Your Directors are pleased to present the Management Discussion and
Analysis Report for the year ended 31st March, 2023.
The Management Discussion and Analysis have been included in consonance
with the Code of Corporate Governance as approved by The Securities and Exchange Board of
India (SEBI). Investors are cautioned that these discussions contain certain forward
looking statements that involve risk and uncertainties including those risks which are
inherent in the Companys growth and strategy. The company undertakes no obligation
to publicly update or revise any of the opinions or forward looking statements expressed
in this report consequent to new information or developments, events or otherwise.
The management of the company is presenting herein the overview,
opportunities and threats, initiatives by the Company and overall strategy of the company
and its outlook for the future. This outlook is based on managements own assessment
and it may vary due to future economic and other future developments in the country.
GLOBAL ECONOMIC OUTLOOK
Global GDP is forecasted to grown by 2.6 percent in 2023, down from 3.3
percent in 2022, most of the weakness is concentrated in Europe, Latin America and the US.
The Asian economies are expected to drive most of global growth in 2023. The world is
becoming more and more responsible towards achieving sustainable growth, with technology
playing a pivotal role.
Weak spots in the global economy include housing, bank lending and
industrial Sector. However, this is more than offset by strength in other sectors, most
notably in service sector activities and visible in labour market. Incoming data for the
first half of 2023 have therefore exceeded expectations, leading to upward revisions to
the full year forecast for 2023 for many economies. In 2023, trade will grow at less than
a third of its pace in the years before the pandemic. In emerging markets and developing
economies, debt pressures are growing due to higher interest rates. Fiscal weaknesses have
already tipped many low-income countries into debt distress. Meanwhile, the financing
needs to achieve the sustainable development goals are far greater than even the most
optimistic projections of private investment
In advanced economies, growth is set to decelerate from 2.6% in 2022 to
0.7% this year and remain weak in 2024, the report says. After growing 1.1% in 2023, the
U.S. economy is set to decelerate to 0.8% in 2024, mainly because of the lingering impact
of the sharp rise in interest rates over the past year and a half. In the euro area,
growth is forecast to slow to 0.4% in 2023 from 3.5% in 2022, due to the lagged effect of
monetary policy tightening and energy-price increases.
INDIAN CAPITAL MARKET:
The Indian capital market also witnessed a phenomenal rebound in the
current fiscal, factoring in quick resumption of economic activity and future growth
prospects. The World Economy in 2023 is gripped by an economic turmoil- high inflation,
geopolitical turbulence, volatility in asset prices, uncertainty in market cycles. A
recession is foretold and Indian equity is expected to outperform the international
markets, yet again. The worlds largest investment firm believes that the financial
markets this year call for a new investment strategy.
According to a report by the RBI, the CPI (Consumer Price Index) peaked
in September 2022 at a rate of 7.2%. The RBI forecasts that inflation will be 5.8% this
quarter and 5% by the following. Despite the decline in inflation rates, RBI is expected
to come out with a hawkish stance on this session. The prospect of economic growth brings
with it higher inflation. Focusing on growth at this stage would bring the curse of
inflation back, and the cycle would repeat itself. Therefore, inflation is here to stay.
The commodity markets have taken a significant hit as a result,
impacting the prices of crude oil and energy. The European Union is to ban imports of all
petroleum products from Russia effective February 5th, which ought to strike the prices
further.
The Indian retail investor remains the backbone of the stock market,
with SIP inflows of 13,575.08 crores in the month of December and 8,171.61 crores within
the first 11 days of January, which has been steadily increasing while FIIs have
been consistently selling, with an outflow of 15,000 crores in January according to NSE.
OVERVIEW
The Company operates in two reportable segments i.e. Finance and
Commodities Trading Activities. The business
Segments has been identified as separate segment in accordance with
Accounting standard 17 ‘Segment Reporting. The financial statements have been
prepared in compliance with the requirements of the Companies Act, 2013, guidelines issued
by the Securities and Exchange Board of India (SEBI) and IND AS (Indian Accounting
Standard). Due to rise in stiff competition and slowdown in the economy and with the
introduction of GST with rising crude prices the industry is gradually moving and is
expected to bloom in future.
