1. GLOBAL ECONOMY REVIEW:
The global economy faced headwinds in FY 2023 due to weak demand. Commodity prices
declined gradually; however, they are still higher than their five-year average.
Inflationary pressures are expected to persist, whereas currency depreciation and capital
outflows from emerging markets and developing economies have been widespread. The outlook
for global trade remains uncertain due to downside risks pertaining to intense trade
protectionism and supply chain disruptions. Inflation continued to rise throughout CY2023
in most economies. The sanctions and hawkish monetary policies that followed the Ukraine
war had a significant impact on global trade.
In FY 2024, global GDP growth is anticipated to be 3.0%. Additionally, after reaching
its peak in FY2023, global inflation is expected to decline to 4.3% in the days ahead,
banking on stable policies and favourable regulatory guidelines.
2. INDIAS ECONOMIC REVIEW:
The Indian economy proved to be one of the fastest growing in FY2023, supported by
strong domestic demand. Despite a challenging external environment, exports performed
better than expected, due to Indias vast domestic market and limited reliance on
international trade flows. According to the National Statistical Office, Indias Gross
Domestic Product (GDP) is projected to see robust growth of 7% during the fiscal year
2022-23.3 Indias economic ranking has also improved significantly, with the
current-account deficit being financed by increasing foreign direct investment and a solid
cushion of foreign exchange reserves. Although consumer inflation was above the Reserve
Banks upper limit, which prompted a 2.25 percentage point increase in the policy rate,
Indias growth story was propelled by rising retail demand after the pandemic and new
investments in areas such as automobiles, electronics, mining and the aviation industries.
With the broadening of the investor base for government securities, constructive policy
changes and the introduction of cautious rules such as the new Insolvency and Bankruptcy
Code and the creation of the new National Reconstruction Company Limited for controlling
inflation levels have augured well for the Indian economy. However, geopolitical tensions,
tight monetary policies and slow global growth are expected to have an impact on Indias
economic growth in FY2024. However, India will continue to be one of the fastest
developing countries in FY2024 due to its strong domestic demand, robust macroeconomic
forces and limited reliance on the global market. Indias GDP is also predicted to grow by
a steady 6.6%4, making it one of the worlds fastest-growing countries
The COVID-19 pandemic, the consequent acceleration in the adoption of technology and
change in consumer habits, and the increasing availability of data for credit
decision-makinghave supported the further acceleration of retail credit growth. Revival of
economic activity, pent-up demand, strong export, and domestic support have strengthened
credit growth in the MSME segment. The market share of NBFCs in outstanding MSME loans
(including LAP) was 25% in FY 2022 and is estimated to have increased to 27% in FY23. In
terms of growth, NBFCs witnessed a CAGR of 21% between fiscals 2017 and 2023, compared to
8% for other players. Going forward, NBFCs are expected to continue to witness rapid
growth and increase their market share in this segment
3. OVERVIEW OF PORTFOLIO MANAGEMENT SERVICES
Portfolio Management Services (PMS), service offered by the Portfolio Manager, is an
investment portfolio in stocks, fixed income, debt, cash, structured products and other
individual securities, managed by a professional money manager that can potentially be
tailored to meet specific investment objectives. When you invest in PMS, you own
individual securities unlike a mutual fund investor, who owns units of the fund. You have
the freedom and flexibility to tailor your portfolio to address personal preferences and
financial goals. Although portfolio managers may oversee hundreds of portfolios, your
account may be unique.
Types of Portfolio Management Services
Discretionary:
Under these services, the choice as well as the timings of the investment decisions
rest solely with the Portfolio Manager.
Non-Discretionary
Under these services, the portfolio manager only suggests the investment ideas. The
choice as well as the timings of the investment decisions rest solely with the Investor.
However, the execution of trade is done by the portfolio manager.
Advisory
Under these services, the portfolio manager only suggests the investment ideas. The
choice as well as the execution of the investment decisions rest solely with the Investor.
4. INDUSTRY STRUCTURE AND DEVELOPMENTS
The asset management industry has a unique and different structure from the rest of the
financial industry. Its important to note the key characteristics of asset managers when
considering their impact on financial stability.
Overview of Global Industry:
The asset management industry is an integral component of the broader financial system.
Its sole purpose is to help investors achieve their financial goals. Also referred to as
"investment managers" or the "buy-side," asset managers are hired by
investors to allocate capital on their behalf.
