MANAGEMENT DISCUSSION AND ANALYSIS
Overall Outlook
DJS Stock and Shares Limited is engaged in Share Broking activities, Trading and
Investment in equities and with the opening up of all major business markets after the
second wave of pandemic, there are huge emerging opportunities. DJSs young and energetic
team are always in readiness to grab such opportunities. DJSs management team foresee a
bright future ahead.
The COVID-19 pandemic is a once in a lifetime occurrence that has brought with it
unimaginable suffering to people and to almost all sections of the economy. When the
pandemic struck and led to nationwide lockdowns to curtail the transmission of disease, it
was natural to fear that the global economy would stay in extreme stress of the kind not
seen since the Great Depression and would have a long-lasting economic impact. To counter
the crippling impact of the lockdowns on economies, the worlds policymakers have resorted
to fiscal and monetary measures never seen before in global economic history. It still
remains to be seen if these relief measures sufficed, and whether actions taken by
Governments across the globe adequately compensated for the disruptions created in the
lives of people. Fortunately, science prevailed. Multiple vaccines were found with
impressive efficacy levels in less than a year - which will probably rank as among one of
the most incredible achievements in science. The announcement of successful development of
vaccines seemed to lift spirits around the world. Fortunately for India, which is home to
some of the largest vaccine makers in the world, the supply constraints were limited and
temporary. Thereafter, we have seen a rebound - thanks to the resilience of our citizens
and entrepreneurs of our economy.
In India, the second wave (called ‘Delta) proved far more lethal than the first
that struck in 2020. After a shaky start in some places, the vaccine immunisation
programme by the Indian Government and Governments across the world has been exemplary. It
saved lives and livelihood.
The highly transmissible variant ‘Omicron in early January 2022 (the third wave)
spread rapidly across the world. During this wave, Indias daily number of reported cases
peaked to nearly 350,000 on 20 January 2022. Faced with the prospect of yet more
lockdowns, there was fear that the world would face yet another year of slow economic
growth. Fortunately, while highly transmissible, Omicron was not as lethal as Delta. So,
while many got infected, fatality rate was fortunately low. The world did not see a re-run
of massive drop in GDP as witnessed FY2021.Indias GDP grew 8.7% in Financial Year
2021-2022 after contracting 6.6% during the previous fiscal.
The Indian capital market also witnessed a phenomenal rebound in the current fiscal,
factoring in quick resumption of economic activity and future growth prospects. Like its
global peers, India too witnessed a strong rebound from the pandemic lows with the key
indices reaching an all-time high by the fourth quarter on the back of continued and
strong recovery in economic activities in the first half of FY 2021-22. Indias market
capitalisation to GDP ratio now stands at approximately 112 Percent in March 2022 from
approximately 105 Percent in March 2021. The rally in Indian equities was driven by record
Foreign Portfolio Investors (FPI) flows during the year which more than offset the
outflows by domestic institutions.
Industry Structure and Development
People were looking for new methods to diversify their portfolio and create new streams
of income as the pandemic hit. To diversify their income streams, more and more
individuals turned to the stock market.
Year-on-year, Indias stock market has outperformed most major economies. Even though
there has been slight volatility in the market of late, it hasnt really impacted customer
growth. Also, smartphones and low-cost data have propelled investing and trading into the
digital realm. Opening a demat account has become a paperless and simple process thanks to
the implementation of eKYC and Aadhaar eSign. Also, the excitement of upcoming IPOs has
piqued the curiosity of first-time investors, resulting in a steady increase in equity
participation.
Equity participation in India currently stands at 5-6% compared to US which is about
55%. Having said that, the Indian broking sector will continue to grow even if there is a
slowdown. India is a country with a high saving rate, and thus there is immense investing
potential. With growing financial awareness, financial literacy, internet and smartphone
penetration, many people have started showing keen interest in the equity markets and are
looking at diversifying their investment portfolios. Indias brokering industry is vast,
dynamic and continuously on the outlook of new opportunities. With equity participation in
India being around 5-6% there is still a lot of potential for the brokers to flourish in
India.
Segment-wise/Product-wise Performance
The Company is engaged mainly in trading activities and as such there are no other
reportable segment as defined by Indian Accounting Standard 108 on "Operating
Segments" issued by the Institute of Chartered Accountants of India.
