Emkay Global Financial Services Ltd Management Discussions.


The year 2020-21 saw all the economies across the world come under the grip of the Covid-19 pandemic. Nationwide lockdowns and a standstill in economic activities challenged the economic growth and employment. As a result, the global economy contracted by 3.50 per cent in 2020 compared to a growth of 2.30 per cent in 2019 (Source: IMF). The other significant events during the year included the presidential elections in the US (Joe Biden replaced Donald Trump), and the completion of Brexit. Fiscal expansion and continued monetary accommodation will be the critical factors for revival in economic growth. The vaccination drive has raised hopes of a sustainable recovery. However, with the second wave of the pandemic, uncertainty still prevails. The recovery and revival across nations largely depends on universal vaccination supported by adequate medical and health infrastructure and effective and continued policy support.


The first wave of the pandemic, which started in March 2020, affected output, employment, and growth while throwing lives and businesses into disarray. The Government and the RBIs timely fiscal and monetary policy measures helped the swift revival of the economy. GDP growth which fell to -24.30 per cent in Q1 of 2020-21, revived to a flat growth in Q4 of 2020-21, and the year ended at a relatively moderate deceleration of -7.30 per cent. Accommodative monetary stance, low interest rates, and ample liquidity in the interbank market facilitated the recovery. The second wave of the pandemic seems to have peaked out, and even with shutdowns across some of the larger cities and towns, the economy is likely to clock a growth rate of 8 per cent to 9 per cent in 2021-22. The policy of universal vaccination will go a long way in ensuring that we build the capability to thwart any future recurrence of the pandemic. As a strong move towards the AtmaNirbhar Bharat, the Government introduced the Production Linked Incentive (PLI) scheme, the benefits of which were extended to the ten key sectors like food processing, battery storage, automobile components and specialty steel, among others. All these measures take Indias manufacturing sector towards a path of sustainable recovery and growth.


For the markets, the year 2020-21 started with the unprecedented health scare of global magnitude. The ungauged future impact of the pandemic on all economic activities led to a sharp fall in markets, but a swift response from the fiscal and monetary policies to support growth led to markets posing a smart recovery. As the impact of the pandemic was largely priced-in, and the growth expectations were gradually normalised from one of extreme pessimism, the earnings, as well as the multiples awarded to those earnings, started improving.

The recovery was led by safe haven sectors such as pharma, given the demand inelasticity of its products and the implicit benefit accruing due to the pandemic. The continued fiscal and monetary support coupled with street- estimates-beating earnings growth improved the breadth of the markets, with even cyclicals surging on the back of improving commodity prices and expectations of a strong demand recovery. The Nifty 50 TRI, Nifty Midcap 50 TRI and Nifty Smallcap 50 TRI posted returns of 72 per cent, 114 per cent and 134 per cent, respectively, for 2020-21. The improvement in liquidity conditions on the back of strong policy support was responsible in no small measure for the bull run witnessed in 2020-21. The liquidity support, increased retail participation, and buoyant market sentiment led to a slew of IPOs hitting the markets. As a result, the stock markets witnessed 55 initial public offerings (IPOs), with a cumulative capital raised of Rs 46,029.71 crore, up 115per cent year-on-year (YoY) from Rs 21,382.35 crore. Furthermore, Rs 64,058.61 crore was raised through a total of 21 rights issues, up 15per cent YoY from Rs 55,669.79 crore through 17 rights issues.

At the current juncture, it may not be appropriate to say that all the positives have been priced-in. However, it can be safely said that the market valuations are not reflecting pessimistic expectations. Therefore, going ahead investors will have to be much more discerning in their stock selection and stick with good management with proven track record of delivering healthy growth.

Business Overview

Emkay Global Financial Services Limited (Emkay or the Company or we) was incorporated on 24th January, 1995, as Emkay Share and Stock Brokers Private Limited, by two first-generation entrepreneurs. The Company got listed on the stock exchanges in 2006 and acquired its current name in the year 2008.

Today, the Company offers a host of transactional and advisory services across equity, debt, currency and commodities. It has a vast client base including foreign institutional investors, domestic mutual funds, banks, insurance companies, private equity firms, corporate houses, small and medium-sized enterprises and high net worth individuals. The diversity of its services is backed by a team of research experts, robust infrastructure and well- managed processes.


