PS IT Infrastructure & Services Ltd Management Discussions

ECONOMIC OUTLOOK

The global economy in FY24 grappled with slowdown in economic growth due to persistence of high interest rates, increasing geo-political conflicts, sluggish international trade, and climate related issues. Notwithstanding the uncertain global economic backdrop, the Indian economy continued on its strong growth trajectory in FY24 on the back of some of its key inherent strengths, viz. macro-financial stability (characterised by a steadfast inflation targeting regime, adherence to fiscal consolidation roadmap, manageable current account deficit and stable exchange rate along with an adequate buffer of forex reserves), strong twin balance sheets of banks and corporates, and frontloading of public capex in key sectors.

Throughout FY24, the Indian economy has maintained its stature as the fastest growing country in the world. The growth outlook was frequently revised upwards following better-than expected quarterly growth numbers during the year.

As per the second advance estimate of the National Statistical Office, the Indian economy is estimated to have grown by 7.6% in FY24 compared to 7% in FY23. The strong growth performance is driven by strong momentum in the industrial sector and public capex thrust. The services sector too remained resilient in FY24. The agriculture and allied sector is estimated to have grown by 0.7% in FY24 compared to 4.7% in FY23 due to the presence of El Nino conditions. However, relatively higher mandi prices for major agricultural crops and increased allocations under MNREGA acted as the income stabilisers for rural belts.

The Consumer Price Index (CPI) based inflation moderated in FY24 albeit with heightened volatility due to food price shocks. Prices of cereals, pulses, vegetables, and spices surged to double-digit levels during FY24, and intermittent vegetable price shocks kept the overall food inflation levels highly volatile. On the positive side, the decline in core inflation persisted throughout FY24 and touched 3.25% in March 2024, its lowest level since January 2012. RBI has reiterated its policy imperative of bringing down headline inflation to 4% on a durable basis. Consequently, after hiking the policy repo rate by 250 bps in FY23, it stood firm on its policy repo rate (6.50%) and stance (withdrawal of accommodation) during FY24. The Wholesale Price Index (WPI) based inflation collapsed in FY24 and averaged -0.70% during FY24 versus 9.41% during FY23, primarily due to deflation in manufactured product prices on the back of moderation in global commodity prices.

The Central Government hastened its adherence to the fiscal consolidation roadmap in FY24 by containing fiscal deficit to GDP ratio at 5.8% (marginally better than the budgeted 5.9%), despite a lower nominal GDP growth of 8.9% compared to the projected growth rate of 10.5% for budget estimates of FY24. Moreover, the quality of public expenditure continued to improve as the growth in capital expenditure (28.4%, Y-o-Y) significantly outweighed growth in revenue expenditure (2.5%, Y-o-Y) in FY24.

India currently holds the fourth-largest foreign exchange reserves (US$ 646 Bn as of March 29, 2024) in the world, up from the sixth-largest since the Covid-19 pandemic. The Indian Rupee was stable and moved in a tight range of 81.65- 83.40 during FY24, aided by RBIs both-side interventions in currency markets.

The announcement of Indias inclusion in JP Morgans Government Bond Index-Emerging Markets (GBI-EM) provided an impetus to debt inflows into the country. In fact, FPI debt flows significantly jumped since November 2023, typically known as front loading of inflows to take advantage of favourable price movements once the bond inclusion takes place in June 2024. Even Bloomberg announced in early March 2024 that it will include India Fully Accessible Route (FAR) bonds in the Bloomberg Emerging Market (EM) Local Currency Government Index and related indices, to be phased in over a ten-month period, starting January 31, 2025. The inclusion of Indian bonds in these two key indices could attract billions of dollars of foreign investment to the Indian Government securities (G-Sec) market. This could potentially lead to a decline in Indian bond yields and strengthen the rupee.

INDUSTRY OVERVIEW

The Indian stock market has been a centre of attention for investors and analysts alike in recent years, with its ups and downs creating a sense of uncertainty for those investing in the market. However, as we move into 2023, the outlook for the Indian stock market prediction seems positive, with a projected growth rate of 7.5% to 8%.