Outlook
Broking Companies are set to clock record revenues in the current financial year,
driven by higher retail participation and favorable systematic liquidity. The increase in
the activity in equity markets since the beginning of the pandemic was driven by robust
corporate earnings, favorable liquidity in both international and domestic markets, higher
internet penetration, and retail participation.
According to the data analysis and interpretation: During the times of Covid 19(during
financial year 2020) millions of new demat accounts were opened and lot of them were
opened with online trading platforms. Some clients of traditional broking system also
shifted towards the online discount broking system. But the clients who switched platforms
soon came back to traditional system, reason being most of the clients felt the lack of
good customer care services, advice from experienced stock brokers, additional services
like portfolio management, estate planning, tax advice, etc., most of the clients do not
have sufficient time nor the fundamental and technical analysis skills to select stocks
for investment or trading. Thus, forcing clients to move back to the traditional broking
system.
The industry giants and big players of the market neither shifted nor are going to
shift towards online discount broking system because they require the expertise,
experience and premium services provided by the traditional system which our Company is
providing. Moreover, technical issues and glitches in online broking systems cause
problems and delay in execution of big trades (large order quantities) which is definitely
not preferred by the big players of the market.
As far as SEBIs new margin norms are concerned the stricter regulations are brought to
minimise the risk of frauds. As earlier some brokers were illegally transferring clients
investments to their own account and were pledging them without authorisation. As a result
of the norms clients now have to pay either the upfront cash margin or pledge the shares
to cover margin. It can be concluded that though online discount broking system has gained
popularity in past few years, traditional broking system is here to stay as it has the
trust and reliability of many clients and amidst the inherently volatile market and
pressing times, expert guidance of full service brokers is a necessity. In the coming
future both the traditional and online discount broking systems will be existing
cohesively.
Risk Management
The Company operates in an industry that is influenced by various macro parameters i.e.
both global and domestic. Economic environment may be adversely impacted due to rising
crude prices, worsening fiscal position of the country, worsening pandemic situation that
is currently prevalent globally, rising inflation leading to higher interest rate
scenario, depreciating currency, slowdown in corporate earnings, rising NPA position etc.
A slowdown in the economy, due to such adverse changes in operating environment could have
a material impact on investor interest in capital markets. The Company is one of the
prominent digital players in Indian capital market using advanced technology as its
backbone for growth.
Continuous investments in upgrading its IT infrastructure coupled with scaling up its
digital talent pool is imperative for sustenance of growth. The Company will have to be
abreast with the rapidly changing technology to offer seamless and improved experience to
its clients. If the Company is unable to keep pace with this, it runs the risk of
technology obsolescence.
Since the Indian capital market is an evolving market, the industry is likely to
witness regulatory updates frequently. These updates are expected to be with the intent to
ensuring longevity of clients in the system and hence creating long-term sustainability
for the industry. In the interim as the industry recalibrates to the changes, there may be
near term impact on growth however long-term outlook would be strengthened. The broking
industry is highly competitive, with many participants offering a variety of products and
services with the aim to provide best in class customer experience. Similar products and
services being offered by banks, financial institutions, full scale brokers, digital
brokers, etc. makes the industry optically very competitive.
Players with matured journeys based on client experience will be the larger
beneficiaries for future growth. In the initial period of FY 2021- 22 the world and India
was adversely impacted by the pandemic which led to material risk off from the markets.
Global recessionary expectation also drove crude prices to negative territory for a brief
period, which also dented investor sentiment. In such situations, capital market
participants become conservative and considerably reduce client exposure to such assets. A
similar scenario, if replicates in future may also have corresponding impact on the
business financials intermittently. The pace of response by both central and local
administrations will play a key role in the speed of recovery for the industry.
