrant industrial sector and amplified capital expenditure, Indias growth momentum gains strength, driving the nations economic engine forward.

Source: [https://www.wrightresearch.in/blog/fy24-stock-market-recap- and-out!ook-for-india-in-fy25/]

BUSINESS OVERVIEW

We, at Emkay Global Financial Services Limited (Emkay or EGFSL or Our Company), are a renowned diversified financial services institution with a rich history spanning almost three decades. From our modest origins as Emkay Share and Stockbrokers Private Limited in 1995, our Company embarked on a transformative journey that led to our listing on the Indian stock exchanges in 2006. This pivotal milestone paved the way for our Companys rebranding to the current identity, Emkay Global Financial Services Limited, in 2008.

We cater to a diverse clientele, spanning foreign institutional investors, domestic mutual funds, banks, insurance companies, private equity firms, corporate entities, small and medium-sized enterprises, as well as high-net-worth individuals. Our commitment to excellence shines through our comprehensive suite of transactional and advisory services, meticulously crafted to address the unique requirements of each client segment across equity, debt, currency, and commodities markets. A team of experienced research professionals, drives our success, supported by robust infrastructure and well-defined processes. With a strong legacy of 29 years, we stand as industry leaders, rooted in traditional values, such as integrity, while seamlessly blending them with cutting-edge technology and innovation. We stay committed to empowering our clients with customised financial solutions.

BUSINESS SEGMENTS

1. Equity

We prioritise the uncovering of long-term value and viable investment opportunities, leveraging the sound expertise of our research team. Deploying a rigorous blend of qualitative and quantitative analysis, we identify undervalued stocks with a primary focus on preserving capital. Through our unique offerings, we serve both institutional and non-institutional clients, delivering meticulously crafted, dependable portfolio constructions with significant growth potential.

During 2023-24, the institutional equities segment contributed 53% of the total equity broking business, while the non-institutional segment accounted for the remaining.

Institutional Equities

Emkay Globals Institutional Equities (IE) offerings are renowned for their expansive presence in global markets, covering Europe, Hong Kong, India, Singapore, Taiwan, the UK, the US, and other key regions. Our distinguished clientele in this domain primarily comprises Mutual Funds, Insurance Companies, Banks, Foreign Portfolio Investors (FPI), Family Offices, Global Hedge Funds, and Alternative Investment Funds (AIF).

Our competent IE team had a dynamic year in the last fiscal. In June 2023, the team orchestrated the Commercial Vehicle Conference 2.0, bringing together key stakeholders for insightful discussions and productive meetings. August 2023 saw the team hosting our flagship event, the Emkay Confluence 2023, serving as a premier platform for industry leaders, companies, and funds to converge, resulting in extensive engagement and networking opportunities. Additionally, the Emkay Digi Banking Conference, held on 29th and 30th November, 2023, provided a forum for meaningful exchanges and exploration of digital banking trends. Moreover, complementing these major events, our team organised 43 roadshows, 186 expert/client calls, and 68 group calls/events/ conferences during the year. These endeavours reflect our dedication to facilitate meaningful connections and knowledge sharing within the industry.

Non-lnstitutional Equities

The Non-Institutional Equities division caters to a diverse clientele across India and among Non-Resident Indians worldwide. Our clients include corporates, high- net-worth individuals, family offices, trusts, and private equity firms. We prioritise personalised and effective service delivery, leveraging our widespread network of offices across the country, thereby successfully meeting the specific needs of each client within this segment. As of 31st March, 2024, the number of institutional and active non-institutional clients stood at 328 and 43,200, respectively.

Research

We, at Emkay, are known for delivering unparalleled, distinctive, and comprehensive real-time insights through our research capabilities. Our exceptional research quality makes us stand out in the financial industry, as we harness our proprietary research methodology to conduct thorough due diligence with institutional-grade analytics. This allows us to delve into macro and micro-economic trends, offering insights into the capital market outlook. This enables us to craft tailored capital allocation strategies, empowering our clients with informed decision-making.

