LKP Finance Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The financial year 2019-20 had been quite a challenging year for the Indian economy and particularly for the financial services sector. The continued liquidity crunch, uncertain and volatile credit environment and slow economic growth created headwinds. The COVID-19 pandemic and subsequent lockdowns have impacted the businesses and aggravated the prevailing sectoral challenges. NonBanking Financial Companies (NBFCs), today, are confronted with multiple challenges. The unprecedented business environment has put to test the resilience, prudence and adaptability of any business model. Having said that, the fiscal year has been full of learnings. The Company continues to closely observe the situation.

The NBFC segment witnessed marginal growth during first half of 2019-20 but during the second half of the year, NBFCs were impacted on account of tight liquidity conditions, high cost of borrowing and volatility in the capital markets. The spread of the COVID-19 pandemic and the subsequent synchronized lockdown across global markets resulted in shrinking of the capital market lending business.

OPPORTUNITIES AND THREATS

Your Company being an investment Company seeks opportunities in the capital market. The volatility in stock indices in the financial year under report represents both an opportunity and challenge for the Company.

Capital market activities in which most of our activities depend on is also influenced by global events happening in the US, UK & China and hence there is an amount of uncertainty in the near term outlook of the market.

However, strong and stable government at centre, the capital market prospect would significantly improve.

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

The Covid-19 crisis has disrupted global economy and created extraordinary challenges. The economic activity in India was down to a standstill owing to the nation-wide lockdown in India.

The SARS-CoV-2 virus responsible for COVID-19 continues to spread across the globe and India, which has contributed to a significant decline and volatility in global and Indian Financial Markets and a significant decrease in the economic activities. On March 11, 2020, the COVID-19 outbreak was declared as a global pandemic by the World Health Organisation. On March 24, 2020 the Indian Government had announced a strict 21 day lockdown which kept on getting extended across the Country with gradual and modest relaxations.

The Pandemic had a severe impact on the Capital market. The Company carries shares and securities in its books. The effect of mark to market losses thereon have been taken into account in the Statement of Profit and Loss for the year. The Company believes that it has taken into account the impact of known events arising out of COVID 19 pandemic in the preparation of financial results resulting out of fair valuation of these investments. However the impact assessment of COVID 19 is a continuing process given its nature and duration. The Company will continue to monitor for any material changes to future economic conditions

During the lockdown LKP Finance migrated to 100% work from home scenario and all the business operations continue to run smoothly.

The government and the RBI have introduced several liquidity and stimulus measures to support the NBFC industry however those are yet to show tangible results.

RISKS AND CONCERNS

The very nature of the Companys business makes it subject to various kinds of risks. The Company encounters credit risk and operational risks in its daily business operations. Further the performance of the Company is dependent on the capital markets for its returns. Even though it is envisaged that Indian stock market will continue to do well, global concerns can result in sharp corrections.

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 & regulations and compliance with all rules, procedures & guidelines prescribed by the management. An extensive internal audit is carried out by independent firm of Chartered Accountants. An internal team of inspection also regularly visits branches for ensuring regulatory compliance. Post audit reviews are also carried out to ensure follow up on the observations made.

FINANCIAL PERFORMANCE AND OPERATIONAL REVIEW

The Company has adopted Ind AS for reporting financial results of the year under review against previously Indian GAAP the effect of the same can be noted from the Audited Financial Statements. Due to crash of Stock Market in the month of March 2020, companys profits have been affected substantially.

CAUTIONARY STATEMENT

The statements in the "Management Discussion and Analysis Report" section describes the Companys objectives, projections, estimates, expectations and predictions, which may be "forward looking statements" within the meaning of the applicable laws and regulations. The annual results can differ materially from those expressed or implied, depending upon the economic and climatic conditions, Government policies and other incidental factors.

TAX EXPENSES

The tax expense has reduced from Rs. 6,43,28,599/- in previous year to Nil 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, 2020 there are 10 employees employed by the Company. The Company has been paying special attention to improve the skill set of the employees.

KEY FINANCIAL RATIOS

The key financial ratios and details of significant changes in these ratios, to the extent applicable, as required by SEBI (LODR) (Amendment) Regulations, 2018 are given below:

Key Financial Ratios Financial Year 2019-20 Financial Year 2018-19
(i) Debtors Turnover N.A. N.A.
(ii) Inventory Turnover N.A. N.A.
(iii) Interest Coverage Ratio -21.33 34.24
(iv) Current Ratio 3.33 : 1 5.13 : 1
(v) Debt Equity Ratio 0.25 :1 0.21 :1
(vi) Operating Profit Margin (%) or sector-specific equivalent ratios, as applicable. -105.79% -3.64%
(vii) Net Profit Margin (%)or sector-specific equivalent ratios, as applicable. -116.68% 44.35%
(j) details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof. N.A. N.A.

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.