You are here » Home » Companies » Company Overview » The Investment Trust of India Ltd

The Investment Trust of India Ltd.

BSE: 530023 Sector: Financials
NSE: THEINVEST ISIN Code: INE924D01017
BSE 00:00 | 12 Aug 96.20 0.20
(0.21%)
OPEN

99.30

HIGH

99.30

LOW

95.50

NSE 00:00 | 12 Aug 96.25 0.95
(1.00%)
OPEN

97.00

HIGH

98.65

LOW

95.40

OPEN 99.30
PREVIOUS CLOSE 96.00
VOLUME 3353
52-Week high 141.00
52-Week low 84.00
P/E 506.32
Mkt Cap.(Rs cr) 496
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 99.30
CLOSE 96.00
VOLUME 3353
52-Week high 141.00
52-Week low 84.00
P/E 506.32
Mkt Cap.(Rs cr) 496
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

The Investment Trust of India Ltd. (THEINVEST) - Director Report

Company director report

FORTUNE FINANCIAL SERVICES (INDIA) LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT Dear Shareholders Your Directors have pleasure in presenting the Twenty-First Annual Report and Audited Accounts for the year ended 31st March, 2012. Financial Results (Rupees in Lacs) 2011-12 2010-11 2011-12 2010-11 Stand-alone Consolidated Total Income 579.36 1,548.96 8,034.77 9,140.02 Profit before depreciation and tax 72.35 821.99 124.59 2,079.31 Depreciation 11.46 21.92 243.49 285.47 Profit before tax 60.89 800.07 (118.90) 1,793.84 Provision for tax - Current tax 11.80 189.20 147.15 672.80 - Current tax relating to prior years (Net) 4.10 (1.93) 20.51 34.02 - Deferred tax (3.10) (2.46) (65.41) (49.80) Profit after tax 48.09 615.26 (221.15) 1,136.82 Balance brought forward from the previous year 2,639.47 2,332.93 3,720.75 3,117.85 Balance available for appropriations 2,687.56 2,948.19 3,499.60 4,254.67 Transfer to statutory reserve - - 34.50 102.50 Transfer to general reserve - 61.33 - 142.10 Dividend 64.40 247.39 64.40 247.39 Tax on dividend 7.81 - 10.49 41.93 Balance carried to balance sheet 2,615.35 2,639.47 3,390.21 3,720.75 Weighted average number of equity shares - Basic 12,683,674 122,24,953 12,683,674 122,24,953 - Diluted 12,683,674 124,29,474 12,683,674 124,29,474 Nominal value per share (in rupees) 10.00 10.00 10.00 10.00 Basic and diluted earnings per share - Basic (in rupees) 0.38 5.03 (1.74) 9.30 - Diluted (in rupees) 0.38 4.95 (1.74) 9.15 Working Results Standalone The income during the year 2011-12 stood at Rs.579.36 lacs as against Rs.1,548.96 lacs during the previous year. The profit before tax for the year was at Rs. 60.89 lacs as against Rs.800.07 lacs in the previous year. The profit after tax stood at Rs.48.09 lacs as against Rs.615.26 lacs in the previous year. Consolidated The consolidated income during the year 2011-12 stood at Rs.8,034.77 lacs as against Rs.9,140.02 lacs during the previous year. During the year under review the company has on consolidated basis incurred a loss of Rs. 221.15 after tax as against a profit of Rs.1,136.82 lacs in the previous year. Dividend Your Directors have recommended dividend of Rs.0.50 per share (5%) on 128,79,290 equity shares of Rs.10 each fully paid for the financial year 2011-12, subject to the approval of the shareholders at the ensuing annual general meeting. The total outflow on account of equity dividend will be Rs.64.40 lacs. Consolidated Financial Statements The Board of Directors of your company at its meeting held on May 30, 2012 approved the consolidated financial statements for the financial year 2011- 12 in accordance with the Accounting Standard (AS-21) and other applicable Accounting Standards issued by the Institute of Chartered Accountants of India as well as Clause 32 of the Listing Agreement, which includes financial information of all its subsidiaries. Corporate Governance A report on the corporate governance along with a certificate from the auditors of the company regarding the compliance of conditions of the corporate governance as stipulated under Clause 49 of the listing agreement is included and forms part of this annual report. All Board members and senior management personnel have affirmed compliance with code of conduct for the year 2011-12. A declaration to this effect certified by the Executive Chairman of the company is also attached in the annual report. The Executive Chairman and the Chief Financial Officer of the Company have certified to the Board with regard to the financial statements and other matters as required under clause 49 of the listing agreement and the said certificate is attached in the annual