SMIFS Capital Markets Ltd Management Discussions

1. FINANCIALSTATEMENTS

Financial Statements are in compliance with the provisions of the Companies Act, 2013 and the Accounting Standards issued by ICAI. Readers are cautioned that this discussion may include "forward-looking statements" that are not historical in nature. Forward looking statements may include statements relating to future results, financial condition, business prospects, plans and objectives. Statements are based on current beliefs, assumptions, expectations, estimates and projections on the business segment in which your company operates. The statements do not guarantee positive performance, exposed to known and unknown uncertainties, many of which are beyond the control of your Company. Uncertainty could cause results to differ from forward-looking statements, which should not be construed as representation of future performance.

2. MACRO-ECONOMICOVERVIEW

The financial year 2023-24 began on a promising note as supplies of goods were improving, financial markets exuded greater optimism and globally central banks were steering their economies towards a soft landing. However the launch of war by Russia on Ukraine resulted in a sharp increase in prices of various commodities causing high inflation in many countries of the world. The central banks tightened the monetary policies to curb the inflation and are expected to cut interest rates in the later part of this financial year 2024-25 once the inflation comes down within their targeted range. Meanwhile, the recent conflict in the Middle East between Israel and Hamas has also contributed to increase in oil prices and increase in the cost of transportation of goods passing through that area.

Amongst the global turmoil and near recessionary conditions in many countries, India remains one of the fastest growing economies in the world. Reserve Bank of India in its April 2024 policy meet has projected Indias GDP growth rate for the financial year 2024-2025 at 7% as compared to expected GDP growth of 7.6% in 2023-24 and has estimated CPI inflation to come down in 2024-25 to 4.5%. IMF has raised Indias GDP growth forecast to 7.8% for 2024-25, higher than RBIs projection.

Indias retail inflation has also eased to a 11 month low of 4.83% in April 2024. Both IMD and Skymet have forecasted normal monsoon for India in 2024. Therefore, moderating inflation pressures and forecast of normal monsoon have opened up possibility of interest rate cuts in India in the second half of 2024-25.

Our economy is growing at a fast pace and this is evidenced by highest GST revenue collection for April 2024 at Rs. 2.10 lakh crores. This represents a significant 12.4% year on year growth driven by a strong demand in domestic transactions (UP 13.4%) and imports (UP 8.3%). Indias Industrial growth (IIP) for the financial year 2023–24 was at 5.8% compared to 5.2% for the year 2022–23. With a record $776.68 billion worth of exports in financial year 2023–24, Indias trade deficit narrowed to $78 billion. Indias services exports grew at one of the fastest rates over the last 18 years and Indias defence and electronics exports have risen rapidly.

Indias fiscal deficit in 2024–25 is estimated to come down to 5.1% of GDP and around 4.5% in 2025–26. Inspite of geopolitical developments affecting crude prices, India has managed its crude imports well by negotiating appropriate discounts from Russia and other exporting countries.

Amidst this volatility, our banking and non-banking financial service sectors in India remain healthy and are well governed by the Regulators. The Indian Rupee has also moved in an orderly manner in the financial year 2023 – 24.

As per IMF, India is likely to become the third largest economy in 2027. Capital expenditure has emerged as a key growth driver in India. Government has accelerated public sector capital expenditure and private sector capital expenditure is now catching up. Capacity utilization has now reached around 75 percent and corporates are considering setting up new capacities. The Government has also come out with production linked incentive schemes in various sectors which is boosting capital expenditure and manufacturing.

3. OPPORTUNITIES

The forecast of normal monsoon in the current year has brightened the prospects for agriculture sector and rural demand. The governments focus on capital expenditure, capacity utilisation above long-period average and moderating commodity prices should bolster manufacturing and investment activity. The protracted geopolitical tensions and global financial market volatility pose downside risks to the outlook. Taking all these factors into consideration, real GDP growth for 2024-25 is projected at 7 per cent.

The Indian banking system remains sound and healthy, with strong capital and liquidity positions, improving asset quality, better provisioning coverage along with improved profitability. The Indian Capital markets have performed exceedingly well in 2023-2024 and the BSE Sensex has moved up from 58,992 on 31st March 2023 to 73,657 on 31st March 2024, an appreciation of 24.85 %. Participation of retail and high networth individuals have grown significantly as evidenced by the growth in demat accounts. Demat accounts in 31st March 2023 were 114 million and have increased to 151 million on 31st March 2024.

4. THREATS

The conflicts between Russia and Ukraine and between Israel and Hamas and USA-China tensions pose the most significant risks to the global economy in 2024 and beyond. Russias invasion of Ukraine has rapidly inflated energy and food prices, leading to higher costs for businesses and soaring living costs for consumers in 2023-2024. Conflict between Israel and Hamas has led to increase in oil prices and the freight costs. Escalating tensions between the US and China, the two largest economies, could have a profound impact on international trade, thereby potentially transforming the global operating environment and disrupting business operations and supply chains. The main geopolitical risk is Chinas potential invasion of Taiwan, which has already led to deteriorating trade relations and declining business confidence among Chinas trade partners. This in turn has sparked a supply chain reorientation that may benefit India.

5. RISKSANDCONCERNS

The rising uncertainty in international financial markets and imported inflation pressures need to be monitored closely. Taking into account these factors and assuming an annual average crude oil price (Indian basket) of US$ 85 per barrel and a normal monsoon, CPI inflation is projected to moderate to 4.5 per cent or below for 2024-25. The risks are evenly balanced.

6. FUTUREOUTLOOK

Your company is registered as a Category I Merchant Banker and executes assignments in areas of mergers and acquisitions, debt syndication, placement of equity shares and debentures and is cautiously optimistic for the year 2024 as good monsoon, rural recovery and policy reforms are driving growth momentum in the economy.

7. GREENINITIATIVE

Your Company has endeavored to popularize the initiative announced by the Central Government vide its Circular No. 17/2011 dated April 21, 2011 and Circular no. 18/2011 dated April 24, 2011. Your company took measures to send all documents in electronic mode to the members who have registered their email IDs with the Company / Registrar & Share Transfer Agent, a step towards achieving paperless statutory compliances.

8. INTERNALCONTROLSYSTEMANDTHEIRADEQUACY

Internal control system adopted aimed at promoting operational efficiencies and emphasizing adherence to the policies adopted by the Board of Directors.

9. CAUTIONARYSTATEMENT

Statements in the Management Discussion and Analysis describing your Companys position and expectations may be "forward looking statements" within the meaning of the applicable securities laws and regulations. Results could differ materially from the statements expressed or implied.

	For and on behalf of the Board of Directors
Regd.Office:
‘Vaibhav (4F), 4 Lee Road,	Sd/-
Kolkata - 700 020	(UTSAVPAREKH)
	Chairman
The 27th day of May, 2024	(DIN No. 00027642)