stel holdings ltd share price Management discussions


The Management Discussion and Analysis Report (MDA) is an integrated part of Companys annual financial statements. The purpose of the MDA is to provide a narrative explanation, through the eyes of management, of how the Company has performed in the past, its present condition, and its future prospects. This report contains a description of the year gone by and some of the key factors that influenced the business of the Company during the year, as well as a fair and unbiased overview of the Companys past, present, and future.

STEL remains essentially a Core Investment Company. Of the total income received by the Company (STEL), dividend income constitutes the main earnings. The performance of the Company is directly related to the performance of the Investee Companies. During the year company has received a dividend income of Rs. 1578.75 lakhs from its investments compared to the previous year which was Rs. 1760.65 lakhs. Also company have earnings in the nature of interest from fixed deposits and loans.

Industry Structure & Developments, Business Overview and Future Outlook Global Economy Overview 2022-23 & Prospects for 2023-24

The global economy was recovering from the impact of successive waves of the COVID-19 pandemic by early 2022, aided by large policy stimulus and expanding coverage of vaccination, when the war in Ukraine jolted the upturn. The gains achieved through concerted fiscal and monetary policy interventions during the pandemic period (2020 and 2021) were undermined by the impact of the war. A generalised surge in global inflation triggered monetary policy actions by central banks in the form of successive interest rate increases and the pulling back of liquidity leading to tightening of financial conditions and together with other factors, a toll on growth which slowed from 6.2 per cent in 2021 to 3.4 per cent in 2022, according to the International Monetary Fund (IMF).

Waves of global spillovers to Emerging Market Economies ("EMEs") resulted in large currency depreciations, capital flight, investor risk aversion and raised debt distress in some of them. The brunt of a surge in borrowing costs imposed on EMEs and risk-off sentiments resulted in portfolio outflows from both bond and equity markets for much of the year. Heightened risks of a global recession clouded the overall macroeconomic and financial outlook. When data releases pointed towards resilient labour markets and consumer spending in both Advanced Economies ("AEs") and EMEs, sentiments recovered towards the second half of the year. Sovereign bond yields eased across most AEs and EMEs and equity markets regained lost ground. The weakening of the US dollar towards the close of the year buoyed other currencies across AEs and EMEs. By the end of the year, the global economy regained poise, cushioned by a milder winter in Europe, policy support to mitigate the impact of soaring energy prices, resilient labour markets, and signs of inflation peaking. Easing of pandemic restrictions, mending of supply chain and logistics disruptions, and a rebound in demand for contact intensive services buoyed the global economy. Nonetheless, global inflation surged to 8.7 per cent from 4.7 per cent in 2021, overshooting targets in the majority of countries through the year. Global trade (goods and services) growth slowed from 10.4 per cent in 2021 to 5.1 per cent in 2022, reflecting the post-pandemic slowdown in global demand and the restrictions on cross-border movements of goods and services imposed by the war in Ukraine.

Global growth is expected to slow down in 2023 and may remain subdued in the medium run. As per the IMFs World Economic Outlook (WEO) released in April 2023, global growth for 2023 at 2.8 per cent is likely to be followed by the medium-term growth plateauing at 3.0 percent. Globally, disinflation efforts are expected to take down headline inflation from 7.3 per cent to 4.7 per cent in 2023 among AEs, and from 9.8 per cent to 8.6 per cent among emerging market and developing economies (EMDEs). Progress is, however, likely to be gradual amidst sticky and elevated upside pressures. Central banks continue to face a challenging trade-off between restoring price stability and addressing growth slowdown in an environment of heightened uncertainty.

Potential financial risks from high debt levels and the recent banking sector developments in the US and Europe highlight the scope for unanticipated build-up of stress with strong adverse spillovers across the global financial system.

Financial markets are signaling the likely end of the global monetary policy tightening cycle, with equity prices having clawed back losses and bond yields having softened. Commodity prices are also trading with a softening bias as fears of growth slowdown dominate market sentiments.

With policy tightening by global central banks having moderated, the US dollar is likely to depreciate, easing pressures on currencies of other AEs and EMEs even as the outlook for capital flows to EMEs remains uncertain.

Overall, the prospects for the global economy continue to be shadowed by high inflation, the adverse effects of geo-economic fragmentation operating through restrictions on movements of trade, labor, capital and diffusion of technology, and potential amplification of financial sector vulnerabilities. Medium- to long-term challenges such as climate change, cyber security, crypto currencies, FinTech and tech disruptions can also potentially vitiate the outlook.

