Your Directors are pleased to present the Management Discussion and
Analysis Report for the year ended on 31st March, 2023. Investors are cautioned
that these discussions contain certain forward-looking statements that involve risk and
uncertainties including those risks which are inherent in the Companys growth and
strategy. The Company undertakes no obligation to publicly update or revise any of the
opinions or forward-looking statements expressedinthisreportconsequenttonewinformation or
developments, events or otherwise.
GLOBAL ECONOMY
In 2022, several challenges hampered global growth namely, the
continued geopolitical tension, inflationary pressure and a resurgence of Covid-19 in
China. Several central banks were compelled to adopt stringent monetary policies to curb
inflation. Global economic growth came in at 3.4% in 2022 with advanced economies growing
at 2.7% and Emerging Market and Developing Economies (EMDEs) clocking 4% growth. Towards
the end of 2022, supply side bottlenecks gradually began to ease out and transportation
costs saw some respite. Across sectors, input price pressures thus began to decelerate.
Global headline inflation appears to have peaked in the third quarter of 2022. Fuel prices
and prices of nonfuel commodities are declining, lowering headline inflation.
Global growth is estimated at 2.8% in 2023 and 3% in 2024. Advanced
economies are expected to witness 1.3% growth in 2023 and 1.4% in 2024. EMDEs are expected
to grow at 3.9% in 2023 and 4.2% in 2024. In emerging markets and developing economies,
growth bottomed out in 2022 and is expected to pick up, led by China, with the full
reopening in 2023. With inflation subsiding gradually and easing of supply bottlenecks
economic activity is expected to pickup in 2024 in both groups. About 84% countries are
expected to have lower headline (consumer price index) inflation in 2023 than in 2022.
Global inflation is set to fall from 8.7% in 2022 to 7% in 2023 and 4.9% in 2024 when the
impact of tight monetary controls will begin to show benefits.
Source: World Economic Outlook-IMF, April 2023
INDIAN ECONOMY
Amidst challenging global economic growth, the Indian economy grew
sustainably in FY 2022-23. India was one of fastest growing major economies in the world.
As per the National Statistics Office, the Indian GDP growth in FY 2022-23 is estimated at
7% as compared to 9.1% in FY 2021-22 led by strong government support and substantial
increase in capital expenditure. The Union Budget 2023-24, laid strong emphasis on
boosting economic growth amid mounting fears of recession elsewhere.
The total current account deficit for FY23 widened to US$67bn from
US$39bn in FY22, primarily on account of rising oil consumption. The rupee depreciated by
7.8% vs the USD in FY23 vs 3.0% in FY22, primarily due to foreign selling of Indian
stocks. CPI inflation reduced to 5.66% from 6.95% in FY22 aided by drop in Brent crude
prices from US$108 as at the end of FY22 to US$80 as at the end of FY23, partly due to
pressure exerted by Russia selling to several countries (including India) at discounted
prices. Moderation is inflation was led by normalization of activities on easing of
supply-side bottlenecks.
Though there was normalcy witnessed in consumption growth, investment
growth remained slow. Non-food bank credit grew 15.4% in March 2023 as compared to 9.7% in
March 2022. Credit to industry growth slowed to 5.7% as compared to 7.5% as at the end of
FY22. Retail credit grew 20.6% as compared to 12.6% as at the end of FY22. The S&P
Globals Purchasing Managers Index for manufacturing improved from 54.7 in April 2022
to 56.4 in March 2023, signifying steady momentum in manufacturing.
According to IMF, India is expected to be the fastest-growing economy
in FY 2023-24. As per the Economic Survey 2022-23 and RBI, Indian economy is expected to
grow at 6.5% in FY 2023-24. The inflation trajectory in India is likely be determined by
extreme weather conditions like heat waves and the possibility of an El Nino year,
volatility in international commodity prices and pass-through of input costs to output
prices.
