MANAGEMENT DISCUSSION AND ANALYSIS REPORT Overview The year 2014 has come out to be a challenging year in terms of growth and investment sentiments. During the year, while growth momentum was moderate in Advanced Economies, Developing & Emerging Economies experienced the slowdown. Lower oil prices and geo-political brssure in some countries held back the global growth. In 2014, growth picked up only marginally to 2.6 percent, from 2.5 percent in 2013. While activity in the United States and the United Kingdom has gathered momentum, the recovery has been sputtering in the Euro Area and Japan as legacies of the financial crisis lingered, intertwined with structural bottlenecks. China, meanwhile, is undergoing a carefully managed slowdown. Overall, global growth is expected to rise moderately to 3.5 percent in 2015, and average about 3.3 percent through 2017. High-income countries are likely to see growth of 2.2 percent in 2015-17, up from 1.8 percent in 2014 The Reserve Bank of India (RBI) in its first bi-monthly review for the FY 2015-16 kept interest rates on hold at 7.50 percent and announced that it will maintain accommodative monetary policy stance, but monetary policy actions will be conditioned by incoming data. The further rate cuts will be based on (i) transmission of the front-loaded rate reductions in January and February into banks' lending rates (ii) developments in sectoral prices, especially those of food (iii) continuation/ acceleration of policy efforts to contain supply constraints in key inputs such as power and land. Indian Capital Markets: Amidst challenges of slow economic growth and sluggish business sentiments Indian economy showed the path of recovery. IMF has projected a brighter outlook for India's growth; it is expected to grow at 7.4% in the year 2015 and the next, surpassing China's estimated growth at 6.8% and 6.3% for 2015 and 2016 respectively. The positive growth outlook is based on lower oil prices, recent policy initiatives and pick up in investments. With the new GDP formula and base year in place, Indian economy growth was registered at 6.9% for the year 2013-14, which was 4.7% earlier at base year 2004-05. The macroeconomic environment is expected to improve in 2015-16, with fiscal policy gearing to an investment-led growth strategy and monetary policy using available room for accommodation. Opportunities, Threats, Risks and Concerns: The low economic growth coupled with volatile interest rates and high rate of NPAs led to a challenging year for banking sector. A clear demographic shift in favour of a younger population aspiring for a better lifestyle should continue to drive strong demand for all retail finance products for the foreseeable future. Non-banking finance companies (NBFCs) continued to play a critical role in making financial services accessible to a wider set of India's population. Given their unique business models and, for many, their focus on operational excellence, NBFCs should continue to strengthen their position in the financial services space in India. In this era of globalization, all the developing economies are coupled with international markets and their capital markets remain susceptible to events emanating from those countries. The Company's performance is closely linked to the Indian capital markets and the risks associated with the market operations. The value of the investments may be affected by factors which will have a bearing on the functioning of capital markets like price and volume volatility, interest rates, foreign investments and other parameters. With various factors posing threats and high volatility of the capital markets, the management feels that till there is stability and the overall improvement in the economy, investments should be done in safe avenues like Fixed Deposits with scheduled banks and in shares of growth oriented companies having a good track record. Considering the strong fundamentals of the Indian Economy, the capital markets are expected to revive in due course. Internal Control System: The Company has maintained an adequate system of Internal Controls. The assets are safeguarded and protected against loss from unauthorized use and disposition. The transactions are authorized, recorded and reported diligently. The internal control is supplemented by an effective internal audit carried out by an external firm of Chartered Accountants. The management regularly reviews the findings of these internal auditors and takes appropriate steps to implement the suggestions and observations made by them. Outlook: In the coming financial year, we believe that India's GDP will grow with around 5.8%-6%. The inflation is coming down and we expect Reserve Bank of India to decrease the policy rates by end of first half of F.Y.2015. The manufacturing sector will pick up once the borrowing rates are down and will impact the GDP growth rate with multiplier effect. The service sector should be stable with the IT sector and financial sector leading the charge. The fiscal deficit and current account deficit will come down as gold imports have been falling, oil prices are stable and government relaxing investment conditions for FDI. Government is expected to announce reform measures in oil and gas sector that will hugely help Indian companies to augment the oil/gas production domestically and hence reducing the import bill. With very low EPS growth in developed countries, FIIs are expected to continue investing in Indian equity markets for better returns. Business Operations 1.Stressed Asset Management Stressed Asset Management business is one of the key focus areas of the Company and INL being an NBFC has a br-eminent position among the few players brsent in this industry. INL purchases stressed assets and portfolios from banks and financial intermediaries and assist in resolution of such no performing loans. INL has made significant investments in buying stressed asset portfolios, the economic benefits of which will accrue over the next few years. Investment activity is the major segment in which your Company operates. The company invests in quoted as well as unquoted equity shares and in units of Mutual Funds. This segment has been influenced by the overall economic, regulatory and other global as well as domestic factors. As such we expect long term benefits from the investment in the stressed assets. 