Source : Economic Survey 2022-23 & RBI report

Domestic Economy Overview 2022-23 & Prospects for 2023-24

Amidst strong global headwinds, the Indian economy is expected to have recorded a growth of 7.0 per cent in real GDP in 2022-23. A sustained recovery in discretionary spending, particularly in contact intensive services, restoration of consumer confidence, high festival season spending after two consecutive years of COVID-19 induced isolation and the governments thrust on capex provided impetus to the growth momentum. In the second half of the year, however, the pace of year-on-year growth moderated because of unfavourable base effects, weakening private consumption demand caused by high inflation, slowdown in export growth and sustained input cost pressures.

In the industrial sector, manufacturing activity withstood global spillovers, while electricity generation exhibited robust growth, and mining recorded steady activity. Sustained momentum was seen in construction activity, while infrastructure and capital goods production benefitted from the government- led investment in infrastructure. Production of consumer goods, on the other hand, remained muted and recovery in sectors such as automobiles was lopsided. Uneven recovery in consumption was evident as growth in the price sensitive entry-level car segment turned sluggish as compared to the recovery in passenger cars. The continued lag in two-wheeler sales, 40 per cent of which caters to rural India, is also indicative of subdued rural demand.

Like many other economies, India also experienced a surge in inflation during 2022-23, primarily reflecting the impact of overlapping global supply shocks and pass-through of higher input costs. The sharp increase in global prices of crude oil, food, fertilisers and metals, along with renewed supply disruptions in the aftermath of the war, exerted broad-based price pressures during the first half of the year. As a result, inflation reached a peak of 7.8 per cent in April 2022. Following gradual normalisation of global supply chains, softening global commodity prices, targeted supply management measures by the government and successive hikes in the policy repo rate by the Reserve Bank, inflation moderated in the second half of the year. Overall, headline inflation increased to 6.7 per cent in 2022-23 from 5.5 per cent in 2021-22. The lagged pass-through of input costs to retail prices of goods and services amidst improving domestic demand conditions imparted considerable stickiness to already elevated core inflation that ruled at around 6.0 per cent through the year.

Financial markets experienced bouts of volatility in 2022-23, as geopolitical tensions intensified, interest rate hikes by the US Fed turned aggressive and the global growth outlook deteriorated, dampening investors sentiments. Equity markets in India, however, gained marginally, despite portfolio outflows and forex market pressures, reflecting Indias growth resilience and rising investment in the market by resident entities. Money market interest rates hardened during 2022-23, tracking the increase in the policy repo rate and the ebbing surplus liquidity conditions.

Sovereign bond yields hardened in line with the monetary policy actions and changing inflation growth outlook; however, the extent of increase remained contained as compared to the sharp rise observed in bond yields in AEs.

Domestic equity markets moved lower in H1 of 2022-23 as the economic fall-out of geopolitical tensions, hawkish monetary policy stances by global central banks and mounting recession fears weighed on market sentiments. They recovered in early H2 and closed at an all-time high on December 1, 2022, buoyed by robust corporate earnings and inflows from foreign portfolio investors. Weak global cues amid emergence of financial stability risks following the collapse of a few niche banks in the US and concerns about financial health of a major financial services provider in Europe imparted volatility to the markets towards the close of the year. Monetary transmission in the credit market - the pass-through of policy repo rate changes to lending rates - strengthened during 2022-23 on the back of reduction in surplus liquidity in the banking system, sustained high credit growth and he mandated external benchmark regime for loan pricing in select sectors.

India has emerged stronger and more resilient from the pandemic, partly due to the wave of digital transformation. Transactions routed through digital modes recorded a marked expansion in 2022-23 over and above the strong growth witnessed a year ago.

Monetary tightening by the RBI, the widening of the CAD, and the plateauing growth of exports have essentially been the outcome of geopolitical strife in Europe. As these developments posed downside risks to the growth of the Indian economy in FY23, many agencies worldwide have been revising their growth forecast of the Indian economy downwards. These forecasts, including the advance estimates released by the NSO, now broadly lie in the range of 6.5-7.0 percent. Despite the downward revision, the growth estimate for FY23 is higher than for almost all major economies and even slightly above the average growth of the Indian economy in the decade leading up to the pandemic.

Indias recovery from the pandemic was relatively quick, and growth in the upcoming year will be supported by solid domestic demand and a pickup in capital investment. The current 22 Economic Survey 2022-23 growth trajectory will be supported by multiple structural changes that have been implemented over the past few years. The private sector - financial and non-financial - was repairing balance sheets, which led to a slowdown in capital formation in the previous decade. The financial system stress experienced in the second decade of the millennium, evidenced by rising nonperforming assets, low credit growth and declining growth rates of capital formation, caused by excessive lending witnessed in the first decade-plus, is now behind us. Aided by healthy financials, incipient signs of a new private sector capital formation cycle are visible. More importantly, compensating for the private sectors caution in capital expenditure, the government raised capital expenditure substantially. Structural reforms such as the introduction of the Goods and Services Tax and the Insolvency and Bankruptcy Code enhanced the efficiency and transparency of the economy and ensured financial discipline and better compliance.

