In conversation with Mr. Ashish Shah Managing Director on the Company's performanceand prospects.
Fiscal 2018-19 was one of the most challenging and most satisfying year. For its testedthe robustness and resilience of the Company's business model. It gives me great pleasureto mention that we passed this test with flying colours. We scored high on all counts. Thehighly volatile market owing to dwindling volumes and regulatory announcements (TERimplementation by SEBI on Mutual Funds) slashed our revenue from Mutual Funds by more than15%. Despite these headwinds our operating profit jumped by more than 20%. This wasimmensely satisfying. Our contrarian performance was primarily owing to an increase in ourclient base with a large number of new additions falling in the HNI and MNI category. Butbeyond the numbers this year was very special for us. It endorsed the accuracy andrelevance of our investment philosophy. Having analysed the global financial debacle whichled to the ultimate collapse of Lehman Brothers we took a strategic call of totallyavoiding credit funds as an investment instrument. As a result when the NBFC crisis hitIndia's financial ecosystem in the second half of 2018-19 it significantly eroded theNAVs of more than 70% of active credit funds. Our clients remained unscathed by thisvolatility crisis. We did not receive a single call from an anxious client. What alsoworked in our favour was our intense customer engagement efforts. For we realised that themarket turbulence would result in ruffled would need the reassurance that their money wassafe. The entire management team and senior executives engaged with all clients to addressqueries provide assurance and most importantly to tell them that we are with them andwill do everything to protect their capital to the extent possible. This reassuranceworked well. We did not experience a single SIP closure from our clients. Moreover inline with our advice they upped their investment to average out their costs in thepresent and increase returns when the market trend reversed for the better. The otherhighlight of the year was a change in product mix. Till now we had avoided insuranceproducts as an investment avenue. Interestingly our agile and alert team identified aninsurance product which provided a tax arbitrage to our clients and we could invest theirfunds in diversified Mutual Funds. We were able to provide tax efficiency to our clientswithout compromising our investment philosophy. Moreover the team's efforts incontinuously analysing the relevance of our prescribed investment instruments helped us ineliminating certain products. The strategy I am confident will improve our clients'returns and strengthen their trust in our capabilities.
The year ahead
The current situation is grim to say the least. Suddenly it seems like everything isshrinking in India: our capacity for tolerance and diversity the space for democraticexpression and dissent and now economic growth.
The economic data coming out now are stark. There is negative growth in the .Ourclientscore industrial sector as passenger vehicle sales tractor sales and two-wheeler saleshave all been declining for around six months.
Other consumer durables like white goods also show a hit in sales growth. Sales offast-moving consumer goods normally the last to react are slowing down.
Capacity utilisation in all manufacturing segments is apparently below 70% on averageeven as inventories pile up rail freight traffic is now below the past five years'average and the real estate sector is stuck with over seven years' stock of unsoldbuildings.
All this comes even as the credibility of India's official GDP data is beingquestioned as it does not appear to capture the material realities faced by millions ofemployees employers and workers.
Moreover the NBFC crisis has snowballed into a full-scale financial crisis for IndiaInc. which continues to cast a dark shadow on their growth prospects. The bottomline isthat India today stands at the threshold of an elongated slowdown. The impact of this isbeing felt in the current year the market volatility persists as FIIs have pulledout more than `25000 crore in July and August (upto 10th). The Government and the CentralBank are trying to fuel the economic prospects through budgetary allocations andinvestment inducing policies but it would take some time for these announcements totransform into on-ground opportunities.
Keeping these factors in mind the savings propensity of the average Indian is onlygoing to increase over the coming months as uncertainty increases.
And so long as the average
Indian saves we will be in business.
They would need trustworthy financial partners. They would need someone who willprovide some peace of mind in the prevailing mayhem and the shift of the Indian economy toa lower inflation and the lower Interest regime. What we assure our clients is that wewill continue to stick to the basics diligently follow our investment policies and workovertime to strengthen their trust in us. In closing I take this opportunity to extend mysincere appreciation to the valued patrons employees shareholders financialinstitutions and bankers for the support encouragement and motivation extended to us. Ialso thank members on the Board for their invaluable advice and guidance. Warm regards