KJMC Corporate Advisors (India) Ltd Management Discussions.

OVERVIEW

The financial statements for the year have been prepared in compliance with the requirements of the Companies Act, 2013 and rules made thereunder, guidelines issued by the Securities and Exchange Board of India (SEBI), the Accounting Standards prescribed by the Institute of Chartered Accountants of India and the Generally Accepted Accounting Principles in India. Management accepts responsibility for the integrity and objectivity of these financial reported statements. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, so that the financial statements reflect in a true and fair manner and reasonably present our state of affairs, profits and cash flows for the year.

INDIAN ECONOMY

The COVID-19 pandemic is having a "severe" effect on the world economy and is expected to cause a -3% change (i.e., a contraction) in global output in 2020, "much worse" than the 2008-09 financial crises, as per the International Monetary Funds (IMF) World Economic Outlook (WEO). Indias growth is expected to dip to 1.9% in 2020 and rebound to 7.4% in 2021, as per the WEO, which was released by the Fund on Tuesday.

Owning to a strict nationwide lockdown due to the novel coronavirus, COVID-19, during the bulk of the first quarter of FY2020-21, Indias Gross Domestic Product (GDP) for the April-June quarter (Q1) slipped by a sharp 23.9%, as per provisional estimates released by Ministry of Statistics and Programme Implementation (MoSPI) on Monday. The GDP had expanded by 5.2 per cent in the corresponding quarter of 2019-20.

Continued extensions to the lockdown imposed due to COVID-19 led to decrease in Private consumption. In contrast, the Government implemented relief measures and increased government consumption helped to curb the impact of the pandemic.

Cushioned by government spending and rural demand, manufacturing - especially consumer non-durables - and some categories of services, such as passenger vehicles and railway freight, have gradually recovered in Q2FY2021.

The RBI cut the Repo Rate five times in 2019 and consequently the repo rate came down from 6.0% in April 2019 to 4.4% in March 2020. Since May 2020, the RBI has maintained the repo rate at 4.00%. The reverse repo rate under the LAF stands at 3.35%, and the marginal standing facility (MSF) rate and the Bank Rate to 4.25%. The RBI is of the view that the underlying factors are essentially supply-side shocks which should dissipate over the ensuing months as the economy unlocks, supply chains are restored, and overall economic activity normalises.

The COVID-19 pandemic has exacerbated the woes of non-banking financial companies (NBFCs). The decline in non-bank credit growth, which started in the second half of fiscal 2019, continued through fiscal 2020, accentuated first by economic slowdown and then - more vigorously - by the pandemic. The Reserve Bank of India (RBI) has allowed lenders to extend moratorium on loans up to August 31, temporarily mitigating the hardship of borrowers. However, in the absence of any such moratorium on non-banks capital market borrowings, ensuring adequate liquidity to meet repayments coming up in the near term has become the primary challenge for most NBFCs.

The NBFC sector is set to record their lowest loan growth in over a decade in the ongoing fiscal year of 2020.

1. COMPANYS BUSINESS AND SERVICES OFFERRED

Your Company is a Category-I Merchant Banker registered with the Securities & Exchange Board of India (SEBI). Inspite of the effects of the COVID-19 pandemic, your Company foresees immense growth opportunities due to the subsequent pick-up in economic activity, increased focus on "Make In India" initiative leading to increasing role for the private sector, possible opening up of the Agriculture sector, further removal of Trade barriers, etc.. Governmental controls on most business activities are set to evaporate. The Country has highly talented and trained manpower which is attracting Global giants to set up manufacturing base in India. All these will usher in a period of sustained growth, opening immense opportunities for your Company in its core area of business.

The Company offers following Services to the Corporate Sector:

(1) Merchant Banking Services:

(a) Syndication of Funds through Equity Capital Market - Initial Public Offers (IPOs), Offer For Sale, Rights Issue, Qualified Institutional Placements (QIPs).

(b) Other Merchant Banking Services - Buyback, Takeover, Delisting, Fairness Opinion, etc.