Our team of analysts and research associates possess extensive experience and sound domain knowledge in their respective industries. We covered 190 stocks as of 31st March, 2024, including 29 of the Nifty 50 and 24 of the BSE Sensex companies.

2. Asset Management

Emkay Investment Managers Limited (EIML), the Asset Management arm of Emkay Global, serves a diverse clientele, including family offices, high-net-worth individuals (HNIs), corporations, Non-Resident Indians (NRIs), and trusts. We offer Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs) tailored to meet the specific needs of each client. Our investment strategies are rooted in indepth research, focussing on sectors and companies with promising growth prospects. With assets under management exceeding Rs. 900 crore, we are committed to delivering customised wealth management and investment solutions to our esteemed clients.

At EIML, we prioritise capital preservation and client comfort in our asset management approach. Transparency is paramount to us, and we ensure that the investors have full visibility into their investments. Our greatest achievement lies in crafting a clear narrative that illustrates why our stock selection and governance model E-QUAL consistently helps us achieve zero blowouts in our portfolios.

• E-QUAL

EIMLs patented governance system - E-QUAL - evaluates managements based on criteria such as management capability, management integrity, and wealth distribution ability, among others. E-Qual is a first-of-its-kind evaluation framework in the country for quantifying and thereby objectively evaluating the governance aspect of management quality.

Our Strategies: PMS & AIFs

Emkay Emerging Stars Fund

Emkay Emerging Stars Fund intends to produce capital appreciation over the long term for investors from a collection of equity and equity-related securities.

• Received award from PMS - AIF World for robust performance

• Completed the early distribution of proceeds from the Emkay Emerging Stars Fund - AIF Series IV to our unit holders during the year

• Achieved an impressive 20% to 25% XIRR (depending on the class of shares) for our investors, following deductions for all fees and expenses

• Launched Emkay Emerging Stars Fund - Series VI (AIF Category III), a thematic-focussed multicap fund during the year under review

• Unveiled Emkay Indias Golden Decade of Growth, a PMS strategy on the same lines

Emkay Capital Builder

• This multi-cap portfolio uncovers companies with the potential for long-term wealth creation over a horizon of over 3-5 years

• Evaluates the top 600 companies by market capitalisation, carefully adhering to a well-defined portfolio construction discipline

• Applies strict limits to filter stocks through a rigorous three-pronged investment process, thereby ensuring that only the most promising opportunities are selected to maximise returns for our clients

Emkay GEMS

• Employs an equal-weighted twenty-stock midcap-oriented strategy

• Focusses on risk-adjusted returns without wide diversification

• Results in lower portfolio volatility and high liquidity

• It is characterised by low portfolio turnover

Emkay New Vitalised India Strategy

• A multi-cap portfolio aimed at achieving long-term capital appreciation

• Targeted investments in companies poised to benefit from trends like private and public capex, greater indigenisation to reduce dependence on imports, robust export growth, a strong turnaround in the industrial sector and services integral to industrial growth

• Focussed on absolute Returns, with high emphasis on Purchase Price

Emkay Pearls

• Emkay Pearls aims to create wealth over an investment horizon of 2 to 3 years through a robust and research-backed equity portfolio.

• The strategy focusses on 15-20 stocks in the mid- and small-cap space.

• It follows a unique Bargain Hunting method to spot potential stocks at low current valuations, which would deliver superior returns in the long term.

Other Key Highlights of the Year

• Opening of new office space by Emkay Investment Managers during Q3 of 2023-24, with the team successfully moving into the new workspace on 1st January, 2024, marking the start of an exciting phase for our Company

• Unveiling of Emkay Indias Golden Decade of Growth, a PMS strategy, seeking to enable investors to benefit from Five Key Themes that are expected to see accelerated growth in the years ahead

3. Wealth Management

We offer a comprehensive suite of services to our clients, within our Wealth Management segment, targeting Ultra High Net Worth Individuals (UHNIs), family offices, and corporate treasuries. Our holistic approach begins with rigorous client risk profiling and portfolio analysis, followed by meticulous asset allocation and personalised portfolio construction. Our commitment extends to continuous performance evaluation, rigorous monitoring, and strategic rebalancing to ensure optimal outcomes. Additionally, we tender adept transactional support, cutting-edge Management Information System (MIS) solutions, comprehensive information assistance, and tailored advisory services, designed to empower our clients in achieving their financial objectives.

