LKP Securities Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

LKP Securities Limited presents its Management Discussion and Analysis Report for the fiscalyear ended March 31, 2024. The report provides insights into the companys financialperformance, operational highlights, market dynamics, and future outlook. The Indian broking industry experienced significant transformations in FY 2023-24, marked by regulatory changes, technological advancements, and evolving customer preferences. Increased participation of retail investors, fueled by rising digital literacy and accessibility, reshaped market dynamics. The emergence of discount brokerage models and the growing popularity of algorithmic trading posed both opportunities and challenges for full service broking firms like LKP Securities

Limited. Furthermore, regulatory developments, such as SEBIs initiatives to enhance transparency and investor protection, influenced operational practices across the industry.

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, limited.

OPPORTUNITIES

With the increase in size and importance of Indias financial sector relative to its overall economy, the equity broking industry is set for 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.

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 profitablesegments. 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. In Financial Year 2023-24, LKP Securities Limited witnessed robust financial performance despite the challenging market conditions. Total revenue fiscal year, primarily driven by growth in brokerage income, distribution income and other services. Net profit grew by 200% on Year on Year basis, reflecting operational efficiencies and prudent cost management strategies.

OUTLOOK

The Indian broking industry experienced significant transformations in FY 2023-24, marked technological advancements, and evolving customer preferences. Increased participation of retail investors, fueled by rising digital literacy and accessibility, reshaped market dynamics. The emergence of discount brokerage models and the growing popularity of algorithmic trading posed both opportunities and challenges for full service broking firms like LKP Securities

Limited. Furthermore, regulatory developments, such as SEBIs initiatives to enhance transparency and investor protection, influenced operational practices across the industry.

RISKS AND CONCERNS AND THREATS

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 extant 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 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

Looking ahead, LKP Securities Limited remains committed to sustaining its growth momentum and enhancing shareholder value. The company aims to capitalize on emerging opportunities in the Indian capital markets while mitigating risks associated with market volatility and regulatory changes. Key focus areas include expanding product offerings, strengthening risk management frameworks, and leveraging technology to drive operational efficiency. Your Company remains optimistic about its long-term prospects and is well-positioned to navigate the evolving landscape of the broking industry.

In conclusion, FY 2023-24 was a year of resilience and growth for LKP Securities Limited. The companys strong financial performance, coupled with strategic initiatives to adapt to changing market dynamics, underscores its competitive advantage and commitment to stakeholders. As LKP Securities Limited continues its journey of innovation and excellence, it remains dedicated to delivering value to its clients, employees, and shareholders. This Management Discussion and Analysis Report provides a comprehensive overview of LKP Securities Limiteds performance and outlook, serving as a testament to its strategic vision and operational resilience.

FINANCIAL PERFORMANCE AND OPERATIONAL REVIEW (STANDALONE): Share Capital

The paid up equity share capital of the Company as on March 31, 2024 stands at Rs. 16,33,43,058/- divided into 8,16,71,529 fully paid up equity shares of Rs. 2/- each.

Net Worth

The Net Worth of the Company stands at Rs. 7860.76 Lakhs.

Secured Loans

The Company has secured borrowings of Rs. 815.40 Lakhs in the current year.

Total Income

During the year total income was reported at Rs. 9727.84 Lakhs.

Finance Cost

The finance cost of the Company stands at Rs. 525.96 Lakhs.

Tax Expense

The Company has incurred a tax expense of Rs. 373.78 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 its human capital. As on March 31, 2024 there are 371 employees theyear.TheCompanyplacessignificant 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.

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	Financial Year	YOY Change	Favorable/ Adverse	Comments
	2023-24	2022-23
(i) Debtors Turnover	1:3.73	1:3.29	13.54%	Adverse	-
(ii) Interest Coverage Ratio	1:3.71	1:2.69	37.92%	Adverse	Increase due to increase in borrowing for working capital requirement
(iii) Current Ratio	1:1.37	1:1.53	(10.46%)	Adverse	-
(iv) Debt Equity Ratio	0.10:1	0.11:1	(9.09%)	Favorable	-
(v) Operating Profit Margin (%)	17.50%	7.20%	143.94%	Favorable	Operating profit increased due to increase in volume of business in quarter IV
(vi) Net Profit Margin (%)	9.77%	4.06%	140.37%	Favorable	Net profit increased due to increase in volume of business in quarter IV

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.