Luharuka Media & Infra Ltd Management Discussions

MACROECONOMIC OVERVIEW

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now—at 3.1 percent—is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually. The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability.

Indias economy has been notably resilient amidst the past years global inflation and supply chain constraints, boasting an impressive growth rate of 7.8% in the 2023–24 fiscal year (FY) and exceeding the average G20 rate of 3.4%. Strong growth in the manufacturing sector, higher-than-expected agricultural output, and robust government spending have made India the worlds fastest-growing major economy.

However, according to the OECDs latest figures, Indias economic growth is projected to slow to 6.6% in FY 2024–25, as global demand weakens and a tighter monetary policy takes shape to manage global inflationary pressures. With inflation and monetary policy expected to ease in the second half of 2024, the Paris-based think tank forecasts that Indias growth rate will remain at 6.6% in FY 2025–26. Although these figures are above the G20 average of 3.1% in both 2024 and 2025, they fall short of the Indian governments target of 7% to 7.5% by 2030.

The NBFC sector in India has witnessed remarkable transformations since its emergence, with segments such as housing finance, microfinance and consumer finance contributing to its expansion. This growth is driven by various factors, such as a rising middle class, enhanced financial inclusion and positive policy interventions. Additionally, the sector has benefited from a favourable regulatory framework and a stable macroeconomic scenario. After a moderation in growth post the COVID-19 pandemic, NBFCs are back on track with an expected credit growth of 12–14 percent during Financial Year 2024. The industry is expected to continue to witness the emergence of newer NBFCs catering to specific customer segments. The COVID-19 pandemic and consequent acceleration in both adoption of technology and change in consumer habits, as well as increasing availability of data for credit decision-making, has made it possible to build an NBFC lending business without investing large sums to have brick-and-mortar presence on the ground. Overall, between Financial Year 2023 and Financial Year 2025, research shows NBFC credit will increase at a CAGR of 12–14 per cent.

INDUSTRY STRUCTURE AND DEVELOPMENTS

FINANCIAL SERVICES INDUSTRY

The financial services industry in India is diverse and dynamic, encompassing various sectors that play crucial roles in supporting economic growth, investment, and financial inclusion. Here are key aspects of the financial services industry in India:

1. Banking Sector:

Commercial Banks: India has a robust banking sector with public sector banks, private sector banks, and foreign banks operating in the country. The sector is regulated by the Reserve Bank of India (RBI), which oversees monetary policy, banking operations, and financial stability.

Digital Banking: There has been significant growth in digital banking services, including mobile banking, internet banking, and digital payment platforms. The Unified Payments Interface (UPI) has revolutionized digital payments in India, facilitating easy and instant fund transfers between bank accounts.

2. Non-Banking Financial Companies (NBFCs):

NBFCs play a crucial role in providing credit to various sectors of the economy, especially to individuals and small businesses that may not have access to traditional banking services. They offer a wide range of financial products such as loans, leasing, hire purchase, and insurance.

Regulatory oversight for NBFCs is provided by the RBI, ensuring compliance with prudential norms and safeguarding financial stability.

3. Insurance Sector:

Indias insurance industry has seen significant growth, both in life insurance and general insurance segments. The sector is regulated by the Insurance Regulatory and Development Authority of India (IRDAI).

The introduction of innovative insurance products, increasing penetration in rural areas, and digital initiatives have contributed to the expansion of the insurance market.

4. Capital Markets:

India has a well-developed capital market comprising the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), and other regional exchanges. These markets facilitate trading in equities, bonds, derivatives, and other financial instruments.

Regulatory oversight is provided by the Securities and Exchange Board of India (SEBI), which regulates securities markets and protects investor interests.

5. Mutual Funds and Asset Management:

The mutual fund industry in India has grown rapidly, offering investors a variety of investment options across different asset classes such as equity, debt, and hybrid funds.

Asset management companies (AMCs) manage mutual funds and other investment products, catering to the diverse needs of retail and institutional investors.

6. Regulatory Environment:

The regulatory framework in Indias financial services industry is aimed at promoting transparency, protecting consumer interests, and ensuring financial stability. Regulators like the RBI, SEBI, and IRDAI enforce regulations and oversee the operations of financial institutions.

7. Financial Inclusion and Digital Initiatives:

India has made significant strides in financial inclusion through initiatives like Jan Dhan Yojana, which aims to provide banking services to unbanked individuals. Digital initiatives such as Aadhaar-enabled payment systems and fintech innovations have further enhanced access to financial services.