Our approach is firmly grounded in a rigorous commitment to processes and research, enabling us to sharpen our understanding of market dynamics and asset categories. This methodology empowers us to offer tailored investment products and Wealth Management Services. Leveraging both quantitative and qualitative techniques, our wealth research team adeptly navigates the extensive array of available products and services. Our team of private bankers, ably assisted by advanced client profiling methods, dedicate significant time to understanding each clients specific needs, thereby ensuring the provision of tailored products and services.

Emkay Wealth Advisory Private Limited, our subsidiary, specialises in estate and succession planning services, operating as a Registered Investment Advisor. Our proactive research team consistently disseminates insightful articles covering economic trends, market dynamics, and various asset classes, thereby ensuring our clients are well-versed in evolving market landscapes. The efficacy of Emkay Wealth stems from its systematic approach to distribution, strategy development, client engagement, asset allocation, and technological innovation.

With the support of our committed and seasoned private bankers and wealth managers stationed across our branches in India, Emkay Wealth has witnessed substantial expansion since its inception four years ago. Reflecting our continued growth trajectory and dedication to delivering value to our clientele, we surpassed the milestone of 2,500 clients by the end of 2023-24, while managing assets worth Rs. 3,177 crore.

4. Investment Banking

Emkay Investment Banking stands out as a versatile, product-agnostic platform, dedicated to serving midmarket clients. Our expertise lies in guiding clients to secure growth capital from both public and private markets.

Our team of professional investment bankers possesses a profound understanding of the midmarket corporate sector, providing both strategic and financial advisory services. Our strong relationships with regulators and stakeholders further enhance the value we deliver to our clients.

Emkay has built a solid reputation for closing deals successfully within the small and mid-sized company segments, fostering long-term relationships, and delivering consistent value.

Some of our Investment Banking services include Initial Public Offer (IPO)/ Follow on Public Offer (FPO), Qualified Institutional Placement (QIP), Preferential Issue/PIPE, Growth Capital for Private Companies, Private Equity Exits, Private Equity Buyouts, Advisory Services on Buyback, Delisting, Open Offer, Promoter OFS, and Rights Issue, among others.

The Emkay Investment Banking division continues to gain traction, as evidenced by our successful advisory role in numerous prestigious capital market transactions throughout 2023-24.

Key Highlights

• Advisor to the Rs. 405 crore IPO of Senco Gold Limited

• Sole Merchant Banker for the Rs. 200 crore QIP of Vishnu Chemicals Limited

• Merchant Banker to the Rs. 55 crore buyback for Ashiana Housing Limited

• Merchant Banker to the Rs. 4,000 crore QIP of Indian Bank

• Merchant Banker to the Rs. 750 crore QIP of J&K Bank Limited

• Sole Merchant Banker for the Rs. 500 crore QIP of JK Tyres and Industries Limited

• Merchant Banker to the Rs. 251 crore IPO of J.G Chemicals Limited

• Merchant Banker for the Rs. 6 crore Open Offer by Heranba Group for Daikaffil Chemicals India Limited

• Advisor for Rs. 110 crore private equity deal of Biodeal Pharmaceuticals Limited

The remarkable success and positive responses garnered from these transactions reinforced our reputation and propelled us further, building upon the growth momentum accumulated in previous years.

5. Currency and Commodity

Emkays affiliation with the Multi Commodity Exchange (MCX), the National Commodity & Derivatives Exchange (NCDEX), and the NSE Commodity enables us to offer a comprehensive range of client services in the Commodities sector. These include the following:

• Trading Software: We offer the Omnesys Nest by Thomson Reuters. For our clients, we provide a varied suite of Algo Strategies (Omnesys Nest/ Greeksoft).

• Execution Channels: We provide clients the convenience of Call & Trade services through recorded lines, along with access via Bloomberg and Reuters chat platforms.

