jackson investments ltd share price Management discussions


Despite facing challenges from an uninspiring global outlook, Indias growth momentum is likely to be sustained in 2023-24 amid easing inflationary pressures, the Reserve Bank of India (RBI) said in its annual report for 2022-23. For 2023-24, real GDP growth is projected at 6.5 per cent with risks evenly balanced. The economy is expected to expand at 7 per cent in FY2023. “On the back of sound macroeconomic policies, softer commodity prices, a robust financial sector, a healthy corporate sector, continued fiscal policy thrust on quality of government expenditure, and new growth opportunities stemming from global realignment of supply chains, Indias growth momentum is likely to be sustained in 2023-24 in an atmosphere of easing inflationary pressures,” RBI said in the report. It said the real GDP growth at 6.5 per cent in FY2024 will be on account of softer global commodity and food prices, good rabi crop prospects, sustained buoyancy in contact-intensive services, the governments continued thrust on capex, higher capacity utilisation in manufacturing, double-digit credit growth, receding drag on purchasing power from high inflation and rising optimism among businesses and consumers. However, slowing global growth, protracted geopolitical tensions and a possible upsurge in financial markets volatility following new stress events in the global financial system could pose downside risks to growth.

“It is important, therefore, to sustain structural reforms to improve Indias medium-term growth potential,” the report said. The RBI said risks to inflation have moderated with downward corrections in global commodity and food prices and easing of the pass-through from high input cost pressures of last year. Consumer price-based inflation eased to an 18-month low of 4.7 per cent in April 2023 from 5.7 per cent in the previous month, thereby remaining in the RBIs comfort zone of 2-6 per cent for two consecutive months. It is expected that CPI will ease further in May, RBI Governor Shaktikanta Das said. “The cumulative increase in policy repo rate by 250 bps last year would steer the disinflationary process, along with supply side measures to address transient demand-supply mismatch due to food and energy shocks,” the report said. With a stable exchange rate and a normal monsoon unless an El Nino event strikes the inflation trajectory is expected to move down over 2023-24, with headline inflation edging down to 5.2 per cent from the average level of 6.7 per cent recorded last year, it said.

Monetary policy remains focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth, the RBI said. The report highlighted that the crowding-in effects of sustained increase in government capex over recent years is expected to spur higher private investment in the current fiscal. On the external sector front, the current account deficit (CAD) is expected to remain moderate, drawing strength from robust services exports and the salubrious impact of moderation in commodity prices of imports.

“With global uncertainties persisting, foreign portfolio investment (FPI) flows may remain volatile, the RBI said. The favourable domestic growth outlook, lower inflation, and business friendly policy reforms could, however, help sustain buoyant FDI inflows,” it said. The recent financial sector turmoil in the US and Europe has necessitated the need to reassess risks to the financial stability and resilience of financial institutions in the context of monetary policy tightening.

INDUSTRY OVERVIEW

Indias economy showed great signs of recovery in FY22 after the COVID-19 pandemic. Indias gross domestic product (GDP) at current prices in the first quarter of 2022-23 is estimated to be Rs. Rs. 36.85 lakh crore (US$ 447.44 billion), as against Rs. 32.46 lakh crore (US$ 394.13 billion) in 2021-22, showing a growth rate of 13.5%, while nominal GDP is expected to stand at Rs. 64.95 lakh crore (US$ 788.64 billion), a 26.7% growth YoY. These figures make India the fastest-growing major economy in the world, and this economic growth has translated to the investment market in India. Retail investors, mutual funds and PE/VC firms have all stepped up their domestic investments in the Indian market.

On the FDI front, in FY22, India received its highest-ever annual FDI inflow, standing at US$ 83.57 billion, a staggering 85.09% growth from US$ 45.15 billion FDI inflows in FY15. In the manufacturing sector, FDI equity inflows stood at US$ 21.34 billion in FY22, a 76% YoY growth from US$ 12.09 billion in FY21. Singapore (27%) was the country with the highest FDI equity inflow in India in FY22, followed by the US (18%) and Mauritius (16%). Indias Private Equity (PE)/Venture Capital (VC) investment environment is also scaling new heights, with increases in deal size, deal activity and fundraising, as well as improvements in term sheets and benchmarking practices. In the first half of 2022 (January-June), PE/VC investment activity stood at US$ 34.1 billion across 714 deals, a 28% growth YoY. Among these, startup investments were the highest, standing at US$ 13.3 billion across 506 deals.

