SKP Securities Management Discussions


INDUSTRY STRUCTURE AND DEVELOPMENTS

Your Company is primarily engaged in stock broking and depository participant services, distribution of financial products, investment/merchant banking and corporate advisory services, serving a cross section of society viz. financial institutions, corporates, business families, professionals and retail investors.

Most business activities of the company are regulated by the Securities and Exchange Board of India (SEBI). The industry comprise of boutique entities like your Company, multinational/ private/public sector banks and bank promoted entities, large multinational and domestic entities with nationwide presence, regional entities, small local entities, individual and the new age fintech platforms. Industry is gradually getting consolidated towards relatively larger and fintech players. However, boutique bespoke personalized value-add based relationship-based entities, like your company, also have a niche.

OPPORTUNITIES AND THREATS

A growing economy, leading to higher investible surplus with families, growing financialization of household savings, leading its way to a growing pool of investments managed by institutional investors and corporate sectors? growth provide growing business opportunities for the Company. However, it is encountering game changing technological, regulatory, taxation and competitive disruptions.

BUSINESS REVIEW

Your Company has witnessed mixed performance across its verticals, resulting in slightly lower topline and lower bottom line, during Financial Year 2023.

RISK AND CONCERNS

Risks are integral to financial markets. However, it has been SEBI?s continuous endeavor to reduce risks, even for service providers like your Company. As already mentioned, the company encounters risks posed by game changing technological, regulatory, taxation and competitive disruptions. Investments made by your company face market-related risks. Marked-to-market valuation of investments in compliance with Accounting Standards can have a meaningful impact on company?s bottom line, beyond reasonable control of the management, as witnessed during FY20. As we were coming out of Covid-19 Pandemic, which posed a very different kind of risk for health of its employees and their families and business continuity, the war in Europe is causing business and market disruption, the kind of which we have not witnessed in recent decades; it still continues.

Efforts are being continuously made to make the Company withstand all such risks and grow. It has a diversified bouquet of service offerings to a cross section of customer base. Superior risk management measures have been put in place to reduce risk in broking business. Prudent asset allocation and selection of investment products in line with time horizon, dilutes risks in proprietary investments. A comprehensive risk evaluation methodology and processes for early identification and mitigation of all kinds of risks are also in place.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The scope of work for Internal Auditors, which is reviewed and expanded as required, addresses issues related to internal control systems particularly those related to regulatory compliance and risk management. Pre-audit and post-audit checks and reviews ensure that audit observations are acted upon.

Audit Committee of the Board of Directors reviews the Internal Audit Reports and adequacy of internal controls and makes suitable recommendations regularly.

FINANCIAL PERFORMANCE

A snapshot of financial performance is furnished in the Report of Board of Directors.

FUTURE OUTLOOK

Amidst the stated risks mentioned above, geo-political and macro-economic challenges are at a heightened level. Some experts have opined that 2023 is likely to be a VUCA year - volatile, uncertain, complex and ambiguous. However, the long term future looks promising for India and its financial markets. With various initiatives taken in recent past, the future outlook of your company remains positive, although it may face short to medium term business challenges during FY24.

HUMAN RESOURCE MANAGEMENT

We are committed to make SKP a preferred place to work with a career growth oriented professional environment and a sense of ownership. As at 31st March 2023, the Company had 45 employees.

PREVENTION OF SEXUAL HARASSMENT

As a good corporate citizen, SKP is committed to a gender friendly workplace. It seeks to enhance equal opportunities for men and women, prevent/stop/redress sexual harassment at workplace and institute good employment practices.

SKP maintains an open door for repartees and encourages employees to report any harassment or other unwelcome and offensive conduct. The Company has a policy for prevention, prohibition and a committee for redressal of complaints/grievances on sexual harassment of women at work place. The policy is communicated to all employees in an appropriate and meaningful manner.

DETAILS OF SIGNIFICANT CHANGES (i.e. 25% OR MORE AS COMPARED TO IMMEDIATELY PRECEDING FINANCIAL YEAR) IN KEY FINANCIAL RATIOS ALONG-WITH DETAILED EXPLANATION THEREOF:

i) Debtor Turnover Ratio: Debtors turnover ratio decreased from 0.37 to 0.27, primarily due to superior debtor management.

ii) Interest Service Coverage Ratio: Interest Service Coverage ratio has decreased from 41.89 to 14.84 because of increase in interest payment obligation due to increase in debt and lower EBIDTA as compared to previous year. However, it is far above the minimum acceptable level and the Company does not envisage any problem in servicing it?s interest or debt.

iii) Net Profit Margin (%): Net Profit Margin has decreased from 27% to 17% mainly because of decrease in top line, primarily on account of lower Fair Market Value Gain and increase in tax expenses as this gain is not considered while calculating Income Tax as per Income Tax Act.

iv) Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof. Return on Net worth decreased from 18% to 9% because of decrease in Profit after Tax by 43% because of reason stated under point no iii above.