IT IS THAT TIME OF THE YEAR WHEN ONE SITS DOWN TO WRITE HOW PRIME FARED IN THE LAST ACCOUNTING YEAR.
IT IS HOWEVER DIFFICULT TO FREEZE THE FRAME FOR A CERTAIN TWELVE MONTHS BETWEEN APRIL 2018 AND MARCH 2019 WHEN THE WHOLE BUSINESS WORLD AROUND WAS AND STILL IS IN TUMULT.
IN MACRO-ECONOMIC TERMS THE COUNTRY ACHIEVED GDP GROWTH OF 7% +/-; ACTUAL FIGURE DEPENDS ON WHO YOUR FAVOURITE ECONOMIST IS AND HIS/ HER ESTIMATE.
THE HEALTH OF VARIOUS BUSINESS SEGMENTS AND COMPANIES THEREIN WAS FAIRLY UNEVEN. AND THUS DEMANDS MADE ON A FINANCIAL SERVICES COMPANIES LIKE PRIME CONTINUED TO BE VARIED.
Be that as it may your Company turned in a fairly fine performance despite the uncertainty. If you recall I had said in my last annual letter that your Company is offering tailored services and 'whether it's an aspirational situation or one of desperation your Company's team has some solid service to offer'!
This versatility has stood the Company in good stead. Income from operations on a consolidated basis nearly doubled to H45.86 crore. The consolidated EBITDA increased by about 47% and PBT by 26%.
Since opportunities were not evenly distributed the performance of companies in the group was rather uneven. Primesec Investments Ltd (Primesec) accounted for nearly half the consolidated income and contributed to 77% of the total EBITDA and nearly 4/5th of before-tax profits. Primesec offers restructuring services and that should tell you that it helped many in dire distress.
I hope that in the current year we get to balance our services portfolio a little more; a beginning has been made. If some of you have noticed Prime Securities Ltd (Prime) has been a frontline participant (one of the four) in the hugely successful H2000 crore QIP by Yes Bank just a few days ago.
Knowledge & Networks
Your management believes that its assiduous cultivation of networks and intellectual property has pulled the performance wagon. With each engagement the network will continue to grow exponentially. I believe the clients we helped when in distress shall bring in others to the table and also remember us during times that shall inevitably turn good. Similarly the knowledge culled from each engagement unique that each bit has been will create knowledge assets. This will enable the Company to scale. My intelligent colleagues have dilated on this aspect in pages that follow. I can only say that the key lies in extracting knowledge bits from each engagement and archiving them single- mindedly. If it is left in the heads of team members it may walk out of the door with them once in a while. Leading international consulting companies have mastered this art and have benefited hugely. Prime needs to commit a part of its surplus to this.
New Lines of Business Status
Last year we had reported that the Company had decided to move into adjacent lines of business. We had accomplished that by taking a team on board and housing it in Prime Research & Advisory Ltd (PRAL). The team it was expected would bring skills in wealth management et al and importantly steady its annuity income. While PRAL contributed 32% of the consolidated income and 9% of the margin its annuity business ran into structural roadblocks. Your management has taken immediate steps to cut costs and that meant letting go of a substantial part of the team. It was difficult but it had to be done. I hope these measures help grow the productive part and improve margins in the current year as costs are trimmed.
During the year the Company Board had to contend with some significant churn. Mr. Vineet Suri Executive Director resigned during the latter half to pursue his personal goals. But it was Independent Director Mr. Anil Dharker's resignation in November that was personally disconcerting. Mr. Dharker was on the board when the Company went through tough times. He was fiercely independent and a trusted source of counsel for the Board and support for me; he never minced words. I will miss him.
During the year we added two new Independent Directors. Ms. Namrata Kaul and Ms. Smita Affinwalla joined the Board in Q4 2018-19. While Ms. Kaul an IIMA alumnus has been an inveterate banker for two decades-and-a-half Ms. Affinwalla an alumnus of Jamanalal Bajaj Institute has spent years in reputed Investment Banks in their operations and then in HR. They bring rich experience and intellectual acuity to the Board's deliberations. With Ms. Parida Independent Director also on the Board your Board now boasts of a compelling gender diversity amongst Indian companies. Interestingly a research paper written by Prof. Jaya Sarkar and Prof. Ekta Selarka of Indira Gandhi Institute of Development Research found that women Directors on the Board not only improved governance but also improved the valuation of companies.
With three distinguished and fiercely independent women Directors on Board you cannot go wrong!
In my last annual letter we had promised that we would put in place a comprehensive Risk Management Framework. The management had commissioned a consulting firm to study the business and processes. Their report has been received and I am happy to say that the system would be instituted by Q3.
This letter won't be complete without a word of praise for the management team led by Mr. N. Jayakumar (aka Jakes). The team led by Jakes and assisted by Mr. Subramanian Sharma at Primesec has done great multi-tasking to establish a satisfied and happy client base. Their enthusiasm for jobs at hand is electric. In my last letter I had likened the Prime Team to Special Forces (Para Commandos) of the Indian Army. If you have watched the film URI based on the surgical strike by Para Commandos across the border you will remember Major Shergill (Vicky Kaushal) who led the team. He frequently asked his para team Kaisa hai joshRs. The resounding war cry every time was High sir!.
If any of you come to the Prime office and ask Kaisa hai joshRs. you will also get a similarly energetic answer. High sir!
Chairman & Independent Director Prime Securities and Primesec Investments