LKP Securities Ltd Management Discussions.

Industry structure and developments

F.Y 2018-19 witnessed a surge in indices with large caps doing well led by key constituents of the NIFTY However the broader markets especially the small and midcap segment actually fell. F.Y 2018-19 witnessed an 81% drop in fund raising from IPO market at Rs. 16300 crores against Rs. 83767 crores during last fiscal. Similarly funds mobilized through the QIP route also witnessed a massive decline of 83% at Rs. 10500 crores as against Rs. 62520 crores seen last fiscal. Bank Credit grew 13% while Deposits grew 10%. Mid 2018 witnessed considerable weakness in inflows into debt mutual funds.

Mutual Fund Houses with exposure to Fixed Maturity Plans of certain large corporate groups created nervousness in debt markets. We being distributors of these products also felt the heat during the year.

Your company made significant investments in Technology Upgradation during the year keeping an eye on the future growth opportunities.

Opportunities and Threats

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

The business of the company is affected by the sentiments prevailing in the stock markets.

LKP Securities Ltd. is one of the reputed broking houses of the country, having a network of 3000 plus channel partner PAN India (including Branch Offices, Registered Authorized Persons and Introducers). The company has put in place a new team to drive the retail business.

The Company is empanelled with most of the reputed domestic financial institutions including life and non-insurance companies, mutual funds, foreign financial institutions and corporates, apart from having large number of HNI and retail clients. In the event of strong and stable government at the centre, the likely increase in capital mobilisation from the primary market, increase in resource mobilisation by mutual funds and phenomenal growth in secondary market volumes could provide significant business opportunities for the Company.

Outlook

The liquidity crisis, coupled with increasing stress in the corporate segment warrants caution. Prime Minister Narendra Modi while addressing the World Economic Forum said India could well be a $5 trillion economy by 2025 but is surely facing a major challenge of falling farm incomes and the lack of job opportunities for thousands of youth entering the labour force each month.

On the external front the ongoing Trade War between the US and China and the happenings in the EU are factors which could exert pressure on markets. Also within India a visible slowdown as seen in the Q4 earnings released by the first set of companies seem to suggest that on the ground we are witnessing muted demand even in defensive sectors like Fast Moving Consumer Goods. The advent and prediction of Monsoon is also a key factor to be watched.

LKP Securities Limited, being an intermediary in the market, sees the constant opportunities of driving their Business Growth through its wide customer base PAN India. LKP provides alternative modes of trading and investments to its clients and have constantly taken efforts to upgrade various platforms for trading and investments, since Broking Industry has significantly undergone transformation to technology based trading from manual trading. LKP provides Web Based and Mobile trading App to its client for all their trading and investment needs.

During the year under review Wholesale Debt Market Division of your Company has made its significant presence as an Arranger for many primary issuances of Bonds and NCDs by Corporate and PSUs. The Company managed the CP Issuances by leading Corporate & PSUs. The Company has been rated by Prime League table as one of the top 16 long-term debts Arranger and as No. 5 Arranger for CP placement. The Company has emerged as one of the top intermediary in WDM segment of NSE/BSE.

LKP Wealth Advisory Limited (100% subsidiary of your company) which started as a corporate agent for Insurance business received the Advisory License and commenced new product offerings in Cash Market and Structured Products.

Risks and Concerns

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.

Internal Control Systems and their adequacy

The Company has satisfactory internal control system.

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 with respect to Operational Performance Share Capital

The paid up equity share capital of the Company as on March 31, 2019 stands at Rs. 14,78,69,472/- divided into 7,39,34,736 equity shares of Rs. 2/- each fully paid up.

Net Worth

The Net Worth of the Company is Rs. 3808.35 Lacs.

Secured Loans

During the year under consideration Rs. 2532.08 Lacs.

Total Income

During the year under consideration Rs. 9450.15 Lacs.

Other Income

During the year under consideration Rs. 35.97 Lacs.

Interest and Finance Charges

During the year under consideration Rs. 748.10 Lacs.

Tax Expense

During the year under consideration Rs. (111.29) Lacs.

Human Resources

There has been no material development on the Human Resource/Industrial Relations front during the year.

LKP Securities Ltd. places significant importance to its human capital. As on 31st March 2019 there are 556 employees employed by the Company. The company has also provided medical insurance for its employees and family members as a welfare measure. 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.

For and on behalf of the Board of Directors

Mumbai (Pratik M. Doshi)

Date: 2nd May, 2019 Managing Director