The Board of Directors of the Company have pleasure in presenting the Management
Discussion and Analysis Report in adherence to the spirit enunciated in the Securities and
Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements)
Regulations, 2015, as amended from to time.
GLOBAL ECONOMIC OVERVIEW
Global economic growth in 2018 at 3.6% was slightly slower than that in 2017 at 3.8%.
The slight deceleration in growth is attributable to demand slowdown in the second half of
the year coupled with trade tensions mounting between US and China, weak manufacturing,
poor financial market conditions, subdued business confidence and policy paralysis across
many economies.
As per the World Economic Outlook Report - April 2019, world economic growth is
expected to further decelerate to 3.3% in 2019, before recovering again to 3.6% in 2020.
Advanced economies are expected to register slower growth in 2019 at 1.8% which is
expected to further slow down to 1.7% in 2020. Emerging markets growth is expected to
slow down to 4.4% in 2019, and pick up pace in 2020 to 4.8%. Slowing external demand,
rising borrowing costs, and persistent policy uncertainties are the primary reasons for
slowing growth.
Indias economic growth is expected to pick up in 2019, benefiting from lower oil
prices and a slower pace of monetary tightening, as inflation pressures ease.
INDIAN ECONOMIC OVERVIEW
As per the Central Statistics Offices (CSO) provisional estimates, Indias Gross
Domestic Product (GDP) is estimated to grow by 6.8% in 2018-19, a tad slower than 7.2%
growth of 2017-18. However, consumer demand picked pace and the economy is coming back on
track after the temporary disruptions caused by demonetization and GST implementation.
Demand revival is well reflected in 7.4% growth in financial, real estate and professional
services industry and 6.9% growth in manufacturing in 2018-19.
The Indian economy maintains the fast growth route, emerging as the fastest growing
major economy in the world. India witnessed a 23-notch jump to record 77th position in the
World Banks 2019 report on the ease of doing business. IMF has projected growth to pick
up to 7.3% in 2019-20 and 7.5% in 2020-21, supported by the continued implementation of
structural reforms, easing of infrastructure bottlenecks and robust consumption amid a
more expansionary stance of monetary policy and some expected impetus from fiscal policy.
INDUSTRY OVERVIEW
The financial year 2018-2019 was a volatile year for equity markets. During the
financial year under review, Nifty was up 15% (vs. 10% in financial year 2017-2018),
despite the turbulence seen in the middle of the year.
India continues to be one of the fastest growing major economies in the world and is
expected to be among the worlds top three economic powers in the next 10-15 years. The
Indian economy is expected to improve and close the year 2019 with a GDP growth of 7.3%.
Major stock markets around the world ended in losses in 2018 as compared to a year ago,
except the Indian markets.
Capital Market
Capital markets play an important role in mobilizing financial resources and their
allocation towards productive projects and channels. The size of the capital market in
India continued to expand during 2018-19, with the market capitalization rising by 6.3% to
Rs. 151 Lakh Crores. In 2018-19, the Indian capital market outperformed several major
global markets, including US, UK, China and Brazil, with double-digit returns despite
numerous global and domestic headwinds.
Capital markets help mobilize savings, accelerate capital formation and offer
investment opportunities for the public, acting as an effective economic barometer.
Equity Market
The Indian market benchmark indices showed remarkable performance in 2018-19, with
BSEs Sensex growing 17.3% and NSEs Nifty growing at 14.9%. This is much better than the
equity market returns recorded in the US at 7.6%, UK at 3.2%, China at negative 2.5%,
Brazil at 11.8%, Japan at negative 1.2%, South Korea at negative 12.5% and Hong Kong at
negative 3.5%. Indias equity market turnover (including F&O) for 2018-19 stood at Rs.
22,581,720 Crores, increasing by 25% over the previous financial year.
OPPORTUNITIES AND THREATS
The Company closely monitors the potential opportunities and threats that arise from
political, economic and regulatory environment, exchange rate fluctuations, technology
changes and competition.
Indias household savings rate stands at around 20% of the GDP, which translates to
about Rs. 30 Lakh Crores. With regulatory tightening, investors are moving away from
physical assets such as gold and real estate to financial assets. Indians are increasingly
becoming tech savvy and this trend will further lead to more growth in the digital
financial services.
Indias per capita national income is set to grow at 8.19% in 2019-20. Increased income
is expected to boost investments in capital market.
As macro headwinds of 2018 appear to be turning into tailwinds, the outlook for fixed
income in 2019 appears bright. Corporate earnings are also expected to stabilize in 2019
with demonetization and GST turbulence having settled.
Though, the Company is optimistic about its future in the financial services industry
but also understands and perceives certain threats as well.
The intensity of competition in capital market has increased and the fluctuations in
the equity markets have made investors think twice before put in their hard earned money.
Cyber insecurity continues to be a threat to growth in the digital financial services.
Further, uncertainty in the capital markets, owing to slow implementation of regulatory
reforms and lack of consensus on important legislations can delay growth.
COMPANY PERFORMANCE
The Company has over two decades of rich experience in the Indian Equity Market and in
past few years has made substantial investments in people and technology and continues to
focus on delivering steady performance. The Company is cognizant of the changes in the
financial services sector and has always been well-prepared to overcome challenges and
sustain its performance.
The Company seeks to further strengthen its position as a stock broking company by
successfully differentiating service offerings and increasing the scale of operations. To
achieve these goals, it seeks to increase business from existing and new clients. The aim
is to build enduring relationships with both existing and new clients.
SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE
The Company is primarily engaged in the business of stock and share brokerage and its
allied matters and as such there are no separate reportable segments.