At Emkay, we believe in consistent value investing and value creation. Our research team is a crucial pillar that helps in identifying undervalued stocks through in-depth qualitative and quantitative analysis. We cater to institutional and noninstitutional clients and help in building portfolios with the most well researched, stable and promising stocks. During the financial year, the institutional segment contributed 57 per cent of the total equity broking business, while the noninstitutional segment accounted for the remaining. The total number of institutional and non-institutional clients stood at 406 and 1,44,000+, respectively, in 2020-21.


Our strength of research lies in generating unparalleled, differentiated, extensive and exhaustive real-time insights. Emkay has an industry-wide reputation for high quality, differentiated research. Our timely information to our clients has always helped them in making informed decisions and in creating wealth.

Our coverage of stocks increased to 305 in 2020-21, comprising 48 of Nifty 50 and all 30 of the BSE Sensex companies. We have a competent team of more than 30 analysts and research associates with rich experience and sound domain knowledge in their respective industries. Despite the lockdown, we successfully conducted our flagship conference Emkay Confluence virtually, which received an overwhelming response, with more than 100 corporates participating. We further hosted Alcobev conference, FinShift-Digi-Banking Conference, and organised our first Millions Under Billion small and mid-cap conference with participation from 75 companies.

Asset Management

For Emkay Investment Managers Limited (EIML), the financial year 2020-21 proved to be an inflection point in more ways than one. While the crisis tested the resilience and temperament of all the teams, it also helped sharpen our value proposition to our investors and advisors from a holistic perspective. ElMLs clientele includes marquee family offices, HNIs, corporates, NRIs and trusts. A team of highly experienced and qualified portfolio managers and analysts leverage proprietary frameworks across their investment strategies to deliver consistent long-term returns.

We believe that capital preservation and client comfort is of utmost importance in asset management. Hence we ensure that the investors understand what exactly they are investing in. Our most enormous success has been in terms of a straightforward narrative explaining why both our Classical Alpha and Smart Alpha frameworks have consistently delivered superior performance.

ElMLs proprietary governance framework E-QUAL has been able to score managements based on parameters like management capability, management integrity and ability to distribute wealth, amongst others.

On the other hand, the Smart Alpha framework identifies stocks and themes like value migration and consumption. The Smart Alpha framework is probably the only one of its kind in the country. Through its robust risk management processes, it delivers consistent returns by mitigating selection and allocation biases in a portfolio.

Key highlights during the year

• Emkay Emerging Stars - Series 1, an AIF offering, won an award for the best performance from the PMS- AIF world.

• A website (www.emkayim.com) dedicated to the vertical and important social media handles were launched on 15th August, 2020. All the digital properties have gained consistent traction over the months since their launch.

• Emkays Value Shastra, launched in collaboration with MSJ Mister Bond Pvt Ltd, brought the countrys first asset allocation product on the PMS platform to the customers. It is one of those rare breeds of investment options that flags off an exit route to the investor for his investments, basis its proprietary algorithm

• In the last quarter of the financial year, EIML also launched Emkay Alpha Mavens, a one-of-a-kind investment option for Ultra HNIs, family offices, and trusts. Its 3C value proposition of Customization, Cost effectiveness and Comfort on performance fees, immediately generated quick appreciation and interest from a highly savvy set of customers.

Wealth Management

The services offered under this segment include portfolio creation, investment planning, portfolio monitoring and re-balancing, transactional support, MIS and information support and advisory towards treasury management to corporate. Estate and succession planning services are also offered through the subsidiary Emkay Wealth Advisory Private Limited (Emkay Wealth). Its research division regularly releases publications focused on the economy, markets and the various asset classes. Emkay Wealth follows a disciplined approach across distribution, product, client selection, asset allocation and technology.

In less than three years since inception, Emkay Wealth has scaled operations to 9 locations pan India and has a strength of 27 top quality private bankers/wealth managers across these locations. During the year, the revenue of Emkay Wealth increased by 87 per cent to Rs 476 lac and Assets Under Management increased by 56 per cent to Rs 182,118 lac.

We remain entirely open architecture. Our client acquisition strategy works on a multitude of options, and we are optimistic about the future of our business.

Investment Banking

The year2020-21 was a pivotal year for the Investment Banking division. The most significant event was our blockbuster entry into the IPO advisory segment. In 2020-21, Emkay played the crucial role of Left Lead Book Running Lead Manager (BRLM) for the Rs 625 crore IPO of Heranba Industries Limited (HIL). Its IPO was oversubscribed (> 80x) with prominent mutual funds, foreign portfolio investors and insurance firms bidding for the anchor book. Emkays individual contribution to the anchor book was >75 per cent. IPO investors earned bumper listing day gains of over 30 per cent.