Overall, the financial services industry in India is poised for continued growth and transformation, driven by technological advancements, regulatory reforms, and evolving consumer preferences.

Non-Banking Financial Companies (NBFCs)

NBFC sector plays an extremely crucial role in the development of the countrys core infrastructure. By offering quicker funds and credit to the Indian trade and commerce industry, these entities are enabling the nation-wide growth of large infrastructure projects. Furthermore, small businesses, start-ups, and MSMEs/SSIs are dependent on funds offered by NBFCs. As these small businesses expand their operations, their need for skilled and unskilled labour, goes up to fulfil the increase in operations. Thus, indirectly, each new NBFC registration creates more job opportunities at the macro-economic level. The customer base of NBFC vs bank is pretty wide. NBFCs cater to the urban, as well as unorganized rural areas, offering loans to satisfy different requirements.

Whereas banks provide finance to the organized sector only. This has resulted in the amount of money lent by the NBFCs to the consumers has been phenomenally more as against banks. Over the last few years, consumer lending has seen a continuous rise, with NBFCs catering to a large portion. With the growth in the economy, the requirement for loans is bound to surge. And NBFCs, along with banks, can give a strong push to the growth and development of the Indian economy.

As of 30 September 2023, there were a total of 9,356 NBFCs registered with the Reserve Bank of India (RBI). Based on liability structure, NBFCs have been traditionally categorised into deposit-taking NBFCs (NBFCs-D), which are allowed to raise term deposits and non-deposit-taking NBFCs (NBFCs-ND). In October 2021, the RBI introduced a scale-based regulation for NBFCs to align its regulatory framework and further classify these financial institutions based on their evolving risk profile, considering the evolution of NBFCs with regard to size, complexity and interconnection within the financial sector.

ABOUT LUHARUKA MEDIA & INFRA LIMITED

BUSINESS OVERVIEW

Our Company was originally incorporated as "Indus Commercials Limited" on July 07, 1981 under the Companies Act, 1956 in the State of West Bengal. Thereafter the name has been changed from Indus Commercials Limited to Hindustan Stockland Limited and received a fresh certificate of incorporation consequent to change of name from Registrar of Mumbai, Maharashtra on September 19, 1991. Thereafter, the Company name has been further changed to Splash Mediaworks Ltd and a fresh certificate of incorporation was received from Registrar of Mumbai, Maharashtra on May 08, 2002. Further, the name of the Company was changed to Splash Media & Infra Limited on November 09, 2009. Thereafter the name was changed to the current name i.e. Luharuka Media & Infra Limited ("LMIL") and a fresh certificate of incorporation was received from Registrar of Mumbai, Maharashtra on October 15, 2015.

The Company was taken over by the present promoters in the year 2015. The Company had a Certificate of Registration from Reserve Bank of India as a Non-Banking Financial Company ("NBFC") vide certificate no. B-13.01559 in the name of the "Hindustan Stockland Limited". Thereafter, the Company obtained a fresh Certificate of Registration from Reserve Bank of India in the present name of the Company i.e. Luharuka Media & Infra Limited vide certificate no. B-13.01559 dated January 12, 2017.

PRODUCTS & SERVICES

The Company is a NBFC and its primary focus is providing inter corporate loans, personal loans, loans against shares & securities, loans against properties, Mortgage Loans, Auto / Home Loans, trade financing, bills discounting.

Since the Company is an NBFC it is now developing to position itself between the organized banking sector and local money lenders, offering the customers competitive, flexible and timely lending services. As such there are no separate reportable segments or product wise performance reports applicable to the Company.

Our Company offers financial services to commercial, industrial and financial clients with a one stop financial solution as follows:

NEW PRODUCT

Our Company has launched a new range of financial products under a new brand name "DhanSafal". This brand signifies our commitment to success and prosperity in financial endeavours.

As we introduce "DhanSafal", our goal is to strengthen our connection with customers and solidify our market presence by providing transparent and reliable financial services. This initiative aims to empower investors and partners by equipping them with the necessary tools and support to navigate and succeed in the ever-evolving financial markets.

FINANCIAL PERFORMANCE

The following table presents Companys abridged financials for the financial year 2023-24, including revenues, expenses and profits.