• Trading Platforms: We facilitate online platforms for both trade execution and viewing. Additionally, for clients sensitive to latency, we provide Direct Market Access (DMA).

• Research Advisory: We deliver real-time research advisory to our clients through WhatsApp messages & phone, Bloomberg, and Reuters chat.

• Client Support: We offer online client back-office access, electronic contract notes, and SMS facility.

Research reports such as the Daily Technical Report, Monthly Fundamental Review, and Periodic Special Reports further contribute to keeping our clients informed about the commodity market direction.

Key Service Offerings Provided in Currency

Our comprehensive suite of offerings is tailored to meet the needs of clients seeking in-depth insights and analysis for navigating the foreign exchange markets. The FX Insights report tracks the Indian Rupee (INR) movement and trends, furnishing a daily outlook on its performance. Meanwhile, the RBI MPC Meeting Preview report conducts a thorough analysis of macroeconomic indicators to gauge their potential market impact and influence on the RBIs policy decisions. In addition, the Daily FX Insight report delivers technical and fundamental analysis across various Forex market segments. Furthermore, we offer regular updates on Forex Markets via WhatsApp to ensure our clients stay abreast of the latest developments.

Our specialised reports delve into specific areas, such as the Exchange v/s OTC Spread report, which compares forward premiums between the Exchange and Over- the-Counter markets. Meanwhile the USDINR Weekly Insight report provides a comprehensive analysis of the weekly movement and trends of the US Dollar and Indian Rupee (USDINR) pair. It includes a hedging matrix for importers and exporters, along with a weekly economic events calendar to facilitate decisionmaking. Additionally, our Option Max Pain - USDINR report analyses derivative concepts and strategies related to the USDINR pair, helping determine potential levels of maximum pain for option traders at expiration. Furthermore, the USDINR Technical Report focusses on offering in-depth technical analysis and hedging strategies tailored specifically for the USDINR currency pair.

Opportunities

Large Potential IPO and M&A Pipeline

The Indian capital markets are witnessing a significant uptick in activity, as evidenced by companies raising substantial fund through initial public offerings (IPOs) in 2023-24. Looking ahead, the pipeline appears equally robust for 2024-25, with offerings worth Rs. 70,000 crore expected to hit the markets, featuring some prominent names. This bullish IPO trend is complemented by a rise in entrepreneurial endeavours, facilitated by initiatives like Ease of Doing Business and Start-up India.

Additionally, there is a significant uptick in mergers & acquisitions (M&A) as various sectors undergo consolidation. This trend is coupled with an influx of private equity and venture capital investments flowing into Indian companies. Despite a number of persisting challenges, including high inflation and geopolitical tensions, there is a prevailing sense of optimism. Many anticipate that once these factors stabilise, a growing number of companies across various sectors will seek to raise capital through primary markets, driven by expectations of reduced volatility and the promising potential for strong earnings.

Source:[https://economictimes.indiatimes.com/markets/ipos/fpos/rs-70000-crore-pipeline-awaits-ipo-market-in-fy25-featuring-some- household-names/articleshow/108872722.cmsRs.from=mdr]

Increasing HNIs in India

The surge in High-Net-Worth Individuals (HNIs) across India presents a compelling opportunity for the wealth management industry. With HNI numbers expected to nearly double from 797,714 individuals with assets over USD 1 million in 2022-23 to 1,657,272 by 2026-27, this affluent investor class holds immense potential. Defined as individuals with an investment capacity exceeding Rs. 5 crore, HNIs seek diverse investment avenues to grow and safeguard their wealth. Financial institutions and wealth managers are well-positioned to cater to their unique requirements through personalised services, encompassing portfolio management, risk mitigation, inheritance planning, and tax optimisation strategies. The burgeoning HNI in India represents an opportunity for the introduction of innovative financial products and specialised advisory services designed to meet their evolving requirements.

