Mercantile Vent. Management Discussions


MANAGEMENT DISCUSSION AND ANALYSIS REPORT

a) Industry Structure and developments

After a protracted period of economic stagnation the real estate sector has witnessed a considerable upswing despite rising costs and a series of hikes in repo rates. The sector has seen robust growth in the commercial office and residential segments and the momentum is expected to be sustained in the year ahead

b) Opportunities and Threats

With soaring demand, the commercial real estate market is set to see double digit growth in the office and residential segments with increasing absorption and diminishing vacancy rates.

The series of hikes in interest rates announced by the RBI have pushed up home loan rates and this had an impact on demand and customer sentiments. However, with the flexible payment plans, the innovative products and thoughtful designs being offered by developers, the demand supply dynamics are expected to be resilient in the year ahead.

With the interest rates likely to soften in the years ahead, the market is expected to respond positively and maintain the growth trajectory. But a continued tight money policy of RBI could dampen the demand for residential and commercial real estate space.

c) Segment-wise or produce-wise performance

The company is operating in the segment of leasing of properties and Manpower supply services.

The prospects for this line of business is considered good and the company is expected to maintain the revenue streams from the aforesaid activities in future also.

d) Future Outlook and state of the companys affairs

The main business of the Company is investment in properties for leasing and Manpower supply services. The revenue stream from these operations is expected to remain stable in the current fiscal year also.

e) Risk and concerns

The Company has an appropriate and effective risk management system which carries out risk assessment and ensures that risk mitigation plans are in place by validating the same at regular intervals. The Board reviews the risks, threats & concerns.

The company has an adequate internal control system.

f) Internal Controls and adequacy

The company has an adequate internal control system by having a independent Internal Audit team with well-established risk management processes both at the business and corporate levels. Internal Auditor submits their reports,directly to the Chairman of the Audit Committee of the Board of Directors, which ensures process independence. The Company believes that every employee has a role to play in fostering an environment in which controls, assurance, accountability and ethical behaviour are accorded high importance. This complements the Internal Audits conducted to ensure total coverage during the year. The company developed a robust internal control framework which ensures the operations being carried effectively and are aligned to the strategic goals. The internal control framework is intended to ensure correct, reliable, complete and timely financial reporting and management information.

g) Discussion on financial performance with respect to operational performance

A review for the financial performance is given under review of operations.

h) Material developments in Human Resources / Industrial Relations front, including number of people employed - Nil

i) Details of significant changes in key financial ratios (Change of 25% or more as compared to the immediately previous financial year).

During the year, on a standalone basis the significant changes in the financial ratios of the Company, which are more than 25% as compared to the previous year are summarized below:

Particulars 2022-23 2021-22 Change % Reason for change
(a) Current Ratio 5.14 10.67 (107.67)% Due to a significant reduction in Current investments and Loans and Advances
(b) Debt Equity Ratio - - - -
(c) Debt Service Coverage Ratio - - - -
(d) Return on Equity 2.27 2.98 (31.23)% Due to an increase in Other Expenses -Bad Debts written off and expected credit loss on advances recognised and sharp reduction in Profit from LLP
(e) Inventory Turnover Ratio - - - -
(f) Trade Receivables Turnover Ratio 5.11 4.02 21.28% -
(g) Trade Payables Turnover Ratio - - - -
(h) Net Capital Turnover Ratio 0.40 0.12 70.72% Due to increase in operating revenue and sharp reduction in Current Investments and Loans and advances
(i) Net Profit Ratio 33.00 63.43 (92.22)% Due to reduction in PAT caused by increase in other expenses and reduction in share of profit from LLP and increase in operational revenue
(j) Return on capital employed 2.25 2.95 (31.39)% Due to reduction in PAT caused by increase in other expenses and reduction in share of profit from LLP
(k) Return on Investment 2.16 2.83 (31.40)% Due to reduction in PAT caused by increase in other expenses and reduction in share of profit from LLP

j) Any change in return of net worth as compared to the immediately preceding financial year.

The details of return of net worth as compared to the immediately preceding financial year are provided as given below:

(Rs. In Lakhs)
S. No. Net worth FY 2022-23 Net worth FY 2021-22 (previous financial year) Changes Explanation
30,176.50 31,101.94 (925.44) The steep fall in the market value of investments has impacted adversely on the Other Comprehensive Income of the company and consequently its net worth.