report. Management Discussion and Analysis A detailed review of operations, performance and future outlook of your company and its businesses is given in the Management Discussion and Analysis, which forms part of this annual report. Issue of equity shares on exercise of ESOP options Details of equity shares issued under ESOP, as also the disclosures in compliance with clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure - I to this report. The company has received a certificate from the Auditors of the company certifying that the FFSIL ESOP Schemes 2006 & 2007 have been implemented in accordance with the SEBI Guidelines and the resolution passed at the annual general meeting held on September 23, 2006. The Certificate would be placed at the annual general meeting for inspection by members. During the year under review, the company has granted 45,000 options to employees of the subsidiary companies. Capital During the year under review the company has issued 6,00,000 equity shares of Rs.10 each fully paid at a premium of Rs.70 per equity share on conversion of 6,00,000 equity warrants of Rs.10/- each which were issued on February 5, 2010. On issue of these shares, the paid up capital of the company increased from Rs.1,227.93 lacs to Rs.1,287.93 lacs. Issue of equity warrants In nineteenth annual general meeting, held on August 28, 2010, the company had obtained members' approval for issue of 4,00,000 equity warrants of Rs.10 each at a premium of Rs.170 per warrant aggregating to Rs.720.00 lacs on preferential basis to the promoters, relatives of promoters and to a company in which relatives of a promoter are interested. The Internal Finance Committee of the Board of Directors of the company on September 13, 2010 allotted 4,00,000 equity warrants of Rs.10 each which are convertible into one equity share of Rs.10 per equity warrant within a period of eighteen months from the date of allotment of the equity warrants on exercise of the option by the allottees. These equity warrants were due for conversion latest by March 12, 2012. None of the subscribers have exercised their options for conversion of equity warrants in to equity shares of the company. The initial amount of Rs.180.00 lacs received from the subscribers have been forfeited and credited to the capital reserve account of the company. Subsidiary Companies As per general circular issued by the Ministry of Corporate Affairs, the balance sheet, statements of profit & loss and other documents of the subsidiary companies for the year ended March 31, 2012 are not attached with the accounts of the holding company. However, the annual accounts of the subsidiary companies will be made available to investors of the holding and subsidiary companies for inspection by the members at the registered office of the company and will also be uploaded on the website of the company. The following information in aggregate for each of the subsidiary companies are disclosed in annual report as stipulated in the circular issued by the Ministry of Corporate Affairs, New Delhi: (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investments (f) turnover/income (g) profit before tax (h) provision for tax (i) profit after tax and (j) proposed dividend. Statement pursuant to Section 212 (3) of the Companies Act, 1956 relating to the subsidiary companies is annexed as Annexure II and forms part of the annual report. Fixed Deposits The company has not accepted any deposit from the public during the year under review, within the meaning of Section 58A of the Companies Act, 1956 and the rules made there under. Committees The company has four committees of the Board of Directors. These committees are - Audit Committee, Remuneration / Compensation Committee, Shareholders Grievances Committee and Internal Finance Committee. The terms of reference, composition and the details of the meetings held during the year under review are provided in corporate governance report. Internal Control Systems & their adequacy The company has in place adequate systems of internal control that are commensurate with its size and nature of the business and documented procedures covering all financial and operating functions. The company being in service industry, it has in place clear processes and well-defined roles and responsibilities for its staff at various levels. The Management has a defined reporting system, which facilitates