Source: [https://cleartax.in/s/high-net-worth-individuals]

Financialisaton of Household Savings

The household sector is a vital contributor to the Indian economy, accounting for roughly 78.5% of gross savings and serving as the primary source of financial resources for gross investment. A striking trend emerging in recent years is the growing commitment of Indian households to allocate larger portions of their savings towards financial assets, moving away from traditional investments in physical assets like gold and real estate. This shift is driven by steady economic growth and a diminishing appeal of physical assets, primarily due to their lower returns compared to financial assets. Consequently, there is a projected surge in investment options, including mutual funds, equities, ULIPs, and various other avenues, all set for substantial growth.

Source: [https://www.rbi.org.in/Scripts/BS_ViewBulletin aspxRs.Id=21336]

Fintech Innovations

The financial industry has significant opportunities for growth and innovation by embracing fintech solutions like digital banking and innovative payment systems. Leveraging big data analytics presents an opportunity to gain valuable customer insights and steer towards data-driven decision-making. Additionally, developing sustainable finance initiatives such as green investment funds and carbon trading platforms, holds immense promise for sustainable finance. By adopting these innovations, financial institutions can usher in a new era of customer services, enhanced operational efficiency, new revenue streams. Furthermore, embracing these advancements position financial institutions as industry leaders in the rapidly evolving digital and sustainable finance landscape.

Rising Alternative Investments in India

The Alternative Investment market in India is growing rapidly, with total AUM increasing from USD 26 billion in 2015-16 to an estimated USD 65 billion in 2023-24 - representing a staggering increase of over 100%. This burgeoning demand is driven by several factors, including the expansion of Indias middle class with rising wealth, higher interest rates making traditional assets less appealing, and regulatory reforms enabling easier access. Private equity, venture capital, hedge funds, real estate funds, and infrastructure funds emerge as key drivers of this growth, with private equity and real estate being largest and fastest growing segments. Alternative investments offer potential for higher returns and portfolio diversification due to low correlation with public markets. However, they also entail risks, such as illiquidity and volatility. Nonetheless, this expanding market presents an opportunity to cater to the evolving needs of investors by providing access to a diverse range of investment avenues.

Source: [https://www.sganalytics.com/blog/what-are-altemative-investments/]

Threats

Emkays advancement may face obstacles stemming from various quarters, including geopolitical tensions, market volatility, escalating commodity and energy prices, inflationary pressures, and anticipated interest rate hikes aimed at restricting liquidity. In addition to these potential threats, it is crucial to explore further risks that could impede our Companys growth.

Risk Mitigation

Risk	Impact	Mitigation
Technology Risk	A substantial surge in user traffic could potentially overload the servers capacity, leading to service disruptions and inconveniences for our clients. Moreover, given the critical role of our IT infrastructure in sustaining business operations, the risks associated with system failures, security breaches, or similar incidents cannot be ruled out.	We are committed to deliver seamless service to our clients and mitigate technology risk. To ensure this, we implemented a cloud- based Customer Relationship Management (CRM) system for the Commodity PCG Desk, and developed Web API services to facilitate efficient data exchange with the Wealth CRM. Furthermore, our ongoing investments in technological advancements seeks to fortify the resilience of our platform and enhance the user experience.
Competition Risk	The ever-increasing entry of emerging competitors into our industry possesses a significant threat to our market share.	We set ourselves apart from our competitors to mitigate this risk. By offering top-notch research, advisory services, and alpha generation capabilities, we tackle the threat from emerging competitors. Moreover, we continue to diversify our services and offerings to effectively encounter the impact of market fluctuations arising out of increased competition.
Reputation Risk	The significant concern, arising out of negative public perception, stakeholder dissatisfaction, or adverse media coverage may pose risk to our reputation. This has the potential to result in loss of customers, and market share, while augmenting regulatory scrutiny.	We focus on several key initiatives to mitigate reputation risk. Firstly, we cultivate a robust corporate culture that emphasises ethical behaviour and accountability. Secondly, we develop a crisis management plan to address potential reputation risk events. Lastly, we actively engage with stakeholders to build trust and uphold a positive reputation.
Cyber Attacks and Data Breaches	Cyber attacks and data breaches represent a substantial threat to our operations, alongside compromising sensitive information, and potentially damaging our reputation.	We plan to implement robust cybersecurity measures to mitigate this risk. Our strategy includes deployment of firewalls, data encryption, and multi-factor authentication. Additionally, we plan to conduct regular security assessments and vulnerability testing, provide comprehensive employee cybersecurity training, and develop a detailed incident response plan.
Talent Acquisition and Retention	Inability to attract and retain skilled and experienced employees has the potential to impact our productivity, innovation, and competitiveness.	We are committed to mitigate this risk by offering competitive compensation and benefits packages, providing professional development and career growth opportunities, fostering a positive and inclusive corporate culture, and implementing employee engagement and retention initiatives.

