The influence of the economy is overarching in the financial advisory business. GDPgrowth was rather muted at 6.7% in 2017-18 as against a forecast of 7.1%. Oil priceincreased and its effect on fiscal deficit and currency business process adjustment on agargantuan national scale due to the introduction of GST credit stall because of debtrecovery worries inflation worries and interest rate hikes by RBI in its wake did serveas speed breakers. Political fragmentation and a stall in parliamentary processes alsocontributed to the slowdown.
Many of these uncertainties continue. Disturbances in global trade initiated by the USadministration policies and sanctions imposed on Iran have exacerbated localuncertainties. What happens if the Iran oil supply is taken out? What happens to the INRif there is a currency war? Continued depreciation engineered or otherwise of theChinese Yuan and reaction of the US make any take on the global economy dangerous. As ifthis was not enough some respected economists have been talking of a shrinking worldmonetary base (US$) and how it could lead to a global recession in 2019! In the midst ofthis doom and gloom the Indian economy is expected to grow at 7.3% or so. The IMF reporton the Indian economy has rather graphically said that the Indian elephant has begunto run'.
Our Company's mission continues
As Mr. Jayakumar explained last year it is difficult for company managements to makesense of these rapid changes let alone proactively react to them. Your Company has lent ahelping hand to some of those affected with timely advice and creative execution. A lot ofwork that your Company does is non-mandated; it means that many a time we seek out clientslikely to run into road blocks. It is not that we have a solution that is in search of aproblem with a particular sector; the Company's client portfolio is diversified with about50% drawn from service sector 39% from manufacturing and 11% from trading. Think of itthis way whether it is an aspirational situation or one of desperation your Company'steam has some solid service to offer!
New lines of business
During the year under review your Company decided to move into adjacent lines ofbusiness like value-added intermediation services in wealth management for CorporateTreasuries Fund Management companies and Family Offices. Such moves are common; what isslightly different was the path we took. Instead of building capability ground-up wewelcomed a well experienced and networked team into our fold and housed it in PrimeResearch and Advisory Limited a subsidiary. Your Company hit the ground running with aclient base annuity income and a profitable operation. The complementarity is vivid;wealth management is incomplete without
financial advisory and investment banking. Similarly financial advisory clients are anexcellent catchment area for wealth management services. Annuity income from thisbusiness moreover could smoothen current chunky revenue streams from transaction-ledadvisory fees.
With this induction of a new team in a subsidiary your Company's team is more thandoubled. It is expected to more than double over this year and that too in differentgeographies. To meet this challenge your Board redesignated Mr. Jayakumar as MD &Group CEO. All MDs and EDs including of subsidiaries shall report to him. We alsopersuaded Independent Director Mr. Subramaniam Sharma to take over as MD at PrimesecInvestments Limited a subsidiary that shows promise and needed enlightened leadership. Wecontinue to receive his wise counsel as he continues as a Non-
Executive Director on this Board. In Q1 of the current year we also elevated Mr.Vineet Suri a veteran in Corporate Finance to the Board as an Executive Director.
The services that we provide and that includes new ones added require our clients torepose complete confidence and trust in us. The expansion in services and growing numbersin the team means your management needs to reassess the risk management' frameworkon an urgent basis and put changes in place. The board has directed the management tourgently reassess the Risk management structure and processes across the group includingthe subsidiaries. Mr. Subramaniam Sharma is heading this effort and his long experience inShinsei Bank of Japan would serve us well. This hopefully will be done in the comingquarter.
Corporate governance has been centre stage in public discourse.
Whenever a situation has arisen a constant refrain of all is What were theIndependent Directors doing?' In a Company like yours which has no promoter (one amongvery few) the Independent Directors need to shoulder a disproportionate burden to ensureregulatory hygiene. Governance becomes less of providing leadership and oversight and asone of my esteemed colleagues pointed out more of policing. My colleagues and I on theBoard have been having constructive debates on these issues. Irrespective what is said orunsaid in your Company governance ethos is like atmospheric pressure; always 14 pounds toa square inch. I have to thank my colleagues for that.
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