Keynote Financial Services Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS REPORT</dhhead>

Industry structure and developments

During F.Y. 2022-23, overall public equity fund raising dropped by about 56% as compared to F.Y. 2021-22. This financial year saw the largest IPO of Life Insurance Corporation of India. The primary market conditions remained volatile and was not very conducive for IPO activity. The overall response from pubic was also moderate. Average listing gain also fell by about 10% in comparison of the previous financial year. Mobilization of resources through Right issue was also lower compared to the last financial year. Inflation has emerged as a global challenge owing to increase in energy prices, disruption of global supply change & raising freight cost etc. However, India has emerged as one of the fastest growing economy in the world and an attractive investment destination. The flow of investment in India has been increasing for the past few years. The financial year saw many Companies filing their offer documents with SEBI for approval and primary market activity is likely to improve in tandem with secondary market.

Your Company continued to provide services to various clients & could complete few assignments on Buy Back, Takeover Offers & Rights Issues. The Company also concluded a few corporate finance mandates & continued to provide valuations & advisory services to various Corporate/ESOP clients. Company established its practice of providing services to Alternative Investment Funds (AIFs) as mandated by SEBI. During past financial year, Keynote provided Due Diligence Certifications for 15 AIFs & Annual Certifications for 24 AIFs. Further, Company has many more mandates to be serviced in this sphere.

Besides this Company is able to bag 3 mandates for acting as Merchant Banker to Main Board IPOs. Though overall financial performance during the financial year was subdued, management hopes to achieve better results based on mandates on hand which are likely to be completed during the next financial year.

 

Opportunities & Threats

Your company is committed to provide efficient services boosted by its strength in ECM market and execution capabilities. We look at various opportunities to bag mandate in the mid-market segment. The volatility in the capital market on account of various developments in domestic as well as global markets is likely to continue.

 

Segment-wise performance

During the financial year, ECM mandates were executed besides Corporate Finance mandates in the form of M&A, Valuation services & ESOP advisory services. A new vertical of providing Due Diligence services to AIFs is now well established and company could provide services to various AIFs during the financial year. The total revenue from sale of services for the F.Y. 2022-23 was Rs. 604.62 lakhs as compared to Rs. 446.13 lakhs for the financial year ended 2021-22.

 

Outlook

The outlook for the current financial year in the industry segment in which your Company operates remains uncertain. Though the pipeline for IPOs is strong, the IPO activity is likely to remain muted for the first couple of quarters in the next financial year because of combination of domestic & foreign developments.

 

Risks & Concerns

The size of your Company is a concern given the segment in which it operates. However, your Company also enjoys a niche in the segment in which it operates for providing value added and efficient services to its clients. It may be increasingly difficult to compete for your Company for securing large size mandates.

 

Internal Control systems and their adequacy

The company being in existence as Merchant Banker since past several years has developed well-structured internal control systems to conduct the business within the framework of Regulations. The present structure & systems are adequate and commensurate to the size of operations of your company.

 

Discussion on financial performance with respect to operational performance

Your company has been continuing to adopt the policy of being selective while accepting the assignments. Company has been able to get mandates from good corporate houses and companies. Improved financial market is likely to have positive impact on financial performance of the company. The management is striving hard to continue to look out for good and large mandates to execute enabling the company to sustain its performance.

 

Material developments in Human Resources/Industrial Relations front, including number of people employed

Company has been adopting a policy of appointing key personnel for various segments. There are no material adverse developments in human resources/industrial relations front. Company continues to operate with the sleek employee structure.

 

Significant Financial Ratios (i.e. change of 25% or more as compared to the immediately previous financial year) along with detailed explanations thereof

 

(i) Debtors Turnover

Debtors to turnover ratio was at around 6.44 times as against around 8.73 times as at the end of previous financial year. Your company is a service provider & have adopted the policy of raising the invoices on the clients on completion of the milestone as per respective engagement letters. As a result, the outstanding

. However, some of the debtors remain outstanding at the end of financial year debtors are not significant which are mostly recovered in the next financial year.

 

(ii) Inventory Turnover

Being into services business not applicable.

 

(iii) Interest Coverage Ratio

Your company is debt free.

 

(iv) Current Ratio

Current Ratio for this financial year is about 17.35% as against 19.14% for the previous financial year. This is particularly on account of provision for fair value adjustments in current investment as per requirements of IND-AS.

 

(v) Debt Equity Ratio

Your company is debt free.

 

(vi) Operating Profit Margin (%)

The operating profit margins stood at 0.11% as against the profit 0.39% reported financial the previous year. During the year profitability is reduced on account of decline in net gain on fair value of investments as per accounting standards.

 

(vii)NetProfit (%)

The net profit margin is at 0.07% during current financial year as against 0.40% previous year.

 

(viii) Sector-specific equivalent ratios:

Not applicable

 

Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

There has been a fall in Return on networth which stood at 0.01% as against 0.06% during previous financial year. Same is attributed to completion of very few assignments on hand, substantial decrease in net gain on fair value of investments coupled with constant expenses on account of salary & administrative costs.

 

DISCLOSURE OF ACCOUNTING TREATMENT

Your Company follows Accounting Standards as prescribed by Institute of Chartered Accountants of India (ICAI) for preparation of financial statements; there is no other such different treatment followed for the same.