Inventure Grow. Management Discussions


(a) Industry structure and developments.

Indian broking industry operates in the volatile environment which has changed rapidly over past 3 years. Sentiments of the market was impacted by aftermath of global pandemic accelerating retail inflation rate to 7.79% in April 2022 on the back of central bank hawkish stance. FPIs were the net sellers during the fiscal. Geo political tension continued resulted in souring crude oil prices and recession fears across some developed nation. IPO market was largely tepid with Indias largest IPO Life Insurance Corporation (LIC) made its debut in the market in May 2022 to raise Rs.20,557 crores.

Benchmark indices also remained quite volatile with Nifty making Low at around 15183.40 in June month and High at around 18887.60 in Dec month. Retail broking has played a prominent role with new investors entry in the market has been tripled from March 2020. The total number of demat account crossed the 10 crore mark for the first time in August 2022. As per data reported by CDSL & NSDL, 2.5 crores demat accounts were added in FY2023 totaling cumulative demat account to 11.45 crores.

Average daily turnover of ADTO for the equity markets both cash & F&O during FY2023 stood at Rs.153.9 lakh crore, up 121% YoY from Rs.69.5 lakh crore in FY2022.

Industry has gone through structural changes transitioning to fee based model from earlier transaction based tilting companies to increase its source of income by providing wealth management, Mutual Fund, Insurance, Investment advisory, Research of PMS services apart from brokerages charges. Cross selling of different products has become important trigger to have skin in the game by providing add-on services and retaining profitability.

The government increased STT on the sale of futures and options from 0.05% to 0.062% (Hiking by 25%) which will have negative impact on F&O volumes. Further NSE announced scrapping of Do Not Exercise (DNE) from the beginning of April 2023 expiry.

(b) Opportunities and Threats

Company operates in highly competitive industry environment. Technological advancement has potential to revolutionize the broking industry playing a dominant role enabling brokers to make informed decisions, execute trades more efficiently, and better manage risk. It has made tedious tiring work quite simple, quiet and easy mandating broker to stay updated with current digital scenario. Some of the smart features introduces are E-KYC, AMO trades, User friendly mobile app, Analytical and charting tool etc. Increasing number of investor from tier 2 and tier 3 cities will help company to increase its revenue base.

Cross selling has provided great opportunity to increase value share by offering different types of services to clients.

Updating cut edge technology requires capital infusion. It is very difficult for full service broker to adapt quickly adapt to this digital transformation just like discount brokers. Moreover, various rules and regulations imposed by the government and regulatory agency like SEBI impact trading volumes, indirectly impacting revenue and margins of the broker.

(c) Segment-wise or product-wise performance

Company is engaged in the business of providing stock broking service. Its consolidated quarterly segment performance is mentioned below.

Sales Q4 FY22 Q3 FY23 Q4 FY23 QoQ % change YoY % change
Equ ity/Commodity Broking & Other Related 9 7 7 0% -22%
Financing & Other Related Activity 2 2 5 150% 150%
Others 2 4 3 -25% 50%

Figures Rs. In Crores

More than 60% of the company revenue comes from Equity/Commodity broking business. 28% of the revenue is obtained from Financing activity and remaining from others.

(d) Outlook

Indias GDP growth started off strong in Q1FY2023, with a double-digit growth of 13.1%. However, growth slowed down in the following quarters, reaching 6.2% in Q2FY2023 and 4.5% in Q3FY2023. This was due to a number of factors, including high inflation and weakening demand. In Q4FY2023, growth bounced back to 6.1%, pushing the overall growth rate for FY2023 to 7.2%. This makes India one of the fastest growing major economies globally in FY2023. However, the IMF has revised its growth forecast for FY2024 to 5.9%, citing a slowdown in domestic consumption and challenging external conditions.

India has emerged as the fastest-growing major economy in the world, and is expected to be one of the top three economic powers globally over the next 10-15 years, backed by its robust democracy and strong partnerships. Source: www.ibef.org.

According to CareEdge, the broking sectors revenue growth will decelerate to 10% in FY23 to reach $28,000- $30,000 billion and be flat in FY24E, with some conventional brokers benefiting from industry consolidation.

Indian Economy is currently at inflection point. Efforts and initiatives taken by the government will help our country to become 5 trillion economies faster.

(e) Risks and concerns.

