(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) |
+91-9892691696