Even as Indias outlook remains bright, global economic prospects for the next year have been weighed down by the combination of a unique set of challenges expected to impart a few downside risks. Multi-decadal high inflation numbers have compelled central banks across the globe to tighten financial conditions. The impact of monetary tightening is beginning to show in slowing economic activity, especially in Advanced Economies. Besides this, adverse spillovers from the prolonged strains in supply chains and heightened uncertainty due to geo-political conflict have further deteriorated the global outlook. Hence, global growth is forecasted to slow from 3.2 per cent in 2022 to 2.7 per cent in 2023 as per IMFs World Economic Outlook, October 2022. A slower growth in economic output coupled with increased uncertainty will dampen trade growth. This is seen in the lower forecast for growth in global trade by the World Trade Organisation, from 3.5 per cent in 2022 to 1.0 per cent in 2023.

Source : Economic Survey 2022-23 & RBI report

Going forward the performance of company will be dependent on how global factors, the economy and corporate earnings shape up over the second half of the year. Your Company will continue to look for opportunities to invest in companies which have consistent growth prospects with high quality earnings. In new age companies where valuations are a concern and whose earnings will fructify at a later stage in their development, the Company has made a small allocation of capital.

The Company will continue to allocate its capital between listed equity, fixed income and unlisted equity. Management will evaluate and select investments based on high quality governance, long term sustainability and strength of the investee companys balance sheets.

Companys Financial Performance

Analysis of Profit and Loss statement and Balance Sheet including the key ratios based on consolidated results is mentioned as follows:

Profit and Loss Statement Analysis

Revenue for FY23 stands at Rs 1716.17 lakhs with a growth of 14 % Y-o-Y, despite a challenging environment. Despite economic challenges across globe, we have achieved an EBITDA of Rs 1647.49 lakhs with EBITDA margin of 95 % for the year. During the year company achieved a Dividend Income of Rs.1578.75 lakhs compared to Rs. 1760.65 lakhs in Previous Year. The net profit for the year stands at Rs 1226.94 lakhs compared to Rs 1461.75 lakhs in PY Earnings per Share (EPS) stands at Rs 6.65 in FY23 against 7.92 in FY22.

Balance Sheet Analysis

Net Worth increased to Rs 183.78 crore in FY23 from Rs 171.51 crore in FY22. The Company has not raised any Equity Capital during the year, keeping the Equity Share Capital unchanged at Rs 18.45 crore. Reserves and Surplus increased to Rs 165.37 crore in FY 23 from Rs 153.10 crore in FY22. Book Value per share increased to Rs 441.21 in FY 23 from Rs 400.55 in FY 22.

The Shareholders of the company will be pleased to note that the share price of the Company as on March 2023 is 169.00 per share high, having recorded an appreciation of 1.30 times vis-a-vis to the share price of 131.10 per share as on March, 2022. The strategy of the Company has always been to remain invested in leaders and in businesses which require lower capital reinvestment to grow. As shown in our Investment Schedule of Annual Financials, the portfolio is skewed in its focus in Power Generation & Transmission Sector, Carbon Black Manufacturers, Tyre Manufacturers, Construction & Infrastructure, Pharmaceuticals, Consumer Goods, Financial Services etc.

We are pleased to share that the market value of our investments in quoted and unquoted securities will come to around 781.50 crores as on March 31, 2023 compared to 713.41 crores in PY.

Your Company will continue to allocate its capital between listed equity, fixed income and unlisted equity. Management will evaluate and select investments based on high quality governance, sustainability and strength of the investee companys balance sheets.

Opportunities, Threats & Future Outlook

With a stable government at the Centre, growth is expect to revive, and with stalled projects coming on line, easing of capital availability, in the process improving general business confidence.

The Company is a Core Investment Company and derives major revenue from investments. Also, the value of the stocks, shares and other securities depends on the prevailing capital markets scenario.

The Companys investments are predominantly held in group companies engaged in Power Generation and Transmission, Auto Tyres & Rubber Products, Electric Utilities, Carbon Black, Pharmaceuticals, FMCG Retail etc.

Any adverse impact on these industries could possibly have direct bearing on the performance of the Company. Any slowdown in the growth of Indian economy or any volatility in global financial markets, could also affect the business. The Company is also prone to risks pertaining to change in government regulations, tax regimes, other statutes and capital market fluctuations in respect of investments held.