2.Area of operation of Subsidiary Companies a. IndiaNivesh Securities Private Limited (INSPL) In the era of diversified field of activities and more importantly Capital Market grabbing the attention of most of the people INSPL provides the most needed diversified area of operation. Of the 1.3 billion population and 250 million households in India, only about 40 million Indians invest in shares and mutual funds. In terms of retail household assets, only 1.6% is invested in equity related instruments, indicating a huge growth potential. INSPL is attractively positioned to capitalise on this inflection opportunity. The striking feature of INSPL is that: •INSPL is registered as a Stock Broker with SEBI and has memberships of Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) for both Cash and Derivatives segments and also for Currency Futures Segment. •INSPL is a registered Depository Participant with CDSL and NSDL. •INSPL is also into Paper Distribution - Primary Market and New Fund Offerings (NFO). •INSPL is also registered with AMFI for Mutual Fund distribution. •Private Placement of Equity and Debts. b.Siddhi Multi-Trade Private Limited (SMTPL) As real estate construction and values have expanded in India underpinned by healthy economic growth coupled with a series of IPOs from eminent real estate players which has substantially changed the whole view about the real estate sector, SMTPL provides the back up support to INL in the areas of acquisition of stressed assets and for the acquisition of movable and immovable properties. Furthermore, with a growth in global property market, the level of competition in the Indian property business is rising, while the need for property firms to strengthen their operational infrastructures, personnel and finances to better compete is also becoming more acute. SMTPL can efficiently provide the support to the Company in these areas of operation c.IndiaNivesh Investment Advisors Private Limited (INIAPL) The Company is engaged in the business of rendering consultancy services and portfolio management services for clients and to act as counsel to funds operating as a Sponsor to the scheme of Venture Capital Fund - IndiaNivesh Growth and Special Situations Fund. d.IndiaNivesh Commodities Private Limited (INCPL) IndiaNivesh Commodities Private Limited was incorporated on May 1, 2000. INCPL is a trading cum clearing member of Multi-Commodities Exchange and National Commodities & Derivatives Exchange of India. INCPL has been providing commodities trading facilities to both corporate and retail clients since 2005. e.IndiaNivesh Capitals Limited IndiaNivesh Capitals Limited (ICL) was incorporated on February 24, 1983. ICL has been registered with the Reserve Bank of India (RBI) as a Non-Banking Finance Company (NBFC) under registration no. 05.0140 dated March 20, 1998. ICL's main business activities include Investment and Trading in Shares and Securities etc. ICL has been qualified as Qualified Institutional Buyer (QIB) as per notification dated March 31, 2008 issued by Securities and Exchange Board of India (SEBI) under clause (u) of sub section (1) of Section 2 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. In the light of the opportunities available in distress assets ICL has expanded its scope of business activity into stressed assets management. ICL acquires debts / assets of distressed companies. Opportunities, Threats, Risks and Concerns Due to constant change in market dynamics, your Company has endeavored to tread cautiously and re-align the portfolio. With the mix of old and new economy, your Company aspires to achieve better growth in the ensuing year. Financial Performance The total Income for the year under review is Rs.3,45,75,048/- as compared to Rs.1,82,87,350/- in the brvious year. After providing for debrciation and amortization expenses of Rs.3,09,036/- (Previous Year Rs.1,81,081/-) the Company has incurred a Net Profit of Rs.1,61,53,236/- (Previous Year Net Profit of Rs.65,59,373/-). Internal Control System The internal controls are structured at three different levels. The first level being - the 'Internal Audit Department' which exercises internal control over each type of Expenditure. The second level employs the services of an 'External Auditors' Firm, to audit the processes and activities of key functions in the organization such as the materials, personnel functions. The 'Statutory Auditors' operate at the apex, third level. In the opinion of the Board of Directors, these systems are adequate considering the size and nature of the Company's business. The management regularly reviews the findings of these internal auditors and takes appropriate steps to implement the suggestions and observations made by them. Human Resources As on March 31, 2015, the Company had 2 employees on its rolls. There have been very cordial relations between the employees and the management. Research Base: Develop highly informative research reports on equity and commodity market for its clients. Stressed Asset Portfolio: To enhance its Stressed Assets Portfolio by buying value assets from banks and financial institutions. Branch Network: Expand brsence of the Company by opening of branches at various destinations across the country including Tier II cities. DISCLAIMER: The information and opinion exbrssed in this section of the Annual Report may contain certain statements, which the management believes are true to the best of its knowledge at the time of its brparation. The Company and the Management shall not be held liable for any loss, which may arise as a result of any action taken on the basis of the information contained herein. On Behalf of the Board of Directors Sd/-Rajesh Nuwal Managing Director (DIN:00009660) Place: Mumbai Date: May 30, 2015 |