( in Lakh, Except EPS)

PARTICULARS	2023-2024	2022-2023
Revenue from Operations	162.77	193.00
Other Income	2.65	0.45
Total Revenue	165.43	193.45
Total Expense	76.59	103.19
Profit before Tax	88.83	90.26
Current Tax	23.61	23.50
Tax of earlier year	4.64	(0.05)
Profit for the Year	60.59	66.81
Earnings Per Share (EPS) (Basic & Diluted)	0.06	0.07

During the year under review, your Companys total revenue from operations has changed to 162.77 lakh as compared to 193.00 lakh in the previous financial year. The net profit has changed to 60.59 lakh as compared to 66.81 lakh in the previous financial year.

This Industry is primarily attributed to challenges such as regulatory compliance complexities, funding constraints, credit risk management, intense market competition, and economic volatility impacting their operations and growth prospects. Despite this challenge, we remain focused on maintaining our competitiveness and financial stability. We are actively reviewing our strategies and implementing necessary adjustments to improve profitability moving forward. Our commitment to delivering value to our stakeholders remains unwavering, and we appreciate your continued support during this time.

Details of Significant changes, if any, in the Key Financial Ratios, along with the detailed explanation forms part of the financial Statements. Return on Net worth of the Company has changed to 0.04 in the financial year 2023-24 as compared to the previous financial year due to change in Profit after Tax of the Company.

The Management continues to concentrate its efforts to increase the revenue of the Company by identifying new opportunities.

DEVELOPMENT OF HUMAN RESOURCE

Human Resource development is essential for building a skilled and motivated workforce capable of driving innovation, achieving performance excellence, and sustaining competitive advantage in the long term. People are our key pillars of strength. Human Capital is the core strength in achieving the sustainable growth path charted by our strategic apex as it plays an important role in developing, reinforcing, and enhancing the culture of an organization. Our Company believes that its employees are one of the most important stakeholders. As on March 31, 2024, it had a total head count of 8 employees. The Directors wish to place on record their appreciation and acknowledgment for the efforts and dedication and contributions made by employees at all levels during the year under review.

Our Company is focused on building and developing enduring capabilities for a future-ready workforce. For the same it aims to attract as well as develop, motivate and retain diverse talent in the highly competitive market that is critical for its continued success. Our Company has people-friendly policies and practices aligned with business strategy that provides its employees an opportunity to learn grow and take their career forward. All employees, from a new joiner to a tenured one, are provided tailored learning opportunities as per their role, level, and specific focus area. Employees are equally treated and provided opportunities irrespective of gender, marital status, religion, race/caste, colour, age, ancestry, nationality, language, ethnic origin, socioeconomic status, physical appearance, disability, sexual orientation, gender and expression.

SWOT ANALYSIS

During the financial year 2023-24, our Company grappled with persistent liquidity challenges, exacerbated by tightened market conditions and higher borrowing costs. Regulatory pressures intensified with stringent compliance requirements, impacting operational flexibility and increasing costs. Rising non-performing assets (NPAs) and competitive pressures further strained profitability, while navigating economic uncertainties and digital transformation hurdles added complexity to business operations.

Strengths	Opportunities
-Promoted and managed by qualified & experienced professionals: The Board of the Company compromises of Professionals & other highly qualified & experienced Directors.	- Various schemes and tax motivations by government
- Prudent fund management practices.	- NBFC sector has lots of scope to cover larger market.
- Specialization in the task of recovery.	- Large untapped rural and urban markets.
- Easy and simplified sanction procedure and disbursement.	- Untapped use of digital solutions for business/ collections.
- Serving the under-served retail markets.	- Expanded role of being in diversified financial intermediation activities in the areas of credit and in channelizing the savings.
- Strong Customer Relationships.	- Partnerships and Collaborations.
- Flexible Lending Criteria
Weakness	Threats
- Does not have aggressive advertising strategies.	- Inflation
- Increase in competition from other finance companies and small banks.	- Tightening regulation of NBFCs
- Stringent regulatory requirements, which can sometimes limit their ability to expand operations or introduce new products quickly.	- Geopolitical crisis
	- Uncertain economic and political environment
	- Operational Challenges
	- Cybersecurity and Data Privacy

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY:

An internal control system encompasses policies, procedures and processes designed to safeguard assets, ensure accurate financial reporting and comply with regulations. Its adequacy is determined by its ability to effectively mitigate risks, prevent fraud and support operational efficiency. Regular evaluation, feedback from audits and alignment with organizational goals are crucial for maintaining and improving the effectiveness of internal controls over time.

The Company has robust internal controls system in place aligned with regulatory and legal requirements and best practices.

The Company has instituted the three lines of defence model, viz.