Internal Control System
The internal control systems have been designed to effectively and efficiently handle
the dynamic and complex nature of business operations of the Company. The internal control
systems and environment are commensurate to the scale and volumes of the business with
adequate segregation of roles and responsibilities. The executives of the Company keep
themselves abreast with the detailed documentation of its policies and SOPs, which are
regularly reviewed and updated by the management. The statutory auditors of the Company
critically review the internal control environment to arrive at their opinion about the
financial performance of the Company. The Company also has a strong internal audit
framework as approved by the Audit Committee which ensures detailed coverage of the
processes and systems needed to safeguard its assets, prevention and detection of errors
and frauds, ensure accuracy and completeness of accounting transactions thus enabling
timely preparation of reliable financial information. The various committees of the board,
including the Audit Committee, periodically review the observations and recommendations of
the internal auditors to further improve the systems and processes.
Financial Performance w.r.t. Operational Performance
It has been a very tough year globally with the pandemic and the various lockdowns. We
pray that all our shareholders, their families, the companys board of directors and all
the staff of DJS Stock and Shares Limited (hereinafter referred to as ‘DJS or
‘the Company) are safe and continue to stay healthy.
It has been a difficult year for the company too as we had to manage with minimal
staff. I would like to take the opportunity here itself to thank our staff for being extra
cooperative and attending office in these trying times. It was a major turnaround year for
the markets. Given the pandemic it is hard to imagine how well the markets have performed
globally. It has been a concerted effort globally by governments and central banks to
support the economy and the markets in the best possible way. The current fiscal year has
begun on a good positive note for both the markets and for our company. As we continue to
strive to grow the Institutional business, we are seeing better momentum in our retail
segment too. We expect markets to remain robust and thus are optimistic for the rest of
the year.
DJS Stock and Shares Limited is engaged in Share Broking activities, Trading and
Investment in equities and with the opening up of all major business markets after the
second wave of pandemic, there are huge emerging opportunities. DJSs young and energetic
team are always in readiness to grab such opportunities. DJSs management team foresee a
bright future ahead.
During the year under review, the Company has earned Total Revenue of Rs. 14,516
hundred in comparison to Rs. 40,794 hundred during the previous financial year. The total
expenses has been increased from Rs. 133,442 hundred to Rs.142,522 hundred due to which
there is loss of Rs. 128,064 hundred in comparison with loss of Rs. 92,704 hundred during
the previous year. There was a deferred tax of Rs. 58 hundred compared to Rs. 56 hundred
for the previous financial year. The Company is trying hard to grab the market
opportunities and make it into a profit making Company.
Safety, Health and Environment
Your Company as a matter of policy gives greater importance to safety, health and
environment and also ensures compliance with applicable legislative requirements.
Human Resources
People are our key pillars of strength. This belief was further strengthened as our
people showed tremendous resilience and extraordinary commitment during the pandemic times
to bring the Company back to its core performance.
COVID-19 created an unprecedented health crisis, especially during the second wave. Our
Company took multiple initiatives to ensure safety and well-being of employees and their
families and extended financial and logistical support towards diagnosis and treatment.
The Company is committed to create a vibrant and inclusive workplace for all its employees
and actively takes steps to ensure these are well enshrined in our policies and practices.
We have adopted people practices that enable us to attract and retain talent in an
increasingly competitive market; and to foster a work culture that is always committed to
providing the best opportunities to employees to realise their potential. We are committed
as an equal opportunity employer. Train people. Treat them well. Happiness and
productivity will follow, this is our Companys philosophy.
Key Financial Ratios:
In accordance with the SEBI (Listing Obligations and disclosures Requirements)
Regulations 2018 (Amendment) Regulations, 2018, the Company is required to give details of
significant changes (change of 25% or more as compared to the immediately previous
financial year) in Key sector-specific financial ratios.
| Particulars |
F.Y. 2021-22 |
F.Y. 2020-21 |
| Current Ratio1 |
5.94 times |
2.86 times |
| Net Profit Margin (%)2 |
(882.22)% |
(227.25)% |
| Return On Net-worth (%)3 |
(19.40)% |
(11.78)% |
1rThe current ratio has improved as a result of more decline in current
liabilities..
2The net profit margin ratio has gone down due to decrease in income from
operation of the company.
3Return on Networth (%) gone down due to decrease in income from operation of the
company.
Cautionary Statement
The report contains forward looking statements describing expectations, estimates,
plans or words with similar meaning. Your Companys results may differ depending on
various factors. Your Company cannot guarantee that the assumptions and estimates in the
forward looking statements are accurate or will be realized.
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