MANAGEMENT DISCUSSION AND ANALYSIS
INDUSTRY STRUCTURE AND DEVELOPMENTS
The broking segment, especially retail broking, has become increasingly dynamic. Entry
of new players, digitisation & disruption, regulations have changed the way business
has been shaping up. Brokers are now restructuring their business strategy to diversify
revenue streams. Value added services, including wealth management, research, advisory,
AMC and financial planning has been the focus to ensure maximum customers engagement and
enrich wealth creation journey of clients. Fund based activity, including margin funding
and loan against shares, is expected to enable sustained contribution to earnings. Thus,
while brokerages have witnessed an increase in topline, share of pure broking income has
been sliding in the overall pie. Revenue growth for the broking industry was moderate in
FY23 of approx. 30000 crore and the same is estimated be flatfish in FY24 with
consolidation in industry benefiting some traditional brokers. The Nifty 50 index declined
by 1.76% and S&P BSE Sensex declined by 0.48%.
We believe the industry is moving towards fee for service model wherein a customer is
charged fee as per services availed instead of a standard or fixed charge. With financial
savings rising and lower interest rates, equity as an asset class will continue to remain
attractive. Capital market businesses are currently in a sweet spot in the journey or
transition of business model. While we expect discount brokers to continue with growth
ahead, however revenue growth is largely dependent on client additions as scope for higher
pricing remains difficult. Hence, earnings growth from pure brokerage income to remain
limited.
OPPORTUNITIES AND THREATS
With the increase in size and importance of Indias financial sector relative to its
overall economy, the equity broking industry is set for an increased volumes over the next
few years. Further, since equities are expected to do well over the longer term, we will
likely see increased investor participation.
Ability to onboard clients and complete their KYC journey digitally has been a big
boost for the industry. Extensive use of Artificial Intelligence and Machine Learning
capabilities are imperative to create a vital differentiator across the entire value chain
of the business. The digital brokerages today garner a dominant share in the industry with
their service offerings to clients using digital trading platforms. Facilitated by
seamless DIY registration, ease of transacting, offering an open architecture with
integration of 3rd party products, the industry is experiencing a surge in retail investor
participation, which, in turn, is boosting the overall trading volumes.
Despite the abundance of opportunities, the wealth management industry in India faces
several challenges. The entry of new players has led to stiff competition for customers,
thereby exerting greater pressure on fees and services. Furthermore, stringent regulations
have increased compliance costs and subjected the industry to additional scrutiny from
regulatory bodies.
Acquainted of the situations the Company is making conscious efforts to increase
investor participation and has plans to increase its overall market share by targeting
profitable segments. The Company is also focusing on efficient use of technology to become
a cost efficient performer in the market. The Company will continue to focus on
technology, drive client acquisition, increase its business partner network, provide
efficient trading tools and value added research advice to its clients. The overall
strategic focus is to create product and service differentiators across all segments.
SEGMENT WISE / PRODUCT WISE PERFORMANCE
The Company offers research based equity advisory and trading services to individuals,
corporates and retail clients. With presence in more than 150 cities in India through
network of branches and franchisees, it has helped the Company achieve a de-risked
business model and a wide spread presence.
OUTLOOK
In 2023, the market situation has changed significantly. RBI has already implemented a
rate pause in response to a consistent decline in inflation and the expectation of further
softening. Barring an unexpected inflation spike, it is unlikely that RBI will increase
rates again this year. With the rate increase in early May 2023, the US Federal Reserve
appears to have reached the apex of its cycle of rate increases during this time. Bond
yields have already begun to decline globally, including in India, and this trend is
expected to continue.
The broking industry is growing immensely with negligible penetration in tier II, III
and beyond geographies where about 60% of the countrys population resides. With these
geographies accessible largely through digital means, a significantly large market share
will be up for grabs between the top 10 digital players. The Company is pushing hard to
demonstrate its capabilities to harness this opportunity over the last few years. With its
strong understanding of these markets supported by its best-in-class digital products, the
Company will aggressively take a dominant market share amongst these players.
