<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS REPORT</dhhead>
The FY 2022-23 was the year where global uncertainties were rife. As
the clouds of the pandemic decide to recede leaving a deep imprints, the war in Ukraine
broke out in February 2022. Prices of food, fuel and fertilizer rose sharply. As inflation
rates accelerated, central banks of advanced countries scrambled to respond with monetary
policy tightening. Many developing countries, particularly in the South Asian region,
faced severe economic stress as the combination of weaker currencies, higher import
prices, the rising cost of living and a stronger dollar, making debt servicing more
expensive, proved too much to handle. In the second half of 2022, there was a respite for
governments and households. Commodity prices peaked and then declined.
For India, 2022 was special. It marked the 75th year of Indias
Independence from the inglorious imperialism. As India enters its Arnrit Kaal, the 25-year
journey towards its centenary as a modern, independent nation and regain its lost glory.
India is now the worlds fifth largest economy, measured in current dollars. And, destined
to be one of the leaders of this age. Ministry of Statistics and Programme Implementation
is releasing in Press Note dated August 31, 2023 the estimates of Gross Domestic Product
(GDP) for the April-June quarter (Ql) of 2023-24, both at Constant (2011-12) and Current
Prices Real GDP or GDP at Constant (2011-12) Prices in Ql 2023-24 is estimated to attain a
level of ^ 40.37 lakh crore, as against ^ 37.44 lakh crore in Ql 2022-23, showing a growth
of 7.8 percent as compared to 13.1 percent in Ql 2022-23. Nominal GDP or GDP at Current
Prices in Ql 1 2023-24 is estimated at ^ 70.67 lakh crore, as against ? 65.42
lakh crore in Ql 2022-23, showing a
growth of 8.0 percent as compared to 27.7 percent in Ql 2022-23.
Indias GDP has reached $3.75 trillion in 2023, from around $2 trillion in 2014 Economic
Survey 2022-23 states the rise in consumer prices has slowed considerably. The annual rate
of inflation is below 6 per cent. Wholesale prices are rising at a rate below 5 per cent.
The export of goods and services in the first nine months of the financial year
2022-23(April - December) is up 16 per cent compared to the same period in 2021-22.
Although.the high oil price this year compared to last inflated Indias import bill and
caused the merchandise trade deficit to balloon, concerns over the current account deficit
and its financing have ebbed as the year rolled on. Foreign exchange reserve levels are
comfortable and external debt is low.
. Policies pursued carefully and consciously have ensured that the
recovery is robust and sustainable. During the year, the Reserve Bank of India (RBI)
raised interest rates swiftly to prevent the second- round effects of the inflation shock
from commodities from affecting economic activity. That played a big part in the relative
stability of the Indian rupee against the US dollar in a year of dollar strength. The use
of technology has enhanced the quality of life for citizens to ensure the reach of social
sector schemes to intended beneficiaries, especially during the pandemic. The
transformations in the lives of • the citizens happening through the Aspirational
Districts Programme, Direct Benefit Transfers, use of Aadhaar and various initiatives in
the education, health and basic infrastructure availability is enormous making individual
self reliant.
It is befitting that during Indias Ararit Kaal, it assumed the
Presidency of G-20 nations in December 2022. Global problems need global solutions, and
global solutions require collaboration and cooperation. Based on the theme of
"Vasudhaiva Kutumbakam: One Earth, One Family, One Future",
, India’s G20 Presidency aims to achieve co-ordinated solutions to
key issues of global concern. The Presidency is a platform for India to share its success
stories with the global community, especially the manner in which Digital Public
Infrastructure has supported an inclusive people-centric growth paradigm. In short, the
G20 Presidency is an opportunity for India to bind an otherwise fragmented global order.
1. Opportunities and Threats
(a) Opportunities
Indias mutual fund (MF) industry is on a high, but need sustained
thrust; while ample opportunities are knocking at the door, its equally concerned with
the numerous challenges. It is beautifully put by Roy T. Bennett "When things do not
go your way, remember that every challenge -every adversity - contains within it the seeds
of opportunity and growth."
? Low mutual fund penetration
The mutual fund industry registering a growth by over 20 per cent, it
has only 2 crore investors. The numbers indicate the huge opportunity lying ahead. While
the industry is making inroads into the remote areas, there needs to be much more feet on
the street in terms of distributors and use of infrastructure of banks, small finance
banks, self help groups, and India Post to ensure last mile integration with investors of
the B-30 cities.
