Twenty First Century Management Services Ltd Management Discussions

Indian Economic Outlook for FY 2023-24

It now appears very likely that the Indian economy will achieve a growth rate at or above 7% for FY24, and some predict it will achieve another year of 7% real growth in FY25 as well. If the prognosis for FY25 turns out to be right, that will mark the fourth year post-pandemic that the Indian economy will have grown at or over 7 per cent. That would be an impressive achievement, testifying to the resilience and potential of the Indian economy. It augurs well for the future. Some economists1 argue, with considerable merit, that not all growth is equal. They are right. It is one thing for India to grow at 8-9 per cent when the world economy is growing at 4 per cent, but it is another thing to grow at or above 7 per cent when the world economy is struggling to grow at 2 per cent. One unit of growth in the latter circumstance is qualitatively superior to the former. The marginal utility of growth in the second scenario is much higher. The global economy is struggling to maintain its recovery post-Covid because successive shocks have buffeted it. Some of them, such as supply chain disruptions, have returned in 2024. If they persist, they will impact trade flows, transportation costs, economic output and inflation worldwide. India will not be exempt from it, but having faced and seen off COVID and the energy and commodity price shocks of 2022, India is quietly confident of weathering the emerging disturbances. At least three trends will be with us in the coming years. The era of hyper-globalisation in global manufacturing is over. It does not mean that de-globalisation will be upon us any time soon, as countries are only now discovering the enormous integration of global supply chains that have taken place in the last few decades. So, an alternative to the globalisation of supply chains will take much longer to emerge if it ever does. However, that will not deter governments from pursuing on-shoring and friend-shoring of production with a consequent impact on transportation, logistics costs, and, hence, the final prices of products. Recent events in the Red Sea may have brought back concerns over reliance on global supply chains, further.

The Indian Economy: A Review aggravating the slower growth in global trade in 2023. In other words, exporting ones way to growth will not be easy. This reinforces the need to lower logistics costs and invest in product quality to hold on to and expand market share in areas where India has an advantage. Closely related to this challenge is the advent of Artificial Intelligence with the profound and troubling questions it poses for growth in services trade and employment since technology might remove the advantage of cost competitiveness that countries exporting digital services enjoy.

The financial sector is healthy. Its balance sheet is stronger. It is willing to lend and is lending. Non-food credit growth, excluding personal loans, is growing at double-digit rates. The pursuit of inclusive development finds Indian households in good financial health. Fiftyone crore bank accounts under Jan Dhan Yojana now have total deposits of over 2.1 lakh crore. Over 55 per cent of them are women. In Dec. 2019, household financial assets were 86.2 per cent of GDP; liabilities were 33.4 per cent of GDP. In March 2023, these numbers were 103.1 per cent and 37.6 per cent, respectively. So, Net Financial Assets of households were 52.8 per cent of GDP in Dec. 2019, and by March 2023, it had improved to 65.5 per cent of GDP. The economy has created jobs; the unemployment rate has declined considerably from the peaks during Covid times. The labour force participation rate has increased, especially that of women. Net new subscribers to the Employee Provident Fund (EPF) have steadily risen post Covid, especially among the younger population. Women are also enrolling more than ever in tertiary education.

In 2014, the economy was beset with high fiscal and current account deficits and double-digit inflation. Now, inflation is under control, the fiscal deficit is trending lower, the current account deficit is just above one per cent of GDP, and foreign exchange reserves cover nearly eleven months of imports. It has been a journey from fragility to stability and strength. Two things must be singled out here. The governments COVID management and the vaccination record have been instrumental in the quick recovery staged by the economy. Similarly, the deft management of the crude oil supply at reasonable prices in the last two years is noteworthy. Humans are not capable of appreciating the unseen - the mistakes not made and the risks avoided - but the counterfactuals are all around us. They cannot be missed. As the government resolves longstanding problems such as deficient infrastructure and financial exclusion, aspirations rise, and expectations shift higher. That is actually a tribute to the policies and performance of the government. Today, many young Indians not only aspire to a better life but are also confident that it will happen in their lifetime. They feel that they have a better life than their previous generations and that succeeding generations will do better than them. Nations and people have to believe in themselves for important changes to happen. Now, India does, and Indians do.

Indian Equity Market:

In 2023-24, the Indian equity market remained ebullient on strong macroeconomic fundamentals and robust corporate profitability. The BSE Sensex touched a new high, gaining 24.9 per cent to close at 73,651 at end March 2024, outperforming most global peers. The exuberance of the secondary market translated into increased resource mobilisation in the primary market as well, with initial public offer (IPO) issuances maintaining a steady pace and resource mobilisation through preferential allotments and qualified institutional placements (QIPs) also growing at a fast clip. The markets began

Q1:2023-24 on a positive note buoyed by solid corporate earnings for Q4:2022-23, upbeat domestic manufacturing performance, robust goods and services tax (GST) collections and soft inflation print for May 2023.

