Prime Securities Ltd Management Discussions

& Developments

Prime Securities is part of the financial services sector that includes Non-Banking Finance Services, Insurance, and Capital Markets. We are a Category-1 Merchant Banker licensed by the Securities and Exchange Board of India (SEBI). In addition, our subsidiary Prime Research and Advisory Limited is a Corporate Insurance Agent licensed by the Insurance Regulatory and Development Authority of India ("IRDAI").

Global Economic Trends

The world economy grew steadily by a cumulative 6.7 percent from 2022 to 2023 (data from IMF World Economic Outlook, April 2024), despite ongoing issues like geopolitical conflicts and climate events. While attempts to tackle inflation are working in some nations, challenges like supply chain problems, shifts in trade ties, and geopolitical tensions will make stabilising inflation harder in the coming years. For instance, softening of interest rates as expected in US in March 2024 has been pushed back by US Federal Reserve again reiterating the signs of stickiness of the inflation.

With this backdrop, the International Monetary Fund (IMF) expects the world economy to grow at no more than 3.0% in 2024. Advanced economies—i.e., the United States, the Euro area, Japan, the United Kingdom, and Canada—are forecasted to experience tepid growth at 1.4% in 2024. But many emerging economies should see higher growth on the back of strong consumer demand, younger demographics, and improving trade balances. In particular, India is expected to have one of the strongest growth rates: 6.3% in 2024.

One of the glimpses of such growth forecast can be seen in significant growth

in Indias financial sector. In FY23, A total of 75 firms raised H61,915 crore through main board IPOs during this period, up significantly from the H52,116 crore raised by 37 IPOs in the previous FY22 (data from Economic Times). Out of the 75 IPOs, 54 IPOs were subscribed more than 10 times, with 22 of them witnessing subscriptions exceeding 50 times (data from Economic Times). According to AMFI, Indias mutual funds industry touched a life-time high of H55.01 as of March 31, 2024.

Continuation of Funding Winter

A combination of both domestic and global factors contributed to the extension of the funding winter. Investor confidence was furthermore affected by softening global consumption and persistent geopolitical uncertainties. According to Bain Venture Capital Report 2024, this culminated in a decline in deal volume in India (from 1,611 to 880 deals) and average deal size (from $16 million to $11 million).

Several changes in the deal flow were observed in 2022 continued through 2023. According to the same report, megarounds plummeted by almost 70%, from 48 to 15. Several scaled start-ups chose to defer fund-raising since the advent of the funding winter-this droves consecutive and substantial declines in the emergence of unicorns, reaching pre-2019 levels. In contrast, small and medium deals (less than $50 million) witnessed milder compression, declining by about 45% from 1,501 to 852. This resilience signalled investor optimism for Indias medium-to- long-term prospects.

Emerging from a challenging 2023, the maturity of the Indian VC landscape underwent a visible shift, fostering optimism for 2024 and beyond. So, though the total PE & VC fund-raising slowed down from $24 billion in 2022 to $4 billion in 2023 (LSEG Deals Intelligence), domestic VCs became significantly more salient, driving more than 90% of theraises in 2023. A lot of these VCs were thematic funds focused on emergent themes such as such as energy transition, sustainability-centric agritech, and India- nuanced AI tooling.

According to RBIs data in March 2024 bulletin, net FDI in India declined 38.4 per cent year-on-year to $15.41 billion as of 31 January 2024 (10-month period) due to an increase in the repatriation of capital. Manufacturing, computer services, electricity, and other energy sectors, financial services, and transport accounted for about two-thirds of the FDI equity inflows.

In the long run, international investors are expected to maintain a positive outlook on India as an investment hub. This is due to the markets proven macroeconomic strengths, disciplined fiscal and monetary policies, abundant talent reserves, and continuously expanding digital infrastructure, all of which offer promising opportunities.

Opportunities

Looking ahead to 2024, with IMF projecting one of the highest growth rates for India, we feel that this environment will be more conducive for deal closures especially on fund raising side. We have a very robust deal flow and pipeline and expect closure rate to be better, provided the environment remains conducive. Our execution capability pivots on our skills at deal structuring and our ability to leverage our network for execution. We are constantly seeking alliances and partnerships to enhance this capability. Customers come to us for solutions for the efficient raising of equity or debt capital and our proven ability to execute. Our pipeline is full, and we expect to see this continue.

