A) INDUSTRY STRUCTURE & DEVELOPMENTS
Prime Securities is part of the financial services sector that includes Non-Banking
Finance Services, Insurance, and Capital Markets. We are a Category-1 Merchant Banker
licensed by the Securities and Exchange Board of India (SEBI). In addition, our subsidiary
Prime Research and Advisory Limited is a Corporate Insurance Agent licensed by the
Insurance Regulatory and Development Authority of India ("IRDAI").
2022-23: A period of tightening of Global Liquidity
The crisis created by Covid 19 pandemic, during FY 2021 and FY 2022 necessitated a
broad array of actions by central banks across the world to keep credit flowing and limit
the economic damage from the pandemic. As we entered FY 23 the effects of pandemic started
waning and the world gradually unlocked, resulting in an extraordinary surge in demand for
goods and services. This along with high liquidity in the system increased the
inflationary pressure. The continuing war in Ukraine further exacerbated the situation and
created supply-chain disruptions. In fact, US saw a 41 Year high inflation at 9.10% in
June 2022. To control inflation US Fed started hiking interest rates from March 2022 and
the same has increased from near zero rate to 5% March 2023. Other Central Banks followed
suit and RBI also started raising rates from April 2022 and has announced a pause in April
2023. Apart from raising rates, there was withdrawal of accommodative monetary policy
globally.
Funding Winter
Capital flows in Indian equity market slowdown substantially. Fundraising by Indian
companies through IPO more than halves to H
52,116 crore in FY 2023 from record high in FY 2022. Similarly fund raise through
qualified institutional placements (QIP) plunged to an 11-year low in FY23 to INR 7619 cr.
from INR 28,532 cr. in FY 2022. Private Equity and VC Funding averaged around USD 2 bn in
2022 compared to USD 3 Bn in 2021 and in January 2023 it touched 63 months low of USD 630
mn.
Performance of Indian Equity market remained flat with Nifty down by 0.60% and BSE
Sensex up by 0.72% during the CY 23. Foreign Institutional Investors pulled out INR 28,222
cr. and domestic institution pumped in nearly 2.5 lakh cr.
Retail investors continued its increasing participation in stock market, as evidenced
by addition of 2.5 cr. demat account in FY 23, taking the total demat accounts to 11.5 cr.
in March 2023. SEBI came out with regulation which reduced the settlement cycle and also
announced ASBA like mechanism for secondary market trades. These measures are expected to
further boost to retail participation in capital markets. However, the stockbrokers will
have lower earnings from float and they will have to look at further value added products
to shore up their margins.
Opportunities
Indias growth continues to be resilient despite some signs of moderation in growth,
says the World Bank in its latest India Development Update. The Update notes that although
significant challenges remain in the global environment, India was one of the fastest
growing economies in the world. We believe that we are at the fag end of liquidity
tightening cycle and inflation also appears to have peaked out. This environment will be
more conducive for deal closures especially on fund raising side.
We have a very robust deal flow and pipeline and expect closure rate to be better,
provided the environment remains conducive. Our execution capability pivots on our skills
at deal structuring and our ability to leverage our network for execution. We are
constantly seeking alliances and partnerships to enhance this capability. Customers come
to us for solutions for the efficient raising of equity or debt capital and our proven
ability to execute. Our pipeline is full, and we expect to see this continue.
We have made strategic investment in / acquisition of an Artificial Intelligence /
Machine Learning powered company in the area of financial products. This is expected to
provide a significant transformation of business and scale through cutting edge AI/ ML
products in financial services space. The company will make an entry into retail space
without the infrastructure costs, typically associated with retail business, as it will be
a technology driven B2B2C model. The revenue from this vertical will be more granular and
stable will completement the advisory business which is more lumpy.
Threats
While we are confident of our deal flow pipeline and growth from new business
initiatives. We are also mindful of the looming recession threat globally and volatile
geopolitical situation. In case of any precipitation on these fronts, there could be a
deterioration of economic environment. Events like the banking debacle Credit Suisse and
failure of Silicon Valley Bank could also be sentiment dampener.
B) RISKS AND CONCERNS
Given that we are debt free we do not have the usual risks that debt on the balance
sheet represents. As our business model is only advisory and does not require any risk to
capital to be taken, we see minimal risks to our continuing operations. Our substantial
cash reserves will help tide over any disruptions. With increased mobility due to waning
of covid pandemic we see more opportunities on expanding our business and deliver on our
assignments. We remain vigilant to opportunities and will not hesitate to exploit them
provided we can do so by eliminating any risk to our capital.
C) INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY
Your Companys Internal Control System and procedures were reviewed during the year and
systems and procedures were corrected wherever found to be inadequate to the Companys
size, the nature of its business and the business environment. The internal control
systems lay down the policies, authorisation and approval procedures.
We have enhanced controls over management of funds, cash and operations for conducting
operations on hybrid model of work from office and home. All transactions are done on a
dual control basis that assures greater safety for our operations. We have also
strengthened the scope of internal audit to specifically focus on transaction tracking. We
are leveraging all available digital tools to run our operations securely.
The adequacy of the internal control systems has been reported by the auditors under
the Companies (Auditors Report) Order, 2003.
D) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
TheConsolidatedRevenuesoftheCompanywere H 4,684 lakhs for the financial year under
review as against previous year H 4,571 lakhs. Consolidated Profit after Tax including
Comprehensive Income was at H 1,850 lakhs as compared to H 2,389 lakhs. Operating profit
margins was 23.98% as against 38.66% for the previous year. At the same time, cash and
cash equivalents, including investments having maturities in excess of three months, have
increased from H 11,043 lakhs to H 11,287 lakhs, reflecting an improved operational
performance.
We make suitable provisions for any receivable outstanding for more than 60 days.
We advised over 14 start-ups for fund raising, These represent new age businesses like
electric vehicles (EV) and new consumer segments like gaming. In many of these assignments
we have negotiated to receive our fees in shares of the company. Being start-ups, they
dont have the ability to pay high fees and these investments have the potential to
deliver very high returns in future. Your Company operates in only one segment, financial
advisory services. We are debt free and have no interest expense.
OVERVIEW OF OPERATIONS
Despite the limitations placed on us by the pandemic, we had a year of robust revenues
but more importantly a strong flow of deals that sets us up well for FY 2022-23. As with
the previous year, it was driven by repeat and referral business signifying a high level
of customer satisfaction. We have been noticed for our ideation, our "Intellectual
Property"- the ability to ideate and craft unique solutions, coupled with our
"Network" that has underpinned our execution capabilities and drives robust deal
flow. We will make additions to our team opportunistically, our current team very capably
servicing our customer base. As a pure fee based, knowledge driven firm, we remain ideally
placed to be a one- stop source of solutions for our customers, and this is underscored by
our deal flow.
E) MATERIAL DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING
NUMBER OF PEOPLE EMPLOYED
We continue to grow our pipeline of transactions in the corporate advisory business and
add people as needed. We believe our team is optimally staffed at this time.
F) 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
| Particulars |
F.Y. 2022-23 |
F.Y. 2021-22 |
| Debtors Turnover (Excl. Unbilled) |
87.34 |
39.77 |
| Debtors Turnover (Incl. Unbilled) |
171.84 |
65.87 |
| Inventory Turnover |
N.A. |
N.A. |
| Interest Coverage Ratio |
19.43 |
145.39 |
| Current Ratio (Incl. Equity Instrument) |
10.08 |
3.50 |
| Current Ratio (Excl. Equity Instrument) |
4.89 |
1.98 |
| Debt Equity Ratio |
0.00 |
0.05 |
| Operating Profit Margin (%) |
23.98% |
38.66% |
| Net Profit Margin (%) |
27.57% |
40.89% |
G) DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS
FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF
In the current financial year, it has been observed that the Return on Net Worth (RoNW)
has reduced from 20.14% to 9.38%. RoNW is a profitability indicator that measures the
returns generated by a company on its shareholders equity. The decrease in RoNW is
primarily due to decrease in Companys profitability owing to following factors:
- Increased payment to intermediaries for enhanced business
- Increased legal, professional fees and travelling expenses
- Unrealised loss on financial instruments on fair value changes
CAUTIONARY STATEMENT
Statements in this Management Discussion & Analysis describing the Companys
objectives, projections, estimates, expectations or predictions may be "forward
looking statements" within the meaning of applicable securities laws and regulations.
Actual results could differ materially from those expressed or implied. Important factors
that could make a difference to the Companys operations include economic developments in
the country and improvement in the state of capital markets, changes in the Government
regulations, tax laws and other status and other incidental factors.
|
|
For and on behalf of the Board of Directors |
| Mumbai |
Pradip Dubhashi |
N. Jayakumar |
| April 21, 2023 |
Chairman |
Managing Director & Group CEO |
+91-9892691696