(2) Mergers and Acquisition Advisory services.

(3) Syndication of Funds through Seed Funding, Venture Capital, Angel Investors, Family Offices, Private Equity Funds, etc.

(4) Syndication of Debt through Banks, Financial Institutions, Non Banking Finance Company, etc.

(5) Channel Financing

(6) Advisory on Project Financing, Debt Restructuring, Debt Refinancing and One Time Settlement (OTS)

(7) Valuation services for:

• Overseas Direct Investment transactions

• Foreign Direct Investment transactions

• Transactions coming under the purview of Rule 11UB and Rule 11UC of Income Tax Rules

• Requirements under Companies Act

• Requirements under SEBI Regulations

(8) ESOP Advisory services including Fair Market Value Certification

(9) Corporate Advisory Services

(10) Arrangers to shares of Unlisted / Pre-IPO companies

2. FINANCIAL REVIEW:- Consolidated

During the year under review, while the sentiments improved the Project and Corporate activities and growth will take some time to see its impact on the Companys revenue. Your Company earned the total consolidated revenue of Rs. 463.66 Lakhs as against Rs. 468.30 Lakhs in the previous year. The total expenditure during the year is Rs. 530.54 Lakhs as against Rs. 522.36 Lakhs in the previous year. The net loss for the year under review was Rs. 70.88 Lakhs as against net loss of Rs. 156.31 Lakhs in the previous year.

Standalone

During the year under review, the total standalone revenue was Rs. 152.93 Lakhs as against Rs. 182.25 Lakhs in the previous year. The total expenditure during the year is Rs. 224.86 Lakhs as against Rs.

212.02 Lakhs in the previous year. The net loss for the year under review was Rs.69.82 Lakhs as against net profit of Rs. 28.31 Lakhs in the previous year.

Sr No Name of Ratio 31.03.2020 31.03.2019 Reason for significant change
1 Debtors Turnover Ratio 3.214161292 5.639166535 The reduction in sales turnover led to the change in the ratio.
2 Inventory Turnover Ratio Nil Nil -
3 Interest Coverage Ratio -24.24 -14.35 The reduction in profit before tax led to the change in the ratio.
4 Current Ratio 0.30 0.48 The change in Current Assets and Current Liabilities both resulted in the change in ratio.
5 Debt Equity Ratio 0.030 0.006
6 Operating profit Margin -0.45 -0.15 The reduction in profit before tax led to the change.
7 Net Profit Margin (0.457) (0.155) The change in total revenue and net profit led to change in the ratio.

3. BUSINESS OUTLOOK:-

As part of its service areas, your Company is striving hard for getting mandates across business verticals which includes Private Placements involving PE/VC Funds, managing Initial Public Offers, Rights Issues, Follow on Offers, Qualified Institutional Placements and Preferential Placements to institutional and strategic investors, Valuation Services and Corporate Advisory Services. Our expertise in due diligence, structuring, pricing and distribution combined with independent, unbiased and objective recommendation as corporate advisory has enabled us to face competition.

Your Company is also actively involved in arranging shares of Unlisted/ Pre IPo Companies.

The current slowdown in the Global and Indian Economy, mainly due to COVID-19, has negatively impacted the capital markets and led to continued volatility. Inspite of this, many Companies which received approval for their Initial Public Offer (IPO) / Offer For Sale (OFS), came out with IPO / OFS and tasted great success. However, many Companies have delayed their fund raising plans due to volatile market conditions.

Economic activity is expected to gather pace in second half of FY2020-21 on account of recovery of investment and consumption, aided by government policies and increased public expenditure. This is expected to have a positive impact on the capital markets leading to healthy growth in fund-raising activities thus enabling more companies to tap the capital markets.

4. RISKS AND CONCERNS:-

The current business environment is increasingly complex, competitive and continuously evolving and thus subject to increasingly stringent regulatory and legislative framework. Risk is an integral part of the financial services industry and almost every business decision requires the management to balance risk and reward with the ultimate aim of delivering superior shareholder value.

