Luharuka Media & Infra Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

MACROECONOMIC OVERVIEW

After recovering from the COVID-19 pandemic attributable to a successful vaccination drive on a world-wide scale, short lived Omicron wave and the Russia - Ukraine war crisis, the resilience of global economy stood out by manoeuvring the challenges in the financial year 2022-23. Although, the global economy is gradually recovering from the series of disruptions, according to the International Monetary Fund (IMF), the forecast of global growth is to fall from 3.5% in 2022 to 3.0% in both 2023 and 2024 respectively. Global inflation remained uncomfortably high at 8.7% in 2022, as against 4.7% a year ago with inflation overshooting the target in an overwhelming majority of countries and expected to fall to 6.8% in 2023 and 5.2% in 2024. However, amidst the disruptions and the tightening of monetary policy, certain economies are expected to exhibit resilience.

Indias economy registered a strong growth of 7.2% in 2022-23, the highest among major economies in the world, amidst a global turmoil following the war in Ukraine. The growth momentum remained steady, showcasing the underlying strength of Indias economy in recovering and revitalising growth drivers. Sound macroeconomic fundamentals, a resilient financial system reflected in healthy balance sheets of banks and Non-Banking Financial Companies ("NBFCs") imparted resilience to counter the adverse global spillovers. As per IMF, India will alone contribute 15% of the global growth in 2023 driven by its demographic dividend, pent-up demand growth, digital infrastructure and commitment to fiscal consolidation.

The growing importance of the NBFC sector in the Indian financial system is reflected in the consistent rise of NBFCs credit as a proportion to GDP. Supported by various policy initiatives, NBFCs absorbed the shocks of the pandemic. They built up financial soundness during the financial year 2022, marked by balance sheet consolidation, improvement in asset quality, augmented capital buffers and profitability.

The National Statistical Office ("NSO") has placed real GDP in the year 2022-23 is estimated to attain a level of Rs. 160.06 lakh crore, as against the First Revised Estimates of GDP for the year 2021-22 of Rs. 149.26 lakh crore. The growth in real GDP during 2022-23 is estimated at 7.2% as compared to 9.1% in 202l-22.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Financial Services Industry

India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises:

• Commercial banks,

• Insurance companies,

• Non-banking financial companies.

• Co-operatives, pension funds,

• Mutual funds and,

• Other smaller financial entities,

The Government has initiated various policies and schemes that are favourable for the growth of the financial service sector.

Further, NBFCs often take lead role in providing innovative financial services to Micro, Small, and Medium Enterprises (MSMEs) most suitable to their business requirements. An NBFC would often take a lead in innovating and customizing the financial services to fund various industries such as transportation, employment generation, wealth creation, bank credit in rural segments and aid financially weaker sections of the society.

Non-Banking Financial Companies (NBFCs)

With exposure towards banking as well as capital markets, NBFCs have emerged as an essential part of Indias financial ecosystem over the past two decades. Over the years, NBFCs have become an important source of credit for low-income households and businesses that do not have collateral or sufficient credit profile for bank credit. Through wide network of branches, digitalization and innovative solutions, they have grown their presence among MSMEs and consumers, especially for financing vehicles, housing and gold. They all have actively embraced technology and digital tools to bring down the transaction costs, speed up the loan disbursal process and leverage alternate data and practices to improve risk assessment and underwriting. Some of them have also grown larger in size than many banks and have been one of the major stock outperformers.

With NBFCs constituting an increasingly important segment of the Indian financial system, the Reserve Bank of India plans to strengthen the analysis of transmission to lending rates and sectoral credit flows by expanding the coverage to include NBFCs in addition to banks in a phased manner.

The continuous improvement in asset quality is seen in the declining Gross Non-performing assets (GNPAs) ratio of NBFCs from the peak of 7.2 per cent recorded during the second wave of the pandemic (June 2021) to 5.9 per cent in September 2022, reaching close to the pre-pandemic level. Credit extended by NBFCs is picking up momentum, with the aggregate outstanding amount at Rs. 31.5 lakh crore as of September 2022. NBFCs continued to deploy the largest quantum of credit from their balance sheets to the industrial sector, followed by retail, services, and agriculture.