? Rising middle class incomes
Middle class population in India has increased manifold. While 2005,
one in 15 households were considered upper middle class, by 2018 it moved to one in five
households. Today, India has 6.1 crore upper middle class households with disposable
income. However, only 2 crore choose to invest in mutual funds. How to tap in the
remaining four crore? Probably, a new kind of marketing strategy can be the answer.
? Move to market-linked products
The chart below shows that there is movement from physical (gold, real
estate) to financial assets. There is also a shift from traditional products to
market-linked ones. Today, people realise that with rising expenses and declining interest
rates, some level of market risk is a must, and this is best taken via products like
mutual funds.
? Millennial s and retirees, two ends of the age spectrum
Millennials form a third of our population. According to a Deloitte
report they contribute 70 per cent of total household income and account for 46 per cent
of the workforce. It is accepted wisdom that the young want much more than just monetary
compensation for their work.
However, with the proportion of senior citizens increasing, India will
have INR 3.5 crore such individuals by 2030. With increasing life expectancy, lack of
social security, rising medical expenses,
senior citizens need solutions that not only beat inflation, but also
support their golden years. The opportunity lies in offering accumulation solutions to
millennials and decumulalion solutions to seniors, both of, which mutual funds are well
suited to do.
? Fixed income products
Mutual funds have played a key role in developing India’s debt
market and have emerged as a key source of funding. However, despite the variety of fixed
income products, investors have shown preference for equity funds vis-a-vis debt funds.
This makes the debt-side largely untapped.
(b) Threats
? Shifting from awareness to education
¦ The industry spends two basis points or about Rs.500 crore per
annum on investors education. 50 per cent of which was via AMFIs pretty successful
Mutual Funds Sahi Hai campaign. However, need of the hour is to transform mutual funds
from a push to a pull product For example, adding financial investment [mutual funds) in
high-school or college curriculum. Such efforts will help in instilling the habit of early
savings. Mutual funds are one of the most buzzing investment options among millennials
these days.
? Need for more distributors
There is a need for far more distributors and advisors to spread the
message of investing in mutual funds far and wide. Indians are usually risk averse and
lacks sound financial literacy, thus refrain from investing in market-linked products
owing to a lack of understanding.To address this, we need an army of well-trained
financial advisors who can help educate investors about modern investment tools such as
mutual funds.
? Mutual Funds will have a tough job to maintain the growth in SIP
accounts
Many new investors that have participated in the markets through mutual
fund SIPs over the last few years haven’t seen any extended bearish phase of the
market, if the markets fail to generate attractive returns even in 2023, some investors
might consider discontinuing their SIPs. Along with Slow Processes another disadvantage is
the Lock-in Period that Locks you in. Thats the real challenge mutual fund houses may
have to deal with this year.
? Simplified operational processes
While the mutual fund industry has made significant strides in
standardising processes, but few challenges still remain: such as a simplified KYC to make
on boarding hassle-free; making Aadhar inter-changeable with PAN; and allowing investments
on the basis ofBank KYC’.
2. Segment-wise or product-wise performance of the Company
The business activities of the Company is engaged in one segment (i.e.
Financial Services) only, hence segment wise reporting is not required to be given.
3. Outlook
The MF industry continued to make new highs on multiple counts in 2022,
riding a shift in the preference of Indian investors for traditional debt products such as
fixed deposit. MF penetration also increased, catalysed by incentivisation and efficient
use of technology. Rightly said by Crisil Research Industry growing, SIP by SIP .
¦ The MF industrys asset under management (AUM) grew more than
five times over the past 10 years as of March 2023. The AUM grew from Rs 7.01 trillion in
March 2013 to Rs 39.42 trillion on March 31, 2023, the AMFI data shows. Individual
investors, including high-net individuals (HNIs), held mutual funds worth Rs 23.27 lakh
crore as of March 2023, up 11.80 per cent from a year ago.
In the year ended March 2023, investments in equity-oriented schemes,
including equity and balanced funds, by individual investors rose by 13 per cent compared
to a 0.16 per cent increase in debt-oriented schemes.
In addition, liquid or money-market mutual funds saw a 30 per cent
increase, while exchange-traded funds (ETFs) and fund-of-funds (FoFs) saw about 21 per
cent growth in the same period, according to AMFI data. Indian Mutual Funds have currently
about 6.81 crore (68.1 million) SIP accounts through which investors regularly invest in
Indian Mutual Fund schemes. SIP Contribution saw a rise from ? 1,24,566 crore to ^
1,55,972 crore. this figure is testimony to the growing investing resilience of retail
investors despite volatile markets
During April-November 2022, Mutual Funds witnessed significantly
lower net inflows than last year. However, during the same period, some schemes comprising
growth/equity oriented schemes and solution-oriented schemes observed significantly higher
inflows than in the previous year.