monitoring and adherence to the process and systems in place. Auditors M/s. Nipun Sudhir & Associates, Chartered Accountants, Mumbai, Statutory Auditors of the company hold office up to the conclusion of this annual general meeting and are recommended for re-appointment. The company has received a certificate under section 224 (1B) of the Companies Act, 1956 stating that the appointment, if made, will be within the limits as specified in that section. Auditors' Report Your Directors refer to the observations made by the Auditors in their report and wish to state that the notes forming part of accounts are self explanatory and hence do not require any further comments. Directors Mr. C. R. Mehta & Mr. Sohan C. Mehta Directors of the company, retire by rotation and being eligible offer themselves for reappointment. Conservation of Energy, Technology Absorption The information required under section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosures of Particulars in the Report of the Board of Directors) Rules, 1988 with respect to the matters specified therein are not applicable to your company. Foreign Exchange earnings and outgo (Rupees in Lacs) Particulars 2011-2012 2010-2011 Earnings: Investment banking income 62.32 55.52 Outgo: Travelling & business promotion 2.01 4.09 Miscellaneous expenses 2.04 - Dividend 86.68 108.35 Particulars of employees Statement under section 217(2A) of the Companies Act, 1956 read with the Companies (Particular of Employees) Rules 1975, as amended by the Companies Amendment Act, 1988 is annexed as Annexure III and forms part of the Annual Report. Investor Education & Protection Fund During the year under review, an amount of Rs.82,240/- lying in unclaimed dividend for the year 2005 was transferred to the Investor Education & Protection Fund. Directors' Responsibility Statement Pursuant to Section 217 (2AA) of the Companies Act, 1956, to the best of their knowledge and belief confirm that: * in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; * appropriate accounting policies had been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for that period; * proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and * the annual accounts have been prepared on a going concern basis. Acknowledgement Your Directors are pleased to place on record their deep appreciation towards the sincere services and co-operation extended by employees of the organization at all levels. They also wish to place on record their gratitude for the confidence placed in them by the banks & financial institutions they are associated with. Further, your Directors wish to thank the various regulatory authorities, business associates and clients for their valued co-operation. On behalf of the Board J.T. Poonja Executive Chairman Mumbai, May 30, 2012 Annexure I Disclosure as required under Clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 Sr. PARTICULARS ESOP SCHEME 2006 ESOP SCHEME 2007 No. a. Options Granted 522,500 60,990 b. The pricing formula The remuneration/compensation committee has been authorised to decide the exercise price in accordance with the SEBI and any other amendments made thereto. c. Options vested 413,790 38,000 d. Options exercised 179,290 Nil e. Total number of shares arising as a result of exercise of option 179,290 Nil f. Options lapsed 343,210 22,990 g. Variation of terms of options Not Applicable h. Money realized by Rs. 1,41,15,790 Nil exercise of options (Rupees One Crore Forty One Lacs Fifteen Thousand Seven Hundred Ninety only) i. Total number of options in force Nil 38,000 j. Employee wise details of options granted to: i. Senior managerial personnel Nil Nil ii. any other employee who receives a grant in any Nil Nil one year of option amounting to 5% or more of option granted during that year. iii. identified employees Nil Nil who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant; k. Diluted earnings per share (EPS) pursuant to issue of shares on exercise of option calculated in accordance Rupees 0.38 with [Accounting Standard (AS) 20 'Earnings Per Share'] l. As the exercise is made at the market price prevailing on the date of the grant, the issuance of equity shares pursuant to exercise of ESOP Options does not affect the profit & loss account of the company. - m. Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately Not Applicable for options whose exercise price either equals or exceeds or is less than the market price of the stock. n. A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted- average information: * risk-free interest rate Not Applicable * expected life * expected volatility * expected dividends, and * the price of the underlying share in market at the time of option grant. MANAGEMENT DISCUSSION AND ANALYSIS Macroeconomic outlook Indian's annual GDP growth for FY12 clocked 6.48% which is even below the growth in FY09, it managed to achieve post Lehman crisis. The most disturbing trend is the quarterly GDP growth which is on a declining trend for last 9 quarters. The Q4 FY12 GDP growth of 5.3% is the lowest quarterly number in 9 years. Although the deteriorating global environment is partly to blame for the lower GDP the inaction and policy paralysis that crippled the central government is also to blame for this abysmal performance. In the last one year rupee depreciated from Rs44/USD to Rs56/USD putting further pressure on India's current account deficit considering imports an abundant quantity of oil. GDP plunged to newer low in FY12 GDP at factor cost at FY-09 FY-10 FY-11 FY-12 2004-05 prices (in %) Gross Domestic Product 6.80 8.00 8.39 6.48 Agriculture, Forestry & Fishing (0.20) 0.40 7.03 2.76 Mining & Quarrying 1.30 7.00 4.99 (0.87) Manufacturing 4.30 8.80 7.56 2.49 Electricity, Gas & Water supply 4.90 6.40 3.04 7.87 Construction 5.40 7.00 8.01 5.31 Trade, Hotel, Transport & Communication 7.50 9.70 11.13 9.95 Finance, Insurance, Real Estate & Business Services 12.50 9.20 10.41 9.61 Social & Personal Services 12.70 11.80 4.52 5.81 Source: MOSPI Exports grew at rapid clip due to global recovery Indian exports (in USD terms) grew by 28.5% in FY12 which is quite impressive considering the slowdown in major global economy. Imports also grew by 32.34% on account of the high crude prices putting pressure on current account deficit and therefore on the Rupee. Recently though global crude prices have corrected by nearly 20% bringing much needed relief for India which is struggling hard to put a brake on its currency depreciation. Unprecedented growth in exports In % 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Exports 30.8 23.4 22.6 28.9 13.7 -3.5 40.5 28.53 Imports 42.7 33.8 24.5 35.4 20.8 -5.0 28.2 32.34 Source: RBI Inflation has softened for a while FY-07 FY-08 FY-09 FY-10 FY-11 FY-12 WPI 6.5% 4.8% 8.0% 3.6% 9.9% 6.9% Primary articles 9.6% 8.3% 11.0% 12.7% 17.7% 9.6% Fuel & Power 6.5% 0.0% 11.6% -2.1% 12.3% 10.4% Manufactured products 5.6% 4.9% 6.1% 1.8% 6.2% 4.9% Source: MOSPI After recording 9.9% rise, the WPI inflation has come down to 6.9% due to a tough monetary policy action taken by RBI in the last year. As this year's monsoon is predicted to be normal, we may see food prices decline in future. Also softening crude prices can also help ease the inflation woes in FY13. This will help RBI to go for further monetary easing to spur the economic growth. Merchant Banking After the robust growth in FY11, the primary equity issuance market in FY12 saw muted numbers. Issuances dropped as the market was not conducive and most market participants remained risk averse. (in Rs. crores) FY-09 FY-10 FY-11 FY-12 Primary Market - Debt Issue 1,500 2,500 9,451 35,623 Primary Market - Equity Issue 14,800 55,055 58,157 12,857 QIP 188 42,729 25,861 2,163 Private Placement - Debt 187,947 226,948 218,785 261,282 Source: SEBI Both QIP and primary market equity issuances shows a considerable decline while debt issue through primary market and private placement remained the flavor of the season due to high interest rate and lower risk. Capital market After the stupendous recovery in FY10 when the S&P CNX NIFTY returned a growth of 73.8%, normalcy returned in FY11 as the index exhibited a modest return of 11.1% only. In FY12 the broader market gave a negative return of 9.2% mainly on account of higher inflation and lower growth in domestic economy and the on-going Euro crisis. The above-mentioned developments in the equity markets had an impact on the aggregate turnover as well. Overall daily turnover in equity markets declined by 24% from Rs.18,397 crores in FY11 to Rs.13,982 crores in FY12 as the lack of appreciable movements in the equity markets and the increasing bearish sentiments prevented the market participants from increasing their allocation to equities. Both the BSE and the NSE suffered a decline in average