ABOUT LUHARUKA MEDIA & INFRA LIMITED

BUSINESS OVERVIEW

Luharuka Media & Infra Limited formerly known as "Splash Media and Infra Limited" was originally incorporated as "Indus Commercials Limited" on July 07, 1981 under the Companies Act, 1956 in the State of West Bengal. Thereafter the name has been changed from Indus Commercials Limited to Hindustan Stockland Limited and received a fresh certificate of incorporation consequent to change of name from Registrar of Mumbai, Maharashtra on September 19, 1991.Thereafter, the Company name has been further changed to Splash Mediaworks Ltd and a fresh certificate of incorporation was received from Registrar of Mumbai, Maharashtra on May 08, 2002. Further, the name of the Company was changed to Splash Media & Infra Limited on November 09, 2009 & thereafter to the present name i.e. Luharuka Media & Infra Limited ("LMIL") on October 15, 2015.

The Company was taken over by the present promoters in the year 2015. The Company had a Certificate of Registration from Reserve Bank of India as a Non-Banking Financial Company ("NBFC") vide certificate no. B-13.01559 in the name of the "Hindustan Stockland Limited". Thereafter, the company obtained a fresh Certificate of Registration from Reserve Bank of India in the present name of the company i.e. Luharuka Media & Infra Limited vide certificate no. B-13.01559 dated January 12, 2017.

PRODUCTS & SERVICES

The Company is a NBFC and its primary focus is providing inter corporate loans, personal loans, loans against shares & securities, loans against properties, Mortgage Loans, Auto / Home Loans, trade financing, bills discounting. Since the Company is an NBFC it is now developing to position itself between the organized banking sector and local money lenders, offering the customers competitive, flexible and timely lending services. As such there are no separate reportable segments or product wise performance reports applicable to the Company.

Our Company offers financial services to commercial, industrial and financial clients with a one stop financial solution as follows:

INFRASTRUCTURE:

Includes Hotels, Office Buildings, Industrial Buildings, etc.

REAL ESTATE

Retail Shopping Centers, Apartment Projects, Residential Communities

MORTGAGE LOAN

Loans against properties, Auto/Home Loans

FINANCIAL PERFORMANCE

The following table presents Companys abridged financials for the financial year 2022-23, including revenues, expenses and profits.

		(Rs. in Lakh, Except EPS)
PARTICULARS	2022-2023	2021-2022
Revenue from Operations	193.00	167.92
Other Income	0.45	0.00
Total Revenue from Operations	193.45	167.92
Total Expense	103.19	90.95
Profit before Tax	90.26	76.97
Current Tax	23.50	20.11
Deferred Tax	0.00	0.00
Tax of earlier year	(0.05)	(0.46)
Profit for the Year	66.81	57.32
Earnings Per Share (EPS) (Basic & Diluted)	0.07	0.06

During the year under review, your Companys total revenue from operations increased to Rs. 193.45 lakh as compared to Rs. 167.92 lakh in the previous Financial Year, the Net profit increased to Rs. 66.81 lakh as compared to Rs. 57.32 lakh in the previous Financial Year and the Net Worth of Company increased to Rs.1483.18 lakh as compared to Rs.1416.37 lakh in the previous Financial Year.

The Management continues to concentrate its efforts to increase the revenue of the Company by identifying new opportunities.

Details of Significant changes, if any, in the Key Financial Ratios, along with the detailed explanation forms part of the financial Statements. Return on Net worth of the Company is increased to 0.05 in the financial year 2022-23 as compared to the previous financial year due to increase in Profit after Tax of the Company.

DEVELOPMENT OF HUMAN RESOURCE JP

People are our key pillars of strength. Human Capital is the core strength in achieving the sustainable growth path charted by our strategic apex as it plays an important role in developing, reinforcing, and enhancing the culture of an organization. LMIL believe that its employees are one of the most important stakeholders. As on March 31,2023, it had a total head count of 7 employees. The Directors wish to place on record their appreciation and acknowledgment for the efforts and dedication and contributions made by employees at all levels during the year under review.

