The Management of PANKAJ PIYUSH TRADE AND INVESTMENT LIMITED in its Analysis Report has highlighted the performance and outlook of the Company in order to comply with the requirement of Corporate Governance as laid down in SEBI Listing Regulations, 2015. However, investors and readers are cautioned that this discussion contains certain forwardlooking statements that involve risk and uncertainties.
A. Industry Structure and Development
Financial Year 2023: A Glance
FY23 witnessed a significant milestone with the Indian economy positioning itself as the fifth-largest global economy while showcasing unwavering resilience, despite formidable challenges like inflationary pressures and a high-interest rate environment that affected the global economy, Indian markets remained buoyant.
Here is a recap of the major events of FY.
Ukraine War Impact: Russias invasion of Ukraine in February 2022 triggered an energy supply shortage, causing fuel, food, and raw material prices to soar globally. This resulted in the US experiencing its highest inflation rate in forty years.
Covid-Threat and China: The fiscal year started with the threat of the spread of the new Covid-virus subtype, which resulted in Chinas decision to continue lockdown in its cities. This had a detrimental impact on the global supply chain. It also resulted in a significant increase in oil and food prices which in turn in resulted in the steep rise in inflation across the global economies. Even India was not spared either, and for the most part of the year, inflation remained beyond the RBIs tolerance limit.
Interest Rate Hikes: Central banks, including the US Fed and the RBI, responded to high inflation fears by implementing aggressive rate hikes.
Foreign Portfolio Investment (FPI) Outflows: Foreign investors withdrew Rs. 37,631 crores from Indian equity markets since April 2022 due to higher interest rates and concerns about market overvaluation.
Banking Crisis in the West: Tech-focused regional banks in the US, such as SVB, Silicon Bank, and Signature Bank, collapsed due to deposit runs caused by higher interest rates and losses on bond portfolios. The crisis spread to Europe, resulting in UBS rescuing Swiss Lender Credit Suisse through a government-mediated deal.
The financial year 2022-23 was a subdued year for the Indian market, majorly influenced by a range of factors discussed above. The Indian markets were very volatile during FY23 and ended the year on a flat note. The benchmark BSE Sensex closed the year up 0.78%, while the Nifty ended down 0.44%. However, Nifty and Sensex outperformed most major global peers like the American Dow Jones, S&P 500, Nasdaq 100, Hong Kongs Hang Seng, and Australias S&P/ASX 200 in the financial year 2023.
Remarkably, India emerged as the second-best performer among emerging markets, trailing only South Africa. The resilience of Indian equities was primarily attributed to robust investments from domestic institutions, amounting to nearly Rs. 1.62 lakh crores. Foreign portfolio investors sold Indian shares worth Rs. 37,631 crores. Despite their sell-off, domestic sectors like FMCG, auto, and banks experienced notable gains, with the Nifty index rising by 26%, while auto and banking sectoral indices increased by 16% and 11%, respectively, by the end of the fiscal year. On the other hand, sectors such as pharma, energy, metals, realty, and IT witnessed declines ranging between 12% and 20% in FY23, Robust growth in the agriculture, construction, and services sectors, and a rebound in manufacturing in March quarter supported Indias 7.2% growth in FY23, beating the official forecast of 7%.
Indian Trading Industry
The Indian Trading industry exhibits a remarkable diversity, encompassing numerous intermediaries that contribute to the market infrastructure. In the past few years, many new digitally setup companies have entered the market resulting in severe competition and low rates. The growth and competition in the market further intensified during the Covid-19 pandemic as the industry recorded growth. This has helped in increasing the penetration of equity as an asset class among Indians and the entry of many young Indians into the markets.
Who We Are and What We Do?
The Company is engaged to carry on the activity of investment, invest the capital and other amounts of money of the Company in the purchase or upon the security of shares, stocks, units, debentures, debenture-stock, bonds, mortgages, obligation and securities issued or guaranteed by any company, corporation or undertaking, whether incorporated or otherwise, and where-so ever constituted or carrying on business and to buy, sell or otherwise deal in, shares, stocks, debentures, debenture-stock, bonds, notes mortgages, obligation and other securities issued or guaranteed by any government, sovereign ruler, commissioners, trust municipal, local or other authority or body in India or abroad. Company is also involved in wholesale trading business of fabrics and garments.
B. Opportunities and Threats
The risks and opportunities of all corporations are inherent and inseparable elements. Directors and management of the Company take constructive decisions to protect the interests of stakeholders. The Company has in place a Risk Management Policy, which is monitored and reviewed under the guidance of the Audit Committee. The Committee comprises various departmental heads who meet regularly to identify processes exposed to risks, determine risk mitigation strategies, and monitor their implementation.
