Khoobsurat Ltd Management Discussions

ANNUAL OVERVIEW AND OUTLOOK

Global growth is projected to decline after a period of steady but underwhelming performance, amid policy shifts and new uncertainties. Global headline inflation is expected to decline further, notwithstanding upward revisions in some countries. Risks to the outlook are tilted to the downside. Escalating trade tensions and elevated policy-induced uncertainty may further hinder growth. Shifting policies could lead to abrupt tightening of global financial conditions and capital outflows, particularly impacting emerging markets. Demographic shifts threaten fiscal sustainability, while the recent cost-of-living crisis may reignite social unrest. More limited international development assistance could push low-income countries deeper into debt, jeopardizing living standards. At this critical juncture, policies need to be calibrated to foster international cooperation while ensuring internal economic stability, thereby helping reduce global imbalances.

After enduring a prolonged and unprecedented series of shocks, the global economy appeared to have stabilized, with steady yet underwhelming growth rates. However, the landscape has changed as governments around the world reorder policy priorities and uncertainties have climbed to new highs. Forecasts for global growth have been revised markedly down compared with the January 2025 World Economic Outlook (WEO) Update, reflecting effective tariff rates at levels not seen in a century and a highly unpredictable environment. Global headline inflation is expected to decline at a slightly slower pace than what was expected in January.

Intensifying downside risks dominate the outlook, amid escalating trade tensions and financial market adjustments. Divergent and swiftly changing policy positions or deteriorating sentiment could lead to even tighter global financial conditions. Ratcheting up a trade war and heightened trade policy uncertainty may further hinder both short-term and long-term growth prospects. Scaling back international cooperation could jeopardize progress toward a more resilient global economy.

INDUSTRY OVERVIEW

Indias GDP grew by 6.2% in the quarter ended December 2024, rising from the 5.6% growth witnessed in the previous quarter. Institutional investment activity in real estate recorded a total of INR 100 bn (USD 1.15 bn). Domestic investors held a 66% share, while foreign investors contributed the remaining 34%. The residential sector was most attractive, having received a 46% share of institutional inflows, followed by the office sector (30%) and retail sector (14%). Despite the presence of current global uncertainties, the outlook for 2025 remains positive for real estate investments in India:

• For FY26, the Reserve Bank of India (RBI) has projected Indias real GDP growth at 6.5 per cent, with risks evenly balanced.

• Global economic uncertainty stemming from a potential disruption of global trade could result in foreign PE investors adopting a go-slow approach, although this is likely to reverse soon.

• With another sizeable office REIT filing for an IPO, Indias total listed REIT portfolio will comprise 174 MSF of office and retail assets, rendering it a formidable market within the APAC region.

Indias economic outlook remains positive, demonstrating resilience amidst persistent global economic headwinds. Stabilising inflationary trends have enabled the RBI to reduce the key policy rate in February 2025. Further policy rate adjustments could be anticipated in the subsequent quarters, contingent upon suitable domestic and international economic conditions.

OPPORTUNITIES & CHALLANGES

Shaped by a new presidential administration, economic shifts, and technological advancements, 2025 marks a transformative year, with significant changes expected across mergers and acquisitions (M&A), IPO activity, regulatory compliance, and cybersecurity. As companies face the demands of a dynamic marketplace, those leveraging emerging technologies like AI will be better positioned to navigate and prepare for the complexities of the evolving capital markets landscape.

We are optimistic about growth in the M&A and IPO markets in 2025. Theres a strong appetite for deal-making, with companies positioning themselves for the next phase of economic expansion. The stabilization of interest rates is creating a more predictable financing environment, and sectors like technology, healthcare, and clean energy are driving innovation and opportunities. Additionally, many companies are sitting on significant cash reserves, thanks to the success of their products, and are actively seeking to expand their pipelines and scale their operations. Private equity firms are feeling the pressure to put dry powder to work and finally exit their investments after extended holding periods. Weve seen PE-backed companies deliver strong stock performances following their IPOs, which will likely lead to an increase in PE-backed offerings in 2025.

With a new administration in place, companies have more clarity as to how the market and regulators will act and can move forward accordingly. Companies have also been waiting on the side-lines for years, carefully preparing for an IPO, and are now poised to take action.

That said, challenges like inflation, cybersecurity risks, and geopolitical tensions remain critical considerations. To navigate these complexities, clients are increasingly leveraging digital tools and expertise to enhance efficiency, improve data analysis, and maintain compliance with evolving regulations.

As companies ready themselves for the next wave of M&A activity, the ability to act quickly and demonstrate real value to shareholders will be pivotal. Collaborative technologies are expediting deal-making, while CFOs are ensuring their organizations remain agile and ready to seize opportunities. Despite the challenges, the momentum were seeing across industries reflects a shared optimism for sustained growth and innovation in 2025.

RISKS AND CONCERNS

Khoobsurat Ltd. (KL) has exposures in various line of business. KL are exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, liquidity and interest rate risk, human resource risk, operational risk, information security risks, regulatory risk and macroeconomic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.

MARKET RISK

The Company has quoted investments which are exposed to fluctuations in stock prices. KL continuously monitors market exposure in equity and, in appropriate cases, also uses various derivative instruments as a hedging mechanism to limit volatility.

LIQUIDITY AND INTEREST RATE RISK

The Company is exposed to liquidity risk principally, because of lending and investment for periods which may differ from those of its funding sources. Management team actively manages asset liability positions in accordance with the overall guidelines laid down by various regulators. The Company may be impacted by volatility in interest rates in India which could cause its margins to decline and profitability to shrink. The success of the Companys business depends significantly on interest income from its operations. It is exposed to interest rate risk, both as a result of lending at fixed interest rates and for reset periods which may differ from those of its funding sources. Interest rates are highly sensitive to many factors beyond the Companys control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions and, inflation. As a result, interest rates in India have historically experienced a relatively high degree of volatility.

The Company seeks to match its interest rate positions of assets and liabilities to minimize interest rate risk. However, there can be no assurance that significant interest rate movements will not have an adverse effect on its financial position.

HUMAN RESOURCE DEVELOPMENT

The Company recognizes that its success is deeply embedded in the success of its human capital. During 2024-25, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings, streamlining the Performance Management System, making the compensation structure more competitive and streamlining the performance-link rewards and incentives.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable to the Company.

COMPLIANCE

The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company continues to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Companys Board of Directors and the Companys Compliance Policy. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/internal guidelines on a periodic basis.

Fine of Rs. 2,46,800/- was levied by CSE for delayed filing of Financial Results and also without advance notice for Board Meeting. Further, BSE has levied fine of Rs. 35400/-, BSE and MSEIL has levied fine of Rs. 11800/- each, for delayed submission of Related Parties Transaction under Regulation 23(9) of SEBI LODR Regulations, 2015.

Further, the Company has not taken approval from CSE for its Right Issue and now the Company has filed Listing Application with CSE. Outcome/penalty for delayed filing is yet to be considered by CSE.

Apart from above, no penalty has been imposed by any of SEBI, BSE and CSE; during the year under review.