Portfolio Management Service is a tailor-made professional service offered to cater the
investment objective of different investor classes. The Investment solutions provided by
PMS cater to a niche segment of clients. The clients can be Individuals or Institutions
entities with high net worth. In simple words, a portfolio management service provides
professional management of your investments to create wealth.
The asset management industry is made up of a large number of diverse firms that offer
a wide array of investment strategies. These investment strategies are available to
investors in a variety of forms, including mutual funds, ETFs, private funds and
separately managed accounts, among others.
The asset management industry serves as a critical link between providers and seekers
of investment capital around the world. The industry provides professional investment
services for a diverse client base with varying objectives and risk tolerances. Asset
managers have evolved with the global expansion of capital markets and will likely
continue to evolve as technological advancements and demographic trends influence new
innovations and opportunities.
The portfolio management process includes the construction, monitoring, and revision of
an asset owners or asset managers portfolio. The process is represented by a sequence of
activities that begins with understanding the asset owners entire circumstances including
objectives, constraints, and other preferences and forms the basis for structuring a
portfolio and formulating other portfolio decisions, such as investing passively or
actively. The portfolio management process rests on a foundation of good investment
governance, which includes the assignment of decision-making responsibilities to qualified
individuals and the oversight of processes.
The portfolio management deals with the analysis of individual securities as well as
with the theory and practice of optimally combining securities into portfolios. It makes
use of analytical techniques of analysis and conceptual theories regarding rational
allocation of funds. Thus, portfolio management is a complex process which tries to make
investment activity more rewarding and less risky. Portfolios are built to suit the return
expectations and risk appetite of the investor i.e. a combination of assets or securities
is formulated which meets the level of return investor expects provided he is willing to
meet the associated risk, or the possible return at the level of risk he is willing to
bear.
On PMS front, SEBI introduced performance benchmarking and categorization for the PMS
industry, akin to the current norms in mutual funds. The move will help investors assess
and compare the performance of service providers and came into effect from April 1, 2023.
Moving to bring parity between multiple modes of investment and reduce mis_selling and
high commission charges, SEBI introduced direct plan for AIF investors and removed upfront
commission model. These rules will become effective from May 1, 2023
Developments in the portfolio management services
The asset management industry has seen unprecedented growth in recent decades, thanks
largely to the strength of the worlds equity markets. But new forces are taking hold as
global markets enter an era of greater uncertainties.
• As of March 2023, AUM managed by the mutual funds industry stood at US$ 482.40
billion (Rs. 39.42 trillion) and the total number of accounts stood at 145.7 million.
• In May 2021, the mutual fund industry crossed over 10 crore folios. Inflow in
Indias mutual fund schemes via systematic investment plans (SIP) stood at Rs. 1.5 lakh
crore (US$ 18.09 billion) Growth in B30 (beyond the top 30) cities, sustainability of
alpha, alternative investments and regulatory norms are expected to shape the mutual fund
industry in the coming years. • About 17% of assets in the mutual fund industry were
generated from B30 locations in December 2021. These assets increased by 25%, from US$
68.33 billion (Rs. 5.13 lakh crore) in January 2021 to US$ 85.51 billion (Rs. 6.42 lakh
crore) in January 2022. • The assets under management growth is expected to be 12-14%
in FY2022 and 18-22% between 2022-23. In November 2020, an agreement with the World Bank
was signed by the Department of Investment and Public Asset Management (DIPAM).
Under the agreement, the World Bank is expected to provide DIPAM with asset
monetization advisory services.
This project is established to encourage and speed up the monetization of non-core
assets and help unlock the value of these unused/marginally used assets that have the
potential to dramatically increase financial capital for further investment and
development.
5. OPPORTUNITIES AND THREATS
Opportunities
India is one of the fastest growing economies globally and various projections for
growth by World Bank or IMF etc., indicate that India will continue to outperform other
economies. This would open up vast opportunities for SME businesses which employs large
part of total workforce of India. Easy capital generation means and relaxation in
Government regulations & policies will facilitate the ease of doing business in India
for SMEs.