The company is mainly exposed to market risk, interest risk and credit risk. However, prudent business and risk management practices followed by the company over the years helps it to manage normal industry risk factors which includes economic/business cycle, fluctuations in the stock prices in the market besides the interest rate volatility. However, the company hopes to improve its performance on the strength of its long experience and its strong emphasis on the fundamentals.
C. Segment-wise Performance
In the Fiscal year ending on March 31, 2023, the companys operations were categorized into distinct segments to provide a comprehensive view of its financial performance and resource allocation. These segments include:
? Trading Shares and Securities
This segment did not report any specific revenue, profit, or capital employed during the stated period.
? Financing of Loans
This Segment has assets of Rs 2120.19 lakhs
? Trading of Fabric
This segment played a pivotal role, generating total revenue of Rs 374.59 lakhs. The segment reported a profit of Rs 374.58 lakhs before interest and taxes. However, after considering other un-allocable expenditures amounting to Rs 377.10 lakhs, the segments total loss before taxes was Rs 251.94 lakhs. In terms of assets, this segment held Rs 341.41 lakhs, while its liabilities amounted to Rs 500.00 lakhs.
With assets worth Rs 274.98 lakhs and liabilities of Rs 203.42 lakhs it contributed to the companys total capital employed of Rs 71.56 lakhs.
Overall, the total revenue for the company during the fiscal year was Rs 374.58 lakhs with a net loss of (Rs 2.5193) lakhs before taxes. Total assets across all segments amounted to Rs 2736.59 lakhs while total liabilities were Rs 208.42 lakhs. The total capital employed for the entire company was Rs 2528.16 lakhs.
This segment-wise breakdown offers insight into the companys financial performance, highlighting the varying contributions and financial health of each operational segment.
Indian Economy Outlook FY24
According to the International Monetary Fund (IMF), in FY24, the Indian economy is expected to grow at 6.5%. The logistic costs and commodity costs, which had risen substantially due to the Ukraine-Russia war, have started tapering and have also resulted in better margins for various companies. To control inflation, the Reserve Bank of India (RBI) had to adopt a tightening policy and raise interest rates by 250 basis points during the year. However, we expect the interest rate hikes to come to a pause during the next fiscal year.
Indias oil import bill is crucial as it is a major component of cross-border trade. Indias trade deficit in merchandise exports had gone up in FY23 from the previous year, and improvements in service exports were insufficient to offset the imbalance in trade. In FY24, the major challenges for India will be a slowdown in exports as the global economy is showing signs of a slowdown and the impact of higher interest rates. The projections of all major global rating agencies are also indicating a global slowdown.
On the positive side, India has one of the youngest populations in the world. The government is committed to infrastructure growth, and adequate capex is happening on defense and infrastructure. Moreover, the Indian banking sector has shown resilience during a global banking crisis demonstrating the inherent strength of the economy and the banking system. We are likely to see consolidation with a strong positive bias and continue to attract the attention of global investors amidst a forecasted global slowdown.
Global Outlook FY24
According to the International Monetary Fund (IMF), the global economy is anticipated to face a slowdown in the corning years. Projections suggest that growth rates will see a dip in 2023 before stabilizing in 2024 (as per calendar year), Advanced economies, including the USA, are likely to experience a notable decline in growth rates, with estimates falling from 2.7% in 2022 to 1.3% in 2023.
The IMFs analysis highlights an anticipated global economic slowdown, particularly in advanced economies. Inflation is projected to decrease, although core inflation may take additional time to reach desired levels.
E. Risks and Concerns
The company pays close attention to the risks associated with its products, as they could potentially harm the business. It has established clear risk management policies to handle changing market conditions and evolving regulations, regularly reviewing its risk management framework. The company has dedicated resources in terms of people, processes, and technology to effectively manage its risk management system. It takes proactive measures to identify and address risks and opportunities, aiming to safeguard and add value for its stakeholders. Some key risks that affect the companys overall governance include economic and geopolitical risks, technology risks, operational risks, market risks, regulatory risks, governance risks, resource risks, and reputation risks.
? Economic & Geopolitical Risk
As a trading company, the companys business is materially affected by the economic conditions of the country and even global economies, global economic slowdown, and any geopolitical risks.
? Technological Risk
The Company will have to be abreast with the rapidly changing technology to offer a seamless and improved experience to its clients. If the Company is unable to keep pace with this, it runs the risk of technology obsolescence.
The management periodically reviews various technology risks such as protecting sensitive customer data, identity theft, cyber-crimes, data leakage, business continuity, access controls, etc., While the Company has put in place processes, systems, and tools and is actively monitoring suspicious activities, there can be times that.
The substantial amount of costs involved in the deployment of technology is a critical factor. Obsolescence is another major concern as the upgradation of technology is an ongoing exercise. Any significant changes in technology would pose pressure on our profita bility.
