KLG Capital Services Ltd Management Discussions.
The Company is a Non-Banking Financial Company ("NBFC") which mainly deals in capital market and financial services. The Company is registered with Reserve Bank of India as a Non-banking Finance Company, not accepting public deposits under Section 45-IA of the Reserve Bank of India Act, 1934. The Equity Shares of the Company are listed on Bombay Stock Exchange Limited.
The Company was incorporated as Public Limited Company on April 13, 1994, in New Delhi and was taken over by Awaita Properties Private Limited in October 2008 in accordance with the Securities and Exchange Board of India (Substantial Acquisitions of Shares and Takeovers) Regulations, 1997. Awaita Properties Private Limited is promoted by Mr. Nikhil Gandhi and Mr. Bhavesh Gandhi. The Registered Office of the Company was shifted from New Delhi to Mumbai in May, 2010.
The Company has a wholly-owned subsidiary namely, KLG Stock Brokers Private Limited, which has been admitted as a Deposit Based Trading Member of Cash Segment and Equity Derivatives Segment of BSE Limited.
1. INDUSTRY STRUCTURE AND DEVELOPMENTS
Indias financial system remains stable, even though the banking sector continues to face significant challenges. While the global growth outlook and market sentiments have improved, political stability on the domestic front has further reinforced expectations of accelerated reforms, overall positive business sentiment and macroeconomic stability.
After years of sluggish growth, the global economy seems poised for a turnaround. Even though there are uncertainties, the underlying feeling of a stable transition from a global accommodative monetary policy regime to a normal rate cycle is evident in equity and fixed income markets.
Domestically macroeconomic conditions remained stable and the expectations of accelerated reforms and political stability further reinforced the overall positive business sentiment. While the retail inflation witnessed significant decline during the recent quarters, the real Gross Domestic Product (GDP) growth slowed to 6.8 per cent in March19 as compared with 7.2 per cent in March18. Going forward, reforms in foreign direct investment, implementation of goods and services tax (GST), and revival in external demand are likely to contribute to a better growth outlook. The capital market indices moved to a higher territory reflecting these positive sentiments.
NBFCs accounted for 23% of total loans and 18% of total credit in India as on 31st March, 2018. They have shown strong growth in recent years, buoyed by access to equity capital and liquidity in the system. However, post the liquidity squeeze and headwinds in the industry, NBFCs have faced increased cost of borrowing and some have had funding challenges.
2. OPPORTUNITIES AND THREATS
Government has announced a slew of policy measures to achieve a higher GDP growth, including de-bottle necking of large infrastructure projects, increasing FDI limits in Insurance, Railways, Defence manufacturing and Aerospace. Given these recent initiatives, NBFCs can also look for growth in various areas of project financing.
Your Company is examining various new avenues of business in financial activities. The present business of your Company is investment and financing. The Company intends to diversify its activities into financing of some of the above sectors. The biggest challenge before NBFCs is the stiff competition from banks and financial low cost funds which enables them to provide funds at much cheaper rate. Besides, increased purview of monitoring by regulatory authorities increase the threat of losing the essence of NBFCs.
3. SEGMENT WISE PERFORMANCE
The Company operates in single segment.
4. FUTURE PROSPECTS & OUTLOOK
In the forthcoming year, the Company envisages to identify new avenues of business activities and make use of opportunities available, besides strengthening its present operations.
5. RISK AND CONCERNS
General risks associated with the financial services sector in the normal course of business that we are in, apply to the Company also.
6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has adequate internal controls commensurate with its size and nature of operations. Besides, the Audit Committee reviews the internal controls in co-ordination with the Auditors.
7. FINANCIAL PERFORMANCE
a) Share Capital: As on March 31, 2019, the Companys issued and subscribed share capital consists of Equity Share Capital only. The paid-up Share Capital of Company as at March 31, 2019, stood at Rs. 320.24 Lacs comprising of 32,02,400 Equity Shares of Rs. 10/- each (previous year Rs. 320.24Lacs).
b) Reserves and Surplus: During the year under review, the Reserves and Surplus stood at Rs. 439.36 Lacs (previous year Rs. 436.73 Lacs).
c) Financial Result: During the year ended March 31, 2019, the Company has earned total income of Rs. 98.42 Lacs as compared to the income of Rs. 90.39 Lacs during the previous financial year. The profit after tax as on March 31, 2019 amounted to Rs. 6.95 Lacs as against profit of Rs. 53.24 Lacs during the previous financial year.
8. HUMAN RESOURCE
Human resource management is an important function in the Company. The Companys aim is to create a working environment that attracts, motivate and retains the best people. Some of the salient motivational initiates taken by the management in boosting the morale of the staff is:
- Interactive forums
- Feedbacks through mails
- Quarterly reviews
- Festive Celebrations
- Regular Annual Appraisals
9. ANALYSIS OF SIGNIFICANT CHANGES IN FINANCIAL RATIOS
As per the recent amendments to the SEBI Listing Obligations and Disclosure Requirements (LODR), we give below additional information in respect of financial parameters that are applicable to our company: of 25% or more as compared to the immediately previous 1. Detailsofsignificant financial year) in key financial ratios, along with detailed explanations therefor as under :
Profit Before Tax Margin (%):
The Profit before Tax Margin for FY19 was 12% compared to 77% for FY18, a drop of 84%.
Net Profit Margin (%):
The Profit after Tax Margin for FY19 7% compared to 59% for FY18, a drop of 88%.
Other parameters, namely Debtors Turnover, Inventory Turnover, and Interest Coverage Ratio are not applicable to our company.
2. Details of any changes in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof: Return on Net Worth, i.e. Return on Equity (RoE), on Standalone basis for FY19 was 0.55% down from 4.45% a year ago. RoE has declined in FY19 on account of increase in Administrative expenses.
10. RISK MANAGEMENT FRAMEWORK
The Company has in place mechanism to inform Board Members about the risk assessment and minimization procedures and ensure that risk is controlled through the means of a properly defined framework.
11. CAUTIONARY STATEMENT
Statements in the Management Discussion and Analysis Report describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities, laws and regulations. Actual results may differ materially from those expressed in the statement. The important factors that could influence include change in government regulations, tax laws, economic developments, litigations, etc.