HB Portfolio Management Discussions


1. OPERATING RESULTS

During the year under review, the Company reported Total Income of Rs 1193.88 Lakhs as compared to Rs 162.15 Lakhs in the previous year. The Company incurred total expenses amounted to Rs 919.79 Lakhs as compared to Rs 218.56 Lakhs during the previous year. Profit/Loss after tax stood at Rs 223.04 Lakhs

(55.12) Lakhs in the previous year.

2. INDUSTRY STRUCTURE AND DEVELOPMENTS

The strength of any modern economy is based on the soundness of its financial system.

With a combined push by Government and private sector, India is undoubtedly one of the worlds most vibrant capital markets. Indian financial services industry has experienced huge growth in the past few years and this momentum is expected to continue. The Commodities markets play a vital role in the functioning and development of the Indian economy. The biggest driver of exchange business in India has been the application and operationalization of information technology, which changed the entire face of the industry. The growth of online commodity futures trading and development of an efficient,transparent, and well-organized market, over the past few years, have thrown open number of opportunities and enormous benefits to various stakeholders, ranging from producers to processors and consumers. The Indian economy recorded a growth of 7.2 per cent in GDP in 2022-23 amidst global challenges - the war in Ukraine, the persistent elevation in food and energy inflation and tightening of financial conditions in response to aggressive and synchronized monetary policy tightening across the globe. The Financial markets experienced bouts of volatility in 2022-23, as geopolitical tensions intensified, interest rate hikes by the US Fed turned aggressive and global growth outlook deteriorated. A sustained recovery in discretionary spending, restoration of consumer confidence, high festive season spending after two consecutive years of COVID-19 provided impetus to the growth momentum.

3. OPPORTUNITIES AND THREATS

After the COVID-19 pandemic forced the world to limit face-to-face contact, businesses were urged to escalate their digital transformation efforts. Rise in cases of data breaches and privacy concerns, coupled with progressive regulatory and compliance requirements are the new hurdles for Finance Sector in India. With the threat of recession looming, organizations are forced to rethink their strategies and investments. The problems faced by financial markets have resulted from short term economic slowdown, geopolitical tensions and global surge in inflation.

India is still a highly under penetrated market in terms of geographical reach and wallet shares across wealth, credit and protection products. Positive long term economic outlook will lead to opportunity for financial services. After the COVID-19 pandemic, regulatory reforms have accelerated and it would aid greater participation by all class of investors. Indian financial market outperformed most of its competitors on the strength of macroeconomic fundamentals and favorable growth prospects.

4. FUTURE PROSPECTS AND OUTLOOK

Research from the World Bank shows that the quantities of consumption of many commodities have risen over the past years, as there has been a corresponding growth in global demographics as well as growth in incomes. Any commodity market today, therefore, should be a fruitful one for investment. However, due to innovations in the technology sector, the relevance of commodities has seen a shift. This is largely because technological advancement has given rise to new ways of use of some raw materials, and some commodities have been substituted so that they may not be required at all. On the subject of the growth of technology, this is one of the key variables that will have an effect on commodities and commodity trading in the future. Though the commodity futures market has proved their mettle over the years, there are huge benefitsfor the economy waiting to be reaped, if a more liberalized environment is permitted for this market to operate in. Ultimately, new measures can potentially alter the face of the commodity derivativeseconomyinIndiagiventhelong-termbenefitsthat flow to all sections of the economy.

The Outlook of the Company for the year ahead is to derive profitablegrowth by exploring various options to strengthen its capital base to augment the long-term resources for meeting funds requirements for its business activities, future growth opportunities and general corporate purposes.

5. RISKS AND CONCERNS

The Company like any other Company is exposed to specific risks that are particular to its business and the environment within which it operates. The Company is exposed to the market risk (including liquidity risk) and also the factors that are associated with

Capital market, which inter alia includes economic / business cycle, fluctuations in the stock prices in the market, besides the interest rate volatility and credit risk.

Risk Management Policy

The Company has implemented a systematic process to assist in the identification, assessment, treatment and monitoring of risks which provides the necessary tools and resources to management and staff to support the effective management of risks. The Company is primarily engaged in investment in Securities viz. Equity Shares, Preference Shares, Mutual Funds etc. which involves macroeconomic risks, investee company specific risks, market wide liquidity risks and execution risks relating to the

Company / its intermediaries.