FINANCIAL PERFORMANCE
Over the last 25 years, the Company has experienced various phases in its journey.
Net Worth:
Net Worth on consolidated basis for the financial year under review was Rs. 150,488,660
as compared to Rs. 141,074,964 for the previous financial year resulting in a growth of
6.67%.
Net Worth on standalone basis for the financial year under review was Rs. 130,892,248
as compared to Rs. 128,731,316 for the previous financial year resulting in a growth of
1.67%.
Income:
Total Income on consolidated basis for the financial year under review was Rs.
248,216,076 as compared to Rs. 256,089,194 for the previous financial year resulting in a
decline of 3.17%.
Total Income on standalone basis for the financial year under review was Rs.
211,482,613 as compared to Rs. 245,896,154 for the previous financial year resulting in a
growth of 16.27%.
Expenditure:
Total expenses on consolidated basis for the financial year under review was Rs.
233,353,146 as compared to Rs. 249,975,395 for the previous financial year resulting in a
positive decline of 6.64%.
Total expenses on standalone basis for the financial year under review was Rs.
206,423,219 as compared to Rs. 239,332,176 for the previous financial year resulting in a
positive decline of 15.94%.
Profit after taxes:
Profit after taxes on consolidated basis for the financial year under review was Rs.
12,791,625 as compared to Rs. 6,944,418 for the previous financial year resulting in a
growth of 84.20%.
Profit after taxes on standalone basis for the financial year under review was Rs.
5,538,860 as compared to Rs. 7,435,672 for the previous financial year resulting in a
decline of 34.24%.
RISKS AND CONCERNS
Since the Company operates in the financial service sector, it is governed by several
rules and regulations by various governing bodies. Non-compliance or misinterpretation may
lead to inadequate observance. Also, the Company needs to be prepared to follow any new
rules introduced or modifications brought about in existing laws. The Company prioritizes
compliance with any new guidelines, circulars and notifications.
The financial services of the Company are exposed to various risks that are either
inherent to the business or exposed to the changes in external environment.
Operational risks may result from inadequate control of internal processes, people and
systems. External factors also pose a threat to business operations. Changes in consumer
preference may pose risk to financial earnings.
Redundancy in technology used or lack of proper technological support may pose risk to
business growth. The Company keeps itself sufficiently invested in latest hardware and
software to meet the requirements of diversified teams. Continuous efforts to upgrade
Information Technology (IT) systems help the Company to avoid any technology-related risk.
The Company is exposed to risk arising out of its major strategic moves and the
likelihood of replication by competitors. High growth prospects of the industry make it
lucrative for new entrants both from domestic as well as international players.
The Company has a robust risk management framework to identify, monitor and minimize
risk and also identify business opportunities.
INTERNAL CONTROLS
The internal control systems are designed to safeguard the Companys assets and ensure
efficient productivity at all levels. The systems are adequate for the size of business
and industry in which it operates. Well-defined processes, guidelines and procedures and
adequate internal information systems enable the Company to enhance the internal controls.
Decision-making is made easier due to proper information flow. Periodic and frequent
audits ensure strict adherence to the set procedures and processes. Internal controls also
ensure strict adherence to applicable laws and regulations.
The Audit Committee of the Board keeps a close eye on business operations and
functioning of the internal audit function. The internal controls facilitate prompt
detection and redressal of deviation(s), if any, in the business operations. The Company
believes that these systems provide reasonable assurance that the Companys internal
financial controls are designed effectively and are operating as intended.
HUMAN RESOURCES
The Company considers human capital to be a key pillar of growth. Its skilled and
professional management team is a strong driving force. The Company ensures a safe,
conducive and productive work environment. The aim is to minimize attrition of
technologically driven and high performers, especially amidst the rapidly-evolving
business environment.
Over a period it has developed a strong culture of transparency through constant
employee communication and has developed strong performance management practices, wherein,
best in class reward and recognition systems are deployed. The Company has also set up a
scalable recruitment and human resources management process which enables us to attract
and retain high caliber employees. The Company has invested into training and learning and
development of employees on a regular basis through Management Development Programs,
online exams and certification courses.
RETURN ON NETWORTH
Return on Networth (RONW) or Return on Equity (ROE) is computed on the basis of Net
Income and the Shareholders Equity.
Net Income i.e. Profit after taxes on consolidated basis for the financial year under
review was Rs. 12,791,625 as compared to Rs. 6,944,418 for the previous financial year.
Shareholders Equity on consolidated basis for the financial year under review was Rs.
150,488,660 as compared to Rs. 141,074,964 for the previous financial year resulting in
the increase of 4% in RONW/ROE.
Net Income i.e. Profit after taxes on standalone basis for the financial year under
review was Rs. 5,538,860 as compared to Rs. 7,435,672 for the previous financial year.
Shareholders Equity on standalone basis for the financial year under review was Rs.
130,892,248 as compared to Rs. 128,731,316 for the previous financial year resulting in
the decline of 2% in RONW/ROE.
CAUTIONARY STATEMENT
Statements in this report describe the Companys objectives, projections, estimates,
expectations and predictions, which are forward-looking. By their nature, forward-looking
statements require the Company to make assumptions and are subject to inherent risks and
uncertainties. Readers are cautioned not to place undue reliance on forward-looking
statements as a number of factors could cause assumptions, actual future results and
events to differ materially from those expressed in the forward-looking statements. The
Company assumes no responsibility to publicly amend, modify or revise any forward-looking
statements, on the basis of any subsequent development, information or events or
otherwise. These statements dont guarantee future performance and are subject to known
and unknown risks, uncertainties and other factors such as change in the government
regulations, tax laws, economic conditions and other incidental factors.
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