Financial Performance

(Rs. in Lakhs)

Particulars	As of 31st March, 2024	As of 31st March, 2023
ASSETS
Financial Assets
(a) Cash and cash equivalents	4,782	2,949
(b) Bank balance other than (a) above	53,498	31,911
(c) Stock in trade (Securities held for trading)	130	72
(d) Trade receivables	12,515	10,529
(e) Loans	3,958	5,136
(f) Investments	2,616	2,368
(g) Other financial assets	23,323	13,965
Sub-total - Financial Assets	1,00,822	66,930
Non-Financial Assets
(a) Current tax assets (net)	384	510
(b) Deferred tax assets (net)	-	501
(c) Property, plant and equipment	3,243	2,999
(d) Right of use assets	890	747
(e) Other intangible assets	146	55
(f) Other non-financial assets	1,041	1,353
Sub-total - Non-Financial Assets	5,704	6,165
Total - Assets	1,06,526	73,095
LIABILITIES AND EQUITY
Liabilities
Financial Liabilities
(a) Trade payables	20,889	12,026
(b) Borrowings (other than debt securities)	3,255	1,497
(c) Deposits	1,032	1,036
(d) Lease liabilities	916	763
(e) Other financial liabilities	50,836	33,129
Sub-total - Financial Liabilities	76,928	48,451
Non-Financial Liabilities
(a) Current tax liabilities (net)	17	4
(b) Provisions	3,710	2,192
(c) Deferred tax liabilities (net)	19	-
(d) Other non-financial liabilities	1,764	1,409
Sub-total - Non-Financial Liabilities	5,510	3,605
Equity
(a) Equity share capital	2,469	2,464
(b) Other equity	21,619	18,575
Sub-total - Equity	24,088	21,039
Total - Liabilities and Equity	1,06,526	73,095

 

	2023-24	2022-23	2021-22	2020-21
Revenue	31,501	21,548	27,377	16,183
Earnings before interest, tax and depreciation & amortisation	5,712	2,601	5,685	2,800
Profit/(Loss) before tax	4,242	1,255	4,611	1,737
Profit/(Loss) for the year	3,244	1,408	3,380	1,113
Total assets	1,06,526	73,095	76,393	56,484
EPS (in )	13.16	5.71	13.72	4.52

Financial Ratios

Metrics	Standalone			Consolidated
	31st March, 2024	31st March, 2023	% Change Increase (Decrease)	31st March, 2024	31st March, 2023	% Change Increase (Decrease)	Explanation in Case Change is 25% or More, As Compared to The Previous Year
Current ratio	1.10	1.04	5.77	1.21	1.16	4.31
Debt equity ratio	0.2	NA	NA	0.14	0.07	100.00
Net profit margin	8.63%	5.36%	61.01	10.30%	6.53%	57.73	Net Profit margin has risen due to substantial jump in profits backed by increased revenue
Return on net worth	14.11%	7.03%	100.71	13.47%	6.69%	101.35	Substantial jump in profits have contributed for higher return on net worth
Interest coverage ratio	6.56	2.57	155.25	9.64	3.93	145.29	EBIT has increased substantially due to rise in profitability and revenue

INFORMATION TECHNOLOGY

Our sustained focus on transformation is the mantra behind the success in client acquisition. We emphasise enhancing interfaces, streamlining efficiencies, and elevating the customer experience across all our platforms. Our strength lies in driving innovation and actively incorporating feedback into tangible actions. This methodology empowers our team to develop a platform that delivers a seamless experience across all touchpoints. Our goal is to anticipate needs, respond to disruptions with appropriate offerings, and create an ecosystem that adapts to evolving demands. This approach ensures a holistic experience for our users, propelling our growth in the industry.