Our success depends largely upon our highly skilled technology professionals and our ability to hire, attract, motivate, retain, and train these personnel.
? Operational Risks
Security breaches pose a significant operational risk for financial services companies, potentially resulting in significant liability and reputational damage. The breach of the companys systems, as well as those of its clients or third parties, can lead to unauthorized access, theft of sensitive information, such as client personal data or financial details, and potential financial fraud. Such incidents can result in financial losses, legal implications, regulatory penalties, and erosion of customer trust.
? Market Risk
Market volatility is a significant risk, as sudden price movements and increased market fluctuations can affect trading volumes and investor activity. Economic conditions also play a role as downturns or recessions con reduce investor confidence and trading activity. Hence, like other players in the market, our business is highly sensitive to economic and political conditions prevalent in the country. Any sustained downturn in general economic conditions or Indian equity markets and severe market fluctuations would likely result in reduced client trading volumes and net revenues, and hence, will have a material adverse effect on our profitability.
? Reputation Risk
Over the years, the company pays special attention to issues that may create a reputational risk. Events that can negatively impact the organizations position are handled cautiously ensuring utmost compliance with relevant laws.
Our reputation could be at risk and we may be liable to our clients or to regulators for damages caused by the inadvertent disclosure of confidential information and sensitive data. Our reputation, access to capital, and longer-term financial stability could be at risk if we are unable to meet our stated action goals.
? Credit Risk
We provide exposure limits to clients, based on the collaterals of securities that we receive from them, in connection with our trading business. The sharp change in market values of securities and the failure by parties to honor their commitments on a timely basis could have a material adverse effect on the profitability of our operations.
? Competition Risks
As a trading company operating in a rapidly evolving industry, we face significant challenges due to competition risk. The market landscape has become increasingly competitive, making it harder for us to differentiate ourselves and attract new customers. Aggressive pricing strategies employed by our competitors can trigger price wars, resulting in squeezed profit margins and overall diminished profitability.
Established trading firms with strong brand recognition and abundant resources pose a formidable challenge. Furthermore, regulatory changes introduce additional complexities, increasing our compliance costs and creating barriers to entry. To navigate these challenges, we understand the utmost importance of maintaining customer loyalty. Competitors offering attractive incentives, superior service, or additional features can tempt our clients to switch.
? Compliance Risk
As a participant in the markets, we are subject to extensive regulation under the Securities and Exchange Board of India (SEBI), multiple exchanges, and other regulatory bodies. The costs and uncertainty related to complying with such regulations continue to increase. While the slew of new regulations introduced by SEBI is in the interest of the investors, and we really welcome such changes, these regulations may impact our business operations, enhance capital requirements and impose restrictions on the activities we are allowed to do, and the facilities we can offer to the clients.
Despite our best efforts to comply with all the applicable regulations, there are a number of risks, particularly in areas where applicable regulations or laws may be unclear or where regulators could revise their previous guidelines. Additionally, some legal/regulatory frameworks provide for the imposition of fines and penalties for non-compliance even though the non-compliance was unintentional or inadvertent and even though the systems and processes reasonably designed to prevent violations were in place, such a finding can affect our business, and damage our reputation.
? Litigation Risk
As a financial services company, we face significant litigation and regulatory risks. Litigation and arbitration claims include those brought by our clients authorized partners and the regulators. And unfavorable judgment, settlement, injunction or fine could materially impact our business and affect our operating results. Moreover, such litigation can require the expenditure of significant company resources.
Risk management holds a pivotal role in our business strategy and planning discussions. At Pankaj Piyush Trade and Investment Limited, we have implemented a robust risk management framework that allows us to identify, understand, and, effectively manage risks associated with our operations.
Integrating risk management seamlessly across all aspects of our business, we aim to strike the right balance between risk and return while ensuring prudent financial management. Compliance with applicable laws, rules, and regulations is of utmost importance to us. Risk management is deeply ingrained in our overall strategy, fostering a strong risk culture that encourages a holistic approach to risk management throughout our organization.
Regular review of our risk management policies and processes is conducted by the Audit Committee, which also stays informed about risk assessments, the impact of risks on our business, and our mitigation plans. We are committed to maintaining a vigilant and proactive approach to risk management, ensuring the security and stability of our operations in the best interest of our stakeholders.
F. Internal Control Systems and their Adequacy
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 the business and the industry in which it operates. Well-defined processes, guidelines, and procedures and adequate internal information systems enable the Company to enhance 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. The audit committee reviews reports presented by the internal auditors on a routine basis. The committee makes note of the audit observations and takes corrective actions, if necessary. It maintains a constant dialogue with statutory and internal auditors to ensure that internal control systems are operating effectively.
