industrial investment trust ltd share price Management discussions


GLOBAL ECONOMIC SCENARIO:

The year 2022-23 was a turbulent and most challenging year for the global economy in general and the banking industry. The global economy was on the path of recovery after waning of the

COVID-19 pandemic until the Russia-Ukraine conflict broke out in February 2022. The conflict further disrupted the global supply chains and led to a spike in prices of critical commodities, leading to uptick in inflationary pressures. To restrain the consequent inflation, major central banks around the world undertook monetary tightening resulting in tightening of financial conditions.

The impact of increased borrowing costs and stubbornly high inflation is beginning to show in multiple leading indicators of global economic activity. Towards the end of financial year, there was Global Financial crisis on account of the collapse of the systemically important banks outside the country. This caused concerns of potential risks of contagion, which in turn resulted in increased turbulence across global markets. Banks across the world remained watchful and cautious and continued to withdraw their accommodative stance in a regulated manner which led to shrinking of liquidity across global markets and an increase in interest rates. As per IMF projections, world growth will bottom out at 2.8 percent this year before rising to 3.0 percent in 2024.

INDIAN ECONOMIC SCENARIO:

Indian economy recorded a strong growth of 7.2 percent in FY 23 much higher than expected. Despite the global economy facing heightened uncertainty due to failure of banking system in certain countries, persisting geopolitical tensions and moderating but elevated inflation, the Indian economy and the domestic financial system remain resilient supported by strong macroeconomic fundamentals as stated by the Reserve Bank of India (RBI) in its Financial Stability Report. Indian economy continues to be one of the fastest growing major economies in FY 2023, which reflects Indias inflationary strong economic fundamentals. With surging pressures, the RBI increased the Repo rates by 250 basis points and tightened liquidity, exerting pressure on deposit rates, competitive which turned positive in real terms and intensified pressures. The RBI paused the rate hikes in April 2023. FY23 witnessed volatility on liquidity front. However, RBIs fine operations through conduct of variable rate repo and reverse repo supported liquidity.

INDIAN CAPITAL MARKETS:

After stellar returns in the preceding two financial years, the equity markets took a pause in FY 23 with the benchmark Sensex and

Nifty 50 finishing nearly flat. Sustained rate hikes by global central banks, the Russia-Ukraine war, stubborn inflation and the banking crisis in the developed World Banking, restrained the stock price performance in the outgoing financial year. The markets witnessed intense volatility during the year. It had poor performance in the the fiscal 2022-23, gained momentum in the second first half and declined after the release of the adverse report by a research firm which was another highlight. The Sensex finished FY 23 at 58,991 and NIFTY 50 index ended at 17,360 over the previous financial years close. The Indian rupee declined by 8.4 percent against the US dollar over the last fiscal and was Asias worst performing currency. Global head winds led to sustained selling by foreign portfolio investors (FPIs) who pulled out Rs 38,377 crores from Indian equity market. Domestic institutional investors bought shares worth 1.73 trillion in FY 23.

BUSINESS OVERVIEW OF THE COMPANY, ITS SUBSIDIARIES, ASSOCIATE COMPANIES AND JOINT VENTURE:

Your Company is registered with Reserve Bank of India (RBI) as a Non-Deposit taking Non-Banking Financial Company. In terms of provisions of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, your Company is categorized as a ‘Systemically Important Non-Deposit taking Non-Banking Financial Company. It is primarily a Holding company, holding investments in its subsidiaries and other group companies. The activities of the Company comprises of Investment in equity shares, quoted as well as unquoted, units of mutual funds, Fixed deposits with renowned banks, Government Securities (G secs), Inter Corporate deposits and loans to its Group Entities.

The Company through its subsidiary viz., IITL Projects Limited (IITLPL) and the joint ventures of subsidiary are in the business of real estate. The residential projects which have been undertaken by them are located in Noida and Greater Noida region and Yamuna Express way. (The details of projects undertaken by IITLPL and through Joint ventures have been provided in the Directors Report).

The subsidiary company, IIT Investrust Limited (IITIL) was into Stock Broking and Depository business. In June 2019, IITIL had applied for Surrender of membership of Stock Broking and Depository Participant business. Upon surrender IITIL ceases to be the Stock Broker as well as Depository Participant.

