MANAGEMENT DISCUSSION AND ANALYSIS REPORT FORWARD LOOKING STATEMENTS Statements in this Management Discussion and Analysis of Financial Conditions and Results of Operations of the Company describing the Company's objectives, expectations or brdictions may be forward looking within the meaning of applicable securities' laws and regulations. Forward-looking 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 realised. The Company assumes no responsibility to publicly amend, modify or revise forward-looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those exbrssed in the statement Important factors that could influence the Company's operations include changes in government/regulatory regulations, tax laws, economic developments within the country and such other factors. (A) INDUSTRY STRUCTURE & DEVELOPMENT The last year has been a fortuitously good one for the Indian economy with a sea change in the macroeconomic parameters and a sustainable turnaround on the cards. At a time when concerns have been raised about global growth prospects, the Indian economy has marched on and has in fact entered a sweet spot. As a start, Gross Domestic Product (GDP) growth, which had plummeted to sub 5% levels in past two fiscal years finally seems to have picked up on the back of a cyclical rebound and some genuine improvement. Growth in the current year, while not spectacular, has moved up firmly into the 5%+ handle. This improvement has come on the back of improved performance in the industrial sector, stable growth in the services sector and a surprisingly resilient agriculture sector. Further, policy action on the environmental clearances and mining licenses has helped prop up sentiment while a push to some stuck projects have aided growth prospects. Encouragingly, the pick-up in growth seems to be taking place at a time when inflation is on the downtrend as effects of the past slowdown and the massive fall in global commodity prices is introduction of an opportunity for revival of the economy. Inflation levels have continued to surprise on the downside and have printed comfortably under the Central Bank's comfort zone. Price levels have seen an across the board moderation as food, fuel and service price inflation has come down. This clearly shows that there is still some slack in the economy as it grows below its potential rate of growth. This moderation in inflation has also had an impact on interest rates as the Reserve Bank of India (RBI) has finally started its rate cutting cycle with its first rate cut in January earlier this year. The RBI had established targets for inflation under its new policy regime and as such those targets have been met comfortably and set the stage for a further easing of policy in the coming months. The RBI continues to remain vigilant on the external front and the possible threat of capital outflows in response to the normalization of monetary policy in the US. The situation is further being buttressed by a perceptible improvement in the external account metrics with the current account deficit coming under control despite the government lifting most of the import restrictions from the last year. Imports have fallen sharply in response to the halving of global crude oil prices and while exports have suffered too, service exports have held up as growth in the US has rebounded in the current year. Foreign fund flows through the portfolio route have picked up massively after the elections responding to an improvement across most macroeconomic parameters. The more important and stable flows through the Foreign Direct Investment (FDI) route have also picked up as the government increased the level of permissible investments into some sectors. The capital markets have continued to scale record levels as euphoria has built up on the possible trajectory of the Indian economy. The markets seem to have priced in a favourable policy environment and a consequent increase in corporate performance in the coming years. Overall there is a real sense that a new set of reforms and the enthusiasm in the markets can lead India towards another prosperous era of high growth. Industry overview India has a diversified financial sector, which is undergoing rapid expansion. The sector comprises commercial banks, insurance companies, non-banking financial companies, cooperatives, pension funds, mutual funds and other smaller financial entities. The financial sector in India is brdominantly a banking sector with commercial banks accounting for more than 60 per cent of the total assets held by the financial system. India's services sector has always served the country's economy well, accounting for about 57 per cent of the gross domestic product (GDP). In this regard, the financial services sector has been an important contributor. The Government of India has introduced reforms to liberalize, regulate and enhance this industry. At brsent, India is undoubtedly one of the world's most vibrant capital markets. Challenges remain, but the future of the sector looks good. The Indian economy is likely to expand by 6.4 per cent in 2015 as compared to 5.5 per cent last year. "Positive expectations regarding the extent of reforms to be proposed and implemented" by the Narendra Modi-government boosted consumer and business confidence in the latter part of 2014, resulting in increased economic growth. Structural reforms and lower oil prices can further boost grown for sustainable development. Economies such as India is expected to make progress in carrying out much-needed structural reforms under their new administrations, which is likely to boost their performance in 2015. It is likely that monetary policy can be eased a little in the near future if the trend of lower inflation stays intact, a move that would further support growth. The