Industrial Investment Trust Ltd Management Discussions.


During the year gone by, economic activity was accelerating in almost all regions of the world and the global economy was projected to grow at 3.9 percent in fiscal 2018 and fiscal 2019. The global growth slowed notably towards the second half of fiscal 2019 as the macro environment became challenging. The escalation of US - China trade tension, macro economic stress in European countries, tighter credit policies in China and financial tightening of monetary policies in advanced economies have all contributed to a significantly weakened global expansion. With this weakness expected to persist, the World Economic Outlook (WEO) projects a further decline in growth to 3.3 percent. Although as per IMF and WEO a 3.3 percent global expansion is reasonable, the outlook for many countries is very challenging, with considerable uncertainties in the short term and downside risk due to trade tensions and impending Brexit. The US Federal Reserve in response to rising global risks, paused interest rate increases for the rest of the year. China has ramped up its fiscal and monetary policy to counter the negative effect of trade tariffs.


During the year 2018-19 growth of GDP moderated to 6.8 percent. The economy had to deal with post demonetization effects, disruption from implementation of Goods and Service tax. Subsequent to these upheavals a growth slowdown has gripped the domestic economy. Private investment a critical element of growth continues to be sluggish as Corporates battle low capacity utilization. Banking industry troubles refuse to go away and the challenges in the financial sector have been compounded by the crisis in the non-banking finance sector. The country is facing slowdown in economic growth, rising unemployment, inflation outlook and resilient external sector. The main drivers of growth- investment and consumption remain weak. The Current Account Deficit (CAD) has widened and adverse geopolitical developments coupled with trade tensions are a potential threat to trade and CAD. During the fiscal 2018-19 economic growth has weakened to 6.8 percent and is expected to be around 7 percent in 2019-20. India is still considered to be a fastest growing major economy. It is a gruelling time for the Indian industries. A host of factors - weak economic growth, low disposable income, rising fuel costs have contributed to the consumption slowdown. The financiers of the economy- banks and NBFCs are grappling with bad loans and mounting NPAs. The trade wars and increased protectionism policy of US pose a threat to export orientated sectors.


Despite several challenges including the NBFCs-triggered liquidity crisis as well as global trade tensions and high crude oil prices, the Indian equities market emerged as one of the best performers globally in 2018-19. The year was marked by several issues starting from high crude oil prices, rupee faltering to new record lows, liquidity crisis in the Non-Banking Financial Companies (NBFC), US-China trade tensions, delay in Brexit breakthrough. The equity markets touched its all-time high levels in FY2019. Post default by IL&FS and on NBFC liquidity concerns, market saw sharp correction in the Benchmark indices. However, market rallied sharply towards the end of the financial year due to strong inflows from FIIs and Nifty ended with 14.93% gains in FY2019. The BSE Sensex rose nearly 17 per cent during the financial year 2019, while the Nifty 50 on the National Stock Exchange increased by 15 per cent during same period. However, the gains were capped as crude oil prices rose and fears over a tariff warinduced global slowdown grew. On March 29, the last trading day of FY 2018-19, Sensex rose 127 points to close at 38,672.91 and the Nifty 50 settled at 11,623.90 points, higher by 53.90 points from its previous close.

Recapitalisation of state-run banks which were under stress was a major boost for the markets. Along with recapitalisation of Public sector banks, eventual easing of liquidity concerns, and a sustained rise in foreign fund inflows supported the market. Expectations of the incumbent government coming back to power further boosted the investor sentiments.

The important factor that changed the overall scenario in FY19 was the rising interest rates in global markets which was a major concern for the Indian market. Hence the liquidity that was there available easily was being sucked out and capital outflow was seen. So it was a year more of consolidation.


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, 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), IIT Investrust Limited (IITIL) is in the business of Stock Broking and depository facilities. Besides that IITIL also provides advisory and consultancy services to various body corporates. In June 2019, IITIL has made application to BSE Limited and NSE for voluntary closure of stock broking business and surrender of membership with the Exchanges. IIT Insurance Broking and Risk Management Private Limited (IIT Insurance) is in the business of Direct Insurance Broking. (Life and Non-Life). IITL Corporate Insurance Services Private Limited (IITL Corporate Insurance) had withdrawn the application for undertaking the business of Corporate Agency. Subsequent to that it has not commenced any business till date.