OPPORTUNITIES AND THREAT
In the modern age, for every entrepreneurial or business activity,
finance (capital and funds) are required, as without it the entrepreneur cannot function
finance is the lifeblood of all economic activities.
Our Company has achieved consistent and sustained growth over the years
on the back of its choice of markets to cater to and products to offer. It has assiduously
gauged which segments offer promise for lenders and what the needs of these segments are,
in terms of lending structures. Over the years, our Company has understood that an
opportunity is nothing without sound execution. The most significant threat for any
lending activity is to constantly exhibit operational excellence and contain the loss
given defaults within the acceptable limits. The Company believes that this task is to be
worked upon continuously through a very sharp learning and unlearning in order to achieve
operational excellence.
RISKS AND CONCERNS
Risk is an inherent part of any business. There are various types of
risks that threat the existence of a company like Credit Risk, Market Risk, Operational
Risk, Liquidity Risk, Interest Rate Risk, Strategic Risk, Regulation Risk etc. Your
Company aims at enhancing and maximizing shareholders value by achieving appropriate
trade-off between risk & returns. There is the risk of loss from inadequate or failed
systems, processes or procedures. These may be attributed to human failure or technical
problems given the increase use of technology and staff turnover. Your company has in
place suitable mechanisms to effectively reducesuch risks. All these risks are
continuously analysed and reviewed at various levels of management through an effective
information system.
The companys business, results of operations and financial
condition are affected by number of risks, so the risk management function is of paramount
importance and integral to the functioning of the company. The objective of the risk
management strategy includes ensuring that critical risks are identified, monitored and
managed effectively in order to protect the companys business.
INTERNAL CONTROL SYSTEM
The Company has adequate system of internal control in place. This is
to ensure that assets are safeguarded and all transactions are authorized, recorded and
correctly reported. The top management and the Audit Committee of the Board review the
findings and recommend to the Board improvement on the same.
There are adequate controls right from tracking the originators
activities, quality of logins and stringent credit checks and appraisal, which are
evaluated on the basis of the quality of the portfolio. At the same time, there is no
compromise on the fundamentals of extending credit where it is due. The internal audit
department comprises of an external team to highlight the gaps whereas the risk and
monitoring department is expected to constantly scrutinize various trends of the portfolio
behavior and also the macro developments from time to time. The other significant internal
control at our Company comprises constantmonitoring of operational expenditure with an
endeavour to bring it down through better efficiencies rather than just focusing on
curtailing the expenditure. The adequacy of internal controls and their execution are
driven by an ethos of constantly endeavouring to improve.
HUMAN RELATIONS
Your Company considers its employees as one the key stakeholders. It
has created a Human Resources environment which fasters speed and agility in responding to
the changing environment, learning and innovation to survive and prosper and integrity in
all operation.
FORWARD LOOKING AND CAUTIONARY STATEMENTS
The countrys demographics and stage of growth suggest that there
is a huge unfulfilled demand in financespaces. Sectors have been financially under-served
or, in some ways completely neglected by the formal financial sector. As a result, their
development has been stymied. The situation is fast changing as NBFCs, private banks and
private equity have begun to flow into the sectors to tap the vast potential that they
offer. They have begun to approach their target customers with innovative and customised
lending products. Using data, information and technology, they are also able to overcome
issues of the past such as proof of creditworthiness - that presented hurdles in the past.
The Government and RBI are also making efforts to institute policy reforms that will
facilitate lending to these segments, companies that have garneredexpertise through years
of experience will always enjoy a competitive advantage.
This Report is based on the current situation, past experience and
information available to the Company about its various businesses and assumptions
regarding economic and industrial scenario, Governmental and other regulatory policies.
The Performance of the Company is, to a great extent, dependent on these factors. The
future performance may be materially influenced by the changes in any of these factors,
whichare beyond the control of the Company and may affect the views expressed in or
perceived from this Report. Therefore the investors are requested to make their own
independent judgments by taking into account all relevant factors before any investment
decision.
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