Interactive Financial Services Ltd Management Discussions

OVERVIEW OF INDIAN ECONOMY

Growing Indian economy, rising per capita income and increasing urbanisation are also acting as tailwinds for the wealth management industry. The number of affluent middle-class people is on the rise. The World Economic Forum estimates 80% of Indias population to fall in the middle-class segment by 2030, up from about 50% in 2019. The increase in disposable income will create wealth management needs in the affluent middle-class segment.

India has a diversified financial sector undergoing rapid expansion both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The banking regulator has allowed new entities such as payment banks to be created recently, thereby adding to the type of entities operating in the sector. However, the financial sector in India is predominantly a banking sector with commercial banks accounting for more than 64% of the total assets held by the financial system.

India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. Indias appeal as a destination for investments has grown stronger and more sustainable because of the current period of global unpredictability and volatility, and the record amounts of money raised by India-focused funds in 2022 are evidence of investor faith in the "Invest in India" narrative.

(Source: IBEF and Indian Economy Survey Report)

OUTLOOK

Indias financial services industry has experienced huge growth in the past few years. This momentum is expected to continue. Indias private wealth management Industry shows huge potential. India is expected to have 16.57 lakh HNWIs in 2027. This will indeed lead India to be the fourth-largest private wealth market globally by 2028. Indias insurance market is also expected to reach US$ 250 billion by 2025. This will further offer India an opportunity of US$ 78 billion in additional life insurance premiums from 2020-30.

The outlook for Indias financial sector appears bright. The vision of Viksit Bharat by 2047 is indeed an opportunity for a prosperous society, robust financial services sector, strong public finances, and economic sovereignty. The elements of a robust financial services sector include a highly competitive and viable banking sector, universal access to banking and other financial services for all citizens, lowest intermediation costs, efficient and quick access to credit and equity funding for small businesses, highly liquid, efficient, and well-regulated stock, bond, and commodity markets.

The next big step in the coming years is likely to be towards Artificial Intelligence/ Machine Learning (AI/ML), Decentralised Finance, Internet of Things (IoT), etc., which have a vast potential to disrupt the digital payments ecosystem. Further, the vision is for India to evolve as a ‘fintech nation with the highest number of fintech firms and the highest fintech adoption rate by incumbents fuelled by digital public infrastructure.

The Indian financial sector is at a turnpike moment. The dominance of banking support to credit is being reduced, and the role of capital markets is rising. For a country that aspires to be a developed nation by 2047, this is a long-awaited and welcome development. Being reliant on and exposed to the capital market, however, comes with its challenges and trade-offs. As Indias financial sector undergoes this critical transformation, it must also brace for likely vulnerabilities and prepare itself with regulatory and government policy levers to intervene and hedge, as required.

(Source: Economic Survey Report)

1. INDUSTRY STRUCTURE AND DEVELOPMENT

The services sector continues to be a significant contributor to Indias growth, accounting for about 55 per cent of the total size of the economy in FY25. The significant domestic demand for services such as education, healthcare, finance, tourism, hospitality, and entertainment is underpinned by a large and young population. Rapid urbanisation supports transportation, housing, sanitation, and utility services. The expansion of e-commerce platforms has generated heightened requirements for logistics, digital payments, and related services.

The Government has played a crucial role in fostering the growth and competitiveness of Indias services sector by creating an enabling environment, promoting investment, enhancing skills, and facilitating market access. For instance, the Digital India campaign has fostered growth in digital services, export promotion schemes have encouraged services exports, infrastructure development has boosted logistics, tourism, and hospitality industry, and skill development initiatives have provided increased opportunities for the workforce. Furthermore, targeted efforts in healthcare and tourism have enhanced accessibility and development, ensuring a promising future for Indias services sector.

Road Ahead

Indias services sector has thrived on low-cost offerings. The digitisation of services, coupled with appropriate policy nudges, kept progressively transforming the nature of service delivery almost irreversibly during the early part of the last decade. The services exports are diversifying beyond software to include Human Resources (HR), legal, and design services in line with emerging global demands. Thus, two significant transformations are reshaping Indias services landscape: the rapid technology-driven transformation of domestic service delivery and the diversification of Indias services exports.

Domestically, start-ups drive innovation, improving access to credit, raw materials, and markets. Aided by the deep technology ecosystem and the consistent policy push, many technology start-ups are digitising manufacturing and other services. The embedded service content of the non-service economic activities has increased significantly, as evidenced by the National Accounts Statistics. The post-production value addition in activities is also increasingly dependent on services like e-commerce, innovative packaging and advertisement and modern logistics services.

