Transcorp International Ltd Management Discussions

(Within the limits set by Companys competitive position)

BUSINESS REVIEW

GENERAL ECONOMY

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025 will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now at 3.1 percent is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually.

The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability. Chapter 2 explains that changes in mortgage and housing markets over the prepandemic decade of low interest rates moderated the near-term impact of policy rate hikes. Chapter 3 focuses on medium-term prospects and shows that the lower predicted growth in output per person stems, notably, from persistent structural frictions preventing capital and labor from moving to productive firms. Chapter 4 further indicates how dimmer prospects for growth in China and other large emerging market economies will weigh on trading partners.

Source: https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/world-economic-outlook-april-2024

INDIAN ECONOMY

Strong economic growth in the first quarter of FY23 helped India overcome the UK to become the fifth-largest economy after it recovered from the COVID-19 pandemic shock. Nominal GDP or GDP at Current Prices in the year 2023-24 is estimated at Rs. 293.90 lakh crores (US$ 3.52 trillion), against the First Revised Estimates (FRE) of GDP for the year 2022-23 of Rs. 269.50 lakh crores (US$ 3.23 trillion). The growth in nominal GDP during 2023-24 is estimated at 9.1% as compared to 14.2% in 2022-23. Strong domestic demand for consumption and investment, along with Governments continued emphasis on capital expenditure are seen as among the key driver of the GDP in the first half of FY24. During the period January-March 2024, Indias exports stood at US$ 119.10 billion, with Engineering Goods (25.01%), Petroleum Products (17.88%) and Organic and Inorganic Chemicals (7.65%) being the top three exported commodity. Rising employment and increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months. Future capital spending of the government in the economy is expected to be supported by factors such as tax buoyancy, the streamlined tax system with low rates, a thorough assessment and rationalisation of the tariff structure, and the digitization of tax filing. In the medium run, increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers. The contact-based services sector has demonstrated promise to boost growth by unleashing the pent-up demand. The sectors success is being captured by a number of HFIs (High-Frequency Indicators) that are performing well, indicating the beginnings of a comeback. India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. Indias appeal as a destination for investments has grown stronger and more sustainable because of the current period of global unpredictability and volatility, and the record amounts of money raised by India-focused funds in 2022 are evidence of investor faith in the "Invest in India" narrative.

RECENT DEVELOPMENTS

India is primarily a domestic demand-driven economy, with consumption and investments contributing to 70% of the economic activity. With an improvement in the economic scenario and the Indian economy recovering from the Covid-19 pandemic shock, several investments and developments have been made across various sectors of the economy. According to World Bank, India must continue to prioritise lowering inequality while also putting growth-oriented policies into place to boost the economy. In view of this, there have been some developments that have taken place in the recent past. Some of them are mentioned below.

According to HSBC Flash India PMI report, business activity surged in April to its highest level in about 14 years as well as sustained robust demand. The composite index reached 62.2, indicating continuous expansion since August 2021, alongside positive job growth and decreased input inflation, affirming Indias status as the fastest-growing major economy.

As of April 12, 2024, Indias foreign exchange reserves stood at US$ 643.162 billion.

In 2023, India saw a total of US$ 49.8 billion in PE-VC investments.

Merchandise exports in March 2024 stood at US$ 41.68 billion, with total merchandise exports of US$ 437.06 billion during the period of April 2023 to March 2024.

India was also named as the 48th most innovative country among the top 50 countries, securing 40th position out of 132 economies in the Global Innovation Index 2023. India rose from 81st position in 2015 to 40th position in 2023. India ranks 3rd position in the global number of scientific publications.

In March 2024, the gross Goods and Services Tax (GST) stood at second highest monthly revenue collection at Rs.1.78 lakh crore (US$ 21.35 billion), of which CGST is Rs. 34,532 crore (US$ 4.14 billion), SGST is Rs. 43,746 crore (US$ 5.25 billion).

Between April 2000 December 2023, cumulative FDI equity inflows to India stood at US$ 971.52 billion.

In February 2024, the overall IIP (Index of Industrial Production) stood at 147.2. The Indices of Industrial Production for the mining, manufacturing and electricity sectors stood at 139.6, 144.5 and 187.1, respectively, in February 2024.

According to data released by the Ministry of Statistics & Programme Implementation

(MoSPI), Indias Consumer Price Index (CPI) based retail inflation reached 5.69% in

December 2023.

Foreign Institutional Investors (FII) inflows between April-July (2023-24) were close to Rs. 80,500 crore (US$ 9.67 billion), while Domestic Institutional Investors (DII) sold Rs. 4,500 crore (US$ 540.56 million) in the same period. As per depository data, Foreign Portfolio Investors (FPIs) invested (US$ 8.06 billion) in India during January-April 2024.

The wheat procurement during RMS 2023-24 (till May) was estimated to be 262 lakh metric tonnes (LMT) and the rice procured in KMS 2023-24 was 385 LMT. The combined stock position of wheat and rice in the Central Pool is over 579 LMT (Wheat 312 LMT and Rice 267 LMT).

Source: https://www.ibef.org/economy/indian-economy-overview

BUSINESS AND INDUSTRY DEVELOPMENTS, OPPORTUNITIES & THREATS

OUTLOOK, OPPORTUNITIES AND THREATS

The principal focus areas of the company are money changing, remittance and pre-paid payment systems.

1. Foreign Exchange Business:

Your Company is designated Authorized Dealer (Category II) from Reserve Bank of India, for money changing which includes buying and selling of Foreign Exchange in retail as well as wholesale to individuals and corporate clients and various permissible Outward Remittance activities such as remittance for overseas education, medical treatment abroad, emigration and emigration consultancy fees and for other permissible purpose.