The Companys technology-based platforms play a key role in facilitating business from
self-serviced segments, and provide a larger base for cross-selling financial products.
Its strategy continues to be built on improving and fortifying research content, investing
in technology for trading platform as well as human resources. The Company during the
financial year under review has made substantial investments in people, processes and
technology and continues to focus on delivering steady performance. The Company has taken
into consideration the changes in the capital market and brokerage segment and is well
prepared to overcome challenges and perform sustainably.
risks and concerns
The very nature of the Companys business makes it subject to various kinds of risks.
The Company encounters market risk, credit risk and operational risks in its daily
business operations. Further the stock broking industry has witnessing intense
competition, falling brokerage rates and the entry of several big players. The Capital
market industry in which your Company is operating is subject to extensive regulation. The
Company evaluates the technological obsolescence and the associated risk and makes
investment accordingly.
Risk management is a key element of our business strategy and is integrated seamlessly
across all of its business operations. The objective of the risk management process is to
optimize the risk-return equation and ensure prudent financial management; along with
meticulous compliance with all laws, rules, and regulations applicable to all its business
activities. A strong risk culture is designed to help reinforce resilience by encouraging
a holistic approach to the management of risk throughout the organisation. The Company
invests in technology and cyber security measures, conducts regular risk assessments, and
maintains business continuity plans. The Company has invested in people, processes and
technology to mitigate both external and internal risks.
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. The
Board/Audit Committee reviews the overall risk management framework and the adequacy of
internal controls instituted by the management team. The Audit Committee reviews major
instances on a quarterly basis and actions are taken on the same. It also focusses on the
implementation of the necessary systems and controls to strengthen the system and prevent
such recurrence. The internal processes have been designed to ensure adequate checks and
balances and regulatory compliances at every stage. Internal audit team carries out a
risk-based audit of these processes to provide assurance on the adequacy and effectiveness
of internal controls for prevention, detection, reporting and remediation of frauds. 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, 2023 stands at Rs.
15,67,71,684/- divided into 7,83,85,842 fully paid up equity shares of Rs. 2/- each.
Net Worth
The Net Worth of the Company stands at Rs. 6,511.52 Lakhs.
Secured Loans
The Company has secured borrowings of Rs. 728.42 Lakhs in the current year.
Total Income
During the year total income was reported at Rs.7,789.65 Lakhs.
Finance Cost
The finance cost of the Company stands at Rs. 263.58 Lakhs.
Tax Expense
The Company has incurred a tax expense of Rs. 127.97 Lakhs 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, 2023 there are 385 employees employed by
the Company. The Companys focus is on recruitment of good talent and retention of the
talent pool. The Company has been paying special attention to improve the skill set of the
employees through various training programs. All employees are encouraged and motivated to
get themselves certified in relevant industry standard certifications such as CFP, NCFM,
NISM, BSEC & AMFI. The Company invests in its employees through training and
development programmes, provides competitive compensation and benefits, and fosters a
positive work culture.
KEY FINANCIAL RATIOS
The key financial ratios and details of significant changes in these ratios, to the
extent applicable, as required by SEBI Listing Regulations are given below:
| Key Financial Ratios |
Financial Year 2022-23 |
Financial Year 2021-22 |
| (i) Debtors Turnover |
1:3.29 |
1:4.23 |
| (ii) Interest Coverage Ratio |
1:2.69 |
1:8.52 |
| (iii) Current Ratio |
1:1.53 |
1:1.29 |
| (iv) Debt Equity Ratio |
1:0.11 |
1:0.16 |
| (v) Operating Profit Margin (%) |
7.20% |
21.07% |
| (vi) Net Profit Margin (%) |
4.06% |
14.25% |
Cautionary statement
Statements in this Management Discussion and Analysis describing the Company’s
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.
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