HB Portfolio Ltd Management Discussions

1. OPERATING RESULTS

Standalone Performance

On a standalone basis, the Total Income was Rs 3774.45 Lakhs for FY 2023-24 which was higher than previous years Total Income of Rs 1193.88 Lakhs. Total expenses increased to Rs. 3630.20 Lakhs for FY 2023-24 from Rs 919.79 Lakhs in the previous year. Profit after tax stood at Rs 138.57 Lakhs for FY 2023-24 as against Profit after tax Rs 223.04 Lakhs in the previous year.

Consolidated Performance

On Consolidated basis, the Total Income was Rs 5502.88 Lakhs for FY 2023-24 which was higher than previous years Total Income of Rs 2309.43 Lakhs. Total expenses increased to Rs. 4705.75 Lakhs for FY 2023-24 from Rs 1954.57 Lakhs in the previous year. Profitafter tax stood at Rs 516.91 Lakhs for FY 2023-24 as against Profit after tax of

Rs 294.38 Lakhs in the previous year.

2. INDUSTRY STRUCTURE AND DEVELOPMENTS

The Global economy continue to be shadowed by high inflation, tight monetary and financialconditions, escalating geopolitical tensions, disruptions in key global shipping routes. Indian economy however expanded at a robust pace in 2023-24. Indian Financial Market remained stable during 2023-24, with orderly movements in the bond and foreign exchange market and energetic equity market. The domestic equity market capitalization crossed the US$ 4 trillion mark making the Indian stock market the fifth world. India is one of the top producers of a large number of commodities, and also has a long history of trading in commodities and related derivatives. The commodity market has made enormous progress in terms of technology, transparency and the trading activity. Commodity market will become ‘hot spot for Indian farmers rather than spot market. And producers, traders as well as consumers will be benefited from it. But for this to happen one has to take initiative to standardize and popularize the Commodity Market. 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.

3. OPPORTUNITIES AND THREATS

As an economy, India is likely to grow much faster than global growth. Indias growing population and young demographic, and its effort to build digital, regulatory, financial and physical infrastructure over the last decade, will pave the way for growth acceleration over the next decade. Indias young population is a tailwind for growth, but this must be enabled by proper policies.

Global Spillovers resulting from high inflation, tight monetary and financial conditions, escalating geopolitical tensions, disruptions in key global shipping routes may adversely affect the Indian Financial Market. Indian Financial Sector faces dual challenge of making small changes in its operations and business strategies to support the green transition process while also strengthening resilience to rising vulnerability to adverse climate events so as to safeguard financial stability. The increase in financial risk i.e. ‘market risk, ‘liquidity risk and ‘operational risk may pose a serious threat to financial stability.

4. FUTURE PROSPECTS AND OUTLOOK

Indias commodity market is a major player in the global economy, with a wide range of products traded on exchanges and in local markets throughout the country. Indian commodity market is a vital part of countrys economy, with multiple commodities being produced, consumed and traded on a daily basis. With increasing demand for commodities, both domestically and globally, the Indian commodity market is expected to continue growing in the coming years, proving significant and traders alike. The Indian government has taken steps to modernize and regulate the market, which has led to increased participation from both domestic and foreign investors.

There are various obstacles that the market must overcome, such as volatility in prices, limitations in infrastructure and difficulties in regulatory compliance.

Despite these challenges, the future of the Indian commodity market is relatively bright compared to other Asian commodity markets. The country has a vast population and a growing middle class, which is expected to drive demand for commodities in the coming years. Furthermore, the emphasis of the government on the development of infrastructure and reform in agriculture is anticipated to augment the supply and production of commodities, consequently fostering the growth of the market.

During the year 2023-24, the Indian stock market showed a robuse performance with periods of volatility and stability. Major stock indices such as the BSE Sensex and NSE

Nifty showed robust gains over the year, reflecting overall market optimism despite occasional volatility. The BSE Sensex, for instance, started the financial year around 65,000 points and ended around 75,000 points, marking a significant total market capitalization of listed companies on Indian stock exchanges increased significantly, indicating strong investor confidence and inflows. This growth was driven by both domestic and foreign institutional investments.

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 and Commodities 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. 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 largestinthe 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, 2024 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 25132.93 Lakhs and Rs 226.55 Lakhs respectively as against Rs 15995.75 Lakhs and Rs 254.28 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 257.19 Lakhs and Rs 888.11 Lakhs respectively as against Rs 105.80 Lakhs and Rs 30.97 Lakhs during the previous year.

d) Key Financial Ratios (Standalone): opportunitiesforinvestors

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.