The Foreign exchange & Outward remittance business has seen unhindered growth for over decades due to increase in travel and business activities across the globe except during the period affected by COVID-19. Your Company has strong view that such incremental growth in the business will continue to surge in coming years. The company continues to steadily grow and be profitable on an ongoing basis. The Company has added many new clients and done several strategic businesses tie ups to increase market share. The Company has expanded its network by adding 2 new branch offices for providing Foreign Exchange services in the fiscal year. The Company registered 3 times growth in the quarter ended March 2024 in comparison to the quarter ended December 2023. Simultaneously the growth in PAT is 42 % in the fiscal year ended 31st March 2024 in comparison to March 2023. The Company registered a phenomenal growth of 26 % in the Travel Forex Cards business and 42 % in the AD 1 referral business.

2. Setting up and operating payment systems:

The companys Payments Division added that the Payments Systems division of the Company which includes the Prepaid Payment Instruments (PPI) license continues to flourish with tremendous growth in transaction volumes and issuance. The company has crossed over 30 lac instruments issued and transaction volumes compared to the last fiscal year have grown over 500%. With a progressive regulatory framework from Reserve Bank of India; which is empowering PPIs with additional authorizations, the Payments Systems division is a sunrise business with immense lucrative opportunities which will also digitally and financially empower the nation. The Company continues to work closely with payment networks, strategic partners the Apex regulator to steadily compound the growth of the business.

Company has become the first non-Bank in India for various activities including:

1. First non-Bank to go live with network cards (Rupay)

2. First non-Bank to get RBI approvals for co-branding

3. First (and currently only) non-Bank live on the VISA network

4. CKYC and Video KYC

5. First issuer to go live with contactless wearables (rings) and biometric cards

6. Preferred partners for Rupay and VISA for co-branding programs and any new product innovation

7. Only non-Bank offering cash withdrawals

Company works selectively with marquee clients to deliver full stack co-branded card programs which bundles licensing & technology- the only non-Bank offering this in India. Company powers co-branded prepaid cards and wallets for leading fintech companies, lenders, aggregators, industry giants and startups using its unique licensing and platform bundle. Companys PPI platform is being used for many kinds of payouts including merchant settlements, commission/incentives, gifts, loans, salaries, expenses/meals. In addition to tax benefits, payouts on these cards give visibility on customer spend patterns and data analytics to optimize marketing. In April 2021, Reserve Bank of India has strategically broadened the scope of services for PPIs - allowing cash withdrawals and other financial products to enabling Transcorp to provide offerings akin to a traditional Bank. These changes include offering and settling NEFT/RTGS transactions and cash withdrawals from ATM. There was also a positive growth of 30 % income in the Financial Inclusion Division (Business Correspondence business of State Bank of India) and the business achieved a milestone of 1200 SBI Customer Service Points (CSP) this financial Year to provide better service to the customers in different geographies of the country. Total business volume of the FID business crossed Rs. 3000 crores which mainly comprised of deposits , withdrawals and money transfer by SBI customers. The Company has also partnered with Bajaj Allianz , IFFCO-Tokio and Care Health Insurance Companies for building the Travel , Health and Motor Insurance business. The Foreign Exchange business, PPI payment system business as well as the Business Correspondence business continue to flourish and generate profits. The Company continues to work towards enhancing the value for all its stakeholders Customers, business partners, employees and shareholders in making Transcorp a brand of first choice for all our customers.

SEGMENT WISE REPORTING

Segment wise revenue, results and capital employed are provided in the notes on account forming part of the Annual Report.

RISK AND CONCERNS

Your company has exposure in foreign exchange and any wide fluctuations in foreign exchange prices have adverse effect on the performance of the company. Further the increase in competition, reduction in profit margins and change in government policies may affect the operation of the company.

Your Company has satisfactory internal control systems, the adequacy of which has been reported by the Auditors in their report as required under Companies (Auditors Report) Order, 2020. The discussion on the financial performance of the company is covered in the Directors Report.

FORWARD- LOOKING STATEMENTS

This report contains forward- looking statements, which may be identified by use of words like ‘plans, ‘expects, ‘will, ‘anticipates, ‘believes, ‘intends, ‘projects, ‘estimates or other words of similar meaning. All statements that address expectations or projections about the future, including but not limited to statements about the Companys strategy for growth, market position, expenditures and financial results, are forward looking statements.

These statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Companys actual results, performance or achievements could thus differ materially from those projected in any such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, on the basis of any subsequent developments, information or events.

CHANGES IN THE KEY FINANCIAL RATIOS

S.no	Particulars	As on 31.03.2024	As on 31.03.2023	Change in %	Explanation for reduction (if significant i.e., more than 25%)
1	Return on net worth (%)	1.08%	0.76%	42.07	Due to growth in revenue and profits
2	Return on Capital Employed (%)	4.55%	5.80%	21.66	Due to increase in borrowings
3	Debt Equity Ratio	32%	12%	168.77	Due to higher Borrowings
4	Current Ratio	74%	74%	-	-
5	Debtors Turnover Ratio	48.48	45.76	5.94	-
6	Inventory Turnover	674.74	934.69	27.81	Due to downfall in revenue
7	Interest Coverage Ratio	205%	127%	-	-
8	Operating Profit Margin (%)	0.14%	0.11%	-	-
9	Net Profit Margin (%)	0.03%	0.01%	92.23	Improvement in net profit margins