daily turnover by 38% and 20% in FY12 respectively. Cash Market daily turnover declines: (Rs. in crores) BSE NSE Total FY08 6,264 14,097 20,361 FY09 4,501 11,272 15,773 FY10 5,637 16,910 22,547 FY11 4,349 14,048 18,397 FY12 2,693 11,289 13,982 Source: NSE, BSE, SEBI Commodity Market The FY12 witnessed a 51.7% increase in the total value of trade to Rs.181.26 lac crores in commodities across 22 exchanges in India. Growth of commodities turnover during past 5 years Year 2007-08 2008-09 2009-10 2010-11 2011-12 Turnover (in Lac Crore) 40.66 52.49 77.65 119.49 181.26 Growth (in %) - 29.1 47.9 53.9 51.7% Source:- Reuters, Forward Market Commission website The major commodities that were traded in India were bullion and metals which comprised 46% and 19% respectively of total trade. Trade in bullion grew 45.9% over the last year and led among other major commodities. We expect robust growth in trade volume in bullion on account of global uncertainty. The agriculture commodities grew in line with the overall commodity growth of 51%. Sectoral Break up and Growth of Different Commodities: (Rs. in crores) 2011-12 % age 2010-11 % age Growth in share in share in 2011-12 overall overall trade trade Agriculture 2,196,149 12.12% 1,456,390 12.19% 50.79% Bullion 10,181,957 56.17% 5,493,892 45.98% 85.33% Metals 2,896,720 15.98% 2,687,673 22.49% 7.78% Energy 2,851,268 15.73% 2,310,959 19.34% 23.38% Other 9 0.00% 29.04 0.00% -69.01% Overall 18,126,103 11,948,942 51.70% Source- Reuters, Forward Market Commission website The government of India is planning a new legislation this year which would allow banks and foreign players to participate in commodity trading. The mini contract introduced by exchanges will help small investors like farmers to participate in the commodity market as well. The option contract in commodities which is under review by government will help improve the trade volume by attracting hedgers and speculators. Option contract can be a perfect tool for the commodity risk management market in India. This would help bring the equity, debt and commodity market together spurring the business for the many market participants. Despite having a strong and growing economy, India's share in global commodity market is not much encouraging. Except gold, India's share in other commodities compared to its global peers is insignificant. Although India's production of agriculture products is large its contribution to international trade is miniscule. Various development projects on and off the farm will be the key growth driver in the near future. Challenges ahead Institution Participation - Currently many institutional financials are not permitted to trade commodity futures. Introduction of Commodity Options - The matter is said to be under the active consideration of the Government and the options trading may be introduced in the near future. Tax and Legal bottlenecks - Regulatory changes are needed to bring uniformity in octroi, sales taxes etc. VAT is yet to be adopted by all states. Currently the taxes for speculative gain and loss are different which means speculator cannot offset futures losses against profits in the underlying commodity. Wholesale Debt Market In Indian wholesale debt market is government securities (G-sec) hold a major share of approx 47.8% of total traded value and 57.9% of total market capitalization. RBI regulations require banks to keep a min 25% SLR which is the major reason behind the popularity of G-sec. Also the less developed corporate bond market helps G-sec to take a major share of bond market. The share of top 10 securities in total trade value is steadily decreasing over the years signaling a more broad based market evolution. In year 2011-12 the share of top 10 securities accounts for 41.77% as compared to 53% in 2007-08. Indian debt market is the third largest in Asia, yet the volumes are abysmally low. Market Capitalization as on March-31, 2012 Security Type No of Securities Mkt Cap %age of total (Rs. in crores) G-Sec 132 24,721,786 57.86 PSU Bonds 971 2,441,650 5.71 State Loans 1,416 7,572,813 17.72 Treasury Bills 52 2,592,709 6.07 Local Bodies 19 30,283 0.07 Fin Inst 443 1,435,382 3.36 Bank Bonds 509 1,902,191 4.45 Supranational Bonds 1 3,912 0.01 Corporate Bonds 1,605 2,026,638 4.75 Total 5,148 42,727,364 100.00 Source:- NSE Website Financing Activities (NBFC) NBFCs have been playing a very important role both