In Q2, the markets continued the upward trajectory on positive domestic corporate results for Q1:2023-24 and favourable macroeconomic data, notwithstanding some drag from the sharp correction in Chinas equities and rising concerns of a prolonged period of high global interest rates.

In Q3, the markets initially registered losses in October 2023 due to FPI outflows and Middle East hostilities. Subsequently, domestic equity indices rebounded sharply propelled by positive global cues from softer-than-anticipated inflation prints in the US and favourable domestic corporate earnings for Q2:2023-24.

In Q4:2023- 24, markets registered a marginal increase. The BSE Sensex crossed the 74,000 mark - a fresh peak - in March 2024 following strong GDP growth data for Q3:2023-24. The broader market indices outperformed the benchmark indices, with BSE MidCap and SmallCap indices increasing by 63.4 per cent and 60.1 per cent, respectively, during 2023- 24 on increased risk appetite (Chart II.5.7a). FPIs made net purchases of 2.1 lakh crore in the domestic equity market during 2023-24 as against net sales of 0.4 lakh crore in the previous Chart II.5.5: Turnover and AAA-rated 3-Year Yield Spread in Corporate Bond Market Source: SEBI and FIMMDA.

In this financial year Mutual funds made net purchases of 2.0 lakh crore in 2023-24. Primary Market Resource Mobilisation. In the primary segment of the equity market, resource mobilisation through preferential allotments and QIPs increased to 1.1 lakh crore during 2023-24 from 0.9 lakh crore during the previous year. Resource mobilisation through IPOs, follow-on public offers (FPOs) and rights issues increased to 0.8 lakh crore from 0.7 lakh crore. The small and medium enterprises (SMEs) segment exhibited exuberance, with 197 SME IPO/ FPO issues garnering 6,122 crore in 2023-24, as compared with 125 SME IPO/FPO issues mobilising 2,333 crore a year ago. Net resources mobilised by mutual funds increased by more than four times to 3.5 lakh crore during 2023-24 from 0.8 lakh crore during 2022-23. Net mobilisation by open-ended equity oriented mutual fund schemes rose to 1.8 lakh crore from 1.5 lakh crore. Average monthly contributions to mutual funds through the systematic investment plan (SIP) route increased to 16,602 crore in 2023-24 from 12,998 crore in the previous year. Assets under management (AUM) of open- ended equityoriented mutual funds rose by around 55 per cent to 23.5 lakh crore at end-March 2024. Net redemptions in open-ended debt-oriented schemes fell to 0.2 lakh crore during 2023-24 from 1.8 lakh crore in the previous year. 6. Foreign Exchange Market II.5.20 The Indian rupee (INR) exhibited resilience during 2023-24 on improving domestic macroeconomic fundamentals, narrowing current account deficit (CAD) and higher capital inflows. In Q1, the fall in crude oil prices and large FPI inflows imparted an appreciation bias to the INR while it faced downward pressures from a stronger US dollar and the impasse around the US debt ceiling issue. On net, the INR appreciated by 0.2 per cent in Q1 to 82.04 per US dollar by end June 2023. In Q2:2023-24, the INR came under pressure, tracking sharp gains in the US dollar and crude oil prices. The US dollar index (DXY) gained 3.2 per cent during the quarter, its best since September 2022, on expectations of further monetary tightening by the US Fed and its higher for longer interest rate stance. FPI outflows in September 2023 added to pressure on the INR while

Opportunities and Threats

Opportunities

• Long-term economic outlook positive, will lead to opportunity for Investment activities

• Regulatory reforms would aid greater participation by all class of investors

• Corporates looking at consolidation / acquisitions / restructuring opens out opportunities for good investment

Threats

• Execution risk

• Short term economic slowdown impacting investor sentiments and business activities

• Slowdown in global liquidity flows

• Increased intensity of competition from local and global players

• Market trends making other assets relatively attractive as investment avenues Strengths

• Experienced top management

With over three decades of experience of the Chairman of the company in Capital Market Operations and good business acumen of picking up the right stocks for investment and trading the business of the company could improve during the current financial year 2023-24.

The top management team comprises qualified and experienced professionals, with a successful track record. The company believes that its managements entrepreneurial spirit, strong technical expertise, leadership skills, insight into the market and customer needs provide it with a competitive strength, which will help to implement its business strategies.