We undertook the following initiatives in 2023-24 to enhance our technology process:

• Initiated an upgrade in the Backoffice application to process trades with higher volumes and faster processing capabilities

• Enhanced network bandwidth for our connectivity to Exchanges & Colocation facilities, ensuring faster performance

• Rolled-out a new hyper-converged platform, upgrading capacity and improving performance of user applications

• Implemented critical infrastructure upgrade to align with global standard within our data centres, featuring efficient cooling systems and advanced power distribution systems

• Decommissioned older servers and network equipment and replaced them with newer, more advanced hardware

• Pioneered DMA Certification on MCX, demonstrating our commitment to innovation and compliance within the industry

• Onboarded a new trading platform within the exchange colocation facility, enabling seamless and secure trading activities

• Implemented an Order Management System (OMS) with FIX connectivity in the exchange colocation environment, streamlining order management and execution processes

• Deployed a new Backoffice platform in GIFT City processing DMA & Institutional trade flows

• Adopted a granular application control platform to safeguard the user environment, thereby restricting unauthorised applications on our Companys computers

• Conducted enterprise-wide hardware refresh with the aim of offering a superior user experience, while upgrading systems to the latest operating systems

FASTER TRADING EXPERIENCE THROUGH DIGITAL INNOVATION

We prioritise delivering an optimal trading experience to our clients, empowering them to make well-informed financial decisions. We are committed to providing our customers with faster, more accurate, and more secure access to data. Through our platform offerings and API initiatives, we strive to deliver superior performance and an enhanced experience to our clients in a highly competitive landscape. To enhance our software services and infrastructure robustness, we took the following initiatives:

• Backoffice Application was upgraded to process trades in multiples of volumes and faster processing.

• Upgraded the network bandwidth for our connectivity to Exchanges & Colocation for faster performance.

• A new hyper-converge platform was rolled out for upgrading the capacity and better performance of the user applications.

• Implemented critical infrastructure into global standard data centres that have efficient cooling systems and advanced power distribution systems.

• Decommissioning old servers, and network equipment and replacing them with newer ones.

• Pioneering DMA Certification on MCX, demonstrating our commitment to innovation and compliance.

• We successfully onboarded a new trading platform within the exchange colocation facility, enabling seamless and secure trading activities.

• We implemented the OMS with FIX connectivity in the exchange colocation environment, streamlining order management and execution.

• In GIFT, we deployed a new Backoffice platform for processing DMA & Institutional trade flows.

• To safeguard our user environment, we implemented a granular application control platform, restricting unauthorized applications on our computers.

• To provide a superior user experience, we conducted an enterprise-wide hardware refresh and upgraded systems to the latest operating systems.

These initiatives reinforce our commitment to providing clients with a seamless, secure, and technologically advanced trading experience, solidifying our position as a leader in the financial services industry.

CYBERSECURITY

We fortified our infrastructure and information with robust security measures. We have a robust framework in sync with the regulatory guidelines for safeguarding the information assets of the Company.

• We carry out periodic vulnerability assessments and penetration testing through a CERT-IN auditor to identify and remediate any vulnerabilities in our platforms.

• We consider our human resources as our first line of defence against cyber-threats and conduct periodic simulation attacks to assess any vulnerable human resources, followed by appropriate training programmes to educate our users about modern cyber-threats and guide them to stay alert and cybersafe.

• We have engaged with a CERT-IN empanelled third-party SOC that monitors and protects our critical infrastructure on a 24x7 basis.

• We have deployed an cutting-edge EDR platform that protects our critical assets and a layer of virtual patching solution to protect any legacy platforms.

• We have deployed an identity threat detection and response platform to ensure that our identities are secured from unauthorised access.

Through these initiatives, we remain committed to maintaining a robust and secure technological infrastructure, ensuring the safety and integrity of our operations and information assets.