Since our group has been involved in the SME exchange related services since its
inception; we have an insight of developments in this segment, robust performance by the
SME sector and growth in SME Listed bourses and our ability to provide sound investment
advisory or fund management with focus on investing in this segment would provide us a
niche and hence an entry point with existing PMS or Investment Advisory clients and over
time we can sell other products of our business to them.
a) Ongoing financialization of savings in India
b) Increasing per capita GDP
c) Increasing flows from smaller cities/towns
d) Deepening digital channel distribution contributing to disintermediation and
de-risking of sales and distribution
e) Ongoing consolidation in the industry
Threats
f) Uncertainty in the global markets, owing to the increased strain in the advanced
economies and emerging economies due to the COVID-19 & Ukraine War impact can result
in volatile capital inflows and currency fluctuations. Increased restrictions on migration
and global trade could hurt productivity and incomes and take an immediate toll on market
sentiment.
g) Technological disruptions- With rapid changes in technology and innovations,
companies need to increase its attention towards innovation objectives alongside business
growth objectives. With increasing performance expectations related to quality, timings
and cost, technological upkeep is very important to keep in line with competitors,
especially new competitors that are "born digital" and with a low-cost base for
their operations. The risk of disruptive innovations enabled by new and emerging
technologies is always present.
h) Any stringent regulatory changes or unfavorable policy changes can pose a threat to
the Company in the short run.
i) Short term economic slowdown impacting investor sentiments and business activities
j) Intense competition amongst AMCs to garner higher AUMs can increase pressure on
commissions.
6. ECONOMIC OUTLOOK
The global headwinds continue to weigh in on the growth prospects of 2023.However, the
note of optimism stems from Chinas opening and cooling down of energy prices. It is
expected the slowdown in global economic growth will bottom out in 2023 and will start
picking up in 2024. According to the latest IMF World Economic Outlook, the global economy
is projected to grow by 2.8% in 2023, before rebounding to 3.0% in 2024.
FY23 was a landmark year for the Indian economy. While the global economy faced a
growth slowdown in a high-interest rate environment, Indias economy was resilient. It
became the worlds fifth largest economy. Unlike other emerging and developing economies,
Indias resilience was not entirely dependent on fiscal stimulus but led by structural
interventions by the Government of India such as Aatmanirbhar Bharat and the National
Infrastructure Pipeline and stronger than anticipated private consumption.
According to the second advanced estimate by the Ministry of Statistics and Program
Implementation (MOSPI), Indias
FY23 GDP growth stood at 7.0% compared to 9.1% in the previous year. This growth was
broad-based and strong across sectors, with manufacturing and services showcasing a
healthy recovery. The loss in demand from the external sector, due to moderate global
economic growth, was compensated by a surge in domestic demand, driven largely by the
governments successful rollout of universal vaccination and an increase in Capital
Expenditure (Capex). This uptick in public spending had a ripple effect on private Capex
and a noticeable uptick in capacity utilisation across sectors. Further, the expansion of
the Production Linked Incentive scheme, announced in 2020 as part of the Prime
Ministers vision of making India Aatmanirbhar, has played a pivotal role in driving
growth within the countrys manufacturing sector, attracting investments from both
domestic and foreign companies.
With increasing prices continuing to squeeze living standards worldwide, taming
inflation should be the first priority for policymakers. Tighter monetary policy will
inevitably have real economic costs, but delay will only exacerbate them. Targeted fiscal
support can help cushion the impact on the most vulnerable, but with government budgets
stretched by the pandemic and the need for a disinflationary overall macroeconomic policy
stance; such policies will need to be offset by increased taxes or lower government
spending. Tighter monetary conditions will also affect financial stability, requiring
judicious use of macro prudential tools and making reforms to debt resolution frameworks
all the more necessary. Policies to address specific impacts on energy and food prices
should focus on those most affected without distorting prices. And as the pandemic
continues, vaccination rates must rise to guard against future variants. Finally,
mitigating climate change continues to require urgent multilateral action to limit
emissions and raise investments to hasten the green transition.
7. RISKS AND CONCERN
Escorp Asset Management Limited is exposed to specific risks that are particular to its
businesses and the environment within which it operates, including credit risk,
operational risk, competition risk, regulatory risk, human resource risk, execution risk,
information security risks and macro-economic risks.
Our risk management practices have been designed and implemented taking into
consideration the varying needs of our organization, operating structure, business
operations and regulatory requirements. We have facilities for approach to risk management
and the roles and responsibilities of all stakeholders. The Audit Committee is responsible
for overseeing the risk management framework, reviewing the key risks and mitigation
strategies, and ensuring the effectiveness of risk management policies and procedures. The
Management is also responsible for ensuring that the risk management framework is
effectively implemented within all areas of their respective functions.
Our business depends on consumer confidence in the overall economy, economic growth
rates, household saving rates and consumer attitudes towards financial savings, in
particular, within India. Any adverse market rate fluctuations and/or adverse economic
conditions could affect our business in many ways, causing a decline in our revenue
Risk is an integral part of the business and we aim at delivering superior shareholder
value by achieving an appropriate balance between risks and returns. The financial
services industry is subject to continuously evolving legislative and regulatory
environment due to increasing globalization, integration of world markets, newer and more
complex products & transactions and an increasingly stringent regulatory framework.