(Source: Economic Survey Report)

2. OPPORTUNITIES AND THREATS

OPPORTUNITIES:

With continuous support by the Government towards entrepreneurship (e.g. ease of doing business), India sees an increasing number of startups and small businesses. With the advent of SME exchange, it has become easier for SMEs to get listed. Furthermore, the rising penetration of private equity and venture capital in Indian startups is expected to result in increased M&As and IPOs.

Revival from Indian Equity market post lock down will revive the IPO deals and thereby push demand of merchant bankers.

Growth in foreign direct investment and also funding by promoters in to companies will push demand of merchant bankers for valuation assignments.

Various funding transactions push demand of merchant bankers for valuation certifications.

THREATS:

Despite opportunities, there are significant factors presenting threats to our business viz:

Capital Market gets affected by events such as interest rate hikes, monsoon performance, tax concerns, other global events & domestic political events such as interim & state elections.

Continuous downward pressure on the fees and commissions caused by heightened competition and willingness of most players to deliver services at very low fees.

The effect of any of the adverse events on the capital market would pose a threat for the process of capital formation and resource raising.

3. SEGMENT-WISE / PRODUCT-WISE PERFORMANCE:

The Company has delivered a satisfactory financial and operating performance for 2024-25. The total revenue is 740.81 lakhs in FY 2024-25 as compared to 306.65 lakhs in FY 2023-24. The Profit before interest and taxes stands 405.64 lakhs for the FY 2024-25 as against 158.27 lakhs in 2023-24.

4. OUTLOOK FOR FY 2025-26

We are a SEBI-registered Category I Merchant Banker with a primary focus on SME IPOs in previous financial years. In FY 2024-25, we successfully completed our first Main Board IPO, which gave us the experience and insight into the dynamics of larger public issues and broader public participation. Having witnessed the potential and the opportunities in Main Board listings, we now intend to strengthen our focus in this segment. Accordingly, for the current financial year 2025-26, we aim to achieve a minimum of 5 Main Board IPO listings. Alongside this, we also plan to enhance our SME IPO activities with a target of completing at least 10 SME IPOs, which is higher than our earlier performance. This balanced approach is part of our strategy to expand and diversify our capital market advisory services.

5. RISK AND CONCERN

The Companys ability to foresee and manage business risks is crucial in achieving favorable results. Risk management at Interactive Financial Services Limited is an integral part of the business, focusing to mitigate the adverse impact of risks on business objectives. The Company has laid down a well defined risk management procedure covering the risk identification, risk exposure, potential impact and risk mitigation process. The Board periodically reviews the risks and suggests steps to be taken to control and mitigate the same through a properly defined framework.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUECY

The Company has an adequate internal control system adopted for operating procedures, policies and process guidelines. The guidelines are well-documented with clearly defined authority limits corresponding with the level of responsibility for each functional area. Further, the Company has budgetary control system to monitor expenditure against approved budgets on an ongoing basis. The Companys robust internal audit programme which works to conduct a risk-based audit not only tests the adherence to laid down policies and procedures but also suggests improvements in the current processes and systems.

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Financial performance of the company during the FY 2024-25 as compared to FY 2023-24 is as under:

(Rs. In Lakhs)

Operational Performance

The Company continued to focus on improving operational efficiency leading to better returns for the shareholders. Further, the company has significantly enhanced its operational performance by establishing prudent risk management framework.

8. MATERIAL DEVELOPMENT IN HUMAN RESOURCES/INDUSTRIAL RELATIONSHIP FRONT, INCLUDING NUMBER OF PEPOLE EMPLOYED

Human resource practices and policies at Interactive Financial Services Limited ensure that all employees, wherever they work, whatever their role is, are always treated equally, fairly and respectfully. We maintain consistent and transparent diversity policies.

Our human resource team believes in personnel management, which involves planning, organizing, directing and controlling of the recruitment and resource management, training & development, compensation, integration and maintenance of people for the purpose of contributing to organizational, individual and social goals.

People power is one of the pillars of success of company. As on March 31, 2025 the Company employs 17 employees. Going ahead, the Company aims to retain and develop the existing employees and align their goals with the common business vision and mission.

9. THE DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

During the financial year, the details of significant change in the key financial ratios i.e. change of more than 25% as compared to the previous year along with the detailed explanation is summarized below on standalone basis:

*The company operated in service industry hence the Inventory Turnover Ratio is not applicable to us.

The Return on Net Worth during the FY 2024-25 was 19.47% as compared to 35.98% in FY 2023-24. The decrease in the return on Net Worth is mainly due to increase in equity shareholders funds due to rights issue made during the year.

10. CAUTIONARY STATEMENT

Statement made in the Management Discussion and Analysis describing the various parts may be "forward looking statement" within the meaning of application securities laws and regulations. The actual result may differ from those expectations depending upon the economic conditions, changes in Government regulation and amendments in tax laws and other internal and external factors.