Kiran Vyapar Ltd Management Discussions.

Industry Structure and Developments:

The Company operates in the Non-Banking Financial Company (NBFC) segment of Industry and is registered with the Reserve Bank of India. It is mainly engaged in the business of providing Loans and making Investment in Shares and Securities. The performance of the company is closely linked with the overall performance of the Indian Economy, Financial and Capital Markets and the business strategy of the company is dependent on the economic environment, policies of the Government and Reserve Bank of India. The Company continues to invest for the long term while availing opportunities to realize gains endeavoring to maintain its policy of consistent dividend distribution. The Company continues to remain invested in leaders across sectors, which we believe have potential to remain value accretive over the long term.

COVID-19, a global pandemic has affected the world economy including India, leading to significant decline and volatility in financial markets and decline in economic activities. Due to the outbreak of COVID-19 pandemic, all nations of the world reacted to the potential health risk arising from the spread of COVID-19 and every border was locked down for travel and the nervousness in global sentiment drove markets into a steep correction with the MSCI World Index falling vertically down to 1,602 points on 23rd March, 2020. As things stand in June 2020 the world is enveloped with lower demand for many products and industries, excess and growing leverage in the balance sheets of the Central Banks, Governments, and companies and unprecedented unemployment and finally a spiral rise in bankruptcies.

The national lockdown announced on 23rd March 2020 affected activities of organizations across the economic ecosystem, impacting earning prospects and valuations of companies and creating huge volatility in the stock markets. The Indian equity indices have tracked the global markets with near perfect correlation. The Sensex peaked to its all-time high in January, 2020 to 42,274 level and thereafter corrected sharply to 25,639 in March, 2020 (a fall of 39% in two months). The Index has recovered to some extent and moved up from those lows to around 33,000 in mid-June, 2020. This recovery is being attributed mainly to factors such as opening up of the economy, a promising monsoon, substantially higher global liquidity, the financial support packages and measures taken by the RBI and the Finance Ministry.

Opportunities and Threats

It is now an accepted paradigm - the world changed in March 2020 due to COVID-19. In India, it could have been a healthcare calamity, if the government had not imposed a complete lockdown. On an optimistic note, this will mean that the gradual opening up of the lockdown may result in a relatively faster normalization of economic activity. Perhaps, the biggest opportunity for India could be that many manufacturers want to move out of China as a strategy for de-risking. Government of India must invite foreign investment and this can happen if India can become competitive and adopt business friendly reforms in areas of Taxation, FDI, Judiciary, Labour etc. to become the most attractive destination for investments. CMIE report says that early estimates of jobs data indicate that the corona virus effect may have left a devastating impact on the economy, sending the urban unemployment rate soaring to 30.9%, and overall unemployment rose to 23.4%. It is imperative that India creates employment opportunities and higher distributable income in the hands of individuals, especially millennials, for consumption to grow. Manufacturing must make a comeback in India if GDP growth has to once again rise above 7%. India has far higher interest rates than the developed world. Needless to say that some of the Investee companies in our portfolio will suffer in these circumstances for the better part of the year and the share prices of those companies may also suffer underperformance. As a result of the pandemic, the Companys business is likely to be impacted by lower lending opportunities and decline in carrying value of investments, thereby impacting profitability. The impact of COVID-19 on Companys operations and results remain uncertain and dependent on extent of spread of the pandemic, steps taken by the Government and central bank to mitigate the economic impact, steps taken by the Company and its Investee Companies and the time it takes for economic activities to resume at normal levels. However, the Company endeavors to evaluate opportunities considering the macroeconomics conditions both globally and domestically.

Segment Wise Performance

The Company being a Non-Banking Financial Company operates under a single segment viz providing loans and investments in shares and securities.

Outlook

Your company remains invested in diversified sectors and instruments across high quality investee companies and funds and will keep evaluating business opportunities on a continuous basis across sectors, both in the listed and unlisted space. Management will evaluate and select investments based on high quality governance, sustainability and financially strong balance sheets. In this disruption, we will look for emerging sectors and companies which may become the leaders in the next decade. The Companys capital and liquidity position remains strong and would continue to be the focus area for the Management.

Based on the current assessment of the potential impact of the COVID-19 on the Company, management is of the view that the Company is well capitalised with low leverage, widely diversified in terms of its lending and investment activities and has adequate liquidity to service its obligations, sustain its operations and also look at any appropriate investment/lending opportunities. The Company has maintained adequate provisions on loan assets based on the information available at this point of time including economic forecasts. The extent to which the current pandemic will impact the carrying value of investments and loan receivables is dependent on the future developments, which are highly uncertain at this point in time. The Company believes that it has considered all the possible impact of known events arising out of COVID 19 pandemic in the preparation of the financial results. The impact assessment of COVID 19 is a continuing process given its nature and duration. The Company will continue to monitor for any material changes to future economic conditions and the developments with respect to early discovery of a successful vaccine for Covid-19.

Risks and Concerns

The Company being a Non-Banking Financial Company is mainly engaged in the business of providing Loans and making Investment in Shares and Securities and therefore it is exposed to various financial risks such as credit, market, interest rate and liquidity risks associated with financials products. However, the Company has a robust financial risk management system in place to identify, evaluate, manage and mitigate various risks associated with financial products and ensure that the Company accomplishes its desired financial objectives. The Company has a Risk Management Policy in accordance with the provisions of Master Direction - Non Banking Financial Company - Systemically Important Non Deposit Taking Company and Deposit Taking Company (Reserve Bank) Directions, 2016 issued by Reserve Bank of India. It establishes various types and levels of risks with its varying levels of probability, the likely impact on the business and its mitigation measures. The Management evaluates the execution of Risk Management Practices in the Company, in the areas of risk identification, assessment, monitoring, mitigation and reporting from time to time.

