Keynote Financial Services Ltd Management Discussions

Industry structure and developments

In FY25, economic growth slowed due to uncertainties around the elections and limited government activity, which weakened capital expenditure. Despite this, several key macroeconomic indicators remained strong: foreign exchange reserves stood at USD 676 Bn, inflation eased to 3.3% by March 2025, the rupee strengthened to 86 per USD, and the trade deficit was offset by a robust surplus in services, all contributing to a GDP growth of 6.5% for the year, with Q4FY25 growth reaching 7.4%. Capital markets played a pivotal role in this growth, driven by resilient macroeconomic performance, expanding retail participation, and a deeper market ecosystem. Indias equity market capitalisation reached ~USD 5.33 Tn in March 2025, ranking fifth globally after the US, China, Japan and Hong Kong.

Total fundraising in FY25 was estimated at ~ Rs 20 Tn, comprising ~ Rs 3.71 Tn in equity (up ~92% YoY) and Rs 11.12 Tn in debt. India witnessed a total of 318 IPOs during FY25 including 80 mainboard IPOs, which was up from 76 in FY24, while capital raised surged 163% to ~ Rs 1,63,000 Cr from ~ Rs 61,900 Cr. The IPO pipeline was dominated by sectors such as technology, consumer goods, and financial services, reflecting investor confidence in these industries. H2FY25 experienced subdued IPO activity, with only 11 IPOs in Q4, attributed to consistent net FPI sell-offs and global economic uncertainties. SIP inflows rose 45% to ~ Rs 2.9 Tn with Rs 8.11 Cr active accounts, up 27% YoY. NSE added ~ Rs 84 lakh new accounts, totalling ~ Rs 4.9 Cr. Higher derivatives turnover and regulatory support boosted capital formation despite global volatility.

Your Company continues to provide services of Merchant Banking on ECM in the mid-market client segment. With a focus on IPOs on the main board, your Company is currently working actively on several mandates as BRLM which will fructify over the next 12-18 months.

The Company also concluded a few mandates on Corporate Finance and Advisory. The Company also continued its practice of providing services to Alternative Investment Funds (AIFs) as mandated by SEBI and issued more than 50 Due Diligence Certificates for various AIFs.

Your Company is committed to provide tailor made and efficient services ECM execution capabilities. We look at various opportunities to secure mandates in the mid-market segment. The volatility in the capital market on account of various developments in domestic as well as global markets is likely to continue.

During the financial year, ECM mandates were executed besides Corporate Finance mandates in the form of M&A, Valuation services & ESOP advisory services. A new vertical of providing Due Diligence services to AIFs is now well established and company provided services to various AIFs during the financial year. The total revenue from sale of services for F.Y.2024-25 was Rs 593.73 lakhs as compared to Rs 1,687.46 lakhs for the financial year ended 2023-24.

The outlook for the current financial year in the industry segment in which your Company operates remains optimistic. Though the pipeline for IPOs is strong, the IPO activity is likely to remain muted for the first couple of quarters in the next financial year because of combination of domestic & foreign developments.

The size of your Company is a concern given the segment in which it operates. However, your Company also enjoys a niche in the segment in which it operates for providing value added and efficient It may be difficult for your Company to compete for large size global ECM mandates.

Your Company is in existence as Merchant Banker since past several years has developed well-structured internal control systems to conduct business within the framework of Regulations. The present structure & systems are adequate and commensurate to the size of operations of your Company.

Your Company has adopted a policy of being selective while accepting assignments. Your Company has been able suceesful in making a mark as a Life Cycle Banker & Advisor to several coprporates over the years. Improved capital markets is likely to have positive impact on financial performance of the company. The management is striving hard to grow the existing pipeline for mandates and focus on timely execution enabling the company to sustain its performance.

Your Company has adopted a policy of appointing key personnel for various segments. There are no material adverse developments in human resources/industrial relations front. Although, the Company has recently expanded its manpower strength, it would like to continue to operate with a lean and robust employee structure.

Significant Financial Ratios (i.e. change of 25% or more as compared to the immediately previous financial year) along with detailed explanations thereof

Debtors to turnover ratio was at around 2.80 times as against around 6.34 times as at the end of previous financial year. Your company is a service provider & have adopted the policy of raising the invoices on the clients on completion of the milestone as per respective engagement letters. As a result, the outstanding debtors are not significant. However, some of the debtors remain outstanding at the end of financial year which are mostly recovered in the next financial year.

Being into services business not applicable.

The Interest Coverage Ratio is approximately 49.15 times as compared to NIL in the previous financialyear.

Current Ratio for this financial year is about 22.72 times as against 7.33 times for the previous financial year. This is particularly on account of provision for fair value adjustments in current investment as per requirements of IND-AS.

Debt Equity Ratio is 0.01 as compared to NIL in the previous year.

The operating profit margins stood at 48.45% as against the profit87.81% reported in the previous financial year. During the year profitability is reduced on account of decline in net gain on fair value of investments as per accounting standards.

The net profit margin is at 35% during current financial year as against 43% previous year.

Not applicable

There has been a fall in Return on networth which stood at 5.07% as against 15.31% during previous financial year. Same is attributed to completion of very few assignments on hand, substantial decrease in net gain on fair value of investments coupled with constant expenses on account of salary & administrative costs.

Your Company follows Accounting Standards as prescribed by Institute of Chartered Accountants of India (ICAI) for preparation of financial statements; there is no other such different treatment followed for the same.