LKP Finance Management Discussions


MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian economy has witnessed profound positive transformation in the last ten years. The Indian economy has showed resilience and strong growth across sectors and continues to be among the fastest- growing economies in the world. The accelerated pace of economic reforms and strong domestic consumption have led to higher and sustainable growth of the Indian economy and strengthened its position in the world. The geopolitical tensions, supply chain disruptions, high inflation, and tighter monetary conditions were some of the challenges for the economic recovery.

NBFCs has always been an important component of the financial sector and has seen higher credit growth over the past few years. The NBFC sector in India is expected to grow due to several factors like governments commitment to financial inclusion, sectors digital transformation, regulatory changes that aim to ensure the sectors stability and prevent excessive risk-taking and also due to impressive growth projections. With strategic moves by industry leaders, the market is set to expand further. NBFCs are leveraging their superior understanding of regional dynamics and customized products and services to expedite financial inclusion in India. Lower transaction costs, quick decision making, customer orientation and prompt service standards have typically differentiated NBFCs from banks. Systemically Important NBFCs have demonstrated agility, innovation, and frugality to provide formal financial services to millions of Indians.

OPPORTUNITIES AND THREATS

Your Company is committed to addressing the changes boosted by its strengths in market position, agile execution capabilities, robust early warning systems and extensive use of analytics for risk mitigation and resource allocation. It will ensure to take advantage of the tailwinds that may emerge during the course of the year. The stringent RBI and other regulatory norms governing the functioning of NBFC and certain government restrictions acts as hindrance in smooth functioning of NBFC.

SEGMENT WISE / PRODUCT WISE PERFORMANCE

The Company is engaged in investment activities and other financial services during the year under review, hence the requirement of segment-wise reporting is considered irrelevant.

OUTLOOK

LKP Finance Limited being an investment Company seeks opportunities in the capital market. While interest rate were steady in 2023-34, the same are expected to decline in the FY 2024-25. The volatility in stock indices represents both an opportunity and challenge for the Company. We continue to see significant volatility in the market and will use periods of weakness as investment opportunities for long term.

RISKS AND CONCERNS

The very nature of the Companys business makes it subject to various kinds of risks. As an NBFC, the Company is exposed to credit, liquidity, market and interest rate risk. Capital market

activities in which most of our activities depend on is also influenced by global events and hence there is an amount of uncertainty in the near term outlook of the market.

The Company has a strong Risk Management System for identification, monitoring, mitigation and reporting of the risks associated with its operations. The Company has an established practice of compliance reporting covering all operations and support functions; compliance reporting is periodically reviewed to ensure comprehensive coverage.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate system of internal controls to ensure accuracy of accounting records, compliance with all laws and regulations and compliance with the rules, procedures and guidelines prescribed by the management. An extensive internal audit is carried out by independent firm. An internal team of inspection regularly visit for ensuring regulatory compliance. Post audit reviews are also carried out to ensure follow up on the observations made.

FINANCIAL PERFORMANCE AND OPERATIONAL REVIEW

Share Capital

The paid up equity share capital of the Company as on March 31, 2024 stands at Rs. 12,56,86,230/- divided into 1,25,68,623 fully paid up equity shares of Rs. 10/- each.

Net Worth

The Net Worth of the Company stands at Rs. 34,924.27 lakh. Secured Loans

The Company has secured borrowings of Rs. 1894.41/- lakhs in the current year.

Total Income

During the year total income was reported at Rs. 8280.89 lakh. Finance Cost

The finance cost of the Company stands at Rs. 322.75 lakh.

Tax Expense

The Company has incurred a tax expense of Rs. 1277.44 lakh in the current year.

HUMAN RESOURCES

During the year under review there has been no material development on the Human Resource/Industrial Relations front during the year. The Company places significant importance to its human capital. As on March 31, 2024 there are 32 employees employed by the Company. The Companys focus is on recruitment of good talent and retention of the talent pool. The Company commends the commitment, dedication and competence shown by its employees in all aspects of business.

KEY FINANCIAL RATIOS

The key financial ratios and details of significant changes in these ratios, to the extent applicable, as required by the Securities and Exchange Board of India (Listing Obligations and Disclosure

Requirements) Regulations, 2015 are given below:

Key Financial Ratios Financial

Year

2023-24

Financial

Year

2022-23

YOY

Change

(%)

Favorable

(F)/

Adverse

(A)

Remarks
(i) Debtors Turnover N.A N.A N.A - -
(ii) Interest Coverage Ratio 22.02 5.5 300.36 F Net Profit Increased substantially
(iii) Current Ratio 4.63 2.41 92.12 F Current assets increased & liabilities decreased
(v) Debt Equity Ratio 0.16 0.32 50 F Debt

decreased & Equity increased

(vi) Operating Profit Margin

(%)

N.A N.A N.A
(vii) Net Profit Margin (%) 66.65% 48.62% 37.08 F Increase in Net profit & Turnover
(viii) Return on Net Worth (% ) 15.76% 4.15% 279.76 F Increase in Net Profit & Equity

Cautionary statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward looking within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied. Investors are advised to exercise due care and caution while interpreting these statements.