Our senior management identifies and monitors the risks on an ongoing basis and evolves
processes/systems to monitor and control the same to contain the risks to minimum levels.
Periodic monitoring by our officials helps in identifying risks in early stage. If
required, a risk event update report is periodically placed before the Board of Directors
of the Company.
If our investment strategies perform poorly, our existing customers may reduce or
withdraw their investments. Underperformance to benchmark could lead to a shift to low
cost passive funds. We are exposed to credit risks, liquidity risks and market risks such
as interest rate risks and price risks. We are also exposed to operational risks and legal
risks. The effectiveness of our risk management is limited by the quality and availability
of data. Our schemes and other investment products carry their own risks.
We depend on the skills and expertise of our employees and our success depends on our
ability to retain key members of our teams. If we are not able to retain existing
employees or attract new talent, it could affect our operations resulting in decline in
performance of our business.
Regulatory framework, focused on maintaining controls on domestic businesses but even
inadvertently creating more favorable regulatory environment for global entities operating
in India is a matter of concern. We actively participate in dialogue in industry bodies
and with regulators to point these out and to recommend appropriate changes. While we
ensure that we are in compliance with all applicable laws, however any failure in
detecting errors in our statutory records or errors or omissions in our business
operations could expose us to potential losses and regulatory fines amongst others.
8. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Through our compliance function, we monitor compliance with regulatory requirements
laid down by the Securities and Exchange Board of India (SEBI) with respect to Portfolio
Management Services.
The company has an Internal Control System commensurate with its requirement and size
of business to ensure that the assets and interest of the company assets are safeguarded.
The adequacy and effectiveness of the internal control across various activities, as well
as compliance with laid down system and policies are comprehensively and frequently
monitored by your companys management at all the levels of the organization.
Our team stays abreast of the new regulatory requirements and communicates the same to
the relevant functions along with meaningful inputs for implementation. The Compliance
team also reviews the implementation status of various requirements by coordinating with
respective functions.
The Audit Committee of the Board of Directors reviews the existing audit procedures and
internal systems of control on an ongoing basis keeping in mind the organizations
requirements, growth prospects and ever evolving business environment. They also review
the internal audit findings and recommendations and ensure that corrective measures are
implemented. The Audit Committee is responsible for overseeing the risk management
framework, reviewing the key risks and mitigation strategies, and ensuring the
effectiveness of risk management policies and procedures. The Management is also
responsible for ensuring that the risk management framework is effectively implemented
within all areas of their respective functions.
V. N. PUROHIT& CO, the statutory auditor of the Company, has audited the financial
statements included in this Annual
Report and has issued as a part of its Auditors Report, a report on our internal
financial controls with reference to the financial statements (as defined in Section 143
of the Companies Act, 2013). Based on its evaluation, our audit committee has concluded
that as of March 31, 2023 our internal financial controls were adequate and operating
effectively.
9. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
Operation of the company:
Portfolio management team performs functions such as, post trade investment support,
cash management, treasury and settlement functions, recording of transactions in the books
of accounts of the respective clients, valuation of securities in the clients portfolios,
providing various reports to management, liaising with bankers and custodians.
All operational activities are subject to audit. We have appointed auditors as required
under relevant regulations for our schemes and the portfolio management and segregated
account services. They audit the customers accounts in respect of the Portfolio
Management Service. In addition, all applications used in Operations are periodically
subjected to reviews. Our audit committee reviews the auditors reports and these reports
are placed before our board and processes form the backbone of our operations with
extensive focus on internal controls, minimizing operational risks, scalability and
bringing about efficiency to meet various timelines. We continuously endeavour to keep
upgrading our systems and re-engineer our processes to ensure maintenance of a very high
standard of regulatory compliance and governance.
Review Of Financial Performance
The Total Income of the Company stood at 235.86 lakhs for the year ended March 31, 2023
as against 632.86 lakhs in the previous year. The Company made a net profit (after tax) of
175.51 lakhs for the year ended March 31, 2023 as compared to the 585.60 lakhs in the
previous year.