• Internal Operation Management and Management Controls

• Risk and Compliance function

• Internal Audit function

The Board carries out regular checks to ensure internal control system are operating as decided and gaps, if any, identified and are set right. Senior management also contributes in implementing risk mitigating measures and regulatory guidelines. In the opinion of Board and senior management, internal control systems are well placed and are working in an efficient manner. The internal control systems are supplemented by internal audits and are adequate and operating effectively in line with the regulatory requirements, nature of company and size of its operations. Internal Audit is an autonomous function of the Company. The Internal Audit function works closely with the Compliance Department.

The Company has appointed M/s. ASHP & Co. LLP, Chartered Accountants to conduct independent financial and operational internal audit in accordance with the scope as defined by the Audit Committee. The reports from the Internal Auditors are reviewed by the Audit Committee on periodic basis and the Internal Auditor has been advised to issue flash reports, if required. The Audit Committee of the Company reviews and recommends the unaudited quarterly financial results and the annual audited financial statements of your Company to the Board for approval. Further, all related party transactions are placed before the

Audit Committee for their approval.

OUR STRATEGY

Our corporate strategy is to focus on digital transformation to enhance operational efficiency and customer experience. Emphasis is placed on strengthening risk management frameworks and compliance readiness amidst evolving regulatory landscapes. Market expansion through geographical diversification and product innovation, coupled with a customer-centric approach and sustainable practices, will be pivotal. Additionally, nurturing talent, fostering a culture of innovation, and maintaining strong governance will ensure resilience and competitive advantage in a dynamic financial services sector.

OUTLOOK

NBFC (Non-Banking Financial Company) companies in India for the financial year 2024-25 is cautiously optimistic amidst several challenges and opportunities. Regulatory compliance will continue to be stringent, requiring NBFCs to focus on maintaining robust governance and risk management frameworks. Economic recovery post-pandemic is expected to bolster credit demand, particularly in sectors like retail lending, small business finance, and affordable housing. Digital transformation will be crucial as NBFCs accelerate adoption of technology to enhance operational efficiencies and customer engagement. However, intense competition, fluctuating interest rates, and ongoing challenges in asset quality management will necessitate agile strategies and prudent financial management to sustain growth and profitability.

Your company in the NBFC sector is poised for substantial growth driven by strategic initiatives and market opportunities.

Key factors contributing to our future outlook include:

1. Diversified Product Portfolio: We plan to expand our product offerings beyond traditional lending to include innovative financial solutions tailored to meet diverse customer needs.

2. Digital Transformation: Embracing digital technologies will be pivotal in enhancing operational efficiency, customer experience, and risk management. We aim to leverage data analytics for personalized customer insights and streamline processes through automation, thereby improving agility and responsiveness.

3. Customer-Centric Approach: Enhancing customer engagement and satisfaction will be a cornerstone of our growth strategy. We will focus on delivering superior service, quick turnaround times, and tailored financial solutions that address specific pain points of our target segments.

4. Risk Management Excellence: Strengthening our risk management framework will be a priority to mitigate credit risks, manage liquidity effectively, and ensure compliance with regulatory requirements. This includes enhancing credit assessment capabilities and implementing robust monitoring mechanisms.

5. Expansion and Market Penetration: We intend to expand our geographic footprint selectively, targeting underserved regions and tapping into emerging opportunities in urban and rural markets. Strategic partnerships and alliances will play a crucial role in accelerating our market penetration efforts.

6. Sustainability and Governance: Integrating environmental, social, and governance (ESG) principles into our business operations will enhance our reputation, attract responsible investors, and align with evolving regulatory expectations. Strong governance practices will underpin our commitment to transparency and ethical conduct.

7. Financial Strength and Capital Management: Optimizing our capital structure, diversifying funding sources, and maintaining strong liquidity buffers will fortify our financial resilience and support sustainable growth ambitions. Prudent financial management will be instrumental in navigating economic uncertainties and volatility.

By focusing on innovation, digitalization, customer-centricity, risk management, expansion, sustainability, and financial strength, we are confident in our ability to achieve robust growth and consolidate our position as a leading player in the NBFC sector in the coming months.

RISK & CONCERNS:

The Companys business activities are exposed to a variety of financial risks, namely liquidity risk, market risks and credit risk. The Companys senior management has the overall responsibility for establishing and governing the Companys risk management framework. The Company has constituted a core Management Committee, which is responsible for developing and monitoring the Companys risk management policies.