The Company expects FY 2020-21 to be a highly volatile year for Global Markets including India and believes that the future success of the company depends on its ability to anticipate volatility in Capital and Financial Markets and minimise related risks through diversified and prudent long term investing decisions. Hence the Management regularly monitors and reviews the continuous changing Economic and Market conditions globally in order to take timely and prudent investment decisions. However, any slowdown in the Global and/or Indian economy or volatility in the Financial and/or Capital markets induced due to the ongoing Covid-19 pandemic could adversely affect the performance of the company.

Internal Control System and their Adequacy:

The Company has a proper and adequate internal control system to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorised, recorded and reported correctly. The internal control is exercised through documented policies, guidelines and procedures. It is supplemented by an extensive program of internal audits conducted by the Internal Auditor and tested by the Statutory Auditors of the Company. The audit observations and corrective action taken thereon are periodically reviewed by the audit committee to ensure effectiveness of the internal control system. The internal control is designed to ensure that the financial and other records are reliable for preparing financial statements and other data, and for maintaining accountability of persons.

Financial and Operational Performance:

The financial statements have been prepared in accordance with Indian Accounting Standards notified under section 133 of the Companies Act 2013, read together with the Companies (Indian Accounting Standards) Rules, 2015 (as amended) together read with the MCA notification dated 11 October 2018 which states the mandate for adoption of these standards by the NBFC Companies, as defined under the Companies (Indian Accounting Standards) (Amendment) Rules, 2016. Please refer to the Directors Report in this respect.

Material Developments in Human Resources:

Your Company continues with the philosophy of thrust and focus on human resources for its continued success. In order to strengthen our human resources for meeting the future challenges and expansion plans, we have focused on hiring the best resources available and retaining and developing our existing talent pool.

The total employee strength as on 31st March, 2020 was 12.

Details of Significant Changes in the Key Financial Ratios

Pursuant to amendment made in Regulation 34(3) read with Part B of Schedule V to SEBI has notified SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, details of Significant Changes (i.e. Changes of 25% or more as compared to the immediately previous Financial year) in the Key Financial Ratios and Return on Net Worth of the Company (on standalone basis) including explanation thereof are given below:

Particulars FY ended 31st March 2020 FY ended 31st March 2019 Changes between FY20 and FY19 Explanation
Interest Coverage Ratio 6.44 18.99 -66.09% Increase in Interest Expenses along- with reduction in PBT
Current Ratio 4.76 4.31 10.36% -
Debt-Equity Ratio 0.026 0.030 -15.41% -
Return on Capital Employed 3.1% 3.6% -14.89% -
Return on Net Worth 1.50% 2.12% -29.02% Decrease in PAT by Rs. 4.53 Crores due to adverse impact of COVID-19 pandemic.

Cautionary Statement

Statements in this management discussion and analysis describing the Companys objectives, projections and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downtrend in the industry- global or domestic or both, significant changes in political and economic environment in India, applicable statutes, litigations etc.

For and on behalf of the Board of Directors
Place : Kolkata Date : 15.06.2020 L. N. Bangur Shreeyash Bangur Chairman Managing Director

To the Members of Kiran Vyapar Limited

1. This certificate is issued in accordance with the terms of our engagement letter dated 03 October 2019.

2. We have examined the compliance of conditions of corporate governance by Kiran Vyapar Limited (‘the Company) for the year ended on 31 March 2020, as stipulated in Regulations 17 to 27, clauses (b) to (i) of Regulation 46(2), and paragraphs C, D and E of Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations).

Managements Responsibility

3. The compliance of conditions of corporate governance is the responsibility of the management. This responsibility includes the designing, implementing and maintaining operating effectiveness of internal control to ensure compliance with the conditions of corporate governance as stipulated in the Listing Regulations.

Auditors Responsibility

4. Pursuant to the requirements of the Listing Regulations, our responsibility is to express a reasonable assurance in the form of an opinion as to whether the Company has complied with the conditions of corporate governance as stated in paragraph 2 above. Our responsibility is limited to examining the procedures and implementation thereof, adopted by the Company for ensuring the compliance with the conditions of corporate governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

5. We have examined the relevant records of the Company in accordance with the applicable Generally Accepted Auditing Standards in India, the Guidance Note on Certification of Corporate Governance issued by the Institute of Chartered Accountants of India (‘ICAI), and Guidance Note on Reports or Certificates for Special Purposes issued by the ICAI which requires that we comply with the ethical requirements of the Code of Ethics issued by the ICAI.

6. We have complied with the relevant applicable requirements of the Standard on Quality Control (SQC) 1, Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements.

Opinion

7. Based on the procedures performed by us and to the best of our information and according to the explanations provided to us, in our opinion, the Company has complied, in all material respects, with the conditions of corporate governance as stipulated in the Listing Regulations during the year ended 31 March 2020.

We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

Restriction on use

8. This certificate is issued solely for the purpose of complying with the aforesaid regulations and may not be suitable for any other purpose.

For Walker Chandiok & Co LLP

Chartered Accountants

Firms Regn. No. : 001076N/N500013

Vikram Dhanania

Partner

Membership No. : 060568

UDIN : 20060568AAAABF9032

Place : Kolkata

Date : 15 June 2020