G. Financial Performance
The financial performance of our company in FY23 was directly influenced by the volatility witnessed in the Indian financial markets. The fluctuations in the market had a substantial impact on our revenues. However, despite these challenges, we remained resilient and focused on strengthening our digital capabilities.
The companys financial performance and key financial ratios for the period under review are mentioned as follows:
|Year Ended (Rs. in lacs)
|Income from operations
|Profit after tax
|Net profit for the period
|Earnings per share
Income from Operations:
Income from operations for the fiscal year ending in March 2023 reached Rs. 3,74,58,961.94 lakhs, showing a significant increase compared to Rs. 2,04,07,536 lakhs in the previous year (March 2022).
Total income, including other income, amounted to Rs. 3,74,58,961.94 lakhs for March 2023, compared to Rs. 2,04,16,100 lakhs in March 2022.
Total expenditure for March 2023 was Rs. 3,77,10,889.64 lakhs, reflecting an increase from Rs. 2,06,62,825 lakhs in March 2022.
Profit After Tax:
The company reported a profit after tax of (Rs. 5,26,778.30) in March 2023, while in March 2022, the profit after tax was (Rs. 4,62,613).
Net Profit for the Period:
The net profit for the fiscal year ending in March 2023 was (Rs. 5,26,778.30) , representing an increase from (Rs. 4,62,613) in March 2022.
Earnings Per Share (EPS):
Earnings per share (EPS) for March 2023 amounted to (Rs. 1.32), which is an improvement from
(Rs.1.16) in March 2022.
Net Cash Flow During the Year:
Net cash flow during the year for the year ending March 31, 2023, amounted to Rs. 25,048.64 lakhs, while it was Rs. 2,019.44 lakhs for the year ending March 31, 2022.
Cash and Cash Equivalents:
The closing cash and cash equivalents for the year ending March 31, 2023, stood at Rs. 34,984.20 lakhs, compared to Rs. 9,935.56 lakhs for the year ending March 31, 2022. This included cash on hand of Rs. 3,636.50 lakhs and a balance with banks of Rs. 31,347.70 lakhs.
H. Human Resources Management
Pankaj Piyush Trade and Investment Limited has an experienced and talented pool of employees who play a key role in enhancing business efficiency, devising strategies, setting up systems, and responding to an evolving business environment. The company has embarked on several human resource initiatives to enhance the productivity of the organization. The company endeavors to provide a safe, conducive, and, productive work environment.
The company is committed to providing a positive work environment free of discrimination and harassment. Equal opportunity and fair treatment ore port of our code of conduct.
The company believes that the quality of its employees is the key to its success and is committed to equipping them with skills that enable them to seamlessly evolve with ongoing technological advancements. Our success depends in large port on our management team, key personnel, and our ability to attract and retain them.
The company conducts training programmes to improve technical and behavioral skills, business excellence, management skills, and, leadership skills. It also creates awareness about company values and the code of conduct. The company believes in a safety culture and implements policies and programmes to safeguard the health and well-being of its people. It also strives to create a diverse and inclusive workplace that accommodates people from varied backgrounds with on unbiased attitude towards personal preferences, cultural or sexual orientation, geographical origin, etc.
I. Details of Key Financial Ratios
Key Financial Ratios
|Reason for variation over 25%
|Debtors turnover ratio
(Credit Sales or income/Average receivables)
|Due to increase in turnover during the year.
|Inventory Turnover ratio (COGS/Average Inventory)
|Due to increase in sale of product during the current year.
|Interest coverage Ratio (EBIT/Finance cost)
|No Finance Cost
(Current Assets/Current Liabilities)
|Due to increase in current assets.
|Debt Equity Ratio (Total Lia bilities/Equ ity)
|Operating Profit Margin (%) (EBIT/Total Turnover)
|Net Profit Margin (%) (PAT/ Total Turnover)
|Due to increase in turnover during the year.
|Return on Net Worth (PAT/Net Worth)
J. Cautionary Statement
The Management Discussion and Analysis (MDA) report provides a comprehensive overview of the companys objectives, projections, estimates, and expectations. It is important to note that these statements may be forward-looking, as defined by applicable laws and regulations. However, it is crucial to understand that the actual outcomes and results may vary significantly from what is expressed or implied in the report. Numerous factors can influence the companys operations, including changes in governmental regulations, tax regimes, forex markets, economic developments both in India and the countries where the company operates, and other incidental factors. Therefore, it is essential to consider these dynamic elements when interpreting the information presented in the MDA report.
|For Pankaj Piyush Trade and Investment Limited
|Regd. Office: 304, Building No. 61,
|Vijay Block, Laxmi Nagar,
|Delhi - 110092