Besides that, IITIL is also in the business of providing Advisory and Consultancy services to Body Corporates.

The subsidiary company, IIT Insurance Broking and Risk Management Private Limited (IIT Insurance) was in the business of Direct Insurance Broking. (Life and Non-Life). During the year 2019-20, IIT Insurance had applied to Insurance Regulatory and Development Authority of India (IRDAI) for voluntary surrender of Insurance Broking license. IRDAI vide its letter dated June 17, 2021 granted Certificateof approval for voluntary surrender Registration. Consequent to this, IIT Insurance ceased to be an tuning Insurance Broker.

Subsequently, IIT Insurance changed its name to IITL Management and Consultancy Private Limited and also changed its Object Clause. The same were approved by Ministry of Corporate Affairs. Consequent to this, IIT Insurance ceased to be an Insurance Broker. IITL Corporate Insurance Services Private Limited (IITL Corporate Insurance) was incorporated in the year 2014. The Company did not commence any business and applied to Ministry of Corporate Affairs for removal of its name from the Register of Members. IITL Corporate Insurance Services Private Limited has been struck off from the Register of Companies w.e.f. August 23, 2021 and the Company stands dissolved.

The Company had made an investment of Rs. 340 crore in Future Generali India Life Insurance Company Limited (FGILICL), a Joint venture Company acquiring 22.5 percent of equity capital in March 2013. Future Generali India Life Insurance Company Limited made several Rights Issues. The company did not participate in any of the Rights Issues, due to which the companys stake reduced to 16.62 percent. Since couple of years, the Company had been exploring to divest its stake in FGILICL. In December 2021, the Company received offer from Generali Participations Netherlands N.V. (Generali), one of the Joint Venture partners of FGILICL, to acquire Equity holding of 16.62 percent (equivalent to 32,67,00,000 equity shares) at a total consideration of 225 crores. On December 18, 2021, the Company entered into Share Purchase Agreement with Generali. Upon receiving approvals from Insurance Regulatory and Development Authority of India (IRDAI), Registrar of Companies, Competition Commission of India (CCI), Reserve Bank of India, Shareholders and all other Statutory / Regulatory Authorities the transaction was consummated on March 28, 2022. The Associate Company, World Resorts Limited is in the business of hospitality and owns and operates a Deluxe Five Star Resort by the name Golden Palms Hotel and Spa at off. Tumkur Road, Bangalore. The hospitality and travel industry were hard-hit by Covid-19 and incurred immense losses in the last couple of years. The Reserve Bank of India (RBI) vide its Letter dated June 25, 2018 had prohibited the Company from expanding its credit / investment portfolio other than investment in Government Securities till Net NPAs are brought down to below 5%. Pursuant to the restrictions imposed by RBI, the Company did not expand its credit / investment portfolio.

During the year under review, the Company entered into One Time Settlement with the Joint Ventures of the subsidiary Company, IITL Projects Limited. All outstanding loans have been recovered and the NPAs have become NIL. The company has parked 225 crores in Government Securities received from the sale of equity stake of Future Generali.

The Company informed RBI regarding the status of the loans and investments. The Company made necessary submissions to RBI with regard to their Supervisory concerns.

RISKS AND CONCERNS:

The Company is exposed to specific risks that are particular to its business and the environment within which it operates, including interest rate risk, market risk, credit risk, liquidity risk, geo-political risk or uncertain economic conditions. Besides that the equity markets become extremely volatile due to various other factors like policy changes, capital inflows/outflows etc. The Company manages these risks by maintaining conservative financial profile and by following prudent business and risk management practices. The Company manages the risks through proper frame work of policy and procedures approved by the Board of Directors from time to time. The Company has formulated a Risk Management Policy The Company has formed a seperate Risk analyses Management Committee which identifies, and prioritize risks in order to address and minimize such risks. This exercise facilitates identifying high level risks and implement appropriate solutions for minimizing the impact of such risks on the business of the Company. The Company is exposed to Credit risk which can be on account of loss of interest income and the Companys inability to recover the principal amount of the loan disbursed to the borrowers.

The assets are classified from time to time as performing and non-performing in accordance with RBI guidelines. Provisions are made on standard, sub-standard and doubtful assets at rates prescribed by RBI. An asset is classifiedas non-performing if any amount of interest or principal remains overdue for the number of stipulated days.

