j k investo trade india ltd Management discussions

J.K. INVESTO TRADE (INDIA) LIMITED ANNUAL REPORT 2006-2007 MANAGEMENT DISCUSSION AND ANALYSIS OVERVIEW During the year under review both the national economy and the capital market were on the up swing. The sensex crossed record mark of 14K points. The GDP growth is estimated at over 9% during the financial year. The Union Budget 2007 has given positive boost to capital market. BUSINESS REVIEW The investment portfolio of the Company is structured in a manner to realise the highest post tax returns on investments. During the year the income of the Company by way of dividend (tax free income) was Rs. 229.72 lacs as compared to Rs.150.10 lacs in previous year. The rental income has increased from Rs. 81.84 lacs to Rs.129.35 lacs. An amount of Rs.59.25 lacs was transferred to Statutory Reserve Fund pursuant to section 45 IC of the Reserve Bank of India Act, 1934. INDUSTRY STRUCTURE AND DEVELOPMENTS The operations of Non-Banking Financial Companies (NBFC) are being regulated and supervised by Reserve Bank of India in terms of powers conferred under Chapter III-B of Reserve Bank of India Act, 1934. The regulatory and supervisory framework for NBFCs have been continuously strengthened in order to ensure strong and healthy functioning, limiting the excessive risk taking practices and protecting the interest of the deposit holders. The Reserve Bank of India also intends towards moving to a phase of non-acceptance of public deposits by NBFCs over the years. OPPORTUNITIES AND CHALLENGES GDP growth forecast is 8 - 9% over the next few years, which will provide lucrative opportunities to the Indian economy. The financial service industry is one of the main drivers of growth and this augurs well for the future. The NBFC sector continues to face competitive pressures from the banking sector and financial institutions, due to their increased penetration in the consumer financing market, with comparatively low cost of funds at their disposal. The spreads in the lending business have also narrowed considerably, bringing risk-adjusted margins to generally unviable levels. JKITs strong financial position, reflected by its low debt : equity ratio and adoption of prudent business strategies, have enabled it to consistently post satisfactory performance despite these difficult conditions. RISK AND CONCERNS JKIT is exposed to specific risks that are particular to its businesses and the environment within which it operates, including interest rate volatility, economic cycle, market risk and credit risk. JKIT manages these risks by maintaining a conservative financial profile and by following prudent business and risk management practices. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACIES A system of internal controls is practiced by JKIT to ensure that all its assets are safeguarded and protected against loss from unauthorised use or disposition of assets and that the transactions are authorised, recorded and reported correctly. Regular internal audits and checks ensure that responsibilities are executed effectively. Report of Internal auditors is submitted to Audit Committee for review. The Audit Committee also reviews the adequacy of internal control system. HUMAN RESOURCES DEVELOPMENT JKIT has a team of able and experienced persons and takes outside professional advice from time to time. The number of employees as on 31st March 2007 stood at 17. CAUTIONARY STATEMENT Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include changes in Government regulations, tax regimes, economic developments within India and abroad and other incidental factors.