BUSINESS RISK MANAGEMENT

The company is functioning under the dynamic leadership and guidance of the experienced CEO and hence the risks connected with the investments in equity market will be balanced. Further the Investment Committee will also assist to manage the risk in a prudent manner.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate system of internal control to safeguard and protect from loss, unauthorized use or disposition of its assets.

All the transactions are properly authorized, recorded and reported to the Management. The Company is following all the applicable Accounting Standards for properly maintaining the books of accounts and reporting financial statements.

All the investments related activities are done under the direct supervision of the Chairman of our company. Based on the nature of the business the Audit Committee has suggested formation of Investment Committee and the investments of the company are done as per the decisions taken by the Investment Committee. This will augur well for this financial year also.

Considering the size and nature of business the company has appointed an Internal Auditor for the company from the financial year 2016-17 to ensure proper and adequate systems and procedures commensurate with its size and nature of its business. Internal Auditors continue to monitor the operations and administration of the company.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

In order to ensure that the activities of the Company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism, honesty, integrity and ethical behaviour, the company continues to pursue a vigil mechanism policy framed during the financial year 2016-17.

REMUNERATION POLICY

The Board has, on the recommendation of the Nomination & Remuneration committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report.

DIRECTORS AND COMMITTEE MEETINGS

During the year Five (5) Board Meetings, Four (4) Audit Committee Meetings, Four (4) Stakeholders Relationship and Investor Grievances Committee Meetings, One Meeting of Corporate Social Relationship Committee, Two (2) Meetings of Nomination and Remuneration Committee, One Meeting of Directors other than Independent Directors for evaluation of performance of Independent Directors and One Meeting of Independent Directors for evaluation of performance of other Directors were held. The Details of which are given in Corporate Governance Report. The provisions of Companies Act, 2013 and listing agreement were adhered to while considering the time gap between two meetings.

AUDIT COMMITTEE

The company is having an audit committee comprising of the following directors:

Shri B.K.Rai - Chairman of the Committee - Non Executive & Independent Director Ms. Dipti Dinesh Sakpal - Member - Non Executive & Independent Director Mrs. Raghavan Suguna - Member - Non Executive & Independent Director

Stakeholders/Investors Grievance and Share Transfer Committee

The company is having a Stakeholders/Investors Grievance and Share Transfer Committee comprising of the following directors:

Ms. Dipti Dinesh Sakpal -Chairperson of the Committee - Non Executive & Independent Director Shri B.K.Rai - Member - Non Executive & Independent Director Mrs. Raghavan Suguna - Member - Non Executive & Independent Director NOMINATION AND REMUNERATION COMMITTEE

The company is having a Nomination and Remuneration Committee comprising of the following directors:

Ms. Dipti Dinesh Sakpal - Chairperson of the Committee - Non Executive & Independent Director Shri B.K.Rai - Member - Non Executive & Independent Director Mrs. Raghavan Suguna - Member - Non Executive & Independent Director CORPORATE SOCIAL RESPONSIBILITY (CSR) COMMITTEE

The company is having a Corporate Social Responsibility Committee comprising of the following directors:

Shri Sundar Iyer- Chairman of the Committee - Executive Director

Shri B.K.Rai - Member - Non Executive & Independent Director

Ms. Dipti Dinesh Sakpal - Member - Non Executive & Independent Director

RELATED PARTY TRANSACTIONS

As per the requirements of the Companies Act, 2013 and SEBI (LODR) Regulation 2015, your Company has formulated a Policy on Related Party Transactions which is also available on Companys website at www.tcms.bz .

The Policy intends to ensure that proper reporting; approval and disclosure processes are in place for all transactions between the Company and Related Parties. This Policy specifically deals with the review and approval of Material Related Party Transactions keeping in mind the potential or actual conflicts of interest that may arise because of entering into these transactions.

All Related Party Transactions are placed before the Audit Committee as well as Board for review and approval. Prior omnibus approval is obtained for Related Party Transactions on a quarterly basis for transactions which are of repetitive nature and/ or entered in the Ordinary Course of Business and are at Arms Length.

There were no contract / arrangement / transactions entered in to during the year ended March 31, 2023 which were not at arms length basis.

All the material related party transitions exceeding ten percent of the annual consolidated turnover as per the last audited financial statement were entered during the year by the company are disclosed in accordance with section 134 (3) (h) of the Companies Act, 2013, in form AOC 2 as per Annexure “2” of this report.

CORPORATE GOVERNANCE

As per the provisions of the Listing Agreement with the Stock Exchanges, a separate section on corporate governance practices followed by the Company, together with a certificate from the Companys Secretarial Auditor (which is given below) confirming compliance forms an integral part of this Report.