shardul securities ltd Management discussions

(i) Financial Performance:

The Year 2019-20 witnessed a general trend of lower growth in almost all sectors of the economy and your company also had to reconcile to the vagaries of market forces that prompted to follow cautious approach. At the far end of the year, the panic set in due to pandemic outrage nullified all the good work done through the year. Though our overall performance per se was comparable to the previous year, the setback suffered at the yearend affected our working results to a great extent. The fair valuation losses reflected in the audited financial statements are as a consequence of a steep fall in stock market indices as on 31st March and application of the new accounting standards as per the Company (Indian Accounting standards Rules 2015 of the companies act 2013) read with section133 of the Act for preparation of financial statements. This position is bound to be reversed once the market indices recover in the ensuing year.

(ii) Industry Structure and developments:

The year under report continued the same way the previous year ended with economic slow down globally that affected the market sentiments. The delayed Budget presentation after the general elections coupled with lack of any big investments and Government expenditure resulted in lower GDP growth that affected all round growth in industrial activities and agricultural segments. The GDP growth dipped to 3.1 percent from 4.2 percent in the previous year and inflation rate increased to 4.8 percent from 3.4 percent in the previous year. Merchandise export import declined by 4.8 percent and 9.1 percent respectively. The combined index of 8 core industries stood at 137 constituting 0.6 percent growth as against an expected level of 2.5%. Indias FDI equity inflow reached $ 469 billion with maximum contribution from services, software exports, telecommunication, construction, automobiles and trading. The liquidity in the market continued to be tight notwithstanding efforts of the Government to infuse additional capital in banking system. The flow of credit barring a few select segments continued to affect the business growth. The diamond and jewellery industry for example suffered the most with credit flow virtually coming to a standstill. The NBFC sector in India faced a few more failures and frauds resulting in liquidity crisis. These also resulted in huge provisions for bad debts of Public Sector and some private sector banks. The Agricultural sector showed a marginal increase while the manufacturing sector continued to be negative.

The capital markets continued to remain volatile though it appeared to be more index driven than real time appreciation in small and medium cap stocks. However by end of March, the stocks took a heavy beating due to the panic around the world.

(iii) Business Review:

Despite the economic slowdown, high volatility in Capital markets, and other uncertainties your company could achieve comparable results with that of the previous year. The setback suffered during the year end, should get reversed in the ensuing year although the trading losses cannot be reversed. India is going through a severe economic down turn due to Corona pandemic after effects and the ensuing year would be an unprecedented year of setbacks and poor results for most of the business activities.

(iv) Opportunities and Threats:

The GDP is projected to recover to around 3 percent which is not a good news for business growth. The Government has announced several measures to boost the economic activities but it remains to be seen if these measures would be adequate to bring a turnaround in the economy.

(v) Segment-wise Product-wise reporting:

As there has been no change in your companys business activities and broking activities there are no separate reportable segment.

(vi) Outlook:

Your company expects the capital markets continuing to be volatile in view of the present down turn in economy and would like to be guarded in making projections for the year. The Company does not foresee any improvements in the working results for the ensuing year and the aim would be to ensure that the deterioration in the financial health is kept to a minimum level

(vii) Risks and Concerns:

Your companys activities which are essentially in the capital market segments and the risk perception of our activity could be discerned as under: Market Risk: Your companys major investments are mostly in capital market instruments like shares, mutual funds and bonds and any volatility could erode the capital value of the investments. No doubt, your company would keep a close vigil on movement of prices and take appropriate steps to minimize this risk. Interest risk: The changes in interest rates by RBI and Banks could result in fluctuations in prices and consequently the income of various investments and borrowings by the company may vary. Your company has put in measures to hedge this risk but this cannot be eliminated totally. Operation Risk: The stock market operations are fraught with certain risks associated with market judgments by operational executives and their decision making process based on certain perceptions prevailing at any given time and these could change suddenly resulting in unexpected adverse positions.

(viii) Internal Financial Control Systems and their Adequacy:

Your company has in place adequate internal financial control measures. There is continuous monitoring of all the activities and necessary creative measures are taken periodically to manage any unforeseen risk factors.

(ix) Human Resources:

Your company has adequate trained professionals to manage the affairs of the company in the most prudent manner.

(x) Details of significant changes in key financial ratios are given in Annexure D to Board Report.