projected inflation in India for 2015 to drop to 6.3 per cent from 6.7 per cent last year. the 'Make in India' programme launched by the new Indian government with the goal to make it easier to establish and operate a business in India. The Company has built and managed its business through challenging times and this time too we are firm in our resolve to look ahead and turn challenges into opportunities by devising and implementing coherent strategies in an intelligent manner. (B) OPPORTUNITIES & THREATS As a financial services intermediary, the company's growth and profitability are, to a large part, dependent on the stable growth and functioning of the Capital markets. The growth of financial services sector will allow the Company to grow businesses in each of the verticals. The last year saw India enter a sweet spot as growth rebounded, inflation declined and the external accounts came under control. From then on there has been a lot of positivity built around the India growth story and India seems to be poised to enjoy another spurt in growth. However, to convert this promise into tangible reality we need the government to institute the correct set of reforms all that would set India on the virtuous cycle of growth. The goal for the Company for the year FY 15 will be to improve operating efficiency. (C) SEGMENT-WISE PERFORMANCE The following table sets forth the net revenues, operating expenses and br-tax earnings of various business segments of the Company Debt & Equity Market Operations Our Debt Market operations comprise dealing/trading in securities, bonds, etc. The Indian debt markets as expected is coming out of the situation of lack of activities which has been witnessed since the last couple of years. With interest rates cut and more to happen in future, there is a renewed interest by corporates to plan expansions and capital expenditure in the near future. The banking industry is expected to be refeulled with the recapitalisations exercise to be conducted by the Government. We expect to see new lensings happening for capital expenditure in the some of the important sectors like Defence and renewable energy. Accordingly, debt capital market activity is anticipated to take off in FY 15. Corporate Finance Our Corporate Finance activities include, acting as arranger of debts / bonds, etc., corporate & infrastructure advisory and loan syndication. We also have a Private Equity advisory which provides transaction structuring, strategy formulation, target identification, valuations, negotiations i.e. end-to-end execution. Consequent to SEBI orders which relate to the role of your Company as Merchant Bankers in the IPO's of Bharatiya Global Infomedia Limited & PG Electroplast Limited. SEBI has prohibited your Company from taking new assignment or involvement in any new issue of capital including IPO, follow-on issue etc. from the securities market in any manner whatsoever. Therefore all activities requiring a merchant banking license have been suspended, impacting our performance in related service lines. Corporate Finance performance is expected to improve with improvement in the general economic climate and business confidence. Resumption of merchant banking activities is contingent on the outcome of the ongoing SEBI matters. Broking Broking activities comprises stock broking, broking and commission of/from mutual funds, equity IPOs, capital gain bonds, fixed deposits of government undertakings, RBI taxable bonds, PMS, etc. During Fy-2014-15 the Company had earned income of Rs. 1745.44 Lacs as compared to Rs. 1798.46 Lacs in the brvious. Performance is expected to improve as investor sentiments improve. Equity Broking We offer equity broking services to Retail and Institutional clients in the cash and derivative segments. These clients include mutual funds, banks, financial institutions, insurance companies, and Flls. The equity broking is witnessing a good respite due to positive market conditions. (D) OUTLOOK The Greece crisis was averted after, Greece and European Central Bank (ECB) agreed to a new bailout deal. In another continent an important negotiation ended with positive results, Iran successfully negotiated with the major powers over its nuclear program. This has sent the crude prices under brssure and has been on a declining trend. With China's slow down and no other country taking over its place, there has been a steady fall in commodity prices too. This bodes well for India's long-term growth, as majority of our imports comes from the energy segment. Meanwhile on the local front, Monsoon seems to be at par with long period average (LPA), hence the probability of it being a concern anymore is negligible. Till date the monsoon is near normal. Also the RBI in its recent policy review mentioned that it will support growth and keep an accommodative stance, thereby signaling that interest rates could fall further. On the downside, muted earnings can affect the sentiments of investors, and thereby increase volatility. Another factor that may push towards negative sentiment can be political headwinds, as the Government faces problems in passing key legislative bills — GST, Land Acquisition bill, etc in the parliament. The US Fed rate hike also remains a key event in the international arena that can affect the domestic stock market. Hence it is expected that there could be reasonable volatility in equity markets in the near term even though over the long-term equity remains a suitable investment avenue for investors. (E) RISKS & CONCERNS ? In today's complex business environment, almost every business decision requires executives and managers to balance risk and reward. Effective risk management is therefore critical to an organisation's success. Globalization, with increasing integration of markets, newer