The Companys risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Audit Committee of the Company.

As NBFC (Non-Banking Financial Company) following several risks and concerns are anticipated that could impact the operations and financial stability:

Credit Risk:

Continued economic recovery post-pandemic may lead to increased credit demand, but also pose challenges in assessing borrower creditworthiness and managing loan quality. Sector-specific risks, such as in real estate and small business lending, could heighten the likelihood of non-performing assets (NPAs) if economic conditions fluctuate.

Liquidity Risk:

Dependency on market borrowings, including commercial paper and debentures, exposes NBFCs to liquidity risk amid potential market volatility or changes in investor sentiment. Managing liquidity mismatches between short-term liabilities and longer-term assets remains critical, especially during periods of tightening liquidity conditions.

Regulatory and Compliance Environment:

Stricter regulatory oversight by the Reserve Bank of India (RBI) on capital adequacy, asset quality, and governance standards may increase compliance costs and operational complexities. Adapting to regulatory changes, including new guidelines on liquidity management and provisioning norms, could impact profitability and require operational adjustments.

Interest Rate Risk:

Fluctuations in interest rates, influenced by RBI policy decisions and market conditions, may affect NBFCs net interest margins and profitability. Managing interest rate risk through effective asset-liability management (ALM) strategies and hedging instruments will be crucial to mitigate adverse impacts.

Operational Risks:

Operational disruptions, including cyber threats, IT system failures, and operational errors, could lead to financial losses, reputational damage, and regulatory penalties. Strengthening operational resilience and investing in robust cybersecurity measures will be essential amid increasing digitalization and remote working environments.

Market and Competitive Dynamics:

Intensified competition from banks, fintech firms, and new entrants offering innovative financial products and digital solutions may pressure NBFCs to differentiate through superior customer service and product innovation. Market shifts in customer preferences, technological advancements, and regulatory changes could necessitate agility and strategic adaptation to maintain market relevance.

Macroeconomic Uncertainties:

Global economic uncertainties, geopolitical tensions, and domestic macroeconomic factors may impact investor sentiment, capital flows, and overall economic stability. NBFCs must monitor external economic indicators closely to anticipate potential impacts on funding costs, business operations, and credit risk profiles.

Reputational and Legal Risks:

Upholding strong corporate governance, ethical practices, and transparency is crucial to mitigate reputational risks and maintain stakeholder trust. Managing legal and regulatory compliance, including adherence to consumer protection laws and data privacy regulations, is paramount to avoid legal challenges and regulatory sanctions.

OTHER RISKS

Due to rapid changes in the technologies, business dimensions and complexities, regulatory changes and environmental concerns, new and various types of risks have emerged. Financial firms are now increasingly focused on asset-liability risk. Asset-liability risk is a leveraged form of risk. So, in the era of fast changing global economy, multiplicity of legal compliances, cross border business transactions and to ensure the survival, viability and sustainability of business, the management of various types of risks have gained utmost importance.

All such risks cannot be eradicated completely however can be controlled, mitigated and managed within the Company in order to balance risk and reward. Risk management is an important part of the Companys business strategy, and it is smoothly incorporated into all of the Companys activities. The aim of the Companys framework is to optimize the risk-return equation while also ensuring strict adherence to all current and upcoming laws, rules, and regulations that apply to all of the Companys business activities. Thus, managing risks is not a one-time activity; its an ongoing process. The Company strives to cultivate a strong and disciplined risk management culture across all of its business operations and at all levels of the organization. The Companys senior management has the overall responsibility for establishing and governing the Companys risk management framework. The Company has constituted a core Management Committee, which is responsible for developing and monitoring the Companys risk management policies. The Companys risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly.

CAUTIONARY STATEMENT

Certain statements made in the Management Discussion and Analysis Report relating to the Companys objectives, projections, outlook, expectations, estimates and others may constitute ‘forward looking statements, within the meaning of applicable laws and regulations. Actual results may differ from such expectations, whether expressed or implied. Several factors could make a significant difference to the Companys operations. These include climatic and economic conditions affecting demand and supply, government regulations and taxation, any epidemic or pandemic, natural calamities over which the Company may not have any direct/indirect control.

The management of the Company has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements reflect a true and fair manner, the state of affairs and profit / loss for the year. The narrative on our financial condition and result of operations should be read together with the notes to the financial statements included in the annual report. Important factors that could make a difference to the Companys operations include changes in Government regulations and tax regime, economic developments within India and abroad, financial markets, etc.