Apart from the HIL IPO, we also saw a series of successful transactions, including a rights Issue (Mold-Tek Packaging), Tender Offer Buyback (Dhanuka Agritech), Open Market Buyback (Eclerx) and promoter block offer for sale (Valiant Organics). Emkay is also advising a delisting transaction. The tremendous success of these transactions resulted in an aggravated reputation and is expected to culminate in market share gains. We expect to maintain this growth momentum in the coming year, owing to our healthy pipeline of mandates.

Currency and Commodity

The lockdowns resulted in a complete slowdown of international trade during the year. Emkay focuses on targeting corporate clients looking to the exchange platform for hedging their currency/commodity risks. The ban on exports/imports for a longer portion of the financial year caused us to lose some market share. As a result, our YoY volumes declined by nearly 10 per cent and 12 per cent in the currency and commodity segments, respectively. However, with the pace of vaccination picking up and the slow resumption of business activities across the country, we hope to regain our market share. For this purpose, we continue to invest in technology platforms backed by skilled manpower to leverage upon the normalisation of commercial activities.


Large Potential IPO and M&A Pipeline

With continuous support by the Government towards entrepreneurship (e.g. ease of doing business), India sees an increasing number of startups and small businesses. With the advent of SME exchange, it has become easier for SMEs to get listed. Furthermore, the rising penetration of private equity and venture capital in Indian startups is expected to result in increased M&As and IPOs.

Financialisation of Household Savings

Despite having the 3rd largest household savings globally, over 60 per cent of Indias household savings are in physical assets such as real estate and gold. Gradually, this is shifting towards financial assets. Even within financial assets, a large part of savings is in bank deposits, which barely compensates for inflation. Equity savings as a percentage of financial savings are expected to reach 10.2 per cent by 2026 (Source: https://economictimes.indiatimes.com/ markets/stocks/news/india70-domestic-retail-investors-are- breaking-free-beating-all-odds/articleshow/60065087.cms).

Digital Penetration

The total number of internet users in India grew by 8.2 per cent YoY (Source: https://datareportal.com/reports/digital- 2021 -india), demonstrating the large untapped digital market for rural India. Rising internet access, driven by the Governments Digital India initiative, will make it easier for financial services firms to reach the massive unserved and underserved rural markets.


Rising Preference towards Index Funds

Investors have increasingly realised that the number of active managers who can consistently generate net (post-fees) alpha are very few. Having burnt their fingers in PMSs that invest in dodgy companies, investors have now recognised that the index return of around 15 per cent (historically) is satisfactory. They are now paying negligible fees (0.1 per cent expense ratio typically) and just getting market returns, resulting in an emerging trend of preference towards passive, low-cost index funds and ETFs. This may reduce our total market opportunity.

Large Ticket Size Requirement

Unlike mutual funds, where the minimum investment can be as low as Rs 500, the minimum investment in a PMS is at Rs 50 lac as per SEBI regulations and Rs 1 crore for AIFs. This, to an extent, reduces the total addressable market for Emkay.

Risk Impact Mitigation
Technology Risk A large number of users could lead to temporary crashing of the server and inconvenience for clients During the financial year, we implemented a new cloud- based CRM for Commodity PCG Desk and developed Web API Services (for data exchange) for Wealth CRM to prevent any inconvenience to clients.
Cyber Security Risk The absence of proper critical security systems in place can result in cyberattacks and hacking of our platform Our efficient IT security system and our skilled software team help prevent, protect, detect, and respond to any cyber security threats.
Competition Risk A rising number of new entrants in the industry could pose a threat to our market share We have high-quality research, advisory services, and alpha-generating skills, which differentiate us from competitors.

Financial Performance Consolidated:

The Company recorded a total income of Rs 16,498 lac in 2020-21 as against Rs 13,513 lac in 2019-20, an increase of 22 per cent. The Companys EBIDTA stood at Rs 2,564 lac compared to a loss of Rs 679 lac in 2019-20. The Company saw a turnaround and reported Profit/(Loss) after Tax (continuing operations) at Rs 1,113 lac against Rs (1,259) lac in 2019-20.


The Company recorded a total income of Rs 14,595 lac as against Rs 11,972 lac in 2019-20, an increase of 22 per cent. The Companys EBIDTA stood at Rs 1,969 lac compared to loss of Rs 907 lac in 2019-20. The Profit/(Loss) after Tax stood at Rs 801 lac against Rs (1,258) lac in 2019-20.