INDUSTRY OVERVIEW
Stock broking
In FY23, the stock markets in India faced multiple challenges like
aggressive policy stance globally, high valuations in Indian equity markets, reopening of
the Chinese trade which took away some part of fund flows, selling pressure by foreign
portfolio investors (FPIs) and the US banking crisis. The Sensex and Nifty closed at
58,992 (up 1%) and 17,360 (down 0.5%) respectively in March 2023. Still, India was the
second-best performer among the emerging markets in FY23 after South Africa. The benchmark
Nifty 50 declined 1.8% to 17,360 on 31st March 2023 from 17,670 on 1st
April 2022, after touching a high of 18,812 on 1st December 2022. During FY23,
24.8 million demat accounts were added, taking the total to 114.5 million as compared to
89.7 million in FY22. Market activity took a meaningful breather in FY23 against FY22. BSE
cash and derivatives (ex-commodity) turnover slipped by 23% and 44% respectively. For the
NSE, cash turnover declined by 20% but derivatives increased by 17%. In FY23, FIIs
remained cautious by pulling out 37,632 crore from the Indian stock market, lesser than
the outflow of 1.4 lakh crore in FY22. FPIs net sold stocks worth 1,98,639 crore, whereas
DIIs bought net 2,55,236 crore (cash market only). DIIs have acquired primacy in the last
few years which continued in FY23, thereby lending stability to the markets even as FPIs
pulled out of emerging markets in the face of geopolitical conflicts. Amongst cash market
participants, retail, institution and proprietary segments constituted 47%, 25% and 28% of
total cash volume, respectively. The proportion of DII in the cash market was 10%.
Investment banking
The investment banking market was distinctly muted in FY23 compared to
FY22, marred by the collapse of some notable global financial entities. In FY23, there
were 37 main board IPOs as compared to 53 in FY22.
The IPO market raised approximately 15,600 crore in FY23 as compared to
1,46,145 crore in FY22. The general level of activity was significantly low in FY23 as
compared to FY22 which witnessed big-ticket fintech, tech and Life Insurance Corporation
IPOs. Based on publicly disclosed information, M&A deals went from 57,904 crore in
FY22 to 22,440 crore in FY23. Disclosed private equity deals were 72,540 crore in FY22,
which went down marginally to 70,150 crore in FY23.
Asset management
The Alternative Investment Fund (AIF) industry saw robust performance
in FY23. Within Category II, the largest of the three categories, actual investments made
went up from 1,99,452 crore in FY22 to 2,42,915 crore in FY23. Under Category III,
corresponding figures were 60,809 crore in FY22 to 71,055 crore in FY23. AIFs compete with
other forms of collective investment vehicles like mutual funds, they offer better,
cost-effective and focussed solutions for high net worth investors, and hence have been
growing in importance. AUMs of mutual funds and portfolio management services, which are
larger than AIFs, also grew in FY23, but to a lesser extent. MF AUM increased from
37,56,683 crore in FY22 to 43,20,468 crore in FY23. PMS AUM grew from 24,19,270 crore in
FY22 to 27,79,604 crore in FY23.
COMPANY OVERVIEW:
Monarch Networth Capital Limited is a leading player in the Indian
financial services space. Monarch Networth Capital is a strategic amalgamation of two
leading financial service providers Monarch Group of Companies and Networth Stock Broking
Ltd. With more than 2 decades of devising and executing smart financial products and
strategies, we have emerged as one of the leading and reliable financial services
providers.
We, during these years have added more verticals to pure stock broking
services. At Monarch Networth Group we offer a wide range of products & services to
our customers such as Equity, Commodity And Currency Broking, Initial Public Offer (IPO),
Follow-on public offer (FPO) and qualified institutional placements (QIP), Alternative
Investment Fund (AIF), Distribution of mutual fund products, bonds, FDs, NPS, Life
Insurance & General Insurance policies of various insurance companies, Depository
(demat) services, Investment banking services, Loan against securities (LAS) and margin
funding, Wealth Management, Portfolio Management Services, Merchant Banking Services, etc.
Further we also provide services like NBFC, Research and Analyst, through its various
subsidiaries. The diversity of our services is backed by a team of research experts,
robust infrastructure and well managed processes.
With a customer first culture, it is our constant endeavor to engage
with them, allowing us to develop a deep understanding of their unique requirements. We
believe in building lasting relationships with our customers. At Monarch, we continue to
create meaningful value for our customers by making investing easy providing rewarding
investment opportunities, incisive research from industry experts and multi-product
offering. Among other uses, we are activelydeployingtechnologyforcustomeracquisition,
increased customer activation and facilitating ease of conducting business with us.
OPPORTUNITIES AND THREATS
Opportunities
Long-term economic outlook positive, will lead to opportunity for
financial services Growing Financial Services industrys share of wallet for
disposable income.