from the macro economic perspective and the structure of the Indian financial system. NBFCs are the preferred alternatives to the conventional banks as a financial intermediary for meeting various financial requirements of a business enterprise as they provide a hassle free credit. A sales driven approach and quick & efficient service offered by NBFC without complex formalities make them a better alternative to traditional banks. To withstand the competition, NBFCs need to constantly innovate in terms of their product as well as improve their operational efficiencies. The coming years will be very crucial for NBFCs and only those who will be able to face the challenge and prove themselves by standing the test of time will survive in the long run. The changing and tougher banking regulation can be a major impediment to the growth of NBFC in India. Number of NBFC registered with RBI End June Number of Number of Number of Registered NBFC-D NBFCs ND-SI NBFC 2005 13,261 507 - 2006 13,014 428 149 2007 12,968 401 173 2008 12,809 364 189 2009 12,740 336 234 2010 12,630 308 260 2011 12,409 297 - Source-RBI Annual Report on trends and progress of banks. The number of NBFCs has decreased over the last 4 years. Cancellation of certification of registration of some NBFCs coupled with RBI's unwillingness to give new NBFC licenses are the main reason behind the decrease in total number of NBFC. In the coming year we expect to see more consolidation in the NBFC sector which will help the stronger players to gain significant market share. Despite the decrease in total number of NBFCs the net asset held by all the NBFC has increased from Rs.248,983 crore in 2010 to Rs.290,616 crore in 2009-10. The financial performance of the Fl sector improved during 2009-10 as compared with 2008-09. The increase in net profits of Fl is mainly attributed to increase in interest income of Rs.17,965 crore in 2011 from Rs.15,624 crore in 2010. NBFCs-D are not subject to Cash Reserve Ratio (CRR) requirements like banks but are mandated to maintain 15 per cent of their public deposit liabilities in Government and other approved securities as liquid assets. The maturity of public deposits is mainly from short to medium term. In 2009-10 there is an increase in the share of deposit of maturity less than 1 year and 2-3 year range. Only 7% of the total deposits as of 2011 have maturity of above 3 years. At the end of 2010-11, only 7% of deposit taking NBFCs had the asset size of more than 500 crore that accounted almost 98% of the total asset held by all the NBFC-D. Mutual Funds The year FY11 was witness to the launch of 762 schemes - substantial growth over the previous year and the highest number of new launches in a year over a decade. The significant increase in the number of schemes could not stop the slide in the sales which is down 23% YoY. The trend of significant redemptions which started in FY10 continued unabated and the industry suffered redemptions of Rs.6,841,702 crores in FY12 - a 23% decline over the level witnessed in FY11. Thus, the industry suffered a significant decline in net resource mobilization by Rs.22,023 crore in FY11 - significant change from the increase in net resource mobilization of Rs.83,081 crores in FY10. (Rs. in crores) Sales Redemptions Net Resource Mobilization FY05 840,694 837,508 3,186 FY06 1,099,559 1,045,336 54,223 FY07 1,938,592 1,844,512 94,080 FY08 4,464,376 4,310,575 153,801 FY09 5,426,353 5,454,650 (28,297) FY10 10,019,023 9,935,942 83,081 FY11 8,859,515 8,908,921 (49,406) FY 12 6,819,679 6,841,702 (22,023) Source: AMFI Insurance Total life insurance collected for the FY11 has grown by 9.85% to Rs.2916bn. The asset under management of life insurers has increased to Rs.14,301 bn from Rs.12124 bn. Insurance penetration in India has improved from 4.6% in 2008 to 5.1% in 2010 as against a dip in world average insurance penetration from 7.1% in 2008 to 6.9% in 2010. India's insurance penetration is still lower than world average, which indicates further potential of insurance in India. Improved insurance penetration; rattled recently by global meltdown: Insurance Penetration 2004 2005 2006 2007 2008 2009 2010 as % to GDP India (fiscal year) 3.2 3.1 4.8 4.7 4.6 5.2 5.1 World 7.9 7.5 7.5 7.5 7.1 7.0 6.9 Source: IRDA Challenges & Outlook The Indian economy growth slowed down in last couple of quarters due to domestic and global factors. The