The Company recognizes that risk is inherent to any business activity and that managing risk effectively is critical to the immediate and future success of the Company. The Company is registered and regulated by SEBI for stock broking, depository participant, investment advisory, and mutual funds. The Company has highly digitalized processes which minimizes the scope for omission and commission of errors and frauds. However, the Company faces variety of risk because of business environment it operates in, which may affect its operations or financial results and many of that risk are driven by factors that the company cannot predict or control. The major sources of our revenues are derived from equity brokerage business. Hence, like other players in the market, our business is highly sensitive to economic and political conditions prevalent in the country and across the globe. Any sustained downturn in general economic conditions or Indian equity markets and severe market fluctuations would likely result in reduced client trading volumes and net revenues, and hence, will have a material adverse effect on our profitability. The Company is also exposed to the risk arising from misconduct, fraud or trading errors by its employees such as indulgence in unauthorized transactions by employees/registered authorized persons, misreporting of and noncompliance with various statutory and legal requirements, improper use of confidential information and operational errors. We also provide exposure limits to clients, based on the collaterals of securities that we receive from them, in connection without brokerage business. Sharp change in market values of securities and the failure by parties to honor their commitments on a timely basis could have a material adverse effect on the portability of our operations. The overall assessment of risks and threats at Company level is carried out and presented to the Board of Directors. Hence adequate risk management system has been put in place by the management to ensure the success and financial soundness of the company and to deal with various trades related risks.

(f) Internal control systems and their adequacy.

The Company has an internal audit system which is effective and commensurate with the nature of business, regulatory prescriptions and the size of its operations. The scope of internal audit covers all aspects of the business, including regular front-end and back-end operations and internal compliances. The Company also retains specialized audit firms to carry out specific I concurrent audit of some critical functions, such as halfyearly internal audit mandated by SEBI/Exchanges, Processes, Know Your Customer (KYC) verifications, demat transfers, payouts verifications, systems audit, branches and authorized person Ds audit and, end use verification audits, among others. In addition, the Company complies with several specific audits mandated by regulatory authorities such as SEBI I Exchanges I Depositories and the reports are periodically submitted to the regulators. The Board/Audit Committee reviews the overall risk management framework and the adequacy of internal controls instituted by the management team. The Audit Committee reviews major instances of fraud periodically and actions are taken on the same. The Board has also put in place state-of- threat technology and has automated most of the key areas of operations and processes, to minimize human intervention. The statutory auditors, after reviewing the systems and processes, have confirmed the adequacy and effectiveness of the internal financial controls of the Company.

(g) Discussion on financial performance with respect to operational performance.

Particulars Q4 FY22 Q3 FY23 Q4 FY23 QoQ % A YoY % A FY 2022 FY 2023 % A
Sales 10.45 12.93 14.45 12% 38% 47.55 48.82 3%
Operating Profit 1.48 2.29 5.91 158% 299% 17.83 13.07 -27%
OPM 14.16 % 17.71 % 40.90 % 2319 Bps 2674 Bps 37.50 % 26.77 % (1073) Bps
Net Profit 2.09 1.44 4.20 192% 101% 13.95 9.27 -34%
NPM 20.00 % 11.14 % 29.07 % 17.93 Bps 9.07 Bps 29.34 % 18.99 % (1035) Bps

Figures:- Rs. In Crores

• The revenue posted by the company was Rs.14.45 crore which grew by 38.28% on YoY basis and grew by 11.76% on QoQ basis for the first quarter of FY2022. On yearly basis revenue of the company largely impacted due to lower brokerage.

• The EBITDA posted by the company was Rs.5.91 crore which grew by 299.33% on YoY basis and grew by 158.08% on QoQ basis for the first quarter of FY2022.

• The EBITDA Margin for the quarter ended 30th June FY2021 was 40.9%, which grew by 2673.7 bps on YoY basis and grew by 2318.9 bps on QoQ basis.

• The net profit posted by the company was Rs.4.2 crore which grew by 100.96% on YoY basis and grew by 191.67% on QoQ basis for the first quarter of FY2022.

• The Net profit margin for the quarter was 29.07%, which grew by 906.58 bps on YoY basis and grew by 1792.89 bps on QoQ basis.

(h) Material developments in Human Resources/Industrial Relations front including number of people employed.

As of March 2023, the employee strength stood at 96.

(i) Key Ratios.

Key Ratio 2022 -2023 2021 - 2022
Interest Coverage Ratio 22.69 19.10
Current Ratio 2.68 2.42
Debt Equity Ratio 0.05 0.04
Networth 16843.17 16418.43

Note: The change in key Ratios are negligible as compare to previous year.

(j) Disclosure of Accounting treatment:

Your Company in preparation of Financial Statement has followed all the Ind Accounting Standard applicable.

Cautionary Statement

This report contains forward-looking statements extracted from reports of Government Authorities/ Bodies, Industry Associations etc. available on the public domain which may involve risks and uncertainties including, but not limited to, economic conditions, government policies, dependence on certain businesses and other factors. Actual results, performance or achievements could differ materially from those expressed or implied in such forward-looking statements. This report should be read in conjunction with the financial statements included herein and the notes thereto. The Company does not undertake to update these statements

For lnventure Growth & Securities Limited Sd/- Sd/-
Mr. Kanji B. Rita Mr. Kamlesh S. Limbachiya
(Chairman & Managing Director) (Whole-Time Director)