The Indian stock market has been through a roller coaster ride in the past few years. From a record-breaking bull run to the COVID-19-induced crash, investors have experienced both the highs and lows of the market. As we move into 2023, the market outlook seems promising, and investors are eager to know about the stock market predictions for the year ahead.

Most experts predict a bullish market outlook for the Indian stock market in 2023. Positive economic growth and government policies are expected to drive up stock prices. Additionally, the low-interest rates and ample liquidity are expected to attract investors toward equities. The return on foreign investments is also expected to further fuel the markets growth.

OPPORTUNITIES & THREATS

The Indian stock market delivered an exceptional year. The Nifty50 spiked up an impressive 28.6% in FY24, outperforming most major market indices globally.

As shareholders are aware that mid-caps and small caps have appreciated substantially in Fy2324 and share prices have reached levels not seen before in many scrips. The following chart brings out the returns of small and mid-caps indices relative to the nifty 50 and nifty100.

The aforesaid rally in small-caps and mid-caps has resulted in many stocks becoming expensively valued relative to their past valuation and relative to peers or large cap. Your company has taken advantage of this rally and reduced the number of scrips especially those with a higher valuation risk.

Equity markets are expected to offer high returns in the long run, supported by improving global and domestic landscapes. Our outlook remains optimistic, grounded in factors such as softened inflation, early adjustments in monetary policy rates, and reduced crude oil prices.

In FY 22-23, as also mentioned in the MDA of the previous year, the turbulence in global financial markets and the geopolitical uncertainty resulted in spike in gold prices. In FY 23-24, the growing demand for gold from central banks has resulted in gold prices testing lifetime highs of around the level of USD 2,200-2,300/ounce. The "de-dollarization" strategy being adopted by central banks has led to this incremental demand. This trend has escalated with the probability of escalation the middle-east conflict with Gold touching a life time high. It seems Gold will continue its upward march.

Looking ahead to 2024, with IMF projecting one of the highest growth rates for India, we feel that 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.

RISKS AND CONCERNS

PS IT Infrastructure & Services Ltd. (PIISL) has exposures in various line of business. PIISL are exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, liquidity and interest rate risk, human resource risk, operational risk, information security risks, regulatory risk and macro-economic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.

MARKET RISK

The Company has quoted investments which are exposed to fluctuations in stock prices. PIISL continuously monitors market exposure in equity and, in appropriate cases, also uses various derivative instruments as a hedging mechanism to limit volatility.

LIQUIDITY AND INTEREST RATE RISK

The Company is exposed to liquidity risk principally, because of lending and investment for periods which may differ from those of its funding sources. Management team actively manages asset liability positions in accordance with the overall guidelines laid down by various regulators. The Company may be impacted by volatility in interest rates in India which could cause its margins to decline and profitability to shrink. The success of the Companys business depends significantly on interest income from its operations. It is exposed to interest rate risk, both as a result of lending at fixed interest rates and for reset periods which may differ from those of its funding sources. Interest rates are highly sensitive to many factors beyond the Companys control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions and, inflation. As a result, interest rates in India have historically experienced a relatively high degree of volatility.

The Company seeks to match its interest rate positions of assets and liabilities to minimize interest rate risk. However, there can be no assurance that significant interest rate movements will not have an adverse effect on its financial position.

HUMAN RESOURCE DEVELOPMENT

The Company recognizes that its success is deeply embedded in the success of its human capital. During 2023-24, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings, streamlining the Performance Management System, making the compensation structure more competitive and streamlining the performance-link rewards and incentives.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable to the Company.

COMPLIANCE

The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company continues to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Companys Board of Directors and the Companys Compliance Policy. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/internal guidelines on a periodic basis.

The Company has complied with all requirements of regulatory authorities except as per remark and observations stated in the Form MR-3 issued and submitted by Secretarial Auditors and is forming of the Annual Report.

Mumbai, August 23, 2024	By order of the Board For PS IT Infrastructure & Services Limited
Registered Office:	S/d-
Office No-308, B2B Agarwal Centre,	Kawarlal K Ojha
Near Malad Industrial Estate,	DIN: 07459363
Kanchpada, Mumbai - 400 064	Managing Director