The future success of the Company continues to depend on its ability to anticipate the volatility of the financial markets, minimising risks and increasing returns through prudent investment decisions. The investments of the Company are typically long term in nature and predominantly in the listed equities.

The Company invests in Companies, where it is part of the promoter group entity from long-term perspective. The Company continues to invest for the long term while availing opportunities to realize a better gaining position considering the macro economic conditions both globally & domestically.

Risk and Concerns

Risk Management is an important aspect of the corporate governance which aims to improvise the governance practices across the Companys activities. The provisions of Risk Management Committee are not applicable on the Company. The Company is mainly exposed to market risks in the form of reduction in value of its investments and fall in returns due to dip in the Investee Companys performance. Company has also adopted the risk management processes which will enable the Company to proactively manage uncertainty and changes in the internal and external environment to limit negative impacts and capitalize on opportunities. It will help in business growth with financial stability.

The identified risks pertaining to the nature of business carried out by the Company comprise of Strategic Risk, Operational Risk, Sectoral Risk, ESG related risks, Capital Market Fluctuations Risk, Regulatory & Compliance Risk, Human Resource Risk, Information and Technology Risk, Liquidity Risk etc. Risk mitigation measures are also reviewed alongside the identified risks.

Internal Control System

Effective internal controls are necessary for building up an efficient organization. The Company has an adequate system of accounting and administrative control with adequate system of internal checks that ensures safe recording of all Companys assets and their proper and authorized utilization. Board has appointed the internal auditor to conduct a risk based audit with to review not only test adherence to laid down in policies and procedures but also to suggest improvements in process and systems. Any internal control weaknesses, non-compliance with statutes and suggestions on improvements in existing practices form part of internal audit report. Their audit program is agreed upon by the Audit Committee. Internal Audit observations and recommendations reported to the Audit Committee, which monitors the implementation of such recommendations. The Company has an Audit Committee which on a regular basis reviews the adequacy and effectiveness of internal control.

Key Financial Ratios

Key Financial Ratios *

2022-23 2021-22 Variance (%)

Debtors Turnover Ratio

NA. The Company does not have any receivables during the year and previous year. NA. The Company does not have any receivables during the year and previous year. NA

Inventory Turnover Ratio

NA. The Company is into Investment operations and hence does not have inventory. NA. The Company is into Investment operations and hence does not have inventory.

Interest Service Coverage Ratio

NA. The Company does not have any borrowings till date. NA. The Company does not have any borrowings till date.

Current Ratio

442.82 301.65 46.79%

Debt Equity Ratio


Operating Profit Margin %

95.39 % 96.70 % -1.31

Net Profit Margin %

71.49% 72.83% -1.34%

Return on Networth %

2.00 % 2.00 % 0

^Assessment of key ratios have been derived at as follows: Debtors Turnover = Revenue from Operations/Trade Receivables Inventory Turnover = Revenue from Operations / Inventories

Interest Service Coverage Ratio = Profit before Depreciation and Amortisation, Interest and Tax / Interest or Finance Cost Current Ratio = Current Assets/Current Liabilities

Debt Equity Ratio= Term loans and Debentures/Total Equity including all reserves

Operating Profit Margin % = EBITDA/Revenue from Operations

Net Profit Margin % = Net Profit after Tax / Revenue from Operations

Return on Net worth % = Net Profit After Tax/ Net worth (Total Equity including all reserves)

Human Resources

Every Company is depended on the quality of workforce. An Organizations vision is lived by and fructified by its people. The Board places on record its appreciation for the dedicated services rendered by the employees for the smooth functioning of the company. During the year under review, the company had only 3 (Three) employees and the company continued with its focus on training and development of its employees.

The Company believes in retaining the best talent, clearly defining their roles and responsibilities. Segment wise or product wise performance

The Companys income for the year consisted of dividend, interest and income from disposal of investments and accordingly there are no reportable segments.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys outlook, projections, estimates, expectations or predictions are "Forward Looking Statements" within the meaning of applicable securities laws or regulations. Actual results could differ materially from those expressed or implied. As "forward looking statements" are based on certain assumptions and expectations of future events over which the Company exercise no control, the Company cannot guarantee their accuracy nor can it warrant that the same will be realized by the Company. Important developments that could affect the Companys operations include a downtrend in the Investee Company performance, significant changes in political and economic environment in India and tax laws.

For and on behalf of the Board of Directors

Mr. Mahesh Narayanaswamy

Mr. Alok Kalani

Place : Kochi

(DIN : 01449684)

(DIN: 03082801)

Date : 04.08.2023