persistent inflation has dented corporate margins and peoples purchasing power. Rupee depreciated almost 20% in a year. With falling savings rate and investment rate, Indian economy is on a slippery surface and needs immediate attention from the union government in terms of policy re-formulation and reforms. During past one year the inaction of government and failure to pass key reform bills made the already fragile Indian economy more vulnerable to erosion. The government needs to understand that when in a hole they should stop digging. But we feel there are few silver linings in this gloomy environment. RBI has already indicated that the interest rate cycle has been reversed. We have already seen a rate cut in last policy meeting and we expect further easing from RBI to spur investment and investor confidence in Indian economy. Last year the high inflation along with high crude price dented investor confidence which had the effect on market returns. But as commodities soften, the oil import bill will come down easing the current account deficit and inflation worries. Also, Gold import has already started showing signs of slowing down which augurs well for the Indian economy. Financial Performance on Consolidated Basis The financial markets were volatile during the year under review. A combination of factors such as high inflation, a depreciating rupee, investors fear about the euro zone, sluggish industrial and investment activities, net drop in Fll inflow collectively contributed to the lower growth of the economy. All these have taken a toll on investor sentiments and market participation. There was a fall in fee-based income. The investment banking business and the institutional brokerage business also witnessed drop in incomes. With tough macro and volatile market condition, the consolidated top-line dipped from Rs.91.40 crore to Rs.80.35 crore. Your company posted a net loss of Rs. 2.21 crore as compared to Rs.11.37 crore profit it made in FY11. Risk and Concern With euro zone under severe financial distress and talk of Greece exit becoming louder by the day, the impact of this event on Indian economy needs to be seen. This event poses a major risk and could derail the whole current global recovery. On the domestic front if the current policy logjam and lower demand for investment is not addressed soon, one may risk a stagflationary environment. Another event unfolding is the outcome of monsoon this year whose onset is becoming all the more relevant in the current context. It will be safe to say that a deficient rainfall will surely hit consumption and drive demand lower. Internal control and their adequacy The Company has in place adequate systems of internal control that are commensurate with its size and nature of the business and documented procedures covering all financial and operating functions. The Company being a service industry, it has in place clear processes and well-defined roles and responsibilities for its employees at various levels. The Management has a defined reporting system, which facilitates monitoring and adherence to the process and systems in place. Also the Management evaluates these reports, internal controls and ensures that its employees adhere not only to internal processes and procedures set by the Company from time to time but also to the various statutory compliances. These have been designed to provide reasonable assurance with regard to maintaining proper accounting controls, monitoring economy and efficiency of operations, protecting assets from unauthorized use or losses, and ensuring reliability of financial and operational information published from time to time. Internal audit of its entire subsidiaries are regularly carried out. The Internal Audit Reports along with implementation and recommendations contained therein are constantly reviewed by the Audit Committee of the Board. Audit Committee of the Board of Directors, comprising of independent directors, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with Accounting Standards as well as reasons for changes in accounting policies and practices, if any. Cautionary Statement Statements in this Management Discussion and Analysis report describing the Company's objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those expressed or implied. The Company is not under any obligation to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events.
.