Ladderup Finance Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

NBFC sector has received wide ranging attention for past few years for various reasons. As an insubordinate part of the financial system, it holds immense potential with its ability to reach out to vast cross-section of the population and diverse geographies areas of the Country. This sector plays an extremely crucial role in the development of the countryRss core infrastructure, by offering quicker funds and credit to the Indian trade and commerce industry.

The Non-Banking Financial Companies (NBFC) sector in India has witnessed significant developments in the fiscal year 2023-24, marked by growth and regulatory changes.

The sector strengthened its financial soundness during the year through robust capital buffers, improved asset quality and consolidation of the balance sheet.

BUSINESS & FINANCIAL PERFORMANCE OF THE NBFC SECTOR

The Reserve Bank of India (RBI) has continued to strengthen the regulatory framework for NBFCs. Key measures include stress tests to evaluate the resilience of NBFCs to credit and liquidity shocks, ensuring a strong capital position across the sector. The capital adequacy ratio (CRAR) for NBFCs stood at 24.4%, indicating robust capital buffers.

Assets and credit growth have been robust, with the upper-layer NBFCs reporting a year-on-year credit growth of 21.9% as of September 2023. The gross non-performing assets (GNPA) ratio improved to 3.4% during the same period, reflecting better asset quality.

There has been a notable increase in borrowing from banks, which now accounts for 25% of the total borrowings of NBFCs as of September 2023. This shift indicates a growing reliance on banking channels for funding. The stress tests conducted by the RBI highlight the potential impact of adverse scenarios on the sectorRss financial stability.

Overall, FY 2023-24 has been a period of robust growth and strategic strengthening for the NBFC sector in India, positioning it for sustained development in the coming years.

BUSINESS STRATEGIES & FINANCIAL PERFORMANCE OF THE COMPANY

Ladderup Finance Limited ("LFL") is a residuary NBFC, registered with RBI as Non-Deposit Taking Non-Banking Financial Company. It is listed on the BSE Limited and primarily engaged in the business of investing in securities of listed and unlisted companies, predominantly for medium to long term. The CompanyRss investment portfolio is diversified across various sectors, such as financial services, healthcare, retail, packaging, QSR, information technology, infrastructure, energy, Oil & Gasand real estate etc.

The diversified nature of the CompanyRss investment, both strategic and financial investments, have performed reasonably well and it is expected to do even better in the following years. We are confident on our long-term business strategies and our underlying investment are mostly long-term in nature and we believe that these investments shall gradually create value through realization of profit in the combination of dividends and capital gains over a period of time.

The Company is continuously evaluating new opportunities for Investments, during the year it has invested in various Listed Companies. As the nature of the companyRss business is to invest, hold and exit, the profit so materialized during the year may not essentially reflect the true picture of performance. The accrued profits/loss is being recognized in the year of sale.

The company has been using the fair value through other comprehensive income (FVOCI) method to account for its equity investments until March 31, 2024. This means that profits from these investments were not recorded in the profit and loss account but instead in other comprehensive income.

However, because the FVOCI election is irrevocable, the company will continue to use this method for investments made before April 1, 2024. This means that the company will have two different valuation methods for its equity investments.

Due to increasing equity investments, the company has decided to apply fair value through profit or loss (FVTPL) effective April 1, 2024 for investment in the securities. This will provide a clearer picture of the companyRss performance to investors on a regular basis

The details with respect to financial performance has been included in detail in financial statements of the Company and in the BoardsRs Report.

The Company have one Subsidiary Company, one Joint Venture Company and one Associate Company, the financial performance of those Companies are as follows:

FINANCIAL PERFORMANCE OF LADDERUP WEALTH MANAGEMENT PRIVATE LIMITED (SUBSIDIARY COMPANY)

Ladderup Wealth has consistently demonstrated a robust performance that positions it favorably within the wealth management industry. Over the past few years, Ladderup Wealth has achieved significant growth in assets under management (AUM), surpassing industry averages and reflecting a strong client trust and retention rate. When compared to industry benchmarks, Ladderup Wealth has outperformed many of its peers, particularly in terms of return on investments and client satisfaction metrics. The firmRss emphasis on a comprehensive financial planning process, which includes in-depth risk assessment and customized investment solutions, has been a key differentiator.

Ladderup Wealth Management has a niche business of advising clients on right investing across asset classes. The organization has always worked to optimize client returns while maintaining their safety, thereby safeguarding our clients from adverse market impacts. On the financial front, the CompanyRss profit after tax stood at INR 222.54 Lacs for the FY 2023-24 as against a profit of INR 85.65 Lacs in the previous year. The Company continues to adopt the best practices while continuously evolving to improve the service delivery to clients through integrity, transparency, and competence.