OPPORTUNITIES & THREATS

While the Indian market has been underperforming its top global peers this year so far, analysts at Franklin Templeton believe the situation appears to be changing and investors are taking another look at Indian equities thanks to the countrys resilient economy and slightly comfortable valuation of stocks after the recent underperformance. "Indias economy has been resilient in the face of recent challenges, including the banking turmoil impacting the United States and Europe.

Indias gross domestic product (GDP) is expected to grow 5.9 per cent in 2023, on the back of 6.8 per cent growth in 2022. Contrast that with negative numbers anticipated in parts of Europe this year and growth of only 1.1 per cent seen in the United States with many forecasters anticipating a recession there as well," The Indian market underperformed its major global peers as investors turned concerned over the valuation amid the prospects of low economic growth. As Rajah highlighted that some analysts felt that the valuations for Indian stocks didnt make sense in a lower-growth environment, and thus the market needed to correct. The price-earnings ratio for Indian stocks (based on the MSCI India Index) stands at 24.13 at present, higher than the MSCI Emerging Markets Index, at 12.41, or the MSCI All Country World Index, at 18.30. The MSCI India Index declined in the first quarter of 2023, while the MSCI All-Country World Index, a global stock market proxy, was up more than 7 per cent.

Overall, we think the market is still very attractive compared with other markets in the region, and we believe the recent underperformance is unlikely to continue. We think India has an opportunity to become even more resilient and domestic investor net inflows should continue as a result. We are also seeing signs of global investors looking to allocate funds to India on a standalone basis. That should change the market picture materially. Many investors are not well informed of the changes that India has seen in the last few years and are yet to understand how differentiated the India story is. Few countries can sustain GDP and corporate earnings growth at high levels for decades, and therein lies the unique opportunity India offers. The Indian IT companies have been under pressure since last year on concerns over a slowdown in key US and European markets. As Indian IT companies have grown in size and importance globally, they are now more exposed to global issues.

RISKS AND CONCERNS

Jackson Investments Ltd. (JIL) has exposures in various line of business. JIL are exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, liquidity and interest rate risk, human resource risk, operational risk, information security risks, regulatory risk and macro-economic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.

MARKET RISK

The Company has quoted investments which are exposed to fluctuations in stock prices. JIL continuously monitors market exposure in equity and, in appropriate cases, also uses various derivative instruments as a hedging mechanism to limit volatility.

LIQUIDITY AND INTEREST RATE RISK

The Company is exposed to liquidity risk principally, because of lending and investment for periods which may differ from those of its funding sources. Management team actively manages asset liability positions in accordance with the overall guidelines laid down by various regulators. The Company may be impacted by volatility in interest rates in India which could cause its margins to decline and profitability to shrink. The success of the Companys business depends significantly on interest income from its operations. It is exposed to interest rate risk, both as a result of lending at fixed interest rates and for reset periods which may differ from those of its funding sources.

Interest rates are highly sensitive to many factors beyond the Companys control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions and, inflation. As a result, interest rates in India have historically experienced a relatively high degree of volatility. The Company seeks to match its interest rate positions of assets and liabilities to minimize interest rate risk. However, there can be no assurance that significant interest rate movements will not have an adverse effect on its financial position.

HUMAN RESOURCE DEVELOPMENT

The Company recognizes that its success is deeply embedded in the success of its human capital. During 2022-23, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings, streamlining the Performance Management System, making the compensation structure more competitive and streamlining the performance-link rewards and incentives.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable to the Company.

COMPLIANCE

The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company continues to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Companys Board of Directors and the Companys Compliance Policy. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/internal guidelines on a periodic basis. The Company has complied with all requirements of regulatory authorities. No penalties/strictures were imposed on the Company by stock exchanges or SEBI or any statutory authority on any matter related to capital market during the last three years.

Kolkata, August 8, 2023 By order of the Board
For Jackson Investments Limited
S/d-
Registered Office: Ramesh Kumar Saraswat
7A, Bentinck Street, 3rd Floor, Room No. 310A DIN: 00243428
Kolkata-700 001 Chairman & Managing Director