and more * complex products & transactions and an increasingly stringent regulatory framework has exposed organisations to newer risks. As a result, today's operating environment demands a rigorous and integrated approach to risk management. Timely and effective risk management is of prime importance * to our continued success. The risk for the Company arises mainly out of the risks associated with the operations we carry. Experienced professionals review and monitor risks in our Company. We have formulated combrhensive risk management policies and processes to mitigate the risks that are encountered in conducting business activities. The management also periodically reviews the policies and procedures and formulates plans for control of identified risks and improvements in the systems. A risk/compliance * update report is regularly placed before the Board of Directors of the Company. The Directors review the risk/ compliance update reports and the course of action taken or to be taken, to mitigate and manage the risks. The internal audit carried out by external firms of auditors also provides a review of the risks attendant in various businesses and the effectiveness of processes on a periodical basis. These reports are placed before the Audit Committees of the Company. We manage the following categories of risks : * * Market Conditions and Market Risk-The domestic and global economic conditions and markets will always be a major factor in the business of financial intermediation and adverse change in conditions invariably leaves a larger than normal impact. However, beyond the universality of this risk, the Company's business is exposed to Market Risk only to the extent of its investments in its proprietary debt portfolio. This * Market Risk is contained to appropriate levels through well defined and Board laid down policies and is monitored on a daily basis. * Financial Risks : • Liquidity Risks - The Company requires funds for its operations, growth and expansion projects. It has sufficient committed lines of credit from various banks in India to fund the operations as well as expansion projects. The Company has a strong continued focus and review mechanism for cash flow management and control on borrowings from the banks. This ensures that while liquidity is maintained for the Company, it does not borrow * above generally accepted financials norms and is * able to meet the obligations to the banks without any default. For organic growth plans, the primary source is internal accruals of cash. • Interest Risk-The Company is exposed to the interest rate risks on its borrowings. It evaluates the various sources of short term funding to have a lower blended rate of interest. Credit Risk - This risk manifests when debtors do not perform their obligations. Both Credit Risk and CounterParty Risk have been elaborately defined in our Company's Investment Policy that governs all investment decisions, and its stipulations are strictly adhered. Operational Risk - The Company's operations under each of its business verticals are the subject of elaborate and well defined Policies so as to cover all internal processes. The Company also has a system of internal audit that encompasses all operational areas. Legal & Regulatory Risk -The Company is in the business of financial intermediation and is committed to adhere to very high compliance standards. This is imperative in any regulated business as the business' continuance is otherwise at risk. Substantial legal liability or a significant regulatory action against the Company could have material adverse financial effects or cause significant reputational harm. Internal Controls Review -The Company has strong internal controls and review mechanism. A detailed audit process and audit plan by external agencies cover the key risks identified through the risk management program, wherein existence and effectiveness of the control measures indicated against the risks are verified. The review of the process and findings is done by the senior management on a monthly basis and is an integral part of the performance management of the organisation. Economic and Political Risks -The Company is fairly exposed to the domestic and global political and economic risks. The risks arising out of any downturn in the economic conditions of the global markets, as felt in the last year, could have an adverse impact on the performance of the company. Performance and growth is also dependent upon the health of the overall Indian economy and political stability. Competition Risks -The Company operates in a highly competitive environment. The demand for the Company's services and solutions depend upon various domestic and global factors and most importantly the customer's plans and ability to incur expenditure/ investment. In the existing market and with existing customers also, new competitors may come in and put brssure on volume and pricing of the Company's services and solutions. To mitigate the above risks, the Company continuously endeavour to maintain a very good relationship with the customers/clients and endeavour to keep introducing enhanced features in services to improve value proposition to its customer / clients. Human Resource Risks -The Company's success depends largely upon the quality and competence of its management team and key personnel. Attracting and retaining talented professionals is, therefore, a key element of the Company's strategy and a significant source of competitive advantage. While the Company has a salary and incentive structure designed to encourage employee retention, a failure to attract and retain talented professionals, or the resignation or loss of key management personnel, may have an adverse impact on the Company's business, its future financial performance