FINANCIAL PERFORMANCE OF WATERPROOF CORPORATION PRIVATE LIMITED (WACO), (JOINT VENTURE COMPANY)

The Company is a pioneer in the Adhesive Tapes business in India and grown year on year to become the largest manufacturer and supplier of high-quality and superior-performance Gummed Paper Tapes and allied products in the country. With presence in over 50 countries, it has a global brand in the Water Activated Gummed Paper Tapes segment. The brands RsWACORs & RsTACORs are synonymous with Trust - Quality - Fair Practices. The company manufactures products for various industries such as the Packaging Industry, Plywood Industry, Gypsum Board Industry and has built rock-solid reputation for excellence in quality and services.

Waterproof Corporation has been in business for over 75 years and is the largest gummed paper tape manufacturer in India. The technology for manufacture of gummed paper tapes has been internally developed in the CompanyRss 35,000 square foot manufacturing facility in central Mumbai, which has an in-house laboratory and engineering design & workshop facilities.

During the financial year 2023-24, it has achieved growth in its revenue as compared to the previous year. The Company generated total revenue of INR 4024.22 Lacs as compared to INR 3957.00 Lacs in the previous year. The profit before tax in the financial year 2023-24 INR 273.45 Lacs as compared to INR 617.64 lacs in the previous year.

The Consolidated Revenue as on 31st March, 2024 stood at 5997.12 Lacs as compared to 4,609.25 Lacs in the previous year. The profit before tax in the financial year 2023-24 was INR 374.16 Lacs as compared to INR 637.16 lacs in the previous year.

FINANCIAL PERFORMANCE OF SHREE VINAYAK ORGANIC PVT. LTD. ("SVO") (WHOLLY OWNED SUBSIDIARY OF WATERPROOF CORPORATION PRIVATE LIMITED)

The SVO is a leading manufacturer of special purpose solvent based and water based acrylic adhesives and emulsions. It Produces roughly 18 varieties of adhesives which are primarily used in production of pre coating foam, metalized PET, PVC Stickers, medicated strips, paper labelling, BOPP, wet lamination, and prosthesis. SVO has won various awards for its consistency and quality of products.

During the financial year 2023-24, it has achieved growth in its revenue as compared to the previous year. The Company generated total revenue of INR 593.88 Lacs as compared to INR 652.25 Lacs in the previous year. The profit before tax in the financial year 2023-24 INR 49.48 Lacs as compared to INR 61.97 lacs in the previous year.

ANNAPURNA PET PRIVATE LIMITED, (ASSOCIATE COMPANY)

The Company has high class PET preform production plant at Umbergaon Gujrat. It manufactures and Markets comprehensive range of PET PREFORMS in variety of weights, color and sizes for the most diverse applications like Packaged Water, Carbonated Soft Drinks, Edible Oils, Juices etc. by employing latest fully automatic HUSKY & ENGEL Injection molding machines with 96 and 72 cavities as well as CSD CAPS with HUSKY injection Moulding Machine. The Plant has an installed capacity of approx. 1 BILLION preform per annum (15,500 Tonnes).

It is certified by GEO-TEK ISO 9001:2015, ISO 22000:2005, ISO 14001:2015 & OHSAS 18001:2007. Key clientele of the company is amongst the blue-chip companies, with the major concentration of customers in western region followed by south and central regions and exports to African countries.

The Shareholders of Annapurna Pet Private Limited ("Transferor Company or Annapurna") and Waterproof Corporation Private Limited ("Transferee Company or WACO") have approved the Scheme of Merger, whereby Annapurna will merge into WACO. The synergy benefit of mergers includes reduction in common admin & employee costs, optimum use of AnnapurnaRss factory land, tax benefit on account of set of losses among others. Further, the said merger would not impact the ownership and the Company would continue to hold 50% shares of Waterproof Corporation Pvt Ltd. The said scheme is under approval stage before the National Company Law Tribunal at Mumbai Bench.

During the financial year 2023-24, the Company generated total revenue of INR 4308.74 Lacs as compared to INR 6094.25 Lacs in the previous year. The Loss of the Company stood at Rs 310.46 as compared to INR 420.29 lacs in the previous year.

GLOBAL OUTLOOK

According to IMFRss World Economic Outlook (WEO) released in June 2024, Global growth is projected to stabilize at 2.6 percent this year, holding steady for the first time in three years despite flaring geopolitical tensions. It is then expected to edge up to 2.7 percent in 2025-26 amid modest growth in trade and investment.

The Aggregate growth in EMDEs is forecast to edge down from 4.2 percent in 2023 to 4 percent in 2024 and remain broadly stable over 2025-26, near estimates of EMDE potential growth for the 2020s.