Regulatoryreformswouldaidgreaterparticipation by all class of investors
Leveraging technology to enable best practices and processes
Corporate looking at consolidation / acquisitions / restructuring opens
out opportunities for the corporate advisory business
Threats
Execution risk
Short term economic slowdown impacting investor sentiments and business
activities Slowdown in global liquidity flows Increased intensity of competition from
local and global players Market trends making other assets relatively attractive as
investment avenues
RISK MANAGEMENT & INTERNAL CONTROL SYSTEM:
As per the Provisions of Section 134(3) of the Companies Act, 2013
(‘the Act) the Company as a part of the Boards Report needs to give a
statement indicating development and implementation of a risk management policy for the
company including identification therein of elements of risk, if any, which in the opinion
of the Board may threaten the existence of the Company. Additionally, as per Listing
Obligations and Disclosure Requirement Regulations, 2015 requires to lay down procedures
about the risk assessment and risk minimization.
The company is exposed to specific risks that are particular to its
business and the environment within which it operates including economic cycle, market
risks, competition risk, interest rate volatility, human resource risk and execution risk,
etc. The Company mitigates these risks by enhancing its technological capabilities in
Surveillance mechanism and by following prudent business and risk practices and adhering
to standard policies and procedures adopted for risk management. Compliance Risk &
Responsive strategies: The Company has a full-fledged compliance department manned by
knowledgeable and well-experienced professionals in compliance, corporate, legal and audit
functions. The department guides the businesses/support functions on all regulatory
compliances and monitors implementation of extant regulations/ circulars, ensuring all the
regulatory compliances, governance and reporting of the Group.
Key highlights of the Segment wise financial performance is summarized
below:
|
|
( in Lakhs) |
Particulars |
Standalone |
Consolidated |
|
31st March, 2023 31st |
March, 2022 31st
March, 2023 31st |
March, 2022 |
a) Broking and Related Services |
|
|
|
|
| 1) Fees and commission income |
7951.69 |
9001.33 |
7951.69 |
9001.33 |
| 2) Interest Income |
4515.52 |
3233.36 |
4515.52 |
3233.36 |
| 3) Merchant Banking & Other Services |
1844.90 |
825.50 |
1844.90 |
825.50 |
| 4) Asset Management Services |
217.88 |
695.76 |
217.88 |
695.76 |
| 5) Others (Un-allocated) |
597.41 |
943.04 |
600.19 |
943.38 |
b) Non-Banking financial business |
- |
- |
937.91 |
620.69 |
c) Insurance business |
- |
- |
133.04 |
136.14 |
TOTAL |
15127.40 |
14698.99 |
16201.13 |
15456.14 |
The Company has put in place adequate systems and controls to ensure
compliance with anti-money laundering standards. The Company has implemented business
specific Compliance
Manuals, limit monitoring systems and AML/ KYC policies and enhanced
risk based supervision systems. The compliance requirements across various service points
have been communicated comprehensively to all, through compliance manuals and circulars.
In the broking business, MNCL has put in place robust surveillance & risk management
systems.
Human Resource Risk & Responsive strategies:
HumanResourcedepartmenthasbeenconstantly striving to align with business, implement
digital solutions, and build a strong culture of transparency and service orientation
within the organisation. The Group continued to put in place people friendly policies and
practices in the past year and continues to focus on adopting best practices for its HR
policies. o The Group also has a strong focus on ensuring that employees are adequately
trained in their job functions and on all compliance related trainings. o The HR function
also ensures all statutory compliances with labour laws and other relevant statutes and
ensures that strong background screening standards are in place to minimize any risk of
fraud from incoming employees
Reputation Risk & Responsive strategies : Over the years, the
Company has fostered a culture that enables operating managers to say ‘No to
poor quality business and eschewing from adopting short cuts and stopgap alternatives. In
addition, it has in place stringent employee code of conduct and trading guidelines, which
are to be followed by every employee. The Companys policy and processes ensure close
monitoring and strict disciplinary actions against those deviating from the same.
The Group also has a strong focus on ensuring that employees are
adequately trained in their job functions and on all compliance related trainings.
The organization pays special attention to issues that may create a
Reputational risk. Events that can negatively impact the organization position are handled
cautiously ensuring utmost compliance and in line with the values of the organization.
Risk Culture & Responsive strategies: Risk management is integral
to the Companys strategy. A strong risk culture is designed to help reinforce
resilience by encouraging a holistic approach to the management of risk throughout the
organization.
The Company has, over the years, invested in people, processes and
technology to mitigate the risks posed by the external environment and by its borrowers. A
strong risk management team and an effective credit operations structure ensures that
risks are properly identified and addressed in a timely manner to ensure minimal impact on
the Companys growth and performance. The Company has developed the necessary
competency to identify early stress signals and has also defined processes, including
corrective and remedial actions as regards people and processes, for mitigation to ensure
minimum damage.