HUMAN RESOURCES

We, at Emkay, firmly believe that our employees are our greatest asset, and their well-being and engagement are paramount to our success. Our Human Resource initiatives are driven by a deep commitment to fostering a supportive and nurturing environment to enable our employees to thrive both personally and professionally.

Employee Wellness & Engagement Initiatives

• Launched the Voice of Employees initiative, facilitating one-on-one feedback sessions with existing employees. By fostering collaboration and actively listening to employees from their early days, we aim to create a culture of open communication and continuous improvement, facilitated by repeated surveys at intervals of 30, 60, and 90 days

• Encouraged active participation by Emkayites in the prestigious Tata Mumbai Marathon, organised in January 2024, highlighting our collective dedication to fitness and team spirit

• Activated an HRMS platform for continuous feedback, providing a mechanism for employee development and fostering strong team dynamics

• Unveiled 1to1 Help, an employee mental wellness initiative, underscoring our commitment to the overall well-being of our employees and their families, addressing their physical, mental, and emotional needs

• Organised an offsite for the Institutional Equities team, aligning them to a common mission while promoting cohesion, and strengthening the shared vision

• Introduced Emkay T-shirts to spotlight the agenda of One Company, One Team, thereby fostering a sense of unity and pride among our employees

Talent Acquisition & Development

• We continue to hire from reputed B-schools and attract seasoned professionals to build a young, dynamic workforce for Emkay and nurture our future leaders

• We invest in the development of our young talent through customised trainings, equipping them with the necessary behavioural and functional skills to excel in their roles

• We deliver our training initiatives through a Learning Management System and concerted in-house programmes, achieving a remarkable 79% coverage across the organisation

• We designed a recruitment strategy where a significant portion of our new hires, almost 50%, is through employee referrals from our existing workforce, reflecting the thriving culture and level of employee satisfaction we cultivated within the organisation

Continuous Activities to Aid Employees

• We organise health camps to promote the overall wellbeing of our employees

• Conduct Ease of Banking camps to address employee issues and provide convenient financial services

• Undertake mid and annual performance reviews to ensure fair evaluation, feedback, and recognition of our employees contributions

At Emkay, we are committed to creating and sustaining an environment where our employees thrive, grow, and contribute to our collective success. Our human resources initiatives are designed to nurture talent, promote wellbeing, and foster a culture of excellence, innovation, and camaraderie.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACIES

We, at Emkay, place great importance on the implementation of Internal Control Systems, ensuring they are adequate, effective, and appropriate for our business size. Our professional management team, alongside established policies and procedures, plays a pivotal role in facilitating this process. We maintain a robust audit programme, an internal control environment, effective risk monitoring, and management information systems. Regular updates to our systems are made in accordance with industry best practices, and internal audits complement our internal control systems. Management conducts regular evaluations, ensuring that standard policies and norms are in place to guarantee the accuracy of financial records used in compilation of financial statements and other data. Integral to our control system is our Management Information System (MIS), which undergoes regular checks and processes to ensure its efficacy. Moreover, we engage Independent audit companies to conduct regular internal audits, and carefully review their reports. Executive summaries, as well as Action Taken Reports (ATR) outlining management actions to address issues, are presented to the Audit Committee/Board meetings for evaluation. The Audit Committee thoroughly reviews internal auditor reports, and corrective actions are promptly taken to improve the efficiency of future systems and procedures in alignment with Internal Control Systems. The acknowledgment of auditors work by the Board serves as an independent validation of the information provided by management regarding our Companys operations and performance.

CAUTIONARY STATEMENTS

The Management Discussion and Analysis contains statements about our Companys objectives, plans, estimates, and expectations. It should be noted that these statements may be deemed as forward-looking statements under relevant securities laws and regulations. It is important to acknowledge that the actual outcomes may significantly differ from those stated or suggested due to various factors such as economic developments in the country, industry demand and supply circumstances, input pricing, changes in Government regulations and tax laws, as well as issues such as litigation and labour relations. These factors hold the potential to impact our Companys operations in a significant manner.