LMIL is focused on building and developing enduring capabilities for a future-ready workforce. For the same it aims to attract as well as develop, motivate and retain diverse talent in the highly competitive market that is critical for its continued success. LMIL has people-friendly policies and practices aligned with business strategy that provides its employees an opportunity to learn grow and take their career forward. All employees, from a new joiner to a tenured one, are provided tailored learning opportunities as per their role, level, and specific focus area. Employees are equally treated and provided opportunities irrespective of gender, marital status, religion, race/caste, colour, age, ancestry, nationality, language, ethnic origin, socioeconomic status, physical appearance, disability, sexual orientation, gender and expression.

The HR function focuses on attracting new talent & help them as well as existing employees to acquire new skills, explore new roles and realize their potential capability.

SWOT ANALYSIS

During the financial year 2022-23, our Company addressed the challenges posed by the COVID-19 pandemic, short lived Omicron wave and slowdown in economy due to the Russia - Ukraine war crisis with enhanced focus on protecting the balance sheet and strengthening the business franchise.

Strengths

• Promoted and managed by qualified & experienced professionals: The Board of the Company compromises of Professionals & other highly qualified & experienced Directors.

• Prudent fund management practices.

• Specialization in the task of recovery.

• Better services to individual customers.

• Easy and simplified sanction procedure and disbursement.

• Serving the under-served retail markets.

Weakness

• We do not have branches so we are unable to explore the business opportunities in other areas.

• Does not have aggressive advertising strategies.

• Increase in competition from other finance companies and small banks.

• Adopting the regulations and quicker compliances improves the ability to continuously renew itself to meet new challenges.

Opportunities

• Various schemes and tax motivations by government

• NBFC sector has lots of scope to cover larger market.

• Large untapped rural and urban markets.

• Untapped use of digital solutions for business/ collections.

• Expanded role of being in diversified financial intermediation activities in the areas of credit and in channelizing the savings.

Threats m

• Inflation

• Tightening regulation of NBFCs

• Geopolitical crisis

• Uncertain economic and political environment

• Operational Challenges

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY:

The Company has robust internal controls system in place aligned with regulatory and legal requirements and best practices. The Company has instituted the three lines of defence model, viz.

• Internal Operation Management and Management Controls

• Risk and Compliance function

• Internal Audit function

The Board carries out regular checks to ensure internal control system are operating as decided and gaps, if any, identified and are set right. Senior management also contributes in implementing risk mitigating measures and regulatory guidelines. In the opinion of Board and senior management, internal control systems are well placed and are working in an efficient manner. The internal control systems are supplemented by internal audits and are adequate and operating effectively in line with the regulatory requirements, nature of company and size of its operations. Internal Audit is an autonomous function of the Company. The Internal Audit function works closely with the Compliance Department.

The Company has appointed M/s. ASHP & Co. LLP, Chartered Accountants to conduct independent financial and operational internal audit in accordance with the scope as defined by the Audit Committee. The reports from the Internal Auditors are reviewed by the Audit Committee on periodic basis and the Internal Auditor has been advised to issue flash reports, if required. The Audit Committee of the Company reviews and recommends the unaudited quarterly financial results and the annual audited financial statements of your Company to the Board for approval. Further, all related party transactions are placed before the Audit Committee for their approval.

OUR STRATEGY

• Expansion of existing activities 0 Financial Management/Advisory Services 0 Brand recognition

• Retention of customer base with a holistic association approach

•Constant strengthening of risk framework

OUTLOOK

NBFCs have come a long way in terms of their scale and diversity of operations. They now play a critical role in financial intermediation and promoting inclusive growth by providing last-mile access of financial services to meet the diversified financial needs of less-banked customers. Different sectors in the economy are undergoing different modes of revival. However, need of finance is common amongst all sectors. NBFCs have a prosperous future ahead as a result of various advantages over banks and other mode of financing. In the Indian economy, NBFC is playing a phenomenal role by providing excellent sources of funding. The NBFC sector will continue to act as catalyst Indias economic growth. The uniqueness of this sector lies in the inherent diversity of activities carried out by different NBFCs and thus, there can be no ‘one-size-fits-all prescription in the regulatory approach for NBFCs.