On the other hand, income/debt-oriented schemes and hybrid schemes
recorded outflows compared to inflows in the same period of the previous year. Outflows
from liquid funds and hybrid schemes were mainly affected by increasing interest rate
cycles, liquidity requirements and advance tax commitments by corporates. Despite that,
the mutual fund industry’s assets under management (AuM) increased by 8.1 per cent at
the end of November 2022 on YoY basis, thanks to the market performance.
The resilience of the domestic financial system is reflected in the
healthy balance sheet of banks, stronger capital levels of NBFCs and robust growth in the
AuM of domestic mutual funds. Buoyant demand for bank credit and early signs of a revival
in the investment cycle are benefiting from improving asset quality, a return to
profitability and resilient capital and liquidity buffers.
¦ The significant growth in the Mutual fund industry is due to
three major trends - the increasing utilization of digital platforms, a rise in investors
risk appetite, and the availability of advisory services. These trends have also
contributed to the notable increase in the share of adults with bank accounts, which rose
significantly which in turn resulted in higher household savings and increased investments
in capital market products such as mutual funds.
Individual investors in MFs have mostly preferred the equity side (86%
of their investments) and shied away from the debt segment due to lack of understanding
and competition from traditional fixed-income products. Therefore, it is important for the
MF industry to educate investors about the opportunities on the debt side. MFs are on a
strong footing, and we have plenty of reason to believe the products and services offered
by the industry would see rapid uptake in coming years.
4. Risks and Concerns
Risk Management is the continuous process of systematically
identifying, quantifying, prioritizing and responding to all risks and opportunities that
can affect the achievement of the Company’s strategic and annual objectives.
Accordingly the risk Management Policy of the company elaborates the various methods in
identification, assessment, monitoring and mitigation of various risks that the company
may face in its business. The company’s objective is to achieve a balance between
acceptable levels of risk and reward in effectively managing its operational, financial,
business and other risks.
5. Internal control systems and their adequacy
An effective internal control mechanism is imperative to good corporate
governance. The Company has put in place robust internal control systems and procedures in
line with the scale of operations and business to ensure timely and accurate recording of
financial transactions and adherence to applicable accounting standards; optimum
utilization and safety of assets; compliance with applicable laws & regulations; and
an effective management information system & reviews of other systems. The Company
also has in place well-defined organizational structures to facilitate clearly established
roles and responsibilities for effective discharge of duties in a smooth manner.
6. Discussion on financial performance with respect to operational
performance
Our revenues primarily consist of revenue from sale of securities,
brokerage income from distribution of Mutual Fund and other financial products, income
from interest and dividend.
Due to the outbreak of COVID-19 pandemic and its aftermath, the Company
had served a letter to Reserve Bank of India (RBI) pertaining to voluntarily surrender of
Certificate of Registration "CoR" of NBFC- ND (Reg No. B-14.00790). But as Covid
situation recedes and NBFC Sector is regaining with emerging market economy, NBFCs could
absorb the shocks of the pandemic. Company proposes to or withdrawn the application for
voluntary surrender with immediate effect. An application submitted with RBI for the
aforesaid purpose. Company shall continue to hold the license/ Certificate of.
Registration "CoR" as Non-Deposit accepting Non-Banking Financial Company and it
shall continue to undertake the Business of Non-Banking Financial Institution under our
Certificate of Registration no. B-14.00790.
During the year, the brokerage Income has decreased from Rs.
153,754,763 /- in the Financial Year 2021-22 to Rs. 147,989,055 in the Financial Year
2022-23.
It is submitted further that company has recorded Profit before tax of
Rs. 3,468,036 in the Financial Year 2022-23 as compared to Rs. 3,443,849 /- in the
Financial Year 2021-22.
7. Material developments in Human Resources / Industrial Relations
front, including number of people employed
Employees are our vital and most valuable assets. We have created a
favorable work environment that encourages innovation and meritocracy. It is important for
us that organization culture and organization strategy are well aligned. Over a period we
have developed a strong culture of transparency through constant employee communication
and have developed strong performance management practices wherein best class rewards and
recognition systems are deployed. We have also set up a scalable recruitment and human
resources management process which enables us to attract and retain high caliber
employees.
8. Cautionary Statement
It is, forever, a work in progress, just like the economy. The
statements describing the Companys outlook, estimates or predictions may be
forward-looking statements based on certain assumptions of future events. Actual results
may differ materially from those expressed or implied, since the Companys operations are
influenced by external or internal factors. Your Company closely monitors all major
developments likely to affect the operations and will respond to meet the potential
threats and to gain from any possible opportunities.
+91-9892691696