The Board of Directors of the Company and Audit Committee shall
periodically review the risk management policy of the Company so that management controls
the risk through properly defined network. Being engaged in the business in a highly
regulated industry; we are equipped with risk management measures in the very regulations
itself. An extensive Internal Audit is carried out by independent firm of Chartered
Accountants reporting to Audit Committee on regular basis. Company has a proper and
adequate internal control system to ensure that all assets are safeguarded and protected
against loss from unauthorized use or disposition and that transaction are authorized,
recorded and reported correctly which ensures- o Compliance with all applicable laws,
rules & regulations, listing requirements and management regulations, o Proper
recording and verification of all financial transactions o Adherence to applicable
accounting standards and policies.
With growing presence of players offering advisory service coupled with
provision of funds for the clients needs, we would face competition of unequal
proportion. We continuously tackle this situation by providing increasingly superior
customized services.
The performance of capital market in India has a direct correlation
with the prospect of economic growth and political stability. Though the growth
projections for FY 2021-22 appear reassuring, there are certain downside risks such as
pace and shape of global recovery, effect of withdrawal of fiscal stimulus and hardening
of commodity prices. Our business performance may also be impacted by increased
competition from local and global players operating in India, regulatory changes and
attrition of employees. With growing presence of players offering advisory service coupled
with provision of funds for the clients needs, we would face competition of unequal
proportion. We continuously tackle this situation by providing increasingly superior
customized services.
In financial services business, effective risk management has become
very crucial. Your Company is exposed to credit risk, liquidity risk and interest rate
risks. Your company has in place suitable mechanisms to effectively reduce such risks. All
these risks are continuously analyzed and reviewed at various levels of management through
an effective management information system.
DISCUSSION ON FINANCIAL/OPERATIONAL PERFORMANCE (STANDALONE BASIS) (ON
THE BASIS OF IND-AS):
Particulars |
2022-23 |
2021-22 |
2020-21 |
| Total Revenue |
14529.99 |
13755.94 |
9,153.94 |
| EBIDTA |
5566.15 |
6804.44 |
3095.72 |
| PBT |
4720.45 |
6576.52 |
2924.73 |
| PAT |
3,483.81 |
4874.92 |
2039.7 |
| Total Comprehensive |
3,465.03 |
5253.10 |
2,178.03 |
Income for the year EPS () |
10.23 |
16.92 |
7.01 |
HUMAN RESOURCES/INDUSTRY RELATIONS:
Human capital is a key to the any service industry and company being
into financial service industry it understands its value & follows healthy HR
practices providing constant training and motivation to its staff. The Company provides
excellent working environments that the individual staff can reach his/her full potential.
The Company is poised to take on the challenges and march towards
accomplishing its mission with success.
The Company maintained good Industrial/
Business relation in market which enhanced the Creditworthiness of the
Company. The total staff strength of the Company and its subsidiaries as on 31st
March, 2023 stood at 376.
ENVIRONMENTAL ISSUES:
As the Company is not in the field of manufacturing, the matter
relating to produce of any harmful gases and the liquid effluents are not applicable.
DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED
TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED
EXPLANATIONS THEREFOR:
Particular |
FY 2022-23 |
FY 2021-22 |
Reason If changes done more than 25% |
| Debtors Turnover |
NA |
NA |
- |
| Inventory Turnover |
NA |
NA |
- |
Interest Coverage Ratio |
9.59 |
33.17 |
Due to higher short term debt
availed for collateral deposit with exchanges |
| Current Ratio |
1.39 |
1.24 |
- |
| Debt Equity Ratio |
0.004 |
0.009 |
- |
| Operating Profit Margin (%) |
31.21% |
43.37% |
- |
Net Profit Margin (%) |
23.03% |
33.17% |
Due to higher employee
expenses which has impacted profitability |
DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE
IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF:
Particular |
FY 2022-23 |
FY 2021-22 |
Return on Net Worth as
compared to the immediately previous financial year. |
16.57% |
32.76% |
Explanation: Declined due to equity expansion (on conversion of
warrants) and lower profitability.
CAUTIONARY STATEMENT:
Statement in the Management Discussion and analysis describing the
companys objectives exceptions or predications may be forward looking within the
meaning of applicable securities, laws and regulations. Actual results may differ
materially from those expressed in the statement. Several factors could make significant
difference to the companys operation. These include climatic conditions and economic
conditions affecting demand and supply, government regulations and taxation, natural
calamities etc. over which the company does not have any control.
|
For and on behalf of the
Board of Directors |
Place: Ahmedabad |
Vaibhav Shah |
Manju Bafna |
Date: 23rd August, 2023 |
Managing Director |
Chairman cum Whole-Time Director |
+91-9892691696