Last year was phenomenal for Emkay, as we recorded the highest ever consolidated revenue of Rs 16,498 lac. The growth was backed by sound progress across all the verticals with Broking vertical recording a 580 per cent jump in average daily turnover on YoY basis.

2020-21 2019-20 2020-21 2019-20

in crore

Revenue 145.95 119.72 164.98 135.13
Earnings before interest, tax and depreciation & amortization 19.69 (9.07) 25.64 (6.79)
Profit before tax 11.41 (18.00) 17.37 (16.57)
Profit for the year 8.01 (12.58) 11.13 (12.59)
Total Assets 518.00 345.92 564.84 380.66
EPS (In ) 3.26 (5.11) 4.52 (5.03)



Particulars 31st March, 2021 31st March, 2020 % Change increase (decrease) 31st March, 2021 31st March, 2020 % Change increase (decrease)
Current ratio 1.06 1.10 -3.64% 1.16 1.36 -14.71%
Debt equity ratio NA 0.07 NA 0.060 0.052 14.82%
Net profit margin 5.49% -10.51% Loss to Profit 6.75% -9.32% Loss to Profit
Return on net worth 6.13% -10.46% Loss to Profit 6.69% -8.24% Loss to Profit
Interest coverage ratio 3.86 (2.95) Loss to Profit 5.47 (2.11) Loss to Profit


The Company believes that its employees are the key to its success and is committed to equipping them with advanced skills. Thus, enabling them to evolve with ongoing technological advancements seamlessly.

We allotted company laptops and data cards to some employees during the year and facilitated continued work from home (WFH) through secured VPN gateways to access the required Drives/Systems. We made exclusive arrangements with a car vendor to provide thoroughly sanitised vehicles and arranged Essential Services E-Pass for every employee who needed to work from the office. In addition, we stationed security and housekeeping personnel in our offices and facilitated an uninterrupted supply of sanitisers, hand-wash solutions, and gloves to ensure office cleanliness and hygiene and maintained emergency food stocks and First-Aid.

Going forward, as unlock guidelines enable more employees to work from the office, we shall continue our focus on employee health and safety by following all the necessary protocols required for ensuring a safe working environment. We are also in discussion with a few hospitals and would soon be carrying out a vaccination drive for our employees and their kin.

We are committed to being a responsible employer, and we constantly strive to promote a healthy, collaborative and holistic working environment. Despite work from home, we continued to ensure an inclusive and interactive work culture.

During the year, we conducted various short training programs at regular intervals. The programs primarily focused on building skills related to communication, time management, client pitches and customer orientation, and internal knowledge sharing and cyber security. We helped in upgrading both the Behavioural and Functional skillset of our employees.

Employees are the key stakeholders and lifeline of our organisation. In these tough times, we ensured that appraisals and increments were done timely and communicated effectively. In addition, we extended our HRSM system for filing to enable ease of filing of ITR (Income Tax Returns). We also introduced a helpdesk where the employees could seamlessly resolve their queries.

Total training programs conducted in 2020-21

KM>1 Participations across the organisation

At Emkay, we continue to stand by our employees, promote gender equality, focus on building skills and improving efficiency. Our policy initiatives help in nurturing future leaders who will take our legacy forward.


The Companys internal control systems are adequate, effective and commensurate with its size of business. These internal control systems are provided in various ways. A competent management along with the implementation of standard policies and processes, is put in place. Alongside, maintenance of an appropriate audit program with an internal control environment and effective risk monitoring

and management information systems also aid the purpose. The Company regularly and continuously upgrades these systems, keeping in line with the best available practices. The internal control systems are supplemented by extensive internal audits. There are regular reviews by the management and standard policies and guidelines as well. These policies and guidelines ensure the reliability of financial and all other records to prepare financial statements and other data. The Management Information System (MIS) forms an integral part of the Companys control mechanism. The Company carries out regular checks and procedures. This is done through periodical internal audits conducted by an independent audit firm. The reports are deliberated, and an executive summary of the same, along with Action Taken Reports (ATR) and steps taken by the management to address the issues, are placed before the Audit Committee meeting/Board meeting for a review. The Audit Committee reviews reports of internal auditors. If any, the corrective measures for the same are carried out to improve further systems and procedures in compliance with Internal Control Systems. The Board also recognises the auditors work as an independent check on the information received from the management on the operations and performance of the Company.


Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, 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 influence the Companys operations include economic developments within the country, demand and supply conditions in the industry, input prices, changes in Government regulations, tax laws and factors such as litigation and industrial relations.