The Companys subsidiary and its joint ventures are in the business of real estate and their financial performance will have impact on the Groups business results and financial condition.

The subsidiaries of the Company also manage their business risks by following proper risk management policies to avoid any adverse impact on the holding company

SIGNIFICANT FINANCIAL RATIOS

As per the provisions of SEBI Listing Regulations, 2015, the significant financial ratios are given below:

Particulars

2022-2023 2021-2022
Net Profit margin % 321.18% 59.88% Due to Increase in Net Profit and Turnover
Operating Profit margin % 322.32% 63.99% Due to increase in operating profit
Current ratio Times 15.36 0.45 Due to increase in Current Assets
Return on Net worth % 12.10% (31.88%) he change in Return on Net Worth ratio has happened majorly because of reversal of impairment provision on account of repayment of loan by borrowers amounting to Rs 4405.46 lakhs.
EPS 19.07 (44.17) Due to Increase in Net Profit
PE Ratio 4.54 (1.80) Due to change in Market price and Earning Per Share value

FINANCIAL PERFORMANCE:

The Company has incurred a profit after tax of 4,299.38 lakhs during the year compared to loss of Rs 9,960.31 lakhs in the previous year. The revenue from operations during the year is Rs 1,527.67 lakhs compared to Rs 677.78 lakhs in the previous year.

During the current year the company has rectified the presentation and disclosure relating to the notional interest and impairment in fair value of investments in preference shares in Associates, in accordance with Ind AS 8, read with Ind AS 27. However this does not have any impact on the profits / losses determined in the previous periods, networth and the carrying amount of the investments. Net gain on fair value changes for the above transaction in the current year is Rs 59.03 lakhs compared to previous year of Rs 354.35 lakhs.

HUMAN RESOURCE:

Your company considers Human Resource as key drivers to the growth of the Company. The Company has performance-based appraisal system. As on March 31, 2023, the total number of employees including subsidiaries was 18.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company maintains appropriate systems of Internal Control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorised use or disposition. Company policies, guidelines and procedures provide for adequate checks and balances and are meant to ensure that all transactions are authorized, recorded and reported correctly. The Company has established appropriate Internal control framework in its operations and financial accounting and reporting practices to ensure due adherence to the Internal Financial Control over Financial Reporting under section 143(3) of The Companies Act 2013.

The Board of Directors have adopted Related Party Transactions

Policy and Whistle Blower /Vigil Mechanism for ensuring efficient conduct of the business of the Company, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

The internal control is supplemented by an effective internal audit carried out by an external firm. The management regularly reviews the findings of the Internal Auditors and takes appropriate steps to implement the suggestions and observations made by them. The management ensures adherence to all internal control policies and procedures as well as compliance with all regulatory guidelines. The Audit

Committee of the Board of Directors reviews the adequacy of Internal Controls. The Internal Auditors are present at the Audit Committee Meetings where Internal Audit Reports are discussed alongside of management comments and the final observation of the Internal Auditor. All these measures assist in timely detection of any irregularities and remedial steps that can be taken to avoid any pecuniary loss.

OUTLOOK:

The global economy continues to gradually recover from the pandemic and Russias invasion of Ukraine. The COVID-19 health crisis is over, and supply-chain disruptions have returned to pre-pandemic levels. While Financial 2023 has brought many challenges, it can be considered as a year of change and opportunity. Inflation is gradually easing, but the US Federal Reserve continues to raise interest rates, leading to an economic slowdown. However, the worlds battle against inflation is not over.

IMF has raised Indias growth forecast to 6.1 percent for FY 24 citing strong domestic investment, while compared to RBIs estimate of 6.5 percent and expects inflation to decline in FY 24.

DISCLAIMER:

The information and opinion expressed in this section of the Annual Report may contain certain statements, which the Management believes are true to the best of its knowledge at the time of its preparation. The Company and the Management shall not be held liable for any loss, which may arise as a result of any action taken on the basis of the information contained herein.

On Behalf of the Board of Directors,
Dr. Bidhubhusan Samal
Chairman
(DIN: 00007256)
Place: Mumbai
Date: August 18, 2023