Disruptions can be overwhelming. Those unprepared during such timesoften have to bear the brunt. The COVID-19 pandemic has been a classic example of this.Its initial outbreak the subsequent spread globally and worldwide lockdown to reduce itshealth impact have had significant impact on business and economies.
These tough times have tested the resilience and adaptability ofcompanies. The way Geojit has responded to this by enabling employees to work from homeand ensuring terminals at the residence of dealers to enable business continuity anduninterrupted trading is an instance of this. It is noteworthy that with our technologyplatform and customer-centric approach we remained constantly in touch with customers tooffer valuable assistance.
That said we will have to be vigilant and agile to better understandand respond to the evolving dynamics as we come out of it.
FY 2019-20 has been an eventful year. Worldwide we saw issues ofelevated trade barriers and low manufacturing activity. In India the economic activityremained subdued led by NBFC crisis in the wake of which the financial services sectorreduced lending. Lower infrastructure activity due to fiscal
constraints and weak consumer sentiments dampened the overall capitalmarket sentiments.
Though there was a brief period of recovery due to improving globalscenario and various initiatives by the Government of India including reforming FDI lawsrecapitalizing public sector banks and reducing corporate tax rate. However the eventualsluggishness in macroeconomy and the fallout of COVID-19 pandemic led to all major indices
shedding off the gains made through the year. NIFTY and SENSEX recordedtheir biggest quarterly fall with major sell-offs by foreign portfolio investors whopulled out a record Rs. 1.2 trillion from Indian debt and equity markets in March 2020.This resulted in the worst yearly performance by indices since 2009. Mutual Funds (MFs)also came under pressure. The Asset Under Management (AUM) of MFs declined by 6% to Rs.22.26 trillion as on 31st March 2020. If we compare it with February 2020 whenthe AUM peaked the decline was sharper at 18%.
While the market's reaction reflected the initial anxiety of investorsto safeguard capital things have eventually settled. Especially during the lockdownperiod when retail investors saw an opportunity to enter the market leading to a surge intrading activity. That said restriction in movement and social distancing norms will hitthe financial products distribution business which to a great extent depends on face-to-face interactions with investors. Though we will continue to be focused on growing the MFand insurance distribution business to enhance stability of our revenues and protect frommarket volatility shocks. Both these businesses are highly underpenetrated in India andoffer significant scope for growth.
In MF the regulator's (SEBI) move to reduce distributor commission andbring down the cost will play a catalyzing role in driving volumes. However it will taketime until the markets become favorable.
While this move has brought down our yields we believe these aresustainable levels for growth of the industry. Besides the expected rise in volumes willto some extent offset the decline in yields. In insurance too we see good opportunity.People are increasingly understanding its importance in overall financial portfolio mix toprotect self and
family and the recent overwhelming healthcare impact of COVID-19 hasmade it more evident. We are strengthening our technology platform to reach out toinvestors who are now more dependent on online services.
Amidst the challenging scenario our total income declined by 1% to Rs.30534 lakhs in FY 2019-20. The revenue from the primary equity business declined 2% toRs. 23631 lakhs however proactive efforts to diversify and de-risk business by buildinga stable revenue source in the form of financial products provided support. Revenues fromthis business grew by 21% to Rs. 5000 lakhs with incremental contribution from insurancedistribution. Its share in overall financial products distribution rose from about 8% inFY 2018-19 to 25% in FY 2019-20.
The sharp correction in markets led to our SIP Asset Under Managementdeclining from Rs. 2092 crore as on 31st March 2019 to Rs. 1798 crore as on31st March 2020 resulting in a 5 basis points decline in SIP Book market shareto 1.85%. The total Mutual Fund AUM (excluding JV) declined from Rs. 4400 crore as on 31stMarch 2019 to Rs. 3750 crore as on 31st March 2020.
Despite this we registered a 13% growth in Profit before ExceptionalItems and Tax to Rs. 7411 lakhs in FY 2019-20 led by our efforts to reduce costs byrationalising branch network and staff strength. Total Comprehensive Income grew by arobust 81% to Rs. 5056 lakhs.
Message for the Shareholders
Your Company is now operating at times where it is facing the challengeof increasing competition from the discount brokers and declining yields in the MutualFunds distribution.
As far as competition in broking is concerned we feel that there ismarket for both discount and full- service brokers like us to operate sustainably. Havingsaid that we are focused on launching more products enhancing service standards andincreasing products features to strengthen our competitive edge.
In the Mutual Funds we believe that the decline in yield will becompensated by the growth in the volumes.
I think in these times the robustness and uniqueness of our businessmodel will also be important. We are not just execution service providers; we are helpingclient to create wealth. This is the way we position ourselves in relationship withclients. And this strong relationship is established through multiple years of advisoryand human interface. So while our yields are under pressure these relationships arehelping us to increase revenue through crossselling financial products to our clients aswell as their family.
So this is how Geojit is placed and we are confident of a better andmore sustainable future. I thank all our stakeholders for their constant support. YourCompany is constantly undertaking efforts to create more value.