We had made a strategic investment in / acquisition of an Artificial Intelligence / Machine Learning powered company in financial products in FY24. To leverage the global technology platform of the previous investment, we are venturing into Fund Management Services that will offer its services to global institutional investors and family offices.

Threats

While we are confident of our deal flow pipeline and growth from new business initiatives. We are also mindful of the looming recession threat globally and volatile geopolitical situation. In case of any precipitation on these fronts, there could be a deterioration of economic environment.

B) Risks and Concerns

Given that we are debt free we do not have the usual risks that debt on the balance sheet represents. As our business model is only advisory and does not require any risk to capital to be taken, we see minimal risks to our continuing operations. Our substantial cash reserves will help tide over any disruptions. With increased mobility due to waning of covid pandemic we see more opportunities on expanding our business and deliver on our assignments. We remain vigilant to opportunities and will not hesitate to exploit them provided we can do so by eliminating any risk to our capital.

C) Internal control systems & their adequacy

Your Companys Internal Control System and procedures were reviewed during the year and systems and procedures were corrected wherever found to be inadequate to the Companys size, the nature of its business and the business environment. The internal control systems lay down the policies, authorisation and approval procedures.

We have enhanced controls over management of funds, cash and operations for conducting operations on hybrid model of work from office and home. All transactions are done on a dual control basis that assures greater safety for our operations. We have also strengthened the scope of internal audit to specifically focus on transaction tracking. We are leveraging all available digital tools to run our operations securely.

The adequacy of the internal control systems has been reported by the auditorsunder the Companies (Auditors Report)Order, 2003.

D) discussion on financial performance with respect to operational performance

The Consolidated Revenues of the Company were H6,664 lakhs for the financial year under review as against previous year H4,684 lakhs. Consolidated Profit after Tax including Comprehensive Income was at H2,921 lakhs as compared to H1,850 lakhs. Operating profit margins was 32.04% as against 23.98% for the previous year. At the same time, cash and cash equivalents, including investments having maturities in excess of three months, have increased from H11,287 lakhs to H14,754 lakhs, reflecting an improved operational performance.

We make suitable provisions for any receivable outstanding for more than 60 days.

We advised over 18 start-ups for fund raising. These represent new age businesses like electric vehicles (EV) and new consumer segments like gaming. In many of these assignments we have negotiated to receive our fees in shares of the company. Being start-ups, they dont have the ability to pay high fees and these investments have the potential to deliver very high returns in future.

Your Company operates in only one segment, financial advisory services. We are debt free and have no interest expense.

Overview of Operations

Despite the limitations placed on us by the pandemic, we had a year of robust revenues but more importantly a strong flow of deals that sets us up well for FY 2024-25. As with the previous year, it was driven by repeat and referral business signifying a high level of customer satisfaction. We have been noticed for our ideation, our "Intellectual Property"-

the ability to ideate and craft unique solutions, coupled with our "Network" that has underpinned our execution capabilities and drives robust deal flow. We will make additions to our team opportunistically, our current team very capably servicing our customer base. As a pure fee based, knowledge driven firm, we remain ideally placed to be a one- stop source of solutions for our customers, and this is underscored by our deal flow.

number of people employed

We continue to grow our pipeline of transactions in the corporate advisory business and add people as needed. We believe our team is optimally staffed at this time.

F) Details of significant changes (i.E. Change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor

G) Details of any change in return on net worth as compared to the immediately previous financial year along with a detailed explanation thereof

In the current financial year, it has been observed that the Return on Net Worth (RoNW) has increased from 9.38% to 13.05%. RoNW is a profitability indicator that measures the returns generated by a company on its shareholders equity. The increase in RoNW is primarily due to increase in Companys profitability owing to following factors:

- Increased revenues during the year.

- Lower legal, professional fees and travelling expenses.

- Unrealised gain on financial instruments on fair value changes.

Cautionary Statement

Statements in this Management Discussion & Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic developments in the country and improvement in the state of capital markets, changes in the Government regulations, tax laws and other status and other incidental factors.