and the price of its equity shares. (F) ADEQUACY OF INTERNAL CONTROLS The Company has invested in building a system of internal controls to achieve operational efficiency, optimum resource utilization, effective monitoring, and adherence to strict compliance standards. The Company has in place a well defined organization structure with separate business and support lines. Each line has a separate revenue, cost and contribution budget which is monitored periodically. The budgets are in turn disintegrated over various levels within the business/support verticals to reveal individual performance. There is a well defined delegation of authority and responsibility across the organisation. (G) OPERATIONAL PERFORMANCE Almondz is an integrated financial services group, offering a wide range of services to a significant clientele. The group has interests in investment banking, institutional equity sales, trading, research, and broking, private and corporate wealth management, equity broking, depository services, portfolio management, commodity broking, NBFC (Non-Banking Finance Company) activities, private equity, insurance broking and reinsurance broking. The values of integrity, teamwork, innovation, client focus, performance and partnership shape the corporate vision and drive its purpose. We provide a wide range of advisory services including, financial advisory (investment advisory and equity broking services), depository participant services, and private equity -toa diversified client base of corporates. Our services include origination, brparation of placement materials, structuring the transactions, negotiation on financial and strategic terms. Our research capabilities and in-depth capital market expertise enables us to design and execute customised solutions for our clients. Our institutional equities business offers quality research based broking services to domestic and offshore institutional clients. Our services revolve around three key tenets : * High Quality Research with a focus on new stock ideas and keeping ahead of competition. * Intensive Client Servicing with a view to keep investors abreast of important corporate news and market trends. * Efficient Trade Execution complimented by hassle-free post-trade settlement. We offer research-based investment advisory and equity broking services to corporate, high net-worth individuals and retail investors across a wide range of financial products. We endeavour to be among the most reputed brokerage houses in India, offering combrhensive investment advisory and investment management services to institutions, corporates, and high net-worth individuals. We provide financial planning, research-based investment consulting services and execution capabilities. (H) FINANCIAL PERFORMANCE For the year ended March 31, 2015 your Company earned a total income of Rs. 5365.66 Lacs, as against brvious year's total income of Rs. 4310.94 Lacs. As per the Consolidated Accounts, the total income is Rs. 6709.82 Lacs, as against the brvious year's income of Rs. 9604.29 Lacs. The Company has incurred a profit of Rs. 484.69 Lacs in the current year as compared to a profit of Rs. 583.95 Lacs in the brvious year. As per the Consolidated Accounts, the net profit for the year is Rs. 758.31 Lacs as compared to Rs.537.07 Lacs in 2013-14. (I) HUMAN RESOURCES DEVELOPMENT The nature of your Company's business requires trained and skilled professionals. Your Company has been successful in attracting and retaining qualified professionals, by offering them a challenging work environment, coupled with competitive compensation including stock ownership. Financial services are a knowledge intensive sector where employee skills form a critical component in service delivery. Your Company is involved in developing combrhensive in-house training sessions to make sure that all employees identify with your Company's vision, purpose and imbibe the ethos of the organisation. The Company's team strength sbrad across all business and support lines stood at 206 on 31 March 2015. The Company has a young and vibrant team of qualified professionals. (J) CONSOLIDATED FINANCIAL STATEMENTS Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 ("Act"), the Consolidated Financial Statements of the Company and a separate statement containing the salient features of the Financial Statements of its subsidiaries, associates and joint venture, in the brscribed Form No. AOC-1, is included in the Annual Report. The Financial statements os subsidiaries are kept for inspection by members at the Registered Office of the Company. The Company shall provide free of cost, a copy of the Financial Statements of the subsidiary companies to the Members upon their request. The said Financial Statements are also available on the website of the Company, www.almondzglobal.com (K) CORPORATE SOCIAL RESPONSIBILITY At Almondz, an essential component of our corporate social responsibility is to care for our community and our endeavour is to make a positive contribution towards the lesser privileged communities by enabling them to be self reliant by supporting a wide range of socio-economic, educational and health initiatives. The Company has in place CSR Policy aligned with the provisions of the Companies Act and other applicable provisions. (L) STATUTORY DISCLOSURES The information required under Section 197 read with Rule 5(2) of the Companies Act, 2013 are given in the annexure appended hereto and forms part of this report. The provisions of Section 134 of the Companies Act, 2013 relating to conservation of energy and technology absorption do not apply to your Company. The Company has, however, used information technology extensively in its operations. The report on the Corporate Governance is annexed herewith and forms part of this report. |