Your Company lays great importance on Risk Management and Risk Management has been an important and integral part of the operations of your Company. This ensures meeting the objectives of maintaining robust asset quality alongside growth in business. The Management regularly identifies, evaluates and reviews the various risks on an on-going basis and develops risk mitigation plans to minimize the overall impact of the various risks involved. The Companys operational processes are well defined and adherence to Maker/Checker mechanism ensures precise compliance with laid-down procedures. Additionally, independent Internal Audit firms have been appointed to review and report on the business processes. Being engaged in the business in a highly regulated industry; we are presented with risk containment measures in the very regulations.

The companys business could potentially be affected by the following factors:-

• Risk that a client will fail to deliver as per the terms of a contract with us or another party at the time of settlement;

• Impact of volatility in markets on our revenues and investments, sustainability of the business across cycles;

• Risk due to uncertainty of a counter partys ability to meet its financial obligations to us;

• Inability to conduct business and service clients in the event of a contingency such as a natural calamity, breakdown of infrastructure, etc.

OPPORTUNITIES AND THREATS:-

Opportunities:

• Focus on "Make in India" to boost various sectors of the economy

• Focus on continuous reforms by the Government of India

• Increased Agricultural production leading to growth in the Rural economy and stimulating rural demand

• Increased channelization of savings into financial assets

• Increased availability of credit for MSME / SME companies and increasing investments in Indian Companies by PE / VC Funds

• Favourable demographics like large young population with high disposable income, willingness to take risk, etc.

Threats:

• Effects of COVID19 leading to decline in overall economic activity;

• Geo-political tensions with China leading to disruption in supply chains;

• Increased incidence of frauds in NBFC, Banking and Broking sectors affecting overall availability of credit and leading to tightening of norms;

• Factors like excessive monsoon, rise in crude oil prices due to geo-political tensions, etc. may delay capex plans and impede growth;

• Increasing costs of compliance due to Regulatory changes;

• Increased competition from local and global players operating in India;

• Continuous downward pressure on the fees, commissions and brokerages caused by heightened competition and willingness of most players to deliver services at very low fees;

• Execution risk;

• High attrition rate of skilled and experienced human capital

6. ADEQUACY OF INTERNAL CONTROL SYSTEMS:-

Your Companys internal control systems are commensurate with the nature of its business and the size and complexity of its operations. Your Company has a proper and adequate system of internal controls that includes, inter alia, segregation of duties, timely updations of records, etc. that covers operations, financial reporting, compliance with applicable laws and regulations, safeguarding assets from unauthorized use or disposal, and ensures compliance of corporate policies. Internal controls are reviewed periodically by the internal auditors, and are subject to management reviews with significant audit observations and follow up actions reported to the Audit Committee.

The Audit Committee actively the findings and recommendations of internal auditors so as to continuously monitor and improve internal controls to match the organisations pace of growth and increasing complexity of operations as well as to meet the changes in statutory and accounting requirements. Significant deviations, if any, are brought to the notice of the Audit Committee and corrective measures are recommended for implementation with necessary oversight and directions. The Company continues its efforts to align all its processes and controls with global best practices.

7. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES

In a competitive economy, the proper utilization of human resources plays a crucial role in shaping the future of the Company. The human resource philosophy and strategy of your Company believes human capital to be the most valuable asset. The Companys human resource policies create a sense of belonging in employees and nurture spirit of teamwork keeping the employees engaged and motivated.

Your Company has fostered a culture that rewards innovation, continuous learning, collaboration and development, making it future ready with respect to the challenges posed by ever- changing market realities.

The Company has well documented and updated policies in place to prevent any kind of discrimination and harassment, including sexual harassment. The Whistle Blower Policy plays an important role as a watchdog. Your Company maintains a cordial relationship with its employees.

8. CAUTIONARY STATEMENT

Some of the statements in this management discussion and analysis describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. The Company assumes no responsibility in respect of the forward looking statements, which may undergo changes in future on the basis of subsequent developments, information or events.