10. HUMAN RESOURCES
Escorp Asset Management Ltd. is part of a dynamic and progressive group that actively
fosters a challenging work environment and encourages Entrepreneurship. With trust being
the critical part of our business belief, we lay a strong emphasis on integrity, teamwork,
innovation, performance and partnership. Our professional staff with diverse backgrounds
brings varied talent, knowledge and experience to the Group, helping our businesses to
remain competitive, achieve greater success and newer milestones.
Our management team and board of directors are resolved to do what, we believe, is best
for our shareholders, clients and associates.
At Escorp Asset Management limited we understand that internal selection and succession
is very critical for the long-term sustenance of the business as it ensures business
continuity, preserves corporate culture, enhances knowledge capital and fuels the
ambitions of the Companys talent force leading to better retention. We ensure that our
internal talent is groomed for the next level. In order to create value for our
stakeholders we continue to invest in technology and adopt fair HR practices to empower
our people creating a supportive environment. We continue to uphold high standards of
governance with respect to all statutory compliance and regulatory requirements.
11. OUTLOOK OF THE COMPANY
We believe we are well-poised to capitalise on the healthy prospects of the industry
and further solidify our position in the market. Our strong brand equity, disciplined
investment philosophy and robust process, customer-centric approach, expansive reach, and
healthy financials should facilitate our future growth.
k) Our strategic priorities include: a) Maintaining a strong investment performance
against benchmarks and peer groups b) Enhancing our reach and distribution network c)
Enhancing our product portfolio to cater to various financial needs and aspirations of
consumers d) Investing in digital platforms to acquire, retain and grow our customer base
12. KEY RATIOS
| PARTICULARS |
2022-23 |
2021-22 |
Change in ratios in % |
| Current ratio |
232.48 |
176.68 |
33% |
| Debt- Equity Ratio |
N.A |
1.68 |
N.A |
| Debt Service Coverage Ratio |
N.A |
0.49 |
N.A |
| Inventory turnover Ratio |
N.A |
2.98 |
N.A |
| Debtors Turnover Ratio |
N.A |
849.79 |
N.A |
| Interest Service Coverage Ratio |
N.A |
1.19 |
N.A |
| Long term debt to working capital |
N.A |
N.A |
N.A |
| Bad debts to accounts receivable ratio |
N.A |
N.A |
N.A |
| Current liability ratio |
0.01 |
0.01 |
-12% |
| Total debts to total assets |
N.A |
N.A |
N.A |
| Return on Equity Ratio |
0.05 |
0.20 |
-77% |
| Trade Receivable Turnover Ratio |
31.77 |
210.22 |
-85% |
| Trade Payable Turnover Ratio |
593.77 |
20070.85 |
-97% |
| Net Capital Turnover Ratio |
0.30 |
1.40 |
-78% |
| Net Profit Ratio |
0.84 |
0.94 |
-10% |
| Return on Capital Employed |
0.05 |
0.18 |
-74% |
| Return on Investment |
0.21 |
0.31 |
-31% |
REASONS FOR MORE THAN 25% VARIANCE
| RATIOS WITH VARIANCE MORE THAN 25% |
REASONS FOR VARIANCE |
| Current ratio |
Increased in Current assets along with current liabilities compared to last year |
| Return on Equity Ratio |
Decreased due to decrease in net profit income |
| Trade Receivable Turnover Ratio |
Decreased due to decrease in revenue from operation & trade receivables |
| Net Capital Turnover Ratio |
Decreased due to decrease in revenue from operation |
| Return on Capital Employed |
Decreased due to decrease in other equity |
| Return on Investment |
Decreased due to decrease in return on incomes |
13.SAFE HARBOUR
This report describing our activities, projections and expectations for the future, may
contain certain ‘forward looking statements within the meaning of applicable laws
and regulations. The actual results of business may differ materially from those expressed
or implied due to various risk factors and uncertainties. The Company cannot guarantee
that these assumptions and expectations are accurate or will be realised. The Company
assumes no responsibility to publicly amend, modify or revise forward-looking statements,
on the basis of any subsequent developments, information or events. Actual results may
differ materially from those expressed in the statement. Important factors that could
influence the Companys operations include determination of tariff and such other charges
and levies by the regulatory authority, changes in government regulations, tax laws,
economic developments within the country and such other factors globally.
The financial statement are prepared under historical cost convention, on accrual basis
of accounting, and in accordance with the provisions of the Companies Act, 2013 (the
"Act") and comply with the Accounting Standards notified under Section 133 of
the Act. The management of Escorp Asset Management Limited has used estimates and
judgements relating to the financial statement on a prudent and reasonable basis, in order
that the financial statement reflects in a true and fair manner, the profit for the year.
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