(a) The macroeconomic risks, investee company specific risks are covered by investment decisions based on third party research and internal assessment. (b) Market wide risks are assessed and managed by investment timing decisions.

(c) The execution risk is managed by dealing with reputed intermediaries and through own back office discipline re accounting and follow up of trades.

(d) All investment decisions are made after distinguishing among alternative courses of action with identification of expected risks. against Profit/Loss of Rs The Company also faces credit default risks, concentration risk and industry specific risk while making Inter corporate loans to other body corporate. The Company performs the credit check on the prospective borrower considering various factors relating to the loan such as loan purpose, credit rating, and loan-to-value ratio and estimates the effect on yield (credit spread). The Company mitigates the concentration risk, industry specific risks by diversifying the borrower pool relating to different industries. The Company periodically monitors and reviews the financial condition, credit rating, debt to equity ratio to minimize the credit default risks associated with the borrowers. The Company has established Internal Financial Control Systems to provide reasonable assurance regarding safeguarding of assets, maintenance of proper accounting records and the reliability of financial reporting.

The Company controls the operational risks associated with its business activities by way of prescribing / amending processes, imposing controls and defining roles and responsibilities. The Company assesses the effectiveness of its risk management plan through structured continuous improvement processes to ensure risks and controls are continually monitored and reviewed.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has proper and adequate system of Internal Controls to ensure that all its assets are safeguarded and protected against loss from unauthorized use or disposition of assets and that the transactions are recorded and reported.

The Company ensures adherence to all Internal Control policies and procedures as well as compliance with all regulatory guidelines. The Internal Auditor monitors and evaluates the efficacy and adequacy of Internal Control Systems in the Company, its compliance with the operating systems, accounting procedures and policies. The Audit Committee reviews the internal controls at periodic intervals in close coordination with the Internal Auditors.

7. FINANCIAL PERFORMANCE a) Share Capital: The Companys Issued and Subscribed Share Capital consists of Equity Share Capital only. The Paid-up Share Capital of the Company as at 31st March, 2023 stood at Rs 10,76,42,300/- comprising of 1,07,64,230 nos. of Equity Shares of Rs 10/- each. b) Financial Assets and Non-Financial Assets: The Financial Assets and Non-Financial Assets for the year under review stood at Rs 15995.75 Lakhs and Rs 254.28 Lakhs respectively as against Rs 17,375.70 Lakhs and Rs 242.70 Lakhs for the previous year. c) Financial Liabilities and Non-Financial Liabilities: During the year under review, the Financial Liabilities and Non-Financial Liabilities stood at Rs 105.80 Lakhs and Rs 30.97 Lakhs respectively as against Rs 135.26 Lakhs and Rs 35.68 Lakhs during the previous year. d) Key Financial Ratios (Standalone):

Sr. No.

Particulars

FY 2022-23 FY 2021-22 % change over previous year

Reason for change of more than 25% in Key Financial Ratios:

1 Debtors Turnover Ratio NA NA NA
2 Inventory Turnover Ratio NA NA NA

3

Interest Coverage Ratio

42.92 (17.90) (97.24)

Increase in operating profit

4

Current Ratio

14.07 11.56 (5.98)

Decrease in current liabilities

5 Debt Equity Ratio 0.00 0.00 NA

6

Operating Profit Margin (%)

22.44 (32.98) 511.12

Increase in operating profit and Net Profit

7

Net Profit Margin (%)

18.68 (34.03) 673.14

Increase in operating profit and Net Profit

8 Return on Net Worth (%) 20.72 (5,12) 93.37 Increase in Net Profit

8. HUMAN RESOURCES

The Company has adequate human resources which is commensurate with the current volume of activity and is reviewed by the management periodically and the Company would induct competent personnel on increase / expansion of the activity.

9. CAUTIONARY STATEMENT

Statements in this "Managements Discussion and Analysis" describing the Companys objectives, projections, estimates, expectations or predictions 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 make a difference to the Companys operations include interest rates and changes in the Government regulations, tax regimes, economic developments and other factors such as litigation etc.