kovalam investment & trading co ltd share price Management discussions

OVERVIEW:

Kovalam Investment and Trading Company Limited is registered with the Reserve Bank of India (“RBI”) as a Non-Deposit taking, Non-Banking Financial Company and is a Financial/Investment Company.

ECONOMIC OVERVIEW:

Financial Year 2022-23 (FY2023) began on a mixed note. On the positive side, after two years, the impact of the Covid-19 pandemic on lives and livelihoods started receding thanks to a successful mass immunization programme and the advent of a less virulent variant called Omicron. However, the impact of inflationary trends, supply chain disruptions emanating from China, and the Russia-Ukraine conflict have been impacting commodity prices.

However, despite these challenges, India emerged as the fastest growing major economy in the world. The second advance estimate of national income released by the Central Statistics Office (CSO) on 28 February 2023 expects real GDP growth in FY2023 to be 7.0%.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

Non-Banking Financial Institutions (NBFIs) are an important alternative channel of finance in Indias bank dominated financial sector. NBFCs supplement banks by providing the infrastructure to allocate surplus resources to individuals and companies. Additionally, NBFCs also introduces competition in the provision of financial services. While banks may offer a set of financial services as a packed deal, NBFCs unbundle and tailor these services to meet the needs of specific clients. NBFCs provide multiple alternatives to transform an economys savings into capital investment.

The Non-Banking Financial Companies (NBFCs) sector plays a significant role in the Indian economy, providing credit to individuals, small and medium-sized enterprises, and rural areas, among others. NBFCs have emerged as a key segment in the financial sector, bridging the gap between banks and borrowers who are underserved or excluded from traditional banking services. In recent years, the sector has witnessed significant growth, fuelled by a rise in demand for credit and the emergence of new players. The sectors resilience and ability to innovate have been tested during times of economic turmoil, such as the COVID-19 pandemic.

Pursuant to RBIs regulatory framework, your Company is a “Non- Banking Financial Company Non-Systemically Important (Non- public deposit taking company) (NBFCs-ND-NSI) registered under Reserve Bank of India (“RBI”) vide registration number N-06.00576 dated October 17, 2003 and involved in the activities of Investment in shares as well as trading and financing activities.

FUTURE OUTLOOK:

Despite the challenges, the future of NBFCs in India looks promising. The sector is expected to grow at a CAGR of 18.5% between 2021 and 2026, according to a report by Research And Markets.com. The growth is expected to be driven by various factors like the increasing demand for credit, the governments initiatives to promote financial inclusion, and the rise of digitalization.

The Company also intends to continue focusing on diversifying its business into new avenues of Investment/financial deals with lower risk to earn reasonable returns and making its best efforts to utilize the available opportunities with caution and emerge as fully Integrated Financial Company.

RISK AND CONCERNS:

As a NBFC, the Company is exposed to market risk, global risk, regulatory risk, credit risk, liquidity risk, competition risk and interest rate risk etc. which can affect the return on investments and financial business in unexpected way. Sustained efforts to strengthen the risk framework and portfolio quality have yielded consistently better outcomes for the Company.

OPPORTUNITIES AND THREATS:

During the financial year 2022-2023, your Company changed the pattern of allocation of funds. Company also increased lending to known Business associates and Group Companies for safety and higher returns. Company is hopeful that revised allocation will help in better Asset Portfolio Management to get the better returns with safety.

Your Company foresees and is cautious of all the economic and financial threats while making new investments and also aware of the fact that change in Government policies and rate of interest revisions will affect the valuation of investments made by Company.

FINANCIAL/OPERATIONAL PERFORMANCE:

The Company achieved an income of Rs. 2,15,46,727/- with a profit before tax of Rs. 1,58,60,096/-. The detailed performance has already been discussed in the Directors Report under the column ‘Financial Performance.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company is maintaining an efficient and effective system of Internal Financial Control for the facilitation of speedy and accurate compilation of financial statements. The Companys internal control system is designed to ensure operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliance with laws and regulations and procedures. Pursuant to the provisions of Section 138 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, the Company has also appointed M/s. Piyush Singla & Associates, Chartered Accountants as an Internal Auditors of the Company. The Company has in place adequate internal financial control systems with reference to the Financial Statements. The Internal Audit Reports are discussed with the Management and are reviewed by the Audit Committee of the Board which also reviews the adequacy and effectiveness of the internal controls in the Company. During the year, Companys Internal Controls were tested and no reportable weakness in the system was observed.

HUMAN RESOURCES/INDUSTRIAL RELATIONS:

The Industrial Relations remained cordial throughout the year. The Company recognizes people as its most valuable asset and it has built an open, transparent and meritocratic culture to nurture this asset. The total permanent employees strength of the Company was 3 (three) as on 31st March 2023.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS:

As per SEBI (Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018, the Company is required to provide details of significant changes (change of 25% or more as compared to immediately previous financial year) in key financial ratios. Accordingly, the Company has identified the following ratios as key financial ratios:-

Ratios	Unit	31.03.2023	31.03.2022	% Change
PBT/Total Income	%	73.59	95.29	-22.78
Financial Assets to Total Assets	%	98.42	99.28	-0.87
Financial Income/Total Income	%	100.00	99.88	0.12
Return on Net Worth	%	1.41	9.24	-84.72
Current Ratio	%	23.53	20.59	-14.27

EXPLANATION FOR CHANGE OF 25% OR MORE IN KEY FINANCIAL RATIOS:

Due to increase in the value of Investments Return on net worth has decreased during the financial year 2022-2023.

ACCOUNTING TREATMENT:

The financial statements of the Company for financial year 2022-2023 have been prepared in accordance with the applicable accounting principles in India and the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Companies Act, 2013 read with the rules made thereunder. The Company has followed accounting principles generally accepted in India, including the Indian Accounting Standards (‘Ind AS) specified under Section 133 of the Companies Act, 2013 (‘the Act) and other relevant provisions of the Act. The significant accounting policies, which are consistently applied, are set out in the notes to the financial statements.

CAUTIONARY STATEMENT:

Though the statement and views expressed in the above said report are on the basis of best judgment but the actual future results might differ from whatever is stated in the report.

	For and on behalf of the Board
	For Kovalam Investment and Trading Company Limited
Date: 12.08.2023	(Navdeep Sharma)	(Komal Jain)
Place: Ludhiana	Director	Director
	DIN: 00454285	DIN: 00399948