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Aditya Birla Money Ltd.

BSE: 532974 Sector: Financials
NSE: BIRLAMONEY ISIN Code: INE865C01022
BSE 11:04 | 17 May 59.90 0.80
(1.35%)
OPEN

60.30

HIGH

60.40

LOW

58.95

NSE 10:49 | 17 May 59.70 0.40
(0.67%)
OPEN

59.15

HIGH

60.75

LOW

58.70

OPEN 60.30
PREVIOUS CLOSE 59.10
VOLUME 3046
52-Week high 88.50
52-Week low 43.90
P/E 12.91
Mkt Cap.(Rs cr) 338
Buy Price 59.75
Buy Qty 1.00
Sell Price 60.00
Sell Qty 2.00
OPEN 60.30
CLOSE 59.10
VOLUME 3046
52-Week high 88.50
52-Week low 43.90
P/E 12.91
Mkt Cap.(Rs cr) 338
Buy Price 59.75
Buy Qty 1.00
Sell Price 60.00
Sell Qty 2.00

Aditya Birla Money Ltd. (BIRLAMONEY) - Chairman Speech

Company chairman speech

Dear Members

In the financial year 2019-20 (FY20) Indian economy continued its struggle of growth with the first nine months showing very minor improvement over the previous year. The very sluggish growth witnessed in the first nine months of the economy is in some parts the tail impact of the shadow banking fiasco that India has been witnessing for the past few quarters. However the last quarter of the year took a completely global turn once the Covid-19 pandemic outbreak pushed nearly half the world into a war-like lockdown. Yet for the full year the economy is expected to grow at 4.8% as per IMF (International Monetary Fund) estimates as compared to 6.1% in FY19. That will still be one of the slowest in a decade. While the year 2018-19 was marked by a lot of disruptions and dislocations in the financial markets FY20 will certainly be historic for the economic and social devastation caused by Covid-19 pandemic. An initial assessment has led to a co-ordinated response amongst the global large economies on both the monetary and fiscal side. But the complete and true impact can only be assessed over the months to come as the pandemic prevalence mortality and economic loss becomes more tangible and quantifiable.

As far as the Indian economy is concerned the economic indicators painted a muddled picture for the year. Index of Industrial Production came in at three year low of 3.6% (vs 4.8% last year). Inflation (Consumer Price Index) has hovered between 2-3% for most part of the year with pushes and pulls from food fuel and services in different directions. The core inflation though has been sticky and remained around 5% for most of the year. The pick-up in inflation towards the latter half of the year was largely due to stemming of food disinflation and a spike in oil prices due to geo-political sanctions and artificial supply bottlenecks implemented by the Organization of the Petroleum Exporting Countries. Despite inflation data being sticky FY20 was marked as a year of falling interest rate environment as the Reserve Bank of India tried to rejuvenate the economy through interest rate cut. For the whole FY20 RBI made 185 bps repo rate cut including a significant 75 bps rate cut in a preponed Monetary Policy Committee meet during March end. Central Banks across the globe did massive rate cuts in second half of March including US Federal Reserve Bank which has cut rates to zero along with massive quantitative easing to support economy damaged by Covid-19. Given the economic standstill owing to lockdown one can expect more rate cuts from the RBI's end in upcoming months.

As far as external sector of the economy is concerned India's trade deficit narrowed from $184 billion in FY19 to $153 billion in FY20. Imports declined by 9.1% YoY to $467 billion in FY20 while exports were down by 4.8% YoY to $314 billion. With oil prices being on lower side gold being costly and slowdown in economy; imports to remain on lower side which is expected to push trade deficit further south in upcoming months. Owing to lower trade deficit Rupee has been broadly stable during the year vs performance of other currencies against US$. Relatively stable rupee is a signal that underlying economy is healthy and its fundamentals are improving despite slowing growth. There is also a case building up for a market share shift from China as a manufacturing hub to other Asian countries including India. However this is likely to play out more in medium to long term.

On the fiscal side target of 3.8% was breached convincingly as FY20 ended with deficit at 4.4% of Gross Domestic Product mainly owing to poor tax collection. The slippage adds to the challenges faced by the economy that is ground to a halt due to a nationwide lockdown to check the spread of Covid-19. Tax collections are likely to remain under pressure as the shutdown decimated consumption. Also welfare and stimulus packages lead to rise in fiscal deficit for FY21. Government is likely to increase its borrowing program to tackle the Covid-19 outbreak with fiscal deficit target to be keenly eyed.

Globally majority of countries have announced massive stimulus packages and are expanding their balance sheet exponentially to support the economic downfall owing to Covid-19. Global market uncertainty is huge owing to i) Covid-19 ii) Oil price war and iii) rising tension between the world's two major economies US and China. Although India remains relatively less impacted owing to these factors the absolute cost is significantly high in near term. However it also provides an opportunity for India in medium to long term to steadily grab market share from China for sustainable growth.

While the macros remained relatively stable in the last fiscal FY20 saw worsening of macros somewhat specially on the growth and fiscal front. However micros worsened compared to FY19 with sectors like autos consumer discretionary and capital goods seeing continued slowdown. Basic industrial sector like cement also saw a de-growth for the full year. However steel saw a decent growth but was largely driven by the sharp Q1FY20 growth seen in the sector due to supply side constraints. However with the Covid-19 outbreak most economic indicators are likely to be sluggish for a few months and will likely recover only gradually. While the shock value of the event seems to have played out till the time that a medical solution (either therapeutic or preventive) is not found economic activity will take its own time to return to normal and like other viruses it might stay with the world for a very long time before the world develops some kind of herd immunity against it.

As far as investment flows are concerned Foreign Institutional Investors turned net seller for the year for equity (-$2 billion) largely in the fourth quarter as there was a global risk-off in the face of Covid-19 outbreak. However debt market saw even bigger outflows (~$7 billion). The Domestic Institutional Investors however pumped in a sizeable commitment upwards of Rs.128000 crore.

While FY20 did see capital outflows FY21 onwards could look a very different picture as global central banks have opened the liquidity tap with full gusto and the easy money regime might be here to stay for a very long time. Also the fiscal push globally will see global spends rising and money chasing EMs.

As far as your Company is concerned its continued focus on cost reduction and productivity enhancement initiatives supported by market buoyancy has resulted into considerable gains both in revenues as well as profitability. Also we enhanced our product offerings and reached out to specific profitable segments successfully.

Your Company reported a net profit of Rs.11.98 Crore in the financial year 2019-20 as compared to Rs.9.99 Crore in previous financial year. Revenue from operations of the Company for the financial year 2019-20 was Rs.166.66 Crore.

While the past two years have been quite difficult for the economy in particular and concomitantly the Indian equity markets the situation now has a global context with the Covid-19 pandemic outbreak gripping the whole world. Nevertheless given the underlying potential of Indian markets in the long run a narrative to diversify supply chains away from single source like China India's relatively better demographics providing relative protection against Covid-19 and the cyclical low which the Indian economy is currently witnessing we believe that once this pandemic storm eases India could actually lead the global recovery as it is likely to be less impacted and also benefit from a business shift away from China. Also from an equity market perspective cheap money sloshing around globally will chase growth and yields and India will likely be a beneficiary on both counts and attract sizeable foreign money. Besides your Company will continue to work towards creating enduring value for its stakeholders and customers by converting challenges into opportunities.

Yours Sincerely
Gopi Krishna Tulsian
Chairman

   

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