The pace of economic activity was dragged down, inter alia, by restrictive monetary policy stances to tame inflation, protracted geopolitical tensions and sluggish recovery in China.

Looking ahead, the IMF projects global growth to improve slightly to 3.1% in 2024 and 3.2% in 2025.

INDIAN ECONOMY

During the financial year 2023-24, IndiaRss economy exhibited resilience and moderate growth despite global economic challenges. Against the backdrop of subdued global economic activity and multiple headwinds, the Indian economy expanded at a robust pace in 2023-24, with real GDP growth accelerating to 7.6 per cent from 7.0 per cent in the previous year - the third successive year of 7 per cent or above growth.

This growth was supported by robust private consumption, increased private investment, and significant government initiatives aimed at improving infrastructure and the business ecosystem.

According to the Monetary Policy Committee of Reserve Bank of India, the expected real GDP Growth rate of India is projected at 7.0 per cent with Q1 at 7.2 per cent; Q2 at 6.8 per cent; Q3 at 7.0 per cent; and Q4 at 6.9 percent in Financial Year 2024-25.

On balance, we believe that the Indian economy has weathered the external shocks reasonably well. The proof of it is that the country has emerged as the fastest growing major economy in the world.

OPPORTUNITIES AND THREATS FOR THE COMPANY

Opportunities

• The number of retail investors in India has been growing, driven by higher financial literacy and the proliferation of online trading platforms.

• Leveraging big data and analytics can help in identifying market trends and making informed investment decisions.

• SEBI (Securities and Exchange Board of India) has been implementing reforms to enhance market transparency and protect investors, which helps build investor confidence.

• Developing scalable business models that can adapt to market changes and regulatory requirements.

• Corporates looking at consolidation / acquisitions / restructuring opens out opportunities for the corporate advisory business.

THREATS

Despite great opportunities, there are significant factors presenting threats to our businesses viz.

• The Reserve Bank of India (RBI) has tightened regulations to ensure better governance and risk management. Compliance with these regulations can be challenging due to limited resources.

• Stricter capital adequacy norms require NBFCs to maintain higher levels of capital, which can be difficult to achieve.

• The rise of fintech companies offering innovative and digital-first solutions can attract customers more than traditional approach.

• Keeping up with technological advancements requires significant investment, which can be a burden.

• Attracting and retaining skilled talent is often more challenging due to financial constraints.

However, your Company is well aware of the above threats and has worked steadily to strengthen its business operations by putting appropriate policies and measures in place and well positioned to counter any adverse threat successfully.

RISK MANAGEMENT AND CONCERN

The management of the Company has made policies and processes for risk identification, risk assessment and risk mitigation planning for business, strategic, operational, and financial and compliance related issues.

The Directors have formed a committee which is known as Risk Management Committee. The Board of Directors with the Aid of such Risk Management committee review and monitor Business risks for your Company. Moreover, the management also periodically reviews the policies and procedures and formulates plans for control of identified risks and improvements in the systems.

A risk/compliance update report is regularly placed before the Audit Committee /Board of Directors of the Company. The Directors/ Audit Committee review the risk/ compliance update reports and the course of action taken or to be taken, to mitigate and manage the risks is taken.

HUMAN RESOURCES

The Human Resources initiative focuses on structured training programs (both in-house and external) intended to equip employees at all levels, with the necessary knowledge and experience in order to demonstrate high levels of performance. The Company takes further necessary steps to use its human resources in effective manner as well as to provide good working environment as well good infrastructure to the Employees of the company. It focuses on the Growth of Employees in terms of monetary as well as non-monetary terms.

Our organization is committed and focused on identifying and retaining the right talent to meet the overall business strategy and objective. The broad range of activity includes viz. robust manpower planning process in line with the business objective, enhancement of employee skill-sets by identifying training and development needs, retention programs, reward and recognition, learning and development.

INTERNAL CONTROL AND THEIR ADEQUACY

The CompanyRss 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.

The Company, being in the lending and investment industry, has put in place an adequate internal control system to safeguard all assets and ensure operational excellence. The system also meticulously records all transaction details and ensures regulatory compliance.

The CompanyRss internal control system is commensurate with the size, nature, and operations of the Company.

DISCLOSURE OF ACCOUNTING TREATMENT

Your company follows the same accounting procedure and makes the financial statement as per the accounting standard, IND - AS, as well as the other laws applicable with respect to financial statements. Your company has not changed its accounting policy.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report describing the CompanyRss objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of the applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could influence the CompanyRss operations include economic and political conditions in which the Company operates, interest rate fluctuations, changes in Government / RBI regulations, Tax laws, other statutes and incidental factors. This report contains statements extracted from reports of Government Authorities / Bodies, Industry Associations etc.