The Company is providing wide variety of products and will be expanding its activities, consistent with its status of sector and needs of economy. The Company is also looking forward to enter into newer areas and expands its customer base. With the growth in size and interconnectedness, NBFCs have increasingly become systemically significant and the prudential regulations for NBFC sector have evolved to give greater focus to the theme of financial stability. Ensuring good corporate governance in NBFCs is at the core of any regulatory change. The Company has always been focused towards following best corporate governance practice. The management is optimistic about the future outlook of the Company.

RISK & CONCERNS:

The Companys business activities are exposed to a variety of financial risks, namely liquidity risk, market risks and credit risk. The Companys senior management has the overall responsibility for establishing and governing the Companys risk management framework. The Company has constituted a core Management Committee, which is responsible for developing and monitoring the Companys risk management policies.

The Companys risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Audit Committee of the Company.

Financial Risks

A) Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk. Financial instruments affected by market risk include loans and borrowings and deposits.

• Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. This risk exists mainly on account of borrowings of the Company. However, all these borrowings are at fixed interest rate and hence the exposure to change in interest rate is insignificant.

• Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company is not exposed to significant foreign currency risk as at the respective reporting dates.

• Price Risk

The Company is mainly exposed to the price risk due to its investment in debt mutual funds. The price risk arises due to uncertainties about the future market values of these investments.

B) Credit Risk

Credit Risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and other financial assets.

• Trade Receivables

Customer credit risk is managed by each business unit subject to the Companys established policy, procedures and control relating to customer credit risk management. An impairment analysis is performed at each reporting date on an individual basis for major trade receivables.

• Other Financial Assets

Credit risk from balances with banks and financial institutions is managed by the Company in accordance with the Companys policy. Investments of surplus funds are made only in highly marketable debt instruments with appropriate maturities to optimise the cash return on instruments while ensuring sufficient liquidity to meet its liabilities.

C) Excessive risk concentration

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Companys performance to developments affecting a particular industry.

In order to avoid excessive concentrations of risk, the Companys policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.

D) Liquidity risk

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Companys approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses.

The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31st March, 2023 and 31st March, 2022. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis. The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an ongoing basis to meet operational needs. Any short term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in interest bearing term deposits and other highly marketable debt investments with appropriate maturities to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.

The Company manages its liquidity requirement by analysing the maturity pattern of Companys cash flows of financial assets and financial liabilities. The Companys objective is to maintain a balance between continuity of funding and flexibility. The Company invests its surplus funds in debt schemes of mutual funds, which carry low mark to market risks.

Other Risks

Due to rapid changes in the technologies, business dimensions and complexities, regulatory changes and environmental concerns, new and various types of risks have emerged. Financial firms are now increasingly focused on asset-liability risk. Asset-liability risk is a leveraged form of risk. So, in the era of fast changing global economy, multiplicity of legal compliances, cross border business transactions and to ensure the survival, viability and sustainability of business, the management of various types of risks have gained utmost importance.

All such risks cannot be eradicated completely however can be controlled, mitigated and managed within the Company in order to balance risk and reward. Risk management is an important part of the Companys business strategy, and it is smoothly incorporated into all of the Companys activities. The aim of the Companys framework is to optimize the risk-return equation while also ensuring strict adherence to all current and upcoming laws, rules, and regulations that apply to all of the Companys business activities. Thus, managing risks is not a one-time activity; its an ongoing process. The Company strives to cultivate a strong and disciplined risk management culture across all of its business operations and at all levels of the organization.

The Companys senior management has the overall responsibility for establishing and governing the Companys risk management framework. The Company has constituted a core Management Committee, which is responsible for developing and monitoring the Companys risk management policies. The Companys risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly.

CAUTIONARY STATEMENT

Statements in this report pertaining to the Companys objectives, projections, estimates, exceptions and predictions are forward-looking statements subject to the applicable laws and regulations. These statements may be subject to certain risks and uncertainties. Important factors that could make a difference to the Companys operations include changes in Government regulations and tax regime, economic developments within India and abroad, financial markets, etc. The Company assumes no responsibility in respect of forward-looking statements that may be revised or modified in future on the basis of subsequent developments, information or events.

The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014. The management of the Company has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements reflect a true and fair manner, the state of affairs and profit / loss for the year. The narrative on our financial condition and result of operations should be read together with the notes to the financial statements included in the annual report.