The company derives major source of revenue from the interest income on the loans granted to various group companies. Some of these loans have become NPAs on account of non repayment of loan as well as default in servicing their interest obligations. Besides that in compliance with RBI guidelines, the Company is also required to make provisions on said loans which have further impacted the financials of the company, its performance and profitability.

Major portion of the loans granted to the group companies are in the business of real estate. However the sector is facing trouble from last few years. It is in the midst of structural changes with Real Estate (Regulation and Development) Act 2016, Goods and Service Tax Act (GST), the Insolvency and Bankruptcy code and other regulatory measures. Initially these measures dampened the residential property demand as the buyers lost confidence in the market and many developers took a hit. The unsold inventory levels rose and new launches also declined. There were signs of revival in 2018, but due to the IL&FS default and RBIs tightening norms for NBFC and Housing Finance Corporation which are the primary lender for realty sector has been affecting the market and sales.

With the benefits granted in the budget for affordable housing the joint ventures of the subsidiary company, IITL Projects expect a turnaround in sales in the current fiscal and generate revenue.


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 through the Committee for Investments / Loans and Risk Management identifies, evaluates, analyses 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 classified as non-performing if any amount of interest or principal remains overdue for the number of stipulated days.

The Company has made a substantial investment by acquiring stake in Insurance Company as a Joint Venture participant. The insurance business is subjected to many risks like pricing risk, market-viability risk, asset related risk, lapse rates, mortality assumption risk or any other acquisition risks. Under the said circumstances, the Company is required to monitor the risks managed by the investee company in order to avoid adverse impact on the investment made by the company. However insurance business has a gestation period and therefore management views this as long term investment.

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.


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

Particulars 2018-2019 2017-18
Net Profit margin % (168.77%) (127.35%)
Operating Profit margin % (168.54%) (127.07%)
Debtors turnover times N.A. N.A.
Stock turnover times N.A. N.A.
Debt equity ratio % N.A. N.A.
Current ratio times 5.51 11.99
Interest coverage ratio times N.A. N.A.
Return on Net worth % (8.86%) (4.91%)


The Company has incurred a loss after tax of Rs 4408.67 lakhs during the year compared to loss of Rs 2582.03 lakhs in the previous year. The revenue from operations during the year is Rs 2611.77 lakhs compared to Rs 2239.03 lakhs in the previous year.

Reversal of provision of Rs 307.50 lakhs compared to previous year provision made for sub standard assets of Rs 3740.02 lakhs has been made towards long term loans given to related parties. The income of Rs 273.89 lakhs comprises of interest income compared to previous year of Rs 257.22 lakhs. The income on preference shares amortization is Rs 1440.71 lakhs compared to previous year of 1187.58 lakhs in line with guidelines on Ind AS implementation


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, 2019, the total number of employees including subsidiaries was 21.


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 of Chartered Accountants. 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.


During the financial year 2018-19 the Companys performance remained subdued on account of under performance of its subsidiaries and other group entities as well as on account of RBI restrictions imposed on the company to make further investments or grant loans till the level of NPAs are reduced.

Major component of the loans granted to real estate group entities have turned NPAs. The group entities which are in the real estate have not been able to generate enough cash flows on account of low sales volume. The sector is also reeling from severe cash crunch created by the liquidity squeeze.

The management is of the opinion that reform measures such as GST, IBC, RERA have stabilized the sector and has also brought in more transparency. Also the Union Budget 2019-20 has enhanced its focus on real estate, particularly in the affordable housing segment. To stimulate the demand in the residential market, the Government has announced additional deductions in income tax for affordable housing properties over and above the existing deductions.

With the concessions granted for the real estate sector it is expected that sales will pick up in the current financial year. The Company expects that these entities will be able to repay the loans once the demand picks up.

As per IMF, the Indian economy is projected to grow at 7.2 percent in 2020. A lot depends on several factors like global oil prices, a good monsoon, core inflation and a low interest rate regime

As for global economy it is expected that there will be improvement in the growth in second half of 2019. A lot would depend on host of other factors, the most debilitating being the escalating trade war between US and China on tariffs and counter tariffs.


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. B. Samal
Place: Mumbai Chairman
Date: August 19, 2019 (DIN: 00007256)